<PAGE>
UNITED STATES 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): April 12, 1999
NUMEX CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 0-9459 06-1034587
(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation) Identification Number)
11111 Santa Monica Blvd., Suite 210
Los Angeles, California 90025
(Address of principal executive offices)
Registrant's telephone number, including area code: (310) 914-3007
Not applicable
(Former name or former address, if changed since last report)
<PAGE>
ITEM 1 CHANGES IN CONTROL OF REGISTANT
Pursuant to that certain Agreement and Plan of Merger dated as of
April 12, 1999 (the "Merger Agreement") between Numex Corporation (the
"Company") and JSA Acquisition Corporation, a wholly owned subsidiary of the
Company, on the one hand; and Jeffrey A. Stern & Associates, Inc. ("JSA") and
the shareholders of JSA (the "JSA Shareholders"), on the other hand, on April
12, 1999, the Company acquired all of the outstanding capital stock of JSA
(the "Closing"), in consideration of the issuance to the JSA Shareholders of
an aggregate of 3,046,875 shares of the Company's Common Stock, of which
Jeffrey A. Stern ("Stern") received 2,500,006 shares. In connection with the
Closing, the Company completed a private placement (the "Private Placement")
of 132,000 shares of Series B Convertible Preferred Stock of the Company
which is convertible into an aggregate of 2,200,044 shares of the Company's
Common Stock at any time. At the Closing, the Company also issued (a) 12,000
Preferred Shares (convertible into 200,004 shares of Common Stock) to MCG
Credit Corporation in connection with the restructuring of the existing bank
debt of JSA (the "Bank Restructuring") and (b) 156,250 shares of Common Stock
as a finder's fee for the acquisition of JSA. The Company also entered into
an employment agreement with Stern (the "Stern Employment Agreement")
pursuant to which Stern was granted options to purchase an aggregate of
2,000,000 shares (the "Stern Options") of the Company's Common Stock. The
Stern Options vest equally over three years commencing April 12, 2000. The
first set (666,666 options) has an exercise price of $3.50 per share. The
second set has an exercise price of $4.50 per share with a remainder at $6.50
per share. Under the Stern Employment Agreement, Stern became the President
and Chief Executive Officer.
Pursuant to a Stockholders Agreement among Stern, Jack Salzberg and
Isaac Salzberg, Jack Salzberg or his designee has the right to designate two
directors and Stern has a right to designate two directors with respect to a
board of directors of four persons. At the Closing, Mr. Stern designated himself
and Marc Strausberg, and Jack Salzberg designated himself and Isaac Salzberg as
directors.
The following table sets forth certain information and after giving
effect to the issuance of securities at the Closing (including the conversion
of Preferred Shares issued in connection with the Bank Restructuring and the
Private Placement) with respect to the beneficial ownership of the
outstanding shares of Common Stock by the Company's directors, executive
officers and each person known to the Company who owns in excess of 5% of the
outstanding shares of Common Stock and the directors and executive officers
of the Company as a group. Each person listed below has personal and sole
beneficial ownership of the shares of Common Stock listed with their name:
2
<PAGE>
<TABLE>
<CAPTION>
Name of Beneficial Owner Number of Shares Percentage of Ownership
<S> <C> <C>
Isaac Salzberg 246,500(1) 1.45
Jack Salzberg 2,247,831(2) 12.67
Jeffrey Stern 2,540,006(3) 15.03
Marc Strausberg -- --
Marcelino Miyares 192,400 1.13
Barry Freilicher 269,469 1.59
All Directors and Executive 5,496,206 30.98
Officers (6 persons)
</TABLE>
(1) Includes 40,500 shares held as custodian under the Uniform Gift to
Minors Act for the benefit of Jacob Salzberg, 60,500 shares held as
custodian under the Uniform Gift to Minors Act for the benefit of Adam
D. Salzberg, and 60,500 shares held as custodian under the Uniform Gift
to Minors Act for the benefit of Matthew A. Salzberg; and 85,000 shares
held as trustees of the Isaac S. Salzberg and Susan S. Salzberg Living
Trust.
(2) Consists of 1,797,831 shares held as trustees of the Jack I. Salzberg
and Anna S. Salzberg Family Trust and 450,000 shares issuable upon the
exercise of warrants to be effected on or before the Closing.
(3) Does not include 2,000,000 shares issuable upon the exercise of the
Stern Options.
ITEM 2 ACQUISITION OR DISPOSITION OF ASSETS
As described in Item 1 above, pursuant to the Merger Agreement, at the
Closing, the Company acquired from the JSA Shareholders all of the issued and
outstanding Common Stock of JSA. In consideration therefor, the Company issued
to the JSA Shareholders an aggregate of 3.046,875 shares of the Company's Common
Stock. Pursuant to the Stern Employment Agreement, Stern, the principal
shareholder of JSA, became the President and Chief Executive Officer of the
Company. At the Closing, Jack Salzberg, the Company's then President and Chief
Executive Officer, resigned and, pursuant to an employment agreement entered
into at the Closing, became the Company's Chairman of the Board. The
consideration for the acquisition of JSA was negotiated on an arms length basis
between the Company and Stern.
JSA is a California corporation which at the closing owned a majority
interest in JSA Communications LLC, a California limited liability company. JSA
and JSA Communications LLC are referred to herein as the JSA Group.
3
<PAGE>
JSA - The Combined Companies
The JSA Group is a media and marketing services company that has
focused on niche and underdeveloped markets. Its Spanish language division, JSA
en espanol, has created proprietary integrated marketing programs to help
marketers reach the rapidly growing Hispanic market in the United States. Its
custom publishing division, JSA Communications, develops retention marketing
programs for companies.
JSA en espanol/The Current Business
JSA en espanol is a leading marketer targeting the Hispanic community.
The company creates customized integrated marketing programs for firms across
the country which desire to target the Hispanic Community. These programs are
built around JSA's unique distribution system, La Bolsita, and include
proprietary publications such as Promociones Hogarama and Mundo Deportivo.
La Bolsita (translation: the little bag) reaches 3 million Hispanic
households across the US, as determined by a sophisticated analysis of census
tract data. This distribution program provides opportunities for marketers to
distribute coupons, retail inserts and product samples on a door-to-door basis.
In addition, the company publishes its own proprietary publications,
Promociones Hogarama and Mundo Deportivo. Promociones Hogarama is a Spanish
language free-standing insert program distributed door-to-door providing
recipients with coupons and sweepstakes offers. JSA also distributes product
samples and inserts to Hispanic households. Mundo Deportivo is a monthly sports
magazine targeting Hispanic men.
JSA's clients include national and regional advertisers which are
focused on the Hispanic market. The company is headquartered in Los Angeles with
a sales offices in New York.
The Hispanic market represents a fast growing, underdeveloped market.
Currently, one in ten Americans is Hispanic. According to the Bureau of the
Census, Hispanics are projected to number 31 million in 2000; by 2010, that
number will grow to approximately 40 million, and in 2050, approximately 88
million Hispanics are projected to live in the US. As a result, nearly 1 in 4
Americans will be Hispanic. According to a study by the University of Georgia's
Selig Center for Economic Growth, the Latino purchasing power reached $348
billion in 1998, up from $325 billion the previous year.
Based on the growth of this market, marketers are increasing their
advertising commitment to the Hispanic market. In 1983, the Hispanic market
advertising expenditures were $224 million. In 1994, advertising expenditures
had increased to $952 million.
During the next thirty years, the Anglo US population will be flat. The
most substantial growth by far will be in the Hispanic market, leading US
marketers inevitably in that direction. JSA intends to establish a presence
among Hispanics as that transformation in marketing budgets takes place.
4
<PAGE>
JSA en espanol/e-commerce
As indicated, Hispanics represent the fastest-growing population
segment in the United States. In virtually every category of increases in
consumption and spending, Hispanics outrank any other segment of the population.
Computer ownership and internet access are no exception to this statement.
According to the Tomas Rivera Policy Institute, 30% of Hispanic households now
own computers, up from 13% in 1994, growing at twice the national average.
Internet use among US Hispanic households has increased from 2% in 1994 to 15%
today. Among all US households, the internet is available to 28%.
Since 1993, JSA has been assembling a significant position within the
Hispanic print and direct distribution businesses. In 1999, JSA plans to
leverage that promotional strength in support of the first major electronic
shopping mall for Hispanics.
JSA expects to sell products directly to consumers as well as host
the Spanish-language sites of major e-commerce players. It is designed as the
leading site for Spanish-language commerce in a Latino cultural setting.
JSA Communications/The Current Business
JSA Communications is a custom publishing company that creates
value-added programs for major marketers. Each program focuses on retention
marketing and is designed to help build customer loyalty. Since 1990, JSA
Communications has focused on the areas of entertainment, health care and
retail. It has demonstrated an ability to grow with its clients as well as
develop new products and clients.
5
<PAGE>
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION
AND RESULTS
a. Financial Statements of Business Acquired
Audited Financial Statements for the JSA Group as required.
c. Exhibits:
<TABLE>
<CAPTION>
Exhibit
Number Description
------ -----------
<S> <C>
10.1 Agreement and Plan of Merger dated as of April 12, 1999
</TABLE>
* It is impractical at the present time to provide such documents. Such
documents will be filed as soon as practicable.
6
<PAGE>
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 hereunto duly authorized.
