<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 7, 1996
REGISTRATION NO. 333-14879
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
PRODUCTION GROUP INTERNATIONAL, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
2200 WILSON BOULEVARD, SUITE 200
ARLINGTON, VA 22201-3324
(703) 528-8484
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
----------------
DELAWARE 7389 52-1710407
(PRIMARY STANDARD (IRS EMPLOYER
(STATE OR OTHER INDUSTRIAL IDENTIFICATION NO.)
JURISDICTION OF CLASSIFICATION CODE
INCORPORATION OR NUMBER)
ORGANIZATION)
----------------
MARK N. SIRANGELO, PRESIDENT
PRODUCTION GROUP INTERNATIONAL, INC.
2200 WILSON BOULEVARD, SUITE 200
ARLINGTON, VA 22201-3324
(703) 528-8484
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE
OF AGENT FOR SERVICE)
----------------
COPIES TO:
EDWIN M. MARTIN, JR., ESQUIRE MICHAEL J. SILVER, ESQUIRE
NANCY A. SPANGLER, ESQUIRE HOGAN & HARTSON L.L.P.
PIPER & MARBURY L.L.P. 111 SOUTH CALVERT STREET
1200 19TH STREET, N.W. BALTIMORE, MD 21202
WASHINGTON, DC 20036 (410) 659-2700
(202) 861-3900
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended (the "Securities Act") check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_] ____________________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_] ____________________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED OFFERING PRICE (1) REGISTRATION FEE
- ------------------------------------------------------------------------------
<S> <C> <C>
Shares of Common Stock, par value $.01
per share............................. $56,810,000 $0(2)
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(1) Estimated solely for purposes of determining the registration fee pursuant
to Rule 457(o) under the Securities Act.
(2) A registration fee of $17,215 was previously paid in connection with the
initial filing of the Registration Statement.
----------------
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this
registration statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933, as amended, or until the
registration statement shall become effective on such date as the Commission,
acting pursuant to said Section 8(a), may determine.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the various expenses in connection with the
sale and distribution of the securities offered hereby, other than
underwriting discounts and commissions. All of the amounts shown are estimated
except the Securities and Exchange Commission registration fee, the NASD
filing fee and the Nasdaq listing fee.
<TABLE>
<S> <C>
Securities and Exchange Commission filing fee......................... $
National Association of Securities Dealers, Inc. filing fee...........
Nasdaq listing fee....................................................
Transfer agent's and registrar's fees.................................
Printing expenses.....................................................
Legal fees and expenses...............................................
Accounting fees and expenses..........................................
Blue Sky filing fees and expenses..................................... 5,000
Miscellaneous expenses................................................
-----
Total............................................................... $
=====
</TABLE>
14. INDEMNIFICATION OF OFFICERS AND DIRECTORS
Section 145 of the Delaware General Corporation Law ("Section 145") permits
indemnification of directors, officers, agents and controlling persons of a
corporation under certain conditions and subject to certain limitations. The
Registrant's Bylaws include provisions to require the Registrant to indemnify
its directors and officers to the fullest extent permitted by Section 145,
including circumstances in which indemnification is otherwise discretionary.
Section 145 also empowers the Registrant to purchase and maintain insurance
that protects its officers, directors, employees and agents against any
liabilities incurred in connection with their service in such positions.
At present, there is no pending litigation or proceeding involving a
director or officer of the Registrant as to which indemnification is being
sought nor is the Registrant aware of any threatened litigation that may
result in claims for indemnification by any officer or director.
The Underwriting Agreement filed as Exhibit 1 to this Registration Statement
provides for indemnification by the Underwriters of the Registrant and its
directors and officers, and by the Registrant of the Underwriters, for certain
liabilities arising under the Securities Act of 1933, as amended (the "Act")
or otherwise.
15. RECENT SALES OF UNREGISTERED SECURITIES
A. The Registrant was reincorporated in Delaware in October 1996. During the
past three years, the Registrant's predecessor has issued unregistered
securities in the transactions described below. Securities issued in such
transactions were offered and sold in reliance upon the exemption from
registration under Section 4(2) of the Act, relating to sales by an issuer not
involving any public offering, or under Rule 701 under the Act. The sales of
securities were made without the use of an underwriter and the certificates
evidencing the shares bear a restrictive legend permitting the transfer
thereof only upon registration of the shares or an exemption under the Act.
(1) In November 1993, the Company issued and sold an aggregate of 1,231,151
shares of Series C Preferred Stock to six accredited investors, as such term
is defined in Rule 501 of the Act ("Accredited Investors") at a purchase price
of $2.60 per share. In January 1994, the Company issued and sold
II-1
<PAGE>
additional 29,000 shares of Series C Preferred Stock to four employees at a
purchase price of $2.60 per share. The Company received an aggregate
consideration of approximately $3.3 million for such sales.
(2) In February 1995, the Company issued and sold an aggregate of 1,574,997
shares of Series D Preferred Stock to eight Accredited Investors at a purchase
price of $7.00 per share. The Company received an aggregate consideration of
approximately $11 million.
(3) In February 1996, the Company issued and sold an aggregate of 646,707
shares of Series E Preferred Stock to ten Accredited Investors at a purchase
price of $8.35 per share. In April 1996, the Company issued and sold
additional 718,563 shares of Series E Preferred Stock to 11 Accredited
Investors at a purchase of $8.35 per share. In June 1996, the Company issued
and sold additional 276,705 shares of Series E Preferred Stock to five
Accredited Investors at a purchase price of $8.35 per share. In September
1996, the Company issued and sold additional 154,432 shares of Series E
Preferred Stock to an Accredited Investor at a purchase price of $8.35 per
share. The Company received an aggregate consideration of approximately $15
million for sales of an aggregate of 1,796,407 shares of Series E Preferred
Stock.
(4) From January 1991 through September 1996, the Company granted to various
employees and consultants stock options under the Company's 1995 stock plans
and other stock option agreements to purchase an aggregate of 1,033,300 shares
of Common Stock which are exercisable at prices ranging from $0.01 to $5.00
per share, of which stock options for 1,000 shares have been exercised.
II-2
<PAGE>
16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<C> <S>
1.1 Form of Underwriting Agreement.
3.1 Certificate of Incorporation of the Registrant, as amended.
3.2 By-Laws of the Registrant.
4.1* Specimen stock certificate for shares of Common Stock of the
Registrant.
5.1* Opinion of Piper & Marbury L.L.P. regarding legality of securities
being registered.
10.1* Registrant's 1995 Stock Option/Stock Issuance Plan (Virginia).
10.2* Registrant's 1995 Stock Option/Stock Issuance Plan (California).
10.3 Registrant's 1997 Directors' Stock Option Plan.
10.4 Registrant's Financing and Security Agreement with The First National
Bank of Maryland, dated as of October 18, 1995.
10.5 Contract for Employment for Executive Management by and between Douglas
L. Ducate, dated as of November 22, 1994.
10.6 Contract for Employment for Executive Management by and between the
Registrant and Cyril M. Wismar, dated as of December 28, 1994.
10.7 Contract for Employment for Executive Management by and between Robert
A. Kirkland, dated as of October 11, 1995.
10.8 Contract for Employment for Executive Management by and between John M.
Green, dated as of November 21, 1995.
10.9 Contract for Employment for Executive Management by and between Richard
S. Bartell, dated as of January 19, 1996.
10.10 Contract for Employment for Executive Management by and between the
Registrant and Edward P. Doody, dated as of March 21, 1996.
10.11 Contract for Employment for Executive Management by and between the
Registrant and Mark N. Sirangelo, dated as of September 1, 1996.
10.12 Share Acquisition Agreement by and between the Registrant and the
parties named therein, dated as of September 5, 1995.
10.13# Stock Purchase Agreement by and between the Registrant and the parties
named therein, dated as of January 1, 1996.
10.14# Stock Purchase Agreement by and between the Registrant and the parties
named therein, dated as of February 1, 1996, as amended.
10.15# Stock Purchase Agreement by and between the Registrant and the parties
named therein, dated as of April 1, 1996
10.16# Stock Purchase Agreement by and between the Registrant and the parties
named therein, dated as of July 1, 1996, as amended.
10.17 Series D Convertible Preferred Stock Purchase Agreement by and between
the Registrant and the parties named therein, dated as of February 10,
1995.
10.18 Series E Convertible Preferred Stock Purchase Agreement by and between
the Registrant and the parties named therein, dated as of February 22,
1996.
10.19 Amendment No. 1 to Series E Convertible Preferred Stock Purchase
Agreement by and between the Registrant and the parties named therein,
dated as of June 19, 1996.
10.20 Amendment No. 2 to Series E Convertible Preferred Stock Purchase
Agreement by and between the Registrant and the parties named therein,
dated as of September 26, 1996.
</TABLE>
II-3
<PAGE>
<TABLE>
<C> <S>
10.21 Second Restated Investors' Rights Agreement, dated as of February 22,
1996.
11.1* Statement of computation of loss per share.
21.1 Subsidiaries of the Registrant.
23.1 Consent of Ernst & Young LLP
23.2 Consent of Kingston Smith, Chartered Accountants
23.3 Consent of Ernst & Young, Chartered Accountants
23.4* Consent of Piper & Marbury L.L.P. (to be included as part of Exhibit 5.1
hereto).
24.1 Power of Attorney (included in signature pages).
27.1 Financial Data Schedule.
</TABLE>
(b) Financial Statement Schedules
<TABLE>
<CAPTION>
SCHEDULE DESCRIPTION
-------- -----------
<S> <C>
</TABLE>
- --------
#Filed herewith. Portions of this Exhibit were omitted and have been filed
separately with the Secretary of the Commission pursuant to the Registrant's
Application Requesting Confidential Treatment under Rule 406 of the Act,
filed on November 7, 1996.
*To be filed by Amendment.
17. UNDERTAKINGS
A. The undersigned Registrant hereby undertakes to provide to the
Underwriter at the closing specified in the Underwriting Agreement
certificates in such denominations and registered in such names as required by
the Underwriter to permit prompt delivery to each purchaser.
B. Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the Delaware General Corporate Law, the Certificate
of Incorporation and the Bylaws, or otherwise, the Registrant has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the
Registrant in the successful defense of any action, suit, or proceeding) is
asserted by such director, officer or controlling person in connection with
the securities being registered, the Registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question of whether such indemnification
by it is against public policy as expressed in the Act and will be governed by
the final adjudication of such issue.
C. (1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be a part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act of
1933, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Company has duly caused this Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the County of Arlington,
Commonwealth of Virginia, on the 25th day of October, 1996.
Production Group International, Inc.
By: /s/ Mark N. Sirangelo
---------------------------------
MARK N. SIRANGELO
CHAIRMAN OF THE BOARD, PRESIDENT
AND
CHIEF EXECUTIVE OFFICER
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated.
Each person whose signature appears below in so signing also makes,
constitutes and appoints Mark N. Sirangelo, Richard S. Bartell and Edwin M.
Martin, Jr. and each of them acting alone, his true and lawful attorney-in-
fact, with full power of substitution, for him in any and all capacities, to
execute and cause to be filed with the Securities and Exchange Commission any
and all amendments and post-effective amendments to this Registration
Statement, and any Registration Statement filed pursuant to Rule 424(b), with
exhibits thereto and other documents in connection therewith, and hereby
ratifies and confirms all that said attorney-in-fact or his substitute or
substitutes may do or cause to be done by virtue hereof.
<TABLE>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Mark N. Sirangelo Chairman of the Board, November 7,
- ------------------------------- President and Chief 1996
MARK N. SIRANGELO Executive Officer
(Principal Executive
Officer)
/s/ Richard S. Bartell Senior Vice President and November 7,
- ------------------------------- Chief Financial Officer 1996
RICHARD S. BARTELL (Principal Financial
Accounting Officer)
Director and Vice Chairman November 7,
* of the Board 1996
- -------------------------------
DARRYL HARTLEY-LEONARD
Senior Vice President and November 7,
* Director 1996
- -------------------------------
EDWARD P. DOODY
Director November 7,
* 1996
- -------------------------------
ROBERT C. MCCORMACK
Director November 7,
* 1996
- -------------------------------
PETER C. WENDELL
/s/ Edwin M. Martin, Jr.
*By: _____________________
EDWIN M. MARTIN, JR.
Attorney-in-Fact
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ------------------------------------------------------------------
<C> <S>
1.1 Form of Underwriting Agreement.
3.1 Certificate of Incorporation of the Registrant, as amended.
3.2 By-Laws of the Registrant.
4.1* Specimen stock certificate for shares of Common Stock of the
Registrant.
5.1* Opinion of Piper & Marbury L.L.P. regarding legality of securities
being registered.
10.1* Registrant's 1995 Stock Option/Stock Issuance Plan (Virginia).
10.2* Registrant's 1995 Stock Option/Stock Issuance Plan (California).
10.3 Registrant's 1997 Directors' Stock Option Plan.
10.4 Registrant's Financing and Security Agreement with The First
National Bank of Maryland, dated as of October 18, 1995.
10.5 Contract for Employment for Executive Management by and between
Douglas L. Ducate, dated as of November 22, 1994.
10.6 Contract for Employment for Executive Management by and between
the Registrant and Cyril B. Wismar, dated as of December 28, 1994.
10.7 Contract for Employment for Executive Management by and between
Robert A. Kirkland, dated as of October 11, 1995.
10.8 Contract for Employment for Executive Management by and between
John M. Green, dated as of November 21, 1995.
10.9 Contract for Employment for Executive Management by and between
Richard S. Bartell, dated as of January 19, 1996.
10.10 Contract for Employment for Executive Management by and between
the Registrant and Edward P. Doody, dated as of March 21, 1996.
10.11 Contract for Employment for Executive Management by and between
the Registrant and Mark N. Sirangelo, dated as of September 1,
1996.
10.12 Share Acquisition Agreement by and between the Registrant and the
parties named therein, dated as of September 5, 1995.
10.13# Stock Purchase Agreement by and between the Registrant and the
parties named therein, dated as of January 1, 1996.
10.14# Stock Purchase Agreement by and between the Registrant and the
parties named therein, dated as of February 1, 1996, as amended.
10.15# Stock Purchase Agreement by and between the Registrant and the
parties named therein, dated as of April 1, 1996
10.16# Stock Purchase Agreement by and between the Registrant and the
parties named therein, dated as of July 1, 1996, as amended.
10.17 Series D Convertible Preferred Stock Purchase Agreement by and
between the Registrant and the parties named therein, dated as of
February 10, 1995.
10.18 Series E Convertible Preferred Stock Purchase Agreement by and
between the Registrant and the parties named therein, dated as of
February 22, 1996.
10.19 Amendment No. 1 to Series E Convertible Preferred Stock Purchase
Agreement by and between the Registrant and the parties named
therein, dated as of June 19, 1996.
10.20 Amendment No. 2 to Series E Convertible Preferred Stock Purchase
Agreement by and between the Registrant and the parties named
therein, dated as of September 26, 1996.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- -----------------------------------------------------------------
<C> <S>
10.21 Second Restated Investors' Rights Agreement, dated as of February
22, 1996.
11.1* Statement of computation of loss per share.
21.1 Subsidiaries of the Registrant.
23.1 Consent of Ernst & Young LLP
23.2 Consent of Kingston Smith, Chartered Accountants
23.3 Consent of Ernst & Young, Chartered Accountants
23.4* Consent of Piper & Marbury L.L.P. (to be included as part of
Exhibit 5.1 hereto).
24.1 Power of Attorney (included in signature pages).
27.1 Financial Data Schedule.
</TABLE>
- --------
# Filed herewith. Portions of this Exhibit were omitted and have been filed
separately with the Secretary of the Commission pursuant to the Registrant's
Application Requesting Confidential Treatment under Rule 406 of the Act, filed
on November 7, 1996.
* To be filed by Amendment.
<PAGE>
Exhibit 10.13
STOCK PURCHASE AGREEMENT
DATED AS OF JANUARY 1, 1996
BETWEEN
PGI COMPANY H
AND
J. FRANKLYN DICKSON
<PAGE>
TABLE OF CONTENTS
1. Definitions.................................................... 2
1.1. Use of Defined Terms..................................... 2
1.2. Accounting Terms......................................... 2
1.3. Production and Entertainment............................. 2
1.4. Sections, Exhibits and Schedules......................... 3
1.5. Miscellaneous Terms...................................... 3
2. Purchase and Sale of the Company Shares........................ 3
2.1. Purchase and Sale of the Company Shares.................. 3
2.2. Purchase Price........................................... 4
2.3. Definition of Profit Before Interest and Taxes........... 9
2.4. Financial Statements and Seller's Right to
Audit.................................................... 10
2.5. Offset Against Purchase Price............................ 11
2.6. Closing Costs ........................................... 12
3. Closing........................................................ 13
3.1. Closing.................................................. 13
4. Deliveries at the Closing...................................... 13
4.1. Deliveries to the Buyer by the Seller.................... 13
4.2. Deliveries to the Seller by the Buyer.................... 15
5. Representations and Warranties of the Seller................... 17
5.1. Ownership; Transfer of the Company Shares................ 17
5.2. Authority................................................ 18
5.3. Approvals................................................ 19
5.4. No Brokers............................................... 19
5.5. Organization, Etc........................................ 20
5.6. Capital Stock............................................ 21
5.7. No Subsidiaries, Etc..................................... 23
5.8. Financial Statements..................................... 23
5.9. Absence of Certain Changes............................... 23
5.10. Taxes.................................................... 26
5.11. Non-Contravention........................................ 27
5.12. Title to and Condition of the Assets of the
Company.................................................. 28
<PAGE>
5.13. Litigation............................................... 31
5.14. Employee Benefit Plans and Other Arrangements............ 32
5.15. Contracts................................................ 34
5.16. Insurance................................................ 36
5.17. Trademarks, Etc.......................................... 36
5.18. Transactions with Interested Persons..................... 38
5.19. Compliance with Laws, etc................................ 38
5.20. No Undisclosed Liabilities, Etc.......................... 39
5.21. Environmental Matters.................................... 40
5.22. Governmental Authorizations and Regulations.............. 41
5.23. Accounting Practices..................................... 42
5.24. Minute Books............................................. 42
5.25. Employee Matters......................................... 42
5.26. Accuracy of Information Furnished........................ 43
5.27. Disclosure............................................... 44
6. Representations and Warranties of Buyer........................ 44
6.1. Authority for Agreements................................. 44
6.2. Non-Contravention........................................ 45
6.3. Approvals................................................ 45
6.4. No Brokers............................................... 46
6.5. Accuracy of Information Furnished........................ 46
6.6. Organization, Etc........................................ 46
6.7. Litigation............................................... 47
6.8. Compliance with Laws, Etc................................ 49
6.9. Disclosure............................................... 49
7. Covenants of the Seller........................................ 50
7.1. Employment Contracts..................................... 50
7.2. Liability for Federal, State and Local Taxes............. 50
7.3. Claims Experience........................................ 51
7.4. Employment and Employee Benefits......................... 51
7.5. Non-Competition.......................................... 52
7.6. Subordination Agreement.................................. 53
7.7. Further Assurances....................................... 54
7.8. Loan Repayment........................................... 54
8. Covenants of the Buyer......................................... 55
8.1. Employment and Employee Benefits......................... 55
8.2. Termination of Company's Benefit Plans................... 56
8.3. Certain Life Insurance Policies.......................... 56
8.4. Undisclosed Liabilities.................................. 57
8.5. Payment of Assumed Liabilities........................... 57
8.6. F. Dickson Employment Agreement.......................... 57
-ii-
<PAGE>
8.7. Umbrella Insurance Coverage.............................. 58
8.8. Further Assurances....................................... 58
9. Conditions Precedent to Seller's Obligations to Sell the
Company Shares................................................ 58
9.1. The Buyer's Performance.................................. 58
9.2. Consents and Approvals................................... 59
9.3. No Legal Impediment...................................... 59
10. Conditions Precedent to the Buyer's Obligation to
Purchase the Company Shares................................... 60
10.1. Company's and the Seller's Performance................... 60
10.2. Consents and Approvals................................... 60
10.3. Physical Properties...................................... 61
10.4. No Legal Impediment...................................... 61
11. Events of Default.............................................. 61
11.1. Principal................................................ 61
11.2. Interest................................................. 62
11.3. Payments................................................. 62
11.4. Change of Control........................................ 63
11.5. Keyman................................................... 63
11.6. Bankruptcy; Insolvency................................... 63
12. Remedies Upon Default by Buyer................................. 63
12.1. Declare Notes and Other Elements of the Purchase
Price Due and Payable.................................... 63
12.2. Assignment of the Mark................................... 64
12.3. Covenants Not to Compete................................. 65
12.4. Employment Agreements.................................... 64
13. Indemnification................................................ 65
13.1. Indemnification of the Buyer and the Company............. 65
13.2. Indemnification of the Seller............................ 67
13.3. Procedure for Indemnification............................ 68
13.4. Survival of Representations, Warranties,
Covenants and Indemnification............................ 70
-iii-
<PAGE>
14. Miscellaneous.................................................. 71
14.1. Complete Agreement; Amendments; Waivers.................. 71
14.2. Counterparts............................................. 71
14.3. Successors and Assigns................................... 72
14.4. Governing Law............................................ 72
14.5. Notices.................................................. 72
14.6. Expenses................................................. 74
14.7. Headings; Form of Words.................................. 74
14.8. Severability............................................. 74
-iv-
<PAGE>
STOCK PURCHASE AGREEMENT
------------------------
STOCK PURCHASE AGREEMENT (the "Agreement") dated as of the 1st
day of January, 1996 by and between PGI Company H, a Virginia corporation (the
"Buyer"), and J. Franklyn Dickson, an individual residing at 537 Eugene Way,
Wyckoff, New Jersey 07481 (the "Seller");
WHEREAS, the Seller is the sole shareholder of Ray Bloch
Productions, Inc. (the "Company"), owning eighty-two and one half (82 1/2)
shares of the common stock of the Company, which comprise all of the outstanding
shares of common stock of Company;
WHEREAS, the Buyer desires to purchase from the Seller, and
the Seller desires to sell to the Buyer, one hundred percent (100%) of the
outstanding capital stock of the Company, all upon the terms and conditions
hereinafter set forth;
NOW, THEREFORE, in consideration of the foregoing premises,
the mutual covenants, agreements, representations, and warranties herein
contained, and other good and valuable consideration, the receipt and legal
sufficiency of which are hereby acknowledged, the parties hereto, each intending
to be legally bound, hereby agree as follows:
<PAGE>
1. Definitions.
-----------
1.1 Use of Defined Terms. Any defined term used in the plural
--------------------
shall refer to all members of the relevant class, and any defined term used in
the singular shall refer to any one or more of the members of the relevent
class.
1.2 Accounting Terms. All accounting terms not otherwise
----------------
defined in this Agreement shall be construed in conformity with, and all
financial data of the Buyer required to be submitted by this Agreement shall be
prepared in conformity with, generally accepted accounting principles ("GAAP")
and all financial data of Company and its Subsidiaries required to be submitted
by this Agreement shall be prepared on an income tax basis.
1.3 Production and Entertainment. Production business, is
----------------------------
defined as staged events held by corporations and organizations such as sales
meetings, product launches, and business communications in which the Company
would typically provide for the client conceptual design, coordinate and/or
supply staging and audiovisual services, outside speakers, and key production
personnel and other such materials and support necessary to run such meetings
and events. Entertainment business, is defined as the contracting and
production of well
2
<PAGE>
known professional talent to perform at such staged events.
1.4. Sections, Exhibits and Schedules. References in this
--------------------------------
Agreement to Sections, Exhibits and Schedules are to Sections, Exhibits and
Schedules of and to this Agreement. All Exhibits and Schedules to this Agreement
are hereby incorporated herein by this reference as if fully set forth herein.
1.5. Miscellaneous Terms. The term "or" shall not be
-------------------
exclusive. The terms "herein," "hereof," "hereto," "hereunder" and other terms
similar to such terms shall refer to this Agreement as a whole and not merely to
the specific article, section, paragraph or clause where such terms may appear.
The term "including" shall mean "including, but not limited to."
2. Purchase and Sale of the Company Shares.
---------------------------------------
2.1. Purchase and Sale of the Company Shares. Upon the terms
---------------------------------------
and provisions of this Agreement, the Buyer agrees to purchase and accept
delivery from the Seller, and the Seller agrees to sell, assign, transfer, and
deliver to the Buyer, at the Closing provided for in Section 3 hereof, the
common stock certificates representing eighty-two and one half (82 1/2) shares
of Common Stock of the Company, constituting one hundred percent (100%) of the
outstanding shares of capital stock of the Company
3
<PAGE>
(the "Company Shares"), free and clear of all liens, claims, charges,
restrictions, equities, or encumbrances of any kind.
2.2. Purchase Price. The purchase price to be paid by
--------------
Buyer (the "Purchase Price") for the Company Shares is a sum of
the following:
(a) The Buyer will, at the Closing, deliver to the
Seller, by certified check payable to the order of the Seller
("Certified Check"), or at Buyer's option, by wire
transfer to the account of the Seller:
J. Franklyn Dickson
c/o Chemical Bank
11 West 51st Street
New York, NY
#007-257-252
("Wire Transfer") the amount of Three Million Dollars
($3,000,000).
(b) The Buyer will, at the Closing, deliver to Seller
a series of five (5) subordinated promissory notes of Buyer in the
total amount of Three Million Dollars ($3,000,000) payable to the
Seller in the form annexed as Exhibit 2.2(b) hereto (the "Notes"). The
first of the Notes will be payable on the first anniversary of the
Closing, in the amount of One Million Two Hundred Fifty Thousand
Dollars ($1,250,000). The remaining four Notes will be payable as
follows:
4
<PAGE>
Note 2 -- on June 27, 1997
Note 3 -- on September 26, 1997
Note 4 -- on December 26, 1997
Note 5 -- on March 27, 1998;
Each of Notes 2 through 5 shall be in the principal amount of Four Hundred
Thirty-Seven Thousand Five Hundred Dollars
($437,500).
(c) The net working capital of Company as of December
31, 1995 shall be paid to Seller as follows:
(i) The Buyer will, at the Closing, deliver to the
Seller, by Wire Transfer, an additional amount equal to Two Hundred
Thousand Dollars ($200,000); and
(ii) The Buyer will, ninety (90) days after Closing,
deliver to the Seller, by Wire Transfer, an additional amount equal to
One Hundred Fifty Thousand Dollars ($150,000).
(d) The Seller will, at the Closing, provide the
following to Buyer: (i) a schedule of Company's accounts receivable as
of December 31, 1995, based on all information available to Seller as
of date of Closing in the form attached hereto as Schedule 2.2(d)(i);
and (ii) a schedule of accounts payable as of December 31, 1995, as
updated at the Closing in the form attached hereto as Schedule 2.2
(d)(ii).
In the event that any accounts receivable set
5
<PAGE>
forth on Schedule 2.2(d)(i) have not been paid to Company within ninety
(90) days after the Closing, Buyer shall have the right to offset the
amount of such unpaid accounts receivable against unpaid portions of
the Purchase Price, subject to Seller's right to collect such accounts
receivable pursuant to Section 2.5(a). In the event that any accounts
receivable existing prior to December 31, 1995 and not scheduled on
Schedule 2.2(d)(i) are paid to the Company within ninety (90) days
after the Closing, the amount of such unscheduled accounts receivable
shall immediately be paid to Seller by Company.
In the event that any undisclosed accounts payable or
undisclosed liability of the Company, including but not limited to
unpaid taxes, fines or penalties related thereto and any employee
benefit plan or arrangement, existing as of December 31, 1995 but not
scheduled on Schedule 2.2(d)(ii) are paid by the Company within ninety
(90) days after the Closing, Buyer shall have the right to offset the
amount of such undisclosed accounts payable or undisclosed liabilities
paid by the Company against unpaid portions of the Purchase Price,
provided that Company first notified Seller of such payable or
liability and offered Seller the opportunity to defend and/or settle
such claim pursuant to Section 2.5(b). In the event that any disclosed
accounts payable and/or liabilities set forth on Schedule 2.2(d)(ii)
are
6
<PAGE>
fully discharged by the Company for less than the scheduled value of
such accounts payable and/or liability, Buyer shall pay to Seller the
difference between the scheduled amount and the amount actually paid to
third parties.
(e) The Profit Before Interest and Taxes of the Company
in each of the Calendar Years 1996 and 1997 will be credited with the
amount of any commission shortfall existing as of December 31, 1995, as
set forth on Schedule 2.2(e)(i) hereto, recaptured by Company during
1996 and/or 1997, provided, however, Company shall have no obligation
to pursue the recapture of any such commission shortfalls, and Seller
will take no action to recapture any such commission shortfall after
Closing and Seller has, prior to Closing, taken only those acts and
recovered only those commission shortfalls listed on Schedule
2.2(e)(ii).
(f) If in either the calendar year beginning January 1,
1996 and ending December 31, 1996 ("Calendar Year 1996") or the
calendar year beginning January 1, 1997 and ending December 31, 1997
("Calendar Year 1997"), the existing business of the Company, defined
as the annual business generated by the employees of the Company who
were employed as of the Closing, or their replacements and any
Production or Entertainment business generated from accounts of the
Company as of December 31, 1995 taken over by others employed by the
Company or any of its affiliates
7
<PAGE>
("Existing Business"): (i) exceeds ******** ******* *******
************* in net revenue; (ii) generates at least a ***** *******
**** Profit Before Interest and Taxes; and (iii) generates at least ***
******* **** ******* ***** ******** ******* ************ of Profit
Before Interest and Taxes, then, in each such calendar year an amount
of **** ******* ******** ******* ********** will be paid by Buyer to
Seller by Wire Transfer within *** **** **** after the completion of
the applicable Calendar Year end financial audit by the Buyer's outside
public auditor or within one hundred and twenty (120) days after the
end of the applicable Calendar Year, whichever is sooner.
(g) If in either Calendar Year 1996 or Calendar Year
1997, the Existing Business: (i) exceeds ******** ******* *******
************* in net revenue ; (ii) generates at least a **** *******
**** Profit Before Interest and Taxes; and (iii) generates at least ***
******* **** ******* ***** ******* ************ of Profit Before
Interest and Taxes then for each such Calendar Year, in addition to the
amount specified in Section 2.2(f) above, Buyer shall pay an additional
amount of *** ******* ***** ******** ******* ********** by Wire
Transfer, within *** **** **** after the completion of the applicable
Calendar Year end financial audit by the Buyer's outside public auditor
or within one hundred and twenty (120) days after
* CONFIDENTIAL INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
COMMISSION
8
<PAGE>
the end of the applicable Calendar Year, whichever is
sooner.
(h) If Seller is terminated with or without cause under
the F. Dickson Employment Agreement (as those terms are defined in such
F. Dickson Employment Agreement), and if the goals (i) though (iii) set
forth in subsection (f) above are not met in Calendar Year 1996 or
Calendar Year 1997, then the Company shall pay Seller an amount of
$250,000 for each such Calendar Year when Seller is not employed on the
last day of such Calendar Year, provided, however, no payment shall be
made under this Section 2.2(h) if the Seller is terminated because he
was convicted of a criminal offense involving moral turpitude, such as,
but not limited to, larceny, embezzlement, fraud or making false
statements to a government entity or agency.
2.3. Definition of Profit Before Interest and Taxes. For
----------------------------------------------
the purpose of calculating the Purchase Price to be paid to Seller under the
terms of Sections 2.2(f) and 2.2(g) above, Profit Before Interest and Taxes
shall be defined as income from the Existing Business of the Company prior to
any loan interest charges, or charges for federal, state or local income taxes,
but after all expenses relating to the Existing Business of the Company except:
(i) any extraordinary corporate
9
<PAGE>
allocation charged by Buyer to the Company; and (ii) depreciation on all new
fixed assets of the Company added after Closing and not added in the ordinary
course of business; and (iii) any corporate expense of the Buyer not incurred in
the ordinary course of business charged to the Company unless mutually agreed
upon.
2.4. Financial Statements and Seller's Right to Audit. During
------------------------------------------------
Calendar Years 1996 and 1997 the Company's financial statements will be prepared
on an accrual basis in accordance with GAAP. Seller shall have the right to
inspect and/or audit Company's financial statements relating to Calendar Years
1996 and 1997 during business hours at Seller's expense on reasonable notice to
Company, provided, however, that if the Profit Before Interest and Taxes has
been understated in any Calendar Year by more than five percent (5%), the
expense of Seller's audit shall be paid by Buyer. It is the intent of the Buyer
and Seller that the change from income tax basis to accrual basis accounting
will not alter the payments, if any, due to Seller under Sections 2.2 (f) and
2.2 (g). Accordingly, the financial statements for Calendar Years 1996 and 1997
shall include statements of Existing Business and Profit Before Interest and
Taxes, prepared both on an accrual basis and on a reconstructed cash basis. In
the event that Buyer and Seller cannot come to mutual agreement after good faith
consultation on
10
<PAGE>
the actual amount of Existing Business and/or Profit Before Interest and Taxes
in Calendar Year 1996 and/or 1997, either party may submit the issue of such
disputed amount to arbitration in New York City or Washington, D.C. Said
arbitration shall be conducted under the expedited procedures of the commercial
arbitration rules of the American Arbitration Association before a single
arbitrator who shall be a certified public accountant. The issues to be
arbitrated shall be limited solely to the issue of the disputed amount. The
arbitrator shall make specific findings of fact respecting such disputed amount.
The determination of the arbitrator shall be final and binding upon the parties.
2.5. Offset Against Purchase Price. Buyer and Seller agree
-----------------------------
that Buyer has the right to offset, the amount of: (i) any accounts receivable
of the Company as of the Closing Date that are not paid to Buyer in full in
accordance with their terms; and (ii) any undisclosed accounts payable or
undisclosed liability of the Company, including but not limited to unpaid taxes,
fines or penalties related thereto and any employer matter or employee benefit
plan or arrangement, existing as of the Closing that are paid after Closing by
Buyer or Company, from any future payments to the Seller, including but not
limited to all payments constituting the Purchase Price:
(a) In the event Buyer determines that an account
11
<PAGE>
receivable of Company has not been paid in accordance with its contract
terms, Buyer shall notify Seller, providing Seller with the particulars
of the account receivable. Seller may then pursue collection of such
amounts remaining due from the debtor in question at Seller's own
expense. If Seller collects any such amounts on behalf of Company or
Company otherwise receives payment of any such amounts that Buyer has
previously offset from Purchase Price, then Buyer shall within ten (10)
days of receiving any such amount pay Seller such amounts. Seller shall
take no action in collecting such amounts which Buyer reasonably
designates as detrimental to Buyer's continuing relationship with such
debtor.
(b) Any undisclosed accounts payable or undisclosed
liabilities of the Company that existed as of the Closing shall
promptly be brought to the attention of Seller by Company and Seller
shall have the opportunity to defend against and/or settle such claim
at his own expense, unless such action would have an unreasonably
adverse effect on the Company and its on-going business. Company may
offset only amount of such accounts payable or liability actually paid
by it.
2.6. Closing Costs. At the Closing, the Buyer will pay by
-------------
check the sum of Twenty Two Thousand Dollars ($22,000) to
12
<PAGE>
Cowan, Gold, DeBaets, Abrahams & Sheppard, attorneys for Seller, to cover legal
drafting costs incurred at Buyer's request.
3. Closing.
-------
3.1. Closing. The closing of the purchase and sale of the
-------
Company Shares (the "Closing") will take place at the offices of Cowan, Gold,
DeBaets, Abrahams & Sheppard (or at such other place as the parties may mutually
agree) at 10:00 a.m. on March 27, 1996, or at such other time and on such other
date as the parties may mutually agree, but in no event will the Closing occur
after March 31, 1996. The date and time of the Closing are referred to herein as
the "Closing Date."
4. Deliveries at the Closing.
-------------------------
4.1. Deliveries to the Buyer by the Seller. At the Closing,
-------------------------------------
the Seller will deliver to the Buyer:
(a) Against receipt of the Wire Transfer or Certified
Check, the Seller will deliver to the Buyer the certificates for one
hundred percent (100%) of the Company Shares, all in accordance with
the requirements of Section 2.1 hereof, which certificates will be duly
endorsed in blank or accompanied by stock powers duly executed in
blank, in proper form for transfer;
13
<PAGE>
(b) A certificate, in form and substance reasonably
acceptable to the Buyer, executed by the President of the Company, and
attested to by the Secretary of the Company, dated as of the Closing
Date, and certifying that: (i) attached thereto is a true and complete
copy of the By-laws of the Company in effect as of the Closing Date;
and (ii) attached thereto is a true and complete copy of the Articles
of Incorporation of the Company, as amended and in effect as of the
Closing Date;
(c) A certificate, in form and substance reasonably
acceptable to the Buyer, executed by the Seller, dated as of the
Closing Date, certifying as to the accuracy of the Company's and the
Seller's representations and warranties at and as of the Closing;
(d) Resignations of all of the directors and officers of
the Company, in their capacity as directors, officers and employees,
with the exception of Seller;
(e) A schedule in the form attached hereto as Schedule
4.1(e) of the location of all of the Company's contracts, books,
records, and other data relating to the Company's operations, including
the Company's minutes and stock books;
(f) Copies of all of Company's employment
agreements;
(g) The employment agreement between the Company
14
<PAGE>
and the Seller, in the form attached hereto as Exhibit 4.1(g) executed
by Seller (the "F. Dickson Employment Agreement");
(h) Control over all assets of the Company and its
subsidiaries including cash held in the Company's or its subsidiaries'
name or owned by Company or its subsidiaries as of the Closing;
(i) Any schedules that are to be updated as of the
Closing Date;
(j) An opinion of Seller's counsel in the form attached
hereto as Exhibit 4.1 (j);
(k) The Release between Robin Dickson and the Company in
the form attached hereto as Exhibit 4.1(k) executed by Robin Dickson;
and
(l) The Company's cancelled common stock certificates
redeemed from Robin Dickson.
4.2. Deliveries to the Seller by the Buyer. At the Closing,
-------------------------------------
the Buyer will deliver to the Seller the following:
(a) The sum of three million dollars ($3,000,000) by Wire
Transfer or Certified Check to the Seller's account, against receipt of
the stock certificates for the Company Shares in accordance with
Section 4.1(a) and 2.2(a) above;
(b) Fully executed Notes in the form annexed as
15
<PAGE>
Exhibit 2.2(b) above;
(c) A fully executed guarantee agreement between
Production Group International, Inc. and Seller (the "Guarantee"), in
the form annexed as Exhibit 4.2(c) hereto;
(d) A fully executed, undated, trademark assignment of
the trade name "Ray Bloch Productions, Inc." and all trademarks and
associated logos (the "Assignment") from Company to Seller in the form
annexed hereto as Exhibit 4.2 (d)(i), to be deposited in escrow
pursuant to this Agreement and a fully executed escrow agreement (the
"Escrow Agreement") among Buyer, Seller, and Cowan, Gold, DeBaets,
Abrahams & Sheppard as escrow agent in the form annexed as Exhibit
4.2(d)(ii);
(e) A certificate, in form and substance reasonably
acceptable to the Seller, executed by the President of the Buyer, and
attested to by the Secretary of the Buyer, dated as of the Closing
Date, certifying as to the accuracy of the Buyer's representations and
warranties at and as of the Closing;
(f) A certificate, in form and substance reasonably
acceptable to Seller, executed by the President of the Buyer and
attested to by the Secretary of the Buyer, dated the Closing Date, and
certifying that: (i) attached thereto is a true and complete copy of
the By-laws of Buyer, as in effect as of the Closing Date; (ii)
16
<PAGE>
attached thereto is a true and complete copy of resolutions duly
adopted by the Board of Directors of Buyer authorizing the execution,
delivery and performance of this Agreement; and that such resolutions
have not been modified, rescinded, or amended and are in full force and
effect; and (iii) attached thereto is a true and complete copy of the
Articles of Incorporation of the Buyer, as amended and as in effect as
of the Closing Date.
5. Representations and Warranties of the Seller. The Seller,
--------------------------------------------
individually and in his capacity as an officer and director of the Company and
its subsidiaries, represents and warrants to the Buyer that as of the date of
this Agreement and as of the Closing Date:
5.1. Ownership; Transfer of the Company Shares. The Company
-----------------------------------------
Shares are duly authorized, validly issued, fully paid, and non-assessable. The
Seller owns the Company Shares free and clear of all liens, encumbrances,
pledges, charges, security interests, rights, options, or other adverse
interests of any kind. The Seller has the right, power, and authority to sell
all of the Company Shares as provided herein, and upon such sale, the Buyer will
receive good and valid title to all of the Company Shares, subject to no liens,
encumbrances, pledges, charges, security interests, rights, options, or other
adverse interests of any kind. The certificates for the Company Shares will be,
17
<PAGE>
when delivered to the Buyer, duly endorsed in blank or accompanied by stock
powers duly executed in blank, in proper form for transfer.
5.2. Authority. The Seller has the power and authority to execute
---------
and deliver this Agreement and each of the Seller and the Company has the power
and authority to execute and deliver the other agreements and documents
contemplated by this Agreement (all such agreements and documents will be known
hereafter as the "Transaction Documents", regardless of which party is required
to execute or deliver any such agreement or document) to which it or he is a
party and to carry out its or his obligations hereunder and thereunder, as the
case may be. The execution, delivery, and performance of each of the Transaction
Documents to which the Company is a party and the consummation of the
transactions contemplated thereby have been duly authorized by the Board of
Directors of the Company. No other proceeding on the part of the Company or the
Seller is necessary to authorize the execution and delivery of this Agreement or
any of the Transaction Documents to which the Company or the Seller is a party
or the performance by the Company or the Seller of any of the transactions
contemplated hereby or thereby. This Agreement, and each of the Transaction
Documents to which the Company or the Seller is a party, has been duly executed
and delivered on behalf of the Company and the
18
<PAGE>
Seller and when executed and delivered by all required parties thereto, will be
a legal, valid, and binding obligation of the Company and the Seller enforceable
against the Company and the Seller in accordance with their respective terms,
except to the extent that the validity, binding legal effect, or enforceability
of any provisions in the Agreement or any Transaction Document, or any rights
granted herein or thereunder may be subject to or affected by applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium, or
similar laws affecting the rights of creditors generally, and general principles
of equity (whether asserted in an action at law or in equity).
5.3. Approvals. No consent, approval, order, or authorization of,
---------
or registration, declaration, or filing with, any governmental authority is
required in connection with the execution and delivery of this Agreement and the
Transaction Documents, by each of the Company or the Seller, or with the
consummation of the transactions contemplated hereby or thereby. No consent of
any third party is necessary to permit the consummation of the transactions
contemplated hereby or thereby.
5.4. No Brokers. All negotiations relating to this Agreement and
----------
the Transaction Documents, and the transactions contemplated hereby and thereby,
have been carried out by the Company and the Seller without the intervention of
any
19
<PAGE>
person or firm in such manner as to give rise to any valid claim against any of
the parties hereto for a brokerage commission or finder's fee.
5.5. Organization, Etc.
-----------------
(a) The Company is a corporation duly organized, validly
existing, and in good standing under the laws of the State of New York, and
has all requisite corporate power and authority to own or lease and to
operate its properties and to carry on its business as now being conducted.
The Company has delivered to the Buyer complete and correct copies of the
Company's Articles of Incorporation, By-laws, and all amendments thereto.
The Company is not duly qualified or licensed to do business as a foreign
corporation in any jurisdictions outside the State of New York.
(b) All subsidiary corporations or other entities of the
Company, listed on Schedule 5.7, are duly organized, validly existing, and
in good standing under the laws of the state of their incorporation or
organization and individually have all requisite power and authority to own
or lease and to operate its properties and to carry on its business as now
being conducted. The Company has delivered to the Buyer complete and
correct copies of each subsidiary's Articles of Incorporation, By-laws or
20
<PAGE>
organizational documents, whichever is applicable, and all amendments
thereto. No subsidiary entity is qualified or licensed to do business as a
foreign corporation or entity in any jurisdictions outside of the state of
their incorporation or organization.
(c) As of the date of Closing, no claim has been made against
Company by any person or entity based upon the failure of Company or any of
its subsidiaries to qualify or be licensed to do business as a foreign
corporation in any state. In the event a future claim is made based upon
the Company or its subsidiary's failure to qualify or be licensed to do
business as a foreign corporation in any state prior to the Closing Date,
such claim shall be treated as an undisclosed liability in accordance with
Section 2.2(d) above, provided: a liability continuing after the Closing
Date shall be pro-rated to cover only the amount of time prior to the
Closing Date.
5.6. Capital Stock.
-------------
(a)(i) The Company's authorized capital stock consists of two
hundred (200) shares of Common Stock, no par value per share; (ii) the only
issued and outstanding shares of capital stock of the Company are eighty-
two and one half (82 1/2) shares of the Company's Common Stock, all of
which eighty-two and one half (82 1/2) shares are owned
21
<PAGE>
beneficially and of record by the Seller; (iii) there are no outstanding
subscriptions, options, conversion rights, warrants, or other agreements or
commitments of any nature whatsoever (either firm or conditional) obligating
the Company to issue, deliver, sell, or cause to be issued, delivered, or
sold any additional shares of capital stock of the Company, or obligating
the Company to grant, extend, or enter into any such agreement or
commitment; and (iv) there are no rights of first refusal, pre-emptive
rights, or other similar agreements obligating the Company to offer any
shares of its capital stock to any person.
