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STOCK PURCHASE AGREEMENT
among
LANCASTER PRESS, INC.,
a Delaware Corporation,
THE STOCKHOLDERS OF
LANCASTER PRESS, INC.,
and
CADMUS COMMUNICATIONS CORPORATION,
a Virginia Corporation
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Dated as of May 21, 1996
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TABLE OF CONTENTS
1. DEFINITIONS.................................................................................1
1.1. Certain Matters of Construction...............................................1
1.2. Cross Reference Table.........................................................2
1.3. Certain Definitions...........................................................4
2. ACQUISITION................................................................................11
3. PAYMENT AND CLOSING........................................................................12
3.1. Purchase Price...............................................................12
3.2. Retention of Consideration...................................................12
3.3. Adjustment of Purchase Price.................................................13
3.4. Time and Place of Closing....................................................15
3.5. Delivery.....................................................................15
4. REPRESENTATIONS AND WARRANTIES OF THE SELLERS..............................................15
4.1. Organization and Authority...................................................15
4.2. Authorization and Enforceability.............................................16
4.3. Non-Contravention, Etc.......................................................16
4.4. Title to Stock...............................................................16
5. REPRESENTATIONS AND WARRANTIES RELATING TO THE
COMPANY................................................................................17
5.1. Corporate Matters, etc.......................................................17
5.2. Financial Statements, etc....................................................19
5.3. Change in Condition..........................................................20
5.4. Liabilities..................................................................22
5.5. Assets.......................................................................22
5.6. Sufficiency of Assets........................................................24
5.7. Accounts; Funds, etc.........................................................24
5.8. Certain Contractual Obligations..............................................24
5.9. Insurance, etc...............................................................26
5.10. Litigation, etc..............................................................27
5.11. Compliance with Laws, etc....................................................27
5.12. Tax Matters..................................................................28
5.13. Employee Benefit Plans.......................................................30
5.14. Environmental Matters, etc...................................................35
5.15. Labor Relations..............................................................36
5.16. Brokers, etc.................................................................37
6. REPRESENTATIONS AND WARRANTIES OF THE BUYER................................................37
6.1. Corporate Matters, etc.......................................................37
6.2. Financial Condition, Solvency, etc...........................................38
6.3. Investment Intent, Related Matters...........................................38
6.4. Litigation...................................................................38
6.5. Brokers, etc.................................................................39
7. CERTAIN AGREEMENTS OF THE PARTIES..........................................................39
7.1. Access to Premises and Information...........................................39
7.2. Confidentiality Covenant of the Buyer........................................39
7.3. Operation of Business, Related Matters.......................................39
7.4. Preparation for Closing......................................................41
7.5. Payment of Transfer Taxes and Other Charges..................................42
7.6. Support Services; Cash; BCC Debt.............................................42
7.7. Cancellation of Options and Warrants; Payment
of Key Employee Bonuses......................................................42
7.8. No Shopping..................................................................42
7.9. Post-Closing Agreement.......................................................43
7.10. Stockholders Agreement.......................................................43
7.11. Further Assurances...........................................................43
8. CONDITIONS TO THE OBLIGATION TO CLOSE OF THE BUYER.........................................43
8.1. Representations, Warranties and Covenants....................................44
8.2. Legality; Governmental Authorization; Litigation.............................44
8.3. Third Party Consents.........................................................45
8.4. Opinions of Counsel..........................................................45
8.5. Releases.....................................................................45
8.7. Cancellation Agreements......................................................45
8.8. General......................................................................45
9. CONDITIONS TO THE OBLIGATION TO CLOSE OF THE SELLING
PARTIES.................................................................................45
9.1. Representations, Warranties and Covenants....................................46
9.2. Payment of BCC Debt..........................................................46
9.3. Legality; Government Authorization; Litigation...............................46
9.4. Opinion of Counsel...........................................................46
9.5. General......................................................................47
10. EMPLOYMENT AND EMPLOYEE BENEFITS ARRANGEMENTS..............................................47
10.1. Employment of Affected Employees.............................................47
10.2. Employee Benefits............................................................47
10.3. WARN.........................................................................48
10.4. Third-Party Rights...........................................................48
10.5. Indemnity....................................................................48
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11. INDEMNIFICATION............................................................................48
11.1. Indemnification..............................................................48
11.2. Time Limitation on Indemnification...........................................50
11.3. Monetary Limitations on Indemnification......................................51
11.4. Third Party Claims...........................................................52
11.5. Certain Other Indemnity Matters. ............................................53
12. CONSENT TO JURISDICTION; JURY TRIAL WAIVER.................................................54
12.1. Consent to Jurisdiction......................................................54
12.2. WAIVER OF JURY TRIAL.........................................................55
13. TERMINATION................................................................................55
13.1. Termination of Agreement.....................................................55
13.2. Effect of Termination........................................................56
13.3. Time of Essence..............................................................56
14. MISCELLANEOUS..............................................................................57
14.1. Entire Agreement; Waivers....................................................57
14.2. Amendment or Modification....................................................57
14.3. Investigation; No Additional Representations.................................57
14.4. Severability.................................................................58
14.5. Successors and Assigns.......................................................58
14.6. Agreements Among Sellers.....................................................58
14.7. Notices......................................................................60
14.8. Public Announcements.........................................................61
14.9. Headings, etc................................................................61
14.10. Disclosure...................................................................62
14.11. Third Party Beneficiaries....................................................62
14.12. Counterparts.................................................................62
14.13. Governing Law................................................................62
14.14. Expenses.....................................................................62
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EXHIBITS
Exhibit A - Legal Opinion of Sellers' Counsel
Exhibit B - Legal Opinion of Sellers' Counsel
Exhibit C - Legal Opinion of Sellers' Counsel
Exhibit D - BCC Debt Termination and Release
Exhibit E - BCC Industrial Services, Inc. Termination and Release
Exhibit F - Stockholder Release
Exhibit G - BCC Certificate
Exhibit H - Legal Opinion of Buyer's Counsel
SCHEDULES
Schedule 1 - Selling Shareholders, Shares
Schedule 1.3.6 - BCC Debt
Schedule 1.3.11 - Closing Balance Sheet
Schedule 3.1(a) - Sellers Percentages
Schedule 3.1(b) - Other Debt
Schedule 3.1(c) - Other Purchase Price Reductions
Schedule 4.3 - Sellers' Exceptions to Non-Contravention
Schedule 5.1.1 - Company Foreign Qualifications
Schedule 5.1.3 - Company Exceptions to Non-Contravention
Schedule 5.1.5 - Subsidiaries
Schedule 5.3.1 - Changes in Accounting Practices
Schedule 5.3.2 - Changes in Condition
Schedule 5.5.1 - Leases, Owned Real Property and Related Matters
Schedule 5.5.2 - Personal Property
Schedule 5.5.3 - Intellectual Property Rights
Schedule 5.7 - Bank Account, etc.
Schedule 5.8 - Contracts
Schedule 5.9 - Insurance
Schedule 5.10 - Litigation Matters
Schedule 5.11 - Compliance with Law
Schedule 5.12 - Tax Matters
Schedule 5.13 - Company Plans and Benefit Arrangements, etc.
Schedule 5.14 - Environmental Matters
Schedule 5.15 - Labor Matters
Schedule 6.4 - Litigation Matters
Schedule 7.3 - Operations of Business
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STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (this "Agreement") is made as of the 21st
day of May, 1996, among Lancaster Press, Inc., a Delaware corporation (the
"Company"), each stockholder or holder of options or warrants of the Company
listed on Schedule 1 hereto (each such stockholder, a "Seller" or "Selling
Party", and collectively, the "Sellers" or "Selling Parties") and Cadmus
Communications Corporation, a Virginia corporation (the "Buyer").
Recitals
1. Each of the Sellers respectively owns the number of issued and
outstanding shares of Class A common stock of the Company, par value $.01 per
share, Class B common stock of the Company, par value $.01 per share, (together,
the "Shares") and options and warrants to purchase such Class A or Class B
common stock (the "Options and Warrants"), in each case as set forth opposite
such Seller's name on Schedule 1 hereto.
2. The Sellers desire to sell and transfer the Shares to the Buyer and
the Buyer desires to acquire (the "Purchase") the Shares from the Sellers, all
upon the terms and subject to the conditions set forth in this Agreement.
Agreement
Therefore, in consideration of the foregoing and the mutual agreements
and covenants set forth below, the parties hereto hereby agree as follows:
1. DEFINITIONS. For purposes of this Agreement:
1.1. Certain Matters of Construction. In addition to the
definitions referred to or set forth below in this Section 1:
(a) The words "hereof", "herein", "hereunder" and words of
similar import shall refer to this Agreement as a whole and not to any
particular Section or provision of this Agreement, and reference to a
particular Section of this Agreement shall include all subsections
thereof.
1
(b) The words "party" and "parties" shall refer to the
Sellers, the Company and the Buyer.
(c) Definitions shall be equally applicable to both the
singular and plural forms of the terms defined, and references to the
masculine, feminine or neuter gender shall include each other gender.
(d) Accounting terms used herein and not otherwise defined
herein are used herein as defined by Generally Accepted Accounting
Principles in effect as of the date hereof, consistently applied.
(e) All references in this Agreement to any Exhibit or
Schedule shall, unless the context otherwise requires, be deemed to be
a reference to an Exhibit or Schedule, as the case may be, to this
Agreement, all of which are made a part of this Agreement.
1.2. Cross Reference Table. The following terms defined elsewhere
in this Agreement in the Sections set forth below shall have the respective
meanings therein defined:
Term Definition
"Adjusted Final Working Capital" Section 3.3
"Agreement" Preamble
"Arthur Andersen" Section 3.3
"Audited Balance Sheet" Section 5.2.1
"Audited Financials" Section 5.2.1
"BCC Debt Payment" Section 3.1
"BCC ISI" Section 4.1
"Bowles Hollowell" Section 5.16
"Buyer" Preamble
"Cancellation Agreements" Section 7.7
"Cancellation Payment" Section 7.7
"Cash Consideration" Section 3.1
"Closing" Section 3.4
"Closing Date" Section 3.4
2
"Company" Preamble
"Company Plans" Section 5.13
"Competing Transaction" Section 7.8
"Confidentiality Agreement" Section 7.2
"Contracts" Section 5.8
"DOL" Section 5.13
"Easco" Section 7.8
"Easco Note" Section 7.8
"ERISA Affiliate Section 5.13
"Financial Statements" Section 5.2.1
"Gross Cancellation Payment" Section 3.1
"HSR Act" Section 8.2
"Income Taxes" Section 5.12
"Indemnifying Party" Section 11.1
"Indemnitee" Section 11.1
"Intangibles" Section 5.5.3
"Interim Financials" Section 5.2.1
"IRS" Section 5.12
"Key Employee Bonuses" Schedule 5.3.2
"Leases" Section 5.5.1
"Licenses" Section 5.5.3
"Loan Agreement" Schedule 5.1.3
"March Balance Sheet" Section 5.2.1
"MLA I" Section 1.3.6
"MLA II" Section 1.3.6
"MLA III" Section 4.1
"Options" Recitals
"Other Debt Payment" Section 3.1
"Other Purchase Price Reductions" Section 3.1
"PBGC" Section 5.13
"Permits" Section 5.11
"Personal Property" Section 5.5.2
"Purchase" Recitals
"Purchase Price" Section 3.1
"Purchase Price Adjustment" Section 3.3
"Purchase Price Increase" Section 3.3
3
"Purchase Price Reduction" Section 3.3
"Real Property" Section 5.5.1
"Reserved Claims" Section 11.2
"Retained Funds" Section 3.2
"Seller" Preamble
"Sellers" Preamble
"Seller's Percentage" Section 3.1
"Sellers' Representative" Section 3.3
"Selling Party" Preamble
"Selling Parties" Preamble
"Stockholder Release " Section 8.5
"Supplemental Agreement" Section 11.2
"Shares" Recitals
"SLA" Section 1.3.6
"Warrants" Recitals
"Working Capital Excess" Section 3.3
"Working Capital Increase" Section 3.3
"Working Capital Requirement" Section 3.3
1.3. Certain Definitions. The following terms shall have the
following meanings:
1.3.1. Action. The term "Action" shall mean any
claim, action, cause of action or suit (in contract, tort or
otherwise), inquiry, proceeding or investigation by or before any
Governmental Authority.
1.3.2. Affected Employees. The term "Affected
Employees" shall mean all current employees of any of the Lancaster
Companies as of the Closing Date, including any such person who is on
an approved leave of absence.
1.3.3. Affiliate. The term "Affiliate" shall mean, as to the
Company (or other specified Person), each Person directly or indirectly
controlling, controlled by or under common control with the Company (or
such specified Person). For purposes of this definition, the term
"control" (including the terms "controlling," "controlled by" and
"under common control with") means the possession, direct or indirect,
of the
4
power to direct or cause the direction of the management and policies
of a Person, whether through ownership of voting securities or
otherwise.
1.3.4. Assets. The term "Assets" shall mean the
real property, personal property and intellectual property rights of
the Lancaster Companies as set forth on Schedules 5.5.1, 5.5.2 and
5.5.3 hereto.
1.3.5. Balance Sheet Date. The term "Balance Sheet
Date" shall mean March 31, 1995.
1.3.6. BCC Debt. The term "BCC Debt" shall mean all debt as
described on Schedule 1.3.6 hereto (including all outstanding
principal, interest, prepayment, penalties or premiums, if any, and
fees and expenses related thereto) of any of the Lancaster Companies to
Senior Lending Associates I, L.P. ("SLA"), Mezzanine Lending Associates
I, L.P. ("MLA I") and Mezzanine Lending Associates II, L.P. ("MLA II").
1.3.7. Business. The term "Business" shall mean
the business of the Lancaster Companies as such business is currently
conducted.
1.3.8. Business Day. The term "Business Day" shall
mean any day on which banking institutions in New York, New York are
customarily open for the purpose of transacting business.
1.3.9. By-laws. The term "By-laws" shall mean the
corporate by-laws of a corporation, as from time to time in effect.
1.3.10. Charter. The term "Charter" shall mean the
certificate or articles of incorporation or organization or other
charter or organizational documents of any Person (other than an
individual), each as from time to time in effect.
1.3.11. Closing Working Capital Sheet. The term
"Closing Working Capital Sheet" shall mean the worksheet scheduling
working capital, as of the close of business on the Closing Date and as
adjusted, of the Lancaster Companies, in substantially the
5
form attached as Schedule 1.3.11 hereto prepared in accordance with
Generally Accepted Accounting Principles as observed by the Lancaster
Companies in preparation of the Audited Balance Sheet, subject to
adjustment as required by the Closing Working Capital Sheet. Except as
set forth in the preceding sentence, the Closing Working Capital Sheet
shall not give effect to any tax effect of the transactions
contemplated by the terms of this Agreement.
1.3.12. COBRA. The term "COBRA" refers to
the provisions of the Consolidated Omnibus Budget Reconciliation Act of
1985 relating to continuation of health benefits in certain
circumstances.
1.3.13. Code. The term "Code" shall mean the federal Internal
Revenue Code of 1986, as amended, or any successor statute, and the
rules and regulations thereunder, and in the case of any referenced
section of any such statute, rule or regulation, any successor section
thereto, collectively and as from time to time amended and in effect.
1.3.14. Contractual Obligation. The term "Contractual
Obligation" shall mean, with respect to any Person, any contract,
agreement, deed, mortgage, lease, license, indenture, note, bond,
commitment, undertaking, or other document or instrument (including,
without limitation, any document or instrument evidencing or otherwise
relating to any indebtedness but excluding the Charter and By-laws of
such Person) to which or by which such Person is legally bound.
