<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Schedule 14(a)
of the Securities Exchange Act of 1934
(Amendment No. ____)
Filed by the Registrant X
-----
Filed by a Party other than Registrant ______
Check the Appropriate Box:
X Preliminary Proxy Statement
- -----
_____ Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2)
_____ Definitive Proxy Statement
_____ Definitive Additional Materials (Annual Report)
_____ Soliciting Material Pursuant to Section 2401.14a-11 or
Section 240.14a-12
METRO GLOBAL MEDIA, INC.
(Name of Registrant as Specified In Its Charter)
Eric P. Littman, Esquire
(Name of person Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
X No fee required.
- -----
_____ Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
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 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
- --------------------------------------------------------------------------------
4. Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
5. Total fee paid:
_____ Fee paid previously with preliminary materials.
_____ 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 Statement No.:
------------------------
3) Filing Party:
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4) Date Filed:
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METRO GLOBAL MEDIA, INC.
ONE METRO PARK DRIVE
CRANSTON, RHODE ISLAND 02910
---------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD TUESDAY, JANUARY 26, 1999
---------------------------------
To the Shareholders of Metro Global Media, Inc.:
Notice is hereby given that the Annual meeting of Stockholders of Metro
Global Media, Inc. will be held at the on
Tuesday, January 26, 1999, at 10:00 am., local time, for the purpose of
considering and voting upon the following matters:
1. To elect a board of Directors to serve until the next Annual Meeting of
Stockholders and until their successors are duly elected and qualified.
2. To vote on the ratification of the terms of the Company's purchase of
Fanzine International, Inc.
3. To transact such other business as may properly come before the meeting.
Only stockholders of record as of the close of business on November 30,
1998 are entitled to receive notice of and to vote at the meeting or any
adjournment thereof.
By order of the Board of Directors
A. DANIEL GERIBO
Secretary
YOU ARE CORDIALLY INVITED TO ATTEND THE MEETING AND VOTE YOUR SHARES. EVEN IF
YOU PLAN TO ATTEND IN PERSON, PLEASE DATE, SIGN AND MAIL THE ENCLOSED PROXY IN
THE ENCLOSED SELF-ADDRESSED ENVELOPE AT YOUR EARLIEST CONVENIENCE. A STOCKHOLDER
WHO EXECUTES AND RETURNS A PROXY IN THE ACCOMPANYING FORM HAS THE POWER TO
REVOKE SUCH PROXY AT ANY TIME PRIOR TO THE EXERCISE THEREOF.
<PAGE>
METRO GLOBAL MEDIA, INC.
ONE METRO PARK DRIVE
CRANSTON, RHODE ISLAND 02910
---------------------------------
PROXY STATEMENT
---------------------------------
The accompanying proxy is solicited by the Board of Directors of Metro
Global Media, Inc. (the "Company"), for use at the Annual Meeting of
Stockholders to be held on Tuesday, January 26, 1999.
PROXY SOLICITATION AND EXPENSE
Proxies in the accompanying form, properly executed and received prior to
the meeting and not revoked, will be voted as specified, or if no instructions
are given, will be voted in favor of the proposals described herein. Proxies
may be revoked at any time prior to being voted by written notice to the
Secretary of the Company. Solicitation of proxies may be made by personal
interview, mail, telephone or telegraph by directors, officers and employees of
the Company. The expense of soliciting proxies will be borne by the Company.
The Company may also request banking institutions, brokerage firms, custodians,
trustees, nominees and fiduciaries to forward solicitation material to the
beneficial owners of the Company's Common Stock. The approximate date on which
this Proxy Statement and the accompanying proxy card will first be mailed to
stockholders is January 4, 1999.
OUTSTANDING VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
Only stockholders of record at the close of business on November 30, 1998
will be entitled to notice of and to vote at the meeting. At the close of
business on that date, the Company had outstanding ___________________ Shares of
Common Stock, $.0001 par value, exclusive of treasury shares. The presence at
the meeting, in person or by proxy, of shareholders entitled to cast at least a
majority of the votes which all shareholders are entitled to cast on each
particular matter to be considered at the meeting will constitute a quorum for
the purpose of considering such matter. Each holder of the Company's Common
Stock will be entitled to one vote for each share held.
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PROPOSAL NO. 1
ELECTION OF DIRECTORS
Shares represented by the enclosed proxy will, unless otherwise directed,
be voted to elect the nominees listed below to serve until the next annual
meeting of stockholders and until their successors are duly elected and
qualified. In the event of a vacancy in the list of nominees, the holders of
the enclosed proxy will vote for the election of a nominee acceptable to the
remaining nominees. Management is not aware of any person who is unable or
unwilling to stand for election or to serve if nominated.
<TABLE>
<CAPTION>
Name of Nominee Age Position with Company
- --------------------- --- ----------------------
<S> <C> <C>
Dan H. Eberly 48 Director and President
Alan S. Casale 48 Director
A. Daniel Geribo 53 Director
Robert T. Maiello 47 Director
Philip P. Salvatore 52 Director
Bart T. Senior 34 Director
Janet M. Hoey 35 Director and Treasurer
</TABLE>
Dan H. Eberly was named President and Chief Executive Officer of Metro
Global Media, Inc. on December 1, 1998. Prior to his appointment at Metro, Mr.
Eberly was employed, since 1995, as Chief Financial Officer and a senior
management member of the executive operations and strategic planning group of
Performance Polymers, Inc., the largest independent thermoplastic distributor in
the United States. From 1992 through 1995, Mr. Eberly was employed by
Computerland Corporation ("Computerland") as Vice-President of Operations in two
subsidiaries established to acquire, restructure and operate a computer products
sales and service business. During Mr. Eberly's tenure at Computerland, he also
held a position as financial controller of the Northeast region of the United
States. Mr. Eberly, a certified public accountant, obtained his Masters degree
in Business Administration with a concentration in finance from Northeastern
University.
Alan S. Casale is a principal in the accounting firm of Casale, Caliri, and
Jeroma since its inception in 1996. Prior to 1996, Mr. Casale was a principal
in the accounting firm of Cardello, Riccitelli & Casale since 1987. Cardello,
Riccitelli & Casale were the auditors of record of the Company from December
1992 to February 1993, and audited the financial statements of Metro for
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the years ended May 31, 1992, and May 31, 1991. Mr. Casale, who specializes in
taxation, valuation and litigation services, has over 25 years of experience in
both the private and public sectors. Mr. Casale, a certified public accountant,
received both his Bachelor of Science and Masters of Taxation degrees from
Bryant College. Mr. Casale is a member of both the American Institute and Rhode
Society of Certified Public Accountants.
A. Daniel Geribo has served as President, Treasurer, Secretary and sole
director of Capital Video Corporation ("CVC"), which operates a chain of retail
video stores in the New England and upstate New York are since November 1994,
and from September 1993 to November 1994 served as General Manager of CVC. From
January 1983 to May 1993, Mr. Geribo served as President of Unfinished Furniture
House, Inc., a chain of retail furniture stores. Mr. Geribo obtained his
Masters degree in Business Administration from Babson College.
Robert T. Maiello, President of Fanzine International, Inc. and Maxstone
Media Group, LLC, has extensive publishing and circulation experience. Since
1996, Mr. Maiello has been President of Millenium Publishing Partners. From
1990 through 1996, Mr. Maiello was President and Publisher of GCR Publishing
Group, and previous to that he held the positions of President and Publisher of
Swank International. Mr. Maiello received a Bachelor of Science degree in
marketing and management from St. John's University.
Philip P. Salvatore is President of Philip P. Salvatore & Associates, Inc.
which was established in 1993. Philip P. Salvatore & Associates, Inc. is now
recognized as the leading service provider to magazine publishers in North
America. Mr. Salvatore has over 30 years of both consumer product and newsstand
distribution experience dating back to the Scott Paper Company, Squibb
Laboratories and Combe Incorporated in various management positions. Before
starting Philip P. Salvatore & Associates, Inc., Mr. Salvatore served for 12
years as Vice President, Director of Marketing for Curtis Circulation Company.
Mr. Salvatore is a graduate of Salem State College with degrees in Marketing and
Economics.
Bart T. Senior, Executive Vice President of Philip P. Salvatore &
Associates, Inc. since 1993, has over 12 years of experience in magazine
newsstand publishing and distribution and plays an integral role in the
management of Fanzine International, Inc. Mr. Senior was previously employed by
the Curtis Circulation Company in a variety of positions, including National
Marketing Manager. Along with Philip Salvatore, Mr. Senior formed Philip P.
Salvatore & Associates, Inc. who have been hired in the single copy sales
management of some of the world's largest publishing companies, to include the
Meridith Corporation (publisher of LADIES HOME JOURNAL and BETTER HOMES AND
GARDENS), Rodale Press, Inc. (publisher of PREVENTIONS and MEN'S HEALTH) and
Time-Venture, Inc. (publisher of VIBE). Mr. Senior graduated cum laude with an
associate degree in Marketing from the State University of new York.
Janet M. Hoey was elected Treasurer of the Company in December 1997. Ms.
Hoey was employed by the accounting firm of Ernst and Young from 1985 through
1990. From 1990 through 1996, Ms. Hoey was employed as controller and financial
consultant for Quantum Resources, a
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forensic accounting and consulting company. Prior to joining Metro, Ms. Hoey was
employed by Barnstable County Supply as its controller. Ms. Hoey, a certified
public accountant, received her Bachelors of Science Degree from Providence
College.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE ELECTION OF
EACH OF THE NOMINEES FOR DIRECTOR NAMED ABOVE. PROXY CARDS EXECUTED AND
RETURNED WILL BE SO VOTED UNLESS CONTRARY INSTRUCTIONS ARE INDICATED THEREON.
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PROPOSAL NO. 2
Ratification of the terms of the Stock Purchase Agreement, dated July 31, 1998,
by and between the Company and the shareholders of Fanzine International, Inc.
________________________________________________________________________________
PURCHASE OF FANZINE INTERNATIONAL, INC.
General
- -------
On July 31, 1998, your Company purchased 100% of the outstanding stock of
Fanzine International, Inc. ("Fanzine") located at 230 West 41st Street, Suite
1500, New York, NY 10036. All of the outstanding stock of Fanzine was owned by
four individuals, none of whom had any affiliation with the Company prior to the
purchase of Fanzine. The Stock Purchase Agreement provided for the purchase of
100% of the stock of Fanzine for a total purchase price of $7,500,000,
consisting of $4,000,000 in cash, payable over a 6-month period from July 31,
1998, and the issuance of 1,000,000 shares of the Company's common stock.
Business of Fanzine
- -------------------
Fanzine is a publishing company which produces a line of event driven,
mainstream magazines, which are translated into seven languages and distributed
to over twenty different nations. During fiscal 1998, Fanzine released Hit
Sensations and Hit Sensations Specials on music, television, sports and
Hollywood celebrities. Since inception in the summer of 1997, consumers have
spent over $20 million in purchases of more than 90 Fanzine domestic and foreign
releases.
The Company intends to expand Fanzine's product base with a line of
high-quality academic calendars, as well as the launch of four major new monthly
celebrity magazines: CELEBRITY STYLE, TEEN CELEBRITY, GYM and BURN.
CELEBRITY STYLE and TEEN CELEBRITY (two of the largest launches in the
entire magazine industry in 1998) will each distribute more than 700,000 copies
on newsstands throughout the United States and Canada. Both publications are
intended to take advantage of the heightened interest in entertainment
celebrities and their lifestyles. Competitive sales data indicates that this
genre is currently very popular. GYM and BURN will offer practical health,
fitness and nutritional advice for today's male reader. Like CELEBRITY STYLE and
TEEN CELEBRITY, GYM and BURN will feature strong editorial content as well as
exceptional packaging quality. GYM and BURN are scheduled to hit newsstands
during the first quarter of 1999.
5
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Terms of the Transaction
- ------------------------
Pursuant to a Stock Purchase Agreement, on July 31, 1998, the Company
purchased 100% of the stock of Fanzine for a total purchase price of $7,500,000,
consisting of $4,000,000 cash payable over a six-month period from closing and
1,000,000 shares of the Company's common stock. The shares of the Company's
restricted common stock were issued to the selling shareholders of Fanzine. The
issuance of the restricted shares did not involve an underwriter and no discount
or commission was paid in connection therewith. The acquisition has been
accounted for as a purchase. As such, the excess of the aggregate purchase price
over the fair market values of net assets acquired, which consisted mainly of
licenses, trademarks, and publishing rights, was allocated principally to good
will. The final acquisition purchase price is subject to certain earn-out
contingencies during the first five quarters following the closing. Also, the
selling shareholders of Fanzine have the right to redeem their respective shares
of the registrant at a price of $8.00 per share on a quarterly basis if certain
minimum earning levels, as defined in the Stock Purchase Agreement, are met
during any four quarters of the first five quarters following the closing.
The initial cash payable of $2,000,000 and the balance due was principally
financed by long-term convertible debentures.
This summary does not purport to be a complete description of all the terms
of the transaction and is qualified in its entirety by reference to the Stock
Purchase Agreement, a copy of which is attached to this proxy as Appendix I.
Federal Income Tax Consequence of the Transaction
- -------------------------------------------------
There are no federal tax consequences to the Company or its shareholders in
connection with the transaction.
Shareholder Vote Required
- -------------------------
Although shareholder approval was not required, under Delaware law, to
enter into or to perform the Stock Purchase Agreement, the Company realized,
subsequent to the execution and completion of the Fanzine transaction, that,
inasmuch as the issuance of 1,000,000 shares of the Company's common stock on
July 31, 1998, represented 20.4% of the Company's then total shares outstanding,
shareholder approval was required in order to comply with continuing listing
requirements for the NASDAQ Small Cap market. As required by NASDAQ market
rules, in order to satisfy continuing inclusion requirements, transactions that
involve the issuance of in excess of 20% of a Company's common stock must be
approved by its shareholders. Therefore, in order to remedy the Company's
inadvertent failure to comply with NASDAQ Small Cap marketplace rule, the
Company is seeking ratification of the Fanzine transaction by its shareholders.
