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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of earliest event reported): June 19, 1998:
PRODUCTION RESOURCE GROUP, L.L.C.
(Exact name of Registrant as Specified in its Charter)
Delaware 333-46235 14-1786937
(State or other Jurisdiction (Commission File Number) (IRS Employer
of Formation) Identification No,)
539 Temple Hill Road, New Windsor, New York 12553
(Address of Principal Executive Offices) (Zip Code)
(914) 567-5700
(Registrant's Telephone Number, Including Area Code)
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Item 2. Acquisitions
Light and Sound Design
On June 19, 1998 Production Resource Group, L.L.C. (the "Company")
acquired all of the Cumulative Participating Preferred Ordinary Shares and
Cumulative Redeemdable Preference Shares and approximately 90% of the Ordinary
Shares of Light & Sound Design Holdings Limited, an English company
("Holdings"), pursuant to a Share Purchase Agreement dated June 19, 1998 among
the shareholders of Holdings and the Company. Pursuant to the Share Purchase
Agreement, in exchange for the aforementioned Holdings stock, the Company
paid $14,517,571 in cash to the shareholders of Holdings. The amount of
consideration paid to the Holdings' shareholders was reached through
arm's-length negotiations and was funded through the Company's credit
facility with The Bank of New York, as agent for a syndicate of lenders. A
copy of the Share Purchase Agreement is attached as Exhibit 10.9.
Holdings has two wholly-owned operating subsidiaries, Light & Sound
Design Limited, an English company, which is based in Birmingham, England with
an office in London, England and operates exclusively in Europe, and Light &
Sound Design, Inc., a California corporation, which is based in Los Angeles,
California and Nashville, Tennessee and operates in the North American market.
Light & Sound Design Limited and Light & Sound Design, Inc. each provide
rentals of lighting and other equipment for use in the concert touring and
industrial markets. Light & Sound Design Limited and Light & Sound Design,
Inc. will each continue their business and operations as subsidiaries of
Holdings, which is a subsidiary of the Company.
Prior to the acquisition, the ownership in Holdings was held by Nick
Jackson, Tim Murch, John Lobel, Bill Hewlett, Dave Keighley, Terry Lee, Jerry
Reidy, Mickey Curbishley, Murray Ventures PLC, Sumit Venture Fund One Limited
Partnership and John Lawrence. Messrs. Jackson, Murch, Lobel, Hewlett,
Keighley, Lee, Reidy and Curbishley (the "Management Shareholders") have
granted the Company an option to purchase their remaining shares in Holdings
for their fair market value at any time during the five year period commencing
on the closing date.
Holdings' consolidated revenues for its fiscal year ended March 31,
1998 were approximately $31.5 million (based on an exchange rate of 1.6675
pounds to the dollar).
Production Arts
On June 30, 1998 the Company acquired substantially all of the assets
subject to substantially all of the operating liabilities, of Production Arts
Lighting Inc., a New York corporation, Production Arts Europe, Inc., a
Delaware corporation and
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Production Arts West, Inc., a California corporation, collectively "Production
Arts") pursuant to an Acquisition Agreement dated as of June 25, 1998 among
Production Arts, the shareholders of Production Arts and the Company. Pursuant
to the Acquisition Agreement, in exchange for the assets of the three
companies constituting Production Arts, the Company paid $13,700,000 in cash
to Production Arts. The amount of consideration paid to Production Arts was
reached through arm's-length negotiations and was funded through the Company's
credit facility with The Bank of New York, as agent for a syndicate of
lenders. A copy of the Acquisition Agreement is attached as Exhibit 10.10.
Production Arts is based in Moonachie, New Jersey with offices in New
York, Los Angeles and London, England. Production Arts provides sales and
rentals of lighting and other equipment for use in the permanent installation,
theatrical and industrial markets. Production Arts will continue its business
and operations as part of the Company's lighting division, provided that the
UK operations of Production Arts will be conducted as a division of Light &
Sound Design, Limited.
Prior to the acquisition, the ownership in Production Arts was held by
John T. McGraw and Steven R. Terry.
Production Arts' combined revenues for its year ended December 31, 1997
were approximately $25.0 million.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a)(b) Financial Statements of Businesses Acquired. Pro Forma Financial
Information
As of the date of this report, the financial statements and pro forma
financial information required by this item are not available. It is the
Company's intention that such financial statements and pro forma data will be
filed within 60 days of the due date of this report, as required under
applicable regulations of the Securities and Exchange Commission.
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(c) Exhibits
EXHIBIT INDEX
Exhibit No. Document Description
10.9 Share Purchase Agreement dated June 19, 1998 among N B Jackson & Others
and the Company
10.10 Acquisition Agreement dated June 25, 1998 among Production Arts Lighting
Inc., Production Arts Lighting West, Inc., Production Arts Europe, Inc., John
T. McGraw, Steven R. Terry and the Company.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report on Form 8-K, to be signed on its behalf
by the undersigned hereunto duly authorized.
PRODUCTION RESOURCE GROUP, L.L.C.
(Registrant)
Date: July 2, 1998 By: /s/ Robert A. Manners
---------------------
Robert A. Manners
Senior Vice President, Business Affairs
and General Counsel
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DATED 1998
N B JACKSON & OTHERS
- and -
PRODUCTION RESOURCE GROUP LLC
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SHARE PURCHASE AGREEMENT
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CONTENTS
Clause Heading Page
1. Interpretation 1
2. Agreement to Sell 11
3. Consideration 11
4. Completion 12
5. The Warranties 16
6. Management Sellers' Continuing Obligations 17
7. Indemnity 19
8. Subscription Agreement 19
9. Restrictive Trade Practices Act 21
10. Successors and Assigns 21
11. Release, Indulgence, etc by Buyer 22
12. Notices 22
13. Confidentiality 23
14. Miscellaneous 23
15. Sale and Use Tax 24
16. Election for U.S. Income Tax Purposes 25
17. Further Assurance 25
18. Jurisdiction 25
Schedule 1
The Sellers 27
Schedule 2
The Company 28
Schedule 3
The Subsidiaries 30
Schedule 4
The Warranties 32
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Schedule 5
Limitations on Liability 45
Schedule 6
Properties 50
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DATE OF AGREEMENT 1998
PARTIES
(1) The Persons listed in Schedule 1 ("the Sellers")
(2) PRODUCTION RESOURCE GROUP LLC, a Delaware limited liability company
whose head office is at 539 Temple Hill Road New Windsor New York
12553 ("the Buyer")
IT IS AGREED THAT:
1. Interpretation
1.1 In this Agreement words and phrases shall, unless the context
requires otherwise, have the following meanings.
1.1.1 "the Accounts" means the audited financial statements
of the Company and the audited consolidated financial
statements of the Company and the Subsidiaries in each
case for the year ended on the Accounts Date.
1.1.2 "the Accounts Date" means 31 March 1998.
1.1.3 "the Act" means the Companies Act 1985.
1.1.4 "agreed form" means in the form of the draft, a copy of
which is annexed to this Agreement and initialled for
identification purposes by or on behalf of the parties
or the form of the document as executed by the relevant
parties.
1.1.5 "the Auditors" means Arthur Anderson of 1 Victoria
Square Birmingham B1 1BD.
1.1.6 "the Business" means the business of designing
manufacturing and supplying stage lighting systems for
concerts and other functions and events.
1.1.7 "the Buyer's Solicitors" means Gibson, Dunn & Crutcher
LLP and Nabarro Nathanson.
1.1.8 "Claim" means any claim by the Buyer pursuant to the
terms of this Agreement.
1.1.9 "the Company" means Light & Sound Design Holdings
Limited details of which are set out in Schedule
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2.
1.1.10 "Completion" means completion as per clause 0.
1.1.11 "the Completion Date" means the date of this Agreement.
1.1.12 "Consent" means approval, consent, ratification,
waiver or other authorisation (including any
Governmental Authorisation).
1.1.13 "the Consideration" means $14,567,571.
1.1.14 "the Deeds of Release" the deeds of release to be
executed on completion by Murray Ventures PLC and Sumit
Venture Fund One Limited Partnership relating to the
release of the debentures in their favour set out in
Schedules 2 and 3 and other security over any Group
Company.
1.1.15 "the Disclosure Letter" means the letter in the agreed
form delivered by the Management Sellers to the Buyer
immediately prior to execution of this Agreement which
contains certain disclosures to the Warranties.
1.1.16 "the Directors" means the directors of the Company and
any one of them as appropriate.
1.1.17 "the Employees" means the employees engaged by the
Company and the Subsidiaries at Completion a list of
whom is attached to the Disclosure Letter.
1.1.18 "Encumbrance" means any charge, lien, option, security
interest, any restriction on use, voting, transfer,
receipt or income or exercise of any other attribute
of ownership.
1.1.19 "Environment" means soil, land surface or subsurface
strata, surface waters (including navigable waters,
ocean waters, streams, ponds, drainage basins and
wetlands), groundwaters, drinking water supply, stream
sediments and plant and animal life.
1.1.20 "Environmental Law" means 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 commencement 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 minimising the hazardous characteristics of
wastes that are generated;
(d) reducing to acceptable levels the risks inherent
in the transportation and storage of hazardous
substances, pollutants, oil or other potentially
harmful substances;
(e) cleaning up pollutants that have been released,
preventing the threat of release or paying the
costs of such clean up or prevention; or
(f) 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.
1.1.21 "the Equipment" means all items of machinery,
equipment, furniture, fixtures and fittings used by the
Company and the Subsidiaries as at Completion.
1.1.22 "fully indemnified" means fully indemnified against
all costs, demands, expenses and proceedings in respect
of the matter concerned.
1.1.23 "GAAP" means generally accepted UK accounting
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principles, applied on a basis consistent with the
basis on which the Accounts were prepared.
1.1.24 "Governmental Authorization" means any approval,
consent, license, permit, waiver or other authorisation
issued, granted, given or otherwise made available by
or under the authority of any Governmental Body or
pursuant to any Legal Requirement.
1.1.25 "Governmental Body" means any:
1.1.25.1 nation, state, city, district or other
political subdivision or jurisdiction of
any nature;
1.1.25.2 national, local, foreign or other
government;
1.1.25.3 governmental or quasi-governmental
authority of any nature (including any
governmental ministry, agency, branch,
department, official or entity and any
court or other tribunal);
1.1.25.4 body exercising or entitled to exercise any
administrative, executive, judicial,
police, regulatory or taxing authority or
power of any nature.
1.1.26 "Group Companies" means, collectively, the Company,
LSD and LSD, Inc.
1.1.27 "the Intellectual Property" means in relation to the
Company all patents, copyrights, design rights, trade
marks, service marks, business names and trade names.
1.1.28 "Legal Requirement" means any national, local, foreign,
international order, constitution, law, ordinance,
principle of common law, regulation, statute or treaty.
1.1.29 "LSD" means Light and Sound Design Limited, one of the
Subsidiaries.
1.1.30 "LSD, Inc." means Light & Sound Design, Inc., one of
the Subsidiaries.
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1.1.31 "the Management Sellers" means all of the Sellers
other than John Lawrence, Murray Ventures PLC and Sumit
Venture Fund One Limited Partnership.
1.1.32 "Material Interest" means 10% or more of the share
capital of or other ownership interest in any person.
1.1.33 "Option Agreement" means the option agreement in the
agreed form to be entered into on completion between
the Management Sellers (1) and the Buyer (2).
1.1.34 "the Option Shares" means certain of the 'B' ordinary
shares of 20p each in the capital of the Company owned
by the Management Sellers further details of which are
set out in Schedule 1.
1.1.35 "Order" means any award, decision, injunction,
judgment, order, ruling, subpoena or verdict entered,
issued, made or rendered by any court, administrative
agency or arbitrator.
1.1.36 "the Pension Schemes" means the Light & Sound Design
Stafflink Group Personal Pension Scheme, the Light &
Sound Design Executive Pension Scheme and the Light &
Sound Design Inc 401 (K) Plan.
1.1.37 "person" means any individual, corporation,
partnership, joint venture, association, joint stock
company, limited liability corporation, or trust.
1.1.38 "Properties" means the leasehold properties of the
Company and subsidiaries further details of which are
set out in Schedule 6
1.1.39 "Registrable Restriction" means a provision by virtue
of which the Restrictive Trade Practices Act 1976
applies to an agreement.
1.1.40 "Related person" means with respect to a person:
1.1.40.1 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;
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1.1.40.2 any person that holds a Material Interest in
such specified person;
1.1.40.3 each person that serves as a director,
officer, partner, executor or trustee of
such specified person;
1.1.40.4 any person in which such specified person
holds a Material Interest;
1.1.40.5 any person with respect to which such
specified person serves as general partner
or trustee;
1.1.40.6 any Related Person of any individual
described in clause (0) or (0).
1.1.41 "the Sale Shares" means the shares in the capital of
the Company further details of which are set out in
column 2 of Schedule 1.
1.1.42 "the Sellers' Solicitors" means Dibb Lupton Alsop of
Windsor House Temple Row Birmingham B2 5LF.
1.1.43 "the Specified Rate" means 3% above the base
lending-rate from time to time of Midland Bank plc.
1.1.44 "the Service Agreements" the service agreements in the
agreed form to be entered into upon Completion between
each of the Management Sellers (1) and the Company (2).
1.1.45 "the Subscription Agreement" the subscription agreement
dated 13 April 1995 between Murray Ventures plc (1)
Sumit Venture Fund One Limited Partnership (2) N B
Jackson & Others (3) and the Company (4).
1.1.46 "the Subsidiaries" means LSD & LSD, Inc further details
of which are set out in Schedule 3.
1.1.47 "Tax Claim" means any claim by the Buyer pursuant to
the Tax Deed.
1.1.48 "Taxes" shall bear the meaning given to "Tax" in the
Tax Deed.
1.1.49 "the Tax Deed" means a deed in the agreed form
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which contains certain covenants on the part of the
Management Sellers relating to the taxation affairs of
the Company and LSD.
1.1.50 "the Taxes Act" means the Income and Corporation
Taxes Act 1988.
1.1.51 "Transaction Documents" means collectively this
Agreement, the Tax Deed, the Service Agreements, the
Option Agreement and the Disclosure Letter (or any one
of them as the case maybe).
1.1.52 "UK Companies" means, collectively, the Company and
LSD.
1.1.53 "UK Facilities" means any real property, leaseholds
or other interests in real property owned or operated
by any UK Company and any buildings.
1.1.54 "US Facilities" means any real property, leaseholds
currently owned or operated by LSD, Inc.
1.1.55 "the Warranties" means the warranties set out in
Schedule 4.
1.1.56 "the Warrantors" means the Management Sellers.
1.1.57 "Working Day" means a day (excluding Saturday and
Sunday) on which clearing banks are generally open for
business in the City of London.
1.2 Words and phrases which are defined in the Act have the same
meaning in this Agreement.
1.3 Any reference to a statutory provision includes all
modifications, enactments and amendments of that provision and
any regulations which may have been made under it in both cases
prior to the date of this Agreement.
1.4 References to clauses and schedules are unless specified
otherwise to the clauses and schedules of this Agreement.
1.5 References to the masculine gender include the feminine and vice
versa. Similarly, references to the singular include the plural
and vice versa.
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1.6 The headings and index to this Agreement have been inserted for
convenience only. They are not to affect its construction or
interpretation.
1.7 The Schedules all form part of this Agreement.
1.8 In clause 0 all references to "the Company" are to include a
corresponding reference to the Subsidiaries.
1.9 In Schedule 4 references to the Company are to include a
corresponding reference to Light & Sound Design Limited and
Light & Sound Design Inc save where expressly stated to the
contrary.
1.10 In Schedule 4 references to corporate constitution documents
which have an English meaning are to include references in
relation to Light & Sound Design Inc to the corresponding
documents under the laws applicable to the incorporation of
that entity.
2. Agreement to Sell
2.1 The Sellers will sell and the Buyer will buy the Sale Shares.
2.2 The Sale Shares are sold:
2.2.1 with full title guarantee;
2.2.2 with the benefit of all rights attaching to them at
Completion;
2.2.3 free from all rights of pre-emption (which the Sellers
waive or will procure the waiver of);
2.2.4 free from any Encumbrances.
2.3 Each Seller hereby warrants that he or it has incurred no
obligation or liability, contingent or otherwise for brokerage
or finders fees or agents commission or other similar payments
or payments of professional fees in connection with the
transaction contemplated by this Agreement which are or could
become the obligation or liability of any Group Company.
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3. Consideration
3.1 The consideration for the sale of the Sale Shares and the
obligations of the Sellers pursuant to this Agreement is the
payment by the Buyer of the Consideration and the entering into
of the Option Agreement.
4. Completion
4.1 The Buyer will not be bound to complete the purchase of any of
the Sale Shares unless the Sellers satisfy all of their
obligations pursuant to clauses 0 and 0 at the same time.
4.2 The sale and purchase of the Sale Shares will be completed at a
venue to be agreed by the parties on the Completion Date. The
following will then occur.
4.3 The Sellers are to deliver to the Buyer:
4.3.1 duly executed transfers in respect of the Sale Shares
in favour of the Buyer or its nominee;
4.3.2 a duly executed transfer in respect of any shares in
the Subsidiaries which are not registered in the name
of the Company in favour of the Company;
4.3.3 the share certificates relating to the Sale Shares and
any shares transferred as contemplated by clause 0 (or
an indemnity for lost share certificates in a form
reasonably satisfactory to the Buyer);
4.3.4 the statutory books of the Company and LSD written up
to date;
4.3.5 the books of unissued share certificates and the
common seal of the Company and LSD;
4.3.6 the certificate of incorporation and any certificates
of incorporation on change of name of the Company and
LSD;
4.3.7 all available prints of the memorandum and articles of
association of the Company and LSD;
4.3.8 the share register, transfer records and minute books
of Light and Sound Design Inc complete and up to date
(but not to include the events
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occurring at or immediately prior to Completion) and
its Certificate of Incorporation and Common Seal.
4.3.9 the Tax Deed duly executed by the Management Sellers;
4.3.10 the written resignation of the Auditors as auditors of
the Company and LSD containing an acknowledgement that
they have no claim for compensation for loss of office,
professional fees or otherwise and a statement pursuant
to section 394 of the Act that there are no
circumstances connected with such resignations which
the Auditors consider should be brought to the
attention of the members or creditors of the Company or
LSD;
4.3.11 a banker's draft in favour of the Company or the
Subsidiaries in respect of all amounts owed to it by
the Sellers or a certificate from the Sellers that
there are no such sums owing;
4.3.12 the Deeds of Release duly executed by Murray Ventures
PLC and Sumit Venture Fund One Limited Partnership;
4.3.13 the Option Agreement duly executed by the Management
Sellers.
4.3.14 the Service Agreements executed by each of the
Management Sellers;
4.3.15 the consents described in clause 16.
4.4 The Sellers are to ensure that board meetings of the Company
and LSD are held at which:
4.4.1 the transfers of the Sale Shares are approved for
registration subject only to being stamped;
4.4.2 in the case of the Subsidiaries the transfers referred
to in clause 0 are approved for registration subject
only to being stamped;
4.4.3 John Lawrence and Richard Collins deliver their
written resignations as directors of the Company and
the Subsidiaries in the agreed form;
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4.4.4 the nominees of the Buyer are appointed as directors;
4.4.5 all existing authorities to bankers are amended as the
Buyer may direct;
4.4.6 Ernst & Young are appointed auditors; and
4.4.7 the accounting reference dates are changed to 31
December.
4.5 The Buyer and the Management Sellers are to enter into and
exchange engrossments of the Option Agreement.
4.6 The Management Sellers will and the Buyer will procure that the
Company enters into and exchanges engrossments of the Service
Agreements.
