<PAGE>
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): October 17, 1996
THE EASTWIND GROUP, INC.
------------------------
(Exact name of issuer as specified in charter)
Delaware 0-27638 23-2732753
(State or Other Jurisdiction Commission (I.R.S. Employer
of Incorporation or file number Identification
Organization) Number)
100 Four Falls Corporate Center
Suite 305
West Conshohocken, Pennsylvania 19428
(Address of principal executive offices)
(610) 828-6860
(Registrant's telephone number, including area code)
<PAGE>
Item 2. Acquisition or Disposition of Assets
------------------------------------
On October 17, 1996, Centennial Acquisition Corp. ("Merger Corp."), a
wholly-owned subsidiary of The Eastwind Group, Inc. (the "Company"), merged with
and into Centennial Printing Corporation ("Centennial") in a merger transaction
(the "Merger") pursuant to an Amended and Restated Agreement and Plan of Merger
dated as of September 30, 1996 (the "Agreement"). As a result of the Merger,
Merger Corp. ceased to exist and the Company owns all of the outstanding stock
of Centennial. The total consideration paid by the Company pursuant to the
Merger was negotiated at arms-length and valued at $2,850,000 (the "Merger
Consideration"). All of the Merger Consideration was received by Bruce K.
Worrall, the sole shareholder of Centennial prior to the Merger, in the form of
182,232 shares of the Company's common stock (the "Shares"), 9,000 shares of the
Company's Series B Preferred Voting Stock (the "Preferred Stock") and $450,000
in cash. The Company used internal funds to pay the cash portion of the Merger
Consideration.
The Preferred Stock issued in the Merger has a stated value of $100
per share and the holder is entitled to receive cash dividends at a rate of 6%
per annum of the stated value. Additionally, the holder of Preferred Stock may
require the Company to redeem for cash, in an amount equal to the stated value
plus accrued dividends, up to 1,800 shares of Preferred Stock during each three
month period beginning on April 1, 1997.
Prior to the Merger, none of the officers, directors, shareholders or
employees of Centennial had any material relationship with the Company or any of
its affiliates. In connection with the Agreement, the Company paid Mr. Worrall
$500,000 in consideration of his agreement not to compete with Centennial and
agreed to use its best efforts to file a registration statement (the
"Registration Statement") to register the Shares for resale under the Securities
Act of 1933, as amended, as soon as reasonably practicable following the date of
the Merger and, in any event, no later than six months from such date. If,
during the one year period following the effective date of the Registration
Statement, the proceeds from the total number of any Shares sold during such
period aggregate less than the amount that would have been realized had such
Shares been sold at a price of $7.00 per Share (the "Difference"), the Company
will be obligated to make additional payments to the seller in the amount of the
Difference. The Company also agreed that, for a period of three years following
the Merger, Centennial would spend $100,000 per year to sponsor Centennial
Racing, an automobile racing team controlled by Mr. Worrall. In return for such
sponsorship, Centennial Racing has agreed to promote Centennial's printing
business through, among other things, the display of advertisements on its race
cars.
-2-
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Centennial is engaged in the business of commercial printing. It is
the Company's intent for Centennial to continue in this business.
Item 7. Financial Statements, Pro Forma
Financial Information and Exhibits
----------------------------------
(a) Financial statements of businesses acquired (provided in accordance
with Item 310(c) of Regulation S-B).
It is impracticable to provide the audited financial statements
required relative to the acquired business described in Item 2 at the
time this Report on Form 8-K is filed. The Registrant will file the
required financial statements as soon as practicable, but in no event
later than December 31, 1996.
(b) Pro forma financial information (provided in accordance with Item
310(d) of Regulation S-B).
It is impracticable to provide the pro forma financial information
required relative to the acquired business described in Item 2 at the
time this Report on Form 8-K is filed. The Registrant will file pro
forma financial information as soon as practicable, but in no event
later than December 31, 1996.
(c) Exhibits
2.1 Amended and Restated Agreement and Plan of Merger by and between
Centennial Printing Corporation, The Eastwind Group, Inc. and
Centennial Acquisition Corp., dated as of September 30, 1996.
-3-
<PAGE>
SIGNATURE
---------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
THE EASTWIND GROUP, INC.
Date: October 31, 1996 By:/s/ Paul A. DeJuliis
------------------------------
Chairman and Chief Executive
Officer
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EXHIBIT INDEX
Exhibit Sequential
No. Description Page Number
- ------- ----------- -----------
2.1 Amended and Restated Agreement and Plan of
Merger by and between Centennial Printing
Corporation, The Eastwind Group, Inc. and
Centennial Acquisition Corp., dated as of
September 30, 1996. (Certain exhibits and
schedules have been omitted in accordance with
Item 610(b)(2) of Regulation S-B. A copy of such
exhibits and schedules shall be furnished
supplementally to the Securities and Exchange
Commission upon request.)
<PAGE>
CLF&Y
DRAFT
09-06-96
rev. 09-09-96
rev. 09-20-96
rev. 09-27-96
rev. 09-30-96
AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
CENTENNIAL PRINTING CORPORATION,
THE EASTWIND GROUP, INC.
AND
CENTENNIAL ACQUISITION CORP.
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TABLE OF CONTENTS
<TABLE>
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ARTICLE I - THE MERGER................................................................................. 2
1.01 The Merger.................................................................................... 2
(a) Merger Structure......................................................................... 2
(b) Certificate of Merger; Effective Time.................................................... 2
(c) Rights Following Merger.................................................................. 2
1.02 Certain Definitions........................................................................... 2
(a) "Affiliate".............................................................................. 2
(b) "Company Common Stock"................................................................... 2
(c) "Company Dissenting Shares".............................................................. 3
(d) "Eastwind Common Stock".................................................................. 3
(e) "Eastwind Preferred Stock"............................................................... 3
(f) "Eastwind Closing Price Per Share"....................................................... 3
(g) "Eastwind Closing Shares"................................................................ 3
(h) "Environment"............................................................................ 3
(i) "Environmental Claim".................................................................... 3
(j) "Environmental Clean-Up Site"............................................................ 4
(k) "Environmental Law"...................................................................... 4
(l) "Environmental Permit"................................................................... 4
(m) "ERISA Affiliate"........................................................................ 5
(n) "GAAP"................................................................................... 5
(o) "Governmental Authority"................................................................. 5
(p) "Hazardous Material"..................................................................... 5
(q) "Indebtedness"........................................................................... 5
(r) "Investment Assets"...................................................................... 5
(s) "Knowledge".............................................................................. 5
(t) "Laws"................................................................................... 6
(u) "Liabilities"............................................................................ 6
(v) "Loss"................................................................................... 6
(w) "Release"................................................................................ 6
(x) "Stockholder"............................................................................ 6
1.03 Conversion of Company Shares.................................................................. 6
(a) Company Treasury Stock................................................................... 6
(b) Merger Subsidiary Stock.................................................................. 7
(c) Company Stock............................................................................ 7
(d) Issuance of Eastwind Shares.............................................................. 7
1.04 Adjustments for Capital Changes............................................................... 7
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1.05 Fractional Shares............................................................................. 8
1.06 Surrender and Payment......................................................................... 8
1.07 Dissenting Shares............................................................................. 10
ARTICLE II - THE SURVIVING CORPORATION................................................................ 10
2.01 Certificate of Incorporation.................................................................. 10
2.02 Bylaws........................................................................................ 11
2.03 Directors and Officers........................................................................ 11
2.04 Treatment of Merger as a Reorganization....................................................... 11
ARTICLE III - REPRESENTATIONS AND WARRANTIES......................................................... 11
3.01 Representations and Warranties of Company and Stockholder..................................... 11
(a) Organization, Power and Authority.................................................... 11
(b) Conflicts; Defaults.................................................................. 12
(c) Consents............................................................................. 12
(d) Assets of Company, Good Title........................................................ 12
(e) Real Property........................................................................ 12
(f) Contracts............................................................................ 13
(g) Financial Statements................................................................. 14
(h) Accounts Receivable.................................................................. 14
(i) Inventories.......................................................................... 15
(j) Litigation........................................................................... 15
(k) Regulatory Compliance................................................................ 15
(l) Environmental Matters................................................................ 15
(m) Intellectual Property................................................................ 16
(n) Permits.............................................................................. 17
(o) Insurance............................................................................ 17
(p) Collective Bargaining Agreements..................................................... 17
(q) Employee Plans....................................................................... 17
(r) Customers and Suppliers.............................................................. 19
(s) Changes in Circumstances............................................................. 19
(t) Taxes................................................................................ 20
(u) Brokers, Finders and Agents.......................................................... 20
(v) Employment Matters................................................................... 21
(w) Bank and Brokerage Accounts.......................................................... 21
(x) Disclosure........................................................................... 21
3.02 Representations and Warranties of Eastwind and Merger
Subsidiary.................................................................................... 21
(a) Organization, Power and Authority.................................................... 22
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(b) Conflicts; Defaults.................................................................. 22
(c) Brokers, Finders and Agents.......................................................... 22
(d) Litigation........................................................................... 22
(e) Financing............................................................................ 22
(f) Regulatory Compliance................................................................ 22
(g) Disclosure Documents................................................................. 23
(h) SEC Filings.......................................................................... 23
(j) Ability to Issue Eastwind Closing Shares and
Eastwind Preferred Shares............................................................ 23
(k) Registration Statement Eligibility................................................... 24
(l) Trading Status....................................................................... 24
ARTICLE IV - COVENANTS OF THE COMPANY.................................................................. 24
4.01 Maintenance of Business....................................................................... 24
4.02 Regulatory Authorizations..................................................................... 26
4.03 Maintenance of, and Access to, Records........................................................ 26
4.04 Further Assurances............................................................................ 27
4.05 No Solicitation............................................................................... 27
4.06 Stockholder Consent; Company Information Statement............................................ 28
4.07 Limited Right of Offset and Collateral Security............................................... 29
ARTICLE V - COVENANTS OF EASTWIND AND MERGER SUBSIDIARY................................................ 30
5.01 Maintenance of, and Access to, Records........................................................ 30
5.02 Regulatory Authorizations..................................................................... 30
5.03 Further Assurances............................................................................ 30
5.04 Offer of Employment........................................................................... 30
5.05 Promotion..................................................................................... 31
5.06 Obligations of Merger Subsidiary.............................................................. 31
5.07 Registration Rights........................................................................... 32
5.08 Floor Guarantee of Resale Price of Eastwind Closing
Shares........................................................................................ 40
5.09 Board of Directors............................................................................ 42
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5.10 Continued Participation of Stockholder in Certain Benefit
Plans of Surviving Corporation................................................................ 42
ARTICLE VI - COVENANTS OF EASTWIND, MERGER SUBSIDIARY AND THE
COMPANY....................................................................................... 42
6.01 Press Releases................................................................................ 42
6.02 Expenses...................................................................................... 42
6.03 Reasonable Efforts............................................................................ 43
6.04 Certain Filings............................................................................... 43
6.05 Further Assurances............................................................................ 43
ARTICLE VII - CONDITIONS TO THE MERGER................................................................. 44
7.01 Conditions to the Obligations of Each Party................................................... 44
7.02 Conditions to the Obligations of Eastwind and Merger
Subsidiary.................................................................................... 44
7.03 Conditions to the Obligations of the Company.................................................. 47
ARTICLE VIII - TERMINATION............................................................................. 48
8.01 Termination................................................................................... 48
8.02 Effect of Termination......................................................................... 49
8.03 Efforts to Close.............................................................................. 49
ARTICLE IX - TAX MATTERS............................................................................... 49
9.01 Taxes and Adjustments......................................................................... 49
ARTICLE X - INDEMNIFICATION............................................................................ 50
10.01 Indemnification by Merger Subsidiary.......................................................... 50
10.02 Indemnification by Stockholder................................................................ 50
(a) General................................................................................. 50
(b) De Minimis Amount....................................................................... 51
(c) Time Limitations........................................................................ 51
(d) Maximum Amount.......................................................................... 51
10.03 Notice of Claim and Right to Participate In and
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Defend Third-Party Claim...................................................................... 51
ARTICLE XI - MISCELLANEOUS............................................................................. 52
11.01 Amendments.................................................................................... 52
11.02 Entire Agreement.............................................................................. 52
11.03 Governing Law................................................................................. 52
11.04 Arbitration................................................................................... 53
11.05 Consent to Jurisdiction and Service of Process................................................ 53
11.06 Notices....................................................................................... 54
11.07 Counterparts.................................................................................. 55
11.08 Assignment.................................................................................... 55
11.09 Waivers....................................................................................... 55
11.10 Third Parties................................................................................. 55
11.11 Construction.................................................................................. 55
11.12 Headings...................................................................................... 56
</TABLE>
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EXHIBITS
--------
Exhibit 1.02(e) Certificate of Powers, Designations
Preferences and Special Rights
of Series B Preferred Stock 03
--
Exhibit 1.02(f) Joint Certificate Re: Eastwind
Closing Share 03
--
Exhibit 2.01 Certificate of Incorporation
of Surviving Corporation 10
--
Exhibit 2.02 Bylaws of Surviving Corporation 10
--
Exhibit 4.06(c) Stockholder Lock-up Agreement 28
--
Exhibit 7.02(k) Non-Complete Agreement with
Stockholder 47/48
-----
Exhibit 7.02(l) Opinion letter of Riley, Riper,
Hollin & Colagreco 47
--
Exhibit 7.03(m) Opinion Letter of Clark, Ladner,
Fortenbaugh & Young 48
--
SCHEDULES
---------
Schedule 3.01(b) Conflicts and Defaults 11
--
Schedule 3.01(c) Third-Party Consents 11
--
Schedule 3.01(d) Exceptions to Title and Encumbrances
Re: Acquired Assets 12
--
Schedule 3.01(e) Real Property and Leases 12
--
Schedule 3.01(f) Contracts 13
--
Schedule 3.01(g) Financial Statements and Exceptions 13
--
Schedule 3.01(h) Accounts Receivable 14
--
Schedule 3.01(j) Litigation 14
--
Schedule 3.01(l) Environmental 15
--
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Schedule 3.01(m) Intellectual Property 16
--
Schedule 3.01(n) Permits and Licenses 16
--
Schedule 3.01(o) Insurance 16
--
Schedule 3.01(p) Collective Bargaining Agreements 17
--
Schedule 3.01(q) Employee Plans 17
--
Schedule 3.01(r) Customers and Suppliers 18
--
Schedule 3.01(s) Changes in Circumstances 19
--
Schedule 3.01(v) Employment Matters 20
--
Schedule 3.01(w) Banks and Brokerage Accounts 20
--
Schedule 3.02(b) Conflicts and Defaults 21
--
Schedule 4.01(h) Personal Belongings of Stockholder 25
--
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<PAGE>
AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER dated as of September
30, 1996 among Centennial Printing Corporation, a Delaware corporation (the
"Company"), The Eastwind Group, Inc., a Delaware corporation ("Eastwind"), and
Centennial Acquisition Corp., a Delaware corporation and a wholly-owned
subsidiary of Eastwind ("Merger Subsidiary"), in which Agreement Stockholder and
Racing (as hereinafter defined) have joined by signifying their consent to
obligations or conditions to their benefits imposed upon them hereunder.
WHEREAS, the Boards of Directors of Eastwind, Merger Subsidiary and the
Company have each determined to engage in the transactions contemplated hereby,
pursuant to which (i) Merger Subsidiary will be merged with and into the Company
in a statutory merger (the "Merger") in which the Company will be the surviving
corporation, (ii) certain shares of capital stock of the Company (except for
shares as to which appraisal rights have been perfected) shall be converted into
a right to receive shares of Eastwind Common Stock and Eastwind Preferred Stock
as set forth herein and (iii) the capital stock of Merger Subsidiary shall be
converted into shares of Common Stock of the Company, in exchange for which
Eastwind will issue the shares of Eastwind Common Stock and Eastwind Preferred
Stock to be issued upon the conversion of shares of the Company's stock in the
Merger to the holders of such Company shares, all upon the terms and subject to
the conditions set forth herein; and
WHEREAS, on September 30, 1996, the parties hereto executed an
Agreement and Plan of Merger and now wish to amend and restate such agreement as
set forth herein; and
WHEREAS, the Board of Directors of the Company has approved the Merger
and resolved to recommend, subject to its fiduciary duties, that the
stockholders of the Company adopt and approve this Amended and Restated
Agreement; and
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements contained herein, the parties hereto agree as follows:
<PAGE>
ARTICLE I
THE MERGER
1.01 The Merger.
----------
(a) Merger Structure. Subject to the terms and conditions of
----------------
this Agreement, in the Merger, Merger Subsidiary shall be merged with and into
the Company in accordance with the General Corporation Law of the State of
Delaware ("Delaware Law"), whereupon the separate existence of Merger Subsidiary
shall cease, and the Company shall be the surviving corporation of the Merger
(the "Surviving Corporation").
