SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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): January 28, 2000
Tangible Asset Galleries, Inc.
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(Exact name of registrant as specified in its charter)
Nevada
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(State or other jurisdiction of incorporation)
0-21271 88-0396772
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(Commission File Number) (IRS Employer Identification No.)
3444 Via Lido
Newport Beach, California 92663
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (949) 566-0021
1550 S. Pacific Coast Highway, Suite 103
Laguna Beach, California 92651
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(Former name or former address, if changed since last report)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On December 30, 1999, the Company entered into an Acquisition Agreement
(the "Agreement") between Tangible Asset Galleries, Inc. ("Tangible" or
the "Company") and Gehringer and Kellar, Inc., a Pennsylvania corporation dba
Keystone Coin & Stamp Exchange ("Keystone"), Stephen J. Gehringer, Kenneth J.
Kellar, and Curtis W. Mease. Keystone is a rare coin wholeseller, retailer
and auction company located in Allentown, Pennsylvania. Pursuant to the
Agreement, the Company issued an aggregate of 201,861 shares of the common
stock of the Company to the shareholders of Keystone in exchange for all
of the outstanding shares of common stock of Keystone. As a result, Mr.
Gehringer will receive 94,880 shares of the Company's common stock; Mr.
Kellar will receive 94,880 shares of the Company's common stock; and Mr.
Mease will receive 12,101 shares of the Company's common stock. The Company
will become the sole shareholder of Keystone.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial statements of businesses acquired.
No financial statements of Keystone are required pursuant to
Item 310(c) of Regulation S-B.
(b) Pro forma financial information.
No pro forma financial information is required pursuant to
Item 310(d) of Regulation S-B.
(c) Exhibits.
Acquisition Agreement by and between the Company and Gehringer and
Kellar, Inc., a Pennsylvania corporation dba Keystone Coin & Stamp
Exchange ("Keystone"), Stephen J. Gehringer, Kenneth J. Kellar,
and Curtis W. Mease.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: January 31, 2000 TANGIBLE ASSET GALLERIES, INC.
By:/s/ Silvano DiGenova
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Silvano DiGenova
President and Chief Executive Officer
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ACQUISITION AGREEMENT
This ACQUISITION AGREEMENT, dated as of December 30, 1999 (this "Agreement'),
among TANGIBLE ASSET GALLERIES, INC., a Nevada corporation ("TAGZ"), and
GEHRINGER AND KELLAR, INC., a Pennsylvania corporation d/b/a Keystone Coin &
Stamp Exchange ("Keystone") and STEPHEN J. GEHRINGER, KENNETH J. KELLAR, and
CURTIS W. MEASE, individuals who are the 100% stockholders of Keystone
(together, the "Keystone Stockholders").
WITNESSETH:
A. TAGZ is organized under the laws of the State of Nevada and is one of
the leading dealers of Collectibles in the United States.
B. Keystone is engaged in the business of buying and selling Collectibles
at the retail and wholesale levels, by mail order, at trade shows or auctions or
over the internet or by other means of electronic commerce (collectively, the
"Businesses" or, individually, the "Business"), and TAGZ intends to integrate
the products and services offered by Keystone in order to expand the sale of
Keystone's products, increase the efficiencies and reduce the operating costs of
Keystone and to increase its presence and expand its sales over the Internet.
C. TAGZ desires to acquire all of the outstanding capital stock of
Keystone, and Keystone Stockholders desire to sell and transfer and convey all
of the outstanding capital stock of Keystone to TAGZ, in exchange for which TAGZ
will issue to Keystone Stockholders shares of TAGZ Common Stock.
D. This Agreement is being entered into by the parties as part of a plan
of exchange of stock that is intended by the parties to qualify for
non-recognition treatment under the Internal Revenue Code of 1986, as amended
(the "Code"). However, none of the parties to this Agreement has made or is
making any representations or warranties with respect to whether the
transactions being consummated pursuant to and as part of such plan will comply
with the requirements of the Code or as to the consequences, under applicable
federal, state or other tax laws, of such transactions to the parties to this
Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and
agreements herein contained, and intending to be legally bound hereby, TAGZ, and
Keystone and Keystone Stockholders hereby agree as follows:
ARTICLE I
EXCHANGE OF CONSIDERATION
1.1 Sale and Purchase of Keystone Shares. On the terms and subject to the
conditions that are set forth in this Agreement, on the Closing Date (as defined
in Section 1.3 below) the Keystone Stockholders shall sell, convey, assign,
transfer and deliver to TAGZ all of the outstanding shares of Common Stock of
Keystone (the "Keystone Shares"), free and clear of all liens, claims,
encumbrances, pledges, options, security interests and any other adverse
interests of any kind or nature whatsoever, in exchange for the Acquisition
Consideration (as defined in Section 1.2 below).
1.2 Acquisition Consideration.
(a) On the terms and subject to the conditions that are set forth in this
Agreement, at the Closing TAGZ shall, as consideration for the sale of Keystone
Shares by the Keystone Stockholders to TAGZ, issue to Keystone Stockholders a
total of 201,861 validly issued, fully paid and nonassessable shares of Common
Stock of TAGZ ("TAGZ Shares"). The TAGZ Shares (as the same may be adjusted
pursuant to Paragraph 1.2(b) hereof) shall constitute the "Acquisition
Consideration." It is understood and agreed that as between the Keystone
Stockholders, Gehringer and Kellar shall each be entitled to 47% of the
Acquisition Consideration due the Keystone Stockholders in the aggregate, Mease
shall be entitled to 6% of the Acquisition Consideration, and TAGZ may so direct
the issuance of the TAGZ Shares as follows: 94,880 each to Gehringer and Kellar,
and 12,101 to Mease.
(b) If it is determined that, Keystone Stockholders have not, prior to the
Closing Date, discharged fully and completely and without any liability (fixed
or contingent) to Keystone, any of Keystone's Pre-Closing Excluded Liabilities
(as defined in Section 5.5 hereof), the Acquisition Consideration otherwise
required to be paid to Keystone Stockholders at the Closing pursuant to
Paragraph 1.2(a) above shall be reduced by the amount of such undischarged
Pre-Closing Excluded Liabilities (the "Undischarged Liabilities").
1.3 Closing. Subject to the satisfaction or waiver of the conditions set
forth in Article VI, the consummation of the transactions contemplated hereby
(the "Closing") shall take place at the offices of Douglas M. Marinos, Esq.,
attorney for Keystone and Keystone Stockholders, located at 101 North Cedar
Crest Boulevard, Allentown, PA 18104, on January 21, 2000 unless another date,
time or place is agreed to in writing by the parties hereto. At the Closing,
Keystone Stockholders shall surrender to TAGZ all of the certificates evidencing
Keystone Shares (the "Keystone Stock Certificates"), together with one or more
stock assignments separate from these certificates, each duly endorsed in blank
and with signature guaranteed. In exchange therefor, TAGZ shall deliver to
Keystone Stockholders certificates evidencing the TAGZ Shares, issued in the
name of Keystone Stockholders. The parties also shall execute and deliver the
additional documents and instruments listed on Exhibit B hereto (the "Closing
Documents").
1.4 Taking of Necessary Action; Further Action. Each of TAGZ , Keystone and
Keystone Stockholders shall take all such reasonable and lawful action as may be
necessary or appropriate in order to consummate the transactions contemplated
hereby in accordance with this Agreement as promptly as possible. If, at any
time after the Closing, any such further action is necessary or desirable to
carry out the purposes of this Agreement, the parties hereto will take all such
lawful and necessary action.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF KEYSTONE AND KEYSTONE STOCKHOLDERS
Keystone and the Keystone Stockholders hereby jointly and severally
represent and warrant to TAGZ that, except as set forth in the written
disclosure schedule delivered on or prior to the date hereof by Keystone to TAGZ
that is arranged in paragraphs corresponding to the numbered and lettered
paragraphs contained in this Article II (the "Company Disclosure Schedule"):
2.1 Organization and Qualification. Keystone is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Pennsylvania and it has the requisite corporate power and authority and is in
possession of all franchises, grants, authorizations, licenses, permits,
easements, consents, certificates, approvals and orders necessary to own, lease
and operate the properties it purports to own, and to operate or lease and to
carry on its business as it is now being conducted. Keystone is duly qualified
or licensed as a foreign corporation to do business, and is in good standing, in
each jurisdiction where the character of its properties owned, leased or
operated by it or the nature of its activities make such qualification or
licensing necessary. Except as set forth in Section 2.1 of Keystone Disclosure
Schedule, Keystone does not directly or indirectly own any ownership, equity or
similar interest in, or any interest convertible into or exchangeable or
exercisable for, any equity or similar interest in, any corporation, limited
liability company, partnership, joint venture or other business association or
entity.
2.2 Articles of lncorporation and By-Laws. Keystone Stockholders have
heretofore furnished to TAGZ a complete and correct copy of Keystone's Articles
of Incorporation and By-Laws, as amended to date. Such Articles of Incorporation
and By-Laws are in full force and effect. Keystone is not in violation of any of
the provisions of its Articles of Incorporation or By-Laws.
2.3 Capitalization.
(a) The authorized capital stock of Keystone consists of (i) 2000 shares of
Keystone Common Stock, par value $100.00 per share. The Keystone Shares (i)
consist of a total of 750 shares of Common Stock of Keystone, (ii) constitute
100% of the issued and outstanding shares of capital stock of Keystone, (iii)
are validly issued, fully paid and nonassessable and (iv) are owned,
beneficially and of record, solely by the Keystone Stockholders. Keystone is not
authorized to issue or sell any shares of capital stock other than the Common
Stock and has not issued or sold any shares of capital stock other than Keystone
Shares.
