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AGREEMENT AND PLAN OF MERGER
AMONG
THE PUBLISHING COMPANY OF NORTH AMERICA, INC.,
NEW COLLEGE DIRECTORY PUBLISHING, INC.
AND
COLLEGE DIRECTORY PUBLISHING, INC.
----------------------------------------------
July 1, 1997
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TABLE OF CONTENTS
PAGE
----
1. Definitions...................................................... 1
2. Basic Transaction................................................ 5
(a) The Merger................................................. 6
(b) The Closing................................................ 6
(c) Effect of Merger........................................... 6
3. Representations and Warranties of the Target
and the Stockholders............................................. 7
(a) Organization of the Target................................. 7
(b) Authorization of Transaction............................... 7
(c) Capitalization............................................. 7
(d) Subsidiaries............................................... 8
(e) Non-Contravention.......................................... 8
(f) Brokers' Fees.............................................. 8
(g) Investment................................................. 8
(h) Title to Assets............................................ 8
(i) Financial Statements....................................... 9
(j) Events Subsequent to Most Recent
Fiscal Year End.......................................... 9
(k) Undisclosed Liabilities.................................... 11
(l) Related Party Transactions................................. 11
(m) Legal Compliance........................................... 12
(n) Tax Matters................................................ 12
(o) Real Property.............................................. 13
(p) Intellectual Property...................................... 14
(q) Tangible Assets............................................ 16
(r) Inventory.................................................. 16
(s) Contracts.................................................. 16
(t) Notes and Accounts Receivable.............................. 17
(u) Powers of Attorney......................................... 18
(v) Insurance.................................................. 18
(w) Litigation................................................. 18
(x) Product Warranty........................................... 18
(y) Employees.................................................. 18
(z) Employee Benefits.......................................... 19
(aa) Guaranties................................................. 21
(bb) Environment, Health, and Safety............................ 21
(cc) Americans With Disabilities Act of 1990.................... 21
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(dd) Contingent Liabilities..................................... 22
(ee) Accuracy of Net Bookings................................... 22
(ff) College Directories........................................ 22
(gg) Stockholder Approval....................................... 22
(hh) Disclosure................................................. 22
(ii) No Other Representations................................... 22
4. Representations and Warranties of PCNA
and the Buyer.................................................. 22
(a) Organization of PCNA and the Buyer......................... 22
(b) Authorization of Transaction............................... 23
(c) Non-Contravention.......................................... 23
(d) Brokers' Fees.............................................. 23
(e) Title to Assets............................................ 23
(f) Capitalization............................................. 23
(g) Reports and Financial Statements........................... 24
(h) Absence of Undisclosed Liabilities......................... 24
(i) Absence of Certain Changes or Events....................... 24
(j) Material Agreements........................................ 25
(k) Form 8-Ks.................................................. 25
(l) Disclosure................................................. 25
(m) No Other Representations................................... 25
5. Pre-Closing Covenants............................................ 25
(a) General.................................................... 25
(b) Notices and Consents....................................... 25
(c) Operation of Business...................................... 25
(d) Preservation of Business................................... 25
(e) Full Access................................................ 26
(f) Notice of Developments..................................... 26
(g) Exclusivity................................................ 26
6. Post-Closing Covenants........................................... 26
(a) General.................................................... 26
(b) Litigation Support......................................... 26
(c) Transition................................................. 27
(d) Withdrawal of Funds by Stockholders........................ 27
(e) Restrictions on Common Stock............................... 27
(f) Determination of Additional
Consideration for Target Shares.......................... 28
(g) PCNA Guarantee of the Buyer's
Obligations to the Stockholders.......................... 29
(h) Elimination of Personal Guarantees
on Credit Line........................................... 29
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(i) Directory Printing Obligation.............................. 29
(j) Net Bookings Guarantee..................................... 29
(k) PCNA Negative Assurances. ................................ 29
(l) PCNA Cooperation Regarding Code
Section 368(a)(1)(A) Status.............................. 30
(m) Officers and Directors of Buyer............................ 30
(n) Effect of Lock-Ups Upon Third Party
Acquisition of PCNA Stock................................ 30
(o) Line of Credit............................................. 30
(p) Contingent Interactive Communication
Specialists, Inc......................................... 31
7. Conditions to Obligation to Close................................ 31
(a) Conditions to Obligation of PCNA and
the Buyer................................................ 31
(b) Conditions to Obligation of the Target
and the Stockholders..................................... 32
8. Remedies For Breaches of This Agreement.......................... 33
(a) Survival of Representations and Warranties................. 33
(b) Indemnification Provisions for Benefit
of PCNA and the Stockholders............................. 33
(c) Indemnification Provisions for Benefit
of PCNA and the Buyer.................................... 34
(d) Matters Involving Third Parties............................ 34
(e) Determination of Adverse Consequences...................... 35
(f) PCNA's Right to Set-Off.................................... 35
(g) Other Indemnification Provisions........................... 36
(h) Limitation on Indemnification.............................. 36
9. Termination...................................................... 37
(a) Termination of Agreement................................... 37
(b) Effect of Termination...................................... 37
10. Miscellaneous.................................................... 38
(a) Press Releases and Public Announcements.................... 38
(b) No Third-Party Beneficiaries............................... 38
(c) Expenses................................................... 38
(d) Construction............................................... 38
(e) Specific Performance....................................... 38
(f) Severability............................................... 39
(g) Counterparts............................................... 39
(h) Benefit.................................................... 39
(i) Notices and Addresses...................................... 39
(j) Attorney's Fees............................................ 40
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(k) Oral Evidence.............................................. 40
(l) Governing Law.............................................. 40
(m) Arbitration................................................ 40
(n) Section or Paragraph Headings.............................. 41
v
<PAGE>
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement") entered into as of
this 1st day of July, 1997, by and among The Publishing Company of North
America, Inc., a Florida corporation ("PCNA"), New College Directory Publishing,
Inc., a Delaware corporation (the "Buyer"), College Directory Publishing, Inc.,
a Delaware corporation (the "Target") and Michael Paul and John Rafanello (the
"Stockholders"). PCNA, the Buyer, the Target and the Stockholders are referred
to collectively herein as the "Parties".
WHEREAS, PCNA owns 100% of the outstanding capital stock of the Buyer;
WHEREAS, the Target and the Stockholders wish to merge the Target into the
Buyer in a tax-free reorganization pursuant to Section 368(a)(1)(A) of the
Internal Revenue Code (the "Code") through which the Target shall merge into the
Buyer and the Stockholders shall receive cash and common stock of PCNA in
exchange for 100% of the capital stock of the Target; and
WHEREAS, this Agreement provides for various rights and responsibilities.
NOW, THEREFORE, in consideration of the mutual promises made herein, and
in consideration of the representations, warranties, and covenants contained
herein, the Parties adopt this plan of merger and agree as follows:
1. Definitions.
"Adverse Consequences" means all actions, suits, proceedings,
hearings, investigations, charges, complaints, claims, demands,
injunctions, judgments, orders, decrees, rulings, damages, dues,
penalties, fines, costs, amounts paid in settlement, Liabilities, as
defined, obligations, Taxes, as defined, liens, losses, expenses, and
fees, including court costs and reasonable attorneys' fees and expenses.
"Affiliate" has the meaning set forth in Rule 12b-2 of the
regulations promulgated under the Securities Exchange Act of 1934.
"Basis" means any past or present fact, situation, circumstance,
status, condition, activity, practice, plan, occurrence, event, incident,
action, failure to act, or transaction that forms or could form the basis
for any specified consequence.
"Business" means the college and university directory publishing
business.
"Buyer" has the meaning set forth in the preface above.
"Certificate of Merger" has the meaning set forth in Section 2(b).
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"Closing" has the meaning set forth in Section 2(b) below.
"Closing Date" has the meaning set forth in Section 2(b) below.
"Code" means the Internal Revenue Code of 1986, as amended.
"Common Stock" means the common stock, no par value, of PCNA.
"Effective Time" has the meaning as set forth Section 2(c)(i).
"Employee Benefit Plan" means any (a) non-qualified deferred
compensation or retirement plan or arrangement which is an Employee
Pension Benefit Plan, as defined, (b) qualified defined contribution
retirement plan or arrangement which is an Employee Pension Benefit Plan,
(c) qualified defined benefit retirement plan or arrangement which is an
Employee Pension Benefit Plan (including any multi-employer Plan), or (d)
Employee Welfare Benefit Plan, as defined, or material fringe benefit plan
or program.
"Employee Pension Benefit Plan" has the meaning set forth in Section
3(z)(i)(B)) of ERISA, as defined.
"Employee Welfare Benefit Plan" has the meaning set forth in Section
3(z)(i)(B)) of ERISA, as defined.
"Environmental, Health, and Safety Laws" means the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, the
Resource Conservation and Recovery Act of 1976, and the Occupational
Safety and Health Act of 1970, each as amended, together with all other
laws (including rules, regulations, codes, plans injunctions, judgments,
orders, decrees, rulings, and charges thereunder) of federal, state,
local, and foreign governments (and all agencies thereof) concerning
pollution or protection of the environment, public health and safety, or
employee health and safety, including laws relating to emissions,
discharges, releases, or threatened releases of pollutants, contaminants,
or chemical, industrial, hazardous, or toxic materials or water into
ambient air, surface water, ground water, or lands or otherwise relating
to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport, or handling of pollutants, contaminants, or chemical,
industrial, hazardous, or toxic materials or wastes.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
"Extremely Hazardous Substances" has the meaning set forth in Sec.
302 of the Emergency Planning and Community Right-to-Know Act of 1986, as
amended.
"Family Member" means any spouse, child, parent, father or
mother-in-law, brother or sister, brother or sister-in-law, nephew or
niece, and any corporation, partnership, joint venture, limited liability
company, association, trust, joint stock company, unincorporated
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organization, or entity in which such a Person has any ownership interest
in (excluding any public company in which a Person owns less than 1% of
the outstanding shares of common stock).
"Fiduciary" has the meaning set forth in ERISA Section 3(21) of
ERISA, as defined.
"Financial Statements" has the meaning set forth in Section 3(i)
below.
"Form 10-KSB" shall mean the Form 10-KSB of PCNA for the year ended
December 31, 1996 which has been filed with the SEC, as defined.
"Form 10-QSB" shall mean the Form 10-QSB of PCNA for the quarter
ended March 31, 1997 which has been filed with the SEC, as defined.
