Stock Purchase Agreement - Master Graphics Inc., Phoenix Communications Inc. and King Mailing Services Inc.
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement ("Agreement") is made as of December 15, 1997, by
MASTER GRAPHICS, INC., a Delaware corporation ("Buyer"), CARY ROSENTHAL, an
individual residing in Atlanta, Georgia ("Rosenthal"), JOSEPH SEGAL, an
individual residing in Atlanta, Georgia ("Segal"), ROSS LENHART, an individual
residing in Atlanta, Georgia ("Lenhart"), RICHARD ROBERTS, an individual
residing in Atlanta, Georgia ("Roberts"), and SCOTT DIAMOND, an individual
residing in Atlanta, Georgia ("Diamond")(Rosenthal, Segal, Lenhart, Roberts and
Diamond shall hereinafter be collectively referred to as "Sellers").
RECITALS
Sellers desire to sell, and Buyer desires to purchase, all of the issued and
outstanding shares (the "Shares") of capital stock of Phoenix Communications,
Inc., a Georgia corporation ("Phoenix"), and King Mailing Services, Inc., a
Georgia corporation ("King"), for the consideration and on the terms set forth
in this Agreement.
AGREEMENT
The parties, intending to be legally bound, agree as follows:
1. DEFINITIONS
For purposes of this Agreement, the following terms have the meanings specified
or referred to in this Section 1:
"ACCOUNTANTS"-the independent certified public accountants utilized by the Buyer
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to audit the financial statements of the Acquired Companies as of the Closing
Date.
"ACQUIRED COMPANIES"-Phoenix Communications, Inc. and King Mailing Services,
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Inc.
"ADJUSTED NET WORTH"-The sum of:
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(a) the aggregate stockholders' equity of the Acquired Companies as of the
Closing Date determined in accordance with GAAP;
(b) Crouch Overrides which have accrued through the Closing Date; and
(c) the reduction (if any) in such stockholders' equity which results from the
accrual of the Success Fee.
"ADJUSTMENT AMOUNT"--as defined in Section 2.5.
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"APPLICABLE CONTRACT"--any Contract (a) under which either Acquired Company has
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or may acquire
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any rights, (b) under which either Acquired Company has or may become subject to
any obligation or liability, or (c) by which either Acquired Company or any of
the assets owned or used by it is or may become bound.
"BALANCE SHEETS"--as defined in Section 3.4.
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"BEST EFFORTS"--the efforts that a prudent Person desirous of achieving a result
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would use in similar circumstances to ensure that such result is achieved as
expeditiously as possible.
"BREACH"--a "Breach" of a representation, warranty, covenant, obligation, or
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other provision of this Agreement or any instrument delivered pursuant to this
Agreement will be deemed to have occurred if there is or has been any inaccuracy
in or breach of, or any failure to perform or comply with, such representation,
warranty, covenant, obligation, or other provision, and the term "Breach" means
any such inaccuracy, breach, failure, claim, occurrence, or circumstance.
"BUYER"--as defined in the first paragraph of this Agreement.
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"CASH AMOUNT"-as defined in Section 2.2.
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"CLOSING"--as defined in Section 2.3.
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"CLOSING DATE"--the date and time as of which the Closing actually takes place.
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"CLOSING FINANCIAL STATEMENTS"-as defined in Section 2.6.
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"CONSENT"--any approval, consent, ratification, waiver, or other authorization
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(including any Governmental Authorization).
"CONTEMPLATED TRANSACTIONS"-the following transactions contemplated by this
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Agreement:
(a) the sale of the Shares by Sellers to Buyer;
(b) the execution and delivery of the Fixed Notes, the Earnout Notes, the
Employment Agreements, the Noncompetition Agreements, and the Sellers' Releases;
(c) the performance by Buyer and Sellers of their respective covenants and
obligations under this Agreement to be performed at or before Closing; and
(d) Buyer's acquisition of the Shares and the commencement of Buyer's ownership
of the Shares and exercise of control over the Acquired Companies.
"CONTRACT"--any agreement, contract, obligation, promise, or undertaking
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(whether written or oral and whether express or implied) that is legally
binding.
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"CROUCH OVERRIDES"-amounts accrued and to accrue after August 31, 1997 under the
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portion of section 2 of that certain Employment Agreement between Phoenix and A.
Bruce Crouch dated July 19, 1991 effective August 5, 1991 designated "Override";
provided, however, the annualized amount of the Crouch Override shall in no
event be greater than $300,000.
"DAMAGES"--as defined in Section 10.2.
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"EARNOUT AMOUNT"-as defined in Section 2.2.
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"EARNOUT NOTES"-as defined in Section 2.4.
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"EBITDA"--pre-tax income plus (i) interest expense, (ii) Crouch Overrides and
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(iii) Whitmire Payments deducted in computing pre-tax income, minus interest
income included in pre-tax income, plus or minus any extraordinary items of
expense or income, respectively, deducted or included in computing pre-tax
income, plus or minus any losses or gains from the sale of capital assets,
respectively, deducted or included in computing pre-tax income, plus
depreciation and amortization deducted in computing pre-tax income, all as
determined in accordance with GAAP by the Accountants. In computing pre-tax
income one-half (1/2) of the Net Value Added generated from orders generated by
the division in question but processed by a separate division shall be included
in the originating division's pre-tax income.
"EMPLOYMENT AGREEMENTS"--as defined in Section 2.4(a)(iii).
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"ENCUMBRANCE"--any charge, claim, community property interest, condition,
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equitable interest, lien, option, pledge, security interest, right of first
refusal, or restriction of any kind, including any restriction on use, voting,
transfer, receipt of income, or exercise of any other attribute of ownership.
"ENVIRONMENT"--soil, land surface or subsurface strata, surface waters
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(including navigable waters, ocean waters, streams, ponds, drainage basins, and
wetlands), groundwaters, drinking water supply, stream sediments, ambient air
(including indoor air), plant and animal life, and any other environmental
medium or natural resource.
"ENVIRONMENTAL, HEALTH, AND SAFETY LIABILITIES"--any cost, damages, expense,
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liability, obligation, or other responsibility arising from or under
Environmental Law or Occupational Safety and Health Law and consisting of or
relating to:
(a) any environmental, health, or safety matters or conditions (including on-
site or off-site contamination, occupational safety and health, and regulation
of chemical substances or products);
(b) fines, penalties, judgments, awards, settlements, legal or administrative
proceedings, damages, losses, claims, demands and response, investigative,
remedial, or inspection costs and expenses arising under Environmental Law or
Occupational Safety and Health Law;
(c) financial responsibility under Environmental Law or Occupational Safety and
Health Law for
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cleanup costs or corrective action, including any investigation, cleanup,
removal, containment, or other remediation or response actions ("Cleanup")
required by applicable Environmental Law or Occupational Safety and Health Law
(whether or not such Cleanup has been required or requested by any Governmental
Body or any other Person) and for any natural resource damages; or
(d) any other compliance, corrective, investigative, or remedial measures
required under Environmental Law or Occupational Safety and Health Law.
The terms "removal," "remedial," and "response action," include the types of
activities covered by the United States Comprehensive Environmental Response,
Compensation, and Liability Act, 42 U.S.C. (S) 9601 et seq., as amended
("CERCLA").
"ENVIRONMENTAL LAW"--any Legal Requirement that requires or relates to:
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(a) advising appropriate authorities, employees, and the public of intended or
actual releases of pollutants or hazardous substances or materials, violations
of discharge limits, or other prohibitions and of the commencements of
activities, such as resource extraction or construction, that could have
significant impact on the Environment;
(b) preventing or reducing to acceptable levels the release of pollutants or
hazardous substances or materials into the Environment;
(c) reducing the quantities, preventing the release, or minimizing the hazardous
characteristics of wastes that are generated;
(d) assuring that products are designed, formulated, packaged, and used so that
they do not present unreasonable risks to human health or the Environment when
used or disposed of;
(e) protecting resources, species, or ecological amenities;
(f) reducing to acceptable levels the risks inherent in the transportation of
hazardous substances, pollutants, oil, or other potentially harmful substances;
(g) cleaning up pollutants that have been released, preventing the threat of
release, or paying the costs of such clean up or prevention; or
(h) making responsible parties pay private parties, or groups of them, for
damages done to their health or the Environment, or permitting self-appointed
representatives of the public interest to recover for injuries done to public
assets.
"ERISA"--the Employee Retirement Income Security Act of 1974 or any successor
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law, and regulations and rules issued pursuant to that Act or any successor law.
"EXISTING NOTES"-the promissory notes from Phoenix dated January 22, 1996 and
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payable in the amounts and to the individuals set forth below:
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Name of Payee Principal Amount of Note
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as of Date of this Agreement
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Joseph Segal $ 400,000
Mendel Segal 259,500
Bernice Alter 50,000
Mynette Segal 70,000
Segal Services 124,000
Jon Cunningham 95,000
The Cunningham Group, Inc. 1,599,812.50
Clyde Powell 157,363.20
Harriett Knight 116,772.32
Bart Knight 116,772.32
Scott Diamond 482,089.30
"FACILITIES"--any real property, real property leaseholds, or other real
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property interests currently owned or operated by either Acquired Company and
any buildings, plants, structures, or equipment (including motor vehicles, tank
cars, and rolling stock) currently owned or operated by either Acquired Company.
"FIXED NOTE AMOUNT"-as defined in Section 2.2.
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"FIXED NOTES"-as defined in Section 2.4.
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"FLEET PREPAYMENT PENALTY"-the prepayment penalty charged by Fleet Capital
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Corporation for the payment in full of all amounts due and owing Fleet Capital
Corporation by Phoenix as of the Closing Date
"GAAP"--generally accepted accounting principles, applied on a basis consistent
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with the basis on which the Balance Sheet and the other financial statements
referred to in Section 3.4(b) were prepared.
"GMA CLAIM"-a claim by Green, Morris & Associates, Inc. (or a Person related
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thereto) for a brokerage or finder's or agent's commission, fee or other similar
payment in connection with the Contemplated Transactions.
"GOVERNMENTAL AUTHORIZATION"--any approval, consent, license, permit, waiver, or
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other authorization issued, granted, given, or otherwise made available by or
under the authority of any Governmental Body or pursuant to any Legal
Requirement.
"GOVERNMENTAL BODY"--any:
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(a) nation, state, county, city, town, village, district, or other jurisdiction
of any nature;
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(b) federal, state, local, municipal, foreign, or other government;
(c) governmental or quasi-governmental authority of any nature (including any
governmental agency, branch, department, official, or entity and any court or
other tribunal);
(d) multi-national organization or body; or
(e) body exercising, or entitled to exercise, any administrative, executive,
judicial, legislative, police, regulatory, or taxing authority or power of any
nature.
"GUARANTIES"--as defined in Section 2.4(b)(ii).
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"HAZARDOUS ACTIVITY"--the distribution, generation, handling, importing,
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management, manufacturing, processing, production, refinement, Release, storage,
transfer, transportation, treatment, or use (including any withdrawal or other
use of groundwater) in each case in violation of Environmental Laws, of
Hazardous Materials in, on, under, about, or from the Facilities or any part
thereof into the Environment.
"HAZARDOUS MATERIALS"--any waste or other substance that is listed, defined,
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designated, or classified as, or otherwise determined to be, hazardous,
radioactive, or toxic or a pollutant or a contaminant under or pursuant to any
Environmental Law, including any admixture or solution thereof, and specifically
including petroleum and all derivatives thereof or synthetic substitutes
therefor and asbestos or asbestos-containing materials.
"INTELLECTUAL PROPERTY ASSETS" --as defined in Section 3.22.
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"INTERIM BALANCE SHEETS"--as defined in Section 3.4.
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"IRC"--the Internal Revenue Code of 1986 or any successor law, and regulations
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issued by the IRS pursuant to the Internal Revenue Code or any successor law.
"IRS"--the United States Internal Revenue Service or any successor agency, and,
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to the extent relevant, the United States Department of the Treasury.
"KING"-as defined in the Recitals.
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"KNOWLEDGE"--an individual will be deemed to have "Knowledge" of a particular
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fact or matter if and only if such individual has actual knowledge thereof,
whether or not (a) such individual could obtain knowledge of such fact or matter
by conducting an examination or (b) any other individual or other Person has or
had knowledge of such fact or matter. "Knowledge" does not include constructive
knowledge. An individual does have "Knowledge" of a fact or matter to the extent
of information regarding such fact or matter which has been delivered in writing
to such individual regardless of whether or not such individual acted on such
information, but (except as aforesaid in
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this sentence) an individual does not have "Knowledge" of a fact or matter which
such individual could or should know or have known but does not actually know..
A Person (other than an individual) will be deemed to have "Knowledge" of a
particular fact or matter if and only if any individual who is serving, or who
has at any time served, as a director, officer, partner, executor, or trustee of
such Person (or in any similar capacity) has, or at any time had, Knowledge of
such fact or matter; provided, however, that an Acquired Company will be deemed
to have "Knowledge" of a particular fact or matter if and only if Rosenthal or
Segal has Knowledge of such fact or matter.
"LEGAL REQUIREMENT"--any federal, state, local, municipal, foreign,
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international, multinational, or other administrative order, constitution, law,
ordinance, principle of common law, regulation, statute, or treaty.
"NET VALUE ADDED"-the Value Added from orders where the sale is generated by the
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Phoenix Communications Division and the work is performed by a separate division
of Premier less the Value Added from orders where the sale is generated by a
separate division of Premier and the work is performed by the Phoenix
Communications Division, all as (a) determined by Premier Graphic, Inc.'s
estimating department, acting reasonably and in good faith, and (b) approved by
Sellers, acting reasonably and in good faith after conducting (by themselves or
through others selected by them) such review of all relevant books and records
as they may determine to be desirable. In no event shall the Net Value Added be
less than zero.