4.7 The Buyer will then:
4.7.1 deliver to the Sellers' Solicitors a counterpart of the
Disclosure Letter, duly executed by the Buyer's
Solicitors;
4.7.2 deliver to the Management Sellers a duly executed
counterpart of the Option Agreement;
4.7.3 pay the sum of $14,567,571 in respect of the
Consideration by wire transfer to the account of the
Seller's Solicitors with the Midland Bank Plc, New
Street Branch, Birmingham, England, Sort Code:
40-11-18, Account Number: 37612414 Ref 605-601236-4000
(Name: Dibb Lupton Alsop Call Deposit US $ Account);
4.7.4 deliver to the Management Sellers an executed
counterpart of the Tax Deed; and
4.7.5 pay to Murray Ventures Plc and Sumit Venture Fund One
Limited Partnership the sum of ,42,500 in full and
final settlement of all sums due to them in respect of
the Cumulative Preferred Participating Ordinary Shares
of 10p each and Cumulative Redeemable Preference Shares
of 50p each held by them prior to the transfer referred
to in clause 0.
4.7.6 deliver to the Warrantors executed Counterparts of the
Service Agreements.
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4.8 After Completion the parties will do all acts and things which
may prove necessary to implement in full their respective
obligations under the terms of this Agreement.
5. The Warranties
5.1 The Management Sellers severally warrant to the Buyer as at the
Completion Date in the terms set out in Schedule 4 subject
only to:
5.1.1 any matter which is fairly disclosed in the Disclosure
Letter;
5.1.2 the provisions of this clause 0 and Schedule 5; and
5.1.3 any matter or thing done or omitted to be done
pursuant to this Agreement.
5.2 The Management Sellers acknowledge that the Buyer has entered
into this Agreement in reliance upon, amongst other things, the
Warranties.
5.3 The Warranties shall be separate and independent.
5.4 All Warranties which relate to the Management Sellers'
knowledge, information, belief or awareness are given by them
after having made all reasonable enquiries and investigations.
5.5 For the avoidance of doubt Murray Venture PLC, Summit Venture
Funds One Limited and John Lawrence shall have no liability to
the Buyer under this Agreement or the Tax Deed save in respect
of:-
5.5.1 clause 0;
5.5.2 clause 0;
5.5.3 clause 2.3;
5.5.4 Clause 0;
5.5.5 Clause 4.3.11;
5.5.6 Clause 4.3.12;
5.5.7 clause 0;
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5.5.8 clause 6.2;
5.5.9 clause 0;
5.5.10 clause 8;
5.5.11 clause 13;
5.5.12 clause 14.3;
5.5.13 clause 14.6; and
5.5.14 clause 16;
5.5.15 Clause 17.
6. Management Sellers' Continuing Obligations
6.1 Notwithstanding Completion the Management Sellers shall:
6.1.1 continue to give to the Buyer such information as the
Buyer may reasonably require relating to the Company
the Business and its employees, customers and
suppliers;
6.1.2 recommend and introduce the Buyer to customers,
suppliers and professional contacts of the Company; and
6.1.3 at the Buyer's request and cost execute all such
documents and do all such things and afford to the
Buyer such assistance as the Buyer may require for the
purpose of implementing all the provisions of this
Agreement.
6.2 The Sellers severally (but not jointly) undertake that they will
not at any time after Completion without the Buyer's prior
written consent:
6.2.1 use any name identical to or likely to be confused with
a name used by the Company prior to Completion in
connection with the Business or make reference in any
way to such a name (and for this purpose, "name"
includes a company or trading name);
6.2.2 make any public announcement regarding the Company, the
Business or this transaction save as may be required by
law or the rules of any recognised investment exchange;
or
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6.2.3 disclose or use any trade secrets or confidential
information (other than any which is public knowledge)
relating to the Company and/or the Business which they
have acquired prior to Completion.
6.3 Save as specified in clause 0 the restrictions set out in clause
0 are to prevent each of the Sellers from carrying out any of
the prohibited activities on their own behalf or jointly with
or as servant, agent, manager, employee, consultant, director or
shareholder of any other person, firm, company or body.
6.4 Nothing in this clause is to prevent any of the Management
Sellers from:
6.4.1 holding for investment purposes up to 3% of the issued
share capital of a company whose shares are dealt in
or quoted on a recognised stock exchange; or
6.4.2 performing their duties under any contract of
employment with the Company.
6.5 In this clause 0 all references to the Company shall be deemed
to include a reference to each of the Subsidiaries.
6.6 The parties consider the commitments contained in this clause 0
to be reasonable as between themselves and the public interest.
If, however, any of them are found by a court to be unreasonable
and unenforceable but would be reasonable and enforceable if
certain words were deleted, then the commitments will apply with
those words deleted.
7. Indemnity
Following Completion, the Company and the Buyer will keep Nicholas
Jackson and Terence Lee (two of the Management Sellers) fully
indemnified against all liabilities, costs, claims and expenses
(including without limitation all reasonable professional fees)
incurred by either of them in relation to the claim against them by
Friend & Co further details of which are set out in the Disclosure
Letter. Save to the extent that any such liabilities costs claims and
expenses are incurred as a result of the wilful misconduct or gross
negligence of either Nicholas Jackson or Terence Lee.
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8. Subscription Agreement
8.1 Each of the Sellers and the Company and the Subsidiaries hereby
forever release and discharge each other (and their respective
affiliates, employees and agents) from all claims, demands,
damages, debts, liabilities, obligations and causes of action,
whether fixed or contingent and whether known or unknown, based
on facts existing on or prior to the date of this Agreement and
arising under the terms of the Subscription Agreement.
8.2 Murray Ventures plc and Sumit Venture Fund One Limited
Partnership (the "Investors") hereby forever release and
discharge the Group Companies their affiliates, employees and
agents from all claims, demands, damages, debts, liabilities,
obligations and causes of action, whether fixed or contingent
and whether known or unknown, based upon facts existing on or
prior to the date hereof (other than any claims arising out of
the Investors' investment in any companies other than any Group
Company), including, but not limited to, any obligations
pursuant to the following agreements:
8.2.1 Share Subscription Agreement, dated April 13, 1995,
between the Investors, Nicholas Jackson and others, and
Manordegree Limited;
8.2.2 Secured Loan Notes and Debentures, dated April 13,
1995, executed by Manordegree Limited in favour of the
Investors; and
8.2.3 Guarantees, Debentures and Security Agreement, dated
April 13, 1995, executed by Shinetest Limited and
Shinetest, Inc. in favour of the Investors.
8.2.4 Subject to clause 4.7.5 any unpaid accumulated
dividends due in respect of any of the Sale Shares
held by the Investors.
8.3 The Investors hereby waive and release the Company from any
obligations pursuant to the Articles of Association of the
Company to redeem the CPPO Shares or Preference Shares (as
defined in the Articles of Association).
8.4 The releases and waivers contained in clauses 0 and 0 shall not
apply to any claims which arise as the result of the fraud or
wilful default of the party against whom a claim is made.
15
<PAGE>
9. Restrictive Trade Practices Act
9.1 If any provision of this Agreement is a Registrable Restriction
the following shall apply:
9.1.1 each of the parties shall either independently or
together with the other party furnish this Agreement
to the Director General of Fair Trading within 3 months
of the date of this Agreement; and
9.1.2 none of the parties will give effect to, or enforce or
purport to enforce any Registrable Restriction until
the day following the day upon which the particulars of
that Registrable Restriction are furnished to the
Director General of Fair Trading in accordance with the
provisions of the Restrictive Trade Practices Act 1976.
9.2 The parties agree that if this Agreement is not furnished in
accordance with the provisions of clause 0, then any Registrable
Restriction (whether contained in this Agreement or not) forming
part of the arrangement of which this Agreement is itself part
will be void and no party will seek to enforce such Registrable
Restriction.
10. Successors and Assigns
Neither party may assign its rights or obligations under this Agreement
without the consent in writing of the other.
11. Release, Indulgence, etc by Buyer
Any liability to the Buyer under this Agreement may in whole or in part
be released, compounded or compromised or time or indulgence given by
the Buyer in its absolute discretion as regards any of the Management
Sellers under such liability without in any way prejudicing or
affecting its rights against any other of the Management Sellers under
the same or a like liability whether joint or several or otherwise.
12. Notices
12.1 Any notice given under this Agreement is to be in writing and
signed by or on behalf of the party giving it. The notice may
be served by leaving it at or sending it by facsimile
transmission, pre-paid recorded delivery, reputable
international courier or registered post to:
12.1.1 in the case of the Buyer, its head office; and
16
<PAGE>
12.1.2 in the case of the Management Sellers, their addresses
set out in Schedule 1 or such other address within the
United Kingdom or the United States as they may notify
to the Buyer from time to time.
12.2 Any notice so served is deemed to have been received:
12.2.1 in the case of personal service, upon delivery;
12.2.2 in the case of facsimile transmission, 1 hour after the
time of despatch provided that the sender obtains
confirmation of transmission; and
12.2.3 in the case of international courier, pre-paid recorded
delivery or registered post, 96 hours from the time of
posting, save that where a notice would be deemed to be
received on a day which is not a Working Day, the
notice shall instead be deemed to be received at 9.00
am on the next Working Day.
12.3 For notices served by post it will be sufficient in proving
service to establish that the envelope containing the notice
was properly stamped, addressed and posted.
13. Confidentiality
Save to the extent required by law or the rules of any recognised
investment exchange, no announcement concerning the terms of or any
matters contemplated by this Agreement or any matter ancillary to it
may be made by or on behalf of any party to the Agreement except with
the prior written consent of all of the other parties.
14. Miscellaneous
14.1 This Agreement may be executed in any number of counterparts and
by the several parties to it on separate counterparts, each of
which when so executed and delivered shall be an original, but
all the counterparts shall together constitute one document.
14.2 This Agreement will remain in full force and effect after
Completion in respect of any matters which have not been
performed in full at such time.
14.3 Each of the parties is to be responsible for its or his own
costs relating to the preparation and execution and performance
of this Agreement and any document entered
17
<PAGE>
into pursuant to its terms.
14.4 This Agreement and the documents referred to in it constitute
the entire agreement between the parties. No variation of this
Agreement will be effective unless it is in writing signed by
or on behalf of all of the parties.
14.5 If any monies falling due for payment pursuant to this Agreement
are not paid in full on the due date for payment they will bear
interest at the Specified Rate from the due date for payment
until the date of payment in full. Interest will be calculated
on a daily basis and compounded quarterly on the last day of
March, June, September and December in each year. Interest will
not accrue on the Completion monies provided they are paid
within 10 working days of the date of this Agreement.
14.6 The Management Sellers and the Buyer shall consult together as
to the terms of, the timetable for and manner of publication of,
any announcement to the Employees, the customers and suppliers
or otherwise which either party may desire or be obliged to make
regarding this Agreement. Except as agreed between the
Management Sellers and the Buyer, such agreement not to be
unreasonably withheld or delayed, or to the extent required by
law or any regulatory authority where there is no opportunity to
consult with the other, neither the Sellers nor the Buyer shall
make or authorise any public announcement or statement
concerning the subject matter of this Agreement.
15. Sale and Use Tax
The parties recognise that LSD, Inc. may be deemed to have transacted
business in several of the United States of America. In so doing,
issues may arise as to the liability of LSD, Inc. for sales, use,
franchise and income taxes in said states other than California and
Tennessee. While the Management Sellers believe that all requisite tax
returns have been filed and taxes paid, if any Governmental Body, other
than the States of California, Tennessee, and any State in which LSD
Inc maintains or has maintained a place of business or from which more
than 10% of LSD Inc's net revenues in any fiscal year have been derived
shall assert or assess or threaten to assert or assess any liability
for sales, use, franchise and income taxes against LSD, Inc., the
Management Sellers shall have no responsibility or liability for the
defense or payment of same and the Buyer shall procure that LSD Inc
pays such taxes but for the avoidance of doubt this clause 15 shall not
exclude the liability of the
18
<PAGE>
Management Sellers under this Agreement or the Tax Deed in respect of
such taxes in the states of California, Tennessee and any State in
which LSD Inc maintains or has maintained a place of business or from
which more than 10% of LSD Inc's net revenues in any fiscal year have
been derived.
16. Election for U.S. Income Tax Purposes
On or before Completion each Seller agrees to provide the Buyer with a
written consent with respect to the Company and LSD to treat each such
company as either a partnership or a disregarded entity for U.S.
Federal income tax purposes pursuant to Section 301.7701-3(c) of U.S.
Treasury Regulations. The election shall be effective as of the day
immediately before the Completion Date and each consent shall be
provided on separate statements substantially in the form agreed.
Notwithstanding the foregoing, whether or not the Company and/or LSD
shall file an election pursuant to U.S. Treasury Regulation Section
301.7701-3(c) shall be made in the sole and absolute discretion of the
Buyer.
17. Further Assurance
The Sellers will execute all deeds and documents and provide such
reasonable assistance as may be necessary to validly transfer title to
the Sale Shares to the Buyer and to give full effect to the
transactions contemplated by this Agreement .
18. Jurisdiction
This Agreement will be governed by English Law. The parties agree to
submit to the exclusive jurisdiction of the Courts of England.
IN WITNESS of which this document has been executed and on the date set out
above delivered as a deed.
19
<PAGE>
Schedule 1
The Sellers
Part 1
The Management Sellers
<TABLE>
<CAPTION>
1 2 3 4 5
SHAREHOLDER NUMBER OF SALE SHARES NUMBER % OF AMOUNT
OF CLAIM OF
OPTION CONSIDERATION
SHARES
- -----------------------------------------------------------------------------------------------------------------------------------
'A' 'B' Cumulative Cumulative
Ordinary Ordinary Preferred Redeemable
Shares of Shares Participating Preference
10p each of 20p Ordinary Shares Shares of
each of 10p each 50p each
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Nick Jackson 0 25,000 0 0 6,250 25 $1,415,615
- -----------------------------------------------------------------------------------------------------------------------------------
Tim Murch 0 20,000 0 0 5,000 20 $1,161,293
- -----------------------------------------------------------------------------------------------------------------------------------
John Lobel 0 12,500 0 0 3,125 12.5 $725,807
- -----------------------------------------------------------------------------------------------------------------------------------
Bill Hewlett 0 12,500 0 0 3,125 12.5 $725,807
- -----------------------------------------------------------------------------------------------------------------------------------
Dave Keighley 15,000 0 0 0 1,875 7.5 $669
- -----------------------------------------------------------------------------------------------------------------------------------
Terry Lee 15,000 0 0 0 1,875 7.5 $669
- -----------------------------------------------------------------------------------------------------------------------------------
Jerry Reidy 15,000 0 0 0 1,875 7.5 $669
- -----------------------------------------------------------------------------------------------------------------------------------
Mickey Curbishley 15,000 0 0 0 1,875 7.5 $669
Part 2
<CAPTION>
A B
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Murray
Ventures PLC 0 0 203,703 1,416,667 0 0 $7,000,000
- -----------------------------------------------------------------------------------------------------------------------------------
Sumit
Venture Fund
One Limited
Partnership 0 0 101,852 708,333 0 0 $3,500,000
- -----------------------------------------------------------------------------------------------------------------------------------
John Lawrence 8,333 0 0 0 0 0 $373
</TABLE>
20
<PAGE>
<TABLE>
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
TOTAL 68,333 70,000 305,555 2,125,000 25,000 100 $14,567,571
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
21
<PAGE>
Schedule 2
The Company
Company number : 3024622
Date of incorporation : 21 February 1995
Authorised
share capital : 1,125,000
Issued share capital : ,1,118,888,80 registered as follows:
No of Class of
Member Shares Shares
- ------ ------ ------
Nick Jackson 'B' Ordinary Shares of 20p
31,250
Tim Murch 25,000 'B' Ordinary Shares of 20p
John Lobel 15,625 'B' Ordinary Shares of 20p
Bill Hewlett 15,625 'B' Ordinary Shares of 20p
Dave Keighley 1,875 'B' Ordinary Shares of 20p
Terry Lee 1,875 'B' Ordinary Shares of 20p
Jerry Reidy 1,875 'B' Ordinary Shares of 20p
Mickey Curbishley 1,875 'B' Ordinary Shares of 20p
Terry Lee 15,000 'A' Ordinary Shares of 10p each
Jerry Reidy 15,000 'A' Ordinary Shares of 10p each
Mickey Curbishley 15,000 'A' Ordinary Shares of 10p each
Dave Keighley 15,000 'A' Ordinary Shares of 10p each
John Lawrence 8,333 'A' Ordinary Shares of 10p each
Murray Ventures plc 203,703 Cumulative Participating Preferred
Ordinary Shares of 10p
Sumit Venture Fund 101,852 Cumulative Participating Preferred
One Limited Ordinary Shares of 10p
Partnership
Murray Ventures plc 1,416,667 Cumulative Redeemable Preference
Shares of 50p
22
<PAGE>
No. of Class of
Member Shares Shares
- ------ ------ ------
Sumit Venture Fund 708,333 Cumulative Redeemable Preference
One Limited Shares of 50p each
Partnership
Registered office : 201 Coventry Road Birmingham West Midlands
Accounting reference
date : 31 March
Directors : N B Jackson, J Lawrence, J Reidy,
T J Murch, R A Collins, D J Keighley
Secretary : J Reidy
Auditors : Arthur Anderson
<TABLE>
Charges and
debentures : Document
Date of
Chargee Creation
------- ----------
<S> <C> <C>
Sumit Venture Debenture 13 April 1995
Fund One Limited
Partnership
Murray Debenture 13 April 1995
Ventures plc
Midland Bank Fixed & 23 May 1995
plc Floating
Charge
Midland Bank Fixed & 3 July 1995
plc Floating
Charge
</TABLE>
23
<PAGE>
Schedule 3
The Subsidiaries
Part 1
------
Light & Sound Design Limited
----------------------------
Company number : 3014564
Date of Incorporation : 26 January 1995
Authorised share
capital : ,100
Issued share capital : ,2 registered as follows:
No of Class of
Member Shares Shares
- ------ ------ ------
Light & Sound Design 2 Ordinary
(Holdings) Limited
Registered office : 201 Coventry Road Birmingham West
Midlands
Accounting Reference
date : 31 March
Directors : M Curbishley, T Lee, N B Jackson, J Reidy,
D J Keighley
Secretary : J Reidy
Auditors : Arthur Andersen
Charges and Date of
debentures Chargee Document Creation
------- -------- --------
Sumit Venture Debenture 13.04.95
Fund One
Limited
Partnership
Murray Ventures Debenture 13.04.95
24
<PAGE>
plc
Midland Bank Fixed & 23.05.95
plc Floating Charge
Part 2
------
Light & Sound Design Inc.
-------------------------
Date of Incorporation : 7 April 1995
Registered Office : 9107 Wiltshire Boulevard
Suite 3000, Beverley Hills
California 90210
Authorised share
capital : 1,000,000 of no par value
Issued share capital :
No of Class of
Member Shares Shares
- ------ ------ ------
Light & Sound Design
(Holdings) Limited 416,000 Common Stock
Accounting Reference
Date : 31 March
Directors : N B Jackson
T Murch
J Lobel
W E Hewlett
Secretary : J Lobel
Auditors : Arthur Anderson
25
<PAGE>
Charges : Security Interest dated 13 April 1995 in
favour of Murray Ventures PLC
Security Interest dated 13 April 1995
in favour of Sumit Venture Fund One
Limited Partnership
Charge dated 23 May 1995 in favour of
Midland Bank Plc
26
<PAGE>
Schedule 4
The Warranties
1 Capacity
1.1 The information contained in the Schedules is true,
complete and accurate in all respects.
1.2 The copy of the memorandum and articles of association of
the Company annexed to the Disclosure Letter is true,
accurate and up-to-date. It has annexed to it copies of
all resolutions and agreements as are required by law to
be annexed to them.
1.3 All the assets of the Company or which it purports to own
(including without limitation those set out on the HITS
listing and the HIREMATE listing annexed to the Disclosure
Letter) are its absolute property and are free of any
Encumbrance. They are not subject to any charge,
mortgage, leasing or hiring agreement, hire-purchase
agreement or agreement for payment on deferred terms.
1.4 The Company is duly organised and validly existing under
the Act. It has full power and authority under the Act
to conduct the 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 the material obligations under
the contracts to which it is a party.
1.5 The Sellers have full power and authority to enter into
the Agreement which will constitute a legally binding
commitment on their part.
