EXHIBIT 10.1
EXECUTION
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ASSET PURCHASE AGREEMENT
BY AND BETWEEN
CAPS GROUP ACQUISITION, LLC,
AN ILLINOIS LIMITED LIABILITY COMPANY
AND
SCHAWK, INC.,
A DELAWARE CORPORATION
AND THE FOLLOWING WHOLLY-OWNED
DIRECT OR INDIRECT SUBSIDIARIES OF SCHAWK, INC.
SCHAWK HOLDINGS, INC.
AND
SCHAWK USA, INC.
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TABLE OF CONTENTS
PAGE
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1. PURCHASE AND SALE OF ASSETS; ASSUMPTION OF LIABILITIES.............. 2
1.1 Purchase and Sale of Assets.................................... 2
1.2 Excluded Assets................................................ 4
1.3 Assumed and Excluded Liabilities............................... 5
1.4 Purchase Price Calculation..................................... 6
1.5 Payment of Purchase Price...................................... 7
1.6 Post-Closing Adjustment........................................ 7
1.7 Dispute Resolution-Post-Closing Adjustment..................... 7
2. REPRESENTATIONS AND WARRANTIES...................................... 8
2.1 Representations and Warranties of Seller....................... 8
2.2 Representations and Warranties of Buyer........................ 29
2.3 Survival of Warranties and Representations..................... 30
2.4 Knowledge...................................................... 30
3. AGREEMENTS PENDING CLOSING.......................................... 31
3.1 Agreements of Seller Pending the Closing....................... 31
3.2 Agreements of Buyer Pending the Closing........................ 33
4. CONDITIONS PRECEDENT TO THE CLOSING................................. 33
4.1 Conditions Precedent to Buyer's Obligations.................... 33
4.2 Conditions Precedent to the Obligations of Seller.............. 36
5. CLOSING DATE AND DOCUMENTS.......................................... 37
5.1 Closing Date................................................... 37
5.2 Seller's Deliveries............................................ 37
5.3 Buyer's Deliveries............................................. 39
5.4 Third Party Consents........................................... 39
5.5 Transaction Costs.............................................. 40
5.6 Further Assurances............................................. 40
5.7 Post-Closing Receipts.......................................... 41
6. INDEMNIFICATION..................................................... 41
6.1 Seller's Agreement to Indemnify................................ 41
6.2 Buyer's Agreement to Indemnify................................. 43
6.3 Procedures for Making Claims................................... 43
6.4 Defense Procedure for Third Party Claims....................... 43
6.5 Warranty Claims................................................ 44
6.6 Consent to Jurisdiction, Etc................................... 44
6.7 Intentionally Omitted.......................................... 44
6.8 Compliance with Bulk Sales Laws................................ 44
6.9 Limitation on Indemnity........................................ 45
7. OTHER AGREEMENTS.................................................... 46
7.1 Intentionally Omitted.......................................... 46
7.2 Allocation of Purchase Price................................... 46
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TABLE OF CONTENTS
(Continued)
PAGE
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7.3 Covenant Not to Compete........................................ 46
7.4 Termination of Employees....................................... 48
7.5 Conditions to Closing.......................................... 48
7.6 Tax Cooperation................................................ 48
7.7 Employees of the Business...................................... 48
8. MISCELLANEOUS....................................................... 49
8.1 Termination.................................................... 49
8.2 Entire Agreement and Modification.............................. 49
8.3 Sole Benefit................................................... 49
8.4 Severability................................................... 50
8.5 Waiver......................................................... 50
8.6 Governing Law.................................................. 50
8.7 Public Announcement............................................ 50
8.8 Notices........................................................ 50
8.9 Currency....................................................... 51
8.10 Assignment..................................................... 51
8.11 Counterparts................................................... 52
8.12 Section Headings; Gender; Person............................... 52
8.13 Prevailing Party............................................... 52
8.14 Jury Waiver.................................................... 52
8.15 Other Definitions.............................................. 52
8.16 Arbitration.................................................... 53
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SCHEDULES AND EXHIBITS*
Schedule 1.1.1 Equipment
Schedule 1.1.2 Customer Lists
Schedule 1.1.3 Assumed Contracts
Schedule 1.1.4 Inventory
Schedule 1.1.5 Memberships
Schedule 1.1.6 Marketing and Reference Materials
Schedule 1.1.7 Receivables
Schedule 1.1.9 Authorizations
Schedule 1.1.10 Goodwill and Trade Names
Schedule 1.1.11 Intellectual Property
Schedule 1.1.12 Security Deposits and Prepaid Expenses
Schedule 1.1.13 Other Assets
Schedule 1.2 Excluded Assets
Schedule 1.3 Assumed and Excluded Liabilities
Schedule 1.3(e) Certain Compensation to Employees/Executive Officers
Schedule 2.1.2 Conflicts; Defaults; Consents
Schedule 2.1.3 Liens
Schedule 2.1.4 Condition of Assets
Schedule 2.1.6 Customers; Distributors; Contractors; Suppliers
Schedule 2.1.10 Financial Statements
Schedule 2.1.11 Absence of Undisclosed Liabilities
Schedule 2.1.17 Insurance
Schedule 2.1.18 Contracts and Commitments
Schedule 2.1.19 Labor Matters; Employee Relations
Schedule 2.1.20 Employee Plans
Schedule 2.1.21 Intellectual Property Agreements and Rights
Schedule 2.1.22 Premises
Schedule 2.1.23 Environmental
Schedule 2.1.25 Warranty; Product Liability Claims
Schedule 2.1.26 The Software
Schedule 2.1.27 Other Material Adverse Information
Schedule 7.2 Allocation of Purchase Price
Exhibit A Intentionally Omitted
Exhibit B Working Capital Formula Sheet
Exhibit C Opinion of Seller
Exhibit D License Agreement
Exhibit E, E-1 and E-2 Lease Agreements
Exhibit F Transition Services Agreement
Exhibit G Opinion of Buyer
Exhibit H 401(k) Plan Spinoff Agreement
Exhibit I Waiver
* Schedules and exhibits to this agreement have been omitted pursuant to Item
601(b)(2) of Regulation S-K. Schawk, Inc. will furnish supplementally a
copy of any omitted schedule or exhibit to the Securities and Exchange
Commission upon request.
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ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT (hereinafter the referenced above ("AGREEMENT"),
made and entered into this 3rd day of March, 2006, by and between CAPS GROUP
ACQUISITION, LLC, an Illinois limited liability company ("BUYER") and SCHAWK,
INC., a Delaware corporation ("SCHAWK") and each of the direct or indirect
wholly-owned subsidiaries of Schawk, Inc. signatories hereto (Schawk and such
subsidiaries are hereinafter collectively and individually referred to as
"SELLER").
RECITALS:
WHEREAS, Seller, is in the business of providing printing and pre-press
services through its Seven Worldwide Publications, Books and Catalog operating
unit (the "SEVEN WORLDWIDE PUBLICATIONS, BOOKS AND CATALOG BUSINESS") and is in
the business of providing certain other printing, pre-press, imaging and other
services;
WHEREAS, Buyer wishes to purchase the Seven Worldwide Publications, Books
and Catalog Business and certain other operations of Seller described below,
namely, all of Seller's Black Dot division operation, excluding the accounts
with Sears and its affiliates, including, without limitation, the Great Indoors
account, operating at 6115 Official Road, 6209 Official Road, 6210 Factory Road
and 6220 Factory Road, Crystal Lake, Illinois (the "CRYSTAL LAKE OPERATIONS");
all of Seller's operations at 1001 W. North Street, Pontiac, Illinois (the
"PONTIAC OPERATIONS"); all of Seller's operations at 2606 East Livingston
Street, Orlando, Florida (the "ORLANDO OPERATIONS"); all of Seller's operations
at 1620 Central Street, Lower level, 1st and 2nd Floors, Evanston, Illinois (the
"EVANSTON OPERATIONS"); all of Seller's operations at 450 West 33rd Street, 11th
Floor, New York, specifically including the Hudson Yards retouching business,
the on-site facilities at McGraw-Hill and Newsweek, the on-site facilities of
Time, Inc. and that portion of Seller's operations relating to the Kero Road
Transferred Accounts (collectively, the "NEW YORK OPERATIONS"), and, together
with the Crystal Lake Operations, Pontiac Operations, Orlando Operations and
Evanston Operations, the "BUSINESS"). Not in limitation of the foregoing, the
Business includes the following account work done in New York to the extent such
type of work has been done prior to the "Closing Date" (as defined below): the
General Motors work from Lowe and Partners, the Kraft work from various
agencies, the KMart work directed by Martha Stewart Omnimedia (for the Martha
Stewart Line), the ad work directed by agencies for Elizabeth Arden and
Unilever, and the Rolex account for J. Walter Thompson internationally. The
portion of Seller's business and operations not included within the Business is
hereinafter referred to as the "RETAINED BUSINESS". The parties hereto agree
that Seller's Designer's Atelier division shall be included within the Retained
Business.
WHEREAS, Seller desires to sell to Buyer, upon the terms and subject to the
conditions hereinafter set forth, the Business and that portion of Seller's
properties and assets substantially and primarily used in connection with the
Business, as well as certain specified liabilities, which assets include,
without limitation, the goodwill, accounts receivable, equipment, assumed
contracts, marketing materials, permits, customer lists, memberships, inventory,
work in process, trade names, and general intangibles of Seller used primarily
and substantially in the operation of the Business (but which assets shall
exclude the "EXCLUDED ASSETS" (as defined below); and
WHEREAS, Buyer desires to purchase and acquire from Seller, upon the terms
and subject to the conditions hereinafter set forth, the Business and the
"PURCHASED ASSETS" (as defined below) and to assume the "ASSUMED LIABILITIES"
(as defined below);
NOW, THEREFORE, for and in consideration of the premises and the mutual
covenants hereinafter contained and other good and valuable consideration, the
receipt and sufficiency of which are hereby mutually acknowledged by the parties
hereto, Buyer and Seller on the basis of, and in reliance upon, the
representations, warranties, covenants, obligations and agreements set forth in
this Agreement, and upon the terms and subject to the conditions contained
herein, hereby agree as follows:
1. PURCHASE AND SALE OF ASSETS; ASSUMPTION OF LIABILITIES
1.1 Purchase and Sale of Assets. Seller shall, and hereby does, effective
as of the Closing Date (as hereinafter defined in Section 3.1 hereof), sell,
assign, transfer, and deliver to Buyer free and clear of all Encumbrances (other
than Permitted Encumbrances) and Buyer shall and hereby does effective as of the
Closing Date, purchase and acquire from Seller the Business together with the
following assets, properties, rights and interests of Seller, wherever situated,
as the same exist as of the Closing Date (such Business together with the
assets, properties, rights and interests of the Business being hereinafter
collectively called the "ACQUIRED ASSETS"):
1.1.1 Equipment. All equipment owned or leased by Seller used
substantially and primarily in the operation of the Business including,
without limitation, trucks, other vehicles, machinery, and computers, and
supplies and tools used to repair such equipment, and goods and other
tangible personal property of Seller including any and all policy manuals
and records relating to such equipment ("EQUIPMENT"), including, without
limitation, all personalty listed on Schedule 1.1.1, attached to and made a
part hereof.
1.1.2 Customer Lists. All lists of the persons or entities to whom or
to which Seller has provided goods or services pertaining to the Business
at any time prior to the Closing date including, without limitation,
customers relating to bids in process or outstanding proposals, all as
listed on Schedule 1.1.2 (collectively, the "CUSTOMERS").
1.1.3 Assumed Contracts. All assignable rights Seller may have under
any and all agreements, contracts, including customer contracts and
supplier contracts, licenses and leases and pending orders pertaining to
the Business, including without limitation, the Agreement by and between
Black Dot Graphics, Inc. and Ettore G. Nardulli dated April 1, 2004 (the
"NARDULLI EMPLOYMENT AGREEMENT") (all as listed on Schedule 1.1.3)
("ASSUMED CONTRACTS"), but excluding all Employee Plans (as defined
herein).
1.1.4 Inventory. All inventory (collectively, "INVENTORY") of Seller
pertaining to the Business including as described on Schedule 1.1.4 hereto,
including all raw materials, work in process relating to work that has not
yet been completed and/or has not yet been billed, and finished goods,
reflected in the Financial Statements (as hereinafter defined), and the
Inventory acquired since the date thereof; provided, however, that Seller
shall sell and Buyer shall purchase only good and usable Inventory, but not
obsolete or
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unusable Inventory or Inventory in excess of two (2) years' actual
historical usage as of the Closing Date.
1.1.5 Memberships. All assignable rights of Seller in and to any
memberships of Seller pertaining to the Business which Buyer elects to
assume (all as listed on Schedule 1.1.5).
1.1.6 Marketing and Reference Materials. Any and all marketing and
reference materials utilized substantially and primarily in the Business
including, without limitation, any and all product literature and/or
brochures, technical documents, computer software and ancillary materials,
referral lists, marketing leads, telephone numbers, websites, facsimile
numbers and the domain names, names for any catalogs and the books and
publications business, email addresses and internet home pages and similar
assets utilized by Seller primarily and substantially in the conduct of the
Business.
1.1.7 Accounts Receivable. All accounts receivable of Seller arising
out of the sale of goods and services by the Business outstanding as of or
prior to the Closing Date which are acceptable to Buyer net of reserves,
including as set forth on Schedule 1.1.7 attached hereto ("RECEIVABLES").
1.1.8 Furniture and Fixtures. Any and all furniture and fixtures (the
"FURNITURE AND FIXTURES") owned by Seller and used primarily and
substantially in relation to the Business and including, without
limitation, as set forth on Schedule 1.1.1 attached hereto and made a part
hereof.
1.1.9 Authorizations. All rights under any permit, registration,
franchise, license, easement, right, application, filing, approval or
authorization of any nature applicable to the Business, to the extent
assignable (collectively, "AUTHORIZATIONS") including, without limitation,
all as listed on Schedule 1.1.9, attached to and made a part hereof;
1.1.10 Goodwill and Trade Names. The Business and associated goodwill
of Seller related to the Business, as a going concern as well as any and
all proprietary rights of Seller in and to the names Black Dot, Applied
Graphics Technologies, HudsonYards, Agile Enterprises and Typo-Graphics and
the goodwill related thereto. Without limiting the foregoing, Seller shall
cooperate with Buyer in transferring to Buyer any and all customer leads,
referrals, and inquiries pertaining to the Business. Seller shall refer to
Buyer any customer calls or referrals received after the Closing Date with
respect to the Business. Except as provided below, Seller agrees to cease
using the names Black Dot, Applied Graphics Technologies, HudsonYards,
Agile Enterprises and Typo-Graphics and any name similar thereto as of the
Closing Date and to execute and/or file any and all necessary documents,
instruments and certificates to accomplish such name changes and to use an
expedited filing process and pay all fees and charges related to such
filings listed on Schedule 1.1.10. The foregoing notwithstanding, Buyer
acknowledges that after the Closing Date, Seller may continue to use the
trade name Applied Graphics Technology and Agile Enterprises in connection
with existing contracts and agreements
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of the Retained Business (but not with respect to any contracts or
agreements entered into after the Closing Date).
1.1.11 Intellectual Property. All rights under any patent application,
patent, trademark, service mark, trade dress, trade name or copyright,
whether registered or unregistered, internet domain name, and any
applications therefor; and all technologies, methods, formulations, data
bases, trade secrets, know how, inventions and other intellectual property
owned or licensed by Seller and used substantially and primarily in the
Business or under development with respect to the Business; and all
computer software primarily and substantially used in connection with the
Business (including documentation and related object and source codes) and
the goodwill related to all of the foregoing but only to the extent of, the
intellectual property listed on Schedule 1.1.11 (collectively, the
"INTELLECTUAL PROPERTY"); provided, however, that the Intellectual Property
shall not include (x) the TeamBase and Digital Link software (the "TEAMBASE
AND DIGITAL LINK SOFTWARE"), which shall be licensed to Buyer pursuant to
the License Agreement or (y) the Studio Eye software, which is used by
Seller's Ambrosi's operating unit and which shall not be licensed to Buyer.
1.1.12 Security Deposits and Prepaid Expenses. All security deposits
and prepaid expenses of Seller as they pertain to the Business listed on
Schedule 1.1.12.
1.1.13 Other Assets. Any and all other assets and properties of Seller
of every kind, character and description, whether tangible, intangible,
real, personal or mixed, and wherever located or by whomever possessed
pertaining primarily and substantially to the Business including, without
limitation, supplies on hand, all financial accounting and business related
books and records pertaining substantially and primarily to the Business,
or any of the Acquired Assets (provided that Seller's accountant shall be
permitted to retain all records of Seller that it holds, but Buyer shall be
provided access thereto to the extent pertaining primarily and
substantially to the Business, and may, at its expense, make copies
thereof), existing advertising, technical manuals, any and all policy
and/or procedure manuals pertaining primarily and substantially to the
Business, all rights or choses in action arising out of occurrences before
or after the Closing (as hereinafter defined) pertaining primarily and
substantially to the Business including, without limitation, all rights
under express or implied warranties relating to the Acquired Assets, and
all information and records (including, without limitation, personnel
records to the extent not prohibited by law), whether reduced to physical
form or otherwise, acquired for, used in, or in any way primarily related
to the Business listed on Schedule 1.1.13. The foregoing notwithstanding,
Buyer acknowledges that Seller may retain the pre-Closing Date original
personnel records of employees of the Business who are hired by Buyer so
long as Seller has made complete copies of said records and delivered such
copies to Buyer. Seller agrees to pay the entire cost for any such copying,
and furthermore, Seller will assume the responsibility for making all such
copies. Pre-Closing personnel records of employees of the Business who are
not retained by Buyer shall remain Seller's property.
