EXHIBIT 1
EXECUTION COPY
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FOUR STAR HOLDING, INC.
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SALE AGREEMENT
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This SALE AGREEMENT (this "Agreement"), dated as of March 20, 1998, is
made and entered into by and among Four Star Holding, Inc., a Delaware
corporation (the "Company"), Four Star Lighting, Inc, a New York corporation
("Lighting" or "Four Star"), each of Four Star Associates, L.P., Stonebridge
Partners Equity Fund, L.P., ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇
▇▇▇▇▇▇▇ (individually, a "Selling Shareholder," and collectively the "Selling
Shareholders"), and ▇▇▇▇▇▇▇▇ Studio Equipment Group, a California corporation
("Buyer").
W I T N E S S E T H :
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WHEREAS, the Selling Shareholders own all of the issued and
outstanding capital stock (the "Capital Stock") of the Company and the Company
owns all of the Capital Stock of Lighting; and
WHEREAS, Buyer and the Selling Shareholders desire to transfer the
ownership of the Capital Stock of the Company to Buyer for the consideration
specified herein;
NOW THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants, agreements, terms and conditions
contained herein, and in order to set forth the terms and conditions of the
sale, the parties hereto do hereby agree as follows:
ARTICLE I
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CLOSING
1.1 The Closing. The closing (the "Closing") of the transactions
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provided for in this Agreement shall be held at the offices of ▇▇▇▇▇▇▇ Breed
▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ (unless the
parties hereto otherwise agree in writing) on the Closing Date (as defined in
Section 1.2).
1.2 Closing Date. The "Closing Date" shall mean April 1, 1998,
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provided, however, that if any of the conditions provided for in Article IV
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shall not have been waived or met by March 30, 1998, then either Buyer in the
case of conditions provided in Section 4.1 or the Selling Shareholders in the
case of conditions provided in Section 4.2 shall be entitled to postpone the
Closing Date by written notice to the other party until three (3) business days
after such condition or conditions have been met or waived. The Closing Date
shall not be later than April 30, 1998
unless mutually agreed upon by Buyer and the Selling Shareholders.
1.3 Consideration. On and subject to the terms and conditions of
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this Agreement, Buyer agrees to purchase from the Selling Shareholders all of
the shares of Capital Stock of the Company for aggregate consideration in cash
equal to $26,500,000, plus the excess of the Net Asset Amount (as defined below)
over $8,900,000 or minus the excess of $8,900,000 over the Net Asset Amount (the
"Purchase Price").
1.4 Deliveries at the Closing.
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(a) Payment to the Selling Shareholders. At the Closing, Buyer
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will pay to the Selling Shareholders pro rata, to an account or accounts
designated by the Shareholders' Representative (as defined in Section 1.6), by
wire transfer of immediately available funds, an amount in cash equal to (i)
$26,500,000, (ii) plus the excess, if any, of the Estimated Net Asset Amount
over $8,900,000 or minus the excess, if any, of $8,900,000 over the Estimated
Net Asset Amount (as defined below), (iii) less the Indebtedness Payment (as
defined in Section 1.5(a)), which is paid by Buyer as provided in Section 1.5.,
and (iv) less the Escrow Payment (as defined in Section 1.4(b)).
Not later than 3 days before the Closing, the Shareholders'
Representative will provide Buyer in writing with a good faith estimate of (i)
the Net Asset Amount (as defined in Section 1.6), using the format shown on
Schedule 1.6 (the "Estimated Net Asset Amount"), and (ii) the Indebtedness
Payment.
(b) Escrow Payment. At the Closing, Buyer will pay to Bank of
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America Illinois, as escrow agent (the "Escrow Agent"), $1,000,000 (the "Escrow
Payment"), all to be held pursuant to the terms of the Escrow Agreement (as
defined in Section 4.1(h)).
(c) Deliveries by the Selling Shareholders. At the Closing, the
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Selling Shareholders will deliver, or cause to be delivered, to Buyer:
(i) the stock certificates representing all (and not less than
all) of the Capital Stock of the Company (the "Shares"), accompanied
by stock powers duly executed in blank or duly executed stock transfer
forms or instruments of transfer, with any applicable transfer stamps
affixed, which validly transfer title to the Shares to Buyer free and
clear of any Liens (as defined in Section 2.2(b));
(ii) the resignations, effective as of the Closing Date, of all
members of the Board of Directors of the
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Company and Four Star and of such officers of the Company and Four
Star as Buyer shall specify;
(iii) the stock books, ledger books and corporate seals of the
Company and Four Star, together with the original stock certificate or
certificates representing all of (A) the Preferred Stock (as defined
in Section 1.5(a)) held by the Selling Shareholders and (B) the
Capital Stock of Four Star held by the Company;
(iv) the certificate of the Shareholders' Representative
referred to in Section 4.1(i);
(v) a certificate of the Selling Shareholders' non-foreign
status which complies with the requirements of Section 1445 of the
Internal Revenue Code of 1986 as amended (the "Code") and the Treasury
Regulations promulgated thereunder; and
(vi) all other documents, instruments and writings to be
delivered by the Selling Shareholders at or prior to the Closing
pursuant to this Agreement.
1.5 Indebtedness Payment.
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(a) Definitions. For purposes of this Agreement, the following terms
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shall have the following meaning:
(i) "Indebtedness Payment" shall mean an amount equal to, as
of the Closing Date, the then outstanding principal of, accrued and
unpaid interest on, any prepayment penalties or premiums on, and any
other amounts payable (including any success fee) with respect to, (A)
all indebtedness of Four Star under that certain loan and security
agreement (the "Loan Agreement") with Bank of America Illinois ("Bank
of America"), dated as of September 8, 1995, as amended (the "Bank
Indebtedness Payment"), (B) all indebtedness of the Company under
certain subordinated notes (the "Subordinated Notes") held by Four
Star Associates, L.P. and Stonebridge Partners Equity Fund, L.P. (the
"Subordinated Notes Indebtedness Payment"), and (C) the redemption
value of the cumulative redeemable preferred stock, par value $.01, of
the Company (the "Preferred Stock") plus accrued but unpaid dividends
thereon (the " Preferred Stock Indebtedness Payment").
(b) Indebtedness Payment. At the Closing, Buyer will pay to accounts
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designated by the Shareholders' Representative, by wire transfer of immediately
available funds, a portion of the Purchase Price equal to the Indebtedness
Payment as follows: (i) to Bank of America (for the benefit of the financial
institutions party to the Loan Agreement) an amount in cash equal
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to the Bank Indebtedness Payment; (ii) to the holders of the Subordinated Notes
an amount in cash equal to the Subordinated Notes Indebtedness Payment; and
(iii) to the holders of the Preferred Stock an amount in cash equal to the
Preferred Stock Indebtedness Payment.
At the Closing, the Shareholders' Representative shall deliver to
Buyer written statements from Bank of America, the holders of the Subordinated
Notes (or their representatives) and the holders of the Preferred Stock stating
the amounts due, as of the Closing Date, for the Bank Indebtedness Payment, the
Subordinated Notes Indebtedness Payment and the Preferred Stock Indebtedness
Payment, respectively.
1.6 Purchase Price Adjustment.
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(a) Definitions. For purposes of this Agreement, the following terms
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shall have the following meanings:
(i) "Final Net Asset Statement" shall mean the Net Asset
Statement (as defined in Section 1.6(b)) which has become conclusive
and binding upon the parties pursuant to this Section 1.6.
(ii) "Net Asset Amount" shall mean the Company's Included
Current Assets (as shown on Schedule 1.6), plus the Historical Net
Book Value of Rental Equipment (as shown on Schedule 1.6) minus the
Company's Included Current Liabilities (as shown on Schedule 1.6), all
of which shall have been calculated on the basis of consolidation of
the accounts of the Company and Lighting as of the close of business
on the day immediately preceding the Closing Date, as finally
determined on the Final Net Asset Statement.
(b) Net Asset Statement. Within 60 days following the Closing Date,
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▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ and/or ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ acting as representative of all
Selling Shareholders (the "Shareholders' Representative") shall prepare (or
cause to be prepared), issue and deliver to Buyer a statement of the Net Asset
Amount (the "Net Asset Statement") and the computation of the Consideration
Adjustment (as defined in Section 1.6(d)). The Net Asset Statement shall be
prepared as set forth on Schedule 1.6 using the same accounting methods,
policies, practices, principles and procedures (the "Methods"), with consistent
classifications, judgments, and valuation and estimation methodologies (the
"Methodologies"), that were used in the preparation of the December Balance
Sheet (as defined in Section 2.2(f)) except as otherwise provided on Schedule
1.6.
(c) Dispute Procedures. The Net Asset Statement delivered by the
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Shareholders' Representative to Buyer and the computation of the Net Asset
Amount and the Consideration
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Adjustment indicated thereon shall be conclusive and binding upon the parties
unless Buyer, within 30 days after delivery to Buyer of the Net Asset Statement,
notifies the Shareholders' Representative in writing that Buyer disputes any of
the amounts set forth therein, specifying the nature of the dispute and the
basis therefor. The parties shall in good faith attempt to resolve any dispute,
in which event the Net Asset Statement and the computation of the Net Asset
Amount and the Consideration Adjustment, as amended to the extent necessary to
reflect the resolution of the dispute, shall be conclusive and binding on the
parties. If the parties do not reach agreement resolving the dispute within 10
days after notice is given by Buyer to the Shareholders' Representative pursuant
to the second preceding sentence, the parties shall submit the dispute to a
partner at the accounting firm of Price Waterhouse LLP, or, if no partner of
such firm will act, to a partner at such other nationally recognized independent
accounting firm mutually agreeable to the parties, which shall not have a
material relationship with the Selling Shareholders, the Shareholders'
Representative or Buyer or any of their respective affiliates within two years
preceding the appointment (the "Arbiter"), for resolution. If the Parties
cannot agree on the selection of a partner at such an independent accounting
firm to act as Arbiter, the parties shall request the American Arbitration
Association to appoint such a partner, and such appointment shall be conclusive
and binding on the parties. Promptly, but no later than 20 days after its
acceptance of his or her appointment as Arbiter, the Arbiter shall determine,
based solely on presentations by the Shareholders' Representative and Buyer, and
not by independent review, only those issues in dispute and shall render a
report as to the dispute and the resulting computation of the Net Asset Amount
and the Consideration Adjustment, if any, which shall be conclusive and binding
upon the parties. All proceedings conducted by the Arbiter shall take place in
the City of New York. In resolving any disputed item, the Arbiter (x) shall be
bound by the provisions of Section 1.6 and Schedule 1.6 and (y) may not assign a
value to any item greater than the greatest value for such item claimed by
either party or less than the smallest value for such item claimed by either
party. The fees, costs and expenses of the Arbiter (i) shall be borne by Buyer
in the proportion that the aggregate dollar amount of such disputed items so
submitted that are unsuccessfully disputed by Buyer (as finally determined by
the Arbiter) bears to the aggregate dollar amount of such disputed items so
submitted and (ii) shall be borne by the Selling Shareholders in the proportion
that the aggregate dollar amount of such disputed items so submitted that are
successfully disputed by Buyer (as finally determined by the Arbiter) bears to
the aggregate dollar amount of such disputed items so submitted. Whether any
dispute is resolved by agreement among the parties or by the Arbiter, changes to
the Net Asset Statement shall be made hereunder only for items as to which Buyer
has taken exception as provided herein.
