SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant /_/
Check the appropriate box:
/X/ Preliminary Proxy Statement
/_/ Definitive Proxy Statement
/_/ Definitive Additional Materials
/_/ Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
AGP & Company, Inc.
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(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/_/ Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
_____________________________________________________________________________
2) Aggregate number of securities to which transaction applies:
_____________________________________________________________________________
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:*
_____________________________________________________________________________
4) Proposed maximum aggregate value of transaction:
_____________________________________________________________________________
/_/ Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the form or schedule
and the date of its filing.
1) Amount previously paid: _________________________________________________
2) Form, Schedule or Registration No. ______________________________________
3) Filing party: ___________________________________________________________
4) Date filed: _____________________________________________________________
___________
*Set forth the amount on which the filing fee is calculated and state how it was
determined.
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AGP and Company, Inc.
551 Fifth Avenue, Suite 1501
New York, New York 10176
(212) 986-1313 Fax: (212) 986-3737
P R E L I M I N A R Y
February 13, 1997
TO OUR SHAREHOLDERS
You are invited to attend a Special Meeting of Shareholders of AGP and
Company, Inc. ("the Company") which will be held at 10:00 AM local time on March
17, 1997 at the Hilton Gateway Hotel, Gateway Center, on Raymond Boulevard,
Newark, New Jersey 07102.
At the Special Meeting, you will be asked to consider and vote upon a
proposal to approve the sale, by the Company, of its subsidiary, TMC Group, Inc.
("TMC") to Social Expressions Acquisition Corporation ("SEAC") pursuant to a
Stock Purchase Agreement dated as of October 29, 1996 between SEAC, the Company,
and its wholly-owned subsidiary, Robmar Corporation ("Robmar"), TMC's parent.
If the Proposed Sale is consummated, you will continue to retain your
proportionate equity interest in the Company.
Your new Board of Directors has (with one director abstaining) reaffirmed
the Proposed Sale and recommends that you vote FOR the approval of the Proposed
Sale. In arriving at its recommendation, the new Board carefully reviewed the
terms and conditions of the Proposed Sale, as well as a number of factors
described in the enclosed Proxy Statement, such as the Fairness Opinion of
Raymond Serra, CPA, that the consideration to be received by the Company
pursuant to the Proposed Sale is fair to the Company.
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The accompanying Notice of Special Meeting of Shareholders and Proxy
Statement contain complete information concerning the matter to be considered at
the Special Meeting.
Whether or not you expect to attend, we urge you to participate in the
Special Meeting by completing, signing and returning the enclosed proxy card
with the box checked FOR as promptly as possible.
Sincerely,
/s/ Douglas E. Castle
Douglas E. Castle
Chief Executive Officer
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AGP and Company, Inc.
551 Fifth Avenue, Suite 1501
New York, New York 10176
(212) 986-1313 Fax: (212) 986-3737
P R E L I M I N A R Y
February 13, 1997
NOTICE OF SPECIAL MEETING
OF SHAREHOLDERS
The Special Meeting of Shareholders ("Special Meeting") of AGP and Company,
Inc. (the "Company") will be held at the Hilton Gateway Hotel, Gateway Center,
on Raymond Boulevard, Newark, New Jersey 07102 on Monday, March 17, 1997 at
10:00 AM local time, for the following purposes:
ITEM 1: To consider and vote upon a proposal to approve the sale by the Company
of TMC Group, Inc. ("TMC"), a wholly owned subsidiary of Robmar Corporation (a
wholly owned subsidiary of the Company), to Social Expressions Acquisition
Corporation ("SEAC") pursuant to a Stock Purchase Agreement dated as of October
29, 1996 between SEAC and the Company and its wholly owned subsidiary Robmar
Corporation ("Robmar"). Robmar, in turn, is the owner of all of the issued and
outstanding shares of the capital stock of TMC for certain consideration and the
assumption by SEAC of all of TMC's liabilities as more fully described in the
accompanying Proxy Statement. A copy of the Stock Purchase Agreement is attached
to the Proxy Statement accompanying this Notice. Following consummation of the
proposed sale, you will continue to retain your proportionate equity interest in
the Company.
ITEM 2: To transact such other business as may properly come before the Special
Meeting or any adjournment or postponement thereof.
Only holders of record of the Company's common stock at the close of
business on February 7, 1997 (the Record Date) will be entitled to vote at the
Special Meeting.
By Order of the Board of Directors
/s/ Ellen J. Downing
Ellen J. Downing
Assistant Secretary
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P R E L I M I N A R Y
AGP and Company, Inc.
551 Fifth Avenue, Suite 1501
New York, New York 10176
(212) 986-1313 Fax: (212) 986-3737
PROXY STATEMENT
For Special Meeting of Shareholders
Monday, March 17, 1997
This Proxy Statement is being furnished to holders of common stock, no par
value per share ("Common Stock"), of AGP and Company, Inc., a New Jersey
corporation (the "Company"), in connection with the solicitation of proxies by
the Board of Directors of the Company for use at the Special Meeting of
Shareholders of the Company, to be held at the Hilton Gateway Hotel, Gateway
Center, on Raymond Boulevard, Newark, New Jersey 07102 on Monday, March 17,
1997, commencing at 10:00 AM local time, or any adjournment thereof.
At the Special Meeting, shareholders will be asked to consider and vote
upon a proposal to approve the sale by the Company of TMC Group, Inc. ("TMC"), a
Delaware corporation, pursuant to a Stock Purchase Agreement dated as of October
29, 1996 among the purchaser, Social Expressions Acquisition Corporation
("SEAC"), the Company, and Robmar Corporation (a Delaware Corporation), which is
a wholly owned subsidiary of the Company. Robmar, in turn, is the owner of all
of the issued and outstanding shares of the capital stock of TMC (see the
Proposed Sale and Stock Purchase Agreement in the summary portion of the Proxy
Statement).
The new Board of Directors (with one director abstaining) has reaffirmed
the proposed sale and recommends a vote FOR approval of the proposed sale.
This Proxy Statement and the accompanying proxy are first being mailed to
shareholders of the Company on or about February 13, 1997.
No persons have been authorized to give any information or to make any
representation, other than those contained in this Proxy Statement, in
connection with the solicitations of proxies made hereby and, if given or made,
such information or representation must not be relied upon as having been
authorized by the Company or any other person. All information pertaining to the
Purchaser contained in this Proxy Statement has been supplied by the Purchaser.
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TABLE OF CONTENTS
Page Number
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Summary:
The Parties to the Proposed Sale i
The Proposed Sale ii
The Stock Purchase Agreement v
The Special Meeting:
Time, date and place 1
Matters to be considered at the Special Meeting 1
Voting and record date 1
Proxies 2
The Proposed Sale:
Background and reasons for the Proposed Sale 3
Recommendation of the Board of Directors 4
Fairness Opinion 5
Interest of certain persons in the Proposed Sale 6
Financial statements 6
Effect of the Proposed Sale on the Company's shareholders 6
Consideration to the Company from the Proposed Sale 7
Plans for the Company following the Proposed Sale 8
The Stock Purchase Agreement:
Closing 9
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SUMMARY
The following is a brief summary of information contained elsewhere in this
Proxy Statement. This summary is not a complete statement of all facts material
to a shareholder's decision with respect to the matters to be voted upon at the
Special Meeting. This summary should only be read in conjunction with, and is
qualified in its entirety by reference to the more detailed information
contained in the remainder of this Proxy Statement and Annexes hereto.
Shareholders are urged to review CAREFULLY this Proxy Statement and the Annexes
hereto in their entirety.
THE PARTIES TO THE PROPOSED SALE
THE COMPANIES AGP and Company, Inc. ("AGP") is the owner of
all of the issued and outstanding shares of the
capital stock of Robmar Corporation ("Robmar")
which, in turn, is the owner of all of the
issued and outstanding shares of the capital
stock of TMC Group, Inc. ("TMC"). The offices of
AGP are located at 551 Fifth Avenue, Suite 1501,
New York, New York 10176, telephone (212)
986-1313. TMC is located at One Treasure Lane,
Derry, New Hampshire 03038.
THE PURCHASER Social Expressions Acquisition Corporation
("SEAC") is a holding company with offices
located at 551 Fifth Avenue, Suite 1501, New
York, New York, telephone (212) 986-1313.
THE SPECIAL MEETING The Special Meeting will be held at the Hilton
Gateway Hotel, Gateway Center, on Raymond
Boulevard, Newark, New Jersey 07102 on Monday,
March 17, 1997 commencing at 10:00 AM local
time.
MATTERS TO BE CONSIDERED
AT THE SPECIAL MEETING Shareholders of the Company will be asked to
consider and vote upon the proposed sale of TMC
To SEAC.
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RECORD DATE: SHARES
ENTITLED TO VOTE Holders of Record of shares of common stock at
the close of business on February 7, 1997 are
entitled to vote at the Special Meeting. At the
record date, there were 12,921,023 shares of
common stock outstanding, each of which will be
entitled to one vote on the matter to be acted
upon at the Special Meeting, or at least
6,460,512 shares is necessary to constitute a
quorum at the Special Meeting - see "Special
Meeting - Voting and Record Date".
VOTE REQUIRED The approval of this proposed sale and any other
matter to be submitted to a vote of shareholders
at the Special Meeting will require the
affirmative vote of a majority of the votes cast
by the holders of outstanding shares of common
stock entitled to vote thereon.
THE PROPOSED SALE
BACKGROUND AND REASONS
FOR THE PROPOSED SALE See "The Proposed Sale - Background and Reasons
for the Proposed Sale".
RECOMMENDATIONS OF THE
BOARD OF DIRECTORS The new Board of Directors (with one director
abstaining) has reaffirmed the Proposed Sale and
recommends to the Company's shareholders that
they vote FOR its approval. For a discussion of
the --- material facts considered by the Board
of Directors in reaching its decision, see "The
Proposed Sale - Recommendations of the Board of
Directors".
FAIRNESS OPINION Raymond Serra, CPA, has delivered his written
opinion, dated January 30, 1997, to the Board of
Directors of the Company that, as of such date,
the consideration to be received by the Company
pursuant to the Proposed Sale, as reflected in
the Stock Purchase Agreement, is fair to the
Company
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from a financial point of view. A copy of the
written opinion of Raymond Serra, CPA, which
sets forth the assumptions made, matters
considered and limits of his review, is attached
to this Proxy Statement as Annex I and should be
read in its entirety. See "The Proposed Sale -
Opinion of Financial Advisor".
INTEREST OF CERTAIN PERSONS
IN THE PROPOSED SALE Pursuant to the Stock Purchase Agreement, the
purchaser (Social Expressions Acquisition
Corporation) is controlled by Omar Peraza,
president of TMC Group, Inc. and Joseph Drucker
a director, secretary and general counsel of AGP
and Company, Inc. The former Board of Directors
was aware of these interests and considered
them, among other matters, in approving the
Stock Purchase Agreement and the proposed sale.
The former Board determined that such interests
have no material effect on the fairness of the
Proposed Sale, with Joseph Drucker having
abstained in voting on any resolutions relative
to the Proposed Sale. See "The Proposed Sale -
Interests of Certain Persons in the Proposed
Sale" and "Stock Purchase Agreement - Ancillary
Agreements".
FINANCIAL STATEMENTS OF
TMC GROUP, INC: The audit reports for the years ended December
31, 1994 and year ended December 31, 1995. See
"Financial Statements of TMC Group, Inc." in
this Proxy Statement (Annex II).
EFFECT OF THE PROPOSED SALE
ON THE COMPANY'S SHAREHOLDERS Shareholders will continue to retain their
proportionate equity interest in the Company.
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PLANS FOR THE COMPANY
FOLLOWING THE PROPOSED SALE The new Board of Directors has initiated
negotiations with the Company's creditors for
the settlement of delinquent liability balances,
with the primary objective of substantially
reducing (or eliminating) the outstanding
amounts in return for small cash payments.
Concurrently, the new Board has contacted the
Company's independent auditors to determine the
extent of the Company's financial and
informational requirements in order to complete
the audit reports for the years ended December
31, 1994, 1995, and 1996.
In conjunction with its legal and financial
advisors, the new Board is determining the
optimal and appropriate timing, amount and form
of a proposed dividend for distribution to the
Company's shareholders. The dividend would be
paid from the available proceeds brought into
the Company through the stock and revenue-based
royalty it will be receiving in consideration of
the proposed transaction.
While many severe legal and financial
impediments had been placed in the Company's
path by its former Board and Chief Executive
Officer through their waste and mismanagement,
your new Board is highly confident in its
ability to achieve its dividend payment
objective to the satisfaction of all
shareholders.
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THE STOCK PURCHASE AGREEMENT
THE PROPOSED SALE Effective on the Closing Date, AGP and Company,
Inc. and Robmar Corporation will sell and
transfer to the Purchaser all of the common
stock of TMC Group, Inc. See "Stock Purchase
Agreement"
CONSIDERATION Provided that Purchaser is a public company on
or before the date of Closing, the purchase
price shall ConsistIof (i) a number of shares of
Purchaser's voting common stock having an
aggregate value of $2,500,000 and (ii) a royalty
in the amount of 0.75% of TMC's annual net
collected revenues, paid quarterly in arrears,
for a period of three (3) years commencing with
the date of Closing. Purchaser has entered into
agreements to become a public company on or
before the Closing. In the event the Purchaser
is not a public company, an alternative purchase
price has been agreed to by the parties in the
form of a 10% subordinated note and increased
royalty payments. See "Stock Purchase Agreement
- Consideration".
CERTAIN OTHER PROVISIONS The Purchaser shall retain the right, should the
Subordinated Note be issued, to redeem the
Subordinated Note in exchange for shares of its
common stock at the time it does become public.
Should it not be public at time of Closing,
Seller shall have the right to convert the
Subordinated Note in exchange for Purchaser's
common stock in the event Purchaser does not
elect to redeem said note.
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THE SPECIAL MEETING
TIME, DATE AND PLACE
This Proxy Statement is being furnished to holders of common stock in
connection with the solicitation of proxies by the Board of Directors of the
Company for use at the Special Meeting to be held at the Hilton Gateway Hotel,
Gateway Center, on Raymond Boulevard, Newark, New Jersey 07102 on Monday, March
17, 1997, commencing at 10:00 AM local time, or any adjournment thereof.
MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING
The shareholders of the Company will be asked to consider and vote upon the
Proposed Sale.
The new Board of Directors (with one director abstaining) has reaffirmed
the Proposed Sale and recommends a vote FOR the approval of the Proposed Sale.
VOTING AND RECORD DATE
THE Board of Directors has fixed February 7, 1997 as the record date (the
"Record Date") for determining shareholders of record entitled to receive notice
of and to vote at the Special Meeting. Accordingly, only holders of record of
common stock as of the Record Date will be entitled to notice of and to vote at
the Special Meeting. As of the Record Date, there were 12,921,023 shares of
common stock outstanding and entitled to vote, which shares were held by
approximately 1,900 holders of record.