(b) Certificate of Merger; Effective Time. As soon as
-------------------------------------
practicable after satisfaction or, to the extent permitted hereunder, waiver of
all conditions to the Merger, and following or during a closing meeting among
the parties hereto, held at the offices of Eastwind at a time mutually agreeable
to the parties (the "Closing"), the Company and Merger Subsidiary will file a
certificate of merger with the Secretary of State of the State of Delaware and
make all other filings or recordings required by Delaware Law in connection with
the Merger. The Merger shall become effective at such time as the certificate of
merger is duly filed with the Secretary of State of Delaware or at such later
time on the date of such filing as is specified in the certificate of merger
(the "Effective Time").
(c) Rights Following Merger. From and after the Effective
-----------------------
Time, the Surviving Corporation shall possess all the rights, privileges, powers
and franchises and be subject to all of the restrictions, disabilities and
duties of the Company and Merger Subsidiary, all as provided under Delaware Law.
1.02 Certain Definitions.
-------------------
As used in this Agreement, the following terms shall have the
meanings set forth below:
(a) "Affiliate" shall mean any person, firm or corporation
---------
which directly, or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, the person specified.
(b) "Company Common Stock" means the Common Stock, no par
--------------------
value, of the Company issued and outstanding immediately prior to the Effective
Time.
2
<PAGE>
(c) "Company Dissenting Shares" means any shares of Company
-------------------------
Stock with respect to which the statutory rights to require the appraisal of
such shares as provided in Section 262 of the Delaware General Corporation Law
have been properly and timely exercised.
(d) "Eastwind Common Stock" means the Common Stock, $.10
---------------------
par value per share, of Eastwind.
(e) "Eastwind Preferred Stock" means the Series B Preferred
------------------------
Voting Stock, $.10 par value per share, of Eastwind, having the terms contained
in Exhibit 1.02(e) attached hereto and made a part hereof.
(f) "Eastwind Closing Price Per Share" means that price set
--------------------------------
forth on the Joint Certificate contained in Exhibit 1.02(f) attached hereto and
made a part hereof.
(g) "Eastwind Closing Shares" means 182,232 shares of
-----------------------
Eastwind Common Stock, which number of shares was calculated as explained on
Exhibit 1.02(f), attached hereto and made a part hereof.
(h) "Environment" means all air, surface water, groundwater,
-----------
or land, including land surface or subsurface, including all fish, wildlife,
biota and all other natural resources.
(i) "Environmental Claim" means any and all administrative or
-------------------
judicial actions, suits, orders, claims, liens, notices, notices of violations,
investigations, complaints, requests for information, proceedings, or other
communication (written or oral), whether criminal or civil, pursuant to or
relating to any applicable Environmental Law by any person (including but not
limited to any Governmental Authority or regulatory agency, private person and
citizens' group) based upon, alleging, asserting, or claiming any actual or
potential (i) violation of or liability under any Environmental Law, (ii)
violation of any Environmental Permit, or (iii) liability for investigatory
costs, cleanup costs, removal costs, remedial costs, response costs, natural
resource damages, property damage, personal injury, fines, or penalties arising
out of, based on, resulting from, or related to the presence, Release, or
threatened Release into the Environment, of any Hazardous Materials at any
location, including but not limited to any off-site location to which Hazardous
Materials or materials containing Hazardous Materials were sent for handling,
storage, treatment, or disposal.
3
<PAGE>
(j) "Environmental Clean-Up Site" means any location which is
---------------------------
listed or proposed for listing on the National Priorities List, the
Comprehensive Environmental Response, Compensation and Liability Information
System, or on any similar state list of sites requiring investigation or
cleanup, or which is the subject of any pending or threatened action, suit,
proceeding, or investigation related to or arising from any alleged violation of
any Environmental Law, or, to the best of Company's knowledge, at which there
has been a Release, threatened or suspected Release of a Hazardous Material.
(k) "Environmental Law" means any and all federal, state,
-----------------
local, provincial and foreign, civil and criminal laws, statutes, ordinances,
orders, codes, rules, regulations, Environmental Permits, policies, guidance
documents, judgments, decrees, injunctions, or agreements with any Governmental
Authority or regulatory agency, relating to the protection of health and the
Environment, worker health and safety, and governing the handling, use,
generation, treatment, storage, transportation, disposal, manufacture,
distribution, formulation, packaging, labeling, or Release of Hazardous
Materials, as in effect at the Effective Time, including but not limited to: the
Clean Air Act, 42 U.S.C. ss.7401 et seq.; the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, 42 U.S.C. ss.9601 et seq.; the
Federal Water Pollution Control Act, 33 U.S.C. ss.1251 et seq.; the Hazardous
Material Transportation Act, 49 U.S.C. ss.1801 et seq.; the Federal Insecticide,
Fungicide and Rodenticide Act, 7 U.S.C. ss.136 et seq.; the Resource
Conservation and Recovery Acts of 1976 ("RCRA")1 42 U.S.C. ss.6901 et seq.; the
Toxic Substances Control Act, 15 U.S.C. 2601 et seq.; the Occupational Safety &
Health Act of 1970, 29 U.S.C. ss.651 et seq.; the Oil Pollution Act of 1990, 33
U.S.C. 2701 et seq.; and the state law analogues thereto, all as in effect at
the Effective Time; and any common law doctrine relating to the protection of
health and the Environment, worker health and safety, and governing the
handling, use, generation, treatment, storage, transportation, disposal,
manufacture, distribution, formulation, packaging, labeling, or Release of
Hazardous Materials, as in effect at the Effective Time, including but not
limited to, negligence, nuisance, trespass, personal injury, or property damage
related to or arising out of the presence, Release, or exposure to a Hazardous
Material.
(l) "Environmental Permit" means any federal, state, local,
--------------------
provincial, or foreign permits, licenses, approvals, consents or authorizations
required by any Governmental Authority or regulatory agency under or in
connection with any Environmental Law and includes any and all orders, consent
orders or binding agreements issued or entered into by a Governmental Authority
or regulatory agency under any applicable Environmental Law.
4
<PAGE>
(m) "ERISA Affiliate" means any person who is, or at any time
---------------
was, in the same control group of corporations or who is under common control
with the Company (within the meaning of Section 414 of the Code).
(n) "GAAP" means generally accepted accounting principles as
----
applied in the United States.
(o) "Governmental Authority" means any foreign, federal,
----------------------
state or local governmental entity or municipality or subdivision thereof or any
authority, department, commission, board, bureau, agency, court or
instrumentality.
(p) "Hazardous Material" means petroleum, petroleum
------------------
hydrocarbons, petroleum products or petroleum by-products, radioactive
materials, underground storage tanks, asbestos or asbestos-containing materials,
gasoline, diesel fuel, pesticides, radon, urea formaldehyde, lead or
lead-containing materials, polychlorinated biphenyls, ionizing and non-ionizing
radiation including radon and electromagnetic frequency radiation; and any other
chemicals, materials, substances or wastes in any amount of concentration which
are now defined as, or included in the definition of, "hazardous substances,"
"hazardous materials," "hazardous wastes," "extremely hazardous wastes,"
"restricted hazardous wastes," "toxic substances," "toxic pollutants,"
"pollutants," "regulated substances," "solid wastes," or "contaminants" or words
of similar import, under any Environmental Law.
(q) "Indebtedness" of any person means all obligations of
------------
such person (A) for borrowed money, (B) evidenced by notes, bonds, debentures,
or similar instruments, (C) for the deferred purchase price of goods or services
(other than trade payables or accruals incurred in the ordinary course of
business), (D) under capital leases and (E) in the nature of guarantees of the
obligations described in clauses (A) through (D) above of any other person.
(r) "Investment Assets" means all debentures, notes and other
-----------------
evidences of Indebtedness, stocks, securities, (including rights to purchase and
securities convertible into or exchangeable for other securities), interests in
joint ventures and general and limited partnerships, mortgage loans and other
investment or portfolio assets owned of record or beneficially by the Company.
(s) "Knowledge", "To the best of the knowledge of" and
---------
similar phrases means actual knowledge of the operating managers or supervisors
of the Business and officers of Company or Merger Subsidiary, as the case may
be.
5
<PAGE>
(t) "Laws" means all laws, statutes, rules, regulations,
----
ordinances and other pronouncements having the effect of law of the United
States, any foreign country or any domestic or foreign state, county, city or
other political subdivision or of any Governmental Authority or regulatory
agency.
(u) "Liabilities" means all Indebtedness, obligations and
-----------
other liabilities of a person (whether absolute, accrued, contingent, known or
unknown, fixed or otherwise, or whether due or become due).
(v) "Loss" means any and all damages, fines, fees, penalties,
----
deficiencies, losses and expenses, including without limitation, fees and
expenses of banks and other lenders, interest, reasonable expenses of
investigation, negotiation and documentation, court costs, reasonable fees and
expenses of attorneys, accountants and other experts or other expenses of
litigation or other proceedings or of any claim, default or assessment (such
fees and expenses to include, without limitation, all fees and expenses,
including, without limitation fees and expenses of attorneys, incurred in
connection with (A) the investigation or defense of any third-party claim or (B)
asserting or disputing any rights under this Agreement against any party hereto
or otherwise).
(w) "Release" means any spilling, leaking, pumping, pouring,
-------
emitting, emptying, discharging, injecting, escaping, leaching, dumping, or
disposing of a Hazardous Material into the Environment.
(x) "Stockholder" means Bruce K. Worrall of 48 Collins
-----------
Lane, Schwenksville, PA 19473.
Other capitalized terms defined elsewhere in this Agreement and not defined in
this Section 1.02 shall have the meanings assigned to such terms in this
Agreement.
1.03 Conversion of Company Shares.
----------------------------
At the Effective Time by virtue of the Merger and without the
need for any action on the part of any holder of any shares of stock of the
Company described below (other than surrender of his stock certificates (or, if
applicable under Section 1.07, a lost stock certificate indemnity agreement) at
the Closing before he will receive his Eastwind stock certificates):
(a) Company Treasury Stock. Each share of Company Stock
----------------------
held by the Company as treasury stock immediately prior to the
6
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Effective Time shall be cancelled, and no payment shall be made with respect
thereto;
(b) Merger Subsidiary Stock. Each share of common stock of
-----------------------
Merger Subsidiary outstanding immediately prior to the Effective Time shall be
converted into and become one (1) share of Company Common Stock that will be
outstanding immediately after the Effective Time and all such shares of Company
Common Stock shall constitute the only outstanding shares of Company Stock
outstanding immediately after the Effective Time;
(c) Company Stock. Except as otherwise provided in Section
-------------
1.03(a) or as provided in Section 1.08 with respect to Company Dissenting Shares
as to which appraisal rights have been exercised, each share of Company Common
Stock that is outstanding immediately prior to the Effective Time shall be
converted into (i) that number of Eastwind Common Shares determined by dividing
the total number of Eastwind Closing Shares by the number of shares of Company
Common Stock issued and outstanding immediately prior to the Effective Time,
subject to the provisions of this Section 1.03 and the elimination of fractional
shares of Eastwind Common Stock pursuant to Section 1.05, (ii) 9,000 shares of
Eastwind Preferred Stock (the "Eastwind Preferred Shares") and (iii) a cash
payment determined by dividing the sum of $450,000 by the number of shares of
Company Common Stock issued and outstanding immediately prior to the Effective
Time (collectively, the "Merger Consideration"); and
(d) Issuance of Eastwind Shares. The Eastwind Common Shares
---------------------------
and Eastwind Preferred Shares to be issued in respect of the conversion of
shares of Company Common Stock in the Merger shall be issued upon the Effective
Time to those holders of shares of Company Common Stock who are entitled to
receive such Eastwind Common Shares and Eastwind Preferred Shares under the
provisions of this Article I in respect of the conversion of their shares of
Company Common Stock as provided in this Section 1.03.
1.04 Adjustments for Capital Changes.
-------------------------------
If, prior to the Effective Time, Eastwind or the Company
recapitalizes either through a split-up or subdivision of its outstanding shares
into a greater number of shares, or through a reverse split or combination of
its outstanding shares into a lesser number of shares, or reorganizes,
reclassifies or otherwise changes its outstanding shares into the same or a
different number of shares of other classes (other than through a split-up or
combination of shares provided for in the previous clause), or
7
<PAGE>
declares a dividend on its outstanding shares payable in shares or securities
convertible into shares, then the number of shares of Eastwind Common Stock and
Eastwind Preferred Shares into which the shares of the Company Common Stock are
to be converted in the Merger shall be adjusted appropriately (as agreed to by
Eastwind and the Company if it involves something other than a mathematical
adjustment) so as to maintain the proportional interests of the holders of the
Company Common Stock in the outstanding Eastwind Common Stock and Eastwind
Preferred Shares.
1.05 Fractional Shares.
-----------------
No fractional shares of Eastwind Common Stock or Eastwind
Preferred Stock shall be issued in connection with the Merger. In lieu thereof,
each holder of the Company Common Stock who (after aggregating all Eastwind
Shares to be received by such holder) would otherwise be entitled to receive a
fraction of a share of Eastwind Common Stock, shall instead receive from
Eastwind, within ten (10) business days after the Effective Time, an amount of
cash equal to (i) the Eastwind Closing Price Per Share, in the case of Eastwind
Common Stock, or (ii) $100.00 in the case of Eastwind Preferred Stock,
multiplied by the fraction of a share of Eastwind Common Stock or Eastwind
Preferred Stock to which such holder would otherwise be entitled.
1.06 Surrender and Payment.
---------------------
(a) At or prior to the Effective Time, Eastwind shall deliver
to the Closing the stock certificates for the Eastwind Closing Shares and
Eastwind Preferred Shares to be issued upon the conversion of shares of Company
Common Stock. As a condition to receipt of the Eastwind Closing Shares and
Eastwind Preferred Shares to which each holder of shares of Company Common Stock
is entitled under this Agreement, such holder shall deliver to the Closing at or
prior to the Effective Time of the Merger, the stock certificates for the shares
of Company Common Stock held by such holder to be exchanged and delivered to
Eastwind hereunder.
For purposes of determining the number of Eastwind Common
Shares to be delivered to the Closing, it shall be assumed that no holder of
Company Common Shares will perfect his right to appraisal of his shares. At the
Closing and upon the Effective Time, the Surviving Corporation shall cause to be
delivered to each holder of shares of Company Common Stock at the Effective Time
certificates for the appropriate number of Eastwind Closing Shares upon proper
delivery of the certificates representing such stockholder's shares of Company
Common Stock to Eastwind subject to the provisions of the last paragraph of this
Section 1.06 regarding lost or missing share certificates.
8
<PAGE>
(b) After the Effective Time, each such certificate
representing shares of Company Common Stock that has been converted into a right
to receive the Eastwind Common Shares and Eastwind Preferred Shares, upon
surrender will be entitled to receive the Eastwind Common Shares and Eastwind
Preferred Shares, payable in respect of such Shares and shall, until so
surrendered, represent for all purposes only the right to receive such Eastwind
Common Shares and Eastwind Preferred Shares.
(c) If any portion of the Eastwind Common Shares or Eastwind
Preferred Shares is to be paid to a person other than the registered holder of
the shares of Company Common Stock represented by the certificate or
certificates surrendered in exchange therefor, it shall be a condition to such
payment that the certificate or certificates so surrendered shall be properly
endorsed or otherwise be in proper form for transfer and that the person
requesting such payment shall pay to Eastwind any transfer or other taxes
required as a result of such payment to a person other than the registered
holder of such Shares or establish to the satisfaction of Eastwind that such tax
has been paid or is not payable.