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(d) Consideration Adjustment. The difference, if any, between the
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Net Asset Amount and the Estimated Net Asset Amount, whether a positive or a
negative number, is herein referred to as the "Consideration Adjustment." If the
Net Asset Amount exceeds the Estimated Net Asset Amount, the dollar amount of
the Consideration Adjustment shall be paid by Buyer to the Shareholders'
Representative, for the benefit of the Selling Shareholders, in accordance with
the provisions of Section 1.6(e). If the Net Asset Amount is less than the
Estimated Net Asset Amount, the dollar amount of the Consideration Adjustment
shall be paid by the Shareholders' Representative, on behalf of Selling
Shareholders pro rata, to Buyer in accordance with the provisions of Section
1.6(e).
(e) Payment. Any amount payable as Consideration Adjustment shall be
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paid by wire transfer of immediately available funds to an account designated in
writing by the Shareholders' Representative or Buyer, as the case may be. Such
payment shall be made on the third business day following the earliest of (i)
the last day on which Buyer may, pursuant to the first sentence of Section
1.6(c), notify the Shareholders' Representative that it disputes any of the
amounts set forth in the Net Asset Statement, if Buyer shall not notify the
Shareholders' Representative of any dispute, or such earlier date as Buyer shall
advise the Shareholders' Representative of the absence of any dispute, or (ii)
the date mutual agreement is reached as to the amount of the Consideration
Adjustment, if any, in the event of a dispute that is settled by the parties
without resort to the Arbiter, or (iii) the date of receipt of the report of the
Arbiter in the event of a dispute which is settled by the Arbiter.
(f) Access. Buyer shall provide the Shareholders' Representative and
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its accountants full access to all relevant books and records and to employees
of the Company and Four Star to the extent necessary for the Shareholders'
Representative to prepare the Net Asset Statement and in connection with any
dispute with respect to the Net Asset Statement.
ARTICLE II
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REPRESENTATIONS AND WARRANTIES
2.1 Representations and Warranties by Buyer. Buyer represents and
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warrants to, and agrees with, the Selling Shareholders as follows:
(a) Organization, etc. Buyer is a corporation, validly existing and
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in good standing under the laws of the State of California, with full power and
authority to own all of its property and assets and to carry on its business as
it is now being conducted. Buyer is duly qualified or licensed to do business
and is in good standing in each jurisdiction in which
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the nature of its business or the character of its property makes such
qualification necessary.
(b) Authority Relative to Agreement. Buyer has the corporate power
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and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery by Buyer of this
Agreement and the consummation by Buyer of the transactions contemplated hereby
have been, or prior to the Closing will be, duly authorized by all necessary
action or proceedings. This Agreement has been duly executed and delivered by
Buyer and constitutes a valid and binding agreement of Buyer, enforceable in
accordance with its terms.
(c) Non-Contravention. The execution and delivery of this Agreement
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by Buyer does not, and the consummation by Buyer of the transactions
contemplated hereby will not, violate any provision of its Certificate of
Incorporation or Bylaws, or violate, or result with the giving of notice or the
lapse of time or both in a violation of, any provision of any mortgage, lien,
lease, agreement, license, instrument, law, ordinance, regulation, order,
arbitration award, judgment or decree to which Buyer or any of its properties or
assets (real, personal or mixed, tangible or intangible) are bound.
(d) Consents, etc. As of the Closing Date, Buyer shall have obtained
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all licenses, permits, consents, authorizations, orders or approvals of any
governmental commission, board or regulatory body necessary for the execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby.
(e) Purchase for Investment; Investor Sophistication.
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(1) Buyer has sufficient knowledge and experience in financial
and business matters to enable it to evaluate the merits and risks of the
transactions contemplated by the terms and conditions of this Agreement.
(2) Buyer at the Closing Date will have been given access to
information regarding the Company and Four Star, including the opportunity
to ask questions of it and receive answers from the officers of the Company
and Four Star concerning the present and proposed activities of the Company
and Four Star, and to obtain information which Buyer deems necessary in
order to evaluate the merits of the transactions contemplated by this
Agreement; provided, that no such inquiry, investigation or information
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shall affect the representations and warranties of the Selling Shareholders
contained herein.
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(3) Buyer is purchasing the Shares solely for its own account,
for investment purposes, and not with a view to resale or distribution of
all or any part of the Shares. Buyer understands that the Shares have not
been registered under the Securities Act, or applicable state securities
laws, on the grounds that the Shares were issued in a transaction, not
involving any public offering, and are now being sold in a transaction
involving a person other than an issuer, underwriter or dealer, to a
knowledgeable investor that is familiar with the affairs and proposed
operations of the Company and that consequently such transaction is exempt
from registration under the Securities Act of 1933, as amended, and
applicable state laws.
2.2 Representation and Warranties by the Company, Four Star and the
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Selling Shareholders. The Company, Four Star and the Selling Shareholders,
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jointly and severally, represent and warrant to, and agree with, Buyer as
follows:
(a) Organization. Each of the Company and Lighting is a corporation
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duly organized, validly existing and in good standing under the laws of its
state of incorporation, with full corporate power and authority to own all of
its properties and assets and to carry on its business as it is now being
conducted. Each of the Company and Lighting is duly qualified or licensed to do
business and is in good standing in the states in which it has facilities and
each other jurisdiction in which the nature of its business or the character of
its properties requires such qualification. The copies of the Certificate of
Incorporation and By-laws, as amended, of the Company and Lighting, which have
been delivered to Buyer, are complete and correct, and such instruments are in
full force and effect. The Company has no other subsidiary than Lighting.
(b) Capital Stock and Securities. The authorized capital stock of
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the Company consists of Seven Hundred and Fifty Thousand (750,000) shares of
"Common Stock" (par value $.01) and Three Hundred and Fifty (350,000) shares of
"Preferred Stock" (par value $.01). On the date hereof and on the Closing Date,
Seven Hundred Twelve Thousand Five Hundred (712,500) shares of the Common Stock
are issued and outstanding and One Hundred and Fifty Thousand (150,000) shares
of the Preferred Stock are issued and outstanding, all of which are owned,
beneficially and of record, by the Selling Shareholders in the amounts set forth
on Schedule 2.2(b) attached hereto. Each share of Capital Stock of the Company
shall on the Closing Date be owned by the Selling Shareholders free and clear of
any and all liens, charges, claims, pledges, security interests, title
imperfections or other encumbrances of any kind ("Liens"). Upon transfer by the
Selling Shareholders to Buyer of the Certificates evidencing the Shares, the
Selling Shareholders will have transferred to Buyer good and valid title to the
Shares free and clear of all Liens, other than Liens which become applicable as
a result of any acts or
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omissions of Buyer. The authorized capital stock of Four Star consists of One
Thousand (1,000) shares of common stock with a par value of one dollar ($1.00).
On the date hereof and on the Closing Date, One Thousand (1,000) shares of the
common stock of Four Star are issued and outstanding, all of which are owned,
beneficially and of record, by the Company free and clear of any and all Liens.
Each outstanding share of Capital Stock of the Company and Four Star is on the
date hereof, and shall on the Closing Date, be duly authorized, validly issued,
fully paid and nonassessable. Neither the Company nor Four Star has any
outstanding commitments to issue or sell any shares of its Capital Stock, or any
securities or obligations convertible into or exchangeable for, or giving any
person any right to subscribe for, or acquire from the Company or Four Star any
shares of its Capital Stock, and no securities or obligations evidencing any
such right are outstanding. Neither the Company nor Four Star has outstanding
any other debt or equity securities other than the Preferred Stock, Common Stock
and existing indebtedness, which, including the terms thereof, are fully
described in the disclosure schedule dated as of the date hereof prepared by the
Company and the Selling Shareholders and made a part hereof (the "Disclosure
Schedule").
(c) Authority Relative to Agreement. Each Selling Shareholder has
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the power and authority to execute and deliver this Agreement and to consummate
the transactions contemplated hereby. The execution and delivery by each
Selling Shareholder of this Agreement and the consummation by the Selling
Shareholders of the transactions contemplated hereby have been duly authorized
by all necessary action or proceeding. No other action or proceeding on the
part of any Selling Shareholder, or the Company or Lighting, is necessary, and
no vote or consent by the shareholders of the Company or Lighting is necessary,
to authorize the execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby. This Agreement has been duly executed
and delivered by each Selling Shareholder and constitutes a valid and binding
agreement of each Selling Shareholder, enforceable in accordance with its terms.
(d) Non-Contravention. The consummation of the transactions
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contemplated hereby will not violate any provision of the Company's or Four
Star's Certificate of Incorporation or By-Laws, or the charter documents of any
Selling shareholder, as applicable, or violate, or result with the giving of
notice or the lapse of time or both in a violation of, any material provision of
any mortgage, lien, lease, agreement, license, instrument, law, ordinance,
regulation, order, arbitration award, judgment or decree to which the Company,
Four Star, or any Selling Shareholder, or any of its or his properties or assets
(real, personal or mixed, tangible or intangible) are bound.
(e) Consents, etc. As of the Closing Date, the Company, Lighting and
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the Selling Shareholders shall have
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obtained all licenses, permits, consents, authorizations, orders or approvals of
any governmental commission, board or regulatory body, or any other third party,
if any, necessary for the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby.
(f) Financial Statements. The Selling Shareholders have heretofore
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delivered to Buyer, or will deliver prior to Closing, the audited consolidated
financial statements of the Company and Lighting for the fiscal years ended
December 31, 1997 and 1996 and for the period from September 5, 1995 to December
31, 1995 (the "Audited Financial Statements") and the unaudited consolidated
financial statements of the Company and Lighting for the fiscal year ended
December 31, 1997 (the "December 97 Financial Statements;" and collectively with
the Audited Financial Statements, the "Financial Statements"). The consolidated
balance sheet included in the December 97 Financial Statements is referred to as
the "December Balance Sheet." Except as noted therein or as set forth in the
Disclosure Schedule, the Financial Statements have been prepared from the books
and records of the Company and Lighting, and present fairly in all material
respects the consolidated financial condition, results of operations, and cash
flows of the Company and Lighting as of the statement dates and for the periods
indicated in accordance with generally accepted accounting principles
consistently applied throughout the periods covered thereby, except, in the case
of the December 97 Financial Statements, footnotes are not included and such
statements are subject to year-end adjustments consistent with past practice.