(b) There are no shares of Common Stock held in treasury or reserved for
future issuance pursuant to stock options, warrants or other rights to acquire,
by purchase, exchange conversion or otherwise, any shares of Common Stock of
Keystone. There are no options, warrants or other rights, and there are no
agreements, arrangements or commitments of any character, written or oral,
relating to the issued or unissued capital stock of Keystone or obligating
Keystone to issue or sell any shares of capital stock of, or other equity
interests in, Keystone.
(c) There are no obligations, contingent or otherwise, of Keystone to
repurchase, redeem or otherwise acquire any shares of Company Common Stock or to
provide funds to or make any investment (in the form of a loan, capital
contribution or otherwise) in any business entity.
(d) Keystone and Keystone Stockholders have furnished to TAGZ a true and
complete copy of its stock issuance and transfer records that set forth all
issuances, transfers and repurchases of shares of its Common Stock since
Keystone's inception. Except as set forth in Section 2.3 of Keystone Disclosure
Schedule, there are no Company Certificates that have been lost or are not
accounted for and Keystone has not issued any Company Certificates in
replacement of any Company Certificates that have been lost, stolen or destroyed
or could not be found by any holder thereof.
2.4 Authority Relative to this Agreement.
(a) Keystone has all necessary corporate power and authority to execute
and deliver this Agreement and to perform its obligations hereunder and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement by Keystone and the consummation by Keystone of the transactions
contemplated hereby have been duly and validly authorized by all necessary
corporate and stockholder action, and no other corporate or stockholder
proceedings or actions are necessary to authorize this Agreement or to
consummate the transactions contemplated hereby. The Board of Directors of
Keystone has determined that it is advisable and in the best interest of
Keystone's Keystone Stockholders for Keystone to enter into this Agreement and
to consummate the transactions contemplated hereby.
(b) This Agreement has been duly and validly executed and delivered by
Keystone and, assuming due authorization, execution and delivery by TAGZ, as
applicable, constitutes a legal, valid and binding obligation of Keystone
enforceable against Keystone in accordance with its terms, except as the
enforceability thereof may be subject to or limited by (i) bankruptcy,
insolvency, reorganization, arrangement, moratorium, or other similar laws
relating to or affecting rights of creditors, and (ii) general equitable
principles, regardless of whether the issue of enforceability is considered in a
proceeding in equity or at law.
2.5 Material Contracts; No Conflicts; Required Filings and Consents.
(a) Section 2.5 of the Keystone Disclosure Schedule includes a list of all
promissory notes, mortgages, contracts, leases, licenses, permits, franchises
and all other agreements and obligations (including any open obligations to
suppliers or customers) to which Keystone is a party or by which it is bound and
(i) which provide for payments either by or to Keystone of more than $1,000 per
month or more than $15,000 in the aggregate over any period of time, or (ii)
which requires the giving of more than 30 days notice or the payment of any
amounts by Keystone as a condition or requirement of its termination or
non-renewal by Keystone, or (iii) as to which a termination or non- renewal by
the other party or parties thereto, or a breach or default by Keystone, could
have a material adverse effect on Keystone, or (iv) which, in the absence of a
the obtaining of a consent or approval from the other party or parties thereto,
would be breached or violated by reason of the consummation of the transactions
contemplated hereby or (v) which imposes any restrictions on the conduct of
Keystone's business or any security interests, liens or encumbrances on
Keystone's assets (collectively, the "Material Contracts"). Keystone and
Keystone Stockholders have furnished true and correct copies of all such
Material Contracts to the TAGZ or its counsel.
(b) Except as set forth in Section 2.5 of the Keystone Disclosure Schedule,
the execution and delivery of this Agreement by Keystone and Keystone
Stockholders does not, and the performance of this Agreement by Keystone and the
Keystone Stockholders will not, (i) conflict with or violate the Articles of
Incorporation or By-Laws of Keystone, (ii) conflict with or violate any law,
rule, regulation, order, judgment or decree applicable to Keystone or by which
its properties are bound or affected, or (iii) result in any breach of or
constitute a default (or an event that with notice or lapse of time or both
would become a default) under, or impair Keystone's rights or alter the rights
or obligations of any third party under, or give to others any rights of
termination, amendment, acceleration or cancellation of any Material Contract,
or result in the creation of a lien or encumbrance on any of the properties or
assets of Keystone pursuant to any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which Keystone is a party or by which Keystone or any of its properties is
bound or affected, except in any such case for any such conflicts, violations,
breaches, defaults or other occurrences that would not have, either individually
or in the aggregate, a material adverse effect on Keystone.
(c) Except as set forth in Section 2.5 of the Keystone Disclosure Schedule,
the execution and delivery of this Agreement by Keystone and by the Keystone
Stockholders does not, and the performance of this Agreement by Keystone and the
Keystone Stockholders will not, require any consent, approval, authorization or
permit of, or filing with or notification to, any person or any governmental or
regulatory authority, domestic or foreign.
2.6 Compliance; Permits.
(a) Except as disclosed in Section 2.6 of the Keystone Disclosure Schedule,
Keystone is not in default or violation of, (i) any law, rule, regulation, writ,
order, judgment or decree applicable to Keystone or by which any of its
properties is bound or affected or (ii) any Material Contract, and no event has
occurred which, either with the passage of time or the giving of notice, or
both, would constitute a breach or violation of any such law, rule, regulation,
writ, order, judgment or decree or any Material Contract.
(b) Except as disclosed in Section 2.6 of the Keystone Disclosure Schedule,
Keystone holds all permits, licenses, easements, variances, exemptions,
consents, certificates, orders and approvals from governmental authorities which
are material to the operation of the business of Keystone as it is now being
conducted (collectively, the "Company Permits"). Keystone is in compliance with
the terms of Company Permits, except where the failure to so comply would not
have a material adverse effect.
2.7 Financial Statements and Liabilities.
(a) Financial Statements. Keystone and Keystone Stockholders have furnished
true and complete copies of the financial statements of Keystone, consisting of
balance sheets as of, and related statements of income, cash flow and Keystone
Stockholders equity for the twelve month period ended, December 31, 1997 and
1998 and the nine-month period ended September 30, 1999 (the "Keystone Financial
Statements"). Keystone Financial Statements were prepared on an accrual basis,
in accordance with generally accepted accounting principles ("GAAP") applied on
a consistent basis throughout the periods involved (except as may be indicated
in the footnotes thereto), and Keystone Financial Statements fairly present in
all material respects the financial position of Keystone as at the respective
dates thereof and the results of its operations and cash flows for the periods
covered thereby.
(b) No Undisclosed Liabilities. Except as is disclosed in Section 2.7 of the
Keystone Disclosure Schedule, Keystone does not have any liabilities (absolute,
accrued, contingent or otherwise), except (i) liabilities that individually and
in the aggregate are adequately provided for in Keystone's balance sheet
(including any related notes thereto) as of September 30, 1999 included in
Keystone Financial Statement (the "1999 Keystone Balance Sheet"), (ii)
non-material liabilities which were incurred in the ordinary course of business
and were not required under generally accepted accounting principles to be
reflected on the 1999 Keystone Balance Sheet, or which were incurred after
September 30, 1999 in the ordinary course of business and consistent with past
practice and which are not, in the aggregate, in excess of $5,000.
2.8 Absence of Certain Changes or Events. Except as set forth in Section 2.8
of the Keystone Disclosure Schedule, since September 30, 1999, Keystone has
conducted its business in the ordinary course and there has not occurred: (i)
any amendments or changes in the Articles of Incorporation or By-laws of
Keystone or any amendments, terminations or non-renewals of or breaches or
defaults under any of the Material Contracts; (ii) any damage to or destruction
or loss of any assets of Keystone (whether or not covered by insurance); (iii)
the commencement or threat of litigation or governmental proceeding or
investigation, that, if adversely determined against Keystone, would have a
material adverse effect on Keystone or would interfere with the consummation of
the transactions contemplated hereby; (iv) any material revaluation by Keystone
of any of its assets, including, without limitations writing down the value of
inventory or writing off notes or accounts receivable other than in the ordinary
course of business; (v) any other action or event that, if it had occurred after
the date of this Agreement and prior to the Closing, would have violated, or
required the consent of TAGZ under, Section 5.1 of this Agreement; (vi) the
execution of any agreement to do any of the foregoing, or (vii) the occurrence
of any event or circumstance or the taking of any action that has had or might
have a material adverse effect on Keystone.
2.9 Absence of Litigation. Except as set forth in Section 2.9 of the
Keystone Disclosure Schedule, there are no claims, actions, suits, proceedings
or investigations (governmental or other) that are pending or, to the knowledge
of Keystone or Stockholder, threatened against Keystone, or any properties or
rights of Keystone, before any court, arbitrator or administrative, governmental
or regulatory authority or body, domestic or foreign.
2.10 Employee Benefit Plans, Labor Matters.
(a) Section 2.10 of the Keystone Disclosure Schedule lists all employee
pension plans (as defined in Section 3(2) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")), all employee welfare plans and all
bonus, stock option, stock purchase, incentive, deferred compensation,
supplemental retirement, severance and other similar fringe or employee benefit
plans, programs or arrangements, and any current or former employment, executive
compensation, consulting or severance agreements, written or otherwise, for the
benefit of, or relating to, any employee of or independent contractor or
consultant to Keystone.
(b) Except as set forth in Section 2.10 of the Keystone Disclosure Schedule,
Keystone is in full compliance with ERISA with respect to any plans described in
subparagraph (a) hereof, as well as with all laws and regulations governing the
employment of and working conditions of its employees.
2.11 Restrictions on Business Activities. Except for this Agreement or as set
forth in Section 2.11 of the Keystone Disclosure Schedule, there is no
agreement, judgment, injunction, order or decree binding upon Keystone or
Stockholder which has or could reasonably be expected to have the effect of
prohibiting or impairing any material business practice of Keystone or the
conduct of business by Keystone as currently conducted or as proposed to be
conducted by Keystone.
