<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. ____)*
THE SOURCE INFORMATION MANAGEMENT COMPANY
(Name of Issuer)
COMMON STOCK, $0.01 par value
(Title of Class of Securities)
836151209
(CUSIP Number)
S. Leslie Flegel
The Source Information Management Company
11644 Lilburn Park Road
St. Louis, Missouri 63146
(314) 995-9040
(Name, address and telephone number of person
authorized to receive notices and communications)
With a copy to:
John L. Gillis, Jr., Esq.
Armstrong Teasdale LLP
One Metropolitan Square, Suite 2600
St. Louis, Missouri 63102
January 7, 1999
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition that is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following
box.[ ]
Note: Schedules filed in paper format shall include a signed original and five
copies of the schedule, including all exhibits. See Section 240.13d-7(b) for
other parties to whom copies are to be sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
Page 1 of 6 Pages
<PAGE> 2
- ------------------------------ -------------------
CUSIP No. 836151209 13D Page 2 of 6 Pages
- ------------------------------ -------------------
- --------------------------------------------------------------------------------
1 Name of Reporting Persons/I.R.S. Identification Nos. of Above Persons
(Entities Only)
S. Leslie Flegel SSN: ###-##-####
- --------------------------------------------------------------------------------
2 Check the Appropriate Box if a Member of a Group (See Instructions)
(a)[ ]
(b)[X]
- --------------------------------------------------------------------------------
3 SEC Use Only
- --------------------------------------------------------------------------------
4 Source of Funds (See Instructions)
Not applicable
- --------------------------------------------------------------------------------
5 Check if Disclosure of Legal Proceedings is Required Pursuant to Item
2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
6 Citizenship or Place of Organization
USA
- --------------------------------------------------------------------------------
7 Sole Voting Power
0
----------------------------------------
Number of 8 Shared Voting Power
Shares
Beneficially 7,615,844
Owned by
Each -----------------------------------------
Reporting
Person With 9 Sole Dispositive Power
1,312,773
-----------------------------------------
10 Shared Dispositive Power
0
- --------------------------------------------------------------------------------
11 Aggregate Amount Beneficially Owned by Each Reporting Person
7,615,844
- --------------------------------------------------------------------------------
12 Check if the Aggregate Amount in Row (11) Excludes Certain Shares
(See Instructions) [ ]
- --------------------------------------------------------------------------------
13 Percent of Class Represented by Amount in Row (11)
65.0%
- --------------------------------------------------------------------------------
14 Type of Reporting Person (See Instructions)
IN
- --------------------------------------------------------------------------------
<PAGE> 3
- ------------------------------ -------------------
CUSIP No. 836151209 13D Page 3 of 6 Pages
- ------------------------------ -------------------
ITEM 1. SECURITY AND ISSUER
This Schedule 13D relates to shares of common stock, $.01 par value per shares
(the "Common Stock"), of The Source Information Management Company, a Missouri
corporation (the "Issuer"). The address of the principal executive office of the
Issuer is 11644 Lilburn Park Road, St. Louis, Missouri 63146.
ITEM 2. IDENTITY AND BACKGROUND
S. Leslie Flegel, an individual and US citizen ("Flegel"), is filing this
Schedule 13D on behalf of himself. For purposes of this Schedule 13D, Flegel may
be a member of a group with Jonathan J. Ledecky ("Ledecky").
Flegel is the Chairman and CEO of the Issuer. Flegel's business address, and the
address of his employer, is 11644 Lilburn Park Road, St. Louis, Missouri 63146.
During the past five years, Flegel has not been (i) convicted in a criminal
proceeding (excluding traffic violations or similar misdemeanors) or (ii) a
party to a civil proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding was or is subject to a judgment,
decree or final order enjoining future violations of, or prohibiting or
mandating activities subject to, United States federal or state securities laws
or finding any violation with respect to such laws.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
On January 7, 1999, Flegel and Ledecky entered into a voting agreement ("Voting
Agreement") whereby Ledecky agreed to vote 1,779,383 shares of Common Stock held
by him and 1,360,617 shares of Common Stock issuable upon conversion of the
1,360,617 shares of Class A Convertible Preferred Stock, par value $.01 per
share, of the Issuer (the "Preferred Stock") held by him in the same manner as
Flegel on matters pertaining to the election of directors of the Issuer; the
ratification of the Issuer's auditors; composition of senior management;
financings; stock bonus, option or incentive plans or programs for employees and
consultants of the Issuer and amendments thereto; the amendment of the Articles
of Incorporation of the Issuer to increase the authorized capital of the Issuer;
and similar matters pertaining to the day-to-day operations of the Issuer. The
Voting Agreement specifically excludes matters pertaining to fundamental changes
in the Issuer, including, but not limited to, mergers, acquisitions requiring
shareholder approval, tender offers, sales of all or substantially all of the
assets of the Issuer, changes in control of the Issuer, and the issuance of
capital stock of the Issuer requiring shareholder approval. Ledecky granted a
proxy to Flegel to vote his shares in accordance with the terms of the Voting
Agreement. No cash or other consideration was paid by Flegel in respect of the
Voting Agreement. The Voting Agreement will terminate upon the earlier of (a)
the second anniversary of the Voting Agreement, (b) Ledecky beneficially owning
less than ten percent of the issued and outstanding capital stock of the Issuer,
or (c) the removal or resignation of Flegel from either of his positions as
Chief Executive Officer and as Chairman of the Board of Directors of the Issuer.
ITEM 4. PURPOSE OF TRANSACTION
The information set forth in Item 3 is incorporated herein by reference.
On January 7, 1999, the Issuer, Source-U.S. Marketing Services, Inc., a
subsidiary of the Issuer ("Sub"), U.S. Marketing Services, Inc. ("U.S.
Marketing"), Ledecky, James R. Gillis ("Gillis") and Monte Weiner ("Weiner")
<PAGE> 4
- ------------------------------ -------------------
CUSIP No. 836151209 13D Page 4 of 6 Pages
- ------------------------------ -------------------
(Ledecky, Gillis and Weiner collectively, the "U.S. Marketing Shareholders")
entered into an Agreement and Plan of Merger (the "Merger Agreement"), whereby
U.S. Marketing was merged with and into Sub. Pursuant to the Merger Agreement,
each share of U.S. Marketing was converted into a right to receive .3626 shares
of Common Stock and .2772 shares of Preferred Stock. As a result of the merger,
the separate existence of U.S. Marketing ceased to exist and Sub was the
surviving corporation. Also as a result of the merger, Ledecky, Gillis and
Weiner received 1,779,383, 73,668, and 73,668 shares of Common Stock,
respectively, and 1,360,617, 56,332 and 56,322 shares of Preferred Stock,
respectively.
Pursuant to the Certificate of Designation of the Preferred Stock, each share of
Preferred Stock will automatically convert into an equal number of shares of
Common Stock upon receipt of the approval of the holders of a majority of the
outstanding shares of Common Stock (disregarding any shares of Common Stock held
by the U.S. Marketing Shareholders) of the conversion; if shareholder approval
is not received on or before June 30, 1999, the shares of Preferred Stock will
be convertible, at the option of the holders, into demand debt of the Issuer
aggregating $11,388,462.
In connection with the Merger Agreement, Flegel and certain other shareholders
of the Issuer (the "Conversion Shareholders") entered into a Conversion Voting
Agreement with the U.S. Marketing Shareholders dated as of January 7, 1999 (the
"Conversion Voting Agreement"), whereby the Conversion Shareholders granted
proxies to Flegel and William H. Lee, Jr. to vote their shares of Common Stock
at the next duly called special shareholders meeting of the Issuer in favor of
the conversion of the Preferred Stock into Common Stock.
In connection with the Merger Agreement, the Issuer and the U.S. Marketing
Shareholders entered into a Registration Rights Agreement dated as of January 7,
1999 (the "Registration Rights Agreement") whereby the U.S. Marketing
Shareholders agree not to transfer their shares of Common Stock (including any
shares of Common Stock issuable upon conversion of the Preferred Stock) for a
period of one year from the date of the Registration Rights Agreement without
the consent of the Issuer, except under certain circumstances, and the U.S.
Marketing Shareholders have the right to require the registration of their
shares of Common Stock (including any shares of Common Stock issuable upon
conversion of the Preferred Stock) under the Securities Act of 1933, as amended,
for resale under certain circumstances.
Except as described herein, Flegel does not have any present plans or proposals
which relate to or would result in (i) the acquisition by any person of
additional securities of the Issuer, or the disposition of securities of the
Issuer; (ii) an extraordinary corporate transaction, such as a merger,
reorganization or liquidation, involving the Issuer or any of its subsidiaries;
(iii) a sale or transfer of a material amount of assets of the Issuer or its
subsidiaries; (iv) any change in the present Board of Directors or management of
the Issuer, including any plans or proposals to change the number of term of the
directors or to fill any vacancies on the Board; (v) any material change in the
present capitalization or dividend policy of the Issuer; (vi) any other material
change in the Issuer's business or corporate structure; (vii) changes in the
Issuer's charter, by-laws or other instruments corresponding thereto or other
actions which may impede the acquisition of control of the Issuer by any person;
(viii) causing a class of securities of the Issuer to be delisted from a
national securities exchange or to cease to be authorized to be quoted in an
inter-dealer quotation system of a registered national securities association;
(ix) a class of equity securities of the Issuer to become eligible for
termination of registration pursuant to Section 12(g)(4) of the Securities
Exchange Act of 1934; or (x) any action similar to any of those enumerated
above.
<PAGE> 5
- ------------------------------ -------------------
CUSIP No. 836151209 13D Page 5 of 6 Pages
- ------------------------------ -------------------
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER
Flegel may be deemed to be the beneficial owner of 7,615,844 shares of Common
Stock, or approximately 65.0% of the shares of Common Stock outstanding,
including 1,312,773 shares of Common Stock held of record by Flegel, 3,210,915
shares of Common Stock held by the members of the Conversion Voting Agreement
group (other than himself) for which proxies were granted to Flegel, and
1,779,383 shares of Common Stock held of record by Ledecky for which a proxy was
granted to Flegel. Flegel has the sole power to dispose of the shares of Common
Stock owned of record by him. Flegel has shared power to vote the shares of
Common Stock owned of record by him.
Flegel has not effected any transaction in the Common Stock (other than in
connection with the transactions described herein) in the past 60 days.
Flegel does not know of any person who has the right to receive or the power to
direct the receipt of dividends on the Common Stock owned beneficially by him.
The percentage of shares of Common Stock outstanding reported as beneficially
owned by each person herein on the date hereof is based upon the 11,724,604
shares of Common Stock outstanding as of January 7, 1999.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH
RESPECT TO SECURITIES OF THE ISSUER
The information set forth in Item 4 above is incorporated herein by reference.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS
Exhibit 1 - Voting Agreement, dated as of January 7, 1999, by and
between S. Leslie Flegel and Jonathan J. Ledecky.
Exhibit 2 - Agreement and Plan of Merger, dated as of January 7, 1999,
by and among The Source Information Management Company,
Source-U.S. Marketing Services, Inc., U.S. Marketing
Services, Inc., Jonathan J. Ledecky, James R. Gillis and
Monte Weiner.
Exhibit 3 - Conversion Voting Agreement, dated as of January 7, 1999,
by and among the persons listed on Exhibit B thereto,
Jonathan J. Ledecky, James R. Gillis and Monte Weiner.
Exhibit 4 - Certificate of Designation of Class A Convertible
Preferred Stock of The Source Information Management Company.
Exhibit 5 - Registration Rights Agreement, dated as of January 7, 1999,
by and among The Source Information Management Company,
Jonathan J. Ledecky, James R. Gillis and Monte Weiner.
<PAGE> 6
- ------------------------------ -------------------
CUSIP No. 836151209 13D Page 6 of 6 Pages
- ------------------------------ -------------------
SIGNATURES
After reasonable inquiry and to the best of his knowledge and belief, the
undersigned certifies that the information set forth in this Statement is true,
complete and correct.
January 19, 1999 By: /s/ Leslie Flegel
------------------------------
S. Leslie Flegel
<PAGE> 1
EXHIBIT 1
VOTING AGREEMENT
This Voting Agreement (the "Agreement") is entered into by and between
S. Leslie Flegel ("Flegel") and Jonathan J. Ledecky ("Ledecky") as of January 7,
1999.
RECITALS
WHEREAS, Flegel is the CEO & Chairman and the owner of certain shares
of the common stock, $.01 par value per share (the "Common Stock"), of The
Source Information Management Company, a Missouri corporation (the
"Corporation"), and
WHEREAS, as of the date hereof, the Corporation has effectuated a
merger of U.S. Marketing Services, Inc., a Delaware corporation ("Target"), with
and into Source - U.S. Marketing Co., a Missouri corporation and a wholly-owned
subsidiary of the Corporation ("S-US"), pursuant to an Agreement and Plan of
Merger among the Corporation, Target, S-US, Ledecky, James R. Gillis and Monte
Weiner dated as of January 7, 1999 (the "Merger Agreement"); and
WHEREAS, in connection with the Merger Agreement, the Corporation
issued 1,779,383 shares of Common Stock and 1,360,617 shares of Series A
Convertible Preferred Stock, $.01 par value per share (the "Preferred Stock") to
Ledecky; and
WHEREAS, the Merger Agreement requires Flegel and Ledecky to enter into
an agreement pursuant to which Ledecky will vote his Common Stock in the same
manner as Flegel on certain matters.
NOW, THEREFORE, in consideration of the foregoing and the terms and
conditions set forth herein, the receipt and sufficiency of which are
acknowledged by the parties hereto, the parties agree to the following.
1. Voting Agreement.
(a) Ledecky agrees to vote any and all of his shares of
Common Stock, whether now owned or hereafter acquired, in the same manner as
Flegel on matters pertaining to the election of directors of the Corporation;
the ratification of the Corporation's auditors; composition of senior
management; financings; stock bonus, option or incentive plans or programs for
employees and consultants of the Corporation and amendments thereto; the
amendment of the Articles of Incorporation of the Corporation to increase the
authorized capital of the Corporation; and similar matters pertaining to the
day-to-day operations of the Corporation.
(b). Such agreement specifically excludes matters pertaining
to fundamental changes in the Corporation, including, but not limited to,
mergers, acquisitions requiring
<PAGE> 2
shareholder approval, tender offers, sales of all or substantially all of the
assets of the Corporation, changes in control of the Corporation, and the
issuance of capital stock of the Corporation requiring shareholder approval.
2. Irrevocable Proxy. In order to insure the voting of Ledecky in
accordance with this Agreement, Ledecky agrees to execute an irrevocable proxy,
at or prior to each meeting of shareholders called for the purpose of
considering the matters specified in ss.1(a) hereof, in the form of Exhibit A
attached hereto and made a part hereof granting to Flegel the right to vote, or
to execute and deliver stockholder written consents, in respect of all of the
Common Stock now owned or hereafter acquired (including Common Stock received
upon the conversion of the Preferred Stock) by Ledecky.
3. Changes in Common Stock. In the event that subsequent to the
date of this Agreement any shares or other securities of the Corporation are
issued on, or in exchange for, the Common Stock of the Corporation held by
Ledecky by reason of any stock dividend, stock split, consolidation of shares or
reclassification, such Common Stock or securities shall be deemed to be covered
by the terms of this Agreement.
4. Representations of Ledecky. Ledecky hereby represents and
warrants to Flegel that (a) he was the record owner as of the date hereof of the
Common Stock and the Preferred stock stated in the recitals above and has the
right to vote the number of shares of Common Stock stated in the recitals above,
(b) he has full power to enter into this Agreement and has not, prior to the
date of this Agreement, executed or delivered any proxy or entered into any
other voting agreement or similar arrangement other than one which has expired
or terminated prior to the date hereof or which is superseded by this
Irrevocable Proxy, and (c) he will not take any action inconsistent with the
purpose and provisions of this Agreement.
5. Enforceability. Ledecky expressly agrees that this Agreement
shall be specifically enforceable in any court of competent jurisdiction in
accordance with its terms.
6. Termination. This Agreement shall terminate and be void and of
no effect upon the earliest of the following to occur: (a) the second
anniversary of this Agreement, (b) Ledecky and his permitted transferees under
Registration Rights Agreement by and among the Corporation, Ledecky, James R.
Gillis and Monte Weiner of even date hereof beneficially owning less than ten
percent of the issued and outstanding capital stock of the Corporation, or (c)
the removal or resignation of Flegel from either of his positions as Chief
Executive Officer and as Chairman of the Board of Directors of the Corporation.
7. Proxy Holder. Flegel hereby agrees to act as proxy for Ledecky
subject to the terms and conditions set forth herein.
-2-
<PAGE> 3
8. General Provisions.
(a) All of the covenants and agreements contained in this
Agreement shall be binding upon, and enure to the benefit of, the respective
parties and their successors, assigns, heirs, executors, administrators and
other legal representatives, as the case may be.
(b) This Agreement and the rights of the parties hereto,
shall be governed by and construed in accordance with the laws of the State of
Missouri.
(c) This Agreement may be executed in one or more
counterparts (including by facsimile transmission), each of which will be deemed
an original but all of which together shall constitute one and the same
instrument.
(d) If any provision of this Agreement shall be declared
void or unenforceable by any court or administrative board of competent
jurisdiction, such provision shall be deemed to have been severed from the
remainder of this Agreement and this Agreement shall continue in all respects to
be valid and enforceable.
(e) No waivers of any breach of this Agreement extended by
any party hereto to any other party shall be construed as a waiver of any rights
or remedies of any other party hereto or with respect to any subsequent breach.
(f) Whenever the context of this Agreement shall so
require, the use of the singular number shall include the plural and the use of
any gender shall include all genders.
-3-
<PAGE> 4
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
/s/ Jonathan J. Ledecky /s/ S. Leslie Flegel
- --------------------------- ---------------------------
Jonathan J. Ledecky S. Leslie Flegel
-4-
<PAGE> 1
EXHIBIT 2
AGREEMENT AND PLAN OF MERGER
AMONG
THE SOURCE INFORMATION MANAGEMENT COMPANY,
SOURCE - U.S. MARKETING SERVICES, INC.,
U.S. MARKETING SERVICES, INC.