NUMEX CORPORATION
-----------------
(Registrant)
Date: April 23, 1999 By: /s/ Jeffrey A.Stern
-------------------------------------------
Jeffrey A. Stern
President and Chief Executive Officer
7
<PAGE>
AGREEMENT AND PLAN OF MERGER
by and between
Numex Corporation, a Delaware corporation
and
JSA Acquisition Corporation, a Delaware corporation
on the one hand
and
Jeffrey A. Stern & Associates, Inc., a California corporation
and
JSA Shareholders
on the other hand
Dated as of April 12, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE(s)
-------
<S> <C>
AGREEMENT AND PLAN OF MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
RECITALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1. THE MERGER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.1 Surviving Corporation; Effective Time.. . . . . . . . . . . . . . . . . . . . . . . 2
1.2 Articles of Incorporation and Bylaws. . . . . . . . . . . . . . . . . . . . . . . . 2
1.3 Directors and Officers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.4 Conversion of Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.5 Fractional Shares.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.6 Exchange of Certificates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.7 Closing.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2. REPRESENTATIONS AND WARRANTIES OF JSA AND THE JSA SHAREHOLDERS. . . . . . . . . . . . . . . 4
2.1 Organization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.2 Capitalization of JSA/BHF/JSA LLC.. . . . . . . . . . . . . . . . . . . . . . . . . 4
2.3 Subsidiaries and Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.4 Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.5 Liabilities.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.6 Absence of Material Changes.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.7 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.8 Title to Assets.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.9 Contracts and Undertakings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.10 Transactions with Affiliates, Directors and Shareholders. . . . . . . . . . . . . . 6
2.11 No Conflict.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.12 Authority.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.13 Compliance with Law.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.14 Private Placement Memorandum. . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.15 Securities Laws.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.16 Exchange and Liquidation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . 7
3.1 Organization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.2 Capitalization of the Company.. . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.3 Subsidiaries and Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.4 Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.5 Liabilities.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
i
<PAGE>
3.6 Absence of Material Changes.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.7 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.8 Title to Assets.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.9 Contracts and Undertakings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.10 Transactions with Affiliates, Directors and Shareholders. . . . . . . . . . . . . . 9
3.11 No Conflict.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.12 Authority.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.13 Compliance with Law.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.14 Private Placement Memorandum. . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4. COVENANTS AND AGREEMENTS OF THE PARTIES EFFECTIVE PRIOR TO CLOSING. . . . . . . . . . . . . 9
4.1 Corporate Examinations and Investigations.. . . . . . . . . . . . . . . . . . . . . 9
4.2 Cooperation; Consents.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
4.3 Conduct of Business.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
4.4 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
4.5 Notice of Default.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
4.6 Private Placement.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
5. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS.. . . . . . . . . . . . . . . . . . .10
6. CONDITIONS TO CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
6.1 Conditions to Obligation of JSA and JSA Shareholders. . . . . . . . . . . . . . . .11
(a) Representations and Warranties of Company to be True.. . . . . . . .11
(b) No Legal Proceedings.. . . . . . . . . . . . . . . . . . . . . . . .11
(c) Statutory Requirements.. . . . . . . . . . . . . . . . . . . . . . .11
(d) Directors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
(e) Private Placement. . . . . . . . . . . . . . . . . . . . . . . . . .11
(f) Restructuring of Loan with MCG Finance Corporation.. . . . . . . . .11
(g) Employment Agreement.. . . . . . . . . . . . . . . . . . . . . . . .12
(h) Stockholders Agreement.. . . . . . . . . . . . . . . . . . . . . . .12
(i) Registration Rights. . . . . . . . . . . . . . . . . . . . . . . . .12
(j) Certificate. . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
(k) Legal Fees.. . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
6.2 Conditions to Obligations of Company. . . . . . . . . . . . . . . . . . . . . . . .12
(a) Representations and Warranties of JSA and the JSA
Shareholders to be True. . . . . . . . . . . . . . . . . . . . . . .12
(b) No Legal Proceedings.. . . . . . . . . . . . . . . . . . . . . . . .13
(c) Statutory Requirements.. . . . . . . . . . . . . . . . . . . . . . .13
(d) Employment Agreement.. . . . . . . . . . . . . . . . . . . . . . . .13
(e) Certain Releases.. . . . . . . . . . . . . . . . . . . . . . . . . .13
(f) Pledge Agreement (Stock).. . . . . . . . . . . . . . . . . . . . . .13
ii
<PAGE>
(g) Waiver.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
(h) Certain Other Conditions.. . . . . . . . . . . . . . . . . . . . . .13
(i) Shareholders Certificate.. . . . . . . . . . . . . . . . . . . . . .13
(j) Certificate. . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
(k) Legal Fees.. . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
7. INDEMNIFICATION.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
7.1 Indemnification by the JSA Shareholders.. . . . . . . . . . . . . . . . . . . . . .14
7.2 Indemnification by the Company. . . . . . . . . . . . . . . . . . . . . . . . . . .15
7.3 Computation of Losses.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
7.4 Notice to Indemnifying Party. . . . . . . . . . . . . . . . . . . . . . . . . . . .15
7.5 Defense by Indemnifying Party.. . . . . . . . . . . . . . . . . . . . . . . . . . .15
8. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
8.1 No Liability of JSA BHF and JSA LLC.. . . . . . . . . . . . . . . . . . . . . . . .16
8.2 Further Assurances. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
8.3 Expenses of Sale. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
8.4 Use and Confidentiality.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
8.5 Notices.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
8.6 Parties in Interest.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
8.7 Entire Agreement, Amendments. . . . . . . . . . . . . . . . . . . . . . . . . . . .18
8.8 Headings, Etc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
8.9 Pronouns. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
8.10 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
8.11 Governing Law.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19
8.12 Registration Statement on Form SB-2.. . . . . . . . . . . . . . . . . . . . . . . .19
8.13 Attorneys' Fees.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19
</TABLE>
iii
<PAGE>
SCHEDULES
Schedule 2.5 - Liabilities
Schedule 2.6(b) - JSA Shareholders
Schedule 2.7 - Litigation
Schedule 2.8 - Title to Assets
Schedule 2.9 - Contracts and Undertakings
Schedule 2.10 - Transactions with Affiliates, Directors and
Shareholders
Schedule 2.11 - No Conflicts
Schedule 2.13 - Compliance with Law
Schedule 2.15 - Legend
Schedule 3.5 Liabilities
EXHIBITS
Exhibit A - Agreement of Merger
Exhibit B - Certificate of Merger
Exhibit C - Employment Agreement (Stern)
Exhibit D - Numex Corporation Stockholders Agreement
Exhibit E - Employment Agreement (Salzberg)
Exhibit F - Pledge Agreement (Stock)
Exhibit G - Amendment of Note
iv
<PAGE>
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement") is dated as of
April 12, 1999, by and between Numex Corporation, a Delaware corporation (the
"Company") and JSA Acquisition Corporation, a Delaware corporation and a
wholly owned subsidiary of the Company ("Sub"), on the one hand; and Jeffrey
A. Stern & Associates, Inc., a California corporation ("JSA"), and each of
the shareholders of JSA set forth on the signature page hereto (collectively,
the "JSA Shareholders"), on the other hand.
RECITALS
A. As of April 8, 1999, Jeffrey A. Stern ("Stern") owned One
Thousand (1,000) shares constituting all of the then issued and outstanding
shares of capital stock, no par value per share, of JSA;
B. On April 9, 1999, Stern as the sole director of JSA, authorized
the issuance of, and JSA issued, an aggregate of Ninety-three and Four Hundred
Sixty-four One-Thousandth (93.464) shares of capital stock, no par value per
share, of JSA to certain of its employees as compensation.
C. As of April 9, 1999, JSA and BHF Companies, a California
corporation ("BHF"), owned all of the membership units of JSA Communications,
LLC, a California limited liability company ("JSA LLC");
D. On April 9, 1999, JSA and BHF as all the members and managers of
JSA LLC elected to dissolve and liquidate JSA, LLC, and concurrently therewith,
all the assets of JSA LLC were assigned to, and all the liabilities of JSA LLC
were assumed by, JSA and BHF in cancellation of their membership interests in
JSA LLC (the "Liquidation");
E. Pursuant to that certain Share Exchange Agreement by and between
JSA and Barry Freilicher, dated as of the date hereof, Barry Freilicher
exchanged all of his shares in BHF for the shares of capital stock, no par value
per share, of JSA (the "Exchange");
F. Barry Freilicher owned One Thousand (1,000) shares constituting
all of the issued and outstanding shares of common stock, par value $0.01 per
share, of BHF ("BHF Shares") immediately prior to the Exchange, and, pursuant to
the Exchange, the BHF Shares were converted into One Hundred Six and Nine
One-Hundredth (106.09) shares of capital stock, no par value per share, of JSA;
G. By virtue of the foregoing, as of the date hereof, an aggregate
of One Thousand One Hundred Ninety-nine and Five Thousand Five Hundred
Forty-five Ten-Thousandth (1,199.5545) shares of the capital stock, no par value
per share, of JSA are issued and outstanding (the "JSA Shares"), BHF became a
wholly owned subsidiary of JSA and JSA LLC has been liquidated;
H. The Company, Sub and JSA have each determined to engage in the
transactions contemplated hereby (collectively, the "Transaction") pursuant to
which Sub will merge with and into JSA (the "Merger") and each issued and
outstanding share of capital stock of JSA shall be converted into shares of the
Company's common stock in the manner herein described;
<PAGE>
I. The respective Boards of Directors of the Company, Sub and JSA
have each approved the Merger, the Transaction, this Agreement, and the
Agreement of Merger and the Certificate of Merger, both referred to in Section
1.1(b) hereof, and the JSA Shareholders and the Company, as the sole stockholder
of Sub, have each approved the Merger, the Transaction, this Agreement, and the
Agreement of Merger and the Certificate of Merger, both referred to in
Section 1.1(b) hereof, and the parties intend that this Agreement constitutes a
plan of reorganization within the meaning of Section 368(a) of the Internal
Revenue Code of 1986, as amended (the "Code"), and the regulations promulgated
thereunder; and
J. The Company is presently engaged in a private placement of up to
$3,300,000 (the "Private Placement") pursuant to the sale to accredited
investors of shares of the Company's Series B 5% Convertible Preferred Stock
(the "Preferred Stock").
