Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
MARKETING SERVICES GROUP, INC.,
GCG MERGER CORP.,
AND
XXXXXXXX ADVERTISING INCORPORATED
TABLE OF CONTENTS
1. THE MERGER.............................................................2
1.1 The Merger.......................................................2
1.2 Effective Time...................................................2
1.3 Closing..........................................................2
1.4 Certificate of Incorporation and Bylaws of the Surviving
Corporation ....................................................3
1.5 Directors and Officers of the Surviving Corporation..............3
1.6 Effects of the Merger............................................3
2. STATUS AND CONVERSION OF SECURITIES....................................3
2.1 Stock of Xxxxxxxx................................................4
2.2 Securities Act Compliance.......................................11
2.2 Capital Stock of Merger-Sub.....................................11
3. REPRESENTATIONS AND WARRANTIES........................................11
3.1 Certain Representations and Warranties of Xxxxxxxx..............11
3.2 Certain Representations and Warranties of MSGI and Merger-Sub...33
4. CERTAIN COVENANTS AND AGREEMENTS OF THE PARTIES.......................39
4.1 Conduct of Business of Xxxxxxxx and its Subsidiaries............39
4.2 Conduct of Business of MSGI and its Subsidiaries................42
4.3 Access and Information..........................................43
4.4 Reasonable Efforts; Antitrust Notification; Additional Actions..43
4.5 Notification of Certain Matters.................................45
4.6 Transfer and Real Property Transfer Gains Taxes; HSR Act Fees...45
4.7 Public Announcements............................................46
4.8 Execution of Affiliates Letter..................................47
4.9 Execution of Voting Agreement and Affiliates Agreement..........47
4.10 Certain Employee Matters........................................47
4.11 Non-Solicitation................................................48
4.12 MSGI's SEC Filings..............................................48
4.13 Notice of Litigation, Contract Issues and Labor Matters.........48
4.14 Financial Statements............................................49
4.15 Preparation of Registration Statement...........................49
4.16 NASDAQ Listing..................................................50
4.17 Confidential Information........................................50
4.18 Xxxxxxxx Stockholders'Meeting...................................51
4.19 Insurance.......................................................51
4.20 Stockholders'Representative.....................................52
5. CONDITIONS............................................................54
5.1 Conditions to Each Party's Obligation to Effect the Merger......54
5.2 Conditions to Obligation of MSGI and Merger-Sub to Effect the
Merger ........................................................56
5.3 Conditions to Obligation of Xxxxxxxx to Effect the Merger.......58
6. TERMINATION...........................................................61
6.1 Termination.....................................................61
6.2 Effect of Termination...........................................62
7. SURVIVAL, INDEMNIFICATION AND SET-OFF.................................63
7.2 Rights to Setoff................................................63
7.3 Obligation of MSGI and Merger-Sub to Indemnify..................64
7.4 Notice and Opportunity to Defend Third Party Claims.............64
7.5 Limits on Indemnification.......................................67
7.6 Adjustment......................................................67
7.7 Exclusive Remedy................................................68
8. MISCELLANEOUS.........................................................68
8.1 Further Actions.................................................68
8.2 Availability of Equitable Remedies..............................69
8.3 Modification....................................................69
8.4 Notices.........................................................69
8.5 Waiver..........................................................70
8.6 Binding Effect..................................................70
8.7 No Third-Party Beneficiaries....................................70
8.8 Severability....................................................71
8.9 Governing Law...................................................71
8.10 Judicial Proceedings............................................71
8.11 Counterparts....................................................72
8.12 Interpretation..................................................72
8.13 Entire Agreement................................................72
9. DEFINED TERMS.........................................................72
9.1 Defined Terms...................................................72
9.2 Interpretation..................................................86
TABLE OF SCHEDULES
MSGI/Xxxxxxxx: Merger Agreement
-------------------------------
Subject Schedule
------- --------
Xxxxxxxx Officers..........................................................1.5
Xxxxxxxx Stockholders...................................................2.1(f)
Xxxxxxxx Affiliates........................................................2.2
Organization............................................................3.1(a)
Stock Ownership.........................................................3.1(b)
Capitalization..........................................................3.1(c)
Authority, Approvals and Consents.......................................3.1(e)
Xxxxxxxx Certain Changes or Events......................................3.1(g)
Litigation..............................................................3.1(h)
Xxxxxxxx Compliance.....................................................3.1(i)
Taxes...................................................................3.1(j)
Employee Benefit Plans..................................................3.1(k)
Environmental Matters...................................................3.1(l)
Intangible Property.....................................................3.1(m)
Real Property...........................................................3.1(n)
Tangible Personal Property..............................................3.1(o)
Contracts...............................................................3.1(p)
Insurance...............................................................3.1(q)
Labor Matters...........................................................3.1(r)
Transactions with Affiliates............................................3.1(s)
Conduct of Business.....................................................3.1(t)
Xxxxxxxx Undisclosed Liabilities........................................3.1(u)
Finders and Investment Bankers..........................................3.1(y)
Finders; Fees...........................................................3.2(d)
MSGI Compliance.........................................................3.2(h)
MSGI Undisclosed Liabilities............................................3.2(i)
MSGI Certain Changes or Events..........................................3.2(j)
Xxxxxxxx Conduct of Business............................................4.1(c)
Xxxxxxxx Capital Stock..................................................4.1(e)
Xxxxxxxx Contracts......................................................4.1(f)
Indebtedness............................................................4.1(g)
Compensation, etc.......................................................4.1(h)
Tax Policies............................................................4.1(i)
Contractual Commitments....................................................4.2
Lockup Agreements..........................................................4.8
Employee Matters..........................................................4.10
Xxxxxxxx Liens......................................................9.1(pp)(i)
MSGI Liens.........................................................9.1(pp)(ii)
TABLE OF EXHIBITS
-----------------
Form of Exhibit
------- -------
Holdback Agreement...........................................................A
Xxxxxx & Bird Legal Opinion..................................................B
CKS Legal Opinion............................................................C
Lockup Agreement.............................................................D
Voting Agreement.............................................................E
Stockholders' Representative Agreement.......................................F
Schedules and Exhibits of the Agreement and Plan of Merger have been omitted
from the filing in accordance with Item 601 of Regulation S-K and the Company
agrees to furnish supplementally a copy of any omitted schedule or exhibits to
the Commission upon request.
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
MARKETING SERVICES GROUP, INC.,
GCG MERGER CORP.,
AND
XXXXXXXX ADVERTISING INCORPORATED
AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of July 8, 1999,
by and among MARKETING SERVICES GROUP, INC., a Nevada corporation, whose address
is 000 Xxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 ("MSGI"), GCG MERGER CORP., a
Delaware corporation and a wholly-owned subsidiary of MSGI, whose address is 000
Xxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 ("Merger-Sub"), and XXXXXXXX
ADVERTISING INCORPORATED, a Texas corporation, whose address is 000 Xxxxxxxxx
Xxxxxx, X.X., Xxxxxxx, Xxxxxxx 00000 ("Xxxxxxxx"). Merger-Sub, in its capacity
as the surviving corporation, is herein sometimes called the "Surviving
Corporation," and Merger-Sub and Xxxxxxxx are herein sometimes called the
"Constituent Corporations."
W I T N E S S E T H :
WHEREAS, the Boards of Directors of MSGI, Merger-Sub, and Xxxxxxxx have
each determined that it is advisable and in the best interests of their
respective stockholders to consummate, and have approved, the business
combination transaction provided for herein in which Xxxxxxxx would merge with
and into Merger-Sub (the "Merger"); and
WHEREAS, concurrently with the execution of this Agreement and as a
condition and inducement to MSGI's willingness to enter into this Agreement,
MSGI, Merger-Sub and Xxxxx Xxxxxxxx Xxxxx, Xxxxxxx X. Xxxxx, Xxxxx X. Xxxxxxx,
Xxxxxxx X. Xxxxxxx, Xxxxxx X. Xxxxxxxx Xx., Xxxxx X. Xxxxxxxx, Xxxxxx X.
Xxxxxxxx Xx., Xxxxxx X. Xxxxxxxx Xx., Xxxxxxxxx X. Xxxxxxxx, Xxxx Xxxx Xxxxxxx,
Xxxxx Xxxxxxx, Xxxxx Xxxxxxxx, The Salvation Army, Xxxx Xxxxx Xxxxxxx, Trustee
and Xxxx Xxxx Xxxxxxx, Trustee (collectively, the "Majority Stockholders") have
entered into the Voting Agreement pursuant to which, among other things, the
Majority Stockholders have agreed to vote their shares of Xxxxxxxx Common Stock
in favor of the Merger, subject to the terms and conditions set forth therein
and herein; and
WHEREAS, it is the express intention of MSGI, Merger-Sub and Xxxxxxxx that
this Agreement constitute a plan of reorganization intended to qualify for
federal income tax purposes as a "reorganization" within the meaning of Sections
368(a)(1)(A) and 368(a)(2)(D) of the Internal Revenue Code of 1986, as amended
from time to time, and any successor statute thereto (the "Code"); and
WHEREAS, MSGI, Merger-Sub and Xxxxxxxx desire to make certain
representations, warranties and agreements in connection with the Merger and to
prescribe various conditions to the Merger.
NOW, THEREFORE, in consideration of the mutual premises, representations,
warranties, covenants and agreements set forth in this Agreement, and intending
to be legally bound hereby, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. THE MERGER
1.1 The Merger. At the Effective Time, upon the terms and subject to the
conditions of this Agreement, Xxxxxxxx shall be merged with and into Merger-Sub
in accordance with the DGCL and the TBCA. Merger-Sub shall be the surviving
corporation in the Merger. As a result of the Merger, the outstanding shares of
capital stock of Xxxxxxxx shall be converted or cancelled in the manner provided
in Article 2.
1.2 Effective Time. At the Closing, a Certificate of Merger shall be duly
prepared and executed by the Surviving Corporation and thereafter delivered to
the Secretary of State of the State of Delaware for filing on, or as soon as
practicable after, the Closing Date. The Merger shall become effective at the
time of the filing of the Certificate of Merger with the Secretary of State of
the State of Delaware (the date and time of such filing being referred to herein
as the "Effective Time"). At the Effective Time, the Surviving Corporation shall
file with the officials of the State of Texas all necessary documentation
required under the TBCA to effectuate the Merger.
1.3 Closing. The closing of the Merger (the "Closing") will take place at
the offices of Camhy Karlinsky & Xxxxx LLP, 0000 Xxxxxxxx, Xxx Xxxx, Xxx Xxxx
00000-0000, or at such other place as the parties hereto mutually agree, on a
date and at a time to be specified by the parties, which shall in no event be
later than 10:00 a.m., local time, on the next business day following
satisfaction of the condition set forth in Section 5.1(a), provided that the
other closing conditions set forth in Article 5 have been satisfied or, if
permissible, waived in accordance with this Agreement, or on such other date as
the parties hereto mutually agree (the "Closing Date"). At the Closing there
shall be delivered to MSGI, Merger-Sub, and Xxxxxxxx the certificates and other
documents and instruments required to be delivered under Article 5.
1.4 Certificate of Incorporation and Bylaws of the Surviving Corporation.
At the Effective Time, (i) the Certificate of Incorporation of Merger-Sub as in
effect immediately prior to the Effective Time shall be amended to change the
name of Merger-Sub to "Xxxxxxxx Communications Group, Inc.," and, as so amended,
such Certificate of Incorporation shall be the Certificate of Incorporation of
the Surviving Corporation until thereafter amended as provided by law and such
Certificate of Incorporation, and (ii) the Bylaws of Merger-Sub as in effect
immediately prior to the Effective Time shall be the Bylaws of the Surviving
Corporation until thereafter amended as provided by law, the Certificate of
Incorporation of the Surviving Corporation, and such Bylaws.
1.5 Directors and Officers of the Surviving Corporation. The directors of
Merger-Sub immediately prior to the Effective Time shall, from and after the
Effective Time, be the directors of the Surviving Corporation, and such
directors shall appoint the officers of Xxxxxxxx as set forth on Schedule 1.5 to
be the officers of the Surviving Corporation. The directors and officers of the
Surviving Corporation shall serve until their successors shall have been duly
elected or appointed and qualified or until their earlier death, resignation, or
removal in accordance with the Surviving Corporation's Certificate of
Incorporation and Bylaws.
1.6 Effects of the Merger. Subject to the foregoing, the effects of the
Merger shall be as provided in the applicable provisions of the DGCL and the
TBCA.
2. STATUS AND CONVERSION OF SECURITIES
2.1 Stock of Xxxxxxxx.
(a) Xxxxxxxx Common Stock. Subject to the provisions of Section 2.1(b)
hereof, each share of Xxxxxxxx Common Stock issued and outstanding at the
Effective Time shall, by virtue of the Merger and without any action on the part
of the holders thereof, be converted into the right to receive (i) an amount in
cash equal to the Per Share Cash Payment, without any interest thereon, (ii) the
Per Share Stock Consideration and (iii) the right to receive, not later than
five (5) business days following any Distribution Date, the Per Share Deferred
Payment payable on such Distribution Date, payable to the holder thereof, upon
surrender of the certificate representing such share of Xxxxxxxx Common Stock,
except that shares of Xxxxxxxx Common Stock held in Gizzard's treasury at the
Effective Time shall be cancelled without payment of any consideration thereof.
(b) Payment of Deferred Amount. (i)On or prior to the Closing Date, MSGI,
Merger-Sub and the Stockholders' Representative will execute and deliver the
Holdback Agreement substantially in the form of Exhibit A hereto. MSGI shall pay
the Per Share Deferred Payments to the Xxxxxxxx Stockholders at the times and
subject to the terms and conditions of the Holdback Agreement. At the Closing,
MSGI will deliver to the Stockholders' Representative a standby letter of credit
substantially in the form of Appendix I to the Holdback Agreement (the "Standby
Letter of Credit") issued by a nationally recognized financial institution
acceptable to the Stockholders' Representative in an amount equal to $5,000,000
(the "Initial Deferred Amount") plus interest thereon at the Interest Rate, for
a three (3) year period commencing on the Closing Date, which Standby Letter of
Credit will secure the obligation of MSGI to make payments to the Xxxxxxxx
Stockholders as provided in the Holdback Agreement.
(c) Exchange of Xxxxxxxx Common Stock.
(i) MSGI shall authorize one or more persons to act as an exchange agent
hereunder (the "Exchange Agent") pursuant to an agreement (the "Exchange
Agreement") satisfactory to MSGI and Xxxxxxxx. Promptly after the Closing, MSGI
shall deposit or cause to be deposited with the Exchange Agent the amount of (A)
certificates representing the shares of MSGI Common Stock payable to the holders
of Xxxxxxxx Common Stock pursuant to Section 2.1(a) hereof based on the number
of shares of Xxxxxxxx Common Stock converted into the Share Consideration, (B)
cash as payment of the Closing Cash Payment and for fractional shares of
Xxxxxxxx Common Stock pursuant to Section 2.1(c)(vii) hereof, (C) cash in the
amount of the Expense Amount, and (D) cash in the amount of the Earn-Out Amount.
The Exchange Agent may in its sole discretion invest portions of the cash
deposited with it, provided that such investments shall be in obligations of or
guaranteed by the United States of America or in certificates of deposit, or in
money market funds that are invested substantially in any such investments. Any
net profit resulting from, or interest or income produced by, such investments
shall be payable to MSGI.
(ii) As soon as practicable after the Effective Time, the Exchange Agent
shall (A) pay the Expense Amount and the Earn-Out Amount to the Stockholders'
Representative to be held and/or disbursed by him as provided in the
Stockholders' Representative Agreement, and (B) mail, to each holder of record
of a certificate or certificates that immediately prior to the Effective Time
represented outstanding shares of Xxxxxxxx Common Stock (the "Xxxxxxxx
Certificates"), a form letter of transmittal (which shall specify that delivery
shall be effective, and risk of loss and title to the Xxxxxxxx Certificate(s)
shall pass, only upon delivery of the Xxxxxxxx Certificate(s) to the Exchange
Agent) and instructions for such holder's use in effecting the surrender of the
Xxxxxxxx Certificates in exchange for certificates representing shares of MSGI
Common Stock ("MSGI Certificates").
(iii) As soon as practicable after the Effective Time, the Exchange Agent
shall distribute to holders of shares of Xxxxxxxx Common Stock, upon surrender
to the Exchange Agent of one or more Xxxxxxxx Certificates for cancellation,
together with a duly-executed letter of transmittal, if applicable, pursuant to
Section 2.1(c)(ii), (A) a check in the amount of the Per Share Cash Payment
payable with respect to each share represented by the Xxxxxxxx Certificate(s) so
surrendered as provided in Section 2.1(a) and (B) one or more MSGI Certificates
representing the number of whole shares of MSGI Common Stock into which the
shares represented by the Xxxxxxxx Certificate(s) so surrendered shall have been
converted pursuant to Sections 2.1(a), and the Xxxxxxxx Certificate(s) so
surrendered shall be cancelled. Except for interest included in any Per Share
Deferred Payment or Per Share Reserve Payment payable to a holder of Xxxxxxxx
Common Stock hereunder, the holder of any such surrendered Xxxxxxxx
Certificate(s) shall not be entitled to receive interest on any of the funds
received in the Merger. In the event of a transfer of ownership of Xxxxxxxx
Common Stock that is not registered in the transfer records of Xxxxxxxx, it
shall be a condition to the payment of cash and/or issuance of the MSGI
Certificate(s) pursuant to the above-described Sections that the Xxxxxxxx
Certificate(s) so surrendered shall be properly endorsed or be otherwise in
proper form for transfer and that such transferee shall (x) pay to the Exchange
Agent any transfer or other taxes required, or (y) establish to the satisfaction
of the Exchange Agent that such tax has been paid or is not payable.
(iv) No dividends or other distributions that are declared with respect to
MSGI Common Stock payable to holders of record thereof after the Effective Time
shall be paid to the stockholders entitled to receive MSGI Certificates until
such stockholders surrender their Xxxxxxxx Certificates. Upon such surrender,
there shall be paid to the stockholder in whose name the MSGI Certificates shall
be issued any dividends that shall have a record date subsequent to the
Effective Time which shall have become payable with respect to such MSGI Common
Stock between the Effective Time and the time of such surrender, without
interest. After such surrender, there shall also be paid to the stockholder in
whose name the MSGI Certificates shall be issued any dividend on such MSGI
Common Stock that shall have a record date subsequent to the Effective Time and
a payment date after such surrender, and such payment shall be made on such
payment date. In no event shall the stockholders entitled to receive such
dividends be entitled to receive interest on such dividends. All dividends or
other distributions declared after the Effective Time with respect to MSGI
Common Stock and payable to the holders of record thereof after the Effective
Time that are payable to the holders of Xxxxxxxx Certificates not theretofore
surrendered and exchanged for MSGI certificates pursuant to this Section
2.1(c)(iv) shall be paid or delivered by MSGI to the Exchange Agent, in trust,
for the benefit of such holders. All such dividends or other distributions held
by the Exchange Agent for payment or delivery to the holders of unsurrendered
Xxxxxxxx Certificates and unclaimed at the end of one year from the Effective
Time shall be repaid or redelivered by the Exchange Agent to MSGI, after which
time any holder of Xxxxxxxx Certificates who has not theretofore surrendered
such Xxxxxxxx Certificates to the Exchange Agent, subject to applicable law,
shall look as a general creditor only to MSGI for payment or delivery of such
dividends or distributions, as the case may be. Any MSGI Common Stock delivered
or made available to the Exchange Agent pursuant to this Section 2.1(c) hereof
and not exchanged for Xxxxxxxx Certificates within one year after the Effective
Time pursuant to this Section 2.1(c) shall be returned by the Exchange Agent to
MSGI which shall thereafter act as Exchange Agent subject to the rights of
holders of unsurrendered Xxxxxxxx Certificates under this Article 2.
