<PAGE>
FORM 8-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) August 15, 1996
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T/SF COMMUNICATIONS CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 1-10263 73-1341805
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
2407 East Skelly Drive, Tulsa, Oklahoma 74105
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(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code 918-747-2600
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N/A
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(Former name or former address, if changed since last report.)
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ITEM 2. Acquisition or Disposition of Assets
On August 15, 1996, the Registrant, through its wholly-owned subsidiary,
T/SF Investment Co., a Delaware corporation (the "Buyer"), entered into that
certain Stock Purchase Agreement (the "Purchase Agreement"), with all of the
stockholders of CORSEARCH, Inc., a Delaware corporation ("CORSEARCH") based in
New York, New York, whereby Buyer acquired all of the issued and outstanding
capital stock of CORSEARCH. CORSEARCH is a leading provider of trademark and
tradename research and information services, utilizing both proprietary and
public databases.
The Registrant paid $14,400,000 in cash and $900,000 in notes and assumed
approximately $1,300,000 in additional non-operating liabilities to acquire the
stock of CORSEARCH, subject to a post-closing adjustment to reflect the amount
by which the CORSEARCH working capital at August 15, 1996, exceeds or is less
than $200,000. In addition, the Registrant agreed to pay additional
consideration in the year 2000 to the two senior managers/stockholders of
CORSEARCH (Robert Frank, President, and Robert Capshaw, Vice President-
Marketing), predicated upon CORSEARCH achieving certain pre-tax income levels in
the years 1997, 1998 and 1999. Under this provision, these
managers/stockholders and their affiliates would receive amounts determined on
the following formula:
P = M x [[0.235 (A+B+3C)] / 5] - $1,800,000
Where under such formula:
P = the amount payable to the managers/shareholders and their affiliates in
the year 2000 (one-half of which is due on April 1, 2000, with the
remainder to be evidenced by a one year note bearing interest at New
York prime rate plus one percent).
M = a multiplier, which will be not less than seven nor more than nine,
determined based upon the average growth rate ("AGR") of CORSEARCH'S
"net income" (as defined in the Purchase Agreement, but generally net
income as determined in accordance with GAAP, but before Federal income
taxes) over the three following comparison periods: 1997 compared to
1996; 1998 compared to 1997; and 1999 compared to 1998, based upon the
following AGR ranges:
<TABLE>
<CAPTION>
AGR M
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<S> <C>
Less than 20% 7.0
20.00% to 24.99% 7.5
25.00% to 29.99% 8.0
30.00% to 34.99% 8.5
35% or more 9.0
</TABLE>
A = CORSEARCH'S "net income" for 1997, less any amount by which the 1996
"net income" for CORSEARCH is less than $2,000,000.
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B = CORSEARCH'S "net income" for 1998.
C = CORSEARCH'S "net income" for 1999.
The consideration paid in connection with the acquisition of CORSEARCH was
determined through arm's-length negotiation between the Registrant and the
stockholders of CORSEARCH. Prior to the closing of the acquisition, there were
no material relationships between such stockholders and the Registrant or any of
its affiliates, or any director or officer of the Registrant or any of their
associates. The funds used by the Registrant came from available working capital
and a $3 million advance under its credit facility with BancFirst.
In connection with the closing of the transactions contemplated by the
Purchase Agreement, CORSEARCH entered into employment agreements with Robert
Frank, as President of CORSEARCH, and Robert Capshaw, as Vice President-
Marketing of CORSEARCH. These employment agreements provide for base salaries,
bonuses based on achieving escalating "net income" targets, and covenants not to
compete. These employment agreements run through December 31, 1999.
The Registrant intends to operate CORSEARCH as a free-standing operation in
New York City, but may share some accounting, human resource and other
administrative functions with other divisions and/or headquarters. The
Registrant intends to continue the use of CORSEARCH'S assets in CORSEARCH'S
business.
Item 7. Financial Statements and Exhibits
(a) Financial Statements of Businesses Acquired. It is impracticable
to provide any of the required financial statements at this time. The required
financial statements will be filed as soon as practicable, but not later than
October 29, 1996.
(b) Pro Forma Financial Information. It is impracticable to provide
any of the required pro forma financial information at this time. The required
pro forma financial information will be filed with the financial statements
referred to under Item 7(a) above.
(c) Exhibits. The following exhibits are filed as part of this
Current Report on Form 8-K:
Exhibit Number
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2.1. Stock Purchase Agreement, dated August 15, 1996.
99.1 Employment Agreement, dated August 15, 1996, by and between
CORSEARCH, Inc., and Robert Frank.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
T/SF COMMUNICATIONS CORPORATION
Date: August 30, 1996 By: /s/ Howard G. Barnett, Jr.
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Howard G. Barnett, Jr.
Chairman of the Board, President and
Chief Executive Officer
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T/SF COMMUNICATIONS CORPORATION
Exhibit Index
Exhibit Number
2.1. Stock Purchase Agreement, dated as of August 15, 1996, by and among
T/SF Investment Co., a Delaware corporation, and the shareholders of
CORSEARCH, INC., a Delaware corporation.
99.1 Employment Agreement, dated August 15, 1996, by and between
CORSEARCH, Inc., and Robert Frank.
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EXHIBIT 2.1
STOCK PURCHASE AGREEMENT
among
T/SF INVESTMENT CO.
and
THE SHAREHOLDERS
of
CORSEARCH, INC.
August 15, 1996
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STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT, dated as of August 15, 1996 (the "Stock Purchase
Agreement"), by and among T/SF INVESTMENT CO., a Delaware corporation
("Purchaser"), and the shareholders of CORSEARCH, INC., a Delaware corporation
(the "Company"), each of whom is listed on Schedule 1 hereto (each, a
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"Shareholder," and collectively, the "Shareholders"). Capitalized terms used
but not otherwise defined herein shall have the meanings ascribed to such terms
in Section 1.1 hereof.
W I T N E S S E T H :
===================
WHEREAS, the Shareholders own 120,070.25 of the issued and outstanding
shares of the common stock, $0.01 par value per share, of the Company (the
"Shares"); each Shareholder owning, as of the date hereof, the number of Shares
set forth opposite such Shareholder's name on Schedule 1 hereto;
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WHEREAS, Purchaser desires to purchase the Shares from the Shareholders and
each of the Shareholders desires to sell such Shareholder's Shares to Purchaser,
all upon the terms and subject to the conditions set forth in this Stock
Purchase Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants and agreements hereinafter set forth, the
parties hereto, intending to be legally bound, hereby agree as follows:
1. Certain Definitions.
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1.1 Defined Terms. As used in this Stock Purchase Agreement,
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the following terms shall have the meanings ascribed to such terms in this
Section 1.1 (terms defined in the singular to have the correlative meaning in
the plural and vice versa):
"Account Deficit" shall have the meaning ascribed to such term in Section
2.2(e)(ii)(D)2 of this Stock Purchase Agreement.
"Affiliate" of any Person shall mean any entity which, directly or
indirectly, controls or is controlled by that Person, or is under common control
with that Person. For the purposes of this definition, "control" (including,
with correlative meaning, the terms "controlled by" and "under common control
with"), as used with respect to any Person, shall mean the possession, directly
or indirectly, of the power to direct or cause the direction of the management
and policies of such person, whether through the ownership of voting securities
or by contract or otherwise.
"AGR" shall have the meaning ascribed to such term in Section 2.2(e)(i)(A)
hereof.
"Approved Services" shall have the meaning ascribed to such term in Section
2.2(e)(ii)(E) of this Stock Purchase Agreement.
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"Audited Financial Statements" shall mean the audited balance sheet of the
Company as of December 31, 1995 and the related statements of income and changes
in financial position for the fiscal year ended December 31, 1995, including the
footnotes thereto, and the audit report thereon by Arthur Andersen, LLP,
independent certified public accountants.
"Balance Sheet" shall mean the balance sheet included with the Interim
Financial Statements.
"Balance Sheet Date" shall mean June 30, 1996, which is the date of the
Balance Sheet.
"Base Price Promissory Notes" shall mean, together, (i) the Robert Capshaw
Base Price Promissory Note, (ii) the Robert Frank Base Price Promissory Note,
(iii) the Micah Frank Base Price Promissory Note and (iv) the Dakota Frank Base
Price Promissory Note.
"Business Day" shall mean any day that is not a Saturday or a Sunday or a
day on which banks located in New York City are authorized or required to be
closed.
"Cash Purchase Price" shall mean an amount equal to the aggregate of (i)
the Non-Management Shareholders Purchase Price, (ii) the Frank Cash Purchase
Price and (iii) the Robert Capshaw Cash Purchase Price.
"Citibank Cash Purchase Price Account" shall have the meaning ascribed to
such term in Section 2.2(a)(ii) of this Stock Purchase Agreement.
"Citibank Loan" shall mean that certain Term Promissory Note, dated
December 27, 1994, in the original principal amount of $300,000, executed by the
Company, in favor of Citibank, N.A., together with all documents executed in
connection therewith or related thereto.
"Citibank Prime Rate" shall mean the prime rate as publicly announced from
time to time in New York, New York by Citibank, N.A.
"Closing" shall have the meaning ascribed to such term in Section 3.1 of
this Stock Purchase Agreement.
"Closing Date" shall have the meaning ascribed to such term in Section 3.1
of this Stock Purchase Agreement.
"Closing Date Balance Sheet" shall have the meaning ascribed to such term
in Section 2.2(b)(i) of this Stock Purchase Agreement.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Company" shall have the meaning ascribed to such term in the introductory
paragraph to this Stock Purchase Agreement.
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"Company Account" shall have the meaning ascribed to such term in Section
2.2(e)(ii)(D)2 of this Stock Purchase Agreement.
"Contingent Consideration" shall have the meaning ascribed to such term in
Section 2.2(e)(i)(A) of this Stock Purchase Agreement.
"Contingent Price Promissory Notes" shall mean, together, (i) the Robert
Capshaw Contingent Price Promissory Note, (ii) the Robert Frank Contingent Price
Promissory Note, (iii) the Micah Frank Contingent Price Promissory Note and (iv)
the Dakota Frank Contingent Price Promissory Note; each in the form attached as
Exhibit D hereto.
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"Corsearch Special Bonus Plan" shall mean the Corsearch Special Bonus Plan,
established by the Board of Directors of the Company on August 15, 1996, in the
form attached as Exhibit F to this Stock Purchase Agreement.
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"Dakota Frank Base Price Promissory Note" shall mean that certain Base
Price Promissory Note, dated the date hereof, by the Purchaser, in favor of
Robert Frank, as custodian for Dakota Frank under the Uniform Gifts to Minors
Act, in the initial principal amount of $99,653.98, in the form attached as
Exhibit E hereto.
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"Dakota Frank Cash Purchase Price" shall mean the Dakota Frank Preliminary
Cash Purchase Price, as adjusted in accordance with Section 2.2(c) hereof.
"Dakota Frank Contingent Price Promissory Note" shall mean the Contingent
Price Promissory Note, to be issued by Purchaser if the Contingent Consideration
is earned, in favor of Robert Frank, as custodian for Dakota Frank under the
Uniform Gifts to Minors Act, in the initial principal amount determined pursuant
to the provisions of Section 2.2(e)(i)(C)(ii) hereof, in the form of Exhibit D
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hereto.
"Dakota Frank Preliminary Cash Purchase Price" shall have the meaning
ascribed to such term in Section 2.2(a)(v) of this Stock Purchase Agreement.
"Defense" shall have the meaning ascribed to such term in Section 9.5 of
this Stock Purchase Agreement.
"Employment Agreements" shall mean the Robert Capshaw Employment Agreement
and the Frank Employment Agreement.
"Encumbrance" shall mean any security interest, mortgage, lien,
encumbrance, charge, adverse claim or restriction of any kind, including, but
not limited to, any restriction on the use, voting, transfer, receipt of income
or other exercise of any attribute of ownership.
"Environmental Laws" shall mean any federal, state or local law, statute,
ordinance, regulation, rule, permit or administrative order relating to
pollution or the protection of human health and environment, to the emission,
discharge, release or threatened release of Hazardous Substances, or to the use,
handling, generation, treatment, storage, disposal, or transportation of
Hazardous Substances.
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"Equity Security" shall mean any stock or similar security, certificate of
interest or participation in any profit sharing agreement, preorganization
certificate or subscription, transferable share, voting trust certificate or
certificate of deposit for any equity security, limited partnership interest,
interest in a joint venture, or certificate of interest in a business trust; or
any general partnership interest or any other direct or indirect equity or
ownership interest in any business or right to acquire any such interest; or any
security convertible, with or without consideration, into such a security, or
carrying any warrant or right to subscribe to or purchase such a security; or
any such warrant or right.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"Escrow Agent" shall have the meaning ascribed to such term in Section
9.7(b)(ii) of this Stock Purchase Agreement.
"Excess Capital Expenditure" shall have the meaning ascribed to such term
in Section 2.2(e)(ii)(C) of this Stock Purchase Agreement.
"Excluded Assets" shall mean (i) cash and cash equivalents held by the
Company as of the Business Day prior to the Closing Date and (ii) the Greenwich
Stock.
"Existing E&O Policy" shall have the meaning ascribed to such term in
Section 8.3(b) of this Stock Purchase Agreement.
"Frank Preliminary Cash Purchase Price" shall mean, together, the Robert
Frank Preliminary Cash Purchase Price, the Dakota Frank Preliminary Cash
Purchase Price and the Micah Frank Preliminary Cash Purchase Price.
"Frank Cash Purchase Price" shall mean, together, the Robert Frank Cash
Purchase Price, the Micah Frank Cash Purchase Price and the Dakota Frank Cash
Purchase Price.
"Frank Employment Agreement" shall mean that certain Employment Agreement,
dated the date hereof, between Robert Frank and the Company.
"GAAP" shall mean generally accepted accounting principles in the United
States.
"Governmental Body" shall mean any domestic or foreign national, state,
multi-state or municipal or other local government, any subdivision, agency,
commission or authority thereof, or any quasi-governmental or private body
exercising any regulatory or taxing authority thereunder.
"Greenwich Stock" shall mean, at any time, all of the shares of the capital
stock of Greenwich Entertainment Group, Inc. held by the Company at such time.
"Hazardous Substance" shall include any waste, substance or material that
is defined or regulated as hazardous or forms the basis for liability under the
Environmental Laws
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<PAGE>
and includes petroleum or any fraction thereof, asbestos or asbestos containing
material, and polychlorinated biphenyls.
"Income Taxes" shall mean (a) foreign, federal, state or local income or
franchise taxes, together with any interest or penalties or additions to tax
imposed with respect thereto, and (b) any obligations under any agreements or
arrangements with respect to any Income Taxes described in clause (a) above.
"Income Tax Returns" shall mean foreign, federal, state or local Tax
Returns required to be filed with any Taxing Authority that include the Company
that pertain to Income Taxes.
"Indemnification Matter" shall have the meaning ascribed to such term in
Section 9.4 of this Stock Purchase Agreement.
"Indemnification Notice" shall have the meaning ascribed to such term in
Section 9.4 of this Stock Purchase Agreement.
"Indemnitee" shall have the meaning ascribed to such term in Section 9.4
of this Stock Purchase Agreement.
"Indemnitor" shall have the meaning ascribed to such term in Section 9.4
of this Stock Purchase Agreement.
"Indemnity Escrow Agreement" shall mean the Indemnity Escrow Agreement to
be entered into at the Closing, among the Non-Management Shareholders, Purchaser
and the Escrow Agent, pursuant to Section 9.7(b)(ii) of this Stock Purchase
Agreement, in substantially the form attached as Exhibit C hereto.
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"Indemnity Escrow Deposit" shall have the meaning ascribed to such term in
Section 9.7(b)(ii) of this Stock Purchase Agreement.
"Intangible Property" shall mean all patents, trademarks, copyrights,
service marks, tradenames, trade secrets, know-how, software, technical
information, data and process technology of the Company, all applications for
any of the foregoing, and all permits, grants, franchises and licenses and other
rights running to or from the Company relating to any of the foregoing.
"Interim Financial Statements" shall mean the unaudited balance sheet of
the Company as of June 30, 1996, and related statement of income of the Company
for the six month period then ended.
"Judgment" shall mean any order, writ, injunction, citation, award, decree
or other judgment of any nature of any foreign, federal, state or local court,
Governmental Body, administrative agency, regulatory authority or arbitration
tribunal.
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"Liabilities" shall mean all liabilities, claims or obligations of any
nature (whether known or unknown and whether absolute, accrued, contingent, or
otherwise) including, without limitation, unasserted claims or assessments.
"Management Shareholders" shall mean, together, (i) Robert Frank, (ii)
Micah Frank, (iii) Robert Frank, as custodian for Dakota Frank under the Uniform
Gifts to Minors Act and (iv) Robert Capshaw.
"Management Shareholders Base Purchase Price" shall mean an amount equal to
the aggregate dollar amount of (i) the Base Price Promissory Notes, (ii) the
Robert Capshaw Cash Purchase Price, (iii) the Robert Frank Cash Purchase Price,
(iv) the Micah Frank Cash Purchase Price and (v) the Dakota Frank Cash Purchase
Price.
"Maximum Transaction Costs Amount" shall mean an amount equal to (i)
$1,300,000 minus (ii) the amount actually paid by Purchaser to Citibank, N.A. in
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respect of the discharge and satisfaction of the Citibank Loan.
"Micah Frank Base Price Promissory Note" shall mean that certain Base Price
Promissory Note, dated the date hereof, by the Purchaser, in favor of Micah
Frank, in the initial principal amount of $112.110.73, in the form attached as
Exhibit E hereto.
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"Micah Frank Contingent Price Promissory Note" shall mean the Contingent
Price Promissory Note, to be issued by Purchaser if the Contingent Consideration
is earned, in favor of Micah Frank, in the initial principal amount determined
pursuant to the provisions of Section 2.2(e)(i)(C)(ii) hereof, in the form of
Exhibit D hereto.
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"Micah Frank Preliminary Cash Purchase Price" shall have the meaning
ascribed to such term in Section 2.2(a)(iv) of this Stock Purchase Agreement.
"Micah Frank Cash Purchase Price" shall mean the Micah Frank Preliminary
Cash Purchase Price, as adjusted in accordance with Section 2.2(c) of this Stock
Purchase Agreement.
"Minimum Contingent Consideration Payment" shall have the meaning set forth
in Section 2.2(e)(iv)(A)2 of this Stock Purchase Agreement.
"Net Income Notice of Objection" shall have the meaning ascribed to such
term in Section 2.2(e)(i)(B) of this Stock Purchase Agreement.