1.3.15. Debt. The term "Debt" of any Person shall mean all
obligations of such Person (i) for borrowed money, including all
outstanding principal and interest, (ii) evidenced by notes, bonds,
debentures or similar instruments and (iii) in the nature of guarantees
of obligations of the type described in clauses (i) and (ii) above of
any other Person.
1.3.16. Enforceable. The term "Enforceable"
shall mean, with respect to any Contractual Obligation, that such
Contractual Obligation is the legal, valid and binding obligation of
the Person in question, enforceable against such Person in accordance
with its terms.
6
1.3.17. Environmental Laws. The term "Environmental Laws"
shall mean (i) any federal, state, local or municipal laws, rules,
orders, regulations, statutes, ordinances, codes, decrees or
requirements of any Governmental Authority regulating, relating to or
imposing liability or standards of conduct concerning Hazardous
Substances or environmental protection as in effect as of the Closing
and (ii) case law existing as of the Closing regarding toxic torts,
public or private nuisance, trespass, personal injury or property
damage related to environmental conditions.
1.3.18. ERISA. The term "ERISA" shall mean the federal
Employee Retirement Income Security Act of 1974 or any successor
statute, and the rules and regulations thereunder, and in the case of
any referenced section of any such statute, rule or regulation, any
successor section thereto, collectively and as from time to time
amended and in effect.
1.3.19. Final Closing Working Capital Sheet. The term "Final
Closing Working Capital Sheet" shall mean the Closing Working Capital
Sheet as agreed upon pursuant to Section 3.3 hereof.
1.3.20. Generally Accepted Accounting Principles. The term
"Generally Accepted Accounting Principles" shall mean generally
accepted accounting principles consistently applied throughout the
specified periods.
1.3.21. Governmental Authority. The term "Governmental
Authority" shall mean any federal, state or local or any foreign
government, governmental authority, regulatory or administrative
agency, governmental commission, court or tribunal (or any department,
bureau or division thereof).
1.3.22. Governmental Order. The term "Governmental Order"
shall mean any order, writ, judgment, injunction, decree, stipulation,
determination or award entered by or with any Governmental Authority.
1.3.23. Hazardous Substances. The term "Hazardous Substances"
shall mean hazardous materials, hazardous wastes, infectious medical
wastes, hazardous or toxic
7
substances defined or regulated as such in or under any Environmental
Law, including, without limitation, petroleum, crude oil or fractions
thereof, petroleum products, natural or synthetic gas, materials
exhibiting the characteristics of ignitability, corrosivity, reactivity
or extraction procedure toxicity, as such terms are defined in
connection with hazardous materials or hazardous wastes or hazardous or
toxic substances in any Environmental Law.
1.3.24. Knowledge of the Buyer. The terms
"Knowledge of the Buyer" or "Knowledge" shall mean the actual
knowledge, upon due and reasonable inquiry, of C. Stephenson Gillispie,
Jr., Michael Dinkins, David E. Bosher, Bruce V. Thomas, John H.
Phillips and David G. Wilson, Jr.
1.3.25. Knowledge of the Sellers. The terms "Knowledge of the
Sellers" or "Knowledge" shall mean the actual knowledge, upon due and
reasonable inquiry of appropriate members of management of the
Lancaster Companies, of any of the Sellers.
1.3.26. Lancaster Companies. The term
"Lancaster Companies" shall mean, collectively, the Company and its
Subsidiaries (each of which individually is sometimes referred to
herein as a "Lancaster Company").
1.3.27. Legal Requirement. The term "Legal Requirement" shall
mean any federal, state or local or any foreign law, statute,
ordinance, code, rule or regulation, or any Governmental Order, or any
license, franchise, consent, approval, permit or similar right granted
under any of the foregoing, or any similar provision having the force
and effect of law.
1.3.28. Liabilities. The term "Liabilities" shall mean any and
all debts, liabilities and obligations, whether accrued, fixed,
absolute or contingent, including, without limitation, those arising
under any Legal Requirement or Governmental Order, those arising under
any Contractual Obligation and all Debt.
1.3.29. Lien. The term "Lien" shall mean
any mortgage, pledge, lien, security interest, charge, claim,
attachment, encumbrance, restriction on the transfer or voting of
capital stock, conditional sale or other title retention device or
arrangement
8
(other than capital leases), or transfer for the purpose of subjection
to the payment of any Debt, whether relating to any property or right
or the income or profits therefrom; provided, however, that the term
"Lien" shall not include (i) statutory liens for Taxes to the extent
that the payment thereof is not in arrears or otherwise due, (ii)
encumbrances in the nature of zoning restrictions, easements, rights or
restrictions of record on the use of real property if the same do not
detract from the value of the property encumbered thereby or impair the
use of such property in the Business, (iii) statutory or common law
liens to secure landlords, lessors or renters under leases or rental
agreements confined to the premises rented to the extent that no
payment or performance under any such lease or rental agreement is in
arrears or is otherwise due, (iv) deposits or pledges made in
connection with, or to secure payment of, worker's compensation,
unemployment insurance, old age pension programs mandated under
applicable Legal Requirements or other social security, (v) statutory
or common law liens in favor of carriers, warehousemen, mechanics and
materialmen, statutory or common law liens to secure claims for labor,
materials or supplies and other like liens, which secure obligations
disclosed in the Audited Balance Sheet or the March Balance Sheet to
the extent that payment of such obligations is not in arrears or
otherwise due, and (vi) restrictions on transfer of securities imposed
by applicable state and federal securities laws.
1.3.30. Losses. The term "Losses" shall mean any and all
losses, damages, deficiencies, awards, assessments, amounts paid in
good faith settlement, judgments, fines, penalties, costs and expenses
(including, without limitation, reasonable legal costs and expenses);
provided, however, that the amount of any such Losses for the purposes
of indemnification shall be determined net of the sum of (a) any
amounts actually recovered by the Indemnitee under insurance policies
with respect to such Loss minus (b) premiums or other costs actually
paid by such Indemnitee for such insurance coverage and shall be (i)
increased to take account of any Tax cost incurred by the Indemnitee
(or any consolidated, combined or unitary group of which the Indemnitee
is also a member) arising from the accrual or receipt of an indemnity
payment or insurance recovery relating to such Loss and (ii) reduced to
take account of the present value (based on a discount factor of the
federal tax underpayment rate per annum without regard to Section
6621(c) of the Code) of any Tax Benefit reasonably expected to be
realized by the Indemnitee (or any consolidated, combined or unitary
group of
9
which the Indemnitee is also a member) arising from the incurrence or
payment of such Loss. Without limiting the foregoing, the term "Losses"
shall also include the cost of any increase in insurance premiums in
excess of the rate of inflation to the extent any such increase is
directly attributable to amounts recovered under an insurance policy
with respect to a Loss for which a claim for indemnification may be
made under Section 11 of this Agreement. In computing the amount of any
such Tax cost or Tax Benefit, (i) all indemnity payments hereunder
shall be considered an adjustment to the Purchase Price, except to the
extent that the Indemnitee would be required to treat the payment
otherwise under applicable income tax law, and (ii) the Indemnitee (or
any consolidated, combined or unitary group of which the Indemnitee is
a member) shall be deemed to recognize all other items of income, gain,
loss, deduction or credit before recognizing any such item arising from
the accrual or receipt of the relevant indemnity payment or insurance
recovery or the incurrence or payment of the relevant Loss.
1.3.31. Material Adverse Effect. The term "Material Adverse
Effect" shall mean any change in or effect on the business, operations,
assets or financial condition of any one or more of the Lancaster
Companies that has a material adverse effect on the business,
operations, assets or financial condition of the Lancaster Companies
taken as a whole.
1.3.32. Ordinary Course of Business. The
term "Ordinary Course of Business" shall mean the ordinary course of
the Lancaster Companies' business consistent with current and past
custom and practice.
1.3.33. Person. The term "Person" shall
mean any individual, partnership, corporation, association, trust,
joint venture, unincorporated organization or other entity, and any
Governmental Authority.
1.3.34. Significant Customer. The term
"Significant Customer" shall mean each customer to whom the Lancaster
Companies had annual sales for fiscal year 1996 in excess of $750,000.
1.3.35. Subsidiary. The term "Subsidiary"
shall mean any Person of which the Company (or other specified Person)
shall own directly or indirectly through a
10
Subsidiary, a nominee arrangement or otherwise at least a majority of
the outstanding capital stock (or other shares of beneficial interest)
entitled to vote generally.
1.3.36. Tax Benefit. The term "Tax Benefit" shall mean any
reduction in Taxes realized by any person, which Tax Benefit shall be
determined after first taking all other items of income, gain, loss,
deduction or credit of such person into account.
1.3.37. Taxes. The term "Tax" shall mean any (and in the
plural "Taxes" shall mean all) federal, state, local or foreign income,
gross receipts, franchise, estimated, alternative minimum, add-on
minimum, sales, use, transfer, registration, value added, excise,
severance, stamp, occupation, premium, profit, windfall profit,
customs, duties, real property, personal property, capital stock,
social security, employment, unemployment, disability, payroll,
license, employee, and other tax, withholding taxes, assessments,
imposts, levies, and other charges of every kind and nature arising
under or imposed by any Legal Requirement, including, without
limitation, all interest, penalties and additions with respect to any
of the foregoing.
1.3.38. Tax Return. The term "Tax Return" shall mean all
federal, state, local, and foreign Tax returns, Tax reports, claims for
refund of Tax, and declarations of estimated Tax, or other statement
relating to Taxes and any schedule or attachments to any of the
foregoing or amendments thereto, including (where permitted or
required) consolidated, combined or unitary returns for any group of
entities.
1.3.39. WARN. The term "WARN" shall mean the Worker
Adjustment and Retraining Notification Act of 1988.
1.3.40. Working Capital Assets. The term "Working Capital
Assets" shall mean the cash, accounts receivable, inventory and prepaid
expenses shown on the Financial Statements.
2. ACQUISITION. Upon the terms, subject to the conditions, and in
reliance on the representations, warranties and covenants set forth herein, on
the Closing Date, each of the Sellers agrees to sell, transfer and deliver to
the Buyer the number of Shares set forth opposite
11
such Seller's name in Schedule 1 hereto, and the Buyer agrees to purchase and
acquire from each of the Sellers such Shares for the consideration specified in
Section 3.1 hereof.
3. PAYMENT AND CLOSING.
3.1. Purchase Price. In consideration of the sale and transfer of the
Shares by the Sellers to the Buyer and of the agreement by the Sellers to
perform each of the other obligations and covenants to be fulfilled or complied
with by them hereunder, the Buyer will pay at the Closing or as otherwise agreed
to by the parties fifty-seven million, four hundred and fifty thousand dollars
($57,450,000) consisting of (A) $36,034,155.65 paid to the Company to be applied
at the Closing to the payment in full of all outstanding BCC Debt (the "BCC Debt
Payment"), (B) $6,857,585.21 for the assumption or payment in full of
$6,930,359.90 in other debt, including prepayment penalty, of the Lancaster
Companies as set forth on Schedule 3.1(b) hereto (the "Other Debt Payment"), (C)
$723,366.21 paid to the Company to be applied to the cancellation of the Options
and Warrants pursuant to Section 7.7 (the "Gross Cancellation Payment"), (D)
$375,000 related to the matters referred to on Schedule 3.1(c) hereto (the
"Other Purchase Price Reductions"), and (E) payment of the balance of
$13,459,892.93 in cash to the Sellers at the Closing (the "Cash Consideration,"
together with the BCC Debt Payment, the Other Debt Payment, the Gross
Cancellation Payment and the Other Purchase Price Reductions, the "Purchase
Price"). The Cash Consideration shall be paid to the Sellers' Representative to
be allocated by it among each of the Sellers in the respective percentages of
Cash Consideration set forth on Schedule 3.1(a).
3.2. Retention of Consideration. Notwithstanding anything to the
contrary in this Agreement, each of the Sellers, the Sellers' Representative and
the Buyer hereby agree that the Sellers' Representative shall retain in trust
for the benefit of the Sellers and the Buyer an amount equal to $1.3 million of
the aggregate Cash Consideration and Gross Cancellation Payment (the "Retained
Funds") in order to satisfy the Purchase Price Reduction, if any. The Sellers'
Representative shall only disburse the Retained Funds in accordance with this
Section 3.2 and Section 3.3(c). Not later than 12:00 noon (New York time) on any
day within five Business Days after the Final Closing Working Capital Sheet is
delivered to the Sellers' Representative pursuant to Section 3.3, the Buyer
shall notify the Sellers' Representative in writing of its wire transfer
instructions with respect to the disbursement of the Retained Funds in
connection with the payment of any Purchase Price Reduction and the Sellers'
12
Representative shall disburse the Purchase Price Reduction to Buyer in
accordance with such instructions on the next Business Day following receipt of
such notice. After payment by the Sellers' Representative to Buyer of the
Purchase Price Reduction, if any, in accordance with this Section 3.2 and
Section 3.3, the Sellers' Representative shall pay to each Seller the balance of
any remaining amounts included in the Retained Funds in an amount corresponding
to the respective fully-diluted percentages set forth on Schedule 3.1(a)
("Seller's Percentage"). In the event Buyer does not provide the notice referred
to above within five Business Days after the Final Working Capital Sheet is
delivered to the Sellers' Representative pursuant to Section 3.3(c), the
Sellers' Representative shall disburse the Retained Funds in accordance with
Section 3.3(c). The Sellers' Representative shall invest the Retained Funds in
an interest bearing account, and shall disclose to Buyer and each Seller, upon
request, the location, including the identity of the financial institution and
account number, of the Retained Funds, and each of the Sellers shall be entitled
to receive from the Sellers' Representative an amount of earned interest equal
to the product of (x) the aggregate amount of interest earned on the Retained
Funds, multiplied by (y) such Seller's Percentage.
3.3. Adjustment of Purchase Price
(a) Within 30 days after the Closing Date, the Buyer shall
cause the Company to prepare and deliver to Butler Capital Corporation,
as agent for the Sellers (the "Sellers' Representative"), a draft
Closing Working Capital Sheet. If Sellers' Representative shall have
any objections to the draft Closing Working Capital Sheet, it will
deliver a written notice describing in detail its objections to the
Buyer within 30 days after receiving the draft Closing Working Capital
Sheet. The Buyer and Sellers' Representative will use their reasonable
best efforts to resolve any such objections. If a final resolution is
not obtained within 14 days after the Buyer has received the notice of
objections, Arthur Andersen, LLP ("Arthur Andersen") will resolve any
remaining objections by reference to Generally Accepted Accounting
Principles used in preparing the Closing Working Capital Sheet, subject
to the adjustments required thereby. Arthur Andersen shall, upon a
review of the draft Closing Working Capital Sheet and consideration of
Sellers' Representative's objections thereto, resolve any such
objections that have not been resolved by the Buyer and Sellers'
Representative, revise the Closing Working Capital Sheet (which shall
constitute the Final Closing Working Capital Sheet), determine the
Final Working Capital and Purchase Price Adjustment,
13
and communicate the foregoing to the Buyer and the Sellers'
Representative in writing, not later than 30 days following the date of
its receipt of such dispute. Buyer, on the one hand, and the Sellers,
on the other hand, shall share equally in the payment of all fees of
Arthur Andersen incurred in the resolution of such objections.