Notwithstanding the foregoing, neither MSGI, Merger-Sub, the Exchange Agent nor
any other party hereto shall be liable to a holder of Xxxxxxxx Common Stock for
any MSGI Common Stock, or dividends or distributions thereon, delivered to a
public official pursuant to applicable escheat laws.
(v) All cash paid and shares of MSGI Common Stock issued upon the surrender
for exchange of Xxxxxxxx Common Stock in accordance with the terms hereof
(including any cash paid for fractional shares pursuant to Section 2.1(c)(vii))
shall be deemed to have been paid or issued, as applicable, in full satisfaction
of all rights pertaining to such shares of Xxxxxxxx Common Stock.
(vi) After the Effective Time, there shall be no further registration of
transfers on the stock transfer books of Xxxxxxxx of the shares of Xxxxxxxx
Common Stock that were outstanding immediately prior to the Effective Time. As
of the Effective Time, the holders of Xxxxxxxx Certificates shall cease to have
any rights as stockholders of Xxxxxxxx, except such rights, if any, as they may
have pursuant to this Agreement and any applicable laws. Except as provided
above, until such Xxxxxxxx Certificates are surrendered for exchange, each such
Xxxxxxxx Certificate shall, after the Effective Time, represent for all purposes
only the right to receive the Per Share Cash Payment, the Per Share Stock
Consideration, the right to receive the Per Share Deferred Payment, if any, the
right to receive the Per Share Reserve Payment, and the right to receive the
cash value of any fraction of a share of MSGI Common Stock as provided in
Section 2.1(c)(vii) hereof.
(vii) No fractional share of MSGI Common Stock and no certificates or scrip
therefor, or other evidence of ownership thereof, shall be issued upon the
surrender for exchange of Xxxxxxxx Certificates, no dividend or distribution of
MSGI shall relate to any fractional share, and such fractional share interests
shall not entitle the owner thereof to vote or to any rights of a stockholder of
MSGI. All fractional shares of MSGI Common Stock to which a holder of Xxxxxxxx
Common Stock immediately prior to the Effective Time would otherwise be
entitled, at the Effective Time, shall be aggregated. If a fractional share
results from such aggregation, then (in lieu of such fractional share) the
Exchange Agent shall pay to each holder of shares of Xxxxxxxx Common Stock an
amount of cash (without interest) determined by multiplying (x) the Average
Closing Price by (y) the fractional share of MSGI Common Stock to which such
holder would otherwise be entitled. MSGI will make available to the Exchange
Agent, without regard to any other cash being provided to the Exchange Agent,
any cash necessary for this purpose.
(viii) In the event any Xxxxxxxx Certificates shall have been lost, stolen
or destroyed, the Exchange Agent shall issue in exchange for such lost, stolen
or destroyed Xxxxxxxx Certificate, upon the making of an affidavit of that fact
by the holder thereof, such shares of MSGI Common Stock and/or cash as may be
required pursuant to this Article 2; provided, however, that MSGI may, in its
sole discretion and as a condition precedent to the issuance thereof, require
the owner of such lost, stolen or destroyed Xxxxxxxx Certificate to deliver a
bond in such sum as it may direct as an indemnity against any claim that may be
made against MSGI or the Exchange Agent with respect to the Xxxxxxxx Certificate
alleged to have been lost, stolen or destroyed.
(d) Dissenter's Rights. If any holder of Xxxxxxxx Common Stock dissents
from the consummation of this Agreement in accordance with the TBCA, and if such
holder has complied with the requirements of Sections 5.11, 5.12 and 5.13 of the
TBCA (a "Xxxxxxxx Dissenting Stockholder"), then, notwithstanding anything
contained in this Agreement to the contrary, each share of Xxxxxxxx Common Stock
held by a Xxxxxxxx Dissenting Stockholder shall not be converted into or
represent the right to receive such holder's pro rata share of the Merger
Consideration pursuant to Section 2.1, but such Xxxxxxxx Dissenting Stockholder
shall be entitled to the rights specified in the TBCA; provided, however, if a
Xxxxxxxx Dissenting Stockholder withdraws his, her or its dissent (or if a
person ceases to be a Xxxxxxxx Dissenting Stockholder because such person fails
to comply with the requirements of Article 5.13 of the TBCA), then the Xxxxxxxx
Common Stock held by such person shall be deemed to be converted, as of the
Effective Time, into the Merger Consideration as set forth in Section 2.1,
without any interest thereon.
(e) Withholding. MSGI shall deduct and withhold from the cash consideration
otherwise payable pursuant to this Agreement to any holder of shares of Xxxxxxxx
Common Stock, such amounts as MSGI is required to deduct and withhold with
respect to the making of such payment under the Code, or any provision of state,
local or foreign tax law. To the extent that amounts are so withheld, such
withheld amounts shall be treated for all purposes of this Agreement as having
been paid to the holder of the shares of the Xxxxxxxx Common Stock in respect of
which such deduction and withholding was made.
(f) Payment of Stockholders' Indebtedness. Xxxxxxxx shall use its best
efforts to cause each of the Xxxxxxxx Stockholders who are listed on Schedule
2.1(f) hereto who are indebted to Xxxxxxxx or whose indebtedness to others is
guaranteed by Xxxxxxxx to authorize MSGI to cause to be withheld from any cash
consideration otherwise payable to such stockholder hereunder the principal
amount of any and all accrued but unpaid interest on such indebtedness. All
amounts so withheld shall be promptly remitted to Xxxxxxxx or to the person or
entity to which such indebtedness is owed. Upon such remittance, the
indebtedness of any such Xxxxxxxx Stockholder shown on Schedule 2.1(f) as being
indebted to Xxxxxxxx shall be deemed paid and satisfied in full.
2.2 Securities Act Compliance. Xxxxxxxx and MSGI agree that each will use
its best efforts so that the Merger and other transactions contemplated hereby
shall be consummated without violating the securities laws of the United States
or of any state or other jurisdiction. Xxxxxxxx has set forth in Schedule 2.2
all individuals who are affiliates of Xxxxxxxx for purposes of the Securities
Act.
2.3 Capital Stock of Merger-Sub. At the Effective Time, each share of
Merger-Sub Common Stock issued and outstanding immediately prior to the
Effective Time shall, by virtue of the Merger and without any action on the part
of the holder thereof, remain one share of Merger-Sub Common Stock.
3. REPRESENTATIONS AND WARRANTIES
3.1 Certain Representations and Warranties of Xxxxxxxx. Xxxxxxxx represents
and warrants to MSGI and Merger-Sub as follows:
(a) Organization. Each of Xxxxxxxx and Xxxxxxxx'x Subsidiaries is duly
organized and existing in good standing under the laws of the jurisdiction of
its incorporation or organization and has all requisite power and authority to
own, lease and operate its respective properties and to carry on its respective
business as now being conducted. Except as set forth in Schedule 3.1(a), each of
Xxxxxxxx and Xxxxxxxx'x Subsidiaries is duly qualified or licensed to do
business and in good standing in each jurisdiction in which the property owned,
leased or operated by it or the nature of the business conducted by it makes
such qualification or licensing necessary, except for such failures to be so
duly qualified or licensed and in good standing that would not have a Material
Adverse Effect with respect to Xxxxxxxx. Complete and correct copies of the
Organizational Documents of Xxxxxxxx and each of its Subsidiaries, with all
amendments thereto to the date hereof, have been delivered or made available to
MSGI.
(b) Stock Ownership. Schedule 3.1(b) lists (i) each Subsidiary of Xxxxxxxx
and its jurisdiction of incorporation or organization; (ii) the authorized
number of shares of each class or series of capital stock or other equity
interests of such Subsidiary; (iii) the number of issued and outstanding shares
of each such class or series or other equity interest; and (iv) the names of the
record owners of the capital stock of, or equity interest in, each Subsidiary
and the number of shares of such capital stock or the percentage of such equity
interest owned by them. Except as set forth in Schedule 3.1(b), Xxxxxxxx is the
beneficial and record owner of all of the issued and outstanding capital stock
of, or equity interests in, Xxxxxxxx'x Subsidiaries, free and clear of all Liens
and preemptive rights, other than Permitted Liens and Liens imposed by Federal
and state securities laws. Except as set forth on Schedule 3.1(b), Xxxxxxxx does
not own, directly or indirectly, any shares of capital stock or other equity
interest in any Person, foreign or domestic.
(c) Capitalization. The authorized Xxxxxxxx capital stock consists solely
of 1,000,000 shares of Xxxxxxxx Common Stock of which 135,355.96 shares are as
of the date hereof, and will be on the Closing Date, issued and outstanding.
Except as set forth on Schedule 3.1(c), there are no outstanding or authorized
options, warrants, calls, subscriptions, rights, agreements or other commitments
of any character (contingent or otherwise) obligating Xxxxxxxx or Xxxxxxxx'x
Subsidiaries to issue, sell, purchase, return or redeem any shares of capital
stock of (or equity interest in), or securities convertible into or exchangeable
for, any shares of capital stock of (or equity interest in) Xxxxxxxx or its
Subsidiaries. Upon the consummation of the Merger, any such outstanding or
authorized options, warrants, calls, subscriptions, rights, agreements or other
commitments set forth on Schedule 3.1(c) will be cancelled (without any
consideration therefor) and none will be authorized or outstanding. Except as
disclosed on Schedule 3.1(c) hereto, there are no stockholder agreements, voting
trusts or other agreements or understandings to which Xxxxxxxx or any Subsidiary
thereof is a party or to which any of them is bound relating to the voting or
registration of any shares of Xxxxxxxx Common Stock or capital stock of or
equity interests in Xxxxxxxx'x Subsidiaries. All issued and outstanding shares
of Xxxxxxxx Common Stock and capital stock of or other equity interests in
Xxxxxxxx'x Subsidiaries are duly authorized, validly issued, fully paid and
non-assessable.
(d) Authorization and Enforceability. This Agreement has been duly
authorized by the Board of Directors of Xxxxxxxx, has been duly executed and
delivered by Xxxxxxxx, and (assuming this Agreement constitutes a valid and
binding obligation of each of MSGI and Merger-Sub), constitutes a legal, valid
and binding obligation of Xxxxxxxx, enforceable against Xxxxxxxx in accordance
with its terms, except as such enforceability may be limited by bankruptcy,
insolvency, reorganization, fraudulent conveyance or transfer or similar laws
affecting the enforcement of creditors' rights generally and general principles
of equity (whether considered in a proceeding at law or in equity). Except for
the aforesaid authorizations and approvals, no other authorizations or approvals
are required of any boards of directors or holders of the capital stock of
Xxxxxxxx or its Subsidiaries with respect to this Agreement or the transactions
contemplated hereby.
(e) Authority, Approvals and Consents. Neither Xxxxxxxx nor any of its
Subsidiaries is in violation of its Organizational Documents, except as would
not have a Material Adverse Effect with respect to Xxxxxxxx. Except as set forth
on Schedule 3.1(e), neither the execution, delivery or performance by Xxxxxxxx
of this Agreement or any Ancillary Agreement, nor the consummation by Xxxxxxxx
of the transactions contemplated hereby and thereby, does or will constitute,
result in or give rise to (i) a breach or default under any provision of the
Organizational Documents of Xxxxxxxx or its Subsidiaries, (ii) a breach,
violation or default under (a) any statute, law, judgment, decree, decision,
ruling, injunction or order of any Governmental Authority applicable to Xxxxxxxx
or its Subsidiaries or (b) any other Legal Requirement not referred to in the
foregoing clause (a) applicable to Xxxxxxxx or its Subsidiaries, (iii) the
imposition of any Lien upon any assets of Xxxxxxxx or its Subsidiaries or (iv) a
breach or default under or the occurrence of any event which, with due notice or
lapse of time or both, would constitute a default under (or the acceleration of
the time for performance of any obligation under or the termination,
cancellation or non-renewal of) any Contracts of Xxxxxxxx or its Subsidiaries
(or binding on their assets, businesses or properties), except with respect to
clauses (ii)(b), (iii) and (iv) as would not have a Material Adverse Effect with
respect to Xxxxxxxx. Except as set forth in Schedule 3.1(e) and except for the
filing of the Certificate of Merger with the Secretary of State of the State of
Delaware and any filings with the Secretary of State of the State of Texas, and
filings in respect of the HSR Act, no approval, consent, waiver, authorization
or other order of, and no declaration, filing, registration, qualification or
recording with, any Governmental Authority or any Person party to any Contracts
of Xxxxxxxx or its Subsidiaries (or binding on their assets, business or
properties) is required to be obtained or made by or on behalf of any of
Xxxxxxxx or its Subsidiaries in connection with the execution, delivery or
performance of this Agreement and the consummation of the Closing hereunder in
accordance with the terms and conditions thereof, except those where failure to
obtain such approval, consent, waiver, authorization or other order, or to make
such declaration, filing, registration, qualification or recording, would not
have a Material Adverse Effect with respect to Xxxxxxxx.
(f) Financial Statements.
(i) Financial Information. MSGI has been furnished with each of the
following:
(A) The consolidated audited balance sheet of Xxxxxxxx and its
Subsidiaries at December 31, 1997 and 1998 and the related statements
of earnings and stockholders equity and cash flows for the fiscal
years then ended, accompanied by the notes thereto and the report
thereon of Deloitte & Touche LLP (collectively, the "Audited
Financials").
(B) The unaudited consolidated balance sheet of Xxxxxxxx and its
Subsidiaries at March 31, 1999 and related unaudited consolidated
statements of earnings and cash flows for the nine-month period then
ended (the "Interim Financials" and, together with the Audited
Financials, the "Xxxxxxxx Financial Statements").
(ii) Character of Financial Information. The Xxxxxxxx Financial Statements
were prepared, and the 1999 Audited Financials, when delivered to MSGI, will be
prepared, in each case, in accordance with Generally Accepted Accounting
Principles consistently applied throughout the periods specified therein, except
as disclosed in the Xxxxxxxx Financial Statements or the 1999 Audited
Financials, as applicable, and present and will present fairly, in all material
respects, the consolidated financial position and consolidated results of
operations of Xxxxxxxx and its Subsidiaries, respectively, as of the dates and
for the periods specified therein in conformity with Generally Accepted
Accounting Principles, subject in the case of the Interim Financials to an
absence of footnotes required by Generally Accepted Accounting Principles and to
normal year-end adjustments.
(g) Absence of Certain Changes or Events
(i) Except as disclosed in Schedule 3.1(g) or as contemplated by this
Agreement, since December 31, 1998, Xxxxxxxx and its Subsidiaries have
conducted their respective businesses in the Ordinary Course of Business
and there has not been any condition, event or occurrence that,
individually or in the aggregate, has had or would have a Material Adverse
Effect with respect to Xxxxxxxx (without regard, however, to changes in
conditions generally applicable to the industries in which Xxxxxxxx and its
Subsidiaries are involved or general economic conditions).
(ii) Without limiting the generality of paragraph (i) of this Section
3.1(g), except as disclosed in Schedule 3.1(g) or as contemplated by this
Agreement, since December 31, 1998 through the date hereof, neither
Xxxxxxxx nor any of its Subsidiaries has:
(A) acquired or agreed to acquire, develop, lease, operate or
manage, by merging or consolidating with, or by purchasing a material
portion of the assets of any business or any corporation, partnership,
joint venture, association or other business organization or division
thereof (each, a "Business"), or by any other manner (x) any Business
or (y) any assets that are material to Xxxxxxxx or its Subsidiaries;
(B) declared, set aside, or paid any dividends or made any
distributions on Xxxxxxxx Common Stock;
(C) except as disclosed in the Xxxxxxxx Financial Statements,
changed any of its tax or accounting policies (including, without
limitation, procedures with respect to the payment of accounts payable
and collection of accounts receivable);
(D) made any capital expenditure in excess of $100,000;
(E) amended or entered in any new employment agreement; or
(F) resolved, agreed or otherwise committed to do any of the
foregoing.
(h) Absence of Litigation. Except as set forth on Schedule 3.1(h) or as
would not have, individually or in the aggregate, a Material Adverse Effect with
respect to Xxxxxxxx, as of the date hereof, there is no Action pending or, to
the knowledge of Xxxxxxxx, threatened against Xxxxxxxx or any of its
Subsidiaries or any portion of their properties or assets, and there is no
Action pending or, to the knowledge of Xxxxxxxx, threatened against Xxxxxxxx or
any of its Subsidiaries which could reasonably be expected to interfere with the
consummation of this Agreement or any of the transactions contemplated hereby.
(i) Compliance. Except as set forth on Schedule 3.1(i), each of
Xxxxxxxx, its Subsidiaries and the properties identified in Schedules
3.1(n)(i) and 3.1(n)(ii) hereto is in compliance with all Legal
Requirements, including, without limitation, those relating to zoning
(excluding those relating to Environmental, Health, or Safety Requirements
which are covered by Section 3.1(l) hereof), except for such failures to
comply or to be in compliance as have not had, and would not have,
individually or in the aggregate, a Material Adverse Effect with respect to
Xxxxxxxx. Except as set forth on Schedule 3.1(i), none of Xxxxxxxx or any
of its Subsidiaries has received any written notice asserting any
non-compliance with any such Legal Requirements, except for such failures
to comply as have not had, and would not have, a Material Adverse Effect
with respect to Xxxxxxxx.
(j) Taxes.
(i) Except as set forth on Schedule 3.1(j), (A) all federal, state, local
and foreign income tax returns and reports and any other tax return or report
for which there is a liability for the payment of Taxes in excess of ten
thousand ($10,000) dollars (collectively, "Xxxxxxxx Tax Returns") required to be
filed by or on behalf of Xxxxxxxx and its Subsidiaries (and any combined,
consolidated, unitary or affiliated group of which Xxxxxxxx and its Subsidiaries
are or have been members prior to the Closing Date) for Taxes have been duly and
timely filed with the appropriate taxing authorities in all jurisdictions in
which such Xxxxxxxx Tax Returns are required to be filed (after giving effect to
any valid extensions of time in which to make such filings); (B) all such
Xxxxxxxx Tax Returns are true, correct and complete in all material respects;
and (C) all amounts shown as due on such Xxxxxxxx Tax Returns and any other
required payment of any other Tax liability in excess of ten thousand ($10,000)
dollars due from Xxxxxxxx or its Subsidiaries (and any combined, consolidated,
unitary or affiliated group of which Xxxxxxxx and its Subsidiaries are or have
been members prior to the Closing Date) have been timely paid or accrued for on
the 1999 Audited Financials. Except as set forth on Schedule 3.1(j), Xxxxxxxx
and its Subsidiaries shall prepare and timely file, in a manner consistent with
prior years except as required by a change in applicable laws and regulations,
all Xxxxxxxx Tax Returns required to be filed on or before the Effective Time
(after giving effect to any valid extensions of time in which to make such
filings). Prior to any filing, MSGI shall be provided with copies of such
returns for review.