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein and in reliance upon the representations and warranties
hereinafter set forth, the parties hereto hereby agree as follows:
1. THE MERGER
1.1 SURVIVING CORPORATION; EFFECTIVE TIME.
(a) At the Closing (as hereinafter defined), subject
to the terms and conditions of this Agreement, Sub shall be merged with and into
JSA in accordance with the General Corporation Law of California (the "CGCL"),
whereupon the separate existence of Sub shall cease, and JSA shall be the
surviving corporation. It is intended by the parties hereto that the
Transaction shall constitute a reorganization within the meaning of Section
368(a) of the Code and the parties hereto hereby adopt this Agreement as a "plan
of reorganization" within the meaning of Sections 1.368-2(g) and 1.368-3(a) of
the United States Treasury Regulations.
(b) Simultaneously with the Closing, JSA and Sub shall
file an agreement of merger (the "Agreement of Merger"), in the form attached
hereto as Exhibit A, in the office of the Secretary of State of the State of
California in accordance with the CGCL. The Merger shall become effective at
such time as the Agreement of Merger is duly filed in California (the date of
such filing being hereinafter referred to as the "Effective Date") and the time
of such filing being hereinafter referred to as the "Effective Time". On the
Effective Date a certificate of merger, in the form attached hereto as Exhibit
B, shall be filed with the Secretary of State of the State of Delaware in
accordance with the Delaware General Corporation Law. From and after the
Effective Time, JSA shall possess all the rights, privileges, powers and
franchises and be subject to all of the restrictions, disabilities and duties of
both JSA and Sub, as provided under the CGCL.
1.2 ARTICLES OF INCORPORATION AND BYLAWS. The Articles of
Incorporation and Bylaws of JSA following the Closing shall be the Articles of
Incorporation and Bylaws of JSA as in effect immediately prior to the Effective
Time, until thereafter amended in accordance with applicable law.
1.3 DIRECTORS AND OFFICERS. From and after the Effective
Time, until successors are duly elected or appointed and qualified in accordance
with the applicable law, the directors and
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officers of the Company immediately after the Effective Time shall be the
directors and officers of JSA.
1.4 CONVERSION OF SHARES. As of the Effective Time, by
virtue of the Merger, automatically and without any action on the part of any
holder thereof:
(a) Each share of common stock, par value $0.01 per
share, of Sub issued and outstanding immediately prior to the Effective Time
shall be converted into one fully paid and nonassessable share of capital stock,
no par value per share, of JSA.
(b) Each JSA Share, or portion thereof, outstanding
immediately prior to the Effective Time, shall be converted into shares of the
Company's common stock, par value $0.10 per share (the "Company Shares"), at the
rate of Two Thousand Five Hundred Forty and Six One-Thousandth (2,540.006)
Company Shares for each whole JSA Share. Each JSA Shareholder shall be entitled
to receive the number of Company Shares set forth on Schedule 2.6(b) attached
hereto, or an aggregate of Three Million Forty-six Thousand Eight Hundred
Seventy-five (3,046,875) Company Shares.
1.5 FRACTIONAL SHARES. Fractional shares of the Company
shall not be issued in connection with the Company Shares, but any fractional
shares shall be rounded to the nearest whole share. No cash shall be issued in
lieu of any fractional shares.
1.6 EXCHANGE OF CERTIFICATES.
(a) Upon surrender to the Company of the certificates
representing the JSA Shares (collectively, the "JSA Certificates"), the holders
of such JSA Certificates shall each be entitled to receive in exchange therefor
one or more certificates representing the number of shares of Company Shares to
which such holder is entitled pursuant to the provisions of Section 1.4(b)
hereof.
(b) Each JSA Certificate converted into Company Shares
shall, by virtue of the Merger and without any action on the part of the holder
thereof, cease to be outstanding, be cancelled and retired and cease to exist.
Until surrendered as contemplated by this Section 1.6(b), each holder of JSA
Shares shall thereafter cease to possess any rights with respect to such shares,
except the right to receive upon such surrender number of shares of Company
Shares as provided by Section 1.4(b) hereof.
(c) No dividends on the Company Shares shall be paid
to the holder of any unsurrendered JSA Certificate until such JSA Certificate is
surrendered; provided, however, that upon surrender of an JSA Certificate, there
shall be paid to such holder the amount of dividends, if any, which theretofore
became payable, but which were not paid by reason of the foregoing, with respect
to the number of shares of Company Shares issued upon such surrender. Subject
to the effect, if any, of applicable escheat and other laws, following surrender
of any JSA Certificate, there shall be delivered to the holder entitled thereto,
without interest, the amount of dividends so withheld as of any date subsequent
to the Effective Date and prior to such date of delivery.
(d) All Company Shares delivered to the JSA
Shareholders in respect of the JSA Shares in accordance with the terms of this
Agreement shall be deemed to have been delivered in full satisfaction of all
rights pertaining to such JSA Shares. If, after the Effective Time,
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JSA Certificates are presented for any reason, they shall be cancelled and
exchanged as provided in this Section 1.6.
1.7 CLOSING. Subject to the satisfaction of the conditions
precedent specified in Section 6 hereof, the closing of the Transaction shall
take place at 11:00 a.m. (Los Angeles time) at the offices of Loeb & Loeb LLP,
1000 Wilshire Blvd., Los Angeles, CA 90017, on or before April 30, 1999 or on
such other date as may be mutually agreed upon by the parties (the "Closing").
2. REPRESENTATIONS AND WARRANTIES OF JSA AND THE JSA SHAREHOLDERS
JSA and the JSA Shareholders hereby represent and warrant to the
Company as follows (in Sections 2.1, 2.3-2.14 hereof, all references to JSA mean
not only JSA, but also BHF and JSA LLC):
2.1 ORGANIZATION.
(a) JSA is a corporation or limited liability company,
as the case may be, duly organized, validly existing, and in good standing under
the laws of the State of California. JSA has the power and authority to carry
on its business as presently conducted; and JSA is qualified to do business in
all jurisdictions where the failure to be so qualified would have a material
adverse effect on its business.
(b) The copies of the charter documents of JSA
heretofore furnished to the Company are complete and correct copies thereof as
amended and in effect on the date hereof.
2.2 CAPITALIZATION OF JSA/BHF/JSA LLC.
(a) The authorized capital stock of JSA consists of
Ten Thousand (10,000) shares of capital stock, no par value per share, of which
One Thousand One Hundred Ninety-nine and Five Thousand Five Hundred Forty-five
Ten-Thousandth (1,199.5545) shares are presently, and will be immediately prior
to the Closing, issued and outstanding. All of the issued and outstanding
shares of JSA and BHF are duly authorized, validly issued, fully paid and
nonassessable and are free from any liens, claims, charges, security interests
or other encumbrances. The JSA Shareholders are the sole beneficial and record
owners of the JSA Shares, and such JSA Shareholders will have the unqualified
right to transfer and dispose of such JSA Shares. JSA is the sole beneficial
and record owner of all the issued and outstanding capital stock of BHF and,
directly and/or indirectly, owns all of the outstanding membership interests of
JSA LLC.
(b) There are no outstanding options, warrants or
rights of any kind to acquire any securities of JSA or BHF or any membership
interests of JSA LLC.
2.3 SUBSIDIARIES AND INVESTMENTS. Other than BHF and JSA
LLC, JSA does not own any capital stock or have any interest in any corporation,
partnership, or other form of business organization.
2.4 FINANCIAL STATEMENTS. The reviewed consolidated balance
sheets of JSA as of December 31, 1997 and reviewed consolidated statements of
operations and cash flows for the 12 months ended December 31, 1997, and the
unaudited consolidated balance sheets as of December 31,
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1998 and unaudited statements of operations and cash flows for the 12 months
ended December 31, 1998 (collectively, the "JSA Financial Statements") (a) were
prepared in accordance with the books and records of JSA and JSA LLC; (b) were
prepared in accordance with generally accepted accounting principles
consistently applied; and (c) are accurate and fairly present their respective
financial condition and the results of operations as of the relevant dates
thereof and for the entities and periods covered thereby.
2.5 LIABILITIES. All of the liabilities of any nature
whatsoever, contingent or otherwise, of JSA as of the date hereof are accurately
described in detail and quantified (both individually and in the aggregate) in
Schedule 2.5 attached hereto.