JONATHAN J. LEDECKY
JAMES R. GILLIS
AND
MONTE WEINER
JANUARY 7, 1999
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
1. Definitions..............................................................................................1
2. Basic Transaction........................................................................................6
(a) The Merger......................................................................................6
(b) Method of Effecting Merger and Closing..........................................................6
(c) Actions at the Closing..........................................................................6
(d) Conversion of Target Shares.....................................................................6
(e) Effect of Merger................................................................................7
(f) Exchange Procedures.............................................................................7
(g) Transfer Restrictions; Closing of Stock Transfer Books..........................................7
(h) Source Shareholders Meeting.....................................................................8
3. Representations and Warranties Concerning the Transaction................................................8
(a) Representations and Warranties of Target Shareholders...........................................8
4. Representations and Warranties Concerning the Target and Its Subsidiaries...............................11
5. Covenants...............................................................................................32
(a) General........................................................................................32
(b) Notices and Consents...........................................................................32
(c) Regulatory Matters and Approvals...............................................................32
(d) Nasdaq Notification of Source Common Stock Issuance............................................32
(e) Nasdaq Approval of Source Preferred Stock Issuance.............................................32
(f) Operation of Business..........................................................................32
(g) Full Access....................................................................................33
(h) Notice of Developments.........................................................................33
(i) Exclusivity....................................................................................33
(j) Acquisition of 100% Ownership of Subsidiaries..................................................34
(k) Payoff of Debt.................................................................................34
6. Conditions to Obligation to Close.......................................................................34
(a) Conditions to Obligation of the Source and S-US................................................34
(b) Conditions to Obligation of the Target and Target Shareholders.................................35
7. Remedies for Breach of This Agreement...................................................................36
(a) Survival of Representations and Warranties.....................................................36
(b) Indemnification Provisions for Benefit of the Source...........................................37
(c) Indemnification Provisions for Benefit of the Target Shareholders..............................38
(d) Matters Involving Third Parties................................................................38
(e) Other Indemnification Provisions...............................................................39
8. Miscellaneous...........................................................................................39
(a) Press Releases and Public Announcements........................................................39
(b) No Third Party Beneficiaries...................................................................40
(c) Entire Agreement...............................................................................40
(d) Succession and Assignment......................................................................40
(e) Counterparts...................................................................................40
(f) Headings.......................................................................................40
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
(g) Notices........................................................................................40
(h) Governing Law..................................................................................42
(i) Amendments and Waivers.........................................................................42
(j) Severability...................................................................................42
(k) Expenses.......................................................................................42
(l) Construction...................................................................................42
(m) Incorporation of Exhibits and Schedules........................................................43
</TABLE>
<PAGE> 4
TABLE OF CONTENTS
PAGE
----
Exhibit A-Certificate of Designation
Exhibit B-Certificate of Merger
Exhibit C-Exceptions to Ledecky Representations and Warranties
Exhibit D-Exceptions to Source Representations and Warranties
Exhibit E-Financial Statements
Exhibit F-Form of Opinion of Counsel to the Target
Exhibit G-Voting Agreement
Exhibit H-Registration Rights and Lock-Up Agreement
Exhibit I-Form of Opinion of Counsel to the Source
Exhibit J-Conversion Voting Agreement
Disclosure Schedule--Exceptions to Representations and Warranties
<PAGE> 5
AGREEMENT AND PLAN OF MERGER
Agreement entered into as of January 7, 1999 by and among The Source
Information Management Company, a Missouri corporation ("Source"); Source- U.S.
Marketing Services, Inc., a Delaware corporation ("S-US"); U.S. Marketing
Services, Inc., a Delaware corporation ("Target"); Jonathan J. Ledecky
("Ledecky"); James R. Gillis ("Gillis"); and Monte Weiner ("Weiner"). Ledecky,
Gillis and Weiner are referred to collectively herein as "Target Shareholders;"
Gillis and Weiner are referred to collectively herein as "Target Management
Shareholders;" and Source, S-US, Target, Ledecky, Gillis and Weiner are referred
to collectively herein as the "Parties".
This Agreement contemplates a tax-free merger of the Target with and
into S-US in a reorganization pursuant to Code Section 368(a)(2)(D). The Target
Shareholders will receive capital stock in the Source in exchange for their
capital stock in the Target.
Now, therefore, in consideration of the premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree as follows.
1. Definitions.
"Accounts Receivable" has the meaning set forth in Section 4(p) below.
"Accredited Investor" has the meaning set forth in Regulation D
promulgated under the Securities Act.
"Adverse Consequences" means all actions, suits, proceedings, hearings,
investigations, charges, complaints, claims, demands, injunctions, judgments,
orders, decrees, rulings, damages, dues, penalties, fines, costs, amounts paid
in settlement, Liabilities, obligations, Taxes, liens, losses, expenses, and
fees, including court costs and reasonable attorneys' fees and expenses.
"Affiliate" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act.
"Audited Balance Sheet Date" has the meaning set forth in Section
4(n)(i) below.
"Authorizations" has the meaning set forth in Section 4(y) below.
"Benefit Plan" has the meaning set forth in Section 4(x) below.
"Brand" means Brand Manufacturing Corporation, a New York corporation.
"Brand and TCE Audited Financial Statements" has the meaning in
Section 4(n)(i) below.
<PAGE> 6
"CERCLA" has the meaning set forth in Section 4(ii) below.
"Certificate of Designation" means the Certificate of Designation in
the form of Exhibit A attached hereto.
"Certificate of Merger" has the meaning set forth in Section 2(b)(i)
below.
"Closing" has the meaning set forth in Section 2(b)(ii) below.
"Closing Date" has the meaning set forth in Section 2(b)(ii) below.
"Commonly Controlled Entity" has the meaning set forth in Section 4(x)
below.
"Confidential Information" means any information concerning the
businesses and affairs of the Target and its Subsidiaries that is not already
generally available to the public.
"Contracts" has the meaning set forth in Section 4(s) below.
"Definitive Source Proxy Materials" means the definitive proxy
materials relating to the Special Source Meeting.
"Delaware General Corporation Law" means the General Corporation Law of
the State of Delaware, as amended.
"Disclosure Schedule" has the meaning set forth in Section 4 below.
"Effective Time" has the meaning set forth in Section 2(b)(i) below.
"Environmental, Health, and Safety Requirements" shall mean all
federal, state, local and foreign statutes, regulations, ordinances and other
provisions having the force or effect of law, all judicial and administrative
orders and determinations, all contractual obligations and all common law
concerning public health and safety, worker health and safety, and pollution or
protection of the environment, including without limitation all those relating
to the presence, use, production, generation, handling, transportation,
treatment, storage, disposal, distribution, labeling, testing, processing,
discharge, release, threatened release, control, or cleanup of any hazardous
materials, substances or wastes, chemical substances or mixtures, pesticides,
pollutants, contaminants, toxic chemicals, petroleum products or byproducts,
asbestos, polychlorinated biphenyls, noise or radiation, each as amended and as
now or hereafter in effect.
"Environmental Permits" has the meaning set forth in Section 4(ii)
below.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Financial Statement" has the meaning set forth in Section 4(n)(ii)
below.
2
<PAGE> 7
"Flegel" means S. Leslie Flegel.
"Foreign Plans" has the meaning set forth in Section 4(x)(ix)(L)(IV)
below.
"GAAP" means United States generally accepted accounting principles as
in effect from time to time.
"Gillis" has the meaning set forth in the preface above.
"Governmental Entity" has the meaning set forth in Section 4(w)(iii)
below.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"Indemnified Party" has the meaning set forth in Section 7(d)(i) below.
"Indemnifying Party" has the meaning set forth in Section 7(d)(i)
below.
"Intellectual Property" means (a) all inventions (whether patentable or
unpatentable and whether or not reduced to practice), all improvements thereto,
and all patents, patent applications, and patent disclosures, together with all
reissuances, continuations, continuations-in-part, revisions, extensions, and
reexaminations thereof, (b) all trademarks, service marks, trade dress, logos,
trade names, and corporate names, together with all translations, adaptations,
derivations, and combinations thereof and including all goodwill associated
therewith, and all applications, registrations, and renewals in connection
therewith, (c) all copyrightable works, all copyrights, and all applications,
registrations, and renewals in connection therewith, (d) all mask works and all
applications, registrations, and renewals in connection therewith, (e) all trade
secrets and confidential business information (including ideas, research and
development, know-how, formulas, compositions, manufacturing and production
processes and techniques, technical data, designs, drawings, specifications,
customer and supplier lists, pricing and cost information, and business and
marketing plans and proposals), (f) all computer software (including data and
related documentation), (g) all other proprietary rights, and (h) all copies and
tangible embodiments thereof (in whatever form or medium).
"Interim Balance Sheet Date" has the meaning set forth in Section
4(n)(ii) below.
"Interim Financial Statements" has the meaning set forth in Section
4(n)(ii) below.
"Ledecky" has the meaning set forth in the preface above.
"Liabilities" has the meaning set forth in Section 4(o) below.
"May 1998 Agreement" has the meaning set forth in Section 7(b)(i)
below.
3
<PAGE> 8
"Merger" has the meaning set forth in Section 2(a) below.
"Missouri General Corporation Law" means the General and Business
Corporation Act of the State of Missouri, as amended.
"Multiemployer Plan" has the meaning set forth in ERISA Section 3(37).
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"Party" has the meaning set forth in the preface above.
"PBGC" means the Pension Benefit Guaranty Corporation.
"PCB" has the meaning set forth in Section 4(ii) below.
"Pension Plan" has the meaning set forth in Section 4(x) below.
"Person" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization, or a governmental entity (or any department, agency, or political
subdivision thereof).
"Product Liability" has the meaning set forth in Section 4(kk) below.
"Put Transaction" means the consummation of the transaction endorsed to
occur immediately prior to Merger, pursuant to which Target acquires shares of
Brand and TCE held by Gillis and Weiner in exchange for cash and Target Shares.
"Real Property" has the meaning set forth in Section 4(u) below.
"Regulations" has the meaning set forth in Section 4(y) below.
"Release" has the meaning set forth in Section 4(ii) below.
"Requisite Source Shareholder Approval" means the approval of the
holders of a majority of the outstanding Source Common Stock of the issuance of
Source Common Stock upon the conversation of the Class A Convertible Preferred
Stock voting at a shareholders meeting at which a quorum is present held for
such purpose. For purposes of determining such majority vote, shares of Common
Stock held by the holders of the Source Preferred Stock shall be disregarded.
"Securities Act" means the Securities Act of 1933, as amended.
4
<PAGE> 9
"Source" has the meaning set forth in the preface above.
"Source Common Stock" means any share of the Common Stock, $.01 par
value per share, of the Source.
"Source Preferred Stock" means any share of the Class A Convertible
Preferred Stock $.01 par value per share, of the Source.
"Special Source Meeting" has the meaning set forth in Section 2(h)
below.
"Subsidiary" means any corporation with respect to which a specified
Person (or a Subsidiary thereof) owns a majority of the common stock or has the
power to vote or direct the voting of sufficient securities to elect a majority
of the directors.
"Surviving Corporation" has the meaning set forth in Section 2(a)
below.
"S-US" has the meaning set forth in the preface above.
"Target" has the meaning set forth in the preface above.
"Target Audited Financial Statements" has the meaning set forth in
Section 4(n)(i) below.
"Target Management Shareholders" has the meaning set forth in the
preface above.
"Target Share" means any share of the Common Stock, $.001 par value per
share, of the Target.
"Target Shareholder" has the meaning set forth in the preface above.
"Tax" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Code Section 59
A), customs duties, capital stock, franchise, profits, withholding, social
security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or
add-on minimum, estimated, or other tax of any kind whatsoever, including any
interest, penalty, or addition thereto, whether disputed or not.
"Tax Return" means any return, declaration, report, claim for refund,
or information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"TCE" means TCE Corporation, a Delaware corporation.
"Third Party Claim" has the meaning set forth in Section 7(d)(ii)
below.
5
<PAGE> 10
"Weiner" has the meaning set forth in the preface above.
"Welfare Plan" has the meaning set forth in Section 4(x) below.
"Year 2000 Compliant" means, with respect to each System, that each
System is designed to be used before, during, and after January 1, 2000, and
will accurately accept date input and process, store and output date data and
date-related data, including, without limitation, calculating, comparing,
sorting and sequencing such data and calculating leap years before, during and
after January 1, 2000 without any manual intervention.
2. Basic Transaction.
(a) The Merger. Subject to the terms and conditions set forth in this
Agreement, on the Closing Date (as hereinafter defined), Target will merge with
and into S-US (the "Merger") pursuant to the provisions of the Delaware General
Corporation Law whereupon the separate corporate existence of Target shall
cease. S-US shall be the surviving corporation of the Merger (sometimes referred
to herein as the "Surviving Corporation") and shall continue to be governed by
the laws of the State of Delaware.
(b) Method of Effecting Merger and Closing. The Merger shall be
effected as follows:
(i) Subject to the satisfaction or waiver of all other conditions
to the Closing (as hereinafter defined), a certificate of merger, in
substantially the form attached hereto as Exhibit B (the "Certificate of
Merger"), duly executed by the proper officers of Target and S-US, shall be
filed with the Secretary of State of Delaware on the Closing Date. The Merger
shall become effective and be consummated immediately upon the filing of the
Certificate of Merger. The date and time of such filing is herein referred to as
the "Effective Time."
(ii) The closing of the transactions contemplated by this Agreement
(the "Closing") shall take place at the offices of Richards & O'Neil, L.L.P. in
New York, New York, commencing at 9:00 a.m. local time on the business day
following the satisfaction or waiver of all conditions to the obligations of the
Parties to consummate the transactions contemplated hereby (other than
conditions with respect to actions the respective Parties will take at the
Closing itself) or such other date as the Parties may mutually determine (the
"Closing Date").
(c) Actions at the Closing. At the Closing, (i) the Target will deliver
to the Source the various certificates, instruments, and documents referred to
in Section 6(a) below, and (ii) the Source will deliver to the Target the
various certificates, instruments, and documents referred to in Section 6(b)
below.
(d) Conversion of Target Shares. At the Effective Time, by virtue of
the Merger and without any action on the part of the holder thereof, each Target
Share that is issued and outstanding immediately prior to the Effective Time
shall be converted into the right to receive
6
<PAGE> 11
.3626 shares of Source Common Stock and .2772 shares of Source Preferred Stock
and each Target Share shall be canceled. No Target Share shall be deemed to be
outstanding or to have any rights after the Effective Time. Immediately after
the Effective Time, the Source will furnish to the Target Shareholders stock
certificates representing the Source Common Stock and Source Preferred Stock
that they have the right to receive pursuant to the conversion of the Target
Shares described above.
(e) Effect of Merger.
(i) Upon consummation of the Merger and pursuant to this Agreement,
the Surviving Corporation shall possess all the rights, privileges, immunities
and franchises, as well as of a public as of a private nature, of S-US and
Target; and all property, whether real, personal or mixed, and all debts due on
whatever account, including subscriptions to shares and all other chooses in
action, and all and every other interest, of or belonging or due to each of the
merging corporations, shall be taken and deemed to be transferred to and vested
in the Surviving Corporation without further act or deed; and the title to any
real estate, or any interest therein, vested in either of such corporations
shall not revert or be in any way impaired by reason of the Merger. The Merger
shall have all further effects as specified in all applicable corporate laws of
the State of Delaware and such other state, if any, the laws of which shall
govern the Merger.
(ii) The Certificate of Incorporation and By-Laws of S-US in effect
immediately prior to the Effective Time shall be the Certificate of
Incorporation and By-Laws of the Surviving Corporation, except to the extent
amended in the Certificate of Merger in accordance with their respective
provisions and applicable law.
(iii) The officers and members of the Board of Directors of S-US
immediately prior to Effective Time shall be the officers and members of the
Board of Directors of the Surviving Corporation, and such persons will serve
until their respective successors are duly elected and qualified.
(f) Exchange Procedures. On the Closing Date, the Target Shareholders
shall deliver to Source stock certificates representing their Target Shares,
together with such letters of transmittal or other transfer documents as Source
may deem necessary or appropriate. In exchange therefor, the Target Shareholders
shall be entitled to receive the number of shares of Source Common Stock and
Source Preferred Stock described in Section 2(d). After the Effective Time,
there shall be no further transfer on the records of the Target of certificates
representing shares of the Target Shares and after certificates are presented to
the Target for transfer, they shall be canceled against delivery of the shares
of Source Common Stock and Source Preferred Stock provided therefor in this
Agreement.
(g) Transfer Restrictions; Closing of Stock Transfer Books. The stock
transfer books of the Target shall be closed at the close of business on the
date hereof. In the event of a transfer of ownership of the Target Shares which
is not registered in the transfer records prior to the closing of such records,
the Source Common Stock and Source Preferred Stock issuable in
7
<PAGE> 12
conversion of such stock pursuant to this Agreement may be delivered to a
transferee, if the certificate representing such Target Shares is presented to
Source, accompanied by all documents required to evidence and effect such
transfer and all applicable stock transfer taxes are paid. Source shall be
entitled to rely upon the stock transfer books of the Target to establish the
identity of Target Shareholders, which books shall be conclusive with respect to
the ownership of such shares.
(h) Source Shareholders Meeting. Immediately after the Closing, Source
will proceed with the preparation of the Definitive Source Proxy Materials in
anticipation of a special meeting of Source shareholders to be held as soon as
practicable (the "Special Source Meeting") to obtain the Requisite Source
Shareholder Approval of the conversion of the Source Preferred Stock into Source
Common Stock pursuant to the terms of the Certificate of Designation, with an
intent to secure the Requisite Source Shareholder Approval by March 31, 1999.
Source agrees to keep counsel to the Target Shareholders informed as to proposed
date for the Special Source Meeting and the preparations therefor. In the event
such Special Source Meeting is not held or the Requisite Source Shareholder
Approval has not been obtained on or before June 30, 1999, the Source Preferred
Stock may be converted into demand notes at the election of the holders of the
Source Preferred Stock pursuant to the terms of the Certificate of Designation.
3. Representations and Warranties Concerning the Transaction.
(a) Representations and Warranties of Target Shareholders. Each Target
Shareholder represents and warrants to the Source that the statements contained
in this Section 3(a) are correct and complete as of the date of this Agreement
and will be correct and complete as of the Closing Date (as though made then
and as though the Closing Date were substituted for the date of this Agreement
throughout this Section 3(a)) with respect to himself, except as set forth in
Exhibit C attached hereto.
(i) Authorization of Transaction. Each Target Shareholder has full
power and authority to execute and deliver this Agreement and to perform his
obligations hereunder. This Agreement constitutes the valid and legally binding
obligation of each Target Shareholder, enforceable in accordance with its terms
and conditions. No Target Shareholder need give any notice to, make any filing
with, or obtain any authorization, consent, or approval of any government or
governmental agency in order to consummate the transactions contemplated by this
Agreement including, without limitation, any premerger notification pursuant to
the HSR Act.
(ii) Noncontravention. Neither the execution and the delivery of
this Agreement, nor the consummation of the transactions contemplated hereby,
will (A) violate any constitution, statute, regulation, rule, notice
requirement, injunction, judgment, order, decree, ruling, charge, or other
restriction of any government, governmental agency, or court to which any Target
Shareholder is subject or (B) conflict with, result in a breach of, constitute a
default under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under any
agreement, contract, lease, license, instrument, or other
8
<PAGE> 13
arrangement to which any Target Shareholder is a party or by which he is bound
or to which any of his assets is subject.
(iii) Brokers' Fees. No Target Shareholder has any Liability or
obligation to pay any fees or commissions to any broker, finder, or agent with
respect to the transactions contemplated by this Agreement for which the Source
could become liable or obligated.
(iv) Investment. Each Target Shareholder (A) understands that the
Source Common Stock and the Source Preferred Stock have not been, and will not
be, registered under the Securities Act, or under any state securities laws, and
are being offered and sold in reliance upon federal and state exemptions for
transactions not involving any public offering, (B) is acquiring the Source
Common Stock and the Source Preferred Stock solely for his own account for
investment purposes, and not with a view to the distribution thereof, (C) is a
sophisticated investor with knowledge and experience in business and financial
matters, (D) has received certain information concerning the Source and has had
the opportunity to obtain additional information as desired in order to evaluate
the merits and the risks inherent in holding the Source Common Stock and the
Source Preferred Stock, (E) is able to bear the economic risk and lack of
liquidity inherent in holding the Source Common Stock and the Source Preferred
Stock, and (F) is an Accredited Investor as that term is defined in Rule 501(a)
of the Securities Act.
(v) Target Shares. Each Target Shareholder holds of record and owns
beneficially the number of Target Shares set forth next to his name in Section
4(b) of the Disclosure Schedule, free and clear of any restrictions on transfer
(other than any restrictions under the Securities Act and state securities
laws), Taxes, Security Interests, options, warrants, purchase rights, contracts,
commitments, equities, claims, and demands. No Target Shareholder is a party to
any option, warrant, purchase right, or other contract or commitment that could
require such Target Shareholder to sell, transfer, or otherwise dispose of any
capital stock of the Target (other than this Agreement). No Target Shareholder
is a party to any voting trust, proxy, or other agreement or understanding with
respect to the voting of any capital stock of the Target.