"NONCOMPETITION AGREEMENTS"--as defined in Section 2.4(a)(iv).
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"OCCUPATIONAL SAFETY AND HEALTH LAW"--any Legal Requirement designed to provide
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safe and healthful working conditions and to reduce occupational safety and
health hazards, and any program, whether governmental or private (including
those promulgated or sponsored by industry associations and insurance
companies), designed to provide safe and healthful working conditions.
"ORDER"--any award, decision, injunction, judgment, order, ruling, subpoena, or
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verdict entered, issued, made, or rendered by any court, administrative agency,
or other Governmental Body or by any arbitrator.
"ORDINARY COURSE OF BUSINESS"--an action taken by a Person will be deemed to
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have been taken in the "Ordinary Course of Business" only if:
(a) such action is consistent with the past practices of such Person and is
taken in the ordinary course of the normal day-to-day operations of such Person;
(b) such action is not required to be authorized by the board of directors of
such Person (or by any Person or group of Persons exercising similar authority)
and is not required to be specifically authorized by the parent company (if any)
of such Person; and
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"ORGANIZATIONAL DOCUMENTS"--(a) the articles or certificate of incorporation and
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the bylaws of a corporation; (b) the partnership agreement and any statement of
partnership of a general partnership; (c) the limited partnership agreement and
the certificate of limited partnership of a limited partnership; (d) any charter
or similar document adopted or filed in connection with the creation, formation,
or organization of a Person; and (e) any amendment to any of the foregoing.
"PERSON"--any individual, corporation (including any non-profit corporation),
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general or limited partnership, limited liability company, joint venture,
estate, trust, association, organization, labor union, or other entity or
Governmental Body.
"PHOENIX"-as defined in the Recitals.
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"PHOENIX COMMUNICATIONS DIVISION"-contemporaneous with the closing on the
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purchase of the Shares, the Acquired Companies will be merged into Premier. The
Acquired Companies will then operate as a separate division of Premier Graphics,
Inc. known as the Phoenix Communications Division.
"PLAN"--as defined in Section 3.13.
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"POST-CLOSING THIRD PARTY RECOVERIES"-recoveries from Tracey Mosley as a result
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of criminal restitution, and other recoveries of claims of the Acquired
Companies in existence at the time of the Closing but not reflected on the
Closing Financial Statements (Buyer being obliged to pursue such recoveries or
to cause others to pursue such recoveries if and only if so determined by Buyer,
acting reasonably and in good faith).
"PREMIER"-Premier Graphics, Inc., a Delaware corporation which is a wholly owned
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subsidiary of Buyer.
"PROCEEDING"--any action, arbitration, audit, hearing, investigation,
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litigation, or suit (whether civil, criminal, administrative, investigative, or
informal) commenced, brought, conducted, or heard by or before, or otherwise
involving, any Governmental Body or arbitrator.
"PROMISSORY NOTES"-the Earnout Notes and the Fixed Notes.
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"RELATED PERSON"--with respect to a particular individual:
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(a) each other member of such individual's Family;
(b) any Person that is directly or indirectly controlled by such individual or
one or more members of such individual's Family;
(c) any Person in which such individual or members of such individual's Family
hold (individually or in the aggregate) a Material Interest; and
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(d) any Person with respect to which such individual or one or more members of
such individual's Family serves as a director, officer, partner, executor, or
trustee (or in a similar capacity).
With respect to a specified Person other than an individual:
(a) any Person that directly or indirectly controls, is directly or indirectly
controlled by, or is directly or indirectly under common control with such
specified Person;
(b) any Person that holds a Material Interest in such specified Person;
(c) each Person that serves as a director, officer, partner, executor, or
trustee of such specified Person (or in a similar capacity);
(d) any Person in which such specified Person holds a Material Interest;
(e) any Person with respect to which such specified Person serves as a general
partner or a trustee (or in a similar capacity); and
(f) any Related Person of any individual described in clause (b) or (c).
For purposes of this definition, (a) the "Family" of an individual includes (i)
the individual, (ii) the individual's spouse and former spouses, (iii) any other
natural person who is related to the individual or the individual's spouse
within the second degree, and (iv) any other natural person who resides with
such individual, and (b) "Material Interest" means direct or indirect beneficial
ownership (as defined in Rule 13d-3 under the Securities Exchange Act of 1934)
of voting securities or other voting interests representing at least 5% of the
outstanding voting power of a Person or equity securities or other equity
interests representing at least 5% of the outstanding equity securities or
equity interests in a Person.
"RELEASE"--any spilling, leaking, emitting, discharging, depositing, escaping,
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leaching, dumping, or other releasing into the Environment, whether intentional
or unintentional.
"REPRESENTATIVE"--with respect to a particular Person, any director, officer,
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employee, agent, consultant, advisor, or other representative of such Person,
including legal counsel, accountants, and financial advisors.
"SALESPERSONS CAPITAL APPRECIATION PLAN"-the compensation plan of Phoenix
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effected by Exhibit 1 hereto.
"SECURITIES ACT"--the Securities Act of 1933 or any successor law, and
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regulations and rules issued pursuant to that Act or any successor law.
"SELLERS"--as defined in the first paragraph of this Agreement.
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"SELLERS' RELEASES"--as defined in Section 2.4.
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"SHARES"--as defined in the Recitals of this Agreement.
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"SUBSIDIARY"--with respect to any Person (the "Owner"), any corporation or other
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Person of which securities or other interests having the power to elect a
majority of that corporation's or other Person's board of directors or similar
governing body, or otherwise having the power to direct the business and
policies of that corporation or other Person (other than securities or other
interests having such power only upon the happening of a contingency that has
not occurred) are held by the Owner or one or more of its Subsidiaries; when
used without reference to a particular Person, "Subsidiary" means a Subsidiary
of the Company.
"SUCCESS FEE"-collectively (i) a bonus of $25,000 payable to Duane Dobler for
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his assistance in consummating the Contemplated Transactions, and (ii) a bonus
of $15,000 to Randolph Kirk for his assistance in consummating the Contemplated
Transactions
"TAX RETURN"--any return (including any information return), report, statement,
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schedule, notice, form, or other document or information filed with or submitted
to, or required to be filed with or submitted to, any Governmental Body in
connection with the determination, assessment, collection, or payment of any Tax
or in connection with the administration, implementation, or enforcement of or
compliance with any Legal Requirement relating to any Tax.
"THREAT OF RELEASE"--a substantial likelihood of a Release that may require
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action in order to prevent or mitigate damage to the Environment that may result
from such Release.
"THREATENED"--a claim, Proceeding, dispute, action, or other matter will be
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deemed to have been "Threatened" if any demand or statement has been made
(orally or in writing) or any notice has been given (orally or in writing), or
if any other event has occurred or any other circumstances exist, that would
lead a prudent Person to conclude that such a claim, Proceeding, dispute,
action, or other matter is likely to be asserted, commenced, taken, or otherwise
pursued in the future.
"VALUE ADDED"-revenue generated from a particular job less the cost of paper,
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film plates, all direct material costs and outside services associated with such
job.
"WHITMIRE PAYMENTS"-payments to be made after the date hereof in the aggregate
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amount of $202,333 to Mackey Whitmire relating to deferred compensation.
2. SALE AND TRANSFER OF SHARES; CLOSING
2.1 SHARES
Subject to the terms and conditions of this Agreement, at the Closing, Sellers
will sell and transfer the Shares to Buyer, and Buyer will purchase the Shares
from Sellers.
2.2 PURCHASE PRICE
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(a) The purchase price (the "Purchase Price") for the Shares will be equal to
the excess of:
(i) the sum of
(A) $8,300,000, and
(B) the lesser (the "Earnout Amount") of
(1) $1,260,000 or
(2) 45% of the sum of the excesses, if any, for each of the
calendar years 1998, 1999 and 2000, of
(a) the EBITDA of the Phoenix Communications Division for
such year over
(b) $3,720,000; over
(ii) the sum of the Adjustment Amount, Fleet Prepayment Penalty, Whitmire
Payments and the Success Fee.
(b) Of the Purchase Price:
(i) $7,150,000 less the Success Fee, Whitmire Payments and the Fleet
Prepayment Penalty (the "Cash Amount") will be paid in cash at Closing;
(ii) $1,150,000 (the "Fixed Note Amount") will be paid pursuant to the
Fixed Notes (as defined in Clause 2.4(b)(ii); and
(iii) the Earnout Amount will be paid pursuant to the Earnout Notes (as
defined in Clause 2.4(b)(iii).
(c) Of the total Purchase Price $102,000 shall be allocated to the purchase of
the Shares of King with the remaining portion of the Purchase Price being
allocated to the purchase of the Shares of Phoenix.
2.3 CLOSING
The purchase and sale (the "Closing") provided for in this Agreement will take
place at the offices of Black Bobango & Morgan, Attorneys, 530 Oak Court Drive,
Suite 345, Memphis, Tennessee, at 10:00 a.m. (local time) on a date in 1997
mutually agreed to, or at such other time and place as the parties may agree.
Absent termination of this Agreement in accordance with the provisions of
Section 9, failure to consummate the purchase and sale provided for in this
Agreement on the date and time and at the place determined pursuant to this
Section 2.3 will not result in the termination of this Agreement and will not
relieve any party of any obligation under this Agreement.
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2.4 CLOSING OBLIGATIONS
At the Closing:
(a) Sellers will deliver to Buyer:
(i) certificates representing the Shares, duly endorsed (or accompanied by
duly executed stock powers), for transfer to Buyer;
(ii) releases in the form of Exhibit 2.4(a)(ii) executed by each Seller
(collectively, "Sellers' Releases");
(iii) employment agreements in the form of Exhibit 2.4(a)(iii), executed by
Rosenthal and Segal (collectively, "Employment Agreements");
(iv) noncompetition agreements in the form of Exhibit 2.4(a)(iv), executed by
each Seller (collectively, the "Noncompetition Agreements"); and
(v) a certificate executed by Sellers representing and warranting to Buyer
that, except as otherwise stated in such certificate, each of Sellers'
representations and warranties in this Agreement is accurate in all material
respects as of the Closing Date as if made on the Closing Date; and
(b) Buyer will deliver to Sellers:
(i) the Cash Amount, by wire transfer to accounts specified by Sellers;
(ii) promissory notes ("Fixed Notes") in the form of Exhibit 2.4(b)(ii)(A)
aggregating to the Fixed Notes Amount which will be personally guaranteed by
John P. Miller pursuant to guaranty agreements in the form of Exhibit
2.4(b)(ii)(B) (the "Guaranties");
(iii) promissory notes ("Earnout Notes") in the form of Exhibit 2.4(b)(iii);
(iv) a certificate executed by Buyer to the effect that, except as otherwise
stated in such certificate, each of Buyer's representations and warranties in
this Agreement is accurate in all material respects as of the Closing Date as if
made on the Closing Date; and
(v) the Employment Agreements, executed by Buyer.
2.5 ADJUSTMENT AMOUNT
In the event the Adjusted Net Worth is less than $450,000, the Adjustment Amount
will be equal to the excess, if any, of (a) $450,000, over (b) the Adjusted Net
Worth. In the event the Adjusted Net Worth is equal to or greater than
$450,000, there will be no Adjustment Amount.
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2.6 ADJUSTMENT PROCEDURE
(a) Buyer and Sellers will jointly prepare financial statements ("Closing
Financial Statements") of the Acquired Companies as of the Closing Date and for
the period from the date of the beginnings of the Acquired Companies' respective
current fiscal years through the Closing Date, including a computation of the
Adjusted Net Worth. Buyer and Sellers agree to complete the Closing Financial
Statements within sixty days after the Closing Date. If within thirty days
following completion of the Closing Financial Statements, neither Buyer nor
Sellers have objected to the Closing Financial Statements (such objection must
contain a statement of the basis of the objection), then the Adjusted Net Worth
reflected in the Closing Financial Statements will be used in computing the
Adjustment Amount. If Buyer or Sellers give notice of objection, or if Buyer
and Sellers are unable to agree on how the Closing Financial Statements should
be prepared, then the issues in dispute will be submitted to the Accountants for
resolution. If issues in dispute are submitted to the Accountants for
resolution, (i) each party will furnish to the Accountants such workpapers and
other documents and information relating to the disputed issues as the
Accountants may request and are available to that party (or its independent
public accountants), and will be afforded the opportunity to present to the
Accountants any material relating to the determination and to discuss the
determination with the Accountants; (ii) the determination by the Accountants,
as set forth in a notice delivered to both parties by the Accountants, will be
binding and conclusive on the parties; and (iii) Buyer will bear the fees of the
Accountants for such determination.
(b) On the tenth business day following the final determination that there is
an Adjustment Amount and the amount of the Adjustment Amount, Sellers will pay
the amount of the Adjustment Amount to Buyer. Payments to Buyer must be made by
wire transfer to such bank account as Buyer will specify.