2.12 Title to, Condition and adequacy of properties. Except as set forth in
Section 2.12 of the Keystone Disclosure Schedule, Keystone has good, defensible
and marketable title to all of its properties and assets, free and clear of all
liens, charges and encumbrances, except liens for taxes not yet due and payable
and such liens or other imperfections of title, if any, as do not materially
detract from the value of or interfere with the present use or subsequent
disposition of the property or assets affected thereby; and, to the best
knowledge of Keystone and the Keystone Stockholders, all leases pursuant to
which Keystone leases from others material real or personal property are in good
standing, valid and effective in accordance with their respective terms, and
there is not, under any of such leases, any existing material default or event
of default, or any event which, with notice or lapse of time, or both, would
constitute a material default thereunder. Keystone Stockholders Kenneth J.
Kellar and Stephen J. Gehringer agree to lease Keystone's principal offices at
1801 Tilghman Street, Allentown, PA, and all fixtures and equipment located
therein, to Keystone for the sum of $3,000 per month for a period of three (3)
years commencing on the Date of Closing, the parties intending that TAGZ receive
the benefit of this lease. The fixed assets of Keystone used in its business are
in good condition, normal wear and tear excepted and the assets that Keystone
will own or possess under leases immediately following the Closing are all of
the assets required to enable Keystone to conduct its business as such business
has been conducted during the past 12 months.
2.13 Taxes.
(a) For purposes of this Agreement: (i) "Tax" or "Taxes" shall mean (a)
taxes, fees, levies, duties, tariffs, imposts, and government impositions or
charges of any kind payable to any federal, state, local or foreign taxing
authority, and (b) interest, penalties, additional taxes and additions to tax
imposed with respect thereto; and (ii) "Tax Returns" shall mean returns,
reports, and information statements with respect to Taxes required to be filed
with the IRS or any other taxing authority, domestic or foreign, including,
without limitation, consolidated, combined and unitary tax returns .
(b) Other than as disclosed in Section 2.13(b) of Keystone Disclosure
Schedule, Keystone has filed all United States federal income Tax Returns and
all other material Tax Returns required to be filed by it, and Keystone has paid
and discharged all Taxes due in connection with or with respect to the periods
or transactions covered by such Tax Returns and have paid all other Taxes as are
due, except such as are being contested in good faith by appropriate proceedings
and except as may be determined to be owed upon completion of any Tax Return not
yet filed based upon an extension of time to file, and there are no other Taxes
that would be due if asserted by a taxing authority, except with respect to
which Keystone is maintaining reserves to the extent currently required. Except
as does not involve or would not result in liability to Keystone, (i) there are
no tax liens on any assets of Keystone; and (ii) Keystone has not granted any
waiver of any statute of limitations with respect to, or any extension of a
period for the assessment of, any Tax. The accruals and reserves for Taxes
(including deferred taxes) reflected in the 1998 Company Balance Sheet are in
all material respects adequate to cover all Taxes required to be accrued through
the date thereof (including interest and penalties, if any, thereon and Taxes
being contested) in accordance with GAAP consistently applied.
(c) Keystone Stockholders agree to file any Tax Return and to pay any Taxes
required in connection with any transactions conducted by Keystone prior to the
Closing Date, and to indemnify and hold harmless TAGZ from any Taxes,
obligations and/or liabilities connected therewith.
2.14 Intellectual Property.
(a) Except as set forth in Section 2.14 of the Keystone Disclosure Schedule,
Keystone owns or is licensed or otherwise possesses legally enforceable rights
to use all patents, trademarks. trade names, service marks, copyrights, and any
applications therefor, trade secrets, technology, know-how, computer software
programs or applications, and tangible or intangible proprietary information
that are used in the business of Keystone as currently conducted. Section 2.14
of Keystone Disclosure Schedule contains a complete and accurate list of all
such patents, trademarks, trade names, service marks, copyrights, and any
applications therefor, trade secrets, technology, know-how, computer software
programs or applications, and other tangible or intangible proprietary
information.
(b) Except as disclosed in Section 2.14 of Keystone Disclosure Schedule,
Keystone is not, nor will it be as a result of the execution and delivery of
this Agreement or the performance of its obligations hereunder, in violation of
any licenses, sublicenses and other agreements as to which Keystone is a party
and pursuant to which Keystone is authorized to use any third-party patents,
trademarks, trade names, service marks, copyrights, trade secrets, technology,
know-how, computer software programs or applications, or other tangible or
intangible proprietary information. No claims with respect to (i) any of
Keystone's intellectual property or (ii) any third-party's intellectual property
rights, are currently pending or, to the knowledge of Keystone or Keystone
Stockholders, are threatened by any person. Keystone does not know of any valid
grounds for any bona fide claims (i) to the effect that the conduct of its
business or the sale, licensing or use of any product as now used, sold or
licensed or proposed for use, sale or license by Keystone infringes on any
copyright,. patent. trademark, service mark or trade secret or other
intellectual property, rights of any person; (ii) against the use by Keystone of
any trademarks, trade names, trade secrets, copyrights, patents, trade secrets,
technology, know-how or computer software programs or applications used in the
business of Keystone or any of its subsidiaries as currently conducted or as
proposed to be conducted; (iii) challenging the ownership, validity or
effectiveness of any of Keystone's intellectual property; or (iv) challenging
the license or legally enforceable right to use of any third party's
intellectual property rights by Keystone.
(c) To the knowledge of Keystone and the Keystone Stockholders, (i) all
Keystone's intellectual property and its rights therein, including patents,
registered trademarks, service marks and copyrights held by Keystone, are valid
and subsisting. Except as set forth in Section 2.14 of Keystone Disclosure
Schedule, and (ii) there is no material unauthorized use, infringement or
misappropriation of any of Keystone's intellectual property by any third party,
including employee or former employee of Keystone.
(d) All computer software and hardware used in the conduct of Keystone's
business and operations are Year 2000 compliant, which means that such software
and hardware are designed to be used prior to, during, and after the calendar
year 2000 A.D., and such software and hardware will operate during each of such
time periods without error relating to date data, specifically including any
error relating to, or the product of, date data which represents or references
different centuries or more than one century.
2.15 Customers and Suppliers. Set forth on Section 2.15 of Keystone
Disclosure Schedule are lists of the identities of the twenty (20) largest
customers and twenty (20) largest suppliers, respectively, of Keystone in each
of calendar years 1997 and 1998, and the first nine months of calendar year
1999, ranked by and setting forth the dollar volume of their transactions with
Keystone during those respective periods. Except as set forth on Section 2.15 of
the Keystone Disclosure Schedule, (i) since September 30, 1999 there has been
no material adverse change in the business relationship of Keystone with any
customer or supplier named in the foregoing customer or supplier schedules or
any other event which has had or could reasonably be expected to have a material
adverse effect on Keystone, and (ii) neither Keystone nor the Keystone
Stockholders has any present information or is aware of any facts indicating
that any of Keystone's customers or suppliers listed in the aforementioned
customer and supplier schedules intends to cease doing business with Keystone,
or alter materially the amount of the business that any of them did with
Keystone during the 12 months ended December 31, 1998.
2.16 Related Party Transactions. Except as set forth in Section 2.16 of
Keystone Disclosure Schedule, Keystone is not a party to any agreement or
transaction with any of its officers, directors, Keystone Stockholders or
employees, or any of their relatives or affiliates, and to the knowledge of the
Keystone Stockholders and Keystone, no officer, director, stockholder or
employee, or any relative or affiliate thereof, owns any interest in any
competitor, lessor, lessee or customer or supplier of Keystone, other than the
employment relationships that Keystone has with its officers and employees in
the ordinary course of the conduct of its business.
2.17 Insurance. Section 2.17 of Keystone Disclosure Schedule contains a list
of each policy of insurance maintained by Keystone for the protection of
Keystone and its assets and business. True and correct copies of such policies
have been delivered to TAGZ. All such policies are, and for at least the past
five (5) years such policies (or policies substantially equivalent thereto) have
been, in full force and effect and without any gaps in coverage, all premiums
with respect thereto covering all periods up to and including the date hereof
have been paid, and no notice of cancellation, termination or denial of coverage
has been received with respect to any such policy. Since January 1, 1998,
Keystone has not been refused any insurance with respect to its properties,
assets or operations, nor has its coverage been limited, by any insurance
carrier to which it has applied for or with which it has carried any such
insurance.
2.18 Brokers. No broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of Keystone.
2.19 Full Disclosure. No representation or warranty made by Keystone or the
Keystone Stockholders contained in this Agreement and none of their respective
or joint statements contained in any certificate or schedule furnished or to be
furnished by Keystone or the Keystone Stockholders to TAGZ in, or pursuant to
the provisions of, this Agreement, including without limitation the Keystone
Disclosure Schedule, contains or shall contain any untrue statement of a
material fact or omits or will omit to state any material fact necessary, m
light of the circumstances under which it was made, in order to make statements
herein or therein not misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE KEYSTONE STOCKHOLDERS
The Keystone Stockholders hereby represent and warrant to TAGZ that:
3.1 Authority and Capacity. Keystone Stockholders have the full legal right
and capacity to execute and deliver, and to perform their obligations under, and
have duly executed and delivered, this Agreement with the intent to be legally
bound hereby. This Agreement constitutes, and when executed and delivered by the
Keystone Stockholders with the Employment and Non-Competition Agreement, if
applicable, will constitute, valid and legally binding obligations of the
Keystone Stockholders that are enforceable against them in accordance with their
respective terms. Keystone Stockholders are not obligated to obtain any consent
or approval of any other person in connection with the execution and delivery of
this Agreement or the Employment and Non-Competition Agreement, if applicable,
their approval thereof in their capacities as Keystone Stockholders of Keystone
or the consummation of the transactions contemplated thereby and the execution
and delivery of this Agreement and the Employment and Non-Competition Agreement,
if applicable, and the consummation by them of the transactions contemplated
thereby will not violate, or constitute a breach or default under or cause the
acceleration of any obligation or liability under any contract, promissory note,
mortgage, lease, license, permit, writ, decree or other instrument or agreement
to which either of the Keystone Stockholders is a party or is subject.
