MERGER AGREEMENT
June 9, 1999
The parties to this agreement are Network Event Theater, Inc.,
a Delaware corporation ("NET"); Trent Acquisition Co., Inc., a Delaware
corporation and a wholly-owned subsidiary of NET ("TGNEW"); Trent Graphics,
Inc., a Pennsylvania corporation (the "Company"); and Xxxxxxx Xxxxxxx, Xxxxxx
Xxxxxxx, Xxxxxx Xxxxxxx and Xxxxxxx Xxxxxxx (together, the "Stockholders"), who
own all of the Company's outstanding stock.
The Company is engaged in the business of (a) selling posters
and other products (i) at sales events at junior and four-year college campuses,
high schools and other locations, (ii) at retail stores and (iii) over the
Internet and other mediums, and (b) selling and custom framing of wall posters
(i) at the wholesale level to other retailers and (ii) at the retail level
(collectively, the "Business"). The parties wish to provide for the acquisition
of the Company by NET through the merger of the Company into TGNEW and the
conversion of the Company's outstanding shares into the right to receive common
stock of NET and cash.
It is agreed as follows:
1. Merger; Provisions Relating to Surviving Corporation.
1.1 Certificate of Merger. Contemporaneously
with the closing under this agreement, a duly executed certificate of merger
providing for the merger of the Company into TGNEW shall be delivered for filing
to the Secretary of State of Delaware and the Secretary of the Commonwealth of
Pennsylvania. The merger shall become effective upon the filing of the
certificate of merger in those jurisdictions (the "Effective Time").
1.2 Merger. At the Effective Time, the Company
shall be merged into TGNEW pursuant to the Delaware General Corporation Law and
the Pennsylvania Business Corporation Law of 1988, and the separate existence of
the Company shall cease. TGNEW shall be the surviving corporation (the
"Surviving Corporation") and shall continue to be governed by the Delaware
General Corporation Law. At the Effective Time, TGNEW's name shall be changed to
"Trent Graphics, Inc."
1.3 Certificate of Incorporation and By-Laws.
The certificate of incorporation and by-laws of TGNEW in effect at the Effective
Time shall continue as the certificate of incorporation and by-laws of the
Surviving Corporation, until amended.
1.4 Directors and Officers. The directors and
officers of TGNEW at the Effective Time shall continue as the directors and
officers of the surviving corporation, until their respective successors are
elected.
1.5 Closing. The closing under this agreement
(the "Closing") shall take place at the offices of Proskauer Rose LLP, 0000
Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000 (or at such other place as the parties may
agree upon in writing) on a date to be agreed upon by the parties, but in any
event no later than June 30, 1999. The date on which the Closing is held is
referred to in this agreement as the "Closing Date." At the Closing, the parties
shall execute and deliver the documents referred to in section 7.
2. Conversion of Company Shares; Additional
Consideration and Related Provisions.
2.1 Conversion of Company Shares.
(a) All of the Company's shares of
common stock that are issued and outstanding at the Effective Time (the
"Company's Shares") shall then automatically cease to be outstanding and shall
be converted into the right to receive the amount of cash and number of shares
of NET common stock provided for in section 2.2 plus an additional amount, if
any, determined and payable as provided in section 2.3. After the Effective Time
the holders of the Company's Shares shall have no rights with respect to such
Shares except to receive the consideration to which the holders are entitled in
accordance with the terms of this agreement.
(b) All of the shares of common stock
of TGNEW that are issued and outstanding at the Effective Time shall continue to
be outstanding as shares of common stock of the Surviving Corporation.
2.2 Consideration Payable at the Closing.
At the Closing, (a) the Surviving Corporation shall pay to the Stockholders, by
wire transfer of immediately available funds to the account(s) designated in
writing by the Stockholders, cash in the aggregate amount of $3.5 million and
(b) NET shall issue and deliver to the Stockholders an aggregate number of
shares of NET's common stock determined by dividing $3.5 million by the Market
Price (as defined below) on the Closing Date.
2.3 Additional Consideration. In addition to the
consideration provided for in section 2.2:
(a) if the aggregate amount of the
Surviving Corporation's EBITDA for the two fiscal years ending June 30, 2001
equals or exceeds $1.2 million (the "Target"), the Surviving Corporation shall
make a cash payment to the Stockholders in the aggregate amount of $600,000 and
NET shall issue and deliver to the Stockholders an aggregate number of shares of
NET common stock determined by dividing $600,000 by the Market Price on
September 30, 2001;
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(b) if the aggregate amount of the
Surviving Corporation's EBITDA for the two fiscal years ending June 30, 2001 is
less than the Target but equals or exceeds $1.05 million, the Surviving
Corporation shall make a cash payment to the Stockholders in the aggregate
amount of $450,000 and NET shall issue and deliver to the Stockholders an
aggregate number of shares of NET common stock determined by dividing $450,000
by the Market Price on September 30, 2001; and
(c) if the aggregate amount of the
Surviving Corporation's EBITDA for the two fiscal years ending June 30, 2001 is
less than $1.05 million but equals or exceeds $900,000, the Surviving
Corporation shall make a cash payment to the Stockholders in the aggregate
amount of $300,000 and NET shall issue and deliver to the Stockholders an
aggregate number of shares of NET common stock determined by dividing $300,000
by the Market Price on September 30, 2001.
2.4 Definition of EBITDA; Determination.
(a) As used in this agreement, the
term "EBITDA" means, with respect to any fiscal year, sales less cost of goods
sold less all direct and indirect expenses, but before interest expense, taxes,
depreciation and amortization, determined on the basis of an audited income
statement for that year prepared in accordance with generally accepted
accounting principles consistently applied by NET's independent certified public
accountants (subject to the dispute mechanism in section 2.5(a)), with only the
following adjustments:
(i) only revenue of the Surviving
Corporation from, and direct and indirect expenses with respect to, (1) the sale
of posters and other products at sales events at junior and four-year college
campuses, high schools, retail stores and other locations and over the Internet
and other mediums, (2) the sale and custom framing of wall posters at the
wholesale level to other retailers and at the retail level, and (3) up to
$200,000 per year of revenue from the type of marketing activities that had been
performed by the Company prior to the Closing Date in conjunction with NET,
shall be included;
(ii) any management, home office or similar
fees charged by NET shall be excluded;
(iii) any and all direct and indirect
expenses related to revenues excluded from the calculation of EBITDA shall not
be used to reduce EBITDA;
(iv) any legal and accounting fees related
to the negotiation of, preparation for and consummation of the transactions
contemplated hereunder shall be excluded; and
(v) reasonable out-of-pocket expenses,
up to a maximum of $50,000, incurred in connection with the relocation of the
Company's warehouse shall be excluded and, if the Surviving Corporation or NET
purchases the new warehouse, the Surviving Corporation
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shall be charged $3 per square foot rent for the space occupied by the Surviving
Corporation in the warehouse.
(b) The parties agree that, in
calculating EBITDA, the inventory of the Surviving Corporation shall be counted
and valued in accordance with generally accepted accounting principles applied
consistently with the past practices of the Company.
2.5 Additional Provisions Relating to Payment of
Consideration.
(a) The Surviving Corporation shall
deliver to the Stockholders not later than September 30 of each of the years
2000 and 2001, a report setting forth in reasonable detail the amount and
calculation of the Surviving Corporation's EBITDA for those years, determined in
accordance with section 2.4. Any objection to the amount and calculation of
EBITDA must be made by the Stockholders (the "Notice") within 10 business days
following delivery to the Stockholders of such report. If the parties are unable
to resolve such objection within 20 business days of the delivery of the Notice,
then the parties shall designate an independent certified public accounting firm
(the "Firm") who shall review the amount and calculation of EBITDA and determine
the definitive amount of EBITDA. The finding of the Firm shall be binding upon
the parties. The party whose calculation of the amount of EBITDA is further from
the Firm's determination of the amount of EBITDA shall be responsible for the
Firm's fees. Payment of the cash and delivery of the shares due to the
Stockholders under section 2.3 shall be made on September 30, 2001.