(b)(i) The only issued and outstanding shares of capital stock of
the Company's subsidiaries listed on Schedule 5.7 are wholly-owned by the
Company; (ii) there are no outstanding subscriptions, options, conversion
rights, warrants, or other agreements, or commitments of any nature
whatsoever (either firm or conditional) obligating the Company or a
subsidiary to issue, deliver, sell, or cause to be issued, delivered, or
sold, any additional shares of capital stock of any subsidiary, or
obligating the Company or subsidiary to grant, extend, or enter into any
such agreement or commitment; and (iii) there are no rights of first
refusal, preemptive rights, or similar agreements obligating any subsidiary
to offer any shares of its capital stock to any person.
22
<PAGE>
5.7. No Subsidiaries, Etc. The Company does not own, directly
--------------------
or indirectly, capital stock or equity in any other corporation or other person
and is not a partner in any partnership or a participant in any joint venture,
except as listed on Schedule 5.7.
5.8. Financial Statements. The Company has delivered to the
--------------------
Buyer complete and correct copies of (a) the Company's consolidated income tax
returns for the calendar years ended December 31, 1993 and 1994 and (b) the
Company's unaudited consolidated financial statements for the calendar year
ended December 31, 1995; and (c) all financial statements completed since
December 31, 1995. All such financial statements have been prepared on an income
tax accounting basis and on an historically consistent basis throughout the
periods indicated and present fairly the financial condition of the Company at
the dates indicated and the results of operations for the periods indicated.
5.9. Absence of Certain Changes. Except to the extent
--------------------------
specifically set forth in reasonable detail on Schedule 5.9 hereto, since
December 31, 1995 there have been no material adverse changes in the assets,
liabilities, properties, business, or prospects of the Company or of any
subsidiary and neither the Company nor any subsidiary has:
23
<PAGE>
(a) issued or sold any stock, notes, bonds, or other securities,
or any option to purchase the same, or entered into any agreement with
respect thereto;
(b) declared, set aside, or made any dividend or other
distribution on capital stock or redeemed, purchased, or acquired any
shares thereof, except for the redemption of shares previously owned by
Robin Dickson, or entered into any agreement in respect of the foregoing;
(c) amended its Articles of Incorporation or By-laws;
(d) other than in the ordinary course of business (i) purchased,
sold, assigned or transferred any material tangible or intangible assets or
property (including cash and cash equivalents); (ii) mortgaged, pledged,
granted or suffered to exist any lien or other encumbrance or charge on any
material tangible or intangible assets or properties, except for liens for
taxes not yet due; or (iii) waived any rights of material value or canceled
any material debts or claims;
(e) incurred any material obligation or liability (absolute or
contingent), except current liabilities and obligations incurred in the
ordinary course of business, or paid any material liability or obligation
(absolute or contingent) other than current liabilities and obligations
incurred in the ordinary course of business;
24
<PAGE>
(f) increased, or become obligated to increase, the compensation
or other benefits payable to any officer or director of the Company or any
relative of any such officer or director, or paid a bonus, or granted any
severance or termination pay, or entered into any employment agreement or
other agreement (written or oral) with any officer or salaried employee
(except as may be effected in accordance with the terms of this Agreement);
(g) incurred any damage, destruction, or similar loss, whether
or not covered by insurance, materially affecting the businesses or
properties of the Company;
(h) entered into any transaction other than in the ordinary
course of business;
(i) suffered any strike or other labor trouble materially and
adversely affecting its business, operations, or prospects;
(j) made or permitted any material amendment or termination of
any material contract, agreement, or license to which it is a party other
than in the ordinary course of business;
(k) made any change in its accounting methods or practices with
respect to its condition, operations, business, properties, assets, or
liabilities;
(l) abandoned or disposed of any material trade secret,
trademark, tradename, trademark application,
25
<PAGE>
tradename application, or any other intellectual property;
(m) suffered any loss of employees or customers that materially
and adversely affects its business, operations, or prospects;
(n) failed to carry on their business and operations
substantially in the manner carried on as of the date hereof and the Company and
the subsidiaries have not engaged in any activity or transaction or made any
commitment to purchase or spend, other than in the ordinary course of their
business as heretofore conducted;
(o) failed to make their best efforts to preserve its business
organization intact, to keep available to the Buyer the services of its
employees and independent contractors and to preserve for the Buyer its
relationships with suppliers, licensees, distributors, and customers and others
having business relationships with it;
(p) obligated itself to, sell or otherwise dispose of or pledge
or otherwise encumber any of their properties or assets except in the ordinary
course of business or failed to maintain its facilities, machinery, and
equipment in good operating condition and repair, subject only to ordinary wear
and tear.
5.10. Taxes. Except to the extent specifically set forth in reasonable
-----
detail on Schedule 5.10 hereto, all federal,
26
<PAGE>
state, county, municipal, and foreign tax returns required by law to be filed by
the Company, any subsidiary, and the Seller as of December 31, 1995 have been
duly filed, and all taxes (including without limitation sales, use, property,
and payroll taxes), assessments, fees, and other governmental charges together
with any and all penalties, fines, and interest thereon ("Taxes") upon the
Company, any subsidiary and the Seller or upon any of the Company's,
subsidiaries' or the Seller's properties, assets, revenues, income, sales, or
franchises that have become due and payable in respect of the periods or
transactions covered thereby, have been paid. Except to the extent specifically
set forth in reasonable detail on Schedule 5.10 hereto, neither the Internal
Revenue Service nor any other taxing authority or agency is now asserting, or is
threatening to assert, against the Company, any subsidiary or the Seller any
deficiency or claim for additional Taxes or interest thereon or penalties in
connection therewith. The Company, any subsidiary, and the Seller have not been
granted any waiver of any statute of limitation with respect to, or been granted
any extension of a period for the assessment of, any federal, state, county,
municipal, or foreign income tax. Seller has delivered to Buyer copies of all
federal, state and local tax returns for the Company and all its subsidiaries
for the calendar years 1992, 1993 and 1994.
5.11. Non-Contravention. Except to the extent
-----------------
27
<PAGE>
specifically set forth in reasonable detail on Schedule 5.11 hereto, the
execution and delivery of this Agreement and the Transaction Documents and the
consummation of the transactions contemplated hereby and thereby will not (a)
violate any provision of the Articles of Incorporation or By-laws of the Company
or any subsidiary; (b) violate any material provision of, or result in the
breach or the acceleration of, or entitle any party to accelerate (whether after
the giving of notice or lapse of time or both) any material obligation under any
mortgage, lien, lease, agreement, license, instrument, order, arbitration award,
judgment, or decree to which either the Company, any subsidiary, or the Seller
is a party or by which it or he is bound; (c) result in the creation or
imposition of any material lien, charge, pledge, security interest, or other
encumbrance upon any property of the Company, any subsidiary or the Seller; or
(d) violate or conflict with any other material restriction or any law,
ordinance, or rule to which the Company, any subsidiary or the Seller or any
property of either the Company, any subsidiary or the Seller is subject.
5.12. Title to and Condition of the Assets of the Company.
---------------------------------------------------
(a) The Company and all subsidiaries have good and marketable
title to all assets owned by them free and clear of all mortgages, liens,
charges, encumbrances, easements,
28
<PAGE>
security interests, or title imperfections, except to the extent
specifically set forth in reasonable detail on Schedule 5.12 hereto. The
assets reflected in the financial statements of the Company for its fiscal
year ended December 31, 1995 referred to in Section 5.8 hereof constitute
all of the tangible assets and properties that the Company and its
subsidiaries own, use, or hold in connection with their business, and the
conduct of such business as a going concern, except for additions or
dispositions in the ordinary course of business. The facilities, machinery,
furniture, office, and other equipment of the Company and all subsidiaries
that are used in its business are in good operating condition and repair,
subject only to the ordinary wear and tear of that business, and neither
the Company nor any property or asset owned or leased by it is in violation
of any applicable ordinance, regulation, or building, zoning, environmental
or other law in respect thereof, the violation of which will have a
material adverse effect on the financial condition, the conduct of the
business or the ownership or use of any of the properties or assets of the
Company or its subsidiaries.
(b) The Company and the subsidiaries own no real estate.
Schedule 5.12(b) hereto sets forth all personal property (with monthly
lease payments in excess of One Hundred Dollars ($100.00)) and real estate
leased to the
29
<PAGE>
Company or its subsidiaries and specifies in the case of real estate the
location of each property, the use of the facility thereon, the name of the
owner or the names of the lessor and the lessee, the approximate square
footage of improvements. The Company has delivered to the Buyer access to
copies of each lease by which the Company or a subsidiary acquired its
interest in the personal property described in Schedule 5.12(b). Neither
the Company nor any subsidiary has received any written notice from any
governmental agency, board, bureau, body, department, or authority of any
United States or foreign jurisdiction, which materially restricts the use
of any of the real estate described in Schedule 5.12(b) hereto. Except as
set forth in Schedule 5.12(b) hereto, there is no easement, right-of-way
agreement, license, sublease, occupancy agreement, or like instrument with
respect to any of the real estate described in Schedule 5.12(b) hereto
which would have a material adverse effect on the Company's or a
subsidiary's use of such real estate. Each lease pursuant to which the
Company or a subsidiary leases any real or personal property is in full
force and effect and is valid and enforceable in accordance with its terms.
There is not under any such lease any material default by the Company or a
subsidiary, or any event that with notice or lapse of time or both would
constitute such a material default by the Company or a
30
<PAGE>
subsidiary. Each property used in the business of the Company or a
subsidiary is reflected in the balance sheet of the Company as of December
31, 1995, referred to in Section 5.8 hereof.
(c) Seller has provided Buyer with a complete and accurate list
of all of the Company's accounts payable and liabilities as of December 31,
1995 on Schedule 5.12(c) and shall update this Schedule 5.12(c) as of the
Closing Date.
5.13. Litigation. Except as set forth in reasonable detail on
----------
Schedule 5.13 hereto:
(a) There are no actions, suits, proceedings, investigations, or
inquiries pending or threatened against or affecting the business,
operations, financial condition, or prospects of the Company or any
subsidiary at law or in equity in any court or before any federal, state,
municipal, or other governmental department, commission, board, bureau,
agency, or instrumentality.
(b) There are no actions, suits, proceedings, investigations,
or inquiries pending or threatened against the Seller at law or in equity
in any court or before any federal, state, municipal, or other governmental
department, commission, board, bureau, agency, or instrumentality that
reasonably could be expected to have an adverse effect on the Seller's
right or ability to execute and deliver this
31
<PAGE>
Agreement and the Transaction Documents or consummate the transactions
contemplated hereby or thereby.
(c) Neither the Company nor any subsidiary is in default in
respect of any judgment, order, writ, injunction, or decree of any court or
any federal, state, municipal, or other governmental department,
commission, board, bureau, agency, or instrumentality.
(d) There are no actions, suits, proceedings, investigations, or
inquiries pending or threatened against the Company, any subsidiary at law
or in equity in any court or before any federal, state, municipal, or other
governmental department, commission, board, bureau, agency, or
instrumentality that reasonably could be expected to have an adverse effect
on the Company's or any subsidiary's right or ability to execute and
deliver any of the Transaction Documents or consummate the transactions
contemplated thereby.
5.14 Employee Benefit Plans and Other Arrangements.
---------------------------------------------
(a) Employee Plans Generally. Except as set forth in reasonable
------------------------
detail on Schedule 5.14(a) hereto, the Company does not maintain, does not
make any contributions to, or has not been obligated by law or agreement to
establish, maintain, sponsor, or make any contributions to (i) any employee
pension benefit plan as described in Section 3(2)
32
<PAGE>
of the Employee Retirement Income Security Act of 1974, as amended, and
regulations thereunder ("ERISA"); (ii) any employee welfare benefit plan as
described in Section 3(1) of ERISA, including, without limitation, any
arrangement providing for the payment of health benefits to former
employees or their beneficiaries; (iii) any formal or informal severance
plan or arrangement, including, without limitation, any arrangement
providing for payments to be made to any person contingent upon a change of
ownership or effective control of the Company or ownership of a substantial
portion of the assets of the Company; or (iv) any other deferred
compensation, bonus, stock option, stock purchase, insurance, or other
employee benefit plan, agreement, fund, or arrangement, whether or not set
forth in writing, providing benefits of economic value to any employee,
former employee, or present or former beneficiary, dependent, or assignee
other than regular salary, wages, or commissions paid substantially
concurrently with the performance of the services for which such benefits
are paid.
(b) Post-Retirement Benefits. Except to the extent required
------------------------
under the Consolidated Omnibus Budget Reconciliation Act of 1985, as
amended ("COBRA"), the Company has not incurred any current or future
obligation to provide health or life insurance benefits to employees or
33
<PAGE>
former employees with respect to any period which extends beyond
retirement or other termination of employment.
(c) ERISA Title IV Considerations. Neither the Company nor any
-----------------------------
member of the Company's controlled group (within the meaning of Section
4001 of ERISA) has incurred (or reasonably expects to incur) any material
liability to the Pension Benefit Guaranty Corporation or any material
liability under Title IV of ERISA, and there are no circumstances that
might result in the imposition of a lien on any of the assets of the
Company pursuant to ERISA Sections 302 or 4068 or Section 412 of the
Internal Revenue Code of 1986, as amended.
(d) Multiemployer Plans. Neither the Company nor any member of
-------------------
the Company's controlled group (within the meaning of Section 4001 of
ERISA) does now have, or during the last five years has had, any obligation
to contribute to, or any other liability or potential liability with
respect to, a "multiemployer plan" as that term is defined in Section 3(37)
of ERISA or a multiple controlled group plan as described in Sections 4063
and 4064 of ERISA (including, without limitation, any withdrawal liability
or plan termination obligations).
5.15. Contracts.
---------
(a) Schedule 5.15(a) hereto contains a complete
34
<PAGE>
and correct list of all agreements, contracts, and commitments to which
the Company or any subsidiary is a party or by which it or any of its
assets is bound as of the date hereof.
(b) The Buyer has been given access and upon Buyers's request
Seller will provide complete and correct copies of all written agreements,
contracts, and commitments to which the Company or any subsidiary is a
party or by which it or any of its assets is bound, together with all
amendments thereto. Such agreements, contracts, and commitments are in full
force and effect, and all parties to such agreements, contracts, and
commitments have, in all material respects, performed all obligations
required to be performed by them to date, and the Company and subsidiaries
are not, and no other party is, in material default thereunder.
(c) No agreement, contract, or commitment to which the Company
or any subsidiary is a party or by which its or any of its assets is bound
purports to limit its freedom to compete in any line of business or with
any person or entity. The Company has no outstanding power of attorney,
except routine powers of attorney relating to representation before
governmental agencies.
(d) Neither the Company nor any subsidiary is a party to any
material contract with any governmental
35
<PAGE>
authority. Neither the Company nor any subsidiary is a party to any
contract that materially and adversely affects its condition (financial or
otherwise), operations (present or prospective), business (present or
prospective), properties, assets, or liabilities. Except as set forth on
Schedule 5.15(d) hereto, neither the Company nor any subsidiary knows of a
bid or contract proposal made by either that, if accepted or entered into,
might reasonably be expected to result in a loss to the Company.
5.16. Insurance. The Company maintains adequate insurance against
---------
risks for the business in which it and its subsidiaries are engaged, including
without limitation, worker's compensation and comprehensive liability insurance.
All of the Company's and subsidiaries' insurance policies are listed on Schedule
5.16 hereto, are in full force and effect, all premiums due thereon have been
paid, and the Company and the subsidiaries have complied in all material
respects with the provisions of such policies.
5.17. Trademarks, Etc. Schedule 5.17 hereto contains a complete and
---------------
accurate list (including registration numbers and dates of filing, renewal, and
termination) of all trademarks, patents, tradenames, trade secrets, copyrights,
service marks, licenses, all registrations and applications for any of the
36
<PAGE>
foregoing, and other intellectual property owned by the Company or any
subsidiary or in which the Company or any subsidiary has registered an interest
or for which applications have been made (collectively, the "Intellectual
Property"). Except as otherwise set forth in Schedule 5.17 hereto, (a) all of
the Intellectual Property is owned by the Company or its subsidiaries free and
clear of all liens, encumbrances, or claims whatsoever; none of the Company's or
any subsidiary's rights in or use of such Intellectual Property infringes on the
rights of others, and Company's or any subsidiary's rights in said property have
not been and are currently not being, to the knowledge of the Seller, threatened
or challenged; (b) all of the Intellectual Property registrations set forth in
Schedule 5.17 have been duly issued and have not been canceled, abandoned, or
otherwise terminated; (c) all of the Intellectual Property applications set
forth in Schedule 5.17 have been duly filed with the appropriate authorities;
and (d) no consents or approvals of any person are necessary to sell, convey,
transfer, assign, and deliver any of the Intellectual Property to the Buyer.
Except as set forth in Schedule 5.17 hereto, the Company and each subsidiary
owns or has the right to use all of the Intellectual Property necessary to
conduct its operations and business and the Company and its subsidiaries know of
no claim, or any basis of any claim, that it has infringed any intellectual
property of any other person or that any other person has infringed any of the
Intellectual
37
<PAGE>
Property. Except as set forth in Schedule 5.17 hereto, no third party has been
permitted or licensed to use any of the Intellectual Property and no royalties
or other fees are payable to any third party with respect to any of the
Intellectual Property.
5.18. Transactions with Interested Persons. Except to the extent
------------------------------------
specifically set forth in reasonable detail on Schedule 5.18 hereto and the
financial statements delivered to the Buyer pursuant to Section 5.8 above,
neither the Company nor Seller (or Seller's family members) owns, directly or
indirectly, on an individual or joint basis, an interest in, or serves as an
officer, director, employee, consultant, contractor, or agent of or to any
competitor or supplier of the Company or any person or entity having a contract
or arrangement with the Company, and to the best of Seller's knowledge, no
employee (or family member thereof) of the Company owns, directly or indirectly,
on an individual or joint basis, an interest in, or serves as an officer,
director, employee, consultant, contractor, or agent of or to any competitor or
supplier of the Company or any person or entity having a contract or arrangement
with the Company.
5.19 Compliance with Laws, etc. The Company, and its subsidiaries
-------------------------
have complied with and are in compliance with all federal, state, local, and
foreign statutes, laws, ordinances,
38
<PAGE>
regulations, rules, permits, judgments, orders, or decrees applicable to it or
any of its properties, assets, operations, and business, the failure of
compliance with which would have a material adverse effect on the properties,
operations, business, financial condition, or prospects of the Company. There
does not exist any basis for any claim of default under or violation of any such
statute, law, ordinance, regulation, rule, permit, judgment, order, or decree
except such defaults or violations, if any, that in the aggregate do not and
will not materially and adversely affect the properties, operations, business,
financial condition, or prospects of the Company.
5.20. No Undisclosed Liabilities, Etc. Except for the transactions
-------------------------------
contemplated by this Agreement and as set forth in Schedule 5.20 hereto:
(a) The Company and subsidiaries have not incurred any material
liability or obligation (absolute, accrued, contingent, or otherwise) of
any nature (other than liabilities and obligations incurred in the ordinary
course of business) [that would properly be reflected or reserved against
in a balance sheet prepared in a manner historically consistent with that
used in the preparation of the balance sheet of the Company as of December
31, 1995] referred to in Section 5.8 above.
(b) Neither Company nor any subsidiary has
39
<PAGE>
acquired any material amount of accounts receivable that are uncollectible.
5.21. Environmental Matters.
---------------------
(a) No releases or threat of releases of hazardous substances
have occurred at, from, in or on any real property owned, leased or
operated by the Company ("Site", or collectively, "Sites"), nor are there
any hazardous substances in, on, about or migrating to any Site;
(b) No releases or threat of releases of hazardous substances
have occurred at, from or in any Site to which a hazardous substance
generated by or from the Company has been disposed of;
(c) There are no past or pending environmental claims against
the Company or any subsidiary related to any Site or off-Site locations
to which the Company or any subsidiary has shipped hazardous substances.
To the Seller's best knowledge, there has been no violation of or non-
compliance with any environmental law or environmental permit by the
Company or any subsidiary relating to operations of the Company or any
subsidiary or other uses of the Site;
(d) There are no facts, circumstances, or conditions that could
reasonably be expected to restrict, encumber, or result in the imposition
of special conditions
40
<PAGE>
under any environmental law or environmental permits with respect to the
ownership, occupancy, development, use, or transferability of any Site;
(e) There are no underground storage tanks, polychlorinated
biphenyl-containing materials, or asbestos containing materials located at
any Site;
(f) There are not and there have not been any environmental
conditions at any Site resulting from or arising out of any of Company's
past activities at any Site created prior to or existing at the Closing
Date; and
(g) All necessary environmental permits and other permits for
all activities related to the past operations and current operations at all
Sites were obtained. The Company has fully complied and is in full
compliance with all environmental laws and environmental permits with
respect to activities relating to the Sites.
5.22. Governmental Authorizations and Regulations. Schedule 5.22
-------------------------------------------
hereto lists all licenses, franchises, permits, and other governmental
authorizations held by the Company material to the conduct of its business. Such
licenses, franchises, permits, and other governmental authorizations are valid,
and the Company has not received any notice that any governmental authority
intends to cancel, terminate, or not renew any such license, franchise, permit,
or other governmental authorization. The
41
<PAGE>
Company holds all licenses, franchises, permits, and other governmental
authorizations, the absence of which could have a material adverse effect
on its business.
5.23. Accounting Practices. The Company makes and keeps accurate books
--------------------
and records, which are not kept in accordance with GAAP. The Company uses income
tax accounting methods to reflect its assets. The Company maintains internal
accounting controls that provide reasonable assurance that (a) transactions are
executed with management's authorization and (b) transactions are recorded as
necessary to permit preparation of the Company's financial statements and to
maintain accountability for the assets of the Company.
5.24. Minute Books. The minute books of the Company and its
------------
subsidiaries contain complete and accurate records of all meetings and other
corporate actions of their shareholders and Board of Directors and Committees
thereof.
5.25. Employee Matters. Neither the Company nor any subsidiary is in
----------------
violation, nor have they been alleged to be in violation, nor have they been
charged with any violation of any of the various provisions of Title VII of the
Federal Civil Rights Act, the Age Discrimination in Employment Act, the
Americans with Disabilities Act, or any other federal or state
42
<PAGE>
law dealing with employment discrimination, federal or state wage and hour laws,
federal or state income or unemployment and social security tax withholding
laws, or occupational safety and health laws and applicable standards and
regulations thereunder. Neither the Company nor any subsidiary is liable for any
accrued unpaid wages, vacation pay, bonuses, or commissions, or for any material
tax, penalty, assessment, or forfeiture for failure to comply with any
employer/employee matter. Except as set forth in reasonable detail on Schedule
5.25 hereto, neither Company nor any subsidiary is a party to any collective
bargaining agreement, no such agreement determines the terms and conditions of
employment of any employee of the Company or any subsidiary, no collective
bargaining agent has been certified as a representative of any of the employees
of the Company or any subsidiary, and no representation campaign or election is
now in progress with respect to any of the Company's or any subsidiary's
employees.
5.26. Accuracy of Information Furnished. This Agreement, the
---------------------------------
Transaction Documents, and the Schedules and Exhibits hereto and thereto
prepared by Seller do not contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements (excluding
statements concerning solely the Buyer) contained herein or therein, in light of
the circumstances under which they were made, not
43
<PAGE>
misleading.
5.27. Disclosure. The Seller and the Company have not knowingly
----------
failed to disclose to the Buyer any facts that would have a material adverse
impact on the value of the Shares or on the assets, liabilities, earnings,
prospects and business of the Company. No representation or warranty by the
Seller contained in this Agreement, and no statement contained in, any Schedule
or Exhibit, or other document attached hereto, or any list, certificate or
writing delivered in connection with or pursuant hereto, contains any untrue
statement of a material fact, or omits to state a material fact necessary in
order to make the statements (excluding statements concerning solely the Buyer)
contained herein or therein not misleading or necessary in order to provide
fully and fairly the information required to be provided in any such document.
6. Representations and Warranties of Buyer. The Buyer represents and
---------------------------------------
warrants to the Seller that, as of the Closing Date:
6.1. Authority for Agreements. The Buyer has the power and
------------------------
authority to execute this Agreement and the Transaction Documents applicable to
the Buyer and to carry out its obligations hereunder and thereunder. When
executed and
44
<PAGE>
delivered by the Buyer, this Agreement will be binding upon and enforceable
against the Buyer in accordance with its terms, except as such enforceability
may be limited by applicable bankruptcy, reorganization, insolvency, moratorium,
or other similar laws from time to time in effect, affecting creditors' rights
generally, and general principles of equity (whether asserted in an action at
law or in equity).
6.2. Non-Contravention. The execution and delivery of this
-----------------
Agreement and the Transaction Documents and the consummation of the transactions
contemplated hereby and thereby will not (a) violate any provision of the
Articles of Incorporation or By-laws of the Buyer; (b) violate any material
provision of, or result in the breach or the acceleration of, or entitle any
party to accelerate (whether after the giving of notice or lapse of time or
both) any material obligation under any mortgage, lien, lease, agreement,
license, instrument, order, arbitration award, judgment, or decree to which the
Buyer is a party or by which it is bound; (c) result in the creation or
imposition of any material lien, charge, pledge, security interest, or other
encumbrance upon any property of the Buyer except for the security interest of
The First National Bank of Maryland; or (d) violate or conflict with any other
material restriction or any law, ordinance, or rule to which the Buyer or its
property is subject.
6.3. Approvals. No consent, approval, order, or
---------
45
<PAGE>
authorization of, or registration, declaration, or filing with, any governmental
authority is required in connection with the execution and delivery of this
Agreement and the Transaction Documents by the Buyer or the consummation of the
transactions contemplated hereby or thereby. Except as set forth in Schedule 6.3
hereto, no consent of any third party is necessary to permit the consummation of
the transactions contemplated hereby or thereby.
6.4. No Brokers. All negotiations relating to this Agreement and
----------
the Transaction Documents and the transactions contemplated hereby and thereby
have been carried out by the Buyer without the intervention of any person or
firm in such manner as to give rise to any valid claim against any of the
parties hereto for a brokerage commission or finder's fee.
6.5. Accuracy of Information Furnished. This Agreement and the
---------------------------------
Schedules and Exhibits hereto and thereto prepared by the Buyer do not contain
any untrue statement of a material fact and do not omit to state a material fact
necessary to make the statements (excluding statements concerning solely the
Company or the Seller) herein or therein, in light of the circumstances under
which they were made, not misleading.
6.6. Organization, Etc. The Buyer is a corporation
-----------------
46
<PAGE>
duly organized, validly existing, and in good standing under the laws of the
State of Virginia, and has all requisite corporate power and authority to own or
lease and to operate its properties and to carry on its business as now being
conducted. The Buyer has delivered to the Seller complete and correct copies of
the Buyer's Articles of Incorporation, By-laws, and all amendments thereto. The
Buyer is not required to be qualified or licensed to do business as a foreign
corporation in any other jurisdiction except such jurisdictions, if any, in
which the failure to be so qualified or licensed will not have a material
adverse effect on its financial condition, the conduct of its business or the
ownership, lease or use of any of its properties or assets.
6.7. Litigation. Except as set forth in reasonable detail on
----------
Schedule 6.7. hereto:
(a) There are no actions, suits, proceedings,
investigations, or inquiries pending or threatened against or affecting
the business, operations, financial condition, or prospects of the
Buyer or any subsidiary at law or in equity in any court or before any
federal, state, municipal, or other governmental department,
commission, board, bureau, agency, or instrumentality that reasonably
could be expected to have an adverse effect on the Buyer's right or
ability to execute and deliver this Agreement and the Transaction
47
<PAGE>
Documents or consummate the transactions contemplated hereby
or thereby.
(b) There are no actions, suits, proceedings,
investigations, or inquiries pending or threatened against the Buyer at
law or in equity in any court or before any federal, state, municipal,
or other governmental department, commission, board, bureau, agency, or
instrumentality that reasonably could be expected to have an adverse
effect on the Buyer's right or ability to execute and deliver this
Agreement and the Transaction Documents or consummate the transactions
contemplated hereby or thereby.
(c) The Buyer is not in default in respect of any
judgment, order, writ, injunction, or decree of any court or any
federal, state, municipal, or other governmental department,
commission, board, bureau, agency, or instrumentality that reasonably
could be expected to have an adverse effect on the Buyer's right or
ability to execute and deliver this Agreement and the Transaction
Documents or consummate the transactions contemplated hereby or
thereby.
(d) There are no actions, suits, proceedings,
investigations, or inquiries pending or threatened against the Buyer at
law or in equity in any court or before any federal, state, municipal,
or other governmental department, commission, board, bureau, agency, or
instrumentality that reasonably could be expected to have an adverse
effect on
48
<PAGE>
the Buyer's right or ability to execute and deliver this Agreement or
the Transaction Documents or consummate the transactions contemplated
hereby or thereby.
6.8. Compliance with Laws, etc. The Buyer has complied with and
-------------------------
is in compliance with all federal, state, local, and foreign statutes, laws,
ordinances, regulations, rules, permits, judgments, orders, or decrees
applicable to it or any of its properties, assets, operations, and business, the
failure of compliance with which would have a material adverse effect on the
properties, operations, business, financial condition, or prospects of the
Buyer. There does not exist any basis for any claim of default under or
violation of any such statute, law, ordinance, regulation, rule, permit,
judgment, order, or decree except such defaults or violations, if any, that in
the aggregate do not and will not materially and adversely affect the
properties, operations, business, financial condition, or prospects of the
Buyer.
6.9. Disclosure. The Buyer has not knowingly failed to disclose
----------
to the Seller any facts that would have a material adverse impact on the assets,
liabilities, earnings, prospects and business of the Buyer. No representation or
warranty by the Buyer contained in this Agreement, and no statement contained in
any Schedule or Exhibit, or other document attached hereto, or
49
<PAGE>
any list, certificate or writing delivered in connection with or pursuant
hereto, contains any untrue statement of material fact, or omits to state a
material fact necessary in order to make the statements (excluding statements
concerning solely the Seller and/or the Company) contained herein and/or therein
not misleading or necessary in order to provide fully and fairly the information
required to be provided in any such document.
7. Covenants of the Seller.
-----------------------
7.1. Employment Contract. At the Closing, the Seller will enter
-------------------
into the F. Dickson Employment Agreement.
7.2. Liability for Federal, State and Local Taxes. The Seller
--------------------------------------------
will be liable for all federal, state, and local taxes resulting from the
transactions contemplated by this Agreement, including, but not limited to, all
sales, use, and transfer taxes, if any, resulting from this transaction. In
addition, the Seller will be responsible for all of Company's and its
subsidiaries' federal, state, and local taxes and any interest, penalty, or
expenses incurred thereon for all tax years ending on or before December 31,
1995. In the event an audit is commenced or a claim is made for taxes which, if
upheld, would be the obligation of Seller hereunder, Seller shall be notified of
such audit or claim and shall defend and, if necessary, pay any taxes,
50
<PAGE>
penalties and interest ultimately assessed.
7.3. Claims Experience. At or prior to the Closing, the Seller
-----------------
will prepare and deliver to the Buyer a description of all claims experience of
the Company during the past three years under all of the insurance policies
listed on Schedule 5.16 hereto, including settled and outstanding claims under
all such policies in respect of general liability and workers' compensation
claims.
7.4. Employment and Employee Benefits. The Seller has delivered
--------------------------------
to the Buyer Schedule 7.4 listing the name, title, and current annual base
salary or hourly rate of each person employed by Company on December 31, 1995,
together with a statement of the full amount and nature of any other
remuneration, whether in cash or kind, paid to each such person during the 1995
calendar year. The Seller will furnish an updated copy of Schedule 7.4 at the
Closing which will reflect any changes in such information occurring between
December 31, 1995, and the Closing Date. The Seller agrees with the Buyer that
any individuals who were full-time employees of the Company on the Closing Date
and who agree to execute the standard PGI Code of Conduct agreement will be
offered continued employment with the Company, effective immediately after the
Closing. Any individuals who accept this offer of employment with the Company
51
<PAGE>
will be referred to herein as "Transferring Employees." This employment of
Transferring Employees will be "at will" and nothing herein expressed or implied
confers upon any such Transferring Employee any rights or remedies of any nature
or kind whatsoever under or by reason of this Agreement, including, without
limitation, any rights to employment for a specific period. After the Closing,
the Buyer will make available to Transferring Employees such wages and benefits
as the Buyer, in its sole business judgment, deems appropriate, subject only to
the covenants set forth in Section 8.1 hereof, and the Buyer will be under no
obligation to credit Transferring Employees with past service credit for any
purpose (including, without limitation, vacation, severance, or pension
purposes).
7.5. Non-Competition.
---------------
For a period of **** *** ***** commencing on the Closing Date,
Seller will not:
(a) Directly or indirectly, engage in, own, control, or
make an investment in a business in excess of 2% of the outstanding
shares of such business and hold such investment in a name other than a
"street name" and such business competes directly with the business of
the Company;
(b) Accept employment with any person or entity that
competes directly with the business of the Company;
(c) Directly or indirectly solicit or employ any
* CONFIDENTIAL INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
COMMISSION
52
<PAGE>
person who at such time provides services for or is otherwise employed
by the Company or the Buyer, or encourage or induce any employee of the
Company or the Buyer to leave such employment;
(d) Directly or indirectly, divert or attempt to divert
from the Company or the Buyer, the business of any customer or client
of the Company or the Buyer.
7.6. Subordination Agreement. At Closing, Seller agrees to sign
-----------------------
a subordination agreement with Buyer's primary financial institution, The First
National Bank of Maryland, in the form attached hereto as Exhibit 7.6 provided
that at Closing, Buyer supplies Seller with a written statement from The First
National Bank of Maryland acknowledging that as of the Closing Date, it does not
have and will not later obtain any security interest or lien in the service mark
"Ray Bloch Productions, Inc." (the "Mark") and that it waives any provisions of
the subordination agreement that could impair or prevent Seller from acquiring
the Mark by assignment upon an Event of Default hereunder. Seller agrees to sign
updates of the subordination agreement described in the immediately preceding
sentence as may be reasonably requested from time to time, provided such updates
are consistent with Exhibit 7.6. Buyer agrees and warrants that it shall not
directly or indirectly encumber or grant any security interest in the Mark, or
cause the Mark to be encumbered
53
<PAGE>
or a security interest in same to be granted to any party. If the Buyer
determines to change its primary financial institution, the Seller shall
cooperate with Buyer in executing a new subordination agreement with such new
institution, provided such new agreement does not restrict any rights or
prejudice any position of Seller beyond the restrictions which may be contained
in Exhibit 7.6, and provided that such financial institution acknowledges and
agrees that it does not have and will not obtain any security interest or lien
in the Mark or otherwise prevent Seller from subsequently acquiring the Mark by
assignment upon an Event of Default hereunder. This Section will have no force
or effect once Seller has received full satisfaction of all elements of the
Purchase Price.
7.7. Further Assurances. The Seller agrees, at the Seller's
------------------
sole expense, to do or cause to be done such further acts and things and deliver
or cause to be delivered to the Buyer such additional assignments, agreements,
powers, and instruments as the Buyer may reasonably require to carry into effect
the purposes of this Agreement and the Transaction Documents or to better assure
and confirm unto the Buyer its rights, powers, and remedies hereunder and
thereunder.
7.8. Loan Repayment. Seller will at Closing, pay in full
--------------
Seller's loan from Company as reflected on Company's
54
<PAGE>
December 31, 1995 year-end financial statement.
8. Covenants of the Buyer.
----------------------
8.1. Employment and Employee Benefits.
--------------------------------
(a) After the Closing, the Buyer agrees to offer continued
employment to Transferring Employees. This employment of Transferring
Employees will be "at will" and nothing herein expressed or implied
confers upon any such Transferring Employee any rights or remedies of
any nature or kind whatsoever under or by reason of this Agreement,
including, without limitation, any rights to employment for a
specific period. The Buyer will make available to Transferring
Employees such wages and benefits as the Buyer, in its sole business
judgment, deems appropriate, provided, however, that it will use its
best efforts to initially provide Transferring Employees with
substantially similar working terms and working conditions as they
were afforded as employees of the Company prior to the Closing Date.
The Buyer will be under no obligation to credit Transferring
Employees with past service credit for any purpose (including,
without limitation, vacation, severance, or pension purposes). In
addition to the foregoing, the Buyer will use its best efforts to
offer Transferring Employees who are employed with the Company in a
management position,
55
<PAGE>
the opportunity to participate in the Buyer's management benefit
programs, if any, as they exist at the Closing Date.
(b) In addition, Buyer will use its best commercial
efforts to include the Transferring Employees in Buyer's benefit plans,
which include medical coverage and 401(k) plans, at Closing without a
waiting period.
(c) Buyer will recommend to the insurance company
currently providing medical insurance coverage to its employees that
Transferring Employees be covered under such medical insurance without
a required physical examination or the exclusion of existing
conditions.
(d) The cost of incorporating the Transferring Employees
into the Buyer's plan will be paid by the Buyer.
8.2. Termination of Company's Benefit Plans. Buyer will cause
--------------------------------------
the Company to terminate all Company Employee benefit plans in existence at
Closing or as soon as possible subsequent to Closing. Seller retains
responsibility for all liabilities, including funding liabilities and fiduciary
responsibilities related to the termination and distribution of such plans.
8.3. Certain Life Insurance Policies. At Closing, Buyer agrees
-------------------------------
to cause the Company to assign to Seller and Robin Dickson, individually, the
life insurance policies that the Company owns insuring the lives of said
individuals.
56
<PAGE>
8.4. Undisclosed Liabilities. After the Closing Date, Buyer
-----------------------
agrees:
(a) To notify Seller of any undisclosed payables or
liabilities of which it becomes aware and Seller shall have the right
to defend or compromise any of the same unless such action would have
an unreasonably adverse effect on the Company, its affiliates or their
ongoing businesses; and
(b) To notify Seller of any claims or audits the Company
has regarding any local, state or federal tax and any interest, penalty
or expenses incurred for tax years or business conducted prior to
December 31, 1995, and Seller shall have the right to defend or
compromise any of the same, as long as such defense or compromise is
not detrimental to the Company and any taxes, interest or penalties
incurred are paid by Seller.
8.5. Payment of Assumed Liabilities. Buyer will pay all assumed
------------------------------
liabilities listed on Schedule 8.5 in accordance with their terms, and
consistent with the side letter dated March 27, 1996 from J. Franklyn Dickson to
Mark N. Sirangelo re: Ray Bloch Productions, Inc. Acquisition.
8.6. F. Dickson Employment Agreement. At the Closing Buyer will
-------------------------------
cause Company to enter into the F. Dickson Employment Agreement.
57
<PAGE>
8.7. Umbrella Insurance Coverage. Buyer will provide for
---------------------------
umbrella insurance coverage for Company under Parent's general liability policy,
effective immediately as of the Closing.
8.8. Further Assurances. The Buyer will, at the request of the
------------------
Seller and at the Buyer's sole expense, execute and deliver any further
instruments or documents and take all such further action(s) as the Seller may
reasonably request in order to carry into effect the purposes of this Agreement
and the Transaction Documents or to better assure and confirm unto the Seller
its rights, powers, and remedies hereunder and thereunder.
9. Conditions Precedent to the Seller's Obligation to Sell the
-----------------------------------------------------------
Company Shares. The obligations of the Seller to sell the Company Shares is
- --------------
subject to the fulfillment prior to or at the Closing of the following
conditions:
9.1. The Buyer's Performance. There will not be any material
-----------------------
error, misstatement, or omission in the representations and warranties made by
the Buyer in this Agreement; all representations and warranties by the Buyer
contained in this Agreement or in any written statement delivered by the Buyer
to the Company or the Seller pursuant to this Agreement will be true in all
material respects at and as of the Closing as though such
58
<PAGE>
representations and warranties were made at and as of said time (except (a) as
contemplated by this Agreement and (b) to the extent, if any, the Company and
the Seller will waive the same); and the Buyer will have performed and complied
in all material respects with all the terms, provisions and conditions of this
Agreement to be performed and complied with by the Buyer at or before the
Closing.
9.2. Consents and Approvals. The Company and the Buyer (and to
----------------------
the extent required, the Seller) will have obtained all consents,
authorizations, and approvals under all statutes, laws, ordinances, regulations,
rules, judgments, decrees, and orders of any court or governmental agency,
board, bureau, body, department, or authority or of any other person required to
be obtained by the Company, the Buyer, or the Seller, as the case may be, in
connection with the execution, delivery, and performance of this Agreement, the
Transaction Documents and the consummation of the transactions contemplated
hereby and thereby.
9.3. No Legal Impediment. There will be in effect no
-------------------
injunction, writ, temporary restraining order, or any order of any nature issued
by any court or governmental agency directing that the transactions contemplated
by this Agreement not be consummated.
59
<PAGE>
10. Conditions Precedent to the Buyer's Obligation to Purchase the
--------------------------------------------------------------
Company's Shares. The obligation of the Buyer to purchase the Company's Shares
- ----------------
is subject to the fulfillment prior to or at the Closing of the following
conditions:
10.1. Company's and the Seller's Performance. There will not be
--------------------------------------
any material error, misstatement, or omission in the representations and
warranties made by the Company or the Seller in this Agreement; all
representations and warranties by the Company and the Seller contained in this
Agreement or in any written statement delivered by the Company or the Seller to
the Buyer pursuant to this Agreement will be true in all material respects at
and as of the Closing as though such representations and warranties were made at
and as of said time (except (a) as contemplated by this Agreement and (b) to the
extent, if any, the Buyer will waive the same); and the Company and the Seller
will have performed and complied in all material respects with all the terms,
provisions, and conditions of this Agreement to be performed and complied with
by the Company and the Seller at or before the Closing.
10.2. Consents and Approvals. The Company and the Buyer (and to
----------------------
the extent required, the Seller) will have obtained all consents, authorization,
and approvals under all statutes, laws, ordinances, regulations, rules,
judgments, decrees, and
60
<PAGE>
orders of any court or governmental agency, board, bureau, body, department, or
authority or of any other person required to be obtained by the Company, the
Seller, or the Buyer, as the case may be, in connection with the execution,
delivery and performance of this Agreement, the Transaction Documents, and the
consummation of the transactions contemplated hereby and thereby.
10.3. Physical Properties. There will have occurred no material
-------------------
damage to or destruction or loss of (whether or not covered by insurance) any of
the Company's facilities, equipment, or other assets.
10.4. No Legal Impediment. There will be in effect no
-------------------
injunction, writ, temporary restraining order, or any order of any nature issued
by any court or governmental agency directing that the transactions contemplated
by this Agreement not be consummated.
11. Events of Default. Any of the specified events set forth herein
-----------------
shall constitute an event of default under this Agreement ("Events of Default").
11.1. Principal. The Buyer shall have failed to pay when due any
---------
portion of the principal amount of the Notes and such failure shall have
continued for ten (10) business days
61
<PAGE>
after receipt of written notice from Seller.
11.2. Interest. The Buyer shall have failed to pay when due any
--------
interest under or fee with respect to the Notes and such failure shall have
continued for ten (10) business days after receipt of written notice from
Seller.
11.3. Payments. The Buyer shall have failed to pay when due any
--------
payments due to Seller pursuant to Section 2 of this Agreement, other than
payments due under the Notes, and such failure shall have continued for ten (10)
business days after receipt of written notice from Seller.
11.4. Change of Control. The Buyer shall sell control of Company
-----------------
to any unaffiliated third party.
11.5. Key Man. The Company is sold, resulting in Mark Sirangelo
-------
no longer acting as Chief Executive Officer of the Company.
11.6. Bankruptcy; Insolvency. The Buyer or Company shall suspend
----------------------
or discontinue its business or the business of the Company, or shall make an
assignment for the benefit of creditors, or shall become insolvent or be unable
or generally fail to pay its debts when due, or shall become in any
62
<PAGE>
jurisdiction a party or subject to (voluntarily or involuntarily) any
liquidation or dissolution action or proceeding with respect to itself, or any
bankruptcy, reorganization, insolvency or other proceeding for the relief of
financially distressed debtors commenced with respect to it, or a receiver,
liquidator, custodian or trustee shall be appointed for it or a substantial part
of its assets (and with respect to any involuntary action or proceeding, an
order entered in the proceeding is not dismissed within thirty (30) days), or it
shall take any action to effect or which indicates its acquiescence in any of
the foregoing.
12. Remedies Upon Default by Buyer. The Seller shall have the
------------------------------
following rights and remedies (to the permitted by applicable law), in
addition to all other rights and remedies of the Seller under this Agreement,
all such rights and remedies being cumulative, non-exclusive, and enforceable
alternatively, successively and concurrently:
12.1. Declare Notes and Other Elements of the Purchase Price Due and
--------------------------------------------------------------
Payable. Upon the occurrence of an Event of Default and at any time
- -------
thereafter,the Seller shall be entitled to declare the Notes, along with all
interest thereon and all other amounts payable due to Seller from Buyer under
this Agreement,to be forthwith due and payable, whereupon the Notes, all such
interest and all such amounts shall become and be forthwith due and
63
<PAGE>
payable, without presentment, demand, protest or further notice of any kind, all
of which are expressly waived by the Buyer.
12.2. Assignment of the Mark. In the event of the occurrence of an
----------------------
Event of Default described in Sections 11.1, 11.2 or 11.3, in addition to the
remedy set forth in Section 12.1 above, the Seller shall be entitled to notify
the Escrow Agent of Buyer's Default and obtain the Assignment of the Mark from
the Escrow Agent in accordance with the terms of the Escrow Agreement attached
as Schedule 4.2(d)(ii) hereto. From that point forward, Buyer and Company will
abandon any use of the Mark or any confusingly similar mark or designation, and
Seller will have full and unencumbered use of that name and all related Marks.
