1
EXHIBIT 2.7
STOCK PURCHASE AGREEMENT
among
TBA ENTERTAINMENT CORPORATION,
▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇ & ASSOCIATES, INC.,
INK UP, INC.
and
KGA, INC.
March 18, 1999
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TABLE OF CONTENTS
Page
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ARTICLE 1 - DEFINITIONS......................................................................1
Section 1.1 Definition of Certain Terms............................................1
ARTICLE 2 - PURCHASE AND SALE OF SHARES......................................................8
Section 2.1 Purchase and Sale......................................................8
Section 2.2 Purchase Price.........................................................8
Section 2.3 Adjustment to Purchase Price...........................................8
Section 2.4 Registration Rights...................................................10
Section 2.5 Closing...............................................................10
Section 2.6 Further Action........................................................10
ARTICLE 3 - REPRESENTATIONS AND WARRANTIES OF TBA...........................................11
Section 3.1 Organization and Qualification........................................11
Section 3.2 Authority Relative to this Agreement..................................11
Section 3.3 TBA Common Stock and TBA SEC Documents................................11
Section 3.4 Certain Corporate Matters.............................................12
Section 3.5 Broker's Fees.........................................................12
Section 3.6 Absence of Certain Changes............................................12
Section 3.7 No Reliance...........................................................12
Section 3.8 No Actions Pending....................................................13
Section 3.9 Investment Intent.....................................................13
Section 3.10 Information...........................................................13
Section 3.11 Sophistication of TBA.................................................13
Section 3.12 Accredited Investor...................................................13
Section 3.13 No Knowledge of Breach................................................13
ARTICLE 4 - REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS..............................13
Section 4.1 Authorization, etc....................................................13
Section 4.2 Organization, Status, Capitalization etc..............................14
Section 4.3 No Conflicts, etc. ..................................................15
Section 4.4 Financial Statements..................................................15
Section 4.5 Absence of Undisclosed Liabilities....................................15
Section 4.6 Tax Returns and Audits................................................16
Section 4.7 Absence of Changes. ..................................................17
Section 4.8 Litigation............................................................19
Section 4.9 Compliance with Laws; Governmental Approvals and Consents;
Governmental Contracts................................................19
Section 4.10 Tangible Property.....................................................20
Section 4.11 Contracts.............................................................20
Section 4.12 Territorial Restrictions. ............................................22
Section 4.13 Inventories. .........................................................22
Section 4.14 Customers.............................................................22
Section 4.15 Suppliers.............................................................22
Section 4.16 Product Warranties....................................................23
Section 4.17 Intellectual Property.................................................23
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TABLE OF CONTENTS
(Continued)
Page
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Section 4.18 Insurance. ...........................................................24
Section 4.19 Real Property.........................................................25
Section 4.20 Environmental Matters.................................................26
Section 4.21 Employees, Labor Matters, etc.........................................27
Section 4.22 Employee Benefit Plans and Related Matters............................28
Section 4.23 No Guarantees.........................................................30
Section 4.24 Records...............................................................30
Section 4.25 Brokers, Finders, etc.................................................30
Section 4.26 Receivables...........................................................30
Section 4.27 Certain Business Relationships........................................31
Section 4.28 Investment Representations............................................31
Section 4.29 Limitation of Representations.........................................32
ARTICLE 5 - [INTENTIONALLY DELETED].........................................................32
ARTICLE 6 - ADDITIONAL AGREEMENTS...........................................................32
Section 6.1 Expenses..............................................................33
Section 6.2 Press Releases........................................................33
Section 6.3 Employee Matters......................................................33
Section 6.4 Tax Matters...........................................................33
Section 6.5 Section 338(h)(10) Election...........................................34
Section 6.6 Adjustments to Eliminate Debt and Transfer Inventory..................34
Section 6.7 Glass Guaranties......................................................34
Section 6.8 Lease Agreements......................................................34
ARTICLE 7 - CLOSING.........................................................................35
Section 7.1 Closing Deliveries by TBA.............................................35
Section 7.2 Closing Deliveries by the Shareholders................................35
ARTICLE 8 - INDEMNIFICATION; MISCELLANEOUS..................................................36
Section 8.1 Indemnification.......................................................36
Section 8.2 Survival of Representations and Warranties, etc.......................39
Section 8.3 Severability..........................................................39
Section 8.4 Notices...............................................................40
Section 8.5 Miscellaneous.........................................................41
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TABLE OF CONTENTS
(Continued)
ANNEX I List of TBA SEC Documents
EXHIBIT A Form of Pledge Agreement
EXHIBIT B Registration Rights Agreement
EXHIBIT C Form of Employment Agreement
EXHIBIT D Form of ▇▇▇▇▇▇ Realty Lease Agreement
EXHIBIT E Form of The Glass Family Limited Partnership Lease Agreement
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement"), dated March 18, 1999,
is by and among TBA Entertainment Corporation, a Delaware corporation ("TBA"),
▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇, each individual residents of the State of Indiana
and shareholders of the Acquired Companies (as defined below) (individually
referred to as a "Shareholder" and collectively, the "Shareholders"), ▇▇▇▇▇
▇▇▇▇▇ & Associates, Inc., an Indiana corporation ("KGA"), Ink Up, Inc., an
Indiana corporation ("Ink"), and KGA, Inc., an Indiana corporation ("K Corp.")
(KGA, Ink and K Corp. are sometimes referred to herein individually as an
"Acquired Company" and collectively as the "Acquired Companies").
W I T N E S S E T H :
WHEREAS, the Shareholders own all of the issued and outstanding equity
stock (the "Shares") of the Acquired Companies;
WHEREAS, TBA, the Acquired Companies and the Shareholders each desire
for TBA to acquire (the "Acquisition") all of the Shares pursuant to the terms
and conditions of this Agreement, as a result of which the Acquired Companies
will become wholly-owned subsidiaries of TBA;
NOW, THEREFORE, in consideration of the mutual covenants,
representations and warranties made herein, and of the mutual benefits to be
derived hereby, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.1 DEFINITION OF CERTAIN TERMS. The terms defined in this
Section 1.1, whenever used in this Agreement (including in the Schedules), shall
have the respective meanings indicated below for all purposes of this Agreement.
All references herein to a Section, Article or Schedule are to a Section,
Article or Schedule of or to this Agreement, unless otherwise indicated.
ACQUIRED COMPANY: any of KGA, Ink or K Corp., individually.
ACQUIRED COMPANIES: KGA, Ink and K Corp., collectively.
ACQUIRED COMPANY INDEMNITEES: as defined in Section 8.1(b).
ACQUISITION: as defined in the recitals to this Agreement.
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AFFILIATE: of a Person means a Person that directly or indirectly
through one or more intermediaries, controls, is controlled by, or is under
common control with, the first Person. "Control" (including the terms
"controlled by" and "under common control with") means the possession, directly
or indirectly, of the power to direct or cause the direction of the management
policies of a person, whether through the ownership of voting securities, by
contract or credit arrangement, as trustee or executor, or otherwise.
AGREEMENT: this Stock Purchase Agreement, including the Schedules and
Exhibits hereto.
APPLICABLE LAW: all applicable provisions of all (i) constitutions,
treaties, statutes, laws (including the common law), rules, regulations,
ordinances, codes or orders of any Governmental Authority, (ii) Governmental
Approvals and (iii) orders, decisions, injunctions, judgments, awards and
decrees of or agreements with any Governmental Authority.
AVERAGE PRICE: the average of the closing sale prices of TBA Common
Stock reported by The Nasdaq Stock Market for each of the five (5) consecutive
trading days ending five (5) business days preceding the Closing Date.
BUSINESS DAY: shall mean a day other than a Saturday, Sunday or other
day on which commercial banks in Indianapolis, Indiana are authorized or
required to close.
CASH PORTION: as defined in Section 2.2(b).
CERCLA: the Comprehensive Environmental Response, Compensation and
Liability Act, as amended, 42 U.S.C. Section 9601 et seq.
CLOSING: as defined in Section 2.5.
CLOSING DATE: as defined in Section 2.5.
CODE: the Internal Revenue Code of 1986, as amended.
COMMON STOCK PORTION: as defined in Section 2.2(a).
CONSENT: any consent, approval, authorization, waiver, permit, grant,
franchise, concession, agreement, license, exemption or order of, registration,
certificate, declaration or filing with, or report or notice to, any Person,
including but not limited to any Governmental Authority.
CONTRACT: as defined in Section 4.11(a).
DISPUTE: as defined in Section 2.3.
EMPLOYEES: as defined in Section 4.22(a).
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EMPLOYMENT AGREEMENT: as defined in Section 7.1(c).
ENVIRONMENTAL LAWS: all Applicable Laws relating to the protection of
the environment, to human health and safety, or to any emission, discharge,
generation, processing, storage, holding, abatement, existence, Release,
threatened Release or transportation of any Hazardous Substances, including,
without limitation, (i) CERCLA, the Resource Conservation and Recovery Act, and
the Occupational Safety and Health Act, (ii) all other requirements pertaining
to reporting, licensing, permitting, investigation or remediation of emissions,
discharges, releases or threatened releases of Hazardous Materials into the air,
surface water, groundwater or land, or relating to the manufacture, processing,
distribution, use, sale, treatment, receipt, storage, disposal, transport or
handling of Hazardous Substances, and (iii) all other requirements pertaining to
the protection of the health and safety of employees or the public.
ENVIRONMENTAL LIABILITIES AND COSTS: all Losses, whether direct or
indirect, known or unknown, current or potential, past, present or future,
imposed by, under or pursuant to Environmental Laws, including, without
limitation, all Losses related to Remedial Actions, and all fees, disbursements
and expenses of counsel, experts, personnel and consultants based on, arising
out of or otherwise in respect of: (i) the ownership or operation of the
Acquired Companies, Real Property or Other Leases or any other real properties,
assets, equipment or facilities, by the Shareholders, or any of their
predecessors or Affiliates; (ii) the environmental conditions existing on the
Closing Date on, under, above, or about any Real Property or property subject to
Other Leases or any other real properties, assets, equipment or facilities
currently or previously owned, leased or operated by the Acquired Companies, or
any of their predecessors or Affiliates; and (iii) expenditures necessary to
cause any Real Property or any aspect of the business of the Acquired Companies
to be in compliance with any and all requirements of Environmental Laws as of
the Closing Date, including, without limitation, all Environmental Permits
issued under or pursuant to such Environmental Laws, and reasonably necessary to
make full economic use of any Real Property and/or the business of the Acquired
Companies.
ENVIRONMENTAL PERMITS: any federal, state and local permit, license,
registration, consent, order, administrative consent order, certificate,
approval or other authorization with respect to the Acquired Companies necessary
for the conduct of the Acquired Companies' business as currently conducted under
any Environmental Law.
ERISA: the Employee Retirement Income Security Act of 1974, as amended.
FINANCIAL STATEMENTS: each of the financial statements provided by the
Acquired Companies pursuant to Section 4.4.
FINANCIAL STATEMENTS DATE: as defined in Section 4.4.
GAAP: generally accepted accounting principles as in effect in the
United States on the date of this Agreement, as may be modified or amended from
time to time.
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GLASS GUARANTIES: as defined in Section 4.23.
GOVERNMENT APPROVAL: any Consent of, with or to any Governmental
Authority.
GOVERNMENTAL AUTHORITY: any nation or government, any state or other
political subdivision thereof, any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government,
including, without limitation, any government authority, agency, department,
board, commission or instrumentality of the United States, any State of the
United States or any political subdivision thereof, and any tribunal or
arbitrator(s) of competent jurisdiction, and any self-regulatory organization.
HAZARDOUS SUBSTANCES: any substance that: (i) is or contains asbestos,
urea formaldehyde foam insulation, polychlorinated biphenyls, petroleum or
petroleum-derived substances or wastes, radon gas or related materials, (ii)
requires investigation, removal or remediation under any Environmental Law, or
is defined, listed or identified as a "hazardous waste" or "hazardous substance"
thereunder, or (iii) is toxic, explosive, corrosive, flammable, infectious,
radioactive, carcinogenic, mutagenic, or otherwise hazardous and is regulated by
any Governmental Authority or Environmental Law.
INDEMNIFICATION DISPUTE: as defined in Section 8.1(d).
INDEMNIFIED PARTY: as defined in Section 8.1(d).
INDEMNIFYING PARTY: as defined in Section 8.1(d).
INK: Ink Up, Inc., an Indiana corporation.
INTELLECTUAL PROPERTY: any and all United States and foreign: (a)
patents (including design patents, industrial designs and utility models) and
patent applications (including docketed patent disclosures awaiting filing,
reissues, divisions, continuations-in-part and extensions), patent disclosures
awaiting filing determination, inventions and improvements thereto; (b)
trademarks, service marks, trade names, trade dress, logos, business and product
names, slogans, and registrations and applications for registration thereof; (c)
copyrights (including software) and registrations thereof; (d) inventions,
processes, designs, formulae, trade secrets, know-how, industrial models,
confidential and technical information, manufacturing, engineering and technical
drawings, product specifications and confidential business information; (e) mask
work and other semiconductor chip rights and registrations thereof; (f)
intellectual property rights similar to any of the foregoing; (g) copies and
tangible embodiments thereof (in whatever form or medium, including electronic
media).
INTELLECTUAL PROPERTY ASSETS: all Intellectual Property, including, but
not limited to, all designs and art work developed for or by the Acquired
Companies for their own use or for any client of the Acquired Companies, and all
rights thereunder or in respect thereof, primarily relating to or
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used or held for use in connection with the business of the Acquired Companies,
including, but not limited to, rights to ▇▇▇ for and remedies against past,
present and future infringements thereof, and rights of priority and protection
of interests therein under the laws of any jurisdiction worldwide and all
tangible embodiments thereof, and the right to use, and conduct business under,
the names "▇▇▇▇▇ ▇▇▇▇▇ & Associates," "KGA," "Ink Up" and "K Corp."