(b) As used in this agreement, the term
"Market Price" means, as of any date, the average closing price (computed and
rounded to the third decimal point) of NET's common shares on NASDAQ as of 4:00
p.m. (EST) during the 20 trading days ending on the third day immediately
preceding that date.
(c) Any calculation of shares that
equates to a fractional number of shares shall be rounded to the nearest whole
number.
(d) All cash payments to the
Stockholders under this agreement shall be made 30% to Xxxxxxx Xxxxxxx and
23.33% to each of Xxxxxxx Xxxxxxx, Xxxxxx Xxxxxxx and Xxxxxx Xxxxxxx and all
stock issuances to the Stockholders under this agreement shall be made 20% to
Xxxxxxx Xxxxxxx and 26.66% to each of Xxxxxxx Xxxxxxx, Xxxxxx Xxxxxxx and Xxxxxx
Xxxxxxx.
2.6 Operations Following the Merger.
(a) Although the Stockholders shall
be responsible for the day-to-day operations of the Surviving Corporation's
business pursuant to the employment agreements referred to in section 5.1,
nothing in this agreement or those agreements shall be construed to limit the
rights of the boards of directors and officers of NET and the Surviving
Corporation to manage the business and affairs of those corporations or give the
Stockholders any claim against either NET
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or the Surviving Corporation with respect to any decision relating to the
conduct of their businesses, whether or not that decision affects the amount of
any consideration payable under section 2.3.
(b) Notwithstanding section 2.6(a),
NET agrees that during the period through June 30, 2001:
(i) Subject to the ultimate control of
the board of directors of NET, the Stockholders will be permitted to manage the
day-to-day operations of the Surviving Corporation consistent with approved
business plans, operating budgets and capital expenditure budgets, including
hiring employees and independent contractors.
(ii) NET will provide, or arrange for a bank
to provide, the Surviving Corporation with working capital consistent with past
practices of the Company (as described on schedule 2.6(b)(ii)) so long as the
Surviving Corporation's business is operating in a manner substantially
consistent with the business plan and budgets or any changes thereto approved by
NET.
(iii) NET will allow the Stockholders to
conduct the Surviving Corporation's business for the remaining 1999 calendar
year according to the Company's current business plan and budgets so long as the
business is operating in a manner substantially consistent with the business
plan and budgets or any changes thereto approved by NET.
(iv) NET will allow the Stockholders to
conduct the Surviving Corporation's business for the first six months of
calendar year 2000 according to the business plan and budgets attached hereto as
exhibit 2.6(b)-iv so long as the business is operating in a manner substantially
consistent with the business plan and budgets or any changes thereto approved by
NET.
(v) NET will allow the Stockholders to
conduct the Surviving Corporation's business for fiscal year 2001, ending June
30, 2001, according to a business plan and budgets consistent with the prior
business plans and budgets of the Surviving Corporation with appropriate
increases so long as the business is operating in a manner substantially
consistent with the business plan and budgets or any changes thereto approved by
NET.
(vi) Any additional profit making
opportunities for the Surviving Corporation proposed by NET will not cause the
Stockholders and the Surviving Corporation to substantially direct their efforts
away from the Company's core Business. The Stockholders will be permitted to
reject additional profit making opportunities proposed by NET that are not part
of the Business, if, in the Stockholders' reasonable judgment, such
opportunities would materially adversely affect the Business.
(vii) Any expansion of the Business, and the
timing thereof, will be jointly agreed to by the Stockholders and NET, provided,
however that the Stockholders will be permitted to expand the Business into new
mediums consistent with the business plan and budgets of the Surviving
Corporation.
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(c) In the event NET or the Surviving
Corporation breaches in any material respect the provisions of section 2.6(b),
the Stockholders shall give notice to NET of such breach, specifying in
reasonable detail the nature of the breach. If NET or the Surviving Corporation
fails to correct the breach within 45 days after the notice from the
Stockholders, then the Stockholders shall be entitled to receive the additional
consideration set forth in section 2.3(a) as if EBITDA equaled or exceeded the
Target for the two fiscal years ending June 30, 2001, payable on October 1,
2001; provided, however, the Stockholders shall not be entitled to any payment
pursuant to this section 2.6(c) if prior to the breach by NET or the Surviving
Corporation either (1) the Company or any of the Stockholders breached in any
material respect the terms of this agreement, (2) any of the Stockholders
breached in any material respect the terms of his Employment Agreement with the
Company, or (3) there was a material misrepresentation or material breach of
warranty by the Stockholders in this agreement, in any case which was not cured
within 45 days after notice from NET.
3. Representations and Warranties by the Company and the
Stockholders. The Company and the Stockholders jointly and severally represent
and warrant to NET and TGNEW as follows:
3.1 Organization and Authority of the Company.
The Company is a corporation duly organized, validly existing and in good
standing under the law of the jurisdiction of its incorporation and has the full
corporate power and authority to own, lease and operate its properties as it now
does and to carry on its business as it is presently being conducted. To the
best of the knowledge of the Company and the Stockholders, the Company is duly
qualified and in good standing in each jurisdiction in which the property owned
or leased by it or the nature of the activities conducted by it requires
qualification. Except as set forth on schedule 3.1, the Company does not
directly or indirectly own any equity or similar interest in, or any interest
convertible into or exchangeable or exercisable for, any equity or similar
interest in, any corporation, partnership, joint venture or other business
association or entity.
3.2 Authorization of Agreement. The execution,
delivery and performance of this agreement by the Company have been duly
authorized by all requisite corporate action of the Company. Each of the
Stockholders has the full right to enter into and perform his obligations under
this agreement in accordance with its terms. This agreement and the employment
agreements referred to in section 5.1 constitute valid and binding obligations
of the Company and each of the Stockholders parties thereto, enforceable against
each of them in accordance with its terms, except as may be limited by
bankruptcy, insolvency or other similar laws affecting the enforcement of
creditors' rights in general and subject to general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
3.3 Consents of Third Parties. Except as set
forth on schedule 3.3, the execution, delivery and performance of this agreement
by the Company and the Stockholders do not and will not (i) conflict with the
certificate of incorporation or by-laws of the Company or conflict with, result
in the breach or termination of, constitute a default under, or increase or
accelerate any
6
obligation under, any lease, agreement, commitment or other instrument, or any
order, judgment or decree, to which the Company or any of the Stockholders is a
party or by which the Company, the Business, any of the assets of the Company or
any of the Stockholders is bound; (ii) constitute a violation by the Company or
any of the Stockholders of any law, regulation, order, writ, judgment,
injunction or decree applicable to any of them; (iii) result in the creation of
any claim, lien, security interest, charge or encumbrance ("Liens") upon any of
the assets of the Company; or; (iv) adversely affect the operation of the
Business in any material respect. Except as set forth on schedule 3.3, no
consent, approval or authorization of, or designation, declaration or filing
with, any court or governmental authority or any other person or entity is
required on the part of the Company or any of the Stockholders in connection
with the execution, delivery and performance of this agreement.