(b) Representations and Warranties of the Source. The Source represents
and warrants to the Target Shareholders that the statements contained in this
Section 3(b) are correct and complete as of the date of this Agreement and will
be correct and complete as of the Closing Date (as though made then and as
though the Closing Date were substituted for the date of this Agreement
throughout this Section 3(b)), except as set forth in Exhibit D attached hereto.
(i) Organization of the Source. The Source is a corporation duly
organized, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation. The Source is duly authorized to conduct
business and is in good standing under the laws of each jurisdiction where such
qualification is required.
(ii) Authorization of Transaction. The Source has full power and
authority (including full corporate power and authority) to (i) execute and
deliver this Agreement and to perform its obligations hereunder (ii) own its
property and conduct its business as it is presently
9
<PAGE> 14
being conducted. This Agreement constitutes the valid and legally binding
obligation of the Source, enforceable in accordance with its terms and
conditions. The Source need not give any notice to, make any filing with, or
obtain any authorization, consent, or approval of any government or governmental
agency in order to consummate the transactions contemplated by this Agreement
including, without limitation, any premerger notification pursuant to the HSR.
(iii) Noncontravention. Neither the execution and the delivery of
this Agreement, nor the consummation of the transactions contemplated hereby,
will (A) violate any constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which the Source is subject or any provision of
its charter or bylaws or (B) conflict with, result in a breach of, constitute a
default under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under any
agreement, contract, lease, license, instrument, or other arrangement to which
the Source is a party or by which it is bound or to which any of its assets is
subject.
(iv) Brokers' Fees. The Source has no Liability or obligation to
pay any fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which Ledecky could become
liable or obligated.
(v) Organization of S-US. S-US is a corporation duly organized,
validly existing, and in good standing under the laws of the jurisdiction of its
incorporation.
(vi) Capitalization. The entire authorized capital stock of the
S-US consists of 3,000 S-US Shares, of which 1,000 S-US Shares are issued and
outstanding and 0 S-US Shares are held in treasury. All of the issued and
outstanding S-US Shares have been duly authorized, are validly issued, fully
paid, and nonassessable, and are held of record by the Source. There are no
outstanding or authorized options, warrants, purchase rights, subscription
rights, conversion rights, exchange rights, or other contracts or commitments
that could require the S-US to issue, sell, or otherwise cause to become
outstanding any of its capital stock. There are no outstanding or authorized
stock appreciation, phantom stock, profit participation, or similar rights with
respect to the S-US. There are no voting trusts, proxies, or other agreements or
understandings with respect to the voting of the capital stock of the S-US.
(vii) Authorization of Transaction. S-US has full power and
authority (including full corporate power and authority) to execute and deliver
this Agreement and to perform its obligations hereunder. This Agreement
constitutes the valid and legally binding obligation of S-US, enforceable in
accordance with its terms and conditions. S-US need not give any notice to, make
any filing with, or obtain any authorization, consent, or approval of any
government or governmental agency in order to consummate the transactions
contemplated by this Agreement including, without limitation, any premerger
notification pursuant to the HSR.
(viii) Noncontravention. Neither the execution and the delivery of
this Agreement, nor the consummation of the transactions contemplated hereby,
will (A) violate any
10
<PAGE> 15
constitution, statute, regulation, rule, injunction, judgment, order, decree,
ruling, charge, or other restriction of any government, governmental agency, or
court to which S-US is subject or any provision of its charter or bylaws or (B)
conflict with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate, modify,
or cancel, or require any notice under any agreement, contract, lease, license,
instrument, or other arrangement to which S-US is a party or by which it is
bound or to which any of its assets is subject.
(ix) Brokers' Fees. S-US has no Liability or obligation to pay any
fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which Target Shareholder could
become liable or obligated.
(x) Source Common Stock and Source Preferred Stock. The shares of
Source Common Stock and Source Preferred Stock to be issued in the Merger will
be, as of the Effective Time, duly and validly issued, fully paid and
nonassessable.
(xi) Source Disclosure Document. The disclosure document dated
January 5, 1999 delivered by the Source to each of the Target Shareholders does
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading;
provided, however, that such representation does not include any information
contained in the disclosure document that was provided to the Source by third
parties.
(xii) As of January 6, 1998, 9,633,596 shares of Source Common
Stock were issued and outstanding and 0 shares of Source Preferred Stock were
issued and outstanding. All of the issued and outstanding shares of Source
Common Stock have been duly authorized, are validly issued, fully paid and
non-assessable. As of January 6, 1998, there were opinions and warrants
outstanding for 1,651,703 shares of Source Common Stock.
4. Representations and Warranties Concerning the Target and Its
Subsidiaries. Ledecky represents and warrants with respect to himself and
Target, and the Target Shareholders represent and warrant with respect to
themselves and the Subsidiaries of the Target, to the Source that the statements
contained in this Section 4 are correct and complete as of the date of this
Agreement and will be correct and complete as of the Closing Date (as though
made then and as though the Closing Date were substituted for the date of this
Agreement throughout this Section 4), except as set forth in the disclosure
schedule delivered by the Target Shareholders to the Source on the date hereof
and initialed by the Parties (the "Disclosure Schedule"). Nothing in the
Disclosure Schedule shall be deemed adequate to disclose an exception to a
representation or warranty made herein, however, unless the Disclosure Schedule
identifies the exception with reasonable particularity and describes the
relevant facts in reasonable detail. Without limiting the generality of the
foregoing, the mere listing (or inclusion of a copy) of a document or other
item shall not be deemed adequate to disclose an exception to a representation
or warranty made herein (unless the representation or warranty has to do with
the existence of the document or other item itself). The Disclosure Schedule
will be arranged in paragraphs corresponding to the lettered and numbered
paragraphs contained in this Section 4.
11
<PAGE> 16
(a) Organization, Qualification, and Corporate Power. Each of the
Target and its Subsidiaries is a corporation duly organized, validly existing,
and in good standing under the laws of the jurisdiction of its incorporation.
Each of the Target and its Subsidiaries is duly authorized to conduct business
and is in good standing under the laws of each jurisdiction where such
qualification is required. Each of the Target and its Subsidiaries has full
corporate power and authority and all licenses, permits, and authorizations
necessary to carry on the businesses in which it is engaged and to own and use
the properties owned and used by it. Section 4(a) of the Disclosure Schedule
lists the directors and officers of each of the Target and its Subsidiaries.
The Target Shareholders have delivered to the Source correct and complete
copies of the charter and bylaws of each of the Target and its Subsidiaries (as
amended to date). The minute books (containing the records of meetings of the
stockholders, the board of directors, and any committees of the board of
directors), the stock certificate books, and the stock record books of each of
the Target and its Subsidiaries are correct and complete. None of the Target
and its Subsidiaries is in default under or in violation of any provision of
its charter or bylaws.
(b) Capitalization. The entire authorized capital stock of the Target
consists of 100,000,000 Target Shares, of which 5,313,854 Target Shares are
issued and outstanding and 0 Target Shares are held in treasury. All of the
issued and outstanding Target Shares have been duly authorized, are validly
issued, fully paid, and nonassessable, and are held of record by the Target
Shareholders as set forth in Section 4(b) of the Disclosure Schedule. There are
no outstanding or authorized options, warrants, purchase rights, subscription
rights, conversion rights, exchange rights, or other contracts or commitments
that could require the Target to issue, sell, or otherwise cause to become
outstanding any of its capital stock. There are no outstanding or authorized
stock appreciation, phantom stock, profit participation, or similar rights with
respect to the Target. There are no voting trusts, proxies, or other agreements
or understandings with respect to the voting of the capital stock of the Target.
(c) Authorization of Transaction. The Target has full power and
authority (including full corporate power and authority) to execute and deliver
the Agreement and to perform its obligations thereunder. The Agreement
constitutes the valid and legally binding obligation of the Target, enforceable
in accordance with its terms and conditions.
(d) Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
(A) violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which any of the Target and its Subsidiaries is
subject or any provision of the charter or bylaws of any of the Target and its
Subsidiaries or (B) conflict with, result in a breach of, constitute a default
under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under any
agreement, contract, lease, license, instrument, or other arrangement to which
any of the Target and its Subsidiaries is a party or by which it is bound or to
which any of its assets is subject (or result in the imposition of any Security
Interest upon any of its assets). None of the Target and its Subsidiaries needs
to give any notice to, make any filing with, or obtain any authorization,
12
<PAGE> 17
consent, or approval of any government or governmental agency in order for the
Parties to consummate the transactions contemplated by this Agreement.
(e) Brokers' Fees. None of the Target and its Subsidiaries has any
Liability or obligation to pay any fees or commissions to any broker, finder, or
agent with respect to the transactions contemplated by this Agreement.
(f) Certain HSR Matters. The Target Shareholders represent and warrant
that neither they individually (or as ultimate parent entity of any other person
or entity) nor the Target have net sales or assets of one hundred million
dollars, within the meaning of the HSR Act.
(g) Capital Stock of the Subsidiaries. The authorized capital stock of
each Subsidiary of Target consists solely of the shares shown on the Disclosure
Schedule, of which only the shares shown on such Disclosure Schedule to be
issued and outstanding are issued and outstanding. All of the issued and
outstanding shares of the capital stock of each Subsidiary are owned by the
Target or one of its Subsidiaries as set forth on the Disclosure Schedule, and
are free and clear of all liens, security interests, pledges, charges, voting
trusts. restrictions, encumbrances and claims of every kind. All of the issued
and outstanding shares of the Subsidiaries capital stock are duly authorized and
validly issued, fully paid and nonassessable. None of such shares will have
been, and none of the shares from which they will have derived were, issued in
violation of the preemptive rights of any past or present stockholder, whether
contractual or statutory.
(h) Transactions in Capital Stock. No Subsidiary has acquired any
treasury stock since December 31, 1995. No option, warrant, call, conversion
right or commitment of any kind exists which obligates any Subsidiary to issue
any of its authorized but unissued capital stock. No Subsidiary has an
obligation (contingent or otherwise) to purchase, redeem or otherwise acquire
any of its equity securities or any interests therein or to pay any dividend or
make any. distribution in respect thereof.
(i) No Bonus Shares. None of the shares of capital stock of the
Subsidiaries was, and none of the shares of the Subsidiaries' capital stock will
be, issued pursuant to awards, grants or bonuses, whether of stock or of options
or other rights.
(j) Subsidiaries. Neither the Target nor any Subsidiary currently owns,
of record or beneficially, or controls, directly or indirectly, any capital
stock, any securities convertible into capital stock or any other equity or
ownership interest in any corporation, association or other business entity.
Neither the Target nor any Subsidiary is directly or indirectly, a participant
in any joint venture, partnership or other noncorporate entity.
(k) Predecessor Status: etc. The Disclosure Schedule lists all names of
all predecessor companies of the Target and each Subsidiary, including the names
of all entities from whom the Target and each Subsidiary previously acquired
significant assets. Except as set
13
<PAGE> 18
forth on the Disclosure Schedule, no Subsidiary has ever been a subsidiary or
division of another corporation or been a part of an acquisition which was later
rescinded.
(l) Spin-offs. Since December 31, 1995, there has not been any sale or
spin-off of significant assets of the Target or any Subsidiary other than in the
ordinary course of business.
(m) No Third Party Options. There are no existing agreements, options,
commitments or rights with, of or to any person to acquire any properties,
assets or rights of the Target or any Subsidiary or any interest therein.
(n) Financial Statements. Attached hereto as Exhibit E are copies of
the following audited financial statements of the Target:
(i) the consolidated balance sheet of the Target at March 31, 1998
and the related statements of operations, cash flows and changes in
stockholders' equity for the period March 25, 1998 through March 31, 1998,
certified by Ernst & Young, the Target's independent public accountants,
together with the report of such independent public accountants thereon (the
"Target Audited Financial Statements"), the balance sheets of Brand and TCE at
December 31, 1997 (the "Audited Balance Sheet Date"), December 31, 1996 and
December 31, 1995, and the related statements of income, cash flows and changes
in stockholders' equity for the fiscal years then ended, certified by Ernst &
Young LLP with respect to December 31, 1997 and Lopez Edwards Frank & Co. LLP,
the independent public accountants of Brand and TCE, with respect to
December 31, 1996 and December 31, 1995, together with the report of such
independent public accountants thereon (the "Brand and TCE Audited Financial
Statements"); and
(ii) the unaudited balance sheets of Brand and TCE at September 30,
1998 (the "Interim Balance Sheet Date") and September 30, 1997, and the related
statements of income and cash flows for the interim periods then ended (the
"Brand and TCE Interim Financial Statements," and together with the Target
Audited Financial Statements and the Brand and TCE Audited Financial Statements,
the "Financial Statements").
All of the Financial Statements have been prepared in accordance with GAAP
consistently applied throughout the periods involved. All of the balance sheets
included in the Financial Statements, including the related notes, fairly
present the financial position, assets and liabilities (whether accrued,
absolute, contingent or otherwise) of the Target, Brand and TCE at the dates
indicated and such statements of income, cash flows and changes in stockholders'
equity fairly present the results of operations, cash flows and changes in
stockholders' equity of the Target, Brand and TCE for the periods indicated. The
Unaudited Financial Statements contain all adjustments, which are solely of a
normal recurring nature, necessary to present fairly the financial position for
the periods then ended.
(o) Liabilities and Obligations.
14
<PAGE> 19
(i) The Disclosure Schedule contains an accurate list, as of a date
not more than two days prior to the date of this Agreement, of: (i) all
liabilities incurred after the Interim Balance Sheet Date other than in the
ordinary course of business; and (ii) all material liabilities incurred after
the Interim Balance Sheet Date in the ordinary course of business. Each of the
foregoing liabilities that has not heretofore been paid or discharged is so
noted on the Disclosure Schedule. For purposes of this Agreement, "liabilities"
means liabilities of any kind, character or description, whether accrued,
absolute, secured or unsecured, contingent or otherwise.
(ii) For each such liability for which the amount is not fixed or
is contested, the Disclosure Schedule includes a summary description of the
liability, together with copies of all relevant documentation relating thereto,
detail of all amounts claimed and any other action or relief sought, the names
of the claimant and all other parties to the claim, suit or proceeding, the name
of each court or agency before which such claim, suit or proceeding is pending,
the date such claim, suit or proceeding was instituted, and a best estimate of
the maximum amount, if any, which is likely to become payable with respect to
each such liability. If no estimate is provided the best estimate shall for
purposes of this Agreement be deemed to be zero.
(iii) All of the liabilities reflected on the unaudited
consolidated balance sheet included in the Interim Financial Statements arose
only out of or were incurred only in connection with the conduct of the
respective businesses of the Target. Except as set forth in the Disclosure
Schedule and except for liabilities not required to be set forth thereon
pursuant to Section 4(o)(i), the Target has no liabilities or obligations with
respect to their respective businesses, whether direct or indirect. matured or
unmatured, absolute contingent or otherwise. and there is no condition,
situation or set of circumstances which would reasonably be expected to result
in any such liability.
(p) Accounts and Notes Receivable. The Disclosure Schedule contains a
complete and accurate list, as of January 6, 1999, of the accounts and notes
receivable of the Target (including, without limitation, receivables from and
advances to employees and the Target Shareholders) (collectively, the "Accounts
Receivable"). The Disclosure Schedule contains an aging of all Accounts
Receivable showing amounts due in 30-day aging categories. All Accounts
Receivable represent valid obligations arising from bona fide business
transactions in the ordinary course of business consistent with past practice.
The Accounts Receivable are, and as of the Closing Date will be, current and
collectible net of any respective reserves shown on the Target's books and
records (which reserves are adequate and calculated consistent with past
practice). Subject in the case of Accounts Receivable reflected on the Target's
balance sheet to such reserves reflected on such balance sheet, each of the
Accounts Receivable will be collected in full within one hundred twenty (120)
days after the day on which it first became due and payable. There is no
contest, claim, counterclaim, defense or right of set-off, other than rebates
and returns in the ordinary course of business, under any contract with any
obligor of any Account Receivable relating to the amount or validity of such
Account Receivable. The allowance for collection losses on the Interim Balance
Sheet has been determined in accordance with GAAP consistent with past practice.
15
<PAGE> 20
(q) Permits. Each material Permit, together with the name of the
Governmental Entity issuing, such Permit is set forth on the Disclosure
Schedule. Such Permits are valid and in full force and effect and none of such
Permits will be terminated or impaired or become terminable as a result of the
transactions contemplated by this Agreement.
(r) Real and Personal Property. The Disclosure Schedule contains an
accurate list, including substantially complete descriptions as of the Interim
Balance Sheet Date, of all the real and personal property (which in the case of
personal property had an original cost in excess of $25,000) owned or leased by
the Target and its Subsidiaries, including true and correct copies of leases for
equipment and properties on which are situated buildings, warehouses and other
structures used in the operation of the business of each of the Target and its
Subsidiaries and including an indication as to which assets were formerly owned
by any Target Shareholder or Affiliate of any of the Target or its Subsidiaries.
Except as set forth on the Disclosure Schedule, all of the Target's and its
Subsidiaries' buildings, leasehold improvements, structures, facilities,
equipment and other material items of tangible property and assets are in good
operating condition and repair, subject to normal wear and maintenance, are
usable in the regular and ordinary course of business and conform to all
applicable laws. ordinances, codes, rules and regulations, and Authorizations
relating to their construction, use and operation. All leases set forth on the
Disclosure Schedule have been duly authorized, executed and delivered and
constitute the legal, valid and binding obligations of the Target or its
Subsidiaries and, to the knowledge of the Target Shareholders, no other party to
any such lease is in default thereunder and such leases constitute the legal,
valid and binding obligations of such other parties. All fixed assets used by
the Target and its Subsidiaries in the operation of its business are either
owned by such entity or leased under an agreement set forth on the Disclosure
Schedule. The Target and the Target Shareholders have heretofore delivered to
the Source copies of all title reports and title insurance policies received or
held by each of the Target and its Subsidiaries. The Target and the Target
Shareholders have indicated on the Disclosure Schedule a summary description of
all plans or projects involving the opening of new operations, expansion of any
existing operations or the acquisition of any real property or existing business
to which management of the Target and its Subsidiaries has devoted any
significant effort or expenditure in the two-year period prior to the date of
this Agreement which, if pursued by the Target and its Subsidiaries would
require additional expenditures of significant efforts or capital.
(s) Contracts and Commitments. The Disclosure Schedule sets forth an
accurate, correct and complete list of all agreements, contracts, commitments,
arrangements and understandings, written or oral, including all amendments and
supplements thereto, of each of the Target and its Subsidiaries (the
"Contracts"), to which any of the Target or its Subsidiaries is a party or is
bound, or by which any of their respective assets are bound. and which involve
any:
(i) agreement, contract, commitment, arrangement or understanding
with any present or former employee or consultant or for the employment of any
person, including any consultant;
16
<PAGE> 21
(ii) agreement, contract, commitment, arrangement or understanding
for the future purchase of, or payment for, supplies or products, or for the
performance of services by a third party involving in any one case $10,000 or
more;
(iii) agreement, contract, commitment, arrangement or understanding
to sell or supply products or to perform services involving in any one case
$10,000 or more;
(iv) agreement, contract, commitment, arrangement or understanding
containing requirements or "take or pay" provisions;
(v) agreement, contract, commitment, arrangement or understanding
not otherwise listed on the Disclosure Schedule and continuing over a period of
more than six months from the date hereof or exceeding $10,000 in value;
(vi) distribution, dealer, representative or sales agency
agreement, contract, commitment, arrangement or understanding;
(vii) agreement, contract, commitment. arrangement or understanding
containing a provision to indemnify any person or entity or assume any tax,
environmental or other liability;
(viii) agreement, contract, commitment, arrangement or
understanding with federal, state, local, regulatory or other governmental
entities.