3. REPRESENTATIONS AND WARRANTIES OF SELLERS
Sellers, jointly and severally, represent and warrant to Buyer as follows as of
the date hereof, in each case subject to the matters described in any Schedule
referred to in this Section 3:
3.1 ORGANIZATION AND GOOD STANDING
(a) Schedule 3.1 contains a complete and accurate list for each Acquired
Company of its name, its jurisdiction of incorporation, other jurisdictions in
which it is authorized to do business, and its capitalization (including the
identity of each stockholder and the number of shares held by each). Each
Acquired Company is a corporation duly organized, validly existing, and in good
standing under the laws of its jurisdiction of incorporation, with full
corporate power and authority to conduct its business as it is now being
conducted, to own or use the properties and assets that it purports to own or
use, and to perform all its obligations under Applicable Contracts. Each
Acquired Company is duly qualified to do business as a foreign corporation and
is in good standing under the laws of each state or other jurisdiction in which
either the ownership or use of the properties owned or used by it, or the nature
of the activities conducted by it, requires such qualification.
(b) Sellers have delivered to Buyer copies of the Organizational Documents of
each Acquired
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Company, as currently in effect.
3.2 AUTHORITY; NO CONFLICT
(a) Subject to the qualifications which appear in Exhibit 7.4(a), this
Agreement constitutes the legal, valid, and binding obligation of Sellers,
enforceable against Sellers in accordance with its terms. Upon the execution and
delivery by Sellers of the Employment Agreements, the Sellers' Releases, and the
Noncompetition Agreements (collectively, the "Sellers' Closing Documents"), the
Sellers' Closing Documents will, subject to the qualifications which appear in
Exhibit 7.4(a), constitute the legal, valid, and binding obligations of Sellers,
enforceable against Sellers in accordance with their respective terms. Sellers
have the absolute and unrestricted right, power, authority, and capacity to
execute and deliver this Agreement and the Sellers' Closing Documents and to
perform their obligations under this Agreement and the Sellers' Closing
Documents.
(b) To the Knowledge of the Acquired Companies, except as set forth in
Schedule 3.2, neither the execution and delivery of this Agreement by Sellers
nor the consummation or performance by Sellers of any of the Contemplated
Transactions will, directly or indirectly (with or without notice or lapse of
time):
(i) contravene, conflict with, or result in a violation of (A) any provision
of the Organizational Documents of the Acquired Companies, or (B) any resolution
adopted by the board of directors or the stockholders of either Acquired
Company;
(ii) materially contravene, materially conflict with, or result in a material
violation of, or give any Governmental Body or other Person the right to
challenge any of the Contemplated Transactions or to exercise any material
remedy or obtain any material relief under, any Legal Requirement or any Order
to which either Acquired Company or either Seller, or any of the assets owned or
used by either Acquired Company, may be subject;
(iii) materially contravene, materially conflict with, or result in a material
violation of any of the terms or requirements of, or give any Governmental Body
the right to revoke, withdraw, suspend, cancel, terminate, or materially modify,
any Governmental Authorization that is held by either Acquired Company or that
otherwise relates to the business of, or any of the assets owned or used by,
either Acquired Company;
(iv) materially contravene, material conflict with, or result in a material
violation or breach of any provision of, or give any Person the right to declare
a material default or exercise any material remedy under, or to materially
accelerate the maturity or performance of, or to cancel, terminate, or
materially modify, any material Applicable Contract; or
(v) result in the imposition or creation of any material Encumbrance upon or
with respect to any of the assets owned or used by either Acquired Company.
Except as set forth in Schedule 3.2, no Seller or Acquired Company is or will be
required to give any
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notice to or obtain any Consent from any Person in connection with the execution
and delivery of this Agreement by Sellers or the consummation or performance by
Sellers of any of the Contemplated Transactions.
(c) Sellers are acquiring the Promissory Notes for their own account and not
with a view to their distribution within the meaning of Section 2(11) of the
Securities Act.
3.3 CAPITALIZATION
The authorized equity securities of Phoenix consist of 500 shares of common
stock without par value of which 100 shares are issued and outstanding. The
authorized equity securities of King consist of 100,000 shares of common stock,
par value $1.00 per share, of which 680 shares are issued and outstanding.
Sellers are and will be on the Closing Date the record and beneficial owners and
holders of all of the Shares, free and clear of all Encumbrances. Set forth in
Schedule 3.3 is the division of ownership of the Shares by and among the
Sellers. No legend or other reference to any purported Encumbrance appears upon
any certificate representing equity securities of either Acquired Company. All
of the outstanding equity securities of each Acquired Company have been duly
authorized and validly issued and are fully paid and nonassessable. There are no
Contracts relating to the issuance, sale, or transfer of any equity securities
or other securities of either Acquired Company. None of the outstanding equity
securities or other securities of either Acquired Company was issued in
violation of the Securities Act or any other Legal Requirement. No Acquired
Company owns, or has any Contract to acquire, any equity securities or other
securities of any Person (other than Acquired Companies) or any direct or
indirect equity or ownership interest in any business not presently conducted by
an Acquired Company.
3.4 FINANCIAL STATEMENTS
Sellers have delivered to Buyer: (a) audited balance sheets of Phoenix as of
January 31, 1995, 1996 and 1997, and the related audited statements of income,
changes in stockholders' equity, and cash flow for each of the fiscal years then
ended (the audited balance sheet of Phoenix as of January 31, 1997 shall
hereinafter be referred to as the "Balance Sheet") and (b) unaudited balance
sheets of the Acquired Companies as of September 30, 1997 (the "Interim Balance
Sheets") and the related unaudited statements of income, changes in
stockholders' equity, and cash flow for (x) in the case of Phoenix the eight
months then ended and (y) in the case of King, the nine months then ended,
including in each case the notes thereto. To the Knowledge of the Acquired
Companies: such financial statements and notes fairly present in all material
respects the financial condition and the results of operations, changes in
stockholders' equity, and cash flow of the Acquired Companies as at the
respective dates of and for the periods referred to in such financial
statements, all in accordance with the historical accounting methods used by the
Acquired Companies, subject, in the case of interim financial statements, to
normal recurring year-end adjustments (the effect of which will not,
individually or in the aggregate, be materially adverse) and the absence of
notes (that, if presented, would not differ materially from those included in
the Balance Sheets); the financial statements referred to in this Section 3.4
reflect the consistent application of such accounting methods throughout the
periods involved, except as disclosed in the notes to such financial statements;
and
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no financial statements of any Person other than the Acquired Companies are
required by GAAP to be included in the consolidated financial statements of the
Company.
3.5 BOOKS AND RECORDS
The Acquired Companies have no Knowledge of any fact or matter which would
produce a material adverse effect as a result of: (a) the failure of the books
of account, minute books, stock record books, and other records of the Acquired
Companies, all of which have been made available to Buyer, to be complete and
correct or to have been maintained in accordance with sound business practices,
including the maintenance of an adequate system of internal controls; (b) the
failure of the minute books of the Acquired Companies to contain accurate and
complete records of all meetings held of, and corporate action requiring
stockholder or board approval taken by, the stockholders, the Boards of
Directors, and committees of the Boards of Directors of the Acquired Companies;
or (c) the holding of meetings of any such stockholders, Board of Directors, or
committee has been held for which minutes (i) have not been prepared or (ii) are
not contained in such minute books. At the Closing, all of those books and
records will be in the possession of the Acquired Companies.
3.6 TITLE TO PROPERTIES; ENCUMBRANCES
Schedule 3.6 contains a complete and accurate list of all real property, real
property leaseholds, or other interests in real property owned by either
Acquired Company. Sellers have delivered or made available to Buyer copies of
the deeds and other instruments (as recorded) by which the Acquired Companies
acquired such real property and interests, and copies of all title insurance
policies, opinions, abstracts, and surveys in the possession of Sellers or the
Acquired Companies and relating to such property or interests. The Acquired
Companies own (with good and marketable title in the case of real property,
subject only to the matters permitted by the following sentence) all the
properties and assets (whether real, personal, or mixed and whether tangible or
intangible) that they purport to own located in the facilities operated by the
Acquired Companies or reflected as owned in the books and records of the
Acquired Companies, including all of the properties and assets reflected in the
Balance Sheet and the Interim Balance Sheets (except for assets held under
capitalized leases and personal property sold since the date of the Balance
Sheet and the Interim Balance Sheets, as the case may be, in the Ordinary Course
of Business. All of the properties and assets purchased or otherwise acquired
by the Acquired Companies since the date of the Balance Sheet other than in the
Ordinary Course of Business (except for personal property acquired and
subsequently sold since the date of the Balance Sheets in the Ordinary Course of
Business and consistent with past practice), which subsequently purchased or
acquired properties and assets (other than inventory and short-term investments)
are listed in Schedule 3.6. All material properties and assets reflected in the
Balance Sheet and the Interim Balance Sheets are free and clear of all
Encumbrances and are not, in the case of real property, subject to any rights of
way, building use restrictions, exceptions, variances, reservations, or
limitations of any nature except, with respect to all such properties and
assets, (a) mortgages or security interests shown on the Balance Sheet or the
Interim Balance Sheets as securing specified liabilities or obligations, with
respect to which no default (or event that, with notice or lapse of time or
both, would constitute a default) exists, (b) mortgages or security interests
incurred in connection with the purchase of property or assets after the date of
the Interim Balance
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Sheets (such mortgages and security interests being limited to the property or
assets so acquired), with respect to which no default (or event that, with
notice or lapse of time or both, would constitute a default) exists, (c) liens
for current taxes not yet due, (d) other matters described in materials made
available to Buyer, and (e) with respect to real property, (i) other
Encumbrances, if any, none of which is substantial in amount, materially
detracts from the value or impairs the use of the property subject thereto, or
impairs the present operations of either Acquired Company, and (ii) zoning laws
and other land use restrictions that do not impair the present use of the
property subject thereto.
3.7 CONDITION AND SUFFICIENCY OF ASSETS
To the Knowledge of the Acquired Companies the buildings, plants, structures,
and equipment of the Acquired Companies which are material to the ongoing
operations of the Acquired Companies are in operating condition and repair, and
are adequate for the uses to which they are being put, and no material
maintenance or repairs of such buildings, plants, structures, or equipment has
been deferred except for ordinary, routine maintenance and repairs that are not
material in nature or cost. To the Knowledge of the Acquired Companies the
building, plants, structures, and equipment of the Acquired Companies are
sufficient for the continued conduct of the Acquired Companies' businesses after
the Closing in substantially the same manner as conducted prior to the Closing.
3.8 ACCOUNTS RECEIVABLE
All accounts receivable of the Acquired Companies that are reflected on the
Balance Sheets or the Interim Balance Sheets or on the accounting records of the
Acquired Companies (collectively, the "Accounts Receivable") represent or will
represent valid obligations arising from sales actually made or services
actually performed in the Ordinary Course of Business. To the Knowledge of the
Acquired Companies, there is no contest, claim, or right of set-off, other than
returns in the Ordinary Course of Business, under any Contract with any obligor
of an Accounts Receivable relating to the amount or validity of such Accounts
Receivable. Schedule 3.8 contains a complete and accurate list of all Accounts
Receivable as of the date of the Interim Balance Sheets, which list sets forth
the aging of such Accounts Receivable.
3.9 INVENTORY
Except as described on Schedule 3.9: all inventory of the Acquired Companies,
whether or not reflected in the Balance Sheets or the Interim Balance Sheets,
consists of a quality and quantity usable and salable in the Ordinary Course of
Business, except for obsolete items and items of below-standard quality, all of
which have been written off or written down to net realizable value in the
Balance Sheets or the Interim Balance Sheets or on the accounting records of the
Acquired Companies; and all inventories not written off have been priced at the
lower of cost or net realizable value on a first in, first out basis.
3.10 NO UNDISCLOSED LIABILITIES
To the Knowledge of the Acquired Companies, except as set forth in Schedule
3.10, the Acquired
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Companies have no material liabilities or obligations of any nature (whether
absolute, accrued, contingent, or otherwise) except for liabilities or
obligations reflected or reserved against in the Balance Sheets or the Interim
Balance Sheets and current liabilities incurred in the Ordinary Course of
Business since the respective dates thereof.
3.11 TAXES
(a) The Acquired Companies have filed or caused to be filed (on a timely basis
since 1995) all Tax Returns that are or were required to be filed by or with
respect to either of them. Sellers have delivered or made available to Buyer
copies of, and Schedule 3.11 contains a complete and accurate list of, all such
Tax Returns relating to income or franchise taxes filed since 1994. The Acquired
Companies have paid, or made provision for the payment of, all Taxes that have
or may have become due pursuant to those Tax Returns or otherwise, or pursuant
to any assessment received by Sellers or either Acquired Company, except such
Taxes, if any, as are listed in Schedule 3.11 and are being contested in good
faith and as to which adequate reserves (determined in accordance with GAAP)
have been provided in the Balance Sheet and the Interim Balance Sheets.
(b) Schedule 3.11 contains a complete and accurate list of all audits of all
federal and state Income Tax Returns commenced after December 31, 1994,
including a reasonably detailed description of the nature and outcome of each
audit. All deficiencies proposed as a result of such audits have been paid,
reserved against, settled, or, as described in Schedule 3.11, are being
contested in good faith by appropriate proceedings. Schedule 3.11 describes all
adjustments to the United States federal income Tax Returns filed by either
Acquired Company or any group of corporations including either Acquired Company
for all taxable years since 1995, and the resulting deficiencies proposed by the
IRS. Except as described in Schedule 3.11, no Seller or Acquired Company has
given or been requested to give waivers or extensions (or is or would be subject
to a waiver or extension given by any other Person) of any statute of
limitations relating to the payment of Taxes of either Acquired Company or for
which either Acquired Company may be liable.