3.4 Ownership of the Company. Each of Xxxxxxx
Xxxxxxx, Xxxxxx Xxxxxxx, Xxxxxx Xxxxxxx and Xxxxxxx Xxxxxxx is the record and
beneficial owner of 25% of the Company's outstanding stock, in each case free
and clear of any Liens. Except as set forth on schedule 3.4, there are no
outstanding options, warrants or rights of any kind to acquire any stock, and
there are no outstanding securities convertible into stock, of the Company, and
there are no obligations to issue any such options, rights or securities.
3.5 Financial Statements. The following
financial statements, copies of which have been delivered to NET, have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis and fairly present the financial position of the Company as
of the dates indicated and the results of operations for the periods indicated
(subject, in the case of the interim statements, to year-end audit adjustments):
(a) Combined balance sheets of Trent
Graphics, Inc. and Trent Graphics (a partnership) as of December 31, 1997 and
1996, and related combined statements of income, retained earnings, partners'
capital and cash flows for the years then ended, reviewed by Stone,
Xxxxxxx-Xxxxxxx & Associates, Inc.
(b) Combined balance sheets of Trent
Graphics, Inc. and Trent Graphics (a partnership) as of December 31, 1998 and
1997, and related combined statements of income, retained earnings, partners'
capital and cash flows for the years then ended, which statements are audited by
Stone, Xxxxxxx-Xxxxxxx & Associates, Inc.
(c) Balance sheet of Trent Graphics,
Inc. as of April 30, 1999, and related statement of income for the four months
then ended.
All such financial statements have been prepared in accordance with the books
and records of the Business and show all income and expenses attributable to the
Business during the respective periods covered by them. All of the books of
account of the Company have been exhibited or made available to NET and those
books of account have been maintained in accordance with good business practice
on a consistent basis and accurately record all transactions of the Company
during the periods covered by them. All of the Company's accounts receivable
outstanding as of the date
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of this agreement arose from bona fide transactions in the ordinary course of
the business and the Stockholders have no reason to believe that any of them
will not be collected in full when due.
3.6 Absence of Undisclosed Liabilities. As
of the date of this agreement the Company does not have any liability or
obligation of any kind, whether accrued, absolute, contingent or otherwise,
other than (a) liabilities and obligations under leases, commitments and other
agreements entered into in the ordinary course of business (which, to the extent
required by section 3.13, are listed on schedule 3.13), (b) the trade accounts
payable and accrued expenses listed on schedule 3.6, each of which has been
incurred in the ordinary course of business, (c) the liabilities set forth on
schedule 3.6 and (d) liabilities and obligations set forth on the Company's most
recent financial statements described in section 3.5(c). The Stockholders do not
know of any basis for the assertion against the Company or the Business of any
liability as of the date of this agreement that is not listed on schedule 3.6
(other than the liabilities under leases, commitments and other agreements
referred to in the immediately preceding sentence).
3.7 Absence of Certain Changes. Since December
31, 1998, the Company has operated its business in the ordinary course and
consistent with past practice, and, except as set forth on schedule 3.7:
(a) the Company has not entered into
any transaction or incurred any liability or obligation other than in the
ordinary course of business;
(b) there has been no material adverse
change in the condition (financial or otherwise), business, operations or assets
of the Company, and the Stockholders know of no fact or circumstance that is
reasonably likely to have a material adverse effect on the Company's future
business or operations;
(c) the Company has not sold or
transferred any assets other than in the ordinary course of business and other
than assets that have been replaced with other assets of equal or greater value;
(d) the Company has not incurred any
liability that was unusual in nature or amount or any indebtedness other than
indebtedness to trade creditors incurred in the ordinary course of business;
(e) the Company has not made any
distribution on or acquired any of its stock or, directly or indirectly, made
any other payment of any kind or any loan to or on behalf of the Stockholders,
any member of the Stockholders' families, or any entity controlled by the
Stockholders or any member of their families;
(f) the Company has not granted or
agreed to grant any general increase in any rate or rates of salaries or
compensation or in benefits of any kind to its employees or any specific
increase in the salary of or compensation to any employee whose total salary and
compensation after such increase would be at an annual rate in excess of
$25,000;
8
(g) the Company has not made any change
in its accounting methods or principles (or the application of those methods or
principles) or introduced any material new method of management, operations or
accounting;
(h) the Company has not established any
new employee benefit plan (as defined in section 3.24), amended or modified any
existing employee benefit plan, or incurred any obligation or liability under
any employee benefit plan materially different in nature or amount from
obligations or liabilities incurred during similar periods in prior years; and
(i) the Company has not entered into
any employment, bonus or deferred compensation agreement with any of its
directors, officers or other employees.
3.8 Taxes. The Company has timely filed all
foreign, federal, state and local income, gross receipts, personal property,
commercial rent, sales and use and other tax returns, reports and information
returns (including any related or supporting information) required by law to be
filed by it; each of those tax returns is correct and complete in all material
respects. The Company has timely paid all taxes required to be paid by it to
date. Except as set forth on schedule 3.8, none of the Company's tax returns has
been audited by any tax authority and there exist no pending or, to the best of
the knowledge of the Company and the Stockholders, proposed tax assessments,
suits, actions, claims, audits, investigations or inquiries by any tax authority
with respect to the Business or assets of the Company or against the Company or
any of the Stockholders with respect to the Business, or, to the best of the
Stockholder's knowledge, against any independent contractors with respect to the
Business. There are no tax liens on any of the Company's assets. The Company
(including any person acting on behalf of the Company) has not given nor been
requested to give waivers or extensions of any statute of limitations relating
to payment of taxes of the Company or for which the Company may be liable and no
other party has given or been requested to give such waivers or extensions with
respect to taxes for which the Company may be liable. All taxes that are or were
required by law to be withheld or collected by the Company have been duly
withheld or collected and paid to the proper tax authority. To the best of the
knowledge of the Company and the Stockholders, the Company is properly treated
as an S corporation for federal income tax purposes. The Company does not have
any tax liability of any kind that could result in a Lien on any of its assets.
3.9 Title to Assets. Except as set forth on
schedule 3.9 and except for the lien, if any, of current taxes not yet due and
payable, the Company has valid title, free and clear of any Liens, to all the
assets, tangible and intangible, used in the conduct of the Business, and those
assets will be sufficient to enable the Surviving Corporation to continue after
the Effective Time to operate the Business in the manner in which it has been
operated by the Company. The Company does not owe any amount to, or have any
contract with or commitment to, or use any property (real or personal) in its
business owned or leased by, any of the Stockholders or any director, officer,
employee, agent or representative of the Company, or any of their respective
affiliates.
3.10 Personal Property. Schedule 3.10 lists all
of the equipment, machinery, computers, furniture, leasehold improvements,
vehicles and other personal property
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having an individual value greater than $5,000 owned or leased by the Company
and all interests therein. All equipment and other tangible assets owned or used
by the Company are in good operating condition and in good condition of
maintenance and repair, ordinary wear and tear excepted, are suitable for their
present uses and purposes, and conform in all material respects with all
applicable ordinances, rules and regulations and all building, zoning and other
laws.
3.11 Real Property. The Company does not own any
real property. Schedule 3.11 contains a list and brief description of all real
properties leased by the Company. To the best of the knowledge of the Company
and the Stockholders, all improvements used by the Company on the real
properties leased by the Company are (a) in accordance with all applicable laws,
ordinances, regulations and orders in all material respects, including, but not
limited to, those applicable to zoning, environment and the establishment and
maintenance of working conditions for labor, and (b) in good condition of
maintenance and repair and are adequate, sufficient and suitable for their
present uses and purposes. The transactions contemplated by this agreement will
not adversely affect the Surviving Corporation's right to use those properties
for the same purpose and to the same extent as they were being used by the
Company prior to the date of this agreement.
