<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended May 31, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________ to ___________
Commission file no. 1-11107
FRANKLIN COVEY CO.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
Utah 87-0401551
(State of incorporation) (I.R.S. Employer Identification No.)
2200 West Parkway Boulevard
Salt Lake City, Utah 84119-2331
(Address of principal executive offices) (Zip code)
Registrant's telephone number,
including area code: (801) 975-1776
</TABLE>
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X]
No [ ]
Indicate the number of shares outstanding of each of the issuer's
classes of Common Stock as of the latest practicable date:
25,325,607 shares of Common Stock as of June 25, 1997
1
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FRANKLIN COVEY CO.
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands, except share amounts)
<TABLE>
<CAPTION>
May 31, August 31,
1997 1996
--------- --------
<S> <C> <C>
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 46,741 $ 24,041
Accounts receivable, less allowance for
doubtful accounts of $1,216 and $889 27,314 28,706
Inventories 48,520 49,463
Income taxes receivable 16,191 5,064
Other current assets 7,492 5,743
--------- --------
Total current assets 146,258 113,017
Property and equipment, net 105,194 102,063
Intangible assets, net 84,174 51,115
Other long-term assets 8,506 2,250
--------- --------
$ 344,132 $268,445
========= ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 13,961 $ 12,585
Other current liabilities 29,600 16,092
--------- --------
Total current liabilities 43,561 28,677
Long-term debt, less current portion 53,821 5,500
Deferred income taxes 2,787 2,433
--------- --------
Total liabilities 100,169 36,610
--------- --------
Shareholders' equity:
Common stock, $0.05 par value, 40,000,000
shares authorized, 22,025,000 shares issued 1,101 1,101
Additional paid-in capital 134,299 132,959
Retained earnings 160,044 130,849
Deferred compensation (1,702) (1,240)
Cumulative translation adjustments (1,015) (940)
---------- ---------
292,727 262,729
Less 1,763,388 and 1,497,407 shares of treasury stock, (48,764) (30,894)
---------- ---------
at cost
Total shareholders' equity 243,963 231,835
--------- --------
$ 344,132 $268,445
========= ========
</TABLE>
(See Notes to Consolidated Condensed Financial Statements)
2
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FRANKLIN COVEY CO.
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
May 31, May 31,
---------------------- ----------------------
1997 1996 1997 1996
------- ------- -------- --------
<S> <C> <C> <C> <C>
(unaudited) (unaudited)
Sales $79,840 $72,465 $288,175 $257,938
Cost of sales 33,612 30,861 119,953 110,291
------- ------- -------- --------
Gross margin 46,228 41,604 168,222 147,647
Operating expenses 40,852 31,299 119,616 94,941
------- ------- -------- --------
Income from operations 5,376 10,305 48,606 52,706
Interest and other, net (142) 329 255 1,253
------- ------- -------- --------
Income before provision for income 5,234 10,634 48,861 53,959
taxes
Provision for income taxes 2,107 4,349 19,666 21,892
------- ------- -------- --------
Net income $ 3,127 $6,285 $29,195 $32,067
======= ====== ======== ========
Net income per share $ 0.15 $ 0.28 $ 1.41 $ 1.42
======= ====== ======== ========
Weighted average number of common
and common equivalent shares 20,537 22,447 20,742 22,583
======= ====== ======== ========
</TABLE>
(See Notes to Consolidated Condensed Financial Statements)
3
<PAGE> 4
FRANKLIN COVEY CO.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(dollars in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
May 31,
-------------------
1997 1996
------- -------
<S> <C> <C>
(unaudited)
Cash flows from operating activities:
Net income $29,195 $32,067
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 15,777 11,636
Other changes in assets and liabilities (9,661) (2,889)
------- -------
Net cash provided by operating activities 35,311 40,814
------- -------
Cash flows from investing activities:
Acquisition of businesses (33,024) (7,608)
Purchases of property and equipment (11,214) (14,381)
------- -------
Net cash used in investing activities (44,238) (21,989)
------- -------
Cash flows from financing activities:
Proceeds from short-term borrowings 3,256
Payments on short-term borrowings (133)
Proceeds from long-term debt 48,357
Payments on long-term debt (2,398) (2,477)
Purchase of treasury shares (18,377) (19,070)
Proceeds from treasury stock issuance 997 1,462
------- -------
Net cash provided by (used in) financing activities 31,702 (20,085)
------- -------
Effect of foreign exchange rates (75) (208)
------- -------
Net increase (decrease) in cash and cash equivalents 22,700 (1,468)
Cash and cash equivalents at beginning of period 24,041 35,006
------- -------
Cash and cash equivalents at end of period $46,741 $33,538
======= =======
Supplemental disclosure of cash flow information:
Income taxes paid $27,916 $21,247
------- -------
Interest paid 757 461
------- -------
Fair value of assets acquired 45,542 11,019
Cash paid for net assets (33,024) (7,608)
------- -------
Liabilities assumed from acquisitions 12,518 3,411
------- -------
Supplemental schedule of non-cash investing and financing activities:
Tax effect of exercise of affiliate stock options 13 175
</TABLE>
(See Notes to Consolidated Condensed Financial Statements)
4
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FRANKLIN COVEY CO.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(unaudited)
NOTE 1 - BASIS OF PRESENTATION
Effective June 2, 1997 Franklin Quest Co. (the "Company", see Note 6)
merged (the "Merger") with the Covey Leadership Center, Inc. ("Covey") to form
Franklin Covey Co. Since the Merger became effective subsequent to May 31, 1997,
the accompanying financial statements do not include the financial position and
results of operations for Covey.
The attached unaudited consolidated condensed financial statements
reflect, in the opinion of management, all adjustments (which include only
normal recurring adjustments) necessary to present fairly the financial position
and results of operations of the Company as of the dates and for the periods
indicated.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to the Securities and
Exchange Commission rules and regulations. The Company suggests the information
included in this report on Form 10-Q be read in conjunction with the financial
statements and related notes included in the Company's Annual Report to
Shareholders for the fiscal year ended August 31, 1996. It should also be read
in conjunction with the definitive Proxy Statement relating to the Merger which
was filed with the Securities and Exchange Commission on April 30, 1997 which
includes certain pro forma financial information giving effect to the Merger.
Certain reclassifications have been made in the consolidated condensed
financial statements to conform with the current year presentation.
The results of operations for the nine months ended May 31, 1997 are not
necessarily indicative of results for the entire fiscal year ending August 31,
1997.
NOTE 2 - NET INCOME PER COMMON SHARE
Net income per common share is computed based on the weighted average
number of common and common equivalent (stock options) shares outstanding for
the periods presented.
NOTE 3 - INVENTORIES
Inventories are comprised of the following (in thousands):
<TABLE>
<CAPTION>
May 31, August 31,
1997 1996
--------- ---------
<S> <C> <C>
(unaudited)
Finished Goods $ 33,825 $ 36,156
Work in Process 4,626 4,969
Raw Materials 10,069 8,338
--------- ---------
$ 48,520 $ 49,463
========= =========
</TABLE>
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NOTE 4 - TRUENORTH ACQUISITION
Effective October 1, 1996, the Company acquired the assets of TrueNorth
Corporation, which now operates as the Personal Coaching Division ("Coaching")
of the Company. Coaching, a Utah corporation, is a leading provider of
post-instructional personal coaching to corporations and individuals. The
Coaching Division develops and delivers one-on-one personalized coaching which
is designed to augment the effectiveness and duration of training curricula. The
cash purchase price was $10.0 million. In addition, contingent payments may be
made over the next five years based on Coaching's operating performance during
the five years following the acquisition. Coaching had sales for the twelve
months ended July 31, 1996 of approximately $16.0 million.
NOTE 5 - PREMIER AGENDAS ACQUISITION
Effective March 1, 1997, the Company acquired Premier Agendas, Inc. and
Premier School Agendas, Ltd., located in Bellingham, Washington, and Abbotsford,
British Columbia, respectively (collectively, "Premier"). The combined cash
purchase price was $23.2 million with additional contingent payments being made
over the next three years based upon Premier's operating performance over that
same time period. Premier is the leading provider of academic and personal
planners for students from kindergarten to college throughout the U.S. and
Canada. Premier's revenues were approximately $35.4 million for the year ended
December 31, 1996.
NOTE 6 - SUBSEQUENT EVENT
Effective June 2, 1997, the Company and Covey Leadership Center, Inc.
merged to form Franklin Covey Co. In the Merger, the Company issued 5,030,894
shares of its Common Stock in exchange for all of the issued and outstanding
capital stock of Covey. The Company's shares were valued in the exchange at
$22.1625 per share, which was the average of the per share closing sale price of
the Company's Common Stock on the New York Stock Exchange for the twenty
consecutive trading days ending on May 28, 1997. All outstanding options to
purchase Covey Common Stock were converted into 382,100 options to purchase the
Company's Common Stock, exercisable at $5.97 per share. In connection with the
Merger, the Company acquired from Stephen R. Covey certain license rights for
$27.0 million in cash.
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<PAGE> 7
FRANKLIN COVEY CO.
FORM 10-Q
This Form 10-Q contains forward-looking statements within the meaning of
that term in the Private Securities Litigation Reform Act of 1995 (Section 27A
of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934). Additional written or oral forward-looking statements may be made by the
Company from time to time, in filings with the Securities and Exchange
Commission or otherwise. Statements contained herein that are not historical
facts are forward-looking statements made pursuant to the safe harbor provisions
referenced above. Forward-looking statements may include, but are not limited
to, projections of revenue, income or loss and capital expenditures, statements
regarding future operations, financing needs, compliance with financial
covenants in loan agreements, plans for the acquisition and sale of assets or
businesses and consolidation of operations of newly acquired businesses, and
plans relating to products or services of the Company, assessments of
materiality, predictions of future events and the effects of pending and
possible litigation, as well as assumptions relating to the foregoing. In
addition, when used in this discussion, the words "anticipates", "believes",
"estimates", "expects", "intends", "plans" and variations thereof and similar
expressions are intended to identify forward-looking statements.
Forward-looking statements are inherently subject to risks and
uncertainties, some of which cannot be predicted or quantified based on current
expectations. Consequently, future events and actual results could differ
materially from those set forth in, contemplated by, or underlying the
forward-looking statements contained in this Quarterly Report. Statements in
this Quarterly Report, particularly in the Notes to Consolidated Condensed
Financial Statements and in Management's Discussion and Analysis of Financial
Condition and Results of Operations, describe certain factors, among others,
that could contribute to, or cause such differences. Other factors that could
contribute to or cause such differences include, but are not limited to,
unanticipated developments in any one or more of the following areas: the
integration of acquired or merged businesses, management of growth, dependence
on products or services, the rate and consumer acceptance of new product
introductions, competition, the number and nature of customers and their product
orders, pricing, pending or threatened litigation, the availability of key
personnel and other risk factors which may be detailed from time to time in the
Company's Press Releases, reports to shareholders and in Securities and Exchange
Commission filings.
Readers are cautioned not to place undue reliance on any forward-looking
statements contained herein, which speak only as of the date hereof. The Company
undertakes no obligation to publicly release the result of any revisions to
these forward-looking statements that may be made to reflect events or
circumstances after the date hereof or to reflect the occurrence of unexpected
events.
7
<PAGE> 8
FRANKLIN COVEY CO.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the
Consolidated Financial Statements, the Notes thereto and the Management's
Discussion and Analysis included in the Company's Annual Report to Shareholders
for the fiscal year ended August 31, 1996.
RESULTS OF OPERATIONS
The following table sets forth selected data concerning the sales of the
Company's products and services:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
May 31, May 31,
---------------------------- ------------------------------
1997 1996 Change 1997 1996 Change
------- ------- ------ -------- -------- ------
<S> <C> <C> <C> <C> <C> <C>
(in thousands) (in thousands)
Product sales $50,908 $48,667 5% $206,031 $185,409 11%
Training sales 22,964 18,200 26% 64,273 53,988 19%
Services 5,968 5,598 7% 17,871 18,541 -4%
------- ------- -------- --------
$79,840 $72,465 10% $288,175 $257,938 12%
======= ======= ======== ========
</TABLE>
Three Months Ended May 31, 1997 Compared with Three Months Ended May 31, 1996
Sales for the three months ended May 31, 1997, increased 10.2%, or $7.4
million, over the same period in fiscal 1996. Total sales for the three months
ended May 31, 1997 included approximately $3.9 million of sales from Coaching,
which was acquired effective October 1, 1996. Without the sales from Coaching,
overall sales growth would have been 4.8% for the three months ended May 31,
1997. Premier's sales come primarily from the educational markets and occur
predominantly in the Company's fourth fiscal quarter. Accordingly, no
significant sales increase was recognized from the acquisition of Premier for
the three months ended May 31, 1997.
Product sales increased $2.2 million, or 4.6%, compared to the
corresponding three months of the prior fiscal year. Retail store sales growth
of $3.3 million was partially offset by weaker than expected sales performance
by Productivity Plus, and the timing of certain Network Marketing sales which
are expected to occur in the fourth quarter of Fiscal 1997. The increase in
retail store sales was primarily due to the number of stores opened during the
past twelve months. At May 31, 1996 there were 84 retail stores compared to 103
such stores at May 31, 1997. Comparable store sales increased 6.0% for the three
months ended May 31, 1997 compared to the three months ended May 31, 1996.
Training sales increased $4.8 million, or 26.2%, for the three months
ended May 31, 1997 compared to the corresponding period in the prior fiscal
year. Approximately $3.9 million of this increase was a result of the
acquisition of Coaching, which was effective October 1, 1996. Without Coaching,
training sales growth would have been 4.7%.
8
<PAGE> 9
Gross margin was 57.9% of sales in the three months ended May 31, 1997,
compared to 57.4% for the same period in 1996. The improvement is primarily due
to Coaching, which has a higher gross margin than the Company's core products
and services. Without the sales and cost of sales from Coaching, gross margin
would have been 57.2% for the three months ended May 31, 1997.
Operating expenses, consisting primarily of selling, general and
administrative expenses, increased to $40.9 million, or 51.2% of sales, during
the three months ended May 31, 1997 compared to $31.3 million, or 43.2% of
sales, for the same period of 1996. The operating expense increase was primarily
due to the acquisition of Premier, which added $4.3 million of operating
expenses, and Coaching, which added $2.3 million of operating expenses in the
three months ended May 31, 1997. Due to the seasonal nature of Premier's
business, this acquisition added a notable amount of operating expenses without
providing significant corresponding sales activity. Without Premier, operating
expenses would have been 46.1% of sales. The remaining increase came primarily
in the area of employee expenses which resulted from staff increases in the
areas of sales and technology support. There were also increased marketing
program expenses in the third quarter of fiscal 1997 compared to the same
quarter a year ago. Depreciation and leasehold amortization charges were higher
by $660,000 because of new equipment purchased, the addition of leasehold
improvements in new stores and the expansion of facilities at the Franklin Quest
Institute of Fitness. Amortization charges increased $613,000 primarily due to
amortization of intangible assets acquired in connection with the Premier and
Coaching acquisitions.
Income taxes were provided using an effective rate of 40.3% for the
three months ended May 31, 1997, and 40.9% for the same quarter of fiscal 1996.
The decrease was caused by a reduction in the Company's estimated effective
state income tax rates.
Nine Months Ended May 31, 1997 Compared with Nine Months Ended May 31, 1996
Sales for the nine months ended May 31, 1997 increased $30.2 million, or
11.7%, over the same period in fiscal 1996. Sales for the nine months ended May
31, 1997 included $9.6 million from Coaching which was not acquired until
October 1996. Without sales from Coaching, overall sales would have increased by
8.0% over the corresponding period of the prior fiscal year.
Product revenue for the nine months ended May 31, 1997 increased $20.6
million, or 11.1%, as compared to the nine months ended May 31, 1996. Retail
store sales comprised $11.9 million of this increase which represented a 16.4%
increase compared to the same period of fiscal 1996. Comparable store sales
increased 6.2% for the nine months ended May 31, 1997. Most of the remaining
increase was realized in catalog sales and international product sales.
Training revenue for the nine months ended May 31, 1997 increased by
approximately $10.3 million, or 19.1%, compared to the same period a year ago.
Training sales growth was primarily attributable to Coaching, which added $9.6
million in sales during the nine months ended May 31, 1997. Without sales from
Coaching, training sales would have increased 1.3% over the same period in
fiscal 1996.
Gross margin was 58.4% of sales in the first nine months of fiscal 1997
compared to 57.2% in the comparable nine months of fiscal 1996. The increase was
primarily a result of the addition of the Personal Coaching Division which
generates higher gross margins than the Company's core products and services.
Without the sales and cost of sales of the Personal Coaching Division, gross
margin for the nine months ended May 31, 1997 would have been 57.7%.
9
<PAGE> 10
Operating expenses increased to 41.5% of sales for the nine months ended
May 31, 1997 compared to 36.8% for the comparable nine months of the previous
year. The increase is primarily due to the acquisition of Premier, which was
effective March 1, 1997, and increased technology and marketing activity. As
discussed above, the Premier acquisition added $4.3 million in operating
expenses without a corresponding increase in sales activity. Without Premier,
operating expenses would have been 40.1% of sales. In addition, staff increases
in the areas of sales and technology support generated increased employee
expenses for the nine months ended May 31, 1997 compared to the nine months
ended May 31, 1996. Also, the operating expenses of Coaching are generally
higher as a percentage of sales than operating expenses in the Company's core
business.
Depreciation and leasehold amortization charges were higher by $2.2
million compared to the same period a year ago because of new equipment
purchased to augment management information systems, improve customer service,
the addition of leasehold improvements in new stores and expansion of the
facilities at the Franklin Quest Institute of Fitness. Amortization charges
increased by $1.4 million primarily due to amortization of intangible assets
acquired in connection with the Premier and Coaching acquisitions.
The consummation of the Covey Merger, effective June 2, 1997, will have
a material impact on the financial position and results of operations of the
Company. The Company intends to integrate product offerings, training services,
distribution channels, administration, sales and marketing efforts. There can be
no assurance that integration will result in substantial improvements in the
results of operations and financial condition of the combined Company.
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company's primary sources of capital have been net
cash provided by operating activities, long-term borrowing, capital lease
financing and the sale of Common Stock. Working capital requirements have also
been financed through short-term borrowing. At May 31, 1997, the Company had
$46.7 million in cash and cash equivalents, although $27.0 million was committed
to fund the acquisition of license rights in connection the Covey Merger which
was effective June 2, 1997.
Net cash provided by operating activities during the nine months ended
May 31, 1997 was $35.3 million. Net cash used in investing activities was $44.2
million. Of this total, $11.2 million was invested in property and equipment,
and the balance was used primarily in the acquisitions of Premier and Coaching.
During the first nine months of fiscal 1997, the Company used $18.4 million to
repurchase 970,000 shares of its Common Stock on the open market. Management
also has Board authorization to purchase up to an additional 1,545,000 shares of
Common Stock. Should such authority be exercised at current prices, the Company
would utilize approximately $40.7 million in cash.
Working capital during the period increased by $18.4 million. Management
believes that cash flows and available credit facilities are sufficient to meet
working capital requirements, including anticipated increases in accounts
receivable and inventories associated with sales increases.
At May 31, 1997 the Company had utilized $48.0 million of its long-term
line of credit primarily to complete payment on the acquisition of Premier, make
estimated income tax payments, to draw down $27.0 million to fund the purchase
of license rights from Stephen R. Covey and for use in other general operating
areas. The Company has remaining available lines of credit totaling $52.0
million at May 31, 1997.
10
<PAGE> 11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings:
Not applicable.
Item 2. Changes in Securities:
On June 2, 1997 the Company issued 5,030,894 shares of its Common
Stock, $.05 par value, in connection with the Merger of Covey, a
Utah corporation with and into the Company.
The shares issued in connection with the Merger were not publicly
offered and were issued to the former shareholders of Covey in
exchange for all of the issued and outstanding capital stock of
Covey.
The shares of the Company were valued at $22.1625 per share for
purposes of the Merger.
The shares were issued in the Merger in reliance upon the
exemption from registration contained in Section 4(2) of the
Securities Act of 1933 for transactions not involving any public
offering. Each of the 15 Covey shareholders was provided a Joint
Proxy Statement of the Company and Covey prepared and filed in
accordance with Section 14 of the Securities and Exchange Act of
1934 which constituted the Disclosure Statement of the Company in
connection with the Merger. Each of the Covey shareholders
acquired the shares for investment without a view to further
distribution and each certificate issued bears a legend
restricting further transfer in the absence of registration or an
opinion that registration is not required.
Item 3. Defaults upon Senior Securities:
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders:
A special meeting of Stockholders was held on May 30, 1997 at the
Company's headquarters in Salt Lake City, Utah to vote upon the
Merger with Covey. A Joint Proxy Statement dated April 30, 1997
was delivered in accordance with Securities and Exchange
Commission regulations to both the Company's and Covey's
stockholders prior to the meeting.
The number of Company shares voting in favor of the Merger was
12,573,402, the number of shares voting against the Merger was
111,457, the number of shares that abstained was 24,244 and
there were no broker non-votes.
11
<PAGE> 12
Item 5. Other information:
In September 1996, the Board of Directors approved the repurchase
of up to 2,000,000 shares of the Company's Common Stock. As of
June 30, 1997, the Company had acquired 455,000 shares at an
average price of $18.95.
On March 21, 1997, the Company signed a definitive merger
agreement with Covey. See Note 6 to the financial statements
included in this report.
Item 6. Exhibits and Reports on Form 8-K:
(A) Exhibits:
<TABLE>
<CAPTION>
S-K No. Exhibit No.
------- -----------
<S> <C>
10.1 Purchase agreement between the Company and 1
Premier Holding Company
10.2 Amendment to the long-term line of credit 2
agreement between the Company, Zions First
National Bank and The First National Bank of
Chicago
</TABLE>
(B) Reports on Form 8-K:
The Company filed a Current Report on Form 8-K with the
Securities and Exchange Commission on June 3, 1997 to report the
completion of the Merger with Covey.
12
<PAGE> 13
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
<TABLE>
<CAPTION>
FRANKLIN COVEY CO.
<S> <C>
Date: ____________________________ By: _________________________
Jon H. Rowberry
President
Chief Operating Officer
Date: ____________________________ By: __________________________
John L. Theler
Executive Vice President
Chief Financial Officer
</TABLE>
13
<PAGE> 1
PURCHASE AGREEMENT
BY AND AMONG
PREMIER HOLDING COMPANY
THE SHAREHOLDERS OF PREMIER HOLDING COMPANY
PREMIER AGENDAS, INC.
PREMIER SCHOOL AGENDAS LTD.
PREMIER GRAPHICS, L.P.
THE LIMITED PARTNERS OF PREMIER GRAPHICS
FRANKLIN QUEST CO.
AND
FRANKLIN QUEST CANADA, LTD.
MARCH 1, 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
RECITALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE I SALE OF SHARES; CLOSING
1.1 PURCHASE AND SALE OF SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2 PURCHASE PRICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.3 CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.4 CLOSING OBLIGATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.5 ADJUSTMENTS TO INITIAL PAYMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.6 COMBINED POST-CLOSING BALANCE SHEET . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.7 EARN-OUT PAYMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.8 MANAGEMENT OF ACQUIRED COMPANIES DURING EARN-OUT PERIOD . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.9 ALLOCATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE II REPRESENTATIONS AND WARRANTIES OF SELLERS
2.1 ORGANIZATION AND GOOD STANDING; SUBSIDIARIES; RESIDENCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.2 AUTHORITY; NO CONFLICT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.3 CAPITALIZATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.4 FINANCIAL STATEMENTS AND OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.5 BOOKS AND RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.6 TITLE TO PROPERTIES; ENCUMBRANCES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.7 INTELLECTUAL PROPERTY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.8 CONDITION AND SUFFICIENCY OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.9 ACCOUNTS RECEIVABLE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2.10 INVENTORY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2.11 NO UNDISCLOSED LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2.12 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2.13 NO MATERIAL ADVERSE CHANGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
2.14 EMPLOYEE BENEFITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
2.15 COMPLIANCE WITH LEGAL REQUIREMENTS; GOVERNMENTAL AUTHORIZATIONS . . . . . . . . . . . . . . . . . . . . . . . . 18
2.16 LEGAL PROCEEDINGS; ORDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
2.17 ABSENCE OF CERTAIN CHANGES AND EVENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
2.18 CONTRACTS; NO DEFAULTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
2.19 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
2.20 ENVIRONMENTAL AND OCCUPATIONAL SAFETY AND HEALTH MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
2.21 EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
2.22 LABOR DISPUTES; COMPLIANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
2.23 CERTAIN PAYMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
2.24 DISCLOSURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
2.25 RELATIONSHIPS WITH RELATED PERSONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
2.26 BROKERS OR FINDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
2.27 CANADIAN SECURITIES LAWS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
2.28 OWNERSHIP OF STOCK OR PARTNERSHIP INTEREST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
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2.29 EXECUTION, DELIVERY AND ENFORCEABILITY OF AGREEMENT; NO VIOLATION . . . . . . . . . . . . . . . . . . . . . . . 31
2.30 RESIDENCE AND DOMICILE; BANKRUPTCY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
2.31 NO ORDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
2.32 BROKERS OR FINDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
ARTICLE III REPRESENTATIONS AND WARRANTIES OF BUYERS
3.1 ORGANIZATION AND GOOD STANDING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
3.2 AUTHORITY; NO CONFLICT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
3.3 INVESTMENT INTENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
3.4 CERTAIN PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
3.5 BROKERS OR FINDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
ARTICLE IV CONDITIONS PRECEDENT TO THE OBLIGATIONS OF BUYERS
4.1 ACCURACY OF REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
4.2 SELLERS' AND THE ACQUIRED COMPANIES' PERFORMANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
4.3 CONSENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
4.4 COMPLETION OF INVESTIGATIONS, INSPECTIONS AND STUDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
4.5 NO MATERIAL ADVERSE CHANGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
4.6 ADDITIONAL DOCUMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
4.7 NO PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
4.8 NO CLAIM REGARDING STOCK OWNERSHIP OR SALE PROCEEDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
4.9 NO PROHIBITION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
4.10 COMPLIANCE WITH LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
4.11 NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
4.12 ACTIONS SATISFACTORY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
4.13 DISCLOSURE LETTER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
4.14 EMPLOYMENT AGREEMENTS, COVENANTS NOT TO COMPETE AND RELEASES . . . . . . . . . . . . . . . . . . . . . . . . . . 36
ARTICLE V CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SELLERS
5.1 ACCURACY OF REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
5.2 BUYER'S PERFORMANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
5.3 ADDITIONAL DOCUMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
5.4 NO INJUNCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
5.5 RELEASE OF GUARANTEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
ARTICLE VI COVENANTS OF THE SELLERS
6.1 CONDUCT OF BUSINESS PRIOR TO CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
6.2 ACCESS FOR INVESTIGATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
6.3 NEGATIVE COVENANT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
6.4 REQUIRED APPROVALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
6.5 NOTIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
6.6 NO NEGOTIATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
6.7 BEST EFFORTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
6.8 SUPPLEMENTS TO DISCLOSURE LETTER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
6.9 PAYMENT OF INDEBTEDNESS BY RELATED PERSONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
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6.10 WITHHOLDING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
6.11 PRIOR TAXATION PERIODS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
ARTICLE VII COVENANTS OF THE BUYERS
7.1 CONFIDENTIALITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
7.2 APPROVALS OF GOVERNMENTAL BODIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
7.3 BEST EFFORTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
7.4 INVESTMENT CANADA NOTIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
ARTICLE VIII INDEMNIFICATION
8.1 SURVIVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
8.2 INDEMNIFICATION BY SELLERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
8.3 INDEMNIFICATION BY BUYERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
8.4 NOTICE AND DEFENSE OF THIRD PARTY CLAIMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
8.5 NOTICE OF INDEMNIFICATION DEMAND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
ARTICLE IX MISCELLANEOUS
9.1 EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
9.2 AMENDMENT AND MODIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
9.3 WAIVER; CONSENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
9.4 FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
9.5 DISCLOSURE LETTER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
9.6 NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
9.7 ASSIGNMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
9.8 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
9.9 JURISDICTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
9.10 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
9.11 INTERPRETATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
9.12 ENTIRE AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
9.13 ATTORNEYS' FEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
9.14 TIME OF ESSENCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
9.15 CONSTRUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
9.16 SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
9.17 NO THIRD-PARTY BENEFICIARIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
9.18 INCORPORATION OF EXHIBITS AND SCHEDULES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
9.19 APPOINTMENT OF PREMIER HOLDING AS AGENT OF SELLERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
ARTICLE X DEFINITIONS
"ACQUIRED COMPANIES" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
"ACQUIRED COMPANIES' ACCOUNTANTS" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
"AFFILIATE" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
"ALLOCATION SCHEDULE" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
"APPLICABLE CONTRACT" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
"ANNUAL BUDGET" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
"BALANCE SHEET" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
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"BEST EFFORTS" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
"BREACH" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
"BUYER'S AUDITORS" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
"CLOSING" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
"CLOSING DATE" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
"COMBINED NET ASSETS" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
"COMBINED NET INCOME" AND "COMBINED NET LOSS" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
"CODE" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
"CONSENT" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
"CONTEMPLATED TRANSACTIONS" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
"CONTRACT" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
"DAMAGES" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
"DISCLOSURE LETTER" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
"EARN-OUT PAYMENT" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
"EARN-OUT YEAR" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
"EFFECTIVE DATE" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
"EMPLOYEE BENEFIT PLAN" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
"EMPLOYMENT AGREEMENTS" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
"ENCUMBRANCE" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
"ENVIRONMENT" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
"ENVIRONMENTAL, HEALTH, AND SAFETY LIABILITIES" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
"ENVIRONMENTAL LAW" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
"ERISA" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
"ERISA AFFILIATE" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
"EXISTING MANAGEMENT" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
"FACILITIES" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
"FAMILY" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
"GAAP" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
"GOVERNMENTAL AUTHORIZATION" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
"GOVERNMENTAL BODY" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
"GUARANTEED PENSION PLAN" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
"HAZARDOUS ACT" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
"HAZARDOUS MATERIALS" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
"HSR ACT" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
"IRS" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
"KNOWLEDGE" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
"KNOWLEDGE OF THE ACQUIRED COMPANIES" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
"LEGAL REQUIREMENT" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
"MATERIAL INTEREST" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
"MINIMUM PERFORMANCE STANDARD" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
"MULTIEMPLOYER PLAN" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
"OCCUPATIONAL SAFETY AND HEALTH LAW" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
"ORDER" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
"ORDINARY COURSE OF BUSINESS" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
"ORGANIZATIONAL DOCUMENTS" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
"PARTNERSHIP INTERESTS" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
"PERSON" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
"PLAN" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
"PREMIER AGENDAS SHARES" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
</TABLE>
iv
<PAGE> 6
<TABLE>
<S> <C>
"PRE-TAX NET INCOME" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
"PROCEEDING" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
"PSA SHARES" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
"PURCHASE PRICE" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
"RELATED PERSON" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
"RELEASE" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
"REPRESENTATIVE" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
"SECURITIES ACT" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
"SELLERS" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
"SHARES" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
"SUBSIDIARIES" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
"TAX" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
"TAX ACT" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
"TERMINATION DATE" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
"TRANSACTION DATE" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
"US GAAP" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
"WARRANTING SHAREHOLDERS" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
</TABLE>
v
<PAGE> 7
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT (the "Agreement") is entered into effective as
of March 1, 1997, by and among Premier Agendas, Inc., a Washington corporation
("Premier Agendas"), Premier School Agendas Ltd., a corporation incorporated
under the Canada Business Corporations Act and registered to do business in
British Columbia ("PSA"), Premier Graphics L.P., a limited partnership
organized under the laws of the State of Washington ("Premier Graphics"),
Premier Holding Company, a Nova Scotia unlimited company ("Premier Holding"),
the shareholders of Premier Holding (collectively the "Premier Holding
Shareholders"), the limited partners of Premier Graphics (collectively, the
"Partners") (Premier Holding, the Premier Holding Shareholders and the Partners
are collectively referred to herein as the "Sellers" and sometimes individually
referred to herein as a "Seller") and Franklin Quest Co., a Utah corporation
("Franklin"), and Franklin Quest Canada, Ltd., an Ontario corporation
("Franklin Canada") (Franklin and Franklin Canada are collectively referred to
as the "Buyers" and sometimes individually referred to herein as a "Buyer").