1.2 Excluded Assets. Notwithstanding the foregoing, the Acquired Assets
shall not include any of the following assets (collectively, the "EXCLUDED
ASSETS"):
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(a) cash and cash equivalents of Seller;
(b) the tax returns, books of account or other records having to
do with the organization of Seller;
(c) the real estate holdings of the Business as set forth on
Schedule 1.2, including, without limitation, the Owned Real Property
(as hereinafter defined).
(d) the rights which accrue or will accrue to Seller under this
Agreement;
(e) the rights to any of Seller's claims for any federal, state,
local, or foreign tax refunds; or
(f) the other assets, properties or rights of Seller which are
not part of the Business and which constitute or are used in the
Retained Business, including, without limitation, those assets listed
on Schedule 1.2 hereof.
1.3 Assumed and Excluded Liabilities. Except for (x) those categories of
current liabilities set forth on Exhibit B hereto as of the Closing Date, (y)
obligations arising under Assumed Contracts on or after the Closing Date and (z)
liabilities and obligations arising under the 401(k) Plan Spinoff Agreement to
the extent (and only to the extent) provided for in said 401(k) Plan Spinoff
Agreement (collectively, the "ASSUMED LIABILITIES"), Buyer shall not assume or
be liable for, and Seller shall retain, discharge and perform, any and all
liabilities and obligations of Seller, including, without limitation, the
following (collectively, the "EXCLUDED LIABILITIES"):
(a) Any liability, expense or cost relating to claims against
Seller for personal injury or property damage arising from or relating
to, in whole or in part, any event occurring prior to Closing;
(b) Any liability or obligation of Seller arising from or
relating to services provided, goods produced, sold or distributed by
Seller prior to Closing;
(c) Any liability or obligation of Seller for loans or other
debts of Seller;
(d) Any liability or obligation of Seller under any real estate
lease or in relation to any real estate owned or operated by Seller
(other than leases included within Assumed Contracts for the
liabilities or obligations accruing after the Closing);
(e) Except as set forth on Exhibit B hereto, any liability or
obligation of Seller to any employee of Seller for any stay bonuses,
severance, or related items to be paid to any key employees, agents
and executive officers of Seller;
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(f) Any obligation of Seller for Taxes (as hereinafter defined)
(including interest and penalties) imposed by any state, federal or
other entity arising from, on, or out of the ownership, use or
operation of the Acquired Assets prior to Closing, or arising from,
on, or out of the sale or conveyance by Seller of the Acquired Assets
pursuant to this Agreement other than those Taxes arising from the
conveyance of the Acquired Assets to Buyer which by applicable law are
assessed against the purchaser of such assets (which such Taxes shall
be included in the Assumed Liabilities);
(g) Any obligation of Seller for expenses incurred in connection
with the sale or conveyance of the Acquired Assets pursuant to this
Agreement, including, without limitation, the fees and expenses of
attorneys, accountants, brokers and other advisors and agents;
(h) Any liability related to rent for the vacated space on the
twelfth floor of the Newsweek building in New York, New York;
(i) Any liability related to the union and employment
discrimination claims related to the merger or consolidation of
Seller's operating units or divisions prior to the Closing Date;
(j) Any environmental liability occurring before the Closing;
(k) Any OSHA-related liabilities, including, but not limited to,
OSHA Complaint No. 203439302 (OSHA Complaint No. 203439302) incurred
or occurring as a result of the operations of the Business prior to
the Closing Date;
(l) Any obligation or liability of Seller for health benefits,
welfare benefits, pension or retirement benefits which have accrued
prior to Closing; except for those items included within the
classification of accrued expenses on Exhibit B;
(m) Any liability of Buyer related to the "Plan" (as defined in
the 401(k) Plan Spinoff Agreement) except to the extent provided in
such 401(k) Plan Spinoff Agreement.
(n) Any other liability, contract, commitment or obligation
(whether known or unknown, fixed or contingent, liquidated or
unliquidated) arising out of or relating to the ownership, use or
operation of the Acquired Assets prior to Closing and not included
within the Assumed Liabilities; and
(o) Any liability or obligation of Seller arising under this
Agreement.
Within a reasonable time prior to Closing (as hereinafter defined), Buyer
shall have the right to review the proposed Assumed Liabilities of Seller and
refuse to be responsible for any Assumed Liabilities that are unrelated to the
Business. Buyer hereby agrees and covenants to perform and discharge and fully
indemnify Seller from all costs, expenses and damages relating
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to the Assumed Liabilities. Seller hereby agrees and covenants to indemnify
Buyer from all costs, expenses and damages relating to the Excluded Liabilities.
1.4 Purchase Price Calculation. The Purchase Price ("PURCHASE PRICE") shall
be Twenty-Nine Million and No/100 Dollars ($29,000,000.00) plus the amount of
the Assumed Liabilities. The Purchase Price shall be subject to adjustment and
the Post-Closing Adjustment (as hereinafter defined).
1.5 Payment of Purchase Price. The Purchase Price shall be paid as follows:
1.5.1 Cash Purchase Price. At the Closing on the Closing Date, Buyer
shall pay to Seller or as otherwise directed by Seller an amount ("CASH
PURCHASE PRICE") equal to Twenty-Nine Million and No/100 Dollars
($29,000,000.00) in the form of a certified or cashier's check, or by wire
transfer of immediately available funds.
1.6 Post-Closing Adjustment. On or prior to the Closing Date (as
hereinafter defined), Seller shall provide Buyer with its estimated balance
sheet and income statement reflecting Seller's estimated calculation of working
capital (as hereinafter defined) as of the Closing Date (collectively, the
"SELLER'S ESTIMATED CLOSING BALANCE SHEET"). Within one hundred and 20 (120)
days after Closing, Seller shall have prepared, at Seller's/Buyer's expense on a
50/50 basis, through an accountant engaged by Seller, an audited balance sheet
in accordance with generally accepted accounting principles as of the Closing
Date (the "CLOSING BALANCE Sheet"), for purposes of confirming the accuracy of
the calculation of Working Capital as of the Closing Date. Based upon such
Closing Balance Sheet, the parties agree that the amount of the Purchase Price
shall be adjusted upwards or downwards, as appropriate (the "POST-CLOSING
ADJUSTMENT"), on a dollar-for-dollar basis to the extent that the amount of the
Working Capital of Seller calculated using the Closing Balance Sheet is greater
than or less than, as the case may be, Eleven Million Eight Hundred Seventy-Two
Thousand and No/100 Dollars ($11,872,000.00) (the "TARGET WORKING CAPITAL") plus
or minus Five Hundred Thousand and No/100 Dollars ($500,000.00). If the Target
Working Capital is greater than the Working Capital by more than Five Hundred
Thousand and No/100 Dollars ($500,000.00), then within five (5) business days
after the final determination thereof pursuant to Section 1.7 hereof, then
Seller shall immediately pay Buyer such shortfall (the amount by which the
Target Working Capital exceeds the sum of Working Capital plus $500,000).
If the Working Capital is greater than the sum of Target Working Capital
plus Five Hundred Thousand and No/100 Dollars ($500,000.00), then Buyer shall
pay Seller any amount by which Working Capital exceeds the sum of Five Hundred
Thousand and No/100 Dollars ($500,000.00) plus the Target Working Capital, such
payments to be made within five (5) business days after the final determination
thereof pursuant to Section 1.7 hereof.
For purposes of determining the Working Capital as of the Closing Date, the
parties agree that the components thereof shall consist solely of those line
items set forth on the Working Capital Formula Sheet attached hereto as Exhibit
B, which line items shall contain those categories of assets and liabilities
contained in the line items as of September 30, 2005.
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1.7 Dispute Resolution-Post-Closing Adjustment. Any dispute which may arise
between Seller and Buyer as to the Closing Balance Sheet or the proper amount of
the Post-Closing Adjustment shall be resolved in the following manner:
(a) Buyer, if it disputes the Closing Balance Sheet or the
Post-Closing Adjustment, shall notify Seller in writing ("ADJUSTMENT
OBJECTION NOTICE") within forty-five (45) days after the delivery of
the Closing Balance Sheet that Buyer disputes the Closing Balance
Sheet or the amount of the Post-Closing Adjustment; with such notice
to specify in reasonable detail the nature of the dispute and Buyer's
proposed Closing Balance Sheet and Post-Closing Adjustment;
(b) if Buyer fails to deliver an Adjustment Objection Notice
within such forty-five (45) days, the Post-Closing Adjustment shall be
paid to the appropriate party pursuant to Section 1.6 above;
(c) if Buyer delivers an Adjustment Objection Notice, then during
the fifteen (15) day period following the date of such notice, Seller
and Buyer shall attempt to resolve such dispute and to determine the
appropriateness of the Closing Balance Sheet and/or the Post-Closing
Adjustment; and
(d) if at the end of the fifteen (15) day period specified in
subparagraph (c) above, Seller and Buyer shall have failed to reach a
written agreement with respect to such dispute, the matter shall be
referred to the Chicago, Illinois office of Blackman Kallick
Bartelstein, LLC, independent certified public accountants (the
"ARBITRATOR"), which shall act as an arbitrator and shall issue its
report as to the Closing Balance Sheet or the Post-Closing Adjustment
within sixty (60) days after such dispute is referred to the
Arbitrator. At the opening of the arbitration review, each party shall
present the Arbitrator with such party's proposed Post-Closing
Adjustment along with supporting documentation. The Arbitrator is not
required to choose a Post-Closing Adjustment from the adjustment
proposals. All costs and expenses incurred by the parties in
connection with such arbitration including, without limitation, fees
and expenses of the Arbitrator shall be paid by the party whose
proposed Post-Closing Adjustment number is furthest from the
Post-Closing Adjustment actually determined by the Arbitrator. This
provision for arbitration shall be specifically enforceable by the
parties and the decision of the Arbitrator in accordance with the
provisions hereof shall be final and binding and there shall be no
right of appeal therefrom. The dispute resolution provisions in this
Section 1.7 are intended to resolve disputes only with respect to the
Closing Balance Sheet and the Post-Closing Adjustment. All other
disputes arising under the terms of this Agreement shall be resolved
pursuant to the provisions of Section 6 hereof.
2. REPRESENTATIONS AND WARRANTIES
2.1 Representations and Warranties of Seller. Each Seller hereby, jointly
and severally, represents and warrants to Buyer as follows:
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2.1.1 Organization and Standing; Power and Authority. Each Seller is a
corporation duly organized, validly existing and in good standing under the
laws of the state of its incorporation or formation and has full power and
authority to operate its business, to own or lease the Acquired Assets, to
carry on its business as now being conducted, to make and perform this
Agreement and the transactions and other agreements and instruments
contemplated by this Agreement. Each Seller is qualified to conduct
business in the state of its incorporation or formation and is in good
standing in each jurisdiction in which the failure to so qualify would have
a Material Adverse Effect (as hereinafter defined). This Agreement and all
other agreements and instruments executed and delivered by each Seller in
connection herewith have been duly authorized, executed and delivered by
each Seller. This Agreement and the transactions contemplated hereby have
been duly approved and authorized by the board of directors (managers) of
each Seller (and shareholder or member approval and authorization is not
required), and this Agreement and all other agreements and instruments
delivered by each Seller in connection herewith constitute the valid and
binding obligations of each Seller enforceable in accordance with their
respective terms, except as the enforceability thereof may be limited by
the availability of equitable principles or by bankruptcy, insolvency,
reorganization, moratorium, or other similar laws affecting creditors'
rights generally.
2.1.2 Conflicts; Defaults; Consents. Except as set forth on Schedule
2.1.2 attached hereto, neither the execution and delivery of this Agreement
and the other agreements and instruments executed in connection herewith by
any Seller nor the performance by any Seller of the transactions
contemplated hereby or thereby (including Buyer's ability to continue to
conduct the Business after the Closing in the manner in which such Business
is currently conducted), will (with or without the giving of notice or the
lapse of time or both) (a) violate, conflict with, require to consent
under, accelerate an obligation under, or change the rights or obligations
of any Seller under, or constitute a default under, any of the terms of
such Seller's certificate of incorporation or by-laws, or any provisions
of, any material contract, sales or service commitment, license, purchase
order, security agreement, mortgage, note, deed, lien, lease, agreement,
instrument, order, judgment or decree relating to any Seller to which such
Seller is a party or to which such Seller or the Acquired Assets may be
bound or subject, (b) breach or violate, or constitute a default under, or
trigger any payment or other material obligations pursuant to, any of any
Seller's Employee Plans (as hereinafter described in Section 2.1.20) or any
grant or award made under any of the foregoing, (c) result in any material
change in the rights or obligations of any party under any of the Contracts
described pursuant to Section 2.1.18 hereof excluding any such change as
the result of a change in control provision or similar provision contained
in any such Contract with any customer, (d) result in the creation or
imposition of any liens on the Acquired Assets, (e) violate any statute,
law, ordinance or regulation of any jurisdiction, as such statute, law,
ordinance or regulation relates to any Seller or to the securities,
properties, assets or the Business, the violation of which would have a
Material Adverse Effect, (f) constitute an event which, after notice or
lapse of time or both, would result in such violation, conflict, default,
acceleration, or creation or imposition of any liens, or (g) require any
consent, approval authorization or other action by, or filing with or
notification to any governmental or regulatory authority. For purposes of
this Agreement, the term "MATERIAL ADVERSE EFFECT" means any change, effect
or circumstance that (a) a reasonably prudent investor would consider
important
9
(either individually or when considering the collective effect of all such
matters) in deciding whether to consummate the transactions contemplated
hereby) and (b) is materially adverse to the business, assets, financial
condition or results of operations of the Business, taken as a whole, or
that materially and adversely affects the ability of Seller to perform its
obligations under this Agreement and consummate the transactions
contemplated hereby; provided, however, that any change, effect or
circumstance that singly exceeds Five Thousand and No/100 Dollars
($5,000.00) or in the aggregate exceeds Fifteen Thousand and No/100 Dollars
($15,000.00) shall be deemed a Material Adverse Effect; provided, further,
however, that the term Material Adverse Effect shall not include the impact
of (i) changes in laws or interpretations thereof by courts or any other
governmental entity, (ii) changes in general accepted accounting principles
and (iii) actions or omissions of Seller taken with the consent of Buyer in
contemplation of the transactions contemplated hereby, (iv) general
economic conditions and events or conditions generally affecting the
printing, pre-press graphic arts business or imaging business, (v) national
or international hostilities, acts of terror or acts of war, and (vi) this
Agreement or the announcement hereof.
2.1.3 Title to the Acquired Assets. Seller has good and marketable
title to, and has the right to transfer to Buyer, each of the Acquired
Assets, and, except as set forth on Schedule 2.1.3 or with respect to other
Permitted Encumbrances, the Acquired Assets are free and clear of all
mortgages, liens, pledges, security interests, charges, claims,
restrictions and encumbrances of any nature whatsoever ("ENCUMBRANCES").
Seller will transfer the Acquired Assets to Buyer with good and marketable
title, free and clear of all Encumbrances other than the Permitted
Encumbrances. The Acquired Assets constitute substantially all of the
tangible assets used in or necessary to the conduct of the Business as it
is presently being conducted.
2.1.4 Condition of Acquired Assets. The Acquired Assets including,
without limitation, the Equipment and the Furniture and Fixtures, are in
good operating condition and repair, ordinary wear and tear and normal
levels of obsolescence excepted and conform to all applicable laws,
ordinances, codes, rules and regulations relating to their construction,
use and operation, except that the air conditioning equipment for the New
York Operations at the West 33rd Street location are to be sold on an "AS
IS," "WHERE IS" basis and except as otherwise described on Schedule 2.1.4.
No person other than Seller owns any of the Acquired Assets other than that
portion of the Acquired Assets consisting of leased or licensed Equipment
or Intellectual Property in which case, no person other than a Seller owns
the leasehold interest or license with respect to such Acquired Asset.
2.1.5 Services Rendered by Seller. Seller has conducted the Business
in compliance with (a) all laws, statutes, regulations and ordinances
applicable to such services and (b) the contracts it has entered into;
except where the failure to be in such compliance could not be reasonably
expected to have a Material Adverse Effect.
2.1.6 Customers, Distributors, Contractors, Suppliers. Schedule 2.1.6
sets forth all the Customers (with annual purchases of $25,000 or more)
relating to the Business during the two (2) year period ended December 31,
2005, and also sets forth the ten (10)
10
largest customers by revenue during such period and the revenue generated
for each such customer during such period, and Schedule 2.1.6 sets forth
all contractors, distributors and suppliers who have provided in excess of
Twenty-Five Thousand Dollars ($25,000) of services or materials in the
aggregate to Seller relating to the Business during such two (2) year
period (each, a "MATERIAL SUPPLIER") and also sets forth the ten (10)
largest Material Suppliers by cost during such period and the fees paid to
each such Material Supplier during such period. Except as set forth on
Schedule 2.1.6 with respect to Newsweek, McGraw-Hill and any other item
disclosed thereon, Seller has not received any notice or threat from any
Customer to terminate, cancel or otherwise materially and adversely modify
its relationship with Seller since January 31, 2005, and to Seller's
Knowledge, there is no plan or intention of any Customer to terminate,
cancel, or otherwise materially modify its relationship with Seller. To
Seller's Knowledge, there is no plan or intention of any Material Supplier
to decrease materially or limit its services, supplies or materials to
Seller or its usage, purchase, or distribution of the services or products
of Seller. Except as set forth on Schedule 2.1.6, Seller has not submitted
and is not aware of or received notice or invitation to submit any
competitive bid for sale of its services with respect to the continuation
of any existing program with any Customer relating to the Business or
enhancement of an existing program or service, other than quotations given
and competitive bids submitted in the ordinary course of business.
