STOCK PURCHASE AGREEMENT EXHIBIT 10.14
DATED AS OF FEBRUARY 1, 1996
AMONG
PGI COMPANY J,
EPIC ENTERPRISES, INC.,
▇▇▇▇▇ ▇▇▇▇▇▇▇▇
AND
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
TABLE OF CONTENTS
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1. Definitions.......................................................... 2
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1.1. Use of Defined Terms......................................... 2
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1.2. Accounting Terms............................................. 2
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1.3. Exhibition Ownership and Exhibition Management............... 2
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1.4. Sections, Exhibits and Schedules............................. 3
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1.5. Miscellaneous Terms.......................................... 3
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1.6. Buyer's Parent............................................... 3
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2. Purchase and Sale of the Company Shares.............................. 3
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2.1. Purchase and Sale of the Company Shares...................... 3
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2.2. Purchase Price............................................... 4
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2.3. Definition of Net Income Pre-Tax............................. 8
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2.4. Financial Statements for Fiscal Years 1997 and 1998.......... 9
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3. Closing.............................................................. 9
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4. Deliveries at the Closing............................................ 9
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4.1. Deliveries to the Buyer by the Sellers....................... 9
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4.2. Deliveries to the Sellers by the Buyer....................... 12
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5. Representations and Warranties of the Company and Sellers............ 13
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5.1. Ownership; Transfer of the Company Shares.................... 14
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5.2. Authority.................................................... 14
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5.3. Approvals.................................................... 16
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5.4. No Brokers................................................... 16
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5.5. Organization, Qualification to Do Business................... 16
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5.6. Capital Stock................................................ 18
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5.7. No Subsidiaries, Etc. ....................................... 18
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5.8. Financial Statements......................................... 18
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5.9. Absence of Certain Changes................................... 19
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5.10. Taxes........................................................ 22
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5.11. Non-Contravention............................................ 23
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5.12. Title to and Condition of the Assets of the Company.......... 24
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5.13. Litigation................................................... 26
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5.14 Employee Benefit Plans and Other Arrangements................ 27
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5.15. Contracts.................................................... 29
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5.16. Insurance.................................................... 31
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5.17. Trademarks, Etc. ............................................ 31
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5.18. Transactions with Interested Persons......................... 32
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5.19 Compliance with Laws, etc. .................................. 33
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5.20. No Undisclosed Liabilities, Etc. ............................ 34
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5.21. Environmental Matters........................................ 34
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5.22. Governmental Authorizations and Regulations.................. 36
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5.23. Accounting Practices......................................... 36
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5.24. Minute Books................................................. 37
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5.25. Employee Matters............................................. 37
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5.26. Accuracy of Information Furnished............................ 38
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5.27. Disclosure................................................... 38
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6. Representations and Warranties of Buyer.............................. 39
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6.1. Authority for Agreements..................................... 39
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6.2. Non-Contravention............................................ 39
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6.3. Approvals.................................................... 40
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6.4. No Brokers................................................... 40
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6.5. Accuracy of Information Furnished............................ 40
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6.6. Organization, Good Standing.................................. 41
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7. Covenants of the Company and Each of the Sellers..................... 41
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7.1. Access, Information and Documents............................ 41
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7.2. Conduct of Business Pending Closing.......................... 42
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7.3. Consents and Approvals....................................... 44
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7.4. Confidential Material........................................ 44
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7.5. Employment Contract.......................................... 46
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7.6. Liability for Federal, State and Local Taxes................. 46
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7.7. Claims Experience............................................ 46
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7.8. Employment and Employee Benefits............................. 46
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7.9. Non-Competition.............................................. 47
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7.10. Subordination Agreement...................................... 48
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7.11. Further Assurances........................................... 48
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7.12. Termination of Company's Benefit Plans....................... 49
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7.13. Release of Liens............................................. 49
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8. Covenants of the Buyer............................................... 49
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8.1. Confidential Information..................................... 49
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8.2. Consents and Agreements...................................... 50
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8.3. Employment and Employee Benefits............................. 51
8.4. Termination of Company's Benefit Plans....................... 52
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8.5. Undisclosed Liabilities...................................... 52
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8.6. Payment of Assumed Liabilities............................... 52
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8.7. ▇. ▇▇▇▇▇▇▇▇ Employment Agreement and ▇. ▇▇▇▇▇▇▇▇ Employment
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Agreement.................................................... 53
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8.8. Further Assurances........................................... 53
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9. Conditions Precedent to the Sellers' Obligation to Sell the Company
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Shares............................................................... 53
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9.1. The Buyer's Performance...................................... 53
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9.2. Consents and Approvals....................................... 54
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9.3. No Legal Impediment.......................................... 54
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10. Conditions Precedent to the Buyer's Obligation to Purchase the
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Company's Shares..................................................... 54
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10.1. Company's and the Sellers' Performance....................... 54
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10.2. Consents and Approvals....................................... 55
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10.3. Physical Properties.......................................... 55
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10.4. No Legal Impediment.......................................... 56
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10.5. Closing of Buyer's Purchase of Epic Enterprises of
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Nevada, Inc. ................................................ 56
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10.6. ▇▇▇▇▇ Epic Partnership....................................... 56
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10.7. ▇▇▇▇▇▇ ▇▇▇▇▇................................................. 56
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11. Termination.......................................................... 56
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11.1. Termination by the Buyer..................................... 56
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11.2. Termination by the Company or the Sellers.................... 57
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11.3. Effect of Termination........................................ 57
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12. Indemnification...................................................... 58
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12.1. Indemnification of the Buyer and the Company................. 58
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12.2. Indemnification of the Sellers............................... 60
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12.3. Procedure for Indemnification................................ 61
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12.4. Survival of Representations, Warranties, Covenants and
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Indemnification.............................................. 63
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13. Miscellaneous........................................................ 63
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13.1. Complete Agreement; Amendments; Waivers...................... 63
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13.2. Counterparts................................................. 64
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13.3. Successors and Assigns....................................... 64
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13.4. Governing Law................................................ 64
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13.5. Notices...................................................... 64
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13.6. Expenses..................................................... 66
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13.7. Headings; Form of Words...................................... 66
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13.8. Severability................................................. 67
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STOCK PURCHASE AGREEMENT
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STOCK PURCHASE AGREEMENT (the "Agreement") dated as of the 1st day of
February, 1996 by and among PGI Company J, a Virginia corporation (the "Buyer"),
Epic Enterprises, Inc., a California corporation ("Epic" or the "Company"),
▇▇▇▇▇ ▇▇▇▇▇▇▇▇, an individual residing at ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇. ▇▇▇, ▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ("▇. ▇▇▇▇▇▇▇▇"), and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, an individual residing at
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇. ▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ("▇. ▇▇▇▇▇▇▇▇") (collectively, ▇.
▇▇▇▇▇▇▇▇ and ▇. ▇▇▇▇▇▇▇▇ shall be referred to as the "Sellers" and individually
as a "Seller");
WHEREAS, prior to Closing, Sellers will be the sole stockholders of Epic
owning Three Thousand Nine Hundred Twenty-Eight (3,928) shares of the common
stock of Epic, which comprise all of the issued and outstanding shares of common
stock of Epic; and
WHEREAS, the Buyer desires to purchase from the Sellers, and the Sellers
desire to sell to the Buyer, one hundred percent (100%) of the outstanding
capital stock of the Company (the "Company Shares") all upon the terms and
conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the foregoing premises, the mutual
covenants, agreements, representations, and warranties herein contained, and
other good and valuable consideration, the
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receipt and legal sufficiency of which are hereby acknowledged, the parties
hereto, each intending to be legally bound, hereby agree as follows:
1. Definitions.
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1.1. Use of Defined Terms. Any defined term used in the plural
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shall refer to all members of the relevant class, and any defined term used in
the singular shall refer to any one or more of the members of the relevant
class.
1.2. Accounting Terms. All accounting terms not otherwise
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defined in this Agreement shall be construed in conformity with, and all
financial data of the Buyer required to be submitted by this Agreement shall be
prepared in conformity with, generally accepted accounting principles ("GAAP")
and all financial data of Company, required to be submitted by this Agreement
shall be prepared on a modified accrual basis applied on a historically
consistent basis.
1.3. Exhibition Ownership and Exhibition Management. Exhibition
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ownership is the ownership of and proprietary rights to exhibitions and trade
shows. Exhibition management is exhibit space sales, liaison with exhibitors,
development of programs to increase exhibit space sales, trade advertisement for
exhibition, development of budgets for exhibitions, preparation of post-
exhibition analysis, promotion of exhibition, development and maintenance of
floor plans for
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exhibition, maintenance of exhibition documents, coordination of seminars and
workshops, on-site management of exhibitions to include set-up and tear-down,
maintenance of an office at exhibition, assignment of exhibit space,
coordination of activities between exhibitors and service contractors,
contracting for and providing security for exhibition, negotiating for hotel
room blocks, contracting for and providing registration services for exhibition
and maintenance of financial statements for exhibition.
1.4. Sections, Exhibits and Schedules. References in this
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Agreement to Sections, Exhibits and Schedules are to Sections, Exhibits and
Schedules of and to this Agreement. All Exhibits and Schedules to this Agreement
are hereby incorporated herein by this reference as if fully set forth herein.
1.5. Miscellaneous Terms. The term "or" shall not be exclusive.
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The terms "herein," "hereof," "hereto," "hereunder" and other terms similar to
such terms shall refer to this Agreement as a whole and not merely to the
specific article, section, paragraph or clause where such terms may appear. The
term "including" shall mean "including, but not limited to."
1.6. Buyer's Parent. The parent company of Buyer is Production
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Group International, Inc. (hereinafter known as Buyer's Parent").
2. Purchase and Sale of the Company Shares.
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2.1. Purchase and Sale of the Company Shares.
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(a) The Sellers are the one hundred percent (100%) owners
of the issued and outstanding shares of capital stock of Epic.
(b) Upon the terms and provisions of this Agreement, the
Buyer agrees to purchase and accept delivery from the Sellers, and the Sellers
agree to sell, assign, transfer, and deliver to the Buyer, at the Closing
provided for in Section 3 hereof, common stock certificates representing Three
Thousand Nine Hundred Twenty-Eight (3,928) shares of Common Stock of Epic,
constituting one hundred percent (100%) of the outstanding shares of capital
stock of Epic, free and clear of all liens, claims, charges, restrictions,
equities, or encumbrances of any kind.
2.2. Purchase Price. The purchase price to be paid by Buyer (the
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"Purchase Price") for the Company Shares is a sum of the following:
(a) The Buyer will, at the Closing, deliver to the Sellers,
by certified checks payable to the order of the Sellers ("Certified Checks"), or
at Buyer's option, by wire transfer to the account of each of the Sellers as set
forth on Schedule 2.2(a) ("Wire Transfers") the aggregate amount of Three
Million Dollars ($3,000,000) to each of the Sellers and One Million One Hundred
Sixty-Six Thousand Six Hundred Sixty-Seven Dollars ($1,166,667.00) to ▇▇▇▇▇▇▇
▇., Inc., a California
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corporation ("▇▇▇▇▇▇▇"), in satisfaction of the obligation of the Company to
▇▇▇▇▇▇▇, as provided in separate documents.
