SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported): June 11, 1996
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PRIME CELLULAR, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 0-18700 13-3570672
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(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
100 First Stamford Place, Stamford, Connecticut 06902
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (203) 327-3620
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Former name or former address, if changed since last report
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Item 2. Acquisition and Disposition of Assets.
On June 11, 1996 (the "Closing"), Registrant's wholly- owned subsidiary
consummated the merger contemplated by the Merger Agreement, dated May 14, 1996
(the "Merger Agreement), by and among Registrant, Prime Cellular Acquisition
Corp., a newly formed wholly-owned subsidiary of Registrant (the "Subsidiary"),
Bern Associates, Inc. ("Bern") and all of the stockholders of Bern (the "Bern
Stockholders"). Bern was merged with and into the Subsidiary and all of the
outstanding shares of common stock of Bern were converted into an aggregate of
4,100,000 shares of Common Stock, par value $.01 per share, of Registrant (the
"Merger"), representing approximately 49.3% (after consummation of the
transaction) of Registrant's issued and outstanding Common Stock (the "Merger
Shares").
Bern provides software, equipment and services necessary to enable local
telephone companies to become Internet "providers" and provides support and
assistance to such companies and their Internet-user customers (the "Business").
Following the Merger, the Subsidiary changed its name to "Bern Communications,
Inc." and will conduct the Business under such name.
Simultaneous with the Closing:
1. Each of James B. Fleming, Milton A. Gilbert and Samuel A. Rozzi resigned
as directors of Registrant, effective as of the Closing (collectively, the
"Board Resignations").
2. Registrant increased the authorized number of directors constituting the
Board of Directors from four (4) to five (5) members. Joseph K. Pagano
("Pagano"), the sole director following the Board Resignations, elected Ellen
Kirschenbaum ("Kirschenbaum") and Rafael Collado ("Collado") as the two (2) Bern
Designees (as defined pursuant to the Merger Agreement), Frederick R. Adler
("Adler") as the other designee of Registrant (the other designee of Registrant
being Pagano) and L. Mark Newman ("Newman") as the fifth (5th) director. An
affiliate of Newman was a Bern Stockholder and received 246,000 of the Merger
Shares in the Merger. This same affiliate also owned 100,000 shares of the
Common Stock of Registrant as of the Closing.
3. Collado and Kirschenbaum were also elected as President/Chief Executive
Officer and Executive Vice-President, respectively, of Registrant and the
Subsidiary. Each was an owner of Bern and received 543,250 and 553,500 of the
Merger Shares, respectively.
4. Registrant allocated up to an aggregate of 233,000 shares of its Common
Stock for granting, in accordance with its
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1990 Stock Option Plan, stock options to key management personnel of Bern as
designated by Collado and Kirschenbaum.
5. Registrant and Subsidiary entered into an Indemnification Agreement with
the Bern Stockholders (the "Indemnification Agreement") pursuant to which
Registrant and each of the Bern Stockholders indemnified the other party in the
event of a breach by the indemnifying party of any of their respective
representations, warranties or covenants contained in the Merger Agreement. By
the terms of the Indemnification Agreement, obligations to indemnify are
limited, however, to the extent that any damages resulting from a breach by the
indemnifying party exceed $50,000 and, with respect to each Bern Stockholder, to
a maximum liability equal to the value of the Merger Shares received by such
Bern Stockholder as part of the Merger.
6. As security for the obligations under the Indemnification Agreement,
Registrant entered into an Escrow Agreement with the Bern Stockholders (the
"Escrow Agreement") pursuant to which the Merger Shares will be held in escrow
by the escrow agent until the earlier of (i) the filing with the Commission of
Registrant's annual report on Form 10-K for the fiscal year ending May 31, 1997
or (ii) September 13, 1997 (the "Escrow Termination Date"). During the period
the Merger Shares are held in escrow, the Escrow Agreement sets forth procedures
for the making by Registrant of claims under the Indemnification Agreement, and
the delivery by the Escrow Agent of Merger Shares in satisfaction of such
claims. If any escrowed Merger Shares are sold or otherwise disposed of (which
transactions are subject to substantial restrictions), the proceeds of such sale
or disposition are held in escrow. Upon termination of the escrow, assuming no
unsatisfied claims are outstanding, the escrowed Merger Shares (and any
proceeds) will be delivered to the Bern Stockholders.
7. Registrant and each of the Bern Stockholders also entered into a
Registration Rights Agreement (the "Registration Rights Agreement") pursuant to
which Registrant agreed to register the Merger Shares as promptly as possible
after the Escrow Termination Date and to keep such registration effective until
the second anniversary of the Closing. The Registration Rights Agreement also
provides for "piggyback" registration rights for the Merger Shares.
Notwithstanding the Registration of the Merger Shares under the Registration
Rights Agreement the sale of the Merger Shares is subject to certain volume
restrictions limiting sales by any Bern Stockholder to the number of Shares
which could be sold under Rule 144(e) of the rules and regulations promulgated
by the Securities and Exchange Commission under the Securities Act of 1933
("Rule 144") as though Rule 144 were applicable to the sale of such Shares (the
"Volume Restriction"). The Registration Rights Agreement also contains other
provisions governing, among other things, payment of
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expenses and indemnification of the selling stockholders of the Merger Shares by
Registrant.
8. Pagano and Adler, each a director of Registrant, entered into Lock-Up
Agreements whereby each agreed, until the Escrow Termination Date, not to
transfer or dispose of any of their respective shares of the Common Stock of
Registrant and agreed to thereafter be subject to the Volume Restriction with
respect to sales of their Common Stock.
The source of the consideration paid for the Business was shares of common
stock of Registrant contributed to Subsidiary.
The amount of consideration paid by Registrant for the Business was
determined by negotiations among the representatives of the Subsidiary and Bern.
The descriptions of the Merger Agreement and the other agreements described
herein are qualified in their entirety by reference to the copy of the Merger
Agreement and the other agreements which are filed exhibits to this Report and
which are incorporated herein by reference.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
A. Financial Statements of the Business Acquired.
It is impractical to provide the required financial information at this
time. The required financial information for the business acquired will be filed
under cover of Form 8 within 60 days of the date this Form 8-K was required to
be filed.
B. Pro Forma Financial Information and Exhibits.
It is impracticable to provide the required pro forma financial information
at this time. The required pro forma financial information will be filed under
cover of Form 8 within 60 days of the date this Form 8-K was required to be
filed.
C. Exhibit 2.1 - Merger Agreement, dated as of May 14, 1996, by and
among Registrant, the Subsidiary, Bern and the Bern Stockholders.
D. Exhibit 2.2 - List of Omitted Schedules/Exhibits to Merger Agreement.
E. Exhibit 10.1 - Registration Rights Agreement, dated June 10, 1996,
between Registrant and the Bern Stockholders.
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F. Exhibit 10.2 - Escrow Agreement, dated June 10, 1996, between
Registrant and the Bern Stockholders.
G. Exhibit 10.3 - Indemnification Agreement, dated June 10, 1996 between
Registrant and the Bern Stockholders.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PRIME CELLULAR, INC.
By:/s/ Joseph K. Pagano
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Joseph K. Pagano, President
Date: June 24, 1996
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MERGER AGREEMENT
dated as of
May 14, 1996
by and among
PRIME CELLULAR, INC.,
PRIME CELLULAR ACQUISITION CORP.
and
BERN ASSOCIATES, INC.
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MERGER AGREEMENT
MERGER AGREEMENT, dated as of May __, 1996 (the "Agreement"), by and among
Prime Cellular, Inc., a Delaware corporation ("Prime"), Prime Cellular
Acquisition Corp., a Delaware corporation ("Prime Acquisition Subsidiary"), Bern
Associates, Inc., a New Jersey corporation ("Bern") and persons listed in
Schedule I hereto representing all of the holders of capital stock of Bern (the
"Bern Owners"). Capitalized terms used in this Agreement are defined in Article
IX.
RECITALS:
A. The respective Boards of Directors of Prime, Prime Acquisition
Subsidiary and Bern have each determined to engage in the transactions
contemplated hereby, pursuant to which (i) Bern will be merged with and into
Prime Acquisition Subsidiary (the "Merger"), with Prime Acquisition Subsidiary
surviving the Merger and (ii) subject to Section 1.7 hereof, each issued and
outstanding share of the capital stock of Bern, no par value per share (the
"Bern Shares"), will be converted into 4,100,000 shares of the common stock, par
value $.01 per share, of Prime ("Prime Stock"), all upon the terms and subject
to the conditions set forth herein.
B. The Board of Directors of Prime has approved the Merger and this
Agreement and the issuance of Prime Stock in connection therewith.
C. The Board of Directors of Prime Acquisition Subsidiary has approved this
Agreement and the Merger.
D. The Board of Directors and stockholders of 100% of the Bern Shares have
approved this Agreement and the Merger.
NOW, THEREFORE, in consideration of the premises, the representations,
warranties and agreements herein contained and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, and
subject to the conditions set forth herein, the parties hereto hereby agree as
follows:
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ARTICLE I.
THE MERGER
Section 1.1. The Merger. At the Effective Time and subject to and upon the
terms of this Agreement, Bern shall be merged with and into Prime Acquisition
Subsidiary, all in accordance with the provisions of the General Corporation Law
of the State of Delaware (the "GCL"). Following the Merger, Prime Acquisition
Subsidiary shall continue as the surviving corporation and will change its name
to "Bern ________________" or such other name as shall be mutually acceptable to
Prime and Bern ("Surviving Corporation") and the separate corporate existence of
each of Prime Acquisition Subsidiary and Bern (collectively, the "Constituent
Corporations") shall cease.
Section 1.2. Closing and Effective Time.
(a) Subject to the provisions of Article VII hereof, the closing (the
"Closing") of the Merger shall take place at 10:00 a.m., New York time, at the
offices of Tenzer Greenblatt LLP, 405 Lexington Avenue, New York, New York
10174, no later than the second Business Day after satisfaction of the latest to
occur of the conditions set forth in Article VII hereof (other than the delivery
of the officers' certificates and opinions referred to therein which are to be
delivered on the date of the Closing, and other than any conditions which are
waived in accordance with said Article) or such other time, place or date as
Prime and Bern may mutually agree. Failure to consummate the transactions
provided for in this Agreement on the date and time selected pursuant to this
Section 1.2(a) shall not, except as permitted by Article VIII hereof, result in
the termination of this Agreement and shall not relieve any party to this
Agreement of any obligation hereunder.
(b) The Merger shall become effective at the time specified as the
effective time in the Certificate of Merger, substantially in the form of
Exhibit 1.2 hereof (the "Certificate of Merger"). The Certificate of Merger
shall be filed with the Secretaries of State of each of the State of Delaware
and the State of New Jersey in accordance with the provisions of the GCL and the
New Jersey Business Corporation Act ("BCA"), respectively, at the time of the
Closing (the date and time when the Merger shall become effective being the
"Effective Time").
Section 1.3. Effects of the Merger. The separate corporate existence of
Prime Acquisition Subsidiary, with all its respective purposes, objects, rights,
privileges, powers, certificates and franchises, shall continue unimpaired by
the Merger. At the Effective Time, the separate corporate existence of Bern
shall cease, and the Surviving Corporation shall succeed to all the properties
and assets of the Constituent Corporations and to all debts and other interests
due or belonging to the Constituent Corporations and shall be subject to, and
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responsible for, all the debts, liabilities and duties of the Constituent
Corporations with the effects provided by the applicable provisions of the GCL.
Section 1.4. Certificate of Incorporation and By-laws.
(a) The Certificate of Incorporation of Prime Acquisition Subsidiary in
effect immediately prior to the Effective Time shall be the Certificate of
Incorporation of the Surviving Corporation until amended in accordance with the
provisions of the GCL.
(b) The By-laws of Prime Acquisition Subsidiary as in effect immediately
prior to the Effective Time shall be the By-laws of the Surviving Corporation
until duly amended in accordance with applicable law, the Certificate of
Incorporation of the Surviving Corporation and such By-laws.
Section 1.5. Directors. The respective directors of Bern shall resign
immediately prior to the Effective Time and the initial directors of the
Surviving Corporation shall consist of five (5) members, as set forth in
Schedule 1.5 hereof, two (2) of which are appointed by Prime (the "Prime
Designees") and two (2) of which are appointed by the Bern Owners (the "Bern
Designees") and one (1) of which shall be appointed by the directors elected as
aforesaid). Such directors shall hold office in accordance with the Certificate
of Incorporation and By-laws of the Surviving Corporation, respectively, from
the Effective Time until their respective successors are duly elected or
appointed and qualified.
Section 1.6. Officers. The officers of Bern shall resign immediately prior
to the Effective Time and the initial officers of the Surviving Corporation
shall be those individuals set forth in Schedule 1.6 hereof, and shall hold
office in accordance with the Certificate of Incorporation and By-laws of the
Surviving Corporation from the Effective Time until their respective successors
are duly elected or appointed and qualified.
Section 1.7. Conversion of Stock.
(a) Except as provided below and in Section 1.8 hereof, as of the Effective
Time, by virtue of the Merger and without any action on the part of the holders
of any Bern Shares, or the holders of any shares of common stock, $.01 par value
per share, of Prime Acquisition Subsidiary (the "Acquisition Subsidiary Stock")
or the holders of Prime Stock, each Bern Share outstanding immediately prior to
the Effective Time shall be converted at the Effective Time into the right to
receive from Prime 10,250 fully-paid, validly issued and non-assessable shares
of Prime Stock (the "Exchange Ratio"). As of and after the Effective Time, no
holder of any certificate that immediately before the Effective Time represented
Bern Shares shall have any rights as a holder of Bern Shares, other than to
receive the consideration specified in this Section 1.7 in accordance with the
terms hereof.
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(b) If between the date of this Agreement and the Effective Time the
outstanding Bern Shares or Prime Stock shall have been changed into a different
number of shares or a different class, by reason of any stock dividend,
subdivision, reclassification, recapitalization, split-up, combination, exchange
of shares or the like, the Exchange Ratio and the number of shares of Prime
Stock to be issued in the Merger shall be correspondingly adjusted.
Section 1.8. Cancellation of Stock. At the Effective Time, all Bern Shares
that are owned directly or indirectly by Bern as treasury stock, shall be
canceled without any consideration being payable therefor.
Section 1.9. Exchange of Certificates.
(a) As soon as practicable after the Effective Time, Prime shall mail to
each holder of record of a certificate or certificates which immediately prior
to the Effective Time represented outstanding Bern Shares (a "Bern Certificate")
a form letter of transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to the certificate will pass, only upon
delivery of the Bern Certificate to Prime) and instructions for use in effecting
the surrender of the Bern Certificate in exchange for the consideration
specified in Section 1.7. Lost Bern Certificates shall be treated in accordance
with the existing By-laws of Bern. Upon surrender of a Bern Certificate for
cancellation to Prime, together with such letter of transmittal, duly executed,
the holder of such Bern Certificate shall be entitled to receive in exchange
therefor from Prime a certificate for the number of whole shares of Prime Stock
to which the holder of Bern Shares is entitled pursuant to Section 1.7 hereof
(and an amount in cash in lieu of any fractional share of Prime Stock in
accordance with Section 1.10 hereof) and, subject to the provisions of the
Escrow Agreement (as defined in Section 1.11 hereof), Prime shall issue and
deliver such certificates, and pay such cash, to the holder of each such Bern
Certificate at the address specified at the address specified in such letter of
transmittal. The Bern Certificate so surrendered shall forthwith be canceled. In
the event of a transfer of ownership of Bern Shares which is not registered in
the transfer records of Bern, Prime Stock may be delivered to a transferee if
the Bern Certificate representing such Bern Shares is presented to Prime and
accompanied by all documents required to evidence and effect such transfer and
to evidence that any applicable stock transfer taxes have been paid and that
such transfer has been made in accordance with all applicable Federal and state
securities laws. Until surrendered as contemplated by this Section 1.9(a), each
Bern Certificate shall be deemed at any time after the Effective Time to
represent only the right to receive upon such surrender such whole number of
shares of Prime Stock (and cash in lieu of fractional shares) as provided by
Section 1.7 and the provisions of the GCL.
(b) No dividends or other distributions declared or made after the
Effective Time on the Prime Stock shall be paid to the holder of any
unsurrendered Bern Certificate until the holder of record of such Bern
Certificate shall surrender such Bern Certificate; provided,
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however, that upon surrender of a Bern Certificate, but subject to the effect,
if any, of applicable escheat and other laws, there shall be paid to the holder
of such Bern Certificate, without interest, the amount of dividends or
distributions, if any, which theretofore became payable, but which were not paid
by reason of the foregoing, with respect to the number of whole shares of Prime
Stock represented by the Bern Certificate(s) issued upon such surrender.
(c) All Prime Stock delivered upon the surrender for exchange of Bern
Shares in accordance with the terms hereof shall be deemed to have been
delivered in full satisfaction of all rights pertaining to such Bern Shares.
After the Effective Time, there shall be no further registration of transfers on
the stock transfer books of Bern of the Bern Shares that were outstanding
immediately prior to the Effective Time. If, after the Effective Time, Bern
Certificates are presented for any reason, they shall be canceled and exchanged
as provided in this Section 1.9.
Section 1.10. Fractional Shares. No certificate or scrip representing
fractional shares of Prime Stock shall be issued upon the surrender for exchange
of Bern Certificates, and such fractional share interests will not entitle the
owner thereof to vote or to enjoy any other rights of a stockholder of Prime. In
lieu thereof, each holder of Bern Shares who would otherwise be entitled to a
fraction of a share of Prime Stock (after aggregating all fractional shares of
Prime Stock to be received by such holder) shall receive from Prime, at Prime's
option, either (i) an amount of cash (rounded to the nearest whole cent),
without interest, equal to the product of (a) such fraction multiplied by (b)
the average closing bid price as furnished by the National Association of
Securities Dealers, Inc. through NASDAQ, the OTC Bulletin board or similar
organization, for the five (5) consecutive trading days ending on and including
the trading day immediately preceding the date of the Closing or (ii) one whole
share of Prime Stock.
Section 1.11. Escrow. Simultaneously with the exchange of certificates in
accordance with Section 1.9 hereof, the Bern Owners shall deposit any Prime
Stock received pursuant thereto with an Escrow Agent pursuant to that certain
escrow agreement in the form annexed as Exhibit 1.11 hereto (the "Escrow
Agreement").
ARTICLE II.
REPRESENTATIONS AND WARRANTIES OF BERN
Except as set forth (by reference to the applicable Section of this
Agreement) in the disclosure schedule previously delivered by Bern to Prime (the
"Bern Disclosure Schedule"), a copy of which is attached hereto as Exhibit 2,
each of Bern and each Bern Owner hereby represents and warrants to Prime and
Prime Acquisition Subsidiary as follows:
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Section 2.1. Organization, Etc.
(a) Bern is a corporation duly organized, validly existing and in good
standing under the laws of the State of New Jersey and has all requisite
corporate power and corporate authority to conduct its business as it is now
being conducted and to own, operate or lease the properties and assets it
currently owns, operates or holds under lease. Bern is duly qualified or
licensed to do business and is in good standing as a foreign corporation in each
jurisdiction where the character of its business or the nature of its properties
makes such qualification or licensing necessary, except where the failure to so
qualify or be licensed would not have a Material Adverse Effect, all of which
jurisdictions are set forth on the Bern Disclosure Schedule. Bern has heretofore
delivered to Prime true and correct copies of its Certificate of Incorporation,
By-laws and to the extent applicable, certificates of authority as in effect on
the date hereof. Bern has all requisite corporate power and corporate authority
to enter into this Agreement and each of the other agreements contemplated
hereby, to carry out its obligations under this Agreement and each of the other
agreements contemplated hereby and to consummate the transactions contemplated
hereby and thereby.
Section 2.2. Subsidiaries. Bern does not own any of its assets, or conduct
any of its business or operations, through, nor have any interest in, any other
corporation, partnership, joint venture or other entity. No Bern Owner has any
ownership interest, direct or indirect, of record or beneficially, in any
corporation, partnership, joint venture or other entity engaged in the business
of providing internet services to telephone companies (excepting less than 2%
stock holdings for investment purposes in securities of publicly held and traded
companies).
Section 2.3. Capitalization.
(a) The authorized, issued and outstanding capital stock of Bern is set
forth in the Bern Disclosure Schedule, all of which Bern Shares are owned of
record and, to the best knowledge of Bern, beneficially, by the Bern Owners and
in the amounts set forth in the Bern Disclosure Schedule. There are no Bern
Shares held by Bern as treasury shares. The designations, powers, preferences,
rights, qualifications, limitations and restrictions in respect of the
authorized capital stock of Bern are as set forth in Bern's Certificate of
Incorporation. All outstanding shares of capital stock of Bern have been duly
authorized and validly issued, are fully paid and non-assessable, and were
issued in compliance with all applicable Federal and state securities laws. None
of the outstanding Bern Shares has been issued in violation of any preemptive
rights, rights of first refusal or similar rights. There are no outstanding
options, warrants, convertible securities, calls, rights, commitments,
preemptive rights or agreements or instruments or understandings of any
character to which Bern is a party or by which Bern is bound, obligating Bern to
issue, deliver or sell, or cause to be issued, delivered or sold, contingently
or otherwise, additional shares of capital stock of Bern or any
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securities or obligations convertible into or exchangeable for such shares or to
grant, extend or enter into any such option, warrant, convertible security,
call, right, commitment, preemptive right or agreement. There are no outstanding
obligations, contingent or other, of Bern to purchase, redeem or otherwise
acquire any capital stock of Bern. There are no voting trust agreements or other
contracts, agreements, arrangements, commitments, plans or understandings
restricting or otherwise relating to voting, dividend or other rights with
respect to the capital stock of Bern.