2.1.7 Inventory. The Inventory shown on Schedule 1.1.4 consists, and
all Inventory on the Closing Date will consist of, in each case, net of
reserves as accounted for on the Interim Balance Sheet as of the Interim
Balance Sheet Date, items of a quality and quantity useable in the ordinary
course of business during the twelve (12) month period after the Closing
Date, and has been maintained in the ordinary course of business, is of
good and merchantable quality, and consists substantially of a quality,
quantity, and condition usable or saleable in the ordinary course of the
Business. The value at which the Inventory is carried, and the reserves
reflected, on the Financial Statements reflect Seller's normal inventory
valuation policy (which provides for statement at cost) all in accordance
with generally accepted accounting principles consistently applied and,
other than as reflected in such reserves, such Inventory is not subject to
any write-down or write-off. None of the Inventory is obsolete (unless
appropriate writedowns have been taken). Seller is not under any liability
or obligation with respect to the return of Inventory in the possession of
wholesalers, retailers, or customers. Seller has, and on the Closing Date
will have, inventories in such amounts as are consistent with past
practices.
2.1.8 Receivables. All of the Receivables shown on the Financial
Statements, and any such Receivables, net of reserves, which have arisen
since the Interim Balance Sheet Date are, and all Receivables on the
Closing Date will be valid and genuine, arose from bona fide sales made or
services delivered in the ordinary course of business, represent legal and
valid obligations to Seller and are not subject to any liens or set-offs or
counterclaims or valid defenses. All of the Receivables are enforceable in
the ordinary course of business. All of the Receivables are collectible
(other than for reasons of the account debtor's credit worthiness) in the
ordinary course of business, net of reserves for doubtful accounts.
Schedule 1.1.7 hereto accurately lists as of the date hereof, and will list
as of the last day of the month immediately prior to the Closing Date, each
11
Receivable, the amount owing, the aging of such Receivable and the name of
the party from whom such Receivable is owing.
2.1.9 No Third Party Options. There are no existing agreements,
options, commitments or rights with, of or to any person other than Buyer
to acquire any of Seller's assets, properties or rights included in the
Acquired Assets or any interest therein.
2.1.10 Financial Statements. Seller has delivered to Buyer true and
complete copies of the Business' pro forma balance sheets and the related
statements of income for the annual periods ended as of December 31, 2003
and December 31, 2004, as well as pro forma accrual basis interim
financials for the period January 1, 2005 through December 31, 2005
(collectively, the "FINANCIAL STATEMENTS"), certified as true and correct
in all material respects by an authorized representative of Seller. Except
as otherwise disclosed on Schedule 2.1.10 hereto, the Financial Statements
have been prepared in accordance with generally accepted accounting
principles applied consistent with Seller's past practices, and all
Financial Statements are complete and accurate in all respects and fairly
present the financial condition of the Business at the dates thereof and
the results of operations for the periods covered thereby, except that such
Financial Statements do not include footnotes and with respect to the
interim period ending September 30, 2005 are subject to year-end audit
adjustments. Further, such Financial Statements were created on a pro forma
basis using the methodology and assumptions detailed on Schedule 2.1.10
hereto. Buyer acknowledges that such assumptions have been arrived at in
consultation with Buyer. Buyer agrees that such assumptions are reasonable
and that Buyer shall not contest the validity of any such assumptions. Such
statements of income do not contain any items of special or non-recurring
income or any other income not earned in the ordinary course of business
except as expressly specified therein, and such Financial Statements
include all adjustments, which consist only of normal recurring accruals,
necessary for such fair presentation. The Interim Balance Sheet identifies
the assets and liabilities which, if the Closing had been held on the
Interim Balance Sheet Date, would have been transferred to Buyer in
accordance herewith. References in this Agreement to the "INTERIM BALANCE
SHEET" shall mean the pro forma balance sheet of the Business as of
December 31, 2005, previously delivered to Buyer; and references in this
Agreement to the "INTERIM BALANCE SHEET DATE" shall be deemed to refer to
September 30, 2005.
2.1.11 Absence of Undisclosed Liabilities. Except as set forth on
Schedule 2.1.11, the Business has no Liabilities (as hereinafter defined)
except those Liabilities reflected in the Interim Balance Sheet and not
heretofore paid or discharged and those Liabilities arising in the ordinary
course of business under any agreement, contract, or lease. For the purpose
of this Agreement, "LIABILITIES" shall include, without limitation, any
direct or indirect indebtedness, guaranty, endorsement, claim, loss,
damage, deficiency, cost, expense, obligation or responsibility, fixed or
unfixed, known or unknown, asserted or unasserted, choate or unchoate,
liquidated or unliquidated, secured or unsecured. All prepaid expenses of
the Business arose in the ordinary course of business and represent valid
obligations with value to the Business.
12
2.1.12 Books of Account. The books, records and accounts of Seller
maintained with respect to the Business accurately and fairly reflect, in
reasonable detail, the transactions and the assets and liabilities of
Seller with respect to the Business. Seller has not engaged in any
transaction with respect to the Business, maintained any bank account for
the Business or used any of the funds of Seller in the conduct of the
Business except for transactions, bank accounts and funds which have been
and are reflected in the normally maintained books and records of the
Business.
2.1.13 Tax Matters. Seller has timely filed all federal, state, local
and foreign tax returns and reports required to be filed by Seller. Seller
has paid or has properly accounted for all federal, state, local and
foreign taxes (and all interest, penalties or additions to tax thereon, if
any), including, without limitation, all income, franchise, transfer, real
property transfer or real property gains, recording, documentary, sales,
use, property, payroll unemployment withholding, occupation, gross
receipts, value added, excise and estimated taxes, due or which later
become due and payable by Seller with respect to all taxable periods up to
and including the period ending on the Closing Date (collectively, the
"TAXES"). There are no due and unpaid assessments or proposals by any
taxing authority for Taxes for which Seller does not have adequate reserves
and there are no pending audits of Seller and Seller has not waived
restrictions on assessment or collection of taxes or consented to the
extension of any statute of limitations related to federal, state, local or
foreign taxes. All Taxes that Seller is or was required by law to withhold
or collect have been duly withheld or collected and, to the extent
required, have been paid to the proper governmental body or person. Seller
has not received any notice of assessment or proposed assessment in
connection with any tax returns and there are not pending tax examinations
of or tax claims asserted against Seller or any of assets or properties of
Seller. Seller has no Knowledge of any basis for any additional assessment
of any taxes. Seller has made all deposits required by law to be made with
respect to employee's withholding of employment taxes, including without
limitation, the portion of such deposits relating to taxes imposed upon
Seller. Adequate accruals on the Financial Statements have been made for
the payment of all accrued and unpaid Taxes attributable to the Business
and to be included within the Assumed Liabilities, whether or not disputed,
for all fiscal periods through the date hereof or arising out of
transactions entered into or any state of facts existing on or prior
thereto; and for such periods, and all periods prior to and through the
date hereof have been, and through the Closing Date will be, properly
accrued on the books and financial records of Seller maintained in respect
of the Business in accordance with generally accepted accounting principles
and in amounts sufficient for the payment of all unpaid Taxes required to
be paid by Seller with respect to such periods.
2.1.14 Existing Condition. Since the Interim Balance Sheet Date,
Seller, with respect to the Business, has not:
(a) incurred or paid any liabilities, other than liabilities
incurred in the ordinary course of business consistent with past
practice, or discharged or satisfied any lien or encumbrance, or
failed to pay or discharge when due any liabilities of which the
failure to pay or discharge has caused or will cause any material
damage or risk of material loss to it or any of the Acquired Assets;
13
(b) sold, encumbered, assigned, or transferred any assets or
properties which would have been included in the Acquired Assets if
the Closing had been held on the Interim Balance Sheet Date or on any
date since the Interim Balance Sheet Date, except for dispositions of
surplus or used Equipment or obsolete or unusable Inventory, or other
sales of Inventory in the ordinary course of business;
(c) pledged or subjected any of the Acquired Assets to any
mortgage, lien, pledge, security interest, conditional sales contract
or other encumbrance of any nature whatsoever;
(d) Intentionally Deleted;
(e) suffered any damage, destruction or loss, whether or not
covered by insurance which has had or could reasonably be expected to
have a Material Adverse Effect or suffered any repeated, recurring or
prolonged shortage, cessation or interruption of supplies or utility
or other services required to conduct the Business which has had or
could reasonably be expected to have a Material Adverse Effect;
(f) suffered any loss of any key employee or any change in the
Business, its operations, assets, properties, prospects or condition
(financial or otherwise) which has had or could reasonably be expected
to have a Material Adverse Effect;
(g) made any increase in the compensation, commissions or
perquisites payable or to become payable to, or made any loan or
advance to, any employee of the Business or agent thereof, or any
payment of any bonus, profit sharing or other extraordinary
compensation to any employee of the Business (other than any such
increase or payment paid or to become payable in the ordinary course
of business consistent with past practices);
(h) received notice or had Knowledge of any actual or threatened
labor trouble, strike or other occurrence, event or condition of any
similar character which has had or could reasonably be expected to
have a Material Adverse Effect;
(i) negotiated or otherwise made any commitment or incurred any
liability or obligation to any labor organization or labor pension
plan with respect to employees of the Business;
(j) changed, in any material respect, any of its accounting
principles followed by it or the methods of applying such principles
with respect to transactions involving the Business;
(k) experienced any cancellation of any debts owed to or claims
held by or on behalf of Seller with respect to the Business, other
than the settlement or write-off of Receivables in the ordinary course
of business consistent with past practice;
14
(l) except for the loss of ULTA, Linens N Things and DDB Needham,
experienced any actual or threatened terminations of any business
relationships or agreements between the Business' Customers or
Material Suppliers which has had or could reasonably be expected to
have a Material Adverse Effect;
(m) experienced, with respect to the Business, any occurrence of
any obligation or liability (absolute or contingent) for any
indebtedness, except routine trade accounts payable, operating
expenses and contract obligations incurred in the ordinary course of
business; or any acceleration in the payment of, or payment other than
in the ordinary course of the business of the Business and consistent
with past custom and practices thereof, of any indebtedness or amounts
due or payable thereunder;
(n) with respect to the Business, made or suffered any amendment
or termination of any agreement, contract, commitment, lease or plan
to which it is a party or by which it is bound, or cancelled, modified
or waived any substantial debts or claims held by it or waived any
rights of substantial value, whether or not in the ordinary course of
business where the effect of any such event could reasonably be
expected to have a Material Adverse Effect;
(o) with respect to the Business, made commitments or agreements
for capital expenditures or capital additions or betterments exceeding
in the aggregate Two Hundred Fifty Thousand and No/100 Dollars
($250,000.00), except such as may be involved in the ordinary repair,
maintenance or replacements of the Equipment.
2.1.15 Compliance with Law; Authorizations. As pertaining to the
Business, (a) Seller is in compliance with all federal, state, local, or
foreign laws, ordinances, regulations, and orders applicable to its
Business, operations, assets or its properties ("REGULATIONS"), (b) Seller
possesses all Authorizations which are in any manner necessary for it to
conduct the Business as now or previously conducted or for the ownership
and use of the assets owned or used by Seller in the conduct of the
Business, free and clear of all Encumbrances (other than Permitted
Encumbrances) and in compliance with all Regulations, and (c) no written
notice has been received of any requirement that Seller is required to
obtain any Authorization or other similar governmental approval which it
does not presently have, except where in any such instance, the failure of
any of the foregoing could not reasonably be expected to have a Material
Adverse Effect. Schedule 1.1.9 lists all Authorizations which are presently
in effect with respect to the Business, and no action or claim is pending
and no written notice of any such claim or action has been received which
threatens to revoke, terminate, or declare any of them invalid in any
respect and Seller, in respect to the Business, is not in default, nor has
it received any notice of a claim of default, with respect to any such
Authorization, except where any such default could not reasonably be
expected to have a Material Adverse Effect. All such Authorizations are
renewable by their terms or in the ordinary course of business without the
need to comply with any special qualification procedures or to pay any
amounts other than routine filing fees. None of such Authorizations will be
affected, in any matter that could reasonably be expected to have a
15
Material Adverse Effect, by consummation of the transactions contemplated
hereby. No shareholder, director, officer, employee or former employee of
Seller or any affiliates of Seller, or any other person, firm or
corporation owns any proprietary, financial or other interest (direct or
indirect) in any authorization which Seller owns, possesses or uses in the
operation of the Business as now or previously conducted.
2.1.16 Litigation. No litigation, including any arbitration,
investigation, or other proceeding of or before any court, arbitrator or
governmental or regulatory official, body, or authority is pending or, to
Seller's Knowledge, is threatened against Seller as relates to the Business
or which relates to the Acquired Assets or the transactions contemplated by
this Agreement, the result of which could reasonably be expected to have a
Material Adverse Effect on the Business, the Acquired Assets or the
transactions contemplated hereby. Seller is not a party to or subject to
the provisions of any judgment, order, writ, injunction, decree, or award
of any court, arbitrator, or governmental or regulatory official body or
authority which could reasonably be expected to have a Material Adverse
Effect on the Business, the Acquired Assets or the transactions
contemplated hereby.
2.1.17 Insurance. Schedule 2.1.17 contains a list of all insurance
policies (specifying (a) the insurer, (b) the amount of the coverage, (c)
the type of insurance, (d) the policy number and (e) any currently pending
claims thereunder or any claims asserted thereunder or under similar
policies since January 31, 2005) currently maintained by or on behalf of
Seller on the properties, assets, business or personnel of the Business. No
notice of cancellation, termination or non-renewal has been received by
Seller with respect to any insurance policy providing insurance coverage of
any nature to Seller, nor has Seller been refused any insurance by any
insurance carrier to which it has applied for insurance coverage in the
past two (2) years. No bonds or surety claims are outstanding currently
and, except as set forth on Schedule 2.1.17, Seller has provided
performance or payment bonds wherever necessary. All such policies are in
full force and effect in accordance with their terms and there is existing
no default which, with the giving of notice or lapse of time or both, would
constitute a default thereunder. Such policies are in amounts which are
adequate in relation to the Business and all premiums to date have been
paid in full.
2.1.18 Contracts and Commitments. Except as set forth on Schedule
2.1.18 hereto, as related to the Business, Seller is not a party to, or
bound by, any oral or written contracts, agreements, commitments or
understandings:
(a) with any present or former officer or employee or consultant
or for the employment of any person, including any consultant, who is
engaged for in the conduct of the Business;
(b) with any dealer, representative, or service agreement
contract or commitment, sales agency, manufacturer's representative,
distributorship or marketing agreement or commitment relating to the
Business;
(c) for leasing personal property (including, without limitation,
leases for vending and other machinery and office equipment,
furniture, fixtures,
16
vehicles and tools) which require in any case an annual payment in
excess of Twenty-Five Thousand Dollars ($25,000) or the term of any of
which exceeds one (1) year and which is not cancelable on thirty (30)
days' or less notice without penalty;
(d) involving the payment or receipt in any case of in excess of
Twenty-Five Thousand Dollars ($25,000) per annum by Seller and the
term of any of which exceeds one (1) year (including, without
limitation, vendor, supply and service contracts) and which is not
cancelable on thirty (30) days' or less notice without penalty;
(e) containing a covenant not to compete or confidentiality
agreement by Seller with respect to the Business or which restricts
Seller from engaging in the Business, which restriction would affect
Buyer's ability to operate the Business or to Seller's Knowledge, is
any employee at Seller engaged in the conduct of the Business subject
to any covenants not to compete, confidentiality agreement or other
agreement which in any case restricts such employee's ability to
perform his obligations to the Business;
(f) involving capital expenditures or the acquisition of fixed
assets which require or will require aggregate payments of more than
One Hundred Thousand Dollars ($100,000);
(g) other than as included within the Assumed Contracts,
involving a note, debenture, bond, equipment trust agreement,
mortgage, indenture, security agreement, letter of credit agreement,
loan agreement or other contract or commitment for the borrowing or
lending of money specifically relating to the Business, or agreement
or arrangement for a line of credit or guarantee, pledge, or
undertaking of the indebtedness of any other person specifically
relating to the Business;
(h) providing for the services of agents, consultants, advisors,
advertisers, dealers, distributors, sales representatives or similar
representatives involving in any case the payment or receipt of in
excess of Twenty-Five Thousand Dollars ($25,000) per annum by the
Business and not immediately terminable by Seller at will and without
cost or liability to the Business (exclusive of accrued but unpaid
salaries, commissions and other benefits);
(i) involving any license, franchise, distributorship or other
agreement which relates in whole or in part to any of the Acquired
Assets not otherwise disclosed in the Schedules hereto;
(j) partnership, joint venture or other arrangements or
agreements involving a sharing of profits or expenses involving the
Business;
(k) Intentionally Omitted;
17
(l) relating to product or service warranties outside the
Ordinary Course of Business (as hereinafter defined) of the Business;
(m) directly or indirectly between Seller, on the one hand, and
any of its shareholders, directors, officers and their Affiliates, on
the other hand, regarding the leasing or licensing of properties or
assets, royalty payments, the providing of services to or by Seller
relating to the Business or any loan or other financial or business
relationship relating to the Business other than the provision of
accounting, legal, corporate, technology support and other services by
Seller's corporate offices to the Business in the Ordinary Course of
Business;
(n) Intentionally Omitted;
(o) which otherwise is material to the Business and not made in
the Ordinary Course of Business and is not otherwise disclosed in any
of the Schedules hereto; and
(p) involving any charitable or political contribution relating
to the Business.