(c) To the Knowledge of the Acquired Companies, the charges, accruals, and
reserves with respect to Taxes on the respective books of each Acquired Company
are adequate (determined in accordance with GAAP) and are at least equal to that
Acquired Company's liability for Taxes; there exists no proposed tax assessment
against either Acquired Company except as disclosed in the Balance Sheets or in
Schedule 3.11; no consent to the application of Section 341(f)(2) of the IRC has
been filed with respect to any property or assets held, acquired, or to be
acquired by either Acquired Company; and all Taxes that either Acquired Company
is or was required by Legal Requirements to withhold or collect have been duly
withheld or collected and, to the extent required, have been paid to the proper
Governmental Body or other Person.
(d) All Tax Returns filed by (or that include on a consolidated basis) either
Acquired Company are true, correct, and complete in all material respects. There
is no tax sharing agreement that will require any payment by either Acquired
Company after the date of this Agreement.
3.12 NO MATERIAL ADVERSE CHANGE
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To the Knowledge of the Acquired Companies, since January 31, 1997 there has not
been any material adverse change in the business, operations, properties,
personnel, assets, or condition of either Acquired Company, and no event has
occurred or circumstance exists that may result in such a material adverse
change.
3.13 EMPLOYEE BENEFITS
(a) Schedule 3.13 sets forth a true and complete list of all employment
contracts, all collective bargaining or other labor agreements, all pension,
retirement, stock option, stock purchase, savings, profit-sharing, deferred
compensation, retainer, consultant, bonus, group insurance, incentive, welfare
or any other contracts, plans or arrangements providing for employee
compensation or benefits (the "Plans"), and all trust agreements relating
thereto, to which the Acquired Companies are a party or to which the Acquired
Companies contribute or by which it is bound. Copies of each of the foregoing
have been or promptly will be furnished or made available to Purchaser. The only
Plans which individually or collectively would constitute an "employee pension
benefit plan" as defined in Section 3(2) of ERISA are identified in Schedule
3.13, and are hereinafter referred to as the "Pension Plans." No Plan
constitutes a "multiemployer plan" as defined in Section 4001(a)(3) of ERISA.
Neither of the Acquired Companies currently maintains or has previously
maintained any Pension Plan that is subject to Title IV of ERISA.
(b) To the Knowledge of the Acquired Companies, each Plan that is intended to
be qualified under Section 401(a) of the Code is so qualified, and each trust
forming a part thereof is exempt from tax pursuant to Section 501(a) of the
Code. Copies of all Internal Revenue Service determination letters relating to
such Plans have been or promptly will be provided to Purchaser.
(c) To the Knowledge of Acquired Companies: each Plan has been maintained in
substantial compliance with the materials requirements prescribed by any and all
statutes, orders, rules and regulations, including, but not limited to, ERISA
and the Code, that are applicable to such Plans; and no Plan nor any trust
created thereunder, nor any trustee or administrator thereof, has engaged in a
"prohibited transaction" as such term is defined in Section 4975 of the Code,
which could subject such Plans or any of them, any such trust, or any such
trustee or administrator thereof, or any party dealing with such employee
benefit plans or any such trust, to any tax or penalty on prohibited
transactions imposed by such Section 4975.
(d) All contributions and payments accrued through September 30, 1997 under
each Plan, determined in accordance with prior funding and accrual practices as
adjusted to the extent required to include proportional contribution and payment
accruals for the period from the last funding date to the date hereof, have been
recorded as a liability on the Interim Balance Sheets or Schedule 3.13. Except
as otherwise set forth in Schedule 3.13, neither the Acquired Companies nor, to
the Knowledge of the Acquired Companies, any employee, agent or representative
thereof has taken any actions, made any statements or given any representations,
in writing or orally, that will result in any increase in the rate of benefit
accrual or contributions under any Pension Plan, or the creation of additional
benefits under any Plan.
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3.14 COMPLIANCE WITH LEGAL REQUIREMENTS; GOVERNMENTAL AUTHORIZATIONS
To the Knowledge of the Acquired Companies:
(a) except as set forth in Schedule 3.14:
(i) each Acquired Company is, and at all times has been, in substantial
compliance with each material Legal Requirement that is or was applicable to it
or to the conduct or operation of its business or the ownership or use of any of
its assets;
(ii) no event has occurred or circumstance exists that (with or without notice
or lapse of time) (A) may constitute or result in a material violation by either
Acquired Company of, or a failure on the part of either Acquired Company to
comply substantially with, any material Legal Requirement, or (B) may give rise
to any material obligation imposed by any Legal Requirement on the part of
either Acquired Company to undertake, or to bear all or any portion of the cost
of, any remedial action of any nature; and
(iii) neither Acquired Company has received any notice or other communication
(whether oral or written) from any Governmental Body or any other Person
regarding (A) any actual, alleged, possible, or potential violation of, or
failure to comply with, any Legal Requirement, or (B) any actual, alleged,
possible, or potential obligation on the part of either Acquired Company to
undertake, or to bear all or any portion of the cost of, any remedial action of
any nature;
(b) Schedule 3.14 contains a complete and accurate list of each Governmental
Authorization (other than those applicable to businesses generally) that is held
by either Acquired Company or that otherwise relates to the business of, or to
any of the assets owned or used by, either Acquired Company; each Governmental
Authorization listed or required to be listed in Schedule 3.14 is valid and in
full force and effect; except as set forth in Schedule 3.14:
(i) each Acquired Company is, and at all times has been, in substantial
compliance with all of the material terms and requirements of each Governmental
Authorization identified or required to be identified in Schedule 3.14;
(ii) no event has occurred or circumstance exists that may (with or without
notice or lapse of time) (A) constitute or result directly or indirectly in a
material violation of or a failure to comply substantially with any material
term or requirement of any Governmental Authorization listed or required to be
listed in Schedule 3.14, or (B) result directly or indirectly in the revocation,
withdrawal, suspension, cancellation, or termination of, or any material
modification to, any Governmental Authorization listed or required to be listed
in Schedule 3.14;
(iii) neither Acquired Company has received any notice or other communication
(whether oral or written) from any Governmental Body or any other Person
regarding (A) any actual, alleged, possible, or potential violation of or
failure to comply with any term or requirement of any
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Governmental Authorization, or (B) any actual, proposed, possible, or potential
revocation, withdrawal, suspension, cancellation, termination of, or
modification to any Governmental Authorization; and
(iv) all applications required to have been filed for the renewal of the
Governmental Authorizations listed or required to be listed in Schedule 3.14
have been duly filed on a timely basis with the appropriate Governmental Bodies,
and all other filings required to have been made with respect to such
Governmental Authorizations have been duly made on a timely basis with the
appropriate Governmental Bodies; and
(c) the Governmental Authorizations listed in Schedule 3.14 collectively
constitute all of the Governmental Authorizations necessary to permit the
Acquired Companies to lawfully conduct and operate their businesses in the
manner they currently conduct and operate such businesses and to permit the
Acquired Companies to own and use their assets in the manner in which they
currently own and use such assets.
3.15 LEGAL PROCEEDINGS; ORDERS
To the Knowledge of the Acquired Companies
(a) except as set forth in Schedule 3.15, there is no pending Proceeding:
(i) that has been commenced by or against either Acquired Company or that
otherwise relates to or may affect the business of, or any of the assets owned
or used by, either Acquired Company; or
(ii) that challenges, or that may have the effect of preventing, delaying,
making illegal, or otherwise interfering with, any of the Contemplated
Transactions;
(1) no such Proceeding has been Threatened, and (2) no event has occurred or
circumstance exists that may give rise to or serve as a basis for the
commencement of any such Proceeding; Sellers have delivered or made available to
Buyer copies of all pleadings, correspondence, and other documents relating to
each Proceeding listed in Schedule 3.15; the Proceedings listed in Schedule 3.15
will not have a material adverse effect on the business, operations, assets or
condition of either Acquired Company.
(b) except as set forth in Schedule 3.15:
(i) there is no Order to which any of the Acquired Companies, or any of the
assets owned or used by either Acquired Company, is subject;
(ii) no Seller is subject to any Order that relates to the business of, or any
of the assets owned or used by, either Acquired Company; and
(iii) no officer, director, agent, or employee of either Acquired Company is
subject to any Order that
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prohibits such officer, director, agent, or employee from engaging in or
continuing any conduct, activity, or practice relating to the business of either
Acquired Company.
(c) except as set forth in Schedule 3.15:
(i) each Acquired Company is, and at all times has been, in substantial
compliance with all of the material terms and requirements of each Order to
which it, or any of the assets owned or used by it, is or has been subject;
(ii) no event has occurred or circumstance exists that may constitute or result
in (with or without notice or lapse of time) a material violation of or failure
to comply substantially with any material term or requirement of any material
Order to which either Acquired Company, or any of the assets owned or used by
either Acquired Company, is subject; and
(iii) no Acquired Company has received any notice or other communication
(whether oral or written) from any Governmental Body or any other Person
regarding any actual, alleged, possible, or potential violation of, or failure
to comply with, any term or requirement of any Order to which either Acquired
Company, or any of the assets owned or used by either Acquired Company, is or
has been subject.
3.16 ABSENCE OF CERTAIN CHANGES AND EVENTS
Except as set forth in Schedule 3.16, since January 31, 1997, the Acquired
Companies have conducted their businesses only in the Ordinary Course of
Business and there has not been any:
(a) change in either Acquired Company's authorized or issued capital stock;
grant of any stock option or right to purchase shares of capital stock of either
Acquired Company; issuance of any security convertible into such capital stock;
grant of any registration rights; purchase, redemption, retirement, or other
acquisition by either Acquired Company of any shares of any such capital stock;
or declaration or payment of any dividend or other distribution or payment in
respect of shares of capital stock;
(b) amendment to the Organizational Documents of either Acquired Company;
(c) payment of or agreement to pay any bonus by either Acquired Company, or
increase of more than $5,000 per year by either Acquired Company of any
salaries, or other compensation to any stockholder, director, officer, or
(except in the Ordinary Course of Business) employee or entry into any
employment, severance, or similar Contract with any director, officer, or
employee;
(d) adoption of, or increase in the payments to or benefits under, any profit
sharing, bonus, deferred compensation, savings, insurance, pension, retirement,
or other employee benefit plan for or with any employees of either Acquired
Company;
(e) damage to or destruction of any asset or property of either Acquired
Company, not covered by
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insurance, materially and adversely affecting the properties, assets, business
or financial condition of the Acquired Companies, taken as a whole;
(f) entry into, termination of, or receipt of notice of termination of (i) any
license, distributorship, dealer, sales representative, joint venture, credit,
or similar agreement, or (ii) any Contract or transaction, other than purchase
orders placed or received in the Ordinary Course of Business, involving a total
remaining commitment by or to either Acquired Company of at least $25,000;
(g) sale, lease, or other disposition of any asset or property of either
Acquired Company (other than sales, retirements and collections of personal
property in the Ordinary Course of Business) or mortgage, pledge, or imposition
of any lien or other encumbrance on any material asset or property of either
Acquired Company;
(h) cancellation or waiver of any claims or rights with a value to either
Acquired Company in excess of $25,000;
(i) material change in the accounting methods used by Phoenix; or
(j) agreement, whether oral or written, by either Acquired Company to do any of
the foregoing.
3.17 CONTRACTS; NO DEFAULTS
(a) Schedule 3.17(a) contains a complete and accurate list, and Sellers have
delivered or made available to Buyer true and complete copies, of (in each case
excluding purchase orders placed or received in the Ordinary Course of Business
and Contracts which to the Knowledge of the Acquired Companies have been fully
performed, where for this purpose a Contract will be considered to have been
fully performed if the only remaining performance thereunder is payment to an
Acquired Company of amounts included in such Company's accounts receivable):
(i) each Applicable Contract that involves performance of services or delivery
of goods or materials by one or more Acquired Companies of an amount or value in
excess of $10,000;
(ii) each Applicable Contract that involves performance of services or delivery
of goods or materials to one or more Acquired Companies of an amount or value in
excess of $10,000;
(iii) each Applicable Contract that was not entered into in the Ordinary Course
of Business and that involves expenditures or receipts of one or more Acquired
Companies in excess of $10,000;
(iv) each lease, rental or occupancy agreement, license, installment and
conditional sale agreement, and other Applicable Contract affecting the
ownership of, leasing of, title to, use of, or any leasehold or other interest
in, any real or personal property (except personal property leases and
installment and conditional sales agreements having a value per item or
aggregate payments of less than $5,000 and with terms of less than one year);
(v) each licensing agreement or other Applicable Contract with respect to
patents, trademarks,
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copyrights, or other intellectual property, including agreements with current or
former employees, consultants, or contractors regarding the appropriation or the
non-disclosure of any of the Intellectual Property Assets;
(vi) each collective bargaining agreement and other Applicable Contract to or
with any labor union or other employee representative of a group of employees;
(vii) each joint venture, partnership, and other Applicable Contract (however
named) involving a sharing of profits, losses, costs, or liabilities by either
Acquired Company with any other Person;
(viii) each Applicable Contract containing covenants that in any way purport to
restrict the business activity of either Acquired Company or any Affiliate of an
Acquired Company or limit the freedom of either Acquired Company or any
Affiliate of an Acquired Company to engage in any line of business or to compete
with any Person;
(ix) each Applicable Contract providing for payments to or by any Person based
on sales, purchases, or profits, other than direct payments for goods;
(x) each power of attorney that is currently effective and outstanding;
(xi) each Applicable Contract entered into other than in the Ordinary Course
of Business that contains or provides for an express undertaking by either
Acquired Company to be responsible for consequential damages;
(xii) each Applicable Contract for capital expenditures in excess of $10,000;
(xiii) each written warranty, guaranty, and or other similar undertaking with
respect to contractual performance extended by either Acquired Company other
than in the Ordinary Course of Business; and
(xiv) each amendment, supplement, and modification (whether oral or written) in
respect of any of the foregoing.