(b) The Buyer will, at the Closing, deliver to Sellers
subordinated promissory notes of Buyer in the form annexed as Exhibit 2.2(b)
hereto, in the aggregate principal amount of One Million Five Hundred Thousand
Dollars ($1,500,000) payable to the Sellers (the "Note" or "Notes"). On the
first anniversary of Closing, Notes in the aggregate principal amounts of One
Million Five Hundred Thousand Dollars ($1,500,000) and interest accrued on the
then outstanding amount of such Notes will be payable Five Hundred Thousand
Dollars ($500,000) to each of the Sellers and Five Hundred Thousand Dollars
($500,000) to ▇▇▇▇▇▇▇ in satisfaction of the obligation of the Company to
▇▇▇▇▇▇▇, as provided in separate documents.
If there is a default under either or both of the Notes and it has not
been corrected by the end of the cure period,then all amounts earned under
Paragraphs 2.2(d) and/or 2.2(e) as of the date of the default shall be
immediately due and payable without further action or notice of Sellers. Amounts
are earned for the purposes of this Paragraph on a pro rata basis.
(c) The Buyer will pay Sellers the additional purchase
price (the "Specialty Equipment Addition") in the amount of Five Hundred
Thousand Dollars ($500,000) provided that (i) Sellers execute a three-year
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extension to the exhibition
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management contract pursuant to which the Company manages Specialty Equipment
Market Association Exhibition held in Las Vegas, (ii) such extension is
substantially under the same terms and conditions as the existing contract in
effect on the date hereof and (iii) such extension is fully executed on or
before December 31, 1996. Buyer shall pay Sellers such Specialty Equipment
Addition within ten (10) days of the satisfaction of conditions (i) through
(iii) above.
(d) If during either the period February 1, 1997 - January
31, 1998 ("Fiscal Year 1997") or the period February 1, 1998 - January 31, 1999
("Fiscal Year 1998"), the existing business of the Company, defined as the
annual exhibition ownership and exhibition management business generated by the
employees of the Company who were employed as of the Closing, or their
replacements and the new trade show business generated by all employees, but
does not include the business of any subsidiary corporation or entity ("Existing
Business"): (i) exceeds **** ******* ******* ************ in net revenue; (ii)
generates at least ****** ******* ***** Net Income Pre-Tax; or (iii) generates
at least *** ******* ******* ************ of Net Income Pre-Tax, then, in each
such fiscal year an amount of *** ******* ***** ******** ******* ********** will
be paid by Buyer to Sellers and a portion of such to ▇▇▇▇▇▇▇ in amounts provided
in separate documents by Wire Transfer within one hundred and
* CONFIDENTIAL INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
COMMISSION
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twenty (120) days after the end of the applicable Fiscal Year. For purposes of
Sections 2.2(d) and (e), net revenue shall be defined as gross revenue minus bad
debt and discounts.
(e) If in either Fiscal Year 1997 or Fiscal Year 1998, the
Existing Business: (i) exceeds **** in net revenue; (ii) generates at least ****
Net Income Pre-Tax; or (iii) generates at least *** ******* **** *******
******** ******* ************ of Net Income Pre-Tax then for each such Fiscal
Year, in addition to the amount specified in Section 2.2(d) above, Buyer shall
pay an additional amount of **** by Wire Transfer within one hundred and twenty
(120) days after the end of the applicable Fiscal Year.
(f) The Sellers will, at the Closing, provide the following
to Buyer: (i) a schedule of Company's accounts receivable as of January 31,
1996, updated through Closing based on all information available to Sellers as
of date of Closing in the form attached hereto as Schedule 2.2(f)(i); and (ii) a
schedule of accounts payable as of January 31, 1996, as updated through the
Closing in the form attached hereto as Schedule 2.2(f)(ii).
In the event that any accounts receivable set forth on
Schedule 2.2(f)(i) have not been paid to the Company within thirty (30) days
after February 1, 1996, Buyer shall
* CONFIDENTIAL INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
COMMISSION
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have the right to offset the amount of such unpaid accounts receivable from
future payments to Sellers, including but not limited to payments of the
Purchase Price. Sellers shall not indemnify or be assessed for accounts
receivable in relation to the Women's Apparel Vegas Shows scheduled for August
1996 and February 1997 for Exhibitors which/who withdraw, cancel or otherwise do
not participate and/or do not pay and/or require a refund.
In the event that any undisclosed accounts payable or
undisclosed liability of the Company incurred by the Company prior to February
1, 1996, including but not limited to unpaid taxes, fines or penalties related
thereto and any employee benefit plan or arrangement, existing as of February 1,
1996 but not scheduled on Schedule 2.2(f)(ii) are paid by the Company or Buyer
after the February 1, 1996 [Closing], Buyer shall have the right to offset the
amount of such undisclosed accounts payable or undisclosed liabilities paid by
the Company or Buyer from any future payments to Sellers, including but not
limited to payments of the Purchase Price.
2.3. Definition of Net Income Pre-Tax. For the purpose of
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calculating the Purchase Price to be paid to Sellers under the terms of Sections
2.2.(d), 2.2(e) and 2.2(f) above, Net Income Pre-Tax shall be defined as income
from the Existing Business of the Company prior to charges for federal, state or
local income taxes, but after all expenses relating to the Existing Business of
the Company except: (i) any corporate expense of Buyer not incurred in the
ordinary course of business
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charged to the Company unless mutually agreed otherwise; and (ii) depreciation
on all new fixed assets of the Company added after Closing and not added in the
ordinary course of business.
2.4. Financial Statements for Fiscal Years 1997 and 1998. During
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Fiscal Years 1997 and 1998 the Company's financial statements will be prepared
on an accrual basis in accordance with GAAP. Sellers shall have the right to
inspect and/or audit Company's financial statements relating to Fiscal Years
1997 and 1998 during business hours at Sellers' expense on reasonable notice to
Company.
3. Closing. The closing of the purchase and sale of the Company Shares
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(the "Closing") will take place at the offices of the Buyer (or at such other
place as the parties may mutually agree) at 10:00 a.m. on June 28, 1996, or at
such other time and on such other date as the parties may mutually agree, but in
no event will the Closing occur after _______________, 1996. The date and time
of the Closing are referred to herein as the "Closing Date."
4. Deliveries at the Closing.
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4.1. Deliveries to the Buyer by the Sellers. At the Closing, the
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Sellers will deliver to the Buyer:
(a) Against receipt of the Wire Transfers or Certified
Checks, the Sellers will deliver to the Buyer the certificates for one hundred
percent (100%) of the Company
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Shares, all in accordance with the requirements of Section 2.1 hereof, which
certificates will be duly endorsed in blank or accompanied by stock powers duly
executed in blank, in proper form for transfer;
(b) A certificate, in form and substance reasonably
acceptable to the Buyer, executed by the President of Epic, and attested to by
the Secretary of the Company, dated as of the Closing Date, and certifying that:
(i) attached thereto is a true and complete copy of the By-laws of the Company
in effect as of the Closing Date; (ii) attached thereto is a true and complete
copy of the Articles of Incorporation of the Company, as amended and in effect
as of the Closing Date; and (iii) attached thereto is a true and complete copy
of resolutions adopted by the Board of Directors and shareholders of the Company
authorizing the execution, delivery and performance of this Agreement and such
resolutions have not been modified, rescinded, or amended and are in full force
and effect;
(c) A certificate, in form and substance reasonably
acceptable to the Buyer, executed by the Sellers, dated as of the Closing Date,
certifying as to the accuracy of the Company's and the Sellers' representations
and warranties at and as of the Closing;
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(d) Resignations of all of the directors and officers of
the Company, in their capacity as directors, officers and employees;
(e) A schedule in the form attached hereto as Schedule
4.1(e) of the location of all of the Company's contracts, books, records, and
other data relating to the Company's operations, including the Company's minutes
and stock books;
(f) Copies of all of the Company's employment agreements;
(g) The employment agreement between the Company and ▇.
▇▇▇▇▇▇▇▇ in the form attached hereto as Exhibit 4.1(g) executed by Seller (the
"▇. ▇▇▇▇▇▇▇▇ Employment Agreement");
(h) The employment agreement between the Company and ▇.
▇▇▇▇▇▇▇▇ in the form attached hereto as Exhibit 4.1(h) executed by Seller (the
"▇. ▇▇▇▇▇▇▇▇ Employment Agreement");
(i) Control over all assets of the Company including cash
held in the Company's name or owned by the Company excluding any real estate
owned by the Company in Mexico.
(j) Any schedules that are to be updated as of the Closing
Date;
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(k) An opinion of Sellers' counsel in the form attached
hereto as Exhibit 4.1(k); and
(l) Evidence of the acquisition ownership by the Company,
prior to Closing of ▇▇▇▇▇▇▇ ▇. Inc.'s partnership interest or any other interest
in the ▇▇▇▇▇ Epic General Partnership formed pursuant to the Partnership
Agreement of ▇▇▇▇▇ Epic, a California partnership, dated February 13, 1989, as
amended and restated on February 12, 1996 ("▇▇▇▇▇ Epic Partnership"); and any
and all of the proprietary rights to, the interests to and intellectual rights
to the International Silk Flower and Accessories Exhibition and AmeriChristmas
International Trim-A-Home Exhibition.
(m) Executed Agreement for a term of three (3) years with
▇▇▇▇▇▇ ▇▇▇▇▇ ("▇▇▇▇▇") and the Company under which ▇▇▇▇▇ provides his services,
including but not limited to selling exhibition space for the International Silk
Flower and Accessories Exhibition and the AmeriChristmas International Trim-A-
Home Exhibition.
(n) Except as provided in Section 7.3, fully executed
assignments or consent to change of ownership, whichever is applicable, of all
leases, contracts and franchises agreements.
4.2. Deliveries to the Sellers by the Buyer. At the Closing, the
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Buyer will deliver to the Sellers the following:
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(a) The sum of Three Million Dollars ($3,000,000) by Wire
Transfer or Certified Check to the Sellers' accounts, against receipt of the
stock certificates for the Company Shares in accordance with Section 4.1(a) and
2.2(a) above;
(b) Fully executed Notes in the form annexed as Exhibit
2.2(b) above;
(c) A certificate, in form and substance reasonably
acceptable to the Sellers, executed by the President of the Buyer, and attested
to by the Secretary of the Buyer, dated as of the Closing Date, certifying as to
the accuracy of the Buyer's representations and warranties at and as of the
Closing;
(d) A fully executed guarantee agreement between Production
Group International, Inc. and Sellers (the "Guarantee") in form annexed hereto
as Exhibit 4.2(d) hereto;
(e) A certificate, in form and substance reasonably
acceptable to the Sellers, executed by the President of Buyer and attested to by
the Secretary of the Buyer dated as of the Closing Date, and certifying that:
(i) attached thereto is a true and complete copy of the By-laws of the Buyer in
effect as of the Closing Date; (ii) attached thereto is a true and complete copy
of the Articles of Incorporation of the Buyer as amended and in effect as of the
Closing Date; and (iii) attached
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thereto is a true and complete copy of a certificate of the Buyer's Secretary
certifying as to the resolutions adopted by the Board of Directors and
shareholders of the Buyer authorizing the execution, delivery and performance of
this Agreement and that such resolutions have not been modified, rescinded, or
amended and are in full force and effect.