3.12 Litigation; Compliance with Laws. Except
as set forth on schedule 3.12, there is no claim, litigation, proceeding or
governmental investigation pending or, to the best of the knowledge of the
Company and the Stockholders, threatened, or any order, injunction or decree
outstanding, against the Business, the Company or any of its properties or
assets. Neither the Company nor the Business is in violation in any material
respect of any law, regulation or ordinance, or any other requirement of any
governmental body or court, and no notice has been received by the Company or
any of its officers or directors alleging any such violation. The Company is not
engaged in any dispute with any of its advertisers, customers, suppliers or
printers and, to the best of the knowledge of the Company and the Stockholders,
has good relationships with all of them.
3.13 Lists of Agreements, etc. Schedule 3.13
contains a true and complete list of all orders, commitments and agreements
(written or oral) to which the Company is a party, including, but not limited
to, orders, commitments and agreements with advertisers and customers,
agreements for the purchase of materials, supplies, equipment or services,
leases (as lessee or lessor), license agreements (as licensee or licensor), loan
agreements, distribution agreements, and employment, consulting, sales
representative and independent contractor agreements other than any orders,
commitments or agreements that involve $5,000 or less or can be terminated on 30
days' notice without liability. True and complete copies of the agreements,
commitments and leases referred to on schedule 3.13 have been delivered or made
available to NET.
3.14 Status of Agreements. All of the Company's
agreements, commitments and orders were entered into in the ordinary course of
business. Except as set forth on schedule 3.14, each of the agreements,
commitments and orders referred to in section 3.13 is presently in full force
and effect in accordance with its terms and the Company is not in default, and,
to the best of the knowledge of the Company and the Stockholders, no other party
is in default under any of the provisions of any of those agreements and no
condition exists that, with notice or lapse of time or both, would constitute a
default by the Company or, to the best of the knowledge of the Company and the
Stockholders, any other party to any of those agreements. Each of the
agreements,
10
commitments or orders referred to in section 3.13 is valid and binding upon and
enforceable against each of the parties thereto in accordance with its terms,
except as enforceability may be limited by bankruptcy, insolvency or other
similar laws affecting the enforcement of creditors' rights in general. No party
to any of the agreements, commitments or orders referred to in section 3.13 has
made, asserted or has any defense, setoff or counterclaim under any of those
agreements, commitments or orders or has exercised any option granted to it to
cancel or terminate its agreement, to shorten the term of its agreement, or to
renew or extend the term of its agreement and neither the Company nor any of its
officers or directors has received any notice to that effect.
3.15 Employees.
(a) Schedule 3.15(a) contains a true and
complete list of the names and addresses, social security numbers, positions,
hire dates and annual or hourly compensation of all employees of the Company and
a description of vacation policies, sick leave policies, and bonus, incentive
compensation and group insurance plans for the benefit of those employees. No
employee of the Company is owed any wages, benefits or other compensation for
past services, other than wages and benefits accrued in the ordinary course of
business during the current pay period and accrued vacation. Except as set forth
on schedule 3.15(a), the Company does not have any severance policy and no
employee of the Company is entitled to any severance payment, either by law or
by agreement, upon the termination of his or her employment. To the best of the
knowledge of the Company and the Stockholders, the transactions provided for in
this agreement will not give rise to any liability of the Company or the
Surviving Corporation for severance pay or termination pay to any employee of
the Company or trigger any payments of any kind to any employee of the Company.
No employee of the Company is represented by any union or other collective
bargaining agent and there are no collective bargaining or other labor
agreements with respect to those employees.
(b) Schedule 3.15(b) contains a true and
complete list of the names and addresses, social security or tax identification
numbers, the annual, weekly or hourly compensation, and the job descriptions, of
all persons that the Company has engaged as independent contractors since
December 31, 1998. All such persons are properly characterized as independent
contractors and neither the Internal Revenue Service nor any other governmental
agency has asserted any claim to the contrary and, to the best of the knowledge
of the Company or the Stockholders, there is no pending investigation by any
governmental agency relating to the Company's practice of engaging independent
contractors.
(c) Schedule 3.15(c) contains a true and
complete copy of the Company's employee handbook, which contains accurate
summaries of the Company's employee benefit plans and human resources policies.
3.16 Labor Disagreements. Except as set forth
on schedule 3.16, (a) to the best of the knowledge of the Company and the
Stockholders, the Company and the Business are in compliance in all material
respects with all applicable laws and regulations respecting employment and
employment practices, terms and conditions of employment and wages and hours,
and is not
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engaged in any unfair labor practice; (b) there is no (and has never
been any) unfair labor practice charge or complaint against the Company or the
Business pending before the National Labor Relations Board, any state labor
relations board or any court or tribunal and, to the best of the knowledge of
the Company and the Stockholders, none is or has been threatened; (c) there is
no labor strike, dispute, request for representation, slowdown or stoppage
actually pending against or affecting the Company or the Business and, to the
best of the knowledge of the Company and the Stockholders, none is or has been
threatened; and (d) no grievance which might have an adverse effect on the
conduct of the operations of the Business or any arbitration proceeding arising
out of or under any collective bargaining agreement is pending and, to the best
of the knowledge of the Company and the Stockholders, none is or has been
threatened.
3.17 Restrictive Documents, etc. Neither the
Company nor the Business is subject to, or a party to, any lease, license,
permit, agreement or other commitment, instrument, law, rule, ordinance,
regulation, order, judgment or decree, or any other restriction of any kind,
that materially and adversely affects its business practices or operations or
any of the assets of the Company.
3.18 Environmental Matters. To the best of the
Stockholders' knowledge, the Company is not in violation of any federal, state
or local law, regulation, rule, order, decree, ordinance or common law relating
to pollution, the protection of human health or the environment.
3.19 Permits and Licenses. The Company has all
material permits, licenses, franchises and other authorizations ("Licenses")
necessary for the conduct of the Business and all such Licenses are valid and in
full force and effect. All Licenses held by the Company that are material to the
Company or the Business are listed on schedule 3.19.
3.20 Banks; Powers of Attorney. Schedule 3.20
sets forth (a) the names and locations of all banks, trust companies, savings
and loan associations and other financial institutions at which the Company
maintains safe deposit boxes or accounts of any nature and the names of all
persons authorized to draw thereon, make withdrawals therefrom or have access
thereto and (b) the names of all persons to whom the Company has granted a power
of attorney, together with a description thereof. The Company has provided NET
with true and complete copies of all bank statements received by it twenty-four
months prior to the date of this agreement.
3.21 Intangible Property. Schedule 3.21 contains
a complete list of the trademarks, trade names, copyrights and logos (including
registrations and applications for registration of any of them) used by the
Company. The Company owns, free and clear of any Liens, each of the trademarks,
trade names, copyrights and logos listed on schedule 3.21, and they constitute
all of the trademarks, copyrights, trade names and logos necessary for the
continued operation of the Business in a manner consistent with past practices.
To the knowledge of the Company and the Stockholders, the Company is not
infringing upon any trademark, trade name, copyright or other rights of any
third party; no proceedings are pending or threatened; and no claim has been
received by the Company alleging any such violation. To the best of the
knowledge of the
12
Company and the Stockholders, there is no violation by others
of any right of the Company with respect to any trademark, trade name or
copyright.
3.22 Software and Databases. The Company owns
or possesses adequate licenses or other rights to use all material computer
software used by it. Schedule 3.22 contains a list of all such software. Any
license of the Company to use any software is valid and does not infringe on the
property rights of any third party. The Company has not granted to any person or
entity any interest, as licensee or otherwise, in any of its owned software or
databases or in any of its mailing lists, advertiser lists or member lists.