Each holder of record of common stock on the Record Date is entitled to
cast one vote per share, exercisable in person or by properly executed proxy,
with respect to the approval of the Proposed Sale and any other matter properly
submitted for the vote of the Company's shareholders at the Special Meeting. At
least 6,460,512 shares are necessary to constitute a quorum at the Special
Meeting (see "Stock Purchase Agreement).
The Company is holding a meeting of its shareholders and soliciting proxies
for the approval of the proposed Sale.
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PROXIES
All shares of common stock which are represented at the Special Meeting by
properly executed proxies received prior to or at the Special Meeting and not
duly and timely resolved, will be voted at the Special Meeting in accordance
with the choices marked thereon by the shareholders. Unless a contrary choice is
marked, the shares will be voted FOR approval of the Proposed Sale.
At the time this proxy statement was filed with the Securities and Exchange
Commission (the "Commission"), the Board of Directors was not aware that any
other matters not referenced to herein would be presented for action at the
Special Meeting. If any other matters properly come before the Special Meeting,
the persons designated in the proxy intend to vote the shares represented
thereby in accordance with their best judgment.
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before it is voted. Proxies may be revoked by (I) filing
with the Secretary of the Company at or before the taking of the vote at the
Special Meeting, a written notice of revocation bearing a later date than the
proxy, (ii) duly executing a later dated proxy relating to the same shares and
delivering it to the Assistant Secretary of the Company before the taking of the
vote at the Special Meeting or (iii) attending the Special Meeting and voting in
person (although attendance at the Special Meeting will not in and of itself
constitute a revocation of a proxy). Any written notice of revocation or
subsequent proxy should be sent so as to be delivered to: AGP and Company, Inc.,
551 Fifth Avenue, Suite 1501, New York, New York 10176, Attention: Assistant
Secretary, or hand-delivered to the Assistant Secretary of the Company at or
before the taking of the vote at the Special Meeting.
All expenses of this solicitation, including the cost of preparing and
mailing this Proxy Statement, will be borne by the Company. In addition to
solicitation by mail, arrangement will be made with brokers and other
custodians, nominees and fiduciaries to forward proxy solicitation materials to
beneficial owners of shares of common stock held of record by such brokers,
custodians, nominees and fiduciaries, and the Company may reimburse such
brokers, custodians, nominees and fiduciaries for their reasonable expenses in
connection therewith. The Company has retained Continental Stock Transfer &
Trust Co. to aid in the distribution and tabulation of proxies, at a cost which
the Company anticipates not to exceed $1,000.00.
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THE PROPOSED SALE
AGP and Company, Inc. ("AGP"), a New Jersey corporation, is the owner of
all of the issued and outstanding shares of the capital stock of Robmar
Corporation ("Robmar"), a Delaware corporation which, in turn, is the owner of
all of the issued and outstanding shares of the capital stock of TMC Group, Inc.
("TMC"), a Delaware corporation.
Purchaser has entered into a Stock Purchase Agreement with AGP and Robmar
dated October 29, 1996 which provides for the sale of TMC to the Purchaser. AGP
and Robmar will sell all of the issued and outstanding shares of TMC to
Purchaser on terms and conditions of the Stock Purchase Agreement (see Agreement
attached hereto).
BACKGROUND AND REASONS FOR THE PROPOSED SALE
AGP & Company, Inc. ("AGP") is a corporation organized under existing laws
of the State of New Jersey.
Robmar Corporation ("Robmar"), a Delaware corporation, through its
wholly-owned subsidiary, TMC Group, Inc. ("TMC") is in the business of
manufacturing and distributing wedding and bridal accessories and juvenile gifts
to retailers nationwide.
AGP entered into a Stock Purchase Agreement to sell TMC to Social
Expressions Acquisition Corporation ("SEAC") on October 29, 1996. At that date,
Steven W. Bingaman was chief executive officer of AGP. The Stock Purchase
Agreement required that 1) AGP obtain a Fairness Opinion stating that the
Proposed Sale is fair to the Company from a financial point of view, and 2) that
AGP obtain the approval of the shareholders.
As of the date of the Stock Purchase Agreement, Mr. Bingaman agreed to
place his resignation in escrow should he fail to perform his obligations
pursuant to the Agreement. It became evident that Mr. Bingaman did not intend to
fulfill the terms of the Agreement, and on December 11, 1997 the resignations of
both Mr. Bingaman and Mr. James Howard, AGP's co-chairman, were received from
the escrow agent and accepted by the Board. New directors were appointed to
replace Mr. Bingaman and Mr. Howard, and a new Chief Executive Officer was
elected.
Under the former management there had been no shareholders meetings since
1991, and an investigation of the Company and its chief executive officer was
commenced by the Securities and Exchange Commission. This investigation is still
ongoing. Further, the Company's stock was de-listed from the NASDAQ (Small
Corporations) market. Over the past several years, the Company continually
suffered substantial losses.
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Your new Board and Chief Executive Officer reviewed and reaffirmed the
Stock Purchase Agreement except for the requirement of the issuance of audited
statements of the Company due to the extreme hardship, expense and continued
effect of the SEC investigation, which would render such issuance impractical,
if not impossible. Further, the new Board set a date of March 17, 1997 for a
Special Shareholders meeting to approve the sale of TMC to SEAC.
The new Board has begun the process of negotiating settlements with the
Company's creditors, to complete the audits for the years ended December 31,
1994, 1995 and 1996, and to determine a dividend to the Company shareholders
based on the transaction and receipt of shares and royalties from the Purchaser.
This is not a simple task based on the mismanagement of the Company under the
former Board and Chief Executive officer, but your new Board is confident that
this objective will be accomplished.
The recommendation of the sale has been reaffirmed by your new Board after
diligent review of the Company's financial condition and its continued
deterioration and, upon securing a Fairness Opinion as the Proposed Sale relates
to the Company.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors believes that the proposed sale is clearly in the
best interest of the Company and its shareholders. Accordingly, the Board of
Directors has (with one director abstaining) approved the proposed sale and
recommends to the Company's shareholders that they vote FOR its approval.
In reaching its conclusion, the Board of Directors considered the following
material factors:
1. The effect of the Securities and Exchange Commission's continued
investigation of the Company.
2. The delisting of the Company from the NASDAQ (Small Corporations)
market.
3. The inability of the Company to secure audited financials for the
years ended December 31, 1994, December 31, 1995 and December 31,
1996.
4. The arrest of Steven W. Bingaman by the FBI in October, 1996 and the
resignation of Steven W. Bingaman as Chief Executive Officer, Chief
Financial Officer and Director, and the resignation of James S. Howard
as Co-Chairman and Director on December 11, 1996.
5. The proposed terms and conditions of the Stock Purchase Agreement.
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6. The anticipated favorable effect of the Proposed Sale on the
respective equity holders of the Company.
7. The Fairness Opinion of Raymond Serra, CPA dated January 30, 1997
that, as of such date, the consideration to be received by the Company
pursuant to the Proposed Sale is fair to the Company from a financial
point of view (see "Fairness Opinion", Annex I).
8. The recommendation of the Company's management to enter into the
Proposed Sale.
In view of the variety of factors considered in connection with the
evaluation of the Proposed Sale, the Board of Directors concluded that there was
substantial doubt as to the Company's ability to continue as a going concern,
that it was reasonably likely, therefore, that the Company would have to
liquidate itself in the absence of the Proposed Sale or a similarly
extraordinary transaction, and that the terms of the Proposed Sale would be more
favorable to the Company and its shareholders than a liquidation of the Company.
These conclusions ultimately led the Board to reach its decision.
FAIRNESS OPINION
Pursuant to an engagement letter dated January 17, 1997, Raymond Serra,
CPA, was engaged by the Company to provide a Fairness Opinion for the sale of
TMC to the Purchaser. Raymond Serra, CPA, has delivered his written opinion,
dated January 30, 1997 to the Board of Directors of the Company, stating that
the consideration to be received by the Company pursuant to said Proposed Sale,
as reflected in the Stock Purchase Agreement, is fair to the Company.
The opinion by Raymond Serra, CPA, is attached in its entirety hereto as
Annex I to this Proxy Statement. Shareholders are urged to read carefully the
full text of the Fairness Opinion for a description of the procedures followed,
assumptions made, matters considered and the qualifications and limitations on
the review undertaken in rendering the Opinion.
The Fairness Opinion is addressed and directed to the Board of Directors of
the Company and does not constitute a recommendation to any shareholder of the
Company as to how such shareholder should vote at the Special Meeting.
In conducting its analysis and in arriving at his Opinion, Raymond Serra,
CPA, among other things, reviewed the Stock Purchase Agreement dated October 29,
1996; certain publicly available financial information regarding the Company;
and contacted management to discuss matters believed to be relevant in
delivering this Opinion, and performed other procedures and reviewed documents
as deemed appropriate in delivering the Opinion.
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The Opinion took into account a number of factors, including: the financial
performance and capital position of the Company; the capital and liquid position
of the Company; the negative publicity of the Company and the SEC investigation;
the arrest of the former CEO and Director of the Company, the risk of these
matters as they relate to TMC, its relationships with lenders and the
maintenance of its credit facility.
INTEREST OF CERTAIN PERSONS IN THE PROPOSED SALE
In considering the recommendation of the Board of Directors of the Company
with respect to the Proposed Sale, shareholders should be aware that certain of
the executive officers of the Company and TMC Group, Inc. have special interests
in the Proposed Sale. Omar Peraza, president of TMC and Joseph Drucker, director
and secretary of the Company are principals in the Purchaser.
The new Board of Directors was aware of these special interests and
considered them, among other matters, in reaffirming the Stock Purchase
Agreement and Proposed Sale. The Board determined that such interests have no
material effect on the fairness of the Proposed Sale to the Company's
shareholders, and that the consummation of the Sale would be of significantly
greater benefit to the Company and its shareholders.
FINANCIAL STATEMENTS
The audit report of Shapiro , Weiss & Company for TMC Group, Inc. for the
year ended December 31, 1994 and the audit report of M.R. Weiser & Company for
the year ended December 31, 1995 are hereby annexed to the Proxy Statement
(Annex II).
EFFECT OF THE PROPOSED SALE ON THE COMPANY'S SHAREHOLDERS
The Company's Certificate of Incorporation and By Laws will not be amended
or modified in connection with the Proposed Sale, nor will there be any other
material differences in the rights of shareholders.
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CONSIDERATION TO THE COMPANY FROM THE PROPOSED SALE
Purchaser anticipates becoming a public company subject to the reporting
requirements of the Securities Exchange Act of 1934, as amended (a"Public
Company") on or before the Closing. The Purchaser has entered into agreement
with Argent Securities, Inc. wherein the Purchaser anticipates an infusion of
$4,500,000 in equity capital provided through a combination of a private
placement and a public offering. These proceeds are anticipated to be applied
toward TMC's operations, acquisitions and growth. Provided that Purchaser is a
public company on or before the date of Closing, the Purchase Price shall
consist of (I) a number of shares of Purchaser's voting common stock ("Common
Stock") having an aggregate value of $2,500,000, and (ii) a royalty in the
amount of 0.75% of TMC's annual net collected revenues (as defined below), paid
quarterly, in arrears, for a period of three (3) years commencing with the date
of Closing. The precise number of such shares to be delivered to Robmar at the
Closing shall be calculated by dividing $2,500,000 by the average of the closing
bid and asked prices of the common stock during the last ten trading days
immediately preceding the Closing.
In the event that Purchaser is not a public company on the date of Closing,
then the purchase price shall consist of (I) Purchaser's 10% subordinated note
maturing ten (10) years from the date of Closing (the "Note") in an aggregate
principal amount of $2,500,000 and (ii) a royalty payment equal to 1.5% of TMC's
annual net collected revenues (defined as gross cash revenues from product sales
less returns, discounts and allowances), paid quarterly, in arrears, for a
period of three (3) years commencing with the date of Closing, one-half (1/2) of
which shall reduce the principal amount otherwise due and owing on the Note. The
Purchaser shall retain the right to redeem the Note in exchange for the issuance
of shares of its common stock at the time it becomes a public company. In the
event that Purchaser does not redeem the Note at such time, Robmar shall have
the right to immediately convert the Note in exchange for shares of Purchaser's
common stock. Upon such redemption or exercise by Robmar of its right described
in the preceding sentence, Purchaser shall issue a number of shares of its
common stock having an aggregate value equal to the then outstanding principal
amount of the Note and any accrued interest (the "Amount"). The precise number
of such shares to be delivered to Robmar shall be calculated by dividing the
Amount by the average of the closing bid and asked price of the common stock
during the last ten trading days immediately preceding the date of such
redemption or conversion by Robmar.
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PLANS FOR THE COMPANY FOLLOWING THE PROPOSED SALE
The new Board of Directors has initiated negotiations with the Company's
creditors for the settlement of delinquent liability balances, with the primary
objective of substantially reducing (or eliminating) the outstanding amounts in
return for small cash payments. Concurrently, the new Board has contacted the
Company's independent auditors to determine the extent of the Company's
financial and informational requirements in order to complete the audit reports
for the years ended December 31, 1994, 1995, and 1996.
In conjunction with its legal and financial advisors, the new Board is
determining the optimal and appropriate timing, amount and form of a proposed
dividend for distribution to the Company's shareholders. The dividend would be
paid from the available proceeds brought into the Company through the stock and
revenue-based royalty it will be receiving in consideration of the proposed
transaction.
While many severe legal and financial impediments had been placed in the
Company's path by its former Board and Chief Executive Officer through their
waste and mismanagement, your new Board is highly confident in its ability to
achieve its dividend payment objective to the satisfaction of all shareholders.
-8-
<PAGE>
THE STOCK PURCHASE AGREEMENT
The Stock Purchase Agreement is hereby attached as Annex III to this Proxy
Statement. It is important and the stockholders are urged to read the Stock
Purchase Agreement in its entirety.
CLOSING
A. Closing hereunder shall take place at 10:00 AM local time on the first
business day after receipt of approval of this Agreement by the shareholders of
AGP, time being of the essence, unless all parties hereto mutually agree, in a
signed writing, upon a different time and date ("Closing Date"). Closing shall
take place at the offices of the Company, 551 Fifth Avenue, Suite 1501, New
York, New York 10176, unless the parties hereto mutually agree, in writing, upon
a different place of Closing.
B. At Closing, Robmar and AGP shall deliver to Purchaser the following:
(I) The certificate or certificates representing all of the issued
and outstanding shares of TMC together with stock powers relating
thereto, duly executed in blank.
(II) The minute books, stock books and corporate seal of TMC.
(III) A certified copy of resolutions of the Board of Directors and
shareholders of AGP, and a certified copy of resolutions of the
Board of Directors and the sole shareholder of Robmar, approving
and authorizing the execution, delivery and performance of this
Agreement by AGP and Robmar (and all other documents to be
executed and delivered by Robmar in connection herewith) and the
consummation of the transaction contemplated hereunder.
(IV) Good standing certificate of TMC (from the Secretary of State of
Delaware).
C. At closing, Purchaser shall deliver to Robmar the following:
(I) Either the appropriate number of shares of the common stock of
Purchaser described in Section 3(a) or, in the alternative, the
Subordinated Note, as described in Section 3(b).