"GAAP" means United States generally accepted accounting principles
as in effect from time to time.
"Indemnified Party" has the meaning set forth in Section 8(d)(i)
below.
"Indemnifying Party" has the meaning set forth in Section 8(d)(i)
below.
"Intellectual Property" means (a) all inventions (whether patentable
or unpatentable and whether or not reduced to practice), all improvements
thereto, and all patents, patent applications, and patent disclosures,
together with all re-issuances, continuations, continuations-in-part,
revisions, extensions, and reexaminations thereof, (b) all trademarks,
services marks, trade dress, logos, trade names, and corporate names,
together with all translations, adaptions, derivations, and combinations
thereof and including all goodwill associated therewith, and all
applications, registrations, and renewals in connection therewith, (c) all
copyrightable works, all copyrights, and all applications, registrations,
and renewals in connection therewith, (d) all mask works and all
applications, registrations, and renewals in connection therewith, (e) all
trade secrets and confidential business information (including ideas,
research and development, know-how, formulas, compositions, manufacturing
and production processes and techniques, technical data, designs,
drawings, specifications, customer and supplier lists, pricing and cost
information, and business and marketing plans and proposals), (f) all
computer software (including data and related documentation, (g) all other
proprietary rights, and (h) all copies and tangible embodiments thereof
(in whatever form or medium).
"Investigation" means any preliminary or other inquiry or any
informal or formal investigation being conducted by any federal, state, or
local government including any administrative agency.
"Knowledge" means actual knowledge after reasonable investigation.
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"Liabilities" means any liability (whether known or unknown, whether
asserted or unasserted, whether absolute or contingent, whether accrued or
unaccrued, whether liquidated or unliquidated, and whether due or to
become due), including any liability for Taxes, as defined.
"Merger" has the meaning set forth in Section 2(a) below.
"Merger Consideration" has the meaning set forth in Section
2(c)(iv).
"Most Recent Balance Sheet" means the balance sheet contained within
the Most Recent Financial Statements, as defined.
"Most Recent Financial Statements" has the meaning set forth in
Section 3(i) below.
"Most Recent Fiscal Month End" has the meaning set forth in Section
3(i) below.
"Most Recent Fiscal Year End" has the meaning set forth in Section
3(i) below.
"Net Bookings" means the amount of advertising orders, less ordinary
and/or customary discounts, received on or before Closing by the Target,
as defined, to be published in university and college membership
directories during 1997 without excluding any down payments made by
advertisers.
"Net Pre-Tax Income" has the meaning set forth in Section
6(f)(iii)(D) below.
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to
quantity and frequency).
"Parties" has the meaning set forth in the preface above.
"PCNA" has the meaning set forth in the preface above.
"PCNA's Financial Statements" has the meaning set forth in Section
4(g) below.
"Person" means an individual, a partnership, a corporation, a
limited liability company, an association, a joint stock company, a trust,
a joint venture, an unincorporated organization, or a governmental entity
(or any department, agency, or political subdivision thereof).
"Prohibited Transaction" has the meaning set forth in Section 406 of
ERISA and Section 4975 of the Code.
"Proxy Statement" means the Proxy Statement dated April 30, 1997
filed with the SEC.
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"Reportable Event" has the meaning set forth in Section 4043 of
ERISA.
"Securities Act" means the Securities Act of 1933, as amended.
"SEC" shall mean the Securities and Exchange Commission.
"Security Interest" means any mortgage, pledge, lien, encumbrance,
charge, or other security interest, other than (a) mechanic's,
materialmen's, and similar liens, (b) liens for Taxes, as defined, not yet
due and payable or for Taxes, as defined, that the taxpayer is contesting
in good faith through appropriate proceedings, (c) purchase money liens
and liens securing rental payments under capital lease arrangements, and
(d) other liens arising in the Ordinary Course of Business and not
incurred in connection with the borrowing of money.
"Stockholders" has the meaning set forth in the preface above.
"Subsidiary" means any corporation with respect to which a specified
Person (or a Subsidiary thereof) owns a majority of the common stock or
has the power to vote or direct the voting of sufficient securities to
elect a majority of the directories.
"Surviving Corporation" has the meaning set forth in Section 2(a)
below.
"Target" has the meaning set forth in the preface above.
"Target's Financial Statements" has the meaning set forth in Section
3(i).
"Target Shares" means the common stock, no par value of the Target.
"Tax" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental (including taxes
under Section 59A of the Code), customs duties, capital stock, franchise,
profits, withholding, social security (or similar), unemployment,
disability, real property, personal property, sales, use, transfer,
registration, value added, alternative or add-on minimum, estimated, or
other tax of any kind whatsoever, including any interest, penalty, or
addition thereto, whether disputed or not.
"Tax Return" means any return, declaration, report, claim for
refund, or information or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.
"Third Party Claim" has the meaning set forth in Section 8(d) below.
2. Basic Transaction.
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(a) The Merger. On and subject to the terms and conditions of this
Agreement, the Target shall merge with and into the Buyer (the "Merger")
at the Effective Time, as defined. The Buyer shall be the corporation
surviving the Merger (the "Surviving Corporation").
(b) The Closing. The closing of the transactions contemplated by
this Agreement (the "Closing") shall take place at the offices of PCNA in
Lake Helen, Florida, at 9:30 a.m., local time, on the 1st day of July,
1997, subject to the satisfaction or waiver of all conditions to the
obligation of the Parties to consummate the transactions contemplated
hereby (other than conditions with respect to actions, the respective
Parties will take at the Closing itself), or such other date as the
Parties may mutually determine (the "Closing Date"). At the Closing, (i)
the Target shall deliver to PCNA and the Buyer the various certificates,
instruments and documents referred to in this Agreement, (ii) the
Stockholders shall deliver to the Buyer the instruments referred to in
this Agreement including certificates representing 100% of the Target
Shares duly executed with medallion guarantees, (iii) PCNA and the Buyer
shall deliver to the Target and the Stockholders the various certificates,
instruments, and documents referred to in Section 6(b) below, (iv) the
Buyer shall deliver to the Stockholders the Common Stock and cashiers
checks referred to in Section 2(e) below, and (v) PCNA and the Buyer shall
file with the Secretary of State of Delaware a certificate of merger in
the form attached hereto as Exhibit A (the "Certificate of Merger").
(c) Effect of Merger.
(i) General. The Merger shall become effective at the time
(the "Effective Time") that the Buyer and the Target file the
Certificate of Merger with the Secretary of State of Delaware. The
Merger shall have the effect set forth in the Delaware General
Corporation Law. The Surviving Corporation may, at any time after
the Effective Time, take any action (including executing and
delivering any documents) in the name and on behalf of either the
Surviving Corporation or the Target in order to carry out and
effectuate the transactions contemplated by the Agreement.
(ii) Certificate of Incorporation. The Certificate of
Incorporation of the Surviving Corporation shall be amended and
restated at and as of the Effective Time to change the name of the
Surviving Corporation so that immediately following the Effective
Time, the name of the Surviving Corporation is College Directory
Publishing, Inc.
(iii) Directors and Officers. The directors and officers of
the Surviving Corporation at and as of the Effective Time shall be
as disclosed on Schedule 2(d)(iii) hereof.
(iv) Conversion of Target Shares. At and as of the Effective
Time, each Target Share shall be converted into the right to receive
an amount (the
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"Merger Consideration") equal to $100 in cash plus 250 shares of
Common Stock. At the Closing, the Buyer shall deliver to the
Stockholders an aggregate of 750,000 shares of Common stock and
$300,000 and the contingent right to receive additional Merger
Consideration as described in Section 6(f) hereof. No Target Share
shall be deemed to be outstanding or to have any rights after the
Effective Time.
3. Representations and Warranties of the Target and the Stockholders. The
Target and each of the Stockholders represents and warrants to PCNA and the
Buyer that to their Knowledge, individually and not collectively, the statements
contained in this Section 3 are correct and complete as of the date of this
Agreement and shall be correct and complete as of the Closing Date.
(a) Organization of the Target. The Target is a corporation duly
organized, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation. The Target is duly authorized to
conduct business and is in good standing under the laws of each
jurisdiction where such qualification is required except where the failure
to so qualify would not have a material adverse effect upon the Target.
The Target has full corporate power and authority to carry on the business
in which it is engaged in to own and use the properties owned and used by
it. Schedule 3(b) lists the directors and officers of the Target. The
Target has delivered to PCNA and the Buyer correct and complete copies of
the charter and bylaws of the Target. The minute books (containing the
records and meetings of the stockholders, the board of directors, and any
committees of the board of directors), the stock certificate books and the
stock record books of the Target are correct and complete. The Target is
not in default under or in violation of any provision of its charter or
bylaws.
(b) Authorization of Transaction. The Target and the Stockholders
have the full power and authority to execute and deliver this Agreement
and to perform their obligations hereunder. Subject to execution, delivery
and authorization of PCNA and the Buyer, this Agreement constitutes the
valid and legally binding obligation of the Target and each Stockholder,
enforceable in accordance with its terms and conditions. The Target and
the Stockholders need not give any notice to, make any filing with, or
obtain any authorization, consent, or approval of any government or
governmental agency in order to consummate the transactions contemplated
by this Agreement.
(c) Capitalization.
(i) The authorized capital stock of the Target consists of
3,000 Target Shares of which 3,000 Target Shares are outstanding.
All of the issued and outstanding Target Shares are validly issued
and are fully paid, non-assessable and free of preemptive rights.
(ii) There are (A) no outstanding subscriptions, options,
calls, contracts, commitments, understandings, restrictions,
arrangements, rights or warrants, including any right of conversion
or exchange under any outstanding
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security, instrument or other agreement and also including any
rights plan or other anti-takeover agreement, obligating Target to
issue, deliver or sell, or cause to be issued, delivered or sold,
additional Target Shares or shares of the capital stock of Target or
obligating Target to grant, extend or enter into any agreement or
commitment, and (B) no voting trusts, proxies or other agreements or
understandings to which Target is a party or is bound with respect
to the voting of any Target Shares or shares of capital stock of
Target. The Target Shares issued to the Stockholders will be as of
the Closing duly authorized, validly issued, fully paid and
non-assessable and free of preemptive rights and liens or Security
Interests.
(d) Subsidiaries. Except as disclosed on Schedule 3(d), the Target
has no Subsidiaries and does not own any interest in any corporation,
partnership, joint venture, limited liability company, association, trust
or entity.