3.2 Keystone Shares. Keystone Stockholders are the record and beneficial
owners of, and have good and marketable title to, all of the outstanding shares
of Common Stock of Keystone (the "Company Shares"), free and clear of any and
all liens, claims, encumbrances, pledges, security interests, options, rights of
first refusal, community property interests, restrictions and any other adverse
interests of any kind or nature whatsoever, other than restrictions on the
transferability under the federal securities laws, which, however, are not an
impediment to consummation of the transactions contemplated hereby. Keystone
Stockholders have not sold, transferred, conveyed, assigned, hypothecated, or
granted any security interest in or pledged, or granted any option or right
entitling anyone to acquire, any of Keystone Shares, and has not entered into
nor is he a party to or bound by any agreement, commitment or understanding
(written or oral) to do any of the foregoing. Keystone Shares are not subject to
any liabilities and no liabilities will arise as a result of or in connection
with the consummation of the transactions contemplated hereby.
3.3 Acknowledgements and Agreements Regarding TAGZ Representations. Keystone
Stockholders acknowledge and agree that (a) TAGZ has not made, and is not
making, any representations or warranties to Keystone Stockholders with respect
to (i) the federal, state or local income or other tax consequences to Keystone
Stockholders of their consummation of the transactions contemplated hereby, or
(ii) the future performance of TAGZ; and (b) in entering into this Agreement,
and the Employment and Non-Competition Agreement, they are not relying on any
statements or representations or warranties of TAGZ, or any representations or
warranties made or purported to have been made by any officer, director,
stockholder, employee or agent of TAGZ, other than the express representations
and warranties of TAGZ contained in this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF TAGZ
TAGZ hereby represents and warrants to Keystone and the Keystone
Stockholders that, except as set forth in the written disclosure schedule
delivered on or prior to the date hereof by TAGZ to Keystone that is arranged in
paragraphs corresponding to the numbered and lettered paragraphs contained in
this Article IV (the "TAGZ Disclosure Schedule"):
4.1 Organization and Qualification; Subsidiaries. TAGZ is a corporation
duly organized, validly existing and in good standing under the laws of Nevada
and has the requisite corporate power and authority to carry on its business as
it is now being conducted. TAGZ is duly qualified or licensed as a foreign
corporation to do business, and is in good standing, in each jurisdiction where
the character of its properties owned, leased or operated by it or the nature of
its activities makes such qualification or licensing necessary.
4.2 Certificate of lncorporation and By-Laws. TAGZ has heretofore furnished
to Keystone and the Keystone Stockholders a complete and correct copy of its
Certificate of Incorporation and By-Laws, as amended to date. Such Certificate
of Incorporation and By-Laws are in full force and effect. TAGZ is not in
violation of any of the provisions of Certificate of Incorporation or By-Laws.
4.3 Capitalization. As of the date hereof, the authorized capital stock of
TAGZ consists of 50,000,000 shares of Common Stock, par value $.001 per share.
On consummation of the transactions contemplated by this Agreement, there will
be (i) a total of 18,372,215 fully paid and nonassessable shares of Common Stock
that will be issued and outstanding, which will include the TAGZ Shares being
issued under this Agreement; (ii) 2,412,503 shares of Common Stock reserved for
issuance on the exercise of stock options. Except as set forth in Section 4.3 of
the TAGZ Disclosure Schedule, as of the date of hereof there are no options,
warrants or other rights, agreements, arrangements or commitments of any
character relating to the issued or unissued capital stock of TAGZ or obligating
TAGZ to issue or sell any shares of capital stock of, or other equity interests
in, TAGZ. There are no obligations, contingent or otherwise, of TAGZ to
repurchase, redeem or otherwise acquire any of the capital stock of TAGZ.
4.4 Power and Authority. TAGZ has all necessary corporate power and authority
to execute and deliver this Agreement and to perform its obligations hereunder
and to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement by TAGZ and the consummation by TAGZ of the
transactions contemplated hereby have been duly and validly authorized by all
necessary corporate action on the part of TAGZ, and no other corporate
proceedings on the part of TAGZ are necessary to authorize this Agreement or to
consummate the transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by TAGZ and, assuming due authorization,
execution and delivery by Keystone and Keystone Stockholders, constitutes a
legal, valid and binding obligation of TAGZ enforceable against it in accordance
with its terms.
4.5 No Conflict, Required Filings and Consents.
(a) The execution and delivery of this Agreement by TAGZ do not, and the
performance of this Agreement by TAGZ will not, (i) conflict with or violate the
Certificate of Incorporation or By-Laws of TAGZ or with any law, rule,
regulation, order, judgment or decree applicable to TAGZ, or (ii) result in any
breach of or constitute a default under, or impair TAGZ's rights or alter the
rights or obligations of any third party under, or give to others any rights of
termination, amendment, acceleration or cancellation, or result in the creation
of a lien or encumbrance on any of the properties or assets of TAGZ pursuant to,
any contract, agreement or other instrument or obligation to which TAGZ is a
party.
(b) The execution and delivery of this Agreement by TAGZ does not, and the
performance of this Agreement by TAGZ will not, require any consent, approval,
authorization or permit of, or filing with or notification to, any governmental
or regulatory authority, domestic or foreign, except (i) for applicable
requirements, if any, of the 1933 Act and any applicable state securities laws,
and (ii) where the failure to obtain such consents, approvals, authorization or
permits, or to make such filings or notifications, would not prevent or delay
consummation of the transactions contemplated hereby, or otherwise prevent TAGZ
from performing its obligations under this Agreement.
4.6 Financial Statements; Liabilities.
(a) TAGZ has furnished to Keystone and Stockholder an SEC Form 10SB/A which
contains the audited financial statements of TAGZ, comprised of a balance sheet
of TAGZ as of December 31, 1998, and related statements of income, cash flows
and stockholders equity for the year then ended, and an SEC Form 10Q/SB which
contains financial statements of TAGZ for the nine months ended, September 30,
1999, all of which have been prepared by TAGZ (collectively, the "TAGZ Financial
Statements"). Except as otherwise set forth in Section 4.6 of the TAGZ
Disclosure Schedule or in the footnotes contained in the TAGZ Financial
Statements, such Financial Statements fairly present, in all material respects,
the financial position of TAGZ as at December 31, 1998 and September 30, 1999,
respectively, and the respective results of operations of TAGZ and changes in
cash flows and stockholders equity for the year and nine months ended on
December 31, 1998 and September 30, 1999, respectively.
(b) No Undisclosed Liabilities. Except as is disclosed in Section 4.6 of the
TAGZ Disclosure Schedule, TAGZ does not have any liabilities (absolute, accrued,
contingent or otherwise), except (a) liabilities that individually and in the
aggregate are adequately provided for in TAGZ's balance sheet (including any
related notes thereto) as of September 30, 1999 included in the TAGZ Financial
Statement (the "1999 TAGZ Balance Sheet"), (b) non-material liabilities which
were incurred in the ordinary course of business and were not required under
generally accepted accounting principles to be reflected on the 1999 TAGZ
Balance Sheet, or (c) liabilities which were incurred after September 30, 1999
in the ordinary course of business and consistent with past practice.
4.7 Absence of Material Adverse Changes. Except as is disclosed in Section
4.7 of the TAGZ Disclosure Schedule, since September 30, 1999, there has not
been (i) a material adverse change in the financial condition or results of
operations or business of TAGZ or (ii) any action or legal proceeding that has
been brought or is known by TAGZ to have been threatened against it, or (iii)
any other event known to TAGZ, that has had or is reasonably expected to have a
material adverse effect on TAGZ.
4.8 Restrictions on Business Activities. To the best knowledge of TAGZ,
there is no material agreement, judgment, injunction, order or decree binding
upon TAGZ which has or could reasonably be expected to have the effect of
prohibiting or materially impairing any material business practice of TAGZ, any
acquisition of property by TAGZ or the conduct of business by TAGZ as currently
conducted or as proposed to be conducted by TAGZ.
4.9 Related Party Transactions. Except as set forth in Section 4.9 of the
TAGZ Disclosure Schedule, TAGZ is not a party to any agreement or transaction
with any of its officers, directors, stockholders or employees or, to its
knowledge, any of their respective relatives or affiliates, and to the knowledge
of TAGZ, no officer, director, stockholder or employee of TAGZ, or any relative
or affiliate thereof, owns any interest in any competitor, lessor, lessee or
customer or supplier of TAGZ, other than the employment relationships that TAGZ
has with its officers and employees in the ordinary course of the conduct of its
business.
4.10 Brokers. No broker, finder or investment banker is entitled to any
brokerage, finder's or other fed or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of TAGZ .
4.11 Full Disclosure. No representation or warranty of TAGZ contained in this
Agreement and no statement contained in any certificate or schedule furnished or
to be furnished by TAGZ to Keystone in, or pursuant to the provisions of, this
Agreement, including without limitation the TAGZ Disclosure Schedule, contains
or will contain any untrue statement of a material fact or omits or shall omit
to state any material fact necessary, in light of the circumstances under which
it was made, in order to make the statements herein or therein not misleading.