(g) Government Authorizations and Compliance with Laws, etc.. Except
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as set forth in the Disclosure Schedule, the business of the Company and
Lighting has been operated in compliance with all laws, ordinances, regulations,
judgments, decrees, injunctions,rulings, awards and orders, of all governmental
entities, courts and arbitrators, domestic or foreign. Each of the Company and
Lighting has all permits, certificates, licenses, approvals and other
authorizations required in connection with the operation of its business.
Except as set forth in the Disclosure Schedule, no notice has been received by
the Company or Lighting and, to the best of the Company's and Selling
Shareholders' knowledge, no investigation or review is pending or threatened by
any governmental entity with respect to (i) any alleged violation by the Company
or Lighting of any law, ordinance, regulation, judgment, decree, injunction,
ruling, award, order, policy or guideline of any governmental entity, court or
arbitrator, domestic or foreign, or (ii) any alleged failure to have all
permits, certificates, licenses, approvals and other authorizations required in
connection with the operation of the business of the Company or Lighting.
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(h) Tax Matters. All federal, state, local and foreign tax returns
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and tax reports required to be filed by or with respect to the Company or
Lighting have been duly filed. The Company has paid, caused to be paid, or made
adequate provision for payment of all taxes (including interest and penalties)
due or to become due from or with respect to the Company or Lighting in respect
of all periods through and including the Closing Date and neither the Company
nor Lighting will be liable for any tax as a result of operations on or before
the Closing Date or the transfers made hereby, except as shown on the Final Net
Asset Statement or as set forth in the Disclosure Schedule. No issues have been
raised, either orally or in writing (and are currently pending), by any foreign,
federal, state or local taxing authority in connection with any of the returns
or reports referred to in this Section 2.2(h). No waivers of statutes of
limitations as to any tax matters are currently in effect with respect to the
Company or Lighting. Except as set forth in the Disclosure Schedule, neither
the Company nor Lighting is a party to a tax sharing or similar agreement and
neither the Company nor Lighting has filed consolidated returns or combined
returns or reports which include the income, loss or assets of any entity other
than the Company and Lighting.
For the purpose of this Agreement, any federal, state, local or
foreign income, sales, use, transfer, payroll, unemployment, Social Security,
personal property, occupancy or other tax, levy, impost, fee, imposition,
assessment or similar charge, together with any related addition to tax,
interest or penalty thereon, is referred to as a "tax" or "taxes."
(i) Title to Properties; Absence of Liens. Each of the Company and
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Lighting has good and marketable title to all of the properties and other assets
(real, personal and mixed, tangible and intangible) reflected in the December
31, 1997 Financial Statements or acquired after the date thereof (except for
properties and assets sold or otherwise disposed of since December 31, 1997 in
the ordinary course of business), free and clear of any and all Liens, except as
shown on the Disclosure Schedule. Except for those properties or assets
acquired since December 31, 1997, all properties and assets (real, personal and
mixed, tangible and intangible) used in the business of the Company and Lighting
are reflected in the Financial Statements in the manner and to the extent
required by generally accepted accounting principles.
(j) Material Agreements. The Disclosure Schedule lists every
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material agreement to which the Company or Lighting is a party or by which it or
any of its properties or assets (real, personal or mixed, tangible or
intangible) is bound which is to be performed in whole or in part after the
Closing Date. Solely for the purpose of this Section 2.2(j), the term "material
agreement" shall mean any single agreement or lease, including
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agreements with respect to notes receivable and purchase orders issued in the
ordinary course of business, pursuant to which any party thereto is obligated
after the date hereof to make payments aggregating more than $25,000
individually. The Disclosure Schedule also indicates the aggregate amount of
all such contracts to the extent such aggregate exceeds $250,000 to any
individual vendor. There is no default, nor will any default occur hereafter,
as a result of the consummation of the transactions contemplated hereby or
otherwise, in any obligation to be performed by any party to any agreement to
which the Company or Lighting is a party or by which it or any of its properties
or assets (real, personal or mixed, tangible or intangible) is bound. Other
than this Agreement, there are no agreements or options to sell or lease any of
the properties or assets (real, personal or mixed, tangible or intangible) of
the Company or Lighting except in the ordinary course of its business.
(k) Litigation. Except as set forth in the Disclosure Statement:
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(i) there is no claim, action, suit or proceeding pending or threatened against
the Company or Lighting or any of their properties or assets (real, personal or
mixed, tangible or intangible) or which seeks to prohibit, restrict or delay
consummation of the transactions contemplated by this Agreement or any of the
conditions to consummation of the transactions contemplated by this Agreement,
nor is there any judgment, decree, injunctions, ruling, award or order of any
court, governmental department, commission, agency or instrumentality or
arbitrator outstanding against the Company, Lighting or any of their properties
or assets (real, personal or mixed, tangible or intangible); (ii) neither the
Company, Lighting nor any of their officers or employees is currently charged
with, or is currently under investigation with respect to, any violation of any
provision of any federal, state, local, foreign or other applicable law,
ordinance or regulation in respect of the business of the Company or Lighting;
and (iii) neither the Company nor Lighting is a party to and is not bound by any
judgment, decree, injunction, ruling, award or order of any court, governmental
department, commission, agency or instrumentality, arbitrator or any other
person.
(l) Employee Benefit Plans. The Disclosure Schedule contains a
----------------------
complete list of "Plans" consisting of each:
(i) "employee welfare benefit plan", as defined in Section
3(1) of the Employee Retirement Income Security Act of 1974
("ERISA"), to which the Company or Lighting (or any entity which
is a member of a "controlled group of corporations" with or is
under "common control" with the Company or Lighting as defined in
Section 414(b) or (c) of the Code ("Common Control Entity"))
contributes or is required to contribute, including each multi-
-12-
employer welfare plan ("Welfare Plan"), and sets forth the amount
of any liability of the Company or Lighting for payments more
than thirty days past due with respect to each Welfare Plan as of
the Closing Date;
(ii) "multi-employer pension plan," as defined in Section
3(37) of ERISA, to which the Company or Lighting (or any Common
Control Entity) has contributed or been obligated to contribute
at any time after September 25, 1980 ("Multi-employer Plan");
(iii) "employee pension benefit plan," as defined in
Section 3(2) of ERISA, (other than a Multi-employer Plan) to
which the Company or Lighting (or any Common Control Entity)
contributes or is required to contribute ("Pension Plan"); and
(iv) deferred compensation plan, bonus plan, stock option
plan, employee stock purchase plan and any other employee benefit
plan, agreement, arrangement or commitment, other than normal
payroll practices and policies concerning holidays, vacations and
salary continuation during short absences for illness or other
reasons, maintained by the Company or Lighting.
(m) Pension Plans. The funding method used in connection with each
-------------
Pension Plan which is subject to the minimum funding requirements of ERISA is in
accordance with ERISA and the Code and the actuarial assumptions used in
connection with funding of each such plan are reasonable. The assets of each
Pension Plan are sufficient to discharge all liabilities under such plan, on an
ongoing basis and on a termination basis, and there is no "accumulated funding
deficiency," as defined in Section 302(a)(2) of ERISA, with respect to any plan
year of any such plan. There are no unpaid contributions with respect to any
Pension Plan which are not accrued for on the financial statements of the
Company or Lighting (or any Common Control Entity) as of the Closing Date.
(i) Each Pension Plan and each related trust agreement,
annuity contract or other funding instrument is qualified and
tax-exempt under the provisions of Code Sections 401(a) (or
403(a) as appropriate) and 501(a).
(ii) Each Pension Plan and each related trust agreement,
annuity contract or other funding instrument complies currently,
and has complied at all times in the past, both as to form and in
-13-
operation, with the provisions of applicable Federal law,
including the Code and ERISA.
(iii) The Company and Lighting have paid all premiums (and
interest charges and penalties for late payment, if applicable)
due the Pension Benefit Guaranty Corporation ("PBGC") with
respect to each Pension Plan for each plan year thereof for which
such premiums are required. There has been no "reportable event"
(as defined in Section 4043(b) of ERISA and the PBGC regulations
under such Section) with respect to any Pension Plan. No
liability to the PBGC has been incurred by the Company, Lighting
or any Common Control Entity on account of the termination of any
Pension Plan. No filing has been made by the Company, Lighting
or any Common Control Entity with PBGC, and no proceeding has
been commenced by the PBGC, to terminate any Pension Plan.
Neither the Company, Lighting nor any Common Control Entity has,
at any time, (a) ceased operations at a facility so as to become
subject to the provisions of Section 4062(e) of ERISA, (b)
withdrawn as a substantial employer so as to become subject to
the provisions of Section 4063 of ERISA, or (c) ceased making
contributions on or before the Closing Date to any Pension Plan
subject to Section 4064(a) of ERISA to which the Company,
Lighting or any Common Control Entity made contributions during
the five years prior to the Closing Date.
(n) Multi-employer Plans. Neither the Company, Lighting nor any
--------------------
Common Control Entity has, at any time, withdrawn from a Multi-employer Plan in
a "complete withdrawal" or a "partial withdrawal" as defined in ERISA Sections
4203 and 4205, respectively.
(o) Prohibited Transactions. Neither the Company, Lighting nor, to
-----------------------
the knowledge of the Company, any plan fiduciary of any Welfare Plan or Pension
Plan has engaged in any transaction in violation of Section 406(a) or (b) of
ERISA or any "prohibited transaction," as defined in Section 4975(c)(1) of the
Code, for which no exemption exists under Section 4975(c)(2) or 4975(d) of the
Code.
(p) Copies of Relevant Plan Documents. True and complete copies of
---------------------------------
each of the following documents have been delivered by the Company to Buyer: (i)
each Welfare Plan, Multi-employer Plan and Pension Plan, related trust
agreements, annuity contracts or other funding instruments, (ii) each plan,
agreement, arrangement and commitment referred to in Sections 2.2(l) and (m),
and complete descriptions of any such plan which is not in writing, (iii) the
most recent determination
-14-
letter issued by the Internal Revenue Service with respect to each Pension Plan,
(iv) Annual Reports on Form 5500 Series required to be filed with any
governmental agency for each Welfare Plan, Multi-employer Plan and Pension Plan
for the two most recent plan years and (v) all actuarial reports prepared for
the last three years for each Pension Plan and Multi-employer Plan.
(q) Validity and Enforceability of Plans. Each Welfare Plan, Pension
------------------------------------
Plan, related trust agreement, annuity contract or other funding instrument and
each plan, agreement, arrangement and commitment referred to in Section 2.2(l)
and (m) is legally valid and binding and in full force and effect.
(r) Payments to Retirees. Except as described on the Disclosure
--------------------
Schedule, neither the Company, Lighting nor any Welfare Plan has any obligation
to make any payment to or with respect to any former or current employee of the
Company, Lighting, or any predecessor in interest thereof pursuant to any
retiree medical benefit or other Welfare Plan.