12.3. Covenants Not To Compete. In the event of the occurrence of an
------------------------
Event of Default described in Sections 11.1, 11.2 or 11.3, in addition to the
remedy set forth in Section 12.1 above, all covenants not to compete, and non-
solicitation agreements, whether expressed in this Agreement, in an Employment
Agreement or otherwise, and all provisions of the PGI Code of Conduct or other
similar restrictions placed on Seller and/or Robin Dickson will automatically
terminate.
12.4. Employment Agreements. In the event of the occurrence of an
---------------------
Event of Default described in Sections 11.1,
64
<PAGE>
11.2 or 11.3, in addition to the remedy set forth in Section 12.1 above, the
Employment Agreement between Company and Seller and the employment agreement
between Company and Robin Dickson then in existence shall terminate upon an
Event of Default, at the option of Seller, except that any amounts due Seller or
Robin Dickson under the terms of the Employment Agreements including salary,
bonuses, commissions or otherwise, for services rendered prior to termination,
will be paid by Buyer in accordance with the terms of such Agreements.
13. Indemnification.
13.1. Indemnification of the Buyer and the Company.
--------------------------------------------
(a) From and after the Closing Date, the Seller will
indemnify, defend, and hold harmless the Buyer and the Company and
their respective officers, directors, shareholders, representatives,
agents, and affiliates from, against, and in respect of all third party
claims, liabilities, actions, suits, proceedings, assessments,
judgments, losses, damages, costs, and expenses (including interest,
penalties, and reasonable accountants', experts', and attorneys' fees
and disbursements) (collectively, "Damages"), arising out of, relating
to, or resulting from (i) any material inaccuracy or material breach of
any of the written representations or warranties of the Seller made in
65
<PAGE>
or pursuant to this Agreement or the Transaction Documents; (ii) the
material breach of any covenant, obligation, or agreement of the Seller
to be performed, fulfilled, or complied with pursuant to this Agreement
or the Transaction Documents; (iii) any material misrepresentation, or
the omission of any material fact (including without limitation, those
facts required to make the facts otherwise set forth not misleading),
in this Agreement or the Transaction Documents (including all Exhibits
and Schedules hereto and thereto); (iv) the operation of the business
of the Company prior to the Closing, or the acts or omissions of any of
the Company's officers, directors, shareholders, agents, or
representatives prior to the Closing in connection with the operation
of the Company's business; (v) any and all taxes of any nature incurred
by the Company or the subsidiaries prior to December 31, 1995; (vi)
with regard to the Seller, any personal taxes incurred on or prior to
the Closing Date; and (vii) from Robin Dickson as a shareholder of the
Company, including but not limited to any claims related to the Stock
Purchase Agreement dated as of October 5, 1995 between Robin Dickson
and the Company; and (viii) the termination by Seller, without Buyer's
consent, of certain of the Company's employees prior to the Closing,
provided that no indemnification will be owed hereunder in any case
where it is determined that Damages result solely from the
66
<PAGE>
gross negligence, willful misconduct, or bad faith of the party to be
indemnified; provided, further, that the Seller will not be liable for
indemnification hereunder in respect of any breach of any warranty,
representation, covenant, obligation, or agreement, or any material
misrepresentation or omission, that is not made or is not to be
performed by the Company or the Seller.
(b) Seller will indemnify and hold harmless Buyer for
any and all undisclosed accounts payable or liabilities not listed on
Schedule 8.5 which subsequently come to the attention of the Buyer
subject to the provisions of Section 2.5.
13.2. Indemnification of the Seller. From and after the Closing
-----------------------------
Date, the Buyer will indemnify, defend, and hold harmless the Seller and its
representatives, agents, and affiliates from, against, and in respect of all
third party Damages arising out of, relating to, or resulting from (a) any
material inaccuracy or material breach of any of the written representations or
warranties of the Buyer made in or pursuant to this Agreement or the Transaction
Documents; (b) the material breach of any covenant, obligation, or agreement of
the Buyer to be performed, fulfilled, or complied with pursuant to this
Agreement or the Transaction Documents; or (c) any material misrepresentation or
the omission of any material fact (including, without limitation, those facts
required to make the
67
<PAGE>
facts otherwise set forth not misleading) in this Agreement or the Transaction
Documents (including all Exhibits and Schedules hereto and thereto); provided
that no indemnification will be owed hereunder in any case where it is
determined that Damages result solely from the gross negligence, willful
misconduct, or bad faith of the Seller or the Company (pre-Closing); provided,
further, that the Buyer will not be liable for indemnification hereunder in
respect of any breach of any warranty, representation, covenant, obligation, or
agreement, or any material misrepresentation or omission, that is not made or is
not to be performed by the Buyer.
13.3. Procedure for Indemnification. After receipt by an
-----------------------------
indemnified party under Section 13.1 or 13.2 of notice of the commencement of
any action, such indemnified party shall, if a claim in respect thereof is to be
made against an indemnifying party under such Section, give notice to the
indemnifying party of the commencement thereof, but the failure so to notify the
indemnifying party shall not relieve it of any liability that it may have to any
indemnified party except to the extent the indemnifying party demonstrates that
the defense of such action is materially prejudiced thereby. If any such action
shall be brought against an indemnified party and it shall give notice to the
indemnifying party of the commencement thereof, the indemnified party shall be
entitled to participate therein and,
68
<PAGE>
to the extent that it shall wish, to assume the defense thereof with counsel
satisfactory to such indemnified party and, after notice from the indemnifying
party as such indemnified party of its election so to assume the defense thereof
the indemnifying party shall not be liable to such indemnified party under such
Section for any fees of other counsel or any other expenses, in each case
subsequently incurred by such indemnified party in connection with the defense
thereof, other than reasonable costs of investigation. If an indemnifying party
assumes the defense of such an action, (a) no compromise or settlement thereof
may be effected by the indemnifying party without the indemnified party's
consent (which shall not be unreasonably withheld) unless (i) there is no
finding or admission of any violation of law or any violation of the rights of
any Person and no effect on any other claims that may be made against the
indemnified party and (ii) the sole relief provided is monetary damages that are
paid in full by the indemnifying party and (b) the indemnifying party shall have
no liability with respect to any compromise or settlements thereof effected
without its consent (which will shall not unreasonably withheld). If notice is
given to indemnifying party of the commencement of any action and it does not,
within ten (10) days after the indemnified party's notice is given, give notice
to the indemnified party of its election to assume the defense thereof, the
indemnifying party shall be bound by any determination made in such action or
any compromise or
69
<PAGE>
settlement thereof effected by the indemnified party. Notwithstanding the
foregoing, if an indemnified party determines in good faith that there is a
reasonable probability that an action may adversely affect it other than as a
result of monetary damages, such indemnified party may, by notice to the
indemnifying party assume the exclusive right to defend, compromise or settle
such action, but the indemnifying party shall not be bound by any determination
of an action so defended or any compromise or settlement thereof effected
without its consent (which shall not unreasonably withheld).
13.4. Survival of Representations, Warranties, Covenants and
------------------------------------------------------
Indemnification. The representations and warranties made in Sections 5 and 6 of
- ---------------
this Agreement other than those in Sections 5.10, 5.14, 5.19, 5.20, 5.21 and
5.25 will survive the Closing and will expire upon the second anniversary of the
Closing Date, except as to any matter as to which a reasonably specific good
faith claim has been submitted in writing to the Buyer or the Seller, as
applicable, prior to such date. All representations and warranties contained in
Sections 5.10, 5.14, 5.19, 5.20, 5.21 and 5.25 will survive until the expiration
of the applicable statute of limitations period (including extensions thereof)
for any claim in respect of matters covered by Sections 5.10, 5.14, 5.19, 5.20,
5.21 and 5.25 respectively. The covenants contained in Section 8 of this
70
<PAGE>
Agreement and the provisions contained in Sections 2.2, 2.3, 2.4, 2.5, 11, 12,
and this Section 13 will survive the Closing.
14. Miscellaneous.
-------------
14.1. Complete Agreement; Amendments; Waivers. This Agreement,
---------------------------------------
together with the Exhibits and Schedules hereto, contains the entire agreement
of the parties with respect to the subject matter hereof and supersedes all
prior agreements and understandings, oral or written, with respect thereto. This
Agreement may be modified or amended only by a written instrument signed by the
parties hereto. No provision of this Agreement may be waived without a written
instrument signed by the waiving party. The failure of any party to require, in
any one or more instances, the performance of any of the terms, covenants, or
conditions of this Agreement will not be construed as a waiver or relinquishment
of any rights granted hereunder or of the future performance of any such term,
covenant, or condition, but the obligations of the parties with respect thereto
will continue in full force and effect.
14.2. Counterparts. This Agreement may be executed in two (2) or
------------
more counterparts, each of which will be deemed an original, but all of which
together will constitute one (1) and the same instrument.
71
<PAGE>
14.3. Successors and Assigns. This Agreement will inure to
----------------------
the benefit of, and be binding upon, the parties hereto and their respective
executors, heirs, and permitted assigns. Neither this Agreement nor any of the
rights or obligations hereunder (or under any document delivered pursuant
hereto) may be assigned by a party hereto without the prior written consent of
the other parties.
14.4. Governing Law. This Agreement will be construed and enforced
-------------
in accordance with the laws of the Commonwealth of Virginia without giving
effect to its conflicts of law principles.
14.5. Notices. All notices, claims, requests, demands, and other
-------
communications hereunder will be in writing and will be duly given if: (a)
personally delivered or sent via telecopy, (b) sent by telegram (other than
where original payment or other documents must be delivered) for delivery within
24 hours, or (c) sent by Federal Express, DHL Worldwide Express, or Airborne
Courier (for next business day delivery), shipping prepaid, as follows:
If to the Buyer, to:
Mark N. Sirangelo, President
PGI Company H
One Courthouse Metro, Suite 200
2200 Wilson Boulevard
Arlington, VA 22201-3324
(Telecopy number (703) 528-1724)
72
<PAGE>
with a copy to:
James N. Schwarz, Esq.
Ginsburg, Feldman and Bress, Chartered
1250 Connecticut Avenue, N.W.
Suite 700
Washington, DC 20036
If to the Parent, to:
Mark N. Sirangelo, President
Production Group International, Inc.
One Courthouse Metro
Suite 200
2200 Wilson Boulevard
Arlington, VA 22201-3324
(Telecopy number (703) 528-1724)
If to the Company, to:
Mark N. Sirangelo, President
Ray Bloch Productions,Inc./PGI Company H
One Courthouse Metro
Suite 100
2200 Wilson Boulevard
Arlington, VA 22201-3324
(Telecopy number (703) 528-1724)
If to the Seller, to:
J. Franklyn Dickson
537 Eugene Way
Wyckoff, NJ 07481
with a copy to:
Philip M. Cowan, Esq.
Cowan, Gold, DeBaets, Abrahams & Sheppard
40 West 57th Street
New York, NY 10019
or such other address or addresses as the person to whom notice is to be given
may have previously furnished to the others in writing in the manner set forth
above. Notices will be deemed
73
<PAGE>
given at the time of personal delivery or completed telecopy, or, if sent by
telegram twenty-four (24) hours after the time sent, or, if sent by Federal
Express, DHL Worldwide Express, or Airborne Courier, one (1) business day after
the date sent.
14.6. Expenses. Except as otherwise expressly provided in this
--------
Agreement, each party hereto will bear its own expenses.
14.7. Headings; Form of Words. The headings contained in this
-----------------------
Agreement (including but not limited to the titles of the Schedules and Exhibits
hereto) have been inserted for the convenience of reference only, and neither
such headings nor the placement of any term hereof under any particular heading
will in any way restrict or modify any of the terms or provisions hereof. Terms
used in the singular will be read in the plural, and vice versa, and terms used
in the masculine gender will be read in the feminine or neuter gender when the
context so requires, and vice versa.
14.8. Severability. The provisions of this Agreement will be
------------
deemed severable, and if any part of any provision is held to be illegal, void,
voidable, invalid, nonbinding, or unenforceable in its entirety or partially or
as to any party, for any reason, such provision may be changed consistent with
the
74
<PAGE>
intent of the parties hereto, to the extent reasonably necessary to make
provisions, as so changed, legal, valid, binding, and enforceable. If any
provision of this Agreement is held to be illegal, void, voidable, invalid,
non-binding, or unenforceable in its entirety or partially or as to any party,
for any reason, and if such provision cannot be changed consistent with the
intent of the parties hereto to make it fully legal, valid, binding and
enforceable, then such provision will be stricken from this Agreement, and the
remaining provisions of this Agreement will not in any way be affected or
impaired, but will remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above written.
BUYER:
PGI Company H
By: /s/ Mark N. Sirangelo
-------------------------------------
Name: Mark N. Sirangelo
Title: President and Chief Executive Officer
SELLER:
/s/ J. Franklyn Dickson
-------------------------------------
J. Franklyn Dickson
/s/ J. Franklyn Dickson
-------------------------------------
J. Franklyn Dickson
President and Director of
Ray Bloch Productions, Inc. and Subsidiaries
75
<PAGE>
STOCK PURCHASE AGREEMENT EXHIBIT 10.14
DATED AS OF FEBRUARY 1, 1996
AMONG
PGI COMPANY J,
EPIC ENTERPRISES, INC.,
HARRY SCHWARTZ
AND
CHARLES SCHWARTZ
<PAGE>
TABLE OF CONTENTS
Page
- ----------------------------------------------------------------------------
1. Definitions.......................................................... 2
-----------
1.1. Use of Defined Terms......................................... 2
--------------------
1.2. Accounting Terms............................................. 2
----------------
1.3. Exhibition Ownership and Exhibition Management............... 2
----------------------------------------------
1.4. Sections, Exhibits and Schedules............................. 3
--------------------------------
1.5. Miscellaneous Terms.......................................... 3
-------------------
1.6. Buyer's Parent............................................... 3
--------------
2. Purchase and Sale of the Company Shares.............................. 3
---------------------------------------
2.1. Purchase and Sale of the Company Shares...................... 3
---------------------------------------
2.2. Purchase Price............................................... 4
--------------
2.3. Definition of Net Income Pre-Tax............................. 8
--------------------------------
2.4. Financial Statements for Fiscal Years 1997 and 1998.......... 9
---------------------------------------------------
3. Closing.............................................................. 9
-------
4. Deliveries at the Closing............................................ 9
-------------------------
4.1. Deliveries to the Buyer by the Sellers....................... 9
----------------------------------------
4.2. Deliveries to the Sellers by the Buyer....................... 12
----------------------------------------
5. Representations and Warranties of the Company and Sellers............ 13
---------------------------------------------------------
5.1. Ownership; Transfer of the Company Shares.................... 14
-----------------------------------------
5.2. Authority.................................................... 14
---------
5.3. Approvals.................................................... 16
---------
5.4. No Brokers................................................... 16
----------
5.5. Organization, Qualification to Do Business................... 16
------------------------------------------
5.6. Capital Stock................................................ 18
-------------
5.7. No Subsidiaries, Etc. ....................................... 18
--------------------
5.8. Financial Statements......................................... 18
--------------------
5.9. Absence of Certain Changes................................... 19
--------------------------
5.10. Taxes........................................................ 22
-----
5.11. Non-Contravention............................................ 23
-----------------
5.12. Title to and Condition of the Assets of the Company.......... 24
---------------------------------------------------
<PAGE>
5.13. Litigation................................................... 26
----------
5.14 Employee Benefit Plans and Other Arrangements................ 27
---------------------------------------------
5.15. Contracts.................................................... 29
---------
5.16. Insurance.................................................... 31
---------
5.17. Trademarks, Etc. ............................................ 31
---------------
5.18. Transactions with Interested Persons......................... 32
------------------------------------
5.19 Compliance with Laws, etc. .................................. 33
---------------------------
5.20. No Undisclosed Liabilities, Etc. ............................ 34
-------------------------------
5.21. Environmental Matters........................................ 34
---------------------
5.22. Governmental Authorizations and Regulations.................. 36
-------------------------------------------
5.23. Accounting Practices......................................... 36
--------------------
5.24. Minute Books................................................. 37
------------
5.25. Employee Matters............................................. 37
----------------
5.26. Accuracy of Information Furnished............................ 38
---------------------------------
5.27. Disclosure................................................... 38
----------
6. Representations and Warranties of Buyer.............................. 39
---------------------------------------
6.1. Authority for Agreements..................................... 39
------------------------
6.2. Non-Contravention............................................ 39
-----------------
6.3. Approvals.................................................... 40
---------
6.4. No Brokers................................................... 40
----------
6.5. Accuracy of Information Furnished............................ 40
---------------------------------
6.6. Organization, Good Standing.................................. 41
---------------------------
7. Covenants of the Company and Each of the Sellers..................... 41
------------------------------------------------
7.1. Access, Information and Documents............................ 41
---------------------------------
7.2. Conduct of Business Pending Closing.......................... 42
-----------------------------------
7.3. Consents and Approvals....................................... 44
----------------------
7.4. Confidential Material........................................ 44
---------------------
7.5. Employment Contract.......................................... 46
-------------------
7.6. Liability for Federal, State and Local Taxes................. 46
--------------------------------------------
7.7. Claims Experience............................................ 46
-----------------
7.8. Employment and Employee Benefits............................. 46
--------------------------------
7.9. Non-Competition.............................................. 47
---------------
7.10. Subordination Agreement...................................... 48
-----------------------
7.11. Further Assurances........................................... 48
------------------
7.12. Termination of Company's Benefit Plans....................... 49
--------------------------------------
7.13. Release of Liens............................................. 49
----------------
8. Covenants of the Buyer............................................... 49
----------------------
-ii-
<PAGE>
8.1. Confidential Information..................................... 49
------------------------
8.2. Consents and Agreements...................................... 50
-----------------------
8.3. Employment and Employee Benefits............................. 51
8.4. Termination of Company's Benefit Plans....................... 52
--------------------------------------
8.5. Undisclosed Liabilities...................................... 52
-----------------------
8.6. Payment of Assumed Liabilities............................... 52
------------------------------
8.7. H. Schwartz Employment Agreement and C. Schwartz Employment
-----------------------------------------------------------
Agreement.................................................... 53
---------
8.8. Further Assurances........................................... 53
------------------
9. Conditions Precedent to the Sellers' Obligation to Sell the Company
-------------------------------------------------------------------
Shares............................................................... 53
------
9.1. The Buyer's Performance...................................... 53
-----------------------
9.2. Consents and Approvals....................................... 54
----------------------
9.3. No Legal Impediment.......................................... 54
-------------------
10. Conditions Precedent to the Buyer's Obligation to Purchase the
--------------------------------------------------------------
Company's Shares..................................................... 54
----------------
10.1. Company's and the Sellers' Performance....................... 54
--------------------------------------
10.2. Consents and Approvals....................................... 55
----------------------
10.3. Physical Properties.......................................... 55
-------------------
10.4. No Legal Impediment.......................................... 56
-------------------
10.5. Closing of Buyer's Purchase of Epic Enterprises of
--------------------------------------------------
Nevada, Inc. ................................................ 56
------------
10.6. Goren Epic Partnership....................................... 56
----------------------
10.7. Gideon Goren................................................. 56
------------
11. Termination.......................................................... 56
-----------
11.1. Termination by the Buyer..................................... 56
------------------------
11.2. Termination by the Company or the Sellers.................... 57
-----------------------------------------
11.3. Effect of Termination........................................ 57
---------------------
12. Indemnification...................................................... 58
---------------
12.1. Indemnification of the Buyer and the Company................. 58
--------------------------------------------
12.2. Indemnification of the Sellers............................... 60
------------------------------
12.3. Procedure for Indemnification................................ 61
-----------------------------
12.4. Survival of Representations, Warranties, Covenants and
------------------------------------------------------
Indemnification.............................................. 63
---------------
13. Miscellaneous........................................................ 63
-------------
13.1. Complete Agreement; Amendments; Waivers...................... 63
---------------------------------------
13.2. Counterparts................................................. 64
------------
13.3. Successors and Assigns....................................... 64
----------------------
-iii-
<PAGE>
13.4. Governing Law................................................ 64
-------------
13.5. Notices...................................................... 64
-------
13.6. Expenses..................................................... 66
--------
13.7. Headings; Form of Words...................................... 66
-----------------------
13.8. Severability................................................. 67
------------
-iv-
<PAGE>
STOCK PURCHASE AGREEMENT
------------------------
STOCK PURCHASE AGREEMENT (the "Agreement") dated as of the 1st day of
February, 1996 by and among PGI Company J, a Virginia corporation (the "Buyer"),
Epic Enterprises, Inc., a California corporation ("Epic" or the "Company"),
Harry Schwartz, an individual residing at 650 Columbia Street, No. 112, San
Diego, CA 92101 ("H. Schwartz"), and Charles Schwartz, an individual residing at
655 India Street, No. 421, San Diego, CA 92101 ("C. Schwartz") (collectively, H.
Schwartz and C. Schwartz shall be referred to as the "Sellers" and individually
as a "Seller");
WHEREAS, prior to Closing, Sellers will be the sole stockholders of Epic
owning Three Thousand Nine Hundred Twenty-Eight (3,928) shares of the common
stock of Epic, which comprise all of the issued and outstanding shares of common
stock of Epic; and
WHEREAS, the Buyer desires to purchase from the Sellers, and the Sellers
desire to sell to the Buyer, one hundred percent (100%) of the outstanding
capital stock of the Company (the "Company Shares") all upon the terms and
conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the foregoing premises, the mutual
covenants, agreements, representations, and warranties herein contained, and
other good and valuable consideration, the
1
<PAGE>
receipt and legal sufficiency of which are hereby acknowledged, the parties
hereto, each intending to be legally bound, hereby agree as follows:
1. Definitions.
-----------
1.1. Use of Defined Terms. Any defined term used in the plural
--------------------
shall refer to all members of the relevant class, and any defined term used in
the singular shall refer to any one or more of the members of the relevant
class.
1.2. Accounting Terms. All accounting terms not otherwise
----------------
defined in this Agreement shall be construed in conformity with, and all
financial data of the Buyer required to be submitted by this Agreement shall be
prepared in conformity with, generally accepted accounting principles ("GAAP")
and all financial data of Company, required to be submitted by this Agreement
shall be prepared on a modified accrual basis applied on a historically
consistent basis.
1.3. Exhibition Ownership and Exhibition Management. Exhibition
----------------------------------------------
ownership is the ownership of and proprietary rights to exhibitions and trade
shows. Exhibition management is exhibit space sales, liaison with exhibitors,
development of programs to increase exhibit space sales, trade advertisement for
exhibition, development of budgets for exhibitions, preparation of post-
exhibition analysis, promotion of exhibition, development and maintenance of
floor plans for
2
<PAGE>
exhibition, maintenance of exhibition documents, coordination of seminars and
workshops, on-site management of exhibitions to include set-up and tear-down,
maintenance of an office at exhibition, assignment of exhibit space,
coordination of activities between exhibitors and service contractors,
contracting for and providing security for exhibition, negotiating for hotel
room blocks, contracting for and providing registration services for exhibition
and maintenance of financial statements for exhibition.
1.4. Sections, Exhibits and Schedules. References in this
--------------------------------
Agreement to Sections, Exhibits and Schedules are to Sections, Exhibits and
Schedules of and to this Agreement. All Exhibits and Schedules to this Agreement
are hereby incorporated herein by this reference as if fully set forth herein.
1.5. Miscellaneous Terms. The term "or" shall not be exclusive.
-------------------
The terms "herein," "hereof," "hereto," "hereunder" and other terms similar to
such terms shall refer to this Agreement as a whole and not merely to the
specific article, section, paragraph or clause where such terms may appear. The
term "including" shall mean "including, but not limited to."
1.6. Buyer's Parent. The parent company of Buyer is Production
--------------
Group International, Inc. (hereinafter known as Buyer's Parent").
2. Purchase and Sale of the Company Shares.
---------------------------------------
3
<PAGE>
2.1. Purchase and Sale of the Company Shares.
---------------------------------------
(a) The Sellers are the one hundred percent (100%) owners
of the issued and outstanding shares of capital stock of Epic.
(b) Upon the terms and provisions of this Agreement, the
Buyer agrees to purchase and accept delivery from the Sellers, and the Sellers
agree to sell, assign, transfer, and deliver to the Buyer, at the Closing
provided for in Section 3 hereof, common stock certificates representing Three
Thousand Nine Hundred Twenty-Eight (3,928) shares of Common Stock of Epic,
constituting one hundred percent (100%) of the outstanding shares of capital
stock of Epic, free and clear of all liens, claims, charges, restrictions,
equities, or encumbrances of any kind.
2.2. Purchase Price. The purchase price to be paid by Buyer (the
--------------
"Purchase Price") for the Company Shares is a sum of the following:
(a) The Buyer will, at the Closing, deliver to the Sellers,
by certified checks payable to the order of the Sellers ("Certified Checks"), or
at Buyer's option, by wire transfer to the account of each of the Sellers as set
forth on Schedule 2.2(a) ("Wire Transfers") the aggregate amount of Three
Million Dollars ($3,000,000) to each of the Sellers and One Million One Hundred
Sixty-Six Thousand Six Hundred Sixty-Seven Dollars ($1,166,667.00) to Shelley
H., Inc., a California
4
<PAGE>
corporation ("Shelley"), in satisfaction of the obligation of the Company to
Shelley, as provided in separate documents.
(b) The Buyer will, at the Closing, deliver to Sellers
subordinated promissory notes of Buyer in the form annexed as Exhibit 2.2(b)
hereto, in the aggregate principal amount of One Million Five Hundred Thousand
Dollars ($1,500,000) payable to the Sellers (the "Note" or "Notes"). On the
first anniversary of Closing, Notes in the aggregate principal amounts of One
Million Five Hundred Thousand Dollars ($1,500,000) and interest accrued on the
then outstanding amount of such Notes will be payable Five Hundred Thousand
Dollars ($500,000) to each of the Sellers and Five Hundred Thousand Dollars
($500,000) to Shelley in satisfaction of the obligation of the Company to
Shelley, as provided in separate documents.
If there is a default under either or both of the Notes and it has not
been corrected by the end of the cure period,then all amounts earned under
Paragraphs 2.2(d) and/or 2.2(e) as of the date of the default shall be
immediately due and payable without further action or notice of Sellers. Amounts
are earned for the purposes of this Paragraph on a pro rata basis.
(c) The Buyer will pay Sellers the additional purchase
price (the "Specialty Equipment Addition") in the amount of Five Hundred
Thousand Dollars ($500,000) provided that (i) Sellers execute a three-year
--------
extension to the exhibition
5
<PAGE>
management contract pursuant to which the Company manages Specialty Equipment
Market Association Exhibition held in Las Vegas, (ii) such extension is
substantially under the same terms and conditions as the existing contract in
effect on the date hereof and (iii) such extension is fully executed on or
before December 31, 1996. Buyer shall pay Sellers such Specialty Equipment
Addition within ten (10) days of the satisfaction of conditions (i) through
(iii) above.
(d) If during either the period February 1, 1997 - January
31, 1998 ("Fiscal Year 1997") or the period February 1, 1998 - January 31, 1999
("Fiscal Year 1998"), the existing business of the Company, defined as the
annual exhibition ownership and exhibition management business generated by the
employees of the Company who were employed as of the Closing, or their
replacements and the new trade show business generated by all employees, but
does not include the business of any subsidiary corporation or entity ("Existing
Business"): (i) exceeds **** ******* ******* ************ in net revenue; (ii)
generates at least ****** ******* ***** Net Income Pre-Tax; or (iii) generates
at least *** ******* ******* ************ of Net Income Pre-Tax, then, in each
such fiscal year an amount of *** ******* ***** ******** ******* ********** will
be paid by Buyer to Sellers and a portion of such to Shelley in amounts provided
in separate documents by Wire Transfer within one hundred and
* CONFIDENTIAL INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
COMMISSION
6
<PAGE>
twenty (120) days after the end of the applicable Fiscal Year. For purposes of
Sections 2.2(d) and (e), net revenue shall be defined as gross revenue minus bad
debt and discounts.
(e) If in either Fiscal Year 1997 or Fiscal Year 1998, the
Existing Business: (i) exceeds **** in net revenue; (ii) generates at least ****
Net Income Pre-Tax; or (iii) generates at least *** ******* **** *******
******** ******* ************ of Net Income Pre-Tax then for each such Fiscal
Year, in addition to the amount specified in Section 2.2(d) above, Buyer shall
pay an additional amount of **** by Wire Transfer within one hundred and twenty
(120) days after the end of the applicable Fiscal Year.
(f) The Sellers will, at the Closing, provide the following
to Buyer: (i) a schedule of Company's accounts receivable as of January 31,
1996, updated through Closing based on all information available to Sellers as
of date of Closing in the form attached hereto as Schedule 2.2(f)(i); and (ii) a
schedule of accounts payable as of January 31, 1996, as updated through the
Closing in the form attached hereto as Schedule 2.2(f)(ii).
In the event that any accounts receivable set forth on
Schedule 2.2(f)(i) have not been paid to the Company within thirty (30) days
after February 1, 1996, Buyer shall
* CONFIDENTIAL INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
COMMISSION
7
<PAGE>
have the right to offset the amount of such unpaid accounts receivable from
future payments to Sellers, including but not limited to payments of the
Purchase Price. Sellers shall not indemnify or be assessed for accounts
receivable in relation to the Women's Apparel Vegas Shows scheduled for August
1996 and February 1997 for Exhibitors which/who withdraw, cancel or otherwise do
not participate and/or do not pay and/or require a refund.
In the event that any undisclosed accounts payable or
undisclosed liability of the Company incurred by the Company prior to February
1, 1996, including but not limited to unpaid taxes, fines or penalties related
thereto and any employee benefit plan or arrangement, existing as of February 1,
1996 but not scheduled on Schedule 2.2(f)(ii) are paid by the Company or Buyer
after the February 1, 1996 [Closing], Buyer shall have the right to offset the
amount of such undisclosed accounts payable or undisclosed liabilities paid by
the Company or Buyer from any future payments to Sellers, including but not
limited to payments of the Purchase Price.
2.3. Definition of Net Income Pre-Tax. For the purpose of
---------------------------------
calculating the Purchase Price to be paid to Sellers under the terms of Sections
2.2.(d), 2.2(e) and 2.2(f) above, Net Income Pre-Tax shall be defined as income
from the Existing Business of the Company prior to charges for federal, state or
local income taxes, but after all expenses relating to the Existing Business of
the Company except: (i) any corporate expense of Buyer not incurred in the
ordinary course of business
8
<PAGE>
charged to the Company unless mutually agreed otherwise; and (ii) depreciation
on all new fixed assets of the Company added after Closing and not added in the
ordinary course of business.
2.4. Financial Statements for Fiscal Years 1997 and 1998. During
---------------------------------------------------
Fiscal Years 1997 and 1998 the Company's financial statements will be prepared
on an accrual basis in accordance with GAAP. Sellers shall have the right to
inspect and/or audit Company's financial statements relating to Fiscal Years
1997 and 1998 during business hours at Sellers' expense on reasonable notice to
Company.
3. Closing. The closing of the purchase and sale of the Company Shares
-------
(the "Closing") will take place at the offices of the Buyer (or at such other
place as the parties may mutually agree) at 10:00 a.m. on June 28, 1996, or at
such other time and on such other date as the parties may mutually agree, but in
no event will the Closing occur after _______________, 1996. The date and time
of the Closing are referred to herein as the "Closing Date."
4. Deliveries at the Closing.
-------------------------
4.1. Deliveries to the Buyer by the Sellers. At the Closing, the
--------------------------------------
Sellers will deliver to the Buyer:
(a) Against receipt of the Wire Transfers or Certified
Checks, the Sellers will deliver to the Buyer the certificates for one hundred
percent (100%) of the Company
9
<PAGE>
Shares, all in accordance with the requirements of Section 2.1 hereof, which
certificates will be duly endorsed in blank or accompanied by stock powers duly
executed in blank, in proper form for transfer;
(b) A certificate, in form and substance reasonably
acceptable to the Buyer, executed by the President of Epic, and attested to by
the Secretary of the Company, dated as of the Closing Date, and certifying that:
(i) attached thereto is a true and complete copy of the By-laws of the Company
in effect as of the Closing Date; (ii) attached thereto is a true and complete
copy of the Articles of Incorporation of the Company, as amended and in effect
as of the Closing Date; and (iii) attached thereto is a true and complete copy
of resolutions adopted by the Board of Directors and shareholders of the Company
authorizing the execution, delivery and performance of this Agreement and such
resolutions have not been modified, rescinded, or amended and are in full force
and effect;
(c) A certificate, in form and substance reasonably
acceptable to the Buyer, executed by the Sellers, dated as of the Closing Date,
certifying as to the accuracy of the Company's and the Sellers' representations
and warranties at and as of the Closing;
10
<PAGE>
(d) Resignations of all of the directors and officers of
the Company, in their capacity as directors, officers and employees;
(e) A schedule in the form attached hereto as Schedule
4.1(e) of the location of all of the Company's contracts, books, records, and
other data relating to the Company's operations, including the Company's minutes
and stock books;
(f) Copies of all of the Company's employment agreements;
(g) The employment agreement between the Company and H.
Schwartz in the form attached hereto as Exhibit 4.1(g) executed by Seller (the
"H. Schwartz Employment Agreement");
(h) The employment agreement between the Company and C.
Schwartz in the form attached hereto as Exhibit 4.1(h) executed by Seller (the
"C. Schwartz Employment Agreement");
(i) Control over all assets of the Company including cash
held in the Company's name or owned by the Company excluding any real estate
owned by the Company in Mexico.
(j) Any schedules that are to be updated as of the Closing
Date;
11
<PAGE>
(k) An opinion of Sellers' counsel in the form attached
hereto as Exhibit 4.1(k); and
(l) Evidence of the acquisition ownership by the Company,
prior to Closing of Shelley H. Inc.'s partnership interest or any other interest
in the Goren Epic General Partnership formed pursuant to the Partnership
Agreement of Goren Epic, a California partnership, dated February 13, 1989, as
amended and restated on February 12, 1996 ("Goren Epic Partnership"); and any
and all of the proprietary rights to, the interests to and intellectual rights
to the International Silk Flower and Accessories Exhibition and AmeriChristmas
International Trim-A-Home Exhibition.
(m) Executed Agreement for a term of three (3) years with
Gideon Goren ("Goren") and the Company under which Goren provides his services,
including but not limited to selling exhibition space for the International Silk
Flower and Accessories Exhibition and the AmeriChristmas International Trim-A-
Home Exhibition.
(n) Except as provided in Section 7.3, fully executed
assignments or consent to change of ownership, whichever is applicable, of all
leases, contracts and franchises agreements.
4.2. Deliveries to the Sellers by the Buyer. At the Closing, the
--------------------------------------
Buyer will deliver to the Sellers the following:
12
<PAGE>
(a) The sum of Three Million Dollars ($3,000,000) by Wire
Transfer or Certified Check to the Sellers' accounts, against receipt of the
stock certificates for the Company Shares in accordance with Section 4.1(a) and
2.2(a) above;
(b) Fully executed Notes in the form annexed as Exhibit
2.2(b) above;
(c) A certificate, in form and substance reasonably
acceptable to the Sellers, executed by the President of the Buyer, and attested
to by the Secretary of the Buyer, dated as of the Closing Date, certifying as to
the accuracy of the Buyer's representations and warranties at and as of the
Closing;
(d) A fully executed guarantee agreement between Production
Group International, Inc. and Sellers (the "Guarantee") in form annexed hereto
as Exhibit 4.2(d) hereto;
(e) A certificate, in form and substance reasonably
acceptable to the Sellers, executed by the President of Buyer and attested to by
the Secretary of the Buyer dated as of the Closing Date, and certifying that:
(i) attached thereto is a true and complete copy of the By-laws of the Buyer in
effect as of the Closing Date; (ii) attached thereto is a true and complete copy
of the Articles of Incorporation of the Buyer as amended and in effect as of the
Closing Date; and (iii) attached
13
<PAGE>
thereto is a true and complete copy of a certificate of the Buyer's Secretary
certifying as to the resolutions adopted by the Board of Directors and
shareholders of the Buyer authorizing the execution, delivery and performance of
this Agreement and that such resolutions have not been modified, rescinded, or
amended and are in full force and effect.
5. Representations and Warranties of the Company and Sellers. The
---------------------------------------------------------
Company, each of the Sellers, jointly, severally, individually and in their
capacity as officers and directors of the Company, represent and warrant to the
Buyer that as of the date of this Agreement and as of the Closing Date:
5.1. Ownership; Transfer of the Company Shares. The Company
-----------------------------------------
Shares are duly authorized, validly issued, fully paid, and non-assessable. The
Sellers own the Company Shares set forth next to their names on Schedule 5.1,
free and clear of all liens, encumbrances, pledges, charges, security interests,
rights, options, or other adverse interests of any kind except as to a Buy-Sell
Agreement between Sellers to which each waives his rights. Sellers have the
right, power, and authority to sell all of the Company Shares as provided
herein, and upon such sale, the Buyer will receive good and valid title to all
of the Company Shares, subject to no liens, encumbrances, pledges, charges,
security interests, rights, options, or other adverse interests of any kind.
The certificates for the Company Shares will be,
14
<PAGE>
when delivered to the Buyer, duly endorsed in blank or accompanied by stock
powers duly executed in blank, in proper form for transfer.
5.2. Authority. The Sellers have the power and authority to
---------
execute and deliver this Agreement and each of the Sellers and the Company have
the power and authority to execute and deliver the other agreements and
documents contemplated by this Agreement (all such agreements and documents will
be known hereafter as the "Transaction Documents", regardless of which party is
required to execute or deliver any such agreement or document) to which it or he
is a party and to carry out its or his obligations hereunder and thereunder, as
the case may be. The execution, delivery, and performance of each of the
Transaction Documents to which the Company is a party and the consummation of
the transactions contemplated thereby have been duly authorized by the Board of
Directors of such Company. No other proceeding on the part of the Company or the
Sellers is necessary to authorize the execution and delivery of this Agreement
or any of the Transaction Documents to which the Company or the Sellers is a
party or the performance by the Company or the Sellers of any of the
transactions contemplated hereby or thereby. This Agreement, and each of the
Transaction Documents to which the Company or the Sellers is a party, has been
duly executed and delivered on behalf of the Company and the
15
<PAGE>
Sellers and when executed and delivered by all required parties thereto, will be
a legal, valid, and binding obligation of the Company and the Sellers
enforceable against the Company and the Sellers in accordance with their
respective terms, except to the extent that the validity, binding legal effect,
or enforceability of any provisions in the Agreement or any Transaction
Document, or any rights granted herein or thereunder may be subject to or
affected by applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium, or similar laws affecting the rights of creditors
generally, and general principles of equity (whether asserted in an action at
law or in equity).
5.3. Approvals. No consent, approval, order, or authorization
---------
of, or registration, declaration, or filing with, any governmental authority is
required in connection with the execution and delivery of this Agreement and the
Transaction Documents, by the Company or the Sellers, or with the consummation
of the transactions contemplated hereby or thereby. No consent of any third
party is necessary to permit the consummation of the transactions contemplated
hereby or thereby.
5.4. No Brokers. All negotiations relating to this Agreement and
----------
the Transaction Documents, and the transactions contemplated hereby and thereby,
have been carried out by the Company and the Sellers without the intervention of
any person or firm in such manner as to give rise to any valid
16
<PAGE>
claim against any of the parties hereto for a brokerage commission or finder's
fee.
5.5. Organization, Qualification to Do Business.
------------------------------------------
(a) The Company is a corporation duly organized, validly existing,
and in good standing under the laws of the State of California, and has all
requisite corporate power and authority to own or lease and to operate its
properties and to carry on its business as now being conducted. The Company has
delivered to the Buyer complete and correct copies of the Company's Articles of
Incorporation, By-laws, and all amendments thereto. The Company is duly
qualified or licensed to do business as a foreign corporation in any
jurisdictions outside the State of California in which it conducts business
except as listed on Schedule 5.5(a).
(b) Other entities of the Company, listed on Schedule 5.5(b), are
duly organized, validly existing, and in good standing under the laws of the
state of their incorporation or organization and individually have all requisite
power and authority to own or lease and to operate its properties and to carry
on its business as now being conducted. The Company has delivered to the Buyer
complete and correct copies of each entity's Articles of Incorporation, By-laws
or organizational documents, whichever is applicable, and all amendments
thereto. Schedule 5.5(b) lists where each subsidiary entity is qualified
17
<PAGE>
or licensed to do business as a foreign corporation or entity in any
jurisdictions outside of the state of their incorporation or organization.
(c) As of the date of Closing, no claim has been made against any
of the Company by any person or entity based upon the failure of the Company to
qualify or be licensed to do business as a foreign corporation in any state. In
the event a future claim is made based upon the Company's failure to qualify or
be licensed to do business as a foreign corporation in any state prior to the
Closing Date, such claim shall be treated as an undisclosed liability in
accordance with Section 2.2(e) above.
5.6. Capital Stock. Epic's authorized capital stock consists of Six
-------------
Thousand (6,000) shares of Common Stock, ______ par value per share; (ii) the
only issued and outstanding shares of capital stock of Epic are Three Thousand
Nine Hundred Twenty-Eight (3,928) shares of Epic's Common Stock, all of which
Three Thousand Nine Hundred Twenty-Eight (3,928) shares are owned beneficially
and of record by the Sellers; (iii) there are no outstanding subscriptions,
options, conversion rights, warrants, or other agreements or commitments of any
nature whatsoever (either firm or conditional) obligating Epic to issue,
deliver, sell, or cause to be issued, delivered, or sold any additional shares
of capital stock of Epic, or obligating Epic to grant,
18
<PAGE>
extend, or enter into any such agreement or commitment; and (iv) there are no
rights of first refusal, pre-emptive rights, or other similar agreements
obligating Epic to offer any shares of its capital stock to any person, except
to the Buy Sell Agreement between the Sellers to which each is waiving his
rights.
5.7. No Subsidiaries, Etc. The Company does not own, directly or
--------------------
indirectly, capital stock or equity in any other corporation or other person and
is not a partner in any partnership or a participant in any joint venture,
except as listed on Schedule 5.7.
5.8. Financial Statements. The Company has delivered to the
--------------------
Buyer complete and correct copies of (a) the Company's income tax returns for
the fiscal years ended January 31, 1994, January 31, 1995 and January 31, 1996
and (b) the Company's unaudited financial statements for the fiscal years ended
January 31, 1994, January 31, 1995 and January 31, 1996; and (c) financial
statements dated January 31, 1996. Any advances made by the Company to the
Company's officers or employees and any advances made by any officer or employee
that appear in the January 31, 1996 financial statements or were made subsequent
to January 31, 1996 shall be settled and eliminated prior to Closing. All such
financial statements have been prepared on a modified accrual accounting basis
and on an historically consistent basis throughout the periods indicated
19
<PAGE>
and present fairly and accurately the financial condition of the Company at the
dates indicated and the results of operations for the periods indicated.
5.9. Absence of Certain Changes. Except to the extent
--------------------------
specifically set forth in reasonable detail on Schedule 5.9 hereto, since
January 31, 1996 there have been no material adverse changes in the assets,
liabilities, properties, business, or prospects of the Company, and the Company
has not:
(a) issued or sold any stock, notes, bonds, or other securities,
or any option to purchase the same, or entered into any agreement with respect
thereto;
(b) declared, set aside, or made any dividend or other
distribution on capital stock or redeemed, purchased, or acquired any shares
thereof, or entered into any agreement in respect of the foregoing;
(c) amended its Articles of Incorporation or By-laws;
(d) other than in the ordinary course of business or with respect
to the purchase of the assets of Shelley H. Inc.'s partnership interest in the
Goren Epic Partnership (i) purchased, sold, assigned or transferred any material
tangible or intangible assets or property (including cash and cash equivalents);
(ii) mortgaged, pledged, granted or suffered to exist any lien or other
encumbrance or charge on any material
20
<PAGE>
tangible or intangible assets or properties, except for liens for taxes not yet
due; or (iii) waived any rights of material value or canceled any material debts
or claims;
(e) incurred any material obligation or liability (absolute or
contingent), except current liabilities and obligations incurred in the ordinary
course of business, or paid any material liability or obligation (absolute or
contingent) other than current liabilities and obligations incurred in the
ordinary course of business;
(f) increased, or become obligated to increase, the compensation or
other benefits payable to any officer or director of the Company or any relative
of any such officer or director, or paid a bonus, or granted any severance or
termination pay, or entered into any employment agreement or other agreement
(written or oral) with any officer or salaried employee (except as may be
effected in accordance with the terms of this Agreement);
(g) incurred any damage, destruction, or similar loss, whether or not
covered by insurance, materially affecting the businesses or properties of the
Company;
(h) entered into any transaction other than in the ordinary course of
business;
21
<PAGE>
(i) suffered any strike or other labor trouble materially and
adversely affecting its business, operations, or prospects;
(j) made or permitted any material amendment or termination of any
material contract, agreement, or license to which it is a party other than in
the ordinary course of business;
(k) made any change in its accounting methods or practices with
respect to its condition, operations, business, properties, assets, or
liabilities;
(l) abandoned or disposed of any material trade secret, trademark,
tradename, trademark application, tradename application, or any other
intellectual property;
(m) suffered any loss of employees or customers that materially and
adversely affects its business, operations, or prospects;
(n) failed to carry on their business and operations substantially in
the manner carried on as of the date hereof and the Company and the subsidiaries
have not engaged in any activity or transaction or made any commitment to
purchase or spend, other than in the ordinary course of their business as
heretofore conducted;
(o) failed to use their best efforts to preserve its business
organization intact, to keep available to
22
<PAGE>
the Buyer the services of its employees and independent contractors and to
preserve for the Buyer its relationships with suppliers, licensees,
distributors, and customers and others having business relationships with it;
(p) obligated itself to, sell or otherwise dispose of or pledge or
otherwise encumber any of their properties or assets except in the ordinary
course of business or failed to maintain its facilities, machinery, and
equipment in good operating condition and repair, subject only to ordinary wear
and tear.