(ix) note, debenture, bond, equipment trust agreement, letter of
credit agreement, loan agreement or other contract or commitment for the
borrowing or lending of money or agreement or arrangement for a line of credit
or guarantee, pledge or undertaking of the indebtedness of any other person;
(x) agreement, contract, commitment, arrangement or understanding
for any charitable or political contribution;
(xi) agreement, contract, commitment. arrangement or understanding
for any capital expenditure or leasehold improvement in excess of $10,000;
(xii) agreement, contract, commitment, arrangement or understanding
or restraining any of the Target or its Subsidiaries or any successor thereto,
or to the knowledge of the Target and each Target Shareholder, any employee of
any of the Target or its Subsidiaries or any successor thereto, from engaging or
competing in any manner or in any business;
(xiii) license, franchise, distributorship or other agreement which
relates in whole or in part to any software, patent, trademark, trade name.
service mark or copyright or to any ideas, technical assistance or other
know-how of or used by any of the Target or its Subsidiaries;
17
<PAGE> 22
(xiv) agreement, contract, commitment, arrangement or understanding
to which any of the Target or its Subsidiaries, on the one hand, and any
affiliate, officer, director or stockholder of any of the Target or its
Subsidiaries, on the other hand, are parties; or
(xv) material agreement, contract, commitment, arrangement or
understanding not made in the ordinary course of business.
Each of the Contracts listed on the Disclosure Schedule, or not required to be
listed therein because of the amount thereof, is valid and enforceable in
accordance with its terms; the Target and each Subsidiary is, and to the
knowledge of the Target and each Target Shareholder, all other parties thereto
are, in compliance with the provisions thereof. Neither the Target nor any
Subsidiary is, and to the knowledge of Target and each Target Shareholder, no
other party thereto is, in default in the performance, observance or fulfillment
of any material obligation, covenant or condition contained therein, and no
event has occurred which with or without the giving of notice or lapse of time,
or both, would constitute a default thereunder. None of the rights of any of the
Target or its Subsidiaries under any Contract will be impaired by the
consummation of the transactions contemplated hereby, and subject to obtaining
any required consents set forth on the Disclosure Schedule, all such rights will
be enforceable by the Source after the Closing Date without the consent or
agreement of any other party. The Target has delivered accurate and complete
copies of each Contract to the Source. No Contract obligates any party to obtain
any consent in connection with the transactions contemplated hereby.
(t) Government Contracts. Neither the Target nor its Subsidiaries is
now or has ever been a party to any contract with any Governmental Entity
subject to price redetermination or renegotiation.
(u) Title to Real Property. All real property and all other interests
in and rights to real property, that are owned or leased by the Target and its
Subsidiaries and used in connection with their business are set forth on the
Disclosure Schedule (the "Real Property"). The Target and its Subsidiaries do
not occupy or use in the conduct of their business, or have rights in or to, any
Real Property other than the real property, listed in the Disclosure Schedule.
(v) Insurance. The assets, properties and operations of each of the
Target and its Subsidiaries are insured under various policies of general
liability and other forms of insurance, all of which are described in the
Disclosure Schedule, which discloses for each policy the risks insured against.
coverage limits, deductible amounts, all outstanding claims thereunder, and
whether the terms of such policy provide for retrospective premium adjustments.
All such policies are in full force and effect in accordance with their terms,
no notice of cancellation has been received, and there is no existing default or
event which, with the giving of notice or lapse of time or both, would
constitute a default thereunder. Such policies are in amounts which are adequate
in relation to the business and assets of the Target and its Subsidiaries and
all premiums to date have been paid in full. Neither the Target nor its
Subsidiaries has been refused any insurance, nor has the coverage of the Target
and its Subsidiaries been limited, by any insurance
18
<PAGE> 23
carrier to which it has applied for insurance or with which it has carried
insurance during the past five years. The Disclosure Schedule also contains a
true and complete description of all outstanding bonds and other surety
arrangements issued or entered into in connection with the business, assets and
liabilities of the Target and its Subsidiaries.
(w) Employees. The Disclosure Schedule contains the following with
respect to each of the Target and its Subsidiaries:
(i) a list of all employees of each of the Target and its
Subsidiaries (including name, title and position);
(ii) each such employee's length of service; and
(iii) the compensation (including terms of payment. bonuses,
commissions and deferred compensation, as well as any benefits) of each such
employee.
Except as disclosed in the Disclosure Schedule with respect to the Target and
its Subisidiares: (A) there have not been in the past five years and, to the
knowledge of the Target and the Target Shareholders, there are not pending, any
labor disputes, work stoppages, requests for representation, pickets or work
slow-downs due to labor disagreements; (B) there are and have been no unresolved
violations of any Laws of any Governmental Entity respecting the employment of
any employees; (Ci) there is no unfair labor practice, charge or complaint
pending, unresolved or, to the knowledge of the Target and the Target
Shareholders, threatened before the National Labor Relations Board or similar
body in any foreign country; (D) there is no employment handbook, personnel
policy manual, or similar document that creates prospective employment rights or
obligations; (E) the employees of the Target and its Subsidiaries are not
covered by any collective bargaining agreement; (F) each of the Target and its
Subsidiaries has provided or will timely provide prior to Closing all notices
required by law to be given prior to Closing to all local, state, federal or
national labor, wage-payment, equal employment opportunity, unemployment
insurance and related agencies; (G) each of the Target and its Subsidiaries has
paid or properly accrued in the ordinary course of business all wages and
compensation due to employees, including all vacations or vacation pay, holidays
or holiday pay, sick days or sick pay, and bonuses, and (Hi) the transactions
contemplated by this Agreement will not create liability under any Laws of any
Governmental Entity respecting reductions in force or the impact on employees on
plant closing, or sales of businesses. All employees of the Target and its
Subsidiaries are legally able to work in the United States. As used herein, the
term "Governmental Entity" means any court, administrative or regulatory agency
or commission, or other governmental authority or instrumentality, domestic,
foreign or supranational.
(x) Employee Benefit Plans and Arrangements. The Disclosure Schedule
sets forth a complete and accurate list of each Benefit Plan covering any
present or former officers, employees or directors of the Target and its
Subsidiaries. "Benefit Plan" means each "employee pension benefit plan" (as
defined in Section 3(2) of ERISA hereinafter a "Pension Plan"), "employee
welfare benefit plan" (as defined in Section 3(l) of ERISA. hereinafter a
"Welfare
19
<PAGE> 24
Plan") and each other plan or arrangement (written or oral) relating to
deferred compensation, bonus, performance compensation, stock purchase, stock
option. stock appreciation, severance, vacation, sick leave, holiday pay, fringe
benefits, personnel policy, reimbursement program, incentive, insurance, welfare
or similar plan, program. policy or arrangement, in each case maintained or
contributed to, or required to be maintained or contributed to, by or for which
there otherwise is, or may be any liability as of the Closing Date, of the
Target and its Subsidiaries or their respective affiliates or any other person
or entity that, together with the Target and its Subsidiaries, is treated as a
single employer under Section 414(b), (c), (m) or (o) of the Code (each,
together with the Target and its Subsidiaries, a "Commonly Controlled Entity")
for the benefit of any present or former officer. employee or director. The
Target and its Subsidiaries have no intent or commitment to create any
additional Benefit Plan or amend any Benefit Plan so as to increase benefits
thereunder. The Target and its Subsidiaries have not created any Benefit Plan or
declared or paid any bonus compensation in contemplation of the reactions
contemplated by this Agreement. A current, accurate and complete copy of each
Benefit Plan and related contracts has been made available to the Source. Except
as disclosed on the Disclosure Schedule:
(i) each Benefit Plan is in substantial compliance with all
reporting, disclosure and other requirements of ERISA applicable to such Benefit
Plan;
(ii) each Pension Plan which is intended to be qualified under
Section 401(a) of the Code, has been determined by the Internal Revenue Service
to be so qualified and, to the knowledge of the Target and the Target
Shareholders, no condition exists that would adversely affect any such
determination;
(iii) neither any Benefit Plan, nor any of the Target or its
Subsidiaries, nor any Commonly Controlled Entity, nor any trustee or agent has
been or is presently engaged in any prohibited transactions as defined by
Section 406 of ERISA or Section 4975 of the Code for which an exemption is not
applicable which could subject any Company to the tax or penalty imposed by
Section 4975 of the Code or Section 502 of ERISA;
(iv) there is no event or condition existing which could be deemed
a "reportable event" (within the meaning of Section 4043 of ERISA) with respect
to which the thirty day notice requirement has not been waived; to the knowledge
of the Target and the Target Shareholders, no condition exists which could
subject any Company to a penalty under Section 4071 of ERISA;
(v) The plan marked as a "Multiemployer Plan" on the Disclosure
Schedule is the only Benefit Plan that is a Multiemployer Plan. Each of the
Target and its Subsidiaries and each Commonly Controlled Entity has made all
required contributions to the Multiemployer Plan: neither the Target, its
Subsidiaries or Commonly Controlled Entity has incurred any withdrawal liability
with respect to a Multiemployer Plan; and no condition exists that is likely to
cause any of the Target and its
20
<PAGE> 25
Subsidiaries or any Commonly Controlled Entity to incur any withdrawal liability
with respect to a Multiemployer Plan. If any of the Target and its Subsidiaries
or Commonly Controlled Entity incurred a complete withdrawal from the
Multiemployer Plan as of December 31, 1998, the aggregate withdrawal liability
of the Target and its Subsidiaries or Commonly Controlled Entity with respect to
the Multiemployer Plan would not exceed $0 and to the knowledge of the Target
and its Subsidiaries or Commonly Controlled Entity, nothing has occurred prior
to the Closing Date which would change the foregoing;
(vi) except as set forth in the Disclosure Schedule, true and
correct copies of (i) the most recent annual report on Form 5500 and any
attached schedules for each Benefit Plan (if any such report was required by
applicable law), (ii) the most recent summary plan description for each Benefit
Plan and (iii) the most recent determination letter issued by the Internal
Revenue Service for each Pension Plan have been provided to the Source;
(vii) with respect to each Benefit Plan, there are no actions,
suits or claims (other than routine claims for benefits in the ordinary course)
pending or, to the knowledge of the Target and the Target Shareholders,
threatened against any Benefit Plan, any of the Target and its Subsidiaries, any
Commonly Controlled Entity or any trustee or agent of any Benefit Plan; and
(viii) with respect to each Benefit Plan to which any of the Target
and its Subsidiaries or any Commonly Controlled Entity is a party which
constitutes a group health plan subject to Section 4980B of the Code, each such
Benefit Plan substantially complies, and in each case has substantially
complied, with all applicable requirements of Section 4980B of the Code.
(ix) Except as set forth on the Disclosure Schedule:
(A) there is no outstanding liability (except for premiums
that have not become due) under Title IV of ERISA with respect to any Pension
Plan and no condition exists that could be expected to result in the Target and
its Subsidiaries incurring liability under Title IV of ERISA either directly or
with respect to any Commonly Controlled Entity. All premiums payable to the PBGC
have been paid when due;
(B) neither the PBGC nor any of the Target or its Subsidiaries
nor any Commonly Controlled Entity has instituted proceedings to terminate any
Pension Plan and the PBGC has not informed any of the Target and its
Subsidiaries of its intent to institute proceedings to terminate any Pension
Plan;
(C) full payment has been made of all amounts which any of the
Target and its Subsidiaries or any Commonly Controlled Entity was required to
have paid as a contribution to the Pension Plans as of the last day of the most
recent fiscal year of each of the Pension Plans ended prior to the date of this
Agreement, and none of the Pension Plans has incurred any "accumulated funding
deficiency" (as defined in Section 302 of ERISA and Section 412 of the Code),
whether or not waived, as of the last day of the most recent fiscal year of each
such Pension Plan ended prior to the date of this Agreement;
21
<PAGE> 26
(D) to the knowledge of the Target and the Target
Shareholders, the actuarial assumptions utilized, where appropriate, in
connection with determining the funding of each Pension Plan which is a defined
benefit pension plan (as set forth in the actuarial report for such Pension
Plan) are reasonable. Copies of the most recent actuarial reports have been
furnished to the Source. Based on such actuarial assumptions, as of the Interim
Balance Sheet Date, the fair market value of the assets or properties held under
each such Pension Plan exceeds the actuarially determined present value of all
accrued benefits of such Pension Plan (whether or not vested) determined on an
ongoing basis;
(E) each of the Benefit Plans is, and its administration is
and at all times has been in substantial compliance with, and neither the Target
nor its Subsidiaries has received any claim or notice that any such Benefit Plan
is not in compliance with, all applicable laws and orders and prohibited
transaction exemptions, including without limitation, to the extent applicable,
the requirements of ERISA and the Code;
(F) neither the Target nor its Subsidiaries and no Commonly
Controlled Entity is in default in performing any of its contractual obligations
under any of the Benefit Plans or any related trust agreement or insurance
contract.
(G) there are no material outstanding liabilities of any
Benefit Plan other than liabilities for benefits to be paid to participants in
Benefit Plan and their beneficiaries in accordance with the terms of Benefit
Plan;
(H) each Benefit Plan may be amended or modified or terminated
by the applicable Target or its Subsidiaries or Commonly Controlled Entity at
any time without liability except under any defined pension benefit plan;
(I) no Benefit Plan other than a Pension Plan, retiree medical
plan or severance plan provides benefits to any individual after termination of
employment;
(J) the consummation of the transactions contemplated by this
Agreement will not (in and of itself): (I) entitle any employee of any of the
Target or its Subsidiaries to severance pay, unemployment compensation or any
other payment or benefit; (II) accelerate the time of payment or vesting, or
increase the amount of compensation due to any such employee; (III) result in
any liability under Title IV of ERISA; (IV) result in any prohibited transaction
described in Section 406 of ERISA or Section 4975 of the Code for which an
exemption is not available; or (V) result (either alone or in conjunction with
any other event) in the payment or series of payments by any of the Target or
its Subsidiaries or any of its affiliates to any person of an "excess parachute
payment" within the meaning of Section 280G of the Code;
(K) with respect to each Benefit Plan that is funded wholly or
partially through an insurance policy, all premiums required to have been paid
to date under the insurance
22
<PAGE> 27
policy have been paid, all premiums required to be paid under the insurance
policy through the Closing Date will have been paid on or before the Closing
Date and as of the Closing Date, there will be no liability of any of the Target
or its Subsidiaries or any Commonly Controlled Entity under any insurance policy
or ancillary agreement with respect to such insurance policy in the nature of a
retroactive rate adjustment, loss sharing arrangement or other actual or
contingent liability arising wholly or partially out of events occurring prior
to the Closing Date;
(L) (I) each Benefit Plan that constitutes a "welfare benefit
plan," within the meaning of Section 3(l) of ERISA, and for which contributions
are claimed by any of the Target or its Subsidiaries or any Commonly Controlled
Entity as deductions under any provision of the Code is in material compliance
with all applicable requirements pertaining to such deduction;
(II) with respect to any welfare benefit fund (within the
meaning of Section 419 of the Code) related to a welfare benefit plan, there is
no disqualified benefit (within the meaning of Section 4976(b) of the Code) that
would result in the imposition of a tax under Section 4976(a) of the Code; and
(III) all welfare benefit funds intended to be exempt from tax
under Section 501(a) of the Code have been determined by the Internal Revenue
Service to be so exempt and no event or condition exists which would adversely
affect any such determination; and
(IV) all benefit plans outside of the United States, if any
(the "Foreign Plans"), are in compliance with all applicable laws and
regulations and have been operated in accordance with the plans' respective
terms. There are no material unfunded liabilities under or in respect of the
Foreign Plans, and all contributions or other payments required to be made to or
in respect of the Foreign Plans prior to the Closing Date have been made or will
be made prior to the Closing Date.
(V) all persons classified by any of the Target or its
Subsidiaries or any Commonly Controlled Entity as independent contractors
satisfy and have at all times satisfied the requirements of applicable law to be
so classified; each of the Target and its Subsidiaries and each Commonly
Controlled Entity has fully and accurately reported their compensation on IRS
Forms 1099 when required to do so; and none of the Target or its Subsidiaries or
any Commonly Controlled Entity has any obligation to provide benefits with
respect to such persons under any Benefit Plan or otherwise.
(y) Compliance with Law; Authorizations. Each of the Target and its
Subsidiaries has complied with each, and is not in violation of any, law,
ordinance, or governmental or regulatory rule or regulation, whether federal,
state, local or foreign, to which such entity's business, operations, assets or
properties is subject ("Regulations"). The Target and its Subsidiaries have not
received notice, and, expect as set forth on the Disclosure Schedule, has no
reason to believe, that the Real Property, or any improvements erected or
situate thereon relating to their business, or the uses conducted thereon or
therein, violate any Regulations applicable
23
<PAGE> 28
thereto. Each of the Target and its Subsidiaries owns, holds, possesses or
lawfully uses in the operation of its business all franchises, licenses,
permits, easements, rights, applications, filings, registrations and other
authorizations ("Authorizations") which are in any manner necessary for it to
conduct its business as now or previously conducted or for the ownership and use
of the assets owned or used by such entity in the conduct of the business of
such entity, free and clear of all liens, charges, restrictions and encumbrances
and in compliance with all Regulations. All such Authorizations are listed and
described on the Disclosure Schedule. None of the Target or its Subsidiaries is
in default, nor has any of the Target or its Subsidiaries received any notice of
any claim of default, with respect to any such Authorization. All such
Authorizations are renewable by their terms or in the ordinary course of
business without the need to comply with any special qualification procedures or
to pay any amounts other than routine filing fees. None of such Authorizations
will be adversely affected by consummation of the transactions contemplated
hereby. No Target Shareholder and no director, officer, employee or former
employee of any of the Target or its Subsidiaries or any affiliates of any of
the Target or its Subsidiaries, or any other person, firm or corporation. owns
or has any proprietary, financial or other interest (direct or indirect) in any
Authorization which such entity owns, possesses or uses in the operation of the
business of such entity as now or previously conducted.
(z) Transactions With Affiliates. No Target Shareholder and no
director, officer or employee of any of the Target or its Subsidiaries, or any
member of his or her immediate family or any other of its, his or her
affiliates, owns or has a 5% or more ownership interest in any corporation or
other entity that is or was during the last three years a party to, or in any
property which is or was during the last three years the subject of, any
contract, agreement or understanding, business arrangement or relationship with
such entity.
(aa) Litigation. (i) Except as set forth on the Disclosure Schedule, no
litigation, including any arbitration, investigation or other proceeding of or
before any court, arbitrator or governmental or regulatory official, body or
authority is pending or, to the knowledge of the Target and the Target
Shareholders, threatened against any of the Target or its Subsidiaries or which
relates to the Target or its Subsidiaries or the transactions contemplated by
this Agreement.
(ii) None of the Target or any Target Shareholder knows of any
reasonably likely basis for any litigation, arbitration, investigation or
proceeding referred to in Section 4(b)(xxi)(A).
(iii) None of the Target or its Subsidiaries is a party to or
subject to the provisions of any judgment, order, writ, injunction, decree or
award of any court, arbitrator or governmental or regulatory, official, body or
authority.
(bb) Restrictions. None of the Target or its Subsidiaries is a party to
any indenture, agreement, contract, commitment, lease, plan, license, permit,
authorization or other instrument, document or understanding, oral or written,
or subject to any charter or other corporate restriction or any judgment, order,
writ injunction, decree or award which materially adversely
24
<PAGE> 29
affects or materially, restricts or, so far as the Target or any of the Target
Shareholders can now reasonably foresee, may in the future materially adversely
affect or materially restrict, the business, operations, assets, properties,
prospects or condition (financial or otherwise) of the Target or its
Subsidiaries after consummation of the transactions contemplated hereby.