Schedule 3.17(a) sets forth information adequate to identify such Contracts,
including the date of and parties to the Contracts and the Acquired Companies'
office where details relating to the Contracts are located.
(b) Except as set forth in Schedule 3.17(b):
(i) no Seller (and no Related Person of either Seller, other than the Acquired
Companies) has or may acquire any rights under, and no Seller has or may become
subject to any obligation or liability under, any Contract that relates to the
business of, or any of the assets owned or used by, either Acquired Company; and
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(ii) to the Knowledge of the Acquired Companies, no officer, director, agent,
employee, consultant, or contractor of either Acquired Company is bound by any
Contract that purports to limit the ability of such officer, director, agent,
employee, consultant, or contractor to (A) engage in or continue any conduct,
activity, or practice relating to the business of either Acquired Company, or
(B) assign to either Acquired Company or to any other Person any rights to any
invention, improvement, or discovery.
(c) Except as set forth in Schedule 3.17(c), each Contract identified or
required to be identified in Schedule 3.17(a) is in full force and effect and is
valid and enforceable in accordance with its terms (subject to the qualification
which appear in Exhibit 7.4(a)).
(d) Except (x) as respects purchase orders placed or received in the Ordinary
Course of Business and Contracts which to the Knowledge of the Acquired
Companies have been fully performed (where for this purpose a Contract will be
considered to have been fully performed if the only remaining performance
thereunder is payment to an Acquired Company of amounts included in such
Company's accounts receivable) and (y) as set forth in Schedule 3.17(d):
(i) To the Knowledge of the Acquired Companies, each Acquired Company is in
substantial compliance with all applicable material terms and requirements of
each Contract under which such Acquired Company has any obligation or liability
or by which such Acquired Company or any of the assets owned or used by such
Acquired Company is bound;
(ii) to the Knowledge of the Acquired Companies each other Person that has any
material obligation or liability under any Contract under which an Acquired
Company has any rights is in substantial compliance with all applicable material
terms and requirements of such Contract;
(iii) to the Knowledge of the Acquired Companies no event has occurred or
circumstance exists that (with or without notice or lapse of time) may
materially contravene, materially conflict with, or result in a material
violation or breach of, or give either Acquired Company or other Person the
right to declare a default or exercise any material remedy under, or to
accelerate the maturity or performance of, or to cancel, terminate, or
materially modify, any Applicable Contract; and
(iv) to the Knowledge of the Acquired Companies, no Acquired Company has given
to or received from any other Person, any notice or other communication (whether
oral or written) regarding any actual, alleged, possible, or potential material
violation or breach of, or default under, any Contract.
(e) There are no renegotiations of, attempts to renegotiate, or outstanding
rights to renegotiate any material amounts paid or payable to either Acquired
Company under current or completed Contracts with any Person and, to the
Knowledge of the Acquired Companies, no such Person has made written demand for
such renegotiation.
(f) The Contracts relating to the sale, design, manufacture, or provision of
products or services by the Acquired Companies have been entered into in the
Ordinary Course of Business and have been entered into without the commission of
any act alone or in concert with any other Person, or any
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consideration having been paid or promised, that is or would be in violation of
any Legal Requirement.
3.18 INSURANCE
(a) Sellers have delivered to Buyer:
(i) true and complete copies of all policies of insurance to which either
Acquired Company is a party or under which either Acquired Company is or has
been covered at any time within the three years preceding the date of this
Agreement;
(ii) true and complete copies of all pending applications for policies of
insurance; and
(iii) any statement by the auditor of either Acquired Company's financial
statements with regard to the adequacy of such entity's coverage or of the
reserves for claims.
(b) Schedule 3.18(b) describes:
(i) any self-insurance arrangement (other than deductibles and copayment
arrangements described in insurance policies delivered to Buyer) by or affecting
either Acquired Company, including any reserves established thereunder;
(ii) any contract or arrangement, other than a policy of insurance, for the
transfer or sharing of any risk by either Acquired Company.
(c) [Intentionally Omitted]
(d) Except as set forth on Schedule 3.18(d):
(i) To the Knowledge of the Acquired Companies all policies to which either
Acquired Company is a party or that provide coverage to any Seller or either
Acquired Company:
(A) are valid, outstanding, and enforceable (subject to the qualification which
appear in Exhibit 7.4(a));
(B) are sufficient for material compliance with all Legal Requirements and
Contracts to which either Acquired Company is a party or by which any of them is
bound;
(C) will (assuming timely payment of premiums) continue in full force and effect
immediately following the consummation of the Contemplated Transactions; and
(D) do not provide for any retrospective premium adjustment or other
experienced-based liability on the part of either Acquired Company.
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(ii) No Acquired Company has received (A) any refusal of coverage or any notice
that a defense will be afforded with reservation of rights, or (B) any notice of
cancellation or any other indication that any insurance policy is no longer in
full force or effect or will not be renewed or that the issuer of any policy is
not willing or able to perform its obligations thereunder.
(iii) To the Knowledge of the Acquired Companies, the Acquired Companies have
paid all premiums due, and have otherwise performed all of their respective
obligations, under each policy to which either Acquired Company is a party or
that provides coverage to either Acquired Company or director thereof.
(iv) To the Knowledge of the Acquired Companies, the Acquired Companies have
given notice to the insurer of all claims that may be insured thereby.
3.19 ENVIRONMENTAL MATTERS
To the Knowledge of the Acquired Companies, except as set forth in Schedule
3.19:
(a) each Acquired Company is, and at all times has been, in substantial
compliance with, and has not been and is not in material violation of or
materially liable under, any Environmental Law; no Seller or Acquired Company
has any basis to expect, nor has any of them received, any actual or Threatened
order, notice, or other communication from (i) any Governmental Body or private
citizen acting in the public interest, or (ii) the current or prior owner or
operator of any Facilities, of any actual or potential violation or failure to
comply with any Environmental Law, or of any actual or Threatened obligation to
undertake or bear the cost of any Environmental, Health, and Safety Liabilities
with respect to any of the Facilities or any other properties or assets (whether
real, personal, or mixed) in which either Acquired Company has had an interest,
or with respect to any property or Facility at or to which Hazardous Materials
were generated, manufactured, refined, transferred, imported, used, or processed
by either Acquired Company;
(b) there are no pending or Threatened claims, Encumbrances, or other
restrictions of any nature, resulting from any Environmental, Health, and Safety
Liabilities or arising under or pursuant to any Environmental Law, with respect
to or affecting any of the Facilities or any other properties and assets
(whether real, personal, or mixed) in which either Acquired Company has or had
an interest;
(c) neither Acquired Company has any basis to expect any citation, directive,
inquiry, notice, Order, summons, warning, or other communication that relates to
Hazardous Activity, Hazardous Materials, or any alleged, actual, or potential
violation or failure to comply with any Environmental Law, or of any alleged,
actual, or potential obligation to undertake or bear the cost of any
Environmental, Health, and Safety Liabilities with respect to any of the
Facilities or any other properties or assets (whether real, personal, or mixed)
in which either Acquired Company had an interest, or with respect to any
property or facility to which Hazardous Materials generated, manufactured,
refined, transferred, imported, used, or processed either Acquired Company have
been transported, treated, stored, handled, transferred, disposed, recycled, or
received.
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(d) no Seller or Acquired Company has any Environmental, Health, and Safety
Liabilities with respect to the Facilities or with respect to any other
properties and assets (whether real, personal, or mixed) in which either
Acquired Company (or any predecessor), has or had an interest.
(e) there are no Hazardous Materials present on or in the Environment at the
Facilities including any Hazardous Materials contained in barrels, above or
underground storage tanks, landfills, land deposits, dumps, equipment (whether
moveable or fixed) or other containers, either temporary or permanent, and
deposited or located in land, water, sumps, or any other part of the Facilities
or incorporated into any structure therein or thereon, in any case in violation
of Legal Requirements; no Seller or Acquired Company has permitted or conducted,
or is aware of, any Hazardous Activity conducted with respect to the Facilities
or any other properties or assets (whether real, personal, or mixed) in which
either Acquired Company has or had an interest except in substantial compliance
with all applicable material Environmental Laws;
(f) there has been no Release or Threat of Release, of any Hazardous Materials
at or from the Facilities or at any other locations where any Hazardous
Materials were generated, manufactured, refined, transferred, produced,
imported, used, or processed by either Acquired Company from or by the
Facilities, or from or by any other properties and assets (whether real,
personal, or mixed) in which either Acquired Company has or had an interest by
either Acquired Company in violation of Environmental Laws; and
(g) Sellers have delivered to Buyer true and complete copies and results of any
reports, studies, analyses, tests, or monitoring possessed or initiated by
Sellers or either Acquired Company pertaining to Hazardous Materials or
Hazardous Activities in, on, or under the Facilities, or concerning compliance
by either Acquired Company with Environmental Laws.
3.20 EMPLOYEES
(a) Schedule 3.20 contains a complete and accurate list of the following
information for each employee or director of the Acquired Companies, including
each employee on leave of absence or layoff status: employer; name; job title;
current compensation paid or payable and any change in compensation since
December 31, 1996; vacation accrued; and service credited for purposes of
vesting and eligibility to participate under either Acquired Company's Plans.
(b) To the Knowledge of the Acquired Companies, no employee or director of
either Acquired Company is a party to, or is otherwise bound by, any agreement
or arrangement, including any confidentiality, noncompetition, or proprietary
rights agreement, between such employee or director and any other Person
("Proprietary Rights Agreement") that in any way adversely affects or will
affect (i) the performance of his duties as an employee or director of the
Acquired Companies, or (ii) the ability of either Acquired Company to conduct
its business, including any Proprietary Rights Agreement with Sellers or the
Acquired Companies by any such employee or director. To the Knowledge of the
Acquired Companies, no director, officer, or other key employee of either
Acquired Company intends to terminate his employment with such Acquired Company.
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(c) Schedule 3.20 also contains a complete and accurate list of the following
information for each retired employee or director of the Acquired Companies, or
their dependents, receiving benefits or scheduled to receive benefits in the
future: name, pension benefit, pension option election, retiree medical
insurance coverage, retiree life insurance coverage, and other benefits.
3.21 LABOR RELATIONS; COMPLIANCE
Since January 1, 1994, neither Acquired Company has been or is a party to any
collective bargaining or other labor Contract. Since January 1, 1994, there has
not been, there is not presently pending or existing, and to the Knowledge of
the Acquired Companies there is not Threatened, (a) any strike, slowdown,
picketing, work stoppage, or employee grievance process, (b) any Proceeding
against or affecting either Acquired Company relating to the alleged violation
of any Legal Requirement pertaining to labor relations or employment matters,
including any charge or complaint filed by an employee or union with the
National Labor Relations Board, the Equal Employment Opportunity Commission, or
any comparable Governmental Body, organizational activity, or other labor or
employment dispute against or affecting any of the Acquired Companies or their
premises, or (c) any application for certification of a collective bargaining
agent. To the Knowledge of the Acquired Companies no event has occurred or
circumstance exists that could provide the basis for any work stoppage or other
labor dispute. There is no lockout of any employees by either Acquired Company,
and no such action is contemplated by either Acquired Company. To the Knowledge
of the Acquired Companies, each Acquired Company has substantially complied in
all material respects with all Legal Requirements relating to employment, equal
employment opportunity, nondiscrimination, immigration, wages, hours, benefits,
collective bargaining, the payment of social security and similar taxes,
occupational safety and health, and plant closing, and no Acquired Company is
liable for the payment of any compensation, damages, taxes, fines, penalties, or
other amounts, however designated, for failure to comply with any of the
foregoing Legal Requirements.
3.22 INTELLECTUAL PROPERTY
(a) The term "Intellectual Property Assets" includes:
(i) the names Phoenix Communications and King Mailing Services, all fictional
business names, trading names, registered and unregistered trademarks, service
marks, and applications (collectively, "Marks");
(ii) all copyrights in both published works and unpublished works (collectively,
"Copyrights");
(iii) all know-how, trade secrets, confidential information, customer lists,
software, technical information, data, process technology, plans, drawings, and
blue prints (collectively, "Trade Secrets"); owned, used, or licensed by either
Acquired Company as licensee or licensor.
(b) Neither Acquired Company (i) has made any filing with any governmental
agency or taken any other unusual action to obtain or protect its ownership or
use of any Intellectual Property Assets, (ii) is obliged to make future payments
principally for its ownership or use of any Intellectual Property
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Assets, (iii) has received any notice that its use of any Intellectual Property
Assets infringes on the rights of any other person, or (iv) upon the
consummation of the transactions contemplated hereunder will be in violation of
any contracts or agreements relating to the use of any Intellectual Property
Assets.
3.23 CERTAIN PAYMENTS
Since January 1, 1991, no Seller or Acquired Company has directly or indirectly
(a) made any contribution, gift, bribe, rebate, payoff, influence payment,
kickback, or other payment to any Person, private or public, regardless of form,
whether in money, property, or services (i) to obtain favorable treatment in
securing business, (ii) to pay for favorable treatment for business secured,
(iii) to obtain special concessions or for special concessions already obtained,
for or in respect of either Acquired Company or any Affiliate of an Acquired
Company, or (iv) in violation of any Legal Requirement, (b) established or
maintained any fund or asset that has not been recorded in the books and records
of the Acquired Companies.
3.24 DISCLOSURE
To the Knowledge of the Acquired Companies, no representation or warranty of
Sellers in this Agreement omits to state a material fact necessary to make the
statements herein or therein, in light of the circumstances in which they were
made, not misleading.
