EXHIBIT 2.1
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EXECUTION COPY
STOCK PURCHASE AGREEMENT
by and among
SCHAWK, INC.,
SEVEN WORLDWIDE, INC.,
KAGT HOLDINGS, INC.
AND
THE STOCKHOLDERS OF
KAGT HOLDINGS, INC.
TABLE OF CONTENTS
SECTION PAGE
1. Purchase and Sale of Stock..............................................................................1
2. Purchase Price and Terms; Adjustments; Closing Transactions.............................................1
2.1. Purchase Price; Payment........................................................................1
2.2. Adjustment of Purchase Price...................................................................2
2.3. Accrued Expenses Capital Adjustment............................................................3
2.4. Post-Closing Adjustment Mechanics..............................................................3
2.5. Adjustments to the Purchase Price..............................................................4
3. Representations and Warranties Relating to Acquired Entities............................................4
3.1. Organization, Power and Qualification..........................................................4
3.2. Subsidiaries and Investments...................................................................5
3.3. Capitalization.................................................................................5
3.4. Corporate Authority............................................................................5
3.5. No Violation...................................................................................6
3.6. Financial Statements...........................................................................6
3.7. Liabilities and Obligations....................................................................7
3.8. Absence of Certain Changes.....................................................................7
3.9. Tax Returns and Reports........................................................................8
3.10. Title to and Condition of Assets..............................................................12
3.11. Real Estate and Leases........................................................................13
3.12. Contracts.....................................................................................13
3.13. Inventory.....................................................................................15
3.14. Receivables...................................................................................15
3.15. No Default, Violation or Litigation...........................................................15
3.16. Bank Accounts, Guarantees and Powers..........................................................16
3.17. Insurance.....................................................................................16
3.18. Employment, Labor and Other Relations.........................................................16
3.19. Employee Benefits.............................................................................17
3.20. Intellectual Property Rights..................................................................21
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TABLE OF CONTENTS
(continued)
SECTION PAGE
3.21. Approvals.....................................................................................22
3.22. Environmental Matters.........................................................................23
3.23. Transactions with Affiliates..................................................................24
3.24. Customers and Vendors.........................................................................24
3.25. Corporate Records.............................................................................25
3.26. Employee Intentions...........................................................................25
3.27. Antitrust Compliance..........................................................................25
3.28. Other Material Adverse Information............................................................25
3.29. Schedules.....................................................................................25
4. Representations and Warranties of Stockholders.........................................................26
4.1. Authorization.................................................................................26
4.2. No Violation..................................................................................26
4.3. Stock Ownership...............................................................................26
4.4. Investment Intent.............................................................................27
5. Representations and Warranties of Schawk...............................................................27
5.1. Organization and Good Standing................................................................27
5.2. Authorization.................................................................................27
5.3. Investment Intent.............................................................................27
5.4. Capitalization................................................................................28
5.5. No Violation..................................................................................29
5.6. Absence of Certain Changes....................................................................29
5.7. Antitrust Compliance..........................................................................29
5.8. Other Material Adverse Information............................................................29
5.9. Filings with the SEC..........................................................................30
5.10. 1934 Act Reports..............................................................................30
5.11. Financial Statements..........................................................................30
5.12. Liabilities and Obligations...................................................................30
5.13. No Default, Violation or Litigation...........................................................31
5.14. Transactions with Affiliates..................................................................31
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TABLE OF CONTENTS
(continued)
SECTION PAGE
5.15. Customers and Vendors.........................................................................31
5.16. Commitment Letter.............................................................................31
6. Covenants of the Parties...............................................................................32
6.1. Operations of Acquired Entities...............................................................32
6.2. Operations of Schawk..........................................................................34
6.3. Disclosure Controls; Loans to Directors and Officers..........................................35
6.4. No Solicitation...............................................................................36
6.5. Notification..................................................................................36
6.6. Additional Information........................................................................36
6.7. Supplements to Schedules......................................................................37
6.8. Publicity.....................................................................................37
6.9. Conditions....................................................................................37
6.10. Interim or Annual Financial Statements........................................................38
6.11. Shareholder Consent of Certain Executive Compensation Arrangements............................38
7. Additional Covenants of Schawk.........................................................................38
7.1. Notification..................................................................................38
7.2. Commitment Letter.............................................................................38
7.3. Due Diligence.................................................................................38
7.4. Stockholders' Representative Fee..............................................................38
7.5. Cancellation of Non-Vested Options/Special Compensation Payments..............................39
8. Conditions to Closing..................................................................................39
8.1. Mutual Conditions.............................................................................39
8.2. Conditions to Schawk's Obligations............................................................39
8.3. Conditions to Stockholders' Obligations.......................................................41
9. Additional Agreements..................................................................................42
9.2. Restrictions on Transfer......................................................................43
9.3. Indemnification of Directors, Officers and Employees..........................................44
9.4. Indemnity.....................................................................................44
10. Termination............................................................................................44
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TABLE OF CONTENTS
(continued)
SECTION PAGE
10.1. Termination of Agreement......................................................................44
10.2. Effect of Termination.........................................................................45
11. Indemnification........................................................................................45
11.1. Indemnification of Schawk Indemnified Parties by Stockholders.................................45
11.2. Indemnification of Stockholder Indemnified Parties by Schawk..................................46
11.3. Method of Asserting Claims....................................................................46
11.4. Nature and Survival of Representations........................................................47
11.5. Limitation on Indemnity.......................................................................47
11.6. Limitation on Remedies........................................................................48
11.7. Limitations on Indemnities for Pre-Closing Matters............................................48
11.8. Indemnifications Relating to Tax Liabilities..................................................49
12. Confidentiality; Nonsolicitation.......................................................................49
13. General Provisions.....................................................................................50
13.1. Waiver of Terms...............................................................................50
13.2. Amendment of Agreement........................................................................50
13.3. Payment of Expenses...........................................................................50
13.4. Contents of Agreement, Parties in Interest, Assignment........................................50
13.5. Notices.......................................................................................51
13.6. Brokers.......................................................................................52
13.7. Severability..................................................................................52
13.8. Counterparts..................................................................................52
13.9. Headings......................................................................................52
13.10. Governing Law; Jurisdiction...................................................................52
13.11. Instruments of Further Assurance..............................................................52
13.12. No Third-Party Beneficiaries..................................................................52
13.13. Currency......................................................................................52
13.14. Intentionally Omitted.........................................................................52
13.15. Tax Matters...................................................................................53
13.16. Provisions Concerning Stockholders' Representative............................................54
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TABLE OF CONTENTS
(continued)
SECTION PAGE
13.17. Tax Structure.................................................................................55
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STOCK PURCHASE AGREEMENT
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STOCK PURCHASE AGREEMENT, dated as of December 17, 2004 ("Agreement"),
among Schawk, Inc., a Delaware corporation ("Schawk" or "Buyer"), Seven
Worldwide, Inc., a Delaware corporation ("Company"), KAGT Holdings, Inc., a
Delaware corporation ("Holdings"), Kohlberg Investors IV, L.P. ("Kohlberg IV"),
Kohlberg TE Investors IV, L.P. ("Kohlberg TE IV"), Kohlberg Offshore Investors
IV, L.P. ("Kohlberg Offshore IV"), Kohlberg Partners IV, L.P. ("Kohlberg
Partners IV"), KOCO Investors IV, L.P. ("KOCO"), Silver Point Capital Fund, L.P.
("Silver Point"), Silver Point Capital Offshore Fund, Limited ("Silver Point
Offshore"), Hudson River Co-Investment Fund, L.P. ("Hudson") and VO III, LLC
("VO" and together with Kohlberg IV, Kohlberg TE IV, Kohlberg Offshore IV,
Kohlberg Partners IV, KOCO, Silver Point, Silver Point Offshore and Hudson
individually a "Stockholder" and collectively, "Stockholders").
WITNESSETH:
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WHEREAS, Stockholders own all of the currently issued and outstanding
shares of Holdings;
WHEREAS, Buyer desires to purchase from Stockholders, and Stockholders
desire to sell to Buyer, all of the outstanding shares of Holdings' Capital
Stock.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained and in reliance upon the representations and warranties
hereinafter set forth, the parties agree as follows:
1. Purchase and Sale of Stock. Subject to the terms and conditions
herein contained, on such date that is two business days after the satisfaction
(or waiver) of the conditions set forth in Article 8 or such other date as
mutually agreed to by the parties hereto (the "Closing Date"), each Stockholder
severally shall sell, transfer, assign and deliver to Buyer, and Buyer shall
purchase from such Stockholder, the number of shares outstanding of Holdings
Capital Stock set forth opposite such Stockholder's name on Annex I. The
consummation of such purchase and sale of Holdings Capital Stock is hereinafter
referred to as the "Closing."
2. Purchase Price and Terms; Adjustments; Closing Transactions. The
Purchase Price shall be payable in the manner described below.
2.1. Purchase Price; Payment. The purchase price ("Purchase Price") for
Holdings Capital Stock is One Hundred Ninety-One Million Dollars ($191,000,000)
subject to adjustment as provided in Section 2.2.1 and Section 2.4 below. The
Purchase Price shall be payable (without regard to any withholding obligations)
as follows: (i) on the Closing Date, Schawk shall pay One Hundred Twelve Million
Eight Hundred Thousand Dollars ($112,800,000) as adjusted pursuant to Section
2.2.1 below to the Stockholders' Representative on behalf of the Stockholders in
immediately available funds by federal wire transfer to an account designated by
Stockholders' Representative, (ii) on the Closing Date, Schawk shall issue and
deliver Four Million (4,000,000) shares of Schawk's class A common stock, $0.008
par value, ("Schawk Class A Common Stock") to Stockholders' Representative, or
at the direction of Stockholders' Representative, to Stockholders pro rata in
accordance with each Stockholder's
Percentage, in the names and amounts specified by Stockholders' Representative
on the Closing Date and (iii) on the Closing Date, Schawk shall deliver, on
behalf of Stockholders, Ten Million Dollars ($10,000,000) (the "Escrow Amount")
to the Escrowee named in the Escrow Agreement (the "Escrowee") in immediately
available funds to an account designated by Escrowee who shall hold such funds
pursuant to an escrow agreement (the "Escrow Agreement") in the form attached
hereto and incorporated herein as Exhibit A. With respect to all holders of
options (the "Option Holders") under the KAGT Holdings 2004 Equity Incentive
Plan (the "Equity Plan") who have unexercised options at the effective time of
the Closing, Holdings shall inform each such Option Holder that any amounts to
which such Option Holder would otherwise become entitled upon the exercise of
such options issued to such Option Holder under the Equity Plan shall be
delivered to a special compensatory trust established by Holdings, that is
intended to be structured as a "rabbi trust" (the "KAGT Holdings Rabbi Trust").
The KAGT Holdings Rabbi Trust shall be established pursuant to a trust
instrument reasonably satisfactory in form and substance to Schawk and the
Stockholders' Representative. Accounts shall be established under the KAGT
Holdings Rabbi Trust to which amounts shall be allocated for each of the Option
Holders equal to the amount (including cash and, if applicable, shares of Schawk
Class A Common Stock) to which each such Option Holder would have been entitled
had the options been exercised at the Closing Date. Such amounts, together with
notional earnings thereon (payable with respect to the cash portion of the trust
corpus at a per annum rate of 5%), shall be paid to each such Option Holder on
no later than July 1, 2005. Notwithstanding anything to the contrary contained
herein, Stockholders' Representative shall have the right in its sole discretion
to reallocate the respective amounts of cash and Schawk Class A Common Stock
consideration to be received by such Option Holders. The Escrow Amount, together
with all interest and earnings thereon while held in escrow under the Escrow
Agreement, are referred to collectively in this Agreement as the "Escrow Funds."
The shares of Schawk Common Stock so delivered to Stockholders' Representative,
Stockholders or Escrowee are sometimes hereinafter referred to as the
"Registerable Securities." The Registerable Securities shall be entitled to the
benefit of a registration rights agreement (the "Registration Rights Agreement")
in the form attached hereto and incorporated herein as Exhibit B. Said
Registration Rights Agreement shall provide, inter alia, that the holders of the
Registerable Securities shall be entitled to require three demand registrations
and certain incidental registration rights.
2.2. Adjustment of Purchase Price.
2.2.1. Payment of Indebtedness. On the Closing Date, the cash portion
of the Purchase Price required to be paid to Stockholders pursuant to Section
2.1(i) above shall be (a) reduced by the difference of (i) Closing Indebtedness
Amount to be paid by Schawk pursuant to Section 9.1 below and (ii) the aggregate
amount of Lockbox Cash and cash of any Acquired Entity located in accounts in
the United Kingdom, to the extent not applied to Indebtedness, (b) reduced by
the amount of the Drasner Expense to the extent not paid prior to the Closing
Date and (c) increased or reduced, as the case may be, by the amount provided in
Section 2.2.3 below.
2.2.2. Legends on Stock Certificates. Each stock certificate evidencing
shares of Schawk Class A Common Stock issued to Stockholders pursuant to Section
2.1(b) and each certificate issued to any subsequent transferee of any such
certificate shall be stamped or otherwise imprinted with the following legend:
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"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES OR BLUE
SKY LAWS OF ANY STATE. THE SHARES REPRESENTED BY THIS CERTIFICATE MAY
NOT BE TRANSFERRED IN VIOLATION OF SUCH ACT AND LAWS, THE RULES AND
REGULATIONS THEREUNDER. THE SHARES REPRESENTED BY THIS CERTIFICATE WILL
NOT BE TRANSFERRED UNLESS SUCH SHARES HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 OR, IN THE OPINION OF COUNSEL REASONABLY
ACCEPTABLE TO SCHAWK, INC., AN EXEMPTION FROM SUCH REGISTRATION IS
AVAILABLE."
2.3. Accrued Expenses Capital Adjustment. Not less than two business
days prior to the Closing Date, the Stockholders' Representative, on behalf of
the Stockholders, will prepare an estimate of the Accrued Expenses as of the
Closing (the "Estimated Closing Accrued Expenses Amount"), determined in
accordance with Section 2.3, as if it were the actual Closing Accrued Expenses
Amount, but based on the Stockholders' Representative's review of financial
information then reasonably available to it and inquiries of personnel
responsible for the preparation of the financial information of the Company and
its Subsidiaries in the ordinary course. The Purchase Price required to be paid
to Stockholders pursuant to Section 2.1(i) above will be reduced or increased,
as the case may be, as contemplated by Section 2.2 above, by the amount by which
the Estimated Closing Accrued Expenses Amount is more than or less than
$31,322,432.
2.4. Post-Closing Adjustment Mechanics.
2.4.1. As soon as practicable (and in no event later than 60 days after
the Closing Date), Schawk shall prepare or cause to be prepared in good faith
(a) a balance sheet of the Company and its Subsidiaries as of the close of
business on the Closing Date (the "Closing Balance Sheet") and (b) a statement
of the Accrued Expenses reflected on the Closing Balance Sheet (the "Closing
Accrued Expenses Amount"). The Closing Balance Sheet and the Closing Accrued
Expenses Amount will be prepared and determined in accordance with GAAP, using
the same policies, principles, assumptions and methodology used in connection
with the preparation of the Financial Statements (to the extent such policies,
principles, assumptions and methodology are consistent with GAAP) and in
accordance with the methodology set forth in Exhibit 2.4.1 attached hereto. To
the extent of any inconsistency between the methodology described on Exhibit
2.4.1 and that used in the preparation of the Financial Statements, the terms of
Exhibit 2.4.1 will govern. Following such preparation, Schawk shall deliver the
Closing Balance Sheet and Closing Accrued Expenses Amount to the Stockholders'
Representative for review; provided, however, that such delivery shall in no
event be later than 60 days after the Closing Date. In connection with the
preparation and review of the Closing Balance Sheet and the Closing Accrued
Expenses Amount, Schawk and Stockholders' Representative shall each provide the
other party and their representatives with reasonable access to the personnel,
books, records, documents and other information of Company and its Subsidiaries.
From the date of delivery of the Closing Balance Sheet and Closing Accrued
Expenses Amount until the date which is 90 days after the Closing Date, Schawk
and Stockholders' Representative shall work in good faith to agree on the
Closing Balance Sheet and the Closing Accrued Expenses Amount.
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2.4.2. If Schawk and Stockholders' Representative cannot agree on the
final Closing Balance Sheet and the Closing Accrued Expenses Amount within 90
days after the Closing Date, the parties shall submit their final calculations
of the items in dispute to an arbitrator (the "Arbitrator") who shall be a
certified public accountant (with significant public accounting experience,
including in the context of business combinations) and be appointed by agreement
of Schawk and Stockholders' Representative or, failing such agreement, by the
American Arbitration Association (the "AAA") in accordance with the Commercial
Arbitration Rules (the "Arbitration Rules") of the AAA. The Arbitrator shall
review such final calculations and make a selection as to which of the final
calculations presented to it is, in the aggregate, more accurate. The decision
of the Arbitrator shall be made in accordance with the Arbitration Rules and in
accordance with the terms of this Agreement, including the procedures set forth
on Exhibit 2.4.1. The decision of the Arbitrator shall be made within thirty
(30) days after being engaged, or as soon thereafter as reasonably practicable,
and shall be final and binding on the parties. The costs and expenses of the
Arbitrator shall be paid by the party whose proposed calculation is not selected
by the Arbitrator. Schawk and the Stockholders shall make available to the
Arbitrator all relevant books and records relating to the calculations submitted
and all other information reasonably requested by the Arbitrator.
2.5. Adjustments to the Purchase Price. Upon the final determination of
the Closing Accrued Expenses Amount (either pursuant to Section 2.3.1 or 2.3.3
above), the Purchase Price will be adjusted as follows:
2.5.1. If the Closing Accrued Expenses Amount is less than the
Estimated Closing Accrued Expenses Amount, then the Purchase Price will be
increased by, and Schawk will pay Stockholders' Representative, on behalf of
Stockholders, the amount of such difference.
2.5.2. If the Closing Accrued Expenses Amount exceeds the Estimated
Closing Accrued Expenses Amount, then the Purchase Price will be decreased by
the amount of such difference, and Schawk shall be entitled to payment of such
amount. The Stockholders shall be severally liable for their respective
Percentage of any amount owed pursuant to this Section 2.4.2.
2.5.3. Any payment in respect of the adjustment required to be made
pursuant to this Section 2.4 will be made by Schawk or by the Stockholders, as
applicable, in cash by federal wire transfer of immediately available funds to
an account or accounts specified by Schawk or the Stockholders, as applicable,
in writing, within five Business Days after the final determination of the
Closing Accrued Expenses Amount (either pursuant to Section 2.3.1 or 2.3.3
above).
3. Representations and Warranties Relating to Acquired Entities.
Company and Holdings represent and warrant as of the date of this Agreement and
again as of the date of Closing Date to Schawk as follows:
3.1. Organization, Power and Qualification. Holdings and each of its
Subsidiaries is a corporation, limited partnership or limited liability company
duly formed or organized, validly existing and in good standing (to the extent
that such a concept is recognized
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by the applicable jurisdiction) under the laws of its respective jurisdiction of
formation or organization, and has all requisite power and authority to own or
hold under lease its respective properties and assets and to carry on its
respective businesses as now conducted. Holdings and each of its Subsidiaries is
duly qualified to do business and is in good standing as a foreign corporation
(to the extent such a concept is recognized by the applicable jurisdiction) in
every jurisdiction in which a failure to so qualify or be in good standing would
be reasonably expected to have a Company Material Adverse Effect, and a complete
list of such jurisdictions is set forth on Schedule 3.1. True and complete
copies of the articles or certificates of incorporation, or equivalent documents
with respect to Foreign Acquired Entities, as amended to date, and the by-laws
(or equivalent), as amended to date, of Holdings and of each of its Subsidiaries
have been furnished to Buyer.
3.2. Subsidiaries and Investments. A true and complete list of all
Subsidiaries of Holdings, together with the jurisdiction of organization of each
Subsidiary and the percentage of the outstanding capital stock or other equity
interest of each Subsidiary owned by Holdings and each other Subsidiary of
Holdings, is set forth in Schedule 3.2 to this Agreement. Except as set forth in
Schedule 3.2, all the outstanding shares of capital stock of, or other equity
interests in, each Subsidiary have been validly issued and are fully paid and
nonassessable and are owned directly or indirectly by Holdings, free and clear
of all Liens and free of any other restriction (including any restriction on the
right to vote, sell or otherwise dispose of such capital stock or other
ownership interests except as may be provided as a matter of law). Except as
disclosed in Schedule 3.2, Holdings does not own, directly or indirectly, any
stocks, bonds or securities or any equity or other proprietary interest in any
corporation, partnership, joint venture, business enterprise or other entity of
any nature whatsoever.
3.3. Capitalization. As of the date hereof, the authorized capital
stock of Holdings consists of 65,000,000 shares of Holdings Capital Stock, and
as of the Closing Date shall consist of no more than 70,000,000 shares of
Holdings Capital Stock, $0.01 par value, of which as of the date of this
Agreement, 58,350,000 shares are currently issued and outstanding and owned of
record and beneficially by Stockholders and, of which as of the Closing Date, no
more than 67,200,400 shares will be issued and outstanding (including those
shares of Holdings Capital Stock issued pursuant to the exercise of the options
outstanding as of the date hereof as permitted by Section 6.1(viii)) all of
which will be owned by Stockholders, Management Holders and Other Option
Holders. All of the currently issued and outstanding shares of the capital stock
of Holdings are duly authorized, validly issued and outstanding, fully paid and
nonassessable and have not been issued in violation of any stockholder rights
under applicable law, or of Holdings' certificate or articles of incorporation
or by-laws or the terms of any agreement to which Holdings is a party or by
which Holdings is bound. Except as disclosed in Schedule 3.3, as of the date of
this Agreement, there are no securities, options, warrants, calls, rights,
commitments, agreements, arrangements or undertakings of any kind to which
Holdings or any of its Subsidiaries is a party or by which any of them is bound
obligating Holdings or any of its Subsidiaries to issue, deliver or sell, or
cause to be issued, delivered or sold, additional shares of capital stock or
other voting securities of Holdings or any of its Subsidiaries or obligating
Holdings or any of its Subsidiaries to issue, grant, extend or enter into any
such security, option, warrant, call, right, commitment, agreement, arrangement
or undertaking.