1.6 Except as set out in the Disclosure Letter, the execution
delivery and performance of this Agreement will not:-
1.6.1 contravene, (a) any provision of the Memorandum or
Articles of Association of the Company or (b) any
resolution adopted by the Board of Directors or
the shareholders of the Company;
1.6.2 contravene, conflict with or result in a violation
of, or give any Governmental Body or other person
the right to challenge any
27
<PAGE>
of the transactions contemplated hereby or to
exercise any remedy or obtain any relief under any
Legal Requirement or any Order to which the
Company or any Seller, or any of the assets owned
or used by the Company may be subject;
1.6.3 contravene, conflict with, or result in a
violation of any of the terms or requirements of,
or give any Governmental Body the right to
revoke, withdraw, suspend, cancel, terminate or
modify, any Governmental Authorisation that is
held by the Company or that otherwise relates to
the business of, or any of the assets owned or
used by, the Company;
1.6.4 result in the imposition or creation of any
Encumbrance upon or with respect to any of the
assets owned or used by the Company.
1.7 Except as set out in the Disclosure Letter, the Company
is not required to give any notice to or obtain any
consent from any person in connection with the execution
and delivery of this Agreement.
2 The Accounts
2.1 A true copy of the Accounts is annexed to the Disclosure
Letter.
2.2 The Accounts:
2.2.1 comply with the provisions of the Act;
2.2.2 have been prepared in accordance with generally
accepted accountancy practice in the United
Kingdom;
2.2.3 show a true and fair view of the state of affairs
of the Company as at the Balance Sheet Date and of
the profit or loss of the Company for the
accounting period ended on that date.
2.2.4 value stock and work in progress at the lower of
cost and net realisable value.
2.3 All accounts receivable reflected in the Accounts
represent valid obligations arising from sales
28
<PAGE>
actually made or services actually provided in the
ordinary course of business.
2.4 There is attached to the Disclosure Letter a list of all
accounts receivable as at 31 May. The Warrantors are not
aware, having made no enquiry other than of each other,
of any reason why such receivables will not be collected
in the ordinary course of business.
3 Events since the Accounts Date
3.1 Since the Accounts Date the Company has carried on its
business in the ordinary and normal course so as to
maintain the same as a going concern and except as set
out in the Disclosure Letter there has not been any:
3.1.1 increase by the Company in any bonuses, salaries
or other compensation to any shareholder,
director, officer or employee or entry into any
employment, severance or similar contract with
any director, officer or employee earning in
excess of ,30,000 per annum after such increase;
3.1.2 adoption of, or increase in the payments to or
benefits under, any profit sharing, bonus,
deferred compensation, pension, retirement or
other employee benefit plan for or with any
employees of the Company;
3.1.3 entry into, termination of, or receipt of written
notice of termination of any contract, involving
a total remaining commitment by the Company of
,50,000;
3.1.4 material change in the accounting policies used by
the Company;
3.1.5 incurrence of any actual liabilities in excess of
50,000 as a result of any event or transaction or
series of related events or transactions, or
discharge or satisfaction of any Encumbrances,
other than in the ordinary course of business,
payment of any liabilities, other than in the
ordinary course of business, or failure to pay or
discharge when due any liabilities of which the
failure to pay or discharge has caused or will
cause any material damage or risk of material
loss to it or any of its
29
<PAGE>
assets or properties (liabilities in this context
includes without limitation any indebtedness,
guarantee, cost, expense, fine or responsibility
in respect of any third party claim or violation
of any legal requirement but shall exclude any
matter relating to the Environment or any matter
for which the Company has compulsory insurance
cover at Completion);
3.1.6 creation by the Company of any guarantee of any
indebtedness for money borrowed, or mortgaging or
pledging of any of its assets or subjecting any
of its assets to any Encumbrance;
3.1.7 Any capital commitments or expenditure in excess
of ,10,000;
3.1.8 dividend or other distribution paid or declared by
the Company;
3.1.9 any material adverse change in the business or
operations of the Company.
4 Legislation
4.1 So far as the Warrantors are aware all necessary licences,
consents, permits and authorities (public and private)
have been obtained by the Company to enable it to carry
on its business in the manner in which it is now carried
on. So far as the Warrantors are aware all such licences,
consents, permits and authorities are valid and
subsisting. The Warrantors know of no reason why any of
them should be suspended, cancelled or revoked the
Disclosure Letter contains details of all such licences,
consents, permits and authorities.
4.2 So far as the Warrantors are aware the Company has
conducted the Business in all material respects in
accordance with all applicable laws and regulations of
the United Kingdom.
4.3 The minute books, stock record books and other records of
the Company, all of which have been made available to the
Buyer, are complete and correct in all material respects
and have been maintained in accordance with all Legal
Requirements. The minute books of the
30
<PAGE>
Company contain accurate and complete records of all
meetings held of and corporate action taken by, the
Shareholders, the Boards of Directors and committees of
the Boards of Directors of the Company, and no meeting
of any such Shareholders, Board of Directors or
committee has been held for which minutes have not been
prepared and are not contained in such minute books
except to the extent set forth in clause 4.3.8.
5 Litigation
5.1 No claim of any nature has been made against the Company
which has not been settled in full and there has not
been any and so far as the Warrantors are aware there is
no investigation, decree or judgment of any court
outstanding or anticipated against the Company which has
had or may have a material adverse effect upon the
Company.
5.2 The Company is not at present engaged, whether as
plaintiff or defendant or otherwise, in any legal
action, proceedings or arbitration and is not being
prosecuted for any criminal offence. There are no
circumstances of which the Warrantors are aware likely
to lead to any such claim, legal action, proceedings,
arbitration or prosecution.
5.3 There is no Order to which the Company, or any of the
assets owned or used by the Company, is subject.
5.4 No Seller is subject to any Order that relates to the
business of, or any of the assets owned or used by, the
Company.
5.5 So far as the Warrantors are aware, no officer, director
or employee of the Company is subject to any Order that
prohibits such officer, director, or employee from
engaging in or continuing any conduct, activity or
practice relating to the business of the Company.
6 Trading and associated matters
6.1 The Company does not use on its letterhead, brochures,
sales literature or vehicles or otherwise carry on its
business under a name other than its corporate name.
6.2 There are no monies owed by the Company to the Sellers
nor any monies owed by the Sellers to the Company.
31
<PAGE>
6.3 Not more than 10% of the aggregate amount of all the
sales of the Company are made to any single source.
6.4 The Disclosure Letter contains details of:
6.4.1 each contract not entered into in the ordinary
course of business that involves performance of
services or delivery of goods or materials by
the Company of an amount or value in excess of
,50,000;
6.4.2 each contract that was not entered into in the
ordinary course of business and that involves
expenditure or receipt by the Company in excess
of ,50,000;
6.4.3 each collective bargaining agreement and other
contract to or with any labour union or other
employee representative of the Company's
employees;
6.4.4 each contract containing covenants that in any
way purport to restrict the business activity
of the Company or any Affiliate of the Company
or limit the freedom of the Company or any
Affiliate of the Company to engage in any line
of business or to compete with any person;
6.4.5 each contract providing for payments by the
Company to or to the Company by any person
based on sales, purchases or profits, other
than direct payments for goods or services;
6.4.6 each power of attorney granted by the Company
that is currently effective and outstanding;
6.4.7 each contract entered into other than in the
ordinary course of business that contains or
provides for an express undertaking by the
Company to be responsible for consequential
damages;
6.4.8 each written warranty, guaranty and other
similar undertaking with respect to contractual
performance extended by the Company other than
in the ordinary course of business; and
32
<PAGE>
6.4.9 each contract to which the Company is a party
involving a sharing of profits losses costs or
liabilities by the Company with any other
person.
6.5 Except as set out in the Disclosure Letter:
6.5.1 so far as the Warrantors are aware having made
no enquiry, no officer, director or employee,
of the Company is bound by any contract that
purports to limit the ability of such officer,
director, or employee, to (a) engage in or
continue any conduct, activity or practice
relating to the business of the Company, or (b)
assign to the Company or to any other person
any rights to any invention, improvement or
discovery.
6.6 Except as set out in the Disclosure Letter, each such
contract required to be set out in paragraph 6.4 above
is in full force and effect and the Company has not
given to or received from any other person, any written
notice regarding any material default under any such
Contract and the Warrantors are not aware of any
circumstances likely to cause any such notice to be
served.
6.7 There are no current renegotiations of any material
amounts paid or payable to the Company (being amounts in
excess of ,50,000) under current or completed contracts
with any person and, so far as the Warrantors are aware,
no such person has made written demand for such
renegotiation.
6.8 The Contracts relating to the sale, design, manufacture
or provision of products or services by the Company 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
consideration having been paid or promised, that is or
would be in violation of any Legal Requirement.
6.9 So far as the Warrantors are aware having made no enquiry
the Company as at Completion has no actual or contingent
liabilities or obligations other than liabilities or
obligations provided for in the
33
<PAGE>
Accounts or liabilities in respect of goods and services
supplied to the Company in the ordinary course of
business. Liabilities in this context includes without
limitation any indebtedness, guarantee, cost, expense
fine or responsibility other than any relating to the
Environment or any for which the Company has compulsory
insurance cover as at Completion.
7 Employees
7.1 So far as the Warrantors are aware the Company has
complied with all obligations imposed by statute,
regulation, contract and common law relating to the
Employees and the Company has maintained adequate and
suitable records regarding their service.
7.2 The Warrantors have not received any notice of termination
from any of the Employees in respect of their contracts
of employment.
7.3 There are not in existence any service agreements with
directors, officers or employees of the Company which
cannot be terminated by 3 months' notice or less without
giving rise to any claim for damages or compensation
(other than a statutory redundancy payment).
7.4 The Employees have been paid all sums to which they are
entitled from the Company.
7.5 There are no disputes between the Company and the
Employees and so far as the Warrantors are aware there
are no facts, matters or circumstances likely to give
rise to any such disputes or any claim by any of the
Employees or any former employee of the Company.
7.6 The Disclosure Letter contains a complete and accurate
list of the following information for each employee or
director of the Company, employer; name; job title;
current salary and participation under any employee
benefit plan, including any pension plan.
7.7 Since the date of the Company's incorporation, it has not
been and is not currently a party to any collective
bargaining or other labour contract, and there has not
been and there is not presently pending or existing, any
strike, slowdown, picketing or work stoppage.
34
<PAGE>
7.8 The Warrantors are not aware of any pending grievance or
dispute that could give rise to any strike, slow down,
picketing or work stoppage or disruption.
8 Insurances
8.1 The Disclosure Letter contains full particulars of all
insurance policies validly effected by the Company.
8.2 The Disclosure Letter sets out a summary of the claims
history under each policy.
8.3 Except as set out in the Disclosure Letter:
8.3.1 All policies to which the Company is a party or
that provide coverage to the Company, or any
director or officer of the Company:-
8.3.1.1 are valid and existing;
8.3.1.2 and the premiums in respect of them
are fully paid up to date
and the Company has duly performed all its obligations
under such policies.
9 Intellectual Property
9.1 The details of all Intellectual Property owned by the
Company are contained in the Disclosure Letter and are
accurate in all material respects and the Company has
complied with all formal Legal Requirements relating to
the maintenance of or application for the registration
of such Intellectual Property.
9.2 So far as the Warrantors are aware none of the
Intellectual Property used by the Company infringes the
rights of any third party and no third party is
currently infringing any of the Intellectual Property
used by the Company and the Warrantors are not aware of
any circumstances likely to give rise to any such
infringement.
9.3 The Company is not under any obligation to make payment
to third parties in respect of the Intellectual Property
used by it.
35
<PAGE>
10 The Properties
10.1 The Properties comprise all the land and premises that
the Company owns, occupies or otherwise uses.
10.2 The Company has in its possession all title deeds and
agreements to which it is a party and other documents
which it owns or which ought to be in its possession,
and these are properly executed and stamped.
10.3 With respect to the real property that is leased by the
Company:
10.3.1 True, complete and up-to-date copies of every
lease and sublease to which the Company is a
tenant or subtenant ("the Leases") are annexed
to the Disclosure Letter.
10.3.2 The Company has paid the rents due under the
Leases and has not received written notification
from any Landlord of the Leases that it is in
breach of any obligation contained in the Leases.
11 Shares
11.1 No person has the right (whether exercisable now or in
the future and whether contingent or not) to call for the
issue or transfer of any share or loan capital of the
Company under any option or other agreement (including,
without limitation, conversion rights).
11.2 The Company has never had any subsidiaries other than the
Subsidiaries and the Company owns all of the issued and
outstanding securities of the Subsidiaries free from any
Encumbrance.
11.3 There are no rights of pre-emption over or restrictions
relating to the transfer of the Sale Shares (whether
contained in the Company's articles of association or
otherwise) which could prevent their sale by the Sellers
to the Buyer pursuant to this Agreement.
11.4 All of the outstanding equity securities of the Company
have been validly issued in accordance with all
applicable Legal Requirements and are fully paid.
36
<PAGE>
12 Taxation
12.1 Definitions
For the purposes of the warranties in this paragraph 0
the following definitions have the following meanings:
12.1.1 "CAA" means the Capital Allowances Act 1990;
12.1.2 "CGTA" means the Capital Gains Tax Act 1979;
12.1.3 "Company" shall mean Light & Sound Design
Holdings Limited and Light & Sound Design
Limited that shall not be deemed to include a
reference to LSD Inc.
12.1.4 "TA" means the Income and Corporation Taxes Act
1988;
12.1.5 "TCGA" means the Taxation of Chargeable Gains
Act 1992;
12.1.6 "VAT" means value added tax; and
12.1.7 "VATA" means the Value Added Tax Act 1994.
12.2 Capital gains - appropriation to trading stock
The Company has not made any claim or election under
section 161(3) of the TCGA.
12.3 Capital gains
12.3.1 No chargeable gain would arise on the disposal
by the Company of any asset where such disposal
is acquired since the Accounts Date for a
consideration equal to the consideration
actually given for the acquisition of such asset
(disregarding any indexation relief);
12.3.2 No chargeable gain could arise on the disposal
by the Company of any asset (the ownership of
which was reflected in the Accounts) for a
consideration equal to the value attributed to
that asset in the Accounts (disregarding any
indexation relief).
37
<PAGE>
12.4 Close companies
12.4.1 The Company is a close company.
12.4.2 The Company is not and has never been a close
investment-holding company within the meaning
of section 13A of the TA;
12.4.3 No distribution within section 418 of the TA
has been made by the Company.
12.5 Capital allowances
12.5.1 All capital expenditure incurred by the Company
since the Accounts Date has qualified for
capital allowances. Such allowances have been
made in taxing the Company's trade;
12.6 Distributions
No distribution within the meaning of sections 209 or 210
of the TA (other than dividends shown in its audited
accounts) has been made by the Company since 6 April 1965.
The Company is not bound to make any such distribution.
12.7 The Company is a member of a group for VAT purposes.
12.8 Purchase of own shares
The Company has not purchased, redeemed or repaid nor
agreed to purchase, redeem or repay any of its own shares
in circumstances to which section 219 of the TA applies.
12.9 All returns, computations, deductions and payments which
should be, or should have been, made by the Company for
any taxation purpose have been made.
13 Pensions
13.1 The Company neither operates nor is a participant in any
pension or retirement benefit arrangements other than the
Pension Schemes.
13.2 The Pension Scheme is an exempt approved scheme within
section 592(1) of the Taxes Act or is capable of
receiving such exempt approval. The Warrantors are
38
<PAGE>
not aware of any matter which could result in the
withdrawal or refusal of that approval.
13.3 The Pension Scheme is contracted-out scheme for the
purposes of Part III of the Pension Scheme Act 1993. The
Warrantors are not aware of any matter which could result
in the Occupational Pensions Board withdrawing its
contracted-out status.
13.4 All contributions payable by the Company and all
contributions due from members to the Pension Scheme have
been made at the rate stipulated by the actuary to the
Pension Scheme in the most recent actuarial investigation
of the Pension Scheme.
13.5 True copies of the Trust Deeds and Rules and ancillary
deeds of the Pension Scheme are attached to the Disclosure
Letter.
13.6 The Disclosure Letter sets forth a complete list of all
pension and other employee benefit, fringe benefit and
compensation plans and arrangements covering directors,
employees, former directors or employees, or their
respective dependents, of LSD, Inc. (the "Plans"). The
Plans have been administered in accordance with their
terms; may be amended or terminated by the Company at
any time without notice or approval and without any
liability other than for benefits previously accrued as
of the amendment or termination date; and, if intended
to be tax qualified, are and have always been so tax
qualified and have received favourable rulings to this
effect covering such Plans since their inception.
13.7 There are no multi-employer or multiple employer plans
(as defined in the U.S. Internal Revenue Code and/or the
U.S. Employee Retirement Income Security Act ("ERISA")
and related laws and regulations). No Plan has been
terminated and no reportable event (as defined in ERISA
and related laws and regulations) has occurred with
respect to any Plan.
39
<PAGE>
14 Related Persons
Except as set out in the Disclosure Letter, no Seller or any
Related Person of any Seller or of the Company has, or since the
date of incorporation of the company has had, any interest in any
property (whether real, personal or mixed and whether tangible or
intangible), used in or pertaining to the Company's business.
Except as set forth in the Disclosure Letter, no Seller or any
Related Person of any Seller or of the Company is, or since the
date of incorporation of the Company has owned (of record or as a
beneficial owner) an equity interest or any other financial or
profit interest in, a person that has (a) had business dealings or
a material financial interest in any transaction with the Company
or (b) engaged in competition with the Company with respect to any
line of the products or services of the Company (a "Company
Competing Business") in any market presently served by the Company
except for passive investments in less than three percent of the
outstanding share capital of any Company Competing Business that is
publicly traded on any recognised exchange or in an
over-the-counter market or any investments of those Sellers listed
in part 2 of Schedule 1. Except as set out in the Disclosure
Letter, no Seller or any Related Person of any Seller or of the
Company is a party to any contract with, or has any claim or right
against, the Company other than any Contract of Employment.
15 Environment
The Company has complied with and is in compliance with all
applicable Environmental Laws and there is no pending, or so far as
the Warrantors are aware, threatened claim pursuant to any breach
prior to Completion by the Company of any Environmental Law with
respect to or relating to any of the properties or assets (whether
real, personal or mixed) in which the Company has or has had an
interest or for which the Company is otherwise responsible and
which could reasonably be expected to have a material adverse
effect on the Company's financial condition, results of operations
or business.
16 Disclosure Letter
So far as the Warrantors are aware, the contents of the Disclosure
Letter fairly represent exceptions to those Warranties to which
they relate and are not knowingly or deliberately misleading.
40
<PAGE>
Schedule 5
Limitations on Liability
17 The provisions of this schedule apply despite (and prevail over)
any other provision of this agreement or the Tax Deed and are in
addition and without prejudice to the Buyer's general legal
obligation to mitigate any loss or damage it may suffer.
18 The Buyer:
18.1 confirms that, in entering into this agreement, it relies
on no warranties, representations, covenants,
undertakings, indemnities or other information except to
the extent set forth in the Transaction Documents;
18.2 agrees that (except as expressly set out or referred to
in the Transaction Documents) no information, advice or
assurances it or anyone on its behalf may have received
from the Warrantors, their advisors or anyone else on
their behalf in relation to the Company or otherwise in
relation to this agreement or its negotiation may be
legally relied upon in any manner; and
18.3 waives any rights it may have in respect of any
information, advice or assurance it may have received
other than that expressly set out or referred to in the
Transaction Documents; and
18.4 agrees that rescission shall not be available as a remedy
for any breach of this agreement and agrees not to claim
that remedy;
19 The Buyer shall not be entitled to make a Claim if and to the extent
that the facts or information upon which it is based are fairly
disclosed in the Disclosure Letter.
20 The Buyer shall not be entitled to make a Claim to the extent that:
20.1 provision or reserve together with a note disclosing the
matter to which it relates (or the existence or
possibility of any resulting liability) has been made in
the Accounts; or
20.2 provision or reserve together with a note disclosing the
matter to which it relates has been made in the Accounts
which is insufficient by reason only of any increase in
41
<PAGE>
rates of Tax or change in the law after the date of this
agreement having retrospective effect.