3.23 Insurance. Schedule 3.23 contains a
complete list of all of the insurance policies held by the Company, specifying
with respect to each policy the policy limit, type of coverage, location of the
property covered, annual premium, premium payment date and expiration date. All
of such policies are in full force and effect and the Company is not in default
of any material provision thereof. True and complete copies of all of those
policies have been delivered to NET.
3.24 ERISA. Except as set forth on schedule
3.24, the Company is not a party to or bound by or liable with respect to any
"employee benefit plan," within the meaning of section 3(3) of the Employee
Retirement Income Security Act of 1974.
3.25 Expenses Related to this Agreement. The
Company has not paid any expenses related to the negotiation or preparation of
this agreement or any broker's, finder's or similar fee relating to the
transactions contemplated by this agreement, and no such payment will be payable
after execution of this agreement.
3.26 Transactions with Affiliates. Except as
set forth on schedule 3.26, during the twelve months preceding the date of this
agreement the Company has not engaged in any transaction with any of the
Stockholders or any of their respective affiliates.
3.27 Posters. Schedule 3.27 contains a
complete list of the colleges and other locations at which the Company held
poster sales events in 1998 and the retail stores at which the Company sold or
framed posters in 1998.
3.28 Repayment of Loan. The loan agreements
(the "PNC Agreements") between the Company and PNC Bank ("PNC") will permit
repayment of the loans to the Company at the Closing without any penalties or
premiums. The outstanding principal amount (and accrued interest thereon) under
the PNC Agreements is $537,709.81, and no default exists under the PNC
Agreements.
3.29 Business Relationships. Except as set
forth in the schedules to this agreement, since December 31, 1998 the Company
has enjoyed good relationships with all suppliers of goods or services to the
Business, the operators of all of the venues in which its posters are sold and
all other parties with which it has business relations, and neither the Company
nor any of the
13
Stockholders knows of any intention on the part of any such vendor, venue
operator or other party to substantially change its relationship with the
Company.
3.30 No Misrepresentation. No representation
or warranty by the Company or the Stockholders in this agreement (including the
schedules and exhibits to this agreement) contains any untrue statement of a
material fact or omits to state a material fact necessary to make the statements
contained in this agreement (including the schedules and exhibits to this
agreement) not misleading.
3.31 Knowledge. As used in this agreement, "to
the Stockholders' knowledge," "the Company's knowledge" and words of similar
import shall mean the actual knowledge of the Stockholders.
4. Representations and Warranties by TGNEW and NET. TGNEW and
NET jointly and severally represent and warrant to the Company and the
Stockholders as follows:
4.1 Organization. Each of TGNEW and NET is a
corporation duly organized, validly existing and in good standing under the law
of the State of Delaware and has the full corporate power to enter into and to
perform this agreement.
4.2 Authorization of Agreement. The execution,
delivery and performance of this agreement by TGNEW and NET have been duly
authorized by all requisite corporate action of each of them. This agreement and
the employment agreements referred to in section 5.1 constitute valid and
binding obligations of TGNEW and NET, enforceable against each of them in
accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency or other similar laws affecting the enforcement of
creditors' rights in general and subject to general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
4.3 Consents of Third Parties. The execution,
delivery and performance of this agreement by each of TGNEW and NET will not (a)
conflict with TGNEW's or NET's certificate of incorporation or by-laws and will
not conflict with, result in the breach or termination of, or constitute a
default under, any lease, agreement, commitment or other instrument, or any
order, judgment or decree to which either of them is a party or by which either
of them is bound, or (b) constitute a violation by it of any law, regulation,
order, writ, judgment, injunction or decree applicable to it. No consent,
approval or authorization of, or designation, declaration or filing with, any
court or governmental authority is required on the part of TGNEW or NET in
connection with the execution, delivery and performance of this agreement.
4.4 Financial Ability. NET and TGNEW have the
financial ability to satisfy their respective obligations to the Company and the
Stockholders under this agreement.
4.5 Validity of Shares. All the issued and
outstanding shares of common stock of NET have been duly authorized, are validly
issued, fully paid and non-assessable. The
14
shares of NET common stock, when issued to the Stockholders under article 2,
will be duly authorized, validly issued, fully paid and non-assessable.
4.6 Litigation; Compliance with Laws. Except
as set forth on schedule 4.6, there is no claim, litigation, proceeding or
governmental investigation pending or, to the best of the knowledge of TGNEW and
NET, threatened, or any order, injunction or decree outstanding, against their
respective businesses or any of their respective properties or assets. Neither
TGNEW nor NET is in violation of any law, regulation or ordinance, or any other
requirement of any governmental body or court, except where such violation or
non-compliance would not have a material adverse effect on the financial
condition, business or operations of NET and its subsidiaries taken as a whole,
and no notice has been received by TGNEW, NET or any of their respective
officers or directors alleging any such violation.
4.7 NET Financials and SEC Reports. The "SEC
Documents" shall mean (a) each final prospectus and definitive proxy statement
filed by NET with the Securities and Exchange Commission (the "SEC") since
January 1, 1997 (other than prospectuses contained in registration statements on
Forms X-0, X-0, X-00 or S-15), and (b) each report on Form 10-K or Form 10-Q
(and any amendments thereto) filed by NET with the SEC since January 1, 1997.
None of the SEC Documents referred to in the preceding sentence, as of the date
they were filed with the SEC, contained any untrue statement of a material fact
or omitted to state a material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading. The consolidated financial statements of
NET and its subsidiaries for the fiscal year or period ended December 31, 1996
or thereafter included in the SEC Documents referred to in the first sentence of
this section 4.7 (the "NET Financials") (including any related notes thereto)
fairly present in all material respects the consolidated financial position and
the consolidated operations, shareholders' equity and changes in financial
position, as the case may be, of NET and its consolidated subsidiaries as of its
date or for the respective periods set forth therein (subject, in the case of
unaudited statements, to normal recurring year-end audit adjustments), in each
case, in accordance with generally accepted accounting principles consistently
applied during the periods involved (in the case of audited statements) or
applicable accounting requirements of the SEC (in the case of unaudited
statements), except as set forth therein.
4.8 No Misrepresentation. No representation
or warranty by TGNEW or NET in this agreement (including the schedules and
exhibits to this agreement) contains any untrue statement of a material fact or
omits to state a material fact necessary to make the statements contained in
this agreement (including the schedules and exhibits to this agreement) not
misleading.
50 Further Agreements of the Parties.
5.1 Undertaking by Stockholders With Respect to
Stock; Employment Agreements.
(a) Prior to the Closing, the
Stockholders shall not sell, transfer or cause or permit any Lien to exist on
any of the Company's Shares.
15
(b) At the Closing, each of the
Stockholders shall execute an employment agreement with the Company in the form
of exhibit 5.1.
5.2 Access to Information. Prior to the Closing,
NET and its representatives may make such investigation of the property, assets
and businesses of the Business as they may desire, and the Company and the
Stockholders shall give to NET and to its counsel, accountants and other
representatives, upon reasonable notice, reasonable access, during normal
business hours throughout the period prior to the Closing, to all of the assets,
books, commitments, agreements, records and files of the Company relating to the
Business and the Company and the Stockholders shall furnish to NET during that
period all documents and copies of documents and information concerning the
Business as NET reasonably may request. NET shall hold, and shall cause its
representatives to hold, all such information and documents and all other
information and documents delivered pursuant to this agreement confidential and,
if the purchase and sale contemplated by this agreement is not consummated for
any reason, shall return to the Company all such information and documents and
any copies as soon as practicable, and shall not disclose any such information
(that has not previously been disclosed by a party other than NET) to any third
party, unless required to do so pursuant to a request or order under applicable
laws and regulations or pursuant to a subpoena or other legal process. NET's
obligations under this section shall survive the termination of this agreement.