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3.4. Corporate Authority. Each of Company and Holdings has all
requisite corporate, limited partnership or limited liability company power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate, limited partnership or limited liability company
action on the part of Company and Holdings. This Agreement has been duly
executed and delivered by Company and Holdings and, assuming that this Agreement
constitutes the valid and binding agreements of Buyer, constitutes the valid and
binding agreement of Company and Holdings, enforceable against each of them in
accordance with its terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization and other laws affecting creditors'
rights generally and general principles of equity (whether considered in a
proceeding in equity or at law).
3.5. No Violation. Except as set forth in Schedule 3.5 or except with
respect to clauses (b) and (c) below where any such matter has not had and would
not reasonably be expected to have a Company Material Adverse Effect, neither
the execution and delivery of this Agreement, nor the consummation of the
transactions contemplated hereby will constitute a violation of, or be in
conflict with, or result in a cancellation of, or constitute a default under, or
create (or cause the acceleration of the maturity of) any debt, obligation or
liability affecting, or result in the creation or imposition of any security
interest, lien, or other encumbrance upon any of the assets owned or used by, or
any of the capital stock of Holdings or Company under: (a) any term or provision
of the certificate or articles of incorporation, by-laws or other organizational
document of Holdings or Company; (b) any contract, agreement, indenture, lease
or other commitment to which any Acquired Entity is or are party or by which any
Acquired Entity is or are bound; or (c) any Law of any Governmental Entity
applicable to the Acquired Entities or their respective properties or assets.
Except as disclosed in Schedule 3.5 and any clearances or consents referred to
in Section 8.3.4 hereof or as would not be reasonably expected to have a Company
Material Adverse Effect, no consent of, or notice to, any federal, state, or
local authority, or any private person or entity, is required to be obtained or
given by any Acquired Entity in connection with the execution, delivery or
performance of this Agreement or any other agreement or document to be executed,
delivered or performed hereunder by Company or any Acquired Entity.
3.6. Financial Statements. Holdings has made available to Schawk true
and complete copies of its audited consolidated Balance Sheet as of December 31,
2002 and December 31, 2003, and related consolidated Statements of Earnings and
Changes in Stockholder's Equity and Cash Flows for the years then ended, in each
case audited and certified by, Deloitte & Touche LLP, Holdings' independent
auditors (collectively, "Annual Financial Statements").
Holdings has made available to Schawk true and complete copies of its
consolidated unaudited interim Balance Sheets of Holdings and its consolidated
Subsidiaries as of September 30, 2004 and October 31, 2004 and the related
consolidated and consolidating Statements of Earnings and consolidated
Statements of Cash Flows for the applicable, interim period ended then, together
with any notes thereto (collectively, "Interim Financial Statements").
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Except as set forth on Schedule 3.6, all such Financial Statements have
been prepared in accordance with GAAP consistently applied and fairly present in
all material respects the financial position of Holdings and its consolidated
Subsidiaries as of the respective dates thereof, and fairly present, in all
material respects, the results of operations and changes in cash flows of
Holdings and its consolidated Subsidiaries for the periods covered thereby
(subject in the case of unaudited statements, to the absence of footnotes and
normal and non-material year-end audit adjustments).
3.7. Liabilities and Obligations.
(a) No Acquired Entity has any liabilities or obligations
(direct or indirect, contingent or absolute, matured or unmatured) of
any nature whatsoever, whether arising out of contract, tort, statute
or otherwise, including, without limitation, customer claims for
rework, offsets or errors or omissions, in each case, required by GAAP
to be set forth on a consolidated balance sheet of Holdings and its
consolidated Subsidiaries or in the Notes thereto, which are not
reflected, reserved against or given effect to in the Annual Financial
Statements or Interim Financial Statements except: (a) liabilities and
obligations which are specifically disclosed in Schedule 3.7; or (b)
liabilities and obligations incurred in the ordinary course of business
since the dates of the Annual Financial Statements and the Interim
Financial Statements, respectively, and which are of the same nature as
those set forth on the Annual Financial Statements and the Interim
Financial Statements and which, individually or in the aggregate, are
not material to the Acquired Entities; (c) non-material contingent or
unmatured liabilities that would not normally be reflected, reserved
against or given effect to in the Financial Statements (including,
without limitation, the notes thereto); (d) liabilities and obligations
under this Agreement; and (e) liabilities and obligations which would
not reasonably be expected to have a Company Material Adverse Effect.
(b) Schedule 3.7 lists all claims pending or, to the Knowledge
of the Acquired Entities, threatened for breach of any warranty
relating to any products sold or services performed by the Acquired
Entities, except for such claims that, in the aggregate, would not
reasonably be expected to have a Company Material Adverse Effect and
for claims for corrections and additional work in the ordinary course
of business consistent with past practices.
3.8. Absence of Certain Changes. Except as disclosed in Schedule 3.8,
since December 31, 2003, there has not been: (a) any change that individually or
in the aggregate has had and would be reasonably expected to have a Company
Material Adverse Effect; (b) any damage, destruction or loss (whether or not
covered by insurance) that has had and would reasonably be expected to have a
Company Material Adverse Effect; (c) any declaration, setting aside, or payment
of any dividend or other distribution in respect of the capital stock of
Holdings, or any direct or indirect redemption, retirement, purchase or other
acquisition of any of such stock, or any issuance of shares of stock or the
granting, issuance or exercise of any right, warrant, option or similar
commitment relating to Holdings' authorized or issued capital stock; (d) any
increase in the compensation, commissions or perquisites payable or to become
payable by any Acquired Entity to any director, officer or employee (earning
more than $150,000 per annum) of any Acquired Entity, or any payment of any
bonus, profit sharing or other
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extraordinary compensation to any employee (earning more than $150,000 per
annum) of any Acquired Entity (other than any such increase or payment paid or
to become payable in the ordinary course of business consistent with past
practices or to the extent required under employment agreements in effect on the
date hereof); (e) except as disclosed in Schedule 3.8 or in the Financial
Statements, any change in the accounting methods or practices followed by any
Acquired Entity or any change in depreciation or amortization policies or rates
theretofore adopted; (f) any cancellation of any debts owed to or claims held by
any Acquired Entity other than compromises of accounts receivable in the
ordinary course of business which do not involve any write off and reduction of
any account receivable in excess of $50,000; (g) any sale, lease, abandonment or
other disposition by any Acquired Entity of any real property, or, other than in
the ordinary course of business, of any machinery, equipment or other operating
properties, or any intangible assets utilized in the business of any Acquired
Entity during the twelve month period ending on the date hereof.
3.9. Tax Returns and Reports.
(a) Except as set forth on Schedule 3.9, all federal, state,
local and foreign income, excise, property, sales, value-added, use,
information, escheat and unclaimed property reports, payroll and other
tax returns and reports required to be filed by any Acquired Entity
with respect to any Tax (including any tax returns of any consolidated,
combined or uniform group that includes any Acquired Entity) (the "Tax
Returns") have been filed with the appropriate governmental agencies in
a timely manner in all jurisdictions in which such returns and reports
are required to be filed, and all such Tax Returns are correct and
complete in all material respects for the periods covered thereby.
Except as set forth on Schedule 3.9, all Taxes which are called for as
due by the Tax Returns, or which are claimed to be due, or which are
otherwise due to any taxing authority from any Acquired Entity have
been properly accrued or paid. All Taxes of any Acquired Entity which
are accrued, but not yet due to the applicable taxing authority, have
been properly accrued for as a separate liability on the books and
records of the Acquired Entities. No Acquired Entity has received any
written notice of assessment or proposed assessment by the Internal
Revenue Service ("IRS") or any other taxing authority in connection
with any Tax Returns (for a period with respect to which the statute of
limitations (including any extensions thereof) has not expired) and to
the Knowledge of Acquired Entities, there are no pending Tax
examinations of or Tax claims asserted against Acquired Entities or
their properties. No Acquired Entity has taken any position in any of
the Tax Returns which, to Acquired Entities' Knowledge, is in
disregard, in any material respect, of any statute, regulation, rule or
revenue ruling applicable to any Acquired Entity. Except as disclosed
in Schedule 3.9, there are no Tax liens on any of the properties or
assets of any Acquired Entity except for liens for current Taxes not
yet due and payable. Except as disclosed on Schedule 3.9, no Acquired
Entity has waived any law or regulation fixing, or consented to the
extension of, any period of time for assessment of any Taxes which
waiver or consent is currently in effect. Acquired Entities have
provided to Buyer complete and correct copies of all income Tax Returns
and other material Tax Returns of each Acquired Entity for each taxable
year beginning on or after January 1, 2001. All monies required to be
withheld from employees, independent contractors, stockholders, or
creditors of any Acquired Entity for Taxes have been withheld as
appropriate and collected and paid, when due, to the
8
appropriate governmental agencies, or if such payment is not yet due,
an adequate reserve has been established for such Taxes. Except as
disclosed on Schedule 3.9, no Acquired Entity has any liability for
Taxes (other than to another Acquired Entity) under Regulation Section
1.1502-6 (or any similar provision of state, local or foreign law), as
a transferee or successor, by contract or otherwise; or is a party to
any agreement that would result in the making of a payment which is not
deductible under Section 280G of the Code or subject to the excise Tax
under Section 4999 of the Code if such payment is made prior to or
within ten business days after the Closing Date.
(b) With respect to each U.K. Acquired Entity, except for
those matters that have not had and would not be reasonably expected to
have a Company Material Adverse Effect:
(i) each U.K. Acquired Entity has, within the
relevant time limits, correctly made all returns and payments
required to (a) be made by it for any Tax purposes, and has
kept all records and other documents required to be kept by
any Legislation relating to Tax or (b) it could reasonably be
expected to retain in order to enable it to calculate any
future Tax Liabilities which could arise in connection with
any of its assets; each U.K. Acquired Entity has properly
operated the Pay As You Earn system (including its application
to National Insurance Contributions) and has complied with all
of its reporting obligations to the Inland Revenue in
connection with all benefits provided for employees; no Pay As
You Earn settlement agreement has been entered into and no
dispensations have been obtained of any U.K. Entity.
(ii) Intentionally Omitted;
(iii) Intentionally Omitted;
(iv) all rents, interest, annual payments and other
sums of an income nature which have been paid or became
payable since January 1, 2003 or in the case of Seven
Worldwide (U.K.) Limited, January 1, 2002 or which is under an
existing obligation to pay in the future are, or will be,
wholly allowable as deductions or charges against profits or
in computing profits for the purposes of Tax; each U.K.
Acquired Entity is entitled to capital allowances in respect
of all expenditure incurred by it on industrial buildings,
scientific research, know-how and plant and machinery used in
any trade carried on by it;
(v) Intentionally Omitted
(vi) no U.K. Acquired Entity has, at any time, been a
Close Company for the purposes of Taxes;
(vii) each U.K. Acquired Entity is registered as a
taxable Person for the purposes of value-added tax;
(viii) neither any U.K. Acquired Entity nor any of
its relevant associates (as that term is defined by paragraph
3(7) of Schedule 10 to Value-
9
Added Tax Act 1994 ("VATA 1994") has made an election to waive
exemption available pursuant to paragraph 2 of that Schedule
in relation to any U.K. Acquired Entity's Real Estate; no U.K.
Acquired Entity is, nor can it be treated as, a developer in
relation to any building or civil engineering work for the
purposes of paragraphs 5 and 6 of Schedule 10 to VATA 1994; no
U.K. Acquired Entity has acquired any asset in circumstances
falling within Section 44 of VATA 1994;
(ix) all documents in the enforcement of which any
U.K. Acquired Entity may be interested have been properly
stamped; no U.K. Acquired Entity has executed and retained
outside the United Kingdom any instrument which would be
subject to stamp duty if brought into the United Kingdom;
(x) Intentionally Omitted;
(xi) All transactions for which consent, clearance of
notification (pre or post transaction) was required from a Tax
authority has been obtained. All particulars furnished to any
Tax or other authority in connection with an application for
consent or clearance on behalf of or affecting any U.K.
Acquired Entity fully and accurately disclosed everything
material to such authority's decision; the consent or
clearance is valid and effective; and the transactions for
which the consent or clearance was obtained have been carried
into effect only in accordance with the terms of the
application and the consent or clearance;
(xii) No U.K. Acquired Entity has provided, or agreed
to provide, to any officer or employee or ex-officer or
ex-employee of such U.K. Acquired Entity any shares, or
interest in shares or right to acquire shares; any other
benefit in respect of which such U.K. Acquired Entity will or
would, if the prescribed circumstances arise, be required on
or after the Closing Date to operate Pay As You Earn or pay or
account for any National Insurance Contributions;
(xiii) Intentionally Omitted;
(xiv) Intentionally Omitted;
(xv) Intentionally Omitted;
(xvi) Intentionally Omitted;
(xvii) Since January 1, 2003 or in the case of Seven
Worldwide (U.K.) Limited, January 1, 2002, no U.K. Acquired
Entity has been a party to any transaction as a result of
which any capital allowance to which it would otherwise be
entitled could be reduced or withdrawn;
(xviii) Intentionally Omitted;
(xix) No U.K. Acquired Entity owns any property
which, as of the Closing Date, will be within an adjustment
period under Part XV of the Value Added Tax Regulations 1995.
No U.K. Acquired Entity has acquired assets in the
10
circumstances described in Article 5(1) of the VAT (Special
Provisions) Order 1995. No U.K. Acquired Entity has, at any
time, acted as agent of any person not resident in the United
Kingdom for the purposes of section 47 of VATA 1994 or been
appointed as a VAT representative of any person for the
purposes of section 48 of VATA 1994;
(xx) Any exemption or relief obtained by any U.K.
Acquired Entity from stamp duty under section 42 of the
Finance Act 1930 (intra-group transfers), sections 75, 76 or
77 of the Finance Act 1986 (reconstructions and amalgamations)
or the Stamp Duty (Exempt Instruments) Regulations 1987 or
under Schedule 7 of the Finance Act 2003 (group and
reconstruction relief for stamp duty and tax) was properly
claimed and no such exemption or relief has become liable to
forfeiture;
(xxi) Each U.K. Acquired Entity is, and has always
been, resident in the United Kingdom for United Kingdom Tax
purposes. No U.K. Acquired Entity has traded or carried on any
activity and no U.K. Acquired Entity owns any asset outside
the United Kingdom;
(xxii) Intentionally Omitted;
(xxiii) Intentionally Omitted;
(xxiv) Since January 1, 2003 and in the case of Seven
Worldwide (U.K.) Limited, since January 1, 2002, the following
warranties in this paragraph (xxiv) apply: Each U.K. Acquired
Entity applies an authorized accruals method of accounting
(within the meaning of section 85 of the Finance Act 1996 in
respect of all loan relationships (as that term is defined in
section 81 of the Finance Act 1996) to which it is a party. No
U.K. Acquired Entity is a party to any loan relationship to
which section 92 (convertible securities) or section 93
(asset-linked debt) of the Finance Act 1996 applies. No U.K.
Acquired Entity is a party to any debtor relationship (as that
term is defined in section 103 of the Finance Act 1996) which
relates to a relevant discounted security (as that term is
defined in paragraph 3 of Schedule 13 to the Finance Act 1996)
to which paragraph 17 (connected companies) or paragraph 18
(close companies) of Schedule 9 to the Finance Act 1996
applies. No U.K. Acquired Entity has entered into any
transaction to which paragraph 11(1) of Schedule 9 to the
Finance Act 1996 (transactions not at arm's length) applies.
No U.K. Acquired Entity has been, and is not entitled to be,
released from any liability which arises under a debtor
relationship of the U.K. Acquired Entity. No U.K. Acquired
Entity is a party to any loan relationship, whether as debtor
or creditor, to which paragraph 8 of Schedule 15 to the
Finance Act 1996 has applied or will apply on the occurrence
of a relevant event (as defined in paragraph 8(2)) in respect
thereof. No U.K. Acquired Entity is nor ever has been a party
to any loan relationship to which paragraph 13 of Schedule 9
to the Finance Act 1996 (unallowable purposes) could apply;
11
(xxv) Since January 1, 2003 and in the case of Seven
Worldwide (U.K.) Limited, January 1, 2002, no U.K. Acquired
Entity is nor ever has been a party to any loan relationship
to which the provisions of paragraph 2, Schedule 9 Finance Act
1996 (late interest) have applied;
(xxvi) Intentionally Omitted;
(xxvii) Intentionally Omitted;
(xxviii) Intentionally Omitted;
(xxix) Intentionally Omitted;
(xxx) Intentionally Omitted;
(xxxi) No U.K. Acquired Entity has ceased to be a
member of a group of companies in circumstances where the
provisions of section 178 or 179 of TCGA 1992 (deemed disposal
on leaving the group) apply;
(xxxii) Since January 1, 2003, no distribution has
been made by a U.K. Acquired Entity except dividends shown in
its audited accounts nor is a U.K. Acquired Entity bound to
make any such distribution. U.K. Acquired Entity has repaid,
redeemed or repurchased or agreed to repay, redeem or
repurchase any of its share capital or agreed to capitalize in
the form of redeemable shares or debentures, any profits or
reserves of any class or description;
(xxxiii) No U.K. Acquired Entity has made any
distribution prior to Closing within the meaning of section
418 ICTA ("distribution" to include certain expenses of close
companies);
(xxxiv) No U.K. Acquired Entity is or has ever been a
close investment holding company within the meaning of section
13A ICTA; and
(xxxv) No U.K. Acquired Entity has made any loans or
advances within the meaning of section 419 (as extended by
section 422) of ICTA (loans to participators, etc.).
3.10. Title to and Condition of Assets. Each Acquired Entity is the
legal and beneficial owner of and has good and marketable title to all of its
owned properties and assets and in the case of property held under lease,
license or any other contract, a valid and enforceable right to use said
property, including those assets and properties reflected in the Interim
Financial Statements (other than those properties and assets disposed of by the
applicable Acquired Entity since October 31, 2004, in the ordinary course of
business and for fair value) in the amounts and categories reflected therein,
and to all properties and assets acquired by Acquired Entities after the
respective dates thereof, free and clear of all mortgages, liens, pledges,
charges, security interests, encumbrances or other third party interests of any
nature whatsoever, except: (a) for the Lien of current Taxes not yet due and
payable or the amount or validity of which is being contested in good faith by
appropriate proceedings and for which
12
appropriate reserves have been established in accordance with GAAP, (b) Liens in
favor of or which otherwise are owed to materialmen, workmen, carriers,
warehousepersons or laborers not in excess of $100,000 in the aggregate, (c)
zoning, entitlement, building and other land use regulations imposed by
Governmental Entities having jurisdiction over any Real Estate which are not
violated in any material respect by the current use and operation of the Real
Estate, (d) deposits or pledges made in connection with, or to secure payment
of, worker's compensation, unemployment insurance, old age pension programs
mandated under applicable Laws or Legislation or other social security
provisions, (e) covenants, conditions, restrictions, easements, encumbrances and
other similar matters of record affecting title to but not adversely affecting
current occupancy or use of the Real Estate in any material respect, (f)
restrictions on the transfer of securities arising under federal and state
securities Laws, (g) as reflected in the Financial Statements, (h) for other
title exceptions or Liens disclosed and described in Schedule 3.10 or Schedule
3.20 hereto and (i) for such matters that have not had and would not be
reasonably expected to have a Company Material Adverse Effect. Except as
disclosed in Schedule 3.10, the properties and assets of Acquired Entities
utilized in the operation of their businesses (including all buildings) are in
good operating condition and repair, ordinary wear and tear excepted, to the
Knowledge of Acquired Entities, are usable in the ordinary course of its
business and, except as disclosed in Schedule 3.10, conform in all respects to
all applicable statutes, ordinances and regulations relating to their
construction, use and operation, except for such matters that have not had and
would not be reasonably expected to have a Company Material Adverse Effect.
3.11. Real Estate and Leases. There is disclosed in Schedule 3.11 a
description of all real estate owned or leased by Acquired Entities or occupied
by any Acquired Entity as a tenant-in-common or in relation to any real estate
located in the United Kingdom, as free-holder, (the "Real Estate"). There is
disclosed in Schedule 3.11 a brief description (consisting of, in each case, the
annual rental payable and the expiration date) of every lease or agreement
(written or oral) under which any Acquired Entity is lessee of, or holds or
operates, any real property. Each of such leases and agreements is in full force
and effect and constitutes a legal, valid and binding obligation of the
applicable Acquired Entity and, to the Knowledge of the Acquired Entities, the
lessor or other party thereto, except as has not had and would not be reasonably
expected to have a Company Material Adverse Effect. Neither any Acquired Entity
nor, to the Knowledge of Acquired Entities, any other party thereto is in
default in any respect under any such lease or agreement nor has any event
occurred which with the passage of time or giving of notice or both would
constitute such a default, except for such defaults or events as have not had
and would not reasonably be expected to have a Company Material Adverse Effect.
Except as disclosed on Schedule 3.11, the Real Estate owned or utilized by
Acquired Entities in the conduct of their business does not violate any
building, zoning or similar Laws or ordinances, or any agreements applicable
thereto, and no notice of any such violation or claimed violation has been
received by any Acquired Entity, except for such violations as have not had and
would not be expected to have in the aggregate a Company Material Adverse
Effect. True, correct and complete copies of all such title documents and leases
(if any), including, without limitation, all amendments or modifications
thereto, have been made available to Schawk on or prior to the date hereof.