2.6 ABSENCE OF MATERIAL CHANGES. Since December 31, 1998,
there has not been:
(a) any material adverse change in the condition
(financial or otherwise) of the properties, assets, liabilities or business of
the JSA, except changes in the ordinary course of business which, individually
and in the aggregate, have not been materially adverse.
(b) except the issuance of One Hundred Ninety-nine and
Five Thousand Five Hundred Forty-five Ten-Thousandth (199.5545) shares of
capital stock, no par value per share, of JSA to certain JSA Shareholders
referred to in Recitals B and F hereof and as set forth on Schedule 2.6(b)
attached hereto, any redemption, purchase or other acquisition of any shares of
the capital stock of JSA or any issuance of any shares of capital stock or the
granting, issuance or execution of any rights, warrants, options or commitments
by JSA relating to its authorized or issued capital stock.
2.7 LITIGATION. Except as set forth on Schedule 2.7 attached
hereto, there is no litigation, proceeding, or investigation pending or
threatened against JSA affecting any of its properties or assets, that might
result, either in any case or in the aggregate, in any material adverse change
in the business, operations, affairs or financial condition of JSA or its
properties or assets, or that might call into question the validity of this
Agreement, or any action taken or to be taken pursuant hereto.
2.8 TITLE TO ASSETS. Except as set forth on Schedule 2.8
attached hereto, JSA has good and marketable title to all of the assets and
properties now carried on its books including those reflected in the most recent
balance sheet contained in the JSA Financial Statements, free and clear of all
liens, claims, charges, security interests or other encumbrances, except as
described in the JSA Financial Statements or arising thereafter in the ordinary
course of business (none of which will be material).
2.9 CONTRACTS AND UNDERTAKINGS. Except as set forth on
Schedule 2.9 attached hereto, JSA has no contracts, agreements, leases,
licenses, arrangements, commitments and other undertakings (collectively the
"JSA Contracts") to which it is a party or to which it or its property is
subject. Except as set forth on such Schedule 2.9 attached hereto, JSA is not
in material default under any of the JSA Contracts and, to the knowledge of
Stern, no other party to any JSA Contract to which JSA is a party is in default
thereunder nor, to the knowledge of Stern does there exist any condition or
event which, after notice or lapse of time or both, would constitute a default
by any party to any such JSA Contract.
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2.10 TRANSACTIONS WITH AFFILIATES, DIRECTORS AND SHAREHOLDERS.
Except as set forth on Schedule 2.10 attached hereto, there are no contracts,
agreements, arrangements or other transactions between JSA and any officer,
director, member or shareholder of JSA, or any corporation or other entity owned
or controlled, directly or indirectly, by any such officer, director, member of
shareholder, a member of any such officer, director, member or shareholder's
family, or any affiliate of any such officer, director, member or shareholder.
2.11 NO CONFLICT. Except as set forth on Schedule 2.11
attached hereto, the execution and delivery of this Agreement and the
consummation of the Transaction will not conflict with or result in a breach of
any term or provision of, or constitute a default under, the charter documents
of JSA or any agreement, contract or instrument to which JSA or any of the JSA
Shareholders is a party or by which any of them or any of their respective
assets are bound.
2.12 AUTHORITY. JSA and each of the JSA Shareholders has full
power and authority to enter into this Agreement and to carry out the
Transaction. The execution and delivery of this Agreement and the consummation
of the Transaction have been duly authorized and approved by all of the
Shareholders and the Board of Directors of JSA and no other corporate or other
proceedings on the part of JSA or the JSA Shareholders are necessary to
authorize this Agreement and the Transaction.
2.13 COMPLIANCE WITH LAW. Except as set forth on Schedule
2.13 attached hereto, JSA has in all material respects complied with and it is
now in all material respects in compliance with, all federal, state and local
laws applicable to it. The JSA Shares were issued in compliance with all state
and federal securities laws.
2.14 PRIVATE PLACEMENT MEMORANDUM. All statements and
disclosures about, pertaining to or involving each of Stern, Barry Freilicher
and JSA contained in the Private Placement Memorandum, as it may be supplemented
or amended from time to time ("Private Placement Memorandum"), used and to be
used by the Company in connection with the Private Placement will (i) be true
and correct, and (ii) not contain any misstatements of a material fact or omit
to state a material fact necessary in order to make the statements made, in
light of the circumstances under which they are made, not misleading.
2.15 SECURITIES LAWS. The JSA Shareholders acknowledge that
the Company Shares are not being registered under the Securities Act of 1933, as
amended (the "Securities Act"), on the ground that the offer and sale of the
Company Shares are exempt from the registration provisions of Section 5 of the
Securities Act pursuant to Section 4(2) thereof, as transactions by an issuer
not involving any public offering, and/or may be deemed not to involve an offer
or sale within the meaning of Section 5 of the Securities Act pursuant to
Regulation D promulgated thereunder, and that the Company Shares may not be
resold in any transaction subject to Section 5 of the Securities Act unless
registered or an exemption from registration is available for such sale, and
that the certificates representing the Company Shares will bear a legend to that
effect, substantially in the form set forth on Schedule 2.15 attached hereto.
Each of the JSA Shareholders is acquiring the Company Shares for investment
purposes only and not with a view to distribution or resale thereof except that
Stern shall have the registration rights with respect to Four Hundred Thousand
(400,000) Company Shares contemplated in Section 6.1(i) hereof.
2.16 EXCHANGE AND LIQUIDATION. The Exchange and Liquidation
did not conflict with or result in a breach or violation of any applicable laws
or any term or provision of, or constitute
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a default under, the Articles of Incorporation or Bylaws of JSA or BHF, as the
case may be, or the Articles of Organization or Operating Agreement of JSA LLC,
or any agreement, contract or instrument to which JSA, BHF or JSA LLC, as the
case may be, is a party or by which any of them or any of their respective
assets are bound.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Each of the Company and Sub hereby represent and warrant, individually
as to itself, to the JSA Shareholders as follows:
3.1 ORGANIZATION
(a) Each of the Company and Sub is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Delaware, has the corporate power and authority to carry on its business as
presently conducted, and is qualified to do business in all jurisdictions where
the failure to be so qualified would have a material adverse effect on the
business of the Company or Sub, as the case may be.
(b) The copies of the Certificate of Incorporation of
the Company and Sub, and the Bylaws of the Company and Sub heretofore furnished
to JSA are complete and correct copies of the Certificate of Incorporation and
the Bylaws, as amended, of the Company and Sub as in effect on the date hereof.
3.2 CAPITALIZATION OF THE COMPANY. The authorized capital
stock of the Company consists of Twenty Million (20,000,000) shares of common
stock, par value $0.10 per share, of which the number of share set forth in the
Private Placement Memorandum were issued and outstanding as of the date of the
Private Placement Memorandum, subject to interim exercises of options or
warrants issued and outstanding as of the date hereof; and Ten Million
(10,000,000) shares of Preferred Stock, par value $1.00 per share, none of which
are issued and outstanding. All of the issued and outstanding shares are duly
authorized, validly issued, fully paid and non-assessable, and, at the Closing,
the Company Shares will be duly authorized, validly issued, fully paid and
non-assessable. Except for such outstanding shares and except as disclosed in
the Private Placement Memorandum or the registration statement referred to in
Section 8.12 hereof (the "Registration Statement"), there are no outstanding
shares of capital stock or other securities or other equity interests of the
Company or options, warrants or rights of any kind to acquire such stock or
other securities of the Company. Except (i) with respect to the securities
covered by the Registration Statement, (ii) Stern's registration rights with
respect to Four Hundred Thousand (400,000) Company Shares contemplated in
Section 6.1(i) hereof, and (iii) as disclosed in the Private Placement
Memorandum or the Registration Statement, there are no outstanding agreements
which impose an obligation to file a registration statement or register any of
the capital stock of the Company.
3.3 SUBSIDIARIES AND INVESTMENTS. Except as disclosed in the
Private Placement Memorandum or the Registration Statement, the Company does not
own directly or indirectly, any capital stock or have any interest in any
corporation, partnership or other form of business organization.
3.4 FINANCIAL STATEMENTS. The audited consolidated balance
sheet of the Company as of March 31, 1998 and the consolidated statements of
operations and cash flows for the year then ended and the unaudited consolidated
balance sheet as of December 31, 1998 and the
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unaudited consolidated statements of operations and cash flow for the nine
months then ended (the "Company Financial Statements") (a) were prepared in
accordance with the books and records of the Company; (b) were prepared in
accordance with generally accepted accounting principles consistently applied;
and (c) are accurate and fairly present the Company's financial condition and
the results of its operations as of the relevant dates thereof and for the
period covered thereby.
3.5 LIABILITIES. Except as set forth on Schedule 3.5
attached hereto or otherwise contemplated in this Agreement, the liabilities of
the Company will not exceed Two Hundred Thousand Dollars ($200,000) as of the
Closing. As used herein, liabilities shall mean liabilities of any nature
whatsoever, contingent or otherwise.
3.6 ABSENCE OF MATERIAL CHANGES. Since December 31, 1998,
there has not been:
(a) any material adverse change in the condition
(financial or otherwise) of the properties, assets, liabilities or business of
the Company or Sub, as the case may be, except changes in the ordinary course of
business which, individually and in the aggregate, have not been materially
adverse.