(b) The Bern Owners have good and marketable title to all of the issued and
outstanding shares of Bern Stock, free and clear of any and all liens, adverse
claims, security interests, pledges, mortgages, charges and encumbrances of any
nature whatsoever (except for federal and state securities law restrictions of
general applicability), and at the date of the Closing will own all of such Bern
Shares, free and clear of any and all liens, adverse claims, security interests,
pledges, mortgages, charges and encumbrances of any nature whatsoever (except
for federal and state securities law restrictions of general applicability),
including, but not limited to, any claims by any present or former stockholders
of Bern.
Section 2.4. Authorization. The execution and delivery of this Agreement,
the consummation of the transactions contemplated hereby and the performance by
Bern of its obligations hereunder, have been duly authorized by all necessary
corporate action on the part of Bern, including the unanimous consent of its
board of directors and the written consent of its stockholders. Each Bern Owner
is an individual having all necessary capacity, power and authority to execute
and deliver this Agreement and such other agreements to be executed by any of
them pursuant hereto (collectively, the "Bern Owner Documents") and to
consummate the transactions contemplated hereby and thereby. This Agreement is,
and when duly executed and delivered by Bern and the Bern Owners, each of the
other agreements to be delivered by any of them pursuant hereto will be
(assuming that this Agreement constitutes the legal, valid and binding
obligation of Prime and Prime Acquisition Subsidiary), the legal, valid and
binding obligation of Bern and the Bern Owners, enforceable against Bern and the
Bern Owners in accordance with their respective terms, except as the same may be
limited by any applicable bankruptcy, insolvency or other laws affecting
creditors' rights generally or by general principles of equity, regardless of
whether such enforceability is considered in equity or law.
Section 2.5. No Violation. Neither the execution and delivery of this
Agreement by Bern nor the consummation by Bern of the transactions contemplated
hereby, and compliance with the terms hereof, will (a) conflict with, or result
in any violation of or default or loss of any benefit under, any provision of
the Certificate of Incorporation or By-laws of Bern; (b) conflict with, or
result in any violation of or default or loss of any material benefit under, any
permit, concession, grant, franchise, law, rule or regulation, or any judgment,
decree or order of any court or other governmental agency or instrumentality to
which Bern is a party or to which any of its properties is subject; (c) conflict
with, or
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result in a breach or violation of or default or loss of any material benefit
under, or accelerate the performance required by, the terms of any agreement,
contract, indenture or other instrument to which Bern is a party or to which any
of its properties is subject, or constitute a default or loss of any right
thereunder or an event which, with the lapse of time or notice or both, might
result in a default or loss of any right thereunder or the creation of any lien,
charge or encumbrance upon any of the assets or properties of Bern; or (d)
result in any suspension, revocation, impairment, forfeiture or nonrenewal of
any material License.
Section 2.6. Approvals. The execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby by Bern and the Bern
Owners will not require the consent, approval, order or authorization of any
Governmental Entity or Regulatory Authority or any other Person under any
statute, law, rule, regulation, License, agreement, indenture or other
instrument to which Bern is a party or to which any of its properties are
subject, and no declaration, filing or registration with any Governmental Entity
or Regulatory Authority is required or advisable by Bern or the Bern Owners in
connection with the execution and delivery of this Agreement, the consummation
of the transactions contemplated hereby, or the performance by Bern of its
obligations hereunder, other than the filing of the Certificate of Merger as
required by the GCL.
Section 2.7. Financial Statements and Other Information.
(a) Attached as Exhibit 2.7(a) is (i) true, correct and complete copies of
the unaudited balance sheet of Bern as of December 31, 1995 (the "Balance Sheet
Date"), and the related statements of operations, and statements of retained
earnings and cash flows for the fiscal year then ended (the "Unaudited Financial
Statements") and (ii) true, correct and complete copies of the unaudited balance
sheets of Bern and the related statement of operations, and statement of
retained earnings and cash flows for the four (4) month period ended March 31,
1996 (the "Interim Financial Statements"). The Unaudited Financial Statements
and Interim Financial Statements were compiled and prepared by management in
conformity with Bern's internal accounting procedures, which do not differ from
generally accepted accounting principles ("GAAP"), except for the absence of
auditor's notes; and fairly present the financial position of Bern as at the
dates thereof and its results of operations for the periods indicated, subject
to normal recurring adjustments and the inclusion of notes which might be
required as a result of year-end audit.
(b) Bern will, prior to the Closing, deliver to Prime and Prime Acquisition
Subsidiary (a) its financial statements consisting of the audited balance sheet
for the year ended May 31, 1996, and the related statements of income,
stockholders' equity and cash flows for the year ended on such date, certified
without qualification by BDO Seidman, independent certified public accountants
(the "Audited Financial Statements"). The Audited Financial Statements, when
prepared, shall be in accordance with the books and records of Bern (which are
complete and correct, have been maintained in accordance with good
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business practices, and accurately reflect the basis for the financial
conditions of Bern as set forth in the Audited Financial Statements) and shall
be prepared in accordance with generally accepted accounting principles
consistently followed throughout the periods covered thereby (except as
otherwise indicated in the notes thereto) and Regulation S-X under the
Securities Act, and the balance sheets included therein present fairly as of
their respective dates the financial condition of Bern. All material liabilities
and obligations, whether absolute, accrued, contingent or otherwise, whether
direct or indirect, and whether due or to become due, which existed at the date
of such Audited Financial Statements, shall be disclosed in the balance sheets
included in the Audited Financial Statements or in notes to the Financial
Statements. The statements of operations, and statements of retained earnings
and cash flows included in the Audited Financial Statements, when prepared,
shall present fairly the results of operations, retained earnings and cash flows
of Bern for the periods indicated, and the notes included in such Audited
Financial Statements shall present fairly the information purported to be shown
thereby. The statements of operations included in the Audited Financial
Statements, when prepared, shall not contain any items of special or
non-recurring income or other income not earned in the ordinary course of
business except as expressly specified therein.
(c) The accounts receivable of all kinds of Bern, net of the allowance for
doubtful accounts applicable thereto (which allowance is established on a basis
consistent with Bern's prior practices) included in the latest balance sheets
included in the Audited Financial Statements, are collectible in full over the
period of usual trade terms (by use of Bern's normal collection methods), and
there do not exist any defenses, counterclaims and set-offs which would
materially adversely affect such receivables, and all such receivables are
actual and bona fide receivables representing obligations for the total dollar
amount thereof shown on the books of Berm. Bern has fully performed all
obligations with respect thereto which they were obligated to perform to the
date hereof. [Bern has delivered to Prime an aging schedule for the accounts
receivable as of December 31, 1995.]
(d) The inventories reflected on the Unaudited Financial Statements and
Interim Financial Statements and, when prepared, the Audited Financial
Statements, and to the extent thereafter added, consist of items of a quality
and quantity usable or saleable in the ordinary course of business, except for
obsolete materials, slow-moving items, materials of below standard quality and
not readily marketable items, all of which have been written down to net
realizable value or adequately reserved against on the books and records of
Bern. All inventories are stated at the lower of cost or market in accordance
with generally accepted accounting principles.
Section 2.8. Events Subsequent to the Balance Sheet Date.
(a) Since the Balance Sheet Date, there has been no Material Adverse Change
in the assets or liabilities, or in the business or condition, financial or
otherwise, or in the
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results of operations or prospects, of Bern, whether as a result of any
legislative or regulatory change, revocation of any License or right to do
business, fire, explosion, accident, casualty, labor trouble, flood, drought,
riot, storm, condemnation or act of God or otherwise, and, to the best knowledge
of Bern, no fact or condition exists or is contemplated or threatened which
could reasonably be anticipated to cause such a change in the future.
(b) Since the Balance Sheet Date, Bern has not (a) issued any stock, bond
or other corporate or partnership security (including without limitation
securities convertible into or rights to acquire capital stock of Bern); (b)
borrowed any amount or incurred or become subject to any liability (absolute,
accrued or contingent), except current liabilities incurred and liabilities
under contracts entered into, all of which were in the ordinary course of
business; (c) discharged or satisfied any lien or encumbrance or incurred or
paid any obligation or liability (absolute, accrued or contingent) other than
current liabilities shown on the most recent balance sheet included in the
Audited Financial Statements and current liabilities incurred since the Balance
Sheet Date in the ordinary course of business; (d) declared or made any payment
or distribution (whether in cash, securities, other property or any combination
thereof) on or in respect of the capital stock of Bern or purchased or redeemed
any shares of its capital stock or other securities; (e) mortgaged, pledged or
subjected to lien any of its assets, tangible or intangible, (f) sold, assigned
or transferred any of its tangible assets except in the ordinary course of
business, or canceled any debt or claim; (g) sold, assigned, transferred or
granted any license with respect to any trademark, trade name, service mark,
copyright, trade secret or other intangible asset; (h) suffered any loss of
property or waived any right of substantial value whether or not in the ordinary
course of business; (i) suffered any Material Adverse Change in its relations
with, or any loss or threatened loss of, any of its Suppliers disclosed pursuant
to Section 2.21; (j)(i) granted any severance or termination pay to any of its
directors, officers, partners or employees, (ii) entered into any employment,
deferred compensation or other similar agreement (or any amendment to any such
existing agreement) or arrangement with any of its directors, officers, partners
or employees, (iii) increased any benefits payable under any existing severance
or termination pay policies or employment agreements, or (iv) increased the
compensation, bonus or other benefits payable to any of its directors, officers,
partners or employees; (k) made any change in the manner of its business or
operations; (l) except for modifying its fiscal year from a calendar year to a
May 31 fiscal year in conformity with Prime, made any change in any method of
accounting or accounting practice; (m) written off as uncollectible any accounts
or notes receivable in excess of reserves; (n) entered into any transaction
except in the ordinary course of business or as otherwise contemplated hereby;
or (o) entered into any commitment (contingent or otherwise) to do any of the
foregoing.
Section 2.9. No Undisclosed Liabilities. There are no liabilities of Bern
of any kind whatsoever, whether or not accrued and whether or not contingent or
absolute, determined or determinable or otherwise, and, to the best knowledge of
Bern, no existing condition,
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situation or set of circumstances that could reasonably result in such a
liability, other than (i) liabilities disclosed in the Audited Financial
Statements, and (ii) liabilities which have arisen after the Balance Sheet Date
in the ordinary course of business and consistent with past practice (none of
which is a liability for breach of contract, breach of warranty, tort,
infringement claim or lawsuit) and none of which, individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect. There
are no claims for indemnification by any Person against Bern under any law or
agreement or pursuant to the Certificate of Incorporation or By-laws or the
organizational documents of Bern, and Bern is not aware of any facts or
circumstances that might reasonably give rise to such a claim against Bern
thereunder.
Section 2.10. Corporate Action. All corporate action of the Board of
Directors and of the stockholders of Bern taken on or prior to the date hereof
has been duly authorized and adopted, ratified or confirmed in accordance with
applicable law and the Certificate of Incorporation and By-laws of Bern and has
been duly recorded in its corporate minute book (a true, correct and complete
copy of which has been delivered to Prime).
Section 2.11. Taxes. Attached as Exhibit 2.11 are true and accurate copies
of all tax returns (including without limitation income, profit, franchise,
sales and use, excise, severance, occupation, property, gross receipts, payroll
and withholding tax returns and information returns), deposits and reports (all
such returns, deposits and reports herein referred to collectively as "Tax
Returns" or singularly as a "Tax Return") of or relating to any Federal, state,
local or foreign or other governmental tax (all, together with any penalties,
additions to tax, fines and interest thereon or related thereto, herein referred
to collectively as "Taxes" or singularly as a "Tax") that are required to be
filed or deposited (taking into account all extensions) for, by, on behalf of or
with respect to Bern, including but not limited to those relating to the income,
business, operations, transfer or property of Bern and those which include or
should include Bern, and all such Tax Returns have been filed or deposited and
all Taxes shown to be due and payable on such Tax Returns have been paid in
full; all such Tax Returns and the information and data contained therein have
been properly and accurately compiled and completed, fairly present the
information purported to be shown therein and reflect all liabilities for Taxes
for the periods covered by such Tax Returns; all Taxes imposed on Bern or for
which Bern is or could be liable, whether to any Governmental Entity or to other
Persons (as, for example, under tax allocation agreements), for all periods up
to the Effective Time which are due and payable on or before the Effective Time
have been or will be paid; none of such Tax Returns are now under audit or
examination by any Federal, state, local or foreign or other Governmental Entity
and there are no agreements, waivers or other arrangements providing for an
extension of time with respect to the assessment or collection of any Tax or
deficiency of any nature against Bern or with respect to any such Tax Return or
any suits or other judicial or administrative actions, proceedings,
investigations or claims now pending or, to the best of their knowledge,
threatened against Bern with respect to any Tax;
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the latest balance sheet included in the Audited Financial Statements reflects
and includes adequate provisions for the payment in full of any and all Taxes
for which Bern is or could be liable, whether to any Governmental Entity or to
other Persons (as, for example, under tax allocation agreements), not yet due
for any and all periods up to and including the date of such balance sheet; and
all Taxes for periods beginning after the Balance Sheet Date through the
Effective Time have been, or will be, paid when due or adequately reserved
against on the books of Bern and an amount of cash equal to the amount of such
reserve will have been set aside for the payment of such Taxes. There is no tax
lien, whether imposed by any Federal, state, county, local or foreign taxing
authority, outstanding against the assets, properties or business of Bern. All
material elections and consents with respect to any Tax (or the computation
thereof) affecting Bern as of the date hereof are set forth on the Bern
Disclosure Schedule. After the date hereof, no election or consent with respect
to any Tax (or the computation thereof) affecting Bern will be made without the
prior written consent of Prime. Bern has not agreed to make or is required to
make any adjustment under Section 481(a) of the Code, by reason of a change in
accounting method or otherwise. Bern is not a party to any Tax sharing or
allocation agreement. Bern has not been a member of an affiliated group filing a
consolidated Federal income tax return or has any liability for Taxes under
Treas. Reg. ss. 1.1502-6 (or any similar provision of state, local or foreign
law), as a transferee or successor, by contract or otherwise.
Section 2.12. Litigation. There are no claims, actions, suits, proceedings
or, to the best knowledge of its executive officers, investigations pending or,
to the best knowledge of its executive officers, threatened against Bern, or any
of its properties or rights, before any Governmental Entity or arbitrator,
domestic or foreign. As of the date hereof, neither it nor any of its respective
properties is subject to any order, writ, judgment, injunction, decree,
determination or award.
Section 2.13. Compliance with Laws; Environmental Matters.
(a) Bern is in compliance with all applicable laws, rules or regulations
(other than Environmental Laws which are subject to Section 2.13(b) below, Real
Property Laws which are subject to Section 2.14 hereof, and ERISA which is
subject to Section 2.16 hereof) relating to or affecting the operation, conduct
or ownership of its properties or business, except for violations that
individually or in the aggregate would not and, insofar as may reasonably be
foreseen, in the future will not, have a Material Adverse Effect. Neither Bern
nor, to the best knowledge of Bern, any director, officer, consultant or
employee of Bern (in their capacity as such), is in default with respect to any
order, writ, injunction or decree known to or served upon Bern by any
Governmental Entity or Regulatory Authority, which default would, individually
or in the aggregate, have a Material Adverse Effect. To the best knowledge of
Bern and the Bern Owners, there is no existing law, rule, regulation or order,
whether Federal, state or local, which would prohibit or materially restrict
Bern from, or
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otherwise materially adversely affect Bern in, conducting its business in any
jurisdiction in which it is now conducting business or in which it currently
proposes to conduct business.
(b) (i) Specifically, without limiting the representations contained in
subsection (a) hereof, no permits, licenses and other authorizations are
required of Bern to conduct its businesses under any Federal, state, county and
local statute, law, regulation, ordinance, rule, judgment, order, decree,
concession, grant, franchise, agreement or governmental restriction relating to
the environment or the general treatment, storage, recycling, transportation,
release or disposal of any Hazardous Materials (as defined below) into the
environment (collectively, "Environmental Laws"). Bern is in compliance in all
material respects with all limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules and timetables contained in
any Environmental Law applicable to it in connection with the conduct of its
business or in any regulation, code, plan, order, decree, judgment, injunction,
notice or demand letter issued, entered, promulgated or approved under any
Environmental Law. In addition, no notice, notification, demand, request for
information, citation, summons or order has been issued, no complaint has been
filed, no penalty has been assessed and no investigation or review is pending
or, to the best knowledge of Bern and the Bern Owners, threatened by any
Federal, regional, state, county or local government or any executive,
legislative, judicial, regulatory or administrative entity, or other
Governmental Entity with respect to any alleged failure by Bern to have any
permit, license or authorization required in connection with the generation,
treatment, storage, recycling, transportation, release or disposal of any
pollutant, toxic or hazardous material, hazardous substance, hazardous
constituent or waste of any kind as defined under any Environmental Laws
(collectively "Hazardous Materials") generated by or relating to Bern or any of
its properties (or any predecessor to any of the businesses or assets of Bern
with respect to such businesses or assets) whether or not occurring at or on
property owned, leased or operated by Bern. Bern does not have, and its
properties are not subject to, any material liability, contingent or otherwise,
arising out of or resulting from the release, leakage, pouring, emission,
emptying, injection, pumping, escaping, leaching, dumping, discharge, spillage,
storage, burying or other disposal, whether on its own premises or through other
Persons, of any Hazardous Materials. There are no material citations, fines or
penalties heretofore assessed against Bern or with respect to any of its
property under any Federal, state or local law that remain unpaid, nor has Bern
received any notices or any other material communications from the Environmental
Protection Agency, the Occupational Safety and Health Administration or any
other Regulatory Agency or other Governmental Entity with respect to any
violations or alleged violations of any Federal, state or local law, regulation,
directive, guidance or agency policy which have not been remedied prior to the
date hereof.
(ii) To the best knowledge of Bern, (a) there are no Hazardous Substances
(as such term is defined in the Comprehensive Environment Response, Compensation
and Liability Act of 1980 ("CERCLA") and equivalent state laws) upon, beneath or
migrating or
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threatening to migrate to or from the Real Property and (b) there are no
underground storage tanks for Hazardous Substances, active or abandoned, at any
property now or previously owned or leased by Bern with respect to its business.
(iii) There are no encumbrances in favor of any Governmental Entity for (A)
any liability under Environmental Laws or (B) damages arising from or costs
incurred by such Governmental Entity in response to a release or threatened
release of Hazardous Substances into the environment (collectively,
"Environmental Encumbrances") arising under or pursuant to any Environmental
Laws, and, no governmental actions have been taken or, to the best knowledge of
Bern, are threatened which could reasonably be anticipated to subject the
business of Bern to such Environmental Encumbrances and Bern is not required to
place any notice or restriction relating to the presence of Hazardous Substances
at any facility owned or managed by Bern in any deed to such property.
Section 2.14. Properties, Title and Related Matters.
(a) Bern does not own any real property. The Bern Disclosure Schedule
identified each of the properties in which Bern holds all or a portion of a
leasehold estate in the property (the "Leased Property").
(b) Each lease agreement under which Bern is either lessor or lessee is a
valid, subsisting and enforceable lease and, there has been no material default
under any such lease by Bern, or to the best knowledge of Bern, by any other
party thereto, or any event which, with the lapse of time or notice or both,
might result in a default or loss of any material right thereunder. Bern's
occupation, possession and use of any Leased Property has not been disturbed and
no claim has been asserted or, to the best knowledge of Bern, threatened,
adverse to their respective rights to the continued occupation, possession and
use of the Leased Property, as currently utilized and as presently contemplated
to be utilized.
(c) The use and operation of the Leased Property is lawful and in full
compliance with all use statutes, rules, regulations, ordinances, orders, writs,
injunctions, judgments, decrees, awards and restrictions, including without
limitation, zoning, land use, construction and safety laws and access thereto by
the handicapped (collectively, the "Real Property Laws") of every Governmental
Entity having jurisdiction over such Leased Property. Effective as of the
Closing, the Surviving Corporation shall have the right under all Real Property
Laws to continue the use and operation of the Leased Property for its current
uses in the operation of the business of Bern. Bern has not received any notice
of any violation of or investigation regarding any Real Property Laws.
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Section 2.15. Personal Property. All tangible personal property of Bern
which is utilized in the operation of the business of Bern or is material to the
condition (financial or otherwise) of Bern is owned by Bern free and clear of
all lien and encumbrances and in good operating condition and repair, reasonable
wear and tear excepted, and is suitable for use in the ordinary conduct of the
business of Bern, and no maintenance, repair or replacement has knowingly been
deferred, which deferral has had, or could have a Material Adverse Effect on the
business or operations of Bern.
Section 2.16. Contracts.
(a) Bern has no written or oral contract, obligation, commitment or quote
outstanding of any nature (other than obligations involving annual payments of
less than $[25,000] individually), including without limitation the following:
(i) Employment, bonus, severance or consulting agreements, retirement,
stock bonus, stock option, or similar plans;
(ii) Loan or other agreements, notes, indentures, or instruments
relatingto or evidencing indebtedness for borrowed money or mortgaging,
pledging or granting or creating a lien or security interest or other
encumbrance on any of the assets of Bern or any agreement or instrument
evidencing any guaranty by Bern of payment or performance by any other
Person;
(iii) Any contract or series of contracts with the same person for the
furnishing or purchase of equipment, goods or services;
(iv) Any joint venture contract or arrangement or other agreement
involving a sharing of profits or expenses to which Bern is a party or by
which any of them is bound;
(v) Agreements which would, after the Closing Date, limit the freedom
of Prime or the Surviving Corporation to compete in any line of business or
in any geographic area or with any Person;
(vi) Agreements providing for disposition of the assets, businesses or
a direct or indirect ownership interest in Bern;
(vii) Any lease under which Bern is either lessor or lessee;
(viii) Any contract, commitment or arrangement not made in the
ordinary course of business of Bern, including without limitation, any
powers-of-attorney giving any Person authority to act on behalf of Bern;
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(ix) Any contract or series of contracts, commitments or arrangement
relating to the provision of goods or services for Bern by any Person who
is related to, or an Affiliate of, Bern or any officer, director, partner
or stockholder of Bern, and any contract or series of contracts,
commitments or arrangement relating to the provision of goods or services
for Bern by any Person the terms of which were not determined on an arms'
length basis; and
(x) Agreements with any Governmental Entity.