RECITALS
WHEREAS, Premier Holding owns all of the issued and outstanding shares
of capital stock of Premier Agendas (the "Premier Agendas Shares"), and all of
the issued and outstanding capital stock of PSA (the "PSA Shares") (the Premier
Agendas Shares and the PSA Shares are collectively referred to as the
"Shares"); and
WHEREAS, the Partners own all of the limited partnership interests in
Premier Graphics and Premier Agendas is the general partner of Premier Graphics
(the limited partnership interests in Premier Graphics held by the Partners are
collectively referred to herein as the "Partnership Interests"); and
WHEREAS, Franklin desires to purchase from Premier Holding all of the
Premier Agendas Shares, Franklin Canada wishes to purchase from Premier Holding
all of the PSA shares and Franklin wishes to purchase from the Partners all of
the Partnership Interests; and
WHEREAS, in order to induce Franklin and Franklin Canada to purchase
the Premier Agenda Shares, the PSA Shares and the Partnership Interests on the
terms and conditions set forth in this Agreement, the Sellers are willing to
make the representations, warranties, covenants and indemnities set forth
herein; and
WHEREAS, in order to induce Sellers to sell the Premier Agenda Shares,
the PSA Shares and the Partnership Interests, Buyers are willing to make the
representations, warranties and covenants set forth herein;
AGREEMENT
NOW THEREFORE, in consideration of the respective representations,
warranties and covenants contained herein and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto agree as follows:
ARTICLE I
<PAGE> 8
SALE OF SHARES; CLOSING
1.1 PURCHASE AND SALE OF SHARES. Subject to the terms and
conditions of this Agreement, at the Closing, certain of the Sellers shall
sell, transfer and deliver to Buyers, and the Buyers will purchase from such
Sellers the Shares and Partnership Interests as follows:
(a) Premier Holding shall sell, transfer and deliver to
Franklin and Franklin shall purchase from Premier Holding, all of the Premier
Agendas Shares.
(b) Premier Holding shall sell, transfer and deliver to
Franklin Canada and Franklin Canada shall purchase from Premier Holding, all of
the PSA Shares.
(c) The Partners shall sell, transfer and deliver to
Franklin and Franklin shall purchase from the Partners, all of the Partnership
Interests.
1.2 PURCHASE PRICE. The aggregate purchase price (the "Purchase
Price") for the Shares and the Partnership Interests shall be the sum of:
(a) Nineteen Million Five Hundred Thousand Dollars (US
$19,500,000) (the "Initial Payment"), subject to adjustment as provided in
Section 1.5 hereof, which shall be allocated among Premier Agendas, PSA and the
Partnership Interests as set forth on Schedule 1.2(a). The portion of the
Initial Payment allocated to the Partnership Interests shall constitute payment
in full for each such Partner's share of the Purchase Price and shall be
divided among and paid to the Partners in the amounts set forth on Schedule
1.2(a). No Partner will be entitled to receive any portion of an Earn-Out
Payment, if any. All Earn-Out Payments, if any, shall be paid to Premier
Holding only.
(b) The Earn-Out Payments, if any, required to be paid by
Buyers to Premier Holding in accordance with the terms of Section 1.7. Each
Earn-Out Payment shall be attributed to and allocated among Premier Agendas and
PSA in the same ratio as set forth on Schedule 1.2(a).
(c) Buyers shall be jointly and severally liable for
payment of the Initial Payment and Earn-Out Payments, if any.
(d) All references to $ or money herein shall be to
United States dollars. If, for any purpose, it is or becomes necessary to
calculate at any time the United States currency equivalent of any amount
expressed or determined in Canadian currency, the United States currency
equivalent of such Canadian currency amount shall be determined at the spot
rate at which Canadian currency can be exchanged into United States currency as
set out in the Money and Investing Sections of The Wall Street Journal. The
spot rate shall be determined as of the Transaction Date.
1.3 CLOSING. The purchase and sale (the "Closing") provided for
in this Agreement will take place at Vancouver, British Columbia, upon
satisfaction of all conditions of Closing in Articles IV and V, but no later
than March 3, 1997 (the "Termination Date"). All capitalized terms used herein
and not otherwise defined herein shall have the meanings ascribed to them in
Article X hereof.
2
<PAGE> 9
1.4 CLOSING OBLIGATIONS. At the Closing:
(a) Premier Holding and the Partners, as the case may be,
will deliver to Buyers:
(i) certificates representing all of the Premier
Agendas Shares and the PSA Shares duly endorsed for transfer (or accompanied by
duly executed stock powers), to Franklin and Franklin Canada, respectively;
(ii) Assignments of Partnership Interests duly
executed by the Partners assigning the Partnership Interests to Franklin;
(iii) Releases executed by each of the Sellers
releasing any claim of such Seller, other than those created by this Agreement,
against any of Premier Agendas, PSA or Premier Graphics (collectively, the
"Sellers' Releases");
(iv) Employment Agreements, incorporating
non-competition and non-disclosure provisions (the "Employment Agreements") and
as provided in Section 4.14, in form reasonably acceptable to Buyers executed
by each of the persons identified on Schedule 1.4(a)(iv);
(v) a certificate executed by the President of
each of Premier Agendas and PSA and the general partner of Premier Graphics
(Premier Agendas, PSA and Premier Graphics are sometimes collectively referred
to herein as the "Acquired Companies" and individually as an "Acquired
Company") representing and warranting to Buyers that each of the
representations and warranties made by the Acquired Companies and Sellers in
this Agreement (other than the individual representations and warranties made
by the Sellers in Sections 2.28 through 2.32 hereof) was accurate in all
material respects as of the date of this Agreement and is accurate as of the
Closing Date as if made on the Closing Date (giving full effect to any
supplements to the Disclosure Letter that were delivered by the Sellers and the
Acquired Companies to Buyers prior to the Closing Date in accordance with
Section 6.8) and that the conditions set forth in Sections 4.1 and 4.2 have
been satisfied; and
(vi) such other documents as are required to be
provided pursuant to Article IV or as reasonably requested by Buyers to close
the transactions contemplated hereby.
(b) Buyer will deliver to Sellers:
(i) the amounts, as set forth in the Allocation
Schedule, to be paid at the Closing to Premier Holding and each Partner, by
bank cashier's, certified check or by wire transfer to accounts specified by
each person or entity entitled to a portion of such amounts, subject to
adjustment as provided in Sections 1.5 hereof;
(ii) a certificate executed by an authorized
officer of Buyers to the effect that each of Buyers' representations and
warranties in this Agreement was accurate in all material respects as of the
date of this Agreement and is accurate in all material respects as of the
Closing Date as if made on the Closing Date;
(iii) such other documents as are required to be
provided pursuant to Article V or as reasonably requested by Sellers to close
the transactions contemplated hereby.
3
<PAGE> 10
1.5 ADJUSTMENTS TO INITIAL PAYMENT.
(a) In the event that the Combined Net Assets of the
Acquired Companies as of December 31, 1996, are more or less than
US$[219,000.00] then the amount of the Initial Payment set forth in
Section 1.2 shall be adjusted as follows:
(i) If the Combined Net Assets of the Acquired
Companies as of December 31, 1996, is greater than US$[219,000.00] then the
amount of the Initial Payment shall be increased by an amount equal to the
difference between the Combined Net Assets of the Acquired Companies as of
December 31, 1996, and US$[219,000.00].
(ii) If the Combined Net Assets of the Acquired
Companies as of December 31, 1996, is less than US$[219,000.00], then the amount
of the Initial Payment shall be decreased by an amount equal to the difference
between US$[219,000.00] and the Combined Net Assets of the Acquired Companies as
of December 31, 1996. Sections 1.5(a)(i) and (ii) are collectively referred to
as the "Purchase Price Adjustment."
(b) The Purchase Price Adjustment shall be paid by the
appropriate party upon the approval of the Combined Post-Closing Balance Sheet
by both parties pursuant to Section 1.6 and shall be allocated among Premier
Agendas and PSA in the same ratio as set forth on Schedule 1.2(a).
1.6 COMBINED POST-CLOSING BALANCE SHEET.
(a) Within thirty (30) days following the Closing Date,
Sellers shall prepare and deliver to Buyers a combined post-closing balance
sheet for Buyer, effective as of December 31, 1996, showing the final status of
all assets and liabilities as of December 31, 1996 (the "Combined Post-Closing
Balance Sheet"). The Combined Post-Closing Balance Sheet shall be reviewed by
the Buyers and, if the Buyers have any objections to the Combined Post-Closing
Balance Sheet, Buyers and Sellers shall work reasonably and in good faith to
resolve such objections.
(b) If Buyers and Sellers are not able to resolve their
disagreements and objections with respect to the Combined Post-Closing Balance
Sheet within thirty (30) days after Sellers deliver the Combined Post-Closing
Balance Sheet to Buyers, then the issues in dispute will be submitted to
independent certified public accountants (the "Accountants"), for resolution.
If issues in dispute are submitted to the Accountants for resolution, (i) each
party will furnish to the Accountants such work papers and other documents and
information relating to the disputed issues as the Accountants may request and
are available to that party or its Subsidiaries (or its independent public
accountants), and will be afforded the opportunity to present to the
Accountants any material relating to the determination and to discuss the
determination with the Accountants; (ii) the determination by the Accountants,
as set forth in a notice delivered to both parties by the Accountants, will be
binding and conclusive on the parties; and (iii) Buyers and Sellers shall each
bear 50% of the fees of the Accountants for such determination.
(c) Upon finalization of the Combined Post-Closing
Balance Sheet and the calculation of the Combined Net Assets of the Acquired
Companies as of December 31, 1996, the Purchase Price Adjustment shall be paid
by the appropriate party within seven (7) days after approval of the Combined
Post-Closing Balance Sheet by both parties or the submission by the Accountants
of its determination.
4
<PAGE> 11
1.7 EARN-OUT PAYMENT.
(a) Premier Holding shall be entitled to receive, and the
Buyers agree to pay, as part of the Purchase Price to be paid to Premier
Holding, the following:
(i) If, but only if, the Pre-Tax Net Income of
the Acquired Companies for the twelve-month period commencing on September 1,
1996 and ending on August 31, 1997 (herein referred to as the "first Earn-Out
Year") is more than US$2,750,000, an amount equal to 1.65 multiplied by the
amount (if any) by which the Pre-Tax Net Income for the first Earn-Out Year
exceeds US$2,750,000;
(ii) If, but only if, the Pre-Tax Net Income of
Acquired Companies for the twelve-month period commencing on September 1, 1997
and ending on August 31, 1998 (herein referred to as the "second Earn-Out
Year") is more than US$4,000,000, an amount equal to 1.65 multiplied by the
amount (if any) by which the Pre-Tax Net Income for the second Earn-Out Year
exceeds US$4,000,000; and
(iii) If, but only if, the Pre-Tax Net Income of
Acquired Companies for the twelve-month period commencing on September 1, 1998
and ending on August 31, 1999 (herein referred to as the "third Earn-Out Year")
is more than US$7,200,000, an amount equal to 1.65 multiplied by the amount (if
any) by which the Pre-Tax Net Income for the third Earn-Out Year exceeds
US$7,200,000.
The first, second, and third Earn-Out Years are collectively referred to herein
as the "Earn-Out Period," and individually as an "Earn-Out Year." The payments
to be made to Premier Holding pursuant to this Section 1.7, are collectively
referred to as the "Earn-Out Payments," and individually as an "Earn-Out
Payment."
(b) Immediately following each Earn-Out Year, Buyers
shall cause the Acquired Companies to prepare combined financial statements of
the Acquired Companies for the twelve-month period ended on the last day of
such Earn-Out Year, in strict accordance with US GAAP consistently applied and
consistent with the accounting methods used by the Acquired Companies in
previous periods except for such changes as may be necessary to conform with US
GAAP. The combined financial statements of the Acquired Companies shall be
prepared and delivered to Franklin within 45 days after the close of each
Earn-Out Year. Sellers shall be given full access to the books and records of
the Acquired Companies in order to prepare the combined financial statements.
Such financial statements shall be reviewed or audited by Franklin and/or
Buyers' Auditors. Franklin's and/or Buyers' Auditors shall make such
adjustments, changes, and modifications to such financial statements as they
deem appropriate and shall submit to Premier Holding for consideration and
comment within 30 days of Franklin's receipt of such combined financial
statements (i) the reviewed or audited combined financial statements of the
Acquired Companies for the respective Earn-Out Year, and (ii) a detailed
summary of the calculation of Pre-Tax Net Income for such Earn-Out Year and the
amount of the Earn-Out Payment based on such Pre-Tax Net Income. Premier
Holding shall deliver any comments or objections it has concerning the audited
or reviewed combined financial statements or the calculation of Pre-Tax Income
or the Earn-Out Payment to Franklin within 60 days of receiving such
information and, if Premier Holding does not object within that period, the
amount of the Earn-Out Payment for that Earn-Out Year shall conclusively be
deemed to have been established on the day immediately following the expiration
of that period unless Premier Holding gives written notice to Franklin that it
accepts Franklin's determination of the amount of the Earn-Out Payment for that
Earn-Out
5
<PAGE> 12
Year, in which case the amount of the Earn-Out Payment for that Earn-Out Year
shall conclusively be deemed to have been established on the day Franklin
receives or is deemed to receive that notice. Franklin and Premier Holding
shall work reasonably and in good faith to resolve such objections. If
Franklin and Premier Holding are not able to resolve such objections within ten
(10) days after delivery of Premier Holding's objections to Franklin, then the
issues in dispute shall be submitted to the Accountants for resolution. If
issues in dispute are submitted to the Accountants for resolution, (i) each
party will furnish to the Accountants such work papers and other documents and
information relating to the disputed issues as the Accountants may request and
are available to that party or its Subsidiaries (or its independent public
accountants), and will be afforded the opportunity to present to the
Accountants any material relating to the determination and to discuss the
determination with the Accountants; and (ii) the determination by the
Accountants, as set forth in a notice delivered to Buyers and Premier Holding
by the Accountants, will be binding and conclusive on the parties. The costs
and expenses of the Accountants shall be borne solely by Franklin if the
determination reached by the Accountants results in a change in Pre-Tax Income
of more than 5% from the amount of the Pre-Tax Income finally determined by
Franklin's and/or Buyers' Auditors prior to submission of the disputed issues
to the Accountants. The costs and expenses of the Accountants shall be borne
solely by Premier Holding if the determination reached by the Accountants
results in a change in Pre-Tax Income of 5% or less from the amount of the
Pre-Tax Income finally determined by Franklin's and/or Buyers' Auditors prior
to submission of the disputed issues to the Accountants. The Earn-Out Payment
for that Earn-Out Year shall conclusively be deemed to be established on the
day after the date on which Franklin and Premier Holding resolve Premier
Holding's objection or the date of the Accountant's determination, as the case
may be.
(c) Not later than ten (10) days after the final Pre-Tax
Net Income for an Earn-Out Year has been established, Buyers shall pay to
Premier Holding the Earn-Out Payment for such Earn-Out Year, if any, subject to
Buyers' right to offset the Earn-Out Payment as set forth in Section 1.7(d).
Interest at the most favorable rate paid by Franklin on funds borrowed from its
primary bank shall accrue on any portion of any Earn-Out Payment not paid
within 75 days after the last day of an Earn-Out Year.
(d) Without limiting the generality of Buyers' remedies,
Buyers shall be entitled to deduct and set-off against any amount due to
Sellers under this Agreement, including, without limitation, any Earn-Out
Payments under this Section 1.7, the amount of (i) any claim for
indemnification or payment of damages to which either of the Buyers may be
entitled to under the terms of this Agreement, or (ii) any other obligations or
liabilities of, or monies owing by, any Seller to either of the Buyers.
(e) All amounts paid to Premier Holding pursuant to this
Section 1.7 shall be deemed to be part of the Purchase Price.
1.8 MANAGEMENT OF ACQUIRED COMPANIES DURING EARN-OUT PERIOD.
(a) During the Earn-Out Period, Existing Management shall
retain control of, and shall be responsible for managing, the day-to-day
operations of the Acquired Companies, subject to the review and oversight of
the Boards of Directors of the Acquired Companies and subject to the provisions
of this Section 1.8. Concurrently with the Closing, the existing members of
the Boards of Directors of the Acquired Companies shall resign and be replaced
with the following persons:
6
<PAGE> 13
Premier Agenda Board PSA Board
Hendrik A. Berends Hendrik A. Berends
David L. Loeppky David L. Loeppky
Harry Stel Harry Stel
James S. Gibson James S. Gibson
Gerrit Kuik Gerrit Kuik
Val John Christensen will be Secretary
of both companies
Subject to the provisions of Section 1.8(f), Buyers agree to vote their shares
in the Acquired Companies so as to cause the foregoing persons, or their
designates, to be elected directors of the Acquired Companies during each
Earn-Out Year.
(b) Existing Management will conduct the business of the
Acquired Companies only in the Ordinary Course of Business, in compliance with
all Legal Requirements and good business practices, and shall use their Best
Efforts to preserve intact the current business organization of the Acquired
Companies, keep available the services of the current officers, employees, and
agents of the Acquired Companies, and maintain the relations and good will with
suppliers, customers, landlords, creditors, employees, agents, and others
having business relationships with the Acquired Companies. In addition,
Existing Management of the Acquired Companies shall confer with their
respective Boards of Directors concerning operational matters of a material
nature and obtain the input and approval of said Boards of Directors for all
actions related to operational matters of a material nature. Buyers shall not
during the Earn-Out Period, without the consent of Existing Management of an
Acquired Company, (i) terminate or modify any contract or other relationship
that an Acquired Company has with a supplier or vendor, including, but not
limited to, Premier Printing Ltd., or (ii) sell any asset or interest in the
Acquired Companies, merge or combine the Acquired Companies with any other
entity, or otherwise restructure or reorganize the Acquired Companies. During
the Earn-Out Period, Buyers:
(i) shall provide to the Acquired Companies
working capital and/or bank guarantees according to a budget approved by
Franklin and the Board of Directors of the Acquired Companies; provided,
however, that Buyers shall have no affirmative duty to provide assistance or
resources (except as required herein), to generate or increase revenues, or
manage or reduce any costs or expenses associated with the generation of
Pre-Tax Net Income; and
(ii) shall not engage in any business, directly or
indirectly, which is in direct competition with the business of the Acquired
Companies, it being understood by the parties that any business now carried on
by the Covey Group of companies shall not be considered to be in competition
with the Acquired Companies.
(c) Without obtaining the prior approval and
authorization of Buyers, Existing Management will not:
7
<PAGE> 14
(i) cause the Acquired Companies to engage in or
effect any new business activity outside of the scope of the activities
currently engaged in by the Acquired Companies in the Ordinary Course of
Business or change the strategic direction of the Acquired Companies;
(ii) change any of the accounting methods or
controls used by the Acquired Companies except as necessary to comply with
GAAP;
(iii) sell or transfer any assets of the Acquired
Companies except for the sale or transfer of inventory or obsolete or defective
assets in the Ordinary Course of Business;
(iv) enter into any material Contract or other
arrangement, or modify or amend any existing material Contract or other
arrangement, with Existing Management, any Seller, any Related Person of
Existing Management, or any Related Person of any Seller;
(d) Within 30 days after the execution of this Agreement,
and at least 45 days before the end of each Earn-Out Year thereafter, Existing
Management shall prepare and submit to the Boards of Directors an annual
operating budget (the "Annual Budget") covering the activities of each of the
Acquired Companies for the following year. The Boards of Directors and
Existing Management shall work together to make changes to the Annual Budget as
deemed appropriate by the Boards of Directors and which must be reasonably
consistent with and based upon the prior year's history and future forecasts.
The Annual Budget must be submitted to Buyers for prior approval, which
approval shall not be unreasonably withheld, and adopted by the Boards of
Directors. Existing Management and the Boards of Directors shall use their
Best Efforts to adopt the Annual Budget prior to the beginning of each Earn-Out
Year. Following the adoption of the Annual Budget, it may be amended only with
the approval of the Boards of Directors. The final Annual Budget, as it may be
amended from time to time during any year, shall bind Existing Management in
their management of the day-to-day operations of the Acquired Companies.
(e) Existing Management shall prepare a monthly written
report for the Boards of Directors discussing the status of the business,
operations and finances of the Acquired Companies and the operating results for
the month and a comparison of actual operating results versus budgeted
operating results which report shall be delivered to the Boards of Directors
within 15 days after the end of each month. Existing Management shall also
meet with the Boards of Directors, or committees thereof, from time to time as
requested by the Boards of Directors to discuss the status of the business
operations and finances of the Acquired Companies.
(f) The Boards of Directors and Buyers shall retain the
right to terminate Existing Management's control of, and responsibility for,
the day to day operations of the Acquired Companies upon the occurrence of any
of the following events:
(i) The Boards of Directors or Buyers determine
during an Earn-Out Year, acting reasonably (including due consideration of the
seasonal nature of the business of the Acquired Companies), that in such
Earn-Out Year it is readily apparent that the Acquired Companies will not, on a
reasonable basis, achieve the Minimum Performance Standard for such Earn-Out
Year; or
(ii) Within thirty (30) days after written notice
from the Buyers to Existing Management setting out the particulars of any
action inconsistent with or in breach of the
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provisions of this Section 1.8, Existing Management fails to take any action
required to be taken pursuant to this Section 1.8, continues to engage in or
condone, or fails to prevent any action inconsistent with or in breach of the
provisions of this Section 1.8; or
(iii) Within thirty (30) days after written notice
from the Buyers to Existing Management setting out the particulars of any
action inconsistent with or in breach of the provisions of this Section 1.8,
any member of Existing Management continues to engage in any activity in
competition with any activity of the Acquired Companies or the Buyers, or
contrary or harmful to the interests of the Acquired Companies or the Buyers.
1.9 ALLOCATION. Premier Holding, the Premier Holding Shareholders
and each Partner agree that (i) the Initial Payment and Purchase Price
adjustments shall be made to Premier Holding and allocated between Premier
Holding and the Partners in accordance with the Allocation Schedule without
regard to specific adjustments to the financial statements of individual
Acquired Companies, and (ii) any Earn-Out Payment shall be made to Premier
Holding and shall be allocated between Premier Agendas and PSA in accordance
with the Allocation Schedule, and without regard to the operating results of
individual Acquired Companies during the Earn-Out Years.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLERS
Premier Holding and the Warranting Shareholders, jointly and
severally, represent and warrant to Franklin with respect to each
representation and warranty set forth below which is applicable to Premier
Agendas as follows; Premier Holding and the Warranting Shareholders, jointly
and severally, represent and warrant to Franklin Canada with respect to each
representation and warranty set forth below which is applicable to PSA as
follows; Premier Holding and each of the Partners, jointly and severally,
represent and warrant to Buyers with respect to each representation and
warranty set forth below which is applicable to Premier Graphics as follows;
and each Seller hereby represents and warrants as to itself with respect to the
representations and warranties set forth in Sections 2.28 through 2.32, as
follows:
2.1 ORGANIZATION AND GOOD STANDING; SUBSIDIARIES; RESIDENCE.
(a) Part 2.1(a) of the Disclosure Letter contains a
complete and accurate list for each of the Acquired Companies of such entity's
name, its jurisdiction of incorporation, other jurisdictions in which it is
authorized to do business, and its capitalization (including the identity of
each stockholder or partner and the number of shares or interest held by each).
Each Acquired Company (other than Premier Graphics) is a corporation duly
organized, validly existing, and in good standing under the laws of its
jurisdiction of organization, with full corporate power and authority to
conduct its business as it is now being conducted, to own or use the properties
and assets that it purports to own or use, and to perform all its obligations
under Applicable Contracts. Premier Graphics is a limited partnership duly
organized, validly existing, and in good standing under the laws of the State
of Washington with full partnership power and authority to conduct its business
as it is now being conducted, to own or use the properties that it purports to
own or use, and to perform all of its obligations under Applicable Contracts.
Each Acquired Company is duly qualified to do business and is in good standing
under the laws of each state, province or other jurisdiction in which either
the ownership or use of the properties owned, leased or used by it, or the
nature of the activities conducted by it, requires such qualification, except
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where the failure to so qualify would not have a material adverse effect on
such Acquired Company or its operations.
(b) Sellers have delivered to Buyers copies of the
Organizational Documents of each Acquired Company, as currently in effect on or
prior to the date hereof.
(c) Other than as listed on Part 2.1(c) of the Disclosure
Letter, the Acquired Companies (i) have no Subsidiaries, (ii) do not own or
control (directly or indirectly) any capital stock, bonds or other securities
of, and do not have any proprietary interest in, any other corporation, general
or limited partnership, firm, association or business organization, entity or
enterprise, and (iii) do not control (directly or indirectly) the management or
policies of any other corporation, partnership, firm, association or business
organization, entity or enterprise.
(d) Premier Holding is not a non-resident of Canada
within the meaning of the Tax Act.
2.2 AUTHORITY; NO CONFLICT.
(a) This Agreement constitutes the legal, valid, and
binding obligation of Premier Holding enforceable against Premier Holding in
accordance with its terms, except as enforcement may be limited by applicable
bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or
other laws affecting creditor's rights generally. Premier Holding has the
absolute and unrestricted right, power, authority, and capacity to execute and
deliver this Agreement and to perform its respective obligations under this
Agreement.
(b) Except as set forth in Part 2.2(b) of the Disclosure
Letter, neither the execution and delivery of this Agreement nor the
consummation or performance of any of the Contemplated Transactions will,
directly or indirectly (with or without notice or lapse of time):
(i) contravene, conflict with, or result in a
violation of (A) any provision of the Organizational Documents of the Acquired
Companies, Premier Holding or any of the other Sellers to the extent such
Seller is not an individual, or (B) any resolution adopted by the board of
directors, the shareholders or partners of any Acquired Company, Premier
Holding or any of the other Sellers to the extent such Seller is not an
individual;
(ii) contravene, conflict with, or result in a
violation of, or give any Governmental Body or other Person the right to
challenge any of the Contemplated Transactions or to exercise any remedy or
obtain any relief under, any Legal Requirement or any Order to which any
Acquired Company or any Seller, or any of the assets owned, leased or used by,
any Acquired Company, may be subject which would have a material adverse affect
on any Acquired Company;
(iii) contravene, conflict with, or result in a
violation of any of the terms or requirements of, or give any Governmental Body
the right to revoke, withdraw, suspend, cancel, terminate, or modify, any
Governmental Authorization that is held by any Acquired Company or that
otherwise relates to the business of, or any of the assets owned, leased or
used by, any Acquired Company;
(iv) contravene, conflict with, or result in a
violation or breach of any provision of, or give any Person the right to
declare a default or exercise any remedy under, or to
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accelerate the maturity or performance of, or to cancel, terminate, or modify,
any Applicable Contract; or
(v) result in the imposition or creation of any
Encumbrance upon or with respect to any of the assets owned, leased or used by
any Acquired Company.
Except as set forth in Part 2.2(b) of the Disclosure Letter, no Seller or any
Acquired Company is or will be required to give any notice to or obtain any
Consent from any Person in connection with the execution and delivery of this
Agreement or the consummation or performance of any of the Contemplated
Transactions.
2.3 CAPITALIZATION.
(a) The authorized equity securities of Premier Agendas
consists of 1,000,000 shares of common stock, no par value, 11,200 of which are
issued and outstanding and constitute the Premier Agendas Shares. No equity
securities of any class or nature are authorized or issued with respect to
Premier Agendas, except the Premier Agenda Shares. The authorized equity
securities of PSA consists of an unlimited number of common shares for an
unlimited consideration, 100 of which are issued and outstanding and constitute
the PSA Shares. No equity securities of any class or nature are authorized or
issued with respect to PSA, except the PSA Shares. All of the ownership
interests in Premier Graphics are held by the Partners or Premier Agendas.
Sellers are and will be on the Closing Date the record and beneficial owners
and holders of the Shares and Partnership Interests free and clear of all
Encumbrances. The Shares and Partnership Interests listed on Schedule 2.3(a)
represent all of the holdings of securities of the Acquired Companies, all of
which are owned by the Sellers. Other than as set forth on Part 2.3 of the
Disclosure Letter, no legend or other reference to any purported Encumbrance
appears upon any certificate representing equity securities of each Acquired
Company. All of the outstanding equity securities of any Acquired Company have
been duly authorized and validly issued and are fully paid and nonassessable.
(b) There are no outstanding options, warrants or other
securities or rights that may be exercised to purchase or are convertible into
equity or debt securities of the Acquired Companies and there are no Applicable
Contracts relating to the issuance, sale, or transfer of any equity securities
or other securities of any Acquired Company. None of the outstanding
securities of any Acquired Company was issued in violation of the Securities
Act or any equivalent securities laws in Canada or any state of the United
States or province of Canada or any other Legal Requirement. Other than as set
forth on Part 2.3 of the Disclosure Letter, no Acquired Company owns, or has
any Contract to acquire, any securities of any Person (other than Acquired
Companies) or any direct or indirect equity or ownership interest in any other
business.
2.4 FINANCIAL STATEMENTS AND OTHER INFORMATION. The Sellers and
the Acquired Companies have, or will have prior to the Closing, delivered or
made available to Buyers:
(a) Reviewed balance sheets, together with combining
schedules, of the Acquired Companies as of December 31st in each of the years
1994 through 1995, and the related statements of income, changes in
shareholders' equity or partners' capital, and cash flow for the year ended
December 31, 1995 and the three months ended December 31, 1994, together with
the report thereon by the preparers thereof, for the periods through December
31, 1995. Such financial statements and notes fairly present the financial
condition and the results of operations, changes in shareholders' equity or
partners' capital, and cash flow of the Acquired Companies as
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at the respective dates of and for the periods referred to in such financial
statements, all in accordance with GAAP; the financial statements referred to
in this Section 2.4 reflect the consistent application of such accounting
principles throughout the periods involved, except as disclosed in the notes to
such financial statements. No financial statements of any Person other than
the Acquired Companies are required by GAAP to be included in the financial
statements of the Acquired Companies. Part 2.4(a) of the Disclosure Letter
sets forth the accounting treatment of certain items that may be an exception
to this representation and warranty. Sellers have, or will have prior to
Closing, delivered to the Buyers unaudited combined balance sheets of the
Acquired Companies as of December 31, 1996 (the "Balance Sheet"), and the
related statements of income for the year then ended which fairly present the
financial condition and results of operations of the Acquired Companies as of
December 31, 1996, and for the year then ended, all in accordance with GAAP and
reflect the consistent application of such accounting principles throughout the
periods involved, except for normal recurring year-end adjustments which are
not and are not expected to be material in amount.