(ii) Each of Xxxxxxxx and its Subsidiaries has complied in all
material respects with all applicable laws, rules and regulations relating
to the withholding or payment of Taxes.
(iii) MSGI has received copies of (A) all federal, state, local and
foreign income or franchise Xxxxxxxx Tax Returns relating to the tax
periods ended in 1996, 1997 and 1998 and (B) any audit report issued within
the last three years (or otherwise with respect to any audit or
investigation in progress) relating to Taxes due from or with respect to
Xxxxxxxx and its Subsidiaries, their respective income, assets or
operations. The income and franchise Xxxxxxxx Tax Returns filed by or on
behalf of Xxxxxxxx and its Subsidiaries for the taxable years ended in
1996, 1997 and 1998 set forth on Schedule 3.1(j) have been examined by the
relevant taxing authority or the statute of limitations with respect to
such Xxxxxxxx Tax Returns has expired.
(iv) Except as set forth on Schedule 3.1(j), no written claim has been
made by a taxing authority in a jurisdiction where Xxxxxxxx or its
Subsidiaries does not file Xxxxxxxx Tax Returns such that it is or may be
subject to taxation by that jurisdiction.
(v) Except as set forth on Schedule 3.1(j), all deficiencies asserted
or assessments made as a result of any examinations by the IRS or other
taxing authority of Xxxxxxxx Tax Returns of or covering or including
Xxxxxxxx and its Subsidiaries have been fully paid, and to the knowledge of
Xxxxxxxx there are no other audits or investigations by any taxing
authority in progress, nor has Xxxxxxxx or any of its Subsidiaries received
any written notice from any taxing authority that it intends to conduct
such an audit or investigation.
(vi) Except as set forth on Schedule 3.1(j), neither Xxxxxxxx nor its
Subsidiaries has received any private letter ruling of the IRS or
comparable rulings of other taxing authorities.
(vii) Except as set forth on Schedule 3.1(j), none of Xxxxxxxx, any of
its Subsidiaries or any other Person on behalf of Xxxxxxxx or its
Subsidiaries has (A) agreed to or is required to make any adjustments that
in the aggregate are likely to have a Material Adverse Effect with respect
to Xxxxxxxx pursuant to Section 481(a) of the Code or any similar provision
of state, local or foreign law by reason of a change in accounting method
initiated by Xxxxxxxx or its Subsidiaries or has any application pending
with any taxing authority requesting permission for any change in
accounting methods that relate to the business or operations of Xxxxxxxx or
its Subsidiaries, and Xxxxxxxx has no knowledge that the IRS has proposed
any such adjustment or change in accounting method, (B) executed or entered
into a closing agreement pursuant to Section 7121 of the Code or any
predecessor provision thereof or any similar provision of state, local, or
foreign law with respect to Xxxxxxxx or its Subsidiaries, (C) extended the
time within which to file any Xxxxxxxx Tax Return, which Xxxxxxxx Tax
Return has since not been filed, or the assessment or collection of Taxes,
which Taxes have not since been paid or (D) authorized any power of
attorney with respect to any tax matter currently in force.
(viii) No property owned by Xxxxxxxx or its Subsidiaries (A) is
property required to be treated as being owned by another Person pursuant
to the provisions of Section 168(f)(8) of the Code and in effect
immediately prior to the enactment of the Tax Reform Act of 1986, (B)
constitutes "tax-exempt use property" within the meaning of Section
168(h)(1) of the Code or (C) is "tax-exempt bond financed property" within
the meaning of Section 168(g) of the Code.
(ix) Neither Xxxxxxxx nor any of its Subsidiaries is a party to any
tax sharing or similar contract or arrangement currently in effect (whether
or not written) with any Person other than Xxxxxxxx and its Subsidiaries.
(x) Except as set forth on Schedule 3.1(j), since July 1, 1996 neither
Xxxxxxxx nor any of its Subsidiaries has been a member of any consolidated,
combined, unitary or affiliated group of corporations for any tax purposes
other than the group of which Xxxxxxxx or a present or former Subsidiary of
Xxxxxxxx is or was the common parent corporation.
(xi) Neither Xxxxxxxx nor any of its Subsidiaries has filed a consent
pursuant to Section 341(f) of the Code or agreed that Section 341(f)(2) of
the Code shall apply to the disposition of any assets.
(xii) Xxxxxxxx and its Subsidiaries have not made any payment, nor are
they obligated to make any payment, nor are they party to any agreement
that under certain circumstances could obligate them to make any payment,
that will not be deductible under Section 280G of the Code. Xxxxxxxx and
its Subsidiaries have no liability for the Taxes of any other Person under
Treasury Regulation Section 1.1502-6 (or any similar provision of state,
local or foreign law) as a transferee or successor, by contract, or
otherwise.
(xiii) Xxxxxxxx and its Subsidiaries have not waived any statute of
limitations in respect of Taxes or agreed to any extension of time with
respect to a Tax assessment or deficiency.
(k) Employee Benefit Plans.
(i) Schedule 3.1(k)(i) contains a true and complete list of
each "employee benefit plan" (within the meaning of Section 3(3) of ERISA), and
each stock purchase, stock option, severance, employment, change-in-control,
fringe benefit, welfare benefit, collective bargaining, bonus, incentive,
deferred compensation and all other employee benefit plans, agreements,
programs, policies or other arrangements, whether or not subject to ERISA
(including any funding mechanism therefor now in effect or required in the
future as contemplated by this Agreement or otherwise), whether formal or
informal, oral or written, legally binding or not, under which any employee or
former employee of Xxxxxxxx has, by virtue of such employee or former employee's
employment with Xxxxxxxx, any present or future right to benefits or under which
Xxxxxxxx has any present or future liability. All such plans, agreements,
programs, policies and arrangements shall be collectively referred to as the
"Xxxxxxxx Plans."
(ii) The documents relating to the Xxxxxxxx Plans provided to
MSGI are accurate copies thereof, and Xxxxxxxx will, to the extent not delivered
or made available prior to the date hereof with respect to each Xxxxxxxx Plan,
deliver or make available to MSGI promptly following the date hereof a current,
accurate and complete copy (or, to the extent no such copy exists, an accurate
description) thereof and, to the extent applicable: (A) any related trust
agreement or other funding instrument; (B) the most recent determination letter;
(C) any summary plan description and other written communications (or a
description of any material oral communications) by Xxxxxxxx to its employees
concerning the extent of the benefits provided under a Xxxxxxxx Plan; and (D)
for the most recent year (1) the Form 5500 and attached schedules, (2) audited
financial statements, (3) actuarial valuation reports and (4) attorney's
response to an auditor's request for information.
(iii) Except as disclosed on Schedule 3.1(k)(iii), (A) each
Xxxxxxxx Plan has been established and administered in all material respects in
accordance with its terms, and with the applicable provisions of ERISA, the Code
and other applicable laws, rules and regulations; (B) each Xxxxxxxx Plan which
is intended to be qualified within the meaning of Code Section 401(a) is so
qualified and has received a favorable determination letter as to its
qualification, and, to the knowledge of Xxxxxxxx, nothing has occurred, whether
by action or failure to act, that could reasonably be expected to cause the loss
of such qualification; (C) for each Xxxxxxxx Plan that is a "welfare plan"
within the meaning of ERISA Section 3(1), Xxxxxxxx does not have nor will have
any liability or obligation under any plan which provides medical or death
benefits with respect to current or former employees of Xxxxxxxx beyond their
termination of employment (other than coverage mandated by law); (D) to the
knowledge of Xxxxxxxx, no event has occurred and no condition exists that would
subject Xxxxxxxx, either directly or by reason of its affiliation with any
Commonly Controlled Entity (defined as any organization which is a member of a
controlled group of organizations within the meaning of Code Sections 414(b),
(c), (m) or (o)), to any material tax, fine, lien, penalty or other material
liability imposed by ERISA, the Code or other applicable laws, rules and
regulations; (E) for each Xxxxxxxx Plan with respect to which a Form 5500 has
been filed, no material change has occurred with respect to the matters covered
by the most recent Form 5500 since the date thereof; and (F) no "prohibited
transaction" (as such term is defined in ERISA Section 406 and Code Section
4975) for which Xxxxxxxx has any liability has occurred with respect to any
Xxxxxxxx Plan.
(iv) No Xxxxxxxx Plan is subject to Title IV of ERISA.
(v) No Xxxxxxxx Plan is a multiemployer plan within the
meaning of ERISA Section 4001(a)(3). Xxxxxxxx has not contributed or had any
obligation to contribute in the preceding five (5) years to such a multiemployer
plan.
(vi) With respect to any Xxxxxxxx Plan, (A) no material
actions, suits or claims (other than routine claims for benefits in the ordinary
course) are pending or threatened, and (B) to the knowledge of Xxxxxxxx, no
facts or circumstances exist that could give rise to any such actions, suits or
claims.
(vii) Except as disclosed on Schedule 3.1(k)(vii), the
consummation of the transactions contemplated by this Agreement will not (A)
entitle any current or former employee or director of Xxxxxxxx to severance pay,
unemployment compensation or any similar payment or (B) accelerate the time of
payment or vesting, or increase the amount of any compensation due to, any
current or former employee of Xxxxxxxx.
(viii) Xxxxxxxx has not taken any action, other than in the
Ordinary Course of Business, that has or would result in a material increase in
benefits under any Xxxxxxxx Plan after December 31, 1998.
(l) Environmental Matters. Except as set forth in Schedule 3.1(l) or
except with respect to events, conditions or circumstances that, individually or
in the aggregate, would not have a Material Adverse Effect with respect to
Xxxxxxxx: (i) Xxxxxxxx and its Subsidiaries have obtained and are in compliance
with all Permits issuable and issued pursuant to any Environmental, Health or
Safety Requirements; (ii) as of the date hereof, there are no administrative,
civil or criminal actions, suits, demands, notices, investigations, writs,
injunctions, decrees, orders or judgments outstanding or, to the knowledge of
Xxxxxxxx, threatened against Xxxxxxxx or its Subsidiaries based upon or arising
out of any Environmental, Health or Safety Requirements; (iii) neither Xxxxxxxx
nor its Subsidiaries has caused or has received notice and have no knowledge of
any Release or threatened Release in a quantity requiring reporting or
remediation under any Environmental, Health or Safety Requirements of any
Hazardous Materials on or from the assets owned or operated by Xxxxxxxx or its
Subsidiaries; (iv) Xxxxxxxx and its Subsidiaries do not have any current
liability in connection with any Release of Hazardous Materials into the indoor
or outdoor environment, whether on-site or off-site; (v) none of the operations
of Xxxxxxxx or its Subsidiaries involves the treatment, storage for longer than
90 days, or disposal of hazardous waste on any property owned, leased or
operated by Xxxxxxxx or any subsidiary, as defined under 40 C.F.R. Parts 260-270
or any state equivalent; and (vi) Xxxxxxxx and its Subsidiaries have provided
all Phase I environmental assessments, and all reports of investigations
conducted as a result of any recommendation in any such assessments that have
been performed within the past three years with respect to the currently or
previously owned, leased or operated properties of Xxxxxxxx and its
Subsidiaries.
(m) Intangible Property. Schedule 3.1(m) hereto identifies all the
Intangible Property (other than commonly available computer software programs
subject to "shrink wrap" license agreements) owned or licensed, or which will be
owned or licensed, by Xxxxxxxx or its Subsidiaries as of the Closing which is
material to, and currently used to conduct, the business of Xxxxxxxx and its
Subsidiaries, as well as copies of all contracts or agreements pursuant to which
Xxxxxxxx or any of its Subsidiaries have or enjoy any license or right to use
any such Intangible Property. Xxxxxxxx or its Subsidiaries own (free and clear
of any Liens, except Permitted Liens) or possess all necessary or appropriate
licenses or other valid rights to use all Intangible Property material to and
currently used to conduct the business of Xxxxxxxx and its Subsidiaries. Except
as disclosed on Schedule 3.1(m): (i) no Action is pending, or to the knowledge
of Xxxxxxxx threatened, against Xxxxxxxx or any of its Subsidiaries claiming
that Xxxxxxxx or any of its Subsidiaries is infringing or otherwise adversely
affecting the rights of any Person with regard to any Intangible Property
material to and currently used in the business of Xxxxxxxx and its Subsidiaries
and (ii) to the knowledge of Xxxxxxxx, no person is infringing the rights of
Xxxxxxxx or any of its Subsidiaries with respect to any such Intangible
Property; provided, that no representation or warranty is made in the foregoing
clauses (i) and (ii) with respect to matters that would not have a Material
Adverse Effect with respect to Xxxxxxxx. All of the permits, grants or licenses
or other rights relating to the Intangible Property are valid and binding upon
Xxxxxxxx and its Subsidiaries and, to the knowledge of Xxxxxxxx, the other
parties thereto, in accordance with their respective terms, except as would not,
individually or in the aggregate, have a Material Adverse Effect with respect to
Xxxxxxxx.
(n) Real Property.
(i) Schedule 3.1(n)(i) hereto identifies all the real property
owned, or which will be owned, by Xxxxxxxx or its Subsidiaries as of the
Closing, as well as all contracts, agreements or options to acquire other real
property, or to sell or lease owned property, in each case, binding on Xxxxxxxx
or any of its Subsidiaries. Except as disclosed in Schedule 3.1(n)(i), Xxxxxxxx
and its Subsidiaries have good, valid and insurable title to all such real
property and all improvements located thereon free and clear of all Liens,
except Permitted Liens.
(ii) Schedule 3.1(n)(ii) hereto identifies the real property
("Leased Real Property") leased, subleased, occupied or used by Xxxxxxxx or any
of its Subsidiaries pursuant to a Lease or other agreement (each such Lease or
other similar agreement being hereinafter referred to as a "Xxxxxxxx Lease") and
Xxxxxxxx or its Subsidiaries owns or leases the improvements located on such
Leased Real Property. Neither Xxxxxxxx nor any of its Subsidiaries has received
any written notification that it is in default with respect to any Xxxxxxxx
Leases pursuant to which it occupies or uses any Leased Real Property and/or
such improvements nor, to the knowledge of Xxxxxxxx, are there any disputes
between any Person and Xxxxxxxx or any of its Subsidiaries with respect to
Xxxxxxxx Leases, which default or dispute would materially adversely affect the
right of Xxxxxxxx or its Subsidiaries to remain in possession of the property in
question or otherwise adversely affect in any material respect the ability to
use such property for its current use. Except as set forth in Schedule
3.1(n)(ii), Xxxxxxxx and its Subsidiaries have performed all obligations
required to be performed by them to date under, and are not in default in
respect of, any Xxxxxxxx Lease, and no event has occurred which, with due notice
or lapse of time or both, would constitute such a default, except for such
obligations, the non-performance of which, and such defaults, the existence of
which, in each case, would not result in a termination or cancellation of any
Lease (or other such agreement) or which would not otherwise, individually or in
the aggregate, have a Material Adverse Effect with respect to Xxxxxxxx. To the
knowledge of Xxxxxxxx, no other party to any Xxxxxxxx Lease or such other
agreement is in default in respect thereof, and no event has occurred which,
with due notice or lapse of time or both, would constitute such a default,
except for defaults which, individually or in the aggregate, would not have a
Material Adverse Effect with respect to Xxxxxxxx. Except as disclosed in
Schedule 3.1(n)(ii), either Xxxxxxxx or a Subsidiary of Xxxxxxxx has a valid
leasehold interest in each Leased Real Property subject to a Xxxxxxxx Lease,
which leasehold interest is free and clear of all Liens, except Permitted Liens.
(o) Tangible Personal Property.
(i) The Tangible Personal Property owned, leased or used by
Xxxxxxxx or any of its Subsidiaries is in the aggregate sufficient and adequate
to carry on their respective businesses as presently conducted and is, in the
aggregate, in good operating condition and repair, normal "wear and tear"
excepted.
(ii) Except as set forth on Schedule 3.1(o)(ii) or property
and assets sold or disposed of in the Ordinary Course of Business of Xxxxxxxx,
each of Xxxxxxxx and its Subsidiaries have good and valid title to all Tangible
Personal Property shown on the Interim Financials as being owned by any of them
(and, as of the Closing, will have good and valid title with respect to such
property as shown on the 1999 Audited Financials), in each case free and clear
of all Liens, except for (i) Permitted Liens and (ii) Liens arising in the
Ordinary Course of Business of Xxxxxxxx after the date hereof, which would
otherwise fall within the definition of Permitted Liens if such definition did
not require adequate reserves on the financial statements of Xxxxxxxx or any of
its Subsidiaries with respect to such Liens.
(p) Contracts. Schedule 3.1(p) contains a list of the following
Contracts to which Xxxxxxxx or any of its Subsidiaries is a party or by which
any of their assets, business or properties are bound: (i) employment,
consulting, severance or "golden parachute" agreements (other than employment or
consulting agreements that constitute Excluded Contracts); (ii) Contracts
granting a right of first refusal or first offer or negotiation with respect to
any properties or rights (in each case with a value in excess of fifty thousand
($50,000) dollars) of Xxxxxxxx or any of its Subsidiaries; (iii) partnership or
joint venture agreements; (iv) Contracts for the acquisition, sale or lease of
material properties or assets of any Subsidiaries (by merger, purchase or sale
of assets, stock or otherwise and other than Contracts entered into in the
Ordinary Course of Business of Xxxxxxxx) or under which Xxxxxxxx or any of its
Subsidiaries has continuing obligations; (v) Contracts with any Governmental
Authority; (vi) Contracts which limit or restrain Xxxxxxxx or any of its
Subsidiaries from engaging or competing in any business; and (vii) Contracts
relating to indebtedness for borrowed money and guarantees thereof and capital
leases. True and complete copies of all Contracts listed on Schedule 3.1(p) have
been delivered or made available to MSGI, as amended to date, and each such
Contract is in full force and effect. Except as set forth on Schedules 3.1(p),
there is no material default under any Contract listed therein either by
Xxxxxxxx or any of its affiliates party thereto, and no event has occurred that
with notice or lapse of time or both would constitute such a default or, to the
knowledge of Xxxxxxxx, by any other party thereto. As of the date hereof, no
party to any such Contract has given notice to Xxxxxxxx, or any Subsidiary of
Xxxxxxxx, or made a claim against any of them with respect to, any breach or
default thereunder.
(q) Insurance. Schedule 3.1(q) hereto sets forth a list of all
policies or binders of fire, liability, workmen's compensation or other
insurance held by or on behalf of Xxxxxxxx or any of its Subsidiaries
(specifying the insurer, the policy number or covering note number with respect
to binders). Correct and complete copies of such policies or binders have been
delivered or made available to MSGI. None of Xxxxxxxx or any of its Subsidiaries
(i) is in default with respect to any material provision contained in any such
policy or binder; or (ii) has received a notice of cancellation or non-renewal
of any such policy or binder. All of such insurance is in full force and effect
and all premiums due and payable thereon have been paid. The last annual premium
paid by Xxxxxxxx for directors' and officers' liability insurance prior to the
date hereof was approximately $13,365.