21 The Buyer shall not be entitled to make a Claim to the extent that
the matter to which it relates:
21.1 is recoverable by the Company from insurers;
21.2 would not have arisen but for any matter or thing done or
omitted to be done by the Buyer or the Company on or after
Completion save that the Buyer shall be entitled to claim
to the extent that any existing liability of the
Warrantors is merely increased as a result of any such
act or omission by the Buyer provided that the Buyer
shall bear any increase in such liability;
21.3 arises as a result of the passing or amendment of any
legislation (including any subsidiary legislation) after
Completion with retrospective effect.
22 The Buyer shall have no right to recover in respect of any Claim or
Tax Claim unless and until the aggregate liability of the
Warrantors (but for this paragraph) in respect of all Claims and
Tax Claims would exceed $100,000, but, if such aggregate liability
should exceed that sum, the Warrantors shall be liable for the
full aggregate amount of the Claims and Tax Claims and not only
for the amount by which the Claims and Tax Claims exceeds that
sum.
23 The Buyer shall have no right to recover in respect of any
individual Claim or Tax Claim in respect of which the aggregate
liability of the Warrantors (but for this paragraph) would not
exceed $10,000 and such Claim or Tax Claim shall not be counted in
calculating the aggregate liability of the Warrantors for the
purposes of paragraph 6 provided that any series of related or
similar Claims or Tax Claims arising out of the same subject
matter shall for the purpose of this paragraph 7 be deemed to be a
single Claim or Tax Claim.
24 The maximum liability of each Warrantor pursuant to this Agreement
and the Tax Covenant shall not exceed the following amounts:-
Nick Jackson $1,451,615
Tim Murch $1,161,292
John Lobel $ 725,807
Bill Hewlett $ 725,807
Terry Lee $ 435,484
Dave Keighley $ 435,484
42
<PAGE>
Mickey Curbishley $ 435,484
Jerry Reidy $ 435,484
25 The Warrantors shall not be liable in respect of any Claim or Tax
Claim unless particulars of that Claim or Tax Claim (with
sufficient detail to enable the Warrantors to identify the basis
of the Claim or Tax Claim and the Buyer's best estimate of the
quantum of the Claim or Tax Claim and how this has been
quantified) are given in writing to the Warrantors in respect of
any Claim or Tax Claim, except to the extent set forth in the next
succeeding proviso under the Warranties not later than 31st
December 1999 and, in respect of any Tax Claim under the Tax Deed,
not later than the sixth anniversary of the Completion Date.
26 The Buyer will give notice of a claim to the Warrantors as soon as
reasonably practicable after becoming aware of any matter
entitling it to bring a Claim provided that if failure or delay to
so notify the Warrantors results in the Warrantors being
prejudiced, the Warrantors' liability shall be reduced to the
extent of that prejudice.
27 Any Claim or Tax Claim shall be unenforceable and be deemed waived
unless proceedings in respect of it are issued and served within
12 months of the date of service of notice of that Claim or Tax
Claim on the Warrantors under paragraph 9 (or if later in the case
of a Tax Claim 3 months after any matter pursued pursuant to the
provisions of clause 6 of the Tax Deed is concluded).
28 If any group Company or the Buyer is or becomes entitled to be
indemnified by or to recover from any other person (including any
Tax or other authority) in respect of a matter which would (apart
from this paragraph) give rise to a Claim, the Buyer shall procure
that:
28.1 the Warrantors are notified as soon as practicable after
the Company or the Buyer becomes aware of the possible
entitlement;
28.2 subject to the Warrantors indemnifying the Buyer to its
reasonable satisfaction against the costs incurred, all
reasonable steps are taken to enforce the indemnity or
right of recovery (and during such enforcement activity
the time period specified in paragraph 9 shall be
suspended)
29 If the Company or the Buyer becomes entitled to recover any sum
from any person in respect of the subject matter of any Claim in
respect of which the Warrantors have made any payment to the
43
<PAGE>
Buyer, the provisions of paragraph 11 of this schedule shall apply
mutatis mutandis to that entitlement and the Buyer shall pay to
the Warrantors immediately after receipt by the Buyer or any group
company the amount of the liability of the person (if any) which
is established or agreed a sum equal to the lesser of:
29.1 any amount any group Company or the Buyer receives (net
of all costs and expenses reasonably and properly
incurred by it in pursuing the claim against the other
person); and
29.2 the amount paid by the Warrantors in respect of the Claim
30 The Warranties are given on a several basis (save that for the
avoidance of doubt each Warrantor shall be deemed to have the
knowledge of each other Warrantor) and in respect of any Claim or
Tax Claim the Buyer shall only be entitled to recover from each
Warrantor that percentage of the Claim as is set against their
respective names in Part 1 Schedule 1.
31 Payments made by the Warrantors to the Buyer in respect of Claims
and Tax Claims shall constitute a repayment of and a reduction in
the Consideration.
32 The Buyer shall not be entitled to make any Claim to the extent
that the facts or matters giving rise to the Claim are outside the
actual or constructive knowledge of all the Warrantors after
having made all reasonable enquiries and investigation.
33 For the avoidance of doubt the Warrantors shall not be deemed to be
aware of (save where the Warrantors otherwise have knowledge of
such matters), and the Buyer acknowledges that no enquiries have
been made of, any matter which would be revealed by searches at HM
Land Registry, HM Land Charges Registry, all relevant Local Land
Charges Registries and matters which would have been revealed by
the replies to enquiries of all relevant Local Authorities in form
CON29A.
44
<PAGE>
Schedule 6
Properties
<TABLE>
<CAPTION>
Address Parties to Lease Term Current Rent
<S> <C> <C> <C>
24328 Vermont S Espirit Jones Inc. Monthly
Avenue, Harbor dba Mini Suites (1)
City, LSD, Inc (2)
California
1415 Lawrence Lawrence Drive 1 January 1996
Drive, Newbury Partners Limited (1) to 31 December
Park, LSD, Inc (2) 2002
California
1600 Heil Richard J Marsek 3 years from 1
Quaker Richard V Marsek June 1996
Boulevard, David Marsek &
Nashville, Christine Kohun (1)
Tennessee LSD, Inc (2)
Part of Ground Faram Limited (1) 6 January 1997
Floor at 163 LSD (2) LSD, Inc (3) to 22 March 2003
Eversholt
Street, London,
NW1
201 Coventry The Trustees of the 20 years from
Road, Small Light & Sound Design 11 December 1987
Heath, Limited Self
Birmingham Administered Pension
Scheme (1) Light &
Sound Design Limited
(Company number
1472288) (2)
(assigned to LSD on
13 April 1995)
</TABLE>
SIGNED and delivered as a deed ) /s/ Jerry Reidy
by NICK JACKSON acting by his ) for Nick Jackson
duly authorised attorney in )
the presence of: )
)
Witness
45
<PAGE>
Signature : /s/ Charles Cook
Name : Charles Cook
Occupation : Solicitor
Address : Birmingham
SIGNED and delivered as a deed )
by TIM MURCH acting by his ) /s/ Jerry Reidy
duly authorised attorney in ) for Tim Murch
the presence of: )
)
Witness
Signature : /s/ Charles Cook
Name : Charles Cook
Occupation : As above
Address : As above
<PAGE>
SIGNED and delivered as a deed )
by JOHN LOBEL acting by his ) /s/ Jerry Reidy
duly authorised attorney in ) for John Lobel
the presence of: )
)
Witness
Signature : /s/ Charles Cook
Name : Charles Cook
Occupation : As above
Address : As above
SIGNED and delivered as a deed ) /s/ Bill Hewlett
by BILL HEWLETT in the )
presence of: )
Witness
Signature : /s/ Charles Cook
Name : Charles Cook
Occupation : As above
Address : As above
<PAGE>
SIGNED and delivered as a deed ) /s/ Dave Keighley
by DAVE KEIGHLEY in the )
presence of: )
Witness
Signature : /s/ Charles Cook
Name : Charles Cook
Occupation : As above
Address : As above
SIGNED and delivered as a deed ) /s/ Jerry Reidy
by TERRY LEE acting by his ) for Terry Lee
duly authorised attorney in )
the presence of:
Witness
Signature : /s/ Charles Cook
Name : Charles Cook
Occupation : As above
<PAGE>
Address : As above
SIGNED and delivered as a deed )
by JERRY REIDY in the ) /s/ Jerry Reidy
presence of: )
Witness
Signature : /s/ Charles Cook
Name : Charles Cook
Occupation : As above
Address : A above
SIGNED and delivered as a deed )
by MICKEY CURBISHLEY in the ) /s/ Dave Keighly
presence of: ) for Mickey Curbishley
Witness
Signature : /s/ Charles Cook
<PAGE>
Name : Charles Cook
Occupation : As above
Address : As above
SIGNED and delivered as a deed ) /s/ Jerry Reidy
by JOHN LAWRENCE acting by his ) for John Lawrence
duly authorised attorney in )
the presence of:-
Witness
Signature : /s/ Charles Cook
Name : Charles Cook
Occupation : As above
Address : As above
EXECUTED by MURRAY VENTURES )
PLC acting by its duly ) /s/ Richard Collins
authorised signatory in the )
presence of: )
<PAGE>
Witness
Signature : /s/ Charles Cook
Name : Charles Cook
Occupation : As above
Address : As above
EXECUTED by SUMIT VENTURE FUND )
ONE LIMITED PARTNERSHIP acting ) /s/ Richard Collins
by its duly authorised )
attorney in the presence of: )
Witness
Signature : /s/ Charles Cook
Name : Charles Cook
Occupation : As above
Address : As above
EXECUTED by PRODUCTION )
<PAGE>
RESOURCE GROUP LLC acting by )
its duly authorised attorney ) /s/ Jeremiah J. Harris
in the presence of: )
Witness
Signature :
Name :
Occupation :
Address :
<PAGE>
RAM - Draft 07/02/98
EXECUTION COPY
ACQUISITION AGREEMENT
AMONG
PRODUCTION RESOURCE GROUP, L.L.C.
ON ITS OWN BEHALF AND AS NOMINEE
FOR LIGHT & SOUND DESIGN LTD.
Buyer
PRODUCTION ARTS LIGHTING INC.
PRODUCTION ARTS LIGHTING WEST, INC.
PRODUCTION ARTS EUROPE, INC.
Seller
and
John T. McGraw
and
Steven R. Terry
Sole Shareholders
June 25, 1998
<PAGE>
Exhibit A Inventory Schedule
Exhibit B Form of Steven R. Terry Employment Agreement
Exhibit C Form of Legal Opinion
<PAGE>
ACQUISITION AGREEMENT
ACQUISITION AGREEMENT, dated as of June 25, 1998, by and among
PRODUCTION ARTS LIGHTING INC., a New York corporation ("PA"), PRODUCTION ARTS
LIGHTING WEST, INC. a California corporation ("West"), and PRODUCTION ARTS
EUROPE, INC., a Delaware corporation ("Europe") (collectively "Seller"), John
T. McGraw ("McGraw") and Steven R. Terry ("Terry") (collectively the
"Shareholders"), and PRODUCTION RESOURCE GROUP, L.L.C., a Delaware limited
liability company ("PRG") on its own behalf with respect to the assets sold by
PA and West and as nominee for Light & Sound Design, Ltd., an English company,
with respect to the assets of Europe.
RECITALS
A. Seller is engaged, in the business of providing, renting
and selling specialized lighting equipment and related products (the
"Business"). Such business operations of Seller have been carried on under the
names of "PRODUCTION ARTS LIGHTING INC.", "PRODUCTION ARTS LIGHTING WEST,
INC." and "PRODUCTION ARTS EUROPE, INC." Seller has principal places of
business located at 35 Oxford Drive, Moonachie, New Jersey 07074, 10741
Sherman Way, Unit #6, Sun Valley, CA 91352 and 3 Greenock Road, Acton, London
W3 8DU, respectively. Shareholders are the sole owners, of record and
beneficially, of all of the issued and outstanding capital stock of each of
the entities constituting Seller.
B. PRG is engaged, in part, in the business of providing set
design, production management, lighting and audio rental and sale and
construction and maintenance services for a variety of staged events and
environments, and desires to acquire all of the above-described business
operations of Seller, except for certain Excluded Assets (as hereinafter
defined). All of the assets related to the business operations of Seller to be
acquired by PRG hereunder are collectively referred to herein as the
"Business" and such assets of Seller not to be acquired by PRG are
collectively referred to herein as the "Excluded Assets."
C. Subject only to the limitations and exclusions contained
in this Agreement and on the terms and conditions hereinafter set forth,
Seller desires to sell and PRG desires to purchase the Business and its
operations, and, on the terms and conditions hereinafter set forth, PRG
desires to assume the liabilities associated with the Business.
D. PRG wishes to employ Steven R. Terry pursuant to an
employment agreement substantially in the form of Exhibit B hereto.
NOW, THEREFORE, in consideration of the recitals and of the
respective covenants, representations, warranties and agreements herein
contained, and for other good and
1
<PAGE>
valuable consideration the receipt and sufficiency of which are hereby
acknowledged, and intending to be legally bound hereby, the parties hereto
hereby agree as follows:
ARTICLE 1
PURCHASE AND SALE
1.1 Agreement to Sell. At the Closing (as defined in Section 2.1 hereof),
except as otherwise specifically provided in this Section 1.1, Seller
shall sell, convey, assign, transfer and deliver to PRG, upon and
subject to the terms and conditions of this Agreement, all of its
respective rights, titles and interests in and to (a) the Business as
a going concern, (b) the names "PRODUCTION ARTS LIGHTING INC.,"
"PRODUCTION ARTS LIGHTING WEST, INC." and "PRODUCTION ARTS EUROPE,
INC." including any variation thereon and all goodwill associated
therewith, and (c) all of the assets, properties and rights of Seller
constituting the Business or used therein, of every kind and
description, real, personal and mixed, tangible and intangible,
wherever situated excluding the Excluded Assets (which Business, name,
goodwill, assets, properties and rights are herein sometimes
collectively called the "Assets"), free and clear of all mortgages,
liens, pledges, security interests, charges, claims, restrictions and
encumbrances of any nature whatsoever (except for Permitted Liens as
defined in subsection 3.1.12 hereof).
1.2 Included Assets. The Assets shall include, without limitation, the
following assets, properties and rights of Seller used directly or
indirectly in the conduct of, or generated by or constituting, the
Business, except as otherwise expressly set forth in subsection 1.3
hereof:
1.2.1 all cash and cash equivalents in transit, on hand or in bank accounts
except as set forth in Section 1.3 hereof;
1.2.2 all machinery, equipment, tools, vehicles, furniture, furnishings,
leasehold improvements, goods, and other tangible personal property
including, without limitation, the assets listed on Schedule 1.2
hereof;
1.2.3 all prepaid items, utility and similar deposits, insurance return
premiums, if any, unbilled costs and fees;
1.2.4 all supplies and inventories and office and other supplies;
1.2.5 all rights under any written or oral contract, agreement, lease, plan,
instrument, registration, license, certificate of occupancy, permit or
approval of any nature, or other document, commitment, arrangement,
undertaking, practice or authorization;
1.2.6 all rights under any event, trademark, service mark, trade name or
copyright, whether registered or unregistered, and any applications
therefor;
2
<PAGE>
1.2.7 all technologies, methods, formulations, data bases, trade secrets,
know-how, inventions and other intellectual property used in the
Business or under development, if any;
1.2.8 all rights or choses in action arising out of occurrences before or
after the Closing, including without limitation all rights under
express or implied warranties relating to the Assets;
1.2.9 all assets and properties reflected on the Closing Balance Sheet (as
defined in Section 1.8);
1.2.10 all inventory reflected on the Inventory Schedule attached as Exhibit
A hereto excluding any inventory which has been sold before the
Closing in the ordinary course of business; and
1.2.11 all information, files, records, data, plans, contracts and recorded
knowledge, including customer and supplier lists, related to the
foregoing.
1.3 Excluded Assets. Notwithstanding the foregoing, the Assets shall not
include any of the following:
1.3.1 the corporate seal, certificate of incorporation, minute books, stock
books, tax returns, books of account or other records having to do
with the corporate organization of Seller;
1.3.2 the cash of Seller in its money market accounts up to a maximum
aggregate amount of two hundred thousand dollars ($200,000);
1.3.3 the notes and other receivables and other assets, properties or rights
of Seller as set forth in Schedule 1.3;
1.3.4 the cash value of life insurance maintained by Seller on McGraw. If
requested by Seller or McGraw, PRG will consent to the assignment of
the life insurance maintained on McGraw to McGraw or his designee;
1.3.5 the rights which accrue or will accrue to Seller under this Agreement;
1.3.6 any rights under any written or oral contract, agreement, lease, plan,
instrument, registration, license, certificate of occupancy, permit or
approval of any nature, or other document, commitment, arrangement,
undertaking, practice or authorization to the extent the transfer of
such rights is prohibited by applicable law or requires the consent of
a third party, which consent has not been obtained; provided, however,
that Section 2.3 hereof shall apply to any such rights;
1.3.7 the rights to any claims of Seller for any federal, state, local or
foreign tax refunds; or
3
<PAGE>
1.3.8 the assets, properties or rights set forth on Schedule 1.1.2.
1.4 Agreement to Purchase. At the Closing, PRG shall purchase the Assets
(other than the Excluded Assets) from Seller, upon and subject to the
terms and conditions of this Agreement and in reliance on the
representations, warranties and covenants of Seller contained herein, in
exchange for the Purchase Price (as defined in Section 1.5 hereof). In
addition, PRG shall assume at the Closing and agree to pay, discharge or
perform, as appropriate, liabilities and obligations of Seller to the
extent and as provided in Section 1.7 of this Agreement (the "Assumed
Liabilities"). Except as specifically provided in Section 1.7 hereof,
PRG shall not assume or be responsible for any of the liabilities or
obligations of Seller, whether related to or arising under or with
respect to the Business, or otherwise.
1.5 Purchase Price. The "Purchase Price" shall be thirteen million seven
hundred thousand dollars ($13,700,000) payable by wire transfer of
immediately available funds to such account as Seller shall designate.
1.6 Allocation of Purchase Price.
1.6.1 The parties agree that the Purchase Price including the Assumed
Liabilities and any non-recourse liabilities to which any Asset is
subject as finally determined shall be allocated among the Assets
acquired by PRG and, with respect to Europe, by PRG as nominee for
Light & Sound Design, Ltd. in accordance with the principles
established in Schedule 1.6.1 hereof, updated to take account of
changes from December 31, 1997 through the Closing Date.
1.6.2 The parties hereto shall timely file with the Internal Revenue Service a
Form 8594 consistent with the allocations provided for in Section
1.6.1. Seller and PRG each hereby covenant and agree that it will not
take a position on any income tax return, before any governmental
agency charged with the collection of any income tax, or in any
judicial proceeding that is in any way inconsistent with the terms of
this Section 1.6 or such Form 8594.
1.7 Assumption of Liabilities. At the Closing hereunder and except as
otherwise specifically provided in this Section 1.7, PRG shall assume
and agree to pay, discharge or perform, as appropriate, the
liabilities and obligations of Seller except as set forth in Section
1.7.5 hereof including, but not limited to, the following:
1.7.1 all operating liabilities and obligations of Seller in respect of the
Business (including, without limitation, trade payables, accrued
expenses, taxes indicated on Schedule 1.7.1, liabilities relating to
the 401(k) plan to the extent indicated on Schedule 1.7.1, deferred
income on long-term contracts, deposits on rentals, profit-sharing
contributions as set forth in section 1.7.5(ii) and lease commitments
all as existing on the Closing Date and
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assuming operation in the ordinary course of the Business and in
accordance with this Agreement until the Closing.