(cc) Taxes. All Tax Returns with respect to any Taxes have been timely
filed with the appropriate governmental agencies in all jurisdictions in which
such Tax Returns are required to be filed. and all such Tax Returns properly
reflect the liabilities of the Target and its Subsidiaries for Taxes for the
periods, property or events covered thereby. All Taxes, including without
limitation those which are called for by the Tax Returns, required to be paid,
withheld or accrued by the Target and its Subsidiaries and any deficiency
assessments, penalties and interest have been timely paid, withheld or accrued.
The accruals for Taxes contained in the Interim Balance Sheet are adequate to
cover the Tax liabilities of the Target and its Subsidiaries as of that date and
include adequate provision for all deferred Taxes, and nothing has occurred
subsequent to that date to make any of such accruals inadequate. The Target's
Tax basis in its assets for purposes of determining its future amortization,
depreciation and other federal income tax deductions is accurately reflected on
the Target's Tax books and records. None of the Target or its Subsidiaries is or
has at any time ever been a party to a Tax sharing, Tax indemnity or Tax
allocation agreement, and none of the Target or its Subsidiaries has assumed any
Tax liability of any other person or entity under contract. None of the Target
or its Subsidiaries has received any notice of assessment or proposed assessment
in connection with any Tax Returns and there are not pending tax examinations of
or tax claims asserted against any of the Target or its Subsidiaries or any of
its assets or properties. The Target and its Subsidiaries have not extended, or
waived the application of, any statute of limitations of any jurisdiction
regarding the assessment or collection of any Taxes. There are now (and as of
immediately following the Closing there will be) no Liens (other than any Lien
for current Taxes not yet due and payable) on any of the assets or properties of
the Target or its Subsidiaries relating to or attributable to Taxes. To the
knowledge of the Target and the Target Shareholders, there is no basis for the
assertion of any claim relating to or attributable to Taxes which, if adversely
determined, would result in any Lien on the assets of any of the Target or its
Subsidiaries or other-wise have an adverse effect on any of the Target or its
Subsidiaries or their business, operations, assets, properties, prospects or
condition (financial or otherwise). Neither the Target nor the Target
Shareholders have any knowledge of any basis for any additional assessment of
any Taxes. All Tax payments related to employees, including income tax
withholding, FICA, FUTA, unemployment and worker's compensation, required to be
made by the Target or its Subsidiaries have been fully and properly paid,
withheld, accrued or recorded. There are no contracts, agreements, plans or
arrangements. including but not limited to the provisions of this Agreement,
covering any employee or former employee of any of the Target or its
Subsidiaries that, individually or collectively, could give rise to any payment
(or portion thereof) that would not be deductible pursuant to Sections 280G, 404
or 162 of the Code. Two correct and complete copies of (a) all Tax examinations,
(b) all extensions of statutory limitations and (c) all federal, state and local
income tax returns and franchise tax returns of each of the Target or its
Subsidiaries for the last five fiscal years, or such shorter period of time as
any of them shall have existed, have heretofore been delivered by the Target and
the Target Shareholders to the Source. Each of the
25
<PAGE> 30
Target or its Subsidiaries made an election to be taxed under the provisions of
Subchapter S of the Code within 75 days of its original organization and has at
no time immediately prior to the Closing Date been taxed under the provisions of
Subchapter C of the Code. Each such of the Target and its Subsidiaries has a
taxable year ended December 31 and none of the Target or its Subsidiaries has
made an election to retain a fiscal year other than December 31 under Section
444 of the Code. Each of the Target and its Subsidiaries currently utilizes the
accrual method of accounting for income tax purposes and has not changed its
method of accounting for income tax purposes in the past five years.
(dd) Intellectual Property Matters.
(i) None of the Target or its Subsidiaries has utilized or
currently utilizes any Intellectual Property except for those listed on the
Disclosure Schedule, all of which are owned by the Target or its Subsidiaries
free and clear of any liens, claims, charges or encumbrances. The Intellectual
Property constitutes all such assets. properties and rights which are used or
held for use in, or are necessary for, the conduct of the business of the Target
and its Subsidiaries.
(ii) There are no royalty, commission or similar arrangements, and
no licenses, sublicenses or agreements, pertaining to any of the Intellectual
Property or products or services of the Target or its Subsidiaries.
(iii) None of the Target or its Subsidiaries infringes upon or
unlawfully or wrongfully uses any patent, trademark, trade name, service mark,
copyright or trade secret owned or claimed by another. No action, suit,
proceeding or investigation has been instituted or, to the knowledge of the
Target and the Target Shareholders, threatened relating to any, patent,
trademark, trade name, service mark, copyright or trade secret formerly or
currently used by any of the Target or its Subsidiaries. None of the
Intellectual Property is subject to any outstanding order decree or judgment.
None of the Target or its Subsidiaries has agreed to indemnity any person or
entity for or against any infringement of or by the Intellectual Property.
(iv) No present or former employee of any of the Target or its
Subsidiaries and no other person or entity owns or has any proprietary,
financial or other interest, direct or indirect, in whole or in part, in any
patent, trademark, trade name, service mark or copyright, or in any application
therefor, or in any trade secret, which any of the Target or its Subsidiaries
owns, possesses or uses in its operations as now or heretofore conducted. The
Disclosure Schedule lists all confidentiality or non-disclosure agreements to
which each of the Target and its Subsidiaries or any of their employees is a
party.
(v) All registrable items of Intellectual Property that are
material to the business of the Target and the Subsidiaries have been duly
registered in, filed in or issued by the United States Copyright Office or the
United States Patent and Trademark Office, the appropriate offices in the
various states of the United States and the appropriate offices of the
jurisdictions indicated on the Disclosure Schedule.
26
<PAGE> 31
(vi) All rights of the Target and its Subsidiaries in the
Intellectual Property shall vest in the Source pursuant to the transactions
contemplated hereby without any consent or other approval.
(vii) All Intellectual Property in the form of computer software
that is utilized by the Target or its Subsidiaries in the operations of their
business (including computer software utilized by third parties in providing
services to the Target and its Subsidiaries) is capable of processing date data
between and within the twentieth and twenty-first centuries.
(ee) Completeness; No Violations. The certified copies of the
Certificate of Incorporation and Bylaws, both as amended to date, of each of the
Target and its Subsidiaries, and the copies of all leases, instruments,
agreements, licenses, permits, certificates or other documents which are
included on schedules attached hereto or which have been delivered to the Source
in connection with the transactions contemplated hereby, are complete and
correct; neither the Target nor its Subsidiaries nor, to the knowledge of the
Target Shareholders, any other party to any of the foregoing is in material
default thereunder; and, except as set forth in the schedules and documents
attached to this Agreement, the rights and benefits of each of the Target and
its Subsidiaries thereunder will not be materially and adversely affected by the
reactions contemplated hereby, and the execution of this Agreement and the
performance of the obligations hereunder will not result in a material violation
or breach or constitute a material default under any of the terms or provisions
thereof. Except as set forth on the Disclosure Schedule, none of such leases,
instruments, agreements, contracts, licenses, permits, certificates or other
documents requires notice to, or the consent or approval of, any governmental
agency or other third party to any of the transactions contemplated hereby to
remain in full force and effect. The consummation of the transactions
contemplated hereby will not give rise to any right of termination, cancellation
or acceleration or result in the loss of any right or benefit thereunder.
(ff) Existing Condition. Except as set forth on Disclosure Schedule,
since March 31, 1998, the Target has not and since December 31, 1997, the
Subsidiaries have not:
(i) incurred any liabilities, other than liabilities incurred in
the ordinary course of business consistent with past practice, or discharged or
satisfied any lien or encumbrance, or paid any liabilities, other than in the
ordinary course of business consistent with past practice, or failed to pay or
discharge when due any liabilities of which the failure to pay or discharge has
caused or will cause any material damage or risk of material loss to it or any
of its assets or properties;
(ii) sold, encumbered, assigned or transferred any assets,
properties or rights or any interest therein, except for the sales in the
ordinary course of business consistent with past practice, or made any agreement
or commitment or granted any option or right with, of or to any person to
acquire any assets, properties or rights of any of the Target or its
Subsidiaries or any interest therein;
27
<PAGE> 32
(iii) created, incurred, assumed or guaranteed any indebtedness
for money borrowed, or mortgaged, pledged or subjected any of its assets to any
mortgage, lien, pledge, security interest, conditional sales contract or other
encumbrance of any nature whatsoever;
(iv) made or suffered any amendment or termination of any material
agreement, contract, commitment, lease or plan to which it is a party or by
which it is bound, or canceled, modified or waived any substantial debts or
claims held by it or waived any rights of substantial value, whether or not in
the ordinary course of business;
(v) declared, set aside or paid any dividend or made or agreed to
make any other distribution or payment in respect of its capital shares or
redeemed, purchased or otherwise acquired or agreed to redeem, purchase or
acquire any of its shares of capital stock or other ownership interests;
(vi) suffered any damage, destruction or loss, whether or not
covered by insurance, (A) materially and adversely affecting its business,
operations, assets, properties or prospects or (B) of any item or items carried
on its books of account individually or in the aggregate at more than $10,000,
or suffered any repeated, recurring or prolonged shortage, cessation or
interruption of supplies or utility or other services required to conduct its
business and operations;
(vii) suffered any material adverse change in its business,
operations, assets, properties, prospects or condition (financial or otherwise);
(viii) received notice or had knowledge of any actual or
threatened labor trouble, strike or other occurrence, event or condition of any
similar character which has had or might have an adverse effect on its business,
operations, assets, properties or prospects;
(ix) made commitments or agreements for capital expenditures or
capital additions or betterments exceeding in the aggregate $10,000, except such
as may be involved in ordinary repair, maintenance or replacement of its assets;
(x) increased the salaries or other compensation of, or made any
advance (excluding advances for ordinary and necessary business expenses) or
loan to, any of its employees or made any increase in, or any addition to, other
benefits to which any of its employees may be entitled;
(xi) changed any of the accounting principles followed by it or
the methods of applying such principles;
(xii) entered into any transaction other than in the ordinary
course of business consistent with past practice;
28
<PAGE> 33
(xiii) changed its authorized capital or its securities
outstanding or otherwise changed its ownership interests, or granted any
options, warrants, calls, conversion rights or commitments with respect to any
of its capital stock or other ownership interests; or
(xix) agreed to take any of the actions referred to above.
(gg) Deposit Accounts; Powers of Attorney. The Disclosure Schedule
includes an accurate list, as of the date of this Agreement, of:
(i) the name of each financial institution in which each of the
Target and its Subsidiaries has accounts or safe deposit boxes;
(ii) the names in which the accounts or boxes are held;
(iii) the type of account;
(iv) the name of each person authorized to draw thereon or have
access thereto; and
(v) the name of each person, corporation, firm or other entity
holding a general or special power of attorney from each of the Target and its
Subsidiaries and a description of the terms of such power.
(hh) Books of Account. The books, records and accounts of each of the
Target and its Subsidiaries accurately and fairly reflect, in reasonable detail,
the transactions and the assets and liabilities of such entity. None of the
Target or its Subsidiaries has engaged in any transaction, maintained any bank
account or used any of the funds of such entity except for transactions, bank
accounts and funds which have been and are reflected in the normally maintained
books and records of the business.
(ii) Environmental Matters. (i) Each of the Target and its Subsidiaries
has secured, and is in compliance with, all Environmental Permits (as defined
below), with respect to any premises on which its business is operated. all of
which Environmental Permits shall vest in the Source upon consummation of the
transactions contemplated hereby. Each of the Target and its Subsidiaries is in
compliance with all Environmental, Health and Safety Requirements.
As used herein. the term "Release" means any spill, emission, leaking, pumping,
injection. deposit, disposal. discharge, dispersal, leaching, emanation or
migration of any Hazardous Substance in, into, onto or through the environment
(including ambient air, surface water, ground water, soils, land surface,
subsurface strata, workplace or structure). As used herein, the term "CERCLA"
means the Comprehensive Environmental Response, Compensation, and Liability Act,
42 U.S.C. Section 9601 et seq. As used herein the term "Environmental Permits"
mean all permits, licenses, approvals or authorizations from any Governmental
Entity required under Environmental Laws for the operation of the business of
the applicable Company.
29
<PAGE> 34
(ii) None of the Target or its Subsidiaries nor Target Shareholder
has received any communication from any Governmental Entity that alleges that
any of the Target or its Subsidiaries is not in compliance with any
Environmental Laws or Environmental Permits.
(iii) None of the Target or its Subsidiaries has entered into or
agreed to any court decree or order, and none of the Target or its Subsidiaries
is subject to any judgment, decree or order, relating to compliance with any
Environmental Law or to investigation or cleanup of a Hazardous Substance under
any Environmental Law.
(iv) No lien, charge, interest or encumbrance has been attached,
asserted, or to the knowledge of the Target and the Target Shareholders,
threatened to or against any assets or properties of any of the Target or its
Subsidiaries pursuant to any Environmental Law.
(v) There has been no treatment, storage, disposal or release of
any Hazardous Substance on any property owned, operated or leased by any of the
Target or its Subsidiaries.
(vi) None of the Target or its Subsidiaries has received a CERCLA
104(e) information request or has been named a potentially responsible party for
any National Priorities List site under CERCLA or any site under analogous state
law or received an analogous notice or request from any non-U.S. Governmental
Entity, which notice, request or any resulting inquiry or litigation has not
been fully and finally resolved without possibility of reopening.
(vii) Except as set forth on the Disclosure Schedule, there are no
aboveground tanks or underground storage tanks on, under or about any property
owned, operated or leased by any of the Target or its Subsidiaries and any
former aboveground or underground tanks on any property owned, operated or
leased by any of the Target or its Subsidiaries have been removed in accordance
with all Environmental Laws and no residual contamination, if any, remains at
such sites in excess of applicable standards.
(viii) There are no polychlorinated biphenyls ("PCBs") leaking
from any article, container or equipment on, under or about any property owned,
operated or leased by any of the Target or its Subsidiaries and there are no
such articles, containers or equipment containing PCBs, and there is no asbestos
containing material in a condition or location currently constituting a
violation of any Environmental Law at, on, under or within any property owned,
operated or leased by any of the Target or its Subsidiaries.
(ix) The Target and the Target Shareholders have provided to the
Source true and complete copies of, or access to, all written environmental
assessment materials and reports in their possession that have been prepared by
or on behalf of the of the Target and its Subsidiaries during the past five
years.
(jj) No Illegal Payment. None of the Target or its Subsidiaries and, to
the knowledge of the Target and the Target Shareholders, no affiliate, officer,
agent or employee thereof, directly or indirectly, has, during the past five
years, on behalf of or with respect to any of the
30
<PAGE> 35
Target or its Subsidiaries or any affiliate thereof. (a) made any unlawful
domestic or foreign political contributions, (b) made any payment or provided
services which were not legal to make or provide or which any of the Target or
its Subsidiaries or any affiliate thereof or any such officer, agent or employee
should have known were not legal for the payee or the recipient of such services
to receive, (c) received any payment or any services which were not legal for
the paver or the provider of such services to make or provide, (d) had any
transactions or payments related to the Target or its Subsidiaries which are not
recorded in their accounting books and records or (e) had any off-book bank or
cash accounts or "slush funds" related to the Target or its Subsidiaries.
(kk) Product Warranties and Liabilities. Each of the Target or its
Subsidiaries has no forms of warranties or Guarantees of its products and
services that are in effect or proposed to be used by it. The Disclosure
Schedule sets forth a description of each pending or, to the knowledge of each
of the Target and its Subsidiaries, threatened suit, claim. action, proceeding
or investigation under any warranty or guaranty against each of the Target and
its Subsidiaries. None of the Target or its Subsidiaries has incurred, nor does
any of the Target or its Subsidiaries know or have any reason to believe there
is any basis for alleging, any material liability, damage, loss, cost or expense
as a result of any material defect or other deficiency (whether of design,
materials, workmanship, labeling instructions or otherwise) ("Product
Liability") with respect to any product sold or services rendered by or on
behalf of any of the Target or its Subsidiaries (including any lessee thereof),
whether such Product Liability is incurred by reason of any express or implied
warranty (including, without limitation, any warranty of merchantability or
fitness), any doctrine of common law (tort, contract or other), any statutory
provision or otherwise and irrespective of whether such Product Liability is
covered by insurance.
(ll) Inventory. The inventory of each of the Target and its
Subsidiaries consists of raw materials and supplies, manufactured and purchased
parts, goods in process, and finished goods, all of which is merchantable and
fit for the purpose for which it was procured or manufactured, and none of which
is slow-moving, obsolete, damaged, or defective, subject only to the reserve for
inventory writedown set forth on the face of the Interim Balance Sheet (rather
than in any notes thereto) as adjusted for the passage of time through the
Closing Date in accordance with the past custom and practice of each of the
Target and its Subsidiaries.
(mm) Disclosure. Each of the Target and its Subsidiaries has delivered
to the Source true and complete copies of each agreement, contract, commitment
or other document (or, in the case of any such document not in the possession of
reasonably available to the Target or the Target Shareholders, accurate and
complete summaries thereto that is referred to in the schedules to this
Agreement or that has been requested by the Source or its representatives.
Without limiting any exclusion, exception or other limitation contained in any
of the representations and warranties made herein, this Agreement and the
schedules hereto and all other documents and information furnished to the Source
and its representatives pursuant hereto do not and will not include any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements herein and therein not misleading.
31
<PAGE> 36
5. Covenants. The Parties agree as follows with respect to the period
from and after the execution of this Agreement:
(a) General. Each of the Parties will use its reasonable best efforts
to take all action and to do all things necessary, proper, or advisable in order
to consummate and make effective the transactions contemplated by this Agreement
(including satisfaction, but not waiver, of the closing conditions set forth in
Section 6 below).
(b) Notices and Consents. The Target will give any notices (and will
cause each of its Subsidiaries to give any notices) to third parties, and will
use its reasonable best efforts to obtain (and will cause each of its
Subsidiaries to use its reasonable best efforts to obtain) any third party
consents, that the Source reasonably may request in connection with the matters
referred to in Section 4(d) above.
(c) Regulatory Matters and Approvals. Each of the Parties will (and the
Target will cause each of its Subsidiaries to) give any notices to, make any
filings with, and use its reasonable best efforts to obtain any authorizations,
consents, and approvals of governments and governmental agencies in connection
with the matters referred to in Section 3(a)(ii), Section 3(b)(ii) and Section
4(d) above.
(d) Nasdaq Notification of Source Common Stock Issuance. The Source
will notify Nasdaq of the issuance of the Source Common Stock in the Merger as
soon as practicable after the Closing.
(e) Nasdaq Approval of Source Preferred Stock Issuance. The Source will
obtain the formal approval of Nasdaq of the issuance of the Source Preferred
Stock in the Merger prior to the Effective Time.
(f) Operation of Business. The Target will not (and will not cause or
permit any of its Subsidiaries to) engage in any practice, take any action, or
enter into any transaction outside the Ordinary Course of Business. Without
limiting the generality of the foregoing:
(i) none of the Target and its Subsidiaries will authorize or
effect any change in its charter or bylaws;
(ii) none of the Target and its Subsidiaries will grant any
options, warrants, or other rights to purchase or obtain any of its capital
stock or issue, sell, or otherwise dispose of any of its capital stock (except
upon the conversion or exercise of options, warrants, and other rights currently
outstanding);
(iii) none of the Target and its Subsidiaries will declare, set
aside, or pay any dividend or distribution with respect to its capital stock
(whether in cash or in kind), or redeem, repurchase, or otherwise acquire any of
its capital stock, in either case outside the Ordinary Course of Business;
32
<PAGE> 37
(iv) none of the Target and its Subsidiaries will issue any note,
bond, or other debt security or create, incur, assume, or guarantee any
indebtedness for borrowed money or capitalized lease obligation outside the
Ordinary Course of Business;
(v) none of the Target and its Subsidiaries will impose any
Security Interest upon any of its assets outside the Ordinary Course of
Business;
(vi) none of the Target and its Subsidiaries will make any capital
investment in, make any loan to, or acquire the securities or assets of any
other Person outside the Ordinary Course of Business;
(vii) none of the Target and its Subsidiaries will make any change
in employment terms for any of its directors, officers, and employees outside
the Ordinary Course of Business; and
(viii) none of the Target and its Subsidiaries will commit to any
of the foregoing.