"Non-Management Shareholders" shall mean all Shareholders of the Company
listed on Schedule 1 hereto, other than Robert Frank and Robert Capshaw.
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"Non-Management Shareholder Preliminary Purchase Price" shall mean have the
meaning ascribed to such term in Section 2.2(a)(ii) of this Stock Purchase
Agreement.
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<PAGE>
"Non-Management Shareholders Purchase Price" shall mean the Non-Management
Shareholders Preliminary Purchase Price, as adjusted in accordance with Section
2.2(c) of this Stock Purchase Agreement.
"Nonpartisan Accountants" shall have the meaning ascribed to such term in
Section 2.2(b)(ii) of this Stock Purchase Agreement.
"Notice of Net Income" shall have the meaning ascribed to such term in
Section 2.2(e)(i)(B) of this Stock Purchase Agreement.
"Notice of Objection" shall have the meaning ascribed to such term in
Section 2.2(b)(ii) of this Stock Purchase Agreement.
"Operating Profit Bonus Program" shall mean the Operating Profit Bonus
Program of the Company, in the form attached as Exhibit G to this Stock Purchase
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Agreement.
"Person" shall mean any individual, corporation, partnership, joint
venture, limited liability company, trust, association, unincorporated
organization, other entity, or Governmental Body.
"Plans" shall have the meaning ascribed to such term in Section 6.11(a) of
this Stock Purchase Agreement.
"POP Radio Notes" shall mean, together, (i) that certain Promissory Note,
dated March 1, 1991, issued by the Company, in favor of POP Radio Corporation,
in the initial principal amount of $50,000 and (ii) that certain Promissory
Note, dated March 1, 1991, issued by the Company, in favor of POP Radio
Corporation, in the initial principal amount of $168,000.
"Preliminary Cash Purchase Price" shall mean an amount equal to the
aggregate of (i) the Non-Management Shareholders Preliminary Purchase Price,
(ii) the Frank Preliminary Cash Purchase Price and (iii) the Robert Capshaw
Preliminary Cash Purchase Price.
"Proceeding" shall mean any demand, claim, suit, action, litigation,
investigation, arbitration, administrative hearing or other proceeding of any
nature.
"Pro Rata Share" with respect to each Non-Management Shareholder shall mean
the percentage set forth opposite such Non-Management Shareholder's name on
Schedule 1 hereto.
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"Purchaser" shall have the meaning ascribed to such term in the
introductory paragraph of this Stock Purchase Agreement.
"Representatives" shall have the meaning ascribed to such term in Section 4
of this Stock Purchase Agreement.
"Robert Capshaw Employment Agreement" shall mean that certain Employment
Agreement, dated the date hereof, between Robert Capshaw and the Company.
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<PAGE>
"Robert Capshaw Cash Purchase Price" shall mean the Robert Capshaw
Preliminary Cash Purchase Price, as adjusted in accordance with Section 2.2(c)
hereof.
"Robert Capshaw Preliminary Cash Purchase Price" shall have the meaning
ascribed to such term in Section 2.2(a)(vi) of this Stock Purchase Agreement.
"Robert Capshaw Base Price Promissory Note" shall mean that certain Base
Price Promissory Note, dated the date hereof, issued by the Purchaser, in favor
of Robert Capshaw, in the initial principal amount of $189,965.40, in the form
attached as Exhibit E hereto.
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"Robert Capshaw Contingent Price Promissory Note" shall mean the Contingent
Price Promissory Note, to be issued by Purchaser if the Contingent Consideration
is earned, in favor of Robert Capshaw, in the initial principal amount
determined pursuant to the provisions of Section 2.2(e)(i)(C)(ii) hereof, in the
form of Exhibit D hereto.
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"Robert Frank Base Price Promissory Note" shall mean that certain Base
Price Promissory Note, dated the date hereof, by the Purchaser, in favor of
Robert Frank, in the initial principal amount of $498,269.90 in the form
attached as Exhibit E hereto.
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"Robert Frank Cash Purchase Price" shall mean the Robert Frank Preliminary
Cash Purchase Price, as adjusted in accordance with Section 2.2(c) of this Stock
Purchase Agreement.
"Robert Frank Contingent Price Promissory Note" shall mean the Contingent
Price Promissory Note, to be issued by Purchaser if the Contingent Consideration
is earned, in favor of Robert Frank, in the initial principal amount determined
pursuant to the provisions of Section 2.2(e)(i)(C)(ii) hereof, in the form of
Exhibit D hereto.
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"Robert Frank Preliminary Cash Purchase Price" shall have the meaning
ascribed to such term in Section 2.2(a)(iii) of this Stock Purchase Agreement.
"Section 2.2(e) Right" shall have the meaning ascribed to such term in
Section 2.2(e)(v)(A) of this Stock Purchase Agreement.
"Section 5 Claim" shall have the meaning ascribed to such term in Section
9.2(b) of this Stock Purchase Agreement.
"Shareholders" shall have the meaning ascribed to such term in the
introductory paragraph of this Stock Purchase Agreement.
"Shares" shall have the meaning ascribed to such term in the first recital
paragraph of this Stock Purchase Agreement.
"Stub End Date" shall have the meaning ascribed to such term in Section
8.6(b)(i) of this Stock Purchase Agreement.
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<PAGE>
"Subsidiary" shall mean, with respect to any specified Person, any other
Person (a) whose board of directors or similar governing body, or a majority
thereof, may presently be directly or indirectly elected or appointed by such
specified Person, (b) whose management decisions and corporate actions are
directly or indirectly subject to the present control of such specified Person,
or (c) whose voting securities are more than 50% owned, directly or indirectly,
by such specified Person.
"Tangible Property" shall mean the real property, facilities, machinery,
equipment, furniture, leasehold improvements, fixtures, vehicles, structures,
any related capitalized items and other fixed assets used in the business of the
Company.
"Taxes" shall mean (a) any and all Income Taxes and other taxes whatsoever
(whether federal, state, local or foreign), including, without limitation, gross
receipts, profits, sales, use, occupation, value added, ad valorem, transfer,
franchise, withholding, payroll, employment, excise and property taxes, together
with any interest, penalties or additions to tax imposed with respect thereto,
and (b) any obligations under any agreements or arrangements with respect to
Taxes described in clause (a) above.
"Tax Contest" shall have the meaning set forth in Section 8.6(f) of this
Stock Purchase Agreement.
"Taxing Authority" shall mean a Governmental Body having jurisdiction over
the assessment, determination, collection, or other imposition of any Tax.
"Tax Returns" shall mean returns, reports and forms required to be filed
with any Taxing Authority.
"Transaction Costs" shall have the meaning ascribed to such term in Section
8.1 of this Stock Purchase Agreement.
"Transaction Costs Statement" shall have the meaning ascribed to such term
in Section 2.2(d) of this Stock Purchase Agreement.
"T/SF" shall mean T/SF Communications Corporation, the parent company of
Purchaser.
"T/SF Plan Participation" shall have the meaning ascribed to such term in
Section 8.8 of this Stock Purchase Agreement.
"Working Capital" shall mean the Company's current assets (specifically
including prepaid amounts reflected on the Closing Date Balance Sheet as current
assets under GAAP) less the Company's current liabilities (excluding the current
portion of long term debt and Transaction Costs actually paid by Purchaser on
behalf of the Company, but specifically including as a current liability the
amount of Taxes accrued or accruable under GAAP by the Company with respect to
its income, assets, business, operations, activities and status attributable to
the period from January 1, 1996 to the close of business on the Closing Date),
determined in accordance with GAAP.
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<PAGE>
1.2. References to Dollars. References to dollars or "$" in this Stock
---------------------
Purchase Agreement shall mean United States Dollars.
2. Sale and Transfer of Shares; Purchase Price.
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2.1. Purchase and Sale. Subject to the terms and conditions of this
-----------------
Stock Purchase Agreement, Purchaser shall purchase the Shares from the
Shareholders and the Shareholders shall sell and transfer the Shares to
Purchaser, free and clear of all Encumbrances, for the purchase price set forth
in Section 2.2 hereof.
2.2. Purchase Price; Payment of Transaction Costs; Closing Adjustment.
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(a) The purchase price for the Shares, which may be subject to adjustment after
the Closing as provided in Section 2.2(c), shall be paid by Purchaser at the
Closing as follows:
(i) (x) $955,102.04, which is the portion of the Non-
Management Shareholder Preliminary Purchase Price equal to the
Indemnity Escrow Deposit, (y) $3,750, which is one-half of the two-
year fee payable to the Escrow Agent, and (z) one half of fees
required to be paid to Citibank, N.A. in respect of wire transfer and
check writing fees on the Closing Date shall be deposited by Purchaser
with Citibank, N.A., (for distribution to the Escrow Agent) by wire
transfer in immediately available funds to the Citibank Cash Purchase
Price Account;
(ii) $12,544,897.96 (which is the portion of the Non-
Management Shareholders Preliminary Purchase Price which remains
following the delivery of the Indemnity Escrow Deposit to the Escrow
Agent pursuant to Section 2.2(a)(i) hereof), less 76.4082% of amounts,
if any, actually paid by Purchaser in respect of Transaction Costs in
excess of the Maximum Transaction Costs Amount (the "Non-Management
Shareholder Preliminary Cash Purchase Price"), shall be paid to the
Non-Management Shareholders by deposit of such amount with Citibank,
N.A., by wire transfer in immediately available funds to an account
designated by the Representatives (the "Citibank Cash Purchase Price
Account");
(iii) $498,269.90, less 13.0612% of amounts, if any,
actually paid by Purchaser in respect of Transaction Costs in excess
of the Maximum Transaction Costs Amount (the "Robert Frank Preliminary
Cash Purchase Price"), shall be deposited with Citibank, N.A. (for
distribution to Robert Frank) by wire transfer in immediately
available funds to the Citibank Cash Purchase Price Account;
(iv) $112,110.73, less 2.9388% of amounts, if any, actually
paid by Purchaser in respect of Transaction Costs in excess of the
Maximum Transaction Costs Amount (the "Micah Frank Preliminary Cash
Purchase Price"), shall be deposited with Citibank, N.A. (for
distribution to Micah Frank) by wire transfer in immediately available
funds to the Citibank Cash Purchase Price Account;
(v) $99,653.98, less 2.6122% of amounts, if any, actually
paid by Purchaser in respect of Transaction Costs in excess of the
Maximum Transaction Costs
10
<PAGE>
Amount (the "Dakota Frank Preliminary Cash Purchase Price"), shall be
deposited with Citibank, N.A. (for distribution to Robert Frank, as
custodian for Dakota Frank under the Uniform Gifts to Minors Act) by
wire transfer in immediately available funds to the Citibank Cash
Purchase Price Account;
(vi) $189,965.40, less 4.9796% of amounts, if any,
actually paid by Purchaser in respect of Transaction Costs in excess
of the Maximum Transaction Costs Amount (the "Robert Capshaw
Preliminary Cash Purchase Price") shall be deposited in an account
with Citibank, N.A. (for distribution to Robert Capshaw) by wire
transfer in immediately available funds to the Citibank Cash Purchase
Price Account; and
(vii) the Robert Capshaw Base Price Promissory Note, the
Robert Frank Base Price Promissory Note, the Micah Frank Base Price
Promissory Note and the Dakota Frank Promissory Note, each having been
duly executed by Purchaser, shall be delivered to Robert Capshaw,
Robert Frank, Micah Frank and Robert Frank, as custodian for Dakota
Frank under the Uniform Gifts to Minors Act, respectively.
(viii) The amounts described in this Section 2.2(a)
payable to the Non-Management Shareholders (subject to the Working
Capital adjustment in Sections 2.2(b) and 2.2(c) hereof) shall
constitute all of the purchase price to be received by the Non-
Management Shareholders with respect to the sale of the Shares owned
by them to Purchaser, and the Non-Management Shareholders shall not be
entitled to receive any portion of the consideration, fixed or
contingent, payable, or which may become payable to the Management
Shareholders, pursuant to Sections 2.2(a) or 2.2(e) hereof or the
Employment Agreements.
(b)(i) Not later than 75 days after the Closing Date, Purchaser
shall cause the Company to prepare and deliver to the Representatives an
unaudited balance sheet of the Company as at the close of business on the
Closing Date (the "Closing Date Balance Sheet"). The Closing Date Balance Sheet
shall be prepared in conformity with GAAP, applied on a basis consistent with
the Audited Financial Statements, subject, however, to (x) changes resulting
from normal year-end audit adjustments that will not, in the aggregate be
material and (y) the absence of the type of notes that would customarily be
included in a financial statement prepared in accordance with GAAP.
(ii) Unless the Representatives, within 15 days following receipt
of the Closing Date Balance Sheet, give Purchaser a notice objecting thereto and
specifying the basis for such objection and the amount in dispute ("Notice of
Objection"), the Closing Date Balance Sheet shall be considered accepted and
binding upon Purchaser and the Shareholders. If within 15 days following the
receipt of the Closing Date Balance Sheet the Representatives give a Notice of
Objection to Purchaser, Purchaser and the Shareholders shall negotiate in good
faith with a view to resolving any differences. If such negotiations fail to
resolve all disputed items within 15 days after Notice of Objection was first
given by the Representatives, the remaining disputed items shall be submitted to
a nationally recognized accounting firm jointly designated and agreed upon by
Purchaser and the Shareholders (the "Nonpartisan Accountants") for final
resolution. After affording each of the Shareholders and the Shareholders'
representatives and Purchaser and Purchaser's representatives the opportunity to
present their positions as to the disputed items
11
<PAGE>
(which opportunity, in total, shall not extend for more than 30 days), the
Nonpartisan Accountants shall resolve all disputed items. Such resolution shall
be final and binding upon the parties and shall be reflected in any necessary
revisions to the Closing Date Balance Sheet. The fees, costs and expenses of the
Nonpartisan Accountants shall be shared equally by the Shareholders and
Purchaser.
(c) If the Working Capital as of the Closing Date as reflected on the
Closing Date Balance Sheet (as adjusted, if necessary, to reflect the resolution
of any disputed items pursuant to Section 2.2(b)(ii)) is greater or less than
$200,000, (i) the Non-Management Shareholders Purchase Price shall be increased
above or decreased below the Non-Management Shareholders Preliminary Purchase
Price by an amount equal to 76.4082% of such excess or shortfall, as the case
may be, (ii) the Robert Frank Cash Purchase Price shall be increased above or
decreased below the Robert Frank Preliminary Cash Purchase Price by an amount
equal to 13.0612% of such excess or shortfall, as the case may be, (iii) the
Micah Frank Cash Purchase Price shall be increased above or decreased below the
Micah Frank Preliminary Cash Purchase Price by an amount equal to 2.9388% of
such excess or shortfall, as the case may be, (iv) the Dakota Frank Cash
Purchase Price shall be increased above or decreased below the Dakota Frank
Preliminary Cash Purchase Price by an amount equal to 2.6122% of such excess or
shortfall, as the case may be and (vi) the Robert Capshaw Cash Purchase Price
shall be increased above or decreased below the Robert Capshaw Preliminary Cash
Purchase Price by an amount equal to 4.9796% of such excess or shortfall, as the
case may be. Any excess of the Cash Purchase Price over the Preliminary Cash
Purchase Price shall be paid by Purchaser to the Representatives (for
distribution to the Non-Management Shareholders), Robert Frank, Micah Frank,
Robert Frank, as custodian for Dakota Frank under the Uniform Gifts to Minors
Act and Robert Capshaw (in each case in accordance with the percentages set
forth in the preceding sentence), and any decrease of the Cash Purchase Price
below the Preliminary Cash Purchase Price shall be paid by the Non-Management
Shareholders, Robert Frank, Micah Frank, Robert Frank, as custodian for Dakota
Frank under the Uniform Gifts to Minors Act and Robert Capshaw (in each case in
accordance with the percentages set forth in the preceding sentence) to
Purchaser, in each case by wire transfer of immediately available funds, as
follows: (i) if no Notice of Objection is delivered by the Representatives,
such amount shall be paid within three (3) Business Days of the expiration of
the 15-day period for delivery of such Notice of Objection; (ii) if Notice of
Objection is delivered by the Representatives, (x) any net undisputed amounts
due from the Non-Management Shareholders, Robert Frank, Micah Frank, Robert
Frank, as custodian for Dakota Frank under the Uniform Gifts to Minors Act and
Robert Capshaw, to Purchaser or from Purchaser to the Non-Management
Shareholders, Robert Frank, Micah Frank, Robert Frank, as custodian for Dakota
Frank under the Uniform Gifts to Minors Act and Robert Capshaw (as the case may
be), shall be paid within five Business Days after delivery of such Notice of
Objection, and (y) the remaining amount, if any, due from the Non-Management
Shareholders, Robert Frank, Micah Frank, Robert Frank, as custodian for Dakota
Frank under the Uniform Gifts to Minors Act and Robert Capshaw, to Purchaser or
from Purchaser to the Non-Management Shareholders, Robert Frank, Micah Frank,
Robert Frank, as custodian for Dakota Frank under the Uniform Gifts to Minors
Act and Robert Capshaw (as the case may be), shall be paid within five Business
Days after the date all disputed items are finally resolved in accordance with
this Section 2.2(c). Any amounts not paid when required pursuant to this
Section 2.2(c) shall bear interest from the required date of payment to the date
of actual payment at the Citibank Prime Rate plus 4%.
12
<PAGE>
(d) (i) Not later than three (3) days prior to the Closing Date, the
Shareholders shall have delivered to Purchaser a statement setting forth in
reasonable detail the Transaction Costs (the "Transaction Costs Statement").
(ii) On the Closing Date, Purchaser shall pay the amounts due in
respect of such Transaction Costs to the Persons to whom such amounts are due
and payable by wire transfer of immediately available funds, or in such other
manner as shall be specified by a Person to whom a portion of the Transaction
Costs are due and payable.
(e) Contingent Consideration.
------------------------
(i) (A) In addition to the Management Shareholders Base Purchase
Price, the Management Shareholders may earn additional consideration for the
Shares sold by the Management Shareholders to Purchaser (designated as "P"
below, the "Contingent Consideration"). The Contingent Consideration shall be
determined based on the earnings performance of the Company (as determined
herein) from the Closing Date through December 31, 1999, pursuant to the
following formula:
P = M x [[.235(A+B+3C)] / 5] - $1,800,000
Where under such formula
P = The Contingent Consideration for the Shares being sold by the
Management Shareholders to Purchaser at the Closing.