3.12. Contracts. Schedule 3.12 shall contain a list of all oral and
written contracts, agreements, commitments or understandings to which any
Acquired Entity is a party
13
(such contracts, agreements, commitments or understandings, "Company Material
Contracts") relating to
(a) each contract, agreement or group of related agreements or
contracts with any of Acquired Entities' largest 100 customers and
vendors during the first nine months of fiscal year 2004, as identified
on Schedule 3.24;
(b) all employment, consulting, severance, termination or
indemnification agreements between any Acquired Entity and any
director, officer or employee of such Acquired Entity whose total
annual compensation (including incentive compensation), after giving
effect to any increase after the date of this Agreement, exceeds
$150,000;
(c) all (A) management contracts (excluding contracts for
employment) and (B) contracts with consultants which involve
consideration of more than $50,000 per annum or $100,000 over the
remaining term of any such contract; all contracts, credit agreements,
indentures and other agreements evidencing indebtedness for borrowed
money (including capitalized leases) involving an amount greater than
$250,000 over the term thereof;
(d) all agreements under which an Acquired Entity has advanced
or loaned funds in excess of $100,000;
(e) all guarantees of any obligations of any third party other
than an Acquired Entity in excess of $50,000 (other than guarantees of
Indebtedness which is to be retired at Closing);
(f) all joint venture or other similar agreements;
(g) agreements under which Holdings has granted any person
registration rights (including demand and piggy-back registration
rights) or any other agreements with respect to the capital stock of
any Acquired Entity;
(h) all contracts and agreements that limit the ability of any
Acquired Entity to compete in any line of business or with any person
or entity or in any geographic area or during any period of time with
respect to any business currently conducted by any Acquired Entity;
(i) all contracts and other agreements with Affiliates;
(j) for leasing tangible personal property (including, without
limitation, leases for equipment used in Acquired Entities' business)
involving remaining aggregate payments of $200,000 or more for non-auto
leases and $50,000 for auto or other vehicle licenses;
(k) for the purchase of equipment and/or software used in the
operation of Acquired Entities' business involving annual payments of
$50,000 or more;
14
(l) relating to the ownership, use or licensing of any
patents, trademarks, trade names, brand names, copyrights, inventions,
processes, know-how, formulae, trade secrets or other proprietary
rights, in each case, involving annual payments of $50,000 or more
(other than licenses under which the Acquired Entities use Intellectual
Property Rights including Operational Software, which licenses are
disclosed on Schedule 3.20); and
(m) any other contracts or agreements that are material to the
business, assets, condition (financial or otherwise) or results of
operations of the Acquired Entities taken as a whole.
Except, in each case, as would not reasonably be expected, individually
or in the aggregate, to have a Company Material Adverse Effect, each Company
Material Contract is a legal, valid and binding agreement of the applicable
Acquired Entity in full force and effect in accordance with its terms and
neither the Company nor any other Acquired Entity is in violation or default, or
has received written notice that it is in violation or default, under any
Company Material Contract and to Acquired Entities' Knowledge no other party is
in default under any Company Material Contract. The Company has provided or made
available to Buyer all Company Material Contracts, together with all amendments
or modifications thereto.
3.13. Inventory. The inventory of Acquired Entities, consisting of raw
materials (film, ink, paper and the like), reflected in the Interim Financial
Statements, and such raw material inventory acquired since the date thereof,
net, in each case, of provisions for shrinkage and obsolescence, if any,
reflected on such Financial Statements and Acquired Entities' books and records,
consists of items of a quantity and quality which are usable and salable in the
ordinary course of the business of Acquired Entities consistent with past
practice. To the Knowledge of Acquired Entities, all work-in-process inventory,
listed on the Closing Date Balance Sheet, net of reserves, will be billable in
the ordinary course of business. Schedule 3.13 contains a schedule, as of
September 30, 2004, and, subject to Section 6.7, on the Closing Date will
contain a schedule, as of December 31, 2004, of all work-in-process inventory
with a value greater than $5,000 that is older than 60 days.
3.14. Receivables. Schedule 3.14 contains an aging schedule for
Acquired Entities' accounts receivables, as of September 30, 2004 and, subject
to Section 6.7, on the Closing Date, will contain a schedule for Acquired
Entities' accounts receivables as of the date which is two business days prior
to the Closing Date.
3.15. No Default, Violation or Litigation. Except as disclosed in
Schedule 3.15, no Acquired Entity is in violation of any Law or has received any
written notice of any claimed non-compliance with any Law, except for such
matters that have not had and would not be reasonably expected to have a Company
Material Adverse Effect. Except as disclosed in Schedule 3.15, there are no
lawsuits, proceedings, claims or governmental investigations pending or, to the
Knowledge of any Acquired Entity, threatened in writing against, or involving,
Acquired Entities or against their properties or business that have had or would
reasonably be expected to have a Company Material Adverse Effect. Except as set
forth in Schedule 3.15, there are no judgments, consents, decrees, injunctions,
or any other judicial or administrative mandates outstanding against any
Acquired Entity which have had or would
15
reasonably be expected to have a Company Material Adverse Effect. Except, in
each case, for such matters that have not had and would not be reasonably
expected to have a Company Material Adverse Effect, no U.K. Acquired Entity is a
party to any agreement or arrangement or engaged in any practice which was
Registerable under the Restrictive Trade Practices Act 1976, whether or not
particulars of it were required to be furnished to the Office of Fair Trading,
is of the description mentioned in Article 81 or 82 of the EC Treaty, is of the
description mentioned in Section 2 or 18 of the Competition Act 1998; infringes
any legislation of a jurisdiction outside the United Kingdom for the control or
prevention of anti-competitive practices; or is or has been the subject of any
enquiry, investigation or proceeding under any Legislation mentioned in this
sentence or under the Fair Trading Act 1973 or the market investigation
provisions of the Enterprise Act 2002. No U.K. Entity is bound by any
undertaking given by it to or any order, judgment or direction made by the
Restrictive Practices Court, the Office of Fair Trading, the Secretary of State
for Trade and Industry, the Competition Commission, the European Commission or
the European Court of Justice (including the Court of First Instance or any
other regulatory body in any jurisdiction, whether in connection with any
Legislation mentioned in the paragraph above or otherwise. No former or current
employees of the U.K. Subsidiary is involved or has in the past been involved in
any activity whatsoever of the type envisaged by Section 188 of the Enterprise
Act 2002 where any such activity has or would reasonably be expected to have a
Company Material Adverse Effect.
3.16. Bank Accounts, Guarantees and Powers. Schedule 3.16 sets forth:
(a) a list of all accounts and deposit boxes maintained by each Acquired Entity
at any bank or other financial institution and the names of the persons
authorized to effect transactions in such accounts pursuant to such resolutions
and with access to such boxes; and (b) the names of all persons, firms,
associations, corporations or business organizations holding general or special
powers of attorney from any Acquired Entity, together with a summary of the
terms thereof.
3.17. Insurance. Schedule 3.17 contains a list of all insurance
policies (requiring annual premiums of $10,000 or more) (specifying (a) the
insurer, (b) the amount of the coverage, (c) the type of insurance, (d) the
policy number and (e) as of the date hereof, and on an updated basis as of the
Closing Date, any pending claims thereunder or any claims asserted thereunder or
under similar policies since December 31, 2001) maintained by or on behalf of
Acquired Entities, or their properties, assets, business or personnel. All such
policies are in full force and effect, and no Acquired Entity is in default in
any respect with respect to any provision contained in any such insurance
policies, nor has any Acquired Entity failed to give any notice or present any
claim thereunder in due and timely fashion, except, in any case, for such
matters that have not had and would not reasonably be expected to have a Company
Material Adverse Effect. Schedule 3.17 also contains a schedule of any insurance
policy of any Acquired Entity which since December 31, 2001, was cancelled by
the applicable insurance carrier or was not renewed by the applicable Acquired
Entity and a description of the reasons for such cancellation or non-renewal.
3.18. Employment, Labor and Other Relations. Except as set forth in
Schedule 3.18, no Acquired Entity is a party to or is otherwise bound by any
written contract, agreement or collective bargaining agreement with any labor
union or organization. Except as set forth in Schedule 3.18, there are no
charges or complaints involving any foreign, federal, state or local civil
rights enforcement agency or court; complaints or citations under the
16
Occupational Safety and Health Act or any foreign, state or local occupational
safety act or regulation; unfair labor practice charges or complaints with the
National Labor Relations Board; or other claims, charges, actions or
controversies pending, or, to the Knowledge of an Acquired Entity, threatened
involving any such Acquired Entity and any employee, former employee or any
labor union or other organization representing or claiming to represent such
employees' interests, which, in any case, have had or would reasonably be
expected to have a Company Material Adverse Effect. Each Acquired Entity is and
has heretofore been in compliance in all respects with all Laws respecting
employment and employment practices, terms and conditions of employment and
wages and hours and occupational safety and health programs, except where such
noncompliance has not had and would not reasonably be expected to have a Company
Material Adverse Effect, and no Acquired Entity is engaged in any violation of
any Law related to employment, including unfair labor practices or acts of
employment discrimination, except for such violations that have not had and
would not reasonably be expected to have a Company Material Adverse Effect.
Except as disclosed in Schedule 3.18, no employees of Acquired Entities are
represented by any labor union or organization. No Acquired Entity is aware of
any existing or threatened strike, work stoppage or work slowdown by Acquired
Entities' employees, which would reasonably be expected to have a Company
Material Adverse Effect. Except as set forth on Schedule 3.18 or as provided by
applicable Laws, all contracts of employment to which any Acquired Entity is a
party can be terminated by it, without payment of severance, by giving the
applicable minimum period of notice required by applicable Laws. There are no
training schemes, arrangements or proposals (whether past or present) in respect
of which a levy may become payable by any U.K. Acquired Entity under the
Industrial Training Act 1982 (as amended by the Employment Act 1989). Except as
disclosed in Schedule 3.18, no present employee of any U.K. Acquired Entity, or
other individuals whose services are provided for any U.K. Entity, has given or
received notice of termination of his employment or engagement. Except as
disclosed in Schedule 3.18, no former employee of a U.K. Acquired Entity, has or
may have the right under any Legislation to return to work or to be reinstated
or re-engaged by a U.K. Acquired Entity. There are no arrangements for job
sharing, flexible working or early retirement applicable to employees of a U.K.
Acquired Entity and there is no scheme under which employees are entitled to
receive from U.K. Acquired Entity redundancy payments greater than those
required by Legislation.
3.19. Employee Benefits. As used herein, the term "Employee Plan"
includes any pension, retirement, savings, disability, medical, dental, health,
life (including any individual life insurance policy to which any Acquired
Entity makes premium payments, whether or not such Acquired Entity is the owner,
beneficiary or both of such policy), death benefit, group insurance, profit
sharing, deferred compensation, stock option, bonus, incentive, vacation pay,
severance pay, or other employee benefit plan, trust, arrangement, contract,
agreement, policy or commitment (including, without limitation, any pension plan
("Pension Plan") as defined in Section 3(2) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), and any welfare plan as defined in
Section 3(1) of ERISA ("Welfare Plan")), whether any of the foregoing is funded,
insured or self-funded, written or oral, (a) to which an Acquired Entity is a
party or by which an Acquired Entity is bound or (b) with respect to which an
Acquired Entity has made any payments or contributions since December 31, 2001
or may otherwise have any material liability (whether or not such Acquired
Entity still maintains such plan, trust, arrangement, contract, agreement or
policy ). For purposes of Sections 3.19(a) through (h) below, the term "Employee
Plan" shall not include any Employee Plan to which a U.K. Acquired
17
Entity is a party or by which a U.K. Acquired Entity is bound or with respect to
which a U.K. Acquired Entity has made any payments or contributions or may
otherwise have any material liability. With respect to the Employee Plans:
(a) A true and complete list of all material Employee Plans
are disclosed in Schedule 3.19 and true and correct copies of all such
Employee Plans disclosed in Schedule 3.19, including, without
limitation, all amendments and modifications thereto have been
delivered to Buyer on or prior to the date hereof.
(b) Each Employee Plan, the administrator and fiduciaries of
each non-multiemployer Employee Plan, and, to the extent applicable,
each Acquired Entity has at all times complied in all material respects
with the applicable requirements of ERISA, including, without limit the
fiduciary responsibilities imposed by Part 4 of Title I, Subtitle B of
ERISA, the Internal Revenue Code of 1986, as amended (the "Code"), and
any other applicable law (including regulations and rulings thereunder)
governing each Employee Plan, and each Employee Plan has at all times
been properly administered in all material respects in accordance with
all such requirements of law, and in accordance with its terms and the
terms of any applicable collective bargaining agreement to the extent
consistent with all such requirements of law, except, in each case, for
such matters that have not had and would not be reasonably expected to
have a Company Material Adverse Effect. Each Employee Plan that is
tax-qualified under Code Section 401(a) has received a favorable
determination letter of the IRS stating that the plan meets the
requirements of the Code (as amended through January 1, 2000) and that
the trust associated with the plan is tax-exempt under Code Section
501(a). No lawsuits or claims (other than routine claims for benefits)
to, or by, any person or governmental entity have been filed or are
pending and no Acquired Entity has Knowledge of any facts or
contemplated event which reasonably could be expected to give rise to
any such lawsuit or claim (other than routine claims for benefits) with
respect to any Employee Plan, except, in each case, for such matters
that have not had and would not be reasonably expected to have a
Company Material Adverse Effect. Without limiting the foregoing, the
following clauses (i), (ii), (iii) and (vi) are true with respect to
each Employee Plan:
(i) With respect to each Employee Plan of which it is
the plan administrator, each Acquired Entity has filed or
caused to be filed every material return, report, statement,
notice, declaration and other document required by any law or
government agency, federal, state and local (including,
without limitation, the IRS, the Department of Labor, and the
Securities and Exchange Commission) with respect to each such
Employee Plan, where the failure to file would reasonably be
expected to have a Company Material Adverse Effect.
(ii) With respect to each Employee Plan of which it
is the plan administrator, Acquired Entities have delivered or
caused to be delivered to every participant, beneficiary and
other party entitled to such material (to the extent such
material is required by Law to be delivered to such other
party or such other party has lawfully requested such
material), all material plan descriptions, returns, reports,
schedules, notices, statements and similar materials,
including, without
18
limitation, summary plan descriptions and summary annual
reports, as are required under Title I of ERISA, the Code, or
both, except where the failure to make any such delivery has
not had and would not be reasonably expected to have a Company
Material Adverse Effect and no Acquired Entity has incurred
any material liability in connection with the untimeliness of
such deliveries.
(iii) Except as disclosed in Schedule 3.19, no
Acquired Entity makes, or has committed to make, any payment,
contribution or award into or under any Employee Plan except
as required by the terms of such Employee Plan or as required
by a collective bargaining agreement or applicable Law.
(iv) No Acquired Entity is delinquent as to
contributions or payments to or in respect of any Employee
Plan as to which such Acquired Entity is in any way obligated
to make contributions or payments, nor has any Acquired Entity
failed to pay any assessments made with respect to any such
Employee Plan, except, in each case, for such matters that
have not had and would not be reasonably expected to have a
Company Material Adverse Effect. All contributions and
payments with respect to Employee Plans that are required to
be made by Acquired Entities with respect to periods ending
before the Closing Date (including periods from the first day
of the then-current plan or policy year to the Closing Date)
have been made or accrued before the Closing Date by Acquired
Entities in accordance with the appropriate actuarial report,
collective bargaining agreements or insurance contracts or
arrangements, except where the failure to so pay or accrue
would not reasonably be expected to have a Company Material
Adverse Effect.
(v) Except as set forth on Exhibit 3.19, no Acquired
Entity is now, nor has been at any time since September 2,
1974, a "substantial employer" (as defined in Section
4001(a)(2) of ERISA) with respect to any "multiemployer
pension plan", as defined in Section 4001(a)(3) of ERISA (a
"Multiemployer Plan").
(vi) With respect to each such Employee Plan, to the
extent applicable, Acquired Entities have delivered or made
available to Schawk true and complete copies of (a) material
plan documents, or any and all other material documents that
establish the existence of the plan, trust, arrangement,
contract, policy or commitment, (b) the most recent
determination letter, if any, received from the IRS, (c) the
most recent Form 5500 Annual Report and (d) all related
material trust agreements, insurance contracts or other
funding agreements that implement each such Employee Plan.
(c) Except as disclosed on Schedule 3.19, no Acquired Entity
maintains or has maintained in the past five years a Pension Plan that
is a "defined benefit plan" within the meaning of Section 3(35) of
ERISA.
(d) Except with respect to a Multiemployer Plan to which an
Acquired Entity is a Party, there is no Employee Plan that is a Welfare
Plan, the benefits under
19
which are not provided exclusively from the assets of an Acquired
Entity or through insurance contracts.
(e) With respect to each Employee Plan, there has not
occurred, and no person or entity is contractually bound to enter into,
any nonexempt "prohibited transaction" within the meaning of Section
4975 of the Code or Section 406 of ERISA, that has had or would
reasonably be expected to have a Company Material Adverse Effect.
(f) The financial and actuarial statements, if any, for each
Employee Plan for which an Acquired Entity is the plan administrator
reflect in all material respects the financial condition and funding of
the Employee Plans as of the date of such financial and actuarial
statements, and no material adverse change has occurred with respect to
the financial condition or funding of the Employee Plans since the date
of such financial and actuarial statements.
(g) Intentionally Omitted.
(h) Except as otherwise disclosed in Schedule 3.19, no
Acquired Entity is liable for any severance pay, option cancellation
expenses, change of control payments, or other payments to any employee
or former employee arising from the termination of employment under any
change of control, benefit or severance policy, practice, agreement,
plan, or program of Acquired Entities, nor will any Acquired Entity
have any liability which exists or arises, or may be deemed to exist or
arise, under any applicable Laws or otherwise, as a result of or in
connection with the transactions contemplated hereunder or as a result
of the termination by an Acquired Entity of any persons employed by an
Acquired Entity on or prior to the Closing Date except as required by
Code Section 4980B. Each Acquired Entity is in compliance with its
obligations pursuant to the Worker Adjustment and Retraining
Notification Act of 1988 ("WARN Act") and Parts 6 and 7 of Title I of
ERISA, to the extent applicable, and all other employee notification
and bargaining obligations arising under any collective bargaining
agreement or statute.
(i) With respect to all Employee Plans of each U.K. Acquired
Entity:
(i) except for matters that have not had and would
not be reasonably expected to have a Company Material Adverse
Effect, all Employee Plans of any U.K. Acquired Entity are
either exempt approved schemes (within the meaning of Chapter
I of Part XIV of the Income and Corporation Taxes Act 1988)
or, to the Knowledge of Acquired Entities, approved personal
pension plans (within the meaning of Chapter IV of Part XIV of
the Income and Corporation Taxes Act 1988) and nothing has
been done or omitted to be done which will or may result in
such approvals being revoked;
(ii) except as disclosed on Schedule 3.19, no U.K.
Acquired Entity is providing or has provided ex gratia
pensions or other like payments for any of its employees or
former employees or dependents of any such persons;
20
(iii) each U.K. Acquired Entity has complied with its
obligations to consult, designate and facilitate access to a
stakeholder pension scheme as required by the Welfare Reform
and Pensions Act 1999 and any regulations made thereunder,
except, in each case, for such matters that have not had and
would not be reasonably expected to have a Company Material
Adverse Effect;
(iv) all death in service benefits, which may be
payable under the Employee Plans of each U.K. Acquired Entity,
are fully insured, and all premiums by way of insurance that
have become due, which are payable in respect of such Employee
Plans by each U.K. Acquired Entity or by the trustees of the
Employee Plans, have been paid to the relevant insurance
company, except, in each case, for such matters that have not
had and would not be reasonably expected to have a Company
Material Adverse Effect;
(v) every person who has at any time had the right to
join, or apply to join, any of the Employee Plans of any U.K.
Acquired Entity has been properly advised of that right, and
no person has been excluded from membership of any of such
Employee Plans or from any of the benefits thereunder in
contravention of Article 141 of the Treaty of Rome, the
Pensions Act 1995 or other applicable Laws or requirements or
the provisions of the Employee Plans or otherwise, except, in
each case, for such matters that have not had and would not be
reasonably expected to have a Company Material Adverse Effect;
and
(vi) none of the Employee Plans of any U.K. Acquired
Entity or any U.K. Acquired Entity is engaged or involved in
any proceedings which relate to or are in connection with such
Employee Plans or the benefits thereunder and no such
proceedings are pending or, to the Knowledge of Acquired
Entities, threatened (for the purpose of this paragraph,
"proceedings" includes any litigation or arbitration and any
investigation or determination by the Pensions Ombudsman or
the Pensions Advisory Service or the Occupational Pensions
Regulatory Authority and any complaint under any internal
dispute resolution procedure established in connection with
such Employee Plans, except, in each case, for such matters
that have not had and would not be reasonably expected to have
a Company Material Adverse Effect.
3.20. Intellectual Property Rights
(a) Except as disclosed in Schedule 3.20, each Acquired Entity
owns, legally possesses or has licenses or similar rights to utilize
all Intellectual Property Rights used in the conduct of its business as
presently conducted ("Company Intellectual Property Rights"). All
Company Intellectual Property Rights owned by an Acquired Entity that
are registered with any governmental office (the "Registered
Intellectual Property Rights") are disclosed in Schedule 3.20. All
licenses under which the Acquired Entities use any material Company
Intellectual Property Rights, including licenses to material
Operational Software, also are disclosed in Schedule 3.20.
21
(b) To the Knowledge of Acquired Entities, the conduct of the
business of each Acquired Entity as presently conducted does not
infringe the Intellectual Property Rights or the moral rights (as
identified in Chapter IV of the United Kingdom's Copyright, Designs and
Patents Act 1988) or their equivalent in any jurisdiction, of any third
party. Where possible under applicable Law and except as would not be
reasonable be expected to have a Company Material Adverse Effect, all
such moral rights (whether past, present or future) conferred in
respect of any copyright work comprised in the Company Intellectual
Property Rights have been irrevocably waived in favor of the relevant
Acquired Entity. The Acquired Entities have not disclosed any material
confidential information to any third party other than under an
appropriate obligation of confidentiality. None of the Acquired
Entities is in breach, in any material respect, of any license granted
to it by a third party under which it uses any Company Intellectual
Property Rights and/or confidential information. There is no existing
or, to the Knowledge of Acquired Entities, pending civil, criminal,
arbitration, administrative or other proceedings or disputes in any
jurisdiction concerning all or any of the Company Intellectual Property
Rights. All renewal or other fees in relation to Registered
Intellectual Property Rights which are owned by any Acquired Entity
have been paid. Each Acquired Entity has complied with relevant data
protection legislation in each jurisdiction in which it conducts
business. No Acquired Entity has received any written notification that
it is in breach of any data protection legislation.