INVENTORIES: all inventories of raw materials, work in process, finished
products, goods, spare parts, replacement and component parts, and office and
other supplies.
IRS: the Internal Revenue Service.
K CORP.: KGA, Inc. d/b/a K Corp., an Indiana corporation.
KGA: ▇▇▇▇▇ ▇▇▇▇▇ & Associates, Inc., an Indiana corporation.
KNOWLEDGE: an individual will be deemed to have "Knowledge" of a
particular fact or other matter if (a) such individual is actually aware of such
fact or other matter or (b) such individual should have been aware of such fact
or other matter as a result of the receipt of information by such individual
which indicates the existence of such fact or other matter. A person (other than
an individual) will be deemed to have "Knowledge" of a particular fact or other
matter if any individual who is serving, or who has at any time served, as a
director, officer, partner, executor, or trustee of such person (or in any
similar capacity) has, or at any time had, Knowledge of such fact or other
matter.
LEASED REAL PROPERTY: means all interests leased pursuant to the Leases.
LEASES: means the real property leases, subleases, licenses and
occupancy agreements pursuant to which any Acquired Company is the lessee,
sublessee, licensee or occupant.
LIEN: any mortgage, pledge, hypothecation, right of others, claim,
security interest, encumbrance, lease, sublease, license, occupancy agreement,
adverse claim or interest, easement, covenant, encroachment, burden, title
defect, title retention agreement, voting trust agreement, interest, equity,
option, lien, right of first refusal, charge or other restrictions or
limitations of any nature whatsoever, including but not limited to such as may
arise under any Contracts.
LOSSES: as defined in Section 8.1(a).
MATERIAL ADVERSE EFFECT: any event, occurrence, fact, condition, change
or effect that (a) is materially adverse to the business, operations, prospects,
results of operations, prospects, condition (financial or otherwise), properties
(including intangible properties), assets (including intangible assets) or
liabilities of the Acquired Companies taken as a whole and (b) materially
impairs the ability of the Acquired Companies as a whole to conduct their
business.
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NET PRETAX INCOME: Net income before provision is made for federal and
state income taxes and any amortization or write-off of goodwill or other costs
associated with the Acquisition, as calculated in accordance with GAAP, and
pursuant to the provisions of Section 2.3.
OTHER LEASES: the leases, subleases, licenses and occupancy agreements
pursuant to which any Acquired Company is a lessor, sublessor or licensor of any
part of the Real Property.
OWNED INTELLECTUAL PROPERTY: as defined in Section 4.17(a).
OWNED REAL PROPERTY: the real property owned by the Acquired Companies,
together with all other structures, facilities, improvements, fixtures, systems,
equipment and items of property presently or hereafter located thereon attached
or appurtenant thereto, or owned by the Acquired Companies and located on Leased
Real Property and all easements, licenses, rights and appurtenances relating to
the foregoing.
PERMITTED LIENS: (i) Liens reserved against in the Financial Statements,
to the extent so reserved, (ii) Liens for Taxes not yet due and payable or which
are being contested in good faith and by appropriate proceedings if adequate
reserves with respect thereto are maintained on the Acquired Companies' books in
accordance with GAAP, or (iii) Liens that, individually and in the aggregate, do
not and would not materially detract from the value of any of the property or
assets of any Acquired Company or materially interfere with the use thereof as
currently used or contemplated to be used or otherwise.
PERSON: any natural person, firm, partnership, association, corporation,
company, trust, business trust, Governmental Authority or other entity.
PLAN: as defined in Section 4.22(a).
PLEDGE AGREEMENT: as defined in Section 2.3.
PURCHASE PRICE: as defined in Section 2.2.
PURCHASE PRICE ADJUSTMENT: as defined in Section 2.3.
REAL PROPERTY: the Owned Real Property and the Leased Real Property.
REAL PROPERTY LAWS: as defined in Section 4.19(f).
RELATED PERSONS: as defined in Section 4.22(a).
RELEASE: any releasing, disposing, discharging, injecting, spilling,
leaking, leaching, pumping, dumping, emitting, escaping, emptying, seeping,
dispersal, migration, transporting, placing
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and the like, including without limitation, the moving of any materials through,
into or upon, any land, soil, surface water, ground water or air, or otherwise
entering into the environment.
REMAINING TBA STOCK: as defined in Section 2.3.
REMEDIAL ACTION: all actions required to (i) clean up, remove, treat or
in any other way remediate any Hazardous Substances; (ii) prevent the release of
Hazardous Substances so that they do not migrate or endanger or threaten to
endanger public health or welfare or the environment; or (iii) perform studies,
investigations and care related to any such Hazardous Substances.
SEC: the United States Securities and Exchange Commission.
SECURITIES ACT: the Securities Act of 1933, as amended.
SECURITY: as defined in Section 4.28.
SHARES: as defined in the recitals to this Agreement.
SUBSIDIARIES: each corporation or other Person in which a Person owns or
controls, directly or indirectly, capital stock or other equity interests
representing at least 50% of the outstanding voting stock or other equity
interests.
TAX: any federal, state, provincial, local, foreign or other income,
alternative, minimum, accumulated earnings, personal holding company, franchise,
capital stock, net worth, capital, profits, windfall profits, gross receipts,
value added, sales, use, goods and services, excise, customs duties, transfer,
conveyance, mortgage, registration, stamp, documentary, recording, premium,
severance, environmental (including taxes under Section 59A of the Code), real
property, personal property, ad valorem, intangibles, rent, occupancy, license,
occupational, employment, unemployment insurance, social security, disability,
workers' compensation, payroll, health care, withholding, estimated or other
similar tax, duty or other governmental charge or assessment or deficiencies
thereof (including all interest and penalties thereon and additions thereto
whether disputed or not).
TAX RETURN: any return, report, declaration, form, claim for refund or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
TBA: TBA Entertainment Corporation, a Delaware corporation.
TBA COMMON STOCK: the common stock, par value $.001 per share, of TBA.
TBA INDEMNITEES: as defined in Section 8.1(a).
TBA SEC DOCUMENTS: as defined in Section 3.3.
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TREASURY REGULATIONS: the regulations prescribed pursuant to the Code.
ARTICLE 2
PURCHASE AND SALE OF SHARES
SECTION 2.1 PURCHASE AND SALE. Subject to the terms and conditions of
this Agreement, the Shareholders hereby sell, assign, transfer and deliver to
TBA, and TBA hereby purchases from the Shareholders the Shares, free and clear
of any and all Liens.
SECTION 2.2 PURCHASE PRICE. The aggregate purchase price (the "Purchase
Price") for the Shares shall be equal to Three Million Two Hundred Thousand
Dollars ($3,200,000), subject to adjustment as provided in Section 2.3 hereof,
and shall be paid or delivered to the Shareholders at the Closing as follows:
(a) TBA shall issue and deliver to the Shareholders
certificates registered in the Shareholders' names representing the
number of fully-paid and nonassessable shares of TBA Common Stock equal
to the dollar amount set forth opposite each such Shareholder's name on
Schedule 2.2 divided by the Average Price (the "Common Stock Portion").
The total aggregate value of the Common Stock Portion shall equal Nine
Hundred Thousand Dollars ($900,000). The Common Stock Portion shall be
subject to the Pledge Agreement;
(b) TBA shall deliver to the Shareholders by wire transfer
of immediately available funds to one or more accounts designated in
writing by the Shareholders to TBA prior to the Closing cash in an
amount equal to Two Million Three Hundred Thousand Dollars ($2,300,000)
(the "Cash Portion"). The Cash Portion shall be allocated among the
Shareholders as specified in Schedule 2.2; and
(c) No fraction of a share of TBA Common Stock will be
issued to the Shareholders but in lieu thereof the Shareholders will be
paid an amount in cash equal to the product of (A) the number of
fractional shares to which the Shareholders are otherwise entitled and
(B) the Average Price. No interest shall be paid on such amount.
SECTION 2.3 ADJUSTMENT TO PURCHASE PRICE. (a) The Purchase Price may be
reduced based on the Net Pretax Income of the Acquired Companies for the twelve
(12) month periods ending December 31, 1999 and December 31, 2000, as such
amounts are agreed to by TBA and the Shareholders or determined by arbitration
in accordance with Section 2.3(c) (the "Purchase Price Adjustment"). In
calculating the Net Pretax Income of the Acquired Companies for purposes of this
Agreement, if TBA charges its other Subsidiaries for overhead costs, TBA may
charge the Acquired Companies an overhead fee consistent with charges to other
TBA Subsidiaries not to exceed two percent (2%) of gross revenue, but no other
corporate fees or expenses of any kind shall be charged by TBA or any of its
Affiliates to the Acquired Companies for the purposes of calculating Net Pretax
Income. In addition, the parties agree that certain administrative and operating
personnel will be
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hired by the Acquired Companies to assist in the operations of the Acquired
Companies with total costs associated with such employees, including salary,
bonus, all benefits and any other compensation of any kind, not to differ
materially from such costs and expenses reflected in the budgets prepared by TBA
and the Shareholders, unless otherwise mutually agreed by TBA and the
Shareholders. In the event that the aggregate Net Pretax Income of the Acquired
Companies for the twelve (12) month period ended December 31, 1999, is less than
$650,000 ("1999 Target Earnings") or the aggregate Net Pretax Income of the
Acquired Companies for the twelve (12) month period ended December 31, 2000 is
less than $750,000 ("2000 Target Earnings"), subject to the limitations and
adjustments hereinafter set forth, the Purchase Price shall be reduced by, and
the Shareholders shall pay to TBA (in accordance with the provisions of the
Section 2.3), the cumulative amount calculated as follows:
1. 1999 Target Earnings less the actual aggregate Net Pretax Income
of the Acquired Companies for the twelve (12) month period ended
December 31, 1999 multiplied by five (5) multiplied by sixty
five percent (65%); and
2. 2000 Target Earnings less the actual aggregate Net Pretax Income
of the Acquired Companies for the twelve (12) month period ended
December 31, 2000 multiplied by five (5) multiplied by thirty
five percent (35%).
(b) The aggregate Net Pretax Income of the Acquired
Companies for the twelve (12) month period ended December 31, 1999 shall
be calculated as if the Closing Date was January 1, 1999. In addition,
for purposes of the calculations set forth in 1. and 2. above, (i) the
excess, if any, of the Net Pretax Income of the Acquired Companies for
the twelve (12) month period ended December 31, 1999 over the 1999
Target Earnings shall be carried forward and may be used as a credit
against the excess, if any, of the 2000 Target Earnings over the Net
Pretax Income of the Acquired Companies for the twelve (12) month period
ended December 31, 2000, and (ii) the excess, if any, of the Net Pretax
Income of the Acquired Companies for the twelve (12) month period ended
December 31, 2000 over the 2000 Target Earnings (the "2000 Excess")
shall be carried back and may be used as a credit against the excess, if
any, of the 1999 Target Earnings over the Net Pretax Income of the
Acquired Companies for the twelve (12) month period ended December 31,
1999 (the "1999 Shortfall") at the rate of one dollar ($1.00) of 2000
Excess for each fifty cents ($0.50) of 1999 Shortfall. The amount
payable by the Shareholders to TBA hereunder, if any, shall be paid by
the Shareholders to TBA at the option of the Shareholders (a) in cash by
wire transfer of immediately available funds, or (b) by the delivery to
TBA of TBA Common Stock held by TBA pursuant to the Pledge Agreement.
The payment of the Purchase Price Adjustment shall be made not later
than the later of (x) March 31, 2001 or (y) ten (10) business days after
any Dispute is resolved. The obligation of the Shareholders pursuant to
this Section 2.3 shall be secured by a pledge of the shares of TBA
Common Stock to be issued to the Shareholders pursuant to Section 2.2(a)
pursuant to a pledge agreement (the "Pledge Agreement") substantially in
the form attached hereto as Exhibit A. Notwithstanding any other
provisions of this Section 2.3, the Shareholders shall have no liability
to TBA pursuant to this Section 2.3 in excess of the value of the TBA
Common Stock issued to the Shareholders pursuant to Section 2.2(a) and
then held by TBA pursuant to the Pledge Agreement
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(the "Remaining TBA Stock"), and upon delivery of the Remaining TBA
Stock (or release thereof in accordance with the Pledge Agreement), the
Shareholders shall have no further liability to TBA pursuant to this
Section 2.3, whether or not the value of the Remaining TBA Stock is less
than the Purchase Price Adjustment. For purposes of this Section 2.3,
the value of such TBA Common Stock shall be the average of the closing
sales price of TBA Common Stock reported by the Nasdaq Stock Market for
each of the five (5) consecutive trading days ending five (5) business
days preceding the date the payment, if any, is due hereunder from the
Shareholders to TBA. TBA shall provide to the Acquired Companies such
assistance as it may, in its reasonable discretion, determine to be
advisable to enable the Acquired Companies to achieve the 1999 Target
Earnings and the 2000 Target Earnings. Net Pretax Income as calculated
for purposes of this Section 2.3 shall also be increased by any amount
received or which may be received by TBA, the Acquired Companies or any
of their Affiliates pursuant to Section 8.1 of this Agreement, to the
extent that Net Pretax Income includes a corresponding deduction for
such amount.