(e) Non-Contravention. Neither the execution and the delivery of
this Agreement, nor the consummation of the transactions contemplated
hereby, will (i) violate any constitution, statute, regulation, rule,
injunction, judgment, order, decree, ruling, charge, or other restriction
of any government, governmental agency, or court to which Target is
subject or, (ii) conflict with, result in a breach of, constitute a
default under, result in the acceleration of, create in any party the
right to accelerate, terminate, modify, or cancel, or require any notice
under, any agreement, contract, lease, license, instrument, or other
arrangement to which the Target is a party or by which it is bound or to
which any of its assets is subject.
(f) Brokers' Fees. Target and the Stockholders have no Liability or
obligation to pay any fees or commissions to any broker, finder, or agent
with respect to the transactions contemplated by this Agreement for which
PCNA or the Buyer could become liable or obligated.
(g) Investment. Each of the Stockholders (i) understands that the
Common Stock has not been, and will not be, registered under the
Securities Act, or under any state securities laws, and are being offered
and transferred in reliance upon federal and state exemptions for
transactions not involving any public offering, (ii) except as provided in
this Agreement, is acquiring the Common Stock solely for his own account
for investment purposes, and not with a view to the distribution thereof,
(iii) is a sophisticated investor with knowledge and experience in
business and financial matters and has had the opportunity to obtain
additional information as desired in order to evaluate the merits and the
risks inherent in holding the Common Stock, (iv) acknowledges receipt of
PCNA's Form 10-KSB, Form 10-QSB and Proxy Statement, and (v) is able to
bear the economic risk and lack of liquidity inherent in holding the
Common Stock.
(h) Title to Assets. The Target has good and marketable title to, or
a valid leasehold interest in, the properties and assets used by it,
located on its premises, shown on the Most Recent Balance Sheet or
acquired after the date thereof and, except as shown on Schedule 3(h), are
free and clear of all Security Interests, except for properties and assets
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disposed of in the Ordinary Course of Business since the date of the Most
Recent Balance Sheet. Schedule 3(h) also includes a list of all assets
owned and leased by the Target with the designation as which assets are
leased.
(i) Financial Statements. Attached hereto as Exhibit B are the
following financial statements of the Target (collectively the "Financial
Statements"): (i) unaudited balance sheets and statements of income,
changes in stockholders' equity, and cash flow as of and for the fiscal
year ended December 31, 1996 (the "Most Recent Fiscal Year End"); and (ii)
unaudited balance sheets and statements of income, changes in
stockholders' equity, and cash flow (the "Most Recent Financial
Statements") as of and for the five months ended May 31, 1997 (the "Most
Recent Fiscal Month End"). The Financial Statements (including the notes
thereto) have been prepared in accordance with GAAP applied on a
consistent basis through the periods covered thereby, present fairly the
financial condition of the Target as of such dates and the results of
operations of the Target for such periods, are materially correct and
complete, and are consistent with the books and records of the Target
(which books and records are materially correct and complete).
(j) Events Subsequent to Most Recent Fiscal Year End. Since the Most
Recent Fiscal Year End, there has not been any material adverse change in
the business, financial condition, operations, results of operations or
future prospects of the Target. Without limiting the generality of the
foregoing, except as provided to the contrary in this Agreement since that
date:
(i) the Target has not sold, leased, transferred, or assigned
any of its assets, tangible or intangible, other than for a fair
consideration in the Ordinary Course of Business;
(ii) except as otherwise disclosed in this Agreement, the
Target has not entered into any agreement, contract, lease, or
license (or series of related agreements, contracts, leases, and
licenses) involving (A) more than $12,000, (B) a term of more than
one year, or (C) outside the Ordinary Course of Business;
(iii) except as listed elsewhere herein, no party (including
Target) has accelerated, terminated, modified, or cancelled any
agreement, contract, lease or license (or series of related
agreements, contracts, leases, and licenses) to which the Target is
a party or by which it is bound involving (A) more than $12,000; or
(B) a term of more than one year;
(iv) the Target has not imposed any Security Interest upon any
of its assets, tangible or intangible, except as listed elsewhere
herein;
(v) except as listed elsewhere herein, the Target has not made
any capital expenditure (or series of related capital expenditures)
either involving more than $12,000 or outside the Ordinary Course of
Business;
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(vi) the Target has not made any capital investment in, any
loan to, or any acquisition of the securities or assets of, any
other Person (or series of related capital investments, loans, and
acquisitions) either involving (A) more than $12,000, (B) or outside
the Ordinary Course of Business;
(vii) the Target has not issued any note, debenture, bond, or
other debt security or created, incurred, assumed, or guaranteed any
indebtedness for borrowed money or capitalized lease obligation
either involving more than $12,000 singly or $25,000 in the
aggregate;
(viii) the Target has not delayed or postponed the payment of
accounts payable and other Liabilities outside the Ordinary Course
of Business except with respect to that certain vendor debt
allegedly due Directory Printing in the approximate amount of
$241,700:
(ix) the Target has not cancelled, compromised, waived, or
released any right or claim (or series of related rights and claims)
either involving (A) more than $12,000, or (B) outside the Ordinary
Course of Business except for those claims released as part of the
settlement of the lawsuit involving the St.
Joseph's University;
(x) the Target has not granted any license or sublicense of
any rights under or with respect to any Intellectual Property;
(xi) there has been no change made or authorized in the
charter or bylaws of the Target;
(xii) the Target has not issued, sold, or otherwise disposed
of any Target Shares, or granted any options, warrants, or other
rights to purchase or obtain (including upon conversion, exchange,
or exercise) any Target Shares;
(xiii) the Target has not declared, set aside, or paid any
dividend or made any distribution with respect to Target Shares
(whether in cash or in kind) or redeemed, purchased, or otherwise
acquired any Target Shares except for those made to the Stockholders
in the approximate amount of $269,000 through the Closing;
(xiv) the Target has not experienced any material damage,
destruction, or loss (whether or not covered by insurance) to its
property;
(xv) the Target has not made any loan to, or entered into any
other transaction with, any of its employees involving more than
$12,000 in the aggregate outside the Ordinary Course of Business;
(xvi) except as disclosed elsewhere herein, the Target has not
entered
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into any employment contract, written or oral, or modified the terms
of any existing such contract or agreement involving more than
$12,000 in the aggregate or entered into any collective bargaining
agreement;
(xvii) the Target has not granted any increase in the base
compensation of any of its directors, officers or Family Members;
(xviii) the Target has not adopted, amended, modified, or
terminated any bonus, profit-sharing, incentive, severance, or other
plan, contract, or commitment for the benefit of any of its
directors, officers, or Family Members (or taken any such action
with respect to any other Employee Benefit Plan);
(xix) the Target has not made any other change in employment
terms for any of its directors and officers;
(xx) the Target has not made or pledged to make any charitable
or other capital contribution outside the Ordinary Course of
Business;
(xxi) there has not been any other occurrence, event,
incident, action, failure to act, or transaction outside the
Ordinary Course of Business involving the Target;
(xxii) the Target has not terminated or amended any insurance
policies nor has any insurance company done so with regard to a
policy paid for by the Target; and
(xxiii) the Target is not committed to any of the foregoing.
(k) Undisclosed Liabilities. The Target does not have any
Liabilities (and there is no Basis for any present or future action, suit,
proceeding, hearing, investigation, charge, complaint, claim, or demand
against it giving rise to any Liability), except for (i) Liabilities,
obligations or contingencies which (A) would not, in the aggregate, have a
material adverse effect on the Target, or (B) have been discharged or paid
in full prior to the date hereof; and (ii) Liabilities and obligations
which are of a nature not required to be reflected in the financial
statements of the Target prepared in accordance with generally accepted
accounting principles consistently applies and which were incurred in the
Ordinary Course of Business.
(l) Related Party Transactions. Since January 1, 1995, the Target
has not entered into any transactions or engaged in any business with any
director or officer of the Target or any Family Member. As used in this
representation and warranty, the phrase "any transactions or engaged in
any business" includes any of the matters listed on Schedule 3(1) hereof.
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(m) Legal Compliance. The Target, its directors, officers and
Affiliates (including the Stockholders) have complied with all applicable
laws (including rules, regulations, codes, plans, injunctions, judgments,
orders, decrees, rulings, and charges thereunder) of federal, state,
local, and foreign governments (and all agencies thereof), and no action,
suit, proceeding, hearing, investigation, charge, complaint, claim,
demand, or notice has been filed or commenced against any of them alleging
any failure so to comply. Nor has the Target, its directors, officers and
Affiliates (including the Stockholders) received any oral or written
notice from any other Person regarding any of the foregoing.
(n) Tax Matters.
(i) Except as disclosed on Schedule (n)(i), the Target has
filed all Tax Returns that it was required to file. All such Tax
Returns were correct and complete in all material respects. All
Taxes owed by the Target (whether or not shown on any Tax Return)
have been paid. The Target currently is not the beneficiary of any
extension of time within which to file any Tax Return. No claim has
ever been made by an authority in a jurisdiction where the Target
does not file Tax Returns that it is or may be subject to taxation
by that jurisdiction. There are no Security Interests on any of the
assets of the Target that arose in connection with any failure (or
alleged failure) to pay any Tax.
(ii) The Target has withheld and paid all Taxes required to
have been withheld and, except as may not yet be required in the
Ordinary Course of Business, has paid in connection with amounts
paid or owing to any employee, independent contractor, creditor,
stockholder, or other third party.
(iii) Neither of the Stockholders or any director, officer (or
employee responsible for Tax matters) of Target expects any
authority to assess any additional Taxes for any period for which
Tax Returns have been filed. There is no dispute or claim concerning
any Tax Liability of the Target either (A) claimed or raised by any
authority in writing, or (B) as to which either of the Stockholders
and the directors and officers (and employees responsible for Tax
matters) of the Target has Knowledge based upon personal contact
with any agent of such authority. Schedule 3(n)(iii) lists all
federal, state, local, and foreign income Tax Returns filed with
respect the Target for taxable periods ended on or after December
31, 1992, indicates those Tax Returns that have been audited, and
indicates those Tax Returns that currently are the subject of audit.
The Target has delivered to PCNA and the Buyer correct and complete
copies of all federal, state and local income Tax Returns,
examination reports, and statements of deficiencies assessed against
or agreed to by the Target since December 31, 1992.