M = A multiplier, which will be not less than seven nor more than
nine, determined based upon the average annual growth rate
("AGR") of the Company's Net Income (as hereinafter defined) over
the following three comparison periods: 1997 compared to 1996;
1998 compared to 1997; and 1999 compared to 1998, based upon the
following AGR ranges:
<TABLE>
<CAPTION>
----------------------------
AGR M
--- -
----------------------------
<S> <C>
less than 20% 7
----------------------------
20.00% - 24.99% 7.5
----------------------------
25.00% - 29.99% 8
----------------------------
30.00% - 34.99% 8.5
----------------------------
35% or more 9
----------------------------
</TABLE>
A = The Company's Net Income for 1997, less any shortfall from the
1996 target Net Income, which 1996 target Net Income shall be
$2,000,000.
13
<PAGE>
B= The Company's Net Income for 1998.
C= The Company's Net Income for 1999.
(B) On or before April 1, of each of 1997, 1998, 1999 and 2000, T/SF
with the assistance of its independent public accountants, shall determine the
Company's Net Income (for the prior year) in accordance with the provisions of
Section 2.2(e)(ii) below, and provide the Management Shareholders with written
notice of the Net Income determination together with a reasonable amount of
detail concerning the computation thereof (the "Notice of Net Income"). Unless
the Management Shareholders, within 10 days following receipt of the Notice of
Net Income, give T/SF a notice objecting thereto and specifying the basis for
such objection and the amount in dispute (a "Net Income Notice of Objection"),
the Notice of Net Income shall be considered accepted and binding upon Purchaser
and the Management Shareholders. If within 10 days following the receipt of the
Notice of Net Income, the Management Shareholders give a Net Income Notice of
Objection to T/SF, T/SF and the Management Shareholders, together with the
Management Shareholders' accountant, shall negotiate in good faith with a view
to resolving any differences. If, as a result of such negotiations, there is an
adjustment to the Net Income calculation which increases such amount, T/SF shall
pay the reasonable costs incurred by the Management Shareholders with respect to
the Management Shareholders' accountant in connection with any such negotiation;
otherwise, the Management Shareholders shall bear such costs. If such
negotiations fail to resolve all disputed items within 15 days after the Net
Income Notice of Objection was first given by the Management Shareholders, the
remaining disputed items shall be submitted to the Nonpartisan Accountants for
final resolution. After affording each of the Management Shareholders and the
Management Shareholders' accountants and T/SF and T/SF's accountants the
opportunity to present their positions as to the disputed items (which
opportunity, in total, shall not extend for more than 30 days), the Nonpartisan
Accountants shall resolve all disputed items. Such resolution shall be final
and binding upon the parties and shall be reflected in any necessary revisions
to Net Income. The fees, costs and expenses of the Nonpartisan Accountants
shall be shared equally by the Management Shareholders and Purchaser.
(C) On or before April 1, 2000 (or on such later date as all disputes
with respect to the Net Income calculation (if any arise) are settled pursuant
to Section 2.2(e)(i)(B) above) T/SF will provide final calculations to the
Management Shareholders concerning the amounts, if any, due to them as the
Contingent Consideration determined pursuant to this Section 2.2(e). The
Contingent Consideration shall be paid as follows: (i) 50% of such Contingent
Consideration shall be paid by Purchaser on April 1, 2000 (or on such later date
as all disputes with respect to the Net Income calculation (if any arise) are
settled pursuant to Section 2.2(e)(i)(B) above), to the Management Shareholders,
in immediately available funds in accordance with the following percentages: (w)
21.1073% to Robert Capshaw, (x) 12.4567% to Micah Frank, (y) 11.0727% to Robert
Frank, as custodian for Dakota Frank under the Uniform Gifts to Minors Act and
(z) 55.3633% to Robert Frank, and (ii) the remaining 50% of the Contingent
Consideration shall be paid on April 1, 2001, in the form of, and in accordance
with the terms of, the Contingent Price Promissory Notes (such amount to be
allocated among such Contingent Price Promissory Notes in accordance with the
percentages set forth in the preceding clause (i)).
14
<PAGE>
(D) Any amounts earned or to be earned under this Section 2.2(e)(i)
once the final amount has been determined shall accrue interest at the Citibank
Prime Rate plus 1% retroactively from January 1, 2000.
(ii) In determining the Contingent Consideration which may be earned
by the Management Shareholders, Net Income will be computed in accordance with
GAAP, as determined by Purchaser's independent public accountants, after
deduction of all applicable state, city and local income taxes but before and
without consideration of federal income taxes, with the following adjustments
and exceptions:
(A) One hundred percent (100%) of all amounts to be paid, whether
accrued for payment or paid (other than with respect to amounts described in
this Section 2) to the Management Shareholders from Purchaser, T/SF, any of
their subsidiaries or the Company, whether in the form of base salary,
commissions, discretionary or contractual bonuses, incentive compensation or
non-competition payments, will be charged against Net Income; no discretionary
bonuses will be paid to the Management Shareholders without the unanimous
approval of the Board of Directors of the Company.
(B) The bonuses or additional compensation paid to the Company's
employees in 1996 or 1997, not to exceed an aggregate of $250,000 pursuant to
the Corsearch Special Bonus Plan shall not be deducted in determining Net Income
for 1996 or 1997.
(C) Subject to the limitation set forth in the last sentence of this
paragraph, all asset acquisition and development costs and any other costs
(including, but not limited to, leases which may be required to be capitalized)
required to be capitalized, regardless of how the cost of the asset was financed
or the source of the funds, shall be amortized or depreciated over a period
which is in accordance with GAAP and consistent with the accounting practices of
T/SF, and such depreciation or amortization shall be a charge against Net
Income. Depreciation or amortization of any cost incurred or asset acquired
before the Closing Date shall be continued on a basis consistent with GAAP and
the Company's past practices. Notwithstanding the foregoing if and to the
extent capital expenditures in excess of $400,000 per year are proposed or
directed by Purchaser, T/SF or the Company ("Excess Capital Expenditures"), and
such Excess Capital Expenditures are not approved by Robert Frank (which non-
approval, for any reason, or for no reason, will not constitute a violation of
the Frank Employment Agreement or be in contravention of any fiduciary or other
duty owed by Robert Frank to the Company, its board of directors or its
shareholders), then the depreciation, amortization, expense (and any other
financially detrimental impact) attributable to such Excess Capital Expenditure
shall not be considered in the determination of the Company's Net Income, nor
shall the revenue (or other financially beneficial impact) attributable thereto
be considered in the determination of Net Income for purposes of this Section
2.2(e)(ii).
(D) The cash management function of the Company will be managed in
good faith by, and under the supervision of, Purchaser or T/SF. All available
cash of the Company shall be transferred by Company to Purchaser upon request
and Purchaser will make cash available to the Company as needed for its normal
operating needs and approved capital expenditures. All transfers of funds
between the Company, Purchaser and its affiliates shall be by intercompany loan
or advance, equity contribution (as to transfers from Purchaser to the Company)
or repayment of
15
<PAGE>
loans or advances or distributions with respect to equity (as to transfers from
the Company to Purchaser), all as determined by Purchaser from time to time.
1. It is intended that Purchaser, at its option, may advance
funds to the Company on or from time to time after the Closing solely for
the purpose of repaying the Company's bank debt or funding the payment of
other current (including, without limitation, capital expenditure
obligations, subject to the provisions of (C) above) or long-term
liabilities as Purchaser or T/SF in its good faith discretion may
determine. If and to the extent Purchaser or T/SF makes such advances in
excess of $200,000 (the amount necessary to fund the Company's initial cash
working capital needs), whether in the form of debt or equity, directly or
indirectly, such advances shall bear interest and the Company's Net Income
shall be charged therewith at a rate of 1% above the Citibank Prime Rate as
in effect from time to time until such advances are repaid as provided
below. Notwithstanding the foregoing, no interest will be charged on
amounts paid by Purchaser or T/SF with respect to Transaction Costs.
2. It is further intended that Purchaser and T/SF shall have
received and retained for their own use all Net Income of the Company, as
the same is earned. All cash or other funds transferred out of the Company
to or for the benefit of Purchaser, T/SF or any of their affiliates (other
than the Company), and all cash or other funds transferred to or for the
benefit of the Company or its subsidiaries by Purchaser, T/SF or any of
their affiliates (other than the Company) shall be accounted for in the
Company's account with Purchaser (the "Company Account"). Purchaser shall
be compensated for the use of any funds needed or used by the Company which
prevent Purchaser from retaining in the Company Account an amount at least
equal to the Company's Net Income on a cumulative basis. Accordingly, at
the end of any month between the date hereof and December 31, 1999, in
which the Company Account is less (the amount being referred to as the
"Account Deficit") than the Company's cumulative Net Income from the date
hereof through such month, Net Income for the purposes of the Contingent
Consideration herein shall be charged with a "use fee" for each such month
equal to the Citibank Prime Rate at such month end plus one percent (1%),
multiplied by the Account Deficit. The "use fee" shall be calculated based
on a year of 360 days composed of twelve (12) thirty (30) day months.
3. If and to the extent the Company transfers cash to or for the
benefit of Purchaser, T/SF or any of their affiliates (other than the
Company) in excess of the Company's cumulative Net Income from time to
time, such amount shall be credited in the Company Account against any
amount which may have been transferred to the Company under Section
2.2(e)(ii)(D)1 above, thereby reducing the Company's interest charge on
such advances. If and to the extent advances under Section 2.2(e)(ii)(D)1
are completely repaid, excess cash transferred by the Company to or on
behalf of Purchaser shall bear interest and be credited to the Company's
account at a rate equal to the rate of interest then in effect for three-
month treasury bills. Other than as set forth in this subsection, no
interest or other cost for the use of funds will be charged or credited to
Purchaser, T/SF of the Company on funds transferred to the Company or by
the Company to Purchaser or T/SF. Purchaser or T/SF shall make the
determination of any interest to be charged
16
<PAGE>
against or credited to the Company's Net Income on a monthly basis and
inform the Company thereof in writing within 30 days after the end of each
month.
(E) After the Closing Date, it is anticipated that T/SF and its
affiliated companies will provide audit and 401(k) plan services to the Company.
In addition, with the written consent of Robert Frank (the withholding of which
consent, for any reason, or for no reason, will not constitute a violation of
the Frank Employment Agreement or be in contravention of any fiduciary or other
duty owed by Robert Frank to the Company, its board of directors or its
shareholders), T/SF and its affiliated companies may provide other types of
management and administrative services to the Company, including, without
limitation, insurance, legal, tax, employee benefit or other services (together
with the services specified above, the "Approved Services"). Whether or not the
charges for such Approved Services are required to be charged against the
operations of the Company under GAAP and whether or not recorded for financial
statement purposes, for purposes of determining Net Income hereunder, the actual
costs of Approved Services provided or paid for by T/SF will be passed through
from T/SF to the Company as a charge against Net Income. No other T/SF related
charges or costs shall be charged against the income of the Company for purposes
of determining Net Income. Notwithstanding the foregoing, T/SF or Purchaser may
impose management, administrative or tax-sharing fees on the Company as it
determines to be appropriate; to the extent any such fees (other than fees for
the audit and 401(k) plan services referred to above) are imposed without the
consent of Robert Frank, such fees shall not be included in the determination of
Net Income hereunder.
(F) Without the express written consent of Robert Frank, none of the
Company, Purchaser nor T/SF shall enter into or engage in any transaction or
corporate action, including, without limitation, a merger, acquisition or other
form of business combination which would (i) not preserve the integrity of the
Company from a management or operations standpoint, or (ii) render the continued
computation of the Net Income of the Company and the Contingent Consideration in
accordance with the provisions of this Section 2.2(e) impossible. If any such
transaction or corporate action can be undertaken without violating either (i)
or (ii) of the preceding sentence, the same may be so undertaken without the
necessity of Robert Frank's consent, but, in such event, any effect on the
financial statements of the Company that would be required by GAAP shall be
ignored in computing Net Income of the Company and the Contingent Consideration
under this Section 2.2(e).
(G) The Company's fiscal year for financial reporting, accounting and
tax purposes will be the calendar year to coincide with T/SF's fiscal year, and
for all purposes the Company's Net Income will be determined based on the
calendar year. The Company's Net Income calculation for 1996 will include all
of 1996, including the period prior to the Closing Date.
(iv) Simultaneous with the execution of this Stock Purchase Agreement,
the Company and each of Robert Frank and Robert Capshaw has entered into an
Employment Agreement. The termination of Robert Frank's or Robert Capshaw's
employment with the Company, whether pursuant to or in violation of the
applicable Employment Agreement and as described in this subsection (iv), shall
affect the Contingent Consideration which may be earned under Section 2.2(e)(i)
of this Stock Purchase Agreement as follows.
17
<PAGE>
(A) In the event of the termination of employment with the Company
pursuant to subparagraphs 8(a) or 8(b) of the applicable Employment Agreement,
the following shall apply:
1. With respect to the Contingent Consideration which, in the case of
the termination of Robert Frank, (i) Robert Frank, (ii) Micah Frank
and (iii) Robert Frank, as custodian for Dakota Frank under the
Uniform Gifts to Minors Act, and, in the case of the termination of
Robert Capshaw, Robert Capshaw, may earn pursuant to Section
2.2(e)(i), the applicable Management Shareholder shall receive the
greater of (i) such Management Shareholder's Minimum Contingent
Consideration Payment (as set forth in subparagraph (iv)(A)(2) below)
or (ii) if ultimately earned, the following percentages of the
Contingent Consideration which may be earned pursuant to Section
2.2(e)(i) herein, according to the following designated time periods
during which the termination of employment occurred:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Percentage of Contingent
Date of Termination Consideration Payable if Earned
- --------------------------- ---------------------------------------------------
<S> <C>
Before July 1, 1997 25%
- --------------------------------------------------------------------------------
7-1-97 -- 12-31-97 40%
- --------------------------------------------------------------------------------
1-1-98 -- 6-30-98 55%
- --------------------------------------------------------------------------------
7-1-98 -- 12-31-98 70%
- --------------------------------------------------------------------------------
1-1-99 -- 7-1-99 85%
- --------------------------------------------------------------------------------
After 7-1-99 100%
- --------------------------------------------------------------------------------
</TABLE>
2. The amount set forth opposite each Management Shareholder's name
in the following table reflects such Management Shareholder's Minimum Contingent
Consideration Payment, referred to in the preceding subparagraph (iv)(A)(1).
<TABLE>
<CAPTION>
Minimum Contingent
Management Shareholder Consideration Payment
- --------------------------- -----------------------------
<S> <C>
Robert Frank $830,449.50
- -----------------------------------------------------------
Micah Frank $186,850.50
- -----------------------------------------------------------
Robert Frank, as custodian
for Dakota Frank under
the Uniform Gifts to
Minors Act $166,090.50
- -----------------------------------------------------------
Robert Capshaw $316,609.50
- -----------------------------------------------------------
</TABLE>
The amounts paid pursuant to this subparagraph (A) shall be payable in
the form, and pursuant to the terms, described in subparagraph (e)(i)(C) above,
as if such termination of employment had not occurred.
18
<PAGE>
(B) In the event (i) of the termination of Robert Capshaw's or Robert
Frank's employment with the Company pursuant to subparagraph 8(d) of the
applicable Employment Agreement, or (ii) Robert Frank or Robert Capshaw resigns
from employment with the Company for any reason other than death or Disability
(as defined in the Employment Agreements), in any such case prior to July 1,
1998, in the case of such termination of or resignation by Robert Frank, (i)
Robert Frank, (ii) Micah Frank and (iii) Robert Frank, as custodian for Dakota
Frank under the Uniform Gifts to Minors Act, and, in the case of such
termination of or resignation by Robert Capshaw, Robert Capshaw shall not be
entitled to receive any Contingent Consideration which may be earned hereunder.
(C) In the event (i) of the termination of Robert Frank's or Robert
Capshaw's employment with the Company pursuant to subparagraph 8(d) of the
applicable Employment Agreement, or (ii) Robert Frank or Robert Capshaw resigns
from employment with the Company for any reason other than death or Disability,
in any such case on or after July 1, 1998, in the case of such termination of or
resignation by Robert Frank, (i) Robert Frank, (ii) Micah Frank and (iii) Robert
Frank, as custodian for Dakota Frank under the Uniform Gifts to Minors Act, and,
in the case of such termination of or resignation by Robert Capshaw, Robert
Capshaw, shall receive a proportionate share of the Contingent Consideration
which may be earned based upon the quotient obtained by dividing the number of
full months of service of Robert Frank or Robert Capshaw, as applicable, with
the Company after August 1, 1996, up to and including the date of the
termination, by 41; provided, however, that in the event Robert Frank or Robert
Capshaw commits a breach of the terms of Section 7 of his Employment Agreement,
after July 1, 1998, in the case of such breach by Robert Frank, (i) Robert
Frank, (ii) Micah Frank and (iii) Robert Frank, as custodian for Dakota Frank
under the Uniform Gifts to Minors Act, and, in the case of such breach by Robert
Capshaw, Robert Capshaw, shall not be entitled to receive any Contingent
Consideration which may otherwise be payable under this subparagraph (C).
(D) In the event Robert Frank or Robert Capshaw terminates employment
with the Company due to the Substantial Breach of the applicable Employment
Agreement (as defined in Section 8(e) of the applicable Employment Agreement),
and such breach is not cured within the notice period provided in subparagraph
8(c) of the applicable Employment Agreements, in the case of such termination by
Robert Frank, (i) Robert Frank, (ii) Micah Frank and (iii) Robert Frank, as
custodian for Dakota Frank under the Uniform Gifts to Minors Act, and, in the
case of such termination by Robert Capshaw, Robert Capshaw, shall receive the
full Contingent Consideration earned hereunder, as and when the same shall
otherwise become due and payable.
(E) The payments described in this subsection (iv) shall be in
addition to any payments due to the Management Shareholders pursuant to the
applicable Employment Agreement, the Base Price Promissory Notes, under law,
equity or otherwise.
(v) (A) Anything to the contrary contained in this Stock Purchase
Agreement notwithstanding, the ability of any Management Shareholder to enforce,
or to make a claim against the Company, Purchaser or T/SF in connection with,
the rights granted to such Management Shareholder pursuant to this Section
2.2(e), including, without limitation (i) the rights to the payment of any
amounts, including without limitation, the Contingent Consideration, and (ii)
the right to grant or withhold their approval, or to consent, with respect to
actions taken
19
<PAGE>
or proposed to be taken by the Company, the Purchaser or T/SF, or (iii) any
other right granted hereunder (any such right being a "Section 2.2(e) Right"),
shall in no way be limited by, or subject to, (x) any limitations with respect
to amount or time set forth in any provision of Section 9 hereof or elsewhere
herein, or (y) the compliance by the Management Shareholders with any mechanic,
procedure, or process set forth in Section 9 hereof or elsewhere herein.