(s) Litigation Under Plans. Neither the Company, Lighting nor any
----------------------
Plan is a party to any litigation relating to, or seeking benefits under, any
Plan.
(t) Employment Agreements. Neither the Company nor Lighting is a
---------------------
party to any employment, severance or similar agreements, except as shown on the
Disclosure Schedule.
(u) Change in Control Provisions. Neither the Company nor Lighting
----------------------------
is a party to any agreement which contains any provision pursuant to which the
Company or Lighting will be obligated to make any payment as a result of the
transactions contemplated hereby, except as set forth on the Disclosure
Schedule.
(v) Labor and Employment Law Matters. There are no controversies
--------------------------------
pending, or, to the knowledge of the Selling Shareholders, threatened between
the Company or Lighting and any of their employees or officers, including
without limitation any strikes, work stoppages, work slowdowns, unfair labor
practice charges or complaints, grievances or arbitrations, or any other pending
or threatened charges, complaints, actions or proceedings with respect to any
aspect of employment, application for employment, or the termination of
employment, including without limitation any charges, complaints or actions
alleging employment discrimination, unlawful retaliation, breach of contract,
wrongful discharge, breach of a duty of good faith and fair dealing, defamation,
breach of privacy or any federal, state or local laws, ordinances or regulations
with respect to employment standards, wage and hours, payment of wages, safety
and health, immigration or labor practices. Neither the Company nor Lighting is
subject to any collective agreements, or any side letters or
-15-
memoranda of agreement pertaining thereto, other than shown on the Disclosure
Schedule. There are no pending labor negotiations with respect to the Company
or Lighting. No union or other labor organization is seeking to organize or be
recognized as a collective bargaining representative for any employee of the
Company or Lighting, and there are no representation proceedings or petitions
pending or threatened.
(w) Employees. The Disclosure Schedule contains a true and complete
---------
list of all employees of the Company and Lighting, pay levels and length of
service with the Company or Lighting. Except for the employment agreements
disclosed on the Disclosure Schedule, neither the Company nor Lighting has made
any legally enforceable commitment to any such employees with respect to the
duration of, or which restricts or limits the ability of the Company or Lighting
to terminate, such employee's employment. Neither the Company nor Lighting has
knowledge of any plans by any such employee to terminate employment with the
Company or Lighting. There are no pending claims for workers' compensation,
unemployment insurance or disability benefits under federal, state or local law.
(x) Absence of Certain Changes or Events. Except as set forth in the
------------------------------------
Disclosure Schedule, since December 31, 1997 there has not been (i) any material
change which has had a material adverse effect on the financial condition,
business or operations of the Company; (ii) any damage, destruction or other
loss with respect to property owned by the Company or Lighting, whether or not
covered by insurance, or any strike, work stoppage or slowdown or other labor
trouble involving the Company or Lighting; (iii) any direct or indirect
redemption, purchase or other acquisition by the Company or Lighting of any
shares of its capital stock; (iv) any declaration, setting aside or payment of
any dividend or distribution (whether in cash, capital stock or property) other
than shown in the Disclosure Statement; or (v) the entry by the Company or
Lighting into any commitment or transaction which is not in the ordinary course
of business; (vi) any change in the method of accounting used by the Company or
Lighting other than with prior written consent of Buyer or (vii) any increase in
the salaries or other compensation, or of any advances (excluding advances for
ordinary and necessary business expenses) or loan to, any of its employees or
any increase in, or any addition to, other benefits to which any of its
employees may be entitled, other than with the prior written consent of Buyer.
(y) Absence of Undisclosed Liabilities and Agreements. Except as
-------------------------------------------------
disclosed in the Disclosure Schedule or as specifically provided for or
disclosed in the Financial Statements and except for items not required to be
provided for or disclosed in accordance with generally accepted accounting
principles neither the Company nor Lighting (i) had, as of December 31, 1997,
any material debts, liabilities or obligations, whether accrued, absolute,
contingent or otherwise
-16-
and whether due or to become due (including, without limitation, any liabilities
resulting from the failure to comply with any law applicable to the Company or
Lighting, or to the conduct of its business), (ii) has not incurred, since
December 31, 1997, any such debts, liabilities or obligations other than in the
ordinary course of its business, or (iii) except in connection with the
transactions contemplated in this Agreement, has not, since December 31, 1997,
conducted its business otherwise than in the ordinary course.
(z) Insurance. The Company and Lighting have insurance policies in
---------
full force and effect which provide for coverages which are adequate for the
business of the Company and Lighting as to both amount and scope. The Company's
and Lighting's current insurance coverage is as described in the Disclosure
Schedule.
(aa) Payments. Neither the Company nor Lighting has directly or
--------
indirectly, paid or delivered any fees, commissions or other sums of money or
items of property however characterized to any finders, agents, customers,
government officials or other parties, in the United States or in any other
country, which in any manner are related to the business or operations of the
Company or Lighting, and which have been illegal under any federal, state or
local laws of the United States or any other country or territory having
jurisdiction over the Company or Lighting. Neither the Company nor Lighting has
participated, directly or indirectly, in any boycotts or similar practices.
(bb) Proprietary Rights. The proprietary rights listed in the
------------------
Disclosure Schedule are all those used in the business of the Company or
Lighting. The Company's and Lighting's use of such proprietary rights is not
infringing upon or otherwise violating the rights of any third party in or to
such proprietary rights, and no proceedings have been instituted against or
notices received by the Company or Lighting that are presently outstanding
alleging that the Company's or Lighting's use of such proprietary rights
infringes upon or otherwise violates any rights of a third party in or to such
proprietary rights.
(cc) Books of Account. The books of account of the Company and
----------------
Lighting adequately reflect all of their respective items of income and expense
and all of their assets, liabilities and accruals, in order to permit financial
statements to be prepared in accordance with generally accepted accounting
principles.
(dd) Purchase Commitments and Outstanding Bids. No outstanding
-----------------------------------------
purchase or outstanding lease commitment of the Company or Lighting presently is
in excess of the normal, ordinary and usual requirements of its business or
contains terms
-17-
and conditions more onerous than those usual and customary in the Company's or
Lighting's business.
(ee) Customers and Suppliers. The Disclosure Schedule contains a
-----------------------
complete and accurate list of (i) the 10 largest customers of the Company and
Lighting in terms of revenues during the Company's and Lighting's last fiscal
year, showing the approximate total sales by the Company or Lighting to each
such customer during such fiscal year; (ii) the 10 largest suppliers of the
Company and Lighting in terms of purchases during the Company's and Lighting's
last fiscal year, showing the approximate total purchases by the Company and
Lighting from each such supplier during such fiscal year. Since December 31,
1996, to the knowledge of the Selling Shareholders, there has been no material
adverse change in the business relationship of the Company or Lighting with any
customer or supplier named in the Disclosure Schedule or with any other material
customer or supplier.
(ff) Permits. The Disclosure Schedule contains a complete and
-------
accurate list of all permits held by the Company or Lighting or for which the
Company or Lighting has applied, which are the only permits necessary for or
used by the Company or Lighting to carry on its business as presently conducted.
(gg) Compliance with Legislation Regulating Environmental Quality.
------------------------------------------------------------
There are no toxic wastes or other toxic or hazardous substances or materials
being used, stored or otherwise held on, under or about any portion of the
facilities occupied by the Company or Lighting except as set forth in the
Disclosure Schedule. Each facility occupied by the Company or Lighting has been
maintained, used and operated by the Company and Lighting in compliance with all
federal, state and local environmental protection, occupational, health and
safety or similar laws, ordinances, restrictions, licenses and regulations
("Environmental Law"). Neither the Company nor Four Star has received written
notice of, or, to the knowledge of the Selling Shareholders, is the subject of,
any actions, claims, investigations, demands, or notices by any person alleging
liability under or non-compliance with any Environmental Law.
(hh) Transactions with Certain Persons. Except as set forth in the
---------------------------------
Disclosure Schedule, neither any officer, director, shareholder or employee of
the Company or Lighting nor any member of any such person's immediate family is
presently a party to any material transaction with the Company or Lighting
relating to the Company's or Lighting's business, including without limitation,
any contract, agreement or other arrangement (i) providing for the furnishing of
material services by, (ii) providing for the rental of material real or personal
property from, or (iii) otherwise requiring material payments to (other than for
services as officers, directors or employees of the Company or Lighting) any
such person or corporation, partnership,
-18-
trust or other entity in which any such person has a substantial interest as a
shareholder, officer, director, trustee or partner.
(ii) Availability of Documents. The Company and Lighting have made
-------------------------
available to Buyer copies of all documents, including, without limitation, all
agreements, contracts, commitments, insurance policies, leases, plans,
instruments, undertakings, authorizations, permits, licenses, patents,
trademarks, tradenames, service marks, copyrights and applications therefor
listed in the Disclosure Schedule hereto or referred to herein. All such
copies are true and complete and include all amendments, supplements and
modifications thereto or waivers currently in effect thereunder.
(kk) Accounts. The accounts receivable of Lighting reflected in the
--------
Financial Statements were incurred in the ordinary course of business and
reflect bonafide sales or lease transactions.
(ll) Disclosure. Neither this Agreement nor the Disclosure Statement
----------
contains or will contain any untrue statement of a material fact or omits or
will omit to state a material fact necessary to make the statements made, in
light of the circumstances under which they were or are made, not misleading.
ARTICLE III
-----------
ADDITIONAL COVENANTS AND AGREEMENTS
3.1 Conduct of the Company and Lighting. During the period from the
-----------------------------------
date hereof to the Closing Date:
(a) Operation in the Ordinary Course of Business. Except as
--------------------------------------------
contemplated by this Agreement, the Selling Shareholders shall cause the Company
and Lighting to conduct their business operations according to the ordinary and
usual course of business and will use their best efforts, subject to the
foregoing, (i) to preserve intact their business organization; (ii) to maintain
their books and records in accordance with past practices; (iii) to keep
available the services of their officers and employees; and (iv) to maintain
satisfactory relationships with licensors, suppliers, distributors, customers
and others having business relationships with them. The Selling Shareholders
shall confer with Buyer or its representatives to keep it informed with respect
to operational matters of a material nature and to report the general status of
the ongoing operations of the business of the Company and Lighting.