(c) Schedule 3.20 lists in reasonable detail all material
Operational Software. No Acquired Entity has experienced any disruption
in or to its business or operations in the 12 months prior to the date
of this Agreement as a result of (i) any security breach in relation to
any information technology or (ii) any failure (whether arising from
any bugs, virus defect or otherwise), lack of capacity or other
substandard performance of any information technology, which such
disruption has had or would be reasonably expected to have a Company
Material Adverse Effect. Except as set forth on Schedule 3.20, all
Computer Systems, excluding Operational Software, used by any Acquired
Entity in the conduct of its business (as presently conducted by it)
are owned and operated by, or legally leased or licensed to, and are
under the control of the relevant Acquired Entity and are not wholly or
partly dependent on any facilities which are not either (a) under the
ownership, operation or control of the relevant Acquired Entity or (b)
provided to on Acquired Entity pursuant to a contractual arrangement.
Acquired Entities will not be required to obtain the consent of any
third party to enable such Computer Systems to continue to be used in
the business of the relevant Acquired Entity (as presently conducted by
it) to the same extent and in the same manner as they have been used to
the date hereof. Where any Operational Software has been developed by
persons other than employees of an Acquired Entity and is used by an
Acquired Entity in the course of its business as presently conducted,
the relevant Acquired Entity has obtained written assignment of all
Intellectual Property Rights in such software or has obtained a license
to use such software from such persons, except where the failure to
obtain any such assignment or license has not had and would not
reasonably be expected to have a Company Material Adverse Effect.
3.21. Approvals. Acquired Entities possess all governmental and other
permits, licenses, consents, certificates, orders, authorizations and approvals
(the "Approvals") to
22
own or hold under lease and operate their respective properties and assets and
to carry on their business as now conducted, except Approvals, the failure of
which to possess, has not had and would not be reasonably expected to have a
Company Material Adverse Effect. No Acquired Entity has received any written
notice of proceedings relating to the revocation or modification of any such
Approvals which, singly or in the aggregate, if the subject of an unfavorable
ruling or finding, would reasonably be expected to have a Company Material
Adverse Effect. Acquired Entities are operating in compliance with the
provisions, terms and conditions of the Approvals, except where such failure to
comply has not had and would not reasonably be expected to have a Company
Material Adverse Effect.
3.22. Environmental Matters.
(a) Except as disclosed in Schedule 3.22, all facilities
currently or formerly owned, leased, used in Acquired Entities'
business operations or operated by the applicable Acquired Entity have
been, and continue to be, owned, leased, used or operated in compliance
with all applicable Environmental Laws and no condition exists at such
facilities as of the Closing Date or any time within the five (5) years
prior thereto which would constitute a violation of Environmental Laws
or give rise to any liability or obligation of any Acquired Entity
thereunder, except where any such matter has not had and would not be
reasonably expected to have a Company Material Adverse Effect.
(b) Schedule 3.22 identifies (i) all environmental audits,
assessments or occupational health studies undertaken by any Acquired
Entity in respect of its properties currently or formerly owned, leased
or used; (ii) the results of the most recent analyses undertaken by any
Acquired Entity of water, soil, air or asbestos samples in connection
with any Acquired Entity's properties currently or formerly owned used
or leased; (iii) the most recent inspection of any Acquired Entity's
properties by the Environmental Protection Agency or other relevant
environmental authority of which any Acquired Entity has Knowledge;
(iv) written communications between any Acquired Entity and any
environmental agencies relating to material issues of noncompliance
with any Environmental Laws or any material obligations, investigations
or inquiries thereunder or contamination; and (v) any written claim or
complaint received by any Acquired Entity from any applicable federal,
state or local environmental agency alleging non-compliance or
asserting liabilities arising under Environmental Laws with respect to
properties currently or formerly owned, operated or used by any
Acquired Entity. Acquired Entities have made available to Schawk true,
correct and complete copies of all items referred to in clauses (i),
(ii), (iii), (iv) and (v) of this Section 3.22(b).
(c) Except as disclosed in Schedule 3.22, no Acquired Entity
is aware of any Release or threat of Release of any Hazardous
Substances at any facility currently or formerly leased, owned, used or
operated by any such Acquired Entity, except where such Release has not
had and would not be reasonably expected to have a Material Adverse
Effect. Each such reported Release of any Hazardous Substance is also
disclosed in Schedule 3.22.
(d) Except as disclosed in Schedule 3.22 and except for
matters that have not had and would not reasonably be expected to have
a Company Material Adverse
23
Effect, no Acquired Entity has disposed, released treated, or arranged
for the storage, disposal or treatment of, any "Hazardous Substance" or
other waste at a site or location, or has leased or used in such
Acquired Entity's operations or owned a site or location including but
not limited to any site which, pursuant to CERCLA or other similar
state law: (i) has been placed on the National Priorities List or its
state equivalent; (ii) is the subject of a claim, administrative order
or other demand either to take "removal" or "remedial" action as those
terms are defined by CERCLA, the Resource Conservation and Recovery Act
("RCRA") or other federal or state Environmental Law or to reimburse
any person who has taken "removal" or "remedial" action in connection
with that site; or (iii) is currently undergoing or anticipated to
undergo investigation, remediation or other response actions pursuant
to any Environmental Law.
(e) Schedule 3.22 sets forth the age, contents or former
contents of any storage tanks located on the properties, used, leased
or occupied by any Acquired Entity or, to any Acquired Entity's
Knowledge located on any other portion of its properties. Except as set
forth in Schedule 3.22, no Acquired Entity has owned or operated, or
presently owns or operates, any underground storage tanks as defined in
RCRA at its properties. Except as set forth in Schedule 3.22, all such
tanks and pipes pertinent to its properties are presently and have been
in the past in good condition and do not leak.
(f) There are no wastes, drums or containers disposed of or
buried on, in or under the ground or any surfaces waters located on the
properties currently owned by any Acquired Entity. No Acquired Entity
has disposed of or buried any wastes, drums or containers in or under
the ground of any surface waters located on the property currently or
formerly leased by any Acquired Entity. Neither any Acquired Entity,
nor, to the Knowledge of Acquired Entities, any party acting on its
behalf disposed of or buried, or arranged to dispose of or bury, any
waste, drums or containers in or on the premises of a third party other
than those pursuant to and in compliance with all applicable
Environmental Laws.
(g) Except as set forth in Schedule 3.22 and except for
conditions that have not had and would not reasonably be expected to
have a Company Material Adverse Effect, there are no polychlorinated
biphenyls, asbestos or urea formaldehyde in or on the portion of the
properties of any Acquired Entity.
3.23. Transactions with Affiliates. Except as set forth in Schedule
3.23, no amounts have been paid (or deemed for accounting purposes to have been
paid) by any Acquired Entity to or received by an Acquired Entity from the
Stockholders or any of their Affiliates (other than any other Acquired Entities)
since June 12, 2003 for products or services (including amounts paid for
administrative, purchasing, financial, or other services), except where such
amounts were less than $200,000 per year in arms' length transactions.
3.24. Customers and Vendors. Schedule 3.24 is a true and complete list
of Acquired Entities' 100 largest customers and vendors by sales or purchase
volume during each of the fiscal years 2001-2003 and during the first nine
months of fiscal year 2004 showing, with respect to each such customer or
vendor, the name and dollar amount involved. No Acquired Entity is required to
provide bonding or other financial security arrangements in connection with
24
any transactions with any of its customers or vendors in the ordinary course of
its business, other than as set forth on Schedule 3.24. No vendor listed on
Schedule 3.24 is a sole source of supply for the Acquired Entities. To Acquired
Entities' Knowledge, none of the 20 largest customers by sales volume during the
first nine months of fiscal year 2004 has indicated or otherwise informed any
other Acquired Entity, in a manner that a reasonably prudent person would
conclude as likely to occur, that it will stop or decrease the rate of business
done with the Acquired Entities where the aggregate amount of decreases would
affect annual sales volumes of the Acquired Entities by $5,000,000 or more. The
payment due to Kellogg North America Company from Company as an incentive to
Kellogg North America Company to terminate the supply contract with Schawk
regarding work for such corporation's Keebler division or Subsidiary has been
paid.
3.25. Corporate Records. All of the minute books and stock record books
of each Acquired Entity have been made available to Schawk and its agents for
inspection, are accurate and correct in all material respects, and contain all
of the corporate minutes and stock records of each Acquired Entity from July 1,
1999 to the date hereof. Such minutes and records for the period from this date
to the Closing Date will be made available to Schawk on or before Closing.
Except as set forth in Schedule 3.25, Holdings and its consolidated
Subsidiaries, taken as a whole, maintain internal accounting controls adequate
to provide reasonable assurance that (i) transactions are executed with
management's authorization; (ii) transactions are recorded as necessary to
permit preparation of the consolidated financial statements of Holdings and its
consolidated Subsidiaries and to maintain accountability for Holdings' and its
consolidated Subsidiaries' consolidated assets; (iii) access to Holdings' and
its consolidated Subsidiaries' assets is permitted only in accordance with
management's authorization; (iv) the reporting of Holdings' and its consolidated
Subsidiaries' assets is compared with existing assets at regular intervals; and
(v) accounts, notes and other receivables and inventory are recorded accurately,
and proper and adequate procedures are implemented to effect the collection
thereof on a current and timely basis.
3.26. Employee Intentions. Except as set forth on Schedule 3.26 and, to
the Knowledge of each Acquired Entity, no key employee has notified any Acquired
Entity, with reasonable detail in light of the circumstances then known, that he
or she intends to establish or join a business competitive to the businesses of
the Acquired Entities as currently conducted, where such act would reasonably be
expected to adversely affect annual sales volumes of Acquired Entities by
$2,500,000 or more.
3.27. Antitrust Compliance. The Annual Financial Statements are the
last regularly prepared reviewed consolidated balance sheets and statements of
Acquired Entities reflecting annual net sales of Acquired Entities. Stockholders
acknowledge and agree that Schawk will rely on the foregoing representations and
warranties in connection with compliance requirements under the federal
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the
Enterprise Act 2002.
3.28. Other Material Adverse Information. Except as expressly set forth
in this Agreement and the Schedules, in the Financial Statements, or in the
certificates delivered pursuant hereto, or matters which affect the economy
generally or the industry generally of
25
which Acquired Entities are a part, no Acquired Entity has Knowledge of any
facts which would reasonably be expected to have a Company Material Adverse
Effect.
3.29. Schedules. Copies of all documents referred to herein or in the
Schedules have been delivered or made available to Schawk, are true, correct and
complete copies thereof, and include all material amendments, supplements or
modifications thereto or waivers thereunder.
4. Representations and Warranties of Stockholders. As of the date of
this Agreement and again as of the Closing Date, each Stockholder, solely as to
itself, severally represents and warrants to Schawk as follows:
4.1. Authorization. Such Stockholder has full power and authority to
execute and deliver this Agreement and all other agreements and documents to be
executed and delivered by such Stockholder pursuant hereto, and to consummate
the transactions contemplated hereby and thereby. This Agreement and all other
agreements and documents to be executed and delivered by such Stockholder
pursuant hereto, assuming that this Agreement constitutes the valid and binding
agreement of Buyer, constitute the valid and binding agreements of such
Stockholder, enforceable in accordance with their respective terms, except as
such enforceability may be limited by bankruptcy, insolvency, reorganization or
other laws affecting creditors' rights generally and general principles of
equity (whether considered in a proceeding at law or in equity).
4.2. No Violation. Neither the execution and delivery of this Agreement
by such Stockholder, nor of any other agreement or document to be executed and
delivered by such Stockholder pursuant hereto, nor the consummation by such
Stockholder of the transactions contemplated hereby or thereby will constitute a
violation of, or be in conflict with, or result in a cancellation of or
constitute a default under, or create (or cause the acceleration of the maturity
of) any debt, obligation or liability affecting the Holdings Capital Stock owned
by such Stockholder pursuant to, or result in the creation or imposition of any
security interest, lien, or other encumbrance upon the Holdings Capital Stock
owned by such Stockholder under: (a) any contract, agreement, lease or other
commitment to which such Stockholder is a party or by which such Stockholder is
bound; or (b) any Law of any Governmental Entity applicable to such Stockholder.
Except as set forth in Schedule 4.2 and any clearances or consents referred to
in Section 8.3.4, no consent of, or notice to, any federal, state or local
authority, or any private person or entity is required to be obtained or given
by such Stockholder in connection with the execution, delivery and performance
of this Agreement or the other agreements or documents to be executed, delivered
and performed by such Stockholder pursuant hereto, and other than any consent
where the failure of such Stockholder to obtain such consent would not adversely
affect such Stockholder's ability to consummate the Closing hereunder in
accordance with the terms and conditions of this Agreement.
4.3. Stock Ownership. Such Stockholder is the owner of record and
beneficially of the number of shares of the Holdings Capital Stock set forth
opposite its or his name on Annex I hereto, free and clear of all mortgages,
liens, pledges, charges, security interests, encumbrances or other third party
interests of any nature whatsoever, including, without limitation,
subscriptions, options, warrants, rights or other agreements granting to any
26
person, firm or corporation any interest in or right to acquire from such
Stockholder at any time, or upon the happening of any stated event, any shares
(or interests therein) of the Holdings Capital Stock owned by such Stockholder,
in each case, other than restrictions on transfers imposed by applicable Law,
which restrictions, assuming that Schawk's representations and warranties
contained in Article 5 below are true and correct, will not prevent the
consummation of the transactions contemplated hereby.
4.4. Investment Intent. Such Stockholder is acquiring its shares of
Schawk Class A Common Stock for its own account and not with a view towards
public distribution. Such Stockholder has sufficient knowledge and experience in
financial and business matters so as to be capable of evaluating the merits and
risks of its investment in the shares of Schawk Class A Common Stock and is
capable of bearing the economic risks of such investment.
5. Representations and Warranties of Schawk. As used in this Section 5,
the term "Schawk" shall include Schawk and its Subsidiaries unless the context
otherwise requires. As of the date of this Agreement and again as of the Closing
Date, Schawk represents and warrants to Stockholders as follows:
5.1. Organization and Good Standing. Schawk is a corporation duly
organized, validly existing and in good standing under the laws of its state of
incorporation, and has all requisite corporate power and authority and Approvals
to own or hold under lease its properties and assets and to carry on its
business as now conducted. Schawk is duly qualified to do business and is in
good standing as a foreign corporation in every jurisdiction in which a failure
to so qualify could have a Schawk Material Adverse Effect. True and complete
copies of the certificate of incorporation, as amended to date, and the by-laws,
as amended to date, of Schawk have been furnished to Stockholders.
5.2. Authorization. Schawk has all requisite corporate power and
authority to execute and deliver this Agreement and all other agreements and
documents to be executed and delivered by Schawk pursuant hereto and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement and all other agreements and documents to be executed and
delivered by Schawk pursuant hereto, and the consummation of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
action on Schawk's part and this Agreement and all other agreements and
documents to be executed and delivered by Schawk pursuant hereto constitute the
valid and binding agreements of Schawk, enforceable against Schawk in accordance
with their respective terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization or other laws affecting creditors' rights
generally and general principles of equity (whether considered in a proceeding
at law or in equity). Except as set forth in Schedule 5.2 and any clearances or
consents referred to in Section 8.3.4 hereof, no consent or approval of, or
notice to, any Governmental Entity or any other Person is required to be
obtained, made or given by Schawk in connection with the execution, delivery or
performance of this Agreement and the other agreements or documents to be
executed, delivered and performed by Schawk pursuant hereto, except where any
such consent, approval or notice has been made or obtained.
5.3. Investment Intent. Schawk is acquiring the Holdings Capital Stock
for its own account for investment and not with a view toward public
distribution. Schawk has
27
sufficient knowledge and experience in financial and business matters so as to
be capable of evaluating the merits and risks of its investment in the shares of
Holdings Capital Stock and is capable of bearing the economic risks of such
investment.
5.4. Capitalization.
(a) The entire authorized capital stock of Schawk consists of
40,200,000 shares of Schawk Class A Common Stock and 1,000,000 shares
of preferred stock, $0.01 par value per share. As of September 30, 2004
(the "Capitalization Date"), (i) 21,792,062 shares of Schawk Class A
Common Stock were issued and outstanding; (ii) no shares of Schawk
preferred stock were issued and outstanding; (iii) 3,178,108 shares of
Schawk Class A Common Stock were subject to outstanding options issued
pursuant to the option plans described in Schawk's 10-K Report for the
period ended December 31, 2003 of which options to purchase 2,716,917
shares were exercisable and (iv) 5,252,250 shares of Schawk Class A
Common Stock were reserved for issuance under the option plans
described in Schawk's 10-K Report for the period ended December 31,
2003. Other than as described above or as otherwise expressly permitted
under this Agreement, since the Capitalization Date there have been no
issuances of shares of the capital stock or other equity securities of
Schawk or of options, warrants or rights with respect to shares of
Schawk Class A Common Stock or other equity Securities of Schawk, other
than issuances of shares of Schawk Class A Common Stock pursuant to
options outstanding on the date hereof and options granted in the
ordinary course of business consistent with past practice to Schawk
employees hired after the date hereof under the option plans described
in Schawk's 10-K Report for the period ended December 31, 2003. Except
as set forth above and except for the transactions expressly permitted
by this Agreement, (1) there are no shares of capital stock or other
voting Securities of Schawk or any of its Subsidiaries authorized,
issued or outstanding, (2) there are no authorized or outstanding
options, warrants, calls, preemptive rights, subscriptions or other
rights, agreements, arrangements or commitments of any character
(whether or not conditional) relating to the issued or unissued capital
stock or other voting Securities of Schawk or any of its Subsidiaries,
obligating Schawk or any of its Subsidiaries to issue, transfer or sell
or cause to be issued, transferred or sold any shares of capital stock
or other voting Securities in Schawk or any of its Subsidiaries or
Securities convertible into or exchangeable for shares of capital stock
or other voting Securities, or obligating Schawk or any of its
Subsidiaries to grant, extent or enter into any such option, warrant,
call, subscription or other right, agreement, arrangement or
commitment, (3) there are no outstanding obligations (contingent or
otherwise) of Schawk or any of its Subsidiaries to repurchase, redeem
or otherwise acquire any shares of Schawk Class A Common Stock, other
capital stock or other voting Securities of Schawk or any of its
Subsidiaries, or to make any payments based on the market price or
value of shares of capital stock or other voting Securities of Schawk
or its Subsidiaries, or to provide funds to make any investment (in the
form of a loan, capital contribution or otherwise) in any Subsidiary or
any other entity other than loans to Subsidiaries in the ordinary
course of business and (4) except for stock options as described in
Schawk's 10-K Report for the period ended December 31, 2003, there are
no "phantom" stock, "phantom" stock rights, stock appreciation rights
or stock based performance units of Schawk or its Subsidiaries. All of
the currently issued and outstanding shares of capital
28
stock of Schawk are, and all of the shares of Schawk Class A Common
Stock issuable upon exercise of outstanding options will be when issued
in accordance with the terms thereof, duly authorized, validly issued
and outstanding, fully paid and nonassessable and have not been issued
in violation of any stockholder rights under applicable Law, or of
Schawk's certificate of incorporation or by-laws (or other
organizational documents) or the terms of any agreement to which Schawk
is a party or by which Schawk is bound. In respect to the shares of
Schawk Class A Common Stock to be issued to Stockholders hereunder; (i)
there are no outstanding subscriptions, options, warrants, rights, or
other agreements granting to any Person, firm or corporation, any
interest in or right to acquire from Schawk, at any time, or upon the
happening of any stated event an interest in such shares of Schawk
Class A Common Stock; and (ii) such shares, when issued to
Stockholders, will be duly authorized, validly issued and outstanding,
fully paid and nonassessable and shall not have been issued in
violation of stockholder's rights under applicable law, or of Schawk's
certificate of incorporation or by-laws (or other organizational
documents) or the terms of any agreement to which Schawk is a party or
by which Schawk is bound.
(b) All of the outstanding capital stock or other equity
interests (other than director's qualifying shares (if any) issued by
any foreign Subsidiary of Schawk) of Schawk's Subsidiaries is owned by
Schawk, directly or indirectly, free and clear of any Lien or any other
limitation or restriction (including any restriction on the right to
vote or sell the same, except as may be provided as a matter of law),
and there are no irrevocable proxies with respect to such capital stock
or other equity interests.
5.5. No Violation. Neither the execution and delivery of this
Agreement, nor the consummation of the transactions contemplated hereby will
constitute a violation of, or be in conflict with, or result in a cancellation
of, or constitute a default under, or create (or cause the acceleration of the
maturity of) any debt, obligation or liability affecting, or result in the
creation or imposition of any Lien upon any of the assets owned or used by, or
any of the capital stock of Schawk under: (a) any term or provision of the
certificate of incorporation or by-laws (or other organizational document) of
Schawk; (b) any contract, agreement, indenture, lease or other commitment to
which Schawk is party or by which Schawk is bound; (c) any judgment, decree,
order, regulation or rule of any court or other Governmental Entity; or (d) any
Law.
5.6. Absence of Certain Changes. Since December 31, 2003, there has not
been any Schawk Material Adverse Effect.
5.7. Antitrust Compliance. The December 31, 2003 financial statements
of Schawk are the last regularly prepared audited consolidated balance sheets
and consolidated statements of Schawk reflecting annual net sales of Schawk.
Schawk acknowledges and agrees that Stockholders will rely on the foregoing
representations and warranties in connection with compliance requirements under
the federal Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended and
the Enterprise Act of 2002.
5.8. Other Material Adverse Information. Except as expressly set forth
in this Agreement and the Schedules or in the financial statements of Schawk
contained in Schawk's Public Filings, or in the certificates delivered pursuant
hereto, or matters which affect
29
the economy generally or the industry generally of which Schawk is a part,
Schawk has no knowledge of any facts which would reasonably be expected to have
a Schawk Material Adverse Effect.