(B) The parties hereto hereby acknowledge and agree that the
exercise by any Management Shareholder of any of such Management Shareholder's
Section 2.2(e) Rights, under any circumstances and for any reason, shall not
constitute a violation of the Frank Employment Agreement, the Robert Capshaw
Employment Agreement, any Base Price Promissory Note or any Contingent Price
Promissory Note, or be in contravention of any fiduciary or other duty owed by
Robert Frank or Robert Capshaw to the Company, its board of directors or its
shareholders.
2.3. Allocation of Amounts Among Non-Management Shareholders. The
-------------------------------------------------------
parties hereto hereby acknowledge and agree that any and all amounts in respect
of the Non-Management Shareholders Purchase Price or the Non-Management
Shareholders Preliminary Purchase Price payable (i) by Purchaser to the
Representatives on behalf of or for distribution to the Non-Management
Shareholders pursuant to this Stock Purchase Agreement, are intended to be, and
shall be, allocated among the Non-Management Shareholders in accordance with
each Non-Management Shareholder's Pro Rata Share and (ii) by the Non-Management
Shareholders to Purchaser in connection with the adjustment contemplated by
Section 2.2(c) of this Stock Purchase Agreement, are intended to be, and shall
be, paid by the Non-Management Shareholders in accordance with each Non-
Management Shareholder's Pro Rata Share.
3. The Closing.
-----------
3.1. Place and Time The closing of the purchase and sale of the
--------------
Shares and the consummation of the other transactions contemplated hereby (the
"Closing") shall take place at the offices of Kaye, Scholer, Fierman, Hays &
Handler, LLP, at 425 Park Avenue, New York, New York, at 9:00 A.M. on August 15,
1996, and shall occur immediately following the execution and delivery of this
Stock Purchase Agreement (the "Closing Date").
3.2. Deliveries by Shareholders. At the Closing, in exchange for the
---------------------------
payment by Purchaser of the Preliminary Cash Purchase Price and the delivery by
Purchaser of the Frank Promissory Note and the Robert Capshaw Promissory Note,
the Representatives or the Shareholders shall deliver, or shall cause the
Company to deliver, to Purchaser the following:
(a) stock certificates representing the number of Shares set forth
opposite each Shareholder's name on Schedule 1 hereto, in each case, duly
endorsed for transfer to Purchaser, or accompanied by stock powers, duly
endorsed in blank, in a form sufficient to permit the valid transfer to
Purchaser of title to the Shares free and clear of all Encumbrances;
(b) duly executed resignations, dated the Closing Date, of all of
the members of the board of directors of the Company other than Robert Frank;
20
<PAGE>
(c) the opinion of Kaye, Scholer, Fierman, Hays & Handler, LLP,
counsel to the Shareholders, dated the Closing Date and addressed to Purchaser,
in substantially the form attached hereto as Exhibit A;
(d) the Indemnity Escrow Agreement, executed by each Representative
on behalf of the Non-Management Shareholders;
(e) evidence of the repayment by the Company of the POP Radio Notes;
(f) payment of one-half of the two-year fee payable to the Escrow
Agent; and
(g) (i) the certificate of incorporation of the Company and a
certificate evidencing the good standing of the Company in the State of
Delaware, each certified as of a recent date by the Secretary of State of the
State of Delaware and (ii) a certificate evidencing the good standing of the
Company as a foreign corporation authorized to do business in the State of New
York, certified as of a recent date by the Secretary of State of the State of
New York.
3.3. Deliveries by Purchaser. At the Closing, in exchange for the
-----------------------
delivery of the Shares in accordance with Section 3.2(a) hereof, Purchaser
shall, as applicable, (i) deliver to the Representatives on behalf of the Non-
Management Shareholders, Robert Capshaw, Robert Frank, Micah Frank, Robert
Frank, as custodian for Dakota Frank under the Uniform Gifts to Minors Act, (ii)
deposit with the Escrow Agent and (iii) deposit in the Citibank Cash Purchase
Price Account, the following:
(a) in respect of the purchase price for the Shares: (i) the Non-
Management Shareholders Preliminary Purchase Price, (ii) the Robert Frank
Preliminary Cash Purchase Price, (iii) the Micah Frank Preliminary Cash Purchase
Price, (iv) the Dakota Frank Preliminary Cash Purchase Price, (v) the Robert
Capshaw Preliminary Cash Purchase Price, (vi) the Robert Frank Base Price
Promissory Note, (vii) the Micah Frank Base Price Promissory Note, (viii) the
Dakota Frank Base Price Promissory Note and (ix) the Robert Capshaw Base Price
Promissory Note;
(b) the Indemnity Escrow Deposit, together with one-half of the fee
payable to the Escrow Agent;
(c) evidence of the payment by Purchaser of the Transaction Costs in
accordance with Section 2.2(d) hereof;
(d) the opinion of Conner & Winters, A Professional Corporation,
counsel to the Purchaser, dated the Closing Date and addressed to the
Shareholders, in substantially the form attached hereto as Exhibit B;
(e) a Written Consent of Purchaser, as the Sole Shareholder of the
Company, duly executed by Purchaser, (i) accepting the resignations of certain
members of the Board of Directors of the Company and (ii) electing the new
(post-closing) Board of Directors of the Company;
21
<PAGE>
(f) a Written Consent of the Board of Directors of the Company, duly
executed by each member of the Board of Directors of the Company elected by the
Purchaser in accordance with Section 3.3(e) hereof, approving, ratifying, and
otherwise authorizing the Company to enter into the Employment Agreements;
(g) the Employment Agreements, each Employment Agreement having been
executed by a duly authorized officer of the Company, on the one hand and Robert
Frank or Robert Capshaw (as applicable), on the other;
(h) the Indemnity Escrow Agreement, executed by a duly authorized officer
of Purchaser on behalf of Purchaser; and
(i) documentation evidencing that the Citibank Loan has been satisfied and
discharged in full, and all Encumbrances, pledges and guarantees thereunder and
any and all notes, debentures or other agreements or instruments delivered
pursuant thereto have been extinguished. Not later than three (3) days prior to
the Closing Date, the Shareholders will have advised Purchaser of the then
outstanding amount of the Citibank Loan (not to exceed $137,994.61) to be
satisfied and discharged by Purchaser in accordance with this Section 3.3(i);
4. Appointment of the Representatives. Each Shareholder, by
----------------------------------
execution of this Stock Purchase Agreement, hereby names, constitutes and
appoints each of William Frank and Daniel Frank (each, a "Representative" and,
together, the "Representatives") as such Shareholder's agents and attorneys-in-
fact, with full power of substitution, to act jointly for and on behalf of the
Shareholders:
(a) to receive any and all notices directed to any or all of the
Shareholders under the terms of this Stock Purchase Agreement and the Indemnity
Escrow Agreement and service of process as provided in Section 9 hereof;
(b) to receive and hold each Shareholder's Shares, stock powers and all
other documents to be delivered by the Shareholder at Closing, to make such
modifications to such stock powers and other documents as may be necessary or
desirable to effectuate the transactions contemplated hereby (including, without
limitation, the Pro Rata Redemption and the sale of the Shares to Purchaser) and
to deliver the same on the Closing Date to Purchaser in accordance with the
terms and conditions of this Stock Purchase Agreement;
(c) to execute the Indemnity Escrow Agreement on behalf of the Non-
Management Shareholders, to give instructions regarding payment of amounts due
to any or all of the Shareholders pursuant to this Stock Purchase Agreement at
Closing or pursuant to the Indemnity Escrow Agreement, as applicable, and to
receive on behalf of each Shareholder such payments as may be deliverable to
such Shareholder pursuant to this Stock Purchase Agreement at Closing or
pursuant to the Indemnity Escrow Agreement;
(d) to agree on behalf of each Shareholder to amend, modify, or waive any
provision of, this Stock Purchase Agreement (except as to price) or the
Indemnity Escrow
22
<PAGE>
Agreement, in any manner which, in the judgment of the Representatives, is
desirable and to act for and bind any or all of the Shareholders as provided
under Section 10 hereof;
(e) to give any and all instructions required or permitted to be given by
the Non-Management Shareholders to the Escrow Agent pursuant to the terms of the
Indemnity Escrow Agreement; and
(f) make any and all decisions and take any and all actions (including,
without limitation, with respect to the Defense or settlement of any third party
action, suit, claim or demand or the consent to any Judgment) required to be
taken by the "Indemnitor" pursuant to Section 9 of this Stock Purchase Agreement
with respect to Indemnification Matters in connection with which the
Shareholders are the "Indemnitor."
If either Representative dies, becomes incompetent, resigns or otherwise
refuses to act, the remaining Representative shall be entitled to exercise all
of the rights and powers of the Representatives hereunder. Each Representative
agrees to perform the duties herein required of him in good faith and to the
best of his ability. Each Representative shall not be answerable, liable or
accountable for his actions or inactions pursuant to this Section 4, however,
except for his own bad faith or willful misconduct. The Shareholders hereby
agree to indemnify each Representative against, and to hold each Representative
harmless from, any and all liability, loss, expense or damage, including without
limitation attorneys' fees, which he may incur under or by reason of the
exercise and performance, in good faith and without willful misconduct or gross
negligence, of any of such Representative's powers and duties under this Stock
Purchase Agreement. Purchaser shall be entitled to rely upon, as being binding
upon each Shareholder, any agreement, document, certificate or other instrument
believed by Purchaser to be genuine and correct and to have been signed by each
Representative, and Purchaser shall not be liable to any Shareholder for any
action taken or omitted to be taken by Purchaser in such reliance, nor shall
Purchaser be responsible for the disposition by the Representatives or
Substitute Representative of any payments made to any of them at Closing for the
account of any Shareholder.
5. Representations and Warranties of the Shareholders. Each of the
--------------------------------------------------
Shareholders, severally and individually, represents and warrants to Purchaser
as follows:
5.1. Due Authorization of the Shareholders. The execution, delivery
-------------------------------------
and performance by such Shareholder of this Stock Purchase Agreement and the
Indemnity Escrow Agreement are within his, her or its full legal right, power
and authority, do not contravene, permit the termination of or constitute a
default under any agreement or other instrument binding upon such Shareholder,
and will not result in the creation or imposition of any lien, charge or
encumbrance in favor of any third Person upon the Shares owned by such
Shareholder. The execution, delivery and performance by such Shareholder of
this Stock Purchase Agreement and the Indemnity Escrow Agreement do not require
the consent of any Person, and do not require any action by or in respect of any
filing with, or the consent, approval or authorization of, any Governmental Body
or official, except those consents, approvals or authorizations that have been
obtained, and do not violate any provision of any applicable law or regulations
or any judgment, decree or order to which such Shareholder is subject.
23
<PAGE>
5.2. Execution and Enforceability With Respect to the Shareholders.
-------------------------------------------------------------
Each of this Stock Purchase Agreement and, in the case of each Non-Management
Shareholder, the Indemnity Escrow Agreement, has been duly and validly executed
and delivered by or on behalf of such Shareholder and constitutes the legal,
valid and binding obligation of such Shareholder, enforceable in accordance with
its terms, except as such enforcement may be limited by applicable bankruptcy,
insolvency, moratorium or other laws affecting creditors' rights generally and
general principles of equity.
5.3. Ownership of Shares by Shareholders. The Shares shown as being
-----------------------------------
owned by such Shareholder on Schedule 1 hereto are owned by him or her
----------
beneficially and of record, free and clear of any lien or other Encumbrance,
and, delivery to Purchaser of the Shares pursuant to the provisions of this
Stock Purchase Agreement will transfer to Purchaser valid title thereto, free
and clear of all liens and Encumbrances.
6. Representations and Warranties of the Shareholders with Respect
---------------------------------------------------------------
to the Company. The Shareholders, jointly and severally, represent and warrant
- --------------
to Purchaser as follows:
6.1. Organization and Good Standing of the Company. (a) The
---------------------------------------------
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware and has full corporate authority to
conduct its business as it is now being conducted. The Company is duly qualified
to do business, and is in good standing under the laws of each state or other
jurisdiction, with respect to which the nature of the Company's assets and
business requires it to be so qualified.
6.2. Certificate of Incorporation and Bylaws. The Shareholders
---------------------------------------
have caused the Company to deliver to Purchaser true and complete copies of its
Certificate of Incorporation (certified by the Secretary of State of the State
of Delaware) and Bylaws (certified by the Company's secretary or assistant
secretary). There have been no amendments to the Company's Certificate of
Incorporation or the Bylaws since their respective certification dates.
6.3. Subsidiaries and Affiliates. The Company has no Subsidiaries
---------------------------
and does not own, directly or indirectly, any interest in any other Person.
6.4. Capitalization. The authorized equity securities of the
--------------
Company consist of 500,000 shares of common stock, par value $0.01 per share, of
which 120,070.25 shares are issued and outstanding as of the date of the
execution of this Stock Purchase Agreement and constitute the Shares. The Shares
are beneficially owned and held of record, as of the date of the execution of
this Stock Purchase Agreement by the Persons listed on and in the respective
amounts set forth on Schedule 1 hereto. The Shares are duly authorized, validly
----------
issued, fully paid, nonassessable and free of all preemptive rights and
constitute the only issued and outstanding capital stock of the Company.
6.5. Outstanding Options and Other Rights. There are no outstanding
------------------------------------
rights, subscriptions, warrants, calls, unsatisfied preemptive rights, options,
or other agreements of any kind to purchase or otherwise receive from the
Company any of the Shares or any of the authorized but unissued shares of the
capital stock or any other security of the Company, and there is no outstanding
security of any kind issued by the Company convertible into capital stock
24
<PAGE>
of the Company. There are no treasury shares as of the date of the execution of
this Stock Purchase Agreement.
6.6. Absence of Conflict. Neither the execution and delivery of this
--------------------
Stock Purchase Agreement, nor the consummation of the transactions contemplated
hereby will (a) violate, conflict with, or result in the breach of any provision
of the Certificate of Incorporation or Bylaws of the Company or (b) (i) violate,
be in conflict with or constitute a default under any agreement or commitment to
which the Company is a party or by which any of the Company's property or assets
is bound, or (ii) violate any statute or law or any judgment, decree, order,
regulation or rule of any court or other Governmental Body applicable to the
Company, or (iii) result in any Encumbrance upon any of the properties or assets
of the Company under any agreement to which the Company is a party or by which
the Company or its assets may be bound.
6.7. Consents and Approvals. Except for such consents which have
----------------------
been obtained and delivered to Purchaser on or prior to the Closing Date, the
execution and delivery of this Stock Purchase Agreement and the consummation of
the transactions contemplated hereby and the continuation in full force and
effect following the consummation of the transactions contemplated hereby of all
contracts and agreements set forth on Schedule 6.13, do not require the Company
-------------
to obtain any consent, approval or action of, or make any filing with or give
any notice to, any Person or Governmental Body.
6.8. Financial Statements. True and complete copies of the Audited
--------------------
Financial Statements and the Interim Financial Statements have been delivered to
Purchaser. The Audited Financial Statements fairly present the financial
position of the Company and the results of operations of the Company for the
period covered by such financial statements, and have been prepared in
accordance with GAAP. The Interim Financial Statements fairly present the
financial position of the Company at the Balance Sheet Date, and the results of
operations of the Company for the six months ended on the Balance Sheet Date,
and have been prepared in accordance with GAAP, applied on a basis consistent
with that of the Audited Financial Statements, subject, however, to (i) changes
resulting from normal year-end audit adjustments that will not, in the aggregate
be material and (ii) the absence of the type of notes that would customarily be
included in a financial statement prepared in accordance with GAAP.
6.9. No Material Adverse Change. Since the Balance Sheet Date, there
--------------------------
has been no material adverse change in the business, results of operations or
financial condition of the Company, nor has there been any material damage,
destruction or loss of any material assets or properties of the Company that has
had a material adverse effect on the condition of the Company. Since the
Balance Sheet date, the Company has not taken any of the following actions:
(a) amended its articles of incorporation or bylaws;
(b) issued, sold or otherwise disposed of any of its Equity
Securities, or created or suffered to be created any Encumbrance thereon, or
reclassified, split up or otherwise changed any of its Equity Securities or
granted or entered into any options, covenants or calls or other rights to
purchase or convert any Liability into its Equity Securities except and to the
extent as was necessary in connection with distribution of the Excluded Assets;
25
<PAGE>
(c) organized any Subsidiary or acquired any Equity Securities of any
Person or any equity or ownership interest in any business (other than portfolio
investments in marketable securities and shares of capital stock of Greenwich
Entertainment Group, Inc.) or made any capital contribution to or other
investment in any Person;
(d) incurred or guaranteed any indebtedness for borrowed money, except to
the extent required in the ordinary course of business or for leases entered
into in the ordinary course of business, or permitted any Encumbrances to be
created against any of the Company's assets;
(e) paid, discharged or satisfied any Liability other than in the ordinary
course of business; provided, however, that the Company may have, on or prior to
the Closing Date, applied all or any portion of its cash and cash equivalents to
pay down any Liability of the Company;
(f) except as contemplated by the Employment Agreements, the Corsearch
Special Bonus Plan and the Operating Profit Bonus Plan, made or granted any
increases in salaries, bonuses or other remuneration to any of the Company's
employees, except in the ordinary course of business (including pursuant to
employment agreements or plans in effect as of the date hereof), in accordance
with its historical practices;
(g) sold, assigned, transferred, conveyed, leased, pledged, encumbered or
otherwise disposed of or agreed to sell, assign, transfer, convey, lease,
pledge, encumber or otherwise dispose of any material portion of its assets or
properties (other than the Excluded Assets), or any other material right,
including, without limitation, the Tangible Property and the Intangible
Property, except for fair consideration or in the ordinary course of business;
(h) other than (x) the Employment Agreements, (y) the Corsearch Special
Bonus Plan and (z) contracts relating to the purchase by the Company of personal
computers and related peripheral equipment, entered into, amended, modified or
terminated any agreement or commitment having a term in excess of one year or
involving consideration or value in excess of $50,000, except in the ordinary
course of business consistent with past practice;
(i) canceled any debts or affirmatively waived any claims or rights of
substantial value, except for cancellations made or waivers granted in the
ordinary course of business, which, in the aggregate, are not material;
(j) declared or paid any dividend or made any other payment or distribution
in respect of its Equity Securities, other than as contemplated in connection
with the distribution of the Excluded Assets;
(k) other than commitments relating to the purchase by the Company of
personal computers and related peripheral equipment, made capital expenditure
commitments in excess of $50,000 in the aggregate, it being understood that
nothing in the foregoing shall have prevented the Company from making capital
expenditures pursuant to existing capital
26
<PAGE>
expenditure commitments disclosed on Schedule 6.13 hereto or not required to be
disclosed thereon; -------------
(l) in any other manner, modified, changed or otherwise altered the
fundamental nature of the business of the Company as conducted on the Balance
Sheet Date;
(m) made any loan to any Person;
(n) delayed or postponed the payment of accounts payable and other
liabilities outside the ordinary course of business; or
(o) made any material change in any accounting principles followed
by it or the method of applying such principles.