(b) If the Buyer and the Sellers' Representative resolve all
objections without resort to Arthur Andersen, the Buyer will, within
five days of such resolution, revise the draft Closing Working Capital
Sheet as appropriate to reflect such resolution (as agreed upon by the
parties) and deliver it to Sellers' Representative. Such revised
Closing Working Capital Sheet (or the draft Closing Working Capital
Sheet prepared by the Company, if Sellers' Representative does not
object thereto in accordance with Section 3.3(a)) shall constitute the
Final Closing Working Capital Sheet.
(c) If the working capital of the Company determined by
subtracting current liabilities shown on the Final Closing Working
Capital Sheet from current assets shown on the Final Closing Working
Capital Sheet, as adjusted in accordance with the provisions of the
Closing Working Capital Sheet (the "Adjusted Final Working Capital"),
is equal to or greater than $11,252,000 (the "Working Capital
Requirement"), but less than or equal to $11,700,000 (the "Working
Capital Excess") the Purchase Price shall not be adjusted. To the
extent the Adjusted Final Working Capital of the Company is less than
the Working Capital Requirement, the Purchase Price shall be reduced
one dollar for every dollar by which the Working Capital Requirement
exceeds the Adjusted Final Working Capital (the "Purchase Price
Reduction"). To the extent the Adjusted Final Working Capital of the
Company exceeds the Working Capital Excess, the Purchase Price shall be
increased one dollar for every dollar by which the Adjusted Final
Working Capital exceeds the Working Capital Excess (the "Purchase Price
Increase"). The Purchase Price Increase and the Purchase Price
Reduction shall be collectively referred to herein as the "Purchase
Price Adjustment". The Purchase Price Reduction, if any, shall be paid
by the Sellers' Representative, on behalf of the Sellers, to the Buyer,
in cash, in the amount of such shortfall. The amount of the Purchase
Price Reduction shall not be limited to the amount of the Retained
Funds. Sellers' Representative shall pay such Purchase Price Reduction
to Buyer in cash within five Business Days of the delivery of the Final
Closing Working Capital Sheet. The Purchase Price Increase, if any,
shall be paid by
14
the Buyer in cash, within five Business Days of the delivery of the
Final Closing Working Capital Sheet, to the Sellers' Representative who
shall allocate such funds among the Sellers in proportion to each of
the Seller's Percentages.
3.4. Time and Place of Closing. The closing (the "Closing") shall take
place at the offices of Ropes & Gray, One International Place, Boston,
Massachusetts, 02110 at 2:00 p.m. (local time) on May 21, 1996, or at such other
time or place upon which the parties may agree, provided that all conditions to
Closing have been satisfied or waived as provided in Sections 8 and 9 (the day
on which the Closing takes place being referred to herein as the "Closing
Date"). Each of the Sellers also shall deliver to the Buyer (i) a certificate,
complying with the requirements of Treasury Regulation ss.1.1445-2(b)(2), that
the Seller is not a foreign person for federal income tax purposes and (ii) a
completed Internal Revenue Service Form W-9.
3.5. Delivery. At the Closing, each of the Sellers shall deliver to
Buyer the certificate or certificates evidencing all of the Shares held by such
Seller free and clear of all liens, claims and encumbrances (except under
applicable federal and state securities laws) other than those created by the
Buyer and duly executed stock powers transferring such Shares to Buyer, against
(i) delivery by the Buyer to the Sellers' Representative of the Cash
Consideration, (ii) payment of the BCC Debt Payment pursuant to Section 9.2
hereof, (iii) payment or assumption of the Debt included in the Other Debt
Payment, including the cash payment in full of the Debt and any related payables
described in Item 1 of Schedule 3.1(b), (iv) payment of the Cancellation Payment
pursuant to Section 7.7 hereof, and (v) payment or assumption of the Other
Purchase Price Reductions, including the cash payment in full of the Key
Employee Bonuses pursuant to Section 7.7 hereof.
4. REPRESENTATIONS AND WARRANTIES OF THE SELLERS. In order to induce the Buyer
to enter into and perform this Agreement and to consummate the transactions
contemplated hereby, each of the Sellers, severally and not jointly, represents
and warrants to the Buyer, but only with respect to such Seller and the Shares,
Options and Warrants owned by such Seller, as follows:
4.1. Organization and Authority. Each of SLA, MLA I, MLA II and
Mezzanine Lending Associates III, L.P. ("MLA III") is a limited partnership,
duly formed, legally
15
existing and in good standing under the laws of the State of Delaware, BCC
Industrial Services, Inc. ("BCC ISI") is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of Delaware,
and each Seller has full power and authority to enter into this Agreement, to
carry out and perform his, her or its obligations hereunder and to consummate
the transactions contemplated hereby.
4.2. Authorization and Enforceability. This Agreement, and each of the
other agreements entered into pursuant to this Agreement to which any Seller is
a party, have been duly authorized, executed and delivered by, and are
Enforceable against, each Seller that is a party thereto.
4.3. Non-Contravention, Etc. Except as set forth in Schedule 4.3
hereto, the execution and delivery of this Agreement by such Seller, the
consummation by such Seller of the transactions contemplated herein, the sale to
the Buyer of the Shares owned by such Seller and the cancellation of the Options
and Warrants as contemplated herein and the performance by such Seller of this
Agreement in accordance with its terms and conditions do not and will not
conflict with or result in the breach of any of the terms or provisions of, or
constitute a default under, any Contractual Obligation to which such Seller is a
party or by which such Seller is, or the Shares to be sold by such Seller
hereunder, or the Options and Warrants to be canceled hereunder are bound or any
Legal Requirement applicable to such Seller or to the Shares to be sold by such
Seller and the Options and Warrants to be canceled hereunder. The existence of
any such conflict, whether or not set forth on Schedule 4.3, shall not
constitute a failure on the part of such Seller to comply with the requirements
of Section 8.1.1 hereof to the extent that any such conflict shall have been
waived prior to the Closing in writing by the other party to any such
Contractual Obligation or by the appropriate Governmental Authority. No consent
is required to be obtained by such Seller in connection with the execution and
delivery of this Agreement by such Seller or the sale of the Shares to be sold
by such Seller or the cancellation of the Options and Warrants as contemplated
hereby, except as set forth in Schedule 4.3.
4.4. Title to Stock. Each Seller is the record and beneficial owner of
and has good and valid title to the Shares, Options and Warrants set forth
opposite such Seller's name on Schedule 1 hereto which will be sold by such
Seller as contemplated hereby, free and clear of any liens, claims or
encumbrances (other than restrictions on transfer of securities imposed by
16
applicable state and federal securities laws). There is no Contractual
Obligation pursuant to which any Seller has, directly or indirectly, granted any
option, warrant or other right to any Person to acquire such Seller's Shares,
Options or Warrants.
5. REPRESENTATIONS AND WARRANTIES RELATING TO THE COMPANY. In order to
induce the Buyer to enter into and perform this Agreement and to consummate the
transactions contemplated hereby, each of the Sellers jointly and severally
represents and warrants to the Buyer as follows:
5.1. Corporate Matters, etc.
5.1.1. Organization, Power and Standing of the Company. The
Company is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of Delaware and has all
requisite power and authority, corporate and otherwise, to enter this
Agreement, to carry out and perform its obligations hereunder, to
consummate the transactions contemplated hereby and the Company has the
corporate power and authority to own, operate or lease its properties
and to carry on its business as currently conducted. The Company is
duly qualified or licensed to do business as a foreign corporation in
the jurisdictions listed on Schedule 5.1.1, and is in good standing as
such, in each jurisdiction in which the nature of its business or the
ownership of its properties require such qualification or licensing,
except for such failures which, when taken together with all other such
failures, would not have a Material Adverse Effect.
5.1.2. Authorization and Enforceability.
This Agreement, and each of the other agreements entered into pursuant
to this Agreement to which the Company is a party, have been duly
authorized, executed and delivered by, and are Enforceable against, the
Company.
5.1.3. Non-Contravention, etc. Except for items listed on
Schedule 5.1.3, neither the execution, delivery or performance of this
Agreement nor the consummation of any of the transactions contemplated
hereby does or will constitute, result in or give rise to (i) a breach,
violation or default under any Legal Requirement applicable to any
Lancaster Company, (ii) a breach of or a default under any Charter or
17
By-Laws provision of any Lancaster Company, (iii) the imposition of any
Lien upon any Asset or (iv) a breach of or a default under (or the
acceleration of the time for performance of) any Contractual Obligation
of any Lancaster Company. To the Knowledge of the Sellers, no approval,
consent, waiver, authorization or other order of, and no declaration,
filing, registration, qualification or recording with, any Governmental
Authority is required to be obtained or made by or on behalf of any
Lancaster Company in connection with the execution, delivery or
performance of this Agreement and the consummation of the transactions
contemplated hereby, except as shall have been obtained or made on or
prior to, and shall be in full force and effect at, the Closing Date.
5.1.4. Title to Stock. The entire authorized capital stock of
the Company consists of (i) 490,000 shares of Class A common stock of
which 251,300 shares are issued and outstanding and 91,700 shares are
reserved for issuance upon exercise of the Options and 33,657 shares
are reserved for issuance upon exercise of the Warrants and (ii)
775,000 shares of Class B common stock of which 773,245 shares are
issued and outstanding. The Shares constitute all of the issued and
outstanding shares of common stock of the Company, are duly authorized,
validly issued and are fully paid and nonassessable. The Shares,
Options and Warrants are held of record and beneficially by the Sellers
as set forth on Schedule 1 hereto. Except for this Agreement, the
Options and the Warrants, there is no Contractual Obligation pursuant
to which the Company has, directly or indirectly, granted any option,
warrant or other right to any Person to acquire the shares of common
stock or any other securities of or equity interests in the Company.
5.1.5. Subsidiaries. Schedule 5.1.5 sets forth a true and
complete list of all Subsidiaries of the Company, including the name
and jurisdiction of incorporation or organization of each such
Subsidiary. Each Subsidiary listed on Schedule 5.1.5 is a corporation
duly incorporated and validly existing under the laws of its respective
jurisdiction of incorporation, has the corporate power and authority to
own, operate or lease the properties and assets now owned, operated or
leased by such Subsidiary and to carry on its business as currently
conducted, is duly qualified as a foreign corporation in each
jurisdiction indicated on Schedule 5.1.5 where the character of its
properties owned, operated or leased or the nature of its activities
makes such
18
qualification necessary, except for such failures which, when taken
together with all other such failures, would not have a Material
Adverse Effect. Each Subsidiary listed on Schedule 5.1.5 is
wholly-owned by the Company (either directly or indirectly by way of
ownership through another Subsidiary listed on Schedule 5.1.5).
5.1.6. Charter and By-laws. The Company
has delivered to the Buyer true and complete copies of the Charter and
By-laws of each Lancaster Company, in each case as in effect on the
date hereof.
5.2. Financial Statements, etc.
5.2.1. Financial Information. The Company has delivered to
the Buyer the following:
(a) The consolidated balance sheet (the "Audited Balance
Sheet") of the Company and its consolidated Subsidiaries as of the
Balance Sheet Date and the related statements of earnings and
shareholders equity and cash flows for the fiscal year then ended,
accompanied by the notes thereto and the report thereon of Arthur
Andersen and similar financial statements as at the end of and for each
of the preceding two (2) fiscal years (collectively, the "Audited
Financials" and, together with the Interim Financials (as defined in
paragraph (b) below), the "Financial Statements").
(b) The unaudited consolidated balance sheet (the "March
Balance Sheet") of the Company and its consolidated Subsidiaries as of
March 31, 1996 and related unaudited consolidated statements of
earnings and cash flows for the twelve-month period then ended together
with comparable financial statements as of and for the same period in
the preceding year (the "Interim Financials").
5.2.2. Character of Financial Information. The Financial
Statements (including the notes thereto) were prepared in accordance
with Generally Accepted Accounting Principles consistently applied
throughout the periods specified therein and present fairly, in all
material respects, the financial position and results of operations of
the Company and its Subsidiaries as of the dates and for the periods
specified therein,
19
subject in the case of the Interim Financials to an absence of
footnotes and to normal year-end adjustments.
5.3. Change in Condition.
5.3.1. Accounting Practices. Except for the matters set
forth in Schedule 5.3.1, since the Balance Sheet Date the Company has
not made or agreed to make, and has not permitted any of its
Subsidiaries to make or agree to make, any material change in its
methods of accounting or accounting practices as reflected in the
Audited Financials.
5.3.2. Since Balance Sheet Date. Except for matters set forth
in Schedule 5.3.2, since the Balance Sheet Date the Business has been
conducted only in the Ordinary Course of Business (except as otherwise
required by the terms of this Agreement) and, without limiting the
generality of the foregoing:
(a) Neither the Company nor any of its Subsidiaries have:
(i) entered into any Contractual Obligation
other than this Agreement relating to (A)
the sale of any capital stock or equity
interest in any Lancaster Company, (B) the
purchase of assets constituting a business
or (C) any merger, consolidation or other
business combination;
(ii) made or agreed to make any material change
in its customary payment or credit
practices or granted any extensions of
credit other than in the Ordinary Course of
Business or paid any indebtedness other
than as required by the terms of the
instruments governing the Debt disclosed on
the Financial Statements;
(iii) waived or released any right of substantial
value;
(iv) instituted, settled or agreed to settle any
Action;
20
(v) mortgaged, pledged or subjected to any Lien
any of the Assets or the Working Capital
Assets other than (A) conditional sales or
similar security interests granted in
connection with the lease or purchase of
equipment or supplies in the Ordinary
Course of Business including the
capitalized leases disclosed on Schedule
5.5.1 hereto, and (B) Liens disclosed on
Schedule 5.5.1 and Schedule 5.5.2 hereto;
(vi) made any change in the rate of compensation
payable to any director, officer, manager
or senior employee, of any Lancaster
Company, made or agreed to any change in
the rate of fees for services rendered to
any Lancaster Company by any Affiliate
thereof or made any change in the rate of
compensation for hourly employees (other
than increases granted or made in the
Ordinary Course of Business, which
increases have not had a Material Adverse
Effect);
(vii) sold, leased, transferred or exchanged any
Assets, including Intangibles, or Working
Capital Assets not in the Ordinary Course
of Business;
(viii) declared or paid any dividends or other
distributions on any shares of its capital
stock or redeemed or purchased any such
shares; or
(ix) incurred any liability owing to, sold any
Assets or Working Capital Assets to, or
entered into any transaction with, any
Seller or any Affiliate of any Seller.
(b) None of the Lancaster Companies has entered into any
Contractual Obligation to do any of the actions referred to in clause
(a) above;
21
(c) There has not been any material adverse change in the
Business or in the financial condition of the Lancaster Companies,
taken as a whole; and
(d) Except as set forth on Schedule 5.3.2(d), (i) to the
Knowledge of Sellers, there is no current unresolved commercial dispute
between any Significant Customer and the Lancaster Companies which
could reasonably be expected to result in a Significant Customer
terminating its relationship with the Lancaster Companies and (ii) none
of the Sellers or the Lancaster Companies have received written or, to
the Knowledge of Sellers, any other notice from a Significant Customer
(of the type customarily provided by customers of the Lancaster
Companies with respect to such matters), of either (x) any termination
of such Significant Customer's relationship with the Lancaster
Companies or (y) the intent of any such Significant Customer to reduce
its annual volume for fiscal year 1997 with the Lancaster Companies by
more than 50% of actual annual sales by the Lancaster Companies to such
Significant Customer for fiscal year 1996.