(b) All information in the Sellers' and Acquired
Companies' possession or control, or of which the Acquired Companies or Sellers
have Knowledge, concerning the operation, business and prospects of the
Acquired Companies as may be requested by either Buyer, including, without
limitation, making the working papers of the Acquired Companies' Accountants
available for inspection and copying by the Buyers' Auditors (except for
proprietary information of Sellers' and Acquired Companies' Accountants), and
all other information requested by the Buyers concerning any of the Acquired
Companies' assets, liabilities, and any aspect of the Acquired Companies'
business.
2.5 BOOKS AND RECORDS. The books of account, minute books, stock
record books, partnership records, and other records of the Acquired Companies,
all of which have been made available to Buyers, are complete and correct in
all material respects and have been maintained in accordance with reasonable
business practices. At the Closing, all of those books and records will be in
the possession or control of the Acquired Companies.
2.6 TITLE TO PROPERTIES; ENCUMBRANCES.
(a) The Acquired Companies own (with good and marketable
fee title in the case of real property, subject only to the matters permitted
by Section 2.6(b)), all the properties and assets (whether real, personal, or
mixed and whether tangible or intangible) reflected as owned in the books and
records of the Acquired Companies, including all of the properties and assets
reflected in the Balance Sheet (except for assets held under capitalized leases
disclosed or not required to be disclosed in Part 2.6 of the Disclosure Letter
and properties and assets sold since the date of the Balance Sheet, as the case
may be, in the Ordinary Course of Business), and all of the properties and
assets purchased or otherwise acquired by the Acquired Companies since the date
of the Balance Sheet (except for properties and assets acquired and sold since
the date of the Balance Sheet in the Ordinary Course of Business), which
subsequently purchased or acquired properties and assets having an individual
value in excess of $10,000.00, excluding the improvements to the property
located at 2000 Kentucky Street, Bellingham, Washington, costing approximately
$300,000.00 (other than inventory and short-term investments), are listed in
Part 2.6 of the Disclosure Letter.
(b) Except as set forth in Part 2.6 of the Disclosure
Letter, all properties and assets reflected in the Balance Sheet are free and
clear of all Encumbrances and are not, in the case of real property, subject to
any boundary disputes, rights of way, easements, building, mining
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or other use restrictions, variances, reservations, United States state or
federal patents or limitations (but, with respect to Canadian real property,
such property is subject to reservations in the original or any subsequent
grant from the Crown), of any nature, except, with respect to all such
properties and assets, (i) mortgages or security interests shown on the Balance
Sheet as securing specified liabilities or obligations, with respect to which
no default (or event that, with notice or lapse of time or both, would
constitute a default) exists, (ii) mortgages or security interests incurred in
connection with the purchase of property or assets after the date of the
Balance Sheet (such mortgages and security interests being limited to the
property or assets so acquired), with respect to which no default, or event
that, with notice or lapse of time or both, is reasonably likely to constitute
a default exists, (iii) liens for current taxes and assessments not yet due, or
in the case of real property due but not yet delinquent, and (iv) with respect
to real property. (x) easements or restrictions which, individually or in the
aggregate, would not have a material adverse effect on the use of such real
property by the Acquired Company for the purposes for which it is intended, and
(y) current zoning laws and other land use restrictions.
(c) Part 2.6 of the Disclosure Letter contains a complete
and accurate list of all real property, leaseholds, or other interests in real
property owned or leased by any Acquired Company, and a list of all real
property, leaseholds or other interests in real property previously owned or
leased by any Acquired Company or a company owned by an Acquired Company. The
Acquired Companies have already delivered or made available to Buyers copies of
the recorded deeds by which the Acquired Companies acquired fee title to all
such real property owned by the Acquired Companies and copies of fully executed
leases pertaining to real property currently leased by the Acquired Companies.
Premier Holding and the Acquired Companies have also delivered copies of all
title insurance policies, opinions, abstracts, permits, certificates, plans
(including all reclamation plans), studies, investigations, reports and surveys
in the possession of any Acquired Company or Seller and relating to the
ownership, use or operation of such real property.
(d) Except as set forth in Part 2.6 of the Disclosure
Letter, no Acquired Company has received notice of a proposed general plan
amendment, zone reclassification, modification, expiration or cancellation of
any conditional use permit or other public land use action which would affect
any part of the real property owned or leased by any Acquired Company. No
current use of the real property owned or leased by any Acquired Company, or
any currently anticipated future use, conflicts with any present general plan
or zoning classification or use permit which affects any part of such real
property. All buildings, plants and structures owned by any of the Acquired
Companies lie wholly within the legal boundaries of the real property owned by
or leased by such Acquired Company and do not encroach upon the property of, or
otherwise conflict with the property rights of, any other Person. Except as
set forth on Part 2.6 of the Disclosure Letter, no Acquired Company has
received or been threatened with any notice or communication of any violation
of any Legal Requirement pertaining to the real property owned or leased by any
Acquired Company, including without limitation, environmental regulations
affecting the Property. No commitment to or agreement with any Governmental
Authority exists which could affect such real property, including but not
limited to any dedication agreement, operation restrictions, and formation of
any special assessment or taxing district, except as disclosed in this
Agreement. None of such real property is located in an area designated as (i)
having special flood hazards on any official flood hazard map published by the
United States Department of Housing and Urban Development (except as may
pertain to possible 100 year flood plan status), or (ii) a wetland area on any
official wetland inventory map published by the United States Department of the
Interior, or similar state law. Each real property owned or leased by any
Acquired Company has valid legal access to a public street or road and no
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restrictions exist pertaining to truck traffic to and from such real property
except for general vehicular registrations governing speed and weight limits.
The buildings and structures located on any real property owned, leased, or
used by the Acquired Companies have not been insulated with a urea formaldehyde
foam type installation.
2.7 INTELLECTUAL PROPERTY. The term "Intellectual Property
Assets" shall include the names of the Acquired Companies, all other fictitious
business names and trade names under which the Acquired Companies have
conducted their businesses, registered and unregistered trademarks, service
marks and applications (collectively, "Marks") used in connection with the
Acquired Companies' businesses, all copyrights in both published works and
unpublished works (collectively, "Copyrights") owned, developed or used by any
of the Acquired Companies in connection with the operation of the businesses,
and all designs, inventions, know-how, trade secrets, confidential information,
software, technical information, workbooks, consulting plans and products
(collectively, "Trade Secrets") owned, developed or used by any of the Acquired
Companies in connection with the operation of the businesses. All of the
Intellectual Property Assets of the Acquired Companies are described in Part
2.7 of the Disclosure Letter. The Intellectual Property Assets are all the
intellectual property necessary or used in the operation of the Acquired
Companies' business. There are no pending Proceedings or threatened disputes
or disagreements with respect to the Intellectual Property Assets. The
Acquired Companies are the owners of all right, title and interest in and to
each of the Intellectual Property Assets free and clear of all Encumbrances.
No such Intellectual Property Asset infringes upon or, to the Knowledge of
Acquired Companies, has been alleged to infringe upon the intellectual
property rights of any other Person.
2.8 CONDITION AND SUFFICIENCY OF ASSETS. Except as set forth on
Part 2.8 of the Disclosure Letter, the buildings, plants, structures, and
equipment of the Acquired Companies, including all equipment not shown on the
Balance Sheet of each Acquired Company which is held by such Acquired Company
pursuant to the terms of operating leases, are structurally sound, are in
reasonable operating condition and repair, subject to ordinary wear and tear,
and are adequate for the uses to which they are being put. All buildings,
plants, structures and equipment of the Acquired Companies that are capitalized
on the Balance Sheet and all equipment held under operating leases are
described in Part 2.8 of the Disclosure Letter. The building, plants,
structures, and equipment of the Acquired Companies are sufficient for the
continued conduct of the Acquired Companies' businesses after the Closing in
substantially the same manner as conducted prior to the Closing.
2.9 ACCOUNTS RECEIVABLE. All accounts receivable of the Acquired
Companies that are reflected on the Balance Sheet or on the accounting records
of the Acquired Companies as of the close of business on December 31, 1996 and
from such date through the Closing Date (collectively, the "Accounts
Receivable") represent or will represent valid obligations arising from sales
actually made or services actually performed in the Ordinary Course of
Business. Unless paid prior to the Closing Date, the Accounts Receivable are
or will be as of the Closing Date current and collectible net of the respective
reserves shown on the Balance Sheet. Except as set forth in Part 2.9 of the
Disclosure Letter, there is no material contest or claim other than returns in
the Ordinary Course of Business, under any Applicable Contract with any maker
of an Accounts Receivable relating to the amount or validity of such Accounts
Receivable. Part 2.9 of the Disclosure Letter contains a complete and accurate
list of all Accounts Receivable posted on each of the Acquired Companies' books
as of December 31, 1996, which list sets forth the aging of such Accounts
Receivable as well as a list of all receipts as well as billings for the period
ending on the last business date prior to the Closing.
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2.10 INVENTORY. The quantities of each item of inventory (whether
raw materials, work-in-process, or finished goods) are not excessive, but are
reasonable in the present circumstances of the Acquired Companies. None of
such inventory is obsolete and all of it is useable and saleable in the
Ordinary Course of Business. Part 2.10 of the Disclosure Letter contains a
complete and accurate list of all inventory of the Acquired Companies as of
close of business on December 31, 1996, as updated to the last business day
prior to the Closing.
2.11 NO UNDISCLOSED LIABILITIES. Except as set forth in Part 2.11
of the Disclosure Letter, none of the Acquired Companies has any material
liabilities or obligations of any nature (whether known or unknown and whether
absolute, accrued, contingent, or otherwise), or guarantees of any material
liabilities or obligations, except for liabilities or obligations reflected or
reserved against in the Balance Sheet and current liabilities incurred in the
Ordinary Course of Business since the respective dates thereof. None of such
liabilities relate to a criminal proceeding, violation of law, breach of
contract or tort obligation.
2.12 TAXES.
(a) The Acquired Companies filed or caused to be filed on
a timely basis all Tax Returns that are or were required to be filed by or with
respect to any of them, either separately or as a member of a group of
corporations, pursuant to applicable Legal Requirements. The Acquired
Companies have delivered to Buyers copies of, and Part 2.12 of the Disclosure
Letter contains a complete and accurate list of, all such Tax Returns relating
to income or franchise taxes filed since January 1, 1994. The Acquired
Companies have paid, or made provision for the payment of, all Taxes that have
or may have become due pursuant to those Tax Returns or otherwise, or pursuant
to any assessment received by any Acquired Company, except such Taxes, if any,
as are listed in Part 2.12 of the Disclosure Letter and are being contested in
good faith and as to which adequate reserves (determined in accordance with
GAAP) have been provided in the Balance Sheet.
(b) Federal Canadian income tax assessments have been
issued to PSA covering all past periods through the fiscal year ended December
31, 1995 (and such assessments, if any amounts were owing in respect thereof,
have been paid or, where permitted by law, security therefor has been provided.
Except as set forth on Part 2.12(b) of the Disclosure Letter, the United States
federal and state income Tax Returns of each Acquired Company subject to the
United States Taxes described in Section 2.12(a) have not been audited by the
IRS or relevant state tax authorities and the Canadian federal and provincial
Tax Returns of each Acquired Company subject to the Canadian Taxes described in
Section 2.12(a) have not been audited by Revenue Canada or applicable
provincial taxing authorities. Except as described in Part 2.12 of the
Disclosure Letter, no Seller or Acquired Company has given or been requested to
give waivers or extensions (or is or would be subject to a waiver or extension
given by any other Person) of any statute of limitations relating to the
payment of Taxes of any Acquired Company or for which any Acquired Company may
be liable.
(c) The charges, accruals, and reserves with respect to
Taxes on the respective books of each Acquired Company are adequate (determined
in accordance with GAAP) and are at least equal to that Acquired Company's
liability for Taxes. There exists no proposed tax assessment against any
Acquired Company except as disclosed in the Balance Sheet or in Part 2.12 of
the Disclosure Letter. No consent to the application of Section 341(f)(2) of
the Code has been filed with respect to any property or assets held, acquired,
or to be acquired by any Acquired Company. All Taxes that any Acquired Company
is or was required by Legal
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Requirements to withhold or collect have been duly withheld or collected and,
to the extent required, have been paid to the proper Governmental Body or other
Person.
(d) All Tax Returns filed by (or that include on a
combined basis) any Acquired Company are true, correct, and complete.
2.13 NO MATERIAL ADVERSE CHANGE. Since the date of the Balance
Sheet other than for general economic conditions or as disclosed in Part 2.13
of the Disclosure Letter, there has not been any material adverse change in the
business, operations, properties, prospects, assets, liabilities or condition
of the Acquired Companies, taken as a whole, and no event has occurred or
circumstance exists that is reasonably likely to result in such a material
adverse change. In addition, since the date of the Balance Sheet, there has
been no material adverse change in the composition of the assets of the
Acquired Companies.
2.14 EMPLOYEE BENEFITS. Except as described in Part 2.14 of the
Disclosure Letter, none of the Acquired Companies maintains or operates any
Employee Benefit Plan nor has any such Employee Benefit Plan been maintained or
operated during the past three years. None of the Acquired Companies maintains
or contributes to any Guaranteed Pension Plan or Multiemployer Plan. With
respect to each Employee Benefit Plan listed in Part 2.14 of the Disclosure
Letter, to the extent applicable,
(a) each such Employee Benefit Plan affecting employees
of Premier Agendas and/or Premier Graphics has been maintained and operated in
all material respects in compliance with its terms and with all applicable
provisions of ERISA, the Code and all applicable regulations, rulings and other
authority issued thereunder and, in the case of PSA, all applicable
legislation, regulations, rulings and other authority issued thereunder;
(b) all contributions required by law to have been made
under each such Employee Benefit Plan to any fund or trust established
thereunder or in connection therewith have been made by the due date thereof;
(c) each such Employee Benefit Plan intended to qualify
under Section 401(a) of the Code is the subject of a favorable unrevoked
determination letter issued by the Internal Revenue Service as to its qualified
status under the Code, which determination letter may still be relied upon as
to such tax qualified status, and no circumstances have occurred that would
adversely affect qualified status of any such Employee Benefit Plan;
(d) no Employee Benefit Plan affecting employees of
Premier Agendas and/or Premier Graphics is subject to Title IV of ERISA;
(e) none of such Employee Benefit Plans affecting
employees of Premier Agendas and/or Premier Graphics that are "employee welfare
benefit plans" as defined in section 3(a) of ERISA provides for continuing
benefits or coverage for any participant or beneficiary of a participant after
such participant's termination of employment except as required by applicable
law, including section 4980B of the Code or Section 6701 of ERISA; and
(f) neither Premier Agendas nor Premier Graphics, nor any
trade or business (whether or not incorporated) under common control with
Premier Agendas or Premier Graphics within the meaning of Section 401 of ERISA
has, or at any time has had, any obligation to contribute to any "Multiemployer
Plan."
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The pension plan described in Part 2.14 of the
Disclosure Letter is the only pension plan maintained by PSA for the employees
in its Canadian operations, and PSA is not in default of any of its obligations
under the pension plan. No Acquired Company is party to any management
agreement, pay equity plan, vacation or vacation pay policy, employee
insurance, hospital or medical expense program or pension, retirement, profit
sharing, stock bonus, deferred profit sharing, supplemental retirement,
unemployment benefit, group registered retirement savings plan, disability
insurance, dental services or other employee benefit plan, program or
arrangement or to any executive or key personnel incentive or other special
compensation arrangement or to other contracts or agreements with or with
respect to officers, employees or agents other than those listed and described
in Part 2.14 of the Disclosure Letter and those required to be maintained, paid
or contributed to by law.
2.15 COMPLIANCE WITH LEGAL REQUIREMENTS; GOVERNMENTAL
AUTHORIZATIONS.
(a) Except as set forth in Part 2.15 of the Disclosure
Letter:
(i) each Acquired Company is in material
compliance with each Legal Requirement that is or was applicable to it or to
the conduct or operation of its business or the ownership or use of any of its
assets;
(ii) to the Knowledge of the Acquired Companies no
event has occurred or circumstance exists that (with or without notice or lapse
of time) (A) is reasonably likely to constitute or result in a violation by any
Acquired Company of, or a failure on the part of any Acquired Company to comply
with, any Legal Requirement, or (B) is reasonably likely to give rise to any
obligation on the part of any Acquired Company to undertake, or to bear all or
any portion of the cost of, any remedial action of any nature; and
(iii) no Acquired Company has received any notice
or other communication (whether oral or written) from any Governmental Body or
any other Person regarding (A) any actual, alleged, possible, or potential
violation of, or failure to comply with, any Legal Requirement, or (B) any
actual, alleged, possible, or potential obligation on the part of any Acquired
Company to undertake, or to bear all or any portion of the cost of, any
remedial action of any nature.
(b) Part 2.15 of the Disclosure Letter contains a
complete and accurate list of each Governmental Authorization that is held by
any Acquired Company or that otherwise relates to the business of, or to any of
the assets owned, leased or used by, any Acquired Company. Each Governmental
Authorization listed or required to be listed in Part 2.15 of the Disclosure
Letter is valid and in full force and effect. Except as set forth in Part 2.15
of the Disclosure Letter:
(i) each Acquired Company is in material
compliance with all of the terms and requirements of each Governmental
Authorization identified or required to be identified in Part 2.15 of the
Disclosure Letter;
(ii) to the Knowledge of the Acquired Companies no
event has occurred or circumstance exists that is reasonably likely to (with or
without notice or lapse of time) (A) constitute or result directly or
indirectly in a violation of or a failure to comply with any term or
requirement of any Governmental Authorization listed or required to be listed
in Part 2.15 of the Disclosure Letter, or (B) result directly or indirectly in
the revocation, withdrawal,
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suspension, cancellation, or termination of, or any modification to, any
Governmental Authorization listed or required to be listed in Part 2.15 of the
Disclosure Letter;
(iii) no Acquired Company has received any notice
or other communication (whether oral or written) from any Governmental Body or
any other Person regarding (A) any material, actual, alleged, possible, or
potential violation of or failure to comply with any term or requirement of any
Governmental Authorization, or (B) any material, actual, proposed, possible, or
potential revocation, withdrawal, suspension, cancellation, termination of, or
modification to any Governmental Authorization; and
(iv) all applications required to have been filed
for the renewal of the Governmental Authorizations listed or required to be
listed in Part 2.15 of the Disclosure Letter have been duly filed on a timely
basis with the appropriate Governmental Bodies, and all other filings required
to have been made with respect to such Governmental Authorizations have been
duly made on a timely basis with the appropriate Governmental Bodies.
The Governmental Authorizations listed in Part 2.15 of the Disclosure Letter
collectively constitute all of the Governmental Authorizations necessary as at
the Closing Date to permit each of the Acquired Companies to lawfully conduct
and operate its business in the manner it currently conducts and operates such
business and to permit the Acquired Companies to own and use their assets in
the manner in which they currently own and use such assets.
2.16 LEGAL PROCEEDINGS; ORDERS.
(a) Except as set forth in Part 2.16 of the Disclosure
Letter, there is no pending Proceeding:
(i) that has been commenced by or against any
Acquired Company; or
(ii) that challenges, or that may have the effect
of preventing, delaying, making illegal, or otherwise interfering with, any of
the Contemplated Transactions; or
(iii) relating to the Shares or the Partnership
Interests.
To the Knowledge of the Acquired Companies, no such Proceeding has been
threatened, and no event has occurred or circumstance exists that is reasonably
likely to give rise to or serve as a basis for the commencement of any such
Proceeding. Sellers have delivered or will deliver to Buyers copies of all
pleadings, correspondence, and other documents relating to each Proceeding
listed in Part 2.16 of the Disclosure Letter. The Proceedings listed in Part
2.16 of the Disclosure Letter are not reasonably likely to have a material
adverse effect on the business, operations, assets, condition, or prospects of
any Acquired Company.
(b) Except as set forth in Part 2.16 of the Disclosure
Letter:
(i) there is no Order to which any of the
Acquired Companies, or any of the assets owned, leased or used by any of the
Acquired Companies is subject;
(ii) no officer, director or, to the Knowledge of
the Acquired Companies, no agent, or employee of any Acquired Company is
subject to any Order that
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prohibits such officer, director, agent, or employee from engaging in or
continuing any conduct, activity, or practice relating to the business of any
Acquired Company.
(c) Except as set forth in Part 2.16 of the Disclosure
Letter:
(i) each Acquired Company is, and at all times
has been, in material compliance with all of the terms and requirements of each
Order to which it, or any of the assets owned, leased or used by it, is or has
been subject;
(ii) to the Knowledge of the Acquired Companies,
no event has occurred or circumstance exists that may constitute or result in
(with or without notice or lapse of time) a violation of or failure to comply
with any term or requirement of any Order to which any Acquired Company, or any
of the assets owned, leased or used by any Acquired Company, is subject; and
(iii) no Acquired Company has received at any time
any notice or other communication (whether oral or written) from any
Governmental Body or any other Person regarding any actual, alleged, possible,
or potential violation of, or failure to comply with, any term or requirement
of any Order to which any Acquired Company, or any of the assets owned, leased
or used by any Acquired Company, is or has been subject.
2.17 ABSENCE OF CERTAIN CHANGES AND EVENTS. Except as set forth in
Part 2.17 of the Disclosure Letter, since December 31, 1996 there has not been
any:
(a) change in any Acquired Company's authorized or issued
capital stock; grant of any stock option or right to purchase shares of capital
stock of any Acquired Company; issuance of any security convertible into such
capital stock; grant of any registration rights; purchase, redemption,
retirement, or other acquisition by any Acquired Company of any shares of any
such capital stock; or declaration or payment of any dividend or other
distribution or payment in respect of shares of capital stock;
(b) amendment to the Organizational Documents of any
Acquired Company;
(c) payment or increase by any Acquired Company of any
bonuses, salaries, or other compensation to any Seller, stockholder, director,
officer, partner, or (except in the Ordinary Course of Business) employee or
entry into any employment, severance, or similar Contract with any director,
officer, partner or employee;
(d) discharge or satisfaction of any Encumbrance, or
payment of any obligation or liability (fixed or contingent) other than
liabilities included in the Balance Sheet and current liabilities incurred
since the date of the Balance Sheet in the Ordinary Course of Business;
(e) adoption of, or increase in the payments to or
benefits under, any profit sharing, bonus, deferred compensation, savings,
insurance, pension, retirement, or other employee benefit plan for or with any
employees of any Acquired Company;
(f) damage to or destruction or loss of any asset or
property of any Acquired Company, whether or not covered by insurance,
materially and adversely affecting the properties, assets, business, financial
condition, or prospects of any of the Acquired Companies;
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(g) entry into (i) any license, sales representative,
joint venture, credit, or similar agreement, or (ii) any Applicable Contract
outside the Ordinary Course of Business;
(h) termination of, or receipt of notice of termination
of (i) any license, sales representative, joint venture, credit, or similar
agreement or (ii) any Applicable Contract or transaction involving a total
remaining commitment by any Acquired Company of at least $100,000.00;
(i) sale, lease, or other disposition of any asset of any
Acquired Company other than sales of inventory in the Ordinary Course of
Business or dispositions of minor items of personal property, the cumulative
effect of which is not material to any Acquired Company, or mortgage, pledge,
or imposition of any Encumbrance on any material asset of any Acquired Company;
(j) cancellation or waiver of any claims or rights with a
value to any Acquired Company in excess of $10,000.00, except for lien releases
given in the Ordinary Course of Business;
(k) material change in the accounting methods used by any
Acquired Company; or
(l) agreement, whether oral or written, by any Acquired
Company to do any of the foregoing.
2.18 CONTRACTS; NO DEFAULTS.
(a) Part 2.18(a) of the Disclosure Letter contains a
complete and accurate list, and Sellers have delivered to Buyers true and
complete copies, of all Applicable Contracts which have not been fully
performed and for which obligations are still outstanding, of:
(i) each Applicable Contract for which work is
still to be performed or services or goods are still to be provided that
involves performance of services or delivery of goods or materials by any
Acquired Company of an amount or value in excess of $50,000;
(ii) each Applicable Contract for which work is
still to be performed or services or goods are still to be provided that
involves performance of services from a subcontractor in excess of $50,000;
(iii) each Applicable Contract that involves
capital expenditures of any Acquired Company in excess of $50,000;
(iv) each lease, rental or occupancy agreement,
license, installment and conditional sale agreement, and other Applicable
Contract affecting the ownership of, leasing of, title to, use of, or any
leasehold or other interest in, any real or personal property (except personal
property leases and installment and conditional sales agreements having a value
per item or aggregate payments of less than $1,000 per month);
(v) each licensing agreement or other Applicable
Contract with respect to patents, trademarks, copyrights, or other intellectual
property, including agreements with
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current or former employees, consultants, or contractors regarding the
appropriation or the non-disclosure of any of the Intellectual Property Assets;
(vi) each collective bargaining agreement and
other Applicable Contract to or with any labor union or other employee
representative of a group of employees relating to wages, hours, and other
conditions of employment;
(vii) each joint venture, partnership, and other
Applicable Contract (however named) involving a sharing of profits, losses,
costs, or liabilities by any Acquired Company with any other Person;
(viii) each Applicable Contract containing covenants
that in any way purport to restrict any Acquired Company's business activity or
limit the freedom of any Acquired Company to engage in any line of business or
to compete with any Person;
(ix) each Applicable Contract providing for
payments to or by any Person based on sales, purchases, or profits, other than
direct payments for goods;
(x) each power of attorney that is currently
effective and outstanding;
(xi) each Applicable Contract entered into other
than in the Ordinary Course of Business that contains or provides for an
express undertaking by any Acquired Company to be responsible for consequential
damages;
(xii) each written warranty, guaranty, and or other
similar undertaking with respect to contractual performance extended by any
Acquired Company other than in the Ordinary Course of Business; and
(xiii) each amendment, supplement, and modification
(whether oral or written) in respect of any of the foregoing.
Part 2.18(a) of the Disclosure Letter sets forth information regarding such
Applicable Contracts, including the parties to the Applicable Contracts, the
date of such Applicable Contracts and the Acquired Company's office where
details relating to the Applicable Contracts are located.
(b) Except as set forth in Part 2.18(b) of the Disclosure
Letter:
(i) no Seller or any shareholder of Premier
Holding has or may acquire any rights under, and no Seller or any shareholder
of Premier Holding has or may become subject to any obligation or liability
under, any Applicable Contract that relates to the business of, or any of the
assets owned, leased or used by, any Acquired Company; and
(ii) to the Knowledge of the Acquired Companies,
no officer, director, agent, employee, consultant, or contractor of any
Acquired Company is bound by any Contract that purports to limit the ability of
such officer, director, agent, employee, consultant, or contractor to (A)
engage in or continue any conduct, activity, or practice relating to the
business of any Acquired Company, or (B) assign to any Acquired Company or to
any other Person any rights to any invention, improvement, or discovery.
(c) Except as set forth in Part 2.18(c) of the Disclosure
Letter:
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(i) each Contract identified or required to be
identified in Part 2.18(a) of the Disclosure Letter is in full force and
effect; and
(ii) to the Knowledge of the Acquired Companies,
no Contract identified or required to be identified in Part 2.18(a) of the
Disclosure Letter contains any term or requirement that is not customary in the
industries in which the Acquired Companies operate.
(d) Except as set forth in Part 2.18(d) of the Disclosure
Letter:
(i) each Acquired Company is in material
compliance with all applicable terms and requirements of each Applicable
Contract under which such Acquired Company has or had any obligation or
liability or by which such Acquired Company or any of the assets owned, leased
or used by such Acquired Company is or was bound;
(ii) to the Knowledge of the Acquired Companies,
each other Person that has or had any obligation or liability under any
Contract under which an Acquired Company has or had any rights is in material
compliance with all applicable terms and requirements of such Contract;
(iii) to the Knowledge of the Acquired Companies,
no event has occurred or circumstance exists that (with or without notice or
lapse of time) is reasonably likely to contravene, conflict with, or result in
a violation or breach of, or give any Acquired Company or other Person the
right to declare a default or exercise any remedy under, or to accelerate the
maturity or performance of, or to cancel, terminate, or modify, any Applicable
Contract; and
(iv) no Acquired Company has given to or received
from any other Person any notice or other communication (whether oral or
written) regarding any actual, alleged, possible, or potential violation or
breach of, or default under, any Contract.
(e) There are no renegotiations of, attempts to
renegotiate, or outstanding rights to renegotiate any material amounts paid or
payable to any Acquired Company under current or completed contracts with any
Person having the contractual or statutory right to demand or require such
renegotiation and, to the Knowledge of each Acquired Company and Seller, no
such Person has made written demand for such renegotiation.
(f) To the Knowledge of the Acquired Companies, the
Contracts relating to the sale, design, manufacture, or provision of products
or services by the Acquired Companies have been entered into in the Ordinary
Course of Business and have been entered into without the commission of any act
alone or in concert with any other Person, or any consideration having been
paid or promised, that is or is reasonably likely to be in violation of any
Legal Requirement.
2.19 INSURANCE.
(a) The Acquired Companies have delivered or will deliver
to Buyers on or before the date hereof:
(i) true and complete copies of all policies of
insurance to which any Acquired Company is a party or under which any Acquired
Company, or any director of any Acquired Company, is or has been covered at any
time within the three (3) years preceding the
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date of this Agreement to the extent in the possession of any Acquired Company
or Seller or their insurance agent;
(ii) true and complete copies of all pending
applications for policies of insurance; and
(iii) any statement by the auditor of any Acquired
Company's financial statements with regard to the adequacy of such entity's
coverage or of the reserves for claims.
(b) Part 2.19(b) of the Disclosure Letter describes:
(i) any self-insurance arrangement by or
affecting any Acquired Company, including any reserves established thereunder;
(ii) any contract or arrangement, other than a
policy of insurance for the transfer or sharing of any risk by any Acquired
Company; and
(iii) all obligations of the Acquired Companies to
provide coverage to third parties (for example, under leases or service
agreements) and identifies the policy under which such coverage is provided.
(c) Part 2.19(c) of the Disclosure Letter sets forth, by
year, for the current policy year and each of the 3 preceding policy years:
(i) a summary of the loss experience under each
policy;
(ii) a statement describing the loss experience
for all claims that were self-insured, including the number and aggregate cost
of such claims.
(d) Except as set forth on Part 2.19(d) of the Disclosure
Letter:
(i) All policies to which any Acquired Company is
a party or that provide coverage to any Acquired Company or director or officer
thereof:
(A) are valid and outstanding;
(B) are issued by an insurer that to the
knowledge of the Acquired Companies is financially sound and reputable;
(C) taken together, provide adequate
insurance coverage for the assets and the operations of Acquired Companies for
all risks normally experienced by the Acquired Companies according to their
historical experience;
(D) are sufficient for compliance with
all Legal Requirements and Contracts to which the any Acquired Company is a
party or by which any of them is bound; and
(E) will not, by virtue of the Closing
of this transaction, fail to continue in full force and effect following the
consummation of the Contemplated Transactions.
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(ii) No Seller or Acquired Company has received
(A) any refusal of coverage or any notice that a defense will be afforded with
reservation of rights, or (B) any notice of cancellation or any other
indication that any insurance policy is no longer in full force or effect or
that the issuer of any policy is not willing or able to perform its obligations
thereunder.
(iii) The Acquired Companies have paid all premiums
due, and have otherwise performed all of their respective obligations, under
each policy to which any Acquired Company is a party or that provides coverage
to any Acquired Company or director thereof.
(iv) The Acquired Companies have given notice to
the insurer of all claims that may be insured thereby.
