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EXHIBIT 2.5
MERGER AGREEMENT
among
TBA ENTERTAINMENT CORPORATION,
CPI ACQUISITION CORP., INC.,
XXXXXXX X. XXXXX,
XXXXXXX X. XXXXX,
XXXXXX X. XXXXXXXX
and
CORPORATE PRODUCTIONS, INC.
August 11, 1998
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TABLE OF CONTENTS
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ARTICLE 1 - The Merger.................................................................... 1
1.1 The Merger....................................................................... 1
1.2 Effect of the Merger............................................................. 1
1.3 Consummation of the Merger....................................................... 2
1.4 Charter and Bylaws; Directors and Officers....................................... 2
1.5 Consideration for Merger; Conversion of Securities; Issuance of TBA Shares....... 2
1.6 Closing of CPI's Transfer Books.................................................. 3
1.7 Mechanics of Exchange of CPI Common Stock Certificates........................... 4
1.8 Lost, Stolen or Destroyed Certificates........................................... 5
1.9 Further Action................................................................... 5
ARTICLE 2 - Representations and Warranties of TBA and Merger Sub.......................... 5
2.1 Organization and Qualification................................................... 5
2.2 Authority Relative to this Agreement............................................. 5
2.3 TBA Stock and TBA SEC Documents.................................................. 6
2.4 Liabilities of Merger Sub........................................................ 6
2.5 Certain Corporate Matters........................................................ 6
2.6 Broker's Fees.................................................................... 7
2.7 Disclosure....................................................................... 7
ARTICLE 3 - Representations and Warranties of CPI......................................... 7
3.1 Organization, Qualification and Corporate Power.................................. 7
3.2 Capitalization................................................................... 8
3.3 Authorization of Transaction..................................................... 8
3.4 Subsidiaries..................................................................... 9
3.5 Financial Statements............................................................. 9
3.6 Events Subsequent to Financial Statements........................................ 9
3.7 Undisclosed Liabilities.......................................................... 11
3.8 Tax Returns and Audits........................................................... 11
3.9 Books and Records................................................................ 12
3.10 Real Property.................................................................... 13
3.11 Tangible Property................................................................ 13
3.12 Intellectual Property............................................................ 13
3.13 Contracts........................................................................ 15
3.14 Suppliers and Customers.......................................................... 16
3.15 Notes; Accounts Receivable....................................................... 16
3.16 Powers of Attorney............................................................... 16
3.17 Condition of Property............................................................ 16
3.18 Insurance........................................................................ 16
3.19 Litigation....................................................................... 17
3.20 Employees........................................................................ 17
3.21 Employee Benefit Plans........................................................... 17
3.22 Guarantees....................................................................... 18
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TABLE OF CONTENTS
(Continued)
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3.23 Legal Compliance................................................................. 18
3.24 Certain Business Relationships................................................... 19
3.25 Broker's Fees.................................................................... 19
3.26 Environment, Health and Safety................................................... 19
3.27 Disclosure....................................................................... 19
ARTICLE 4 - Representations and Warranties of the Shareholders............................ 19
4.1 Representations Regarding Shares of CPI.......................................... 19
4.2 Investment Representations....................................................... 20
4.3 Authorization.................................................................... 21
ARTICLE 5 - Conduct of Business Pending The Merger........................................ 21
5.1 Conduct of Business by CPI and CII Pending the Merger............................ 21
5.2 No Other Bids for CPI............................................................ 24
5.3 Lines of Business and Capital Expenditures....................................... 24
5.4 Accounting Methods............................................................... 25
5.5 Other Actions.................................................................... 25
5.6 Conduct of Business by Merger Sub................................................ 25
ARTICLE 6 - Additional Agreements......................................................... 25
6.1 Action of Shareholders........................................................... 25
6.2 Expenses......................................................................... 25
6.3 Notification of Certain Matters.................................................. 25
6.4 Access to Information............................................................ 26
6.5 Shareholder Claims............................................................... 26
6.6 Taking of Necessary Action....................................................... 26
6.7 Notice of Changes................................................................ 26
6.8 Press Releases................................................................... 26
6.9 Employee Matters................................................................. 26
ARTICLE 7 - Conditions to Merger.......................................................... 27
7.1 Conditions to Obligations of Each Party to Effect the Merger..................... 27
7.2 Additional Conditions to TBA's and Merger Sub's Obligations...................... 27
7.3 Additional Conditions to the Obligations of CPI and the Shareholders............. 29
ARTICLE 8 - Termination, Amendment and Waiver............................................. 31
8.1 Termination...................................................................... 31
8.2 Amendment........................................................................ 31
8.3 Waiver........................................................................... 31
8.4 Effect of Termination............................................................ 32
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TABLE OF CONTENTS
(continued)
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ARTICLE 9 - Indemnification............................................................... 32
9.1 By TBA, Merger Sub, CPI and the Shareholders..................................... 32
9.2 Claims for Indemnification....................................................... 32
9.3 Defense by Indemnifying Party.................................................... 33
9.4 Payment of Indemnification Obligation............................................ 33
ARTICLE 10 - General Provisions........................................................... 33
10.1 Survival of Representations and Warranties....................................... 33
10.2 Effect of Due Diligence.......................................................... 34
10.3 Specific Performance............................................................. 34
10.4 Notices.......................................................................... 34
10.5 Interpretation................................................................... 35
10.6 Severability..................................................................... 35
10.7 Miscellaneous.................................................................... 35
10.8 Material Adverse Breach.......................................................... 36
10.9 Limitation of Liability.......................................................... 36
SCHEDULE 1 Disclosure Schedule
ANNEX I List of TBA SEC Documents
ANNEX II Shareholders of CPI
EXHIBIT A Form of Plan of Merger
EXHIBIT B Form of Promissory Notes
EXHIBIT C Form of Pledge Agreement
EXHIBIT D Form of Employment Agreements
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MERGER AGREEMENT
This MERGER AGREEMENT, dated as of August 11, 1998 (this "Agreement"),
is by and among TBA Entertainment Corporation, a Delaware corporation ("TBA"),
CPI Acquisition Corp., Inc., a Delaware corporation and wholly owned subsidiary
of TBA (the "Merger Sub"), Xxxxxxx X. Xxxxx ("Xxxxx"), Xxxxxxx X. Xxxxx
("Xxxxx") and Xxxxxx X. Xxxxxxxx ("Xxxxxxxx"), all individuals and shareholders
of CPI (as defined below) (individually, a "Shareholder" and collectively, the
"Shareholders"), and Corporate Productions, Inc., an Illinois corporation
("CPI").
RECITALS
WHEREAS, CPI owns one hundred percent (100%) of the outstanding equity
securities of Corporate Incentives, Inc., an Illinois corporation ("CII");
WHEREAS, TBA, Merger Sub, CPI and the Shareholders each desire for TBA
to acquire all of the outstanding shares of CPI's capital stock pursuant to the
Merger described below in Article 1, as a result of which CPI will become a
wholly owned subsidiary of TBA; and
WHEREAS, the Shareholders intend for the Merger to qualify as a
"reorganization" pursuant to the provisions of Section 368(a)(2)(D) of the
Internal Revenue Code of 1986, as amended (the "Code"), and this Agreement
constitutes the plan of reorganization;
NOW, THEREFORE, in consideration of the foregoing premises, the
representations, warranties and agreements herein contained and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and subject to the conditions set forth herein, the parties hereto
agree as follows:
ARTICLE 1
THE MERGER
1.1 The Merger. At the Effective Time (as defined in Section 1.3), in
accordance with this Agreement and the respective provisions of the Delaware
General Corporation Law (the "DGCL") and the Illinois Business Corporation Act
(the "IBCA"), CPI shall be merged with and into Merger Sub (the "Merger"), the
separate existence of CPI (except as may be continued by operation of law) shall
cease and Merger Sub shall continue as the surviving corporation under the name
"Corporate Productions, Inc." Merger Sub, in its capacity as the corporation
surviving the Merger, sometimes is referred to herein following the Effective
Time as the "Surviving Corporation."
1.2 Effect of the Merger. The Surviving Corporation shall possess all
the rights, privileges, immunities and franchises, of a public as well as a
private nature, of each of Merger Sub and CPI (collectively, the "Constituent
Corporations"), and all property, real, personal and mixed, and all debts due on
whatever account, including subscriptions to shares and all other choses in
action, and every other interest of or belonging to or due to each of the
Constituent Corporations shall be deemed to be transferred to and vested in the
Surviving Corporation without reversion or
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impairment and without any further act or deed; and without any transfer or
assignment having occurred, but subject to any existing liens or other
encumbrances thereon, and all liabilities and obligations of each of the
Constituent Corporations shall thenceforth attach to the Surviving Corporation
and the Surviving Corporation shall be the primary obligor therefor, all with
the effect set forth in Sections 251 and 252 of the DGCL and Section 5/11.35 of
the IBCA.
1.3 Consummation of the Merger. As soon as is practicable after the
satisfaction or waiver of the conditions set forth in Article 7 of this
Agreement, and in no event later than the earlier of (a) five business days
after such satisfaction or waiver or (b) July 31, 1998, if all such conditions
have been satisfied or waived, the parties hereto will cause Articles of Merger,
in such form as may be required by, and executed, acknowledged and certified in
accordance with, the relevant provisions of the DGCL and the IBCA to be filed
with the Secretaries of State of the States of Delaware and Illinois, which
shall include, as an exhibit, a Plan of Merger substantially in the form
attached hereto as Exhibit A (the "Plan of Merger"). The Merger shall be
effective upon the filing of the Articles of Merger with the Secretaries of
State of the States of Delaware and Illinois (the "Effective Time"). For the
purposes of this Agreement, the term "Closing Date" shall mean the date on which
all of the terms and conditions to the closing (the "Closing") of the Merger
have been satisfied or waived in accordance with the terms of this Agreement. At
the Closing (a) CPI and the Shareholders shall deliver to TBA and Merger Sub the
various certificates, instruments and documents referred to in Section 7.2; (b)
TBA and Merger Sub shall deliver to CPI and the Shareholders the various
certificates, instruments and documents referred to in Section 7.3; (c) TBA
shall deliver the Merger Consideration (hereinafter defined) to the
Shareholders; and (d) TBA shall file the Articles of Merger with the Secretaries
of State of the States of Delaware and Illinois.
1.4 Charter and Bylaws; Directors and Officers. The charter (as amended
as of the Effective Time to reflect the change of name) and bylaws of Merger Sub
shall be the charter and bylaws of the Surviving Corporation immediately after
the Effective Time and shall thereafter continue to be its charter and bylaws
until further amended. The directors of Merger Sub holding office immediately
prior to the Effective Time shall be the directors of the Surviving Corporation
immediately after the Effective Time and shall serve until their successors are
duly elected and shall qualify. The officers of Merger Sub holding office
immediately prior to the Effective Time shall be the officers (holding the same
offices as they held with Merger Sub) of the Surviving Corporation immediately
after the Effective Time and shall serve until their successors are duly elected
and shall qualify.
1.5 Consideration for Merger; Conversion of Securities; Issuance of TBA
Shares. The total consideration payable to the Shareholders in respect of the
Merger (the "Merger Consideration") shall be equal to Five Million Dollars
($5,000,000), subject to possible adjustment as provided in the Notes
(hereinafter defined), and shall be paid or delivered to the Shareholders at the
Closing as follows:
(a) TBA shall issue and deliver to the Shareholders
certificates registered in the Shareholders' names representing the
number of fully-paid and nonassessable shares of TBA common stock,
$.001 par value per share ("TBA Common Stock"), equal to the amount set
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forth opposite such Shareholder's name on Schedule 1.5 divided by the
Average Price (as defined below) (the "Common Stock Portion"). The
total value of the Common Stock Portion shall equal an aggregate total
of Two Million Dollars ($2,000,000);
(b) TBA shall deliver to the Shareholders by wire transfer to
one or more accounts designated in writing by the Shareholders to TBA
prior to the Closing cash in an amount equal to One Million Four
Hundred Fifty Thousand Dollars ($1,450,000) (the "Cash Portion"). The
Cash Portion shall be allocated among the Shareholders as specified in
Schedule 1.5; and
(c) TBA shall deliver to the Shareholders promissory notes
(the "Notes") in the initial aggregate principal amount of One Million
Five Hundred Fifty Thousand Dollars ($1,550,000) (the "Note Portion"),
subject to possible adjustment as set forth in the Notes, each Note
substantially in the form of Exhibit B attached hereto (the "Form of
Note"), allocated among the Shareholders as specified in Schedule 1.5,
and secured by a pledge of the stock of CPI (pursuant to the form of
Pledge Agreement attached hereto as Exhibit C) or other similar form of
collateral to be approved by the Shareholders, such approval not to be
unreasonably withheld.