(d) No Eastwind Closing Shares which a stockholder of the
Company would have been entitled to receive hereunder but for his election and
perfection of dissenting stockholders' appraisal rights shall be issued to such
stockholder, pursuant to this Section 1.06 and the number of the Eastwind
Closing Shares, shall be reduced by the number of Eastwind Closing Shares that
are not issued to such dissenting stockholder of the Company pursuant to this
Section 1.06(d).
(e) No dividends, interest or other distributions with respect
to the Eastwind Closing Shares or Eastwind Preferred Shares shall be paid to the
holder of any unsurrendered certificates representing shares of Company Common
Stock outstanding immediately prior to the Effective Time until such
certificates are surrendered as provided in this Section. Upon such surrender,
there shall be paid, without interest, to the person in whose name the
certificates representing the Eastwind Common Shares and Eastwind Preferred
Shares into which such shares were converted are registered, all dividends,
interest and other distributions payable in respect of such securities on a date
subsequent to, and in respect of a record date after, the Effective Time.
(f) Notwithstanding the foregoing provisions of this Section,
in the event that a holder of shares of Company Common Stock cannot locate any
stock certificate or certificates evidencing such Company Common Stock after a
good faith search therefor, then for all purposes hereof Eastwind shall accept,
in
9
<PAGE>
lieu of such lost or missing Company Common Stock certificate(s), a written
agreement executed by such stockholder, reasonably acceptable in form and
substance to Eastwind, pursuant to which such stockholder shall agree to
indemnify Eastwind for losses it may suffer due to the loss of such
stockholder's Company Common Stock certificate or certificates, and upon such
stockholder's delivery and execution of such agreement, such stockholders will
be deemed, for purposes hereof, to have delivered such lost or missing Company
Common Stock certificate(s). Such agreement shall also provide that such
stockholder will promptly deliver to Eastwind any such lost or missing Company
Common Stock certificates that are subsequently found.
1.07 Dissenting Shares.
-----------------
Notwithstanding Section 1.03, shares of Company Common Stock
outstanding immediately prior to the Effective Time that were not voted in favor
of the Merger or consented thereto in writing and which are held by a holder who
has demanded appraisal for such shares in accordance with Section 262 of the
Delaware General Corporation Law shall not be converted into a right to receive
the Eastwind Closing Shares and Eastwind Preferred Shares, unless such holder
fails to perfect or withdraws or otherwise loses his right to appraisal. If
after the Effective Time such holder fails to perfect or withdraws or loses his
right to appraisal under Section 262 of the Delaware Law, such shares of Company
Common Stock shall be treated as if they had been converted as of the Effective
Time into a right to receive Eastwind Closing Shares and Eastwind Preferred
Shares as provided herein. The Company shall give Eastwind prompt notice of any
demands received by the Company for appraisal of shares of Company Common Stock,
and Eastwind shall have the right to participate in all negotiations and
proceedings with respect to such demands. The Company shall not, except with the
prior written consent of Eastwind, make any payment with respect to, or settle
or offer to settle, any such demands.
ARTICLE II
THE SURVIVING CORPORATION
2.01 Certificate of Incorporation.
----------------------------
By virtue of the Merger, effective upon the Effective Time,
the Certificate of Incorporation of the Surviving Corporation shall read as set
forth in the Certificate of Merger, the form of which is attached hereto as
Exhibit 2.01.
10
<PAGE>
2.02 Bylaws.
------
By virtue of the Merger, effective upon the Effective Time,
the bylaws of the Surviving Corporation shall read in their entirety as set
forth in Exhibit 2.02 attached hereto, and shall be identical to the Bylaws of
the Merger Subsidiary except as to their corporate names, until amended in
accordance with applicable law.
2.03 Directors and Officers.
----------------------
By virtue of the Merger, effective upon the Effective Time,
(i) the number of directors constituting the Board of Directors of the Surviving
Corporation shall be three (3), and the directors of the Merger Subsidiary at
the Effective Time shall become the directors of the Surviving Corporation,
until their successors are duly elected or appointed and qualified in accordance
with applicable law, and (ii) the officers of the Merger Subsidiary at the
Effective Time shall be the officers of the Surviving Corporation.
2.04 Treatment of Merger as a Reorganization.
---------------------------------------
The parties intend to adopt this Agreement as a plan of
tax-free reorganization and to consummate the Merger in accordance with the
provisions of Section 368(a)(1)(A) of the Internal Revenue Code of 1986, as
amended.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.01 Representations and Warranties of Company and Stockholder.
---------------------------------------------------------
Company and Stockholder represent and warrant to Eastwind and Merger Subsidiary
that:
(a) Organization, Power and Authority. Company 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 own or
lease its assets, to carry on the business as now being conducted (the
"Business"), and to make and perform this Agreement, and the transactions and
other agreements and instruments contemplated by this Agreement. This Agreement
and all other agreements and instruments executed or to be executed by Company
in connection herewith have been (or upon execution will have been) duly
executed by Company. This Agreement and the transactions and other agreements
and instruments contemplated hereby have been duly approved by the Directors and
Stockholders of
11
<PAGE>
Company, and constitute the valid and binding obligations of Company,
enforceable in accordance with their respective terms.
(b) Conflicts; Defaults. Except as set forth on Schedule
----------------------------------------------------
3.01(b), neither the execution and delivery of this Agreement and the other
- -------
agreements and instruments executed in connection herewith by Company, nor the
performance by Company of the transactions contemplated hereby or thereby, will
violate, conflict with, or constitute a material default under, any of the terms
of Company's Certificate of Incorporation or By-Laws, or following the granting
of the consents listed in Section 3.01 hereof, any provisions, or result in the
acceleration, of any obligation under, any material contract, sales commitment,
license, purchase order, security agreement, mortgage, note, deed, lien, lease,
agreement, instrument, order, judgment or decree relating to the Business or its
assets, or by which its assets are bound. Company is not, as of the date of this
Agreement, in violation of or in default in any material respect under any
provision of any contract, sales commitment, license, purchase order, security
agreement, mortgage, note, deed, lien, lease, agreement, instrument, order,
judgment or decree relating to the Business or its assets, or by which its
assets are bound, including, without limitation, the Contracts and the Leases,
and, to the best of Company's knowledge, there exists no condition or event
which, after notice or lapse of time or both, would result in any such material
violation or default.
(c) Consents. To the best knowledge of Company, Schedule
-------- --------
3.01(c) lists all consents, approvals, authority and other requirements
- -------
prescribed by any law, rule or regulation, or any contract, agreement,
commitment or undertaking, which must be obtained or satisfied by Company for
the consummation of the transactions contemplated by this Agreement (the
"Consents").
(d) Assets of Company, Good Title. Except as set forth on
-----------------------------
Schedule 3.01(d), Company has good and marketable title to, and the right to
- ----------------
use, each of the assets which it owns. The assets are free and clear of all
Liens except as set forth on Schedule 3.01(d) and Permitted Liens (as
----------------
hereinafter defined), but in all other respects are to be considered only in an
"as is, where is" condition.
(e) Real Property. Schedule 3.01(e) sets forth a true, correct
------------- ----------------
and complete list of all real property leased by Company in connection with the
operation of the Business. The real estate leases for each leased property
identified on Schedule 3.01(e) are, unless otherwise described on Schedule
---------------- --------
3.01(e), in full force and effect, enforceable in accordance with their
- -------
respective terms, subject, as to enforcement, to bankruptcy, insolvency,
12
<PAGE>
reorganization, arrangement, moratorium or other similar laws affecting the
enforcement of creditors' rights generally. Neither the Company nor any other
party to any such real estate lease has materially breached or improperly
terminated such lease, or is in default under any such lease, and to Company's
knowledge there exists no condition or event which after notice or lapse of time
or both, would constitute any such breach, termination or default. To Company's
knowledge, there are no actions, suits, proceedings or investigations pending or
threatened to take or condemn all or any portion of the leased real properties
pursuant to a power of eminent domain or similar authority, and except as
disclosed on Schedule 3.01(e) hereof, Company has received no written notice
----------------
that any laws, statutes, or ordinances or building or use restrictions or zoning
laws prohibit the uses presently being made of the leased real properties except
where such non-compliance would not materially impair or interfere with the use
of such properties. Company has received no written notice that any assessment
for public improvements, such as sewer and water lines and mains, streets,
sidewalks and curbs, has been made against any of the leased real properties
which remains unpaid or that any public improvement with respect to such
properties has been ordered to be made which has not been heretofore completed,
and the cost therefor assessed and paid.
(f) Contracts. Schedule 3.01(f) sets forth a complete list of
--------- ----------------
(i) each license, contract, agreement, commitment or undertaking (whether oral
or written) relating to the Business which involves an amount in excess of
$10,000 or extends for a period of six months or more, (ii) each loan or credit
agreement, security agreement, guaranty, indenture, mortgage, pledge,
conditional sale or title retention agreement, equipment obligation, lease
purchase agreement or other instrument evidencing indebtedness relating to the
Business, (iii) each contract or agreement between Company and an employee
engaged in the Business, and (iv) each distributor agreement, sales
representative agreement or other agreement pursuant to which Company sells or
distributes products in respect of the Business. All such Contracts are, unless
otherwise described on Schedule 3.01(f), in full force and effect, enforceable
----------------
in accordance with their respective terms, subject, as to enforcement, to
bankruptcy, insolvency, reorganization, arrangement, moratorium or other similar
laws affecting the enforcement of creditors' rights generally. Neither the
Company nor any other party to any Contract has breached in any material respect
or improperly terminated any such Contract, or is in default in any material
respect under any Contract by which it is bound, and, to the best of Company's
knowledge, there exists no condition or event which, after notice or lapse of
time or both, would constitute any such material breach, termination or material
default.
13
<PAGE>
(g) Financial Statements. (i) Attached as Schedule 3.01(g) are
-------------------- ----------------
the following financial statements (collectively, the "Financial Statements"):
(A) the audited balance sheet of the Company (the
"Balance Sheet") as of December 31, 1995 (the "Balance Sheet Date");
(B) the audited statement of income of the Company
for the year ended December 31, 1995; and
(C) the internal unaudited financial statements of
the Business for the month of August 1996.
Except as set forth on Schedule 3.01 (g), the Financial
-----------------
Statements were prepared from the books and records kept by Company and fairly
present in all material respects the financial position of the Company as of
December 31, 1995, the results of the Company for the period ended December 31,
1995, and the results and financial position of the Company for the period ended
on the last day of the month of August 1996, all in accordance with GAAP
consistently applied.
(ii) Except as reflected or reserved against in the
Balance Sheet or as disclosed in Schedule 3.01(g), there are no
liabilities to the knowledge of Company relating to or affecting the
Company or any of its assets, other than liabilities incurred in the
ordinary course of the Business consistent with past practice since the
date of the Balance Sheet or in accord with the provisions of this
Agreement or which in the aggregate are not material to the Business.
(iii) The accounting treatment of all items included
in the Financial Statements shall be treated in a manner historically
consistent with the accounting treatment of such items in Company's
prior financial statements, and particularly the unaudited financial
statements shall be consistent in such regard with the audited
financial statements as at December 31, 1995.
(h) Accounts Receivable. Subject to reasonable reserves and
-------------------
allowances established by Company, all Accounts Receivable shown on the Balance
Sheet and acquired thereafter up to the Effective Date are bona fide receivables
representing the sales price of merchandise sold and delivered or services
rendered in the ordinary course of business. To the knowledge of Company, there
is no set-off, back charge, counterclaim or similar item in any material amount
arising in the ordinary course of business and
14
<PAGE>
relating to the Accounts Receivable, except as listed on Schedule 3.01(h)
----------------
hereof.
(i) Inventories. The Inventories shown on the Balance Sheet,
-----------
and those acquired by the Business since December 31, 1995, consisted or consist
of items of a quality and quantity usable and salable in the ordinary course of
business, except for those Inventories which have been written down to net
realizable market value. The Inventories shown on the Balance Sheet are valued
at cost or market, whichever is lower.
(j) Litigation. Except as set forth in Schedule 3.01(j), and
---------- ----------------
to Company's best knowledge, there exists no litigation, action, suit, or
proceeding pending or any litigation, action, suit, investigation, claim or
proceeding threatened, nor any circumstances known to Company, or as to which it
has received notice, likely to give rise to any litigation, action, suit,
investigation, claim or proceeding, against or affecting the Business or assets
of the Company, or which would affect the transactions contemplated by this
Agreement, at law or in equity or before any Governmental Authority.
(k) Regulatory Compliance. To the knowledge of Company, the
---------------------
Business conducted by it, and its assets are maintained, in substantial
compliance with all applicable laws, regulations and other requirements of any
Governmental Authority, and Company has received no written notice to the
contrary.
(l) Environmental Matters. Except as set forth on Schedule
--------------------- --------
3.01(l), and to the best knowledge of Company, with respect to all of the real
- -------
properties described on Schedule 3.01(e) (the "Real Property") and with respect
to the operation of the Business:
(i) To the knowledge of Company it has obtained all
permits, licenses and other authorizations which are currently required under
any applicable Environmental Laws (as defined in Section 1.02);
(ii) Company is currently operating the Business and
is otherwise in material compliance with all terms, conditions and provisions of
all of the permits, licenses and other authorizations set forth above which have
been obtained by Company, and Company has no knowledge or notice that it has
failed to operate the Business in compliance with all applicable Environmental
Laws;
(iii) There are no pending or threatened Environmental
Claims (as defined in Section 1.02) against the
15
<PAGE>
Company with respect to the ownership of the Real Property or the operation of
the Business, nor does Company have knowledge of any facts or circumstances
which could reasonably be expected to form the basis for any Environmental
Claim;
(iv) No Releases of Hazardous Materials or other
emissions or discharges into the environment of any hazardous substance (as
defined in Section 1.02) except as permitted by law have occurred, or are
currently occurring, in, to, on, or under any Real Property or in connection
with the conduct of the Business, and no Hazardous Materials are present in, on,
about or migrating to or from any Real Property that could give rise to an
Environmental Claim, except as permitted by law;
(v) Except for finished goods and raw materials
handled in the ordinary course of business (except for disposal), neither the
Company nor any person previously owned directly or indirectly by the Company
has transported or arranged for the treatment, storage, waste handling,
disposal, or transportation for treatment, storage, waste handling or disposal
of any Hazardous Material generated by the Business or relating to the Real
Property to any location other than the Real Property which is an Environmental
Clean-Up site;
(vi) To Company's knowledge, there are no (A)
underground storage tanks (active or abandoned), (B) polychlorinated biphenyl
containing equipment, or (C) asbestos containing material at or on the Real
Property;
(vii) There have been no environmental
investigations, studies, audits, tests, reviews or other analyses conducted by,
on behalf of, or which are in the possession of Company with respect to the
operation of the Business or to any of the Real Property which have not been
delivered to Eastwind or to Eastwind's counsel prior to the execution of this
Agreement; and
(viii) Company has received no written notices of
any violation of any Environmental Law.
(m) Intellectual Property. Schedule 3.01(m) sets forth a
--------------------- ----------------
complete list of all patents, trademarks, service marks, trade names and
copyrights (and all applications for the foregoing) which are used in the
conduct of, or which relate to, the Business. True, correct and complete copies
of the patents, trademarks, service marks, trade names and copyrights (and all
applications for the foregoing) identified on Schedule 3.01(m) have been
delivered to Eastwind to the extent the same exist. Company solely owns or has
the exclusive right to use, free and clear of any payment, restriction or
encumbrance, all patents, trademarks, service marks,
16
<PAGE>
trade names and copyrights used in the conduct of the Business. Except as set
forth in Schedule 3.01(m), there is no claim or demand of any person pertaining
----------------
to, or any proceedings which are pending or threatened, which challenge (i) the
exclusive rights of Company in respect of any patents, trademarks, service
marks, trade names or copyrights used in the conduct of the Business, or (ii)
the rights of Company in respect of any of the processes, formulas, confidential
information, trade secrets, know-how, technology or other intellectual property
used in the conduct of the Business. No patent, trademark, service mark, trade
name, copyright, process, formula, know-how, technology or other intellectual
property owned or used by Company in the conduct of the Business is subject to
any outstanding order, ruling, decree, judgment or stipulation by or with any
Governmental Authority or infringes or is being infringed by others.
(n) Permits. Schedule 3.01(n) contains a complete list of all
------- ----------------
the permits issued to Company which are currently used by Company in the
operation of the Business (the "Licenses"). Such permits are all the permits
necessary or required for the operation of the Business as it is currently being
operated.