(c) TBA shall provide to the Shareholders all relevant
information used to determine the Net Pretax Income amounts not later
than February 15, 2001 and shall provide the Shareholders access to the
books and records of the Acquired Companies. If TBA and the Shareholders
cannot reach an agreement on Net Pretax Income for any period, all
disagreements (a "Dispute") shall be resolved by arbitration to be held
in Indianapolis, Indiana. All Disputes shall be presented to an
arbitrator selected by mutual agreement of TBA and the Shareholders from
impartial arbitrators designated by the American Arbitration Association
who are familiar with matters similar to the Dispute. The decision of
the arbitrator shall be binding on TBA and the Shareholders. The
expenses of such arbitration shall be allocated by the arbitrator.
(d) Prior to December 31, 2000, unless consented to by ▇▇▇▇▇
▇▇▇▇▇ in writing, the Acquired Companies shall not undertake any
project, event or activity which, after deducting all applicable costs
and expenses associated with such project, event or activity, is
reasonably expected to cause the Acquired Companies to incur a pretax
loss with respect to such project, event or activity for calendar years
1999 or 2000.
SECTION 2.4 REGISTRATION RIGHTS. The Shareholders and TBA shall execute
a Registration Rights Agreement (herein so called) in the form attached hereto
as Exhibit B with respect to the shares of TBA Common Stock issued to the
Shareholders pursuant to Section 2.2(a) and the Shareholders shall have the
registration and other rights provided in such Registration Rights Agreement,
which Registration Rights Agreement is hereby incorporated herein by this
reference as if set forth in full in this Agreement. The parties hereto
stipulate and agree that the execution and delivery of the Registration Rights
Agreement is intended to provide the Shareholders with flexibility in
liquidating their investment in TBA Common Stock and does not evidence any
present intention to dispose of such investment.
SECTION 2.5 CLOSING. The closing of the transactions contemplated by
this Agreement (the "Closing") will take place at the offices of Ice ▇▇▇▇▇▇
▇▇▇▇▇▇▇ & ▇▇▇▇, Indianapolis, Indiana simultaneously with the execution of this
Agreement (the "Closing Date").
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SECTION 2.6 FURTHER ACTION. If, at any time after the Closing Date, any
further action is necessary or desirable to vest TBA with full right, title and
possession and all rights, privileges and immunities with respect to any or all
of the Shares, the Shareholders shall take all such action. After the Closing,
all parties to this Agreement will take such action as is reasonably requested
by any other party hereto to carry out the purposes of this Agreement.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF TBA
TBA hereby represents and warrants to the Acquired Companies and the
Shareholders as follows:
SECTION 3.1 ORGANIZATION AND QUALIFICATION. TBA has been duly
incorporated and is validly existing as a corporation and in good standing under
the laws of the State of Delaware and has the requisite corporate power to carry
on its business as now conducted.
SECTION 3.2 AUTHORITY RELATIVE TO THIS AGREEMENT. TBA has the requisite
corporate power and authority to enter into this Agreement and to carry out its
obligations hereunder. The execution and delivery of this Agreement by TBA and
the consummation by TBA of the transactions contemplated hereby have been duly
authorized by the Board of Directors of TBA, and no other corporate proceedings
on the part of TBA are necessary to authorize this Agreement and the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by TBA and constitutes the valid and binding obligation of TBA,
enforceable in accordance with its terms, except as such enforcement may be
limited by bankruptcy, insolvency or other similar laws affecting the
enforcement of creditors' rights generally or by general principles of equity.
None of the execution and delivery of this Agreement by TBA, the performance by
TBA of its obligations hereunder or the consummation of the transactions
contemplated hereby by TBA will require any consent, approval or notice under,
or violate, breach, be in conflict with or constitute a default (or an event
that, with notice or lapse of time or both, would constitute a default) under,
or permit the termination of, or result in the creation or imposition of any
Lien upon any properties, assets or business of TBA under any note, bond,
indenture, mortgage, deed of trust, lease, franchise, permit, authorization,
license, contract, instrument or other agreement or commitment or any order,
judgment or decree to which TBA is a party or by which TBA or any of its assets
or properties is bound or encumbered, except those that have already been given,
obtained or filed. Other than filings under the Securities Act, if any,
necessary to perfect an exemption from registration under the Securities Act,
filings made with the National Association of Securities Dealers, Inc. to list
the shares of TBA Common Stock to be issued in connection with the Acquisition
in the National Market System of The Nasdaq Stock Market and filings to be made
with state securities regulatory agencies, no authorization, consent or approval
of, or filing with, any public body, court or authority is necessary on the part
of TBA for the consummation by TBA of the transactions contemplated by this
Agreement.
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SECTION 3.3 TBA COMMON STOCK AND TBA SEC DOCUMENTS. The TBA Common Stock
is listed for trading on the National Market System of The Nasdaq Stock Market.
The shares of TBA Common Stock to be issued by TBA at the Closing have been duly
authorized for such issuance and, when issued and delivered by TBA in accordance
with the provisions of this Agreement, will be validly issued, fully paid, and
nonassessable. The issuance of such shares under this Agreement is not subject
to any preemptive or similar rights. TBA has furnished the Acquired Companies
and the Shareholders with a true and complete copy of each report, schedule,
registration statement and definitive proxy statement filed by TBA with the SEC
since January 1, 1998 (the "TBA SEC Documents"), which are all the documents
(other than preliminary materials) that TBA was required to file with the SEC
since such date and all of which documents are listed on Annex I attached
hereto. As of its date, each TBA SEC Document was in compliance, in all material
respects, with the requirements of its form. None of the TBA SEC Documents,
including, without limitation, any financial statements or schedules included
therein, at the time filed, contained any untrue statement of a material fact or
omitted to state any material fact required to be stated therein or necessary in
order to make the statements contained therein, in light of the circumstances
under which they were made, not misleading. The financial statements of TBA
included in the TBA SEC Documents complied, at the time of filing with the SEC,
as to form, in all material respects, with applicable accounting requirements
and published rules and regulations of the SEC with respect thereto, were
prepared in accordance with generally accepted accounting principles, applied on
a consistent basis during the periods involved, and fairly presented, in all
material respects (subject, in the case of unaudited statements, to normal,
recurring year-end audit adjustments) the financial position of TBA as and at
the dates thereof and the results of its operations and cash flows for the
periods then ended.
SECTION 3.4 CERTAIN CORPORATE MATTERS. TBA is duly qualified to do
business as a foreign corporation and is in good standing in each jurisdiction
in which the ownership of its properties, the employment of its personnel or the
conduct of its business requires it to be so qualified, other than in such
jurisdictions where the failure to so qualify would not, individually or in the
aggregate, have a materially adverse effect on TBA and its Subsidiaries, taken
as a whole. TBA has full corporate power and authority and all authorizations,
licenses and permits necessary to carry on the business in which it engages or
in which it proposes presently to engage and to own and use the properties owned
and used by it. TBA has delivered to the Acquired Companies and the Shareholders
true, accurate and complete copies of its charter documents and bylaws which
reflect all amendments made thereto at any time prior to the date of this
Agreement. The minute books containing the records of meetings of the
shareholders and board of directors of TBA are accurate and complete in all
material respects. All material corporate actions taken by TBA since its date of
incorporation have been duly authorized and/or subsequently ratified, as
necessary. TBA is not in default under or in violation of any material provision
of its charter or bylaws.
SECTION 3.5 BROKER'S FEES. Neither TBA nor anyone on its behalf has any
liability to any broker, finder, investment banker or agent, or has agreed to
pay any brokerage fees, finder's fees or commissions, or to reimburse any
expenses of any broker, finder, investment banker or agent in connection with
the Acquisition or any similar transaction.
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SECTION 3.6 ABSENCE OF CERTAIN CHANGES. Since January 1, 1998, there has
not been any material adverse change in the business, assets, results of
operations, condition (financial or otherwise), or prospects of TBA and its
Subsidiaries considered as a whole.
SECTION 3.7 NO RELIANCE. In determining to enter into this Agreement and
consummate the transactions contemplated herein, TBA has not relied on any
information or materials other than (a) the representations and warranties of
the Shareholders set forth in Article 4 of this Agreement, and (b) the schedules
related to such representations and warranties.
SECTION 3.8 NO ACTIONS PENDING. There are no actions, suits or
proceedings pending or, to the Knowledge of TBA, threatened, and to the
Knowledge of TBA, there are no investigations pending or threatened, which in
any manner challenge or seek to prevent, enjoin, alter or materially delay the
transactions contemplated by this Agreement, by or before any court, arbitrator
or administrative or governmental body.
SECTION 3.9 INVESTMENT INTENT. TBA is acquiring the Shares for its own
account for the purpose of investment and not with a view to, or for sale in
connection with, any distribution thereof within the meaning of the Securities
Act. TBA will not sell or otherwise dispose of any shares in a manner which
would require registration under the Securities Act or any applicable blue sky
law unless such registrations are effected.
SECTION 3.10 INFORMATION. TBA has had an opportunity to ask questions
of, and receive answers from, the Shareholders concerning the Shares, and the
operations, financial condition and prospects of the Acquired Companies.
SECTION 3.11 SOPHISTICATION OF TBA. TBA has such knowledge and
experience in financial and business matters that it is capable of evaluating
the merits and risks of an investment in the Shares.
SECTION 3.12 ACCREDITED INVESTOR. TBA is an "accredited investor" as
that term is defined in regulations promulgated by the SEC.
SECTION 3.13 NO KNOWLEDGE OF BREACH. Neither TBA nor any of its
employees, agents or Affiliates is aware of any breach by the Shareholders of
any of the representations and warranties of the Shareholders as set forth in
Article 4 of this Agreement.
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ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS
Each Shareholder represents and warrants, jointly and severally, to TBA
as follows:
SECTION 4.1 AUTHORIZATION, ETC. Each Acquired Company has the corporate
power and authority to execute and deliver this Agreement, to perform fully its
obligations hereunder, and to consummate the transactions contemplated hereby.
The execution and delivery by each Acquired Company of this Agreement, and the
consummation of the transactions contemplated hereby, have been duly authorized
by all requisite action of such Acquired Company. This Agreement is a legal,
valid and binding obligation of each Shareholder and each Acquired Company,
enforceable against each Shareholder and each Acquired Company in accordance
with its terms, except as such enforcement may be limited by bankruptcy,
insolvency or other similar laws affecting the enforcement of creditors' rights
generally or by general principles of equity.
SECTION 4.2 ORGANIZATION, STATUS, CAPITALIZATION ETC.
(a) Each Acquired Company is a corporation duly organized
and validly existing under the laws of the jurisdiction of its
organization, as set forth in Schedule 4.2(a), with full power and
authority to carry on the business in which it is engaged and to own or
lease and to operate its properties as such properties are owned, leased
or operated.
(b) [Intentionally Deleted]
(c) Each Acquired Company has delivered to TBA complete and
correct copies of its Articles of Incorporation and Bylaws or other
organizational documents, in each case, as amended and in effect on the
date hereof. No Acquired Company is in violation of any of the
provisions of its Articles of Incorporation and Bylaws or other
organizational documents. The minute books containing the records of
meetings of the shareholders and Board of Directors of each Acquired
Company, the stock certificate books and the stock record books of each
Acquired Company are complete and correct in all material respects. The
stock record books and the shareholder lists of each Acquired Company
which the Shareholders have previously furnished to TBA are complete and
correct in all respects and accurately reflect the record and beneficial
ownership of all of the outstanding shares of the Acquired Companies'
capital stock and all other outstanding securities issued by any
Acquired Company. All material corporate actions taken by the Acquired
Companies since incorporation have been duly authorized and/or
subsequently ratified as necessary.
(d) KGA has an authorized capitalization consisting of 1,000
shares of common stock, no par value per share, of which 500 shares are
issued and outstanding. Ink has an authorized capitalization consisting
of 1,000 shares of common stock, no par value per share, of which 100
shares are issued and outstanding. K Corp. has an authorized
capitalization
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consisting of 1,000,000 shares of common stock, no par value per share,
of which 95 shares are issued and outstanding. All of the issued and
outstanding shares of each of KGA, Ink and K Corp. have been duly
authorized and are validly issued, fully paid and nonassessable and have
not been issued in violation of any preemptive rights. There are no
outstanding or authorized options, rights, warrants, calls, convertible
securities, rights to subscribe, conversion rights or other agreements
or commitments to which any Acquired Company is a party or which are
binding upon any Acquired Company providing for the issuance or transfer
by such Acquired Company of additional shares of its capital stock and
no Acquired Company has reserved any shares of its capital stock for
issuance, nor are there any outstanding stock option rights, contracts,
arrangements or commitments based upon the book value, income or other
attribute of any Acquired Company. There are no voting trusts or any
other agreements or understandings with respect to the voting of any
Acquired Company's capital stock. Upon consummation of the Acquisition,
TBA will own the entire equity interest in each Acquired Company and no
Acquired Company will have outstanding any stock or securities
convertible or exchangeable for any shares of its capital stock, nor
have outstanding any rights, options, agreements or arrangements to
subscribe for or to purchase its capital stock or any stock or
securities convertible into or exchangeable for its capital stock. The
Shareholders are the only holders of capital stock of the Acquired
Companies. All capital stock, options, warrants and other securities
issued by any Acquired Company were issued in compliance, in all
respects, with all applicable federal and state securities laws.
(e) No Acquired Company owns nor is obligated to purchase
any equity interest in or any other interest convertible into or
exchangeable for an equity interest in any entity.