(d) The term "Average Price" shall mean the average of the
closing sale prices of TBA Common Stock reported by The Nasdaq Stock
Market for each of the thirty (30) consecutive trading days ending five
(5) trading days preceding the Closing Date, but not to be less than
$4.425 per share.
(e) Schedule 1.5 may be amended unilaterally by the
Shareholders at any time prior to the Closing so as to change the
allocation of the total Merger Consideration among the Shareholders.
Such amended Schedule must be signed by all of the Shareholders to be
effective.
(f) No fraction of a share of TBA Common Stock will be issued
to the Shareholders but in lieu thereof each Shareholder who would
otherwise be entitled to receive fractional shares will be paid an
amount in cash equal to the product of (A) the number of fractional
shares to which such holder is otherwise entitled and (B) the Average
Price. No interest shall be paid on such amount.
(g) Each share of CPI Common Stock (as defined below) held in
the treasury of CPI shall automatically be cancelled and no shares of
TBA Common Stock will be issued with respect thereto.
1.6 Closing of CPI's Transfer Books. At the Effective Time, the stock
transfer books of CPI shall be closed with respect to shares of CPI Common Stock
issued and outstanding immediately prior to the Effective Time and no further
transfer of such shares shall thereafter be made on such stock transfer books.
If, after the Effective Time, valid certificates previously
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representing such shares are presented to the Surviving Corporation, such
certificates shall be exchanged as provided in Section 1.7 of this Agreement.
1.7 Mechanics of Exchange of CPI Common Stock Certificates.
(a) After the Effective Time, each holder of an outstanding
certificate that prior thereto represented shares of common stock, no
par value per share (the "CPI Common Stock"), of CPI shall be entitled,
upon surrender thereof to TBA, to receive such Shareholder's pro rata
portion of the Cash Portion and the Note Portion of the Merger
Consideration and (i) a certificate or certificates representing the
number of whole shares of TBA Common Stock into which the shares of CPI
Common Stock so surrendered shall have been converted and exchanged as
aforesaid, in such denominations and registered in such names as such
holder may request and (ii) any cash to which such holder may be
entitled pursuant to Section 1.5(e). Until so surrendered, each such
outstanding certificate that, prior to the Effective Time, represented
shares of CPI Common Stock will be deemed from and after the Effective
Time, for all corporate purposes, other than the payment of dividends,
to evidence the ownership of the number of full shares of TBA Common
Stock into which such shares of CPI Common Stock shall have been so
converted and exchanged pursuant to Section 1.5 of this Agreement and
the right to receive an amount in cash in lieu of the issuance of any
fractional share of TBA Common Stock in accordance with Section 1.5(e)
of this Agreement.
(b) All cash and shares of TBA Common Stock into which shares
of CPI Common Stock shall have been converted and exchanged pursuant to
Section 1.5 of this Agreement, including any cash paid in lieu of any
fractional shares of TBA Common Stock in accordance with Section 1.5(e)
of this Agreement, will be issued and delivered in full satisfaction of
all rights pertaining to such exchanged shares and shall be fully-paid
and nonassessable.
(c) If any certificate for shares of TBA Common Stock is to be
issued in a name other than that in which the certificate surrendered
in exchange therefor is registered, it will be a condition of the
issuance thereof that the certificate so surrendered will be properly
endorsed and otherwise in proper form for transfer and that the person
requesting such conversion and exchange will have paid to TBA any
transfer or other taxes required by reason of the issuance of a
certificate for shares of TBA Common Stock in any name other than that
of the registered holder of the certificate surrendered, or established
to the satisfaction of TBA that such tax has been paid or is not
payable. Prior to the issuance of such certificate(s), the registered
holder(s) thereof will be required to demonstrate to TBA's satisfaction
that such transfer will be made in compliance with all applicable
securities laws and will not adversely impact any exemption from the
registration/qualification requirements of applicable securities laws
to be relied upon in connection with the transactions contemplated
hereby.
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1.8 Lost, Stolen or Destroyed Certificates. In the event any
certificates evidencing shares of CPI Common Stock shall have been lost, stolen
or destroyed, TBA shall issue in exchange for such lost, stolen or destroyed
certificate(s), upon the making of an affidavit of that fact by the holder
thereof, such shares of TBA Common Stock and cash for fractional shares, if any,
as may be required pursuant to Section 1.5 of this Agreement; provided, however,
that TBA may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed certificate(s) to
deliver a bond in such sum as TBA may reasonably direct as indemnity against any
claim that may be made against TBA with respect to the certificate(s) alleged to
have been lost, stolen or destroyed.
1.9 Further Action. If, at any time after the Effective Time, any
further action is necessary or desirable to carry out the purposes of this
Agreement or to vest the Surviving Corporation with full right, title and
possession to all assets, property, rights, privileges, immunities and
franchises of either or both of the Constituent Corporations, the officers and
directors of the Surviving Corporation are fully authorized in the name of
either or both of the Constituent Corporations or otherwise to take, and shall
take, all such action.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF TBA AND MERGER SUB
TBA and Merger Sub hereby represent and warrant to CPI as follows:
2.1 Organization and Qualification. TBA has been duly incorporated and
is validly existing as a corporation and in good standing under the laws of the
State of Delaware and has the requisite corporate power to carry on its business
as now conducted. Merger Sub has been duly incorporated and is validly existing
as a corporation and in good standing under the laws of the State of Delaware
and has the requisite corporate power to carry on its business as now conducted.
2.2 Authority Relative to this Agreement. Each of TBA and Merger Sub
has the requisite corporate power and authority to enter into this Agreement and
to carry out its respective obligations hereunder. The execution and delivery of
this Agreement by TBA and Merger Sub and the consummation by TBA and Merger Sub
of the transactions contemplated hereby have been duly authorized by the
respective Boards of Directors of TBA and Merger Sub and by TBA as the sole
shareholder of Merger Sub, and no other corporate proceedings on the part of TBA
or Merger Sub are necessary to authorize this Agreement and the transactions
contemplated hereby. This Agreement has been duly executed and delivered by TBA
and Merger Sub and constitutes the valid and binding obligation of each such
company, enforceable in accordance with its terms, except as such enforcement
may be limited by bankruptcy, insolvency or other similar laws affecting the
enforcement of creditors' rights generally or by general principles of equity.
None of the execution and delivery of this Agreement by TBA or Merger Sub, the
performance by TBA or Merger Sub of their obligations hereunder or the
consummation of the transactions contemplated hereby by TBA or Merger Sub will
require any consent, approval or notice under, or violate, breach, be in
conflict with
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or constitute a default (or an event that, with notice or lapse of time or both,
would constitute a default) under, or permit the termination of, or result in
the creation or imposition of any lien upon any properties, assets or business
of TBA or Merger Sub under any note, bond, indenture, mortgage, deed of trust,
lease, franchise, permit, authorization, license, contract, instrument or other
agreement or commitment or any order, judgment or decree to which TBA or Merger
Sub is a party or by which TBA or Merger Sub or any of their respective assets
or properties is bound or encumbered, except those that have already been given,
obtained or filed. Other than in connection with filing Articles of Merger with
the Secretaries of State of the States of Delaware and Illinois, filings under
the Securities Act of 1933, as amended (the "Securities Act"), if any, necessary
to perfect an exemption from registration under the Securities Act, filings made
with the National Association of Securities Dealers, Inc. to list the shares of
TBA Common Stock to be issued in connection with the Merger in the National
Market System of The Nasdaq Stock Market and filings to be made with state
securities regulatory agencies, no authorization, consent or approval of, or
filing with, any public body, court or authority is necessary on the part of TBA
or Merger Sub for the consummation by TBA and Merger Sub of the transactions
contemplated by this Agreement.
2.3 TBA Stock and TBA SEC Documents. The TBA Common Stock is listed for
trading on the National Market System of The Nasdaq Stock Market. TBA has
furnished CPI with a true and complete copy of each report, schedule,
registration statement and definitive proxy statement filed by TBA with the
Securities and Exchange Commission ("SEC") since January 1, 1998 (the "TBA SEC
Documents"), which are all the documents (other than preliminary materials) that
TBA was required to file with the SEC since such date and all of which documents
are listed on Annex I attached hereto. As of its date, each TBA SEC Document was
in compliance, in all material respects, with the requirements of its form. The
financial statements of TBA included in the TBA SEC Documents complied, at the
time of filing with the SEC, as to form, in all material respects, with
applicable accounting requirements and published rules and regulations of the
SEC with respect thereto, were prepared in accordance with generally accepted
accounting principles, applied on a consistent basis during the periods
involved, and fairly presented, in all material respects (subject, in the case
of unaudited statements, to normal, recurring year-end audit adjustments) the
financial position of TBA as at the dates thereof and the results of its
operations and cash flows for the periods then ended.
2.4 Liabilities of Merger Sub. Prior to the date hereof, Merger Sub has
conducted no business operations and has incurred no liabilities.
2.5 Certain Corporate Matters. Each of TBA and Merger Sub is duly
qualified to do business as a foreign corporation and is in good standing in
each jurisdiction in which the ownership of its properties, the employment of
its personnel or the conduct of its business requires it to be so qualified,
other than in such jurisdictions where the failure to so qualify would not,
individually or in the aggregate, have a materially adverse effect on TBA and
its subsidiaries, taken as a whole. TBA has full corporate power and authority
and all authorizations, licenses and permits necessary to carry on the business
in which it engages or in which it proposes presently to engage and to own and
use the properties owned and used by it. TBA and Merger Sub have each delivered
to CPI true, accurate and complete copies of its charter documents and bylaws
which reflect all amendments
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made thereto at any time prior to the date of this Agreement. The minute books
containing the records of meetings of the shareholders and board of directors of
TBA and Merger Sub are accurate and complete in all material respects. All
material corporate actions taken by TBA and Merger Sub since their respective
dates of incorporation have been duly authorized and/or subsequently ratified,
as necessary. Neither TBA nor Merger Sub is in default under or in violation of
any material provision of its charter or bylaws.
2.6 Broker's Fees. Neither TBA nor anyone on its behalf has any
liability to any broker, finder, investment banker or agent, or has agreed to
pay any brokerage fees, finder's fees or commissions, or to reimburse any
expenses of any broker, finder, investment banker or agent in connection with
the Merger or any similar transaction.
2.7 Disclosure. The representations and warranties and statements of
fact made by TBA in this Agreement and in certificates and other written
statements or agreements delivered or to be delivered pursuant to this Agreement
are accurate, correct and complete on the date of this Agreement and will,
except as contemplated hereby, be accurate, correct and complete at the
Effective Time and do not and will not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements and information contained herein or therein not misleading.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF CPI
Except as set forth in the correspondingly numbered section of the
disclosure schedule attached hereto as Schedule 1 and incorporated herein by
this reference (the "Disclosure Schedule"), CPI and CII hereby represent and
warrant to TBA and Merger Sub as follows:
3.1 Organization, Qualification and Corporate Power. Each of CPI and
CII is a corporation duly organized, validly existing and in good standing under
the laws of the jurisdiction of its incorporation. Each of CPI and CII is duly
qualified to do business as a foreign corporation and is in good standing in the
jurisdictions specified in Section 3.1 of the Disclosure Schedule, which are the
jurisdictions in which the ownership of its properties, the employment of its
personnel or the conduct of its business requires that it be so qualified or
where a failure to be so qualified or licensed would have a material adverse
effect on its financial condition, results of operation or business. Each of CPI
and CII has full corporate power and authority and all authorizations, licenses
and permits necessary to carry on the business in which it is engaged or in
which it proposes presently to engage and to own and use the properties owned
and used by it. Each of CPI and CII has delivered to TBA true, accurate and
complete copies of its charter and bylaws which reflect all amendments made
thereto at any time prior to the date of this Agreement. The minute books
containing the records of meetings of the shareholders and Board of Directors of
each of CPI and CII, the stock certificate books and the stock record books of
each of CPI and CII are complete and correct in all material respects. The stock
record books of each of CPI and CII and the shareholder
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lists of each of CPI and CII which each of CPI and CII has previously furnished
to TBA are complete and correct in all respects and accurately reflect the
record and beneficial ownership of all the outstanding shares of each of CPI's
and CII's capital stock and all other outstanding securities issued by each of
CPI and CII. All material corporate actions taken by each of CPI and CII since
incorporation have been duly authorized and/or subsequently ratified as
necessary. Neither CPI nor CII is in default under or in violation of any
provision of its charter or bylaws. Neither CPI nor CII is in default or in
violation of any restriction, lien, encumbrance, indenture, contract, lease,
sublease, loan agreement, note or other obligation or liability by which it is
bound or to which any of its assets is subject.