(o) Insurance. Schedule 3.01(o) sets forth a list of all
--------- ----------------
insurance policies (specifying the location, insured, insurer, beneficiary of
the policy, amount of coverage, type of insurance and policy number) maintained
by Company in respect of the Business. Company has in full force and effect,
with all premiums paid thereon, the policies of insurance, or renewals thereof,
in the amounts set forth on such Schedule.
(p) Collective Bargaining Agreements. Except as set forth in
--------------------------------
Schedule 3.01(p), Company is not a party to any collective bargaining or union
- ----------------
contract in respect of the Business, nor is Company under any current obligation
to bargain with any bargaining agent on behalf of any of the employees working
in or for the Business, nor has there been any attempt to organize such
employees.
(q) Employee Plans. (i) Except for the plans disclosed on
--------------
Schedule 3.01(q), Company neither maintains nor contributes to any employee
- ----------------
pension benefit, nor to Company's knowledge, any welfare plans, as defined in
the Employee Retirement Income Security Act of 1974 ("ERISA"), or any other
severance, bonus, stock option, stock appreciation, stock purchase, retirement,
insurance, pension, profit-sharing or deferred compensation plan, agreement or
arrangement for the benefit of Company's employees engaged in the Business
(collectively, the "Employee Plans").
(ii) Except as disclosed in Schedule 3.01(q):
17
<PAGE>
(A) Each Employee Plan and the administration
thereof complies, and has at all times complied, in all material
respects with its terms and the requirements of all applicable laws,
including ERISA and the Code and all reports required to be filed or
distributed with respect to any Employee Plan have been duly filed or
distributed on a timely basis or any such failure to comply, file or
distribute would not result in a material liability to the Business or
materially and adversely affect any of the Company's assets;
(B) Each Employee Plan intended to qualify under
Section 401(a) of the Code has at all times since its adoption been so
qualified, and each trust which forms a part of any such Plan has at
all times since its adoption been tax exempt under Section 501(a) of
the Code;
(C) No benefit under any Employee Plan, including,
without limitation, any severance or parachute payment plan or
agreement, will be established or become accelerated, vested or payable
by reason of any transaction contemplated under this Agreement;
(D) No person who is not an employee or former
employee or the beneficiary or dependent of such an employee or former
employee of the Business is entitled to benefits under any Employee
Plan;
(E) Neither the Company nor any ERISA Affiliate has
maintained or contributed to, or at any time within the past six (6)
years has maintained or contributed to, any single-employer plan
(within the meaning of Section 3(41) of ERISA) or any multi-employer
plan (within the meaning of Section 3(37) of ERISA) subject to Title IV
of ERISA, and Company is not aware of any circumstances pursuant to
which the Business could reasonably be expected to have a material
liability to any person under Title IV of ERISA;
(F) Neither the Company nor any ERISA Affiliate has
incurred any liability for any tax imposed under Section 4971 through
4980(B) of the Code or civil liability under Section 503(i) or (l) of
ERISA;
(G) No Employee Plan provides health or death
benefit coverage beyond the termination of an employee's employment,
except as required by Part 6 of Subtitle B of Title I of ERISA or
Section 4980B of the Code or any state laws requiring continuation of
benefits coverage following termination of employment;
18
<PAGE>
(H) No suit, action or other litigation
(excluding claims for benefits incurred in the ordinary course of plan
activities) have been brought or, to the knowledge of Company,
threatened against or with respect to any Employee Plan and there are
no facts or circumstances known to Company that could reasonably be
expected to give rise to any such suit, action or other litigation; and
(I) All contributions to Employee Plans
that were required to be made under such Employee Plans will have been
made as of the Effective Time, and all benefits accrued under any
unfunded Employee Plan will have been paid, accrued or otherwise
adequately reserved in accordance with GAAP, as of such date and
Company will have performed by the Effective Time all material
obligations required to be performed as of such date under all Employee
Plans.
(r) Customers and Suppliers. Schedule 3.01(r) contains a list
----------------------- ----------------
of (i) the 10 largest customers of the Business ("Material Customers"); and (ii)
all suppliers which, during the 12 months ended December 31, 1995, accounted for
$25,000 or more of Company's orders for the purchase of products, raw materials,
supplies, equipment or parts in connection with the Business ("Material
Suppliers"). Except as set forth in Schedule 3.01(r), Company is not involved in
----------------
any controversy with any Material Customer or Material Supplier and has no
knowledge of any facts or circumstances which are reasonably likely, based on
actual notice received by, or given to, Stockholder, to result in a loss of, or
material diminution in the levels of business from, any present customer which
is likely to occur within the balance of calendar year 1996 and which alone or
in the aggregate represents two percent (2%) or more of Company's net revenues.
Notwithstanding the foregoing, Eastwind and Merger Subsidiary acknowledge being
advised by Company that all of Company's contracts with its customers are
terminable at will, and Company does not represent or warrant any continuing
level of sales in the future.
(s) Changes in Circumstances. Except as set forth in
------------------------
Schedule 3.01(s), since the Balance Sheet Date, Company has not (i) sold,
- ----------------
transferred or otherwise disposed of any properties or assets used in connection
with the Business outside the ordinary and normal course of business for less
than fair market value, (ii) mortgaged, pledged or subjected to any Lien, any of
its assets, (iii) acquired any property or assets used in connection with the
Business outside the ordinary and normal course of business for more than fair
market value, or acquired the stock, assets or properties of any other person,
(iv) sustained any damage, loss or destruction of or to its assets (whether or
not covered by insurance), in the aggregate in excess of $25,000, (v) entered
into
19
<PAGE>
any transaction or otherwise conducted the Business other than in the ordinary
and normal course of business, (vi) in connection with the Business and except
for actions in the ordinary and normal course of business, granted any salary
increase or bonus (other than as set forth in this Agreement) or permitted any
advance to any employee, or entered into any new, or, altered or amended any
existing, employee plan or any employment or consulting agreement, (vii) made
any borrowing, whether or not in the ordinary and normal course of business,
issued any commercial paper or refinanced any existing borrowings in connection
with the Business, (viii) in connection with the Business, paid any obligation
or liability (fixed or contingent), other than in the ordinary and normal course
of business, repaid any indebtedness in the absence of a scheduled repayment
date, discharged or satisfied any Lien, or settled any claim, liability or suit
pending or threatened against the Business or any of its assets, (ix) entered
into any licenses or leases in connection with the Business, (x) made any loans
or gifts in connection with the Business, (xi) modified, amended, cancelled or
terminated any contracts or commitments under circumstances which would
materially and adversely affect the condition (financial or otherwise), results
of operations, business, properties, assets, liabilities or prospects of the
Business, (xii) declared or paid, or became obligated to declare or pay, any
dividend or other distribution, redemption or other purchase of stock (other
than as set forth in this Agreement) (xiii) made any write-off or write-down of
any of its assets or made or participated in any intra- company adjustments,
charges or transfers other than in the ordinary course of the Business
consistent with past practice, (xiv) made or incurred any obligations for
capital expenditures or commitments in an aggregate amount in excess of $20,000,
(xv) commenced, terminated or changed any line of business, or (xvi) agreed to,
or obligated itself to, do anything identified in (i) through (xv) above.
(t) Taxes. Company has prepared in good faith and filed or
-----
caused to be filed all tax returns and reports relating to the Business and
required to be filed by it with any Governmental Authority prior to the date of
this Agreement. All taxes owed to any Governmental Authority by Company as
indicated to be due on such returns and reports, and all claims, demands,
assessments, judgments, costs and expenses therewith, have been paid in full.
(u) Brokers, Finders and Agents. Company is not directly or
---------------------------
indirectly obligated to anyone acting as a broker, finder or in any other
similar capacity in connection with this Agreement or the transactions
contemplated hereby, except Dictor Capital Corp., whose fee will be paid by
stockholder.
20
<PAGE>
(v) Employment Matters. Schedule 3.01(v) contains a true and
------------------
complete list of the names and positions of all employees engaged in the
Business, which includes current hourly wages or monthly salaries and other
compensation amounts payable to such employees. To the best of Company's
knowledge, it has complied in all respects with all applicable laws relating to
the employment of such employees, including without limitation, those relating
to wages, hours, collective bargaining, unemployment insurance, workers'
compensation and the withholding of payroll taxes.
(w) Bank and Brokerage Accounts. Schedule 3.01(w) sets
---------------------------
forth:
(i) A true and complete list of the names and
locations of all banks, trust companies,
securities brokers and other financial
institutions at which the Company has an account
or safe deposit box or maintains a banking,
custodial, trading or similar relationship,
which accounts are the only accounts to which
customers of the Business are directed to make
payments;
(ii) A true and complete list and description of each
such account, box and relationship, indicating
in each case the account number and the names of
the respective officers, employees, agents or
other similar representatives of the Company
having signatory power with respect thereto; and
(iii) A list of each Investment Asset, the name of the
record and beneficial owner thereof, the
location of the certificates, if any, therefor,
the maturity date, if any, and any stock or bond
powers or other authority for transfer granted
with respect thereto.
(x) Disclosure. To the best knowledge of Company, no
----------
representation or warranty contained in this Agreement, and no statement
contained in any Schedule hereto or in the certificates furnished to Merger
Subsidiary hereunder, contains any untrue statement of a material fact or omits
to state a material fact necessary in order to make the statements herein or
therein, in the light of the circumstances under which they were made, not
misleading.
3.02 Representations and Warranties of Eastwind and Merger
-----------------------------------------------------
Subsidiary. Eastwind and Merger Subsidiary, jointly and severally, represent
- ----------
and warrant to Company that:
21
<PAGE>
(a) Organization, Power and Authority. Merger 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 make and
perform this Agreement, and to perform the transactions contemplated by this
Agreement. This Agreement and all other agreements and instruments executed or
to be executed by Merger Subsidiary in connection herewith have been (or on the
Effective Time will have been) duly executed by Merger Subsidiary. This
Agreement and the transactions and other agreements and instruments contemplated
by this Agreement are expected to be duly approved by the Directors of Eastwind,
and following such approval will constitute the valid and binding obligations of
Merger Subsidiary and Eastwind, enforceable in accordance with their respective
terms.
(b) Conflicts; Defaults. Subject to the consents required as
-------------------
listed on Schedule 3.02(b) hereof, neither the execution and delivery of this
Agreement and the other agreements and instruments executed in connection
herewith by Merger Subsidiary, nor the performance by Merger Subsidiary of the
transactions contemplated hereby or thereby, will violate, conflict with, or
constitute a default under, any of the terms of Merger Subsidiary's Certificate
of Incorporation or By-Laws, or any provisions of, or result in the acceleration
of any obligation under, any contract or agreement to which Merger Subsidiary is
a party or by which its assets are bound.
(c) Brokers, Finders and Agents. Neither Eastwind nor Merger
---------------------------
Subsidiary is directly or indirectly obligated to anyone as a broker, finder or
in any other similar capacity in connection with this Agreement or the
transactions contemplated hereby.
(d) Litigation. There exists no litigation, action, suit or
----------
proceeding pending, or to the best of Eastwind's knowledge, any litigation,
action, suit, investigation, claim or proceeding threatened, which would affect
the transactions contemplated by this Agreement, at law or in equity, before any
Governmental Authority or the ability of Eastwind or Merger Subsidiary to
perform its obligations under this Agreement or any of the other documents to be
executed and delivered by them at the Closing.
(e) Financing. Merger Subsidiary and Eastwind will have
---------
all necessary funds to pay all payments provided in this Agreement
when due.
(f) Regulatory Compliance. No authorization or approval of
---------------------
any governmental unit or regulatory agency is required to approve the
transactions contemplated by this Agreement.
22
<PAGE>
(g) Disclosure Documents. The information with respect to
--------------------
Eastwind and its subsidiaries furnished to the Company by or on behalf of
Eastwind specifically for use in any Company Information Statement to be
distributed to the Company's stockholders to solicit their consent and approval
of this Agreement and the Merger will not contain any untrue statement of a
material fact or omit 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 in the case of the Company Information Statement, at the
time the Company Information Statement or any amendment or supplement thereto is
first mailed to stockholders of the Company, at the time the Company's
stockholders vote on adoption of this Agreement and the Merger, and at the
Effective Time.
(h) SEC Filings. Eastwind's filings with the Securities and
-----------
Exchange Commission over the past 12 months, when read together, accurately
describe Eastwind's current business prospects and financial condition, subject
to changes thereto in the ordinary course of business that are not material or
adverse to Eastwind, and Eastwind is not aware of any events or occurrences that
are likely to result in a material adverse change in Eastwind's business
prospects or financial condition. Eastwind is in compliance, and will comply,
with all filing and reporting requirements under the Securities and Exchange Act
of 1934, as amended (the "1934 Act") necessary to make Rule 144 under the 1933
Act available to selling stockholders who wish to sell Eastwind Shares.
(i) Capitalization of Merger Subsidiary. The authorized
-----------------------------------
capital stock of Merger Subsidiary consists of 1,000 shares of common stock, par
value $.01 per share, all of which are outstanding. All the issued and
outstanding capital stock of Merger Subsidiary is owned by Eastwind. Except for
such common stock, there are outstanding (i) no shares of capital stock or other
voting securities of Merger Subsidiary, (ii) no securities of Merger Subsidiary
convertible into or exchangeable for shares of capital stock or voting
securities of Merger Subsidiary and (iii) no options, warrants or other rights
to acquire from Merger Subsidiary, and no obligation of Merger Subsidiary to
issue, any capital stock, voting securities or securities convertible into or
exchangeable for capital stock or voting securities of Merger Subsidiary. Merger
Subsidiary has not conducted any business prior to the date hereof and has no
assets, liabilities or obligations of any nature other than those incident to
its formation and pursuant to this Agreement.
(j) Ability to Issue Eastwind Closing Shares and Eastwind
-----------------------------------------------------
Preferred Shares. Eastwind has sufficient treasury stock
- ----------------
23
<PAGE>
and/or authorized but unissued shares of Eastwind Common Stock and Eastwind
Preferred Stock, without any requirement for amendment of its articles or
certificate of incorporation to increase its authorized capital, in order to
issue to the holders of shares of Company Common Stock all of the Eastwind
Closing Shares and Eastwind Preferred Shares contemplated under this Agreement
in order to effect all the issuances of Eastwind Closing Shares and Eastwind
Preferred Shares contemplated by this Agreement.
(k) Registration Statement Eligibility. Eastwind will either
----------------------------------
use Form SB-2, Form S-1, Form S-3 or any other applicable form of Registration
Statement under the 1933 Act to register all Eastwind Closing Shares to be
issued in the Merger under the 1933 Act in accordance with Section 5.07 hereof
and Eastwind shall use its best efforts to continue to satisfy all eligibility
requirements for the use of at least one of such Form or Forms at all times that
Eastwind Closing Shares may be subject to an effective registration statement
filed under the 1933 Act pursuant to Section 5.07 hereof. Eastwind currently is
eligible to register its securities on Form SB-2 under the 1933 Act.
(l) Trading Status. Eastwind Common Stock is currently listed
--------------
for trading on the NASDAQ Small Capital Market.