If the acquisition of Fanzine is not ratified, the Company intends to request
that the Selling Shareholders of all of Fanzine's outstanding common stock agree
to re-negotiate the transaction so that the number of shares issuable in the
transaction on July 31, 1998, would be less than 20% of the Company's
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outstanding shares on such date. Inasmuch as the Board of Directors believes
the transaction is in the best interest of the Company and that it will likely
be approved by the shareholders, there have been no discussions with the Selling
Shareholders of Fanzine's outstanding common stock regarding re-negotiation of
the terms of the transaction.
Board of Directors Recommendation
- ---------------------------------
THE BOARD OF DIRECTORS UNANIMOUSLY APPROVED THE TERMS OF THE TRANSACTION AT
THE TIME THE STOCK PURCHASE AGREEMENT WAS EXECUTED AND THE ACQUISITION WAS
CONSUMMATED, HAVING DETERMINED THAT THE TRANSACTION IS IN THE BEST INTEREST OF
THE COMPANY AND ITS STOCKHOLDERS. ACCORDINGLY, THE BOARD OF DIRECTORS
UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE PROPOSAL TO RATIFY THE
TRANSACTION.
7
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MANAGEMENT
The Directors and Executive Officers of the Company are as follows:
<TABLE>
<CAPTION>
Name Age Position
- ------------------- --- ---------------------------------
<S> <C> <C>
A. Daniel Geribo 53 Director, President and Secretary
Alan S. Casale 48 Director
Dolores Guglielmi 59 Director
Janet M. Hoey 35 Treasurer
</TABLE>
Mr. Geribo's biography is included above under Proposal No. 1 - Election of
Directors.
Mr. Casale's biography is included above under Proposal No. 1 - Election of
Directors.
Ms. Hoey's biography is included above under Proposal No. 1 - Election of
Directors.
Dolores Guglielmi has been a Registered Nurse Anesthetist for Associates in
Anesthesia, Inc. a medical services provider, for more than five years.
In addition to the directors and executive officers listed above, Dennis
Nichols is expected to make a significant contribution to the business of the
Company and its subsidiaries. Dennis Nichols has served as President and sole
director of Metro Inc. since its inception in 1990. From March 1992 to November
1994, Mr. Nichols served as President, Treasurer, Secretary and director of CVC,
which operates a chain of retail video stores in the New England and upstate New
York area. Mr. Nichols is 49 years old.
No director or executive officer serves pursuant to any arrangement or
understanding between him or her and any other person(s), other than arrangement
or understandings with directors and officers acting solely in their capacity as
such.
The Board of Directors of the company held 4 meetings during the fiscal
year ended May 31, 1998. During the last fiscal year, no director attended
fewer than 75% of the regularly scheduled and special meetings held while he or
she was a director. The Company does not have standing audit, compensation or
nominating committees.
The Bylaws of the Company provide for a Board of Directors consisting of
seven directors. Upon the election of the individuals listed in Proposal No. 1,
above, there will be no vacancy on the Board.
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SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
--------------------- ----------------------
OTHER ALL
NAME AND PRINCIPAL FISCAL ANNUAL OTHER
POSITION YEAR SALARY BONUS COMP. AWARDS PAYOUTS COMP.
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
A. DANIEL GERIBO 1998 $ - - $30,000 - - -
PRESIDENT 1997 $ - - $15,000
KENNETH F. GUARINO 1997 $ 74,200 -
PRESIDENT (2) 1996 $ 83,798 -
</TABLE>
(1) Mr. Geribo was elected President of the Company in November 1996. His
services are valued at $30,000 per year.
(2) Mr. Guarino was elected President of Metro effective October 31, 1995, and
he resigned effective October 31, 1996.
Aggregated Options / SAR Exercises in Last Fiscal Year and fiscal year-end
--------------------------------------------------------------------------
Option / SAR Values
-------------------
<TABLE>
<CAPTION>
Number of Value of
Securities Unexercised
Underlying In-the-Money
Unexercised Options/SARs at
Options/SARs at FY-end
FY-End
Name Shares Acquired Value Exercisable / Exercisable /
on exercise (#) Realized ($) Unexercisable Unexercisable
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Kenneth Guarino 0 - 200,000/0 -
A. Daniel Geribo 0 - 10,000/0 -
</TABLE>
In September 1993, a disinterested majority of the Board of Directors
authorized the execution of an Employment Agreement with Kenneth F. Guarino,
effective as of January 1, 1993. By mutual agreement, the employment agreement
was terminated on December 31, 1996. In addition, the Company granted Mr.
Guarino stock options to purchase up to 200,000 shares of Common Stock, at a
purchase price of $1.50 per share, exercisable in four annual installments of
50,000 shares, commencing January 1, 1994. In January 1997, the term of the
options was extended to December 31, 2006. The requirement that the options be
exercised within 30 days after termination of employment was deleted. Except as
set forth above, no other executive officer received salary and bonus exceeding
$100,000 in any of the last three fiscal years.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
--------------------------------------------------------------
The following table sets forth certain information regarding the
Company's Common Stock beneficially owned as of July 31, 1998: (i) by each
person who is known by the Company to own beneficially more than 5% of the
Company's common stock, (ii) by each of the Company's directors, and by all
executive officers and directors as a group.
<TABLE>
<CAPTION>
NO. OF SHARES OF PERCENTAGE OF
COMMON STOCK BENEFICIAL
NAME AND ADDRESS BENEFICIALLY OWNED OWNERSHIP (1)
Officers and Directors
- ----------------------
<S> <C> <C>
A. Daniel Geribo 10,000 (2) *
788 Reservoir Avenue, Suite 300
Cranston, RI 02910
Alan S. Casale 620 *
1140 Reservoir Avenue
Cranston, RI 02920
Dolores Guglielmi 24,600 0
27 Sherman Avenue
Lincoln, RI 02865
All Executive Officers and 35,220 *
Directors as a group (4 people)
Other 5% Beneficial Owners
- --------------------------
Briana Investment Group, LP 1,492,903 24.44
c/o Helen Adderley, Esquire
Corner House
20 parliament Street
Hamilton HM DX, Bermuda
Kenneth F. Guarino 545,325 (3) 8.93
50 Fort Avenue
Cranston, RI 02905
Metro Plus 385,000 6.30
1060 Park Avenue
Cranston, RI 02910
</TABLE>
* Beneficial ownership represents less than 1% of the outstanding common
stock.
(1) Assumes 5,907,562 shares of Common Stock issued and outstanding at
July 31, 1998 and 200,000 unexercised stock options.
(2) Includes 10,000 unexercised stock options.
(3) Includes 200,000 unexercised stock options.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
A. Daniel Geribo serves as the sole officer and director of, and Mr.
Guarino also serves as the operations manager and is 100% owner of, Capital
Video Corporation ("CVC") which operates a chain of retail video stores in the
New England and upstate New York area. CVC accounted for $9,952,316 (47%),
$7,134,774 (39%), and $6,297,550 (32%) of the net sales of Metro, Inc. for the
fiscal years ended May 30, 1998, 1997, and 1996 respectively. At May 30, 1998,
$2,447,041 (47.1%) of Metro's outstanding accounts receivable were due from CVC.
At May 31, 1997, $1,711,443 (41.9%) of Metro's outstanding accounts receivable
were due from CVC. CVC's indebtedness to Metro is secured by a security
interest in all of the inventory of CVC and the personal guaranty of Mr.
Guarino's wife. At May 30, 1996, $662,807 (21%) of Metro's outstanding accounts
receivable were due from CVC. The age of the accounts receivable from CVC is as
follows:
<TABLE>
<CAPTION>
Current 30-60 days 60-90 days Over 90 days
--------- ----------- ---------- ------------
<S> <C> <C> <C> <C>
May 31, 1998 $998,408 $1,328,941 $149,692 $0
May 30, 1997 $814,473 $ 612,796 $284,174 $0
May 30, 1996 $566,033 $ 96,774 $ 0 $0
</TABLE>
The significant increase in Metro's accounts receivable from CVC is the
result of increased sales due to CVC opening new stores, and a reflection of
CVC's excellent payment history with Metro. Metro has permitted CVC to return
to the previous net 60 day payment terms. Management of the Company has
determined that, given the volume of business CVC has historically provided to
Metro, the value of the CVC inventory (which is monitored by Metro and in which
Metro retains a security interest), such aging is reasonable and in the best
interests of the Company.
Effective May 1, 1993, Metro entered into a lease with Castle Properties,
L.L.C. for approximately 50,000 square feet of office space, which includes a
warehouse and shipping complex, located in Cranston, Rhode Island. This new
facility houses Metro's executive, administrative, editorial and operational
offices, the data center and customer service, warehouse and fulfillment
facilities. The lease is for a term of 10 years with two five-year renewal
options, and provides for a fixed annual rent of $245,200 for the first five
years, triple net. The annual rent for lease years 6 through 10 as well as the
rent for the renewal terms, if any, shall be adjusted based upon increases in
the consumer price index. Approximately 7,500 square feet of the facility is
sublet to CVC under an oral, month-to-month lease agreement for $9,000 per month
for June 1997, and $4,000 per month thereafter. Castle Properties, L.L.C. is a
Rhode Island limited liability company principally owned by Mr. Guarino's wife.
In fiscal 1998, the Company was granted a rent reduction of $81,733 which is
being amortized over the remaining term of the lease.
On January 13, 1996, the Company entered into a lease agreement with
Centurion Financial Group, L.L.C. for approximately 5,000 square feet of office
space in Cranston, Rhode Island, with a monthly rent of $5,833.33, effective
June 1, 1994. The lease is for a term of 5 years, with a 5-year
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renewal option. Centurion Financial Group, L.L.C. is a Rhode Island limited
liability company, principally owned by a trust for the benefit of Mr. Guarino's
children. This lease was terminated by mutual agreement of the parties during
the year ended May 30, 1997.
CONFLICTS OF INTEREST
- ---------------------
Of necessity, some inherent conflict of interest is involved whenever
officers, directors and others acting on behalf of the Company supply services
or goods to the Company for compensation. Additional conflicts and non-arm's
length transactions may arise in the future when Company officers or directors
are involved in the management of any other company with which the Company
transacts business. Conflicts may also arise with respect to opportunities
which come to the attention of such persons. Conflicts may also arise with
respect to the amount of time and effort devoted to respective businesses and
opportunities.
Many of the persons who perform services as officers and directors to the
Company are actively, and in the future will be, involved in businesses from
which they derive income other than the Company. Their activities may include
information and management of business ventures, the legal profession, purchase
and sale of real estate and pursuit of other opportunities. It is expected that
these persons will continue their separate business activities in conjunction
with their activities at the Company.
Although the Board of Directors believes that members of management will be
of great assistance to the Company in the fulfillment of its corporate mission,
some transactions may and will occur where the Company and a member of
management will have conflicts in particular respects; however, it is intended
that, in accordance with legal principles applicable to corporations, the
Company's actions will be determined whenever possible by a disinterested
majority of the Board of Directors.
It is the Company's policy that all transactions in which an officer,
director or 5% shareholder has a direct or indirect interest be on terms no less
favorable to the Company than the Company would grant to or obtain from an
independent third-party in an arms-length transaction. Because a majority of
the Board of Directors are not affiliated with CVC, all transactions between the
Company or Metro and CVC have been, and all future transactions will be,
approved and/or ratified by a disinterested majority of the Board of Directors.
12
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RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
The accounting firm of Trien, Rosenberg, Rosenberg, Weinberg, Ciullo &
Fazzari, LLP served as the Company's independent certified public accountants
for the year ended May 30, 1998, and management anticipates that such firm will
be reappointed for the present fiscal year. A representative of Trien,
Rosenberg, Rosenberg, Weinberg, Ciullo & Fazzari is expected to be present at
the meeting with an opportunity to make a statement, if he desires to do so.
Such representative is expected to be available to respond to appropriate
questions from stockholders.
ANNUAL REPORT
ANY PERSON FROM WHOM PROXIES FOR THIS MEETING ARE SOLICITED MAY OBTAIN FROM
THE COMPANY, WITHOUT CHARGE, A COPY OF ITS ANNUAL REPORT TO THE SECURITIES AND
EXCHANGE COMMISSION ON FORM 10-KSB FOR THE FISCAL YEAR ENDED MAY 30, 1998,
INCLUDING THE FINANCIAL STATEMENTS THEREIN AND THE RELATED SCHEDULES, BY WRITING
TO THE COMPANY AT 1060 PARK AVENUE, CRANSTON, RHODE ISLAND 02910 ATTENTION:
SECRETARY. ANY SUCH REQUEST FROM A BENEFICIAL OWNER OF STOCK NOT REGISTERED IN
HIS NAME MUST CONFIRM THAT HE WAS A BENEFICIAL OWNER OF SUCH STOCK ON THE RECORD
DATE.
STOCKHOLDER PROPOSALS
Proposals of security holders intended to be presented at the next annual
meeting of stockholders must be received by the Company at 1060 Park Avenue,
Cranston, Rhode Island 02910, on or before September 1, 1999, for inclusion in
the proxy material for said meeting.
OTHER BUSINESS
It is not anticipated that any business other than as set forth hereinabove
will be brought before the meeting. Management is not aware of any matters
proposed to be presented to the meeting by any other person. However, if any
other business should properly come before the meeting, it is the intention of
the persons named in the enclosed form of proxy to act in accordance with their
best judgment on such business.
INCORPORATION BY REFERENCE
The Company's Annual Report on Form 10-KSB for the year ended May 30, 1998,
and the Company's reports on Form 8K and Form 8K/A, dated August 15, 1998 and
October 16, 1998, respectively, copies of which have been, contemporaneously
with this Proxy Statement, provided to all shareholders of record, are
incorporated by reference herein.