SECTION 4.3 NO CONFLICTS, ETC. The execution, delivery and performance
by each Acquired Company of this Agreement and the consummation of the
transactions contemplated hereby, do not and will not in any material respect
conflict with or result in a violation of or a default under (with or without
the giving of notice or the lapse of time or both) (i) any Applicable Law
applicable to such Acquired Company or any Affiliate of such Acquired Company or
any of the properties or assets of such Acquired Company, (ii) the Articles of
Incorporation or other organizational documents of such Acquired Company or
(iii) any material Contract or other material contract, agreement or other
instrument to which such Acquired Company or any Affiliate of such Acquired
Company is a party or by which such Acquired Company or any of its properties or
assets, may be bound or affected. To the Knowledge of the Shareholders, except
as set forth on Schedule 4.3, no Governmental Approval or other Consent is
required to be obtained or made by any Acquired Company in connection with the
execution and delivery of this Agreement or the consummation of the transactions
contemplated hereby.
SECTION 4.4 FINANCIAL STATEMENTS. Financial statements of each Acquired
Company as at and for the period ended December 31, 1998 (the "Financial
Statements Date") including a balance sheet and statement of income and retained
earnings are attached hereto as Schedule 4.4 (collectively the "Financial
Statements"). The Financial Statements have been generated based on the
accounting
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systems of the respective Acquired Companies and reflect all of the transactions
which have been entered into such systems. Since December 31, 1997, there have
been no changes in any Acquired Company's method of accounting for tax purposes.
The financial condition of the Acquired Companies on the Closing Date shall not
be materially different from the Acquired Companies' financial condition as set
forth in the Financial Statements.
SECTION 4.5 ABSENCE OF UNDISCLOSED LIABILITIES. No Acquired Company has
any liabilities or obligations of any nature, whether known or unknown,
absolute, accrued, contingent or otherwise and whether due or to become due,
arising out of or relating to the business of the Acquired Companies, except (a)
as set forth in Schedule 4.5, (b) as and to the extent disclosed or reserved
against in the Financial Statements and (c) for liabilities and obligations that
were incurred after the Financial Statements Date in the ordinary course of
business consistent with prior practice. No employee of any Acquired Company is
now or will by the passage of time hereinafter become entitled to receive any
vacation time, vacation pay or severance pay attributable to services rendered
prior to such date except as disclosed in the Financial Statements. Except as
set forth on Schedule 4.5, no Acquired Company is indebted, directly or
indirectly, to any person who is an officer, director or shareholder of any
Acquired Company or any Affiliate of any such Person in any amount whatsoever
other than for salaries for services rendered or reimbursable business expenses,
and no such officer, director, shareholder or Affiliate is indebted to any
Acquired Company, except for advances made to employees of the Acquired
Companies in the ordinary course of business to meet reimbursable business
expenses anticipated to be incurred by such obligor.
SECTION 4.6 TAX RETURNS AND AUDITS.
(a) The taxable year of each Acquired Company ends December
31. Except as set forth on Schedule 4.6, each Acquired Company has duly
and timely filed or caused to be filed all Tax Returns required to be
filed on behalf of itself and has paid in full or fully reserved against
in the Financial Statements all Taxes. Except as set forth on Schedule
4.6, such Tax Returns are correct in all material respects, and no
Acquired Company is required to pay any other Taxes for such periods
except as shown in such Tax Returns. The income tax returns filed by
each Acquired Company have not been, and are not being, to the Knowledge
of the Shareholders, examined by the Internal Revenue Service or other
applicable taxing authorities for any period. Except as set forth on
Schedule 4.6, all Taxes or estimates thereof that are due, or are
claimed or asserted by any taxing authority to be due, have been timely
and appropriately paid so as to avoid penalties for underpayment. Except
as set forth on Schedule 4.6, except for amounts not yet due and
payable, all Tax liabilities to which the properties of any Acquired
Company may be subject have been paid and discharged. There are no Tax
liens (other than liens for Taxes which are not yet due and payable) on
any of the property of any Acquired Company, nor are there any pending
or threatened examinations or Tax claims asserted. No Acquired Company
has granted any extensions of limitation periods applicable to Tax
claims or filed a consent under Section 341(f) of the Code relating to
collapsible corporations. To the Knowledge of the Shareholders, except
in jurisdictions in which any Acquired Company voluntarily files Tax
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Returns, no claim has ever been made by a taxing authority that any
Acquired Company is or may be subject to taxation by that jurisdiction.
True and correct copies of all federal, foreign, state and local income
and other Tax Returns, notices from foreign, federal, state and local
taxing authorities, tax examination reports and statements of
deficiencies assessed against or agreed to by any Acquired Company since
January 1, 1994, have been made available to TBA. No Acquired Company is
a party to, or bound by, any tax indemnity, tax sharing or tax
allocation agreement. No Acquired Company is a party to any agreement
that has resulted or would result in the payment of any "excess
parachute payments" within the meaning of Section 280G of the Code. No
Acquired Company has ever been a member of an "affiliated group," as
defined in Section 1504(a) of the Code. All positions taken on federal
Tax Returns that could give rise to a penalty for substantial
understatement pursuant to Section 6662(d) of the Code have been
disclosed on such Tax Returns. No Acquired Company is a United States
real property holding corporation as defined in Section 897 of the Code.
No shareholder of any Acquired Company is a foreign person within the
meaning of Section 1445(b)(2) of the Code. No Acquired Company has made
any tax elections under any section of the Code (other than its election
to be taxed as an "S" corporation under Section 1362), including,
without limitation under any of Sections 108, 168, 338, 441, 463, 472,
1017, 1033 or 4977 of the Code (or any predecessor thereof). None of the
assets and properties of any Acquired Company is an asset or property
that TBA or any of its affiliates is or will be required to treat as
being (i) owned by any other Person pursuant to the provisions of
Section 168(f)(8) of the Internal Revenue Code of 1954 as amended, and
in effect immediately before the enactment of the Tax Reform Act of
1986, or (ii) tax-exempt use property within the meaning of Section
168(h)(1) of the Code. No closing agreement pursuant to Section 7121 of
the Code (or any predecessor provision) or any similar provision of any
state, local, or foreign law has been entered into by or with respect to
any Acquired Company or any assets thereof. No Acquired Company has
agreed to or is required to make any adjustment pursuant to Section
481(a) of the Code (or any predecessor provision) by reason of any
change in any accounting method of any Acquired Company, no Acquired
Company has any applications pending with any taxing authority
requesting permission for any changes in any accounting method of any
Acquired Company, and the IRS has not proposed any such adjustment or
change in accounting method therefor. Except as set forth on Schedule
4.6, no Acquired Company has been or is in violation (or with notice or
lapse of time or both, would be in violation) of any Applicable Law
relating to the payment or withholding of Taxes. Except as set forth on
Schedule 4.6, each Acquired Company has duly and timely withheld from
salaries, wages and other compensation and paid over to the appropriate
taxing authorities all amounts required to be so withheld and paid over
for all periods under all applicable laws.
(b) Each Acquired Company has been a validly electing S
corporation within the meaning of Code Sections 1361 and 1362 since
their respective dates of incorporation, and each Acquired Company will
be an S corporation up to and including the day before the Closing Date.
Except as set forth in Schedule 4.6, no Acquired Company would be liable
for any tax under Code Section 1374 if its assets were sold for their
fair market value as of January 1, 1999.
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SECTION 4.7 ABSENCE OF CHANGES. Except as set forth in Schedule 4.7,
since the Financial Statements Date, the Acquired Companies have conducted their
respective businesses only in the ordinary course consistent with prior practice
and no Acquired Company has, on behalf of, in connection with or relating to its
business:
(a) suffered any Material Adverse Effect;
(b) incurred any obligation or liability, absolute, accrued,
contingent or otherwise, whether due or to become due, except current
liabilities for trade or business obligations incurred in connection
with the purchase of goods or services in the ordinary course of
business consistent with prior practice; none of which liabilities in
any case or in the aggregate, could have a Material Adverse Effect;
(c) discharged or satisfied any Lien other than those then
required to be discharged or satisfied, or paid any obligation or
liability, absolute, accrued, contingent or otherwise, whether due or to
become due, other than current liabilities shown on the Financial
Statements and current liabilities incurred since the date thereof in
the ordinary course of business consistent with prior practice;
(d) mortgaged, pledged or subjected to Lien, any material
property, business or assets, tangible or intangible;
(e) sold, transferred, leased to others or otherwise
disposed of any material assets, except for inventory sold in the
ordinary course of business, or cancelled or compromised any debt or
claim, or waived or released any right of substantial value;
(f) received any notice of termination of any contract,
lease or other agreement or suffered any damage, destruction or loss
(whether or not covered by insurance) which, in any case or in the
aggregate, has had a Material Adverse Effect;
(g) transferred or granted any rights under, or entered into
any settlement regarding the breach or infringement of, any Intellectual
Property, or modified in any material respect any existing rights with
respect thereto;
(h) other than in the ordinary course of business as
disclosed on Schedule 4.7, made any change in the rate of compensation,
commission, bonus or other direct or indirect remuneration payable,
declared or paid a dividend or otherwise made or agreed to make any
distribution with respect to the outstanding stock of any Acquired
Company or any redemption, purchase or other acquisition of any such
stock, or paid or agreed or orally promised to pay, conditionally or
otherwise, any material bonus, incentive, retention or other
compensation, retirement, welfare, fringe or severance benefit or
vacation pay, to or in
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respect of any shareholder, director, officer, employee, salesman,
distributor or agent of such Acquired Company;
(i) encountered any labor union organizing activity, had any
actual or threatened employee strikes, work stoppages, slowdowns or
lockouts, or had any change in its relations with its employees, agents,
customers or suppliers which has had a Material Adverse Effect;
(j) made any capital expenditures or capital additions or
improvements in excess of $10,000;
(k) instituted, settled or agreed to settle any litigation,
action or proceeding before any court or governmental body other than in
the ordinary course of business consistent with past practices but not
in any case involving amounts in excess of $10,000;
(l) made or authorized any changes to the articles of
incorporation or bylaws of any Acquired Company;
(m) entered into any transaction, contract or commitment
other than in the ordinary course of business; or
(n) taken any action or omitted to take any action that
would result in the occurrence of any of the foregoing.
SECTION 4.8 LITIGATION. Except as set forth on Schedule 4.8, there is no
action, claim, demand, suit, proceeding, arbitration, grievance, citation,
summons, subpoena, inquiry or investigation of any nature, civil, criminal,
regulatory or otherwise, in law or in equity, pending or, to the Knowledge of
the Shareholders, threatened against or relating to any Acquired Company or
against or relating to the transactions contemplated by this Agreement, and the
Shareholders have no Knowledge of any basis for the same. None of the actions,
suits, proceedings or investigations set forth on Schedule 4.8 could result in a
Material Adverse Effect. There are no unsatisfied judgments, orders (other than
orders of general applicability), decrees or stipulations affecting any Acquired
Company or to which any Acquired Company is a party.
SECTION 4.9 COMPLIANCE WITH LAWS; GOVERNMENTAL APPROVALS AND CONSENTS;
GOVERNMENTAL CONTRACTS.
(a) Except as disclosed in Schedule 4.9(a), to the Knowledge
of the Shareholders, each Acquired Company has complied in all material
respects with all Applicable Laws, and no Acquired Company has received
any notice alleging any such conflict, violation, breach or default.
(b) To the Knowledge of the Shareholders, Schedule 4.9(b)
sets forth all Governmental Approvals and other Consents necessary for,
or otherwise material to, the
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business of the Acquired Companies. Except as set forth in Schedule
4.9(b), all such Governmental Approvals and Consents have been duly
obtained and are in full force and effect, and each Acquired Company is
in material compliance with each of such Governmental Approvals and
Consents held by it.
(c) Schedule 4.9(c) sets forth all Contracts with any
Governmental Authority.
(d) To the Knowledge of the Shareholders, there are no
proposed laws, rules, regulations, ordinances, orders, judgments,
decrees, governmental takings, condemnations or other proceedings which
would be applicable to the business, operations or properties of any
Acquired Company and which might adversely affect the properties,
assets, liabilities, operations or prospects of any Acquired Company,
either before or after the Closing Date.
(e) To the Knowledge of the Shareholders, none of the
Shareholders or the Acquired Companies, nor any director, officer,
agent, partner or employee thereof or any other person associated with
or acting for or on behalf of the Shareholders or the Acquired
Companies, has directly or indirectly (a) made or agreed to make any
contribution, gift, bribe, rebate, payoff, influence payment, kickback
or other payment (whether in cash or otherwise) to any person, private
or public, regardless of form, whether in money, property, or services,
in violation of any Applicable Law, rule or regulation (i) to obtain
favorable treatment in securing business, (ii) to pay for favorable
treatment for business secured, (iii) to obtain special concessions or
for special concessions already obtained, for or in respect of any
Acquired Company, or (iv) to pay for any lobbying or similar services or
(b) established or maintained any fund or asset that has not been
recorded in the books and records of the Acquired Companies.
SECTION 4.10 TANGIBLE PROPERTY. Each Acquired Company has good and
marketable title to, or a valid leasehold interest in, each item of tangible
property, whether real, personal or mixed, reflected on its books and records as
owned or used by it, subject to no material encumbrances, loans, security
interests, mortgages or pledges except for Permitted Liens. Each building,
fixture, machine and piece of equipment owned or used by any Acquired Company is
in good operating condition and repair, subject to normal wear and tear, and, to
the Knowledge of the Shareholders, is in compliance with all zoning, building
and fire codes in all material respects. Each Acquired Company owns or leases or
is under valid lease of all buildings, machinery, equipment and other tangible
assets used in the conduct of its business as presently conducted.
SECTION 4.11 CONTRACTS.