For purposes of this Agreement, "AFFILIATES" shall mean a person that
directly, or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, the person referred to. In
this definition, "CONTROL" means the possession, direct or indirect, of the
power to direct or cause the direction of the management and policies of a
person, whether through ownership of securities, by contract, or otherwise.
Except as set forth on Schedule 2.1.18, Seller is not in default and,
to Seller's Knowledge, no event has occurred which with or without the
giving of notice or lapse of time, or both, would constitute a default in
the performance, observance, or fulfillment of any obligation, covenant or
condition contained in any of the agreements, contracts, commitments,
leases, documents, and other instruments listed on Schedule 2.1.18 (the
"CONTRACTS") and each of the Contracts is valid and enforceable in
accordance with its terms, except in any case where any such default or
event of default thereunder could not reasonably be expected to have a
Material Adverse Effect. Except as disclosed on Schedule 2.1.18, no
Contract requires the consent of any party to this assignment in connection
with the transactions contemplated by this Agreement. Correct and complete
copies of all written Contracts disclosed on Schedule 2.1.18 have been
delivered to Buyer.
2.1.19 Labor Matters; Employee Relations. Except as set forth on
Schedule 2.1.19, Seller is not a party to any collective bargaining
agreement or contract or lease with respect to labor or bound to or made
any agreement or commitment to enter into any other agreement with a labor
union pertaining to the Business. Except as set forth on Schedule 2.1.19,
no employees of the Business are represented by any labor union or similar
organization, and no representation campaign or election is now in progress
with respect to any of the employees of the Business. Schedule 2.1.19
contains
18
the name and compensation (including information as to bonuses paid for the
immediately-preceding calendar year) of all employees of Seller involved in
the Business. There has not been within the preceding fiscal year of Seller
and the current fiscal year, nor is there currently, any strike, walkout or
work stoppage related to the Business; nor, to Seller's Knowledge, is any
such action threatened. There is no existing or, to Seller's Knowledge,
threatened labor disturbance by any of the Business' principal suppliers,
contractors or customers which could reasonably be expected to have a
Material Adverse Effect. Seller is not delinquent in payments to any of the
Business' employees or consultants for wages, salaries, commissions,
bonuses, or other direct compensation for any services performed by them to
the date hereof or amounts required to be reimbursed to such employees.
Also attached to Schedule 2.1.19 is a list of all employee handbooks,
manuals, and/or written policies pertaining to the employees of the
Business, true, correct and complete copies of which have been delivered to
Buyer.
Except as set forth in Schedule 2.1.19, there are no charges or
complaints pertaining to the Business and involving any federal, state or
local civil rights enforcement agency or court; complaints or citations
under the Occupational Safety and Health Act, as amended, or any state or
local occupational safety act or regulation; unfair labor practice charges
or complaints by employees of the Business with the National Labor
Relations Board; or other claims, charges, actions or controversies
pending, or, to Seller's Knowledge, threatened or proposed, involving
Seller and any employee or former employee of the Business or any labor
union or other organization representing or claiming to represent such
employees' interests, which could reasonably be expected to have a Material
Adverse Effect. To Seller's Knowledge, the Business has good relations with
its employees.
Seller, with respect to the Business, is and has heretofore been in
compliance in all respects with all laws, rules and regulations respecting
employment and employment practices, terms and conditions of employment and
wages and hours, the sponsorship, maintenance, administration and operation
of (or the participation of its employees in) employee benefit plans and
arrangements and occupational safety and health programs, and Seller is not
engaged in any violation of any law, rule or regulation related to
employment, including unfair labor practices or acts of employment
discrimination, which, in either case, could reasonably be expected to have
a Material Adverse Effect. No incidents, injuries or events have occurred
which have affected or, to Seller's Knowledge, will affect Seller's
workmen's compensation rating. As of the date of this Agreement, Seller has
provided to Buyer Seller's most recent workmen's compensation rating
information.
Except as disclosed on Schedule 2.1.19, Seller has not made, or agreed
to make, any direct or indirect change (including any general uniform
increase) in the rate or amount or kind of benefits, payable or paid, to
any employee or class of employees of the Business or any direct or
indirect change in the terms or conditions of (including the adoption of)
any policy, plan, agreement, trust, fund or other arrangement for the
benefit of any employee or class of employees of Seller as it relates to
the Business. Schedule 2.1.19 sets forth all the employees of the Business.
Effective as of the Closing, the employment of all employees of Seller with
respect to the Business will be terminated
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by Seller and, except as set forth on Schedule 2.1.19, Buyer intends to
hire all such employees, including, without limitation, Diane Romano and
Jerry H. Byrd at comparable base pay and with customary fringe benefits
such as health and insurance coverage.
2.1.20 Employee Plans.
(a) Definitions. The following terms, when used in this Section
2.1.20, shall have the following meanings. Any of these terms may,
unless the context otherwise requires, be used in the singular or the
plural depending on the reference.
(i) "BENEFIT ARRANGEMENT" means any employment, consulting,
severance, bonus, or other similar contract, arrangement or
policy and each plan, arrangement (written or oral), program,
agreement or commitment providing for insurance coverage
(including any self-insured arrangements), workers' compensation,
disability benefits, supplemental unemployment benefits, vacation
benefits, retirement benefits, life, health, disability or
accident benefits (including any voluntary employees' beneficiary
association as defined in Section 501(c)(9) of the Code providing
for the same or other benefits) or providing for deferred
compensation, profit-sharing, bonuses, stock options, stock
appreciation rights, stock purchases or other forms of incentive
compensation or post-retirement insurance, compensation or
benefits which (A) is not a Welfare Plan, Pension Plan or
Multi-employer Plan, (B) is entered into, maintained, contributed
to or required to be contributed to, as the case may be, by
Seller or an ERISA Affiliate (as hereinafter defined) or under
which Seller or any ERISA Affiliate may incur any liability, and
(C) covers any employee or former employee of Seller or any ERISA
Affiliate (with respect to their relationship with such
entities). "EMPLOYEE PLANS" means all Benefit Arrangements,
Multi-employer Plans, Pension Plans and Welfare Plans. "EMPLOYEE"
means all employees working for Seller or any Subsidiary (as
hereinafter defined), whether on a part-time or full-time basis.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended. "ERISA AFFILIATE" means any entity which is (or
at any relevant time was) a member of a controlled group of
corporations with or under common control with Seller, as defined
in Section 414(b) or (c) of the Code. "MULTI-EMPLOYER PLAN" means
any multi-employer plan, as defined in, Section 4001 (a)(3) of
ERISA, and to which Seller, or any ERISA Affiliate is making, is
obligated to make or has made or been obligated to make, on
behalf of any employee or former employee of Seller or any ERISA
Affiliate (with respect to their relationship with such
entities). "PBGC" means the Pension Benefit Guaranty Corporation.
"PENSION PLAN" means any employee pension benefit plan as defined
in Section 3(2) of ERISA (other than a Multi-employer Plan) (A)
which Seller or any ERISA Affiliate maintains, administers,
contributes to or is required to contribute to, or,
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within the five (5) years prior to the Closing Date, maintained,
administered, contributed to or was required to contribute to, or
under which Seller or any ERISA Affiliate may incur any liability
and (B) which covers any employee or former employee of Seller or
any ERISA Affiliate (with respect to their relationship with such
entities). "SUBSIDIARY" for purposes of this Section 2.1.20 means
(A) any partnership in which Seller is a general partner; or (B)
any partnership in which Seller possesses a fifty percent (50%)
or greater interest in the total capital or total income of such
partnership. "WELFARE PLAN" means any employee welfare benefit
plan as defined in Section 3(l) of ERISA, (A) which Seller or any
ERISA Affiliate maintains, administers, contributes to or is
required to contribute to, or under which Seller or any ERISA
Affiliate may incur any liability and (B) which covers any
employee or former employee of Seller or any ERISA Affiliate
(with respect to their relationship with such entities).
(b) Disclosure; Delivery of Copies of Relevant Documents and
Other Information. Schedule 2.1.20 contains a description of the
Employee Plans which pertain to the Business. True and complete copies
of each of the following documents which relate to the Business have
been delivered by Seller to Buyer: (i) each Welfare Plan and Pension
Plan (and, if applicable, related trust agreements) and all amendments
thereto, all written interpretations thereof and written descriptions
thereof which have been distributed to the employees of the Business
and all annuity contracts or other funding instruments, (ii) each
Benefit Arrangement which pertains to the Business including written
interpretations thereof and written descriptions thereof which have
been distributed to the Business' employees (including descriptions of
the number and level of employees covered thereby) and a complete
description of any such Benefit Arrangement which pertains to the
Business which is not in writing, (iii) the most recent determination
letter issued by the Internal Revenue Service with respect to each
Pension Plan relating to the Business, (iv) for the three (3) most
recent plan years, Annual Reports on Form 5500 Series required to be
filed with any governmental entity for each Pension Plan, Welfare Plan
and Benefit Arrangement relating to the Business, and (v) a
description setting forth the amount of any liability of Seller as of
the Closing Date for payments more than thirty (30) days past due with
respect to each Welfare Plan relating to the Business.
(c) Representations.
(i) Pension Plans. Except as described on Schedule 2.1.20,
no Pension Plan of Seller pertaining to the Business exists or
has existed at any time in the past.
(ii) Multi-employer Plans. Except as disclosed on Schedule
2.1.20, neither Seller nor any ERISA Affiliate contributes to, or
within the past six (6) years has been obligated to, contribute
to any Multi-employer Plan.
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(iii) Welfare Plans. No Welfare Plan of Seller exists or has
existed at any time in the past and, except as described on
Schedule 2.1.20, none of Seller or any ERISA Affiliate has any
present or future obligation to make any payment to or with
respect to any present or former employee of Seller or any ERISA
Affiliate pursuant to any retiree medical benefit plan, or other
retiree Welfare Plan, and no condition exists which would prevent
Seller from amending or terminating any such benefit plan.
(iv) Compliance with Law. Each Pension Plan and each related
trust agreement, annuity contract or other funding instrument is
qualified and tax-exempt under the provisions of Code Sections
401(a) (or 403(a), as appropriate) and 501(a) and has been so
qualified or tax exempt and maintained during the period from its
adoption to date, and each Welfare Plan, Pension Plan and each
related trust agreement, annuity contract or other funding
instrument has been funded and administered in compliance
(including both operational compliance and formal plan document
compliance) with its terms, ERISA, the Code and all applicable
Regulations. Each Welfare Plan which is a group health plan, as
defined in Section 607(l) of ERISA, has been operated in
compliance with provisions of Part 6 of Title I of ERISA and
Sections 162(k) and 4980B of the Code at all times.
(v) Affiliated Service Groups. Neither Seller nor any ERISA
Affiliate is a member of an affiliated service group as defined
in Section 414(m) of the Code.
(vi) Benefit Arrangements. Each Benefit Arrangement which
covers or has covered employees or former employees of Seller
(with respect to their relationship with such entities) has been
maintained in material compliance with its terms and with the
requirements prescribed by ERISA, the Code, and any and all
Regulations which are applicable to such Benefit Arrangement.
Except as provided by law, the employment of all persons
presently employed or retained by Seller as relates to the
Business is terminable at will, at any time and without advance
notice.
(vii) Unrelated Business Taxable Income. No Employee Plan
(or trust or other funding vehicle pursuant thereto) is subject
to any Tax under Code Section 511.
(viii) Deductibility of Payments. There is no contract
covering any employee or former employee of the Business (with
respect to their relationship with such entities) that,
individually or collectively, provides for the payment by Seller
of any amount (i) that is not deductible under Section 162(a)(1)
or 404 of the Code or (ii) that is an excess parachute payment
pursuant to Section 280G of the Code.
22
(ix) Fiduciary Duties and Prohibited Transactions. Neither
Seller nor any plan fiduciary of any Welfare Plan or Pension Plan
which covers or has covered employees or former employees of
Seller or any ERISA Affiliate, has engaged in any transaction in
violation of Sections 404 or 406 of ERISA or any prohibited
transaction, as defined in Section 4975(c)(1) of the Code, for
which no exemption exists under Section 408 of ERISA or Section
4975(c)(2) or (d) of the Code.
(x) No Amendments. Neither Seller nor any ERISA Affiliate
has any announced plan or legally binding commitment to create
any additional Employee Plans or to amend or modify any existing
Employee Plan.
(xi) Certain Contracts. None of the Employee Plans holds any
interest in any annuity contract, guaranteed investment contract
or any other investment contract which is issued by an insurance
company which is the subject of bankruptcy, receivership or
conservatorship proceedings.
(xii) No Acceleration of Rights or Benefits. Neither the
execution and delivery of this Agreement nor the consummation of
the actions contemplated hereby will result in the acceleration
or creation of any rights of any person to benefits under any of
the Employee Plans, including the acceleration of the vesting of
any restricted stock, the acceleration of the accrual or vesting
of any benefits under any Pension Plan or the creation of rights
under any severance, parachute or change of control agreement.
(xiii) No Other Material Liability. No event has occurred in
connection with which Seller or any ERISA Affiliate or any
Employee Plan, directly or indirectly, could be subject to any
material liability (i) under any Regulation or Court Order
relating to any Employee Plans or (ii) pursuant to any obligation
of Seller to indemnify any person against liability incurred
under any such Regulation or order as they relate to the Employee
Plans.
(xiv) 401(k) Plan Spinoff Agreement. The 401(k) Plan Spinoff
Agreement and the spinoff provided for under Section 2 therein
shall not adversely effect the tax qualification under Code
Section 401(a) of the Plan or the CAPS Plan, as those terms are
defined in the 401(k) Plan Spinoff Agreement.
2.1.21 Intellectual Property. Seller in the conduct of the Business
did not and does not utilize any Intellectual Property except for those
listed on Schedule 1.1.11, all of which are owned or licensed by Seller
free and clear of any Encumbrances other than Permitted Encumbrances. As
pertains to the Business, Seller does not infringe upon or unlawfully or
wrongfully use any patent, trademark, trade dress, trade name, service
mark, copyright, trade secret or other intellectual property rights owned
or claimed by
23
another. Seller is not in default under, and has not received any notice of
any claim of infringement or any other claim or proceeding relating to any
Intellectual Property or the TeamBase and Digital Link Software. No present
or former employee of Seller and no other person owns or has any
proprietary, financial or other interest, direct or indirect, in whole or
in part, in Intellectual Property or in any application therefor. Schedule
2.1.21 lists all confidentiality or non-disclosure agreements to which
Seller, in connection with the Business, or any of Seller's employees
engaged in the Business is a party which pertains to the Business. Schedule
2.1.21 sets forth all rights that any party may have or assert in regard to
the Intellectual Property and the TeamBase, Telescope, Job Wizard and
Digital Link Software other than with respect to the licensor of licensed
pre-packaged software contained within the Acquired Assets.
2.1.22 Premises. The Seller owns the following premises with respect
to the Business: the premises located at 6115 Official Road, 6209 Official
Road, 6210 Factory Road and 6220 Factory Road, Crystal Lake, Illinois (the
"CRYSTAL LAKE PREMISES"), the premises located at 2606 East Livingston
Street, Orlando, Florida (the "ORLANDO PREMISES"), the premises located at
1001 W. North Street, Pontiac, Illinois (the "PONTIAC PREMISES") and
together with the Crystal Lake Premises, the Orlando, Florida Premises and
the Pontiac, Illinois Premises, the "OWNED REAL PROPERTY"). Seller owns no
other real property used primarily and substantially with respect to the
Business.
Seller leases the following premises with respect to the Business: the
premises located at 450 West 33rd Street, 11th Floor, New York, New York
and the on-site location at McGraw-Hill, Two Penn Plaza, New York, New York
(collectively, the "NEW YORK PREMISES"); the premises located at 1620
Central Street, lower level, 1st and 2nd floors, Evanston, Illinois (the
"EVANSTON PREMISES", together with the New York Premises, the "LEASED REAL
PROPERTY"). Seller leases no other real property used primarily and
substantially with respect to the Business. The Leased Real Property and
the Owned Real Property are hereinafter referred to as the "REAL PROPERTY".
(i) Seller has previously delivered to Buyer true, correct
and complete copies of each lease relating to the Leased Premises
(collectively, the "LEASES").
(ii) Seller has maintained the Real Property in good
operating condition and repair. The Real Property, including the
real property and the buildings thereon utilized by Seller in the
conduct of the Business, does not violate any building, zoning or
other laws or ordinances, or any agreement, applicable thereto,
and no notice of any such violation or claimed violation or of
any condemnation proceedings has been received by Seller; except
where any such violation or notice thereof could not reasonably
be expected to have a Material Adverse Effect. Except as set
forth on Schedule 2.1.11, no part of the owned Real Property
contains, is located within, or abuts any flood plain, navigable
water or other body of water, tideland, wetland, marshland or any
other area which is subject to special state, federal or
municipal regulation, control or protection. All covenants,
conditions, restrictions, easements and similar matters affecting
24
the Real Property have been complied with, except where the
failure to so comply could not reasonably be expected to have a
Material Adverse Effect.