(II) A certified copy of resolutions of the Board of Directors of
Purchaser approving and authorizing the execution, delivery and
performance of this Agreement by Purchaser (and all other
documents to be executed and delivered by Purchaser in connection
herewith) and the consummation of the transaction contemplated
hereunder.
-9-
<PAGE>
The management does not know of any matters to come before the Special
Meeting, (or any adjournment thereof), other than those set forth. However,
inasmuch as matters of which management is not aware may come before the
Meeting, the enclosed proxy confers discretionary power and authority with
respect to acting upon such other matters, and the person designated as proxy
therein will vote, act and consent in accordance with his/her best judgment in
respect of any such other matters. Upon receipt of such proxy (on the form
enclosed and properly signed) in time for voting, the shares represented thereby
will be voted as indicated thereon and in this Proxy Statement.
Dated: February 13, 1997 /s/ Ellen J. Downing
-----------------------------------
Ellen J. Downing
Assistant Secretary
Your proxy is important, whether you own a few or many shares.
Please sign and mail today.
-10-
<PAGE>
AGP and COMPANY, INC.
551 Fifth Avenue
Suite 1501
New York, NY 10176
This proxy is solicited on behalf of the Board of Directors. The
undersigned hereby appoint Richard A. Pelletier and Ellen J. Downing as proxies,
each with the power to appoint his substitute, and hereby authorizes them to
represent and to vote as designated below, all the shares of common stock of AGP
and Company, Inc. held of record by the undersigned on February 7, 1997, at the
Special Meeting of Shareholders to be held March 17, 1997 or any adjournment
thereof.
1. Proposal to approve the proposed sale of TMC Group, Inc. pursuant to the
Stock Purchase Agreement dated October 29, 1996 among such companies, Social
Expressions Acquisition Corporation, AGP and Company, Inc. and Robmar
Corporation.
FOR |_| AGAINST |_| ABSTAIN |_|
<PAGE>
2. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting
This Proxy, when properly executed, will be voted in the manner directed
herein by the undersigned stockholder, if no direction is made, this Proxy will
be voted FOR Proposal 1.
DATED;__________________________, 1997
SIGNATURE:______________________
__________________________
SIGNATURE IF HELD JOINTLY
Please sign exactly as name appears below. When
shares are held by joint tenants, both should sign.
When signing as attorney, as executor,
administrator, trustee or guardian, please give
full title. If a corporation, please sign in
corporate name by the president or other authorized
officer. If a partnership, please sign in
partnership name by authorized person.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
[LETTERHEAD OF RAYMOND J. SERRA
CERTIFIED PUBLIC ACCOUNTANT]
- --------------------------------------------------------------------------------
February 4, 1997
Board of Directors
AGP and Company, Inc.
551 Fifth Avenue, Suite 1501
New York, NY 10176
Gentlemen:
We have been engaged to review the fairness, from a financial perspective, of
the proposed sale by AGP and Company Inc.'s subsidiary, Robmar Corporation,
(parent of TMC Group, Inc.), of all of the issued and outstanding shares of the
capital stock of TMC Group, Inc. to Social Expressions Acquisition Corporation.
Summary Description of the Transaction
AGP and Company, Inc., and its wholly-owned subsidiary, Robmar, Inc.
(hereinafter referred to as the "Sellers") have entered into an agreement (the
"Agreement") with Social Expressions Acquisition Corporation (hereinafter
referred to as "Purchaser"), wherein Purchaser shall be acquiring all of the
outstanding shares of the common stock of TMC Group, Inc. (hereinafter referred
to as "TMC"), which latter entity is a wholly-owned subsidiary of Robmar, Inc.
Pursuant to the Agreement, and as more fully set forth therein, Purchaser has
agreed to pay to Sellers the following consideration in exchange for all of the
outstanding shares of the common stock of TMC Group, Inc.:
1) a number of shares of Purchaser's voting common stock having an aggregate
value of $2,500,000 (provided that Purchaser or its successor is a
publicly-traded company as of the closing date of the subject transaction), plus
2) a royalty in the amount of 0.75% of TMC's annual collected net revenues, paid
quarterly in arrears, for a period of three (3) years, commencing with the
closing date of the subject transaction. The precise number of shares to be
delivered to Robmar at the closing shall be calculated by dividing $2,500,000 by
the average of the closing bid and asked prices of the common stock during the
last ten trading days immediately preceding the closing.
Page 1 of 7
<PAGE>
In the event that Purchaser or its successor is not a publicly-traded company as
of the closing date of the subject transaction, the aforementioned consideration
shall not be paid, and in lieu thereof, an alternative consideration shall be
paid, consisting of:
1) a ten percent (10%) subordinated promissory note maturing ten (10) years from
the date of Closing (the "Note") in an aggregate principal amount of $2,500,000,
plus
2) a royalty payment equal to 1.5% of TMC's annual collected net revenues, paid
quarterly in arrears, for a period of three (3) years, commencing with the
closing date of the subject transaction.
The note is planned to be interest free for the first year, interest only for
the second year and monthly principal payment of $26,041.66 per month plus
interest for the remaining eight years. This note is subordinate to all existing
secured institutional indebtedness and any indebtedness incurred in the future,
without limitation. Further, there are no restrictions on the amount of
unsecured debt that may be incurred in the future and there are no conditions of
default except failure to make payments required by the note.
Conversion privileges
This note is convertible by the purchaser and the seller. The precise number of
shares to be delivered to Robmar at the closing shall be calculated by dividing
$2,500,000 by the average of the closing bid and asked prices of the common
stock during the last ten trading days immediately preceding the closing.
Irrevocable proxy:
If shares are issued to the purchaser, an irrevocable proxy is given to Omar L.
Peraza and Joseph Drucker for a period of five years.
Additional consideration:
Social Expressions Acquisition Corporation has engaged professionals, who will,
upon the completion of the subject transaction as described previously, provide
for the reduction of certain liabilities and obligations of AGP and Company,
Inc. through negotiations and agreements. Management has informed us that the
professionals engaged in this capacity have sufficient experience and ability to
perform this engagement;
Description of Assignment
You have requested the opinion of this office regarding the fairness, from a
financial perspective, to the Sellers of the consideration to be received by
them in connection with the Transaction described in the preceding paragraphs
hereof, and as more fully set forth in the referenced Stock Purchase Agreement.
Page 2 of 7
<PAGE>
Management Responsibilities
The management of AGP and Company, Inc. has provided us with copies of the
following documents and has taken full responsibility as to their accuracy and
completeness:
1. Settlement and Escrow Agreements between AGP and Company, Inc. and the Peraza
Entities dated October 1, 1996, which agreements primarily provide for:
a) the dismissal of an action commenced against AGP and Company, Inc. in
the Superior Court, for Hudson County, Chancery Division, captioned Omar L.
Peraza, individually and on behalf of the Peraza Trust v. AGP & Company,
Inc., Docket No. C-99-96;
b) the resignations of Stephen W. Bingaman and James S. Howard from all
positions held by them as directors, officers and employees of AGP and
Company, Inc. and the proxies of the two aforementioned individuals; and
c) the agreement of Messrs. Bingaman and Howard, in their capacities as
directors of AGP and Company, Inc. to recommend that the shareholders vote
for the approval of the sale of TMC Group, Inc. to Social Expressions
Acquisition Corporation;
2. Stock Purchase Agreement between Social Expressions Acquisition Corporation
and AGP and Company, Inc. dated October 29, 1996, which agreement primarily
provides for the details of the transaction as described previously in this
report;
3. TMC Group, Inc. Consolidated Financial Statements as of the years ended April
30, 1992, 1993; the eight months ended December 31, 1993; and the years ended
December 31, 1994 and 1995 with accompanying audit opinions.
4. TMC Group, Inc. internal preliminary balance sheet for fiscal year end
December 31, 1996, prepared January 14, 1997, unaudited.
5. TMC Group, Inc. internal preliminary income statement for fiscal year end
December 31, 1996, prepared January 14, 1997, unaudited
During discussions with current management, we have been informed of the
following facts and circumstances, which management has taken full
responsibility for the accuracy of:
In a letter dated February 4, 1997, management has represented to the best of
its knowledge and belief that:
a. We have made available to you all information requested and all
information that is relevant to your report. All significant matters of
judgment have been approved by us.
Page 3 of 7
<PAGE>
b. The financial statements furnished to you present TMC Group, Inc. and
its related subsidiaries in conformity with generally accepted accounting
principles, consistently applied.
c. TMC Group, Inc. has no commitments or contingent liabilities, including
those arising from litigation, claims and assessments, that are not
disclosed in the financial statements identified above, or otherwise
disclosed by the Company to you.
d. TMC Group, Inc. does not have any employment contracts with salaried
employees, stock option plans, or stock redemption agreements with
shareholders except to the extent indicated in written agreements furnished
to you.
e. Any forecasts of future earnings presents our assumptions and, to the
best of our knowledge and belief, based upon our judgment, considering
present circumstances, of the expected conditions and our expected course
of action.
f. Your report will be for the information of the Board of Directors and
will serve as a partial basis for the Board of Directors to recommend a
course of action to the shareholders, as it relates to the proposed sale of
the capital stock of TMC Group, Inc. and will not be used for any other
purpose.
g. TMC Group, Inc.'s only subsidiaries are The Wedding Company, Inc. which
has no assets or liabilities at this date and Illuminations, Inc.
h. There are no other patents, trademarks or other intellectual property of
any value owned by TMC Group, Inc. or any of its subsidiaries.
i. The board has explored a number of alternative strategies ( including
finding other purchasers) regarding the disposition of TMC Group, Inc. and
has determined, due to, time constraints, that it is impractical to
continue to seek other opportunities for an indeterminate period of time.
j. The board represents that under current circumstances, TMC Group, Inc.
cannot be evaluated solely as a going concern and that, without additional
financing, TMC Group, Inc. and its subsidiaries will likely be out of
business within six months.
k. TMC Group, Inc.'s credit facilities have been reduced by $1,000,000 as
of February 1, 1997, adversely affecting TMC Group, Inc.'s ability to pay
current operating expenses and to continue its business.
l. We have reviewed the preliminary draft of your report and represent that
the information about the Company presented therein is accurate and
complete.
Page 4 of 7
<PAGE>
Actions by Reviewer
In arriving at the opinion set forth herein, we have, among other things:
1. Reviewed the above referenced documents.
2. Met with management to discuss the foregoing and other matters we believe to
be relevant to our inquiry.
3. Taken into account a number of factors, including, but not limited to the
following:
a. The reported deterioration in the financial position of AGP and Company,
Inc. (the "Company") since December 31, 1992, and the increased need for
liquidity during such period;
b. The results of the efforts to solicit third parties with respect to
their possible interest in purchasing, making an investment in, or entering
into an assumption of the liabilities of the TMC Group, Inc.
c. The capital and liquidity position of the TMC Group, Inc.
d. Advice from the management of AGP and Company, Inc. as to the necessity
of raising capital and or credit lines for TMC Group, Inc. as expediently
as possible;
e. The possibility of adverse regulatory action relating to AGP and
Company, Inc's deteriorating capital and liquidity position; and
f. The possibility that TMC Group, Inc., absent the completion of the
proposed transaction, is reasonably likely to fail to continue as a going
concern, and that it will probably have to liquidate itself in the absence
of the proposed transaction.
Unavailable information pertaining to the engagement
1. The management of AGP and Company, Inc. was unable to obtain recent audited
financial statements for the year ended December 31, 1996, further, it is unable
to obtain anything more definitive than an internally prepared document clearly
marked "preliminary" by the preparer. It is generally understood that the most
important financial information regarding the value of any company is the most
recent financial performance.
2. The management of AGP and Company, Inc. was unable to provide prospective
financial statements that present, to the best of the responsible party's
knowledge and belief, the expected financial position, results of operations,
and changes in financial position. The expected earnings potential by management
is a key factor in determining the relative value of TMC Group, Inc.
Page 5 of 7
<PAGE>
3. The management of AGP and Company, Inc. was unable to provide any third-party
appraisal values for any of the assets held by TMC Group, Inc.
4. The management of AGP and Company, Inc. was not provided by the purchaser
with a copy of a fairness opinion which is a condition precedent to the purchase
agreement with Social Expressions Acquisition Corporation. This fairness opinion
was to state that the consideration to be received by Robmar for the shares
pursuant to the agreement is fair from a financial point of view.
5. The consolidated financial statements prepared by the management of TMC
Group, Inc. for the year ended December 31, 1995 omit the consolidation of a
subsidiary The Wedding Company, Inc. (formerly known as The Bridal Company). The
effect of the omission of this subsidiary from the consolidated financial
statements is not determinable.
The information that is unavailable described above could have a material effect
on both the opinion of the board of directors and this fairness opinion.
Certain risks in the nature of the offer:
1. The calculation method to determine the number of shares valued at $2,500,000
does not consider the effect of dilution on the share values after they are
issued. In addition to the dilution it assumes their will be an active enough
market during the ten day period preceding the closing to reflect market value.
It is possible that large trades could temporarily suppress the market during
that time period.
2. As described above the note is subordinate to virtually all secured debt.
Management has advised us that the effect of these issues will not have a
material effect on the consideration to be received by the Company in the
contemplated transaction
Statement of Independence
This report was prepared under my direction. Neither the professionals who
worked on this engagement nor the undersigned have any present or contemplated
future interest in AGP and Company, Inc., Social Expressions Acquisition
Corporation, Robmar Corporation, or TMC Group, Inc., any personal interest with
respect to the parties involved, or any other interest that could prevent us
from performing an unbiased review of the transaction. Our compensation is not
contingent on an action or event resulting from the analysis, opinion, or
conclusions in, or the use of, this report.
Page 6 of 7
<PAGE>
Restrictions of Report Uses
This report is intended solely for the information and use of the management and
the Board of Directors of AGP and Company, Inc. as it relates to their decision
to recommend the proposed sale of the capital stock of TMC Group, Inc. and
should not be used for any other purpose. Further, this report is not intended
to be used to determine the fairness of the proposed transaction on either the
shareholders or creditors of AGP and Company, Inc.
Opinion
We have not independently verified any of the information or the assumptions
contained therein on which we have relied, and, for the purposes of this report,
have assumed the accuracy, completeness and reasonableness thereof, ( except as
noted herein ), to be as represented by AGP and Company, Inc. management. In
addition, we are not actuaries and our services did not include any actuarial
determinations or evaluations by us.
Our opinion is based solely on the information provided by the management of AGP
Company, Inc., and our expertise in financial matters, and economic and other
conditions as they exist and can be evaluated as of the date of this report. We
have no responsibility to update our report for events and circumstances that
occur after the date of this report.
Based upon and subject to the foregoing report in its entirety, we are of the
opinion that, as of the date of this report, the consideration to be received by
the Company in the contemplated transaction, as summarized previously, is fair,
from a financial point of view, to AGP and Company, Inc.