(a) Schedule 4.11(a) contains a complete and correct list of
all agreements, contracts, commitments and other instruments and
arrangements (whether written or oral) of the types described below to
which any Acquired Company is a party or by which it is bound (the
"Contracts"):
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(i) leases, licenses, permits, franchises, insurance
policies, Governmental Approvals and other contracts concerning
or relating to any real or personal property;
(ii) employment, consulting, agency, collective
bargaining or other similar contracts, agreements, and other
instruments and arrangements relating to or for the benefit of
current, future or former employees, officers, directors, sales
representatives, distributors, dealers, agents, independent
contractors or consultants;
(iii) loan agreements, indentures, letters of credit,
mortgages, security agreements, pledge agreements, deeds of
trust, bonds, notes, guarantees, and other agreements and
instruments relating to the borrowing of money or obtaining of
or extension of credit;
(iv) licenses, licensing arrangements and other
contracts providing in whole or in part for the use of, or
limiting the use of, any Intellectual Property;
(v) brokerage or finder's agreements;
(vi) joint venture, partnership and similar contracts
involving a sharing of profits or expenses (including but not
limited to joint research and development and joint marketing
contracts);
(vii) asset purchase agreements and other acquisition
or divestiture agreements (other than sales of inventory in the
ordinary course of business) or agreements involving continuing
indemnity or other obligations;
(viii) orders and other contracts for the purchase or
sale of materials, supplies, products or services, each of which
involves aggregate payments in excess of $25,000;
(ix) contracts with respect to which the aggregate
amount that could reasonably be expected to be paid or received
thereunder in the future exceeds $25,000 per annum or $50,000 in
the aggregate;
(x) sales agency, manufacturer's representative,
licensing, marketing or distributorship agreements;
(xi) contracts, agreements or commitments with any
employee, director, officer, stockholder or Affiliate of any
Acquired Company; and
(xii) any other contracts, agreements or commitments
not entered into in the ordinary course of business.
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(b) The Acquired Companies have delivered or made available
to TBA complete and correct copies of all written Contracts, together
with all amendments thereto, and accurate descriptions of all material
terms of all oral Contracts, set forth or required to be set forth in
Schedule 4.11(a).
(c) To the Knowledge of the Shareholders, all Contracts are
in full force and effect and enforceable against each party thereto. To
the Knowledge of the Shareholders, there does not exist under any
Contract any event of default or event or condition that, after notice
or lapse of time or both, would constitute a violation, breach or event
of default thereunder on the part of any Acquired Company or, to the
Knowledge of the Shareholders, any other party thereto except as set
forth in Schedule 4.11(c) and except for such events or conditions that,
individually and in the aggregate, (i) has not had or resulted in, and
will not have or result in, a Material Adverse Effect and (ii) has not
and will not materially impair the ability of any Acquired Company to
perform its obligations under this Agreement. Except as set forth in
Schedule 4.11(c), to the Knowledge of the Shareholders, no consent of
any third party is required under any Contract as a result of or in
connection with, and the enforceability of any Contract will not be
affected in any manner by, the execution, delivery and performance of
this Agreement or the consummation of the transactions contemplated
hereby.
(d) No Acquired Company has outstanding powers of attorney.
SECTION 4.12 TERRITORIAL RESTRICTIONS. No Acquired Company is restricted
by any written agreement or understanding with any other Person from carrying on
its business anywhere in the world.
SECTION 4.13 INVENTORIES. Except as provided on Schedule 4.13, all
Inventories are of good, usable and merchantable quality in all material
respects and do not include obsolete or discontinued items. Schedule 4.13 lists
the locations of all Inventories.
SECTION 4.14 CUSTOMERS. Schedule 4.14 sets forth the names and addresses
of all customers of the Acquired Companies that ordered goods and services from
the Acquired Companies with an aggregate value for each such customer of $25,000
or more since January 1, 1998. Except as set forth on Schedule 4.14, no Acquired
Company has received any written notice that any significant customer of any
Acquired Company (i) has ceased, or will cease, to use the products, goods or
services of any Acquired Company, (ii) has substantially reduced or will
substantially reduce, the use of products, goods or services of any Acquired
Company or (iii) has sought, or is seeking, to reduce the price it will pay for
products, goods or services of any Acquired Company, including in each case
after the consummation of the transactions contemplated hereby. To the Knowledge
of the Shareholders, no customer of any Acquired Company described in the first
sentence of this section has otherwise threatened to take any action described
in the preceding sentence as a result of the consummation of the transactions
contemplated by this Agreement.
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SECTION 4.15 SUPPLIERS. Schedule 4.15 sets forth the names and addresses
of all suppliers from which any Acquired Company ordered raw materials,
supplies, merchandise and other goods and services with an aggregate purchase
price for each such supplier of $25,000 or more since January 1, 1998. Except as
set forth on Schedule 4.15, no Acquired Company has received any written notice
that there has been any material adverse change in the price of such raw
materials, supplies, merchandise or other goods or services, or that any such
supplier will not sell raw materials, supplies, merchandise and other goods to
TBA at any time after the Closing Date on terms and conditions similar in all
material respects to those used in its current sales to the Acquired Companies,
subject to general and customary price increases. To the Knowledge of the
Shareholders, no supplier of any Acquired Company described in the first
sentence of this section has otherwise threatened to take any action described
in the preceding sentence as a result of the consummation of the transactions
contemplated by this Agreement.
SECTION 4.16 PRODUCT WARRANTIES. Except as set forth in Schedule 4.16
and for warranties under Applicable Law, (a) there are no warranties express or
implied, written or oral, with respect to the products of any Acquired Company
and (b) there are no pending or threatened claims with respect to any such
warranty, and, to the Knowledge of the Shareholders, no Acquired Company has any
liability with respect to any such warranty, whether known or unknown, absolute,
accrued, contingent or otherwise and whether due or to become due.
SECTION 4.17 INTELLECTUAL PROPERTY.
(a) TITLE. Schedule 4.17(a) contains a complete and correct
list of all Intellectual Property that is owned by any Acquired Company,
including all patents, patent applications, trademarks, service marks,
trade dress, trade names, trade secrets, corporate names, customer
lists, copyrights, mask works, technology or intellectual property that
are material to the business of such Acquired Company and restrictions
or applications to register any of the foregoing and a list of all
licenses or other contracts related thereto (the "Owned Intellectual
Property") other than (i) inventions, trade secrets, processes,
formulas, compositions, designs and confidential business and technical
information and (ii) Intellectual Property that is both not registered
or subject to application for registration and not material to the
business of the Acquired Companies. To the Knowledge of the
Shareholders, each Acquired Company owns or has the exclusive right to
use pursuant to license, sublicense, agreement or permission all
Intellectual Property Assets, free from any Liens (other than Permitted
Liens) and free from any requirement of any past, present or future
royalty payments, license fees, charges or other payments, or conditions
or restrictions whatsoever. The Intellectual Property Assets comprise
all of the Intellectual Property necessary to conduct and operate the
business as now being conducted by the Acquired Companies.
(b) TRANSFER. To the Knowledge of the Shareholders,
immediately after the Closing Date, the Acquired Companies will continue
to own all of the Owned Intellectual Property and will have a right to
use all other Intellectual Property Assets, free from any
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Liens (other than Permitted Liens) and on the same terms and conditions
as in effect prior to the Closing Date.
(c) NO INFRINGEMENT. To the Knowledge of the Shareholders,
the Owned Intellectual Property does not infringe or otherwise conflict
with any rights of any Person in the United States in respect of any
Intellectual Property. To the Knowledge of the Shareholders, none of the
Intellectual Property Assets is being infringed or otherwise used or
available for use, by any other Person.
(d) LICENSING ARRANGEMENTS. Schedule 4.17(d) sets forth all
agreements (i) pursuant to which any Acquired Company has licensed
Intellectual Property Assets to, or the use of Intellectual Property
Assets is otherwise permitted (through non-assertion, settlement or
similar agreements or otherwise) by, any other Person and (ii) pursuant
to which any Acquired Company has had Intellectual Property licensed to
it, or has otherwise been permitted to use Intellectual Property
(through non-assertion, settlement or similar agreements or otherwise).
All of the agreements or arrangements set forth on Schedule 4.17(d) (x)
are, to the Knowledge of the Shareholders, in full force and effect in
accordance with their terms, and no default exists thereunder by any
Acquired Company, or to the Knowledge of the Shareholders, by any other
party thereto, (y) are free and clear of all Liens, except Permitted
Liens, and (z) do not contain any change in control or other terms or
conditions that will become applicable or inapplicable as a result of
the consummation of the transactions contemplated by this Agreement. The
Acquired Companies have delivered or made available to TBA true and
complete copies of all written licenses and arrangements (including
amendments) set forth on Schedule 4.17(d). To the Knowledge of the
Shareholders, all royalties, license fees, charges and other amounts
payable by, on behalf of, to, or for the account of, any Acquired
Company in respect of any Intellectual Property are set forth on
Schedule 4.17(d).
(e) NO INTELLECTUAL PROPERTY LITIGATION. No claim or demand
of any Person has been made nor is there any proceeding that is pending,
or to the Knowledge of the Shareholders, threatened, which (i)
challenges the rights of any Acquired Company in respect of any Owned
Intellectual Property, (ii) asserts that any Acquired Company is
infringing or otherwise in conflict with, or is, except as set forth in
Schedule 4.17(d), required to pay any royalty, license fee, charge or
other amount with regard to, any Intellectual Property Asset in the
United States, or (iii) claims that any default exists under any
agreement or arrangement listed on Schedule 4.17(d). None of the
Intellectual Property Assets is subject to any outstanding order,
ruling, decree, judgment or stipulation by or with any court,
arbitrator, or administrative agency, or has been the subject of any
litigation within the last five (5) years, whether or not resolved in
favor of the Acquired Companies.
(f) USE OF NAMES AND MARKS. Except as set forth in Schedule
4.17(g), there are, to the Knowledge of the Shareholders, no contractual
restriction or limitations pursuant to any orders, decisions,
injunctions, judgments, awards or decrees of any Governmental
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Authority on TBA's right to use the names "▇▇▇▇▇ ▇▇▇▇▇ & Associates,"
"KGA" or "Ink Up" and any marks associated with such names, in the
conduct of the business as presently carried on by the Acquired
Companies.
SECTION 4.18 INSURANCE. Schedule 4.18 contains a complete and correct
list and summary description of all insurance policies maintained by the
Acquired Companies. The Acquired Companies have delivered or made available to
TBA complete and correct copies of all such policies together with all riders
and amendments thereto. To the Knowledge of the Shareholders, such policies are
in full force and effect, and all premiums due thereon have been paid. The
Acquired Companies have complied in all material respects with the terms and
provisions of such policies. Schedule 4.18 sets out all claims made by any
Acquired Company under any policy of insurance during the past two years.
SECTION 4.19 REAL PROPERTY.
(a) OWNED REAL PROPERTY. None of the Acquired Companies owns
any real property.
(b) LEASES. Schedule 4.19(b) contains a complete and correct
list of (i) all Leases setting forth the address, landlord and tenant
for each Lease and (ii) all Other Leases, setting forth the address,
landlord and tenant for each Other Lease. The Acquired Companies have
delivered or made available to TBA correct and complete copies of the
Leases and the Other Leases. To the Knowledge of the Shareholders, each
Lease and Other Lease is legal, valid, binding, enforceable, and in full
force and effect, except as may be limited by bankruptcy, insolvency,
reorganization and similar Applicable Laws affecting creditors generally
and by the availability of equitable remedies. No Acquired Company nor,
to the Knowledge of the Shareholders, any other party, is in default,
violation or breach in any respect under any Lease or Other Lease, and
no event has occurred and is continuing that constitutes or, with notice
or the passage of time or both, would constitute a default, violation or
breach in any respect under any Lease or Other Lease. Each Lease grants
the tenant under the Lease the exclusive right to use and occupy the
demised premises thereunder. Each Acquired Company has good and valid
title to the leasehold estate under each Lease free and clear of all
Liens other than Permitted Liens. Each Acquired Company enjoys peaceful
and undisturbed possession under its respective Leases for the Leased
Real Property.
(c) FEE AND LEASEHOLD INTERESTS, ETC. The Real Property
constitutes all the fee and leasehold interests in real property held
for use in connection with, necessary for the conduct of, or otherwise
material to, the business as conducted by the Acquired Companies.
(d) NO PROCEEDINGS. There are no eminent domain or other
similar proceedings pending or, to the Knowledge of the Shareholders,
threatened, affecting any portion of the Real Property. There is no
writ, injunction, decree, order or judgment outstanding, nor any
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action, claim, suit or proceeding, pending or threatened, relating to
the ownership, lease, use, occupancy or operation by any Person of any
Real Property.
(e) CURRENT USE. The use and operation of the Real Property
by the Acquired Companies does not violate in any material respect any
instrument of record or agreement affecting the Real Property. To the
Knowledge of the Shareholders, there is no material violation of any
covenant, condition, restriction, easement or order of any Governmental
Authority having jurisdiction over such property or of any other Person
entitled to enforce the same affecting the Real Property or the use or
occupancy thereof. No damage or destruction has occurred with respect to
any of the Real Property since January 1, 1998 that would, individually
or in the aggregate, have a Material Adverse Effect.
(f) COMPLIANCE WITH REAL PROPERTY LAWS. To the Knowledge of
the Shareholders, the Real Property is in compliance in all material
respects with all applicable building, zoning, subdivision and other
land use and similar Applicable Laws affecting the Real Property
(collectively, the "Real Property Laws"), and no Acquired Company has
received any notice of violation or claimed violation of any Real
Property Law. To the Knowledge of the Shareholders, no current use by
any Acquired Company of the Real Property is dependent on a
nonconforming use or other Governmental Approval the absence of which
would materially limit the use of such properties or assets.
