Confidential information has been omitted and filed
separately with the Commission
================================================================================
STOCK PURCHASE AND SALE AGREEMENT
AMONG
PGI, INC.
AMERICAN SHOW MANAGEMENT, INC.
▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
AND
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
JANUARY 31, 1997
===============================================================================
TABLE OF CONTENTS
PAGE
------
List of Exhibits iv
ARTICLE I - THE PURCHASE AND SALE OF THE STOCK........................... 1
1.1 The Purchase and Sale of the Stock........................... 1
1.2 The Closing.................................................. 1
1.3 Actions at the Closing....................................... 2
1.4 Additional Action............................................ 2
1.5 Purchase Consideration....................................... 2
1.6 Treatment of Stock........................................... 9
1.7 Certain Tax Matters.......................................... 10
1.8 Business Plan................................................ 12
ARTICLE II - REPRESENTATIONS AND WARRANTIES OF ASM
AND THE STOCKHOLDERS................................................... 13
2.1 Organization, Qualification and Corporate Power.............. 13
2.2 Capitalization............................................... 13
2.3 Authorization of Transaction................................. 14
2.4 Non-Contravention............................................ 14
2.5 Subsidiaries................................................. 15
2.6 Financial Statements......................................... 15
2.7 Absence of Certain Changes................................... 15
2.8 Undisclosed Liabilities...................................... 16
2.9 Tax Matters.................................................. 16
2.10 Assets....................................................... 17
2.11 Owned Real Property.......................................... 18
2.12 Intellectual Property........................................ 18
2.13 Real Property Leases......................................... 20
2.14 Contracts.................................................... 20
2.15 Powers of Attorney........................................... 22
2.16 Insurance.................................................... 22
2.17 Litigation................................................... 22
2.18 Employees.................................................... 23
2.19 Employee Benefits............................................ 23
2.20 Environmental Matters........................................ 25
2.21 Legal Compliance............................................. 26
2.22 Permits. 26
- i -
2.23 Certain Business Relationships With Affiliates............... 27
2.24 Fees and Brokers............................................. 27
2.25 Books and Records............................................ 27
2.26 Certain Payments............................................. 27
2.27 Accounts Receivable.......................................... 28
2.28 Customers and Suppliers...................................... 28
2.29 Access to Information; Sophistication; Investment Intent..... 29
2.30 ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Compliance................................. 29
2.31 Disclosure................................................... 29
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF PGI...................... 30
3.1 Organization................................................. 30
3.2 Authorization of Transaction................................. 30
3.3 Non-Contravention............................................ 31
3.4 Brokers' Fees................................................ 31
3.5 Disclosure................................................... 31
3.6 Legal Compliance............................................. 31
3.7 Due Diligence................................................ 31
3.8 Purchase for Investment...................................... 32
3.9 Initial Public Offering...................................... 32
3.10 Lending Covenants............................................ 32
3.11 ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Compliance................................. 32
ARTICLE IV - COVENANTS................................................... 33
4.1 Best Efforts................................................. 33
4.2 Notices and Consents......................................... 33
4.3 Operation of Business........................................ 33
4.4 Full Access.................................................. 35
4.5 Notice of Breaches........................................... 35
4.6 Exclusivity.................................................. 35
4.7 Confidentiality.............................................. 36
4.8 Covenant Not to Disclose..................................... 36
4.9 Non-Compete.................................................. 37
4.10 Non-Interference............................................. 38
4.11 Cooperation.................................................. 38
4.12 Initial Public Offering...................................... 39
4.13 Postponement of Contemplated Public Financing................ 39
4.14 Employees.................................................... 39
4.15 Other Actions................................................ 39
- ii -
4.16 Acceleration of Earn-Out..................................... 40
4.17 Termination of Certain Covenants............................. 41
ARTICLE V - CONDITIONS TO CONSUMMATION OF PURCHASE AND SALE.............. 42
5.1 Conditions to Each Party's Obligations....................... 42
5.2 Conditions to Obligations of PGI............................. 42
5.3 Conditions to Obligations of ASM and the Stockholders........ 45
ARTICLE VI - TERMINATION................................................. 46
6.1 Termination of Agreement..................................... 46
6.2 Effect of Termination........................................ 46
ARTICLE VII - SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNITY...... 47
7.1 Survival of Representations and Warranties................... 47
7.2 Indemnification by the Stockholders.......................... 47
7.3 Indemnification by PGI....................................... 48
7.4 General Indemnification Provisions........................... 49
7.5 Limits on Indemnification.................................... 50
7.6 Adjustment of Liability...................................... 50
7.7 Indemnification as Exclusive Remedy From and After Closing... 51
7.8 Waiver of Contribution....................................... 51
ARTICLE VIII - MISCELLANEOUS............................................. 51
8.1 Press Releases and Announcements............................. 51
8.2 No Third Party Beneficiaries................................. 51
8.3 Entire Agreement............................................. 51
8.4 Succession and Assignment.................................... 52
8.5 Counterparts................................................. 52
8.6 Headings..................................................... 52
8.7 Notices...................................................... 52
8.8 Governing Law................................................ 54
8.9 Amendments and Waivers....................................... 54
8.10 Severability................................................. 54
8.11 Expenses..................................................... 55
8.12 Specific Performance......................................... 55
8.13 Construction................................................. 55
8.14 Incorporation of Exhibits and Schedules...................... 55
8.15 Arbitration.................................................. 55
- iii -
LIST OF EXHIBITS
Exhibit A Form of Subordination Agreement
---------
Exhibit B Opinion of Counsel to ASM
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Exhibit C Inglis Employment Agreement
---------
Exhibit ▇ ▇▇▇▇▇▇▇ Employment Agreement
---------
Exhibit E ▇▇▇▇▇▇▇▇ Employment Agreement
---------
Exhibit F Opinion of Counsel to PGI
---------
- iv -
STOCK PURCHASE AND SALE AGREEMENT
THIS STOCK PURCHASE AND SALE AGREEMENT (this "Agreement") entered into
as of January 31, 1997 by and among PGI, INC., a Delaware corporation ("PGI"),
AMERICAN SHOW MANAGEMENT, INC., an Oregon corporation ("ASM"), ▇▇▇▇ ▇▇▇▇▇▇, a
resident of the State of Oregon ("▇▇▇▇ ▇▇▇▇▇▇"), ▇▇▇▇ ▇▇▇▇▇▇, a resident of the
State of Oregon ("▇▇▇▇ ▇▇▇▇▇▇"), ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, a resident of the State of
Oregon ("▇▇▇▇▇▇▇"), and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, a resident of the State of Oregon
("▇▇▇▇▇▇▇▇"). PGI, ASM, ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ are
referred to collectively herein as the "Parties." ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ are referred to collectively herein as the "Stockholders."
WHEREAS, ASM is engaged in the business of (i) creating regional
communications, office equipment and automation trade shows, including high
technology solutions serving business-to-business needs, (ii) field marketing,
consulting and educational services to companies; and (iii) technology
recruitment expos (collectively, the "Business"); and
WHEREAS, the Stockholders own or will at the Closing own all of the
issued and outstanding stock of ASM (the "Stock"); and
WHEREAS, the Stockholders desire to sell the Stock to PGI and PGI
desires to purchase the Stock from the Stockholders according to the terms and
provisions of this Agreement (the "Purchase and Sale") so that, following the
Purchase and Sale, ASM will be a wholly-owned subsidiary of PGI;
NOW, THEREFORE, in consideration of the foregoing premises and the
representations, warranties, agreements and covenants herein contained, and for
other good and valuable consideration, the receipt and legal sufficiency of
which are hereby acknowledged, the Parties hereby agree as follows:
ARTICLE I
THE PURCHASE AND SALE OF THE STOCK
1.1 The Purchase and Sale of the Stock.
----------------------------------
Upon and subject to the terms and conditions of this Agreement, the
Stockholders shall sell the Stock to PGI and PGI shall purchase the Stock from
the Stockholders at the Closing (as defined below). From and after the Closing
Date (as defined below), all shares of the capital stock of ASM shall be owned
by PGI.
1.2 The Closing.
-----------
The closing of the transactions contemplated by this Agreement (the
"Closing") shall take place at the offices of ▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, Portland,
Oregon, commencing at
1
10:00 a.m. local time on the later to occur of the following (the "Closing
Date"): (a) February 28, 1997; (b) as soon as practicable, but in no event later
than 5 business days, after PGI has received all of the proceeds of its public
offering (the "Public Offering") under the Securities Act of 1933, as amended
(the "Securities Act"); or (c) if all of the conditions to the obligations of
the Parties to consummate the transactions contemplated hereby have not been
satisfied or waived as of the later of the dates in (a) and (b), on such
mutually agreeable later date as soon as practicable after the satisfaction or
waiver of all conditions to the obligations of the Parties to consummate the
transactions contemplated hereby, provided, however, in no event shall ASM or
the Stockholders be required to consent to a Closing Date later than March 15,
1997.
1.3 Actions at the Closing.
----------------------
At the Closing, (a) the Stockholders shall deliver to PGI all stock
certificates representing the Stock, which shall be all of the issued and
outstanding capital stock of ASM, duly endorsed and transferred to PGI, free and
clear of any restrictions, obligations, liens and encumbrances, along with the
other certificates, instruments and documents referred to in Section 5.2, (b)
ASM shall deliver to PGI the various resignations, certificates, instruments,
and documents referred to in Section 5.2; (c) PGI shall deliver to ASM and the
Stockholders the various certificates, instruments and documents referred to in
Section 5.3, along with the Purchase Consideration (as defined and calculated
pursuant to Section 1.5 hereof).
1.4 Additional Action.
-----------------
PGI may, at any time after the Closing, take any action, including
executing and delivering any document, in the name and on behalf of ASM, in
order to consummate the Purchase and Sale contemplated by this Agreement.
1.5 Purchase Consideration.
----------------------
The purchase consideration (the "Purchase Consideration") to be paid
by PGI shall be the sum of the Base Purchase Consideration (as hereinafter
defined) and the Additional Purchase Consideration (as hereinafter defined).
The Purchase Consideration shall be paid to the Stockholders when due by wire
transfer of immediately available funds to an account or accounts designated in
writing by the Stockholder Representative (as hereinafter defined) to PGI not
less than three days prior to the date on which any such payment is due. The
Purchase Consideration shall be allocated to the Stockholders on a pro rata
basis in accordance with the number of shares of Stock owned by each
Stockholder, and shall be characterized on the tax returns of each Party as
provided in Section 1.7 hereof.
(a) Base Purchase Consideration - PGI shall (i) pay the sum of Twenty
---------------------------
Million Dollars ($20,000,000) (the "Base Purchase Consideration") at the Closing
in the manner set forth above in this Section 1.5; and (ii) issue to
Stockholders 10,000 shares of PGI Common Stock, par value $.01 per share, free
and clear of all liens and encumbrances. The Base Purchase Consideration shall
be subject to adjustment as set forth in Section 1.5(b) below.
2
(b) Adjustment to Base Purchase Consideration.
-----------------------------------------
(i) Within 75 days after the Closing Date, PGI shall cause its
accountants to prepare and shall deliver to Stockholders unaudited financial
statements of ASM as of the Closing Date and for the period from the date of the
Most Recent Balance Sheet (as defined in Section 2.8 hereof) through the Closing
Date (the "Closing Financial Statements"). The Closing Financial Statements
shall be prepared in accordance with generally accepted accounting principles
(on an accrual basis of accounting) from all books, records and accounts of ASM.
Such Closing Financial Statements shall be prepared using the same accounting
policies as those used to prepare the financial statements as of November 30,
1996 and for the eleven months then ended. The retained earnings (deficit)
balance, derived from the Closing Financial Statements, less any fixed assets or
intangible assets purchased during the period from November 30, 1996 to the date
of the Closing Financial Statements (unless such purchase was approved by PGI
pursuant to Section 4.3(a) hereof, or otherwise in writing) (the "Adjusted
Retained Earnings (Deficit)"), shall provide the basis for determining the
adjustment to the purchase price described in the following paragraphs. A detail
listing of accounts receivable by customer and amount as of the Closing Date
should be provided to PGI.
(ii) Stockholders and their representatives shall have the right
to review all work papers and procedures used to prepare the Closing Financial
Statements and shall have the right to perform any other reasonable procedures
necessary to verify the accuracy thereof. Unless Stockholders, within 30 days
after delivery to Stockholders of the Closing Financial Statements, notify PGI
in writing that they object to the Closing Financial Statements, and specify the
basis for such objection, such Closing Financial Statements shall become final,
binding and conclusive upon the parties for purposes of this Agreement. If
Stockholders and PGI are unable to resolve any objections to the Closing
Financial Statements within ten days after any such notification has been given,
the dispute shall be referred to Price Waterhouse LLP (the "Designated
Accountant") for resolution (or, if the Designated Accountant is unavailable, to
another nationally recognized public accounting firm mutually agreed upon by
Stockholders and PGI within five days from the date upon which the Designated
Accountant notifies the parties that it is not available). If PGI and
Stockholders are unable to agree upon the designation of such an accounting firm
within such five-day period, then either party may, within three days
thereafter, request that the President of the American Arbitration Association
make such designation. The Designated Accountant or the accounting firm
designated hereunder will make a determination as to each of the items in
dispute and shall notify the Parties of such determination within 30 days after
referral of the dispute to such accountant hereunder, which determination shall
be final, conclusive and binding upon each of the Parties hereto. PGI and
Stockholders shall cooperate with each other and with each other's authorized
representatives in order to resolve any and all matters in dispute under this
Section 1.5(b) as quickly as practicable and shall share the fees and expenses
of the Designated Accountant equally.
(iii) If the Adjusted Retained Earnings (Deficit) of ASM as set
forth on the balance sheet included in the Closing Financial Statements is less
than zero dollars, then the Base Purchase Consideration shall be decreased
dollar for dollar by the amount by which such retained earnings (deficit) is
less than zero dollars (the "Base Purchase Consideration Reduction").
Stockholders shall remit the amount of such Base Purchase Consideration
3
Reduction, with interest, to PGI within five days after finalization of the
Closing Financial Statements as set forth above. Interest for purposes of this
Section 1.5(b)(iii) and of Section 1.5(b)(iv) hereof shall be calculated at the
rate of 8% per annum.
(iv) If the Adjusted Retained Earnings (Deficit) of ASM as set
forth on the balance sheet included in the Closing Financial Statements is
greater than zero dollars, then the Base Purchase Consideration shall be
increased dollar for dollar by the amount by which such retained earnings
(deficit) is greater than zero dollars (the "Base Purchase Consideration
Increase"). PGI shall remit the amount of such Base Purchase Consideration
Increase, with interest, to Stockholders within five days after finalization of
the Closing Financial Statements as set forth above.
(c) Additional Purchase Consideration for 1997 - If applicable, PGI
------------------------------------------
shall pay to Stockholders the following additional sum (the "1997 Additional
Purchase Consideration") in the manner set forth below:
(i) As used in this Section 1.5, "Pre-Tax, Pre-Executive
Compensation Net Income" or "PTPECNI" for the period in question (the
"Applicable Period") shall mean the difference between Total Revenues (as
hereinafter defined) for the Applicable Period less Expenses (as hereinafter
defined) for the Applicable Period. For purposes of calculation of PTPECNI,
"Total Revenues" shall mean all cash revenues of the Existing ASM Business (as
hereinafter defined) based on a calendar year accounting, including, without
limitation, all advance deposits received by ASM. For purposes of calculation of
PTPECNI, "Expenses" shall mean all expenses paid by ASM in the Applicable Period
(inclusive of advance expenses on shows), exclusive of (A) management fees or
other corporate expenses paid to PGI and not directly attributable to the
Existing ASM Business, (B) executive compensation paid to ▇▇▇▇ ▇▇▇▇▇▇ or
▇▇▇▇▇▇▇, (C) extraordinary expenses, including professional fees and the costs
of the transaction contemplated under this Agreement, (D) interest expense,
income or other taxes. As used in this Section 1.5, "Existing ASM Business"
shall mean all business of ASM existing as of the date hereof, and all business
of ASM commenced after the date hereof other than business of ASM that (I)
competes directly or indirectly with any activity of PGI, (II) requires a
significant capital investment by PGI, (III) is outside the area of expertise of
ASM at the time of implementation, (IV) requires for implementation the addition
of staff or expertise by ASM not possessed by ASM as of the date hereof, or (V)
is conducted by a subsidiary or division of PGI included in the operations of
ASM by PGI (such ASM business commenced after the date hereof and satisfying the
conditions set forth in clauses I, II, III, IV or V above shall be separately
referred to as "New ASM Business"), provided, however, that any New ASM Business
-------- -------
subject to the exclusions set forth in clauses (I), (II), (III) (IV) or (V)
immediately above shall be included in the definition of Existing ASM Business
upon the written approval of the Chief Executive Officer of PGI. As used in this
Section 1.5, "Profit Margin" shall mean the percentage that results from
dividing PTPECNI of the Existing ASM Business generated during any calendar year
by the amount of Total Revenues generated by the Existing ASM Business during
such calendar year.
(ii) (A) On or before 30 days following the end of March, June,
September and December of 1997, PGI shall prepare a quarterly unaudited internal
calculation (each, a "Quarterly Earn-Out Estimate") to determine whether any
1997 Additional
4
Purchase Consideration has been earned in 1997 prior to or during such quarter.
On or before April 30, 1998, PGI shall deliver to Stockholders a statement (the
"Final Quarterly 1997 Earn-Out Statement") setting forth whether any 1997
Additional Purchase Consideration has been earned during calendar year 1997.
(B) If (x) PTPECNI for year-to-date 1997 as set forth in a
Quarterly Earn-Out Estimate or Final Quarterly 1997 Earn-Out Statement, as the
case may be, is greater than the year to date PTPECNI target (the "Year To Date
PTPECNI Target") listed in Table 1 below and (y) the Profit Margin for year-to-
-------
date 1997 as of the end of such quarter is equal to or greater than * , then
PGI shall pay to the Stockholders in the manner set forth below an amount equal
to * of the amount by which (I) PTPECNI for year-to-date 1997 exceeds (II)
the Year to Date PTPECNI Target in Table 1 below, reduced by any 1997 Additional
-------
Purchase Consideration paid previously.
(C) Table 1 is as follows:
-------
----------------------------------------------------------------------------------------
Q1-1997 Q2-1997 Q3-1997 Q4-1997 1997
-------- ---------- ---------- ---------- ----------
QUARTERLY PTPECNI * * * * *
----------------------------------------------------------------------------------------
YEAR TO DATE PTPECNI TARGET * * * * *
----------------------------------------------------------------------------------------
(iii) Stockholders and their representatives shall have the right
to review all work papers and procedures used to prepare the Final Quarterly
1997 Earn-Out Statement and shall have the right to perform any other reasonable
procedures necessary to verify the accuracy thereof. Unless Stockholders, within
30 days after delivery to Stockholders of the Final Quarterly 1997 Earn-Out
Statement, notify PGI in writing that they object to the Final Quarterly 1997
Earn-Out Statement, and specify the basis for such objection, such Final
Quarterly 1997 Earn-Out Statement shall become final, binding and conclusive
upon the Parties for purposes of this Agreement. If the Parties are unable to
resolve any objections to the Final Quarterly 1997 Earn-Out Statement within ten
days after any such notification has been given, PGI shall pay to the
Stockholders any undisputed amount of 1997 Additional Purchase Consideration and
the dispute shall be referred to Designated Accountant for resolution (or, if
the Designated Accountant is unavailable, to another nationally recognized
public accounting firm mutually agreed upon by Stockholders and PGI within five
days from the date upon which the Designated Accountant notifies the parties
that it is not available). Within 30 days the Designated Accountant will make a
determination as to each of the items in dispute, which determination shall be
final, conclusive and binding upon each of the Parties hereto, provided,
however, that if the amount of the dispute shall exceed $100,000, any Party that
disputes the Designated Accountant's determination may submit the matter for
binding arbitration in accordance with Section 8.15 hereof. PGI and the
Stockholders shall cooperate with each other and with each other's authorized
representatives in order to resolve any and all matters in dispute under this
Section 1.5(c) as soon as practicable, and each of PGI and the Shareholders
shall pay half of the fees and
------------
* Confidential information has been omitted and filed separately with the
Commission.
5
expenses of the Designated Accountant or of arbitration. The total amount of
1997 Additional Purchase Consideration owed to Stockholders hereunder shall be
the amount set forth on the Final Quarterly 1997 Earn-Out Statement as
determined in accordance with this Section 1.5(c)(iii) (the "Final 1997 Earn-Out
Amount").