5.10. Taxes. Except to the extent specifically set forth in
-----
reasonable detail on Schedule 5.10 hereto, all federal, state, county,
municipal, and foreign tax returns required by law to be filed by the Company,
and the Sellers as of January 31, 1996 have been duly filed, and all taxes
(including without limitation sales, use, property, and payroll taxes),
assessments, fees, and other governmental charges together with any and all
penalties, fines, and interest thereon ("Taxes") upon the Company, and the
Sellers or upon any of the Company's or the Sellers' properties, assets,
revenues, income, sales, or franchises that have become due and payable in
respect of the periods or transactions covered thereby, have been paid. Except
to the extent specifically set forth in reasonable detail on Schedule 5.10
hereto, neither the Internal Revenue Service nor
23
<PAGE>
any other taxing authority or agency is now asserting, or is threatening to
assert, against the Company or the Sellers any deficiency or claim for
additional Taxes or interest thereon or penalties in connection therewith. The
Company and the Sellers have not been granted any waiver of any statute of
limitation with respect to, or been granted any extension of a period for the
assessment of, any federal, state, county, municipal, or foreign income tax.
Sellers have delivered to Buyer copies of all federal, state and local tax
returns for the Company for the last three (3) years.
5.11. Non-Contravention. Except to the extent specifically set
-----------------
forth in reasonable detail on Schedule 5.11 hereto, the execution and delivery
of this Agreement and the Transaction Documents and the consummation of the
transactions contemplated hereby and thereby will not (a) violate any provision
of the Articles of Incorporation or By-laws of the Company; (b) violate any
material provision of, or result in the breach or the acceleration of, or
entitle any party to accelerate (whether after the giving of notice or lapse of
time or both) any material obligation under any mortgage, lien, lease,
agreement, license, instrument, order, arbitration award, judgment, or decree to
which either the Company or the Sellers is a party or by which it or he is
bound; (c) result in the creation or imposition of any material lien, charge,
pledge, security
24
<PAGE>
interest, or other encumbrance upon any property of the Company or the Sellers;
or (d) violate or conflict with any other material restriction or any law,
ordinance, or rule to which the Company or the Sellers or any property of the
Company or the Sellers is subject.
5.12. Title to and Condition of the Assets of the Company.
---------------------------------------------------
(a) The Company has good and marketable title to all assets owned
by them free and clear of all mortgages, liens, charges, encumbrances,
easements, security interests, or title imperfections, except to the extent
specifically set forth in reasonable detail on Schedule 5.12 hereto. The assets
reflected in the financial statements of the Company dated January 31, 1996
referred to in Section 5.8 hereof constitute all of the tangible assets and
properties that the Company owns, uses, or holds in connection with its
business, and the conduct of such business as a going concern, except for
additions or dispositions in the ordinary course of business. The facilities,
machinery, furniture, office, and other equipment of the Company that are used
in its business are in good operating condition and repair, subject only to the
ordinary wear and tear of that business, and neither the Company nor any
property or asset owned or leased by it is in violation of any applicable
ordinance, regulation, or building, zoning, environmental or other law in
25
<PAGE>
respect thereof, the violation of which will have a material adverse effect on
the financial condition, the conduct of the business or the ownership or use of
any of the properties or assets of the Company.
(b) Except as set forth herein, the Company owns no real estate.
Schedule 5.12(b) hereto sets forth all personal property (with monthly lease
payments in excess of One Hundred Dollars ($100.00)) and real estate leased or
owned by the Company and specifies in the case of real estate the location of
each property, the use of the facility thereon, the name of the owner or the
names of the lessor and the lessee, the approximate square footage of
improvements. The Company has delivered to the Buyer copies of each lease by
which the Company acquired its interest in the personal property described in
Schedule 5.12(b). The Company has not received any written notice from any
governmental agency, board, bureau, body, department, or authority of any United
States or foreign jurisdiction, which materially restricts the use of any of the
real estate described in Schedule 5.12(b) hereto. Except as set forth in
Schedule 5.12(b) hereto, there is no easement, right-of-way agreement, license,
sublease, occupancy agreement, or like instrument with respect to any of the
real estate described in Schedule 5.12(b) hereto which would have a material
adverse effect on the Company's use of such real estate. Each lease pursuant to
which
26
<PAGE>
the Company leases any real or personal property is in full force and effect and
is valid and enforceable in accordance with its terms. There is not under any
such lease any material default by the Company or any event that with notice or
lapse of time or both would constitute such a material default by the Company.
Each property used in the business of the Company is reflected in the balance
sheet of the Company as of January 31, 1996, referred to in Section 5.8 hereof.
(c) Sellers have provided Buyer with a complete and accurate list
of all of the Company's accounts payable and liabilities as of January 31, 1996
on Schedule 5.12(c) and shall update this Schedule 5.12(c) as of the Closing
Date.
5.13. Litigation. Except as set forth in reasonable detail on
----------
Schedule 5.13 hereto:
(a) There are no, and the Sellers are not aware of any situation
that could result, in actions, suits, proceedings, investigations, or inquiries
pending or threatened against or affecting the business, operations, financial
condition, or prospects of the Company at law or in equity in any court or
before any federal, state, municipal, or other governmental department,
commission, board, bureau, agency, or instrumentality.
27
<PAGE>
(b) There are no, and the Sellers are not aware of any situation
that could result, in actions, suits, proceedings, investigations, or inquiries
pending or threatened against the Sellers at law or in equity in any court or
before any federal, state, municipal, or other governmental department,
commission, board, bureau, agency, or instrumentality.
(c) The Company is not, and the Sellers are not aware of any
situation that could result, in default in respect of any judgment, order, writ,
injunction, or decree of any court or any federal, state, municipal, or other
governmental department, commission, board, bureau, agency, or instrumentality.
(d) There are no, and the Sellers are not aware of any situation
that could result in, actions, suits, proceedings, investigations, or inquiries
pending or threatened against the Company at law or in equity in any court or
before any federal, state, municipal, or other governmental department,
commission, board, bureau, agency, or instrumentality.
5.14 Employee Benefit Plans and Other Arrangements.
---------------------------------------------
(a) Employee Plans Generally. Except as set forth in reasonable
------------------------
detail on Schedule 5.14(a) hereto, the Company does not maintain, does not make
any contributions to, or has not been obligated by law or agreement to
establish,
28
<PAGE>
maintain, sponsor, or make any contributions to (i) any employee pension benefit
plan as described in Section 3(2) of the Employee Retirement Income Security Act
of 1974, as amended, and regulations thereunder ("ERISA"); (ii) any employee
welfare benefit plan as described in Section 3(1) of ERISA, including, without
limitation, any arrangement providing for the payment of health benefits to
former employees or their beneficiaries; (iii) any formal or informal severance
plan or arrangement, including, without limitation, any arrangement providing
for payments to be made to any person contingent upon a change of ownership or
effective control of the Company or ownership of a substantial portion of the
assets of the Company; or (iv) any other deferred compensation, bonus, stock
option, stock purchase, insurance, or other employee benefit plan, agreement,
fund, or arrangement, whether or not set forth in writing, providing benefits of
economic value to any employee, former employee, or present or former
beneficiary, dependent, or assignee other than regular salary, wages, or
commissions paid substantially concurrently with the performance of the services
for which such benefits are paid.
(b) Post-Retirement Benefits. Except to the extent required under the
------------------------
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA"),
the Company has not incurred any current or future obligation to provide health
29
<PAGE>
or life insurance benefits to employees or former employees with respect to any
period which extends beyond retirement or other termination of employment.
(c) ERISA Title IV Considerations. Neither the Company nor any
-----------------------------
member of the Company's controlled group (within the meaning of Section 4001 of
ERISA) has incurred (or reasonably expects to incur) any material liability to
the Pension Benefit Guaranty Corporation or any material liability under Title
IV of ERISA, and there are no circumstances that might result in the imposition
of a lien on any of the assets of the Company pursuant to ERISA Sections 302 or
4068 or Section 412 of the Internal Revenue Code of 1986, as amended.
(d) Multiemployer Plans. Neither the Company nor any member of the
-------------------
Company's controlled group (within the meaning of Section 4001 of ERISA) does
now have, or during the last five years has had, any obligation to contribute
to, or any other liability or potential liability with respect to, a
"multiemployer plan" as that term is defined in Section 3(37) of ERISA or a
multiple controlled group plan as described in Sections 4063 and 4064 of ERISA
(including, without limitation, any withdrawal liability or plan termination
obligations).
5.15. Contracts.
---------
(a) Schedule 5.15(a) hereto contains a complete and correct list
of all agreements, contracts, and
30
<PAGE>
commitments to which the Company is a party that have either payments or
receipts of One Thousand Dollars ($1,000) or greater, or by which it or any of
its assets is bound as of the date hereof.
(b) The Buyer has been given complete and correct copies of all
written agreements, contracts, and commitments to which the Company is a party
or by which it or any of its assets is bound, together with all amendments
thereto. Such agreements, contracts, and commitments are in full force and
effect, and all parties to such agreements, contracts, and commitments have, in
all material respects, performed all obligations required to be performed by
them to date, and the Company is not, and no other party is, in material default
thereunder.
(c) No agreement, contract, or commitment to which the Company is a
party or by which it or any of its assets is bound purports to limit its freedom
to compete in any line of business or with any person or entity except those
listed on Schedule 5.15(c). The Company has no outstanding power of attorney,
except routine powers of attorney relating to representation before governmental
agencies.
(d) The Company is not a party to any material contract with any
governmental authority. The Company is not a party to any contract that
materially and adversely
31
<PAGE>
affects its condition (financial or otherwise), operations (present or
prospective), business (present or prospective), properties, assets, or
liabilities. Except as set forth on Schedule 5.15(d) hereto, the Company knows
of no bid or contract proposal made by either that, if accepted or entered into,
might reasonably be expected to result in a loss to the Company.
5.16. Insurance. The Company maintains adequate insurance against
---------
risks for the business in which it and its subsidiaries are engaged, including
without limitation, worker's compensation and comprehensive liability insurance.
All of the Company's insurance policies are listed on Schedule 5.16 hereto, are
in full force and effect, all premiums due thereon have been paid, and the
Company has complied in all material respects with the provisions of such
policies.
5.17. Trademarks, Etc. Schedule 5.17 hereto contains a complete
---------------
and accurate list (including registration numbers and dates of filing, renewal,
and termination) of all trademarks, patents, tradenames, trade secrets,
copyrights, service marks, licenses, all registrations and applications for any
of the foregoing, and other intellectual property owned by the Company or in
which the Company has registered an interest or for which applications have been
made (collectively, the "Intellectual Property"). Except as otherwise set forth
in Schedule 5.17 hereto, (a) all of the Intellectual Property is
32
<PAGE>
owned by the Company free and clear of all liens, encumbrances, or claims
whatsoever; none of the Company's rights in or use of such Intellectual Property
infringes on the rights of others, and Company's rights in said property have
not been and are currently not being, to the knowledge of the Sellers,
threatened or challenged; (b) all of the Intellectual Property registrations set
forth in Schedule 5.17 have been duly issued and have not been canceled,
abandoned, or otherwise terminated; (c) all of the Intellectual Property
applications set forth in Schedule 5.17 have been duly filed with the
appropriate authorities; and (d) no consents or approvals of any person are
necessary to sell, convey, transfer, assign, and deliver any of the Intellectual
Property to the Buyer. Except as set forth in Schedule 5.17 hereto, the Company
owns or has the right to use all of the Intellectual Property necessary to
conduct its operations and business and the Company knows of no claim, or any
basis of any claim, that it has infringed any intellectual property of any other
person or that any other person has infringed any of the Intellectual Property.
Except as set forth in Schedule 5.17 hereto, no third party has been permitted
or licensed to use any of the Intellectual Property and no royalties or other
fees are payable to any third party with respect to any of the Intellectual
Property.
33
<PAGE>
5.18. Transactions with Interested Persons. Except to the extent
------------------------------------
specifically set forth in reasonable detail on Schedule 5.18 hereto and the
financial statements delivered to the Buyer pursuant to Section 5.8 above,
neither the Company nor Sellers (or Sellers' family members) owns, directly or
indirectly, on an individual or joint basis, an interest in, or serves as an
officer, director, employee, consultant, contractor, or agent of or to any
competitor or supplier of the Company or any person or entity having a contract
or arrangement with the Company, and to the best of Sellers' knowledge, no
employee (or family member thereof) of the Company owns, directly or indirectly,
on an individual or joint basis, an interest in, or serves as an officer,
director, employee, consultant, contractor, or agent of or to any competitor or
supplier of the Company or any person or entity having a contract or arrangement
with the Company.
5.19. Compliance with Laws, etc. The Company has complied with
--------------------------
and is in compliance with all federal, state, local, and foreign statutes, laws,
ordinances, regulations, rules, permits, judgments, orders, or decrees
applicable to it or any of its properties, assets, operations, and business, the
failure of compliance with which would have a material adverse effect on the
properties, operations, business, financial condition, or prospects of the
Company. There does not exist any
34
<PAGE>
basis for any claim of default under or violation of any such statute, law,
ordinance, regulation, rule, permit, judgment, order, or decree except such
defaults or violations, if any, that in the aggregate do not and will not
materially and adversely affect the properties, operations, business, financial
condition, or prospects of the Company.
5.20. No Undisclosed Liabilities, Etc. Except for the transactions
-------------------------------
contemplated by this Agreement and as set forth in Schedule 5.20 hereto:
(a) The Company has not incurred any material liability or
obligation (absolute, accrued, contingent, or otherwise) of any nature (other
than liabilities and obligations incurred in the ordinary course of business)
that would properly be reflected or reserved against in a balance sheet prepared
in conformity with generally accepted accounting principles applied on a basis
consistently used in the preparation of the balance sheet of the Company as of
the fiscal year ending January 31, 1996 referred to in Section 5.8 above.
(b) The Company has not acquired any material amount of accounts
receivable that are uncollectible, and the frequency and amounts of payments
received by the Company with respect to the accounts receivable reflected on the
balance sheet of the Company as at January 31, 1996, referred to in Section 5.8
hereof, do not, in retrospect, render inadequate the
35
<PAGE>
reserve for uncollectible accounts set forth on such balance sheet.
5.21. Environmental Matters.
---------------------
(a) No releases or threat of releases of hazardous substances have
occurred at, from, in or on any real property owned, leased or operated by the
Company ("Site", or collectively, "Sites"), nor are there any hazardous
substances in, on, about or migrating to any Site;
(b) No releases or threat of releases of hazardous substances have
occurred at, from or in any Site to which a hazardous substance generated by or
from the Company has been disposed of;
(c) There are no past or pending environmental claims against the
Company related to any Site or off-Site locations to which the Company has
shipped hazardous substances. There has been no violation of or non-compliance
with any environmental law or environmental permit by the Company relating to
operations of the Company or other uses of the Site;
(d) There are no facts, circumstances, or conditions that could
reasonably be expected to restrict, encumber, or result in the imposition of
special conditions under any environmental law or environmental permits with
respect to the ownership, occupancy, development, use, or transferability of any
Site;
36
<PAGE>
(e) There are no underground storage tanks, polychlorinated biphenyl-
containing materials, or asbestos containing materials located at any Site;
(f) There are not and there have not been any environmental conditions
at any Site resulting from or arising out of any of Company's past activities at
any Site created prior to or existing at the Closing Date; and
(g) All necessary environmental permits and other permits for all
activities related to the past operations and current operations at all Sites
were obtained. The Company has fully complied and is in full compliance with all
environmental laws and environmental permits with respect to activities relating
to the Sites.
5.22. Governmental Authorizations and Regulations. The Company
-------------------------------------------
holds all licenses, franchises, permits, and other governmental authorizations,
the absence of which could have a material adverse effect on its business.
Schedule 5.22 hereto lists all licenses, franchises, permits, and other
governmental authorizations held by the Company material to the conduct of its
business. Such licenses, franchises, permits, and other governmental
authorizations are valid, and the Company has not received any notice that any
governmental authority intends to cancel, terminate, or not renew any such
license, franchise, permit, or other governmental authorization.
37
<PAGE>
5.23. Accounting Practices. The Company makes and keeps accurate
--------------------
books and records, on a modified accrual accounting method on a historically
consistent basis to reflect its assets. The Company maintains internal
accounting controls that provide reasonable assurance that (a) transactions are
executed with management's authorization and (b) transactions are recorded as
necessary to permit preparation of the Company's financial statements and to
maintain accountability for the assets of the Company.
5.24. Minute Books. The minute books of the Company contain
------------
complete and accurate records of all meetings and other corporate actions of its
shareholders and Board of Directors and Committees thereof.
5.25. Employee Matters. The Company is not in violation, nor has
----------------
it been alleged to be in violation, nor has it been charged with any violation,
nor is the Company aware of any violation of any of the various provisions of
Title VII of the Federal Civil Rights Act, the Age Discrimination in Employment
Act, the Americans with Disabilities Act, or any other federal or state law
dealing with employment discrimination, federal or state wage and hour laws,
federal or state income or unemployment and social security tax withholding
laws, or occupational safety and health laws and applicable standards and
regulations thereunder. The Company is not liable for any substantial
38
<PAGE>
accrued unpaid wages, or for any material tax, penalty, assessment, or
forfeiture for failure to comply with any employer/employee matter. Except as
set forth in reasonable detail on Schedule 5.25 hereto, the Company is not a
party to any collective bargaining agreement, no such agreement determines the
terms and conditions of employment of any employee of the Company, no collective
bargaining agent has been certified as a representative of any of the employees
of the Company, and no representation campaign or election is now in progress
with respect to any of the Company's employees.
5.26. Accuracy of Information Furnished. This Agreement, the
---------------------------------
Transaction Documents, and the Schedules and Exhibits hereto and thereto
prepared by Sellers do not contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements (excluding
statements concerning solely the Buyer) contained herein or therein, in light of
the circumstances under which they were made, not misleading.
5.27. Disclosure. The Sellers and the Company have not knowingly
----------
failed to disclose to the Buyer any facts that would have an adverse impact on
the value of the Company Shares or on the assets, liabilities, earnings,
prospects and business of the Company. No representation or warranty by the
Sellers contained in this Agreement, and no statement contained in, any
39
<PAGE>
Schedule or Exhibit, or other document attached hereto, or any list, certificate
or writing delivered in connection with or pursuant hereto, contains any untrue
statement of a material fact, or omits to state a material fact necessary in
order to make the statements (excluding statements concerning solely the Buyer)
contained herein or therein not misleading or necessary in order to provide
fully and fairly the information required to be provided in any such document.
6. Representations and Warranties of Buyer. The Buyer represents and
---------------------------------------
warrants to the Sellers that, as of the Closing Date:
6.1. Authority for Agreements. The Buyer has the power and
------------------------
authority to execute this Agreement and the Transaction Documents applicable to
the Buyer and to carry out its obligations hereunder and thereunder. When
executed and delivered by the Buyer, this Agreement will be binding upon and
enforceable against the Buyer in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, reorganization,
insolvency, moratorium, or other similar laws from time to time in effect,
affecting creditors' rights generally, and general principles of equity (whether
asserted in an action at law or in equity).
6.2. Non-Contravention. The execution and delivery of this
-----------------
Agreement and the Transaction Documents and the
40
<PAGE>
consummation of the transactions contemplated hereby and thereby will not (a)
violate any provision of the Articles of Incorporation or By-laws of the Buyer;
(b) violate any material provision of, or result in the breach or the
acceleration of, or entitle any party to accelerate (whether after the giving of
notice or lapse of time or both) any material obligation under any mortgage,
lien, lease, agreement, license, instrument, order, arbitration award, judgment,
or decree to which the Buyer is a party or by which it is bound; or (c) violate
or conflict with any other material restriction or any law, ordinance, or rule
to which the Buyer or its property is subject.
6.3. Approvals. No consent, approval, order, or authorization
---------
of, or registration, declaration, or filing with, any governmental authority is
required in connection with the execution and delivery of this Agreement and the
Transaction Documents by the Buyer or the consummation of the transactions
contemplated hereby or thereby. Except as set forth in Schedule 6.3 hereto, no
consent of any third party is necessary to permit the consummation of the
transactions contemplated hereby or thereby.
6.4. No Brokers. All negotiations relating to this Agreement and
----------
the Transaction Documents and the transactions contemplated hereby and thereby
have been carried out by the Buyer without the intervention of any person or
firm in such
41
<PAGE>
manner as to give rise to any valid claim against any of the parties hereto for
a brokerage commission or finder's fee.
6.5. Accuracy of Information Furnished. This Agreement and the
---------------------------------
Schedules and Exhibits hereto and thereto prepared by the Buyer do not contain
any untrue statement of a material fact and do not omit to state a material fact
necessary to make the statements (excluding statements concerning solely the
Company or the Sellers) herein or therein, in light of the circumstances under
which they were made, not misleading.
6.6. Organization, Good Standing. The Buyer is a corporation duly
---------------------------
organized, validly existing, and in good standing under the laws of the State of
Virginia, and has all requisite corporate power and authority to own or lease
and to operate its properties and to carry on its business as now being
conducted.
6.7. Investigation. Buyer is purchasing the shares from sellers
-------------
based on its investigation, and Buyer is not solely relying on any statement or
either or both of Sellers as to the anticipated revenues or general business of
Company.
7. Covenants of the Company and Each of the Sellers.
------------------------------------------------
7.1. Access, Information and Documents. Pending the Closing, the
---------------------------------
Company and the Sellers will give to the Buyer and to its agents and
representatives (including, but not limited to, accountants, lawyers, and
appraisers) full and complete access during normal working hours to any and all
of the properties, assets, books, records, and other documents of the Company to
enable the Buyer to make such examination of the business, properties, assets,
books, records, and other documents
42
<PAGE>
of the Company as the Buyer may determine, and of the Company and the Sellers
will furnish to the Buyer such information and copies of such documents and
records as the Buyer will reasonably request. As part of such examination the
Buyer may make such inquiries of such persons having business relationships with
the Company as the Buyer will determine and the Company, and the Sellers will
cooperate fully with the Buyer in connection therewith.
7.2. Conduct of Business Pending Closing. From the date hereof until
-----------------------------------
the Closing with regard to the Company, except as consented to by the Buyer in
writing:
(a) The Company will maintain itself at all times as a
corporation duly organized, validly existing, and in good standing, as
applicable, under the laws of the jurisdictions under which it is incorporated
and in which it is doing business as a foreign corporation;
(b) The Company will carry on its business and operations in
the normal course, substantially in the manner carried on as of the date hereof
and the Company will not engage in any activity or transaction or make any
commitment to purchase or spend, other than in the ordinary course of their
business as heretofore conducted;
(c) The Company will not declare, authorize, or pay any
distribution or dividend to any of its shareholders
43
<PAGE>
and the Company will not redeem, purchase, or otherwise acquire, or agree to
redeem, purchase, or otherwise acquire, any shares of their own stock;
(d) The Company will not pay or obligate itself to pay any
compensation, commission, or bonus to any director, officer, employee, or
independent contractor as such, except for the regular compensation and
commissions payable to such director, officer, employee, or independent
contractor at the rate in effect on the date of this Agreement or otherwise in
the ordinary course of business;
(e) The Company will continue to carry all of its existing
insurance;
(f) The Company will use its best efforts to preserve its
business organization intact, to keep available to the Buyer the services of its
employees and independent contractors and to preserve for the Buyer its
relationships with suppliers, licensees, distributors, and customers and others
having business relationships with each of them;
(g) The Company will not, and will not obligate itself to, sell
or otherwise dispose of or pledge or otherwise encumber any of its properties or
assets except in the ordinary course of business and the Company will maintain
its facilities, machinery, and equipment in good operating condition and repair,
subject only to ordinary wear and tear;
44
<PAGE>
(h) The Company will not enter into any agreement or
understanding with any partner, employee, officer, director, or shareholder of
the Company, or any affiliate of any of the foregoing;
(i) The Company will not engage in any activity or transaction
other than in the ordinary course of business as heretofore conducted;
(j) Without limiting the foregoing, the Company will consult
with the Buyer regarding all significant developments, transactions, contracts,
personnel actions, personnel changes, proposals relating to their business or
similar events prior to taking any action; and
(k) The Company will not make any advances to any officer or
employee or take any advances from any officer or employee
7.3. Consents and Approvals. The Company and the Sellers will use
----------------------
their best efforts to obtain prior to the Closing all consents, authorizations,
and approvals under all statutes, laws, ordinances, regulations, rules,
judgments, decrees, and orders of any court or governmental agency, board,
bureau, body, department, or authority or of any other person required to be
obtained by either of the Company or the Sellers in connection with the
execution, delivery, and performance of this Agreement, the Transaction
Documents to which they are a party, and the consummation of the transactions
contemplated hereby and thereby. Notwithstanding the
45
<PAGE>
previous sentence, Sellers shall, within twenty (20) Days of the Closing, obtain
consents to the assignment or consent to change of ownership, whichever is
applicable, of (a) the leases listed on Schedule 5.12(b) and (b) the contracts
for exhibition management with Specialty Equipment Manufacturing Association and
the Divers Equipment Manufacturing Association and complete the transfer of the
real estate in Mexico listed on Schedule 5.12(b).
7.4. Confidential Material. The Company and the Sellers will, and
---------------------
will instruct all of their employees, representatives, agents, and affiliates
to, treat all Confidential Material confidentially and not disclose it except in
accordance herewith; provided, that (a) any Confidential Material may be
disclosed to the Company's or the Sellers' agents who (i) need to have access to
such information and (ii) are directed by either of the Company or the Sellers
to treat such Confidential Material confidentially; (b) any disclosure of
Confidential Material may be made with the prior written consent of the Buyer;
and (c) Confidential Material may be disclosed without liability hereunder to
the extent required by law or by the order or decree of any court or other
governmental authority; provided, however, that the party legally compelled to
disclose the Confidential Material will provide the Buyer with prompt notice of
that fact so that the Buyer may attempt to obtain a protective order or other
appropriate remedy. For purposes of this section, the term "Confidential
Material" will
46
<PAGE>
be defined to mean all information furnished by the Buyer or any of its agents
to either of the Company or any of the Sellers or any of their agents; provided,
however, that the term "Confidential Material" will not include information that
(x) becomes generally available to the public other than as a result of a
disclosure by either of the Company, any of the Sellers or any of their
employees, representatives, agents, or affiliates, or (y) was made available to
either of the Company or the Sellers on a non-confidential basis from a source
other than the Buyer or any of its agents, provided, that such source is not
bound by a confidentiality agreement with the Buyer or any of its agents.
7.5. Employment Contract. At the Closing, H. Schwartz and C. Schwartz
-------------------
will enter into the H. Schwartz Employment Agreement and the C. Schwartz
Employment Agreement, respectively.
7.6. Liability for Federal, State and Local Taxes. The Sellers will
--------------------------------------------
be liable for all federal, state, and local taxes resulting from the
transactions contemplated by this Agreement, including, but not limited to, all
sales, use, and transfer taxes, if any, resulting from this transaction. In
addition, the Sellers will be responsible for all of Company's federal, state,
and local taxes and any interest, penalty, or expenses incurred thereon for all
tax years and partial tax years ending on or before January 31, 1996. In the
event an audit is commenced or a claim is made for taxes which, if upheld, would
be the obligation of Sellers hereunder, Sellers shall be
47
<PAGE>
notified of such audit or claim and shall defend and, if necessary, pay any
taxes, penalties and interest ultimately assessed.
7.7. Claims Experience. At or prior to the Closing, the Sellers
-----------------
will prepare and deliver to the Buyer a description of all claims experience of
the Company during the past three years under all of the insurance policies
listed on Schedule 5.16 hereto, including settled and outstanding claims under
all such policies in respect of general liability and workers' compensation
claims.
7.8. Employment and Employee Benefits. The Sellers have delivered
--------------------------------
to the Buyer Schedule 7.8 listing the name, title, and current annual base
salary or hourly rate of each person employed by the Company on January 31, 1996
and June 15, 1996, together with a statement of the full amount and nature of
any other remuneration, whether in cash or kind, paid to each such person during
the 1995 calendar year. The Sellers will furnish an updated copy of Schedule 7.8
at the Closing which will reflect any changes in such information occurring
between January 31, 1996, and the Closing Date. The Sellers agree with the Buyer
that any individuals who were full-time employees of the Company on the Closing
Date and who agree to execute the standard PGI Code of Conduct agreement will be
offered continued employment with the Company, effective immediately after the
Closing. Any individuals who accept this offer of employment with the Company
will be referred to herein as "Transferring Employees." This employment of
Transferring Employees will be "at will" and nothing
48
<PAGE>
herein expressed or implied confers upon any such Transferring Employee any
rights or remedies of any nature or kind whatsoever under or by reason of this
Agreement, including, without limitation, any rights to employment for a
specific period. After the Closing, the Buyer will make available to
Transferring Employees such wages and benefits as the Buyer deems appropriate,
subject only to the covenants set forth in Section 8.3 hereof, and, other than
service credit for the purpose of determining an employee's vacation benefit,
the Buyer will be under no obligation to credit Transferring Employees with past
service credit for any purpose (including, without limitation, severance, or
pension purposes).
7.9. Non-Competition. For a period of *** commencing on the Closing
---------------
Date, Sellers will not:
(a) Directly or indirectly, engage in, own, control, or make
an investment in any business that competes directly or indirectly for the
business of the clients (as of Closing) of the Company or Epic Enterprises of
Nevada, Inc. ("Epic L.V.").
(b) Accept employment with any person or entity that competes
directly or indirectly for the business of the clients (as of Closing) of the
Company or Epic L.V.;
(c) Directly or indirectly solicit or employ any PGI Company J
and affiliates person who at such time provides services for or is otherwise
employed by the Company, or Epic L.V., or encourage
* CONFIDENTIAL INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
COMMISSION
49
<PAGE>
or induce any employee of the Company or Epic L.V. to leave such employment;
(d) Directly or indirectly, divert or attempt to divert from
the Company or Epic L.V., Buyer or Buyer's Parent the business of any customer
or client of the Company, Epic L.V. that was a customer or client as of Closing.
7.10. Subordination Agreement. At Closing, Sellers agree to sign a
-----------------------
standard subordination agreement provided by Buyer's primary financial
institution in the form attached hereto as Exhibit 7.10 or such other
subordination agreements as may be provided from time to time by Buyer's primary
financial institution.
7.11. Further Assurances. The Sellers agree, at the Sellers' sole
------------------
expense, to do or cause to be done such further acts and things and deliver or
cause to be delivered to the Buyer such additional assignments, agreements,
powers, and instruments as the Buyer may reasonably require to carry into effect
the purposes of this Agreement and the Transaction Documents or to better assure
and confirm unto the Buyer its rights, powers, and remedies hereunder and
thereunder.
7.12. Termination of Company's Benefit Plans. Sellers shall pay all
--------------------------------------
expenses for all liabilities, including funding liabilities and fiduciary
responsibilities related to the termination and distribution of such plans, and
if Sellers agree to such a merger,
50
<PAGE>
then for the merger of the Company's pension plan into the 401(K) plan of
Buyer's Parent.
7.13. Release of Liens.
----------------
(a) Sellers will use commercially reasonable efforts to obtain
within sixty (60) days of Closing releases of all liens which are paid and
satisfied as of the date of Closing and are listed on Schedule 5.12(a). Upon
receipt of the Uniform Commercial Code Termination Statement (UCCTS), Sellers
will file UCCTS in appropriate jurisdiction(s) and deliver a copy of UCCTS and
evidence of filing to Seller.
(b) With regard to liens filed by San Diego National Bank,
Sellers will work with Buyer in replacing the financing provided by San Diego
National Bank which gave rise to the Lien(s) with Buyer's or Buyer's Parent's
Letter of Credit.
8. Covenants of the Buyer.
----------------------
8.1. Confidential Information. The Buyer will, and will instruct
------------------------
all of its employees, representatives, agents, and affiliates to, treat all
Confidential Information confidentially and not disclose it except in accordance
herewith; provided, that (a) any Confidential Information may be disclosed to
the Buyer's agents who (i) need to have access to such information and (ii) are
directed by the Buyer to treat such Confidential Information confidentially; (b)
any disclosure of Confidential Information may be made with the prior written
consent of the Company or the Sellers; and (c) Confidential Information may be
disclosed without liability hereunder to the extent required by law or by the
order or decree of any court or other governmental authority; provided, however,
that the party legally compelled to disclose the Confidential Information will
provide the Company or the Sellers, as appropriate, with prompt notice of that
fact so that the Company or any of the Sellers may attempt to obtain a
protective order or other appropriate remedy. For purposes of this section, the
term "Confidential Information" will be defined to mean all information
51
<PAGE>
furnished by the Company or the Sellers or any of their agents to the Buyer or
any of its agents; provided, however, that the term "Confidential Information"
will not include information that (x) becomes generally available to the public
other than as a result of a disclosure by the Buyer or any of its employees,
representatives, agents, or affiliates, or (y) was made available to the Buyer
on a non-confidential basis from a source other than the Company or the Sellers
or any of their agents, provided, that such source is not bound by a
confidentiality agreement with the Company, the Sellers or any of their agents.
The provisions contained in this Section 8.1 will not survive the Closing.
8.2. Consents and Agreements. The Buyer will use its reasonable
-----------------------
commercial efforts to obtain prior to the Closing all consents, authorizations,
and approvals under all statutes, laws, ordinances, regulations, rules,
judgments, decrees, and orders of any court or governmental agency, board,
bureau, body, department, or authority or of any other person required to be
obtained by the Buyer in connection with the execution, delivery, and
performance of this Agreement, the Transaction Documents to which it is a party
and the consummation of the transactions contemplated hereby and thereby.
8.3. Employment and Employee Benefits.
--------------------------------
(a) After the Closing, the Buyer agrees to offer continued
employment to Transferring Employees. This employment of Transferring Employees
will be "at will" and nothing herein expressed
52
<PAGE>
or implied confers upon any such Transferring Employee any rights or remedies of
any nature or kind whatsoever under or by reason of this Agreement, including,
without limitation, any rights to employment for a specific period. The Buyer
will make available to Transferring Employees such wages and benefits as the
Buyer deems appropriate and will provide Transferring Employees with
substantially similar working terms and working conditions as are provided to
all Buyer's employees. Other than service credit for the purpose of determining
an employee's vacation benefit, the Buyer will be under no obligation to credit
Transferring Employees with past service credit for any purpose (including,
without limitation, severance, or pension purposes).
(b) Buyer will recommend to the insurance company currently providing
medical insurance coverage to its employees that Transferring Employees be
covered under such medical insurance without a required physical examination or
the exclusion of existing conditions.
(c) Buyer will recommend and use its commercially reasonable best
efforts to make provisions for the Company's employees to transfer savings from
any of the Company employee benefit plans, terminated as a result of this
transaction, into the Buyer's existing 401(K) plan.
8.4. Termination of Company's Benefit Plans. Sellers with Buyer's
--------------------------------------
assistance (at no cost or expense to Buyer) will cause the Company to terminate
all Company's Employee benefit plans in existence,
53
<PAGE>
including but not limited to defined contribution plans, at Closing or as soon
as possible subsequent to Closing.
8.5. Undisclosed Liabilities. After the Closing Date, Buyer
-----------------------
agrees:
(a) To notify Sellers of any undisclosed payables or
liabilities of which it becomes aware and Sellers shall have the right to defend
or compromise any of the same unless such action would have an unreasonably
adverse effect on the Company, its affiliates or their ongoing businesses; and
(b) To notify Sellers of any claims or audits the Company has
regarding any local, state or federal tax and any interest, penalty or expenses
incurred for tax years or business conducted prior to January 31, 1996, and
Sellers shall have the right to defend or compromise any of the same, as long as
such defense or compromise is not detrimental to the Company and any taxes,
interest or penalties incurred are paid by Sellers.
8.6. Payment of Assumed Liabilities. Buyer will pay all assumed
------------------------------
liabilities listed on Schedule 8.6 in accordance with their terms.
8.7. H. Schwartz Employment Agreement and C. Schwartz Employment
-----------------------------------------------------------
Agreement. At the Closing Buyer will cause Epic to enter into the H. Schwartz
- ---------
Employment Agreement and C. Schwartz Employment Agreement.
54
<PAGE>
8.8. Further Assurances. The Buyer will, at the request of the
------------------
Sellers and at the Buyer's sole expense, execute and deliver any further
instruments or documents and take all such further action(s) as the Sellers may
reasonably request in order to carry into effect the purposes of this Agreement
and the Transaction Documents or to better assure and confirm unto the Sellers
its rights, powers, and remedies hereunder and thereunder.
8.9. Replacement Letters of Credit
-----------------------------
(a) Buyer agrees to work with Sellers to replace the existing
financing from San Diego National Bank which created the liens on the Company's
inventory, proceeds and products with Buyer's or Buyer's Parent's Letter of
Credit.
(b) Buyer agrees to use commercially reasonable efforts to
replace Seller's personal guarantees on any outstanding leases to which the
Company is a party.
9. Conditions Precedent to the Sellers' Obligation to Sell the Company
-------------------------------------------------------------------
Shares. The obligations of the Sellers to sell the Company Shares is subject to
- ------
the fulfillment prior to or at the Closing of the following conditions:
9.1. The Buyer's Performance. There will not be any material error,
-----------------------
misstatement, or omission in the representations and warranties made by the
Buyer in this Agreement; all representations and warranties by the Buyer
contained in this Agreement or in any written statement delivered by the Buyer
to the Company or the Sellers pursuant to this Agreement will be true in all
material respects at and as of the Closing as though such representations and
warranties were made at and as of said time (except (a) as contemplated by this
Agreement and (b) to the extent, if any, the Company and the Sellers will waive
the same); and the Buyer will have performed and complied in all material
respects with all the terms, provisions and conditions of this Agreement to be
performed and complied with by the Buyer at or before the Closing.
55
<PAGE>
9.2. Consents and Approvals. The Company and the Buyer (and to the
----------------------
extent required, the Sellers) will have obtained all consents, authorizations,
and approvals under all statutes, laws, ordinances, regulations, rules,
judgments, decrees, and orders of any court or governmental agency, board,
bureau, body, department, or authority or of any other person required to be
obtained by the Company, the Buyer, or the Sellers, as the case may be, in
connection with the execution, delivery, and performance of this Agreement, the
Transaction Documents and the consummation of the transactions contemplated
hereby and thereby.
9.3. No Legal Impediment. There will be in effect no injunction,
-------------------
writ, temporary restraining order, or any order of any nature issued by any
court or governmental agency directing that the transactions contemplated by
this Agreement not be consummated.
10. Conditions Precedent to the Buyer's Obligation to Purchase the Company's
------------------------------------------------------------------------
Shares. The obligation of the Buyer to purchase the Company Shares is subject
- ------
to the fulfillment prior to or at the Closing of the following conditions:
10.1. Company's and the Sellers' Performance. There will not be any
--------------------------------------
material error, misstatement, or omission in the representations and warranties
made by the Company or the Sellers in this Agreement; all representations and
warranties by the Company and the Sellers contained in this Agreement or in any
written statement delivered by the Company or the Sellers to the Buyer pursuant
to this
56
<PAGE>
Agreement will be true in all material respects at and as of the Closing as
though such representations and warranties were made at and as of said time
(except (a) as contemplated by this Agreement and (b) to the extent, if any, the
Buyer will waive the same); and the Company and the Sellers will have performed
and complied in all material respects with all the terms, provisions, and
conditions of this Agreement to be performed and complied with by the Company
and the Sellers at or before the Closing, including but not limited to the
deliveries to Buyer from Sellers required under Section 4.1 hereof.
10.2. Consents and Approvals. The Company and the Buyer (and to the
----------------------
extent required, the Sellers) will have obtained all consents, authorization,
and approvals under all statutes, laws, ordinances, regulations, rules,
judgments, decrees, and orders of any court or governmental agency, board,
bureau, body, department, or authority or of any other person required to be
obtained by the Company, the Sellers, or the Buyer, as the case may be, in
connection with the execution, delivery and performance of this Agreement, the
Transaction Documents, and the consummation of the transactions contemplated
hereby and thereby.
10.3. Physical Properties. There will have occurred no material
-------------------
damage to or destruction or loss of (whether or not covered by insurance) any of
the Company's facilities, equipment, or other assets.
10.4. No Legal Impediment. There will be in effect no injunction, writ,
-------------------
temporary restraining order, or any order of any
57
<PAGE>
nature issued by any court or governmental agency directing that the
transactions contemplated by this Agreement not be consummated.
10.5. Closing of Buyer's Purchase of Epic Enterprises of Nevada, Inc.
---------------------------------------------------------------
Either the purchase of Epic Enterprises of Nevada, Inc. from Sellers shall: (i)
have occurred; (ii) occur simultaneously with the Closing of the transaction
contemplated by this Agreement; or (iii) Buyer has waived this condition
precedent and is satisfied that the closing of the aforementioned transaction
will occur shortly after the closing of the transaction contemplated hereunder.
10.6. Goren Epic Partnership. The Company will own one hundred
----------------------
percent (100%) interest in the Goren Epic Partnership and all the property
rights to, interests to and intellectual rights to the International Silk Flower
and Accessories Exhibit, AmeriChristmas International Trim-A-Home Exhibition and
all tangible and intangible assets of said partnership.
10.7. Gideon Goren. Goren and Company will have executed an
------------
agreement for a term of three (3) years for Goren to provide his services to the
Company including but not limited to selling exhibition space to the
International Silk Flower and Accessories Exhibition and AmeriChristmas
International Trim-A-Home Exhibition.
11. Termination. This Agreement may be terminated as follows:
-----------
11.1. Termination by the Buyer. The Buyer may, without liability
------------------------
to the Company or the Sellers, terminate this Agreement by notice to the Company
and the Sellers (a) at any time prior to the
58
<PAGE>
Closing if material default is made by the Company or the Sellers in the
observance or in the due and timely performance of any of the terms hereof to be
performed by the Company or the Sellers that cannot be cured at or prior to the
Closing, or (b) at any time prior to the Closing if the Buyer discovers
something unsatisfactory about either of the Company or the Sellers during its
due diligence or (c) at the Closing if any of the conditions precedent to the
performance of the Buyer's obligations at the Closing will not have been
fulfilled.
11.2. Termination by the Company or the Sellers. The Company and
-----------------------------------------
the Sellers may, without liability to the Buyer, terminate this Agreement by
notice to the Buyer (a) at any time prior to the Closing if material default
will be made by the Buyer in the observance or in the due and timely performance
of any of the terms hereof to be performed by the Buyer that cannot be cured at
or prior to the Closing or (b) at the Closing if any of the conditions precedent
to the performance of the Company or the Sellers' obligations at the Closing
have not been fulfilled.
11.3. Effect of Termination. If this Agreement is terminated,
---------------------
this Agreement, except for Sections 7.4 and 8.1, will no longer be of any force
or effect and there will be no liability on the part of any party or its
respective directors, officers, or shareholders except, in the case of
termination because of a material default or material breach resulting from the
willful fault of another party, the aggrieved party or parties may recover from
the defaulting
59
<PAGE>
party the amount of expenses incurred by such aggrieved party or parties in
connection with this Agreement and the transactions contemplated hereby which
the aggrieved party or parties would otherwise have to bear pursuant to Section
13.6 of this Agreement. If this Agreement is terminated, Sections 7.4 and 8.1
will remain in full force and effect, and any party, or its respective
directors, officers, agents or representatives, breaching Section 7.4 or Section
8.1 may be held liable for any such breach.
12. Indemnification.
---------------
12.1. Indemnification of the Buyer and the Company.
--------------------------------------------
(a) From and after the Closing Date, the Sellers will
indemnify, defend, and hold harmless the Buyer and the Company and its officers,
directors, shareholders, representatives, agents, and affiliates from, against,
and in respect of all third party claims, liabilities, actions, suits,
proceedings, assessments, judgments, losses, damages, costs, and expenses
(including interest, penalties, and reasonable accountants', experts', and
attorneys' fees and disbursements) (collectively, "Damages"), arising out of,
relating to, or resulting from (i) any material inaccuracy or material breach of
any of the written representations or warranties or the Sellers made in or
pursuant to this Agreement or the Transaction Documents; (ii) the material
breach of any covenant, obligation, or agreement of the Sellers to be performed,
fulfilled, or complied with pursuant to this Agreement or the Transaction
Documents; (iii) any material
60
<PAGE>
misrepresentation, or the omission of any material fact (including without
limitation, those facts required to make the facts otherwise set forth not
misleading), in this Agreement or the Transaction Documents (including all
Exhibits and Schedules hereto and thereto); (iv) the operation of the business
of the Company prior to February 1, 1996, or the acts or omissions of any of the
Company's officers, directors, shareholders, agents, or representatives prior to
the Closing in connection with the operation of the Company's business except
for the fiscally related matters which include, without limitation, accounts
payable, accounts receivable, debts and obligations of the Company from February
1, 1996 to Closing; (v) any liabilities or responsibilities that remain with
Company or Sellers or come into existence after Closing which result from the
Company's purchase of all the partnership interests in the Goren Epic
partnership or may arise independently from its individual partners; (vi) any
and all taxes of any nature incurred by the Company prior to January 31, 1996;
(vii) the Company's ownership of real estate in Mexico, including but not
limited to [Address]; (viii) unlawful, authorized, unauthorized or ultra vires
---------
actions of any employees prior to Closing; (ix) the relationship with On-Line
Reservation Systems, Inc. or the Agreement by and On-Line Reservation Systems,
Inc., a California Corporation, and Epic Enterprises of Nevada, Inc. dated
September 15, 1994; (xi) with regard to the Sellers, any personal taxes incurred
on or prior to the Closing Date, provided that no indemnification will be owed
hereunder
61
<PAGE>
in any case where it is determined that Damages result solely from the gross
negligence, willful misconduct, or bad faith of the party to be indemnified; and
(xii) the Company's Employee Benefit Plans and any other employee benefit
agreement described in Section 5.14 hereinabove; provided, further, that the
Sellers will not be liable for indemnification hereunder in respect of any
breach of any warranty, representation, covenant, obligation, or agreement, or
any material misrepresentation or omission, that is not made or is not to be
performed by the Company or the Sellers.