5.9. Filings with the SEC. Schawk has made on a timely basis all
filings with the Securities and Exchange Commission (the "SEC") that it has been
required to make within the past three (3) years under the Securities Act of
1933, as amended (the "Securities Act"), and the Securities Exchange Act of
1934, as amended (the "Exchange Act"). Each of the Public Filings has complied
with the Securities Act and the Exchange Act in all material respects. None of
the Public Filings, as of their respective dates, contained any untrue statement
of a material fact or omitted to state a material fact necessary in order to
make the statements made therein, in light of the circumstances under which they
were made, not misleading. Schawk has delivered to the Stockholders a correct
and complete copy of the most recent Public Filing (as amended to date). Schawk
is in compliance with, in all material respects, the rules and regulations of
the New York Stock Exchange.
5.10. 1934 Act Reports. Prior to the execution of this Agreement,
Schawk has delivered or made available to Stockholders' Representative complete
and accurate copies of (a) Schawk Annual Reports on Form 10-K for the years
ended December 31, 2002 and 2003 (the "Schawk 10-K Reports") as filed with the
SEC, (b) all Schawk proxy statements and annual reports to stockholders used in
connection with meetings of Schawk shareholders held since January 1, 2002 and
(c) Schawk's Quarterly Reports on Form 10-Q for the quarters ended March 31,
2004, June 30, 2004 and September 30, 2004 (the "Schawk 10-Q Reports," and
together with the Schawk 10-K Reports, Schawk "Public Filings") as filed with
the SEC. As of their respective dates or as subsequently amended prior to the
date hereof, such documents (i) 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 statement therein, in light of the circumstances under
which they were made, not misleading and (ii) complied as to form in all
material respects with the applicable rules and regulations of the SEC.
5.11. Financial Statements. The financial statements (including any
footnotes thereto) contained in the Schawk Public Filings have been prepared in
accordance with GAAP, applied on a consistent basis during the periods covered,
except as indicated in the notes thereto or, in the case of unaudited
statements, as permitted by Form 10-Q, and fairly present, in all material
respects, the financial position of Schawk and its consolidated Subsidiaries as
of the respective dates thereof and fairly present, in all material respects,
the results of operations, changes in stockholders' equity and cash flows of
Schawk and its consolidated Subsidiaries for the periods then ended (subject, in
the case of the unaudited statements, to normal and non-material year end audit
adjustments normal in nature and amount and the absence of footnotes.)
5.12. Liabilities and Obligations. Schawk has no liabilities or
obligations (direct or indirect, contingent or absolute, matured or unmatured)
of any nature whatsoever, whether arising out of contract, tort, statute or
otherwise, including, without limitation, customer claims for rework, offsets or
errors or omissions required by GAAP to be set forth on a consolidated balance
sheet of Schawk and its consolidated Subsidiaries or in the notes thereto which
are not reflected or reserved against in the financial statements referred to in
Section 5.11,
30
except: (a) liabilities and obligations which are specifically disclosed in
Schedule 5.12; or (b) liabilities and obligations incurred in the ordinary
course of business since the dates of the financial statements referred to in
Section 5.11; (c) liabilities and obligations under this Agreement; and (d)
liabilities and obligations which would not reasonably be expected to have a
Schawk Material Adverse Effect.
5.13. No Default, Violation or Litigation. Except as disclosed on
Schedule 5.13, Schawk is not in violation of any Law (including, without
limitation, Environmental Laws and Laws applicable to controls, wages and hours,
civil rights and occupational health and safety), except where the failure to so
comply has not had and would not reasonably be expected to have a Schawk
Material Adverse Effect and Schawk has not received any written notice of
claimed non-compliance. Except as disclosed in Schedule 5.13, there are no
lawsuits, proceedings, claims or governmental investigations pending or, to the
knowledge of Schawk, threatened against, or involving, Schawk or against its
properties or business which have had or would reasonably be expected to have a
Schawk Material Adverse Effect or which in any manner challenge or seek to
prevent, enjoin, hinder or delay any of the transactions contemplated hereby.
There are no judgments, consents, decrees, injunctions, or any other judicial or
administrative mandates outstanding against Schawk which have had or would
reasonably be expected to have a Schawk Material Adverse Effect.
5.14. Transactions with Affiliates. Except as set forth on Schedule
5.14 or as expressly disclosed in Schawk's Public Filings filed on or after
January 1, 2003 and prior to the date of this Agreement, no amounts have been
paid (or deemed for accounting purposes to have been paid) by Schawk to or
received by Schawk from any Affiliate since January 1, 2003 for products or
services (including amounts paid for administrative, purchasing, financial, or
other services), except when such amounts were less than $200,000 per year in
arms-length transactions.
5.15. Customers and Vendors. Except as set forth on Schedule 5.15,
Schawk is not required to provide bonding or other financial security
arrangements in connection with any transactions with any of its customers or
vendors in the ordinary course of business. Except as set forth on Schedule
5.15, no vendor is a sole source of supply for Schawk.
5.16. Commitment Letter. Schawk confirms that it has obtained an
executed commitment letter (the "Commitment Letter"), a true and complete copy
of which has been provided to the Stockholders' Representative, pursuant to
which the lender party thereto has, subject to the terms and conditions therein,
agreed to enter into a loan agreement and to provide financing for the cash
portion of the Purchase Price. Schawk confirms that the Commitment Letter is in
full force and effect thereunder, and represents the legal, valid and binding
obligation of Schawk, and, to the knowledge of Schawk, the other parties
thereto, enforceable in accordance with the respective terms thereof, subject to
the effect of any applicable bankruptcy, reorganization, insolvency, moratorium,
fraudulent conveyance or similar laws affecting creditors' rights generally and
subject, as to enforceability, to the effect of general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law). Except as set forth on Schedule 5.16, Schawk is not aware of
any facts or circumstances that create a reasonable basis for Schawk to believe
that it will not be able to obtain financing under the Commitment Letter, and
agrees to provide Stockholders' Representative immediate
31
written notice thereof, in the event any such facts or circumstances should
arise. In particular, to the best of Schawk's knowledge and belief, each of the
parties with funding commitments under the Commitment Letter has satisfactorily
completed its respective due diligence investigation.
6. Covenants of the Parties. The parties covenant and agree with each
other that from the date hereof until the Closing or other termination of this
Agreement:
6.1. Operations of Acquired Entities. Except as otherwise expressly
permitted by the terms hereof or as otherwise agreed to in writing by Schawk
(which agreement shall not be unreasonably withheld) during the period between
the date hereof and the Closing Date or the date that this Agreement is sooner
terminated:
(i) Acquired Entities shall operate and conduct their
business and operate their assets in the normal course of
business and in substantial compliance with all applicable
Laws and shall continue to pay their trade accounts payable
and accrued expenses as such become due in the ordinary course
of business in a manner consistent with past practice;
(ii) Acquired Entities shall maintain their tangible
assets in as good a state of operating condition and repair as
they are on the date hereof, except for ordinary depreciation
and wear and tear;
(iii) No Stockholder shall sell, pledge, lease,
mortgage, encumber or otherwise dispose of any of the Holdings
Capital Stock and no Acquired Entity shall sell, pledge,
lease, mortgage, encumber or otherwise dispose of any of its
assets other than sales of inventory or services or
dispositions of obsolete or redundant equipment in the
ordinary course of business;
(iv) each Acquired Entity shall use its commercially
reasonable efforts to preserve intact the organizations and
personnel of Acquired Entities and keep available the services
of all of their key employees of Acquired Entities,
commensurate with the business requirements of Acquired
Entities;
(v) each Acquired Entity shall use its commercially
reasonable efforts to preserve intact its customer
relationships and the goodwill of all customers and others, in
accordance with the ordinary course of business;
(vi) each Acquired Entity shall use its commercially
reasonable efforts to keep in force all policies of insurance
covering its business and assets including, but not limited
to, errors and omissions insurance and all other insurance
listed in Schedule 3.16 hereto.
(vii) no Acquired Entity shall enter into any
contracts or commitments for the purchase or lease of
equipment, for other capital expenditures, or become obligated
upon any other contracts not in the ordinary course of
business, involving in the aggregate, in excess of $100,000,
without the prior written approval of Schawk (such approval
not to be unreasonably
32
withheld), unless the approval or amount is waived or modified
in writing by Schawk;
(viii) Holdings shall neither declare any dividends
on the Holdings Capital Stock nor acquire or agree to acquire
(through redemption or otherwise) any of the outstanding
securities of Holdings, incur or agree to incur any
obligations to issue securities of Holdings nor issue, sell or
dispose of any of the securities or options or rights
convertible into the securities of Holdings, other than
issuances of Holdings' Capital Stock pursuant to the exercise
of options outstanding on the date hereof, which shares of
Holdings' Capital Stock shall be subject to the closing
conditions set forth in Section 8.2.5 of this Agreement;
(ix) except with the written consent of Schawk (which
consent shall not be unreasonably withheld), no Acquired
Entity shall authorize or pay or agree to pay or accrue any
increase in any wage, salary or other remuneration of
directors, officers or other employees (receiving annual
compensation of more than $150,000) (other than scheduled cost
of living adjustments, increases included in budgets made
available to Schawk, or to the extent required under binding
employment agreements in effect on the date hereof), authorize
or make any changes in compensation or policy regarding
compensation payable or to become payable to any directors,
officers or other key employees (receiving annual compensation
of more than $150,000) (other than scheduled cost of living
adjustments, increases included in budgets made available to
Schawk or to the extent required under binding employment
agreements on the date hereof), or hire any new employees
(receiving annual compensation of more than $150,000) or elect
any new officers or directors of any Acquired Entity; provided
that any Acquired Entity may, in the normal course of
business, hire persons to replace terminated employees and
hire new employees as may be necessary to conduct its
business, provided that such increases and hirings do not
increase, in any material respect, the level of payroll costs
of Acquired Entities;
(x) Holdings shall not amend any of Holdings'
Certificate of Incorporation or by-laws, except that it shall
be permitted to increase the authorized capital stock to no
more than 70,000,000 shares of common stock;
(xi) except for the quarterly management fee payable
to Stockholders' Representative on January 1, 2005 in the
amount of $125,000, Acquired Entities shall cause all payments
due any Affiliate of Stockholders (other than an Acquired
Entity) under any management or other similar contract during
the period from the date hereof until the Closing Date or date
this Agreement is sooner terminated to be deferred and to be
waived upon the consummation of the Closing;
(xii) unless required by applicable law, no Acquired
Entity shall make, change or revoke any material Tax election,
file an amended Tax Return, enter into any agreement with any
taxing authority, settle or otherwise resolve a Tax claim or
assessment, surrender any right to claim for a Tax refund,
consent to
33
an extension of an applicable statute of limitations with
respect to Taxes, in each case, if such action could have a
Company Material Adverse Effect;
(xiii) no Acquired Entity shall extend or renew any
collective bargaining agreement; and
(xiv) no Acquired Entity shall take, agree to take,
or Knowingly permit to be taken any action or do or Knowingly
permit to be done anything in the conduct of its business, or
otherwise, which would be contrary to or in breach of any of
the terms or provisions of this Agreement, or (except as
expressly contemplated by this Agreement) which would cause
any of the representations, warranties or covenants of
Company, Holdings or Stockholders contained herein to be or
become untrue, in any material respect.
6.2. Operations of Schawk. Except as otherwise expressly permitted by
the terms hereof or as otherwise agreed to in writing by the Shareholders'
Representative (which agreement will not be unreasonably withheld) during the
period between the date hereof and the Closing Date:
(i) Schawk will, and will cause each of its
Subsidiaries to, operate and conduct its business and operate
its assets in the normal course of business and in substantial
compliance with all applicable Laws;
(ii) Schawk will, and will cause each of its
Subsidiaries to, use its commercially reasonable efforts to
preserve intact their respective organizations and personnel
and keep available the services of all of their key employees
and key brokers, commensurate with the business requirements
of such entities;
(iii) Schawk will, and will cause each of its
Subsidiaries to, use its commercially reasonable efforts to
preserve intact its customer relationships and the goodwill of
all customers and others, in accordance with the ordinary
course of business;
(iv) Schawk will not, and will cause each of its
Subsidiaries not to (A) other than quarterly dividends paid in
accordance with historic practice (not in excess of $0.0325
per share per quarter), declare, set aside or pay any
dividends on, or make any other distributions in respect of,
any of its capital stock, other than dividends and
distributions by a direct or indirect wholly owned subsidiary
of Schawk to its parent, (B) split, subdivide, combine or
reclassify any of its capital stock or issue or authorize the
issuance of any other securities in respect of, in lieu of or
in substitution for shares of its capital stock, or (C)
purchase, redeem or otherwise acquire any shares of capital
stock of Schawk or any Subsidiary or any other securities
thereof or any rights, warrants or options to acquire any such
shares or other securities;
(v) Schawk will not, and will cause each of its
Subsidiaries not to, issue, deliver, sell or grant (A) any
shares of its capital stock, (B) any other
34
equity interests, any voting Securities or any Securities
convertible into or exchangeable for capital stock, other
equity interests or other voting Securities, (C) except for
options granted in the ordinary course of business to Schawk
employees hired after the date hereof under option plans
described in Schawk's 10-K Report for the period ended
December 31, 2003, any options, warrants, calls or other
rights to acquire, any such shares of capital stock, any
equity interests or any voting Securities or any Securities
convertible into or exchangeable therefor or (D) any "phantom"
stock, "phantom" stock rights, stock appreciation rights or
stock-based performance units, other than the issuance of
Schawk Class A Common Stock upon the exercise of stock options
and warrants outstanding on the date of this Agreement and in
accordance with their present terms;
(vi) Schawk will not, and will cause each of its
Subsidiaries not to, amend its Certificate of Incorporation,
by-laws or any other organizational document;
(vii) Schawk will not, and will cause each of its
Subsidiaries not to, enter into any agreement or transaction
with any of its Affiliates that would require disclosure
pursuant to Item 404 of Regulation S-K;
(viii) Schawk will not, and will cause each of its
Subsidiaries not to, take, agree to take, or knowingly permit
to be taken any action or do or knowingly permit to be done
anything in the conduct of its business, or otherwise, which
would be contrary to or in breach of any of the terms or
provisions of this Agreement, or (except as expressly
contemplated by this Agreement) which would cause any of the
representations, warranties or covenants of Schawk contained
herein to be or become untrue in any material respect;
(ix) Except for the acquisition of all or
substantially all of the assets or capital stock of Weir
Imaging Benelux, B.V., Weir Imaging Espania SL and Weir
Technologies, Limited or mergers, consolidations or
acquisitions involving less than $5,000,000 in aggregate
consideration (including the assumption of indebtedness),
Schawk will not, and will cause each of its Subsidiaries not
to, acquire or agree to acquire (A) by merging or
consolidating with, or by purchasing a substantial equity
interest in, or portion of the assets of, or by any other
manner, any business or any Person or division thereof or (B)
all or substantially all of the assets of any Person; and
(x) Schawk will not, and will cause each of its
Subsidiaries not to, sell, lease (as lessor), license or
otherwise dispose of or subject to any Lien on any properties
or assets with a book or fair market value (whichever is
greater) of $1,000,000 or more, in the aggregate, except for
transactions in the ordinary course of business consistent
with past practices.
6.3. Disclosure Controls; Loans to Directors and Officers. Between the
date of this Agreement and the Closing Date or the date this Agreement is sooner
terminated, Acquired Entities shall, upon reasonable notice during normal
business hours, permit Schawk
35
(i) to meet with the officers of Acquired Entities responsible for the financial
statements of Holdings and its Subsidiaries and the internal control over
financial reporting of Holdings and its Subsidiaries to discuss such matters as
Schawk may deem reasonably necessary or appropriate concerning Schawk's
obligations under Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 and any
rules and regulations relating thereto (collectively, "SOX"); and (ii) to meet
with officers of Acquired Entities to discuss the integration of appropriate
disclosure controls and procedures relating to Acquired Entities' operations
with the controls and procedures of Schawk for purposes of assisting Schawk in
compliance with the applicable provisions of SOX following the Closing Date.
Holdings shall, and shall cause its and its Subsidiaries' respective employees
and accountants to, fully cooperate with Schawk in the preparation,
documentation, review, testing and all other actions Schawk deems necessary to
satisfy the internal control certification requirements of Section 404 of SOX.
6.4. No Solicitation. Neither any Stockholder nor any officers,
directors, employees, trustees or agents of any Acquired Entity will solicit,
negotiate, act upon or entertain in any way an offer from any other person or
entity to purchase any of the Holdings Capital Stock or any of any Acquired
Entity's assets (other than sales of inventory or services and dispositions of
obsolete or redundant equipment in the ordinary course of business). Company and
Holdings agree to promptly notify Schawk upon the receipt by Stockholders or any
Acquired Entity of an unsolicited formal written competing offer in respect of
such a purchase, and of the proposed terms thereof.
6.5. Notification. Each of the parties hereto shall give prompt written
notice to the other parties, of (i) any representation or warranty made by it
contained in this Agreement that is qualified as to materiality becoming untrue
or inaccurate in any respect or any such representation or warranty that is not
so qualified becoming untrue or inaccurate in any material respect or (ii) the
failure by it to comply with or satisfy in any material respect any covenant,
condition or agreement to be complied with or satisfied by it under this
Agreement; provided, however, that no such notification shall affect the
representations, warranties, covenants or agreements of the parties or the
conditions to the obligations of the parties under this Agreement.
6.6. Additional Information.
(a) Company and Holdings will make available to Schawk and its
authorized agents and accountants for inspection upon reasonable
notice, reasonable access during normal business hours between the date
of this Agreement and the Closing Date or the date that this Agreement
is sooner terminated, to the assets, business and financial records,
management reports and all Tax returns and working papers of Acquired
Entities, files and memoranda of their public accountants (in each
case, to the same extent such accountants are willing to disclose such
items to Schawk or any third party at the direction of Acquired
Entities) and outside legal counsel (in each case, unless any such
disclosure would waive attorney-client privilege and to the same extent
such counsel is willing to disclose such items to Acquired Entities)
and relevant materials relating to Acquired Entities, their assets or
business, as Schawk shall reasonably request, for the purpose of making
such accounting review, legal and audit investigation or examination
deemed desirable by Schawk. The foregoing notwithstanding, Company and
Holdings shall not be required to cause their accountants and/or
outside legal counsel
36
to disclose any information or analysis relating to the transactions
contemplated hereby. Company and Holdings will cause such officers,
employees, public accountants and outside legal counsel of Acquired
Entities to cooperate reasonably with such examination to the extent
consistent with the foregoing.
(b) Prior to the Closing of the transactions contemplated
hereby, or if this Agreement shall not be consummated for any reason,
for a period of three years from the date hereof, any such information
and documentation treated as confidential by Acquired Entities or their
respective representatives prior to such delivery or marked
confidential at the time of delivery to Schawk or its representatives
("Company's Confidential Information") shall be kept confidential by
Schawk and its representatives except to the extent that (i) it was
already known to Schawk or such representatives or was made available
to Schawk on a non-confidential basis when received; (ii) it hereafter
becomes lawfully obtainable from other sources or (iii) it is disclosed
by any Acquired Entity in any document filed with any Government Entity
or authority and available to public inspection. If this Agreement is
terminated, Schawk will promptly, upon request of Holdings or Company,
destroy the Company's Confidential Information or deliver it to the
Company (without retaining any copies thereof) and confirm to Company
the compliance herewith in writing.
6.7. Supplements to Schedules. From time to time prior to the Closing
Date, the Company or Holdings or Schawk, as applicable, will promptly supplement
or amend any Schedules provided for in this Agreement (i) if any matter arises
hereafter which, if existing or occurring at or prior to the date of this
Agreement, would have been required to be set forth or described in any such
Schedule, or (ii) if it becomes necessary to correct any information in any such
Schedules which has become inaccurate in any material respect; provided,
however, that except as set forth in the immediately following proviso, no such
supplement or amendment to any Schedule shall be considered in determining
satisfaction of the conditions set forth in Sections 8.2 or 8.3 of this
Agreement; provided, further, that notwithstanding the foregoing, the parties
agree that, for purposes of determining the accuracy of the representations and
warranties set forth in Sections 3.13 and 3.14 in determining satisfaction of
the condition set forth in Section 8.2 of this Agreement as well as the basis
for a claim for indemnification under Section 11, Company and Holdings are
required to update Schedule 3.13 as of December 31, 2004 and Schedule 3.14 as of
the date two business days prior to the Closing Date.
6.8. Publicity. None of the parties hereto or any employee, agent,
attorney, officer or public accountant of any such party shall issue any oral or
written publicity regarding this transaction without prior consultation with and
approval of either Holdings or Schawk, as applicable, except as required by
applicable Law.
6.9. Conditions. Upon the terms and subject to the conditions set forth
in this Agreement, each of the parties hereto shall use all commercially
reasonable efforts to take, or cause to be taken, all reasonable actions, and to
do, or cause to be done, and to assist and cooperate with the other parties in
doing, all things reasonably necessary, proper or advisable to consummate and
make effective, in the most expeditious manner practicable, the transactions
contemplated hereby, including (i) the obtaining of all necessary actions or
nonactions, waivers, consents and approvals from Governmental Entities and the
making of all necessary registrations
37
and filings (including filings with Governmental Entities, if any) and the
taking of all reasonable steps as may be necessary to obtain an approval or
waiver from, or to avoid an action or proceeding by, any Governmental Entity,
(ii) the obtaining of all necessary consents, approvals or waivers from third
parties, (iii) the defending of any lawsuits or other legal proceedings, whether
judicial or administrative, challenging this Agreement, including, when
reasonable, seeking to have any stay or temporary restraining order entered by
any court or other Governmental Entity vacated or reversed and (iv) the
execution and delivery of any additional instruments necessary to fully carry
out the purposes of this Agreement. Nothing in this Agreement shall be deemed to
require any party to waive any substantial rights or agree to any substantial
limitation on its operations or to dispose of any significant asset or
collection of assets.
6.10. Interim or Annual Financial Statements. Holdings shall promptly
provide Schawk with interim monthly and annual financial statements with respect
to the assets or operations of Acquired Entities prepared in the ordinary course
of business or otherwise available to Holdings or Stockholders or to management
of Acquired Entities together with any management reports so prepared regarding
Acquired Entities.