(iv) On the Closing Date, PGI shall deposit * (the "Initial
Additional Purchase Consideration Amount") to an account maintained by the
Stockholders (the "Additional Purchase Consideration Account"). The Additional
Purchase Consideration Account shall be maintained by the Stockholders at United
States National Bank, Portland, Oregon (the "Designated Bank"). The Additional
Purchase Consideration Account (A) shall require for withdrawal the signature of
▇▇▇▇ ▇▇▇▇▇▇ as Stockholder Representative and the Chief Executive Officer of PGI
or his designee; and (B) shall be interest bearing with all interest paid to
PGI. Any 1997 Additional Purchase Consideration shown to be owed on any
Quarterly Earn-Out Estimate in excess of the Initial Additional Purchase
Consideration Amount shall be paid by PGI into the Additional Purchase
Consideration Account within 45 days following the end of the calendar quarter.
Notwithstanding the withdrawal mechanism set forth above, all funds in the
Additional Purchase Consideration Account shall be the sole and exclusive
property of the Stockholders. Any failure of the Stockholder Representative to
approve an authorized withdrawal as set forth herein shall constitute the breach
of a material covenant pursuant to this Agreement subject to the Stockholder
indemnification obligations as set forth herein.
(v) Withdrawals shall be permitted from the Additional Purchase
Consideration Account as follows:
(A) To PGI, following the preparation of the Quarterly Earn-
Out Estimate for the third quarter of 1997 or the Final Quarterly 1997 Earn-Out
Statement: (i) in the event that PTPECNI for year-to-date 1997 as set forth in
the Quarterly Earn-Out Estimate for the third quarter of 1997 or Final Quarterly
1997 Earn-Out Statement, as the case may be, is equal to or less than the Year
To Date PTPECNI Target listed in Table 1 above, or (ii) in the event that the
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Profit Margin for year-to-date 1997 is less than * ; in either of which events
PGI shall be entitled to receive the full amount in the Additional Purchase
Consideration Account.
(B) To PGI, to the extent of the excess of any amount in the
Additional Purchase Consideration Account over the Final 1997 Earn-Out Amount.
(C) To Stockholders, to pay the Final 1997 Earn-Out Amount.
(D) To PGI, on or before September 30, 1997, to reimburse PGI
for up to an aggregate of $250,000 of any Hall Contract Losses (as defined in
Section 7.2(e) hereof) in the event that the Stockholders do not pay the full
amount of any Hall Contract Loss (up to $250,000) within 30 days following
notice from PGI.
(E) To Stockholders, in the event an Accelerated Earn-Out
Event occurs.
-------------
* Confidential information has been omitted and filed separately with the
Commission.
6
(vi) PGI shall be obligated to pay Stockholders any amount of the
Final 1997 Earn-Out Amount in excess of the amount in the Additional Purchase
Consideration Account within 10 days following determination of the Final 1997
Earn-Out Amount in accordance with Section 1.5(c)(iii) hereof.
(d) Additional Purchase Consideration for 1998 - If applicable, PGI
------------------------------------------
shall pay to Stockholders the following additional sum (the "1998 Additional
Purchase Consideration") in the manner set forth below (the 1997 Additional
Purchase Consideration and the 1998 Additional Purchase Consideration shall be
collectively referred to herein as the "Additional Purchase Consideration"):
(i) (A) On or before 30 days following the end of March, June,
September and December of 1998, PGI shall prepare a Quarterly Earn-Out Estimate
to determine whether any 1998 Additional Purchase Consideration has been earned
in 1998 prior to or during such quarter. On or before April 30, 1999, PGI shall
deliver to Stockholders a statement (the "Final Quarterly 1998 Earn-Out
Statement") setting forth whether any 1998 Additional Purchase Consideration has
been earned during calendar year 1998.
(B) If (x) PTPECNI for year-to-date 1998 as set forth in a
Quarterly Earn-Out Estimate or Final Quarterly 1998 Earn-Out Statement, as the
case may be, is greater than the Year To Date PTPECNI Target set forth in (C)
below and (y) the Profit Margin for year-to-date 1998 is equal to or greater
than * , then PGI shall pay to the Stockholders in the manner set forth below
an amount equal to * of the amount by which (I) PTPECNI for year-to-date 1998
exceeds (II) the Year to Date PTPECNI Target set forth in (C) below, reduced by
any 1998 Additional Purchase Consideration paid previously.
(C) (a) Table 2 is as follows:
-------
------------------------------------------------------------------------------------------
Q1-1998 Q2-1998 Q3-1998 Q4-1998 1998
-------- ---------- ----------- ---------- ----------
QUARTERLY PTPECNI * * * * *
-------------------------------------------------------------------------------------------
YEAR TO DATE PTPECNI TARGET * * * * *
-------------------------------------------------------------------------------------------
(b) Notwithstanding the amounts set forth for Year to Date PTPECNI
Target in Table 2, such amounts shall be increased to the greater of the amount
for such target set forth in Table 2 and actual quarterly PTPECNI for 1997 as
-------
set forth on the Final Quarterly 1997 Earn-Out Statement.
(ii) Stockholders and their representatives shall have the right
to review all work papers and procedures used to prepare the Final Quarterly
1998 Earn-Out Statement and shall have the right to perform any other reasonable
procedures necessary to verify the accuracy thereof. Unless Stockholders, within
30 days after delivery to Stockholders of the Final Quarterly 1998 Earn-Out
Statement, notify PGI in writing that they object to the Final Quarterly 1998
Earn-Out Statement, and specify the basis for such objection, such Final
Quarterly
-------------
* Confidential information has been omitted and filed separately with the
Commission
7
1998 Earn-Out Statement shall become final, binding and conclusive upon
the Parties for purposes of this Agreement. If the Parties are unable to
resolve any objections to the Final Quarterly 1998 Earn-Out Statement within ten
days after any such notification has been given, PGI shall pay to the
Stockholders any undisputed amount of 1998 Additional Purchase Consideration and
the dispute shall be referred to the Designated Accountant for resolution.
Within 30 days the Designated Accountant will make a determination as to each of
the items in dispute, which determination shall be final, conclusive and binding
upon each of the Parties hereto, provided, however, that if the amount of the
dispute shall exceed $100,000, any Party that disputes the Designated
Accountant's determination may submit the matter for binding arbitration
pursuant to Section 8.15 hereof. PGI and the Stockholders shall cooperate with
each other and with each other's authorized representatives in order to resolve
any and all matters in dispute under this Section 1.5(d) as soon as practicable,
and each of PGI and the Shareholders shall pay half of the fees and expenses of
the Designated Accountant or of arbitration. The total amount of 1998
Additional Purchase Consideration owed to Stockholders hereunder shall be the
amount set forth on the Final Quarterly 1998 Earn-Out Statement as determined in
accordance with this Section 1.5(c)(ii) (the "Final 1998 Earn-Out Amount").
(iii) Any 1998 Additional Purchase Consideration shown to be owed
on any Quarterly Earn-Out Estimate shall be paid by PGI into the Additional
Purchase Consideration Account within 45 days following the end of the calendar
quarter. Notwithstanding the withdrawal mechanism set forth in Section
1.5(c)(iv) above, all funds in the Additional Purchase Consideration Account
shall be the sole and exclusive property of the Stockholders. Any failure of the
Stockholder Representative to approve an authorized withdrawal as set forth
herein shall constitute the breach of a material covenant pursuant to this
Agreement subject to the Stockholder indemnification obligations as set forth
herein.
(iv) Withdrawals shall be permitted from the Additional Purchase
Consideration Account as follows:
(A) To PGI, following the preparation of the Quarterly Earn-
Out Estimate for any quarter of 1998 or the Final Quarterly 1998 Earn-Out
Statement: (i) in the event that PTPECNI for year-to-date 1998 as set forth in
the Quarterly Earn-Out Estimate or Final Quarterly 1998 Earn-Out Statement, as
the case may be, is equal to or less than the Year To Date PTPECNI Target listed
in Section 1.5(d)(i)(C) above, or (ii) in the event that the Profit Margin for
year-to-date 1998 is less than * ; in either of which events PGI shall be
entitled to receive the full amount in the Additional Purchase Consideration
Account.
(B) To PGI, any remaining amount after the payment provided
for in Section 1.5(d)(iv)(C) below.
(C) To Stockholders, to pay the Final 1998 Earn-Out Amount.
(D) To Stockholders, in the event an Accelerated Earn-Out
Event occurs.
-----------
* Confidential information has been omitted and filed separately with the
Commission.
8
(v) PGI shall be obligated to pay Stockholders any amount of the
Final 1998 Earn-Out Amount in excess of the amount in the Additional Purchase
Consideration Account within 10 days following determination of the Final 1998
Earn-Out Amount in accordance with Section 1.5(d)(ii) hereof, and thereafter
shall have no further responsibility under this Section 1.5.
(e) Calculation Matters. For purposes of the calculation of 1997
-------------------
Additional Purchase Consideration and 1998 Additional Purchase Consideration,
PTPECNI and Profit Margin shall be calculated on a cash basis in a manner
consistent with the Business Plan (as hereinafter defined). Promptly following
the Closing, PGI and the Stockholders shall negotiate in good faith to establish
calculation principles on an accrual basis consistent with PGI's current
accounting methods. For purposes of the comparison of PTPECNI generated during
any present and prior calendar year, if PGI shall have expanded the scope of the
Existing ASM Business by the addition of a new business line or activity or any
New ASM Business to ASM in the present calendar year that shall have resulted in
a change in the amount of PTPECNI during such calendar year, the PTPECNI dollar
target and Profit Margin set forth above for calculation of Additional Purchase
Consideration shall be increased or decreased on a pro rata basis with respect
to such change. Stockholders acknowledge and agree that the Executive Committee
of the Board of Directors of PGI shall have unrestricted authority to exercise
its independent business judgment with regard to the affairs of ASM after the
Closing, including, without limitation, decisions with respect to appropriate
charges to ASM for expenses incurred by ASM, decisions as to expansion, if any,
and decisions as to ASM's business or redeployment of its assets, provided,
however, that material alterations in the allocation of expenses to ASM shall be
reasonable and shall be generally consistent with the business plan agreed to
among the Parties, as supplemented pursuant to Section 1.8 hereof (the "Business
Plan"), which is set forth as Section 1.5(e) of the disclosure schedule attached
--------------
hereto (the "Disclosure Schedule"). In calculating the amount of Additional
Purchase Consideration earned in 1997 or 1998, PGI shall make reference to the
Business Plan and the amount of Additional Purchase Consideration projected
thereunder.
(f) Stockholder Representative. The Stockholders hereby appoint ▇▇▇▇
--------------------------
Inglis as their representative (the "Stockholder Representative") for all
matters relating to this Agreement and the Purchase and Sale transaction,
including, without limitation, for purposes of the calculation of Additional
Purchase Consideration and for purposes of indemnification matters under Article
VII hereof. PGI may rely on all agreements reached with the Stockholder
Representative on behalf of the Stockholders, and all such agreements entered
into with such Stockholder Representative shall be final and binding on
Stockholders. The Stockholder Representative also shall be responsible for the
appropriate allocation of Purchase Consideration among the Stockholders.
1.6 Treatment of Stock.
------------------
From and after the Closing, all of the capital stock of ASM shall be
held by PGI.
9
1.7 Certain Tax Matters.
-------------------
(a) The Parties acknowledge that the Purchase and Sale of the Stock of
ASM will constitute a "qualified stock purchase" for purposes of Section
338(d)(3) of the Internal Revenue Code (the "Code") and that PGI intends to make
an "express election" pursuant to Section 338(g) of the Code and the regulations
thereunder with respect to each such Purchase and Sale. Stockholders warrant to
Purchaser that they are qualified to make a valid election under Section
338(h)(10) of the Code and Section 1.338(h)(10)-1(d)(1) of the Income Tax
Regulations with respect to such purchase. Stockholders and PGI agree to join
in making a valid election under Section 338(h)(10) of the Code with respect to
such purchase. Stockholders and PGI also agree to make the state law equivalent
of the Section 338(h)(10) election wherever such election is available. PGI
shall prepare Forms 8023 and submit them to Stockholders for signing. PGI and
Stockholders shall fully cooperate in making the elections under Section
338(h)(10) of the Code and similar available elections pursuant to applicable
state and local laws. The Parties agree to allocate the deemed purchase price
of the assets of ASM pursuant to the procedures in Section 1.7(g) below. In
connection with the foregoing, ASM and the Stockholders shall cause ▇▇▇▇▇▇▇ &
Company to provide appropriate PGI personnel with the information needed to
invoke the necessary and appropriate tax elections.
(b) Stockholders shall pay or cause to be paid all taxes (hereinafter,
"Election Taxes") arising as a result of the elections under Sections 338(g) and
338(h)(10) of the Code, or comparable provisions of state and local law,
provided, however, that if the Stockholders shall be required to pay a greater
amount of tax as a result of such elections than the Stockholders would have
been required to pay in connection with the transaction contemplated hereby had
no such elections been made, then PGI shall reimburse the Stockholders an amount
equal to the excess of (i) the lesser of (A) the federal income tax amount
resulting from such election or (B) the federal income tax amount that would
have resulted from such election if ASM had qualified as an S corporation at all
times from the date of its formation through the opening of business on the
Closing Date over (ii) the federal income tax amount that would have resulted in
the absence of such election.
(c) Stockholders and PGI shall cooperate fully with each other and
make available or cause to be made available to each other in a timely fashion
such tax data, prior tax returns and filings and other information as may be
reasonably required for the preparation by PGI or Stockholders of any tax
returns, elections, consents or certificates required to be prepared and filed
by PGI or Stockholders and any audit or other examination by any taxing
authority, or judicial or administrative proceeding relating to liability for
Election Taxes. Purchaser and Stockholders will each retain and provide to the
other party all records and other information which may be relevant to any Tax
Return (as defined in Section 2.9 hereof), audit or examination, proceeding or
determination, and will each provide the other Party with any final
determination of any such audit or examination, proceeding or determination that
affects any amount required to be shown on any Tax Return of the other Party for
any period. Without limiting the generality of the foregoing, each of PGI and
Stockholders will retain copies of all Tax Returns, supporting work schedules
and other records relating to tax periods or portions thereof ending prior to or
on the Closing Date. PGI will cause appropriate personnel to prepare usual and
customary tax return packages for (i) the tax period ending December 31, 1997
(the "1997 Packages") and (ii) the tax
10
period beginning as of January 1, 1997, and ending as of the Closing Date (the
"Short Period Packages") (collectively, a "Package" or the "Packages"). Except
as otherwise provided below, the 1997 Packages will be delivered to Stockholders
not later than June 1, 1998 and the Short Period Packages will be delivered to
Stockholders not later than 120 days after the Closing Date. If PGI cannot
deliver the Packages on or before the prescribed times without incurring
additional out-of-pocket expenses, it may notify Stockholders of that fact not
later than 30 days prior to the prescribed date of delivery of such Package. If
Stockholders agree to reimburse PGI for the additional out-of-pocket expenses of
timely delivery of the Packages, then PGI shall deliver the Packages at the
times prescribed herein. If Stockholders does not agree to reimburse PGI for the
additional out-of-pocket expenses of timely delivery of the Packages, PGI shall
deliver the Packages to Stockholders as soon after the initially prescribed
times as is reasonably practicable, PGI having no obligation to incur additional
out-of-pocket expenses to accelerate the delivery. PGI will provide Stockholders
with any necessary payroll records attributable to the period prior to the
Closing Date.
(d) Any sales, transfer, use or other similar taxes imposed as a
result of the sale of the Stock to PGI pursuant to this Agreement shall be borne
by Stockholders. At the Closing, PGI shall remit to Stockholders such properly
completed resale exemption certificates and other similar certificates or
instruments as are necessary to claim available exemptions from the payment of
sales, transfer, use or other similar taxes under applicable law. All
recording, transfer and other similar taxes and fees payable as a result of the
public recordation of the instruments of conveyance or transfer of the Stock
executed and delivered to PGI pursuant to this Agreement shall be allocated
between the PGI and the Stockholders in accordance with the customary practice
prevailing in Oregon.
(e) Stockholders shall be responsible for, and shall indemnify and
hold harmless, PGI and its officers, directors and shareholders in respect of
any damages attributable to all Election Taxes with respect to the ownership or
operation of ASM on or prior to the Closing Date and PGI or its affiliates shall
be responsible for, and shall indemnify and hold harmless Stockholders and their
affiliates in respect of any damages attributable to all Election Taxes with
respect to the ownership or operation of ASM after the Closing Date.
Stockholders' share of all real and personal property taxes, state and local ad
valorem taxes and assessments applicable to ASM for any period commencing on or
prior to the Closing Date and ending after the Closing Date shall be determined
on a pro rata basis based on the length of such period and when the Closing Date
occurs therein.
(f) Stockholders and PGI agree that the Purchase and Sale contemplated
by this Agreement constitutes a sale of a trade or business within the meaning
of Section 41(f)(3) of the Code. Stockholders agree to provide PGI upon request
with all information necessary to permit PGI to timely apply the provisions of
Section 41(f)(3)(A) of the Code with respect to ASM. Stockholders agree to
furnish PGI upon request clearance certificates or similar documents that may be
required by any state, local or other taxing authority to relieve PGI of any
obligations to withhold any portion of the purchase consideration to be
transferred pursuant to this Article I.
11
(g) The Purchase Consideration, including the Base Purchase
Consideration and the Additional Purchase Consideration, if any, shall be
allocated among the assets of ASM as provided in Section 338 of the Code and the
Treasury Regulations thereunder, which allocation is as set forth on Schedule
--------
1.7(g) attached hereto (which Schedule shall be completed by the Parties prior
------
to the Closing). PGI and ASM each agree to file Form 8594 and any other
relevant income tax returns and reports in a manner consistently reflecting the
allocations set forth on Schedule 1.7(g). Stockholders agree to provide PGI and
---------------
its representatives (including without limitation the appraiser) reasonable
access to the assets and records of Stockholders prior to the Closing. PGI and
Stockholders shall not take any position on their respective Tax Returns that is
inconsistent with such allocation of the Purchase Consideration, and PGI and
Stockholders shall duly prepare and timely file such reports and information
returns as may be required to report the allocation of the Purchase
Consideration pursuant to this Section 1.7(g). The Parties acknowledge that the
Purchase Consideration subject to allocation will be different amounts for each
of PGI and Stockholders (e.g., due to inclusion of differing amounts of
transaction costs).
(h) In the event any taxing authority mistakenly delivers to or
otherwise credits PGI with a refund relating to taxes paid or arising in periods
prior to the Closing Date, PGI will promptly negotiate such refund to
Stockholders or pay an amount equal to such credit to Stockholders, as the case
may be.