True and correct copies of all contracts, agreements, arrangements and similar
instruments set forth on the Bern Disclosure Schedule have been provided to
Prime. Each contract, agreement, arrangement, plan, lease, license or similar
instrument to which Bern is a party, whether or not listed on the Bern
Disclosure Schedule (collectively, the "Bern Contracts"), is a valid and binding
obligation of Bern and, to the best knowledge of Bern and the Bern Owners, the
other parties thereto, enforceable in accordance with its terms (except as the
enforceability thereof may be limited by any applicable bankruptcy, insolvency
or other laws affecting creditors' rights generally or by general principles of
equity, regardless of whether such enforceability is considered in equity or at
law), and is in full force and effect. Neither Bern nor, to the best knowledge
of Bern and the Bern Owners, any other party thereto has breached any material
provision of, nor is in default in any material respect under the terms of (and,
to the best of Bern's knowledge, no condition exists which, with the passage of
time, the giving of notice, or both, would result in a material default under
the terms of), any of the Bern Contracts.
(b) The continuation, validity and effectiveness of all such Bern Contracts
under the current material terms thereof will in no way be affected by the
Merger or the other transactions contemplated hereby and each of such Bern
Contracts is fully assignable without the consent, approval, order or any waiver
by, or any other action of or with any Person which will not be obtained before
the Closing, without the payment of any penalty, the incurrence of any
additional debt, liability or obligation of any nature whatsoever or the change
of any term. There are no negotiations pending or in progress to revise any
material term of any such Bern Contract.
Section 2.17. Employee and Labor Matters and Plans.
(a) The Bern Disclosure Schedule lists each of the following plans,
contracts, policies and arrangements which is or, prior to the date hereof, was
sponsored, maintained or contributed to by, or otherwise binding upon, Bern or,
in the case of an "employee pension plan" (as defined in Section 3(2) of ERISA),
an ERISA Affiliate for the benefit of any current or former employee, director
or other personnel (including any such plan, contract, policy or arrangement
approved or adopted before, but effective on or after, the date of this
Agreement): (i) any "employee benefit plan," as such term is defined in Section
3(3) of
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ERISA, whether or not subject to the provisions of ERISA; (ii) any personnel
policy; and (iii) any other employment, consulting, collective bargaining, stock
option, stock bonus, stock purchase, phantom stock, incentive, bonus, deferred
compensation, retirement, severance, vacation, dependent care, employee
assistance, fringe benefit, medical, dental, sick leave, death benefit, golden
parachute or other compensatory plan, contract, policy or arrangement which is
not an employee benefit plan as defined in Section 3(3) of ERISA (each such
plan, contract, policy and arrangement being herein referred to as an "Employee
Plan").
(b) With respect to each Employee Plan, Bern has delivered to Prime true
and complete copies of (i) each contract, plan document, policy statement,
summary plan description and other written material governing or describing the
Employee Plan and/or any related funding arrangements (including without
limitation any related trust agreement or insurance company contract) or, if
there are no such written materials, a summary description of the Employee Plan;
and (ii), where applicable, (1) the last two annual reports (5500 series) filed
with the IRS or the Department of Labor; (2) the most recent balance sheet and
financial statement; (3) the most recent actuarial report or valuation
statement; (4) the most recent determination letter issued by the IRS, as well
as any other determination letter, private letter ruling, opinion letter or
prohibited transaction exemption issued by the IRS or the Department of Labor
within the last six years and any application therefor which is currently
pending; and (5) the last PBGC-1 filed with the PBGC.
(c) Each Employee Plan has been maintained and administered in accordance
with its terms and in substantial compliance with the provisions of applicable
law, including without limitation applicable disclosure, reporting, funding and
fiduciary requirements imposed by ERISA and/or the Code. All contributions,
insurance premiums, benefits and other payments required to be made to or under
each Employee Plan have been made timely and in accordance with the governing
documents and in substantial compliance with applicable law. With respect to
each Employee Plan, (i) no application, proceeding or other matter is pending
before the IRS, the Department of Labor, PBGC or any other governmental agency;
(ii) no action, suit, proceeding or claim (other than routine claims for
benefits) is pending or threatened; and (iii) to the knowledge of Bern, no facts
exist which could give rise to an action, suit, proceeding or claim which, if
asserted, could result in a material liability or expense to Bern or the plan
assets.
(d) There is no Employee Plan with respect to Bern which is an "employee
benefit plan" within the meaning of Section 3(3) of ERISA, which is a "plan"
within the meaning of Section 4975(e) of the Code or which is an employee
pension plan within the meaning of Section 3(2) of ERISA.
(e) No Employee Plan listed on the Bern Disclosure Schedule is a
multiemployer plan within the meaning of Section 3(37) of ERISA.
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(f) Bern and its respective ERISA Affiliates have complied in all material
respects with the provisions of Section 4980(B) of the Code with respect to any
Employee Plan or benefit arrangement which is a group health plan within the
meaning of Section 5001(b)(1) of the Code. Bern does not maintain, contribute
to, or is obligated under any plan, contract, policy or arrangement providing
health or death benefits (whether or not insured) to current or former employees
or other personnel beyond the termination of their employment or other services.
Except as set forth in the Bern Disclosure Schedule, Bern has reserved the right
to unilaterally terminate and/or amend each Employee Plan at any time.
(g) The consummation of the transactions contemplated by this Agreement
will not (either alone or in conjunction with another event, such as a
termination of employment or other services) entitle any employee or other
person to receive severance or other compensation which would not otherwise be
payable absent the consummation of the transactions contemplated by this
Agreement or cause the acceleration of the time of payment or vesting of any
award or entitlement under any Employee Plan.
(h) The Bern Disclosure Schedule sets forth a complete and accurate list
showing the names, titles, length of employment or service, the rate of
compensation (and the portions thereof attributable to salary and bonuses,
respectively), fringe benefits, and the amount of accrued bonuses, vacation,
sick leave, maternity leave and other leave of all current officers of Bern or
any ERISA Affiliate and of all employees of or consultants to Bern or any ERISA
Affiliate that received, for the year ended December 31, 1995, or are expected
to receive, during the year ending December 31, 1996, annual base salary or
other compensation in excess of $50,000. Except as set forth on the Bern
Disclosure Schedule, none of such personnel is a party or subject to any oral or
written employment, bonus, pension, profit-sharing, deferred compensation,
percentage compensation, employee benefit (including without limitation medical
disability, life insurance and other welfare benefit plans), incentive, pension
or retirement plans, fringe benefit or termination or severance agreements,
plans or commitments. Bern is not in default with respect to any of the
foregoing obligations. Bern is not in default with respect to any withholding or
other employment taxes or payments with respect to accrued vacation or severance
pay on behalf of any employee for which it is obligated on the date hereof and
will maintain and continue to make all such necessary payments or adjustments
arising through the Effective Time. Except as set forth on the Bern Disclosure
Schedule, there are no covenants, agreements or restrictions to which Bern or
any ERISA Affiliate is a party, including but not limited to employee noncompete
agreements, prohibiting, limiting or in any way restricting any officer or
employee listed on the Bern Disclosure Schedule from engaging in any types of
business activity in any location. To the best knowledge of Bern, no officer or
employee listed on the Bern Disclosure Schedule, and no group of Bern's or any
ERISA Affiliate's employees, has any plans to terminate their employment. There
has not been, and Bern does not anticipate, any adverse change in relations with
employees as a result of the announcement of the transactions contemplated by
this Agreement. Neither Bern nor any ERISA Affiliate
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has instituted any "freeze" of, or delayed or deferred the grant of, any
cost-of-living or other salary adjustments for any of its employees.
(i) There have been no audits of the equal employment opportunity practices
of Bern and, to the best knowledge of Bern and the Bern Owners, no basis for any
violation of equal employment opportunity practices. No representation question
exists respecting the employees of Bern and no collective bargaining agreement
is currently being negotiated by Bern. Bern has not received notice from any
union or employees setting forth demands for representation, elections or for
present or future changes in wages, terms of employment or working conditions.
(j) The Bern Disclosure Schedule sets forth all outstanding loans and other
advances (other than travel advances in the ordinary course of business which do
not exceed $1,000 per individual) made by Bern to any of its officers,
directors, employees, stockholders, partners or consultants.
Section 2.18. Insurance Policies. The Bern Disclosure Schedule contains a
correct and complete description of all insurance policies of Bern covering Bern
and its respective employees, agents and assets. Each such policy is in full
force and effect, is with responsible insurance carriers and, to the best
knowledge of Bern, is adequate in coverage and amount to insure fully against
risks to which Bern and its employees, businesses, properties and other assets
may be exposed in the operation of its business. All premiums with respect to
such insurance policies have been paid on a timely basis, and no notice of
cancellation or termination has been received with respect to any such policy.
Bern has not failed to give any notice or present any claim thereunder in due
and timely fashion. There are no pending claims against such insurance by Bern
as to which the insurers have denied coverage or otherwise reserved rights. Bern
has not been refused any insurance with respect to its assets or operations, nor
has its coverage been limited, by any insurance carrier to which it has applied
for any such insurance or with which it has carried insurance since the date it
commenced operations.
Section 2.19. Records. Bern has records that accurately and validly reflect
its transactions and accounting controls sufficient to insure that such
transactions are (i) in all material respects executed in accordance with
management's general or specific authorization and (ii) recorded in conformity
with generally accepted accounting principles.
Section 2.20. Brokerage Fees. Neither Bern nor any of its Affiliates has
retained any financial advisor, broker, agent or finder or paid or agreed to pay
any financial advisor, broker, agent or finder on account of this Agreement or
any transaction contemplated hereby or any transaction of like nature that would
be required to be paid by Bern.
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Section 2.21. Suppliers and Providers of Services.
(a) The Bern Disclosure Schedule lists all suppliers of goods to, and
providers of services to, Bern (collectively, "Suppliers") to which Bern made
payments during the fiscal year ended December 31, 1995, or expects to make
payments during the year ending December 31, 1996, in excess of five percent
(5%) of Bern's operating expenses as reflected on its statement of operations
for such year.
(b) Neither Bern nor the Bern Owners has information which might reasonably
indicate that any of the Suppliers listed on the Bern Disclosure Schedule have
any disputes with Bern and its business or intend to cease selling or rendering
services to, or dealing with, Bern on substantially the same basis as of the
date hereof, nor has any information been brought to their attention which might
reasonably lead them to believe any such Supplier intends to alter in any
material respect the amount of sales or service or the extent of dealings with
Bern, or would alter in any material respect the sales or service or dealings in
the event of the consummation of the Merger. Neither Bern nor any Bern Owners
has information which might reasonably indicate, nor has any information been
brought to its attention which might reasonably lead them to believe, that any
Supplier will not be able to fulfill outstanding or currently anticipated
purchase orders placed by, or service obligations to, Bern.
(c) Neither Bern nor, to the best knowledge of Bern or the Bern Owners, any
of its officers or directors, partners or Affiliates (or their respective
spouses, relatives or spouses' relatives), nor any entity controlled by one of
more of the foregoing:
(i) owns, directly or indirectly, any interest in (excepting less than
2% stock holdings for investment purposes in securities of publicly held
and traded companies), or is an officer, director, employee, partner or
consultant of, any Person (1) which is, or is engaged in business as, a
competitor, lessor, lessee or Supplier of Bern, or (2) which is engaged in
any business similar to that conducted by Bern;
(ii) owns, directly or indirectly, in whole or in part, any tangible
or intangible property that Bern uses in the conduct of business; or
(iii) has any cause of action or other claim whatsoever against, or
owes any amount to, Bern, except for claims in the ordinary course of
business such as for accrued vacation pay, accrued benefits under employee
benefit plans, and similar matters and agreements existing on the date
hereof.
Section 2.22. Intellectual Property. The Bern Disclosure Schedule
contains an accurate and complete list of all trade names, trademarks, software
licenses, service marks, trademark registrations and applications, service mark
registrations and applications, and
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copyright registrations and applications owned (in whole or in part), licensed
to any extent or used or anticipated to be used by Bern in the conduct of its
business, whether in the name of Bern, any employee or otherwise (collectively,
the "Intellectual Property"). Bern either has full right, title and interest in
and to, or possesses the right to use, the Intellectual Property used in the
conduct of its business (including without limitation the exclusive right to use
and license the same). Bern has acquired from the Bern Owners, consultants,
employees and other third parties all rights (without the obligation for
additional payments) to use, without restriction, all customized software
(including billing communications software) utilized by Bern in implementing its
products. Any item constituting part of the Intellectual Property in which Bern
has an ownership or license interest has been, to the extent indicated on the
Bern Disclosure Schedule, duly registered with, filed in or issued by, as the
case may be, the United States Patent and Trademark Office or such other
Governmental Entities as are indicated on the Bern Disclosure Schedule and such
other Governmental Entities as are indicated on the Bern Disclosure Schedule and
such registrations, filing and issuances remain in full force and effect. No
claim of infringement or misappropriation of trademarks, trade names, service
marks, copyrights or trade secrets of any other Person has been made nor, to the
best knowledge of Bern, threatened against Bern and, to the best knowledge of
Bern, Bern is not infringing or misappropriating any trademarks, trade names,
service marks, copyrights or trade secrets of any other Person. Without limiting
any other provisions hereof, Bern has not granted any license, franchise or
permit to any Person to use any of the Intellectual Property of Bern and no
other Person has the right to use the same trademarks, service marks or trade
names used by Bern or any similar trademarks, service marks or trade names
likely to lead to confusion. No proceedings have been instituted, are pending,
or are threatened which challenge the rights of Bern with respect to its
Intellectual Property, if any, or its use thereof in connection with its
business operations and, to the best knowledge of Bern and the Bern Owners,
there is no valid basis for any such proceedings.
Section 2.23. Licenses. Bern and its officers, directors, partners and
employees possess all governmental registrations, certificates of need,
consents, qualifications and accreditations and other material licenses,
permits, authorizations and approvals that are required by every Federal, state
and local Governmental Entity or Regulatory Authority for the conduct of the
business of Bern and the use of its properties as presently conducted or used
(collectively, "Licenses"). The Bern Disclosure Schedule contains a true and
complete list of the Licenses, exclusive of any Licenses with respect to state
or local sales, use or other Taxes. All of the Licenses are in full force and
effect and no action or claim is pending nor, to the best knowledge of Bern, is
threatened to revoke or terminate any License or declare any License invalid in
any material respect. Neither Bern nor any of its officers, directors, or, to
the best knowledge of Bern, employees is in default in any material respect
under any of such Licenses and, to the best knowledge of Bern, no event has
occurred and no condition exists which, with the giving of notice, the passage
of time, or both, would constitute a default thereunder, which default could
reasonably be expected to have a
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Material Adverse Effect on the business or operations of Bern. There are no
Federal, state and local governmental or judicial consents, orders, decrees and
other compliance agreements relating to Bern or any of their respective assets
or businesses under which Bern is operating or bound.
Section 2.24. No Illegal or Improper Transactions. Neither Bern has, nor,
to the best knowledge of Bern or the Bern Owners, have any of its directors,
officers or employees, directly or indirectly, used funds or other assets of
Bern, or made any promise or undertaking in such regard, for (a) illegal
contributions, gifts, entertainment or other expenses relating to political
activity; (b) illegal payments to or for the benefit of governmental officials
or employees, whether domestic or foreign; (c) illegal payments to or for the
benefit of any person, firm, corporation or other entity, or any director,
officer, employee, agent or representative thereof; or (d) the establishment or
maintenance of a secret or unrecorded fund; and there have been no false or
fictitious entries made in the books or records of Bern.
Section 2.25. Restrictive Documents and Territorial Restrictions. Bern is
not subject to, or a party to, any charter, by-law, mortgage, lien, lease,
license, permit, agreement, contract, instrument, judgment or decree, or to the
best of its knowledge, law, rule, ordinance, regulation, order, or any other
restriction of any kind or character, which materially adversely affects the
business, prospects, operations or condition (financial or otherwise) of Bern or
any of their respective assets or property, or which would prevent consummation
of the transactions contemplated hereby, or the continued operation of Bern's
business after the date hereof on substantially the same basis as heretofore
operated or which would restrict the ability of Bern to acquire any property or
conduct business in any area.
Section 2.26. No Misleading Statements. This Agreement, the information and
schedules referred to herein do not include any untrue statement of a material
fact and do not omit to state any material fact necessary to make the statements
contained herein or therein, in light of the circumstances under which they were
made, not misleading. There is no fact known to Bern or any Bern Owners which
materially adversely affects or in the future may (so far as Bern or any Bern
Owners can now reasonably foresee) materially adversely affect the business,
condition (financial or otherwise), property or assets of Bern which has not
been set forth herein.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF PRIME
AND PRIME ACQUISITION SUBSIDIARY
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Except as set forth (by reference to the applicable Section of this
Agreement) in Prime's disclosure schedule previously delivered to the Company
(the "Prime Disclosure Schedule"), a copy of which is attached hereto as Exhibit
3, each of Prime and Prime Acquisition Subsidiary hereby agrees and represents
and warrants to Bern as follows:
Section 3.1. Organization, Etc. Prime is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has all requisite corporate power and corporate authority to conduct its
business as it is now being conducted and to own, operate or lease the
properties and assets it currently owns, operates or holds under lease. Prime
Acquisition Subsidiary is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware and has full corporate
power and authority to conduct its business as it is now being conducted and to
own, operate or lease the properties and assets it currently owns, operates or
holds under lease. Each of Prime and Prime Acquisition Subsidiary is duly
qualified or licensed to do business and is in good standing as a foreign
corporation in each jurisdiction where the character of its business or the
nature of its properties makes such qualification or licensing necessary, except
where the failure to so qualify or be licensed would not have a Material Adverse
Effect. Each of Prime and Prime Acquisition Subsidiary has heretofore delivered
to Bern true and correct copies of its respective charter and Bylaws as in
effect on the date hereof. Each of Prime and Prime Acquisition Subsidiary has
all requisite corporate power and corporate authority to enter into this
Agreement and each of the other agreements contemplated hereby, to carry out its
respective obligations under this Agreement and each of the other agreements
contemplated hereby and to consummate the transactions contemplated hereby and
thereby.
Section 3.2. Capitalization.
(a) The authorized capital stock of Prime consists of 20,000,000 shares of
common stock, $.01 par value per share, of which 4,100,000 shares are issued and
outstanding as of the date hereof and 5,000,000 shares of Preferred Stock, $.01
par value per share, no shares of which are issued and outstanding as of the
date hereof. There are no shares of Prime Stock held as treasury shares. The
designations, powers, preferences, rights, qualifications, limitations and
restrictions in respect of each class and series of authorized capital stock of
Prime are as set forth in Prime's Certificate of Incorporation, and all such
designations, powers, preferences, rights, qualifications, limitations and
restrictions are valid, binding and enforceable and in accordance with all
applicable laws. All outstanding shares of Prime Stock have been duly authorized
and validly issued and are fully paid and non-assessable. All of the outstanding
shares of Prime Stock were issued in compliance with all applicable Federal and
state securities laws. None of the outstanding securities has been issued in
violation of any preemptive rights, rights of first refusal or similar rights.
Except as contemplated hereby and except as described in the Prime Disclosure
Schedule, there are no outstanding options, warrants, convertible securities,
calls,
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rights, commitments, preemptive rights or agreements or instruments or
understandings of any character to which Prime is a party or by which Prime is
bound, obligating Prime to issue, deliver or sell, or cause to be issued,
delivered or sold, contingently or otherwise, additional shares of capital stock
of Prime or any securities or obligations convertible into or exchangeable for
such shares or to grant, extend or enter into any such option, warrant,
convertible security, call, right, commitment, preemptive right or agreement.
There are no outstanding obligations, contingent or other, of Prime to purchase,
redeem or otherwise acquire any capital stock of Prime. Except as described in
the Prime Disclosure Schedule, there are no voting trust agreements or other
contracts, agreements, arrangements, commitments, plans or understandings
restricting or otherwise relating to voting, dividend, registration rights or
other rights with respect to Prime's capital stock. Upon delivery of the
certificates for the shares of Prime Stock to be issued in the Merger in
accordance with the terms of this Agreement, such shares will be validly issued,
fully paid and non-assessable.
(b) The authorized capital stock of Prime Acquisition Subsidiary consists
of 3,000 shares of common stock, $.01 par value, of which 100 shares are issued
and outstanding and are owned beneficially and of record by Prime. The
designations, powers, preferences, rights, qualifications, limitations and
restrictions in respect of the authorized capital stock of Prime Acquisition
Subsidiary are as set forth in Prime Acquisition Subsidiary's Certificate of
Incorporation.
Section 3.3. Authorization. The execution and delivery by Prime and Prime
Acquisition Subsidiary of this Agreement, the consummation of the transactions
contemplated hereby and the performance by Prime and Prime Acquisition
Subsidiary of their respective obligations hereunder have been duly authorized
by all necessary corporate action. This Agreement is, and when duly executed and
delivered by Prime and Prime Acquisition Subsidiary each of the other agreements
to be delivered by either or both of them pursuant hereto will be (assuming that
this Agreement constitutes the legal, valid and binding obligation of Bern) the
legal, valid and binding obligation of each of Prime and Prime Acquisition
Subsidiary, enforceable against each of Prime and Prime Acquisition Subsidiary
in accordance with their respective terms, except as the same may be limited by
any applicable bankruptcy, insolvency or other laws affecting creditors' rights
generally or by general principles of equity, regardless of whether such
enforceability is considered in equity or law.
Section 3.4. Corporate Action. All corporate action of the Board of
Directors and of the stockholders of each of Prime and Prime Acquisition
Subsidiary taken on or prior to the date hereof has been duly authorized and
adopted, ratified or confirmed in accordance with applicable law and the
Certificates of Incorporation and By-laws of each of Prime and Prime Acquisition
Subsidiary and have been duly recorded in their respective corporate minute book
(a true, correct and complete copies of which have been delivered to Bern).