6.11. Shareholder Consent of Certain Executive Compensation
Arrangements. Holdings shall use its reasonable best efforts to submit any and
all payments, awards and benefits paid or made available to, or that may become
payable or available to, any current or former employee, officer, independent
contractor or stockholder of the Company or any of its Subsidiaries, in each
such case, that could constitute "parachute payments" within the meaning of
Section 280G(b)(2)(A) of the Code to a shareholder vote which satisfies the
requirements of Sections 280(g)(b)(5)(A)(ii) and 280G(b)(5)(B) of the Code such
that following such vote, if the requisite number of affirmative votes are
obtained, such payments, awards and benefits will qualify for the exemption
provided under Section 280G(b)(5)(A)(ii) of the Code and will not be subject to
any excise tax pursuant to Section 4999 of the Code. Further, Holdings shall
commission and obtain any report or study necessary for such payments, awards
and benefits to qualify for such exemption and not be subject to any such excise
tax.
7. Additional Covenants of Schawk. In addition to the covenants
contained in Article 6, Schawk covenants with Stockholders that, from and after
the date hereof and until the Closing Date, it will:
7.1. Notification. Promptly notify Holdings and Stockholders in writing
of any lawsuits, claims, proceedings, or investigations of which Schawk may
become aware that may be threatened, brought, asserted or commenced by or
against Schawk which could materially and adversely affect Schawk or Schawk's
ability to perform its obligations under this Agreement.
7.2. Commitment Letter. Schawk shall use its reasonable best efforts to
cause the transactions contemplated by the Commitment Letter to close and for
the funding thereunder to be made in accordance with the terms and conditions
thereof.
7.3. Due Diligence. In connection with any interviews to be conducted
by Schawk or its representatives of any customers of Acquired Entities from and
after the date
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hereof, Schawk shall provide the Stockholders' Representative with reasonable
advance notice of, and an opportunity to participate during, any such
interviews.
7.4. Stockholders' Representative Fee. On the Closing Date, Schawk
shall pay Four Million Dollars ($4,000,000) to Stockholders' Representative in
immediately available funds by federal wire transfer to an account designated by
Stockholders' Representative to pay Stockholders' Representative the fee owed
Stockholders' Representative by Holdings as a result of the consummation of the
transactions contemplated hereby.
8. Conditions to Closing.
8.1. Mutual Conditions. The respective obligations of Schawk and
Stockholders to consummate the transactions contemplated by this Agreement shall
be subject to the fulfillment at or prior to Closing of each of the following
conditions:
8.1.1. No Suit. No suit, action or other proceeding or investigation
shall to the knowledge of any party hereto be threatened or pending before or by
any Governmental Entity or by any third party questioning the legality of this
Agreement or the consummation of the transactions contemplated hereby in whole
or in part.
8.1.2. Issuance of Schawk Class A Common Stock. All approvals and
consents set forth on Schedule 8.1.2 hereof shall have been received from the
SEC, other applicable Governmental Entity and/or the New York Stock Exchange.
8.2. Conditions to Schawk's Obligations. The obligations of Schawk to
consummate the transactions contemplated by this Agreement shall be subject to
the fulfillment at or prior to Closing of each of the following conditions:
8.2.1. Representations, Warranties and Covenants. All representations
and warranties of Company, Holdings and Stockholders contained in this Agreement
that are qualified by materiality shall be true and correct in all respects and
all representations and warranties of Company, Holdings and Stockholders
contained in this Agreement that are not qualified by materiality shall be true
and correct in all respects except for inaccuracies that do not have, and would
not reasonably be expected to have, a Company Material Adverse Effect, in either
case as of the Closing Date as if made on the Closing Date, except for (a)
changes expressly permitted or required by this Agreement and (b) those
representations and warranties which address matters only as of a particular
date (which, as of such date, shall be true and correct to the same extent as
set forth above). Company, Holdings and Stockholders shall have performed and
satisfied, in all material respects, all covenants and agreements required by
this Agreement to be performed or satisfied by them at or prior to the Closing.
Stockholders' Representative shall have furnished to Schawk a certificate,
signed by or on behalf of each of Company and Holdings and each Stockholder,
dated as of the Closing Date, to the effect that the conditions specified in
this Section 8.2.1, to the extent relating to representations, warranties,
covenants and agreements of Company, Holdings and Stockholders, have been
satisfied.
8.2.2. No Adverse Changes. Since the date of this Agreement, no Company
Material Adverse Effect shall have occurred.
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8.2.3. Opinion. Schawk shall have received from counsel to Acquired
Entities and the Stockholders an opinion of such counsel in a form reasonably
satisfactory to Schawk.
8.2.4. Consents and Approvals. All material authorizations, consents,
waivers, Approvals or other action necessary to satisfy the conditions of
Section 8.2.1 or as set forth on Schedule 8.2.4 shall have been obtained.
8.2.5. Holdings Capital Stock. Each Stockholder shall have delivered
all certificates evidencing their shares of the Holdings Capital Stock together
with properly executed assignments separate from certificate (stock powers), all
in form and substance reasonably acceptable to Schawk's counsel; all option
holders who shall have become stockholders of Holdings after the date of this
Agreement shall have executed joinder agreements to this Agreement in form and
substance reasonably acceptable to Schawk's counsel.
8.2.6. Resignations. At Schawk's option, Schawk shall have received
resignations of the directors of Acquired Entities and the officers of Acquired
Entities identified in a letter to be delivered by Schawk to Stockholders'
Representative dated prior to Closing, in each case, from their positions as
such, together with releases of Acquired Entities by such directors and officers
(only to the extent any such officer is contractually required to do so) of any
further liabilities or obligations (other than obligations of the type set forth
in Sections 9.3 and 9.4) which an Acquired Entity may have to any director or
officer due to such relationship all in form and substance reasonably acceptable
to Schawk's counsel; provided, however, that notwithstanding the foregoing, such
directors and officers shall not be required to release or otherwise waive any
existing rights to indemnification or under any existing insurance policies.
8.2.7. Termination of Stockholders Agreement. All stockholders'
agreements or comparable agreements relating to the Holdings Capital Stock shall
have been terminated.
8.2.8. Intentionally Omitted.
8.2.9. Indebtedness. Schawk shall have received Payoff Letters and the
conditions set forth in Section 9.1 shall have been satisfied (other than the
payment of the Closing Indebtedness Amount and provision of cash collateral
and/or back-to-back letters of credit which shall be effected by Schawk as
provided in Section 9.1).
8.2.10. Amounts due from Affiliates and Officers. Except for those
loans listed in Schedule 8.2.10, all amounts due any Acquired Entity from any of
its Affiliates, directors, officers or employees (whose annual compensation
exceeds $150,000) shall have been paid in full.
8.2.11. Financing. Schawk's lenders or sources of debt financing do not
default on or fail to provide the financing for the transactions contemplated
hereby as provided in the Commitment Letter.
8.2.12. Hart-Scott-Rodino and Enterprise Act 2002. That all waiting
periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 shall
have expired or
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shall have been terminated. Any approvals or clearances required under
Enterprise Act 2002 shall have been obtained.
8.2.13. Management Agreements. All management or similar agreements
with Stockholders' Representative or its Affiliates set forth on Schedule 3.12
shall be terminated as of the Closing Date.
8.2.14. Due Diligence. Schawk shall have satisfactorily completed its
due diligence review of Acquired Entities' contracts or agreements with Acquired
Entities' 100 largest customers by sales volume during the first nine months of
fiscal year 2004 and shall have completed to its reasonable satisfaction
interviews with the 20 largest such customers; provided, however, that Schawk
shall be deemed to have waived this condition to the extent it fails to duly
terminate this Agreement pursuant to Section 10.1.5 on or prior to January 15,
2005.
8.2.15. Ancillary Agreements. The parties shall have executed and
delivered the Escrow Agreement, the Registration Rights Agreement and the
Governance Rights Agreement.
8.3. Conditions to Stockholders' Obligations. The obligations of
Stockholders to consummate the transactions contemplated by this Agreement shall
be subject to the fulfillment at or prior to the Closing of each of the
following conditions:
8.3.1. Representations, Warranties and Covenants. All representations
and warranties of Schawk contained in this Agreement that are qualified by
materiality shall be true and correct in all respects and all representations
and warranties of Schawk contained in this Agreement that are not qualified by
materiality shall be true and correct in all respects except for inaccuracies
that do not have, and would not reasonably be expected to have, a Schawk
Material Adverse Effect, in either case as of the Closing Date as if made on the
Closing Date, except for (a) changes expressly permitted or required by this
Agreement and (b) those representations and warranties which address matters
only as of a particular date (which, as of such date, shall be true and correct
to the same extent as set forth above). Schawk shall have performed and
satisfied, in all material respects, all covenants and agreements required by
this Agreement to be performed or satisfied by it at or prior to the Closing.
Schawk shall have furnished to Stockholders' Representative, on behalf of
Stockholders, a certificate, signed by an authorized officer of Schawk, on
behalf of Schawk, dated as of the Closing date, to the effect that the
conditions specified in this Section, to the extent relating to representations,
warranties, covenants and agreements of Schawk, have been satisfied.
8.3.2. Opinion. Stockholders shall have received form counsel to Schawk
an opinion of such counsel, dated as of the Closing Date, in a form reasonably
acceptable to Stockholders' Representative.
8.3.3. Consents and Approvals. All material authorizations, consents,
waivers, approvals or other action necessary to satisfy the conditions of
Section 8.3.1 shall have been obtained.
8.3.4. Hart-Scott-Rodino and Enterprise Act 2002. That all waiting
periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 shall
have expired or
41
shall have been terminated. Any approvals or clearances required under
Enterprise Act 2002 shall have been obtained.
8.3.5. Schawk Material Adverse Effect. Since the date hereof, no Schawk
Material Adverse Effect shall have occurred.
8.3.6. Ancillary Agreements. The parties shall have executed and
delivered the Escrow Agreement, the Registration Rights Agreement and the
Governance Rights Agreement.
9. Additional Agreements.
9.1.1. Payment of Indebtedness. On the Closing Date, Schawk shall pay,
or cause to be paid or otherwise satisfied, the amount of all Indebtedness (as
defined below), as of the Closing Date, of the Acquired Entities (the "Closing
Indebtedness Amount") in order to permit the release, effective as of the
Closing Date, of all liens and security interests of such secured creditors on
the assets and properties of the Acquired Entities in accordance with the Payoff
Letters; it being understood that such amount is a reduction to the Purchase
Price as described in Section 2. In addition, on the Closing Date, Schawk shall
terminate or cause to be terminated, any letters of credit and bankers
acceptances of Acquired Entities or provide cash collateral or acceptable
back-to-back letters of credit in respect of the obligations thereunder.
Company represents and warrants to Schawk that:
(i) The aggregate amount of the Indebtedness at
October 31, 2004 was $48,952,439.
(ii) Except as set forth in Schedule 9.1, all of the
outstanding Indebtedness can be prepaid without any prepayment
charges, fees, penalties or other assessments; and
(iii) Assuming the payment by Schawk of the Closing
Indebtedness Amount in accordance with the terms of the Payoff
Letters, no consents or approvals of lenders or holders of
Indebtedness are required for the consummation of this
Agreement in order to avoid a breach of or default under such
Indebtedness.
Company and Holdings shall not, and shall cause the other Acquired
Entities not to, incur any indebtedness for money borrowed to any lenders except
to existing holders of the Indebtedness and only if the sums can be prepaid
without prepayment charges, fees, penalties or other assessments or issuance of
any shares of preferred or preference stock. On the Closing Date, Holdings and
Company will obtain and furnish to Schawk payoff letters ("Payoff Letters") from
each of the lenders or holders of all Indebtedness: (A) confirming that such
item of Indebtedness can be repaid or redeemed in full on the Closing Date, (B)
stating the exact amount that would be required to repay such item of
Indebtedness, including the principal amount thereof, any prepayment charges,
penalties, fees or other assessments, and any required interest or dividends, as
of the Closing Date, together with per diem charges that would be assessed in
the event that such Indebtedness is paid in full after the date referred to in
such Payoff Letter,
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and (C) including a statement by each respective lender or holder that all Liens
of that lender securing such item of Indebtedness shall be fully released and
discharged upon such repayment, cash collateralization or receipt by the holder
of such Indebtedness of an acceptable back-to-back letter of credit.
The term "Indebtedness" means all obligations (including all
obligations in respect of principal, accrued interest, penalties, fees and
premiums) (a) for borrowed money (including overdraft facilities), (b) evidenced
by notes, debentures or similar contractual obligations (but not surety bonds
entered into in the ordinary course of business consistent with past practice),
(c) for the deferred purchase price of property, goods or services (other than
trade payables or accruals incurred in the ordinary course of business and
capital leases (in accordance with GAAP)), (d) for contractual obligations
relating to interest rate protection, swap agreements and collar agreements, (e)
in respect of letters of credit and bankers' acceptances (other than those
standby letters of credit and bankers' acceptances set forth in Schedule 9.1),
(f) in the nature of guarantees of the obligations described in clauses (a)
through (d) above and (g) with respect to any preferred stock, preference shares
or similar security with a preference over common equity.
9.2. Restrictions on Transfer. Each Stockholder covenants and agrees
that such Stockholder will not, without prior written consent of Schawk,
transfer, pledge, hypothecate, assign or otherwise distribute any of the shares
of Schawk Class A Common Stock received by such Stockholder at Closing until
such time as such shares have been registered under the Securities Act of 1933,
or in the opinion of counsel reasonably acceptable to Schawk, an exemption from
such registration is available.
9.3. Indemnification of Directors, Officers and Employees. Schawk shall
cause the Acquired Entities to ensure that no change will be made to the
certificate or articles of incorporation or by-laws, or other organizational
documents of the Acquired Entities that would adversely affect any director's,
officer's or employee's right to indemnification under applicable Law or
otherwise with respect to any periods prior to the Closing. This Section 9.3
shall be for the benefit of, and shall be enforceable by, the directors,
officers and employees of Acquired Entities, and their respective heirs and
estates.
9.4. Indemnity. Schawk agrees to indemnify the Stockholder Indemnified
Parties and defend and hold the Stockholder Indemnified Parties harmless from
and against any and all Losses that may be incurred by Stockholder Indemnified
Parties, collectively or individually, under the Worker Adjustment and
Retraining Notification Act or under any federal, state, local or foreign Law
with respect to plant closings, lay-offs, relocations or the like occurring at
or following the Closing. Schawk also agrees to indemnify the Stockholder
Indemnified Parties and defend and hold the Stockholder Indemnified Parties
harmless from and against any and all Losses arising out of any claims by, or in
respect of, any employee of the Acquired Entities (or any heir, beneficiary,
executor, administrator or representative of any employee of the Acquired
Entities) with respect to any obligations or liabilities assumed by Schawk or
retained by the Acquired Entities hereunder to the extent that any such Loss
does not arise from a breach by Holdings, Company or any Stockholder of its
representations, warranties or covenants contained herein.
43
10. Termination.
10.1. Termination of Agreement. This Agreement and the transactions
contemplated hereby may be terminated at any time prior to Closing, as follows:
10.1.1. Mutual Consent. By mutual consent of the parties hereto.
10.1.2. Breach. By Schawk, on the one hand, or by Stockholders, on the
other hand, by reason of the breach by the other in any material respect of any
of its or their representations, warranties, covenants or agreements contained
in this Agreement, if the non-breaching party has notified the breaching party
in writing and there is a reasonable likelihood that such breach (unless cured,
if curable) will result in an inability of Schawk on the one hand and the
Stockholders on the other, to satisfy the conditions set forth in Section 8 and
such breach, if curable, has continued without cure for a period of 10 days
after delivery of such notice of breach.
10.1.3. Respective Conditions. By Schawk on the one hand or by
Stockholders on the other hand if the conditions precedent to their respective
obligations contained in Sections 8.2 or 8.3 hereof have not been met in all
material respects on or prior to January 31, 2005, other than through the
failure of any party seeking to terminate this Agreement to comply fully with
its obligations under this Agreement.
10.1.4. Mutual Conditions. By Schawk on the one hand or by Stockholders
on the other hand if any of the conditions described in Section 8.1 shall not
have been fulfilled on or prior to January 31, 2005, other than through the
failure of any party seeking to terminate this Agreement to comply fully with
its obligations under this Agreement. The parties agree that the January 31,
2005 date referred to in this Section 10.1.4 and 10.1.3 above may be extended
for an additional reasonable period (not later than March 31, 2005) in the event
that each party is diligently attempting to obtain all necessary governmental
approvals necessary to effect the Closing but such approvals have not yet been
obtained despite the diligent efforts of the applicable party and if the parties
reasonably expect all such approvals to be obtained.
10.1.5. Due Diligence. By Schawk on or prior to January 15, 2005, if
Schawk shall not be reasonably satisfied with the results of its (a) due
diligence of Acquired Entities' contracts or agreements with Acquired Entities'
100 largest customers by sales volume during the first nine months of fiscal
year 2004 or (b) interviews with the 20 largest such customers.
10.2. Effect of Termination. In the event of the termination of this
Agreement pursuant to Section 10.1, this Agreement - other than the provisions
of Sections 6.6(b) (Additional Information), 6.8 (Publicity), 11.8 (Limits on
Indemnities for Pre-Closing Matters), 13.3 (Payment of Expenses), 13.6 (Brokers)
and 13.10 (Governing Law; Jurisdiction) - will then be null and void and have no
further force and effect and all other rights and liabilities of the parties
hereunder will terminate without any liability of any party to any other party,
except for liabilities arising in respect of breaches under this Agreement by
any party on or prior to the date of termination.
44
11. Indemnification. From and after the Closing, subject to the time
period set forth in Section 11.4 with respect to survival of representations and
warranties and monetary limitations set forth in this Section 11 hereof, the
parties shall be indemnified and provide indemnity as set forth below.
11.1. Indemnification of Schawk Indemnified Parties by Stockholders.
Subject to the limitations set forth in this Section 11, from and after the
Closing, each of the Stockholders shall severally (but not jointly) indemnify
and hold harmless, to the fullest extent permitted by law, Schawk and its
successors, permitted assigns and Affiliates and its officers, directors,
employees and agents (collectively "Schawk Indemnified Parties") from, against
and in respect of:
(a) Losses incurred as a result of any breach or default in
performance by such Stockholder of any covenant or agreement of such
Stockholder contained in this Agreement;
(b) Losses incurred as a result of any breach of, or any
inaccuracy in, any representation or warranty made by such Stockholder
in this Agreement;
(c) Losses incurred as a result of any breach or default in
performance by Company or Holdings of any covenant or agreement of
Company or Holdings contained in this Agreement that is to be performed
at or prior to the Closing;
(d) Losses incurred as a result of any breach of, or any
inaccuracy in, any representation or warranty made by Company or
Holdings in this Agreement; and
(e) Losses arising out of, or in connection with, the
Fuji-Xerox Australia Litigation or the Appraisal Rights Litigation.
11.2. Indemnification of Stockholder Indemnified Parties by Schawk.
Subject to the limitations set forth in this Section 11, from and after the
Closing, Schawk shall indemnify and hold harmless, to the fullest extent
permitted by law, Stockholders and their respective successors, permitted
assigns and Affiliates and their respective officers, directors, employees,
agents and representatives (collectively "Stockholder Indemnified Parties")
from, against and in respect of Losses incurred as a result of any of the
following:
(a) any breach or default in performance by Schawk of any
covenant or agreement of Schawk contained in this Agreement or any
breach or default in performance by Company or Holdings of any covenant
or agreement made by Company or Holdings contained in this Agreement
that is to be performed after the Closing; or
(b) any breach of, or inaccuracy in, any representation or
warranty made by Schawk in this Agreement; or
(c) claims made by any Option Holder that the payment of
amounts due such Option Holder for unvested options under the Equity
Plan have been wrongfully delayed.
45
11.3. Method of Asserting Claims. Subject to the time period set forth
in Section 11.4 hereof with respect to survival of representations and
warranties, the party seeking indemnity ("Indemnitee") will give prompt written
notice to the party providing indemnity ("Indemnitor") of any Loss which it
discovers or of which it receives notice after the Closing and which might give
rise to a Loss by it against Indemnitor under Section 11 hereof, stating the
nature, basis and (to the extent known) amount thereof. In case of any Loss or
suit by a third party or by any Governmental Entity, or any legal,
administrative or arbitration proceeding with respect to which Indemnitor may
have liability under the indemnity agreement contained in this Section 11,
Indemnitor shall be entitled to participate therein, and, to the extent desired
by it or them, to assume the defense thereof, and after notice from Indemnitor
to Indemnitee of the election so to assume the defense thereof, Indemnitor will
not be liable to Indemnitee for any legal or other expenses subsequently
incurred by Indemnitee in connection with the defense thereof, other than
reasonable costs of investigation, unless Indemnitor does not actually assume
the defense thereof following notice of such election or unless Indemnitee
reasonably determines that the Indemnitors do not have sufficient financial
resources to defend such matter. Indemnitee and Indemnitor will render to each
other such assistance as may reasonably be required of each other in order to
insure proper and adequate defense of any such suit, Loss or proceeding.
Indemnitee will not make any settlement of any Loss or consent to the entry of
any judgment with respect to any Loss which might give rise to liability of an
Indemnitor under the indemnity agreements contained in this Section without the
written consent of Indemnitor, which consent shall not be unreasonably withheld,
unless Indemnitee reasonably determines that the Indemnitors do not have
sufficient financial resources to pay the Loss. If Indemnitor shall desire and
be able to effect a bona fide compromise or settlement of any such suit, Loss,
or proceeding and Indemnitee shall unreasonably refuse to consent to such
compromise or settlement, then Indemnitor's liability under this Section 11 with
respect to such suit, Loss or proceeding shall be limited to the amount so
offered in compromise or settlement together with all legal and other expenses
which may have been incurred prior to the date on which Indemnitee has refused
to consent to such compromise or settlement.