1.8 Business Plan.
-------------
After Closing, the Stockholders will have an interest in ASM
represented by the right to receive 1997 Additional Purchase Consideration and
the 1998 Additional Purchase Consideration, if any, as provided herein. In
order to (a) provide for an orderly integration of the Business into the
operations of PGI and (b) protect the Stockholders' opportunity to receive
Additional Purchase Consideration, PGI agrees that PGI will subscribe to the
Business Plan for the operation of ASM during the period beginning on the
Closing Date and continuing until the end of calendar year 1998. The Business
Plan for calendar year 1997 is attached hereto as Section 1.5(e) of the
--------------
Disclosure Schedule and expresses the general intent for the business operations
and objectives of ASM in such calendar year 1997. No later than December 1,
1997, the Stockholders shall submit a supplemented Business Plan that shall
address calendar 1998 and that shall provide a reasonable plan for achieving the
PTPECNI target set forth in Section 1.5(d) hereof, which supplemental Business
Plan shall be subject to the review and approval (which approval shall not be
unreasonably withheld) of the Executive Management Team of PGI. During calendar
years 1997 and 1998, the Parties will conduct themselves in substantial
accordance with the Business Plan, provided, however, that PGI shall have the
right to alter the Business Plan if PGI determines, in the reasonable exercise
of its discretion and following reasonable consultation and discussion with the
Stockholder Representative, that continuing to operate ASM in accordance with
the Business Plan as then drafted is not likely to achieve the targets or
objectives set forth in the Business Plan or that changed business conditions
make such alteration advisable. Notwithstanding the foregoing, if PGI changes
the Business Plan in a manner that causes the Stockholders to receive less
Additional Purchase Consideration than they would have received without such
change, then PGI and the Stockholder Representative shall negotiate in good
faith to
12
reach mutual agreement concerning an equitable adjustment to the calculation
principles with respect to Additional Purchase Consideration in the future.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF ASM
AND THE STOCKHOLDERS
ASM and each of the Stockholders (other than ▇▇▇▇▇▇▇▇) jointly and
severally represent and warrant to PGI as follows and ▇▇▇▇▇▇▇▇ represents and
warrants to PGI as set forth in Sections 2.14, 2.17, 2.26, 2.28 and 2.29:
2.1 Organization, Qualification and Corporate Power.
-----------------------------------------------
ASM is a corporation duly organized, validly existing and in corporate
and tax good standing under the laws of the State of Oregon. Except as set
forth in Section 2.1 of the Disclosure Schedule, ASM is duly qualified to
-----------
conduct business and is in corporate and tax good standing under the laws of
each jurisdiction in which the nature of its businesses or the ownership or
leasing of its properties requires such qualification. Except as set forth in
Section 2.1 of the Disclosure Schedule, ASM has had no written or oral notice or
-----------
other communication with any Governmental Entity (as defined in Section 2.4
hereof) with respect to the failure of ASM to qualify to do business in any
jurisdiction. Except as set forth in Section 2.1 of the Disclosure Schedule,
-----------
ASM has the corporate power and authority to carry on the businesses in which it
is engaged and to own and use the properties owned and used by it. ASM has
furnished or made available to PGI true and complete copies of its Articles of
Incorporation and By-laws, each as amended and as in effect on the date hereof
(hereinafter "Articles of Incorporation" and "By-laws," respectively). Except
as set forth in Section 2.1 of the Disclosure Schedule, ASM is not in default
-----------
under or in violation of any provision of its Articles of Incorporation or By-
laws, each as amended to date. Other than the interests listed in Section 2.5
-----------
of the Disclosure Schedule, ASM does not have any direct or indirect
subsidiaries or any other equity interest in any other firm, corporation,
partnership, joint venture, association or other business organization.
2.2 Capitalization.
--------------
The authorized capital stock of ASM consists of one thousand (1,000)
shares of Common Stock. Section 2.2 of the Disclosure Schedule sets forth the
-----------
number of such shares that are issued and outstanding and the number of such
shares held in the treasury of ASM, as well as a complete and accurate list of
(i) all stockholders of ASM, indicating the type and number of shares of ASM
capital stock held by each stockholder, and (ii) all holders of options and
warrants and conditional stock entitlements, indicating the type and number of
shares of ASM capital stock subject to each option and warrant and conditional
stock entitlement and the exercise price thereof. All of the issued and
outstanding shares of ASM capital stock are, and all shares of ASM capital stock
that may be issued upon exercise of options and warrants and conditional stock
entitlement will be, duly authorized, validly issued, fully paid, non-assessable
and free of all preemptive rights, except as set forth in Section 2.2 of the
-----------
Disclosure Schedule. Except as set
13
forth in Section 2.2 of the Disclosure Schedule, there are no declared or
-----------
accrued but unpaid dividends with regard to any issued and outstanding shares of
ASM capital stock. Holders of issued and outstanding ASM Stock have no basis for
asserting rights to rescind the purchase of any such ASM Stock. Except as set
forth in Section 2.2 of the Disclosure Schedule, there are no
-----------
outstanding or authorized options, warrants, rights, calls, convertible
instruments, agreements or commitments to which ASM is a party or which are
binding upon ASM providing for the issuance, disposition or acquisition of any
of its capital stock. There are no outstanding or authorized stock appreciation,
phantom stock or similar rights with respect to ASM. There are no agreements,
voting trusts, proxies, or understandings with respect to the voting, or
registration under the Securities Act, of any ASM Stock (i) between or among ASM
and any of its stockholders and (ii) to the best of ASM's knowledge, between or
among any of ASM's stockholders. All of the issued and outstanding ASM Stock was
issued in compliance with applicable federal and state securities laws.
2.3 Authorization of Transaction.
----------------------------
ASM has the corporate power and authority to execute and deliver this
Agreement and to perform its obligations hereunder. The execution and delivery
of this Agreement, the performance by ASM of this Agreement and the consummation
by ASM of the transactions contemplated hereby have been duly and validly
authorized by the necessary corporate action on the part of ASM. This Agreement
has been duly and validly executed and delivered by ASM and, assuming the due
authorization, execution and delivery by PGI, constitutes a valid and binding
obligation of ASM, enforceable against ASM in accordance with its terms, except
as enforcement may be limited by bankruptcy, insolvency or other similar laws
affecting the enforcement of creditors' rights and remedies generally, and
except that the availability of equitable remedies, including specific
performance, is subject to the discretion of the court before which any
proceeding therefor may be brought.
2.4 Non-Contravention.
-----------------
Subject to Section 2.14(b) of the Disclosure Schedule and Section
--------------- -------
5.2(f) hereof, neither the execution and delivery of this Agreement by ASM, nor
------
the consummation by ASM of the transactions contemplated hereby, will (a)
conflict with or violate any provision of the Articles of Incorporation or By-
laws of ASM, (b) require on the part of the Stockholders, ASM or any corporation
with respect to which ASM, directly or indirectly, has the power to vote or
direct the voting of sufficient securities to elect a majority of the directors
(a "Subsidiary") any filing with, or any permit, authorization, consent or
approval of, any United States federal or state court, arbitral tribunal,
administrative agency or commission or other United States federal or state
governmental or regulatory authority or agency (a "Governmental Entity"), (c)
conflict with, result in a breach of, constitute (with or without due notice or
lapse of time or both) a default under, result in the acceleration of, create in
any party the right to accelerate, terminate, modify or cancel, or require
notice, consent or waiver under, any contract, lease, sublease, license,
sublicense, franchise, permit, indenture, agreement or mortgage for borrowed
money, instrument of indebtedness, Security Interest (as defined below) or other
arrangement to which the Stockholders, ASM or any Subsidiary is a party or by
which ASM or any Subsidiary is bound or to which any of their assets is subject,
(d) result in the imposition of a Security Interest upon any
14
assets of ASM or any Subsidiary or (e) violate any order, writ, injunction,
decree, statute, rule or regulation applicable to ASM, any Subsidiary or any of
their properties or assets. For purposes of this Agreement, "Security Interest"
means any mortgage, pledge, security interest, encumbrance, charge, or other
lien (whether arising by contract or by operation of law), other than
(i) mechanic's, materialmen's, and similar liens, (ii) liens arising under
worker's compensation, unemployment insurance, social security, retirement, and
similar legislation, and (iii) liens on goods in transit incurred pursuant to
documentary letters of credit, in each case arising in the ordinary course of
business consistent with past custom and practice (including with respect to
frequency and amount) ("Ordinary Course of Business") and not material.
2.5 Subsidiaries.
------------
ASM currently has no Subsidiaries and never has had any Subsidiaries.
Section 2.5 of the Disclosure Schedule discloses each equity or ownership
-----------
interest (by way of stock ownership, joint venture or otherwise) in any other
firm, corporation, partnership, joint venture, association or other business
organization held by ASM or by the Stockholders in connection with the Business.
2.6 Financial Statements.
--------------------
(a) ASM has provided or made available to PGI the unaudited
consolidated balance sheet, statement of operations and statement of cash flows
as of November 30, 1996 and for the eleven month period ended as of November 30,
1996 (the "Most Recent Balance Sheet Date"). Such financial statements
(collectively, the "Financial Statements") have been prepared in accordance with
generally accepted accounting principles ("GAAP"), fairly present the financial
condition, results of operations and cash flows of ASM as of the dates thereof
and for the periods referred to therein and are consistent with the books and
records of ASM.
(b) To the best of the Stockholders' knowledge, the quarterly PTPECNI
figures set forth in the top line of Table 1 in Section 1.5(c)(ii)(C) hereof,
-------
labeled "Quarterly PTPECNI," are approximately the true and accurate Pre-Tax,
Pre-Executive Compensation Net Income amounts actually earned by ASM during the
corresponding quarter of calendar year 1996, calculated in the same manner as
PTPECNI is to be calculated pursuant to this Agreement. As used herein in this
Section 2.6(b), "approximately true and accurate" shall mean having a cumulative
margin of error of less than 10%.
2.7 Absence of Certain Changes.
--------------------------
Since [November 30], 1996, (a) there has not been any material adverse
change in the assets, business, financial condition or results of operations of
ASM (taken as a whole), nor has there occurred any event or development which
could reasonably be foreseen to result in such a material adverse change in the
future, and (b) ASM has not taken any unapproved actions set forth in Section
4.3(a).
15
2.8 Undisclosed Liabilities.
-----------------------
ASM has no liability (whether known or unknown, whether absolute or
contingent, whether liquidated or unliquidated and whether due or to become
due), except for (a) liabilities accrued or reserved against on the November 30,
1996 unaudited balance sheet of ASM attached hereto as Section 2.8 of the
-----------
Disclosure Schedule (the "Most Recent Balance Sheet"), (b) liabilities which
have arisen since November 30, 1996 in the Ordinary Course of Business, (c)
contractual or statutory liabilities incurred in the Ordinary Course of Business
which are not required by GAAP to be reflected on a balance sheet, (d)
liabilities disclosed in Section 2.8 of the Disclosure Schedule or the other
-----------
portions of the Disclosure Schedule, and (e) liabilities adequately reserved
against in the Most Recent Balance Sheet.
2.9 Tax Matters.
-----------
(a) Except as set forth in Section 2.9 of the Disclosure Schedule, (i)
-----------
ASM has filed all Tax Returns heretofore required to be filed by the Code or by
applicable state, local or foreign tax laws, and all such Tax Returns are or
will be correct and complete in all material respect; (ii) all Taxes (as
hereinafter defined) required to be shown to be due on such Tax Returns have
been or will be timely paid in full; (iii) no taxing authority has asserted any
deficiency in the payment of any Tax or informed ASM that it intends to assert
any such deficiency or to make any audit or other investigation of ASM for the
purpose of determining whether such an assertion should be made against ASM;
(iv) ASM has no liability for Taxes imposed with respect to any period (or
portion thereof) ending on or before the Closing Date in excess of the accruals
and reserves for Taxes (other than deferred Taxes) set forth on the Most Recent
Balance Sheet; and (v) ASM has complied in all material respects with all
applicable laws, rules and regulations relating to the payment and withholding
of Taxes and has withheld all amounts required by law to be withheld from the
wages or salaries of employees and independent contractors, and is not liable
for any Taxes for failure to comply with such laws, rules and regulations.
(x) For purposes of this Agreement, "Taxes" means all taxes,
charges, fees, levies or other similar assessments or
liabilities, including without limitation income, gross
receipts, ad valorem, premium, value-added, excise, real
property, personal property, sales, use, transfer,
withholding, employment, payroll and franchise taxes imposed
by the United States of America or any state, local or
foreign government, or any agency thereof, or other
political subdivision of the United States or any such
government, and any interest, fines, penalties, assessments
or additions to tax resulting from, attributable to or
incurred in connection with any tax or any contest or
dispute thereof and any amounts of Taxes of another person
that ASM is liable to pay by law.
(y) For purposes of this Agreement, "Tax Returns" means all
reports, returns, declarations, statements or other
information required to be supplied to a taxing authority in
connection with Taxes.
16
(z) For purposes of determining the amount of Taxes attributable
to a specified period other than a Tax Period (as
hereinafter defined) (including the portion of any Tax
Period beginning before and ending after the Closing Date
which ends on the Closing Date), each Tax shall be computed
as if the specified period were a Tax Period. For purposes
of this paragraph (z), a "Tax Period" means a period for
which a Tax is required to be computed under applicable
statues and regulations.
(b) Except as set forth in Section 2.9 of the Disclosure Schedule, ASM
-----------
has delivered or made available to PGI correct and complete copies of all
federal income Tax Returns, examination reports and statements of deficiencies
assessed against or agreed to by any of ASM since December 31, 1993. The
federal income Tax Returns of ASM have been audited by the Internal Revenue
Service or are closed by the applicable statute of limitations for the taxable
years prior to fiscal 1993. No examination or audit or any Tax Returns of ASM
by any Governmental Entity is currently in progress or, to the actual knowledge
of ASM, threatened or contemplated. ASM has not waived any statute of
limitations with respect to taxes or agreed to an extension of time with respect
to a tax assessment or deficiency.
(c) ASM is not a party to any Tax allocation or sharing agreement
other than an agreement to which only ASM and its affiliates are a party.
(d) ASM is not, and has never been, a member of an "affiliated group"
of corporations (within the meaning of Section 1504 of the Code).
(e) No consent under Section 341(f) of the Code has ever been
filed with respect to ASM.
(f) Each of the Stockholders is a citizen or resident of the
United States.
2.10 Assets.
------
Except as set forth in Section 2.10 of the Disclosure Schedule, ASM
------------
has good and marketable title to all tangible assets necessary for the conduct
of its businesses as presently conducted. Each such tangible asset is free from
material defects, has been maintained in accordance with normal industry
practice, is in good operating condition and repair (subject to normal wear and
tear) and is suitable for the purposes for which it presently is used. No asset
of ASM (tangible or intangible) is subject to any Security Interest, except the
following: (a) liens shown on the Most Recent Balance Sheet securing specified
liabilities or obligations with respect to which no material default exists (or
event that, whether with or without notice, lapse of time, or the happening or
occurrence of any other event would constitute a default); (b) exceptions
disclosed in Section 2.10 of the Disclosure Schedule; and (c) liens for current
------------
taxes not yet due and payable for which adequate reserves have been provided.
17
2.11 Owned Real Property.
-------------------
ASM owns no real property.
2.12 Intellectual Property.
---------------------
(a) Except as set forth in Section 2.12 of the Disclosure Schedule,
------------
ASM owns, or is licensed or otherwise possesses legally enforceable rights to
use, all patents, trademarks, trade names, service marks, copyrights, and any
applications for such patents, trademarks, trade names, service marks and
copyrights, and all patent rights, trade secrets, schematics, technology, know-
how, computer software programs or applications and tangible or intangible
proprietary information or material (collectively, "Intellectual Property") that
are used to conduct its business as currently conducted or planned by ASM to be
conducted. ASM has taken reasonable measures to protect the proprietary nature
of each item of Intellectual Property that it considers confidential, and to
maintain in confidence all trade secrets and confidential information that it
presently owns or uses.
(i) Section 2.12 of the Disclosure Schedule lists all patents
------------
and patent applications and all trademarks, registered
copyrights, trade names and service marks owned by ASM and
which are used in the business of ASM, including the
jurisdictions in which each such Intellectual Property right
has been issued or registered or in which any such
application for such issuance or registration has been
filed.
(ii) Section 2.12 of the Disclosure Schedule lists all written
------------
licenses, sublicenses and other agreements to which ASM is a
party and pursuant to which any person is authorized to use
any Intellectual Property rights, except such licenses,
sublicenses or other agreements with end-users that grant
non-exclusive rights to use a product in accordance with
ASM's standard form of end-user license agreement.
(iii) Section 2.12 of the Disclosure Schedule lists all written
------------
licenses, sublicenses and other agreements as to which ASM
is a party and pursuant to which ASM is authorized to use
any third party patents, patent rights, trademarks, service
marks, trade secrets or copyrights, including software
("Third Party Intellectual Property Rights") which are used
in the business of ASM or which are incorporated in any
existing product or service of ASM.
(iv) Section 2.12 of the Disclosure Schedule lists all written
------------
agreements or other arrangements under which ASM has
provided or agreed to provide source code of any product to
any third party, except for software development kits
provided to agent integration providers.
18
ASM has made available to PGI correct and complete copies of
all such patents, registrations, applications (owned by
ASM), and all licenses, sublicenses and agreements as
amended to date. Except for retail purchases of software,
ASM is not a party to any oral license, sublicense or
agreement which, if reduced to written form, would be
required to be listed in Section 2.12 of the Disclosure
------------
Schedule under the terms of this Section 2.12(a).
(b) Except as set forth in Section 2.12 of the Disclosure Schedule,
------------
with respect to each item of Intellectual Property that ASM owns: (i) subject
to such rights as have been granted by ASM under license agreements entered into
by ASM (copies of which have previously been made available or disclosed in
writing to PGI), ASM possesses all right, title and interest in and to such
item; and (ii) such item is not subject to any outstanding judgment, order,
decree, stipulation or injunction. Except as set forth in Section 2.12 of the
------------
Disclosure Schedule, with respect to each item of Third Party Intellectual
Property Rights: (i) the license, sublicense or other agreement covering such
item is legal, valid, binding, enforceable and in full force and effect with
respect to ASM, and to ASM's knowledge is legal, valid, binding, enforceable and
in full force and effect with respect to each other party thereto; (ii) such
license, sublicense or other agreement will continue to be legal, valid,
binding, enforceable and in full force and effect immediately following the
Closing in accordance with the terms thereof as in effect prior to the Closing;
(iii) ASM is not in breach or default under any such license, sublicense or
other agreement, and to ASM's knowledge no other party to such license,
sublicense or other agreement is in breach or default thereunder, and no event
has occurred which with notice or lapse of time would constitute a breach or
default or permit termination, modification or acceleration thereunder; (iv) the
underlying item of Third Party Intellectual Property is not subject to any
outstanding judgment, order, decree, stipulation or injunction to which ASM is a
party or has been specifically named, nor to ASM's knowledge subject to any
other outstanding judgment, order, decree, stipulation, or injunction; and (v)
no license or other fee is payable upon any transfer or assignment of such
license, sublicense or other agreement.
(c) Except as set forth in Section 2.12 of the Disclosure Schedule,
------------
ASM (i) has not been named in any suit, action or proceeding which involves a
claim of infringement or misappropriation of any Intellectual Property right of
any third party and (ii) has not received any written notice alleging any such
claim of infringement or misappropriation. ASM has made available to PGI
correct and complete copies of all such suits, actions or proceedings or written
notices to the extent ASM is not prohibited from disclosing the same under
applicable court orders. Except as set forth in Section 2.12 of the Disclosure
------------
Schedule, the manufacturing, marketing, licensing or sale of the products or
performance of the service offerings of ASM do not currently infringe, and, to
Stockholders' knowledge, have not within the six years prior to the date of this
Agreement infringed, any Intellectual Property right of any third party; and to
the knowledge of ASM, the Intellectual Property rights of ASM are not being
infringed by activities, products or services of any third party.
19
2.13 Real Property Leases.
--------------------
Section 2.13 of the Disclosure Schedule lists all real property leased
------------
or subleased to ASM. ASM has delivered or made available to PGI correct and
complete copies of the leases and subleases (as amended to date) listed in
Section 2.13 of the Disclosure Schedule. Except as set forth in Section 2.13 of
------------ ------------
the Disclosure Schedule, with respect to each lease and sublease listed in
Section 2.13 of the Disclosure Schedule:
------------
(a) the lease or sublease is legal, valid, binding, enforceable and in
full force and effect with respect to ASM, to ASM's best knowledge is legal,
valid, binding, enforceable and in full force and effect with respect to each
other party thereto, and will continue to be so following the Closing in
accordance with the terms thereof as in effect prior to the Closing, except as
enforcement may be limited by bankruptcy, insolvency or other similar laws
affecting the enforcement of creditors' rights generally and the availability of
equitable remedies;
(b) ASM is not in breach or default under any lease or sublease, and
to ASM's best knowledge no other party to the lease or sublease is in breach or
default, and no event has occurred which, with notice or lapse of time, would
constitute a breach or default or permit termination, modification, or
acceleration thereunder;
(c) there are no disputes, oral agreements or forbearance
programs in effect as to the lease or sublease; and
(d) ASM has not assigned, transferred, conveyed, mortgaged, deeded in
trust or encumbered any interest in the leasehold or subleasehold.