Sincerely,
Raymond J. Serra, CPA
Page 7 of 7
TMC GROUP, INC. AND SUBSIDIARY
(A Wholly-Owned Subsidiary of Robmar Corporation)
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1995
<PAGE>
[LETTERHEAD OF M.R. WEISER & CO. LLP]
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholder
TMC Group, Inc. and Subsidiary
We have audited the accompanying consolidated balance sheet of TMC Group, Inc.
and Subsidiary (a wholly-owned subsidiary of Robmar Corporation) (the "Company")
as of December 31, 1995, and the related consolidated statements of income and
accumulated deficit, and cash flows for the year then ended. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the consolidated financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the consolidated financial statements.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of TMC Group, Inc. and
Subsidiary (a wholly-owned subsidiary of Robmar Corporation) as of December 31,
1995, and the results of its operations and its cash flows for the year then
ended in conformity with generally accepted accounting principles.
/s/ M.R. Weiser & Co. LLP
-------------------------------------
CERTIFIED PUBLIC ACCOUNTANTS
New York, N.Y.
March 25, 1996
<PAGE>
TMC GROUP, INC. AND SUBSIDIARY
(A Wholly-Owned Subsidiary of Robmar Corporation)
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1995
ASSETS
Current assets:
Cash $ 4,999
Accounts receivable, net of allowance for doubtful
accounts of $178,307 2,473,982
Inventories (Notes 1 and 2) 2,865,737
Prepaid expenses and other current assets 507,116
Due from affiliate (Note 10) 99,290
-----------
Total current assets 5,951,124
Property, plant and equipment (Notes 1 and 3) 3,347,700
Patents and trademarks, net of accumulated amortization of $24,586 33,914
Deferred financing costs 27,500
Due from parent 40,562
Goodwill, net of accumulated amortization of $16,133 225,867
-----------
$ 9,626,667
===========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Demand note payable, bank (Note 4) $ 3,206,060
Current portion of long-term debt (Note 5) 172,851
Accounts payable 1,831,701
Accrued expenses 290,779
-----------
Total current liabilities 5,501,391
-----------
Long-term debt, net of current portion (Note 5) 3,152,978
-----------
Commitments and contingencies (Note 7)
Stockholder's equity: (Note 8)
Common Class A stock, $1.00 par value;
50,000 shares authorized;
48,850 shares issued and outstanding
(aggregate liquidation preference of $195,400) 48,850
Common Class B stock, $1.00 par value;
100,000 shares authorized;
93,900 shares issued and outstanding 93,900
Additional paid-in capital 2,657,213
Accumulated deficit (1,827,665)
-----------
Total stockholder's equity 972,298
-----------
$9,626,667
==========
See accompanying notes to consolidated financial statements
<PAGE>
TMC GROUP, INC. AND SUBSIDIARY
(A Wholly-Owned Subsidiary of Robmar Corporation)
CONSOLIDATED STATEMENT OF INCOME AND ACCUMULATED DEFICIT
FOR THE YEAR ENDED DECEMBER 31, 1995
Net sales $ 13,176,871
Cost of sales 7,674,693
------------
Gross profit 5,502,178
Selling, general and administrative expenses 4,966,704
------------
Operating income 535,474
Other income (expense):
Interest (713,085)
Miscellaneous 218,256
------------
Income before provision for income taxes 40,645
Provision for income taxes 4,000
------------
Net income 36,645
Deficit - beginning (1,864,310)
------------
Deficit - end $ (1,827,665)
============
See accompanying notes to consolidated financial statements
<PAGE>
TMC GROUP, INC. AND SUBSIDIARY
(A Wholly-Owned Subsidiary of Robmar Corporation)
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1995
Cash flows from operating activities:
Net income $ 36,645
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation and amortization 297,999
Bad debts 118,507
Changes in operating assets and liabilities, net of effects
from purchase of Nuage Flowers, Inc.:
Increase in accounts receivable (875,501)
Increase in inventories (156,366)
Increase in prepaid expenses and other current assets (186,745)
Increase in other assets (268,500)
Increase in accounts payable 949,016
Increase in accrued expenses 77,085
Decrease in deferred compensation (22,778)
---------
Net cash used in operating activities (30,638)
---------
Cash flows from investing activities:
Payments for purchase of Nuage Flowers, Inc. (500,000)
Acquisition of property and equipment (99,808)
Increase in due from parent (33,097)
Increase in due from affiliate (99,290)
---------
Net cash used in investing activities (732,195)
---------
Cash flows from financing activities:
Repayments of long-term debt (162,038)
Proceeds from demand note payable 924,924
Net cash provided by financing activities 762,886
---------
Net increase in cash 53
Cash at beginning of year 4,946
---------
Cash at end of year $ 4,999
=========
Supplemental Disclosure of Cash Flow Information:
Cash paid during the year for:
Interest $ 700,751
=========
Taxes $ 4,000
=========
See accompanying notes to consolidated financial statements
<PAGE>
TMC GROUP, INC. AND SUBSIDIARY
(A wholly-Owned Subsidiary of Robmar Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Nature of Business:
TMC Group, Inc. and its wholly-owned subsidiary Illuminations, Inc. (the
"Company") are engaged in the manufacture and distribution of gift and
novelty items with sales primarily to retail establishments throughout the
United States. TMC Group, Inc. and Subsidiary is a wholly-owned subsidiary
of Robmar Corporation. Robmar Corporation is a wholly-owned subsidiary of
AGP and Company, Inc.
Basis of Consolidation:
The consolidated financial statements include the accounts of TMC Group,
Inc. and Illuminations, Inc. All material intercompany balances and
transactions have been eliminated in consolidation.
Estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Statement of Cash Flows:
The Company considers all highly liquid investments with an original
maturity of three months or less when purchased to be cash equivalents.
Inventories:
Inventories are stated at the lower of first-in, first-out method (FIFO)
cost or market.
<PAGE>
-2-
Prepaid Catalog Cost:
Included in prepaid expenses and other current assets are the costs
incurred in conjunction with the design and production of marketing
catalogs. These costs are deferred and amortized over the estimated revenue
producing lives of the respective catalogs. Amortization periods range from
six to twelve months with amortization commencing upon the mailing of the
catalogs. Unamortized prepaid catalog costs were approximately $291,000 at
December 31, 1995.
Depreciation and amortization:
Depreciation and amortization is provided by the straight-line method over
the estimated useful lives of the related assets as follows:
Building and improvements 5 - 40 years
Machinery and equipment 7 - 10 years
Furniture and fixtures 3 - 7 years
Computer equipment and software 3 - 7 years
Negatives, plates and dies 3 - 7 years
Expenditures for repairs and maintenance are charged to operations as
incurred while renewals and betterments are capitalized.
Deferred Costs:
Deferred costs consisting of deferred financing costs, patents and
trademarks and goodwill are being amortized over their estimated useful
lives are as follows:
Deferred financing costs (a) 5 years
Patents and trademarks 14 years
Goodwill 15 years
(a) Amortization commencing January 26, 1996.
2. INVENTORIES:
Inventories at December 31, 1995 consist of the following:
Raw materials $ 1,392,833
Finished goods 1,472,904
-----------
$ 2,865,737
===========
<PAGE>
-3-
3. PROPERTY AND EQUIPMENT:
Property and equipment at December 31, 1995 are carried at cost and
consists of the following:
Land $ 432,471
Buildings and improvements 3,359,025
Machinery and equipment 544,824
Furniture and fixtures 166,079
Computer equipment and software(a) 590,667
Negatives, plates and dies 436,287
-----------
5,529,353
Less accumulated depreciation and
amortization 2,181,653
-----------
$ 3,347,700
===========
(a) Machinery and equipment at December 31, 1995 included the following
amounts held under capital lease:
Telephone equipment $ 65,624
Less accumulated depreciation 54,686
--------
$ 10,938
========
4. DEMAND NOTE PAYABLE, BANK:
In 1994, the Company entered into a financing arrangement with a bank for a
$4,000,000 revolving demand loan, carrying interest at the bank's base rate
plus 1.5% per annum. Advances under this credit facility were limited under
certain formulas contained in the agreement. The credit facility was
collateralized by a first priority security interest in all corporate
assets and was personally guaranteed (up to $500,000) by the President of
the Company and a principal shareholder of AGP and Company, Inc. The
Company is in violation of certain of the financial performance and ratio
covenants contained in the agreement.
<PAGE>
-4-
On January 26, 1996, the Company refinanced its revolving demand loan with
another financial institution whereby the financial institution purchases
substantially all of the trade accounts receivables with full recourse to
the Company. The financial institution may make revolving credit advances
to the Company up to $4,000,000.
Advances under the revolving line of credit can be made up to 85% of
eligible accounts receivable and 40% of eligible inventories not to exceed
$1,100,000, as defined under the agreement. The Company pays interest on
the outstanding balance at 1 1/4% above the prime lending rate per annum.
In addition, the Company pays a commission at the rate of 1.10% of the
sales invoice amount. The financial institution has a security interest in
all of the Company's inventories accounts receivables, general intangibles
and other property.
5. LONG-TERM DEBT:
Long-term debt at December 31, 1995 consists of the following:
Promissory note, dated February 1, 1993, is collateralized
by a mortgage on certain real estate situated in New
Hampshire and assignment of rents, if any, arising from
the foregoing. The note is being repaid in monthly
installments of principal and interest of approximately
$41,800. Interest is based on the prime rate established
by Chase Manhattan Bank (10.75% at December 31, 1995),
with the final principal payment due in February 1998. $ 3,309,323
Capitalized lease obligations (see Note 3). 16,506
-----------
3,325,829
Less current maturities 172,851
-----------
$ 3,152,978
===========
At December 31, 1995, approximate aggregate minimum principal amounts due
under all long-term debt agreements are as follows:
Year Ending
December 31, Amount
------------ ------
1996 $ 172,900
1997 156,200
1998 2,996,700
-----------
$ 3,325,800
===========
<PAGE>
-5-
6. CAPITAL LEASE OBLIGATION:
The Company leases equipment under a capital lease agreement. The future
minimum lease payments under this agreement at December 31, 1995 are as
follows:
Year Ending
December 31, Amount
------------ ------
1996 $ 17,124
Less amounts representing interest 618
--------
Present value of net minimum
lease payments $ 16,506
========
7. COMMITMENTS AND CONTINGENCIES:
The Company leases certain equipment from unrelated parties under
noncancellable operating lease agreements. Lease payments charged to
operations totaled approximately $24,900.
During 1993, the Company entered into a 6 year licensing agreement
commencing during the 1995/1996 season, for the right to use 2 club seats
in a preferred seating section of the New Boston Garden. Total fee
obligations under this agreement are approximately $92,000. This agreement
is subject to the substantial completion of the New Boston Garden by March
1996.
Minimum annual rental payments under the above leases are as follows:
Year Ending Licensing
December 31, Equipment Agreement Total
------------ --------- --------- -----
1996 $ 25,815 $ 17,587 $ 43,402
1997 19,448 17,990 37,438
1998 16,161 18,409 34,570
1999 11,184 18,844 30,028
2000 1,864 19,297 21,161
-------- -------- ---------
$ 74,472 $ 92,127 $ 166,599
======== ======== =========
The Company leases to unrelated parties a portion of its buildings under
cancellable operating leases. Rental income was approximately $157,000 at
December 31, 1995. (See Note 14).
<PAGE>
-6-
The Company entered into a royalty agreement with the former owners of
Nuage Flowers, Inc. whereby the Company is required to pay 10% of net sales
for the Nuage product line providing that the Company has exceeded
specified minimum sales and a 35% gross profit margin. For 1995, the
Company was not required to pay any royalties under this agreement. (See
Note 13.) In addition, the Company has an oral agreement with the former
owner of Illuminations to pay approximately 5% of the net gross profit from
Illuminations. At December 31, 1995, the Company paid approximately $78,000
in royalty expense.
The Company entered into a licensing agreement whereby the licensee has
agreed to pay the Company a royalty of 5% of the selling price for each Le
Pouf (a division of TMC Group, Inc.) machine they sold. At December 31,
1995, the Company has received approximately $3,800 in royalty income.
8. STOCKHOLDER'S EQUITY:
In the event of liquidation, an initial distribution of up to $4 per share
will be made first to the holders of Common Class A stock. Amounts, if any,
available for further distribution will then be shared pro rata between any
Common Class A and B stockholders.
9. INCOME TAXES:
The Company participates in a consolidated federal income tax return with
its parent. Income tax expense/benefit is allocated to the Company based on
the Company's share of consolidated taxable income or losses.
Deferred income taxes arise from temporary differences in the recognition
of certain expenses for financial statement and income tax reporting
purposes. The principal sources of these differences as of December 31,
1995, were net operating loss carryforwards, inventory reserves,
depreciation, bad debt reserves and other nondeductible accruals. The
Company has established a 100% valuation allowance for the net deferred tax
asset of approximately $1,025,000, due to the uncertainty related to the
realization of that asset. Valuation allowances are established when
necessary to reduce deferred tax assets to the amount expected to be
realized.
At December 31, 1995, the Company has net operating loss carryforwards of
approximately $3,058,000 available to offset future taxable income. The
carryforwards expire in the years 2003 to 2008.
For the year ended December 31, 1995, the Company utilized approximately
$40,000 of the net operating loss carryforwards. The tax benefit derived
from the utilization of this net operating loss carryforward is
insignificant and has not been reflected on the financial statements at
December 31, 1995.
<PAGE>
-7-
10. RELATED PARTY TRANSACTIONS:
On February 9, 1995, Robmar Corporation, the parent, formed a wholly-owned
subsidiary, The Wedding Co., Inc. ("The Wedding Co."), pursuant to the laws
of the State of Delaware. The Wedding Co. operates as a manufacturing
facility located in Puerto Rico. It produces certain products for which the
Company provides the necessary raw materials. The Company is paying for
some of the costs of The Wedding Co. At December 31, 1995, the Company had
a loan receivable from The Wedding Co. totaling $99,290.
In addition, the Company has a loan receivable from the parent at December
31, 1995 in the amount of $40,562 representing temporary loans and
advances. This loan is non-interest bearing.
11. PROFIT-SHARING RETIREMENT TRUST:
The Company has a profit sharing plan under section 401(k) of the Internal
Revenue Code (IRC). The plan covers substantially all employees. Eligible
employees are permitted to contribute a portion of their gross compensation
based on prescribed IRS limits. The Company's matching contribution is
determined annually by the Board of Directors. These matching contributions
vest to employees over a five year period. In addition to the
above-mentioned employer matching contributions, the Company will make an
annual contribution in an amount to be determined by its Board of
Directors. Company contributions for 1995 amounted to $4,844.
12. FAIR VALUE OF FINANCIAL INSTRUMENTS:
The amounts included in the balance sheet at December 31, 1995 for cash,
accounts receivable, due from affiliate and parent, demand note payable -
bank, accounts payable and accrued expenses approximate fair value because
of the short-term nature of these instruments. The carrying value of
long-term debt approximates the estimated fair value because the long-term
debt is at interest rates comparable to notes currently available to the
Company for debt with similar terms and remaining maturities.