5.3 [Intentionally Omitted]
5.4 Other Action. No party to this agreement
shall take any action that would result in any of its or their representations
and warranties not being true as of the Closing Date. Each of the parties to
this agreement shall use its best efforts to cause the fulfillment at the
earliest practicable date of all of the conditions to the obligations of the
parties to consummate the transactions contemplated by this agreement.
5.5 Covenants Against Competition, Solicitation
and Disclosure.
(a) To accord to NET the full value of
its purchase, for a period of five years after the Effective Time, the
Stockholders shall not, directly or indirectly, engage or be interested in (as
owner, shareholder, partner, member, individual proprietor, director, officer,
employee, manager, lender, agent consultant or otherwise) any business or entity
that engages, anywhere in the world, in (i) the sale, distribution or other
commercial exploitation of wall posters or (ii) any other business in which the
Company has engaged at any time during the two years preceding the date of this
agreement.
(b) For a period of five years after
the date of this agreement, the Stockholders shall not, directly or indirectly,
employ or solicit for employment or consulting, on their own behalf or on behalf
of any other person or entity, or otherwise encourage the resignation of, any
employee of NET, the Surviving Corporation or any of NET's affiliates; provided,
however, this restriction shall not apply to their respective wives.
16
(c) Neither the Company nor any of the
Stockholders shall at any time hereafter disclose to anyone, or use in
competition with NET or any of its subsidiaries, any information with respect to
any confidential or secret aspect of the business or affairs of NET or any of
its subsidiaries.
(d) The Stockholders acknowledge that
the remedy at law for breach of the provisions of this section 5.5 will be
inadequate and that, in addition to any other remedy NET and the Surviving
Corporation may have, they shall be entitled to an injunction restraining any
breach or threatened breach, without the necessity of showing actual damages and
without any bond or other security being required. If any court construes any
covenant in this section 5.5 to be unenforceable in whole or in part, the court
may reduce the duration or area to the extent necessary so that the provision is
enforceable, and the provision, as reduced, shall then be enforceable.
5.6 Stock Options. Prior to the Closing, NET
and the Stockholders shall determine and NET shall recommend to its stock option
committee for its approval (which approval may not occur prior to the Closing)
awards of stock options to be made to the Company's key employees (other than
the Stockholders) under NET's employee stock option plan.
5.7 Expenses. Except as expressly provided in
this agreement, the parties shall bear their own expenses incurred in connection
with the negotiation and preparation of this agreement and in connection with
the transactions contemplated by this agreement.
5.8 Consents and Approvals. After the Closing,
the Surviving Corporation and the Stockholders shall use reasonable efforts to
obtain, at the earliest practicable date, in form and substance reasonably
satisfactory to NET, any consents and approvals set forth on schedule 3.3,
without any condition materially adverse to NET or the operation of the Business
after the Closing Date.
5.9 Audited Financial Statements; Interim
Financial Statements. Prior to the Closing, the stockholders shall deliver to
NET combined balance sheets of Trent Graphics, Inc. and Trent Graphics (a
partnership) as of December 31, 1997, and related combined statements of income,
retained earnings, partners' capital and cash flows for the year then ended,
audited by Stone, Xxxxxxx-Xxxxxxx & Associates, Inc. together with an agreement
of such accountants to consent to the inclusion of such financial statements in
any SEC filing by NET.
5.10 Securities Act Matters.
(a) The Company and the Stockholders
recognize that the issuance of shares of NET common stock under article 2 is
intended to be exempt from registration under the Securities Act of 1933, as
amended (the "Securities Act"), by virtue of section 4(2) of the Securities Act.
In that connection, each of the Stockholders represents and warrants to NET that
he is acquiring the NET shares for his own account, for investment purposes only
and not with a view
17
to the resale or distribution of those shares, in whole or in part. Each of the
Stockholders acknowledges that he understands that sales or transfers of the
shares are restricted by the Securities Act and by certain state securities laws
and that a legend referring to that restriction will be placed on the
certificates representing the shares.
(b) None of the Stockholders may sell
or otherwise transfer the shares acquired by them pursuant to this agreement
unless the transaction is registered under the Securities Act and applicable
state securities laws or an exemption from registration is available.
(c) If within two years after the Effective
Time NET proposes to file a registration statement (other than a registration
statement on Form S-4 or S-8 or any form substituting therefor or the equivalent
thereof) on which securities of NET are to be registered for sale by NET, NET
shall give written notice of such proposed filing to each of the Stockholders at
least 30 days before the anticipated filing date of such registration statement
and such notice shall offer each of the Stockholders the opportunity to have up
to 15% of the shares of NET common stock issued to him on the Closing Date
included in the registration statement. Each Stockholder desiring to have any of
his shares of NET common stock included in the registration statement shall so
advise NET in writing within 20 days after the date such notice is given by NET
(which request shall set forth the number of shares of NET common stock for
which registration is requested). NET shall include in the registration
statement all such securities requested to be included therein unless, if the
registration statement is filed pursuant to an underwritten offering, the
managing underwriter delivers a written opinion that the inclusion of such
requested securities would likely have an adverse effect on the offering, in
which event NET shall include only so many shares as the managing underwriter
indicates may be included without having an adverse effect on the offering.
Notwithstanding the foregoing, NET shall not have
any obligation to include any of a Stockholder's shares in the registration
statement if, in the opinion of NET's counsel (a copy of which shall be
addressed and delivered to the Stockholder), the Stockholder is then permitted
by law to sell, in a single transaction pursuant to the provisions of Rule 144
under the Act, all of the Shares then held by him. NET shall not have any
obligation to notify any of the Stockholders of the filing of a registration
statement if he has received a copy of the opinion referred to in the preceding
sentence.
Each Stockholder shall furnish to NET such
information and other material as NET or its counsel may reasonably request with
respect to the public offering of the shares and the Stockholder shall take any
other action which NET may reasonably request in connection with the
registration statement.
Whenever the Stockholder sells any shares under
a registration statement filed pursuant to this agreement, he shall furnish NET
with a report at the end of the distribution setting forth the number of shares
sold and the manner of such sale.
5.11 Further Assurances, etc. At any time and
from time to time after the date of this agreement, (a) each party shall,
without further consideration, execute and deliver to the
18
other parties such other instruments and take such other action as the others
may reasonably request to carry out the transactions contemplated by this
agreement, (b) NET shall use reasonable efforts to obtain releases of the
Stockholders from any guaranties by them of any amounts payable by the Company
to its vendors and service providers, and (c) the Surviving Corporation shall
make timely payments of all amounts payable to its vendors.
5.12 Post-Closing Payments. After the Closing,
the Stockholders shall, as promptly as practical, forward to the Surviving
Corporation any amount received by them to which the Surviving Corporation is
entitled and shall refer to the Surviving Corporation any telephone calls,
letters and other communications that they may receive relating to the Business.
5.13 Employees. At the Closing, all of the
employees of the Company on the day immediately preceding the Closing Date shall
become employees of the Surviving Corporation. The terms of the employment of
each of such employees shall be determined by the Surviving Corporation, except
that the Surviving Corporation shall provide such employees with vacation time
consistent with the past practices of the Company and fringe benefits as
provided to other employees of NET (unless the Stockholders and NET mutually
determine otherwise).