3.2 Capitalization. CPI's entire authorized capital stock consists of
2,000 shares of common stock, of which 947.36842 shares are issued and
outstanding and 947.36842 shares will be issued and outstanding immediately
prior to the Effective Time. CII's entire authorized capital stock consists of
1,000 shares of Common Stock of which 1,000 shares are issued and outstanding
and 1,000 shares will be issued and outstanding immediately prior to the
Effective Time. All of the issued and outstanding shares of CPI Common Stock and
the common stock of CII ("CII Common Stock") have been and, as of the Effective
Time, will be duly authorized and are and, as of the Effective Time, will be
validly issued, fully paid and nonassessable and have not been and, as of the
Effective Time, will not be issued in violation of any pre-emptive rights. There
are no outstanding or authorized options, rights, warrants, calls, convertible
securities, rights to subscribe, conversion rights or other agreements or
commitments to which either CPI or CII is a party or which are binding upon
either CPI or CII providing for the issuance or transfer by either CPI or CII of
additional shares of their respective capital stock and neither CPI nor CII has
reserved any shares of its capital stock for issuance, nor are there any
outstanding stock option rights, phantom equity or similar rights, contracts,
arrangements or commitments based upon the book value, income or other attribute
of either CPI or CII. There are no voting trusts or any other agreements or
understandings with respect to the voting of either CPI's or CII's capital
stock. Upon consummation of the Merger, TBA will own the entire equity interest
in CPI (and through its ownership of CPI, TBA will own the entire equity
interest of CII) and neither CPI nor CII will have outstanding any stock or
securities convertible or exchangeable for any shares of its capital stock, nor
have outstanding any rights, options, agreements or arrangements to subscribe
for or to purchase its capital stock or any stock or securities convertible into
or exchangeable for its capital stock. Annex II attached hereto sets forth a
true accurate and complete list of all holders of capital stock of CPI and CII,
the number of shares of capital stock held by each such person and the address
of each such person. All capital stock, options, warrants and other securities
issued by CPI and CII were issued in compliance, in all respects, with all
applicable federal and state securities laws.
3.3 Authorization of Transaction. CPI has the requisite corporate power
and authority to enter into this Agreement and perform its obligations
hereunder. The execution, delivery and performance of this Agreement and the
transactions contemplated by this Agreement have been duly authorized by the
Board of Directors of CPI. No other corporate approval on the part of CPI (other
than shareholder approval) will be necessary to authorize the execution,
delivery and performance of this Agreement and the transactions contemplated
hereby. This Agreement has been duly executed and delivered by CPI and, upon
approval hereof by the shareholders of CPI, will constitute
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the valid and binding obligation of CPI, enforceable in accordance with its
terms, except as such enforcement may be limited by bankruptcy, insolvency or
other similar laws affecting the enforcement of creditors' rights generally or
by general principles of equity. None of the execution and delivery of this
Agreement by CPI, the performance by CPI of its obligations hereunder or the
consummation of the transactions contemplated hereby by CPI will require any
consent, approval or notice under, or violate, breach, be in conflict with or
constitute a default (or an event that, with notice or lapse of time or both,
would constitute a default) under, or permit the termination of, or result in
the creation or imposition of any lien upon any properties, assets or business
of either CPI or CII under any note, bond, indenture, mortgage, deed of trust,
lease, franchise, permit, authorization, license, contract, instrument or other
agreement or commitment or any order, judgment or decree to which either CPI or
CII is a party or by which either CPI or CII or any of their respective assets
or properties is bound or encumbered, except those that have already been given,
obtained or filed, all as set forth in Section 3.3 of the Disclosure Schedule.
Other than in connection with filing Articles of Merger with the Secretaries of
State of the States of Delaware and Illinois, no notice to, filing with or
authorization, consent or approval of any public body or authority is necessary
for the consummation by CPI of the transactions contemplated by this Agreement.
3.4 Subsidiaries. Except for CPI's ownership of one hundred percent
(100%) of the outstanding equity securities of CII, CPI does not own and is not
obligated to purchase any equity interest in or any other interest convertible
into or exchangeable for an equity interest in any entity.
3.5 Financial Statements. CPI has delivered to TBA (a) unaudited
balance sheets as of December 31, 1997 and 1996, (b) unaudited statements of
operations for each of the years in the two-year period ended December 31, 1997,
(c) unaudited balance sheets as of March 31, 1998, and (d) unaudited statements
of operations for the three (3) months ended March 31, 1998, for each of CPI and
CII (collectively, the "Financial Statements"). The Financial Statements have
been prepared in accordance with generally accepted accounting principles
consistently applied throughout the periods covered thereby and present fairly
the financial condition of CPI and CII as of such dates and the results of its
operations and changes in financial position for such periods. Since December
31, 1994, there have been no changes in CPI's and CII's method of accounting for
tax purposes.
3.6 Events Subsequent to Financial Statements. Except as disclosed in
the Financial Statements, since December 31, 1997, there has not been:
(a) any materially adverse change in the consolidated
financial condition, results of operations or business of either CPI or
CII;
(b) any sale, lease, transfer, license or assignment of any
material assets, tangible or intangible, of either CPI or CII, other
than in the ordinary course of business;
(c) any damage, destruction or property loss, whether or not
covered by insurance, affecting materially adversely the properties or
business of either CPI or CII;
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(d) any declaration or setting aside or payment of any
dividend or distribution with respect to the shares of capital stock of
either CPI or CII or any redemption, purchase or other acquisition of
any such shares;
(e) any mortgage or pledge of, or subjection to any material
lien, charge, security interest or encumbrance of any kind on, any of
the assets, tangible or intangible, of either CPI or CII (other than
liens arising by operation of law which secure obligations which are
not yet due and payable);
(f) any incurrence of indebtedness or liability or assumption
of obligations by either CPI or CII other than (i) those incurred in
the ordinary course of business, (ii) those which do not exceed $5,000
in the aggregate, and (iii) those incurred in the course of
negotiating, documenting and consummating the transactions contemplated
by this Agreement;
(g) any cancellation or compromise by either CPI or CII of any
material debt or claim, except for adjustments made in the ordinary
course of business which, in the aggregate, are not material;
(h) any waiver or release by either CPI or CII of any right of
any material value;
(i) except licenses of software made in the ordinary course of
business, consistently with past practice, any sale, assignment,
transfer or grant by either CPI or CII of any rights under any
concessions, leases, licenses, agreements, patents, inventions,
trademarks, trade names or copyrights or with respect to any know-how
or other intangible assets;
(j) any material arrangement, agreement or undertaking entered
into by either CPI or CII not terminable on 30 days or less notice
without cost or liability (including, without limitation, any payment
of or promise to pay any bonus or special compensation) with employees
or any increase in compensation or benefits to officers or directors of
either CPI or CII, other than in the ordinary course of business;
(k) any change made or authorized in the charter or bylaws of
either CPI or CII;
(l) any issuance, sale or other disposition by either CPI or
CII of any shares of its capital stock or other equity securities, or
any grant of any options, warrants or other rights to purchase or
obtain (including upon conversion or exercise) shares of its capital
stock or other equity securities;
(m) any loan to or other transaction with any officer,
director or shareholder of either CPI or CII giving rise to any claim
or right of either CPI or CII against any such person or of such person
against either CPI or CII;
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(n) any payment to or other transaction with any officer,
director or shareholder of either CPI or CII involving an amount in
excess of $5,000, individually or in the aggregate, other than the
payment of monthly compensation consistent with customary practice;
(o) any acceleration, termination, modification or
cancellation or threat thereof by any party of any contract, lease or
other agreement or instrument to which either CPI or CII is a party or
by which it is bound so as to affect, materially and adversely, the
properties or business of either CPI or CII; or
(p) any other material transaction or commitment entered into
other than in the ordinary course of business by either CPI or CII.
3.7 Undisclosed Liabilities. Neither CPI nor CII has material liability
or obligation whatsoever, known or unknown, either accrued, absolute, contingent
or otherwise, except to the extent shown on the Financial Statements, incurred
in the normal and ordinary course of business of CPI or CII since January 1,
1998 (provided that, liabilities or obligations incurred in connection with the
termination of employees shall not be considered liabilities incurred in the
ordinary course of business), or incurred in the course of negotiating,
documenting and consummating the transactions contemplated by this Agreement.
Neither CPI nor CII is indebted, directly or indirectly, to any person who is an
officer, director or shareholder of either CPI or CII or any affiliate of any
such person in any amount whatsoever other than for salaries for services
rendered or reimbursable business expenses, and no such officer, director,
shareholder or affiliate is indebted to either CPI or CII, except for advances
made to employees of either CPI or CII in the ordinary course of business to
meet reimbursable business expenses anticipated to be incurred by such obligor.
Neither CPI nor CII has any liability with respect to CPI's investment in Xxxx
Xxxx Interiors.
3.8 Tax Returns and Audits. For purposes of this Section 3.8, the term
"Group" shall mean, individually and collectively, (i) CPI, (ii) CII, and (iii)
any corporation or other entity for which either CPI or CII may be liable for
taxes incurred by such corporation or other entity. The taxable year of the
Group ends December 31. The Group has duly and timely filed or caused to be
filed all tax returns (the "Tax Returns") required to be filed on behalf of
itself and has paid in full or fully reserved against in the Financial
Statements all taxes, interest, penalties, assessments and deficiencies due or
claimed to be due on behalf of itself to foreign, federal, state or local taxing
authorities (including taxes on properties, income, franchises, licenses, sales,
use and payrolls). Such Tax Returns are correct in all material respects, and
the Group is not required to pay any other taxes for such periods except as
shown in such Tax Returns. Notwithstanding the preceding sentence, TBA
acknowledges that CPI intends to file amended federal income tax returns as a
result of information received during the audit of CPI by TBA. The income tax
returns filed by the Group have not been, and are not being, to the knowledge of
CPI, examined by the Internal Revenue Service or other applicable taxing
authorities for any period. All taxes or estimates thereof that are due, or are
claimed or asserted by any taxing authority to be due, have been timely and
appropriately paid so as to avoid penalties for underpayment. Except for amounts
not yet due and payable, all tax liabilities to which the properties of CPI or
CII may be subject have been paid and discharged. The
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provisions for income and other taxes payable reflected in the Financial
Statements make adequate provision for all then accrued and unpaid taxes of the
Group. There are no tax liens (other than liens for taxes which are not yet due
and payable) on any of the property of CPI or CII, nor are there any pending or
threatened examinations or tax claims asserted. The Group has not granted any
extensions of limitation periods applicable to tax claims or filed a consent
under Section 341(f) of the Code relating to collapsible corporations. Except in
jurisdictions in which CPI or CII voluntarily files tax returns, no claim has
ever been made by a taxing authority that either CPI or CII is or may be subject
to taxation by that jurisdiction. True and correct copies of all federal,
foreign, state and local income and other tax returns, notices from foreign,
federal, state and local taxing authorities, tax examination reports and
statements of deficiencies assessed against or agreed to by CPI or CII since
January 1, 1994, have been delivered to TBA, and the same are listed in Section
3.8 of the Disclosure Schedule. Neither CPI nor CII is a party to, or bound by,
any tax indemnity, tax sharing or tax allocation agreement. Neither CPI nor CII
is a party to any agreement that has resulted or would result in the payment of
any "excess parachute payments" within the meaning of Section 280G of the Code.