(b) Sellers, jointly and severally, will indemnify and hold
harmless Buyer for all undisclosed accounts payable or liabilities not listed on
Schedule 8.6 subject to the provisions of Section 2.2(f).
12.2. Indemnification of the Sellers. From and after the Closing
------------------------------
Date, the Buyer will indemnify, defend, and hold harmless the Sellers and its
representatives, agents, and affiliates from, against, and in respect of all
third party Damages arising out of, relating to, or resulting from (a) any
material inaccuracy or material breach of any of the written representations or
warranties of the Buyer made in or pursuant to this Agreement or the Transaction
Documents; (b) the material breach of any covenant, obligation, or agreement of
the Buyer to be performed, fulfilled, or complied with pursuant to this
Agreement or the Transaction Documents; (c) any material misrepresentation or
the omission of any material fact (including, without limitation, those
62
<PAGE>
facts required to make the facts otherwise set forth not misleading) in this
Agreement or the Transaction Documents (including all Exhibits and Schedules
hereto and thereto) or (d) the conduct and/or the operation of the Company after
January 31, 1996; provided that no indemnification will be owed hereunder in any
case where it is determined that Damages result solely from the gross
negligence, willful misconduct, or bad faith of the Sellers or the Company (pre-
Closing); provided, further, that the Buyer will not be liable for
indemnification hereunder in respect of any breach of any warranty,
representation, covenant, obligation, or agreement, or any material
misrepresentation or omission, that is not made or is not to be performed by the
Buyer.
12.3. Procedure for Indemnification. After receipt by an
-----------------------------
indemnified party under Section 12.1 or 12.2 of notice of the commencement of
any action, such indemnified party shall, if a claim in respect thereof is to be
made against an indemnifying party under such Section, give notice to the
indemnifying party of the commencement thereof, but the failure so to notify the
indemnifying party shall not relieve it of any liability that it may have to any
indemnified party except to the extent the indemnifying party demonstrates that
the defense of such action is materially prejudiced thereby. If any such action
shall be brought against an indemnified party and it shall give notice to the
indemnifying party of the commencement thereof, the indemnified party shall be
entitled to participate therein and, to the extent that it shall wish, to assume
the defense thereof with counsel
63
<PAGE>
satisfactory to such indemnified party and, after notice from the indemnifying
party as such indemnified party of its election so to assume the defense thereof
the indemnifying party shall not be liable to such indemnified party under such
Section for any fees of other counsel or any other expenses, in each case
subsequently incurred by such indemnified party in connection with the defense
thereof, other than reasonable costs of investigation. If an indemnifying party
assumes the defense of such an action, (a) no compromise or settlement thereof
may be effected by the indemnifying party without the indemnified party's
consent (which shall not be unreasonably withheld) unless (i) there is no
finding or admission of any violation of law or any violation of the rights of
any Person and no effect on any other claims that may be made against the
indemnified party and (ii) the sole relief provided is monetary damages that are
paid in full by the indemnifying party and (b) the indemnifying party shall have
no liability with respect to any compromise or settlements thereof effected
without its consent (which will shall not unreasonably withheld). If notice is
given to indemnifying party of the commencement of any action and it does not,
within ten (10) days after the indemnified party's notice is given, give notice
to the indemnified party of its election to assume the defense thereof, the
indemnifying party shall be bound by any determination made in such action or
any compromise or settlement thereof effected by the indemnified party.
Notwithstanding the foregoing, if an indemnified party determines in
64
<PAGE>
good faith that there is a reasonable probability that an action may adversely
affect it other than as a result of monetary damages, such indemnified party
may, by notice to the indemnifying party assume the exclusive right to defend,
compromise or settle such action, but the indemnifying party shall not be bound
so defended or any compromise or settlement thereof effected without its consent
(which shall not unreasonably withheld).
12.4. Survival of Representations, Warranties, Covenants and
---------------------------------------- -------------
Indemnification. The representations and warranties made in Sections 5 and 6
- ---------------
of this Agreement other than those in Sections 5.10, 5.14, 5.19, 5.20, 5.21 and
5.25 will survive the Closing and will expire upon the second anniversary of
the Closing Date, except as to any matter as to which a reasonably specific good
faith claim has been submitted in writing to the Buyer or the Sellers, as
applicable, prior to such date. All representations and warranties contained in
Sections 5.10, 5.14, 5.19, 5.20, 5.21 and 5.25 will survive until the expiration
of the applicable statute of limitations period (including extensions thereof)
for any claim in respect of matters covered by Sections 5.10, 5.14, 5.19, 5.20,
5.21 and 5.25 respectively. The covenants contained in Sections 7 and 8 of this
Agreement and the provisions contained in Sections 2.2, 2.3, 2.4, and this
Section 12 will survive the Closing.
13. Miscellaneous.
-------------
65
<PAGE>
13.1. Complete Agreement; Amendments; Waivers. This Agreement,
---------------------------------------
together with the Exhibits and Schedules hereto, contains the entire agreement
of the parties with respect to the subject matter hereof and supersedes all
prior agreements and understandings, oral or written, with respect thereto. This
Agreement may be modified or amended only by a written instrument signed by the
parties hereto. No provision of this Agreement may be waived without a written
instrument signed by the waiving party. The failure of any party to require, in
any one or more instances, the performance of any of the terms, covenants, or
conditions of this Agreement will not be construed as a waiver or relinquishment
of any rights granted hereunder or of the future performance of any such term,
covenant, or condition, but the obligations of the parties with respect thereto
will continue in full force and effect.
13.2. Counterparts. This Agreement may be executed in two (2) or
------------
more counterparts, each of which will be deemed an original, but all of which
together will constitute one (1) and the same instrument.
13.3. Successors and Assigns. This Agreement will inure to the
----------------------
benefit of, and be binding upon, the parties hereto and their respective
executors, heirs, and permitted assigns. Neither this Agreement nor any of the
rights or obligations hereunder (or under any document delivered pursuant
hereto) may be assigned by a party hereto without the prior written consent of
the other parties.
66
<PAGE>
13.4. Governing Law. This Agreement will be construed and
-------------
enforced in accordance with the laws of the Commonwealth of Virginia without
giving effect to its conflicts of law principles.
13.5. Notices. All notices, claims, requests, demands, and other
-------
communications hereunder will be in writing and will be duly given if: (a)
personally delivered or sent via telecopy, (b) sent by telegram (other than
where original payment or other documents must be delivered) for delivery within
24 hours, or (c) sent by Federal Express, DHL Worldwide Express, or Airborne
Courier (for next business day delivery), shipping prepaid, as follows:
If to the Buyer, to:
Mark N. Sirangelo, President
PGI Company J
One Courthouse Metro
Suite 200
2200 Wilson Boulevard
Arlington, VA 22201-3324
(Telecopy number (703) 528-1724)
with a copy to:
James N. Schwarz, Esq.
Ginsburg, Feldman and Bress, Chartered
1250 Connecticut Avenue, N.W.
Suite 700
Washington, D.C. 20036
(Telecopy number (202) 637-9195)
If to the Parent, to:
Mark N. Sirangelo, President
Production Group International, Inc.
67
<PAGE>
One Courthouse Metro
Suite 200
2200 Wilson Boulevard
Arlington, Virginia 22201-3324
(Telecopy number (703) 528-1724)
If to the Company, pre-closing, to:
Mr. Harry Schwartz
Epic Enterprises, Inc.
8989 Rio San Diego Drive
Suite 160
San Diego, CA 92108
If to the Company, post-closing, to:
Mark N. Sirangelo, President
PGI Company J
One Courthouse Metro
Suite 100
2200 Wilson Boulevard
Arlington, Virginia 22201-3324
(Telecopy number (703) 528-1724)
If to the Sellers, to:
Harry Schwartz
650 Columbia Street
No. 112
San Diego, CA 92101
Charles Schwartz
655 India Street
No. 421
San Diego, CA 92101
with a copy to:
Todd Kobernick, Esq.
68
<PAGE>
3131 Camino Del Rio North, Suite 900
San Diego, CA 92108-5710
or such other address or addresses as the person to whom notice is to be given
may have previously furnished to the others in writing in the manner set forth
above. Notices will be deemed given at the time of personal delivery or
completed telecopy, or, if sent by telegram twenty-four (24) hours after the
time sent, or, if sent by Federal Express, DHL Worldwide Express, or Airborne
Courier, one (1) business day after the date sent.
13.6. Expenses. Except as otherwise expressly provided in this
--------
Agreement, each party hereto will bear its own expenses.
13.7. Headings; Form of Words. The headings contained in this
-----------------------
Agreement (including but not limited to the titles of the Schedules and Exhibits
hereto) have been inserted for the convenience of reference only, and neither
such headings nor the placement of any term hereof under any particular heading
will in any way restrict or modify any of the terms or provisions hereof. Terms
used in the singular will be read in the plural, and vice versa, and terms used
in the masculine gender will be read in the feminine or neuter gender when the
context so requires, and vice versa.
13.8. Severability. The provisions of this Agreement will be
------------
deemed severable, and if any part of any provision is held to be illegal, void,
voidable, invalid, nonbinding, or unenforceable in its entirety or partially or
as to any party, for any reason, such
69
<PAGE>
provision may be changed consistent with the intent of the parties hereto, to
the extent reasonably necessary to make provisions, as so changed, legal, valid,
binding, and enforceable. If any provision of this Agreement is held to be
illegal, void, voidable, invalid, non-binding, or unenforceable in its entirety
or partially or as to any party, for any reason, and if such provision cannot be
changed consistent with the intent of the parties hereto to make it fully legal,
valid, binding and enforceable, then such provision will be stricken from this
Agreement, and the remaining provisions of this Agreement will not in any way be
affected or impaired, but will remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have duly
executed this Agreement as of the date first above written.
BUYER:
PGI Company J
By: /s/ Mark N. Sirangelo
--------------------------------------
Mark N. Sirangelo
President and Chief Executive
Officer
SELLERS:
/s/ Harry Schwartz
------------------------------------------
Harry Schwartz
/s/ Charles Schwartz
------------------------------------------
Charles Schwartz
COMPANY:
EPIC ENTERPRISES, INC.
By: /s/ Charles Schwartz
--------------------------------------
Name: Charles Schwartz
--------------------------------
Title: Chairman
--------------------------
70
<PAGE>
Exhibit 10.15
STOCK PURCHASE AGREEMENT
DATED AS OF APRIL 1, 1996
AMONG
PGI COMPANY P,
RMR PRODUCTION SERVICES, INC.,
TIMBERLINE WORLDWIDE, INC.,
MICHAEL C. HEYL,
DIANE D. HEYL,
ROGER K. PEARSALL,
AND
VIRGINIA C. KING
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
-----------------
<S> <C> <C>
1. Purchase of the Company Shares..................................... 2
------------------------------
1.1. Transfer of the Company Shares............................... 2
------------------------------
1.2. Consideration................................................ 2
-------------
1.3. Definition of Net Profit Before Tax.......................... 4
-----------------------------------
1.4. Income Statements and Sellers' Right to Audit................ 5
---------------------------------------------
1.5. Offset Against Purchase Price................................ 5
-----------------------------
2. Closing............................................................ 5
-------
3. Deliveries at the Closing.......................................... 6
-------------------------
3.1. Deliveries to the Buyer by the Company and
------------------------------------------
the Sellers.................................................. 6
-----------
3.2. Deliveries to the Sellers by the Buyer....................... 8
--------------------------------------
4. Representations and Warranties by the Companies and
----------------------------------------------------
each of the Sellers................................................ 9
-------------------
4.1. Ownership; Transfer of the Shares............................ 9
---------------------------------
4.2. Authority.................................................... 9
---------
4.3. Approvals.................................................... 11
---------
4.4. No Brokers................................................... 11
----------
4.5. Organization, Etc............................................ 12
-----------------
4.6. Capital Stock and Partnership Interest....................... 13
--------------------------------------
4.7. No Subsidiaries, Etc......................................... 15
--------------------
4.8. Financial Statements......................................... 15
--------------------
4.9. Absence of Certain Changes................................... 15
--------------------------
4.10. Taxes........................................................ 18
-----
4.11. Non-Contravention............................................ 19
-----------------
4.12. Title to and Condition of the Assets of the Company.......... 20
---------------------------------------------------
4.13. Litigation................................................... 22
----------
4.14. Employee Benefit Plans and Other Arrangements................ 24
---------------------------------------------
4.15. Contracts.................................................... 26
---------
4.16. Insurance.................................................... 27
---------
4.17. Trademarks, Etc.............................................. 28
---------------
4.18. Transactions with Interested Persons......................... 29
------------------------------------
4.19. Compliance with Laws, Etc.................................... 29
-------------------------
4.20. No Undisclosed Liabilities, Etc.............................. 30
-------------------------------
4.21. Environmental Matters........................................ 31
---------------------
4.22. Governmental Authorizations and Regulations.................. 32
-------------------------------------------
</TABLE>
-i-
<PAGE>
<TABLE>
<S> <C>
4.23. Accounting Practices......................................... 33
--------------------
4.24. Minute Books................................................. 33
------------
4.25. Employee Matters............................................. 33
----------------
4.26. Accuracy of Information Furnished............................ 34
---------------------------------
4.27. Disclosure.................................................. 35
----------
</TABLE>
-ii-
<PAGE>
<TABLE>
<S> <C> <C>
5. Representations and Warranties of the Buyer to the Sellers......... 35
----------------------------------------------------------
5.1. Authority for Agreements..................................... 35
------------------------
5.2. Organization................................................. 36
------------
5.3. Non-Contravention............................................ 36
-----------------
5.4. Approvals.................................................... 37
---------
5.5. No Brokers................................................... 37
----------
5.6. Accuracy of Information Furnished............................ 37
---------------------------------
6. Covenants of the Companies and each of the Sellers................. 37
--------------------------------------------------
6.1. Access, Information and Documents............................ 37
---------------------------------
6.2. Conduct of Business Pending Closing.......................... 38
-----------------------------------
6.3. Consents and Approvals....................................... 41
----------------------
6.4. Confidential Material........................................ 41
---------------------
6.5. Employment Contracts......................................... 43
--------------------
6.6. Transfer of Certain Assets................................... 43
--------------------------
6.7. Liability for Federal, State and Local Taxes................. 43
--------------------------------------------
6.8. Claims Experience............................................ 43
-----------------
6.9. Employment and Employee Benefits............................. 44
--------------------------------
6.10. Non-Competition.............................................. 45
---------------
6.11. Subordination Agreement...................................... 46
-----------------------
6.12. IRS Election................................................. 46
------------
6.13. Dissolution of B and G Services.............................. 47
-------------------------------
6.14. Further Assurances........................................... 47
------------------
7. Covenants of the Buyer............................................. 47
----------------------
7.1. Confidential Information..................................... 47
------------------------
7.2. Consents and Approvals....................................... 48
----------------------
7.3. Employment and Employee Benefits............................. 49
--------------------------------
7.4. Undisclosed Liabilities, Tax Audits/Claims................... 50
------------------------------------------
7.5. Payment of Assumed Liabilities............................... 50
------------------------------
7.6. Further Assurances........................................... 50
------------------
7.7. Termination of Companies' Benefit Plans...................... 50
---------------------------------------
8. Conditions Precedent to the Sellers' Obligation to
--------------------------------------------------
Sell the Shares.................................................... 51
---------------
8.1. The Buyer's Performance...................................... 51
-----------------------
8.2. Consents and Approvals....................................... 52
----------------------
8.3. No Legal Impediment.......................................... 52
-------------------
9. Conditions Precedent to the Buyer's Obligation to
-------------------------------------------------
</TABLE>
-iii-
<PAGE>
<TABLE>
<S> <C>
Purchase the Shares................................................ 52
-------------------
9.1. The Companies' and the Sellers' Performance.................. 52
-------------------------------------------
9.2. Consents and Approvals....................................... 53
----------------------
9.3. Physical Properties.......................................... 54
-------------------
9.4. Due Diligence................................................ 54
-------------
9.5. No Legal Impediment.......................................... 54
-------------------
</TABLE>
-iv-
<PAGE>
<TABLE>
<S> <C> <C>
10. Termination........................................................ 54
-----------
10.1. Termination by the Buyer..................................... 54
------------------------
10.2. Termination by the Company or the Sellers.................... 55
-----------------------------------------
10.3. Effect of Termination........................................ 55
---------------------
11. Indemnification.................................................... 56
---------------
11.1. Indemnification of the Buyer and the Companies............... 56
----------------------------------------------
11.2. Indemnification of the Sellers............................... 58
------------------------------
11.3. Survival of Representations, Warranties, and
--------------------------------------------
Covenants and Indemnification................................ 59
-----------------------------
12. Miscellaneous...................................................... 59
-------------
12.1. Complete Agreement; Amendments; Waivers...................... 59
---------------------------------------
12.2. Counterparts................................................. 60
------------
12.3. Successors and Assigns....................................... 60
----------------------
12.4. Governing Law................................................ 60
-------------
12.5. Notices...................................................... 61
-------
12.6. Expenses..................................................... 63
--------
12.7. Headings; Form of Words...................................... 63
-----------------------
12.8. Severability................................................. 64
------------
</TABLE>
-v-
<PAGE>
STOCK PURCHASE AGREEMENT
------------------------
STOCK PURCHASE AGREEMENT (the "Agreement") dated as of the 1st day of
April, 1996 by and among PGI Company P, a Virginia corporation (the "Buyer"),
RMR Production Services, Inc., an Arizona corporation, d/b/a Timberline ("RMR"),
Timberline Worldwide, Inc., d/b/a R.A.V.E. ("TWW") (individually, the "Company"
and collectively, the "Companies"), Michael C. Heyl and Diane D. Heyl,
individuals residing at 3210 East Carol Avenue, Phoenix, AZ 85028 (collectively,
"Heyl") and Roger K. Pearsall and Virginia C. King, individuals residing at
8628 Wren Circle, Phoenix, AZ 85032 (collectively, "Pearsall") (collectively,
Heyl and Pearsall shall be referred to as the "Sellers").
WHEREAS, the Sellers are the sole shareholders of the Companies,
owning the shares of stock listed on Schedule 4.1 attached hereto.
WHEREAS, the Sellers are the sole partners of B and G Services
Partnership, an Arizona general partnership ("B and G Services").
WHEREAS, the Buyer desires to purchase from the Sellers, and the
Sellers desire to sell to the Buyer, 100% of the outstanding capital stock of
the Companies, all upon the terms and conditions hereinafter set forth.
<PAGE>
NOW, THEREFORE, in consideration of the foregoing premises, the mutual
covenants, agreements, representations, and warranties herein contained, and
other good and valuable consideration, the receipt and legal sufficiency of
which are hereby acknowledged, the parties hereto, intending to be legally
bound, hereby agree as follows:
1. Purchase of the Company Shares
------------------------------
1.1. Transfer of the Company Shares. Upon the terms and
------------------------------
provisions of this Agreement, the Buyer agrees to purchase and accept delivery
from the Sellers, and each of the Sellers agrees to sell, assign, transfer, and
deliver to the Buyer, at the Closing provided for in Section 2 hereof, the
shares of Common Stock of each of the Companies held by each of the Sellers,
which shares, in the aggregate, constitute 100% of the outstanding shares of
capital stock of the Companies (the Shares"), free and clear of all liens,
claims, charges, restrictions, equities, or encumbrances of any kind.
1.2. Consideration. The total purchase price for the Company
-------------
Shares will be up to Two Million Eight Hundred Thousand Dollars ($2,800,000), as
calculated pursuant to Subsections 1.2(d), 1.2(e) and 1.5 herein (the "Purchase
Price"). The
2
<PAGE>
Purchase Price will be paid by the Buyer to the Sellers as follows:
(a) The Buyer will, at the Closing, deliver to the Sellers,
at the sole choice of the Buyer, either bank cashier's checks, in the aggregate
amount of one million four hundred thousand dollars ($1,400,000) (the "Bank
Checks"), or by wire transfers, in the aggregate amount of one million four
hundred thousand dollars ($1,400,000), as designated in writing by the Sellers
(the "Wire Transfers").
(b) The Buyer will, at the Closing, deliver to the Sellers,
subordinated promissory notes in the aggregate amount of Six Hundred Thousand
Dollars ($600,000) payable to Sellers in the form annexed as Exhibit 1.2(b)
hereto (the "Notes") payable twenty-four (24) months after Closing.
(c) The Sellers shall designate in writing to Buyer, prior
to the Closing, the manner in which the Purchase Price will be prorated between
each of the Sellers and the principal amount of the Notes.
(d) If in the years commencing on April 1, 1996 or 1997 and
ending March 31, 1997 or 1998 respectively (the "Contract Years"), the existing
business of the Companies,
3
<PAGE>
defined as the annual business generated by the employees of the Companies who
were employed as of the Closing, or their replacements and any Production and
Entertainment business (as hereinafter defined) generated from accounts of the
Companies as of Closing taken over by others employed by the Company ("Existing
Business") (i) exceeds **** ******* ******* ************ in net revenue and (ii)
achieves a minimum of *** ******* ***** of Net Profit Before Tax, for such
Contract Year an amount of *** ******* ******** ******* ********** will be paid
to Sellers within ***** **** days after the completion of the Buyer's Contract
Year end. For purposes of this Section, "Production" business is defined as
staged events held by corporations and organizations such as sales meetings,
product launches, and business communications in which the Companies would
typically provide for the client conceptual design, coordinate and/or supply
staging and audiovisual services, outside speakers, and key production personnel
and other such materials and support necessary to run such meetings and events.
"Entertainment" business, is defined as the contracting and production of well-
known professional talent to perform at such staged events.
* CONFIDENTIAL INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
COMMISSION
4
<PAGE>
(e) If in the Contracts Years, the Existing Business: (i)
exceeds *** in net revenue and (ii) achieves a minimum of *** of Net Profit
Before Tax for such Contract Year, in addition to the amount specified in
Section 1.2(d) above, *** will be paid to Sellers within *** days after the
completion of Buyer's Contract Year end.
1.3. Definition of Net Profit Before Tax. For the purpose of
-----------------------------------
calculating the additional purchase price to be paid to Sellers, Net Profit
Before Tax shall be defined as income from the operations of the Companies prior
to any federal, state or local income taxes, but after all expenses related to
the Existing Business except any extraordinary corporate allocation charged by
Buyer to the Companies and depreciation on all new fixed assets of the Companies
added after Closing, but not added in the ordinary course of business.
1.4. Income Statements and Sellers' Right to Audit. During
---------------------------------------------
Contract Years 1996 and 1997 the Companies' income statements will be prepared
in accordance with GAAP, at Buyer's expense, and Sellers shall have a right to
audit same at Sellers' expense.
*CONFIDENTIAL INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
COMMISSION
5
<PAGE>
1.5. Offset Against Purchase Price. Buyer and Sellers agree that
-----------------------------
Buyer shall receive all revenues from whatever source of each of the Companies
and B and G Services from April 1, 1996 forward, including but not limited to
amounts that have been accrued, billed or not yet billed as of the Closing.
Buyer and Sellers agree that Buyer has the right to offset the amount of: (a)
any accounts receivable of the Companies and B and G Services as of March 31,
1996 that are not paid to the Companies in accordance with their terms and (b)
any undisclosed accounts payable or undisclosed liability of the Companies that
is paid by Buyer or the Companies, from any future payments to the Sellers
including but not limited to payments of the Purchase Price.
2. Closing. The closing of the purchase and sale of the Company
-------
Shares (the "Closing") will take place at the offices of Buyer (or at such other
place as the parties may mutually agree) at 10:00 a.m. on April 12, 1996, or at
such other time and on such date as the parties may mutually agree, but in no
event will the Closing occur after April 15, 1996. The date and time of the
Closing are referred to herein as the "Closing Date."
3. Deliveries at the Closing.
-------------------------
3.1. Deliveries to the Buyer by the Company and the
----------------------------------------------
6
<PAGE>
Sellers. At the Closing, the Companies and the Sellers will deliver to the
- -------
Buyer:
(a) Against receipt of the Bank Checks or the Wire
Transfers, the Sellers will deliver to the Buyer certificates for 100% of the
Shares, all in accordance with the requirements of Section 1.1 hereof, which
certificates will be duly endorsed in blank or accompanied by stock powers duly
executed in blank, in proper form for transfer;
(b) From both RMR and TWW a certificate, in form and
substance reasonably acceptable to the Buyer, executed by each of the Sellers,
the President of such Company, and attested to by the Secretary of such company,
dated the Closing Date, and certifying that: (i) attached thereto is a true and
complete copy of the By-Laws of such company, as in effect as of the Closing
Date; (ii) attached thereto is a true and complete copy of resolutions duly
adopted by the Board of Directors of such company authorizing the execution,
delivery, and performance of this Agreement; (iii) such resolutions have not
been modified, rescinded, or amended and are in full force and effect; and
attached thereto is a true and complete copy of the Articles of Incorporation
of such company, as amended and as in effect as of the Closing Date;
7
<PAGE>
(c) For both RMR and TWW a certificate, in form and
substance reasonably acceptable to the Buyer, executed by the President of such
company and by each of the Sellers, dated the Closing Date, certifying as to the
accuracy of such company's and the Sellers' representations and warranties at
and as of the Closing;
(d) From both RMR and TWW resignations of all of the
directors and officers of such company;
(e) From both RMR and TWW all of such company's and its
subsidiaries contracts, books, records, and other data relating to the company's
and its subsidiaries' operations, including the company's and its subsidiaries'
minute and stock books;
(f) The opinion of counsel in the form attached hereto as
Exhibit 3.1(f);
(g) An executed Employment Agreements between the RMR and
Heyl, substantially in the forms attached hereto as Exhibit 3.1(g)(the "Heyl
Employment Agreements");
(h) An executed Employment Agreement between the RMR and
Pearsall, substantially in the form attached hereto as
8
<PAGE>
Exhibit 3.1(h) (the "Pearsall Agreement")
(i) Any schedules that are to be updated as of the Closing
date;
(j) Control over all assets of the Companies, including
cash held in the Companies' control or owned by the Companies as of the Closing;
(k) Evidence of the distribution of B and G Services'
assets, free and clear of any encumbrances and liens of any kind, to one of the
Companies;
(l) Such other certificates and documents as the Buyer or
its counsel may reasonably request.
3.2. Deliveries to the Sellers by the Buyer. At the Closing,
--------------------------------------
the Buyer will deliver to the Sellers the following:
(a) The Buyer will, against receipt of stock certificates
for the Shares in accordance with Section 3.1(a) above, either have delivered as
of the Closing Date the Bank Checks, or have completed the Wire Transfers as of
the Closing Date, in either case in accordance with Section 1.2(a) hereof;
(b) Fully executed Notes in the form annexed as Exhibit
1.2(b) above;
(c) A fully executed guarantee agreement between
9
<PAGE>
Production Group International, Inc. and Seller (the "Guarantee") in the form
annexed as Exhibit 3.2(c) hereto.
(d) A certificate, in form and substance reasonably
acceptable to the Sellers, executed by the President of Buyer, and attested to
by the Secretary of Buyer, dated the Closing Date, certifying as to the accuracy
of the Buyer's representations and warranties at and as of the Closing;
(e) Such other certificates and documents as the Sellers or
their counsel may reasonably request.
4. Representations and Warranties by the Companies and each of the
---------------------------------------------------------------
Sellers. Each of the Companies, and each of the Sellers, individually and not
- -------
jointly, represent and warrant to the Buyer that, as of the date of this
Agreement and (except as otherwise stated herein) as of the Closing Date (except
with regard to B and G Services):
4.1. Ownership; Transfer of the Shares. The Shares are duly
---------------------------------
authorized, validly issued, fully paid, and non-assessable. Each of the Sellers
owns the shares of each Company as indicated on Schedule 4.1 under his name free
and clear of all liens, encumbrances, pledges, charges, security interests,
rights, options, or other adverse interests of any kind. Each of
10
<PAGE>
the Sellers has the right, power, and authority to sell all of his shares in
each of the Companies as provided herein, and upon such sale, the Buyer will
receive good and valid title to all of the Shares, subject to no liens,
encumbrances, pledges, charges, security interests, rights, options, or other
adverse interests of any kind. The certificates for the Shares will be, when
delivered to the Buyer, duly endorsed in blank or accompanied by stock powers
duly executed in blank, in proper form for transfer.
4.2. Authority. Each of Companies and each of the Sellers has
---------
the power and authority to execute and deliver this Agreement and the other
agreements and documents contemplated by this Agreement (all such agreements and
documents will be known hereafter as the "Transaction Documents" regardless of
which party is required to execute or deliver any such agreement or document) to
which it or he is a party and to carry out its or his obligations hereunder and
thereunder, as the case may be. The execution, delivery, and performance of this
Agreement and each of the Transaction Documents to which the Companies, any
Company or any of the Sellers is a party and the consummation of the
transactions contemplated hereby and thereby have been duly authorized by the
Board of Directors of each of the Companies,
11
<PAGE>
and no other proceeding on the part of each of the Companies or any of the
Sellers is necessary to authorize the execution and delivery of this Agreement
or any of the Transaction Documents to which the Companies, the Company or any
of the Sellers is a party or the performance by the Companies, the Company or
any of the Sellers of any of the transactions contemplated hereby or thereby.
This Agreement and each of the Transaction Documents to which the Companies, any
Company or any of the Sellers is a party, has been duly executed and delivered
on behalf of each of the Companies and any of the Sellers and when executed and
delivered by all required parties thereto, will be a legal, valid, and binding
obligation of the Company and any of the Sellers enforceable against each of the
Companies and the Sellers in accordance with their respective terms, except to
the extent that the validity, binding legal effect, or enforceability of any
provisions in the Agreement or any Transaction Document, or any rights granted
herein or thereunder, may be subject to or affected by applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium, or similar laws
affecting the rights of creditors generally and the availability of equitable
remedies, including specific performance and injunctive
12
<PAGE>
relief.
4.3. Approvals. No consent, approval, order, or authorization
---------
of, or registration, declaration, or filing with, any governmental authority is
required in connection with the execution and delivery of this Agreement and the
Transaction Documents, by each of the Companies or the Sellers, or the
consummation of the transactions contemplated hereby or thereby, except for
those that would have no material adverse affect on the business or assets of
the Companies. No consent of any third party is necessary to permit the
consummation of the transactions contemplated hereby or thereby, except for
those that would have no material adverse affect on the business or assets of
the Companies.
4.4. No Brokers. All negotiations relating to this Agreement
----------
and the Transaction Documents, and the transactions contemplated hereby and
thereby, have been carried on by the Companies and the Sellers. The Sellers
have engaged the services of a broker, Steve Brandwein, in connection with this
transaction and Sellers shall be solely liable to compensate such broker.
4.5. Organization, Etc. (a) (i) RMR is a corporation duly
-----------------
organized, validly existing, and in good standing under the
13
<PAGE>
laws of the State of Arizona, and has all requisite corporate power and
authority to own or lease and to operate its properties and to carry on its
business as now being conducted. RMR has delivered to the Buyer complete and
correct copies of RMR's Articles of Incorporation, By-Laws, and all amendments
thereto. RMR is duly qualified or licensed to do business and is in good
standing as a foreign corporation in the jurisdictions set forth in Schedule 4.5
(a) hereto. RMR is not required to be qualified or licensed to do business as a
foreign corporation in any other jurisdiction.
(a) (ii) TWW is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Arizona and has
all requisite corporate power and authority to own or lease and to operate its
properties and to carry on its business as now being conducted. TWW has
delivered to the Buyer complete and correct copies of TWW's Articles of
Incorporation, By-Laws, and all amendments thereto. TWW is duly qualified or
licensed to do business and is in good standing as a foreign corporation in the
jurisdictions set forth in Schedule 4.5 (a) hereto. TWW is not required to be
qualified or licensed to do business as a foreign corporation in any other
14
<PAGE>
jurisdiction.
(b) B and G Services is duly organized, validly existing,
and in good standing under the laws of the State of Arizona and has all
requisite power and authority to own or lease and to operate its properties and
to carry on its business as now being conducted. The Sellers have delivered to
the Buyers complete and correct copies of B and G Services partnership agreement
and related documents. B and G Services is duly qualified or licensed to do
business and in good standing as a foreign corporation or entity in the
jurisdictions set forth in Schedule 4.5(b) hereto. B and G Services is not
required to be qualified or licensed to do business as a foreign entity in any
other jurisdiction.
4.6. Capital Stock and Partnership Interest.
--------------------------------------
(a) (i) RMR's authorized capital stock consists of 10,000
shares of Common Stock, par value one hundred dollars ($100) per share; (ii) the
only issued and outstanding shares of capital stock of RMR are 681 shares of
RMR's Common Stock of which 340.5 shares are owned beneficially and of record by
Heyl and 340.5 shares are owned beneficially and of record by Pearsall; (iii)
there are no outstanding subscriptions, options,
15
<PAGE>
conversion rights, warrants, or other agreements or commitments of any nature
whatsoever (either firm or conditional) obligating RMR to issue, deliver, sell,
or cause to be issued, delivered, or sold, any additional shares of capital
stock of RMR, or obligating RMR to grant, extend, or enter into any such
agreement or commitment; and (iv) there are no rights of first refusal, pre-
emptive rights, or other similar agreements obligating RMR to offer any shares
of its capital stock to any person.
(b) (i) TWW's authorized capital stock consists of 100,000
shares of Common Stock, no par value; (ii) the only issued and outstanding
shares of capital stock of TWW are 200 shares of TWW's Common Stock of which 100
shares are owned beneficially and of record by Michael C. Heyl and 100 shares
are owned beneficially and of record by Roger K. Pearsall; (iii) there are no
outstanding subscriptions, options, conversion rights, warrants, or other
agreements, or commitments of any nature whatsoever (either firm or conditional)
obligating TWW to issue, deliver, sell, or cause to be issued, delivered, or
sold, any additional shares of capital stock of TWW, or obligating TWW to grant,
extend, or enter into any such agreement or commitment; and (iv) there are no
rights of first refusal, preemptive rights,
16
<PAGE>
or similar agreements obligating any subsidiary to offer any share of its
capital stock to any person.
(c) (i) Sellers are the only partners of B and G Services,
general, limited or otherwise, (ii) there are no outstanding agreements or
commitments of any nature whatsoever either firm or conditional) obligating
Sellers to sell, grant or extend an interest of any nature in B and G Services
or enter into any such agreement or commitment; and (iii) there are no rights of
first refusal or similar agreements obligating any partnership interest of any
nature to any person.
4.7. No Subsidiaries, Etc. Neither of the Companies owns,
--------------------
directly or indirectly, capital stock of any other corporation or is a partner
in any partnership or a participant in any joint venture,except as listed on
Schedule 4.7. Neither of the Companies own, directly or indirectly, any equity
interest in any corporation, partnership, joint venture, or other person except
as listed on Schedule 4.7.
4.8. Financial Statements. The Sellers have delivered to the
--------------------
Buyer complete and correct copies of (a) B and G Services' tax returns for the
calendar years ended December 31, 1993, 1994 and 1995; (b) TWW tax returns for
the fiscal years 1992, 1993 and
17
<PAGE>
1994 and (c) RMR reviewed financial statements, for the calendar years ended
December 31, 1992, 1993 and 1994 and compiled financial statements for the
period ended December 31, 1995. All such financial statements have been prepared
on an accrual accounting basis on an historically consistent basis throughout
the periods indicated and present fairly the financial condition of each of the
Companies and B and G Services at the dates indicated and the results of
operations for the periods indicated.
4.9. Absence of Certain Changes. Except to the extent
--------------------------
specifically set forth in reasonable detail on Schedule 4.9 hereto, since
December 31, 1995 there have been no material adverse changes in the assets,
liabilities, properties, business, or prospects of the Companies or B and G
Services, and neither the Companies nor B and G Services has:
(a) issued or sold any stock, notes, bonds, or other
securities, or any option to purchase the same, or entered into any agreement
with respect thereto;
(b) declared, set aside, or made any dividend or other
distribution on capital stock or redeemed, purchased, or acquired any shares
thereof, or entered into any agreement in
18
<PAGE>
respect of the foregoing;
(c) amended its Articles of Incorporation or By-Laws;
(d) (i) purchased, sold, assigned, or transferred any
material tangible or intangible assets or property (including cash and cash
equivalents); (ii) mortgaged, pledged, granted, or suffered to exist any lien or
other encumbrance or charge on any material tangible or intangible assets or
properties, except for liens for taxes not yet due; or (iii) waived any rights
of material value or canceled any material debts or claims;
(e) incurred any material obligation or liability (absolute
or contingent), or paid any material liability or obligation (absolute or
contingent);
(f) increased, or become obligated to increase, the
compensation or other benefits payable to any officer or director of the
Companies or any relative of any such officer or director, or granted any bonus,
any severance or termination pay, or entered into any employment agreement or
other agreement (written or oral) with any officer, director or salaried
employee of the Companies or any relative of any such officer, director or
19
<PAGE>
salaried employee (except as may be effected in accordance with the terms of
this Agreement);
(g) incurred any damage, destruction, or similar loss,
whether or not covered by insurance, materially affecting the businesses or
properties of the Companies;
(h) entered into any transaction other than in the ordinary
course of business;
(i) suffered any strike or other labor trouble materially
and adversely affecting its business, operations, or prospects;
(j) made or permitted any material amendment or termination
of any material contract, agreement, or license to which it is a party other
than in the ordinary course of business;
(k) made any change in its accounting methods or practices
with respect to its condition, operations, business, properties, assets, or
liabilities;
(l) abandoned or disposed of any material trade secret,
trademark, tradename, trademark application, tradename application, or any other
intellectual property; or
(m) suffered any loss of employees or customers
20
<PAGE>
that adversely affects its business, operations, or prospects.
4.10. Taxes.
-----
(a) Except to the extent specifically set forth in
reasonable detail on Schedule 4.10 hereto, all federal, state, county,
municipal, and foreign tax returns required by law to be filed by each of the
Companies, B and G Services and the Sellers have been duly filed, and all taxes
(including without limitation sales, use, property, and payroll taxes),
assessments, fees, and other governmental charges together with any and all
penalties, fines, and interest thereon ("Taxes") upon each of the Companies, B
and G Services or the Sellers, or upon any of the Companies', B and G Services'
or the Seller's properties, assets, revenues, income, sales, or franchises that
have become due and payable in respect of the periods or transactions covered
thereby, have been paid. Except to the extent specifically set forth in
reasonable detail on Schedule 4.10 hereto, neither the Internal Revenue Service
nor any other taxing authority or agency is now asserting or, is threatening to
assert, against any of the Companies, B and G Services or the Sellers, any
deficiency or claim for additional Taxes or interest thereon or penalties in
connection therewith. Each of the Companies, B and G Services or
21
<PAGE>
the Sellers have not been granted any waiver of any statute of limitation with
respect to, or been granted any extension of a period for the assessment of, any
federal, state, county, municipal, or foreign income tax. Sellers have delivered
to Buyer copies of all federal, state and local tax returns for each of the
Companies and B and G Services for fiscal years 1992, 1993 and 1994.
(b) That the S election made with regard to RMR was
properly made, has not been revoked and RMR and the Sellers have never taken any
action that would cause the S election to be revoked.
4.11. Non-Contravention. The execution and delivery of this
-----------------
Agreement and the Transaction Documents and the consummation of the transactions
contemplated hereby and thereby will not (a) violate any provision of the
Articles of Incorporation or By-laws of any of the Companies; (b) violate any
material provision of, or result in the breach or the acceleration of, or
entitle any party to accelerate (whether after the giving of notice or lapse of
time or both), any material obligation under, any mortgage, lien, lease,
agreement, license, instrument, order, arbitration award, judgment, or decree to
which any of the Companies, or any
22
<PAGE>
of the Sellers is a party or by which any of the Companies or Sellers is bound;
(c) result in the creation or imposition of any material lien, charge, pledge,
security interest, or other encumbrance upon any property of the Companies, or
any of the Sellers; or (d) violate or conflict with any other material
restriction or any law, ordinance, or rule to which any of the Companies or any
of the Sellers or any property of any of the Companies or any of the Sellers is
subject.
4.12. Title to and Condition of the Assets of the Company.
---------------------------------------------------
(a) Each of the Companies, and B and G Services has good
and marketable title to all assets owned by it free and clear of all mortgages,
liens, charges, encumbrances, easements, security interests, or title
imperfections, except to the extent specifically set forth in reasonable detail
on Schedule 4.12(a) hereto. The assets reflected in the financial statements of
the Companies for their fiscal year ended December 31, 1995 referred to in
Section 4.8 hereof constitute all of the tangible assets and properties that the
Companies own, use, or hold in connection with their business, and the conduct
of such business as a going concern and, except for additions or dispositions in
the ordinary
23
<PAGE>
course of business, include all tangible properties and assets used in such
business as being conducted; provided, however, that such financial statements
do not include the assets of B and G Services, which will be transferred to the
one of the Companies prior to the Closing and are reflected on the financial
statements of B and G Services for its fiscal year ended December 31, 1995. The
facilities, machinery, furniture, office, and other equipment of the Companies,
and B and G Services that are used in their business are in good operating
condition and repair, subject only to the ordinary wear and tear of that
business, and the Companies, B and G Services or any property or asset owned or
leased by them are not in violation of any applicable ordinance, regulation, or
building, zoning, environmental or other law in respect thereof, the violation
of which will have a material adverse effect on the financial condition, the
conduct of the business or the ownership or use of any of the properties or
assets of the Companies.
(b) Schedule 4.12(b)(1) hereto sets forth all real and
personal property owned by the Companies and B and G Services. Schedule
4.12(b)(2) hereto sets forth all personal property leased and real estate leased
to the Companies and B and
24
<PAGE>
G Services and specifies, in the case of real estate, the location of each
property, the use of the facility thereon, the name of the owner or the names of
the lessor and the lessee, the approximate square footage of improvements, and
the acreage of land. The Companies and Sellers have delivered to the Buyer a
copy of each lease by which either of the Companies or B and G Services acquired
their interest in the real property described in Schedule 4.12(b)(1) hereto, all
of which documents are true and complete copies thereof as in effect on the date
hereof. The Companies and B and G Services have not received any written notice
from any governmental agency, board, bureau, body, department, or authority of
any United States or foreign jurisdiction, which materially restricts the use of
any of the real estate described in Schedule 4.12(b)(1) hereto. Except as set
forth in Schedule 4.12 hereto, there is no easement, right-of-way agreement,
license, sublease, occupancy agreement, or like instrument with respect to any
of the real estate described in Schedule 4.12(b)(1). Each lease pursuant to
which either of the Companies or B and G Services leases any real or personal
property is in full force and effect and is valid and enforceable in accordance
with its terms. There is not under any such lease
25
<PAGE>
any default by the Companies or B and G Services, or any event that with notice
or lapse of time or both would constitute such a default by the Companies or B
and G Services. There is not under any such lease any default by any other party
thereto or any event that with notice or lapse of time or both would constitute
such a default thereunder by such party. Each property used in the business of
the Companies or B and G Services is reflected in the balance sheet of the
Companies or B and G Services balance sheet as at December 31, 1995 referred to
in Section 4.8.
(c) Sellers have provided Buyer with a complete and
accurate list of all of the Companies' and B and G Services' accounts payable
and liabilities as of December 31, 1995 on Schedule 4.12(c) and shall update
this Schedule 4.12(c) as of the Closing Date.
4.13. Litigation.
----------
(a) Except as set forth in reasonable detail on Schedule
4.13 hereto, there are no actions, suits, proceedings, investigations, or
inquiries pending or, threatened against or affecting the business, operations,
financial condition, or prospects of either of the Companies or B and G Services
at law or in equity in any court or before any federal, state,
26
<PAGE>
municipal, or other governmental department, commission, board, bureau, agency,
or instrumentality.
(b) There are no actions, suits, proceedings, investigations, or
inquiries pending or threatened against either of the Companies, B and G
Services or the Sellers at law or in equity in any court or before any federal,
state, municipal, or other governmental department, commission, board, bureau,
agency, or instrumentality that reasonably could be expected to have an adverse
effect on the Sellers' right or ability to execute and deliver this Agreement
and the Transaction Documents or consummate the transactions contemplated hereby
or thereby.
(c) The Companies and B and G Services are not in default in respect
of any judgment, order, writ, injunction, or decree of any court or any federal,
state, municipal, or other governmental department, commission, board, bureau,
agency, or instrumentality.