(iii) As of the Closing Date, the improvements located on
the owned Real Property utilized by Seller are in good condition
and are structurally sound, and all mechanical and other systems
located therein are in good operating condition, subject to
normal wear, and no condition exists requiring repairs,
alterations or corrections which condition could reasonably be
expected to have a Material Adverse Effect.
(iv) Seller has delivered to Buyer true and correct copies
of all leases and amendments thereto with respect to the Leased
Real Property;
(v) each lease for the Leased Real Property is, and at
Closing shall be, in full force and effect and has not been
assigned, modified, supplemented or amended, except as listed on
Schedule 2.1.22 and neither Seller nor, to the Knowledge of
Seller, the landlord or sublandlord under any lease is in default
under any of such leases, and no circumstances or state of facts
presently exist which, with the giving of notice or passage of
time, or both, would permit the landlord or sublandlord under any
lease to terminate any lease;
(vi) at Closing Seller shall assign to the Buyer all rights,
title, and interest of Seller in and to all leases of the Leased
Real Property (and shall deliver to Buyer original copies of all
consents required for such assignments) and all security deposits
made by Seller pursuant to any of the leases, including, but not
limited to the lease security deposits listed on the Schedule
2.1.22; and
(vii) Schedule 2.1.22 describes each of the owned Real
Property, giving the legal description thereof; and the tax
identification number thereof.
2.1.23 Environmental.
(a) General Compliance. Except as disclosed in Schedule 2.1.23,
with respect to Seller and any predecessor in interest of Seller, each
of the Real Property has been, and continues to be, owned, leased,
used or operated, and the Business has been owned and operated, in
compliance in all respects with all applicable federal, state, local
and foreign environmental laws, regulations and guidelines as enacted,
amended or reauthorized, promulgated, published or proposed.
(b) Audits; Claims. As relates to the Real Property or the
Business, Schedule 2.1.23 identifies (i) all environmental audits,
assessments or occupational health studies undertaken by, or at the
direction of, governmental agencies, Seller, or to the Knowledge of
Seller, any predecessor in interest; (ii) the
25
results of the most recent analyses of water (including groundwater
analyses), soil, air or asbestos samples where non-compliance or
contamination is indicated; (iii) the most recent inspection of any of
the Real Property by the Environmental Protection Agency or other
relevant environmental authority; (iv) written communications with
environmental agencies relating to issues of noncompliance or
continuation; and (v) any claim or complaint concerning environmental
matters of Seller.
(c) Releases. Except as disclosed in Schedule 2.1.23, Seller has
reported promptly to appropriate authorities each unauthorized Release
of any Hazardous Substance at any of the Real Property with respect to
Seller or any predecessor in interest, which could reasonably be
expected to have a Material Adverse Effect. Each such reported
unauthorized Release of any Hazardous Substance is also disclosed in
Schedule 2.1.23. For purposes hereof, "RELEASE" shall have the
meanings assigned to it in the Comprehensive Environmental Response
Compensation and Liability Act of 1980, as amended ("CERCLA").
"HAZARDOUS SUBSTANCE" shall have the meanings assigned to it in CERCLA
and, in addition, shall include fuel oil and petroleum and any
constituent thereof and any petroleum-based product.
(d) Hazardous Substances. Except as disclosed in Schedule 2.1.23,
neither Seller nor, to Seller's Knowledge, any predecessor in
interest, has disposed, treated, or arranged for the storage, disposal
or treatment of, any Hazardous Substance or other waste at any of the
Real Property, and pursuant to CERCLA or other similar state law: (i)
none of the Real Property has been placed on the National Priorities
List or its state equivalent; (ii) the Environmental Protection Agency
or relevant state authority has not proposed, and is not proposing, to
place any of the Real Property on the National Priorities List or
state equivalent; (iii) Seller has no Knowledge of, or is subject to a
claim, administrative order or other demand either to take removal or
remedial action as those terms are defined by CERCLA, the Resource
Conservation and Recovery Act, as amended ("RCRA"), or other federal
or state environmental law or to reimburse any person who has taken
removal or remedial action in connection with any of the Real
Property; (iv) Seller has not filed (nor has had filed with respect to
the Real Property) notification of hazardous waste activities; or (v)
none of the Real Property is listed on any state Comprehensive
Environmental Response Compensation Liability Information System List,
except where any of the foregoing circumstances could not reasonably
be expected to have a Material Adverse Effect.
(e) Tanks. Schedule 2.1.23 sets forth the age, contents or former
contents of any storage tanks located on any of the Real Property.
Except as set forth in Schedule 2.1.23, Seller has not owned or
operated, or presently owns or operates on the Real Property, any
underground storage tanks as defined in RCRA. Except as set forth in
Schedule 2.1.23, all tanks and pipes pertinent thereto are presently
and have been in the past in good condition and do not leak.
26
(f) Waste Disposal. Except as set forth on Exhibit 2.1.23, there
are no wastes, drums or containers disposed of or buried on, in or
under the ground or any surfaces waters located on any of the Real
Property. Neither Seller nor to Seller's Knowledge or any third
parties has disposed of or buried any wastes, drums or containers on,
in or under the ground or any surface waters located on any of the
Real Property. None of Seller nor to Seller's Knowledge or any third
party has disposed of or buried, or arranged to dispose of or bury,
any waste, drums or containers in or on the premises of a third party
other than those pursuant to and in compliance with RCRA.
(g) Certain Chemicals. Except as set forth in Schedule 2.1.23,
there are no polychlorinated biphenyls, asbestos or urea formaldehyde
in or on any of the Real Property.
2.1.24 Brokers, Finders, and Agents. Except for Cochran, Caronia and
Co. for whose fees and expenses Seller is solely responsible, Seller is not
directly or indirectly obligated to anyone acting as a broker, finder, or
in any other similar capacity in connection with this Agreement or the
transactions contemplated hereby.
2.1.25 Warranty; Product Liability Claims.
(a) Except as disclosed on Schedule 2.1.25, there are no actions,
suits, inquiries, proceedings or investigations by or before any court
or governmental or other regulatory or administrative agency or
commission pending or, to Seller's Knowledge, threatened, against or
involving Seller relating to any product alleged to have been
manufactured or sold by Seller and alleged to have been defective or
improperly designed or manufactured, which, if adversely decided,
could have, either individually or in the aggregate, a Material
Adverse Effect upon the properties, assets, financial condition,
results of operation or business prospects of Seller.
(b) Schedule 2.1.25 lists all claims pending or, to the Knowledge
of the Seller, threatened for breach of any warranty relating to any
products sold or services performed by the Business, except for such
claims that, in the aggregate, would not reasonably be expected to
have a Material Adverse Effect.
Copies of all written warranty information relating to the Business
have been supplied by Seller to Buyer.
2.1.26 The Software.
(a) Performance. The computer software of Seller included in the
Intellectual Property and the TeamBase and Digital Link Software (the
"SOFTWARE") performs, in all material respects, in accordance with the
documentation and other written material used in connection with the
Software and is sufficiently free of defects in programming and
operation, is in machine-readable form, contains all current revisions
of such Software (other than respect to licensed Software) in order to
permit Buyer to operate the Business in the
27
Ordinary Course of Business, and, other than in respect to licensed
Software, includes all computer programs, materials, tapes, know-how,
object and source codes, other written materials, know-how and
processes related to the Software. Seller has delivered to Buyer
complete and correct copies of all user and technical documentation
within its possession related to the Software. Schedule 2.1.26 lists
all Software used by Seller in the Business.
(b) Enhancements, New Products. Neither Seller nor, to the best
Knowledge of Seller, any employee or agent thereof has developed or
assisted in the enhancement of the Software except for enhancements
included in the Software as delivered to Buyer pursuant hereto or the
development of any program or product based on the Software or any
part thereof.
(c) Development. To Seller's Knowledge, no employee of Seller is,
or is now expected to be, in default under any term of any employment
contract, agreement or arrangement relating to the Software or
noncompetition arrangement, or any other contract or any restrictive
covenant relating to the Software or its development or exploitation.
That portion of the Software that was internally developed was
developed entirely by the employees of Seller during the time they
were employees only of Seller and such Software does not include any
inventions of the employees made prior to the time such employees
became employees of Seller nor any intellectual property of any
previous employer of such employee. Since January 31, 2005, to the
extent any Software has been developed by independent contractors,
Seller has obtained from such parties work for hire releases and full
assignments from such independent contractors with respect to such
Software.
(d) Title. All right, title and interest in and to the Software
is owned or licensed by Seller, free and clear of all Encumbrances
(other than Permitted Encumbrances), are fully transferable to the
Buyer, and, other than the licensor of any such Software, no party
other than Seller has any interest in the Software, including without
limitation, any security interest, license, contingent interest or
otherwise. Seller's development, use, sale or exploitation of the
Software does not violate any rights of any other person or entity and
Seller has not received any communication alleging such a violation.
Other than fees payable under any applicable license agreement or
developer agreement (which developer agreement is set forth in Exhibit
2.1.18 as required by Section 2.1.18(h)), Seller does not have any
obligation to compensate any Person for the development, use, sale or
exploitation of the Software nor has Seller granted to any other
person or entity any license, option or other rights to develop, use,
sell or exploit in any manner the Software, whether requiring the
payment of royalties or not.
(e) Protection of Proprietary Nature of Software. Seller has kept
secret and has not disclosed the source code for the Software owned by
Seller to any person or entity other than certain employees of Seller
who are subject to the terms of a binding confidentiality agreement
with respect thereto. Seller has taken all appropriate measures to
protect the confidential and proprietary nature of
28
such Software, including without limitation the use of confidentiality
agreements with all of its employees having access to the Software
source and object code. Except as set forth on Schedule 2.1.26, there
have been no patents applied for and no copyrights registered for any
part of the Software. There are no trademark rights of any person
(other than Buyer) in the TeamBase, Digital Link or Job Wizard
Software.
(f) Delivery of All Copies. All copies of the Software embodied
in physical form are being delivered to the Buyer at or prior to the
Closing.
2.1.27 Other Material Adverse Information. Except as expressly set
forth in this Agreement and the Schedules, or in the Financial Statements,
or in the certificates or other documents delivered pursuant hereto, Seller
has no Knowledge of any facts, developments, or threatened developments
with respect to the markets, products, services, clients, customers,
facilities, computer software, databases, personnel, vendors, suppliers,
operations, assets or prospects of the Business which could reasonably be
expected to have a Material Adverse Effect. Seller is not a party to any
indenture, agreement, contract, commitment, lease, plan, license, permit,
authorization or other instrument, document or understanding, oral or
written, or subject to any charter or other corporate restriction or any
judgment, order, writ, injunction, decree or award which could reasonably
be expected to have a Material Adverse Effect.
Seller has used commercially reasonable efforts to keep available for
Buyer the services of the employees, agents, customers and suppliers of
Seller active in the conduct of the Business. Except as set forth on
Schedule 2.1.27, Seller has no reason to believe that any loss of any
employee, agent, customer or supplier or other advantageous arrangement
will result because of the consummation of the transactions contemplated
hereby.
2.1.28 Disclosure. No representations or warranties by Seller in this
Agreement contains or will contain any untrue statement of a material fact,
or omits or will omit to state any material fact of which Seller had
Knowledge and necessary to make the statements or facts contained herein or
therein not misleading, in each case, where the effect of such misstatement
or misrepresentation could reasonably be expected to have a Material
Adverse Effect.
2.2 Representations and Warranties of Buyer. Buyer hereby represents and
warrants to Seller as follows:
2.2.1 Organization and Standing; Power and Authority of Buyer. Buyer
is a limited liability company duly organized, validly existing and in good
standing under the laws of the State of Illinois and Buyer has full company
power and authority to make and perform this Agreement and the transactions
contemplated hereby and other agreements and instruments contemplated by
this Agreement. This Agreement and all other agreements and instruments
executed and delivered by Buyer in connection herewith have been duly
authorized, executed, and delivered by Buyer. This Agreement and the
transactions contemplated hereby have been duly approved and authorized by
the
29
Manager and members of Buyer and this Agreement and all other agreements
and instruments delivered by Buyer in connection herewith constitute the
valid and binding obligations of Buyer, enforceable in accordance with
their respective terms, except as the enforceability thereof may be limited
by the availability of equitable principles or by bankruptcy, insolvency,
reorganization, moratorium, or other similar laws affecting creditors'
rights generally.
2.2.2 Conflicts; Default. Neither the execution and delivery by Buyer
of this Agreement or the other agreements and instruments executed in
connection herewith by Buyer, nor the performance by Buyer of the
transactions contemplated hereby or thereby, will (a) violate, conflict
with, or constitute a default under, any of the terms of Buyer's Articles
of Organization or Operating Agreement, or any provisions of, or result in
the acceleration of any obligation under, any material contract, sales or
service commitment, license, purchase order, security agreement, mortgage,
note, deed, lien, lease, agreement, instrument, order, judgment, or decree
which is applicable to Buyer or by which Buyer or its assets is otherwise
bound, (b) violate any law, statute, judgment, decree, order, rule or
regulation of any governmental or regulatory authority, (c) constitute an
event which, after notice or lapse of time or both, would result in such
violation, conflict, default, acceleration, or creation or imposition of
any liens, or (d) require any consent, approval, authorization or other
action by, or filing with or notification to any governmental or regulatory
authority.
2.2.3 Brokers, Finders and Agents. Buyer is not directly or indirectly
obligated to anyone acting as a broker, finder or in any other similar
capacity in connection with this Agreement or the transactions contemplated
hereby, except that Buyer has agreed to pay a financing fee to Mesirow
Financial.
2.2.4 Consents. All consents, novations, approvals, filings,
authority, and other requirements prescribed by any law, rule or
regulation, or any contract, agreement, commitment or undertaking, which
must be obtained or satisfied by Buyer for the consummation of the
transactions contemplated by this Agreement, have been obtained and
satisfied.
2.3 Survival of Warranties and Representations. The representations and
warranties made by Seller under this Agreement shall survive the Closing until
the date which is eighteen months after the Closing Date, except that (a) all
representations and warranties made in or pursuant to Sections 2.1.1 through
2.1.3 hereof shall survive the Closing indefinitely and (b) any representations
and warranties made in or pursuant to Sections 2.1.13, 2.1.20 and 2.1.23 hereof
shall survive until the applicable statute of limitations (including any
extensions thereof) applicable thereto. The representations and warranties made
by Buyer under this Agreement shall survive the Closing until the date which is
eighteen months after the Closing Date, except that all representations and
warranties made in or pursuant to Sections 2.2.1 and 2.2.2 hereof shall survive
the Closing indefinitely.
2.4 Knowledge. "KNOWLEDGE OF SELLER" or "SELLER'S KNOWLEDGE" or similar
knowledge qualification in this Agreement shall mean to the knowledge that any
director, officer (including director(s) of tax, operations managers, finance
managers and controllers) of Schawk
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or its Affiliates actually had or in the reasonably prudent and diligent
exercise of his duties as a director, officer of Schawk or its Affiliates should
have had.
3. AGREEMENTS PENDING CLOSING.
3.1 Agreements of Seller Pending the Closing. Seller covenants and agrees
that, pending the Closing and except as otherwise agreed to in writing by Buyer:
3.1.1 Business in the Ordinary Course. The Business shall be conducted
solely in the Ordinary Course of Business (as hereinafter defined)
consistent with past practice. For purposes of this Agreement, the Business
shall be deemed to be conducted in the Ordinary Course of Business only if
any action with respect to the Business: (a) is consistent in nature, scope
and magnitude with the past practices of Seller regarding the Business and
is taken in the ordinary course of the normal day-to-day operations of
Seller; (b) does not require authorization by the Board of Directors or
Shareholders of Seller (or by any person or group of persons exercising
similar authority) and does not require any other separate or special
authorization of any nature; and (c) is similar in nature, scope and
magnitude to actions customarily taken, without any separate or special
authorization, in the ordinary course of the normal day-to-day operations
of a person or persons that are in the same line of business as the
Business.
3.1.2 Existing Condition. Seller shall not cause nor permit to occur
any of the events or occurrences described in Section 2.1.14 hereof.
3.1.3 Maintenance of Physical Assets. Seller shall continue to
maintain and service the physical assets used in the conduct of the
Business in the same manner as has been its consistent past practice.
3.1.4 Employees and Business Relations. Seller shall use its Best
Efforts (as hereinafter defined) to preserve the Business intact, to keep
available the services of the present officers, employees and agents of the
Business and to maintain the relations and goodwill with the suppliers,
customers, employees, agents, distributors and any others having business
relations with the Business. For purposes of this Agreement, the term "BEST
EFFORTS" or "REASONABLE BEST EFFORTS" means the efforts that a prudent
person desirous of achieving a result would use in similar circumstances to
achieve that result as expeditiously as possible, provided, however, that a
person required to use Best Efforts under this Agreement will not be
thereby required to take actions that would result in a material adverse
change in the benefits to such person of this Agreement or to dispose of or
to make any change to its Business, expend any material funds or incur any
other material burden other than expenditures customarily incurred in
connection with consummating purchase and sale transactions as are
contemplated by this Agreement.
3.1.5 Maintenance of Insurance. Seller shall notify Buyer of any
changes in the terms of the insurance policies and binders referred to on
Schedule 2.1.17 hereto.
3.1.6 Maintenance of Franchises, etc. Seller shall use its Best
Efforts to maintain in full force and effect all Franchises currently in
effect used in the conduct of the business of the Business.
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3.1.7 Compliance with Laws, etc. Seller shall comply with all laws,
ordinances, rules, regulations and orders applicable to the Business, or
Seller's operations, assets or properties in respect thereof, except where
the noncompliance with which could not reasonably be expected to have a
Material Adverse Effect.