6.10 Tax Matters. (a) All Tax Returns required to be filed by, or
-----------
with respect to, the Company prior to the Closing Date have been filed on a
timely basis in accordance with the laws, regulations and administrative
requirements of each Taxing Authority.
(b) Schedule 6.10 hereto lists all Income Tax Returns of the Company
-------------
that have been audited by any Taxing Authority. Schedule 6.10 also describes all
-------------
adjustments to Income Tax Returns filed by, or on behalf of, the Company that
have been proposed by any representative of any Taxing Authority in currently
pending Tax audits, and the resulting Income Taxes, if any, proposed to be
assessed. All deficiencies proposed (plus interest, penalties and additions to
tax that are proposed to be assessed thereon, if any) as a result of such
examinations have been reserved against in the Interim Financial Statements or
are being contested in good faith by appropriate proceedings. Other than as set
forth on Schedule 6.10 hereto, neither the Company nor any Shareholder has given
-------------
or been requested to give waivers or extensions (or is or would be subject to a
waiver or extension given by any other Person) of any statute of limitations
relating to the payment of Income Taxes for which the Company may be liable.
(c) Except as set forth on Schedule 6.10, the Company has paid, or
made provision as a current item on the Balance Sheet for the payment of, all
Taxes with respect to operations of the Company through the Balance Sheet Date,
including, without limitation, all Taxes reflected on the Tax Returns referred
to in Section 6.10(a) hereof. Except as set forth on Schedule 6.10, the charges,
-------------
accruals and reserves with respect to Taxes on the books of the Company are
adequate (determined in accordance with GAAP consistently applied) and are at
least equal to the Company's Liability for Taxes. There exists no proposed tax
assessment against the Company except as disclosed in the Balance Sheet or on
Schedule 6.10. No consent to the application of Section 341(f)(2) of the Code
- -------------
has been filed with respect to any property or assets held, acquired, or to be
acquired by the Company. All Taxes that the Company is or was required to
withhold or collect have been duly withheld or collected and, to the extent
required, have been paid to the proper Governmental Body or other Person. There
are no Encumbrances with respect to Taxes upon any of the properties or assets,
real or personal, tangible or intangible, of the Company (except for Taxes not
yet due or payable).
27
<PAGE>
(d) There is no existing tax sharing agreement that may or will
require that any payment be made by or to the Company on or after the Closing
Date.
(e) None of the Shareholders is a foreign person within the meaning
of Section 1445 of the Code.
(f) The Company has never been included in a consolidated Tax Return
filed by any other Person.
6.11. Employee Benefits. (a) Except as set forth on Schedule 6.11
----------------- -------------
hereto, the Company (i) does not maintain or contribute to or have any
obligation with respect to, and none of the employees of the Company is covered
by, any bonus, deferred compensation, severance pay, pension, profit-sharing,
retirement, insurance, stock purchase, stock option, or other fringe benefit
plan, arrangement or practice, written or otherwise, or any other "employee
benefit plan," as defined in Section 3(3) of ERISA, whether formal or informal
(collectively, "Plans"), and (ii) is not a party to any contract for the
employment of any employee of the Company or any other person who renders
services to the Company. None of the Plans is a "multiemployer plan," as
defined in Section 3(37) of ERISA, or a funded welfare benefit plan, as defined
in Section 419 of the Code.
(b) With respect to each Plan, the Company has heretofore delivered
or caused to be delivered to Purchaser true, correct and complete copies of all
documents which comprise the most current version of each of such Plan,
including any related trust agreements, insurance contracts, or other funding or
investment agreements and any amendments thereto. Except as set forth in
Schedule 6.11, none of the Plans has been amended or will be amended prior to
- -------------
the Closing Date.
(c) The Company has performed and complied in all material respects
with all of its obligations under and with respect to the Plans.
(d) There are no unpaid contributions due prior to the date hereof
with respect to any Plan that are required to have been made, or that will come
due with respect to any period prior to the Closing Date, under the terms of the
Plan or any applicable law. All accruals for Plans through the Balance Sheet
Date have been made in accordance with GAAP and are reflected on the Interim
Financial Statements.
(e) The Company has no obligation to provide health benefits or
other non-pension benefits to retired or other former employees, except as
specifically required by Section 4980B of the Code or Part 6 of Title I of ERISA
or as set forth on Schedule 6.11 hereto.
-------------
(f) Except for those individuals who are Participants (as defined in
the Corsearch Special Bonus Plan) under the Corsearch Special Bonus Plan, no
director, officer, employee or agent of the Company is or will be entitled to
any severance, bonus or other payment or benefit as a result of this Stock
Purchase Agreement, the Closing or any other change of control with respect to
the Company.
28
<PAGE>
6.12. Compliance With Law. (a) The operation of the business of
-------------------
the Company has been conducted in all material respects in accordance with all
applicable laws, regulations and other requirements of all Governmental Bodies,
excluding those relating to Environmental Laws (which are discussed in Section
6.12(b) hereof). The Company has all licenses, permits, orders, consents and
approvals of, and has made all required registrations with, any Governmental
Body that are required for the conduct of the business of the Company, excluding
those relating to compliance with Environmental Laws (which are discussed in
Section 6.12(b) hereof). All such licenses, permits, orders, consents and
approvals are in full force and effect, no material violations are or have been
recorded in respect thereto, and no proceeding is pending, or, to the best of
the knowledge of the Shareholders, threatened, to revoke or limit any such
license, permit, order, consent or approval.
(b) The Company (i) is not in violation of the Environmental Laws
and has obtained all permits, if any, required by applicable Environmental Laws
for the conduct of its business and operations and (ii) has not used, handled,
released, or disposed of any Hazardous Substance except in material compliance
with applicable Environmental Laws.
6.13. Contracts and Other Agreements. Schedule 6.13 hereto sets
------------------------------ -------------
forth all of the following contracts and other agreements (written or oral) to
which the Company is a party or by or to which its assets or properties are
bound or subject: (i) contracts and other agreements with any current or former
officer, director, shareholder or other Affiliate of the Company or with any
other current employee or consultant of the Company or with an entity in which
any of the foregoing is a controlling Person; (ii) contracts and other
agreements with any labor union or association representing any employee of the
Company; (iii) contracts and other agreements with any Person to provide goods
or services that cannot be canceled by the Company on notice of 90 days or less
without penalty; (iv) contracts and other agreements for the sale or purchase of
any assets or services in excess of $100,000; (v) joint venture or partnership
agreements; (vi) contracts and other agreements under which the Company agrees
to indemnify any Person in an amount in excess of $100,000 or to pay or share
the tax liability of any Person; (vii) contracts and other agreements containing
covenants of the Company not to compete in any line of business or with any
Person in any geographical area or covenants of any other Person not to compete
with the Company in any line or business or in any geographical area; (viii)
contracts and other agreements relating to the lending or borrowing of money by
the Company, including, without limitation, capitalized leases and installment
purchase obligations; (ix) the Company's main office lease and any other
contracts and agreements pursuant to the terms of which there is a direct
current or future obligation of the Company to make payments in excess of
$100,000; (x) any guarantees of indebtedness given by the Company in respect of
indebtedness or other obligations of any Person and (xi) any other contract not
made in the ordinary course of business which is material to the Company and is
to be performed in whole or in part after the Closing Date. All such contracts
and other agreements are in full force and effect and are binding upon the
Company. The Company is not in default in any material respect under any of such
agreements, has not received any notice of a default, and, to the best of the
knowledge of the Shareholders, no other party to any such contract or other
agreement is in default thereunder and no condition exists that constitutes a
material default thereunder. The Company has made available to Purchaser true
and correct copies of all written contracts and other agreements listed on
Schedule 6.13 hereto for its review.
- -------------
29
<PAGE>
6.14. Actions and Proceedings. There are no outstanding orders,
-----------------------
judgments, injunctions, awards or decrees of any court, arbitrator or
Governmental Body against the Company or any actions, suits or claims or legal,
administrative or arbitral proceedings or investigations pending, or, to the
best of the knowledge of the Shareholders, threatened against or involving the
Company or any of its properties or assets.
6.15. Insurance. Schedule 6.15 hereto sets forth a list of all
--------- -------------
insurance policies of any nature maintained as of the date of this Stock
Purchase Agreement by or on behalf of the Company and relating to its business
and/or assets. Such policies are in full force and effect. Except for claims
set forth on Schedule 6.15 hereto there are no outstanding unpaid claims under
-------------
any such policy.
6.16. No Broker's, Finder's or Similar Fees. The Company has
-------------------------------------
engaged Oppenheimer & Co., Inc. ("Oppenheimer") in connection with the
transactions contemplated by this Stock Purchase Agreement and any fees payable
to Oppenheimer shall be included in the Transaction Costs and shall be payable
by Purchaser on behalf of the Company. Other than Oppenheimer, the Company has
not, and the Company's officers, directors and employees have not, and the
Shareholders have not, employed any broker or finder or incurred any liability
for any brokerage or finder's fee or commission or similar payment in connection
with the transactions contemplated by this Stock Purchase Agreement.
6.17. Tangible Property. The Tangible Property is in good operating
-----------------
condition and repair and is reasonably suited for its intended purposes and
current operations, subject to normal wear and tear. All material leases,
conditional sale contracts, franchises or licenses pursuant to which the Company
may hold or use any interest owned or claimed by the Company (including, without
limitation, options) in or to the Tangible Property are in full force and
effect, and free and clear of all Encumbrances.
6.18. Intangible Property. The Company has the right to use the
-------------------
Intangible Property, free and clear of all claims or rights of others. As of
the Closing Date, the conduct by the Company of its business does not infringe
upon or violate the patents, trademarks, trade names, service marks, trade
secrets, copyrights, licenses or other intellectual property rights of any other
Person. Schedule 6.18 hereto sets forth all the Intangible Property. The
-------------
execution, delivery, and performance of this Stock Purchase Agreement and the
transactions contemplated hereby will not result in the loss or impairment of,
or in any other way adversely affect any of the Intangible Property.
6.19. Liabilities. Except as set forth in any Schedule hereto, as
-----------
of the Balance Sheet Date, the Company has no Liabilities that were not
disclosed or reflected on the Balance Sheet. The Company has not, except in the
ordinary course of business, incurred any Liabilities since the Balance Sheet
Date. Since the Balance Sheet Date, all Liabilities becoming due and payable
have been paid in the ordinary course of business consistent with past practice.
6.20. Title to Assets. The Company owns no real property. The
---------------
Company has good and marketable title to all of its assets, including without
limitation, all of the Tangible Property, Intangible Property, and other assets
reflected on the Balance Sheet or described in Sections 6.17 and 6.18 hereof, in
each case free and clear of any Encumbrances, except for
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<PAGE>
(i) Encumbrances specifically described in the notes to the Audited Financial
Statement; (ii) assets used, sold or otherwise disposed of in the ordinary
course of business since the Balance Sheet Date; (iii) Encumbrances securing
taxes, assessments, governmental charges or levies, or the claims of
materialmen, carriers, landlords and like Persons, all of which are not yet due
and payable or are being contested in good faith; or (iv) assets held or used
pursuant to any lease listed on Schedule 6.13 hereto.
-------------
6.21. Labor Relations. There are no labor disputes, material
---------------
grievances, arbitration proceedings or any union organization activities,
strikes, work stoppages or slowdowns pending, or to the best of the
Shareholders' knowledge, threatened between the Company and any of its employees
or their representatives. There are no charges of unfair labor practices
pending, or to the best of the Shareholders' knowledge, threatened against the
Company before any governmental, regulatory or administrative agency.
6.22. Best Knowledge Defined. As used in this Section 6, "best
----------------------
knowledge of the Shareholders" means the actual knowledge of any of the
Shareholders.
6.23. Accounts Receivable (i) all of the accounts and notes
-------------------
receivable that have been recorded on the books of the Company are bona fide and
represent accounts and notes receivable validly due for goods sold or services
rendered and are reasonably expected to be collected in full within 120 days
after the applicable invoice or note maturity date (other than such accounts and
notes receivable that, individually or in the aggregate, do not have a book
value as of the date hereof in excess of $25,000); (ii) all of such accounts and
notes receivable are free and clear of any and all Encumbrances and other
adverse claims and charges and none of such accounts or notes receivable is
subject to any offset of claim of offset; and (iii) no obligor on any such
account or note receivable has given notice to the Company that it will or may
refuse to pay the full amount or any portion thereof.
6.24. Books and Records. All books, records and files of the
-----------------
Company (i) have been prepared, assembled and maintained in accordance with
usual and customary policies and procedures of a privately-held corporation and
(ii) fairly and accurately reflect the ownership, use, enjoyment and operation
by the Company of its assets.
6.25. Improper Payments. Neither the Company nor the Shareholders,
-----------------
directly or through any intermediary, nor any of the officers, directors,
employees, agents or affiliates of the Company or the Shareholders have made,
directly or indirectly, any domestic or foreign payments for bribes or other
questionable or illegal payments or have maintained or permitted to exist any
unrecorded bank accounts, "slush" funds or falsified books or any other device
that has been intentionally utilized to improperly distort records or reports of
the true operating results and financial condition of the Company.
7. Representations and Warranties of Purchaser. Purchaser
-------------------------------------------
represents and warrants to the Shareholders as follows:
7.1 Due Incorporation and Authority. Purchaser is a corporation
-------------------------------
duly organized, validly existing and in good standing under the laws of the
State of Delaware, and has all requisite corporate authority to conduct its
business as it is now being conducted. The
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<PAGE>
execution, delivery and performance by Purchaser of this Stock Purchase
Agreement has been duly and validly authorized by the Board of Directors of
Purchaser and no other corporate proceedings on the part of Purchaser are
necessary to authorize the execution, delivery and performance by Purchaser of
this Stock Purchase Agreement. This Stock Purchase Agreement has been duly and
validly executed and delivered by or on behalf of Purchaser and constitutes the
legal, valid and binding obligation of Purchaser, enforceable in accordance with
its terms, except as such enforcement may be limited by applicable bankruptcy,
insolvency, moratorium or other laws affecting creditor's rights generally and
general principles of equity.
7.2. Consents and Approvals. The execution, delivery and performance
----------------------
by Purchaser of this Stock Purchase Agreement do not require Purchaser to obtain
any consent, approval or action of any Person or Governmental Body.
7.3. No Broker's, Finders or Similar Fees. Purchaser has not, and
------------------------------------
Purchaser's officers, directors and employees have not, employed any broker or
finder or incurred any liability for any brokerage of finder's fee or commission
or similar payment in connection with the transactions contemplated by this
Stock Purchase Agreement.
7.4. Investment Intent. Purchaser is purchasing the Shares for its
-----------------
own account, for investment purposes, and not with a view to the resale or
distribution thereof in violation of applicable federal or state securities
laws.
7.5. Financing. Purchaser has sufficient financing to allow it to
---------
purchase the Shares on the terms set forth in this Stock Purchase Agreement and
to consummate the transactions contemplated hereby.
7.6. Absence of Certain Proceedings. There is no pending Proceeding
------------------------------
that has been commenced or to Purchaser's knowledge is threatened to be
commenced against Purchaser, and that challenges, or may have the effect of
preventing, delaying, making illegal, or otherwise interfering with, any of the
transactions contemplated by this Stock Purchase Agreement.
7.7. Absence of Conflict. Neither the execution and delivery of
-------------------
this Stock Purchase Agreement by Purchaser nor the consummation of the
transactions contemplated hereby will (i) violate, conflict with, or result in
the breach of any provision of the Certificate of Incorporation or Bylaws of
Purchaser, (ii) violate, be in conflict with or constitute a default under any
agreement or commitment to which Purchaser is a party or (iii) violate any
statute or law or any judgment, decree, order, regulation or rule of any court
or other Governmental Body applicable to Purchaser; the consequences of which
violation of (i), (ii) or (iii) would give any Person the right to prevent,
delay, or otherwise interfere with any of the transactions contemplated hereby.
32
<PAGE>
8. Covenants and Agreements.
------------------------
8.1. Expenses. All legal, accounting and other fees and expenses
--------
incurred by the Shareholders and/or the Company in connection with this Stock
Purchase Agreement and the transactions contemplated hereby (the "Transaction
Costs"), and which are included in the Transaction Costs Statement, shall be
paid by Purchaser on behalf of the Company. Purchaser shall bear its own
expenses incurred in connection with this Stock Purchase Agreement and the
transactions contemplated hereby.
8.2. Further Assurances. Each of the parties hereto shall, and the
------------------
Shareholders shall cause the Company to, execute such further documents,
agreements, certificates and other instruments and take such further actions as
may be reasonably necessary or appropriate to carry out the provisions hereof
and the transactions provided for herein.
8.3. Director and Officer Liability and Indemnification; Professional
----------------------------------------------------------------
Liability Insurance. (a) Purchaser hereby agrees that, for a period of three
- -------------------
(3) years after the Closing, it shall not, and shall not permit the Company to
repeal or modify any provision in its charter documents or bylaws relating to
exculpation or indemnification of former officers and directors (unless required
by law), it being the intent of the parties that those individuals serving as
the officers and directors of the Company prior to the Closing shall continue to
be entitled to such exculpation and indemnification to the fullest extent
permitted under the law of its jurisdiction of incorporation.
(b) Purchaser hereby agrees that, for a period of three (3) years
after the Closing, it shall either (A) (i) not and shall not permit the Company
to cancel, suspend or otherwise terminate the Miscellaneous Professional
Liability Policy maintained by the Company with National Union Fire Insurance
Company of Pittsburgh, P.A. (the "Existing E&O Policy"), (ii) shall pay or shall
cause the Company to pay, on a timely basis, any and all premiums or other
amounts required to be paid in connection with the Existing E&O Policy and (iii)
shall renew or shall cause the Company to renew the Existing E&O Policy at any
and all times necessary to maintain the continued effectiveness thereof OR (B)
--
cause the Company to obtain an errors and omissions insurance policy providing
coverage equivalent to or more extensive than (but under no circumstances less
extensive than) the Existing E&O Policy, which such insurance shall include
coverage of claims relating to periods prior to the Closing Date.