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Section 3.5. No Violation. The execution and delivery of this Agreement by
each of Prime and Prime Acquisition Subsidiary do not, and the consummation by
each of Prime and Prime Acquisition Subsidiary of the transactions contemplated
hereby, and compliance with the terms hereof will not, (a) conflict with, or
result in any violation of or default or loss of any benefit under, any
provision of their respective Certificates of Incorporation or By-laws; (b)
conflict with, or result in any violation of or default or loss of any benefit
under, any permit, concession, grant, franchise, law, rule or regulation, or any
judgment, decree or order of any court or other governmental agency or
instrumentality to which Prime or Prime Acquisition Subsidiary is a party or to
which any of their respective properties is subject; (c) conflict with, or
result in a breach or violation of or default or loss of any benefit under, or
accelerate the performance required by, the terms of any material agreement,
contract, indenture or other instrument to which Prime or Prime Acquisition
Subsidiary is a party or to which any of their respective properties is subject,
or constitute a default or loss of any right thereunder or an event which, with
the lapse of time or notice or both, might result in a material default or loss
of any material right thereunder or the creation of any lien, charge or
encumbrance upon any of the assets or properties of Prime or Prime Acquisition
Subsidiary; or (d) result in any suspension, revocation, impairment, forfeiture
or nonrenewal of any material License.
Section 3.6. Approvals. The execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby by Prime and Prime
Acquisition Subsidiary will not require the consent, approval, order or
authorization of any Governmental Entity or Regulatory Authority or any other
Person (other than the Nasdaq Stock Market) under any statute, law, rule,
regulation, permit, license, agreement, indenture or other instrument to which
Prime or Prime Acquisition Subsidiary is a party or to which any of its
properties are subject, and no declaration, filing or registration with any
Governmental Entity or Regulatory Authority is required or advisable by Prime or
Prime Acquisition Subsidiary in connection with the execution and delivery of
this Agreement, the consummation by Prime and Prime Acquisition Subsidiary of
the transactions contemplated hereby, the performance by each of Prime and Prime
Acquisition Subsidiary of their respective obligations hereunder, other than (i)
the filing of the Certificates of Merger as required by the GCL and the BCA,
(ii) compliance with any applicable requirements under the Exchange Act, the
Securities Act and foreign and state securities and "blue sky" laws, and (iii)
such other filings or registrations with, or authorizations, consents or
approvals of, governmental bodies, agencies, officials or authorities, the
failure of which to make or obtain would not have a Material Adverse Effect, or
would not materially adversely affect the ability of Bern, Prime or Prime
Acquisition Subsidiary to consummate the Merger.
Section 3.7. SEC Filings; Financial Statements.
(a) Prime has delivered to Bern (i) its Annual Report on Form 10-K for the
year ended May 31, 1995 (the "Prime 10-K") and (ii) its quarterly report on Form
10-Q for each
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of its fiscal quarters ended August 31, 1995, November 30, 1995 and February 29,
1996 (the "Prime 10-Qs"). Neither the Prime 10-K nor any of the Prime 10-Qs, as
of their respective filing dates, contained any untrue statement of a material
fact or omitted to state any material fact necessary in order to make the
statements made therein, in the light of the circumstances under which they were
made, not misleading, and all such filed documents (including the financial
statements contained therein), as of their respective filing dates, complied as
to form in all material respects with the applicable requirements of the
Exchange Act and the applicable rules and regulations thereunder.
(b) The financial statements of Prime (including the related notes)
included in the Prime 10-K and the Prime 10-Q fairly present the financial
position of Prime and the results of operations and changes in financial
condition as of the dates and periods therein specified. Such financial
statements (including the related notes) have been prepared in accordance with
generally accepted accounting principles consistently applied throughout the
periods involved (except as otherwise noted therein).
(c) Since February 29, 1996, there has been (i) no Material Adverse Change
in the assets or liabilities, or in the business or condition, financial or
otherwise, or in the results of operations or prospects, of Prime or Prime
Acquisition Subsidiary and (ii) no adverse change in the assets or liabilities
or in the business or condition, financial or otherwise, of Prime or Prime
Acquisition Subsidiary except in the ordinary course of business; and, to the
best knowledge of Prime, no fact or condition exists or is contemplated or
threatened which could reasonably be anticipated to cause such a change in the
future.
Section 3.8. Litigation. There are no claims, actions, suits, proceedings
or, to the best knowledge of its executive officers, investigations pending or,
to the best knowledge of its executive officers, threatened against it, or any
of its properties or rights, before any Governmental Entity or arbitrator,
domestic or foreign. As of the date hereof, neither it nor any of its respective
properties is subject to any order, writ, judgment, injunction, decree,
determination or award.
Section 3.9. No Illegal or Improper Transactions. Neither Prime nor Prime
Acquisition Subsidiary has, nor have any of their respective directors, officers
or employees, directly or indirectly, used funds or other assets of Prime, or
made any promise or undertaking in such regard, for (a) illegal contributions,
gifts, entertainment or other expenses relating to political activity; (b)
illegal payments to or for the benefit of governmental officials or employees,
whether domestic or foreign; (c) illegal payments to or for the benefit of any
person, firm, corporation or other entity, or any director, officer, employee,
agent or representative thereof; or (d) the establishment or maintenance of a
secret or unrecorded fund; and there have been no false or fictitious entries
made in the books or records of Prime.
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Section 3.10. No Misleading Statements. This Agreement, the information and
schedules referred to herein and the information that has been furnished to Bern
by Prime in connection with the transactions contemplated hereby do not include
any untrue statement of a material fact and do not omit to state any material
fact necessary to make the statements contained herein or therein, in light of
the circumstances under which they were made, not misleading.
Section 3.11. Brokerage Fees. Neither Prime, Prime Acquisition Subsidiary
nor any of their respective Affiliates has retained any financial advisor,
broker, agent or finder or paid or agreed to pay any financial advisor, broker,
agent or finder on account of this Agreement or any transaction contemplated
hereby or any transaction of like nature that would be required to be paid by
Prime or Prime Acquisition Subsidiary.
ARTICLE IV.
COVENANTS OF BERN
Bern agrees that:
Section 4.1. Conduct of Bern. From the date hereof until the Effective
Time, Bern shall in all material respects conduct its business in the ordinary
course and in a matter consistent with prior practices and in compliance with
all applicable laws. Without limiting the generality of the foregoing, from the
date hereof until the Effective Time, except as contemplated hereby, without the
prior written consent of Prime:
(a) Bern will not adopt or propose any change in its Certificate of
Incorporation or Bylaws, or enter into any agreement or incur any obligation,
the terms of which would be violated by the consummation of the transactions
contemplated by this Agreement;
(b) Except as contemplated by this Agreement or as previously approved by
Prime in writing, Bern will not:
(i) enter into any written contract, agreement, plan or arrangement
covering any director, officer or employee of Bern that provides for the
making of any payments, the acceleration of vesting of any benefit or right
or any other entitlement contingent upon (A) the Merger or (B) the
termination of employment after the Merger;
(ii) enter into or amend any employment agreements (oral or written)
to increase the compensation payable or to become payable by it to any of
its employees or otherwise materially alter its employment relationship
with, officers, directors or consultants over the amount payable as of the
date hereof, or increase the compensation payable to any
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other employees, or adopt or amend any employee benefit plan or arrangement
(oral or written); or
(iii) loan or advance any money to any officer, director, employee,
stockholder or consultant of Bern, other than travel advances in the
ordinary course of business which do not exceed $1,000 at any time
outstanding to any one person;
(c) (i) Except as contemplated by this Agreement, Bern will not (1)
purchase, acquire, issue, deliver, sell or authorize the issuance, delivery or
sale of any stock appreciation rights or of any shares of its capital stock of
any class or any securities convertible into or exchangeable for, or rights,
warrants or options to acquire, any such shares or convertible or exchangeable
securities, (2) make any changes in its capital structure or (3) enter into any
agreement or understanding or take any preliminary action with respect to the
matters referred to in clause (1) or (2) of this clause (i) of this paragraph
(c);
(d) Bern will make reasonable commercial efforts to keep in full force and
effect its existing insurance policies and will not modify or reduce the
coverage thereunder;
(e) Bern will not (i) pay any dividend or make any other distribution to
holders of its capital stock, (ii) split, combine or reclassify any of its
capital stock or propose or authorize the issuance of any other securities in
respect of or in lieu of or in substitution for any shares of its capital stock,
(iii) repurchase, redeem or otherwise acquire any shares of its capital stock,
or (iv) take any preliminary action with respect thereto;
(f) Bern will not incur any indebtedness for borrowed money (including
without limitation by way of guarantee or the issuance and sale of debt
securities or rights to acquire debt securities), or incur any account payable
except for short-term borrowings in the ordinary course of business consistent
with past practice, or enter into or modify any contract, agreement, commitment
or arrangement with respect to the foregoing;
(g) Bern will not (i) sell, lease or otherwise dispose of any of its assets
having a book or market value in excess of $10,000 in the aggregate or that are
otherwise material, individually or in the aggregate, to the business, results
of operations or financial condition of Bern or (ii) enter into, or consent to
the entering into of, any agreement granting a preferential right to sell, lease
or otherwise dispose of any of such assets;
(h) Bern will not (i) enter into any new line of business; (ii) change its
investment, liability management and other material policies in any material
respect; (iii) incur or commit to any capital expenditures, obligations or
liabilities in connection therewith other than capital expenditures, obligations
or liabilities that are provided for, and do not exceed the projections set
forth, in Bern's scheduled budget, as updated by the management or appropriate
officers of Bern monthly (the "Budget"), which Budget shall be submitted to
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Prime for its approval within five (5) business days of receipt by Prime (which
approval shall not be unreasonably withheld) and which budget shall be submitted
to Prime for approval as aforesaid at least five (5) business days prior to the
commencement of the month for which the Budget applies; (iv) acquire or agree to
acquire by merging or consolidating with, or acquire or agree to acquire by
purchasing a substantial portion of the assets of, or in any other manner, any
business or Person; (v) otherwise, except as to the acquisition of materials and
supplies necessary for the conduct of its business in the ordinary course and
consistent with past practice, acquire or agree to acquire during any month
assets for a total consideration in the aggregate in excess of $50,000; or (vi)
make any investment in any Person;
(i) Except for changing to a May 31 fiscal year, Bern will not change its
method of accounting in effect at December 31, 1995;
(j) Bern will not settle or compromise, or agree to settle or compromise,
any suit or other litigation matter or matter in an arbitration proceeding for
any material amount; and
(k) Bern will not agree or commit to do any of the foregoing.
Section 4.2. Access to Records.
(a) At all reasonable times from and after the date hereof until the
Effective Time, Bern shall afford Prime and its accountants, counsel, financial
advisors and other representatives full and complete access to the properties,
employees and officers of Bern and to all books, accounts, financial and other
records and contracts of every kind of Bern; provided, however, that no
investigation pursuant to this Section shall affect any representation or
warranty given by Bern to Prime hereunder.
(b) Bern shall also furnish to Prime: (i) no later than five (5) business
days before the date of the applicable month period, its monthly Budget; (ii) as
promptly as practicable following the end of each calendar month after the date
hereof, balance sheets and related statements of operations, retained earnings
and cash flows of Bern as of the end of such month (all such financial
statements shall be covered by and conform to the representations and warranties
set forth in Section 2.7 hereof and shall be included in the term "Interim
Financial Statements" for purposes of this Agreement); (ii) on or prior to the
Closing, a true, correct and complete copy of the Audited Financial Statements
of Bern as at [May 31, 1996], and the related statements of operations, retained
earnings and cash flows and the statements of operations for the three month
period then ended, and (iii) all financial and operating data and other
information concerning Bern's business, properties and personnel as Prime may
request. Before the Effective Time, Bern will, as requested by Prime, make
available on a regular and frequent basis the officers and other appropriate
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employees of Bern to cooperate fully with Prime and to discuss with
representatives of Prime the condition, operations, business and prospects of
Bern.
Section 4.3. No Other Bids. Bern shall not, nor shall it authorize or
permit any officer, director, partner or employee of, or any investment banker,
attorney, accountant or other representative retained by, Bern to, (i)
entertain, encourage, solicit or initiate any inquiries or the making of any
proposal that may reasonably be expected to lead to any "takeover proposal" or
(ii) participate in any discussions or negotiations, or provide third parties
with any information, relating to any such inquiry or proposal. Bern shall
immediately advise Prime of any such inquiries or proposals. As used in this
Section 4.3, "takeover proposal" shall mean any proposal for a merger or other
Business Combination involving Bern or for the acquisition of a substantial
equity interest in Bern or a substantial portion of the assets of Bern, in each
case other than the transactions contemplated hereby, and "substantial equity
interest" shall mean any equity ownership representing beneficial ownership of
five percent or more of the outstanding Bern Shares.
Section 4.4. Maintenance of Business. Bern will use its commercially
reasonable efforts to carry on its businesses, keep available the services of
its officers and employees and preserve its relationships with those of its
Suppliers, licensors, licensees and others having business relationships with it
that are material to its businesses in substantially the same manner as they
have prior to the date hereof. If Bern becomes aware of a material deterioration
or facts which are likely to result in a material deterioration in the
relationship with any material Supplier, licensor, licensee or others having
business relationships with it, Bern will promptly bring such information to the
attention of Prime in writing.
Section 4.5. Compliance with Obligations. Prior to the Effective
Time, Bern shall comply with (a) all applicable Federal, state and local laws,
rules and regulations, (b) all material agreements and obligations, including
its Certificate of Incorporation and Bylaws, by which it, its properties or its
assets may be bound, and (c) all Licenses, decrees, orders, writs, injunctions,
judgments, statutes, rules and regulations applicable to it, its properties or
its assets.
Section 4.6. Ratification of Merger. The Bern Owners shall execute a
letter agreement substantially in the form attached hereto as Exhibit 4.7
whereby the Bern Owners agree to ratify the transactions contemplated by this
Agreement in the event that Prime elects to solicit ratification of the Merger
subsequent to the Closing. This covenant shall survive the Closing.
ARTICLE V.
COVENANTS OF PRIME
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Section 5.1. Conduct of Prime. From the date hereof until the Effective
Time, Prime and Prime Acquisition Subsidiary shall in all material respects
conduct their business in the ordinary course. Without limiting the generality
of the foregoing, from the date hereof until the Effective Time, except as
contemplated hereby or previously disclosed by Prime to Bern, without the
written consent of Bern:
(a) Except as contemplated by this Agreement, Prime will not adopt or
propose any changes in its Certificate of Incorporation or Bylaws, or enter into
any agreement or incur any obligation, the terms of which would be violated by
the consummation of the transactions contemplated by this Agreement;
(b) Except as contemplated by this Agreement, Prime will not (1) purchase,
acquire, issue, deliver, sell or authorize the issuance, delivery or sale of any
stock appreciation rights or of any shares of its capital stock of any class or
any securities convertible into or exchangeable for, or rights, warrants or
options to acquire, any such shares or convertible or exchangeable securities,
except for the issuance of Prime Stock upon the exercise, if any, of stock
options existing on the date hereof, (2) make any changes in its capital
structure or (3) enter into any agreement or understanding or take any
preliminary action with respect to the matters referred to in clause (1) or (2)
of this paragraph (b);
(c) Prime will not, and will not permit Prime Acquisition Subsidiary to,
(i) pay any dividend or make any other distribution to holders of its or their
capital stock, (ii) split, combine or reclassify any of its or their capital
stock or propose or authorize the issuance of any other securities in respect of
or in lieu of or in substitution for any shares of its or their capital stock,
(iii) repurchase, redeem or otherwise acquire any shares of its or their capital
stock, or (iv) take any preliminary action with respect thereto;
(d) Prime will not, and will not permit Prime Acquisition Subsidiary to,
directly or indirectly, merge or consolidate with another entity or sell,
transfer, license, sublicense or otherwise dispose of or acquire any material
properties, securities or assets;
(e) Prime will not, and will not permit Prime Acquisition Subsidiary to
change their methods of accounting in effect at February 29, 1996 (or inception,
in the case of Prime Acquisition Subsidiary) except as required by changes in
generally accepted accounting principles as concurred in by Prime's independent
auditors;
(f) Prime will not, and will not permit Prime Acquisition Subsidiary to,
agree or commit to do any of the foregoing.
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Section 5.2. Access to Records. At all reasonable times from and after the
date hereof until the Effective Time and upon prior notice from Bern, Prime
shall (and shall cause Prime Acquisition Subsidiary to) afford Bern and its
accountants, counsel and other representatives full and complete access to the
properties, employees and officers of Prime and to all books, accounts,
financial and other records and contracts of every kind of Prime and Prime
Acquisition Subsidiary; provided, however, that no investigation pursuant to
this Section shall affect any representation or warranty given by Prime to Bern
hereunder.
Section 5.3. SEC Filings. Prime shall timely file all reports required to
be filed by it with the SEC between the date hereof and the Effective Time and
shall deliver to Bern copies of all such reports promptly after the same are
filed.
Section 5.4. Compliance with Obligations. Prior to the Effective Time,
Prime will use its best efforts, and will cause Prime Acquisition Subsidiary to
use its best efforts to, comply in all material respects with (i) all applicable
Federal, state, local and foreign laws, rules and regulations, (ii) all material
agreements and obligations, including their respective charters and Bylaws, by
which they, their properties or their assets may be bound, and (iii) all
decrees, orders, writs, injunctions, judgments, statutes, rules and regulations
applicable to them, their properties or their assets, except where the failure
to so comply would not have a Material Adverse Effect.
Section 5.5. Obligations of Prime Acquisition Subsidiary. Prime will take
all action necessary to cause Prime Acquisition Subsidiary to perform its
obligations under this Agreement and to consummate the Merger on the terms and
conditions set forth in this Agreement. Prime Acquisition Subsidiary will not
issue any shares of its capital stock, any securities convertible into or
exchangeable for their capital stock, or any option, warrant or other right to
acquire their capital stock to any Person other than Prime or a wholly owned
subsidiary of Prime.
ARTICLE VI.
COVENANTS OF BERN AND PRIME
Bern and Prime agree that:
Section 6.1. Board of Directors. In connection with the Merger, at the
Effective Time, Prime's Board of Directors will be reconstituted in accordance
with the provisions of Section 1.5.
Section 6.2. Advice of Changes. Each party will promptly advise the other
such party in writing of:
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(a) any notice or other communication from any Person alleging that the
consent of such Person is or may be required in connection with the Merger;
(b) any notice or other communication from any Governmental Entity or
Regulatory Authority in connection with the Merger;
(c) any actions, suits, claims, investigation or other judicial proceedings
commenced or threatened against it or any of its subsidiaries or Affiliates
which, if pending on the date of this Agreement, would have been required to
have been disclosed pursuant to this Agreement or which relate to the
consummation of the Merger;
(d) any event known to it occurring subsequent to the date of this
Agreement that would render any of its representations or warranties contained
in this Agreement, if made on or as of the date of such event or the Effective
Time, untrue, inaccurate or misleading in any material respect (other than an
event so affecting a representation or warranty which is expressly limited to a
state of facts existing at a time prior to the occurrence of such event); and
(e) any Material Adverse Change with respect to such party.
From time to time prior to the Effective Time, each of Bern and Prime will
promptly supplement or amend its respective Disclosure Schedule and the Exhibits
hereto with respect to any matter hereafter arising which, if existing or
occurring at the date of this Agreement, would have been required to be set
forth or described in such Schedule and Exhibits hereto. No supplement or
amendment of a Schedule or Exhibit made pursuant to this Section shall be deemed
to cure any breach of, affect or otherwise diminish any representation or
warranty made in this Agreement unless the other party hereto specifically
agrees thereto in writing.
Section 6.3. Regulatory Approvals. Prior to the Effective Time, each party
shall execute and file, or join in the execution and filing of, any application
or other document that may be necessary in order to obtain the authorization,
approval or consent of any Governmental Entity or Regulatory Authority which may
be reasonably required, or that the other party may reasonably request, in
connection with the consummation of the Merger. Each party shall use its
commercially reasonable efforts to obtain all such authorizations, approvals and
consents.
Section 6.4. Actions Contrary to Stated Intent. Neither party will, either
before or after the Merger, take any action that would prevent the Merger from
qualifying as a reorganization under Section 368(a) of the Code. Each of Bern
and Prime shall use its commercially reasonable efforts to cause its Affiliates
not to take any action, or fail to take any required action, that would prevent
the Merger from qualifying as a reorganization
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under Section 368(a) of the Code. Neither party shall, or shall permit any of
its subsidiaries or Affiliates to, take any action that would, or might
reasonably be expected to, result in any of its representations and warranties
set forth herein being or becoming untrue in any material respect, or in any of
the conditions to the Merger set forth in Article VII not being satisfied.
Section 6.5. Certain Filings. Bern and Prime shall cooperate with one another:
(a) in determining whether any action by or in respect of, or filing with,
any Governmental Entity or Regulatory Authority is required, or any actions,
consents, approvals or waivers are required to be obtained from parties to any
material contracts, in connection with the consummation of the transactions
contemplated by this Agreement; and
(b) in seeking any such actions, consents, approvals or waivers or making
any such filings, furnishing information required in connection therewith and
seeking timely to obtain any such actions, consents, approvals or waivers.
Section 6.6. Public Announcements. Prime and Bern will consult with each
other before issuing any press release or making any public statement with
respect to this Agreement and the transactions contemplated hereby and, except
as may be required by applicable law, will not issue any such press release or
make any such public statement (other than in response to unsolicited inquiries)
prior to such consultation. Bern will consult with Prime before issuing any
other press release or making any public statement and will not issue any such
press release or make any such public statement without Prime's prior consent.
Section 6.7. Name Changes. In connection with the Merger, the name of the
Surviving Corporation will be changed to "Bern ________________".