11.4. Nature and Survival of Representations. All warranties and
representations made by Stockholders, Company or Holdings herein as qualified by
the Schedules hereunder shall be deemed representations and warranties of
Stockholders or Company or Holdings, respectively, regardless of any
investigation made by or on behalf of Schawk. All warranties and representations
made by or on behalf of Schawk herein or in the Schedules hereunder shall be
deemed representations and warranties of Schawk, regardless of any investigation
made by or on behalf of Company, Holdings or Stockholders' Representative or
Stockholders. The representations and warranties made by Stockholders or Company
or Holdings under this Agreement shall survive the Closing until the date which
is eighteen months after the Closing Date, except that (a) all representations
and warranties made in or pursuant to Sections 4.1 through 4.3 hereof shall
survive the Closing indefinitely and (b) any representations and warranties made
in or pursuant to Section 3.9 hereof shall survive until the applicable statute
of limitations (including any extensions thereof) applicable thereto. The
representations and warranties made by Schawk under this Agreement shall survive
the Closing until the date which is eighteen months after the Closing Date,
except that all representations and warranties made in or pursuant to Section
5.2 and Section 5.5 hereof shall survive the Closing indefinitely.
46
11.5. Limitation on Indemnity.
(a) Notwithstanding any other provision of this Agreement:
(i) the Stockholders shall not have any obligation to
indemnify Schawk Indemnified Parties pursuant to Section
11.1(a), (b), (c) and (d) (but not Section 11.1(e)) unless and
until, and only to the extent that, the aggregate of all such
individual Losses incurred or sustained by Schawk Indemnified
Parties with respect to which Schawk Indemnified Parties are
entitled to indemnification under Section 11.1 exceeds
$500,000, in which case the Stockholders shall be liable for
the entire amount of such Losses in excess of $250,000;
indemnities payable with respect to Section 11.1(e) shall not
be subject to any minimum amount;
(ii) the aggregate liability of the Stockholders to
indemnify Schawk Indemnified Parties for Losses under Section
11.1 shall in no event exceed $20,000,000; provided, however,
that the foregoing dollar limitation shall not apply to Losses
(collectively, "Extraordinary Losses"): (a) with respect to
claims made under 11.1(b) for breaches of, or any inaccuracies
in, any representation or warranty made in Sections 4.1, 4.2
and 4.3 of this Agreement, (b) with respect to claims made
under 11.1(d) for breaches of, or any inaccuracies in, any
representation or warranty made in Section 3.9 of this
Agreement, (c) with respect to any claims based on common law
fraud or (d) with respect to claims made under 11.1(e);
(iii) the aggregate liability of each of the
Stockholders to indemnify Schawk Indemnified Parties shall in
no event exceed the Purchase Price received by such
Stockholder;
(iv) the indemnification obligations of each of the
Stockholders for Losses with respect to claims made under
Section 11.1(c), 11.1(d) and 11.1(e) shall be several and
limited to such Stockholders' Percentage of such Loss;
provided that each of the Kohlberg Stockholders shall be
jointly liable for the obligations of each of the other
Kohlberg Stockholders; and
(v) Stockholders shall have no obligation to
indemnify the Schawk Indemnified Parties for any liabilities
or obligations included in Accrued Expenses (to the extent of
the amount included in Accrued Expenses).
(b) Notwithstanding any other provision of this Agreement:
(i) Schawk shall not have any obligation to indemnify
Stockholder Indemnified Parties pursuant to Section 11.2
unless and until, and only to the extent that, the aggregate
of all individual Losses incurred or sustained by Stockholder
Indemnified Parties with respect to which Stockholder
Indemnified Parties are entitled to indemnification under
Section 11.2 exceeds $500,000 in which case Schawk shall be
liable for the entire amounts of such Losses in excess of
$250,000; indemnities payable with respect to a violation of
47
Section 7.4 or with respect to Section 11.2(c) shall not be
subject to any minimum amount; and
(ii) the aggregate liability of Schawk to indemnify
Stockholder Indemnified Parties for Losses under Section 11.2
shall in no event exceed $20,000,000; provided, however, that
the foregoing dollar limitation shall not apply to Losses: (a)
with respect to claims made under 11.2(b) for breaches of, or
any inaccuracies in, any representation, warranty or covenant
made in Sections 5.1, 5.2, 5.4, 5.5 or 7.4 of this Agreement
or (b) with respect to any claims based on common law fraud.
11.6. Limitation on Remedies. From and after the Closing, the sole and
exclusive remedy of Stockholder Indemnified Parties and Schawk Indemnified
Parties as against any Person, with respect to all claims relating to the
subject matter of this Agreement, shall be pursuant to the indemnification
provisions set forth in this Section 11. Nothing in this Section 11.6 shall
effect the indemnity provided in Section 9.3 and Section 9.4. The Schawk
Indemnified Parties' sole and exclusive remedy as against any Person for the
payment of the first $10,000,000 of Losses under the indemnification provisions
set forth in this Section 11 shall be to the Escrow Amount.
11.7. Limitations on Indemnities for Pre-Closing Matters. From and
after the date hereof until the Closing, the sole and exclusive remedy of Schawk
Indemnified Parties and Stockholder Indemnified Parties with respect to any
breach or inaccuracy of any of the representations and warranties set forth
herein, or any breach of any of the covenants set forth herein or Schawk's
failure to obtain or close the financing referred to in Section 8.2.11 shall be
termination of this Agreement pursuant to Section 10 and the right to seek
reimbursement from the breaching party (or Stockholders (severally, provided
that each of the Kohlberg Stockholders shall be jointly liable for the
obligations of each of the other Kohlberg Stockholders) if such breach is made
by any Acquired Entity) for the non-breaching party's reasonable out-of-pocket
costs and expenses (including, without limitation, attorneys' fees, accountants'
fees, investment advisors' fees and other due diligence expenses) incurred in
connection with this Agreement and the transactions contemplated hereby. In
furtherance of the foregoing, the waiver of any condition to Closing based on
the accuracy of any representation or warranty, or on the performance of or
compliance with any covenant, agreement or obligation, shall be deemed a waiver
of the right to indemnification under this Section 11 with respect to such
representation or warranty, covenant, agreement or obligation, but only to the
specific limited extent of any such waiver. Nothing in this Section 11.7 shall
effect the indemnity provided in Section 9.3 and Section 9.4.
11.8. Indemnifications Relating to Tax Liabilities. Notwithstanding the
foregoing, Stockholders shall not be responsible for Losses relating to Tax
liabilities (i) for periods beginning on or after the Closing or the portion of
a period beginning before the Closing to the extent attributable to after the
Closing, (ii) for any actions taken by Schawk, Holdings or their respective
Affiliates on the Closing Date and after the Effective Time, (iii) that arose
after the effective time of the Closing arising from changes effected by Schawk
in Tax assumptions and/or policies so long as the Tax assumption or policy in
effect prior to the effective time of the Closing was supported by appropriate
provisions of the Code, the regulations and/or rulings
48
issued thereunder or interpretations thereof made by tax advisors or authorities
of recognized standing, (iv) related to payments contemplated by Section 2.1 in
respect of Option Holders, including the disallowance or deferral for any
deduction for such payments or (v) any severance payments made in connection
with the termination of the employment of any employee of any Acquired Entity
from and after the Closing.
12. Confidentiality; Nonsolicitation. For a period beginning on the
Closing Date and ending five (5) years after the Closing Date, no Stockholder
shall without the prior written consent of the Schawk, either directly or
indirectly through an Affiliate: (i) solicit for employment any employee of any
Acquired Entity who continued employment with an Acquired Entity after the
Closing Date unless such employee's employment was terminated by Schawk or any
of its Subsidiaries following the Closing; (ii) directly or indirectly, alone or
as an equity holder (owning more than five percent of the outstanding equity
interests) of any Person, corporate director or consultant of any company or
entity, compete with Schawk within the United States of America, Canada, the
United Kingdom, Asia (including, without limitation, India, Southeast Asia,
Japan, China, Indonesia and Hong Kong) or Australia (the "Territory") in the
pre-press graphic arts business or imaging business as conducted by Acquired
Entities prior to the Closing; or (iii) perform any affirmative act specifically
designed to divert from Schawk or its Subsidiaries to any Person in which such
Stockholder has an interest, any trade or business with any customer with whom
any Acquired Entity had any contact or association during the three years
preceding the date hereof, or with any party whose identity or potential as a
customer of an Acquired Entity was confidential or learned by such Stockholder
during such period.
Each Stockholder further acknowledges that by reason of its affiliation
with Acquired Entities it has had access to Acquired Entities' products, markets
and business and financial information which Acquired Entities consider to be
confidential or proprietary (collectively, the "Confidential Information"). Each
Stockholder covenants and agrees that it shall not, within five (5) years after
the Closing Date, directly or indirectly, in the Territory, use for its own
behalf or divulge to any third party any Confidential Information of Acquired
Entities, unless such Confidential Information (i) was already known to such
Stockholder or its representatives from a source other than Acquired Entities or
was made available to such Stockholder on a non-confidential basis when
received, (ii) hereafter becomes lawfully obtainable from other sources or (iii)
it is disclosed by Schawk or any Acquired Entity in any document filed with any
Governmental Entity and available to public inspection.
Each Stockholder acknowledges that the restrictions contained in this
Section 12 are reasonable and necessary to protect the legitimate interests of
Schawk, do not cause such Stockholder undue hardship, and that any violations of
any provision of this Section 12 will result in irreparable injury to Schawk and
that, therefore, Schawk shall be entitled to preliminary and permanent
injunctive relief in any court of competent jurisdiction, which rights shall be
cumulative and in addition to any other rights or remedies to which Schawk may
be entitled.
13. General Provisions. The parties hereto further covenant and agree
as follows:
13.1. Waiver of Terms. Subject to Section 8.2.14, any of the terms or
conditions of this Agreement may be waived at any time by the party or parties
entitled to the
49
benefit thereof but only by a written notice signed by the party or parties
waiving such terms or conditions.
13.2. Amendment of Agreement. Subject to Section 13.16, this Agreement
may be amended or supplemented at any time only by written instrument duly
executed by each Stockholder, Company, Holdings and Schawk.
13.3. Payment of Expenses. Except as set forth in Section 2 above and
as provided for herein, Stockholders, on the one hand, and Schawk, on the other,
shall each pay their or its own expenses, including, without limitation, the
expenses of their or its own counsel, investment bankers and accountants,
incurred in connection with the preparation, execution and delivery of this
Agreement and the other agreements and documents referred to herein and the
consummation of the transactions contemplated hereby and thereby. No such
expense shall be borne or paid by Acquired Entities. In any action brought by
Stockholders, on the one hand, or Schawk, on the other, to enforce any of the
provisions of this Agreement and the other agreements and documents referred to
herein, all expenses incurred by the prevailing party in connection with such
actions, including reasonable attorneys' fees, shall be borne by the
non-prevailing party in such action. Schawk and Stockholders agree that the
filing expense to be incurred in connection with any filing under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, shall be paid
in equal shares by Schawk, on the one hand, and Stockholders, on the other.
13.4. Contents of Agreement, Parties in Interest, Assignment. This
Agreement and the other agreements and documents referred to herein set forth
the entire understanding of the parties with respect to the subject matter
hereof. Any previous agreements or understandings between the parties regarding
the subject matter hereof are merged into and superseded by this Agreement. All
representations, warranties, covenants, terms and conditions of this Agreement
shall be binding upon and inure to the benefit of and be enforceable by the
respective heirs, legal representatives, successors and permitted assigns of the
parties hereto; provided, however, that none of the rights or obligations of any
of the parties hereto may be assigned without the prior written consent of, in
the case of assignment by Stockholders, Schawk, or, in the case of assignment by
Schawk, Stockholders, which consent shall not unreasonably be withheld; provided
however, that Schawk may assign all or part of its rights under this Agreement
and may delegate all or part of its obligations under this Agreement to a
wholly-owned Subsidiary of Schawk, in which event all the rights and powers of
Schawk and the remedies available to it under this Agreement shall extend to and
be enforceable by such assignee so long as such assignee remains a wholly-owned
Subsidiary of Schawk. Any such assignment and delegation shall not release
Schawk from its obligations under this Agreement, and further Schawk guarantees
to Stockholders the performance by each such assignee of its obligations under
this Agreement. In the event of any such assignment and delegation, the term
"Schawk" as used in this Agreement shall be deemed to refer to each such
assignee of the Schawk and shall be deemed to include both Schawk and each such
assignee where appropriate.
13.5. Notices. All notices, requests, demands and other communications
required or permitted to be given hereunder shall be by hand-delivery, certified
or registered mail, return receipt requested; telex, facsimile, or next day air
courier to the parties set forth below. Such notices shall be deemed given: at
the time personally delivered, if delivered by
50
hand; three (3) days after deposit in the United States mail, if sent certified
or registered mail; when answered back, if telexed; upon delivery, with receipt
acknowledged, if sent by facsimile; and the next business day after timely
delivery to the courier, if sent by air courier.
If to Schawk: Schawk, Inc.
1695 River Road
Des Plaines, IL 60018
Attention: David A. Schawk
Facsimile No.: (847) 827-1264
Copies to: Schawk, Inc.
1695 River Road
Des Plaines, IL 60018
Attention: A. Alex Sarkisian and
Ronald J. Vittorini
Facsimile No.: (847) 827-1264
Vedder, Price, Kaufman & Kammholz, P.C.
222 North LaSalle Street
Suite 2600
Chicago, IL 60601
Attention: John T. McEnroe
Facsimile No.: (312) 609-5005
If to Stockholders: Kohlberg & Company, L.L.C.
111 Radio Circle
Mount Kisco, NY 10549
Attention: Mr. Christopher Lacovara
Facsimile No.: (914) 244-0689
Copy to: Ropes & Gray LLP
One International Place
Boston, MA 02110
Attention: Julie H. Jones, Esq.
Facsimile No.: (617) 951-7050
Any party hereto may change its notice address by proper notice to the other
parties.
13.6. Brokers. Schawk, on the one hand, and Stockholders, on the other
hand, represent and warrant that none of them has retained or used the services
of any individual, firm or corporation in such manner as to entitle such
individual, firm or corporation to any compensation for brokers' or finders'
fees with respect to the transactions contemplated hereby for which the other
may be liable or for which any Acquired Entity may be liable.
13.7. Severability. In the event that any one or more of the provisions
contained in this Agreement shall be invalid, illegal or unenforceable in any
respect for any
51
reason, the validity, legality and enforceability of any such provision in every
other respect and of the remaining provisions of this Agreement shall not be in
any way impaired.
13.8. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
13.9. Headings. The headings of the Sections and the subsections of
this Agreement are inserted for convenience of reference only and shall not
constitute a part hereof.
13.10. Governing Law; Jurisdiction. THIS AGREEMENT SHALL BE GOVERNED,
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF
DELAWARE, EXCLUDING ANY CHOICE OF LAW RULES WHICH MAY DIRECT THE APPLICATION OF
THE LAWS OF ANOTHER JURISDICTION.
13.11. Instruments of Further Assurance. Each of the parties hereto
agrees, upon the request of any of the other parties hereto, from time to time
to execute and deliver to such other party or parties all such instruments and
documents of further assurance or otherwise as shall be reasonable under the
circumstances, and to do any and all such acts and things as may reasonably be
required to carry out the obligations of such requested party hereunder.
13.12. No Third-Party Beneficiaries. Subject to Section 9.3, Section
9.4 and Section 11, nothing in this Agreement is intended nor shall it be
construed to give any person, firm, corporation or other entity, other than the
parties hereto and their respective successors and permitted assigns, any right,
remedy or claim under or in respect of this Agreement or any provisions hereof.
13.13. Currency. All monetary amounts expressed in this Agreement and
all payments required by this Agreement are and shall be in United States
dollars.
13.14. Intentionally Omitted.
13.15. Tax Matters.
(a) All transfer, documentary, sales, use, stamp, registration
and other similar Taxes and fees (including any penalties and interest)
incurred in connection with this Agreement, shall be paid by
Stockholders (severally and not jointly) when due, and each of the
parties shall prepare and file and shall fully cooperate with each
other party with respect to the preparation and filing of, any Tax
Returns and other documentation with respect to all such transfer,
documentary, sales, use, stamp, registration and other Taxes and fees.
(b) For Tax Returns to be filed on or after the effective time
of the Closing in respect of any of the Acquired Entities for periods
ending prior to or including the Closing Date, Schawk shall prepare and
file such Tax Return on a basis that is consistent with the manner in
which the applicable Acquired Entity filed Tax Returns in respect of
such Tax for prior taxable periods (unless Schawk determines that such
basis is
52
not supported by Code, the regulations and/or rulings issued thereunder
or interpretations thereof made by tax advisors or authorities of
recognized standing or unreasonably exposes Schawk to any penalties for
which Schawk would not be entitled to indemnification under Section
11). At least twenty days prior to the date on which the relevant
Income Tax Return is due (taking into account any extensions of such
due date), Schawk will deliver to Stockholders' Representative for its
review and approval (not to be unreasonably withheld) such Tax Return.
After the Closing Date, Schawk and the Acquired Entities shall make
available to Stockholders' Representative all information, records and
other documents reasonably requested by Stockholders' Representative
relating to the Acquired Entities for all periods prior to or including
the Closing Date and shall preserve such information, records and other
documents until the expiration of the applicable statute of limitations
or extensions thereof.
(c) Schawk and the relevant Acquired Entity will promptly
notify Stockholders' Representative in writing of the commencement of
any audit or examination, not listed on Schedule 3.9, of any Tax Return
of any of the Acquired Entities for any period of any of the Acquired
Entities ending on or prior to the Closing Date and any other proposed
change or adjustment, claim, dispute, arbitration or litigation that,
if sustained, would reasonably be expected to affect the liability of
Stockholders for Taxes under this Agreement (a "Tax Claim"), although
failure to do so will not relieve Stockholders from their liability
hereunder except to the extent Stockholders are prejudiced by such
failure. Such notice will describe the asserted Tax Claim in reasonable
detail and will include copies of any notices and other documents
received from any Taxing authority in respect of any such asserted Tax
Claim. Stockholders will have the right to control any Tax Claims in
the Tax audit or examination, provided, however, that Stockholders'
Representative will inform Schawk of the status and progress of such
Tax audit or examination and will allow Schawk and its representatives
a reasonable opportunity to review and comment on any legal submissions
prior to submission or other written legal responses in connection with
such audit or examination; and provided, further, that such right to
control any such Tax Claims may be terminated by Schawk if Schawk
reasonably determines that the Indemnitors do not have sufficient
financial resources to satisfy any indemnity obligation under Section
11 in respect of such Tax Claims. Schawk and Stockholders agree that
any advisor or representative used by Stockholders in connection with
any such examination or audit shall obtain, if necessary or
appropriate, waivers from each party of any potential conflict of
interest. If a Tax Claims relating solely to a taxable period ending on
or prior to the Closing Date is not settled at the Tax audit or
examination state, Stockholders' Representative will have the right to
control any further contest of such Tax Claims and, if it exercises
such right, will bear the expenses relating thereto; provided, however,
that Stockholders may not settle any such Tax Claim without Schawk's
consent (which consent will not be unreasonably withheld) if such
settlement would reasonably be expected to adversely affect the Taxes
of any of the Acquired Entities or Schawk for taxable periods beginning
on or after the Closing Date; and provided, further, that such right to
control any such Tax Claims may be terminated by Schawk if Schawk
reasonably determines that the Indemnitors do not have sufficient
financial resources to satisfy any indemnity obligation under Section
11 in respect of such Tax Claims.
53
13.16. Provisions Concerning Stockholders' Representative.
13.16.1. Appointment. Each Stockholder hereby appoints Kohlberg &
Company, L.L.C. as the agent, proxy and attorney-in-fact for such Stockholder
for all purposes under this Agreement (including full power and authority to act
on such Stockholder's behalf). Without limiting the generality of the foregoing,
the Stockholders' Representative will be authorized to:
(a) in connection with the Closing, execute and receive all
documents, instruments, certificates, statements and agreements on
behalf of and in the name of Stockholders necessary to effectuate the
Closing and consummate the transactions contemplated by this Agreement;
(b) take all actions on behalf of Stockholders with respect to
the matters set forth in Sections 2.2.3 and 2.3;
(c) take all actions on behalf of Stockholders in connection
with any claims made under Section 11 to defend or settle such claims,
and to make payments in respect of such claims;
(d) take all actions on behalf of Stockholders in connection
with the escrow account established pursuant to the Escrow Agreement
(including giving any instructions to the Escrowee, on behalf of
Stockholders, to pay from such escrow account any amounts owed by
Stockholders pursuant to this Agreement);
(e) execute and deliver, should it elect to do so in its sole
discretion, on behalf of Stockholders, any amendment to this Agreement
so long as such amendment will apply equally to all Stockholders; and
(f) take all other actions to be taken by or on behalf of
Stockholders and exercise any and all rights which the Stockholders are
permitted or required to do or exercise under this Agreement.
13.16.2. Liability. Stockholders' Representative will not be liable to
any Stockholder for any action taken by it in good faith pursuant to this
Agreement, and the Stockholders will jointly and severally indemnify the
Stockholders' Representative from any Losses arising out of its serving as
Stockholders' Representative hereunder. Stockholders' Representative is serving
in that capacity solely for purposes of administrative convenience, and is not
personally liable in such capacity for any of the obligations of Stockholders
hereunder, and Schawk agrees that it will not look to the personal assets of
Stockholders' Representative, acting in such capacity, for the satisfaction of
any obligations to be performed by the Stockholders hereunder.
13.17. Tax Structure. Schawk, on the one hand, and Stockholders,
Company and Holdings, on the other, agree to cooperate to maximize the Tax
benefits or minimize the Tax expense available or payable to such parties in the
finalization of the events and/or Tax structure of the transaction as a result
of the transactions contemplated by this Agreement. Such cooperation shall
include entering into such reasonable amendments as modifications to this
54
Agreement as requested by a party hereto for such Tax purposes. The foregoing
notwithstanding, however, no party shall be required to take any act, including
without limitation, entering into amendments or modifications to this Agreement,
if such party reasonably believes that any such act would cause such party to
incur or suffer the reasonable possibility of incurring any costs, expenses,
obligations, liabilities as a result of such action.
(SIGNATURE PAGE FOLLOWS)
55
(SIGNATURE PAGE TO STOCK PURCHASE AGREEMENT)
IN WITNESS WHEREOF, this Agreement has been duly executed by the
parties hereto on the day and year first above written.
SCHAWK, INC.