5. Representations and Warranties of the Company and Sellers. The
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Company, each of the Sellers, jointly, severally, individually and in their
capacity as officers and directors of the Company, represent and warrant to the
Buyer that as of the date of this Agreement and as of the Closing Date:
5.1. Ownership; Transfer of the Company Shares. The Company
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Shares are duly authorized, validly issued, fully paid, and non-assessable. The
Sellers own the Company Shares set forth next to their names on Schedule 5.1,
free and clear of all liens, encumbrances, pledges, charges, security interests,
rights, options, or other adverse interests of any kind except as to a Buy-Sell
Agreement between Sellers to which each waives his rights. Sellers have the
right, power, and authority to sell all of the Company Shares as provided
herein, and upon such sale, the Buyer will receive good and valid title to all
of the Company Shares, subject to no liens, encumbrances, pledges, charges,
security interests, rights, options, or other adverse interests of any kind.
The certificates for the Company Shares will be,
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when delivered to the Buyer, duly endorsed in blank or accompanied by stock
powers duly executed in blank, in proper form for transfer.
5.2. Authority. The Sellers have the power and authority to
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execute and deliver this Agreement and each of the Sellers and the Company have
the power and authority to execute and deliver the other agreements and
documents contemplated by this Agreement (all such agreements and documents will
be known hereafter as the "Transaction Documents", regardless of which party is
required to execute or deliver any such agreement or document) to which it or he
is a party and to carry out its or his obligations hereunder and thereunder, as
the case may be. The execution, delivery, and performance of each of the
Transaction Documents to which the Company is a party and the consummation of
the transactions contemplated thereby have been duly authorized by the Board of
Directors of such Company. No other proceeding on the part of the Company or the
Sellers is necessary to authorize the execution and delivery of this Agreement
or any of the Transaction Documents to which the Company or the Sellers is a
party or the performance by the Company or the Sellers of any of the
transactions contemplated hereby or thereby. This Agreement, and each of the
Transaction Documents to which the Company or the Sellers is a party, has been
duly executed and delivered on behalf of the Company and the
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Sellers and when executed and delivered by all required parties thereto, will be
a legal, valid, and binding obligation of the Company and the Sellers
enforceable against the Company and the Sellers in accordance with their
respective terms, except to the extent that the validity, binding legal effect,
or enforceability of any provisions in the Agreement or any Transaction
Document, or any rights granted herein or thereunder may be subject to or
affected by applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium, or similar laws affecting the rights of creditors
generally, and general principles of equity (whether asserted in an action at
law or in equity).
5.3. Approvals. No consent, approval, order, or authorization
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of, or registration, declaration, or filing with, any governmental authority is
required in connection with the execution and delivery of this Agreement and the
Transaction Documents, by the Company or the Sellers, or with the consummation
of the transactions contemplated hereby or thereby. No consent of any third
party is necessary to permit the consummation of the transactions contemplated
hereby or thereby.
5.4. No Brokers. All negotiations relating to this Agreement and
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the Transaction Documents, and the transactions contemplated hereby and thereby,
have been carried out by the Company and the Sellers without the intervention of
any person or firm in such manner as to give rise to any valid
16
claim against any of the parties hereto for a brokerage commission or finder's
fee.
5.5. Organization, Qualification to Do Business.
------------------------------------------
(a) The Company is a corporation duly organized, validly existing,
and in good standing under the laws of the State of California, and has all
requisite corporate power and authority to own or lease and to operate its
properties and to carry on its business as now being conducted. The Company has
delivered to the Buyer complete and correct copies of the Company's Articles of
Incorporation, By-laws, and all amendments thereto. The Company is duly
qualified or licensed to do business as a foreign corporation in any
jurisdictions outside the State of California in which it conducts business
except as listed on Schedule 5.5(a).
(b) Other entities of the Company, listed on Schedule 5.5(b), are
duly organized, validly existing, and in good standing under the laws of the
state of their incorporation or organization and individually have all requisite
power and authority to own or lease and to operate its properties and to carry
on its business as now being conducted. The Company has delivered to the Buyer
complete and correct copies of each entity's Articles of Incorporation, By-laws
or organizational documents, whichever is applicable, and all amendments
thereto. Schedule 5.5(b) lists where each subsidiary entity is qualified
17
or licensed to do business as a foreign corporation or entity in any
jurisdictions outside of the state of their incorporation or organization.
(c) As of the date of Closing, no claim has been made against any
of the Company by any person or entity based upon the failure of the Company to
qualify or be licensed to do business as a foreign corporation in any state. In
the event a future claim is made based upon the Company's failure to qualify or
be licensed to do business as a foreign corporation in any state prior to the
Closing Date, such claim shall be treated as an undisclosed liability in
accordance with Section 2.2(e) above.
5.6. Capital Stock. Epic's authorized capital stock consists of Six
-------------
Thousand (6,000) shares of Common Stock, ______ par value per share; (ii) the
only issued and outstanding shares of capital stock of Epic are Three Thousand
Nine Hundred Twenty-Eight (3,928) shares of Epic's Common Stock, all of which
Three Thousand Nine Hundred Twenty-Eight (3,928) shares are owned beneficially
and of record by the Sellers; (iii) there are no outstanding subscriptions,
options, conversion rights, warrants, or other agreements or commitments of any
nature whatsoever (either firm or conditional) obligating Epic to issue,
deliver, sell, or cause to be issued, delivered, or sold any additional shares
of capital stock of Epic, or obligating Epic to grant,
18
extend, or enter into any such agreement or commitment; and (iv) there are no
rights of first refusal, pre-emptive rights, or other similar agreements
obligating Epic to offer any shares of its capital stock to any person, except
to the Buy Sell Agreement between the Sellers to which each is waiving his
rights.
5.7. No Subsidiaries, Etc. The Company does not own, directly or
--------------------
indirectly, capital stock or equity in any other corporation or other person and
is not a partner in any partnership or a participant in any joint venture,
except as listed on Schedule 5.7.
5.8. Financial Statements. The Company has delivered to the
--------------------
Buyer complete and correct copies of (a) the Company's income tax returns for
the fiscal years ended January 31, 1994, January 31, 1995 and January 31, 1996
and (b) the Company's unaudited financial statements for the fiscal years ended
January 31, 1994, January 31, 1995 and January 31, 1996; and (c) financial
statements dated January 31, 1996. Any advances made by the Company to the
Company's officers or employees and any advances made by any officer or employee
that appear in the January 31, 1996 financial statements or were made subsequent
to January 31, 1996 shall be settled and eliminated prior to Closing. All such
financial statements have been prepared on a modified accrual accounting basis
and on an historically consistent basis throughout the periods indicated
19
and present fairly and accurately the financial condition of the Company at the
dates indicated and the results of operations for the periods indicated.
5.9. Absence of Certain Changes. Except to the extent
--------------------------
specifically set forth in reasonable detail on Schedule 5.9 hereto, since
January 31, 1996 there have been no material adverse changes in the assets,
liabilities, properties, business, or prospects of the Company, and the Company
has not:
(a) issued or sold any stock, notes, bonds, or other securities,
or any option to purchase the same, or entered into any agreement with respect
thereto;
(b) declared, set aside, or made any dividend or other
distribution on capital stock or redeemed, purchased, or acquired any shares
thereof, or entered into any agreement in respect of the foregoing;
(c) amended its Articles of Incorporation or By-laws;
(d) other than in the ordinary course of business or with respect
to the purchase of the assets of ▇▇▇▇▇▇▇ ▇. Inc.'s partnership interest in the
▇▇▇▇▇ Epic Partnership (i) purchased, sold, assigned or transferred any material
tangible or intangible assets or property (including cash and cash equivalents);
(ii) mortgaged, pledged, granted or suffered to exist any lien or other
encumbrance or charge on any material
20
tangible or intangible assets or properties, except for liens for taxes not yet
due; or (iii) waived any rights of material value or canceled any material debts
or claims;
(e) incurred any material obligation or liability (absolute or
contingent), except current liabilities and obligations incurred in the ordinary
course of business, or paid any material liability or obligation (absolute or
contingent) other than current liabilities and obligations incurred in the
ordinary course of business;
(f) increased, or become obligated to increase, the compensation or
other benefits payable to any officer or director of the Company or any relative
of any such officer or director, or paid a bonus, or granted any severance or
termination pay, or entered into any employment agreement or other agreement
(written or oral) with any officer or salaried employee (except as may be
effected in accordance with the terms of this Agreement);
(g) incurred any damage, destruction, or similar loss, whether or not
covered by insurance, materially affecting the businesses or properties of the
Company;
(h) entered into any transaction other than in the ordinary course of
business;
21
(i) suffered any strike or other labor trouble materially and
adversely affecting its business, operations, or prospects;
(j) made or permitted any material amendment or termination of any
material contract, agreement, or license to which it is a party other than in
the ordinary course of business;
(k) made any change in its accounting methods or practices with
respect to its condition, operations, business, properties, assets, or
liabilities;
(l) abandoned or disposed of any material trade secret, trademark,
tradename, trademark application, tradename application, or any other
intellectual property;
(m) suffered any loss of employees or customers that materially and
adversely affects its business, operations, or prospects;
(n) failed to carry on their business and operations substantially in
the manner carried on as of the date hereof and the Company and the subsidiaries
have not engaged in any activity or transaction or made any commitment to
purchase or spend, other than in the ordinary course of their business as
heretofore conducted;
(o) failed to use their best efforts to preserve its business
organization intact, to keep available to
22
the Buyer the services of its employees and independent contractors and to
preserve for the Buyer its relationships with suppliers, licensees,
distributors, and customers and others having business relationships with it;
(p) obligated itself to, sell or otherwise dispose of or pledge or
otherwise encumber any of their properties or assets except in the ordinary
course of business or failed to maintain its facilities, machinery, and
equipment in good operating condition and repair, subject only to ordinary wear
and tear.
5.10. Taxes. Except to the extent specifically set forth in
-----
reasonable detail on Schedule 5.10 hereto, all federal, state, county,
municipal, and foreign tax returns required by law to be filed by the Company,
and the Sellers as of January 31, 1996 have been duly filed, and all taxes
(including without limitation sales, use, property, and payroll taxes),
assessments, fees, and other governmental charges together with any and all
penalties, fines, and interest thereon ("Taxes") upon the Company, and the
Sellers or upon any of the Company's or the Sellers' properties, assets,
revenues, income, sales, or franchises that have become due and payable in
respect of the periods or transactions covered thereby, have been paid. Except
to the extent specifically set forth in reasonable detail on Schedule 5.10
hereto, neither the Internal Revenue Service nor
23
any other taxing authority or agency is now asserting, or is threatening to
assert, against the Company or the Sellers any deficiency or claim for
additional Taxes or interest thereon or penalties in connection therewith. The
Company and the Sellers have not been granted any waiver of any statute of
limitation with respect to, or been granted any extension of a period for the
assessment of, any federal, state, county, municipal, or foreign income tax.