3.1.8 Update Schedules. Seller shall promptly disclose to Buyer any
information contained in its representations and warranties or the
Schedules which, because of an event occurring after the date hereof, is
incomplete or is no longer correct as of all times after the date hereof
until the Closing Date; provided, however, that none of such disclosures
shall be deemed to modify, amend or supplement the representations and
warranties of Seller or the schedules hereto for the purposes of Article IV
hereof unless Buyer shall have consented thereto in writing.
3.1.9 Conduct of Business. Seller shall use its Best Efforts to
conduct its business in such a manner that on the Closing Date the
representations and warranties of Seller contained in this Agreement shall
be true, except as specifically contemplated by this Article 3, as though
such representations and warranties were made on and as of such date.
Furthermore, Seller shall cooperate with Buyer and use its Best Efforts to
cause all of the conditions to the obligations of Buyer and Seller under
this Agreement to be satisfied on or prior to the Closing Date. Seller
shall use its Best Efforts to prevent a Material Adverse Effect.
3.1.10 Sale of Assets; Negotiations. Seller shall not, directly or
indirectly, sell or encumber all or any part of the Acquired Assets, other
than in the ordinary course of the Business consistent with past practice,
or initiate or participate in any discussions or negotiations or enter into
any agreement to do any of the foregoing. Seller shall not provide any
confidential information concerning the Business or its properties or
assets to any third party other than in the ordinary course of business.
3.1.11 Access. Seller shall give to Buyer's officers, employees,
counsel, accountants and other representatives free and full access to and
the right to inspect, during normal business hours, all of the premises,
properties, assets, records, contracts and other documents relating to the
Business and shall permit them to consult with the officers, employees,
accountants, counsel and agents of Seller for the purpose of making such
investigation of the Business, as Buyer shall desire to make, provided that
such investigation shall not unreasonably interfere with Seller's business
operations. Furthermore, Seller shall furnish to Buyer all such documents
and copies of documents and records and information with respect to the
affairs of the Business and copies of any working papers relating thereto
as Buyer shall from time to time reasonably request and shall permit Buyer
and its agents to make such physical inventories and inspections of the
Assets as Buyer may request from time to time.
3.1.12 Press Releases. Except as required by applicable law, Seller
shall not give notice to third parties or otherwise make any public
statement or releases concerning this Agreement or the transactions
contemplated hereby except for such written information as shall have been
approved in writing as to form and content by Buyer, which approval shall
not be unreasonably withheld.
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3.2 Agreements of Buyer Pending the Closing. Buyer covenants and agrees
that, pending the Closing and except as otherwise agreed to in writing by
Seller:
3.2.1 Actions of Purchaser. Buyer will not knowingly take any action
which would result in a breach of any of its representations and warranties
hereunder. Furthermore, Buyer shall cooperate with Seller and use its Best
Efforts to cause all of the conditions to the obligations of Buyer and
Seller under this Agreement to be satisfied on or prior to the Closing
Date.
3.2.2 Confidentiality. Unless and until the Closing has been
consummated, Buyer will hold, and shall cause their counsel, independent
certified public accountants, appraisers and investment bankers to hold in
confidence any confidential data or information made available to Buyer in
connection with this Agreement with respect to the Business using the same
standard of care to protect such confidential data or information as is
used to protect Buyer's confidential information. If the transactions
contemplated by this Agreement are not consummated, Buyer agrees that it
shall return or cause to be returned to Buyer all written materials and all
copies thereof that were supplied to Buyer by Seller and that contain any
such confidential data or information.
3.2.3 Press Releases. Except as required by applicable law, Buyer will
not give notice to third parties or otherwise make any public statement or
releases concerning this Agreement or the transactions contemplated hereby
except for such written information as shall have been approved in writing
as to form and content by Seller, which approval shall not be unreasonably
withheld.
3.2.4 Financing. Buyer represents, warrants and covenants to Seller
that Buyer has sufficient financing to consummate the transactions
contemplated hereby and has delivered to Seller executed commitment letters
in form and substance acceptable to Seller evidencing that Buyer has such
financing.
4. CONDITIONS PRECEDENT TO THE CLOSING
4.1 Conditions Precedent to Buyer's Obligations. All obligations of Buyer
under this Agreement are subject to the fulfillment or satisfaction, prior to or
at the Closing, of each of the following conditions precedent:
4.1.1 Representations and Warranties True as of the Closing Date. Each
of the representations and warranties of Seller contained in this Agreement
or in any schedule, certificate or document delivered by Seller to Buyer
pursuant to the provisions hereof shall have been true on the date hereof
without regard to any schedule updates furnished by Seller after the date
hereof and shall be true on the Closing Date with the same effect as though
such representations and warranties were made as of such date.
4.1.2 Compliance with this Agreement. Seller shall have performed and
complied with each and every agreement and condition required by this
Agreement to be performed or complied with by it prior to or at the
Closing.
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4.1.3 Closing Certificate. Buyer shall have received a certificate
from Seller dated the Closing Date, certifying in such detail as Buyer may
reasonably request that the conditions specified in Sections 4.1.1 and
4.1.2 hereof have been fulfilled and certifying that Seller has obtained
all consents and approvals required with respect to it or the Business by
Section 4.1.6 hereof, other than those consents and/or approvals, the
delivery of which has been waived by Buyer.
4.1.4 Opinions of Counsel for Seller. Vedder, Price, Kaufman &
Kammholz, P.C., counsel for Seller, shall have delivered to Buyer a written
opinion, dated the Closing Date, in the form of Exhibit C hereto with only
such changes as shall be in form and substance reasonably satisfactory to
the Buyer and its counsel.
4.1.5 No Threatened or Pending Litigation. On the Closing Date, no
suit, action or other proceeding, or injunction or final judgment relating
thereto, shall be threatened or be pending before any court or governmental
or regulatory official, body or authority in which it is sought to restrain
or prohibit or to obtain damages or other relief in connection with this
Agreement or the consummation of the transactions contemplated hereby, and
no investigation that might result in any such suit, action or proceeding
shall be pending or threatened.
4.1.6 Consents and Approvals. The holders of any indebtedness of
Seller, the lessors or lessees of any real or personal property or assets
leased by Seller, the parties (other than Seller) to any contract,
commitment or agreement to which Seller is a party or subject, any
governmental or regulatory official, body or authority or any other person
which owns or has authority to grant any Franchise and any governmental,
judicial or regulatory official, body or authority having jurisdiction over
Seller or Buyer to the extent that their consent or approval is required or
necessary under the pertinent debt, lease, contract, commitment or
agreement or other document or instrument or under applicable orders, laws,
rules or regulations, for the consummation of the transactions contemplated
hereby in the manner herein provided, shall have granted such consent or
approval, other than those consents and/or approvals, the delivery of which
has been waived by Buyer.
4.1.7 Material Adverse Changes. There shall not have been and could
not reasonably be expected to be a Material Adverse Effect.
4.1.8 Intentionally Omitted.
4.1.9 Key Employee Arrangements. Each of the employees of the Business
listed in Schedule 2.1.19 hereto shall have been released from their
employment with Seller as of the Closing Date.
4.1.10 Approval of Counsel; Corporate Matters. All actions,
proceedings, resolutions, instruments and documents required to carry out
this Agreement or incidental hereto and all other related legal matters
shall have been approved on the Closing Date by Meltzer, Purtill & Stelle
LLC, counsel for Buyer, in the exercise of their reasonable
34
judgment. Seller shall also have delivered to Buyer such other documents,
instruments, certifications and further assurances as such counsel may
reasonably require.
4.1.11 Financing. Buyer shall have obtained lender approval for the
acquisition and other financing from the financing sources set forth in the
indications of interest delivered to Seller on such terms set forth therein
or from alternative financing sources on substantially similar terms;
provided, however, if Buyer is unable to close the agreement for failure to
obtain financing (other than as a result of a breach by Seller of any of
the representations and warranties or obligations of Seller hereunder or
the non-fulfillment or non-satisfaction by Seller of any other condition
precedent), Buyer agrees to pay Seller its out-of-pocket professional fees
and expenses related to the transaction, not to exceed $250,000.
4.1.12 Hostile Acts. There shall not have occurred any national or
international hostilities, acts of terror or acts of war.
4.1.13 License Agreement. Seller and Buyer shall have entered into an
exclusive, no cost, nonterminable, royalty-free license and intellectual
property rights agreement ("LICENSE AGREEMENT") with respect to the
TeamBase and Digital Link Software in the form of Exhibit D.
4.1.14 Assignment of Leases. Buyer, together with Seller and the
applicable landlord, shall have entered into an assignment of lease with
respect to the Evanston Premises, the New York Premises and the lease with
respect to the Business's on-site location at McGraw-Hill's location at Two
Penn Plaza, New York, New York. With respect to the Evanston Premises, this
shall mean an assignment of the Lease Agreement between Company 2
Incorporated (Landlord) and Proof Positive/Farrowlyne Associates, Inc.
(Tenant) dated June 6, 2002, which lease was assigned by Landlord to 1614
Central, LLC by an Assignment and Assumption of Leases dated May 8, 2003.
With respect to the New York Premises, this shall mean an assignment of
both (a) Agreement of Lease between John Hancock Mutual Life Insurance
Company (Landlord) and Applied Graphics Technologies, Inc. (Tenant) dated
August 7, 1997; (b) Sublease between US. News & World Report, L.P. (Tenant)
and Applied Graphics Technologies, Inc. (Subtenant) dated effective
November 1, 1997, as amended by Amendment No. 1 to Sublease between Applied
Graphics Technologies, Inc. and US. News & World Report, L.P. effective
March 1, 2001; and (c) the lease with McGraw-Hill with respect to the
above-described on-site location. In the event that the underlying landlord
with respect to any of the leases described in this Section 4.1.14 refuses
to consent to an outright assignment of any such lease from Seller to
Buyer, then Buyer and Seller shall enter into a sublease for such premises,
which sublease shall contain, mutatis mutandis, equivalent terms and
conditions as the underlying lease.
4.1.15 Leases. Buyer and Seller shall have entered into Lease
Agreements in the form attached hereto and incorporated herein as Exhibits
E, E-1 and E-2 for the Owned Real Property (excluding that portion of the
Owned Real Property commonly known as 6209 Official Road, 6115 Official
Road, and 6210 Factory Road, Crystal Lake, Illinois.
35
4.1.16 Transition Services Agreement. Seller and Buyer shall have
entered into a Transition Services Agreement ("TRANSITION SERVICES
AGREEMENT") in the form of Exhibit F.
4.1.17 Termination of Agreements. Seller shall have provided Buyer
with termination agreements terminating the agreements and the obligations
thereunder of Diane Romano and Jerry H. Byrd, respectively, with respect to
the Employment Agreement between Schawk, Inc. and Diane Romano dated May 1,
2005; the Non-Competition/Non-Solicitation and Confidentiality Agreement by
and between Applied Graphics Technologies, Inc. and Diane Romano dated
April 1, 2003; and the Employment Agreement by and between Black Dot
Graphics, Inc. and Jerry H. Byrd dated August 1, 1989.
4.1.18 Assignment of Nardulli Employment Agreement. Seller shall have
provided an assignment of the Nardulli Employment Agreement, such
assignment to be accepted by Buyer as of the Closing Date.
4.1.19 Waiver. Seller shall have delivered the Waiver in the form of
Exhibit I.
4.2 Conditions Precedent to the Obligations of Seller. All obligations of
Seller under this Agreement are subject to the fulfillment or satisfaction,
prior to or at the Closing, of each of the following conditions precedent:
4.2.1 Representations and Warranties True as of the Closing Date. The
representations and warranties of Buyer contained in this Agreement or in
any list, certificate or document delivered by Buyer to Seller pursuant to
the provisions hereof shall be true on the Closing Date with the same
effect as though such representations and warranties were made as of such
date.
4.2.2 Compliance with this Agreement. Buyer shall have performed and
complied with all agreements and conditions required by this Agreement to
be performed or complied with by them prior to or at the Closing.
4.2.3 Closing Certificates. Seller shall have received a certificate
from Buyer dated the Closing Date certifying in such detail as Seller may
reasonably request that the conditions specified in Sections 4.2.1 and
4.2.2 hereof have been fulfilled.
4.2.4 No Threatened or Pending Litigation. On the Closing Date, no
suit, action or other proceeding, or injunction or final judgment relating
thereto, shall be threatened or be pending before any court or governmental
or regulatory official, body or authority in which it is sought to restrain
or prohibit or to obtain damages or other relief in connection with this
Agreement or the consummation of the transactions contemplated hereby, and
no investigation that might result in any such suit, action or proceeding
shall be pending or threatened.
4.2.5 Intentionally Omitted.
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4.2.6 Approval of Counsel; Corporate Matters. All actions,
proceedings, resolutions, instruments and documents required to carry out
this Agreement or incidental hereto and all other related legal matters
shall have been approved on the Closing Date by counsel for Seller in the
exercise of their reasonable judgment. Buyer shall also have delivered to
Seller such other documents, instruments, certifications and further
assurances as such counsel for Seller may reasonably require.
4.2.7 Opinions of Counsel for Buyer. Meltzer, Purtill & Stelle, LLC,
counsel for Buyer, shall have delivered to Seller a written opinion, dated
the Closing Date, in the form of Exhibit G hereto with only such changes as
shall be in form and substance reasonably satisfactory to the Seller and
its counsel.
4.2.8 Receipt of Purchase Price. Buyer shall have delivered the
Purchase Price to Seller as provided in Section 1.5.
4.2.9 Leases. Buyer and Seller shall have entered into the Lease
Agreements in the forms attached hereto and incorporated herein as Exhibits
E, E-1 and E-2.
4.2.10 Assignment of Leases. Seller, together with Buyer and the
applicable landlord, shall have entered into an assignment of lease with
respect to the Evanston Premises and the New York Premises.
5. CLOSING DATE AND DOCUMENTS
5.1 Closing Date. The closing of the transactions provided for in this
Agreement (the "CLOSING") shall occur on March 3, 2006, at 10:00 a.m. at the
offices of Meltzer, Purtill & Stelle LLC, 1515 East Woodfield Road, Second
Floor, Schaumburg, Illinois, or as otherwise agreed by the parties (the "CLOSING
DATE"). The Closing shall be effective as of 12:01 a.m. on March 1, 2006 (the
"Closing Date").
5.2 Seller's Deliveries. At the Closing and subject to the terms and
conditions herein contained, Seller shall execute and deliver to Buyer the
following:
5.2.1 A Bill of Sale with covenants of warranty of title, assignments,
endorsements, and other good and sufficient instruments and documents of
conveyance and transfer, in form reasonably satisfactory to Buyer and its
counsel, as shall be necessary and effective to transfer, assign, and vest
in, Buyer all of Seller's right, title and interest in and to the Acquired
Assets including, without limitation, good and valid title in and to all of
the Acquired Assets, and simultaneously with such delivery, all such steps
will be taken as may be required to put Buyer in actual possession and
operating control of the Acquired Assets;
5.2.2 Assignment and Assumption Agreement of Assumed Contracts and
Assumed Liabilities of Seller to be assumed by Buyer as part of the
Acquired Assets executed by Buyer and Seller;
5.2.3 Intentionally Omitted;
37
5.2.4 A settlement statement (the "SETTLEMENT STATEMENT") executed by
Buyer and Seller;
5.2.5 An Assignment of Lease by and among Seller, Buyer and the
applicable landlord for each of the Leased Premises being assigned to Buyer
herein substantially in a form satisfactory to Buyer, in its reasonable
discretion for the New York Premises and the Evanston Premises;
5.2.6 Intentionally Omitted;
5.2.7 Certificates of Good Standing for Schawk, Inc., Schawk Holdings,
Inc. and Schawk USA, Inc. from the Secretary of State of the State of
Delaware;
5.2.8 Secretary's Certificate for each Seller certifying incumbency of
officers of Seller, certifying as to unanimous agreement of the members of
the board of directors of Seller regarding the divestiture of the Acquired
Assets contemplated by this Agreement and attaching Certificate of
Incorporation of Seller as amended (certified by the Secretary of State)
and the Bylaws of Seller;
5.2.9 Third-party consents to assignment with respect to Assumed
Contracts, or as set forth in Section 5.4 herein;
5.2.10 Applicable third party governmental consents;
5.2.11 Legal opinion of Vedder, Price, Kaufman & Kammholz, P.C. in
form satisfactory to Buyer;
5.2.12 Executed name change documents applicable to the name of
applicable trade name/Black Dot Graphics, Inc., Applied Graphics
Technology, HudsonYards and Typo-Graphics along with funds sufficient to
permit expedited filing of such documents;
5.2.13 All schedules to be provided to Buyer hereunder;
5.2.14 The Leases;
5.2.15 Payoff letters and releases of liens from any secured lender or
lienholder of Seller;
5.2.16 Assignment of Trademarks with respect to any registered
trademarks or trade names included within the Intellectual Property and any
other assignments of intellectual property deemed necessary by Buyer's
counsel;
5.2.17 Such other documents as Buyer may reasonably request hereunder;
5.2.18 The License Agreement;
5.2.19 The Transition Services Agreement;
5.2.20 The termination of the Diane Romano Employment Agreement;
38
5.2.21 The termination of the Diane Romano
Non-Competition/Non-Solicitation and Confidentiality Agreement;