1.7.2 all liabilities and obligations of Seller in respect of the Business
existing as of the 1997 Balance Sheet Date (as defined in subsection
3.1.6(a)), but only if and to the extent that the same arose in the
regular and ordinary course of business and are reflected on the
Audited 1997 Balance Sheet or notes thereto (as defined in subsection
3.1.6(a)) and remain unpaid and undischarged on the Closing Date (as
defined in Section 2.1 hereof);
1.7.3 all liabilities and obligations of Seller arising in the regular and
ordinary course of the Business between the 1997 Balance Sheet Date
and the Closing Date, to the extent that the same remain unpaid and
undischarged on the Closing Date including, without limitation, any
agreement, contract, commitment or lease which is entered into after
the signing of this Agreement and in conformance herewith, but before
the Closing Date; and
1.7.4 all liabilities and obligations of Seller in respect of the agreements,
contracts, commitments and leases which are specifically identified in
any schedule required by and attached to this Agreement, including,
without limitation, one-half of the bulk sales tax expense, the
obligations to employees listed on Schedule 1.7 and the accrued but
unpaid sales tax liabilities to the appropriate agency.
1.7.5 PRG shall not assume or incur any liability or obligation under this
Section 1.7 or otherwise in respect of any of the following
liabilities or obligations:
(i) liabilities existing as of the 1997 Balance Sheet Date, and which
under generally accepted accounting principles should have been
reflected on a balance sheet or the notes thereto as a liability or
obligation, if and to the extent that the same were not reflected on
the 1997 Balance Sheet or notes thereto;
(ii) liabilities and obligations of Seller not arising in the regular and
ordinary course of the Business between the 1997 Balance Sheet Date
and the Closing Date except as listed on Schedule 1.7.5;
(iii) liability for the 1997 profit-sharing contribution of Seller with
respect to Messrs. McGraw or Terry or an amount in excess of one-half
of such liability for any other participant in Seller's profit-sharing
plan;
(iv) liabilities or obligations arising out of any breach by Seller of any
provision of any agreement, contract, commitment or lease, including
but not limited to liabilities or obligations arising out of Seller's
failure to perform any agreement, contract, commitment or lease in
accordance with its terms prior to the Closing, but excluding however
any liability arising out of the assignment to PRG of such agreements,
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contracts, commitments or leases in violation of the terms thereof to
the extent that the agreement, contract, commitment or lease is listed
on Schedule 5.1.7 hereof;
(v) any indebtedness for borrowed money including without limitation, any
indebtedness arising under any note, debenture, bond, letter of credit
agreement, loan agreement or other contract or commitment for the
borrowing or lending of money relating to the Business or agreement or
arrangement for a line of credit, or any guaranties, in any manner,
whether directly or indirectly, of any indebtedness, dividend or other
obligation of any other person or entity relating to the Business
(other than endorsements in the ordinary course of business of
negotiable instruments for deposit or collection) or distributions to
the Shareholders for the payment of their taxes provided that such
distributions do not cause the Minimum Net Value of Sellers to be less
than the amount specified in and calculated in accordance with Section
5.1.10 hereof;
(vi) any product liability or similar claim for injury to person or property,
regardless of when made or asserted, which arises out of or is based
upon any express or implied representation, warranty, agreement or
guarantee made by Seller, or alleged to have been made by Seller, or
which is imposed or asserted to be imposed by operation of law, in
connection with any service performed or product sold or leased by or
on behalf of Seller on or prior to the Closing, including without
limitation any claim relating to any product delivered in connection
with the performance of such service and any claim seeking recovery
for consequential damage, lost revenue or income;
(vii) any federal, state or local income or other tax (a) payable with respect
to the Business, assets, properties or operations of Seller or any
Shareholder or any member of any affiliated group of which Seller or
any Shareholder is a member for any period prior to the Closing Date,
or (b) incident to or arising as a consequence of the negotiation or
consummation by Seller or Shareholders of this Agreement and the
transactions contemplated hereby (other than the payment of bulk sales
tax which shall be divided equally between PRG and Seller) and sales
or use taxes except to the extent indicated on Schedule 3.1.9;
(viii) any liability or obligation under or in connection with the Excluded
Assets;
(ix) any liability or obligation arising prior to or as a result of the
Closing to any employees, agents or independent contractors of Seller,
whether or not employed by PRG after the Closing, or under any benefit
arrangement with respect thereto, except for obligations incurred in
the ordinary course of the Business (except as otherwise specifically
provided herein);
(x) any liability or obligation of Seller or any Shareholder arising or
incurred in connection with the negotiation, preparation and execution
of this Agreement and the consummation of the transactions
contemplated hereby (including without limitation fees and expenses of
counsel, accountants and other experts);
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(xi) any liability or obligation of Seller or any Shareholder relating
to any entity affiliated with Seller; or
(xii) any liability or obligation relating to any employee benefit plan except
as otherwise specifically provided above.
1.8 Finanial Statements. Seller shall, and shall use reasonable commerical
efforts to cause its accountants to cooperate in the preparation of
any financial statements required by PRG. Without limiting the
foregoing, Seller shall provide, and shall use reasonable commercial
efforts to cause its accountants to provide, such consents as are
reasonably necessary for the filing of such financial statements with
the Securities and Exchange Commission and, to the extent necessary,
other regulatory agencies.
ARTICLE 2
CLOSING, ITEMS TO BE DELIVERED, THIRD PARTY CONSENTS, CHANGE IN
NAME AND FURTHER ASSURANCES
2.1 Closing. The closing (the "Closing") of the sale and purchase of the
Assets shall take place at 10:00 A.M., local time, on June 30, 1998 or
on such other date as may be mutually agreed upon in writing by PRG
and Seller. The date of the Closing is sometimes herein referred to as
the "Closing Date." The Closing shall take place at the offices of
PRG, or at such other location as the parties shall mutually agree.
2.2 Items to be Delivered at Closing. At the Closing and subject to the
terms and conditions herein contained:
(i) Seller shall deliver to PRG such bills of sale with covenants of
warranty, assignments, endorsements, and other good and sufficient
instruments and documents of conveyance and transfer, in form
reasonably satisfactory to PRG and its counsel, as shall be necessary
and effective to transfer and assign to, and vest in, PRG all of
Seller's rights, titles and interests in and to the Assets including
without limitation, (a) good and valid title in and to all of the
Assets owned by Seller, (b) assignments of all leasehold interests in
and to all of the Assets leased by Seller as lessee, and (c) all of
Seller's rights under all agreements, contracts, commitments, leases,
plans, bids, quotations, proposals, instruments and other documents
included in the Assets to which Seller is party or by which it has
rights on the Closing Date, and simultaneously with such delivery, all
such actions shall be taken as may be required to put PRG in actual
possession and operating control of the Assets. Nothing in this
section 2.2 shall be deemed to require Seller to transfer any of the
Excluded Assets to PRG.
(ii) PRG shall deliver to the Seller the Purchase Price and an undertaking
whereby PRG will assume and agree to pay, discharge or perform, as
appropriate, the Assumed Liabilities to the extent and as provided in
Section 1.7 hereof, in form reasonably satisfactory to Seller and its
counsel.
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(iii) At or prior to the Closing, the parties hereto shall also deliver to
each other the agreements, opinions, certificates and other documents
and instruments referred to in Article V hereof.
2.3. Third Party Consents. To the extent that Seller's rights under any
agreement, contract, commitment, lease, authorization or other Asset
to be assigned to PRG hereunder may not be assigned without the
consent of another person which has not been obtained, this Agreement
shall not constitute an agreement to assign the same if an attempted
assignment would constitute a breach thereof or be unlawful, and
Seller shall use its reasonable commercial efforts to obtain any such
required consent(s) as promptly as possible but shall not be obligated
to expend material funds to do so. If any such consent shall not be
obtained or if any attempted assignment would be ineffective or would
impair PRG's rights under the Asset in question so that PRG would not
in effect acquire the benefit of all such rights, Seller, to the
maximum extent permitted by law, shall act after the Closing as PRG's
agent in order to obtain for it the benefits thereunder and shall
cooperate, to the maximum extent permitted by law, with PRG in any
other reasonable arrangement designed to provide such benefits to PRG.
PRG shall pay or reimburse all costs reasonably incurred by Seller in
compliance with this Section 2.3 and shall use reasonable commercial
efforts to assist in having Shareholders released from all personal
guarantees that they have given with respect to liabilities assumed by
PRG hereunder.
2.4 Change in Name. On the Closing Date, Seller and the Shareholders
shall deliver to PRG all such executed documents as may be required to
change Seller's name on that date to another name bearing no
similarity to "PRODUCTION ARTS" including but not limited to a name
change amendment with the Secretaries of State of New York, California
and Delaware and appropriate name change notices for each state where
Seller is qualified to do business. Seller hereby irrevocably grants
PRG a power of attorney and appoints PRG as its attorney-in-fact to
file all such documents on or after the Closing Date. The power
granted hereunder is coupled with an interest and shall survive the
death, incompetency, bankruptcy and dissolution of Seller and each
Shareholder.
2.5 Further Assurances. Seller and the Shareholders, from time to time
after the Closing, at PRG's request, shall execute, acknowledge and
deliver to PRG such other instruments of conveyance and transfer and
shall take such other actions and execute and deliver such other
documents, certifications and further assurances as PRG may reasonably
require in order to vest more effectively in PRG, or to put PRG more
fully in possession of, any of the Assets, or to better enable PRG to
complete, perform or discharge any of the Assumed Liabilities. Each of
the parties hereto will cooperate with the other parties hereto and
take other actions as may be reasonably requested from time to time by
any other party hereto as necessary to carry out, evidence and confirm
the intended purposes of this Agreement; provided that neither Seller
nor Shareholders shall not be obligated to expend material funds to do
so.
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ARTICLE 3
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warrants of the Seller. Seller and the
Shareholders hereby represent and warrant to PRG that, except as set
forth on the Disclosure Schedule attached hereto (each of which
exceptions shall specifically identify the relevant section or
subsection hereof to which it relates and shall be deemed to be a
representation and warranty as if made hereunder):
3.1.1 Corporate Existence. Each of PA, West and Europe is a corporation duly
organized, validly existing and in good standing under the laws of
the jurisdiction of its incorporation. Seller is duly qualified to do
business and is in good standing as a foreign corporation in each
jurisdiction where the conduct of the Business by it requires it to
be so qualified, all of which jurisdictions are listed on the
Disclosure Schedule in a manner that identifies the jurisdiction in
which Seller is in good standing and so qualified, except where the
failure to be so qualified would not have a material adverse affect
on the business or operations of PRG, PA, West or Europe.
3.1.2 Corporate Power; Authorization; Enforceable Obligations. Each
Shareholder and Seller has the power (corporate or otherwise),
authority and legal right to execute, deliver and perform this
Agreement. The execution, delivery and performance of this Agreement
by each Seller has been duly authorized by all necessary corporate and
shareholder action. This Agreement has been, and the other agreements,
documents and instruments required to be delivered by Seller in
accordance with the provisions hereof (the "Seller's Documents") shall
be, duly executed and delivered by Seller by duly authorized officers
of Seller, and this Agreement constitutes, and the Seller's Documents
when executed and delivered will constitute, the legal, valid and
binding obligations of Seller, enforceable against Seller in
accordance with their respective terms.
3.1.3 No Interest in Other Entities. Seller does not own any shares of any
corporation or any ownership or other investment interest, either of
record, beneficially or equitably, in any association, partnership,
joint venture, limited liability company or other legal entity,
except for an interest of not more than one percent in any
corporation traded on a nationally-recognized securities exchange or
in the over-the-counter market.
3.1.4 Validity of Contemplated Transactions, etc. The execution, delivery and
performance of this Agreement by Seller does not and will not
violate, conflict with or result in the breach of any term, condition
or provision of, or require the consent of, any other person under,
(a) any existing law, ordinance, or governmental rule or regulation
to which Seller is subject, (b) any judgment, order, writ,
injunction, decree or award of any court, arbitrator or governmental
or regulatory official, body or authority which is applicable to
Seller, (c) the charter documents of Seller or any securities issued
by
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Seller, or (d) any mortgage, indenture, agreement, contract,
commitment, lease, plan, authorization, or other instrument, document
or understanding to which Seller is a party, by which Seller may have
rights or by which any of the Assets may be bound or affected, or
give any party with rights thereunder the right to terminate, modify,
accelerate or otherwise change the existing rights or obligations of
Seller thereunder in each case in a manner which would materially
adversely impair the Assets or otherwise materially adversely affect
the Business. Except as aforesaid, no authorization, approval or
consent of, and no registration or filing with, any governmental or
regulatory official, body or authority is required in connection with
the execution, delivery or performance of this Agreement by Seller.
3.1.5 No Third Party Options. There are no existing agreements, options,
commitments, or rights with, of or to any person to acquire any of
the assets, properties or rights included in the Assets or any
interest therein, except for those contracts entered into in the
normal course of business consistent with past practice for the sale
of inventory of Seller.
3.1.6 Financial Statements; Customer and Vendor List.
(i) Seller has delivered to PRG true and complete copies of (a) the
balance sheet of Seller for the fiscal year ending December 31,
1997, accompanied by a report of the Auditors unqualified as to
scope limitations imposed by the Seller and otherwise without
qualification except as noted therein (the "Audited 1997 Balance
Sheet"); and (b) tax balance sheets and tax returns of Seller for
the fiscal years ending December 31, 1995 and 1996 and the related
statements of income for the periods then ended, each of which has
been prepared on a compilation basis by Seller's independent
certified public accountants; the Audited 1997 Balance Sheet and
the related statements of income, cash flows and changes in
shareholders' equity described in clauses (a) and (b) of this
subsection 3.1.6(i) have been prepared in accordance with
generally accepted accounting principles consistently applied
through the periods involved. Such balance sheets, including the
related notes, fairly present the financial position, assets and
liabilities (whether accrued, absolute, contingent or otherwise)
of Seller at the dates indicated and such statements of income,
cash flows and changes in shareholders' equity fairly present the
respective results of operation, cashflows and changes in
shareholders' equity of the Seller for the periods indicated. The
Audited 1997 Balance Sheet specifically identifies in the
footnotes to the Financial Statements the asset and liabilities
which, if the Closing had been held on the 1997 Balance Sheet
Date, would have been transferred to or assumed by PRG in
accordance herewith. References in this Agreement to the "1997
Balance Sheet Date" shall be deemed to refer to December 31, 1997
except with respect to the physical inventory, in which case it
shall be deemed to refer to the date set forth on Exhibit A.
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(ii) Seller has provided access to PRG to review true and complete
copies of all customer and vendor lists and all historic data in
its possession with respect to prior sales to customers and
purchases from vendors.
3.1.7 Inventory. Except as set forth in the Disclosure Schedule, all inventory
of Seller including resale inventory and rental inventory used in the
conduct of the Business reflected on Exhibit A or acquired since the
date thereof was acquired and has been maintained in the ordinary
course of the Business; is of good and merchantable quality; consists
substantially of a quality, quantity and condition usable, leasable or
saleable in the ordinary course of the Business, and is valued at
reasonable amounts based on the ordinary course of business of Seller
during the past six months; and is not subject to any material
write-down or write-off, except, in each case, where it would not be
reasonably likely to cause a material adverse effect. Seller is not
under any liability or obligation with respect to the return of a
material amount of inventory in the possession of wholesalers,
retailers or other customers.
3.1.8 Absence of Undisclosed Liabilities. Seller has no liabilities or
obligations with respect to the Business, either direct or indirect,
matured or unmatured or absolute, contingent or otherwise, except:
(i) those liabilities or obligations set forth on the 1997 Balance Sheet or
notes thereto and not heretofore paid or discharged;
(ii) liabilities arising in the ordinary course of business under any
agreement, contract, commitment, lease or plan or specifically
disclosed on the Disclosure Schedule; and
(iii) those liabilities or obligations incurred, consistently with past
business practice, in or as a result of the normal and ordinary
course of business since the 1997 Balance Sheet Date including
liabilities or obligations for purchased goods reasonably consistent
with past practice and agreements, contracts, commitments or leases
which are entered into after the signing of this Agreement but before
the Closing Date in accordance with the provisions of this Agreement.
For purposes of this Agreement, the term "liabilities" shall
include, without limitation, any indebtedness, guaranty, endorsement, claim,
loss damage, deficiency, cost, expense, obligation or responsibility, fixed or
unfixed, known or unknown, asserted or unasserted, liquidated or unliquidated,
secured or unsecured.
3.1.9 Taxes. All tax returns required to be filed by Seller ("Tax Returns") in
any jurisdiction have been filed and all material taxes, assessments,
fees and other governmental charges upon Seller or upon any of
Seller's properties, income or franchises ("Taxes"), which are shown
to be due and payable in such Tax Returns have been paid except for
such Taxes the payment of which is being contested by Seller in good
faith by appropriate proceedings and with respect to which Seller has
set aside on its books reserves deemed by it to be adequate or would
not be reasonably likely to cause a material adverse effect.
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Schedule 3.1.9 contains a list of all accrued but unpaid sales, use or
similar taxes which have not been paid to the appropriate taxing
authorities. For all taxable years ended on or before December 31,
1995, the federal income tax liability of Seller has been satisfied
and either the period of limitations on assessment of additional
federal income tax has expired or Seller has entered into an agreement
with the Internal Revenue Service closing conclusively the total tax
liability for the taxable year. Seller has not executed any waiver or
waivers that would have the effect of extending the applicable statute
of limitations in respect of income tax liabilities. Seller does not
know of any material proposed additional tax assessment against it for
which provision has not been made on its accounts, and no controversy
in respect of additional federal or state income taxes due since said
date is pending or to the knowledge of Seller threatened. Seller is
not being audited or challenged for any federal or state income tax
liability for any period by the Internal Revenue Service or any state
taxing authority. The provisions for Taxes on the books of Seller are
deemed adequate in all material respects by Seller. Seller has not
received any notice of assessment or proposed assessment in connection
with any Taxes of any nature whatsoever and there are no pending tax
examinations of or to the knowledge of the Seller, tax claims asserted
against Seller or any assets or properties of Seller which would
reasonably be anticipated to materially adversely affect the Business.
There are no tax liens (other than any lien for current taxes not yet
due and payable and for Taxes being contested in good faith, as
indicated on Schedule 3.1.9) on any of the assets or properties of
Seller. Seller has made all deposits required by law to be made with
respect to employees' withholding and other employment taxes,
including without limitation the portion of such deposits relating to
taxes imposed upon Seller.
3.1.10 Books of Account. The books, records and accounts of Seller maintained
with respect to the Business accurately and fairly reflect, in all
material respects, the transactions and the assets and liabilities of
Seller with respect to the Business. Seller has not engaged in any
transaction with respect to the Business, maintained any bank account
for the Business or used any of the funds of Seller in the conduct of
the Business, except for transactions, bank accounts and funds related
solely to the Business and reflected in the normally maintained books
and records of the Business.