(b) except for the Company's investment in Sub and any
warrant and option exercises, any undisclosed redemption, purchase or other
acquisition of any shares of the capital stock of the Company or Sub, as the
case may be, or any issuance of any shares of capital stock or the granting,
issuance or execution of any rights, warrants, options or commitments by the
Company or Sub, as the case may be, relating to its authorized or issued capital
stock.
3.7 LITIGATION. Except as disclosed in the Private Placement
Memorandum or the Registration Statement, there is no litigation, proceeding or
investigation pending or, to the knowledge of the Company or Sub, as the case
may be, threatened against the Company or Sub, as the case may be, affecting any
of its properties or assets that might result, either in any case or in the
aggregate, in any material adverse change in the business, operations, affairs
or financial condition of the Company or Sub, as the case may be, or their
respective properties or assets, or that might call into question the validity
of this Agreement, or any action taken or to be taken pursuant hereto.
3.8 TITLE TO ASSETS. Except as disclosed in the Private
Placement Memorandum or the Registration Statement, the Company and Sub has good
and marketable title to all of its assets and properties now carried on their
respective books including those reflected in the balance sheet contained in the
Company Financial Statements, free and clear of all liens, claims, charges,
security interests or other encumbrances, except as described in the Company
Financial Statements or arising thereafter in the ordinary course of business
(none of which will be material).
3.9 CONTRACTS AND UNDERTAKINGS. Except as disclosed in the
Private Placement Memorandum or the Registration Statement, the Company or Sub,
as the case may be, has no contracts, agreements, leases, licenses,
arrangements, commitments or other undertakings (collectively, the "Company
Contracts") to which the Company or Sub, as the case may be, is a party or to
which it or its property is subject. Except as disclosed in the Private
Placement Memorandum or the Registration Statement, the Company or Sub, as the
case may be, is not in material default, or alleged to be in material default,
under any Company Contract and, to the knowledge of the Company or Sub, as the
case may be, no other party to any Company Contract to which the Company or Sub,
as the case may be, is a party is in default thereunder nor, to the knowledge of
the
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Company or Sub, as the case may be, does there exist any condition or event
which, after notice or lapse of time or both, would constitute a default by any
party to any such Company Contracts.
3.10 TRANSACTIONS WITH AFFILIATES, DIRECTORS AND SHAREHOLDERS.
Except as disclosed in the Private Placement Memorandum or the Registration
Statement, there are no contracts, agreements, arrangements or other
transactions between the Company or Sub, as the case may be, and any officer,
director, or 5% stockholder, a member of any such officer, director or 5%
stockholder's family, or any affiliate of any such officer, director or 5%
stockholder.
3.11 NO CONFLICT. The execution and delivery of this
Agreement and the consummation of the Transaction will not conflict with or
result in a breach of any term or provision of, or constitute a default under,
the Certificate of Incorporation or Bylaws of the Company or Sub, as the case
may be, or any agreement, contract or instrument to which the Company or Sub, as
the case may be, is a party or by which it or any of their respective assets are
bound.
3.12 AUTHORITY. Each of the Company and Sub has full power
and authority to enter into this Agreement and to carry out the Transaction.
The execution and delivery of this Agreement, the consummation of the
Transactions and the issuance of the Company Shares in accordance with the terms
hereof, have been duly authorized and approved by the Board of Directors of the
Company and Sub and no other corporate proceedings on the part of the Company or
Sub are necessary to authorize this Agreement, the Transaction and the issuance
of the Company Shares in accordance with the terms hereof.
3.13 COMPLIANCE WITH LAW. Each of the Company and Sub has in
all material respects complied with and it is now in all material respects in
compliance with, all Federal, State and local laws applicable to the Company or
Sub, as the case may be. Except for the issuance of the Company Shares to the
JSA Shareholders hereunder, all outstanding securities have been issued in full
compliance in all material respects with all state and federal securities laws.
The securities filings of the Company contain no material misstatement or fail
to state a material fact necessary to make the statements made, in light of the
circumstances under which they were made, not misleading.
3.14 PRIVATE PLACEMENT MEMORANDUM. All statements and
disclosures about, pertaining to or involving the Company or Sub, as the case
may be, contained in the Private Placement Memorandum will (i) be true and
correct, and (ii) not contain any misstatement of a material fact or omit to
state a material fact necessary in order to make the statements made, in light
of the circumstances under which they are made, not misleading.
4. COVENANTS AND AGREEMENTS OF THE PARTIES EFFECTIVE PRIOR TO
CLOSING
4.1 CORPORATE EXAMINATIONS AND INVESTIGATIONS. Prior to the
Closing, each party shall be entitled, through its employees and
representatives, to make such investigations and examinations of the books,
records and financial condition of the Company, Sub and JSA as each party may
request. In order that each party may have the full opportunity to do so, the
Company, Sub, each of the JSA Shareholders and JSA shall furnish each party and
its representatives during such period with all such information concerning the
affairs of the Company, Sub or JSA as each party or its representatives may
reasonably request and cause the Company, Sub or JSA and their respective
officers, employees, consultants, agents, accountants and attorneys to cooperate
fully with
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each party's representatives in connection with such review and examination and
to make full disclosure of all information and documents requested by each party
and/or its representatives. Any such investigations and examinations shall be
conducted at reasonable times and under reasonable circumstances, it being
agreed that any examination of original documents will be at each party's
premises, with copies thereof to be provided to each party and/or its
representatives upon request.
4.2 COOPERATION; CONSENTS. Prior to the Closing, each party
shall cooperate with the other parties to the end that the parties shall (i) in
a timely manner make all necessary filings with, and conduct negotiations with,
all authorities and other persons the consent or approval of which, or the
license or permit from which is required for the consummation of the Transaction
and (ii) provide to each other party such information as the other party may
reasonably request in order to enable it to prepare such filings and to conduct
such negotiations.
4.3 CONDUCT OF BUSINESS. Subject to the provisions hereof,
from the date hereof through the Closing, each party hereto shall (i) conduct
its business in the ordinary course and in such a manner so that the
representations and warranties contained herein shall continue to be true and
correct in all material respects as of the Closing as if made at and as of the
Closing and (ii) not enter into any material transactions or incur any material
liability not required or specifically contemplated hereby, without first
obtaining the written consent of the Company and Sub on the one hand and JSA,
Stern and Barry Freilicher on the other hand. Without the prior written consent
of the Company, Sub, and each of Stern or Barry Freilicher, except as required
or specifically contemplated hereby, each party shall not undertake or fail to
undertake any action if such action or failure would render any of said
warranties and representations untrue in any material respect as of the Closing.
4.4 LITIGATION. From the date hereof through the Closing,
each party hereto shall promptly notify the representative of the other parties
(JSA shall represent itself and the JSA Shareholders and the Company shall
represent itself and Sub) of any lawsuits, claims, proceedings or investigations
which after the date hereof are threatened or commenced against such party or
any of its affiliates or any officer, director, employee, consultant, agent or
shareholder thereof, in their capacities as such, which, if decided adversely,
could reasonably be expected to have a material adverse effect upon the
condition (financial or otherwise), assets, liabilities, business, operations or
prospects of such party or any of its subsidiaries.
4.5 NOTICE OF DEFAULT. From the date hereof through the
Closing, each party hereto shall give to the representative of the other parties
(JSA shall represent itself and the JSA Shareholders and the Company shall
represent itself and Sub) prompt written notice of the occurrence or existence
of any event, condition or circumstance occurring which would constitute a
violation or breach of this Agreement by such party or which would render
inaccurate in any material respect any of such party's representations or
warranties herein.
4.6 PRIVATE PLACEMENT. Each of the parties shall cooperate
and use their best efforts to complete the Private Placement which shall close
immediately after the Closing.
5. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS.
All representations, warranties and covenants of the parties hereto
contained herein shall survive the consummation of the Transaction and remain in
full force and effect until the expiration of the applicable statute of
limitations except (a) Sections 2.4 and 3.4 hereof which shall not survive
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the Closing and (b) Sections 2.5 and 3.5 hereof which shall remain in full force
and effect for a period of one year from the Closing.
6. CONDITIONS TO CLOSING
6.1 CONDITIONS TO OBLIGATION OF JSA AND JSA SHAREHOLDERS.
The obligations of JSA and the JSA Shareholders under this Agreement shall be
subject to each of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES OF COMPANY TO BE
TRUE. The representations and warranties of the Company and Sub, as the case
may be, herein contained shall be true in all material respects at the Closing
with the same effect as though made at such time. The Company and Sub, as the
case may be, shall have performed in all material respects all obligations and
complied in all material respects, to their respective actual knowledge, with
all covenants and conditions required by this Agreement to be performed or
complied with by it at or prior to the Closing.
(b) NO LEGAL PROCEEDINGS. No injunction or
restraining order shall be in effect prohibiting this Agreement, and no action
or proceeding shall have been instituted and, at what would otherwise have been
the Closing, remain pending before the court to restrain or prohibit the
Transaction.
(c) STATUTORY REQUIREMENTS. All statutory
requirements for the valid consummation by the Company or Sub, as the case may
be, of the Transaction shall have been fulfilled. All authorizations, consents
and approvals of all governments and other persons required to be obtained by
Company and Sub in order to permit consummation by the Company or Sub, as the
case may be, of the Transaction shall have been obtained except as to any
authorization, consents and approvals that may be required for the issuance of
the Company Shares to the JSA Shareholders hereunder.