Section 6.8. Prime Option Plan; Option Grants. There will be allocated from
the option pool available under Prime's existing stock option plan (as the same
may be amended to increase the number of shares available for issuance
thereunder), options to purchase up to 233,000 shares of Prime Stock to those
officers, directors, employees and other persons eligible to receive options
under such plan as are designated by the Bern Designees; it being understood
that such options are intended as an incentive to key employees and the
management team of Bern to be added to Prime subsequent to the Effective Time.
Section 6.9. Confidentiality. Each party hereto hereby agrees to retain in
strict confidence all Confidential Information received from any other party
hereto pursuant to, or in connection with, this Agreement. For purposes of this
Agreement, "Confidential Information" means all information and data of any kind
belonging to any party which by
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its nature is confidential or proprietary and all other information and data
which is so identified in writing by any party. No party shall disclose any
Confidential Information to any person, firm or corporation or use any such
Confidential Information for any purpose not contemplated by this Agreement.
Notwithstanding the foregoing, each party may disclose Confidential Information
to its Affiliates, directors, officers, employees, consultants and advisors, to
the extent required for the performance of its obligations under this Agreement,
and to the extent required by law, regulation or judicial order.
The obligations of nondisclosure and nonuse pursuant to this Section 6.9
shall not apply with respect to any Confidential Information which any party can
establish by written records:
(a) was known to such party prior to the disclosure thereof by any other
party or was subsequently and independently developed without reference to the
Confidential Information by such party; or
(b) was in the public domain prior to the disclosure thereof to such party
or subsequently entered the public domain by some means other than as a result
of a breach of this Agreement by such party; or
(c) was subsequently disclosed to such party by a third party having a
lawful right to make the disclosure.
The undertakings of each party pursuant to this Section 6.9 shall survive
the expiration or termination of this Agreement.
ARTICLE VII.
CONDITIONS OF CLOSING
Section 7.1. Conditions to All Parties' Obligations. The obligations of all
the parties to this Agreement to effect the Merger shall be subject to the
fulfillment of the following conditions:
(a) The Board of Directors and officers of Prime shall have been
reconstituted as contemplated by Sections 1.5 hereof and 1.6 hereof.
(b) No temporary restraining order, preliminary or permanent injunction or
other order or restraint issued by any court of competent jurisdiction, no
order, decree, restraint or pronouncement by any Governmental Entity, and no
other legal restraint or prohibition which would prevent or have the effect of
preventing the consummation of the Merger shall have been issued or adopted or
be in effect.
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(c) All material permits, approvals, filings and consents required or
advisable to be obtained or made, and all waiting periods required or
contemplated to expire, prior to the consummation of the Merger under applicable
federal laws of the United States or applicable laws of any state or foreign
country having jurisdiction over the Merger and the other transactions
contemplated herein shall have been obtained, made or expired, as the case may
be (all such permits, approvals, filings and consents and the lapse of all such
waiting periods being referred to as the "Requisite Regulatory Approvals"), and
all such Requisite Regulatory Approvals shall be in full force and effect.
(d) The shares of Prime Stock to be issued to the Bern Owners in the Merger
shall have been included for quotation on Nasdaq or on the OTC Bulletin Board,
in either event, where the outstanding shares of Prime Stock are then quoted.
(e) At the Effective Time, Prime shall have stockholder's equity not less
than $6,000,000, as calculated by BDO Seidman.
(f) All documents reasonably necessary to consummate the transactions
contemplated by this Agreement and to be executed by the parties hereto shall be
delivered, duly executed, to the appropriate parties to effect the merger upon
the terms and conditions hereof.
Section 7.2. Conditions to the Obligations of Prime and Prime Acquisition
Subsidiary to Effect the Merger. The obligations of Prime and Prime Acquisition
Subsidiary under this Agreement to effect the Merger are subject to the
fulfillment at or prior to the Closing of the following conditions:
(a) Accuracy of Representations and Warranties. The representations and
warranties of Bern set forth in Article II hereof shall be true and correct as
of the date when made and at and as of the Closing, except for such changes as
are permitted by this Agreement (except to the extent a representation or
warranty speaks only as of an earlier date).
(b) Covenants and Agreements. Bern shall have duly performed and
complied with the covenants, agreements and conditions required by this
Agreement to be performed by or complied with by it prior to or at the Closing.
(c) Consents. Any consent required for the consummation of the Merger under
any agreement, contract or License described in any exhibit or schedule hereto
or referred to herein, or for the continued enjoyment by the Surviving
Corporation of the benefits of any such agreement, contract or License after the
Merger, shall have been obtained.
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(d) Unanimous Stockholder Consent. The Bern Owners shall have executed a
consent agreement, substantially in that form attached hereto as Exhibit 7.2(d),
whereby the Bern Owners duly approve and authorize such steps as necessary to
consummate this Agreement.
(e) Opinion of Counsel. Prime shall have received the opinion of Neville
Shaver Kelly & McLean, counsel to Bern, in form and content satisfactory to
Prime, substantially in the form of Exhibit 7.2(e) hereof.
(f) Certificates of Bern. Prime shall have received certificates of Bern,
satisfactory in form and substance to Prime, executed on behalf of Bern by its
President, as to compliance with the matters set forth in paragraphs (a), (b),
(c) and (k) of this Section 7.2.
(g) Audited Financial Statements. Delivery of Audited Financial Statements,
as at December 31, 1995 and reported on by BDO Seidman.
(h) No Adverse Decision. There shall not be any action taken or threatened,
or any statute, rule, regulation or order enacted, entered, threatened, or
deemed applicable to the transactions contemplated hereby, by any Governmental
Entity or Regulatory Authority or court that, whether in connection with the
grant of a Requisite Regulatory Approval, any agreement proposed by any
Governmental Entity or Regulatory Authority, or otherwise, which (i) requires or
could reasonably be expected to require any divestiture by Bern of a portion of
the business of Bern that Prime in its reasonable judgment believes will have a
Material Adverse Effect on the Surviving Corporation or (ii) imposes any
condition upon Bern that in Prime's reasonable judgment (x) would be materially
burdensome to Bern or (y) would materially increase the costs incurred or that
will be incurred by Prime as a result of consummating the Merger and the other
transactions contemplated hereby. There shall be no action, suit, investigation
or proceeding pending or threatened by or before any Governmental Entity which
(i) seeks to restrain, enjoin, prevent the consummation of or otherwise affect
the transactions contemplated by this Agreement or (ii) questions the validity
or legality of any such transactions or seeks to recover damages or to obtain
other relief in connection with any such transactions.
(i) Results of Investigation. Prime and Prime Acquisition Subsidiary shall
be satisfied with the results of any investigation of the business and affairs
of Bern undertaken by them pursuant to Section 4.2 hereof.
(j) Proceedings; Receipt of Documents. All corporate and other proceedings
taken or required to be taken in connection with the transactions contemplated
hereby and all documents incident thereto shall be reasonably satisfactory in
form and substance to Prime and Prime's counsel, and Prime and Prime's counsel
shall have received all such information and such counterpart originals or
certified or other copies of such documents
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as Prime or its counsel may reasonably request. Prime shall have received such
other agreements, instruments, approvals, opinions and other documents as it may
reasonably request.
(k) Adverse Change. From the Balance Sheet Date to the Effective Time, Bern
shall not have suffered any Material Adverse Change except as set forth in the
Bern Disclosure Schedule supplied as of the date of this Agreement (whether or
not such change is described in any supplement to the Bern Disclosure Schedule).
The Audited Financial Statements shall not differ in any material respect, taken
as a whole or with respect to any individual line item, from the Unaudited
Financial Statements and the Interim Financial Statements.
(l) Indemnification Agreement. Each Bern Owner shall have entered into the
indemnification agreement, substantially in the form of Exhibit 7.2(l), pursuant
to which such holder will indemnify and hold harmless Prime and the Surviving
Corporation from and against any losses arising out of, based upon or resulting
from any breach by Bern of its representations, warranties and agreements
contained herein.
(m) Escrow Agreement. The Bern Owners shall have entered into the escrow
agreement, substantially in the form of Exhibit 1.11.
(n) Stock Transfer Restrictions. Each Bern Owner shall have entered into an
agreement, substantially in the form of Exhibit 7.2(n) hereof (the "Registration
Rights Agreement"), imposing transfer restrictions with respect to the shares of
Prime Stock to be issued in the Merger.
(o) Accrued Salaries. Each of Rafael Collado, Ellen Kirschenbaum, William
Josuva, Michael Islek, Suhail Nanji and Neil Levine for whom salaries have been
accrued through the date hereof shall forgive such amounts as obligations of
Bern; provided further that the effect of such forgiveness on Bern's taxable
income shall not constitute a breach of any representation, warranty or
covenant.
(p) Supporting Documents. Prime and its counsel shall have received copies
of the following documents:
(i) (A) the Certificate of Incorporation of Bern, certified as of a
recent date by the Secretary of State of the State of New Jersey, (B)
certificates of said Secretary dated as of a recent date as to the due
incorporation and good standing of Bern, the payment of all excise taxes by
Bern and listing all documents of the Bern on file with said Secretary and
(C) a certificate from the Secretary of State of each state listed on the
Bern Disclosure Schedule as to Bern's qualification, good standing and
payment of taxes in each such state;
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(ii) a certificate of the Secretary or an Assistant Secretary of Bern
dated the Closing Date and certifying: (A) that attached thereto is a true
and complete copy of the By-laws of Bern as in effect on the date of such
certification; (B) that attached thereto is a true and complete copy of all
resolutions adopted by the Board of Directors and the stockholders of Bern
authorizing the execution, delivery and performance of this Agreement and
the consummation of the Merger, and that all such resolutions are in full
force and effect and are all the resolutions adopted in connection with the
transactions contemplated hereby; (C) that the Certificate of Incorporation
of Bern has not been amended since the date of filing referred to in the
certificate delivered pursuant to clause (i)(B) above; and (D) to the
incumbency and specimen signature of each officer of Bern executing this
Agreement and any certificate or instrument furnished pursuant hereto, and
a certification by another officer of Bern as to the incumbency and
signature of the officer signing the certificate referred to in this clause
(ii);
(iii) such additional supporting documents and other information with
respect to the operations and affairs of Bern as Prime or its counsel
reasonably may request.
All such documents shall be satisfactory in form and substance to Prime and its
counsel.
Section 7.3. Conditions to the Obligations of Bern to Effect the Merger.
The obligations of Bern under this Agreement to effect the Merger are subject to
the fulfillment at or prior to the Closing of the following conditions:
(a) Accuracy of Representations and Warranties. The representations and
warranties of Prime and Prime Acquisition Subsidiary set forth in Article III
hereof shall be true and correct as of the date when made and at and as of the
Closing (except to the extent a representation or warranty speaks only as of an
earlier date and except for changes contemplated by this Agreement).
(b) Covenants and Agreements. Prime and Prime Acquisition Subsidiary each
shall have complied with the covenants, agreements and conditions required by
this Agreement to be performed or complied with by them prior to or at the
Closing.
(c) Certificate of Prime. Bern shall have received a certificate of Prime,
satisfactory in form and substance to Bern, executed on behalf of Prime by the
Chief Executive Officer or President of Prime, as to compliance with the matters
set forth in paragraphs (a) and (b) of this Section 7.3.
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(d) Opinion of Counsel. Bern shall have received the opinion of Tenzer
Greenblatt LLP, counsel to Prime and Prime Acquisition Subsidiary, in form and
content satisfactory to Bern, substantially in the form of Exhibit 7.3(d)
hereto.
(e) Lock-Up Agreements. Each of Joseph K. Pagano and Frederick R. Adler
shall have executed a Lock-Up Agreement in the form of Exhibit 7.3(e) hereto.
(f) Supporting Documents. Bern and its counsel shall have received copies
of the following documents:
(i) (A) the Certificate of Incorporation of Prime, certified as of a
recent date by the Secretary of State of the State of Delaware, (B) a
certificate of said Secretary dated as of a recent date as to the due
incorporation and good standing of Prime, the payment of all excise taxes
by Prime and listing all documents of Prime on file with said Secretary,
and (C) a certificate from the Secretary of State of each state listed on
the Prime Disclosure Schedule as to Prime's qualification, good standing
and payment of taxes in each such state;
(ii) dated the Closing Date and certifying: (A) that attached thereto
is a true and complete copy of the By-laws of Prime as in effect on the
date of such certification; (B) that attached thereto is a true and
complete copy of all resolutions adopted by the Board of Directors and the
stockholders of Prime authorizing the execution, delivery and performance
of this Agreement and the consummation of the Merger, and that all such
resolutions are in full force and effect and are all the resolutions
adopted in connection with the transactions contemplated hereby; (C) that
the Certificate of Incorporation of Prime has not been amended since the
date of filing referred to in the certificate delivered pursuant to clause
(i)(B) above; and (D) to the incumbency and specimen signature of each
officer of Prime executing this Agreement and any certificate or instrument
furnished pursuant hereto, and a certification by another officer of Prime
as to the incumbency and signature of the officer signing the certificate
referred to in this clause (ii);
(iii) (A) the Certificate of Incorporation of Prime Acquisition
Subsidiary, certified as of a recent date by the Secretary of State of the
State of Delaware, and (B) a certificate of said Secretary dated as of a
recent date as to the due incorporation and good standing of Prime
Acquisition Subsidiary, the payment of all excise taxes by Prime
Acquisition Subsidiary and listing all documents of Prime Acquisition
Subsidiary on file with said Secretary;
(iv) a certificate of the Secretary or an Assistant Secretary of Prime
Acquisition Subsidiary dated the Closing Date and certifying: (A) that
attached thereto
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is a true and complete copy of the By-laws of Prime Acquisition Subsidiary
as in effect on the date of such certification; (B) that attached thereto
is a true and complete copy of all resolutions adopted by the Board of
Directors and the stockholders of Prime Acquisition Subsidiary authorizing
the execution, delivery and performance of this Agreement and the
consummation of the Merger, and that all such resolutions are in full force
and effect and are all the resolutions adopted in connection with the
transactions contemplated hereby; (C) that the Certificate of Incorporation
of Prime Acquisition Subsidiary have not been amended since the date of
filing referred to in the certificate delivered pursuant to clause (iii)(B)
above; and (D) to the incumbency and specimen signature of each officer of
Prime Acquisition Subsidiary executing this Agreement and any certificate
or instrument furnished pursuant hereto, and a certification by another
officer of Prime Acquisition Subsidiary as to the incumbency and signature
of the officer signing the certificate referred to in this clause (iv); and
(v) such additional supporting documents and other information with
respect to the operations and affairs of Prime as Bern or their counsel
reasonably may request.
ARTICLE VIII.
TERMINATION, AMENDMENTS AND WAIVERS
Section 8.1. Termination. This Agreement may be terminated at any time
prior to the filing of the Certificate of Merger, whether before or after
approval by Bern's and Prime's stockholders:
(a) by the mutual consent of the Boards of Directors of Prime, Prime
Acquisition Subsidiary and Bern;
(b) by Prime or Bern if the Effective Time shall not have occurred on or
before the close of business on June 30, 1996; provided that, in any case, the
terminating party is not in material breach of its obligations hereunder;
(c) by Prime (provided it is not in material breach of its obligations
under this Agreement), if (A) there has been a material breach by Bern of any of
its respective representations and warranties hereunder such that Section 7.2(a)
will not be satisfied or (B) there has been the willful breach on the part of
Bern of any of its respective covenants or agreements contained in this
Agreement such that Section 7.2(b)will not be satisfied, and, in both case (A)
and case (B), such breach has not been cured within ten (10) days after notice
to Bern;
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(d) by Bern, (provided it is not in material breach of its obligations
under this Agreement), if (A) there has been a material breach by Prime of any
of its representations and warranties hereunder such that Section 7.3(a) will
not be satisfied or (B) there has been the willful breach on the part of Prime
of any of its covenants or agreements contained in this Agreement such that
Section 7.3(b) will not be satisfied, and, in both case (A) and (B), such breach
has not been cured within ten (10) days after notice to Prime;
(e) by Prime, if, after the date of this Agreement, there shall have
occurred a Material Adverse Change in Bern;
(f) by Bern, if, after the date of this Agreement, there shall have
occurred a Material Adverse Change in Prime; provided that (i) any change in the
market price of the Prime Stock and/or (ii) any decrease in the cash held by
Prime or increase in payables of Prime related to expenses incurred in the
ordinary course of business by Prime for the purpose of negotiating this
Agreement (and the Exhibits and Schedules hereto) and consummating the
transactions contemplated hereby (and thereby), shall not be deemed a Material
Adverse Change hereunder; or
Section 8.2. Effect of Termination. In the event of termination of this
Agreement by either Bern or Prime as provided in Section 8.01 hereof, this
Agreement shall, except as provided herein, forthwith become void and there
shall not be any liability or obligation with respect to the terminated
provisions of this Agreement on the part of Bern, Prime or Prime Acquisition
Subsidiary or their respective officers or directors, except and to the extent
such termination results from the willful breach by a party of any of its
representations, warranties or agreements hereunder. Notwithstanding the
foregoing, if a party hereto terminates this Agreement pursuant to Section
8.01(c)(B) or (d)(B) as the case may be, the party terminating the Agreement
shall be entitled to reimbursement for all its out-of-pocket expenses incurred
in connection with this Agreement and the Merger from the other party.
Section 8.3. Amendment. This Agreement may be amended by the parties
hereto, by action taken by their respective Boards of Directors at any time
before or after approval of this Agreement by the stockholders of Bern and Prime
but, after any such approval, no amendment shall be made to the Exchange Ratio
or which in any way materially and adversely affects the rights of the Bern
Owners or the holders of Prime Stock without the further approval of such
Persons. This Agreement may not be amended except by an instrument in writing
signed on behalf of each of the parties hereto.
Section 8.4. Waiver. At any time prior to the Effective Time, the parties
hereto, by action taken by their respective Boards of Directors may (i) extend
the time for the performance of any of the obligations or other acts of the
other party hereto, (ii) waive any inaccuracies in the representations and
warranties of the other party hereto contained herein or in any document
delivered pursuant hereto and (iii) waive compliance with any of the
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agreements or conditions contained herein. Any agreement on the part of a party
hereto to any such extension or waiver shall be valid only if set forth in an
instrument in writing signed on behalf of such party.
ARTICLE IX.
DEFINITIONS
As used in this Agreement, the following terms shall have the meanings set
forth below:
"Affiliate" or "affiliate" shall mean, with respect to any Person, any
other Person that, directly or indirectly, controls or is controlled by or is
under common control with such Person. As used in this definition of
"Affiliate", the term "control" and any derivatives thereof mean the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of a Person, whether through ownership of voting
securities, by contract, or otherwise.
"Agreement" shall mean this Merger Agreement.
"Audited Financial Statements" shall have the meaning given such term in
Section 2.07 hereof.
"Bern Contracts" shall have the meaning given such term in Section 2.16(a)
hereof.
"Bern Designees" shall have the meaning given such term in Section 1.5
hereof.
"Bern Disclosure Schedule" shall have the meaning given such term in the
recitals to Article II hereof.
"Bern Owners" shall have the meaning given such term in the recitals
hereto.
"Bern Shares" shall have the meaning given such term in the recitals
hereto.
"Business Combination" shall mean (i) any merger or consolidation of Bern
with or into any Person (other than Bern or a wholly owned subsidiary of Bern),
(ii) any sale, lease, exchange, transfer or other disposition (whether in one
transaction or a series of related transactions) of more than ten percent of
Bern's assets (including the stock or partnership interests of Bern), (iii) the
adoption of any plan or proposal for the liquidation or dissolution of Bern,
(iv) any issuance, sale, purchase or redemption of equity securities, any
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reclassification of equity securities or recapitalization of Bern, and (v) any
transaction having an effect similar to those described above.
"Business Day" shall mean any day, other than a Saturday, Sunday or legal
holiday under the Federal laws of the United States.
"CERCLA" shall mean the Comprehensive Environment Response, Compensation
and Liability Act of 1980.
"Certificate of Merger" shall have the meaning given such term in Section
1.2 hereof.
"Closing" shall have the meaning given such term in Section 1.2 hereof.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Constituent Corporations" shall have the meaning given such term in
Section 1.1 hereof.
"Construction Laws" shall have the meaning given such term in Section 2.14
hereof.
"Effective Time" shall have the meaning given such term in Section 1.2
hereof.
"Employee Plan" shall have the meaning given such term in Section 2.17
hereof.
"Environmental Laws" shall have the meaning given such term in Section
2.13(c) hereof.
"ERISA" means the Employee Retirement Income Security Act of 1974, as it
now exists and is hereafter amended.
"ERISA Affiliate" means any person, firm or entity (whether or not
incorporated) which, by reason of its relationship with Bern, is required to be
aggregated with Bern under Sections 414(b), 414(c) or 414(m) of the Code, or
which, together with Bern, is a member of a controlled group within the meaning
of Section 4001(a) of ERISA.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended,
and the rules and regulations thereunder.
"Exchange Ratio" shall have the meaning given such term in Section 1.7
hereof.
"Governmental Entity" shall mean any foreign or domestic court,
administrative agency or commission or other governmental or regulatory
authority or instrumentality.
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"Improvements" shall have the meaning given such term in Section 2.14
hereof.
"Intellectual Property" shall have the meaning given such term in Section
2.22 hereof.
"Interim Financial Statements" shall have the meaning given such term in
Section 2.7 hereof.
"IRS" shall mean the Internal Revenue Service.
"Leased Property" shall have the meaning given such term in Section 2.14
hereof.
"Licenses" shall have the meaning given such term in Section 2.23 hereof.
"Material Adverse Change" shall mean a change or a development involving a
prospective change which would have a Material Adverse Effect, it being
understood that a decline in the price of the Prime Stock and the depletion of
Prime's cash in the ordinary course of its business of seeking to consummate,
and consummating, a business combination, shall not constitute a Material
Adverse Change.
"Material Adverse Effect" shall mean, with respect to any Person, a
material adverse effect on the business, prospects, results of operations,
financial condition or assets of such Person. In determining whether any
individual event would result in a Material Adverse Effect, notwithstanding that
such event does not of itself have such effect, a Material Adverse Effect shall
be deemed to have occurred if the cumulative effect of such event and all other
then existing events would result in a Material Adverse Effect.