(iv) The Target has not waived any statute of limitations in
respect of Taxes or agreed to any extension of time with respect to
a Tax assessment or deficiency.
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(v) The Target has not made any payments, is not obligated to
make any payments, and is not a party to any agreement that under
certain circumstances could obligate it to make any payments that
will not be deductible under Code Section 280G. The Target has not
been a United States real property holding corporation within the
meaning of Code Section 897(c)(2) during the applicable period
specified in Code Section 897(c)(1)(A)(ii). The Target has disclosed
on its federal income Tax Returns all positions taken therein that
could give rise to a substantial understatement of federal income
Tax within the meaning of Code Section 6662. The Target is not a
party to any Tax allocation or sharing agreement. The Target (A) has
not been a member of an Affiliated Group filing a consolidated
federal income Tax Return, or (B) has no Liability for the Taxes of
any Person (other than the Target) under Treasury Regulation Section
1.1502-6 (or any similar provision of state, local, or foreign law),
as a transferee or successor, by contract, or otherwise.
(vi) Schedule 3(n)(vi) sets forth as of the most recent
practicable date the basis of the Target in its assets.
(o) Real Property.
(i) The Target does not own any direct or indirect interest in
real property;
(ii) Schedule 3(o)(ii) lists and describes briefly all real
property leased or subleased to the Target. The Target has delivered
to PCNA and the Buyer correct and complete copies of the leases and
subleases listed in Schedule 3(o)(ii). With respect to each lease
and sublease listed in Schedule 3(o)(ii):
(A) the lease or sublease is legal, valid, binding,
enforceable, and in full force and effect;
(B) the lease or sublease will continue to be legal,
valid, binding, enforceable, and in full force and effect on
identical terms following the consummation of the transactions
contemplated hereby;
(C) no 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;
(D) no party to the lease or sublease has repudiated any
provision thereof;
(E) there are no disputes, oral agreements, or
forbearance programs in effect as to the lease or sublease;
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(F) with respect to each sublease, the representations
and warranties set forth in subsections (A) through (E) above
are true and correct with respect to the underlying lease;
(G) the Target has not assigned, transferred, conveyed,
mortgaged, deeded in trust, or encumbered any interest in the
leasehold or subleasehold;
(H) all facilities leased or subleased thereunder have
received all approvals of governmental authorities (including
licenses and permits) required in connection with the
operation thereof and have been operate, and maintained in
accordance with applicable laws, rules, and regulations;
(I) all facilities leased or subleased thereunder are
supplied with utilities and other services necessary for the
operation of said facilities; and
(J) the owner of the facility leased or subleased has
good and marketable title to the parcel of real property, free
and clear of any Security Interest, easement, covenant, or
other restriction, except installments of special easements
not yet delinquent and recorded easements, covenants, and
other restrictions which do not impair the current use,
occupancy, or value, or the marketability of title, of the
property subject thereto.
(p) Intellectual Property.
(i) Except for some immaterial and miscellaneous software
programs, the Target owns or has the right to use pursuant to
license, sublicense, agreement or permission all Intellectual
Property necessary or desirable for the operation of the business of
the Target as presently conducted and as presently proposed to be
conducted. Each item of Intellectual Property owned or used by any
of the Target immediately prior to the Closing hereunder will be
owned or available for use by the Buyer on identical terms and
conditions, immediately subsequent to the Closing hereunder. The
Target has taken all necessary and desirable action to maintain and
protect each item of Intellectual Property that it owns or uses.
(ii) Except as listed on Schedule 3(p)(ii), the Target has not
interfered with, infringed upon, misappropriated, or otherwise come
into conflict with any Intellectual Property rights of third
parties, and none of the Stockholders and the directors and officers
(and employees with responsibility for Intellectual Property
matters) of the Target has ever received any charge, complaint,
claim, demand, or notice alleging any such interference,
infringement, misappropriation, or violation (including any claim
that any of the Target must license or refrain from using any
Intellectual Property rights of any third party). To the Knowledge
of any of the
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Stockholders and the directors and officers (and employees with
responsibility for Intellectual Property matters) of the Target, no
third party has interfered with, infringed upon, misappropriated, or
otherwise come into conflict with any Intellectual Property rights
of any of the Target.
(iii) Schedule 3(p)(iii) identifies each item of Intellectual
Property having a purchase price to the Target of in excess of
$1,000 and not otherwise elsewhere disclosed herein that any third
party owns and that any of the Target uses pursuant to license,
sublicense, agreement, or permission. The Target has delivered to
PCNA and the Buyer correct and complete copies of all available
licenses, sublicenses, agreements, and permissions (as amended to
date). With respect to each item of Intellectual Property required
to be identified in Schedule 3(p)(iii).
(A) the license, sublicense, agreement, or permission
covering the item is legal, valid, binding, enforceable, and
in full force and effect;
(B) the license, sublicense, agreement, or permission
will continue to be legal, valid, binding, enforceable, and in
full force and effect on identical terms following the
Closing;
(C) no party to the license, sublicense, agreement, or
permission 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;
(D) no party to the license, sublicense, agreement, or
permission has repudiated any provision thereof;
(E) with respect to each sublicense, the representations
and warranties set forth in subsections through (D) above are
true and correct with respect to the underlying license;
(F) the underlying item of Intellectual Property is not
subject to any outstanding injunction, judgment, order,
decree, ruling, or charge;
(G) no action, suit, proceeding, hearing, investigation,
charge, complaint, claim, or demand is pending or, to the
Knowledge of any of the Sellers and the directors and officers
(and employees with responsibility for Intellectual Property
matters) of the Company and its Subsidiaries, is threatened
which challenges the legality, validity, or enforceability of
the underlying item of Intellectual Property; and
(H) the Target has not granted any sublicense or similar
right with respect to the license, sublicense, agreement, or
permission.
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(iv) To the Knowledge of any of the Stockholders and the
directors and officers (and employees with responsibility for
Intellectual Property matters) of the Target, nothing will interfere
with, infringe upon, misappropriate, or otherwise come into conflict
with, any Intellectual Property rights of third parties as a result
of the continued operation of its business as presently conducted
and as presently proposed to be conducted.
(v) None of the Stockholders and the directors and officers
(and employees with responsibility for Intellectual Property
matters) of the Target have any Knowledge of any new products,
inventions, procedures, or methods of printing or processing that
any competitors or other third parties have developed which
reasonably could be expected to supersede or make obsolete any
product or process of any of the Target.
(q) Tangible Assets. The Target owns or leases all buildings,
machinery, equipment, and other tangible assets necessary for the conduct
of its business as presently conducted and as presently proposed to be
conducted. Each such tangible asset is free from defects (patent and
latent), 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 and
presently is proposed to be used.
(r) Inventory. There is no inventory.
(s) Contracts. Schedule 3(s) lists the following contracts and other
agreements to which the Target is a party:
(i) any agreement (or group of related agreements) for the
lease of personal property to or from any Person providing for lease
payments in excess of $12,000 per annum;
(ii) any agreement (or group of related agreements) for the
purchase or sale of raw materials, commodities, supplies, products,
or other personal property, or for the furnishing or receipt of
services, (A) the performance of which will extend over a period of
more than one year, or (B) require the payment of a sum in excess of
fair market value determined on arms-length basis, or involve
consideration in excess of $25,000;
(iii) any agreement concerning a partnership, joint venture or
strategic alliance;
(iv) any agreement (or group of related agreements) under
which it has created, incurred, assumed, or guaranteed any
indebtedness for borrowed money, any capitalized lease obligation,
or under which it has imposed a Security Interest on any of its
assets, tangible or intangible in excess of $5,000;
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(v) any agreement concerning confidentiality or
non-competition;
(vi) any agreement with any of the Stockholders except
employment agreements to be entered into by each of the Stockholders
with the Buyer at the Closing;
(vii) any profit sharing, stock option, stock purchase, stock
appreciation, deferred compensation, severance, or other plan or
arrangement for the benefit of its current or former directors,
officers, and employees;
(viii) any collective bargaining agreement;
(ix) any agreement for the employment of any individual on a
full-time, part-time, consulting, or other basis providing annual
compensation in excess of $25,000 or providing severance benefits
except for the employment agreements to be entered into between the
Stockholders and the Buyer at the Closing;
(x) any agreement under which it has advanced or loaned any
amount to any of its directors, officers, and employees;
(xi) any agreement under which the consequences of a default
or termination could have a material adverse effect on the business,
financial condition, operations, results of operations, or future
prospects of any of the Target; or
(xii) any other agreement (or group of related agreements) the
performance of which involves consideration in excess of $25,000.
The Target has delivered to PCNA and the Buyer a correct and complete copy
of each written agreement listed in Schedule 3(s) and a written summary
setting forth the terms and conditions of each oral agreement referred to
in Schedule 3(s). With respect to each such agreement: (A) the agreement
is legal, valid, binding, enforceable, and in full force and effect; (B)
the agreement will continue to be legal, valid, binding, enforceable, and
in full force and effect on identical terms following the consummation of
the transactions contemplated hereby; (C) no party 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 agreement; and (D) no party has repudiated any
provision of the agreement.
(t) Notes and Accounts Receivable. All notes and accounts receivable
of the Target are reflected properly on its books and records, are valid
receivables subject to no material set-offs or counterclaims, are current
and collectible, and will be collected in accordance with their terms at
their recorded amounts, subject only to the reserve for bad debts set
forth on the face of the Most Recent Balance Sheet (rather than in any
notes thereto) as adjusted for the passage of time through the Closing
Date in accordance with the
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past custom and practice of the Target.
(u) Powers of Attorney. There are no outstanding powers of attorney
executed on behalf of any of the Target.
(v) Insurance. Schedule 3(v) identifies each insurance policy
(including policies insuring the lives of Stockholders and policies
providing property, casualty, liability, and workers' compensation
coverage and bond and surety arrangements) under which the Target has
received insurance coverage during the period commencing July 14, 1995. A
copy of each insurance policy is available for inspection by PCNA and the
Buyer at the offices of the Target.
With respect to each such insurance policy: (A) the policy is legal,
valid, binding, enforceable, and in full force and effect; (B) the policy
will continue to be legal, valid, binding, enforceable, and in full force
and effect on identical terms following the consummation of the
transactions contemplated hereby; (C) neither the Target nor any other
party to the policy is in breach or default (including with respect to the
payment of premiums or the giving of notices), 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 the
policy; and (D) no party to the policy has repudiated any provision
thereof. Each of the Target has been covered during the past five years by
insurance in scope and amount customary and reasonable for the business in
which it has engaged during the aforementioned period. Schedule 3(v)
describes any self-insurance arrangements affecting the Target.