Sellers have delivered to Buyer copies of all federal, state and local tax
returns for the Company for the last three (3) years.
5.11. Non-Contravention. Except to the extent specifically set
-----------------
forth in reasonable detail on Schedule 5.11 hereto, the execution and delivery
of this Agreement and the Transaction Documents and the consummation of the
transactions contemplated hereby and thereby will not (a) violate any provision
of the Articles of Incorporation or By-laws of the Company; (b) violate any
material provision of, or result in the breach or the acceleration of, or
entitle any party to accelerate (whether after the giving of notice or lapse of
time or both) any material obligation under any mortgage, lien, lease,
agreement, license, instrument, order, arbitration award, judgment, or decree to
which either the Company or the Sellers is a party or by which it or he is
bound; (c) result in the creation or imposition of any material lien, charge,
pledge, security
24
interest, or other encumbrance upon any property of the Company or the Sellers;
or (d) violate or conflict with any other material restriction or any law,
ordinance, or rule to which the Company or the Sellers or any property of the
Company or the Sellers is subject.
5.12. Title to and Condition of the Assets of the Company.
---------------------------------------------------
(a) The Company has good and marketable title to all assets owned
by them free and clear of all mortgages, liens, charges, encumbrances,
easements, security interests, or title imperfections, except to the extent
specifically set forth in reasonable detail on Schedule 5.12 hereto. The assets
reflected in the financial statements of the Company dated January 31, 1996
referred to in Section 5.8 hereof constitute all of the tangible assets and
properties that the Company owns, uses, or holds in connection with its
business, and the conduct of such business as a going concern, except for
additions or dispositions in the ordinary course of business. The facilities,
machinery, furniture, office, and other equipment of the Company that are used
in its business are in good operating condition and repair, subject only to the
ordinary wear and tear of that business, and neither the Company nor any
property or asset owned or leased by it is in violation of any applicable
ordinance, regulation, or building, zoning, environmental or other law in
25
respect thereof, the violation of which will have a material adverse effect on
the financial condition, the conduct of the business or the ownership or use of
any of the properties or assets of the Company.
(b) Except as set forth herein, the Company owns no real estate.
Schedule 5.12(b) hereto sets forth all personal property (with monthly lease
payments in excess of One Hundred Dollars ($100.00)) and real estate leased or
owned by the Company and specifies in the case of real estate the location of
each property, the use of the facility thereon, the name of the owner or the
names of the lessor and the lessee, the approximate square footage of
improvements. The Company has delivered to the Buyer copies of each lease by
which the Company acquired its interest in the personal property described in
Schedule 5.12(b). The Company has not received any written notice from any
governmental agency, board, bureau, body, department, or authority of any United
States or foreign jurisdiction, which materially restricts the use of any of the
real estate described in Schedule 5.12(b) hereto. Except as set forth in
Schedule 5.12(b) hereto, there is no easement, right-of-way agreement, license,
sublease, occupancy agreement, or like instrument with respect to any of the
real estate described in Schedule 5.12(b) hereto which would have a material
adverse effect on the Company's use of such real estate. Each lease pursuant to
which
26
the Company leases any real or personal property is in full force and effect and
is valid and enforceable in accordance with its terms. There is not under any
such lease any material default by the Company or any event that with notice or
lapse of time or both would constitute such a material default by the Company.
Each property used in the business of the Company is reflected in the balance
sheet of the Company as of January 31, 1996, referred to in Section 5.8 hereof.
(c) Sellers have provided Buyer with a complete and accurate list
of all of the Company's accounts payable and liabilities as of January 31, 1996
on Schedule 5.12(c) and shall update this Schedule 5.12(c) as of the Closing
Date.
5.13. Litigation. Except as set forth in reasonable detail on
----------
Schedule 5.13 hereto:
(a) There are no, and the Sellers are not aware of any situation
that could result, in actions, suits, proceedings, investigations, or inquiries
pending or threatened against or affecting the business, operations, financial
condition, or prospects of the Company at law or in equity in any court or
before any federal, state, municipal, or other governmental department,
commission, board, bureau, agency, or instrumentality.
27
(b) There are no, and the Sellers are not aware of any situation
that could result, in actions, suits, proceedings, investigations, or inquiries
pending or threatened against the Sellers at law or in equity in any court or
before any federal, state, municipal, or other governmental department,
commission, board, bureau, agency, or instrumentality.
(c) The Company is not, and the Sellers are not aware of any
situation that could result, in default in respect of any judgment, order, writ,
injunction, or decree of any court or any federal, state, municipal, or other
governmental department, commission, board, bureau, agency, or instrumentality.
(d) There are no, and the Sellers are not aware of any situation
that could result in, actions, suits, proceedings, investigations, or inquiries
pending or threatened against the Company at law or in equity in any court or
before any federal, state, municipal, or other governmental department,
commission, board, bureau, agency, or instrumentality.
5.14 Employee Benefit Plans and Other Arrangements.
---------------------------------------------
(a) Employee Plans Generally. Except as set forth in reasonable
------------------------
detail on Schedule 5.14(a) hereto, the Company does not maintain, does not make
any contributions to, or has not been obligated by law or agreement to
establish,
28
maintain, sponsor, or make any contributions to (i) any employee pension benefit
plan as described in Section 3(2) of the Employee Retirement Income Security Act
of 1974, as amended, and regulations thereunder ("ERISA"); (ii) any employee
welfare benefit plan as described in Section 3(1) of ERISA, including, without
limitation, any arrangement providing for the payment of health benefits to
former employees or their beneficiaries; (iii) any formal or informal severance
plan or arrangement, including, without limitation, any arrangement providing
for payments to be made to any person contingent upon a change of ownership or
effective control of the Company or ownership of a substantial portion of the
assets of the Company; or (iv) any other deferred compensation, bonus, stock
option, stock purchase, insurance, or other employee benefit plan, agreement,
fund, or arrangement, whether or not set forth in writing, providing benefits of
economic value to any employee, former employee, or present or former
beneficiary, dependent, or assignee other than regular salary, wages, or
commissions paid substantially concurrently with the performance of the services
for which such benefits are paid.
(b) Post-Retirement Benefits. Except to the extent required under the
------------------------
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA"),
the Company has not incurred any current or future obligation to provide health
29
or life insurance benefits to employees or former employees with respect to any
period which extends beyond retirement or other termination of employment.
(c) ERISA Title IV Considerations. Neither the Company nor any
-----------------------------
member of the Company's controlled group (within the meaning of Section 4001 of
ERISA) has incurred (or reasonably expects to incur) any material liability to
the Pension Benefit Guaranty Corporation or any material liability under Title
IV of ERISA, and there are no circumstances that might result in the imposition
of a lien on any of the assets of the Company pursuant to ERISA Sections 302 or
4068 or Section 412 of the Internal Revenue Code of 1986, as amended.
(d) Multiemployer Plans. Neither the Company nor any member of the
-------------------
Company's controlled group (within the meaning of Section 4001 of ERISA) does
now have, or during the last five years has had, any obligation to contribute
to, or any other liability or potential liability with respect to, a
"multiemployer plan" as that term is defined in Section 3(37) of ERISA or a
multiple controlled group plan as described in Sections 4063 and 4064 of ERISA
(including, without limitation, any withdrawal liability or plan termination
obligations).
5.15. Contracts.
---------
(a) Schedule 5.15(a) hereto contains a complete and correct list
of all agreements, contracts, and
30
commitments to which the Company is a party that have either payments or
receipts of One Thousand Dollars ($1,000) or greater, or by which it or any of
its assets is bound as of the date hereof.
(b) The Buyer has been given complete and correct copies of all
written agreements, contracts, and commitments to which the Company is a party
or by which it or any of its assets is bound, together with all amendments
thereto. Such agreements, contracts, and commitments are in full force and
effect, and all parties to such agreements, contracts, and commitments have, in
all material respects, performed all obligations required to be performed by
them to date, and the Company is not, and no other party is, in material default
thereunder.
(c) No agreement, contract, or commitment to which the Company is a
party or by which it or any of its assets is bound purports to limit its freedom
to compete in any line of business or with any person or entity except those
listed on Schedule 5.15(c). The Company has no outstanding power of attorney,
except routine powers of attorney relating to representation before governmental
agencies.
(d) The Company is not a party to any material contract with any
governmental authority. The Company is not a party to any contract that
materially and adversely
31
affects its condition (financial or otherwise), operations (present or
prospective), business (present or prospective), properties, assets, or
liabilities. Except as set forth on Schedule 5.15(d) hereto, the Company knows
of no bid or contract proposal made by either that, if accepted or entered into,
might reasonably be expected to result in a loss to the Company.
5.16. Insurance. The Company maintains adequate insurance against
---------
risks for the business in which it and its subsidiaries are engaged, including
without limitation, worker's compensation and comprehensive liability insurance.
All of the Company's insurance policies are listed on Schedule 5.16 hereto, are
in full force and effect, all premiums due thereon have been paid, and the
Company has complied in all material respects with the provisions of such
policies.
5.17. Trademarks, Etc. Schedule 5.17 hereto contains a complete
---------------
and accurate list (including registration numbers and dates of filing, renewal,
and termination) of all trademarks, patents, tradenames, trade secrets,
copyrights, service marks, licenses, all registrations and applications for any
of the foregoing, and other intellectual property owned by the Company or in
which the Company has registered an interest or for which applications have been
made (collectively, the "Intellectual Property"). Except as otherwise set forth
in Schedule 5.17 hereto, (a) all of the Intellectual Property is
32
owned by the Company free and clear of all liens, encumbrances, or claims
whatsoever; none of the Company's rights in or use of such Intellectual Property
infringes on the rights of others, and Company's rights in said property have
not been and are currently not being, to the knowledge of the Sellers,
threatened or challenged; (b) all of the Intellectual Property registrations set
forth in Schedule 5.17 have been duly issued and have not been canceled,
abandoned, or otherwise terminated; (c) all of the Intellectual Property
applications set forth in Schedule 5.17 have been duly filed with the
appropriate authorities; and (d) no consents or approvals of any person are
necessary to sell, convey, transfer, assign, and deliver any of the Intellectual
Property to the Buyer. Except as set forth in Schedule 5.17 hereto, the Company
owns or has the right to use all of the Intellectual Property necessary to
conduct its operations and business and the Company knows of no claim, or any
basis of any claim, that it has infringed any intellectual property of any other
person or that any other person has infringed any of the Intellectual Property.
Except as set forth in Schedule 5.17 hereto, no third party has been permitted
or licensed to use any of the Intellectual Property and no royalties or other
fees are payable to any third party with respect to any of the Intellectual
Property.