(d) Except as set forth in reasonable detail on Schedule 4.13 hereto,
there are no actions, suits, proceedings, investigations, or inquiries pending
or threatened against either of the Companies or B and G Services or any of the
Sellers
27
<PAGE>
at law or in equity in any court or before any federal, state, municipal, or
other governmental department, commission, board, bureau, agency, or
instrumentality that reasonably could be expected to have an adverse effect on
the Companies or the Sellers' right or ability to execute and deliver this
Agreement or the Transaction Documents or consummate the transactions
contemplated hereby or thereby.
4.14. Employee Benefit Plans and Other Arrangements.
---------------------------------------------
(a) Employee Plans Generally. Except as set forth in
------------------------
reasonable detail on Schedule 4.14 hereto, neither the Companies nor B and G
Services maintain, make any contributions to, or have been obligated by law or
agreement to establish, maintain, sponsor, or make any contributions to (i) any
employee pension benefit plan as described in Section 3(2) of the Employee
Retirement Income Security Act of 1974, as amended, and regulations thereunder
("ERISA"); (ii) any employee welfare benefit plan as described in Section 3(1)
of ERISA, including, without limitation, any arrangement providing for the
payment of health benefits to former employees or their beneficiaries; (iii) any
formal or informal severance plan or arrangement, including, without limitation,
any arrangement providing for payments to be
28
<PAGE>
made to any person contingent upon a change of ownership or effective control of
the Company or ownership of a substantial portion of the assets of such Company;
or (iv) any other deferred compensation, bonus, stock option, stock purchase,
insurance, or other employee benefit plan, agreement, fund, or arrangement,
whether or not set forth in writing, providing benefits of economic value to any
employee, former employee, or present or former beneficiary, dependent, or
assignee other than regular salary, wages, or commissions paid substantially
concurrently with the performance of the services for which paid.
(b) Post-Retirement Benefits. Except to the extent required
------------------------
under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended
("COBRA"), the Companies and B and G Services have not incurred any current or
future obligation to provide health or life insurance benefits to employees or
former employees with respect to any period which extends beyond retirement or
other termination of employment.
(c) ERISA Title IV Considerations. None of the Companies, B
-----------------------------
and G Services nor any member of their respective controlled group (within the
meaning of Section 4001 of ERISA) have incurred (or reasonably expects to incur)
any material
29
<PAGE>
liability to the Pension Benefit Guaranty Corporation or any liability under
Title IV of ERISA, and there are no circumstances that might result in the
imposition of a lien on any of the assets of the Companies or B and G Services
pursuant to ERISA Sections 302 or 4068 or Section 412 of the Internal Revenue
Code of 1986, as amended.
(d) Multiemployer Plans. None of the Companies and B and G
-------------------
Services nor any member of their respective controlled group (within the meaning
of Section 4001 of ERISA) now have, or during the last five years have had, any
obligation to contribute to, or any other liability or potential liability with
respect to, a "multiemployer plan" as that term is defined in Section 3(37) of
ERISA or a multiple controlled group plan as described in Sections 4063 and 4064
of ERISA (including, without limitation, any withdrawal liability or plan
termination obligations).
4.15. Contracts.
---------
(a) Schedule 4.15 hereto contains a complete and correct
list of all agreements, contracts, and commitments (i) to which either of the
Companies or B and G Services is a party and which yearly expenditure thereunder
is equal to or greater than
30
<PAGE>
$1,000 or (ii) by which it or any of its assets is bound as of the date hereof.
(b) The Buyer has been given complete and correct copies of
all written agreements, contracts, and commitments to which each of the
Companies or B and G Services is a party or by which each of the Companies' or B
and G Services' or any of their assets is bound, together with all amendments
thereto. Such agreements, contracts, and commitments are in full force and
effect, and all parties to such agreements, contracts, and commitments have, in
all material respects, performed all obligations required to be performed by
them to date, and each of the Companies and B and G Services are not, and no
other party is, in material default thereunder.
(c) No agreement, contract, or commitment to which each of
the Companies or B and G Services is a party or by which it or any of their
assets is bound, purports to limit their freedom to compete in any line of
business or with any person or entity. The Companies or B and G Services have no
outstanding power of attorney, except routine powers of attorney relating to
representation before governmental agencies or given in connection with
qualification to conduct business in another
31
<PAGE>
jurisdiction.
(d) Each of the Companies or B and G Services is not a party to
any contract with any governmental authority. Each of the Companies or B and G
Services is not a party to any contract that adversely affects its condition
(financial or otherwise), operations (present or prospective), business (present
or prospective), properties, assets, or liabilities. The Companies and B and G
Services know of no bid or contract proposal made by either the Companies or B
and Services that, if accepted or entered into, might reasonably be expected to
result in a loss to such Company or B and G Services.
4.16. Insurance. The Companies and B and G Services maintain adequate
---------
insurance against risks for the business in which they are engaged, including,
without limitation, workers' compensation and comprehensive liability insurance.
All of the Companies' and B and G Services' insurance policies covering such
risks are listed on Schedule 4.16 hereto, are in full force and effect, all
premiums due thereon have been paid, and each has complied in all material
respects with the provisions of such policies.
4.17. Trademarks, Etc. Schedule 4.17 hereto contains a
---------------
32
<PAGE>
complete and accurate list (including registration numbers and dates of filing,
renewal, and termination) of all trademarks, patents, tradenames, trade secrets,
copyrights, service marks, licenses, all registrations and applications for any
of the foregoing, and other intellectual property owned by the Companies and B
and G Services or in which any of them have an interest (collectively, the
"Intellectual Property"). Except as set forth in Schedule 4.17 hereto, (a) all
of the Intellectual Property is valid and is owned by the Companies or B and G
Services free and clear of all liens, encumbrances, or claims whatsoever; none
of the Companies' or B and G Services' rights in or use of such Intellectual
Property infringes on the rights of others or has been, or is currently being,
or, to the knowledge of the Companies or the Sellers, threatened to be,
challenged; (b) all of the Intellectual Property registrations have been duly
issued and have not been canceled, abandoned, or otherwise terminated; (c) all
of the Intellectual Property applications have been duly filed with the
appropriate authorities; and (d) no consents or approvals of any person are
necessary to sell, convey, transfer, assign, and deliver any of the Intellectual
Property to the Buyer. Except as set forth in Schedule 4.17 hereto, the
33
<PAGE>
Companies and B and G Services own or have the right to use all of the
Intellectual Property necessary to conduct their operations and business and the
Companies and B and G Services know of no claim, or any basis of any claim, that
they have infringed any intellectual property of any other person or that any
other person has infringed any of the Intellectual Property. Except as set forth
in Schedule 4.17 hereto, no third party has been permitted or licensed to use
any of the Intellectual Property and no royalties or other fees are payable to
any third party with respect to any of the Intellectual Property.
4.18. Transactions with Interested Persons. Except to the extent
------------------------------------
specifically set forth in reasonable detail on Schedule 4.18 hereto and the
financial statements delivered to the Buyer pursuant to Section 4.8 hereof, the
Companies and B and G Services do not nor does any employee (or family member
thereof) of the Companies or B and G Services, own, directly or indirectly, on
an individual or joint basis, an interest or serve as an officer, director,
employee, consultant, contractor, or agent, of or to, any competitor or supplier
of the Companies or B and G Services or any person or entity who or that has a
contract or arrangement with the Companies or B and G Services.
34
<PAGE>
4.19. Compliance with Laws, Etc. The Companies and B and G Services
-------------------------
have complied with and are in compliance with all federal, state, local, and
foreign statutes, laws, ordinances, regulations, rules, permits, judgments,
orders, or decrees applicable to them or any of their properties, assets,
operations, and business the failure of which to so comply would have an adverse
effect on the properties, operations, business, financial condition, or
prospects of the Companies, and there does not exist any basis for any claim of
default under or violation of any such statute, law, ordinance, regulation,
rule, permit, judgment, order, or decree except such defaults or violations, if
any, that in the aggregate do not and will not adversely affect the properties,
operations, business, financial condition, or prospects of the Companies or B
and G Services.
4.20. No Undisclosed Liabilities, Etc. Except for the transactions
-------------------------------
contemplated by this Agreement and as set forth in Schedule 4.20 hereto:
(a) The Companies or B and G Services have not incurred any
liability or obligation (absolute, accrued, contingent, or otherwise) of any
nature (other than liabilities and obligations incurred in the ordinary course
of business) that
35
<PAGE>
would properly be reflected or reserved against in a balance sheet prepared in
conformity with generally accepted accounting principles applied on a basis
consistently used in the preparation of the balance sheet of the Companies as on
December 31, 1995 referred to in Section 4.8 hereof; and
(b) The Companies or B and G Services have not acquired any
amount of accounts receivable that are uncollectible, and the frequency and
amounts of payments received by the Companies with respect to the accounts
receivable reflected on the consolidated balance sheets of the Companies and B
and G Services as on December 31, 1995 referred to in Section 4.8 hereof do not,
in retrospect, render inadequate the reserve for uncollectible accounts set
forth on such balance sheet.
4.21. Environmental Matters.
---------------------
(a) No releases or threat of releases of hazardous substances
have occurred at, from, in or on any real property owned, leased or operated by
the Companies or B and G Services ("Site"), nor are there any hazardous
substances in, on, about or migrating to any Site;
(b) No releases or threat of releases of hazardous substances
have occurred at, from or in any site at
36
<PAGE>
which a hazardous substance generated by or from the Companies or B and G
Services has been disposed of;
(c) There are no past or pending environmental claims
against the Companies or B and G Services related to the Site or off-site
locations to which the Companies or B and G Services have shipped hazardous
substances. There has been no violation of or non-compliance with any
environmental law or environmental permit by the Companies or B and G Services
relating to operations of the Companies or other uses of the Site;
(d) There are no facts, circumstances, or conditions that
could reasonably be expected to restrict, encumber, or result in the imposition
of special conditions under any environmental law or environmental permits with
respect to the ownership, occupancy, development, use, or transferability of the
Site;
(e) There are no underground storage tanks, polychlorinated
biphenyl-containing materials, or asbestos-containing materials located at the
Site;
(f) There are not any and there have not been any
environmental conditions at the Site resulting from or
37
<PAGE>
arising out of any past activities at the Site created prior to or existing at
the Closing Date; and
(g) All necessary environmental permits and other permits
for all activities related to the past operations and current operations at the
Site were obtained. The Companies have fully complied and is in full compliance
with all environmental laws and environmental permits with respect to activities
relating to the Site.
4.22. Governmental Authorizations and Regulations. Schedule 4.22
-------------------------------------------
hereto lists all licenses, franchises, permits, and other governmental
authorizations held by the Companies and B and G Services necessary to the
conduct of their business. Such licenses, franchises, permits, and other
governmental authorizations are valid, and the Companies or B and G Services
have not received any notice that any governmental authority intends to cancel,
terminate, or not renew any such license, franchise, permit, or other
governmental authorization. The Companies and B and G Services hold all
licenses, franchises, permits, and other governmental authorizations the absence
of any of which could have an adverse effect on their business.
4.23. Accounting Practices. The Companies and B and G
--------------------
38
<PAGE>
Services make and keep accurate books and records reflecting their assets and
maintains internal accounting controls that provide reasonable assurance that
(a) transactions are executed with management's authorization and (b)
transactions are recorded as necessary to permit preparation of the Company's
financial statements and to maintain accountability for the assets of the
Companies and B and G Services.
4.24. Minute Books. Each of the Companies' minute books
------------
contain complete and accurate records of all meetings and other corporate
actions of their shareholders and Board of Directors and committees thereof and
Sellers have given Buyer complete and correct copies of all such minute books.
4.25. Employee Matters. Each of the Companies or B and G Services is not
----------------
in violation, or has not been alleged to be in violation, of any of the various
provisions of Title VII of the Federal Civil Rights Act, the Age Discrimination
in Employment Act, the Americans with Disabilities Act, or any other federal or
state law dealing with employment discrimination, federal or state wage and hour
laws, federal or state income or unemployment and social security tax
withholding laws, or occupational safety and health laws and applicable
standards and regulations
39
<PAGE>
thereunder. Each of the Companies or B and G Services is not liable for any
unpaid wages, vacation pay, bonuses, or commissions, or for any material tax,
penalty, assessment, or forfeiture for failure to comply with any
employer/employee matter. There are no strikes, lockouts, work stoppages,
slowdowns, jurisdictional disputes, material grievances, material arbitrations,
or organizing activities occurring or threatened with respect to either of the
Companies or B and G Services. Each of the Companies or B and G Services is not
a party to any collective bargaining agreement, no such agreement determines the
terms and conditions of employment of any employee of either of the Companies or
B and G Services, no collective bargaining agent has been certified as a
representative of any of the employees of either of the Companies or B and G
Services, and no representation campaign or election is now in progress with
respect to either of the Companies or B and G Services employees.
4.26. Accuracy of Information Furnished. This Agreement, the Transaction
---------------------------------
Documents, and the schedules (prepared by either of the Companies or B and G
Services) and exhibits (prepared by the either of the Companies or B and G
Services) hereto and thereto do not contain any untrue statement of a
40
<PAGE>
material fact or omit to state a material fact necessary to make the statements
(excluding statements concerning solely the Buyer) herein or therein, in light
of the circumstances under which they were made, not misleading.
4.27. Disclosure. The Sellers and each of the Companies have not
-----------
knowingly failed to disclose to the Buyer any facts that would have an adverse
impact on the value of the Shares or on the assets, liabilities, earnings,
prospects and business of each of the Companies or B and G Services. No
representation or warranty by the Sellers or either of the Companies contained
in this Agreement, and no statement contained in, or agreement or other document
exhibited or attached hereto, any Schedule hereto or any list, certificate or
writing delivered in connection with or pursuant hereto, contains any untrue
statement of material fact, or omits to state a material fact necessary in order
to make the statements contained herein or therein not misleading or necessary
in order to provide fully and fairly the information required to be provided in
any such document.
5. Representations and Warranties of the Buyer to the Sellers.
----------------------------------------------------------
The Buyer represents and warrants to the Sellers that,
41
<PAGE>
as of the date of this Agreement and (except as otherwise stated herein) as of
the Closing Date:
5.1. Authority for Agreements. The Buyer has the power and authority to
------------------------
execute this Agreement and the Transaction Documents to which it is a party and
to carry out its obligations hereunder. When executed and delivered by the
Buyer, this Agreement will be binding upon and enforceable against the Buyer in
accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, reorganization, insolvency, moratorium, or other similar
laws, from time to time in effect, affecting creditors' rights generally, and
general principles of equity (whether asserted in an action at law or in
equity).
5.2. Organization. Buyer is a corporation, duly organized, validly
------------
existing, and in good standing under the laws of the Commonwealth of Virginia,
and has all requisite corporate power and authority to own or lease and to
operate its properties and to carry on its business as now being conducted.
5.3. Non-Contravention. The execution and delivery of this Agreement and
-----------------
the Transaction Documents to which it is a party and the consummation of the
transactions contemplated hereby will not, (a) violate any provision of the
Articles of
42
<PAGE>
Incorporation or By-Laws of the Buyer; (b) violate any material provision of, or
result in the breach or the acceleration of, or entitle any party to accelerate
(whether after the giving of notice or lapse of time or both), any material
obligation under, any mortgage, lien, lease, agreement, license, instrument,
order, arbitration award, judgment, or decree to which the Buyer is a party or
by which it is bound; (c) result in the creation or imposition of any material
lien, charge, pledge, security interest, or other encumbrance upon any property
of the Buyer; or (d) violate or conflict with any other material restriction or
any law, ordinance, or rule to which the Buyer or its property is subject.
5.4. Approvals. No consent, approval, order, or authorization of, or
---------
registration, declaration, or filing with, any governmental authority is
required in connection with the execution and delivery of this Agreement and the
Transaction Documents by the Buyer or the consummation of the transactions
contemplated hereby, except as listed on Schedule 5.4.
5.5. No Brokers. All negotiations relating to this Agreement and the
----------
Transaction Documents and the transactions contemplated hereby have been carried
on by the Buyer without the
43
<PAGE>
intervention of any person or firm in such manner as to give rise to any valid
claim against any of the parties hereto for a brokerage commission or finder's
fee.
5.6. Accuracy of Information Furnished. This Agreement and the
---------------------------------
schedules (prepared by Buyer) and exhibits (prepared by Buyer) hereto and
thereto do not contain any untrue statement of a material fact or omit to state
a material fact necessary to make the statements (excluding statements
concerning solely the Companies, B and G Services or the Sellers) herein or
therein, in light of the circumstances under which they were made, not
misleading.
6. Covenants of the Companies and each of the Sellers.
--------------------------------------------------
6.1. Access, Information and Documents. Pending the Closing, each
---------------------------------
of the Companies, B and G Services and the Sellers will give to the Buyer and to
its agents and representatives (including, but not limited to, accountants,
lawyers, and appraisers) full and complete access during normal working hours to
any and all of the properties, assets, books, records, and other documents of
each of the Companies and B and G Services to enable the Buyer to make such
examination of the business, properties, assets, books, records, and other
documents of each
44
<PAGE>
of the Companies and B and G Services as the Buyer may determine, and each of
the Companies, B and G Services and the Sellers will furnish to the Buyer such
information and copies of such documents and records as the Buyer will
reasonably request. Buyer will not contact any employee of either of the
Companies or B and G Services (other than Sellers) without the prior written
consent of the Sellers. As part of such examination the Buyer may make such
inquiries of such persons having business relationships with either of the
Companies or B and G Services as the Buyer will determine and each of the
Companies, B and G Services and the Sellers will cooperate fully with the Buyer
in connection therewith, provided that the Companies or B and G Services are
given reasonable prior notice of all such persons to which the Buyer intends to
make inquiries and the Sellers consent in writing to such inquiries.
6.2. Conduct of Business Pending Closing. From the date hereof until the
-----------------------------------
Closing with regard to each of the Companies and until dissolution with regard
to B and G Services, except as consented to by the Buyer in writing:
(a) (i) Each of the Companies will maintain itself at all times as
a corporation duly organized, validly
45
<PAGE>
existing, and in good standing, as applicable, under the laws of the
jurisdictions under which it is incorporated and in which it is doing business
as a foreign corporation;
(ii) The Sellers shall have transferred all of the assets of B
and G Services to the Companies;
(b) Each of the Companies and B and G Services will carry on their
business and operations substantially in the manner carried on as of the date
hereof and each of the Companies or B and G Services will not engage in any
activity or transaction or make any commitment to purchase or spend, other than
in the ordinary course of their business as heretofore conducted;
(c) (i) Each of the Companies will not declare, authorize, or pay
any distribution or dividend to any of their shareholders and each of the
Companies will not redeem, purchase, or otherwise acquire, or agree to redeem,
purchase, or otherwise acquire, any shares of their own stock;
(ii) B and G Services will not declare, authorize or pay any
distribution to any of its partners;
46
<PAGE>
(d) Each of the Companies and B and G Services will not pay or
obligate itself to pay any compensation, commission, or bonus to any director,
officer, employee, or independent contractor as such, except for the regular
compensation and commissions payable to such director, officer, employee, or
independent contractor at the rate in effect on the date of this Agreement or
otherwise in the ordinary course of business;
(e) Each of the Companies and B and G Services will continue to
carry all of their existing insurance;
(f) Each of the Companies and B and G Services will use its best
efforts to preserve its business organization intact, to keep available to the
Buyer the services of its employees and independent contractors and to preserve
for the Buyer its relationships with suppliers, licensees, distributors, and
customers and others having business relationships with each of them;
(g) Each of the Companies and B and G Services will not, and will
not obligate itself to, sell or otherwise dispose of or pledge or otherwise
encumber any of its properties
47
<PAGE>
or assets except in the ordinary course of business and each of the Companies
and B and G Services will maintain its facilities, machinery, and equipment in
good operating condition and repair, subject only to ordinary wear and tear;
(h) Each of the Companies and B and G Services will not enter into
any agreement or understanding with any partner, employee, officer, director, or
shareholder of either of the Companies, or any affiliate of any of the
foregoing;
(i) Each of the Companies and B and G Services will not engage in
any activity or transaction other than in the ordinary course of business as
heretofore conducted; and
(j) Without limiting the foregoing, each of the Companies and B
and G Services will consult with the Buyer regarding all significant
developments, transactions, contracts, personnel changes and proposals relating
to their business prior to taking any action.
6.3. Consents and Approvals. Each of the Companies, B and G Services and
----------------------
the Sellers will use their reasonable commercial efforts to obtain prior to the
Closing all consents, authorizations, and approvals under all statutes, laws,
ordinances, regulations, rules, judgments, decrees, and orders of
48
<PAGE>
any court or governmental agency, board, bureau, body, department, or authority
or of any other person required to be obtained by either of the Companies or the
Sellers in connection with the execution, delivery, and performance of this
Agreement, the Transaction Documents to which they are a party, and the
consummation of the transactions contemplated hereby and thereby.
6.4. Confidential Material. Each of the Companies, B and G Services and
---------------------
the Sellers will, and will instruct all of their employees, representatives,
agents, and affiliates to, treat all Confidential Material confidentially and
not disclose it except in accordance herewith; provided, that (a) any
Confidential Material may be disclosed to the Companies' or the Sellers' agents
who (i) need to have access to such information and (ii) are directed by either
of the Companies or the Sellers to treat such Confidential Material
confidentially; (b) any disclosure of Confidential Material may be made with the
prior written consent of the Buyer; and (c) Confidential Material may be
disclosed without liability hereunder to the extent required by law or by the
order or decree of any court or other governmental authority; provided, however,
that the party legally compelled to disclose the Confidential Material will
provide the
49
<PAGE>
Buyer with prompt notice of that fact so that the Buyer may attempt to obtain a
protective order or other appropriate remedy. For purposes of this section, the
term "Confidential Material" will be defined to mean all information furnished
by the Buyer or any of its agents to either of the Companies or any of the
Sellers or any of their agents; provided, however, that the term "Confidential
Material" will not include information that (x) becomes generally available to
the public other than as a result of a disclosure by either of the Companies,
any of the Sellers or any of their employees, representatives, agents, or
affiliates, or (y) was made available to either of the Companies or the Sellers
on a non-confidential basis from a source other than the Buyer or any of its
agents, provided, that such source is not bound by a confidentiality agreement
with the Buyer or any of its agents.
6.5. Employment Contracts. At the Closing, RMR and the Sellers
--------------------
individually, as applicable, will enter into the Heyl Employment Agreement and
the Pearsall Employment Agreement.
6.6. Transfer of Certain Assets. Prior to the Closing, B and G Services
--------------------------
will transfer or cause to be transferred to the Companies the assets of B and G
Services.
50
<PAGE>
6.7. Liability for Federal, State and Local Taxes. The Sellers, jointly
--------------------------------------------
and severally, will be liable for all federal, state, and local taxes resulting
from the transactions contemplated by this Agreement, including, but not limited
to, all sales, use, and transfer taxes, if any, resulting from this transaction.
In addition, the Sellers will be responsible for all federal, state, and local
taxes and any interest, penalty, or expenses incurred by the each of the
Companies for all tax years up to and including December 31, 1995 and for all
federal, state and local taxes, and any interest, penalty and expenses, if any,
from January 1, 1996, through March 31, 1996.
6.8. Claims Experience. Prior to the Closing and as soon as possible
-----------------
after the execution of this Agreement, each of the Companies and B and G
Services and the Sellers will prepare and deliver to the Buyer a description of
claims experience of each of the Companies and B and G Services during the past
three years under all of the insurance policies listed on Schedule 4.16 hereto,
including settled and outstanding claims under all such policies in respect of
general liability and workers' compensation claims.
6.9. Employment and Employee Benefits. Each of the
--------------------------------
51
<PAGE>
Companies and B and G Services have delivered to the Buyer Schedule 6.9 listing
the name, title, and current annual base salary or hourly rate of each person
employed by them on December 31, 1995, together with a statement of the full
amount and nature of any other remuneration, whether in cash or kind, paid to
each such person during the 1995 calendar year. Each of the Companies and B and
G Services will furnish an updated copy of Schedule 6.9 at the Closing which
will reflect any changes in such information occurring between December 31, 1995
and the Closing Date. The Sellers and Buyer agree that any individuals who were
full-time employees of either of the Companies on the Closing Date and who agree
to execute PGI Standard Code of Conduct agreement, attached hereto as Exhibit
6.9 will be offered continued employment with one of the Companies, effective
immediately after the Closing hereof. Any individuals who accept this offer of
employment with the one of the Companies will be referred to herein as
"Transferring Employees." This employment of Transferring Employees will be "at
will" and nothing herein expressed or implied confers upon any such Transferring
Employee any rights or remedies of any nature or kind whatsoever under or by
reason of this Agreement, including, without limitation, any
52
<PAGE>
rights to employment for a specific period. After the Closing, the Buyer will
make available to Transferring Employees such wages and benefits as the Buyer,
in its sole business judgment, deems appropriate, subject only to the covenants
set forth in Section 7.3 hereof, and the Buyer will be under no obligation to
credit Transferring Employees with past service credit for any purpose
(including, without limitation, vacation, severance, or pension purposes),
except for determining future vacation.
6.10. Non-Competition. For a period of *** commencing on the Closing
---------------
Date, neither one of the Sellers will:
(a) Directly or indirectly, engage in, own, control, or make an
investment in, any business that competes directly with the business of either
of the Companies.
(b) Accept employment with any person or entity that competes
directly with the business of either of the Companies.
(c) Directly or indirectly solicit or employ any person who at such
time provides services for or is otherwise employed by either of the Companies
or the Buyer, or encourage or induce any employee of either of the Companies or
the Buyer to leave such employment.
* CONFIDENTIAL INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
COMMISSION
53
<PAGE>
(d) Directly or indirectly, divert or attempt to divert from the
Companies or the Buyer, the business of any customer or client of either of the
Companies or the Buyer.
6.11. Subordination Agreement. At Closing, Sellers agrees to sign a
-----------------------
standard subordination as provided by Buyer's primary financial institution in
the form attached hereto as Exhibit 6.11 or as it may from time to time change.
If the Buyer determines to change its primary financial institution, the Seller
shall cooperate with Buyer in executing a new subordination agreement with such
new institution.
6.12. IRS Election. Sellers covenant and agree that upon request from
------------
Buyer, they will jointly make with Buyer a timely election under Section 338(h)
of the U.S. Internal Revenue Code ("Code") and the Treasury regulations
thereunder (and any analogous state or local law provision) with respect to the
sale and purchase of the RMR shares (collectively, the "Section 338(h)(10)
Election"). In connection with the 338(h)(10) Election for federal and (to the
extent applicable) state or local purposes, Sellers shall jointly complete with
Buyer and cause to be filed with the Internal Revenue Service and any relevant
state or local taxing authority, the "Section 338 Forms"
54
<PAGE>
(as defined below). Sellers agree to report with Buyer, and to cause RMR to
report, the transfers under this Agreement consistent with the Section
338(h)(10) Election, and shall take no position contrary thereto. "Section 338
Forms" shall mean all returns, documents, statements and other forms that are
required to be submitted to the Internal Revenue Service or any state or local
taxing authority by shareholders of an "S corporation" (as defined in Section
1361(a) of the Code) or by a "purchasing corporation" (as defined in Section
338(d)(1) of the Code).
6.13. Dissolution of B and G Services. Seller shall cause B and G
-------------------------------
Services to be dissolved in accordance with the provisions of applicable law
within ninety (90) days from the Closing Date and shall deliver to Buyer a
Certificate of Cancellation, or its equivalent, certified by the Arizona
Secretary of State.
6.14. Further Assurances. Each of the Companies, B and G Services and
------------------
the Sellers agree, at the Sellers' sole expense, to do or cause to be done such
further acts and things and deliver or cause to be delivered to Buyer such
additional assignments, agreements, powers, and instruments as the Buyer may
reasonably require to carry into effect the purposes of this
55
<PAGE>
Agreement and the Transaction Documents or to better assure and confirm unto the
Buyer its rights, powers, and remedies hereunder and thereunder.
7. Covenants of the Buyer.
----------------------
7.1. Confidential Information. The Buyer will, and will instruct
------------------------
all of its employees, representatives, agents, and affiliates to, treat all
Confidential Information confidentially and not disclose it except in accordance
herewith; provided, that (a) any Confidential Information may be disclosed to
the Buyer's agents who (i) need to have access to such information and (ii) are
directed by the Buyer to treat such Confidential Information confidentially; (b)
any disclosure of Confidential Information may be made with the prior written
consent of the Company or the Sellers; and (c) Confidential Information may be
disclosed without liability hereunder to the extent required by law or by the
order or decree of any court or other governmental authority; provided, however,
that the party legally compelled to disclose the Confidential Information will
provide the Company or the Sellers, as appropriate, with prompt notice of that
fact so that the Company or any of the Sellers may attempt to obtain a
protective order or other appropriate remedy. For purposes of
56
<PAGE>
this section, the term "Confidential Information" will be defined to mean all
information furnished by the Company or the Sellers or any of their agents to
the Buyer or any of its agents; provided, however, that the term "Confidential
Information" will not include information that (x) becomes generally available
to the public other than as a result of a disclosure by the Buyer or any of its
employees, representatives, agents, or affiliates, or (y) was made available to
the Buyer on a non-confidential basis from a source other than the Company or
the Sellers or any of their agents, provided, that such source is not bound by a
confidentiality agreement with the Company, the Sellers or any of their agents.
The provisions contained in this Section 7.1 will not survive the Closing.
7.2. Consents and Approvals. The Buyer will use its reasonable
----------------------
commercial efforts to obtain prior to the Closing all consents, authorizations,
and approvals under all statutes, laws, ordinances, regulations, rules,
judgments, decrees, and orders of any court or governmental agency, board,
bureau, body, department, or authority or of any other person required to be
obtained by the Buyer in connection with the execution, delivery, and
performance of this Agreement, the Transaction Documents
57
<PAGE>
to which it is a party and the consummation of the transactions contemplated
hereby and thereby.
7.3. Employment and Employee Benefits.
--------------------------------
(a) After the Closing, the Buyer agrees to offer continued
employment to Transferring Employees. This employment of Transferring Employees
will be "at will" and nothing herein expressed or implied confers upon any such
Transferring Employee any rights or remedies of any nature or kind whatsoever
under or by reason of this Agreement, including, without limitation, any rights
to employment for a specific period. The Buyer will make available to
Transferring Employees such terms and working conditions as the Buyer in its
sole business judgment, deems appropriate, substantially similar to the terms
and working conditions as are provided Buyer's employees, provided, however,
that Buyers will use reasonable commercial efforts to initially provide
transferring Employees with substantially similar terms and working conditions
as they had as employees of the Companies. The Buyer will be under no obligation
to credit Transferring Employees with past service credit for any purpose
(including, without limitation, vacation, severance,or pension purposes), except
for determining future vacation. In addition to the
58
<PAGE>
foregoing, the Buyer will offer Transferring Employees who are employed with the
Companies its standard employment benefit programs.
7.4. Undisclosed Liabilities, Tax Audits/Claims. Post Closing Buyer
------------------------------------------
agrees:
(a) To notify Sellers of any undisclosed account payable or
liabilities of which it becomes aware; and
(b) To notify Sellers of any claims or audits either of the
Companies has regarding any local, state or federal tax and any interest,
penalty or expenses incurred for tax years or business conducted prior to the
Closing Date.
7.5. Payment of Assumed Liabilities. Buyer will pay all assumed
------------------------------
liabilities listed on Schedule 4.12(c) in accordance with their terms.
7.6. Further Assurances. The Buyer will, at the request of the Sellers
------------------
and at the Buyer's sole expense, execute and deliver any further instruments or
documents and take all such further action as the Sellers may reasonably request
in order to carry into effect the purposes of this Agreement and the Transaction
Documents.
7.7. Termination of Companies' Benefit Plans. At
---------------------------------------
59
<PAGE>
Buyer's discretion, Buyer will cause the Companies to (a) terminate all
Companies' employee benefit plans in existence at Closing or as soon as possible
subsequent to Closing or (b) merge any of the existing Companies' employee
benefit plans into Buyer's corresponding plans, except for the medical and
dental plans which shall be terminated. Sellers shall retain (a) if a plan is
terminated, responsibility for all liabilities, including funding liabiliities
and fiduciary responsibilities related to the termination and distribution of
such plan or (b) if a plan is merged, responsibility for any required funding
prior to merger or the costs incurred to effect the merger, including actuarial
reports, projections and any other administrative costs.
8. Conditions Precedent to the Sellers' Obligation to Sell the Shares.
------------------------------------------------------------------
The obligations of the Sellers to sell the Shares is subject to the fulfillment
prior to or at the Closing of the following conditions:
8.1. The Buyer's Performance. There will not be any material error,
-----------------------
misstatement, or omission in the representations and warranties made by the
Buyer in this Agreement; all representations and warranties by the Buyer
contained in this Agreement or in any written statement delivered by the Buyer
to
60
<PAGE>
the Sellers pursuant to this Agreement will be true in all material respects at
and as of the Closing as though such representations and warranties were made at
and as of said time (except (a) as contemplated by this Agreement and (b) to the
extent, if any, the Sellers will waive the same); and the Buyer will have
performed and complied in all material respects with all the terms, provisions
and conditions of this Agreement to be performed and complied with by the Buyer
at or before the Closing.
8.2. Consents and Approvals. Each of the Companies, B and G Services
----------------------
and the Buyer (and to the extent required, the Sellers) will have obtained all
consents, authorizations, and approvals under all statutes, laws, ordinances,
regulations, rules, judgments, decrees, and orders of any court or governmental
agency, board, bureau, body, department, or authority or of any other person
required to be obtained by such Company, the Buyer, or the Sellers, as the case
may be, in connection with the execution, delivery, and performance of this
Agreement, the Transaction Documents and the consummation of the transactions
contemplated hereby and thereby.
8.3. No Legal Impediment. There will be in effect no
-------------------
61
<PAGE>
injunction, writ, temporary restraining order, or any order of any nature issued
by any court or governmental agency directing that the transactions contemplated
by this Agreement not be consummated.
9. Conditions Precedent to the Buyer's Obligation to Purchase the Shares.
---------------------------------------------------------------------
The obligation of the Buyer to purchase the Shares is subject to the fulfillment
prior to or at the Closing of the following conditions:
9.1. The Companies' and the Sellers' Performance. There will not be
-------------------------------------------
any material error, misstatement, or omission in the representations and
warranties made by either of the Companies, B and G Services or the Sellers in
this Agreement; all representations and warranties by each of the Companies and
B and G Services and the Sellers contained in this Agreement or in any written
statement delivered by the Company or the Sellers to the Buyer pursuant to this
Agreement will be true in all material respects at and as of the Closing as
though such representations and warranties were made at and as of said time
(except (a) as contemplated by this Agreement and (b) to the extent, if any, the
Buyer will waive the same); and the Companies and B and G Services and the
Sellers will have performed and complied in all
62
<PAGE>
material respects with all the terms, provisions, and conditions of this
Agreement to be performed and complied with by the Companies, B and G Services
and the Sellers at or before the Closing.
9.2. Consents and Approvals. (a) Each of the Companies, B and G
----------------------
Services and the Buyer (and to the extent required, the Sellers) will have
obtained all consents, authorization, and approvals under all statutes, laws,
ordinances, regulations, rules, judgments, decrees, and orders of any court or
governmental agency, board, bureau, body, department, or authority or of any
other person required to be obtained by each of the Companies, B and G Services,
the Sellers, or the Buyer, as the case may be, in connection with the execution,
delivery and performance of this Agreement, the Transaction Documents, and the
consummation of the transactions contemplated hereby and thereby, and (b) B and
G Services assets shall have been transferred to the Companies.
9.3. Physical Properties. There will have occurred no material
-------------------
damage to or destruction or loss of (whether or not covered by insurance) any of
the Companies' facilities, equipment, or other assets.
63
<PAGE>
9.4. Due Diligence. The Buyer will have satisfactorily completed
-------------
its due diligence of the Companies and B and G Services.
9.5. No Legal Impediment. There will be in effect no injunction,
-------------------
writ, temporary restraining order, or any order of any nature issued by any
court or governmental agency directing that the transactions contemplated by
this Agreement not be consummated.
10. Termination. This Agreement may be terminated as follows:
-----------
10.1. Termination by the Buyer. The Buyer may, without liability to
------------------------
the Companies or the Sellers, terminate this Agreement by notice to the
Companies and the Sellers (a) at any time prior to the Closing if material
default is made by the Companies or B and G Services or the Sellers in the
observance or in the due and timely performance of any of the terms hereof to be
performed by the Companies or B and G Services or the Sellers that cannot be
cured at or prior to the Closing, or (b) at any time prior to the Closing if the
Buyer discovers something unsatisfactory about either of the Companies or B and
G Services or the Sellers during its due diligence or (c) at the Closing if
64
<PAGE>
any of the conditions precedent to the performance of the Buyer's obligations at
the Closing will not have been fulfilled.
10.2. Termination by the Company or the Sellers. The Companies and
-----------------------------------------
the Sellers may, without liability to the Buyer, terminate this Agreement by
notice to the Buyer (a) at any time prior to the Closing if material default
will be made by the Buyer in the observance or in the due and timely performance
of any of the terms hereof to be performed by the Buyer that cannot be cured at
or prior to the Closing or (b) at the Closing if any of the conditions precedent
to the performance of the Companies or B and G Services or the Sellers'
obligations at the Closing have not been fulfilled.
10.3. Effect of Termination. If this Agreement is terminated, this
---------------------
Agreement, except for Sections 6.4 and 7.1, will no longer be of any force or
effect and there will be no liability on the part of any party or its respective
directors, officers, or shareholders except, in the case of termination because
of a material default or material breach resulting from the willful fault of
another party, the aggrieved party or parties may recover from the defaulting
party the amount of expenses incurred by such aggrieved party or parties in
65
<PAGE>
connection with this Agreement and the transactions contemplated hereby which
the aggrieved party or parties would otherwise have to bear pursuant to Section
12.6 of this Agreement. If this Agreement is terminated, Sections 6.4 and 7.1
will remain in full force and effect, and any party, or its respective
directors, officers, agents or representatives, breaching Section 6.4 or Section
7.1 may be held liable for any such breach.
11. Indemnification.
---------------
11.1. Indemnification of the Buyer and the Companies.
----------------------------------------------
(a) From and after the Closing Date, the Sellers, jointly and
severally, will indemnify, defend, and hold harmless the Buyer, the Companies
and their respective officers, directors, shareholders, representatives, agents,
and affiliates from, against, and in respect of all claims, liabilities,
actions, suits, proceedings, assessments, judgments, losses, damages, costs, and
expenses (including interest, penalties, and reasonable accountants', experts',
and attorneys' fees and disbursements) (collectively, "Damages"), arising out
of, relating to, or resulting from (i) any material inaccuracy or material
breach of any of the written representations or warranties of either of the
Companies or the Sellers made in or
66
<PAGE>
pursuant to this Agreement or the Transaction Documents; (ii) the material
breach of any covenant, obligation, or agreement of any of the Sellers to be
performed, fulfilled, or complied with pursuant to this Agreement or the
Transaction Documents (iii) any material misrepresentation, or the omission of
any material fact (including without limitation those facts required to make the
facts otherwise set forth not to be misleading), in this Agreement or the
Transaction Documents (including all exhibits and schedules hereto and thereto);
(iv) the operation of the business of the Companies and B and G Services prior
to the Closing, or the acts or omissions of any of either of the Companies'
officers, directors, shareholders, agents, or representatives prior to the
Closing in connection with the operation of the Companies' or B and G Services'
business; (v) any and all taxes, penalties or interest of any nature incurred by
(aa) either of the Companies prior to March 31, 1996 and (bb) B and G Services
prior to dissolution; (vi) with regard to Sellers, any taxes, penalties or
interest of any nature incurred on or prior to the Closing Date and (vii) with
regard to the commission paid to Seller's broker, any amounts paid to such
broker; provided that no indemnification will be owed hereunder
67
<PAGE>
in any case where it is determined that Damages result solely from the
negligence, willful misconduct, or bad faith of the party to be indemnified;
provided, further, that the Sellers will not be liable for indemnification
hereunder in respect of any breach of any warranty, representation, covenant,
obligation, or agreement, or any material misrepresentation or omission, that is
not made or is not to be performed by the Companies or the Sellers.
(b) Sellers, jointly and severally, will indemnify and hold
harmless Buyer from the non-payment of any and all accounts receivable as of
March 31, 1996 and all undisclosed accounts receivable and undisclosed
liabilities.
11.2. Indemnification of the Sellers. From and after the Closing
------------------------------
Date, the Buyer will indemnify, defend, and hold harmless each of the Sellers
and its representatives, agents, and affiliates from, against, and in respect of
all Damages arising out of, relating to, or resulting from (a) any material
inaccuracy or material breach of any of the written representations or
warranties of the Buyer made in or pursuant to this Agreement or the Transaction
Documents; (b) the material breach of any covenant, obligation, or agreement of
the Buyer to
68
<PAGE>
be performed, fulfilled, or complied with pursuant to this Agreement or the
Transaction Documents; or (c) any material misrepresentation or the omission of
any material fact (including without limitation those facts required to make the
facts otherwise set forth not be misleading) in this Agreement or the
Transaction Documents (including all exhibits and schedules hereto and thereto);
provided, that no indemnification will be owed hereunder in any case where it is
determined that Damages result solely from the negligence, willful misconduct,
or bad faith of the Sellers, either of the Companies or B and G Services (pre-
Closing); provided, further, that the Buyer will not be liable for
indemnification hereunder in respect of any breach of any warranty,
representation, covenant, obligation, or agreement, or any material
misrepresentation or omission, that is not made or is not to be performed by the
Buyer.
11.3. Survival of Representations, Warranties, and Covenants and
----------------------------------------------------------
Indemnification. The representations and warranties made in Sections 4 and 5 of
- ---------------
this Agreement, other than those in Sections 4.10, 4.14, 4.20, 4.21, and 4.25
will survive the Closing and any investigation at any time made by or on behalf
of the Buyer, the Companies, or the Sellers, as
69
<PAGE>
applicable, and will expire upon the second anniversary of the Closing Date,
except as to any matter as to which a reasonably specific good faith claim has
been submitted in writing to the Buyer, the Companies, or the Sellers, as
applicable, prior to such date. All representations and warranties contained in
Sections 4.10, 4.14, 4.20, 4.21, and 4.25 will survive until the expiration of
the applicable statute of limitations period (including any extensions thereof)
for any claim in respect of matters covered by Section 4.10, 4.14, 4.20, 4.21,
or 4.25, respectively. The covenants contained in Sections 6 and 7 of this
Agreement and the provisions contained in Sections 1.2(b), 1.3, 1.4 and this
Section 11 will survive the Closing.
12. Miscellaneous.
-------------
12.1. Complete Agreement; Amendments; Waivers. This Agreement,
---------------------------------------
together with the exhibits and schedules hereto, contains the entire agreement
of the parties with respect to the subject matter hereof and supersedes all
prior agreements and understandings, oral or written, with respect thereto. This
Agreement may be amended only by a written instrument signed by the parties
hereto. No provision of this Agreement may be waived without a written
instrument signed by the waiving party. The
70
<PAGE>
failure of any party to insist, in any one or more instances, on performance of
any of the terms or conditions of this Agreement will not be construed as a
waiver or relinquishment of any rights granted hereunder or of the future
performance of any such term, covenant, or condition, but the obligations of the
parties with respect thereto will continue in full force and effect.
12.2. Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
12.3. Successors and Assigns. This Agreement will inure to the
----------------------
benefit of, and be binding upon, the parties hereto and their respective
executors, heirs, and permissible assigns. Neither this Agreement nor any of the
rights or obligations hereunder (or under any document delivered pursuant
hereto) may be assigned by a party hereto without the prior written consent of
the other parties.
12.4. Governing Law. This Agreement will be construed and enforced
-------------
in accordance with the laws of the Commonwealth of Virginia without giving
effect to conflicts of laws principles.
12.5. Notices. All notices, claims, requests, demands,
-------
71
<PAGE>
and other communications hereunder will be in writing and will be duly given if:
(a) personally delivered or sent via telecopy, (b) sent by telegram (other than
where original payment or other documents must be delivered) for delivery within
24 hours, or (c) sent by Federal Express, DHL Worldwide Express, or Airborne
Courier (for next business day delivery), shipping prepaid as follows:
If to the Buyer, to:
Mark N. Sirangelo, President
PGI Company P
One Courthouse Metro
Suite 200
2200 Wilson Boulevard
Arlington, Virginia 22201-3324
(Telecopy number (703) 528-1724)
with a copy to:
James N. Schwarz, Esq.
GINSBURG, FELDMAN & BRESS CHARTERED
1250 Connecticut Avenue, N.W.
Washington, D.C. 20036
(202) 627-9000
72
<PAGE>
If to the Companies, to:
Timberline Worldwide, Inc.
77 East Weldon Avenue
Phoenix, AZ 85012
(Telecopy number ( ) )
Attention: President
RMR Production Services, Inc.
77 East Weldon Avenue
Phoenix, AZ 85012
(Telecopy number ( ) )
Attention: President
with a copy to:
Michael Murphy Esq.
Keyt, Lawless, Zarkou & Murphy
3101 North Central Avenue
Phoenix, AZ 85012
(602) 234-2400
with a copy (post-Closing) to:
Mark N. Sirangelo, President
PGI Company P
One Courthouse Metro
Suite 200
2200 Wilson Boulevard
Arlington, Virginia 22201-3324
(Telecopy number (703) 528-1724)
If to the Sellers, to:
73
<PAGE>
Michael C. Heyl and Diane D. Heyl
3210 East Carol Avenue
Phoenix, AZ 85032
(Telecopy number ( ) )
74
<PAGE>
with a copy to:
Michael Murphy Esq.