(w) Litigation. Schedule 3(w) sets forth each instance in which any
of the Target or the Stockholders (i) is subject to any outstanding
injunction, judgment, order, decree, ruling, or charge, or (ii) is a party
or, to the Knowledge of any of the Stockholders and the directors and
officers (and employees with responsibility for litigation matters) of the
Target, is threatened to be made a party to any action, suit, proceeding,
hearing, or Investigation of, in, or before any court or quasi-judicial or
administrative agency of any federal, state, local, or foreign
jurisdiction or before any arbitrator. None of the actions, suits,
proceedings, hearings, and Investigations set forth in Schedule 3(w) could
result in any material adverse change in the business, financial
condition, operations, results of operations, or future prospects of any
of the Target or which otherwise could result in any Liability to either
or both of the Stockholders. None of the Stockholders and the directors
and officers (and employees with responsibility for litigation matters) of
the Target has any reason to believe that any such action, suit,
proceeding, hearing, or Investigation may be brought or threatened against
any of the Target or the Stockholders.
(x) Product Warranty. The Target has not issued any express warranty
with regard to the membership directories it publishes or sells.
(y) Employees. To the Knowledge of any of the Stockholders and the
directors and officers (and employees with responsibility for employment
matters) of the Target, the
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Target is not a party to or bound by any collective bargaining agreement,
nor has it experienced any strikes, grievances, claims of unfair labor
practices, or other collective bargaining disputes. The Target has not
committed any unfair labor practice. None of the Stockholders and the
directors and officers (and employees with responsibility for employment
matters) of the Target has any Knowledge of any organizational effort
presently being made or threatened by or on behalf of any labor union with
respect to employees of any of the Target. None of the Stockholders and
the Target have any Knowledge that any employee or former employee of the
Target has breached any confidentiality agreement, misappropriated any
trade secrets or violated any trade secret law nor has any former employee
commenced competing with the Target in violation of any non-compete
agreement with the Target.
(z) Employee Benefits.
(i) Schedule 3(z)(i) lists each Employee Benefit Plan that any
of the Target maintains or to which any of the Target contributes.
(A) Each such Employee Benefit Plan (and each related
trust, insurance contract, or fund) complies in form and in
operation in all respects with the applicable requirements of
ERISA, the Code, and other applicable laws.
(B) All required reports and descriptions (including
Form 5500 Annual Reports, Summary Annual Reports, PBGC-1's,
and Summary Plan Descriptions) have been filed or distributed
appropriately with respect to each such Employee Benefit Plan.
The requirements of Part 6 of Subtitle B of Title I of ERISA
and of Code Section 4980B have been met with respect to each
such Employee Benefit Plan which is an Employee Welfare
Benefit Plan.
(C) All contributions (including all employer
contributions and employee salary reduction contributions)
which are due have been paid to each such Employee Benefit
Plan which is an Employee Pension Benefit Plan and all
contributions for any period ending on or before the Closing
Date which are not yet due have been paid to each such
Employee Pension Benefit Plan or accrued in accordance with
the past custom and practice of the Company. All premiums or
other payments for all periods ending on or before the Closing
Date have been paid with respect to each such Employee Benefit
Plan which is an Employee Welfare Benefit Plan.
(D) Each such Employee Benefit Plan which is an
Employee Pension Benefit Plan meets the requirements of a
"qualified plan" under Code Section 401(a).
(E) The market value of assets under each such
Employee
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Benefit Plan which is an Employee Pension Benefit Plan (other
than any Multi-employer Plan) equals or exceeds the present
value of all vested and non-vested Liabilities thereunder
determined in accordance with PBGC methods, factors, and
assumptions applicable to an Employee Pension Benefit Plan
terminating on the date for determination.
(F) The Target has delivered to PCNA and the Buyer
correct and complete copies of the plan documents and summary
plan descriptions, the most recent determination letter
received from the Internal Revenue Service, the most recent
Form 5500 Annual Report, and all related trust agreements,
insurance contracts, and other funding agreements which
implement each such Employee Benefit Plan.
(ii) With respect to each Employee Benefit Plan that the
Target maintains or ever has maintained or to which it contributes,
ever has contributed, or ever has been required to contribute:
(A) No such Employee Benefit Plan which is an
Employee Pension Benefit Plan (other than any Multi-employer
Plan) has been completely or partially terminated or been the
subject of a Reportable Event as to which notices would be
required to be filed with the PBGC. No proceeding by the PBGC
to terminate any such Employee Pension Benefit Plan (other
than any Multi-employer Plan) has been instituted or, to the
Knowledge of any of the Stockholders and the directors and
officers (and employees with responsibility for employee
benefits matters) of the Target, threatened.
(B) There have been no Prohibited Transactions with
respect to any such Employee Benefit Plan. No Fiduciary has
any Liability for breach of fiduciary duty or any other
failure to act or comply in connection with the administration
or investment of the assets of any such Employee Benefit Plan.
No action, suit, proceeding, hearing, or investigation with
respect to the administration or the investment of the assets
of any such Employee Benefit Plan (other than routine claims
for benefits) is pending or, to the Knowledge of any of the
Sellers and the directors and officers (and employees with
responsibility for employee benefits matters) of the Target,
threatened. None of the Stockholders and the directors and
officers (and employees with responsibility for employee
benefits matters) of the Target has any Knowledge of any Basis
for any such action, suit, proceeding, hearing, or
investigation.
(C) The Target has not incurred, and none of the
Stockholders and the directors and officers (and employees
with responsibility for employee benefits matters) of the
Target has any reason to expect that the Target will incur,
any Liability to the PBGC (other than PBGC premium
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payments) or otherwise under Title IV of ERISA (including any
withdrawal Liability) or under the Code with respect to any
such Employee Benefit Plan which is an Employee Pension
Benefit Plan.
(iii) The Target has never contributed to, or been required to
contribute to any Multi-employer Plan or has any Liability
(including withdrawal Liability) under any Multi-employer Plan.
(iv) The Target does not maintain or contributes, and never
has maintained or contributed, or been required to contribute to any
Employee Welfare Benefit Plan providing medical, health, or life
insurance or other welfare-type benefits for current or future
retired or terminated employees, their spouses, or their dependents
(other than in accordance with Code Section 4980B).
(aa) Guaranties. The Target is not a guarantor or otherwise liable
for any Liability or obligation (including indebtedness) of any other
Person.
(bb) Environment, Health, and Safety.
(i) The Target and its respective predecessors and Affiliates
have complied with all Environmental, Health, and Safety Laws, and
no action, suit, proceeding, hearing, Investigation, charge,
complaint, claim, demand, or notice has been filed or commenced
against any of them alleging any failure so to comply. Without
limiting the generality of the preceding sentence, each of the
Target and their respective predecessors and Affiliates has obtained
and been in compliance with all of the terms and conditions of all
permits, licenses, and other authorizations which are required
under, and has complied with all other limitations, restrictions,
conditions, standards, prohibitions, requirements, obligations,
schedules, and timetables which are contained in, all Environmental,
Health, and Safety Laws.
(ii) The Target has no Liability (and none of the Target and
their respective predecessors and Affiliates has handled or disposed
of any substance, arranged for the disposal of any substance,
exposed any employee or other individual to any substance or
condition, or owned or operated any property or facility in any
manner that could form the Basis for any present or future action,
suit, proceeding, hearing, investigation, charge, complaint, claim,
or demand against the Target giving rise to any Liability) for any
illness of or personal injury to any employee or other individual,
or for any reason under any Environmental, Health, and Safety Law.
(cc) Americans With Disabilities Act of 1990. The Target has
complied with the Americans With Disabilities Act of 1990, and no action,
suit, proceeding, hearing, Investigation, charge, complaint, claim,
demand, or notice has been filed or commenced against it alleging any
failure to so comply.
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(dd) Contingent Liabilities. Except as listed on Schedule (ad), the
Target has no contingent liabilities to any Person.
(ee) Accuracy of Net Bookings. The Net Bookings are materially
correct and complete and give effect to any requested cancellations
received prior to the Closing by advertisers. Schedule 3(ae) represents
the Net Bookings of the Target and also reflects the amounts paid as
deposits by advertisers.
(ff) College Directories. The Target has received commitments from
colleges and universities for the publication of membership directories
during 1997 all of which are listed on Schedule 3(af) hereof. Except as
reflected on Schedule 3(af), the Target and the Stockholders have not
received notice from any college or university that they do not intend to
utilize the services of the Target for years following 1997.
(gg) Stockholder Approval. Each of the Stockholders represents and
warrants that the stockholders of the Target have unanimously approved the
Merger with the Buyer and that no dissenters' rights exists. The
Stockholders shall not revoke their vote or consent in favor of the
Merger.
(hh) Disclosure. The representations and warranties contained in
this Section 3 do not contain any untrue statement of a material fact or
omit to state any material fact necessary in order to make the statements
and information contained in this Section 3 not misleading.
(ii) No Other Representations. The Target and the Stockholders shall
not be deemed to have made to PCNA and the Buyer any representation or
warranty other than as is expressly made in Sections 3(a) through (ah).
4. Representations and Warranties of PCNA and the Buyer. PCNA and the
Buyer represent and warrant to the Target and the Stockholders that the
statements contained in this Section 4 are to their Knowledge correct and
complete as of the date of this Agreement and will be correct and complete as of
the Closing Date.
(a) Organization of PCNA and the Buyer. PCNA and the Buyer are
corporations duly organized, validly existing, and in good standing under
the laws of the jurisdiction of their respective incorporation. PCNA and
the Buyer are duly authorized to conduct business and are in good standing
under the laws of each respective jurisdiction where such qualification is
required. PCNA and the Buyer have full corporate power and authority and
all licenses, permits, and authorizations necessary to carry on the
businesses in which each is engaged and to own and use the properties
owned and used by each. PCNA and the Buyer have delivered to the Target
and the Stockholders correct and complete copies of the charter and bylaws
of PCNA and the Buyer (as amended to date). PCNA and the Buyer are not in
default under or in violation of any provision of their respective
charters or bylaws.