33
5.18. Transactions with Interested Persons. Except to the extent
------------------------------------
specifically set forth in reasonable detail on Schedule 5.18 hereto and the
financial statements delivered to the Buyer pursuant to Section 5.8 above,
neither the Company nor Sellers (or Sellers' family members) owns, directly or
indirectly, on an individual or joint basis, an interest in, or serves as an
officer, director, employee, consultant, contractor, or agent of or to any
competitor or supplier of the Company or any person or entity having a contract
or arrangement with the Company, and to the best of Sellers' knowledge, no
employee (or family member thereof) of the Company owns, directly or indirectly,
on an individual or joint basis, an interest in, or serves as an officer,
director, employee, consultant, contractor, or agent of or to any competitor or
supplier of the Company or any person or entity having a contract or arrangement
with the Company.
5.19. Compliance with Laws, etc. The Company has complied with
--------------------------
and is in compliance with all federal, state, local, and foreign statutes, laws,
ordinances, regulations, rules, permits, judgments, orders, or decrees
applicable to it or any of its properties, assets, operations, and business, the
failure of compliance with which would have a material adverse effect on the
properties, operations, business, financial condition, or prospects of the
Company. There does not exist any
34
basis for any claim of default under or violation of any such statute, law,
ordinance, regulation, rule, permit, judgment, order, or decree except such
defaults or violations, if any, that in the aggregate do not and will not
materially and adversely affect the properties, operations, business, financial
condition, or prospects of the Company.
5.20. No Undisclosed Liabilities, Etc. Except for the transactions
-------------------------------
contemplated by this Agreement and as set forth in Schedule 5.20 hereto:
(a) The Company has not incurred any material liability or
obligation (absolute, accrued, contingent, or otherwise) of any nature (other
than liabilities and obligations incurred in the ordinary course of business)
that would properly be reflected or reserved against in a balance sheet prepared
in conformity with generally accepted accounting principles applied on a basis
consistently used in the preparation of the balance sheet of the Company as of
the fiscal year ending January 31, 1996 referred to in Section 5.8 above.
(b) The Company has not acquired any material amount of accounts
receivable that are uncollectible, and the frequency and amounts of payments
received by the Company with respect to the accounts receivable reflected on the
balance sheet of the Company as at January 31, 1996, referred to in Section 5.8
hereof, do not, in retrospect, render inadequate the
35
reserve for uncollectible accounts set forth on such balance sheet.
5.21. Environmental Matters.
---------------------
(a) No releases or threat of releases of hazardous substances have
occurred at, from, in or on any real property owned, leased or operated by the
Company ("Site", or collectively, "Sites"), nor are there any hazardous
substances in, on, about or migrating to any Site;
(b) No releases or threat of releases of hazardous substances have
occurred at, from or in any Site to which a hazardous substance generated by or
from the Company has been disposed of;
(c) There are no past or pending environmental claims against the
Company related to any Site or off-Site locations to which the Company has
shipped hazardous substances. There has been no violation of or non-compliance
with any environmental law or environmental permit by the Company relating to
operations of the Company or other uses of the Site;
(d) There are no facts, circumstances, or conditions that could
reasonably be expected to restrict, encumber, or result in the imposition of
special conditions under any environmental law or environmental permits with
respect to the ownership, occupancy, development, use, or transferability of any
Site;
36
(e) There are no underground storage tanks, polychlorinated biphenyl-
containing materials, or asbestos containing materials located at any Site;
(f) There are not and there have not been any environmental conditions
at any Site resulting from or arising out of any of Company's past activities at
any Site created prior to or existing at the Closing Date; and
(g) All necessary environmental permits and other permits for all
activities related to the past operations and current operations at all Sites
were obtained. The Company has fully complied and is in full compliance with all
environmental laws and environmental permits with respect to activities relating
to the Sites.
5.22. Governmental Authorizations and Regulations. The Company
-------------------------------------------
holds all licenses, franchises, permits, and other governmental authorizations,
the absence of which could have a material adverse effect on its business.
Schedule 5.22 hereto lists all licenses, franchises, permits, and other
governmental authorizations held by the Company material to the conduct of its
business. Such licenses, franchises, permits, and other governmental
authorizations are valid, and the Company has not received any notice that any
governmental authority intends to cancel, terminate, or not renew any such
license, franchise, permit, or other governmental authorization.
37
5.23. Accounting Practices. The Company makes and keeps accurate
--------------------
books and records, on a modified accrual accounting method on a historically
consistent basis to reflect its assets. The Company maintains internal
accounting controls that provide reasonable assurance that (a) transactions are
executed with management's authorization and (b) transactions are recorded as
necessary to permit preparation of the Company's financial statements and to
maintain accountability for the assets of the Company.
5.24. Minute Books. The minute books of the Company contain
------------
complete and accurate records of all meetings and other corporate actions of its
shareholders and Board of Directors and Committees thereof.
5.25. Employee Matters. The Company is not in violation, nor has
----------------
it been alleged to be in violation, nor has it been charged with any violation,
nor is the Company aware of any violation of any of the various provisions of
Title VII of the Federal Civil Rights Act, the Age Discrimination in Employment
Act, the Americans with Disabilities Act, or any other federal or state law
dealing with employment discrimination, federal or state wage and hour laws,
federal or state income or unemployment and social security tax withholding
laws, or occupational safety and health laws and applicable standards and
regulations thereunder. The Company is not liable for any substantial
38
accrued unpaid wages, or for any material tax, penalty, assessment, or
forfeiture for failure to comply with any employer/employee matter. Except as
set forth in reasonable detail on Schedule 5.25 hereto, the Company is not a
party to any collective bargaining agreement, no such agreement determines the
terms and conditions of employment of any employee of the Company, no collective
bargaining agent has been certified as a representative of any of the employees
of the Company, and no representation campaign or election is now in progress
with respect to any of the Company's employees.
5.26. Accuracy of Information Furnished. This Agreement, the
---------------------------------
Transaction Documents, and the Schedules and Exhibits hereto and thereto
prepared by Sellers do not contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements (excluding
statements concerning solely the Buyer) contained herein or therein, in light of
the circumstances under which they were made, not misleading.
5.27. Disclosure. The Sellers and the Company have not knowingly
----------
failed to disclose to the Buyer any facts that would have an adverse impact on
the value of the Company Shares or on the assets, liabilities, earnings,
prospects and business of the Company. No representation or warranty by the
Sellers contained in this Agreement, and no statement contained in, any
39
Schedule or Exhibit, or other document attached hereto, or any list, certificate
or writing delivered in connection with or pursuant hereto, contains any untrue
statement of a material fact, or omits to state a material fact necessary in
order to make the statements (excluding statements concerning solely the Buyer)
contained herein or therein not misleading or necessary in order to provide
fully and fairly the information required to be provided in any such document.
6. Representations and Warranties of Buyer. The Buyer represents and
---------------------------------------
warrants to the Sellers that, as of the Closing Date:
6.1. Authority for Agreements. The Buyer has the power and
------------------------
authority to execute this Agreement and the Transaction Documents applicable to
the Buyer and to carry out its obligations hereunder and thereunder. When
executed and delivered by the Buyer, this Agreement will be binding upon and
enforceable against the Buyer in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, reorganization,
insolvency, moratorium, or other similar laws from time to time in effect,
affecting creditors' rights generally, and general principles of equity (whether
asserted in an action at law or in equity).
6.2. Non-Contravention. The execution and delivery of this
-----------------
Agreement and the Transaction Documents and the
40
consummation of the transactions contemplated hereby and thereby will not (a)
violate any provision of the Articles of Incorporation or By-laws of the Buyer;
(b) violate any material provision of, or result in the breach or the
acceleration of, or entitle any party to accelerate (whether after the giving of
notice or lapse of time or both) any material obligation under any mortgage,
lien, lease, agreement, license, instrument, order, arbitration award, judgment,
or decree to which the Buyer is a party or by which it is bound; or (c) violate
or conflict with any other material restriction or any law, ordinance, or rule
to which the Buyer or its property is subject.
6.3. Approvals. No consent, approval, order, or authorization
---------
of, or registration, declaration, or filing with, any governmental authority is
required in connection with the execution and delivery of this Agreement and the
Transaction Documents by the Buyer or the consummation of the transactions
contemplated hereby or thereby. Except as set forth in Schedule 6.3 hereto, no
consent of any third party is necessary to permit the consummation of the
transactions contemplated hereby or thereby.
6.4. No Brokers. All negotiations relating to this Agreement and
----------
the Transaction Documents and the transactions contemplated hereby and thereby
have been carried out by the Buyer without the intervention of any person or
firm in such
41
manner as to give rise to any valid claim against any of the parties hereto for
a brokerage commission or finder's fee.
6.5. Accuracy of Information Furnished. This Agreement and the
---------------------------------
Schedules and Exhibits hereto and thereto prepared by the Buyer do not contain
any untrue statement of a material fact and do not omit to state a material fact
necessary to make the statements (excluding statements concerning solely the
Company or the Sellers) herein or therein, in light of the circumstances under
which they were made, not misleading.
6.6. Organization, Good Standing. The Buyer is a corporation duly
---------------------------
organized, validly existing, and in good standing under the laws of the State of
Virginia, and has all requisite corporate power and authority to own or lease
and to operate its properties and to carry on its business as now being
conducted.
6.7. Investigation. Buyer is purchasing the shares from sellers
-------------
based on its investigation, and Buyer is not solely relying on any statement or
either or both of Sellers as to the anticipated revenues or general business of
Company.
7. Covenants of the Company and Each of the Sellers.
------------------------------------------------
7.1. Access, Information and Documents. Pending the Closing, the
---------------------------------
Company and the Sellers will give to the Buyer and to its agents and
representatives (including, but not limited to, accountants, lawyers, and
appraisers) full and complete access during normal working hours to any and all
of the properties, assets, books, records, and other documents of the Company to
enable the Buyer to make such examination of the business, properties, assets,
books, records, and other documents
42
of the Company as the Buyer may determine, and of the Company and the Sellers
will furnish to the Buyer such information and copies of such documents and
records as the Buyer will reasonably request. As part of such examination the
Buyer may make such inquiries of such persons having business relationships with
the Company as the Buyer will determine and the Company, and the Sellers will
cooperate fully with the Buyer in connection therewith.