Keyt, Lawless, Zarkou & Murphy
3101 North Central Avenue
Phoenix, AZ 85012
(602) 234-2400
and:
Roger K. Pearsall and Virginia C. King
8628 Wren Circle
Phoenix, AZ 85032
(Telecopy number ( ) )
with a copy to
Michael Murphy Esq.
Keyt, Lawless, Zarkou & Murphy
3101 North Central Avenue
Phoenix, AZ 85012
(602) 234-2400
or such other address or addresses as the person to whom notice is to be given
may have previously furnished to the others in writing in the manner set forth
above. Notices will be deemed given at the time of personal delivery or
completed telecopy, or, if sent by telegram 24 hours after the time sent, or, if
sent by Federal Express, DHL Worldwide Express, or Airborne Courier, one
business days after such sending.
12.6. Expenses. Except as otherwise expressly provided
--------
75
<PAGE>
in this Agreement, each party hereto will bear its own expenses.
12.7. Headings; Form of Words. The headings contained in this
-----------------------
Agreement (including but not limited to the titles of the schedules and exhibits
hereto) have been inserted for the convenience of reference only, and neither
such headings nor the placement of any term hereof under any particular heading
will in any way restrict or modify any of the terms or provisions hereof. Terms
used in the singular will be read in the plural, and vice versa, and terms used
in the masculine gender will be read in the feminine or neuter gender when the
context so requires, and vice versa.
12.8. Severability. The provisions of this Agreement will be deemed
------------
severable, and if any part of any provision is held to be illegal, void,
voidable, invalid, nonbinding, or unenforceable in its entirety or partially or
as to any party, for any reason, such provision may be changed, consistent with
the intent of the parties hereto, to the extent reasonably necessary to make the
provision, as so changed, legal, valid, binding, and enforceable. If any
provision of this Agreement is held to be illegal, void, voidable, invalid,
nonbinding, or unenforceable in its entirety or partially or as to any party,
76
<PAGE>
for any reason, and if such provision cannot be changed consistent with the
intent of the parties hereto to make it fully legal, valid, binding, and
enforceable, then such provisions will be stricken from this Agreement, and the
remaining provisions of this Agreement will not in any way be affected or
impaired, but will remain in full force and effect.
77
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the date first above written.
BUYER:
PGI Company P
By: /s/ Mark N. Sirangelo
---------------------------------------------
Name: Mark N. Sirangelo
Title: President and Chief Executive Officer
THE COMPANIES:
Timberline Worldwide, Inc.
By: /s/ Roger K. Pearsall
---------------------------------------------
Name: Roger K. Pearsall
Title: President
RMR Production Services, Inc.
By: /s/ Roger K. Pearsall
---------------------------------------------
Name: Roger K. Pearsall
Title: President
SELLERS:
/s/ Michael C. Heyl
---------------------------------------------
Michael C. Heyl
/s/ Diane D. Heyl
---------------------------------------------
Diane D. Heyl
78
<PAGE>
/s/ Roger K. Pearsall
---------------------------------------------
Roger K. Pearsall
/s/ Virginia C. King
---------------------------------------------
Virginia C. King
79
<PAGE>
Exhibit 10.16
STOCK PURCHASE AGREEMENT
DATED AS OF JULY 1, 1996
AMONG
PGI COMPANY J,
EPIC ENTERPRISES OF NEVADA, INC.,
HARRY SCHWARTZ,
CHARLES SCHWARTZ
AND
PAMELA SCHWARTZ
<PAGE>
TABLE OF CONTENTS
Page
- ----------------------------------------------------------------------------
1. Definitions.......................................................... 2
-----------
1.1. Use of Defined Terms......................................... 2
--------------------
1.2. Accounting Terms............................................. 2
----------------
1.3. Exhibition Ownership and Exhibition Management............... 2
----------------------------------------------
1.4. Sections, Exhibits and Schedules............................. 3
--------------------------------
1.5. Miscellaneous Terms.......................................... 3
-------------------
1.6. Buyer's Parent............................................... 3
--------------
2. Purchase and Sale of the Company Shares.............................. 3
---------------------------------------
2.1. Purchase and Sale of the Company Shares...................... 3
---------------------------------------
2.2. Purchase Price............................................... 4
--------------
2.3. Definition of Net Income Pre-Tax............................. 8
--------------------------------
2.4. Financial Statements for Fiscal Years 1997 and 1998.......... 9
---------------------------------------------------
3. Closing.............................................................. 9
-------
4. Deliveries at the Closing............................................ 9
-------------------------
4.1. Deliveries to the Buyer by the Sellers....................... 9
----------------------------------------
4.2. Deliveries to the Sellers by the Buyer....................... 12
----------------------------------------
5. Representations and Warranties of the Company and Sellers............ 13
---------------------------------------------------------
5.1. Ownership; Transfer of the Company Shares.................... 14
-----------------------------------------
5.2. Authority.................................................... 14
---------
5.3. Approvals.................................................... 16
---------
5.4. No Brokers................................................... 16
----------
5.5. Organization, Qualification to Do Business................... 16
------------------------------------------
5.6. Capital Stock................................................ 18
-------------
5.7. No Subsidiaries, Etc. ....................................... 18
--------------------
5.8. Financial Statements......................................... 18
--------------------
5.9. Absence of Certain Changes................................... 19
--------------------------
5.10. Taxes........................................................ 22
-----
5.11. Non-Contravention............................................ 23
-----------------
5.12. Title to and Condition of the Assets of the Company.......... 24
---------------------------------------------------
5.13. Litigation................................................... 24
----------
5.14. Employee Benefit Plans and Other Arrangements................ 25
---------------------------------------------
5.15. Contracts.................................................... 27
---------
5.16. Insurance.................................................... 28
---------
<PAGE>
5.17. Trademarks, Etc.............................................. 28
---------------
5.18. Transactions with Interested Persons......................... 30
------------------------------------
5.19 Compliance with Laws, etc.................................... 30
-------------------------
5.20. No Undisclosed Liabilities, Etc.............................. 31
-------------------------------
5.21. Environmental Matters........................................ 31
---------------------
5.22. Governmental Authorizations and Regulations.................. 33
-------------------------------------------
5.23. Accounting Practices......................................... 33
--------------------
5.24. Minute Books................................................. 34
------------
5.25. Employee Matters............................................. 34
----------------
5.26. Accuracy of Information Furnished............................ 35
---------------------------------
5.27. Disclosure................................................... 35
----------
6. Representations and Warranties of Buyer................................ 36
---------------------------------------
6.1. Authority for Agreements..................................... 36
------------------------
6.2. Non-Contravention............................................ 36
-----------------
6.3. Approvals.................................................... 37
---------
6.4. No Brokers................................................... 37
----------
6.5. Accuracy of Information Furnished............................ 37
---------------------------------
6.6. Organization, Good Standing.................................. 38
---------------------------
7. Covenants of the Company and Each of the Sellers....................... 38
------------------------------------------------
7.1. Access, Information and Documents............................ 38
---------------------------------
7.2. Conduct of Business Pending Closing.......................... 39
-----------------------------------
7.3. Consents and Approvals....................................... 41
----------------------
7.4. Confidential Material........................................ 41
---------------------
7.5. Liability for Federal, State and Local Taxes................. 42
--------------------------------------------
7.6. Claims Experience............................................ 43
-----------------
7.7. Employment and Employee Benefits............................. 43
--------------------------------
7.8. Non-Competition.............................................. 44
---------------
7.9. Further Assurances........................................... 45
------------------
7.10. Termination of Company's Benefit Plans....................... 45
--------------------------------------
7.11. Release of Liens............................................. 46
----------------
8. Covenants of the Buyer................................................. 46
----------------------
8.1. Confidential Information..................................... 46
------------------------
8.2. Consents and Agreements...................................... 47
-----------------------
8.3. Employment and Employee Benefits............................. 47
--------------------------------
8.4. Termination of Company's Benefit Plans....................... 49
--------------------------------------
8.5. Undisclosed Liabilities...................................... 49
-----------------------
8.6. Payment of Assumed Liabilities............................... 49
------------------------------
8.7. Seller's Personal Guarantees................................. 50
----------------------------
8.8. Further Assurances........................................... 50
------------------
9. Conditions Precedent to the Sellers' Obligation to Sell the Company
Shares................................................................. 50
9.1. The Buyer's Performance...................................... 50
-----------------------
9.2. Consents and Approvals....................................... 51
----------------------
9.3. No Legal Impediment.......................................... 51
-------------------
ii
<PAGE>
10. Conditions Precedent to the Buyer's Obligation to Purchase the
--------------------------------------------------------------
Company's Shares..................................................... 51
----------------
10.1. Company's and the Sellers' Performance........................ 52
--------------------------------------
10.2. Consents and Approvals........................................ 52
----------------------
10.3. Physical Properties........................................... 53
-------------------
10.4. No Legal Impediment........................................... 53
-------------------
10.5. Closing of Buyer's Purchase of Epic Enterprises of Nevada,
----------------------------------------------------------
Inc............................................................. 53
---
11. Termination.......................................................... 53
-----------
11.1. Termination by the Buyer...................................... 53
------------------------
11.2. Termination by the Company or the Sellers..................... 54
-----------------------------------------
11.3. Effect of Termination......................................... 54
---------------------
12. Indemnification...................................................... 55
---------------
12.1. Indemnification of the Buyer and the Company.................. 55
--------------------------------------------
12.2. Indemnification of the Sellers................................ 57
------------------------------
12.3. Procedure for Indemnification................................. 58
-----------------------------
12.4. Survival of Representations, Warranties, Covenants and
------------------------------------------------------
Indemnification................................................. 60
---------------
13. Miscellaneous........................................................ 60
-------------
13.1. Complete Agreement; Amendments; Waivers....................... 60
---------------------------------------
13.2. Counterparts.................................................. 61
------------
13.3. Successors and Assigns........................................ 61
----------------------
13.4. Governing Law................................................. 62
-------------
13.5. Notices....................................................... 62
-------
13.6. Expenses...................................................... 64
--------
13.7. Headings; Form of Words....................................... 64
-----------------------
13.8. Severability.................................................. 64
------------
-iii-
<PAGE>
STOCK PURCHASE AGREEMENT
------------------------
STOCK PURCHASE AGREEMENT (the "Agreement") dated as of the 1st day of July,
1996 by and among PGI Company J, a Virginia corporation (the "Buyer"), Epic
Enterprises of Nevada, Inc., a Nevada corporation ("Epic L.V." or the
"Company"), Harry Schwartz, an individual residing at 650 Columbia Street, No.
112, San Diego CA 92101 ("H. Schwartz"), Charles Schwartz, an individual
residing at 655 India Street, No. 421, San Diego, CA 92101 ("C. Schwartz") and
Pamela Schwartz, an individual residing at 5683-C Adobe Falls Road, San Diego,
California 92120 ("P. Schwartz") (collectively, H. Schwartz, C. Schwartz and P.
Schwartz shall be referred to as the "Sellers" and individually as a "Seller");
and
WHEREAS, Sellers are the sole stockholders of Epic L.V. owning One Thousand
(1,000) shares of the common stock of Epic, which comprise all of the issued and
outstanding shares of common stock of Epic; and
WHEREAS, the Buyer desires to purchase from the Sellers, and the Sellers
desire to sell to the Buyer, one hundred percent (100%) of the outstanding
capital stock of the Company (the "Company Shares") all upon the terms and
conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the foregoing premises, the mutual
covenants, agreements, representations, and warranties
<PAGE>
herein contained, and other good and valuable consideration, the receipt and
legal sufficiency of which are hereby acknowledged, the parties hereto, each
intending to be legally bound, hereby agree as follows:
1. Definitions.
-----------
1.1. Use of Defined Terms. Any defined term used in the plural
--------------------
shall refer to all members of the relevant class, and any defined term used in
the singular shall refer to any one or more of the members of the relevant
class.
1.2. Accounting Terms. All accounting terms not otherwise
----------------
defined in this Agreement shall be construed in conformity with, and all
financial data of the Buyer required to be submitted by this Agreement shall be
prepared in conformity with, generally accepted accounting principles ("GAAP")
and all financial data of Company required to be submitted by this Agreement
shall be prepared on a modified accrual basis, applied on an historically
consistent basis.
1.3. Leisure and Convention Housing Services, Business Centers
---------------------------------------------------------
and Destination Management Business. Leisure and Convention Housing Services is
- -----------------------------------
the provision of people and material for the housing of attendees to a
convention, exhibition or similar event. Business Centers is the operation of
centers providing general business services to the general public. Such general
business services include but are not limited to posting packages by U.S. mail
or overnight carrier, copying, faxing and
2
<PAGE>
providing mailboxes for the receipt of U.S. mail. Destination management
business is providing hotel reservation services, transportation reservation
services and event logistical services.
1.4. Sections, Exhibits and Schedules. References in this Agreement
--------------------------------
to Sections, Exhibits and Schedules are to Sections, Exhibits and Schedules of
and to this Agreement. All Exhibits and Schedules to this Agreement are hereby
incorporated herein by this reference as if fully set forth herein.
1.5. Miscellaneous Terms. The term "or" shall not be exclusive.
--------------------
The terms "herein," "hereof," "hereto," "hereunder," and other terms similar to
such terms shall refer to this Agreement as a whole and not merely to the
specific article, section, paragraph or clause where such terms may appear. The
term "including" shall mean "including, but not limited to."
1.6. Buyer's Parent. The parent Company of Buyer is Production
--------------
Group International, Inc. (hereinafter known as "Buyer's Parent").
2. Purchase and Sale of the Company Shares.
---------------------------------------
2.1. Purchase and Sale of the Company Shares.
---------------------------------------
Upon the terms and provisions of this Agreement, the Buyer agrees to purchase
and accept delivery from the Sellers, and the Sellers agree to sell, assign,
transfer, and deliver to the Buyer, at the Closing provided for in Section 3
hereof, common stock certificates representing One Thousand (1,000) share of
Common
3
<PAGE>
Stock of Epic L.V., constituting one hundred percent (100%) of the outstanding
shares of capital stock of Epic L.V., free and clear of all liens, claims,
charges, restrictions, equities, or encumbrances of any kind.
2.2. Purchase Price. The purchase price to be paid by Buyer
--------------
(the "Purchase Price") for the Company Shares is a sum of the following:
(a) The Buyer will, at the Closing, deliver to the Sellers, by
certified checks payable to the order of the Sellers ("Certified Checks"), or at
Buyer's option, by wire transfer to the account of each of the Sellers as set
forth on Schedule 2.2(a) ("Wire Transfers") the aggregate amount of One Million
Dollars ($1,000,000).
(b) If the aggregate of the Net Income Pre-Tax in the periods July 1,
1996 - December 31, 1996 ("Fiscal Year 1996"), January 1, 1997 - December 31,
1997 ("Fiscal Year 1997") and January 1, 1998 - December 31, 1998 ("Fiscal Year
1998") ("Aggregate Net Income Pre-Tax 1996-1998") from the existing business of
the Company, defined as the annual business generated by the employees of the
Company who were employed as of Closing or their replacements, any business from
the Company account as of the date of this Agreement taken over by people other
than now current employees of the Company or their replacements ("Existing
Business") and business from the Safari's Las Vegas destination management
business is ***
* CONFIDENTIAL INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
COMMISSION
4
<PAGE>
***, Seller will receive no additional purchase price amount.
(c) If the Aggregate Net Income Pre-Tax 1996-1998 is greater than ***
but less than ****, Seller will be paid a pro rata amount of **** with **** paid
to Seller for **** of Aggregate Net Income Pre-Tax 1996-1998 and **** paid to
Seller for Aggregate Net Income Pre-Tax of **** or greater. Any monies due to
Sellers under this Section 2.2(c) will be paid to Sellers within *** days of the
end of Fiscal Year 1998 minus any monies paid Sellers pursuant to Section
2.2(d)(i) hereof.
(d)(i) If the aggregate of the net Income Pre-Tax in Fiscal Years 1996
and 1997 ("Aggregate Net Income Pre-Tax 1996 and 1997") equals or is greater
than ****, Buyer will pay Sellers **** of what would be paid to the Sellers
under Section 2.2(c) above, as if the Aggregate Net Income Pre-Tax 1996 and 1997
was the Aggregate Net Income Pre-Tax 1996-1998, within **** days of the end of
Fiscal Year 1997.
(ii) If the pro rata amount to be paid to Sellers pursuant to Section
2.2(c) hereof does not equal or
* CONFIDENTIAL INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
COMMISSION
5
<PAGE>
exceed what is paid to the Sellers pursuant to Section 2.2(d)(i), Seller will
remit and refund to Buyer any monies paid under Section 2.2(d)(i) but not earned
under Section 2.2(c) within five (5) days of notice from Buyer.
(e) The Sellers will, at the Closing, provide the following to
Buyer: (i) a schedule of Company's accounts receivable as of July 1, 1996,
based on all information available to Sellers as of date of Closing in the
form attached hereto as Schedule 2.2(e)(i); and (ii) a schedule of accounts
payable as of July 1, 1996, as updated at the Closing in the form attached
hereto as Schedule 2.2(e)(ii).
In the event that any accounts receivable set forth on Schedule
2.2(e)(i) have not been paid to the Company within sixty (60) days after the
Closing incurred by the Company prior to Closing, Buyer shall have the right to
offset the amount of such unpaid accounts receivable from future payments to
Sellers, including but not limited to payments of the Purchase Price.
In the event that any undisclosed accounts payable or undisclosed
liability of the Company, including but not limited to unpaid taxes, fines or
penalties related thereto and any employee benefit plan or arrangement, existing
as of Closing but not scheduled on Schedule 2.2(e)(ii) are paid by the Company
or Buyer after the Closing, Buyer shall have the right to offset the amount of
such undisclosed accounts payable or undisclosed
6
<PAGE>
liabilities paid by the Company or Buyer from any future payments to Sellers,
including but not limited to payments of the Purchase Price.
(f) The Sellers shall designate in writing to Buyer, prior to the
Closing, the proration of the Purchase Price among each of the Sellers.
2.3. Definition of Net Income Pre-Tax. For the purpose of
--------------------------------
calculating the Purchase Price to be paid to Sellers under the terms of Sections
2.2(b), 2.2(c) and 2.2(d) above, Net Income Pre-Tax shall be defined as income
from the Existing Business and new business of the Company prior to charges for
federal, state or local income taxes, but after all expenses relating to the
Existing Business and new business of the Company except: (i) any corporate
expense of the Buyer not incurred in the ordinary course of business charged to
the Company unless mutually agreed otherwise; and (ii) depreciation on all new
fixed assets of the Company added after Closing and not added in the ordinary
course of business.
2.4. Financial Statements for Fiscal Years 1996, 1997 and 1998.
---------------------------------------------------------
During Fiscal Years 1996, 1997 and 1998 the Company's financial statements will
be prepared on an accrual basis in accordance with GAAP. Sellers shall have the
right to inspect and/or audit Company's financial statements relating to Fiscal
Years 1996, 1997 and 1998 during business hours at Sellers' expense on
reasonable notice to Company.
7
<PAGE>
3. Closing.
-------
3.1. Closing. The closing of the purchase and sale of the
-------
Company Shares (the "Closing") will take place at the offices of the Buyer (or
at such other place as the parties may mutually agree) at 2:00 p.m. on July 2,
1996, or at such other time and on such other date as the parties may mutually
agree, but in no event will the Closing occur after July __, 1996. The date and
time of the Closing are referred to herein as the "Closing Date."
4. Deliveries at the Closing.
-------------------------
4.1. Deliveries to the Buyer by the Sellers. At the Closing, the
--------------------------------------
Sellers will deliver to the Buyer:
(a) Against receipt of the Wire Transfers or Certified Checks, the
Sellers will deliver to the Buyer the certificates for one hundred percent
(100%) of the Company Shares, all in accordance with the requirements of
Section 2.1 hereof, which certificates will be duly endorsed in blank or
accompanied by stock powers duly executed in blank, in proper form for transfer;
(b) A certificate, in form and substance reasonably acceptable to the
Buyer, executed by the President of Epic, and attested to by the Secretary of
the Company, dated as of the Closing Date, and certifying that: (i) attached
thereto is a true and complete copy of the By-laws of the Company in effect as
of the Closing Date; (ii) attached thereto is a true and
8
<PAGE>
complete copy of the Articles of Incorporation of the Company, as amended and in
effect as of the Closing Date; and (iii) attached thereto is a true and complete
copy of resolutions adopted by the Board of Directors and shareholders of the
Company authorizing the execution, delivery and performance of this Agreement
and such resolutions have not been modified, rescinded, or amended and are in
full force and effect;
(c) A certificate, in form and substance reasonably acceptable to the
Buyer, executed by the Sellers, dated as of the Closing Date, certifying as to
the accuracy of the Company's and the Sellers' representations and warranties at
and as of the Closing;
(d) Resignations of all of the directors and officers of the Company,
in their capacity as directors, officers and employees.
(e) A schedule in the form attached hereto as Schedule 4.1(e) of the
location of all of the Company's contracts, books, records, and other data
relating to the Company's operations, including the Company's minutes and stock
books;
(f) Copies of all of the Company's employment agreements;
(g) Control over all assets of the Company including cash held in
the Company's name or owned by the Company;
9
<PAGE>
(h) Any schedules that are to be updated as of the Closing Date;
(i) An opinion of Sellers' counsel in the form attached hereto as
Exhibit 4.1(i); and
(j) As qualified and provided in Section 7.3 hereinbelow, the
fully executed assignment or consent for the change of ownership, whichever is
applicable, for the Franchise Agreements between Mail Boxes, Etc., U.S.A., Inc.
and the Company.
4.2. Deliveries to the Sellers by the Buyer. At the Closing, the
--------------------------------------
Buyer will deliver to the Sellers the following:
(a) The sum of One Million Dollars ($1,000,000) by Certified
Check or Wire Transfer to the Sellers' accounts, against receipt of the stock
certificates for the Company Shares in accordance with Section 4.1(a) and 2.2(a)
above; and
(b) A certificate, in form and substance reasonably acceptable
to the Sellers, executed by the President of the Buyer, and attested to by the
Secretary of the Buyer, dated as of the Closing Date, certifying as to the
accuracy of the Buyer's representations and warranties at and as of the Closing;
(c) A certificate, in form and substance reasonably acceptable to
the Buyer, executed by the President of Buyer, and attested to by the Secretary
of the Buyer, dated as of the Closing Date, and certifying that: (i) attached
thereto is a true and complete copy of the By-laws of the Buyer in effect as
<PAGE>
of the Closing Date; (ii) attached thereto is a true and complete copy of the
Articles of Incorporation of the Buyer, as amended and in effect as of the
Closing Date; and (iii) attached thereto is a true and complete copy of a
certificate of Buyer's Secretary certifying as to the resolutions adopted by the
Board of Directors and shareholders of the Buyer authorizing the execution,
delivery and performance of this Agreement and such resolutions have not been
modified, rescinded, or amended and are in full force and effect; and
(d) A fully executed guarantee agreement between Production
Group International, Inc. and Sellers (the "Guarantee") in form annexed hereto
as Exhibit 4.2(c).
5. Representations and Warranties of the Company and Sellers.
---------------------------------------------------------
The Company, each of the Sellers, jointly, severally, individually and in their
capacity as officers and directors of the Company, represent and warrant to the
Buyer that as of the date of this Agreement and as of the Closing Date:
5.1. Ownership; Transfer of the Company Shares. The Company
-----------------------------------------
Shares are duly authorized, validly issued, fully paid, and non-assessable. The
Sellers own the Company Shares set forth next to their names on Schedule 5.1,
free and clear of all liens, encumbrances, pledges, charges, security interests,
rights, options, or other adverse interests of any kind except as to a Buy-Sell
Agreement between Sellers to which each waives his rights. Sellers have the
right, power, and authority to sell all
<PAGE>
of the Company Shares as provided herein, and upon such sale, the Buyer will
receive good and valid title to all of the Company Shares, subject to no liens,
encumbrances, pledges, charges, security interests, rights, options, or other
adverse interests of any kind. The certificates for the Company Shares will be,
when delivered to the Buyer, duly endorsed in blank or accompanied by stock
powers duly executed in blank, in proper form for transfer.
5.2. Authority. The Sellers have the power and authority to
---------
execute and deliver this Agreement and each of the Sellers and the Company have
the power and authority to execute and deliver the other agreements and
documents contemplated by this Agreement (all such agreements and documents will
be known hereafter as the "Transaction Documents", regardless of which party is
required to execute or deliver any such agreement or document) to which it or he
is a party and to carry out its or his obligations hereunder and thereunder, as
the case may be. The execution, delivery, and performance of each of the
Transaction Documents to which the Company is a party and the consummation of
the transactions contemplated thereby have been duly authorized by the Board of
Directors of such Company. No other proceeding on the part of the Company or
the Sellers is necessary to authorize the execution and delivery of this
Agreement or any of the Transaction Documents to which the Company or the
Sellers is a party or the performance by the
<PAGE>
Company or the Sellers of any of the transactions contemplated hereby or
thereby. This Agreement, and each of the Transaction Documents to which the
Company or the Sellers is a party, has been duly executed and delivered on
behalf of the Company and the Sellers and when executed and delivered by all
required parties thereto, will be a legal, valid, and binding obligation of the
Company and the Sellers enforceable against the Company and the Sellers in
accordance with their respective terms, except to the extent that the validity,
binding legal effect, or enforceability of any provisions in the Agreement or
any Transaction Document, or any rights granted herein or thereunder may be
subject to or affected by applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium, or similar laws affecting the rights of
creditors generally, and general principles of equity (whether asserted in an
action at law or in equity).
5.3. Approvals. No consent, approval, order, or authorization
---------
of, or registration, declaration, or filing with, any governmental authority is
required in connection with the execution and delivery of this Agreement and the
Transaction Documents, by the Company or the Sellers, or with the consummation
of the transactions contemplated hereby or thereby. No consent of any third
party is necessary to permit the consummation of the transactions contemplated
hereby or thereby.
5.4. No Brokers. All negotiations relating to this Agreement and
----------
the Transaction Documents, and the
<PAGE>
transactions contemplated hereby and thereby, have been carried out by the
Company and the Sellers without the intervention of any person or firm in such
manner as to give rise to any valid claim against any of the parties hereto for
a brokerage commission or finder's fee.
5.5. Organization, Qualification to Do Business.
------------------------------------------
(a) The Company is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Nevada, and has
all requisite corporate power and authority to own or lease and to operate its
properties and to carry on its business as now being conducted. The Company has
delivered to the Buyer complete and correct copies of the Company's Articles of
Incorporation, By-laws, and all amendments thereto. The Company is duly
qualified or licensed to do business as a foreign corporation in any
jurisdictions outside of the State of Nevada in which it conducts business
except for the jurisdictions listed on Schedule 5.5(a).
(b) Other entities of the Company, listed on Schedule 5.5(b), are
duly organized, validly existing, and in good standing under the laws of the
state of their incorporation or organization and individually have all requisite
power and authority to own or lease and to operate its properties and to carry
on its business as now being conducted. The Company has delivered to the Buyer
complete and correct copies of each entity's Articles of Incorporation, By-laws
or organizational
<PAGE>
documents, whichever is applicable, and all amendments thereto. Schedule 5.5(b)
lists each subsidiary entity which is qualified or licensed to do business as a
foreign corporation or entity in any jurisdictions outside of the state of their
incorporation or organization.
(c) As of the date of Closing, no claim has been made against
any of the Company by any person or entity based upon the failure of the Company
to qualify or be licensed to do business as a foreign corporation in any state.
In the event a future claim is made based upon the Company's failure to qualify
or be licensed to do business as a foreign corporation in any state prior to the
Closing Date, such claim shall be treated as an undisclosed liability in
accordance with Section 2.2(e) above.
5.6. Capital Stock. Epic L.V.'s authorized capital stock consists
-------------
of ___________ (___) shares of Common Stock, ______ par value per share; (ii)
the only issued and outstanding shares of capital stock of Epic L.V. are One
Thousand (1,000) shares of Epic L.V.'s Common Stock, all of which One Thousand
(1,000) shares are owned beneficially and of record by the Sellers; (iii) there
are no outstanding subscriptions, options, conversion rights, warrants, or other
agreements or commitments of any nature whatsoever (either firm or conditional)
obligating Epic L.V. to issue, deliver, sell, or cause to be issued, delivered,
or sold any additional shares of capital stock of Epic L.V., or obligating Epic
L.V. to grant, extend, or enter
<PAGE>
into any such agreement or commitment; and (iv) there are no rights of first
refusal, pre-emptive rights, or other similar agreements obligating Epic L.V. to
offer any shares of its capital stock to any person, except as to a Buy-Sell
Agreement between the Sellers to which each waives his rights.
5.7. No Subsidiaries, Etc. The Company does not own, directly or
--------------------
indirectly, capital stock or equity in any other corporation or other person and
is not a partner in any partnership or a participant in any joint venture,
except as listed on Schedule 5.7.
5.8. Financial Statements. The Company has delivered to the
--------------------
Buyer complete and correct copies of (a) the Company's income tax returns for
the fiscal years ended December 31, 1993, December 31, 1994 and December 31,
1995; and (b) the Company's unaudited financial statements for the fiscal years
ended December 31, 1993, December 31, 1994 and December 31, 1995; and (c)
financial statements dated December 31, 1995. Any advances made by the Company
to the Company's officers or employees and any advances made by any officer or
employee that appear in the December 31, 1995 financial statements or were made
subsequent to December 31, 1995 shall be settled and eliminated prior to
Closing. All such financial statements have been prepared on a modified accrual
accounting basis and on an historically consistent basis throughout the periods
indicated and present fairly and accurately the financial condition of the
<PAGE>
Company at the dates indicated and the results of operations for the periods
indicated.
5.9. Absence of Certain Changes. Except to the extent
--------------------------
specifically set forth in reasonable detail on Schedule 5.9 hereto, since
December 31, 1995 there have been no material adverse changes in the assets,
liabilities, properties, business, or prospects of the Company, and the Company
has not:
(a) issued or sold any stock, notes, bonds, or other securities,
or any option to purchase the same, or entered into any agreement with respect
thereto;
(b) declared, set aside, or made any dividend or other
distribution on capital stock or redeemed, purchased, or acquired any shares
thereof, or entered into any agreement in respect of the foregoing;
(c) amended its Articles of Incorporation or By-laws;
(d) other than in the ordinary course of business (i) purchased,
sold, assigned or transferred any material tangible or intangible assets or
property (including cash and cash equivalents); (ii) mortgaged, pledged, granted
or suffered to exist any lien or other encumbrance or charge on any material
tangible or intangible assets or properties, except for liens for taxes not yet
due; or (iii) waived any rights of material value or canceled any material debts
or claims;
<PAGE>
(e) incurred any material obligation or liability (absolute or
contingent), except current liabilities and obligations incurred in the ordinary
course of business, or paid any material liability or obligation (absolute or
contingent) other than current liabilities and obligations incurred in the
ordinary course of business;
(f) increased, or become obligated to increase, the compensation
or other benefits payable to any officer or director of the Company or any
relative of any such officer or director, or paid a bonus, or granted any
severance or termination pay, or entered into any employment agreement or other
agreement (written or oral) with any officer or salaried employee (except as may
be effected in accordance with the terms of this Agreement);
(g) incurred any damage, destruction, or similar loss, whether or
not covered by insurance, materially affecting the businesses or properties of
the Company ;
(h) entered into any transaction other than in the ordinary
course of business;
(i) suffered any strike or other labor trouble materially and
adversely affecting its business, operations, or prospects;
(j) made or permitted any material amendment or termination of
any material contract, agreement, or license to
<PAGE>
which it is a party other than in the ordinary course of business;
(k) made any change in its accounting methods or practices with
respect to its condition, operations, business, properties, assets, or
liabilities;
(l) abandoned or disposed of any material trade secret,
trademark, tradename, trademark application, tradename application, or any other
intellectual property;
(m) suffered any loss of employees or customers that materially
and adversely affects its business, operations, or prospects;
(n) failed to carry on their business and operations
substantially in the manner carried on as of the date hereof and the Company and
the subsidiaries have not engaged in any activity or transaction or made any
commitment to purchase or spend, other than in the ordinary course of their
business as heretofore conducted;
(o) failed to use their best efforts to preserve its business
organization intact, to keep available to the Buyer the services of its
employees and independent contractors and to preserve for the Buyer its
relationships with suppliers, licensees, distributors, and customers and others
having business relationships with it;
(p) obligated itself to, sell or otherwise dispose of or pledge
or otherwise encumber any of their properties or assets except in the ordinary
course of business or failed to maintain its facilities, machinery, and
equipment in good operating condition and repair, subject only to ordinary wear
and tear.
5.10. Taxes. Except to the extent specifically set forth in reasonable
-----
detail on Schedule 5.10 hereto, all federal, state, county, municipal, and
foreign tax returns required by law to be filed by the Company, and the Sellers
as of December 31, 1995 have been duly filed, and all taxes (including without
limitation sales, use, property, and payroll taxes), assessments, fee, and other
governmental charges together any and all penalties, fines, and interest thereon
("Taxes") upon the Company, and the Sellers or upon the Sellers' properties,
assets, revenues, income, sales, or franchises that have become due and payable
in respect of the periods or transaction covered thereby, have been paid.
Except to the extent specifically set forth in reasonable detail on Schedule
5.10 hereto, neither the Internal Revenue Service nor any other taxing
authority or agency is now asserting, or is threatening to assert, against the
Company or the Sellers any deficiency or claim for additional Taxes or interest
thereon or penalties in connection therewith. The Company and the Sellers have
not been granted any waiver of any statute of limitation with respect to, or
been granted any extension of a period for the assessment of, any federal,
state, county, municipal, or foreign income tax. Sellers have delivered to
buyer copies of all federal, state and local tax returns for the Company for the
last three years.
5.11. Non-Contravention. Except to the extent specifically set forth in
-----------------
reasonable detail on Schedule 5.11 hereto, the execution and delivery of this
Agreement and the Transaction Documents and the consummation of the transactions
contemplated hereby and thereby will not (a) violate any provision of the
Articles of Incorporation or By-laws of the Company; (b) violate any material
provision of, or result in the breach or the acceleration of, or entitle any
party to accelerate (whether after the giving of notice or lapse of time or
both) any material obligation under any mortgage, lien, lease, agreement,
license, instrument, order, arbitration award, judgment, or decree to which
either the Company or the Sellers is a party or by which it or he is bound; (c)
result in the creation or imposition of any material lien, charge, pledge,
security interest, or other encumbrance upon any property of the Company or the
Sellers; or (d) violate or conflict with any other material restriction or any
law, ordinance, or rule to which the company or the Sellers or any property of
the Company or the Sellers is subject.
<PAGE>
5.12. Title to and Condition of the Assets of the Company.
---------------------------------------------------
(a) The Company has good and marketable title to all assets owned
by them free and clear of all mortgages, liens, charges, encumbrances,
easements, security interests, or title imperfections, except to the extent
specifically set forth in reasonable detail on Schedule 5.12 hereto. The assets
reflected in the financial statements of the Company dated January 31, 1996
referred to in Section 5.8 hereof constitute all of the tangible assets and
properties that the Company owns, uses, or holds in connection with its
business, and the conduct of such business as a going concern, except for
additions or dispositions in the ordinary course of business. The facilities,
machinery, furniture, office, and other equipment of the Company that are used
in its business are in good operating condition and repair, subject only to the
ordinary wear and tear of that business, and neither the Company nor any
property or asset owned or leased by it is in violation of any applicable
ordinance, regulation, or building, zoning, environmental or other law in
25
<PAGE>
respect thereof, the violation of which will have a material adverse effect on
the financial condition, the conduct of the business or the ownership or use of
any of the properties or assets of the Company.
(b) The Company owns no real estate. Schedule 5.12(b) hereto sets
forth all personal property (with monthly lease payments in excess of One
Hundred Dollars ($100.00)) and real estate leased or owned by the Company and
specifies in the case of real estate the location of each property, the use of
the facility thereon, the name of the owner or the names of the lessor and the
lessee, the approximate square footage of improvements. The Company has
delivered to the Buyer copies of each lease by which the Company acquired its
interest in the personal property described in Schedule 5.12(b). The Company has
not received any written notice from any governmental agency, board, bureau,
body, department, or authority of any United States or foreign jurisdiction,
which materially restricts the use of any of the real estate described in
Schedule 5.12(b) hereto. Except as set forth in Schedule 5.12(b) hereto, there
is no easement, right-of-way agreement, license, sublease, occupancy agreement,
or like instrument with respect to any of the real estate described in Schedule
5.12(b) hereto which would have a material adverse effect on the Company's use
of such real estate. Each lease pursuant to which the Company leases any real or
personal property is in full force and effect and is valid and enforceable in
accordance with its terms. There is not under any such lease any material
default by the Company or any event that with notice or lapse of time or both
would constitute such a material default by the Company. Each property used in
the business of the Company is reflected in the balance sheet of the Company as
of December 31, 1995, referred to in Section 5.8 hereof.
(c) Sellers have provided Buyer with a complete and accurate list of
all of the Company's accounts payable and liabilities as of July 1, 1996 on
Schedule 5.12(c) and shall update this Schedule 5.12(c) as of the Closing Date.
26
<PAGE>
5.13. Litigation. Except as set forth in reasonable detail on
----------
Schedule 5.13 hereto:
(a) There are no, and the Sellers are not aware of any situation
that could result in, actions, suits, proceedings, investigations, or inquiries
pending or threatened against or affecting the business, operations, financial
condition, or prospects of the Company at law or in equity in any court or
before any federal, state, municipal, or other governmental department,
commission, board, bureau, agency, or instrumentality.
(b) There are no, and the Sellers are not aware of any situation
that could result in, actions, suits, proceedings, investigations, or inquiries
pending or threatened against the Sellers at law or in equity in any court or
before any federal, state, municipal, or other governmental department,
commission, board, bureau, agency, or instrumentality.
(c) The Company is not, and the Sellers are not aware of any
situation that could result in, default in respect of any judgment, order, writ,
injunction, or decree of any court or any federal, state, municipal, or other
governmental department, commission, board, bureau, agency, or instrumentality.
<PAGE>
(d) There are no, and the Sellers are not aware of any situation
that could result in, actions, suits, proceedings, investigations, or inquiries
pending or threatened against the Company at law or in equity in any court or
before any federal, state, municipal, or other governmental department,
commission, board, bureau, agency, or instrumentality.
5.14 Employee Benefit Plans and Other Arrangements.
---------------------------------------------
(a) Employee Plans Generally. Except as set forth in reasonable
------------------------
detail on Schedule 5.14(a) hereto, the Company does not maintain, does not make
any contributions to, or has not been obligated by law or agreement to
establish, maintain, sponsor, or make any contributions to (i) any employee
pension benefit plan as described in Section 3(2) of the Employee Retirement
Income Security Act of 1974, as amended, and regulations thereunder ("ERISA");
(ii) any employee welfare benefit plan as described in Section 3(1) of ERISA,
including, without limitation, any arrangement providing for the payment of
health benefits to former employees or their beneficiaries; (iii) any formal or
informal severance plan or arrangement, including, without limitation, any
arrangement providing for payments to be made to any person contingent upon a
change of ownership or effective control of the Company or ownership of a
substantial portion of the assets of the Company; or (iv) any other deferred
compensation, bonus, stock option, stock purchase, insurance, or other employee
benefit plan, agreement, fund, or arrangement, whether or not set forth in
writing, providing benefits of economic value to any employee, former employee,
or present or former beneficiary, dependent, or assignee other than regular
salary, wages, or commissions paid substantially concurrently with the
performance of the services for which such benefits are paid.
(b) Post-Retirement Benefits. Except to the extent required
------------------------
under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended
("COBRA"), the Company has not incurred any current or future obligation to
provide health or life insurance benefits to employees or former employees with
respect to any period which extends beyond retirement or other termination of
employment.
(c) ERISA Title IV Considerations. Neither the Company nor any
-----------------------------
member of the Company's controlled group (within the meaning of Section 4001 of
ERISA) has incurred (or reasonably expects to incur) any material liability to
the Pension Benefit Guaranty Corporation or any material liability under Title
IV of ERISA, and there are no circumstances that might result in the imposition
of a lien on any of the assets of the Company pursuant to ERISA Sections 302 or
4068 or Section 412 of the Internal Revenue Code of 1986, as amended.
(d) Multiemployer Plans. Neither the Company nor any member of
-------------------
the Company's controlled group (within the meaning of Section 40012 of ERISA)
does now have, or during the last five years has had, any obligation to
contribute to, or any other liability or potential liability with respect to, a
"multiemployer plan" as that term is defined in Section 3(37) of ERISA or a
multiple controlled group plan as described in Sections 4063 and 4064 of ERISA
(including, without limitation, any withdrawal liability or plan termination
obligations).
5.15. Contracts.
---------
(a) Schedule 5.15(a) hereto contains a complete and correct list
of all agreements, contracts, and commitments to which the Company is a party
that have either payments or receipts of one Thousand Dollars or greater or by
which it or any of its assets is bound as of the date hereof.
(b) The Buyer has been given complete and correct copies of all
written agreements, contracts, and commitments to which the Company is a party
or by which it or any of its assets is bound, together with all amendments
thereto. Such agreements, contracts, and commitments are in full force and
effect, and all parties to such agreements, contracts, and commitments have, in
all material respects, performed all obligations required to be performed by
them to date, and the Company is not, and no other party is, in material default
thereunder.
(c) No agreement, contract, or commitment to which the Company is
a party or by which it or any of its assets is bound purports to limit its
freedom to compete in any line of
<PAGE>
business or with any person or entity except those listed on Schedule 5.15(c).
The Company has no outstanding power of attorney, except routine powers of
attorney relating to representation before governmental agencies.
(d) The Company is not a party to any material contract with
any governmental authority. The Company is not a party to any contract that
materially and adversely affects its condition (financial or otherwise),
operations (present or prospective), business (present or prospective),
properties, assets, or liabilities. Except as set forth on Schedule 5.15(d)
hereto, the Company knows of no bid or contract proposal made by either that,
if accepted or entered into, might reasonably be expected to result in a loss
to the Company.
5.16. Insurance. The Company maintains adequate insurance against
---------
risks for the business in which it and its subsidiaries are engaged, including
without limitation, worker's compensation and comprehensive liability insurance.
All of the Company's insurance policies are listed on Schedule 5.16 hereto, are
in full force and effect, all premiums due thereon have been paid, and the
Company has complied in all material respects with the provisions of such
policies.
5.17. Trademarks, Etc. Schedule 5.17 hereto contains a complete
---------------
and accurate list (including registration numbers and dates of filing, renewal,
and termination) of all trademarks, patents, tradenames, trade secrets,
copyrights, service marks, licenses, all registrations and applications for any
of the foregoing, and other intellectual property owned by the Company or in
which the Company has registered an interest or for which applications have been
made (collectively, the "Intellectual Property"). Except as other wise set forth
in Schedule 5.17 hereto, (a) all of the Intellectual Property is owned by the
Company free and clear of all liens, encumbrances, or claims whatsoever; none of
the Company's rights in or use of such Intellectual Property infringes on the
rights of others, and Company's rights in said property have not been and are
currently not being, to the knowledge of the Sellers, threatened or challenged;
(b) all of the Intellectual Property registrations set forth in Schedule 5.17
have been duly issued and have not been canceled, abandoned, or otherwise
terminated; (c) all of the Intellectual Property applications set forth in
Schedule 5.17 have been duly filed with the appropriate authorities; and (d) no
consents or approvals of any person are necessary to sell, convey, transfer,
assign, and deliver andy of the Intellectual Property to the Buyer. Except as
set forth in Schedule 5.17 hereto, the Company owns or has the right to use all
of the Intellectual Property necessary to conduct its operations and business
and the Company knows of no claim, or any basis of any claim, that it has
infringed any intellectual property of any other person or that any person has
infringed any of the intellectual property. Except as set forth in Schedule 5.17
<PAGE>
hereto, no third party has been permitted or licensed to use any of the
Intellectual Property and no royalties or other fees are payable to any third
party with respect to any of the Intellectual Property.
5.18. Transactions with Interested Persons. Except to the extent
------------------------------------
specifically set forth in reasonable detail on Schedule 5.18 hereto and the
financial statements delivered to the Buyer pursuant to Section 5.8 above,
neither the Company nor Sellers (or Sellers' family members) owns, directly or
indirectly, on an individual or joint basis, an interest in, or serves as an
officer, director, employee, consultant, contractor, or agent of or to any
competitor or supplier of the Company or any person or entity having a contract
or arrangement with the Company, and to the best of Sellers' knowledge, no
employee (or family member thereof) of the Company owns, directly or indirectly,
on an individual or joint basis, an interest in, or serves as an officer,
director, employee, consultant, contractor, or agent of or to any competitor or
supplier of the Company or any person or entity having a contract or arrangement
with the Company.
5.19 Compliance with Laws, etc. The Company has complied with
--------------------------
and is in compliance with all federal, state, local, and foreign statutes, laws,
ordinances, regulations, rules, permits, judgments, orders, or decrees
applicable to it or any of its properties, assets, operations, and business,
the failure of compliance with which would have a material adverse effect on the
properties, operations, business, financial condition, or prospects of the
Company. There does not exist any basis for any claim of default under or
violation of any such statute, law, ordinance, regulation, rule, permit,
judgment, order, or decree except such defaults or violations, if any, that in
the aggregate do not and will not materially and adversely affect the
properties, operations, business, financial condition, or prospects of the
Company.