"Merger" shall have the meaning given such term in the recitals hereto.
"Owned Property" shall have the meaning given such term in Section 2.14
hereof.
"PBGC" shall mean the United States Pension Benefit Guaranty Corporation.
"Person" shall mean an individual, corporation, partnership, joint venture,
trust or unincorporated organization, or a government or any agency or political
subdivision thereof.
"Prime" shall mean Prime Cellular, Inc., a Delaware corporation.
"Prime Acquisition Subsidiary" shall mean Prime Cellular Acquisition Corp.,
a Delaware corporation.
"Prime Contracts" shall have the meaning given such term in Section 2.16(a)
hereof.
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<PAGE>
"Prime Designees" shall have the meaning given such term in Section 1.5
hereof.
"Prime Disclosure Schedule" shall have the meaning given such term in the
recitals to Article III hereof.
"Prime Option" shall have the meaning given such term in Section 1.11
hereof.
"Prime Stock" shall have the meaning given such term in the recitals
hereto.
"Prime 10-K" shall have the meaning given such term in Section 3.7(a)
hereof.
"Prime 10-Q" shall have the meaning given such term in Section
3.7(a) hereof.
"Real Property" shall have the meaning given such term in Section 2.14
hereof.
"Real Property Laws" shall have the meaning given such term in Section 2.14
hereof.
"Regulatory Authority" shall mean any United States Federal or state
government or Governmental Entity the approval of which, or filing with, is
legally required or permitted for consummation of the transactions contemplated
by this Agreement.
"Requisite Regulatory Approvals" shall have the meaning given such term in
Section 7.1(c) hereof.
"SEC" shall mean the Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as amended, and the
rules and regulations thereunder.
"Suppliers" shall have the meaning given such term in Section 2.21 hereof.
"Surviving Corporation" shall have the meaning given such term in Section
1.1 hereof.
"Tax" and "Taxes" shall have the meaning given such terms in Section 2.11
hereof.
"Tax Return(s)" shall have the meaning given such term in Section 2.11
hereof.
"Unaudited Financial Statements" shall have the meaning given such term in
Section 2.7 hereof.
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<PAGE>
ARTICLE X.
GENERAL PROVISIONS
Section 10.1. Taking of Necessary Action; Specific Performance. Subject to
the terms and conditions of this Agreement, each of the parties hereto agrees,
subject to applicable laws, to use all reasonable efforts promptly to take or
cause to be taken all action and promptly to do or cause to be done all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement.
Without limiting the foregoing, Bern, Prime and Prime Acquisition Subsidiary
shall use their best efforts to obtain and make all consents, approvals,
assurances and filings of or with third parties and Governmental Entities
necessary or, in the opinion of Prime or Bern, advisable for the consummation of
the transactions contemplated by this Agreement. Each party shall cooperate with
the other in good faith to help the other satisfy its obligations hereunder. If
at any time after the Effective Time any further action is necessary or
desirable to carry out the purposes of this Agreement, or to vest the Surviving
Corporation with full title to and benefits of all properties, assets, rights,
approvals, immunities and franchises of Bern, the proper officers or directors
of Bern or the Surviving Corporation, as the case may be, shall take all such
necessary action. Prime, Prime Acquisition Subsidiary and Bern understand and
agree that the covenants and undertakings on each of their parts herein
contained are uniquely related to the desire of Prime, Prime Acquisition
Subsidiary and Bern to consummate the Merger, that the Merger is a unique
business opportunity for Bern, Prime and Prime Acquisition Subsidiary, and that,
although monetary damages may be available for the breach of such covenants and
undertakings, monetary damages would be an inadequate remedy therefor.
Accordingly, Bern, Prime and Prime Acquisition Subsidiary agree that Prime and
Prime Acquisition Subsidiary shall be entitled to obtain specific performance by
Bern of every such covenant and undertaking contained herein to be performed by
Bern and that Bern shall be entitled to obtain specific performance from Prime
and Prime Acquisition Subsidiary of each and every covenant and undertaking
herein contained to be observed or performed by Prime or Prime Acquisition
Subsidiary.
Section 10.2. Effect of Due Diligence. No investigation by or on behalf of
Prime into the business, operations, prospects, assets or condition (financial
or otherwise) of Bern shall diminish in any way the effect of any
representations or warranties made by Bern in this Agreement or shall relieve
Bern of any of its respective obligations under this Agreement. No investigation
by or on behalf of Bern into the business, operations, prospects, assets or
condition (financial or otherwise) of Prime shall diminish in any way the effect
of any representations or warranties made by Prime in this Agreement or shall
relieve Prime of any of its obligations under this Agreement.
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<PAGE>
Section 10.3. Expenses. Except for the audit expenses of Bern which shall
be paid by Prime and as provided in Section 8.2 hereof, all costs and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby shall be paid by the party incurring the same.
Section 10.4. Successors and Assigns. This Agreement will inure to the
benefit of and be binding upon the parties hereto and their respective
successors and permitted assigns. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto without the prior written consent of the other parties hereto.
Section 10.5. Entire Agreement. This Agreement and the other documents
referred to herein contain the entire agreement among the parties hereto with
respect to the transactions contemplated hereby, and control and supersede any
prior understandings, agreements or representations by or between the parties,
written or oral, which conflicts with, or may have related to, the subject
matter hereof or thereof in any way.
Section 10.6. Notices. All notices or other communications hereunder shall
be in writing and shall be deemed to have been duly given if delivered
personally or sent by telefax, by recognized overnight courier marked for
overnight delivery, or by registered or certified mail, postage prepaid,
addressed as follows:
(a) If to Bern, to c/o Richard M. Neville, Neville Shaver Kelly & McLean,
Three Landmark Square, Stamford Connecticut 06901 with a copy to Neville Shaver
Kelly & McLean, Three Landmark Square, Stamford Connecticut 06901, Attention:
Richard M. Neville; and
(b) If to Prime or Prime Acquisition Subsidiary, 100 First Stamford Place,
3rd Floor, Stamford, Connecticut 06902, Attention: President, with a copy to:
Tenzer Greenblatt LLP 405 Lexington Avenue, New York, New York 10174, Attention:
Barry S. Rutcofsky, Esq.;
or such other addresses as shall be furnished by like notice by such party. All
such notices and communications shall, when telefaxed (immediately thereafter
confirmed by telephone), be effective when telefaxed, or, if sent by nationally
recognized overnight courier service, be effective one (1) Business Day after
the same has been delivered to such courier service marked for overnight
delivery, or, if mailed, be effective when received.
Section 10.7. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby
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<PAGE>
is not affected in any manner adverse to any party. Upon such determination that
any term or other provision is invalid, illegal or incapable of being enforced,
the parties hereto shall negotiate in good faith to modify this Agreement so as
to effect the original intent of the parties as closely as possible in an
acceptable manner to the end that transactions contemplated hereby are fulfilled
to the greatest extent possible.
Section 10.8. Applicable Law. This Agreement shall be governed by, and
construed in accordance with, the internal laws of the State of New York,
without reference to or application of any conflicts of laws principles. Each of
Bern, the Bern Owners, Prime and Prime Acquisition Subsidiary hereby irrevocably
and unconditionally consents to submit to the exclusive jurisdiction of the
courts of the State of New York and of the United States District Court,
Southern District of New York (the "New York Courts") for any litigation arising
out of or relating to this Agreement and the transactions contemplated hereby
(and agrees not to commence any litigation relating thereto except in such
courts), waives any objection to the laying of venue of any such litigation in
the New York Courts and agrees not to plead or claim that such litigation
brought in any New York Courts has been brought in an inconvenient forum.
Section 10.9. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO IRREVOCABLY
WAIVES ANY RIGHT TO A JURY TRIAL IN CONNECTION WITH ANY SUIT, ACTION, OR SIMILAR
PROCEEDING BROUGHT RELATING TO OR ARISING OUT OF THIS AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED HEREBY.
Section 10.10. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Section 10.11. Headings. The headings used in this Agreement are for
convenience only and are not to be considered in construing or interpreting any
term or provision of this Agreement.
Section 10.12. No Third Party Beneficiaries. This Agreement is not intended
to confer any benefit on any third party beneficiaries.
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered as
of the date first written above by each of the parties hereto individually or by
their respective duly authorized officers, as applicable.
[signature page continued]
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<PAGE>
SIGNATURE PAGES FOR MERGER AGREEMENT by and among PRIME
CELLULAR, INC., PRIME CELLULAR ACQUISITION CORP. and BERN
ASSOCIATES, INC.
PRIME CELLULAR, INC.
By: ______________________________
Title: ___________________________
PRIME CELLULAR ACQUISITION
CORP.
By: ______________________________
Title: ___________________________
BERN ASSOCIATES, INC.
By: ______________________________
Title: ___________________________
- ------------------------- -------------------------
RAFAEL COLLADO ELLEN KIRSCHENBAUM
- ------------------------- -------------------------
WILLIAM JOSUVA MICHAEL ISLEK
- ------------------------- -------------------------
SUHAIL NANJI NEIL LEVINE
- ------------------------- -------------------------
MARK NEWMAN ANDREW MITCHELL
- ------------------------- -------------------------
BERNARD KIRSCHENBAUM RICHARD NEVILLE
- ------------------------- -------------------------
JOANNE WITT LOUISE NORTHCUTT
- ------------------------- -------------------------
KATHY DIAZ RAFAEL COLLADO, SR.
-------------------------
JOAN HADSALL
Exhibit 10.2
LIST OF OMITTED SCHEDULES/EXHIBITS
TO MERGER AGREEMENT
Except as otherwise indicated herein, the list identifies schedules and
exhibits annexed to the Merger Agreement but omitted from this filing. In
accordance with Regulation S-X, Item 601, copies of any such schedule or exhibit
will be furnished to the Securities and Exchange Commission upon request.
Schedule
or
Exhibit Brief Description
------- -----------------
1.2 Certificates of Merger
1.5 Initial Board of Directors of
Surviving Corporation
1.6 Initial Officers of
Surviving Corporation
2 Bern Disclosure Schedule
2.7 Bern Unaudited Balance
Sheet
2.11 Bern Tax Returns
3 Registrant Disclosure
Schedule
4.6 Bern Stockholder's letter
agreement to ratify Merger
7.2(d) Bern Consent
7.2(e) Opinion of Neville Shaver
Kelly & McLean
7.3(d) Opinion of Tenzer
Greenblatt LLP
7.3(3) Lock-Up Agreement
REGISTRATION RIGHTS AGREEMENT
AGREEMENT, dated as of the _______ day of ___________, 1996, among
_________________, (the "Holder") and Prime Cellular, Inc., a Delaware
corporation having its principal place of business at 100 First Stamford Place,
Stamford, CT 06902 (the "Company").
RECITALS
WHEREAS, the Holder is or will be receiving from the Company, as part of
the merger of Bern Associates, Inc., with and into Prime Cellular Acquisition
Corp., a wholly-owned subsidiary of the Company (the "Merger"), an aggregate of
___________ shares (the "Shares") of the Company's common stock, par value $.01
per share (the "Common Stock"), Pursuant to that certain Agreement and Plan of
Merger dated of even date herewith (the "Merger Agreement"), among the Holder,
Bern Associates, Inc., the Bern Owners (as such term is defined in the Merger
Agreement), the Company and Prime Cellular Acquisition Corp.; and
WHEREAS, it is a condition to the performance of the Holder's
obligationsunder the Merger Agreement that the Company enter into this Agreement
with each of the Holder;
NOW, THEREFORE, in consideration of the foregoing recitals and mutual
covenants herein contained, the parties agree as follows:
1. Registrable Securities. As used herein the term "Registrable Security"
means each of the Shares and all shares of the Company issued or issuable with
respect to the Shares by way of stock split, stock dividend, recapitalization,
merger or consolidation; provided, however, that with respect to any particular
Registrable Security, such security shall cease to be a Registrable Security
when, as of the date of determination, (i) it has been effectively registered
under the Securities Act of 1933, as amended (the "Securities Act") and disposed
of pursuant thereto, (ii) the date that the holder of Registrable Securities
receive an opinion of counsel to the Company that such holder's Registrable
Securities may be freely tradable without registration under the Securities Act,
under Rule 144 (without volume or manner of sale limitations) promulgated under
the Securities Act ("Rule 144") or otherwise or (iii) it has ceased to be
outstanding. The term "Registrable Securities" means any and/or all of the
securities falling within the foregoing definition of a "Registrable Security."
In the event of any merger, reorganization, consolidation, recapitalization or
other change in corporate structure affecting the Common Stock, such adjustment
shall be made in the definition of "Registrable Security" as is appropriate in
order to prevent any dilution or enlargement of the rights granted pursuant to
this Agreement.
<PAGE>
2. Piggyback Registration. If at any time following the date hereof the
Company proposes to prepare and file a registration statement or post-effective
amendment thereto (for purposes of this Agreement, collectively, a "Registration
Statement"), with the Securities and Exchange Commission (the "SEC") covering,
(a) an underwritten primary offering of Common Stock (an "Underwritten
Offering") or (b) an offering of Common Stock on behalf of any then executive
officer of the Company (as defined in Rule 3(b)-7 promulgated under the
Securities Exchange Act of 1934) (other than Form S-8 or successor form or if
such offering relates to Common Stock acquired by such executive officer
subsequent to the date hereof in connection with a merger with or an acquisition
by the Company) (a "Management Offering"), the Company will give written notice
of its intention to do so by registered mail ("Notice"), at least ten (10)
business days prior to the filing of each such Registration Statement, to all
holders of the Registrable Securities. Upon the written request of such a holder
(a "Requesting Holder"), made within five (5) business days after receipt of the
Notice, that the Company include any of the Requesting Holder's Registrable
Securities in the proposed Registration Statement, the Company shall (subject to
the provisions of the last paragraph of this Section), as to each such
Requesting Holder, use its best efforts to effect the registration under the
Securities Act of the Registrable Securities which it has been so requested to
register ("Piggyback Registration"), at the Company's sole cost and expense and
at no cost or expense to the Requesting Holders; provided, however, that if,
with respect to an Underwritten Offering, in the written opinion of the
Company's managing underwriter, if any, for such offering, the inclusion of all
or a portion of the Registrable Securities requested to be registered, when
added to the securities being registered by the Company or the selling security
holder(s) will exceed the maximum amount of the Company's securities which can
be marketed (i) at a price reasonably related to their then current market
value, or (ii) without otherwise materially adversely affecting the Underwritten
Offering, then the Company may exclude from such offering all or a portion of
the Registrable Securities which it has been requested to register; provided,
further, that any such exclusion of Registrable Securities is conditioned upon
the following paragraph.
If securities are proposed to be offered for sale pursuant to such
Registration Statement by other security holders of the Company and the total
number of securities to be offered by the Requesting Holder and such other
selling security holders is required to be reduced pursuant to a request from
the managing underwriter (which request shall be made only for the reasons and
in the manner set forth above), the number of Registrable Securities to be
offered by Requesting Holder pursuant to such Registration Statement shall equal
the number which bears the same ratio to the maximum number of securities that
the underwriter believes may be included for all the selling security
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<PAGE>
holders (including the Requesting Holder) as the original number of Registrable
Securities proposed to be sold by the Requesting Holder bears to the total
original number of securities proposed to be offered by the Requesting Holder
and the Qualified Selling Security Holders.
Notwithstanding the provisions of this Paragraph 2, the Company shall have
the right at any time after it shall have given written notice pursuant to this
Paragraph 2 (irrespective of whether any written request for inclusion of such
securities shall have already been made) to elect not to file any such proposed
Registration Statement, or to withdraw the same after the filing but prior to
the effective date thereof.
3. Registration.
(a) As expeditiously as possible after the filing of the Company's Annual
Report on Form 10-K, for the year ended May 31, 1997, the Company shall file a
registration statement with respect to all of the Registrable Securities, shall
use its reasonable efforts to have any such registration statement declared
effective at the earliest and shall keep such registration statement effective
until the second anniversary of the Effective Time.
(b) During the effectiveness of any Registration Statement filed pursuant
to Paragraph 2 or Paragraph 3, the Holder shall not sell, transfer, assign,
hypothecate, pledge or otherwise dispose of, in the aggregate, more than the
number of Registrable Securities which would be permitted to be sold pursuant to
the volume limitations of Rule 144(e) under the Securities Act, as if the
Registrable Securities were restricted securities subject to Rule 144(e). The
certificate representing the Shares will bear a legend to the effect of the
restrictions set forth in this Paragraph 3(b).
(c) The Company may withdraw, for up to three (3) months (the "Withdrawal
Period") following a registration statement if, in the good faith judgment of
the Board of Directors of the Company (the "Board"), such filing might, if not
deferred, adversely affect a then proposed or pending public offering, financial
project, acquisition, merger or corporate reorganization or other material event
which, in the opinion of the Board would be detrimental to the Company to
continue the effectiveness of such registration statement; provided, however,
that promptly after the termination of the Withdrawal Period, the Company shall
file a new registration statement in accordance with the terms of Paragraph
3(a).
4. Additional Terms. The following provisions shall be applicable to the
Company in connection with any Registration
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<PAGE>
Statement filed pursuant to Paragraphs 2 or 3 of this Agreement:
(a) If any stop order shall be issued by the SEC in connection therewith,
to use its reasonable efforts to obtain the removal of such order as soon as
practicable. Following the effective date of the Registration Statement, the
Company shall, upon the request of the Holder, forthwith supply such reasonable
number of copies of the registration statement, preliminary prospectus and
prospectus meeting the requirements of the Securities Act as shall be reasonably
requested by the Holder to permit each Holder to make a public distribution of
his Registrable Securities. The Company will use its reasonable efforts to
qualify the Registrable Securities for sale in such states as the Holder of
Registrable Securities shall reasonably request, provided that no such
qualification will be required in any jurisdiction where, solely as a result
thereof, the Company would be subject to service of general process or to
taxation or qualification as a foreign corporation doing business in such
jurisdiction. The obligations of the Company hereunder with respect to the
Holder's Registrable Securities are expressly conditioned on the Holder's
furnishing to the Company such appropriate information concerning the Holder,
the Holder's Registrable Securities and the terms of the Holder's offering of
such Registrable Securities as the Company may reasonably request and any other
information the SEC or any other applicable regulatory authority may require.
(b) The Company shall bear the entire cost and expense of any registration
of the Registrable Securities; provided, however, that the Holder shall be
solely responsible for the fees of any counsel retained by him or her in
connection with such registration and any transfer taxes or underwriting
discounts or commissions applicable to the Registrable Securities sold by him or
her pursuant thereto.
(c) The Company shall indemnify and hold harmless the Holder and each
underwriter, within the meaning of the Securities Act, who may purchase from or
sell for the Holder, any Registrable Securities, from and against any and all
losses, claims, damages and liabilities caused by any untrue statement of a
material fact contained in the registration statement, any other registration
statement filed by the Company under the Securities Act, any post-effective
amendment to such registration statements, or any prospectus included therein
required to be filed or furnished by reason of this Agreement or caused by any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading,
except insofar as such losses, claims, damages or liabilities are caused by any
such untrue statement or alleged untrue statement or omission or alleged
omission based upon information furnished or required to be furnished in writing
to the Company by the Holder or underwriter expressly for use therein; which
indemnification shall include each person, if any,
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<PAGE>
who controls any such underwriter within the meaning of the Securities Act and
each officer, director, employee and agent of such underwriter; provided,
however, that the Company shall not be obligated to so indemnify the Holder or
any such underwriter or other person referred to above unless the Holder or
underwriter or other person, as the case may be, shall at the same time
indemnify the Company, its directors, each officer signing the Registration
Statement and each person, if any, who controls the Company within the meaning
of the Securities Act, from and against any and all losses, claims, damages and
liabilities caused by any untrue statement or alleged untrue statement of a
material fact contained in the registration statement, any registration
statement or any prospectus required to be filed or furnished by reason of this
Agreement or caused by any omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading,
insofar as such losses, claims, damages or liabilities are caused by any untrue
statement or alleged untrue statement or omission based upon information
furnished in writing to the Company by the Holder or underwriter expressly for
use therein.
(d) If for any reason the indemnification provided for in the
preceding subparagraph is held by a court of competent jurisdiction to be
unavailable to an indemnified party with respect to any loss, claim, damage,
liability or expense referred to therein, then the indemnifying party, in lieu
of indemnifying such indemnified party thereunder, shall contribute to the
amount paid or payable by the indemnified party as a result of such loss, claim,
damage or liability in such proportion as is appropriate to reflect not only the
relative benefits received by the indemnified party and the indemnifying party,
but also the relative fault of the indemnified party and the indemnifying party,
as well as any other relevant equitable considerations.
(e) Neither the filing of a Registration Statement by the Company
pursuant to this Agreement nor the making of any request for prospectuses by the
Holder shall impose upon the Holder any obligation to sell his or her
Registrable Securities.
(f) The Holder, upon receipt of notice from the Company that an event
has occurred which requires a post-effective amendment to the Registration
Statement or a supplement to the prospectus included therein, shall promptly
discontinue the sale of his or her Registrable Securities until the Holder
receives a copy of a supplemented or amended prospectus from the Company, which
the Company shall provide as soon as practicable after such notice.
5. Shareholders' Representatives. The Holder appoints Rafael Collado and
Ellen Kirschenbaum as its
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<PAGE>
representatives (the "Shareholders' Representatives") for purposes of any
actions to be taken by Holder hereunder and the Shareholders' Representatives
are authorized to take, on behalf of, and as the act and deed of, the Holder,
any such actions including, without limitation, giving notice or making any
demand or request of the Company pursuant hereto.
6. Governing Law.
(a) The Registrable Securities are being delivered in New York. This
Agreement shall be deemed to have been made and delivered in the State of New
York and shall be governed as to validity, interpretation, construction, effect
and in all other respects by the internal laws of the State of New York.