7.2. Conduct of Business Pending Closing. From the date hereof until
-----------------------------------
the Closing with regard to the Company, except as consented to by the Buyer in
writing:
(a) The Company will maintain itself at all times as a
corporation duly organized, validly existing, and in good standing, as
applicable, under the laws of the jurisdictions under which it is incorporated
and in which it is doing business as a foreign corporation;
(b) The Company will carry on its business and operations in
the normal course, substantially in the manner carried on as of the date hereof
and the Company will not engage in any activity or transaction or make any
commitment to purchase or spend, other than in the ordinary course of their
business as heretofore conducted;
(c) The Company will not declare, authorize, or pay any
distribution or dividend to any of its shareholders
43
and the Company will not redeem, purchase, or otherwise acquire, or agree to
redeem, purchase, or otherwise acquire, any shares of their own stock;
(d) The Company will not pay or obligate itself to pay any
compensation, commission, or bonus to any director, officer, employee, or
independent contractor as such, except for the regular compensation and
commissions payable to such director, officer, employee, or independent
contractor at the rate in effect on the date of this Agreement or otherwise in
the ordinary course of business;
(e) The Company will continue to carry all of its existing
insurance;
(f) The Company will use its best efforts to preserve its
business organization intact, to keep available to the Buyer the services of its
employees and independent contractors and to preserve for the Buyer its
relationships with suppliers, licensees, distributors, and customers and others
having business relationships with each of them;
(g) The Company will not, and will not obligate itself to, sell
or otherwise dispose of or pledge or otherwise encumber any of its properties or
assets except in the ordinary course of business and the Company will maintain
its facilities, machinery, and equipment in good operating condition and repair,
subject only to ordinary wear and tear;
44
(h) The Company will not enter into any agreement or
understanding with any partner, employee, officer, director, or shareholder of
the Company, or any affiliate of any of the foregoing;
(i) The Company will not engage in any activity or transaction
other than in the ordinary course of business as heretofore conducted;
(j) Without limiting the foregoing, the Company will consult
with the Buyer regarding all significant developments, transactions, contracts,
personnel actions, personnel changes, proposals relating to their business or
similar events prior to taking any action; and
(k) The Company will not make any advances to any officer or
employee or take any advances from any officer or employee
7.3. Consents and Approvals. The Company and the Sellers will use
----------------------
their best efforts to obtain prior to the Closing all consents, authorizations,
and approvals under all statutes, laws, ordinances, regulations, rules,
judgments, decrees, and orders of any court or governmental agency, board,
bureau, body, department, or authority or of any other person required to be
obtained by either of the Company or the Sellers in connection with the
execution, delivery, and performance of this Agreement, the Transaction
Documents to which they are a party, and the consummation of the transactions
contemplated hereby and thereby. Notwithstanding the
45
previous sentence, Sellers shall, within twenty (20) Days of the Closing, obtain
consents to the assignment or consent to change of ownership, whichever is
applicable, of (a) the leases listed on Schedule 5.12(b) and (b) the contracts
for exhibition management with Specialty Equipment Manufacturing Association and
the Divers Equipment Manufacturing Association and complete the transfer of the
real estate in Mexico listed on Schedule 5.12(b).
7.4. Confidential Material. The Company and the Sellers will, and
---------------------
will instruct all of their employees, representatives, agents, and affiliates
to, treat all Confidential Material confidentially and not disclose it except in
accordance herewith; provided, that (a) any Confidential Material may be
disclosed to the Company's or the Sellers' agents who (i) need to have access to
such information and (ii) are directed by either of the Company or the Sellers
to treat such Confidential Material confidentially; (b) any disclosure of
Confidential Material may be made with the prior written consent of the Buyer;
and (c) Confidential Material may be disclosed without liability hereunder to
the extent required by law or by the order or decree of any court or other
governmental authority; provided, however, that the party legally compelled to
disclose the Confidential Material will provide the Buyer with prompt notice of
that fact so that the Buyer may attempt to obtain a protective order or other
appropriate remedy. For purposes of this section, the term "Confidential
Material" will
46
be defined to mean all information furnished by the Buyer or any of its agents
to either of the Company or any of the Sellers or any of their agents; provided,
however, that the term "Confidential Material" will not include information that
(x) becomes generally available to the public other than as a result of a
disclosure by either of the Company, any of the Sellers or any of their
employees, representatives, agents, or affiliates, or (y) was made available to
either of the Company or the Sellers on a non-confidential basis from a source
other than the Buyer or any of its agents, provided, that such source is not
bound by a confidentiality agreement with the Buyer or any of its agents.
7.5. Employment Contract. At the Closing, ▇. ▇▇▇▇▇▇▇▇ and ▇. ▇▇▇▇▇▇▇▇
-------------------
will enter into the ▇. ▇▇▇▇▇▇▇▇ Employment Agreement and the ▇. ▇▇▇▇▇▇▇▇
Employment Agreement, respectively.
7.6. Liability for Federal, State and Local Taxes. The Sellers will
--------------------------------------------
be liable for all federal, state, and local taxes resulting from the
transactions contemplated by this Agreement, including, but not limited to, all
sales, use, and transfer taxes, if any, resulting from this transaction. In
addition, the Sellers will be responsible for all of Company's federal, state,
and local taxes and any interest, penalty, or expenses incurred thereon for all
tax years and partial tax years ending on or before January 31, 1996. In the
event an audit is commenced or a claim is made for taxes which, if upheld, would
be the obligation of Sellers hereunder, Sellers shall be
47
notified of such audit or claim and shall defend and, if necessary, pay any
taxes, penalties and interest ultimately assessed.
7.7. Claims Experience. At or prior to the Closing, the Sellers
-----------------
will prepare and deliver to the Buyer a description of all claims experience of
the Company during the past three years under all of the insurance policies
listed on Schedule 5.16 hereto, including settled and outstanding claims under
all such policies in respect of general liability and workers' compensation
claims.
7.8. Employment and Employee Benefits. The Sellers have delivered
--------------------------------
to the Buyer Schedule 7.8 listing the name, title, and current annual base
salary or hourly rate of each person employed by the Company on January 31, 1996
and June 15, 1996, together with a statement of the full amount and nature of
any other remuneration, whether in cash or kind, paid to each such person during
the 1995 calendar year. The Sellers will furnish an updated copy of Schedule 7.8
at the Closing which will reflect any changes in such information occurring
between January 31, 1996, and the Closing Date. The Sellers agree with the Buyer
that any individuals who were full-time employees of the Company on the Closing
Date and who agree to execute the standard PGI Code of Conduct agreement will be
offered continued employment with the Company, effective immediately after the
Closing. Any individuals who accept this offer of employment with the Company
will be referred to herein as "Transferring Employees." This employment of
Transferring Employees will be "at will" and nothing
48
herein expressed or implied confers upon any such Transferring Employee any
rights or remedies of any nature or kind whatsoever under or by reason of this
Agreement, including, without limitation, any rights to employment for a
specific period. After the Closing, the Buyer will make available to
Transferring Employees such wages and benefits as the Buyer deems appropriate,
subject only to the covenants set forth in Section 8.3 hereof, and, other than
service credit for the purpose of determining an employee's vacation benefit,
the Buyer will be under no obligation to credit Transferring Employees with past
service credit for any purpose (including, without limitation, severance, or
pension purposes).
7.9. Non-Competition. For a period of *** commencing on the Closing
---------------
Date, Sellers will not:
(a) Directly or indirectly, engage in, own, control, or make
an investment in any business that competes directly or indirectly for the
business of the clients (as of Closing) of the Company or Epic Enterprises of
Nevada, Inc. ("Epic L.V.").
(b) Accept employment with any person or entity that competes
directly or indirectly for the business of the clients (as of Closing) of the
Company or Epic L.V.;
(c) Directly or indirectly solicit or employ any PGI Company J
and affiliates person who at such time provides services for or is otherwise
employed by the Company, or Epic L.V., or encourage
* CONFIDENTIAL INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
COMMISSION
49
or induce any employee of the Company or Epic L.V. to leave such employment;
(d) Directly or indirectly, divert or attempt to divert from
the Company or Epic L.V., Buyer or Buyer's Parent the business of any customer
or client of the Company, Epic L.V. that was a customer or client as of Closing.
7.10. Subordination Agreement. At Closing, Sellers agree to sign a
-----------------------
standard subordination agreement provided by Buyer's primary financial
institution in the form attached hereto as Exhibit 7.10 or such other
subordination agreements as may be provided from time to time by Buyer's primary
financial institution.
7.11. Further Assurances. The Sellers agree, at the Sellers' sole
------------------
expense, to do or cause to be done such further acts and things and deliver or
cause to be delivered to the Buyer such additional assignments, agreements,
powers, and instruments as the Buyer may reasonably require to carry into effect
the purposes of this Agreement and the Transaction Documents or to better assure
and confirm unto the Buyer its rights, powers, and remedies hereunder and
thereunder.
7.12. Termination of Company's Benefit Plans. Sellers shall pay all
--------------------------------------
expenses for all liabilities, including funding liabilities and fiduciary
responsibilities related to the termination and distribution of such plans, and
if Sellers agree to such a merger,
50
then for the merger of the Company's pension plan into the 401(K) plan of
Buyer's Parent.
7.13. Release of Liens.
----------------
(a) Sellers will use commercially reasonable efforts to obtain
within sixty (60) days of Closing releases of all liens which are paid and
satisfied as of the date of Closing and are listed on Schedule 5.12(a). Upon
receipt of the Uniform Commercial Code Termination Statement (UCCTS), Sellers
will file UCCTS in appropriate jurisdiction(s) and deliver a copy of UCCTS and
evidence of filing to Seller.
(b) With regard to liens filed by San Diego National Bank,
Sellers will work with Buyer in replacing the financing provided by San Diego
National Bank which gave rise to the Lien(s) with Buyer's or Buyer's Parent's
Letter of Credit.
8. Covenants of the Buyer.
----------------------
8.1. Confidential Information. The Buyer will, and will instruct
------------------------
all of its employees, representatives, agents, and affiliates to, treat all
Confidential Information confidentially and not disclose it except in accordance
herewith; provided, that (a) any Confidential Information may be disclosed to
the Buyer's agents who (i) need to have access to such information and (ii) are
directed by the Buyer to treat such Confidential Information confidentially; (b)
any disclosure of Confidential Information may be made with the prior written
consent of the Company or the Sellers; and (c) Confidential Information may be
disclosed without liability hereunder to the extent required by law or by the
order or decree of any court or other governmental authority; provided, however,
that the party legally compelled to disclose the Confidential Information will
provide the Company or the Sellers, as appropriate, with prompt notice of that
fact so that the Company or any of the Sellers may attempt to obtain a
protective order or other appropriate remedy. For purposes of this section, the
term "Confidential Information" will be defined to mean all information
51
furnished by the Company or the Sellers or any of their agents to the Buyer or
any of its agents; provided, however, that the term "Confidential Information"
will not include information that (x) becomes generally available to the public
other than as a result of a disclosure by the Buyer or any of its employees,
representatives, agents, or affiliates, or (y) was made available to the Buyer
on a non-confidential basis from a source other than the Company or the Sellers
or any of their agents, provided, that such source is not bound by a
confidentiality agreement with the Company, the Sellers or any of their agents.
The provisions contained in this Section 8.1 will not survive the Closing.
8.2. Consents and Agreements. The Buyer will use its reasonable
-----------------------
commercial efforts to obtain prior to the Closing all consents, authorizations,
and approvals under all statutes, laws, ordinances, regulations, rules,
judgments, decrees, and orders of any court or governmental agency, board,
bureau, body, department, or authority or of any other person required to be
obtained by the Buyer in connection with the execution, delivery, and
performance of this Agreement, the Transaction Documents to which it is a party
and the consummation of the transactions contemplated hereby and thereby.