(g) Full Access. The Target will (and will cause each of its
Subsidiaries to) permit representatives of the Source to have full access to all
premises, properties, personnel, books, records (including tax records),
contracts, and documents of or pertaining to each of the Target and its
Subsidiaries. The Source will treat and hold as such any Confidential
Information it receives from any of the Target and its Subsidiaries in the
course of the reviews contemplated by this Section 5(g), will not use any of the
Confidential Information except in connection with this Agreement, and, if this
Agreement is terminated for any reason whatsoever, agrees to return to the
Target all tangible embodiments (and all copies) thereof which are in its
possession.
(h) Notice of Developments. Each Party will give prompt written notice
to the other of any material adverse development causing a breach of any of its
own representations and warranties in Section 3 and Section 4 above. No
disclosure by any Party pursuant to this Section 5(h), however, shall be deemed
to amend or supplement the Disclosure Schedule or to prevent or cure any
misrepresentation, breach of warranty, or breach of covenant.
(i) Exclusivity. The Target will not (and will not cause or permit any
of its Subsidiaries to) solicit, initiate, or encourage the submission of any
proposal or offer from any Person relating to the acquisition of all or
substantially all of the capital stock or assets of any of the Target and its
Subsidiaries (including any acquisition structured as a merger, consolidation,
or share exchange). The Target shall notify the Source immediately if any Person
makes any proposal, offer, inquiry, or contact with respect to any of the
foregoing.
(j) Acquisition of 100% Ownership of Subsidiaries. Target will
effectuate the Put Transaction prior to the Effective Time.
33
<PAGE> 38
(k) Payoff of Debt. Ledecky will have received payoff letters with
respect to all of the indebtedness of the Subsidiaries outstanding as of the
Closing from Banker's Trust prior to the Effective Time.
6. Conditions to Obligation to Close.
(a) Conditions to Obligation of the Source and S-US. The obligation of
the Source and S-US to consummate the transactions to be performed by them in
connection with the Closing is subject to satisfaction of the following
conditions:
(i) this Agreement and the Merger shall have received the approval
of the Target board of directors and the Target Shareholders;
(ii) the Target and its Subsidiaries shall have procured all of the
third party consents specified in Section 5(b) above;
(iii) the representations and warranties set forth in Section 3(a)
and Section 4 above shall be true and correct in all material respects at and as
of the Closing Date;
(iv) the Target shall have performed and complied with all of its
covenants hereunder in all material respects through the Closing;
(v) no action, suit, or proceeding shall be pending or threatened
before any court or quasi-judicial or administrative agency of any federal,
state, local, or foreign jurisdiction or before any arbitrator wherein an
unfavorable injunction, judgment, order, decree, ruling, or charge would (A)
prevent consummation of any of the transactions contemplated by this Agreement,
(B) cause any of the transactions contemplated by this Agreement to be rescinded
following consummation, (C) affect adversely the right of the Surviving
Corporation to own the former assets, to operate the former businesses, and to
control the former Subsidiaries of the Target, or (D) affect adversely the right
of any of the former Subsidiaries of the Target to own its assets and to operate
its businesses (and no such injunction, judgment, order, decree, ruling, or
charge shall be in effect);
(vi) this Agreement and the Merger shall have received the approval
of the Source board of directors;
(vii) the Source shall have received from each of counsel to the
Target and Ledecky and counsel to the Target Shareholders an opinion in form and
substance as set forth in Exhibit F attached hereto, addressed to the Source,
and Dated as of the Closing Date;
(viii) Ledecky shall have entered into the Voting Agreement in the
form and substance as set forth in Exhibit G attached hereto and the same shall
be in full force and effect;
34
<PAGE> 39
(ix) The Target Shareholders shall have entered into the
Registration Rights and Lock-Up Agreement in the form and substance as set forth
in Exhibit H attached hereto and the same shall be in full force and effect;
(x) Source shall have completed its due diligence investigation of
Target, its business, condition, properties, financial results and other matters
to the satisfaction of Source; and
(xi) all actions to be taken by the Target in connection with
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the transactions
contemplated hereby will be reasonably satisfactory in form and substance to the
Source.
The Source and S-US may waive any condition specified in this Section
6(a) if they execute a writing so stating at or prior to the Closing.
(b) Conditions to Obligation of the Target and Target Shareholders. The
obligation of the Target and Target Shareholders to consummate the transactions
to be performed by them in connection with the Closing is subject to
satisfaction of the following conditions:
(i) this Agreement and the Merger shall have received the approval
of Source board of directors, the S-US board of directors and the S-US
shareholders;
(ii) the representations and warranties set forth in Section 3(b)
above shall be true and correct in all material respects at and as of the
Closing Date;
(iii) the Source shall have performed and complied with all of its
covenants hereunder in all material respects through the Closing;
(iv) no action, suit, or proceeding shall be pending or threatened
before any court or quasi-judicial or administrative agency of any federal,
state, local, or foreign jurisdiction or before any arbitrator wherein an
unfavorable injunction, judgment, order, decree, ruling, or charge would (A)
prevent consummation of any of the transactions contemplated by this Agreement,
(B) cause any of the transactions contemplated by this Agreement to be rescinded
following consummation, (C) affect adversely the right of the Surviving
Corporation to own the former assets, to operate the former businesses, and to
control the former Subsidiaries of the Target, or (D) affect adversely the right
of any of the former Subsidiaries of the Target to own its assets and to operate
its businesses (and no such injunction, judgment, order, decree, ruling, or
charge shall be in effect);
(v) the Target shall have received from counsel to the Source an
opinion in form and substance as set forth in Exhibit I attached hereto,
addressed to the Target, and dated as of the Closing Date;
35
<PAGE> 40
(vi) Flegel shall have entered into the Voting Agreement in the
form and substance as set forth in Exhibit G attached hereto and the same shall
be in full force and effect;
(vii) Source shall have entered into the Registration Rights and
Lock-Up Agreement in the form and substance as set forth in Exhibit H attached
hereto and the same shall be in full force and effect;
(viii) Flegel and other holders of Source Common Stock holding an
aggregate of at least 51% of Source Common Stock shall have entered into the
Conversion Voting Agreement in the form and substance as set forth in Exhibit J
attached hereto and the same shall be in full force and effect;
(ix) The Target Shareholders shall have completed their due
diligence investigation of Source, its business, condition, properties,
financial results and other matters to the satisfaction of the Target
Shareholders; and
(x) all actions to be taken by the Source in connection with
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the transactions
contemplated hereby will be reasonably satisfactory in form and substance to the
Target Shareholders.
The Target and the Target Shareholders may waive any condition
specified in this Section 6(b) if they execute a writing so stating at or prior
to the Closing.
7. Remedies for Breach of This Agreement.
(a) Survival of Representations and Warranties. All of the
representations and warranties of Target Shareholders contained in Section
4(g)-(z), Section 4(bb), and Section 4(dd)-(mm) of this Agreement shall survive
the Closing (even if the Source knew or had reason to know of any
misrepresentation or breach of warranty at the time of Closing) and continue in
full force and effect for the periods set forth in Section 7 (b)(ii) below. All
of the other representations and warranties of the Source and the Target
Shareholders contained in this Agreement (including the representations and
warranties of the and Target Shareholders contained in Section 3(a), Section
4(a)-(f), Section 4(aa) and Section 4(cc) thereof) shall survive the Closing
(even if the damaged Party knew or had reason to know of any misrepresentation
or breach of warranty at the time of Closing) and continue in full force and
effect until the expiration of any applicable statutes of limitations.
(b) Indemnification Provisions for Benefit of the Source. (i)
Notwithstanding the provisions of Section 7(a), the Parties acknowledge that
the Source will succeed to the rights of the Target under that Stock
Acquisition Agreement by and among Target, certain companies listed on the
signature page thereof and the stockholders of such companies listed on the
signature page thereof dated as of May 20, 1998 (the "May 1998 Agreement"), and
the Source agrees that in the event the former shareholders of Brand and TCE
breach (or in the event any third party alleges facts that, if true, would mean
the former shareholders of Brand and TCE have breached) any of
36
<PAGE> 41
their representations, warranties and covenants contained in the May 1998
Agreement or contained in Section 4(g)-(mm) of this Agreement but which relates
solely to events or circumstances on or prior to May 20, 1998, then the Source
shall be indemnified by the former shareholders of Brand and TCE from and
against the entirety of any Adverse Consequences the Source may suffer through
and after the date of the claim for indemnification on the terms and conditions
of and subject to the May 1998 Agreement.
(ii) In the event the Target Shareholders breach (or in the event
any third party alleges facts that, if true, would mean Target Shareholders have
breached) any of their representations, warranties, and covenants contained in
this Agreement, and, if there is an applicable survival period pursuant to
Section 7(a) above, provided that the Source makes a written claim for
indemnification against Target Shareholders pursuant to Section 8(h) below
within such survival period, then Target Shareholders agree to indemnify the
Source from and against the entirety of any Adverse Consequences the Source may
suffer through and after the date of the claim for indemnification (including
any Adverse Consequences the Source may suffer after the end of any applicable
survival period) resulting from, arising out of, relating to, in the nature of,
or caused by the breach (or the alleged breach); provided, however, that the
Target Shareholders shall not have any obligation to indemnify the Source from
and against any Adverse Consequences resulting from, arising out of, relating
to, in the nature of, or caused by the breach (or alleged breach) of any
representation or warranty contained in Section 4(g)-(z), Section 4(bb), and
Section 4(dd)-(mm) of this Agreement until the Source has suffered Adverse
Consequences by reason of all such breaches (or alleged breaches) in excess of
a $210,000 aggregate threshold (at which point the Target Shareholders will be
obligated to indemnify the Source from and against all such Adverse
Consequences above such threshhold for the following amounts and in the
following time periods: (A) 1,400,000 (in addition to any indemnification
rights in favor of Source pursuant to Section 7(b)(i) above) for any and all
claims made from the Closing Date through January 31, 2000; and (B) $700,000
for claims made after January 2000 and through April 30, 2000. Any claim for
indemnification shall survive until finally resolved and shall not be affected
by the reduction in the indemnification amount pursuant to Section 7(b)(ii)(B).
Liability for such indemnification shall be allocated among the Target
Shareholders in the following percentages: Ledicky, 70%; Weiner, 20%; and
Gillis, 10%. Such indemnification shall be paid at each Target Shareholder's
option in cash or in shares of Source Common Stock at a value of $7.73. The
Target Shareholders shall only be obligated to indemnify the Source pursuant to
this Section 7(b)(ii) for breaches and alleged breaches of the representations,
warranties and covenants contained in Section 4 of this Agreement that relate
solely to events or circumstances after May 20, 1998. In no event shall the
aggregate indemnification by the Target Shareholders under this Section
7(b)(ii) exceed $26,282,000.
(c) Indemnification Provisions for Benefit of the Target Shareholders.
(i) In the event the Source breaches (or in the event any third
party alleges facts that, if true, would mean the Source has breached) any of
its representations, warranties, and covenants contained in this Agreement, and,
if there is an applicable survival period pursuant to Section 7(a) above,
provided that the Target Shareholders make a written claim for indemnification
37
<PAGE> 42
against the Source pursuant to Section 8(h) below within such survival period,
then the Source agrees to indemnify the Target Shareholders from and against
the entirety of any Adverse Consequences the Target Shareholders may suffer
through and after the date of the claim for indemnification (including any
Adverse Consequences Ledecky may suffer after the end of any applicable
survival period) resulting from, arising out of, relating to, in the nature of,
or caused by the breach (or the alleged breach).
(ii) Any indemnification by the Source under this Section 7(c)
shall not exceed $2.5 million.
(d) Matters In-volving Third Parties.
(i) If any third party shall notify any Party (the "Indemnified
Party") with respect to any matter (a "Third Party Claim") which may give rise
to a claim for indemnification against any other Party (the "Indemnifying
Party") under this Section 7, then the Indemnified Party shall promptly notify
each Indemnifying Party thereof in writing; provided, however, that no delay on
the part of the Indemnified Party in notifying any Indemnifying Party shall
relieve the Indemnifying Party from any obligation hereunder unless (and then
solely to the extent) the Indemnifying Party thereby is prejudiced.
(ii) Any Indemnifying Party will have the right to defend the
Indemnified Party against the Third Party Claim with counsel of its choice
reasonably satisfactory to the Indemnified Party so long as (A) the Indemnifying
Party notifies the Indemnified Party in writing within fifteen (15) days after
the Indemnified Party has given notice of the Third Party Claim that the
Indemnifying Party will indemnify the Indemnified Party from and against the
entirety of any Adverse Consequences the Indemnified Party may suffer resulting
from, arising out of, relating to, in the nature of, or caused by the Third
Party Claim, (B) the Indemnifying Party provides the Indemnified Party with
evidence reasonably acceptable to the Indemnified Party that the Indemnifying
Party will have the financial resources to defend against the Third Party Claim
and fulfill its indemnification obligations hereunder, (C) the Third Party Claim
involves only money damages and does not seek an injunction or other equitable
relief, (D) settlement of, or an adverse judgment with respect to, the Third
Party Claim is not, in the good faith judgment of the Indemnified Party, likely
to establish a precedential custom or practice adverse to the continuing
business interests of the Indemnified Party, and (E) the Indemnifying Party
conducts the defense of the Third Party Claim actively and diligently.
(iii) So long as the Indemnifying Party is conducting the defense
of the Third Party Claim in accordance with Section 7(d)(ii) above, (A) the
Indemnified Party may retain separate co-counsel at its sole cost and expense
and participate in the defense of the Third Party Claim, (B) the Indemnified
Party will not consent to the entry of any judgment or enter into any
settlement with respect to the Third Party Claim without the prior written
consent of the Indemnifying Party (not to be withheld unreasonably), and (C)
the Indemnifying Party will not consent to the entry of any judgment or enter
into any settlement with respect to the Third Party
38
<PAGE> 43
Claim without the prior written consent of the Indemnified Party (not to be
withheld unreasonably).
(iv) In the event any of the conditions in Section 7(d)(ii) above
is or becomes unsatisfied, however, (A) the Indemnified Party may defend
against, and consent to the entry of any judgment or enter into any settlement
with respect to, the Third Party Claim in any manner it may deem appropriate
(and the Indemnified Party need not consult with, or obtain any consent from,
any Indemnifying Party in connection therewith), (B) the Indemnifying Parties
will reimburse the Indemnified Party promptly and periodically for the costs of
defending against the Third Party Claim (including attorneys' fees and
expenses), and (C) the Indemnifying Parties will remain responsible for any
Adverse Consequences the Indemnified Party may suffer resulting from, arising
out of, relating to, in the nature of, or caused by the Third Party Claim to the
fullest extent provided in this Section 7.
(e) Other Indemnification Provisions. The foregoing indemnification
provisions are in addition to, and not in derogation of, any statutory,
equitable, or common law remedy any Party may have for breach of representation,
warranty, or covenant. The Target Shareholders hereby agree that they will not
make any claim for indemnification against the Source by reason of the fact that
they were a director, officer, employee, or agent of Target or its Subsidiaries
or was serving at the request of any such entity as a partner, trustee,
director, officer, employee, or agent of another entity (whether such claim is
for judgments, damages, penalties, fines, costs, amounts paid in settlement,
losses, expenses, or otherwise and whether such claim is pursuant to any
statute, charter document, bylaw, agreement, or otherwise) with respect to any
action, suit, proceeding, complaint, claim, or demand brought by the Source
against the Target Shareholders (whether such action, suit, proceeding,
complaint, claim, or demand is pursuant to this Agreement, applicable law, or
otherwise).
8. Miscellaneous.
(a) Press Releases and Public Announcements. No Party shall issue any
press release or make any public announcement relating to the subject matter of
this Agreement without the prior written approval of the other Party; provided,
however, that any Party may make any public disclosure it believes in good faith
is required by applicable law or any listing or trading agreement concerning its
publicly-traded securities (in which case the disclosing Party will use its
reasonable best efforts to advise the other Party prior to making the
disclosure).
(b) No Third Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any Person other than the Parties and their respective
successors and permitted assigns.
(c) Entire Agreement. This Agreement (including the documents referred
to herein) constitutes the entire agreement between the Parties and supersedes
any prior understandings, agreements, or representations by or between the
Parties, written or oral, to the extent they related in any way to the subject
matter hereof.
39
<PAGE> 44
(d) Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. No Party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written approval
of the other Party.
(e) Counterparts. This Agreement may be executed in one or more
counterparts (including by facsimile), each of which shall be deemed an original
but all of which together will constitute one and the same instrument.
(f) Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(g) Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
If to Ledecky:
Building One Services Corporation
800 Connecticut Avenue, N.W., Suite 1111
Washington, D.C. 20006
Attn: Jonathan J. Ledecky
Copy to:
Hogan & Hartson L.L.P.
Columbia Square
555 Thirteenth Street, N.W.
Washington, D.C. 20004-1109
Attn: J. Hovey Kemp, Esq.
40
<PAGE> 45
If to Gillis:
73-15 Weaver Street
Greenwich, CT 06831
Copy to:
Richards & O'Neil, LLP
885 Third Avenue
New York, NY 10022
Attn: Jonathan M. Peterson
If to Weiner:
735 Turf Road
North Woodmere, NY 11581
Copy to:
Richards & O'Neil, LLP
885 Third Avenue
New York, NY 10022
Attn: Jonathan M. Peterson
If to the Source or S-US:
The Source Information Management Company
11644 Lilburn Park Road
St. Louis, Missouri 63146
Attn: S. Leslie Flegel, Chairman & CEO
Copy to:
Armstrong, Teasdale, Schlafly & Davis
One Metropolitan Square
St. Louis, Missouri 63102
Attn: John L. Gillis, Jr., Esq.
41
<PAGE> 46
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no such notice,
request, demand, claim, or other communication shall be deemed to have been duly
given unless and until it actually is received by the intended recipient. Any
Party may change the address to which notices, requests, demands, claims, and
other communications hereunder are to be delivered by giving the other Party
notice in the manner herein set forth.
(h) Governing Law. This Agreement shall be governed by and construed in
accordance with the domestic laws of the State of Missouri without giving effect
to any choice or conflict of law provision or rule (whether of the State of
Missouri or any other jurisdiction) that would cause the application of the laws
of any jurisdiction other than the State of Missouri.
(i) Amendments and Waivers. The Parties may mutually amend any
provision of this Agreement at any time prior to the Effective Time with the
prior authorization of their respective boards of directors. No amendment of any
provision of this Agreement shall be valid unless the same shall be in writing
and signed by both of the Parties. No waiver by any Party of any default,
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence.
(j) Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
(k) Expenses. Each of the Parties will bear its own costs and expenses
(including legal fees and expenses) incurred in connection with this Agreement
and the transactions contemplated hereby.
(l) Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context otherwise requires. The
word "including" shall mean including without limitation.
(m) Incorporation of Exhibits and Schedules. The Exhibits and Schedules
identified in this Agreement are incorporated herein by reference and made a
part hereof.
*****
42
<PAGE> 47
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on
as of the date first above written.
The Source Information Management Company
By: /s/ S. Leslie Flegel
------------------------
S. Leslie Flegel
Chairman and CEO
Source - U.S. Marketing Services, Inc.