SECTION 4.20 ENVIRONMENTAL MATTERS.
(a) PERMITS. To the Knowledge of the Shareholders, no
Environmental Permits are necessary to the business of the Acquired
Companies. No Acquired Company has been notified in writing by any
relevant Governmental Authority that any Environmental Permit will be
necessary to the business of the Acquired Companies.
(b) NO VIOLATIONS. To the Knowledge of the Shareholders,
each Acquired Company has complied and is in compliance in all material
respects with all Environmental Permits and all applicable Environmental
Laws pertaining to the Real Property (and the use, ownership or
transferability thereof). No Person has alleged any violation by any
Acquired Company of any Environmental Permits or any applicable
Environmental Law relating to the use, ownership or transferability of
the Real Property.
(c) NO ACTIONS. Except as set forth in Schedule 4.20(c), to
the Knowledge of the Shareholders, no Acquired Company has caused or
taken any action that has resulted or may result in, or has been or is
subject to, any liability or obligation relating to (i) the
environmental conditions on, under, or about any Real Property or other
properties or assets owned, leased or used by any Acquired Company held
for use in connection with, necessary for the conduct of, or otherwise
material to, the business of the Acquired Companies, or (ii) the past or
present use, management, handling, transport, treatment, generation,
storage or Release of any Hazardous Substances, except for any such
liabilities and obligations that,
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individually and in the aggregate, are not material to the business of
the Acquired Companies and have not had or resulted in, and will not
have or result in, a Material Adverse Effect.
(d) OTHER. Except as set forth in Schedule 4.20(d), to the
Knowledge of the Shareholders:
(i) None of the current or past operations, or any
by-product thereof, and none of the currently or formerly owned
property or assets of any Acquired Company is related to or
subject to any investigation or evaluation by any Governmental
Authority, as to whether any Remedial Action is needed to
respond to a Release or threatened Release of any Hazardous
Substances.
(ii) No Acquired Company is subject to any
outstanding order, judgment, injunction, decree or writ from, or
contractual or other obligation to or with, any Governmental
Authority or other Person in respect of which TBA or any
Acquired Company may be required to incur any Environmental
Liabilities and Costs arising from the Release or threatened
Release of a Hazardous Substance.
(iii) None of the Real Property is, and no Acquired
Company has transported or arranged for transportation (directly
or indirectly) of any Hazardous Substances relating to Real
Property to any location that is listed or proposed for listing
under CERCLA, or on any similar state list, or the subject of
federal, state or local enforcement actions or investigations or
Remedial Action.
(iv) No work, repair, construction or capital
expenditure is required or planned pursuant to or to comply with
any Environmental Law, nor has any Acquired Company received any
notice of any such requirement, except for such work, repair,
construction or capital expenditure as is not material to the
business of the Acquired Companies and is in the ordinary course
of business.
(e) FULL DISCLOSURE. The Acquired Companies have made
available to TBA all information, including without limitation all
studies, analyses and test results, in the possession, custody or
control of the Acquired Companies and their Affiliates relating to (i)
the environmental conditions on, under or about the Real Property, and
(ii) Hazardous Substances used, managed, handled, transported, treated,
generated, stored or Released by any Acquired Company or any other
Person at any time on any Real Property, or otherwise in connection with
the use or operation of the properties or assets used in or held for use
in connection with the business of the Acquired Companies.
SECTION 4.21 EMPLOYEES, LABOR MATTERS, ETC. The Acquired Companies have
listed in Schedule 4.21 and have furnished to TBA true and complete copies of:
(a) any written employment agreements with officers and directors of any
Acquired Company; and (b) any written employment agreements with its employees
which by their terms may not be terminated by the Acquired
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Company at will or which grants severance payments. No Acquired Company has
entered into any similar oral employment agreements. Except as set forth in
Schedule 4.21, no Acquired Company is a party to or bound by any collective
bargaining agreement and there are no labor unions or other organizations
representing, purporting to represent or, to the Knowledge of the Shareholders,
attempting to represent any employees employed by any Acquired Company. Since
January 1, 1997 there has not occurred or, to the knowledge of the Shareholders
and the Acquired Companies, been threatened any material strike, slowdown,
picketing, work stoppage, concerted refusal to work overtime or other similar
labor activity with respect to any employees employed by any Acquired Company.
There are no labor disputes currently subject to any grievance procedure,
arbitration or litigation and there is no representation petition pending or, to
the knowledge of the Shareholders and the Acquired Companies, threatened with
respect to any employee of any Acquired Company. To the Knowledge of the
Shareholders, the Acquired Companies have complied with all provisions of
Applicable Law pertaining to the employment of employees, including, without
limitation, all such laws relating to labor relations, equal employment, fair
employment practices, entitlements, prohibited discrimination or other similar
employment practices or acts, except for any failure so to comply that,
individually or together with all such other failures, has not and will not
result in a material liability or obligation on the part of TBA or the Acquired
Companies, and has not had or resulted in, and will not have or result in, a
Material Adverse Effect. To the Shareholders' Knowledge, no key employee or
group of employees has any plans to terminate employment with any Acquired
Company. Except as set forth on Schedule 4.21, there are no loans or other
obligations payable or owing by any Acquired Company to any shareholder,
officer, director or employee of any Acquired Company (except salaries and wages
incurred and accrued in the ordinary course of business), nor are there any
loans or debts payable or owing by any of such persons to any Acquired Company
or any guarantees by any Acquired Company of any loan or obligation of any
nature to which any such person is a party.
SECTION 4.22 EMPLOYEE BENEFIT PLANS AND RELATED MATTERS.
(a) EMPLOYEE BENEFIT PLANS. Schedule 4.22(a) sets forth a
true and complete list of each "employee benefit plan", as such term is
defined in Section 3(3) of ERISA, whether or not subject to ERISA, and
each bonus, incentive or deferred compensation, severance, termination,
retention, change of control, stock option, stock appreciation, stock
purchase, phantom stock or other equity-based, performance or other
employee or retiree benefit or compensation plan, program, arrangement,
agreement, policy or understanding, whether written or unwritten, that
provides or may provide benefits or compensation in respect of any
employee or former employee employed or formerly employed by the
Acquired Companies or the beneficiaries or dependents of any such
employee or former employee (such employees, former employees,
beneficiaries and dependents collectively, the "Employees") or under
which any Employee is or may become eligible to participate or derive a
benefit and that is or has been maintained or established by any
Acquired Company or any other trade or business, whether or not
incorporated, which, together with such Acquired Company is or would
have been at any date of determination occurring within the preceding
six years treated as a single employer under Section 414 of the Code
(such other trades and businesses
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collectively, the "Related Persons"), or to which such Acquired Company
or any Related Person contributes or is or has been obligated or
required to contribute or with respect to which any Acquired Company may
have any liability or obligation (individually, a "Plan" and
collectively, the "Plans"). With respect to each such Plan, the Acquired
Companies have provided TBA complete and correct copies of: all written
Plans; descriptions of all unwritten Plans; all trust agreements,
insurance contracts or other funding arrangements; the two most recent
actuarial and trust reports; the two most recent Forms 5500 and all
schedules thereto; the most recent IRS determination letter; current
summary plan descriptions; all material communications received from or
sent to the IRS, the Pension Benefit Guaranty Corporation or the
Department of Labor (including a written description of any oral
communication); an actuarial study of any post-employment life or
medical benefits provided under any such Plan, if any; statements or
other communications regarding withdrawal or other multiemployer plan
liabilities, if any; and all amendments and modifications to any such
document. No Acquired Company has communicated to any Employee any
intention or commitment to modify any Plan or to establish or implement
any other employee or retiree benefit or compensation arrangement. No
Acquired Company contributes or has any obligation to make and has never
contributed or had any obligation to make any payment or contribution to
a "multiemployer plan," as that term is defined in Section 3(37) of
ERISA, and no Acquired Company has actual or potential liability under
Section 4201 of ERISA for any complete or partial withdrawal from a
multiemployer plan.
(b) QUALIFICATION. To the Knowledge of the Shareholders,
each Plan intended to be qualified under Section 401(a) of the Code, and
the trust (if any) forming a part thereof, has received a favorable
determination letter from the IRS as to its qualification under the Code
and to the effect that each such trust is exempt from taxation under
Section 501(a) of the Code, and nothing has occurred since the date of
such determination letter that could adversely affect such qualification
or tax-exempt status.
(c) COMPLIANCE; LIABILITY. To the Knowledge of the
Shareholders:
(i) No Plan is subject to Section 412 of the Code or
Section 302 or Title IV of ERISA.
(ii) No liability has been or is expected to be
incurred by any Acquired Company or any Related Person (either
directly or indirectly, including as a result of an
indemnification obligation) under or pursuant to Title I or IV
of ERISA or the penalty, excise tax or joint and several
liability provisions of the Code relating to employee benefit
plans that could, following the Closing Date, become or remain a
liability of any Acquired Company or become a liability of TBA
or of any employee benefit plan established or contributed to by
TBA and, to the knowledge of the Shareholders and the Acquired
Companies, no event, transaction or condition has occurred or
exists that could result in any such liability to any Acquired
Company or, following the Closing Date, TBA.
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(iii) Each of the Plans has been operated and
administered in all respects in compliance with all Applicable
Laws, except for any failure so to comply that, individually or
together with all other such failures, has not and will not
result in a material liability or obligation on the part of any
Acquired Company, or, following the Closing Date, TBA, and has
not had or resulted in, and will not have or result in, a
Material Adverse Effect. There are no material pending or, to
the knowledge of the Shareholders and the Acquired Companies
threatened, claims by or on behalf of any of the Plans, by any
Employee or otherwise involving any such Plan or the assets of
any Plan (other than routine claims for benefits).
(iv) All contributions required to have been made by
each Acquired Company and each Related Person to any Plan under
the terms of any such Plan or pursuant to any applicable
collective bargaining agreement or Applicable Law have been made
within the earliest time prescribed by any such Plan, agreement
or Applicable Law.
(v) No applications for rulings, determination
letters, advisory opinions or prohibited transaction exemptions
are currently pending before the IRS, the Department of Labor or
the Pension Benefit Guaranty Corporation with respect to any
Plan or arrangements or any related trusts. None of such Plans
or arrangements, any related trusts, the trustees of any related
trusts or the directors, officers and employees of the Acquired
Companies is the subject of any lawsuit, arbitration or other
proceeding concerning any benefit claim or other benefit-related
matter (other than routine claims in the ordinary course of
business), and there have been no prohibited transactions as
described in Section 406 of ERISA or as defined in Section 4975
of the Code with respect to any such plan. None of the Acquired
Companies, their respective directors, officers and employees,
nor any other fiduciary, as such term is defined in Section 3 of
ERISA, has committed any breach of fiduciary responsibility
imposed by ERISA or any other applicable law which would subject
any Acquired Company or its directors, officers and employees to
liability under ERISA or any Applicable Law.
SECTION 4.23 NO GUARANTEES. Except for guarantees by ▇▇▇▇▇ ▇▇▇▇▇ and/or
▇▇▇▇▇▇▇ ▇▇▇▇▇ (the "Glass Guaranties"), none of the obligations or liabilities
of the Acquired Companies incurred in connection with the operation of the
business of the Acquired Companies is guaranteed by or subject to a similar
contingent obligation of any other Person. No Acquired Company has guaranteed or
become subject to a similar contingent obligation in respect of the obligations
or liabilities of any other Person. There are no outstanding letters of credit,
surety bonds or similar instruments of any Acquired Company or any of its
Affiliates in connection with the business of the Acquired Companies.
SECTION 4.24 RECORDS. The books of account of each Acquired Company are
sufficient to prepare the Financial Statements in accordance with GAAP, and if
not so sufficient, shall be
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converted at the expense of the Shareholders by an outside accountant chosen by
the Shareholders so as to be sufficient.
SECTION 4.25 BROKERS, FINDERS, ETC. All negotiations relating to this
Agreement and the transactions contemplated hereby, have been carried on without
the participation of any Person acting on behalf of the Shareholders, the
Acquired Companies or their Affiliates in such manner as to give rise to any
valid claim against any Acquired Company, TBA or any of its subsidiaries for any
brokerage or finder's commission, fee or similar compensation, or for any bonus
payable to any officer, director, employee, agent or sales representative of or
consultant to the Acquired Companies or their Affiliates upon consummation of
the transactions contemplated hereby.
SECTION 4.26 RECEIVABLES. All notes payable to and accounts receivable
of the Acquired Companies as stated in the Financial Statements are properly
reflected in all material respects on their respective books and records and, to
the Knowledge of the Shareholders, are valid receivables subject to no setoffs
or counterclaims. All of the Acquired Companies' receivables (including accounts
receivable, loans receivable and advances) which are reflected in the Financial
Statements, and all such receivables which will have arisen since the Financial
Statements Date, shall have arisen only from bona fide transactions in the
ordinary course of business. Schedule 4.26 lists as of December 31, 1998 all
receivables of the Acquired Companies in excess of $10,000, the amount owing and
the aging of such receivable, the name and last known address of the party from
whom such receivable is owing, and any security in favor of the Acquired
Companies for the repayment of such receivable which the Acquired Companies
purport to have. The Acquired Companies have delivered to TBA complete and
correct copies of all instruments, documents and agreements evidencing such
receivables and of all instruments, documents or agreements creating security
therefor ("Security"). The Acquired Companies have valid and perfected security
interests in such Security (to the extent such priority may be obtained under
applicable law by possession of such Security or the filing of financing
statements or similar documents with respect thereto).