5.14 Financing. At the Closing, NET shall provide
to the Surviving Corporation any funds necessary to repay all indebtedness owed
to PNC by the Company pursuant to the PNC Agreement.
5.15 Reports Under Securities Exchange Act of
1934. With a view to making available to the Stockholders the benefits of Rule
144 promulgated under the Securities Act of 1933 and any other rule or
regulation of the SEC that may at any time permit a Stockholder to sell
securities of NET to the public without registration, NET agrees to use its best
efforts to:
(a) make and keep public information
available, as those terms are understood and defined in Rule 144;
(b) file with the SEC in a timely manner
all reports and other documents required of NET under the 1933 Act and the
Securities Exchange Act of 1934, as amended the ("1934 Act"); and
(c) furnish to any Stockholder so long
as such Stockholder owns any of the shares of NET forthwith upon request a
written statement by NET that it has complied with the reporting requirements of
Rule 144, and of the 1933 Act, a copy of the most recent annual or quarterly
report of NET, and such other reports and documents so filed by NET as may be
reasonably requested in availing any Stockholder of any rule or regulation of
the SEC permitting the selling of any such securities without registration.
19
60 Conditions to Closing.
6.1 Conditions Precedent to Obligations of TGNEW
and NET. The obligations of TGNEW and NET to consummate the transactions
contemplated by this agreement are subject to the fulfillment, prior to or at
the Closing, of each of the following conditions (any or all of which may be
waived by TGNEW or NET):
(a) all representations and warranties
of the Company and the Stockholders to TGNEW and NET shall be true and correct
in every material respect as of the time of the Closing, with the same effect as
though those representations and warranties had been made again at and as of
that time;
(b) the Company and the Stockholders
shall have performed and complied in all material respects with all obligations
and covenants required by this agreement to be performed or complied with by
them, respectively, prior to or at the Closing;
(c) NET shall have been furnished with a
certificate (dated the Closing Date and in form and substance reasonably
satisfactory to NET) executed by the president of the Company, certifying to the
fulfillment of the conditions specified in sections 6.1(a) and 6.1(b);
(d) NET shall have been furnished with
an opinion of Xxxxxxxx Xxxxxxxxx Professional Corporation, counsel to the
Company and the Stockholders, in the form of exhibit 6.1(d); and
(e) there shall not be in effect any
injunction or restraining order issued by a court of competent jurisdiction in
an action or proceeding against the consummation of the transactions
contemplated by this agreement.
6.2 Conditions Precedent to Obligations of the
Company and the Stockholders. The obligations of the Company and the
Stockholders to consummate the transactions contemplated by this agreement are
subject to the fulfillment, prior to or at the Closing, of each of the following
conditions (any or all of which may be waived by the Company or the
Stockholders):
(a) all representations and warranties
of TGNEW and NET shall be true and correct in every material respect as of the
time of the Closing, with the same effect as though those representations and
warranties had been made again at and as of that time;
(b) TGNEW and NET shall have performed
and complied in all material respects with all obligations and covenants
required by this agreement to be performed or complied with by them prior to or
at the Closing;
(c) the Stockholders shall have been
furnished with a certificate (dated the Closing Date and in form and substance
reasonably satisfactory to the Stockholders)
20
executed by the president of NET, certifying to the fulfillment of the
conditions specified in sections 6.2(a) and 6.2(b);
(d) the Stockholders shall have been
furnished with an opinion of Proskauer Rose LLP, counsel to TGNEW and NET, in
the form of exhibit 6.2(d);
(e) the Company and the Stockholders
shall have received a pay-off letter from PNC Bank with respect to the
indebtedness under the PNC Agreement, together with the return of the notes,
mortgages and guaranties delivered to PNC by the Company and the Stockholders;
and
(f) there shall not be in effect any
injunction or restraining order issued by a court of competent jurisdiction in
an action or proceeding against the consummation of the transactions
contemplated by this agreement.
70 Documents to be Delivered at Closing.
7.1 Documents to Be Delivered by the Company
and the Stockholders. At the Closing, the Company and the Stockholders shall
deliver to NET and TGNEW the following:
(a) certificates representing all the
issued and outstanding shares of common stock of the Company, registered in the
names of the Stockholders and duly endorsed by the Stockholders in blank for
transfer or accompanied by appropriate stock powers in blank duly signed by the
Stockholders;
(b) a copy of resolutions of the board
of directors and the Stockholders of the Company authorizing the execution,
delivery and performance of this agreement by the Company, and a certificate of
its secretary or assistant secretary, dated the Closing Date, that such
resolutions were duly adopted and are in full force and effect;
(c) the certificate referred to in
section 6.1(c);
(d) the opinion referred to in section
6.1(d); and
(e) the employment agreements referred to in
section 5.1.
7.2 Documents To Be Delivered by TGNEW and NET.
At the Closing, TGNEW and NET shall deliver to the Stockholders the following:
(a) the wire transfer of $3.5 million
referred to in section 2.2;
(b) certificates representing the
number of shares of common stock of NET as determined in accordance with section
2.2;
21
(c) a copy of resolutions of the
boards of directors of NET and TGNEW authorizing the execution, delivery and
performance of this agreement by each of NET and TGNEW, as the case may be, and
a certificate of the secretary or assistant secretary of NET or TGNEW, as the
case may be, dated the Closing Date, that such resolutions were duly adopted and
are in full force and effect;
(d) the certificate referred to in
section 6.2(c);
(e) the opinion referred to in section
6.2(d);
(f) the guaranty of the Surviving
Corporation's obligations referred to in section 10.1; and
(g) the employment agreements referred to in
section 5.1.
80 Survival of Representations and Warranties;
Indemnification.
8.1 Survival. All representations, warranties
and agreements by the Company and the Stockholders shall survive the closing
under this agreement, notwithstanding any investigation at any time by or on
behalf of TGNEW or NET, and shall not be considered waived by TGNEW's or NET's
consummation of the transactions contemplated by this agreement with knowledge
of any breach or misrepresentation by the Company or the Stockholders; provided,
however, any claim for misrepresentation or breach of warranty or breach of any
covenant or agreement to be performed on or prior to the Closing must be
asserted by notice given to the Stockholders within 18 months from the Closing
Date except that a claim with respect to the representations and warranties in
sections 3.1 and 3.4 may be asserted at any time. All representations,
warranties and agreements by TGNEW and NET shall survive the Closing
notwithstanding any investigation at any time by or on behalf of the Company or
the Stockholders, and shall not be considered waived by the Company's or the
Stockholders' consummation of the transactions contemplated by this agreement
with knowledge of any breach or misrepresentation by TGNEW or NET.
8.2 Indemnification.
(a) Subject to the limitations in
sections 8.1 and 8.4, the Stockholders jointly and severally shall indemnify and
hold harmless the Surviving Corporation and NET against all loss, liability,
damage or expense (including reasonable fees and expenses of counsel, whether
involving a third party or between the parties to this agreement) the Surviving
Corporation or NET may suffer, sustain or become subject to as a result of any
breach of any representation, warranty, covenant or other agreement of the
Company or the Stockholders contained in this agreement, or any
misrepresentation by the Company or the Stockholders, or any claim by a third
party which, without regard to the merits of the claim, would constitute such a
breach or misrepresentation.
22
(b) The Surviving Corporation and
NET jointly and severally shall indemnify and hold harmless the Stockholders
against all loss, liability, damage or expense (including reasonable fees and
expenses of counsel, whether involving a third party or between the parties to
this agreement) the Stockholders may suffer, sustain or become subject to as a
result of (1) any breach of any representation, warranty, covenant or other
agreement of TGNEW or NET contained in this agreement, (2) any misrepresentation
by TGNEW or NET, (3) any claim by a third party which, without regard to the
merits of the claim, would constitute such a breach or misrepresentation, and
(4) any personal guaranties by the Stockholders of any amounts payable by the
Company to its vendors and service providers.