8.4. Plans. (a) On and following the Closing Date, (i) Purchaser
-----
shall cause the Company to administer the Corsearch Special Bonus Plan in
accordance with the terms and conditions thereof, including, without limitation,
the payment when due of any and all amounts due to eligible employees thereunder
(including, the Subsequent Bonus Payment (as defined therein) in the amount of
$125,000) and (ii) Purchaser shall not permit the Company to terminate the
effectiveness of the Corsearch Special Bonus Plan other than in accordance with
the terms thereof. The parties acknowledge that on or prior to the Closing
Date, the Company paid the Initial Bonus Payment (as defined in the Corsearch
Special Bonus Plan) to eligible employees pursuant to such plan.
(b) On and following the Closing Date, Purchaser shall cause the
Company to administer the Operating Profit Bonus Program, in accordance with
past practice of the Company
33
<PAGE>
and the terms and conditions thereof, so as to pay all amounts due and payable
in respect of the fiscal year ending December 31, 1996 (which such amounts are
estimated, as of the date hereof, to be approximately $140,000), to eligible
employees thereunder.
8.5. Disposition of Excluded Assets. (a) The parties hereto hereby
------------------------------
acknowledge that the Excluded Assets are specifically excluded from the sale
hereunder to Purchaser and that on or prior to the date hereof (to the extent
desired by the Shareholders), such assets (i) may have been assigned,
transferred, or otherwise distributed to the Shareholders or (ii) may have been
sold and the proceeds thereof distributed to the Shareholders.
(b) The Shareholders hereby acknowledge and agree that the Company
shall, on the Closing Date, effect the distribution of the Excluded Assets
(other than the Greenwich Stock) to the Shareholders by means of a partial
redemption of the shares of the common stock, $.01 par value per share, of the
Company held by the Shareholders (on a pro rata basis in accordance with each
Shareholder's percentage ownership of the Company) in exchange therefor. The
Shareholders hereby consent to such redemption.
8.6. Tax Matters. (a) The Representatives and Purchaser agree that
-----------
an election under Section 338 of the Code (or any similar provision of the law
of any state and local taxing jurisdiction) will not be made with respect to the
sale of the Shares pursuant to this Stock Purchase Agreement.
(b) (i) At the direction of, and following approval by, the
Representatives, the Company shall file, on a timely basis all Tax Returns for
the Company with respect to taxable periods that end on or before the Closing
Date (such date also being hereinafter referred to as the "Stub End Date").
(ii) Purchaser shall file, or cause to be filed, on a timely
basis all, Tax Returns for the Company with respect to taxable periods that end
after the Stub End Date.
(c) (i) The Shareholders, severally and not jointly (except to
the extent payment is made out of the Indemnity Escrow Deposit), shall pay,
indemnify and hold harmless Purchaser and the Company (but without duplication
of payment), and their successors, from and against all liabilities for Taxes
attributable to taxable periods ending on or before the Stub End Date
attributable to the income, business, assets, operations, activities and status
of the Company, but only to the extent such Taxes were not paid in full prior to
the Closing Date or the payment of such Taxes was not provided for in full in
reserves included as current liabilities on the Closing Date Balance Sheet.
(ii) Purchaser shall pay, indemnify and hold harmless the
Shareholders and their successors from and against all liabilities for Taxes
attributable to taxable periods beginning after the Stub End Date attributable
to the income, business, assets, operations, activities and status of the
Company.
(iii) For purposes of this Section 8.6(c), the Stub End Date
shall be treated as the last day of a taxable period whether or not the taxable
period in fact ends on the Stub End Date. Subject to the provisions of
subparagraphs (c)(iv) hereof, the independent
34
<PAGE>
certified public accountants for the Company shall determine the amount, if any,
of Taxes properly accruable for any period that does not in fact end on the Stub
End Date. For purposes of this Section 8.6 and the calculation of any indemnity,
interest, penalties or additions to tax accruing after the Stub End Date with
respect to a liability for Taxes for which the Shareholders are required to
indemnify the Company or Purchaser shall be deemed to be attributable to a
taxable period ending on or before the Stub End Date, and interest, penalties or
additions to tax accruing after the Stub End Date with respect to a liability
for Taxes for which Purchaser is required to indemnify the Shareholders shall be
deemed to be attributable to a tax period ending after the Stub End Date.
(iv) Whenever it is necessary to determine the liability for Taxes
for a portion of a taxable year or period that begins before and ends after the
Stub End Date, the determination of the Taxes for the portion of the year or
period ending on the Stub End Date, and the portion of the year or period
beginning on the day after the Stub End Date, shall be determined by assuming
that the taxable year or period ended at the close of business on the Stub End
Date, except that exemptions, allowances or deductions that are calculated on an
annual basis and annual property taxes shall be prorated on the basis of the
number of days in the annual period elapsed through the Stub End Date as
compared to the number of days in the annual period elapsing after the Stub End
Date.
(d) (i) Purchaser or the Representatives, as the case may be,
shall include in a notice of any claim for indemnification pursuant to this
Section 8.6 a calculation of the amount of the requested indemnity payment,
which calculation shall reflect a reduction for the net amount of any Tax
benefits realized by the claimant to the extent (i) the claim for which
indemnification is sought gives rise to a deductible loss or expense and
(ii) the receipt or right to receive payment of such indemnification claim will
not result in any elimination or reduction of the deduction for such loss or
expense or the realization of taxable income or other liability for Taxes with
respect thereto. If the Representatives or Purchaser, as applicable, disagree
with the calculation of the indemnity payment, the Representatives and Purchaser
shall attempt to resolve such disagreement for a period of 15 days. If the
parties fail to reach an agreement at the end of such period, such disagreement
shall be submitted to the Nonpartisan Accountants, whose determination shall be
final and binding on all parties. The cost of the Nonpartisan Accountants shall
be borne equally by the Shareholders and Purchaser.
(ii) Within 10 days after the indemnity calculation has been
resolved or determined, as provided in Section 8.6(d)(i) above, the
Shareholders, severally and not jointly (except to the extent payment is made
out of the Indemnity Escrow Deposit) shall pay to Purchaser or the Company, as
the case may be, or Purchaser shall pay to the Shareholders, such amounts as
have been determined to be due as a result of the indemnifications provided in
Section 8.6(c) above.
(e) The Shareholders shall be entitled to any refund of any Taxes
with respect to periods ending on or before the Stub End Date except to the
extent the right to such refund was reflected on the Closing Date Balance Sheet.
The Representatives shall have the right to determine whether any claim for
refund for such Taxes shall be made on behalf of the Shareholders by the
Company. If the Representatives elect to make a claim for refund for such Taxes,
Purchaser and the Company shall cooperate fully in connection therewith. The
35
<PAGE>
Shareholders shall reimburse Purchaser and the Company for reasonable out-of-
pocket expenses incurred in providing such cooperation. Any refund received by
the Shareholders pursuant to this Section 8.6(e) shall in no way be limited,
decreased, disallowed, or in any other way affected by the provisions of Section
9 of this Stock Purchase Agreement.
(f) Purchaser shall inform the Representatives and the
Representatives shall be entitled to control and conduct those aspects of
audits, examinations or proceedings ("Tax Contests") relating to the Company
that are related to (i) the liability for any Taxes for which Shareholders would
be required to indemnify the Company or Purchaser pursuant to this Stock
Purchase Agreement, or (ii) a claim for refund of any Taxes to which the
Shareholders would be entitled pursuant to this Section 8.6. All other Tax
Contests relating to the Company shall be controlled by the Company. Costs of
any Tax Contest are to be borne by the party controlling such Tax Contest. The
Representatives' right to control and conduct a Tax Contest shall be limited to
amounts in dispute which would be paid by the Shareholders or refunded to the
Shareholders pursuant to this Stock Purchase Agreement. With respect to a Tax
Contest which the Representatives are entitled to control, the Representatives
shall have the right to determine, in their sole discretion, such issues as (w)
the forum, administrative or judicial, in which to contest any proposed
adjustment, (x) the attorney and/or accountant to represent the Company in the
Tax Contest, (y) whether or not to appeal any decision of any administrative or
judicial body, and (z) whether to settle any such Tax Contest. The Company shall
deliver to the Representatives any power of attorney required to allow the
Representatives and their counsel to represent the Company in connection with
the Tax Contest and shall use its best efforts to provide the Representatives
with such assistance as may be reasonably requested by the Representatives in
connection with the Tax Contest.
(g) Without the prior written consent of the Representatives, neither
Purchaser, the Company, nor any Affiliate of Purchaser shall (i) make any
election or (ii) file any amended Tax Return or propose or agree to any
adjustment of any item with the Internal Revenue Service or any other Taxing
Authority with respect to any tax period ending on or before the Stub End Date
that would have the effect of increasing the liability for any Taxes or reducing
any Tax benefit of the Shareholders or (to the extent of any resulting
indemnification obligations of the Shareholders) the Company.
(h) All transfer, documentary, sales, use, registration and other
similar Taxes and fees (including any penalties and interest) incurred in
connection with this Stock Purchase Agreement and the transactions contemplated
herein shall be paid by Purchaser, and Purchaser shall, at its own expense, file
all necessary Tax Returns and other documentation with respect to all such Taxes
and fees.
(i) Following the Closing, (x) Purchaser shall cause the Company to
give the Representatives and their authorized representatives access to its
books and records (and permit Shareholders to make copies thereof), to the
extent relating to periods prior to or including the Stub End Date, as the
Representatives may reasonably request for purposes of preparing Tax Returns and
conducting proceedings relating to Taxes; and (y) Purchaser hereby agrees that
it will retain, until all appropriate statutes of limitation (including any
extensions) expire, copies of all Tax Returns, supporting work schedules and
other records or information which may be relevant to such Tax Returns, and that
it will not destroy or otherwise dispose of such materials without
36
<PAGE>
first providing the Representatives with a reasonable opportunity to review and
copy such materials.
8.7. T/SF Non-Compete. From the Closing through December 31, 1999,
----------------
T/SF hereby covenants and agrees that it will not own, control or operate any
trademark search business other than the Company, without the prior written
consent of Robert Frank.
8.8. T/SF Plan Participation. The Company shall become a
-----------------------
Participating Employer under the T/SF Communications Corporation Savings and
Retirement Plan ("T/SF Plan") as of January 1, 1997. Each employee of the
Company who has completed at least one year of service measured from his or her
date of hire with the Company shall be eligible to participate in the T/SF Plan
as of January 1, 1997, or any entry date thereafter during continued employment.
Each employee's years of service with the Company shall be recognized for
eligibility and vesting under the T/SF Plan.
9. Survival of Representations and Warranties; Indemnification.
-----------------------------------------------------------
9.1. Survival. The representations and warranties of the parties to
--------
this Stock Purchase Agreement shall survive the Closing for a period of two
years from the Closing Date. The right to indemnification under this Section 9
or Section 8.6 under this Stock Purchase Agreement will not be affected by any
investigation conducted with respect to, or any knowledge acquired (or capable
of being acquired) at any time, whether before or after the execution and
delivery of this Stock Purchase Agreement or the Closing Date, with respect to
the accuracy or inaccuracy of, or compliance with, any representation, warranty,
covenant or obligation of the Indemnitor.
9.2. Indemnification Obligations of the Shareholders. (a) Subject
-----------------------------------------------
to the limitations on indemnification set forth in Section 9.7 hereof, from and
after the Closing Date, the Shareholders shall jointly and severally indemnify
and hold harmless Purchaser, T/SF and the Company (sometimes referred to
collectively in this Section 9 as "Purchaser"), and their respective successors
and assigns, from and against any and all Liabilities, Proceedings, Judgments,
obligations, losses, damages, deficiencies, settlements, assessments, charges,
costs and expenses (including but not limited to reasonable attorneys' fees)
resulting from (i) any misrepresentation or breach of warranty on the part of
any of the Shareholders under the terms of this Stock Purchase Agreement and
(ii) any Liabilities of the Company attributable to any period ending on or
prior to the Closing Date, and which are not recorded as liabilities on the
Balance Sheet or as current liabilities on the Closing Date Balance Sheet.
(b) From and after the Closing Date, each Shareholder shall
severally and individually indemnify and hold harmless Purchaser, and its
successors and assigns, from and against any and all Liabilities, Proceedings,
Judgments, obligations, losses, damages, deficiencies, settlements, assessments,
charges, costs and expenses (including but not limited to reasonable attorneys'
fees) resulting from any misrepresentation or breach of warranty on the part of
such Shareholder under Section 5 of this Stock Purchase Agreement (a claim for
indemnification in respect of such a breach being a "Section 5 Claim").
Notwithstanding the preceding sentence, in no event shall any individual
Shareholder be liable with respect to any and all Indemnification Matters
relating to Section 5 Claims, in the aggregate, for more an amount equal to the
sum of
37
<PAGE>
(A) (i) in the case of a Non-Management Shareholder, such Non-Management
Shareholder's Pro Rata Share of the Non-Management Shareholders Purchase Price
and (ii) in the case of Robert Capshaw, Robert Frank, Micah Frank and Robert
Frank, as custodian for Dakota Frank under the Uniform Gifts to Minors Act, the
total consideration actually received by such party in respect of the Shares
sold by such party to Purchaser hereunder plus (B) all reasonable costs and
expenses incurred by Purchaser or the Company, as the case may be, in connection
with the resolution of any Section 5 Claim or any claim, action or proceeding
which is the basis thereof.
9.3. Indemnification Obligations of Purchaser. From and after the
----------------------------------------
Closing Date, Purchaser shall indemnify and hold harmless each of the
Shareholders, and each such Shareholder's successors, assigns, personal
representatives and heirs, from and against any and all Proceedings, Judgments,
Obligations, losses, damages, deficiencies, settlements, assessments, charges,
costs and expenses (including but not limited to reasonable attorneys' fees)
resulting from (i) any misrepresentation or breach of warranty on the part of
Purchaser under the terms of this Stock Purchase Agreement and (ii) any
Liabilities arising out of events which occurred on or following the Closing
Date.
9.4. Indemnification Notice. With respect to each event, occurrence
----------------------
or matter (each, an "Indemnification Matter") as to which Purchaser on the one
hand or any Shareholder or the Shareholders on the other hand (referred to as
the "Indemnitee"), is entitled to indemnification from the other (referred to as
the "Indemnitor") under this Section 9, within ten days after the Indemnitee
receives any written documents underlying an Indemnification Matter, or, if an
Indemnification Matter does not involve a third party action, suit, claim or
demand, promptly after the Indemnitee first has actual knowledge of such
Indemnification Matter, the Indemnitee shall give notice to the Indemnitor of
the nature of such Indemnification Matter and the amount demanded or claimed in
connection therewith (an "Indemnification Notice"). In connection with any
Indemnification Matter with respect to which the Shareholders are the
Indemnitor, Purchaser in its capacity as Indemnitee shall give Indemnification
Notice to each Representative on behalf of the Shareholders. Any failure to
give, or any delay in giving, an Indemnification Notice shall not relieve the
Indemnitor from any liability that it may have to Indemnitee hereunder, except
to the extent that Indemnitor demonstrates that the defense of such action is
prejudiced by such failure or delay. The Representatives shall be empowered to
act on behalf of the Shareholders in connection with any Indemnification Matter
with respect to which the Shareholders are the Indemnitor (excluding, however,
Indemnification Matters related to claims made by Purchaser against an
individual Shareholder under Section 9.2(b) hereof).
9.5. Defense of Indemnification Matters. If an Indemnification
----------------------------------
Matter involves a third party action, suit, claim or demand, then, upon receipt
of the Indemnification Notice, the Indemnitor shall, at its expense and through
counsel of its choice, promptly assume and have sole control of the litigation,
defense or settlement of such Indemnification Matter (the "Defense"), except
that:
(a) The Indemnitee may, at its option and expense and through
counsel of its own choice, participate in (but not control) the defense.
(b) The Indemnitor shall not consent to any Judgment or agree to any
settlement without the Indemnitee's prior written consent, unless (i) there is
no finding or
38
<PAGE>
admission of any violation of law or any violation of the rights
of any Person and no effect on any other claims that may be made against the
Indemnitee, and (ii) the sole relief provided is monetary damages that are paid
in full by the Indemnitor.
(c) If the Indemnitor does not, within fifteen (15) days of the
notice referred to above, retain counsel and otherwise assume the Defense, the
Indemnitee may, at its option and through counsel of its choice (who shall be
reasonably acceptable to Indemnitee), assume the Defense; provided that the
Indemnitor shall continue to be obligated to indemnify the Indemnitee for all
reasonable expenses incurred by Indemnitee with respect thereto, including,
without limitation, the fees and expenses of counsel.
(d) In any event, the Indemnitor and the Indemnitee shall fully
cooperate with each other in connection with the Defense, including, but not
limited to, furnishing all available documentary or other evidence as is
reasonably requested by the other.
9.6. Indemnification Payments. All amounts owed by an Indemnitor to
------------------------
an Indemnitee with respect to an Indemnification Matter (if any) shall be paid
in full, in the manner directed by such Indemnitee, within twenty business days
after a final settlement or agreement as to the amount owed is reached, or after
a final Judgment (without further right of appeal) determining the amount owed
is rendered.
9.7. Limits on Indemnification. Notwithstanding the other provisions
-------------------------
of this Section 9, an Indemnitor's liability under this Section 9 with respect
to an Indemnification Matter shall be limited as follows:
(a) Deductible. No amount shall be payable by the Shareholders (or
----------
any one of them) under this Section 9 with respect to any Indemnification
Matter, other than a Section 5 Claim, unless and until the aggregate amount
otherwise payable by the Shareholders (or any one of them) under this Section 9
with respect to all Indemnification Matters (other than Section 5 Claims),
exceeds $100,000 (the "Deductible"), in which event all amounts in excess of
such amount payable by the Shareholders (or any one of them) under this Section
9 (other than Section 9.2(b)) shall be payable in full subject to the
limitations contained in Section 9.7(b) hereof; provided, that any
Indemnification Matter relating to claims by any employee or former employee of
the Company under the Fair Labor Standards Act (or any applicable state law
comparable thereto) shall be payable if and to the extent the aggregate amount
of such claims exceeds $25,000 (with all such claims up to such aggregate amount
of $25,000 counting against the Deductible).