ARTICLE V
CONDUCT OF BUSINESS PENDING THE CLOSING
5.1 Conduct of business by Keystone Pending the Closing. Keystone and
Keystone Stockholders jointly and severally covenant and agree that, during the
period from the date of this Agreement and continuing until the earlier of the
termination of this Agreement or the Closing, Keystone shall conduct its
business only in Keystone, and Keystone (i) shall not take any action except in
the ordinary course of business and in the manner consistent with past practice;
and (ii) shall use reasonable commercial efforts to preserve substantially
intact the business organization of Keystone, to keep available the services of
the present officers, employees and consultants of Keystone and to preserve the
present relationships of Keystone with customers, suppliers and other persons
with which Keystone has significant business relations. By way of amplification
and not limitation, except as contemplated by this Agreement, Keystone shall,
during the period from the date of this Agreement and continuing until the
earlier of the termination of this Agreement or the Closing, directly or
indirectly do, or propose to do, any of the following without the prior written
consent of TAGZ, which consent shall not be unreasonably withheld:
(a) amend or otherwise change the Articles of Incorporation or By-Laws of
Keystone;
(b) issue, sell, grant, pledge, dispose of or encumber, or authorize the
issuance, sale, grant, pledge, disposition or encumbrance of, any shares of
capital stock of any class, including shares of Common Stock, or any options,
warrants, convertible securities or other rights of any kind to acquire any
shares of Common Stock or of any other class or series of shares, or any other
ownership interest (including, without limitation, any phantom interest) in
Keystone;
(c) sell, pledge, dispose of or encumber any assets of Keystone except for
(i) sales of assets in the ordinary course of business and in a manner
consistent with past practice, and (ii) disposition of obsolete or worthless
assets;
(d) except as contemplated by Section 5.5 hereof, take any of the following
actions with respect to its capital stock: (i) declare, set aside, make or pay
any dividend or other distribution (whether in cash, stock or property or any
combination thereof) in respect of any of its capital stock, (ii) split, combine
or reclassify any of its capital stock or issue or authorize or propose the
issuance of any other securities in respect of, in lieu of or in substitution
for shares of its capital stock, or (iii) purchase, repurchase, redeem or
otherwise acquire any of its securities, including, without limitation, shares
of Company Common stock, or propose to do any of the foregoing;
(e) Take any of the following actions: (i) acquire (by merger,
consolidation, or acquisition of stock or assets) any corporation, limited
liability company, partnership or other business organization or division
thereof, (ii) incur any indebtedness for borrowed money or issue any debt
securities or assume, guarantee or endorse or otherwise as an accommodation
become responsible for, the obligations of any person or make any loans or
advances to any person or entity, (iii) enter into or amend any Material
Contract, (iv) authorize any capital expenditures or purchase of fixed assets
which are, in the aggregate, in excess of $10,000; or (v) enter into or amend
any contract, agreement, commitment or arrangement to effect any of the matters
prohibited by this Section 5.1(e); provided, however, that TAGZ consents to
Keystone's refinance of the "Existing Revolving Credit Loans" with the
"Shareholder Revolving Credit Loans" listed in Section 2.5 of the Keystone
Disclosure Schedule, and Keystone may execute, deliver and carry out a Credit
Agreement to make the borrowings to be provided by Kenneth J. Kellar and Stephen
J. Gehringer to Keystone thereunder, as security for Keystone's obligations on
account of the Shareholder Revolving Credit Loans, to execute and deliver
revolving credit notes in evidence of such borrowing and to perform its
obligations thereunder and to execute and deliver a security agreement and
collateral assignment of rents and to perform obligations thereunder. All such
action to be taken by Stephen J. Gehringer and Kenneth J. Kellar as President
and Vice President of Keystone, respectively, has been duly authorized by all
necessary corporate proceedings on the part of Keystone and TAGZ, including
Keystone's making execution and delivery of a guaranty and suretyship agreement,
a security agreement and a collateral assignment of loan documents to National
Penn Bank and the execution and delivery of any other loan documents National
Penn Bank may require as security for making a One Million Dollar revolving
credit loan to Stockholders Kenneth J. Kellar and Stephen J. Gehringer at the
time of Closing, and the Board of Directors of TAGZ has determined that it is
advisable and in the best interest of TAGZ's stockholders that Keystone
refinance the "Existing Revolving Credit Loans" with the "Shareholder Revolving
Credit Loans" and to consummate the transaction contemplated thereby, and the
execution and delivery of this Agreement by TAGZ and the consummation of the
"Shareholder Revolving Credit Loans" to Keystone have been duly and validly
authorized by all necessary corporation action on the part of TAGZ, and no other
corporate proceedings on the part of TAGZ are necessary to authorize Stephen J.
Gehringer and Kenneth J. Kellar, as President and Vice President, respectively,
of Keystone to consummate the "Shareholder Revolving Credit Loans" to Keystone.
(f) increase the compensation or employee benefits payable or to become
payable to its officers, directors or employees or independent contractors,
except for increases in salary or wages of employees (other than officers) of
Keystone in accordance with past practice, or grant any severance to termination
pay to, or enter into or amend or terminate any employment or severance
agreement with any director, officer or other employee of Keystone or establish,
adopt, enter into or amend any collective bargaining, bonus, profit sharing,
thrift, compensation, stock option, restricted stock, pension, retirement,
deferred compensation, employment, termination, severance or other plan,
agreement, trust, fund, policy or arrangement for the benefit of any current or
former directors, officers or employees, except, in each case, as may be
required by law;
(g) take any action to change accounting policies, principles, practices or
procedures (including, without limitation, procedures with respect to revenue
recognition, payments of accounts payable and collection of accounts
receivable);
(h) make any material tax election inconsistent with past practice or settle
or compromise any material federal, state, local or foreign tax liability or
agreement to an extension of a statute of limitations, except to the extent the
amount of any such settlement has been reserved for in Keystone Financial
Statements;
(i) pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise), other than
as required under Section 5.5(b) or any payment, discharge or satisfaction in
the ordinary course of business and consistent with past practice of liabilities
reflected or reserved against in Keystone Financial Statements or incurred in
the ordinary course of business and consistent with past practice, provided such
payment does not constitute a prepayment, in whole or in part, of any such
liabilities
(j) take, or agree in writing or otherwise to take, any of the actions
described in Sections 5.1 (a) through (i) above;
Keystone and Keystone Stockholders also each agree, jointly and severally, that
neither of them will take any action which would (i) make any of their
representations or warranties contained in this Agreement untrue or incorrect or
(ii) prevent or interfere with the performance by Keystone or the Keystone
Stockholders of any of their respective covenants contained in this Agreement.
The Keystone Stockholders also covenant and agree that they will not grant any
options or rights to acquire, or pledge or permit the imposition of any liens or
encumbrances on or hypothecate, any of Keystone Shares and that they will not
enter into any agreement or understanding, written or oral, that provides
therefor.
5.2 No Solicitation.
(a) Neither Keystone, directly or indirectly, through any officer, director,
employee, representative or agent of Keystone, nor the Stockholder, directly or
indirectly through any agent or representative, shall (i) solicit, initiate or
encourage the initiation of any inquiries or proposals regarding any merger,
sale of substantial assets, sale of shares of capital stock (including without
limitation by way of a tender offer) or similar transactions involving Keystone
or Keystone Shares, other than the contribution of Keystone Shares to TAGZ (any
of the foregoing inquiries or proposals being referred to herein as an
"Acquisition Proposal"), (ii) engage in negotiations or discussions concerning
any Acquisition Proposal, (iii) provide any nonpublic information to any person
relating to Keystone or its business or any of the transactions contemplated
hereby, or (iv) enter into any agreement or understanding, written or oral,
relating to any Acquisition Proposal. Keystone and Stockholder shall immediately
cease and cause to be terminated any existing discussions or negotiations that
either of them may be having with any person (other than TAGZ) with respect to
any Acquisition Proposal or which could conceivably lead to the making of an
Acquisition Proposal. 'Be Company and the Stockholder agree not to release any
third party from the provisions of any confidentiality agreement that such third
party may have with Keystone or Keystone Stockholders.
(b) Each of Keystone and Stockholder shall notify TAGZ immediately after
receipt by either of them of any Acquisition Proposal or any request for
nonpublic information relating to, or for access to the properties, books or
records of, Keystone by any person or entity. Such notice to TAGZ shall be made
orally and in writing.
(c) Keystone shall ensure that the officers, directors and employees of
Keystone any advisor or representative retained by Keystone are aware of and
shall comply with the restrictions described in this Section 5.2.
5.3 Access to Information. Upon reasonable notice, and subject to the
provisions of Section 5.10 hereof, Keystone and TAGZ shall each afford to the
officers. employees, accountants, counsel and other representatives of the
other, reasonable access, during the period to the Closing, to all its
properties, books, contract, commitments and records and, during such period,
Keystone and TAGZ each shall (and shall cause each of their subsidiaries to)
furnish promptly to the other all information concerning its business,
properties and personnel as such other party may reasonably request, and each
shall make available to the other the appropriate individuals (including
attorneys, accountants and other professionals) for discussion of the other's
business, properties and personnel as either TAGZ or Keystone may reasonably
request.
5.4 Consents; Approvals. Keystone, Keystone Stockholders and TAGZ shall each
use their best reasonable efforts to obtain all consents, waivers, approvals,
authorizations or orders (including, without limitation, all governmental and
regulatory rulings and approvals), and Keystone, Keystone Stockholders and TAGZ
shall make all filings (including, without limitation, all filings with
governmental or regulatory agencies) required in connection with the
authorization, execution and delivery of this Agreement by Keystone, Keystone
Stockholders and TAGZ and the consummation by them of the transactions
contemplated hereby. Keystone and TAGZ shall furnish all information required to
be included in any applications or other filings to be made pursuant to the
rules and regulations of any governmental body in connection with the
transactions contemplated by this Agreement.