ARTICLE IV
COVENANTS OF THE COMPANY
4.01 Maintenance of Business. Except as required by this Agreement,
-----------------------
for the period from the date hereof through the Effective Time, Company shall
carry on the Business in the ordinary course substantially in the manner
heretofore conducted and use its reasonable efforts to maintain or improve its
existing relationships with employees, suppliers, customers and others having
business relations with it in connection with the Business, and without limiting
the generality of the foregoing, Company will also:
(a) Use its reasonable efforts to (i) preserve intact the
present business organization and reputation of the Business, (ii) keep
available (subject to dismissals and retirements in the ordinary course of
business consistent with past practice) the services of the present officers,
employees and consultants of the Business, (iii) maintain all of its assets in
their current condition, ordinary wear and tear and other damage to the extent
actually covered by casualty insurance maintained by Company
24
<PAGE>
excepted, and (iv) continue all current sales, marketing and promotional
activities relating to the Business;
(b) Except to the extent required by applicable law, cause
the books and records of the Business to be maintained in the usual, regular and
ordinary manner;
(c) Use its best efforts to maintain in full force and
effect, without interruption, substantially the same levels of coverage as the
insurance afforded under the policies listed on Schedule 3.01(o);
(d) Comply in all material respects with all laws and orders
applicable to the Business, and promptly following receipt thereof give Merger
Subsidiary copies of any notice received from any governmental or regulatory
authority or any other person alleging any violation of any such law or order;
(e) Administer each employee benefit plan, or cause the same
to be so administered, in all material respects in accordance with the
applicable provisions of the Internal Revenue Code of 1986, as amended (the
"Code"), ERISA and all other applicable laws;
(f) Promptly notify Merger Subsidiary in writing of each
receipt by the Company (and furnish copies to Merger Subsidiary) of any notice
of investigation or administrative proceeding by the Internal Revenue Service,
the Department of Labor, the PBGC or any other person involving any employment
benefit plan;
(g) Not amend its Certificate of Incorporation or Bylaws or
take any action with respect to any such Amendment or any reorganization,
liquidation or dissolution of the Company;
(h) Not take any of the actions listed in Section 3.01(s)
hereof except that (i) Company may make dividends or distributions to
Stockholder in such amounts not to exceed Four Thousand Five Hundred Dollars
($4,500), but only provided that (x) Company has the requisite amount of
accumulated earnings or surplus amounts from which such distributions may
legally be paid, and (y) Company has sufficient cash on hand from which to make
such distributions; (ii) the Company intends to, and may, distribute to
Stockholder an amount equal to the workers' compensation premium rebate received
in September 1996 in an amount of approximately Seventy Thousand Dollars
($70,000), but to the extent such distribution has not been made by the Closing,
then Eastwind shall cause the Surviving Coporation to make such distribution to
Stockholder at Closing; (iii) Company intends to, and may, deliver an assignment
to Stockholder of all of its rights, title and interest in and to a certain life
insurance policy owned by the
25
<PAGE>
Company and insuring the life of a former employee, Robert Woods, having a
current cash surrender value of approximately Twenty-Eight Thousand Dollars
($28,000) and having a current death benefit of approximately One hundred Ninety
Thousand Dollars ($190,000), which assignment will assign to Stockholder all
rights of ownership and all obligations, if any, under such policy; (iv) Company
may distribute to Stockholder in redemption of some or all of Stockholder's
shares in the Company, or may forgive or otherwise reduce any or all of the
indebtedness owed to it by Stockholder up to an aggregate maximum principal
amount not to exceed $641,000 together with all accrued and unpaid interest
therein; and (v) Company may deliver to Stockholder his tangible personal
property located on the Company premises within his personal office and his
racing memorabilia which is listed on Schedule 4.01(h).
(i) Not violate, breach or default under in any material
respect, or take or fail to take any action that, with or without notice or
lapse of time or both, would constitute a material violation or breach of, or
default under, any term or provision of any license held or used in the Business
or any Contract to which the Company is a party or by which any of its assets or
the Business is bound;
(j) Not (i) take any action that would make any
representation or warranty of Company hereunder inaccurate in any material
respect, or (ii) take any action or course of action inconsistent with
compliance with the covenants and agreements of Company herein; and
(k) Not enter into any agreement to do or engage in any
of the foregoing.
4.02 Regulatory Authorizations. Company agrees to use its reasonable
-------------------------
efforts to obtain, and to cooperate with the Merger Subsidiary in obtaining, all
authorizations, consents, orders and approvals of Governmental Authorities that
may be or become necessary in connection with the consummation of the
transactions contemplated by this Agreement, and to take all reasonable actions
to avoid the entry of any order or decree by any Governmental Authorities
prohibiting the consummation of the transactions contemplated hereby.
4.03 Maintenance of, and Access to, Records. From the date of
--------------------------------------
this Agreement until the Effective Time for due diligence purposes, Company
shall provide Merger Subsidiary, the Surviving Corporation and Eastwind with
access (with an opportunity to make copies), during normal business hours, and
upon reasonable notice, to all Company's books and records which relate to the
Business, including those which have not been transferred to Merger Subsidiary.
The
26
<PAGE>
Surviving Corporation shall preserve and maintain such records for at least six
(6) years after the Effective Time and provide Stockholder with access thereto
for tax reporting and other proper purposes. For purposes of such due diligence
until the Effective Time, Company will, and will instruct its agents and
representatives, to provide Merger Subsidiary, Eastwind and their officers,
employees, agents, counsel, accountants, financial advisors, consultants and
other representatives (together "Representatives") with reasonable access, upon
reasonable prior notice and during normal business hours, to all officers,
employees, agents and accountants of the Company and its assets and books and
records pertaining thereto, and shall furnish Merger Subsidiary, Eastwind and
such Representatives with all such information and data (including without
limitation copies of agreements, books and records, etc.) concerning the
Business as Merger Subsidiary, Eastwind or any of such other Representatives
reasonably may request in connection with such investigation. Nothing contained
in this Section 4.03 or other investigation by or disclosure to Merger
Subsidiary, Eastwind or Representatives shall affect the survival of or modify,
limit or create any exception to the representations, warranties, covenants,
agreements and indemnities of Company hereunder, or of the conditions to the
obligations of Merger Subsidiary and Eastwind to close as set forth in this
Agreement.
4.04 Further Assurances. From time to time after the Effective Time,
------------------
upon request of the Surviving Corporation and without further consideration,
Company shall execute, acknowledge and deliver all such other instruments of
sale, assignment, conveyance and transfer and shall take all such other action
required to transfer to and vest in the Surviving Corporation, and to put the
Surviving Corporation in possession of, all of its assets and the Business, in
accordance with the terms of this Agreement.
4.05 No Solicitation. (a) From and after the date hereof until the
---------------
Effective Time or earlier termination of this Agreement, the Company shall not,
and shall take reasonable steps to insure that each of its officers, directors,
employees, representatives, agents and affiliates, including, without
limitation, any investment banker or advisor, attorney, accountant or broker
retained by Company, not (i) disclose to any third party (other than such
officers, directors, key employees and advisors) any of the terms of this
Agreement or the fact that this Agreement exists or (ii) directly or indirectly,
invite, initiate, solicit or knowingly encourage (including by way of furnishing
non-public information or assistance), any inquiries with respect to or the
making of any proposal that constitutes, or may reasonably be expected to lead
to, any Acquisition Proposal (as defined below),
27
<PAGE>
or (iii) enter into or maintain or continue discussions or negotiations with any
person or entity in furtherance of such inquiries or to obtain an Acquisition
Proposal or (iv) agree to endorse any Acquisition Proposal. For purposes of this
Section, the term "Acquisition Proposal" shall mean any of the following (other
than the transactions with the Merger Subsidiary contemplated by this
Agreement): (i) any merger, consolidation, share exchange, recapitalization,
business combination, or other similar transaction involving the Company; (ii)
any sale, lease, exchange, mortgage, pledge, transfer or other disposition of
10% or more of the assets of the Company in a single transaction or series of
transactions; (iii) any offer or proposal for 5% or more of the outstanding
shares of capital stock of the Company or (iv) any public announcement of a
proposal, plan or intention to do any of the foregoing or any agreement to
engage in any of the foregoing. The Company represents that it is not, nor are
any of its stockholders, currently a party to or bound by any agreement with
respect to an Acquisition Proposal. In the event that the Company receives or
becomes aware of any Acquisition Proposal, the Company will promptly notify
Merger Subsidiary in writing of such communication, of the identity of the
person or entity making such Acquisition Proposal and of the terms and
conditions of such Acquisition Proposal.
(b) If the Company, or any of the other persons listed in
subsection (a) above breaches or violates any of its covenants in subsection (a)
above, or if within nine (9) months following termination of this Agreement
(unless such termination is without fault on the part of Company), the Company
or its stockholders shall have entered into an Acquisition Proposal, then the
Company shall immediately reimburse Eastwind and Merger Subsidiary for all of
Eastwind's and Merger Subsidiary's costs and expenses related to the
transactions contemplated under this Agreement incurred through such date and in
addition shall pay to Eastwind a Termination Fee of $50,000. The Company
acknowledges that the agreements and covenants contained in this Section 7.7 are
an integral part of the transactions contemplated by this Agreement.
4.06 Stockholder Consent; Company Information Statement.
--------------------------------------------------
(a) The Company shall solicit the written consent of its
stockholders (the "Company Stockholder Consent") as soon as reasonably
practicable for the purpose of securing such stockholders' approval and adoption
of this Agreement and the Merger. The Directors of the Company shall, subject to
their fiduciary duties, approve this Agreement and the Merger, and recommend
approval and adoption of this Agreement and the Merger by the Company's
stockholders. In connection with such Company Stockholder Consent, the Company
(i) will promptly prepare and
28
<PAGE>
thereafter mail to its stockholders as promptly as practicable all such
information regarding the parties to this Agreement and the transactions
contemplated hereby as it deems reasonably necessary (collectively, the "Company
Information Statement") and all other related materials for such Company
Stockholder Consent, (ii) will, subject to the fiduciary duties of its Board of
Directors, use all reasonable efforts to obtain the necessary approvals by its
stockholders of this Agreement and the transactions contemplated hereby and
(iii) will otherwise comply with all legal requirements applicable to such
Company Stockholder Consent, including, without limitation, Section 228 of the
Delaware General Corporation Law. Notwithstanding the foregoing, in lieu of
soliciting the written consent of its stockholders to approve this Agreement and
the Merger, the Company may, in its discretion, call a meeting of its
stockholders for the purpose of voting on the approval and adoption of this
Agreement and the Merger in accordance with the foregoing provisions of this
Section 4.06.
(b) Eastwind is given the right to approve the form and
content of the Company Stockholder Consent and the Company Information Statement
(if one is prepared and circulated), which approval shall not be unreasonably
withheld. The Company will furnish to Eastwind all such information Eastwind
shall reasonably need in order to prepare the private placement offering
materials to be included as a part of the information furnished by the Company
to its stockholders.
(c) The package of materials compromising the Company
Information Statement shall also contain a form of investment representations as
customary in a private placement offering, a one year limited "lock-up"
commitment in the form of Exhibit 4.06(c) relating to periodic limitations on
the right of Stockholder to resell the Eastwind Closing Shares after the
Effective Time and other information reasonably necessary to qualify the
issuance of the Eastwind Closing Shares as a private placement under Rule 506 of
Regulation D or otherwise under the Securities Act of 1933, as amended (the
"1993 Act").
4.07 Limited Right of Offset and Collateral Security. Stockholder
-----------------------------------------------
and Centennial Racing, Inc., a North Carolina corporation ("Racing") agree that
in order to secure the obligations of Stockholder under his Non-Compete
Agreement attached hereto as Exhibit 7.02(l), in the event of any breach of such
Agreement by Stockholder as determined by the arbitration panel provided for in
Section 11.04 hereof or by a court of competent jurisdiction which results in
the award of damages in favor of Surviving Corporation or Eastwind, then
Surviving Corporation or Eastwind, as the case may be, shall have the following
rights of
29
<PAGE>
offset or collection against Stockholder to recoup such damage award:
(a) The limited right of offset against the promotion
payments set forth in Section 5.05 hereof; and
(b) A right of collection against the death proceeds or cash
surrender value payable under that certain policy of life insurance on the life
of a former employee of Company, Robert Woods, formerly owned by Company and
assigned by it to Stockholder, which security interest shall be evidenced by a
form of collateral assignment or as part of the original agreement of assignment
of all of the rights title and interest in and to such policy by Company to
Stockholder, and which security interest shall lapse upon the death of Mr. Woods
unless a claim hereunder has been asserted in writing prior to his death.
ARTICLE V
COVENANTS OF EASTWIND AND MERGER SUBSIDIARY
5.01 Maintenance of, and Access to, Records. From and after the
--------------------------------------
Closing, Merger Subsidiary shall, whenever reasonably requested by Company,
permit Company to have reasonable access to all business records turned over to
and maintained by Merger Subsidiary pursuant to this Agreement for the purpose
of complying with the requirements of any Governmental Authority tax audit or
other reasonable business purpose consistent with the terms of this Agreement.
The Surviving Corporation shall preserve and maintain such records for at least
six years after the Effective Time.
5.02 Regulatory Authorizations. Merger Subsidiary agrees to use its
-------------------------
best efforts to obtain, and to cooperate with Company in obtaining, all
authorizations, consents, orders and approvals of Governmental Authorities that
may be or become necessary in connection with the transactions contemplated by
this Agreement, and to take all reasonable actions to avoid the entry of any
order or decree by any Governmental Authorities prohibiting the consummation of
the transactions contemplated hereby.
5.03 Further Assurances. From time to time after the Effective Time
------------------
upon request of Company and without further consideration, Merger Subsidiary
shall execute, acknowledge and deliver all such other instruments and shall take
all such other action required effectively to consummate the transactions
contemplated by this Agreement.
5.04 Offer of Employment. Merger Subsidiary agrees to offer
-------------------
employment to all employees of Company as of the Effective Time at
30
<PAGE>
comparable compensation levels to their current compensation, but the status of
all of such employees shall be terminable at will.
5.05 Promotion. Company and Stockholder agree that they will cause
---------
their affiliate, Racing, to continue to promote the Business and other
businesses owned by Eastwind through its automobile racing efforts, in return
for which Eastwind agrees that it will cause the Surviving Corporation to
sponsor Racing's automobile racing team and race cars. The Surviving Corporation
will pay to Racing $100,000 per year, payable in equal monthly installments, for
a period of three (3) years following the Effective Time, and the Surviving
Corporation will retain an option to extend this arrangement for an additional
two years at the same rate. In return for such payments, Racing will provide the
Surviving Corporation and Eastwind with respect to the Business and Eastwind's
other businesses with full sponsorship rights similar to those provided to any
other major primary sponsor of a similar automobile racing team. Such support
will include, but not be limited to, the display of highly visible graphic art
displays similar to those already on Racing's race cars and to be placed on any
additional race cars Stockholder or Racing may be affiliated with and in
connection with any other reasonable promotional activities, provided approved
in advance by the Surviving Corporation. The Surviving Corporation in turn
agrees to provide Company and Racing with printing support in the amount and of
the kinds that were previously utilized to acquire racing engines for the race
cars, up to a total annual cost not to exceed $25,000. The Surviving Corporation
and Eastwind, as the case may be, will have a right of offset to these payments
if Racing fails to provide the support and rights agreed to in this Section 5.05
as determined by the arbitration panel provided for in Section 11.04 hereto or
if the arbitration panel provided for in Section 11.04 hereof or a court of
competent jurisdiction determines that stockholder has breached his Non-Compete
Agreement attached hereto as Exhibit 7.02(l) and has awarded damages in favor of
Surviving Corporation or Eastwind.
5.06 Obligations of Merger Subsidiary.
--------------------------------
Eastwind will take all action necessary to cause Merger
Subsidiary to perform its obligations under this Agreement and to consummate the
Merger on the terms and conditions set forth in this Agreement. Merger
Subsidiary will not issue any shares of its capital stock, any securities
convertible into or exchangeable for its capital stock, or any option, warrant
or other right to acquire its capital stock to any Person other than Eastwind or
a wholly-owned subsidiary of Eastwind. Merger Subsidiary shall not incur any
indebtedness or liabilities of any kind except pursuant to this Agreement.
31
<PAGE>
5.07 Registration Rights.
-------------------
(a) For purposes of this Section 5.07 the following terms shall
have the meanings set forth below:
(i) The terms "Register" and "Registration" refer to a
registration effected by preparing and filing a Registration Statement or
similar document in compliance with the 1933 Act, and the declaration or
ordering of effectiveness of such Registration Statement or document.
(ii) The securities registered by the Registration means all
of the Eastwind Closing Shares issued pursuant to the Merger, regardless of when
issued, and to be registered if not then currently registered under the 1933
Act, in order to permit them to be resold by the Holders thereof.
(iii) The term "Holder" or "Holders" means the Company
stockholders receiving the Eastwind Closing Shares pursuant to Article I of this
Agreement, and their personal representatives, estates and heirs, and any
assignee of record of Eastwind Closing Shares to whom rights under this Section
5.07 may be transferred under Section 5.07(s).
(iv) The terms "Form SB-2", "Form S-1", "Form S-3" and "any
other applicable form of Registration Statement" mean those forms of
Registration Statements under the 1933 Act as in effect on the date hereof or
any registration form subsequently adopted by the Securities and Exchange
Commission ("SEC") which replaces such form.