5.2.22 The termination of the Jerry H. Byrd Employment Agreement;
5.2.23 The termination of the Ettore G. Nardulli Employment Agreement;
5.2.24 The 401(k) Plan Spinoff Agreement; and
5.2.25 The Waiver.
5.3 Buyer's Deliveries. At the Closing and subject to the terms and
conditions herein contained, Buyer shall execute and/or deliver, or arrange for
delivery, to Seller the following:
5.3.1 Cash Purchase Price;
5.3.2 The Settlement Statement;
5.3.3 The Assignment of Leases;
5.3.4 The Leases;
5.3.5 Assignment and Assumption of Assumed Contracts and Assumed
Liabilities of Seller to be assumed by Buyer as part of the Acquired
Assets;
5.3.6 Secretary's Certificate certifying incumbency of officers of
Buyer, attaching certified Articles of Organization (certified by the
Secretary of State) and Operating Agreement of Buyer and certifying as to
the adoption of resolutions of the manager of Buyer, regarding the
acquisition contemplated by this Agreement;
5.3.7 Legal opinion of Meltzer, Purtill & Stelle LLC in form
satisfactory to Seller;
5.3.8 The License Agreement;
5.3.9 The Transition Services Agreement;
5.3.10 The 401(k) Plan Spinoff Agreement; and
5.3.11 The Waiver.
5.4 Third Party Consents. Seller agrees that after the execution of this
Agreement, at the request of Buyer, Seller will use its Reasonable Efforts to
obtain consents to assignment for all contracts or agreements, which require
consent to assignment, and which are being transferred to Buyer hereunder,
whether or not Buyer has agreed to waive such consents as a condition to
Closing. Seller agrees to obtain the consents necessary for the assignment or
transfer to Buyer of the Software and Intellectual Property which are part of
the Acquired Assets and which are necessary to operate the Business in a manner
consistent with the past practices of Seller relating to the operations of the
Business. Seller shall have no obligation to obtain any
39
consent to assignment or transfer with respect to: (a) Software for which Buyer
has waived in writing Seller's obligations to obtain such consent, (b) Software
for which the license assignment or transfer fee attributable to the application
costs less than $100 per unit, (c) outdated versions or editions of Software
that are not available due to vendor or licensor refusal to provide such a
consent, provided that Seller obtains, as a substitution thereof, a license for
a more recent version or edition of such Software that is available from such
vendor or licensor, and (d) licenses for Software that are not listed on the
Software Spectrum records of Seller immediately prior to the Closing Date,
provided that this exception does not apply to any item of Software to which
Buyer can demonstrate a reasonable need to support the Business to the extent of
an existing license for such Software within ninety (90) days after the Closing
Date. With respect to any item of Software referred to in the proviso of clause
(d) of the prior sentence, if any such item of Software is not available from
the vendor or licensor thereof, then Seller shall obtain, as a substitution
thereof, a license for a more recent version or edition of such Software that is
available from such vendor or licensor.
Neither the foregoing nor Schedule 2.1.26 withstanding, Seller shall not be
required to obtain licenses for any item of Software in a greater number than
the number of licenses for such Software (which shall be deemed to equal at
least one) held by the Business immediately prior to the Closing as determined
by Software Spectrum records or other demonstrable evidence.
To the extent that the assignment of any right or agreement the benefit of
which is to be acquired by Buyer pursuant to this Agreement shall require the
consent of any other party, and Seller shall have waived the obtaining of such
consent prior to Closing, this Agreement shall not constitute a contract to
assign the same until such consent is obtained. Buyer and Seller shall use
Reasonable Efforts (including, without limitation, the payment of any transfer
or license fee) after the Closing to obtain any consent necessary to any such
assignment within the 90 days after the Closing Date. If any such consent it not
obtained, (i) this Agreement shall not constitute or be deemed to be a contract
to assign the same if an attempted assignment without such consent, approval or
waiver would constitute a breach of such right or agreement or create in any
party thereto the right or power to cancel or terminate such right or agreement;
and (ii) Seller will cooperate with Buyer in any reasonable arrangement
requested by Buyer designed to provide to Buyer the benefit, monetary or
otherwise, of Seller's rights under such right or agreement, including
enforcement of any and all rights of Seller against the other party arising out
of a breach or cancellation thereof by such other party.
5.5 Transaction Costs. Except as otherwise specifically provided for
herein, each party shall bear all legal, accounting and other expenses incurred
by such party in connection with this Agreement and the other agreements and
transactions contemplated hereby.
5.6 Further Assurances. Seller from time to time after the Closing, at
Buyer's request and at its own expense, will promptly execute, acknowledge, and
deliver to Buyer such other instruments of conveyance and transfer and will take
such other actions and execute and deliver such other documents, certifications,
and further assurances as Buyer may reasonably require in order to vest more
effectively in Buyer, or to put Buyer more fully in possession of, any of the
Acquired Assets, or to better enable Buyer to complete, perform or discharge any
of the Assumed Liabilities. Each of the parties hereto will cooperate with the
other and execute and deliver to the other parties hereto such other instruments
and documents and take such other
40
actions as may be reasonably requested from time to time by any other party
hereto as necessary to carry out, evidence and confirm the intended purposes of
this Agreement. Seller, at no fee, agrees to cooperate with Buyer in connection
with Buyer's application for the transfer or reissuance in the name of Buyer of
all Authorizations or to satisfy any regulatory requirements involving the
transfer of the Acquired Assets. If any Authorization is not transferable or
assignable, Seller agrees to cooperate with Buyer, at Buyer's sole cost, in
obtaining the issuance of any new Authorization(s) required by Buyer.
5.7 Post-Closing Receipts. Seller is responsible for remitting cash to
Buyer for any receipts received by Seller after the Closing Date which are
attributable to Receivables which were outstanding as of the Closing Date, all
such receipts to be submitted on the next day following the date of receipt by
Seller.
6. INDEMNIFICATION
6.1 Seller's Agreement to Indemnify. Each Seller, jointly and severally,
agrees to indemnify, defend and hold harmless Buyer and its successors and
assigns from, against and in respect of the full amount of any and all
liabilities, damages, claims, deficiencies, fines, assessments, losses, taxes,
penalties, interest, costs and expenses, including, without limitation,
reasonable fees and disbursements of counsel ("DAMAGES") arising from, in
connection with, or incident to:
(a) any untruth, inaccuracy, breach or omission of, from or in,
the representations and warranties made to Buyer herein; or any
nonfulfillment of any covenant or agreement of Seller under this
Agreement; or from any untruth, inaccuracy, breach or omission of,
from or in, any representation or warranty, or any nonfulfillment of
any covenant or agreement made by Seller in the Schedules or any other
written statement, list, certificate or other instrument furnished to
Buyer by or on behalf of Seller pursuant to this Agreement.
(b) the Excluded Liabilities;
(c) warranty claims relating to sales, work and/or services
provided by Seller prior to the Closing Date or relating to Seller's
jobs in process as of the Closing Date;
(d) any fees, expenses or other payments incurred or owed by
Seller to any brokers or comparable third parties retained or employed
in connection with the transactions contemplated by this Agreement;
(e) the failure to comply with statutory provisions relating to
bulk sales and transfers (other than Damages resulting from the
failure of Buyer to discharge the Assumed Liabilities or to fulfill
its obligations post-Closing with respect to the Assumed Contracts);
(f) the failure to pay any Taxes arising out of the transactions
contemplated by this Agreement including, without limitation, transfer
taxes
41
(other than transfer taxes which, pursuant to the provisions of
applicable law, are assessed against the Buyer);
(g) any severance benefits payable to the employees of Seller by
reason of the consummation of the transactions contemplated by this
Agreement, including any payments arising out of Seller's termination
of employees, including any payments arising out of a failure to
comply with the WARN Act or any state equivalent;
(h) subject to Section 6.4, any claim made by a third party
alleging facts which, if true, would entitle Buyer to indemnification
pursuant to the above; and
(i) any and all actions, suits, claims, proceedings,
investigations, audits, demands, assessments, fines, judgments, costs
and other expenses (including, without limitation, reasonable audit
and legal fees) incurred by Buyer resulting from the circumstances
described in Section 6.1(a) through (h) above.
6.2 Buyer's Agreement to Indemnify. Buyer agrees to indemnify and hold
harmless Seller and its assigns from, against and in respect of the full amount
of any and all Damages arising from, in connection with, or incident to (i) any
breach or violation of any of the representations, warranties, covenants or
agreements of Buyer contained in this Agreement or in any document or
certificate delivered by Buyer at or prior to the Closing, (ii) the ownership
and operation of the Acquired Assets by Buyer from and after the Closing Date
except with respect to any damages, claims, losses, liability or expenses,
including reasonable attorney fees arising out of or relating to any claim or
finding that Buyer is deemed to be the successor of Seller, in which case all
such damages, claims, losses, liabilities, costs and expenses shall be the
obligation of Seller to the extent they relate to the pre Closing operation of
the Business by Seller, and (iii) the failure by Buyer to pay and discharge the
Assumed Liabilities or to fulfill its obligations under the Assumed Contracts.
6.3 Procedures for Making Claims. If and when either Buyer or Seller (the
"INDEMNITEE") desires to assert a claim for Damages against the other party (the
"INDEMNITOR") pursuant to the provisions of this Section 6, the Indemnitee shall
deliver to the Indemnitor a certificate signed by its president or manager, as
the case may be (the "NOTICE OF CLAIM"): (i) stating that the Indemnitee has
paid or accrued (or intends to pay or accrue) Damages to which it is entitled to
indemnification pursuant to this Section 6 and the amount thereof (to the extent
then known); and (ii) specifying to the extent possible (A) the individual items
of loss, damage, liability, cost, expense or deficiency included in the amount
so stated, (B) the date each such item was or will be paid or accrued and (C)
the basis upon which Damages are claimed. If the Indemnitor shall object to such
Notice of Claim, the Indemnitor shall deliver written notice of objection (the
"NOTICE OF OBJECTION") to the Indemnitee within thirty (30) days after delivery
of the Notice of Claim. The Notice of Objection shall set forth the grounds upon
which the objection is based and state whether the Indemnitor objects to all or
only a portion of the matter described in the Notice of Claim. If the Notice of
Objection shall not have been so delivered within such thirty (30) day period,
the Indemnitor shall be conclusively deemed to have acknowledged the correctness
of the claim or claims specified in the Notice of Claim for the full
42
amount thereof. The Damages set forth in the Notice of Claim shall be payable to
the Indemnitee within ten (10) days of the expiration of such thirty (30) day
period without the necessity of further action. Interest on indemnification
payments hereunder for or-of-pocket Damages, shall accrue at the prime rate as
published in the Wall Street Journal, plus two percent (2%) per annum on any
out-of-pocket expenses from (x) the expiration of such ten (10) day period to
(y) the date of the Indemnitor's payment of indemnification for such Damages. In
the event that a Notice of Objection has been delivered, and an Indemnitee
should have a claim against an Indemnitor hereunder which does not involve a
claim or demand being asserted against or sought to be collected from it by a
third party, the Indemnitor and the Indemnitee shall comply with the other
related provisions of this Agreement.
6.4 Defense Procedure for Third Party Claims. With respect to a claim by a
third party (Third Party Claim), which, if successful, might result in an
obligation of the Indemnitor to pay Damages, the Indemnitee shall give written
notice together with a statement of any available information (other than
privileged information) regarding such claim to the Indemnitor after learning of
such claim. If the Indemnitor notifies the Indemnitee that it acknowledges its
indemnification obligation with respect to such claim, the Indemnitor shall have
the right, upon written notice to the Indemnitee (the Defense Notice) within
fifteen (15) days after receipt from the Indemnitee of notice of such claim,
which notice by the Indemnitor shall specify the counsel it will appoint to
defend such claim (Defense Counsel), to conduct at its expense the defense
against such claim in its own name, or if necessary in the name of the
Indemnitee; provided, however, that the Indemnitee shall have the right to
approve Defense Counsel, which approval shall not be unreasonably withheld.
After notice from Indemnitor to Indemnitee of the election so to assume the
defense thereof, Indemnitor will not be liable to Indemnitee for any legal or
other expenses subsequently incurred by Indemnitee in connection with the
defense thereof, other than reasonable costs of investigation, unless Indemnitor
does not actually assume the defense thereof following notice of such election
or unless Indemnitee reasonably determines that the Indemnitors do not have
sufficient financial resources to defend such matter. Indemnitee and Indemnitor
will render to each other such assistance as may reasonably be required of each
other in order to insure proper and adequate defense of any such suit, Damages
or proceeding.
(a) In the event that the Indemnitor shall fail to give the
Defense Notice, it shall be deemed to have elected not to conduct the
defense of the subject claim, and in such event the Indemnitee shall
have the right to conduct the defense in good faith and to compromise
and settle the claim in good faith.
(b) In the event that the Indemnitor does deliver a Defense
Notice and thereby elects to conduct the defense of the subject claim,
the Indemnitor shall conduct such defense at its sole cost and
expense. The Indemnitee will cooperate with and make available to the
Indemnitor such assistance and materials as it may reasonably request,
all at the expense of the Indemnitor, and the Indemnitee shall have
the right at its expense to participate in the defense assisted by
counsel of its own choosing; provided, however, that the Indemnitee
shall have the right to compromise and settle such claim only with the
prior written consent of the Indemnitor, which consent shall not be
unreasonably withheld or delayed.
43
(c) Without the prior written consent of the Indemnitee, the
Indemnitor will not enter into any settlement of any Third Party Claim
or cease to defend against such claim, if pursuant to or as a result
of such settlement or cessation, (i) injunctive relief or specific
performance would be imposed against the Indemnitee, or (ii) such
settlement or cessation would lead to liability or create any
financial or other obligation on the part of the Indemnitee.
(d) The Indemnitor shall not be entitled to control, and the
Indemnitee shall be entitled to have sole control over, the defense or
settlement or any claim to the extent that claim seeks a temporary
restraining order, a preliminary or permanent injunction or specific
performance against the Indemnitee which, if successful, could
materially interfere with the business, operations, assets, condition
(financial or otherwise) or prospects of the Indemnitee (and the cost
of such defense shall constitute an amount for which the Indemnitee is
entitled to indemnification hereunder).
(e) If a firm decision is made to settle a Third Party Claim,
which claim the Indemnitor is permitted to settle under Section
6.4(c), and the Indemnitor desires to accept and agree to such
settlement, the Indemnitor will give written notice to the Indemnitee
to that effect. If the Indemnitee fails to consent to such settlement
within thirty (30) calendar days after its receipt of such notice, the
Indemnitee may continue to contest or defend such Third Party Claim
and, in such event, the maximum liability of the Indemnitor as to such
Third Party Claim will not exceed the amount of such settlement offer.
6.5 Warranty Claims. In the case of any warranty claim against Buyer for
services provided or work performed by Seller, Buyer may, to the extent required
to preserve its relationship with its customers, resolve such claim, without the
consent of Seller without releasing Seller's indemnity obligations hereunder;
provided, that (i) Seller is given notice of such claim and right to participate
in such settlement discussions; and (ii) Buyer shall use commercially-reasonable
efforts to obtain Seller's consent, which consent shall not be unreasonably
withheld. If Seller does not consent to any such resolution of any such warranty
claim and Buyer nonetheless resolves such claim with its customer, then whether
Buyer has a claim for Damages against Seller as a result of resolution of such
warranty claim shall be determined without regard to the fact that Buyer
incurred such costs, but only with regard to whether the underlying customer
claim was valid.
6.6 Consent to Jurisdiction, Etc. Subject to the provisions of this
Agreement, Seller and Buyer irrevocably and unconditionally (1) agree that any
suit, action or other legal proceeding arising out of this Agreement may be
brought in the United States District Court for the Northern District of
Illinois or, if such court does not have jurisdiction or will not accept
jurisdiction, in any court of general jurisdiction in the County of Lake in the
State of Illinois; (2) consent to the jurisdiction of any such court in any such
suit, action or proceeding; (3) waive any objection which such party may have to
the laying of venue of any such suit, action or proceeding in any such court;
and (4) agree that the venue for any proceeding described in Section 6.5 below
shall be located within the county limits of Lake County, Illinois, or in such
other location as the parties may mutually agree in writing.
44
6.7 Intentionally Omitted.
6.8 Compliance with Bulk Sales Laws. Buyer and Seller hereby waive
compliance by Buyer and Seller with the bulk sales laws and any other similar
laws in any jurisdiction in respect of the transactions contemplated by this
Agreement. Seller shall indemnify Buyer from and hold it harmless against, any
liabilities, damages, costs, and expenses, including reasonable attorney's fees,
resulting from and arising out of (i) the parties' failure to comply with any of
said laws in respect of the transactions contemplated by this Agreement, or (ii)
any action brought or levy made as a result thereof.
6.9 Limitation on Indemnity.
(a) Notwithstanding any other provision of this Agreement:
(i) Seller shall not have any obligation to indemnify Buyer
or its assigns pursuant to Section 6 unless and until, and only
to the extent that, the aggregate of all such individual Damages
incurred or sustained by Buyer or its assigns with respect to
which Buyer or its assigns are entitled to indemnification under
Section 6 exceeds $300,000 (the Basket), in which case the Seller
shall be liable for the entire amount of such Damages in excess
of $150,000; provided, however, that the foregoing Basket shall
not apply to Damages resulting from a breach by Seller of
Sections 2.1.1 and 2.1.3; any matters disclosed pursuant to a
Supplement Disclosure Schedule provided under Section 3.1.8 which
matters disclosed therein were known by Seller at the signing of
this Agreement; any failure by Seller to pay the Excluded
Liabilities; the indemnification obligation of Seller under
Section 6.8, and any breach by Seller of Section 7.3(a), (b) or
(c); any pre-Closing Date liabilities of Seller under the 401(k)
Plan Spinoff Plan; and the failure of Seller to pay any license,
assignment or transfer fee for the Software in accordance with
the provisions of Section 5.4.