2.14 Contracts.
---------
(a) Section 2.14 of the Disclosure Schedule lists the following
------------
written arrangements (including, without limitation, written agreements) to
which Stockholders in connection with the Business or ASM is currently a party
and which has not been terminated in accordance with its terms:
(i) any written arrangement (or group of related written
arrangements) for the lease of personal property from or to
third parties providing for lease payments in excess of
$10,000 per annum;
(ii) any written arrangement (or group of related written
arrangements) for the licensing or distribution of software,
products or other personal property or for the furnishing or
receipt of services (x) which calls for performance over a
period of more than one year, (y) which involves more than the
sum of $5,000, or (z) in which ASM has granted rights to
license, sublicense or copy, "most favored nation" pricing
provisions or exclusive marketing or distribution rights
relating to any products or territory or has agreed
20
to purchase a minimum quantity of goods or services or has
agreed to purchase goods or services exclusively from a
certain party;
(iii) any written arrangement establishing a partnership or
joint venture;
(iv) any written arrangement (or group of related written
arrangements) under which it has created, incurred, assumed,
or guaranteed (or may create, incur, assume, or guarantee)
indebtedness (including capitalized lease obligations)
involving more than $5,000 or under which it has imposed (or
may impose) a Security Interest on any of its assets, tangible
or intangible;
(v) any written arrangement concerning confidentiality or non-
competition;
(vi) any written arrangement relating to the Business
involving the Stockholders or their affiliates (as defined in
Rule 12b-2 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act");
(vii) any written arrangement under which the consequences of
a default or termination could have a material adverse effect
on the assets, business, financial condition or results of
operations of ASM;
(viii) any other written arrangement (or group of related
written arrangements) either involving more than $5,000 or not
entered into in the Ordinary Course of Business;
(ix) any written arrangement by which ASM agrees to make
available any particular product, service or maintenance or
support;
(x) all leases or contracts for the rental of any convention
center or similar exhibition hall during 1997 (the "1997 Hall
Contracts"); and
(xi) any written agreement material to the operations of ASM
or binding on Stockholders in connection with the Business or
ASM and not listed above.
(b) Except as set forth on Section 2.14 of the Disclosure Schedule,
------------
SM has delivered or made available to PGI a correct and complete copy of each
written arrangement (as amended to date) listed in Section 2.14 of the
------------
Disclosure Schedule. Except as set forth in Section 2.14 of the Disclosure
------------
Schedule, with respect to each written arrangement so listed: (i) the written
arrangement is legal, valid,
21
binding and enforceable and in full force and effect with respect to ASM and, to
ASM's knowledge the written arrangement is legal, valid, binding and is
enforceable and in full force and effect with respect to each other party
thereto, except as enforcement may be limited by bankruptcy, insolvency or other
similar laws affecting the enforcement of creditors' rights generally, and
except that the availability of equitable remedies, including specific
performance, is subject to the discretion of the Court before which any
proceedings therefor may be brought; (ii) the written arrangement will continue
to be legal, valid, binding and enforceable and in full force and effect
immediately following the Closing in accordance with the terms thereof as in
effect prior to the Closing and does not require the consent of any party to the
transactions contemplated hereby; and (iii) ASM is not in breach or default, to
ASM's knowledge no other party thereto is in breach or default, and no event has
occurred which with notice or lapse of time would constitute a breach or default
or permit termination, modification, or acceleration, under the written
arrangement. Except as set forth in Section 2.14 of the Disclosure
------------
Schedule, ASM is not a party to any oral contract, agreement or other
arrangement which, if reduced to written form, would be required to be listed in
Section 2.14 of the Disclosure Schedule under the terms of this
------------
Section 2.14.
2.15 Powers of Attorney.
------------------
There are no outstanding powers of attorney executed on behalf of
Stockholders in connection with the Business or ASM.
2.16 Insurance.
---------
Section 2.16 of the Disclosure Schedule lists each current insurance
------------
policy (including fire, theft, casualty, general liability, workers
compensation, business interruption, environmental, product liability and
automobile insurance policies and bond and surety arrangements) to which ASM is
a party, a named insured, or otherwise the beneficiary of coverage at any time
within the past year. Except as set forth in Section 2.16 of the Disclosure
------------
Schedule, each such policy is in full force and effect and will continue to be
in full force and effect following the Closing. During the past three years,
ASM has not been denied insurance for any reason.
ASM is not in breach or default (including with respect to the payment
of premiums or the giving of notices) under such policy, and no event has
occurred which, with notice or the lapse of time, would constitute such a breach
or default or permit termination, modification or acceleration, under such
policy; and ASM has not received any notice from the insurer disclaiming
coverage or reserving rights with respect to a particular claim or such policy
in general. Except as set forth in Section 2.16 of the Disclosure Schedule,
------------
within the last year, ASM has not incurred any loss, damage, expense or
liability covered by any such insurance policy for which it has not properly
asserted a claim under such policy. ASM is covered by insurance in scope and
amount customary and reasonable for the businesses in which it is engaged.
2.17 Litigation.
----------
(a) Section 2.17 of the Disclosure Schedule identifies, and contains a
------------
brief description of, (i) any unsatisfied judgment, order, decree, stipulation
or injunction and (ii) any claim, complaint, action, suit, proceeding, hearing
or investigation of or in any Governmental
22
Entity or before any arbitrator affecting ASM to which ASM or any officer,
director, employee, Stockholder or agent of ASM is or was (for the five years
prior to and including the date hereof) a party or, to the knowledge of
Stockholders or ASM, is threatened to be made a party. Other than
as set forth in Section 2.17 of the Disclosure Schedule, none of the complaints,
------------
actions, suits, proceedings, hearings, and investigations set forth in
Section 2.17 of the Disclosure Schedule, if determined adversely to ASM,
------------
could have a material adverse effect on the assets, business, financial
condition or results of the operations of ASM taken as a whole.
(b) ASM has provided or has made available any agreement or other
document or instrument settling any claim, complaint, action, suit or other
proceeding, or a threat of any such claim, complaint, action, suit or other
proceedings, against ASM.
2.18 Employees.
---------
Section 2.18 of the Disclosure Schedule contains a list of all
------------
employees of ASM, along with the position of each such person. Section 2.18 of
------------
the Disclosure Schedule lists (i) the annual rate of compensation for each such
person, (ii) the terms of any bonus program applicable to such employee, and
(iii) the name of each such employee who has entered into an agreement with ASM
concerning confidentiality, non-competition, or assignment of inventions. A
copy of each such agreement has previously been delivered or made available to
PGI. To the knowledge of ASM, no key employee or group of employees has any
current plans to terminate employment with ASM following the Closing. ASM is
not a party to or bound by any collective bargaining agreement, nor has any of
them experienced any strikes, formal grievances, claims of unfair labor
practices or other collective bargaining disputes. ASM has no knowledge of any
organizational effort made or threatened, either currently or within the past
two years, by or on behalf of any labor union with respect to employees of ASM.
Except as set forth in Section 2.18 of the Disclosure Schedule, ASM is not in
------------
violation, nor has it been alleged to be in violation, nor has it been charged
with any violation, nor is ASM 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. Except as set forth in Section 2.18 of
------------
the Disclosure Schedule, ASM is not liable for any accrued unpaid wages,
vacation pay, bonuses, or commissions, or for any material tax, penalty,
assessment, or forfeiture for failure to comply with any employer/employee
matter.
2.19 Employee Benefits.
-----------------
(a) Section 2.19 of the Disclosure Schedule contains a complete and
------------
accurate list of all Employee Benefit Plans (as defined below) maintained, or
contributed to, by ASM or any ERISA Affiliate (as defined below). For purposes
of this Agreement, "Employee Benefit Plan" means any "employee pension benefit
plan" (as defined in Section 3(2) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA")), any "employee welfare benefit plan" (as defined
in Section 3(1) of ERISA), and any other written or oral plan, agreement or
arrangement involving direct or indirect compensation, including without
limitation
23
insurance coverage, severance benefits, disability benefits, deferred
compensation, bonuses, stock options, stock purchase, phantom stock, stock
appreciation or other forms of incentive compensation or post-retirement
compensation. For purposes of this Agreement, "ERISA Affiliate" means any
entity which is a member of (i) a controlled group of corporations (as defined
in Section 414(b) of the Code), (ii) a group of trades or businesses under
common control (as defined in Section 414(c) of the Code), or (iii) an
affiliated service group (as defined under Section 414(m) of the Code or the
regulations under Section 414(o) of the Code), any of which includes ASM.
Complete and accurate copies of (i) all Employee Benefit Plans which have been
reduced to writing, (ii) written summaries of all unwritten Employee Benefit
Plans, if any, (iii) all related trust agreements, insurance contracts and
summary plan descriptions, and (iv) all annual reports filed on IRS Form 5500,
5500C or 5500R for the last five plan years for each Employee Benefit Plan, have
been delivered or made available to PGI. Each Employee Benefit Plan has been
administered in accordance with its terms and each of ASM and the ERISA
Affiliates has met its obligations with respect to such Employee Benefit Plan
and has made all required contributions thereto. ASM and all Employee Benefit
Plans are in compliance with the currently applicable provisions of ERISA and
the Code and the regulations thereunder.
(b) There are no investigations by any Governmental Entity,
termination proceedings or other claims (except claims for benefits payable in
the normal operation of the Employee Benefit Plans and proceedings with respect
to qualified domestic relations orders), suits or proceedings against or
involving any Employee Benefit Plan or asserting any rights or claims to
benefits under any Employee Benefit Plan that could give rise to any liability.
(c) All the Employee Benefit Plans that are intended to be qualified
under Section 401(a) of the Code have received determination, opinion or
notification letters from the Internal Revenue Service to the effect that such
Employee Benefit Plans are qualified and the plans and the trusts related
thereto are exempt from federal income taxes under Sections 401(a) and 501(a),
respectively, of the Code, no such determination, opinion or notification letter
has been revoked and revocation has not been threatened, and no such Employee
Benefit Plan has been amended since the date of its most recent determination,
opinion or notification letter or application therefor in any respect, and no
act or omission has occurred, that would adversely affect its qualification or
increase its cost.
(d) Neither ASM nor any ERISA Affiliate has ever maintained an
Employee Benefit Plan subject to Section 412 of the Code or Title IV of ERISA.
(e) At no time has ASM or any ERISA Affiliate been obligated to
contribute to any "multi-employer plan" (as defined in Section 4001(a)(3) of
ERISA).
(f) There are no unfunded obligations under any Employee Benefit Plan
providing benefits after termination of employment to any employee of ASM (or to
any beneficiary of any such employee), including but not limited to retiree
health coverage and deferred compensation, but excluding continuation of health
coverage required to be continued under Section 4980B of the Code and insurance
conversion privileges under state law.
24
(g) No act or omission has occurred and no condition exists with
respect to any Employee Benefit Plan maintained by ASM or any ERISA Affiliate
that would subject ASM or any ERISA Affiliate to any fine, penalty, tax or
liability of any kind imposed under ERISA or the Code.
(h) No Employee Benefit Plan is funded by, associated with, or related
to a "voluntary employee's beneficiary association" within the meaning of
Section 501(c)(9) of the Code.
(i) No Employee Benefit Plan, plan documentation or agreement, summary
plan description or other written communication distributed generally to
employees by its terms prohibits ASM from amending or terminating any such
Employee Benefit Plan.
(j) Section 2.19 of the Disclosure Schedule discloses each: (i)
------------
written agreement with any director, executive officer or other key employee of
ASM which has not been terminated in accordance with its terms (A) the benefits
of which are contingent, or the terms of which are altered, upon the occurrence
of a transaction involving ASM of the nature of any of the transactions
contemplated by this Agreement, (B) providing any term of employment or
compensation guarantee or (C) providing severance benefits or other benefits
after the termination of employment of such director, executive officer or key
employee; (ii) agreement, plan or arrangement under which any person may receive
payments from ASM that may be subject to the tax imposed by Section 4999 of the
Code or included in the determination of such person's "parachute payment" under
Section 280G of the Code; and (iii) agreement or plan binding ASM, including
without limitation any stock option plan, stock appreciation right plan,
restricted stock plan, stock purchase plan, severance benefit plan, or any
Employee Benefit Plan, any of the benefits of which will be increased, or the
vesting of the benefits of which will be accelerated, by the occurrence of any
of the transactions contemplated by this Agreement or the value of any of the
benefits of which will be calculated on the basis of any of the transactions
contemplated by this Agreement.
2.20 Environmental Matters.
---------------------
(a) ASM has complied with all applicable Environmental Laws (as
defined below). There is no pending or, to the knowledge of ASM, threatened
civil or criminal litigation, written notice of violation, formal administrative
proceeding, or investigation, inquiry or information request by any Governmental
Entity, relating to any Environmental Law involving ASM. For purposes of this
Agreement, "Environmental Law" means any federal, state or local law, statute,
rule or regulation or the common law relating to the environment or occupational
health and safety, including without limitation any statute, regulation or order
pertaining to (i) treatment, storage, disposal, generation and transportation of
toxic or hazardous substances or solid or hazardous waste; (ii) air, water and
noise pollution; (iii) groundwater and soil contamination; (iv) the release or
threatened release into the environment of toxic or hazardous substances, or
solid or hazardous waste, including without limitation emissions, discharges,
injections, spills, escapes or dumping of pollutants, contaminants or chemicals;
(v) the protection of wild life, marine sanctuaries and wetlands, including
without limitation all endangered and threatened species; (vi) storage tanks,
vessels and containers; (vii) underground and other storage
25
tanks or vessels, abandoned, disposed or discarded barrels, containers and other
closed receptacles; (viii) health and safety of employees and other persons; and
(ix) manufacture, processing, use, distribution, treatment, storage, disposal,
transportation or handling of pollutants, contaminants, chemicals or industrial,
toxic or hazardous substances or oil or petroleum products or solid or hazardous
waste. As used above, the terms "release" and "environment" shall have the
meaning set forth in the federal Comprehensive Environmental Compensation,
Liability and Response Act of 1980 ("CERCLA").
(b) There have been no releases of any Materials of Environmental
Concern (as defined below) into the environment at any parcel of real property
or any facility when owned, operated, controlled or leased by ASM. ASM is not
aware of any other releases of Materials of Environmental Concern that could
reasonably be expected to have an impact on the real property or facilities
owned, operated, controlled or leased by ASM. "Materials of Environmental
Concern" means any chemicals, pollutants or contaminants, hazardous substances
(as such term is defined under CERCLA), solid wastes and hazardous wastes (as
such terms are defined under the federal Resources Conservation and Recovery
Act), toxic materials, oil or petroleum and petroleum products, or any other
material subject to regulation under any Environmental Law.
(c) Set forth in Section 2.20(c) of the Disclosure Schedule is a list
of all environmental reports, investigations and audits relating to premises
currently or previously owned, operated or leased by ASM (whether conducted by
or on behalf of ASM or a third party, and whether done at the initiative of ASM
or directed by a Governmental Entity or other third party) which to the
knowledge of ASM were issued or conducted during the past five years and which
ASM has possession of or access to. Complete and accurate copies of each such
report, or the results of each such investigation or audit, have been provided
to PGI.
2.21 Legal Compliance.
----------------
Except as set forth in Section 2.21 of the Disclosure Schedule, ASM,
------------
and the conduct and operations of its respective businesses, are in compliance
with each law (including rules and regulations thereunder) of any federal,
state, local or foreign government, or any Governmental Entity, which (a)
affects or relates to this Agreement or the transactions contemplated hereby or
(b) is applicable to ASM or the business, except for any violation or default
which will not have a material adverse effect on the assets, business, financial
condition or results of operations of ASM.
2.22 Permits.
-------
Section 2.22 of the Disclosure Schedule sets forth a list of all
------------
permits, licenses, registrations, certificates, orders or approvals from any
Governmental Entity required for ASM to conduct its business as currently
conducted (including without limitation those issued or required under
applicable export laws or regulations) ("Permits") issued to or held by ASM and
currently in effect. Such listed Permits are the only Permits that are required
for ASM to conduct their respective businesses as presently conducted, except
for those the absence of which would not have a material adverse effect on the
assets, business, financial condition or results of operations
26
of ASM. Each such Permit is in full force and effect and, to the knowledge of
ASM, no suspension or cancellation of such Permit is threatened and to ASM's
knowledge there is no basis for believing that such Permit will not be renewable
upon expiration.
2.23 Certain Business Relationships With Affiliates.
----------------------------------------------
No Affiliate of ASM (a) owns any property or right, tangible or
intangible, which is used in the business of ASM, (b) has any claim or cause of
action against ASM, or (c) owes any money to ASM. Section 2.23 of the
------------
Disclosure Schedule describes any transactions or relationships between ASM and
any Affiliate thereof (other than employment relationships in the ordinary
course of business) which are reflected in the statements of operations of ASM
included in the Financial Statements. Except to the extent specifically set
forth on Section 2.23 of the Disclosure Schedule and the financial statements
delivered to PGI pursuant to Section 2.6 above, neither ASM nor the Stockholders
(nor the Stockholders' family members) nor any Affiliate 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 ASM or any person or entity having a contract or
arrangement with ASM, and to the best of the Stockholders' knowledge, no
employee (or family member thereof) of ASM 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 ASM or any person or entity having a contract or arrangement with ASM. As
used herein "Affiliate" shall mean the Stockholders and any officer, employee or
director of ASM.
2.24 Fees and Brokers.
----------------
Except as disclosed in Section 2.24 of the Disclosure Schedule, all
------------
negotiations relating to this Agreement, and the transactions contemplated
hereby, have been carried out by ASM and the Stockholders. Except as disclosed
in Section 2.24 of the Disclosure Schedule or otherwise in this Agreement, ASM
------------
has no liability or obligation to pay any fees or commissions to any broker,
investment banking firm, finder or agent with respect to the transactions
contemplated by this Agreement.
2.25 Books and Records.
-----------------
Except as set forth in Section 2.25 of the Disclosure Schedule, the
------------
minute books and other similar records of ASM contain true and complete records
of all actions taken at any meetings of ASM's stockholders, Board of Directors
or any committee thereof and of all written consents executed in lieu of the
holding of any such meeting. The books and records of ASM accurately reflect in
all material respects the assets, liabilities, business, financial condition and
results of operations of ASM and have been maintained in accordance with good
business and bookkeeping practices.
2.26 Certain Payments.
----------------
Except as set forth in Section 2.26 of the Disclosure Schedule, since
------------
January 1, 1994, neither Stockholders, ASM nor any director, officer, agent, or
employee of ASM, has
27
directly or indirectly made any contribution, gift, bribe, rebate, payoff,
influence payment, kickback, or other payment to any person or entity, private
or public, regardless of form, whether in money, property, or services (i) to
obtain favorable treatment in securing business, (ii) to pay for favorable
treatment for business secured, or (iii) to obtain special concessions or for
special concessions already obtained, for or in respect of ASM or the Business.
Since January 1, 1994, ASM has not established or maintained any fund or asset
that has not been recorded in the books and records of ASM.
2.27 Accounts Receivable.
-------------------
Section 2.27 of the Disclosure Schedule contains an Aged Trial Balance
------------
Summary as of November 30, 1996, which, with respect to items marked with an
"X", represents an accurate and complete list of (a) the ITEC Accounts
Receivable of ASM as of such date and (b) the total amounts of accounts
receivable from Advanta events for November 1996, arising from the operation of
the Business (less a reserve for doubtful accounts in the amount of $20,000,
which reserve is reasonable and has been established in accordance with ASM's
past practices). All of the Accounts Receivable arose in the ordinary course of
the Business for goods delivered or services rendered to non-affiliated third
parties, constitute only valid claims, and are collectible in the ordinary
course of business. ASM has not received any written notice from or on behalf
of any account debtor asserting any defense to payment or right of setoff with
respect to any of the Accounts Receivable. The amounts on the Aged Trial
Balance -- Summary not marked with an "X" do not represent accounts receivable
from the operation of the Business prior to December 1, 1996.
2.28 Customers and Suppliers.
-----------------------
(a) Section 2.28 of the Disclosure Schedule contains an accurate and
------------
complete, with respect to the Business, list of the twenty largest customers and
suppliers of ASM, the Business, and ASM's "Advanta" business unit (measured by
dollar volume of purchases and sales, as applicable) and the dollar amount of
the Business which each customer and supplier represented during the fiscal year
ended December 31, 1996. Except as set forth in Section 2.28 of the Disclosure
------------
Schedule, ASM received no notice that, and has no knowledge or reason to believe
that, any such supplier or any customer of ASM does not plan to continue to do
business with ASM, or plans to reduce its supplies to, or volume of orders from,
ASM or will not do business on substantially the same terms and conditions with
ASM subsequent to the Closing Date as such supplier or customer did with ASM
before such date.
(b) Section 2.28 of the Disclosure Schedule sets forth a list of the
------------
number of booths at each of the trade shows held by ASM during 1994, 1995 and
1996, which list is true and accurate in all material respects. ASM and the
Stockholders are not aware of any reason that the schedule of 1997 ASM events as
provided to PGI will not occur as set forth on such schedule. To ASM's and the
Stockholders' knowledge, no persons or entities not currently competing with the
Business have announced or made known an intention to compete with the Business
in the markets currently served by the Business.