(v) The term "Registration Statement" means that form of
Registration Statement under the 1933 Act on Form SB- 2, S-1, S-3 or other
applicable form of Registration Statement, and all amendments and supplements
thereto, as shall be available to Eastwind for the periods required hereunder as
will permit the Holders to sell the Eastwind Closing Shares without having to
rely upon Rule 144 or other exemptions from registration.
(vi) The term "Extension Period" means (A) after a
Registration Statement has become effective, if the same becomes ineffective
within one (1) year, the number of days from the suspension of such
effectiveness until the effectiveness of such Registration Statement is re-
established; and (B) the number of days after a Registration Statement has
become effective, that Eastwind has failed to maintain its listing on NASDAQ or
a comparable national or regional exchange as required by Section 5.07(e)(v)
below.
32
<PAGE>
(b) Eastwind agrees to include all of the Eastwind Closing
Shares in the next Registration Statement filed by Eastwind for any other
purpose, and if none shall be filed, then agrees to use its best efforts to file
a registration statement, the purpose of which is to register all of the
Eastwind Closing Shares issued pursuant to this Agreement (if not currently
registered for resale under the 1933 Act) as soon as reasonably practicable
following the Effective Time, and in any event, no later than within six (6)
months of the Effective Time, and to use its best efforts to cause such
Registration Statement, to become effective under the 1933 Act as soon as
practicable, and particularly to the extent possible within 90 days following
such filing. The foregoing to the contrary notwithstanding, the Holders shall
not have any rights hereunder to cause Eastwind to file more than one
Registration Statement, subject to the provisions of Section 5.07(g) regarding a
withdrawn registration.
(c) If the Holders intend to distribute the Eastwind Closing Shares
by means of an underwriting, they shall so advise Eastwind and Eastwind shall
include such information in the Registration Statement, as the case may be. All
Holders proposing to distribute their Eastwind Closing Shares through such
underwriting shall enter into an underwriting agreement in customary form with
the underwriter or underwriters selected for such underwriting by Holders owning
a majority in interest of the outstanding Eastwind Closing Shares held by the
Holders. Notwithstanding any other provision of this subsection, if the
underwriter advises the Holders in writing that marketing factors require a
limitation of the number of Eastwind Closing Shares to be underwritten, then
Eastwind shall so advise all Holders of Eastwind Closing Shares which would
otherwise be underwritten pursuant hereto, and the number of shares of Eastwind
Closing Shares that may be included in the underwriting shall be allocated among
all Holders thereof in proportion (as nearly as practicable) to the amount of
Eastwind Closing Shares owned by each Holder.
(d) The foregoing to the contrary notwithstanding, if prior to
February 28, 1997, Eastwind shall furnish to each of the Holders a certificate
signed by its Chairman stating that in the good faith judgment of the Board of
Directors of Eastwind it would be seriously detrimental to Eastwind and its
stockholders for such Registration Statement to be filed and it is therefore
essential to defer the filing of such Registration Statement, Eastwind shall
have the right to defer such filing for a period of no more than sixty (60)
days; provided, however, that Eastwind may utilize this right only once. If the
effect of such deferral is to defer the effective date of such Registration
Statement beyond February 28, 1997, such shall not be deemed a violation of
Eastwind's best efforts hereunder, but such deferral of the filing of the
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<PAGE>
Registration Statement shall extend the time during which such Registration
Statement must be kept effective by Eastwind as provided in Section 5.07(e)(i)
by the length of such deferral period.
(e) Eastwind further agrees, as expeditiously as reasonably possible
to use its best efforts:
(i) To keep the Registration Statement for the Registration
of the Eastwind Closing Shares hereunder effective for an aggregate, even if not
continuous, period of one year following its Effective Date, including, to the
extent necessary, preparing and filing all amendments to such Registration
Statement and/or Prospectus as necessary under the 1933 Act to permit the
Holders to resell or dispose of the Eastwind Closing Shares owned by them.
(ii) To furnish to the Holders such numbers of copies of the
Prospectus, including a preliminary prospectus, in conformity with the
requirements of the 1933 Act, and such other documents as they may reasonably
request or as are required by law in order to facilitate the sale or disposition
of Eastwind Closing Shares owned by them.
(iii) To use its best efforts to register and qualify the
Eastwind Closing Shares covered by such Registration Statement, as the case may
be, under such other securities or Blue Sky laws of such jurisdictions within
the United States as shall be reasonably requested by the Holders, provided that
Eastwind shall not be required to qualify to do business or file a general
consent to service or process in any such states or jurisdictions.
(iv) To notify each Holder of Eastwind Closing Shares
covered by such Registration Statement at any time when a prospectus relating
thereto is required to be delivered under the 1933 Act of the happening of any
event as a result of which the prospectus included in such Registration
Statement, as then in effect, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements therein not misleading in the light of the circumstances
then existing.
(v) During the period of time set forth in (i) above, to
use its best efforts to maintain its listing on NASDAQ or a comparable national
or regional exchange in order to provide Holders with a market for their
Eastwind Closing Shares.
(f) It shall be a condition precedent to the obligations of Eastwind
to take any action pursuant to this Section 5.07 with respect to the Eastwind
Closing Shares of any selling Holder that
34
<PAGE>
such Holder shall furnish to Eastwind such information regarding itself, the
Eastwind Closing Shares held by it, the intended method of disposition of such
securities as shall be required to effect the registration of such Holder's
Eastwind Closing Shares and the indemnification contemplated by 5.07(j).
(g) Eastwind shall bear and pay all expenses incurred in connection
with any registration, filing or qualification of the Eastwind Closing Shares
with respect to the registrations hereunder for each Holder, including all
registration, filing and qualification fees, printers and accounting fees
relating or allocable thereto, fees and disbursements of counsel for Eastwind,
but excluding (i) counsel fees for the Selling Holders; (ii) underwriting
discounts, commissions and expenses, if any, relating to the resale of the
Eastwind Closing Shares held by the Selling Holders; and (iii) Eastwind's
expenses of Registration of the Eastwind Closing Shares under the 1933 Act
pursuant to this Section to the date of withdrawal of such Registration if the
withdrawal of such Registration occurs at the selling Holders' request that such
be withdrawn after the Registration process has commenced, unless the selling
Holders' request to withdraw is made because of a material adverse change in the
financial condition or business of Eastwind of which the Selling Holders were
unaware when the registration process began. Any registration withdrawn shall
not count as the registration of the Eastwind Closing Shares.
(h) No Holder shall have any right to obtain or seek an injunction
restraining or otherwise delaying any such registration as the result of any
controversy that might arise with respect to the interpretation or
implementation of this Section 5.07.
(i) To the fullest extent permitted by law, Eastwind will indemnify
and hold harmless each Holder, any underwriter (as defined in the Act) for such
Holder and each person, if any, who controls such Holder or underwriter within
the meaning of the 1933 Act or the 1934 Act, against any losses, claims,
damages, liabilities and reasonable expenses (including legal fees) (joint or
several) to which they may become subject under the 1933 Act, the 1934 Act or
other federal or state law, insofar as such losses, claims, damages, liabilities
or reasonable expenses (or actions in respect thereof) arise out of or are based
upon any of the following statements, omissions or violations (collectively a
"Violation"); (A) any untrue statement or alleged untrue statement of a material
fact contained in such registration statement, including any preliminary
prospectus (but only if such is not corrected in the final prospectus) contained
therein or any amendments or supplements thereto, (B) the omission or alleged
omission to state therein a material fact required to be stated therein, or
necessary to make the statements therein not misleading
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<PAGE>
(but only if such is not corrected in the final prospectus), or (C) any
violation or alleged violation by Eastwind in connection with the registration
of Eastwind Closing Shares under the 1933 Act, the 1934 Act, any state
securities law or any rule or regulation promulgated under the 1933 Act, the
1934 Act or any state securities law; provided, however, that the indemnity
agreement contained in this subsection 5.07(i) shall not apply to amounts paid
in settlement of any such loss, claim, damage, liability, reasonable expenses or
action if such settlement is effected without the consent of Eastwind (which
consent shall not be unreasonably withheld or delayed), nor shall Eastwind be
liable in any such case for any such loss, claim, damage, liability, or action
to the extent that it arises out of or is based upon a violation which occurs in
reliance upon and in conformity with written information furnished expressly for
use in connection with such registration by any such Holder, underwriter or
controlling person.
(j) To the fullest extent permitted by law, each selling Holder will
indemnify and hold harmless Eastwind, each of its directors, each of its
officers who has signed the Registration Statement, each person, if any, who
controls Eastwind within the meaning of the 1933 Act, any underwriter, any other
Holder selling securities in such Registration Statement and any controlling
person of any such underwriter or other Holder, against any losses, claims,
damages, or liabilities and reasonable expenses (including legal fees) (joint or
several) to which any of the foregoing persons may become subject, under the
1933 Act, the 1934 Act or other federal or state law, insofar as such losses,
claims, damages, liabilities or reasonable expenses (or actions in respect
thereto) arise out of or are based upon any Violation, in each case to the
extent (and only to the extent) that such Violation occurs in reliance upon and
in conformity with written information furnished by such Holder expressly for
use in connection with such registration; provided, however, that the indemnity
agreement contained in this subsection 5.07(j) shall not apply to amounts paid
in settlement of any such loss, claim, damage, liability, reasonable expenses or
action if such settlement is effected without the consent of the Holder, which
consent shall not be unreasonably withheld or delayed, and provided further,
-------- -------
that the total amounts payable in indemnity by a Holder under this Section
5.07(j) in respect of all Violations shall not exceed the net proceeds realized
by such Holder from the sale of his Eastwind Closing Shares pursuant to a
registration of such Eastwind Shares under this Section 5.07 (or if such Holder
has not yet sold all of such Eastwind Closing Shares under such a registration
on the date the claim for indemnity is presented to him, then the sum of the net
proceeds realized as aforesaid and the value of such Eastwind Closing Shares
still held by him and subject to the Registration
36
<PAGE>
Statement (measured by the closing price of such shares on NASDAQ on such date).
(k) Promptly after receipt by an indemnified party under this Section
5.07 of notice of the commencement of any action (including any governmental
action), such indemnified party will, if a claim in respect thereof is to be
made against any indemnifying party under this Section 5.07, deliver to the
indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
-------- -------
have the right to retain its own counsel, with the fees and expenses of such
counsel to be paid by the indemnifying party, if it can demonstrate to the
reasonable satisfaction of the indemnifying party that representation of such
indemnified party by the counsel retained by the indemnifying party would be
inappropriate due to actual or potential conflicts of interests between such
indemnified party and any other party represented by such counsel in such
proceeding. The failure to deliver written notice to the indemnifying party
within a reasonable time of the commencement of any such action, if materially
prejudicial to its ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this Section
5.07, but the omission so to deliver written notice to the indemnifying party
will not relieve it of any liability that it may have to any indemnified party
otherwise than under this Section 5.07.
(l) In order to provide for just and equitable contribution to joint
liability under the 1933 Act in any case in which either (i) any Holder
exercising rights under this Agreement, or any controlling person of any such
Holder, makes a claim for indemnification pursuant to Section 5.07(i) but it is
judicially determined (by the entry of a final judgment or decree by a court of
competent jurisdiction and the expiration of time to appeal or the denial of the
last right of appeal) that such indemnification may not be enforced in such case
notwithstanding the fact that Section 5.07(i) provides for indemnification in
such case, or (ii) contribution under the 1933 Act may be required on the part
of any such selling Holder or any such controlling person in circumstances for
which indemnification is provided under this Section 5.07(j); then, and in each
such case, Eastwind and such Holder shall contribute to the aggregate losses,
claims, damages or liabilities to which they may be subject (after contribution
from others) in such proportion so that such Holder is responsible for not more
than the percentage of such losses, damages, claims or liabilities that is equal
to the percentage that the net proceeds and/or value
37
<PAGE>
as applicable, of such Holder's Eastwind Shares, as determined under 5.07(j),
bears to the net proceeds and/or value of all Eastwind Closing Shares, as
determined under 5.07(j), offered by and sold under such registration statement,
such traded values determined on the date such registration statement is
declared effective, and Eastwind and other selling Holders are responsible for
the remaining portion; provided, however, that, in any such case (A) no Holder
-------- -------
shall be required to contribute any amount in excess of the net proceeds and/or
value of such shares, as applicable, as determined under 5.07(j), on such date
of such Holder's Eastwind Closing Shares pursuant to the registration of such
shares effected by Eastwind under this Section 5.07, and (B) no person or entity
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the 1933 Act) shall be entitled to contribution from any person or entity who
was not guilty of such fraudulent misrepresentation.
(m) The obligations of the Company and Holders under this Section
5.07 shall survive the completion of any offering of Registerable Securities in
a registration statement under this Section 5.07 and otherwise.
(n) With a view to making available to the Holders the benefit of
Rule 144 promulgated under the 1933 Act and any other rule or regulation of the
SEC that may at any time permit a Holder to sell securities of Eastwind to the
public without registration or pursuant to a Registration Statement, as the case
may be, Eastwind agrees to at all times until at least October 31, 1998 and, if
applicable, plus any Extension Period:
(i) make and keep public information available, as those
terms are understood and defined in SEC Rule 144;
(ii) take such action, including maintaining the voluntary
registration of its Common Stock under Section 12 of the 1934 Act, as is
necessary to enable the Holders to utilize Rule 144 for the sale of their
Eastwind Closing Shares under the 1933 Act;
(iii) file with the SEC in a timely manner all reports and
other documents required of Eastwind under the 1934 Act; and
(iv) to furnish such Holders, upon reasonable request,
copies of forms and reports filed under the 1934 Act and confirmation that
Eastwind has complied with all requirements imposed upon it to make resales in
compliance with Rule 144 available to them.
38
<PAGE>
(o) With a view to maintaining an active trading market for the
Eastwind Shares for the benefit of the holders thereof, Eastwind agrees to use
its best efforts, to the extent within its control, at all times until at least
October 31, 1998:
(i) to cause the Eastwind Common Stock to be listed on the
NASDAQ Small Capital Market or a comparable securities exchange in the United
States of America and file all notices with the NASDAQ (or other comparable U.S.
securities exchange) that are necessary for the Eastwind Closing Shares to be
designated for issuance as a NASDAQ Small Capital Market (or other comparable
U.S. securities exchange) security;
(p) Any provision of this Section 5.07 may be amended or the
observance thereof may be waived (either generally or in a particular instance
and either retroactively or prospectively), only with the written consent of
Eastwind and the Stockholder. Any amendment or waiver effected in accordance
with this Section shall be binding upon each Holder of any securities purchased
under this Agreement at the time outstanding, each future Holder of all such
securities, and Eastwind.
(q) Eastwind will have no obligation to find purchasers for the
Eastwind Closing Shares held by the Holders and registered for resale, and the
Holders of such Eastwind Closing Shares will only sell them in open market
transactions or through an underwriter, and only pursuant to the Registration
Statement, and as to Stockholder, only to the extent permitted under the "lockup
obligation" referred to in Section 4.06(c).
(r) From and after the date of this Agreement and until the
Registration has been declared effective, Eastwind shall not, without the prior
written consent of the Holders of a majority of the Eastwind Closing Shares then
outstanding, enter into any agreement with any holder or prospective holder of
any other securities of Eastwind that would allow such holder or prospective
holder (a) to include securities other than Eastwind Closing Shares in any
Registration filed under Section 5.07 hereof, unless under the terms of such
agreement, such holder or prospective holder may include such securities in such
Registration under this Section 5.07 only to the extent that the inclusion of
his securities will not reduce the amount of the Eastwind Closing Shares of the
Holders to be included in such Registration or otherwise defer or prevent the
Registration of any Eastwind Closing Shares pursuant to this Section.
(s) The rights of any Holder of Eastwind Closing Shares under this
Section 5.07 may be assigned to any person or entity who acquires or purchases
Eastwind Closing Shares from such Holder in
39
<PAGE>
any transaction not in violation of such Holder's (in the case of Stockholder
only) "lock-up" obligation contemplated by Section 4.06 (c) of this Agreement
(including, but not limited to, any partner or stockholder of such Holder who
receives such Eastwind Closing Shares in any distribution or dividend of any
kind); except that a Holder's rights under this Section 5.07 may not be assigned
to any person or entity who purchases Eastwind Closing Shares from such Holder
pursuant to a public sale of such Eastwind Closing Shares effected pursuant to
the Registration of such Eastwind Closing Shares under the 1933 Act as
contemplated by this Section 5.07.