2.20 ENVIRONMENTAL AND OCCUPATIONAL SAFETY AND HEALTH MATTERS.
Except as set forth in Part 2.20 of the Disclosure Letter:
(a) Each Acquired Company is, and at all times prior to
the date hereof has been, in material compliance with, and has not been and is
not in violation of any Environmental Law or any Occupational Safety and Health
Law. No Acquired Company has any reason to expect, nor has any of them
received, any actual or threatened order, notice, or other communication from
(i) any Governmental Body or private citizen acting in the public interest, or
(ii) the current or prior owner or operator of any Facilities, of any actual or
potential violation or failure to comply with any Environmental Law or any
Occupational Safety and Health Law, or of any actual or threatened obligation
to undertake or bear the cost of any Environmental, Health, and Safety
Liabilities with respect to any of the Facilities or any other properties or
assets (whether real, personal, or mixed) in which any Acquired Company has had
an interest, or with respect to any property or Facility at or to which
Hazardous Materials were generated, manufactured, refined, transferred,
imported, used, or processed by any Acquired Company, or from which Hazardous
Materials have been transported, treated, stored, handled, transferred,
disposed, recycled, or received.
(b) No Acquired Company has any reason to expect, nor has
any of them, received, any Order, notice, communication, inquiry, warning,
citation, summons or directive that relates to Hazardous Activity, Hazardous
Materials, or any alleged, actual, or potential violation or failure to comply
with any Environmental Law or any Occupational Safety and Health Law, or of any
alleged, actual, or potential obligation to undertake or bear the cost of any
Environmental, Health, and Safety Liabilities with respect to any of the
Facilities the operations of the Acquired Companies, or any other properties or
assets (whether real, personal, or mixed) in which any Acquired Company had an
interest, or with respect to any property or facility to which Hazardous
Materials generated, manufactured, refined, transferred, imported, used, or
processed by any Acquired Company have been transported, treated, stored,
handled, transferred, disposed, recycled, or received.
(c) No Acquired Company has any material Environmental,
Health, and Safety Liabilities with respect to the Facilities, the operations
of the Acquired Companies or, with respect to any other properties and assets
(whether real, personal, or mixed) in which any Acquired Company (or any
predecessor), has or had an interest, or, to the Knowledge of the Acquired
Companies, at any property geologically or hydrologically adjoining the
Facilities or any such other property or assets.
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(d) Other than materials used by the Acquired Companies
in the Ordinary Course of Business, there are no Hazardous Materials present on
or in the Environment at the Facilities or, to the Knowledge of the Acquired
Companies, at any geologically or hydrologically adjoining property, including
any Hazardous Materials contained in barrels, above or underground storage
tanks, landfills (authorized or unauthorized), land deposits, dumps, equipment
(whether moveable or fixed) or other containers, either temporary or permanent,
and deposited or located in land, water, swamps, or any other part of the
Facilities or such adjoining property, or incorporated into any structure
therein or thereon. No Acquired Company has permitted or conducted, and is not
aware of, any activity conducted with Hazardous Materials with respect to the
Facilities or, to the Knowledge of the Acquired Companies, any other properties
or assets (whether real, personal, or mixed) in which the Acquired Companies
have or had an interest except in material compliance with all applicable
Environmental Laws and Occupational Safety and Health Laws.
(e) There has been no Release or threat of Release by any
Acquired Company, or any other Person, of any Hazardous Materials at or from
the Facilities or at any other locations where any Hazardous Materials were
generated, manufactured, refined, transferred, produced, imported, used, or
processed from or by the Facilities, or from or by any other properties and
assets (whether real, personal, or mixed) in which any Acquired Company has or
had an interest, or, to the Knowledge of the Acquired Companies, from or by any
geologically or hydrologically adjoining property except in material compliance
with Environmental Laws.
(f) The Sellers and the Acquired Companies have delivered
to Buyers true and complete copies and results of any reports, studies,
analyses, tests, or monitoring possessed or initiated by Sellers or any
Acquired Company pertaining to Hazardous Materials or Hazardous Activities in,
on, or under the Facilities, or concerning compliance by any Acquired Company
with Environmental Laws.
2.21 EMPLOYEES.
(a) Part 2.21 of the Disclosure Letter contains a
complete and accurate list of the following information as of the last day of
the payroll period immediately preceding the Closing Date for each salaried
employee, director or partner of the Acquired Companies, including each
salaried employee on leave of absence or layoff status: employer; name; job
title; current compensation paid or payable and any change in compensation
since August 31, 1996; vacation accrued; and service credited for purposes of
vesting and eligibility to participate under any Acquired Company's pension,
retirement, profit-sharing, thrift-savings, deferred compensation, stock bonus,
stock option, cash bonus, employee stock ownership (including investment credit
or payroll stock ownership), severance pay, insurance, medical, welfare, or
vacation plan, or any other Employee Benefit Plan. Except as set forth on Part
2.21, no Acquired Company is a party to any written contracts of employment
with any of its employees (other than union employees governed by a collective
bargaining agreement) or any oral contracts of employment which are not
terminable on the giving of reasonable notice in accordance, and no inducements
to accept employment with such Acquired Company were offered to any such
employees which have the effect of increasing the period of notice of
termination to which any such employee is entitled.
(b) To the Knowledge of the Acquired Companies and
Sellers, no current employee or current director or current partner of any
Acquired Company is a party to, or is otherwise bound by, any agreement or
arrangement that in any way adversely affected, affects, or
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will affect (i) the performance of his duties as an employee or director or
partner of the Acquired Companies, or (ii) the ability of any Acquired Company
to conduct its business. To the Knowledge of the Acquired Companies and
Sellers, no director, officer, or other key employee of an Acquired Company
intends to terminate his employment with the such Acquired Company.
(c) Part 2.21 of the Disclosure Letter contains a
complete and accurate list of the following information for each retired
employee or director of the Acquired Companies, or their dependents, receiving
benefits or scheduled to receive benefits in the future: name, pension benefit,
pension option election, retiree medical insurance coverage, retiree life
insurance coverage, and other benefits.
(d) Each Acquired Company has deducted and remitted to
the relevant Governmental Authority or entity all income taxes, unemployment
insurance contributions, Canada Pension Plan contributions, employer health tax
remittances and any taxes or deductions or other amounts which it is required
by statute or contract to collect and remit to any Governmental Authority or
other entities entitled to receive payment of such deduction. Each Acquired
Company has paid to the date of this Agreement all amounts payable on account
of salary, bonus payments and commission to or on behalf of any and all
employees.
(e) All levies under the Workers' Compensation Act
(British Columbia), or under the workers' compensation legislation of any other
jurisdiction where any Acquired Company carries on the business, have been paid
by such Acquired Company.
(f) Part 2.21 of the Disclosure Letter contains a
complete and accurate list of employees in receipt of or who have claimed
benefits under any weekly indemnity, long term disability or workers'
compensation plan or arrangement or any other form of disability benefit
program.
2.22 LABOR DISPUTES; COMPLIANCE. Other than as set forth in Part
2.22 of the Disclosure Letter,
(a) no Acquired Company has been or is a party to any
collective bargaining or other labor Contract;
(b) there is no presently pending or existing, and to the
Acquired Companies' Knowledge there is not threatened any strike, slowdown,
picketing, work stoppage, labor arbitration, unfair labor practice complaint or
proceeding in respect of the grievance of any employee, application or
complaint filed by an employee or union with the National Labor Relations Board
or any comparable Governmental Body, organizational activity, or other labor
dispute against or affecting any of the Acquired Companies or their Facilities,
and no application for certification of a collective bargaining agent is
pending or to Affiliates' and the Acquired Companies' Knowledge is threatened;
(c) except as specified on Part 2.22 of the Disclosure
Letter, there are no pending, threatened or anticipated (a) employment
discrimination charges or complaints against or involving any Acquired Company
before any federal, state, provincial, or local board, department, commission
or agency, or (b) unfair labor practice charges or complaints, under any labor
relations legislation, disputes or grievances affecting any Acquired Company.
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(d) to the Acquired Companies' Knowledge no event has
occurred or circumstance exists that is reasonably likely to provide the basis
for any work stoppage or other labor dispute;
(e) there is no lockout of any employees by any Acquired
Company, and no such action is contemplated by any Acquired Company;
(f) the Acquired Companies have complied in all material
respects with all Legal Requirements relating to employment, equal employment
opportunity, nondiscrimination, immigration, wages, hours, benefits, collective
bargaining, the payment of social security and similar taxes, occupational
safety and health, and plant closing; and
(g) no Acquired Company is liable for the payment of any
taxes, fines, penalties, or other amounts, however designated, for failure to
comply with any of the foregoing Legal Requirements.
2.23 CERTAIN PAYMENTS. Neither an Acquired Company nor any
director, officer, agent, or employee of an Acquired Company, or any other
Person acting for or on behalf of an Acquired Company, has directly or
indirectly (a) made any contribution, gift, bribe, rebate, payoff, influence
payment, kickback, or other payment to any Person, private or public,
regardless of form, whether in money, property, or services in violation of any
Legal Requirement (i) to obtain favorable treatment in securing business, (ii)
to pay for favorable treatment for business secured, or (iii) to obtain special
concessions or for special concessions already obtained, for or in respect of
any Acquired Company or any Affiliate of an Acquired Company, or (b)
established or maintained any fund or asset that has not been recorded in the
books and records of an Acquired Company.
2.24 DISCLOSURE.
(a) The representations and warranties of Sellers and the
Acquired Companies in this Agreement together with the Disclosure Letter taken
as a whole do not contain any untrue statement of a material fact and do not
omit to state a material fact necessary to make the statements herein or
therein, in light of the circumstances in which they were made, not misleading.
(b) No notice given pursuant to Section 6.5 will contain
any untrue statement or omit to state a material fact necessary to make the
statements therein or in this Agreement, in light of the circumstances in which
they were made, not misleading.
2.25 RELATIONSHIPS WITH RELATED PERSONS. Except as set forth in
Part 2.25 of the Disclosure Letter, no Seller or any Related Person of Sellers
has any interest in any property (whether real, personal, or mixed and whether
tangible or intangible), used in or pertaining to the Acquired Companies'
businesses. Except as set forth in Part 2.25 of the Disclosure Letter, no
Seller or any Related Person of Sellers or of the Acquired Companies' owns of
record or as a beneficial owner, an equity interest or any other financial or
profit interest in any Person that has (i) had business dealings or a material
financial interest in any transaction with an Acquired Company other than
business dealings or transactions conducted in the Ordinary Course of Business
with an Acquired Company at substantially prevailing market prices and on
substantially prevailing market terms, or (ii) engaged in competition with an
Acquired Company with respect to any line of the products or services of an
Acquired Company (a "Competing Business") in any
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market presently served by any Acquired Company except for less than one
percent of the outstanding capital stock of any Competing Business that is
publicly traded on any recognized exchange or in the over-the-counter market.
Except as set forth in Part 2.25 of the Disclosure Letter, no Seller or any
Related Person of Sellers is a party to any Contract with, or has any claim or
right against, an Acquired Company.
2.26 BROKERS OR FINDERS. The Acquired Companies and their agents
have incurred no obligation or liability, contingent or otherwise, for
brokerage or finders' fees or agents' commissions or other similar payment in
connection with this Agreement.
2.27 CANADIAN SECURITIES LAWS. PSA is a private company
within the meaning of the Securities Act (British Columbia) and the sale of the
Shares and the Partnership Interests by the Sellers to the Purchasers will be
made in compliance with all applicable securities legislation.
Each Seller represents and warrants to Buyers, individually as to such
Seller and not with respect to any other Seller, that the following statements
are, as of the date hereof and will be as of the Closing Date, true and
correct:
2.28 OWNERSHIP OF STOCK OR PARTNERSHIP INTEREST. Except as set
forth on Part 2.28 of the Disclosure Letter, such Seller owns of record and
beneficially the number of Shares and/or the Partnership Interest of the
Acquired Companies indicated opposite such Seller's name in Schedule 2.28
hereto, with full right and authority to sell such Shares and/or Partnership
Interests hereunder, and upon delivery of such Shares hereunder and assignment
of the Partnership Interests, the Buyers will receive good title thereto, free
and clear of all liens, mortgages, pledges or security interests or the rights
of any third person and not subject to any agreements or understandings among
any Persons with respect to the voting or transfer of such Shares or
Partnership Interests other than those arising under agreements to which either
Buyer is a party.
2.29 EXECUTION, DELIVERY AND ENFORCEABILITY OF AGREEMENT; NO
VIOLATION. This Agreement has been duly executed and delivered by or on behalf
of the Seller, and at the Closing any other documents required hereunder to be
executed and delivered by or on behalf of the Seller will have been duly
executed and delivered. This Agreement constitutes the legal, valid and
binding obligation of the Seller, enforceable against such Seller in accordance
with its terms, except as enforcement may be limited by applicable bankruptcy,
insolvency, reorganization, fraudulent conveyance, moratorium or other laws
affecting creditor's rights generally. Any other agreements required hereunder
to be executed and delivered by the Seller at Closing will constitute the
legal, valid and binding agreements of the Seller executing the same,
enforceable against such Seller in accordance with their respective terms,
except as enforcement may be limited by applicable bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium or other laws affecting
creditor's rights generally. Neither the execution of this Agreement nor the
consummation of the transactions provided for herein by the Seller will
violate, or constitute a default under, or permit the acceleration of maturity
of, except to the extent waived, the Seller's Organizational Documents or any
indentures, mortgages, promissory notes, contracts or agreements to which such
Seller is a party or by which such Seller or such Seller's properties are
bound. Upon the execution and delivery by the Seller of this Agreement, and,
if applicable, the Employment Agreements, and the Sellers Releases
(collectively, the "Seller's Closing Documents") the Seller's Closing Documents
will constitute the legal, valid, and binding obligations of such Seller,
enforceable against such Seller in accordance with their respective terms,
except as enforcement may be limited by applicable bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium or other laws affecting
creditor's rights generally.
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2.30 RESIDENCE AND DOMICILE; BANKRUPTCY. The Seller is a resident
of, and domiciled in, the state or province indicated on Schedule 2.28 as being
the residence of such Seller. No bankruptcy, insolvency or receivership
proceedings have been instituted or are pending against such Seller and such
Seller is able to satisfy its respective liabilities as they become due.
2.31 NO ORDERS. No Order has been given under any applicable
family law legislation nor is there any application pending under any family
laws by the spouse of such Seller which would affect the Shares or the
Partnership Interests in any manner whatsoever. Such Seller is not subject to
any Order that relates to the Shares, the Partnership Interests, or the
business of, or any of the assets owned, leased or used by any Acquired
Company.
2.32 BROKERS OR FINDERS. Neither the Seller nor any of such
Seller's agents have incurred any obligation or liability, contingent or
otherwise, for brokerage or finders' fees or agents' commissions or other
similar payment in connection with this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYERS
Buyers represent and warrant to Sellers as follows:
3.1 ORGANIZATION AND GOOD STANDING. Each of the Buyers is a
corporation duly organized, validly existing, and in good standing under the
laws of its incorporation.
3.2 AUTHORITY; NO CONFLICT.
(a) This Agreement constitutes the legal, valid, and
binding obligation of Buyers, enforceable against Buyers in accordance with its
terms, except as such enforcement may be limited by applicable bankruptcy,
insolvency, reorganization, fraudulent conveyance, moratorium or other laws
affecting creditor's rights generally. Buyers have the absolute and
unrestricted right, power, and authority to execute and deliver this Agreement
and to perform their obligations under this Agreement.
(b) Neither the execution and delivery of this Agreement
by Buyers nor the consummation or performance of any of the Contemplated
Transactions by Buyers will give any Person the right to prevent, delay, or
otherwise interfere with any of the Contemplated Transactions pursuant to:
(i) any provision of Buyers' Organizational
Documents;
(ii) any resolution adopted by the board of
directors or the stockholders of Buyers;
(iii) any Legal Requirement or Order to which
Buyers may be subject; or
(iv) any Contract to which Buyers are a party or
by which Buyers may be bound.
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Except as set forth in Schedule 3.2, Buyers are not and will not be required to
obtain any Consent from any Person in connection with the execution and
delivery of this Agreement or the consummation or performance of any of the
Contemplated Transactions.
3.3 INVESTMENT INTENT. Buyers are acquiring the Shares and the
Partnership Interests for their own account and not with a view to their
distribution within the meaning of Section 2(11) of the Securities Act. Buyers
are sophisticated business entities, experienced in the business of the
Acquired Companies and are able to evaluate the merits and risks of acquiring
the Shares and the Partnership Interests.
3.4 CERTAIN PROCEEDINGS. There is no pending Proceeding that has
been commenced against Buyers and that challenges, or may have the effect of
preventing, delaying, making illegal, or otherwise interfering with, any of the
Contemplated Transactions. To Buyers' Knowledge, no such Proceeding has been
threatened.
3.5 BROKERS OR FINDERS. Buyers and their officers and agents have
incurred no obligation or liability, contingent or otherwise, for brokerage or
finders' fees or agents' commissions or other similar payment in connection
with this Agreement.
ARTICLE IV
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF BUYERS
Buyers' obligation to purchase the Shares and the Partnership
Interests and to take the other actions required to be taken by Buyers at the
Closing is subject to the satisfaction, at or prior to the Closing, of each of
the following conditions (any of which may be waived by Buyers, in whole or in
part):
4.1 ACCURACY OF REPRESENTATIONS. All of the Sellers'
representations and warranties in this Agreement or in any document delivered
pursuant hereto (considered collectively), and each of these representations
and warranties (considered individually), must have been accurate as of the
date of this Agreement, and must be accurate as of the Closing Date as if made
on the Closing Date, without giving effect to any supplement to the Disclosure
Letter.
4.2 SELLERS' AND THE ACQUIRED COMPANIES' PERFORMANCE.
(a) All of the covenants and obligations that Sellers and
the Acquired Companies are required to perform or to comply with pursuant to
this Agreement at or prior to the Closing (considered collectively), and each
of these covenants and obligations (considered individually), must have been
duly performed and complied with in all respects.
(b) Each Seller or the Acquired Companies, as the case
may be, must have delivered each of the documents required to be delivered by
such Seller pursuant to Section 1.4.
4.3 CONSENTS. Each of the Consents required to be obtained from
any Person or Governmental Authority to consummate the transactions
contemplated by this Agreement must have been obtained and be in full force and
effect. All corporate, shareholder, partnership and other action necessary to
authorize the execution, delivery and performance of this Agreement by Sellers
and the Acquired Companies and the consummation by Sellers and the Acquired
Companies of the transactions contemplated by this Agreement shall have been
duly and validly
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taken and Sellers shall have full right and power to sell the Shares and the
Partnership Interests and Sellers shall have full right and power to perform
their obligations upon the terms provided in this Agreement.
4.4 COMPLETION OF INVESTIGATIONS, INSPECTIONS AND STUDIES. The
Buyers shall have completed, to their sole satisfaction and at their expense,
an investigation into the financial condition, financial statements, and
business affairs of the Acquired Companies, the condition of the assets and
business operations and the obligations, rights and prospects for Buyers'
operation of the Acquired Companies after the Closing. If Buyers are not
satisfied, for any reason, in their sole discretion, with any matter revealed
during its investigation, Buyers shall have the right to terminate this
Agreement by giving written notice of such termination to Sellers.
4.5 NO MATERIAL ADVERSE CHANGE. During the period from the date
of the Balance Sheet through the Closing Date, there shall not have been any
material adverse change in the Ordinary Course of Business, there shall not
have been any material loss or damage to the assets of the Acquired Companies,
and none of the events described in Section 2.17 of this Agreement shall have
occurred.
4.6 ADDITIONAL DOCUMENTS. Sellers must have caused the following
documents to be delivered to Buyers:
(a) an opinion of Taylor McCaffrey, dated the Closing
Date, in the form reasonably acceptable to Buyers;
(b) certified copy of a resolution of the board of
directors and a special resolution of the shareholders of Premier Holding
approving the transfer of the Shares to the Buyers and the Contemplated
Transactions and a resolution of the board of directors of PSA approving the
transfer of the Shares;
(c) certified copies of the Organizational Documents of
each of the Acquired Companies and Premier Holding;
(d) statutory declaration of the Canadian Sellers
concerning the residence of each of such Canadian Sellers or other reasonable
and satisfactory evidence that each such Canadian Seller is at the Closing Date
a resident of Canada within the meaning of the Tax Act;
(e) certificate of the Sellers concerning the matters
referred to in Sections 4.1 and 4.2 hereof and confirming that all conditions
under this Agreement in favor of the Sellers have been either fulfilled or
waived;
(f) certificates of incumbency of Premier Holding and
each Acquired Company;
(g) share certificates duly endorsed for transfer
representing all Shares and Assignments of Partnership Interest for all
Partnership Interests;
(h) resignation letters from each of the directors of the
Acquired Companies, which resignations shall be effective as of the Closing;
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(i) such other documents as Buyers may reasonably request
for the purpose of (i) evidencing the accuracy of any of Sellers' and the
Acquired Companies' representations and warranties, (ii) evidencing the
performance by either Sellers or the Acquired Companies of, or the compliance
by each Seller and Acquired Company with, any covenant or obligation required
to be performed or complied with by such Seller or Acquired Company, (iii)
evidencing the satisfaction of any condition referred to in this Article IV, or
(iv) otherwise facilitating the consummation or performance of any of the
Contemplated Transactions.
Sellers shall cause the following documents to be delivered to Buyers within a
reasonable time (not to exceed 60 days) following the Closing:
(j) certificates of good standing of Premier Holding and
each Acquired Company in each jurisdiction in which they are qualified to do
business;
(k) a clearance certificate or other similar documentary
evidence from the worker's compensation authority in each jurisdiction where
any Acquired Company carries on business certifying that there are no
outstanding assessments, penalties, fines, levies, charges, surcharges or other
amounts due or owing to those authorities;
4.7 NO PROCEEDINGS. Since the date of this Agreement, there must
not have been commenced or threatened against either Buyer, any Seller or
Acquired Company or against any Person affiliated with either Buyer, any Seller
or Acquired Company, any Proceeding (a) involving any challenge to, or seeking
damages or other relief in connection with, any of the Contemplated
Transactions, or (b) that may have the effect of preventing, delaying, making
illegal, or otherwise interfering with any of the Contemplated Transactions.
4.8 NO CLAIM REGARDING STOCK OWNERSHIP OR SALE PROCEEDS. There
must not have been made or threatened by any Person any claim asserting that
such Person (a) is the holder or the beneficial owner of, or has the right to
acquire or to obtain beneficial ownership of, any stock of, or any other
voting, equity, or ownership interest in, any of the Acquired Companies, or (b)
is entitled to all or any portion of the Purchase Price payable for the Shares
or the Partnership Interests.
4.9 NO PROHIBITION. Neither the consummation nor the performance
of any of the Contemplated Transactions will, directly or indirectly (with or
without notice or lapse of time), materially contravene, or conflict with, or
result in a material violation of, or cause either Buyer or any Person
affiliated with either Buyer to suffer any material adverse consequence under,
(a) any applicable Legal Requirement or Order, or (b) any Legal Requirement or
Order that has been published, introduced, or otherwise proposed by or before
any Governmental Body.
4.10 COMPLIANCE WITH LAW. There shall have been obtained any and
all Governmental Authorizations which counsel for Buyers may reasonably deem
necessary or appropriate so that consummation of the transactions contemplated
by this Agreement and the Transaction Agreements will be in compliance with
Legal Requirements. There shall have been obtained, from all appropriate
Governmental Authorities, such Consents as are required to permit the change of
ownership and due registration of the Shares and the Partnership Interests
contemplated by this Agreement, including, without limitation, the following:
(a) Investment Canada - The Buyers shall have either
received:
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(i) a receipt issued under subsection 13(1) of
the Investment Canada Act certifying that a complete notice in prescribed form
in respect of the acquisition has been received and advising that such
acquisition is not reviewable or a notice from the Minister of Industry issued
under sections 21, 22 or 23 of the Investment Canada Act, indicating that such
Minister is, or is deemed to be, satisfied that the acquisition is likely to be
of net benefit to Canada; or
(ii) an opinion of the Minister of Industry issued
under subsection 37(2) of the Investment Canada Act indicating that such
Minister is of the opinion that the Investment Canada Act is not applicable to
the transactions contemplated herein.
4.11 NOTICES. Sellers will give any notices to third parties
required by agreements with such third parties or pursuant to Legal
Requirements. The parties will have filed with the Federal Trade Commission
and the Antitrust Division of the U. S. Department of Justice all filings
required by the HSR Act and shall have received a notice from the Federal Trade
Commission and the United States Department of Justice that such transaction
may proceed.
4.12 ACTIONS SATISFACTORY. The form and substance of all actions,
proceedings, instruments and documents required to consummate the transactions
contemplated by this Agreement shall have been satisfactory in all reasonable
respects to Buyers and their counsel.
4.13 DISCLOSURE LETTER. The Sellers and the Acquired Companies
shall have provided Buyers full and complete and final copies of the Disclosure
Letter which shall be acceptable to Buyers in their sole discretion.
4.14 EMPLOYMENT AGREEMENTS, COVENANTS NOT TO COMPETE AND RELEASES.
Certain of the Sellers and certain other parties shall have entered into the
Employment Agreements as required by Section 1.4(a)(iv). The Acquired
Companies shall have entered into such employment, confidentiality and
noncompetition agreements with such employees of the Acquired Companies as
Buyers shall deem necessary in order to assure Buyers that all key employees
necessary for the continued operation of the businesses shall remain employees
of the Acquired Companies after the Closing upon terms and conditions
acceptable to Buyers.
ARTICLE V
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SELLERS
Sellers' obligation to sell the Shares and the Partnership Interests
and to take the other actions required to be taken by Sellers at the Closing is
subject to the satisfaction, at or prior to the Closing, of each of the
following conditions (any of which may be waived by the Sellers, in whole or in
part):
5.1 ACCURACY OF REPRESENTATIONS. All of Buyers' representations
and warranties in this Agreement (considered collectively), and each of these
representations and warranties (considered individually), must have been
accurate in all material respects as of the date of this Agreement and must be
accurate in all material respects as of the Closing Date as if made on the
Closing Date.
5.2 BUYER'S PERFORMANCE.
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(a) All of the covenants and obligations that Buyers are
required to perform or to comply with pursuant to this Agreement at or prior to
the Closing (considered collectively), and each of these covenants and
obligations (considered individually), must have been performed and complied
with in all material respects.
(b) Buyers must have delivered each of the documents
required to be delivered by Buyers pursuant to Section 1.4 and must have made
the cash payments required to be made by Buyers pursuant to Section 1.4.
5.3 ADDITIONAL DOCUMENTS. Buyers must have delivered to Sellers
such other documents as Sellers may reasonably request for the purpose of (i)
enabling their counsel to provide the opinion referred to in Section 4.6, (ii)
evidencing the accuracy of any representation or warranty of Buyers, (iii)
evidencing the performance by Buyers of, or the compliance by Buyers with, any
covenant or obligation required to be performed or complied with by Buyers,
(iv) evidencing the satisfaction of any condition referred to in this Article
5, or (v) otherwise facilitating the consummation of any of the Contemplated
Transactions.
5.4 NO INJUNCTION. There must not be in effect any Legal
Requirement or any injunction or other Order that prohibits the sale of the
Shares or Partnership Interest by Sellers to Buyers.
5.5 RELEASE OF GUARANTEES. Sellers shall have secured from
HongKong Bank of Canada releases of all of Sellers' guarantees made in
connection with Sellers' indebtedness incurred through the Ordinary Course of
Business.
ARTICLE VI
COVENANTS OF THE SELLERS
6.1 CONDUCT OF BUSINESS PRIOR TO CLOSING. Between the date of
this Agreement and the Closing Date, the Acquired Companies will, unless the
Acquired Companies obtain the written consent of Buyers (which shall not be
unreasonably withheld or delayed):
(a) conduct the business of the Acquired Companies only
in the Ordinary Course of Business;
(b) use their Best Efforts to preserve intact the current
business organization of the Acquired Companies, keep available the services of
the current officers, employees, and agents of the Acquired Companies, and
maintain the relations and good will with suppliers, customers, landlords,
creditors, employees, agents, and others having business relationships with the
Acquired Companies;
(c) confer with Buyers concerning operational matters of
a material nature;
(d) not make or commit to make any capital expenditure in
excess of $10,000.00;
(e) report regularly to Buyers concerning the status of
the business, operations, and finances of the Acquired Companies;
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(f) continue in force and in good standing all existing
insurance maintained by it; and
(g) to comply with all applicable Legal Requirements.
6.2 ACCESS FOR INVESTIGATION. Between the date of this Agreement
and the Closing Date, the Sellers, the Acquired Companies and their
Representatives will, (a) afford Buyers and their representatives free and full
access to the Acquired Companies' management to discuss the Acquired Companies'
business operations, assets, liabilities, actual or potential litigation and
claims, properties and prospects with the Acquired Companies' employees,
agents, accountants, attorneys, customers, suppliers, and other persons having
business dealings with the Acquired Companies or knowledge of the issues, (b)
afford Buyers and their representatives full and free access to the Acquired
Companies properties (including subsurface testing), contracts, books and
records, and other documents and data, (c) furnish Buyer and Buyers' advisors
and representatives with copies of all such contracts, books and records, and
other existing documents and data as Buyers may reasonably request, and (d)
furnish Buyers and Buyers' Advisors and representatives with such additional
financial, operating, and other data and information as Buyers may reasonably
request in the possession or control of any Acquired Company or Seller, or as
to which any of the Sellers or the Acquired Companies have Knowledge.
6.3 NEGATIVE COVENANT. Except as otherwise expressly permitted by
this Agreement, between the date of this Agreement and the Closing Date, the
Sellers and the Acquired Companies will not, without the prior consent of
Buyer, which shall not be unreasonably withheld or delayed, take any
affirmative action, or fail to take any reasonable action within their or its
control, as a result of which any of the changes or events listed in Section
2.17 is likely to occur.
6.4 REQUIRED APPROVALS. As promptly as practicable after the date
of this Agreement, the Sellers and the Acquired Companies will make all filings
required by Legal Requirements to be made by it in order to consummate the
Contemplated Transactions (including all filings under the HSR Act). Between
the date of this Agreement and the Closing Date, the Sellers and the Acquired
Companies will (a) cooperate with Buyers with respect to all filings that
Buyers elect to make or is required by Legal Requirements to make in connection
with the Contemplated Transactions, and (b) cooperate with Buyer in obtaining
all consents identified in Schedule 3.2 (including taking all actions requested
by Buyer to cause early termination or any applicable waiting period under the
HSR Act).
6.5 NOTIFICATION. Between the date of this Agreement and the
Closing Date, each of the Acquired Companies and each Seller will promptly
notify Buyers in writing if such Seller or the Acquired Companies becomes aware
of any fact or condition that causes or constitutes a Breach of any
representations and warranties of the Acquired Companies, and the Sellers as of
the date of this Agreement, or if such Seller or an Acquired Company becomes
aware of the occurrence after the date of this Agreement of any fact or
condition that would (except as expressly contemplated by this Agreement) cause
or constitute a Breach of any such representation or warranty had such
representation or warranty been made as of the time of occurrence or discovery
of such fact or condition. Should any such fact or condition require any
change in the Disclosure Letter if the Disclosure Letter were dated the date of
the occurrence or discovery of any such fact or condition, the Acquired
Companies will promptly deliver to Buyer a supplement to the Disclosure Letter
specifying such change. During the same period, the Acquired Companies will
promptly notify Buyer of the occurrence of any Breach of any covenant
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in this Article VI or of the occurrence of any event that may make the
satisfaction of the conditions in Article IV or V impossible or unlikely.