28
2.29 Access to Information; Sophistication; Investment Intent.
--------------------------------------------------------
(a) Each of the Stockholders has participated directly in the
negotiation of this Agreement and has received, or has had the opportunity to
receive, the advice of independent counsel and of accounting experts in
connection with such negotiation.
(b) Each of the Stockholders has personal knowledge of the daily
operations of ASM by virtue of such Stockholder's present and prior affiliation
with ASM and has had full access to all relevant information concerning PGI.
Such access to information of PGI by Stockholders does not alter the rights and
obligations of Stockholders and PGI under this Agreement.
(c) Each of the Stockholders is an experienced investor who possesses
sufficient investment knowledge and sophistication to permit such Stockholder to
evaluate the wisdom and prudence of engaging in the transaction contemplated
hereby, and each Stockholder has had a full and fair opportunity to evaluate
this transaction, to request and receive additional information and advice, to
apply to the fullest extent such Stockholder's business acumen, and to receive
the advice of Stockholder's counsel or other experts, in the evaluation of such
information. Each of the Stockholders is participating in the transaction
contemplated hereby solely for purposes of investment and without a view to the
distribution, subdivision, securitization, or other transfer of any right to
receive Base Purchase Consideration or Additional Purchase Consideration in any
manner whatsoever.
2.30 ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Compliance
----------------------------
ASM's most recent annual statement of income and expense does not show
$100 million or more in annual sales, and ASM's most recent regularly prepared
balance sheet does not show $100 million or more in total assets. In addition,
there are no persons or other entities (including, for purposes hereof, (a) any
shareholder of ASM that, together with all other entities included within the
same person as that shareholder, either holds 50% or more of ASM's voting
securities or is currently entitled by contract to appoint 50% or more of ASM's
directors, (b) any entity of which ASM holds 50% or more of the voting
securities, or has the current ability to appoint 50% of the board of directors
(or individuals exercising similar functions for those entities without
directors), or (c) any entity of which ASM is entitled to either 50% of the
profits or 50% of the assets on dissolution) that, if analyzed in combination
with ASM, would cause ASM's most recent annual statement of income and expense
to show $100 million or more in annual sales or ASM's most recent regularly
prepared balance sheet to show $100 million or more in total assets.
2.31 Disclosure.
----------
No representation or warranty by Stockholders or ASM contained in this
Agreement, and no statement contained in the Disclosure Schedule or any other
document, certificate or other instrument delivered, or to be delivered, by or
on behalf of Stockholders or ASM pursuant to this Agreement or in connection
with the preparation of audited financial statements of ASM on an accrual basis
by PGI's accountants (the "Audited Financials"), contains or will contain any
untrue statement of a material fact or omits or will omit to state any material
29
fact necessary, in light of the circumstances under which it was or will be
made, in order to make the statements herein or therein not misleading.
Notwithstanding anything to the contrary contained in this Section 2.31, to the
extent that Stockholders' and ASM's representation and warranty hereunder
relates to the preparation of Audited Financials by PGI's accountants, such
representation and warranty shall be deemed to be limited to only the factual
information regarding ASM and the ASM Business underlying such financial
statements and provided to such accountants, not to any aspect of the Audited
Financials that require the application of subjective accounting principles or
standards.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF PGI
PGI hereby represents and warrants to ASM as follows:
3.1 Organization.
------------
PGI is a corporation duly organized, validly existing and in corporate
and tax good standing under the laws of the state of its incorporation. PGI is
duly qualified to conduct business and is in corporate and tax good standing
under the laws of each jurisdiction in which the nature of its businesses or the
ownership or leasing of its properties requires such qualification, except in
those jurisdictions where the failure to be so qualified will not have a
material adverse effect on the business of PGI or result in a material delay of
the transactions contemplated by this Agreement. PGI has the corporate power
and authority to carry on the businesses in which each is engaged and to own and
use the properties owned and used by it, except to the extent a failure will not
have a material adverse effect on the business of PGI or result in a material
delay of the transactions contemplated by this Agreement. PGI is not in
material default under or in violation of any material provision of its
certificate of incorporation or by-laws, each as amended to date.
3.2 Authorization of Transaction.
----------------------------
PGI has the corporate power and authority to execute and deliver this
Agreement and to perform its obligations hereunder. The execution and delivery
of this Agreement, the performance by PGI of this Agreement and the consummation
by PGI of the transactions contemplated hereby have been duly and validly
authorized by the necessary corporate action on the part of PGI. This Agreement
has been duly and validly executed and delivered by PGI and, assuming the due
authorization, execution and delivery by ASM and the Stockholders, constitutes a
valid and binding obligation of PGI, enforceable against it in accordance with
its terms, except as enforcement may be limited by bankruptcy, insolvency or
other similar laws affecting the enforcement of creditors' rights and remedies
generally, and except that the availability of equitable remedies, including
specific performance, is subject to the discretion of the court before which any
proceeding therefor may be brought.
30
3.3 Non-Contravention.
-----------------
Neither the execution and delivery of this Agreement by PGI, nor the
consummation by PGI of the transactions contemplated hereby, will (a) conflict
with or violate any provision of the articles of incorporation or by-laws of
PGI, (b) require on the part of PGI any filing with, or any permit,
authorization, consent or approval of, any Governmental Entity, (c) conflict
with, result in a breach of, constitute (with or without due notice or lapse of
time or both) a default under, result in the acceleration of, create in any
party the right to accelerate, terminate, modify or cancel, or require notice,
consent or waiver under, any contract, lease, sublease, license, sublicense,
franchise, permit, indenture, agreement or mortgage for borrowed money,
instrument of indebtedness, Security Interest or other arrangement to which PGI
is a party or by which PGI is bound or to which any of their assets is subject,
(d) result in the imposition of a Security Interest upon any assets of PGI or
(e) violate any order, writ, injunction, decree, statute, rule or regulation
applicable to PGI, or any of its properties or assets.
3.4 Brokers' Fees.
-------------
PGI has no liability or obligation to pay any fees or commissions to
any broker, finder or agent with respect to the transactions contemplated by
this Agreement.
3.5 Disclosure.
----------
No representation or warranty by PGI contained in this Agreement, and
no statement contained in any document, certificate or other instrument
delivered to or to be delivered by or on behalf of PGI pursuant to this
Agreement, or in connection with the registration statement filed or to be filed
in connection with PGI's Public Offering (the "Registration Statement"),
contains or will contain any untrue statement of a material fact or omits or
will omit to state any material fact necessary, in light of the circumstances
under which it was or will be made, in order to make the statements herein or
therein not misleading.
3.6 Legal Compliance.
----------------
PGI, and the conduct and operations of its businesses, are in
compliance with each law (including rules and regulations thereunder) of any
federal, state, local or foreign government, or any Governmental Entity, which
(a) affects or relates to this Agreement or the transactions contemplated hereby
or (b) is applicable to PGI or its business, except for any violation or default
which will not have a material adverse effect on the assets, business, financial
condition or results of operations of PGI.
3.7 Due Diligence.
-------------
PGI has performed a due diligence investigation of ASM to its
satisfaction. In its decision to proceed with the Purchase and Sale
contemplated by this Agreement, PGI expressly agrees that it is not relying upon
any past or present forward-looking projection or pro forma concerning ASM or
the Business; provided, however, that PGI is expressly relying on the truth,
completeness and accuracy of each of the disclosures, representations and
warranties made by
31
ASM and the Stockholders in this Agreement and the Disclosure Schedule, except
as such disclosures, representations and warranties are qualified by the
Disclosure Schedule.
3.8 Purchase for Investment.
-----------------------
PGI acknowledges that the Stock of ASM has not been registered under
the Securities Act, or under any state securities laws. PGI is an "accredited
investor" as defined under the Securities Act, and has performed a due diligence
investigation satisfactory to PGI. PGI is purchasing the Stock solely for
investment with no present intention to distribute any of the shares to any
person.
3.9 Initial Public Offering.
-----------------------
PGI shall diligently proceed with and use reasonable efforts to take
such actions as are necessary to effect a successful Public Offering under the
Securities Act in an amount that PGI shall deem sufficient to permit the
consummation of the Purchase and Sale, and to cause PGI to be listed on the
NASDAQ stock exchange in connection with such Public Offering. PGI shall not
grant a security interest in the proceeds of the Public Offering such that PGI
shall be unable to pay the Base Purchase Consideration to the Stockholders when
due under this Agreement.
3.10 Lending Covenants.
-----------------
PGI represents and warrants that, to the best of PGI's knowledge, PGI
is not in breach of any covenant applicable to PGI under any senior secured all-
asset financing or lending commitment extended to PGI, and that all such
financing arrangements in favor of PGI are legal, valid and enforceable and in
full force and effect with respect to PGI, and to PGI's knowledge such financial
arrangements are legal, valid, binding and enforceable and in full force and
effect with respect to each other party thereto (except as enforcement may be
limited by bankruptcy, insolvency or other similar laws affecting the
enforcement of creditors' rights and remedies generally). PGI has no knowledge
of any event that has occurred that is, or that with notice or the passage of
time would be, any default under any financing or lending commitment to which
PGI is a party.
3.11 ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Compliance
----------------------------
Provided that the representation set forth in Section 2.30 is true and
correct, no filing is required under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust
Improvements Act of 1976, 15 U.S.C. (S) 18a in connection with the transaction
contemplated by this Agreement.
32
ARTICLE IV
COVENANTS
4.1 Best Efforts.
------------
Each Party shall each use its or their best efforts to effect the
Purchase and Sale and the other transactions contemplated hereby and to ensure
that there are and will be no impediments to the fulfillment of each of its
conditions to Closing or to the consummation of the transactions contemplated by
this Agreement.
4.2 Notices and Consents.
--------------------
Each of PGI and ASM shall use its respective best efforts to obtain,
at its expense, all such waivers, permits, consents, approvals or other
authorizations from third parties and Governmental Entities, and to effect all
such registrations, filings and notices with or to third parties and
Governmental Entities, as may be required by or with respect to PGI or ASM,
respectively, in connection with the transactions contemplated by this
Agreement.
4.3 Operation of Business.
---------------------
(a) Except as contemplated by this Agreement (or otherwise consented
to by PGI in writing), during the period from the date of this Agreement to the
Closing Date, ASM shall conduct its operations in the Ordinary Course of
Business, in a manner consistent with past practice and in compliance with all
applicable laws and regulations except to the extent that any non-compliance
will not have any material adverse effect on the Business, and, to the extent
consistent therewith, use all reasonable efforts to preserve intact its current
business organization, keep its physical assets in good working condition, keep
available the services of its current officers and employees and preserve its
relationships with customers, suppliers and others having business dealings with
it to the end that its goodwill and ongoing business shall not be impaired in
any material respect. Without limiting the generality of the foregoing, prior
to the Closing, ASM shall not make any decision or take any action that is
material to the business or operations or ASM without the written consent of PGI
(which consent shall not be unreasonably withheld, delayed or conditioned)
including, without limitation:
(i) issue, sell, deliver or agree or commit to issue, sell or
deliver (whether through the issuance or granting of options, warrants,
commitments, subscriptions, rights to purchase or otherwise) or authorize the
issuance, sale or delivery of, or redeem or repurchase, any stock of any class
or any other securities or any rights, warrants or options to acquire any such
stock or other securities (except pursuant to the conversion or exercise of
convertible securities, options, warrants or conditional stock entitlements
outstanding on the date hereof), or amend any of the terms of any such
convertible securities, options, warrants or conditional stock entitlements
except as set forth on Section 2.2 of the Disclosure Schedule;
-----------
(ii) split, combine or reclassify any shares of its capital stock;
declare, set aside or pay any dividend or other distribution (whether in cash,
stock or property or any combination thereof) in respect of its capital stock;
33
(iii) create, incur or assume any debt not currently outstanding
(including obligations in respect of capital leases); assume, guarantee, endorse
or otherwise become liable or responsible (whether directly, contingently or
otherwise) for the obligations of any other person or entity; or make any loans,
advances or capital contributions to, or investments in, any other person or
entity, except in the Ordinary Course of Business;
(iv) enter into, adopt or amend any Employee Benefit Plan or any
employment or severance agreement or arrangement of the type described in
Section 2.19(j) or increase in any manner the compensation or fringe benefits
of, or modify the employment terms of, its directors, officers or employees,
generally or individually, or pay any benefit not required by the terms in
effect on the date hereof of any existing Employee Benefit Plan;
(v) acquire, sell, lease, encumber or dispose of any assets or
property (including without limitation any shares or other equity interests in
or securities of any corporation, partnership, association or other business
organization or division thereof), other than purchases and sales of assets in
the Ordinary Course of Business;
(vi) amend its charter or by-laws, except as required by this
Agreement;
(vii) change in any material respect its accounting methods,
principles or practices, except changes necessary to comply with or come into
compliance with GAAP or as may be required by a generally applicable change in
GAAP;
(viii) discharge or satisfy any Security Interest or pay any
obligation or liability other than in the Ordinary Course of Business;
(ix) mortgage or pledge any of its property or assets or subject
any such assets to any Security Interest;
(x) sell, assign, transfer or license any Intellectual Property,
other than in the Ordinary Course of Business;
(xi) enter into, amend, terminate, take or omit to take any action
that would constitute a violation of or default under, or waive, release or
assign any rights under, any material contract or agreement;
(xii) make or commit to make any expenditure in excess of
$10,000 per item;
(xiii) take any action or fail to take any action permitted by
this Agreement with the knowledge that such action or failure to take action
would result in (i) any of the representations and warranties of ASM set forth
in this Agreement becoming untrue or (ii) any of the conditions to the Purchase
and Sale set forth in Article V not being satisfied;
(xiv) hire, terminate or discharge any employee or engage or
terminate any consultant, provided however that any employee or consultant may
himself or herself terminate his or her relationship with ASM in accordance with
the terms of any applicable
34
employment, consulting or similar agreement, and provided, further, that ASM may
terminate an employee, or take other such action, on an emergency basis without
prior PGI consent if ASM makes reasonable efforts to consult with PGI in such
regard; or
(xv) agree in writing or otherwise to take any of the foregoing
actions.
(b) Notwithstanding the limitations set forth in Section 4.3(a), the
Stockholders shall, without the consent of PGI, have the right to cause ASM to
distribute funds to the Stockholders of ASM prior to the Closing, provided that
any such distributions do not, based upon reasonable estimates at the time of
such distribution, cause a Base Purchase Price Reduction under Section
1.5(b)(iii) to be required.
4.4 Full Access.
-----------
Between the date hereof and the Closing, ASM shall permit PGI and its
counsel, accountants, auditors and other representatives and advisors full
access, upon reasonable notice, to all of the premises, staff, offices,
properties, books and records, contracts and commitments of ASM and to third
parties doing business with ASM, subject to compliance with applicable
confidentiality obligations. Without limiting the foregoing, ASM shall give
PGI's accountants access to the books and records of ASM for the purpose of
preparing restated financial statements of ASM, on the basis of United States
GAAP using the accrual basis of accounting, for the period January 1, 1994
through December 31, 1996. Between the date hereof and the Closing, the
representations and warranties contained in Article II shall not be affected or
deemed waived by reason of the fact that any of PGI, its counsel, its
accountants, its auditors or its other representatives and advisors know or
discover or should have known or discovered that any such representation or
warranty is or might be inaccurate in any respect, whether as a result of such
access or otherwise.
4.5 Notice of Breaches.
------------------
ASM shall promptly deliver to PGI written notice of any event or
development that would (a) render any statement, representation or warranty of
ASM in this Agreement (including the Disclosure Schedule) inaccurate or
incomplete in any material respect, or (b) constitute or result in a breach by
ASM or any of its Affiliates of, or a failure by ASM or any of its Affiliates to
comply with, any agreement or covenant in this Agreement applicable to such
party. PGI shall promptly deliver to ASM written notice of any event or
development that would (i) render any statement, representation or warranty of
PGI in this Agreement inaccurate or incomplete in any material respect, or (ii)
constitute or result in a breach by PGI of, or a failure by PGI to comply with,
any agreement or covenant in this Agreement applicable to such party. No such
disclosure shall be deemed to avoid or cure any such misrepresentation or
breach.
4.6 Exclusivity.
-----------
ASM and the Stockholders covenant and agree that neither ASM, the
Stockholders, nor any of ASM's officers, directors, employees, agents or
representatives (including, without limitation, any investment banker, attorney
or accountant retained by it) will,
35
directly or indirectly, initiate, solicit, entertain or negotiate, or approve,
or enter into any agreement or understanding with respect to, any acquisition,
merger, consolidation, recapitalization, restructuring or similar transaction
involving the Business or ASM during the period commencing the date hereof and
ending on February 28, 1997 (if the Purchase and Sale is never consummated), or
if the Purchase and Sale is consummated, ending on the Closing Date.
4.7 Confidentiality.
---------------
Each of the parties hereto agrees that it shall, and shall cause its
subsidiaries and the officers, employees and authorized representatives of each
of them to, hold in strict confidence all data and information obtained by them
from the other parties hereto (unless such information is or becomes readily
ascertainable from public or published information) and shall not, and shall use
its best efforts to ensure that such subsidiaries, directors, officers,
employees and authorized representatives do not, disclose such information to
others without the prior written consent of the party from which such data or
information was obtained, except as required by law after consultation with
counsel (provided that any such party shall consult with the other party prior
to making such disclosure). In the event that this Agreement terminates without
the Purchase and Sale having taken place, the Parties and their respective
affiliates and agents: (a) shall hold in confidence and refrain from using all
non-public information received in connection with the transactions contemplated
in this Agreement; and (ii) either shall return promptly all such non-public
information to the Party to which such information relates or shall destroy such
documents, work papers and other materials (including all copies made thereof)
obtained pursuant hereto, at such Party's request.
4.8 Covenant Not to Disclose.
------------------------
(a) ASM and the Stockholders acknowledge and agree that ASM and the
Stockholders possess certain data and knowledge of operations of the business
conducted by ASM prior to the Closing Date (the "Business") which are
proprietary in nature and confidential, including, without limitation, certain
trade secrets (the "Trade Secrets"). ASM and the Stockholders jointly and
severally covenant and agree that, except as agreed between PGI and
Stockholders, neither ASM nor the Stockholders will, at any time after the
Closing, reveal, divulge or make known to any Person (other than PGI or ASM) or
use for its or his or her own account or for the account of any Person, any
confidential or proprietary methods, record, data, Trade Secret, pricing policy,
bid amount, bid strategy, rate structure, personnel policy, method or practice
of soliciting or obtaining or doing business by the Business, or any other
confidential or proprietary information whatsoever relating to the Business or
ASM or PGI or their affiliates, whether or not obtained with the knowledge and
permission of ASM or PGI or their affiliates.
(b) ASM and the Stockholders will, following the Closing, maintain the
Trade Secrets as confidential and proprietary information of ASM in the manner
maintained prior to the Closing. ASM and the Stockholders have no knowledge of
any other persons or entities who have written copies of information relating to
the Trade Secrets. ASM has previously delivered to PGI copies of agreements of
confidentiality executed by employees of the ASM.
36
4.9 Non-Compete.
-----------
(a) When used in this Section 4.9, the following terms shall have the
following meanings:
"Competition" means (i) the marketing, development, sale or offering
or promoting for sale of (A) any activities or services of the type that ASM or
PGI currently provides, and (B) shows within the same industries as shows
conducted by ASM or PGI as of the Closing Date; and (ii) any business which is
competitive with the Business or the business or operations of PGI as they are
now or hereafter operated during the period in which the respective individual
Stockholder is in the employ of PGI or ASM or which is the subject of any plan
or initiative of PGI or ASM in development or under consideration by ASM or PGI
during the time that the respective individual Stockholder is in the employ of
PGI or ASM and that the individual Stockholder was aware of or involved in. For
purposes of this Agreement, ▇▇▇▇ ▇▇▇▇▇▇' current separate business operations,
if any, set specifically forth in Schedule 4.9 of the Disclosure Schedule shall
------------
not constitute activities that are deemed to be in Competition with ASM.
"Directly or Indirectly" means as an individual, partner, shareholder,
director, officer, member, principal, agent or employee.
"Person" means an individual, corporation, partnership, joint venture,
limited liability company, trust or other entity.
"Restricted Territory" means anywhere in the entire world.