(t) Each Holder is an intended third-party beneficiary of the
agreements and provisions set forth in this Section 5.07 and, from and after the
Effective Time, each such Holder shall have the right to enforce its rights and
Eastwind's obligations under this Section 5.07.
(u) (A) Until the Registration Statement pursuant to which the
Eastwind Closing Shares have been registered has first been declared effective,
(B) during any suspension of the effectiveness of a Registration Statement which
has been effective for less than one (1) year (in the aggregate, and not
consecutively) prior to suspension, or (C) if during such one year period the
listing required to be maintained under Section 5.07(e)(v) above is suspended or
delisted, then during the additional period of time until such listing has been
reestablished,
the Surviving Corporation shall continue to pay the Stockholder a consulting fee
at a monthly rate of $12,500.
5.08 Floor Guarantee of Resale Price of Eastwind Closing Shares.
----------------------------------------------------------
(a) If, in any succeeding and consecutive three month period
(hereinafter a "Quarter"), following the first effective date of the
Registration Statement referred to in Section 5.07, the Stockholder shall sell
Eastwind Closing Shares at an aggregate gross price received for the sale of all
such shares in such Quarter, which when divided by the number of such shares
sold in such Quarter, results in a per share price of less than 85% of the
Eastwind Closing Price Per Share (hereinafter the "Floor") then Eastwind shall
pay to the Stockholder the difference between such per share price realized by
the Stockholder and the Floor, multiplied by the number of Eastwind Closing
Shares sold during such Quarter, within ten (10) days following evidence
furnished by the Stockholder of such differential.
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<PAGE>
(b) If Eastwind is required to make a payment of such guaranteed
amount between the realized price per share and the Floor, as set forth in
subsection 5.08(a), with respect to any Quarter, then Eastwind shall be entitled
to a refund with respect to its past guarantees to the extent paid by it, and if
Eastwind has not yet been required to make a payment of such guaranteed amount
then Eastwind shall receive a corresponding credit against its future
guarantees, to the extent the Stockholder has sold Eastwind Closing Shares
within the "Floor Guarantee Period" (as hereinafter defined) and the aggregate
gross price received for all of such shares sold in such Floor Guarantee Period,
which when divided by the number of such shares sold in such Floor Guarantee
Period, results in a per share price which exceeds the Eastwind Closing Price
Per Share, and which refund and/or credit shall be in an amount equal to the
aggregate of such excess price for all of such shares sold, but in the case of a
refund, not to exceed the aggregate Floor guarantees previously paid by Eastwind
to Stockholder.
(c) The Eastwind Floor guarantee of resale price support in
subsection 5.08(a), and the corresponding credit or refund obligation of the
Stockholder in subsection 5.08 (b), shall expire at the end of the fourth
Quarter following the first effective date of the Registration Statement
referred to in Section 5.07 plus, if applicable, the Extension Period, even if
the Stockholder has not disposed of all of his Eastwind Closing Shares by such
date (the "Floor Guarantee Period"). Eastwind shall have paid to Stockholder all
applicable Floor guarantees, net of any such credits or refunds, for those four
Quarters (if any), but Stockholder shall not be required to credit or pay any
excess proceeds (as defined in 5.08(b)) to Eastwind which exceed the total
amount of Eastwind Floor guarantees for those four Quarters (if any).
(d) If, in any Quarter, the Stockholder intends to place a sell order
or orders for more than five hundred (500) of the Eastwind Closing Shares at a
price which is more than 25% below the Eastwind Closing Price Per Share, then
before such trade can be effected the Stockholder must first give prompt written
notice of such intention to sell to Eastwind, and Eastwind shall have a right of
first refusal to repurchase such shares being offered for sale at such offered
price, provided Eastwind gives the Stockholder notice of its intention to
immediately purchase such shares at such price no later than forty-eight (48)
hours following its receipt of notice by the Stockholder to Eastwind of such
intention, at a closing to occur not later than five (5) days after issuance of
such notice. Such purchase by Eastwind shall not obviate its Floor guarantee
pursuant to this Section 5.08.
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5.09 Board of Directors. Eastwind covenants that it will cause Stockholder
------------------
to be elected as a director of Surviving Corporation for a period of at least
two (2) years, provided Stockholder wishes to so serve and further provided that
Surviving Corporation remains as a separate corporate entity during such period
of time.
5.10 Continued Participation of Stockholder in Certain Benefit Plans of
------------------------------------------------------------------
Surviving Corporation. The Surviving Corporation shall permit Stockholder to
- ---------------------
continue as a participant in certain medical and health benefit plans maintained
for the employees of Surviving Corporation for a period of five (5) years
following the Effective Date, provided that Stockholder shall pay the full cost
of his participation in such plans. This obligation shall continue only for so
long as Surviving Corporation continues to offer such plans, and nothing
contained herein shall be construed as any obligation on the part of Surviving
Corporation to continue any specific plan now in force for such five (5) year
period nor limit the right of Surviving Corporation to change the form, nature
or amounts of coverage under such plans in the future, including, solely at its
option, to eliminate any and all of such plans in the future.
ARTICLE VI
COVENANTS OF EASTWIND, MERGER SUBSIDIARY AND THE COMPANY
6.01 Press Releases. To the extent required to be made pursuant to any
--------------
applicable law, regulation or other requirement of any Governmental Authority in
the reasonable opinion of its legal counsel, Eastwind may make any public
announcement or issue any press release regarding this Agreement or the
consummation of the transactions contemplated hereby without the prior consent
of Company to such announcement or press release, but Company shall have the
right to review and comment upon such prior to its release, provided such is not
unreasonably delayed thereby. Company will not make any such announcement or
press release without Eastwind's prior written consent, which will not be
unreasonably withheld, and upon its initial announcement of the transactions
contemplated hereunder will notify the Company's employees in a manner mutually
agreed between Company and Eastwind.
6.02 Expenses. Each party hereto will bear the legal, accounting,
--------
brokerage, consulting and other fees and expenses incurred by such party in
connection with this Agreement, and the other agreements and transactions
contemplated hereby, except that Surviving Corporation shall pay Company's and
Stockholder's reasonable legal and accounting fees in connection with the
42
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negotiation and consummation of the transactions contemplated by this Agreement.
6.03 Reasonable Efforts. Subject to the terms and conditions of this
------------------
Agreement, each party will use all reasonable efforts to take, or cause to be
taken, all actions and to do, or cause to be done, all things necessary, proper
or advisable under applicable laws and regulations to consummate the
transactions contemplated by this Agreement; provided that the foregoing shall
not require Eastwind to furnish, other than for itself and its affiliates,
financial statements prepared in accordance with United States generally
accepted accounting principles or any reconciliation of financial statements
with United States generally accepted accounting principles.
6.04 Certain Filings. The Company and Eastwind shall cooperate with one
---------------
another (a) in connection with the preparation of the Company Information
Statement, (b) in determining whether any action by or in respect of, or filing
with, any governmental body, agency or official, or 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 (c) in seeking any such actions,
consents, approvals or waivers or making any such filings, furnishing
information required in connection therewith or with the Company Information
Statement and timely seeking to obtain any such actions, consents, approvals or
waivers.
6.05 Further Assurances. At and after the Effective Time, the officers and
------------------
directors of the Surviving Corporation will be authorized to execute and
deliver, in the name and on behalf of the Company or Merger Subsidiary, any
deeds, bills of sale, assignments or assurances and to take and do, in the name
and on behalf of the Company or Merger Subsidiary, any other actions and things
to vest, perfect or confirm of record or otherwise in the Surviving Corporation
any and all right, title and interest in, to and under any of the rights,
properties or assets of the Company acquired or to be acquired by the Surviving
Corporation as a result of, or in connection with, the Merger; and Eastwind
shall deliver or cause its counsel to deliver in a timely manner to the transfer
agent of Eastwind Common Stock and Eastwind Preferred Stock such authorization
or instructions as a holder of the Eastwind Common Stock or Eastwind Preferred
Shares may reasonably request in order to sell, transfer or dispose of such
shares in the manner set forth herein.
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ARTICLE VII
CONDITIONS TO THE MERGER
7.01 Conditions to the Obligations of Each Party. The obligations of the
-------------------------------------------
Company, Eastwind and Merger Subsidiary to consummate the Merger are subject to
the satisfaction of the following conditions:
(a) this Agreement shall have been adopted by the directors and by
the stockholders of the Company and of Merger Subsidiary in accordance with
Delaware Law;
(b) no provision of any applicable law or regulation and no judgment,
injunction, order or decree shall prohibit the consummation of the Merger;
(c) all actions by or in respect of or filings with any governmental
body, agency, official, or authority required to permit the consummation of the
Merger shall have been obtained (other than those actions or filings which, if
not obtained or made prior to the consummation of the Merger, would not
reasonably be expected to have a Material Adverse Effect or would not cause the
Merger to be legally ineffective, unlawful or invalid);
(d) there shall not be in effect any banking moratorium or suspension
of payments in respect of banks in the United States or Canada, or any general
suspension in trading in, or limitation on prices for, securities on the NASDAQ
Small Capital Market;
(e) All third-party consents to the change of control in the Company
effected by the Merger required under any written contract or agreement, a list
of which is included in Schedules 3.01(b) and (c), the failure of which to
obtain could reasonably be expected to have a Material Adverse Effect, shall
have been obtained.
(f) All other required governmental regulatory approvals of the
Merger in the United States shall have been obtained.
7.02 Conditions to the Obligations of Eastwind and Merger Subsidiary.
---------------------------------------------------------------
The obligations of Eastwind and Merger Subsidiary to consummate the
Merger are subject to the satisfaction of the following further conditions:
44
<PAGE>
(a)(A) the Company shall have performed in all material
respects all of its obligations hereunder required to be performed by it at or
prior to the Effective Time; (B) the representations and warranties of the
Company contained in Section 3.01 or in any certificate or other writing
delivered with respect to any such representation and warranty shall have been
true in all material respects on the date of this Agreement and as of the
Effective Time as if made at and as of such time; (C) each of the other
representations and warranties of the Company contained in any other certificate
or other writing delivered by the Company pursuant hereto shall be true in all
material respects at and as of the Effective Time as if made at and as of such
time; (D) The Company shall have performed and complied with all covenants and
agreements required by this Agreement to be performed or complied with by it at
or prior to the Effective Date; (E) the Board of Directors of the Company shall
have approved the Merger as evidenced by the Company's execution of this
Agreement; and (F) Eastwind shall have received a certificate in a form
satisfactory to Eastwind signed by an executive officer of the Company to the
foregoing effect;
(b) Eastwind shall have received all documents it may
reasonably request relating to the existence of the Company and the Subsidiaries
and the authority of the Company for this Agreement, all in form and substance
satisfactory to Eastwind;
(c) Since the date hereof, there shall have been no material
adverse change, nor any event which likely will result in any change, in the
condition (financial or otherwise), results of operations, properties, assets or
liabilities of the Business, and a Uniform Commercial Code Search for judgments,
liens and UCC filings shall not have discovered any material liability or
encumbrance not disclosed in the Financial Statements nor in the Schedules that
has not been reduced to an immaterial liability or encumbrance prior to the
Effective Time.
(d) All authorizations, approvals or permits, if any, of any
governmental authority or regulatory body of the United States or of any state
that are required in connection with the consummation of the transactions
contemplated by this Agreement shall be duly obtained and effective as of the
Effective Time of the Merger.
(e) The Company shall have prepared and delivered to its
stockholders the Company Information Statement which will be in such form as has
been approved by Eastwind after its review and the review of its counsel thereof
(such approval by Eastwind and its counsel not to be unreasonably withheld) as
provided in
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Section 4.06 hereof, unless counsel to the Company shall have determined that
the Company Information Statement is not required.
(f) At least ninety-five percent (95%) of the Company
stockholders, in interest (measured by the number of shares outstanding of all
classes and series of stock in the Company), shall have approved the Merger, and
no more than two and one-half percent (2 1/2%), in interest (measured by the
number of shares outstanding of all classes and series of stock in the Company),
of such Company stockholders shall have demanded appraisal rights for their
shares of Company Common Stock in accordance with the statutory provisions of
Delaware law relating to stockholder dissenters' rights.
(g) Eastwind shall have received reasonably satisfactory
documentation from the holders of shares of Company Common Stock who are not
exercising dissenting stockholders' rights to the effect that the Eastwind
Closing Shares and Eastwind Preferred Shares that such Company stockholders are
acquiring in the Merger will be acquired for their own account, for investment
and not with a view to distribution without an appropriate registration of such
Eastwind Closing Shares and Eastwind Preferred Shares or an applicable exemption
from registration under the 1933 Act, and further agreeing not to assign,
transfer or dispose of such Eastwind Closing Shares and Eastwind Preferred
Shares for a minimum of 90 days following the Effective Time, and shall
otherwise be satisfied, based upon the reasonable, advice of its counsel, that
the issuance of all Eastwind Closing Shares and Eastwind Preferred Shares
contemplated by this Agreement is covered by an applicable exemption from the
registration requirements of the 1933 Act or have otherwise been registered
under the 1933 Act prior to issuance.
(h) The present directors of the Company and Bruce K. Worrall
and Vicki L. Worrall shall have delivered to Eastwind satisfactory evidence of
their resignations from their positions effective as of the Effective Time.
(i) Eastwind shall have delivered to Merger Subsidiary all
documents and other papers related to actions and legal proceedings that are
required to be delivered hereunder, and no judgment, order or decree shall have
been rendered by any Governmental Authority which has the effect of enjoining
the consummation of the transactions contemplated by this Agreement.
(j) Eastwind shall be satisfied with the results of its
detailed due diligence into the Business conducted after the date hereof.
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(k) Eastwind shall have received the Non-Compete Agreement
with Stockholder properly executed by him, substantially in the form of Exhibit
7.02(k) attached hereto and made a part hereof.
(l) Eastwind shall have received an opinion of Riley, Riper,
Hollin & Colagreco, counsel to the Company, addressed to Eastwind and Merger
Subsidiary, dated as of the Effective Time, substantially in the form set forth
as Exhibit 7.02(l) attached hereto and made a part hereof.
7.03 Conditions to the Obligations of the Company.
--------------------------------------------
The obligations of the Company to consummate the Merger
are subject to the satisfaction of the following further conditions;
(a) Eastwind and Merger Subsidiary shall have performed in all
material respects all of their respective covenants and obligations hereunder
required to be performed by them at or prior to the Effective Time; the
representations and warranties of Eastwind and Merger Subsidiary contained in
this Agreement and any certificate or other writing delivered by Eastwind or
Merger Subsidiary pursuant hereto shall be true in all material respects at and
as of the Effective Time as if made at and as of such time; the Board of
Directors of Eastwind and of the Merger Subsidiary shall have approved the
Merger as evidenced by Eastwind's execution of this Agreement; and the Company
shall have received a certificate in a form satisfactory to Company signed by an
executive officer of each of Eastwind and Merger Subsidiary to the foregoing
effect;
(b) the Company shall have received all documents it may
reasonably request relating to the existence of Eastwind or Merger Subsidiary
and the authority of Eastwind or Merger Subsidiary to enter into this Agreement,
all in form and substance satisfactory to the Company;
(c) no material adverse change in the business, prospects or
financial condition of Eastwind or Merger Subsidiary shall have occurred since
the date hereof and neither Eastwind nor Merger Subsidiary shall have become the
subject of any bankruptcy or similar insolvency proceeding;
(d) Eastwind shall be in full compliance with its obligations
to file and make reports to the SEC under the 1934 Act, and Eastwind Common
Stock shall be listed and quoted on the NASDAQ-
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Small Capital Market, and the Company shall have received a certificate to such
effect from an executive officer of Eastwind.
(e) Eastwind shall have delivered to Company all documents and
other papers related to actions and legal proceedings that are required to be
delivered hereunder. No judgment, order or decree shall have been rendered by
any Governmental Authority which has the effect of enjoining the consummation of
the transactions contemplated by this Agreement.
(f) Merger Subsidiary shall have obtained releases from
third-party lenders and/or assignees of the equipment leases listed on Schedule
3.01(f) or (g) in favor of Stockholder and his wife (the "Worralls" and the
"Third-Party Releases") releasing them from all liability or claims from such
third-party lenders.