CPI has never been a member of an "affiliated group," as defined in Section
1504(a) of the Code (other than a group of which CPI is the common parent). All
positions taken on federal Tax Returns that could give rise to a penalty for
substantial understatement pursuant to Section 6662(d) of the Code have been
disclosed on such Tax Returns. Neither CPI nor CII is a United States real
property holding corporation as defined in Section 897 of the Code. No
shareholder of CPI is a foreign person within the meaning of Section 1445(b)(2)
of the Code. Neither CPI nor CII has made any tax elections under any section of
the Code, including, without limitation under any of Sections 108, 168, 338,
441, 463, 472, 1017, 1033 or 4977 of the Code (or any predecessor thereof). None
of the assets and properties of CPI or CII is an asset or property that TBA or
any of its affiliates is or will be required to treat as being (i) owned by any
other Person pursuant to the provisions of Section 168(f)(8) of the Internal
Revenue Code of 1954 as amended, and in effect immediately before the enactment
of the Tax Reform Act of 1986, or (ii) tax-exempt use property within the
meaning of Section 168(h)(1) of the Code. No closing agreement pursuant to
Section 7121 of the Code (or any predecessor provision) or any similar provision
of any state, local, or foreign law has been entered into by or with respect to
CPI or CII or any assets thereof. Neither CPI nor CII has agreed to or is
required to make any adjustment pursuant to Section 481(a) of the Code (or any
predecessor provision) by reason of any change in any accounting method of CPI
or CII, neither CPI nor CII has applications pending with any taxing authority
requesting permission for any changes in any accounting method of CPI or CII,
and the I.R.S. has not proposed any such adjustment or change in accounting
method therefor. Neither CPI nor CII has been or is in violation (or with notice
or lapse of time or both, would be in violation) of any applicable law relating
to the payment of withholding of taxes. Each of CPI and CII has duly and timely
withheld from salaries, wages and other compensation and paid over to the
appropriate taxing authorities all amounts required to be so withheld and paid
over for all periods under all applicable laws.
3.9 Books and Records. The general ledgers and books of account of each
of CPI and CII, all federal, state and local income, franchise, property and
other tax returns filed by each of CPI and CII, with respect to its assets, and
all other books and records of each of CPI and CII are in all material respects
complete and correct and have been maintained in accordance with good business
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practice and in accordance with all applicable procedures required by laws and
regulations in all material respects.
3.10 Real Property. Set forth in Section 3.10 of the Disclosure
Schedule is a complete and accurate list and a brief description of all real
property owned or leased by CPI and CII. With respect to each lease so set
forth, except as contemplated by this Agreement: (a) the lease has been validly
executed and delivered by CPI or CII, as applicable, and, to the knowledge of
CPI or CII, as applicable, by the other party or parties thereto and is in full
force and effect; (b) neither CPI nor CII, as applicable, and, to the knowledge
of CPI or CII, as applicable, any other party to the lease is in material breach
or default, and no event has occurred on the part of CPI or CII, as applicable
or, to the knowledge of CPI or CII, as applicable, on the part of any other
party which, with notice or lapse of time, would constitute such a breach or
default or permit termination, modification or acceleration under the lease; (c)
the lease will continue to be binding in accordance with its terms following the
consummation of the Merger; (d) neither CPI nor CII, as applicable, has
repudiated and, to the knowledge of CPI or CII, as applicable, no other party to
the lease has repudiated any provision thereof; (e) there are no disputes, oral
agreements or delayed payment programs in effect as to the lease; and (f) all
facilities leased thereunder have been approved by all necessary governmental
authorities, have been maintained in accordance with normal industry practice
and are in good condition, working order and repair.
3.11 Tangible Property. CPI and CII have good and marketable title to,
or a valid leasehold interest in, each item of tangible property, whether real,
personal or mixed, reflected on its books and records as owned or used by it,
subject to no material encumbrances, loans, security interests, mortgages or
pledges.
3.12 Intellectual Property.
(a) Section 3.12(a) of the Disclosure Schedule sets forth a
list of intellectual property owned by CPI and CII including all
patents, patent applications, trademarks, service marks, trade dress,
trade names, trade secrets, corporate names, customer lists,
copyrights, mask works, technology or intellectual property that are
material to the business of CPI and CII and registrations or
applications to register any of the foregoing and a list of all
licenses or other contracts related thereto (collectively, the
"Intellectual Property"). With respect to each such item of
Intellectual Property:
(i) CPI or CII, as applicable, is the sole and
exclusive owner and has the sole and exclusive right to use
the item in the conduct of its business;
(ii) no proceedings have been instituted, are pending
or are threatened which challenge the validity,
enforceability, use or ownership thereof;
(iii) the item (A) does not infringe upon or
otherwise violate the rights of others, (B) to the knowledge
of CPI or CII, as applicable, is not being infringed upon
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by others and (C) is not subject to any outstanding order,
decree, judgment, stipulation or charge;
(iv) no license, sublicense or agreement pertaining
to the item has been granted by CPI or CII, as applicable;
(v) Neither CPI nor CII has received any charge of
interference or infringement with respect to the item;
(vi) except in the ordinary course of business, CPI
or CII, as applicable, has not agreed to indemnify any person
or entity for or against any infringement with respect to the
item;
(vii) the transactions contemplated by this Agreement
will have no material adverse effect on the right, title and
interest of CPI or CII, as applicable, in the item;
(viii) CPI or CII, as applicable, has taken all steps
which are commercially reasonable to protect the rights set
forth in Section 3.12(a) of the Disclosure Schedule and will
continue to use commercially reasonable efforts to maintain
those rights prior to the Effective Time so as to not
materially adversely affect the validity or enforcement of
such rights; and
(ix) CPI or CII, as applicable, has supplied TBA with
true and complete copies of all written documentation
evidencing its ownership of the item and of all licenses and
other contracts related thereto.
(b) Section 3.12(b) of the Disclosure Schedule sets forth a
list describing all patents, trademarks, trade names, service marks,
copyrights, trade secrets and mask works of others which CPI or CII, as
applicable, practices or uses that are material to CPI or CII, as
applicable. With respect to each such item of intellectual property:
(i) any license agreement covering the item is a
valid and binding agreement, has been validly executed and
delivered by CPI or CII, as applicable, and, to the knowledge
of CPI or CII, as applicable, by the other parties thereto and
is in full force and effect;
(ii) no event has occurred which constitutes a breach
of such license agreement, CPI or CII, as applicable, has not
repudiated and, to the knowledge of CPI or CII, as applicable,
no other party thereto has repudiated any provision thereof
and there are no disputes, oral arrangements or delayed
payment programs in effect as to any such license agreement;
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19
(iii) CPI or CII, as applicable, has supplied TBA
with a true and complete copy of the license agreement;
(iv) the transactions contemplated by this Agreement
will have no material adverse effect on the ability of CPI or
CII, as applicable, to continue using or practicing each such
item; and
(v) Neither CPI nor CII, as applicable, is aware of
any claim that the exercise of the rights granted to CPI or
CII, as applicable, with respect to such item infringes upon
the intellectual property rights of any third party.
(c) Neither CPI nor CII, as applicable, has infringed,
misappropriated or otherwise violated any intellectual property rights
of any third party. Neither CPI nor CII, as applicable, is aware of any
infringement, misappropriation or violation with respect to
intellectual property which will occur as a result of the continued
operation of the business of CPI or CII, as applicable, as now
conducted or as presently proposed to be conducted.
(d) CPI and CII have taken commercially reasonable security
measures to protect the security, confidentiality and value of all the
material intellectual property owned by it.
3.13 Contracts. Section 3.13 of the Disclosure Schedule lists the
following contracts and written arrangements, true and complete copies of which
have been delivered to TBA, to which CPI and/or CII is a party:
(a) any contract for the lease of personal property from or to
third parties providing for lease payments in excess of $5,000.00 per
annum;
(b) any contract for the purchase or sale of supplies,
products manufactured by CPI or CII or other personal property or for
the furnishing or receipt of services which contract calls for
performance over a period of more than one year or which involves more
than the sum of $5,000.00;
(c) any joint venture agreement;
(d) any agreement or instrument under which either CPI or CII
is or may become indebted for borrowed money;
(e) any noncompetition agreement;
(f) any other contract in which the consequences of a default
or termination would have a materially adverse effect on the financial
condition of CPI or CII or on the prospects or the conduct of the
business of CPI or CII;
(g) any standard form of license agreement; and
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(h) any other contract or arrangement not entered into in the
ordinary course of business.
All contracts and arrangements listed in Section 3.13 of the Disclosure Schedule
are valid and binding agreements of CPI or CII, as applicable. Neither CPI nor
CII is, as applicable, and, to the knowledge of CPI or CII, as applicable, no
other party is in breach or default, and no event has occurred on the part of
CPI or CII, as applicable, or, to the knowledge of CPI or CII, as applicable, on
the part of any other party to any such contract or arrangement which with
notice or lapse of time would constitute a breach or default or permit
termination under any such contract or arrangement. None of such contracts or
arrangements will be terminated or modified by the consummation of the Merger.
CPI and CII have previously made available to TBA all of the material service
agreements of CPI and CII with their customers. Neither CPI nor CII is a party
to any verbal contract or arrangement which, if reduced to written form, would
be required to be listed in Section 3.13 of the Disclosure Schedule under the
terms of subsections (a)-(h) of this Section 3.13.
3.14 Suppliers and Customers. Section 3.14 of the Disclosure Schedule
is a true and correct list of all suppliers of CPI and CII to whom CPI or CII
made payments, during the fiscal year ended December 31, 1997, in excess of five
percent of CPI's or CII's respective gross revenues, as applicable, as reflected
in the Financial Statements for such year and all customers of CPI and CII that
paid CPI or CII, during the fiscal year ended December 31, 1996, more than five
percent of the gross revenues of either of CPI or CII as reflected in the
Financial Statements for such year. Since December 31, 1996, no material
customer of CPI or CII has notified CPI or CII that it will substantially
decrease or cease doing business with CPI or CII.
3.15 Notes; Accounts Receivable. As of the Effective Time, all notes
payable to and accounts receivable of CPI and CII will be properly reflected on
their respective books and records and will be valid receivables subject to no
setoffs or counterclaims.
3.16 Powers of Attorney. There are no outstanding material powers of
attorney or similar instruments executed by either CPI or CII.
3.17 Condition of Property. Each building, fixture, machine and piece
of equipment (having a net book value of $5,000.00 or more) owned or used by CPI
or CII is in good operating condition and repair, subject to normal wear and
tear, and is in compliance with all zoning, building and fire codes in all
material respects. Each of CPI and CII owns or leases under valid lease all
buildings, machinery, equipment and other tangible assets used in the conduct of
its business as presently conducted.
3.18 Insurance. CPI and CII are insured under the policies listed in
Section 3.18 of the Disclosure Schedule (the "Insurance Policies"). The
Insurance Policies are in full force and effect. All premiums due on the
Insurance Policies or renewals thereof have been paid and there is no default by
either CPI or CII under any of the Insurance Policies.
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3.19 Litigation. Section 3.19 of the Disclosure Schedule sets forth any
instances in which (a) CPI or CII is subject to any judgment or order (other
than orders of general applicability) of any court or quasi-judicial or
administrative agency of any jurisdiction, domestic or foreign, or where there
is any charge, complaint, lawsuit or governmental investigation pending or
threatened against CPI or CII; or (b) CPI or CII is a plaintiff in any action,
domestic or foreign, judicial or administrative, or any such action exists in
which a counterclaim against CPI or CII is pending or might be brought. None of
the actions, suits, proceedings or investigations set forth in Section 3.19
of the Disclosure Schedule could result in any adverse change in the condition,
financial or otherwise, of CPI or CII, the same being fully reserved against in
the Financial Statements. There are no unsatisfied judgments, orders (other than
orders of general applicability), decrees or stipulations affecting CPI or CII
or to which CPI or CII is a party and there is no reason to believe that any
such action, suit, proceeding or investigation may be brought or threatened
against CPI or CII.
3.20 Employees. Each of CPI and CII has listed in Section 3.20 of the
Disclosure Schedule and has furnished to TBA true and complete copies of: (a)
any written employment agreements with officers and directors of CPI and CII;
and (b) any written employment agreements with its employees which by their
terms may not be terminated by CPI and CII, as applicable, at will or which
xxxxx xxxxxxxxx payments. Neither CPI nor CII has entered into any similar oral
employment agreements. To CPI's and CII's knowledge, no key employee or group of
employees has any plans to terminate employment with CPI or CII. Neither CPI nor
CII is a party to or bound by any collective bargaining agreement. There are no
loans or other obligations payable or owing by CPI or CII to any shareholder,
officer, director or employee of CPI or CII (except salaries and wages incurred
and accrued in the ordinary course of business), nor are there any loans or
debts payable or owing by any of such persons to CPI or CII or any guarantees by
CPI or CII of any loan or obligation of any nature to which any such person is a
party. Each of CPI and CII has complied in all material respects with all laws
and regulations which relate to the employment of labor, employee civil rights
or equal employment opportunities.