(r) Labor Matters. Neither Xxxxxxxx nor any of its Subsidiaries is
party to any collective bargaining agreement or other labor agreement with any
union or labor organization and no union or labor organization has been
recognized by Xxxxxxxx or any of its Subsidiaries. Except as disclosed on
Schedule 3.1(r) hereto, as of the date hereof, (i) to the knowledge of Xxxxxxxx
after reasonable inquiry, there is no union or labor organization actively
seeking to organize any employees of Xxxxxxxx or any of its Subsidiaries and
(ii) there is no strike, picketing or work stoppage by, or any lockout of,
Employees of Xxxxxxxx or any of its Subsidiaries pending or, to the knowledge of
Xxxxxxxx, threatened, against or involving Xxxxxxxx or any of its Subsidiaries.
(s) Transactions with Affiliates. Except as set forth on Schedule
3.1(s), none of Xxxxxxxx or any of its Subsidiaries is a party to any material
Contract with any of their Affiliates or any director or officer for the
purchase, sale, lease or other disposition of property or services.
(t) Conduct of Business. Except as set forth on Schedule 3.1(t)
hereto, all of the business and operations of Xxxxxxxx are conducted through
Xxxxxxxx and its Subsidiaries. Any and all direct or indirect ownership
interests, of the stockholders of Xxxxxxxx or any of their respective
Affiliates, in Xxxxxxxx or any of its Subsidiaries shall be directly or
indirectly transferred to Xxxxxxxx or its Subsidiaries (or to designees of MSGI)
upon consummation of the Merger for no additional consideration.
(u) No Undisclosed Liabilities. Except as set forth in the Xxxxxxxx
Financial Statements or with respect to claims disclosed on Schedule 3.1(u), as
of December 31, 1998, none of Xxxxxxxx or any of its Subsidiaries had any
material liabilities or obligations of any nature, whether or not accrued,
contingent or otherwise, and whether due or to become due or asserted or
unasserted, which would be required by Generally Accepted Accounting Principles
to be reflected in, reserved against or otherwise described in the balance
sheets (including the notes thereto, as applicable) included therein.
(v) Questionable Payments. Neither of Xxxxxxxx nor any of its
Subsidiaries, nor any director, officer, agent, employee or other Person
associated with or acting on behalf of Xxxxxxxx or any of its Subsidiaries has,
directly, or indirectly: used any corporate funds for unlawful contributions,
gifts, entertainment, or other unlawful expenses relating to political activity;
made any unlawful payment to foreign or domestic government officials or
employees or to foreign or domestic political parties or campaigns from
corporate funds; established or maintained any unlawful or unrecorded fund of
corporate monies or other assets; made any false or fictitious entry on the
books or records of Xxxxxxxx or any of its Subsidiaries; or made any bribe,
kickback, or other payment of a similar or comparable nature, whether lawful or
not, to any person or entity, private or public, regardless of form, whether in
money, property, or services, to obtain favorable treatment in securing business
or to obtain special concessions, or to pay for favorable treatment for business
secured or for special concessions already obtained.
(w) Corporate Records. The minute books (or comparable records) of
Xxxxxxxx and each of its Subsidiaries heretofore have been made available to
MSGI for its inspection and contain true and complete records of all meetings
and consents in lieu of meeting of the Board of Directors (or the equivalent
thereof) and stockholders (or the equivalent thereof) of Xxxxxxxx and each of
its Subsidiaries since January 1, 1996.
(x) Accuracy of Information Regarding Xxxxxxxx and its
Subsidiaries. None of the information supplied or to be supplied by Xxxxxxxx (in
writing and designated as such) with respect to Xxxxxxxx or any of Xxxxxxxx'x
Subsidiaries for inclusion or incorporation by reference in any filing with the
SEC by MSGI in connection with the transactions contemplated by this Agreement
will, at the time any such filing becomes effective under applicable securities
laws, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. If at any time prior to the Effective Time any event with respect to
Xxxxxxxx, any of Xxxxxxxx'x Subsidiaries or their respective officers and
directors should occur which is required to be described in an amendment of, or
a supplement to, any such filing with the SEC by MSGI in connection with the
transactions contemplated by this Agreement, or if any information previously
supplied by Xxxxxxxx (in writing and designated as such) with respect to
Xxxxxxxx or any of the Xxxxxxxx'x Subsidiaries for inclusion or incorporation by
reference in any such filing is found by Xxxxxxxx to contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, in either case,
Xxxxxxxx represents and warrants that it shall upon becoming aware of any such
untrue statement or omission promptly so advise MSGI and such event shall be so
described in a written notice to MSGI for inclusion in such amendment or
supplement (in the case of any untrue statement or material omission as so
described, to correct the same).
(y) Finders and Investment Bankers. Except as disclosed on
Schedule 3.1(y), (i) none of Xxxxxxxx or any of its officers or directors has
employed any investment banker, business consultant, financial advisor, broker
or finder in connection with the transactions contemplated by this Agreement and
(ii) Xxxxxxxx has not incurred any liability for any investment banking,
business consultancy, financial advisory, brokerage or finders' fees or
commissions in connection with the transactions contemplated hereby.
(z) Actions by Xxxxxxxx. None of Xxxxxxxx nor any Xxxxxxxx
Subsidiary has taken or agreed to take any action or has knowledge of any fact
or circumstance that is reasonably likely to prevent the Merger from qualifying
as a reorganization within the meaning of Section 368(a) of the Code.
(aa) Year 2000. The Information Technology owned, licensed,
utilized and relied upon by Xxxxxxxx is Year 2000 Compliant. For purposes
hereof, "Year 2000 Compliant" means that, with respect to any Information
Technology, including without limitation, any function, process, system or other
device or item, regardless of the particular date, year, century or other
chronological variable: (i) will accurately process date information (e.g.,
accept date input, provide date output and perform calculations and comparisons
on dates and portions of dates); (ii) will function without interruption due to
a change in date, ensuring that any results, data or information processed,
generated or transmitted in connection therewith, shall be correct, valid and
not adversely affected; and, if applicable (iii) will include date data century
recognition, calculations which accommodate same century and multi-century date
values and formulae, as well as date data interfaces (to application and
operating system software, as applicable) reflecting the correct date, year and
century. For purposes hereof, "Information Technology" means any computer
hardware, computer software, computer firmware or databases (whether for a
specific or general purpose), and other similar or related items of automated,
computerized or software system(s).
3.2 Certain Representations and Warranties of MSGI and Merger-Sub. MSGI
and Merger-Sub each represents and warrants to Xxxxxxxx as follows:
(a) Authority Relative to this Agreement. MSGI and Merger-Sub has
full power and authority to execute and deliver this Agreement and each other
Ancillary Agreement to which it is or, at the Closing, will be a party and to
consummate the transactions contemplated by this Agreement. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby to which MSGI and Merger-Sub is or, at the Closing, will be a party have
been duly and validly authorized and approved by the board of directors thereof
and no other corporate proceedings on the part of MSGI and Merger-Sub are
necessary to authorize the execution and delivery by MSGI and Merger-Sub of this
Agreement or the consummation of the transactions contemplated hereby to which
it is or, at the Closing, will be a party. This Agreement has been and, at the
Closing, the Ancillary Agreements to which MSGI and Merger-Sub is a party will
have been duly and validly executed and delivered by MSGI and Merger-Sub and
(assuming the valid execution and delivery thereof by the other parties thereto)
constitutes or will at the Closing constitute the legal, valid and binding
agreement of MSGI and Merger-Sub, enforceable against MSGI and Merger-Sub in
accordance with their respective terms, except as such obligations and their
enforceability may be limited by applicable bankruptcy and other similar laws
affecting the enforcement of creditors' rights generally and except that the
availability of equitable remedies is subject to the discretion of the court
before which any proceeding therefor may be brought (whether at law or in
equity).
(b) No Conflicts; Consents. The execution, delivery and
performance by MSGI and Merger-Sub of this Agreement and each Ancillary
Agreement to which it is or, at the Closing, will be a party and the
consummation of the contemplated transactions to which it is or, at the Closing,
will be a party do not and will not (i) violate any provision of the certificate
of incorporation or by-laws of MSGI and Merger-Sub; (ii) require MSGI and
Merger-Sub to obtain any consent, approval or action of or waiver from, or make
any filing with, or give any notice to, any Governmental Authority or any other
Person, except for the Registration Statement, the Certificate of Merger and
compliance with the HSR Act, violate, conflict with or result in the breach or
default under (after the giving of notice or the passage of time); (iii) permit
the termination of any material Contract to which MSGI and Merger-Sub is a party
or by which MSGI and Merger-Sub or its assets may be bound or subject; or (iv)
violate any law or order of any Governmental Authority against, or binding upon,
MSGI and Merger-Sub or upon its assets or business.
(c) Corporate Existence and Power. Each of MSGI, Merger-Sub and
each other MSGI Subsidiary is a corporation duly organized, validly existing and
in good standing under the laws of its state of incorporation and has all
requisite corporate powers and all material governmental licenses,
authorizations, consents and approvals required to carry on its business as now
conducted. Each of MSGI and Merger Sub is duly qualified or licensed to do
business and in good standing in each jurisdiction in which the property owned,
leased or operated by it or the nature of the business conducted by it makes
such qualification or licensing necessary, except for such failures to be so
duly qualified or licensed and in good standing that would not have a Material
Adverse Effect with respect to MSGI.
(d) Finders; Fees. Except as disclosed on Schedule 3.2(d), there
is no investment banker, broker, finder or other intermediary which has been
retained by or is authorized to act on behalf of MSGI and Merger-Sub who might
be entitled to any fee or commission from MSGI and Merger-Sub upon consummation
of the contemplated transactions.
(e) Actions by MSGI. None of MSGI, Merger-Sub, or any other
Affiliate of MSGI has taken or agreed to take any action or has knowledge of any
fact or circumstance that is likely to prevent the Merger from qualifying as a
reorganization within the meaning of Section 368(a) of the Code.
(f) Capitalization. The authorized capital stock of Merger-Sub
consists of 100 shares of Merger-Sub Common Stock, 50 shares of which are issued
and outstanding and are owned by MSGI free and clear of any Lien. The authorized
MSGI Common Stock consists solely of 75,000,000 shares of MSGI Common Stock and
150,000 shares of preferred stock, par value $.01 per share ("MSGI Preferred
Stock"), of which 21,995,062 shares of MSGI Common Stock are, as of July 1,
1999, issued and outstanding (which number does not include shares held in
treasury) and no shares of Preferred Stock are issued and outstanding on the
date hereof. As of July 1, 1999 there were options and warrants outstanding to
currently purchase 3,391,225 shares of MSGI Common Stock. Except as set forth in
the MSGI SEC Reports and in the preceding sentence, there are no outstanding or
authorized options, warrants, calls, subscriptions, rights, agreements or other
commitments of any character (contingent or otherwise) obligating MSGI or any
MSGI Subsidiary to issue, sell, purchase, return or redeem any shares of capital
stock of (or equity interest in), or securities convertible into or exchangeable
for, any shares of capital stock of (or equity interest in) MSGI or any MSGI
Subsidiary. Except as disclosed in the MSGI SEC Reports, there are no
stockholder agreements, voting trusts or other agreements or understandings to
which MSGI or any MSGI Subsidiary is a party or to which any of them is bound
relating to the voting or registration of any shares of MSGI Common Stock or
capital stock of or equity interests in any MSGI Subsidiary. All issued and
outstanding shares of MSGI Common Stock and capital stock of or other equity
interests in any MSGI Subsidiary are and the Share Consideration when issued in
accordance with the terms of this Agreement will be, duly authorized, validly
issued free of any preemptive rights, fully paid and non-assessable.
(g) SEC Filings; Financial Statements.
(i) MSGI has timely filed and made available to Xxxxxxxx true
and correct copies of (a) MSGI's Annual Report on Form 10-KSB, as amended, for
the year ended June 30, 1998, (b) MSGI's Proxy Statement relating to its 1998
Annual Meeting of Stockholders and (c) MSGI's Quarterly Report on Form 10-Q for
the quarter ended March 31, 1999 (collectively, the "MSGI SEC Reports"). The
MSGI SEC Reports (i) at the time filed, complied in all material respects with
the requirements of applicable securities laws and other applicable laws and
(ii) did not, at the time they were filed (or, if amended or superseded by a
filing prior to the date of this Agreement, then on the date of such filing)
contain any untrue statement of a material fact or omit to state a material fact
required to be stated in such MSGI SEC Reports or necessary to make the
statements in such MSGI SEC Reports, in light of the circumstances under which
they were made, not misleading.
(ii) Each of the MSGI financial statements (including, in each
case, any related notes) contained in the MSGI SEC Reports, including any MSGI
SEC Reports filed after the date of this Agreement until the Effective Time,
complied and shall comply as to form in all material respects with the
applicable published rules and regulations of the SEC with respect thereto, was
or shall be prepared in accordance with Generally Accepted Accounting Principles
applied on a consistent basis throughout the periods involved (except as may be
indicated in the notes to such financial statements or, in the case of unaudited
MSGI statements, as permitted by Form 10-Q (or Form 10-QSB) of the SEC), and
fairly presented or shall fairly present in all material respects the
consolidated financial position of MSGI and its Subsidiaries as at the
respective dates and the consolidated results of operations and cash flows for
the periods indicated, except that the unaudited MSGI financial statements were,
are or shall be subject to normal and recurring year-end adjustments which were
not, are not or shall not be expected to be material in amount or effect.
(h) Compliance. Except as set forth on Schedule 3.2(h), each of MSGI
and its Subsidiaries hereto is in compliance with all Legal Requirements,
including, without limitation, those relating to zoning, except for such
failures to comply or to be in compliance as have not had, and would not have,
individually or in the aggregate, a Material Adverse Effect with respect to
MSGI. Except as set forth on Schedule 3.2(h), none of MSGI or any of its
Subsidiaries has received any written notice asserting any non-compliance with
any such Legal Requirements, except for such failures to comply as have not had,
and would not have, a Material Adverse Effect with respect to MSGI.
(i) No Undisclosed Liabilities. Except as set forth in the MSGI SEC
Reports or with respect to claims disclosed on Schedule 3.2(i), as of Xxxxx 00,
0000, xxxx xx XXXX or any of its Subsidiaries had any material liabilities or
obligations of any nature, whether or not accrued, contingent or otherwise, and
whether due or to become due or asserted or unasserted, which would be required
by Generally Accepted Accounting Principles to be reflected in, reserved against
or otherwise described in the balance sheets (including the notes thereto, as
applicable) included therein.
(j) Absence of Certain Changes or Events. Since March 31, 1999,
except as disclosed in Schedule 3.2(j), (i) there have been no events, changes,
or occurrences which have had, or are reasonably likely to have, individually or
in the aggregate, a Material Adverse Effect with respect to MSGI, and (ii)
neither MSGI nor any MSGI Subsidiary has taken any action, or failed to take any
action, which action or failure would represent or result in a material breach
or violation of any of the covenants and agreements of MSGI contained herein.
(k) Accuracy of Information Regarding MSGI and its Subsidiaries.
None of the information supplied or to be supplied by MSGI (in writing and
designated as such) with respect to MSGI or any of MSGI's Subsidiaries for
inclusion or incorporation by reference in any filing with the SEC by MSGI in
connection with the transactions contemplated by this Agreement (including,
without limitation, the Registration Statement) will, at the time any such
filing becomes effective under applicable securities laws, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. If at any time prior
to the Effective Time any event with respect to MSGI, any of MSGI's Subsidiaries
or their respective officers and directors should occur which is required to be
described in an amendment of, or a supplement to, any such filing with the SEC
by MSGI in connection with the transactions contemplated by this Agreement, or
if any information previously supplied by MSGI (in writing and designated as
such) with respect to MSGI or any of MSGI's Subsidiaries for inclusion or
incorporation by reference in any such filing is found by MSGI to contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading, in either case,
MSGI represents and warrants that it shall upon becoming aware of any such
untrue statement or omission promptly so advise Xxxxxxxx in a written notice.
4. CERTAIN COVENANTS AND AGREEMENTS OF THE PARTIES.
4.1 Conduct of Business of Xxxxxxxx and its Subsidiaries. From the date
hereof until the Effective Time, Xxxxxxxx and its Subsidiaries shall conduct
their business in the Ordinary Course of Business of Xxxxxxxx and shall use
their best efforts to preserve intact their business organizations and
relationships with third parties and to keep available the services of their
present officers and key employees. Except as otherwise approved in writing by
MSGI or as expressly contemplated by this Agreement or the Ancillary Agreements
and without limiting the generality of the foregoing, from the date hereof until
the Effective Time:
(a) Xxxxxxxx shall not, and shall not permit any of its
Subsidiaries to, adopt or propose any change in its Organizational Documents;
(b) Xxxxxxxx shall not, and shall not permit any of its
Subsidiaries to, acquire or agree to acquire, develop, lease, operate or manage,
by merging or consolidating with, or by purchasing a material portion of the
assets of any Business, or by any other manner of acquiring: (i) any Business;
or (ii) any assets, other than assets that are not material to Xxxxxxxx and its
Subsidiaries taken as a whole, except in the Ordinary Course of Business of
Xxxxxxxx;
(c) Xxxxxxxx shall not, and shall not permit its Subsidiaries to,
sell, lease, license, mortgage or otherwise encumber or subject to any Liens or
otherwise transfer or dispose of any of its material properties or assets, or
other ownership interest in any of its properties, assets or subsidiaries, other
than: (i) in the Ordinary Course of Business of Xxxxxxxx; (ii) pursuant to any
agreements existing as of the date hereof, which agreements are set forth on
Schedule 4.1(c) hereto; and (iii) Permitted Liens;
(d) Xxxxxxxx shall not declare, set aside, or pay any dividends or
make any distributions on Xxxxxxxx Common Stock;
(e) Xxxxxxxx shall not, and shall not permit any of its
Subsidiaries to: (i) issue, deliver or sell, or authorize or propose the
issuance, delivery or sale of, any capital stock of (or equity interest in)
Xxxxxxxx or any of its Subsidiaries, or any security convertible into or
exercisable for either of the foregoing; (ii) split, combine or reclassify any
capital stock of Xxxxxxxx or any of its Subsidiaries or issue or authorize the
issuance of any other securities in respect of, in lieu of or in substitution
for shares of capital stock of (or equity interest in) Xxxxxxxx or any of its
Subsidiaries; or (iii) except as disclosed in Schedule 4.1(e) hereto,
repurchase, redeem or otherwise acquire any shares of capital stock of (or
equity interest in) Xxxxxxxx or any of its Subsidiaries or any other securities
thereof or any rights, warrants or options to acquire any such shares, equity
interest or other securities;
(f) except as set forth in Schedule 4.1(f), Xxxxxxxx shall not,
and shall not permit any of its Subsidiaries to, make any commitment or enter
into, or amend, modify, or terminate, any Contract of a nature which would be
required to be disclosed on Schedule 3.1(p) hereto, except (subject to
compliance with the other provisions of this Section 4.1) in the Ordinary Course
of Business of Xxxxxxxx following reasonable advance notice to MSGI;
(g) except in the Ordinary Course of Business of Xxxxxxxx or as
described in Schedule 4.1(g) hereto, Xxxxxxxx shall not, and shall not permit
any of its Subsidiaries to: (i) incur any indebtedness for borrowed money or
guarantee or otherwise become liable or responsible for (whether directly,
contingently or otherwise) any such indebtedness or other obligations of another
Person; (ii) make any loans, advances or capital contributions to, or
investments in, any other Person, other than to Xxxxxxxx or any Subsidiary of
Xxxxxxxx; (iii) discharge or satisfy any Lien (other than Permitted Liens) or
pay any obligation or liability prior to when it is due; or (iv) cancel or
compromise any debt of, or claim against, Xxxxxxxx or any of its Subsidiaries;
(h) except as set forth on Schedule 4.1(h) or pursuant to any
Contract or Xxxxxxxx Plan in effect on the date hereof and set forth on one of
the Schedules hereto, Xxxxxxxx shall not, and shall not permit any of its
Subsidiaries to: (i) increase the compensation payable or to become payable to
its officers, directors or key Employees (other than normal and customary
increases consistent with past practices for Employees who are not senior
executives); (ii) grant or increase any severance or termination pay to
officers, directors or key Employees; (iii) enter into, extend or renew any
employment, severance or consulting agreement with any current or former
director, officer or other Employee of Xxxxxxxx, except that Xxxxxxxx and its
Subsidiaries may, following consultation with MSGI, enter into agreements with
any new Employee who is hired to replace a current Employee who has an
employment agreement; provided, that the term of any such replacement Employee's
agreement may not be more than one year, such replacement Employee's agreement
may not contain any severance obligation beyond such term and the other terms of
such replacement Employee's agreement are in all material respects no less
favorable to Xxxxxxxx or such Subsidiary than the terms of the current
Employee's agreement; or (iv) establish, adopt, enter into or amend, any
collective bargaining, bonus, profit sharing, thrift, compensation stock option,
restricted stock, pension, retirement, deferred compensation, employment
termination, severance or other plan, agreement, trust, fund, policy or
arrangement for the benefit of any current or former director, officer or
Employee.