3.25 RELATIONSHIPS WITH RELATED PERSONS
Except as described on Schedule 3.25, no Seller or any Related Person of Sellers
(other than the Acquired Companies) or of either Acquired Company has, or since
the first day of the next to last completed fiscal year of the Acquired
Companies has had, any interest in any property (whether real, personal, or
mixed and whether tangible or intangible), used in or pertaining to the Acquired
Companies' businesses. No Seller or any Related Person of Sellers or of either
Acquired Company is, or since the first day of the next to last completed fiscal
year of the Acquired Companies has owned (of record or as a beneficial owner) an
equity interest or any other financial or profit interest in, a Person that has
(i) had business dealings or a material financial interest in any transaction
with either Acquired Company other than business dealings or transactions
conducted in the Ordinary Course of Business with the Acquired Companies at
substantially prevailing market prices and on substantially prevailing market
terms, or (ii) engaged in competition with either Acquired Company with respect
to any line of the products or services of such Acquired Company (a "Competing
Business") in any market presently served by such Acquired Company except for
less than five percent of the outstanding capital stock of any Competing
Business that is publicly traded on any recognized exchange or in the over-the-
counter market. Except as set forth in Schedule 3.25, no Seller or any Related
Person of Sellers or of either Acquired Company is a party to any Contract with,
or has any claim or right against, either Acquired Company.
3.26 BROKERS OR FINDERS
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Except for the GMA Claim which shall be the sole responsibility of Sellers,
Sellers and their agents have incurred no obligation or liability, contingent or
otherwise, for brokerage or finders' fees or agents' commissions or other
similar payment in connection with this Agreement.
3.27 HART-SCOTT-RODINO
Neither Acquired Company is a person (or a constituent of a person) with total
assets or annual net sales of $100,000,000 or more (all within the meaning of
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended).
4. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Sellers as follows as of the date hereof, in
each case subject to the matters described in any Schedule referred to in this
Section 4:
4.1 ORGANIZATION AND GOOD STANDING
Buyer is a corporation duly organized, validly existing, and in good standing
under the laws of the State of Delaware.
4.2 AUTHORITY; NO CONFLICT
(a) This Agreement constitutes the legal, valid, and binding obligation of
Buyer, enforceable against Buyer in accordance with its terms. Upon the
execution and delivery by Buyer of the Employment Agreements and the Promissory
Notes (collectively, the "Buyer's Closing Documents"), the Buyer's Closing
Documents will constitute the legal, valid, and binding obligations of Buyer,
enforceable against Buyer in accordance with their respective terms. Buyer has
the absolute and unrestricted right, power, and authority to execute and deliver
this Agreement and the Buyer's Closing Documents and to perform its obligations
under this Agreement and the Buyer's Closing Documents.
(b) Except as set forth in Schedule 4.2, neither the execution and delivery of
this Agreement by Buyer nor the consummation or performance of any of the
Contemplated Transactions by Buyer will give any Person the right to prevent,
delay, or otherwise interfere with any of the Contemplated Transactions pursuant
to:
(i) any provision of Buyer's Organizational Documents;
(ii) any resolution adopted by the board of directors or the stockholders of
Buyer;
(iii) any Legal Requirement or Order to which Buyer may be subject; or
(iv) any Contract to which Buyer is a party or by which Buyer may be bound.
Except as set forth in Schedule 4.2, Buyer is not and will not be required to
obtain any Consent from
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any Person in connection with the execution and delivery of this Agreement or
the consummation or performance of any of the Contemplated Transactions.
4.3 INVESTMENT INTENT
Buyer is acquiring the Shares for its own account and not with a view to their
distribution within the meaning of Section 2(11) of the Securities Act.
4.4 CERTAIN PROCEEDINGS
There is no pending Proceeding that has been commenced against Buyer and that
challenges, or may have the effect of preventing, delaying, making illegal, or
otherwise interfering with, any of the Contemplated Transactions. To Buyer's
Knowledge, no such Proceeding has been Threatened.
4.5 BROKERS OR FINDERS
Buyer and its officers and agents have incurred no obligation or liability,
contingent or otherwise, for brokerage or finders' fees or agents' commissions
or other similar payment in connection with this Agreement and will indemnify
and hold Sellers harmless from any such payment alleged to be due by or through
Buyer as a result of the action of Buyer or its officers or agents.
4.6 HART-SCOTT-RODINO
Buyer is not a person (or a constituent of a person) with total assets or annual
net sales of $100,000,000 or more (all within the meaning of the Hart-Scott-
Rodino Antitrust Improvements Acts of 1976, as amended).
5. COVENANTS OF SELLERS PRIOR TO CLOSING DATE
5.1 ACCESS AND INVESTIGATION
Subject to Section 12.3, between the date of this Agreement and the Closing Date
(or if applicable, termination of this Agreement pursuant to Section 9), Sellers
will, and will cause each Acquired Company and its Representatives to, (a)
afford Buyer and its Representatives and prospective lenders and their
Representatives (collectively, "Buyer's Advisors") reasonable access to each
Acquired Company's personnel, properties (including subsurface testing),
contracts, books and records, and other documents and data, (b) furnish Buyer
and Buyer's Advisors with copies of all such contracts, books and records, and
other existing documents and data as Buyer may reasonably request, and (c)
furnish Buyer and Buyer's Advisors with such additional financial, operating,
and other data and information as Buyer may reasonably request.
5.2 OPERATION OF THE BUSINESSES OF THE ACQUIRED COMPANIES
Between the date of this Agreement and the Closing Date (or, if applicable,
termination of this
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Agreement pursuant to Section 9), Sellers will, and will
cause each Acquired Company to:
(a) conduct the business of such Acquired Company only in the Ordinary Course
of Business;
(b) use their Best Efforts to preserve intact the current business organization
of such Acquired Company, keep available the services of the current officers,
employees, and agents of such Acquired Company, and maintain the relations and
good will with suppliers, customers, landlords, creditors, employees, agents,
and others having business relationships with such Acquired Company;
(c) confer with Buyer concerning operational matters of a material nature; and
(d) otherwise respond to inquiries from Buyer concerning the status of the
business, operations, personnel changes and finances of such Acquired Company.
5.3 NEGATIVE COVENANT
Except as otherwise expressly permitted by this Agreement, between the date of
this Agreement and the Closing Date (or, if applicable, termination of this
Agreement pursuant to Section 9) Sellers will not, and will cause each Acquired
Company not to, without the prior consent of Buyer, take any affirmative action,
or fail to take any reasonable action within their or its control, as a result
of which any of the changes or events listed in Section 3.16 is likely to occur.
5.4 REQUIRED APPROVALS
As promptly as practicable after the date of this Agreement, Sellers will, and
will cause each Acquired Company to, make all filings required by Legal
Requirements to be made by them in order to consummate the Contemplated
Transactions. Between the date of this Agreement and the Closing Date (or, if
applicable, termination of this Agreement pursuant to Section 9, Sellers will,
and will cause each Acquired Company to, (a) cooperate with Buyer with respect
to all filings that Buyer elects to make or is required by Legal Requirements to
make in connection with the Contemplated Transactions, and (b) cooperate with
Buyer in obtaining all consents identified in Schedules 3.2 or 4.2, provided
that this Agreement will not require Sellers to cause either Acquired Company
tot dispose of or make any change in any portion of its business or to incur any
other burden to obtain a Governmental Authorization.
5.5 NOTIFICATION
Between the date of this Agreement and the Closing Date (or, if applicable,
termination of this Agreement pursuant to Section 9), each of Segal and
Rosenthal agrees to notify Buyer in writing if he becomes aware of the
occurrence after the date of this Agreement of any fact or condition that would
(except as expressly contemplated by this Agreement) cause or constitute a
Breach of any of Sellers' representation or warranties contained herein had such
representation or warranty been made as of the time of occurrence or discovery
of such fact or condition. During the same period, each Seller will promptly
notify Buyer of the occurrence of any Breach of any covenant of Sellers in this
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Section 5 or of the occurrence of any event that may make the satisfaction of
the conditions in Section 7 impossible or unlikely.
5.6 PAYMENT OF INDEBTEDNESS BY RELATED PERSONS
Except as expressly provided in this Agreement, Sellers will cause all
indebtedness owed to an Acquired Company by either Seller or any Related Person
of either Seller to be paid in full prior to Closing.
5.7 NO NEGOTIATION
Until such time, if any, as this Agreement is terminated pursuant to Section 9,
Sellers will not, and will cause each Acquired Company and each of their
Representatives not to, directly or indirectly solicit, initiate, or encourage
any inquiries or proposals from, discuss or negotiate with, provide any non-
public information to, or consider the merits of any unsolicited inquiries or
proposals from, any Person (other than Buyer) relating to any transaction
involving the sale of the business or assets (other than in the Ordinary Course
of Business) of either Acquired Company, or any of the capital stock of either
Acquired Company, or any merger, consolidation, business combination, or similar
transaction involving either Acquired Company.
5.8 BEST EFFORTS
Except as set forth in the proviso to Section 5.4, between the date of this
Agreement and the Closing Date (or, if applicable, termination of this Agreement
pursuant to Section 9), Sellers will use their Best Efforts to cause the
conditions in Section 7 to be satisfied.
6. COVENANTS OF BUYER PRIOR TO CLOSING DATE
6.1 REQUIRED APPROVALS
As promptly as practicable after the date of this Agreement, Buyer will, and
will cause each of its Related Persons to, make all filings required by Legal
Requirements to be made by them to consummate the Contemplated Transactions.
Between the date of this Agreement and the Closing Date (or, if applicable,
termination of this Agreement pursuant to Section 9), Buyer will, and will cause
each Related Person to, (a) cooperate with Sellers with respect to all filings
that Sellers elect to make or are required by Legal Requirements to make in
connection with the Contemplated Transactions, and (b) cooperate with Sellers in
obtaining all consents identified in Schedules 3.2 or 4.2; provided that this
Agreement will not require Buyer to dispose of or make any change in any portion
of its business or to incur any other burden to obtain a Governmental
Authorization.
6.2 BEST EFFORTS
Except as set forth in the proviso to Section 6.1, between the date of this
Agreement and the Closing Date (or, if applicable, termination of this Agreement
pursuant to Section 9), Buyer will use its Best Efforts to cause the conditions
in Section 8 to be satisfied.
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7. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE
Buyer's obligation to purchase the Shares and to take the other actions required
to be taken by Buyer at the Closing is subject to the satisfaction, at or prior
to the Closing, of each of the following conditions (any of which may be waived
by Buyer, in whole or in part):
7.1 ACCURACY OF REPRESENTATIONS
All of Sellers' representations and warranties in this Agreement (considered
collectively), and each of these representations and warranties (considered
individually), must be accurate in all material respects as of the Closing Date
as if made on the Closing Date.
7.2 SELLERS' PERFORMANCE
(a) All of the covenants and obligations that Sellers are required to perform
or to comply with pursuant to this Agreement at or prior to the Closing
(considered collectively), and each of these covenants and obligations
(considered individually), must have been duly performed and complied with in
all material respects.
(b) Each document required to be delivered by Sellers pursuant to Section 2.4
must have been delivered.
7.3 CONSENTS
Each of the Consents identified in Schedule 3.2, and each Consent identified in
Schedule 4.2, must have been obtained and must be in full force and effect.
7.4 ADDITIONAL DOCUMENTS
There must have been delivered to Buyer:
(a) an opinion of Holt Ney Zatcoff & Wasserman, LLP, dated the Closing Date, in
the form of Exhibit 7.4(a);
(b) such other documents as Buyer and Sellers agree are reasonable and
necessary for the purpose of (i) enabling Buyer's counsel to provide the opinion
referred to in Section 8.4(a), (ii) evidencing the accuracy of any of Sellers'
representations and warranties, (iii) evidencing the performance by Sellers of,
or the compliance by Sellers with, any covenant or obligation required to be
performed or complied with by Sellers, (iv) evidencing the satisfaction of any
condition referred to in this Section 7, or (v) otherwise facilitating the
consummation or performance of any of the Contemplated Transactions.
7.5 NO PROCEEDINGS
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Since the date of this Agreement, there must not have been commenced or
Threatened against Buyer, any Seller, any Acquired Company or any Person
affiliated with any of the foregoing, any Proceeding (a) involving any challenge
to, or seeking damages or other relief in connection with, any of the
Contemplated Transactions, or (b) that may have the effect of preventing,
delaying, making illegal, or otherwise interfering with any of the Contemplated
Transactions.
7.6 NO CLAIM REGARDING STOCK OWNERSHIP OR SALE PROCEEDS
There must not have been made or Threatened by any Person (other than Sellers)
any claim asserting that such Person (a) is the holder or the beneficial owner
of, or has the right to acquire or to obtain beneficial ownership of, any stock
of, or any other voting, equity, or ownership interest in, any of the Acquired
Companies, or (b) is entitled to all or any portion of the Purchase Price
payable for the Shares.
7.7 NO PROHIBITION
Neither the consummation nor the performance of any of the Contemplated
Transactions will, directly or indirectly (with or without notice or lapse of
time), materially contravene, or conflict with, or result in a material
violation of, (a) any applicable Legal Requirement or Order, or (b) any Legal
Requirement or Order that has been published, introduced, or otherwise proposed
by or before any Governmental Body.
7.8 SUBSTITUTION FOR EXISTING NOTES
At the Closing, the holders of the Existing Notes must have delivered to the
Buyer the Existing Notes marked "satisfied in full" in exchange for new
promissory notes from Buyer containing terms and conditions satisfactory to both
Buyer and the holders of the Existing Notes.