<PAGE>
-8-
13. ACQUISITION:
On January 18, 1995, the Company acquired in a business combination certain
assets and assumed certain liabilities of Nuage Flowers, Inc. for a total
purchase price, including assumed liabilities, equal to $500,000. The
acquisition was accounted for as a purchase whereby the results of
operations of Nuage Flowers, Inc. is included in the accompanying financial
statements since the date of acquisition. Allocation of the purchase price
is as follows:
Item Amount
---- ------
Fixed assets $ 33,000
Inventory 150,760
Receivables 64,240
Goodwill 242,000
Trademarks 5,000
Other assets 5,000
---------
$ 500,000
=========
The purchase price consists of the following:
Assumed trade payables $ 199,188
Payment of bank loan 101,146
Cash at closing 199,666
---------
$ 500,000
=========
The Company acquired certain patents in connection with this acquisition.
The Company will pay the seller a royalty, based upon net sales, through
December 31, 2001. Total royalty payments shall not exceed $1,500,000. (See
Note 7.) In addition, the Company entered into an employment agreement with
the seller for a period of five years commencing on the effective date.
Compensation during the employment term shall be in the amount of $75,000
per annum.
14. SUBSEQUENT EVENT:
On February 2, 1996, the Company sold a building for $1,500,000 of which
$1,400,000 of the proceeds was used to pay down its long-term debt.
<PAGE>
TMC GROUP, INC.
(A Wholly-Owned subsidiary of
Robmar Corporation)
CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1994
<PAGE>
TABLE OF CONTENTS
Page
----
Independent Auditors' Report 1
Consolidated Balance Sheet as of
December 31, 1994 and 1993 2
Consolidated statements of Current Loss
and Accumulated Deficit for the year
ended December 31, 1994 and for the eight months
ended December 31, 1993 3
Consolidated Statement of Cash Flows for the year
ended December 31, 1994 and for the eight months
ended December 31, 1993 4
Notes to Consolidated Financial Statements for the year
ended December 31, 1994 and for the eight months
ended December 31, 1993 5-14
<PAGE>
[LETTERHEAD OF SHAPIRO, WEISS & COMPANY]
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholder
TMC Group, Inc.
We have audited the accompanying consolidated balance sheet of TMC Group,
Inc. (a wholly-owned subsidiary of Robmar Corporation) as of December 31, 1994,
and the related consolidated statements of current loss, accumulated deficit and
cash flows for the year then ended. These consolidated financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audit. The
consolidated financial statements of TMC Group, Inc. as of December 31, 1993,
were audited by other auditors whose report dated August 5, 1994, expressed an
unqualified opinion on those statements.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
As more fully discussed in Note 9, Robmar Corporation (the Parent) incurred
approximately $1,000,000 of debt when it acquired the Company in May, 1986. The
debt is not reflected in the accompanying financial statements of the Company.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of TMC Group,
Inc. (a wholly-owned subsidiary of Robmar corporation) as of December 31, 1994,
and the results of its operations and its cash flows for the year then ended in
conformity with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As shown in the
accompanying consolidated financial statements, the Company continues to incur
operating losses and has an accumulated deficit of approximately $1,860,000 as
of December 31, 1994. The continued losses have resulted in the Company's
inability to meet certain financial performance and ratio covenants under its
revolving credit facility. The bank has indicated that it will not grant a
waiver of these defaults (see Note 2). Management's plans are described in Note
12. These conditions raise substantial doubt about the Company's ability to
continue as a going concern. The accompanying consolidated financial statements
do not include any adjustments that might result from the outcome of these
uncertainties.
/s/ Shapiro, Weiss & Company
March 10, 1995, except for Note 2
for which the date is April 5, 1995
-1-
<PAGE>
TMC GROUP, INC.
(A wholly-owned Subsidiary of Robmar Corporation)
CONSOLIDATED BALANCE SHEET
December 31, 1994 and 1993
ASSETS
1994 1993
---- ----
Current assets:
Cash and cash equivalents $ 4,946 $ 760
Accounts receivable, net of allowance
for doubtful accounts of $92,000 and
$74,500 in 1994 and 1993, respectively 1,652,748 1,140,127
Inventories 2,316,611 2,799,511
Prepaid expenses and other current assets 320,371 434,836
---------- ----------
Total current assets 4,294,676 4,375,234
---------- ----------
Property, plant and equipment:
Land 432,471 432,471
Buildings 3,333,501 3,329,081
Equipment and vehicles 1,237,932 1,214,622
Negatives, plates and dies 392,642 347,533
---------- ----------
5,396,546 5,323,707
Less accumulated depreciation and amortization 1,909,331 1,630,540
---------- ----------
3,487,215 3,693,167
---------- ----------
Other assets:
Patents and trademarks, net 4,790 4,910
Deferred financing costs, net 29,667 41,534
Due from parent 7,465 --
---------- ----------
41,922 46,444
---------- ----------
$7,823,813 $8,114,845
========== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Current portion of long-term debt $ 150,905 $ 162,753
Demand note payable, bank 2,281,136 1,824,312
Accounts payable 882,685 1,571,376
Accrued expenses 213,694 310,325
----------- -----------
Total current liabilities 3,528,420 3,868,766
----------- -----------
Long-term debt, net of current portion 3,336,962 3,480,066
----------- -----------
Deferred compensation 22,778 41,840
----------- -----------
Commitments and contingencies
Stockholder's equity:
Common Class A stock, $1.00 par value;
50,000 shares authorized;
48,850 shares issued and outstanding 48,850 48,850
Common Class B stock, $1.00 par value;
100,000 shares authorized;
93,900 shares issued and outstanding 93,900 93,900
Additional paid-in capital 2,657,213 2,657,213
Accumulated deficit (1,864,310) (1,699,005)
Due from parent -- (376,785)
----------- -----------
Total stockholder's equity 935,653 724,173
----------- -----------
$ 7,823,813 $ 8,114,845
=========== ===========
"See Independent Auditors' Report."
The accompanying notes are an integral
part of the consolidated financial statements.
-2-
<PAGE>
TMC GROUP, INC.
(A wholly-owned Subsidiary of Robmar Corporation)
CONSOLIDATED STATEMENTS OF CURRENT LOSS AND ACCUMULATED DEFICIT
For the year ended December 31, 1994 and for the
eight Months ended December 31, 1993
CURRENT LOSS
1994 1993
---- ----
Net sales $ 10,789,954 $ 6,749,939
Cost of sales 6,164,816 4,127,441
------------ ------------
Gross profit 4,625,138 2,622,498
Selling, general and administrative
expenses 4,628,879 3,293,123
------------ ------------
Loss before other income
(expense) and income taxes (3,741) (670,625)
------------ ------------
Other income (expense):
Interest expense (612,820) (325,601)
Miscellaneous 462,375 277,066
------------ ------------
(150,445) (48,535)
------------ ------------
Loss before income taxes (154,186) (719,160)
Income tax benefit (expense) (11,119) 27,787
------------ ------------
Net loss $ (165,305) $ (691,373)
============ ============
ACCUMULATED DEFICIT
Balance at beginning of year $ (1,699,005) $ (1,007,632)
Net loss (165,305) (691,373)
------------ ------------
Balance at end of year $ (1,864,310) $ (1,699,005)
============ ============
"See Independent Auditors' Report."
The accompanying notes are an integral
part of the consolidated financial statements.
-3-
<PAGE>
TMC GROUP, INC.
(A Wholly-owned Subsidiary of Robmar Corporation)
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended December 31, 1994 and for
the eight months ended December 31, 1993
1994 1993
---- ----
Cash flows from operating activities:
Net loss $(165,305) $(691,373)
Adjustments to reconcile net
loss to net cash flows provided
by (used in) operating activities:
Depreciation and amortization 290,778 200,893
Deferred income taxes -- (12,478)
Forgiveness of debt (123,000) --
(Increase) decrease in operating
assets:
Accounts receivable, net (512,621) 903,809
Inventories 482,900 145,012
Prepaid expenses and other
current assets 114,465 38,836
Increase (decrease) in operating
liabilities:
Accounts payable (565,691) 304,069
Accrued expenses (96,631) 16,993
Deferred compensation (19,062) (48,455)
--------- ---------
Net cash flows provided by
(used in) operating activities (594,167) 857,306
--------- ---------
Cash flows from investing activities-
Purchase of property, plant and
equipment $ (72,839) $(105,752)
--------- ---------
Cash flows from financing activities:
Demand note payable, bank $ 456,824 $(635,324)
Payments of long-term debt (154,952) (115,726)
Due to/from parent, net 369,320 (1,906)
--------- ---------
Net cash flows provided by
(used in) financing activities 671,192 (752,956)
--------- ---------
Increase (decrease) in cash
and cash equivalents 4,186 (1,402)
Cash and cash equivalents
at beginning of year 760 2,162
--------- ---------
Cash and cash equivalents
at end of year $ 4,946 $ 760
========= =========
The Company paid interest of approximately $562,100 and $325,600 in 1994
and 1993, respectively. In addition, the Company paid income taxes of
approximately $4,400 and $15,300 in 1994 and 1993, respectively.
In connection with the sale of the remaining 75% of the outstanding capital
stock of Robmar, approximately $123,000 of TMC Group, Inc.'s liabilities were
forgiven.
"See Independent Auditors' Report."
The accompanying notes are an integral
part of the consolidated financial statements.
-4-
<PAGE>
TMC GROUP, INC.
(A Wholly-Owned Subsidiary of Robmar Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the year ended December 31, 1994 and for the
eight months ended December 31, 1993
Note 1 - Accounting Policies
A summary of the major accounting policies followed by the Company in the
preparation of the accompanying consolidated financial statements is set forth
below:
Basis of Consolidation - The consolidated financial statements include the
accounts of TMC Group, Inc. and its wholly-owned subsidiary Illuminations, Inc.
All material intercompany balances and transactions have been eliminated in
consolidation.
Nature of Business - TMC Group, Inc. (the "Company") is engaged in the
manufacture and distribution of gift and novelty items with sales primarily to
retail establishments. The Company is a wholly-owned subsidiary of Robmar
Corporation ("Robmar").
Cash and Cash Equivalents - The Company considers all highly liquid investments
with a maturity of three months or less when purchased to be cash equivalents.
At December 31, 1994 and 1993, the Company had no cash equivalents. The Company
maintains its cash at financial institutions in amounts which at times may
exceed federally insured limits. The Company has not experienced any losses in
such accounts. The Company believes it is not exposed to any significant credit
risk on cash and cash equivalents.
Accounts Receivable - The Company provides an allowance for doubtful accounts
equal to estimated bad debt losses. The estimated losses are based on historical
collection experience together with a review of the current status of the
existing receivables.
Inventories - Inventories are valued at the lower of first-in, first out method
(FIFO) cost or market.
Inventories consisted of the following:
1994 1993
---- ----
Raw materials $ 1,159,345 $ 999,542
Finished goods 1,157,266 1,799,969
----------- -----------
$ 2,316,611 $ 2,799,511
=========== ===========
-5-
<PAGE>
TMC GROUP, INC.
(A Wholly-Owned subsidiary of Robmar Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
For the year ended December 31, 1994 and for the
eight months ended December 31, 1993
Note 1 - Accounting policies - Continued
During the period ended December 31, 1993, the Company modified the way it
estimates the amount of overhead costs allocated to inventory at year-end. This
change in estimate resulted in an increase to the net loss for the period ended
December 31, 1993, of approximately $250,000.
Property, Plant and Equipment - All property, plant and equipment are stated at
cost. Major additions and betterments are charged to the property accounts while
replacements, maintenance and repairs which do not improve or extend the lives
of the respective assets are expensed in the year incurred.
Depreciation and Amortization - Depreciation and amortization are computed using
the lives and methods noted below:
Assets Years Method
------ ----- ------
Buildings 40 straight-line
Equipment and vehicles 5-7 straight-line
Negatives, plates and dies 7 straight-line
Prepaid Catalog Cost - Included in prepaid expenses and other current assets are
the costs incurred in conjunction with the design and production of marketing
catalogs. These costs are deferred and amortized over the estimated revenue
producing lives of the respective catalogs. Amortization periods range from six
to twelve months with amortization commencing upon the mailing of the catalogs.
Unamortized prepaid catalog costs were approximately $108,000 and $341,000 at
December 31, 1994 and 1993, respectively.
Deferred Costs - Deferred costs consisting of deferred financing costs and
miscellaneous patents and trademarks are being amortized over their estimated
useful lives, 5 years and 14 years, respectively.
Fiscal Year - The Company changed its reporting period during 1993. Accordingly,
the accompanying financial statements are for the year ended December 31, 1994
and for the eight months ended December 31, 1993.
Reclassification of Prior Year - Certain 1993 figures have been reclassified to
conform with the 1994 presentation. There is no effect on previously reported
net loss or accumulated deficit.
-6-
<PAGE>
TMC GROUP, INC.
(A Wholly-Owned Subsidiary of Robmar Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
For the year ended December 31, 1994 and for the
eight months ended December 31, 1993
Note 2 - Demand Note payable, Bank
In 1993, the Company had an agreement with a bank to borrow up to
$3,000,000 under a revolving credit facility with interest at the bank's prime
rate plus 2% (an aggregate of 8% at December, 1993). Outstanding balances were
collateralized by trade accounts receivable, inventories and other tangible
assets of the Company. The note was subsequently refinanced in January, 1994,
with another bank. The new credit facility is a $4,000,000 revolving demand
loan, carrying interest at the bank's base rate plus 1.5% per annum (10% at
December, 1994). Advances under this credit facility are limited under certain
formulas contained in the agreement. The credit facility is secured by a first
priority security interest in all corporate assets and is personally guaranteed
(up to $500,000) by the President of the Company and a principal shareholder of
AGP (see Note 6). The Company is in violation of certain of the financial
performance and ratio covenants contained in the agreement. As of April 5, 1995,
the bank has indicated its intention to issue a notice of default with no
acceleration of payment of the note for at least 90 days.
Note 3 - Long-term Debt
Long-term debt consists of the following:
1994 993
---- ---
Promissory note, dated February 1, 1993, is
secured by a mortgage on certain real estate
situated in New Hampshire and assignment of rents,
if any, arising from the foregoing. The note is
being repaid in monthly installments of principal
and interest of approximately $40,300. Interest is
based on the prime rate established by Chase
Manhattan Bank (10.5% at December 31, 1994), with
the final principal payment due in February, 1998. $ 3,449,007 $ 3,572,010
5% Small Business Administration note,
payable in monthly installments of $1,266.
During the year ended 1994, the note was
repaid. -- 11,547
----------- -----------
Balance forward $ 3,449,007 $ 3,583,557
----------- -----------
-7-
<PAGE>
TMC GROUP, INC.