(d) DIRECTORS. Prior to the Closing, all of the
directors and officers (other than Jack Salzberg and Isaac Salzberg) of the
Company shall have submitted their contingent resignations to Loeb & Loeb LLP to
be held in escrow and to become effective at the Closing. Before the
resignations take effect, the resigning directors shall appoint Stern and one
person nominated by Stern to become new directors of the Company so that, at the
Closing, the Board of Directors of the Company will consist of Jack Salzberg,
Isaac Salzberg, Stern and a designee of Stern.
(e) PRIVATE PLACEMENT. A minimum of Two Million Two
Hundred Fifty Thousand Dollars ($2,250,000) in gross proceeds from the Private
Placement shall have been deposited into escrow so that the Private Placement
can close immediately after the Closing.
(f) RESTRUCTURING OF LOAN WITH MCG FINANCE
CORPORATION. The existing loan of JSA with MCG Finance Corporation ("MCG")
described in Schedule 2.5 attached hereto shall be restructured (the "Bank
Restructuring") substantially as follows:
(i) $1,500,000 cash payment to MCG at Closing;
11
<PAGE>
(ii) delivery to MCG at Closing of Twelve
Thousand (12,000) shares of Series B 5% Convertible Preferred Stock, par value
$1.00 per share, of the Company;
(iii) an aggregate total of Nine Hundred
Thirty-Nine Thousand Five Hundred Ninety-Four Dollars ($939,594) in remaining
debt (the "Bank Debt") with interest at LIBOR plus three percent (3.00%) per
annum payable: three years interest only; Fourth year - twenty-five percent
(25%) of principal; Fifth year - twenty-five percent (25%) of principal; with
balance due on the sixth anniversary of the Closing;
(iv) release by MCG of all personal guaranties
at Closing; and
(v) a security interest granted by the Company
to MCG in all the assets of the Company, including the assets of the Company's
subsidiaries.
(g) EMPLOYMENT AGREEMENT. The Company shall have
entered into an employment agreement with Stern substantially in the form of
Exhibit C attached hereto.
(h) STOCKHOLDERS AGREEMENT. The Company, Stern, Isaac
Salzberg and Jack Salzberg shall have entered into a stockholders agreement
substantially in form of Exhibit D attached hereto (the "Stockholders
Agreement").
(i) REGISTRATION RIGHTS. Stern shall be entitled to
have included the Four Hundred Thousand (400,000) Company Shares to be issued to
Stern hereunder in the registration rights agreement to be entered into between
the Company and the investors in the Private Placement, and, in connection
therewith, the Company shall provide to Stern a letter to such effect in form
and substance reasonably satisfactory to Stern.
(j) CERTIFICATE. The Company shall have delivered to
JSA and the JSA Shareholders, an officer's certificate to JSA and the JSA
Shareholders, in form and substance reasonably satisfactory to JSA and the JSA
Shareholders, as to the satisfaction of the foregoing conditions.
(k) LEGAL FEES. Subject to the billing statements
having been submitted for advance review to the Company, Richman, Lawrence,
Mann, Chizever & Phillips, a professional corporation, shall have confirmed in
writing that all sums payable to such firm for services rendered through the
Closing Date, to the extent billed, have been paid in full.
6.2 CONDITIONS TO OBLIGATIONS OF COMPANY. The obligation of
the Company and Sub under this Agreement shall be subject to the following
conditions:
(a) REPRESENTATIONS AND WARRANTIES OF JSA AND THE JSA
SHAREHOLDERS TO BE TRUE. The representations and warranties of JSA and the JSA
Shareholders herein contained shall be true in all material respects as of the
Closing and shall have the same effect as though made at such time, except as to
effect of transactions, payments and liabilities incurred in the ordinary course
of business, including the payment of accrued salary and reimbursement of
reasonable expenses to Stern and Barry Freilicher, not to exceed Twenty-Five
Thousand Dollars ($25,000) in the aggregate, since the date hereof. JSA and the
JSA Shareholders shall have performed in all material respects all obligations
and complied in all material respects, with all
12
<PAGE>
covenants and conditions required by this Agreement to be performed or complied
with by them prior to the Closing.
(b) NO LEGAL PROCEEDINGS. No injunction or
restraining order shall be in effect, and no action or proceeding shall have
been instituted and, at what would otherwise have been the Closing, remain
pending before the court to restrain or prohibit the Transaction.
(c) STATUTORY REQUIREMENTS. All statutory
requirements for the valid consummation by JSA and the JSA Shareholders of the
Transaction shall have been fulfilled. All authorization, consents and
approvals of all governments and other persons required to be obtained by JSA
and the JSA Shareholders in order to permit consummation by JSA and the JSA
Shareholders of the Transaction shall have been obtained.
(d) EMPLOYMENT AGREEMENT. The Company shall have
entered into an employment agreement with Jack Salzberg substantially in the
form of Exhibit E attached hereto.
(e) CERTAIN RELEASES. Each of Stern and Barry
Freilicher shall have delivered to the Company and JSA, an acknowledgment and
release, in form and substance reasonably satisfactory to the Company,
acknowledging that JSA has no liabilities, debts or obligations of any nature
whatsoever to Stern or Barry Freilicher, as the case may be, and fully and
forever releasing the Company and JSA in respect thereof, except that such
releases shall not cover expense reimbursement obligations (not to exceed the
amounts set forth on Schedule 2.5 attached hereto) and payment of accrued salary
and reimbursement of reasonable expenses, all as incurred in the ordinary course
of business to Stern and Barry Freilicher not to exceed Twenty-Five Thousand
Dollars ($25,000) in the aggregate.
(f) PLEDGE AGREEMENT (Stock). Stern shall have
entered into a Pledge Agreement (Stock) in the form of Exhibit F attached hereto
(the "Pledge Agreement"), with the Company and shall have delivered to Loeb &
Loeb LLP, as pledgeholder ("Pledgeholder"), certificates evidencing Four Hundred
Thousand (400,000) of the Company Shares to be issued to Stern hereunder, duly
and properly endorsed in blank (or accompanied by appropriate stock powers
separate from certificate), to secure Stern's obligations contemplated by
Section 7.1 hereof with respect to the representations and warranties set forth
in Section 2.5 hereof and such Pledge Agreement.
(g) WAIVER. Banta Corporation ("Banta") shall have
executed and delivered to the Company a document in form and substance
reasonably satisfactory to the Company (a) waiving any default under that
certain promissory note of the Company dated November 1, 1997 (the "Note") to
Banta arising from the Transaction and (b) amending the terms of such Note in
accordance with Exhibit G attached hereto.
(h) CERTAIN OTHER CONDITIONS. The conditions
contemplated by Sections 6.1(c), 6.1(d), 6.1(e), 6.1(f), and 6.1(h) hereof shall
have been satisfied.
(i) SHAREHOLDERS CERTIFICATE. The JSA Shareholders
shall have delivered to the Company a certificate as to good title to the JSA
Shares owned by them and as to their waiver of appraisal rights available under
the CGCL in respect of the Merger.
13
<PAGE>
(j) CERTIFICATE. JSA shall have delivered to the
Company an officer's certificate in form and substance reasonably satisfactory
to the Company, as to the satisfaction of the foregoing conditions.
(k) LEGAL FEES. Subject to the billing statements
having been submitted to JSA for advance review, Loeb & Loeb LLP, a California
limited partnership, shall have confirmed in writing that all sums payable for
services rendered through the Closing Date, to the extent billed, have been paid
in full.
7. INDEMNIFICATION.
7.1 INDEMNIFICATION BY THE JSA SHAREHOLDERS. Provided the
Company's claim therefor is instituted by written notice within the time period
specified in Section 5 hereof, except that notice shall be deemed to have been
given for the disputes referred to in paragraph (a) of Schedule 2.5 attached
hereto, Stern and Barry Freilicher shall indemnify, defend and hold harmless and
in all respects make whole the Company from and against any and all claims,
demands, liabilities, damages, judgments and payments, including reasonable
attorneys' fees ("Losses"), which may be incurred or suffered by the Company or
to which it may be subject, which may arise out of or result from (i) any breach
of or exist in violation of any representation, warranty, covenant or agreement
of JSA and the JSA Shareholders contained in this Agreement, or (ii) the
disputes referred to in paragraph (a) of Schedule 2.5 attached hereto in excess
of One Hundred Thousand Dollars ($100,000). Notwithstanding anything herein to
the contrary:
(a) Barry Freilicher shall be required to indemnify
the Company only as to his representations pertaining to
his interest in the JSA Shares and Stern shall not be
required to indemnify the Company as to any
representations pertaining to Barry Freilicher's interest
in the JSA Shares.