(i) except as disclosed in the Xxxxxxxx Financial Statements or
Schedule 4.1(i) or as may be required as a result of a change in law or in
Generally Accepted Accounting Principles, Xxxxxxxx shall not, and shall not
permit any of its Subsidiaries to, change any of its tax or accounting policies
(including, without limitation, procedures with respect to the payment of
accounts payable and collection of accounts receivable);
(j) Xxxxxxxx shall not, and shall not permit or cause its
Subsidiaries to, adopt a plan of complete or partial liquidation, dissolution,
merger, consolidation, restructuring, recapitalization or other reorganization
of Xxxxxxxx or any of its Subsidiaries (other than the Merger);
(k) Xxxxxxxx shall not, and shall not permit any of its
Subsidiaries to, settle any audit relating to Taxes or any material Action which
is not covered by insurance without the prior written consent of MSGI (which
consent will not be unreasonably withheld or delayed) unless such settlement has
been adequately reserved for on the Xxxxxxxx Financial Statements;
(l) Xxxxxxxx shall, and shall cause its Subsidiaries to, use best
efforts to keep or cause to be kept its insurance policies (or substantial
equivalents) in such amounts duly in force until the Effective Time and will
give MSGI notice of any material change in its insurance policies; and
(m) Xxxxxxxx shall not, and shall not permit or cause any of its
Subsidiaries to, agree or commit to do anything described in the foregoing
clauses (a) through (l).
4.2 Conduct of Business of MSGI and its Subsidiaries. Except as
contemplated by this Agreement, from the date hereof to the Effective Time, MSGI
shall, and shall cause each of its Subsidiaries to, conduct its business, in the
Ordinary Course of Business of MSGI. Except as otherwise approved in writing by
Xxxxxxxx or as contemplated by Schedule 4.2 hereof or by this Agreement, and
without limiting the generality of the foregoing, from the date hereof until the
Effective Time, MSGI shall not, and shall not permit its Subsidiaries to, issue,
agree to issue, take any material action, including filing of a registration
statement or dissemination of a private placement memorandum, relating to
issuances of, any capital stock of MSGI or its Subsidiaries, except as
contemplated by this Agreement, or pursuant to (a) any MSGI stock option plan,
(b) any other contractual commitments of MSGI or its Subsidiaries in effect as
of the date hereof and set forth on Schedule 4.2 hereto or (c) any other equity
based arrangement or plan for the benefit of employees of MSGI and its
Subsidiaries.
4.3 Access and Information. Between the date of this Agreement and the
Effective Time, each of MSGI and Xxxxxxxx shall, and shall cause its respective
Subsidiaries to, afford Xxxxxxxx or MSGI, as the case may be, and their
respective authorized representatives (including its accountants, financial
advisors and legal counsel) reasonable access during normal business hours to
all of the properties, personnel, contracts and other agreements, books and
records of MSGI and its Subsidiaries or Xxxxxxxx and its Subsidiaries, as the
case may be, and shall promptly deliver or make available to Xxxxxxxx or MSGI,
as the case may be, all information (including financial information) concerning
the business, properties, assets and personnel of MSGI and its Subsidiaries or
Xxxxxxxx and its Subsidiaries as Xxxxxxxx or MSGI, respectively, may from time
to time reasonably request. Each of MSGI and Xxxxxxxx shall, and shall cause its
respective representatives to, hold all evaluation material in confidence and,
in the event of the termination of this Agreement for any reason, MSGI or
Xxxxxxxx, as applicable, promptly shall return or destroy, or cause to be
returned or destroyed, all evaluation material.
4.4 Reasonable Efforts; Antitrust Notification; Additional Actions.
(a)Upon the terms and subject to the conditions of this Agreement, each of the
parties hereto shall use all reasonable efforts to take, or cause to be taken,
all action, and to do or cause to be done, and to assist and cooperate with the
other parties in doing, all things necessary, proper or advisable to consummate
and make effective as promptly as practicable the transactions contemplated by
this Agreement, including using all reasonable efforts to: (i) obtain all
consents, amendments to or waivers under the terms of any of Xxxxxxxx'x or its
Subsidiaries' borrowing or other contractual arrangements required by the
transactions contemplated by this Agreement; (ii) effect promptly all necessary
or appropriate registrations and filings with Governmental Authorities,
including, without limitation, filings and submissions pursuant to the
Securities Act, the Exchange Act, the DGCL and the TBCA; (iii) defend any
lawsuits or other legal proceedings, whether judicial or administrative,
challenging this Agreement or the consummation of the transactions contemplated
hereby; and (iv) fulfill or cause the fulfillment of the conditions to the
Closing set forth in Article 5.
(b) To the extent required by the HSR Act, each of the parties
will within fourteen (14) business days of the date hereof file with the United
States Federal Trade Commission and the United States Department of Justice the
notification and report form required for the transactions contemplated hereby
and any supplemental or additional information which may reasonably be requested
in connection therewith pursuant to the HSR Act and will comply in all material
respects with the requirements of the HSR Act. The parties will deliver to each
other copies of all filings, correspondence and orders to and from all
Governmental Authorities in connection with the transaction contemplated hereby.
Without limiting the foregoing, in the event that either the Federal Trade
Commission or the Antitrust Division of the United States Department of Justice
should issue a request for Additional Information or Documentary Material under
17 C.F.R. ss.803.20 (a "Second Request"), then Xxxxxxxx and MSGI each agree to
use reasonable best efforts to respond fully to such Second Request as soon as
reasonably practical, but in no event longer than twenty (20) days after its
receipt and will promptly make any further filings or information submissions
and make any employee available for interview or testimony pursuant to the
foregoing (both before and after any Second Request) that may be necessary,
proper or advisable.
(c) Upon the terms and subject to the conditions of this
Agreement, Xxxxxxxx will execute and file the Certificate of Merger with the
Secretary of State of the State of Texas and Merger-Sub will execute and file
the Certificate of Merger with the Secretary of State of the State of Delaware
in connection with the Closing.
(d) Each party, upon reasonable request from time to time of any
other party hereto after the Closing, and at the expense of a requesting party
but without further consideration, shall (i) do each and every act and thing and
execute such documents and other papers as may be necessary or reasonably
requested to consummate the transactions contemplated hereby and (ii) provide
the other party with access to appropriate records in its possession relating to
Tax matters of Xxxxxxxx and its Subsidiaries.
4.5 Notification of Certain Matters. Xxxxxxxx shall give prompt notice to
MSGI and MSGI shall give prompt notice to Xxxxxxxx of (i) any representation or
warranty made by it contained in this Agreement that is qualified or limited as
to materiality or Material Adverse Effect becoming untrue or inaccurate in any
respect or any representation or warranty that is not so qualified becoming
untrue or inaccurate in any material respect (in each case, to the extent
Xxxxxxxx, on the one hand, or MSGI, on the other hand, has knowledge of the
same) or (ii) the failure by MSGI or Xxxxxxxx to comply in any material respect
with any covenant or agreement to be complied with by MSGI or Xxxxxxxx under
this Agreement; provided, however, that no such notification shall affect the
representations, warranties, covenants or agreements of the parties or the
conditions to the obligations of the parties under this Agreement.
4.6 Real Property Transfer Gains Taxes; Registration Fees; HSR Act Fees.
MSGI shall pay (i) any liabilities arising under any real property transfer
taxes, (ii) the fees payable in connection with filings of the Registration
Statement, (iii) the fees payable in connection with filings pursuant to the HSR
Act, (iv) the fees and expenses of its counsel, accountants, financial advisors,
investment bankers and other advisors in connection with the transactions
contemplated hereby, and (v) all other costs, fees or expenses in connection
with the consummation of the transactions provided for herein; provided, the
Xxxxxxxx Stockholders shall pay and be responsible for the fees and expenses of
the counsel, financial advisors and investment bankers retained by Xxxxxxxx or
any Xxxxxxxx Stockholder in connection with the transactions contemplated
hereby, the portion of the fees of Deloitte & Touche LLP attributable solely to
its financial and tax due diligence inquiries of MSGI on behalf of Xxxxxxxx and
any documentary or stamp taxes on the MSGI shares issued in the Merger
(collectively, the "Xxxxxxxx Stockholder Expenses").
4.7 Public Announcements. None of MSGI and Merger-Sub, on the one hand,
or Xxxxxxxx, on the other hand, shall issue any press release or make any public
statements with respect to this Agreement or the transactions contemplated
hereby, without the prior written consent of MSGI or Xxxxxxxx, as the case may
be (which consent will not be unreasonably withheld), except as may be required
by law or the rules and regulations of any national securities exchange or which
is requested or required by any regulatory body which asserts jurisdiction over
such party, in which case such party (or parties) shall be allowed to make such
disclosure; provided, that the party (or parties) making such disclosure or
whose affiliates or agents or representatives are making such disclosure shall
notify the other party (or parties) as promptly as practicable (and, if
possible, prior to making such disclosure) and it shall use its reasonable best
efforts to limit the scope of such disclosure and seek confidential treatment of
the information to be disclosed.
4.8 Execution of Lockup Agreements. Xxxxxxxx shall use its best efforts
to cause the individuals and entities set forth in Schedule 4.8 hereto to
execute and deliver the Lockup Agreements to MSGI at or prior to the Closing.
4.9 Execution of Voting Agreement. Xxxxxxxx shall use its best efforts to
cause the Majority Stockholders to execute and deliver to the other parties
thereto the Voting Agreement at or prior to the Closing.
4.10 Certain Employee Matters.
(a) From and after the Effective Time, MSGI will, and will cause
the Surviving Corporation to, honor in accordance with their terms or enter into
new, employment, severance, indemnification or similar agreements disclosed in
Schedule 4.10 hereto between Xxxxxxxx and certain Employees of Xxxxxxxx and all
Xxxxxxxx Plans; provided, however, that nothing herein shall preclude MSGI or
any of its affiliates from having the right to terminate the employment of any
Xxxxxxxx Employee, with or without cause, or amend or terminate any Xxxxxxxx
Plan after the Effective Time of the Merger.
(b) Immediately following the Effective Time, MSGI and its
Subsidiaries will provide benefits to those of its Employees who were employed
by Xxxxxxxx and its Subsidiaries immediately prior to the Effective Time
substantially comparable in the aggregate to those generally provided by MSGI
and its affiliates to similarly situated Employees employed by MSGI and its
Affiliates; provided, that such Employees shall be credited for service with
Xxxxxxxx and its Subsidiaries (and their respective predecessors to the extent
such service was recognized by Xxxxxxxx or any of its Subsidiaries) for all
purposes, including eligibility, vesting and benefit levels (other than with
respect to benefit accruals under any plans subject to Title IV of ERISA) with
respect to all benefits provided by MSGI and its Subsidiaries to such Employees.
To the extent permitted under applicable insurance policies and laws, MSGI or
its Affiliates shall waive any pre-existing condition exclusions under any group
health plan under which the Employees who were employed by Xxxxxxxx and its
Subsidiaries immediately prior to the Effective Time become covered after the
Effective Time.
4.11 Non-Solicitation. From and after the date hereof through and until
this Agreement is terminated pursuant to Article 6 hereof or the Closing,
whichever shall apply, neither Xxxxxxxx nor its officers, directors, employees,
representatives or advisors will, formally or informally, directly or indirectly
(i) initiate, solicit or encourage any inquiry or the submission of any
proposals by any third party that constitutes or is reasonably likely to lead to
an Acquisition Proposal with respect to Xxxxxxxx or (ii) engage in negotiations
or discussions with, or furnish any information or data to, any third party
relating to an Acquisition Proposal with respect to Xxxxxxxx.
4.12 MSGI's SEC Filings. Xxxxxxxx and its Subsidiaries shall use
commercially reasonable efforts to cooperate with and assist MSGI and its
Subsidiaries in the preparation of any filings with the SEC or other
Governmental Authorities or any private offering memoranda in connection with
this Agreement and the transactions contemplated hereby, including the
preparation of audited financial information and management's discussion and
analysis and delivery of consents and comfort letters of auditors of Xxxxxxxx or
its Subsidiaries in connection therewith.
4.13 Notice of Litigation, Contract Issues and Labor Matters. Xxxxxxxx
shall provide MSGI prompt notice of (a) any material Action (and any material
change with respect thereto) arising from and after the date hereof up to the
Closing, (b) any material change in any material Action existing as of the date
hereof, (c) any notice from or claim made by any Person after the date hereof
and up to the Closing that Xxxxxxxx or any of its Subsidiaries has breached or
is in default under any Contract required to be listed on Schedule 3.1(p) hereto
which such Person giving such notice or making such claim is a party and (d) any
arbitration, strike, picket, work stoppage or lockout arising after the date
hereof and up to the Closing which would have been required to be described in
Schedule 3.1(r) if it had existed as of the date hereof; provided, however, that
no such notification shall affect the representations, warranties, covenants or
agreements of the parties or the conditions to the obligations of the parties
under this Agreement.
4.14 Financial Statements. Xxxxxxxx shall use best efforts to make
available to MSGI the 1999 Audited Financials not later than September 30, 1999.
4.15 Preparation of Registration Statement. MSGI shall prepare and file
with the SEC as soon as reasonably practicable after the date hereof a
registration statement on Form S-4 in connection with the issuance of the MSGI
Common Stock in the Merger, as amended or supplemented from time to time (as so
amended and supplemented, the "Registration Statement"). MSGI shall use best
efforts to have the Registration Statement declared effective by the SEC as
promptly as practicable after such filing. MSGI shall also take any action
(other than qualifying as a foreign corporation or taking any action which would
subject it to service of process in any jurisdiction where MSGI is not now so
qualified or subject) required to be taken under applicable state "Blue Sky" or
securities laws in connection with the issuance of MSGI Common Stock in
connection with the Merger. If at any time prior to the Effective Time any event
shall occur that should be set forth in an amendment of or a supplement to the
Registration Statement, MSGI shall prepare and file with the SEC such amendment
or supplement as soon thereafter as is reasonably practicable. MSGI, Merger-Sub
and Xxxxxxxx shall cooperate with each other in the preparation of the
Registration Statement and any amendment or supplement thereto, and each shall
notify the other of the receipt of any comments of the SEC with respect to the
Registration Statement and of any requests by the SEC for any amendment or
supplement thereto or for additional information. Xxxxxxxx agrees to use its
best efforts, after consultation with the other parties hereto, to respond
promptly to all such comments and requests of the SEC and to cause the
Registration Statement to be declared effective by the SEC.
4.16 NASDAQ Listing. MSGI shall use its best efforts to cause the shares
of MSGI Common Stock to be issued in the Merger in accordance with this
Agreement to be admitted for trading or authorized for quotation on the NASDAQ
SCM and on each national securities exchange on which shares of MSGI Common
Stock may at such time be admitted for trading or listed, subject to official
notice of issuance, prior to the Effective Time.
4.17 Confidential Information.
(a) Prior to the Closing, neither MSGI nor any of its
representatives will, directly or indirectly, use, disclose or make available to
anyone (other than Xxxxxxxx) any confidential information concerning the
ownership and/or operation of Xxxxxxxx (the "Confidential Information"), except
to the extent that such Confidential Information has been made publicly
available by Xxxxxxxx. The Confidential Information includes, without
limitation, the business practices, financial information, customers' and
prospective customers' names, suppliers' and prospective suppliers' names, leads
and account information, mailing lists, computer programs, advertising campaigns
(including, without limitation, displays, drawings, memoranda, designs, styles
or devices), employee names, compensation and benefit information.
(b) Prior to the Closing, neither Xxxxxxxx nor any of its
representatives will, directly or indirectly, use, disclose or make available to
anyone (other than MSGI) any Confidential Information concerning the ownership
and/or operation of MSGI, except to the extent that such Confidential
Information has been made publicly available by MSGI. The Confidential
Information includes, without limitation, the business practices, financial
information, customers' and prospective customers' names, suppliers' and
prospective suppliers' names, leads and account information, mailing lists,
computer programs, advertising campaigns (including, without limitation,
displays, drawings, memoranda, designs, styles or devices), employee names,
compensation and benefit information.
(c) The parties agree that a violation of the foregoing agreements
not to disclose, or any provision thereof, will cause irreparable damage to the
non-disclosing party, and the non-disclosing party shall be entitled (without
any requirement of posting a bond or other security), in addition to any other
rights and remedies which it may have, at law or in equity, to an injunction
enjoining and restraining the disclosing party from doing or continuing to do
any such act or any other violations or threatened violations of this Section
4.17.
4.18 Xxxxxxxx Stockholders' Meeting.
The Board of Directors of Xxxxxxxx shall call a special meeting of
the Xxxxxxxx stockholders, to be held as soon as reasonably practicable after
the date hereof, for the purpose of approving this Agreement and the
transactions contemplated hereby and such other related matters as it deems
appropriate. The Board of Directors of Xxxxxxxx shall recommend at such meeting
that the stockholders of Xxxxxxxx approve this Agreement and the Merger.