By: /s/ Clarence W. Schawk
---------------------------------------
Name: Clarence W. Schawk
Title: Chairman of the Board of Directors
SCHAWK, INC.
By: /s/ David A. Schawk
---------------------------------------
Name: David A. Schawk
Title: President and Chief Executive Officer
(SIGNATURE PAGE TO STOCK PURCHASE AGREEMENT)
SEVEN WORLDWIDE, INC.
By: /s/ Nat Buonfiglio
---------------------------------------
Name: Nat Buonfiglio
Title: Senior Vice President, Chief-
Financial Officer and Treasurer
(SIGNATURE PAGE TO STOCK PURCHASE AGREEMENT)
KAGT HOLDINGS, INC.
By: /s/ Christopher Lacovara
---------------------------------------
Name: Christopher Lacovara
Title:
---------------------------------
(SIGNATURE PAGE TO STOCK PURCHASE AGREEMENT)
KOHLBERG INVESTORS IV, L.P.
By: Kohlberg Management IV, L.L.C.
its general partner
By: /s/ Christopher Lacovara
---------------------------------------
Name: Christopher Lacovara
Title: Vice President
(SIGNATURE PAGE TO STOCK PURCHASE AGREEMENT)
KOHLBERG TE INVESTORS IV, L.P.
By: Kohlberg Management IV, L.L.C.
its general partner
By: /s/ Christopher Lacovara
---------------------------------------
Name: Christopher Lacovara
Title: Vice President
(SIGNATURE PAGE TO STOCK PURCHASE AGREEMENT)
KOHLBERG OFFSHORE INVESTORS IV, L.P.
By: Kohlberg Management IV, L.L.C.
its general partner
By: /s/ Christopher Lacovara
---------------------------------------
Name: Christopher Lacovara
Title: Vice President
(SIGNATURE PAGE TO STOCK PURCHASE AGREEMENT)
KOHLBERG PARTNERS IV, L.P.
By: Kohlberg Management IV, L.L.C.
its general partner
By: /s/ Christopher Lacovara
---------------------------------------
Name: Christopher Lacovara
Title: Vice President
(SIGNATURE PAGE TO STOCK PURCHASE AGREEMENT)
KOCO INVESTORS IV, L.P.
By: Kohlberg Management IV, L.L.C.
its general partner
By: /s/ Christopher Lacovara
---------------------------------------
Name: Christopher Lacovara
Title: Vice President
(SIGNATURE PAGE TO STOCK PURCHASE AGREEMENT)
SILVER POINT CAPITAL FUND, L.P.
By: /s/ Jeffrey A. Gelfand
---------------------------------------
Name: Jeffrey A. Gelfand
Title: Chief Financial Officer
(SIGNATURE PAGE TO STOCK PURCHASE AGREEMENT)
SILVER POINT CAPITAL OFFSHORE FUND, LIMITED
By: /s/ Jeffrey A. Gelfand
---------------------------------------
Name: Jeffrey A. Gelfand
Title: Chief Financial Officer
(SIGNATURE PAGE TO STOCK PURCHASE AGREEMENT)
HUDSON RIVER CO-INVESTMENT FUND, L.P.
By: Hamilton Lane New York Co-Investment, LLC
By: /s/ Robert W. Cleveland
---------------------------------------
Name: Robert W. Cleveland
Title: Vice President
(SIGNATURE PAGE TO STOCK PURCHASE AGREEMENT)
VO III, LLC
By: /s/ B.V.
---------------------------------------
Name: B.V.
Title: Mg. Dir.
APPENDIX OF DEFINITIONS
-----------------------
The following definitions shall be applicable for purposes of the
Agreement except as otherwise specifically provided to the contrary in the text
of the Agreement.
"Accrued Expenses" shall mean the amount equal to Company's and its
Subsidiaries' accrued expenses other than accrued expenses related to (1)
severance, (2) leases no longer occupied by an Acquired Entity, (3) the Drasner
Expense, (4) the Appraisal Rights Litigation, (5) the Fuji-Xerox Australia
Litigation, (6) interest expense, (7) any amounts for which Stockholders are not
required to indemnify the Schawk Indemnified Parties under Section 11.8, and (8)
payroll and related tax withholding, all calculated in accordance with the
methodology set forth on Schedule 2.4.1 attached hereto.
"Acquired Entities" shall mean Holdings and each of its Subsidiaries.
"Affiliates" shall mean a Person that directly, or indirectly through
one or more intermediaries, controls, is controlled by, or is under common
control with, the Person referred to. In this definition, "control" means the
possession, direct or indirect, of the power to direct or cause the direction of
the management and policies of a Person, whether through ownership of
securities, by contract, or otherwise.
"Agreement" shall mean the Stock Purchase Agreement to which this
Appendix is attached, as amended from time to time.
"Annual Financial Statements" shall have the meanings assigned such
term in Section 3.6 of the Agreement.
"Appraisal Rights Litigation" shall mean the lawsuit arising from the
Petition for Appraisal filed on October 10, 2003 by Harold A. Mayerson, William
Matthews and the other former stockholders of Company named therein, pertaining
to the merger of Company and Holdings on October 10, 2003.
"Approvals" shall have the meaning assigned such term in Section 3.21
of the Agreement.
"Beneficial Ownership" shall have the meaning as set forth in
Regulation 13d-3 of the Federal Securities Exchange Act of 1934.
"CAA 01" shall mean the Capital Allowances Act 2001 as it applies in
the United Kingdom.
"CERCLA" shall mean the Comprehensive Environmental Response and
Compensation Liability Act of 1980, as amended.
"Close Company" shall mean the meaning set out in Schedule 414 of ICTA.
"Closing" shall have the meaning assigned such term in Section 1 of the
Agreement.
"Closing Date" shall have the meaning assigned such term in Section 1
of the Agreement.
A-1
"Closing Indebtedness Amount" shall have the meaning assigned such term
in Section 9.1 of the Agreement.
"Code" shall have the meaning assigned such term in Section 3.19 of the
Agreement.
"Commitment Letter" shall have the meaning assigned such term in
Section 5.16 of the Agreement.
"Company" shall have the meaning assigned such term in the opening
paragraph of this Agreement.
"Company's Confidential Information" shall have the meaning assigned
such term in Section 6.6(b) of the Agreement.
"Company Intellectual Property Rights" shall have the meaning assigned
such term in Section 3.20 of the Agreement.
"Company Material Contracts" shall have the meaning assigned such term
in Section 3.12 of the Agreement.
"Company(ies) Material Adverse Effect" shall mean any change, effect or
circumstance that (a) a reasonably prudent investor would consider important
(either individually, or when considering the collective effect of all such
matters) in deciding whether to consummate the transactions contemplated hereby
and (b) is materially adverse to the business, assets, financial condition or
results of operations of the Acquired Entities, taken as a whole, or that
materially and adversely affects the ability of Company, Holdings or
Stockholders to perform their obligations under this Agreement and consummate
the transactions contemplated hereby; provided, however, that the term "Company
Material Adverse Effect" shall not include the impact of (i) changes in Laws or
interpretations thereof by courts or any other Governmental Entity, (ii) changes
in GAAP, (iii) actions or omissions of one or more Stockholders or Acquired
Entities taken with the consent of Schawk in contemplation of the transactions
contemplated hereby, (iv) general economic conditions and events or conditions
generally affecting the pre-press graphic arts business or imaging business, (v)
national or international hostilities, acts of terror or acts of war, and (vi)
this Agreement or the announcement hereof.
"Competition Act 1988" shall mean the Competition Act 1988 as it
applies in the United Kingdom.
"Computer Software" includes, without limitation, any object code,
source code and any other code such as procedure, language or job control
language.
"Computer Systems" shall mean all systems comprising hardware, plant,
equipment, devices and Operational Software and telecommunications equipment
used in or in connection with the business of each Acquired Entity.
"Option Holders" shall have the meaning assigned such term in Section
2.1 of the Agreement.
A-2
"Confidential Information" shall have the meaning assigned such term in
Section 12 of the Agreement.
"Corporation Tax (Installment Payments) Regulations 1998" shall mean
the Corporation Tax (Installment Payments) Regulations 1998 as it applies in the
United Kingdom.
"Drasner Expense" shall mean any and all amounts required to be paid to
Fred Drasner upon the non-renewal of the Employment Agreement entered into
between Company and Fred Drasner dated January 31, 2003, as amended from time to
time.
"Employee Plan" shall have the meaning assigned such term in Section
3.18 of the Agreement.
"Employment Act 1989" shall mean the Employment Act 1989 as it applied
in the United Kingdom.
"Employment Agreement(s)" shall have the meaning contained in Section
8.2.9 of the Agreement.
"Enterprise Act 2002" shall mean Enterprise Act 2002 as it applies in
the United Kingdom.
"Environmental Laws" shall mean any federal, state, local or foreign
Laws relating to (A) releases or threatened releases of Hazardous Substances or
material containing Hazardous Substances; (B) the manufacture, handling,
transport, use, treatment, storage or disposal of Hazardous Substances or
materials containing Hazardous Substances; or (C) otherwise relating to
pollution or protection of the environment.
"Equity Plan" shall have the meaning assigned such term in Section 2.1
of the Agreement.
"ERISA" shall have the meaning assigned such term in Section 3.19 of
the Agreement.
"Exchange Act" shall have the meaning contained in Section 5.9 of the
Agreement.
"Financial Statements" shall mean the Annual Financial Statements and
the Interim Financial Statements.
"Foreign Acquired Entities" shall mean any of the Acquired Entities
organized or existing under jurisdictions other than the United States or any
state, territory or possession thereof.
"Fuji-Xerox Australia Litigation" shall mean the lawsuit or other
action filed in New South Wales, Australia by Fuji-Xerox Australia Pty, Ltd.
against Seven Sydney Pty Ltd. and all related counterclaims.
"GAAP" shall mean generally accepted accounting principles in the
United States of America as in effect from time to time.
A-3
"Governance Rights Agreement" shall mean the Governance Rights
Agreement in the form attached hereto and incorporated herein as Exhibit C.
"Governmental Entities" shall mean any federal, state, municipal,
national or other government, governmental department, commission, board,
bureau, court, agency or instrumentality or political subdivision thereof or any
entity or officer exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to any government or any court, in
each case whether associated with a state in the United States, the United
States, or a foreign entity or government.
"Hazardous Substances" means (i) those substances defined in or
regulated as hazardous under the following federal statutes and their state
counterparts and all applicable regulations thereunder: the Hazardous Materials
Transportation Act, the Resource Conservation and Recovery Act, the
Comprehensive Environmental Response, Compensation and Liability Act, the Clean
Water Act, the Safe Drinking Water Act, the Federal Insecticide, Fungicide, and
Rodenticide Act and the Clean Air Act; (ii) petroleum and petroleum products,
including crude oil and any fractions thereof; (iii) natural gas, synthetic gas,
and any mixtures thereof; (iv) polychlorinated biphenyls, asbestos and radon;
(v) any other contaminant; and (vi) any substance, material or waste regulated
as hazardous by any federal, state, local or foreign Governmental Entity
pursuant to any Environmental Law.
"Holdings" shall have the meaning assigned such term in the opening
paragraph of this Agreement.
"Holdings Capital Stock" shall mean the common stock, $0.01 par value
per share, of Holdings.
"ICTA 1988" shall have the meaning assigned such term in Section
3.9(b)(iii).
"Indebtedness" shall have the meaning assigned to such term in Section
9.1 of the Agreement.
"Indemnitee" shall mean the party seeking indemnification under Section
11 of the Agreement.
"Indemnitor" shall mean the party against whom indemnification is
sought pursuant to Section 11 of the Agreement.
"Industrial Training Act 1982" shall mean the Industrial Training Act
1982 (as amended by the Employment Act of 1989) as it applied in the United
Kingdom.
"Inland Revenue" shall mean Inland Revenue as defined by Section 1
Taxes Management Act 1970 as it applies in the United Kingdom.
"Intellectual Property Rights shall mean all intellectual property
rights at any time protected by statute or common law, including but not limited
to: (a) patents, inventions, copyright, rights in circuit layouts, design
rights, trademarks, rights in databases, rights in know-how; and (b) any
application or right to apply for any of the rights referred to in paragraph
(a).
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"Interim Financial Statements" shall have the meaning assigned such
term in Section 3.5 of the Agreement.
"IRS" shall have the meaning assigned such term in Section 3.8 of the
Agreement.
"KAGT Holdings Rabbi Trust" shall have the meaning assigned such term
in Section 2.1.
"Knowledge of Acquired Entities", "Knowledge of Stockholders",
"Acquired Entities' Knowledge", or "Stockholders' Knowledge" or similar
knowledge qualification in this Agreement shall mean to the knowledge that Diane
Romano, Mark Rutter, any director, officer (including director(s) of tax,
operations managers, finance managers and controllers) of (x) Company, Holdings
or Stockholders' Representative (with respect to representations, warranties and
covenants made as of the date hereof) and (y) any Acquired Entity (with sales
revenue in 2003 of $50,000,000 or more) or Stockholders' Representative (with
respect to representations, warranties or covenants made as of the Closing Date)
actually had or in the reasonably prudent and diligence exercise of his duties
as a director, officer of Company, Holdings, such other Acquired Entity or
Stockholders' Representative (as applicable) should have had.
"Kohlberg Stockholders" shall mean Kohlberg IV, Kohlberg TE IV,
Kohlberg Offshore IV, Kohlberg Partners IV and KOCO.
"Landlord and Tenant Act" shall mean the Landlord and Tenant Act 1954
as it applies in the United Kingdom.
"Laws" shall mean any and all federal, state, local and foreign
statutes, laws, judicial decisions, regulations, ordinances, rules, judgments,
orders, decrees, codes, plans, injunctions, permits, concessions, grants,
franchises, agreements and governmental restrictions.
"Legislation" shall mean all Acts of Parliament, all applicable
provisions of the Treaties constituting the European Community, the European
Union and the European Economic Area and all orders and regulations made
pursuant to such an Act or Treaty or otherwise having the force of law.
"Lien" shall mean, with respect to any asset, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind, or any other type
of preferential arrangement that has the practical effect of creating a security
interest, in respect of such asset. For the purposes of this Agreement, any
Acquired Entity shall be deemed to own subject to a Lien any asset which it has
acquired or holds subject to the interest of a vendor or lessor under any
conditional sale agreement, capital lease or other title retention agreement
relating to such asset.
"Lockbox Cash" shall mean any amounts on deposit in lockbox accounts or
collection accounts which are to be applied against Acquired Entities'
Indebtedness.
"Loss" shall mean any and all losses, damages, deficiencies, awards,
assessments, judgments, fines, penalties, costs and expenses; provided, however,
that the amount of any such Losses for the purposes of indemnification hereunder
shall be determined net of any amounts recovered by the Indemnitee under
insurance policies with respect to such Loss and provided, further, that the
amount of any such Losses for purposes of indemnification hereunder shall be
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determined net of any Tax benefit actually realized by Indemnitee arising from
the incurrence or payment of such Loss after taking into account any
indemnification payment to be received as a result of such Loss.
"Multiemployer Plan" shall have the meaning assigned such term in
Section 3.19(b)(v).
"National Insurance Contributions" shall mean National Insurance
Contributions as defined by the Social Security Contributions and Benefits Act
1992 as it applies in the United Kingdom.
"Occupational Pension Regulatory Authority" shall mean the regulatory
authority established by Section 101 of the Pensions Act.
"Office of Fair Trading" shall mean the Office of Fair Trading in the
United Kingdom.
"Operational Software" shall mean all Computer Software used in or in
connection with the business of each Acquired Entity.
"Option Holders" shall have the meaning assigned such term in Section
2.1 of the Agreement.
"Pay As You Earn System" shall mean "Pay As You Earn," pursuant to the
Income Tax (Pay As You Earn) Regulations 2003 as they apply in Great Britain and
Northern Ireland.
"Payoff Letter" shall have the meaning assigned such term in Section
9.1 of the Agreement.
"Pension Advisory Service" shall mean the Occupation Pensions Advisory
Service.
"Pension Plan" shall have the meaning assigned such term in Section
3.19 of the Agreement.
"Pensions Act" shall mean the Pensions Act 1995 as it applies in the
United Kingdom.
"Pensions Ombudsman" shall mean the office of the Pensions Ombudsman in
the United Kingdom.
"Percentage" shall mean, as to each Stockholder (calculated as of the
Closing Date), a percentage equal to the number of outstanding shares of
Holdings Capital Stock owned by such Stockholder divided by the total number of
outstanding shares of Holdings Capital Stock.
"Person" shall mean any individual, sole proprietorship, partnership,
joint venture, trust, unincorporated organization, association, limited
liability company, corporation, institution, public benefit corporation, entity
or government (whether Federal, state, county, city, municipal or otherwise,
including, without limitation, any instrumentality, division, agency, body or
department thereof).
"Public Filings" shall have the meaning contained in Section 5.10 of
the Agreement.
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"Purchase Price" shall have the meaning assigned to such term in
Section 2.1 of the Agreement.
"Real Estate" shall have the meaning assigned to such term in Section
3.11 of the Agreement.
"Registerable Securities" shall have the meaning assigned to such term
in Section 2.1 of the Agreement.
"Registered Intellectual Property Rights" shall have the meaning
assigned such term in Section 3.20 of the Agreement.
"Release" shall have the meanings assigned to it in CERCLA.
"Schawk" shall mean Schawk, Inc., a Delaware corporation.
"Schawk 10-K Report(s)" shall have the meaning assigned to such term in
Section 5.10 of the Agreement.
"Schawk 10-Q Report(s)" shall have the meaning assigned to such term in
Section 5.10 of the Agreement.
"Schawk Class A Common Stock" shall have the meaning assigned such term
in Section 2.1 of the Agreement.
"Schawk Indemnified Parties" shall have the meaning assigned such term
in Section 11.1 of the Agreement.
"Schawk Material Adverse Effect" shall mean any change, effect or
circumstance that (a) a reasonably prudent investor would consider important
(either individually or when considering the collective effect of all such
matters) in deciding whether to consummate the transactions contemplated hereby)
and (b) is materially adverse to the business, assets, financial condition or
results of operations of Schawk and its Subsidiaries, taken as a whole, or that
materially and adversely affects the ability of Schawk to perform its
obligations under this Agreement and consummate the transactions contemplated
hereby; provided, however, that the term "Schawk Material Adverse Effect" shall
not include the impact of (i) changes in laws or interpretations thereof by
courts or any other Governmental Entity, (ii) changes in GAAP, (iii) actions or
omissions of Schawk taken with the consent of Stockholders' Representative in
contemplation of the transactions contemplated hereby, (iv) general economic
conditions and events or conditions generally affecting the pre-press graphic
arts business or imaging business, (v) national or international hostilities,
acts of terror or acts of war, and (vi) this Agreement or the announcement
hereof.
"SEC" shall have the meaning contained in Section 5.9 of the Agreement.
"Security" shall mean all shares of stock, partnership interests,
membership interests, membership units or other ownership interests in any other
Person and all warrants, options or other rights to acquire the same.
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"Securities Act" shall mean have the meaning assigned such term in
Section 5.9 of the Agreement.
"Stockholders" shall mean the stockholders of Holdings listed in the
first paragraph of this Agreement.
"Stockholder Indemnified Parties" shall have the meaning assigned such
term in Section 11.2 of the Agreement.
"Stockholders' Representative" shall mean Kohlberg & Company, L.L.C.,
not in an individual capacity but solely as representative for the Stockholders.
"Subsidiary" shall mean, with respect to any Person, any corporation of
which an aggregate of more than 50% of the outstanding capital stock having
ordinary voting power to elect a majority of the board of directors of such
corporation (irrespective of whether, at the time, stock of any other class or
classes of such corporation shall have or might have voting power by reason of
the happening of any contingency) is at the time, directly or indirectly, owned
legally or beneficially by such Person and/or one or more Subsidiaries of such
Person.
"Taxes" shall mean all United States, foreign, state, provincial,
county and local income, ad valorem, excise, sales, use, value-added, real
estate, transfer, withholding, unemployment, social security, escheat or
unclaimed property, stamp duty or customs and other taxes, and assessments of or
payable by any Acquired Entity or otherwise chargeable against its assets or
property (including but not limited to any such taxes resulting from the
re-characterization of agents and salesmen of any Acquired Entity as "employees"
and National Insurance Contributions).
"Tax Returns" shall have the meaning contained in Section 3.9 of the
Agreement.
"TCGA" shall have the meaning assigned such term in Section 3.9(b)(ii).
"Territory" shall have the meaning assigned such term in Section 12 of
the Agreement.
"Treasury" shall mean Her Majesty's Treasury in the United Kingdom.
"Treaty of Rome" shall mean the Treaty of Rome as it applies in the
United Kingdom.
"Trustee" shall have the meaning assigned such term in Section 6.12 of
the Agreement.
"U.K. Acquired Entity" shall mean any Acquired Entity organized under
the Laws of the United Kingdom, England or Wales.
"VATA 1994" shall have the meaning assigned such term in Section
3.9(b)(viii).
"VAT (Special Provisions) Order 1995" shall mean the VAT (Special
Provisions) Order 1995 as it applies in the United Kingdom.
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"Welfare Plan" shall have the meaning assigned such term in Section
3.18 of the Agreement.
"Welfare Reform and Pensions Act 1999" shall mean the Welfare Reform
Act 1979 as it applies in the United Kingdom.
Any accounting term used in this Agreement shall have, unless otherwise
specifically provided herein, the meaning customarily given such term in
accordance with GAAP, and all financial computations hereunder shall be
computed, unless otherwise specifically provided herein, in accordance with GAAP
consistently applied. That certain terms or computations are explicitly modified
by the phrase "in accordance with GAAP" shall in no way be construed to limit
the foregoing. The words "herein," "hereof" and "hereunder" and other words of
similar import refer to this Agreement as a whole, including the Exhibits and
Schedules hereto, as the same may from time to time be amended, modified or
supplemented and not to any particular section, subsection or clause contained
in this Agreement.
Wherever from the context is appears appropriate, each term stated in
either the singular or plural shall include the singular and the plural, and
pronouns stated in the masculine, feminine or neuter gender shall include the
masculine, the feminine and the neuter.
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