6.6 NO NEGOTIATION. Each of the Sellers and the Acquired
Companies will, and will cause each of their Representatives not to, directly
or indirectly solicit, initiate, or encourage any inquiries or proposals from,
discuss or negotiate with, provide any non-public information to, or consider
the merits of any unsolicited inquiries or proposals from, any Person (other
than Buyers) relating to any transaction involving the sale of the business or
assets (other than in the Ordinary Course of Business) of the Acquired
Companies, or any of the capital stock of the Acquired Companies, or any
merger, consolidation, business combination, or similar transaction involving
the Acquired Companies.
6.7 BEST EFFORTS. Between the date of this Agreement and the
Closing Date, Sellers and the Acquired Companies will use their Best Efforts to
cause the conditions in Articles IV and V to be satisfied.
6.8 SUPPLEMENTS TO DISCLOSURE LETTER. Sellers and the Acquired
Companies shall have the right, from time to time, on or prior to the Closing,
to supplement the material set forth in the Disclosure Letter initially
delivered by the Sellers and the Acquired Companies to Buyers. Any references
in this Agreement or in any other document entered into in connection with this
Agreement to the Disclosure Letter shall be mean the Disclosure Letter as fully
amended and supplemented on or prior to the Closing Date.
6.9 PAYMENT OF INDEBTEDNESS BY RELATED PERSONS. Except as
expressly provided in this Agreement or as approved by the Buyers, Sellers will
cause all indebtedness of any Seller or Related Person of a Seller to an
Acquired Company to be paid in full no later than ten (10) days after Closing.
6.10 WITHHOLDING. The Sellers agree with the Buyers that the
Buyers shall be entitled to withhold from the Purchase Price payable at the
Closing Date or any payments made as part of the Earn-Out payments, to the
party whose liability is represented by such withholding, the amount, if any,
which Buyers are required to withhold under the Tax Act, the Code or any
similar Canadian federal or provincial or United States federal or state tax
laws.
6.11 PRIOR TAXATION PERIODS. The Sellers shall jointly and
severally indemnify and hold harmless each Acquired Company and the Buyers in
respect of liability of each Acquired Company for Taxes relating to all
financing periods of the Acquired Companies commencing prior to the Effective
Date. If any of the Acquired Companies receives an assessment or reassessment
in respect of which the indemnity of the Sellers may extend, the Buyers shall
cause the Acquired Company so assessed or reassessed, as soon as practicable
after receipt thereof to deliver to the Sellers a copy of such assessment or
reassessment and the Buyers shall notify the Sellers of its claim, if any,
against the Sellers in accordance with the provisions of Article VIII hereof.
The provisions of Article VIII shall apply with regard to the right of the
Sellers to contest any assessment or reassessment relating to the Acquired
Companies prior to the Effective Date. In its return for the financial period
ending on the acquisition of control of PSA by the Buyers, the Buyers shall
elect not to have subsection 256(9) of the Tax Act (and other similar
provisions under provincial law) apply. The Buyers agree that if, at any time
after Closing, there are any assessments or reassessments of the Acquired
Companies for Taxes for financing periods prior to the Effective Date or during
any Earn-Out Year that have the effect of increasing the Initial Payment or any
Earn-Out Payment, the Buyers will immediately notify Premier Holding of such
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assessment or reassessment, set out in writing to Premier Holding the
calculation of the increase in the Initial Payment or Earn-Out Payment, and pay
such amount to Premier Holding immediately thereafter.
ARTICLE VII
COVENANTS OF THE BUYERS
7.1 CONFIDENTIALITY. The Buyers shall keep confidential all
confidential technology and any other confidential information (unless readily
available from public or published information or sources or required to be
disclosed by law) obtained from either the Sellers or any Acquired Company. If
this Agreement is terminated without completion of the transactions
contemplated herein, then, promptly after such termination, all documents,
working papers and other written material obtained by the Buyers from the
Sellers or any Acquired Company in connection with this Agreement shall be
returned by the Buyer to the Party from whom such materials were obtained.
7.2 APPROVALS OF GOVERNMENTAL BODIES. As promptly as practicable
after the date of this Agreement, Buyer will, and will cause each of its
Related Persons to, make all filings required by Legal Requirements to be made
by them to consummate the Contemplated Transactions (including all filings
under the HSR Act). Between the date of this Agreement and the Closing Date,
Buyers will, and will cause each Related Person to (a) cooperate with Sellers
with respect to all filings that Sellers are required by Legal Requirements to
make in connection with the Contemplated Transactions, and (b) cooperate with
Sellers in obtaining all consents identified in Part 3.2 of the Disclosure
Letter.
7.3 BEST EFFORTS. Between the date of this Agreement and the
Closing Date, Buyers will use their Best Efforts to cause the conditions in
Article IV and V to be satisfied.
7.4 INVESTMENT CANADA NOTIFICATION. Before or immediately after
the execution and delivery of this Agreement, the Buyers shall provide the
required notification of the acquisition of control of PSA to Investment Canada
under the Investment Canada Act in accordance with the provisions thereof and
the regulations thereunder and shall thereafter promptly respond to all
enquiries, corrections or other matters which may from time to time be required
or requested from the Buyers by Investment Canada.
ARTICLE VIII
INDEMNIFICATION
8.1 SURVIVAL. All representations, warranties, covenants, and
obligations in this Agreement, the Disclosure Letter, the supplements to the
Disclosure Letter, the certificate delivered pursuant to Section 1.4(a)(vi),
and any other certificate or document delivered pursuant to this Agreement will
survive the Closing. The right to indemnification, payment of Damages or other
remedy based on such representations, warranties, covenants, and obligations
will survive for a period of five (5) years from the Closing Date and will not
be affected by any investigation conducted with respect to, or any knowledge
acquired (or capable of being acquired) at any time, whether before or after
the execution and delivery of this Agreement or the Closing Date, with respect
to the accuracy or inaccuracy of or compliance with, any such representation,
warranty, covenant, or obligation. The waiver of any condition based on the
accuracy of any representation
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or warranty, or on the performance of or compliance with any covenant or
obligation, will not affect the right to indemnification, payment of Damages,
or other remedy based on such representations, warranties, covenants, and
obligations.
8.2 INDEMNIFICATION BY SELLERS. Sellers, jointly and severally,
will indemnify and hold harmless Buyers, the Acquired Companies, and their
respective Representatives, stockholders, controlling persons, and affiliates
(Buyers and such persons are collectively referred to as the "Buyers'
Indemnified Persons") for, and will pay to the Buyers' Indemnified Persons the
amount of, any loss, liability, claim, damage (including incidental and
consequential damages), expense (including costs of investigation and defense
and reasonable attorneys' fees) or diminution of value, whether or not
involving a third-party claim (collectively, "Damages"), arising, directly or
indirectly, from or in connection with:
(a) any Breach of any representation or warranty made by
Sellers in this Agreement, the Disclosure Letter, the supplements to the
Disclosure Letter, or any other certificate or document delivered by Sellers
pursuant to this Agreement;
(b) any Breach of any representation or warranty made by
Sellers in this Agreement as if such representation or warranty were made on
and as of the Closing Date, other than any such Breach that is disclosed in a
supplement to the Disclosure Letter and is expressly identified in the
certificate delivered pursuant to Section 1.4(a)(vi) as having caused the
condition specified in Section 4.1 not to be satisfied;
(c) any Breach by any Seller of any covenant or
obligation of such Seller in this Agreement;
(d) any claim by any Person for brokerage or finder's
fees or commissions or similar payments based upon any agreement or
understanding alleged to have been made by any such Person with either Sellers
or any Acquired Company (or any Person acting on their behalf) in connection
with any of the Contemplated Transactions;
(e) notwithstanding anything in this Section 8.2 to the
contrary, Sellers shall individually indemnify the Buyers as provided in this
Article VIII with respect to any breach of the representations and warranties
contained in Sections 2.28 through 2.32. No Seller or Shareholder shall have
any liability or obligation for the breach by any other Seller of a
representation or warranty in Sections 2.28 through 2.32.
The remedies provided in this Section 8.2 will not be exclusive of or limit any
other remedies that may be available to Buyers or the other indemnified
persons. Notwithstanding anything contained herein to the contrary, (i) each
Seller's liability hereunder shall not exceed the amount of the Purchase Price
received by such Seller, net of applicable Tax in respect thereof, and (ii)
Sellers will have no obligation to indemnify Buyers' Indemnified Persons from
and against any loss resulting from or arising out of a breach of any
representation or warranty hereunder until the Buyers' Indemnified Persons'
aggregate loss suffered by reason of all such breaches is in excess of
$25,000.00 during any Earn-Out Year, in which case the indemnity shall apply to
the aggregate loss.
8.3 INDEMNIFICATION BY BUYERS. Buyers will, jointly and
severally, indemnify and hold harmless Sellers, and will pay to Sellers the
amount of any Damages arising, directly or indirectly, from or in connection
with (a) any Breach of any representation or warranty made by
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Buyers in this Agreement or in any certificate delivered by Buyers pursuant to
this Agreement, (b) any Breach by Buyers of any covenant or obligation of
Buyers in this Agreement, or (c) any claim by any Person for brokerage or
finder's fees or commissions or similar payments based upon any agreement or
understanding alleged to have been made by such Person with Buyers (or any
Person acting on its behalf) in connection with any of the Contemplated
Transactions.
8.4 NOTICE AND DEFENSE OF THIRD PARTY CLAIMS. If any Proceeding
shall be brought or asserted under this Article against an indemnified party or
any successor thereto (the "Indemnified Person") in respect of which indemnity
may be sought under this Article from an indemnifying person or any successor
thereto (the "Indemnifying Person"), the Indemnified Person shall give prompt
written notice of such Proceeding to the Indemnifying Person who shall assume
the defense thereof, including the employment of counsel reasonably
satisfactory to the Indemnified Person and the payment of all expenses;
provided, that any delay or failure to so notify the Indemnifying Person shall
relieve the Indemnifying Person of its obligations hereunder only to the
extent, if at all, that it is prejudiced by reason of such delay or failure.
In no event shall any Indemnified Person be required to make any expenditure or
bring any cause of action to enforce the Indemnifying Person's obligations and
liability under and pursuant to the indemnifications set forth in this Article.
Premier Holding shall be responsible for and coordinate the response of all
Indemnifying Persons under this Section 8.4 and any notice given to or service
upon Premier Holding shall be deemed notice to and service upon all Sellers and
Shareholders. Each Seller and Shareholder irrevocably consents that notice to
or service of process upon Premier Holding shall constitute notice to or
service of process upon such Seller or Shareholder. In addition, actual or
threatened action by a Governmental Authority or other Person is not a
condition or prerequisite to the Indemnifying Person's obligations under this
Article. The Indemnified Person shall have the right to employ separate
counsel in any of the foregoing Proceedings and to participate in the defense
thereof, but the fees and expenses of such counsel shall be at the expense of
the Indemnified Person unless the Indemnified Person shall in good faith
determine that there exist actual or potential conflicts of interest which make
representation by the same counsel inappropriate. The Indemnified Person's
right to participate in the defense or response to any Proceeding should not be
deemed to limit or otherwise modify its rights and obligations under this
Article. In the event that the Indemnifying Person, within fifteen (15) days
after notice of any such Proceeding, fails to assume the defense thereof, the
Indemnified Person shall have the right to undertake the defense, compromise or
settlement of such Proceeding for the account of the Indemnifying Persons,
subject to the right of the Indemnifying Persons to assume the defense of such
Proceeding with counsel reasonably satisfactory to the Indemnified Person at
any time prior to the settlement, compromise or final determination thereof.
If the Indemnifying Person assumes the defense of any Proceeding, the
Indemnified Person shall, reasonably and in good faith, assist and cooperate in
the defense thereof. Anything in this Article to the contrary notwithstanding,
the Indemnifying Persons shall not, without the Indemnified Person's prior
written consent, settle or compromise any Proceeding or consent to the entry of
any judgment with respect to any Proceeding for anything other than money
damages paid by the Indemnifying Persons. The Indemnifying Persons may,
without the Indemnified Person's prior written consent, settle or compromise
any such Proceeding or consent to entry of any judgment with respect to any
such Proceeding that requires solely the payment of money damages by the
Indemnifying Persons and that includes as an unconditional term thereof the
release by the claimant or the plaintiff of the Indemnified Person from all
liability in respect of such Proceeding. As a condition to asserting any
rights under this Article, each of Buyers' Indemnified Persons hereby appoints
Franklin, and each of Sellers' Indemnified Persons and each of the Sellers and
Shareholders in their capacity of Indemnifying Person appoints Premier Holding
as its sole agent for all matters relating to any claim under this Article.
Service upon and notice to Premier
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Holding shall be deemed service upon and notice to each Seller and Shareholder
for purposes of this Article VIII.
8.5 NOTICE OF INDEMNIFICATION DEMAND. If an occurrence or event
shall occur which gives rise to an indemnification right hereunder which is not
covered by Section 8.4 hereof, the Indemnified Persons shall give notice of a
claim for indemnity to the indemnitor and shall give the Indemnifying Person
reasonable information regarding the event or circumstance giving rise to the
indemnity claim. The Indemnifying Person shall have the right to examine the
facts and circumstances and shall, within thirty (30) days of such notice (or
such shorter period as may be required by the events or circumstances
surrounding the event giving rise to the claim for indemnity), give notice to
the Indemnified Persons of how the Indemnifying Person proposes to handle or
resolve the claim for indemnity or notice that the Indemnifying Party disputes
the indemnity claim. If the Indemnified Persons and the Indemnifying Person
cannot resolve, within twenty days of Indemnifying Person's notice to the
Indemnified Persons, how the indemnity will be handled or how the event giving
rise to the claim of indemnity will be treated, then the Indemnified Persons
subject to the other provisions of this Article VIII shall have the right to
bring a suit to enforce the indemnity or otherwise to enforce all of their
rights under this Agreement.
ARTICLE IX
MISCELLANEOUS
9.1 EXPENSES. Except as otherwise expressly provided in this
Agreement, each party to this Agreement will bear its respective expenses
incurred in connection with the preparation, execution, and performance of this
Agreement and the Contemplated Transactions, including all fees and expenses of
agents, representatives, counsel, and accountants. Buyers will be responsible
for payment of their own expenses and the Sellers will be responsible for
payment of their respective expenses. No expenses of this transaction shall be
charged to or be a liability of the Acquired Companies.
9.2 AMENDMENT AND MODIFICATION. This Agreement may be amended,
modified, terminated, rescinded or supplemented only by written agreement of
the parties hereto.
9.3 WAIVER; CONSENTS. The rights and remedies of the parties to
this Agreement are cumulative and not alternative. Any failure of a party to
comply with any obligation, covenant, agreement or condition herein may be
waived by each party affected thereby only by a written instrument signed by
the party granting such waiver. No waiver, or failure to insist upon strict
compliance, by any party of any condition or any breach of any obligation,
term, covenant, representation, warranty or agreement contained in this
Agreement, in any one or more instances, shall be construed to be a waiver of,
or estoppel with respect to, any other condition or any other breach of the
same or any other obligation, term, covenant, representation, warranty or
agreement. Whenever this Agreement requires or permits consent by or on behalf
of any party hereto, such consent shall be given in writing in a manner
consistent with the requirements for a waiver.
9.4 FURTHER ASSURANCES. The parties hereto agree (i) to furnish
upon request to each other such further information, (ii) to execute and
deliver to each other such other documents, and (iii) to do such other acts and
things, all as another party hereto may at any time reasonably
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request, including before, at and after the Closing, for the purpose of
carrying out the intent of this Agreement and the documents referred to herein.
9.5 DISCLOSURE LETTER.
(a) The disclosures in the Disclosure Letter, and those
in any Supplement thereto, must relate only to the representations and
warranties in the Section of the Agreement to which they expressly relate and
not to any other representation or warranty in this Agreement.
(b) In the event of any inconsistency between the
statements in the body of this Agreement and those in the Disclosure Letter
(other than an exception expressly set forth as such in the Disclosure Letter
with respect to a specifically identified representation or warranty), the
statements in the body of this Agreement will control.
9.6 NOTICES. All notices and other communications hereunder shall
be in writing and shall be deemed to have been duly given when (i) delivered
personally, (ii) sent by telecopier (with receipt confirmed), provided that a
copy is mailed by registered or certified mail, return receipt requested within
two business days after being sent by telecopier, (iii) received by the
addressee, if sent by Express Mail, Federal Express or other express delivery
service (receipt requested), or (iv) three business days after being sent by
registered or certified mail, return receipt requested, in each case to the
other party at the following addresses and telecopier numbers (or to such other
address or telecopier number for a party as shall be specified by like notice;
provided that notices of a change of address or telecopier number shall be
effective only upon receipt thereof):
If to Premier Holding: Premier Holding Company
31212 Peardonville Road
Abbotsford, British Columbia V2T 6K8
CANADA
With a copy to: Taylor McCaffrey
9th Floor, 400 St. Mary Avenue
Winnipeg, Manitoba R3C 4K5
CANADA
Attn: Doug Steinburg
If to the Partners: At the address indicated on the
signature page
With a copy to: Premier Holding Company
31212 Peardonville Road
Abbotsford, British Columbia V2T 6K8
CANADA
Taylor McCaffrey
9th Floor, 400 St. Mary Avenue
Winnipeg, Manitoba R3C 4K5
CANADA
Attn: Doug Steinburg
If to the Acquired Companies: 2000 Kentucky Street
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Bellingham, Washington 98226
Attn: Jim Gibson
With a copy to: Taylor McCaffrey
9th Floor, 400 St. Mary Avenue
Winnipeg, Manitoba R3C 4K5
CANADA
Attn: Doug Steinburg
If to Franklin: Franklin Quest Co.
2200 West Parkway Boulevard
Salt Lake City, Utah 84119
Attn: Val John Christensen
With a copy to: Kimball, Parr, Waddoups, Brown & Gee
185 South State Street, Suite 1300
Salt Lake City, Utah 84111
Attn: Scott W. Loveless
If to Franklin Canada: Franklin Quest Co.
2200 West Parkway Boulevard
Salt Lake City, Utah 84119
Attn: Val John Christensen
With a copy to: Miller Thomson
60 Columbia Way, Suite 600
Markham, ON L3R 0C9
Canada
Attn: Wayne D. Gray
Kimball, Parr, Waddoups, Brown & Gee
185 South State Street, Suite 1300
Salt Lake City, Utah 84111
Attn: Scott W. Loveless
9.7 ASSIGNMENT. This Agreement and all of the provisions hereof
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns, but neither this Agreement nor any
of the rights, interests or obligations hereunder shall be assigned by any of
the parties hereto without the prior written consent of the other parties.
This Agreement is not intended to and shall not confer upon any person other
than the parties any rights or remedies hereunder or with respect hereto.
9.8 GOVERNING LAW. This Agreement shall be governed by the laws
of British Columbia (regardless of the laws that might otherwise govern under
applicable principles of conflicts of law) as to all matters, including but not
limited to matters of validity, construction, effect, performance and remedies.
This Agreement shall be deemed to have been executed in British Columbia, and
shall be interpreted, construed and enforced according to the laws of British
Columbia, without giving effect to any conflict of laws provisions, and each
party hereby expressly submits themselves to the exclusive, personal
jurisdiction of the courts situate in British
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Columbia, with respect to any and all claims, demands and/or causes of action
asserted or filed by any party in any way relating to, or arising out of, this
Agreement or the subject matter hereof.
9.9 JURISDICTION. Any process against Buyers, or any of the
Sellers in, or in connection with, any suit, action or proceeding arising out
of or relating to this Agreement or any of the transactions contemplated by
this Agreement may be served personally or by certified mail at the address of
such party set forth in Section 9.6 with the same effect as though served on it
or him personally.
9.10 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same agreement. ANY SIGNATURE AFFIXED TO
THIS DOCUMENT AND RECEIVED IN TELECOPY FORM SHALL BE DEEMED AN ORIGINAL
SIGNATURE.
9.11 INTERPRETATION. The article and section headings contained
in this Agreement are solely for the purpose of reference, are not part of the
agreement of the parties and shall not in any way affect the meaning or
interpretation of this Agreement. Unless otherwise provided, all references in
this Agreement to articles and sections refer to the corresponding articles and
sections of this Agreement. All words used herein shall be construed to be of
such gender or number as the circumstances require. Unless otherwise
specifically noted, the words "herein," "hereof," "hereby," "hereinabove,"
"hereinbelow," "hereunder," and words of similar import, refer to this
Agreement as a whole and not to any particular article, section, subsection,
paragraph, clause or other subdivision hereof. Whenever the term "including"
or a similar term is used in this Agreement, it shall be read as if it were
written "including by way of example only and without in any way limiting the
generality of the clause or concept to which reference is made."
9.12 ENTIRE AGREEMENT. This Agreement, including the Exhibits and
the documents, instruments and schedules referred to herein and in the
Transaction Agreements, embodies the entire agreement and understanding of the
parties hereto in respect of the subject matter contained herein. There are no
restrictions, promises, representations, warranties, covenants, or undertakings
other than those expressly set forth or referred to herein and in the
Transaction Agreements. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
9.13 ATTORNEYS' FEES. In the event any party hereto institutes a
Proceeding against any other party hereto for a claim arising out of or to
enforce this Agreement, the losing party shall pay the reasonable attorneys'
fees and court costs incurred by the prevailing party in connection with such
Proceeding.
9.14 TIME OF ESSENCE. With regard to all time periods set forth or
referred to in this Agreement, time is of the essence.
9.15 CONSTRUCTION. The parties have jointly participated in the
negotiation and drafting of this Agreement. In the event of an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties and no presumptions or burdens of proof
shall arise favoring any party by virtue of the authorship of any of the
provisions of this Agreement.
9.16 SEVERABILITY. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of
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the remaining terms and provisions hereof or the validity or enforceability of
the offending term or provision in any other situation or in any other
jurisdiction. If the final judgment of the court of competent jurisdiction
declares that a term or provision hereof is invalid or unenforceable, the
parties agree that the court making the determination of invalidity or
unenforceability shall have the power to reduce the scope, duration or area of
the term or provision, to delete specific words or phrases, or to replace any
invalid or unenforceable term or provision with a term or provision that is
valid and enforceable that comes closest to expressing the intention of the
invalid or unenforceable term or provision, and this Agreement shall be
enforceable as so modified after the expiration of the time within which the
judgment may be appealed.
9.17 NO THIRD-PARTY BENEFICIARIES. This Agreement shall not confer
any rights or remedies upon any persons other than the parties and their
respective successors or permitted assigns.
9.18 INCORPORATION OF EXHIBITS AND SCHEDULES. The exhibit and
Disclosure Schedules identified in this Agreement are incorporated herein by
reference and are a part hereof.
9.19 APPOINTMENT OF PREMIER HOLDING AS AGENT OF SELLERS. Each
Seller, by his/her/its execution of this Agreement, irrevocably appoints
Premier Holding as such Seller's agent and attorney in fact with full power to
act for such Seller with respect to all matters concerning this Agreement,
including but not limited to, receipt of the Initial Payment and Earn-Out
Payments pursuant to Article I on behalf of Sellers, receipt of service of
process, amendments to the Agreement, settlement of indemnification issues,
resolution of disputes with Buyers and any other matter involving this
Agreement. The decision and agreement of Premier Holding shall be binding upon
all Sellers.
ARTICLE X
DEFINITIONS
For the purposes of this Agreement, the following terms shall have the
meanings specified or referred to below whether or not capitalized when used in
this Agreement. Any reference or citation to a law, statute or regulation
shall be deemed to include any amendments to that law, statute or regulation
and judicial and administrative interpretations of it.
"ACQUIRED COMPANIES"--Premier Agendas, PSA, Premier Graphics and each
of their respective Subsidiaries, collectively.
"ACQUIRED COMPANIES' ACCOUNTANTS"--Larson Gross PLLC for Premier
Agendas; Katherine Slaa-DeVos for PSA.
"AFFILIATE"--with respect to a specified Person, (a) any entity of
which such Person is an executive officer, director, partner, trustee or other
fiduciary or is directly or indirectly the beneficial owner of 10% or more of
any class of equity security thereof or other financial or voting interest
therein; (b) any director, executive officer, partner, trustee or other
fiduciary or any direct or indirect beneficial owner of 10% or more of any
class of equity security of, or other financial or voting interest in, such
entity; or (c) any Person that directly, or indirectly through one or more
intermediaries, controls, is controlled by, or is under common control with the
Person specified. For purposes of this definition, "executive officer" means
the president, any vice president in charge of a principal business unit,
division or function such
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as sales, administration, research and development, or finance, and any other
officer, employee or other Person who performs a policy making function or has
the same duties as those of a president or vice president. For purposes of
this definition, "control" (including "controlling," "controlled by" and "under
common control with") means the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract or otherwise.
When used without reference to a particular Person, "Affiliate" means an
Affiliate of any of the Sellers. Without limiting the foregoing, for the
purpose of this Agreement, each of Sellers shall be deemed to be Affiliates of
each other.
"ALLOCATION SCHEDULE"--Schedule 1.2(a) describing the allocation of
the Purchase Price among Sellers.
"APPLICABLE CONTRACT"--any Contract (a) under which any Acquired
Company has any rights, (b) under which any Acquired Company has any obligation
or liability, or (c) by which any Acquired Company or any of the assets owned,
leased or used by any Acquired Company is bound.
"ANNUAL BUDGET"--as defined in Section 1.8(d).
"BALANCE SHEET"--as defined in Section 2.4.
"BEST EFFORTS"--the efforts that a prudent Person desirous of
achieving a result would use in similar circumstances to maximize to the extent
reasonably practicable the prospects that a result will occur.
"BREACH"--a "Breach" of a representation, warranty, covenant,
obligation, or other provision of this Agreement or any instrument delivered
pursuant to this Agreement will be deemed to have occurred if there is or has
been (a) any inaccuracy in or breach of, or any failure to perform or comply
with, such representation, warranty, covenant, obligation, or other provision,
or (b) any claim (by any Person) or other occurrence or circumstance that is or
was inconsistent with such representation, warranty, covenant, obligation, or
other provision and causes damage to such person, and the term "Breach" means
any such inaccuracy, breach, failure, claim, occurrence, or circumstance.
"BUYER'S AUDITORS"--Arthur Andersen LLP, or such other independent
public accounts as may be engaged by the Buyers from time to time.
"CLOSING"--as defined in Section 1.3.
"CLOSING DATE"--the date and time as of which the Closing actually
takes place.
"COMBINED NET ASSETS"--total assets minus total liabilities as
determined on a combined basis, excluding all material intercompany balances,
for the Acquired Companies in accordance with US GAAP.
"COMBINED NET INCOME" AND "COMBINED NET LOSS"--the combined net
income (loss), excluding all material intercompany transactions, for the
Acquired Companies computed in accordance with US GAAP for the relevant period
plus (i) the sum of any extraordinary loss and minus (ii) the sum of any
extraordinary gain.
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"CODE"--the Internal Revenue Code of 1986, as amended, or any
successor law, and regulations issued by the IRS pursuant to the Internal
Revenue Code or any successor law.
"CONSENT"--any approval, consent, ratification, waiver, or other
authorization (including any Governmental Authorization).
"CONTEMPLATED TRANSACTIONS"--all of the transactions contemplated by
this Agreement, including:
(a) the sale of the Shares by Premier Holding to Buyers,
and the sale of the Partnership Interests by the Partners to Franklin;
(b) the execution, delivery, and performance of the
Employment Agreements, the Noncompetition Agreements, the Sellers' Releases,
and the Escrow Agreement;
(c) the performance by Buyers and Sellers of their
respective covenants and obligations under this Agreement; and
(d) Buyer's acquisition and ownership of the Shares and
Partnership Interests and exercise of control over any Acquired Companies.
"CONTRACT"--any agreement, contract, obligation, promise, or
undertaking (whether written or oral and whether express or implied) that is
legally binding.
"DAMAGES"--as defined in Section 8.2..
"DISCLOSURE LETTER"--the disclosure letter delivered by the Sellers
and the Acquired Companies to Buyers prior to the Closing, as the same may be
supplemented from time to time, containing the information required by Article
II.
"EARN-OUT PAYMENT"--as defined in Section 1.7(a).
"EARN-OUT YEAR"--as defined in Section 1.7(a).
"EFFECTIVE DATE"--March 1, 1997.
"EMPLOYEE BENEFIT PLAN"--with respect to Premier Agendas and Premier
Graphics any employee benefit plan within the meaning of Section 3.(3) of ERISA
or, with respect to PSA, any employee benefit program, scheme or plan
contributed to or funded by premiums paid by PSA or PSA employees, maintained
or contributed to by an employee or an Acquired Company or any ERISA Affiliate,
other than a Multiemployer Plan.
"EMPLOYMENT AGREEMENTS"--as defined in Section 1.4(a)(iv).
"ENCUMBRANCE"--any charge, claim, community property interest,
condition, equitable interest, lien, pledge, security interest, right of first
refusal, option or restriction of any kind, including any restriction on use,
voting (in the case of any security), transfer, receipt of income, or exercise
of any other attribute of ownership.
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"ENVIRONMENT"--soil, land surface or subsurface strata, surface waters
(including navigable waters and ocean waters), groundwaters, drinking water
supply, stream sediments, ambient air (including indoor air), plant and animal
life, and any other natural resource.
"ENVIRONMENTAL, HEALTH, AND SAFETY LIABILITIES"--any cost, damages,
expense, liability, obligation, or other responsibility arising from or under
the Breach of any Environmental Law, Occupational Safety and Health Law, or any
Order, and relating to:
(a) any environmental, health, or safety matters or
conditions (including on-site or off-site contamination, occupational safety
and health, and regulation of chemical substances or products);
(b) fines, penalties, judgments, awards, settlements,
legal or administrative proceedings, damages, losses, claims, demands and
response, remedial, or inspection costs and expenses arising under
Environmental Law or Occupational Safety and Health Law;
(c) financial responsibility under Environmental Law or
Occupational Safety and Health Law for cleanup costs or corrective action,
including any cleanup, removal, containment, or other remediation or response
actions ("Cleanup") required by applicable Environmental Law or Occupational
Safety and Health Law (whether or not such Cleanup has been required or
requested by any Governmental Body or any other Person) and for any natural
resource damages; or
(d) any other compliance, corrective, or remedial
measures required under Environmental Law or Occupational Safety and Health
Law.
Where United States jurisdiction is applicable, the terms "removal,"
"remedial," and "response action" will include the types of activities covered
by the United States Comprehensive Environmental Response, Compensation, and
Liability Act, 42 U.S.C. Section 9601 et seq., as amended ("CERCLA").
"ENVIRONMENTAL LAW"--any Legal Requirement designed:
(a) to advise appropriate authorities, employees, and the
public of intended or actual releases of pollutants or hazardous substances or
materials, violations or discharge limits, or other prohibitions and of the
commencements of activities, such as resource extraction or construction, that
could have significant impact on the Environment;
(b) to prevent or acceptably minimize the release of
pollutants or hazardous substances or materials into the Environment;
(c) to reduce the quantities, prevent the release, and
minimize the hazardous characteristics of wastes that are generated;
(d) to assure that products are designed, formulated,
packaged, or used so that they do not present unreasonable risks to human
health or the Environment when used or disposed of;
(e) to protect resources or species;
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(f) to acceptably minimize the risks inherent in
transportation of hazardous substances, pollutants, oil, or other potentially
harmful substances;
(g) to clean up pollutants that have been released,
prevent the threat of release, or pay the costs of such clean up or prevention;
or
(h) to make responsible parties pay private parties, or
groups of them, for damages done to their health or the Environment, or to
permit self-appointed representatives of the public interest to recover for
injuries done to public assets or the Environment.