4.19 Insurance.
(a) Prior to the Closing, Xxxxxxxx shall purchase directors and
officers insurance to insure each person who is now, or has been at any time
prior to the date hereof, an officer or director of Xxxxxxxx or any of its
against all indemnified liabilities arising out of actions or omissions
occurring prior to the Effective Time (and whether asserted or claimed prior to,
at or after the Effective Time for a period of three (3) years after the
Effective Time; provided, that the cost of such insurance shall not exceed in
the aggregate $50,000. MSGI shall (i) keep such insurance in full force and
effect for a period of three (3) years after the Effective Time, (ii) pay all
premiums for such insurance when due and payable, and (iii) not seek
cancellation of such insurance or a refund of any premiums for such insurance
prior to the end of the three (3) year period after the Effective Time.
(b) From and after the Closing, MSGI shall arrange with its insurance
carrier to provide directors and officers insurance to each continuing officer
and director of the Surviving Corporation on substantially the same terms as
provided to officers and directors of other Subsidiaries of MSGI.
4.20 Stockholders' Representative.
(a) Each stockholder of Xxxxxxxx on the date this Agreement is voted upon
by the stockholders of Xxxxxxxx, for itself and its respective successors and
assigns (each a "Xxxxxxxx Stockholder" and collectively the "Xxxxxxxx
Stockholders") hereby irrevocably makes, constitutes and appoints Xxxxxx X.
Xxxxxxxx, Xx. as such Xxxxxxxx Stockholder's attorney-in-fact and agent, with
full power of substitution, to act for and on behalf of such Xxxxxxxx
Stockholder with respect to any claim or matter arising after the Closing Date
under this Agreement or the Holdback Agreement (the "Stockholders'
Representative"), and authorizes and empowers him to fulfill the role of
Stockholders' Representative as set forth in Section 4.20(b). Each such Xxxxxxxx
Stockholder acknowledges that the appointment of this Stockholders'
Representative herein made is coupled with an interest and may not be revoked.
The Stockholders' Representative accepts his appointment and authorization to
act as attorney-in-fact and agent of the Xxxxxxxx Stockholders.
(b) In furtherance of this appointment herein made, each Xxxxxxxx
Stockholder, fully and without restriction: (i) agrees to be bound by all
notices received and agreements and determinations made by and documents
executed and delivered by the Stockholders' Representative under this Agreement
or the Holdback Agreement; and (ii) authorizes the Stockholders' Representative
to (A) dispute or refrain from disputing any claim made by MSGI or Merger-Sub
under this Agreement or the Holdback Agreement, (B) negotiate and compromise any
dispute which may arise under this Agreement or the Holdback Agreement, (C)
exercise or refrain from exercising any remedies available to the Xxxxxxxx
Stockholders under this Agreement or the Holdback Agreement, (D) sign any
releases or other documents with respect to any such dispute or remedy, (E)
waive any condition contained in this Agreement or the Holdback Agreement, (F)
give such instructions and do such other things and refrain from doing such
other things as the Stockholders' Representative in his sole discretion deems
necessary or appropriate to carry out the provisions of this Agreement or the
Holdback Agreement, (G) disburse all or any portion of the Expense Amount in
payment of the Xxxxxxxx Stockholder Expenses, (H) disburse any or all of the
Earn-Out Amount pursuant to a separate writing executed by the Stockholders'
Representative and MSGI, and (I) retain such counsel, accountants and other
professional advisors as the Stockholders' Representative reasonably deems
necessary to assist him in the performance of his duties hereunder and pay the
fees, costs and expenses thereof out of funds coming into the hands of the
Stockholders' Representative.
(c) In the event of the resignation of the Stockholders'
Representative, the resigning Stockholders' Representative shall appoint a
successor from among the Majority Stockholders and who shall agree in writing to
accept such appointment. If the Stockholders' Representative should die or
become incapacitated, his successor shall be appointed within 15 days of his
death or incapacity by a majority of the Majority Stockholders, and such
successor shall be a Majority Stockholder. The choice of a successor
Stockholders' Representative appointed in any manner permitted above shall be
final and binding upon each Xxxxxxxx Stockholder. The decisions and actions of
any successor Stockholders' Representative shall be, for all purposes, those of
a Stockholders' Representative as if originally named herein.
(d) The death or incapacity of any Xxxxxxxx Stockholder shall not
terminate the authority and agency of the Stockholders' Representative.
(e) MSGI and Merger-Sub shall be entitled to rely exclusively upon
any communication given or other action taken by the Stockholders'
Representative pursuant hereto and shall not be liable for any action taken or
not taken in reliance upon the Stockholders' Representative. MSGI and Merger-Sub
shall not be obligated to inquire as to the authority of the Stockholders'
Representative with respect to the taking of any action that the Stockholders'
Representative takes or purports to take on behalf of the Xxxxxxxx Stockholders.
(f) The Xxxxxxxx Stockholders, jointly and severally, agree to
indemnify the Stockholders' Representative and to hold him or her harmless
against any and all loss, liability or expense incurred without bad faith on
the part of the Stockholders' Representative and arising out of or in
connection with his or her duties as the Stockholders' Representative,
including the reasonable costs and expenses incurred by the Stockholders'
Representative in defending against any claim or liability in connection
herewith.
5. CONDITIONS.
5.1 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligation of each party to effect the Merger is subject to the
fulfillment, at or prior to the Closing, of each of the following conditions:
(a) Stockholder Approval. This Agreement shall have been adopted
by the requisite vote of the stockholders of Xxxxxxxx under the TBCA and
Xxxxxxxx'x Certificate of Incorporation (the "Xxxxxxxx Stockholders' Approval").
(b) Registration Statement; State Securities Laws. The
Registration Statement shall have become effective in accordance with the
provisions of the Securities Act, and no stop order suspending such
effectiveness shall have been issued and remain in effect. MSGI shall have
received all state securities or "Blue Sky" permits and other authorizations
necessary to issue the MSGI Common Stock pursuant to this Agreement after the
Merger.
(c) NASDAQ Listing. The shares of MSGI Common Stock issuable to
Xxxxxxxx'x stockholders in the Merger in accordance with this Agreement shall
have been authorized for quotation on the NASDAQ SCM or such other national
exchange upon which the MSGI Common Stock is traded, upon official notice of
issuance.
(d) No Injunctions or Restraints. No court of competent
jurisdiction or other competent governmental or regulatory authority shall have
enacted, issued, promulgated, enforced or entered any law or order (whether
temporary, preliminary or permanent) which is then in effect and has the effect
of making illegal or otherwise restricting, preventing or prohibiting
consummation of the Merger or the other transactions contemplated by this
Agreement.
(e) Consents and Approvals. Other than the filing provided for by
Section 1.2, all consents, approvals and actions of, filings with and notices to
any Governmental Authority or any other public or private third parties required
of MSGI, Xxxxxxxx or any of their Subsidiaries to consummate the Merger and the
other matters contemplated hereby, the failure of which to be obtained or taken
could be reasonably expected to have a Material Adverse Effect on MSGI and its
Subsidiaries or Xxxxxxxx and its Subsidiaries, in each case taken as a whole, or
on the ability of MSGI and Xxxxxxxx to consummate the transactions contemplated
hereby, shall have been obtained, all in form and substance reasonably
satisfactory to MSGI and Xxxxxxxx, and no such consent, approval or action shall
contain any term or condition which could be reasonably expected to result in a
material diminution of the benefits of the Merger to MSGI or Xxxxxxxx.
(f) Tax Opinion. MSGI and Xxxxxxxx shall have received at the
Effective Time an opinion of Xxxxxx & Bird LLP, counsel for Xxxxxxxx, to the
effect that the Merger constitutes a reorganization within the meaning of
Section 368(a) of the Code (the "Tax Opinion") and will result in the tax free
exchange of MSGI Common Stock by the holders of Xxxxxxxx Common Stock, except to
the extent of cash received by such holders in exchange for their shares of
Xxxxxxxx Common Stock. In rendering such Tax Opinion, such counsel shall be
entitled to rely upon representations of officers of MSGI and Xxxxxxxx
reasonably satisfactory in form and substance to such counsel.
(g) Fairness Opinion. At the Effective Time, Xxxxxxxx-Xxxxxxxx
Company, LLC shall have delivered to Xxxxxxxx its opinion to the effect that the
Merger Consideration to be paid to the stockholders of Xxxxxxxx upon
consummation of the Merger is fair, from a financial point of view, to
Xxxxxxxx'x stockholders.
(h) Waiting Periods. At the Effective Time, the waiting periods (and
any extension thereof) applicable to the transactions contemplated by this
Agreement under the HSR Act shall have expired or been terminated.
(i) Each of the Xxxxxxxx Stockholders shall have executed and
delivered a separate Agreement Appointing Stockholders' Representative
substantially in the form of Exhibit F hereto (the "Stockholders' Representative
Agreement") pursuant to which each Xxxxxxxx Stockholder appoints the
Stockholders' Representative as the agent and attorney-in-fact of such Xxxxxxxx
Stockholder with the powers and on the terms set forth in Section 4.20 hereof.
5.2 Conditions to Obligation of MSGI and Merger-Sub to Effect the Merger.
The obligations of MSGI and Merger-Sub to effect the Merger is further subject
to the fulfillment, at or prior to the Closing, of each of the following
additional conditions (all or any of which may be waived in whole or in part by
MSGI and Merger-Sub in their sole discretion):
(a) Representations and Warranties. The representations and
warranties made by Xxxxxxxx in this Agreement shall be true and correct in all
material respects as of the Closing Date as though made on and as of the Closing
Date or, in the case of representations and warranties made as of a specified
date earlier than the Closing Date, on and as of such earlier date, and Xxxxxxxx
shall have delivered to MSGI a certificate, dated the Closing Date and executed
on behalf of Xxxxxxxx by its Chairman of the Board or President to such effect.
(b) Performance of Obligations. Xxxxxxxx shall have performed and
complied with, in all material respects, each agreement, covenant, and
obligation required by this Agreement to be so performed or complied with by
Xxxxxxxx at or prior to the Closing, and Xxxxxxxx shall have delivered to MSGI a
certificate dated the Closing Date and executed on behalf of Xxxxxxxx by its
Chairman of the Board or President to such effect.
(c) Opinion of Xxxxxxxx'x Counsel. MSGI and Merger-Sub shall have
received at the Effective Time an opinion of Xxxxxx & Bird LLP, counsel for
Xxxxxxxx, dated as of such date, addressed to MSGI and Merger-Sub, in the form
of Exhibit B hereto.
(d) Accountant's Letter. MSGI shall have received prior to the
effective date of the Registration Statement a letter from Deloitte & Touche LLP
consenting to the inclusion in the Registration Statement of the report of such
independent public accountants on the Audited Financials and the 1999 Audited
Financials, and shall have received letters from such accountants, dated the
effective date of the Registration Statement and the Closing Date respectively,
giving customary comfort on Xxxxxxxx financial information contained in the
Registration Statement.
(e) Other Closing Documents. Xxxxxxxx shall have delivered to MSGI
and Merger-Sub at or prior to the Effective Time such other documents as MSGI
may reasonably request in order to enable MSGI and Merger-Sub to determine
whether the conditions to their obligations under this Agreement have been met
and otherwise to carry out the provisions of this Agreement.
(f) Review of Proceedings. All actions, proceedings, instruments,
and documents required by Xxxxxxxx to carry out this Agreement or incidental
thereto and all other related legal matters shall be subject to the reasonable
approval of Camhy Xxxxxxxxx & Xxxxx LLP, counsel to MSGI and Merger-Sub and
Xxxxxxxx shall have furnished such counsel such documents as such counsel may
have reasonably requested for the purpose of enabling them to pass upon such
matters.
(g) Legal Action. There shall not have been instituted or
threatened any legal proceeding relating to, or seeking to prohibit or otherwise
challenge the consummation of, the transactions contemplated by this Agreement,
or to obtain substantial damages with respect thereto.
(h) No Governmental Action. There shall not have been any action
taken, or any law, rule, regulation, order, judgment, or decree proposed,
promulgated, enacted, entered, enforced, or deemed applicable to the
transactions contemplated by this Agreement by any federal, state, local, or
other Governmental Authority or by any court or other tribunal, including the
entry of a preliminary or permanent injunction, which, in the reasonable
judgment of MSGI, (i) makes this Agreement, the Merger or any of the other
transactions contemplated by this Agreement illegal, (ii) results in a material
delay in the ability of Xxxxxxxx, MSGI, or Merger-Sub to consummate the Merger
or any of the other transactions contemplated by this Agreement, (iii) requires
the divestiture by MSGI of a material portion of the business of either MSGI and
its Subsidiaries taken as a whole, or of Xxxxxxxx and its Subsidiaries taken as
a whole, (iv) imposes material limitations on the ability of MSGI effectively to
exercise full rights of ownership of shares of the Surviving Corporation
including the right to vote such shares on all matters properly presented to the
stockholders of the Surviving Corporation, or (v) otherwise materially
prohibits, restricts, or delays consummation of the Merger or any of the other
transactions contemplated by this Agreement or materially impairs the
contemplated benefits to MSGI or Merger-Sub of this Agreement, the Merger, or
any of the other transactions contemplated by this Agreement.
(i) Lockup Agreements. Prior to the Closing, MSGI shall have
received the executed Lockup Agreements from each of the persons and entities
set forth in Schedule 4.8.
(j) Material Adverse Effect. Since the date hereof no Material
Adverse Effect shall have occurred with respect to Xxxxxxxx.
(k) Audit Opinion. MSGI shall have received at the Effective Time,
an unqualified audit opinion with respect to the Audited Financials and the 1999
Audited Financials.
5.3 Conditions to Obligation of Xxxxxxxx to Effect the Merger. The
obligation of Xxxxxxxx to effect the Merger is further subject to the
fulfillment, at or prior to the Closing, of each of the following additional
conditions (all or any of which may be waived in whole or in part by Xxxxxxxx in
its sole discretion):
(a) Representations and Warranties. The representations and
warranties made by MSGI and Merger-Sub in this Agreement shall be true and
correct in all material respects as of the Closing Date as though made on and as
of the Closing Date or, in the case of representations and warranties, made as
of a specified date earlier than the Closing Date, on and as of such earlier
date, and MSGI and Merger-Sub shall each have delivered to Xxxxxxxx a
certificate, dated the Closing Date and executed on behalf of MSGI by its
Chairman of the Board or President and on behalf of Merger-Sub by its Chairman
of the Board or President to such effect.
(b) Performance of Obligations. MSGI and Merger-Sub shall have
performed and complied with, in all material respects, each agreement, covenant
and obligation required by this Agreement to be so performed or complied with by
MSGI or Merger-Sub at or prior to the Closing, and MSGI and Merger-Sub shall
each have delivered to Xxxxxxxx a certificate, dated the Closing Date and
executed on behalf of MSGI by its Chairman of the Board or President and on
behalf of Merger-Sub by its Chairman of the Board or President to such effect.
(c) Opinion of MSGI's and Merger-Sub's Counsel. Xxxxxxxx shall
have received at the Effective Time (and also on the effective date of the
Registration Statement) opinions of Camhy Xxxxxxxxx & Xxxxx LLP, counsel for
MSGI and Merger-Sub, dated as of such date, addressed to Xxxxxxxx, in the form
of Exhibit C hereto.
(d) Other Closing Documents. MSGI and Merger-Sub shall have
delivered to Xxxxxxxx at or prior to the Effective Time such other documents as
Xxxxxxxx may reasonably request in order to enable Xxxxxxxx to determine whether
the conditions to its obligations under this Agreement have been met and
otherwise to carry out the provisions of this Agreement.
(e) Review of Proceedings. All actions, proceedings, instruments,
and documents required by MSGI or Merger-Sub to carry out this Agreement or
incidental thereto and all other related legal matters shall be subject to the
reasonable approval of Xxxxxx & Bird LLP, counsel to Xxxxxxxx, and MSGI and
Merger-Sub shall have furnished such counsel such documents as such counsel may
have reasonably requested for the purpose of enabling them to pass upon such
matters.
(f) Legal Action. There shall not have been instituted or
threatened any legal proceeding relating to, or seeking to prohibit or otherwise
challenge the consummation of, the transactions contemplated by this Agreement,
or to obtain substantial damages with respect thereto.
(g) No Governmental Action. There shall not have been any action
taken, or any law, rule, regulation. order, judgment, or decree proposed,
promulgated, enacted, entered, enforced, or deemed applicable to the
transactions contemplated by this Agreement by any federal, state, local, or
other Governmental Authority or by any court or other tribunal, including the
entry of a preliminary or permanent injunction which, in the reasonable judgment
of Xxxxxxxx, (i) makes this Agreement, the Merger, or any of the other
transactions contemplated by this Agreement illegal, (ii) results in a material
delay in the ability of MSGI, Merger-Sub, or Xxxxxxxx to consummate the Merger
or any of the other transactions contemplated by this Agreement, or (iii)
otherwise materially prohibits, restricts, or delays consummation of the Merger
or any of the other transactions contemplated by this Agreement or materially
impairs the contemplated benefits to Xxxxxxxx and the stockholders of Xxxxxxxx
of this Agreement, the Merger, or any of the other transactions contemplated by
this Agreement.
6. TERMINATION.
6.1 Termination. This Agreement may be terminated, and the transactions
contemplated hereby may be abandoned at any time prior to the Effective Time:
(a) by mutual written agreement of the parties hereto duly
authorized by action taken by or on behalf of their respective Boards of
Directors; or
(b) by either Xxxxxxxx or MSGI upon written notification to the
non-terminating party by the terminating party:
(i) at any time after six (6) months from the date hereof, if
the Merger shall not have been consummated on or prior to such date and such
failure to consummate the Merger is not caused by a breach of this Agreement by
the terminating party, unless such date is extended in writing by the parties
hereto; or
(ii) if facts exist which render impossible the satisfaction
of one or more of the conditions set forth in Section 5.1 and such are not
waived by Xxxxxxxx and MSGI; or
(c) by Xxxxxxxx upon written notification to MSGI, if:
(i) there has been a material breach of any represntation,
warranty, covenant or agreement on the part of MSGI set forth in this Agreement
which breach has not been cured within ten (10) Business Days following receipt
by MSGI of notice of such breach from Xxxxxxxx or assurance of such cure
reasonably satisfactory to Xxxxxxxx shall not have been given by or on behalf of
MSGI within such ten (10) Business Day period; or
(ii) facts exist which render impossible the satisfaction of
one or more of the conditions set forth in Section 5.3 and such are not waived
by Xxxxxxxx; or
(d) by MSGI, upon written notification to Xxxxxxxx, if:
(i) there has been a material breach of any representation,
warranty, covenant or agreement on the part of Xxxxxxxx set forth in this
Agreement which breach has not been cured within ten (10) Business Days
following receipt by Xxxxxxxx of notice of such breach from MSGI or assurance of
such cure reasonably satisfactory to MSGI shall not have been given by or on
behalf of Xxxxxxxx within such ten (10) business day period; or
(ii) if the Xxxxxxxx Stockholders' Approval shall not be
obtained by reason of the failure to obtain the requisite vote upon a vote held
at a meeting of such stockholders, or any adjournment thereof, called therefor;
or
(iii) facts exists which render impossible the satisfaction of
one or more of the conditions set forth in Section 5.2 and such are not waived
by MSGI.