5.4. Liabilities. At the Closing, the Lancaster Companies will not have
any Liabilities, other than: (a) Liabilities either set forth on or referred to
in the Audited Balance Sheet or the March Balance Sheet (or in any notes
thereto) or which are not required by Generally Accepted Accounting Principles
to be reflected in such balance sheet, (b) Liabilities with respect to matters
disclosed in this Agreement or in the Schedules hereto, (c) Liabilities covered
by insurance, indemnification, contribution or comparable arrangements which
will remain in effect and available to the Lancaster Companies immediately after
the Closing, (d) Liabilities with respect to matters addressed in Sections 7.5
and 10 (which shall be governed solely by the terms of such Sections) and (e)
Liabilities incurred since the date of the March Balance Sheet in the Ordinary
Course of Business and not in violation of this Agreement.
5.5. Assets.
5.5.1. Real Property. Schedule 5.5.1 hereto sets
forth a complete and correct list of all real property owned by any
Lancaster Company, and each Contractual Obligation (including all
amendments) under which any real property is leased by any Lancaster
Company (the "Leases", and together with the real property owned by the
Lancaster Companies, the "Real Property"). The Company and each
Subsidiary has
22
good and valid title to all the real property listed in Schedule 5.5.1
as owned by it, and valid leasehold interests in all real property
listed in Schedule 5.5.1 as leased by it, free and clear of all Liens
other than those securing liabilities reflected in the March Balance
Sheet or listed in Schedule 5.5.1 since the date of the March Balance
Sheet. Each of the Company and the Subsidiaries enjoys peaceful and
undisturbed possession under all Leases under which it operates.
Neither the Company nor any Subsidiary has received written notice
that, and the Sellers have no Knowledge that, the ownership or lease of
the Real Property by the Company or a Subsidiary or the use thereof, as
presently used by the Company or a Subsidiary, violates any local
zoning or similar land use laws or governmental regulations. Neither
the Company nor any Subsidiary has received written notice of, and the
Sellers have no Knowledge of, any presently existing, violation of or
noncompliance with any covenant, condition, restriction, order or
easement affecting the Real Property. Neither the Company nor any
Subsidiary has received written notice of, and the Sellers have no
Knowledge of, any presently pending or threatened, condemnation
affecting the Real Property. The Company has delivered to the Buyer
complete and correct copies of the Leases referred to in Schedule
5.5.1. To the Knowledge of the Sellers, there are no material defects
in any buildings, structures and appurtenances thereto located on the
Real Property.
5.5.2. Personal Property. Schedule 5.5.2 hereto contains a
list of all tangible personal property owned or leased, as indicated
thereon, by the Lancaster Companies as of the date so indicated thereon
which are material to the conduct of the Business or which has an
individual book value in excess of $25,000 (the "Personal Property")
including, without limitation, all personal properties, rights and
assets reflected in the March Balance Sheet (except as sold or
otherwise disposed of since the date of the March Balance Sheet in the
Ordinary Course of Business or as otherwise permitted by this
Agreement). The Lancaster Companies have valid title to all owned
personal property, or, in the case of personal property held under
lease, a valid and enforceable right to use such property under an
Enforceable lease. The personal property of the Lancaster Companies is
not subject to any Lien except as described in Schedule 5.5.2 hereto.
To the Knowledge of the Sellers, all Personal Property having an
individual book value in excess of $50,000 has been maintained in all
material respects by the Company in accordance with standard industry
practices.
23
5.5.3. Intellectual Property Rights. Schedule 5.5.3 lists all
trade and product names, trademarks, service marks, logos and
copyrights (including registrations and applications) that are owned,
licensed (other than pursuant to general computer software licenses
entered into in the Ordinary Course of Business) or otherwise used by
the Lancaster Companies (the "Intangibles"). Schedule 5.5.3 also lists
each license or other Contractual Obligation (including all amendments)
under which any Intangible is owned, leased or used by the Lancaster
Companies (the "Licenses"). Except as disclosed on Schedule 5.5.3, all
Intangibles are owned by one or more Lancaster Companies or licensed to
one or more Lancaster Companies under a License that is Enforceable.
Except as disclosed on Schedule 5.5.3 or Schedule 5.8, there is no
license or other Contractual Obligation under which one or more
Lancaster Companies are a licensor or licensee with respect to any
Intangibles. To the Knowledge of the Sellers, (i) use by the Lancaster
Companies of the Intangibles does not infringe and has not infringed
any rights of any third party, and (ii) no activity of any third party
infringes upon the rights of the Lancaster Companies with respect to
any of the Intangibles. No Action alleging or relating to any such
infringement against the rights of the Lancaster Companies or any third
parties is currently pending or, to the Knowledge of the Sellers,
threatened.
5.6. Sufficiency of Assets. The Real Property, Personal Property and
Intangibles and all of the other personal property owned or leased by the
Lancaster Companies together constitute all properties, rights and assets
necessary for the conduct of the Business, other than as described on Schedule
5.6; provided, however, no representation or warranty is made herein as to the
sufficiency or adequacy of the Working Capital Assets.
5.7. Accounts; Funds, etc. Schedule 5.7 identifies each bank
account or similar account for the deposit of cash or securities maintained by
or on behalf of any of the Lancaster Companies (indicating the name and address
of the bank or other financial institution).
5.8. Certain Contractual Obligations. Set forth on Schedule 5.8
hereto is a true and complete list of all of the following Contractual
Obligations of the Lancaster Companies:
(a) All collective bargaining agreements and other labor
agreements and all written employment or consulting agreements pursuant
to which services are rendered
24
to the Lancaster Companies, in each case which are likely to involve
payments by or on behalf of a Lancaster Company in excess of $50,000
per year;
(b) All Contractual Obligations under which any Lancaster
Company is or will after the Closing be (i) restricted from carrying on
any business or other activities anywhere in the world (other than use
restrictions contained in any of the Leases and limiting only the
tenant's use of the property leased pursuant to such Lease) or (ii)
bound to participate in any allocation or sharing of Taxes;
(c) All Contractual Obligations (including, without
limitation, options) to sell or otherwise dispose of any Assets having
a fair market value in excess of $50,000 except in the Ordinary Course
of Business;
(d) All Contractual Obligations under which any Lancaster
Company has, or after the Closing will have, any liability or
obligation to or for the benefit of any of the Sellers or any Affiliate
of any Seller (other than the Lancaster Companies);
(e) All Contractual Obligations (including, without
limitation, partnership and joint venture agreements) under which (i)
any Lancaster Company has any Liability for Debt or constituting or
giving rise to a guarantee of any Liability of any Person (other than
any Lancaster Company), (ii) any Lancaster Company has given any
warranty or has assumed any Liabilities, (iii) any Lancaster Company
has settled any claims or (iv) any Person has any Liability
constituting or giving rise to a guarantee of (or other contingent
obligation in respect of) any Liability or obligation of any Lancaster
Company, in each case involving any Debt or Liability in excess of
$50,000 individually or $100,000 in the aggregate together with all
other such Debts or Liabilities;
(f) All Contractual Obligations under which any Lancaster
Company may reasonably be expected to become obligated to pay any
amount or receive any benefit in respect of indemnification
obligations, purchase price adjustment or otherwise in connection with
any (i) acquisition or disposition of assets constituting a business or
securities representing a controlling interest in any Person, (ii)
merger, consolidation or
25
other business combination, or (iii) series or group of related
transactions or events of a type specified in subclauses (i) and (ii);
(g) All license or franchise agreements, which in each case
individually or as part of any series of related agreements involved
payments by or on behalf of, or to, any Lancaster Company in excess of
$50,000 during the calendar year ended December 31, 1995 or that are
likely to involve such payments over the remaining term of the
contract;
(h) All Contractual Obligations pursuant to which any
Lancaster Company may be expected to perform services with a value in
excess of $50,000; and
(i) All Contractual Obligations pursuant to which any
Lancaster Company may be obligated to pay for goods and services to be
delivered or performed with a value in excess of $50,000 in any fiscal
year.
The Company has delivered to the Buyer a true and complete copy of each of the
Contractual Obligations listed on Schedule 5.8 hereto, each as in effect on the
date hereof, including all amendments (such Contractual Obligations, other than
the Company Plans being referred to herein collectively as the "Contracts").
Each Contract is Enforceable by the Lancaster Company that is a party thereto,
against each other Person party thereto. No material breach or default by any
Lancaster Company under any of the Contracts has occurred and is continuing, and
no event has occurred which with notice or lapse of time or both would
constitute such a material breach or default. To the Knowledge of the Sellers,
no material breach or default by any other Person under any of the Contracts has
occurred and is continuing, and no event has occurred which with notice or lapse
of time or both would constitute such a material breach or default. Except as
otherwise disclosed in Schedule 5.8, neither the execution, delivery or
performance of this Agreement nor the consummation of any of the transactions
contemplated hereby does or will constitute, result in or give rise to a breach
or violation of or a default under (or the acceleration of the time for
performance of any obligation under) any Contract.
5.9. Insurance, etc. Schedule 5.9 is a true and accurate list as
of the date hereof of all policies or binders of insurance covering the Assets
and operations of the Lancaster
26
Companies. The Company has delivered or made available to the Buyer true and
accurate copies of all such policies or binders (including all amendments
thereto) as in effect on the date hereof. The Sellers or the Lancaster Companies
have paid all premiums due under such policies, and none of the Lancaster
Companies is in any default with respect to its obligations under any of such
policies which, to the Knowledge of Sellers, would result in the termination of
any such policy.
5.10. Litigation, etc.
(a) There is no Action pending or, to the Knowledge of
Sellers, threatened (i) against any Seller or its respective Affiliates
which could have a material adverse effect on the ability of any of the
Sellers to perform its obligations under this Agreement or (ii) which
seeks rescission of or seeks to enjoin the consummation of this
Agreement or any of the transactions contemplated hereby. Neither the
Sellers nor any of its respective Affiliates is subject to any
Governmental Orders which could have a material adverse effect on the
ability of the Sellers to perform their obligations under this
Agreement.
(b) Schedule 5.10 is a true and accurate list of all Actions
against any Lancaster Company pending (or, to the Knowledge of the
Sellers, threatened) and all Governmental Orders that have been issued
specifically naming any Lancaster Company and that are currently in
effect. Except as indicated on Schedule 5.10, no such Action could
reasonably be expected to have a Material Adverse Effect. No
Governmental Order has been issued which has had or is reasonably
likely to have a Material Adverse Effect.
5.11. Compliance with Laws, etc. The operations of the Business comply
in all material respects with applicable Legal Requirements. Except as disclosed
on Schedule 5.11, the Lancaster Companies have been duly granted all licenses,
permits, consents, approvals, franchises and other authorizations under any
Legal Requirement (including, but not limited to, the Environmental Laws)
necessary for or material to the conduct of the Business (the "Permits"). All of
the Permits are in full force and effect, are being complied with in all
material respects and will remain in effect immediately after the Closing.
Except as set forth on Schedule 5.11, to the Sellers' Knowledge, the Company has
not received any notice that
27
any Governmental Authority or other licensing authority will revoke, cancel,
rescind, materially modify or refuse to renew in the ordinary course any of the
Permits.
5.12. Tax Matters.
(a) Except as set forth on Schedule 5.12:
(i) Each of the Lancaster Companies has filed
or has had filed on its behalf all Tax
Returns that it was required to file on or
before the date hereof (or the Closing
Date), to the Knowledge of the Sellers all
information set forth in such Tax Returns
is accurate and complete in all material
respects, and each of the Lancaster
Companies has paid all Taxes shown thereon
as owing;
(ii) all deficiencies asserted in writing and
any assessments made as a result of any
examinations of the Tax Returns referred to
in clause (i) by the Internal Revenue
Service ("IRS") or the appropriate state,
local or foreign taxing authority have been
paid in full;
(iii) none of the Lancaster Companies has
received any written or, to the Knowledge
of the Sellers, any other notice of any
audit, claim, deficiency or assessment
pending or proposed with respect to Taxes
of any of the Lancaster Companies;
(iv) none of the Lancaster Companies is party to
any written or, to the Knowledge of the
Sellers, any other agreements or waivers
extending the statutory period of
limitation applicable to any Taxes of the
Lancaster Companies;
(v) none of the Lancaster Companies (A) files
or is required to file any combined,
consolidated or unitary State, local or
foreign Tax Returns (other than Tax Returns
filed by a group the common parent of which
was the Company) and (B) is a party to
28
any Contractual Obligation relating to any
allocation or sharing of Taxes;
(vi) each of the Lancaster Companies has
collected or withheld all Taxes required to
be collected or withheld by it, and all
such Taxes have been paid to the
appropriate Governmental Authority or set
aside in appropriate accounts for future
payment when due;
(vii) the Audited Balance Sheet properly reflects
under Generally Accepted Accounting
Principles, as of the date thereof, all
material liabilities of the Lancaster
Companies for all accrued Taxes and, for
periods ending after such date, the books
and records of the Lancaster Companies
properly reflect under Generally Accepted
Accounting Principles all material
liabilities for accrued Taxes;
(viii) none of the Lancaster Companies has made a
consent pursuant to Section 341(f) of the
Code or is a party to any "safe harbor
lease" subject to former Section 168(f)(8)
of the Code;
(ix) none of the Lancaster Companies is
obligated to make any payment, or is a
party to any Contractual Obligation that
could require it to make any payment, that
would not be deductible by reason of
Section 280G of the Code;
(x) there is no unpaid Tax due and payable by
any of the Lancaster Companies; and
(xi) there is no unpaid Tax due and payable by
any other person that is or, to the
Knowledge of Sellers, could become a lien
on any Asset of the Lancaster Companies.
29
(b) The Company has provided or made available to the Buyer
true, complete, and correct copies of all Tax Returns filed by it with
Taxing authorities since January 1, 1993 with respect to Taxes on,
based on, measured by or with respect to net income ("Income Taxes").
5.13. Employee Benefit Plans and Programs.
(a) Schedule 5.13 lists (i) each "employee benefit plan"
within the meaning of section 3(3) of ERISA (including, without
limitation, pension, profit sharing, stock bonus, medical
reimbursement, life insurance, disability and severance pay plans) that
is maintained or otherwise contributed to by, or under which there is
any continuing obligation on the part of, any Lancaster Company for the
benefit of any current or former employee, spouse or former spouse,
dependent or beneficiary thereof of any Lancaster Company or any of its
current or former ERISA Affiliates and (ii) all other employee benefit
plans, agreements, programs, policies or other arrangements (including,
without limitation, vacation, sick, personal or other leave and
dependent care), not subject to ERISA, that are maintained or otherwise
contributed to by, or under which there is any continuing obligation on
the part of, any Lancaster Company for the benefit of any current or
former employee, spouse or former spouse, dependent or beneficiary
thereof of any Lancaster Company or any of its current or former ERISA
Affiliates (collectively, "Company Plans"). For purposes hereof, an
"ERISA Affiliate" means each entity that is or, depending on the
context, was within the prior 6 years a member of a controlled group or
affiliated service group of which the Company or any of its
Subsidiaries is or, depending on the context, was within the prior 6
years such a member or that is or, depending on the context, was within
the prior 6 years under common control with the Company or any of its
Subsidiaries (within the meaning of sections 414(b), 414(c), 414(m) or
414(o) of the Code).