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APPENDIX 1
----------
STOCK PURCHASE AGREEMENT
------------------------
THIS STOCK PURCHASE AGREEMENT ("Agreement") is effective as of the 31/st/
day of July, 1998 by and among ROBERT MAIELLO, MICHAEL LEVINE, PHILIP P.
SALVATORE and BART SENIOR (collectively, the "Stockholders"), and METRO GLOBAL
MEDIA, INC., a Delaware corporation.
RECITALS:
A. The Stockholders own all of the issued and outstanding shares of
the capital stock of Fanzine International, Inc., a New Jersey corporation (the
"Company").
B. Metro desires to purchase all of the issued and outstanding
shares of stock of the Company owned by the Stockholders, and the Stockholders
desire to sell such shares to Metro on the terms set forth herein.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements, representations, warranties, provisions and covenants herein
contained, the parties hereto hereby agree as follows:
1. PURCHASE AND SALE OF SHARES; CLOSING
1.1 PURCHASE AND SALE. On the Closing Date referred to in
------------------
Section 1.2 hereof, Metro agrees to purchase from the Stockholders, and the
Stockholders agree to sell, assign, transfer and deliver to Metro, free and
clear of all claims, liens and encumbrances, one hundred (100) shares of the
voting common capital stock of the Company (the "Company Shares"), constituting
all of the issued and outstanding capital stock of the Company. Notwithstanding
the foregoing, on the Closing Date, the Company Shares shall be subject to a
Pledge Agreement delivered by substantially in the form of Annex I attached
hereto (the "Pledge Agreement").
1.2 CLOSING. The closing of the transactions contemplated by
--------
this Agreement (the "Closing") shall take place at the offices of Lipsitz,
Green, Fahringer, Roll, Salisbury & Cambria LLP, 42 Delaware Avenue, Suite 300,
Buffalo, New York 14202-3857, at 10:00 a.m. local time on the later of: (I)
August 1, 1998, or (ii) the second business day following the satisfaction or
waiver of all conditions set forth herein to the obligations of the parties to
consummate the transactions contemplated hereby (other than conditions to be
satisfied at or concurrently with the Closing), or on such other date and at
such other place as Metro and the Stockholders may mutually determine (the
"Closing Date").
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2. PURCHASE PRICE; ADJUSTMENTS
2.1 PURCHASE PRICE. Subject to the adjustment pursuant to
---------------
Sections 2.3 and 2.4, below, the purchase price (the "Purchase Price") to be
paid by Metro to the Stockholders for the shares is estimated to be Seven
Million Five Hundred Thousand Dollars ($7,500,000), payable as hereinafter
provided.
2.2 MANNER OF PAYMENT. The Purchase Price shall be paid as follows:
------------------
a) On the Closing Date, Metro shall deliver to the
Stockholders One Million (1,000,000) shares of the common stock of Metro (the
"Metro Stock"). The parties agree that the Metro Stock shall be attributed
solely to the Purchase Price and shall not be deemed any form of employment
compensation to any of the Stockholders. Metro shall not make any tax filing
seeking any tax deduction for the Metro Shares as employee compensation.
b) On or before the Closing date, Metro shall deliver to
the Stockholders the sum of Two Million Dollars ($2,000,000), in cash or
certified funds.
c) On or before the date which is ninety (90) days
following the Closing Date, Metro shall deliver to the Stockholders the sum of
One Million Dollars ($1,000,000), in cash or certified funds.
d) On or before the date which is one hundred eighty (180)
days following the Closing Date, Metro shall deliver to the Stockholders the sum
of One Million Dollars ($1,000,000), in cash or certified funds.
2.3 RETENTION OF CASH-ON-HAND, PUBLICLY TRADED SECURITIES, AND
----------------------------------------------------------
RECEIVABLES. Unless indicated on Schedule 2.3 as being excluded, any (I) cash
- ------------
owned by the Company as of the Closing Date, as reflected in its bank statement
(the "Closing Date Cash"), (ii) any publicly traded securities owned by the
Company as of the Closing Date, as reflected in Schedule 3.4 (the "Closing Date
Securities"), and (iii) the total amount, if any, of the Company's accounts
receivable accrued as of the Closing Date, as set forth in the Interim Financial
Statements (as defined in Section 3.5(ii) below), to the extent they are for
services actually performed or goods sold prior to the Closing Date but are not
collected by the Company as of the Closing Date (the "Closing Date
Receivables"), shall be deemed the property of the Shareholders and disbursed to
the Shareholders at such time or times as the Shareholders deem appropriate [the
Closing Date Cash, the Closing Date Securities and the Closing Date Receivables
are hereinafter collectively referred to as the "Closing Date Retained
Property"]. Any liabilities existing as a result of any services performed or
goods produced for which the Closing Date Receivable accrued shall be the sole
responsibility of the Shareholders and shall be timely paid by the Shareholders.
It is the intention of the parties that any receivables and liabilities
attributable to any publication of the Company shipped prior to the Closing Date
shall be, respectively, the property and obligation of the Shareholders, and
that any receivables and liabilities and/or expenses attributable to any
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publication of the Company shipped subsequent to the Closing Date shall be,
respectively, the property and obligation of the Company.
2.4 DECREASES IN PURCHASE Price. If the Company fails to
---------------------
generate Pre-Tax Net Earnings After Compensation (as defined in Section 2.5,
below) of at least $1,750,000 (the "Minimum Earnings Level"), in the aggregate,
during any, four (collectively) of the first five Fiscal Quarters (as
hereinafter defined) following the Closing, as designated by Stockholders (such
period referred to as the "Initial Year"), then the Purchase Price shall be
reduced pro rata, in an amount determined by multiplying $7,500,000 by a
fraction, the numerator of which is the Earnings Deficiency (as defined in
Section 2.5, below) for the Initial Year and the denominator of which is the
Minimum Earnings Level (the "Purchase Price Reduction"). The Purchase Price
Reduction shall be paid to Metro, at the election of the Shareholders, either
through (I) the return of such number of the Metro Stock as is equivalent to the
amount determined by multiplying 1,000,000 by a fraction, the numerator of which
is the Earnings Deficiency for the Initial Year and the denominator of which is
the Minimum Earnings Level, or (ii) in cash. Each Stockholder shall have the
individual option to pay to the Company cash in an amount equal to the value of
his pro rata share of the Earnings Deficiency, rather than returning a portion
of the Metro Stock as aforesaid. Such election shall be made by the Stockholders
within four (4) months following the last day of the Initial Year by delivering
to Metro written notice of such election (the "Deficiency Election").
2.5 DEFINITIONS. As used herein, the following terms shall have
the following meanings:
(i) "Pre-Tax Net Earnings After Compensation" shall mean, with
respect to any period, the gross revenues of the Company
for such period less all costs (including, but not limited
to, the Incentive Compensation or Deferred Compensation
paid or payable by the Company to the Stockholders
pursuant to the Employment Agreements of even date
herewith entered into by the Stockholders and the Company)
incurred in connection with the business operations of the
Company other than (I) taxes, (ii) interest, and (iii)
depreciation and amortization.
(ii) "Fiscal Year" shall mean a consecutive twelve (12) month
period beginning August 1st and ending July 31st of each
year.
(iii) "Fiscal Quarter" shall mean any of the four (4)
consecutive three (3) month periods which constitute a
Fiscal Year, with the first such three (3) month period
beginning on the first day of a Fiscal Year.
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(iv) "Earnings Deficiency" shall mean, with respect to any
period, the difference between the Pre-Tax Net Earnings
After Taxes for such period and the Minimum Earnings
Level.
3. REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS
The Stockholders jointly and severally represent and warrant that
all of the following representations and warranties set forth in this Section 3
are true at the date of this Agreement and shall be true at the time of Closing.
For purposes of this Agreement, the term "Material Adverse Effect" means, when
used in reference to the Company, a material adverse effect on the business,
operations, properties, assets or condition (financial or otherwise) of the
Company and its subsidiaries taken as a whole. For purposes of this Section 3,
the term "Company" shall mean and refer to the Company and all of its
subsidiaries, if any.
3.1 DUE ORGANIZATION. The Company is a corporation duly
-----------------
organized, validly existing and in good standing under the laws of the State of
New Jersey, and has all requisite power and authority to carry on its business
as it is now being conducted. The Company is duly qualified to do business and
is in good standing in each jurisdiction in which the nature of its business or
the ownership or leasing of its properties makes such qualification necessary,
except where the failure to be so authorized or qualified would not have a
Material Adverse Effect. Schedule 3.1 sets forth a list of all jurisdictions in
which the Company is authorized or qualified to do business. True, complete and
correct copies of the Company's Certificate of Incorporation and By-laws, each
as amended (the "Charter Documents"), are all attached to Schedule 3.1. The
stock records of the Company are attached to Schedule 3.1 and are correct and
complete in all material respects. There are no minutes in the possession of
the Company or the Stockholders which have not been made available to Metro, and
all of such minutes are attached to Schedule 3.1 and are correct and complete in
all respects.
3.2 AUTHORIZATION. The execution, delivery and performance of
--------------
this Agreement and the consummation of the transactions contemplated hereby have
been duly authorized by all appropriate parties.
3.3 CAPITAL STOCK OF THE COMPANY. The authorized capital stock
-----------------------------
of the Company consists solely of (I) two hundred (200) shares of Common Stock,
no par value per share, one hundred (100) of which are issued and outstanding,
and the foregoing capital stock represents all of the Company Stock. All of the
issued and outstanding shares of the capital stock of the Company are owned of
record and beneficially by the Stockholders in the amounts set forth on Schedule
3.3 and are owned free and clear of all liens, security interests, pledges,
charges, voting trusts, restrictions, encumbrances and claims of every
5
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kind. All of the issued and outstanding shares of the capital stock of the
Company have been duly authorized and validly issued, are fully paid and
nonassessable, and were offered, issued, sold and delivered by the Company in
compliance with all applicable state and federal laws concerning the issuance of
securities. None of such shares were issued in violation of any preemptive
rights or similar rights of any past or present stockholder of the Company. No
option, warrant, call, conversion right or commitment of any kind exists which
obligates the Company to issue any shares of its capital stock or obligates any
of the Stockholders to transfer any shares of the Company Stock to any person
except pursuant to this Agreement.
3.4 SUBSIDIARIES. Except as set forth on Schedule 3.4, the
-------------
Company has no subsidiaries or d/b/a names and has not conducted business under
any other name except its legal name on its Certificate of Incorporation.
Except as set forth on Schedule 3.4, the Company does not own, of record or
--------
beneficially, or control, directly or indirectly, any capital stock, securities
convertible into capital stock or any other equity interest in any corporation,
association or other business entity, and the Company is not, directly or
indirectly, a participant in any joint venture, partnership or other non-
corporate entity.
3.5 FINANCIAL STATEMENTS. Complete and correct copies of the
---------------------
following financial statements are attached as Schedule 3.5:
(i) the balance sheets of the Company as of December 31,
1997, and the related statements of operations,
stockholder's equity and cash flows for the period
from the Company's formation through December 31,
1997, together with the related notes and schedules
(such balance sheet and related statements, notes and
schedules are referred to as the "Year-End Financial
Statements"); and
(ii) the balance sheet of the Company as of the Closing
Date (the "Balance Sheet Date") and the related
statements of operations, stockholder's equity and
cash flows for the period ending on the Balance Sheet
Date, together with the related notes and schedules
(such balance sheet and related statements, notes and
schedules are referred to as the "Interim Financial
Statements"). The Year-End Financial Statements and
the Interim Financial Statements are collectively
referred to as the "Financial Statements".
The Financial Statements have been prepared from the books and
records of the Company in conformity with generally accepted accounting
principles applied on a basis consistent with preceding years and throughout the
periods involved
6
<PAGE>
("GAAP") and present fairly the financial position and results of operations of
the Company as of the dates of such statements and for the periods covered
thereby. The books of account of the Company have been kept accurately in all
material respects in the ordinary course of business, the transactions entered
therein represent bona fide transactions, and the revenues, expenses, assets and
liabilities of the Company have been properly recorded therein in all material
respects.
3.6 LIABILITIES AND OBLIGATIONS. Except as and to the extent
----------------------------
disclosed and adequately provided for on the face of the Financial Statements
(rather than in any notes thereto) or on Schedule 3.6, the Company has no
liabilities or obligations of any kind, whether accrued, absolute, secured or
unsecured, contingent or otherwise. Except and to the extent disclosed on the
face of the Financial Statements (rather than in any notes thereto) or on
Schedule 3.6, there are no claims, liabilities or obligations, nor, to the best
knowledge of the Stockholders, any reasonable basis for assertion against the
Company, of any claim, liability or obligation, of any nature whatsoever.
Schedule 3.6 contains a reasonable estimate by the Stockholders of the maximum
amount which may be payable with respect to liabilities which are not fixed.
For each such liability for which the amount is not fixed, the Stockholders have
provided a summary description of the liability together with copies of all
relevant documentation relating thereto. Notwithstanding the foregoing
provisions of this Section 3.6, the liabilities and obligations required to be
disclosed under this Section 3.6 do not include payables and accruables incurred
in the ordinary course of operating the business of the Company.
3.7 ACCOUNTS AND NOTES RECEIVABLE. Schedule 3.7 sets forth an
------------------------------
accurate list of the accounts and notes receivable of the Company, as of the
Balance Sheet Date and generated subsequent t the Balance Sheet Date, including
any such amounts which are not reflected in the balance sheet as of the Balance
Sheet Date. Receivables from and advances to employees and the Stockholders and
any entities or persons related to or affiliated with any of the Stockholders
are separately identified on Schedule 3.7. Except to the extent reflected on
Schedule 3.7, all such accounts, notes and other receivables were incurred in
the ordinary course of business, are stated in accordance with GAAP and are
collectible in the amounts shown on Schedule 3.7, net of reserves reflected in
the balance sheet as of the Balance Sheet Date.