6.2 Effect of Termination. If this Agreement is validly terminated by
either Xxxxxxxx or MSGI pursuant to Section 6.1,
(a) this Agreement shall forthwith become null and void and there
shall be no liability or obligation on the part of either Xxxxxxxx or MSGI (or
any of their respective officers, directors, representatives or Affiliates),
except that (i) the provisions of this Section 6.2, Section 6.3 and Section 4.20
will continue to apply following any such termination, and (ii) nothing
contained herein shall relieve Xxxxxxxx, MSGI or Merger-Sub from liability for
any breach of their respective obligations contained in this Agreement prior to
such termination; and
(b) except as provided in Section 4.6, each of MSGI, Merger-Sub,
and Xxxxxxxx shall pay and bear its own fees and expenses incident to the
negotiation, preparation, and execution of this Agreement and its meeting of
stockholders, including fees and expenses of its counsel, accountants,
investment banking firm, and other experts.
7. SURVIVAL, INDEMNIFICATION AND SET-OFF.
7.1 Rights to Setoff. MSGI and Merger-Sub shall have the right to setoff
and deduct from the Holdback Amounts (as that term is defined in the Holdback
Agreement) to the extent hereinafter provided for all claims, losses,
liabilities, damages, deficiencies, judgments, settlements, costs of
investigation or other expenses (including interest, penalties and reasonable
attorneys' fees and disbursements and expenses incurred in enforcing this right
to setoff) (collectively, the "Losses") suffered or incurred by MSGI,
Merger-Sub, any Subsidiary, or any of the foregoing persons arising out of (a)
any breach of the representations, warranties or covenants and agreements of
Xxxxxxxx contained in this Agreement or the Schedules hereto, except for Section
3.1(j) (Taxes) hereof, (b) any Taxes levied or assessed against Xxxxxxxx for or
with respect to any period ended on or prior to the Effective Time and whether
or not disclosed on any Schedule hereto to the extent the aggregate amount of
such Taxes exceeds the reserve for taxes reflected on the 1999 Audited
Financials, and (c) such other matters as the parties may stipulate in a
separate writing between them (each a "Separate Matter," and together, the
"Separate Matters"). All amounts set-off shall be deducted from and shall reduce
on a dollar-for-dollar basis the respective Holdback Amount (as defined in the
Holdback Agreement) against which such set-off or deduction is made as
hereinafter provided.
7.2 Obligation of MSGI and Merger-Sub to Indemnify. MSGI and Merger-Sub,
jointly and severally, agree to indemnify, defend and hold harmless the Xxxxxxxx
Stockholders, and each of them, and their successors and assigns, from and
against any Losses suffered or incurred by the Xxxxxxxx Stockholders arising out
of any breach of the representations, warranties or covenants and agreements of
MSGI or Merger-Sub contained in this Agreement or in the Schedules hereto.
7.3 Notice and Opportunity to Defend Third Party Claims. (a) Promptly
after receipt by any party hereto (the "Indemnitee") of notice of any demand,
claim or circumstance which would or might give rise to a claim or the
commencement (or threatened commencement) of any action, proceeding or
investigation (an "Asserted Liability") that may result in a Loss, the
Indemnitee shall give prompt notice thereof (the "Claims Notice") to the party
or parties obligated to provide setoff or indemnification pursuant to 7.1 or 7.2
(each an "Indemnifying Party"). The Claims Notice shall describe the Asserted
Liability in reasonable detail and shall indicate the amount (estimated, if
necessary, and to the extent feasible) of the Loss that has been or may be
suffered by the Indemnitee.
(b) Except with respect to an Asserted Liability based upon or
arising out of Sections 3.1(j), 7.1(b) or 7.1(c), the Indemnifying Party may
elect to defend, at its own expense and with counsel reasonably acceptable to
the Indemnitee, any Asserted Liability unless (i) the Asserted Liability seeks
an order, injunction or other equitable or declaratory relief against the
Indemnitee or (ii) the Indemnitee shall have reasonably concluded that (x) there
is a conflict of interest between the Indemnitee and the Indemnifying Party in
the conduct of such defense or (y) the Indemnitee shall have one or more
defenses not available to the Indemnifying Party. If the Indemnifying Party
elects to defend such Asserted Liability, it shall within thirty days (or
sooner, if the nature of the Asserted Liability so requires) notify the
Indemnitee of its intent to do so, and the Indemnitee shall cooperate, at the
expense of the Indemnifying Party, in the defense of such Asserted Liability. If
the Indemnifying Party elects not to defend the Asserted Liability, is not
permitted to defend the Asserted Liability by reason of the first sentence of
this Section 7.3(b), fails to notify the Indemnitee of its election as herein
provided or contests its obligation to indemnify under this Agreement with
respect to such Asserted Liability, the Indemnitee may pay, compromise or defend
such Asserted Liability at the sole cost and expense of the Indemnifying Party.
Notwithstanding the foregoing, neither the Indemnifying Party nor the Indemnitee
may settle or compromise any claim over the reasonable written objection of the
other, provided, that the Indemnitee may settle or compromise any claim as to
which the Indemnifying Party has failed to notify the Indemnitee of its election
under this Section 7.3(b) or as to which the Indemnifying Party is contesting
its indemnification obligations hereunder. In any event, the Indemnitee and the
Indemnifying Party may participate, at their own expense, in the defense of any
Asserted Liability.
(c) MSGI alone shall have the right to contest, at its expense and
with counsel selected by it, any assessment or levy of Taxes giving rise to an
Asserted Liability based upon or arising out of Sections 3.1(j) or 7.1(b), and
to settle or compromise any such assessment or levy, unless such assessment or
levy is against any present or former officer of Xxxxxxxx, in which event such
present or former officer shall have the right to assume control over any part
of the contest of such assessment or levy relating to his or her personal
liability with counsel of his or her choosing. The Stockholders' Representative
alone shall have the right to contest, at the expense of the Xxxxxxxx
Stockholders, and with counsel selected by the Stockholders' Representative, any
Separate Matter that gives rise to an Asserted Liability, and to settle and
compromise any such Separate Matter so long as the aggregate amount of all such
settlements of Separate Matters does not exceed the Claims Holdback Amount (as
defined in the Holdback Agreement).
(d) Each party shall make available to the other parties any
books, records or other documents within its control that are necessary or
appropriate for such defense. Any Losses of any Indemnitee for which
indemnification is available hereunder shall be paid upon written demand
therefor. Xxxxxxxx acknowledges and agrees that the Stockholders' Representative
shall have full power and authority to take, in the name and on behalf of
Xxxxxxxx or the Xxxxxxxx Stockholders, any and all actions required or permitted
to be taken by Xxxxxxxx under this Section 7.3.
7.4. Survival of Representations and Warranties. (a) The respective
representations and warranties of a party shall survive the execution and
delivery of this Agreement and the Closing hereunder for such period of time as
a claim for set-off or indemnification, as the case may be, for breach thereof
may be made as set forth in Sections 7.1 and 7.2 hereof. The respective
covenants and agreements of the parties shall survive the execution and delivery
of this Agreement and the Closing hereunder indefinitely.
(b) No claim for set-off based upon the breach of any representation
or warranty of Xxxxxxxx made or given herein may be made after the first
anniversary of the Closing Date. No claim for set-off of Losses arising out of
or based upon Section 7.1(b) may be made after the third anniversary of the
Closing Date. No claim for set-off with regard to any Separate Matter may be
made by MSGI or Merger-Sub after the third anniversary of the Closing Date. If
any claim of set-off by MSGI may be based on either a breach of the
representations and warranties of Section 3.1(j) or upon Section 7.1(b), it
shall be deemed based on Section 7.1(b) unless aggregate set-off under that
Section 7.1(b) exceeds the Tax Holdback Amount (as defined in the Holdback
Agreement), in which case it may be asserted as a Loss arising under Section
7.1(a). No claim for indemnification based upon the breach of any representation
or warranty of MSGI or Merger-Sub made or given herein may be made after the
first anniversary of the Closing Date. The liability of a party for breach of a
representation or warranty shall not terminate on the date such representation
or warranty expires if notice of a claim for indemnification based upon a breach
of such representation or warranty is given prior to the time specified above
for the expiration of the representation or warranty on which such claim is
based.
7.5 Limits on Indemnification. (a) MSGI and Merger-Sub shall not have any
obligation to indemnify Xxxxxxxx pursuant to Section 7.2 hereof with respect to
Losses specified therein unless and until Xxxxxxxx shall have incurred Losses
under Section 7.2 in an aggregate amount in excess of $250,000, in which case
Xxxxxxxx shall be entitled to be indemnified for all of its Losses until the
amount of such Losses exceeds $1,000,000, in which case Xxxxxxxx shall not be
entitled to be indemnified for any Loss over such amount; provided, however,
that in the event of a breach by MSGI of Sections 3.2(g) or 3.2(k) hereof,
Xxxxxxxx shall be entitled to be indemnified for all Losses arising out of or
based on such breach without regard to the prior limitations.
(b) Neither MSGI nor Merger-Sub shall have the right to set off
against or deduct from the Representative Holdback Amount (as defined in the
Holdback Agreement) any Losses under Section 7.1(a) unless and until the
aggregate amount of all such Losses which, but for this provision, would be
subject to such set-off or deduction shall exceed $250,000, in which case MSGI
and Merger-Sub may set-off against and deduct all such losses only from the
Representative Holdback Amount (as defined in the Holdback Agreement). Except as
provided in Section 7.4(b), any Loss suffered or incurred by MSGI or Merger-Sub
based upon or arising out of Section 7.1(b) may only be set-off against and
deducted from (and only to the extent of) any Tax Holdback Amount (as defined in
the Holdback Agreement). Any Loss suffered or incurred by MSGI or Merger-Sub
based upon or arising out of the Separate Matters described in Section 7.1(c)
hereof may only be set-off against and deducted from (and only to the extent of)
the Claims Holdback Amount (as defined in the Holdback Agreement). Neither MSGI
nor Merger-Sub may recover any Losses by set off against or deduction from any
amounts that at any time after the Effective Time may be or become payable to or
for the account of any Xxxxxxxx stockholder by virtue of any employment of other
compensation or benefit arrangement or relationship existing between such
Xxxxxxxx stockholder and MSGI or any present or future subsidiary or Affiliate
thereof.
7.6 Adjustment. It is the intent of the parties that any amounts paid or
set-off under Section 7.1 or indemnified under Section 7.2 shall represent an
adjustment of the Merger Consideration and the parties will report such payments
consistent with such intent. Nevertheless, if any payment pursuant to Sections
7.1 or 7.2 hereof would be treated by any Tax Authority as other than a Merger
Consideration adjustment and would, on that basis, be includable in the gross
income of the Indemnitee that is reported to such Tax Authority, then such
payment shall be increased by the amount necessary so that the Indemnitee is
fully and completely indemnified on an after-Tax basis. Similarly, if the Loss
giving rise to such set-off or indemnification may be taken as a deduction
against taxable income, the tax savings resulting from such deduction shall
reduce the claimed Loss.
7.7 Exclusive Remedy. Except as otherwise explicitly provided in this
Agreement, the parties agree that the indemnification and setoff provisions of
this Article 7 shall constitute the parties' sole and exclusive remedies in
respect of this Agreement and the contemplated transactions hereunder; provided,
however, notwithstanding the foregoing, each party shall have all rights and
remedies against the other party available at law or in equity with respect to
any willful or intentional breach by such other party of any representation,
warranty covenant or agreement made or given by such other party.
7.8 Reliance; Closing with Knowledge of Breach. No investigation relating
to Xxxxxxxx conducted by or on behalf of MSGI or Merger-Sub at anytime prior to
the Closing shall limit, affect or impair the ability of MSGI and Merger-Sub to
rely upon the representations and warranties of Xxxxxxxx contained herein;
unless, except for any Loss pursuant to Section 7.1(b) or (c) hereof, during
such investigation MSGI or Merger-Sub became aware of a breach of any such
representation or warranty and consummated this transaction with knowledge
thereof, in which case neither MSGI nor Merger-Sub shall have the right to set
off against or deduct from any Holdback Amount (as defined in the Holdback
Agreement) any Losses based upon or arising out of such breach.
8. MISCELLANEOUS.
8.1 Further Actions. Each party hereto will execute such further
documents and instruments and take such further actions as may reasonably be
requested by the other party to consummate the Merger, to vest the Surviving
Corporation with full title to all assets, properties, rights, approvals,
immunities, and franchises of either of the Constituent Corporations or to
effect the other purposes of this Agreement.
8.2 Availability of Equitable Remedies. Since a breach of the provisions
of this Agreement could not adequately be compensated by money damages, any
party shall be entitled, either before or after the Effective Time, in addition
to any other right or remedy available to it, to an injunction restraining such
breach or threatened breach and to specific performance of any such provision of
this Agreement, and, in either case, no bond or other security shall be required
in connection therewith, and the parties hereby consent to the issuance of such
an injunction and to the ordering of specific performance.
8.3 Modification. This Agreement may be amended, supplemented or modified
by action taken by or on behalf of the respective Board of Directors of the
parties hereto at any time prior to the Effective Time, to the extent permitted
by applicable law. No such amendment, supplement or modification shall be
effective unless set forth in a written instrument duly executed by or on behalf
of each party hereto.
8.4 Notices. Any notice or other communication required or permitted to
be given hereunder shall be in writing and shall be mailed by certified mail,
return receipt requested or by express mail, or similar overnight delivery or
courier service or delivered (in person or by telecopy, telex, or similar
telecommunications equipment) against receipt to the party to which it is to be
given at the address of such party set forth in the preamble to this Agreement
(or to such other address as the party shall have furnished in writing in
accordance with the provisions of this Section 8.4) with copies (which copies
shall not constitute notice) as follows:
If to MSGI:
Camhy Xxxxxxxxx & Xxxxx LLP
0000 Xxxxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Attention: Xxxx X. Annex, Esq.
If to Xxxxxxxx:
Xxxxxx & Bird LLP
One Atlantic Center
0000 Xxxx Xxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxxx X. Xxxxxx, Esq.
Any notice shall be addressed to the attention of the Chairman. Any notice or
other communication given by certified mail shall be deemed given at the time of
certification thereof, except for a notice changing a party's address which will
be deemed given at the time of receipt thereof. Any notice given by other means
permitted by this Section 8.4 shall be deemed given at the time of receipt
hereof.
8.5 Waiver. Any waiver by any party of a breach of any term of this
Agreement shall not operate as or be construed to be a waiver of any other
breach of that term or of any breach of any other term of this Agreement. The
failure of a party to insist upon strict adherence to any term of this Agreement
on one or more occasions will not be considered a waiver or deprive that party
of the right thereafter to insist upon strict adherence to that term or any
other term of this Agreement. Any waiver must be in writing and be authorized by
a resolution of the Board of Directors or by an officer of the waiving party.
8.6 Binding Effect. The provisions of this Agreement shall be binding
upon and inure to the benefit of MSGI, Merger-Sub and Xxxxxxxx and their
respective successors and assigns.
8.7 No Third-Party Beneficiaries. This Agreement does not create, and
shall not be construed as creating, any rights enforceable by any person not a
party to this Agreement, except for the Xxxxxxxx stockholders with respect to
Section 2.1, and the Indemnified Parties with respect to Article 7.
8.8 Severability. If any provision of this Agreement is hereafter held to
be invalid, illegal, or unenforceable for any reason, such provision shall be
reformed to the maximum extent permitted so as to preserve the parties' original
intent, failing which, it shall be severed from this Agreement, with the balance
of this Agreement continuing in full force and effect. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable. If any provision is inapplicable to any
person or circumstance, it shall nevertheless remain applicable to all other
persons and circumstances.
8.9 Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York applicable to agreements made
and to be performed entirely within such State, without regard to the choice of
law principles thereof, except to the extent that the DGCL and the TBCA apply to
the Merger.
8.10 Judicial Proceedings.
EACH OF THE PARTIES HERETO AGREES THAT ANY ACTION, SUIT OR
PROCEEDING AGAINST ANY OF THE PARTIES HERETO ARISING UNDER OR RELATING IN ANY
WAY TO THIS AGREEMENT OR A TRANSACTION CONTEMPLATED HEREBY MAY BE BROUGHT OR
ENFORCED IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES FOR THE
SOUTHERN DISTRICT OF NEW YORK, AND EACH OF THE PARTIES HERETO CONSENTS TO THE
JURISDICTION OF EACH SUCH COURT IN RESPECT OF ANY SUCH ACTION, SUIT OR
PROCEEDING. EACH OF THE PARTIES HERETO FURTHER IRREVOCABLY CONSENTS TO THE
SERVICE OF PROCESS IN ANY SUCH ACTION, SUIT OR PROCEEDING BY THE MAILING OF
COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL POSTAGE PRE-PAID, RETURN RECEIPT
REQUESTED, OR BY A NATIONALLY RECOGNIZED OVERNIGHT COURIER, TO SUCH PARTY AT ITS
ADDRESSES PROVIDED FOR NOTICES HEREUNDER.
8.11 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
8.12 Interpretation. The article and section headings contained in this
Agreement are solely for the purpose of reference, are not part of the agreement
of the parties and shall not in any way affect the meaning or interpretation of
this Agreement. All references to the term "as of the date hereof" shall mean
the date of this Agreement.
8.13 Entire Agreement. This Agreement (including the schedules, exhibits,
documents or instruments referred to herein) constitutes the entire agreement
and understanding of the parties hereto in respect of the subject matter hereof
and supersedes all prior agreements and understandings, both written and oral,
among the parties, or between any of them, with respect to the subject matter
hereof.
9. DEFINED TERMS.
9.1 Defined Terms. For purposes of this Agreement, the following terms
shall have the meanings ascribed to them in this Section 9.1.
"1999 Audited Financials" shall mean the consolidated audited
balance sheet of the Xxxxxxxx and its Subsidiaries at June 30, 1999 and the
related statements of earnings and stockholders equity and cash flows for the
fiscal year then ended, accompanied by the notes thereto and the report thereon
of Deloitte & Touche LLP.
"Acquisition" shall mean the acquisition of beneficial ownership of
all or material portion of the assets of, or any material interest in, a Person
(including its Subsidiaries) pursuant to a merger, consolidation or other
business combination, sale of shares of capital stock, sale of assets, tender
offer, exchange offer, joint venture or other similar transaction.
"Acquisition Proposal" shall mean any bona fide proposal, whether in
writing or otherwise, made by a third party to effect an Acquisition.
"Action" shall mean any claim, action, cause of action or suit (in
contract, tort or otherwise), inquiry, proceeding or investigation by or before
any Governmental Authority.
"Affiliate" with respect to any Person, shall mean any Person
controlling, controlled by or under common control with such Person.
"Ancillary Agreements" shall mean, collectively, the Voting
Agreement, the Lockup Agreements, the Holdback Agreement, and the Exchange
Agreement.
"Asserted Liability" shall have the meaning ascribed to that term in
Section 7.3.