(b) The Company and the Holder each (a) agrees that any legal suit,
action or proceeding arising out of or relating to this Agreement, or any other
agreement entered into between the Company and the Holder pursuant to the
Offering shall be instituted exclusively in New York State Supreme Court, County
of New York, or in the United States District Court for the Southern District of
New York, (b) waives any objection which the Company or such Holder may have now
or hereafter to the venue of any such suit, action or proceeding, and (c)
irrevocably consents to the jurisdiction of the New York State Supreme Court,
County of New York and the United States District Court for the Southern
District of New York in any such suit, action or proceeding. The Company and the
Holder each further agrees to accept and acknowledge service of any and all
process which may be served in any such suit, action or proceeding in the New
York State Supreme Court, County of New York or in the United States District
Court for the Southern District of New York and agrees that service of process
upon the Company or the Holder mailed by certified mail to the Company's or, as
the case may be, the Holder's address shall be deemed in every respect effective
service of process upon the Company or the Holder, as the case may be, in any
suit, action or proceeding.
7. Amendment. This Agreement may only be amended by a written
instrument executed by the Company and the Holder.
8. Entire Agreement. This Agreement constitutes the entire agreement
of the parties hereto with respect to the subject matter hereof, and supersedes
all prior agreements and understandings of the parties, oral and written, with
respect to the subject matter hereof.
9. Execution in Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same document.
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<PAGE>
10. Notices. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed duly given when delivered by
hand or mailed by registered or certified mail, postage prepaid, return receipt
requested, as follows:
If to the Holder, to his or her address set forth on the signature page of
this Agreement.
If to the Company, to the address set forth on the first page of this
Agreement.
11. Binding Effect; Benefits. The Holder may assign his or her rights
hereunder. This Agreement shall inure to the benefit of, and be binding upon,
the parties hereto and their respective heirs, legal representatives and
successors. Nothing herein contained, express or implied, is intended to confer
upon any person other than the parties hereto and their respective heirs, legal
representatives, successors and such permitted assigns, any rights or remedies
under or by reason of this Agreement.
12. Headings. The headings contained herein are for the sole purpose of
convenience of reference, and shall not in any way limit or affect the meaning
or interpretation of any of the terms or provisions of this Agreement.
13. Severability. Any provision of this Agreement which is held by a court
of competent jurisdiction to be prohibited or unenforceable in any
jurisdiction(s) shall be, as to such jurisdiction(s), ineffective to the extent
of such prohibition or unenforceability without invalidating the remaining
provisions of this Agreement or affecting the validity or enforceability of such
provision in any other jurisdiction.
IN WITNESS WHEREOF, this Agreement has been executed and delivered by the
parties hereto as of the date first above written.
COMPANY: PRIME CELLULAR, INC.
By:
----------------------------
Joseph K. Pagno, President
and CEO
HOLDER: -----------------------------
[ ]
Address:
----------------------------
----------------------------
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ESCROW AGREEMENT
ESCROW AGREEMENT, dated June __, 1996, by and among Prime Cellular, Inc., a
Delaware corporation ("Prime"); Prime Cellular Acquisition Corp., a Delaware
corporation (the "Prime Acquisition Subsidiary"); the persons listed on Schedule
1 hereto (the "Bern Owners"); and Tenzer Greenblatt LLP, a New York limited
liability partnership (the "Escrow Agent").
B A C K G R O U N D F A C T S:
------------------------------
A. Pursuant to a Merger Agreement dated as of May 14, 1996 (the "Merger
Agreement"), by and among Prime, Prime Acquisition Subsidiary, Bern Associates,
Inc., a New Jersey corporation ("Bern") and the Bern Owners, Bern merged with
and into Prime Acquisition Subsidiary and the outstanding shares of capital
stock of Bern have been converted into shares of the common stock, $.01 par
value, of Prime (the "Prime Stock").
B. Pursuant to the Merger Agreement each of Prime, Prime Acquisition
Subsidiary, the Bern Owners and Bern entered into an Indemnification Agreement
of even date herewith (the "Indemnification Agreement", which Indemnification
Agreement is incorporated herein as if fully set forth herein), whereby the Bern
Owners agreed to indemnify Prime and the Surviving Corporation (as such term is
defined in the Merger Agreement) for certain loss contingencies, and
<PAGE>
it is a requirement under the Indemnification Agreement that the Bern Owners and
the Escrow Agent shall have executed and delivered an agreement in the form
hereof.
C. The purpose of this Agreement is to provide security, in the form of the
shares of Prime Stock delivered pursuant to the Merger Agreement, for the
indemnity furnished by the Bern Owners to Prime and the Surviving Corporation
pursuant to the Indemnification Agreement.
A G R E E M E N T:
-----------------
NOW, THEREFORE, for good and valuable consideration, the receipt of which
is hereby acknowledged, the parties hereto agree, as follows:
1. Certain Definitions. For all purposes of this Agreement, the following
terms shall have the following meanings: -------------------
(a) The term "Collateral" shall mean (x) the Prime Stock at any time
represented by the Escrow Certificates delivered to the Escrow Agent
pursuant to Section 3, (y) any other Prime Stock received by the Escrow
Agent as provided in Section 7 and (z) all other property or cash obtained
by the Escrow Agent in respect of or in exchange for the Prime Stock.
(b) The term "Escrow Fund" shall mean the Collateral delivered to the
Escrow Agent pursuant to Section 7 hereof.
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<PAGE>
(c) The term "Final Determination" shall mean the final decision of
any court of competent jurisdiction from which no appeal has been allowed
because of lapse of time or otherwise.
(d) The term "Indemnified Parties" shall mean Prime and the Surviving
Corporation.
(e) The term "Loss" shall mean any losses, damages, expenses,
liabilities, claims, settlements, assessments, judgments, expenses or costs
(including, without limitation, reasonable attorneys' fees) incurred or
suffered by Prime or the Surviving Corporation (net of any insurance
proceeds actually received by the Prime Entities) as a result of any claim,
or the defense, settlement or investigation thereof arising out of, caused
by, based upon or resulting from any breach by Bern or any Bern Owners of
their respective representations and warranties, obligations or covenants
contained in the Merger Agreement or any document or certificate referred
to in and delivered or to be delivered by Bern or any of the Bern Owners
pursuant to the Merger Agreement. The amount of any Loss shall be
determined, either by payment for the Loss claimed as certified to by the
President or Principal of the Indemnified Party or Parties in a Claim
Certificate (as defined in Section 4(a) hereof), or by entry of a final
judgment, order or decree (after exhaustion or expiration of appeal rights)
by a court of competent jurisdiction.
(f) The term "Proportionate Share" with respect to any Bern Owner
shall mean the number of shares of Prime Stock equal to that fraction,
determined as of the date of any particular Payout (as defined in Section
4(b) hereof), the numerator of which is the total number of Shares of Prime
Stock delivered to any Bern Owner pursuant to the Merger and the
denominator of which is the total number of shares of Prime Stock held by
all of the Bern Owners.
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(g) The term "Termination Date" shall mean the earlier of (i) the date
of the filing of Prime's Annual Report on Form 10-K for the fiscal year
ending May 31, 1997, subject to the provisions of Paragraph 5 or (ii)
September 13, 1997.
(h) The term "Threshold Amount" shall mean an aggregate of $50,000 of
Losses.
(i) The following terms shall have the meanings ascribed to them in
this Agreement as set forth in the reference Section opposite such term:
Term Sectio
Claim Certificate Section 4(a)
Escrow Certificate Section 3(a)
Estimated Loss Section 5
Majority Owners Section 4(c)
Objection Notice Section 4(c)
Payout Section 4(b)
(j) Capitalized terms not otherwise defined herein shall have the
meanings ascribed to such terms in the Merger Agreement, which terms and
meanings ascribed thereto are incorporated herein as if fully set forth
herein.
2. Indemnification and Escrow Fund. This Agreement has been executed
and delivered, and the Escrow Fund has been established, for the purpose of
providing funds for any liability obligations incurred by Bern and/or any Bern
Owner under the Indemnification Agreement, including, without limitation, all
damages, costs and expenses indemnified against thereunder, with respect to the
Losses. The provisions of the Indemnification Agreement shall establish the
notice requirements and mechanics of defense for all claims of indemnification
for which the Escrow Fund established hereby is available and are incorporated
by reference herein.
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<PAGE>
3. Escrowed Stock.
(a) At the Effective Time, Prime shall deposit with the Escrow Agent,
for the account of the Bern Owners, certificates registered in the name of the
Escrow Agent (each, an "Escrow Certificate") for 4,100,000 shares of Prime
Stock, representing the aggregate number of shares of Prime Stock delivered to
the Bern Owners under the Merger. The shares represented by the Escrow
Certificate shall be held by the Escrow Agent for the benefit of the Indemnified
Parties under this Agreement, and shall not, except as provided in Sections 4
and 11 hereof, be sold or disposed of by the Escrow Agent. Prime shall maintain
a written record of the name and address of each Bern Owner and the number of
shares of Escrowed Stock or Proportionate Share credited to his or her account.
(Shares of Escrowed Stock shall be credited to the accounts of the Bern Owners
in the same proportion as shares of Prime Stock were delivered to the Bern
Owners under the Merger Agreement.)
(b) The respective interests of the Bern Owners in the Escrow Fund
shall not be transferable or assignable other than (i) to executors,
administrators, legatees or heirs of the Bern Owners or (ii) in a transaction
involving no change in beneficial ownership. Any transfer pursuant to clause
(ii) above shall be upon prior written notice from the Bern Owner(s) to Prime
and the Escrow Agent, and no such transfer shall be valid without the consent of
Prime, which consent shall not be unreasonably withheld or delayed.
(c) To the extent that the Escrow Fund contains cash, the Escrow Agent
may invest such cash in any Treasury Bill issued by the United States having a
maturity of 90 days or less.
4. Claims Against Escrow Fund.
Subject to the terms and conditions of this Agreement, the Escrow Fund
shall be applied, as provided herein, to indemnify and hold harmless the
Indemnified Parties against and
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<PAGE>
in respect of any Loss as set forth in a Claim Certificate (as defined below)
duly delivered to the Escrow Agent and the Bern Owners prior to the Termination
Date.
(a) If the Indemnified Parties shall suffer or incur any Loss as to
which indemnification is provided for under the Indemnification Agreement, it
shall promptly deliver simultaneously to the Escrow Agent and the Bern Owners a
certificate (a "Claim Certificate"), which Claim Certificate shall be signed by
the President or Chief Executive Officer of Prime or the Surviving Corporation,
as the case may be, certifying to the effect that Prime and/or the Surviving
Corporation, as the case may be, has suffered or incurred Losses in the amount
specified in such Claim Certificate and the basis for any such Loss.
(b) Unless otherwise provided in Sections 4(c) and (d), Escrow Agent
shall, as soon as practicable but not earlier than fifteen (15) business days
after the delivery to the Escrow Agent of such Claim Certificate, pay to Prime
and/or the Surviving Corporation, as the case may be, an amount of collateral
from the Escrow Fund equal to the amount of any Loss so suffered or incurred by
Prime and/or the Surviving Corporation, as the case may be, in accordance with
the Claim Certificate (the "Payout"). Whenever the Escrow Agent is required to
make a Payout, the Escrow Agent shall withdraw from the Escrow Fund and
transfer, deliver and assign to Prime (i) first, any cash comprising the Escrow
Fund, (ii) second, to the extent that there is insufficient cash to pay the
Losses, shares of Prime Stock in accordance with the ratio of the original
deposits of Prime Stock which comprise the Escrow Fund and (iii) third to the
extent there is an insufficient number of shares of Prime Stock in the Escrow
Fund to pay the Losses,any other property ("Other Property") comprising the
Escrow Fund. For purposes hereof, shares of Prime Stock shall be valued in
accordance with the terms of the Indemnification Agreement and Other Property,
if any, shall be valued in good faith by the Prime Designees on the Board of
Directors of Prime. The delivery by the Escrow Agent to Prime of the shares of
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<PAGE>
Prime Stock hereunder shall be effected by surrendering to Prime, or its
transfer agent, of the Escrow Certificate then in the Escrow Agent's possession,
whereupon Prime, or its transfer agent, shall promptly issue to the Escrow Agent
a new stock certificate registered in its name for the number of shares of Prime
Stock then remaining in the Escrow Fund as reduced by the number of shares
surrendered to Prime.
(c) If, within ten (10) days after notice to the Bern Owners of any
Claim Certificate, the Bern Owners who beneficially own a majority in interest
of the Escrowed Stock then held in the Escrow Fund (the "Majority Owners") shall
not have objected by written notice to Prime and the Escrow Agent, such Claim
Certificate (the "Objection Notice"), such Claim Certificate shall constitute
full authority to the Escrow Agent to take the action provided for in Section
4(b) hereof and shall be conclusive on all parties hereto. In the event that the
Majority Owners shall object timely to any such Claim Certificate and the
parties hereto shall fail to resolve the matter within three (3) business days
from the date of the Objection Notice, then any such dispute shall be submitted
to a court of competent jurisdiction for a declaratory judgment. Following any
Objection Notice timely given, the Escrow Agent shall not assign any Escrowed
Stock or make any indemnification payment pursuant to this Section 4 until (i)
it receives the written consent of the Majority Owners and Prime or (ii) there
is a Final Determination with respect to the dispute. The party against whom
such declaratory judgment is actually rendered shall reimburse the other party
thereto for the reasonable expenses incurred by it in the defense, prosecution,
or investigation of such claim.
(d) Notwithstanding anything contained herein to the contrary, no
Payout shall be made until any such Loss exceeds the Threshold Amount, whereupon
any Payout shall be only to the extent that any Loss exceeds such Threshold
Amount, in each case as specified in the Claim Certificate.
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<PAGE>
(e) If any dispute arises as to any matter arising under this Escrow
Agreement or there arises any uncertainty as to the meaning or applicability of
any of the provisions hereof, or as to the Escrow Agent's duties, rights or
responsibilities hereunder, the Escrow Agent may, at it option at any time
thereafter deposit the Escrowed Stock then being held by it in escrow into a
court having appropriate jurisdiction, and the Escrow Agent shall thereby be
discharged and relieved of all liability hereunder.
5. Termination. The Escrow Fund shall terminate on the Termination Date, or
upon written notice from Prime and the Majority Owners to the Escrow Agent. Any
shares or other assets then held in the Escrow Fund shall be distributed upon
termination by the Escrow Agent in accordance with the provisions of Section 6
hereof. Notwithstanding the foregoing, if on or before the Termination Date any
Indemnified Party has (a) duly delivered a Claim Certificate with respect to a
claim which has not been satisfied pursuant to this Agreement or (b) delivered
to the Escrow Agent and the Bern Owners written notice of the occurrence of an
event which constitutes a breach of any representation, warranty or agreement
made by Bern or the Bern Owners in the Merger Agreement and may give rise to a
claim for indemnification under the Indemnification Agreement and this
Agreement, and if such Indemnified Party has delivered to the Escrow Agent a
good faith written estimate of the maximum potential amount of Losses resulting
from all outstanding claim(s) or potential claim(s) (the "Estimated Loss"), the
Escrow Fund shall not terminate with respect to such claims until all such
claims have been fully satisfied or resolved or a Final Determination has been
rendered with respect thereto. Until such termination, the Escrow Agent shall
retain in the Escrow Fund that amount of Escrowed Stock, as valued and allocated
in accordance with the Indemnification Agreement and this Agreement, equal to
the Estimated Loss. In the event that the value of the shares of Prime Stock and
other
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<PAGE>
assets, if any, then remaining in the Escrow Fund is less than the Estimated
Loss, then the Losses shall be capped at, and shall not exceed, the then value
of the Collateral in the Escrow Fund as determined pursuant to the
Indemnification Agreement. Promptly after the Termination Date, any shares or
other assets in the Escrow Fund having a value in excess of the Estimated Loss
shall be distributed to the Bern Owners in accordance with Section 6 hereof and
shall no longer be subject to this Agreement.
6. Distribution of the Escrowed Stock. Upon any partial reduction of the
Escrow Fund pursuant to Section 5 hereof, and subject to the terms thereof, the
Escrow Agent shall, within ten (10) business days of such Termination Date,
distribute to each of the Bern Owners at their last known addresses appearing on
the records of Prime, the amount of Escrowed Stock to be distributed to the Bern
Owners pursuant to Section 5. Any delivery of shares of Prime Stock shall be of
full shares, and the Escrow Agent shall, upon instructions received from the
Majority Owners, make such adjustments for fractional share interests as the
Majority Owners in their sole discretion deem appropriate.
7. Delivery and Deposit of Additional Stock or Property. Any cash,
securities or other property distributable or payable to the Bern Owners in
respect of or in exchange for, any of the Escrowed Stock, whether by way of cash
dividends, stock dividends, stock splits, recapitalizations, liquidations,
mergers, consolidations, split-offs, spin-offs, or exchanges or conversions of
shares or the like, shall be delivered to, and deposited with, the Escrow Agent,
who shall hold such cash, securities and other property in the Escrow Fund,
subject to all of the provisions of this Escrow Agreement relating to the Escrow
Fund.
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8. Voting of Shares and Reports. The Escrow Agent will promptly distribute
copies of all communications to Prime stockholders received by it as registered
owner of the Escrowed Stock to the Bern. Upon notice from Prime of any action
which requires or entitles the stockholders of Prime to vote or execute written
consents, the Escrow Agent shall promptly notify (the "Notice") each Bern Owner
of such pending action. The Notice to the Bern Owners shall be in writing and
shall include copies of all information distributed by Prime to Prime's
stockholders with respect to such action. Such Notice shall (i) state the date
upon which the Escrow Agent shall be required to vote or consent with respect to
the shares of Escrowed Stock; (ii) shall set forth a date (not less than ten
days after the delivery of the Notice, unless such shorter period is required by
the date of the vote by Prime's stockholders) by which each Bern Owner must
notify the Agent of its vote with respect to such action and (iii) include a
written ballot to be completed by such Bern Owner with respect to such action,
to be returned to the Agent on or before the date set forth in accordance with
(ii) above. The Escrow Agent shall vote and abstain from voting the shares of
Escrowed Stock attributable to each Bern Owner or consent or decline to consent
with respect to such shares as directed by each Bern Owner's ballot. In the
event that the Escrow Agent does not receive a ballot form any Bern Owner, the
escrow agent shall abstain from voting, and decline to consent with respect to,
the shares of Escrowed Stock attributable to such Bern Owner.
9. Notice. Unless written designation of a different address is
filed with each of the other parties hereto, all notices and Claim Certificates
required to be given under this Agreement shall be deemed to have been properly
given if in writing and delivered or mailed by registered or certified mail,
postage prepaid or by overnight courier. Mailed notices and Claim Certificates
shall be deemed given when duly mailed and addressed as follows:
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Prime or Prime Acquisition Subsidiary:
100 First Stamford Place
3rd Floor
Stamford, Connecticut 06902
Attention: Joseph K. Pagano
With a copy to:
Tenzer Greenblatt LLP
405 Lexington Avenue
New York, New York 10174
Attention: Barry S. Rutcofsky
The Bern Owners:
To their addresses as set forth on
Schedule 1 hereto
With a copy to:
Neville Shaver Kelly & McLean
Three Landmark Square
Stamford, Connecticut 06901
Attention: Richard M. Neville
Escrow Agent:
Tenzer Greenblatt LLP
405 Lexington Avenue
New York, New York 10174
Attention: Barry S. Rutcofsky
10. Liability of the Escrow Agent. The Escrow Agent may act upon any
instrument or other writing believed by it in good faith to be genuine and to be
signed or presented by the proper person and shall not be liable in connection
with the performance by it of its duties pursuant to the provisions of this
Agreement except for its own willful misconduct or gross negligence. The Escrow
Agent may retain counsel and act with respect to this Agreement and its
obligations hereunder on the advice of such counsel. The Escrow Agent shall be,
and hereby is, jointly and severally, indemnified and saved harmless, by the
parties hereto, from all losses,
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costs and expenses (including reasonable attorneys' fees) which may be incurred
by it as a result of its involvement in any litigation arising from performance
of its duties hereunder, provided that such litigation or action in interpleader
shall not result from any action taken or omitted by the Escrow Agent and for
which it shall have been adjudged to have acted in bad faith or to have been
grossly negligent. Prime shall be responsible for determining any requirements
for paying taxes or reporting any payments for tax purposes. Prime and the
Majority Owners may give written directions to the Escrow Agent to prepare and
file tax information or to withhold any payments hereunder for tax purposes.
Prime and the Bern Owners, jointly and severally, covenant and agree to
indemnify and hold the Escrow Agent harmless against all liability for tax
withholding and/or reporting for any payments made by the Escrow Agent pursuant
to the Agreement. The Escrow Agent shall have no duties or obligations except
those expressly set forth in this Escrow Agreement, and no implied duties or
obligations shall be read into this Escrow Agreement against the Escrow Agent.
The Escrow Agent shall have no obligation to make any payment, investment or
disbursement of any type pursuant hereto or to incur any financial liability in
the performance of its duties hereunder unless Prime shall have deposited with
the Escrow Agent sufficient funds therefor. The Escrow Agent may conclusively
rely upon and shall be protected, indemnified and held harmless by Prime and the
Bern Owners, jointly and severally, in acting upon the written (which shall
include instructions given by telecopier or other telecommunications device) or
oral instructions of any officer or agent of either of them or of counsel to
either of them with respect to any matter relating to its actions as Escrow
Agent hereunder, and the Escrow Agent shall be entitled to request that further
instructions be given by such persons or to request that instructions be given
in writing.
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<PAGE>
11. Fees and Expenses. Prime will pay to the Escrow Agent its reasonable
fees for the services rendered by it pursuant to the provisions of this
Agreement with respect to the Escrow Fund and will reimburse the Escrow Agent
for its reasonable expenses (including reasonable fees and disbursements of its
counsel) incurred in connection with the performance by it of such services. Any
transfer taxes incurred as a result of the operation of any provision of this
Agreement relating to the Escrow Fund shall be paid by Prime. Notwithstanding
anything contained in this Agreement to the contrary, the Escrow Agent shall
have no lien upon or claim against the Escrow Fund for the payment of its fees
and expenses.
12. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without reference to or
application of any conflicts of laws principles.
13. Binding Effect. This Agreement and all action taken hereunder in
accordance with its terms shall be binding upon and inure to the benefit of
Prime, the Bern Owners, the Surviving Corporation and the Escrow Agent and their
respective successors and assigns.
14. Successor Escrow Agent. The Escrow Agent, or any successor to it
hereafter appointed, may at any time resign by giving prior notice in writing to
Prime and the Bern Owners and shall be discharged of its duties hereunder upon
the appointment of a successor Escrow Agent as hereinafter provided. In the
event of any such resignation, a successor Escrow Agent, [which shall be a bank
or trust company organized under the laws of the United States of America or the
State of New York having a combined capital and surplus of not less than
$50,000,000, or other entity acceptable to the Majority Owners] shall be
appointed by Prime. Any such successor
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<PAGE>
Escrow Agent shall deliver to Prime and the Bern Owners a written instrument
accepting such appointment hereunder, and thereupon it shall succeed to all the
rights and duties of the Escrow Agent hereunder and shall be entitled to receive
all the Escrow Fund.
15. Confirmation of Escrow Agent's Appointment. Prime and the Bern Owners
hereby confirm the appointment of Tenzer Greenblatt LLP to act as Escrow Agent
under this Escrow Agreement, and Tenzer Greenblatt LLP hereby accepts such
appointment. Bern Owners acknowledge that Tenzer Greenblatt LLP acts as counsel
for Prime and agree that in the event of any dispute between Prime and Bern
Owners, including under this Escrow Agreement that Tenzer Greenblatt LLP acts as
counsel for Prime. The Bern Owners waive any right to object to Tenzer
Greenblatt's representation of Prime.
16. Entire Agreement. This Agreement and the Indemnification Agreement and
the Merger Agreement contain the entire agreement among the parties hereto with
respect to the transactions contemplated hereby and supersede all prior
agreements and understandings whether written or oral, among the parties hereto
with respect to the subject matter of this Agreement.
17. Severability. The invalidity or unenforceability of any particular
provision of this Agreement shall not affect any other provisions, and this
Agreement shall be construed in all respects as though such invalid or
unenforceable provisions were omitted.
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18. Amendments. This Agreement may only be amended or modified by a written
instrument executed by Prime, the Majority Owners and the Escrow Agent.
19. Counterparts. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original, and it shall not
be necessary in making proof of this Agreement to produce or account for more
than one such counterpart.
IN WITNESS WHEREOF, the parties hereto have executed this Escrow Agreement
on the day, month and year first written above.
PRIME CELLULAR, INC.
By:_______________________________________
Joseph K. Pagano, President and CFO
PRIME CELLULAR ACQUISITION CORP.
By:______________________________________
Joseph K. Pagano, President
- ----------------------------------- -----------------------------------
Rafael Collado Ellen Kirschenbaum
- ----------------------------------- -----------------------------------
William Josuva Michael Islek
- ----------------------------------- -----------------------------------
Suhail Nanji Neil Levine
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- ----------------------------------- -----------------------------------
Mark Newman Andrew Mitchell
- ----------------------------------- -----------------------------------
Bernard Kirschenbaum Richard Neville
- ----------------------------------- -----------------------------------
Joanne Witt Louise Northcutt
- ----------------------------------- -----------------------------------
Kathy Diaz Rafael Collado, Sr.
-----------------------------------
Joan Hadsall
Accepted and Agreed
Tenzer Greenblatt LLP, as Escrow Agent
By:_________________________
Name:
Title:
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ESCROW AGREEMENT
SCHEDULE 1
Names and Addresses of the Bern Owners
Rafael Collado Ellen Kirschenbaum
93 Walling Road 122 Beverley Road
Warwick, NY 10990 Upper Montclair, NJ 07043
William Josuva Michael Islek
170 Northfield Avenue 27 Chestnut Lane
West Orange, NJ 07052 Woodbury, NY 11797
Suhail Nanji Neil Levine
765 Midland Avenue 2352 Linwood Avenue
Yonker, NY 10704 Fort Lee, NJ 07024
Atlanta Selective Fund Andrew Mitchell
#6 Limited Partnership
601 Fairview Blvd. 118 Beverley Road
Incline, NV 89451 Upper Montclair, NJ 07043
Joanne Witt Richard Neville
65 Columbia Street 57 Marshall Ridge Road
Wood Ridge, NJ 07075 New Canaan, CT 06840
Bernard Kirschenbaum Louise Northcutt
12 Gregory Road 26 Little Brooklyn Road
Springfield, NJ 07083 Warwick, NY 10990
Kathy Diaz Rafael Collado, Sr.
31 A Tanayer Road 3 Demarest Road
Monroe, NY 10950 Teaneck, NJ 07666
Joan Hadsall
25 Crescent Drive
Fairfield, NJ 07004
INDEMNIFICATION AGREEMENT
AGREEMENT, dated as of June __, 1996, by and among Prime Cellular, Inc., a
Delaware corporation ("Prime"); Prime Cellular Acquisition Corp., a Delaware
corporation ("Prime Acquisition Subsidiary"); Bern Associates, Inc., a New
Jersey corporation ("Bern"); and the persons listed on Schedule 1 hereto (the
"Bern Owners").
RECITALS:
WHEREAS, the Bern Owners own all of the outstanding shares of common stock
of Bern;
WHEREAS, Prime, Prime Acquisition Subsidiary, Bern and the Bern Owners
entered into a Merger Agreement, dated as of May 14, 1996 (the "Merger
Agreement"), pursuant to which, among other things, Bern will be merged with and
into Prime Acquisition Subsidiary (all capitalized terms used herein and not
otherwise defined herein shall have the respective meanings ascribed to them in
the Merger Agreement);
WHEREAS, pursuant to the Merger Agreement and upon the consummation of the
transactions contemplated thereby, the Bern Owners shall receive shares of
common stock, par value of $.01 per share, of Prime (the "Prime Stock");
WHEREAS, pursuant to the Merger Agreement, Bern and the Bern Owners, on the
one hand, and Prime on the other hand, have agreed to indemnify each other as
more particularly provided herein; and
WHEREAS, it is a condition to the consummation of the transactions
contemplated by the Merger Agreement that Prime and each of Bern and the Bern
Owners enter into this Indemnification Agreement.
NOW, THEREFORE, in consideration of the premises and mutual covenants and
agreements of the parties set forth herein and other good and valuable
consideration, receipt of which is hereby acknowledged, the parties hereto agree
as follows:
Section 1. Indemnification by the Bern Owners. Subject to the provisions of
Section 3 hereof, each of the Bern Owners indemnifies and agrees to defend and
hold harmless each of Prime and the Prime Acquisition Subsidiary (collectively,
the "Prime Entities") from and against any losses, damages, expenses,
liabilities, claims, settlements, assessments, judgments, expenses or costs
(including without limitation reasonable attorneys' fees)
<PAGE>
incurred or suffered by any Prime Entity (net of any insurance proceeds actually
received by the Prime Entities) as a result of any claim, or the defense,
settlement or investigation thereof (the "Loss"), which Loss arises out of, is
caused by, based upon or results from any breach by Bern or any of the Bern
Owners of their respective representations and warranties, obligations or
covenants contained in the Merger Agreement or any document or certificate
referred to in and delivered or to be delivered by Bern or any of the Bern
Owners pursuant to the Merger Agreement. This indemnification provision shall
also apply to direct claims by the Prime Entities against Bern or the Bern
Owners.
Section 2. Indemnification by Prime. Subject to the provisions of Section 3
hereof, Prime indemnifies and agrees to defend and hold harmless the Bern Owners
from and against any Loss arising out of, caused by, based upon or resulting
from any breach by Prime of its representations and warranties, obligations or
covenants contained in the Merger Agreement or any document or certificate
referred to in and delivered or to be delivered by Prime pursuant to the Merger
Agreement. This indemnification shall also apply to direct claims by Bern or the
Bern Owners against the Prime Entities.
Section 3. Limitations. (a) Neither the Prime Entities nor any of the Bern
Owners shall be entitled to make any claim for indemnification pursuant to this
Indemnification Agreement after the expiration of the applicable Survival Period
(as defined herein). For purposes hereof, the Survival Period shall be that
period of time during which the representations and warranties contained in the
Merger Agreement shall survive the Closing and remain in full force and effect,
which period shall commence at the Closing and continue until the later to occur
of (i) the date of filing with the Securities Exchange Commission of Prime's
Annual Report on Form 10-K with respect to the year ending May 31, 1997 but in
no event later than September 13, 1997 or (ii) with respect to the
representations and warranties of each of Bern or the Bern Owners and Prime
concerning Taxes and Environmental laws until the expiration of the applicable
statutes of limitations. To the extent any claim is timely made hereunder, the
representations and warranties shall survive until such claim is finally
determined or settled. Notwithstanding anything to the contrary contained
herein, the representations and warranties of Bern contained in Sections 2.4,
2.10, 2.13 and 2.14 of the Merger Agreement and the representations and
warranties of Prime contained in Sections 3.3 and 3.5 of the Merger Agreement
shall remain in full force and effect indefinitely.
(b) Except as otherwise provided in Section 3(d) hereof, neither the
Prime Entities nor any of the Bern Owners shall be entitled to indemnification
hereunder unless the aggregate amount
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of their respective Loss exceeds $50,000 (the "Threshold Amount") and once the
Threshold Amount is met, then the indemnity shall only apply to amounts over
such Threshold Amount.
(c) Notwithstanding anything to the contrary contained herein, the
maximum liability of any Bern Owner for any Loss incurred by Prime Entities
shall in no event exceed the value of the shares of Prime Stock, as determined
pursuant to Section 7(b) hereof, received by such Bern Owner as consideration
for the Merger, except that none of the limitations set forth in this Section
3(c) shall apply to any obligation of any Bern Owner to indemnify Loss caused by
his fraudulent misrepresentation.
Section 4. Notice and Defense of Claims. (a) Each party entitled to
indemnification under this Indemnification Agreement (each being an "Indemnified
Party") shall give notice to each party required to provide indemnification
(each being an "Indemnifying Party") promptly after such Indemnified Party has
knowledge of any claim for Loss as to which indemnity may be sought, and, in the
event of any claim or demand asserted against an Indemnified Party by a third
party, shall permit the Indemnifying Party or Parties to assume the defense of
any such claim (and litigation resulting therefrom) as provided in Section 4(b)
hereof. Notwithstanding anything to the contrary contained herein, any failure
by an Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party or Parties of their respective obligations under this
Indemnification Agreement unless such failure materially and adversely affects
the Indemnifying Party's ability to defend such action.
(b) The Indemnifying Party or Parties shall have ten (10) business days
after said notice is given to elect, by written notice given to the Indemnified
Party or Parties, to undertake, conduct and control, through counsel of their
own choosing (subject to the consent of the Indemnified Party or Parties, which
consent is not to be unreasonably withheld or delayed) and at their sole risk
and expense, the good faith settlement or defense of such claim, and the
Indemnified Party or Parties shall cooperate with the Indemnifying Party or
Parties in connection therewith; provided, in the event that the Indemnifying
Party elects to undertake, conduct and control such settlement or defense: (i)
all settlements require the prior reasonable consultation with the Indemnified
Party and the prior written consent of the Indemnified Party, which consent
shall not be unreasonably withheld or delayed, and (ii) the Indemnified Party or
Parties shall be entitled to participate in such settlement or defense through
counsel chosen by the Indemnified Party or Parties, provided that the fees and
expenses of such counsel shall be borne by the Indemnified Party or Parties and
shall not constitute a Loss subject to being indemnified hereunder. So long as
the Indemnifying Party or
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Parties are contesting any such claim in good faith, the Indemnified Party or
Parties shall not pay or settle any such claim; provided, however, that
notwithstanding the foregoing, the Indemnified Party or Parties shall have the
right to pay or settle any such claim at any time, provided that in such event
they shall waive any right of indemnification therefor by the Indemnifying Party
or Parties. If the Indemnifying Party or Parties do not make a timely election
to undertake the good faith defense or settlement of the claim as aforesaid, or
if the Indemnifying Party or Parties fail to proceed with the good faith defense
or settlement of the matter after making such election, then, in either such
event, the Indemnified Party or Parties shall have the right to contest, settle
or compromise (provided that all settlements or compromises require the prior
reasonable consultation with the Indemnifying Party and the prior written
consent of the Indemnifying Party, which consent shall not be unreasonably
withheld) the claim at their exclusive discretion, at the risk and expense of
the Indemnifying Party of Parties.
(c) The Indemnified Party or Parties shall furnish such information
regarding themselves or the claim in question as the Indemnifying Parties may
reasonably request in writing and as shall be reasonably required in connection
with defense of such claim and litigation resulting therefrom.
Section 5. Reimbursement and Subrogation. (a) Payment of Indemnification
for a Loss shall be due upon a determination of the dollar amount of any Loss
for which indemnification is sought hereunder, whether by payment by an
Indemnified Party of such Loss claimed or by entry of a final judgment, order or
decree (after exhaustion or expiration of appeal rights) by a court of competent
jurisdiction. Unless an Indemnifying Party disputes his liability for such Loss
or any portion thereof, he shall forthwith, upon receipt of notice from the
Indemnified Party or Parties, pay to such Indemnified Party or Parties as
provided in subparagraph (b) hereof, his pro rata share of the amount of such
Loss.
(b) The Indemnifying Party or Parties may discharge any indemnity
obligation hereunder either by paying cash or by transferring shares of Prime
Stock. If the Indemnifying Party or Parties elect to discharge their indemnity
obligation, in whole or in part, by transferring shares of Prime Stock, said
shares shall be valued pursuant to the following formula: 80% of the average
closing price of the Prime Stock, as reported by the principal securities
exchange on which the Prime Stock is listed or admitted to trading, or, if the
Prime Stock is not listed or admitted to trading, on any securities exchange or
if any such exchange on which the Prime Stock is listed is not its principal
trading market, the average closing bid price as furnished by the National
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Association of Securities Dealers, Inc. through NASDAQ, the OTC Bulletin Board
or similar organization (regardless of method utilized, the "Average Closing
Price"), as determined for (i) the five (5) consecutive trading days ending on
and including the trading day immediately preceding the date the Loss is
determined, as provided in subsection (a) of this Section 5, or (ii) the five
(5) consecutive trading days ending on and including the trading day immediately
preceding the Effective Time, whichever yields the greater value.
(c) The Indemnified Party may, at its option, take legal action against any
Indemnifying Party who fails to pay his pro rata share when due as provided in
subsection (a) of this Section 5 for reimbursement of its Loss together with (i)
any costs (including reasonable attorney's fees) to bring such legal action and
(ii) interest on the foregoing items (but only to the extent pre- judgment
interest is not already included within such items) at the rate of ten percent
(10%) per annum from the date the Loss is due, as hereinabove provided, until
such Loss shall be paid by the Indemnifying Party or Parties.
(d) To the extent that any Loss is paid hereunder by an Indemnifying Party,
he shall thereby become subrogated to any rights of recovery (including rights
to insurance or indemnification from persons other than the Indemnifying
Parties) which the Indemnified Parties may have with respect to the Indemnity
Claim. The Indemnified Party shall do all things reasonably requested to
facilitate such subrogation and the prosecution of any claims made by the
subrogated Indemnifying Party.
Section 8. Security for Indemnity. As security for the performance by the
Bern Owners of their respective obligations under the Merger Agreement, and in
connection with their execution of this Indemnification Agreement, each Bern
Owner simultaneously herewith deposits in escrow, in accordance with a certain
Escrow Agreement in the form attached hereto as Exhibit A, that number of shares
of Prime Stock received by such Bern Owner pursuant to the Merger.
Section 9. Effect of Due Diligence. No investigation by or on behalf of the
Indemnified Parties into the business, operations, prospects, assets or
condition (financial or otherwise) of Bern or Prime, as the case may be, shall
diminish in any way the effect of any representations or warranties made by Bern
and the Bern Owners or the Prime Entities in the Merger Agreement or shall
relieve the Bern Owners or Prime of any of their respective obligations under
this Indemnification Agreement.
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Section 10. Successors and Assigns. This Indemnification Agreement will
inure to the benefit of and be binding upon the parties hereto and their
respective successors and permitted assigns. Neither this Indemnification
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by any of the parties hereto without the prior written consent of the
other parties hereto.
Section 11. Entire Agreement. This Indemnification Agreement and the other
documents referred to herein contain the entire agreement among the parties
hereto with respect to the transactions contemplated hereby, and controls and
supersedes any prior understandings, agreements or representations by or between
the parties, written or oral, which conflicts with, or may have related to, the
subject matter hereof or thereof in any way.
Section 12. Notices. All notices or other communications hereunder shall be
in writing and shall be deemed to have been duly given if delivered personally
or sent by telefax communication, by recognized overnight courier marked for
overnight delivery, or by registered or certified mail, postage prepaid,
addressed: (a) if to a Bern Owner, at its address on Schedule 1 hereto, (b) if
to Bern, c/o Richard Neville at Neville, Shaver, Kelly & McLean, Three Landmark
Square, Stamford, CT 06901, Attention: Chairman and (c) if to Prime or Prime
Acquisition Subsidiary, at 100 First Stamford Place, 3rd Floor, Stamford,
Connecticut 06902, Attention: President, with a copy in the case of either (a)
or (b) to Neville Shaver Kelly & McLean, Three Landmark Square, Stamford,
Connecticut 06901, Attention: Richard M. Neville and, in the case of (c), to:
Tenzer Greenblatt LLP, 405 Lexington Avenue, New York, New York 10174,
Attention: Barry S. Rutcofsky, Esq.; or such other addresses as shall be
furnished by like notice by such party. All such notices and communications
shall, when telefaxed (immediately thereafter confirmed by telephone), be
effective when telefaxed or if sent by nationally recognized overnight courier
service, be effective one business day after the same has been delivered to such
courier service marked for overnight delivery, or, if mailed, be effective three
days after being mailed by registered or certified mail, return receipt
requested, postage prepaid.
Section 13. Applicable Law. This Indemnification Agreement shall be
governed by, and construed in accordance with, the internal laws of the State of
New York, without reference to or application of any conflicts of laws
principles. Each of the Prime Entities and each of Bern and the Bern Owners
hereby irrevocably and unconditionally consents to submit to the exclusive
jurisdiction of the courts of the State of New York and of the United States
District Court, Southern District of New York (the "New York Courts") for any
litigation arising out of or relating to this Agreement and the transactions
contemplated hereby (and agrees
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not to commence any litigation relating thereto except in such courts), waives
any objection to the laying venue of any such litigation in the New York Courts
and agrees not to plead or claim that such litigation brought in any New York
Courts has been brought in an inconvenient forum.
Section 14. Severability. Whenever possible, each provision of this
Indemnification Agreement shall be interpreted in such manner so as to be
effective and valid under applicable law, but if any provision of this
Indemnification Agreement is held to be invalid, illegal or unenforceable in any
respect under any applicable law or rule in any jurisdiction, such invalidity,
illegality or unenforceability shall not affect any other provision of this
Indemnification Agreement. If any provision contained in this Indemnification
Agreement is determined to be invalid, illegal or unenforceable as written, a
court of competent jurisdiction shall, at any party's request, reform the terms
of this Indemnification Agreement to the extent necessary to cause such
otherwise invalid provisions to be enforceable under applicable law.
Section 15. Counterparts. This Indemnification Agreement may be executed in
one or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
Section 16. Headings. The headings used in this Indemnification Agreement
are for convenience only and are not to be considered in construing or
interpreting any term or provision of this Indemnification Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Indemnification
Agreement on the day, month and year first written above.
PRIME CELLULAR, INC.
By:_____________________________
Joseph K. Pagano, President
and CFO
PRIME CELLULAR ACQUISITION
CORP.
By:_____________________________
Name/Title:
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BERN ASSOCIATES, INC.
By:
Name/Title:
- ------------------------- -------------------------
RAFAEL COLLADO ELLEN KIRSCHENBAUM
- ------------------------- ------------------------
WILLIAM JOSUVA MICHAEL ISLEK
- ------------------------- ------------------------
SUHAIL NANJI NEIL LEVINE
- ------------------------- ------------------------
MARK NEWMAN ANDREW MITCHELL
- ------------------------- ------------------------
BERNARD KIRSCHENBAUM RICHARD NEVILLE
- ------------------------- ------------------------
JOANNE WITT LOUISE NORTHCUTT
- ------------------------- ------------------------
KATHY DIAZ RAFAEL COLLADO, SR.
------------------------
JOAN HADSALL
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INDEMNIFICATION AGREEMENT
SCHEDULE 1
Names and Addresses of the Bern Owners
Rafael Collado Ellen Kirschenbaum
93 Walling Road 122 Beverley Road
Warwick, NY 10990 Upper Montclair, NJ 07043
William Josuva Michael Islek
170 Northfield Avenue 27 Chestnut Lane
West Orange, NJ 07052 Woodbury, NY 11797
Suhail Nanji Neil Levine
765 Midland Avenue 2352 Linwood Avenue
Yonker, NY 10704 Fort Lee, NJ 07024
Atlanta Fund #6 Limited Partnership Andrew Mitchell
601 Fairview Blvd. 118 Beverley Road
Incline, NV 89451 Upper Montclair, NJ 07043
Joanne Witt Richard Neville
65 Columbia Street 57 Marshall Ridge Road
Wood Ridge, NJ 07075 New Canaan, CT 06840
Bernard Kirschenbaum Louise Northcutt
12 Gregory Road 26 Little Brooklyn Road
Springfield, NJ 07083 Warwick, NY 10990
Kathy Diaz Rafael Collado, Sr.
31 A Tanayer Road 3 Demarest Road
Monroe, NY 10950 Teaneck, NJ 07666
Joan Hadsall
25 Crescent Drive
Fairfield, NJ 07004