3.21 Employee Benefit Plans. Each of CPI and CII has listed in Section
3.21 of the Disclosure Schedule and has furnished to TBA true and complete
copies of (a) any nonqualified deferred or incentive compensation or retirement
plans or arrangements, (b) any qualified retirement plans or arrangements, (c)
any other employee compensation, severance or termination pay or welfare benefit
plans, programs or arrangements and (d) any related trusts, insurance contracts
or other funding arrangements maintained, established or contributed to by CPI
or CII or to which CPI or CII is a party or otherwise is bound ("CPI/CII
Employee Benefit Plans"). Except as required by law, neither CPI nor CII
maintains or contributes or has ever maintained or contributed to any funded or
unfunded medical, health or life insurance plan or arrangement for retirees or
terminated employees. Neither CPI nor CII contributes or has any obligation to
make and has never contributed or had any obligation to make any payment or
contribution to a "multiemployer plan," as that term is defined in Section 3(37)
of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
and neither CPI nor CII has any actual or potential liability under Section 4201
of ERISA for any complete or partial withdrawal from a multiemployer plan.
Neither CPI nor CII maintains, contributes to or has any liability with respect
to any employee pension benefit plan (as
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defined in Section 3(2) of ERISA) which is intended to meet the requirements of
a qualified plan under Section 401(a) of the Code. Neither CPI nor CII
maintains, contributes to or has any liability with respect to a plan which is
subject to Title IV of ERISA or Section 412 of the Code. With respect to the
employee benefit plans listed in Section 3.21 of the Disclosure Schedule, CPI
and CII have furnished to TBA true and complete copies of (i) any summary plan
description or other employee communication materials, (ii) the latest financial
statements and annual reports, and (iii) all documents filed with the Internal
Revenue Service or the Department of Labor since December 31, 1994. All employee
benefit plans and related trusts listed in Section 3.21 of the Disclosure
Schedule and maintained or contributed to by CPI or CII or with respect to which
CPI or CII now has or has ever had any liability or potential liability comply
in form and in operation with all requirements of ERISA and the Code. All
required reports with respect to such plans required by applicable law have been
filed and all contributions or payments presently anticipated hereunder have
been made or properly accrued. No applications for rulings, determination
letters, advisory opinions or prohibited transaction exemptions are currently
pending before Internal Revenue Service, the Department of Labor or the Pension
Benefit Guaranty Corporation with respect to any such employee benefit plans or
arrangements or any related trusts. None of such employee benefit plans or
arrangements, any related trusts, the trustees of any related trusts or the
directors, officers and employees of CPI or CII is the subject of any lawsuit,
arbitration or other proceeding concerning any benefit claim or other
benefit-related matter (other than routine claims in the ordinary course of
business), and there have been no prohibited transactions as described in
Section 406 of ERISA or as defined in Section 4975 of the Code with respect to
any such plan. Neither CPI, CII, their respective directors, officers and
employees nor any other fiduciary, as such term is defined in Section 3 of
ERISA, has committed any breach of fiduciary responsibility imposed by ERISA or
any other applicable law which would subject CPI or CII or their respective
directors, officers and employees to liability under ERISA or any applicable
law.
3.22 Guarantees. Neither CPI nor CII is a guarantor or otherwise liable
for any material indebtedness of any other person, firm or corporation other
than endorsements for collection in the ordinary course of business.
3.23 Legal Compliance. Each of CPI and CII and each of their respective
directors, officers and employees (the individuals only in their capacities as
representatives of CPI or CII) has complied in all material respects with all
applicable laws and regulations of foreign, federal, state and local governments
and all agencies thereof, and no claim has been filed against CPI or CII
alleging a violation of any such laws or regulations. Each of CPI and CII holds
all of the material permits, licenses, certificates or other authorizations of
foreign, federal, state or local governmental agencies required for the conduct
of its business as presently conducted or proposed to be conducted. Neither CPI
nor CII, nor any director, officer, agent, partner or employee thereof or any
other person associated with or acting for or on behalf of either CPI or CII has
directly or indirectly (a) made or agreed to make any contribution, gift, bribe,
rebate, payoff, influence payment, kickback or other payment (whether in cash or
otherwise) to any person, private or public, regardless of form, whether in
money, property, or services, in violation of any applicable law, rule or
regulation (i) to obtain favorable treatment in securing business, (ii) to pay
for favorable treatment for business secured, (iii) to obtain special
concessions or for special concessions already obtained, for or in respect of
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either CPI or CII, or (iv) to pay for any lobbying or similar services or (b)
established or maintained any fund or asset that has not been recorded in the
books and records of either CPI or CII.
3.24 Certain Business Relationships. To the knowledge of CPI and CII,
none of the present or former shareholders, directors, officers or employees of
CPI or CII owns, directly or indirectly, any interest in any business,
corporation or other entity (other than investments in publicly held companies)
which, on the date hereof or within the past 12 months, has been involved in any
manner in any business arrangement or relationship with CPI or CII, and none of
the foregoing persons owns any property or rights, tangible or intangible, which
are used in the business of CPI or CII.
3.25 Broker's Fees. Neither CPI nor CII nor anyone on their behalf has
any liability to any broker, finder, investment banker or agent, or has agreed
to pay any brokerage fees, finder's fees or commissions, or to reimburse any
expenses of any broker, finder, investment banker or agent in connection with
the Merger or any similar transaction.
3.26 Environment, Health and Safety. Neither CPI nor CII is in
noncompliance with environmental, health and safety laws, and no action, suit,
proceeding, hearing, investigation, charge, complaint, claim, demand or notice
has been held or commenced against either CPI or CII alleging any failure so to
comply. Each of CPI and CII has obtained and been in compliance with all of the
material terms and conditions of all permits, licenses and other authorizations
which are required under, and have complied with all other material limitations,
restrictions, conditions, standards, prohibitions, requirements, obligations,
schedules, laws, and timetables which are contained in, all applicable
environmental, health and safety laws.
3.27 Disclosure. The representations and warranties and statements of
fact made by CPI and/or CII in this Agreement, in the Disclosure Schedule and in
certificates and other written statements or agreements delivered or to be
delivered pursuant to this Agreement are accurate, correct and complete in all
material respects on the date of this Agreement and will, except as contemplated
hereby, be accurate, correct and complete in all material respects at the
Effective Time and do not and will not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements and information contained herein or therein not misleading.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS
Except as set forth in the correspondingly numbered section of the
Disclosure Schedule, each Shareholder severally represents and warrants to TBA
as to himself or herself only and not with respect to any other Shareholder as
follows:
4.1 Representations Regarding Shares of CPI.
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(a) Such Shareholder is the record and beneficial owner of and has good
title to the shares of CPI Common Stock set forth opposite his or her name on
Annex II attached hereto, free and clear of any and all restrictions, voting
rights or agreements, liens, charges, encumbrances, options and adverse claims
or rights whatsoever. Annex II attached hereto sets forth the number of all
shares of capital stock of CPI owned by each of the Shareholders, and all such
shares collectively represent all the issued and outstanding shares of CPI.
(b) Such Shareholder has the full right, power and authority to enter
into this Agreement.
(c) Such Shareholder is not a party to, subject to or bound by any
agreement or any judgment, order, writ, prohibition, injunction or decree of any
court or other governmental body which would prevent the execution or delivery
of this Agreement by such Shareholder.
(d) No broker or finder has acted for such Shareholder in connection
with this agreement or the transactions contemplated hereby, and no broker or
finder is entitled to any brokerage or finder's fee or other commissions in
respect of such transactions based upon agreements, arrangements or
understandings made by or on behalf of such Shareholder.
4.2 Investment Representations.
(a) Such Shareholder is acquiring TBA Common Stock in the
Merger for his or her own account for investment and not with a view
to, or for sale in connection with, any distribution thereof, nor with
any present intent of distributing or selling his or her shares.
(b) Such Shareholder has reviewed the representations
concerning TBA contained in this Agreement and has made or has had the
opportunity to make inquiry concerning TBA. Such Shareholder has
sufficient knowledge and experience so as to be able to evaluate the
risks and merits of his or her investment in TBA, and he or she is able
financially to bear the risks thereof. Such Shareholder is entering
into the transactions contemplated herein based on his or her own
assessments of the merits and risks, upon his or her own experience as
an officer and/or shareholder of CPI and is not relying on any business
plan, projections, valuations or other financial information provided
to such Shareholder by TBA (other than the TBA SEC Documents). Such
Shareholder further acknowledges and agrees that TBA and Merger Sub
have made no assurances of any nature whatsoever regarding the future
operations of TBA and Merger Sub and have made no guarantees as to the
profitability of an investment therein. Shareholder further
acknowledges that he or she is an accredited investor as defined in
Rule 501 of Regulation D of the Securities Act.
(c) Such Shareholder acknowledges that Surviving Corporation
is a newly-formed entity with no history of operations.
(d) Such Shareholder understands that the certificates of TBA
Common Stock to be issued to him or her pursuant to this Agreement will
bear a restrictive legend in substantially the following form:
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The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended, and
may not be offered, sold or otherwise transferred, pledged or
hypothecated unless and until such shares are registered under
such Act or an opinion of counsel satisfactory to TBA is
obtained to the effect that such registration is not
required."
The foregoing legend shall be removed from the certificates, at the
request of the holder thereof, at such time as they become registered for resale
or eligible for resale pursuant to Rule 144(k) under the Securities Act.
4.3 Authorization. This Agreement and all such other agreements and
obligations entered into and undertaken in connection with the transactions
contemplated hereby to which each of the Shareholders is a party constitute the
valid and legally binding obligations of such Shareholder, enforceable against
such Shareholder in accordance with their respective terms, except as
enforceability may be limited or affected by applicable bankruptcy, insolvency,
moratorium, reorganization or other laws of general application relating to or
affecting creditors' rights generally.
The execution, delivery and performance by each of the Shareholders of
this Agreement and the agreements provided for herein, and the consummation by
each of the Shareholders of the transactions contemplated hereby and thereby,
will not, with or without the giving of notice or the passage of time or both,
(a) violate the provisions of any law, rule or regulation applicable to each of
the Shareholders; (b) violate any judgment, decree, order or award of any court,
governmental body or arbitrator; or (c) conflict with or result in the breach or
termination of any term or provision of, or constitute a default under, or cause
any acceleration under, or cause the creation of any lien, charge or encumbrance
upon the properties or assets of such Shareholder pursuant to, any indenture,
mortgage, deed of trust or other instrument or agreement to which such
Shareholder is a party or by which such Shareholder or any of his or her
properties is or, to the knowledge of such Shareholder, may be bound, except for
violations or conflicts which individually or in the aggregate would not have a
material adverse effect on CPI's and CII's financial condition or results of
operation.