"ERISA"--the Employee Retirement Income Security Act of 1974, any
successor statue and the rules and regulations thereunder, collectively, as
from time to time amended and in effect.
"ERISA AFFILIATE"--any Person which is treated as a single employer
with Premier Agendas or Premier Graphics under Section 414 of the Code.
"EXISTING MANAGEMENT"--the existing management of the Acquired
Companies consisting of the following individuals:
(i) For PSA:
Name Title
Hendrik A. Berends President
Harry Stel General Manager
(ii) For Premier Agendas:
Name Title
Hendrik A. Berends President
David L. Loeppky General Manager
James S. Gibson Chief Financial Officer
Barrett J. Berends National Sales Manager
(iii) For Premier Graphics:
Name Title
Hendrik A. Berends President
James S. Gibson Chief Financial Officer
"FACILITIES"--any real property or leaseholds currently owned or
operated by the Acquired Companies and any buildings, plants, structures, or
equipment currently owned, leased, or operated by any Acquired Company.
"FAMILY"--as defined in the definition of "Related Person."
"GAAP"--with respect to the financial accounting matters of PSA,
generally accepted accounting principles in Canada, consistently applied, and
with respect to all other Acquired Companies, generally accepted accounting
principals in the United States, consistently applied. GAAP means those
accounting principles and practices (a) which are recognized as such by the
Financial Accounting Standards Board with respect to US GAAP or the Canadian
Institute of
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Chartered Accountants with respect to Canadian GAAP, (b) which are applied for
all periods in a manner consistent with the manner in which such principles and
practices were applied to the most recent audited or reviewed financial
statements of the Acquired Company in question furnished to Buyer, and (c)
which are consistently applied for all periods so as to reflect properly the
financial condition, and results of operations and cash flows, of the Sellers.
"GOVERNMENTAL AUTHORIZATION"--any approval, consent, license, permit,
waiver, or other authorization issued, granted, given, or otherwise made
available by or under the authority of any Governmental Body or pursuant to any
Legal Requirement.
"GOVERNMENTAL BODY"--any:
(a) nation, state, province, county, city, town, village,
district, or other governmental jurisdiction of any nature;
(b) federal, state, provincial, local, municipal,
foreign, or other government;
(c) governmental or quasi-governmental authority of any
nature (including any governmental agency, branch, department, official, or
entity and any court or other tribunal);
(d) multi-national organization or body; or
(e) body exercising, or entitled to exercise, any
administrative, executive, judicial, legislative, police, regulatory, or taxing
authority or power of any nature, whether in the United States, Canada or any
other jurisdiction.
"GUARANTEED PENSION PLAN"--any employee pension plan within the
meaning of Section 3(2) of ERISA, maintained or contributed to by an Acquired
Company or any ERISA Affiliate the benefits of which are guaranteed on
termination in full or in part by the Pension Benefit Guaranty Corporation
pursuant to Title IV of ERISA, other than a "Multiemployer Plan."
"HAZARDOUS ACT"--the distribution, generation, handling, importing,
management, manufacturing, processing, production, refinement, Release,
storage, transfer, transportation, treatment, or use (including any withdrawal
or other use of groundwater) of Hazardous Materials in, on, under, about, or
from the Facilities or any part thereof into the Environment, and any other
act, business, operation, or thing that increases the danger, or risk of
danger, or poses an unreasonable risk of harm to persons or property on or off
the Facilities, or that may affect the value of the Facilities or the Acquired
Companies.
"HAZARDOUS MATERIALS"--any substance that is now listed, defined,
designated, or classified as, or otherwise determined to be, hazardous,
radioactive, or toxic or a pollutant or a contaminant under or pursuant to any
Environmental Law, including any admixture or solution thereof, and
specifically including petroleum and all derivatives thereof or synthetic
substitutes therefor and asbestos or asbestos containing materials.
"HSR ACT"--the Hart-Scott-Rodino Antitrust Improvements Act of 1976 or
any successor law, and regulations and rules issued pursuant to that Act or any
successor law.
"IRS"--the United States Internal Revenue Service or any successor
agency, and, to the extent relevant, the United States Department of the
Treasury.
49
<PAGE> 56
"KNOWLEDGE"--an individual will be deemed to have "Knowledge" of a
particular fact or other matter if:
(a) such individual is actually aware of such fact or
other matter; or
(b) a prudent individual could be expected to discover or
otherwise become aware of such fact in carrying out such individual's duties
for any Acquired Company.
"KNOWLEDGE OF THE ACQUIRED COMPANIES"--shall mean Knowledge of the
following individuals about the affairs of the Company: Hendrik A. Berends,
David L. Loeppky, Harry Stel, Barrett J. Berends, and James S. Gibson.
"LEGAL REQUIREMENT"--any federal, state, provincial, local, municipal,
foreign, international, multinational, or other constitution, law, ordinance,
principle of common law, regulation, statute, or treaty.
"MATERIAL INTEREST"--as defined in the definition of "Related Person."
"MINIMUM PERFORMANCE STANDARD"--the Pre-Tax Net Income amounts set
forth in Section 1.7(a) which must be achieved before an Earn-Out Payment will
be paid for an Earn-Out Year.
"MULTIEMPLOYER PLAN"--a "multiemployer plan" within the meaning of
Section 3(37) of ERISA.
"OCCUPATIONAL SAFETY AND HEALTH LAW"--any Legal Requirement designed
to provide safe and healthful working conditions and to reduce occupational
safety and health hazards.
"ORDER"--any award, decision, injunction, judgment, order, directive,
ruling, subpoena, or verdict entered, issued, made, or rendered by any court,
administrative agency, or other Governmental Body or by any arbitrator.
"ORDINARY COURSE OF BUSINESS"--an action taken by a Person will be
deemed to have been taken in the "Ordinary Course of Business" only if such
action is consistent with the past practices of such Person and is taken in the
ordinary course of the normal day-to-day operations of such Person and is not
excessive in amount or time with similar past actions.
"ORGANIZATIONAL DOCUMENTS"--(a) the articles of incorporation,
memorandum and articles and the bylaws of a corporation; (b) the partnership
agreement and any statement of partnership of a general partnership; (c) the
limited partnership agreement and the certificate of limited partnership of a
limited partnership; (d) any charter or similar document adopted or filed in
connection with the creation, formation, or organization of a Person; and (e)
any amendment to any of the foregoing.
"PARTNERSHIP INTERESTS"--as defined in the Recitals to this Agreement.
"PERSON"--any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, or other entity or
Governmental Body.
50
<PAGE> 57
"PLAN"--as defined in Section 3.14.
"PREMIER AGENDAS SHARES"--as defined in the Recitals to this
Agreement.
"PRE-TAX NET INCOME"--the Combined Net Income for the Acquired
Companies for the relevant period (provided, however, that depreciation expense
will be determined by adjusting the depreciable basis of any assets owned by
the Acquired Companies as of the Effective Date to pre-acquisition levels),
excluding the following:
(a) gross interest expense and gross interest income for
such period;
(b) income tax expense, gross receipts tax, capital tax
or tax based on equity for such period;
(c) amortization expense of general intangibles resulting
from the purchase of the Acquired Companies for such period;
(d) any abnormal costs for such period, such as special
audit or legal fees incurred by virtue of the Acquired Companies having been
affiliated with Franklin or Franklin's status as a publicly-held company;
(e) expenses for travel requested by Buyers and expenses
or amortization relating to equipment purchased or systems installed at the
request of Buyers
As far as is reasonably possible, the amount calculated in accordance with this
definition is determined as if the Acquired Companies were not affiliated with
Franklin, and excludes any gain or loss resulting from any sale, exchange or
other disposition of assets of the Acquired Companies other than in the
ordinary course of business. All of the amounts for items (a) through (e)
shall be determined in accordance with US GAAP. During the Earn-Out Years, no
intercompany transaction between Franklin and its affiliates (other than the
Acquired Companies) and the Acquired Companies shall act as to reduce Pre-Tax
Net Income of the Acquired Companies unless the transaction has the written
consent, with respect to the reduction of Pre-Tax Net Income, of Existing
Management or their successors.
"PROCEEDING"--any action, arbitration, audit, hearing, investigation,
litigation, or suit (whether civil, criminal, administrative, investigative, or
informal) commenced, brought, conducted, or heard by or before, or otherwise
involving, any Governmental Body or arbitrator.
"PSA SHARES"--as defined in the Recitals to this Agreement.
"PURCHASE PRICE"--as defined in Section 1.2.
"RELATED PERSON"--with respect to a particular individual:
(a) each other member of such individual's Family;
(b) any Person that is directly or indirectly controlled
by any one or more members of such individual's Family;
51
<PAGE> 58
(c) any Person in which members of such individual's
Family hold (individually or in the aggregate) a Material Interest; and
(d) any Person with respect to which one or more members
of such Individual's Family serves as a director, officer, partner, executor,
or trustee (or in a similar capacity).
With respect to a specified Person other than an individual:
(a) any Person that directly or indirectly controls, is
directly or indirectly controlled by, or is directly or indirectly under common
control with such specified Person;
(b) any Person that holds a Material Interest in such
specified Person;
(c) each Person that serves as a director, officer,
partner, executor, or trustee of such specified Person (or in a similar
capacity);
(d) any Person in which such specified Person holds a
Material Interest; and
(e) any Person with respect to which such specified
Person serves as a general partner or a trustee (or in a similar capacity).
For purposes of this definition, (a) the "Family" of an individual includes (i)
the individual, (ii) the individual's spouse, (iii) any other natural person
who is related to the individual or the individual's spouse within the first
degree, and (iv) any other natural person who resides with such individual, and
(b) "Material Interest" means direct or indirect beneficial ownership (as
defined in Rule 13d-3 under the Securities Exchange Act of 1934) of voting
securities or other voting interests representing at least ten percent (10%) of
the outstanding voting power of a Person or equity securities or other equity
interests representing at least ten percent (10%) of the outstanding equity
securities or equity interests in a Person.
"RELEASE"--any spilling, leaking, emitting, discharging, depositing,
escaping, leaching, dumping, or other releasing into the Environment.
"REPRESENTATIVE"--with respect to a particular Person, any director,
officer, employee, agent, consultant, advisor, or other representative of such
Person, including legal counsel, accountants, and financial advisors.
"SECURITIES ACT"--the Securities Act of 1933 or any successor law, and
regulations and rules issued pursuant to that Act or any successor law.
"SELLERS"--as defined in the first paragraph of this Agreement.
"SHARES"--as defined in the Recitals of this Agreement.
"SUBSIDIARIES"--with respect to any Person (the "Owner"), any
corporations or other Persons of which securities or other interests having the
power to elect a majority of that corporation's or other Person's board of
directors or similar governing body, or otherwise having the power to direct
the business and policies of that corporation or other Person (other than
securities or other interests having such power only upon the happening of a
contingency that has
52
<PAGE> 59
not occurred) are held by the Owner or one or more of its Subsidiaries; when
used without reference to a particular Person, "Subsidiary" means a Subsidiary
of an Acquired Company.
"TAX"--any tax (including any income tax, capital gains tax,
value-added tax, sales tax, property tax, gift tax, or estate tax, federal
goods and services tax and social services tax and other federal, provincial or
state taxes), levy, assessment, tariff, duty (including any customs duty),
deficiency, or other fee, and any related charge or amount (including any fine,
penalty, interest, or addition to tax), imposed, assessed, or collected by or
under the authority of any Governmental Body.
"TAX ACT"--the Income Tax Act (Canada), as amended from time to time.
"TERMINATION DATE"--as defined in Section 1.3.
"TRANSACTION DATE"--the date on which an event occurs giving rise to
an obligation to pay money or the right to receive money in consideration for
services rendered or property exchanged or in accordance with the terms of this
Agreement.
"US GAAP"--generally accepted United States accounting principles,
applied on a basis consistent with the basis on which the Balance Sheet and the
other financial statements referred to in Section 2.4 were prepared.
"WARRANTING SHAREHOLDERS"--Hendrik A. Berends, David L. Loeppky, Harry
Stel, Barrett J. Berends, Gerrit Kuik, and Wilhelm Gortemaker.
[Remainder of Page Intentionally Blank]
53
<PAGE> 60
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed on its behalf effective as of the date first above
written.
"BUYERS" "ACQUIRED COMPANIES"
FRANKLIN QUEST CO. PREMIER AGENDAS, INC.
By: By:
------------------------------- ---------------------------------
Val John Christensen Hendrik A. Berends
Executive Vice President President
PREMIER SCHOOL AGENDAS LTD.
FRANKLIN QUEST CANADA, LTD.
By:
---------------------------------
By: Hendrik A. Berends
------------------------------- President
Val John Christensen
Vice President PREMIER GRAPHICS L.P.
By:
---------------------------------
Hendrik A. Berends, President
of Premier Agendas, Inc., its
General Partner
"SELLERS"
PREMIER HOLDING COMPANY
By:
---------------------------------
Hendrik A. Berends
President
54
<PAGE> 61
"PARTNERS"
- ------------------------------------- ---------------------------------
Stephanie Bareman Grietje Gortemaker
Address: 1275 Thalen Drive Address: Box 35, Group 606, SS6
Lynden, WA 98264 Winnipeg, MB R2C 2Z3
- ------------------------------------- ---------------------------------
Barrett J. Berends Wilhelm Gortemaker
Address: 936 North Pine Court Address: Box 35, Group 606, SS6
Lynden, WA 98264 Winnipeg, MB R2C 2Z3
- ------------------------------------- ---------------------------------
Hendrik A. Berends Evertje Kingma
Address: 29415 Simpson Road Address: 3705 Lindsay Road
Matsqui, BC V4X 1H9 Everson, WA 98247
- ------------------------------------- ---------------------------------
Joanne Berends Theodore Kingma
Address: 29415 Simpson Road Address: 3705 Lindsay Road
Matsqui, BC V4X 1H9 Everson, WA 98247
- ------------------------------------- ---------------------------------
Patricia E. Berends Henry Klos
Address: 1209 Guyatt Road East, RR Address: 596 Bertrand Drive
Binbrook, ON L0R 1C0 Lynden, WA 98264
- ------------------------------------- ---------------------------------
Janice Berends Corrie Klos
Address: 29415 Simpson Road Address: 596 Bertrand Drive
Matsqui, BC V4X 1H9 Lynden, WA 98264
- ------------------------------------- ---------------------------------
Heather Berends Ben Kuik
Address: Address: Box 9, Group 14, RR1
----------------------------- Dugald, MB R2C 3C2
- -------------------------------------
- ------------------------------------- ---------------------------------
Katherine Berends Carolyn Kuik
Address: Address: 854 Plessis Road
----------------------------- Winnipeg, MB R2C 3C2
- -------------------------------------
- ------------------------------------- Dugald, MB R0E 0K0
Kathleen Kuik ----------------------------------
Address: Box 9, Group 14, RR1 Jake Kuik
55
<PAGE> 62
Address: 854 Plessis Road
Winnipeg, MB R2C 3C2 ----------------------------------
Verna Mumford
Address: 7334 Everson-Goshen Road
Everson, WA 98247
- -------------------------------------
David L. Loeppky ----------------------------------
Address: 711 Briar Road Henrietta Raap
Bellingham, WA 98225 Address: 281 Symington Rd.
Box 36, Grp 607, SS6
Winnipeg, MB R2C 4W6
- -------------------------------------
George Loeppky
Address: 749 Townsend Avenue
Winnipeg, MB R3T 2V5 ----------------------------------
Franciska Stel
Address: 20434-46A Avenue
- ------------------------------------- Langley, BC V3A 3J8
Lindsay R. Loeppky
Address: 698 St. Anne's Road
Winnipeg, MB R2M 3M6
----------------------------------
Harry Stel
- ------------------------------------- Address: 20434-46A Avenue
Muriel O.J. Loeppky Langley, BC V3A 3J8
Address: 749 Townsend Avenue
Winnipeg, MB R3T 2V5
----------------------------------
Mary Lee Taylor
- ------------------------------------- Address: 597 West 62nd Avenue
Patricia J. Loeppky Vancouver, BC V6P 2C8
Address: 30 Via Lucca, #E120
Irvine, CA 92715
----------------------------------
Lawrence Toet
Address: 4573 Mountainview Rd. N,
- ------------------------------------- RR3
Sharon M. Loeppky Beamsville, ON L0R 1B3
Address: 711 Briar Road
Bellingham, WA 98225
----------------------------------
Marilyn Toet
Address: 4573 Mountainview Rd. N,
- ------------------------------------- RR3
Phil Minderhoud Beamsville, ON L0R 1B3
Address: 3602 Hurst Crescent
Abbotsford, BC V2S 6G8
----------------------------------
Audrey Toet
Address: 58 Rizzuto Bay
Winnipeg, MB R2C 4N7
----------------------------------
John Toet
Address: 58 Rizzuto Bay
Winnipeg, MB R2C 4N7
56
<PAGE> 63
- ------------------------------------
Davida Tuininga
Address: Box 59
Neerlandia, AB T0J 1R0
- ------------------------------------
Anita Vanderveen
Address: Box 1542
Carman, MB R0G 0J0
- ------------------------------------
G. Bernice Vreugdenhil
Address: 4938 Hillview Road
Sumas, WA 98295
"SHAREHOLDERS"
Pueri Investments Inc. Premier Investment Group, Inc.
By By
---------------------------------- --------------------------------
Its David L. Loeppky
--------------------------------- President
Crystal Acquisition Inc.
----------------------------------
By Hendrik A. Berends
---------------------------------- Address: 29415 Simpson Road
Its Matsqui, BC V4X 1H9
---------------------------------
H.T.B. & Associates Ltd.
----------------------------------
Joanne Berends
By Address: 29415 Simpson Road
---------------------------------- Matsqui, BC V4X 1H9
Its
---------------------------------
HABCO Enterprises Ltd.
----------------------------------
Grietje Gortemaker
Address: Box 35, Group 606, SS6
By Winnipeg, MB R2C 2Z3
----------------------------------
Its
---------------------------------
- ------------------------------------ Winnipeg, MB R2C 2Z3
Wilhelm Gortemaker
Address: Box 35, Group 606, SS6 ----------------------------------
57
<PAGE> 64
Ben Kuik
Address: Box 9, Group 14, RR1 --------------------------------
Dugald, MB R2C 3C2 Henrietta Raap
Address: 281 Symington Rd. Box
36, Grp 607, SS6
- -------------------------------------- Winnipeg, MB R2C 4W6
Carolyn Kuik
Address: 854 Plessis Road
Winnipeg, MB R2C 3C2 --------------------------------
Franciska Stel
Address: 20434-46A Avenue
- -------------------------------------- Langley, BC V3A 3J8
Kathleen Kuik
Address: Box 9, Group 14, RR1
Dugald, MB R0E 0K0 --------------------------------
Harry Stel
Address: 20434-46A Avenue
- -------------------------------------- Langley, BC V3A 3J8
Jake Kuik
Address: 854 Plessis Road
Winnipeg, MB R2C 3C2 --------------------------------
Mary Lee Taylor
Address: 597 West 62nd Avenue
Vancouver, BC V6P 2C8
- --------------------------------------
George Loeppky
Address: 749 Townsend Avenue --------------------------------
Winnipeg, MB R3T 2V5 Lawrence Toet
Address: 4573 Mountainview Rd.
N, RR3
- -------------------------------------- Beamsville, ON L0R 1B3
Lindsay R. Loeppky
Address: 698 St. Anne's Road --------------------------------
Winnipeg, MB R2M 3M6 Marilyn Toet
Address: 4573 Mountainview Rd.
N, RR3
- -------------------------------------- Beamsville, ON L0R 1B3
Muriel O.J. Loeppky
Address: 749 Townsend Avenue
Winnipeg, MB R3T 2V5 --------------------------------
Audrey Toet
Address: 58 Rizzuto Bay
- -------------------------------------- Winnipeg, MB R2C 4N7
Phil Minderhoud
Address: 3602 Hurst Crescent
Abbotsford, BC V2S 6G8
--------------------------------
John Toet
Address: 58 Rizzuto Bay
Winnipeg, MB R2C 4N7
---------------------------------
Davida Tuininga
Address: Box 59
Neerlandia, AB T0J 1R0
58
<PAGE> 65
- -----------------------------------------
Anita Vanderveen
Address: Box 1542
Carman, MB R0G 0J0
59
<PAGE> 1
AMENDMENT TO LOAN AGREEMENT
This Amendment to Loan Agreement (the "Amendment") is made and entered
into between Zions First National Bank ("Zions"), The First National Bank of
Chicago ("FNBC") (assignee of NBD Bank) (Zions and FNBC are hereinafter
referred to collectively as "Lenders"), Zions First National Bank, not in its
individual capacity but solely as agent pursuant to an Intercreditor Agreement
dated October 16, 1996 between Zions, NBD Bank and Agent (herein, in such
capacity, "Agent"), and Franklin Quest Co., a Utah corporation ("Borrower").
Recitals
1. Zions, NBD Bank, Agent and Borrower have entered into a Loan
Agreement dated October 16, 1996 (the "Loan Agreement").
2. Pursuant to an Assignment Agreement dated as of February 3,
1997, NBD Bank sold and assigned its rights and obligations under the Loan
Agreement and related documents, and instruments to FNBC.
3. Zions, FNBC, Agent and Borrower desire to modify and amend the
Loan Agreement to increase the amount of the loan to $90,000,000 and to modify
the Loan Agreement as provided herein.
Amendment
For good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, Zions, FNBC, Agent and Borrower hereby agree and
amend and modify the Loan Agreement as follows:
1. Definitions. Except as otherwise expressly provided herein,
terms assigned defined meanings in the Loan Agreement shall have the same
defined meanings in this Amendment.
2. FNBC as Assignee of NBD Bank. All references in the Loan
Agreement to NBD Bank are amended to refer to FNBC. It is acknowledged and
agreed that FNBC has succeeded to all rights, benefits, duties, and obligations
of NBD Bank under the Loan Agreement, Promissory Notes, and Intercreditor
Agreement.
3. Promissory Notes. Exhibits A and B to the Loan Agreement are
deleted and replaced with Exhibits A and B to this Amendment. All references
in the Loan Agreement to Exhibits A and B thereto shall refer to Exhibits A and
B to this Amendment. All references in the Loan Agreement to the Promissory
Notes shall refer to the Amended Promissory Notes attached as Exhibits A and B
to this Amendment.
<PAGE> 2
4. Amount of Loan. Section 2.1 Amount of Loan of the Loan
Agreement is deleted and replaced with the following:
Section 2.1. Amount of Loan
Upon fulfillment of all conditions precedent set forth in this
Loan Agreement, and so long as no Event of Default exists, and no
other breach has occurred under this Loan Agreement, Lenders, through
Agent, agree to loan Borrower ninety million dollars ($90,000,000.00).
5. Financial Covenants. Section 5.7 Financial Covenants of the
Loan Agreement is amended as follows:
a. The first paragraph of Subsection a Consolidated Tangible Net
Worth, is deleted and replaced with the following:
Borrower will maintain a consolidated tangible net worth of not less
than eighty million dollars ($80,000,000.00) at all times through
Borrower's fiscal year ending August 31, 1997, and thereafter not
less than such amount plus an annual increase of five million dollars
($5,000,000.00) for each subsequent fiscal year.
b. By adding the following new subsection c:
c. Total Liabilities to Tangible Net Worth. Borrower will
maintain a ratio of total liabilities to tangible net worth of not
greater than one and twenty-five hundredths to one (1.25:1) on a
fiscal quarter basis until Borrower's fiscal year ending August 31,
1998, and a ratio of not greater than one and one-tenth to one (1.1:1)
as of the fiscal quarter ending August 31, 1998 and thereafter. Total
liabilities are to be determined in accordance with generally accepted
accounting principles consistent with those applied in the preparation
of the financial statements previously submitted by Borrower to
Lenders. Tangible net, worth means the excess of total assets over
total liabilities, total assets and total liabilities each to be
determined in accordance with generally accepted accounting principles
consistent with those applied in the preparation of the financial
statements previously submitted by Borrower to Lenders excluding,
however, from the determination of total assets all assets which would
be classified as intangible assets under generally accepted accounting
principles, including, without limitation, goodwill, licenses,
patents, trademarks, trade names, copyrights, and franchises.
6. Notices. Section 8.15 Notices is amended by deleting the
notice address for NBD Bank and replacing it with:
2
<PAGE> 3
The First National Bank of Chicago
West Coast Regional Office
777 South Figueroa Street Suite 4001
Los Angeles, CA 90071
Attention: James P. Moore
7. Waiver and Release of Claims. Borrower (i) represents that it
has no defenses to or setoffs against any indebtedness or other obligations
owing to Lenders or their affiliates (the "Obligations"), nor claims against
Lenders or their affiliates for any matter whatsoever, related or unrelated to
the Obligations, and (ii) releases Lenders and their affiliates from all
claims, causes of action, and costs, in law or equity, existing as of the date
of this Amendment to Loan Agreement, which Borrower has or may have by reason
of any matter of any conceivable kind or character whatsoever, related or
unrelated to the Obligations, including the subject matter of the Loan
Agreement. This provision shall not apply to claims for performance or express
contractual obligations owing to Borrower by Lenders or their affiliates.
8. Representations and Warranties. Borrower hereby affirms and
again makes the representations and warranties set forth in Article 4
Representations and Warranties of the Loan Agreement as of the date of this
Amendment.
9. Authorization. Borrower represents and warrants that the
execution, delivery, and performance by Borrower of this Amendment, the Amended
Promissory Notes, and all agreements, documents, obligations, and transactions
herein contemplated have been duly authorized by all necessary corporate action
on the part of Borrower and are not inconsistent with Borrower's Articles of
Incorporation, By-Laws or any resolution of the Board of Directors of Borrower,
do not and will not contravene any provision of, or constitute a default under,
any indenture, mortgage, contract, or other instrument to which Borrower is a
party or by which it is bound, and that upon execution and delivery hereof and
thereof, this Amendment and the Amended Promissory Notes will constitute legal,
valid, and binding agreements and obligations of Borrower, enforceable in
accordance with their respective terms.
10. Payment of Expenses and Attorney's Fees. Borrower shall pay
all reasonable expenses of Lender relating to the negotiation, drafting of
documents, and documentation of this Amendment, including, without limitation,
reasonable attorney's fees and legal expenses. If such expenses are not
promptly paid, Lender is authorized and directed, upon execution of this
Amendment and fulfillment of all conditions precedent hereunder, to disburse a
sufficient amount of the Loan proceeds to pay in full these expenses.
3
<PAGE> 4
11. Agreement Remains in Full Force and Effect. Except as
expressly amended or modified by this Amendment, the Loan Agreement remains in
full force and effect.
12. Integrated Agreement: Amendment. This Amendment, together
with the Loan Agreement, Amended Promissory Notes, Intercreditor Agreement, and
Amendment to Intercreditor Agreement constitute the entire agreements and
understandings between the parties and supersede all other prior and
contemporaneous agreements and may not be altered or amended except by written
agreement signed by the parties. This Amendment and the Loan Agreement shall
be read and interpreted together as one agreement. PURSUANT TO UTAH CODE
SECTION 25-5-4, BORROWER IS NOTIFIED THAT THESE AGREEMENTS ARE A FINAL
EXPRESSION OF THE AGREEMENT BETWEEN LENDER AND BORROWER AND THESE AGREEMENTS
MAY NOT BE CONTRADICTED BY EVIDENCE OF ANY ALLEGED ORAL AGREEMENT. All other
prior and contemporaneous agreements, arrangements and understandings between
the parties hereto as to the subject matter hereof are, except as otherwise
expressly provided herein, terminated.
Dated: May 12, 1997
Zions First National Bank
By: /s/ KEITH R. THOMPSON
----------------------------------
Keith R. Thompson
Vice President
The First National Bank of Chicago
By: /s/ [SIG]
----------------------------------
Title: First Vice President
Zions First National Bank, not in its
individual capacity but solely as agent
pursuant to an Intercreditor Agreement
dated October 16, 1996, between Zions
First National Bank, The First Chicago
National Bank, and Agent
By: /s/ KEITH R. THOMPSON
----------------------------------
Keith R. Thompson
Vice President
4
<PAGE> 5
Franklin Quest Co.
By: /s/ [SIG]
--------------------------------
Title: Chief Financial Officer
5
<PAGE> 6
EXHIBIT A
PROMISSORY NOTE
(ZIONS FIRST NATIONAL BANK)
6
<PAGE> 7
AMENDED PROMISSORY NOTE
Revolving Line of Credit
October 16, 1996
Borrower: Franklin Quest Co.
Lender: Zions First National Bank
Agent: Zions First National Bank, not in its individual capacity but
solely as agent pursuant to an Intercreditor Agreement dated
October 16, 1996 between Zions First National Bank ("Zions"),
The First National Bank of Chicago, and Agent, as amended
Amount: $30,000,000.00
Maturity: October 1, 2001
For value received, Borrower promises to pay to the order of Agent, at
Zions First National Bank's Commercial Banking Department in Salt Lake City,
Utah, the sum of thirty million dollars ($30,000,000.00) or such other
principal balance as may be outstanding hereunder in lawful money of the United
States with interest thereon calculated and payable as provided herein.
This Promissory Note shall be a revolving line of credit under which
Borrower may repeatedly draw and repay funds, so long as no default has
occurred hereunder or under the Loan Agreement dated October 16, 1996, between
Zions, The First National Bank of Chicago, Agent and Borrower, as amended (the
"Loan Agreement") and so long as the aggregate, outstanding principal balance
at any time does not exceed the principal amount of this Promissory Note.
Disbursements under this Promissory Note shall be made in accordance with the
Loan Agreement. Agent shall have no obligation to make any disbursements
except to the extent funds have been provided by Zions.
In connection with each request for an advance under this Promissory
Note, Borrower shall specify whether the advance shall bear interest based on
the Prime Rate or the LIBOR Rate and, if the LIBOR Rate is selected, the
applicable Interest Period. The specification made by Borrower may not be
changed without consent of Agent. If no specification is made by Borrower, the
advance shall bear interest based on the Prime Rate.
Interest on advances based on the Prime Rate shall be calculated and
payable as follows:
1. Interest shall be at a variable rate computed on the basis of
a three hundred sixty (360) day year as follows:
<PAGE> 8
The Prime Rate Performance Percent (hereinafter defined) per
annum below the Prime Rate (hereinafter defined) of Zions from
time to time in effect, adjusted as of the date of any change
in the Prime Rate. Interest accrued is to be paid monthly
commencing November 2, 1996, and on the same day of each month
thereafter. All principal and unpaid interest shall be paid
in full on October 1, 2001.
2. The Prime Rate Performance Percent shall be determined as
follows:
(a) If the ratio determined by the following
formula is greater than seven (7), the Prime Rate Performance
Percent will be five-tenths (.5). If such ratio is seven (7)
or less, the Prime Rate Performance Percent will then be
determined in accordance with subsections (b), (c) and (d),
below.
Formula:
EBITDA divided by (Total Interest plus CMLTD)
For purposes of this formula, EBITDA means Borrower's
earnings before interest, taxes, depreciation, and
amortization; Total Interest means all interest paid by
Borrower and accrued but unpaid by Borrower; CMLTD means
current maturities on long term debt of Borrower; for the most
recent four (4) fiscal quarters of Borrower.
Each of the foregoing terms shall have the meanings
used in accordance with generally accepted accounting
principles consistent with those used in preparation of the
financial statements previously submitted to Lender by
Borrower.
(b) If the ratio of total liabilities divided by
tangible net worth of Borrower is above one (1.0), the Prime
Rate Performance Percent will be five-tenths (.5).