3.1.11 Existing Condition. Since the 1997 Balance Sheet Date, except as set
forth in the Disclosure Schedule, Seller has not:
(i) incurred any liabilities, other than liabilities incurred in
the ordinary course of business consistent with past
practice, or discharged or satisfied any lien or
encumbrance, or paid any liabilities, other than in the
ordinary course of business consistent with past practice,
or failed to pay or discharge when due any liabilities of
which the failure to pay or discharge has caused or will
cause any material damage or risk of material loss to it or
any of its assets or properties other than with the prior
written consent of PRG;
(ii) sold, encumbered, assigned or transferred any assets or
properties which would have been included in the Assets if
the Closing had been held on the 1997
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Balance Sheet Date or an any date since then, except for the
sale of property in the ordinary course of business consistent
with past practice or with the prior written consent of PRG;
(iii) created, incurred, assumed or guaranteed any indebtedness
for money borrowed, or mortgaged, pledged or subjected any
of its Assets to any mortgage, lien, pledge, security
interest, conditional sales contract or other encumbrance of
any nature whatsoever, except for Permitted Liens (as
defined in subsection 3.1.12), other than with the prior
written consent of PRG;
(iv) made or suffered any amendment or termination of any
material agreement, contract, commitment, lease or plan to
which it is a party or by which it is bound, or canceled,
modified or waived any substantial debts or claims held by
it or waived any rights of substantial value, whether or not
in the ordinary course of business, other than with the
prior written consent of PRG;
(v) declared, set aside or paid any dividend or made or agreed
to make any other distribution or payment in respect of its
capital shares or redeemed, purchased or otherwise acquired
or agreed to redeem, purchase or acquire any of its capital
shares, other than with the prior written consent of PRG
(other than distributions to the Shareholders for the
payment of their taxes in the amount indicated in Schedule
3.1.11);
(vi) suffered any damage, destruction or loss, whether or not
covered by insurance, (i) materially and adversely affecting
its business, operations, assets properties or prospects or
(ii) of any item or items carried on its books of account
individually or in the aggregate at more than $7,500 or
suffered any repeated, recurring or prolonged shortage,
cessation or interruption of supplies or utility or other
services required to conduct its business and operations in
each case which would reasonably be expected to have a
material adverse effect on the Business;
(vii) suffered any material adverse change in its business,
operations, assets, properties, prospects or condition
(financial or otherwise);
(viii) received notice or had knowledge of any actual or threatened
labor dispute, strike or other occurrence, event or
condition of any similar character which has had or would
reasonably be expected to have a material adverse effect on
its business, operations, assets, properties or prospects;
(ix) made commitments or agreements for capital expenditures or
capital additions or betterments except such as may be
involved in ordinary repair, maintenance or replacement of
its assets, other than with the prior written consent of PRG;
(x) increased the salaries or other compensation of, or made any
advance (excluding advances for ordinary and necessary
business expenses) or loan to, any of its
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employees or made any increase in, or any addition to, other
benefits to which any of its employees may be entitled, other
than with the prior written consent of PRG;
(xi) changed any of the accounting principles followed by it or
the methods of applying such principles other than with the
prior written consent of PRG; or
(xii) entered into any transaction other than in the ordinary
course of business consistent with past practice, other than
with the prior written consent of PRG. PRG agrees that to
the extent such transaction occurs between the signing of
this Agreement and the Closing Date, the consent of PRG
shall not be unreasonably withheld.
3.1.12 Title to Properties. Seller has good, valid and marketable title to all
of its properties and assets which would be included in the Assets if
the Closing took place on the date hereof, which it purports to own
including, without limitation, all properties and assets reflected in
the 1997 Balance Sheet (except for property sold since the date
thereof in the ordinary course of business consistent with past
practice), and all assets physically on the Business premises on the
date hereof (except assets set forth in Schedule 3.1.12), free and
clear of all mortgages, liens, pledges, security interest, charges,
claims, restrictions and other encumbrances and defects of title of
any nature whatsoever, except for (i) liens for current real or
personal property taxes not yet due and payable, (ii) liens disclosed
in the Disclosure Schedule in response to this Section, (iii)
worker's, carrier's and materialman's liens, and (iv) liens that
individually and in the aggregate are immaterial in character, amount,
and extent, and which do not materially detract from the value or
interfere with the present use of the properties they affect
("Permitted Liens").
3.1.13 Condition for Tangible Assets. All buildings, structures, facilities,
equipment and other material items of tangible property and assets
which would be included in the Assets if the Closing took place on
the date hereof are in reasonable operating condition and repair,
subject to normal wear and maintenance, are usable in the regular and
ordinary course of business, and conform, in all material respects,
to all applicable laws, ordinances, codes, rules and regulations, and
Authorizations (as defined in subsection 3.1.14) relating to their
construction, use and operation. No person other than Seller owns any
equipment or other tangible assets or properties situated on the
premises of Seller or necessary for the operation of the Business,
except for leased items listed on Schedule 3.1.12 and for items that,
individually and in the aggregate, are of immaterial value.
3.1.14 Compliance with Law; Authorizations. Seller has complied with each, and
is not in violation of any, law, ordinance, or governmental or
regulatory rule or regulation, whether federal, state, local or foreign,
to which Seller's business, operations, assets or properties is subject
("Regulations") except where the violation would not have a material
adverse affect on the Business. Seller owns, holds, possesses or
lawfully uses in the operation of its business all franchises,
licenses, permits, easements, rights,
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applications, filings, registrations and other authorizations
("Authorizations") which are in any manner necessary for it to conduct
its business as now or previously conducted or for the ownership and
use of the assets owned or used by Seller in the conduct of the
business of Seller, free and clear of all liens, charges, restrictions
and encumbrances and in compliance with all Regulations except where
the failure to own, hold, possess or lawfully use such Authorizations
would not have a material adverse affect on the Business. All such
Authorizations are listed in the Disclosure Schedule. Seller is not in
default, nor has Seller received any notice of any claim of default,
with respect to any such Authorization, except where a default would
not be reasonably likely to cause a material adverse effect. All such
Authorizations are renewable by their terms or in the ordinary course
of business without the need to comply with any special qualification
procedures or to pay any amounts other than routine filing fees. None
of such Authorizations will, to the knowledge of Seller, be adversely
affected by consummation of the transactions contemplated hereby. No
shareholder, director, officer, employee or former employee of Seller
or any affiliates of Seller, or any other person, firm or corporation
owns or has any proprietary, financial or other interest (direct or
indirect) in any Authorization which Seller owns, possesses or uses in
the operation of the business of Seller as now or previously
conducted.
3.1.15 Related Party Transactions. To the knowledge of Seller, no employee,
officer or director of Seller, or member of the immediate family of
any employee, officer or director of Seller presently has, or during
the past three years has had, any direct or indirect ownership
interest in (a) any firm or corporation with which Seller is or was
affiliated or with which Seller presently has, or during the past
three years has had, a business relationship, or (b) any firm or
corporation that competes or during the past three years has competed
with Seller, or (c) any property which is, or during the past three
years was, the subject of any material contract, agreement,
understanding or business relationship. To the knowledge of Seller, no
employee, officer or director of Seller, or member of the immediate
family of any employee, officer or director of Seller presently has,
or during the past three years has had, any direct or indirect
interest in any material contract with Seller.
3.1.16 Litigation. No litigation, including any arbitration, investigation or
other proceeding of or before any court, arbitrator or governmental or
regulatory official, body or authority is pending or, to the knowledge
of Seller is threatened which relates to the assets of Seller or the
transactions contemplated by this Agreement, nor does Seller know of
any reasonably likely basis for any such litigation, arbitration,
investigation or proceeding, the result of which would materially
adversely affect Seller, its assets or the transactions contemplated
hereby in a manner that would be reasonably likely to materially
adversely affect the Business.
3.1.17 Insurance. The assets, properties and operations of Seller are insured
under various policies of general liability and other forms of
insurance, all of which are listed in the Disclosure Schedule, which
discloses for each policy whether the terms of such policy provide for
retrospective premium adjustments. All such policies are in full force
and
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effect in accordance with their terms, no notice of cancellation has
been received, since 1995 and there is no existing default or event
which, with the giving of notice or lapse of time or both, would
constitute a default thereunder. Such policies are in amounts which
Seller reasonably believes to be adequate in relation to the business
and assets of Seller and all premiums to date have been paid in full.
Seller has not been refused any insurance, nor has its coverage been
limited, by any insurance carrier to which it has applied for
insurance or with which it has carried insurance during the past five
years. The Disclosure Schedule also contains a true and complete
description of all outstanding bonds and other surety arrangements
issued or entered into in connection with the business, assets and
liabilities of Seller.
3.1.18 Contracts and Commitments.
(i) The agreements listed on the Disclosure Schedule constitute all
written and oral agreements to which Seller is a party that are
material to the Business as currently conducted including, without
limitation,
(a) any agreements relating to the construction or purchase of
capital improvements, or the purchase of any materials,
supplies, or equipment involving the expenditure of more than
$50,000;
(b) any employment, consulting, management, or noncompetition
agreement not terminable at will by Seller without liability on
less than 30 days notice;
(c) any bonus, pension, retirement, profit sharing or other plan or
agreement providing for employee benefits other than group
health insurance, sick pay and vacation pay plans for employees
generally;
(d) any license of any patent, copyright, trade secret or other
proprietary right or any other license or franchise, or similar
agreement;
(e) any contract with any labor union or association of employees;
(f) any indemnification agreement relating to infringement of
proprietary rights;
(g) any agreement, contract, or commitment that is reasonably
expected by Seller to be performed at or result in a loss, or
which has or would be reasonably likely to have a material
adverse effect upon the Business;
(h) any lease of personal property material to the operations of
Seller;
(i) any agreement with any broker, finder, investment banker or
underwriter;
(j) any note, debenture, bond, equipment trust agreement, letter of
credit agreement, loan agreement or other contract or commitment
for the borrowing or lending of
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money relating to the Business or agreement or arrangement for a
line of credit or any guaranties, in any manner, whether directly
or indirectly, or any indebtedness, dividend or other obligation
of any other person or entity relating to the Business (other than
endorsements in the ordinary course of business of negotiable
instruments for deposit or collection); and
(k) any agreements with sales representatives and distributors;
and including each amendment, modification, renewal or extension
or other material ancillary document pertaining thereto (the
"Seller Agreements"). Seller has previously delivered or made
available to Buyer correct and complete copies of each of the
Seller Agreements that are in writing.
(ii) To Seller's knowledge, Seller has not received written notice of
cancellation or termination under any option or right reserved to the other
party to the Seller Agreements or any written notice of default under such
agreement. Except as otherwise disclosed on the Disclosure Schedule, Seller is
not, nor to the knowledge of the persons specified in Schedule 3.1.8, is any
other party, in breach or default of any Seller Agreement, which default would
reasonably be likely to cause a material adverse effect on the Business and,
to the knowledge of the persons specified in Schedule 3.1.8, no event has
occurred that, with notice or lapse of time or both, would constitute such a
breach or default or permit termination, modification or acceleration under
such Seller Agreement, the loss of which would reasonably be anticipated to
cause a material adverse effect on the Business. Section 3.1.27
notwithstanding, a material adverse affect attributable to a breach or default
of a Seller Agreement by a person other than Seller shall mean a breach, or
series of related breaches, which would reasonably to be anticipated to result
in damages exceeding fifty thousand dollars. Except as separately identified
in the Disclosure Schedule, no approval or consent of any person is needed in
order that the Seller Agreements continue in full force and effect following
the assignment of such agreements to PRG. Furthermore, to the knowledge of the
persons specified in Schedule 3.1.8, no Seller Agreement, in the reasonable
opinion of Seller, contains any contractual requirement with which there is a
reasonable likelihood Seller or any other party thereto will be unable to
comply. PRG acknowledges that Seller has many small customers, such as
non-profit entities and that Seller is making this representation without
having made any inquiry of such entities regarding their financial condition.
3.1.19 Additional Information. The Disclosure Schedule contains accurate lists
of the following:
(i) all material inventory, equipment and furniture and fixtures
of Seller included in the Assets as of the 1997 Balance
Sheet Date, specifying such items as are owned and such as
are leased and, with respect to the owned property,
specifying its net book value as of the 1997 Balance Sheet
Date and, with respect to the material leased property as to
which Seller is lessee, specifying the identity of the
lessor, the rental rate and the unexpired term of the lease;
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(ii) the names and titles of and current annual base salary or
hourly rates and date and amount of most recent raise for
all employees of Seller engaged in the conduct of the
Business, together with a statement of the full amount and
nature of any other remuneration, whether in cash or kind,
paid to each such person during the past or current fiscal
year or payable to each such person in the future and the
bonuses accrued for, the vacation and severance benefits to
which, each such person is entitled; and
(iii) all names under which Seller has conducted any business or
which it has otherwise used during the last five years.
3.1.20 Labor Matters. The Disclosure Schedule contains a complete list of all
written and, to the knowledge of Seller, oral, express or implied,
contracts, commitments or arrangements with any labor union, and
no labor union has requested in writing to the Seller or, to the
best of Seller's knowledge, has sought to represent any of the
employees, representatives or agents of Seller, other than as
disclosed in the Disclosure Schedule. There is no strike or other
labor dispute involving Seller pending, or to the best of Seller's
knowledge, threatened, that would reasonably be likely to have a
material adverse effect on the Business, nor is Seller aware of
any labor organization activity involving its employees, other
than as disclosed in the Disclosure Schedule.
3.1.21 Employees and Related Matters.
(i) The Disclosure Schedule contains a complete list of all written
employee benefit plans whether covering one person or more
than one person, sponsored or maintained by Seller. For the
purposes hereof, the term "employee benefit plan" includes all
written plans, funds, programs and policies providing benefits
of economic value to any employee, former employee, or present
or former beneficiary, dependent or assignee of any such
employee or former employee other than regular salary, wages
or commissions paid substantially concurrently with the
performance of the services for which paid. Without
limitation, the term "employee benefit plan" includes all
employee welfare benefit plans within the meaning of section
3(1) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), and all employee pension benefit plans
within the meaning of section 3(2) of ERISA. Each plan
providing benefits which are funded through a policy of
insurance is indicated by the word "insured" placed by the
listing of the plan in the Disclosure Schedule. Neither Seller
nor any trade or business (whether or not incorporated) which,
together with Seller, would be treated as a "controlled group"
under Section 4001(a)(14) of ERISA (an "ERISA Affiliate") is a
contributing employer to a multiemployer plan as defined in
Section 3(37) of ERISA. With respect to employee benefit plans
subject to Title IV of ERISA, Seller has made full and timely
payment of all contributions in material compliance with the
terms of each such plan and Section 412(m) of the Internal
Revenue Code of 1986, as amended (the "Code"), and Section
203(3) of ERISA; the present fair market value of all assets
of each such plan exceeds the
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present value of all vested benefits under each such plan, as
determined on the most recent valuation date of such plan and
in accordance with the provisions of ERISA and the regulations
thereunder for calculating the potential liability of Seller
or any ERISA Affiliate under Title IV of ERISA; and no
accumulated funding deficiency (as defined in Section 412 of
the Code and Section 302 of ERISA) exists with respect to any
such plan. Neither Seller nor any ERISA Affiliate has incurred
any liability to the Pension Benefit Guaranty Corporation
under ERISA.
(ii) Seller has no obligation to provide medical, life insurance,
disability or other benefits to its or any of its
predecessors retired employees formerly engaged in the
Business.
(iii) Seller is not a party to any collective bargaining
agreement, other than as disclosed in the Disclosure
Schedule.
(iv) Upon execution of this Agreement, PRG shall have no
liability for any withdrawal liability with respect to any
present or former employee of Seller under any employee
benefit or pension plan.
3.1.22 Intellectual Property Matters. Seller does not in the conduct of the
Business utilize any patent, trademark, tradename (other than
"PRODUCTION ARTS LIGHTING INC." "PRODUCTION ARTS LIGHTING WEST" and
"PRODUCTION ARTS EUROPE"), service mark, copyright or software except
for those listed on the Disclosure Schedule (the "Intellectual
Property") under Seller's name, all of which (together with the
tradenames "PRODUCTION ARTS LIGHTING, INC." "PRODUCTION ARTS LIGHTING
WEST, INC." and "PRODUCTION ARTS EUROPE, INC.") are owned by Seller
free and clear of any liens, claims, charges or encumbrances. Seller
is not aware of any facts which would reasonably be anticipated to
call into question that Seller does not infringe upon or unlawfully or
wrongfully use any patent, trademark, tradename, service mark,
copyright or trade secret owned or claimed by another in a manner that
would reasonably be anticipated to have a material adverse effect on
the Business. Schedule 3.1.22 contains a list of any third-party
subpoenas or other similar written requests with respect to
intellectual property matters received since 1995. Seller is not in
default under, and Seller has not received any notice of any claim of
infringement or any other claim or process relating to any such
patent, trademark, tradename, service mark, copyright or trade secret
except in each case that would reasonably be anticipated to have a
material adverse effect on the Business. No present or former employee
of Seller and no other person owns or has any proprietary, financial
or other interest, direct or indirect, in whole or in part, in any
patent, trademark, tradename, service mark or copyright, or in any
application therefor, or in any trade secret, which Seller owns,
possesses or uses in its operations as now or heretofore conducted.
The Disclosure Schedule lists all confidentiality or non-disclosure
agreements to which Seller or, to Seller's Knowledge, any of Seller's
employees engaged in the Business is a party which relates to the
Business indicating any which would not be enforceable by PRG.
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3.1.23 Environmental Matters. Except as set forth on the Disclosure Schedule,
(i) To Seller's knowledge, Seller is not required to obtain any
permits, licenses and other authorizations which are required
in connection with the conduct of the Business under
Regulations relating to pollution or protection of the
environment.
(ii) To Seller's knowledge, Seller is in material compliance with
all limitations, restrictions, conditions, standards,
prohibitions, requirements and obligations, contained in
Regulations relating to pollution or protection of the
environment or contained in any code, plan, order, decree,
judgment, injunction, notice or demand letter issued, entered,
promulgated or approved thereunder.
(iii) Seller has no knowledge of, nor has Seller received notice of,
any past, present or future events, conditions, circumstances,
activities, practices, incidents, actions or plans which would
be reasonably likely to interfere with or prevent compliance
or continued compliance with those laws or any regulations,
code, plan, order, decree, judgment, injunction, notice or
demand letter issued, entered, promulgated or approved
thereunder, or which may give rise to any common law or legal
liability, or otherwise form the basis of any claim, action,
demand, suit or proceeding regarding the manufacture,
processing, distribution, use, treatment, storage, disposal,
transport, or handling, or the emission, discharge, release or
threatened release into the environment, of any pollutant,
contaminant, chemical, or industrial, toxic or hazardous
substance or waste.
(iv) To Seller's knowledge, there is no civil, criminal or
administrative action, suit, demand, claim, hearing, demand
letter, notice or violation, investigation, or proceeding
pending or, to Seller's knowledge, threatened against Seller
in connection with the conduct of the Business relating in any
way to those laws relating to pollution or protection of the
environment or any regulation, code, plan, order, decree,
judgment, injunction, notice or demand letter issued, entered,
promulgated or approved thereunder except for environmental
matters which would not be reasonably likely to cause a
material adverse effect.
3.1.24 Real Property.
(i) Real Property Defined. All real property (including, without
limitation, all interests in and rights to real property) and
improvements located thereon which are owned or leased by
Seller and used in connection with the Business or included in
the Assets are listed on the Disclosure Schedule in response
to this subsection (collectively, the "Real Property").
(ii) Title to Owned Real Property. Seller does not own any Real
Property.
(iii) Leased Real Property. With respect to the Real Property that
is leased by Seller:
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(a) Seller has delivered to PRG a true and complete copy of
every lease and sublease to which Seller is a tenant or
subtenant (each a "Lease" and collectively, the "Leases");
and
(b) Each Lease is, and at Closing shall be, in full force and
effect, and, to Seller's knowledge, shall constitute a legal
and permissible use of the applicable property, and has not
been assigned, modified, supplemented or amended except as
listed on the Disclosure Schedule, and, to Seller's
knowledge, neither Seller nor the landlord or sublandlord
under any Lease is in material default under any of the
Leases, and, to Seller's knowledge, no circumstances or
state of facts presently exists which, with the giving of
notice or passage of time, or both, would permit the
landlord or sublandlord under any Lease to terminate any
Lease.
(c) Seller has received no written notices from any governmental
body, and has no reason to believe, that the Real Property
or any improvements erected or situated thereon, or the uses
conducted thereon or therein, violate any Regulations of any
governmental body having jurisdiction over the Real
Property, except where such violations would not be
reasonably likely to cause a material adverse effect.
(d) Between the date of this Agreement and Closing Seller shall
not sell, mortgage or encumber the Leases.
(e) Executory Contracts. Set forth on the Disclosure Schedule is
a list of all executory contracts made by or on behalf of
Seller, or by which Seller is bound, with respect to the
Real Property ("Executory Contracts"), including, without
limitation, operation, management, maintenance, utility and
construction contracts. At Closing, the Seller shall deliver
to PRG a true and complete copy (the original execution
copy, if available) of each of the Executory Contracts.
3.1.25 Availability of Documents. Seller has made available to PRG copies of
all Documents including, without limitation, all agreements, contracts,
commitments, insurance policies, leases, plans, instruments,
undertakings, authorizations, permits, licenses, patents, trademarks,
trade names, service marks, copyrights and applications therefor
listed in the Disclosure Schedule hereto or referred to herein. All
such copies are true and complete and include all amendments,
supplements and modifications thereto or waivers currently in effect
thereunder.