ARTICLE 5
CONDUCT OF BUSINESS PENDING THE MERGER
5.1 Conduct of Business by CPI and CII Pending the Merger. Each of CPI
and CII covenants and agrees that, prior to the Effective Time, unless TBA shall
otherwise approve in writing (which approval will not be unreasonably withheld)
or as otherwise expressly contemplated or permitted by this Agreement:
(a) Each of CPI and CII shall conduct its business and
operations, including its cash management practices, the collection of
receivables, maintenance of facilities and payment of payables, only in
the usual and ordinary course of business and consistent with past
custom and practice in all material respects;
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(b) Except for the acquisition by CPI of two hundred (200)
shares of the capital stock of CII on July 1, 1998, neither CPI nor CII
shall directly or indirectly do any of the following: (i) sell, pledge,
dispose of or encumber any material portion of its assets, except in
the ordinary course of business; (ii) amend or propose to amend its
charter or bylaws; (iii) split, combine or reclassify any outstanding
shares of its capital stock, or declare, set aside or pay any dividend
or other distribution payable in cash, stock, property or otherwise
with respect to shares of its capital stock; (iv) redeem, purchase or
acquire or offer to acquire any shares of its capital stock or other
securities; (v) create any subsidiaries; or (vi) enter into or modify
any contract, agreement, commitment or arrangement with respect to any
of the matters set forth in this Section 5.1(b);
(c) Neither CPI nor CII shall (i) issue, sell, pledge or
dispose of, or agree to issue, sell, pledge or dispose of, any
additional shares of, or any options, warrants, conversion privileges
or rights of any kind to acquire any shares of, its capital; (ii)
acquire (by merger, consolidation, acquisition of stock or assets or
otherwise) any corporation, partnership or other business organization
or division or material assets thereof; (iii) incur any material
indebtedness for borrowed money, issue any debt securities or guarantee
any indebtedness to others; or (iv) enter into or modify any contract,
agreement, commitment or arrangement with respect to any of the
foregoing;
(d) Neither CPI nor CII shall (i) enter into or modify any
employment, severance or similar agreements or arrangements with, or
grant any bonus, salary increase, severance or termination pay to, any
officers or directors; or (ii) in the case of employees who are not
officers or directors, take any action other than in the ordinary
course of business and consistent in all material respects with past
practice (none of which shall be unreasonable or unusual) with respect
to the grant of any bonuses, salary increases, severance or termination
pay or with respect to any increase of benefits payable in effect on
January 1, 1998;
(e) Neither CPI nor CII shall adopt or amend any bonus, profit
sharing, compensation, stock option, pension, retirement, deferred
compensation, employment or other employee benefit plan, agreement,
trust, fund or arrangement for the benefit or welfare of any employee;
(f) except as otherwise required by its charter or bylaws, by
this Agreement or by applicable law, and except in connection with the
acquisition on July 1, 1998 by CPI of two hundred (200) shares of the
capital stock of CII, neither CPI nor CII shall call any meeting of its
shareholders and, with respect to any meeting of its shareholders
called by CPI or CII, as applicable, shall provide to TBA copies of all
written materials and other information given to the shareholders prior
to the time such materials and information are given to the
shareholders;
(g) Each of CPI and CII shall use commercially reasonable
efforts to cause its current insurance (or reinsurance) policies not to
be cancelled or terminated or any of the coverage thereunder to lapse,
unless simultaneously with such termination, cancellation or
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lapse, replacement policies underwritten by insurance and reinsurance
companies of nationally recognized standing providing coverage equal to
or greater than the coverage under the cancelled, terminated or lapsed
policies for substantially similar premiums are in full force and
effect;
(h) Each of CPI and CII shall (i) use commercially reasonable
efforts to preserve intact its business organization and goodwill, keep
in full force and effect all material rights, licenses, permits and
franchises relating to its business, keep available the services of its
officers and employees as a group and maintain satisfactory
relationships with suppliers, distributors, customers and others having
business relationships with it; (ii) report on a regular and frequent
basis, at reasonable times, to representatives of TBA regarding
operational matters and the general status of ongoing operations; (iii)
use commercially reasonable efforts not to take any action which would
render, or which reasonably may be expected to render, any
representation or warranty made by it in this Agreement untrue in any
material respect at any time prior to the Effective Time if then made;
and (iv) notify TBA of any emergency or other change in the normal
course of their respective business or in the operation of their
properties and of any tax audits, tax claims, governmental or third
party complaints, investigations or hearings (or communications
indicating that the same may be contemplated) if such emergency,
change, audit, claim, complaint, investigation or hearing would be
material, individually or in the aggregate, to the financial condition,
results of operations or business of CPI or CII, or to the ability of
CPI, CII, Merger Sub or TBA to consummate the transactions contemplated
by this Agreement;
(i) Each of CPI and CII shall deliver to TBA promptly (but in
any event within two business days) after the discovery or receipt of
notice of any default under any material agreement to which it is a
party or any other material adverse event or circumstance affecting CPI
or CII (including the filing of any material litigation against CPI or
CII or the existence of any dispute with any person or entity which
involves a reasonable likelihood of such litigation being commenced), a
certificate of the President of each of CPI or CII, as applicable,
specifying the nature and period of the existence thereof and what
actions CPI or CII has taken and proposes to take with respect thereto;
(j) Each of CPI and CII shall use commercially reasonable
efforts to maintain its assets in customary repair, order and
condition, replace in accordance with past practice its inoperable,
worn out or obsolete assets with assets of quality at least comparable
to the original quality of the assets being replaced and maintain in
all material respects its books, accounts and records in accordance
with past custom and practice as used in the preparation of the
Financial Statements;
(k) Each of CPI and CII shall use commercially reasonable
efforts to maintain in full force and effect the existence of all
material patents, inventions, trademarks, service marks, trade dress,
trade names, corporate names, copyrights, mask works, trade secrets,
licenses, computer software, data and documentation and other
proprietary rights, which it uses or owns;
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(l) Each of CPI and CII shall have positive working capital at
the Effective Time;
(m) Each of CPI and CII shall comply in all material respects
with all legal requirements and contractual obligations applicable to
its operations and business and pay all applicable taxes; and
(n) Neither CPI nor CII shall enter into any contract (except
for artist performances) requiring payments in excess of $5,000 or for
a duration of more than one (1) year.
For purposes of this Section 5.1, should TBA fail to approve in writing
any action for which its approval is required pursuant to this Section 5.1
within three (3) business days after its receipt of a written request for
approval in accordance with the notice requirements contained herein, the matter
shall be deemed approved by TBA. Notwithstanding the foregoing, in the event
"time is of the essence" with respect to a pending contract, the verbal approval
by Xxxx Xxxxxx of Avalon Entertainment Group, Inc., a wholly-owned subsidiary of
TBA, will be sufficient to satisfy this requirement provided a facsimile of the
contract to be approved has been previously sent to Xxxxxx Xxxxxxxxxxx of TBA.
Notwithstanding any other provision of this Agreement, the amendment or
modification of the Disclosure Schedule by CPI or CII after the time TBA has
signed this Agreement shall have no effect with respect to the agreements,
covenants and obligations of CPI, CII, TBA and Merger Sub pursuant to this
Section 5.1 and Sections 7.2 and 7.3 of this Agreement.
5.2 No Other Bids for CPI. CPI shall not, nor either authorize or
knowingly permit any officer, director, shareholder or employee of, or any
investment banker, attorney, accountant or other representative retained by, CPI
to, make, solicit, initiate, encourage or respond to a submission of a proposal
or offer from any person or entity (other than TBA) relating to any liquidation,
dissolution, recapitalization, merger, consolidation or acquisition or purchase
of all or a material portion of the assets of, or any equity interest in, CPI or
CII or other similar transaction or business combination involving CPI or CII
(hereinafter collectively referred to as a "Third Party Offer"). Neither CPI nor
CII will participate in any negotiations regarding, or furnish to any person or
entity (other than TBA) any information with respect to, or otherwise cooperate
in any way with, or assist or participate in, facilitate or encourage, any
effort or attempt by any person or entity (other than TBA) to do or seek any of
the foregoing. Each of CPI and CII will immediately cease and cause to be
terminated any contacts or negotiations currently pending with respect to Third
Party Offers, if any, and shall use its best efforts to cause all reports,
material, data and other written information heretofore disseminated by it or on
its behalf by any such officer, director or employee or any investment banker,
attorney, accountant or other representative in connection with any such Third
Party Offer or any inquiry or proposal related thereto to be promptly returned
to it. Each of CPI and CII shall promptly notify TBA of the receipt of any Third
Party Offer or any inquiry or communication which might reasonably be expected
to lead to any Third Party Offer and will provide TBA with all information that
TBA may reasonably request with respect thereto.
5.3 Lines of Business and Capital Expenditures. Unless approved in
writing by TBA, each of CPI and CII covenants that it will not (a) enter into
any new material line of business;
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(b) change its investment, liability management and other material policies in
any material respect; or (c) incur or commit to any capital expenditures,
obligations or liabilities in connection therewith.
5.4 Accounting Methods. Unless approved in writing by TBA, each of CPI
and CII covenants that it will not change its methods of accounting in effect at
December 31, 1997, except as required by changes in generally accepted
accounting principles as concurred in by CPI's independent accountants.
Notwithstanding the provisions of the preceding sentence, each of CPI and CII
will, at their expense, have their financial statements converted to accrual
basis statements prepared in accordance with generally accepted accounting
principles for the fiscal years ended 1996 and 1997 and for the quarter ended
March 31, 1998. Expenses incurred by CPI and CII to comply with such conversion
and any accounting and legal fees incurred in connection with the transactions
contemplated by this Agreement, may be expensed in 1998, prior to Closing, up to
the amount by which actual consolidated stockholders' equity of CPI and CII as
of December 31, 1997, exceeds $245,000.
5.5 Other Actions. Unless approved in writing by TBA, each of CPI and
CII covenants that it shall not take any action that would or might reasonably
be expected to result in any of the representations and warranties of CPI and
CII set forth in this Agreement becoming untrue in any material respect after
the date hereof or any of the conditions to the Merger set forth in Article 7 of
this Agreement not being satisfied.
5.6 Conduct of Business by Merger Sub. Prior to the Effective Time, TBA
covenants that Merger Sub will not conduct any business activities and will not
incur any material liabilities.
ARTICLE 6
ADDITIONAL AGREEMENTS
6.1 Action of Shareholders. CPI shall take all action in accordance
with the IBCA and its charter and bylaws to cause its shareholders promptly to
consider and vote upon this Agreement and the Plan of Merger and the
transactions contemplated hereby and thereby, and shall take all other action
necessary or, in the opinion of TBA, helpful, to secure a vote of CPI's
shareholders in favor of adoption of this Agreement and the Plan of Merger and
the transactions contemplated hereby and thereby.
6.2 Expenses. Except as otherwise provided herein, all costs and
expenses incurred in connection with this Agreement and the other agreements
contemplated hereby and the transactions contemplated hereby and thereby shall
be paid by the party incurring such expenses. All costs and expenses incurred by
TBA and Merger Sub in connection with this Agreement shall be borne by TBA.
6.3 Notification of Certain Matters. Each party shall give prompt
notice to the others of (a) the occurrence or failure to occur of any event,
which occurrence or failure would result in any
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Material Adverse Breach (as defined in Section 10.8 of this Agreement), and (b)
any failure of such party, or any officer, director, employee or agent thereof,
to comply with or satisfy any covenant, condition or agreement to be complied
with or satisfied hereunder.
6.4 Access to Information. From the date hereof to the Effective Time,
each of CPI, CII, Merger Sub and TBA shall, and shall cause its respective
officers, directors, employees and agents to, afford the officers, employees,
agents and representatives of the other parties hereto (including the
Shareholders) complete access at all reasonable times to such officers,
employees and agents and its properties, books and records (all such access to
be arranged through the respective officers of the parties hereto so as not to
be unreasonably disruptive to any of the parties), and shall furnish each of
such parties all financial, operating, personnel, compensation, tax and other
data and information as such parties, through their respective officers,
employees, agents or representatives, may request.
6.5 Shareholder Claims. CPI shall not settle or compromise any claim
brought by any present, former or purported holder of any securities of CPI or
CII in connection with the Merger prior to the Effective Time without the prior
written consent of TBA.
6.6 Taking of Necessary Action. Subject to the terms and conditions of
this Agreement, each of the parties hereto agrees, subject to applicable laws,
to use all reasonable efforts promptly to take or cause to be taken all action
and promptly to do or cause to be done all things necessary, proper or advisable
under applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement. Without limiting the foregoing,
CPI, CII, Merger Sub and TBA shall use their best efforts to maintain and make
all filings with and obtain all consents, approvals, and/or assurances from
third parties and appropriate governmental agencies and authorities necessary
or, in the opinion of CPI, CII or TBA, advisable for the consummation of the
transactions contemplated by this Agreement. Each party shall cooperate with the
other in good faith to help the other satisfy its obligations in this Section
6.6.
6.7 Notice of Changes. Each of CPI, CII and TBA shall each promptly
inform the other in writing if any change shall have occurred or shall have been
threatened (or any development shall have occurred or shall have been threatened
involving a prospective change) in its financial condition, results of
operations or business that is or may reasonably be expected to have a material
adverse effect on its financial condition, results of operations or business.