8. CONDITIONS PRECEDENT TO SELLERS' OBLIGATION TO CLOSE
Sellers' obligation to sell the Shares and to take the other actions required to
be taken by Sellers at the Closing is subject to the satisfaction, at or prior
to the Closing, of each of the following conditions (any of which may be waived
by Sellers, in whole or in part):
8.1 ACCURACY OF REPRESENTATIONS
All of Buyer's representations and warranties in this Agreement (considered
collectively), and each of these representations and warranties (considered
individually), must be accurate in all material respects as of the Closing Date
as if made on the Closing Date.
8.2 BUYER'S PERFORMANCE
(a) All of the covenants and obligations that Buyer is required to perform or
to comply with pursuant to this Agreement at or prior to the Closing (considered
collectively), and each of these covenants
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and obligations (considered individually), must have been performed and complied
with in all material respects.
(b) Buyer must have delivered each of the documents required to be delivered by
Buyer pursuant to Section 2.4 and must have made the cash payments required to
be made by Buyer pursuant to Section 2.4(b)(i).
8.3 CONSENTS
Each of the Consents identified in Schedule 3.2 or Schedule 4.2 must have been
obtained and must be in full force and effect.
8.4 ADDITIONAL DOCUMENTS
Buyer must have caused to be delivered to Sellers:
(a) an opinion of Black Bobango & Morgan, a Professional Corporation, dated the
Closing Date, in the form of Exhibit 8.4(a); and
(b) such other documents as Sellers and Buyer agree are reasonable and
necessary request for the purpose of (i) enabling Sellers' counsel to provide
the opinion referred to in Section 7.4(a), (ii) evidencing the accuracy of any
representation or warranty of Buyer, (iii) evidencing the performance by Buyer
of, or the compliance by Buyer with, any covenant or obligation required to be
performed or complied with by Buyer, (ii) evidencing the satisfaction of any
condition referred to in this Section 8, or (v) otherwise facilitating the
consummation of any of the Contemplated Transactions.
8.5 NO INJUNCTION
There must not be in effect any Legal Requirement or any injunction or other
Order that (a) prohibits the sale of the Shares by Sellers to Buyer, and (b) has
been adopted or issued, or has otherwise become effective, since the date of
this Agreement.
8.6 NO PROCEEDINGS
Since the date of this Agreement, there must not have been commenced or
Threatened against Buyer, any Seller, any Acquired Company, or any Person
affiliated with any of the foregoing, any Proceeding (a) involving any challenge
to, or seeking damages or other relief in connection with, any of the
Contemplated Transactions, or (b) that may have the effect of preventing,
delaying, making illegal, or otherwise interfering with any of the Contemplated
Transactions.
8.7 NO PROHIBITION
Neither the consummation nor the performance of any of the Contemplated
Transactions will, directly
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or indirectly (with or without notice or lapse of time), materially contravene,
or conflict with, or result in a material violation of, (a) any applicable Legal
Requirement or Order, or (b) any Legal Requirement or Order that has been
published, introduced, or otherwise proposed by or before any Governmental Body.
9. TERMINATION
9.1 TERMINATION EVENTS
This Agreement may, by notice given prior to or at the Closing, be terminated:
(a) by either Buyer or Sellers if a material Breach of any provision of this
Agreement has been committed by the other party and such Breach has not been
cured or waived;
(b) (i) by Buyer if any of the conditions in Section 7 has not been satisfied
in all material respects as of the Closing Date or if satisfaction in all
material respects of such a condition is or becomes impossible (other than
through the failure of Buyer to comply with its obligations under this
Agreement) and Buyer has not waived such condition on or before the Closing
Date; or (ii) by Sellers, if any of the conditions in Section 8 has not been
satisfied in all material respects as of the Closing Date or if satisfaction in
all material respects of such a condition is or becomes impossible (other than
through the failure of Sellers to comply with their obligations under this
Agreement) and Sellers have not waived such condition on or before the Closing
Date; or
(c) by mutual consent of Buyer and Sellers.
9.2 EFFECT OF TERMINATION
If this Agreement is terminated pursuant to Section 9.1, all further obligations
of the parties under this Agreement will terminate, except that the obligations
in Sections 12.1 and 12.3 will survive; provided, however, that if this
Agreement is terminated by a party because of the material Breach of the
Agreement by the other party or because one or more of the conditions to the
terminating party's obligations under this Agreement is not satisfied in all
material respects as a result of the other party's failure to comply with its
obligations under this Agreement, the terminating party's right to pursue all
legal remedies will survive such termination unimpaired, subject to Section
10.6.
10. INDEMNIFICATION; REMEDIES
10.1 SURVIVAL; RIGHT TO INDEMNIFICATION NOT AFFECTED BY KNOWLEDGE
All representations and warranties in the certificate delivered pursuant to
Sections 2.4(a)(v) and 2.4(b)(iv), will survive the Closing for the applicable
period described in Section 10.4, but no other representations or warranties in
this Agreement are in any other certificate or document delivered pursuant to
this Agreement will survive the Closing, nor shall any Person have any liability
with respect to any such representations or warranties. If the Closing occurs,
there shall not exist any right to indemnification, payment of Damages or other
remedy based on any representation, warranty,
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covenant, or obligation which is Known to be untrue, inaccurate or unsatisfied
at the time of the Closing by the Person who or which (but for this sentence)
would have such rights.
10.2 INDEMNIFICATION AND PAYMENT OF DAMAGES BY SELLERS
Subject to all other provisions of this Section 10, Sellers, jointly and
severally, will indemnify and hold harmless Buyer, the Acquired Companies, and
their respective Representatives, stockholders, controlling persons, and
affiliates (collectively, the "Indemnified Persons") for, and will pay to the
Indemnified Persons the amount of, any loss, liability, claim, damage (including
incidental and consequential damages), expense (including costs of investigation
and defense and reasonable attorneys' fees) or diminution of value, whether or
not involving a third-party claim (collectively, "Damages"), arising, directly
or indirectly, from or in connection with:
(a) any material Breach of any representation or warranty made by Sellers in
the certificate delivered pursuant to Section 2.4(a)(v);
(b) any material Breach by any Seller of any covenant or obligation of such
Seller in this Agreement; or
(c) any claim by any Person for brokerage or finder's fees or commissions or
similar payments based upon any agreement or understanding alleged to have been
made by any such Person with either Seller or either Acquired Company (or any
Person acting on their behalf) in connection with any of the Contemplated
Transactions.
10.3 INDEMNIFICATION AND PAYMENT OF DAMAGES BY BUYER
Buyer will indemnify and hold harmless Sellers, and will pay to Sellers the
amount of any Damages arising, directly or indirectly, from or in connection
with (a) any material Breach of any representation or warranty made by Buyer in
the certificate delivered pursuant to Section 2.4(b)(iv), (b) any Breach by
Buyer of any covenant or obligation of Buyer in this Agreement, or (c) any claim
by any Person for brokerage or finder's fees or commissions or similar payments
based upon any agreement or understanding alleged to have been made by such
Person with Buyer (or any Person acting on its behalf) in connection with any of
the Contemplated Transactions, or (d) any matter arising out of the post-Closing
activities of Buyer, Premier Graphics, Inc. or any other Person related to Buyer
or Premier Graphics, Inc. which are contemplated under this Agreement.
10.4 TIME LIMITATIONS
If the Closing occurs, Sellers will have no liability (for indemnification or
otherwise) with respect to any representation or warranty, or covenant or
obligation to be performed and complied with prior to the Closing Date, other
than those in Sections 3.3, 3.11 and 3.13, unless at or before the expiration of
eighteen (18) months following the Closing Date, Buyer notifies Sellers of a
claim specifying the factual basis of that claim in reasonable detail to the
extent then known by Buyer. A claim with respect to Section 3.3 or a claim for
indemnification or reimbursement not based upon any
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representation or warranty or any covenant or obligation to be performed and
complied with prior to the Closing Date, may be made at any time within the
applicable statutes of limitation; a claim with respect to Section 3.11 may be
made only on or before the fourth (4/th/) anniversary of the Closing; and a
claim with respect to Section 3.13 may be made only on or before the third
(3/rd/) anniversary of the Closing. If the Closing occurs, Buyer will have no
liability (for indemnification or otherwise) with respect to any representation
or warranty, or covenant or obligation to be performed and complied with prior
to the Closing Date, unless at or before the expiration of eighteen (18) months
following the Closing Date, Sellers notify Buyer of a claim specifying the
factual basis of that claim in reasonable detail to the extent then known by
Sellers.
10.5 LIMITATIONS ON AMOUNT--SELLERS
(a) Sellers will have no liability (for indemnification or otherwise) with
respect to the matters described in of Section 10.2 until the total of all
Damages with respect to such matters exceeds $25,000, and then only for the
amount by which such Damages exceed $25,000.
(b) Subject to subsection (c), Buyer's right to recovery against Sellers will
be limited to an amount equal to the Purchase Price. In the event, Buyer's right
to recovery against Sellers is in excess of the amount payable under the
Promissory Notes, Buyer shall be immediately entitled to payment of that part of
the Cash Amount retained by Sellers after payment of state and federal taxes.
Any additional amounts due Buyer shall be paid to Buyer after Sellers receive
any income tax refund due Sellers due to the indemnification obligations
contained herein.
(c) Subsections (a) and (b) will not apply to any Breach by any Seller which
constitutes fraud or intentional misconduct by such Seller.
(d) Amounts otherwise recoverable from Sellers hereunder shall be reduced by
all amounts realized from Post-Closing Third Party Recoveries. Amounts so
realized (i) shall increase the amount payable under the Promissory Notes, to
the extent of previous reductions of such amounts pursuant to Section 10.7 which
have not previously been taken into account under this subsection or (ii) be
remitted to Sellers, to the extent of other previous recoveries from Sellers
hereunder which have not previously been taken into account under this
subsection. The foregoing notwithstanding, any Third Party Recoveries received
by Buyer at a time when no amounts are owing to Buyer pursuant to this Section
10 shall be promptly paid by Buyer one-half (1/2) to Segal and one-half (1/2)
to Rosenthal.
10.6 LIMITATIONS ON AMOUNT--BUYER
Buyer will have no liability (for indemnification or otherwise) with respect to
the matters described in clause (a) or (b) of Section 10.3 until the total of
all Damages with respect to such matters exceeds $25,000, and then only for the
amount by which such Damages exceed $25,000. However, this Section 10.6 will
not apply to any Breach of any of Buyer's representations and warranties of
which Buyer had Knowledge at any time prior to the date on which such
representation and warranty is made or any intentional Breach by Buyer of any
covenant or obligation, and Buyer will be liable for all Damages with respect to
such Breaches.
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10.7 OBLIGATION OF SET-OFF
In the event that it is determined that amounts are due Buyer from Sellers
pursuant to this Agreement, Buyer shall first reduce the amount payable under
the Promissory Notes by the amount due Buyer under this Agreement prior to
seeking monetary indemnification from Seller. In the event the amount due Buyer
under this Agreement exceeds the amount payable under the Promissory Notes,
Buyer shall have the right to proceed against the Sellers for such excess,
subject to all other provisions of this Section 10. The exercise of such set-off
by Buyer in good faith, whether or not ultimately determined to be justified,
will not constitute an event of default under the Promissory Notes or any
instrument securing a Promissory Note.
10.8 PROCEDURE FOR INDEMNIFICATION--THIRD PARTY CLAIMS
(a) Promptly after receipt by an indemnified party under Section 10.2 or 10.3,
of notice of the commencement of any Proceeding against it, such indemnified
party will, if a claim is to be made against an indemnifying party under such
Section, give notice to the indemnifying party of the commencement of such
claim. The failure to notify the indemnifying party will relieve the
indemnifying party of any liability that it may have to any indemnified party,
unless such failure does not impair the indemnifying party's administration of
the action (including but not limited to the defense or settlement thereof).
(b) If any Proceeding referred to in Section 10.8(a) is brought against an
indemnified party and it gives notice to the indemnifying party of the
commencement of such Proceeding, the indemnifying party will be entitled to
participate in such Proceeding and, to the extent that it wishes (unless (i) the
indemnifying party is also a party to such Proceeding and the indemnified party
determines in good faith that joint representation would be inappropriate, or
(ii) the indemnifying party fails to provide reasonable assurance to the
indemnified party of its financial capacity to defend such Proceeding and
provide indemnification with respect to such Proceeding), to assume the defense
of such Proceeding with counsel satisfactory to the indemnified party and, after
notice from the indemnifying party to the indemnified party of its election to
assume the defense of such Proceeding, the indemnifying party will not, as long
as it diligently conducts such defense, be liable to the indemnified party under
this Section 10 for any fees of other counsel or any other expenses with respect
to the defense of such Proceeding, in each case subsequently incurred by the
indemnified party in connection with the defense of such Proceeding, other than
reasonable costs of investigation. If the indemnifying party assumes the defense
of a Proceeding, (x) no compromise or settlement of such claims may be effected
by the indemnifying party without the indemnified party's consent unless (A)
there is no finding or admission of any violation of Legal Requirements or any
violation of the rights of any Person and no effect on any other claims that may
be made against the indemnified party, and (B) the sole relief provided is
monetary damages that are paid in full by the indemnifying party; (y) except as
otherwise provided in the last sentence in this subsection (b), the indemnifying
party will have no liability with respect to any compromise or settlement of
such claims effected without its consent. If notice is given to an indemnifying
party of the commencement of any Proceeding and the indemnifying party does not,
within ten days after the indemnified party's notice is given, give notice to
the indemnified party of
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its election to assume the defense of such Proceeding, the indemnifying party
will be bound by any determination made in such Proceeding or any compromise or
settlement effected by the indemnified party. If notice is given to an
indemnifying party of the commencement of any Proceeding and within ten days
after the indemnifying party's notice is given the indemnifying party gives
notice to the indemnified party of its election to assume the defense of such
Proceeding, but refuses a request of the indemnified party for an admission that
the claims made in the Proceeding are within the scope of and subject to
indemnification, the indemnified party shall be entitled to participate in the
defense at its own expense, and the indemnifying party shall be bound not to
unreasonably withhold its consent to any compromise or settlement agreed to by
the indemnified party.