3.8 PERMITS AND INTANGIBLES. The Company and its employees hold
------------------------
all licenses, franchises, permits and other governmental authorizations required
in connection with the conduct of the Company's business. Schedule 3.8 sets
forth an accurate list and summary description of all such licenses, franchises,
permits and other governmental authorizations, including permits, titles
(including licenses, franchises, certificates, trademarks, trade names, patents,
patent applications and copyrights owned or held by the Company or any of its
employees (including interests in software or other technology systems, programs
and intellectual property). The licenses, franchises, permits and other
governmental authorizations listed on Schedule 3.8 are valid, and the Company
has not received any notice that any person intends to cancel, terminate or not
renew any such license, franchise, permit or other governmental authorization.
To the best knowledge of the
7
<PAGE>
Stockholders, the Company has conducted and is conducting its business in
compliance with the requirements, standards, criteria and conditions set forth
in the licenses, franchises, permits and other governmental authorizations
listed on Schedule 3.8 and is not in violation of any of the foregoing. Except
as specifically set forth on Schedule 3.8, the transactions contemplated by this
Agreement will not result in a default under or a breach or violation of, or
adversely affect the rights and benefits afforded to the Company by, any such
licenses, franchises, permits or government authorizations.
3.9 PERSONAL PROPERTY. Schedule 3.9 sets forth an accurate list
-----------------
of (I) all personal property included in "plant, property and equipment" on the
balance sheet of the Company, (ii) all other personal property with an
individual value in excess of $25,000 (a) owned by the Company as of the
Balance Sheet Date and (b) acquired by the Company since the Balance Sheet Date
and (iii) all leases and agreements in respect of personal property of the
Company, including, in the case of each of (I), (ii) and (iii), an indication as
to which assets are currently owned, or were formerly owned, by any Stockholder
any relative of any Stockholder or any affiliate of the Company or any
Stockholder. True, correct and complete copies of all of the documents listed
on Schedule 3.9 have been delivered to Metro. Except as set forth and
specifically described on Schedule 3.9, (1) all material personal property used
by the Company in its business is either owned by the Company or leased by the
Company pursuant to a lease included on Schedule 3.9, (2) the personal property
listed on Schedule 3.9, subject to ordinary repair and replacement, is
reasonably adequate to operate the business of the Company as currently
conducted and (3) all leases and agreements included on Schedule 3.9 are in full
force and effect and constitute valid and binding agreements of the parties (and
their successors) thereto in accordance with their respective terms.
3.10 SIGNIFICANT CUSTOMERS; MATERIAL CONTRACTS AND COMMITMENTS.
----------------------------------------------------------
Schedule 3.10 sets forth a list of (I) all customers representing 5% or more of
the Company's revenues in any of the periods covered by the Financial
Statements, and (ii) all material contracts, commitments and similar agreements
to which the Company is a party or by which it or any of its properties are
bound (including, but not limited to, contracts with significant customers,
joint venture or partnership agreements, contracts with any labor organizations,
strategic alliances and options to purchase land). True, complete and correct
copies of such agreements are attached to Schedule 3.10. Except as described on
Schedule 3.10, (a) none of the Company's significant customers (including those
identified on Schedule 3.10) have canceled or substantially reduced or, to the
knowledge of the Company and the Stockholders, are currently attempting or
threatening to cancel a contract or substantially reduce utilization of the
services provided by the Company, and (b) the Company has complied with all
material commitments and obligations pertaining to it, and is not in default
under any contracts or agreements listed on Schedule 3.10 and no notice of
default under any such contract or agreement has been received. Schedule 3.10
also includes a summary description of all plans or projects involving the
opening of new operations, expansion of existing operations, the acquisition of
any property, business or assets requiring, in any event, the payment of more
than $25,000 by the Company.
8
<PAGE>
3.11 REAL PROPERTY. The Company owns no real property. Schedule
--------------
3.11 includes a list of all real property leased by the Company at the date
hereof, and all other real property, if any, used by the Company in the conduct
of its business. True, complete and correct copies of all leases and agreements
in respect of real property leased by the Company are attached to Schedule 3.11,
and an indication as to which such properties, if any, are currently owned, or
were formerly owned, by any Stockholder, any relative of any Stockholder or any
affiliate of the Company or any Stockholder is included in Schedule 3.1 1.
Except as set forth on Schedule 3.11, all of such leases and agreements included
on Schedule 3.11 are in full force and effect and constitute valid and binding
agreements of the parties (and their successors) thereto in accordance with
their respective terms; provided, however, that each lease between the Company
-------- -------
and any Stockholder, any relative of any Stockholder or any affiliate of the
Company or any Stockholder in respect of real property leased by the Company
shall be terminated as of the Closing Date.
3.12 INSURANCE. The Company does not maintain any insurance
policies.
3.13 COMPENSATION, EMPLOYMENT AGREEMENTS; ORGANIZED LABOR
----------------------------------------------------
MATTERS. Schedule 3.13 sets forth an accurate list showing all officers,
- --------
directors and key employees of the Company, listing all employment agreements
with such officers, directors and key employees and the rate of compensation
(and the portions thereof attributable to salary, bonus and other compensation,
respectively) of each of such persons as of (1) the Balance Sheet Date and (ii)
the date hereof Attached to Schedule 3.13 are true, complete and correct copies
of any employment agreements for the persons listed on Schedule 3.13 and all
other employment and other agreements of any nature containing any provision
that could require the Company to make any payment to any person as a result of
the transactions contemplated by this Agreement, which provisions are
specifically identified on Schedule 3.13. Except as set forth on Schedule 3.13,
since the Balance Sheet Date, there have been no increases in the compensation
payable or any special bonuses to any officer, director, key employee or other
employee, except ordinary salary increases implemented on a basis consistent
with past practices.
Except as set forth on Schedule 3.13, (I) the Company is not bound by
or subject to (and none of its respective assets or properties is bound by or
subject to) any arrangement with any labor union, (ii) no employees of the
Company are represented by any labor union or covered by any collective
bargaining agreement, (iii) to the knowledge of the Company and the
Stockholders, no campaign to establish such representation is in progress and
(iv) there is no pending or, to the best knowledge of the Company and the
Stockholders, threatened, labor dispute involving the Company and any group of
its employees. The Company has not experienced any labor interruptions over the
past five years.
3.14 EMPLOYEE BENEFIT PLANS. Schedule 3.14 sets forth an accurate
-----------------------
schedule showing all employee benefit plans of the Company (including the
Company's Subsidiaries), including all agreements or arrangements (other than
agreements
9
<PAGE>
or arrangements set forth on Schedule 3.14) containing "golden parachute" or
other similar provisions, and deferred compensation agreements, together with
true, complete and correct copies of such plans, agreements and any trusts
related thereto, and classifications of employees covered thereby as of the
Balance Sheet Date. Except for the employee benefit plans, if any, described on
Schedule 3.14, the Company (including the Company's Subsidiaries) does not
sponsor, maintain or contribute to any plan, program, fund or arrangement that
constitutes an "employee pension benefit plan," nor does the Company or any
Subsidiary have any obligation to contribute to or accrue or pay any benefits
under any deferred compensation or retirement funding arrangement on behalf of
any employee or employees (such as, for example, and without limitation, any
individual retirement account or annuity, any "excess benefit plan" (within the
meaning of Section 3(36) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA")) or any non-qualified deferred compensation arrangement).
For the purposes of this Agreement, the term employee pension benefit plan"
shall have the same meaning as is given that term in Section 3(2) of ERISA.
Neither the Company nor any Subsidiary has sponsored, maintained or contributed
to any employee pension benefit plan other than the plans set forth on Schedule
3.14, and neither the Company nor any Subsidiary is required to contribute to
any retirement plan pursuant to the provisions of any collective bargaining
agreement establishing the terms and conditions or employment of any of the
Company's or any Subsidiary's employees.
Neither the Company nor any Subsidiary is now, or can as a result of its past
activities become, liable to the Pension Benefit Guaranty Corporation or to any
multi-employer employee pension benefit plan under the provisions of Title IV of
ERISA. All employee benefit plans listed on Schedule 3.14 and the
administration thereof are in substantial compliance with their terms and all
applicable provisions of ERISA and the regulations issued thereunder, as well as
with all other applicable federal, state and local statutes, ordinances and
regulations. All accrued contribution obligations of Company or any Subsidiary
with respect to any plan listed on Schedule 3.14 have either been fulfilled in
their entirety or are fully reflected on the balance sheet of the Company as of
the Balance Sheet Date. Except as set forth on Schedule 3.14, all plans listed
on Schedule 3.14 that are intended to qualify (the "Qualified Plans") under
Section 401 (a) of the Code are and have been so qualified and have been
determined by the Internal Revenue Service to be so qualified, and copies of the
determination letters relating thereto are included as part of Schedule 3.14.
Except as disclosed on Schedule 3.14, all reports and other documents required
to be filed with any governmental agency or distributed to plan participants or
beneficiaries (including, but not limited to, actuarial reports, audits or tax
returns) have been timely filed or distributed, and copies thereof are included
as part of Schedule 3.14. Neither the Stockholders, any plan listed in Schedule
3.14 nor the Company (including the Company's Subsidiaries) has engaged in any
transaction prohibited under the provisions of Section 4975 of the Code or
Section 406 of ERISA. No plan listed in Schedule 3.14 has incurred an
accumulated funding deficiency, as defined in Section 412(a) of the Code and
Section 302(l) of ERISA; and the Company (including the Company's Subsidiaries)
has not incurred any liability for excise tax or penalty due to the Internal
Revenue Service or any liability to the Pension Benefit Guaranty Corporation.
There have been no terminations, partial terminations or discontinuance of
contributions to any such Qualified Plan intended
10
<PAGE>
to qualify under Section 401 (a) of the Code without notice to and approval by
the Internal Revenue Service; no plan listed in Schedule 3.14 subject to the
provisions of Title IV of ERISA has been terminated; there have been no
"reportable events" (as that phrase is defined in Section 4043 of ERISA) with
respect to any such plan listed in Schedule 3.14; the Company (including the
Company's Subsidiaries) has not incurred liability under Section 4062 of ERISA;
and no circumstances exist pursuant to which the Company could have any direct
or indirect liability whatsoever (including, but not limited to, any liability
to any multi-employer plan or the PBGC under Title IV of ERISA or to the
Internal Revenue Service for any excise tax or penalty, or being subject to any
statutory lien to secure payment of any such liability) with respect to any plan
now or heretofore maintained or contributed to by any entity other than the
Company that is, or at any time was, a member of a "controlled group" (as
defined in Section 412(n)(6)(B) of the Code) that includes the Company.
3.15 CONFORMITY WITH LAW; LITIGATION. Except as set forth on
--------------------------------
Schedule 3.15, there are no claims, actions, suits or proceedings, pending or
threatened against or affecting the Company, at law or in equity, or before or
by any federal, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality having Jurisdiction over the Company.
Except as set forth on Schedule 3.15, no notice of any claim, action, suit or
proceeding, whether pending or threatened, has been received by the Company
during the last five years and there is no basis therefor. Except as set forth
on Schedule 3.15, the Company has conducted and now conducts its business in
compliance in all material respects with all laws, regulations, writs,
injunctions, decrees and orders applicable to the Company or its assets. The
Company is not in violation of any law or regulation or any order of any court
or federal, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality having jurisdiction over any of them.
The Company has conducted and is conducting its business in substantial
compliance with the requirements, standards, criteria and conditions set forth
in applicable federal, state and local statutes, ordinances, permits, licenses,
orders, approvals, variances, rules and regulations, including all such permits,
licenses, orders and other governmental approvals set forth on Schedule 3.8.
3.16 TAXES. For purposes of this Agreement, the term "Taxes"
------
shall mean all taxes, charges, fees, levies or other assessments including,
without limitation, income, gross receipts, excise, property, sales,
withholding, social security, unemployment, occupation, use, service, license,
payroll, franchise, transfer and recording taxes, fees and charges, imposed by
the United States or any state, local or foreign government or subdivision or
agency thereof, whether computed on a separate, consolidated, unitary, combined
or any other basis; and such term shall include any interest, fines, penalties
or additional amounts attributable to or imposed with respect to any such taxes,
charges, fees, levies or other assessments. The Company (including any
subsidiaries) has timely filed all requisite federal, state and other Tax
returns or extension requests due on or before the date hereof, and all such Tax
returns are true and accurate in all material respects. Except as set forth on
Schedule 3.16, the Company has not requested or been granted an extension of the
time for filing any Tax return to a date later than the Closing Date. Except as
set forth on Schedule 3.16, there are no audits or examinations in progress or
claims against the
11
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Company for federal, state or other Taxes (including penalties and interest) for
any period (or portion thereof ending on or prior to the date hereof, and no
notice of any claim for Taxes, whether pending or threatened, has been received.
All Taxes, including interest and penalties (whether or not shown on any Tax
return) due and payable on or prior to the date hereof by the Company, any of
the Company's subsidiaries, or any member of an affiliated or consolidated group
which includes or included the Company or any of the Company's subsidiaries,
have been paid. The amounts shown as accruals for Taxes on the Financial
Statements are sufficient for the payment of all Taxes of the kinds indicated
(including penalties and interest) for all periods shown. Copies of (I) any Tax
examinations, (ii) extensions of time for filing and (iii) the federal, state
and local income tax returns and franchise tax returns of the Company (including
any subsidiaries) for- the last three fiscal years, or such shorter period of
time as any of them shall have existed, are attached hereto as Schedule 3.16.
The Company has not been a United States real property holding corporation
within the meaning of Section 897(c)(2) of the Code during the applicable period
specified in Section 897(c)(1)(A)(11) of the Code.
Each Stockholder certifies that he is not a foreign person pursuant to
Section 1.14452(b) of the Treasury Regulations. The Stockholders made a valid
election under the provisions of Chapter 1, Subchapter S of the Code, effective
as of August 1, 1997. At all times from and after August 1, 1997, the Company
has been taxed under the provisions of Chapter 1, Subchapter S of the Code. The
Stockholders shall pay, and they hereby indemnify Metro and the Company against,
all income, franchise and/or other taxes payable by the Company or any of its
subsidiaries for all periods (or portions thereof) through and including the
Closing Date. The Company uses the accrual method of accounting for income tax
purposes, and the Company's methods of accounting have not changed.