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(b) Authorization of Transaction. PCNA and the Buyer have the full
power and authority to execute and deliver this Agreement and to perform
their obligations hereunder. Subject to execution, delivery and
authorization of the Target and the Stockholders hereto, this Agreement
constitutes the valid and legally binding obligation of PCNA and the
Buyer, enforceable in accordance with its terms and conditions. PCNA and
the Buyer need not give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any government or governmental
agency in order to consummate the transactions contemplated by this
Agreement.
(c) Non-Contravention. Neither the execution and the delivery of
this Agreement, nor the consummation of the transactions contemplated
hereby, will (i) violate any constitution, statute, regulation, rule,
injunction, judgment, order, decree, ruling, charge, or other restriction
of any government, governmental agency, or court to which PCNA or the
Buyer are subject or, (ii) conflict with, result in a breach of,
constitute a default under, result in the acceleration of, create in any
party the right to accelerate, terminate, modify, or cancel, or require
any notice under, any agreement, contract, lease, license, instrument, or
other arrangement to which PCNA or the Buyer are a party or by which
either is bound or to which any of either's assets is subject.
(d) Brokers' Fees. PCNA and the Buyer have no Liability or
obligation to pay any fees or commissions to any broker, finder, or agent
with respect to the transactions contemplated by this Agreement for which
the Target or the Stockholders could become liable or obligated.
(e) Title to Assets. PCNA has good and marketable title to, or a
valid leasehold interest in, the properties and assets used by it, located
on its premises, or shown in its Form 10-QSB or acquired after the date
thereof, free and clear of all Security Interests, except for properties
and assets disposed of in the Ordinary Course of Business since March 31,
1997 or except as disclosed in the Form 10-KSB or Form 10-QSB. The Buyer
has no assets except for organizational costs and the Merger Consideration
which will be delivered to the Stockholders pursuant to the terms of this
Agreement. The Buyer has no Liabilities and has never conducted any
business.
(f) Capitalization.
(i) The authorized capital stock of PCNA consists of
15,000,000 shares of Common Stock, of which 4,121,900 shares are
outstanding as of the date of this Agreement. All of the issued and
outstanding shares of common stock are validly issued and are fully
paid, non-assessable and free of preemptive rights.
(ii) Except as disclosed in the Form 10-KSB, Form 10-QSB,
Proxy Statement or as set forth on Schedule 4(f)(ii) hereof, as of
the date hereof, there are (A) no outstanding subscriptions,
options, calls, contracts, commitments, understandings,
restrictions, arrangements, rights or warrants, including any right
of
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conversion or exchange under any outstanding security, instrument or
other agreement and also including any rights plan or other
anti-takeover agreement, obligating PCNA to issue, deliver or sell,
or cause to be issued, delivered or sold, additional shares of
Common Stock or obligating PCNA to grant, extend or enter into any
agreement or commitment except for the merge consideration, and (B)
no voting trusts, proxies or other agreements or understandings to
which PCNA is a party or is bound with respect to the voting of any
shares of Common Stock. The shares of Common Stock to be issued to
the Stockholders will be as of the Closing duly authorized, validly
issued, fully paid and non-assessable and free of preemptive rights.
(g) Reports and Financial Statements. Since May 17, 1996, PCNA has
filed with the SEC all forms, statements, reports and documents (including
all exhibits, amendments and supplements thereto) required to be filed by
it under each of the Securities Act, the Securities Exchange Act of 1934
and the respective rules and regulations thereunder, all of which, as
amended if applicable, complied in all material respects with all
applicable requirements of the appropriate act and the rules and
regulations thereunder. PCNA has previously delivered to the Stockholders
copies of its Form 10-KSB, Form 10-QSB and Proxy Statement. As of their
respective dates, the Form 10-KSB, the Form 10-QSB and the Proxy Statement
did not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading. The financial statements of PCNA included in such
reports (collectively, "PCNA's Financial Statements") have been prepared
in accordance with generally accepted accounting principles applied on a
consistent basis (except as may be indicated therein or in the notes
thereto) and fairly present the financial position of PCNA as of the dates
thereof and the results of operations and changes in financial position
for the periods then ended, subject, in the case of the unaudited interim
financial statements, to normal year-end and audit adjustments and any
other adjustments described therein.
(h) Absence of Undisclosed Liabilities. Except as disclosed in the
Form 10-QSB, PCNA did not have at March 31, 1997, and has not incurred
since that date, any Liabilities or obligations (whether absolute,
accrued, contingent or otherwise) of any nature, except: (A) Liabilities,
obligations or contingencies (1) which are accrued or reserved against in
PCNA's Financial Statements or reflected in the notes thereto, or (2)
which were incurred after March 31, 1997 and were incurred in the Ordinary
Course of Business and consistent with past practices; (B) Liabilities,
obligations or contingencies which (1) would not, in the aggregate, have a
material adverse effect on PCNA, or (2) have been discharged or paid in
full prior to the date hereof; and (C) Liabilities and obligations which
are of a nature not required to be reflected in the financial statements
of PCNA prepared in accordance with generally accepted accounting
principles consistently applied and which were incurred in the Ordinary
Course of Business.
(i) Absence of Certain Changes or Events. Since the date of the Form
10-QSB, there has not been any material adverse change in the business,
operations, properties,
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assets, liabilities, condition (financial or other), results of operations
or prospects of PCNA, taken as a whole, including as a result of any
change in capital structure, employee compensation arrangement (including
severance rights and benefit plans), accounting method or applicable law.
(j) Material Agreements. Since January 1, 1997, PCNA has not entered
into any material agreements which were not filed as exhibits to or
disclosed in the Form 10-KSB or Form 10-QSB except in the Ordinary Course
of Business.
(k) Form 8-Ks. Since January 1, 1997, PCNA has not filed with the
SEC any reports on Form 8-K.
(l) Disclosure. The representations and warranties contained in this
Section 4(l) do not contain any untrue statement of a material fact or
omit to state any material fact necessary in order to make the statements
and information contained in this Section 4 not misleading.
(m) No Other Representations. PCNA and the Buyer shall not be deemed
to have made to the Target and the Stockholders any representation or
warranty other than as is expressly made in Sections 4(a) through (l).
5. Pre-Closing Covenants. The Parties agree as follows with respect to the
period between the execution of this Agreement and the Closing:
(a) General. Each of the Parties will use his or its reasonable best
efforts to take all action and to do all things necessary, proper, or
advisable in order to consummate and make effective the transactions
contemplated by this Agreement (including satisfaction, but not waiver, of
the closing conditions set forth in Section 7 below).
(b) Notices and Consents. Each of the Parties will give any notices
to, make any filings with, and use its reasonable best efforts to obtain
any authorizations, consents, and approvals of governments and
governmental agencies in connection with the matters referred to in
Section 3 and Section 4 above.
(c) Operation of Business. Except for the $269,000 in cash dividends
described elsewhere herein, the Stockholders will not cause or permit the
Target to engage in any practice, take any action, or enter into any
transaction outside the Ordinary Course of Business. Without limiting the
generality of the foregoing, the Stockholders will not cause or permit any
of the Target to (i) declare, set aside, or pay any dividend or make any
distribution with respect to its capital stock or redeem, purchase, or
otherwise acquire any of its capital stock, (ii) make any loan or advance
to either of the Stockholders or any Family Member, or (iii) otherwise
engage in any practice, take any action, or enter into any transaction of
the sort described in Section 3(j) above.
(d) Preservation of Business. The Stockholders will cause the Target
to keep its
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business and properties substantially intact, including its present
operations, physical facilities, working conditions, and relationships
with lessors, licensors, suppliers, universities and colleges,
advertisers, customers, and employees.
(e) Full Access. Each of the Stockholders will permit, and the
Stockholders will cause the Target to permit, representatives of PCNA and
the Buyer to have full access to all premises, properties, personnel,
books, records (including Tax records), contracts, and documents of or
pertaining to the Target.
(f) Notice of Developments. Each Party will give prompt written
notice to the others of any material adverse development causing a breach
of any of his or its own representations and warranties in Section 3 or 4
above. No disclosure by any Party pursuant to this Section 5(f), however,
shall be deemed to amend or supplement any Schedule (except to the extent
that this Agreement is specifically amended) or to prevent or cure any
misrepresentation, breach of warranty, or breach of covenant.
(g) Exclusivity. None of the Stockholders shall (and the
Stockholders shall not cause or permit the Target to) (i) solicit,
initiate, or encourage the submission of any proposal or offer from any
Person relating to the acquisition of any Target Shares or other
securities of the Target, or any substantial portion of the assets of, any
of the Target and its subsidiaries (including any acquisition structured
as a merger, consolidation, or share exchange) or (ii) participate in any
discussions or negotiations regarding, furnish any information with
respect to, assist or participate in, or facilitate in any other manner
any effort or attempt by any Person to do or seek any of the foregoing.
None of the Stockholders shall vote their Target Shares in favor of any
such acquisition structured as a merger, consolidation, or share exchange.
The Stockholders shall notify PCNA and the Buyer immediately if any Person
makes any proposal, offer, inquiry, or contact with respect to any of the
foregoing.
6. Post-Closing Covenants. The Parties agree as follows with respect to
the period following the Closing:
(a) General. In case at any time after the Closing any further
action is necessary to carry out the purposes of this Agreement, each of
the Parties will take such further action (including the execution and
delivery of such further instruments and documents) as any other Party
reasonably may request, all at the sole cost and expense of the requesting
Party (unless the requesting Party is entitled to indemnification therefor
under Section 8 below). The Stockholders acknowledge and agree that from
and after the Closing the Buyer shall be entitled to possession of all
documents, books, records (including Tax records), agreements, and
financial data of any sort relating to the Target; provided, however, that
the Stockholders and their representatives shall have reasonable access
thereto and shall be permitted to retain copies thereof.
(b) Litigation Support. In the event and for so long as any Party
actively is contesting or defending against any action, suit, proceeding,
hearing, Investigation, charge,
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complaint, claim, or demand in connection with (i) any transaction
contemplated under this Agreement or (ii) any fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence,
event, incident, action, failure to act, or transaction on or prior to the
Closing Date involving the Buyer (including by operation of law the
Target), each of the other Parties will cooperate with him or it and his
or its counsel in the contest or defense, make available their personnel,
and provide such testimony and access to their books and records as shall
be necessary in connection with the contest or defense, all at the sole
cost and expense of the contesting or defending Party (unless the
contesting or defending Party is entitled to indemnification therefor
under Section 8 below).