5.5 Distribution of Certain Assets and Discharge of Certain Liabilities.
(a) Withdrawal of Retained Earnings. Notwithstanding any provision to the
contrary contained elsewhere in this Agreement, Keystone shall be entitled to
effectuate, not later than the day immediately preceding the Closing Date, a
distribution to the Keystone Stockholders of an amount equal to (i) Keystone
Stockholders' paid-in capital of $75,000; and (ii) Keystone's retained earnings
as of the Closing Date. In conjunction therewith, Keystone Stockholders shall
(i) obtain all consents of third parties required in order to avoid such
distribution constituting a breach or violation of any Material Contracts of
Keystone, (ii) pay or otherwise discharge, without cost or liability to
Keystone, all costs, expenses, liabilities, liens, charges and encumbrances that
may arise in connection with or by reason of such distribution, and (iii) be
responsible for and shall pay and discharge, without cost or liability to
Keystone, any and all Taxes arising out of or in connection with such
distribution.
(b) Excluded Liabilities. By the close of business on the day immediately
preceding the Closing Date, Keystone Stockholders shall (i) have paid or
otherwise discharged, or set aside cash funds required to pay or discharge in
full (without cost or liability to Keystone) all of the Pre-Closing Excluded
Liabilities (as hereinafter defined), and (ii) shall have obtained all releases
and terminations of security interests and liens and encumbrances on all of the
assets of Keystone. If and to the extent that it is determined that any of the
known Pre-Closing Excluded Liabilities were not discharged by Keystone
Stockholders prior to the Closing, the Acquisition Consideration otherwise
payable to the Keystone Stockholders by TAGZ on the Closing Date shall be
reduced on a dollar-for-dollar basis as provided in Section 1.2 of this
Agreement. For purposes of this Paragraph 5.5(b), the Keystone Stockholders
shall be entitled to pay or discharge the Pre-Closing Excluded Liabilities with
(x) their personal funds, or (y) any of the distributions authorized by
Paragraph 5.5 (a) above, but in no event with or by means of the sale or
disposition of any other assets of Keystone. Notwithstanding the foregoing, the
Pre-Closing Excluded Liabilities shall not include and Keystone shall retain the
liabilities set forth on Exhibit E hereto (the "Company Retained Liabilities").
(c) Indemnification. The purpose of Paragraph 5.5(b) is to insure that, at
the time of the acquisition of Keystone by TAGZ, Keystone will not have any
obligations or liabilities that have or may have arisen from the conduct of its
business or its operations, or from any other activity, prior to the Closing,
other than the Company Retained Liabilities. Accordingly, in furtherance
thereof, each of the Keystone Stockholders agrees that, from and after the
Closing, he shall indemnify and hold harmless TAGZ and Keystone and their
respective officers, directors, Keystone Stockholders, employees and agents
(other than the Keystone Stockholders themselves) (collectively, the
"Indemnified Parties"), and the respective successors, heirs and assigns of the
Indemnified Parties from and against (i) any and all debts, obligations and
liabilities (other than the Company Retained Liabilities), whether fixed or
contingent and known or unknown, that exist on the date hereof or arise
hereafter out of or in connection with the conduct of Keystone's business prior
to the Closing (the "Pre-Closing Excluded Liabilities"), (ii) any breach of or
default with respect to any of the representations and warranties of Keystone or
Keystone Stockholders contained in this Agreement, and (iii) all costs and
expenses, including reasonable attorneys and accountants and expert witness fees
and disbursements that are incurred by any of the Indemnified Parties, or their
successors, heirs or assigns, in connection with the defense of any action or
proceeding brought against any of the Indemnified Parties by reason of the
Keystone Stockholders' failure to have discharged or paid any of the Pre-Closing
Excluded Liabilities or which assert claims which, if established, would
evidence that one or more representations or warranties of Keystone or the
Keystone Stockholders contained in this Agreement were untrue either when made
or at the time of the Closing.
5.6 Notification of Certain Matters. Keystone or the Keystone Stockholders
shall give prompt notice to TAGZ, and TAGZ shall give prompt notice to Keystone
of (i) the occurrence or nonoccurrence of any event the occurrence or
nonoccurrence of which would be likely to cause any representation or warranty
made by such party in this Agreement to be materially untrue or inaccurate, or
(ii) any failure of Keystone, the Keystone Stockholders or TAGZ, as the case may
be, materially to comply with or satisfy any covenant, condition or agreement to
be complied with or satisfied by it hereunder; provided, however, that the
delivery of any notice pursuant to this Section shall not limit or otherwise
affect the remedies available hereunder to the party receiving such notice.
5.7 Further Action. On the terms and subject to the conditions hereof each
of the parties hereto shall use all reasonable efforts to take, or cause to be
taken, all actions, and to do, or cause to be done, all other things necessary,
proper or advisable to consummate and make effective as promptly as practicable
the transactions contemplated by this Agreement, to obtain in a timely manner
all necessary waivers, consents and approvals and to effect all necessary
registrations and filings, and otherwise to satisfy or cause to be satisfied all
conditions precedent to its obligations under this Agreement. The foregoing
covenant shall not include any obligation by TAGZ to agree to divest, abandon,
license or take similar action with respect to any assets (tangible or
intangible) of TAGZ or Keystone.
5.8 Public Announcements. TAGZ and Keystone shall consult with each other
before issuing any press release or making any public announcement with respect
to this Agreement or the transactions contemplated hereby, and shall not issue
any such press release or make any such public statement without the prior
consent of the other party, which shall not be unreasonably withheld.
5.9 Confidential Information. Each party acknowledges that it may have
access to various items of proprietary and confidential information of the other
in the course of investigations and negotiations prior to Closing. Confidential
information of any party hereto (the "disclosing party") furnished or delivered
to the other party (the "receiving party") or to any of the receiving party's
directors, officers, employees, agents or advisors (collectively, its
"Representatives") shall be kept strictly confidential by the receiving party
and by its Representatives and shall not be used for any purpose other than to
facilitate the consummation of the transactions contemplated herein.
Confidential information shall include any proprietary business or other
information which is delivered (orally or in writing) by a disclosing party or
any of its Representatives to the receiving party or any of its Representatives,
and any such information that is included in or incorporated into any notes,
analyses, memoranda, projections or other documents that are prepared by the
receiving party or any of its Representatives, unless such information (a) is
already of public knowledge, or (b) becomes of public knowledge through no
fault, action or inaction of the receiving party or its Representatives, or (c)
is demonstrated by the receiving party to have been known by the receiving
party, or any of its Representatives prior to the disclosure of such information
by the disclosing party to the receiving party, unless such knowledge was
acquired from a person who the receiving party or its Representatives knew or
reasonably should have known was subject, at the time of such disclosure, to a
fiduciary or other duty of non-disclosure to the disclosing party. Except as
permitted by Section 5.8, no party hereto, nor its respective Representatives,
shall intentionally disclose the existence or nature of, or any of the terms and
conditions relating to, the transactions referred to herein, to any third
person; provided, however that such information may be disclosed (i) with the
written consent of the other parties hereto, (ii) in applications or requests
required to be made to obtain licenses, permits, approvals or consents needed to
consummate the transactions contemplated herein, (iii) to the professional
advisors of each party hereto who need to know such information in connection
with the consummation of the transactions contemplated hereby, or (iv) pursuant
to court order or subpoena, provided, however, that if any receiving party or
any of its Representatives is served with a court order or subpoena that would
require the disclosure of any of the confidential information of a disclosing
party, the receiving party or such Representative so served (as the case may be)
shall promptly, but in any event within three (3) days thereafter, notify the
disclosing party thereof and shall provide reasonable cooperation, at the
disclosing party's expense, with any, efforts that the disclosing party may
undertake to quash such court order or subpoena or obtain a protective order
with respect to the disclosure and use of such confidential information. The
restrictions and obligations contained in this Section 5.9 that are applicable
to TAGZ and Keystone shall terminate upon consummation of the transactions
contemplated by this Agreement.
ARTICLE VI
CONDITIONS PRECEDENT
6.1 Conditions to Obligations of each Party to Consummate Transactions. The
performance by each party of its respective obligations under this Agreement
shall be subject to the satisfaction, at or prior to the Closing Date, of each
of the following conditions unless waived in writing by such party:
(a) Absence of lnjunctions or Restraints; Illegality. No temporary
restraining order, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction or other legal restraint or prohibition
preventing the consummation of the transactions contemplated hereby shall be in
effect, nor shall any proceeding brought by any administrative agency or other
governmental authority or instrumentality, domestic or foreign, seeking any of
the foregoing be pending; and there shall not be any action taken, or any
statute, rule, regulation or order enacted, entered, enforced or deemed
applicable to the transactions contemplated hereby which makes their
consummation illegal;
(b) Governmental Actions. There shall not have been instituted, pending or
threatened, in writing, any action or proceeding (or any investigation or other
inquiry that might result in such an action or proceeding) by any governmental
authority or administrative agency before any governmental authority,
administrative agency or court of competent jurisdiction, nor shall there be in
effect any judgment, decree or order of any governmental authority,
administrative agency or court of competent jurisdiction, in either case,
seeking to prohibit or limit TAGZ, following the Closing, from exercising all
material rights and privileges pertaining to its ownership of Keystone or
seeking to prohibit or limit Keystone, following the Closing, from conducting
its business as it has been heretofore conducted or seeking to compel TAGZ or
any of its subsidiaries (including Keystone) to dispose of or hold separate all
or any material portion of its business or assets as a result of the
consummation of the transactions contemplated by this Agreement or the Other
Combination Transactions; provided, that, such limitation or prohibition, or the
requirement that any portion of the business or assets of TAGZ or any of its
subsidiaries (including Keystone), would have or could reasonably be expected to
have a Material Adverse Effect on TAGZ and its subsidiaries taken as a whole or
Keystone.