(b) Schedule 5.13 hereto also contains a true and complete
list of change in control agreements, severance and benefit
continuation agreements and other benefits other than Company Plans and
other than those reported on Schedule 5.8 of present and former
employees and salesmen (other than independent sales representatives)
of the Lancaster Companies and the spouses, former spouses, dependents
or beneficiaries of any such persons.
30
(c) With respect to each of the Company Plans which is not a
"multiemployer plan" (as such term is defined in section 3(37) of
ERISA), the Company has made available to the Buyer, to the extent the
following material exists:
(i) a current, accurate and complete copy (or,
to the extent no such copy exists, an
accurate description) of the plan document
therefor (including all existing amendments
thereto that shall become effective at a
later date) and, to the extent applicable;
(ii) any related trust agreement, annuity
contract, insurance contract (including,
without limitation, any stop loss
coverage), or other funding instrument;
(iii) any summary plan description and all
summaries of material modifications
thereto;
(iv) any related investment manager agreement,
administrative services agreement or other
agreement with any service provider;
(v) the last year's annual report on IRS Form
5500 series;
(vi) for any Company Plan which is a defined
benefit pension plan, the last five years'
actuarial valuation reports;
(vii) the last five years' tax returns on Form
990 for any trust funds;
(viii) the last five years' tax or other returns
on which excise taxes relating thereto have
been reported;
(ix) for any Company Plan which is a health,
life insurance, disability or accident
plan, the claims experience for the last
three years; and
31
(x) the latest employee handbook and all
modifications thereto.
(d) Except as set forth in Schedule 5.13, with respect to each
of the Company Plans which is not a "multiemployer plan" (as such term
is defined in section 3(37) of ERISA):
(i) to the Knowledge of the Sellers, each such
Company Plan has been established and
administered in substantial compliance with
its terms and with the applicable
provisions, if any, of ERISA and the Code
and of any applicable state or other law,
except where failure to comply would not
have a Material Adverse Effect, and to the
Knowledge of the Sellers, neither the
Lancaster Companies nor any ERISA Affiliate
has received any written notice from the
Department of Labor ("DOL"), Pension
Benefit Guaranty Corporation ("PBGC") or
IRS alleging to the contrary with respect
to any such Company Plan;
(ii) each such Company Plan is enforceable in
accordance with the written terms thereof
and to the Knowledge of the Sellers, no
representation or assurance has been made
to any employee or former employee, spouse,
former spouse, or dependent or beneficiary
of any employee or former employee of the
Lancaster Companies or any ERISA Affiliate
that differs from the written terms of any
such Company Plan;
(iii) the Lancaster Companies have the right to
amend or terminate each such Company Plan
at any time and for any reason to the
extent allowed by law;
(iv) there is no action, claim or demand of any
kind (other than routine claims for
benefits), whether through litigation,
administrative or other proceedings or
otherwise, that has been brought or, to the
Knowledge of Sellers, is proposed or
threatened, against any such Company Plan
or the assets thereof,
32
against the fiduciary of any such Plan, or
against any Lancaster Company which would
have a Material Adverse Effect;
(v) each such Company Plan that is intended to
be qualified within the meaning of section
401(a) of the Code has received a favorable
determination letter as to its
qualification, and to the Knowledge of the
Sellers, there are no facts or
circumstances that would jeopardize any
such Company Plan's qualification under
section 401(a) of the Code;
(vi) each such Company Plan that is intended to
be a cafeteria plan within the meaning of
section 125 of the Code has been
established and operated in accordance with
the applicable requirements thereof, and to
the Knowledge of the Sellers, there are no
facts or circumstances that would
jeopardize any such Company Plan's
treatment as a cafeteria plan under section
125 of the Code;
(vii) to the Knowledge of the Sellers, no
"reportable event" (as such term is used in
section 4043 of ERISA), "prohibited
transaction" (as such term is used in
section 4975 of the Code or ERISA), or
"accumulated funding deficiency" (as such
term is used in section 412 or 4971 of the
Code) has occurred, and no reportable event
would occur by reason of the consummation
of the sale pursuant to this Agreement,
with respect to any such Company Plan that
would result in a Material Adverse Effect;
(viii) to the Knowledge of the Sellers, each
Lancaster Company and each of its ERISA
Affiliates has complied with the health
care continuation requirements of section
601, et seq. of ERISA and COBRA with
respect to employees and their spouses,
former spouses and dependents, except where
failure to comply would not have a Material
Adverse Effect;
33
(ix) no Lancaster Company has obligations under
any such Company Plan to provide health,
life insurance or other welfare benefits to
former employees, spouses, former spouses,
or their dependents except as specifically
required by law;
(x) the Assets are not subject to any liens or
other encumbrances (whether absolute or
contingent), or any condition which could
result in any such lien or encumbrance,
under the Code or ERISA with respect to
such Company Plans;
(xi) none of the agreements listed on Schedule
5.13 hereto will be breached by Seller's
execution, delivery and performance of this
Agreement; and
(xii) each such Company Plan which is a defined
benefit pension plan, which is subject to
Title IV of ERISA is fully funded on a plan
continuation basis.
(e) With respect to each of the Company Plans which is a
"multiemployer plan" (as such term is defined in section 3(37) of
ERISA), except as set forth in Schedule 5.13:
(i) the Company has identified each such plan
on Schedule 5.13 as such a multiemployer
plan and has disclosed the ongoing regular
contribution obligation hereunder to Buyer;
(ii) no Lancaster Company has incurred any
withdrawal liability which would have a
Material Adverse Effect with respect to any
such multiemployer plan that remains
unsatisfied, or has been informed by such
plan that it would, or to the Knowledge of
Sellers would it, incur any withdrawal
liability which would have a Material
Adverse Effect with respect to any such
multiemployer plan if it or any of its
ERISA Affiliates withdrew at the Closing;
34
(iii) the Company has made available to the Buyer
a current, accurate and complete copy (or,
to the extent no such copy exists, an
accurate description) of the plan document
therefor (including all existing amendments
thereto that shall become effective at a
later date), and any summary plan
description and all summaries of material
modifications thereto;
(iv) to the Knowledge of the Sellers, there is
no action, claim or demand of any kind
(other than routine claims for benefits),
whether through litigation, administrative
or other proceedings or otherwise, that has
been brought or, to the knowledge of
Sellers, is proposed or threatened, against
or by any such multiemployer plan or the
assets thereof, any Lancaster Company or
any fiduciary of any such multiemployer
plan which would have a Material Adverse
Effect; and
(v) the Assets are not subject to any liens or
other encumbrances or to the Knowledge of
the Sellers, any condition which could
result in any such lien or encumbrance,
under the Code or ERISA with respect to any
such multiemployer plan.
5.14. Environmental Matters, etc.
(a) Except as set forth in Schedule 5.14, the conduct of the
Business and the use of the Real Property or Assets do not violate or
conflict with, and has not violated or conflicted with, any
Environmental Law. Schedule 5.14 contains a true and complete list of
all Permits related to any Environmental Law.
(b) Except as set forth in Schedule 5.14, (i) none of the
Lancaster Companies nor, since December 15, 1987 their respective
predecessors, has used, stored, treated, transported, manufactured,
refined, handled, produced, emitted, discharged or disposed of any
Hazardous Substances on, under, at, from or in any way affecting any of
the Real Property or Assets, in any manner which violated any
Environmental Law and (ii) to the Knowledge of the Sellers, no prior
owner of such
35
property or asset or any tenant, subtenant, prior tenant or prior
subtenant thereof has used Hazardous Substances on, from or in any way
affecting Real Property or Assets, or otherwise, in any manner which
violated any Environmental Law.
(c) Except as set forth in Schedule 5.14, none of the
Lancaster Companies has any Liability by reason of or based upon any
provision of any Environmental Laws including, without limitation, any
such Liabilities relating to or arising out of or attributable, in
whole or in part, to the manufacture, processing, distribution, use,
treatment, storage, release, emission, discharge, disposal, arranging
for disposal, transport or handling of any Hazardous Substances by any
Lancaster Company or, to the Knowledge of the Sellers (except with
respect to Easco), by any other person at, on, from or under the Real
Property.
(d) Except as set forth on Schedule 5.14, to the Knowledge of
the Sellers no building on the Real Property owned, operated or leased
by any Lancaster Company as of the Closing Date contains any friable
asbestos and there are no underground storage tanks on the Real
Property.
(e) Except as provided in Schedule 5.14, none of the Lancaster
Companies has received any written notices or claims that it is a
potentially responsible party in connection with any claim or notice
asserted pursuant to 42 U.S.C. Section 9601 et seq., or any state
superfund law.
(f) Except as set forth on Schedule 5.14, there are no
"wetlands" (as that term has ever been defined by the U.S. Army Corps
of Engineers or any other regulatory agency) on any of the Real
Property owned, operated or leased by any Lancaster Company as of the
Closing Date.
5.15. Labor Relations. Except as set forth in Schedule 5.15:
(a) To the Knowledge of the Sellers there are no
controversies between the Company and any employees relating to any
unresolved labor union grievances or unfair labor practice charges nor
are there any labor arbitration proceedings pending or, to the
Knowledge of the Sellers, threatened, related to the Company. Certain
36
employees of the Company are currently members of a labor union as more
fully described on Schedule 5.15; and
(b) Neither the Sellers nor any of the Lancaster Companies has
received notice of any claim that any Lancaster Company has not
complied with any laws relating to the employment of labor, including
any provisions thereof relating to wages, hours, collective bargaining,
the payment of social security and similar taxes, equal employment
opportunity, employment discrimination and employment safety, or that
it is liable for any arrears or wages or any taxes or penalties for
failure to comply with any of the foregoing.
5.16. Brokers, etc. Except for the payments to be made by the Sellers
to Bowles Hollowell Conner & Co. ("Bowles Hollowell") on or before the Closing,
no broker, finder, investment bank or similar agent is entitled to any
brokerage, finder's or other similar fee in connection with the transactions
contemplated by this Agreement based upon agreements or arrangements made by or
on behalf of (or upon the conduct of) the Sellers, the Company or any of their
respective Affiliates for which the Buyer or the Company could become liable or
obligated.
6. REPRESENTATIONS AND WARRANTIES OF THE BUYER. In order to induce each
Seller to enter into and perform this Agreement and to consummate the
transactions contemplated hereby, the Buyer represents and warrants to each
Seller as follows:
6.1. Corporate Matters, etc.
6.1.1. Incorporation and Authority of the Buyer. The Buyer is
a corporation duly incorporated, validly existing and in good standing
under the laws of the jurisdiction of its incorporation and has all
requisite power and authority, corporate and otherwise, to enter into
this Agreement, to carry out and perform its obligations hereunder and
to consummate the transactions contemplated hereby.
6.1.2. Authorization and Enforceability. This
Agreement, and each of the other agreements entered into pursuant to
this Agreement to which the Buyer is a party,
37
have been duly authorized, executed and delivered by, and is
Enforceable against, the Buyer.
6.1.3. Non-Contravention, etc. Neither the execution, delivery
or performance of this Agreement nor the consummation of the
transactions contemplated hereby does or will constitute, result in or
give rise to any breach, violation or default under any Contractual
Obligation of or the Charter or By-laws of the Buyer or a material
breach of any Legal Requirement applicable to the Buyer. To the
Knowledge of the Buyer, no approval, consent, waiver, authorization or
other order of, and no declaration, filing, registration, qualification
or recording with, any Governmental Authority is required to be
obtained or made by or on behalf of the Buyer in connection with the
execution, delivery or performance of this Agreement and the
consummation of the transactions contemplated hereby, except as shall
have been obtained or made on or prior to, and shall be in full force
and effect at, the Closing Date.
6.2. Financial Condition, Solvency, etc. The Buyer has available funds
in an aggregate amount sufficient to (i) pay the anticipated Purchase Price and
all contemplated fees and expenses related to the transactions contemplated by
this Agreement, which funds or commitments will be available at Closing to pay
the Purchase Price and such fees and expenses, and (ii) provide adequate working
capital for the Business.
6.3. Investment Intent, Related Matters. The Buyer is purchasing the
Shares for its own account and has the present intention of holding the Shares
for investment purposes and not with a view to, or for sale in connection with,
any public distribution thereof in violation of any federal or state securities
laws. The Buyer is an Accredited Investor within the definition set forth in
Rule 501(a) of the Securities Act of 1933, as amended.
6.4. Litigation. There is no Action pending or to the Knowledge of the
Buyer, threatened (i) against the Buyer or any of its respective Affiliates
which could have a material adverse effect on the ability of the Buyer to
perform its obligations under this Agreement or (ii) which seeks rescission of
or seeks to enjoin the consummation of this Agreement or any of the transactions
contemplated hereby. Neither the Buyer nor any of its respective Affiliates is
subject to any outstanding Governmental Orders which could have a material
adverse effect on the ability of the Buyer to perform its obligations under this
Agreement.
38
6.5. Brokers, etc. Except for the payments to be made by the Buyer to
J.P. Morgan & Co., no broker, finder, investment bank or similar agent is
entitled to any brokerage, finder's or other similar fee in connection with the
transactions contemplated by this Agreement based upon agreements or
arrangements made by or on behalf of (or upon the conduct of) the Buyer or any
of its Affiliates.
7. CERTAIN AGREEMENTS OF THE PARTIES.
7.1. Access to Premises and Information. Prior to the Closing, the
Sellers will cause the Lancaster Companies to permit the Buyer and its
representatives to have reasonable access to their documents, books and records
and to make copies during normal business hours of such financial and other
information with respect to the Lancaster Companies as the Buyer shall
reasonably request; provided, however, that (i) all such requests (and all other
requests contemplated pursuant to this Section 7.1) shall be made through the
Sellers' Representative or through one or more employees or other agents of the
Sellers who may, from time to time, be designated by the Sellers or their
representatives as appropriate contact Persons for such inquiries and (ii) the
Buyer shall cause reasonable notice to be provided to the Sellers'
Representative or the Sellers prior to any visits to the headquarters or other
offices of any Lancaster Company. The Buyer shall exercise its rights under this
Section 7.1 in a manner that is reasonable and does not unreasonably interfere
with the operations of the Lancaster Companies and the Sellers.
7.2. Confidentiality Covenant of the Buyer. The Confidentiality
Agreement dated May 19, 1995 as amended through the date hereof (the
"Confidentiality Agreement") by and between the Buyer and Bowles Hollowell on
behalf of the Company and the Sellers is hereby confirmed and acknowledged as a
continuing obligation of the parties; provided, however, that the
Confidentiality Agreement shall terminate upon the consummation of the Closing.