6.8 Press Releases. CPI and TBA shall consult with each other as to the
form and substance of any press release or other public disclosure of matters
related to this Agreement or any of the transactions contemplated hereby;
provided, however, that nothing in this Section 6.8 shall be deemed to prohibit
any party hereto from making any disclosure that is required to fulfill such
party's disclosure obligations imposed by law, including, without limitation,
federal securities laws.
6.9 Employee Matters. TBA and CPI agree that all employees of CPI and
CII immediately prior to the Effective Time shall be employed by the Surviving
Corporation and CII, as applicable, immediately after the Effective Time at such
level of pay which is mutually agreed
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upon between each employee and TBA, it being understood that TBA shall not have
any obligations to continue employing such employees for any length of time or
at any level of pay for any length of time thereafter, except as set forth in
binding agreements of employment. In the event the CPI Employee Benefit Plans
are not continued after the Effective Time, CPI employees will be eligible to
participate in TBA's comparable employee benefit plans.
ARTICLE 7
CONDITIONS TO MERGER
7.1 Conditions to Obligations of Each Party to Effect the Merger. The
respective obligations of each party to effect the Merger shall be subject to
the fulfillment at or prior to the Effective Time of the following conditions:
(a) this Agreement and the Plan of Merger shall have been
adopted and approved by the Board of Directors of CPI and by the vote
of the shareholders of CPI holding at least a majority of the
outstanding shares of CPI;
(b) no order shall have been entered and remain in effect in
any action or proceeding before any foreign, federal or state court or
governmental agency or other foreign, federal or state regulatory or
administrative agency or commission that would prevent or make illegal
the consummation of the transactions contemplated hereby; and
(c) the Shareholders shall have provided TBA with written
agreements not to sell, assign, convey, encumber or otherwise transfer
shares of TBA Common Stock acquired pursuant to this Agreement for a
period of one year following the Closing Date, provided however, the
Shareholders shall be entitled to assign and transfer all or a portion
of their TBA Common Stock to employees of CPI or CII provided such
employees enter into written agreements not to sell, convey, encumber
or otherwise transfer such shares for the remainder of such one-year
period.
7.2 Additional Conditions to TBA's and Merger Sub's Obligations. The
obligations of TBA and Merger Sub to effect the Merger are subject to the
satisfaction of the following conditions on or before the Effective Time:
(a) Except for breaches which do not constitute a Material
Adverse Breach (as defined in Section 10.8 of this Agreement) by CPI,
CII or the Shareholders, the representations and warranties set forth
in Articles 3 and 4 of this Agreement (without regard to any amendments
or modifications of the Disclosure Schedule by CPI after the time TBA
has signed this Agreement) will be true and correct as of the date
hereof and at and as of the Effective Time, as though then made and as
though the Effective Time were substituted for the date of this
Agreement throughout such representations and warranties and with
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appropriate modifications of tense with respect to representations and
warranties made as of a specified date;
(b) Each of CPI and CII shall have performed, in all material
respects, each obligation and agreement and complied, in all material
respects, with each covenant to be performed and complied with by it
under this Agreement prior to the Effective Time, including, without
limitation, all of its agreements contained in Article 6 of this
Agreement;
(c) Except as otherwise disclosed on the Disclosure Schedule,
all consents by governmental or regulatory agencies or otherwise that
are required for the consummation of the transactions contemplated
hereby or that are required for TBA to own, operate or control CPI or
any portion of the assets of CPI or to prevent a breach of or a default
under or a termination of any agreement material to CPI or CII to which
CPI or CII is a party or to which any material portion of the assets of
CPI or CII is subject, will have been obtained;
(d) No action or proceeding before any court or governmental
body will be pending or threatened wherein a judgment, decree or order
would prevent any of the transactions contemplated hereby or cause such
transactions to be declared unlawful or rescinded or which might
adversely affect the right of TBA to own, operate or control CPI or any
material portion of the assets of CPI or the value of the assets of
CPI;
(e) On or prior to the Effective Time, each of the
Shareholders shall have entered into employment agreements with CPI or
CII, as applicable, substantially in the form of Exhibit D attached
hereto dated as of the Closing Date (the "Employment Agreements") and
each Shareholder shall have terminated any employment, compensation,
consulting, fee, services or other similar agreements payable to him or
her, or to his or her affiliated entities, if any;
(f) At the Effective Time, CPI will have delivered to TBA and
Merger Sub the following:
(i) a certificate executed on behalf of CPI by its
President stating that the conditions set forth in Sections
7.2(a) through 7.2(d) of this Agreement have been satisfied;
(ii) certified copies of the resolutions duly adopted
by CPI's Board of Directors recommending the Merger and the
Plan of Merger, authorizing the execution, delivery and
performance of this Agreement, the Plan of Merger, and the
other agreements contemplated hereby and thereby;
(iii) certified copies of the resolutions duly
adopted by CPI's shareholders approving the Merger and the
Plan of Merger and authorizing the execution, delivery and
performance of this Agreement and the Plan of Merger;
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(iv) good standing or comparable certificates for
each of CPI and CII from the jurisdiction of its incorporation
and from every jurisdiction where a failure to be qualified or
licensed would have a material adverse effect on the
consolidated financial condition, results of operations or
business of CPI and CII, dated not earlier than ten (10) days
prior to the Effective Time;
(v) copies of all third party and governmental
consents (or other evidence satisfactory to TBA) that each of
CPI and CII is required to obtain in order to effect the
transactions contemplated by this Agreement;
(vi) a copy of each of CPI's and CII's charter
certified by the Secretary of State of the State of Illinois;
(vii) two copies of the Plan of Merger executed by
the President of CPI;
(viii) certificates evidencing the shares of CPI
Common Stock owned by the Shareholders for cancellation in
connection with the Merger; and
(ix) such other documents as TBA or Merger Sub may
reasonably request in connection with the transactions
contemplated hereby;
(g) All proceedings to be taken by CPI in connection with the
consummation of the Merger at the Effective Time and the other
transactions contemplated hereby and all documents required to be
delivered by CPI and CII in connection with the Merger and the other
transactions contemplated hereby will be reasonably satisfactory in
form and substance to TBA and Merger Sub.
7.3 Additional Conditions to the Obligations of CPI and the
Shareholders. The obligations of CPI and the Shareholders to effect the Merger
are subject to the satisfaction of the following conditions on or before the
Effective Time;
(a) Except for breaches which do not constitute a Material
Adverse Breach (as defined in Section 10.8 of this Agreement) by TBA
and Merger Sub, the representations and warranties set forth in Article
2 of this Agreement will be true and correct as of the date hereof and
at and as of the Effective Time, as though then made and as though the
Effective Time were substituted for the date of this Agreement
throughout such representations and warranties and with appropriate
modifications of tense with respect to representations and warranties
made as of a specified date;
(b) TBA and Merger Sub shall have performed, in all material
respects, each obligation and agreement and complied, in all material
respects, with each covenant required to be performed and complied with
by them under this Agreement prior to the Effective Time;
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(c) No action or proceeding before any court or government
body will be pending or threatened wherein a judgment, decree or order
would prevent any of the transactions contemplated hereby or cause such
transactions to be declared unlawful or rescinded;
(d) At the Effective Time, TBA and Merger Sub will have
delivered to CPI and the Shareholders the following:
(i) a certificate executed on behalf of each of TBA
and Merger Sub by its Chief Executive Officer stating that the
conditions set forth in Sections 7.3(a) through (c) of this
Agreement have been satisfied;
(ii) certified copies of the resolutions duly adopted
by TBA's and Merger Sub's respective boards of directors
recommending the Merger and the Plan of Merger and authorizing
the execution, delivery and performance of this Agreement and
the Plan of Merger;
(iii) certified copies of the resolutions duly
adopted by Merger Sub's sole shareholder approving the Merger
and the Plan of Merger and authorizing the execution, delivery
and performance of this Agreement and the Plan of Merger;
(iv) good standing certificates for Merger Sub and
for TBA from the Secretary of State of the State of Delaware
each dated not earlier than ten (10) days prior to the
Effective Time;
(v) copies of all third party and governmental or
regulatory consents (or other evidence satisfactory to CPI)
that TBA and Merger Sub are required to obtain in order to
effect the transactions contemplated by this Agreement;
(vi) copies of Merger Sub's and TBA's charter
certified by the Secretary of State of the State of Delaware;
(vii) two copies of the Plan of Merger executed by
the appropriate officer of Merger Sub; and
(viii) such other documents as CPI or the
Shareholders may reasonably request in connection with the
transactions contemplated hereby;
(e) All proceedings to be taken by TBA and Merger Sub in
connection with the consummation of the Merger at the effective Time
and all documents required to be delivered by TBA and Merger Sub in
connection with the transactions contemplated hereby will be reasonably
satisfactory in form and substance to CPI and the Shareholders;
(f) Except as otherwise disclosed to CPI and the Shareholders,
all consents by governmental or regulatory agencies or otherwise that
are required for the consummation of
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the transactions contemplated hereby or that are required for TBA to
own, operate or control CPI or any portion of the assets of CPI and CII
or to prevent a breach of or a default under or a termination of any
agreement material to CPI and CII to which CPI and CII is a party or to
which any material portion of the assets of CPI and CII is subject,
will have been obtained; and
(g) The Employment Agreements will have been executed and
delivered by the Effective Time and there will not have been any
changes, amendments or modifications to, or terminations of, such
agreements.
ARTICLE 8
TERMINATION, AMENDMENT AND WAIVER
8.1 Termination. This Agreement may be terminated at any time prior to
the Effective Time, whether prior to or after approval by the Shareholders:
(a) by mutual consent of the Boards of Directors of TBA,
Merger Sub and CPI;
(b) by either TBA or CPI if the Merger shall not have been
consummated by July 31, 1998;
(c) by TBA if there has been a misrepresentation or breach of
a representation or warranty or a failure to perform a covenant on the
part of CPI, CII or the Shareholders with respect to their
representations, warranties and covenants set forth in this Agreement
and any such breach or failure constitutes a Material Adverse Breach;
and
(d) by CPI if there has been a misrepresentation or a breach
of a representation or warranty or a failure to perform a covenant on
the part of TBA or Merger Sub with respect to their representations,
warranties and covenants set forth in this Agreement and any such
breach or failure constitutes a Material Adverse Breach.
8.2 Amendment. This Agreement may not be amended except by an
instrument signed by each of the parties hereto.
8.3 Waiver. At any time prior to the Effective Time, (a) TBA may (i)
extend the time for the performance of any of the obligations or other acts of
CPI and/or the Shareholders or (ii) waive compliance with any of the agreements
of CPI and/or the Shareholders or with any conditions to its own obligations,
and (b) CPI and/or the Shareholders may (i) extend the time for the performance
of any of the obligations or other acts of TBA and/or Merger Sub or (ii) waive
compliance with any of the agreements of TBA and/or Merger Sub or with any
conditions to their own obligations in each case only to the extent such
obligations, agreements and conditions are intended for their benefit.
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8.4 Effect of Termination. If this Agreement is terminated as provided
in Section 8.1, this Agreement shall become void and there shall be no liability
or further obligation on the part of any party hereto or any of their respective
shareholders, officers or directors, except (a) that nothing herein and no
termination pursuant hereto will relieve any party from liability for any breach
of this Agreement and (b) the provisions of Section 6.8 and any confidentiality
agreements by and between TBA and CPI will survive such termination.
ARTICLE 9
INDEMNIFICATION
9.1 By TBA, Merger Sub, CPI and the Shareholders. TBA and Merger Sub on
the one hand and CPI and the Shareholders on the other hand each hereby agree to
indemnify and hold harmless the other against all claims, damages, losses,
liabilities, costs and expenses (including, without limitation, settlement costs
and any legal, accounting or other expenses for defending any actions or
threatened actions) (collectively "Damages") reasonably incurred by TBA, Merger
Sub, CPI and the Shareholders in connection with each and all of the matters set
forth below to the extent they constitute a Material Adverse Breach.
(a) Any breach by the Indemnifying Party (as defined below) of
any representation or warranty made by such Indemnifying Party in this
Agreement;
(b) Any breach of any covenant, agreement or obligation of the
Indemnifying Party contained in this Agreement or any other agreement,
instrument or document contemplated by this Agreement; and
(c) Any misrepresentation contained in any statement,
certificate or schedule furnished by the Indemnifying Party pursuant to
this Agreement or in connection with the transactions contemplated by
this Agreement.