(b) except as to (i) taxes, penalties and interest
with respect to (A) Stern for present or past standard
payroll withholdings and other deductions authorized by
law which exceed in the aggregate Twenty Thousand Dollars
($20,000); (B) the Liquidation and Exchange; and (C) the
indebtedness now or heretofore owing to JSA LLC by JSA,
or vice versa; and (ii) Losses incurred by the Company in
respect to the disputes referred to in paragraph (a) of
Schedule 2.5 attached hereto in excess of One Hundred
Thousand Dollars ($100,000) and not otherwise offset
against the Basket (as hereinafter defined), and the
Pledged Shares (as hereinafter defined), with respect to
each of which Stern shall have full personal liability,
Stern shall have no liability to the Company with respect
to the representations and warranties in Section 2.5 (the
"Section 2.5 Representations") until such time as the
aggregate amount of Losses with respect thereto exceed
One Hundred Twenty-Five Thousand Dollars ($125,000) (the
"Basket") and then only for the amounts, if any, in
excess thereof. It is also expressly understood and
agreed that, except with respect to the matters covered
by Section 7.1(b)(i) above with respect to which the
following sentence shall have no applicability, (i) Stern
shall have no personal liability with respect to the
Section 2.5 Representations other than in respect of his
interest in the Company Shares deposited with
Pledgeholder as contemplated by Section 6.2(f) hereof
(the "Pledged Shares"), (ii) the Company's sole recourse
with respect to the Section 2.5 Representations shall
14
<PAGE>
be against the Pledged Shares, as more fully contemplated
by the Pledge Agreement, and (iii) the Pledged Shares
shall be valued at One and One-half Dollars ($1.50) per
share (adjusted for any stock splits, recapitalizations,
etc.) for purposes of satisfying claims by the Company
pursuant to the Section 2.5 Representations. Any claim
by the Company pursuant to this Section may be asserted
by a notice executed by a majority of the Board of
Directors of the Company, excluding Stern and any
designee of Stern pursuant to the terms of the
Stockholders Agreement. Any Losses incurred by the
Company in respect of the disputes referred to in
paragraph (a) of Schedule 2.5 attached hereto in excess
of the One Hundred Thousand Dollars ($100,000) referred
to therein shall first be applied against the Basket (if
and to the extent still available) and then applied
against the Pledged Shares (if and to the extent still
available). Any such Losses incurred by the Company in
respect of the disputes referred to in paragraph (a) of
Schedule 2.5 attached hereto in excess of the sum of One
Hundred Thousand Dollars ($100,000), the available Basket
and the available Pledged Shares shall be paid by Stern
personally or pursuant to the delivery of Company Shares
valued at Two and One-Half Dollars ($2.50) per share
(adjusted for any stock splits, recapitalizations etc.).
7.2 INDEMNIFICATION BY THE COMPANY. Provided the claim
therefor is instituted by written notice within the time period specified in
Section 5 hereof, the Company shall indemnify, defend and hold harmless and in
all respect make whole the JSA Shareholders from and against any Losses which
may be incurred or suffered by any such party or to which any such party may be
subject, which may arise out of or result from any breach of or exist in
violation of any representation, warranty, covenant or agreement of the Company
or Sub, as the case may be, contained in this Agreement.
7.3 COMPUTATION OF LOSSES. For purposes of calculating any
Losses suffered by an indemnified party pursuant to Sections 7.1 or 7.2 hereof,
the amount of the Losses suffered by the indemnified party shall be the net
amount of damage so suffered after giving effect to any insurance proceeds
recovered with respect to such matter.
7.4 NOTICE TO INDEMNIFYING PARTY. If any party (the
"Indemnified Party") receives notice of any claim or other commencement of any
action or proceeding with respect to which any other party (or parties) (the
"Indemnifying Party") is obligated to provide indemnification pursuant to
Sections 7.1 or 7.2 hereof, the Indemnified Party shall promptly give the
Indemnifying Party written notice thereof which notice shall specify, if known,
the amount or an estimate of the amount of the Losses arising therefrom. Such
notice shall be a condition precedent to any liability of the Indemnifying Party
for indemnification hereunder. The Indemnified Party shall not settle or
compromise any claim by a third party for which it is entitled to
indemnification hereunder, without the prior written consent of the Indemnifying
Party (which shall not be unreasonably withheld or delayed) unless suit shall
have been instituted against it and the Indemnifying Party shall not have taken
control of such suit after notification thereof as provided in Section 7.5
hereof.
7.5 DEFENSE BY INDEMNIFYING PARTY. In connection with any
claim giving rise to indemnity hereunder resulting from or arising out of any
claim or legal proceeding by a person who is not a party to this Agreement, the
Indemnifying Party at its sole cost and expense shall assume the defense of any
such claim or legal proceeding using counsel of its choice (subject to the
approval of the Indemnified Party, which approval may not be unreasonably
withheld or delayed). The
15
<PAGE>
Indemnified Party shall be entitled to participate in the defense of any such
action, with its counsel and at its own expense; provided, however, that if the
Indemnified Party, in its sole reasonable discretion, determines that there
exists a conflict of interest between the Indemnifying Party (or any constituent
party thereof) and the Indemnified Party or that the Indemnifying Party does not
have sufficient financial resources to fully defend the proceeding or to pay the
claim or judgment, the Indemnified Party (or any constituent party thereof)
shall have the right to engage separate counsel, the reasonable costs and
expenses of which shall be paid by the Indemnifying Party, but in no event shall
the Indemnifying Party be liable for the costs and expenses of more than one
such separate counsel. If the Indemnifying Party does not assume the defense of
any such claim or litigation resulting therefrom, the Indemnified Party may
defend against such claim or litigation, after giving notice of the same to the
Indemnifying Party, on such terms as the Indemnified Party may deem appropriate,
and the Indemnifying Party shall be entitled to participate in (but not control)
the defense of such action, with its counsel and at its own expense.
8. MISCELLANEOUS
8.1 NO LIABILITY OF JSA BHF AND JSA LLC. Notwithstanding
anything to the contrary contained herein, the parties expressly acknowledge and
agree that, from and after the Closing (i) each of JSA, BHF and JSA LLC shall
have no liability of any nature whatsoever under or by virtue of this Agreement,
and (ii) the JSA Shareholders shall in no event seek contribution from JSA, BHF
or JSA LLC in respect of any amounts they may be required to pay hereunder.
8.2 FURTHER ASSURANCES. From time to time, at the other
party's request and without further consideration, each of the parties will
execute and deliver to the others such documents and take such action as the
other party may reasonably request in order to consummate more effectively the
Transaction.
8.3 EXPENSES OF SALE. Except as otherwise provided herein,
each party shall bear its own and the JSA Shareholders and the Company shall
bear its own and Sub's direct and indirect expenses incurred in connection with
the negotiation and preparation of this Agreement and the consummation and
performance of the Transaction. Without limitation, such expenses shall include
the fees and expenses of all attorneys, brokers, investment bankers,
accountants, agents and finders and other professionals incurred in connection
herewith, acting on behalf of such party. The parties shall indemnify each
other against any claims, costs, losses, expenses or liabilities arising from
any claim or commissions, finder's fees or other compensation in connection with
the Transaction which may be asserted by any person based on any agreement or
arrangement for payment by the other party. Notwithstanding the foregoing, in
the event that the Closing has occurred, (a) the Company shall be responsible
for the payment of the accounting (including cost of any review and audit) and
legal fees and costs of the JSA Shareholders in connection with the Transaction,
and (b) the Company shall be responsible for the legal fees of each of Richman,
Lawrence, Mann, Chizever & Phillips and Loeb & Loeb LLP in connection with the
Private Placement and this Agreement together with the schedules and exhibits
hereto.
8.4 USE AND CONFIDENTIALITY. All of the information,
records, books, and data to which the parties are given access as set forth
herein shall be used by the parties solely for the purpose of confirming the
representations and warranties set forth herein. Subject to any obligation to
comply with (i) any law (ii) any rule or regulation of any authority or
securities exchange of (iii) any subpoena or other legal process to make
information available to the persons entitled thereto, whether or not the
Transaction shall be concluded, all information obtained by any party about the
16
<PAGE>
other, and all of the terms and conditions of this Agreement, shall be kept in
confidence by each party, and each party shall cause its shareholders,
directors, trustees, officers, employees, agents and attorneys to hold such
information confidential. Such confidentiality shall be maintained to the same
degree as such party maintains its own confidential information and shall be
maintained until such time, if any, as any such data or information either is,
or becomes, published or a matter of public knowledge; provided, however, that
the foregoing shall not apply to any information obtained by either party
through its own independent investigations of the other party or received by
such party from a third party not under any obligation to keep such information
confidential nor to any information obtained by such party which is generally
known to others engaged in the trade or business; and provided, further, that,
from and after the Closing, such party shall be under no obligation to maintain
confidential any such information concerning the other party. If this Agreement
shall be terminated for any reason, each party shall return or cause to be
returned to the other all written data, information, files, records and copies
of documents, worksheets and other materials obtained by such party in
connection with the Transaction.
8.5 NOTICES. All notices, requests and other communications
thereunder shall be in writing and shall be delivered by courier or other means
of personal service (including by means of a nationally recognized courier
service or professional messenger service), or sent by telex or telecopy or
mailed first class, postage prepaid, by certified mail, return receipt
requested, or by Federal Express or other reputable overnight delivery service,
in all cases, addressed to:
TO JSA OR JSA SHAREHOLDERS:
JSA Publishing
11111 Santa Monica Blvd., Suite 210
Los Angeles, CA 90025
Tel: (310) 914-3007
Fax: (310) 914-0607
Attention: Jeffrey Stern
WITH A COPY TO:
David L. Ficksman, Esq.