(b) Stockholders shall not, for a period of * years after the
Closing Date, Directly or Indirectly, engage in any Competition in the
Restricted Territory; provided, however, that the Stockholders may, without
violating this covenant: (i) own as a passive investment not in excess of 5% of
the outstanding capital stock of a corporation which engages in Competition if
such capital stock is a security which is actively traded on an established
national securities exchange; (ii) have an ownership interest otherwise
proscribed by this Section 4.9 if such interest arises as a result of the
acquisition of a business entity not principally engaged in Competition; and
(iii) ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ may perform their obligations to ASM
under the Inglis Employment Agreement, the ▇▇▇▇▇▇▇ Employment Agreement, and the
▇▇▇▇▇▇▇▇ Employment Agreement (each as hereinafter defined), respectively.
(c) Stockholders acknowledge that in view of the nature of the
business and the business objectives of PGI in purchasing the Stock of ASM, and
the Purchase Consideration paid to the Stockholders therefor, the foregoing
territorial and time limitations are reasonable and properly required for the
adequate protection of PGI and ASM and that in the event that any such
territorial or time limitation is deemed to be unreasonable and is then reduced
by a court of competent jurisdiction, then, as reduced, the territorial and/or
time limitation shall be enforced.
-----------
* Confidential information has been omitted and filed separately with the
Commission.
37
(d) Stockholders further acknowledge that the remedy at law for any
breach by it of the agreements contained in this Section 4.9 will be inadequate
and that PGI and ASM will be entitled to seek injunctive relief without being
required to prove actual damages or post bond. This Section 4.9 constitutes an
independent and severable covenant and if any or all of the provisions of this
Section 4.9 are held to be unenforceable for any reason whatsoever, it will not
in any way invalidate or affect the remainder of this Agreement which shall
remain in full force and effect.
4.10 Non-Interference.
----------------
(a) Stockholders jointly (for a long as a Stockholder is in ASM's
employ) and severally (regardless of whether in the employ of ASM) covenant and
agree that other than in connection with the performance of the Inglis
Employment Agreement, the ▇▇▇▇▇▇▇ Employment Agreement and the ▇▇▇▇▇▇▇▇
Employment Agreement (each, as hereinafter defined), neither the Stockholders,
nor any Person directly or indirectly controlling, controlled by or under common
control with the Stockholders will, for a period of * years after the
Closing, directly or indirectly, for whatever reason, whether for their own
account or for the account of any other Person, during the period that the
covenant set forth in Section 4.9 hereof remains in effect: (i) solicit, deal
with or otherwise interfere with PGI or ASM in connection with any aspect of the
Business or with PGI's or ASM's existing or potential contracts or relationships
with any vendor, customer, supplier, affiliate, employee, officer, director or
any independent contractor, whether the Person is employed by or associated with
the Business or with PGI or ASM on the Closing Date or at any time thereafter;
(ii) solicit, accept, deal with or otherwise interfere with the continuance of
supplies to PGI or ASM (or the terms relating to such supplies), from any
vendors, suppliers or customers who have been supplying goods, materials or
services to ASM at any time during the five years immediately preceding the date
of this Agreement; (iii) solicit, accept, deal with or otherwise interfere with
any of the existing or potential contracts or relationships with any independent
contractor, customer, vendor, supplier, client or consultant of the Business or
PGI or ASM, or any Person who is a bona fide or prospective independent
contractor, customer, client or consultant thereof; or (iv) solicit or otherwise
interfere with any existing or proposed contract between the Business of PGI or
ASM and any other party whatsoever.
4.11 Cooperation.
-----------
Stockholders jointly (for as long as a Stockholder is in ASM's employ)
and severally (regardless of whether employed by ASM) covenant and agree both
before and after the Closing hereunder: (a) to give full cooperation to PGI and
ASM (including, without limitation, giving written notice as requested by PGI or
ASM and referring all telephone inquiries regarding, relating to or in
connection with the Business to PGI or ASM) to assure that each supplier and
customer of ASM will continue to do business with PGI and ASM on substantially
the same terms and conditions subsequent to the Closing Date as such supplier or
customer did with ASM before such date; (b) to cooperate fully with PGI and ASM
in order to effect the transfer of, and assure PGI and ASM of the continued
benefit and full enjoyment of, the Business; and (c) to cooperate fully with PGI
in providing to PGI all information that PGI identifies pertaining to ASM that
PGI identifies as necessary to the Registration Statement for PGI's Public
Offering. During the period
* Confidential information has been omitted and filed separately with the
Commission.
38
prior to the Closing Date, ASM agrees to consult with PGI regarding any material
changes, contracts, or personnel actions or other material events involving ASM
or the business.
4.12 Initial Public Offering.
-----------------------
PGI will inform ASM and the Stockholders in writing of any applicable
rules, regulations or requirements applicable to ASM or the Stockholders that
are required to complete PGI's Public Offering, and ASM and the Stockholders
agree to assist PGI in complying with such rules, regulations and requirements.
ASM will participate in the development of information concerning ASM for
disclosure in connection with the offering process. PGI will not publish any
subjective non-historical or forward-looking information concerning ASM without
ASM's prior review and written approval, and will publish only such information
as shall be necessary and required in connection with the Public Offering,
provided that such information shall be reviewed by ASM.
4.13 Postponement of Contemplated Public Financing.
---------------------------------------------
PGI shall notify ASM within five business days of any material adverse
change in PGI's business or other circumstance that would have the effect of
canceling the anticipated Public Offering or postponing it beyond February 28,
1997. Upon ASM's receipt of such notice, the Parties shall agree upon an
extension of the Closing Date or ASM and the Stockholders shall provide PGI
written notice that PGI shall have 30 additional days from the date of such
written notice in which to obtain alternative financing. If PGI is able,
through the exercise of reasonable commercial efforts, to obtain alternative
financing on terms reasonably acceptable to it, then the obligations of the
Parties under this Agreement shall continue and the Closing shall occur as soon
as reasonably practicable, but in no event later than five business days
following the closing of such financing.
4.14 Employees.
---------
PGI agrees that any individuals who are full-time employees of ASM on
the Closing Date will remain employees of ASM immediately after the Closing.
Such individuals will be referred to herein as "ASM Employees." The employment
by ASM of ASM Employees will be "at will" and nothing herein expressed or
implied is intended to confer upon any such ASM 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.
4.15 Other Actions.
-------------
PGI shall not take any action or fail to take any action permitted by
this Agreement with the knowledge that such action or failure to take action
would result in (i) any of the representations and warranties of PGI set forth
in this Agreement becoming untrue or (ii) any of the conditions to the Purchase
and Sale set forth in Article V not being satisfied.
39
4.16 Acceleration of Earn-Out.
------------------------
(a) PGI shall pay the Stockholders the Accelerated Earn-Out Amount (as
hereinafter defined) in accordance with the terms hereof upon the occurrence of
the following (each, an "Accelerated Earn-Out Event"):
(i) The breach, prior to the full payment to the Stockholders of
Additional Purchase Consideration due Stockholders hereunder in accordance with
the terms hereof, of any one or more obligations of PGI to the Stockholders
under this Agreement involving the payment of money, after the expiration of any
applicable opportunity to cure and/or the arbitrator's final award in favor of
Stockholders for any matter submitted to arbitration in accordance with Section
8.15 hereof (a "Final Monetary Breach"), and provided that said breach involves
a monetary sum that alone, or on combination with other Final Monetary Breaches,
exceeds $100,000 (a "Material Financial Default").
(ii) In the event that, prior to the full payment to the
Stockholders of Additional Purchase Consideration due Stockholders hereunder in
accordance with the terms hereof, the primary lender for PGI takes any action
with respect to the Additional Purchase Consideration Account or the assets of
ASM that the Stockholders reasonably believe renders it impossible for PGI to
pay the 1997 Additional Purchase Consideration or the 1998 Additional Purchase
Consideration when due (an "Earn-Out Impossibility Event"). In the event of the
occurrence of circumstances that the Stockholders reasonably believe constitute
an Earn-Out Impossibility Event, the Stockholders shall send a written notice to
such effect to PGI stating the basis for such belief (an "Anticipated Default
Notice"). Upon receipt of an Anticipated Default Notice, PGI and the
Stockholders shall consult for a period of 30 days with respect to Stockholders'
concerns as set forth in the Anticipated Default Notice. If, following such
consultation, PGI and the Stockholders are unable to resolve the Stockholders'
concerns, then PGI shall have 60 days within which to provide reasonable
alternative security for the payment of the Additional Purchase Consideration
("Alternate Security"). In the event that PGI is unable to provide such
Alternate Security, an Accelerated Earn-Out Event shall be deemed to have
occurred.
(iii) An Insolvency Event (as hereinafter defined) occurring prior
to the full payment to the Stockholders of Additional Purchase Consideration due
Stockholders hereunder in accordance with the terms hereof. As used herein, an
"Insolvency Event" shall mean (A) if PGI voluntarily submits itself to
bankruptcy or is involuntarily submitted to bankruptcy and the action is not
dismissed within 60 days of filing and (B) PGI's obligation to pay the
Additional Purchase Consideration as set forth herein is rejected or otherwise
terminated in connection with the bankruptcy proceeding. No Insolvency Event
shall be deemed to have occurred unless and until the rejection or other
termination of any material portion of PGI's obligation to pay Additional
Purchase Consideration shall have become final and non-appealable.
(iv) A Change in Control (as hereinafter defined) occurring prior
to the full payment to the Stockholders of Additional Purchase Consideration due
Stockholders hereunder in accordance with the terms hereof. As used herein, a
"Change in Control" shall mean: (A) following a sale or other transfer or
disposition of all or substantially all of the assets of
40
ASM, or a merger or consolidation of ASM, or a sale or other transfer or
disposition of the stock of ASM, PGI no longer has, directly or indirectly, a
controlling interest in ASM; or (B) there shall occur the sale or other transfer
or disposition of all or substantially all of the assets of PGI, or a merger or
consolidation of PGI following which the Chief Executive Officer and Executive
Management Team of PGI is changed as a result of or after such acquisition of
control.
(b) Payment Matters.
---------------
(i) As used herein, the "Accelerated Earn-Out Amount" shall mean
(A) with respect to an Accelerated Earn-Out Event occurring in calendar year
1997, the Accelerated Earn-Out Amount shall be * ; and (B) with respect
to an Accelerated Earn-Out Event occurring in calendar year 1998, the
Accelerated Earn-Out Amount shall be the sum of (X) the actual amount of unpaid
1997 Additional Purchase Consideration, if any, and (Y) an amount for calendar
year 1998 equal to * of the difference between (I) * of PTPECNI as
reflected in the 1998 Business Plan for ASM and (II) the actual PTPECNI for
calendar year 1997.
(ii) Either party shall have the obligation to submit any dispute
with respect to the operation of this Section 4.16, including whether an
Accelerated Earn-Out Event has occurred and the calculation of the Accelerated
Earn-Out Amount, to arbitration in accordance with Section 8.15 hereof. No
Accelerated Earn-Out Amount shall be due and payable until 30 days following a
final determination by the arbitrator in accordance with Section 8.15 hereof
that any Accelerated Earn-Out Amount is due.
4.17 Termination of Certain Covenants.
--------------------------------
(a) ▇▇▇▇ ▇▇▇▇▇▇'▇ obligations pursuant to Section 4.9 and 4.10 hereof
shall terminate upon (i) the occurrence of an Accelerated Earn-Out Event, (ii)
termination of the Inglis Employment Agreement by PGI "without Cause" (as
defined in Section V(A)(3)(b) thereof) during the "Initial Term" thereof and
(iii) termination of the Inglis Employment Agreement by Inglis during the
"Initial Term" pursuant to Section V(A)(5) thereof, provided that in the event
of the occurrence of Accelerated Earn-Out Event, the covenants set forth in
Section 4.9 and 4.10 shall not terminate if PGI satisfies its obligation to pay
the Accelerated Earn-Out Amount in accordance with the terms hereof. The events
triggering termination of the covenants set forth in Sections 4.9 and 4.10
hereof with respect to Inglis are referred to herein as "Final Inglis Covenant
Termination Events." ▇▇▇▇ ▇▇▇▇▇▇ or PGI shall have the right to submit any
dispute with respect to the operation of this Section 4.17, including whether a
Final Inglis Covenant Termination Event has occurred, to arbitration in
accordance with Section 8.15 hereof. If the dispute is submitted for
arbitration, the covenants set forth in Section 4.9 and 4.10 shall not terminate
until a final determination by the arbitrator in accordance with Section 8.15
hereof that a Final Inglis Covenant Termination Event has occurred and, in the
case of the Accelerated Earn-Out Events arising pursuant Section 4.16, that any
Accelerated Earn-Out Amount has not been paid when due.
(b) ▇▇▇▇▇▇▇'▇ obligations pursuant to Section 4.9 and 4.10 hereof
shall terminate upon (i) the occurrence of an Accelerated Earn-Out Event, (ii)
termination of the ▇▇▇▇▇▇▇ Employment Agreement by PGI "without Cause" (as
defined in Section V(A)(3)(b)
----------
* Confidential information has been omitted and filed separately with the
Commission.
41
thereof) during the "Initial Term" thereof, provided that in the event of the
occurrence of Accelerated Earn-Out Event, the covenants set forth in Section 4.9
and 4.10 shall not terminate if PGI satisfies its obligation to pay the
Accelerated Earn-Out Amount in accordance with the terms hereof. The events
triggering termination of the covenants set forth in Sections 4.9 and 4.10
hereof with respect to ▇▇▇▇▇▇▇ are referred to herein as "Final ▇▇▇▇▇▇▇ Covenant
Termination Events." ▇▇▇▇▇▇▇ or PGI party shall have the right to submit any
dispute with respect to the operation of this Section 4.17, including whether a
Final ▇▇▇▇▇▇▇ Covenant Termination Event has occurred, to arbitration in
accordance with Section 8.15 hereof. If the dispute is submitted for
arbitration, the covenants set forth in Section 4.9 and 4.10 shall not terminate
until a final determination by the arbitrator in accordance with Section 8.15
hereof that a Final ▇▇▇▇▇▇▇ Covenant Termination Event has occurred and, in the
case of the Accelerated Earn-Out Events arising pursuant Section 4.16, that any
Accelerated Earn-Out Amount has not been paid when due.
(c) In the event of any termination of Inglis's or ▇▇▇▇▇▇▇'▇
obligations pursuant to Section 4.9 and 4.10 in accordance with the provisions
of Section 4.17 hereof, the covenants set forth in Sections 4.7 and 4.8 hereof
shall terminate with respect to the terminated Stockholder, except that the
terminated Stockholder shall not have the right to (i) utilize any hard data of
a confidential or proprietary nature of ASM, including any confidential or
proprietary methods, record, data, Trade Secret, pricing policy, bid amount, bid
strategy, rate structure, personnel policy, method or practice of soliciting or
obtaining or doing business, (ii) any confidential or proprietary information
whatsoever relating to PGI, (iii) any plan of growth or expansion or information
that came from or is derived from PGI or ASM or was developed by ASM or PGI
during the term of their employment with ASM with PGI as a shareholder.
ARTICLE V
CONDITIONS TO CONSUMMATION OF PURCHASE AND SALE
5.1 Conditions to Each Party's Obligations.
--------------------------------------
The respective obligations of each Party to consummate the Purchase
and Sale is subject to the following condition: no temporary restraining order,
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal or regulatory restraint or prohibition
preventing the consummation of the Purchase and Sale or limiting or restricting
PGI's conduct or operation of the business of PGI or ASM after the Purchase and
Sale shall have been issued, nor shall any proceeding brought by any
Governmental Entity, seeking any of the foregoing be pending; nor shall there be
any action taken, or any statute, rule, regulation or order enacted, entered,
enforced or deemed applicable to the Purchase and Sale which makes the
consummation of the Purchase and Sale illegal.
5.2 Conditions to Obligations of PGI.
--------------------------------
The obligation of PGI to consummate the Purchase and Sale and the
other transactions set forth herein is subject to the satisfaction of the
following additional conditions:
42
(a) Each of the representations and warranties of Stockholders and ASM
contained in Article II above shall be true and accurate in all material
respects as of the date of this Agreement and shall be true and accurate in all
material respects as of the Closing Date as if made on the Closing Date (except
for any representation or warranty expressly stated to have been made or given
as of a specified date, which, at the Closing Date, shall be true and accurate
in all material respects as of the date expressly stated) without regard to any
disclosures made by ASM or Stockholders after the execution and delivery of this
Agreement by the parties hereto and no liabilities have been asserted with
respect to the possible liabilities or problems referenced in the Disclosure
Schedules; provided, however, that this condition shall be deemed satisfied if
(i) taken together, all such matters (x) as to which representations are not
true and accurate or (y) which represent an event or events occurring after
execution hereof, but before Closing or (z) involving liabilities asserted with
respect to the possible liabilities or problems referenced in the Disclosure
Schedules, involve in the aggregate less than $500,000 (for this purpose any
third party claim or litigation shall be deemed to involve the amount the
claimant or litigant has a reasonable likelihood of being owed if the matter is
determined adversely to ASM) and (ii) no such representations when made were
known by a party making them to not be true and accurate. Stockholders and ASM
shall have delivered to PGI a certificate of Stockholders and ASM's president or
any vice president certifying the fulfillment of the conditions set forth in
this Section 5.2(a).
(b) All of the covenants and obligations that Stockholders or ASM are
required to perform or to comply with pursuant to the terms of this Agreement
and each of the documents to be executed in connection herewith shall have been
duly performed or complied with by Stockholders and ASM in all respects prior to
the Closing Date.
(c) Since the date of the execution and delivery of this Agreement by
the parties, there shall not have occurred an event or condition which resulted
in a material adverse change in the financial condition, business, assets, net
worth, personnel, prospects or affairs of the Business (when taken as a whole),
and ASM shall not have suffered any loss (whether or not insured) by reason of
physical damage caused by fire, earthquake, flood, wind, accident or other
calamity which materially affects the value of the Business when taken as a
whole.
(d) PGI's Registration Statement shall have become effective in
accordance with the provisions of the Securities Act, and no stop order
suspending the effectiveness of the Registration Statement shall have been
issued by the United States Securities and Exchange Commission (the "SEC") and
remain in effect and the closing pursuant to such Registration Statement shall
occurred.
(e) The Stockholders shall have executed and delivered a Subordination
Agreement in substantially the form attached hereto as Exhibit A in favor of
---------
PGI's primary financial institution concerning future payments owed to the
Stockholders under this Agreement.
(f) ASM either (i) shall have obtained all of the waivers, permits,
consents, approvals or other authorizations, and effected all of the
registrations, filings and
43
notices, as are reasonably necessary to the transfer of any contracts, leases,
rights, or other assets material to the Business, which if not obtained or
effected would have a material adverse effect on the assets, business, financial
condition, results of operations or future prospects of ASM or on the ability of
the Parties to consummate the transactions contemplated by this Agreement, or
(ii) as of the Closing, shall have effected a cure of any alleged failure to
obtain any such item, or (iii) as of the Closing, shall have identified a means
of curing such failure to obtain any such item within a reasonable period of
time after Closing and shall have undertaken such steps as shall be reasonably
necessary to effect such cure within a reasonable period of time after Closing.
(g) PGI shall have received from ▇▇▇▇▇▇ ▇▇▇, Esquire, counsel to ASM,
an opinion in the form set forth as Exhibit B attached hereto, addressed to PGI
---------
and dated as of the Closing Date;
(h) PGI shall have received from ASM a long-form good standing
certificate of ASM dated no earlier than 30 days prior to the closing date.
(i) PGI shall have received from an officer of ASM a closing
certificate in customary form.
(j) An Employment Agreement substantially in the form of Exhibit C
---------
hereto shall have been executed by ▇▇▇▇ ▇▇▇▇▇▇ and ASM (the "Inglis Employment
Agreement").
(k) An Employment Agreement substantially in the form of Exhibit D
---------
hereto shall have been executed by ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and ASM (the "▇▇▇▇▇▇▇
Employment Agreement").
(l) An Employment Agreement substantially in the form of Exhibit E
---------
hereto shall have been executed by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and ASM (the "▇▇▇▇▇▇▇▇
Employment Agreement").
(m) Any and all taxes, interest, penalties or expenses incurred by ASM
for current or prior tax years or arising from business conducted by ASM prior
to the Closing Date shall have been paid by ASM when due, and any sales tax or
other taxes arising from the Purchase and Sale and otherwise attributable to the
Stockholders shall have been paid by the Stockholders when due.