SECTION 4.27 CERTAIN BUSINESS RELATIONSHIPS. Except as set forth on
Schedule 4.27, to the Knowledge of the Shareholders, none of the present or
former shareholders, directors, officers or employees of any Acquired Company
owns, directly or indirectly, any interest in any business, corporation or other
entity (other than investments in publicly held companies) which, on the date
hereof or within the past 12 months, has been involved in any manner in any
business arrangement or relationship with any Acquired Company, and none of the
foregoing persons owns any property or rights, tangible or intangible, which are
used in the business of the Acquired Companies.
SECTION 4.28 INVESTMENT REPRESENTATIONS.
(a) Each of the Shareholders is acquiring the shares of TBA
Common Stock issued pursuant to this Agreement for their own account for
investment and not with a view to, or for sale in connection with, any
distribution thereof, nor with any present intent of distributing or
selling her, his or its shares.
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(b) Each of the Shareholders has reviewed the
representations concerning TBA contained in this Agreement and has made
or has had the opportunity to make inquiry concerning TBA. Each of the
Shareholders has sufficient knowledge and experience so as to be able to
evaluate the risks and merits of her or his investment in TBA, and each
of the Shareholders is able financially to bear the risks thereof. The
Shareholders are entering into the transactions contemplated herein
based on her or his own assessment of the merits and risks, upon her or
his own experience as an officer and/or shareholder of the Acquired
Companies, and upon the representations and warranties of TBA in Article
3 of this Agreement, and are not relying on any business plan,
projections, valuations or other financial information provided to the
Shareholders by TBA (other than the TBA SEC Documents). Each of the
Shareholders further acknowledge and agree that TBA (i) has made no
assurances of any nature whatsoever regarding the future operations of
TBA and/or its Affiliates, including, without limitation, the Acquired
Companies subsequent to the Closing Date, and (ii) has made no
guarantees as to the profitability of an investment therein.
(c) Each of the Shareholders understand that the
certificates of TBA Common Stock to be issued pursuant to this Agreement
will bear a restrictive legend in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE 'ACT') OR ANY
OTHER SECURITIES STATUTE AND MAY NOT BE SOLD, TRANSFERRED, OR
OTHERWISE DISPOSED OF UNLESS AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE COMPANY IS OBTAINED TO THE EFFECT THAT ANY
PROPOSED SALE, TRANSFER OR OTHER DISPOSITION WOULD NOT VIOLATE
OR REQUIRE REGISTRATION UNDER THE ACT OR ANY OTHER SECURITIES
STATUTE."
SECTION 4.29 LIMITATION OF REPRESENTATIONS. Notwithstanding any other
provision of this Agreement or otherwise, the Shareholders shall not be deemed
to have made any representation or warranty other than those expressly made in
Sections 4.1 through 4.28 hereof. Without limiting the generality of the
foregoing, and notwithstanding any otherwise express representation or warranty
made by the Shareholders in Sections 4.1 through 4.28 hereof, the Shareholders
make no representation and warranty to TBA with respect to:
(i) any oral or written projections, estimates,
budgets or statements heretofore delivered to or made available
to TBA of future revenues, expenses or expenditures, results of
operations, profitability, cash flows, budgets, prospects,
financial condition, market conditions or new developments; or
(ii) any other oral or written information or
documents of any kind made available to TBA or its counsel,
accountants or advisers with respect to the Acquired Companies,
except as expressly covered by a representation or warranty
contained in Sections 4.1 through 4.28 hereof.
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ARTICLE 5
[INTENTIONALLY DELETED]
ARTICLE 6
ADDITIONAL AGREEMENTS
SECTION 6.1 EXPENSES. Except as otherwise provided herein, all costs and
expenses incurred in connection with this Agreement and the other agreements
contemplated hereby and the transactions contemplated hereby and thereby shall
be paid by the party incurring such expenses.
SECTION 6.2 PRESS RELEASES. The Shareholders and TBA shall consult with
each other as to the form and substance of any press release or other public
disclosure of matters related to this Agreement or any of the transactions
contemplated hereby; provided, however, that nothing in this Section 6.2 shall
be deemed to prohibit any party hereto from making any disclosure that is
required to fulfill such party's disclosure obligations imposed by law,
including, without limitation, federal securities laws.
SECTION 6.3 EMPLOYEE MATTERS. TBA and the Acquired Companies agree that
all employees of the Acquired Companies immediately prior to the Closing shall
be employed by the Acquired Companies immediately after the Closing at such
level of pay which is mutually agreed upon between each employee, the
Shareholders and TBA, it being understood that TBA shall not have any
obligations to continue employing such employees for any length of time or at
any level of pay for any length of time thereafter, except as set forth in
binding agreements of employment. To the maximum extent permitted by Applicable
Law and the applicable plan or benefit arrangement of TBA, TBA agrees to treat
employment with the Acquired Companies as past service for all employee benefit
plans of TBA in which any employees of the Acquired Companies on the Closing
Date may participate.
SECTION 6.4 TAX MATTERS. From and after the Closing, TBA, on the one
hand, and the Shareholders, on the other hand, shall cooperate fully with each
other and make available or cause to be made available to each other for
consultation, inspection and copying (at such other party's expense) in a timely
fashion such personnel, tax data, tax returns and filings, files, books,
records, documents, financial, technical and operating data, computer records
and other information as may be reasonably required (1) for the preparation by
either of them of any Tax Returns, elections, consents or certificates required
to be prepared and filed by such parties or (2) in connection with any audit or
proceeding relating to taxes relating to the assets of the Acquired Companies.
TBA agrees to retain all books and records with respect to tax matters pertinent
to the Acquired Companies relating to any taxable period beginning before the
Closing Date until the expiration of the statute of limitations of the
respective taxable periods, and to abide by all record retention agreements
entered into with any taxing authority. None of the parties hereto shall cause
an election
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to be made, an accounting for tax purposes to be adopted, or a position to be
taken on any tax return, or in any tax proceeding, that is inconsistent with the
provisions of this Agreement. In addition, as custodian of the books and records
of the Acquired Companies as of the Closing Date, TBA, or its authorized
representatives, shall be responsible for closing such books and records as of
the Closing Date for state and federal income tax and financial reporting
purposes. TBA and the Shareholders shall cooperate fully with each other in
connection with such closing and TBA shall make available to the Shareholders
all financial and income tax data, statements, reports and information relating
to such closing of the books and records as of the Closing Date.
SECTION 6.5 SECTION 338(h)(10) ELECTION. TBA and the Shareholders shall
jointly elect to treat the Acquisition as a "qualified stock purchase" within
the meaning of Section 338 of the Code and shall timely prepare and file with
the Internal Revenue Service a Section 338(h)(10) election on Form 8023. TBA
indemnifies the Shareholders for the amount by which the Shareholders' combined
state and federal income tax liability arising as a result of the sale of the
Shares in accordance with the Section 338(h)(10) election exceeds the combined
state and federal income tax liability the Shareholders would have incurred had
TBA and the Shareholders not filed the Section 338(h)(10) election. Any payment
due by TBA to the Shareholders hereunder shall be paid within thirty (30) days
following the agreement of the parties hereto as to the amount of
indemnification payment payable hereunder. Should the parties disagree with
respect to such calculation, such dispute shall be resolved in accordance with
the arbitration procedures set forth in Section 8.1(d)(iii).
SECTION 6.6 ADJUSTMENTS TO ELIMINATE DEBT AND TRANSFER INVENTORY. The
Shareholders shall take or cause to be taken any and all action necessary (i) to
eliminate any indebtedness between any of the Acquired Companies and the
Shareholders or their Affiliates, including, without limitation, Great Stuff,
Inc., and (ii) to transfer any Inventories of the Acquired Companies from Great
Stuff, Inc. to the appropriate Acquired Company, as applicable, prior to the
Closing.
SECTION 6.7 GLASS GUARANTIES. TBA and the Acquired Companies will use
reasonable efforts to terminate the Glass Guaranties as soon as reasonably
practicable, and TBA will indemnify the Shareholders for any amounts paid by the
Shareholders under or with respect to the Glass Guaranties.
SECTION 6.8 LEASE AGREEMENTS. The Shareholders shall use their
reasonable efforts and cooperate with TBA following the Closing to obtain new
lease agreements (i) with ▇▇▇▇▇▇ Realty with respect to the leasehold space
utilized by Ink located at ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ on such terms
and conditions no less favorable than those imposed on Ink immediately prior to
Closing under the terms of the existing lease agreement between Ink and ▇▇▇▇▇▇
Realty and (ii) with The Glass Family Limited Partnership with respect to the
leasehold space utilized by KGA located at ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇ on such terms and conditions no less favorable than those imposed on KGA
immediately prior to Closing under the terms of the existing lease agreement
between KGA and The Glass Family Limited Partnership.
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ARTICLE 7
CLOSING
SECTION 7.1 CLOSING DELIVERIES BY TBA. At the Closing, TBA shall:
(a) Execute and deliver:
(i) to the Shareholders, the Pledge Agreement and
the Registration Rights Agreement;
(ii) to ▇▇▇▇▇ ▇▇▇▇▇, an employment agreement (the
"Employment Agreement") in substantially the form of Exhibit C
attached hereto.
(b) Issue and deliver, or cause to be issued and delivered,
to the Shareholders the Common Stock Portion.
(c) Pay to the Shareholders the Cash Portion in accordance
with Section 2.2(b).
(d) Deliver to the Shareholders:
(i) certified copies of the resolutions duly adopted
by the board of directors of TBA authorizing the execution,
delivery and performance of this Agreement and the other
agreements contemplated hereby and thereby;
(ii) a good standing certificate for TBA from the
Secretary of State of the State of Delaware dated not earlier
than ten (10) days prior to the Closing Date; and
(iii) a copy of the charter of TBA certified by the
Secretary of State of the State of Delaware.
SECTION 7.2 CLOSING DELIVERIES BY THE SHAREHOLDERS. At the Closing:
(a) The Shareholders shall execute and deliver to TBA the
Registration Rights Agreement and the Pledge Agreement (including the
certificates representing the Common Stock Portion accompanied by stock
powers executed in blank).
(b) ▇▇▇▇▇ ▇▇▇▇▇ shall execute and deliver to TBA the
Employment Agreement.
(c) The Shareholders shall deliver to TBA all documents,
certificates and agreements necessary to transfer to TBA good and
marketable title to the Shares, free and
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clear of any and all Liens thereon, including without limitation,
certificates representing the Shares, duly endorsed for transfer.
(d) The Shareholders shall provide satisfactory evidence to
TBA that the transactions necessary to eliminate debt and transfer
Inventories as provided by Section 6.6 have occurred.
(e) The Shareholders shall deliver to TBA:
(i) certified copies of the resolutions duly adopted
by each Acquired Company's Board of Directors authorizing the
execution, delivery and performance of this Agreement and the
other agreements contemplated hereby and thereby;
(ii) good standing or comparable certificates for
each Acquired Company from the jurisdiction of its incorporation
and from every jurisdiction where a failure to be qualified or
licensed would have a material adverse effect on the business or
of such Acquired Company, dated not earlier than ten (10) days
prior to the Closing Date;
(iii) a copy of each Acquired Company's charter
certified by the Secretary of State of the state of its
incorporation.
ARTICLE 8
INDEMNIFICATION; MISCELLANEOUS
SECTION 8.1 INDEMNIFICATION.
(a) BY THE SHAREHOLDERS. Each of the Shareholders covenants
and agrees to defend, indemnify and hold harmless TBA and its respective
officers, directors, employees, agents, advisers, representatives and
Affiliates (collectively, the "TBA Indemnitees") from and against, and
pay or reimburse Indemnitees for, any and all claims, liabilities,
obligations, losses, fines, costs, royalties, proceedings, deficiencies
or damages (whether absolute, accrued, conditional or otherwise and
whether or not resulting from third party claims), including
out-of-pocket expenses and reasonable attorneys' and accountants' fees
incurred in the investigation or defense of any of the same or in
asserting any of their respective rights hereunder (collectively,
"Losses"), resulting from or arising out of:
(i) any inaccuracy of any representation or warranty
made by the Shareholders herein or in connection herewith;
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(ii) any failure of the Shareholders to perform in
any material respect any covenant or agreement hereunder or
fulfill in any material respect any other obligation in respect
hereof; and
(iii) Environmental Liabilities and Costs arising in
connection with the storage, use and disposal of chemicals,
inks, and emulsions utilized in the business of Ink, prior to
the Closing Date.
Except for inaccuracies in the representations and warranties
contained in Sections 4.2, 4.6, 4.20, 4.21 and 4.22, the Shareholders
shall not be required to indemnify TBA Indemnitees with respect to any
claim for indemnification pursuant to clause (i) of the first sentence
of this Section 8.1(a) unless and until the amount of the claims against
the Shareholders under such clause exceeds $25,000 individually or
$50,000 in the aggregate, at which time the Shareholders shall be
required to indemnify TBA Indemnitees for the full amount of all such
claims. TBA shall notify the Shareholders in accordance with the
provisions of Section 8.1(a) of the aggregate amount of all claims on no
less than a quarterly basis. . Furthermore, the Shareholders shall have
no liability to TBA pursuant to this Section 8.1(a) in excess of the
value of the TBA Common Stock issued to the Shareholders pursuant to
Section 2.2(a) and held at the time of any claim under this Section
8.1(a) by TBA pursuant to the Pledge Agreement. For purposes of the
preceding sentence, the value of such TBA Common Stock shall be the
average of the closing sales price of TBA Common Stock reported by the
Nasdaq Stock Market for each of the five (5) consecutive trading days
ending five (5) business days preceding the date a payment, if any, is
due hereunder from the Shareholders to TBA. The obligations of the
Shareholders pursuant to this Section 8.1(a) shall be secured by the
Pledge Agreement.