3.17 NO VIOLATIONS, NO CONSENTS REQUIRED. The Company is not in
------------------------------------
violation of the Charter Documents. Neither the Company nor any other party
thereto is in material default under any lease, instrument, license, permit or
material agreement to which the Company is a party or by which its properties
--
are bound (the "Material Documents"). Except as set forth in Schedule 3.17, (I)
the execution of this Agreement and the performance of the obligations hereunder
and the consummation of the transactions contemplated hereby will not result in
any material violation or breach or constitute a default under, any of the tem-
is or provisions of the Material Documents or the Charter Documents, and (ii)
the rights and benefits of the Company under the Material Documents will not be
adversely affected by the transactions contemplated hereby. Except as set forth
on Schedule 3.17, none of the Material Documents requires notice to, or the
consent or approval of, any governmental agency or other third party with
respect to any of the transactions contemplated hereby in order to remain in
full force and effect and consummation of the transactions contemplated hereby
will not give rise to any right to termination, cancellation or acceleration or
loss of any night or benefit. Except as set forth on Schedule 3.17, none of the
Material Documents prohibits the use or publication by the Company or Metro of
the name of any other party to such Material Document, and none of the Material
Documents prohibits or restricts the Company from freely providing services to
any other customer or potential customer of the Company or Metro.
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3.18 ABSENCE OF CHANGES. Since the Balance Sheet Date, the
-------------------
Company has conducted its operations in the ordinary course of business and,
except as set forth on Schedule 3.18, there has not been:
(i) any material adverse change in the financial condition,
assets, liabilities (contingent or otherwise), income or
business of the Company;
(ii) any damage, destruction or loss (whether or not covered by
insurance) materially adversely affecting the properties
or business of the Company;
(iii) any change in the authorized capital of the Company or its
outstanding securities or any change in its ownership
interests or any grant of any options, warrants, calls,
conversion rights or commitments;
(iv) any declaration or payment of any dividend or distribution
in respect of the capital stock or any direct or indirect
redemption, purchase or other acquisition of any of the
capital stock of the Company, other than the distribution
of all or part of the Closing Date Retained Property;
(v) any increase in the compensation, bonus, sales commissions
or fee arrangement payable or to become payable by the
Company to any of its officers, directors, stockholders,
employees, consultants or agents;
(vi) any work interruptions, labor grievances or claims filed,
or any event or condition of any character, materially
adversely affecting the business of the Company;
(vii) any sale or transfer, or any agreement to sell or
transfer, any material assets, property or rights of
Company to any person, including, without limitation, the
Stockholders and their affiliates;
(viii) any cancellation, or agreement to cancel, any indebtedness
or other obligation owing to the Company, including
without limitation any indebtedness or obligation of any
Stockholder or any affiliate thereof,
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(ix) any plan, agreement or arrangement granting any
preferential rights to purchase or acquire any interest in
any of the assets, property or rights of the Company or
requiring assignment of any party to the transfer and
assignment of any such assets, property or rights;
(x) any purchase or acquisition of, or agreement, plan or
arrangement to purchase or acquire, any property, rights
or assets outside of the ordinary course of the Company's
business;
(xi) any waiver of any material rights or claims of the
Company;
(xii) any amendment or termination of any material contract,
agreement, license, permit or other night to which the
Company is a party;
(xiii) any transaction by the Company outside the ordinary course
of its business;
(xiv) any cancellation or termination of a material contract
with a customer or client prior to the scheduled
termination date; or
(xv) any distribution of property or assets by the Company
other than in the ordinary course of business.
3.19 DEPOSIT ACCOUNTS; POWERS OF ATTORNEY. Schedule 3.19 sets
-------------------------------------
forth a schedule as of the date of this Agreement of: (i) the name of each
financial institution in which the Company has accounts or safe deposit boxes,
(ii) the names in which the accounts or boxes are held, (iii) the type of
account and account number, (iv) the type of account and the amount of cash,
cash equivalents and securities held in such account, and (v) the name of each
person authorized to draw thereon or have access thereto. Schedule 3.19 also
sets forth the name of each person, corporation, firm or other entity holding
any general or special power of attorney from the Company and a description of
the terms of each such power.
3.20 COMPETING LINES OF BUSINESS; RELATED-PARTY TRANSACTIONS.
--------------------------------------------------------
Except as set forth on Schedule 3.20, neither any of the Stockholders nor any
other affiliate of the Company owns, directly or indirectly, any interest in, or
is an officer, director, employee or consultant of or otherwise receives
remuneration from, any business which is a competitor, lessor, lessee, customer
or supplier of the Company. Except as set forth on
14
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Schedule 3.20, no officer, director or Stockholder of the Company has, nor
during the period beginning January 1, 1990 through the date hereof had, any
interest in any property, real or personal, tangible or intangible, used in or
pertaining to the Company's business.
3.21 DISCLOSURE. The Stockholders have fully provided Metro or
-----------
its representatives with information that Metro has requested in analyzing
whether to consummate the stock purchase, all of which information is contained
in this Agreement and/or on the documents annexed to this Agreement. None of the
information so provided, nor any representation or warranty of the Stockholders
contained in this Agreement, contains any untrue statement or omits to state a
material fact necessary in order to make the statements herein or therein, in
light of the circumstances under which they were made, not misleading. Except
as otherwise set forth in this Agreement or on the documents annexed hereto,
there is no fact known to the Stockholders which has specific application to the
Company (other than general economic or industry conditions) which materially
adversely affects or, so far as the Stockholders can reasonably foresee,
materially threatens, the assets, business, condition (financial or otherwise),
results of operations or prospects of the Company, which has not been described
in this Agreement or the Schedules hereto.
3.22 PROHIBITED ACTIVITIES. Except as set forth on Schedule
----------------------
3.22, the Company has not, between the Balance Sheet Date and the date hereof,
taken any of the actions set forth in Section 5.3.
3.23 PREEMPTIVE RIGHTS. No Stockholder has, and each hereby
------------------
waives, any preemptive or other right to acquire shares of Company Stock or
Metro Stock that such Stockholder has or may have had other than rights of any
Stockholder to acquire Company Stock or Metro Stock pursuant to (I) this
Agreement, (ii) any option granted by Metro, or (iii) any Employment Agreement
entered into between Metro and such Stockholder.
3.24 CERTAIN BUSINESS PRACTICES. Neither the Company nor any of
---------------------------
its affiliates has given or offered anything of value to any governmental
official, political party or candidate for government office nor has it or any
of them otherwise taken any action which would cause the Company to be in
violation of the Foreign Corrupt Practices Act of 1977, as amended, or any law
of similar effect.
4 REPRESENTATIONS OF METRO
Metro represents and warrants that all of the following
representations and warranties set forth in this Section 4 are true at the date
of this Agreement and shall be true at the time of Closing. For purposes of
this Agreement, the term
15
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"Material Adverse Effect" means, when used in reference to Metro, a material
adverse effect on the business, operations, properties, assets or condition
(financial or otherwise) of Metro and its subsidiaries taken as a whole.
4.1 DUE ORGANIZATION. Metro is a corporation duly incorporated,
-----------------
validly existing and in good standing under the laws of the State of Delaware,
and has the requisite power and authority to carry on its business as it is now
being conducted. Metro is qualified to do business and is in good standing in
each jurisdiction in which the nature of its business makes such qualification
necessary, except where the failure to be so authorized or qualified would not
have a Material Adverse Effect.
4.2 AUTHORIZATION. (I) The representatives of Metro executing
--------------
this Agreement have the authority to enter into and bind Metro to the terms of
this Agreement and (ii) Metro has the full legal night, power and authority to
enter into this Agreement.
4.3 NO VIOLATIONS. The execution of this Agreement and the
--------------
performance of the obligations hereunder and the consummation of the
transactions contemplated hereby will not result in any violation or breach or
constitute a default under any of the terms or provisions of Metro's Certificate
of Incorporation or By-laws, each as amended.
4.4 VALIDITY OF OBLIGATIONS. The execution and delivery of this
------------------------
Agreement by Metro and the performance of the transactions contemplated herein
have been duly and validly authorized by the Board of Directors of Metro and
this Agreement has been duly and validly authorized by all necessary corporate
action and is a legal, valid and binding obligation of Metro.
4.5 METRO STOCK. At the time of issuance thereof, the Metro
------------
Stock to be delivered to the Stockholders pursuant to this Agreement will
constitute valid and legally issued, fully paid and nonassessable shares of
Metro.
5 COVENANTS PRIOR TO CLOSING
5.1 ACCESS AND COOPERATION; DUE DILIGENCE. Between the date of
--------------------------------------
this Agreement and the Closing Date, Stockholders and the Company will afford to
the officers and authorized representatives of Metro access to all of the
Company's sites, properties, books and records and will furnish Metro with such
additional financial and operating data and other information as to the business
and properties of the Company as Metro may from time to time reasonably request.
The Stockholders and the Company will cooperate with Metro, its representatives,
auditors and counsel in the preparation of any documents or other material which
may be required in connection with any documents or materials required by this
Agreement. Metro and the Stockholders will treat all information
16
<PAGE>
obtained in connection with the negotiation and performance of this Agreement as
confidential in accordance with the provisions of Section 12.
5.2 CONDUCT OF BUSINESS PENDING CLOSING. Between the date of
------------------------------------
this Agreement and the Closing Date, the Stockholders shall operate the Company
such that the Company will, except as set forth on Schedule 5.2:
(i) carry on its respective businesses in substantially the
same manner as it has heretofore and not introduce any
material new method of management, operation or
accounting;
(ii) maintain its respective properties and facilities,
including those held under leases, in as good working
order and condition as at present, ordinary wear and tear
excepted;
(iii) perform in all material respects all of its respective
obligations under agreements relating to or affecting its
respective assets, properties or rights;
(iv) use its reasonable efforts to maintain and preserve its
business organization intact, retain its respective
present key employees and maintain its respective
relationships with suppliers, customers and others having
business relations with the Company;
(v) maintain compliance with all material permits, laws, rules
and regulations, consent orders, and all other orders of
applicable courts, regulatory agencies and similar
governmental authorities; and
(vi) maintain present debt and lease instruments and not enter
into new or amended debt or lease instruments without the
knowledge and consent of Metro (which consent shall not be
unreasonably withheld), provided that debt and/or lease
instruments may be replaced without the consent of Metro
if such replacement instruments are on terms at least as
favorable to the Company as the instruments being
replaced.
5.3 PROHIBITED ACTIVITIES. Except as set forth on Schedule
----------------------
3.22, between the date hereof and the Closing Date, the Stockholders will
operate the Company such that the Company will not, without prior written
consent of Metro:
17
<PAGE>
(i) make any change in the Charter Documents;
(ii) issue any securities, options, warrants, calls, conversion
rights or commitments relating to its securities of any
kind other than in connection with the exercise of options
or warrants;
(iii) declare or pay any dividend, or make any distribution in
respect of its stock whether now or hereafter outstanding,
or purchase, redeem or otherwise acquire or retire for
value any shares of its stock, except that the
Shareholders may distribute, in such time and manner as
the Shareholders deem appropriate, all or any part of the
Closing Date Retained Property;
(iv) enter into any contract or commitment or incur or agree to
incur any liability or make any capital expenditures,
except in the normal course of business consistent with
past practice in an amount not in excess of (a) $25,000
individually and (b) $50,000 in the aggregate, except for
the printing of any publication of the Company (it being
understood that such bill shall be payable by the persons
or entity receiving the proceeds of the transaction);
(v) create, assume or permit to exist any mortgage, pledge or
other lien or encumbrance upon any assets or properties
whether now owned or hereafter acquired, except (a) with
respect to purchase money liens incurred in connection
with the acquisition of equipment with an aggregate cost
not in excess of $5,000 necessary or desirable for the
conduct of the businesses of the Company, (b) (1) liens
for taxes either not yet due or being contested in good
faith and by appropriate proceedings (and for which
contested taxes adequate reserves have been established
and are being maintained) or (2) printers', materialmen's,
mechanics', workers', repairmen's, employees' or other
like liens arising in the ordinary course of business (the
liens set forth in clause (b) being referred to herein as
"Statutory Liens");
(vi) sell, assign, lease or otherwise transfer or dispose of
any property or equipment except in the normal course of
business;
18
<PAGE>
(vii) negotiate for the acquisition of any business or the
start-up of any new business;
(viii) merge or consolidate or agree to merge or consolidate with
or into any other corporation or other entity;
(ix) waive any material rights or claims of the Company,
provided that the Company may negotiate and adjust bills
in the course of good faith disputes with customers in a
manner consistent with past practice;
(x) commit a material breach or amend or terminate any
material agreement, permit, license or other right of the
Company;
(xi) enter into any other transaction outside the ordinary
course of its business or prohibited hereunder; or
(xii) increase or commit to any increase in the salary, bonus,
commission or other compensation of any officer, director,
employee or agent of the Company.
5.4 NO SHOP. None of the Stockholders, the Company, nor any
--------
agent, officer, director, trustee or any representative of any of the foregoing
will, during the period commencing on the date of this Agreement and ending with
the earlier to occur of the Closing Date or the termination of this Agreement in
accordance with its terms, directly or indirectly:
(i) solicit or initiate the submission of proposals or offers
from any person for,
(ii) participate in any discussions pertaining to, or
(iii) furnish to any person other than Metro, the authorized
agents of Metro and the financial and legal advisors of
the Company and the Stockholders any information relating
to (a) any acquisition or purchase of all or a material
amount of the assets of, or any equity interest in, the
Company or (b) a merger, consolidation or business
combination involving the Company.