(A Wholly-Owned Subsidiary of Robmar Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
For the year ended December 31, 1994 and for the
eight months ended December 31, 1993
Note 3 - Long-term Debt - Continued
1994 1993
---- ----
Balance forward $3,449,007 $3,583,557
Capitalized lease obligations
(see Note 4) 38,860 59,262
---------- ----------
3,487,867 3,642,819
Less current portion 150,905 162,753
---------- ----------
$3,336,962 $3,480,066
========== ==========
The following is a schedule of approximate aggregate minimum principal
amounts due under all long-term debt agreements:
Year ending
December 31, Amount
------------ ------
1995 $ 150,900
1996 158,800
1997 158,200
1998 3,020,000
----------
Total $3,487,900
==========
Note 4 - Capitalized Lease Obligations
The Company leases equipment under a capital lease agreement. The future
minimum lease payments under this agreement are as follow:
Year ending
December 31, Amount
------------ ------
1995 $ 25,408
1996 16,938
--------
Total minimum lease payments 42,346
Less amounts representing interest 3,486
--------
Present value of net minimum
lease payments $ 38,860
========
The cost and accumulated depreciation of equipment capital leases were
$65,624 and $21,876, respectively, as of December 31, 1994.
-8-
<PAGE>
TMC GROUP, INC.
(A Wholly-Owned Subsidiary of Robmar Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
For the year ended December 31, 1994 and for the
eight Months ended December 31, 1993
Note 5 - Commitments and Contingencies
The Company leases certain equipment from unrelated parties under
noncancellable operating lease agreements. Lease payments charged to operations
totaled approximately $35,300 and $34,400 in 1994 and 1993, respectively.
During 1993, the Company entered into a 6 year licensing agreement
commencing during the 1995/1996 season, for the right to use 2 club seats in a
preferred seating section of the New Boston Garden. Total fee obligations under
this agreement are approximately $109,000. This agreement is subject to the
substantial completion of the New Boston Garden by March, 1996.
Minimum annual rental payments under the above leases are as follow:
Year ending Licensing
December 31, Equipment Agreement Total
------------ --------- --------- -----
1995 $ 30,868 $ 5,733 $ 36,601
1996 16,332 17,587 33,919
1997 12,078 17,990 30,068
1998 4,428 18,409 22,837
1999 2,016 18,844 20,860
Later years -- 19,297 19,297
------- -------- ---------
$ 65,722 $ 97,860 $ 163,582
======== ======== =========
The Company leases to unrelated parties a portion of it buildings under
cancellable operating leases. Rental income was approximately $160,000 and
$115,867 for the periods ended December 31, 1994 and 1993, respectively (see
Note 13).
Note 6 - Stockholder's Equity
In the event of liquidation, an initial distribution of up $4 per share
will be made first to the holders of Common Class A stock. Amounts, if any,
available for further distribution will then be shared pro rata between any
Common Class A and B shareholders.
-9-
<PAGE>
TMC GROUP, INC.
(A Wholly-Owned Subsidiary of Robmar Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
For the year ended December 31, 1994 and for the
eight Months ended December 31, 1993
Note 6 - Stockholder's Equity - Continued
On January 3, 1994, AGP and Company, Inc. ("AGP"), a New York merchant
banking firm that owned 25% of the outstanding capital stock of Robmar, acquired
the remaining 75% of the outstanding capital stock of Robmar from the President
of the Company. As a result of the transaction, the President of the Company is
now a major shareholder of AGP. In connection with that sale, approximately
$123,000 of TMC Group, Inc.'s liabilities were forgiven by AGP.
Note 7 - Fire Loss
The Company suffered an inventory loss due to a warehouse fire in June,
1993. The Company has received approximately $207,000 and $251,000 in insurance
proceeds to cover the damaged goods (which the Company estimates cost
approximately $1,000,000) for the periods ended December 31, 1994 and 1993,
respectively. Insurance claims for additional business interruption losses
totaling approximately $100,000 remain open as of December 31, 1994.
Note 8 - Income Taxes
Effective May 1, 1993, the Company adopted Financial Accounting Standards
Board Statement No. 109 (FASB 109), Accounting for Income Taxes, which requires
an asset and liability approach to financial accounting and reporting for income
taxes. Deferred income tax assets and liabilities are computed annually for
differences between the financial statement and tax bases of assets and
liabilities that will result in taxable or deductible amounts in the future
based on enacted tax laws and rates applicable to the periods in which the
differences are expected to affect taxable income.
The Company participates in a consolidated federal income tax return with
its parent. Income tax expense/benefit is allocated to the Company based on the
Company's share of consolidated taxable income or losses.
-10-
<PAGE>
TMC GROUP, INC.
(A Wholly-Owned Subsidiary of Robmar Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
For the year ended December 31, 1994 and for the
eight Months ended December 31, 1993
Note 8 - Income Taxes - Continued
The components of income tax expense are as follow for the periods ended:
1994 1993
---- ----
Current:
Federal $ -- $ --
State (11,119) (4,500)
-------- --------
(11,119) (4,500)
-------- --------
Deferred:
Federal -- --
State -- 32,287
-------- --------
-- 32,287
-------- --------
Total $(11,119) $ 27,787
======== ========
Deferred income taxes arise from differences in the timing of the
recognition of certain expenses for financial statement and income tax reporting
purposes. The principal sources of these differences as of December 31, 1994,
were net operating loss carryforwards, inventory reserves, depreciation, bad
debt reserves and other nondeductible accruals. The Company has established a
valuation allowance for the net deferred tax asset of approximately $1,050,000
due to the uncertainty related to the realization of that asset. Valuation
allowances are established when necessary to reduce deferred tax assets to the
amount expected to be realized.
At December 31, 1994, the Company has net operating loss carryforwards of
approximately $3,083,000 available to offset future taxable income. The
carryforwards expire in the years 2003 to 2008.
Note 9 - Related Party Transaction
On May 15, 1986, Robmar acquired the stock of the Company in a leveraged
buyout. As part of the transaction, Robmar borrowed approximately $1,000,000 in
cash from the previous stockholders. This debt was recorded on the books of
Robmar.
-11-
<PAGE>
TMC GROUP, INC.
(A Wholly-Owned Subsidiary of Robmar Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
For the year ended December 31, 1994 and for the
eight Months ended December 31, 1993
Note 9 - Related Party Transaction - Continued
The debt of Robmar is subordinated to the demand note payable, bank, and
the promissory note of the Company (see Notes 2 and 3). In accordance with the
subordination agreement, payments on the Robmar debt to the former stockholders
can only be made if the Company meets certain cash flow requirements. In the
event that the cash flow requirements are met in the future and a debt payment
is required, the Company will dividend the amount of the payments to Robmar. The
unpaid balance of the note is due in July, 1997.
At December 31, 1993, the Company's receivable from Robmar was accounted
for as a contra-equity account.
Note 10 - Deferred Compensation
The Company had compensation agreements with former officers. The estimated
amounts of future payments to be made under these contracts were charged to
expense over the periods of active employment which ended during 1985. During
the periods ended December 31, 1994 and 1993, the Company made payments of
approximately $19,100 and $48,500, respectively, plus interest under these
agreements.
Note 11 - Profit Sharing Retirement Trust
The Company has a profit sharing plan under section 401(k) of the Internal
Revenue Code (IRC). The plan covers substantially all employees. Eligible
employees are permitted to contribute a portion of their gross compensation
based on prescribed IRS limits. The Company matching contribution is determined
annually by the Board of Directors. These matching contributions vest to
employees over a five year period. In addition to the above mentioned employer
matching contributions, the Company will make an annual contribution in an
amount to be determined by its Board of Directors. No contributions were made
for 1994 or 1993.
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<PAGE>
TMC GROUP, INC.
(A Wholly-Owned Subsidiary of Robmar Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
For the year ended December 31, 1994 and for the
eight Months ended December 31, 1993
Note 12 - Management's Plans
The Company's financial statements have been presented on the basis it will
continue as a going concern. As noted in the accompanying consolidated financial
statements, the Company has incurred a net loss of $165',305 and $691,373 in
1994 and 1993, respectively. As discussed in Note 2, the Company was in
violation of certain bank debt covenants, and the bank has indicated its
intention to issue a notice of default with no acceleration of payment of the
note for at least 90 days.
Management has developed plans to address these uncertainties. The plans
call for, among other things, increasing revenues from expanded sales (see Note
13), monitoring and reducing operating expenditures, and decreasing expenses and
debt by the sale of one of its two buildings (see Note 13). The ultimate success
or failure of these plans can not be determined at this time.
Note 13 - Subsequent Events
The Company entered into a new lease agreement with its existing tenant,
effective January 1, 1995. The lease term is three years with an option to renew
for an additional three years. Rent in the first year is $162,500, and $170,000
in each of the following two years. The tenant has an option to purchase the
building and five acres of land for $1,500,000. The option is open through and
expires after December 31, 1995.
On January 18, 1995, the Company acquired certain assets and assumed
certain liabilities of Nuage Flowers, Inc. for a total purchase price, including
assumed liabilities, equal to $500,000. Allocation of the purchase price is as
follows:
Item Amount
---- ------
Fixed assets $ 33,000
Inventory 392,760
Receivables 64,240
Trademarks 5,000
Other assets 5,000
---------
$ 500,000
=========
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<PAGE>
TMC GROUP, INC.
(A Wholly-Owned Subsidiary of Robmar Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
For the year ended December 31, 1994 and for the
eight Months ended December 31, 1993
Note 13 - Subsequent Events - Continued
The purchase price is payable as follows:
Assumed trade payables $ 199,188
Bank of New York, in
exchange for its
termination of its
security interest in
assets 101,146
Cash at closing 199,666
---------
$ 500,000
=========
In connection with this acquisition, the Company purchased certain patents
for a total purchase price not to exceed $1,500,000 This portion of the purchase
price shall be in the form of a royalty, the amount of which shall be determined
and paid from net sales, as defined in the agreement. No royalties shall be
accrued after December 31, 2001, even if royalties equal to the maximum purchase
price have not been accrued as of December 31, 2001. Furthermore, the Company
entered into an employment agreement with the seller for a period of five years
commencing on the effective date. Compensation during the employment term shall
be in the amount of $75,000 per annum.
On February 9, 1995, AGP formed a wholly-owned subsidiary, Bridal Company,
Inc. (Bridal), pursuant to the laws of the State of Delaware. Bridal operates as
a manufacturing facility located in Puerto Rico. Bridal produces certain
products for which the Company provides the necessary raw materials. The Company
is responsible for all costs of Bridal.
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STOCK PURCHASE AGREEMENT
This Agreement dated as of this 29th day of October, 1996 ("Agreement"), by
and among Social Expressions Acquisition Corporation, a Delaware corporation
(hereinafter called "Purchaser"), AGP and Company, Inc., a New Jersey
corporation (hereinafter called "AGP") and Robmar Corporation, a Delaware
corporation (hereinafter called "Robmar").
W I T N E S S E T H T H A T:
WHEREAS, AGP is the owner of all of the issued and outstanding shares of
the capital stock of Robmar, which, in turn, is the owner of all of the issued
and outstanding shares of the capital stock of TMC Group, Inc. ("TMC"), a
Delaware corporation; and
WHEREAS, AGP, Purchaser and certain other persons and entities have entered
into a Settlement Agreement, dated October 1, 1996 (the "Settlement Agreement"),
which provides for the sale of TMC to Purchaser; and
WHEREAS, AGP and Robmar desire to sell all of the issued and outstanding
shares of TMC to Purchaser, and Purchaser desires to purchase such shares from
Robmar, on the terms and conditions hereinafter set forth,
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and in the Settlement Agreement, Purchaser, AGP and Robmar
hereby agree as follows:
1. Sale and Purchase of Shares: At the Closing (as hereinafter defined), in
reliance upon the representations and warranties of Purchaser and subject to the
fulfillment by Purchaser of the conditions to be fulfilled by Purchaser prior to
or at the Closing, Robmar agrees to sell, assign, transfer and deliver to
Purchaser, and AGP agrees to cause Robmar to sell, assign, transfer and deliver
to Purchaser, for the consideration described in Section 3 hereof, all of the
issued and outstanding shares of the capital stock of TMC on the date of Closing
(the "Shares"). Purchaser, in reliance upon the representations and warranties
of AGP and Robmar and subject to the fulfillment by AGP and Robmar of the
conditions to be fulfilled by them prior to or at the Closing, agrees to
purchase the Shares from Robmar for the consideration specified in such Section
3 hereof, to be paid as provided in such Section 3.
<PAGE>
2. Purchase Price: The purchase price of the Shares ("Purchase Price")
shall be as set forth hereinafter in Section 3.
3. Payment of Purchase Price: Purchaser shall deliver to Robmar the
following in payment for the Shares:
a. Purchaser has entered into agreements to become a public company
subject to the reporting requirements of the Securities Exchange Act of 1934, as
amended (a "Public Company") on or before the Closing. Provided that Purchaser
is a Public Company on or before the date of Closing, the Purchase Price shall
consist of (i) a number of shares of Purchaser's voting common stock ("Common
Stock") having an aggregate value of $2,500,000, and (ii) a royalty in the
amount of 0.75% of TMC's annual net collected revenues (as defined below), paid
quarterly, in arrears, for a period of three (3) years commencing with the date
of Closing. The precise number of such shares to be delivered to Robmar at the
Closing shall be calculated by dividing $2,500,00 by the average of the closing
bid and asked prices of the Common Stock during the last ten trading days
immediately preceding the Closing.
b. In the event that Purchaser is not a Public Company on the date of
Closing, then the Purchase Price shall consist of (i) Purchaser's 10%
subordinated note maturing ten (10) years from the date of Closing (the "Note")
in an aggregate principal amount of $2,500,000, and (ii) a royalty payment equal
to 1.5% of TMC's annual net collected revenues (defined as gross cash revenues
from product sales less returns, discounts and allowances), paid quarterly, in
arrears, for a period of three (3) years commencing with the date of Closing,
one-half (1/2) of which shall reduce the principal amount otherwise due and
owing on the Note. The Note shall be in the form set forth in Exhibit A,
attached hereto and made a part hereof. The Purchaser shall retain the right to
redeem the Note in exchange for the issuance of shares of its Common Stock at
the time it becomes a Public Company. In the event that Purchaser does not
redeem the Note at such time, Robmar shall have the right to immediately convert
the Note in exchange for shares of Purchaser's Common Stock. Upon such
redemption or exercise by Robmar of its right described in the preceding
sentence, Purchaser shall issue a number of shares of its Common Stock having
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<PAGE>
an aggregate value equal to the then outstanding principal amount of the Note
and any accrued interest (the "Amount"). The precise number of such shares to be
delivered to Robmar shall be calculated by dividing the Amount by the average of
the closing bid and asked prices of the Common Stock during the last ten trading
days immediately preceding the date of such redemption or conversion by Robmar.
c. In the event that Purchaser fails to make any required royalty
payment when due pursuant to this Section 3, any and all proxies previously
delivered by AGP with respect to shares of the capital stock of Purchaser shall
be null and void during the period of any such non-payment. Upon payment of the
required royalty fee, such proxies shall be immediately effective again.
Notwithstanding the above, in the event that Purchaser fails to make the first
required royalty payment when due, the proxies given by AGP will remain in
effect, as long as Purchaser has taken no action which requires a vote of its
shareholders prior to Purchaser's making the required payment in full. Purchaser
shall use its best efforts to make all royalty payments on a timely basis.