(b) Forbearances by the Company. Except as contemplated by this
---------------------------
Agreement, the Selling Shareholders will not
-19-
permit the Company or Lighting, after the date hereof, without the prior written
consent of Buyer, to:
(i) incur any new debt, liability or obligation, direct
or indirect, whether accrued, absolute, contingent or otherwise,
other than in the ordinary course of its business;
(ii) assume, guarantee, endorse or otherwise become
responsible for the obligations of, or make any loans or advances
to, any other individual, firm or corporation;
(iii) make any direct or indirect redemption, purchase or
other acquisition of any shares of its Capital Stock or declare,
set aside or pay any dividend or distribution (whether in cash,
capital stock or property);
(iv) mortgage, pledge or otherwise encumber any of its
properties or assets;
(v) sell, lease, transfer or dispose of any of its
properties or assets, waive or release any rights of material
value, or cancel, compromise, release or assign any indebtedness
owed to it or any claims held by it except in the ordinary and
usual course of business;
(vi) except in the ordinary course of business make any
investment or expenditure of a capital nature either by purchase
of stock or securities, contributions to capital, property
transfers or otherwise, or by the purchase of any property or
assets of any other individual, firm or corporation;
(vii) enter into any transaction other than in the ordinary
course of business;
(viii) except in the ordinary course of business enter into
or terminate any agreement, plan or lease, or make any change in
any of its agreements, plans or leases;
(ix) permit any insurance policy naming it as a
beneficiary or a loss payable payee to be canceled or terminated
or any of the coverage thereunder to lapse;
(x) enter into, terminate or make any changes in any
collective bargaining agreements;
-20-
(xi) increase in any manner the compensation, remuneration
or fringe benefits of any of its officers or employees or pay or
agree to pay any pension, retirement allowance, or other benefit
not required by any existing employee benefit plan to any such
officers or employees, commit itself to any employment agreement
or employee benefit plan with or for the benefit of any of its
officers or employees or any other person or alter, amend,
terminate in whole or in part, or curtail or permanently
discontinue distributions to, any pension plan or any other
employee benefit plan;
(xii) issue any shares of capital stock or issue any
warrants, options, calls, subscriptions, or other agreements or
commitments obligating it to issue shares of capital stock;
(xiii) make any distributions, directly or indirectly to the
Selling Shareholders;
(xiv) make any unscheduled repayment of bank or similar
debt, except for advances under or repayments of its revolving
loan with Bank of America other than in the ordinary course of
business; or
(xv) enter into an agreement to do any of the things
described in clauses (i) through (xiv) of this Section 3.1 (b).
3.2 Regulatory Consents, Authorizations, etc. Each party hereto will
-----------------------------------------
use its best efforts to obtain all consents, authorizations, orders and
approvals of, and make all filings and registrations with, any governmental
commission, board or other regulatory body or any other person required for or
in connection with the consummation of the transactions contemplated hereby and
will cooperate fully with the other parties in assisting them to obtain such
approvals and to make such filings and registrations. No party hereto will take
or omit to take any action for the purpose of delaying, impairing or impeding
the receipt of any required consent, authorization, order or approval or the
making of any required filing or registration.
3.3 Investigation By Buyer. Prior to the Closing Date, upon
----------------------
reasonable prior notice, Selling Shareholders agree to permit Buyer
Representatives and their authorized representatives, as specifically approved
by Sellers' Representative in writing, or cause them to be permitted, to have
full access to the premises, books and records, officers, employees, and
independent accountants (including the independent accountant's workpapers,
subject to the execution of a customary
-21-
workpaper access letter) of the Company and Lighting at reasonable hours, and
prior to the Closing Date the officers of the Company and Lighting shall furnish
Buyer with such financial and operating data and other information with respect
to the business, properties and assets of the Company and Lighting as Buyer
shall from time to time reasonably request. No investigation by Buyer heretofore
or hereafter made shall affect the representations and warranties of the Selling
Shareholders contained herein. Prior to the Closing Date, Buyer shall not use
any information relating to the Company and Lighting obtained by it from the
Selling Shareholders, the Company and Lighting pursuant to this Section 3.3,
which is not otherwise publicly available, for any purpose unrelated to the
consummation of the transactions contemplated hereby, and prior to the Closing
Date or in the event this Agreement is terminated, Buyer will not disclose any
such information to any person, unless and until such time as such information
is otherwise publicly available or as Buyer is advised by counsel that such
information is required by law to be disclosed. In the event this Agreement is
terminated, Buyer agrees to keep confidential all information it has obtained
concerning the Company and Lighting under the terms of this Agreement for a two-
year period and to return promptly, if so requested by the Selling Shareholders,
every document furnished to Buyer by the Selling Shareholders, the Company and
Lighting, in connection with the transactions contemplated hereby, and any
copies thereof Buyer may have made, and to use its best efforts to cause its
representatives to whom such documents were furnished promptly to return such
documents, and any copies thereof any of them may have made.
3.4 Expenses. Each party agrees to pay all of its own fees, costs
--------
and expenses (including, without limitation, those of advisors, financial
advisors, lawyers or accountants) incurred by it in connection with the
negotiation, preparation, execution, delivery and performance of this Agreement
and the transactions contemplated hereby. The Selling Shareholders shall be
solely responsible and shall hold Buyer harmless from any claim for any broker's
success or similar fee payable to ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & Co. with respect to the
transaction contemplated by this Agreement.
3.5 Negotiations With Others. During the period from the date of
------------------------
this Agreement to the Closing Date, or until this Agreement is terminated in
accordance with the provisions of Article V, if it is so terminated, the
Selling Shareholders and/or their agents shall not, directly or indirectly,
without the prior written consent of Buyer, solicit or initiate discussions or
engage in negotiations with, or provide any information other than publicly
available information to, or authorize any financial advisor or other person to
solicit or initiate discussions or engage in negotiations with, or provide any
information to, any corporation, partnership, person or other entity or group
(other than Buyer) concerning any possible proposal regarding a sale of shares
of capital stock of, or a
-22-
merger, consolidation, sale of assets or other similar transaction involving the
Company or Four Star, and the Selling Shareholders and/or their agents will
promptly notify Buyer if any such discussions or negotiations are sought to be
initiated with, any such information is requested from, or any such proposal or
possible proposal is received by the Company, Lighting, the Selling Shareholders
and/or their agents.
3.6 Publicity. Until the Closing Date, each party hereto agrees not
---------
to issue any press release or any public statement with respect to the
transactions contemplated hereby, except as may be required by law, in which
event such press release or public statement shall be made only after
consultation with the Company or Buyer, as the case may be; then and thereafter
no such public announcement, press release or any public statement (outside of
ordinary course marketing efforts and government filings) shall be made without
the consent, which shall not be unreasonably withheld, of the Selling
Shareholders (in the case of releases or statements issued or made by Buyer) or
Buyer (in the case of releases or statements issued or made by the Selling
Shareholders).
3.7 General Release. In consideration of the consummation of the
---------------
Sale and receipt by the Shareholders' Representative of each Selling
Shareholder's due portion of the Purchase Price, on the Closing Date each
Selling Shareholder does remise, release and discharge the Company and Four
Star, its successors and assigns, its directors, officers and shareholders, from
any and all Claims (as defined in Section 6.2(a)) through the Closing Date,
including all Claims related to the Selling Shareholder's relationship with the
Company or Four Star as an officer, director or shareholder, but excluding all
Claims related to the Selling Shareholder's relationship with the Company or
Four Star as an employee.
3.8 PRG Litigation. Prior to and after the Closing Date, the Selling
--------------
Shareholders shall, and shall cause the Shareholders' Representative to,
vigorously defend the PRG Litigation (as defined in Section 4.1(d)) and shall
not settle such litigation with any negative effect on the ownership of the
Shares or resulting liability to Buyer, the Company or Four Star, without prior
consent of Buyer.
3.9 Additional Agreements. Subject to the terms and conditions
---------------------
herein provided, each of the parties hereto agrees to use its best efforts to
take, or cause to be taken, all actions and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations, and
as may be requested by Buyer's lenders, or such lenders' counsel, to consummate
and make effective the transactions contemplated hereby as soon as reasonably
practicable hereinafter.
-23-
ARTICLE IV
----------
CONDITIONS TO THE CLOSING
4.1 Conditions to the Closing Relating to Buyer. Consummation of the
-------------------------------------------
transaction contemplated hereby is subject to the fulfillment to the reasonable
satisfaction of Buyer, prior to or at the Closing Date, of each of the following
conditions:
(a) Regulatory Consents, Authorizations, etc.. All consents,
-----------------------------------------
authorizations, orders and approvals of, and filings and registrations with any
governmental commission, board or other regulatory body or any other person
which are required, prior to the Closing Date, for or in connection with the
execution and delivery of this Agreement and the consummation by each party
hereto and the Company of the transactions contemplated hereby, or which are
required in order to avoid violation or termination of any agreement listed in
the Disclosure Schedule, shall have been obtained or made.
(b) Representations and Warranties. The representations and
------------------------------
warranties of the Selling Shareholders contained in this Agreement shall be true
and correct in all material respects at the date hereof and as of the Closing
Date, except for changes contemplated by this Agreement, with the same force and
effect as if made at and as of the Closing Date; and the Selling Shareholders
and the Company shall have performed or complied in all material aspects with
all agreements and covenants required by this Agreement to be performed or
complied with by them at or prior to the Closing Date.
(c) Litigation; Other Events. Except for the PRG Litigation, no
------------------------
action, suit or proceeding shall have been instituted by any person which seeks
to prohibit, restrict or delay consummation of the transactions contemplated
under this Agreement (the "Sale") or any of the conditions to the Sale, or seeks
damages as a result of the consummation of the Sale.
(d) PRG Litigation. The litigation commenced by Production Resource
--------------
Group, L.L.C. against the Selling Shareholders and the Shareholders'
Representative (the "PRG Litigation") shall not be in a posture that, in the
reasonable opinion of Buyer and Buyers' counsel, may be expected to, (i)
prohibit Buyer's ownership of the Shares or operation of all or a material
portion of the Company's and Four Star's business or assets, or compel Buyer to
dispose of or hold separate all or a material portion of the Company's and Four
Star's business or assets after consummation of the Sale, (ii) render Buyer
unable to purchase the Shares or to consummate the Sale, (iii) impose material
limitations on the ability of Buyer effectively to exercise full rights of
ownership of the Shares or the Company's and Four Star's business or assets, or
(iv) result in any material liability of Buyer, the Company or Four Star (giving
-24-
effect to the escrow provided hereunder) after consummation of the Sale.
(e) Existing Indebtedness. The holders of any outstanding
---------------------
indebtedness for borrowed money of the Company and/or Four Star, including, but
not limited to, Bank of America and the holders of the Subordinated Notes, shall
have released and discharged the same and the Liens securing the same, including
any collateral assignment of Four Star's rental contracts and any guaranty of
Four Star's obligations by the Company, and shall have delivered (i) the
original promissory notes evidencing such indebtedness marked canceled and (ii)
the appropriate Uniform Commercial Code termination statements in recordable
form and otherwise in form acceptable to Buyer's counsel, against payment by the
Company and/or Four Star of the outstanding balance of such indebtedness.
(f) Employment. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ shall have executed and delivered an
----------
employment and non-competition agreement with Buyer or Four Star in form and
substance satisfactory to Buyer.