5.5 NOTICE TO BARGAINING AGENTS. Prior to the Closing Date, the
----------------------------
Stockholders shall arrange for the Company to satisfy any requirement for notice
of the
19
<PAGE>
transactions contemplated by this Agreement under applicable collective
bargaining agreements, and shall provide Metro with proof that any required
notice has been sent.
5.6 AGREEMENTS. The Stockholders and the Company shall terminate
-----------
(I) any stockholders agreements, voting agreements, voting trusts, options,
warrants and employment agreements between the Company and any employee except
as specifically approved in writing by Metro and (ii) any existing agreement
between the Company and any Stockholder except as specifically approved in
writing by Metro, on or prior to the Closing Date. Copies of such termination
agreements shall be delivered to Metro at the Closing or prior thereto.
5.7 NOTIFICATION OF CERTAIN MATTERS. The Stockholders shall
--------------------------------
give prompt notice to Metro of (I) the occurrence or non-occurrence of any event
the occurrence or non-occurrence of which would be likely to cause any
representation or warranty of the Stockholders contained herein to be untrue or
inaccurate in any material respect at or prior to the Closing and (ii) any
material failure of any Stockholder to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by such person
hereunder. Metro shall give prompt notice to the Company of (a) the occurrence
or non-occurrence of any event the occurrence or non-occurrence of which would
be likely to cause any representation or warranty of Metro contained herein to
be untrue or inaccurate in any material respect at or prior to the Closing and
(b) any material failure of Metro to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it hereunder. The
delivery of any notice pursuant to this Section 5.7 shall not be deemed to (1)
modify the representations or warranties hereunder of the party delivering such
notice, (2) modify the conditions to Closing set forth herein, or (3) limit or
otherwise affect the remedies available hereunder to the party receiving such
notice.
5.8 AMENDMENT OF SCHEDULES. Each party hereto agrees that, with
-----------------------
respect to the representations and warranties of such party contained in this
Agreement, such party shall have the continuing obligation until the Closing
occurs to notify the other parties hereto with respect to any matter hereafter
arising or discovered which, if existing or known at the date of this Agreement,
would have been required to be set forth or described in the Schedules.
5.9 FURTHER ASSURANCES. At any time before or after the Closing,
-------------------
the parties hereto agree to execute and deliver, or cause to be executed and
delivered, such further instruments or documents or take such other action as
may be reasonably necessary or convenient to carry out the transactions
contemplated hereby.
20
<PAGE>
6 CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS
The obligations of the Stockholders with respect to actions to be
taken on the Closing Date are subject to the satisfaction or waiver on or prior
to the Closing Date of all of the following conditions.
6.1 REPRESENTATIONS AND WARRANTIES, PERFORMANCE OF OBLIGATIONS.
-----------------------------------------------------------
All representations and warranties of Metro contained in Section 4 that are
qualified by materiality shall be true and correct and all other representations
and warranties of Metro contained in Section 4 shall be true and correct in all
material respects, in each case as of the Closing Date with the same force and
effect as though such representations and warranties had been made on and as of
the Closing Date; all terms, covenants and conditions of this Agreement to be
complied with or performed by Metro on or before the Closing Date shall have
been duly complied with and performed in all material respects; and Metro shall
have delivered to the Stockholders a certificate, dated the Closing Date and
signed by the President or any Vice President of Metro, to such effect.
6.2 NO MATERIAL ADVERSE EFFECT. Since the Balance Sheet Date,
---------------------------
no event or circumstance shall have occurred which has had, or reasonably could
be expected to have, a Material Adverse Effect on Metro, and Metro shall not
have suffered any change, loss or damage to any of its properties or assets,
whether or not covered by insurance, which change, loss or damage could
materially affect or impair the ability of Metro to conduct its business.
6.3 SATISFACTION. All actions, proceedings, instruments and
-------------
documents required to carry out the transactions contemplated by this Agreement
or incidental hereto and all other related legal matters shall be reasonably
satisfactory to the Stockholders and their counsel.
6.4 OPINION OF COUNSEL, PLEDGE AGREEMENT, VOTING AGREEMENT. The
-------------------------------------------------------
Stockholders shall have received (1) an opinion from counsel to Metro, dated the
Closing Date, in the form of Annex II hereto, (ii) an executed Pledge Agreement
in the form of Annex I hereto, and (iii) executed Voting Agreement in the form
of Annex V hereto.
6.5 CONSENTS AND APPROVALS. All necessary consents of and
-----------------------
filings with any governmental authority or agency relating to the consummation
of the transaction contemplated herein shall have been obtained and made; no
action or proceeding shall have been instituted or threatened to restrain or
prohibit the transaction; and no governmental agency or body shall have taken
any other action or made any request of the Company as a result of which the
Company deems it inadvisable to proceed with the transactions hereunder.
21
<PAGE>
6.6 EMPLOYMENT AGREEMENT. Each of the Stockholders shall have
---------------------
been afforded an opportunity to enter into an Employment Agreement with the
Company substantially in the form of Annex III hereto.
7 CONDITIONS PRECEDENT TO OBLIGATIONS OF METRO
The obligations of Metro with respect to actions to be taken on the
Closing Date are subject to the satisfaction or waiver on or prior to the
Closing Date of all of the following conditions.
7.1 REPRESENTATIONS AND WARRANTIES, PERFORMANCE OF OBLIGATIONS.
-----------------------------------------------------------
All representations and warranties of the Stockholders contained in this
Agreement that are qualified by materiality shall be true and correct and all
other representations and warranties of the Stockholders contained in this
Agreement shall be true and correct in all material respects, in each case as of
the Closing Date with the same force and effect as though such representations
and warranties had been made on and as of the Closing Date; all terms, covenants
and conditions of this Agreement to be complied with or performed by the
Stockholders on or before the Closing Date shall have been duly complied with
and performed in all material respects; and the Stockholders shall have
delivered to Metro a certificate, dated the Closing Date and signed by the
Stockholders, to such effect.
7.2 NO MATERIAL ADVERSE EFFECT. Since the Balance Sheet Date,
---------------------------
no event or circumstance shall have occurred which has had, or could reasonably
be expected to have, a Material Adverse Effect on the Company, and the Company
shall not have suffered any change, loss or damage to any of its properties or
assets, whether or not covered by insurance, which change, loss or damage could
materially affect or impair the ability of the Company to conduct its business.
7.3 STOCKHOLDERS' RELEASE. The Stockholders shall have
----------------------
delivered to Metro an instrument dated the Closing Date releasing the Company
from (I) any and all claims of the Stockholders against the Company and (ii) all
obligations of the Company to the Stockholders, except for (a) continuing
obligations to the Stockholders relating to their employment by the Company, and
(b) obligations arising under this Agreement or the transactions contemplated
hereby.
7.4 SATISFACTION. All actions, proceedings, instruments and
-------------
documents required to carry out the transactions contemplated by this Agreement
or incidental hereto and all other related legal matters shall have been
approved by counsel to Metro.
22
<PAGE>
7.5 OPINION OF COUNSEL. Metro shall have received an opinion
-------------------
from counsel to the Stockholders, dated the Closing Date, in the form of Annex
IV hereto.
7.6 CONSENTS AND APPROVALS. All necessary consents of and
-----------------------
filings with any governmental authority or agency relating to the consummation
of the transactions contemplated herein shall have been obtained and made; all
consents and approvals of third parties listed on Schedule 3.17 shall have been
obtained; no action or proceeding shall have been instituted or threatened to
restrain or prohibit these transactions; and no governmental agency or body
shall have taken any other action or made any request of Metro as a result of
which Metro deems it inadvisable to proceed with the transactions hereunder.
7.7 GOOD STANDING CERTIFICATES. The Stockholders shall have
---------------------------
delivered to Metro a certificate, dated as of a date no earlier than ten days
prior to the Closing Date, duly issued by the appropriate governmental authority
in the State of New Jersey and in each state in which the Company is authorized
to do business and showing that the Company is in good standing and authorized
to do business and that all of the Company's state franchise and/or income tax
returns and taxes for all periods prior to the Closing have been filed and paid.
7.8 RELATED PARTY TRANSACTIONS. All salary continuation
---------------------------
agreements between the Company and any Stockholder shall have been terminated.
All existing leases, agreements and arrangements between the Company and any
Stockholder, any relative of any Stockholder or any affiliate of the Company or
any Stockholder shall have been canceled or the terms thereof shall have been
renegotiated on an arm's length basis satisfactory to Metro.
7.9 EMPLOYMENT AGREEMENTS. Each of the Stockholders shall have
----------------------
entered into the Employment Agreements referred to in Section 6.7.
8 COVENANTS OF METRO AND THE STOCKHOLDERS AFTER CLOSING
8.1 PREPARATION AND FILING OF TAX RETURNS.
--------------------------------------
(i) The Stockholders shall prepare and file, or cause to be
prepared and filed, all Tax returns for the Company for
all taxable periods that end on or before the Closing
Date, but in each case only after Metro has reviewed such
filings and consented thereto (which consent shall not be
unreasonably withheld or delayed). The Stockholders shall
pay or cause to be paid all Tax liabilities (in excess of
all amounts already paid with respect thereto or properly
accrued or reserved with respect thereto on the Company
Financial Statements) shown by such Tax returns to be due.
23
<PAGE>
(ii) Each party hereto shall, and shall cause its subsidiaries
and affiliates, if any, to, provide to each of the other
parties hereto such cooperation and information as any of
them reasonably may request in filing any Tax returns,
amended Tax returns or claims for refund, determining a
liability for Taxes or a right to refund of Taxes or in
conducting any audit or other proceeding in respect of
Taxes. Such cooperation and information shall include
providing copies of all relevant portions of relevant Tax
returns, together with relevant accompanying schedules and
relevant work papers, relevant documents relating to
rulings or other determinations by taxing authorities and
relevant records concerning the ownership and Tax basis of
property, which such party may possess. Each party shall
make its employees reasonably available on a mutually
convenient basis at its cost to provide explanation of any
documents or information so provided. Subject to the
preceding sentence, each party required to file tax
returns pursuant to this Agreement shall bear all costs of
filing such Tax returns.
9 INDEMNIFICATION
The Stockholders and Metro each make the following covenants that
are applicable to them, respectively:
9.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
-------------------------------------------
(i) The representations and warranties of the Stockholders
made in this Agreement and in the documents and
certificates delivered in connection herewith shall
survive the stock purchase for a period of four (4) years
from the Closing Date, provided, however, that all
-------- -------
representations and warranties with respect to which a
claim is made within the applicable survival period shall
survive until such claim is finally determined and paid.
24
<PAGE>
(ii) The representations and warranties of Metro made in this
Agreement and in the certificates delivered in connection
herewith shall survive the stock purchase for a period of
four (4) years following the Closing Date; provided,
--------
however, that representations and warranties with respect
to which a claim is made within such four year period
shall survive until such claim is finally determined and
paid.
(iii) The date on which a representation or warranty expires as
provided herein is. herein called the "Expiration Date."
No claim for indemnification may be made with respect to a
representation or warranty after the Expiration Date,
other than claims based on fraud.
9.2 GENERAL INDEMNIFICATION BY THE STOCKHOLDERS. The Stockholders
--------------------------------------------
covenant and agree that they will jointly and severally indemnify, defend,
protect, and hold harmless Metro and the Company and their respective
subsidiaries and officers, directors, employees, stockholders, agents,
representatives and affiliates at all times from and after the date of this
Agreement until the Expiration Date from and against all claims, damages
actions, suits, proceedings, demands, assessments, adjustments, costs and
expenses (including specifically, but without limitation, reasonable attorneys'
fees and expenses of investigation) (collectively "Damages") incurred by such
indemnified person as a result of or incident to (I) any breach of any
representation or warranty of any Stockholder set forth herein or in any
documents attached hereto, and (ii) any breach or nonfulfillment of any covenant
or agreement by the Stockholders under this Agreement.
9.3 INDEMNIFICATION BY METRO. Metro covenants and agrees that
-------------------------
it will indemnify, defend, protect and hold harmless the Stockholders at all
times from and after the date of this Agreement until the Expiration Date from
and against all Damages incurred by the Stockholders as a result of (I) any
breach of any representation or warranty of Metro set forth herein or in any
documents attached hereto, and (ii) any breach or nonfulfillment of any covenant
or agreement by Metro under this Agreement.
9.4 SPECIFIC INDEMNIFICATION. In addition to the indemnification
-------------------------
provided for in Section 9.2, the Stockholders covenant and agree that they will
jointly and severally indemnify, defend, protect and hold harmless Metro and its
subsidiaries, officers, directors, employees, stockholders, agents,
representatives and affiliates from and against all Damages incurred by any of
them in connection with the items described in Schedule 3.15 and for liabilities
arising from unfiled tax returns described on Schedule 3.16.
9.5 THIRD PERSON CLAIMS. Promptly after any party hereto (the
--------------------
"Indemnified Party") has received notice of or has knowledge of any claim by a
person not a party to this Agreement ("Third Person") or the commencement of any
action or
25
<PAGE>
proceeding by a Third Person that may give rise to a right of indemnification
hereunder, such Indemnified Party shall give to the party obligated to provide
indemnification hereunder (an "Indemnifying Party") written notice of such claim
or the commencement of such action or proceeding; provided, however, that the
--------
failure to give such notice will not relieve such Indemnifying Party from
liability under this Section 9 with respect to such claim, action or proceeding,
except to the extent that the Indemnifying Party has been actually prejudiced as
a result of such failure. The Indemnifying Party (at its own expense) shall
have the right and shall be given the opportunity to participate with the
Indemnified Party in the defense of such claim, suit or proceeding, provided
that counsel for the Indemnified Party shall act as lead counsel in all matters
pertaining to the defense or settlement of such claim, suit or proceeding. The
Indemnified Party shall not, except at its own cost, make any settlement with
respect to any such claim, suit or proceeding without the prior consent of the
Indemnifying Party, which consent shall not be unreasonably withheld or delayed.