8.3 Defense of Claims. If any third-party
claim is made against any party that, if sustained, would give rise to a
liability of the other party, the party against whom the claim is made shall
promptly cause notice of the claim to be delivered to the other party and shall
afford the other party and its counsel, at the other party's sole expense, the
opportunity to join in defending or compromising the claim.
8.4 Limits on Indemnification. No claim may be
made against the Stockholders for indemnification for breaches of
representations and warranties hereunder or for breaches of any covenants or
agreements to be performed prior to the Closing until the aggregate of all of
the Surviving Corporation's and NET's claims for indemnification hereunder with
respect to all such breaches by the Company or the Stockholders collectively
exceed $50,000 and the aggregate liability of the Stockholders to the Surviving
Corporation and NET for indemnification under this agreement shall be limited to
$1,000,000.
90 Miscellaneous.
9.1 Finders. The parties represent and warrant that
they have not employed or utilized the services of any broker or finder in
connection with this agreement or the transactions contemplated by it.
9.2 Entire Agreement. This agreement (together
with the employment agreements referred to in section 5.1) contains, and is
intended as, a complete statement of all of the terms of the arrangements among
the parties, supersedes any previous agreements and understandings among the
parties with respect to those matters (including, but not limited to, the letter
of intent dated April 13, 1999), and cannot be changed or terminated orally.
9.3 Governing Law. This agreement shall be
governed by and construed in accordance with the law of the Commonwealth of
Pennsylvania, except that the provisions relating to the merger of the Company
into TGNEW shall be governed by Delaware or Pennsylvania law to the extent
appropriate.
9.4 Headings. The section headings of this
agreement are for reference purposes only and are to be given no effect in the
construction or interpretation of this agreement.
23
9.5 Notices. All notices and other
communications under this agreement shall be in writing and shall be deemed
given when delivered personally, one day after being sent by recognized
overnight courier, four days after being mailed by certified mail, return
receipt requested, or by facsimile transmission, with a confirming copy by
certified mail, return receipt requested, to the parties at the following
addresses (or to such other address as a party may specify by notice given to
the other pursuant to this provision):
(a) If to the Company or the Stockholders,
addressed to any or all of them at:
c/o Trent Graphics, Inc.
000 Xxxxx 0xx Xxxxxx, Xxxxx 000
Xxxxxxxxxxx, Xxxxxxxxxxxx 00000
Facsimile No.: 000-000-0000
with a copy to:
Xxxxxxxx Xxxxxxxxx Professional Corporation
000 Xxxxx Xxxxxx Xxxxxx, 0xx Xxxxx
Xxxxxxxxxx, Xxxxxxxxxxxx 00000
Xxxx X. Xxxxxxx, Esq.
Facsimile No.: 000-000-0000
with copies to:
Xxxxxx X. Xxxxxxx
0000 Xxxxxxx Xxxxx
Xxxxxxxxx, Xxxxxxxxxxxx 00000
Facsimile No.: 000-000-0000
Xxxxxxx X. Xxxxxxx
0000 Xxxxxxxxx Xxxxx
Xxxxxxxxxxx, Xxxxxxxxxxxx 00000
Facsimile No.: 000-000-0000
Xxxxxx X. Xxxxxxx
000 Xxxxxxx Xxxxxx
Xxxx Xxxxxxxxxxx, Xxxxxxxxxxxx 00000
Xxxxxxx Xxxxxxx
000 Xxxxxxx Xxxxx
Xxxxxxxxxxx, Xxxxxxxxxxxx 00000
(b) If to TGNEW or NET, addressed to either or both
of them at:
24
Network Event Theater, Inc.
000 Xxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxxx,
Executive Vice President and Chief Financial
Officer
Facsimile No.: 000-000-0000
with a copy to:
Xxxxxxx X. Xxxxxx, Esq.
Proskauer Rose LLP
0000 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile No.: 000-000-0000
9.6 Waiver. Any party may waive compliance by
another with any of the provisions of this agreement. No waiver of any provision
shall be construed as a waiver of any other provision. Any waiver must be in
writing and must be signed by the party waiving the provision.
9.7 Separability. If any provision of this
agreement is invalid or unenforceable, the balance of this agreement shall
remain in effect unless such invalidity or unenforceability shall materially
impair the purpose or objectives of this agreement.
9.8 Assignment. No party may assign any of its
or his rights or delegate any of its or his duties under this agreement without
the consent of the other parties.
9.9 Publicity. No party shall issue any press
release or other public statement regarding the transactions contemplated by
this agreement without the consent of the other parties, except as required by
applicable law.
9.10 Definitions. As used in this agreement,
the term "affiliate" means any person or entity directly or indirectly
controlled by, controlling, or under common control with, any other person or
entity. As used in this agreement, the term "subsidiary" of a person means any
corporation or other legal entity of which that person (either alone or through
or together with any other subsidiary) owns, directly or indirectly, more than
50% of the stock or other equity interests that are ordinarily and generally, in
the absence of contingencies and understandings, entitled to vote for the
election of the board of directors or other governing body of such entity.
9.11 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.
9.12 Specific Performance. The Company and the
Stockholders acknowledge that the Business is of a special, unique and
extraordinary character, and that any
25
breach of this agreement by the Company or any of the Stockholders could not be
compensated for by damages. Accordingly, if the Company or any of the
Stockholders breaches its or his obligations under this agreement NET shall be
entitled, in addition to any other remedies that it may have, to enforcement of
this agreement by a decree of specific performance requiring the Company and the
Stockholders to fulfill their obligations under this agreement, and no bond or
other security shall be required.
9.13 Counterparts. This agreement may be
executed in one or more counterparts.
9.14 Termination. Either the Stockholders or
NET may terminate this agreement by notice to the other if the Closing has not
occurred by June 30, 1999 (but a party shall not have the right to terminate
this agreement if the Closing has not occurred due to the terminating party's
breach of this agreement). Except as otherwise provided in this agreement, upon
such termination none of the parties shall have any liability of any kind
arising out of this agreement.
26
100 Guaranty.
10.1 Surviving Corporation's Obligations. NET
will guarantee, pursuant to a guaranty in the form of exhibit 10.1, to the
Company and the Stockholders the prompt and full performance when due of all
obligations of the Surviving Corporation to the Company and the Stockholders
arising under this agreement and the employment agreements referred to in
section 5.1.
Trent Graphics, Inc.
By: /s/ Xxxxxx Xxxxxxx
-------------------------------
Name: Xxxxxxx Xxxxxxx
Title: Treasurer
/s/ Xxxxxxx Xxxxxxx
------------------------------------
Xxxxxxx Xxxxxxx, individually
/s/ Xxxxxx Xxxxxxx
------------------------------------
Xxxxxx Xxxxxxx, individually
/s/ Xxxxxx Xxxxxxx
------------------------------------
Xxxxxx Xxxxxxx, individually
/s/ Xxxxxxx Xxxxxxx
------------------------------------
Xxxxxxx Xxxxxxx, individually
TRENT ACQUISITION CO., INC.
By: /s/ Xxxxx X. Xxxxxx
------------------------------------
Xxxxx X. Xxxxxx
President
NETWORK EVENT THEATER, INC.
By: /s/ Xxxxx X. Xxxxxx
------------------------------------
Xxxxx X. Xxxxxx
Executive Vice President
and Chief Financial Officer
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