4. Closing Transfer:
a. Closing hereunder shall take place at 10:00 a.m. local time on the
first business day after receipt of approval of this Agreement by the
shareholders of AGP, but in no event later than February 1, 1997, time being of
the essence, unless all parties hereto mutually agree, in a signed writing, upon
a different time and date ("Closing Date"). Closing shall take place at the
office of Hall, Dickler, Kent, Friedman & Wood, 909 Third Avenue, New York, New
York, unless the parties hereto mutually agree, in writing, upon a different
place of Closing.
b. At Closing, Robmar and AGP shall deliver to Purchaser the
following:
(I) The certificate or certificates representing all of the
issued and outstanding shares of TMC together with stock
powers relating thereto, duly executed in blank.
(II) The minute books, stock books and corporate seal of TMC.
-3-
<PAGE>
(III) A certified copy of resolutions of the Board of Directors
and shareholders of AGP, and a certified copy of resolutions
of the Board of Directors and the sole shareholder of
Robmar, approving and authorizing the execution, delivery
and performance of this Agreement by AGP and Robmar (and all
other documents to be executed and delivered by AGP and
Robmar in connection herewith) and the consummation of the
transaction contemplated hereunder.
(IV) Good standing certificates of AGP (from the Secretary of
State of New Jersey) and of Robmar and TMC (from the
Secretary of State of Delaware).
c. At Closing, Purchaser shall deliver to Robmar the following:
(I) Either the appropriate number of shares of the Common Stock
of Purchaser described in Section 3(a) or, in the
alternative, the Note, as described in Section 3(b).
(II) A certified copy of resolutions of the Board of Directors of
Purchaser approving and authorizing the execution, delivery
and performance of this Agreement by Purchaser (and all
other documents to be executed and delivered by Purchaser in
connection herewith) and the consummation of the transaction
contemplated hereunder.
5. Settlement Agreement: The parties hereto expressly acknowledge and agree
that their rights and obligations under the Settlement Agreement, attached
hereto as Exhibit B, the terms of which are hereby incorporated by reference as
if fully set forth herein, are hereby reaffirmed and that this Stock Purchase
Agreement has been prepared in full conformity with such Settlement Agreement.
-4-
<PAGE>
6. Representations, Warranties and Covenants of AGP and Robmar: AGP and
Robmar warrant, represent and covenant to Purchaser as follows:
a. AGP is a corporation duly organized, validly existing and in good
standing under the laws of the State of New Jersey, and Robmar and TMC are each
corporations duly organized, validly existing and in good standing under the
laws of the State of Delaware. AGP and Robmar further represent and warrant that
AGP, Robmar and TMC each, respectively, has all requisite legal and corporate
power and authority to own and utilize its respective properties and to carry on
its respective business and operations as currently conducted (and as the same
shall be conducted on the Closing Date) in all material respects.
b. The Boards of Directors of AGP and Robmar have duly and validly
authorized the execution, delivery and performance by AGP and Robmar of this
Agreement (and all such other documents to be executed, delivered and/or
performed by them in connection herewith), and this Agreement (and all such
other documents) are valid and binding upon AGP and Robmar and enforceable
against them in accordance with their respective terms.
c. Neither the execution nor the delivery of this Agreement by AGP or
Robmar, nor the consummation of the transaction contemplated hereunder, will
conflict with or will result in a violation or breach of any term or provision
of, or constitute an event of default or acceleration under (assuming the
passage of time and/or the giving of notice) the respective Articles of
Incorporation or By-laws of AGP, Robmar and TMC, or any law, regulation, order,
permit, license or decree or any agreement to which AGP, Robmar or TMC is a
party or subject, or will result in the imposition of any lien, encumbrance or
charge upon any of the assets or properties of AGP, Robmar or TMC or give any
third party the right to terminate, amend or renegotiate any material agreement
to which AGP, Robmar or TMC is a party. No consent of any third party is
required to authorize the execution and delivery of this Agreement or the
consummation of any of the transactions contemplated hereunder by AGP or Robmar
except for the approval of the shareholders of AGP.
-5-
<PAGE>
d. No representation or warranty of AGP or Robmar made herein, or in
any exhibit, document, certificate or schedule required to be furnished
hereunder, contains or will contain any untrue statement of material fact or
omits or will omit to state a material fact necessary to make any statement of
fact contained herein or therein not materially misleading.
e. Robmar is the owner of 48,850 shares of the Class A Common Stock,
par value $1.00 per share, of TMC and 93,900 shares of the Class B Common Stock,
par value $1.00 per share, of TMC, such shares constituting all of the issued
and outstanding shares of the capital stock of TMC. Robmar has good and
marketable title to such shares, and there are no liens, claims, options,
proxies, charges or encumbrances whatsoever affecting such shares or the ability
of Robmar or AGP to sell such shares to Purchaser. At the Closing, Purchaser
shall acquire good and marketable title to such shares, free and clear of all
liens, claims, options, proxies, charges and encumbrances whatsoever.
f. Illuminations, Inc. and The Wedding Company, Inc. are subsidiaries
of TMC.
g. In addition to AGP's obligations pursuant to Section 3.3(b) of the
Settlement Agreement, AGP and its directors and officers will use their best
efforts to obtain the requisite approval by the shareholders of AGP of this
Agreement.
7. Representations and Warranties of Purchaser: Purchaser warrants and
represents to AGP and Robmar as follows:
a. Purchaser is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware.
b. The Board of Directors of Purchaser has duly and validly authorized
the execution, delivery and performance by Purchaser of this Agreement (and all
other documents to be executed, delivered and/or performed by Purchaser in
connection herewith), and this Agreement (and all such other documents) are
valid and binding upon Purchaser and enforceable against Purchaser in accordance
with their respective terms.
-6-
<PAGE>
c. Neither the execution nor the delivery of this Agreement by
Purchaser, nor the consummation of the transaction contemplated hereunder, will
conflict with or will result in a violation or breach of any terms or provisions
of, or constitute an event of default or acceleration under (assuming the
passage of time and/or the giving of notice) the Articles of Incorporation or
By-laws of Purchaser, or any law, regulation, order, permit, license or decree
or any agreement to which Purchaser is a party or subject, or will result in the
imposition of any lien, encumbrance or charge upon any of the assets or
properties of Purchaser, or give any third party the right to terminate, amend
or renegotiate any material agreement to which Purchaser is a party. No consent
of any third party is required to authorize the execution and delivery of this
Agreement or the consummation of any of the transactions contemplated hereunder
by Purchaser.
d. No representation or warranty of Purchaser made herein, or in any
exhibit, document, certificate or schedule required to be furnished hereunder,
contains or will contain any untrue statement of material fact or omits or will
omit to state a material fact necessary to make any statement of fact contained
herein or therein not materially misleading.
8. Conditions Precedent to Purchaser's Closing: The obligation of Purchaser
to close this transaction is hereby conditioned upon the fulfillment at or prior
to the Closing of the following conditions, unless waived in writing, in whole
or in part, by Purchaser:
a. All representations and warranties of AGP and Robmar made herein
shall be true and correct in all material respects as of the Closing Date as
though made on such date.
b. AGP and Robmar shall have fully complied in all material respects
with all of the terms, covenants and obligations to be performed by them at or
prior to the Closing Date pursuant to the terms of this Agreement and the
Settlement Agreement.
c. Receipt of the requisite approval from the shareholders of AGP in
accordance with applicable law and AGP's Articles of Incorporation and By-laws.
9. Conditions Precedent to AGP's and Robmar's Closing: The obligation of
AGP and Robmar to close this transaction is hereby conditioned upon the
fulfillment at or prior to
-7-
<PAGE>
the Closing of the following conditions, unless waived in writing, in whole or
in part, by AGP and Robmar:
a. All representations and warranties of Purchaser made herein shall
be true and correct in all material respects as of the Closing Date as though
made on such date.
b. Purchaser shall have fully complied in all material respects with
all of the terms, covenants and obligations to be performed by it at or prior to
the Closing Date pursuant to the terms of this Agreement and the Settlement
Agreement.
c. Receipt of a fairness opinion from Nutmeg Securities, which shall
state that the consideration to be received by Robmar for the Shares pursuant to
this Agreement is fair from a financial point of view and which shall be
received no later than the date on which AGP is first able to mail to its
shareholders the proxy materials to be used in connection with seeking approval
by AGP's shareholders of this Agreement.
d. Receipt of the requisite approval from the shareholders of AGP in
accordance with applicable law and AGP's Articles of Incorporation and By-laws.
10. Survival of Representations and Warranties:
All of the respective representations and warranties made by AGP,
Robmar and Purchaser herein shall survive the Closing for a period of two (2)
years thereafter.
11. Registration Rights and Lock-Up Agreement.
a. Definitions. For purposes of this Section 11, the following terms
shall have the following meanings:
(i) "Holder" shall mean Robmar and its Permitted Assignee.
(ii) "Mandatory Registration Rights Period" shall mean the period
commencing 12 months and 1 day after the Closing Date and ending on a date
which is 24 months after the Closing Date.
(iii) "Permitted Assignee" shall mean AGP.
(iv) "Piggyback Registration Rights Period" shall mean the period
commencing on the Closing Date and ending on a date which is 12 months
after the Closing Date.
-8-
<PAGE>
(v) "Registerable Securities" and "Registerable Shares" shall mean all
shares of Common Stock which are (i) issued to Robmar and (ii) continue to
be held by Robmar or its Permitted Assignee.
(vi) "SEC" shall mean the Securities and Exchange Commission.
(vii) "1933 Act" shall mean the Securities Act of 1933, as amended.
b. Piggyback Registration Rights.
(i) If, during the Piggyback Registration Rights Period, Purchaser
files a registration statement on any SEC Form other than Form S-4 or Form
S-8 (or their respective successors) under the 1933 Act in which any shares
of Common Stock other than Registerable Shares are to be sold, Purchaser
will, prior to such filing, give written notice to the Holder (at its last
known business address) of its intention to do so and, upon the written
request of the Holder given within 10 business days after Purchaser
provides such notice, Purchaser shall use its best efforts to cause all
Registerable Securities which Purchaser has been requested to register by
the Holder to be included in such registration statement; provided,
however, that if such registration statement pertains to an underwritten
offering, then Purchaser shall have the right to postpone or withdraw any
registration effected pursuant to this Section 11(b) without obligation to
the Holder upon the advice of the managing underwriter that such
postponement or withdrawal is in the best interests of Purchaser.
(ii) In connection with any offering under this Section 11(b)
involving an underwriting, Purchaser shall not be required to include any
Registerable Shares in such underwriting unless the Holder accepts the
terms of the underwriting as agreed upon by Purchaser and the underwriter
or underwriters selected by Purchaser (including, without limitation, terms
regarding indemnification by selling shareholders and representations of
selling shareholders). If in the opinion of the managing underwriter the
registration of all or part of the Registerable Shares which the Holder has
requested to be included could adversely affect such public offering, then
Purchaser shall be required to include in the
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<PAGE>
underwriting and in such registration statement only that number of
Registerable Shares, if any, which the managing underwriter believes may be
sold without causing such adverse effect. It is understood that no such
reduction shall be made with respect to any securities offered by Purchaser
for its own account.
(iii) In the case of any registration effected pursuant to this
Section 11(b), the Holder shall bear (a) its pro rata portion of any
underwriting discounts and commissions, (b) the fees and costs of its own
counsel if such counsel is other than Purchaser's counsel, (c) all blue sky
filing fees and related expenses incurred in connection with the Holder's
desire to sell the Registerable Shares in any state where Purchaser does
not intend to sell pursuant to such registration statement and (d) Holder's
pro rata portion of any other offering expenses if required by the
securities laws of any state in which the Holder desires to sell the
Registerable Shares.
(iv) It is understood that Purchaser shall not be required to file
more than one registration statement pursuant to this Section 11(b).
c. Mandatory Registration.
(i) If, at any one time and only one time during the Mandatory
Registration Rights Period, the Holder shall give notice to the Purchaser
requesting that Purchaser file with the SEC under the 1933 Act a
registration statement relating to fifty percent (50%) or more of the
Registerable Shares issued to Robmar pursuant to this Agreement, Purchaser
shall as expeditiously as possible file (subject to Section 11(c)(iv)) and
use its best efforts to cause to become effective under the 1933 Act a
registration statement covering such number of Registerable Shares as the
Purchaser has been requested to register for disposition by the Holder or
to the extent required to permit the public sale or other public
disposition thereof for a period of up to nine months by the Holder.
(ii) Purchaser shall pay all costs, expenses, disbursements and fees,
including fees and expenses of Purchaser's counsel and of printing and
furnishing copies of the prospectuses, in connection with the one
registration statement initiated pursuant to the
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<PAGE>
provisions of this Section 11(c), and also including all costs, expenses,
disbursements and fees required to keep such registration statement current
for a period of up to nine months, but excluding those costs described in
Section 11(b)(iii) above. Notwithstanding the foregoing, Purchaser shall
not be required to pay for any expenses of any registration proceeding
begun pursuant to this Section 11(c) if the registration request is
subsequently withdrawn by the Holder unless such withdrawal results from a
material decline in the market price of the Common Stock for reasons that
were not foreseen by Purchaser and disclosed to the Holder within 10 days
after the request for such registration is made to Purchaser. If the
Holder's request under this Section 11(c) is made at a time when the
Purchaser's nine month financial statements are no longer usable in a
registration statement pursuant to applicable SEC regulations, but the
Purchaser's year-end financial statements are not yet completed and are not
required to be completed pursuant to applicable SEC regulations, the Holder
shall bear the additional costs and fees of the Purchaser's auditors which
may result from the Purchaser's inability to use year-end financial
statements in the registration statement initially filed pursuant to the
Holder's request, unless the Purchaser would ordinarily be required to
incur such costs to comply with the reporting requirements of the
Securities Exchange Act of 1934, as amended.
(iii) It is understood that Purchaser shall not be required to file
more than one registration statement pursuant to this Section 11(c).
(iv) It is also understood that if the registration statement pertains
to an underwritten offering, Purchaser shall have the right to postpone or
withdraw any registration effected pursuant to this Section 11(c) without
obligation to the Holder upon the advice of the managing underwriter that
such postponement or withdrawal is in the best interests of Purchaser.
d. Indemnification and Contribution.