7.3. Operation of Business, Related Matters. From the date hereof and
on and prior to the Closing, except as otherwise described in or permitted by
this Agreement, the Sellers will cause the Lancaster Companies to, and the
Lancaster Companies shall, conduct the Business only in the Ordinary Course of
Business and substantially as presently operated and use reasonable efforts to
keep and maintain the Assets of the Business in good operating
39
condition and repair, ordinary wear and tear excepted, and maintain the value of
the Business as a going concern and the relationships of the Lancaster Companies
with customers, distributors, suppliers, vendors, employees, agents,
Governmental Authorities and others. From the date hereof and on and prior to
the Closing Date, the Sellers will not sell, pledge or otherwise encumber the
Shares, Options or Warrants without the prior written consent of the Buyer. From
the date hereof and on and prior to the Closing Date the Sellers will cause the
Lancaster Companies not to, and the Lancaster Companies shall not, without the
prior written consent of the Buyer:
(a) Enter into any transactions otherwise than on an arms'
length basis with any Seller or any other Affiliate of the Lancaster
Companies (other than as contemplated by this Agreement and
transactions in the Ordinary Course of Business among the Lancaster
Companies);
(b) Pay any compensation other than in the Ordinary Course of
Business or increase any compensation of any officer or employee other
than such increases in compensation for hourly employees as may be made
in the Ordinary Course of Business;
(c) Incur any Debt (including, without limitation, any capital
lease) except capitalized leases entered into as described on Schedule
5.3.2 or in the Ordinary Course of Business;
(d) Amend the Charter or By-laws of any Lancaster Company or
sell, lease or otherwise dispose of any Assets except for (i) sales or
other dispositions of inventory or excess equipment with a current fair
value no greater than $50,000 in the Ordinary Course of Business, (ii)
agreements to dispose of Assets described in Schedule 5.3.2, and (iii)
as may otherwise be permitted by the terms of this Agreement;
(e) Allow any material Permit or License to lapse or terminate
or fail to renew any Permit, in each case, other than in the Ordinary
Course of Business;
(f) Except as specified in Schedule 7.3, enter into or amend
any Contractual Obligation that contains either consideration to be
given by, or is to be performed by,
40
the Lancaster Companies with a value exceeding $50,000 or a term
exceeding three years (except to the extent, if any, permitted by the
terms of this Agreement);
(g) Make any material change in the Business or
operations of any of the Lancaster Companies;
(h) Make any capital expenditure with respect to the
Business or enter into any contract or commitment therefor in excess of
$50,000;
(i) Enter into or amend any existing labor agreements;
(j) Take any of the actions specified in Section 5.3.1 or
subsections (a) or (b) of Section 5.3.2., except as described on
Schedule 5.3.2; or
(k) Enter into any Contractual Obligation to do any of
the actions referred to in this Section 7.3.
The Buyer shall respond with reasonable promptness to any and all
requests by the Sellers for consent(s) to take any of the actions specified in
this Section 7.3.
7.4. Preparation for Closing. Each party will use all reasonable
efforts to bring about the fulfillment of each of the conditions precedent to
the obligations of the other parties hereto set forth in this Agreement. Without
limiting the generality of, or being limited by, the foregoing, the parties
shall take the actions set forth below.
7.4.1. Consents, etc. Prior to the Closing Date, the Sellers
shall use reasonable efforts (but without any obligation to pay any
fees or expenses) to secure required written consents or waivers under
or with respect to the Contracts indicated on Schedule 5.1.3. If
required by the other parties to the Contracts and if requested by the
Sellers in connection with their attempts to obtain such consents, the
Buyer shall execute and deliver an agreement of assignment, assumption
and attornment with respect to and/or guarantee of the obligations
under such Contracts; provided, however, that the Buyer shall be under
no obligation to execute and deliver such agreement if there is any
material change to the terms of such Contract.
41
7.5. Payment of Transfer Taxes and Other Charges. The Buyer shall be
responsible for and shall pay all stock transfer Taxes, real property transfer
Taxes, sales Taxes, documentary stamp Taxes, recording charges and other similar
Taxes arising under any Legal Requirement in connection with the transactions
contemplated by this Agreement. Each of the parties hereto 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 filings relating to any
such Taxes or charges as may be required.
7.6. Support Services; Cash; BCC Debt. The Buyer acknowledges that BCC
ISI provides or makes available to the Lancaster Companies certain
administrative and support services. The Buyer acknowledges that such services
will be terminated as of the Closing Date. In addition, at or prior to the
Closing all BCC Debt shall be paid in full pursuant to Section 9.2 hereof.
7.7. Cancellation of Options and Warrants; Payment of Key Employee
Bonuses. At or prior to Closing, the Company shall enter into agreements in form
and substance reasonably satisfactory to Buyer (the "Cancellation Agreements")
with each holder of an Option or Warrant providing for the cancellation of the
Options and Warrants held by such holder effective as of the Closing in
consideration for the value of the Options and Warrants to be canceled, which in
the aggregate shall equal the amount of the Gross Cancellation Payment. At the
Closing, the Company shall pay to (a) the Sellers' Representative on behalf of
each holder of an Option or Warrant, the amount provided in the applicable
Cancellation Agreement, less the amount of withholding taxes required by
applicable law (each, a "Cancellation Payment") and (b) Mr. Cocanaugher and Ms.
Wells the Key Employee Bonuses, less the amount of withholding taxes required by
applicable law.
7.8. No Shopping. Prior to the Closing Date or termination of this
Agreement pursuant to Section 13.1, or except as permitted by this Agreement,
none of the Lancaster Companies nor any Seller will, directly or indirectly,
through any officer or director of the Lancaster Companies, any agent or
otherwise: (a) solicit, initiate, encourage the submission of, discuss inquiries
or proposals of offers from any person relating to any acquisition or purchase
of the Assets, or of any equity interest in, the Lancaster Companies or the
Shares, Options or Warrants or any exchange offer, merger, consolidation,
business combination, sale
42
of substantially all assets, sale of securities, liquidation, dissolution or
similar transactions involving any of the Lancaster Companies or the Sellers
other than pursuant to this Agreement (each a "Competing Transaction"); (b)
enter into or participate in any discussions or negotiations regarding a
Competing Transaction; (c) furnish to any other person any information with
respect to the business, properties or assets of the Lancaster Companies in
connection with a Competing Transaction; or (d) otherwise cooperate in any way
with, or assist or participate in, facilitate or encourage, any effort or
attempt by any other person to do or seek a Competing Transaction. Prior to the
Closing Date or termination of this Agreement pursuant to Section 13.1 hereof,
the Company and the Sellers shall immediately notify the Buyer of any proposal
relating to a Competing Transaction or if any inquiry or contact with any person
with respect thereto is made and shall promptly deliver to the Buyer copies of
any such written proposal or offer and any written communications made in
response thereto.
7.9. Post-Closing Agreement. Buyer agrees that, after the Closing
Date, the mortgage note (the "Easco Note") payable by the Company to Easco Hand
Tools, Inc. ("Easco") will not be prepaid prior to its maturity date, January
24, 2002.
7.10. Stockholders Agreement. Each of the Sellers, which
is a party thereto, and the Company hereby waives the application of the
provisions of the Stockholders Agreement dated as of December 15, 1987 among
Lancaster Press Acquisition Corp. and the stockholders party thereto.
7.11. Further Assurances. Each party, upon the request from time to
time of any other party hereto after the Closing, and without further
consideration, will do each and every act and thing as may be necessary or
reasonably requested to consummate the transactions contemplated hereby in an
orderly fashion.
8. CONDITIONS TO THE OBLIGATION TO CLOSE OF THE BUYER. The obligations of
the Buyer to consummate the Closing under this Agreement are subject to the
satisfaction, at or prior to the Closing, of all of the following conditions,
compliance with which, or the occurrence of which, may be waived prior to the
Closing in writing by the Buyer in its sole discretion:
43
8.1. Representations, Warranties and Covenants.
8.1.1. Continued Accuracy of Representations and Warranties.
All representations and warranties of the Sellers contained in this
Agreement shall be true and accurate in all material respects as of the
Closing Date as if made on the Closing Date, except for changes
expressly permitted or contemplated by this Agreement.
8.1.2. Performance of Agreements. The Sellers
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.
8.1.3. Closing Certificates. At the Closing, the
Selling Parties shall furnish to the Buyer certificates, signed by each
of the Selling Parties, dated the Closing Date, to the effect that the
conditions specified in Sections 8.1.1 and 8.1.2 hereof have been
satisfied.
8.1.4. Outstanding Capital. The Shares shall constitute all
the outstanding stock of the Company and the Options and Warrants shall
constitute all the Contractual Obligations pursuant to which the
Company or any Seller has, directly or indirectly, granted any option,
warrant or other right to any Person to acquire the shares of common
stock or any other securities of, or equity interests in, the Company.
8.2. Legality; Governmental Authorization; Litigation. The acquisition
of the Shares, and the consummation of the other transactions contemplated
hereby shall not be prohibited by any Legal Requirement, and all applicable
waiting periods under the Hart-ScottRodino Antitrust Improvements Act of 1976,
as amended (the "HSR Act") shall have expired or been terminated. No Action
shall have been instituted at or prior to the Closing by any Person other than a
party hereto, or instituted by any Governmental Authority, relating to this
Agreement or any of the transactions contemplated hereby, which has a reasonable
likelihood of success and the result of which would prevent or make illegal the
consummation of any such transaction or have a Material Adverse Effect.
44
8.3. Third Party Consents. There shall have been obtained all
consents and approvals from parties to Contractual Obligations that are required
in connection with the consummation of the transactions contemplated by this
Agreement.
8.4. Opinions of Counsel. The Sellers shall have furnished the Buyer
with a favorable opinions of Ropes & Gray, Smith, Katzenstein & Furlow and Appel
& Yost, dated as of the Closing Date, substantially in the form attached as
Exhibits A, B and C, respectively.
8.5. Releases. The Buyer shall have received an executed Termination
and Release from the holders of the BCC Debt in the form attached hereto as
Exhibit D. BCC ISI shall have executed and delivered to the Buyer a Termination
and Release in the form of Exhibit E. Each of the Sellers shall have executed
and delivered a Stockholder Release (the "Stockholder Release") in the form
attached as Exhibit F.
8.6. BCC Certificate. The Buyer shall have received an executed
certificate from SLA, MLA I, MLA II and MLA III in the form attached as Exhibit
G.
8.7. Cancellation Agreements. The Cancellation Agreements shall
have been executed and delivered by the parties thereto and the Company shall
deliver the execution copies thereof to Buyer.
8.8. General. All corporate proceedings required to be taken on the
part of the Sellers in connection with the transactions contemplated by this
Agreement shall have been taken. The Buyer shall have received copies of such
officers' certificates, good standing certificates, incumbency certificates and
other customary closing documents as the Buyer may reasonably request in
connection with the transactions contemplated hereby.
9. CONDITIONS TO THE OBLIGATION TO CLOSE OF THE SELLING PARTIES.
The obligations of the Sellers at the Closing to consummate the Closing under
this Agreement are subject to the satisfaction, at or prior to the Closing, of
all of the following conditions, compliance with which, or the occurrence of
which, may be waived prior to the Closing in writing by the Sellers in their
sole discretion:
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9.1. Representations, Warranties and Covenants.
9.1.1. Continued Accuracy of Representations and Warranties.
All representations and warranties of the Buyer contained in this
Agreement shall be true and accurate in all material respects as of the
Closing Date as if made on the Closing Date, except for changes
expressly contemplated by this Agreement.
9.1.2. Performance of Agreements. The Buyer shall
have performed and satisfied, in all material respects, all covenants
and agreements required by this Agreement to be performed or satisfied
by the Buyer at or prior to the Closing.
9.1.3. Officer's Certificate. At the Closing, the
Buyer shall furnish to the Sellers a certificate signed by the
President or any Vice President of the Buyer, dated the Closing Date,
to the effect that the conditions specified in Sections 9.1.1 and 9.1.2
hereof have been satisfied.
9.2. Payment of BCC Debt. The Company shall have paid or made
arrangements satisfactory to Sellers to pay $36,034,155.65 in payment in full on
the Closing Date of all outstanding BCC Debt as of the Closing Date.
9.3. Legality; Government Authorization; Litigation. The Sellers'
consummation of the transactions contemplated hereby shall not be prohibited by
any Legal Requirement, and all applicable waiting periods under the HSR Act
shall have expired or been terminated. No Action shall have been instituted at
or prior to the Closing by any Person other than a party hereto, or instituted
by any Governmental Authority, relating to this Agreement or any of the
transactions contemplated hereby, which has a reasonable likelihood of success
and the result of which would prevent or make illegal the consummation any such
transaction or could otherwise have a material adverse effect on the ability of
the Sellers to consummate the transactions contemplated hereby.
9.4. Opinion of Counsel. The Buyer shall have furnished the
Sellers with a favorable opinion of Hunton & Williams, dated as of the Closing
Date, substantially in the form attached as Exhibit H.
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9.5. General. All corporate proceedings required to be taken by the
Buyer in connection with the transactions contemplated by this Agreement shall
have been taken. The Sellers shall have received copies of such officers'
certificates, good standing certificates, incumbency certificates and other
customary closing documents as the Sellers may reasonably request in connection
with the transactions contemplated hereby.
10. EMPLOYMENT AND EMPLOYEE BENEFITS ARRANGEMENTS.
10.1. Employment of Affected Employees. Buyer shall cause the Lancaster
Companies to continue to employ on the Closing Date, at the same rate of pay as
in effect immediately preceding the Closing Date, all Affected Employees. Except
as otherwise provided herein, the Sellers shall not retain any obligations or
liabilities with respect to any benefits or wages, regardless of whether such
benefits or wages were accrued (or relate to claims incurred) prior to, on or
after the Closing Date, with respect to Affected Employees.
10.2. Employee Benefits.
(a) At the option of the Buyer (which may be applied on a plan
or program by plan or program basis and/or separately to different
groups of employees) and subject to changes required by applicable laws
or by limitations imposed by insurance companies providing plan
benefits or stop loss insurance with respect to a plan or by collective
bargaining agreements, Affected Employees shall be entitled either (i)
to continue to participate in the Company Plans in effect immediately
prior to the Closing Date or (ii) to commence to participate in Buyer's
employee benefit plans and programs on substantially the same basis as
similarly situated employees of Buyer (taking into account all
applicable factors, including but not limited to position, employment
classification, age, length of service, pay, part time or full time
status, preexisting condition limitations (but only to the extent
applicable under comparable Company Plans), and the like, as well as
changes made in such plans and programs in the future). For purposes of
clause (ii) above, service of an Affected Employee with a Lancaster
Company prior to the Closing Date shall be counted as service with the
Buyer for purposes of determining eligibility and vesting (but not
benefit accrual or entitlement) under all of Buyer's employee benefit
plans and programs. If a Lancaster Company does not maintain a plan or
program of the same type as maintained by the Buyer, there
47
shall be no obligation to provide participation to Affected Employees
of such Lancaster Company in such plan or program. The requirements of
this provision shall expire one year after the Closing.
(b) Notwithstanding the foregoing, after the Closing Date,
Buyer shall assume sole responsibility for the payment of severance and
benefit continuation benefits due pursuant to either (i) the Contracts
listed in Items 8 through 15 of Schedule 5.8 hereof, (ii) any agreement
entered into between an Affected Employee, Buyer or the Company at or
after the Closing, or (iii) any Legal Requirement, to any Affected
Employee whose employment with Buyer or with the Company or any of its
Subsidiaries is terminated at or after the Closing.
10.3. WARN. The Buyer shall indemnify the Sellers and their Affiliates
and defend and hold each of them harmless from and against any Losses which may
be incurred by any of them under WARN, or any state plant closing or
notification law, arising out of, or relating to, any actions taken by the Buyer
or the Company on or after the Closing Date.
10.4. Third-Party Rights. No provision of this Section 10 shall create
any third-party beneficiary rights in any employee or former employee (including
any spouse, former spouse, dependent or other beneficiary thereof), the Company
or any Subsidiaries of the Company in respect of continued employment (or
resumed employment) or terms, conditions or benefits of employment for any
specified period of any nature or kind whatsoever.
10.5. Indemnity. Buyer shall indemnify the Sellers and their Affiliates
and defend and hold the Sellers and their Affiliates harmless from and against
any and all Losses arising with respect to events occurring after the Closing,
from claims by or in respect of any Affected Employee (or such Affected
Employee's successors or assigns) with respect to events arising on or after the
Closing Date.