(c) If the ratio of total liabilities divided by
tangible net worth of Borrower is four-tenths (.4) or greater
but not more than one (1.0), the Prime Rate Performance
Percent will be seventy-five hundredths (.75).
(d) If the ratio of total liabilities divided by
tangible net worth of Borrower is less than four-tenths (.4),
the Prime Rate Performance Percent will be one (1.0).
For purposes of subparagraphs (b), (c) and (d),
above, total liabilities shall be determined in
2
<PAGE> 9
accordance with generally accepted accounting principles
consistent with those applied in the preparation of the
financial statements previously submitted by Borrower to
Lender. Tangible net worth means the excess of total assets
over total liabilities, total assets and total liabilities
each to be determined in accordance with generally accepted
accounting principles consistent with those applied in the
preparation of the financial statements previously submitted
by Borrower to Lender, excluding, however, from the
determination of total assets all assets which would be
classified as intangible assets under generally accepted
accounting principles, including, without limitation,
goodwill, licenses, patents, trademarks, trade names,
copyrights, and franchises.
The Prime Rate Performance Percent shall be
determined based upon the most recent Securities and Exchange
Commission Form 10Q or 10K of Borrower and be adjusted as of
the first day of the month following the month in which
Borrower is required to deliver such report to Lender pursuant
to the Loan Agreement.
3. Prime Rate means an index which is determined daily by the
published commercial loan variable rate index held by any two
of the following banks: Chase Manhattan Bank, Wells Fargo Bank
N. A., and Bank of America N. T. & S. A. In the event no two
of the above banks have the same published rate, the bank
having the median rate will establish Zions' Prime Rate. If,
for any reason beyond the control of Zions, any of the
aforementioned banks becomes unacceptable as a reference for
the purpose of determining the Prime Rate used herein, Zions
may, five days after posting notice in the Zions' bank
offices, substitute another comparable bank for the one
determined unacceptable. As used in this paragraph,
"comparable bank" shall mean one of the ten largest commercial
banks headquartered in the United States of America. This
definition of Prime Rate is to be strictly interpreted and is
not intended to serve any purpose other than providing an
index to determine the variable interest rate used herein. It
is not the lowest rate at which Zions may make loans to any of
its customers, either now or in the future.
Interest on advances based on the LIBOR Rate shall be calculated and
payable as follows:
1. Interest shall be at a rate computed on the basis of a three
hundred sixty (360) day year equal to the LIBOR Rate
(hereinafter defined) of Zions for the applicable Interest
Period (hereinafter defined) plus the LIBOR
3
<PAGE> 10
Performance Percent (hereinafter defined). Interest accrued
is to be paid monthly commencing November 2, 1996, on the same
day of each month thereafter, and on the last day of each
applicable Interest Period.
2. The LIBOR Performance Percent shall be determined as follows:
(a) If the ratio determined by the following
formula is greater than seven (7), the LIBOR Performance
Percent will be one and twenty-five hundredths (1.25). If such
ratio is seven (7) or less, the LIBOR Performance Percent will
then be determined in accordance with subsections (b), (c) and
(d), below.
Formula:
EBITDA divided by (Total Interest plus CMLTD)
For purposes of this formula, EBITDA means Borrower's
earnings before interest, taxes, depreciation, and
amortization; Total Interest means all interest paid by
Borrower and accrued but unpaid by Borrower; CMLTD means
current maturities on long term debt of Borrower; for the most
recent four (4) fiscal quarters of Borrower.
Each of the foregoing terms shall have the meanings
used in accordance with generally accepted accounting
principles consistent with those used in preparation of the
financial statements previously submitted to Lender by
Borrower.
(b) If the ratio of total liabilities divided by
tangible net worth of Borrower is above one (1.0), the LIBOR
Performance Percent will be one and twenty-five hundredths
(1.25).
(c) If the ratio of total liabilities divided by
tangible net worth of Borrower is four-tenths (.4) or greater
but not more than one (1.0), the LIBOR Performance Percent
will be one (1).
(d) If the ratio of total liabilities divided by
tangible net worth of Borrower is less than four-tenths (.4),
the LIBOR Performance Percent will be seventy-five hundredths
(.75).
For purposes of subparagraphs (b), (c) and (d),
above, total liabilities shall be determined in accordance
with generally accepted accounting principles consistent with
those applied in the preparation of the financial statements
previously submitted by Borrower to
4
<PAGE> 11
Lender. Tangible net worth means the excess of total assets
over total liabilities, total assets and total liabilities
each to be determined in accordance with generally accepted
accounting principles consistent with those applied in the
preparation of the financial statements previously submitted
by Borrower to Lender, excluding, however, from the
determination of total assets all assets which would be
classified as intangible assets under generally accepted
accounting principles, including, without limitation,
goodwill, licenses, patents, trademarks, trade names,
copyrights, and franchises.
The LIBOR Performance Percent shall be determined
based upon the most recent Securities and Exchange Commission
Form 10Q or 10K of Borrower and be adjusted as of the first
day of the month following the month in which Borrower is
required to deliver such report to Lender pursuant to the Loan
Agreement.
3. The LIBOR Rate applicable to any Interest Period means the
rate per annum quoted by Zions as its LIBOR Rate. The LIBOR
Rate shall be related to quotes for the London Interbank
Offered Rate from the British Bankers Association Interest
Settlement Rates, Lasser Marshall Inc., or other comparable
services for the applicable Interest Period. This definition
of LIBOR Rate is to be strictly interpreted and is not
intended to serve any purpose other than providing an index to
determine the interest rate used herein. The LIBOR Rate of
Zions may not necessarily be the same as the quoted London
Interbank Offered Rate quoted by any particular institution or
service applicable to any Interest Period.
4. Banking Business Day means any day other than a Saturday,
Sunday or other day on which commercial banks in the State of
Utah are authorized or required to close and a day on which
dealings in dollar deposits are also carried on in the London
Interbank market and banks are open for business in London.
5. Dollars and the sign "$" mean lawful money of the United
States.
6. Interest Period means, with respect to any LIBOR Rate advance,
the period commencing on the date such advance is made and
ending, as the Borrower may select, on the numerically
corresponding day in the first, second, third, sixth, or
twelfth calendar month thereafter, except that each such
Interest Period that commences on the last Banking Business
Day of a calendar month (or an any day for which there is no
numerically corresponding
5
<PAGE> 12
day in the appropriate subsequent calendar month) shall end on
the last Banking Business Day of the appropriate subsequent
calendar month; provided that all of the foregoing provisions
relating to Interest Periods are subject to the following:
a. No Interest Period may extend beyond the termination
of the Loan Agreement;
b. No Interest Period may extend beyond the aforesaid
Maturity Date or such later date to which it is
extended; and
c. If an Interest Period would end on a day that is not
a Banking Business Day, such Interest Period shall be
extended to the next Banking Business Day unless such
Banking Business Day would fall in the next calendar
month, in which event such interest Period shall end
on the immediately preceding Banking Business Day.
7. Notwithstanding any other provision in this Promissory Note,
if the adoption of any applicable law, rule, or regulation, or
any change therein, or any change in the interpretation or
administration thereof by any governmental authority, central
bank, or comparable agency charged with the interpretation or
administration thereof, or compliance by Lender with any
request or directive (whether or not having the force of law)
of any such authority, central bank, or comparable agency
shall make it unlawful or impossible for Lender to maintain or
fund advances based on the LIBOR Rate, then upon notice to
Borrower by Agent the outstanding principal amount of the
advances based on the LIBOR Rate,, together with interest
accrued thereon, shall, at the election of Agent, be (1)
immediately converted to an advance based on Prime Rate; (2)
repaid immediately upon demand of Agent if such change or
compliance with such request, in the judgment of Agent,
requires immediate repayment; or (3) repaid at the expiration
of the last Interest Period to expire before the effective
date of any such change or request.
8. Notwithstanding anything to the contrary herein, if Agent
determines (which determination shall be conclusive) that:
a. Quotations of interest rates for the relevant
deposits referred to in the definition of LIBOR Rate
are not being provided in the relevant amounts or for
the relative maturities for purposes of determining
the LIBOR Rate; or
6
<PAGE> 13
b. The LIBOR Rate does not accurately cover the cost to
Lender of making or maintaining advances based on the
LIBOR Rate, then Agent may give notice thereof to
Borrower, whereupon until Agent notifies Borrower
that the circumstances giving rise to such suspension
no longer exist, (1) the obligation of Agent to make
advances based On the LIBOR Rate shall be suspended;
and (2) Borrower shall repay in full the then
outstanding principal amount of each advance based on
LIBOR Rate together with accrued interest thereon, on
the last day of the then current Interest Period
applicable to such advance, or, at Borrower's option,
convert the advancer, based on LIBOR Rate to advances
based on Prime Rate on the last day of the then
current Interest Period applicable to such advance.
All principal advances for which interest is based upon LIBOR Rate
shall be due and payable in full on the last day of the applicable Interest
Period.
As to all advances, whether based on the Prime Rate or the LIBOR Rate:
1. Interest shall accrue from the date of disbursement of the
principal amount or portion thereof until paid, both before
and after judgment, in accordance with the terms set forth
herein.
2. All payments shall be applied first to accrued interest and
the remainder, if any, to principal.
3. Notwithstanding anything to the contrary herein, all principal
and unpaid interest shall be paid in full on the aforesaid
Maturity Date.
4. Upon default in payment of any principal or interest when due,
whether due at stated maturity, by acceleration, or otherwise,
all outstanding principal shall bear interest at a default
rate from. the date when due until paid, both before and after
judgment, which default rate shall be three percent (3.0%) per
annum above the Prime Rate.
If, at any time prior to the maturity of this Promissory Note, this
Promissory Note shall have a zero balance owing, this Promissory Note shall not
be deemed satisfied or terminated but shall remain in full force and effect for
future draws unless terminated upon other grounds.
Borrower may prepay all or any portion of any advance based upon Prime
Rate at any time without penalty. As to any advance based upon LIBOR Rate,
Borrower may prepay up to five percent (5%)
7
<PAGE> 14
of the original principal amount of this Promissory Note annually without a
prepayment fee. Any additional prepayment shall be subject to a prepayment fee
if the "Original LIBOR Rate" is greater than the "Current LIBOR Rate" on the
prepayment date. The prepayment fee shall be an amount equal to the prepaid
principal amount multiplied by the product of the "Original LIBOR Rate" less
the "Current LIBOR Rate", multiplied by the number of years and fractional
portion of a year remaining in the current Interest Period.
"Current LIBOR Rate" means the LIBOR Rate in effect on the date the
prepayment is made for the interest period from that prepayment date to the end
of the current Interest Period.
"Original LIBOR Rate" means the LIBOR Rate in effect for the current
Interest Period.
This Promissory Note is made in accordance with the Loan Agreement.
This Promissory Note modifies and replaces a Promissory Note dated
October 16, 1996, executed by Borrower in favor of Zions First National Bank in
the original principal amount of twenty-five million dollars ($25,000,000.00).
If default occurs in the payment of any principal or interest when
due, or if any Event of Default (as defined in the Loan Agreement) occurs under
the Loan Agreement, time being the essence hereof, then the entire unpaid
balance, with interest as aforesaid, shall, at the election of the holder
hereof and without notice of such election, become immediately due and payable
in full.
If this Promissory Note becomes in default or payment is accelerated,
Borrower agrees to pay to the holder hereof all collection costs, including
reasonable attorney fees and legal expenses, in addition to all other sums due
hereunder.
Borrower and all endorsers, sureties and guarantors hereof hereby
jointly and severally waive presentment for payment, demand, protest, notice of
protest, notice of protest and of non-payment and of dishonor, and consent to
extensions of time, renewal, waivers or modifications without notice and
further consent to the release of any collateral or any part thereof with or
without substitution.
8
<PAGE> 15
EXHIBIT B
PROMISSORY NOTE
(The First National Bank of Chicago)
7
<PAGE> 16
AMENDED PROMISSORY NOTE
Revolving Line of Credit
October 16, 1996
Borrower: Franklin Quest Co.
Lender: The First National Bank of Chicago
Agent: Zions First National Bank, not in its individual capacity but
solely as agent pursuant to an Intercreditor Agreement dated
October 16, 1996 between Zions First National Bank ("Zions"),
The First National Bank of Chicago, and Agent, as amended
Amount: $60,000,000.00
Maturity: October 1, 2001
For value received, Borrower promises to pay to the order of Agent, at
Zions First National Bank's Commercial Banking Department in Salt Lake City,
Utah, the sum of sixty million dollars ($60,000,000.00) or such other principal
balance as may be outstanding hereunder in lawful money of the United States
with interest thereon calculated and payable as provided herein.
This Promissory Note shall be a revolving line of credit under which
Borrower may repeatedly draw and repay funds, so long as no default has
occurred hereunder or under the Loan Agreement dated October 16, 1996, between
Zions, The First National Bank of Chicago and Borrower, as amended (the "Loan
Agreement") and so long as the aggregate, outstanding principal balance at any
time does not exceed the principal amount of this Promissory Note.
Disbursements under this Promissory Note shall be made in accordance with the
Loan Agreement. Agent shall have no obligation to make any disbursements
except to the extent funds have been provided by The First National Bank of
Chicago.
In connection with each request for an advance under this Promissory
Note, Borrower shall specify whether the advance shall bear interest based on
the Prime Rate or the LIBOR Rate and, if the LIBOR Rate is selected, the
applicable Interest Period., The specification made by Borrower may not be
changed without consent of Agent. If no specification is made by Borrower, the
advance shall bear interest based on the Prime Rate.
Interest on advances based on the Prime Rate shall be calculated and
payable as follows:
1. Interest shall be at a variable rate computed on the basis of
a three hundred sixty (360) day year as follows:
<PAGE> 17
The Prime Rate Performance Percent (hereinafter defined) per
annum below the Prime Rate (hereinafter defined) of Zions from
time to time in effect, adjusted as of the date of any change
in the Prime Rate. Interest accrued is to be paid monthly
commencing November 2, 1996, and on the same day of each month
thereafter. All principal and unpaid interest shall be paid
in full on October 1, 2001.
2. The Prime Rate Performance Percent shall be determined as
follows:
(a) If the ratio determined by the following
formula is greater than seven (7) the Prime Rate Performance
Percent will be five-tenths (.5). If such ratio is seven (7)
or less, the Prime Rate Performance Percent will then be
determined in accordance with subsections (b), (c) and (d),
below.
Formula:
EBITDA divided by (Total Interest plus CMLTD)
For purposes of this formula, EBITDA means Borrower's
earnings before interest, taxes, depreciation, and
amortization; Total Interest means all interest paid by
Borrower and accrued but unpaid by Borrower; CMLTD means
current maturities on long term debt of Borrower; for the most
recent four (4) fiscal quarters of Borrower.
Each of the foregoing terms shall have the meanings
used in accordance with generally accepted accounting
principles consistent with those used in preparation of the
financial statements previously submitted to Lender by
Borrower.
(b) If the ratio of total liabilities divided by
tangible net worth of Borrower is above one (1.0), the Prime
Rate Performance Percent will be five-tenths (.5).
(c) If the ratio of total liabilities divided by
tangible net worth of Borrower is four-tenths (.4) or greater
but not more than one (1.0), the Prime Rate Performance
Percent will be seventy-five hundredths (.75).
(d) If the ratio of total liabilities divided by
tangible net worth of Borrower is less than four-tenths (.4),
the Prime Rate Performance Percent will be one (1.0).
For purposes of subparagraphs (b) (c) and (d), above,
total liabilities shall be determined in
2
<PAGE> 18
accordance with generally accepted accounting principles
consistent with those applied in the preparation of the
financial statements previously submitted by Borrower to
Lender. Tangible net worth means the excess Of total assets
over total liabilities, total assets and total liabilities
each to be determined in accordance with generally accepted
accounting principles consistent with those applied in the
preparation of the financial statements previously submitted
by Borrower to Lender, excluding, however, from the
determination of total assets all assets which would be
classified as intangible assets under generally accepted
accounting principles, including, without limitation, goodwill
licenses, patents, trademarks, trade names, copyrights, and
franchises.
The Prime Rate Performance Percent shall be
determined based upon the most recent Securities and Exchange
Commission Form 10Q or 10K of Borrower and be adjusted as of
the first day of the month following the month in which
Borrower is required to deliver such report to Lender pursuant
to the Loan Agreement.
3. Prime Rate means an index which is determined daily by the
published commercial loan variable rate index held by any two
of the following banks: Chase Manhattan Bank, Wells Fargo Bank
K. A., and Bank of America K. T. & S. A. In the event no two
of the above banks have the same published rate, the bank
having the median rate will establish Zions' Prime Rate. If,
for any reason beyond the control of Zions, any of the
aforementioned banks becomes unacceptable as a reference for
the purpose of determining the Prime Rate used herein, Zions
may, five days after posting notice in the Zions' bank
offices, substitute another comparable bank for the one
determined unacceptable. As used in this paragraph,
"comparable bank" shall mean one of the ten largest commercial
banks headquartered in the 'United States of America. This
definition of Prime Rate is to be strictly interpreted and is
not intended to serve any purpose other than providing an
index to determine the variable interest rate used herein. It
is not the lowest rate at which Zions may make loans to any of
its customers, either now or in the future.
Interest on advances based on the LIBOR Rate shall be calculated and
payable as follows:
1. Interest shall be at a rate computed on the basis of a three
hundred sixty (360) day year equal to the LIBOR Rate
(hereinafter defined) of Zions for the applicable Interest
Period (hereinafter defined) plus the LIBOR
3
<PAGE> 19
Performance Percent (hereinafter defined). Interest accrued
is to be paid monthly commencing November 2, 1996, on the same
day of each month thereafter, and on the last day of each
applicable Interest Period.
2. The LIBOR Performance Percent shall be determined as follows:
(a) If the ratio determined by the following formula
is greater than seven (7), the LIBOR Performance Percent will
be one and twenty-five hundredths (1.25). If such ratio is
seven (7) or less, the LIBOR Performance Percent will then be
determined in accordance with subsections (b), (c) and (d),
below.
Formula:
EBITDA divided by (Total Interest plus CMLTD)
For purposes of this formula, EBITDA means Borrower's
earnings before interest, taxes, depreciation, and
amortization; Total Interest means all interest paid by
Borrower and accrued but unpaid by Borrower; CMLTD means
current maturities on long term debt of Borrower; for the most
recent four (4) fiscal quarters of Borrower.
Each of the foregoing terms shall have the meanings
used in accordance with generally accepted accounting
principles consistent with those used in preparation of the
financial statements previously submitted to Lender by
Borrower.
(b) If the ratio of total liabilities divided by
tangible net worth of Borrower is above one (1.0), the LIBOR
Performance Percent will be one and twenty-five hundredths
(1.25).
(c) If the ratio of total liabilities divided by
tangible net worth of Borrower is four-tenths (.4) or greater
but not more than one (1.0), the LIBOR Performance Percent
will be one (1).
(d) If the ratio of total liabilities divided by
tangible net worth of Borrower is less than four-tenths (.4),
the LIBOR Performance Percent will be seventy-five hundredths
(.75).
For purposes of subparagraphs, (b) (c) and (d),
above, total liabilities shall be determined in accordance
with generally accepted accounting principles consistent with
those applied in the preparation of the financial statements
previously submitted by Borrower to
4
<PAGE> 20
Lender. Tangible net worth means the excess of total assets
over total liabilities, total assets and total liabilities
each to be determined in accordance with generally accepted
accounting principles consistent with those applied in the
preparation of the financial statements previously submitted
by Borrower to Lender, excluding, however, from the
determination of total assets all assets which would be
classified as intangible assets under generally accepted
accounting principles, including, without limitation,
goodwill, licenses, patents, trademarks, trade names,
copyrights, and franchises.
The LIBOR Performance Percent shall be determined
based upon the most recent Securities and Exchange Commission
Form 10Q or 10K of Borrower and be adjusted as of the first
day of the month following the month in which Borrower is
required to deliver such report to Lender pursuant to the Loan
Agreement.
3. The LIBOR Rate applicable to any Interest Period means the
rate per annum quoted by Zions as its LIBOR Rate. The LIBOR
Rate shall be related to quotes for the London Interbank
Offered Rate from the British Bankers Association Interest
Settlement Rates, Lasser Marshall Inc., or other comparable
services for the applicable Interest Period. This definition
of LIBOR Rate is to be strictly interpreted and is not
intended to serve any purpose other than providing an index to
determine the interest rate used herein. The LIBOR Rate of
Zions may not necessarily be the same as the quoted London
Interbank Offered Rate quoted by any particular institution or
service applicable to any Interest Period.
4. Banking Business Day means any day other than a Saturday,
Sunday or other day on which commercial banks in the State of
Utah are authorized or required to close and a day on which
dealings in dollar deposits are also carried on in the London
Interbank market and banks are open for business in London.
5. Dollars and the sign "$" mean lawful money of the United
States.
6. Interest Period means, with respect to any LIBOR Rate advance,
the period commencing on the date such advance is made and
ending, as the Borrower may select, on the numerically
corresponding day in the first, second, third, sixth, or
twelfth calendar month thereafter, except that each such
Interest Period that commences on the last Banking Business
Day of a calendar month (or on any day for which there is no
numerically corresponding
5
<PAGE> 21
day in the appropriate subsequent calendar month) shall end on
the last Banking Business Day of the appropriate subsequent
calendar month; provided that all of the foregoing provisions
relating to Interest Periods are subject to the following:
a. No Interest Period may extend beyond the termination
of the Loan Agreement;
b. No Interest Period may extend beyond the aforesaid
Maturity Date or such later date to which it is
extended; and
c. If an Interest Period would end on a day that is not
a Banking Business Day, such Interest Period shall be
extended to the next Banking Business Day unless such
Banking Business Day would fall in the next calendar
month, in which event such Interest Period shall end
on the immediately preceding Banking Business Day.
7. Notwithstanding any other provision in this Promissory Note,
if the adoption of any applicable law, rule, or regulation, or
any change therein, or any change in the interpretation or
administration thereof by any governmental authority, central
bank, or comparable agency charged with the interpretation or
administration thereof, or compliance by Lender with any
request or directive (whether or not having the force of law)
of any such authority, central bank, or comparable agency
shall make it unlawful or impossible for Lender to maintain or
fund advances based on the LIBOR Rate, then upon notice to
Borrower by Agent the outstanding principal amount of the
advances based on the LIBOR Rate, together with interest
accrued thereon, shall, at the election of Agent, be (1)
immediately converted to an advance based an Prime Rate; (2)
repaid immediately upon demand of Agent if such change or
compliance with such request, in the judgment of Agent,
requires immediate repayment; or (3) repaid at the expiration
of the last Interest Period to expire before the effective
date of any such change or request.
8. Notwithstanding anything to the contrary herein, if Agent
determines (which determination shall be conclusive) that:
a. Quotations of interest rates for the relevant
deposits referred to in the definition of LIBOR Rate
are not being provided in the relevant amounts or for
the relative maturities for purposes of determining
the LIBOR Rate; or
6
<PAGE> 22
b. The LIBOR Rate does not accurately cover the cost to
Lender of making or maintaining advances based on the
LIBOR Rate, then Agent may give notice thereof to
Borrower, whereupon until Agent notifies Borrower
that the circumstances giving rise to such suspension
no longer exist, (1) the obligation of Agent to make
advances based on the LIBOR Rate shall be suspended;
and (2) Borrower shall repay in full the then
outstanding principal amount of each advance based on
LIBOR Rate together with accrued interest thereon, on
the last day of the then current Interest Period
applicable to such advance, or, at Borrower's option,
convert the advances based on LIBOR Rate to advances
based on Prime Rate on the last day of the then
current Interest Period applicable to such advance.
All principal advances for which interest is based upon LIBOR Rate
shall be due and payable in full on the last day of the applicable Interest
Period.
As to all advances, whether based on the Prime Rate or the LIBOR Rate:
1. Interest shall accrue from the date of disbursement of the
principal amount or portion thereof until paid, both before
and after judgment, in accordance with the terms set forth
herein.
2. All payments shall be applied first to accrued interest and
the remainder, if any, to principal.
3. Notwithstanding anything to the contrary herein, all principal
and unpaid interest shall be paid in full on the aforesaid
Maturity Date.
4. Upon default in payment of any principal or interest when due,
whether due at stated maturity, by acceleration, or otherwise,
all outstanding principal shall bear interest at a default
rate from the date when due until paid, both before and after
judgment, which default rate shall be three percent (3.0%) per
annum above the Prime Rate.
If, at any time prior to the maturity of this Promissory Note, this
Promissory Note shall have a zero balance owing, this Promissory Note shall not
be deemed satisfied or terminated but shall remain in full force and effect for
future draws unless terminated upon other grounds.
Borrower may prepay all or any portion of any advance based upon Prime
Rate at any time without penalty. As to any advance based upon LIBOR Rate,
Borrower may prepay up to five percent (5%)
7
<PAGE> 23
of the original principal amount of this Promissory Note annually without a
prepayment fee. Any additional prepayment shall be subject to a prepayment fee
if the "Original LIBOR Rate" is greater than the "Current LIBOR Rate" on the
prepayment date. The prepayment fee shall be an amount equal to the prepaid
principal amount multiplied by the product of the "Original LIBOR Rate" less
the "Current LIBOR Rate" multiplied by the number of years and fractional
portion of a year remaining in the current Interest Period.
"Current LIBOR Rate" means the LIBOR Rate in effect on the date the
prepayment is made for the interest period from that prepayment date to the end
of the current Interest Period.
"Original LIBOR Rate" means the LIBOR Rate in effect for the current
Interest Period.
This Promissory Note is made in accordance with the Loan Agreement.
This Promissory Note modifies and replaces a Promissory Note dated
October 16, 1996, executed by Borrower in favor of NBD Bank in the original
principal amount of twenty-five million dollars ($25,000,000.00).
If default occurs in the payment of any principal or interest when
due, or if any Event of Default (as defined in the Loan Agreement) occurs under
the Loan Agreement, time being the essence hereof, then the entire unpaid
balance, with interest as aforesaid, shall, at the election of the holder
hereof and without notice of such election, become immediately due and payable
in full.
If this Promissory Note becomes in default or payment is accelerated,
Borrower agrees to pay to the holder hereof all collection costs, including
reasonable attorney fees and legal expenses, in addition to all other sums due
hereunder.
Borrower and all endorsers, sureties and guarantors hereof hereby
jointly and severally waive presentment for payment, demand, protest, notice of
protest, notice of protest and of non-payment and of dishonor, and consent to
extensions of time, renewal, waivers or modifications without notice and
further consent to the release of any collateral or any part thereof with or
without substitution.
8
<PAGE> 24
Borrower:
Franklin Quest Co.
By:_______________________
Title:____________________
9
<PAGE> 25
AMENDED PROMISSORY NOTE
Revolving Line of Credit
October 16, 1996
Borrower: Franklin Quest Co.
Lender: Zions First National Bank
Agent: Zions First National Bank, not in its individual capacity but
solely as agent pursuant to an Intercreditor Agreement dated
October 16, 1996 between Zions First National Bank ("Zions"),
The First National Bank of Chicago, and Agent, as amended
Amount: $30,000,000.00
Maturity: October 1, 2001
For value received, Borrower promises to pay to the order of Agent, at
Zions First National Bank's Commercial Banking Department in Salt Lake City,
Utah, the sum of thirty million dollars ($30,000,000.00) or such other
principal balance as may be outstanding hereunder in lawful money of the United
States with interest thereon calculated and payable as provided herein.
This Promissory Note shall be a revolving line of credit under which
Borrower may repeatedly draw and repay funds, so long as no default has
occurred hereunder or under the Loan Agreement dated October 16, 1996, between
Zions, The First National Bank of Chicago, Agent and Borrower, as amended (the
"Loan Agreement") and so long as the aggregate, outstanding principal balance
at any time does not exceed the principal amount of this Promissory Note.
Disbursements under this Promissory Note shall be made in accordance with the
Loan Agreement. Agent shall have no obligation to make any disbursements
except to the extent funds have been provided by Zions.
In connection with each request for an advance under this Promissory
Note, Borrower shall specify whether the advance shall bear interest based on
the Prime Rate or the LIBOR Rate and, if the LIBOR Rate is selected, the
applicable Interest Period. The specification made by Borrower may not be
changed without consent of Agent. If no specification is made by Borrower, the
advance shall bear interest based on the Prime Rate.
Interest on advances based on the Prime Rate shall be calculated and
payable as follows:
1. Interest shall be at a variable rate computed on the basis of
a three hundred sixty (360) day year as follows:
<PAGE> 26
The Prime Rate Performance Percent (hereinafter defined) per
annum below the Prime Rate (hereinafter defined) of Zions
from time to time in effect, adjusted as of the date of any
change in the Prime Rate. Interest accrued is to be paid
monthly commencing November 2, 1996, and on the same day of
each month thereafter. All principal and unpaid interest
shall be paid in full on October 1, 2001.
2. The Prime Rate Performance Percent shall be determined as
follows:
(a) If the ratio determined by the following formula
is greater than seven (7), the Prime Rate Performance Percent
will be five-tenths (.5). If such ratio is seven (7) or less,
the Prime Rate Performance Percent will then be determined in
accordance with subsections (b), (c) and (d), below.
Formula:
EBITDA divided by (Total Interest plus CMLTD)
For purposes of this formula, EBITDA means Borrower's
earnings before interest, taxes, depreciation, and
amortization; Total Interest means all interest paid by
Borrower and accrued but unpaid by Borrower; CMLTD means
current maturities on long term debt of Borrower; for the most
recent four (4) fiscal quarters of Borrower.
Each of the foregoing terms shall have the meanings
used in accordance with generally accepted accounting
principles consistent with those used in preparation of the
financial statements previously submitted to Lender by
Borrower.
(b) If the ratio of total liabilities divided by
tangible net worth of Borrower is above one (1.0), the Prime
Rate Performance Percent will be five-tenths (.5).
(c) If the ratio of total liabilities divided by
tangible net worth of Borrower is four-tenths (.4) or greater
but not more than one (1.0), the Prime Rate Performance
Percent will be seventy-five hundredths (.75).
(d) If the ratio of total liabilities divided by
tangible net worth of Borrower is less than four-tenths (.4),
the Prime Rate Performance Percent will be one (1.0).
For purposes of subparagraphs, (b) (c) and (d) above,
total liabilities shall be determined in
2
<PAGE> 27
accordance with generally accepted accounting principles
consistent with those applied in the preparation of the
financial statements previously submitted by Borrower to
Lender. Tangible net worth means the excess of total assets
over total liabilities, total assets and total liabilities
each to be determined in accordance with generally accepted
accounting principles consistent with those applied in the
preparation of the financial statements previously submitted
by Borrower to Lender, excluding, however, from the
determination of total assets all assets which would be
classified as intangible assets under generally accepted
accounting principles, including, without limitation,
goodwill, licenses, patents, trademarks, trade names,
copyrights, and franchises.
The Prime Rate Performance Percent shall be
determined based upon the most recent Securities and Exchange
Commission Form 10Q or 10K of Borrower and be adjusted as of
the first day of the month following the month in which
Borrower is required to deliver such report to Lender pursuant
to the Loan Agreement.