(1) In connection with any registration statement filed pursuant
to this Section 11, the Purchaser shall indemnify and hold harmless
each of the Holder, its
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<PAGE>
officers and directors and each person who controls the Holder within
the meaning of the 1933 Act against any and all losses, claims,
damages or liabilities and expenses whatsoever as incurred, insofar as
such losses, claims, damages, liabilities and expenses arise out of or
are based upon any untrue or alleged untrue statement of material fact
contained in the registration statement, or any prospectus or
preliminary prospectus or any amendment thereof or supplement thereto
or arise out of or are based upon any omission or alleged omission to
state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and agrees to
reimburse each such indemnified person, as incurred, for any legal or
other expense reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or
action; provided, however, that (i) the Purchaser will not be liable
in any case to the extent that any loss, claim, damage, liability or
expenses arises out of or is based upon any such untrue or alleged
untrue statement or any such omission or alleged omission made therein
in reliance upon and in conformity with written information furnished
to the Purchaser by or on behalf of the Holder specifically for
inclusion therein and (ii) the foregoing indemnity with respect to any
untrue statement or alleged untrue statement or any omission or
alleged omission made in any preliminary prospectus relating to the
registration statement shall not inure to the benefit of the Holder
(or any person controlling it) from whom the person asserting any such
loss, claim, damage or liability purchases any of the Registerable
Securities that are the subject thereof if such person did not receive
a copy of the final prospectus (or the final prospectus as
supplemented) at or prior to the written confirmation of the sale of
such Registerable Securities to such person and the untrue statement
or omission contained in the preliminary prospectus was corrected in
the final prospectus (or the final prospectus as supplemented).
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<PAGE>
The Purchaser also agrees to indemnify or contribute to losses
of, as provided in paragraph 4 below, any underwriters of Registerable
Securities registered under the registration statement, their officers
and directors and each person, if any, who controls any such
underwriter (within the meaning of the 1933 Act) on substantially the
same basis as that of the indemnification of the Holder provided in
this paragraph and shall, if requested by the Holder, enter into an
underwriting agreement reflecting such agreement.
(2) The Holder shall indemnify and hold harmless the Purchaser,
its directors and officers and each person, if any, who controls the
Purchaser (within the meaning of the 1933 Act) against any and all
losses, claims, damages, liabilities and expenses described in the
indemnity contained in paragraph 1 above, as incurred, resulting from
any untrue or alleged untrue statement of material fact contained in
the registration statement or any amendment thereof or supplement
thereto or any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading to the extent, but only to the
extent, that such loss, claim, damage, liability or expense relates to
or arises from information relating to the Holder furnished in writing
by the Holder specifically for use in the registration statement;
provided, however, that the obligation to indemnify will be individual
to the Holder and will be limited to the amount of net proceeds
received by the Holder from the sale of Registerable Securities
pursuant to the registration statement.
(3) Any person entitled to indemnification hereunder shall give
notice as promptly as reasonably practicable to each indemnifying
party of any claim or action commenced against it in respect of which
indemnity may be sought hereunder; provided, however, that failure to
so notify an indemnifying party shall not relieve such indemnifying
party from any obligation that it may have pursuant to this Section
except to the extent that it has been materially prejudiced (through
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<PAGE>
the forfeiture of substantive rights or defenses) by such failure;
provided further, however, that the failure to notify the indemnifying
party shall not relieve it from any liability that it may have to an
indemnified party otherwise than on account of this indemnity
agreement. If any such claim or action shall be brought against an
indemnified party, the indemnified party shall notify the indemnifying
party thereof, the indemnifying party shall be entitled to participate
therein and, to the extent that it wishes, jointly with any other
similarly notified indemnifying party, to assume the defense thereof
with counsel reasonably satisfactory to the indemnified party. After
notice from the indemnifying party to the indemnified party of its
election to assume the defense of such claim or action, the
indemnifying party shall not be liable to the indemnified party under
this Section 11 for any legal or other expenses subsequently incurred
by the indemnified party in connection with the defense thereof;
provided, however, that an indemnified party will have the right to
employ its own counsel in any such action, but the fees, expenses and
other charges of such counsel will be at the expense of such
indemnified party unless (1) the employment of counsel by the
indemnified party has been authorized in writing by the indemnifying
party, (2) the indemnified party has reasonably concluded (based on
advice of counsel) that there may be legal defenses available to it or
other indemnified parties that are different from or in addition to
those available to the indemnifying party, (3) a conflict or potential
conflict exists (based on advice of counsel to the indemnified party)
between the indemnified party and indemnifying party (in which case
the indemnifying party will not have the right to direct the defense
of such action on behalf of the indemnified party) or (4) the
indemnifying party has not in fact employed counsel to assume the
defense of such action within a reasonable time after receiving notice
of the commencement of the action, in each of which cases the
reasonable fees, disbursements and other charges of counsel will be at
the expense of the indemnifying party or parties. It is
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understood that the indemnifying party or parties shall not, in
connection with any proceeding or related proceedings in the same
jurisdiction, be liable for the reasonable fees, disbursements and
other charges of more than one separate firm of attorneys (in addition
to any local counsel) at any one time for all such indemnified party
or parties. Each indemnified party, as a condition to the indemnity
agreements contained in paragraphs 1 and 2 above, shall use all
reasonable efforts to cooperate with the indemnifying party in the
defense of any such action or claim. No indemnifying party shall be
liable for any settlement or any such action effected without its
written consent, but if settled with its written consent or if there
be a final judgment of the plaintiff in any such action, the
indemnifying party agrees to indemnify and hold harmless any
indemnified party from and against any loss or liability by reason of
such settlement or judgment. No indemnifying party shall, without the
prior written consent of the indemnified party, effect any settlement
of any pending or threatened proceeding in respect of which any
indemnified party is or could have been a party and indemnity could
have been sought hereunder by such indemnified party, unless such
settlement includes an unconditional release of such indemnified party
from all liability on claims that are the subject matter of such
proceeding.
(4) If a claim by an indemnified party for indemnification under
this Section 11 is found unenforceable in a final judgment by a court
of competent jurisdiction (not subject to further appeal or review)
even though the express provisions hereof provide for indemnification
in such case, then each applicable indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to the amount
paid or payable by such indemnified party as a result of such losses
in such proportion as is appropriate to reflect the relative fault of
the indemnifying party and indemnified party in connection with the
actions, statements or omissions that resulted in such losses as well
as any other relevant equitable considerations.
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<PAGE>
The relative fault of such indemnifying party and indemnified party
shall be determined by reference to, among other things, whether any
action in question, including any untrue or alleged untrue statement
of a material fact or omission or alleged omission of a material fact,
has been taken or made by, or relates to information supplied by, such
indemnifying party or indemnified party, and the parties' relative
intent, knowledge, access to information and opportunity to correct or
prevent such action, statement or omission. The amount paid or payable
by a party as a result of any losses shall be deemed to include,
subject to the limitations set forth in paragraph 3 above, any legal
or other fees or expenses reasonably incurred by such party in
connection with any investigation or proceedings.
The parties hereto agree that it would not be just and equitable
if contribution pursuant to this paragraph 4 were determined by pro
rata allocation or by any other method of allocation that does not
take into account the equitable considerations referred to in the
immediately preceding paragraph. Notwithstanding the provisions of
this Section, an indemnifying party that is the Holder shall not be
required to contribute any amount in excess of the amount by which the
total price at which the Registerable Securities sold by the Holder
and distributed to the public were offered to the public exceeds the
amount of any damages that the Holder has otherwise been required to
pay by reason of such untrue or alleged untrue statement or omission
or alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the 1933 Act) shall be
entitled to any contribution from any person who was not guilty of
such fraudulent misrepresentation.
e. Obligations. Whenever required under either Section 11(b) or
Section 11(c) to use its best efforts to effect the registration of any
Registerable Securities, the Purchaser shall, as expeditiously as reasonably
possible:
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(i) Prepare and file with the SEC a registration statement with
respect to such Registerable Securities and use its best efforts to cause
such registration statement to become and remain effective for a period of
up to nine months in the event of a registration statement filed pursuant
to Section 11(c) hereof and 15 months in the event of a registration
statement filed pursuant to Section 11(b) hereof.
(ii) Prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of
the 1933 Act with respect to the disposition of all securities covered by
such registration statement.
(iii) Furnish to the Holder such numbers of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of
the 1933 Act, and such other documents as the Holder may reasonably request
in order to facilitate the disposition of Registerable Securities owned by
it.
(iv) Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or blue
sky laws of such jurisdictions as shall be reasonably appropriate for the
distribution of the securities covered by the registration statement;
provided, that the Purchaser shall not be required in connection therewith
or as a condition thereto to qualify to do business or to file a general
consent to service of process in any such states or jurisdiction.
f. Assignment. The registration rights granted pursuant to this
Section 11 are not assignable other than to the Permitted Assignee.
g. Information. It shall be a condition precedent to the obligations
of the Purchaser under this Section 11 that the Holder shall furnish to
Purchaser such information regarding it, the Registerable Shares and the
intended method of disposition of such securities as the Purchaser or any
underwriter shall reasonably request and as shall be required in connection with
the action to be taken by the Purchaser.
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<PAGE>
h. Limitation. Notwithstanding any provision herein to the contrary,
the Holder shall not have the right to cause any Registerable Shares to be
registered pursuant to this Section 11 if the Purchaser shall have received a
written statement from the SEC to the effect that the staff of the SEC will take
no action if such Registerable Shares are sold without registration under the
1933 Act or if, in the written opinion of counsel to Purchaser, the Registerable
Shares desired to be sold by the Holder may, at the time a registration request
is made by the Holder, be sold in accordance with Rule 144 of the SEC within any
ninety day period or may otherwise be sold without registration under the 1933
Act.
i. Lock-Up. Notwithstanding the registration rights granted above, the
Holder agrees that in the event of a registration effected pursuant to paragraph
(b) above, it will not sell any Registerable Shares pursuant to the registration
statement for a period of 90 days after the effectiveness of such registration
statement, after which the Holder shall be permitted to sell an additional 25%
of its Registerable Shares during each subsequent 90 day period. In the event of
a registration effected pursuant to paragraph (c) above, the Holder will not be
subject to any lock-up restriction on its ability to sell the Registerable
Securities.
12. Entire Agreement: This Agreement together with the related exhibits,
schedules and other documents referred to herein (including without limitation
the Settlement Agreement), constitutes the entire understanding between the
parties hereto with respect to the sale of the Shares. This Agreement may not be
amended except by an instrument in writing, duly executed by all the parties
hereto. All representations, warranties, covenants, terms, conditions and
provisions of this Agreement shall be binding upon and inure to the benefit of
the respective representatives, successors and assigns of the parties hereto.
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<PAGE>
13. Press Release: AGP, upon execution of this Agreement, shall immediately
publish a press release announcing the transaction contemplated by this
Agreement, which press release shall be reviewed in advance by Purchaser. Upon
the execution of this Agreement and the occurrence of the Closing, AGP shall
make all required regulatory filings, including without limitation any filings
with the Securities and Exchange Commission.
14. The Law of the Contract: This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of New Jersey.
15. Notices: All notices, requests, waivers, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given if sent by United States certified or registered mail, postage
prepaid, return receipt requested:
AGP: 551 Fifth Avenue
New York, New York 10017
Attention: President
Robmar: c/o AGP and Company, Inc.
551 Fifth Avenue
New York, New York 10017
Attention: President
with a copy to:
Steven D. Dreyer, Esq.
Hall, Dickler, Kent, Friedman & Wood
909 Third Avenue
New York, New York 10022-4731
Purchaser: 551 Fifth Avenue, Suite 1501
New York, New York 10017
Attention: President
with a copy to:
Peter H. Ehrenberg, Esq.
Lowenstein, Sandler, Kohl, Fisher & Boylan
65 Livingston Avenue
Roseland, New Jersey 07068
or such other addresses as shall be specified from time to time (in compliance
with the requirements of this Section 15 for the giving of notice) by the
parties entitled to receive such notices.
16. Counterparts: This Agreement may be executed in one or more
counterparts, all of which taken together shall constitute one instrument.
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17. Pronouns: Pronouns used herein shall be deemed to include the
masculine, feminine or neuter, singular or plural, as their contexts may
require.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written and intending to be fully bound, hereby
accept and agree to all of the foregoing terms.
SOCIAL EXPRESSIONS
ACQUISITION CORPORATION
By: /s/ Omar Peraza
---------------------------------
Omar Peraza, President
AGP AND COMPANY, INC.
By: /s/ Steven W. Bingaman
---------------------------------
Steven W. Bingaman, Pres.
ROBMAR CORPORATION
By: /s/ Omar Peraza
---------------------------------
Omar Peraza, President
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<PAGE>
Dated:____________________
SUBORDINATED PROMISSORY NOTE
$2,500,000 New York, New York
For value received, Social Expressions Corporation, a Delaware Corporation
with offices at 551 Fifth Avenue, Suite 1501, New York, New York 10176 (the
"Obligor"), hereby executes this Subordinated Promissory Note (the "Note"), and
promises to pay to the order of Robmar Corporation (the "Holder"), c/o AGP and
Company, Inc. at 551 Fifth Avenue, Suite 1625, New York, New York, in lawful
money of the United States of America, in immediately available funds, the
principal sum of TWO MILLION FIVE HUNDRED THOUSAND dollars ($2,500,000) (the
"Principal Amount"), plus interest at the rate of ten percent (10%) per annum as
follows:
(a) No payments will be due under this Note from the date hereof until
___________, 1997, and there shall be no accrual of interest during such period;
(b) Beginning on ___________, 1997 and ending on ___________, 1998,
Obligor will make 12 monthly payments of interest only on the Principal Amount
at the interest rate set forth above; and
(c) Beginning on ___________, 1998 and continuing monthly thereafter
through and including ___________, 2006 (the "Maturity Date"), the Principal
Amount, together with all interest accruing thereon, shall be paid on a
self-amortizing basis by paying 96 level payments of $____. The unpaid balance,
if any, of the Principal Amount, together with all accrued but unpaid interest
on the Principal Amount, shall be due and payable on the Maturity Date.
1. The obligation of Obligor evidenced by this Note, and all payments due
hereunder, are subordinate to all existing secured institutional indebtedness of
the Obligor, as of the date of issuance hereof and to all secured institutional
indebtedness which Obligor may incur hereafter.
<PAGE>
2. As used herein, secured institutional indebtedness means any borrowing,
credit facility or obligation otherwise owed to a bank, savings bank, trust
company, insurance company, investment firm or other entities in the business of
making commercial loans, which borrowing, credit facility or obligation is
secured by collateral. The Obligor shall have the right to renew or extend its
present credit facilities, to refinance them and to incur new secured
institutional indebtedness, all of which obligations shall be senior to this
Note, without the consent of the Holder. The Obligor's right to incur unsecured
indebtedness shall remain unaffected by this Note.
3. The Holder shall have no claims against individuals for liability
imposed, by statute or otherwise, upon present or future stockholders, directors
or officers of the Obligor.
4. There are no conditions of default which shall have the effect of giving
the Holder the right to accelerate the Maturity Date hereof or any of the
payments described under this Note other than Obligor's failure to make any
required payment when due under this Note, provided that such failure to pay has
not been cured within 30 days after the applicable due date.
5. The Obligor reserves the right to pay all or any portion of the
Principal Amount of this Note at any time, and to redeem said Note in accordance
with the Stock Purchase Agreement, dated October __, 1996, among the Obligor,
the Holder and AGP and Company, Inc.
6. This Note shall be binding on the Obligor and its successors and
assigns.
SOCIAL EXPRESSIONS
ACQUISITION CORPORATION
By:_________________________
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