3.1.26 Completeness of Disclosure. On the Date hereof and on the Closing Date
(i) this Agreement does not contain any untrue statement of a material
fact or omits to state a material fact necessary in order to make the
statements contained herein, in the light of the circumstances under
which such statements were made, not misleading and (ii) there is no
fact known to Seller that materially adversely affects or in the
future may (so far as
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Seller can now foresee based on facts or knowledge known by Seller
which are not known or reasonably knowable by PRG) materially
adversely affect the Business that has not been set forth in this
Agreement.
3.1.27 Definition of Materiality. Except as otherwise specifically provided
herein, solely for purposes of the representations and warranties
contained in Section 3.1.1 through 3.1.26, Seller and PRG agree that
a breach which would reasonably be anticipated to result in damages
exceeding five thousand dollars shall be deemed to be "material" or
"materially adverse."
3.2 Representations and Warrant. PRG represents and warrants to the
Seller as follows:
3.2.1 Legal Existence. PRG is a limited liability company duly organized,
validly existing and in good standing under the laws of the State of
Delaware.
3.2.2 Power and Authorization. PRG has the power, authority and legal right
to execute, deliver and perform this Agreement. The execution, delivery
and performance of this Agreement by PRG have been duly authorized by
all necessary action of PRG and its members and managers. This
Agreement has been duly executed and delivered by PRG and constitutes
the legal, valid and binding obligation of PRG enforceable against
PRG in accordance with its terms.
3.2.3 Validity of Contemplated Transactions, etc. The execution, delivery and
performance of this Agreement by PRG does not and will not violate,
conflict with or result in the breach of any term, condition or
provision of, or require the consent of any other party to, (a) any
existing law, ordinance, or governmental rule or regulation to which
PRG is subject, (b) any judgment, order, writ, injunction, decree or
award of any court, arbitrator or governmental or regulatory
official, body or authority which is applicable to PRG, (c) the
charter documents or by-laws of, or any securities issued by, PRG, or
(d) any mortgage, indenture, agreement, contract, commitment, lease,
plan or other instrument, document or understanding, oral or written,
to which PRG is a party or by which PRG is otherwise bound. No
authorization, approval or consent of, and no registration or filing
with, any governmental or regulatory official, body or authority is
required in connection with the execution, delivery and performance
of this Agreement by PRG.
3.2.4 Litigation. No litigation, including any arbitration, investigation or
other proceeding of or before any court, arbitrator or governmental or
regulatory official, body or authority is pending or, to the
knowledge of PRG is threatened which relates to the assets of PRG or
the transactions contemplated by this Agreement, nor does PRG know of
any reasonably likely basis for any such litigation, arbitration,
investigation or proceeding, the result of which could adversely
affect PRG, its assets or the transactions contemplated hereby.
3.2.5 Funding. PRG has borrowing capacity under its Credit Agreement with
The Bank of New York, as Agent (the "Bank") sufficient to fund the
Purchase Price. PRG has
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received approval from the Bank for the acquisition contemplated
hereby subject to Bank approval of documentation and other customary
funding conditions.
3.3 Survival of Representations and Warrant. All representations and
warranties made by the parties in this Agreement shall survive the
Closing for a period of twelve months following the Closing Date
except that representations and warranties related to Taxes shall
survive until 30 days after the expiration of the applicable statute
of limitations. Notwithstanding any investigation or audit conducted
before or after the Closing Date or the decision of any party to
complete the Closing, each party shall be entitled to rely upon the
representations and warranties set forth herein and therein.
Notwithstanding the foregoing, the representations and warranties
shall survive to the extent of any specific unresolved claims made by
written notice by PRG pursuant to Article 6 hereof prior to the end of
the survival period until the resolution of such claims.
ARTICLE 4
AGREEMENTS PENDING CLOSING
4.1 Agreements of Seller Pending the Closing. Seller covenants and agrees
that, pending the Closing and except as otherwise agreed to in writing
by PRG:
4.1.1 Business in the Ordinary Course. The Business shall be conducted
solely in the ordinary course consistent with past practice.
4.1.2 Existing Condition. Seller shall not cause nor permit to occur any of
the events or occurrences described in subsection 3.1.11 hereof.
4.1.3 Maintenance of Physical Assets. Seller shall continue to maintain and
service the physical assets used in the conduct of the Business in the
same manner as has been consistent with past practice.
4.1.4 Employeesand Business Relations. Seller shall use its commercially
reasonable efforts to keep available the services of the present
employees and agents of the Business and to maintain the relations and
goodwill with the suppliers, customers, distributors and any others
having business relations with the Business; provided, however, that
the inability of PRG to obtain the services of any employee, supplier,
customer, distributor or agent shall not constitute an event of
default hereunder. Seller shall inform PRG if it has knowledge that
any employee, supplier, customer, distributor or agent intends to
terminate its relationship with Seller as a result of the acquisition
of the Business by PRG.
4.1.5 Maintenance of Insurance. Seller shall notify PRG of any changes in
the terms of the insurance policies and binders referred to on the
insurance portion of the Disclosure Schedule hereto.
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4.1.6 Maintenance of Franchises, etc. Seller shall use its commercially
reasonable efforts to maintain in full force and effect all franchises
currently in effect used in and material to the conduct of the
business of the Business.
4.1.7 Compliance with Laws, etc. Seller shall continue to comply with all
laws, ordinances, rules, regulations and orders applicable to the
Business, and to Seller's operations, assets or properties in respect
thereof, the noncompliance with which might materially adversely
affect the Business or the Assets.
4.1.8 Update Schedules. Seller shall disclose to PRG any material
information contained in their representations and warranties or the
Schedules which, because of an event occurring after the date hereof,
is incomplete or is no longer correct as of all times after the date
hereof until the Closing Date.
4.1.9 Conduct of Business. Seller shall use its commercially reasonable
efforts to conduct its business in such a manner that on the Closing
Date the representations and warranties of Seller contained in this
Agreement shall be true, in all material respects, as though such
representations and warranties were made on and as of such date.
Furthermore, Seller shall cooperate with PRG and use its best efforts
to cause all of the conditions to the obligations of PRG and Seller
under this Agreement to be satisfied on or prior to the Closing Date.
4.1.10 Sale of Assets; Negotiations. Neither Seller nor any Shareholder will
enter into any agreement, discussion, or negotiation with, or provide
information to, any other corporation, firm or other person, or
solicit, encourage, entertain or consider any inquiries or proposals,
with respect to (a) the possible disposition of a material portion of
Seller or any assets of Seller not in the ordinary course of Business,
(b) any business combination involving Seller, whether by way of
merger, consolidation, share exchange or other transaction, (c) the
purchase of any debt or equity security (including without limitation
any options, warrants, rights, or convertible security) issued or to
be issued by Seller, (d) the provision of any loan to Seller not in
the ordinary course of Business or (e) the granting of any security
interest, or the creation of any other lien, encumbrance or charge
upon any asset comprising the Business not in the ordinary course of
business. Seller shall not provide any confidential information
concerning the Business or its properties or assets to any third party
other than in the ordinary course of business. No Shareholder shall,
directly or indirectly, sell or encumber all or any part of the
capital stock of Seller. The obligation contained in this section
4.1.10 will terminate if the closing has not occurred by June 30,
1998. PA and Shareholders acknowledge that PRG will spend substantial
time and money to consummate this transaction in reliance on this
promise of exclusivity and will not unreasonably withhold their
consent to extensions of the time periods in the immediately preceding
sentence provided PRG is moving toward a closing. Seller and
Shareholders acknowledge that the BONY consent may contain customary
funding conditions which will not alter the business agreement
contained herein. PRG acknowledges that the 1997 PA financials are
audited and that previous financials are reviewed rather than audited.
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4.1.11 Access; Review. Seller shall give to PRG's officers, employees,
counsel, accountants and other representatives including, without
limitation, the Auditors (collectively, the "Agents"), free and full
access to and the right to inspect, during normal business hours, all
of the premises, properties, assets, financial and other records,
contracts and other documents relating to the Business and shall
permit them to consult with the officers, employees, accountants,
counsel and agents of Seller for the purpose of (a) making such
investigation of the Business, including, without limitation, the
1997 Balance Sheet, as PRG shall desire to make and (b) reviewing the
financial statements and financial and operational condition of
Seller, and preparing reviewed financial statements with respect to,
each of the fiscal years of Seller in the [three] year period ending
on December 31, 1997. Furthermore, Seller shall furnish to PRG and
the Agents all such documents and copies of documents and records and
information with respect to the affairs of the Business and copies of
any working papers relating thereto as PRG or such Agents shall from
time to time reasonably request and shall permit PRG and the Agents
to make such physical inventories and inspections of the Assets as
PRG or such Agents may request from time to time. PRG shall pay at
the Closing, the fees, costs and out-of-pocket expenses of the
Auditors incurred in connection with the review and the preparation
of the reviewed financial statements described in this subsection
4.1.11.
4.2 Agreements of PRG Pending the Closing. PRG covenants and agrees that,
pending the Closing and except as otherwise agreed to in writing by
Seller:
4.2.1 Actions of PRG. PRG will not knowingly take any action which would
result in a breach of any of its representations and warranties
hereunder. Furthermore, PRG shall cooperate with Seller and use its
best efforts to cause all of the conditions to the obligations of PRG
and Seller under this Agreement to be satisfied on or prior to the
Closing Date.
4.2.2 Confidentiality. Unless and until the Closing has been consummated,
PRG will hold, and shall cause its counsel, independent certified
public accountants, appraisers and investment bankers to hold in
confidence any confidential data or information made available to PRG
in connection with this Agreement with respect to the Business, using
the same standard of care to protect such confidential data or
information as is used to protect PRG's confidential information;
provided that PRG shall have the right to disclose such information
regarding Seller as it believes, after consultation with counsel is
required in any public filing with the Securities and Exchange
Commission or to its banks and bondholders. Seller and Shareholder
agree to execute such consents and similar documents as may be
required in connection with such filings. If the transactions
contemplated by this Agreement are not consummated, PRG agrees that
it shall return or cause to be returned to Seller all written
materials and all copies thereof that were supplied to PRG by the
Seller that contain any such confidential data or information.
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ARTICLE 5
CONDITIONS PRECEDENT TO THE CLOSING
5.1 Conditions Precedent to PRG's Obligations. All obligations of PRG under
this Agreement are subject to the fulfillment or satisfaction, prior
to or at the Closing, of each of the following conditions precedent:
5.1.1 Representations and Warranties True as of the Closing Date.
The representations and warranties of Seller contained in
this Agreement shall have been true in all material respects
on the date hereof and shall be true in all material
respects on the Closing Date with the same effect as though
such representations and warranties were made as of such
date.
5.1.2 Compliance with this Agreement. Seller shall have performed
and complied with all agreements and conditions required by
this Agreement to be performed or complied with by it prior
to or at the Closing.
5.1.3 Bank Approval. PRG shall have obtained the approval of the
required lenders under PRG's credit agreement with BONY as
agent for the lenders under PRG's current credit agreement.
5.1.4 Audited Financial Statements. The Auditors shall have
provided PRG with an audited balance sheet of Seller for the
fiscal year ending December 31, 1997; such audited balance
sheet shall have been satisfactory to PRG.
5.1.5 Closing Certificate. PRG shall have received a certificate
from Seller dated the Closing Date, certifying in such
detail as PRG may reasonably request that the conditions
specified in subsections 5.1.1 and 5.1.2 hereof have been
fulfilled and certifying that Seller has obtained all
consents and approvals required with respect to it or the
Business by subsection 5.1.7 hereof.
5.1.6 No Threatened or Pending Litigation. On the Closing Date, no
suit, action or other proceeding, or injunction or judgment
relating thereto, shall be threatened or be pending before
any court or governmental or regulatory official, body or
authority in which it is sought to restrain or prohibit or
to obtain damages or other relief in connection with this
Agreement or the consummation of the transactions
contemplated hereby, and no investigation that might
reasonably be anticipated to result in any such suit, action
or proceeding shall be pending or threatened.
5.1.7 Consents and Approvals.
(i) Except for consents required by the terms of the contracts,
commitments, agreements or franchises listed in Schedule
5.1.7 hereto, the holders of any indebtedness of Seller, the
lessors or lessees of any real or personal property or assets
leased by Seller, the parties (other than Seller) to any
contract, commitment
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or agreement to which Seller is a party or subject, any
governmental or regulatory official, body or authority or
any other person which owns or has authority to grant any
franchise and any governmental, judicial or regulatory
official, body or authority having jurisdiction over any
Shareholder, Seller or PRG to the extent that their consent
or approval is required or necessary under the pertinent
debt, lease, contract, commitment or agreement or other
document or instrument or under applicable orders, laws,
rules or regulations, for the consummation of the
transactions contemplated hereby in the manner herein
provided, shall have granted such consent or approval.
(ii) All required federal, state and local regulatory approvals
required to close the transaction (none of which are
currently contemplated to be required) shall have been
obtained.
5.1.8 Material Adverse Changes. No event has occurred which has
caused the Business, operations, assets, properties or
prospects of the Business to have been materially adversely
affected as a result of any event or occurrence and no such
event or occurrence that is reasonably likely to lead to
such an event or occurrence shall be threatened.
5.1.9 Legal Opinion. Sherreff, Friedman, Hoffman & Goodman, LLP,
counsel for Seller, shall have delivered to PRG a written
opinion, dated the Closing Date, in the form of Exhibit C,
attached hereto, with only such changes as shall be in form
and substance reasonably satisfactory to PRG and its
counsel.
5.1.10 Minimum Net Asset Value. At the closing the net asset value
of the Assets shall be a minimum of ten million dollars.
Seller shall provide PRG with a good faith estimate of its
Net Asset Value at least three business days before the
Closing Date. For these purposes "net assets" shall include
cash, accounts receivable (net of allowance for doubtful
accounts), inventory, rental equipment and the other assets
of Seller as set forth in a balance sheet prepared in
accordance with generally accepted accounting principles
("GAAP") with the adjustments listed on Schedule 5.1.10
hereof.
5.1.11 Minimum EBITDA. Seller will demonstrate that it had a EBITDA
for 1997 of at least $4.2 million determined in accordance
with GAAP and with the adjustments listed on Schedule 5.1.11
hereof.
5.2 Conditions Precedent to the Obligations of Seller. All obligations of
Seller under this Agreement are subject to the fulfillment or
satisfaction, prior to or at the Closing, of each of the following
conditions precedent:
5.2.1 Representations and Warranties True as of the Closing Date.
The representations and warranties of PRG contained in this
Agreement shall be true on the Closing
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Date with the same effect as though such representations and
warranties were made as of such date.
5.2.2 Compliance with this Agreement. PRG shall have performed and
complied with all agreements and conditions required by this
Agreement to be performed or complied with by them prior to
or at the Closing.
5.2.3 Closing Certificate. Seller shall have received a
certificate from PRG dated the Closing Date certifying in
such detail as Seller may reasonably request that the
conditions specified in subsections 5.2.1 and 5.2.2 hereof
have been fulfilled.
5.2.4 No Threatened or Pending Litigation. On the Closing Date, no
suit, action or other proceeding, or injunction or final
judgment relating thereto, shall be threatened or be pending
before any court or governmental or regulatory official,
body or authority in which it is sought to restrain or
prohibit or to obtain damages or other relief in connection
with this Agreement or the consummation of the transactions
contemplated hereby, and no investigation that might
reasonably be anticipated to result in any such suit, action
or proceeding shall be pending or threatened.
ARTICLE 6
INDEMNIFICATION
6.1 General Indemnification Obligation of Seller. From and after the
Closing, Seller and the Shareholders (severally in proportion to their
ownership of Seller on the date hereof), shall reimburse, indemnify
and hold harmless PRG, its officers, directors, employees, agents,
successors and assigns (each an "Indemnified PRG Party") against and
in respect of any and all damages, losses, deficiencies, liabilities,
costs and expenses incurred or suffered by any Indemnified PRG Party
that result from, relate to or arise out of:
6.1.1 any and all liabilities and obligations of Seller of any nature
whatsoever, except for the Assumed Liabilities;
6.1.2 any and all actions, suits, claims, or legal, administrative,
arbitration, governmental or other proceedings or investigations
against any Indemnified PRG Party that relate to Seller or the
Business prior to the Closing Date or which result from or arise out
of any action or inaction prior to the Closing Date of Seller or any
director, officer, employee, agent, representative or subcontractor
of Seller, except for the Assumed Liabilities;
6.1.3 any misrepresentation, breach of warranty or nonfulfillment of any
agreement or covenant on the part of Seller under this Agreement; or
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6.1.4 any and all actions, suits, claims, proceedings, investigations,
demands, assessments, audits, fines, judgments costs and other expenses
(including, without limitation, reasonable legal fees and expenses)
incident to any of the foregoing or to the enforcement of this
Section 6.1.
6.2 General Information Obligation of PRG. From and after the Closing, PRG
will reimburse, indemnify and hold harmless the Seller and its officers,
directors, employees, agents, successors and assigns (each an
"Indemnified Seller Party") against and in respect of any and all
damages, losses, deficiencies, liabilities costs and expenses incurred
or suffered by any Indemnified Seller Party that result from, relate to
or arise out of:
6.2.1 the Assumed Liabilities;
6.2.2 any misrepresentation, breach of warranty or non-fulfillment of any
agreement or covenant on the part of PRG under this Agreement;
6.2.3 any and all actions, suits, claims, or legal, administrative,
arbitration, governmental or other proceedings or investigations
against any Indemnified Seller Party that relate to the Assumed
Liabilities or the operations of the Business after the Closing Date
or which result from or arise out of any action or inaction after the
Closing Date of PRG or any member, manager, officer, employee, agent,
representative or subcontractor of PRG; or
6.2.4 any and all actions, suits, claims, proceeding, investigations, demands,
assessments, audits, fines, judgments, costs and other expenses
(including, without limitation, reasonable legal fees and expenses)
incident to any of the foregoing or to the enforcement of this
Section 6.2.
6.3 Method of Asserting Claims, etc.
6.3.1 Promptly after receipt by an Indemnified PRG Party or an Indemnified
Seller Party (the "Indemnified Party") of notice of a claim or demand
(an "Asserted Liability") that may result in indemnification pursuant to
Sections 6.1 or 6.2 of this Agreement, the Indemnified Party shall give
written notice thereof (the "Claims Notice") to the party or parties
against whom indemnification is or may be claimed (individually an
"Indemnifying Party", and collectively the "Indemnifying Parties"). The
Claims Notice shall describe the Asserted Liability in reasonably
sufficient detail, based on the information then available, to allow the
Indemnifying Party to evaluate the Asserted Liability. The Indemnifying
Party may elect to compromise or defend, at its own expense and by its
own counsel, reasonably acceptable to the Indemnified Party, any
Asserted Liability; provided, however, that the Indemnifying Party may
not compromise or settle any Asserted Liability without the consent of
the Indemnified Party or Parties unless such compromise or settlement
requires no more than a
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monetary payment for which the Indemnified Party or Indemnified Parties
hereunder are fully indemnified or involves other matters not binding
upon the Indemnified Party or Indemnified Parties, and (b) if the
Indemnified Party (or any of the Indemnified Parties) is an Indemnified
PRG Party and, in the reasonable opinion of such Indemnified PRG Party,
the Asserted Liability involves an issue or matter which could have a
materially adverse effect on the business, operations, assets,
properties or prospects of the Indemnified PRG Party including without
limitation the administration of the tax returns and responsibilities
under the tax laws of such Indemnified PRG Party, then such Indemnified
PRG Party shall have the right to compromise or defend, by its own
counsel, such Asserted Liability provided that in such case such
Indemnified PRG Party shall waive its right to indemnification
hereunder. If the Indemnifying Party elects to compromise or defend such
Asserted Liability, it shall within thirty (30) calendar days of notice
of the Asserted Liability provided under this Subsection (or sooner, if
the nature of the Asserted Liability so requires) notify the Indemnified
Party or Indemnified Parties in writing of its intent to do so, and the
Indemnified Party or Indemnified Parties shall cooperate, at the expense
of the Indemnifying Party with respect to out-of-pocket expenses of the
Indemnified Party or Indemnified Parties, in the compromise of, or
defense against, such Asserted Liability. If the Indemnifying Party
elects not to compromise or defend the Asserted Liability, fails to
notify the Indemnified Party or Indemnified Parties of its election as
herein provided or contests its obligation to indemnify under this
Section, the Indemnified Party or Indemnified Parties may pay,
compromise or defend such Asserted Liability in respect of any Asserted
Liability for which the Indemnifying Party may have an indemnification
obligation under this Agreement. Notwithstanding the foregoing, the
Indemnified Party or Indemnified Parties and the Indemnifying Party may
participate, at its/their own expense, in the defense of such Asserted
Liability in respect of any Asserted Liability for which the
Indemnifying Party may have an indemnification obligation under this
Agreement. Notwithstanding anything in the foregoing to the contrary,
the party that would be responsible under the terms of this Agreement
for paying the underlying claim in connection with any Asserted
Liability (should that claim ultimately prevail) shall bear the cost of
the defense of the claim (with the exception of the costs incurred by
any party that voluntarily participates in such defense) regardless of
which party actually provides the defense.