(g) Stockholder shall have received the Non-Compete Agreement
in the form of Exhibit 7.02(k), properly executed by Eastwind and the Surviving
Corporation, and shall have received the lump sum cash payment of $500,000
thereunder in immediately available funds from Eastwind and/or Surviving
Corporation.
(h) Eastwind and Merger Subsidiary shall have delivered the
Eastwind Closing Shares, the Eastwind Preferred Shares, and the cash payment of
$450,000 which together comprise the Merger Consideration.
(i) The Company shall have received an opinion of Clark Ladner
Fortenbaugh & Young, counsel to Eastwind and Merger Subsidiary, addressed to the
Company and dated as of the Effective Time, substantially in the form set forth
as Exhibit 7.03(m) attached hereto.
ARTICLE VIII
TERMINATION
8.01 Termination.
-----------
This Agreement may be terminated and the Merger may be
abandoned at any time prior to the Effective Time (notwithstanding any approval
of this Agreement by the stockholders of the Company):
(a) by mutual written consent of the Company, Merger
Subsidiary and Eastwind;
(b) by either the Company or Eastwind, if the Merger has not
been consummated by December 31, 1996;
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<PAGE>
(c) by either the Company or Eastwind, if there shall be any
law or regulation that makes consummation of the Merger illegal or otherwise
prohibited or if any judgment, injunction, order or decree enjoining Eastwind,
Merger Subsidiary or the Company from consummating the Merger is entered and
such judgment, injunction, order or decree shall become final and nonappealable;
provided that the party seeking to terminate this Agreement pursuant to this
clause (c) shall have used all reasonable efforts to remove such judgment,
injunction order or decree;
(d) by either Eastwind or the Company, if the Company
Stockholders shall have failed to approve and adopt this Agreement and the
Merger; or
(e) by Eastwind, if it and Merger Subsidiary are not in
material breach of their obligations under this Agreement and if the Board of
Directors of the Company shall have (A) withdrawn its recommendation of the
Merger or (B) recommended or approved any acceptance by stockholders of any
Proposal for Acquisition of the Company (other than an acquisition proposal made
by Eastwind or an affiliate of Eastwind).
8.02 Effect of Termination.
---------------------
If this Agreement is terminated pursuant to Section 8.01, this
Agreement shall become void and of no effect with no liability on the part of
any party hereto, except for fraud and for willful breach of a material covenant
contained herein, except that if Company shall have taken the actions specified
in 8.01(e) Eastwind shall have all remedies available at law or in equity. In
any event, the agreements contained in Sections 4.05 and 6.02 shall survive the
termination hereof.
8.03 Efforts to Close.
----------------
The parties will use their best efforts to close and
consummate the Merger in accordance with the terms of this Agreement as soon as
practicable after the date hereof.
ARTICLE IX
TAX MATTERS
9.01 Taxes and Adjustments.
---------------------
Company and Stockholder shall file or cause to be filed when
due all returns in respect of income taxes of Company for taxable years ending
before the Effective Time; Stockholder shall
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<PAGE>
file or cause to be filed when due all returns in respect of income taxes of
Company for all short periods ending on the Effective Time; Company and
Stockholder shall file or cause to be filed all other tax returns or reports for
any other Company taxes past due by the Effective Time; and to the extent
Company has not paid such prior to the Effective Time, Stockholder shall pay or
cause to be paid the income taxes due on or with respect to any such return.
ARTICLE X
INDEMNIFICATION
10.01 Indemnification by Merger Subsidiary. From and after the Effective
------------------------------------
Time, Merger Subsidiary shall indemnify, defend and hold Stockholder harmless
from and against any and all claims, actions, suits, demands, assessments,
judgments, losses, liabilities, damages, costs and expenses (including, without
limitation, reasonable attorney's fees) that may be incurred by Stockholder
arising from: (a) the failure of Merger Subsidiary to assume, pay, perform and
discharge the Company Liabilities to which the Worralls have any residual
liability by reason of personal guarantees and (b) any breach of any
representation, warranty, covenant, obligation or agreement of Merger Subsidiary
contained herein. The right of Stockholder to indemnification under Section
10.01(b) shall only apply to those claims for indemnification, notice of which
is given to Merger Subsidiary on or before the expiration of two (2) years from
the Effective Time. Merger Subsidiary shall not be required to indemnify, defend
or hold Stockholder harmless from or against any Liabilities or Losses under
Section 10.01(b) unless and until the amount of such Liabilities and Losses
incurred by Stockholder in the aggregate exceeds $10,000, and Merger Subsidiary
shall then be obligated to indemnify only with respect to amounts which exceed
$10,000. The maximum amount of indemnification by Merger Subsidiary under
Section 10.01(b) shall not exceed $500,000.
10.02 Indemnification by Stockholder.
------------------------------
(a) General. From and after the Effective Time, Stockholder
-------
shall indemnify, defend and hold Merger Subsidiary and Eastwind, harmless from
and against any and all Liabilities that may be incurred by Merger Subsidiary
and Eastwind, and any and all Losses suffered, or sustained by them or to which
they become subject, resulting from, arising out of or relating to (i) any
breach of any representation, warranty, covenant, obligation or agreement of
Company or Stockholder contained herein, except as otherwise provided in Section
10.03; and (ii) any and all Liabilities, whenever asserted, resulting from,
arising out of or
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<PAGE>
relating to events occurring or facts existing on or prior to the Effective
Time.
(b) De Minimis Amount. Stockholder shall not be required to
-----------------
indemnify, defend or hold Merger Subsidiary and Eastwind harmless from or
against any Liability for the breach of any representation, warranty, covenant
obligation or agreement contained in this Agreement unless and until the amount
of such Liabilities incurred by Merger Subsidiary and Eastwind in the aggregate
exceeds $10,000, and Stockholder shall then be obligated to indemnify only with
respect to amounts which exceeds $10,000.
(c) Time Limitations. The right of Merger Subsidiary and Eastwind
----------------
to indemnification under Section 10.02 shall only apply to those claims
for indemnification, notice of which is given to Stockholder on or before the
expiration of the following periods:
Agreement Section Notice Expiration Date
----------------- ----------------------
Sections 3.01(a), 3.01(b), Thirty (30) months from the
3.01(c), and 6.02 Effective Time
All other sections of One year from the Closing
this Agreement Date
(d) Maximum Amount. The maximum amount of indemnification by
--------------
Stockholder for Liabilities, including any Environmental Liabilities, under
Section 10.02, shall not exceed, in the aggregate, $3,350,000.
10.03 Notice of Claim and Right to Participate In and Defend Third-Party
------------------------------------------------------------------
Claim. (a) In the event that any indemnified party receives notice of the
- -----
assertion of any claim, the commencement of any suit, action or proceeding, or
the imposition of any penalty or assessment by a third party in respect of which
indemnity may be sought hereunder (a "Third-Party Claim"), and the indemnified
party intends to seek indemnity hereunder, then the indemnified party shall
promptly provide the indemnifying party with notice of the Third-Party Claim.
The failure by an indemnified party to notify an indemnifying party of a Third-
Party Claim shall not relieve the indemnifying party of any indemnification
responsibility under this Article X, unless such failure adversely prejudices
the ability of the indemnifying party to defend such Third-Party Claim. The
indemnified party shall provide to the indemnifying party as promptly as
practicable all information and documentation reasonably necessary to support
and verify the claim asserted. The indemnifying party shall have the right to
direct, through counsel of its own choosing, the defense or settlement of the
Third-Party
51
<PAGE>
claim at its own expense. If the indemnifying party elects to assume the defense
of any Third-Party Claim, the indemnified party may participate in such defense,
but in such case the expenses of the indemnified party shall be paid by the
indemnified party. If the indemnifying party shall fail to defend, or if after
commencing or undertaking any such defense, fails to prosecute or withdraws from
such defense, the indemnified party shall have the right to undertake the
defense or settlement thereof, at the indemnifying party's expense. The
indemnifying party shall not be liable for any settlement of a Third-Party Claim
without its prior written consent, which consent shall not be unreasonably
withheld. Whether or not the indemnifying party chooses to assume the defense of
a Third-Party Claim, the parties shall cooperate in the defense or prosecution
thereof and shall furnish such records, information and testimony, and attend at
such conferences, discovery proceedings, hearings, trials and appeals, as may be
reasonably requested in connection therewith. The indemnifying party shall be
subrogated to all rights and remedies of the indemnified party to the extent of
any indemnification provided hereunder.
(b) Any indemnifiable claim hereunder that is not a
Third-Party Claim shall be asserted by the indemnified party by promptly
delivering notice thereof to the indemnifying party. If the indemnifying party
does not respond to such notice within 90 days after its receipt, it shall have
no further right to contest the validity of such claim.
ARTICLE XI
MISCELLANEOUS
11.01 Amendments. This Agreement may be amended only by a writing
----------
executed by all of the parties hereto.
11.02 Entire Agreement. This Agreement and the Schedules hereto and
----------------
the other agreements expressly provided for herein set forth the entire
understanding of the parties hereto and supersede all prior contracts,
agreements, arrangements, communications, discussions, representations and
warranties, oral or written, between the parties.
11.03 Governing Law. This Agreement shall in all respects be
-------------
governed by and construed in accordance with the laws of the State of Delaware,
without giving effect to any choice of law or conflict of law provision or rule
(whether of the State of Delaware or any other jurisdiction) that would cause
the application of the laws of any jurisdiction other than the State of
Delaware.
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<PAGE>
11.04 Arbitration. The parties hereto agree that binding arbitration
-----------
shall be the sole means of resolving any claim or dispute under this Agreement
or the other documents to be delivered at the Closing hereunder and identified
as Exhibits herein, except where a party seeks solely equitable relief, in which
case such party has the option to pursue such action for relief in any court of
competent jurisdiction. Such arbitration shall be conducted by a panel of three
(3) arbitrators at a time and place mutually agreeable to the parties and the
arbitrator(s) within a radius of thirty miles of Broad and Market Streets,
Philadelphia, Pennsylvania; shall be non-appealable; shall be governed by the
rules for commercial arbitration of the American Arbitration Association; and
the normal rules of evidence contained in the Pennsylvania Rules of Evidence
shall apply to such proceeding. The costs of such arbitration shall be borne by
the party who initiates such arbitration unless such party shall prevail in such
proceeding by being awarded by the arbitrator(s) a judgment for money damages or
specific equitable remedy, in which case the losing party or parties shall bear
the cost of such arbitration, exclusive of counsel fees for the prevailing party
or parties. Each party to any such arbitration proceeding shall be responsible
for its own counsel fees, witness fees and other trial and document preparation
expenses in any event.
11.05 Consent to Jurisdiction and Service of Process. Company,
----------------------------------------------
Stockholder and Worralls each hereby irrevocably appoints Edward J. Hollin,
Esquire, at his office at 240 Daylesford Plaza, P.O. Box 568, Paoli, PA 19301,
and Eastwind and Merger Subsidiary each hereby irrevocably appoints Peter O.
Clauss, Esquire, at his office at One Commerce Square, 2005 Market Street, 22nd
Floor, Philadelphia, PA 19103, its or their lawful agent and attorney to accept
and acknowledge service of any and all process against it in any claim, action,
suit, proceeding or arbitration arising in connection with this Agreement and
upon whom such process may be served, with the same effect as if such party were
a resident of the Commonwealth of Pennsylvania and had been lawfully served with
such process in such jurisdiction, and waives all claims of error by reason of
such service, provided that in the case of any service upon any such agent and
attorney, the party effecting such service shall also deliver a copy thereof to
the other party at the address and in the manner specified in Section 11.06.
Company, Stockholder, Worralls, Merger Subsidiary and Eastwind will enter into
such Agreements with such agents as may be necessary to constitute and continue
the appointment of such agents hereunder. In the event that any such agent and
attorney resigns or otherwise becomes incapable of acting as such, such party
will appoint a successor agent and attorney in the Commonwealth of Pennsylvania,
reasonably satisfactory to the other party. Each party hereto irrevocably
submits to the exclusive jurisdiction of the arbitrator or panel of
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<PAGE>
arbitrators provided for in Section 11.04 hereof in any such action, suit or
proceeding, and agrees that any such action, suit or proceeding shall be brought
only in such manner (and waives any objection based on forum non conveniens or
any other objection to venue therein), provided, however, that such consent to
jurisdiction is solely for the purpose referred to in this Section 11.05 and
shall not be deemed to be a general submission to the jurisdiction of any court
in the Commonwealth of Pennsylvania. In addition to the foregoing, each party
agrees that service of process in any such action, suit or proceeding may be
effected by mailing the same in the manner provided in Section 11.06.
11.06 Notices. Any notice, request or other communication required or
-------
permitted hereunder shall be in writing and shall be deemed to have been duly
given (a) when received if personally delivered, (b) within five days after
being sent by registered or certified mail, return receipt requested, postage
prepaid, (c) within 12 hours after being sent by telecopy provided confirmation
of successful transmission has been received, or (d) within one business day of
being sent by established overnight courier, to the parties (and to the persons
to whom copies shall be sent) at their respective addresses set forth below.
To Company: Centennial Printing Corporation
875 First Avenue
P.O. Box 60877
King of Prussia, PA 19406-1403
Attention: Chairman
Telecopy: (610) 992-9870
With a copy to: Edward J. Hollin, Esquire
Riley, Riper, Hollin & Colagreco, P.C.
240 Daylesford Plaza
P.O. Box 568
Paoli, PA 19301
Telecopy: (610) 647-1580
To Merger Subsidiary: Centennial Acquisition Corp.
c/o The Eastwind Group, Inc.
100 Four Falls Corporate Center
Suite 305
West Conshohocken, PA 19428
Attention: Chairman
Telecopy: (610) 828-6980
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<PAGE>
To Eastwind: The Eastwind Group, Inc.
100 Four Falls Corporate Center
Suite 305
West Conshohocken, PA 19428
Attention: Chairman
Telecopy: (610) 828-6980
With a copy to: Peter O. Clauss, Esquire
Clark, Ladner, Fortenbaugh & Young
One Commerce Square
2005 Market Street, 22nd Floor
Philadelphia, PA 19103
Telecopy: (215) 241-1857
Any party by written notice to the other parties may change the address or the
persons to whom notices or copies thereof shall be directed.
11.07 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be deemed to be an original, and all of which
together will constitute one and the same instrument.
11.08 Assignment. This Agreement shall be binding upon and inure to the
----------
benefit of the successors and assigns of each party hereto, but no rights,
obligations or liabilities hereunder shall be assignable by either party hereto,
except to a corporate affiliate (provided the assignor remains liable for its
obligations hereunder) without the prior written consent of the other party
hereto.
11.09 Waivers. No waiver of any provision of this Agreement shall be
-------
effective unless in writing and signed by the party entitled to enforce such
provision. Any waiver by a party of any violation of, breach of or default under
any provision of this Agreement or any other agreements provided for herein, by
the other party hereto, shall not be construed as, or constitute, a continuing
waiver of such provision, or waiver of any other violation of, breach of or
default under any other provision of this Agreement or any other agreements
provided for herein.
11.10 Third Parties. Nothing expressed or implied in this Agreement is
-------------
intended, or shall be construed, to confer upon or give any person or entity
other than Company, Merger Subsidiary, Eastwind, Stockholder and Worralls any
rights or remedies under or by reason of this Agreement.
11.11 Construction. The parties hereto agree that this Agreement is the
------------
product of negotiation between sophisticated
55
<PAGE>
parties and individuals, all of whom were represented by counsel, and each of
whom had an opportunity to participate in and did participate in, the drafting
of each provision hereof. Accordingly, ambiguities in this Agreement, if any,
shall not be construed strictly or in favor of or against any party hereto but
rather shall be given a fair and reasonable construction without regard to the
rule of contra proferentum.
------ -----------
11.12 Headings. The headings in this Agreement are solely for
--------
convenience of reference and shall not be given any effect in the construction
or interpretation of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
CENTENNIAL PRINTING CORPORATION
BY: _____________________________________
THE EASTWIND GROUP, INC.
BY: ______________________________________
CENTENNIAL ACQUISITION CORP.
BY: ________________________________________
BRUCE K. WORRALL, STOCKHOLDER
______________________________________(SEAL)
CENTENNIAL RACING, INC.
BY: ________________________________________
56