By: /s/ S. Leslie Flegel
------------------------
S. Leslie Flegel
President
U.S. Marketing Service, Inc.
By: /s/ Jonathan J. Ledecky
-------------------------
Jonathan J. Ledecky
Chief Executive Officer
/s/ Jonathan J. Ledecky
- ----------------------------
Jonathan J. Ledecky
/s/ James R. Gillis
- -----------------------------
James R. Gillis
/s/ Monte Weiner
- ------------------------------
Monte Weiner
43
<PAGE> 1
EXHIBIT 3
CONVERSION VOTING AGREEMENT
This Conversion Voting Agreement (the "Agreement") is entered into the
persons listed on Exhibit B hereto (hereinafter collectively referred to as the
"Shareholders") and Jonathan J. Ledecky, James R. Gillis and Monte Weiner
(hereinafter collectively referred to as the "USM Shareholders") as of January
7, 1999.
RECITALS
WHEREAS, the Shareholders are all owners of certain shares of the
common stock, $.01 par value per share (the "Common Stock") of The Source
Information Management Company, a Missouri corporation (the "Corporation"); and
WHEREAS, as of the date hereof, the Corporation has effectuated a
merger of U.S. Marketing Services, Inc., a Delaware corporation ("Target"), with
and into Source - U.S. Marketing Co., a Missouri corporation and a wholly-owned
subsidiary of the Corporation ("S-US"), pursuant to an Agreement and Plan of
Merger among the Corporation, Target, S-US and the USM Shareholders dated as of
January 7, 1999 (the "Merger Agreement"); and
WHEREAS, in connection with the Merger Agreement, the Corporation
issued an aggregate of 1,926,719 shares of Common Stock and 1,473,281 shares of
Series A Convertible Preferred Stock, $.01 par value per share (the "Preferred
Stock") to the USM Shareholders; and
WHEREAS, the Merger Agreement requires the Corporation to hold a
special shareholders meeting as soon as practicable ("Meeting") to consider and
vote on the conversion of all of the issued and outstanding shares of Preferred
Stock into shares of Common Stock pursuant to the terms of the Certificate of
Designation for such Preferred Stock (the "Conversion"); and
WHEREAS, the Shareholders are desirous of voting for the Conversion
subject to the conditions set forth herein; and
WHEREAS, the Shareholders desire to enter into an agreement to be
specifically enforceable against each of them pursuant to which they agree to
vote their shares of Common Stock in the Corporation in the manner and for the
purposes specified herein.
NOW, THEREFORE, in consideration of the foregoing and of the other
shareholders entering into this Agreement and the terms and conditions set forth
herein, the receipt and sufficiency of which are acknowledged by the parties
hereto, the Shareholders agree to the following.
<PAGE> 2
1. Voting Agreement. Each of the Shareholders agrees at the next
duly called special shareholders meeting of the Corporation called to consider
the approval of the Conversion to vote any and all of his or her shares of
Common Stock, whether now owned or hereafter acquired, in favor of the
Conversion.
2. Irrevocable Proxy. In order to insure the voting of the
Shareholders in accordance with this Agreement, each Shareholder agrees to
execute an irrevocable proxy simultaneously with the execution hereof in the
form of Exhibit A attached hereto and made a part hereof granting to S. Leslie
Flegel and/or William Lee the right to vote, or to execute and deliver
stockholder written consents, in respect of all of the Common Stock of the
Shareholders now owned or hereafter acquired by any of the Shareholders. It is
understood and agreed that such irrevocable proxy relates solely to voting in
favor of the Conversion at the Meeting pursuant to ss.1 hereof.
3. Changes in Common Stock. In the event that subsequent to the
date of this Agreement any shares or other securities of the Corporation are
issued on, or in exchange for, any of the Common Stock of the Corporation held
by the Shareholders by reason of any stock dividend, stock split, consolidation
of shares or reclassification, such Common Stock or securities shall be deemed
to be covered by and subject to the terms of this Agreement.
4. Representations of Shareholders. Each Shareholder hereby
represents and warrants to each of the USM Shareholders that (a) he or she was
the record owner as of the date hereof and owns and has the right to vote the
number of shares of Common Stock set forth opposite his or her name on Exhibit B
attached hereto, (b) he or she has full power to enter into this Agreement and
has not, prior to the date of this Agreement, executed or delivered any proxy or
entered into any other voting agreement or similar arrangement other than one
which has expired or terminated prior to the date hereof or which is superseded
by this Irrevocable Proxy, and (c) he or she will not take any action
inconsistent with the purpose and provisions of this Agreement.
5. Enforceability. Each Shareholder expressly agrees that this
Agreement shall be specifically enforceable in any court of competent
jurisdiction in accordance with its terms against each of the parties hereto.
6. Validity and Effectiveness. This Agreement shall not be deemed
valid or effective unless each of the parties set forth on the signature pages
of this Agreement shall have executed this Agreement on or before the Effective
Time (as that term is defined in the Merger Agreement).
7. Termination. This Agreement shall terminate and be void and of
no effect upon the earlier of Shareholder approval of the Conversion at the
Meeting or the conversion of the
-2-
<PAGE> 3
Preferred Stock into demand notes pursuant to the terms of the Certificate of
Designation for the Preferred Stock.
8. Indemnification. Each of the Shareholders, other than S.
Leslie Flegel and/or William Lee, hereby agree to jointly and severally
indemnify, defend and hold harmless S. Leslie Flegel and/or William Lee from any
and all claims, liabilities, obligations or expenses they incur (including legal
fees) in connection with their being designated as and their actions in
connection with carrying out their duties as proxies for the Shareholders.
9. Proxy Holders. S. Leslie Flegel and/or William Lee hereby
agree to act as proxies for the Shareholders subject to the terms and conditions
set forth herein.
10. General Provisions.
(a) All of the covenants and agreements contained in this
Agreement shall be binding upon, and enure to the benefit of, the respective
parties and their successors, assigns, heirs, executors, administrators and
other legal representatives, as the case may be.
(b) This Agreement and the rights of the parties hereto,
shall be governed by and construed in accordance with the laws of the State of
Missouri.
(c) This Agreement may be executed in one or more
counterparts (including by facsimile), each of which will be deemed an original
but all of which together shall constitute one and the same instrument.
(d) If any provision of this Agreement shall be declared
void or unenforceable by any court or administrative board of competent
jurisdiction, such provision shall be deemed to have been severed from the
remainder of this Agreement and this Agreement shall continue in all respects to
be valid and enforceable.
(e) No waivers of any breach of this Agreement extended by
any party hereto to any other party shall be construed as a waiver of any rights
or remedies of any other party hereto or with respect to any subsequent breach.
(f) Whenever the context of this Agreement shall so
require, the use of the singular number shall include the plural and the use of
any gender shall include all genders.
-3-
<PAGE> 4
IN WITNESS WHEREOF, the Shareholders have executed this Agreement as of
the date first above written.
/s/ S. Leslie Flegel /s/ Jonathan J. Ledecky
- ------------------------------ ------------------------------
S. Leslie Flegel Jonathan J. Ledecky
/s/ Monte Weiner /s/ James R. Gillis
- ------------------------------ ------------------------------
Monte Weiner James R. Gillis
/s/ Peter L. Keane /s/ Randall S. Minix
- ------------------------------ ------------------------------
Name: Peter L. Keane Name: Randall S. Minix
/s/ Timothy A. Braswell /s/ Mark Flegel
- ------------------------------ ------------------------------
Name: Timothy A. Braswell Name: Mark Flegel
/s/ William H. Lee, Jr. /s/ Charles A. Pascarella
- ------------------------------ ------------------------------
Name: William H. Lee, Jr. Name: Charles A. Pascarella
/s/ Aron Katzman /s/ Harry L. Franc III
- ------------------------------ ------------------------------
Name: Aron Katzman Name: Harry L. Franc III
/s/ Lauren Flegel /s/ P. Randall McGraw
- ------------------------------ ------------------------------
Name: Lauren Flegel Name: P. Randall McGraw
/s/ Jason S. Flegel /s/ Carole Flegel
- ------------------------------ ------------------------------
Name: Jason S. Flegel Name: Carole Flegel
/s/ Dwight L. DeGolia Cameron Capital Ltd
- ------------------------------ By: /s/ N. Snelling
Name: Dwight L. DeGolia ------------------------------
C.F.O
Charles S. Lipson A.J. Finkelstein Realty, Inc.
By: /s/ Charles S. Lipson By: /s/ Andrew J. Finkelstein
- ------------------------------ ------------------------------
General Partner President
A.J. Finkelstein Realty, Inc.
Profit Sharing Plan
By: /s/ Andrew J. Finkelstein /s/ Andrew J. Finkelstein
- ------------------------------ ------------------------------
Name: Andrew J. Finkelstein
Kensington Partners L.P.
By: /s/ David S. Wilson
- ------------------------------
General Partner
-4-
<PAGE> 1
EXHIBIT 4
CERTIFICATE OF DESIGNATION OF
CLASS A CONVERTIBLE PREFERRED STOCK
OF
THE SOURCE INFORMATION MANAGEMENT COMPANY
Pursuant to Section 351.180.7 of the General and Business Corporation
Law of the State of Missouri,
The Source Information Management Company, a corporation organized and
existing under the General and Business Corporation Law of the State of Missouri
(the "Corporation"), in accordance with the provisions of Section 351.180.7
thereof, hereby certifies the following:
Pursuant to the authority conferred upon the Board of Directors by the
Articles of Incorporation of the Corporation, the Board of Directors on December
30, 1998, adopted the following resolution creating a first series of one
million, five hundred thousand (1,500,000) shares of preferred convertible
stock, designated as Class A Convertible Preferred Stock:
BE IT RESOLVED, that pursuant to the authority granted to the Board of
Directors by Article 4 of the Articles of Incorporation of the Corporation,
there is hereby created and the Corporation be, and it hereby is, authorized to
issue one million, five hundred thousand (1,500,000) shares of a first series of
convertible preferred stock, designated "CLASS A CONVERTIBLE PREFERRED STOCK,"
and such series shall have, in addition to the terms set forth in the Articles
of Incorporation of the Corporation, the following terms, conditions,
designation, preferences and privileges, relative, participating, optional and
other special rights, and qualifications, limitations, and restrictions:
1. Liquidation. Upon the voluntary or involuntary liquidation,
winding up or dissolution of the Company out of the assets available for
distribution to shareholders, the holders of Class A Convertible Preferred Stock
shall be entitled to receive, in preference to any payment on the Company's
Common Stock, $7.73 (the "Preferred Liquidation Amount") per share plus any
dividends previously declared but unpaid. In the event the assets of the Company
are insufficient to pay the entirety of the Class A Convertible Preferred Stock,
the Common Stock and other junior classes of stock will receive nothing. After
the Class A Convertible Preferred Stock has been paid, the remaining assets
shall be paid to the Common Stock and other junior classes of stock in
accordance with their respective priority, if any.
2. Dividends. The holders of Class A Convertible Preferred Stock
are entitled to receive, out of legally available funds, dividends at such rate,
on such conditions, at such times and to such extent dividends are paid or
declared by the Company on the Common Stock.
<PAGE> 2
3. Voting Rights. The holders of the Class A Convertible Preferred
Stock shall be entitled to notice of all shareholders meetings, but shall not be
entitled to vote on any matters submitted to the holders of Common Stock for a
vote. Notwithstanding the foregoing, the Company shall not, without the approval
of at least a majority of the outstanding shares of Class A Convertible
Preferred Stock, (i) amend the Articles of Incorporation or any other document
to alter or change any rights, preferences or privileges of the Class A
Convertible Preferred Stock or which materially and adversely affect the Class A
Convertible Preferred Stock, (ii) increase or decrease the authorized number of
shares of the Class A Convertible Preferred Stock or effect a stock split or
reverse stock split of the Class A Convertible Preferred Stock, or (iii)
authorize another class or series of shares senior to or pari passu with the
Class A Convertible Preferred Stock with respect to distribution of assets on
liquidation.
4. Conversion.
a. Upon Shareholder Approval (as hereinafter defined), each
share of Class A Convertible Preferred Stock shall be converted automatically
into one (1) share of Common Stock. Upon conversion, no fractional shares shall
be issued. The Company shall, in lieu thereof, pay cash value, based on the
Preferred Liquidation Amount, for all fractional shares of Common Stock. The
Company shall reserve sufficient authorized but unissued shares of Common Stock
necessary to effectuate the conversion of all shares of Class A Convertible
Preferred Stock. For purposes of this Certificate of Designation, "Shareholder
Approval" means the approval of the holders of a majority of the outstanding
Common Stock of the issuance of Common Stock upon the conversation of the Class
A Convertible Preferred Stock voting at a shareholders meeting at which a quorum
is present held for such purpose. For purposes of determining such majority
vote, shares of Common Stock held by the holders of the Class A Convertible
Preferred Stock shall be disregarded.
b. If Shareholder Approval has not been obtained on or
before June 30, 1999, the Company shall, at the election of a holder of the
Class A Convertible Preferred Stock, convert all of the shares of Class A
Convertible Preferred Stock held by such holder at a price per share equal to
the Preferred Liquidation Amount plus any dividends declared but unpaid. For
each share of Class A Convertible Preferred Stock which is to be converted, the
Company shall be obligated to deliver to the holder thereof a note in a
principal amount equal to the Preferred Liquidation Amount of such share of
Class A Convertible Preferred Stock plus any dividends declared but unpaid. Such
note shall be payable on demand with thirty days notice and shall bear interest
at the Prime Rate (as announced from time to time by J.P. Morgan) plus one
percent from the date of conversion. No holder of Class A Convertible Preferred
Stock shall be entitled to any dividends accruing after the date of conversion.
On the date of conversion, all rights of the holder of Class A Convertible
Preferred Stock so converted shall cease, and such Class A Convertible Preferred
Stock shall not be deemed to be outstanding. Shares of Class A Convertible
Preferred Stock which are converted shall be returned to the status of
authorized but unissued shares of preferred stock.
5. Conversion Procedure. Upon the date of Shareholder
Approval, the conversion shall be deemed to have occurred, and the holders of
the Class A Convertible Preferred Stock shall be
-2-
<PAGE> 3
regarded for all corporate purposes, from and after such date, as the holders of
the number of shares of Common Stock to which they are entitled upon the
conversion.
6. Stock Splits and Combinations. If the Company shall at any time
subdivide or combine its outstanding Common Stock, or fix a record date for
payment of a dividend in Common Stock or other securities of the Company
exercisable, convertible or exchangeable for Common Stock (in which latter event
the maximum number of shares of Common Stock issuable upon the exercise,
conversion or exchange of such securities shall be deemed to have been
distributed), after that subdivision, combination or dividend, the number of
shares of Common Stock issuable upon conversion shall be proportionately
adjusted for such subdivision, combination or dividend. If the Company shall at
any time subdivide the outstanding shares of Common Stock or fix a record date
for payment of a dividend in Common Stock or other securities exercisable,
convertible or exchangeable into Common Stock, the Preferred Liquidation Amount
shall be proportionately decreased, and, if the Company shall at any time
combine the outstanding shares of Common Stock, then the Preferred Liquidation
Amount shall be proportionately increased. Any adjustment under this paragraph
shall become effective at the close of business on the date the subdivision or
combination becomes effective or the dividend is distributed.
7. Reclassification, Exchange and Substitution. If the Common
Stock issuable upon exercise of a share of Class A Convertible Preferred Stock
shall be changed into the same or a different number of shares of any other
class or classes of securities, whether by capital reorganization,
reclassification, or otherwise (other than a subdivision or combination or
payment for dividend of securities provided for above), the holder of Class A
Convertible Preferred Stock shall, on its conversion, be entitled to receive, in
lieu of the Common Stock which the holder would have become entitled to receive
but for such change, a number of shares of such other class or classes of
securities which such holder would have been entitled to receive as the holder
of that number of shares of Common Stock immediately before that change.
8. Reorganizations, Mergers, Consolidations or Sales of Assets.
If at any time there shall be a capital reorganization of the Common Stock
(other than a subdivision, combination, payment of dividend, reclassification or
exchange of Common Stock provided for above), or merger or consolidation of the
Company with or into another corporation, or the sale of the Company's
properties and assets as, or substantially as, an entirety to any other person,
then, as a part of such reorganization, merger, consolidation or sale, lawful
provision shall be made so that the holder of a share of Class A Convertible
Preferred Stock shall thereafter be entitled to receive upon conversion of a
share of Class A Convertible Preferred Stock, the number of shares or other
securities or property of the Company, or of the successor corporation resulting
from such merger or consolidation, to which a holder of the shares issuable upon
conversion of a share of Class A Convertible Preferred Stock would have been
entitled in such capital reorganization, merger, or consolidation or sale if
such share of Class A Convertible Preferred Stock had been converted immediately
before that capital reorganization, merger, consolidation, or sale. If any such
case, appropriate adjustment (as determined in good faith by the Company's Board
of Directors) shall be made in the application of the provisions of the Class A
Convertible Preferred Stock with respect to the rights and interest of the
holder of a share of Class A Convertible Preferred Stock after the
-3-
<PAGE> 4
reorganization, merger, consolidation, or sale such that the provisions of the
Class A Convertible Preferred Stock (including adjustment of the conversion
price then in effect and number and kind of securities received upon conversion
of a share of Class A Convertible Preferred Stock) shall be applicable after
that event in relation to any securities received after that event upon
conversion of a share of Class A Convertible Preferred Stock.
-4-
<PAGE> 5
IN WITNESS WHEREOF, this Certificate of Designation has been executed
in duplicate by The Source Information Management Company as of the day and year
hereafter acknowledged.
THE SOURCE INFORMATION MANAGEMENT
COMPANY
By: /s/ S. Leslie Flegel
-----------------------------------
S. Leslie Flegel
CEO and Chairman
CORPORATE SEAL
ATTEST:
By: /s/ W. Brian Rodgers
------------------------------------
Assistant Secretary
STATE OF MISSOURI )
) SS.
COUNTY OF COLE )
On this 6th day of January, 1999, before me appeared S. Leslie
Flegel to me personally known, who, being by me duly sworn, did say that he is
the CEO and Chairman of The Source Information Management Company, a Corporation
of the State of Missouri, and that the seal affixed to the foregoing instrument
is the corporate seal of said corporation, and that said instrument was signed
and sealed in behalf of said corporation, by authority of its Board of
Directors; and said he acknowledged said instrument to be the free act and deed
of said corporation.
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my
official seal in the County and State aforesaid, the day and year first above
written.
/s/ Joan M. Stoner
---------------------------
Notary Public
My Commission Expires:
Aug. 30, 2000
- ----------------------
-5-
<PAGE> 1
EXHIBIT 5
REGISTRATION RIGHTS AGREEMENT
This Agreement is made as of _________, 1999, by and between The Source
Information Management Company, a Missouri corporation (the "Company"), and
Jonathan J. Ledecky ("Ledecky"), James R. Gillis and Monte Weiner (Messrs.
Ledecky, Gillis and Weiner hereinafter collectively referred to as the
"Shareholders").
Recitals
WHEREAS, the Company and the Shareholders have entered into that
certain agreement and plan of merger by and among the Company, the Shareholders,
U.S. Marketing Services, Inc. ("Target") and Source U.S. Marketing Co.("S-US")
dated January 7, 1999 (the "Merger Agreement") pursuant to which Target will be
merged with and into S-US and the Shareholders will receive an aggregate of
1,926,719 shares of the Company's common stock, $.01 par value per share (the
"Common Stock") and 1,473,281 shares of the Company's Series A Convertible
Preferred Stock, $.01 par value per shares (the "Preferred Stock").
The Company has agreed to extend, and the Shareholders desire to
accept, registration rights with respect to the shares of the Company's Common
Stock issued to the Shareholders pursuant to the Merger Agreement and the shares
of Common Stock that may be issued to the Shareholders upon conversion of the
Preferred Stock.