(n) ASM shall have received from ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ Settlement and
Release Agreements in form reasonably satisfactory to PGI.
(o) The 1997 Hall Arrangements referred to the Section 7.2(f) shall
have become 1997 Hall Contracts and any consents required for 1997 Hall
Contracts by reason of the change of control of ASM shall have been received,
provided that if the aggregate revenue set forth in the Business Plan for the
shows as to which (i) either or both of these requirements have not been met and
(ii) alternative satisfactory arrangements have not been made is less than
$500,000, this condition shall be deemed to have been satisfied.
44
5.3 Conditions to Obligations of ASM and the Stockholders.
-----------------------------------------------------
The obligation of ASM and the Stockholders to consummate the Purchase
and Sale is subject to the satisfaction of the following additional conditions:
(a) Each of the representations and warranties of PGI contained in
Article III above shall be true and accurate in all material respects as of the
date of this Agreement and shall be true and accurate in all material respects
as of the Closing Date as if made on the Closing Date (except for any
representation or warranty expressly stated to have been made or given as of a
specified date, which, at the Closing Date, shall be true and correct in all
material respects as of the date expressly stated) without regard to any
disclosures made by PGI after the execution and delivery of this Agreement by
the parties hereto provided, however, that this condition shall be deemed
satisfied if (i) taken together, all such matters as to which representations
are not time and accurate involve in the aggregate less than $500,000 (for this
purpose any third party claim or litigation shall be deemed to involve the
amount the claimant or litigant has a reasonable likelihood of being owed if the
matter is determined adversely to PGI) and (ii) no such representations when
made were known by a party making them to not be true and accurate. PGI shall
have delivered to ASM a certificate of any of PGI's president or any vice
president certifying the fulfillment of the conditions set forth in this Section
5.3(a).
(b) All of the covenants and obligations that PGI is required to
perform or to comply with pursuant to the terms of this Agreement and each of
the documents to be executed in connection herewith shall have been duly
performed or complied with by PGI in all respects prior to the Closing Date.
(c) Since the date of execution and delivery of this Agreement by the
Parties, there shall not have occurred an event or condition that resulted in a
material or adverse change in the financial condition, business, assets, net
worth, personnel, prospects or affairs of PGI, when taken as a whole.
(d) Either (i) PGI's Registration Statement shall have become
effective in accordance with the provisions of the Securities Act and no stop
order suspending the effectiveness of the Registration Statement shall have been
issued by the SEC and remain in effect, and the closing pursuant to such
Registration Statement shall have occurred; or (ii) PGI shall have concluded
such other financing plan as may be required to consummate this Agreement and to
make all of the payments of Base Purchase Consideration contemplated hereunder,
as contemplated by Section 4.13 hereof.
(e) the Inglis Employment Agreement, the ▇▇▇▇▇▇▇ Employment Agreement,
and the ▇▇▇▇▇▇▇▇ Employment Agreement shall have been executed and delivered by
the parties thereto.
(f) Stockholders shall have received from Piper & Marbury L.L.P.,
counsel to PGI, an opinion in the form set forth as Exhibit F attached hereto,
---------
addressed to ASM and Stockholders and dated as of the Closing Date.
45
(g) Stockholders shall have received from PGI a long-form good
standing certificate dated no earlier than 30 days prior to the closing date.
(h) Stockholders shall have received from PGI a closing
certificate of any officer of PGI in customary form.
(i) The Parties shall have agreed upon (1) the Business Plan, and (2)
the accounting practices and standards applicable to the Closing Date financial
statements.
(j) Stockholders shall have been added as insureds under the PGI
Directors and Officers liability insurance coverage, which coverage (i) will be
substantially similar to coverage provided under the policy and endorsement
forms provided to counsel for the Stockholders; (ii) will have an aggregate
limit liability of no less than $10 million and (iii) will provide coverage for
alleged wrongful acts as insured directors and officers of ASM from February 1,
1997 or earlier.
ARTICLE VI
TERMINATION
6.1 Termination of Agreement.
------------------------
The Parties may terminate this Agreement as provided below:
(a) the Parties may terminate this Agreement prior to the Closing
by mutual written consent; or
(b) either ▇▇▇▇ ▇▇▇▇▇▇ or PGI may terminate this Agreement prior to
the Closing by giving written notice to the other Parties if the Closing shall
not have occurred on or before February 28, 1997; provided, however, that if the
Closing shall have failed to occur by such date as a result of the postponement
or cancellation of PGI's anticipated Public Offering (provided that PGI has not
breached its covenants with respect to the Public Offering as set forth in
Section 3.9 of this Agreement), then PGI shall have until March 15, 1997 in
which to close upon such Public Offering or an alternative financing as provided
in Section 4.13 hereof and, if PGI closes upon such Public Offering or
alternative financing within such period, this Agreement shall not terminate and
shall continue as provided in Section 4.13 hereof, provided that either ▇▇▇▇
▇▇▇▇▇▇ or PGI may terminate this Agreement if the Closing shall not have
occurred on or before March 15, 1997.
6.2 Effect of Termination.
---------------------
If any Party terminates this Agreement pursuant to Section 6.1, all
obligations of the Parties hereunder shall terminate without any liability of
any Party to any other Party (except for any liability of any Party for breaches
of this Agreement).
46
ARTICLE VII
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNITY
7.1 Survival of Representations and Warranties.
------------------------------------------
(a) Each of the representations and warranties of ASM and the
Stockholders in Article II and of PGI in Article III and all other obligations
of the parties hereunder shall survive the Closing as follows:
(i) the representation and warranty set forth in Section 2.9
shall survive the Closing until the expiration of the
applicable statutory period of limitation, giving effect to
any waiver, mitigation or extension thereof; and
(ii) all other representations, warranties, covenants and
undertakings shall survive the Closing until the end of
eighteen months after the Closing (the "Indemnity Period")
except with respect to any representation, warranty or
covenant that, by its terms, is for a longer period.
(b) Except as provided in subsection (c) of this Section 7.1, no claim
may be brought arising under or in connection with this Agreement or any of the
transactions contemplated hereby for a breach of any representation, warranty,
covenant or undertaking after the expiration of the survival period applicable
thereto as provided in subsection (a) of this Section 7.1.
(c) If written notice of a claim for breach of a representation,
warranty, covenant or undertaking under this Agreement has been given by a party
prior to the expiration of the survival period applicable thereto as provided in
subsection (a) of this Section 7.1, then the relevant representation, warranty,
covenant or undertaking shall survive as to such claim until the claim has been
finally resolved, provided that an appropriate action has been filed or
undertaken by the non-breaching party in order to address the alleged breach
within 12 months after receipt of the notice.
7.2 Indemnification by the Stockholders.
-----------------------------------
Except as otherwise limited by this Article VII, the Stockholders
shall jointly and severally indemnify, defend and hold harmless PGI and its
officers, directors, employees, agents, successors and assigns from and against
any and all liabilities, losses, damages, claims, costs and expenses, interest,
awards, judgments and penalties (including, without limitation, reasonable legal
costs and expenses) actually suffered or incurred by them (hereinafter a "PGI
Loss") arising out of or resulting from any of the following:
(a) the breach of any representation or warranty by ASM or the
Stockholders contained herein or in any document delivered hereunder at the
Closing, except as covered by Section 7.2(e) hereof;
47
(b) the breach of any covenant or agreement by ASM or the Stockholders
contained herein or in any document delivered hereunder at the Closing, except
as covered by Section 7.2(e) hereof;
(c) any liabilities of ASM of any nature, whether accrued, absolute,
contingent or otherwise, which existed as of the Closing Date, or arose out of
the conduct of the Business, the ownership or use of the property, or the
existence or occurrence of any events, condition or set of facts, at or prior to
the Closing Date, and which (i) were not reflected on the Most Recent Balance
Sheet, (ii) were not otherwise disclosed on the Disclosure Schedule (other than
through the disclosure of general possibilities of liabilities on certain
Disclosure Schedules or the disclosure of claims or potential claims on Schedule
2.17) or (iii) did not arise from events occurring following the date hereof
which were either permitted pursuant to Section 4.3(b) hereof or occurred in the
ordinary course of business;
(d) any investigation, suit, action or other proceeding by or before
any court or governmental or regulatory agency which seeks to restrain, modify,
prohibit or revoke, or seeks damages or other relief in connection with, the
consummation of this transaction;
(e) a breach of the representation set forth in Section 2.14(b)(i) and
(ii) with respect to the 1997 Hall Contracts, provided that recourse for any
such breach is limited as set forth in Section 7.5(a) hereof (a "Hall Contract
Loss");
(f) without limitation, a breach of the representation set forth in
Section 2.14(b)(i) and (ii) with respect to letters of intent or other
understandings relating to hall contracts for 1997 shows in the cities and
venues listed on Section 7.2(f) of the Disclosure Schedule hereto (the "1997
--------------
Hall Arrangements") as though such 1997 Hall Arrangements had been included as
1997 Hall Contracts on Schedule 2.14.
Notwithstanding anything in this Agreement to the contrary, ASM and
the Stockholders shall be required to update the Disclosure Schedule during the
period between the execution of this Agreement and the date 5 days prior to the
Closing Date (the "Disclosure Termination Period") if such update is necessary
to render the Disclosure Schedule complete and accurate. No such amendment
shall alter the parties' rights and obligations under this Agreement, provided
that the maximum amount of any PGI Loss with respect to events occurring
following the date of this Agreement and disclosed to PGI prior to the
Disclosure Termination Period shall be $200,000, exclusive of any such loss
covered by insurance carried by ASM or the Stockholders. This limitation on
Stockholders' indemnity obligation shall not affect the operation of Sections
5.2(a) or (c).
7.3 Indemnification by PGI.
----------------------
Except as otherwise limited by this Article VII, PGI shall indemnify,
defend and hold harmless Stockholders from and against any and all liabilities,
losses, damages, claims, costs and expenses, interest, awards, judgments and
penalties (including, without limitation, reasonable legal costs and expenses)
actually suffered or incurred by it (hereinafter a "Stockholder Loss") arising
out of or resulting from any of the following:
48
(a) the breach of any representation or warranty by PGI contained
herein or in any document delivered hereunder at the Closing; or
(b) the breach of any covenant or agreement by PGI contained herein or
in any document delivered hereunder at the Closing; or
(c) any liabilities of ASM of any nature, whether accrued, absolute,
contingent or otherwise arising following the Closing Date and based upon the
conduct of the Business or the ownership or use of ASM property after the
Closing Date; or
(d) As PGI is responsible for the preparation of the Registration
Statement and for the compilation of the ASM financial statements and combined
pro forma financial statements included therein, any investigation, suit,
action, claim, liability or damages suffered by ASM prior to the Closing Date,
or by the Stockholders, asserted or initiated by any person, entity, or
governmental or regulatory agency resulting from or arising in connection with
the contemplated public offering of PGI, unless such investigation, suit,
action, claim, liability or damages shall be the result of, arise out of, or be
based upon any untrue statement or alleged untrue statement of a material fact
made by ASM which PGI includes in the Registration Statement, or the omission or
alleged omission to state a material fact required to be stated in the
Registration Statement or necessary to make the statements therein not
misleading, and furnished or to be furnished to PGI by or on behalf of the
Stockholders specifically for inclusion therein.
7.4 General Indemnification Provisions.
----------------------------------
(a) For the purposes of this Section 7.4, the term "Indemnitee" shall
refer to the Person indemnified, or entitled, or claiming to be entitled to be
indemnified, pursuant to the provisions of Section 7.2 or 7.3, as the case may
be; the term "Indemnitor" shall refer to the Person having the obligation to
indemnify pursuant to such provisions; and "Losses" shall refer to the
"Stockholder Losses" or the "PGI Losses", as the case may be.
(b) An Indemnitee shall give written notice (a "Notice of Claim") to
the Indemnitor within ten (10) business days after the Indemnitee has knowledge
of any claim (including a Third Party Claim, as hereinafter defined) which an
Indemnitee has determined has given or could give rise to a right of
indemnification under this Agreement. No failure to give such Notice of Claim
shall affect the indemnification obligations of the Indemnitor hereunder, except
to the extent Indemnitor can demonstrate such failure materially prejudiced such
Indemnitor's ability to successfully defend the matter giving rise to the claim.
The Notice of Claim shall state the nature of the claim, the amount of the Loss,
if known, and the method of computation thereof, all with reasonable
particularity and containing a reference to the provisions of this Agreement in
respect of which such right of indemnification is claimed or arises.
(c) The obligations and liabilities of an Indemnitor under this
Article VII with respect to Losses arising from claims of any third party that
are subject to the indemnification provisions provided for in this Article VII
("Third Party Claims") shall be governed by and contingent upon the following
additional terms and conditions: the Indemnitee at the time it gives a Notice
of Claim to the Indemnitor of the Third Party Claim shall advise the
49
Indemnitor that it shall be permitted, at its option, to assume and control the
defense of such Third Party Claim at its expense and through counsel of its
choice if it gives prompt notice of its intention to do so to the Indemnitee and
confirms that the Third Party Claim is one with respect to which the Indemnitor
is obligated to indemnify. In the event the Indemnitor exercises its right to
undertake the defense against any such Third Party Claim as provided above, the
Indemnitee shall cooperate with the Indemnitor in such defense and make
available to the Indemnitor all witnesses, pertinent records, materials and
information in its possession or under its control relating thereto as is
reasonably required by the Indemnitee. Except for the settlement of a Third
Party Claim which involves the payment of money only and for which the
Indemnitee is totally indemnified by the Indemnitor, no Third Party Claim may be
settled by the Indemnitor without the written consent of the Indemnitee, which
consent shall not be unreasonably withheld. Similarly, no Third Party Claim may
be settled by the Indemnitee without the written consent of the Indemnitor,
which consent shall not be unreasonably withheld.
(d) Any indemnification obligations of Stockholders with respect to a
PGI Loss shall be subject to offset against amounts owed by PGI to Stockholders
hereunder, if the obligation of Stockholders shall have been reduced to the
judgment of a court of competent jurisdiction or the award of an arbitrator
under any arbitration pursuant to Section 8.15 hereof.
7.5 Limits on Indemnification.
-------------------------
No claim may be made against ASM or Stockholders for indemnification
hereunder unless and only to the extent the aggregate of all PGI Losses (other
than Hall Contact Losses) incurred exceed $50,000 (the "Basket"). Thereafter,
indemnification shall be available for all PGI Losses commencing with the first
dollar of loss. No claim may be made against PGI for indemnification hereunder
unless and only to the extent the aggregate of all Stockholder Losses incurred
exceeds the Basket. Notwithstanding anything to the contrary set forth herein,
no claim may be made against the Stockholders with respect to a Hall Contract
Loss (other than with respect to 1997 Hall Arrangements) except to the extent of
the $250,000. PGI and the Stockholders shall be entitled to immediate
reimbursement of any PGI Losses or Stockholder losses hereunder with respect to
which there is no dispute concerning the other party's obligation to indemnify
such loss. With respect to any PGI Losses or Stockholder losses with respect to
which there is a dispute concerning the other party's obligation to indemnify,
such dispute shall be submitted to expedited arbitration pursuant to Section
8.15 hereof. As set forth in Section 1.5(c)(v)(D) above, PGI shall be entitled
to withdraw the full amount, up to an aggregate of $250,000, of any Hall
Contract Loss from the Additional Purchase Consideration Account if the
Stockholders do not pay the full amount of any Hall Contract Loss to PGI within
30 days following notice of such Hall Contract Loss from PGI or, if contested by
the Stockholders, after the final decision of the arbitrator under (S) 8.15.
7.6 Adjustment of Liability.
-----------------------
Any indemnifiable Stockholder Loss or PGI Loss, as the case may be,
shall be reduced by any tax benefit accruing to the indemnified party on account
of the indemnification payment and by the amounts actually recovered by the
indemnified party from its insurance carriers and any amounts recovered by such
party subsequent to the payment by the indemnifying
50
party hereunder with respect to the same claim shall be remitted to such
indemnifying party, except that such remittance shall not exceed the amount of
the indemnification payment made by such indemnifying party.
7.7 Indemnification as Exclusive Remedy From and After Closing.
----------------------------------------------------------
From and after the Closing, neither party hereto shall be liable or
responsible in any manner whatsoever to the other party, whether for
indemnification or otherwise, except for indemnity as expressly provided in this
Article VII which provides the exclusive remedy and cause of action of the
parties hereto with respect to any matter arising out of or in connection with
this Agreement, except for (i) any breaches of Sections 4.6, 4.7, 4.8, 4.9,
4.10, and 4.11 of this Agreement, or (ii) PGI's obligation to pay Additional
Purchase Consideration pursuant to Section 1.5(c) and 1.5(d) hereof.
7.8 Waiver of Contribution.
----------------------
Stockholders hereby waive any right of contribution or similar remedy
against ASM following the Closing.
ARTICLE VIII
MISCELLANEOUS
8.1 Press Releases and Announcements.
--------------------------------
No Party shall issue any press release or public disclosure relating
to the subject matter of this Agreement without the prior written approval of
the other Parties; provided, however, that any Party may make any public
disclosure it believes in good faith is required by law or regulation (in which
case the disclosing Party shall advise the other Parties and provide them with a
copy of the proposed disclosure prior to making the disclosure).
Notwithstanding the foregoing, PGI shall have the right to make disclosure with
respect to ASM and the transaction set forth herein in its registration
statement as required by applicable law.
8.2 No Third Party Beneficiaries.
----------------------------
This Agreement shall not confer any rights or remedies upon any person
other than the Parties and their respective successors and permitted assigns.
8.3 Entire Agreement.
----------------
This Agreement (including the documents referred to herein)
constitutes the entire agreement among the Parties and supersedes any prior
understandings, agreements, or representations by or among the Parties, written
or oral, with respect to the subject matter hereof, including without limitation
any and all prior employment or similar agreements between ASM and any
Stockholder and any amendment or supplement thereto.
51
8.4 Succession and Assignment.
-------------------------
This Agreement shall be binding upon and inure to the benefit of the
Parties named herein and their respective successors and permitted assigns. No
Party may assign either this Agreement or any of its rights, interests, or
obligations hereunder without the prior written approval of the other Parties;
provided that PGI may assign its rights, interests and obligations hereunder to
an Affiliate of PGI if PGI ensures that such PGI Affiliate shall agree to be
bound by each of the obligations of this Agreement relating to the payment of
Additional Purchase Consideration, if any, or if PGI shall pay to the
Stockholders a reasonable estimation of the Additional Purchase Consideration
then owing to the Stockholders based upon the business of ASM at the point of
PGI's sale of control or disposal of assets, if any, calculated in a manner
consistent with Section 1.5 hereof. In the event that PGI sells substantially
all of the Existing ASM Business to a third party, it agrees cause such third
party to be bound by the provisions of this Agreement with respect to the
payment of Additional Purchase Consideration. PGI shall remain secondarily
liable for and shall fully guarantee the payment of any Additional Purchase
Consideration that may become due hereunder.
8.5 Counterparts.
------------
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original but all of which together shall constitute one
and the same instrument.
8.6 Headings.
--------
The section headings contained in this Agreement are inserted for
convenience only and shall not affect in any way the meaning or interpretation
of this Agreement.
8.7 Notices.
-------
All notices, requests, demands, claims, and other communications
hereunder shall be in writing. Any notice, request, demand, claim, or other
communication hereunder shall be deemed duly delivered two business days after
it is sent by registered or certified mail, return receipt requested, postage
prepaid, or one business day after it is sent via a reputable nationwide
overnight courier service, in each case to the intended recipient as set forth
below:
If to ASM:
▇▇▇▇ ▇▇▇▇▇▇
American Show Management, Inc.
▇▇▇▇▇ ▇.▇. ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
Copy to:
▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Esq.
▇▇▇▇▇, Denecke & ▇▇▇▇▇▇
1150 Pioneer Tower
▇▇▇ ▇.▇. ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
52
If to ▇▇▇▇ ▇▇▇▇▇▇:
▇▇▇▇▇ ▇.▇. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
Copy to:
▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Esq.
▇▇▇▇▇, Denecke & ▇▇▇▇▇▇
1150 Pioneer Tower
▇▇▇ ▇.▇. ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
If to ▇▇▇▇ ▇▇▇▇▇▇:
▇▇▇▇▇ ▇.▇. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
Copy to:
▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Esq.