6.2 Additional Conditions to Obligations of TAGZ. The obligations of TAGZ to
consummate its acquisition of Keystone Shares and perform its other obligations
under this Agreement also are subject to the following conditions:
(a) Accuracy of Representations and Warranties. The representations and
warranties of Keystone and Stockholder contained in this Agreement shall be true
and correct in all material respects on and as of the Closing Date, with the
same force and effect as if made on and as of the Closing Date, except for (i)
changes contemplated by this Agreement or by Keystone Disclosure Schedule, (ii)
those representations and warranties which address matters only as of a
particular date (which shall have been true and correct as of such date), and
TAGZ shall have received a certificate to such effect signed by the President of
Keystone.
(b) Performance of Covenants. Keystone and the Keystone Stockholders shall
have performed or complied in all material respects with all agreements and
covenants required by this Agreement to be performed or complied with by it or
him (as the case may be) on or prior to the Closing Date, and TAGZ shall have
received a certificate to such effect signed by the President of Keystone;
(c) Consents Obtained. All material consents, waivers, approvals,
authorizations or orders required to be obtained by TAGZ or Keystone or the
Keystone Stockholders for the authorization, execution and delivery of this
Agreement and the consummation by it of the transactions contemplated hereby
shall have been obtained and made by Keystone or the Keystone Stockholders (as
the case may be);
(d) Additional Instruments. TAGZ shall have received the Closing Documents
listed on Exhibit B hereto and such other instruments and documents as TAGZ or
its counsel reasonably deems to be necessary.
ARTICLE VII
TERMINATION
7.1. Termination. This Agreement may be terminated and the transactions
herein contemplated may be abandoned at any time prior to the Closing: (a) by
mutual written consent of TAGZ and the Keystone Stockholders; (b) by TAGZ, if
any of the conditions to its obligations set forth in Article VI of this
Agreement shall not have been satisfied, or waived by TAGZ in writing, prior to
January 21, 2000, provided, however, that TAGZ is not itself in breach of any of
its material obligations or representations or warranties under this Agreement;
(c) by Keystone and/or Keystone Stockholders if any of the conditions to their
obligations set forth in Article VI of this Agreement shall not have been
satisfied, or waived by Keystone and/or Keystone Stockholders in writing prior
to January 11, 2000, provided, however, that Keystone and/or Keystone
Stockholders are not themselves in breach of any of their material obligations
or representations or warranties under this Agreement.
Notwithstanding anything to the contrary contained elsewhere in this Agreement,
if a party hereto has breached this Agreement (a "Breaching Party") and such
breach is of a nature that it is susceptible of cure, and the other party
determines to terminate this Agreement by reason thereof, such other party shall
give prompt written notice of such termination to the Breaching Party and such
intended termination shall not become effective provided that the Breaching
Party effectuates a cure of such breach by the earlier of (i) the 30th day
following such notice of termination or (ii) February 28, 2000.
7.2 Procedure Upon Termination. Any termination and abandonment by TAGZ or
the Keystone Stockholders, or both, pursuant to Section 7.1 hereof, shall be
effective on written notice thereof from the terminating party to the other
parties and upon any such termination:
(a) Each party will redeliver all documents, workpapers and other material
of any other party relating to the transactions contemplated hereby, whether so
obtained before or after the execution hereof, to the party furnishing the same;
(b) The obligations of confidentiality set forth in Section 5.09 hereof
shall continue despite such termination; and
(c) The parties shall be relieved of any obligation to consummate the
transactions contemplated hereby, but none of the parties shall be relieved of
any liability for its breach or default under this Agreement.
ARTICLE VIII
SURVIVAL OF REPRESENTATIONS AND WARRANTIES
Regardless of any due diligence or other investigation, either prior to or
after the Closing, or any verification or approval by any party hereto or by
anyone or on behalf of any party hereto, all of the representations and
warranties set forth in this Agreement or in any certificates delivered pursuant
hereto shall remain in full force and effect and shall survive the Closing until
the expiration of three (3) years from the Closing Date, except that (i) the
representations and warranties of Keystone relating to Taxes shall survive until
six (6) months following the expiration of the statutory limitations period
applicable to such Taxes, (ii) the representations and warranties of Keystone
and Keystone Stockholders contained in Sections 2.3 and 2.4, the representations
and warranties of Keystone Stockholders contained in Sections 3.1 and 3.2 and
the representations and warranties of TAGZ contained in Sections 4.3 and 4.4,
shall survive for a period of seven (7) years following the Closing. All
covenants which by their terms require performance or compliance following the
Closing, including the obligations of Keystone Stockholders under Section 5.5,
shall remain in full force and effect and shall survive the Closing until they
have been fully performed and discharged; provided, however that the covenants
of Keystone Stockholders under Paragraphs 5.5(b) and 5.5(c) with respect to
Taxes that constitute Pre-Closing Excluded Liabilities shall survive until six
(6) months following the expiration of the statutory limitations period
applicable to the payment of Taxes.
ARTICLE IX
MISCELLANEOUS
9.1 Notices. All notices and other communications given or made pursuant
hereto shall be in writing and shall be deemed to have been duly given or made
if and when delivered personally or by overnight courier to the parties at the
addresses set forth on Exhibit H hereto or sent by electronic transmission, with
confirmation received, to the telecopy numbers specified on that Exhibit (or at
such other address or telecopy number for a party as shall be specified by like
notice):
9.2 Interpretation and Certain Definitions. This Agreement is the result of
arms'-Iength negotiations between the parties hereto and no provision hereof,
because of any ambiguity found to be contained therein or otherwise, shall be
construed against a party by reason of the fact that such party or its legal
counsel was the draftsman of that provision. In addition, for purposes of this
Agreement, the term:
(a) "Collectibles" means rare or valuable coins, stamps, sports cards,
sports memorabilia, or autographed items;
(b) "Affiliates" means a person that directly or indirectly, through one or
more intermediaries, controls, is controlled by, or is under common control
with, the first mentioned person; including, without limitation, any partnership
or joint venture in which Keystone (either alone, or through or together with
any other subsidiary) has, directly or indirectly, an interest of 5% or more;
(c) "business day" means any day on which banks in Pennsylvania are open;
(e) "control" (including the terms "controlled by" and "under common control
with") means possession, directly or indirectly or as trustee or executor, or
the power to direct or cause the direction of the management or policies of a
person, whether through the ownership of stock, as trustee or executor, by
contract or credit arrangement or otherwise; and
(e) "person" means an individual, corporation, limited liability company,
partnership, association, trust, unincorporated organization, other entity or
group (as defined in Section 13(d)(3) of the Securities Exchange Act of 1934).
9.3 Amendment. This Agreement may not be amended except by an instrument in
writing signed by the parties hereto, provided, however, the signature of
Keystone shall not be required if such instrument has been signed by Keystone
Stockholders.
9.4 Waiver. At any time prior to the Closing, the Keystone Stockholders, on
behalf of themselves and Keystone, may with respect to TAGZ and TAGZ may with
respect to the Keystone Stockholders and Keystone (i) extend the time for the
performance of any of the obligations or other acts of the other, (ii) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto by the other, or (c) waive compliance with
any of the agreements or conditions contained herein. Any such extension or
waiver shall be valid if set forth in an instrument in writing signed by the
party or parties to be bound thereby.
9.5 Headings. The section, subsection and any paragraph headings contained
herein are for the purpose of convenience only and are not intended to define,
limit or affect, and shall not be considered in connection with, the
interpretation of any of the terms or provisions of this Agreement.
9.6 Severability. If any term or other provision of this Agreement is
determined by a court of competent jurisdiction to be invalid, illegal or
incapable of being enforced by reason of any rule of law or public policy, all
other conditions and provisions of this Agreement shall nevertheless remain in
full force and effect. If by reason of such a determination of invalidity,
illegality or unenforceability the material economic or legal substance of the
transactions contemplated hereby would have a material adverse effect on
Keystone or TAGZ or would prevent the satisfaction of the conditions to the
consummation of the transactions contemplated hereby, the parties hereto shall
endeavor in good faith to reach agreement on modifications to this Agreement
that would effectuate the original intent of the parties as closely as possible
in a mutually acceptable manner to the end that transactions contemplated hereby
can be consummated.
9.7 Entire Agreement. This Agreement (inclusive of Keystone Disclosure
Schedule and TAGZ Disclosure Schedule) constitutes the entire agreement and
supersedes any prior agreements and undertakings, both oral and written, among
the parties, or any of them, with respect to the subject matter hereof.
9.8 Assignment. This Agreement shall not be assigned voluntarily by any of
the parties nor by operation of law or otherwise.
9.9 Parties In Interest. This Agreement shall be binding upon and inure
solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied, is intended to or shall confer upon any other person any
right, benefit or remedy of any nature whatsoever under or by reason of this
Agreement, including, without limitation, by way of subrogation, other than
Section 5.5 (which is intended to be for the benefit of the Indemnified Parties
and the others specifically referenced therein as beneficiaries of the
agreements contained in Section 5.5, and may be enforced by such Indemnified
Parties and other persons).
9.10 Failure or Indulgence Not Waiver; Remedies Cumulative. No failure or
delay on the part of any party hereto in the exercise of any right hereunder
shall impair such right or be construed to be a waiver of, or acquiescence in,
any breach of any representation, warranty or agreement herein, nor shall any
single or partial exercise of any such right preclude other or further exercise
thereof or of any other right. All rights and remedies existing under this
Agreement are cumulative to, and not exclusive of, any rights or remedies
otherwise available.