8.3. Employment and Employee Benefits.
--------------------------------
(a) After the Closing, the Buyer agrees to offer continued
employment to Transferring Employees. This employment of Transferring Employees
will be "at will" and nothing herein expressed
52
or implied confers upon any such Transferring Employee any rights or remedies of
any nature or kind whatsoever under or by reason of this Agreement, including,
without limitation, any rights to employment for a specific period. The Buyer
will make available to Transferring Employees such wages and benefits as the
Buyer deems appropriate and will provide Transferring Employees with
substantially similar working terms and working conditions as are provided to
all Buyer's employees. Other than service credit for the purpose of determining
an employee's vacation benefit, the Buyer will be under no obligation to credit
Transferring Employees with past service credit for any purpose (including,
without limitation, severance, or pension purposes).
(b) Buyer will recommend to the insurance company currently providing
medical insurance coverage to its employees that Transferring Employees be
covered under such medical insurance without a required physical examination or
the exclusion of existing conditions.
(c) Buyer will recommend and use its commercially reasonable best
efforts to make provisions for the Company's employees to transfer savings from
any of the Company employee benefit plans, terminated as a result of this
transaction, into the Buyer's existing 401(K) plan.
8.4. Termination of Company's Benefit Plans. Sellers with Buyer's
--------------------------------------
assistance (at no cost or expense to Buyer) will cause the Company to terminate
all Company's Employee benefit plans in existence,
53
including but not limited to defined contribution plans, at Closing or as soon
as possible subsequent to Closing.
8.5. Undisclosed Liabilities. After the Closing Date, Buyer
-----------------------
agrees:
(a) To notify Sellers of any undisclosed payables or
liabilities of which it becomes aware and Sellers shall have the right to defend
or compromise any of the same unless such action would have an unreasonably
adverse effect on the Company, its affiliates or their ongoing businesses; and
(b) To notify Sellers of any claims or audits the Company has
regarding any local, state or federal tax and any interest, penalty or expenses
incurred for tax years or business conducted prior to January 31, 1996, and
Sellers shall have the right to defend or compromise any of the same, as long as
such defense or compromise is not detrimental to the Company and any taxes,
interest or penalties incurred are paid by Sellers.
8.6. Payment of Assumed Liabilities. Buyer will pay all assumed
------------------------------
liabilities listed on Schedule 8.6 in accordance with their terms.
8.7. ▇. ▇▇▇▇▇▇▇▇ Employment Agreement and ▇. ▇▇▇▇▇▇▇▇ Employment
-----------------------------------------------------------
Agreement. At the Closing Buyer will cause Epic to enter into the ▇. ▇▇▇▇▇▇▇▇
---------
Employment Agreement and ▇. ▇▇▇▇▇▇▇▇ Employment Agreement.
54
8.8. Further Assurances. The Buyer will, at the request of the
------------------
Sellers and at the Buyer's sole expense, execute and deliver any further
instruments or documents and take all such further action(s) as the Sellers may
reasonably request in order to carry into effect the purposes of this Agreement
and the Transaction Documents or to better assure and confirm unto the Sellers
its rights, powers, and remedies hereunder and thereunder.
8.9. Replacement Letters of Credit
-----------------------------
(a) Buyer agrees to work with Sellers to replace the existing
financing from San Diego National Bank which created the liens on the Company's
inventory, proceeds and products with Buyer's or Buyer's Parent's Letter of
Credit.
(b) Buyer agrees to use commercially reasonable efforts to
replace Seller's personal guarantees on any outstanding leases to which the
Company is a party.
9. Conditions Precedent to the Sellers' Obligation to Sell the Company
-------------------------------------------------------------------
Shares. The obligations of the Sellers to sell the Company Shares is subject to
------
the fulfillment prior to or at the Closing of the following conditions:
9.1. The Buyer's Performance. There will not be any material error,
-----------------------
misstatement, or omission in the representations and warranties made by the
Buyer in this Agreement; all representations and warranties by the Buyer
contained in this Agreement or in any written statement delivered by the Buyer
to the Company or the Sellers pursuant to this Agreement will be true in all
material respects at and as of the Closing as though such representations and
warranties were made at and as of said time (except (a) as contemplated by this
Agreement and (b) to the extent, if any, the Company and the Sellers will waive
the same); and the Buyer will have performed and complied in all material
respects with all the terms, provisions and conditions of this Agreement to be
performed and complied with by the Buyer at or before the Closing.
55
9.2. Consents and Approvals. The Company and the Buyer (and to the
----------------------
extent required, the Sellers) will have obtained all consents, authorizations,
and approvals under all statutes, laws, ordinances, regulations, rules,
judgments, decrees, and orders of any court or governmental agency, board,
bureau, body, department, or authority or of any other person required to be
obtained by the Company, the Buyer, or the Sellers, as the case may be, in
connection with the execution, delivery, and performance of this Agreement, the
Transaction Documents and the consummation of the transactions contemplated
hereby and thereby.
9.3. No Legal Impediment. There will be in effect no injunction,
-------------------
writ, temporary restraining order, or any order of any nature issued by any
court or governmental agency directing that the transactions contemplated by
this Agreement not be consummated.
10. Conditions Precedent to the Buyer's Obligation to Purchase the Company's
------------------------------------------------------------------------
Shares. The obligation of the Buyer to purchase the Company Shares is subject
------
to the fulfillment prior to or at the Closing of the following conditions:
10.1. Company's and the Sellers' Performance. There will not be any
--------------------------------------
material error, misstatement, or omission in the representations and warranties
made by the Company or the Sellers in this Agreement; all representations and
warranties by the Company and the Sellers contained in this Agreement or in any
written statement delivered by the Company or the Sellers to the Buyer pursuant
to this
56
Agreement will be true in all material respects at and as of the Closing as
though such representations and warranties were made at and as of said time
(except (a) as contemplated by this Agreement and (b) to the extent, if any, the
Buyer will waive the same); and the Company and the Sellers will have performed
and complied in all material respects with all the terms, provisions, and
conditions of this Agreement to be performed and complied with by the Company
and the Sellers at or before the Closing, including but not limited to the
deliveries to Buyer from Sellers required under Section 4.1 hereof.
10.2. Consents and Approvals. The Company and the Buyer (and to the
----------------------
extent required, the Sellers) will have obtained all consents, authorization,
and approvals under all statutes, laws, ordinances, regulations, rules,
judgments, decrees, and orders of any court or governmental agency, board,
bureau, body, department, or authority or of any other person required to be
obtained by the Company, the Sellers, or the Buyer, as the case may be, in
connection with the execution, delivery and performance of this Agreement, the
Transaction Documents, and the consummation of the transactions contemplated
hereby and thereby.
10.3. Physical Properties. There will have occurred no material
-------------------
damage to or destruction or loss of (whether or not covered by insurance) any of
the Company's facilities, equipment, or other assets.
10.4. No Legal Impediment. There will be in effect no injunction, writ,
-------------------
temporary restraining order, or any order of any
57
nature issued by any court or governmental agency directing that the
transactions contemplated by this Agreement not be consummated.
10.5. Closing of Buyer's Purchase of Epic Enterprises of Nevada, Inc.
---------------------------------------------------------------
Either the purchase of Epic Enterprises of Nevada, Inc. from Sellers shall: (i)
have occurred; (ii) occur simultaneously with the Closing of the transaction
contemplated by this Agreement; or (iii) Buyer has waived this condition
precedent and is satisfied that the closing of the aforementioned transaction
will occur shortly after the closing of the transaction contemplated hereunder.
10.6. ▇▇▇▇▇ Epic Partnership. The Company will own one hundred
----------------------
percent (100%) interest in the ▇▇▇▇▇ Epic Partnership and all the property
rights to, interests to and intellectual rights to the International Silk Flower
and Accessories Exhibit, AmeriChristmas International Trim-A-Home Exhibition and
all tangible and intangible assets of said partnership.
10.7. ▇▇▇▇▇▇ ▇▇▇▇▇. ▇▇▇▇▇ and Company will have executed an
------------
agreement for a term of three (3) years for ▇▇▇▇▇ to provide his services to the
Company including but not limited to selling exhibition space to the
International Silk Flower and Accessories Exhibition and AmeriChristmas
International Trim-A-Home Exhibition.
11. Termination. This Agreement may be terminated as follows:
-----------
11.1. Termination by the Buyer. The Buyer may, without liability
------------------------
to the Company or the Sellers, terminate this Agreement by notice to the Company
and the Sellers (a) at any time prior to the
58
Closing if material default is made by the Company or the Sellers in the
observance or in the due and timely performance of any of the terms hereof to be
performed by the Company or the Sellers that cannot be cured at or prior to the
Closing, or (b) at any time prior to the Closing if the Buyer discovers
something unsatisfactory about either of the Company or the Sellers during its
due diligence or (c) at the Closing if any of the conditions precedent to the
performance of the Buyer's obligations at the Closing will not have been
fulfilled.
11.2. Termination by the Company or the Sellers. The Company and
-----------------------------------------
the Sellers may, without liability to the Buyer, terminate this Agreement by
notice to the Buyer (a) at any time prior to the Closing if material default
will be made by the Buyer in the observance or in the due and timely performance
of any of the terms hereof to be performed by the Buyer that cannot be cured at
or prior to the Closing or (b) at the Closing if any of the conditions precedent
to the performance of the Company or the Sellers' obligations at the Closing
have not been fulfilled.
11.3. Effect of Termination. If this Agreement is terminated,
---------------------
this Agreement, except for Sections 7.4 and 8.1, will no longer be of any force
or effect and there will be no liability on the part of any party or its
respective directors, officers, or shareholders except, in the case of
termination because of a material default or material breach resulting from the
willful fault of another party, the aggrieved party or parties may recover from
the defaulting
59
party the amount of expenses incurred by such aggrieved party or parties in
connection with this Agreement and the transactions contemplated hereby which
the aggrieved party or parties would otherwise have to bear pursuant to Section
13.6 of this Agreement. If this Agreement is terminated, Sections 7.4 and 8.1
will remain in full force and effect, and any party, or its respective
directors, officers, agents or representatives, breaching Section 7.4 or Section
8.1 may be held liable for any such breach.