(c) Transition. None of the Stockholders shall take any action that
is designed or intended to have the effect of discouraging any lessor,
licensor, customer, supplier, or other business associate of the Target
from maintaining the same business relationships with the Buyer after the
Closing as it maintained with the Target prior to the Closing. Each of the
Stockholders shall refer all customer inquiries relating to the businesses
of the Target to the Buyer from and after the Closing.
(d) Withdrawal of Funds by Stockholders. Prior to the Closing, the
Stockholders shall have collectively withdrawn $269,000 as cash dividends
from the Target in addition to their receipt of their customary salaries
(calculated at the rate of $65,000 per year for each Stockholder) and
fringe benefits. Following the Closing, the Stockholders shall not be
obligated to repay the $269,000 to the Buyer.
(e) Restrictions on Common Stock. The 750,000 shares of Common Stock
to be issued to the Stockholders shall be subject to the following
restrictions:
(i) All Common Stock shall be issued to the Stockholders (and
their transferrees as provided below) pursuant to Section 4(2) of
the Securities Act and Rule 506 thereunder. PCNA shall have no
obligation to register any of the shares of the Common Stock. In
addition to the restrictions imposed by Rule 144 promulgated under
the Securities Act, the shares of Common Stock shall be subject to
the restrictions contained below.
(ii) At the Closing, subject to execution of customary
documentation, an aggregate of 25,000 shares of Common Stock may be
transferred by the Stockholders to Frank & Rosen, attorneys at law
(or its designees), as payment of all fees due from the Stockholders
to such law firm. The Target shall have no responsibility for any
such fees or disbursements.
(iii) The remaining shares of Common Stock may not be publicly
or privately sold, hypothecated or otherwise transferred except as
follows:
(A) for the first 12 months following Closing, no Common
Stock may be sold or transferred. Up to 100,000 shares of
Common Stock may be hypothecated as long as the Loan is
structured to avoid a default
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during the first 12 months following the Closing;
(B) for the second 12 months following Closing, up to
100,000 shares of Common Stock may be sold, hypothecated or
otherwise transferred;
(C) for the third 12 months following Closing, an
additional 100,000 shares of Common Stock may be sold,
hypothecated or otherwise transferred;
(D) 250,000 shares of Common Stock may not be sold,
hypothecated or otherwise transferred until April 20, 2000. At
that time, the Net Pre-Tax Income of the Buyer (and the Target
for the period from January 1, 1997 through the date of the
Merger) for fiscal 1997, 1998 and 1999 shall be determined. As
used in this Agreement, the term "Net Pre-Tax Income" shall
mean the net pre-tax income of the Buyer and the Target
calculated in accordance with GAAP consistently applied, plus
any amounts paid to Directory Printing which are less than
$100,000, and minus additional auditing and accounting fees
incurred by PCNA as a result of its ownership of the business
of the Target (not to exceed $15,000 in the aggregate for
fiscal 1997). Any auditing costs incurred by PCNA prior to the
Closing or in connection with the Form 8-K, PCNA may be
required to file following the Closing shall be paid by PCNA
and shall have no effect on Net Pre-Tax Income. To the extent
that the aggregate Net Pre-Tax Income of the Target for the
six months ended June 30, 1997 and of the Buyer for the 30
months commencing July 1, 1997 and ended December 31, 1999 is
less than $1,875,000, all or some these 250,000 shares of
Common Stock shall be cancelled at the rate of one share for
each $4.00 of Net Pre-Tax Income (for such periods) is less
than $1,875,000.
(E) At the conclusion of the third year following the
Closing, there shall be no further limitations on the sale,
hypothecation or other transfer of any of the remaining shares
of Common Stock owned by the Stockholders.
(f) Determination of Additional Consideration for Target Shares.
(i) The additional Merger Consideration due the Stockholders
referred to in Section 2(c)(iv) of this Agreement shall be based
upon the Net Pre-Tax Income of the Buyer (and the Target for the
period from January 1, 1997 through June 30, 1997 for each of the
fiscal years ending December 31, 1997, 1998 and 1999. PCNA shall pay
each of the Stockholders a sum equal to 12.5% of the Net Pre-Tax
Income of the Buyer (and the Target for the above period) for each
applicable fiscal year. The initial payment to the Stockholders
shall be due on or before April 20, 1998. Thereafter, for fiscal
1998 and 1999, PCNA shall pay such
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additional Merger Consideration to the Stockholders for the initial
six months of each applicable fiscal year on or before August 20th
and for the second six months of each applicable fiscal year, on or
before April 20th. In the event that the audited financial
statements of the Buyer (or the financial statements of the Buyer
derived from the audited financial statements of PCNA) reflect that
the Buyer either under or overpaid the Stockholders for the first
six months of the applicable fiscal year, PCNA shall adjust the
payment due on or before April 20th.
(ii) Notwithstanding anything else contained in this
Agreement, if by January 1, 1998 the Congress of the United States
has not passed legislation which has been signed by the President of
the United States (or otherwise allowed to become law) retroactively
reducing the maximum rate of tax imposed on long term capital gains
stemming from this transaction otherwise taxed in the 1997 calendar
year for each of the Stockholders, then on or before January 10,
1998 PCNA and/or the Buyer shall pay each of the Stockholders the
sum of $25,000 as additional consideration for their Shares of the
Target being transferred at the Closing.
(g) PCNA Guarantee of the Buyer's Obligations to the Stockholders.
All obligations of the Buyer due to the Stockholders pursuant to this
Agreement shall be guaranteed by PCNA.
(h) Elimination of Personal Guarantees on Credit Line. On or before
December 31, 1997, PCNA and/or the Buyer shall take such steps as are
necessary to eliminate the personal guarantees of the Stockholders from
the existing credit line of the Target which shall be assumed by the Buyer
by operation of law.
(i) Directory Printing Obligation. The Target may owe Directory
Printing a sum of approximately $241,700. The Parties agree that to the
extent any sums are paid following the Closing, the Buyer shall be
responsible for the first $100,000 of any cash payment to Directory
Printing and that the Stockholders shall be responsible for the payment of
any amount in excess of $100,000 up to an additional $100,000. All costs
of collection including attorneys fees and disbursements shall be paid by
the Stockholders.
(j) Net Bookings Guarantee. The Stockholders shall each personally
guarantee that 88% of the 1997 Net Bookings of the Target as of Closing
shall be collected between the period beginning January 1, 1997 and ending
12 months following the date of the Closing. Upon determination of the
amount, if any, due by the Stockholders, they shall each have the option
to pay PCNA cash, reduce PCNA's obligation to pay additional Merger
Consideration to them pursuant to Section 6(k) hereof or return shares of
Common Stock to PCNA at the rate of $3.00 per share.
(k) PCNA Negative Assurances. Following the Closing until
determination of the contingent additional Merger Consideration described
in Section 6(f) hereof, PCNA shall not:
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(i) discontinue the business of the Buyer;
(ii) divert to any Affiliate the business of the Buyer;
(iii) substantially alter the business of the Buyer;
(iv) merge the Buyer with or into any other corporation or
entity;
(v) sell all or substantially all of the assets or securities
of the Buyer; and
(vi) acquire any other corporation or entity that competes
with the business of the Buyer
unless the Stockholders have consented to such transaction which consent
shall not be unreasonably withheld. Provided, further, PCNA shall have no
obligations to make any further loans or capital contributions to the
Buyer except as described in Section 6(o) hereof;
(l) PCNA Cooperation Regarding Code Section 368(a)(1)(A) Status.
PCNA shall cooperate to the fullest possible extent to allow the Target
and the Stockholders to confirm that the status of the transactions
contemplated to occur at Closing are properly characterized as
transactions embraced by Sections 368(a)(1)(A) and 368(a)(2)(D) of the
Code.
(m) Officers and Directors of Buyer. During the three-year period
immediately following the Closing, the parties hereto shall take all steps
appropriate to confirm that the Board of Directors of the Buyer consists
of five members, and that the membership of the Board of Directors shall
consist of Peter Balise, Scott Plakon, Michael Paul, John Rafanello, and
one other individual determined by PCNA. Any vacancies in the Board of
Directors of the Buyer shall be filled by PCNA for the fifth director,
Messrs. Balise and Plakon and by the Stockholders for themselves. Further,
during the aforementioned three-year period, all of the parties hereto
shall take such steps as are appropriate to confirm that Messrs. Paul and
Rafanello are and will remain the senior executives of the Buyer.
(n) Effect of Lock-Ups Upon Third Party Acquisition of PCNA Stock.
Except as provided in the next sentence, all of the lock-ups referred to
in this Agreement shall cease and be of no further force and effect in the
event that all or substantially all of the Common Stock or assets of PCNA
is or are acquired by a third party. Provided, however, if the
Stockholders receive the securities of the third party as the result of
such transaction, they shall agree to the same lock-ups as to the third
party's securities that any of PCNA's executive officers agree to as long
as such restrictions do not exceed the restrictions in Section 6(e)
hereof.
(o) Line of Credit. Following the Closing, PCNA shall either provide
loans to
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the Buyer at the same rate of interest and on the same general terms as
available from commercial lending institutions or cause the Buyer to
maintain its existing (or obtain a new) $650,000 line of credit and in
furtherance thereof, PCNA shall, if necessary, guarantee such line of
credit. Provided, however, the foregoing obligation of PCNA shall
terminate if at December 31, 1997 or 1998, the PCNA loan or the line of
credit has not been repaid in full and in any event, following December
31, 1999, PCNA shall have no further obligations to make any additional
loans or guarantee any line of credit.
(p) Contingent Interactive Communication Specialists, Inc.
Compensation. As disclosed on Schedule 6(p), the Target has entered into
an agreement with Messrs. Matthew Keough and William Potolicchio and
Interactive Communication Specialists, Inc. If the contingent compensation
referred to therein is earned, PCNA shall pay to Interactive Communication
Specialists, Inc. the sum of $3,000 and issue to it 5,000 shares of PCNA
Common Stock, subject to compliance with all applicable securities laws,
and the Stockholders shall each pay Interactive Communication Specialists,
Inc. the sum of $1,500 and each transfer to it 2,500 shares of Common
Stock, subject to compliance with all applicable securities laws.