9.11 Governing Law; Jurisdiction over Legal Actions. This Agreement shall be
governed by, and construed in accordance with, the internal laws of the State of
Delaware applicable to contracts executed and fully performed within the State
of Delaware. In the event any party hereto is required to initiate any legal
action or proceeding to enforce its rights hereunder, such action or proceeding
shall be brought and maintained exclusively in the Superior Court for the County
of Orange, in California and each party agrees to accept, and not to challenge,
the jurisdiction of such court over the parties and the subject matter of such
action or proceeding or the convenience of the forum and to accept and not to
challenge the adequacy of service by certified or registered mail. The
prevailing party in any such action or proceeding shall be entitled to recover
its reasonable attorneys fees and disbursements, expert witness fees and
disbursements and other costs of suit from the non-prevailing party. TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, EACH PARTY HEREBY EXPRESSLY WAWFS
ITS RIGHT TO A JURY TRIAL IN ANY SUCH ACTION OR PROCEEDING, IRRESPECTIVE OF
WHICHEVER PARTY MAY BRING ANY SUCH ACTION OR PROCEEDING.
9.12 Counterparts. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
IN WITNESS WHEREOF, each of TAGZ and Keystone has caused this Agreement to be
executed, by its respective officers thereunto duly authorized, and Keystone
Stockholders have executed this Agreement, as of the date first written above.
Keystone & Kellar, Inc.
Keystone & Kellar, Inc.
By: /s/ Stephen J. Gehringer
Tangible Asset Galleries, Inc.
By: /s/ Silvano DiGenova
/s/ Stephen J. Gehringer
Stephen J. Gehringer
/s/ Kenneth J. Kellar
Kenneth J. Kellar
/s/ Curtis W. Mease
Curtis W. Mease
<PAGE>
CONSENT OF SPOUSE
The undersigned is the spouse of Stephen J. Gehringer, who is the owner of ___
of the shares of Common Stock (the "Company Shares") of Gehringer & Kellar,
Inc., a Pennsylvania corporation (the "Company"). I am aware that my spouse
intends to enter into that certain Acquisition Agreement to be dated as of
December 30, 1999 (the "Acquisition Agreement") and that the Acquisition
Agreement, by its express terms, provides for my spouse to contribute and
transfer all of his Company Shares, including any interest of any kind that I
may have in those Company Shares, to Tangible Asset Galleries, Inc. ("TAGZ").
I have read and understand the terms and consequences of the Acquisition
Agreement. I hereby approve, and gives my consent to, the execution and delivery
of the Acquisition Agreement and the contribution and transfer of the Company
Shares, together with any interest of any kind that I may have in those Company
Shares, to TAGZ pursuant to the Acquisition Agreement by my spouse.
December 30,1999
Name: /s/ Joyce Gehringer
<PAGE>
CONSENT OF SPOUSE
The undersigned is the spouse of Kenneth J. Kellar, who is the owner of ___ of
the shares of Common Stock (the "Company Shares") of Gehringer & Kellar, Inc., a
Pennsylvania corporation (the "Company"). I am aware that my spouse intends to
enter into that certain Acquisition Agreement to be dated as of December 30,1999
(the "Acquisition Agreement") and that the Acquisition Agreement, by its express
terms, provides for my spouse to contribute and transfer all of his Company
Shares, including any interest of any kind that I may have in those Company
Shares, to Tangible Asset Galleries, Inc. ("TAGZ").
I have read and understand the terms and consequences of the Acquisition
Agreement. I hereby approve, and gives my consent to, the execution and delivery
of the Acquisition Agreement and the contribution and transfer of the Company
Shares, together with any interest of any kind that I may have in those Company
Shares, to TAGZ pursuant to the Acquisition Agreement by my spouse.
_________________1999
Name: /s/ Unknown signature
<PAGE>
CONSENT OF SPOUSE
The undersigned is the spouse of Curtis W. Mease, who is the owner of ___ of the
shares of Common Stock (the "Company Shares") of Gehringer & Kellar, Inc., a
Pennsylvania corporation (the "Company"). I am aware that my spouse intends to
enter into that certain Acquisition Agreement to be dated as of December 31,
1999 (the "Acquisition Agreement") and that the Acquisition Agreement, by its
express terms, provides for my spouse to contribute and transfer all of his
Company Shares, including any interest of any kind that I may have in those
Company Shares, to Tangible Asset Galleries, Inc. ("TAGZ").
I have read and understand the terms and consequences of the Acquisition
Agreement. I hereby approve, and gives my consent to, the execution and delivery
of the Acquisition Agreement and the contribution and transfer of the Company
Shares, together with any interest of any kind that I may have in those Company
Shares, to TAGZ pursuant to the Acquisition Agreement by my spouse.
January 21, 1999
Name: /s/ Kateryna Mease
<PAGE>
TANGIBLE ASSET GALLERIES, INC. DISCLOSURE SCHEDULE
4.3 See Form 10SB/A
4.6 See Form 10SB/A
4.7 Inapplicable
4.9 See Form 10SB/A
<PAGE>
KEYSTONE COMPANY DISCLOSURE SCHEDULE
2.1 Inapplicable
2.3 Inapplicable.
2.5 "Material Contracts" include:
(a) Revolving Credit Loan from National Penn Bank to Keystone in an
aggregate principal amount not exceeding the Bank's current commitment of SIX
HUNDRED THOUSAND AND 00/100 DOLLARS ($600,000.00) (the "$600,000.00 National
Penn Revolving Credit Loan"). A true and correct copy of the $600,000.00
National Penn Revolving Credit Note evidencing the $600,000.00 National Penn
Revolving Credit Loan, together with every other document made, executed and
delivered to the Bank as security for Keystone's obligations on account of the
$600,000.00 National Penn Revolving Credit Loan are attached hereto, made a part
hereof, and marked as Exhibit "2.5(a)";
(b) Revolving Credit Loan from National Penn Bank to Keystone in an aggregate
principal amount not exceeding the Bank's current commitment of TWO HUNDRED
THOUSAND AND 00/100 DOLLARS ($200,000.00) (the "$200,000.00 National Penn
Revolving Credit Loan"). A true and correct copy of the $200,000.00 National
Penn Revolving Credit Note evidencing the $600,000.00 National Penn Revolving
Credit Loan, together with every other document made, executed and delivered to
the Bank as security for Keystone's obligations on account of the $600,000.00
National Penn Revolving Credit Loan are attached hereto, made a part hereof, and
marked as Exhibit "2.5(b)";
(c) " Revolving Credit Loan from Summit Bank to Keystone in an aggregate
principal amount not exceeding the Bank's current commitment of TWO HUNDRED
THOUSAND AND 00/100 DOLLARS ($200,000.00) (the "$200,000.00 Summit Bank
Revolving Credit Loan"). A true and correct copy of the $200,000.00 Summit Bank
Revolving Credit Note evidencing the $200,000.00 Summit Bank Revolving Credit
Loan, together with every other document made, executed and delivered to the
Bank as security for Keystone's obligations on account of the $200,000.00 Summit
Bank Revolving Credit Loan are attached hereto, made a part hereof, and marked
as Exhibit 2.5(c)".
(d) That certain Lease dated December 31, 1999 by and between Kenneth J.
Kellar and Stephen J. Gehringer, as Lessor, and Keystone, as Lessee, whereby
Lessee leases from Lessor the premises located at 1801 Tilghman Street,
Allentown, Lehigh County, Pennsylvania, for a period of three (3) years,
commencing January 1, 2000 and terminating on December 31, 2003 at the annual
rental of THIRTY-SIX THOUSAND AND 00/00 DOLLARS ($36,000.00), payable in equal
installments in advance on the first (1st) day of each month for that month's
rental, during the term of the Lease. A true and correct copy of the Lease is
attached hereto, made a part hereof, and marked as Exhibit "2.5(d)".
The performance of the Acquisition Agreement will result in a breach of or
constitute a default of the $600,000.00 National Penn Revolving Credit Loan,
$200,000.00 National Penn Revolving Credit Loan, and the $200,000-00 Summit
Revolving Credit Loan (the "Existing Revolving Credit Loans"), and, accordingly,
Keystone Stockholders Kenneth J. Kellar and Stephen J. Gehringer agree to make
revolving credit loans (the "Shareholder Revolving Credit Loans") to Keystone on
the Date of Closing in an aggregate principal amount not exceeding ONE MILLION
AND 00/100 DOLLARS ($1,000,000.00) to refinance Keystone's existing obligations
under the Existing Revolving Credit Loans, and the Shareholder Revolving Credit
Loans as well as that certain Lease dated December 31, 1999 shall be retained by
Keystone post-closing as "Company Retained Liabilities" defined in Section
5.5(b) of that certain Acquisition Agreement dated December 30, 1999.
2.6 Inapplicable.
2.7 Inapplicable.
2.8 Inapplicable.
2.9 Inapplicable.
2.10 (a) "SEP". A true and correct copy of Keystone's SEP is attached
hereto. made a part hereof and marked as Exhibit " 2. 1 0(a) ".
(b) Inapplicable.
2.11 Inapplicable.
2.12 Except for the creation of any lien or grant of any security interest by
Keystone as security for its obligations on account of the Existing Revolving
Credit Loans and the Shareholder Revolving Credit Loans to be made on the Day of
Closing.
2.13 Inapplicable.
2.14 Inapplicable.
2.15 Customers: United Precious Metals; Tony Mat, Inc; Heraeis Precious
Metals; Goldline; Classic Coin Company
Cliff Brackens Rare Coins;U.S. Coins; Avena Rare Coin; Anthonys
Suppliers: Andy Muller, Jr.; TAGZ; Tony Mat, Inc.; John Albanese Rare Coin;
Classic Coin Company
2.16 Inapplicable
2.17 Insurance Policies - a true and correct copy of each policy of insurance
maintained by Keystone is attached hereto, made a part hereof, and marked as
Exhibit "2.17".