"Audited Financials" shall have the meaning ascribed to that term in
Section 3.1(f)(i)(A).
"Average Closing Price" shall mean the numerical average of the
closing sales price (regular way) per share of MSGI Common Stock (or, in case no
such reported sales takes place on such day, the average of the closing bid and
asked prices) on the principle national securities exchange on which the MSGI
Common Stock is then listed, for each of the twenty (20) trading days ending two
(2) trading days prior to the Closing Date.
"Average Signing Price" shall mean the numerical average of the
closing sales price (regular way) per share of MSGI Common Stock (or, in case no
such reported sales takes place on such day, the average of the closing bid and
asked prices) on the principle national securities exchange on which the MSGI
Common Stock is then listed, for each of the twenty (20) trading days ending two
(2) trading days prior to the date hereof.
"Business" shall have the meaning ascribed to that term in Section
3.1(g).
"Business Day" shall mean any day other than a Saturday, Sunday
or Federal holiday on which banking institutions in New York, New York are
permitted to be closed for the purpose of transacting business.
"Cash Consideration" means the aggregate amount of (a) all Per Share
Cash Payments, (b) the Per Share Deferred Payment and (c) all Per Share Reserve
Payments.
"Certificate of Merger" shall mean the certificate of merger
executed by the Surviving Corporation and delivered for filing on, or as soon as
practicable after, the Closing Date, to the Secretary of State of the State of
Delaware.
"Claims Notice" shall have the meaning ascribed to that term in
Section 7.3.
"Closing" shall have the meaning ascribed to such term in Section
1.3.
"Closing Date" shall have the meaning ascribed to such term in
Section 1.3.
"Closing Cash Payment" shall mean the aggregate amount of all Per
Share Cash Payments.
"Code" shall have the meaning ascribed to such term in the preamble
to this Agreement.
"Constituent Corporations" shall have the meaning ascribed to that
term in the preamble to this Agreement.
"Confidential Information" shall have the meaning ascribed to that
term in Section 4.17.
"Contract" shall mean, whether in writing or oral, any contract,
note, bond, deed, mortgage, indenture, lease, license, agreement or other
instrument or obligation.
"Control" (including the terms "controlling," "controlled by" and
"under common control with") shall mean the possession, directly or indirectly,
of the power to direct or cause the direction of the management and policies of
a Person, whether through the ownership of voting securities, by contract or
otherwise.
"DGCL" shall mean the Delaware General Corporation Act, as now
or hereafter amended.
"Distribution Date" shall have the meaning ascribed to that term in
the Holdback Agreement.
"Earn-Out Amount" shall mean four million ($4,000,000) dollars.
"Effective Time" shall have the meaning ascribed to that term in
Section 1.2.
"Employee" with respect to any Person, shall mean any individual
employed by such Person or any of its Subsidiaries.
"Environmental, Health or Safety Requirements" means (i) any and all
federal, state and local statutes, regulations and ordinances, and any rules of
common law, including, without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act (42 U.S.C. ss. 9601 et seq.), the
Hazardous Materials Transportation Act (49 U.S.C. ss. 1801 et seq.), the
Resource Conservation and Recovery Act (42 U.S.C. ss. 6901 et seq.), the Clean
Water Act (33 U.S.C. ss. 1251 et seq.), the Clean Air Act (42 U.S.C. ss. 7401 et
seq.), the Toxic Substance Control Act (15 U.S.C. ss. 2601 et seq.), the Federal
Insecticide, Fungicide and Rodenticide Act (7 U.S.C. ss. 136 et seq.), and the
Occupational Safety and Health Act (29 U.S.C. ss. 651 et seq.), and the
regulations promulgated pursuant to each of the foregoing; and (ii) with respect
to any Person, any and all administrative or judicial orders, consent decrees,
settlement agreements, injunctions, Permits, licenses, codes, covenants and deed
restrictions and other provisions having the force or effect of law, issued by a
Governmental Authority in respect of such Person's or its Subsidiaries'
operations or assets, or applicable thereto; in each case concerning pollution
or protection of the environment, or human health, or safety, including worker
safety, to the extent that such safety may be affected by exposure to Hazardous
Materials (including, without limitation, all those relating to the presence,
use, production, generation, handling, transportation, treatment, storage,
disposal, distribution, labeling, testing, processing, discharge, release,
threatened release, control, or cleanup of or exposure to any Hazardous
Materials, hazardous materials, or wastes).
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Exchange Agent" shall have the meaning ascribed to that term in
Section 2.1(c).
"Exchange Agreement" shall have the meaning ascribed to that
term in Section 2.1(c).
"Excluded Contracts" with respect to any Person, shall mean any
Contracts of such Person (i) entered into in the Ordinary Course of Business of
such Person, (ii) having a duration or remaining term of less than six (6)
months from the date hereof and (iii) the aggregate annual payments in respect
of which do not exceed fifty thousand ($50,000) dollars.
"Expense Amount" shall mean that amount specified by the
Stockholders' Representative in a writing delivered to MSGI at or prior to the
Closing.
"GAAP" or "Generally Accepted Accounting Principles" shall mean
United States generally accepted accounting principles as in effect on the date
on which the document to which it refers relates.
"Governmental Authority" shall mean any foreign, Federal, state,
municipal or other governmental department, commission, board, bureau, agency or
instrumentality, including, without limitation, any court of competent
jurisdiction.
"Xxxxxxxx Certificates" shall have the meaning ascribed to that term
in Section 2.1(c)(ii).
"Xxxxxxxx Common Stock" shall mean the common stock, par value $.01
per share of Xxxxxxxx.
"Xxxxxxxx Dissenting Stockholder" has the meaning ascribed to
that term in Section 2.1(d).
"Xxxxxxxx Financial Statements" shall have the meaning ascribed to
that term in Section 3.1(f)(i)(B).
"Xxxxxxxx Lease" shall have the meaning ascribed to that term in
Section 3.1(n)(ii).
"Xxxxxxxx Plans" shall have the meaning ascribed to that term in
Section 3.1(k)(i).
"Xxxxxxxx Stockholder Expenses" shall have the meaning ascribed to
that term in Section 4.6.
"Xxxxxxxx Stockholder's Approval" shall have the meaning ascribed to
that term in Section 5.1(a).
"Xxxxxxxx Stockholders" shall have the meaning ascribed to that term
in Section 4.20.
"Xxxxxxxx Tax Returns" shall have the meaning ascribed to that term
in Section 3.1(j).
"Hazardous Material" shall mean any chemical, waste, pollutant,
contaminant or substance that is regulated by any Environmental, Health or
Safety Requirements, including, without limitation, asbestos in friable
condition, urea formaldehyde foam insulation, petroleum and its derivatives,
by-products and other petroleum hydrocarbons, radioactive materials and
polychlorinated biphenyls (PCBs), and any material or substance which is defined
as a "hazardous waste," "hazardous substance," "hazardous material," "restricted
hazardous waste," "industrial waste," "solid waste," "contaminant," "pollutant,"
"toxic waste" or "toxic substance" under any Environmental, Health or Safety
Requirement.
"Holdback Agreement" shall mean the Holdback Agreement in the form
of Exhibit A hereto.
"HSR Act" shall mean the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements
Act of 1976, as amended.
"Information Technology" shall have the meaning ascribed to that
term in Section 3.1(aa).
"Indemnifying Party" shall have the meaning ascribed to that term in
Section 7.3.
"Indemnitee" shall have the meaning ascribed to that term in Section
7.3.
"Initial Deferred Amount" shall have the meaning ascribed to
that term in Section 2.1(b).
"Intangible Property" shall mean, collectively, patents, trademarks,
service marks, trade names, copyrights, franchises and rights to receive
royalties, and all applications or registrations for any of the foregoing.
"Interest Rate" shall mean the annual interest rate from time to
time published in The Wall Street Journal as the prevailing prime rate of
interest. If there is any change from time to time in the Interest Rate, such
change shall take effect on the first business day following the date on which
such change became effective.
"Interim Financials" shall have the meaning ascribed to that term in
Section 3.1(f)(i)(B).
"IRS" means the United States Internal Revenue Service.
"Knowledge," with respect to any Person, shall mean the actual
knowledge of any executive officer or director of such Person; provided,
however, that with respect to changes affecting the representations and
warranties set forth in Article 3 occurring after the date hereof and up to the
Closing, "knowledge" shall be deemed to mean actual knowledge after reasonable
inquiry.
"Leases" with respect to any Person, shall mean all leases of real,
personal or intangible property under which either such Person or any of its
Subsidiaries is lessee or lessor (or sublessee or sublessor).
"Leased Real Property" shall have the meaning ascribed to that term
in Section 3.1(n).
"Legal Requirements" with respect to any Person, shall mean (a) all
statutes, laws, ordinances, codes, rules, regulations, judgments, decrees,
decisions, writs, rulings, injunctions, orders and other requirements of any
Governmental Authority and (b) any consent, approval, authorization, waiver,
Permit, agreement, license, certificate, exemption, order, registration,
declaration or filing of, with or to any Governmental Authority, in each case
other than relating to Taxes, and in each case binding upon such Person or such
Person's assets, business or properties.
"Lien" shall mean any encumbrance, charge, security interest,
mortgage, pledge, hypothecation, title defect, title retention agreement, lease,
sublease, license, occupancy agreement, easement, covenant running with the
land, encroachment, voting trust agreement, restriction, option, right of first
offer or refusal, proxy or lien, including, but not limited to, liens for taxes.
"Lockup Agreements" shall mean the Lockup Agreements in the form of
Exhibit D hereto.
"Losses" shall mean any and all losses, damages, deficiencies,
awards, assessments, amounts paid in good faith settlement in accordance with
Article 7 hereof, judgments, fines, penalties, interest, costs and expenses
(including, without limitation, reasonable legal fees and expenses).
"Majority Stockholders" shall have the meaning set forth in the
preamble to this Agreement.
"Material Adverse Effect," with respect to any Person, shall mean
any change or effect that is or would be reasonably expected to be materially
adverse to the business, assets, properties, financial condition or results of
operations of such Person and its Subsidiaries taken as a whole.
"Merger" shall have the meaning ascribed to that term in the
preamble of this Agreement.
"Merger Consideration" shall mean the sum of the Cash Consideration,
the Share Consideration, and the Deferred Payment.
"Merger-Sub Common Stock" shall mean the common stock, par value
$.01 per share, of Merger-Sub.
"MSGI Certificates" shall have the meaning ascribed to that term in
Section 2.1(c)(ii).
"MSGI Common Stock" shall mean the common stock, par value $0.01 per
share, of MSGI.
"MSGI Merger Shares" shall mean the quotient of (x) $50,000,000.00
divided by (y) the MSGI Stock Price.
"MSGI Preferred Stock" shall have the meaning ascribed to that term
in Section 3.2(f).
"MSGI SEC Reports" shall have the meaning ascribed to that term in
Section 3.2(g).
"MSGI Stock Price" shall mean the Average Signing Price unless (a)
the Average Closing Price is less than the Average Signing Price, in which case
the "MSGI Stock Price" shall mean the Average Closing Price or (b) the Average
Closing Price is greater than the Average Signing Price, in which case the MSGI
Stock Price shall equal an amount equal to (i) two multiplied by the product of
the Average Signing Price multiplied by the Average Closing Price divided by
(ii) the sum of the Average Signing Price plus the Average Closing Price.
"NASDAQ SCM" shall mean the National Association of Securities
Dealers, Inc. Small Cap Market.
"Ordinary Course of Business" with respect to any Person, shall mean
the ordinary course of business consistent with past custom and practice in the
business of such Person and its Subsidiaries; provided that, with respect to
Xxxxxxxx and its Subsidiaries, Ordinary Course of Business shall also include,
without limitation, fulfilling their obligations under this Agreement.
"Organizational Documents" shall mean (i) with respect to a
corporation, its articles of incorporation and by-laws, (ii) with respect to a
partnership, its partnership agreement and its certificate of limited
partnership (if a limited partnership) and (iii) with respect to a limited
liability company, its limited liability company operating agreement (or the
equivalent thereof) and its certificate of formation (or the equivalent
thereof), in each case as amended.
"Outstanding Xxxxxxxx Shares" shall mean the aggregate number of
shares of Xxxxxxxx Common Stock issued and outstanding immediately prior to the
Effective Time of the Merger, including shares of Xxxxxxxx Common Stock owned at
that time by Xxxxxxxx Dissenting Stockholders.
"Per Share Cash Payment" shall mean the quotient of (x) fifty
million dollars ($50,000,000.00) less the Initial Deferred Amount less the
Expense Amount and less the Earn-Out Amount divided by (y) the Outstanding
Xxxxxxxx Shares.
"Per Share Deferred Payment" shall have the meaning ascribed to that
term in the Holdback Agreement.
"Per Share Reserve Payment" shall have the meaning ascribed to that
term in the Holdback Agreement.
"Per Share Stock Consideration" shall mean the quotient of (x) the
MSGI Merger Shares, divided by (y) the Outstanding Xxxxxxxx Shares.
"Permit" shall mean any federal, state, local, and foreign
governmental approval, authorization, certificate, easement, filing, franchise,
license, notice, permit, or right to which any Person is a party or that is or
may be binding upon or inure to the benefit of any Person or its securities,
assets, or business.
"Permitted Lien" shall mean (i) any Lien for Taxes not yet due or
delinquent or as to which there is a good faith dispute and for which there are
adequate reserves on the financial statements of the Person affected thereby,
(ii) with respect to Xxxxxxxx and its Subsidiaries, Liens that are set forth on
Schedule 9.1 hereto (identifying therein the particular property to which such
Liens relate), (iii) with respect to real property, any Lien which is not in a
material liquidated amount and which does not, individually or in the aggregate,
interfere materially with the current use or materially detract from the value
or marketability of such property (assuming its continued use in the manner in
which it is currently used), (iv) a Lien arising pursuant to any order of
attachment, distraint or similar legal process arising in connection with court
proceedings, so long as the execution or other enforcement thereof has been
stayed and the claims secured thereby are being contested in good faith by
appropriate proceedings and for which there are adequate reserves on the
financial statements of the Person affected thereby, (v) Liens for assessments,
levies or other governmental charges not delinquent or being contested in good
faith and by appropriate proceedings and for which there are adequate reserves
on the financing statements of the Person affected thereby, (vi) deposits or
pledges to secure bids, tenders, contracts, franchises, leases, statutory
obligations, indemnity, performance, surety and appeal bonds or other
obligations of a like nature, in each case arising in the Ordinary Course of
Business, (vii) deposits or pledges to secure obligations under workers
compensation, social security or similar laws or under employment insurance,
(viii) mechanics', workers', materialmen's or other like Liens arising in the
Ordinary Course of Business that do not materially detract from the value, or
interfere with the present use, of the properties or assets affected thereby and
(ix) Liens existing on the date hereof in respect of any capital leases in
effect on the date hereof.
"Person" shall mean and include an individual, a partnership, a
joint venture, a limited liability company, a corporation, a trust, an
unincorporated organization and a government or any department or agency
thereof.
"Registration Statement" shall have the meaning ascribed to that
term in Section 4.15.
"Release" shall mean any "release," as defined as such pursuant to
CERCLA, 42 U.S.C. ss. 9601(22).
"SEC" shall mean the United States Securities and Exchange
Commission.
"Second Request" shall have the meaning ascribed to that term in
Section 4.4(b).
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Separate Matters" shall have the meaning ascribed to that term in
Section 7.1.
"Set-Off" shall mean any amount set-off against or deducted from
the Initial Deferred Payment by MSGI as provided in Section 7 hereof or in the
Holdback Agreement.
"Share Consideration" shall mean the aggregate number of shares of
MSGI issued in the Merger.
"Standby Letter of Credit" shall have the meaning ascribed to that
term in Section 1(b).
"Stockholders' Representative" shall have the meaning ascribed to
that term in Section 4.20.
"Stockholders' Representative Agreement" shall have the meaning
ascribed to that term in Section 5.1(i).
"Subsidiary," with respect to any Person, shall mean any corporation
50% or more of the outstanding voting power of which, or any partnership, joint
venture, limited liability company or other entity 50% or more of the total
equity interest of which, is directly or indirectly owned by such Person or of
which such Person is directly or indirectly a general partner (or acts in a
similar such capacity). For purposes of this Agreement, all references to
"Subsidiaries" of a Person shall be deemed to mean "Subsidiary" if such Person
has only one Subsidiary.
"Surviving Corporation" shall have the meaning ascribed to that term
in the preamble to this Agreement.
"Tangible Personal Property" shall mean, collectively, machinery,
equipment, furniture, fixtures and other tangible personal property.
"Tax" or "Taxes" shall mean all taxes, charges, fees, levies or
other assessments, and all estimated payments thereof, including, but not
limited to, income, excise, property, sales, use, value added, franchise,
payroll, transfer, transfer gain, gross receipts, withholding, social security
and unemployment taxes or other taxes of any kind, imposed by any foreign,
Federal, state, county or local government, or any subdivision or agency thereof
(a "Tax Authority"), and any interest, penalty and expense relating to such
taxes, charges, fees, levies or other assessments.
"Tax Authority" shall have the meaning ascribed to that term under
the definition of Taxes hereof.
"Tax Opinion" shall have the meaning ascribed to that term in
Section 5.1(f).
"TBCA" shall mean the Texas Business Corporation Act, as now
or hereafter amended.
"Voting Agreement" shall mean the Voting Agreement in the form of
Exhibit E hereto.
The term "voting power" when used with reference to the capital
stock of, or units of equity interests in, any person shall mean the power under
ordinary circumstances (and not merely upon the happening of a contingency) to
vote in the election of directors of such person (if such person is a
corporation) or to participate in the management and control of such person (if
such person is not a corporation).
"Year 2000 Compliant" shall have the meaning ascribed to that term
is Section 3.1(aa).
9.2 Interpretation. Unless the context otherwise requires, the terms
defined in Section 9.1 shall have the meanings herein specified for all purposes
of this Agreement, applicable to both the singular and plural forms of any of
the terms defined herein. All accounting terms defined in Section 9.1, and those
accounting terms used in this Agreement not defined in Section 9.1, except as
otherwise expressly provided herein, shall have the meanings customarily given
thereto in accordance with GAAP. When a reference is made in this Agreement to
Sections, such reference shall be to a Section of this Agreement unless
otherwise indicated. 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. Whenever the words "include," "includes" or "including" are used
in this Agreement, they shall be deemed to be followed by the words "without
limitation."
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IN WITNESS WHEREOF, this Agreement has been executed by duly authorized
officers of each of the parties hereto as of the date first above written.
MARKETING SERVICES GROUP, INC.
By:/s/ Xxxxxx Xxxxxxx
------------------
Name: J. Xxxxxx Xxxxxxx
Title: Chairman & CEO
GCG MERGER CORP.
By:/s/Xxxxxx Xxxxxxx
-----------------
Name: J. Xxxxxx Xxxxxxx
Title: President
XXXXXXXX ADVERTISING
INCORPORATED
By:/s/Xxxxxxx Xxxxxxx
------------------
Name: Xxxxxxx Xxxxxxx
Title: Chairman and CEO