7. Conditions to Obligation to Close.
(a) Conditions to Obligation of PCNA and the Buyer. The obligation
of PCNA and the Buyer to consummate the transactions to be performed by
each in connection with the Closing is subject to satisfaction of the
following conditions:
(i) the representations and warranties set forth in Section 3
above shall be true and correct in all material respects at and as
of the Closing Date;
(ii) the Target and the Stockholders shall have performed and
complied with all of their covenants hereunder in all material
respects through the Closing;
(iii) the Target and the Stockholders shall have procured all
of the third party consents specified in Section 5(b) above;
(iv) no action, suit, or proceeding shall be pending or
threatened before any court or quasi-judicial or administrative
agency of any federal, state, local, or foreign jurisdiction or
before any arbitrator wherein an unfavorable injunction, judgment,
order, decree, ruling, or charge would (A) prevent consummation of
any of the transactions contemplated by this Agreement, (B) cause
any of the transactions contemplated by this Agreement to be
rescinded following consummation, (C) affect adversely the right of
PCNA to own the Target Shares and to control the Target, or (D)
affect adversely the right of the Target to own its assets and to
operate its business (and no such injunction, judgment, order,
decree, ruling, or charge shall be in effect);
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(v) the Target and the Stockholders shall have delivered to
PCNA and the Buyer a certificate to the effect that each of the
conditions specified above in Section 7(a)(i)-(iv) is satisfied in
all respects;
(vi) all applicable waiting periods (and any extensions
thereof) under the Hart-Scott-Rodino Act shall have expired or
otherwise been terminated and the Parties, shall have received all
other necessary authorizations, consents, and approvals of
governments and governmental agencies; and
(vii) the Buyer shall have entered into employment agreements
with each of the Stockholders in form and in substance as set forth
on Exhibit C hereto.
(viii) PCNA and the Buyer shall have received from counsel to
the Target and the Stockholders an opinion in form and substance as
set forth in Exhibit D attached hereto, addressed to PCNA and the
Buyer, and dated as of the Closing Date;
(ix) PCNA shall have completed such due diligence concerning
the business, financial condition, management and the future
prospects of the Target as it in its sole discretion deems
advisable.
(x) all actions to be taken by the Target and the Stockholders
in connection with consummation of the transactions contemplated
hereby and all certificates, opinions, instruments, and other
documents required to effect the transactions contemplated hereby
shall be satisfactory in form and substance to PCNA and the Buyer.
PCNA and the Buyer may waive any condition specified in this Section 7(a)
if each executes a writing so stating at or prior to the Closing.
(b) Conditions to Obligation of the Target and the Stockholders. The
obligation of the Target and the Stockholders to consummate the
transactions to be performed by them in connection with the Closing is
subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in Section 4
above shall be true and correct in all material respects at and as
of the Closing Date;
(ii) PCNA and the Buyer shall have performed and complied with
all of their covenants hereunder in all material respects through
the Closing;
(iii) no action, suit, or proceeding shall be pending or
threatened before any court or quasi-judicial or administrative
agency of any federal, state, local, or foreign jurisdiction or
before any arbitrator wherein an unfavorable injunction, judgment,
order, decree, ruling, or charge would (A) prevent consummation of
any of the transactions contemplated by this Agreement or (B)
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cause any of the transactions contemplated by this Agreement to be
rescinded following consummation (and no such injunction, judgment,
order, decree, ruling, or charge shall be in effect);
(iv) PCNA and the Buyer shall have delivered to the Target and
the Stockholders a certificate to the effect that each of the
conditions specified above in Section 7(b)(i)-(iii) is satisfied in
all respects;
(v) the Buyer shall have entered into employment agreements
with each of the Stockholders in form and in substance as set forth
on Exhibit C hereto;
(vi) the Target and the Stockholders shall have received from
counsel to PCNA and the Buyer an opinion in form and substance as
set forth in Exhibit E attached hereto, addressed to the Target and
the Stockholders, and dated as of the Closing Date;
(vii) all actions to be taken by PCNA and the Buyer in
connection with consummation of the transactions contemplated hereby
and all certificates, opinions, instruments, and other documents
required to effect the transactions contemplated hereby shall be
reasonably satisfactory in form and substance to the Target and the
Stockholders; and
(viii) Working Capital Loan. At or before the Closing, PCNA
shall have loaned $200,000 to the Buyer as working capital which
sums shall not bear interest.
The Target and the Stockholders may waive any condition specified in this
Section 7(b) if they each execute a writing so stating at or prior to the
Closing.
8. Remedies For Breaches of This Agreement.
(a) Survival of Representations and Warranties. All of the
representations and warranties of the Parties contained in this Agreement
shall survive the Closing hereunder and continue in full force and effect
for a period of two years (subject to any applicable statutes of
limitations).
(b) Indemnification Provisions for Benefit of PCNA and the Buyer.
(i) In the event any of the Target or either of the
Stockholders breaches (or in the event any third party alleges facts
that, if true, would mean the Target or either of the Stockholders
has breached) any of their representations, warranties, and
covenants contained herein and provided that PCNA and the Buyer make
a written claim for indemnification against the Target and the
Stockholders pursuant to Section 10(i) below, then each of the
Target and the Stockholders agrees to indemnify PCNA and the Buyer
from and against the entirety of any Adverse
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Consequences PCNA and the Buyer may suffer through and after the
date of the claim for indemnification resulting from, arising out
of, relating to, in the nature of, or caused by the breach (or the
alleged breach).
(ii) The Target and the Stockholders agrees to indemnify PCNA
and the Buyer from and against the entirety of any Adverse
Consequences PCNA and the Buyer may suffer resulting from, arising
out of, relating to, in the nature of, or caused by any claim for
Taxes due as the result of the operation of the Target's business
through the date of the Merger.
(c) Indemnification Provisions for Benefit of the Stockholders. In
the event that PCNA or the Buyer breaches (or in the event any third party
alleges facts that, if true, would mean that PCNA or the Buyer has
breached) any of their representations, warranties, and covenants
contained herein, and provided that either of the Stockholders makes a
claim for indemnification against PCNA and the Buyer pursuant to Section
10(i) below, then PCNA and the Buyer agrees to indemnify each of the
Stockholders from and against the entirety of any Adverse Consequences the
Stockholders may suffer through and after the date of the claim for
indemnification caused proximately by the breach (or the alleged breach).
(d) Matters Involving Third Parties.
(i) If any third party shall notify any Party (the
"Indemnified Party") with respect to any matter (a "Third Party
Claim") which may give rise to a claim for indemnification against
any other Party (the "Indemnifying Party") under this Section 8,
then the Indemnified Party shall promptly notify each Indemnifying
Party thereof in writing; provided, however, that no delay on the
part of the Indemnified Party in notifying any Indemnifying Party
shall relieve the Indemnifying Party from any obligation hereunder
unless (and then solely to the extent) the Indemnified Party thereby
is prejudiced.
(ii) Any Indemnifying Party shall have the right to defend the
Indemnified Party against the third Party Claim with counsel of its
choice satisfactory to the Indemnified Party so long as (A) the
Indemnifying Party notifies the Indemnified Party in writing within
10 days after the Indemnified Party has given notice of the Third
Party Claim that the Indemnifying Party shall indemnify the
Indemnified Party from and against the entirety of any Adverse
Consequences the Indemnified Party may suffer as provided in Section
8(b)(i) or (ii) above, as may be applicable, (B) the Indemnifying
Party provides the Indemnified Party with evidence acceptable to the
Indemnified Party that the Indemnifying Party shall have the
financial resources to defend against the Third Party Claim and
fulfill its indemnification obligations hereunder, (C) the Third
Party Claim involves only money damages and does not seek an
injunction or other equitable relief, (D) settlement of, or an
adverse judgment with respect to, the Third Party Claim is not, in
the good faith judgment of the Indemnified Party, likely to
establish a precedential custom or practice materially adverse to
the continuing business
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interests of the Indemnified Party, and (E) the Indemnifying Party
conducts the defense of the Third Party Claim actively and
diligently.
(iii) So long as the Indemnifying Party is conducting the
defense of the Third Party Claim in accordance with Section 8(d)(ii)
above, (A) the Indemnified Party may retain separate co-counsel at
its sole cost and expense and participate in the defense of the
Third Party Claim, (B) the Indemnified Party shall not consent to
the entry of any judgment or enter into any settlement with respect
to the Third Party Claim without the prior written consent of the
Indemnifying Party (not to be withheld unreasonably), and (C) the
Indemnifying Party shall not consent to the entry of any judgment or
enter into any settlement with respect to the Third Party Claim
without the prior written consent of the Indemnified Party (not to
be withheld unreasonably).
(iv) In the event any of the conditions in Section 8(d)(ii)
above is or becomes unsatisfied, however, (A) the Indemnified Party
may defend against, and consent to the entry of any judgment or
enter into any settlement with respect to, the Third Party Claim in
any manner it may deem appropriate (and the Indemnified Parties need
not consult with, or obtain any consent from, any Indemnifying
Parties in connection therewith), (B) the Indemnifying Parties shall
reimburse the Indemnified Party promptly and periodically for the
costs of defending against the Third Party Claim (including
reasonable attorneys' fees and expenses), and (C) the Indemnifying
Parties shall remain responsible for any Adverse Consequences the
Indemnified Party may suffer resulting from, arising out of,
relating to, in the nature of, or caused by the Third Party Claim to
the fullest extent provided in this Section 8.
(e) Determination of Adverse Consequences. The Parties shall take
into account the time cost of money (using the CitiBank N.A. publicly
announced prime rate as the discount rate) in determining Adverse
Consequences for purposes of this Section 8. All indemnification payments
under this Section 8 shall be deemed adjustments to the Purchase Price.
(f) PCNA's Right to Set-Off. In the event that PCNA is entitled to
claim any sums due from the Stockholders pursuant to this Section 8, it
may, in addition to other remedies provided by this Section 8 or
otherwise, set-off any sums due to the applicable Stockholder (or both) as
additional Merger Consideration based upon the Net Pre-Tax Income of the
Buyer for any applicable period. Furthermore, to the extent that any
shares of Common Stock are beneficially owned by the Stockholders, PCNA
shall have the option to cancel such shares at the rate of $3.00 per share
of Common Stock in addition to all other remedies available to PCNA under
this Section 8 or otherwise except to the extent that PCNA has been given
notice pursuant to Section 10(i) of this Agreement that any such shares
are subject to the prior lien of any Person.
In the event that PCNA elects to exercise its right to set-off as
described herein, the
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Stockholders shall have the option to choose between cash sums and Common
Stock to which PCNA's right of set-off shall apply. PCNA shall exercise
its right of set-off by providing the Stockholders and their counsel with