(c) Notwithstanding the foregoing, if an indemnified party determines in good
faith that there is a reasonable probability that a Proceeding may adversely
affect it or its affiliates other than as a result of monetary damages for which
it would be entitled to indemnification under this Agreement, the indemnified
party may, by notice to the indemnifying party, assume the exclusive right to
defend, compromise, or settle such Proceeding, but the indemnifying party will
not be bound by any determination of a Proceeding so defended or any compromise
or settlement effected without its consent (which may not be unreasonably
withheld).
(d) Each party hereby consent to the non-exclusive jurisdiction of any court in
which a Proceeding is brought against any Indemnified Person for purposes of any
claim that an Indemnified Person may have under this Agreement with respect to
such Proceeding or the matters alleged therein, and agree that process may be
served on such party with respect to such a claim anywhere in the world.
10.9 PROCEDURE FOR INDEMNIFICATION--OTHER CLAIMS
A claim for indemnification for any matter not involving a third-party claim may
be asserted by notice to the party from whom indemnification is sought.
11. CERTAIN MATTERS
11.1 ACCOUNTS RECEIVABLE
Sellers' responsibilities with respect to the Acquired Companies' accounts
receivable are as (and only as) described in Section 3.8 and this Section 11.1.
On the day which is six months after the Closing Date:
(a) the aggregate of the amounts of the Fixed Notes shall be reduced by the
excess, if any, of
(i) the sum of the then (six months after the Closing Date) still
outstanding balances of all accounts receivable of the Acquired Companies
which were more than 120 days old as of the Closing Date, over
(ii) the sum of the accounts receivable reserves taken into account in
determining Adjusted
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Net Worth; and
(b) Buyer shall cause ownership of accounts receivable having balances which in
the aggregate equal the amount of the reduction of the Fixed Notes as set forth
above to be transferred to Sellers. For purposes of this Section payments
received after Closing from obligors of the accounts receivable referred to in
Clause (a)(i) above shall be applied first towards satisfaction of such accounts
receivable unless designated otherwise by the account debtor.
11.2 PERMITTED PRE-CLOSING TRANSFERS
Notwithstanding any other provision hereof to the contrary, each Acquired
Company shall be entitled at or before the Closing:
(a) to sell to the Sellers at book value any and all life insurance policies on
the life or lives of any of the Sellers owned (in whole or in part) by such
Acquired Company; and
(b) with respect to each automobile which is owned by an Acquired Company and
used primarily by a Seller, to sell such automobile to such Seller for an amount
equal to the greater of the net book value of such automobile or the amount of
the indebtedness secured by such automobile. Any Seller acquiring an automobile
hereunder agrees to assume the indebtedness secured by such automobile as part
of the consideration described above. No conveyance permitted under this
Section 11.2 shall constitute a Breach.
11.3 CERTAIN INCENTIVE COMPENSATION
(a) After the Closing, Buyer shall from time to time cause incentive
compensation, in the forms described in subsection (b), to be paid to employees
of the Phoenix Communications Division (potentially including Rosenthal and
Segal) selected from time to time by Rosenthal and Segal (or if neither
Rosenthal or Segal is not then employed by Buyer or a Person related to Buyer,
by the chief executive officer of the successor of the Acquired Companies).
(b) Subject to subsection (c), the incentive compensation described in this
section (b) means: (i) one-ninth (1/9) of the amounts payable under Earnout
Notes, such amounts to be paid simultaneously with payments under the Earnout
Notes, and (ii) one ninth (1/9) of the warrants to be issued under the
Employment Agreements, such warrants to be granted immediately after the
Closing.
(c) Amounts described in clause (i) of subsection (b) which, but for this
subsection (c), would be payable to a Person who is no longer employed by the
Phoenix Communications Division, shall instead be paid to Persons selected as
described in subsection (a) (or, failing any such selection, equally to
Rosenthal and Segal). It is contemplated that a portion of the Warrants granted
to Rosenthal and Segal as described in Section 11.3(b)(ii) above will be
assigned to key employees of the Acquired Companies provided certain criteria
and conditions are met.
11.4 SUCCESS FEE
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At Closing, Buyer shall cause the Success Fee to be paid.
12. GENERAL PROVISIONS
12.1 EXPENSES
Except as provided in the following sentence, Buyer will pay all expenses
incurred in connection with the preparation, execution, and performance of this
Agreement and the Contemplated Transactions, including all fees and expenses of
agents, representatives, counsel, and accountants. Sellers will be responsible
for their own legal and accounting fees in connection with this Agreement, and
for the GMA Claim, and will cause the Acquired Companies not to incur any out-
of-pocket expenses therefor, and the Acquired Companies will be responsible for
all other costs incurred by Sellers or by the Acquired Companies in connection
with this Agreement.
12.2 PUBLIC ANNOUNCEMENTS
Any public announcement or similar publicity with respect to this Agreement or
the Contemplated Transactions will be issued, if at all, at such time and in
such manner as Buyer determines. Unless consented to by Buyer in advance or
required by Legal Requirements, prior to the Closing (or termination hereof)
Sellers shall, and shall cause the Acquired Companies to, keep this Agreement
strictly confidential and may not make any disclosure of this Agreement to any
Person other than Sellers' advisers, including but not limited to lawyers and
accountants, assisting in the preparation and/or administration and/or
consummation of this Agreement. Sellers and Buyer will consult with each other
concerning the means by which the Acquired Companies' employees, customers, and
suppliers and others having dealings with the Acquired Companies will be
informed of the Contemplated Transactions, and Buyer will have the right to be
present for any such communication.
12.3 CONFIDENTIALITY
Between the date of this Agreement and the Closing Date (or, if the Closing does
not occur, December 31, 2000), Buyer and Sellers will maintain in confidence,
and will cause the directors, officers, employees, agents, and advisors of Buyer
and the Acquired Companies to maintain in confidence, and not use to the
detriment of another party or an Acquired Company any written, oral, or other
information obtained in confidence from another party or an Acquired Company in
connection with this Agreement or the Contemplated Transactions, unless (a) such
information is already known to such party or to others not bound by a duty of
confidentiality or such information becomes publicly available through no fault
of such party, (b) the use of such information is necessary or appropriate in
making any filing or obtaining any consent or approval required for the
consummation of the Contemplated Transactions, or (c) the furnishing or use of
such information is required by or necessary or appropriate in connection with
legal proceedings.
If the Contemplated Transactions are not consummated: (a) each party will return
or destroy as much of such written information as the other party may reasonably
request; (b) prior to January 1, 2001,
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Buyer shall not, and shall assure that no Person Related to Buyer will directly
or indirectly, either for itself or any other Person,
(i) induce or attempt to induce any Person known to Buyer or any Related
Person to be an employee of either Acquired Company to leave the employ of
such Acquired Company,
(ii) in any way interfere with the relationship between either Acquired
Company and any Person known to Buyer or any Related Person to be an
employee of either Acquired Company, or
(iii) employee, or otherwise engaged as an employee, independent
contractor, or otherwise, any Person known to Buyer or any Related Person
to be an employee of either Acquired Company; or
(iv) solicit the business of any Person known to Buyer or any Related
Person to be a customer of either Acquired Company, unless Buyer or any
Related Person (or a predecessor thereof) had a business relationship with
such Person prior to the date of this Agreement.
12.4 NOTICES
All notices, consents, waivers, and other communications under this Agreement
must be in writing and will be deemed to have been duly given when (a) delivered
by hand or (b) received by the addressee, if sent by a nationally recognized
overnight delivery service (receipt requested), in each case to the appropriate
addresses set forth below (or to such other addresses as a party may designate
by notice to the other parties):
Sellers: [Name of Seller]
Phoenix Communications, Inc.
5664 New Peachtree Road
Atlanta, Georgia 30341
with a copy to: Holt Ney Zatcoff & Wasserman, LLP
100 Galleria Parkway, Suite 600
Atlanta, Georgia 30339-5511
Attention: Sanford H. Zatcoff, Esq.
Buyer: Master Graphic, Inc.
2500 Lamar Avenue
Memphis, TN 38114
Attention: John P. Miller
with a copy to: Black Bobango & Morgan
A Professional Corporation
530 Oak Court Drive
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Suite 345
Memphis, TN 38117
Attention: Michael P. Morgan
12.5 JURISDICTION; SERVICE OF PROCESS
Any action or proceeding seeking to enforce any provision of, or based on any
right arising out of, this Agreement may be brought against any of the parties
in the courts of the State of Georgia, County of DeKalb, or, if it has or can
acquire jurisdiction, in the United States District Court for the Northern
District of Georgia, and each of the parties consents to the jurisdiction of
such courts (and of the appropriate appellate courts) in any such action or
proceeding and waives any objection to venue laid therein. Process in any action
or proceeding referred to in the preceding sentence may be served on any party
anywhere in the world.
12.6 FURTHER ASSURANCES
The parties agree (a) to furnish upon request to each other such further
information, (b) to execute and deliver to each other such other documents, and
(c) to do such other acts and things, all as the other party may reasonably
request for the purpose of carrying out the intent of this Agreement and the
documents referred to in this Agreement.
12.7 WAIVER
The rights and remedies of the parties to this Agreement are cumulative and not
alternative. Neither the failure nor any delay by any party in exercising any
right, power, or privilege under this Agreement or the documents referred to in
this Agreement will operate as a waiver of such right, power, or privilege, and
no single or partial exercise of any such right, power, or privilege will
preclude any other or further exercise of such right, power, or privilege or the
exercise of any other right, power, or privilege. To the maximum extent
permitted by applicable law, (a) no claim or right arising out of this Agreement
or the documents referred to in this Agreement can be discharged by one party,
in whole or in part, by a waiver or renunciation of the claim or right unless
in writing signed by the other party; (b) no waiver that may be given by a party
will be applicable except in the specific instance for which it is given; and
(c) no notice to or demand on one party will be deemed to be a waiver of any
obligation of such party or of the right of the party giving such notice or
demand to take further action without notice or demand as provided in this
Agreement or the documents referred to in this Agreement.
12.8 ENTIRE AGREEMENT AND MODIFICATION
This Agreement supersedes all prior agreements between the parties with respect
to its subject matter (including the Letter of Intent between Buyer and Sellers
dated October 6, 1997) and constitutes (along with the documents referred to in
this Agreement) a complete and exclusive statement of the terms of the agreement
between the parties with respect to its subject matter. This Agreement may
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not be amended except by a written agreement executed by the party to be charged
with the amendment.
12.9 ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS
Neither party may assign any of its rights under this Agreement without the
prior consent of the other parties, which will not be unreasonably withheld,
except that Buyer may assign any of its rights under this Agreement to any
Subsidiary of Buyer. Subject to the preceding sentence, this Agreement will
apply to, be binding in all respects upon, and inure to the benefit of the
successors and permitted assigns of the parties. Nothing expressed or referred
to in this Agreement will be construed to give any Person other than the parties
to this Agreement any legal or equitable right, remedy, or claim under or with
respect to this Agreement or any provision of this Agreement. This Agreement and
all of its provisions and conditions are for the sole and exclusive benefit of
the parties to this Agreement and their successors and assigns.
12.10 SEVERABILITY
If any provision of this Agreement is held invalid or unenforceable by any court
of competent jurisdiction, the other provisions of this Agreement will remain in
full force and effect. Any provision of this Agreement held invalid or
unenforceable only in part or degree will remain in full force and effect to the
extent not held invalid or unenforceable.
12.11 SECTION HEADINGS, CONSTRUCTION
The headings of Sections in this Agreement are provided for convenience only and
will not affect its construction or interpretation. All references to "Section"
or "Sections" refer to the corresponding Section or Sections of this Agreement.
All words used in this Agreement will be construed to be of such gender or
number as the circumstances require. Unless otherwise expressly provided, the
word "including" does not limit the preceding words or terms.
12.12 TIME OF ESSENCE
With regard to all dates and time periods set forth or referred to in this
Agreement, time is of the essence.
12.13 GOVERNING LAW
This Agreement will be governed by the laws of the State of Georgia without
regard to conflicts of laws principles.
12.14 COUNTERPARTS
This Agreement may be executed in one or more counterparts, each of which will
be deemed to be an original copy of this Agreement and all of which, when taken
together, will be deemed to constitute one and the same agreement.
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12.15 STANDARD OF CONDUCT
Except to the extent (if any) expressly provided herein to the contrary, each
party shall act hereunder, and shall exercise all discretion afforded it
hereunder, reasonably and in good faith.
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of
the date first written above.
BUYER: Master Graphics, Inc.
By: /s/ John P. Miller
------------------
Its: President
SELLERS: /s/ Cary Rosenthal
------------------
Cary Rosenthal
/s/ Joseph Segal
----------------
Joseph Segal
/s/ Ross Lenhart
----------------
Ross Lenhart
/s/ Richard Roberts
-------------------
Richard Roberts
/s/ Scott Diamond
-----------------
Scott Diamond
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