(g) Keyman Life Insurance. Buyer shall have obtained a commitment
---------------------
from a reputable insurance carrier, reasonably acceptable to Buyer's lenders,
for keyman life insurance on ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ in an amount of not less than
$2,000,000.
(h) Escrow Agreement. The Selling Shareholders and the Escrow Agent
----------------
shall have executed and delivered to Buyer an escrow agreement, substantially in
the form of Exhibit A hereto (the "Escrow Agreement").
(i) Resignations. Buyer shall have received the resignations,
------------
effective as of the Closing Date, of all directors of the Company and Four Star
and those officers of the Company and Four Star which Buyer shall request prior
to the Closing Date.
(j) Closing Certificate. The Shareholders' Representative shall have
-------------------
delivered to Buyer a certificate as to the satisfaction of the conditions set
forth in Section 4.1(b) and (c), dated as of the Closing Date.
(k) Stock Certificates. Buyer shall have received (A) the stock
------------------
certificates evidencing the Shares, (B) the stock certificates evidencing all of
the Preferred Stock, and (C) a stock certificate evidencing all of the Common
Stock of Four Star.
(l) Opinion of Counsel. Buyer shall have received the opinion, dated
------------------
the Closing Date, of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
-25-
& ▇▇▇▇▇▇▇▇, special counsel for the Selling Shareholders, in the form attached
hereto as Exhibit B.
(m) Material Adverse Event. The business, operations, assets,
----------------------
financial condition or properties of the Company and Lighting shall not have
been materially adversely affected in any way as a result of any event or
occurrence.
(n) Deliveries. Buyer shall have received all documents required to
----------
be delivered to Buyer by the Selling Shareholders at the Closing as provided
herein, including, but not limited to, any documents requested by Buyer's
lenders, or such lenders' counsel. All such documents shall be in form and
substance satisfactory to Buyer and its counsel.
4.2 Conditions to the Closing Related to the Selling Shareholders.
-------------------------------------------------------------
Consummation of the transaction contemplated hereby is subject to the
fulfillment to the reasonable satisfaction of the Selling Shareholders, prior to
or at the Closing Date, of each of the following conditions:
(a) Representations and Warranties. The representations and
------------------------------
warranties of Buyer contained in this Agreement shall be true and correct in all
material respects at the date hereof and as of the Closing Date, except for
changes contemplated by this Agreement, with the same force and effect as if
made at and as of the Closing Date; and Buyer shall have performed or complied
in all material respects with all agreements and covenants required by this
Agreement to be performed or complied with by it at or prior to the Closing
Date.
(b) No Injunctions. No injunctions, waiting periods or restraining
--------------
order shall be in effect prohibiting the Sale and all required approvals shall
have been obtained.
(c) Payment. Buyer shall have paid the Purchase Price.
-------
(d) Escrow Agreement. Buyer shall have executed and delivered
----------------
the Escrow Agreement.
(e) Opinion of Counsel. The Shareholders' Representative shall have
------------------
received the opinion, dated the Closing Date, of ▇▇▇▇▇▇▇ Breed ▇▇▇▇▇▇ & ▇▇▇▇▇▇
LLP, counsel for Buyer, in the form attached hereto as Exhibit C.
ARTICLE V
---------
TERMINATION
5.1 Termination. This Agreement may be terminated:
-----------
-26-
(i) By mutual action of the Selling Shareholders and
Buyer;
(ii) By either the Selling Shareholders or Buyer, if there
has been a material breach hereof on the part of the other party
hereto, provided such party fails to cure such breach within five
(5) days following notification thereof;
(iii) By the Selling Shareholders, if any of the conditions
set forth in Section 4.2 shall not have been complied with or
performed and such noncompliance or nonperformance shall not have
been cured or eliminated (or by its nature cannot be cured or
eliminated) by Buyer on or before April 30, 1998; or
(iv) By Buyer, if any of the conditions set forth in
Section 4.1 shall not have been complied with or performed and
such noncompliance or nonperformance shall not have been cured or
eliminated (or by its nature cannot be cured or eliminated) by
Selling Shareholders on or before April 30, 1998.
5.2 Effects of Termination. In the event of the termination of this
----------------------
Agreement, this Agreement shall thereafter become void and have no effect, and
no party hereto shall have any liability to the other parties hereto or their
respective stockholders or directors or officers in respect thereof, except for
the obligations of the parties hereto set forth in the last two sentences of
Section 3.3 and in Section 3.4, and except that nothing herein will relieve any
party from liability for any breach of this Agreement prior to such termination.
ARTICLE VI
----------
INDEMNITY
6.1 Survival of Representations and Warranties Indemnity. The
----------------------------------------------------
representations, warranties and covenants by the Selling Shareholders shall
survive the Closing until fifteen (15) months following the Closing Date, except
that the representations and warranties set forth in Section 2.2(h) shall
survive the Closing until thirty six (36) months following the Closing Date,
and, further, except as provided in Section 6.2(b). Any Claim against the
Selling Shareholders of which notice has been given by Buyer pursuant to Section
6.3 at or prior to the expiration of the related period shall continue to be
subject to indemnification provided for in Section 6.2(a) notwithstanding the
expiration of such period.
-27-
6.2 Indemnity.
---------
(a) General Indemnification by Selling Shareholders. The
-----------------------------------------------
Selling Shareholders agree to indemnify, jointly and severally, Buyer, the
Company and/or Four Star, and their respective officers, directors, employees
and agents (individually, a "Buyer Indemnified Party" and collectively, the
"Buyer Indemnified Parties"), for any and all claims, demands, losses, costs,
charges, expenses, obligations, liabilities, actions, suits, damages, judgments
and deficiencies, including interest and penalties, reasonable counsels' fees
and all reasonable amounts paid in settlement of any claim, action, or suit
(collectively referred to as "Claims") which may be sustained, suffered or
incurred by a Buyer Indemnified Party and arising out of or by reason of any
breach of any representation, warranty, covenant or undertaking made by the
Selling Shareholders pursuant to this Agreement; provided, however, that except
-------- -------
in the case of fraud the Selling Shareholders shall not have any obligation for
any of the foregoing until the Buyer Indemnified Parties have suffered an
aggregate of all Claims in excess of $250,000, after which point the Selling
Shareholders will be obligated only to indemnify the Buyer Indemnified Parties
from such further Claims in excess of $250,000, and provided further, that the
-------- -------
Selling Shareholders shall not be obligated to indemnify the Buyer Indemnified
Parties in excess of $1,000,000.
(b) Special Indemnification by Selling Shareholders. The
-----------------------------------------------
foregoing notwithstanding, the Selling Shareholders agree to indemnify, jointly
and severally, without any limitations as to the time and the amount of the
Claims, the Buyer Indemnified Parties for any and all Claims which may be
sustained, suffered or incurred by a Buyer Indemnified Party and arising out of
or by reason of (i) the PRG Litigation and (ii) any failure by Four Star to
comply with the terms of or obligations under the collective bargaining
agreement with Local No. 33 of the International Alliance of Theatrical Stage
Employees, including any and all obligations with respect to Multi-employer
Plans, for all periods ending on or prior to the Closing Date (the "Local 33
Agreement").
(c) Special Indemnification by Buyer. Buyer agrees to
---------------------------------
indemnify the Selling Shareholders, and their respective officers, directors,
employees and agents (individually, a "Seller Indemnified Party"), for any and
all Claims which may be sustained, suffered or incurred by a Seller Indemnified
Party and arising out of or by reason of any failure by Buyer and/or Four Star
to comply with the terms of or obligations under the Local 33 Agreement, for all
periods beginning after the Closing Date.
6.3 Cooperation. The term "Claims" as used in this Article is not
-----------
limited to matters asserted by third parties against a Buyer Indemnified Party
or a Seller Indemnified Party
-28-
(each an "Indemnified Party"), but does not include any losses or expenses
resulting from the management and operation of the Company after the Closing.
Claims does not include any damages to the extent the Company receives insurance
reimbursement therefor. In the event a Claim is asserted by any third party
against an Indemnified Party, it shall notify the other party (the "Indemnifying
Party") of such Claim by giving to the Indemnifying Party prompt written notice,
and shall give the Indemnifying Party and its counsel access to any and all such
files, records and other documents as may be necessary to enable the
Indemnifying Party to investigate or participate in the defense against such
Claim (but at the cost and expense of the Indemnifying Party) and the
Indemnified Party shall otherwise cooperate in connection therewith and shall
not unreasonably assume a position contrary to that of the Indemnifying Party
with respect to all such third party Claims.
ARTICLE VII
-----------
MISCELLANEOUS
7.1 Notices. Any notice or other communication required or
-------
permitted hereunder shall be sufficiently given if delivered personally or sent
by telex or telecopy or by registered or certified mail, postage prepaid,
addressed, in the case of the Selling Shareholders, the Company or Lighting, to
it care of Stonebridge Partners, Westchester Financial Center, ▇▇ ▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Telecopy No.:
(▇▇▇) ▇▇▇-▇▇▇▇, with copies to ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq., ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇, or in the case of the
Buyer to ▇▇▇▇▇▇▇▇ Studio Equipment Group, ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇,
with copies to ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq., ▇▇▇▇▇▇▇ Breed ▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP, ▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇,
with copies to such other person or address as shall be furnished in writing by
any party to the other parties prior to the giving of the applicable notice or
communication, and such notice or communication shall be deemed to have been
given ten (10) days after mailed, or in the case of personal delivery or
telecopy, upon receipt of transmission.
7.2 Financial Advisors and Brokers. Except as disclosed in the
------------------------------
Disclosure Schedule, the Selling Shareholders represent and warrant, jointly and
severally, that no investment banker, broker or finder is entitled to any
financial advisory, brokerage or finder's fee or other similar payment from the
Company based on agreements, arrangements or undertakings made by it or any of
its respective directors, officers or employees in connection with the
transactions contemplated hereby. Buyer shall be solely responsible for the
fees of any investment banker, broker or finder employed by it.
-29-
Buyer represents and warrants that no investment banker, broker or
finder is entitled to any financial advisory, brokerage or finder's fee or other
similar payment from the Company based on agreements, arrangements or
undertakings made by Buyer or any of its respective directors, officers or
employees in connection with the transactions contemplated hereby.
7.3 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
7.4 Disclosure Schedule. The Disclosure Schedule is an integral part
-------------------
of this Agreement.
7.5 Headings. The headings herein are for convenience only, do not
--------
constitute a part of this Agreement, and shall not be deemed to limit or affect
any of the provisions hereof.
7.6 Exhibits. The attached Exhibits are an integral part of this
--------
Agreement.
7.7 Miscellaneous. This Agreement (including the Exhibits hereto and
-------------
the Disclosure Schedule) (a) constitutes the entire agreement and understanding
and supersedes all prior agreements and understandings, both written and oral,
among the parties hereto with respect to the subject matter hereof, (b) is not
intended to confer upon any other person any rights or remedies hereunder, (c)
shall not be assigned, by operation of law or otherwise, except that Buyer may
at its sole option and without the consent of the Selling Shareholders assign
this Agreement and its rights and obligations hereunder to an a wholly owned
subsidiary of Buyer, and (d) shall be governed in all respects, including
validity, interpretation and effect, by the internal laws of the State of New
York.