3. Prime Rate means an index which is determined daily by the
published commercial loan variable rate index held by any two
of the following banks: Chase Manhattan Bank, Wells Fargo Bank
N. A., and Bank of America N. T. & S. A. In the event no two
of the above banks have the same published rate, the bank
having the median rate will establish Zions' Prime Rate. If,
for any reason beyond the control of Zions, any of the
aforementioned banks becomes unacceptable as a reference for
the purpose of determining the Prime Rate used herein, Zions
may, five days after posting notice in the Zions' bank
offices, substitute another comparable bank for the one
determined unacceptable. As used in this paragraph,
"comparable bank" shall mean one of the ten largest commercial
banks headquartered in the United States of America. This
definition of Prime Rate is to be strictly interpreted and is
not intended to serve any purpose other than providing an
index to determine the variable interest rate used herein. It
is not the lowest rate at which Zions may make loans to any of
its customers, either now or in the future.
Interest on advances based on the LIBOR Rate shall be calculated and
payable as follows:
1. Interest shall be at a rate computed on the basis of a three
hundred sixty (360) day year equal to the LIBOR Rate
(hereinafter defined) of Zions for the applicable Interest
Period (hereinafter defined) plus the LIBOR
3
<PAGE> 28
Performance Percent (hereinafter defined). Interest accrued is
to be paid monthly commencing November 2, 1996, on the same
day of each month thereafter, and on the last day of each
applicable Interest Period.
2. The LIBOR Performance Percent shall be determined as follows:
(a) If the ratio determined by the following
formula is greater than seven (7), the LIBOR Performance
Percent will be one and twenty-five hundredths (1.25). If such
ratio is seven (7) or less, the LIBOR Performance Percent will
then be determined in accordance with subsections (b), (c) and
(d), below.
Formula:
EBITDA divided by (Total Interest plus CMLTD)
For purposes of this formula, EBITDA means Borrower's
earnings before interest, taxes, depreciation, and
amortization; Total Interest means all interest paid by
Borrower and accrued but unpaid by Borrower; CMLTD means
current maturities on long term debt of Borrower; for the most
recent four (4) fiscal quarters of Borrower.
Each of the foregoing terms shall have the meanings
used in accordance with generally accepted accounting
principles consistent with those used in preparation of the
financial statements previously submitted to Lender by
Borrower.
(b) If the ratio of total liabilities divided by
tangible net worth of Borrower is above one (1.0), the LIBOR
Performance Percent will be one and twenty-five hundredths
(1.25).
(c) If the ratio of total liabilities divided by
tangible net worth of Borrower is four-tenths (.4) or greater
but not more than one (1.0), the LIBOR Performance Percent
will be one (1).
(d) If the ratio of total liabilities divided by
tangible net worth of Borrower is less than four-tenths (.4),
the LIBOR Performance Percent will be seventy-five hundredths
(.75).
For purposes of subparagraphs (b), (c) and (d),
above, total liabilities shall be determined in accordance
with generally accepted accounting principles consistent with
those applied in the preparation of the financial statements
previously submitted by Borrower to
4
<PAGE> 29
Lender. Tangible net worth means the excess of total assets
over total liabilities, total assets and total liabilities
each to be determined in accordance with generally accepted
accounting principles consistent with those applied in the
preparation of the financial statements previously submitted
by Borrower to Lender, excluding, however, from the
determination of total assets all assets which would be
classified as intangible assets under generally accepted
accounting principles, including, without limitation,
goodwill, licenses, patents, trademarks, trade names,
copyrights, and franchises.
The LIBOR Performance Percent shall be determined
based upon the most recent Securities and Exchange Commission
Form 10Q or 10K of Borrower and be adjusted as of the first
day of the month following the month in which Borrower is
required to deliver such report to Lender pursuant to the Loan
Agreement.
3. The LIBOR Rate applicable to any Interest Period means the
rate per annum quoted by Zions as its LIBOR Rate. The LIBOR
Rate shall be related to quotes for the London Interbank
Offered Rate from the British Bankers Association Interest
Settlement Rates, Lasser Marshall Inc., or other comparable
services for the applicable Interest Period. This definition
of LIBOR Rate is to be strictly interpreted and is not
intended to serve any purpose other than providing an index to
determine the interest rate used herein. The LIBOR Rate of
Zions may not necessarily be the same as the quoted London
Interbank Offered Rate quoted by any particular institution or
service applicable to any Interest Period.
4. Banking Business Day means any day other than a Saturday,
Sunday or other day on which commercial banks in the State of
Utah are authorized or required to close and a day on which
dealings in dollar deposits are also carried on in the London
Interbank market and banks are open for business in London.
5. Dollars and the sign "$" mean lawful money of the United
States.
6. Interest Period means, with respect to any LIBOR Rate advance,
the period commencing on the date such advance is made and
ending, as the Borrower may select, on the numerically
corresponding day in the first, second, third, sixth, or
twelfth calendar month thereafter, except that each such
Interest Period that commences on the last Banking Business
Day of a calendar month (or on any day for which there is no
numerically corresponding
5
<PAGE> 30
day in the appropriate subsequent calendar month) shall end on
the last Banking Business Day of the appropriate subsequent
calendar month; provided that all of the foregoing provisions
relating to Interest Periods are subject to the following:
a. No Interest Period may extend beyond the termination
of the Loan Agreement;
b. No Interest Period may extend beyond the aforesaid
Maturity Date or such later date to which it is
extended; and
c. If an Interest Period would end on a day that is not
a Banking Business Day, such Interest Period shall be
extended to the next Banking Business Day unless such
Banking Business Day would fall in the next calendar
month, in which event such Interest Period shall end
on the immediately preceding Banking Business Day.
7. Notwithstanding any other provision in this Promissory Note,
if the adoption of any applicable law, rule, or regulation, or
any change therein, or any change in the interpretation or
administration thereof by any governmental authority, central
bank, or comparable agency charged with the interpretation or
administration thereof, or compliance by Lender with any
request or directive (whether or not having the force of law)
of any such authority, central bank, or comparable agency
shall make it unlawful or impossible for Lender to maintain or
fund advances based on the LIBOR Rate, then upon notice to
Borrower by Agent the outstanding principal amount of the
advances based on the LIBOR Rate, together with interest
accrued thereon, shall, at the election of Agent, be (1)
immediately converted to an advance based on Prime Rate; (2)
repaid immediately upon demand of Agent if such change or
compliance with such request, in the judgment of Agent,
requires immediate repayment; or (3) repaid at the expiration
of the last Interest Period to expire before the effective
date of any such change or request.
8. Notwithstanding anything to the contrary herein, if Agent
determines (which determination shall be conclusive) that:
a. Quotations of interest rates for the relevant
deposits referred to in the definition of LIBOR Rate
are not being provided in the relevant amounts or for
the relative maturities for purposes of determining
the LIBOR Rate; or
6
<PAGE> 31
b. The LIBOR Rate does not accurately cover the cost to
Lender of making or maintaining advances based on the
LIBOR Rate, then Agent may give notice thereof to
Borrower, whereupon until Agent notifies Borrower
that the circumstances giving rise to such suspension
no longer exist, (1) the obligation of Agent to make
advances based on the LIBOR Rate shall be suspended;
and (2) Borrower shall repay in full the then
outstanding principal amount of each advance based on
LIBOR Rate together with accrued interest thereon, on
the last day of the then current Interest Period
applicable to such advance, or, at Borrower's option,
convert the advances based on LIBOR Rate to advances
based on Prime Rate on the last day of the then
current Interest Period applicable to such advance.
All principal advances for which interest is based upon LIBOR Rate
shall be due and payable in full on the last day of the applicable Interest
Period.
As to all advances, whether based on the Prime Rate or the LIBOR Rate:
1. Interest shall accrue from the date of disbursement of the
principal amount or portion thereof until paid, both before
and after judgment, in accordance with the terms set forth
herein.
2. All payments shall be applied first to accrued interest and
the remainder, if any, to principal.
3. Notwithstanding anything to the contrary herein, all principal
and unpaid interest shall be paid in full on the aforesaid
Maturity Date.
4. Upon default in payment of any principal or interest when due,
whether due at stated maturity, by acceleration, or otherwise,
all outstanding principal shall bear interest at a default
rate from the date when due until paid, both before and after
judgment, which default rate shall be three percent (3.0%) per
annum above the Prime Rate.
If, at any time prior to the maturity of this Promissory Note, this
Promissory Note shall have a zero balance owing, this Promissory Note shall
not be deemed satisfied or terminated but shall remain in full force and effect
for future draws unless terminated upon other grounds.
Borrower may prepay all or any portion of any advance based upon Prime
Rate at any time without penalty. As to any advance based upon LIBOR Rate,
Borrower may prepay up to five percent (5%)
7
<PAGE> 32
of the original principal amount of this Promissory Note annually without a
prepayment fee. Any additional prepayment shall be subject to a prepayment fee
if the "Original LIBOR Rate" is greater than the "Current LIBOR Rate" on the
prepayment date. The prepayment fee shall be an amount equal to the prepaid
principal amount multiplied by the product of the "Original LIBOR Rate" less
the "Current LIBOR Rate" multiplied by the number of years and fractional
portion of a year remaining in the current Interest Period.
"Current LIBOR Rate" means the LIBOR Rate in effect on the date the
prepayment is made for the interest period from that prepayment date to the end
of the current Interest Period.
"Original LIBOR Rate" means the LIBOR Rate in effect for the current
Interest Period.
This Promissory Note is made in accordance with the Loan Agreement.
This Promissory Note modifies and replaces a Promissory Note dated
October 16, 1996, executed by Borrower in favor of Zions First National Bank in
the original principal amount of twenty-five million dollars ($25,000,000.00).
If default occurs in the payment of any principal or interest when
due, or if any Event of Default (as defined in the Loan Agreement) occurs under
the Loan Agreement, time being the essence hereof, then the entire unpaid
balance, with interest as aforesaid, shall, at the election of the holder
hereof and without notice of such election, become immediately due and payable
in full.
If this Promissory Note becomes in default or payment is accelerated,
Borrower agrees to pay to the holder hereof all collection costs, including
reasonable attorney fees and legal expenses, in addition to all other sums due
hereunder.
Borrower and all endorsers, sureties and guarantors hereof hereby
jointly and severally waive presentment for payment, demand, protest, notice of
protest, notice of protest and of non-payment and of dishonor, and consent to
extensions of time, renewal, waivers or modifications without notice and
further consent to the release of any collateral or any part thereof with or
without substitution.
8
<PAGE> 33
Borrower:
Franklin Quest Co.
By: /s/ [SIG]
--------------------------
Title: Chief Financial Officer
-----------------------
9
<PAGE> 34
AMENDED PROMISSORY NOTE
Revolving Line of Credit
October 16, 1996
Borrower: Franklin Quest Co.
Lender: The First National Bank of Chicago
Agent: Zions First National Bank, not in its individual capacity but
solely as agent pursuant to an Intercreditor Agreement dated
October 16, 1996 between Zions First National Bank ("Zions"),
The First National Bank of Chicago, and Agent, as amended
Amount: $60,000,000.00
Maturity: October 1, 2001
For value received, Borrower promises to pay to the order of Agent, at
Zions First National Bank's Commercial Banking Department in Salt Lake City,
Utah, the sum of sixty million dollars ($60,000,000.00) or such other principal
balance as may be outstanding hereunder in lawful money of the United States
with interest thereon calculated and payable as provided herein.
This Promissory Note shall be a revolving line of credit under which
Borrower may repeatedly draw and repay funds, so long as no default has
occurred hereunder or under the Loan Agreement dated October 16, 1996, between
Zions, The First National Bank of Chicago and Borrower, as amended (the "Loan
Agreement") and so long as the aggregate, outstanding principal balance at any
time does not exceed the principal amount of this Promissory Note.
Disbursements under this Promissory Note shall be made in accordance with the
Loan Agreement. Agent shall have no obligation to make any disbursements
except to the extent funds have been provided by The First National Bank of
Chicago.
In connection with each request for an advance under this Promissory
Note, Borrower shall specify whether the advance shall bear interest based on
the Prime Rate or the LIBOR Rate and, if the LIBOR Rate is selected, the
applicable Interest Period. The specification made by Borrower may not be
changed without consent of Agent. If no specification is made by Borrower, the
advance shall bear interest based on the Prime Rate.
Interest on advances based on the Prime Rate shall be calculated and
payable as follows:
1. Interest shall be at a variable rate computed on the basis of
a three hundred sixty (360) day year as follows:
<PAGE> 35
The Prime Rate Performance Percent (hereinafter defined) per
annum below the Prime Rate (hereinafter defined) of Zions from
time to time in effect, adjusted as of the date of any change
in the Prime Rate. Interest accrued is to be paid monthly
commencing November 2, 1996, and on the same day of each month
thereafter. All principal and unpaid interest shall be paid
in full on October 1, 2001.
2. The Prime Rate Performance Percent shall be determined as
follows:
(a) If the ratio determined by the following
formula is greater than seven (7), the Prime Rate Performance
Percent will be five-tenths (.5). If such ratio is seven (7)
or less, the Prime Rate Performance Percent will then be
determined in accordance with subsections (b), (c) and (d),
below.
Formula:
EBITDA divided by (Total Interest plus CMLTD)
For purposes of this formula, EBITDA means Borrower's
earnings before interest, taxes, depreciation, and
amortization; Total Interest means all interest paid by
Borrower and accrued but unpaid by Borrower; CMLTD means
current maturities on long term debt of Borrower; for the most
recent four (4) fiscal quarters of Borrower.
Each of the foregoing terms shall have the meanings
used in accordance with generally accepted accounting
principles consistent with those used in preparation of the
financial statements previously submitted to Lender by
Borrower.
(b) If the ratio of total liabilities divided by
tangible net worth of Borrower is above one (1.0), the Prime
Rate Performance Percent will be five-tenths (.5).
(c) If the ratio of total liabilities divided by
tangible net worth of Borrower is four-tenths (.4) or greater
but not more than one (1.0), the Prime Rate Performance
Percent will be seventy-five hundredths (.75).
(d) If the ratio of total liabilities divided by
tangible net worth of Borrower is less than four-tenths (.4),
the Prime Rate Performance Percent will be one (1.0).
For purposes of subparagraphs (b), (c) and (d) above,
total liabilities shall be determined in
2
<PAGE> 36
accordance with generally accepted accounting principles
consistent with those applied in the preparation of the
financial statements previously submitted by Borrower to
Lender. Tangible net worth means the excess of total assets
over total liabilities, total assets and total liabilities
each to be determined in accordance with generally accepted
accounting principles consistent with those applied in the
preparation of the financial statements previously submitted
by Borrower to Lender, excluding, however, from the
determination of total assets all assets which would be
classified as intangible assets under generally accepted
accounting principles, including, without limitation,
goodwill, licenses, patents, trademarks, trade names,
copyrights, and franchises.
The Prime Rate Performance Percent shall be
determined based upon the most recent Securities and Exchange
Commission Form 10Q or 10K of Borrower and be adjusted as of
the first day of the month following the month in which
Borrower is required to deliver such report to Lender pursuant
to the Loan Agreement.
3. Prime Rate means an index which is determined daily by the
published commercial loan variable rate index held by any two
of the following banks: Chase Manhattan Bank, Wells Fargo Bank
N. A., and Bank of America N. T. & S. A. In the event no two
of the above banks have the same published rate, the bank
having the median rate will establish Zions' Prime Rate. If,
for any reason beyond the control of Zions, any of the
aforementioned banks becomes unacceptable as a reference for
the purpose of determining the Prime Rate used herein, Zions
may, five days after posting notice in the Zions' bank
offices, substitute another comparable bank for the one
determined unacceptable. As used in this paragraph,
"comparable bank" shall mean one of the ten largest commercial
banks headquartered in the United States of America. This
definition of Prime Rate is to be strictly interpreted and is
not intended to serve any purpose other than providing an
index to determine the variable interest rate used herein. It
is not the lowest rate at which Zions may make loans to any of
its customers, either now or in the future.
Interest on advances based on the LIBOR Rate shall be calculated and
payable as follows:
1. Interest shall be at a rate computed on the basis of a three
hundred sixty (360) day year equal to the LIBOR Rate
(hereinafter defined) of Zions for the applicable Interest
Period (hereinafter defined) plus the LIBOR
3
<PAGE> 37
Performance Percent (hereinafter defined). Interest accrued
is to be paid monthly commencing November 2, 1996, on the same
day of each month thereafter, and on the last day of each
applicable Interest Period.
2. The LIBOR Performance Percent shall be determined as follows:
(a) If the ratio determined by the following
formula is greater than seven (7), the LIBOR Performance
Percent will be one and twenty-five hundredths (1.25). If such
ratio is seven (7) or less, the LIBOR Performance Percent will
then be determined in accordance with subsections (b), (c) and
(d), below.
Formula:
EBITDA divided by (Total Interest plus CMLTD)
For purposes of this formula, EBITDA means Borrower's
earnings before interest, taxes, depreciation, and
amortization; Total Interest means all interest paid by
Borrower and accrued but unpaid by Borrower; CMLTD means
current maturities on long term debt of Borrower; for the most
recent four (4) fiscal quarters of Borrower.
Each of the foregoing terms shall have the meanings
used in accordance with generally accepted accounting
principles consistent with those used in preparation of the
financial statements previously submitted to Lender by
Borrower.
(b) If the ratio of total liabilities divided by
tangible net worth of Borrower is above one (1.0), the LIBOR
Performance Percent will be one and twenty-five hundredths
(1.25).
(c) If the ratio of total liabilities divided by
tangible net worth of Borrower is four-tenths (.4) or greater
but not more than one (1.0), the LIBOR Performance Percent
will be one (1).
(d) If the ratio of total liabilities divided by
tangible net worth of Borrower is less than four-tenths (.4),
the LIBOR Performance Percent will be seventy-five hundredths
(.75).
For purposes of subparagraphs (b), (c) and (d),
above, total liabilities shall be determined in accordance
with generally accepted accounting principles consistent with
those applied in the preparation of the financial statements
previously submitted by Borrower to
4
<PAGE> 38
Lender. Tangible net worth means the excess of total assets
over total liabilities, total assets and total liabilities
each to be determined in accordance with generally accepted
accounting principles consistent with those applied in the
preparation of the financial statements previously submitted
by Borrower to Lender, excluding, however, from the
determination of total assets all assets which would be
classified as intangible assets under generally accepted
accounting principles, including, without limitation,
goodwill, licenses, patents, trademarks, trade names,
copyrights, and franchises.
The LIBOR Performance Percent shall be determined
based upon the most recent Securities and Exchange Commission
Form 10Q or 10K of Borrower and be adjusted as of the first
day of the month following the month in which Borrower is
required to deliver such report to Lender pursuant to the Loan
Agreement.
3. The LIBOR Rate applicable to any Interest Period means the
rate per annum quoted by Zions as its LIBOR Rate. The LIBOR
Rate shall be related to quotes for the London Interbank
Offered Rate from the British Bankers Association Interest
Settlement Rates, Lasser Marshall Inc., or other comparable
services for the applicable Interest Period. This definition
of LIBOR Rate is to be strictly interpreted and is not
intended to serve any purpose other than providing an index to
determine the interest rate used herein. The LIBOR Rate of
Zions may not necessarily be the same as the quoted London
Interbank Offered Rate quoted by any particular institution or
service applicable to any Interest Period.
4. Banking Business Day means any day other than a Saturday,
Sunday or other day on which commercial banks in the State of
Utah are authorized or required to close and a day on which
dealings in dollar deposits are also carried on in the London
Interbank market and banks are open for business in London.
5. Dollars and the sign "$" mean lawful money of the United
States.
6. Interest Period means, with respect to any LIBOR Rate advance,
the period commencing on the date such advance is made and
ending, as the Borrower may select, on the numerically
corresponding day in the first, second, third, sixth, or
twelfth calendar month thereafter, except that each such
Interest Period that commences on the last Banking Business
Day of a calendar month (or on any day for which there is no
numerically corresponding
5
<PAGE> 39
Page Missing (folio 6)
(Leave page)
6
<PAGE> 40
b. The LIBOR Rate does not accurately cover the cost to
Lender of making or maintaining advances based on the
LIBOR Rate, then Agent may give notice thereof to
Borrower, whereupon until Agent notifies Borrower
that the circumstances giving rise to such suspension
no longer exist, (1) the obligation of Agent to make
advances based on the LIBOR Rate shall be suspended;
and (2) Borrower shall repay in full the then
outstanding principal amount of each advance based on
LIBOR Rate together with accrued interest thereon, on
the last day of the then current Interest Period
applicable to such advance, or, at Borrower's option,
convert the advances based on LIBOR Rate to advances
based on Prime Rate on the last day of the then
current Interest Period applicable to such advance.
All principal advances for which interest is based upon LIBOR Rate
shall be due and payable in full on the last day of the applicable Interest
Period.
As to all advances, whether based on the Prime Rate or the LIBOR Rate:
1. Interest shall accrue from the date of disbursement of the
principal amount or portion thereof until paid, both before
and after judgment, in accordance with the terms set forth
herein.
2. All payments shall be applied first to accrued interest and
the remainder, if any, to principal.
3. Notwithstanding anything to the contrary herein, all principal
and unpaid interest shall be paid in full on the aforesaid
Maturity Date.
4. Upon default in payment of any principal or interest when due,
whether due at stated maturity, by acceleration, or otherwise,
all outstanding principal shall bear interest at a default
rate from the date when due until paid, both before and after
judgment, which default rate shall be three percent (3.0%) per
annum above the Prime Rate.
If, at any time prior to the maturity of this Promissory Note, this
Promissory Note shall have a zero balance owing, this Promissory Note shall not
be deemed satisfied or terminated but shall remain in full force and effect for
future draws unless terminated upon other grounds.
Borrower may prepay all or any portion of any advance based upon Prime
Rate at any time without penalty. As to any advance based upon LIBOR Rate,
Borrower may prepay up to five percent (5%)
7
<PAGE> 41
of the original principal amount of this Promissory Note annually without a
prepayment fee. Any additional prepayment shall be subject to a prepayment fee
if the "Original LIBOR Rate" is greater than the "Current LIBOR Rate" on the
prepayment date. The prepayment fee shall be an amount equal to the prepaid
principal amount multiplied by the product of the "Original LIBOR Rate" less
the "Current LIBOR Rate" multiplied by the number of years and fractional
portion of a year remaining in the current Interest Period.
"Current LIBOR Rate" means the LIBOR Rate in effect on the date the
prepayment is made for the interest period from that prepayment date to the end
of the current Interest Period.
"Original. LIBOR Rate" means the LIBOR Rate in effect for the current
Interest Period.
This Promissory Note is made in accordance with the Loan Agreement.
This Promissory Note modifies and replaces a Promissory Note dated
October 16, 1996, executed by Borrower in favor of NBD Bank in the original
principal amount of twenty-five million dollars ($25,000,000.00).
If default occurs in the payment of any principal or interest when
due, or if any Event of Default (as defined in the Loan Agreement) occurs under
the Loan Agreement, time being the essence hereof, then the entire unpaid
balance, with interest as aforesaid, shall, at the election of the holder
hereof and without notice of such election, become immediately due and payable
in full.
If this Promissory Note becomes in default or payment is accelerated,
Borrower agrees to pay to the holder hereof all collection costs, including
reasonable attorney fees and legal expenses, in addition to all other sums due
hereunder.
Borrower and all endorsers, sureties and guarantors hereof hereby
jointly and severally waive presentment for payment, demand, protest, notice of
protest, notice of protest and of non-payment and of dishonor, and consent to
extensions of time, renewal, waivers or modifications without notice and
further consent to the release of any collateral or any part thereof with or
without substitution.
8
<PAGE> 42
Borrower:
Franklin Quest Co.
By: /s/ [SIG]
-------------------------------
Title: Chief Financial Officer
---------------------------
9
<PAGE> 43
RECEIPT FOR AMENDED PROMISSORY NOTE
(Zions First National Bank)
Zions First National Bank, not in its individual capacity but solely
as agent pursuant to an Intercreditor Agreement dated October 16, 1996, between
Zions First National Bank, The First National Bank of Chicago, and Agent, as
amended, acknowledges receipt of an Amended Promissory Note dated October 16,
1996 executed by Franklin Quest Co. in favor of Zions First National Bank in
the original principal amount of thirty million dollars ($30,000,000.00).
Dated: May 12, 1997.
ZIONS FIRST NATIONAL BANK, not in its
individual capacity but solely as agent
pursuant to an Intercreditor Agreement dated
October 16, 1996, between Zions First
National Bank, The First National Bank of
Chicago, and Agent, as amended
By: /s/ KEITH R. THOMPSON
----------------------------------
Title: Vice President
-------------------------------
<PAGE> 44
RECEIPT FOR AMENDED PROMISSORY NOTE
(The First National Bank of Chicago)
Zions First National Bank, not in its individual capacity but solely
as agent pursuant to an Intercreditor Agreement dated October 16, 1996, between
Zions First National Bank, The First National Bank of Chicago, and Agent, as
amended, acknowledges receipt of an Amended Promissory Note dated October 16,
1996 executed by Franklin Quest Co. in favor of The First National Bank of
Chicago in the original principal amount of sixty million dollars
($60,000,000.00).
Dated: May 12, 1997.
ZIONS FIRST NATIONAL BANK, not in its
individual capacity but solely as agent
pursuant to an Intercreditor Agreement dated
October 16, 1996, between Zions First
National Bank, The First National Bank of
Chicago, and Agent, as amended
By: /s/ KEITH R. THOMPSON
----------------------------------
Title: Vice President
-------------------------------
<PAGE> 45
CERTIFICATE OF CORPORATE AUTHORIZATION
The undersigned, being President and Secretary, respectively, of
Franklin Quest Co., a corporation organized under the laws of the State of
Utah, certify that the following is a true and correct copy of the resolution
adopted by the Board of Directors of this corporation at a lawful meeting of
the Board held on the 17th day of 1997, and duly recorded in the minutes of
that meeting, and further certify that this resolution has not been rescinded,
modified, or amended and is presently in full force and effect:
Resolved, that this corporation borrow the sum of ninety
million dollars ($90,000,000.00) from Zions First National Bank and
The First National Bank of Chicago.
The officers of this corporation are authorized and directed
to complete negotiations of the terms and conditions of this loan.
Any officer of this corporation is authorized to execute and
deliver a loan agreement, promissory notes, and such other instruments
and documents as are required or needed to obtain this loan.
Dated: May 12, 1997
Franklin Quest Co.
/s/ [SIG]
----------------------------
President
/s/ [SIG]
----------------------------
Secretary
<PAGE> 46
AMENDMENT TO INTERCREDITOR AGREEMENT
This Amendment to Intercreditor Agreement (the "Amendment") is made
and entered into between Zions First National Bank ("Zions"), The First
National Bank of Chicago ("FNBC") (assignee of NBD Bank) (Zions and FNBC are
hereinafter referred to collectively as "Lenders"), and Zions First National
Bank, not in its individual capacity but solely as agent (herein, in such
capacity, "Agent").
Recitals
1. Zions, NBD Bank, Agent and Franklin Quest Co. ("Borrower")
have entered into a Loan Agreement dated October 16, 1996 (the "Loan
Agreement") whereby a $50,000,000 revolving line of credit was extended to
Borrower evidenced by a $25,000,000 Promissory Note to Zions and a $25,000,000
Promissory Note to NBD Bank.
2. Zions, NBD Bank, and Agent also entered into an Intercreditor
Agreement dated October 16, 1996 to provide for Zions to act as agent to
coordinate the activities and relationships with Borrower concerning this loan.
3. Pursuant to an Assignment Agreement dated as of February 3,
1997, NBD Bank sold and assigned its rights and obligations under the Loan
Agreement and related documents and instruments to FNBC.
4. Zions, FNBC, Agent and Borrower have agreed to amend the Loan
Agreement to increase the amount of the loan to $90,000,000 to be evidenced
by a $30,000,000 Promissory Note to Zions and a $60,000,000 Promissory Note to
FNBC.
5. Zions, FNBC, Agent and Borrower desire to modify and amend the
Intercreditor Agreement consistent with the amendments to the Loan Agreement.
Amendment
For good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, Zions, FNBC, and Agent hereby agree and amend
and modify the Intercreditor Agreement as follows:
1. Definitions. Except as otherwise expressly provided herein,
terms assigned defined meanings in the Intercreditor Agreement shall have the
same defined meanings in this Amendment.
The defined terms "Lenders", "Lenders' Pro Rata Shares", and "Loan
Agreement" in Section 1.1 Definitions of the Intercreditor Agreement are
deleted and replaced with the following:
<PAGE> 47
"Lenders" means Zions and FNBC.
"Lenders' Pro Rata Shares" shall mean the following
allocation: Zions - thirty-three and thirty-three hundredths percent
(33.33%), FCNB - sixty-six and sixty-seven hundredths percent
(66.67%).
"Loan Agreement" shall mean that certain Loan Agreement
between Lenders and Borrower dated October 16, 1996 concerning a
$50,000,000 revolving line of credit, as amended by an Amendment to
Loan Agreement dated on or about the date of this Amendment to
Intercreditor Agreement which increased the revolving line of credit
to $90,000,000.
2. FNBC as Assignee of NBD Bank. All references in the
Intercreditor Agreement to NBD Bank are amended to refer to FNBC. It is
acknowledged and agreed that FNBC has succeeded to all rights, benefits,
duties, and obligations of NBD Bank under the Loan Agreement, Promissory Notes,
and Intercreditor Agreement.
3. Consent to Amendment of Loan Documents. Pursuant to Section
2.1 Amendment of Loan Documents, Lenders and Agent hereby consent to amendment
and modification of the Loan Agreement and Promissory Notes as provided in the
Amendment to Loan Agreement dated on or about the date of this Amendment to
Intercreditor Agreement.
4. Notices. Section 6.10 Notices is amended by deleting the
notice address for NBD Bank and replacing it with:
The First National Bank of Chicago
West Coast Regional Office
777 South Figueroa Street Suite 4001
Los Angeles, CA 90071
Attention: James P. Moore
5. Agreement Remains in Full Force and Effect. Except as expressly
amended or modified by this Amendment, the Intercreditor Agreement remains in
full force and effect.
6. Integrated Agreement; Amendment. This Amendment, together
with the Intercreditor Agreement, Amended Promissory Notes, Loan Agreement, and
Amendment to Loan Agreement, constitute the entire agreements and
understandings between the parties and supersede all other prior and
contemporaneous agreements and may not be altered or amended except by written
agreement signed by the parties. This Amendment and the Intercreditor
Agreement shall be read and interpreted together as one agreement. PURSUANT TO
UTAH CODE SECTION 25-5-4, LENDERS AND AGENT ARE NOTIFIED THAT THESE AGREEMENTS
ARE A FINAL EXPRESSION OF THE AGREEMENT BETWEEN LENDERS AND AGENT AND THESE
AGREEMENTS MAY NOT BE CONTRADICTED BY EVIDENCE
2
<PAGE> 48
OF ANY ALLEGED ORAL AGREEMENT. All other prior and contemporaneous agreements,
arrangements and understandings between the parties hereto as to the subject
matter hereof are, except as otherwise expressly provided herein, terminated.
Dated: May 12, 1997
Zions First National Bank
By: /s/ KEITH R. THOMPSON
------------------------------------
Keith R.Thompson
Vice President
The First National Bank of Chicago
By: /s/ [SIG]
------------------------------------
Title: First Vice President
---------------------------------
Zions First National Bank, not in its
individual capacity but solely as agent
pursuant to an Intercreditor Agreement
dated October 16, 1996, between Zions
First National Bank, The First Chicago
National Bank, and Agent
By: /s/ KEITH R. THOMPSON
------------------------------------
Keith R.Thompson
Vice President
The foregoing Amendment to Intercreditor Agreement is authorized and
consented to this 12th day of May, 1997.
Franklin Quest Co.
By: /s/ [SIG]
------------------------------------
Title: Chief Financial Officer
--------------------------------
3
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<PERIOD-START> MAR-01-1997
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