11. INDEMNIFICATION.
11.1. Indemnification. Subject to the terms of this Section 11, the
Sellers jointly and severally, (in their capacity as indemnifying party, an
"Indemnifying Party") shall indemnify the Buyer (on a consolidated basis and in
its capacity as indemnified party, an "Indemnitee")
48
and hold the Buyer harmless, and the Buyer (in its capacity as indemnifying
party, an "Indemnifying Party") shall indemnify each of the Sellers (each in its
capacity as indemnified party, an "Indemnitee") and hold each of the Sellers
harmless, from, against and in respect of any and all Losses sustained by an
Indemnitee or its Affiliates arising from or related to any of the following:
11.1.1. The Sellers. In the case of the Sellers as
Indemnifying Party (i) any breach of any representation or warranty
(other than Section 5.14) made by or on behalf of the Sellers in this
Agreement (including, without limitation, the Schedules hereto) or in
any document, instrument or certificate delivered pursuant hereto,
other than representations made severally and not jointly by a Seller
in which case the Seller who made such representation and warranty
shall be solely liable for any breach thereof; or (ii) any breach or
violation of any covenant or agreement made by or on behalf of the
Sellers in this Agreement (including, without limitation, the Schedules
hereto) or in any document, instrument or certificate delivered
pursuant hereto; or (iii) 50% of any Taxes incurred by the Buyer or any
of the Lancaster Companies, resulting from the disallowance, in whole
or in part, of any deduction (including without limitation any related
loss carryforward or loss carryback) relating to the payments made (A)
pursuant to Section 7.7 in cancellation of the Options and Warrants,
(B) in respect of the Key Employee Bonuses, or (C) in respect of the
prepayment penalties related to the BCC Debt; or (iv) any breach of the
representations and warranties contained in Section 5.14 and the
matters specified in Schedule 5.14, including the matters included in
reports described thereon, to the extent Buyer, as Indemnitee, incurs
any Losses as a result of actions taken by or on behalf of it, as
Indemnitee, if such actions (A) are required by a Governmental Order;
or (B) are in connection with claims made by third parties who are not
Affiliates of Buyer or the Lancaster Companies; or (C) are taken when
there may be risk of imminent and substantial endangerment to human
health, safety or the environment; or (D) are, with respect to Losses
for which a claim for indemnification would be available under the
Supplemental Agreement, taken in compliance with the terms of the
Supplemental Agreement; or (E) are taken when a violation of
Environmental Laws or a pending Governmental Order threatens continued
operation of the Business; or (F) are pursuant to a remediation or
compliance plan agreed to by the Sellers' Representative and Buyer in
good faith; or (v) the matters referred to in Items 9(d), 18(e) and
19(a) and (b)
49
specified in Schedule 5.13; or (vi) the matter referred to in Item 25
specified in Schedule 5.13. For purposes of clause (iii) only, Losses
shall only include the Taxes referred to therein and 50% of the
out-of-pocket costs and expenses related to the defense of any of the
deductions referred to in clause (iii) after any such disallowance or
any asserted disallowance thereof, whether or not upheld. It is hereby
agreed and understood that all claims for Losses under clause (iv)
relating to claims for indemnification which would be available under
the Supplemental Agreement, shall be subject to the penultimate
sentence of Section 11.2.
11.1.2. The Buyer. In the case of the Buyer as Indemnifying
Party (i) any breach of any representation or warranty made by or on
behalf of the Buyer in this Agreement (including, without limitation,
the Schedules hereto) or in any document, instrument or certificate
delivered pursuant hereto; or (ii) any breach or violation of any
covenant or agreement made by or on behalf of the Buyer in this
Agreement (including, without limitation, the Schedules hereto) or in
any document, instrument or certificate delivered pursuant hereto.
11.2. Time Limitation on Indemnification. Notwithstanding the
foregoing, (a) none of the representations, warranties and agreements of the
Sellers shall survive after the expiration of the eighteen month period
beginning immediately after the Closing Date except representations, warranties
and agreements contained in (i) Sections 4.1, 4.2, 4.4, 5.1.4 and the last
sentence of Section 5.1.5 which shall survive for a period of three years
beginning on the date immediately following the Closing, (ii) Sections 5.12,
5.13, Section 11.1.1(iii) and Section 11.1.1(v) which shall survive for sixty
days after the expiration of the latest applicable statute of limitations,
without regard to extensions thereof unless prior written notice of any such
extension is provided to the Sellers' Representative, and (iii) Section
11.1.1(iv) which, subject to the penultimate sentence of this Section 11.2,
shall survive for a period of six years beginning on the date immediately
following the Closing, and no claim may be made or suit instituted by the Buyer
under any provision of this Section 11 after the applicable limitation period
set forth herein except for Reserved Claims and (b) none of the representations,
warranties and agreements of the Buyer shall survive after the expiration of the
eighteen month period beginning immediately after the Closing Date and no claim
may be made or suit instituted by any Seller under any provision of this Section
11 after such eighteen month period except for: (i) claims by any Seller
pursuant to Section 10 hereto which may be made
50
or suit instituted on or before the expiration of the three-year period
beginning immediately after the Closing Date and (ii) Reserved Claims. Buyer
agrees that (i) prior to making any indemnification claim hereunder (other than
providing notice thereof) with respect to which indemnification for Losses
related to such claim is available to the Company under the Easco Note, Buyer
and its Affiliates will assert the offset remedy in the Easco Note (in
accordance with the terms of Section 5 of the Supplemental Agreement) available
thereunder and (ii) if either the agreement contained in Section 7.9 hereof or
the Supplemental Agreement Regarding Environmental Matters dated February 24,
1992 between the Company and Easco (the "Supplemental Agreement") is breached by
Buyer or the Company after the Closing Date, no indemnification claim may be
made hereunder if and to the extent that, but for the breach of Section 7.9 or
the Supplemental Agreement, indemnification for Losses related to such claim
would have been available to the Company under the Easco Note. The term
"Reserved Claims" shall mean all claims as to which any Indemnitee has given any
Indemnifying Party written notice (describing with reasonable specificity the
amount, if determinable, and basis of such claims) on or prior to the expiration
date of the applicable limitation period set forth herein.
11.3. Monetary Limitations on Indemnification. With respect to Losses
incurred by any Indemnitee arising from any claim, the Indemnifying Parties
shall not have any obligation to indemnify an Indemnitee under Section 11.1.1
(i), (ii), (iv) or (vi) or 11.1.2, unless the aggregate cumulative total of all
Losses incurred by the Indemnitee and its Affiliates as Indemnitees with respect
to claims exceeds $300,000, whereupon the Indemnitee and its Affiliates shall be
entitled to indemnification for such Losses but only to the extent that such
Losses exceed $300,000, it being understood that the Indemnitee and its
Affiliates shall be entitled to indemnification for any nonpayment of the
Purchase Price Adjustment if a payment is required under Section 3.3(c), and for
Losses under Section 11.1.1(iii) and (v) without regard to the foregoing minimum
threshold; provided, however, that the maximum aggregate recovery for which the
Selling Parties may be responsible with respect to all claims (other than claims
made as a result of any nonpayment of the Purchase Price Adjustment if payment
is required under Section 3.3(c) or pursuant to Section 11.1.1(iii) and (v))
shall not exceed $5,700,000 and the maximum aggregate recovery for which Buyer
may be responsible with respect to all claims (other than claims made as a
result of any nonpayment of the Purchase Price Adjustment if a payment is
required under Section 3.3(c) or pursuant to a breach of Section 6.2) shall not
exceed $5,700,000; provided, further, each Seller other than SLA, MLA
51
I, MLA II and MLA III shall only be liable in respect of a portion of such
indemnification obligation equal to such Seller's Percentage (determined on a
fully-diluted basis) of the Cash Consideration and Gross Cancellation Payment as
set forth on Schedule 3.1(a).
11.4. Third Party Claims. Promptly after the receipt by any Indemnitee
of notice of the commencement of any Action against such Indemnitee (or any of
its Affiliates) by a third party, such Indemnitee shall, if a claim with respect
thereto is or may be made against any Indemnifying Party pursuant to this
Section 11, give such Indemnifying Party written notice of the nature and basis
of such claim. The failure to give such notice shall not relieve any
Indemnifying Party from any obligation hereunder except to the extent that such
failure adversely affects the rights of such Indemnifying Party. Prior to any
Indemnifying Party notifying the Indemnitee of its intention to defend the
claim, as contemplated by clause (a) of the next sentence, the Indemnitee will
defend against such claim (provided that the Indemnitee shall not settle such
claim without the consent of the Indemnifying Parties, which consent shall not
unreasonably be withheld). Provided that the Indemnifying Parties advise the
Indemnitees in writing that such claim is covered under Section 11.1.1 or
11.1.2, the Indemnifying Parties shall have the right to defend such claim, at
the Indemnifying Parties' expense and with counsel of their choice reasonably
satisfactory to the Indemnitee, provided that (a) the Indemnifying Parties so
notify the Indemnitee within 30 days after receipt of such notice and (b) the
Indemnifying Parties conduct the defense of such claim actively and diligently.
So long as the Indemnifying Parties are conducting the defense of such claim as
provided in the previous sentence, the Indemnitee may retain separate co-counsel
at its sole cost and expense and may participate in defense of such claim, and
neither the Indemnifying Parties nor the Indemnitee will consent to the entry of
any judgment or enter into any settlement with respect to such claim without the
prior written consent of the other, which consent will not be unreasonably
withheld. In the event the Indemnifying Parties cease to defend or do not defend
such claim as so provided, (x) the Indemnitee shall defend against such claim
(provided that the Indemnitee shall not settle such claim without the consent of
the Indemnifying Parties, which consent shall not be unreasonably withheld), (y)
the Indemnifying Parties will reimburse the Indemnitee promptly and periodically
for the costs of defending against such claim, including reasonable attorneys'
fees and expenses, and (z) the Indemnifying Parties will remain responsible for
any Losses the Indemnitee may suffer as a result of such claim to the full
extent provided in this Section 11. Regardless of which party shall assume the
defense of such claim, each party shall provide to the other parties on request
all information and
52
documentation reasonably necessary to support and verify any Losses which give
rise to such claim for indemnification and shall provide reasonable access to
all books, records and personnel in their possession or under their control
which would have a bearing on such claim.
11.5. Certain Other Indemnity Matters. (a) The parties' sole and
exclusive remedy (other than termination pursuant to Section 13, claims under
Section 14.6 and actions for the commission of fraud) with respect to any and
all claims relating to the subject matter of this Agreement shall be pursuant to
the indemnification provisions set forth in this Section 11 and Section 10.5. In
furtherance of the foregoing, each of the Buyer and the Sellers hereby waive, to
the fullest extent permitted under applicable law, any and all rights, claims
and causes of action it may have against the Sellers or the Buyer, respectively,
arising under or based upon any Legal Requirement (including, without
limitation, any such rights, claims or causes of action arising under or based
upon common law other than with respect to actions for the commission of fraud).
(b) In no event shall any party be liable for loss of profits or
consequential damages by reason of a breach of any representation, warranty,
covenant or other provision contained in this Agreement or in any Schedule or
certificate delivered pursuant hereto.
(c) Upon making any payment to an Indemnitee for any indemnification
claim pursuant to this Section 11, the Indemnifying Party shall be subrogated,
to the extent of such payment, to any rights which the Indemnitee may have
against other Persons with respect to the subject matter underlying such
indemnification claim.
(d) The Sellers shall have no liability under any provision of this
Agreement for any Liabilities or Losses to the extent that such Liabilities or
Losses are caused by actions taken or not taken by the Buyer or its Affiliates
after the Closing Date. The Buyer shall, and shall cause the Lancaster Companies
to, take all reasonable steps to mitigate all such Liabilities and Losses upon
and after becoming aware of any event which could reasonably be expected to give
rise to any Liabilities and Losses with respect to which indemnification may be
requested hereunder, provided, that to the extent the Buyer or the Lancaster
Companies have received the prior written consent of the Sellers' Representative
with respect to any steps taken to mitigate Liabilities and Losses (which
consent shall not be unreasonably withheld or delayed) the first sentence of
this Section 11.5(d) shall not apply.
53
12. CONSENT TO JURISDICTION; JURY TRIAL WAIVER.
12.1. Consent to Jurisdiction.
(a) Other than as set forth in Section 12.1(b), each party to
this Agreement, by its execution hereof, (i) hereby irrevocably
submits, and agrees to cause each of its Subsidiaries to submit, to the
exclusive jurisdiction of the state courts of the State of Delaware or
the United States District Court located in the State of Delaware for
the purpose of any Action arising out of or based upon this Agreement
or relating to the subject matter hereof (ii) hereby waives, and agrees
to cause each of its Subsidiaries to waive, to the extent not
prohibited by applicable law, and agrees not to assert, and agrees not
to allow any of its Subsidiaries to assert, by way of motion, as a
defense or otherwise, in any such Action, any claim that it is not
subject personally to the jurisdiction of the above-named courts, that
its property is exempt or immune from attachment or execution, that any
such proceeding brought in one of the above-named courts is improper,
or that this Agreement or the subject matter hereof may not be enforced
in or by such court and (iii) hereby agrees not to commence or to
permit any of its Subsidiaries to commence any Action arising out of or
based upon this Agreement or relating to the subject matter hereof
other than before one of the above-named courts nor to make any motion
or take any other action seeking or intending to cause the transfer or
removal of any such Action to any court other than one of the
above-named courts whether on the grounds of inconvenient forum or
otherwise. Each party hereby consents to service of process in any such
proceeding in any manner permitted by Delaware law, and agrees that
service of process by registered or certified mail, return receipt
requested, at its address specified pursuant to Section 14.7 hereof is
reasonably calculated to give actual notice.
(b) Notwithstanding the provisions of Section 12.1(a), each
Seller by its execution hereof, (i) hereby irrevocably submits, for
purposes of enforcing the provisions of, or any Action arising out of
or based upon, Section 14.6 of this Agreement or relating to the
subject matter thereof, to the exclusive jurisdiction of the state
courts of the State of New York or the United States District Court for
the Southern District of New York, (ii) hereby waives, to the extent
not prohibited by applicable law, and agrees not to assert, by way of
motion, as a defense or otherwise, in any such Action any claim that it
is not subject personally to the jurisdiction of the above-named
courts, that its property is exempt or immune from attachment or
execution that any such proceeding brought in one of the above-named
courts is
54
improper, or that this Agreement or the subject matter hereof may not
be enforced in or by such court and (iii) hereby agrees not to commence
any Action arising out of or based upon the provisions of Section 14.6
of this Agreement or relating to the subject matter thereof other than
before one of the above-named courts nor to make any motion or take any
other action seeking or intending to cause the transfer or removal of
any such Action to any court other than one of the above-named courts
whether on the grounds of unconventional forum or otherwise. Each of
the Sellers hereby consents to service of process in any such
proceeding, in any manner permitted by New York law, and agrees that
service of process by registered or certified mail, return receipt
requested as reasonably calculated to give actual notice.