7.8 Arbitration. For matters other than those provided for in
-----------
Section 1.6(c), any party shall have the right to submit any dispute,
controversy or claim arising out of this Agreement to neutral binding
arbitration in New York, New York. The matter shall be heard and settled by one
arbitrator, in accordance with the Commercial Arbitration Rules of the American
Arbitration Association (the "Rules"). The arbitrator shall be appointed in
accordance with the Rules. Any party requesting arbitration shall give notice
to the other party stating the issue to be resolved. The arbitrator shall be
bound by the terms and conditions of this Agreement and shall have no power, in
rendering the award, to alter or depart from any express provision of this
Agreement. The decision of the arbitrator shall be based solely upon written
submissions to the arbitrator and shall be final and binding on both parties,
with each party or parties bearing its own costs and expenses with respect to
the dispute. Each party hereby consents to the entry of a judgment
-30-
in any court of competent jurisdiction enforcing any arbitration decision made
in accordance herewith.
7.9 Power of Attorney. Each of the undersigned Selling Shareholders
-----------------
hereby irrevocably makes, constitutes and appoints ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇. and/or
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ as his/their or her attorney-in-fact with full power to act,
as Shareholders' Representative, in his/their or her place and stead to
compromise any claim or take any other action, including without limitation
pursuant to Section 6.3, with respect to this Agreement. Each Selling
Shareholder agrees that payment by Buyer to a Shareholders' Representative shall
satisfy Buyer's obligation to each Selling Shareholder.
-31-
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the date first above written:
FOUR STAR HOLDING, INC.
Attest_______________________ By /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------------------
President
FOUR STAR LIGHTING, INC.
Attest_______________________ By /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------------------
President
FOUR STAR ASSOCIATES, L.P.,
a Delaware Limited Partnership
By: Stonebridge Partners Management,
L.P., General Partner
Attest_______________________ By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------------
Its General Partner
---------------------------------
STONEBRIDGE PARTNERS
EQUITY FUND, L.P.
a Delaware Limited Partnership
By: Stonebridge Partners Management,
L.P., General Partner
Attest_______________________ By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------------
Its General Partner
---------------------------------
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
_________________________________________
▇▇▇▇ ▇. ▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
_________________________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
_________________________________________
▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ STUDIO EQUIPMENT GROUP
Attest /s/ ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
------------------------ ---------------------------
Chairman of the Board and
Chief Executive Officer
EMPLOYMENT AGREEMENT
--------------------
This Employment Agreement is made and entered into this 1st day of
April, 1998, by and between Four Star Lighting, Inc. (the "Company" or "Four
Star"), a New York corporation, and ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, an individual
("Executive").
W I T N E S S E T H:
WHEREAS, the Company is engaged in the business of renting lighting
equipment to theatrical production companies in the United States;
WHEREAS, the Executive has superior and unique skill, talent and
ability to promote the business and affairs of the Company;
WHEREAS, the Company desires to be assured of the association and
services of Executive for the Company's operations; and
WHEREAS, Executive is willing and desires to be employed by the
Company, and the Company is willing to employ Executive, upon the terms,
covenants and conditions hereinafter set forth:
NOW, THEREFORE, in consideration of the mutual terms, covenants and
conditions hereinafter set forth, the parties hereto do hereby agree as follows:
1. Employment. The Company hereby employs Executive as the
----------
President of the Company, reporting to the Company's Chief Executive Officer and
Chairman of the Board in conjunction with the Company's Board of Directors.
2. Location and Travel. Executive shall perform his duties for the
-------------------
Company from the Company's facilities located in Mount Vernon, New York.
Executive shall travel as is required or appropriate to carry out his duties.
3. Term. The period of employment hereunder shall be from April 1,
----
1998 through March 31, 2001 subject to extension or termination as hereinafter
provided (the "Initial Period of Employment"). As of the last day of the
Initial Period of Employment, and each anniversary thereafter, the period of
employment shall be automatically extended by one additional year (the "Extended
Period of Employment"; the Initial Period of Employment and, if so extended, the
Extended Period of Employment, together the "Period of Employment") unless at
least three months prior to such date, the Company shall deliver to the
Executive or the Executive shall deliver to the Company written notice that the
Period of Employment will not be extended, in which case the Period of
Employment will end at its then scheduled expiration date and shall not be
further extended except by written agreement of the Company and the Executive.
4. Compensation. (a) For all services rendered by Executive under
------------
this Agreement, the Company shall pay Executive a base salary of One Hundred
Fifty Thousand Dollars ($150,000) per annum ("Base Salary"), payable weekly in
equal installments. The Base Salary may be increased from time to time at the
discretion of the Company's Chief Executive Officer, provided that such increase
shall not in any event exceed ten percent (10%) for any twelve-month period.
(b) In addition to the Base Salary, Executive shall be paid such
bonus as is provided for in Section 5 below.
(c) Executive shall be reimbursed for all reasonable "out-of-pocket"
business expenses for business travel (other than travel related expenses
covered by the car allowance described below) and business entertainment
incurred in connection with the performance of his duties under this Agreement.
Such reimbursement shall be upon periodic presentation to the Company of valid
receipts and other appropriate documentation and upon approval by the Company of
such receipts and documentation; provided, however, any individual expense
greater than One Thousand Dollars ($1,000.00) shall not be incurred without
prior approval of the Chief Executive Officer.
(d) Executive shall be entitled to a car allowance of Eight Hundred
Dollars ($800.00) per month (which includes automobile leasing, insurance and
mileage expenses).
(e) Executive shall also be entitled to such other employee benefits
(such as vacation, and medical, disability and life insurance coverage) as are
available pursuant to the Company's general employment practices.
5. Performance Bonus. (a) In addition to the Base Salary, the
-----------------
Company shall pay Executive a bonus which shall be determined according to the
formula set forth in this Section 5:
(i) For the period commencing on April 1, 1998 and ending on September 30,
1998, the bonus shall be an amount equal to (i) twenty percent (20%)
of Base Salary paid to Executive during such (April 1 through
September 30, 1998) period if "EBIT" (as defined below) for the
Company for such period exceeds Two Million Two Hundred Thousand
Dollars ($2,200,000), or (ii) thirty percent (30%) of Base Salary if
"EBIT" for the Company for such period exceeds Two Million Four
Hundred Fifty Thousand Dollars ($2,450,000) or (iii) forty percent
(40%) of Base Salary if "EBIT" for the Company for such period exceeds
Two Million Seven Hundred Thousand Dollars ($2,700,000).
(ii) For the fiscal year (i.e. twelve month period) ending on September 30,
1999 the bonus shall be an amount equal to (i) twenty percent (20%) of
Base Salary for such fiscal year if "EBIT" for the Company for such
fiscal year exceeds Four Million Four Hundred Thousand Dollars
($4,400,000), or (ii) thirty percent (30%) of Base Salary if "EBIT"
for the Company for such fiscal year exceeds Four Million Nine Hundred
Thousand Dollars ($4,900,000) or (iii)
-2-
forty percent (40%) of Base Salary if "EBIT" for the Company for such
fiscal year exceeds Five Million Four Hundred Thousand Dollars
($5,400,000). Thereafter, the bonus for each fiscal year shall be in
an amount to be determined by the Chief Executive Officer of the
Company in conjunction with the Company's Board of Directors.
(b) Notwithstanding anything contained herein to the contrary,
Executive shall only be entitled to receive a bonus if he remains employed by
the Company, and continues to render services on a full-time basis to the
Company, through the last day of the third month of the calendar year following
the fiscal year in which the bonus is earned. Payment of any bonus earned by
Executive shall be made by no later than the last day of the sixth month of the
calendar year following the fiscal year in which the bonus is earned. No bonus
shall be payable to Executive in respect of any fiscal period unless the "EBIT"
levels specified above shall have been reached for that fiscal period.
(c) In determining the Company's earnings before interest and taxes
("EBIT") for a relevant period, "EBIT" shall be calculated in accordance with
generally accepted accounting principles (including the recognition of
appropriate acquisition related accounting entries, e.g., goodwill
amortization), provided that "EBIT" shall be calculated on the basis of the
results of the same lines of business the Company was engaged in prior to the
date of this Agreement. The attached schedule shows the calculation of EBIT for
the first 12 months based on the Company's forecast.
6. Stock Options. As soon as practicable, Executive shall be issued
-------------
options to purchase One Hundred Fifty Thousand (150,000) shares of the common
stock of ▇▇▇▇▇▇▇▇ Studio Equipment Group ("Group") under Group's 1994 Stock
Option Plan (for employees)(the "ESOP"). The options shall vest over a five
year period in five equal installments (30,000 per installment) on the first,
second, third, fourth and fifth anniversary of the date of this Agreement, and
shall have an exercise price equal to the fair market value (as defined in the
ESOP) of Group's common stock on the date of this Agreement. Such options shall
have such other terms specified by the ESOP as may be required for such options
to qualify, to the extent permitted under the Internal Revenue Code, as amended,
as "incentive stock options" and shall otherwise be in compliance with the
ESOP's generally applicable requirements. Group shall execute this Agreement to
evidence its agreement and obligations under this Section 6.
7. Scope of Duties. (a) Executive shall have responsibility for
---------------
directing the Company's business efforts, including (1) promotion of all Company
products and resources, (2) achieving other business goals of the Company, (3)
achievement of profit plan and other such operational matters relating to the
operations of the Company, and (4) staffing, organization and other such matters
relating to the operations and structure of the Company. Such duties shall be
exercised subject to the control and supervision of the Chief Executive Officer
and the Board of Directors of the Company.
(b) Executive shall have such other duties as may be assigned to him
from time to time by the Company's Chief Executive Officer and the Board of
Directors
-3-
commensurate with his experience and responsibilities in the position for which
he is employed pursuant to Section 1 above. Such duties shall be exercised
subject to the control and supervision of the Chief Executive Officer and the
Board of Directors of the Company.
(c) Executive hereby agrees to devote his full time, abilities and
energy to the faithful performance of duties assigned to him and to the
promotion and forwarding of the business affairs of the Company. Executive also
agrees not to divert any business opportunities from the Company to himself or
to any other person or business entity.
(d) Executive shall not, during the term of this Agreement, be
engaged in any other employment or business activity without the prior consent
of the Chief Executive Officer and the Board of Directors of the Company;
provided, however, that this restriction shall not be construed as preventing
Executive from investing his personal assets in passive investments in business
activities that are not in competition with the Company or any other entity
affiliated with the Company.
(e) Executive hereby agrees to promote and develop all business
opportunities that come to his attention relating to current or anticipated
future business of the Company or any affiliated entity, in general, in a manner
consistent with the best interests of the Company, or its affiliates, as
applicable, and with his duties under this Agreement.