It is understood and agreed that in situations where failure of the Indemnifying
Party to settle a claim expeditiously could have an adverse effect on the
Indemnified Party, the failure of the Indemnifying Party to act upon the
Indemnified Party's request for consent to such settlement within 10 business
days of the Indemnifying Party's receipt of notice thereof from the Indemnified
Party shall be deemed to constitute consent by the Indemnifying Party of such
settlement for purposes of this Section 9.
9.6 METHOD OF PAYMENT. Except as otherwise provided herein, all
------------------
claims for indemnification shall be paid in cash.
9.7 LIMITATIONS ON INDEMNIFICATION. Metro, the Company and the
-------------------------------
other persons or entities indemnified pursuant to this Section 9 shall not
assert any claim for indemnification hereunder against the Stockholders until
such time as the aggregate of all claims which such persons may have against the
Stockholders shall exceed Ten Thousand Dollars ($10,000) (the "Indemnification
Threshold"). The Stockholders shall not assert any claim for indemnification
hereunder against Metro until such time as the aggregate of all claims which
Stockholders may have against Metro shall exceed the Indemnification Threshold.
No person shall be entitled to indemnification under this Section 9 if
and to the extent that such person's claim for indemnification is directly or
indirectly caused by a breach by such person of any representation, warranty,
covenant or other agreement set forth is this Agreement.
The aggregate liability of the Stockholders for indemnification claims
under this Section 9 shall be limited to $8,000,000; provided, however, that the
-------- -------
aggregate liability of the Stockholders for indemnification claims under this
Section 9 with respect to any breach of any representation or warranty that
relates to (I) Taxes (including, without limitation, the representations and
warranties set forth in Section 3.16), and (ii) Illegal Acts (including, without
limitation, the representations and warranties set forth in Sections 3.8, 3.15
and 3.24), shall have no limit.
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<PAGE>
10 TERMINATION OF AGREEMENT
10.1 PRE-CLOSING TERMINATION. This Agreement may be terminated
------------------------
at any time prior to the Closing Date solely:
(i) by mutual consent of the Stockholders and the board of
directors of Metro;
(ii) by the Stockholders or by Metro (acting through its board
of directors), if the transactions contemplated by this
Agreement to take place at the Closing shall not have been
consummated by August 15, 1998 (the "Termination Date");
or
(iii) by the Stockholders, on the one hand, or by Metro, on the
other hand, if a material breach or default shall be made
by the other party in the observance or in the due and
timely performance of any of the covenants or agreements
contained herein, and the curing of such default shall not
have been made on or before the Termination Date.
10.2 LIABILITIES IN EVENT OF PRE-CLOSING TERMINATION. The
------------------------------------------------
termination of this Agreement pursuant to Section 10.1 of this Agreement will in
no way limit any obligation or liability of any party based on or arising from a
breach or default by such party with respect to any of its representations,
warranties, covenants or agreements contained in this Agreement including, but
not limited to, legal and audit costs and out of pocket expenses.
10.3 TERMINATION IN THE EVENT OF POST-CLOSING DEFAULT.
-------------------------------------------------
10.3.1 DEFAULT IN MAKING REQUIRED PURCHASE PRICE PAYMENTS.
---------------------------------------------------
In the event that Metro defaults, which default remains uncured after fourteen
(14) days written notice thereof to Metro, in making any of the Purchase Price
payments required pursuant to Sections 2.1 and 2.2 of this Agreement, this
Agreement may be terminated by, and at the sole election of, the Stockholders.
In the event of such termination (I) the Company Shares shall immediately be
returned by Metro to the Stockholders, together with a stock powers executed by
Metro in favor of the applicable stockholder; (ii) the Returnable Portion (as
hereinafter defined) of the Metro Shares shall be returned by the Stockholders
to Metro, and any excess portion thereof shall be retained by the Stockholders;
and (111) the Stockholders shall retain as liquidated damages, free and clear of
any claims by Metro, any and all funds paid by Metro pursuant to Sections
2.2(b), (C) and (d) of this Agreement, up to the sum of $4,000,000.
27
<PAGE>
10.3.2 DEFAULT IN MAKING REQUIRED REDEMPTION PAYMENTS. In the
-----------------------------------------------
event that Metro defaults in timely making any of the redemption payments
required pursuant to Section 13 of this Agreement, then the entirety of any
subsequent Pre Tax Net Earnings After Compensation shall be paid and delivered
to Stockholders until such time as the default is cured or this Agreement is
terminated (the "Default Funds"). In the event that Metro fails to cure the
default within ninety (90) days of the occurrence of the same, the Stockholders
may elect to either (I) terminate this Agreement by giving written notice of
such termination to Metro, or (ii) apply the Default Funds to the payment of the
outstanding redemption payment due. In the event the Stockholders elect to apply
the Default Funds to the payment of the outstanding redemption payment due, all
Pre Tax Net Earnings After Compensation shall continue to be paid to
Stockholders until the default is entirely cured. Alternatively, in the event
that the Stockholders elect to terminate this Agreement, then (I) the Company
Shares shall immediately be returned by Metro to the Stockholders, together with
stock powers executed by Metro in favor of the Stockholders; (ii) the Returnable
Portion (as hereinafter defined) of the Metro Shares shall be returned by the
Stockholders to Metro, and any excess portion thereof shall be retained by the
Stockholders; and (iii) the Stockholders shall retain as liquidated damages,
free and clear of any claims by Metro, any and all funds paid by Metro pursuant
to Sections 2.2(b), (C) and (d) of this Agreement, up to the sum of $4,000,000.
10.3.3 DEFINITIONS. For the purposes of this Agreement, the
------------
term "Returnable Portion" shall be defined as the amount of the Metro Shares
then collectively owned by the Stockholders, less the amount of the Prior
Receipt Equivalent Shares (as hereinafter defined). For the purposes of this
Agreement, the term "Prior Receipt Equivalent Shares" shall mean the Adjusted
Earnings (as hereinbelow defined) divided by the value (as reflected on the
official records of the stock exchange in which Metro's stock is publicly traded
at the close of business on the date of termination) of one share of Metro's
publicly traded stock (the "Market Share Value"). The "Adjusted Earnings" shall
be defined as the sum of the Net Pre-Tax Earnings After Compensation received by
Metro for each of the two years following the execution of this Agreement (each,
an "Applicable Year"), reduced pro rata in each Applicable Year by an amount
determined by multiplying $1,000,000 by a fraction, the numerator of which is
the number days expired in such Applicable Year as of the date of termination,
and the denominator of which is 365. It is understood and agreed among the
parties that, under no circumstances shall Metro be responsible, in the event of
a default, for liquidated damages in any amount exceeding $3,000,000 (the
aggregate amount of funds paid by Metro pursuant to Sections 2.2(b), (C) and (d)
of this Agreement during the First Year, less up to $1,000,000 in Net Pre-Tax
Earnings After Compensation for each Applicable Year). It is the further
understood and agreed among the parties that, under no circumstances shall Metro
be responsible, in the event of a default, for conveying to the Stockholders any
shares of stock in excess of the Metro Shares delivered pursuant to Section
2.2(a) of this Agreement. The redemption of any shares of Metro Stock pursuant
to Section 13 of this Agreement shall be deemed a final transaction with respect
to such shares, and the proceeds of the same shall not be used in connection
with any of the calculations made pursuant to these Section 10.3.1, 10.3.2 or
10.3.3.
28
<PAGE>
11 NON-COMPETITION
11.1 PROHIBITED ACTIVITIES. Except as may be permitted pursuant
----------------------
to the activities identified in Schedule 11. 1, attached hereto, the
Stockholders will not, for a period of three years following the Closing Date,
for any reason whatsoever, directly or indirectly, for themselves or on behalf
of or in conjunction with any other person, persons, company, partnership,
corporation or business of whatever nature:
(i) engage, as an officer, director, shareholder, owner,
partner, joint venturer, or in a managerial capacity,
whether as an employee, independent contractor, consultant
or advisor, or as a sales representative, in the
development, distribution or sale of any non-adult
sophisticate publication or related services or products
in competition with the Company or any of its subsidiaries
in any state of the United States of America or in any
foreign country in which the Company or any of its
subsidiaries is conducting or has conducted business (the
"Territory");
(ii) call upon any person who is an employee of Metro, the
Company or any of their subsidiaries for the purpose or
with the intent of enticing such employee away from or out
of the employ of Metro, the Company or any of their
subsidiaries;
(iii) call upon any person or entity which is, or has been
within two years prior to the Closing Date, a customer of
the Company or any of its subsidiaries for the purpose of
soliciting or selling products or services in direct
competition with the Company or any of its subsidiaries.
Notwithstanding the above, the foregoing covenant shall not be deemed
to prohibit any Stockholder from (I) acquiring as a passive investor with no
involvement in the operations or management of the business, not more than one
percent (1%) of the capital stock of a competing business whose stock is traded
on a national securities exchange or on an over-the-counter or similar market;
(ii) engaging in any business which such Stockholder is involved in as of the
date of this Agreement, which businesses are specifically set forth on Schedule
11.1 attached hereto; or (iii) participating in any project which is offered to,
but rejected by, the Company and Metro in accordance with the Employment
Agreement of even date herewith among such Stockholder, Metro and the Company.
29
<PAGE>
11.2 EQUITABLE RELIEF. Because of the difficulty of measuring
-----------------
economic losses to Metro and the Company as a result of a breach of the
foregoing covenant, and because of the immediate and irreparable damage that
could be caused to Metro for which it would have no other adequate remedy, each
Stockholder agrees that the foregoing covenant may be enforced by Metro in the
event of breach by such Stockholder, by injunctions, restraining orders and
other equitable actions.
11.3 REASONABLE RESTRAINT. It is agreed by the parties hereto that
---------------------
the foregoing covenants in this Section 11 impose a reasonable restraint on the
Stockholders in light of the activities and business of the Company on the date
of the execution of this Agreement and the current plans of the Company; but it
is also the intent of Metro and the Stockholders that such covenants be
reasonably construed and enforced in accordance with the changing activities,
business and locations of the Company and its subsidiaries throughout the term
of this covenant. During the term of this covenant, if the Company or one of its
subsidiaries engages in activities similar to the activities currently conducted
by the Company, enters a related or similar business or establishes new
locations for its current activities or business, in each case within the
Territory, then the Stockholders will be prohibited from competing with such
activities or business within the Territory.
11.4 SEVERABILITY; REFORMATION. The covenants in this Section 11
--------------------------
are severable and separate, and the unenforceability of any specific covenant
shall not affect the provisions of any other covenant. Moreover, in the event
any court of competent jurisdiction shall determine that the scope, time or
territorial restrictions set forth are unreasonable, then it is the intention of
the parties that such restrictions be enforced to the fullest extent which the
court deems reasonable, and the Agreement shall thereby be reformed.
11.5 INDEPENDENT COVENANT. The Stockholders acknowledge that
---------------------
their covenants set forth in this Section 11 are material conditions to Metro's
willingness to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. Except as to the requirement to make payments
pursuant to Section 2.2 of this Agreement, and the requirement to accept the
redemption of the Metro Stock pursuant to Section 13 of this Agreement, all of
the covenants in this Section 11 shall be construed as an agreement independent
of any other provision in this Agreement, and the existence of any claim or
cause of action of any Stockholder against Metro or any subsidiary thereof,
whether predicated on this Agreement or otherwise, shall not constitute a
defense to the enforcement by Metro of such covenants. It is specifically
agreed that the period of three years stated at the beginning of this Section
11, during which the agreements and covenants of each Stockholder made in this
Section 11 shall be effective, shall be computed by excluding from such
computation any time during which such Stockholder is determined by a court of
competent jurisdiction or by agreement of the parties to have been in violation
of any provision of this Section 11. The covenants contained in Section 11 shall
not be affected by any breach of any other provision hereof by any party hereto
(except as to Sections 2.2 and 13 of this Agreement, as aforesaid) and shall
have no effect if the transactions contemplated by this Agreement are not
consummated.
30
<PAGE>
12. NON-DISCLOSURE OF CONFIDENTIAL INFORMATION
12.1 STOCKHOLDERS' OBLIGATIONS. The Stockholders recognize and
--------------------------
acknowledge that they had in the past, currently have, and in the future may
possibly have, access to certain confidential information of the Company and/or
Metro, such as operational policies, pricing and cost policies, and other
information, that are valuable, special and unique assets of the Company and/or
Metro. The Stockholders agree that they will not disclose such confidential
information to any person, firm, corporation, association or other entity for
any purpose or reason whatsoever, except (a) to authorized representatives of
Metro, (b) following the Closing, such information may be disclosed by the
Stockholders as is required in the course of performing their duties for Metro
or the Company and (C) to counsel and other advisers, provided that such
advisers (other than counsel) agree to the confidentiality provisions of this
Section 12. 1, unless (I) such information becomes known to the public generally
through no fault of the Stockholders, or (ii) disclosure is required by law or
the order of any governmental authority under color of law, provided, that prior
to disclosing any information pursuant to this clause (ii), the Stockholders
shall, if possible, give prior written notice thereof to Metro and provide Metro
with the opportunity to contest such disclosure. In the event of a breach or
threatened breach by any of the Stockholders of the provisions of this Section,
Metro shall be entitled to injunctive or other equitable relief restraining such
Stockholders from disclosing, in whole or in part, such confidential
information. Nothing herein shall be construed as prohibiting Metro from
pursuing any other available remedy for such breach or threatened breach,
including the recovery of damages.
12.2 EQUITABLE RELIEF. Because of the difficulty of measuring
-----------------
economic losses as a result of the breach of the foregoing covenants, and
because of the immediate and irreparable damage that would be caused for which
Metro would have no other adequate remedy, the Stockholders agree that the
foregoing covenants may be enforced against them by injunctions, restraining
orders and other appropriate equitable relief.
12.3 SURVIVAL. The obligations of the parties under this Article
---------
12 shall survive the termination of this Agreement for a period of two (2)
years.