NOW, THEREFORE, in consideration of the premises and mutual agreements
set forth herein, the Company and the Shareholders agree as follows:
Section 1. Definitions. As used in this Agreement, the following terms
shall have the meanings set forth below:
(a) "Commission" shall mean the Securities and Exchange
Commission, or any other federal agency at the time administering the Securities
Act.
(b) :Exchange Act" shall mean the Securities Exchange Act of
1934, as amended, or any similar federal statute, and the rules and regulations
thereunder, all as the same shall be in effect at the time.
(c) "Register," "registered" and "registration" shall refer to
a registration effected by preparing and filing a registration statement with
the Commission in compliance with the Securities Act, and the declaration or
ordering of the effectiveness of such registration statement, and compliance
with applicable state securities laws of such states in which the Shareholders
notify the Company of his intention to offer Registrable Securities.
<PAGE> 2
(d) "Registrable Securities" shall mean all of the (i) shares
of the Company's Common Stock issued to the Shareholders pursuant to the Merger
Agreement, or (ii) shares of the Company's Common Stock issued to the
Shareholders upon conversion of his shares of the Company's Preferred Stock, or
(iii) stock issued in respect of stock referred to in (i) and (ii) above in any
reorganization or (iv) stock issued in respect of the stock referred to in (i),
(ii) or (iii) as a result of a stock split, stock dividend, recapitalization or
combination.
(e) "Rule 144" shall mean Rule 144 under the Securities Act or
any successor or similar rule as may be enacted by the Commission from time to
time, but shall not include Rule 144A.
(f) "Rule 144A" shall mean Rule 144A under the Securities Act
or any successor or similar rule as may be enacted by the Commission from time
to time, but shall not include Rule 144.
(g) "Securities Act" shall mean the Securities Act of 1933, as
amended, or any similar federal statute, and the rules and regulations
thereunder, all as the same shall be in effect at the time.
Section 2. Restrictions on Transferability.
(a) The Registrable Securities shall not be sold, assigned,
transferred or pledged except upon the conditions specified in this Agreement,
which conditions are intended to ensure compliance with the provisions of the
Securities Act. The Shareholders will cause any proposed purchaser, assignee,
transferee, or pledgee of the Registrable Securities held by them to agree to
take and hold such securities subject to the provisions and upon the conditions
specified in this Agreement.
(b) Each certificate representing Registrable Securities shall
(unless otherwise permitted by the provisions of Section 2(c) below) be stamped
or otherwise imprinted with a legend substantially in the following form (in
addition to any legend required under applicable state securities laws or
otherwise):
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933. THESE SHARES MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
EXEMPTION THEREFROM UNDER SAID ACT. COPIES OF THE AGREEMENTS
COVERING THE PURCHASE OF THESE SHARES AND RIGHTS TO REGISTER
THESE SHARES AND RESTRICTING THEIR TRANSFER MAY BE OBTAINED AT
NO COST BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF
THIS
-2-
<PAGE> 3
CERTIFICATE TO THE SECRETARY OF THE CORPORATION AT THE
PRINCIPAL EXECUTIVE OFFICES OF THE CORPORATION.
The Shareholders consent to the Company making a notation on its records and
giving instructions to any transfer agent of the Registrable Securities in order
to implement the restrictions on transfer established in this Agreement.
(c) Each Shareholder agrees not to make any disposition of all
or any portion of any Registrable Securities unless and until:
(i) There is in effect a registration statement
under the Securities Act covering such proposed disposition and such disposition
is made in accordance with such registration statement; or
(ii) The Shareholder shall have notified the Company
of the proposed disposition and shall have furnished the Company with a detailed
statement of the circumstances surrounding the proposed disposition, which
proposed disposition may not be made prior to the first anniversary of this
Agreement and, if reasonably requested by the Company, the Shareholder shall
furnish the Company with an opinion of counsel, reasonably satisfactory to the
Company that such disposition shall not require registration of such shares
under the Securities Act. It is agreed, however, that no such opinion will be
required for Rule 144 or Rule 144A transactions.
(iii) Notwithstanding the provisions of paragraphs
(i) and (ii) above, no such registration statement or opinion of counsel shall
be necessary for (A) a transfer by a Shareholder to a member of his immediate
family, to trusts for the benefit of members of his immediate family, (B) the
pledge or hypothecation of the Registrable Securities as security for
obligations, and (C) with the Company's prior consent, which shall not be
unreasonably withheld, a transfer by Ledecky to Ironbound Partners or another
investment partnership controlled by him; provided, that such transferee or
pledgee agrees in writing to be subject to all of the terms hereof and that any
such transferee or pledgee of Ledecky agrees in writing to be subject to all of
the terms of the Voting Agreement of even date herewith between Ledecky and S.
Leslie Flegel III to the same extent as if he, she or it were Ledecky.
Section 3. Piggyback Registration.
(a) If, at any time or from time to time, the Company shall
determine to register any of its equity securities, for its own account or the
account of any of its shareholders, other than a registration on Form S-4 or
Form S-8, or any successor form thereto, the Company will:
-3-
<PAGE> 4
(i) give to the Shareholders written notice thereof
as soon as practicable prior to filing the registration statement; and
(ii) include in such registration, and in any
underwriting involved therein, all of the Registrable Securities specified in a
written request by the Shareholders, made within fifteen (15) days after receipt
of such written notice from the Company, except as set forth in subsection (b)
below.
(b) Notwithstanding any other provision of this Section 3, if
the managing underwriter determines that marketing factors require a limitation
of the number of shares to be underwritten, the managing underwriter may limit
the number of Registrable Securities to be included in the registration and
underwriting (provided that no shares held by persons with piggyback
registration rights granted after the date of this Agreement are included in the
registration and underwriting). The Company shall so advise the Shareholders,
and the number of shares of Registrable Securities and other securities that may
be included in the registration and underwriting shall be allocated among all
holders in proportion, as nearly as practicable, to the respective amounts of
Registrable Securities held by the Shareholders and other securities held by
other holders at the time of filing the registration statement. If any
Shareholder disapproves of the terms of any such underwriting, he may elect to
withdraw therefrom by written notice to the Company and the managing
underwriter.
Section 4. Demand Registration. The Shareholders shall have the right
at any time or from time to time but not more than three times collectively and
only after the second anniversary of this Agreement to request registrations of
the Registrable Securities on Form S-3, or any successor form thereto. All
requests for registration shall be in writing and shall state the number of
shares of Registrable Securities to be disposed of and the intended method of
disposition. The Company shall, if it is then eligible to register its
securities on such form, file a registration statement on Form S-3 covering the
Registrable Securities so requested to be registered as soon as practical, but
in any event within sixty (60) days after receipt of the request from the
Shareholders, and shall use its reasonable best efforts to have such
registration statement promptly declared effective by the Commission subject to
the following:
(a) The Company shall not be required to effect registration
under this Section 4 on any form other than Form S-3, or any successor forms
thereto, during the term of this Agreement.
(b) The Company shall not be required to file a registration
statement pursuant to this Section 4 within ninety (90) days of the effective
date of any registration referred to in Section 3 above.
(c) The Company shall not be required to file a registration
statement pursuant to this Section 4 unless the Shareholder proposes to dispose
of shares of Registrable Securities
-4-
<PAGE> 5
having an aggregate disposition price (before deduction of underwriting
discounts and expenses of sale) of at least $1,000,000.
(d) The Company shall not be required to file more than two
registration statements pursuant to this Section 4 within any twelve-month
period.
Section 5. Expenses of Registration. In addition to the fees and
expenses contemplated by Section 6 hereof, all expenses incurred in connection
with the registrations pursuant to Sections 3 and 4 hereof, including without
limitation all registration, filing and qualification fees, printing expenses,
and fees and disbursements of counsel for the Company, shall be borne by the
Company, except that the Company shall not be required to pay underwriters'
fees, discounts or commissions relating to the sale of Registrable Securities.
Section 6. Registration Procedures. In the case of each registration
effected by the Company pursuant to this Agreement, the Company will keep the
Shareholders advised in writing as to the initiation of each registration and as
to the completion thereof. At its expense the Company will:
(a) keep such registration pursuant to Sections 3 and 4
continuously effective for a period of one hundred eighty (180) days, or, in
each case, such reasonable period necessary to permit the Shareholders to
complete the distribution described in the registration statement relating
thereto, which ever is less;
(b) promptly prepare and file with the Commission such
amendments and supplements to such registration statement and the prospectus
used in connection therewith as may be necessary to comply with the provisions
of the Securities Act, and to keep such registration statement effective for
that period of time specified in Section 6(a) above;
(c) furnish such number of prospectuses and other documents
incident thereto as the Shareholders from time to time may reasonably request;
(d) use reasonable best efforts to obtain the withdrawal of
any order suspending the effectiveness of any such registration statement, or
the lifting of any suspension of the qualification of any of the Registrable
Securities for sale in any jurisdiction, at the earliest possible moment;
(e) cause all Registrable Securities covered by such
registrations to be listed on each securities exchange, including NASDAQ, on
which similar securities issued by the Company are then listed;
-5-
<PAGE> 6
(f) make available for inspection by the Shareholders, any
underwriter participating in any disposition pursuant to such registration
statement, and any attorney, accountant or other agent retained by the
Shareholders or any underwriter, all financial and other records, pertinent
corporate documents and properties of the Company, and cause the Company's
officers, directors, employees and independent accountants to supply all
information reasonably requested by the Shareholders, or any such underwriter,
attorney, accountant or agent in connection with such registration statement;
(g) notify the Shareholders, at any time a prospectus covered
by such registration statement is required to be delivered under the Securities
Act, of the happening of any event of which it has knowledge as a result of
which the prospectus included in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading in the light of the circumstances then existing; and
(h) take such other actions as shall be reasonably requested
by the Shareholders.
Section 7. Indemnification.
(a) In the event of a registration of any of the Registrable
Securities under the Securities Act pursuant to Sections 3 or 4, the Company
will indemnify and hold harmless the Shareholders, each underwriter of such
Registrable Securities thereunder and each other person, if any, who controls
such underwriter within the meaning of the Securities Act, against any losses,
claims, damages or liabilities, to which the Shareholders, underwriter or
control person may become subject under the Securities Act or otherwise, insofar
as such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement (or alleged untrue
statement) of any material fact contained in any registration statement under
which such Registrable Securities were registered under the Securities Act, any
preliminary prospectus or final prospectus contained therein, or any amendment
or supplement thereof, or arise out of or are based upon the omission (or
alleged omission) to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, or any violation by
the Company of any rule or regulation promulgated under the Securities Act or
any state securities law applicable to the Company and relating to action or
inaction required of the Company in connection with any such registration, and
will reimburse the Shareholders, and each such underwriter and each person who
controls each underwriter, for any reasonable legal and any other expenses
incurred in connection with investigating, defending or settling any such claim,
loss, damage, liability or action, provided that the Company will not be liable
in any such case to the extent that any such claim, loss, damage or liability
arises out of or is based on any untrue statement or omission based upon written
information furnished to the Company by an instrument duly executed by the
Shareholders or underwriter specifically for use therein.
-6-
<PAGE> 7
(b) In the event of a registration of any of the Registrable
Securities under the Securities Act pursuant to Sections 3 or 4, the
Shareholders will, severally but not jointly, indemnify and hold harmless the
Company, against any losses, claims, damages or liabilities to which the Company
may become subject under the Securities Act or otherwise insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement (or alleged untrue statement) of any
material fact contained in any registration statement under which such
Registrable Securities were registered under the Securities Act, any preliminary
prospectus or final prospectus contained therein, or any amendment or supplement
thereof, or arise out of or are based upon any omission (or alleged omission) to
state therein a material fact required to be stated therein or necessary to make
statements therein not misleading, and will reimburse the Company for any
reasonable legal and any other expenses incurred in connection with
investigating, defending or settling any such claim, loss, damage, liability or
action, in each case to the extent, but only to the extent that such untrue
statement (or alleged untrue statement) or omission (or alleged omission) was
made in reliance upon and in conformity with written information furnished to
the Company by the Shareholders specifically for use therein; provided, however,
that the total amount for which any Shareholder shall be liable under this
Section 6(b) shall not in any event exceed the aggregate proceeds received by
such Shareholder from the sale of Registrable Securities in such registration.
(c) Each party entitled to indemnification under this Section
7 (the "Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claims as to which indemnity may be sought, and
shall permit the Indemnifying Party to assume the defense of any such claim or
any litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party, and the Indemnified Party may participate in
such defense at such party's expense, and provided further that the failure of
any Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations hereunder, except to the extent that such
failure resulted in actual detriment to the Indemnifying Party. No Indemnifying
Party, in the defense of any such claim or litigation, shall, except with the
consent of each Indemnified Party, consent to entry of any judgment or enter
into any settlement which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such Indemnified Party of a release from
all liability in respect of such claim or litigation.
(d) If the indemnification provided for in this Section 7 is
held by a court of competent jurisdiction to be unavailable to an Indemnified
Party with respect to any loss, liability, claim, damage or expense referred to
therein, then the Indemnifying Party, in lieu of indemnifying such Indemnified
Party thereunder, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such loss, liability, claim, damage or expense
in such proportion as is appropriate to reflect the relative fault of the
Indemnifying Party on the one hand and of the Indemnified Party on the other
hand in connection with the statements or omissions which resulted in such loss,
liability, claim, damage or expense as well as any other
-7-
<PAGE> 8
relevant equitable considerations. The relevant fault of the Indemnifying Party
and the Indemnified Party shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
Indemnifying Party or by the Indemnified Party and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. Notwithstanding the foregoing, the amount any Shareholder
shall be obligated to contribute pursuant to this Section 7(d) shall be limited
to an amount equal to the proceeds to such Shareholder pursuant to the
registration statement which gives rise to such obligation to contribute (less
the aggregate amount of any damages which such Shareholder has otherwise been
required to pay in respect of such loss, claim, damage, liability or action or
any substantially similar loss, claim, damage, liability or action arising from
the sale of such Registrable Securities).
(e) The indemnification provided by this Section 7 shall be a
continuing right to indemnification and shall survive the registration and sale
of any securities by any person entitled to indemnification hereunder and the
expiration or termination of this Agreement.
Section 8. Lockup Agreement.
(a) Each Shareholder agrees that in the event Registrable
Securities are included in any underwritten registration of the Company's
securities, if the Company or the managing underwriters so request in connection
with such registration, the Shareholders will not, without the prior written
consent of the Company or such underwriters, effect any public sale or other
distribution of any equity securities of the Company, including any sale
pursuant to Rule 144, during the seven (7) days prior to, and during the ninety
(90) day period subsequent to, the effective date of such underwritten
registration, except in connection with such underwritten registration; provided
that each officer and director of the Company and each other person who is also
an affiliate of the Company shall enter into similar agreements.
(b) The Company agrees not to effect any public sale or other
distributions of equity securities, or any securities convertible into or
exchangeable for such equity securities, during the seven (7) days prior to, and
during the ninety (90) day period subsequent to, the effective date of any
underwritten piggyback registration, except in connection with any such
underwritten registration.
Section 9. Rule 144 and 144A Reporting. With a view to making available
to the Shareholders the benefits of certain rules and regulations of the
Commission which may permit the sale of the Registrable Securities to the public
without registration, the Company agrees at all times to:
(a) make and keep public information available, as those terms
are understood in Rule 144 and Rule 144A; and
-8-
<PAGE> 9
(b) use its best efforts to file with the Commission in a
timely manner all reports and other documents required of the Company under the
Securities Act and the Exchange Act.
Section 10. Termination of Rights. All rights with respect to any given
Shareholder under this Agreement shall terminate upon the later to occur of: (i)
the date which is five (5) years after the closing date of the transactions
covered by the Merger Agreement or (ii) the date on which such Shareholder is no
longer deemed to be an "affiliate" of the Company, as defined in Rule 144.
Section 11. Representations and Warranties of the Company. The
Company represents and warrants to the Shareholders as follows:
(a) This Agreement has been duly executed and delivered by the
Company, has been effectively authorized by all necessary action (corporate or
otherwise), and constitutes the legal, valid and binding obligation of the
Company.
(b) Neither the execution or delivery of this Agreement by the
Company, nor the consummation by the Company of the transactions contemplated
hereby, will conflict with or result in a breach or violation of, or default
under any of the terms, conditions or provisions of (i) any material note, bond,
mortgage, indenture, license, agreement or other instrument or obligation to
which the Company is a party or by which the Company or any of its assets or
properties are bound, (ii) the Company's charter documents or bylaws or (iii)
any judgment, order, injunction, decree, statute, rule or regulation applicable
to the Company or any of its properties or assets.
Section 12. Miscellaneous.
(a) All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed given if delivered personally
or mailed by certified or registered mail, postage prepaid, return receipt
requested, addressed as follows:
If to Ledecky: Building One Services Corporation
800 Connecticut Avenue, N.W., Suite 1111
Washington, D.C. 20006
Attn: Jonathan J. Ledecky
With copies to: Hogan & Hartson L.L.P.
Columbia Square
555 Thirteenth Street, N.W.
Washington, D.C. 20004-1109
Attn: J. Hovey Kemp, Esq.
-9-
<PAGE> 10
If to Gillis: 73-15 Weaver Street
Greenwich, CT 06831
With copies to: Richards & O'Neil, LLP
885 Third Avenue
New York, NY 10022
Attn: John Peterson
If to Weiner: 735 Turf Road
North Woodmere, NY 11581
With copies to: Richards & O'Neil, LLP
885 Third Avenue
New York, NY 10022
Attn: John Peterson
If to the Company: The Source Information Management Company
11644 Lilburn Park Road
St. Louis, Missouri 63146
Attn: S. Leslie Flegel, CEO & Chairman
With a copy to: Armstrong, Teasdale, Schlafly & Davis
One Metropolitan Square
St. Louis, Missouri 63102
Attn.: John L. Gillis, Jr., Esq.
(b) Except as provided in Section 2 hereof, this Agreement
shall not be assignable by any of the parties hereto. This Agreement shall inure
to the benefit of and be binding upon the parties hereto and their respective
heirs, representatives, successors and permitted assigns.
(c) This Agreement shall be governed by, and construed and
enforced in accordance with, the internal laws, but not the laws pertaining to
choice or conflicts of laws, of the State of Missouri.
(d) This Agreement may be executed in one or more counterparts
(including by facsimile), each of which shall be deemed an original, but all of
which shall constitute one and the same instrument.
(e) This Agreement and the other agreements entered into by
the parties on this date contain the entire agreement between the parties hereto
with respect to the transactions contemplated herein and supersedes all previous
oral and written and all contemporaneous oral negotiations, commitments,
writings and understandings.
-10-
<PAGE> 11
(f) This Agreement may be amended only by a writing signed by
the Shareholder and the Company.
(g) The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
(h) Any provision to this Agreement which is invalid, illegal
or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity, illegality or unenforceability,
without affecting in any way the remaining provisions hereof in such
jurisdictions or rendering that or any other provision of this Agreement
invalid, illegal or unenforceable in any other jurisdiction, so long as the
remaining provisions are sufficient to carry out the overall intentions of the
parties as evidenced hereby.
-11-
<PAGE> 12
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be signed and delivered as of the date first above written.
THE SOURCE INFORMATION MANAGEMENT
COMPANY:
/s/ Jonathan J. Ledecky By: /s/ S. Leslie Flegel
- ------------------------------ ------------------------------
JONATHAN J. LEDECKY S. Leslie Flegel
CEO & Chairman
/s/ James R. Gillis
- ------------------------------
JAMES R. GILLIS
/s/ Monte Weiner
- ------------------------------
MONTE WEINER
-12-