(b) Ceiling; Indemnity Escrow. (i) The aggregate liability of the
--------------------------
Shareholders under this Section 9 for all Indemnification Matters (other than
Section 5 Claims) shall in no event exceed, in the aggregate, $1,250,000, and in
no event shall any individual Shareholder be liable with respect to any and all
Indemnification Matters (except for Section 5 Claims), in the aggregate, for
more than an amount equal to the product of (i) $1,250,000 and (ii) such
Shareholder's percentage holdings of the Company as of the Closing Date. The
maximum liability of any Shareholder with respect to an Indemnification Matter
related to a Section 5 Claim shall be as provided in Section 9.2(b) only, and no
liability related to Section 5 Claims
39
<PAGE>
shall be counted towards the maximum aggregate liability for other
Indemnification Matters set forth in this Section 9.7(b).
(ii) At the Closing, (i) the Non-Management Shareholders and
Purchaser shall enter into the Indemnity Escrow Agreement with Citibank, N.A.,
as Escrow Agent (the "Escrow Agent") and (ii) Purchaser shall deposit a portion
of the Preliminary Purchase Price equal to $955,102.04 (the "Indemnity Escrow
Deposit") in an account with the Escrow Agent, to be held, administered and
distributed by the Escrow Agent in accordance with the terms of the Indemnity
Escrow Agreement.
(iii) Purchaser agrees and acknowledges that Purchaser's sole and
exclusive remedy in the event of a claim against the Non-Management
Shareholders, Robert Capshaw, Robert Frank, Micah Frank and Robert Frank, as
custodian for Dakota Frank under the Uniform Gifts to Minors Act, respectively,
for indemnification pursuant to this Section 9, or otherwise (other than in
connection with Section 5 Claims against individual Shareholders and claims
under Section 8.6), is limited to (x) with respect to the Non-Management
Shareholders, to recourse against the Indemnity Escrow Deposit (including any
earnings thereon or with respect thereto) held pursuant to the Indemnity Escrow
Agreement and (y) with respect to Robert Frank, Micah Frank, Robert Frank, as
custodian for Dakota Frank under the Uniform Gifts to Minors Act and Robert
Capshaw, to the right of offset granted to Purchaser pursuant to each of the
Robert Capshaw Base Price Promissory Note, the Micah Frank Base Price Promissory
Note, the Dakota Frank Base Price Promissory Note and the Robert Frank Base
Price Promissory Note.
(iv) Purchaser hereby covenants and agrees that in each event in
which payments in respect of the indemnity hereunder are due to Purchaser (other
than in connection with Section 5 Claims against individual Shareholders),
payment in respect of such amounts shall be made as follows: (v) 76.4082% of
each such payment will be paid by means of recourse to the Indemnity Escrow
Deposit held under the Indemnity Escrow Agreement, (w) 13.0612% of each such
payment will be made by means of exercise by Purchaser of the right of offset
granted to Purchaser pursuant to the Robert Frank Base Price Promissory Note,
(x) 2.9388% of each payment will be made by means of exercise by Purchaser of
the right of offset granted to Purchaser pursuant to the Micah Frank Base Price
Promissory Note, (y) 2.6122% of each payment will be made by means of exercise
by Purchaser of the right of offset granted to Purchaser pursuant to the Dakota
Frank Base Price Promissory Note and (z) 4.9796% of each such payment will be
made by means of exercise by Purchaser of the right of offset granted to
Purchaser pursuant to the Robert Capshaw Promissory Note. In addition, Purchaser
may seek payment in connection with amounts due Purchaser for indemnification
claims under Section 8.6 by means of the procedure set forth in the preceding
sentence; provided, that in no event shall such right result in aggregate or
--------
individual liability for the Shareholders or any Shareholder in excess of that
contemplated by Section 9.7(b) hereof. Notwithstanding the foregoing, Section 5
Claims may be made only against, and payment in respect therefor may be sought
only from, the individual Shareholder who is alleged to have breached a
representation under Section 5 of this Stock Purchase Agreement.
(c) Time Limitation. With respect to any Indemnification Matter,
---------------
an Indemnitor shall have no liability unless the Indemnitee gives an
Indemnification Notice in accordance with Section 9.4 hereof within 24 months
after the Closing Date. Notwithstanding
40
<PAGE>
the preceding sentence, indemnification claims under Sections 9.2 or 9.3 for
breaches of covenants to be performed after the Closing Date may be made by the
Shareholders or Purchaser, respectively, at any time.
(d) Calculation of Damages. The amount of damages payable by an
----------------------
Indemnitor under this Section 9.7 shall be reduced by any insurance proceeds
received by the Indemnitee with respect to the claim for which indemnification
is sought, net of retrospective premium adjustments and similar charges.
10. Miscellaneous.
-------------
10.1. Guarantee of T/SF Communications Corporation. T/SF
--------------------------------------------
Communications Corporation guarantees the payment and performance of all
obligations and duties of Purchaser, whether financial or nonfinancial, under
this Stock Purchase Agreement.
10.2. Notices. All notices, consents, and other communications under
-------
this Stock Purchase Agreement shall be in writing and shall be deemed given when
(a) delivered by hand, (b) sent by telecopier (with receipt confirmed) provided
that a copy is sent in the manner provided by clause (c), or (c) when received
by the addressee if sent by DHL, Federal Express, Airborne Express, World
Courier or other generally recognized international express delivery service
(receipt requested), in each case to the appropriate addresses and telecopier
numbers set forth below (or to such other addresses and telecopier numbers as a
party may designate as to itself by notice to the other party):
(a) If to Purchaser:
c/o T/SF Communications Corporation
2407 East Skelly Drive
Tulsa, Oklahoma 74105
Telecopier No.: 918-743-1291
Attention: Howard G. Barnett, Jr.
with a copy to:
Conner & Winters
2400 First Place Tower
15 East Fifth Street
Tulsa, Oklahoma 74103
Telecopier No.: 918-586-8548
Attention: Robert A. Curry, Esq.
(b) If to the Shareholders, to each Representative, at the address
and telecopier number specified below such Representative's signature to this
Stock Purchase Agreement, with a copy to Kaye, Scholer, Fierman, Hays & Handler,
LLP, 425 Park Avenue, New York, New York 10022, Attention: Mark S. Selinger,
Esq. (Telecopier No. (212) 836-7246).
41
<PAGE>
(c) If to the Representatives, to each Representative at the
address and telecopier number specified below such Representative's signature to
this Stock Purchase Agreement, with a copy to Kaye, Scholer, Fierman, Hays &
Handler, LLP, 425 Park Avenue, New York, New York 10022, Attention: Mark S.
Selinger, Esq. (Telecopier No. (212) 836-7246).
10.3. Submission to Jurisdiction. (a) Any legal action or proceeding
--------------------------
with respect to this Stock Purchase Agreement or any of the transactions
contemplated thereby may be brought against any of the parties in the courts of
the State of New York or the United States for the Eastern District of New York;
each of the parties hereby consents generally and unconditionally to the
jurisdiction of the aforesaid courts (and the appropriate appellate courts) in
any such legal action or proceeding.
(b) Each of the parties hereto irrevocably waives, in connection
with any such action or proceeding, any objection, including, without
limitation, any objection to the laying of venue or based upon the grounds of
forum non conveniens, which it may now or hereafter have to bringing of any such
action or proceeding in such jurisdiction.
(c) Each of the parties hereto hereby irrevocably consents to the
service of process of any of the aforementioned courts in any such action or
proceeding anywhere in the world.
(d) Nothing herein shall affect the right of any party hereto to
serve process in any other manner permitted by law or to commence legal
proceedings or otherwise proceed against any other party hereto in any other
jurisdiction.
10.4. Assignment. All of the terms and provisions of this Stock
----------
Purchase Agreement shall be binding upon and inure to the benefit of and be
enforceable by the parties hereto and their respective successors and assigns.
This Stock Purchase Agreement shall not be assignable or transferrable by any
party hereto without the prior written consent of the other parties hereto.
10.5. Governing Law. This Stock Purchase Agreement and (unless
-------------
otherwise provided) all amendments hereto and waivers hereunder shall be
governed by the internal law of the State of New York without regard to the
conflict of law principles thereof.
10.6. Incorporation of Exhibits and Schedules. The Exhibits and
---------------------------------------
Schedules attached hereto are incorporated into this Stock Purchase Agreement
and shall be deemed a part hereof as if set forth herein in full. References
herein to "this Stock Purchase Agreement" and the words "herein," "hereof," and
words of similar import refer to this Stock Purchase Agreement (including its
Exhibits and Schedules) as an entirety. In the event of any conflict between
the provisions of this Stock Purchase Agreement and any such Exhibit or
Schedule, the provisions of this Stock Purchase Agreement shall control.
10.7. Severability. Any term or provision of this Stock Purchase
------------
Agreement which is invalid or unenforceable will be ineffective to the extent of
such invalidity or unenforceability without rendering invalid or unenforceable
the remaining rights of the Person
42
<PAGE>
intended to be benefitted by such provision or any other provisions of this
Stock Purchase Agreement.
10.8. Counterparts. This Stock Purchase Agreement may be executed in
------------
two or more counterparts, each of which shall be considered an original, but all
of which together shall constitute the same instrument.
10.9. Captions. The captions in this Stock Purchase Agreement are
--------
for convenience of reference only and shall not be given any effect in the
interpretation of this Stock Purchase Agreement.
10.10. Publicity. Any press release or other public announcement
---------
(other than any report required to be filed with the Securities and Exchange
Commission) concerning this Stock Purchase Agreement or the transactions
contemplated hereby shall be submitted for review and comment by Robert Frank
prior to its release to the public.
10.11. Exclusive Agreement; Amendment. This Stock Purchase Agreement
------------------------------
supersedes all prior agreements among the parties with respect to its subject
matter, is intended (with the documents referred to herein, including, without
limitation the Exhibits and Schedules hereto and the Confidentiality Agreement)
as a complete and exclusive statement of the terms of the agreement among the
parties with respect thereto and cannot be amended or terminated except by a
written instrument executed by the parties hereto. No party makes, and each
party hereby expressly disclaims reliance upon any representations or warranties
with respect to the transactions contemplated by this Stock Purchase Agreement
other than those expressly set forth herein. Without limiting the generality of
the foregoing, the Shareholders hereby disclaim any representation or warranty
with respect to, and Purchaser hereby affirms that it has not relied upon, any
information contained in the Confidential Information Memorandum with respect to
the Company prepared by Oppenheimer or any data heretofore provided to
Purchaser, whether in writing or orally, in separate presentations or memoranda
of Oppenheimer, the Shareholders, the Company or any representative of any of
the foregoing.
IN WITNESS WHEREOF, the parties hereto have caused this Stock Purchase
Agreement to be duly executed as of the date first written above.
T/SF INVESTMENT CO.
By: /s/ J. Gary Mourton
---------------------------
Name: J. Gary Mourton
Title: President
REPRESENTATIVES
/s/ William Frank
------------------------------
William Frank
43
<PAGE>
42 Pound Ridge Road
Pound Ridge, New York 10576
Facsimile No.: (203) 321-2172
/s/ Daniel Frank
-----------------------------
Daniel Frank
c/o Lattanzio Group
277 Park Avenue
New York, New York 10022
Facsimile No.: (212) 350-5060
Solely for the purposes of Section 10.1
of this Stock Purchase Agreement:
T/SF COMMUNICATIONS CORPORATION
By: /s/ Howard G. Barnett, Jr.
-----------------------------------------
Name: Howard G. Barnett, Jr.
Title: Chairman, President & CEO
44
<PAGE>
Omitted Schedules
The following schedules and exhibits to the Stock Purchase Agreement have
been omitted, but the Registrant will furnish the schedules and exhibits
supplementally to the Commission upon request:
<TABLE>
<CAPTION>
Description Schedules
----------- ---------
<S> <C>
"Shareholders" Schedule 1
Audited and Adjusted Income Tax Returns Schedule 6.10
Employee Benefits Schedule 6.11
Contracts and Agreements Schedule 6.13
Insurance Policies Schedule 6.15
Intangible Property Schedule 6.18
Exhibits
--------
Opinion of Counsel to the Shareholders Exhibit A
Opinion of Counsel to Purchaser Exhibit B
Indemnity Escrow Agreement Exhibit C
Form of Contingent Price Promissory Note Exhibit D
Form of Base Price Promissory Note Exhibit E
CORSEARCH Special Bonus Plan Exhibit F
Description of Operating Profit Bonus Program Exhibit G
</TABLE>
<PAGE>
EXHIBIT 99.1
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is made and entered into this
15th day of August, 1996, by and between CORSEARCH, INC., a New York corporation
("Employer"), and Robert Frank ("Employee").
R E C I T A L S:
---------------
A. On the date hereof, T/SF Communications Corporation ("T/SF"),
through its wholly-owned subsidiary, T/SF Investment Co. ("Buyer"), entered
into that certain Stock Purchase Agreement (the "Purchase Agreement") with
the stockholders of Employer (one of which was Employee) whereby Buyer
acquired 100% of the issued and outstanding capital stock of Employer.
B. Employer and Employee now desire to enter into this Agreement in
order to describe the terms upon which Employee shall be employed by
Employer in the New York metropolitan area.
In consideration of the mutual covenants and agreements contained herein,
the parties agree as follows:
1. Employment. Employer hereby employs Employee and Employee hereby
----------
accepts employment with Employer upon the terms and conditions hereinafter set
forth.
2. Term. The term of this Agreement shall commence on the date hereof
----
and extend through December 31, 1999, unless sooner terminated as herein
provided.
3. Duties. Employee shall devote his full business time and attention
------
and best efforts to the business of Employer. Employee shall serve in the
capacity and office of President of Employer with the duties usually incident to
such office, including but not limited to the following:
(a) The authority, responsibility and accountability to supervise,
manage, lead and conduct all aspects of Employer's business;
(b) Provide leadership, strategic direction and long-term planning;
(c) Prepare and execute business plans for Employer's business
covering the period from the date hereof through 12/31/96 and for each of
1997, 1998 and 1999;
(d) Hire, fire, supervise and determine the compensation of all
employees;
(e) Industry representation and liaison;
<PAGE>
(f) Ensure compliance with all applicable laws, regulations and
corporate policies and ethical standards;
(g) Ensure integrity of financial reporting and information systems;
subject at all times to the direction of the Chief Executive Officer of
Employer, the Board of Directors of Employer and the budgets and business plans
approved (as such plans may be amended from time to time) by Employer's Board of
Directors; provided, that, without Employee's written agreement, Employee shall
be subject to only the direction of the Board of Directors of Employer if
Employer should designate a Chief Executive Officer other than one of Howard G.
Barnett, Jr., Robert E. Craine, Jr., Stuart P. Honeybone or J. Gary Mourton
(each of whom is currently an officer of T/SF). During the term of this
Agreement, Employee shall also be a member of the Board of Directors of
Employer.
4. Compensation. As compensation for the performance by Employee of
------------
the duties specified herein and for the obligations of Employee under paragraph
7 hereof, Employee shall be paid the following during the term of this
Agreement.
(a) Base Salary. Commencing on the date hereof and extending through
-----------
December 31, 1996, subject to the increases or potential increases
described in subparagraph (b) below, Employee shall receive a base salary
of not less than $18,750.00 per month ($225,000.00 annual rate).
(b) Raises. In 1997, Employee's base salary shall be increased by 5%
-------
to $19,687.50 per month ($236,250.00 annually). For 1998, Employee's base
salary (as so increased) shall be increased a further 5% from that paid for
1997 if the "Net Income" (as defined in subparagraph (c) below) of Employer
for 1997 was not less than $2,333,000.00. Similarly, Employees' base
salary (as so increased) for 1999 shall be increased by 5% from that paid
for 1998 if "Net Income" of Employer for 1998 was not less than
$2,832,000.00. Increases for 1998 and 1999 shall be determined no later
than March 31, of the applicable year with any raise retroactive to January
1, of such year.
(c) Bonuses.
--------
Employee shall be paid a bonus for 1996 based on the "Net Income"
of Employer for the period August 1, 1996, through December 31, 1996,
based on the following schedule:
<TABLE>
<CAPTION>
Net Income for 8/1/96 Amount
through 12/31/96 of Bonus
----------------
<S> <C>
At least $600,000 but less than $675,000 $10,000
At least $675,000 but less than 750,000 $20,000
$750,000 or greater $30,000
</TABLE>
2
<PAGE>
The bonus amounts in this subsection (i) are not cumulative.
(ii) For the years 1997, 1998 and 1999, Employee shall be paid a
bonus based on the net income of Employer for the applicable year,
based on the following schedule:
<TABLE>
<CAPTION>
Net Income Bonus Paid when
Threshold Threshold Reached
---------- -----------------
<S> <C> <C>
1997 $2,333,000 $25,000
---- 2,466,000 25,000
2,599,000 25,000
2,732,000 25,000
greater than 2,732,000 10% of any excess
1998 $2,700,000 $40,000
---- 2,850,000 40,000
3,000,000 40,000
3,150,000 40,000
greater than 3,150,000 10% of any excess
1999 $3,062,000 $50,000
---- 3,324,000 50,000
3,586,000 50,000
3,848,000 50,000
greater than 3,848,000 10% of any excess
</TABLE>
The bonus amounts for each year in this subsection (ii) are cumulative.
For example, if the net income for Employer for 1997 was $2,800,000,
Employee would earn a bonus of $106,800
($25,000+$25,000+$25,000+$25,000+10% of $68,000).
For this purpose, "Net Income" of Employer shall be defined and
determined in accordance with the provisions of section 2.2(e) of the
Purchase Agreement; provided, that "Net Income" for purposes of this
Agreement shall be determined before the payment of bonuses to Employee and
to Robert Capshaw under his separate Employment Agreement of even date
herewith. Bonus amounts shall be determined and paid no later than April 1
of the year following the year in which the bonus was earned.
(d) Deductions. All salary payments to Employee shall be made in
-----------
accordance with Employer's normal payroll practices and shall be made
subject to normal deductions therefrom, including social security and
withholding taxes.
(e) Benefit Plans. Employee shall be entitled to participate in
--------------
Employer's group medical and hospitalization insurance plan, and any other
group
3
<PAGE>
insurance or general employee benefit plan provided by Employer, upon
the same terms as all other employees of Employer or upon such other terms
(but in no event less favorable than the terms in effect on the date
hereof) as the Board of Directors of Employer may determine. Provided,
however, that Employer shall pay the entire premium for the group medical
and hospitalization coverage provided to Employee and Employee's eligible
dependents.
5. Expenses.
--------
(a) In addition to the compensation described above, Employee shall be
entitled to reimbursement of his actual out-of-pocket expenses incurred in
the conduct of Employer's business (including, but not limited to,
appropriate professional dues and travel and entertainment expenses related
to the business of Employer), all of which expenses shall be limited to
ordinary and necessary items and which shall be supported by vouchers,
receipts or similar documentation to the extent practicable and as required
by law.