5.20. No Undisclosed Liabilities, Etc. Except for the transactions
-------------------------------
contemplated by this Agreement and as set forth in Schedule 5.20 hereto:
(a) The Company has not incurred any material liability or
obligation (absolute, accrued, contingent, or otherwise) of any nature (other
than liabilities and obligations incurred in the ordinary course of business)
that would properly be reflected or reserved against in a balance sheet prepared
in conformity with generally accepted accounting principles applied on a basis
consistently used in the preparation of the balance sheet of the Company as of
the fiscal year ending January 31, 1996 referred to in Section 5.8 above.
(b) The Company has not acquired any material amount of accounts
receivable that are uncollectible, and the frequency and amounts of payments
received by the Company with respect to the accounts receivable reflected on the
balance sheet of the Company as at January 31, 1996, referred to in Section 5.8
hereof, do not, in retrospect, render inadequate the reserve for uncollectible
accounts set forth on such balance sheet.
5.21. Environmental Matters.
---------------------
(a) Sellers have no actual knowledge of any releases or threat of
releases of hazardous substances have occurred at, from, in or on any real
property owned, leased or operated by the Company ("Site", or collectively,
"Sites"), nor are there any hazardous substances in, on, about or migrating to
any Site;
(b) No releases or threat of releases of hazardous substances
have occurred at, from or in any Site to which a hazardous substance generated
by or from the Company has been disposed of;
(c) There are no past or pending environmental claims against the
Company related to any Site or off-Site locations to which the Company has
shipped hazardous substances. There has been no violation of or non-compliance
with any environmental law or environmental permit by the Company relating to
operations of the Company or other uses of the site;
32
<PAGE>
(d) There are no facts, circumstances, or conditions that could
reasonably be expected to restrict, encumber, or result in the imposition of
special conditions under any environmental law or environmental permits with
respect to the ownership, occupancy, development, use, or transferability of any
Site;
<PAGE>
(e) There are no underground storage tanks, polychlorinated
biphenyl-containing materials, or asbestos containing materials located at any
Site;
(f) There are not and there have not been any environmental
conditions at any Site resulting from or arising out of any of Company's past
activities at any Site created prior to or existing at the Closing Date; and
(g) All necessary environmental permits and other permits for
all activities related to the past operations and current operations at all
Sites were obtained. The Company has fully complied and is in full compliance
with all environmental laws and environmental permits with respect to activities
relating to the Sites.
5.22. Governmental Authorizations and Regulations. Schedule 5.22
-------------------------------------------
hereto lists all licenses, franchises, permits, and other governmental
authorizations held by the Company material to the conduct of its business.
Such licenses, franchises, permits, and other governmental authorizations are
valid, and the Company has not received any notice that any governmental
authority intends to cancel, terminate, or not renew any such license,
franchise, permit, or other governmental authorization. The Company holds all
licenses, franchises, permits, and other governmental authorizations, the
absence of which could have a material adverse effect on its business.
<PAGE>
5.23. Accounting Practices. The Company makes and keeps accurate
--------------------
books and records on a modified accrual accounting method on an historically
consistent basis to reflect its assets. The Company maintains internal
accounting controls that provide reasonable assurance that (a) transactions are
executed with management's authorization and (b) transactions are recorded as
necessary to permit preparation of the Company's financial statements and to
maintain accountability for the assets of the Company.
5.24. Minute Books. The minute books of the Company contain
------------
complete and accurate records of all meetings and other corporate actions of its
shareholders and Board of Directors and Committees thereof.
5.25. Employee Matters. The Company is not in material violation,
----------------
nor has it been alleged to be in violation, nor has it been charged with any
violation nor is the Company aware of any violation of any of the various
provisions of Title VII of the Federal Civil Rights Act, the Age Discrimination
in Employment Act, the Americans with Disabilities Act, or any other federal or
state law dealing with employment discrimination, federal or state wage and hour
laws, federal or state income or unemployment and social security tax
withholding laws, or occupational safety and health laws and applicable
standards and regulations thereunder. The Company is not liable for any
substantial accrued unpaid wages, vacation pay, bonuses, or Employment Act, the
Americans with Disabilities Act, or any other federal or state law dealing with
employment discrimination, federal or state wage and hour laws, federal or state
income or unemployment and social security tax withholding laws, or occupational
safety and health laws and applicable standards and regulations thereunder. The
Company is not liable for any substantial accrued unpaid wages, vacation pay,
bonuses, or commissions, or for any material tax, penalty, assessment, or
forfeiture for failure to comply with any employer/employee matter. Except as
set forth in reasonable detail on Schedule 5.25 hereto, the Company is not a
party to any collective bargaining agreement, no such agreement determines the
terms and conditions of employment of any employee of the Company, no collective
bargaining agent has been certified as a representative of any of the employees
of the Company, and no representation campaign or election is now in progress
with respect to any of the Company's employees.
5.26. Accuracy of Information Furnished. This Agreement, the
---------------------------------
Transaction Documents, and the Schedules and Exhibits hereto and thereto
prepared by Sellers do not contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements (excluding
statements concerning solely the Buyer) contained herein or therein, in light of
the circumstances under which they were made, not misleading.
5.27. Disclosure. The Sellers and the Company has not knowingly
----------
failed to disclose to the Buyer any facts that would have an adverse impact on
the value of the Company Shares or on the assets, liabilities, earnings,
prospects and business of the Company. No representation or warranty by the
Sellers contained in this Agreement, and no statement contained in, any Schedule
or Exhibit, or other document attached hereto, or any list, certificate or
writing delivered in connection with or pursuant hereto, contains any untrue
statement of a material fact, or omits to state a material fact necessary in
order to make the statements (excluding statements concerning solely the Buyer)
contained herein or therein not misleading or necessary in order to provide
fully and fairly the information required to be provided in any such document.
6. Representations an Warranties of Buyer. The Buyer represents and
--------------------------------------
warrants to the Sellers that, as of the Closing Date:
6.1. Authority for Agreements. The Buyer has the power and
------------------------
authority to execute this Agreement and the Transaction Documents applicable to
the Buyer and to carry out is obligations hereunder and thereunder. When
executed and delivered by the Buyer, this Agreement will be binding upon and
enforceable against the Buyer in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, reorganization,
insolvency, moratorium, or other similar laws from time to time in effect,
affecting creditors' rights generally, and general principles of equity (whether
asserted in an action at law or in equity).
<PAGE>
6.2. Non-Contravention. The execution and delivery of this
-----------------
Agreement and the Transaction Documents and the consummation of the transactions
contemplated hereby and thereby will not (a) violate any provision of the
Articles of
<PAGE>
Incorporation or By-laws of the Buyer; (b) violate any material provision of, or
result in the breach or the acceleration of, or entitle any party to accelerate
(whether after the giving of notice or lapse of time or both) any material
obligation under any mortgage, lien, lease, agreement, license, instrument,
order, arbitration award, judgment, or decree to which the Buyer is a party or
by which it is bound; or (c) violate or conflict with any other material
restriction or any law, ordinance, or rule to which the Buyer or its property is
subject.
6.3. Approvals. No consent, approval, order, or authorization
---------
of, or registration, declaration, or filing with, any governmental authority is
required in connection with the execution and delivery of this Agreement and the
Transaction Documents by the Buyer or the consummation of the transactions
contemplated hereby or thereby. Except as set forth in Schedule 6.3 hereto, no
consent of any third party is necessary to permit the consummation of the
transactions contemplated hereby or thereby.
6.4. No Brokers. All negotiations relating to this Agreement and
----------
the Transaction Documents and the transactions contemplated hereby and thereby
have been carried out by the Buyer without the intervention of any person or
firm in such manner as to give rise to any valid claim against any of the
parties hereto for a brokerage commission or finder's fee.
<PAGE>
6.5. Accuracy of Information Furnished. This Agreement and the
---------------------------------
Schedules and Exhibits hereto and thereto prepared by the Buyer do not contain
any untrue statement of a material fact and do not omit to state a material fact
necessary to make the statements (excluding statements concerning solely the
Company or the Sellers) herein or therein, in light of the circumstances under
which they were made, not misleading.
6.6. Organization, Good Standing. The Buyer is a corporation
---------------------------
duly organized, validly existing, and in good standing under the laws of the
State of Virginia, and has all requisite corporate power and authority to own or
lease and to operate its properties and to carry on its business as now being
conducted.
6.7. Investigation. Buyer is purchasing shares based on its
-------------
investigation, and Buyer is not solely relying on any statement of either or
both of Sellers as to the anticipated revenues or general business of Company.
7. Covenants of the Company and Each of the Sellers.
------------------------------------------------
<PAGE>
7.1. Access, Information and Documents. Pending the Closing, the
---------------------------------
Company and the Sellers will give to the Buyer and to its agents and
representatives (including, but not limited to, accountants, lawyers, and
appraisers) full and complete access during normal working hours to any and all
of the properties, assets, books, records, and other documents of the Company as
the Buyer may determine, and of the Company and the Sellers will furnish to the
Buyer such information and copies of such documents and records as the Buyer
will reasonably request. As part of such examination the Buyer may make such
inquiries of such persons having business relationships with the Company as the
Buyer will determine and the Company, and the Sellers will cooperate fully with
the Buyer in connection therewith.
7.2. Conduct of Business Pending Closing. From the date hereof
-----------------------------------
until the Closing with regard to the Company, except as consented to by the
Buyer in writing:
(a) The Company will maintain itself at all times as a
corporation duly organized, validly existing, and in good standing, as
applicable, under the laws of the jurisdictions under which it is incorporated
and in which it is doing business as a foreign corporation;
(b) The Company will carry on its business and operations in the
normal course, substantially in the manner carried on as of the date hereof and
the Company will not engage in any activity or transaction or make any
commitment to purchase or spend, other than in the ordinary course of their
business as heretofore conducted;
(c) The Company will not declare, authorize, or pay any
distribution or dividend to any of its shareholders and the Company will not
redeem, purchase, or otherwise acquire, or agree to redeem, purchase, or
otherwise acquire, any shares of their own stock;
<PAGE>
(d) The Company will not pay or obligate itself to pay any
compensation, commission, or bonus to any director, officer, employee, or
independent contractor as such, except for the regular compensation and
commissions payable to such director, officer, employee, or independent
contractor at the rate in effect on the date of this Agreement or otherwise in
the ordinary course of business;
(e) The Company will continue to carry all of its existing
insurance;
(f) The Company will use its best efforts to preserve its
business organization intact, to keep available to the Buyer the services of its
employees and independent contractors and to preserve for the Buyer its
relationships with suppliers, licensees, distributors, and customers and others
having business relationships with each of them;
(g) The Company will not, and will not obligate itself to,
sell or otherwise dispose of or pledge or otherwise encumber any of its
properties or assets except in the ordinary course of business and the Company
will maintain its facilities, machinery, and equipment in good operating
condition and repair, subject only to ordinary wear and tear;
(h) The Company will not enter into any agreement or under-
standing with any partner, employee, officer, director, or shareholder of
the Company, or any affiliate of any of the foregoing;
<PAGE>
(i) The Company will not engage in any activity or transaction
other than in the ordinary course of business as heretofore conducted; and
(j) Without limiting the foregoing, the Company will consult
with the Buyer regarding all significant developments, transactions, contracts,
personnel actions, personnel changes, proposals relating to their business or
similar events prior to taking any action.
7.3. Consents and Approvals. The Company and the Sellers will
----------------------
use their best efforts to obtain prior to the Closing all consents,
authorizations, and approvals under all statutes, laws, ordinances, regulations,
rules, judgments, decrees, and orders of any court or governmental agency,
board, bureau, body, department, or authority or of any other person required to
be obtained by either of the Company or the Sellers in connection with the
execution, delivery, and performance of this Agreement, the Transaction
Documents to which they are a party, and the consummation of the transactions
contemplated hereby and thereby. Notwithstanding the previous sentence,
Sellers, shall, within twenty (20) days of the Closing obtain consent to (a) the
assignment or consent to change of ownership, as applicable, of leases listed on
Schedule 5.12(b) and (b) the assignment or consent to change of ownership, as
applicable, of the Franchise Agreement between Mail Boxes, Etc., U.S.A., Inc.
and the Company. If such assignments or consents are not received within said
time frame, the parties shall negotiate in good faith the resolution of the lack
of such assignment or consent including, without limitation, the financial
consequences of the failure to obtain such assignment or consent.
<PAGE>
7.4. Confidential Material. The Company and the Sellers will, and
---------------------
will instruct all of their employees, representatives, agents, and affiliates
to, treat all Confidential Material confidentially and not disclose it except in
accordance herewith; provided, that (a) any Confidential Material may be
disclosed to the Company's or the Sellers' agents who (i) need to have access to
such information and (ii) are directed by either of the Company or the Sellers
to treat such Confidential Material confidentially; (b) any disclosure of
Confidential Material may be made with the prior written consent of the Buyer;
and (c) Confidential Material may be disclosed without liability hereunder to
the extent required by law or by the order or decree of any court or other
governmental authority; provided, however, that the party legally compelled to
disclose the Confidential Material will provide the Buyer with prompt notice of
that fact so that the Buyer may attempt to obtain a protective order or other
appropriate remedy. For purposes of this section, the term "Confidential
Material" will be defined to mean all information furnished by the Buyer or any
of its agents to either of the Company or any of the Sellers or any of their
agents; provided, however, that the term "Confidential Material" will not
include information that (x) becomes generally available to the public other
than as a result of a disclosure by either of the Company, any of the Sellers or
any of their employees, representatives, agents, or affiliates, or (y) was made
available to either of the Company or the Sellers on a non-confidential basis
from a source other than the Buyer or any of its agents, provided, that such
source is not bound by a confidentiality agreement with the Buyer or any of its
agents.
7.5 Liability for Federal, State and Local Taxes. The Sellers will
--------------------------------------------
be liable for all federal, state and local taxes resulting from the transactions
contemplated by this Agreement, including, but not limited to, all sales, use,
and transfer taxes, if any, resulting from this transaction. In addition, the
Sellers will be responsible for all of Company's federal, state, and local taxes
and any interest, penalty, or expenses incurred thereon for all tax years and
partial tax years ending on or before January 31, 1996. In the event an audit is
commenced or a claim is made for taxes which, if upheld, would be the obligation
of Sellers hereunder, Sellers shall be notified of such audit or claim and shall
defend and, if necessary, pay any taxes, penalties and interest ultimately
assessed.
7.6 Claims Experience. At or prior to the Closing, the Sellers will
-----------------
prepare and deliver to the Buyer a description of all claims experience of the
Company during the past three years under all of the insurance policies listed
on Schedule 5.16 hereto, including settled and outstanding claims under all such
policies in respect of general liability and workers' compensation claims.
7.7 Employment and Employee Benefits. The Sellers have delivered to
--------------------------------
the Buyer Schedule 7.7 listing the name, title, and current annual base salary
or hourly rate of each person employed by the Company on June 15, 1996, together
with a statement of the full amount and nature of any other remuneration,
whether in a cash or kind, paid to each such person during the 1995 calendar
year. The Sellers will furnish an updated copy of Schedule 7.7 at the Closing
which will reflect any changes in such information occuring between June 15,
1996, and the Closing Date. The Sellers agree with the Buyer that any
individuals who were full-time employees of the Company on the Closing Date and
who agree to execute the standard PGI Code of Conduct agreement will be offered
continued employment with the Company, effective immediately after the Closing.
Any individuals who accept this offer of employment with the Company will be
referred to herein as "Transferring Employees." This employment of Transferring
Employees will be "at will" and nothing herein expressed or implied confers upon
any such Transferring Employee any rights or remedies of any nature or
whatsoever under or by reason of this Agreement, including, without limitation,
any rights to employment for a specific period. After the Closing, the Buyer
will make available to Transferring Employees such wages and benefits as the
Buyer deems appropriate, subject only to the covenants set forth in Section 8.1
hereof, and the Buyer will be under no obligation to credit Transferring
Employees with past service credit for any purpose (including, without
limitation, severance, or pension purposes).
<PAGE>
7.8. Non-Competition. For a period of *** commencing on the
---------------
Closing Date, Sellers will not:
(a) Directly or indirectly, engage in, own, control, or make an
investment in any business that competes directly or indirectly for the business
of the clients (as of Closing) of the Company or Epic Enterprises, Inc.
("Epic");
(b) Accept employment with any person or entity that competes
directly or indirectly for the business of the clients (as of Closing) of the
Company or Epic;
(c) Directly or indirectly solicit or employ any PGI Company J
and affiliates person who at such time provides services for or is otherwise
employed by the Company, or Epic, or encourage or induce any employee of the
Company or Epic to leave such employment;
(d) Directly or indirectly, divert or attempt to divert from
the Company or Epic, Buyer or Buyer's parent the business of any customer or
client of the Company or Epic that was a customer or client (as of Closing);
7.9. Further Assurances. The Sellers agree, at the Sellers'
------------------
sole expense, to do or cause to be done such further acts and things and deliver
or cause to be delivered to the Buyer such additional assignments, agreements,
powers, and instruments as the Buyer may reasonably require to carry into
*CONFIDENTIAL INFORMATION HAS BEEN OMITTED AND FILED SEPERATELY WITH THE
COMMISSION.
<PAGE>
effect the purposes of this Agreement and the Transaction Documents or to better
assure and confirm unto the Buyer its rights, powers, and remedies hereunder and
thereunder.
7.10. Termination of Company's Benefit Plans. Sellers shall pay
--------------------------------------
for all expenses and for all liabilities, including funding liabilities and
fiduciary responsibilities related to the termination and distribution of such
plans and if Seller agrees to such a merger, then for the merger of the
Company's pension plan into the 401(K) plan of Buyer's parent.
7.11. Release of Liens.
----------------
(a) Sellers will use commercially reasonable efforts too
obtain within sixty (60) days of Closing releases of all liens which are paid
and satisfied as of the date of Closing and are listed on Schedule 5.12(a).
Upon receipt of the Uniform Commercial Code Termination Statement (UCCTS),
Sellers will file UCCTS in appropriate jurisdiction(s) and deliver a copy of
UCCTS and evidence of filing to Seller.
(b) With regard to liens filed by San Diego National Bank,
Sellers will work with Buyer in replacing the financing provided by San Diego
National Bank which gave rise to the liens with Buyer's or Buyer's Parent's
Letter of Credit.
8. Covenants of the Buyer.
----------------------
8.1. Confidential Information. The Buyer will, and will instruct
------------------------
all of its employees, representatives, agents, and affiliates to, treat all
Confidential Information confidentially and not disclose it except in accordance
herewith; provided, that (a) any Confidential Information may be disclosed to
the Buyer's agents who (i) need to have access to such information and (ii) are
directed by the Buyer to treat such Confidential Information confidentially; (b)
any disclosure of Confidential Information may be made with the prior written
consent of the Company or the Sellers; and (c) Confidential Information may be
disclosed without liability hereunder to the extent required by law or by the
order or decree of any court or other governmental authority; provided, however,
that the party legally compelled to disclose the Confidential Information will
provide the Company or the Sellers, as appropriate, with prompt notice of that
fact so that the Company or any of the Sellers may attempt to obtain a
protective order or other appropriate remedy. For purposes of this section, the
term "Confidential Information" will be defined to mean all information
furnished by the Company or the Sellers or any of their agents to the Buyer or
any of its agents; provided, however, that the term "Confidential Information"
will not include information that (x) becomes generally available to the public
other than as a result of a disclosure by the Buyer or any of its employees,
representatives, agents, or affiliates, or (y) was made available to the Buyer
on a non-confidential basis from a source other than the Company or the Sellers
or any of their agents, provided, that such source is not bound by a
confidentiality agreement with the Company, the Sellers or any of their agents.
The provisions contained in this Section 8.1 will not survive the Closing.
8.2 Consents and Agreements. The Buyer will use its reasonable
-----------------------
commercial efforts to obtain prior to the Closing all consents, authorizations,
and approvals under all statutes, laws, ordinances, regulations, rules,
judgments, decrees, and orders of any court or governmental agency, board,
bureau, body department, or authority or of any other person required to be
obtained by the Buyer in connection with the execution, delivery, and
performance of this Agreement, the Transaction Documents to which it is a party
and the consummation of the transactions contemplated hereby and thereby.
8.3. Employment and Employee Benefits. (a) After the Closing,
--------------------------------
the Buyer agrees to offer continued employment to Transferring Employees. This
employment of Transferring Employees will be "at will" and nothing herein
expressed or implied confers upon any such Transferring Employee any rights or
remedies of any nature or kind whatsoever under or by reason of this Agreement,
including, without limitation, any rights to employment for a specific period.
The Buyer will make available to Transferring Employees such wages and benefits
as the Buyer deems appropriate and will provide Transferring Employees with
substantially similar working terms and working conditions as are provided to
all Buyer's employees. Other than services credit for the purpose of determining
an employee's vacation benefit, the Buyer will be under no obligation to credit
Transferring Employees with past service credit for any purpose (including,
without limitation, severance, or pension purposes).
(b) Buyer will recommend to the insurance company currently
providing medical insurance coverage to its employees that Transferring
Employees be covered under such medical insurance without a required physical
examination or the exclusion of existing conditions.
(c) Buyer will recommend and use its commercially reasonable
best efforts to make provisions for the Company's employees to transfer their
savings from any of the Company's employee benefit plans, terminated as a result
of this transaction, into Buyer's existing 401(K) plan.
8.4. Termination of Company's Benefit Plans. Sellers with Buyer's
--------------------------------------
assistance (at no cost or expense to Buyer) will cause the Company to terminate
all Company's Employee benefit plans in existence, including but not limited to
defined contribution plans, at Closing or as soon as possible subsequent to
Closing.
8.5. Undisclosed Liabilities. After the Closing Date, Buyer
-----------------------
agrees:
(a) To notify Sellers of any undisclosed payables or liabilities
of which it becomes aware and Sellers shall have the right to defend or
compromise any of the same unless such action would have an unreasonably adverse
effect on the Company, its affiliates or their ongoing businesses; and
(b) To notify Sellers of any claims or audits the Company has
regarding any local, state or federal tax and any interest, penalty or expenses
incurred for tax years or business conducted prior to July 1, 1996, and Sellers
shall have the right to defend or compromise any of the same, as long as such
defense
<PAGE>
or compromise is not detrimental to the Company and any taxes, interest or
penalties incurred are paid by Sellers.
8.6. Payment of Assumed Liabilities. Buyer will pay all assumed
------------------------------
liabilities listed on Schedule 8.6 in accordance with their terms.
8.7. Seller's Personal Guarantees. Buyer agrees to use
----------------------------
commercially reasonable efforts to replace Sellers' personal guarantees to the
Company's vendors relating to Company accounts payable to vendors for business
expenses with Buyer's credit within sixty (60) days of Closing.
8.8. Further Assurances. The Buyer will, at the request of the
------------------
Sellers and at the Buyer's sole expense, execute and deliver any further
instruments or documents and take all such further action(s) as the Sellers may
reasonably request in order to carry into effect the purposes of this Agreement
and the Transaction Documents or to better assure and confirm unto the Sellers
its rights, powers, and remedies hereunder and thereunder.
8.9. Replacement Letters of Credit.
-----------------------------
(a) Buyer agrees to work with Sellers to replace the
existing financing from San Diego National Bank, which created the liens on the
Company's inventory, proceeds and products with Buyer's or Buyer's Parent's
Letter of Credit.
(b) Buyer agrees to use commercially reasonable efforts to
replace Seller's personal guarantees on any outstanding leases to which the
Company is a party.
9. Conditions Precedent to the Sellers' Obligation to Sell the Company
-------------------------------------------------------------------
Shares. The obligations of the Sellers to sell the Company Shares is subject to
- ------
the fulfillment prior to or at the Closing of the following conditions:
9.1. The Buyer's Performance. There will not be any material
-----------------------
error, misstatement, or omission in the representations and warranties made by
the Buyer in this
<PAGE>
Agreement; all representations and warranties by the Buyer contained in this
Agreement or in any written statement delivered by the Buyer to the Company or
the Sellers pursuant to this Agreement will be true in all material respects at
and as of the Closing as though such representations and warranties were made at
and as of said time (except (a) as contemplated by this Agreement and (b) to the
extent, if any, the Company and the Sellers will waive the same); and the Buyer
will have performed and complied in all material respects with all the terms,
provisions and conditions of this Agreement to be performed and complied with by
the Buyer at or before the Closing.
9.2. Consents and Approvals. The Company and the Buyer (and to
----------------------
the extent required, the Sellers) will have obtained all consents,
authorizations, and approvals under all statutes, laws, ordinances, regulations,
rules, judgments, decrees, and orders of any court or governmental agency,
board, bureau, body, department, or authority or of any other person required to
be obtained by the Company, the Buyer, or the Sellers, as the case may be, in
connection with the execution, delivery, and performance of this Agreement, the
Transaction Documents and the consummation of the transactions contemplated
hereby and thereby.
9.3. No Legal Impediment. There will be in effect no injunction,
-------------------
writ, temporary restraining order, or any order of any nature issued by any
court or governmental agency directing
<PAGE>
that the transactions contemplated by this Agreement not be consummated.
10. Conditions Precedent to the Buyer's Obligation to Purchase the
--------------------------------------------------------------
Company's Shares. The obligation of the Buyer to purchase the Company Shares is
- ----------------
subject to the fulfillment prior to or at the Closing of the following
conditions:
10.1. Company's and the Sellers' Performance. There will not be
--------------------------------------
any material error, misstatement, or omission in the representations and
warranties made by the Company or the Sellers in this Agreement; all
representations and warranties by the Company and the Sellers contained in this
Agreement or in any written statement delivered by the Company or the Sellers to
the Buyer pursuant to this Agreement will be true in all material respects at
and as of the Closing as though such representations and warranties were made at
and as of said time (except (a) as contemplated by this Agreement and (b) to the
extent, if any, the Buyer will waive the same); and the Company and the Sellers
will have performed and complied in all material respects with all the terms,
provisions, and conditions of this Agreement to be performed and complied with
by the Company and the Sellers at or before the Closing, including but not
limited to the deliveries to Buyer from Sellers required under Section 4.1
hereof.
10.2. Consents and Approvals. The Company and the Buyer (and to
----------------------
the extent required, the Sellers) will have obtained all consents,
authorization, and approvals under all
<PAGE>
statutes, laws, ordinances, regulations, rules, judgments, decrees, and orders
of any court or governmental agency, board, bureau, body, department, or
authority or of any other person required to be obtained by the Company, the
Sellers, or the Buyer, as the case may be, in connection with the execution,
delivery and performance of this Agreement, the Transaction Documents, and the
consummation of the transactions contemplated hereby and thereby.
10.3. Physical Properties. There will have occurred no material
-------------------
damage to or destruction or loss of (whether or not covered by insurance) any of
the Company's facilities, equipment, or other assets.
10.4. No Legal Impediment. There will be in effect no injunction,
-------------------
writ, temporary restraining order, or any order of any nature issued by any
court or governmental agency directing that the transactions contemplated by
this Agreement not be consummated.
10.5. Closing of Buyer's Purchase of Epic Enterprises of Nevada,
----------------------------------------------------------
Inc. Either the purchase of Epic Enterprises, Inc. from Sellers shall: (i)
- ----
have occurred; (ii) occur simultaneously with the Closing of the transaction
contemplated by this Agreement; or (iii) Buyer has waived this condition
precedent and is satisfied that the closing of the aforementioned transaction
will occur shortly after the closing of the transaction contemplated hereunder.
11. Termination. This Agreement may be terminated as follows:
-----------
11.1. Termination by the Buyer. The Buyer may, without liability
------------------------
to the Company or the Sellers, terminate this Agreement by notice to the Company
and the Sellers (a) at any time prior to the Closing if material default is made
by the Company or the Sellers in the observance or in the due and timely
performance of any of the terms hereof to be performed by the Company or the
Sellers that cannot be cured at or prior to the Closing, or (b) at any time
prior to the Closing if the Buyer discovers something unsatisfactory about
either of the Company or the Sellers during its due diligence or (c) at the
Closing if any of the conditions precedent to the performance of the Buyer's
obligations at the Closing will not have been fulfilled.
11.2. Termination by the Company or the Sellers. The Company and
-----------------------------------------
the Sellers may, without liability to the Buyer, terminate this Agreement by
notice to the Buyer (a) at any time prior to the Closing if material default
will be made by the Buyer in the observance or in the due and timely performance
of any of the terms hereof to be performed by the Buyer that cannot be cured at
or prior to the Closing or (b) at the Closing if any of the conditions precedent
to the performance of the Company or the Sellers' obligations at the Closing
have not been fulfilled.
11.3. Effect of Termination. If this Agreement is terminated, this
---------------------
Agreement, except for Sections 7.4 and 8.1, will no longer be of any force or
effect and there will be no liability on the part of any party or its respective
directors, officers, or shareholders except, in the case of termination because
of a material default or material breach resulting from the willful fault of
another party, the aggrieved party or parties may recover from the defaulting
party the amount of expenses incurred by such aggrieved party or parties in
connection with this Agreement and the transactions contemplated hereby which
the aggrieved party or parties would otherwise have to bear pursuant to Section
13.6 of this Agreement. If this Agreement is terminated, Sections 7.4 and 8.1
will remain in full force and effect, and any party, or its respective
directors, officers, agents or representatives, breaching Section 7.4 or Section
8.1 may be held liable for any such breach.
<PAGE>
12. Indemnification.
---------------
12.1. Indemnification of the Buyer and the Company.
--------------------------------------------
(a) From and after the Closing Date, the Sellers will indemnify,
defend, and hold harmless the Buyer and the Company and its officers, directors,
shareholders, representatives, agents, and affiliates from, against, and in
respect of all third party claims, liabilities, actions, suits, proceedings,
assessments, judgments, losses, damages, costs, and expenses (including
interest, penalties, and reasonable accountants', experts', and attorneys' fees
and disbursements) (collectively, "Damages"), arising out of, relating to, or
<PAGE>
resulting from (i) any material inaccuracy or material breach of any of the
written representations or warranties or the Sellers made in or pursuant to
this Agreement or the Transaction Documents; (ii) the material breach of any
covenant, obligation, or agreement of the Sellers to be performed, fulfilled, or
complied with pursuant to this Agreement or the Transaction Documents; (iii) any
material misrepresentation, or the omission of any material fact (including
without limitation, those facts required to make the facts otherwise set forth
not misleading), in this Agreement or the Transaction Documents (including all
Exhibits and Schedules hereto and thereto); (iv) the operation of the business
of the Company prior to July 1, 1996, or the acts or omissions of any of the
Company's officers, directors, shareholders, agents, or representatives prior to
the Closing in connection with the operation of the Company's business except
for the fiscally related matters which include, without limitation, accounts
payable, accounts receivables, debts and obligations of the Company from July 1,
1996 and Closing; (v) any and all taxes of any nature incurred by the Company
prior to July 1, 1996; (vi) the relationship with On-Line Reservations Systems,
Inc. or the Agreement by and between On-Line Reservations Systems, Inc., a
California corporation, and the Company dated September 15, 1994; (vii) with
regard to the Sellers, any personal taxes incurred on or prior to the Closing
Date, provided that no indemnification will be owed hereunder in any case where
<PAGE>
it is determined that Damages result solely from the gross negligence, willful
misconduct, or bad faith of the party to be indemnified; and (viii) the
Company's Employee Benefit Plans and any other employee benefit agreement
described in Section 5.14 hereinabove; provided, further, that the Sellers will
not be liable for indemnification hereunder in respect of any breach of any
warranty, representation, covenant, obligation, or agreement, or any material
misrepresentation or omission, that is not made or is not to be performed by the
Company or the Sellers.
(b) Sellers, jointly and severally, will indemnify and hold
harmless Buyer for any and all undisclosed accounts payable or liabilities not
listed on Schedule 8.6 subject to the provisions of Section 2.2(f).
12.2. Indemnification of the Sellers. From and after the Closing
------------------------------
Date, the Buyer will indemnify, defend, and hold harmless the Sellers and its
representatives, agents, and affiliates from, against, and in respect of all
third party Damages arising out of, relating to, or resulting from (a) any
material inaccuracy or material breach of any of the written representations or
warranties of the Buyer made in or pursuant to this Agreement or the Transaction
Documents; (b) the material breach of any covenant, obligation, or agreement of
the Buyer to be performed, fulfilled, or complied with pursuant to this
Agreement or the Transaction Documents; (c) any material misrepresentation or
the omission of any material fact
<PAGE>
(including, without limitation, those facts required to make the facts otherwise
set forth not misleading) in this Agreement or the Transaction Documents
(including all Exhibits and Schedules hereto and thereto); or (d) the conduct
and/or the operation of the Company post-July 1, 1996; provided that no
indemnification will be owed hereunder in any case where it is determined that
Damages result solely from the gross negligence, willful misconduct, or bad
faith of the Sellers or the Company (pre-Closing); provided, further, that the
Buyer will not be liable for indemnification hereunder in respect of any breach
of any warranty, representation, covenant, obligation, or agreement, or any
material misrepresentation or omission, that is not made or is not to be
performed by the Buyer.
12.3. Procedure for Indemnification. After receipt by an
-----------------------------
indemnified party under Section 12.1 or 12.2 of notice of the commencement of
any action, such indemnified party shall, if a claim in respect thereof is to be
made against an indemnifying party under such Section, give notice to the
indemnifying party of the commencement thereof, but the failure so to notify the
indemnifying party shall not relieve it of any liability that it may have to any
indemnified party except to the extent the indemnifying party demonstrates that
the defense of such action is materially prejudiced thereby. If any such action
shall be brought against an indemnified party and it shall give notice to the
indemnifying party of the commencement thereof, the
<PAGE>
indemnified party shall be entitled to participate therein and, to the extent
that it shall wish, to assume the defense thereof with counsel satisfactory to
such indemnified party and, after notice from the indemnifying party as such
indemnified party of its election so to assume the defense thereof the
indemnifying party shall not be liable to such indemnified party under such
Section for any fees of other counsel or any other expenses, in each case
subsequently incurred by such indemnified party in connection with the defense
thereof, other than reasonable costs of investigation. If an indemnifying party
assumes the defense of such an action, (a) no compromise or settlement thereof
may be effected by the indemnifying party without the indemnified party's
consent (which shall not be unreasonably withheld) unless (i) there is no
finding or admission of any violation of law or any violation of the rights of
any Person and no effect on any other claims that may be made against the
indemnified party and (ii) the sole relief provided is monetary damages that are
paid in full by the indemnifying party and (b) the indemnifying party shall have
no liability with respect to any compromise or settlements thereof effected
without its consent (which will shall not unreasonably withheld). If notice is
given to indemnifying party of the commencement of any action and it does not,
within twenty (20) days after the indemnified party's notice is given, give
notice to the indemnified party of its election to assume the defense thereof,
the indemnifying party shall be bound
<PAGE>
by any determination made in such action or any compromise or settlement thereof
effected by the indemnified party. Notwithstanding the foregoing, if an
indemnified party determines in good faith that there is a reasonable
probability that an action may adversely affect it other than as a result of
monetary damages, such indemnified party may, by notice to the indemnifying
party assume the exclusive right to defend, compromise or settle such action,
but the indemnifying party shall not be bound by any determination of an action
so defended or any compromise or settlement thereof effected without its consent
(which shall not unreasonably withheld).
12.4. Survival of Representations, Warranties, Covenants and
---------------------------------------- -------------
Indemnification. The representations and warranties made in Sections 5 and 6
- ---------------
of this Agreement other than those in Sections 5.10, 5.14, 5.19, 5.20, 5.21 and
5.25 will survive the Closing and will expire upon the second anniversary of
the Closing Date, except as to any matter as to which a reasonably specific good
faith claim has been submitted in writing to the Buyer or the Sellers, as
applicable, prior to such date. All representations and warranties contained in
Sections 5.10, 5.14, 5.19, 5.20, 5.21 and 5.25 will survive until the expiration
of the applicable statute of limitations period (including extensions thereof)
for any claim in respect of matters covered by Sections 5.10, 5.14, 5.19, 5.20,
5.21 and 5.25 respectively. The covenants contained in Sections 7 and 8 of
<PAGE>
this Agreement and the provisions contained in Sections 2.2, 2.3, 2.4, and this
Section 12 will survive the Closing.
13. Miscellaneous.
-------------
13.1. Complete Agreement; Amendments; Waivers. This Agreement,
---------------------------------------
together with the Exhibits and Schedules hereto, contains the entire agreement
of the parties with respect to the subject matter hereof and supersedes all
prior agreements and understandings, oral or written, with respect thereto. This
Agreement may be modified or amended only by a written instrument signed by the
parties hereto. No provision of this Agreement may be waived without a written
instrument signed by the waiving party. The failure of any party to require, in
any one or more instances, the performance of any of the terms, covenants, or
conditions of this Agreement will not be construed as a waiver or relinquishment
of any rights granted hereunder or of the future performance of any such term,
covenant, or condition, but the obligations of the parties with respect thereto
will continue in full force and effect.
13.2. Counterparts. This Agreement may be executed in two (2) or
------------
more counterparts, each of which will be deemed an original, but all of which
together will constitute one (1) and the same instrument.
13.3. Successors and Assigns. This Agreement will inure to the
----------------------
benefit of, and be binding upon, the parties hereto and their respective
executors, heirs, and permitted assigns.
<PAGE>
Neither this Agreement nor any of the rights or obligations hereunder (or under
any document delivered pursuant hereto) may be assigned by a party hereto
without the prior written consent of the other parties.
13.4. Governing Law. This Agreement will be construed and
-------------
enforced in accordance with the laws of the Commonwealth of Virginia without
giving effect to its conflicts of law principles.
13.5. Notices. All notices, claims, requests, demands, and other
-------
communications hereunder will be in writing and will be duly given if: (a)
personally delivered or sent via telecopy, (b) sent by telegram (other than
where original payment or other documents must be delivered) for delivery within
24 hours, or (c) sent by Federal Express, DHL Worldwide Express, or Airborne
Courier (for next business day delivery), shipping prepaid, as follows:
If to the Buyer, to:
Mark N. Sirangelo, President
PGI Company J
One Courthouse Metro
Suite 200
2200 Wilson Boulevard
Arlington, VA 22201-3324
(Telecopy number (703) 528-1724)
<PAGE>
with a copy to:
James N. Schwarz, Esq.
Ginsburg, Feldman and Bress, Chartered
1250 Connecticut Avenue, N.W.
Suite 700
Washington, D.C. 20036
(Telecopy number (202) 637-9195)
If to the Parent, to:
Mark N. Sirangelo, President
Production Group International, Inc.
One Courthouse Metro
Suite 200
2200 Wilson Boulevard
Arlington, Virginia 22201-3324
(Telecopy number (703) 528-1724)
If to the Company, pre-Closing, to:
Mr. Harry Schwartz
Epic Enterprises of Nevada, Inc.
8989 Rio San Diego Drive
Suite 160
San Diego, CA 92108
If to the Company, post-closing, to:
Mark N. Sirangelo, President
PGI Company J
One Courthouse Metro
Suite 100
2200 Wilson Boulevard
Arlington, Virginia 22201-3324
(Telecopy number (703) 528-1724)
If to the Sellers, to:
Harry Schwartz
Epic Enterprises of Nevada, Inc.
8989 Rio San Diego Drive
Suite 160
San Diego, CA 92108
<PAGE>
with copies to:
Mr. Harry Schwartz
650 Columbia Street
No. 112
San Diego, CA 92101
Charles Schwartz
655 India Street
No. 421
San Diego, CA 92101
Pamela Schwartz
5683-C Adobe Falls Road
San Diego, CA 92120
with a copy to:
Todd Kobernick, Esq.
3131 Camino del Rio North
Suite 900
San Diego, CA 92108-5710
or such other address or addresses as the person to whom notice is to be given
may have previously furnished to the others in writing in the manner set forth
above. Notices will be deemed given at the time of personal delivery or
completed telecopy, or, if sent by telegram twenty-four (24) hours after the
time sent, or, if sent by Federal Express, DHL Worldwide Express, or Airborne
Courier, one (1) business day after the date sent.
13.6. Expenses. Except as otherwise expressly provided in this
--------
Agreement, each party hereto will bear its own expenses.
13.7. Headings; Form of Words. The headings contained in this
-----------------------
Agreement (including but not limited to the titles of the Schedules and Exhibits
hereto) have been inserted for the convenience of reference only, and neither
such headings
<PAGE>
nor the placement of any term hereof under any particular heading will in any
way restrict or modify any of the terms or provisions hereof. Terms used in the
singular will be read in the plural, and vice versa, and terms used in the
masculine gender will be read in the feminine or neuter gender when the context
so requires, and vice versa.
13.8. Severability. The provisions of this Agreement will be
------------
deemed severable, and if any part of any provision is held to be illegal, void,
voidable, invalid, nonbinding, or unenforceable in its entirety or partially or
as to any party, for any reason, such provision may be changed consistent with
the intent of the parties hereto, to the extent reasonably necessary to make
provisions, as so changed, legal, valid, binding, and enforceable. If any
provision of this Agreement is held to be illegal, void, voidable, invalid, non-
binding, or unenforceable in its entirety or partially or as to any party, for
any reason, and if such provision cannot be changed consistent with the intent
of the parties hereto to make it fully legal, valid, binding and enforceable,
then such provision will be stricken from this Agreement, and the remaining
provisions of this Agreement will not in any way be affected or impaired, but
will remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have duly
executed this Agreement as of the date first above written.
<PAGE>
BUYER:
PGI Company J
By: /s/ Mark N. Sirangelo
-----------------------------
Mark N. Sirangelo
President and Chief Executive
Officer
SELLERS:
/s/ Harry Schwartz
---------------------------------
Harry Schwartz
/s/ Charles Schwartz
---------------------------------
Charles Schwartz
/s/ Pamela Schwartz
---------------------------------
Pamela Schwartz
COMPANY:
EPIC ENTERPRISES OF NEVADA, INC.
By: /s/ Charles Schwartz
-----------------------------
Name: /s/ Charles Schwartz
---------------------------
Title: Chairman
--------------------------
<PAGE>
AMENDMENT NO. 1
EFFECTIVE AS OF JULY 1, 1996
TO
STOCK PURCHASE AGREEMENT
DATED AS OF JULY 1, 1996
AMONG
PGI COMPANY J,
EPIC ENTERPRISES OF NEVADA, INC.,
HARRY SCHWARTZ,
CHARLES SCHWARTZ,
AND
PAMELA SCHWARTZ
<PAGE>
Reference is hereby made to that certain Stock Purchase Agreement dated as
of July 1, 1996 among PGI Company J, Epic Enterprises of Nevada, Inc., Harry
Schwartz, Charles Schwartz and Pamela Schwartz (the "Stock Purchase Agreement").
Terms defined in the Stock Purchase Agreement and not otherwise defined herein
are used herein as so defined.
This Amendment is entered into on the ____day of July, 1996 and each of
the Sellers and the Buyer hereby agree that effective as of July 1, 1996, the
Stock Purchase Agreement is hereby amended as follows:
1. The balance sheet referenced in Section 2.2(e) (ii) was delivered to Buyer
on July 3, 1996.
2. Section 5.15(b) is amended by deleting the first sentence in its entirety
and replacing it with the following:
The Buyer has been given complete and correct copies of all written
agreements, contracts, and commitments, or will be provided the same
within ten (10) days after the Closing Date, to which the Company is a
party or by which it or any of its assets is bound, together with all
amendments thereto.
3. Sections 5.20 (a) and (b) are amended by replacing the date(s) of "January
31, 1996" by "December 31, 1995".
4. Section 5.25 is amended by deleting the second sentence in its entirety and
replacing with the following:
The Company is not liable for any substantial accrued unpaid wages, or
for any material tax, penalty, assessment or forfeiture for failure to
comply with any employer/employee matter.
5. Section 7.5 is amended by replacing the date of "January 31, 1996" by "July
1, 1996".
<PAGE>
6. Section 12 is amended by adding a subsection (ix) after the word
"hereinabove" at the end of subsection (viii) and before "as provided further"
as follows:
"and (ix) any liability and costs associated with the amendment of the
Company's articles of incorporation to correct, or with claims by third-
parties or governmental entities because of, the misstated par value of
the Company's shares at $10,000 instead of the correct value of $1.00,
provided, however, that the liability and costs for such Damages is
limited to $5,000;"
7. The invalidity or unenforceability of any term or provisions hereof shall
not affect the validity of enforceability of any other term or provisions
hereof. The Stock Purchase Agreement is hereby confirmed in its entirety, as
amended herein. This Agreement may be executed in any number of counterparts
which together shall constitute one instrument and shall bind and insure to the
benefit of the parties hereto and their respective successors and assigns. This
Agreement shall be governed by the laws of the Commonwealth of Virginia.
<PAGE>
BUYER:
PGI Company J
By: /s/ Mark N. Sirangelo
----------------------------------
Mark N. Sirangelo
President and Chief Executive
Officer
SELLERS:
/s/ Harry Schwartz
-------------------------------------
Harry Schwartz
/s/ Charles Schwartz
-------------------------------------
Charles Schwartz
/s/ Pamela Schwartz
-------------------------------------
Pamela Schwartz
COMPANY:
EPIC ENTERPRISES OF NEVADA, INC.
By: /s/ Charles Schwartz
----------------------------------
Name: Charles Schwartz
--------------------------------
Title: Chairman
-------------------------------