13. REDEMPTION
13.1 RIGHT OF REDEMPTION. Beginning on the first anniversary date
--------------------
of the Closing Date, in any four (4) of the next five (5) Qualifying Quarters
(as hereinafter defined), the Stockholders (pro rata or as otherwise agreed upon
by the Stockholders) shall have the right, collectively, exercisable within
thirty (30) days following the close of each such Qualifying Quarter, to request
that Metro redeem (and Metro shall be obligated to redeem upon such request) up
to one-quarter of the shares of the Metro Stock owned by the Stockholders as of
the Anniversary Date, for the redemption price of Eight Dollars ($8.00) per
share (the "Redemption Price"). The Stockholders may exercise such right by
delivering to Metro a written request specifying the number of shares of Metro
Stock to be redeemed from each Stockholder (the "Redemption
31
<PAGE>
Notice"). Within fourteen (14) days of its receipt of the Redemption Notice,
Metro will pay to each of the Stockholders the Redemption Price for each of the
Metro Shares redeemed, and the Stockholders shall return said shares to Metro.
The right to redeem set forth herein shall not be cumulative, and if the
Stockholders fail to request that Metro redeem all or any portion of Metro
Shares redeemable during the thirty (30) day period following the next Fiscal
Quarter after the Qualifying Quarter, then the Stockholders' redemption rights
with respect to such shares shall be terminated. For the purposes of this
Agreement, a "Qualifying Quarter" shall be defined as either (I) any Fiscal
Quarter in which the Company generates Pre-Tax Net Earnings After Compensation
of at least $437,500, or (ii) any Fiscal Quarter in which the average Pre-Tax
Net Earnings After Compensation of such Fiscal Quarter and the Fiscal Quarter
immediately preceding it is at least $437,500.
13.2 TERMINATION OF RIGHT OF REDEMPTION. At any time during the
-----------------------------------
first year following the Closing, and subsequent to sixty (60) days from the
Closing, Metro may offer in writing to purchase from the Stockholders the
entirety of the Metro Shares (the "Offer to Purchase") at a price equal to
seventy-five percent (75%) of the greater of (I) $8 per share, or (ii) the
Market Value (as hereinafter defined) of the Metro Shares (the "Option Purchase
Price"). For the purposes of this Agreement, the term "Market Value" shall mean
the average price of the Metro Shares (as listed by the exchange on which the
Metro's shares are publicly traded) at the close of trading on each of the
thirty (30) days immediately preceding the written offer by Metro to purchase.
The Stockholders may, individually or collectively, accept the Offer to Purchase
with respect to any quantity, or all, of the Metro Shares then owned by each
accepting Stockholders. Such acceptance shall be in writing and sent to Metro
within thirty (30) days of the Offer to Sell. Within ten (10) days of receipt of
the said written acceptance, Metro shall deliver to the accepting Stockholders
the entirety of the Option Purchase Price, and the accepting Stockholders shall
deliver to Metro the corresponding number of Metro Shares, together with
executed stock powers in favor of Metro. Any of the Metro Shares for which the
Metro Offer has not been accepted in writing within the said thirty (30) day
period shall be deemed to be excluded from the provisions of Section 13.1 of
this Agreement and may not be offered for redemption to Metro.
14. SECURITIES LAW MATTERS
14.1 ECONOMIC RISK; SOPHISTICATION. Each Stockholder represents
------------------------------
and warrants that such Stockholder has not relied on any of Metro's
representatives, or on the Company or any other Stockholder, in connection with
the acquisition of shares of Metro Stock hereunder. The Stockholders each (I)
have such knowledge, sophistication and experience in business and financial
matters that they are capable of evaluating the merits and risks of an
investment in the shares of Metro Stock, (ii) fully understand the nature, scope
and duration of any limitations on transfer described in this Agreement and
(iii) can bear the economic risk of an investment in the shares of Metro Stock
and can afford a complete loss of such investment. The Stockholders have each
had an adequate opportunity to ask questions and receive answers from the
officers of Metro concerning any and all matters relating to the transactions
described herein including without limitation the background and experience of
the officers and directors of Metro, the plans for the
32
<PAGE>
operations of the business of Metro, the business, operations and financial
condition of Metro, and any plans for additional acquisitions and the like. The
Stockholders have each asked any and all questions in the nature described in
the preceding sentence and all questions have been answered to their
satisfaction.
14.2 COMPLIANCE WITH LAW. Each Stockholder covenants that none
--------------------
of the Metro Stock will be offered, sold, assigned, hypothecated, transferred or
otherwise disposed of by such Stockholder except after full compliance with all
of the applicable provisions of the Securities Act of 1933, as amended (the
"Act"), and the rules and regulations of the Securities and Exchange Commission.
The Stockholders may, at any time, request that Metro obtain early registration
of the Metro Stock so as to enable the Stockholder to freely trade the same.
Provided that such registration is in the best interests of Metro, consent to
such registration will not be unreasonably withheld by Metro.
14.3 RESALE LIMITATIONS. The Metro Stock to be issued hereunder
-------------------
will not be registered pursuant to the Act and no Stockholder may transfer the
Metro Stock except pursuant to registration under the Act, or pursuant to a
valid exemption from registration under the Act (including the limitations on
resale under Rule 144 promulgated under the Act). Metro hereby warrants and
represents that it will, at its own cost and expense, cause the said shares to
be registered, and become fully transferable, as of the first anniversary date
of the Closing Date. Additionally, the certificates evidencing the Metro Stock
issued hereunder will initially bear a legend substantially in the form set
forth below:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), NOR
REGISTERED UNDER ANY STATE SECURITIES LAW, AND ARE "RESTRICTED
SECURITIES" AS THAT TERM IS DEFINED IN RULE 144 UNDER THE ACT. THE
SHARES MAY NOT BE OFFERED FOR SALE, SOLD OR OTHERWISE TRANSFERRED
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT,
OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE ACT, THE
AVAILABILITY OF WHICH IS TO BE ESTABLISHED TO THE SATISFACTION OF THE
COMPANY.
33
<PAGE>
15. GENERAL
15.1 COOPERATION. The Stockholders and Metro shall each deliver
------------
or cause to be delivered to the other on the Closing Date, and at such other
times and places as shall be reasonably agreed to, such additional instruments
as the other may reasonably request for the purpose of carrying out this
Agreement. The Stockholders will cooperate and use its reasonable efforts to
have the present officers, directors and employees of the Company cooperate with
Metro on and after the Closing Date in furnishing information, evidence,
testimony and other assistance in connection with any tax return filing
obligations, evidence, actions, proceedings, arrangements or disputes of any
nature with respect to matters pertaining to all periods prior to the Closing
Date.
15.2 SUCCESSORS AND ASSIGNS. This Agreement and the rights of
-----------------------
the parties hereunder may not be assigned (except by operation of law) and shall
be binding upon and shall inure to the benefit of the parties hereto, the
successors of Metro, and the heirs and legal representatives of the
Stockholders.
15.3 ENTIRE AGREEMENT. This Agreement (including the schedules,
-----------------
exhibits and annexes attached hereto) constitute the entire agreement and
understanding among the Stockholders and Metro and supersede any prior agreement
and understanding relating to the subject matter of this Agreement. This
Agreement, upon execution, constitutes a valid and binding agreement of the
parties hereto enforceable in accordance with its terms and may be modified or
amended only by a written instrument executed by the Stockholders and Metro
acting through its respective officers, duly authorized by its respective Boards
of Directors.
15.4 COUNTERPARTS. This Agreement may be executed simultaneously
-------------
in two or more counterparts, each of which shall be deemed an original and all
of which together shall constitute but one and the same instrument.
15.5 BROKERS AND AGENTS. Each party represents and warrants that
-------------------
it employed no broker or agent in connection with this transaction and agrees to
indemnify the other parties hereto against all loss, cost, damages or expense
arising out of claims for fees or commission of brokers employed or alleged to
have been employed by such indemnifying party.
15.6 EXPENSES. Whether or not the transactions herein contemplated
---------
shall be consummated, Metro will pay the fees and expenses of Metro's
representatives, accountants and counsel incurred in connection herewith, and
the Stockholders will pay the fees and expenses of the Stockholders' and the
Company's representatives, accountants and counsel incurred in connection
herewith. Each party shall pay all sales, use, transfer, real property transfer,
recording, gains, stock transfer and other similar taxes and fees ("Transfer
Taxes") applicable to it in connection with the stock transfer. The parties
shall respectively file all necessary documentation and returns with respect to
such Transfer Taxes due by it.
34
<PAGE>
15.7 NOTICES. All notices and communications required or permitted
--------
hereunder shall be in writing and may be given by depositing the same in United
States mail, addressed to the party to be notified, postage prepaid and
registered or certified with return receipt requested, or by delivering the same
in person to an officer or agent of such party, as follows:
(i) If to Metro, addressed to it at:
Metro Global Media, Inc.
One Metro Park Drive
Cranston, RI 02910
Attn: Kenneth Guarino
with a copy to:
Lipsitz, Green Fahringer,
Roll, Salisbury & Cambria LLP
42 Delaware Avenue
Suite 300
Buffalo, New York 14202-3901
Attn: Michael Schiavone, Esq.
(ii) If to any Stockholder, addressed to him or her at his
or her address set forth on Schedule 15.7, with a copy to:
-------------
Michael Levine, Esq.
Fifteen Barclay Road
Scarsdale, New York 10583
or to such other address or counsel as any party hereto shall specify pursuant
to this Section 15.7 from time to time.
15.8 GOVERNING LAW. This Agreement shall be construed in
--------------
accordance with the laws of the State of New York other than its principles
governing conflicts of laws.
15.9 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
-------------------------------------------
representations, warranties, covenants and agreements of the parties made herein
and at the time of the Closing or in writing delivered pursuant to the
provisions of this Agreement shall survive the consummation of the transactions
contemplated hereby and any examination on behalf of the parties until the
applicable Expiration Date.
35
<PAGE>
15.10 EFFECT OF INVESTIGATION; KNOWLEDGE.
-----------------------------------
(i) No investigation by the parties hereto in connection with
this Agreement or otherwise shall affect the
representations and warranties of the parties contained
herein or in any document annexed hereto and each such
representation and warranty shall survive such
investigation.
(ii) When a representation or warranty contained herein or in
any document annexed hereto is made to the "knowledge" of
a party, such party shall be deemed to know all facts and
circumstances that a reasonable investigation of the
subject matter of such representation or warranty would
have revealed.
15.11 EXERCISE OF RIGHTS AND REMEDIES. Except as otherwise herein, no
--------------------------------
delay of or omission in the exercise of any right, power or remedy accruing to
any party as a result of any breach or default by any other party under this
Agreement shall impair any such right, power or remedy, nor shall it be
construed as a waiver of or acquiescence in any such breach or default, or of
any similar breach or default occurring later; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
occurring before or after that waiver.
15.12 TIME. Time is of the essence with respect to this
-----
Agreement.
15.13 REFORMATION AND SEVERABILITY. In case any provision of this
-----------------------------
Agreement shall be invalid, illegal or unenforceable, it shall, to the extent
possible, be modified in such manner as to be valid, legal and enforceable but
so as to most nearly retain the intent of the parties, and if such modification
is not possible, such provision shall be severed from this Agreement, and in
either case the validity, legality and enforceability of the remaining
provisions of this Agreement shall not in any way be affected or impaired
thereby.
15.14 REMEDIES CUMULATIVE. No right, remedy or election given by any
--------------------
term of this Agreement shall be deemed exclusive but each shall be cumulative
with all other rights, remedies and elections available at law or in equity.
15.15 CAPTIONS. The headings of this Agreement are inserted for
---------
convenience only, and shall not constitute a part of this Agreement or be used
to construe or interpret any provision hereof.
36
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
METRO GLOBAL MEDIA, INC.
By:_______________________________
Its:_______________________________
STOCKHOLDERS:
_________________________________
Robert Maiello
_________________________________
Michael Levine
_________________________________
Philip P. Salvatore
_________________________________
Bart Senior
<PAGE>
METRO GLOBAL MEDIA, INC.
Annual Meeting of Stockholders
_________________
The undersigned hereby appoints _________________________ and
____________________, or either one of them, as proxy or proxies for the
undersigned, with full powers of substitution, to vote at the Annual Meeting of
Stockholders to be held on _____________________, at _________________ local
time, at the______________________________________________ and at any and all
adjournments thereof, according to the number of votes that the undersigned
would be entitled to cast with all powers the undersigned would possess if
personally present at said meeting. This proxy may be exercised to vote for the
following purposes:
1. FOR ______ AGAINST ______
the election of all of the following nominees listed below as Directors of
the Company:
Dan H. Eberly
Alan S. Casale
A. Daniel Geribo
Robert T Maiello
Philip P. Salvatore
Bart T. Senior
Janet M. Hoey
If you do not wish your shares to be voted "FOR" a particular nominee,
mark "AGAINST" above and strike a line through the name (s) of the person (s)
for whose election you do not wish to consent
2. FOR ______ AGAINST ______
Ratification of the terms of the acquisition of Fanzine International, Inc.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH PROPOSAL
The undersigned hereby ratifies and confirms all that said proxy or proxies, or
substitutes, may do by virtue hereof. The proxies are authorized to vote in
their discretion with respect to matters not known or determined at the date of
the Proxy Statement. Receipt of the Notice of Meeting, proxy Statement and
Annual Report is hereby acknowledged.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED IN ACCORDANCE WITH YOUR
SPECIFICATIONS ABOVE. IN THE ABSENCE OF SPECIFICATIONS, THIS PROXY WILL BE
VOTED "FOR" ALL OF THE PROPOSALS SET FORTH ABOVE.
Dated:__________________________________________, 1998
_________________________________________________________ L.S.
_________________________________________________________ L.S.
Please sign here exactly as name appears at the left. When signing as attorney,
executor, administrator, trustee or guardian, please give your ful title as
such. Each joint owner or trustee should sign the proxy. If the stockholder is
a corporation, the office of the person signing should be indicated.
Please sign, date and mail today.
This proxy is solicited on behalf of the Board of Directors of the Company.