6.3.2 If a party hereunder should have a claim against another party hereunder
not involving a third-party claim or demand, the party making the claim
(the "Claiming Party") shall promptly notify the other party of the
claim. Within ten (10) days following receipt of the notice, the party
against which the claim is made (the "Challenged Party") shall notify
the Claiming Party whether it disputes liability with respect to the
claim. If the Challenged Party fails to provide timely notice, the
amount of such claim shall be conclusively deemed a liability of the
Challenged Party hereunder.
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6.3.3 Payment. Upon the determination of the liability hereunder, if any
party (a "Paying Party") is required to make a payment to another party
(the "Receiving Party"), the Paying Party shall make such payment within
ten (10) days after such determination of the amount of any claim for
indemnification made hereunder. In the event that the Receiving Party is
not paid in full for any such claim pursuant to the foregoing provisions
promptly after the Paying Party's obligation to indemnify has been
determined in accordance herewith, it shall have the right,
notwithstanding any other rights that it may have against any other
person, firm or corporation, to set-off the unpaid amount of any such
claim against any amounts owed by it under any agreements entered into
pursuant to this Agreement, the Seller's Documents or the PRG's
Documents. Upon the payment in full of any claim, either by set-off or
otherwise, the Paying Party shall be subrogated to the rights of the
Receiving Party against any person, firm or corporation with respect to
the subject matter of such claim.
6.3.4 Limitation on Liability. Neither Seller nor Shareholders will have any
liability (for indemnification or otherwise) with respect to any amount
otherwise indemnifiable pursuant to section 6.1 until the aggregate
amount exceeds $250,000, and, in such, case, only to the extent the
amount exceeds $250,000. Notwithstanding the indemnification obligations
contained in Section 6.1, Seller shall not be required to indemnify the
Indemnified PRG Parties in an aggregate amount in excess of $2,055,000
(15% of the Purchase Price). Anything to the contrary notwithstanding,
the limitations contained in this Section 6.3.4 shall not apply to (i)
any intentional breach by Seller of any covenant contained in Section
4.1.1 through 4.1.11 hereof, or (ii) brokerage fees indemnified pursuant
to Section 8.2.1.
6.4 Arbitration.
6.4.1 All disputes among the parties hereto under this Article VI shall be
settled by arbitration in New York, New York, before a single arbitrator
pursuant to the commercial arbitration rules of the American Arbitration
Association. Arbitration may be commenced at any time by any party
hereto giving written notice to each other party to a dispute that such
dispute has been referred to arbitration under this Section 6.4. The
arbitrator shall be selected by the mutual agreement of Seller and PRG,
but if they do not so agree within twenty (20) days after the date of
the notice referred to above, the selection shall be made pursuant to
the rules from the panels of arbitrators maintained by such association.
Any award rendered by the arbitrator shall be conclusive and binding
upon the parties hereto; provided, however, that any such award shall be
accompanied by a written opinion of the arbitrator giving the reasons
for the award. This provision for arbitration shall be specifically
enforceable by the parties and the decision of the arbitrator in
accordance herewith shall be final and binding and there shall be no
right of appeal therefrom. Each party shall pay its own expenses of
arbitration and the expenses of the arbitrator shall be equally shared;
provided, however, that if in the opinion of the arbitrator any claim
for indemnification or any defense or objection thereto was
unreasonable, the arbitrator may assess, as part of his
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award, all or any part of the arbitration expenses of the other party
(including reasonable attorneys' fees) and of the arbitrator against the
party raising such unreasonable claim, defense or objection.
6.4.2 To the extent that arbitration may not be legally permitted hereunder
and the parties to any dispute hereunder may not at the time of such
dispute mutually agree to submit such dispute to arbitration any party
may commence a civil action in a court of appropriate jurisdiction to
solve disputes hereunder. Nothing contained in this Section 6.5 shall
prevent the parties from settling any dispute by mutual agreement at any
time.
6.5 Compliance with Bulk Sales Laws. PRG and Seller hereby waive compliance
by PRG and Seller with the bulk sales law and any other similar laws in
any applicable jurisdiction in respect of the transactions contemplated
by this Agreement.
ARTICLE 7
POST CLOSING MATTERS
7.1 Non-Solicitation. As of the Closing Date, PRG shall offer employment to,
and Seller shall use its commercially reasonable efforts to assist PRG
in employing as new employees of PRG, all persons presently engaged in
the Business who are identified by PRG prior to the Closing Date as
persons that PRG desires to employ (the "Employees"). Except as set
forth in the Disclosure Schedule, Seller shall at its sole cost and
expense terminate effective as of the Closing Date all employment
agreements it has with any of the Employees. Until the first anniversary
of the Closing Date, neither Seller nor any Shareholder shall solicit or
offer employment or cause to be solicited or offered employment to any
Employee.
7.2 Employee Benefits. PRG shall assume that portion of all benefits
(including the arrangements, plans and programs set forth in the
Disclosure Schedule which has been accrued on behalf of each employee
(or is attributable to expenses properly incurred by that employee) as
of the Closing Date. No portion of the assets of any plan, fund, program
or arrangement, written or unwritten, heretofore sponsored or maintained
by Seller (and no amount attributable to any such plan, fund, program or
arrangement) shall be transferred to PRG. PRG shall initially provide at
least the benefits listed on Schedule 7.2, shall not be required to
continue any such plan, fund, program or arrangement after the Closing
Date but will generally provide equivalent benefits. All employees of
Seller who are employed by PRG on or after the Closing Date shall be new
employees of PRG and shall receive prior service credit for any prior
employment by Seller of such employees for purposes of determining their
entitlement to benefits which PRG may, from time to time make available
to its employees.
7.3 Maintenance of Books and Records. Seller and PRG shall each preserve
until the seventh anniversary of the Closing Date all records possessed
or to be possessed by such party relating to any of the assets,
liabilities or business of the Business prior to the Closing Date.
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After the Closing Date, where there is a legitimate purpose, such party
shall provide the other parties with access, upon prior reasonable
written request specifying the need therefor, during regular business
hours, to (i) the officers and employees of such party and (ii) the
books of account and records of such party, but, in each case, only to
the extent relating to the assets, liabilities or business of the
Business prior to the Closing Date, and the other parties and their
representatives shall have the right to make copies of such books and
records; provided, however, that the foregoing right of access shall not
be exercisable in such a manner as to interfere unreasonably with the
normal operations and business of such party; and further, provided,
that, as to so much of such information as constitutes trade secrets or
confidential business information of such party, the requesting party
and its officers, directors and representatives will use due care to not
disclose such information except (i) as required by law, (ii) with the
prior written consent of such party, which consent shall not be
unreasonably withheld, or (iii) where such information becomes available
to the public generally, or becomes generally known to competitors of
such party, through sources other than the requesting party, its
affiliates or its officers, directors or representatives. Such records
may nevertheless be destroyed by a party after the third anniversary of
the Closing Date if such party sends to the other parties written notice
of its intent to destroy records, specifying with particularly the
contents of the records to be destroyed. Such records may then be
destroyed after the 30th day after such notice is given unless another
party objects to the destruction in which case the party seeking to
destroy the records shall deliver such records to the objecting party.
7.4 Payments Received. Seller and PRG each agree that after the Closing they
will hold and will promptly transfer and deliver to the other, from time
to time as and when received by them, any cash, checks with appropriate
endorsements (using their commercially reasonable efforts not to convert
such checks into cash), or other property that they may receive on or
after the Closing which properly belongs to the other party, including
without limitation any insurance proceeds, and will account to the other
for all such receipts. From and after the Closing, PRG shall have the
right and authority to endorse without recourse the name of Seller on
any check or any other evidences of indebtedness received by PRG on
account of the Business and the Assets transferred to PRG hereunder.
7.5 Use of Name. From and after the Closing Date, Seller will sign such
consents and take such other action as PRG shall reasonably request in
order to permit PRG to use the names "PRODUCTION ARTS" and variants
thereof. From and after the Closing Date, Seller will not itself use any
such names or any names similar thereto or variants thereof.
7.6 UCC Matters. From and after the Closing Date, Seller will refer all
inquiries with respect to ownership of the Assets or the Business to
PRG. In addition, Seller will execute such documents and financing
statements as PRG may request from time to time to evidence transfer of
the Assets to PRG, including any necessary assignments of financing
statements.
7.7 Convenant Not to Compete. Seller and each Shareholder agree that for a
period of five years after the Closing Date, they will not, directly or
indirectly, own, manage, operate, join, control or participate in the
ownership, management, operation or control of any theatrical
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lighting or audio-related business, whether in corporate, proprietorship
or partnership form or otherwise; provided that (i) this covenant shall
not prevent a Shareholder from owning up to one percent (1%) of the
stock of any publicly traded company which may be engaged in such
business, (ii) the Company acknowledges that a company which
manufactures but does not rent lighting equipment would not be viewed as
a competitor for purposes of this noncompetition covenant (iii) a
company that supplies products or services to PRG companies but which
does not directly compete with a material portion of the PRG business as
conducted by PRG on the later of (x) the Closing Date or (y) the last
date on which a Shareholder provides services to PRG under any paid
employment or consulting contract or arrangement would not be viewed as
a competitor for purposes of this noncompetition covenant and (iv) a
company that rents or buys products or services from PRG companies and
then resells these products to its customers would not be viewed as a
competitor for purposes of this noncompetition covenant, provided that
in such case the relevant Shareholder shall use reasonable commercial
efforts to refer business to appropriate PRG companies and provided
further that such company does not directly compete with a material
portion of the PRG business as conducted by PRG on the later of (x) the
Closing Date or (y) the last date on which a Shareholder provides
services to PRG under any paid employment or consulting contract or
arrangement. The parties hereto specifically acknowledge and agree that
the remedy at law for any breach of the foregoing will be inadequate and
that the PRG, in addition to any other relief available to it, shall be
entitled to temporary and permanent injunctive relief without the
necessity of proving actual damage. In the event that the provisions of
this Section 7.7 should ever be deemed to exceed the limitation provided
by applicable law, then the parties hereto agree that such provisions
shall be reformed to set forth the maximum limitations permitted. In the
event of any inconsistency between the Covenant Not to Compete contained
herein and any employment contract between PRG and a shareholder, the
covenant contained in the employment agreement shall control.
ARTICLE 8
MISCELLANEOUS
8.1 Termination Anything herein or elsewhere to the contrary
notwithstanding, this Agreement may be terminated by written notice of
termination at any time before the Closing Date only as follows:
8.1.1 by mutual consent of Seller and PRG;
8.1.2 by PRG, at any time if the representations and warranties of Seller
contained in Section 3.1 hereof were incorrect in any material respect
when made or at any time thereafter; or
8.1.3 by Seller, (i) at any time if the representations and warranties of PRG
contained in Section 3.2 hereof were incorrect in any material
respect when made or at any time
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thereafter, (ii) upon written notice to PRG given at any time after June
30, 1998 (or such later date as shall have been specified in a writing
authorized on behalf of Seller and PRG) if all of the conditions
precedent set forth in Section 5.2 hereof have not been met or (iii)
upon written notice to PRG given at any time after May 31, 1998 (or such
later date as shall have been specified in a writing authorized on
behalf of Seller and PRG) if PRG shall have failed to notify Seller in
writing prior to such date that the condition precedent to PRG's
obligation to close the transactions contemplated herein described in
subsection 5.1.4 has either been deemed satisfied or been waived by PRG.
8.1.4 In the event of the termination and abandonment hereof pursuant to the
provisions of this Section 8.1, this Agreement (except for Section 4.2.2
which shall continue) shall become void and have no effect, without any
liability on the part of any of the parties or their directors or
officers or stockholders in respect of this Agreement.
8.1.5 By either party, if PRG has not tendered payment by July 15, 1998.
8.2 Brokers' and Finders' Fees
8.2.1 Seller represents and warrants to PRG that all negotiations relative to
this Agreement have been carried on by it directly without the
intervention of any person, who may be entitled to any brokerage or
finder's fee or other commission in respect of this Agreement or the
consummation of the transactions contemplated hereby and Seller agrees
to indemnify and hold harmless PRG against any and all claims, losses,
liabilities and expenses which may be asserted against or incurred by it
as a result of Seller's dealings, arrangements or agreements with any
other such person.
8.2.2 PRG represents and warrants to Seller and Shareholders that all
negotiations relative to this Agreement have been carried on by it
directly without the intervention of any person, who may be entitled to
any brokerage or finder's fee or other commission in respect of this
Agreement or the consummation of the transactions contemplated hereby
and PRG agrees to indemnify and hold harmless Seller against any and all
claims, losses, liabilities and expenses which may be asserted against
or incurred by Seller or Shareholders as a result of PRG's dealings,
arrangements or agreements with any other such person.
8.2.3 Sale, Transfer, and Documentary Taxes, etc. Seller shall pay all
federal, state and local sales, documentary and other transfer taxes, if
any, other than bulk sales tax which shall be divided equally between
the parties due as a result of the purchase, sale or transfer of the
Assets and the assumption of the Assumed Liabilities in accordance
herewith whether imposed by law on Seller or PRG and Seller shall
indemnify, reimburse and hold harmless PRG in respect of the liability
for payment of or failure to pay any such taxes or the filing of or
failure to file any reports required in connection therewith.
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8.2.4 Expenses. Except as otherwise provided in this Agreement, each party
hereto shall pay its own expenses incidental to the negotiation and
preparation of this Agreement, the carrying out of the provisions of
this Agreement and the consummation of the transactions contemplated
hereby.
8.2.5 Contents of Agreement; Parties in Interest; etc. This Agreement sets forth
the entire understanding of the parties hereto with respect to the
transactions contemplated hereby. It shall not be amended or modified
except by written instrument duly executed by each of the parties
hereto. Any and all previous agreements and understandings between or
among the parties regarding the subject matter hereof, whether written
or oral, are superseded by this Agreement.
8.2.6 Assignment and Binding Effect. This Agreement may not be assigned prior to
the Closing by any party hereto without the prior written consent of the
other parties; provided that PRG shall have the right to assign its
rights and obligations hereunder to any entity controlled by PRG or by
its principals. Subject to the foregoing, all of the terms and
provisions of this Agreement shall be binding upon and inure to the
benefit of and be enforceable by the successors and assigns of each
Shareholder, Seller and PRG.
8.2.7 Waiver. Any term or provision of this Agreement may be waived at any time
by the party entitled to the benefit thereof by a written instrument
duly executed by such party.
8.2.8 Notices. Any notice, request, demand, waiver, consent, approval or other
communication which is required or permitted hereunder shall be in
writing and shall be deemed given only if delivered personally or sent
by telegram or by registered or certified mail, postage prepaid, as
follows:
If to PRG, to:
Production Resource Group, L.L.C.
539 Temple Hill Road
New Windsor, New York 12553
Attention: Robert A. Manners
Facsimile: 914-567-5804
With a required copy to:
Stephen B. Hazard, Esq.
Pepe & Hazard
Goodwin Square, 225 Asylum Street
Hartford, CT 06103
Facsimile: 860-522-2796
If to Seller or a Shareholder, to:
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Production Arts Lighting Inc.
35 Oxford Drive
Moonachie, New Jersey 07041
Attn: Mr. John T. McGraw, President
Facsimile: 201-440-9335
With a required copy to:
Gerald Adler, Esq.
Shereff, Friedman, Hoffman & Goodman, LLP
919 Third Avenue
New York, NY 10022
Facsimile: 212-980-4665
or to such other address as the addressee may have specified in a notice duly
given to the sender as provided herein. Such notice, request, demand, waiver,
consent, approval or other communication will be deemed to have been given as
of the date so delivered, telegraphed or mailed.
8.2.9 Choice of Law. This Agreement shall be governed by and interpreted and
enforced in accordance with the laws of the State of New York without
regard to principles of conflicts of laws, as applied to agreements
among New York residents entered into and to be performed entirely with
the State of New York.
8.2.10 No Benefit to Others. The representations, warranties, covenants and
agreements contained in this Agreement are for the sole benefit of the
parties hereto and, in the case of Article VI hereof, the other
Indemnified Parties, and their heirs, executors, administrators, legal
representatives, successors and assigns, and they shall not be construed
as conferring any rights on any other persons.
8.2.11 Headings, Gender and "Person". All section headings contained in this
Agreement are for convenience of reference only, do not form a part of
this Agreement and shall not affect in any way the meaning or
interpretation of this Agreement. Words used herein, regardless of the
number and gender specifically used, shall be deemed and construed to
include any other number, singular or plural, and any other gender,
masculine, feminine, or neuter, as the context requires. Any reference
to a "person" herein shall include an individual, firm, corporation,
partnership, trust, governmental authority or body, association,
unincorporated organization or any other entity.
8.2.12 Entire Agreement. When executed and delivered by all parties hereto, this
agreement shall constitute the entire agreement of the parties with
respect to the subject matter contained herein and shall supercede all
prior oral and written agreements among the parties including, without
limitation, binding letter of understanding dated March 16, 1998.
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8.2.13 Schedules and Exhibits. All Exhibits and Schedules referred to herein are
intended to be and hereby are specifically made a part of this
Agreement.
8.2.14 Severability. Any provision of this Agreement which is invalid or
unenforceable in any jurisdiction shall be ineffective to the extent of
such invalidity or unenforceability without invalidating or rendering
unenforceable the remaining provisions hereof, and any such invalidity
or unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
8.2.15 Counterparts. This Agreement may be executed in any number of
counterparts and any party hereto may execute any such counterpart,
each of which when executed and delivered shall be deemed to be an
original and all of which counterparts taken together shall constitute
but one and the same instrument notwithstanding that not all parties
hereto are signatories to the same counterpart. This Agreement shall
become binding when one or more counterparts taken together shall have
been executed and delivered by the parties. It shall not be necessary
in making proof of this Agreement or any counterpart hereof to produce
or account for any of the other counterparts. This Agreement may be
executed by facsimile signature and each party may fully rely upon
facsimile execution; this Agreement shall be fully enforceable against
a party which has executed the Agreement by facsimile.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
on the date first written.
BUYER:
PRODUCTION RESOURCE GROUP, L.L.C.
By: /s/ Bradley G. Miller
---------------------------------------
Name: Bradley G. Miller
---------------------------------------
Its: Executive Vice President
---------------------------------------
SELLER:
PRODUCTION ARTS LIGHTING INC.
By: /s/ John T. McGraw
---------------------------------------
Name: John T. McGraw
---------------------------------------
Its: President
---------------------------------------
PRODUCTION ARTS LIGHTING WEST, INC.
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By: /s/ John T. McGraw
---------------------------------------
Name: John T. McGraw
---------------------------------------
Its: President
---------------------------------------
PRODUCTION ARTS EUROPE, INC.
By: /s/ John T. McGraw
---------------------------------------
Name: John T. McGraw
---------------------------------------
Its: President
---------------------------------------
SHAREHOLDERS:
/s/ John T. McGraw
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John T. McGraw
/s/ Steven R. Terry
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Steven R. Terry