The Shareholders severally, in proportion to their respective interests
in the Merger Consideration, agree to indemnify TBA for any breaches of any
representation or warranty covenant, agreement or obligation of CPI made or
contained, respectively, in this Agreement or any other agreement, instrument or
document contemplated by this Agreement, or any misrepresentation by CPI, as
described in (a) through (c) above to the extent they constitute a Material
Adverse Breach.
9.2 Claims for Indemnification. Whenever any claim shall arise for
indemnification hereunder, the party seeking indemnification (the "Indemnified
Party") shall promptly notify the party from whom indemnification is sought (the
"Indemnifying Party") of the claim and, when known, the facts constituting the
basis for such claim. In the event of any such claim for indemnification
hereunder resulting from or in connection with any claim or legal proceedings by
a third party, the notice to the Indemnifying Party shall specify, if known, the
amount or an estimate of the amount of the liability arising therefrom. The
Indemnified Party shall not settle or compromise any claim by a third party for
which it is entitled to indemnification hereunder without
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the prior written consent of the Indemnifying Party, which shall not be
unreasonably withheld, unless suit shall have been instituted against it and the
Indemnifying Party shall not have taken control of such suit after notification
thereof as provided in Section 9.3 of this Agreement in which case the
Indemnified Party may settle or compromise such claim without the prior consent
of the Indemnifying Party. If the Indemnified Party fails to give prompt notice
of any claim and such failure prejudices the Indemnifying Party's position or
its ability to defend the claim, the Indemnifying Party's liability to the
Indemnified Party shall be reduced by the amount, if any, demonstrated to be
directly attributable to the failure to give such notice in a timely manner.
9.3 Defense by Indemnifying Party. In connection with any claim giving
rise to indemnity hereunder resulting from or arising out of any claim or legal
proceeding by a person who is not a party to this Agreement, the Indemnifying
Party at its sole cost and expense may, upon written notice to the Indemnified
Party, assume the defense of any such claim or legal proceeding if it
acknowledges to the Indemnified Party in writing its obligations to indemnify
the Indemnified Party with respect to all elements of such claim. The
Indemnified Party shall be entitled to participate in (but not control) the
defense of any such action, with its counsel and at its own expense. If the
Indemnifying Party does not assume the defense of any such claim or litigation
resulting therefrom within thirty (30) days after the date such claim is made,
(a) the Indemnified Party may defend against such claim or litigation, in such
manner as it may deem appropriate, including, but not limited to, settling such
claim or litigation, after giving notice of the same to the Indemnifying Party,
on such terms as the Indemnified Party may deem appropriate, and (b) the
Indemnifying Party shall be entitled to participate in (but not control) the
defense of such action, with its counsel and at its own expense. If the
Indemnifying Party thereafter seeks to question the manner in which the
Indemnified Party defended such third party claim or the amount or nature of any
such settlement, the Indemnifying Party shall have the burden to prove by a
preponderance of the evidence that the Indemnified Party did not defend or
settle such third party claim in a reasonably prudent manner.
9.4 Payment of Indemnification Obligation. All indemnification by TBA,
CPI or a Shareholder hereunder shall be effected by payment by wire transfer or
delivery of a cashier's or certified check in the amount of the indemnification
liability.
ARTICLE 10
GENERAL PROVISIONS
10.1 Survival of Representations and Warranties. The representations
and warranties set forth in this Agreement shall survive the consummation of the
Merger for a period of one (1) year. Notwithstanding the above, claims resulting
from any breach of any representation or warranty concerning tax or CPI Employee
Benefit Plan matters shall expire one hundred twenty (120) days after the
expiration of any applicable statute of limitations. Any litigation arising out
of or attributable to a breach of any representation, warranty or covenant
contained herein must be commenced within the applicable period described above.
If not commenced within the applicable
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period, any such claim will thereafter conclusively be deemed to be waived
regardless of when such claim is or should have been discovered.
10.2 Effect of Due Diligence. No investigation by TBA or CPI into the
business, operations and condition of the other shall diminish in any way the
effect of any representations or warranties made by either party in this
Agreement or shall relieve such party of any of its obligations under this
Agreement.
10.3 Specific Performance. TBA, CPI and the Shareholders understand and
agree that the covenants and undertakings on each of their parts herein
contained are uniquely related to the desire of TBA, CPI and the Shareholders to
consummate the Merger, that the Merger is a unique business opportunity for CPI,
TBA, Merger Sub and the Shareholders and that, although monetary damages may be
available for the breach of such covenants and undertakings, monetary damages
would be an inadequate remedy therefor. Accordingly, CPI, TBA, Merger Sub and
the Shareholders agree that TBA and Merger Sub shall be entitled to obtain
specific performance by CPI and the Shareholders of every such covenant and
undertaking contained herein to be performed by CPI and the Shareholders and
that CPI and the Shareholders shall be entitled to obtain specific performance
from TBA and Merger Sub of each and every covenant and undertaking herein
contained to be observed or performed by TBA or Merger Sub.
10.4 Notices. All notices and other communications hereunder shall be
in writing and shall be deemed to have been duly given if delivered personally,
sent by telex, telecopy, facsimile or overnight courier, or mailed by registered
or certified mail (postage prepaid and return receipt requested), to the party
to whom the same is so delivered, sent or mailed at the following addresses (or
at such other address for a party as shall be specified by like notice):
(a) if to TBA or Merger Sub:
TBA Entertainment Corporation
000 Xxxxxxxx Xxxxxxxxxx Xxx
Xxxxxxx Xxxxxx, Xxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxx III
Telecopy: (000) 000-0000
with a copy to:
Xxxxxxxx Xxxxxxxx & Xxxxxx P.C.
5400 Renaissance Tower
0000 Xxx Xxxxxx
Xxxxxx, Xxxxx 00000
Attention: Xxxxxxx X. Xxxxxxx, Esq.
Telecopy: (000) 000-0000
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(b) if to CPI, CII or the Shareholders:
Corporate Productions, Inc.
0000 Xxxxx Xxxx.
Xxx Xxxxx, Xxxxxxxx 00000
Telecopy: (000) 000-0000
with a copy to:
Loss, Xxxxxx & Orel
0000 Xxxx 00xx Xxxxxx
Xxxxx 000
Xxx Xxxxx, Xxxxxxxx 00000
Attention: Xxxxx X. Xxxxxx, Esq.
Telecopy: (000) 000-0000
Notices delivered personally or by telex, telecopy or facsimile shall be deemed
delivered as of actual receipt, mailed notices shall be deemed delivered three
days after mailing and overnight courier notices shall be deemed delivered one
day after the date of sending.
10.5 Interpretation. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. References to Sections and Articles refer to
sections and articles of this Agreement unless otherwise stated.
10.6 Severability. If any term, provision, covenant or Agreement is
held by a court of competent jurisdiction to be invalid, void or unenforceable,
the remainder of the terms, provisions, covenants, and restrictions of this
Agreement shall remain in full force and effect and shall in no way be affected,
impaired or invalidated and the parties shall negotiate in good faith to modify
the Agreement to preserve each party's anticipated benefits under the Agreement.
10.7 Miscellaneous. This Agreement (together with all other documents
and instruments referred to herein): (a) except for any confidentiality
agreements executed in connection with the transactions contemplated hereby,
constitutes the entire agreement and supersedes all other prior agreements and
undertakings, both written and oral, among the parties with respect to the
subject matter hereof, including, without limitation, the Letter of Intent dated
May 7, 1998 among TBA and the Shareholders; (b) except as expressly set forth
herein, is not intended to confer upon any other person any rights or remedies
hereunder; (c) shall not be assigned by operation of law or otherwise, except
that TBA and Merger Sub may assign all or any portion of their rights under this
Agreement to any wholly owned subsidiary but no such assignment shall relieve
TBA and Merger Sub of their obligations hereunder, and except that this
Agreement may be assigned by operation of law to any corporation with or into
which TBA may be merged; and (d) shall be governed in all respects, including
validity, interpretation and effect, by the internal laws of the State of
Illinois, without giving effect to the principles of conflict of laws thereof.
Courts within the State of Illinois will have jurisdiction over any and all
disputes between the parties hereto, whether in law or equity, arising
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out of or relating to this Agreement. The parties consent to and agree to submit
to the jurisdiction of such courts. This Agreement may be executed in two or
more counterparts which together shall constitute a single agreement.
10.8 Material Adverse Breach. Breaches of representations, warranties
and covenants by either party hereto which (a) individually results in damages
to the other party in excess of $25,000 or (b) in the aggregate result in
damages to the other party in excess of $50,000, shall constitute, for purposes
of this Agreement, a "Material Adverse Breach."
10.9 Limitation of Liability. Neither TBA, CPI, CII, the Shareholders
nor Merger Sub shall have any liability for breach of the representations,
warranties and covenants made by them and contained in this Agreement unless
such breach is a Material Adverse Breach.
[THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK.]
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MERGER AGREEMENT
Signature Page
IN WITNESS WHEREOF, TBA, Merger Sub, the Shareholders and CPI have
caused this Agreement to be executed on the date first written above by their
respective officers duly authorized.
TBA ENTERTAINMENT CORPORATION
By:
--------------------------------
Xxxxxx Xxxxxxx Xxxxxx III,
Chief Executive Officer
CPI ACQUISITION CORP., INC.
By:
--------------------------------
Xxxxxx Xxxxxxx Xxxxxx III,
President
CORPORATE PRODUCTIONS, INC.
By:
--------------------------------
Xxxxxxx X. Xxxxx, President
------------------------------------
XXXXXXX X. XXXXX
------------------------------------
XXXXXXX X. XXXXX
------------------------------------
XXXXXX X. XXXXXXXX
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Joined in, consented to and
acknowledged by:
Corporate Incentives, Inc.
By:
-----------------------------------
Xxxxxx X. Xxxxxxxx, President
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SCHEDULE 1
DISCLOSURE SCHEDULE
44
SCHEDULE 1.5
ALLOCATION OF MERGER CONSIDERATION AMONG SHAREHOLDERS
Common Stock Cash Note
Portion Portion Portion Total
------------- ------------- ------------- -------------
Xxxxxxx X. Xxxxx $1,161,111.20 $ 841,806.00 $ 899,861.18 $2,902,778.38
Xxxxxxx X. Xxxxx 738,888.80 535,694.00 572,638.82 1,847,221.62
Xxxxxx X. Xxxxxxxx 100,000.00 72,500.00 77,500.00 250,000.00
------------- ------------- ------------- -------------
$2,000,000.00 $1,450,000.00 $1,550,000.00 $5,000,000.00
45
ANNEX I
LIST OF TBA SEC DOCUMENTS
1. Annual Report on Form 10-KSB for the fiscal year ended December 31,
1997;
2. Quarterly Report on Form 10-QSB for the quarterly period ended March
31, 1998; and
3. Current Report on Form 8-K filed May 22, 1998, as amended by Form 8-K/A
filed May 26, 1998.
46
ANNEX II
SHAREHOLDERS OF CORPORATE PRODUCTIONS, INC.
Number of Certificate(s)
Name Address Shares Number Date
---- ------- ------ ------ ----
Xxxxxxx X. Xxxxx 0000 Xxxxx Xxxx. 550 6 10/25/90
Xxx Xxxxx, Xxxxxxxx 00000
Xxxxxxx X. Xxxxx 0000 Xxxxx Xxxx. 350 7 10/25/90
Xxx Xxxxx, Xxxxxxxx 00000
Xxxxxx X. Xxxxxxxx 0000 Xxxxx Xxxx. 47.36842 8 07/01/98
Xxx Xxxxx, Xxxxxxxx 00000
SHAREHOLDER OF CORPORATE INCENTIVES, INC.
Number of Certificate(s)
Name Address Shares Number Date
---- ------- --------- -------------- -------
Corporate Productions, Inc. 0000 Xxxxx Xxxx. 800 2 9/18/87
Xxx Xxxxx, Xxxxxxxx 00000
Corporate Productions, Inc. 0000 Xxxxx Xxxx. 200 3 7/01/98
Xxx Xxxxx, Xxxxxxxx 00000
47
EXHIBIT A
FORM OF PLAN OF MERGER
48
EXHIBIT B
FORM OF PROMISSORY NOTES
49
EXHIBIT C
FORM OF PLEDGE AGREEMENT
50
EXHIBIT D
FORM OF EMPLOYMENT AGREEMENTS