12.2. WAIVER OF JURY TRIAL. TO THE EXTENT NOT PROHIBITED BY APPLICABLE
LAW WHICH CANNOT BE WAIVED, EACH OF THE PARTIES HERETO HEREBY WAIVES, AND AGREES
TO CAUSE EACH OF ITS SUBSIDIARIES TO WAIVE, AND COVENANTS THAT NEITHER IT NOR
ANY OF ITS SUBSIDIARIES WILL ASSERT (WHETHER AS PLAINTIFF, DEFENDANT OR
OTHERWISE) ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN RESPECT OF ANY ISSUE OR
ACTION ARISING OUT OF OR BASED UPON THIS AGREEMENT OR THE SUBJECT MATTER HEREOF
OR IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE TRANSACTIONS
CONTEMPLATED HEREBY, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING. THE
SELLERS ACKNOWLEDGE THAT THEY HAVE BEEN INFORMED BY THE BUYER THAT THIS SECTION
12.2 CONSTITUTES A MATERIAL INDUCEMENT UPON WHICH THE BUYER IS RELYING AND WILL
RELY IN ENTERING INTO THIS AGREEMENT AND ANY OTHER AGREEMENTS RELATING HERETO OR
CONTEMPLATED HEREBY. ANY PARTY HERETO MAY FILE AN ORIGINAL COUNTERPART OR A COPY
OF THIS SECTION 12.2 WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF EACH
SUCH PARTY TO THE WAIVER OF ITS RIGHT TO TRIAL BY JURY.
13. TERMINATION.
13.1. Termination of Agreement. This Agreement may be terminated by
the parties only as provided below:
(a) The Buyer and the Sellers may terminate this
Agreement by mutual written consent at any time prior to the Closing.
55
(b) The Buyer may terminate this Agreement by giving written
notice to the Sellers at any time prior to the Closing either (i) in
the event the Sellers are in material breach of any representation,
warranty, covenant or agreement contained in this Agreement, the Buyer
has notified the Sellers of the breach and such breach has continued
without cure for a period of 30 days after the notice of breach or
until the Closing Date, if earlier, and there is a reasonable
likelihood that such breach will result in an inability of the Sellers
to satisfy the conditions set forth in Section 8.1 or (ii) if the
Closing shall not have occurred within 90 days after the date of this
Agreement (unless the failure results primarily from the Buyer
breaching any representation, warranty, covenant or agreement contained
in this Agreement).
(c) The Sellers may terminate this Agreement by giving written
notice to the Buyer at any time prior to the Closing either (i) in the
event the Buyer is in material breach of any representation, warranty,
covenant or agreement contained in this Agreement, the Sellers have
notified the Buyer of the breach and such breach has continued without
cure for a period of 30 days after the notice of breach or until the
Closing Date, if earlier, and there is a reasonable likelihood that
such breach will result in an inability of the Buyer to satisfy the
conditions set forth in Section 9.1, or (ii) if the Closing shall not
have occurred within 90 days after the date of this Agreement (unless
the failure results primarily from the Seller's breaching any
representation, warranty, covenant or agreement contained in this
Agreement).
13.2. Effect of Termination. In the event of the termination of this
Agreement pursuant to Section 13.1, all obligations of the parties hereunder
(other than obligations under Sections 7.2, 12.1, 12.2, 13.2, 14.13 and 14.14,
which shall survive termination) shall terminate without any liability of any
party to any other party; provided, however, that no termination pursuant to
clause (b) or (c) of Section 13.1 shall relieve any party from any liability
pursuant to Section 13 arising from or relating to any breach by such party
prior to termination.
13.3. Time of Essence. Time is and shall be of the essence in this
Agreement.
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14. MISCELLANEOUS.
14.1. Entire Agreement; Waivers. This Agreement (including the
Schedules and Exhibits hereto) and the Confidentiality Agreement constitutes the
entire agreement among the parties hereto pertaining to the subject matter
hereof and supersedes all prior and contemporaneous agreements, understandings,
negotiations and discussions, whether oral or written, of the parties with
respect to such subject matter, other than the Confidentiality Agreement (which
shall survive execution and delivery of this Agreement and shall survive any
termination of this Agreement but shall terminate upon consummation of the
Closing). No waiver of any provision of this Agreement shall be deemed or shall
constitute a waiver of any other provision hereof (whether or not similar),
shall constitute a continuing waiver unless otherwise expressly provided nor
shall be effective unless in writing and executed (i) in the case of a waiver by
the Buyer, by the Buyer and (ii) in the case of a waiver by the Sellers, by each
of the Sellers.
14.2. Amendment or Modification. The parties hereto may not amend or
modify this Agreement except in such manner as may be agreed upon by a written
instrument executed by the Buyer and each Seller.
14.3. Investigation; No Additional Representations. (a) The Sellers
have not made and are not making any representation, warranty, covenant or
agreement, express or implied, with respect to the matters contained in this
Agreement other than the explicit representations, warranties, covenants and
agreements set forth herein. The Buyer acknowledges and agrees that it (i) has
made its own inquiry and investigation into, and based thereon has formed an
independent judgment concerning, the Business, the Assets, the Lancaster
Companies and their liabilities, (ii) has been furnished with or given adequate
access to such information about the Business, the Assets, the Lancaster
Companies and their liabilities as it has requested, and (iii) will not assert
any claim against the Sellers, except pursuant to Section 11, or any of their
respective directors, officers, employees, agents, stockholders, Affiliates,
consultants, investment bankers or representatives, or hold the Sellers or any
such persons, except pursuant to Section 11, liable for any inaccuracies,
misstatements or omissions with respect to information (other than the
representations and warranties contained in this Agreement with respect to such
matters) furnished by the Sellers or such persons concerning the Business, the
Assets, the Lancaster Companies and their liabilities, unless such inaccuracies,
misstatements
57
or omissions shall constitute fraud on the part of the Sellers or any of their
respective directors, officers, employees, agents, stockholders, Affiliates,
consultants, investment bankers or representatives.
(b) In connection with its investigation of the Lancaster Companies and
the Business, the Buyer has received certain estimates, projections and other
forecasts, plans and budgets for the Lancaster Companies and the Business. The
Buyer acknowledges that there are uncertainties inherent in attempting to make
such estimates, projections, forecasts, plans and budgets, that the Buyer is
familiar with such uncertainties, that the Buyer takes full responsibility for
making its own evaluation of the adequacy and accuracy of all estimates,
projections, forecasts, plans and budgets so furnished to it, and that the Buyer
will not assert any claim against the Sellers or any of their respective
Affiliates, directors, officers, employees, agents, stockholders, consultants,
investment bankers or representatives, or hold the Sellers or any such persons
liable, with respect thereto. Accordingly, the Sellers make no representation or
warranty with respect to any such estimates, projections, forecasts, plans or
budgets.
14.4. Severability. In the event that any provision hereof would, under
applicable law, be invalid or unenforceable in any respect, such provision shall
(to the extent permitted under applicable law) be construed by modifying or
limiting it so as to be valid and enforceable to the maximum extent compatible
with, and possible under, applicable law. The provisions hereof are severable,
and in the event any provision hereof should be held invalid or unenforceable in
any respect, it shall not invalidate, render unenforceable or otherwise affect
any other provision hereof.
14.5. Successors and Assigns. All of the terms and provisions of this
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective transferees, successors and assigns (each of which
such transferees, successors and assigns shall be deemed to be a party hereto
for all purposes hereof); provided, however, that (i) no transfer or assignment
by any party hereto shall be permitted without the prior written consent of the
other parties hereto and (ii) no transfer or assignment by any party shall
relieve such party of any of its obligations hereunder.
14.6. Agreements Among Sellers.
58
(a) Each of the Sellers hereby irrevocably appoints Butler
Capital Corporation or its designee (as appointed in writing), as the
agent, proxy, and attorney-in-fact for the Sellers for all purposes
under this Agreement (including without limitation full power and
authority to act on the Sellers' behalf) (a) to negotiate this
Agreement and consummate the transactions contemplated hereby, (b) in
the event of such consummation, to receive on behalf of the Sellers
each of such Seller's Cash Consideration and/or Cancellation Payment
(including through a Purchase Price Adjustment, if any), (c) to pay out
of the Seller's Cash Consideration and/or Cancellation Payment all
costs, expenses and fees (including without limitation attorneys' fees
and the Bowles Hollowell Conner & Co. fee) incurred by or on behalf of
the Sellers in connection with the transactions contemplated by this
Agreement (d) to review the Closing Working Capital Sheet and resolve
any disputes regarding the Adjusted Final Working Capital, (e) to pay
to the Buyer out of the Seller's Cash Consideration and/or Cancellation
Payment, the Purchase Price Reduction, if any, (f) to execute and
deliver on behalf of the Sellers any amendment to this Agreement, (g)
to conduct the defense of all claims against the Sellers under Section
11 of this Agreement, and settle all such claims in its sole discretion
on behalf of all the Sellers, and to take all other actions to be taken
by or on behalf of the Sellers and exercise any and all rights which
the Sellers are permitted or required to do or exercise under this
Agreement. Each of the Sellers hereby agrees to indemnify and hold
harmless Sellers' Representative from and against any and all Losses
incurred by Sellers' Representative in its capacity as Sellers'
Representative other than such Losses incurred thereby as a result of
Sellers' Representative's gross negligence or wilful misconduct. Each
of the Sellers hereby agrees that all power and authority hereby
conferred is coupled with an interest and is irrevocable; and to the
extent not prohibited by law shall not be terminated by any act of any
of the Sellers or by operation of law or by the occurrence of any event
whatsoever, including without limitation, the death, incapacity,
dissolution, liquidation, termination, bankruptcy or insolvency of any
of the Sellers or any similar event.
(b) Each Seller hereby unconditionally and irrevocably agrees
to pay to the Sellers' Representative, promptly upon request and in any
event with 10 days of such request, the Seller's Percentage of any
amounts paid by the Sellers' Representative or
59
any of its Affiliates in connection with Section 11 of this Agreement
and agrees to pay its Seller's Percentage of any and all costs and
expenses (including counsel and legal fees and expenses) incurred by
the Sellers' Representative or any of its Affiliates in connection with
the protection, defense or enforcement of any rights under this Section
14.6. Any and all payments made by any Seller hereunder shall be made
free and clear of any present or future taxes, deductions, charges or
withholdings and all liabilities with respect thereto.
(c) No failure on the part of the Sellers' Representative to
exercise, and no delay in exercising, any of its rights under this
Section 14.6 shall operate as a waiver thereof.
14.7. Notices. Any notices or other communications required or
permitted hereunder shall be sufficiently given if in writing and delivered
personally or sent by telecopier, Federal Express, or registered or certified
mail, postage prepaid, addressed as follows:
If to the Company, to: Lancaster Press, Inc.
3575 Hempland Road
Lancaster, PA 17604
Telecopier: (717) 285-7261
Attention: President
If to the Sellers, to: Butler Capital Corporation
767 Fifth Avenue, 6th Floor
New York, New York 10153
Telecopier: (212) 759-0876
Attention: Mark Durfee
with a copy to: Ropes & Gray
One International Place
Boston, MA 02110
Telecopier: (617) 951-7050
Attention: R. Newcomb Stillwell, Esq.
60
If to the Buyer, to it at: Cadmus Communications Corporation
6620 West Broad Street
Suite 500
Richmond, Virginia 23230
Telecopier: (804) 287-5683
Attention: Bruce V. Thomas, Esq.
with a copy to: Hunton & Williams
951 E. Byrd Street
Richmond, Virginia 23219
Telecopier: (804) 788-8218
Attention: C. Porter Vaughan III, Esq.
Unless otherwise specified herein, such notices or other communications shall be
deemed received (a) on the date delivered, if delivered personally, (b) two
Business Days after being sent by overnight courier, if sent by overnight
courier, (c) one Business Day after being delivered, if delivered by telecopier
and (d) three Business Days after being sent, if sent by registered or certified
mail. Each of the parties hereto shall be entitled to specify a different
address by giving notice as aforesaid to each of the other parties hereto.
14.8. Public Announcements. At all times at or before the Closing, no
party hereto will issue or make any reports, statements or releases to the
public with respect to this Agreement or the transactions contemplated hereby
without the consent of the other parties hereto, which consent shall not be
unreasonably withheld. If any party hereto is unable to obtain, after reasonable
effort, the approval of its public report, statement or release from the other
parties hereto and such report, statement or release is, in the opinion of legal
counsel to such party, required by law in order to discharge such party's
disclosure obligations, then such party may make or issue the legally required
report, statement or release and promptly furnish the other parties with a copy
thereof. Each party hereto will also obtain the prior approval by the other
parties hereto of any press release to be issued immediately following the
execution of this Agreement and the Closing announcing the consummation of the
transactions contemplated by this Agreement.
14.9. Headings, etc. Section and subsection headings are not to be
considered part of this Agreement, are included solely for convenience, are not
intended to be full or accurate descriptions of the content thereof and shall
not affect the construction hereof.
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14.10. Disclosure. Any item properly listed or described in any
Schedule pursuant to any Section of this Agreement shall be deemed to have been
listed in or incorporated by reference into each other Schedule to the extent
(but only to the extent) that (a) it should have been disclosed on such other
Schedule and (b) the Buyer is fairly on notice from the disclosure on such first
Schedule that the information disclosed is germane to the representation to
which such other Schedule relates.
14.11. Third Party Beneficiaries. Nothing in this Agreement is
intended or shall be construed to entitle any Person other than the parties or
their respective successors and assigns permitted hereby to any claim, cause of
action, remedy or right of any kind.
14.12. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute but one and the same instrument.
14.13. Governing Law. This Agreement shall be governed by and
construed in accordance with the domestic substantive laws of the State of
Delaware, without giving effect to any choice or conflict of law provision or
rule that would cause the application of the laws of any other jurisdiction.
14.14. Expenses. All costs and expenses (including legal and investment
advisor fees and expenses), including without limitation the fees of Bowles
Hollowell, Ropes & Gray, Appel & Yost and Smith Katzenstein & Furlow incurred by
the Sellers and the Company in connection with this Agreement and the
transactions contemplated hereby shall be paid by the Sellers, whether or not
the transactions contemplated by this Agreement are consummated and the Sellers
shall indemnify the Company for any losses incurred by Buyer and the Company
resulting from the Sellers' failure to pay such costs, fees and expenses. All
costs and expenses incurred by the Buyer (including legal and investment adviser
fees and expenses) including without limitation the fees of J. P. Morgan & Co.,
Mays & Valentine and Hunton & Williams in connection with this Agreement and the
transactions contemplated hereby shall be paid by the Buyer whether or not the
transactions contemplated hereby are consummated and the Buyer shall indemnify
the Sellers for any Losses incurred by the Sellers resulting from Buyer's
failure to pay such costs and expenses.
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IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have caused this Agreement to be executed, as of the date first above
written by their respective officers thereunto duly authorized.
THE COMPANY: Lancaster Press, Inc.
By: ,
President
THE SELLERS: Mezzanine Lending Associates I, L.P.
By: Mezzanine Lending Management
I, L.P., its general partner
By: ,
its authorized signatory
Mezzanine Lending Associates II, L.P.
By: Mezzanine Lending Management
II, L.P., its general partner
By: ,
its authorized signatory
Mezzanine Lending Associates III, L.P.
By: Mezzanine Lending Management
III, L.P., its general partner
By: ,
its authorized signatory
Senior Lending Associates I, L.P.
By: Senior Lending Management I, L.P.,
its general partner
By: ,
its authorized signatory
63
----------------------------
John E. Cocanougher
----------------------------
Donald R. Sherick
----------------------------
Herbert B. Landau
----------------------------
Boyd A. Votens
----------------------------
Dorothy A. Wells
----------------------------
L. Paul Kroekel
----------------------------
Charles Rohrer
BCC Industrial Services, Inc.
By:
a duly authorized officer
THE BUYER: CADMUS COMMUNICATIONS
CORPORATION
By____________________________
Name:
Title:
64