Loeb & Loeb LLP
1000 Wilshire Blvd., Suite 1800
Los Angeles, California 90017
Tel: (213) 688-3698
Fax: (213) 688-3460
TO THE COMPANY:
Numex Corporation
433 N. Camden Drive, 4th Floor, #216
Beverly Hills, California 90210
Tel: (310) 274-6296
Fax: (310) 275-4768
Attention: Jack Salzberg
17
<PAGE>
WITH A COPY TO:
Gerald M. Chizever, Esq.
Richman, Lawrence, Mann,
Chizever & Phillips
9601 Wilshire Boulevard, Penthouse
Beverly Hills, California 90210
Tel: (310) 274-8300
Fax: (310) 274-2831
All notices, requests and other communications shall be deemed given on the date
of actual receipt or delivery as evidenced by written receipt, acknowledgment or
other evidence of actual receipt or delivery to the address. In case of service
by telecopy, a copy of such notice shall be personally delivered or sent by
registered or certified mail, in the manner set forth above, within three (3)
business days thereafter. Either party hereto may from time to time by notice
in writing served as set forth above designate a different address or a
different or additional person to which all such notices or communications
thereafter are to be given.
8.6 PARTIES IN INTEREST. Except as otherwise expressly
provided herein, all the terms and provisions of this Agreement shall be binding
upon, shall inure to the benefit of and shall be enforceable by the respective
heirs, beneficiaries, personal and legal representatives, successors and assigns
of the parties hereto; provided, however, that no assignment or transfer by any
party of this Agreement or its rights or obligations hereunder shall occur
without the prior written consent of the other parties hereto.
8.7 ENTIRE AGREEMENT, AMENDMENTS. This Agreement, including
the Schedules, Exhibits and other documents and writings referred to herein or
delivered pursuant hereto, which form a part hereof, contains the entire
understanding of the parties with respect to this subject matter. There are no
restrictions, agreements, promises, warranties, covenants or undertakings other
than those expressly set forth herein or therein. This Agreement supersedes all
prior agreements and understandings between the parties with respect to its
subject matter. This Agreement may be amended only by a written instrument duly
executed by the parties or their respective permitted successors or assigns.
After the Closing, any amendment or waiver which may limit or otherwise affect
the right of the Company as to Stern shall require the consent of the majority
of the Board of Directors other than Stern and his designee under the
Stockholders Agreement.
8.8 HEADINGS, ETC. The section and paragraph headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretations of this Agreement.
8.9 PRONOUNS. All pronouns and any variations thereof shall
be deemed to refer to the masculine, feminine or neuter, singular or plural, as
the identity of the person, persons, entity or entities may require.
8.10 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
18
<PAGE>
8.11 GOVERNING LAW. This Agreement shall be governed by the
laws of the State of California.
8.12 REGISTRATION STATEMENT ON FORM SB-2. The parties hereto
acknowledge that the Company has filed with the Securities and Exchange
Commission (the "SEC") a Registration Statement on Form SB-2 covering the resale
of up to 5,210,506 shares of Common Stock (the "Registered Shares"), which
Registration Statement has been declared effective by the SEC. The parties
further acknowledge that the Registration Statement will be required to be
suspended as a result of the Transaction pending amendment thereof.
Accordingly, the parties shall use their best efforts to cause the Registration
Statement to be amended as soon as practicable after the Closing, except the
parties may consider not amending the Registration Statement in the event the
Registered Shares may be sold under Rule 144 without regard to the volume
limitations rule thereunder.
8.13 ATTORNEYS' FEES. If any legal action or other proceeding
is brought for the enforcement of this Agreement or because of any dispute,
breach, default or claim hereunder, the successful or prevailing party shall be
entitled to recover reasonable attorneys' fees and other costs it incurred in
that action or proceeding, in addition to any other relief to which it may be
entitled.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK.]
19
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered
by the parties hereto as of the date first above written.
Numex Corporation, a Delaware
corporation
By: /s/ Jack I. Salzberg
------------------------------------------
Name: Jack I. Salzberg
---------------------------------------
Title: President
---------------------------------------
JSA Acquisition Corporation, a Delaware
corporation
By: /s/ Jack I. Salzberg
------------------------------------------
Name: Jack I. Salzberg
----------------------------------------
Title: President
---------------------------------------
Jeffrey A. Stern & Associates, Inc., a
California corporation
By: /s/ Jeffrey A. Stern
------------------------------------------
Name: Jeffrey A. Stern
Title: President
JSA Shareholders
/s/ Jeffrey A. Stern
---------------------------------------------
Jeffrey A. Stern
/s/ Barry Freilicher
---------------------------------------------
Barry Freilicher
/s/ Marcelino Miyares, Jr.
---------------------------------------------
Marcelino Miyares, Jr.
/s/ Felix Telado
---------------------------------------------
Felix Telado
/s/ Lori Radcliff
---------------------------------------------
Lori Radcliff
/s/ Howard Maat
---------------------------------------------
Howard Maat
[AGREEMENT AND PLAN OF MERGER]
<PAGE>
SCHEDULE 2.5
------------
Liabilities
Attached as Exhibit A is a list of liabilities of JSA as of February 28,
1999. The Exhibit does not set forth, but this Schedule should include, the
following:
(a) A reserve in the aggregate amount of $100,000 to cover any potential
settlement or judgment for the Beck and Harman litigation referred to
in Schedule 2.7;
(b) Liabilities incurred and payments made in the ordinary course of
business from March 1, 1999 to the Closing Date; and
(c) Liability to Loeb & Loeb LLP and Holthouse Carlin & Van Trigt LLP in
connection with the Liquidation, Exchange, Agreement and Plan of
Merger and documents in connection therewith and the Private
Placement.
<PAGE>
SCHEDULE 2.6(b)
---------------
JSA Shareholders
<TABLE>
<CAPTION>
Number of Number of
Shareholder JSA Shares Company Shares
- ----------- ---------- --------------
<S> <C> <C>
Marcelino Miyares, Jr. 75.7480 192,400
Barry Freilicher 106.0900 269,469
Felix Telado 9.8425 25,000
Lori Radcliff 3.9370 10,000
Howard Maat 3.9370 10,000
---------- ------
EXISTING SHAREHOLDER
- --------------------
Jeffrey Stern 1,000.0000 2,540,006
---------- ---------
1,199.5545 3,046,875
</TABLE>
<PAGE>
SCHEDULE 2.7
------------
Litigation
(a) Harman v. JSA Publishing, et al.--arbitration matter currently
pending.
(b) Robert Beck v. JSA Publishing, et al.--Federal District Court,
Northern District of New Jersey.
Both cases involve a claim for damages arising from an allegation that
JSA Publishing et al. lost negatives submitted by the plaintiffs in
connection with an issue of Golf Magazine.
<PAGE>
SCHEDULE 2.8
------------
Title to Assets
(a) Attached as Exhibit A is a list of liens;
(b) Lien for taxes not yet due and payable.
<PAGE>
SCHEDULE 2.9
------------
Contracts and Undertakings
(a) Lease for 150 Fifth Avenue, Suite 425, New York, NY 10011 (current
rental of $1,583.33 per month);
(b) Lease for 11111 Santa Monica Boulevard, Los Angeles, CA (current
rental of $5,586.20 per month);
(c) The Amended and Restated Credit Facility Agreement dated as of April
30, 1997 between Jeffrey A. Stern & Associates, Inc. and Signet Bank,
as assigned to MCG Credit Corporation;
(d) Those purchase orders, equipment leases and other ordinary course
contracts, including those the liability for which are reflected on
Schedule 2.5.
<PAGE>
SCHEDULE 2.10
-------------
Transactions With Affiliates, Directors and Shareholders
(a) In the past, the Shareholders or members of JSA Inc. or JSA LLC have
lent or received loans, all of which will be repaid or released as of
the Closing Date;
(b) In the past, there have been inter-company loans and advances which as
of the end of each fiscal period is eliminated in consolidation;
(c) There are normal accrued liabilities for salary and expense
reimbursement owed directors and officers except for the accrued
salary and reimbursement of reasonable expenses owed to Stern and
Barry Freilicher not to exceed $25,000 in the aggregate.
<PAGE>
SCHEDULE 2.11
-------------
No Conflicts
(a) The consummation of the transactions contemplated by the Agreement and
Plan of Merger may result in a default of the Amended Restated Credit
Facility Agreement with MCG Credit Corporation, which breach, if any,
will be waived as of the Closing.
(b) That certain Promissory Note dated November 1, 1997 of JSA Inc. in
favor of Banta Corporation.
<PAGE>
SCHEDULE 2.13
-------------
Compliance With Law
None.
<PAGE>
SCHEDULE 2.15
-------------
TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE IS PROHIBITED EXCEPT
IN ACCORDANCE WITH THE PROVISIONS OF THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"). THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE ACT OR APPLICABLE STATE LAW AND MAY NOT BE OFFERED OR SOLD IN ANY
TRANSACTION SUBJECT TO THE REGISTRATION REQUIREMENTS OF THE ACT OR APPLICABLE
STATE LAW UNLESS SUCH SECURITIES ARE REGISTERED UNDER THE ACT OR APPLICABLE
STATE LAW OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE ACT OR
APPLICABLE STATE LAW IS AVAILABLE.
<PAGE>
SCHEDULE 3.5
------------
Liabilities
(a) Liability to Richman, Lawrence, Mann, Chizever & Phillips in connection
with the Agreement and Plan of Merger and documents in connection therewith
and the Private Placement.