(b) BY TBA. TBA covenants and agrees to defend, indemnify
and hold harmless the Shareholders, the Acquired Companies and their
officers, directors, employees, agents, advisers, representatives and
Affiliates (collectively, the "Acquired Company Indemnitees") from and
against any and all Losses resulting from or arising out of:
(i) any inaccuracy in any representation or warranty
by TBA made or contained in this Agreement or in connection
herewith;
(ii) any failure of TBA to perform any covenant or
agreement made or contained in this Agreement or fulfill any
other obligation in respect hereof; and
(iii) the operation of the Acquired Companies by TBA
following the Closing Date, except to the extent such Losses
constitute Losses for which the Shareholders are required to
indemnify TBA Indemnitees under Section 8.1(a).
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(c) ADJUSTMENTS TO INDEMNIFICATION PAYMENTS. Any payment
made by the Shareholders to TBA Indemnitees, on the one hand, or by TBA
to the Acquired Company Indemnitees, on the other hand, pursuant to this
Section 8.1 in respect of any claim (i) shall be net of any insurance
proceeds realized by and paid to the Indemnified Party in respect of
such claim and (ii) shall be (A) reduced by an amount equal to any Tax
benefits attributable to such claim and (B) increased by an amount equal
to any Taxes attributable to the receipt of such payment, but only to
the extent that such Tax benefits are actually realized, or such Taxes
are actually paid, as the case may be, by the Shareholders or by TBA or
by any consolidated, combined or unitary group of which TBA or the
Shareholders is or are a member. The Indemnified Party shall use its
reasonable efforts to make insurance claims relating to any claim for
which it is seeking indemnification pursuant to this Section 8.1 or any
other claims against third parties which may be available; provided that
the Indemnified Party shall not be obligated to make such an insurance
claim if the Indemnified Party in its reasonable judgment believes, with
the consent of the Indemnifying Party, such consent not to be
unreasonably withheld, that the cost of pursuing such an insurance claim
together with any corresponding increase in insurance premiums or other
chargebacks to the Indemnified Party, as the case may be, would exceed
the value of the claim for which the Indemnified Party is seeking
indemnification.
(d) INDEMNIFICATION PROCEDURES. (i) In the case of any claim
asserted by a third party against a party entitled to indemnification
under this Agreement (the "Indemnified Party"), written notice shall be
given by the Indemnified Party to the party required to provide
indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which
indemnity may be sought, such notice to include reasonable details of
the claim (the "Claim Notice"), and the Indemnified Party shall permit
the Indemnifying Party (at the expense of such Indemnifying Party) to
assume the defense of any claim or any litigation resulting therefrom,
provided that (A) the counsel for the Indemnifying Party who shall
conduct the defense of such claim or litigation shall be reasonably
satisfactory to the Indemnified Party, (B) the Indemnified Party may
participate in such defense at such Indemnified Party's expense, and (C)
the omission by any Indemnified Party to give notice as provided herein
shall not relieve the Indemnifying Party of its indemnification
obligation under this Agreement except to the extent that such omission
results in a failure of actual notice to the Indemnifying Party and such
indemnifying Party is materially damaged as a result of such failure to
give notice. Except with the prior written consent of the Indemnified
Party, which shall not be unreasonably withheld, no Indemnifying Party,
in the defense of any such claim or litigation, shall consent to entry
of any judgment or enter into any settlement that provides for
injunctive or other nonmonetary relief affecting the Indemnified Party
or that does not include as an unconditional term thereof the giving by
each claimant or plaintiff to such Indemnified Party of a release from
all liability with respect to such claim or litigation. In the event
that the Indemnified Party shall in good faith determine that the
conduct of the defense of any claim subject to indemnification hereunder
or any proposed settlement of any such claim by the Indemnifying Party
might be expected to affect adversely the Indemnified Party's Tax
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liability or the ability of TBA to conduct its business, or that the
Indemnified Party may have available to it one or more defenses or
counterclaims that are inconsistent with one or more of those that may
be available to the Indemnifying Party in respect of such claim or any
litigation relating thereto, the Indemnified Party shall have the right
at all times to take over and assume control over the defense,
settlement, negotiations or litigation relating to any such claim at the
sole cost of the Indemnifying Party, provided that if the Indemnified
Party does so take over and assume control, the Indemnified Party shall
not settle such claim or litigation without the written consent of the
Indemnifying Party, such consent not to be unreasonably withheld. In the
event that the Indemnifying Party does not accept the defense of any
matter as above provided, the Indemnified Party shall have the full
right to defend against any such claim or demand and shall be entitled
to settle or agree to pay in full such claim or demand, subject to
obtaining the written consent thereto of the Indemnifying Party which
consent shall not be unreasonably withheld. In any event, the
Indemnifying Party and the Indemnified Party shall cooperate in the
defense of any claim or litigation subject to this Section 8.1 and the
records of each shall be available to the other with respect to such
defense.
(ii) In the event any party to this Agreement should
have a claim pursuant to this Section 8.1 against any other
party to this Agreement which does not involve a claim or demand
being asserted against or sought to be collected from it by a
third party, such party shall send a Claim Notice with respect
to such claim to the party from whom indemnification is sought.
If the party from whom indemnification is sought does not notify
the party requesting indemnification within thirty (30) days of
receipt of the Claim Notice that the party from whom
indemnification is sought disputes such claim, the amount of
such claim will be conclusively deemed a liability of the party
from whom indemnification was sought hereunder.
(iii) If TBA and the Shareholders cannot reach an
agreement with respect to any claim for indemnification under
this Article 8 (an "Indemnification Dispute"), such
Indemnification Dispute shall be resolved by arbitration. All
Indemnification Disputes shall be presented in Indianapolis,
Indiana to an arbitrator selected by mutual agreement of TBA and
the Shareholders from impartial arbitrators familiar with the
nature of the Indemnification Dispute. The decision of the
arbitrator shall be binding on TBA and the Shareholders. The
expenses of such arbitration shall be allocated by the
arbitrator.
(e) TIME LIMITATION. All claims for indemnification under
clause (i) of the first sentence of Section 8.1(a) or clause (i) of the
first sentence of Section 8.1(b) must be asserted within thirty (30)
days after the termination of the survival period set forth in Section
8.2, and all claims under clause (ii) or (iii) of the first sentence of
Section 8.1(a) must be asserted within the two year period following the
date of this Agreement.
(f) All claims for indemnification to be paid by the
Shareholders may be paid at the otpion of the Shareholders either by (i)
the payment in cash of such claim by wire transfer, or (b) the release
and delivery of shares of TBA Common Stock held by TBA
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pursuant to the Pledge Agreement; provided that the Shareholders shall
have no liability for any indemnification claim in excess of the value
of the TBA Common Stock then held by TBA pursuant to the Pledge
Agreement. Upon satisfaction of an indemnification claim by the
Shareholders pursuant to clause 8.1(f)(i), TBA Common Stock having a
value equal to the payment made by the Shareholders shall be released to
the Shareholders.
SECTION 8.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES, ETC. The
representations and warranties contained in this Agreement shall survive the
execution and delivery of this Agreement and the completion of the transactions
contemplated herein, for a period of twelve (12) months following the Closing
Date.
SECTION 8.3 SEVERABILITY. If any provision of this Agreement, including
any phrase, sentence, clause, Section or subsection is inoperative or
unenforceable for any reason, such circumstances shall not have the effect of
rendering the provision in question inoperative or unenforceable in any other
case or circumstance, or of rendering any other provision or provisions herein
contained invalid, inoperative, or unenforceable to any extent whatsoever.
SECTION 8.4 NOTICES. All notices, requests, demands, waivers and other
communications required or permitted to be given under this Agreement shall be
in writing and shall be deemed to have been duly given if (a) delivered
personally, (b) mailed by first-class, registered or certified mail, return
receipt requested, postage prepaid, or (c) sent by next-day or overnight mail or
delivery or (d) sent by telecopy or telegram.
(i) if to TBA:
TBA Entertainment Corporation
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ III
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ P.C.
5400 Renaissance Tower
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
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(ii) if to the Shareholders:
▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Ice ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
or, in each case, at such other address as may be specified in writing to the
other parties hereto.
All such notices, requests, demands, waivers and other communications
shall be deemed to have been received (w) if by personal delivery on the day
after such delivery, (x) if by certified or registered mail, on the seventh
business day after the mailing thereof, (y) if by next-day or overnight mail or
delivery, on the day delivered, (z) if by telecopy or telegram, on the next day
following the day on which such telecopy or telegram was sent, provided that a
copy is also sent by certified or registered mail.
SECTION 8.5 MISCELLANEOUS.
(a) HEADINGS. The headings contained in this Agreement are
for purposes of convenience only and shall not affect the meaning or
interpretation of this Agreement.
(b) ENTIRE AGREEMENT. This Agreement (including the
Schedules, Annexes and Exhibits hereto), constitutes the entire
agreement and supersedes all prior agreements and understandings, both
written and oral, between the parties with respect to the subject matter
hereof, including, without limitation, the Letter of Intent dated
December 31, 1998 among TBA, ▇▇▇▇▇ ▇▇▇▇▇, KGA, Ink and K Corp.
(c) COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed an original and all of which
shall together constitute one and the same instrument.
(d) GOVERNING LAW, ETC. This Agreement shall be governed in
all respects, including as to validity, interpretation and effect, by
the internal laws of the State of Indiana, without giving effect to the
conflict of laws rules thereof. Courts within the State of Indiana
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46
will have jurisdiction over any and all disputes between the parties
hereto, whether in law or equity, arising out of or relating to this
Agreement. The parties consent to and agree to submit to the
jurisdiction of such courts.
(e) BINDING EFFECT. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective heirs,
successors and permitted assigns.
(f) ASSIGNMENT. This Agreement shall not be assignable or
otherwise transferable by any party hereto without the prior written
consent of the other party hereto, provided that TBA may assign this
Agreement to any Subsidiary or Affiliate of TBA.
(g) NO THIRD PARTY BENEFICIARIES. Except as provided in
Section 8.1 with respect to indemnification of Indemnified Parties
hereunder, nothing in this Agreement shall confer any rights upon any
person or entity other than the parties hereto and their respective
heirs, successors and permitted assigns.
(h) AMENDMENT; WAIVERS, ETC. No amendment, modification or
discharge of this Agreement, and no waiver hereunder, shall be valid or
binding unless set forth in writing and duly executed by the party
against whom enforcement of the amendment, modification, discharge or
waiver is sought. Any such waiver shall constitute a waiver only with
respect to the specific matter described in such writing and shall in no
way impair the rights of the party granting such waiver in any other
respect or at any other time. Neither the waiver by any of the parties
hereto of a breach of or a default under any of the provisions of this
Agreement, nor the failure by any of the parties, on one or more
occasions, to enforce any of the provisions of this Agreement or to
exercise any right or privilege hereunder, shall be construed as a
waiver of any other breach or default of a similar nature, or as a
waiver of any of such provisions, rights or privileges hereunder. The
rights and remedies herein provided are cumulative and are not exclusive
of any rights or remedies that any party may otherwise have at law or in
equity. The rights and remedies of any party based upon, arising out of
or otherwise in respect of any inaccuracy or breach of any
representation, warranty, covenant or agreement or failure to fulfill
any condition shall in no way be limited by the fact that the act,
omission, occurrence or other state of facts upon which any claim of any
such inaccuracy or breach is based may also be the subject matter of any
other representation, warranty, covenant or agreement as to which there
is no inaccuracy or breach. The representations and warranties of the
Shareholders shall not be affected or deemed waived by reason of any
investigation made by or on behalf of TBA (including but not limited to
by any of its advisors, consultants or representatives), but excluding
any breach by any of the Shareholders of any of the representations and
warranties in Article 4 to the extent that TBA or any of its employees,
agents or Affiliates is aware of such breach) or by reason of the fact
that TBA or any of such advisors, consultants or representatives should
have known that any such representation or warranty is or might be
inaccurate.
[Remainder of page left intentionally blank]
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IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first above written.
TBA ENTERTAINMENT CORPORATION
By: _____________________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ III
Chairman and Chief Executive Officer
_____________________________________
▇▇▇▇▇ ▇▇▇▇▇
_____________________________________
▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇ & ASSOCIATES, INC.
By: _____________________________________
▇▇▇▇▇ ▇▇▇▇▇
President
INK UP, INC.
By: _____________________________________
▇▇▇▇▇▇▇ ▇▇▇▇▇
President
KGA, INC.
By: _____________________________________
▇▇▇▇▇ ▇▇▇▇▇
President
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ANNEX I
LIST OF TBA SEC DOCUMENTS
1. Annual Report on Form 10-KSB for the fiscal year ended December 31,
1997, as amended;
2. Quarterly Report on Form 10-QSB for the quarterly period ended March 31,
1998;
3. Current Report on Form 8-K filed May 22, 1998, as amended by Form 8-K/A
filed May 26, 1998;
4. Quarterly Report on Form 10-QSB for the quarterly period ended June 30,
1998;
5. Registration Statement on Form S-3 filed August 28, 1998;
6. Current Report on Form 8-K filed September 1, 1998;
7. Proxy Statement relating to the Annual Meeting of Stockholders to be
held on October 27, 1998;
8. Quarterly Report on Form 10-Q for the quarterly period ended September
30, 1998; and
9. Current Report on Form 8-K filed January 11, 1999.
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EXHIBIT A
FORM OF PLEDGE AGREEMENT
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EXHIBIT B
REGISTRATION RIGHTS AGREEMENT
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EXHIBIT C
FORM OF EMPLOYMENT AGREEMENT