(b) Employer will furnish Employee with such office space (in New York
City, Borough of Manhattan), equipment, supplies, facilities and personnel
as Employer deems necessary or appropriate for the performance of
Employee's duties under this Agreement. To facilitate the management of
Employer's business, Employer shall provide Employee with the use of, or
reimburse Employee for expenses incurred for, a cellular telephone, a
laptop computer (including necessary peripheral equipment and software) and
a second telephone line to his residence.
6. Vacations. Employee shall be entitled to annual vacation of an
---------
aggregate of six weeks (30 work days) per annum, with pay, which may include
vacations of up to two consecutive work weeks, at such times as will not unduly
interfere with or hamper the operation of Employer's business and otherwise
subject to Employer's normal vacation policies. Provided, however, that in lieu
of any other allowance for paid sick leave, Employee shall be entitled to use
any part of or all of his vacation as sick leave, and to the extent so used the
annual vacation of 30 work days shall be reduced day for day by the number of
sick days used each year.
7. Noncompetition.
---------------
(a) Subject to the provisions of paragraph 8(e), at all times
during the period beginning on the date hereof and ending on the later of
(i) two (2) year after Employee's termination of employment with Employer,
or (ii) five (5) years after the date hereof, Employee shall not, directly
or indirectly, compete with Employer or own, operate, manage, have a
proprietary interest in, extend financial assistance to, solicit, or
encourage or handle patronage for or serve or be employed by any other
company, firm or enterprise (other than Employer) which is then engaged in
any business engaged in by Employer during Employee's employment with
Employer, in any geographic area or market in which Employer operates or
does business. Provided, however, that Employee may purchase or otherwise
acquire up to two percent of any class of securities of any enterprise if
such securities are listed on any national or regional securities exchange
or
4
<PAGE>
have been registered under Section 12(g) of the Securities Exchange Act
of 1934. Notwithstanding the foregoing, in the event of Employee's
termination of service with Employer, the parties agree that (x) Employee's
acceptance of academic appointments, (y) Employee's publication of
articles, or (z) the furnishing by Employee of part-time consulting
services which do not involve trademark, tradename or any other research
business then engaged in by Employer, provided such services aren't
provided to a person or company which competes with Employer, will not
violate this section 7(a).
(b) At all times during the period beginning on the date hereof
and ending on the later of (i) two (2) year after Employee's termination of
employment with Employer, or (ii) five (5) years after the date hereof,
Employee shall not contact or otherwise deal with any person, corporation,
association or other customer or client of Employer for the purpose of
conducting any business individually or on behalf of any company or person
(other than Employer) with respect to or on behalf of any service, product,
business or idea which is in any way competitive with any service,
business, product or idea of Employer.
(c) The parties hereto acknowledge that the foregoing covenants by
Employee not to enter into competition in the manner set forth in
paragraphs 7(a) and (b) above are an essential element of the transactions
contemplated by the Purchase Agreement and that, in the absence of
Employee's agreement to comply with such covenants, T/SF and Buyer would
not have agreed to enter into such transactions. T/SF, Buyer and Employee
have consulted with their respective counsel and have been advised in all
respects concerning the reasonableness and propriety of such covenants.
(d) The benefits of this paragraph 7 above shall flow to and be
enforceable by any of Employer, T/SF and/or Buyer, and their respective
successors and permitted assigns. The parties hereto recognize that,
because of the nature of the subject matter of this paragraph 7, it would
be impractical and extremely difficult to determine Employee's and/or
T/SF's or Buyer's actual damages in the event of a breach of any of such
provisions. Accordingly, if Employee commits a breach, or threatens to
commit a breach, of this paragraph, Employer and/or T/SF, Buyer or any of
their successors or permitted assigns shall give Employee written notice of
such violation and if Employee has not cured such violation or otherwise
ceased to act in violation of this paragraph 7 within twenty (20) days of
the giving of such notice, Employer, Buyer and/or T/SF or any of their
successors or permitted assigns shall have the following rights and
remedies:
(i) to have the provisions of this paragraph 7 specifically
enforced, by injunctive or other equitable relief, by any court having
equity jurisdiction, it being acknowledged and agreed by Employee that
any such breach or threatened breach will cause irreparable injury to
Employer and/or T/SF and/or Buyer and that an injunction may be issued
against Employee to stop or prevent any such breach or threatened
breach; and
5
<PAGE>
(ii) concurrent with the above remedy, to discontinue any
payments due to Employee under this Agreement and/or, if such
occurrence is prior to December 31, 1999, as provided in the Purchase
Agreement.
In the event that an action shall be instituted to specifically enforce
Employee's obligations hereunder (or under paragraph 9 below), Employee
shall, to the fullest extent permitted by applicable law, waive the defense
that the party or parties seeking enforcement have an adequate remedy at
law and shall interpose no opposition, legal or otherwise, as to the
propriety of pursing specific performance as a remedy and shall not request
any bonding for the issuance of the relief sought. Provided, however, that
the curing of such violation shall not prevent any party from seeking
recovery of its actual damages resulting from such violation.
(e) Each of the rights and remedies enumerated in subparagraph
(d) above shall be independent of the others, and shall be severally
enforceable, and all such rights and remedies shall be in addition to, and
not in lieu of, any other rights and remedies available to Employer and/or
T/SF and/or Buyer and their respective successors and permitted assigns
under law or in equity or pursuant to any other agreement binding upon the
parties, including, without limitation, the Purchase Agreement.
(f) In any action at law or equity to enforce any of the
provisions or rights under this Agreement, the unsuccessful party to such
litigation, as determined by the court in a final judgment or decree, shall
pay the successful party or parties all costs, expenses and reasonable
attorneys' fees and disbursements incurred therein by such party or parties
(including, without limitation, such costs, expenses and fees on any
appeals), and if such successful party or parties shall obtain a judgment
in any such action or proceeding, such costs, expenses and attorneys' fees
shall be included as part of such judgment.
(g) The parties agree that 10% of Employee's base salary shall be
deemed paid in consideration of the agreements and covenants of Employee
under this paragraph 7.
8. Termination. This Agreement may be terminated only upon the
-----------
occurrence of one or more of the following events, and in the event of any such
termination Employee shall receive (in addition to any amounts payable under the
Purchase Agreement) under this Agreement only those amounts specifically set
forth in this paragraph 8:
(a) By Employer upon the permanent disability of Employee or his
temporary disability for a period in excess of four (4) consecutive months,
or six (6) months in any one year. "Disability" for this purpose shall be
deemed to be any physical or mental disability rendering Employee unable to
perform substantially all of his usual duties and responsibilities for
Employer. The Disability of Employee will be determined by a medical
doctor selected by written agreement of the Employer and the Employee upon
the request of either party by notice to the other. If the Employer and
Employee cannot agree
6
<PAGE>
on the selection of a medical doctor, each of them, within ten (10) days of
written request by either Employer or Employee, will select a medical
doctor and the two medical doctors will select a third medical doctor who
will determine whether Employee has a Disability. The determination of the
medical doctor selected under this paragraph 8(a) will be binding on both
parties. In the event of a termination pursuant to this subparagraph,
Employee shall be entitled to such compensation and benefits as are
provided in any long-term disability insurance policy or certificate, if
any, covering Employee maintained by Employer and Employer shall continue
the payment of Employee's base salary, at the monthly rate in effect as of
the date of disability, for a period of not less than six (6) months from
the date of disability.
(b) Upon Employee's death, in which event Employer shall be
obligated to continue the payment of the base salary amount payable under
paragraph 4 herein, at the monthly rate in effect as of the date of death,
for six (6) months after the date of death. Such amounts shall be paid to
Employee's estate or designated beneficiary.
(c) Employee shall have the right to terminate his obligations
under this Agreement in the event of the substantial breach of this
Agreement by Employer (a "Substantial Breach", as defined in paragraph 8(e)
below), in which case Employee shall be entitled to receive his base salary
(as in effect at the time of the breach) for the remaining term of this
Agreement, as well as any other remedies available to Employee pursuant to
the terms of the Purchase Agreement, the Promissory Notes thereunder, or
under law, equity or otherwise. To effect termination by reason of a
Substantial Breach pursuant to paragraph 8(e) below, Employee must give
written notice of such breach to Employer at the address and in the manner
set forth in paragraph 12(g) below, specifying in reasonable detail the
nature of the breach and the provision(s) of such paragraph 8(e) upon which
the termination is based, and Employer shall have failed to cure such
breach within thirty (30) days (ten (10) days in the case of a nonpayment
breach) of its receipt of such notice.
(d) By Employer by written notice for "cause." "Cause" for
termination shall be limited to one or more of the following:
(i) Employee's material breach of his duties or
obligations under the terms or provisions of this Agreement or the
Purchase Agreement;
(ii) Employee's dishonesty (which dishonesty has a
material adverse effect on the business, financial condition or net
income of Employer), fraud, misappropriation or embezzlement in the
course of, related to or connected with, the business of Employer;
(iii) Employee's conviction of a felony;
(iv) Employee's failure to devote his full business time,
attention and best efforts to the business of Employer or related
professional activities;
7
<PAGE>
provided, that Employee may spend personal time on or be involved (and
such time spent or involvement does not prevent Employee from devoting
his full business time, attention and best efforts to the business of
Employer) with personal activities, investments or community affairs
which don't conflict with other provisions of this Agreement or the
Purchase Agreement;
(v) Failure of Employee to act in accordance with the
directions and guidelines established from time to time by the Board
of Directors and/or Chief Executive Officer of Employer, provided such
directions and guidelines were promulgated to meet Employer's
legitimate business objectives and do not conflict with the other
terms of the Purchase Agreement and, provided further, that any such
directions require the accomplishment of tasks by Employee (either as
an individual employee or Employer actions for which Employee is
responsible) which are believed to be reasonably attainable at the
time assigned.
Prior to the termination of this Agreement by Employer pursuant to
subparagraphs 8(d)(i), (iv) or (v) above, Employer shall give written
notice of its intent to terminate Employee, specifying in reasonable detail
the nature of the breach and the provision(s) of the Agreement upon which
the termination is based. Employee shall have thirty (30) days from the
date of his receipt of such notice to cure the breach or breaches, and
Employee's failure or inability to cure same shall give Employer the right
to proceed with termination. The foregoing notice and curative provisions
shall not apply to a termination under subparagraph 8(d)(i) by reason of a
breach of any provision of paragraph 7 of this Agreement for which notice
was given and the breach remained uncured after the thirty (30) days'
notice period provided for in subparagraph 7(d) hereof. In the event of
termination of this Agreement for any of the causes enumerated in this
subparagraph (d), Employer's obligation to pay Employee shall be limited
solely to the payment of (x) an amount equal to one (1) month's then
current base salary (as of the date of termination), (y) any amounts which
may be due pursuant to the Promissory Notes or the Purchase Agreement, and
(z) other accrued benefits (such as accrued vacation pay and accrued
benefits under any retirement, savings or other employee benefit plans of
Employer) through the date of such termination.
(e) The termination of this Agreement for any reason shall not
affect the provisions of paragraphs 7, 9 and 10 hereof, which shall remain
in full force and effect, except as follows: in the event of the
termination of this Agreement by Employee pursuant to paragraph 8(c) hereof
Employee due to the Substantial Breach hereof by Employer, the provisions
of paragraph 7 hereof and the portions of paragraph 10 hereof that would
otherwise prohibit Employee from contacting customers and prospective
customers of Employer shall no longer apply to Employee. For purposes of
this Agreement, Substantial Breach shall be deemed to mean (i) the non-
payment of amounts due to Employee hereunder, under the Promissory Note or
pursuant to the Purchase Agreement (and not cured within applicable notice
and cure periods), (ii) termination of Employee without cause hereunder,
(iii) relocation of the primary business offices of Employer which causes
Employee to have to relocate out of the New York City metro
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area, or (iv) the diminution of Employee's responsibilities by Employer,
without the concurrence of Employee, so that Employee no longer has the
primary authority to exercise substantially all of the powers and duties
set forth in subparagraphs (a), (b), (c) and (d) of paragraph 3 hereof.
9. Ownership of Products, Etc. Employee hereby acknowledges and
--------------------------
agrees that any intellectual property, invention (whether patentable, subject to
copyright or trademark protection or otherwise), process, application,
device, product, production procedure, publication, marketing or publication
idea, or other idea (all referred to herein as "Intellectual Property") which
shall have been conceived, commenced, or developed by Employee, in whole or in
part, at any time during Employee's full-time employment with Employer prior to
the date hereof or during the term of this Agreement shall be the sole and
exclusive property of Employer, and Employee shall not be entitled to any
additional or special compensation in connection with any such item. In the
event any Intellectual Property conceived, commenced or developed by Employee is
not used or exploited by Employer due to the affirmative written decision of
T/SF or the Board of Directors of Employer after the date hereof, Employee
shall, after the termination of this Agreement, have the non-exclusive right to
use or exploit such Intellectual Property if such use or exploitation does not
violate the terms of paragraph 7 hereof. It is acknowledged that Employer would
be irreparably harmed if Employee should breach the provisions of this
paragraph. Accordingly, Employer is granted the right of specific performance
to enforce the provisions of this paragraph.
10. Confidentiality. Employee covenants and agrees that Employee
---------------
shall not, during or subsequent to Employee's employment with Employer, divulge,
furnish, disclose or make accessible to any person or company, any knowledge or
information, techniques, customer or client information, processes, promotional
idea, trade secrets, prospective customer information, plans, devices, or
material with respect to any secret, confidential or sensitive research or
development work, promotions, business plans, designs, services, products or
production methods of Employer or T/SF or with respect to any other secret,
confidential or sensitive aspect of the business of Employer or T/SF, except as
may be necessary in the furtherance and conduct of Employer's or T/SF's business
as an employee of Employer for the period Employee is so employed. Provided,
however, that the restrictions on disclosure in this subparagraph shall not
apply with respect to any of the above-described knowledge, information,
documents or ideas to the extent that the same shall have become known to the
trade or public pursuant to disclosure (a) by sources other than Employee (and
for which Employee is not directly or indirectly responsible), or (b) by
Employee, Employer and/or other employees of Employer or its representatives in
the course of the "auction" and sale of Employer which commenced in 1995.
11. Stock Option. Within twenty (20) days after the date hereof T/SF
------------
shall grant Employee an option to purchase 30,000 shares of T/SF's common stock,
$0.10 par value, at a price of $20.00 per share for 15,000 shares and $24.00 per
share for the remaining 15,000 shares. Such stock options will be granted
pursuant to the terms of the T/SF Communications Corporation 1994 Incentive
Stock Plan, will provide for an option term of five (5) years and will provide
that Employee will acquire, by completing service with Employer after the date
hereof,
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the vested right to exercise such options at the rate of one-third after
the end of each of Employee's first three (3) years of service with Employer
after the date hereof.
12. Miscellaneous.
-------------
(a) This Agreement shall not be assignable by either Employer or
Employee except upon their mutual written consent, except that this
Agreement may be assigned by Employer to a buyer of substantially all of
the assets of Employer who agrees to assume the obligations of Employer and
to recognize and honor the rights of Employee hereunder.
(b) If any of the covenants or agreements contained herein, or
any part hereof, is held to be unenforceable for any reason, the remainder
of this Agreement shall be construed as if such provision or part thereof
was not included herein.
(c) This Agreement shall be interpreted and enforced in
accordance with the laws of the State of New York with respect to
agreements made and to be performed in such state.
(d) This Agreement constitutes the entire understanding of the
parties with respect to the employment of Employee (other than "earnout"
provisions of the Purchase Agreement, which relate to the sale of
Employee's share of stock in Employer), and supersedes all prior written or
oral agreements between and/or among T/SF, Employer and Employee with
respect to the subject matter hereof. This Agreement may not be amended,
except by a written amendment executed by both Employee and Employer.
(e) This Agreement may be executed in multiple counterparts, each
of which shall be deemed an original and all of which together shall
constitute one and the same instrument.
(f) This Agreement shall be binding upon Employer and Employee,
and, to the extent herein provided, shall inure to the benefit of Employer,
T/SF and Employee and their or his respective successors and permitted
assigns, heirs and legal representatives.
(g) Any notice, request, instruction or other document to be
given hereunder by any party hereto to any other party shall be in writing
and delivered personally, or sent by registered, certified mail or
overnight air courier, as follows:
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If to Employer, to:
CORSEARCH, INC.
c/o T/SF Communications Corporation
Attention: Howard G. Barnett, Jr.
2407 East Skelly Drive
Tulsa, Oklahoma 74105
And if to Employee, to:
Robert Frank, President
CORSEARCH, INC.
8th Floor
16 West 22nd Street
New York, New York 10010
Or at such other address for a party as shall be specified by like notice.
Any notice which is delivered personally in the manner provided herein
shall be deemed to have been duly given to the party to whom it is directed
upon actual receipt by such party. Any notice which is addressed and
mailed in the manner herein provided shall be conclusively presumed to have
been given to the party to whom it is addressed at the close of business,
local time of the recipient, on the third (3rd) day after the day it is so
placed in the mail.
(h) Any action or proceeding seeking to enforce any provision of,
or based on any right arising out of, this Agreement may be brought against
either of the parties in the courts of the State of New York, County of New
York, or, if it has or can acquire jurisdiction, in the United States
District Court for the Southern District of the State of New York, and each
of the parties hereto hereby consents to the jurisdiction of such courts
(and of the appropriate appellate courts) in any such action or proceeding
and waives any objection to venue laid therein. Process in any action or
proceeding referred to in the preceding sentence may be served on either
party hereto anywhere in the world.
(i) If any provision of this Agreement is held invalid or
unenforceable by any court of competent jurisdiction, the other provisions
of this Agreement will remain in full force and effect. Any provision of
this Agreement held invalid or unenforceable only in part or degree will
remain in full force and effect to the extent not held invalid or
unenforceable.
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IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Agreement as of the date first written above.
CORSEARCH, INC.
/s/ Robert Frank By: /s/ Howard G. Barnett, Jr.
- ---------------------- -----------------------------
Robert Frank Howard G. Barnett, Jr.
Chairman and Chief Executive Officer
"Employee" "Employer"
T/SF Communications Corporation and T/SF Investment Co. hereby
unconditionally guarantee the full and prompt performance of all obligations of
CORSEARCH, INC. under this Employment Agreement, and otherwise agree to be bound
by the terms hereof to the extent applicable to them.
T/SF COMMUNICATIONS CORPORATION
By: /s/ Howard G. Barnett, Jr.
-----------------------------
Howard G. Barnett, Jr.
President and Chief Executive
Officer
T/SF INVESTMENT CO.
By: /s/ J. Gary Mourton
----------------------------
J. Gary Mourton
President
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