8. Other Duties of Executive During and After the Period of
--------------------------------------------------------
Employment. (a) Both during and after the Period of Employment, other than in
----------
the performance of his duties hereunder, Executive hereby agrees not to
disclose, divulge or otherwise disseminate either during the term of his
employment by the Company or at any time thereafter, to any person, firm or
corporation, any information concerning the business affairs, the trade secrets,
the customer lists or similar proprietary information of the Company or of any
affiliated entity. Any technique, method, process or technology used by the
Company or an affiliated entity in the manufacture, sale or distribution of any
product or in the providing of any service shall be considered a "trade secret"
for purposes of this Agreement.
(b) Both during and after the Period of Employment, Executive hereby
agrees that all patents, patent applications, know-how, documents, reports,
plans, proposals, marketing and sales plans, client lists, client files and
materials made by him, the Company, or any affiliated entity are the property of
the Company or such affiliated entity and shall not be used by him in any way
adverse to the Company's or the affiliated entity's interests either during the
Period of Employment or at any time thereafter. Executive shall not deliver,
reproduce or in any way allow such documents or things to be delivered or used
by any third party without the prior written direction or consent of the
Company's Chief Executive Officer or the Board of Directors. Upon termination
of this Agreement, Executive shall surrender to the Company all items in his
possession which are the property of the Company. Executive hereby assigns to
the Company any rights which he may have in any such trade secret or proprietary
information.
(c) During the Period of Employment and for a period of two (2) years
thereafter, Executive shall not at any time:
-4-
(i) directly or indirectly anywhere in the United States (the "Territory")
own, manage, operate, control, or be connected in any manner, directly
or indirectly, with the ownership, management, operation or control of
(including, without limitation, through (i) serving as an employee,
consultant, partner, officer, independent contractor of, (ii) having
any substantial investment in or (iii) directly or indirectly
contributing services or information to) any person or entity that is
engaged in a business competitive with, or similar to, any line of
business conducted by the Company, ▇▇▇▇▇▇▇▇ Studio Equipment Group or
any other affiliated entity in the Territory as of the end of the
Period of Employment; and
(ii) directly or indirectly solicit any of the customers of the Company or
any affiliated entity with the purpose of obtaining them as customers
for a business competitive with, or similar to, the Company's business
as a whole or any of the Company's lines of business.
9. Term and Termination. (a) This Agreement shall automatically
--------------------
terminate on the death of Executive.
(b) The Company shall have the right to terminate Executive's
employment "with cause" at any time without prior notice, if any of the
following, which shall be deemed "cause" by the Company, shall occur:
1. Any willful breach of duty or habitual neglect of duty;
2. Subject to applicable law, including, but not limited to, the Family
and Medical Leave Act of 1993, the continued incapacity of Executive
for a period of more than sixty (60) consecutive days;
3. Any material breach of Executive's obligations to the Company under
this Agreement and, to the extent such breach can be cured, the
failure of Executive to cure such breach within ten (10) days
following receipt of written notice from the Company, if such breach
can be cured by the payment of money, or a period of thirty (30) days
following receipt of written notice from the Company, if such breach
can be cured by other than the payment of money;
4. Any material acts or events which result in Executive being prevented
from fully performing his responsibilities to the Company in good
faith, such as (i) drug or alcohol abuse, or (ii) acts of dishonesty,
gross carelessness or gross misconduct; or
5. Executive shall be convicted of a felony criminal offense or any other
criminal offense involving Executive's lack of honesty or Executive's
moral turpitude.
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(c) Executive may terminate this Agreement if there shall be a
breach by the Company of a material obligation hereunder and, to the extent such
breach can be cured, such breach remains uncured for a period of ten (10) days
following receipt by the Company's Board of Directors of written notice thereof
from Executive, if such breach can be cured by the payment of money, or a period
of thirty (30) days following receipt by the Company's Board of Directors of
written notice thereof from Executive, if such breach can be cured by other than
the payment of money.
(d) In the event of termination of Executive's employment "with
cause", as of the date of termination, Executive shall be entitled to no further
compensation or employee benefits, except for those salary amounts and employee
benefits accrued and unpaid as of the date of termination and except for any
bonus due under Section 5 above. In the event of termination of Executive's
employment "without cause", Executive shall be entitled to receive the Base
Salary and employee benefits for the period during which he is prohibited from
competing with the Company as provided in Section 8.(c).
10. Insurance. Executive hereby acknowledges and agrees that the
---------
Company or the Group shall have the right to procure insurance up to an amount
of Ten Million Dollars ($10,000,000), to insure against the risk of death or
disability of Executive during the term of this Agreement. If the Company or
the Group so elects to purchase such additional insurance, such additional
insurance shall (i) name the Company as the beneficiary of ninety percent (90%)
of the policy amount and (ii) name Executive's heirs or distributees as the
beneficiaries of ten percent (10%) of the policy amount, in the event of
Executive's death or disability. Executive hereby agrees to cooperate with the
Company or the Group in connection with the procurement and maintenance of such
insurance.
11. Injunctive Relief. The Company and Executive hereby acknowledge
-----------------
and agree that any default under Section 8 above will cause irreparable damage
to the Company in an amount difficult to ascertain. Accordingly, in addition to
any other relief to which the Company may be entitled, the Company shall be
entitled to such injunctive relief as may be ordered by any court of competent
jurisdiction including, but not limited to, an injunction restraining any
violation of Section 8 above and without the proof of actual damages.
12. Arbitration. (a) Except as provided in this Agreement, any
-----------
dispute, controversy or claim arising out of or relating to this Agreement or
breach thereof, shall be settled by binding arbitration heard by one arbitrator,
in accordance with, at the election of Executive, either the Commercial
Arbitration Rules of the American Arbitration Association or the Rules of the
Federal Mediation Service (the "Rules"). The parties hereto agree that the
venue of such arbitration shall be New York City, New York. The party intending
to arbitrate shall serve a written notice of intention to commence arbitration
on the other party. The arbitrator shall be appointed in accordance with the
Rules.
(b) The arbitrator shall be bound by the terms and conditions of this
Agreement and shall have no power, in rendering the award, to alter or depart
from any express provision of this Agreement, and his failure to observe this
limitation shall constitute grounds for vacating the award. Any award of the
arbitrator shall be final and binding upon
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the parties and judgment may be entered in any court of competent jurisdiction,
including, without limitation, the courts of the State of New York or any
Federal court in New York or any court of competent jurisdiction in the United
States. The award and judgment thereon shall include interest at the legal rate
from the date that the sum awarded to the prevailing party was originally due
and payable.
(c) All provisional remedies shall be the exclusive jurisdiction of
the courts. The parties may seek and obtain provisional remedies prior to or
contemporaneously with arbitration.
(d) If any legal action or dispute arises under this Agreement,
arises by reason of any asserted breach of it, or arises between the parties and
is related in any way to the subject matter of the Agreement, the prevailing
party shall be entitled to recover all costs and expenses, including reasonable
attorneys' fees, arbitration costs, investigative costs, reasonable accounting
fees and charges for experts. Attorneys' fees and expenses incurred in
enforcing any judgment are recoverable as a separate item and shall be severable
from other provisions of this Agreement, shall survive any judgment and shall
not be merged into such judgment.
(e) Except as otherwise provided in this Agreement, each of the
parties consents and submits to the exclusive jurisdiction and venue of the
State of New York for the adjudication of any dispute between the parties
pertaining to this Agreement or the alleged breach of any provision hereof.
13. Severability. Nothing contained herein shall be construed to
------------
require the commission of any act contrary to law. Should there be any conflict
between any provision hereof and any present or future statute, law, ordinance,
regulation, or other pronouncement having the force of law, the latter shall
prevail, but the provision of this Agreement affected thereby shall be curtailed
and limited only to the extent necessary to bring it within the requirements of
the law, and the remaining provisions of this Agreement shall remain in full
force and effect.
14. Governing Law. This Agreement is made under and shall be
-------------
construed pursuant to the laws of the State of New York.
15. Counterparts. This Agreement may be executed in counterparts and
------------
all documents so executed shall constitute one agreement, binding on all of the
parties hereto, notwithstanding that all of the parties did not sign the
original or the same counterparts.
16. Entire Agreement. This Agreement constitutes the entire
----------------
agreement and understanding of the parties with respect to the subject matter
hereof and supersedes all prior oral or written agreements, arrangements, and
understandings with respect thereto. No representation, promise, inducement,
statement or intention has been made by any party hereto that is not embodied
herein, and no party shall be bound by or liable for any alleged representation,
promise, inducement, or statement not so set forth herein.
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17. Modification. This Agreement may be modified, amended,
------------
superseded, or canceled, and any of the terms, covenants, representations,
warranties or conditions hereof may be waived, only by a written instrument
executed by the parties hereto.
18. Waiver. The waiver by either of the parties, express or implied,
------
of any right under this Agreement or any failure to perform under this Agreement
by the other party, shall not constitute or be deemed as a waiver of any other
right under this Agreement or of any other failure to perform under this
Agreement by the other party, whether of a similar or dissimilar nature.
19. Cumulative Remedies. Each and all of the several rights and
-------------------
remedies provided in this Agreement, or by law or in equity, shall be
cumulative, and no one of them shall be exclusive of any other right or remedy,
and the exercise of any one or such rights or remedies shall not be deemed a
waiver of, or an election to exercise, any other such right or remedy.
20. Headings. The section and other headings contained in this
--------
Agreement are for reference purposes only and shall not in any way affect the
meaning and interpretation of this Agreement.
21. Notices. All notices, requests, demands and other
-------
communications required or permitted hereunder shall be in writing and shall be
deemed to have been given immediately when delivered by hand or by confirmed
facsimile transmission, or three (3) days after being mailed, certified mail
with postage prepaid, to:
(a) if to Executive: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
(b) if to the Company: Four Star Lighting, Inc.
▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇,
Chief Executive Officer
with copy to:
▇▇▇▇▇▇▇▇ Studio Equipment Group
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the date first set forth above.
"Executive" /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
______________________________________
▇▇▇▇▇▇ ▇▇▇▇▇▇▇
"Company" FOUR STAR LIGHTING, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
----------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Chief Executive Officer
By its signature below, ▇▇▇▇▇▇▇▇ Studio Equipment Group, a California
corporation, agrees to and acknowledges the obligation to issue the options to
purchase 150,000 shares of its common stock described in Section 6 above. The
individual signing below on behalf of ▇▇▇▇▇▇▇▇ Studio Equipment Group represents
and warrants to Executive that he has the requisite power and authorization to
bind ▇▇▇▇▇▇▇▇ Studio Equipment Group.
▇▇▇▇▇▇▇▇ STUDIO EQUIPMENT GROUP
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Chairman of the Board,
Chief Executive Officer
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