12. Indemnification.
---------------
12.1. Indemnification of the Buyer and the Company.
--------------------------------------------
(a) From and after the Closing Date, the Sellers will
indemnify, defend, and hold harmless the Buyer and the Company and its officers,
directors, shareholders, representatives, agents, and affiliates from, against,
and in respect of all third party claims, liabilities, actions, suits,
proceedings, assessments, judgments, losses, damages, costs, and expenses
(including interest, penalties, and reasonable accountants', experts', and
attorneys' fees and disbursements) (collectively, "Damages"), arising out of,
relating to, or resulting from (i) any material inaccuracy or material breach of
any of the written representations or warranties or the Sellers made in or
pursuant to this Agreement or the Transaction Documents; (ii) the material
breach of any covenant, obligation, or agreement of the Sellers to be performed,
fulfilled, or complied with pursuant to this Agreement or the Transaction
Documents; (iii) any material
60
misrepresentation, or the omission of any material fact (including without
limitation, those facts required to make the facts otherwise set forth not
misleading), in this Agreement or the Transaction Documents (including all
Exhibits and Schedules hereto and thereto); (iv) the operation of the business
of the Company prior to February 1, 1996, or the acts or omissions of any of the
Company's officers, directors, shareholders, agents, or representatives prior to
the Closing in connection with the operation of the Company's business except
for the fiscally related matters which include, without limitation, accounts
payable, accounts receivable, debts and obligations of the Company from February
1, 1996 to Closing; (v) any liabilities or responsibilities that remain with
Company or Sellers or come into existence after Closing which result from the
Company's purchase of all the partnership interests in the ▇▇▇▇▇ Epic
partnership or may arise independently from its individual partners; (vi) any
and all taxes of any nature incurred by the Company prior to January 31, 1996;
(vii) the Company's ownership of real estate in Mexico, including but not
limited to [Address]; (viii) unlawful, authorized, unauthorized or ultra ▇▇▇▇▇
---------
actions of any employees prior to Closing; (ix) the relationship with On-Line
Reservation Systems, Inc. or the Agreement by and On-Line Reservation Systems,
Inc., a California Corporation, and Epic Enterprises of Nevada, Inc. dated
September 15, 1994; (xi) with regard to the Sellers, any personal taxes incurred
on or prior to the Closing Date, provided that no indemnification will be owed
hereunder
61
in any case where it is determined that Damages result solely from the gross
negligence, willful misconduct, or bad faith of the party to be indemnified; and
(xii) the Company's Employee Benefit Plans and any other employee benefit
agreement described in Section 5.14 hereinabove; provided, further, that the
Sellers will not be liable for indemnification hereunder in respect of any
breach of any warranty, representation, covenant, obligation, or agreement, or
any material misrepresentation or omission, that is not made or is not to be
performed by the Company or the Sellers.
(b) Sellers, jointly and severally, will indemnify and hold
harmless Buyer for all undisclosed accounts payable or liabilities not listed on
Schedule 8.6 subject to the provisions of Section 2.2(f).
12.2. Indemnification of the Sellers. From and after the Closing
------------------------------
Date, the Buyer will indemnify, defend, and hold harmless the Sellers and its
representatives, agents, and affiliates from, against, and in respect of all
third party Damages arising out of, relating to, or resulting from (a) any
material inaccuracy or material breach of any of the written representations or
warranties of the Buyer made in or pursuant to this Agreement or the Transaction
Documents; (b) the material breach of any covenant, obligation, or agreement of
the Buyer to be performed, fulfilled, or complied with pursuant to this
Agreement or the Transaction Documents; (c) any material misrepresentation or
the omission of any material fact (including, without limitation, those
62
facts required to make the facts otherwise set forth not misleading) in this
Agreement or the Transaction Documents (including all Exhibits and Schedules
hereto and thereto) or (d) the conduct and/or the operation of the Company after
January 31, 1996; provided that no indemnification will be owed hereunder in any
case where it is determined that Damages result solely from the gross
negligence, willful misconduct, or bad faith of the Sellers or the Company (pre-
Closing); provided, further, that the Buyer will not be liable for
indemnification hereunder in respect of any breach of any warranty,
representation, covenant, obligation, or agreement, or any material
misrepresentation or omission, that is not made or is not to be performed by the
Buyer.
12.3. Procedure for Indemnification. After receipt by an
-----------------------------
indemnified party under Section 12.1 or 12.2 of notice of the commencement of
any action, such indemnified party shall, if a claim in respect thereof is to be
made against an indemnifying party under such Section, give notice to the
indemnifying party of the commencement thereof, but the failure so to notify the
indemnifying party shall not relieve it of any liability that it may have to any
indemnified party except to the extent the indemnifying party demonstrates that
the defense of such action is materially prejudiced thereby. If any such action
shall be brought against an indemnified party and it shall give notice to the
indemnifying party of the commencement thereof, the indemnified party shall be
entitled to participate therein and, to the extent that it shall wish, to assume
the defense thereof with counsel
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satisfactory to such indemnified party and, after notice from the indemnifying
party as such indemnified party of its election so to assume the defense thereof
the indemnifying party shall not be liable to such indemnified party under such
Section for any fees of other counsel or any other expenses, in each case
subsequently incurred by such indemnified party in connection with the defense
thereof, other than reasonable costs of investigation. If an indemnifying party
assumes the defense of such an action, (a) no compromise or settlement thereof
may be effected by the indemnifying party without the indemnified party's
consent (which shall not be unreasonably withheld) unless (i) there is no
finding or admission of any violation of law or any violation of the rights of
any Person and no effect on any other claims that may be made against the
indemnified party and (ii) the sole relief provided is monetary damages that are
paid in full by the indemnifying party and (b) the indemnifying party shall have
no liability with respect to any compromise or settlements thereof effected
without its consent (which will shall not unreasonably withheld). If notice is
given to indemnifying party of the commencement of any action and it does not,
within ten (10) days after the indemnified party's notice is given, give notice
to the indemnified party of its election to assume the defense thereof, the
indemnifying party shall be bound by any determination made in such action or
any compromise or settlement thereof effected by the indemnified party.
Notwithstanding the foregoing, if an indemnified party determines in
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good faith that there is a reasonable probability that an action may adversely
affect it other than as a result of monetary damages, such indemnified party
may, by notice to the indemnifying party assume the exclusive right to defend,
compromise or settle such action, but the indemnifying party shall not be bound
so defended or any compromise or settlement thereof effected without its consent
(which shall not unreasonably withheld).
12.4. Survival of Representations, Warranties, Covenants and
---------------------------------------- -------------
Indemnification. The representations and warranties made in Sections 5 and 6
---------------
of this Agreement other than those in Sections 5.10, 5.14, 5.19, 5.20, 5.21 and
5.25 will survive the Closing and will expire upon the second anniversary of
the Closing Date, except as to any matter as to which a reasonably specific good
faith claim has been submitted in writing to the Buyer or the Sellers, as
applicable, prior to such date. All representations and warranties contained in
Sections 5.10, 5.14, 5.19, 5.20, 5.21 and 5.25 will survive until the expiration
of the applicable statute of limitations period (including extensions thereof)
for any claim in respect of matters covered by Sections 5.10, 5.14, 5.19, 5.20,
5.21 and 5.25 respectively. The covenants contained in Sections 7 and 8 of this
Agreement and the provisions contained in Sections 2.2, 2.3, 2.4, and this
Section 12 will survive the Closing.
13. Miscellaneous.
-------------
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13.1. Complete Agreement; Amendments; Waivers. This Agreement,
---------------------------------------
together with the Exhibits and Schedules hereto, contains the entire agreement
of the parties with respect to the subject matter hereof and supersedes all
prior agreements and understandings, oral or written, with respect thereto. This
Agreement may be modified or amended only by a written instrument signed by the
parties hereto. No provision of this Agreement may be waived without a written
instrument signed by the waiving party. The failure of any party to require, in
any one or more instances, the performance of any of the terms, covenants, or
conditions of this Agreement will not be construed as a waiver or relinquishment
of any rights granted hereunder or of the future performance of any such term,
covenant, or condition, but the obligations of the parties with respect thereto
will continue in full force and effect.
13.2. Counterparts. This Agreement may be executed in two (2) or
------------
more counterparts, each of which will be deemed an original, but all of which
together will constitute one (1) and the same instrument.
13.3. Successors and Assigns. This Agreement will inure to the
----------------------
benefit of, and be binding upon, the parties hereto and their respective
executors, heirs, and permitted assigns. Neither this Agreement nor any of the
rights or obligations hereunder (or under any document delivered pursuant
hereto) may be assigned by a party hereto without the prior written consent of
the other parties.
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13.4. Governing Law. This Agreement will be construed and
-------------
enforced in accordance with the laws of the Commonwealth of Virginia without
giving effect to its conflicts of law principles.
13.5. Notices. All notices, claims, requests, demands, and other
-------
communications hereunder will be in writing and will be duly given if: (a)
personally delivered or sent via telecopy, (b) sent by telegram (other than
where original payment or other documents must be delivered) for delivery within
24 hours, or (c) sent by Federal Express, DHL Worldwide Express, or Airborne
Courier (for next business day delivery), shipping prepaid, as follows:
If to the Buyer, to:
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, President
PGI Company J
One Courthouse Metro
Suite 200
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
(Telecopy number (▇▇▇) ▇▇▇-▇▇▇▇)
with a copy to:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ and ▇▇▇▇▇, Chartered
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
(Telecopy number (▇▇▇) ▇▇▇-▇▇▇▇)
If to the Parent, to:
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, President
Production Group International, Inc.
▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
(Telecopy number (▇▇▇) ▇▇▇-▇▇▇▇)
If to the Company, pre-closing, to:
▇▇. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Epic Enterprises, Inc.
▇▇▇▇ ▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
If to the Company, post-closing, to:
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, President
PGI Company J
One Courthouse Metro
Suite 100
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
(Telecopy number (▇▇▇) ▇▇▇-▇▇▇▇)
If to the Sellers, to:
▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇. ▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇. ▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
with a copy to:
▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Esq.
68
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
or such other address or addresses as the person to whom notice is to be given
may have previously furnished to the others in writing in the manner set forth
above. Notices will be deemed given at the time of personal delivery or
completed telecopy, or, if sent by telegram twenty-four (24) hours after the
time sent, or, if sent by Federal Express, DHL Worldwide Express, or Airborne
Courier, one (1) business day after the date sent.
13.6. Expenses. Except as otherwise expressly provided in this
--------
Agreement, each party hereto will bear its own expenses.
13.7. Headings; Form of Words. The headings contained in this
-----------------------
Agreement (including but not limited to the titles of the Schedules and Exhibits
hereto) have been inserted for the convenience of reference only, and neither
such headings nor the placement of any term hereof under any particular heading
will in any way restrict or modify any of the terms or provisions hereof. Terms
used in the singular will be read in the plural, and vice versa, and terms used
in the masculine gender will be read in the feminine or neuter gender when the
context so requires, and vice versa.
13.8. Severability. The provisions of this Agreement will be
------------
deemed severable, and if any part of any provision is held to be illegal, void,
voidable, invalid, nonbinding, or unenforceable in its entirety or partially or
as to any party, for any reason, such
69
provision may be changed consistent with the intent of the parties hereto, to
the extent reasonably necessary to make provisions, as so changed, legal, valid,
binding, and enforceable. If any provision of this Agreement is held to be
illegal, void, voidable, invalid, non-binding, or unenforceable in its entirety
or partially or as to any party, for any reason, and if such provision cannot be
changed consistent with the intent of the parties hereto to make it fully legal,
valid, binding and enforceable, then such provision will be stricken from this
Agreement, and the remaining provisions of this Agreement will not in any way be
affected or impaired, but will remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have duly
executed this Agreement as of the date first above written.
BUYER:
PGI Company J
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
--------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
President and Chief Executive
Officer
SELLERS:
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
------------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
------------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
COMPANY:
EPIC ENTERPRISES, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
--------------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
--------------------------------
Title: Chairman
--------------------------
70