▇▇▇▇▇, Denecke & ▇▇▇▇▇▇
1150 Pioneer Tower
▇▇▇ ▇.▇. ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
If to ▇▇▇▇▇▇▇:
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
Copy to:
▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇▇ ▇.▇. ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇-▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
If to ▇▇▇▇▇▇▇▇:
▇▇▇▇▇ ▇.▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
Copy to:
▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇▇ ▇.▇. Fifth Avenue, Suites 1600-1800
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
53
If to PGI:
▇▇▇▇ ▇▇▇▇▇▇▇▇▇
PGI, Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Copy to:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇., Esq.
Piper & Marbury L.L.P
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
Any Party may give any notice, request, demand, claim, or other
communication hereunder using any other means (including personal delivery,
expedited courier, messenger service, telecopy, telex, ordinary mail, or
electronic mail), but no such notice, request, demand, claim, or other
communication shall be deemed to have been duly given unless and until it
actually is received by the party for whom it is intended. Any Party may change
the address to which notices, requests, demands, claims, and other
communications hereunder are to be delivered by giving the other Parties notice
in the manner herein set forth.
8.8 Governing Law.
-------------
This Agreement shall be governed by and construed in accordance with
the internal laws (and not the law of conflicts) of the State of Delaware.
8.9 Amendments and Waivers.
----------------------
No waiver by any Party of any default, misrepresentation, or breach of
warranty or covenant hereunder, whether intentional or not, shall be deemed to
extend to any prior or subsequent default, misrepresentation, or breach of
warranty or covenant hereunder or affect in any way any rights arising by virtue
of any prior or subsequent such occurrence.
8.10 Severability.
------------
Any term or provision of this Agreement that is invalid or
unenforceable in any situation in any jurisdiction shall not affect the validity
or enforceability of the remaining terms and provisions hereof or the validity
or enforceability of the offending term or provision in any other situation or
in any other jurisdiction. If the final judgment of a court of competent
jurisdiction declares that any term or provision hereof is invalid or
unenforceable, the Parties agree that the court making the determination of
invalidity or unenforceability shall have the power to reduce the scope,
duration, or area of the term or provision, to delete specific words or phrases,
or to replace any invalid or unenforceable term or provision with a term or
provision that is valid and enforceable and that comes closest to expressing the
intention of the invalid or
54
unenforceable term or provision, and this Agreement
shall be enforceable as so modified after the expiration of the time within
which the judgment may be appealed.
8.11 Expenses.
--------
The Stockholders shall be responsible for the costs and expenses
(including any legal, accounting and investment banking fees and expenses)
incurred by them or ASM in connection with this Agreement and the transactions
contemplated hereby. PGI shall be responsible for the costs and expenses
(including any legal, accounting and investment banking fees and expenses)
incurred by PGI in connection with this agreement and the transactions
contemplated hereby.
8.12 Specific Performance.
--------------------
Each of the Parties acknowledges and agrees that one or more of the
other Parties would be damaged irreparably in the event any of the provisions of
this Agreement are not performed in accordance with their specific terms or
otherwise are breached. Accordingly, each of the Parties agrees that the other
Parties shall be entitled to an injunction or injunctions to prevent breaches of
the provisions of this Agreement and to enforce specifically this Agreement and
the terms and provisions hereof in any action instituted in any court of the
United States or any state thereof having jurisdiction over the Parties and the
matter, in addition to any other remedy to which it may be entitled, at law or
in equity. The prevailing party in any such action shall be entitled to recover
from the other party its attorneys' fees, costs and expenses incurred in
connection with regard to such action.
8.13 Construction.
------------
The language used in this Agreement shall be deemed to be the language
chosen by the Parties hereto to express their mutual intent, and no rule of
strict construction shall be applied against any Party. Any reference to any
federal, state, local, or foreign statute or law shall be deemed also to refer
to all rules and regulations promulgated thereunder, unless the context requires
otherwise.
8.14 Incorporation of Exhibits and Schedules.
---------------------------------------
The Exhibits and Disclosure Schedule identified in this Agreement are
incorporated herein by reference and made a part hereof.
8.15 Arbitration.
-----------
In the event that any dispute under Sections 1.5(c)(iii), 1.5(d)(ii),
4.16, 4.17(a), 4.17(b), 7.4(d) or 7.5 of this Agreement (a "Dispute"), either
party in such dispute shall have the right or the obligation (subject to the
terms of the section under which the Dispute has arisen) to submit such Dispute
to expedited binding arbitration as set forth herein. The party seeking
arbitration (the "Moving Party") shall provide a written request for arbitration
(the "Arbitration Request") to the other party (the "Respondent Party"). The
Arbitration Request shall set forth in detail the Moving Party's position and
arguments concerning the Dispute and shall state clearly
55
the desired relief under this Agreement. Following the receipt of such request,
the Moving Party and the Respondent Party shall negotiate in good faith for a
period of 15 days in an attempt to resolve such dispute. If the Moving Party and
the Respondent Party are unable to resolve such Dispute, the Moving Party shall
have the right to provide a written request for arbitration to the American
Arbitration Association and shall simultaneously provide a copy of such
Arbitration Request to the Respondent Party. Within five days of its receipt of
the Arbitration Request, the American Arbitration Association shall appoint a
single arbitrator (the "Arbitrator") to adjudicate the Dispute. Immediately upon
the Respondent Party's receipt of the Arbitration Request, and continuing for 30
days thereafter, the Moving Party and the Respondent Party shall cooperate and
share information with each other in order to discover all facts relevant to the
Dispute ("Discovery"). The Arbitrator shall have authority to adjudicate and
issue orders with respect to any disagreements or disputes arising in connection
with such Discovery. Within 30 days after the conclusion of Discovery, the
Respondent Party shall file with the Arbitrator and the Moving Party its
response (the "Arbitration Response") to the Arbitration Request, which
Arbitration Response shall set forth in detail the Respondent Party's position
and arguments concerning the Dispute. Within the same 30-day period, the Moving
Party shall be entitled to amend and supplement its Arbitration Request based
upon information arising from the Discovery. Within five days after the
Respondent Party's filing of the Arbitration Response, the Arbitrator shall set
a date for a hearing (the "Hearing"), which date shall be within 30 days. At the
Hearing, the Moving Party and the Respondent Party shall each present their
positions and arguments with respect to the Dispute subject to such reasonable
hearing rules as shall be set by the Arbitrator, provided that the Hearing shall
last no longer than two days. Within 30 days after the Hearing, the Arbitrator
shall issue a written decision (the "Decision") with respect to the Dispute,
which Decision shall take into account all information and arguments set forth
in the Arbitration Request, the Arbitration Response, and presented at the
Hearing, and which Decision shall be final and binding among the Parties with
respect to the subject matter of the Dispute.
56
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of
the date first above written.
PGI, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
---------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: President and Chief Executive Officer
AMERICAN SHOW MANAGEMENT, INC
.
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇
---------------
Name: ▇▇▇▇ ▇▇▇▇▇▇
Title: Chief Executive Officer
/s/ ▇▇▇▇ ▇▇▇▇▇▇
---------------
▇▇▇▇ ▇▇▇▇▇▇
/s/ ▇▇▇▇ ▇▇▇▇▇▇
---------------
▇▇▇▇ ▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
-------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇
GLOSSARY
--------
"1997 ADDITIONAL PURCHASE CONSIDERATION" shall have the meaning as defined in
Section 1.5(c) of this Agreement.
"1997 EARN-OUT STATEMENT" shall have the meaning as defined in Section
1.5(c)(ii) of this Agreement.
"1997 HALL CONTRACTS" shall have the meaning as defined in Section 2.14(a)(x) of
this Agreement.
"1997 PACKAGES" shall have the meaning as defined in Section 1.7(c) of this
Agreement.
"1998 ADDITIONAL PURCHASE CONSIDERATION" shall have the meaning as defined in
Section 1.5(d) of this Agreement.
"1998 EARN-OUT STATEMENT" shall have the meaning as defined in Section 1.5(d)(i)
of this Agreement.
"ACCELERATED EARN OUT AMOUNT" shall have the meaning as defined in Section
4.16(b)(i) of this Agreement.
"ACCELERATED EARN-OUT EVENT" shall have the meaning as defined in Section
4.16(a) of this Agreement.
"ACCREDITED INVESTOR" shall have the meaning as defined in Section 3.8 of this
Agreement.
"ADDITIONAL ESCROW DEPOSIT" shall have the meaning as defined in Section
1.5(c)(v) of this Agreement.
"ADDITIONAL PURCHASE CONSIDERATION" shall have the meaning as defined in Section
1.5(d) of this Agreement.
"ADDITIONAL PURCHASE CONSIDERATION ACCOUNT" shall have the meaning as defined in
Section 1.5(c)(v) of this Agreement.
"ADVANTA" shall have the meaning as defined in Section 2.28(a) of this
Agreement.
"AFFILIATE" shall have the meaning as defined in Section 2.23 of this Agreement.
"AFFILIATED GROUP" shall have the meaning as defined in Section 2.9(d) of this
Agreement.
"AGREEMENT" shall mean this Stock Purchase and Sale Agreement entered into as of
January _____, 1997.
"ALTERNATE SECURITY" shall have the meaning as defined in Section 4.16(a)(v) of
this Agreement.
"ANTICIPATED DEFAULT NOTICE" shall have the meaning as defined in Section
4.16(a)(v) of this Agreement.
"ARBITRATION REQUEST" shall have the meaning as defined in Section 8.15 of this
Agreement.
"ARBITRATION RESPONSE" shall have the meaning as defined in Section 8.15 of this
Agreement.
"ARBITRATOR" shall have the meaning as defined in Section 8.15 of this
Agreement.
"ARTICLES OF INCORPORATION" shall have the meaning as defined in Section 2.1 of
this Agreement.
"ASM" for the purposed of this Agreement shall mean American Show Management,
Inc., an Oregon corporation.
"ASM EMPLOYEES." shall have the meaning as defined in Section 4.14 of this
Agreement.
"ASM LOSSES" shall have the meaning as defined in Section 7.4(a) of this
Agreement.
"AT WILL" shall have the meaning as defined in Section 4.14 of this Agreement.
"AUDITED FINANCIALS" shall have the meaning as defined in Section 2.31 of this
Agreement.
"BASE PURCHASE CONSIDERATION" shall have the meaning as defined in Section
1.5(a) of this Agreement.
"BASE PURCHASE PRICE INCREASE" shall have the meaning as defined in Section
1.5(b)(iv) of this Agreement.
"BASE PURCHASE PRICE REDUCTION" shall have the meaning as defined in Section
1.5(b)(iii) of this Agreement.
"BASKET" shall have the meaning as defined in Section 7.5(a) of this Agreement.
"BUSINESS" shall have the meaning as defined in paragraph two of this Agreement.
"BUSINESS" shall have the meaning as defined in Section 4.8(a) of this
Agreement.
"BUSINESS PLAN" shall have the meaning as defined in Section 1.5(e) of this
Agreement.
"BY-LAWS" shall have the meaning as defined in Section 2.1 of this Agreement.
"CAUSE" shall have the meaning as defined in Section 4.16(a)(i) of this
Agreement.
"CERCLA" shall have the meaning as defined in Section 2.20(a)(ix) of this
Agreement.
"CLOSING" shall have the meaning as defined in Section 1.2 of this Agreement.
"CLOSING DATE" shall have the meaning as defined in Section 1.2 of this
Agreement.
"CLOSING FINANCIAL STATEMENTS" shall have the meaning as defined in Section
1.5(b)(i) of this Agreement.
"CODE" shall have the meaning as defined in Section 1.7(a) of this Agreement.
"COMPETITION" shall have the meaning as defined in Section 4.9(a) of this
Agreement.
"DECISION" shall have the meaning as defined in Section 8.15 of this Agreement.
"DESIGNATED ACCOUNTANT" shall have the meaning as defined in Section 1.5(b)(ii)
of this Agreement.
"▇▇▇▇▇▇▇▇" for the purposes of this Agreement shall refer to ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ an
individual residing at _____________.
"▇▇▇▇▇▇▇▇ EMPLOYMENT AGREEMENT" shall have the meaning as defined in Section
5.2(l) of this Agreement.
"DIRECTLY" shall have the meaning as defined in Section 4.9(a) of this
Agreement.
"DISCLOSURE SCHEDULE" shall have the meaning as defined in Section 2.1 of this
Agreement.
"DISCLOSURE SCHEDULE" shall have the meaning as defined in Section 1.5(b)(i) of
this Agreement.
"DISCLOSURE TERMINATION PERIOD" shall have the meaning as defined in Section 7.2
of this Agreement.
"DISCOVERY" shall have the meaning as defined in Section 8.15 of this Agreement.
"DISPUTE" shall have the meaning as defined in Section 8.15 of this Agreement.
"EARN-OUT IMPOSSIBILITY EVENT" shall have the meaning as defined in Section
4.16(a)(v) of this Agreement.
"EMPLOYEE BENEFIT PLAN" or "EMPLOYEE PENSION BENEFIT PLAN" shall have the
meaning as defined in Section 2.19(a) of this Agreement.
"ENVIRONMENT" shall have the meaning as defined in Section 2.20(a)(ix) of this
Agreement.
"ENVIRONMENTAL LAW" shall have the meaning as defined in Section 2.20(a) of this
Agreement.
"ERISA" shall have the meaning as defined in Section 2.19(a) of this Agreement.
"ERISA AFFILIATE" shall have the meaning as defined in Section 2.19(a) of this
Agreement.
"EXCHANGE ACT" shall have the meaning as defined in Section 2.14(a)(vi) of this
Agreement.
"EXISTING ASM BUSINESS" shall have the meaning as defined in Section
1.5(c)(i)(D) of this Agreement.
"EXPENSES" shall have the meaning as defined in Section 1.5(c)(1) of this
Agreement.
"EXPRESS ELECTION" shall have the meaning as defined in Section 1.7(a) of this
Agreement.
"FINAL COVENANT TERMINATION EVENTS" shall have the meaning as defined in Section
4.17 of this Agreement.
"FINANCIAL STATEMENTS" shall have the meaning as defined in Section 2.6 of this
Agreement.
"GOOD REASON" shall have the meaning as defined in Section 4.16(a)(ii) of this
Agreement.
"GOOD REASON" shall have the meaning as defined in Section 4.17 of this
Agreement.
"GOVERNMENTAL ENTITY" shall have the meaning as defined in Section 2.4(b) of
this Agreement.
"HEARING" shall have the meaning as defined in Section 8.15 of this Agreement.
"INDEMNITEE" shall have the meaning as defined in Section 7.4(a) of this
Agreement.
"INDEMNITOR" shall have the meaning as defined in Section 7.4(a) of this
Agreement.
"INDEMNITY PERIOD" shall have the meaning as defined in Section 7.1(a)(ii) of
this Agreement.
"INDIRECTLY" shall have the meaning as defined in Section 4.9(a) of this
Agreement.
"INGLIS EMPLOYMENT AGREEMENT" shall have the meaning as defined in Section
5.2(j) of this
"INTELLECTUAL PROPERTY" shall have the meaning as defined in Section 2.12(a) of
this Agreement.
"▇▇▇▇ ▇▇▇▇▇▇" is an individual residing at ___________.
"▇▇▇▇ ▇▇▇▇▇▇" is an individual residing at ___________.
"▇▇▇▇▇▇▇" for the purposes of this Agreement shall refer to ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
an individual residing at _____________.
"▇▇▇▇▇▇▇ EMPLOYMENT AGREEMENT" shall have the meaning as defined in Section
5.2(k) of this Agreement.
"LOSSES" shall have the meaning as defined in Section 7.4(a) of this Agreement.
"MATERIAL FINANCIAL DEFAULT" shall have the meaning as defined in Section
4.16(a)(iv) of this Agreement.
"MATERIALS OF ENVIRONMENTAL CONCERN" shall have the meaning as defined in
Section 2.20(b) of this Agreement.
"MOST FAVORED NATION" shall have the meaning as defined in Section 2.14(a)(ii)
of this Agreement.
"MOST RECENT BALANCE SHEET" shall have the meaning as defined in Section 2.8(a)
of this Agreement.
"MOST RECENT FISCAL QUARTER END" shall have the meaning as defined in Section
2.6 of this Agreement.
"MULTI-EMPLOYER PLAN" shall have the meaning as defined in Section 2.19(e) of
this Agreement.
"NEW ASM BUSINESS" shall have the meaning as defined in Section 1.5(c)(i)(D) of
this Agreement.
"NOTICE OF CLAIM" shall have the meaning as defined in Section 7.4(b) of this
Agreement.
"ORDINARY COURSE OF BUSINESS" shall have the meaning as defined in Section
2.4(e)(iii) of this Agreement.
"PARACHUTE PAYMENT" shall have the meaning as defined in Section 2.19(j) of this
Agreement.
"PARTIES" for the purposes of this Agreement shall collectively refer to
Production Group International, Inc., American Show Management, Inc., ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇.
"PERMITS" shall have the meaning as defined in Section 2.22 of this Agreement.
"PERSON" shall have the meaning as defined in Section 4.9(a) of this Agreement.
"PGI" for the purposes of this Agreement shall mean Production Group
International, Inc., a Delaware corporation.
"PGI LOSS" shall have the meaning as defined in Section 7.2 of this Agreement.
"PGI LOSSES" shall have the meaning as defined in Section 7.4(a) of this
Agreement.
"PRE-TAX, PRE-EXECUTIVE COMPENSATION NET INCOME" or "PTPECNI" shall have the
meaning as defined in Section 1.5(c)(1) of this Agreement.
"PROFIT MARGIN" shall have the meaning as defined in Section 1.5(c)(1) of this
Agreement.
"PUBLIC OFFERING" shall have the meaning as defined in Section 1.2 of this
Agreement.
"PURCHASE AND SALE" shall refer to American Show Management's desire to sell the
Stock and Production Group International, Inc.'s desire to purchase the Stock
from the Stockholders according to the terms and provision of this Agreement.
"PURCHASE CONSIDERATION" shall have the meaning as defined in Section 1.5 of
this Agreement.
"QUALIFIED STOCK PURCHASE" shall have the meaning as defined in Section 1.7(a)
of this Agreement.
"QUARTERLY EARN-OUT ESTIMATE" shall have the meaning as defined in Section
1.5(c)(v) of this Agreement.
"REGISTRATION STATEMENT" shall have the meaning as defined in Section 3.5 of
this Agreement.
"RELEASE" shall have the meaning as defined in Section 2.20(a)(ix) of this
Agreement.
"RESERVE" shall have the meaning as defined in Section 1.3 of this Agreement.
"RESERVE ACCOUNT" shall have the meaning as defined in Section 1.3 of this
Agreement.
"RESPONDENT PARTY" shall have the meaning as defined in Section 8.15 of this
Agreement.
"RESTRICTED TERRITORY" shall have the meaning as defined in Section 4.9(a) of
this Agreement.
"SECURITIES ACT" shall have the meaning as defined in Section 1.2 of this
Agreement.
"SHORT PERIOD PACKAGES" shall have the meaning as defined in Section 1.7(c) of
this Agreement.
"STOCK" shall refer to the issued and outstanding stock of American Show
Management, Inc.
"STOCKHOLDER LOSS" shall have the meaning as defined in Section 7.3 of this
Agreement.
"STOCKHOLDER REPRESENTATIVE" shall have the meaning as defined in Section 1.5(f)
of this Agreement.
"STOCKHOLDERS" for the purposes of this Agreement shall collectively refer to
▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇.
"SUBSIDIARY" shall have the meaning as defined in Section 2.4(b) of this
Agreement.
"TAX RETURN" shall have the meaning as defined in Section 1.7(c) of this
Agreement.
"TAX RETURNS" shall have the meaning as defined in Section 2.9(a)(y) of this
Agreement.
"TAXES" shall have the meaning as defined in Section 1.7(b) of this Agreement.
"TAXES" shall have the meaning as defined in Section 2.9(a)(x) of this
Agreement.
"THIRD PARTY CLAIMS" shall have the meaning as defined in Section 7.4(c) of this
Agreement.
"THIRD PARTY INTELLECTUAL PROPERTY RIGHTS" shall have the meaning as defined in
Section 2.12(a)(iii) of this Agreement.
"TOTAL REVENUES" shall have the meaning as defined in Section 1.5(c)(1) of this
Agreement.
"TRADE SECRETS" shall have the meaning as defined in Section 4.8(a) of this
Agreement.
"VOLUNTARY EMPLOYEE'S BENEFICIARY ASSOCIATION" shall have the meaning as defined
in Section 2.19(h) of this Agreement.