(ii) the aggregate liability of Seller to indemnity Buyer
and its assigns for Damages under Section 6 shall in no event
exceed the Purchase Price.
(b) Notwithstanding any other provision of this Agreement:
(i) Buyer shall not have any obligation to indemnify Seller
pursuant to Section 6 unless and until, and only to the extent
that, the aggregate of all individual Damages incurred or
sustained by Buyer with respect to which Seller is entitled to
indemnification under Section 6 exceeds the Basket in which case
Buyer shall be liable for the entire amounts of such Damages from
the first dollar; indemnities payable with respect to a violation
of Buyer's obligation to pay and discharge the Assumed
Liabilities or fulfill its obligations under the Assumed Contract
45
or any breach of Section 7.3(d) shall not be subject to any
minimum amount; and
(ii) the aggregate liability of Buyer to indemnify Seller
for Damages under Section 6 shall in no event exceed the Purchase
Price; provided, however, that the foregoing dollar limitation
shall not apply to Damages with respect to claims made for
breaches of, or any inaccuracies in, any representation, warranty
or covenant made in Sections 2.2.1 and 2.2.2 of this Agreement.
7. OTHER AGREEMENTS
7.1 Intentionally Omitted.
7.2 Allocation of Purchase Price. The Purchase Price and the liabilities
assumed by Buyer in accordance with Section 1.3 hereof shall be allocated among
the Acquired Assets acquired hereunder as described on Schedule 7.2 hereof.
Buyer and Seller shall prepare and file their respective federal and state
income tax returns including, without limitation, Internal Revenue Service Form
8594, reflecting the transactions contemplated in this Agreement in a manner
consistent with the allocation in such Schedule 7.2. Buyer and Seller shall make
those portions of their returns, or amendments thereof, that relate to the
reporting of the transactions contemplated hereby available for inspection by
the other party or its representatives, and such other party shall specify,
within ten (10) days after its receipt of such return or amendment, in what
respect, if any, such return or amendment would violate the obligations set
forth in the preceding sentence. Seller and Buyer each hereby covenant and agree
that it will not take a position on any income tax return, before any
governmental agency charged with the collection of any income tax, or in any
judicial proceeding that is in any way inconsistent with the terms of this
Section 7.2.
7.3 Covenant Not to Compete.
(a) Noncompetition; Confidential Information. From the Closing
Date until the end of the fifth (5th) year following the Closing Date
(the "Noncompete Period"), Seller and its Affiliates will not
(directly or indirectly) participate in, own, manage, operate, join,
control, finance or participate in the ownership, management,
operation, control or financing of, or be connected as an officer,
director, employee, principal, agent, representative, consultant,
investor, owner, partner, manager, joint venturer or otherwise with,
or permit its name to be used by or in connection with, or Knowingly
lease, sell or permit to use any real property or interest therein
majority owned by Seller to, any business or enterprise engaged in
providing (i) book and publication printing, pre-press, digital
imaging or retouching services, (ii) any pre-press, digital imaging or
re-touching services for Kero Road Accounts, McGraw Hill, Newsweek or
any other "Active Account" (as defined below), or (iii) any pre-press,
digital imaging or retouching services to be performed in the New York
metropolitan area as controlled or directed by any advertising agency
in the New York metropolitan area (the "PROSCRIBED BUSINESS" and such
agreement not to compete with the Proscribed
46
Business, the "NONCOMPETITION AGREEMENT"), within the continental
United States. Active Account means any "Account" (as defined herein)
for which the Business has provided services within the year
immediately prior to the Closing Date. Account means with respect to
services controlled or directed by an advertising agency, services
performed for a particular client of such advertising agency and not
all services performed for such advertising agency. Account means,
with respect to services not controlled or directed by an advertising
agency, but rather awarded or placed directly by the client, services
performed for a particular division or business unit of the client and
not all services performed for all divisions or operating units of
such client. Notwithstanding the foregoing, nothing herein shall
prevent Seller from conducting and operating the Retained Business
(including, without limitation, pre-press, imaging and re-touching
services) and expansions and extensions thereof so long as Seller does
not violate the Noncompetition Agreement with respect to the
Proscribed Business. Without limitation of the foregoing, Seller on
behalf of it and its Affiliates covenants and agrees that they shall
not use for their own behalf or divulge to any third party any
Confidential Information (as hereinafter defined) or trade secrets
relating to the Business. As used herein, "CONFIDENTIAL INFORMATION"
shall consist of all information, knowledge or data relating to the
Business (including without limit all information relating to customer
and prospective customer lists, prices and trade practices) which is
not in the public domain or otherwise published or publicly available.
(b) Nonsolicitation. Seller agrees that, during the Noncompete
Period, Seller and its Affiliates will not (directly or indirectly)
call on or solicit for the purpose of engaging in the Proscribed
Business, or divert or take away from Buyer or any subsidiary of Buyer
the business of (including, without limitation, by divulging to any
competitor or potential competitor of Buyer the name of) any person,
firm, corporation or other entity who or which at the Closing Date
was, or at any time during the three (3) years preceding the Closing
Date had been, a customer of Seller with respect to the Business or
whose identity is known to Seller at the Closing Date as one whom
Buyer intends to solicit within the succeeding year.
(c) Hiring of Buyer's Employees. During the Noncompete Period,
Seller and its Affiliates shall not (directly or indirectly) hire or
offer employment to any employee of Buyer unless Buyer or such
employee first terminates the employment of such employee.
(d) Buyer Noncompetition; Confidential Information. From the
Closing Date until the end of the fifth (5th) year following the
Closing Date (the "NONCOMPETE PERIOD"), Buyer will not (directly or
indirectly) participate in, own, manage, operate, join, control,
finance or participate in the ownership, management, operation,
control or financing of, or be connected as an officer, director,
employee, principal, agent, representative, consultant, investor,
owner, partner, manager, joint venturer or otherwise with, or permit
its name to be used by or in connection with, or Knowingly lease, sell
or permit to use any real
47
property or interest therein majority owned by Buyer to, any business
or enterprise engaged in providing pre-press, digital imaging or
re-touching services in each case, for the types of work done by such
Designer's Atelier division prior to the Closing Date for those
customers of Seller's Designers Atelier division listed on Schedule
7.3(d) (the "BUYER PROSCRIBED BUSINESS" and such agreement not to
compete with the Buyer Proscribed Business, the "BUYER NONCOMPETITION
AGREEMENT"), within the continental United States. Notwithstanding the
foregoing, nothing herein shall prevent Buyer from conducting and
operating the Business (including, without limitation hereto,
pre-press, digital imaging and re-touching services) and expansions
and extensions thereof so long as Buyer does not violate the Buyer
Noncompetition Agreement with respect to the Buyer Proscribed
Business. Without limitation of the foregoing, Buyer covenants and
agrees that it shall not use for its own behalf or divulge to any
third party any Confidential Information (as hereinafter defined) or
trade secrets relating to the Retained Business. As used herein,
"Retained Confidential Information" shall consist of all information,
knowledge or data relating to the Business (including without limit
all information relating to customer and prospective customer lists,
prices and trade practices) which is not in the public domain or
otherwise published or publicly available.
(e) Hiring of Seller's Employees. During the Noncompete Period
Buyer and its Affiliates shall not (directly or indirectly) hire or
offer employment to any employee of the Retained Business unless
Seller or such employee first terminates the employment of such
employee.
Each of Buyer and Seller acknowledges that (i) the provisions of this
Section 7.3 are reasonable and necessary to protect the respective legitimate
interests of Buyer and Seller, (ii) any violation of this Section 7.3 will
result in irreparable injury to Buyer or Seller, as applicable, and that damages
at law would not be reasonable or adequate compensation to Buyer or Seller, as
applicable, for a violation of this Section 7.3, and (iii) Buyer or Seller, as
applicable, shall be entitled to have the provisions of this Section 7.3
specifically enforced by preliminary and permanent injunctive relief without the
necessity of proving actual damages and without posting bond or other security,
as well as to an equitable accounting of all earnings, profits and other
benefits arising out of any violation of this Section 7.3 and shall be entitled
to all other remedies available at law or in equity. In the event the provisions
of this Section 7.3 should ever be deemed to exceed the limitations provided by
applicable law, then the parties hereto agree that such provisions shall be
reformed to set forth the maximum limitation period.
7.4 Termination of Employees. Seller agrees to terminate at Closing the
employees of the Business listed in Schedule 2.1.19.
7.5 Conditions to Closing. Each of Buyer and Seller shall cause each of the
Closing Conditions over which it has control to be satisfied.
7.6 Tax Cooperation. Each party agrees to use Reasonable Efforts to
minimize the aggregate amount of sales and other Taxes payable in connection
with the transactions
48
contemplated hereby, including, without limitation, executing and delivering any
applicable exemption certificates or comparable documents.
7.7 Employees of the Business. In the event that any employee of the
Business declines to accept Buyer's offer of employment and subsequently, within
six (6) months of the Closing Date, becomes employed by Buyer, then Buyer shall
reimburse Seller for any severance or related out-of-pocket costs (COBRA or the
like) incurred by Seller as a result of such employee no longer being employed
by Seller.
8. MISCELLANEOUS
8.1 Termination.
(a) Anything herein or elsewhere to the contrary notwithstanding,
this Agreement may be terminated by written notice of termination at
any time before the Closing Date only as follows:
(i) by mutual consent of Seller and Buyer;
(ii) by Buyer, (A) at any time if the representations and
warranties of Seller contained in Section 2.1 hereof were
incorrect in any material respect when made or at any time
thereafter, or (B) upon written notice to Seller given at any
time after March 10, 2006 (or such later date as shall have been
specified in a writing authorized on behalf of Seller and Buyer)
if all of the conditions precedent set forth in Section 4.1
hereof have not been met; or
(iii) by Seller, (A) at any time if the representations and
warranties of Purchaser contained in Section 2.2 hereof were
incorrect in any material respect when made or at any time
thereafter, or (B) upon written notice to Buyer given at any time
after March 10, 2006 (or such later date as shall have been
specified in a writing authorized on behalf of Seller and Buyer)
if all of the conditions precedent set forth in Section 4.2
hereof have not been met.
(b) In the event of the termination and abandonment hereof
pursuant to the provisions of this Section 8.1, this Agreement (except
for Section 3.2.2 which shall continue) shall become void and have no
effect, without any liability on the part of any of the parties or
their directors or officers or stockholders in respect of this
Agreement, unless the termination was the result of the
representations and warranties of a party being materially incorrect
when made or the material breach by such party of a covenant hereunder
in which event the party whose representations and warranties were
incorrect or who breached such covenant shall be liable to the other
party for all costs and expenses of the other party in connection with
the preparation, negotiation, execution and performance of this
Agreement.
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8.2 Entire Agreement and Modification. This Agreement, including the
Exhibits and Schedules hereto which are hereby incorporated by reference herein
and made a part hereof for all purposes, constitutes and contains the entire
agreement of the parties and supersedes any and all prior negotiations,
correspondence, understandings and agreements between the parties respecting the
subject matter hereof. This Agreement may be amended, supplemented or
interpreted only by a written instrument signed by the parties.
8.3 Sole Benefit. The agreements of the parties to, and the terms and
conditions of, this Agreement are for the sole benefit of such parties and are
not for the benefit of any third party.
8.4 Severability. The provisions of this Agreement shall be severable. The
unenforceability or invalidity of any one or more provisions, clauses, or
sentences hereof shall not render any other provision, clause or sentence herein
contained unenforceable or invalid. The portion of the Agreement which is not
invalid or unenforceable shall be considered enforceable and binding on the
parties and the invalid or unenforceable provision(s), clause(s) or sentence(s)
shall be deemed excised, modified or restricted to the extent necessary to
render the same valid and enforceable, and this Agreement shall be construed as
if such invalid or enforceable provision(s), clause(s), or sentence(s) were
omitted. Any provision of this Agreement which is unenforceable in any
jurisdiction shall as to such jurisdiction, be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining provisions
hereof and any such prohibition or unenforceability in any jurisdiction shall
not invalidate or render unenforceable such provision in any other jurisdiction.
The provisions of this Section 6.3 shall survive the termination of this
Agreement for any reason.
8.5 Waiver. Any term or provision of this Agreement may be waived at any
time by the party entitled to the benefit thereof by a written instrument
executed by such party. No waiver of any breach of this Agreement shall operate
as a waiver of any similar or subsequent breach or any breach of any other
provision of this Agreement.
8.6 Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of Illinois without regard to
principles of conflicts of law. For all purposes of this Agreement, and any
ancillary document to which it or he is a party, including, without limitation,
any action or proceeding instituted for the enforcement of any right, remedy,
obligation, or liability, including Damages, arising under or by reason hereof
or thereof, each party consents and submits to the venue of such action or
proceeding in any court of general jurisdiction in the County of Lake in the
State of Illinois, and the United States District Court for the Northern
District of Illinois. If any of the provisions or portions of this Agreement are
invalid under any applicable statute or rule of law, they are to that extent to
be omitted. No waiver of any breach of this Agreement shall operate as a waiver
of any similar or subsequent breach or any breach of any other provision of this
Agreement.
8.7 Public Announcement. Following consummation of the transactions
contemplated by this Agreement, Buyer and Seller shall cooperate on a public
announcement thereof, but shall in no event disclose publicly specific details
of the transaction, including, without limitation, the Purchase Price.
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8.8 Notices. Any notice or other communication required or permitted
hereunder shall be in writing and may be delivered by hand, by overnight courier
service, by United States mail or by facsimile. Notices delivered by hand or
overnight courier service shall be deemed to have been duly given on the date of
delivery against receipt. Notices delivered by mail shall be deemed to have been
duly given four (4) days after the date of mailing, if mailed postage prepaid by
certified first class mail, return receipt required. Notices delivered by
facsimile shall be deemed given when received with receipt acknowledged. All
notices to be given under this Agreement shall be addressed to the parties at
the following addresses and/or to such other address (or to such other person's
attention or with a copy to such other person) as either party may specify in a
notice given in accordance with this Section 6.7. In the event that any notice
is not delivered to any party entitled thereto because such party has moved and
the address is unknown, or because such party has refused to accept such notice,
then such notice shall be deemed to be effective as if delivered.
To Buyer: CAPS Group Acquisition LLC
329 West 18th Street, Suite 800
Chicago, Illinois 60616
Attention: John Reilly, Manager
Facsimile: (312) 601-9140
With copy to: Meltzer, Purtill & Stelle LLC
1515 E. Woodfield Road, Second Floor
Schaumburg, Illinois 60173
Attention: John F. Purtill
Facsimile: (847) 330-1231
To Seller and/or
the Related Parties Schawk, Inc.
1695 River Road
Des Plaines, Illinois 60018
Attention: David A. Schawk
Facsimile: (847) 827-1264
With copies to: Schawk, Inc.
1695 River Road
Des Plaines, Illinois 60018
Attention: A. Alex Sarkisian and
Ronald J. Vittorini
Facsimile: (847) 827-1264
and
Vedder, Price, Kaufman & Kammholz, P.C.
222 North LaSalle Street, Suite 2600
Chicago, Illinois 60601
Attention: John T. McEnroe
Facsimile: (312) 609-5005
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8.9 Currency. All monetary amounts expressed in this Agreement and all
payments required by this Agreement are and shall be in United States dollars.
8.10 Assignment. No party's rights and obligations under this Agreement may
be assigned without the prior written consent of the other parties and any
attempted assignment in violation of the preceding sentence shall be void,
provided, however, that Buyer may, at its option, assign its interest to a third
party which is under common control with Buyer or to a successor in interest, by
merger or otherwise or to a lender to secure any loan from such lender to Buyer,
in which event all the rights and powers of Buyer and the remedies available to
it under this Agreement shall extend to and be enforceable by such assignee. Any
such assignment and delegation shall not release Buyer from its obligations
under this Agreement, Buyer guarantees to Seller the performance by each such
assignee of its obligations under this Agreement. In the event of any such
assignment and delegation, the term Buyer as used in this Agreement shall be
deemed to refer to each such assignee of the Buyer and shall be deemed to
include both Buyer and each such assignee where appropriate. Subject to the
foregoing, this Agreement shall be binding upon and inure to the benefit of the
respective successors and assigns of the parties.
8.11 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
8.12 Section Headings; Gender; Person. All section headings contained in
this Agreement are for convenience of reference only, do not form a part of this
Agreement and shall not affect in any way the meaning or interpretation of this
Agreement. Words used herein, regardless of the number and gender specifically
used, shall be deemed and construed to include any other number, singular or
plural, and any other gender, masculine, feminine, or neuter, as the context
requires. Any reference to a person or Person herein shall include an
individual, firm, corporation, partnership, limited liability company, trust,
governmental authority or body, association, unincorporated organization or any
other entity.
8.13 Prevailing Party. In the event of any litigation to enforce any of the
provisions of this Agreement, the losing party shall pay the reasonable costs,
fees and expenses of the prevailing party, unless such costs, expenses and fees
are otherwise allocated by the court. This provision shall not limit in any
manner the definition of, or a party's right to receive, Damages pursuant to the
indemnification provisions of this Agreement.
8.14 Jury Waiver. THE PARTIES IRREVOCABLY WAIVE ANY RIGHT TO TRIAL BY JURY
IN ANY ACTION OR PROCEEDING (I) TO ENFORCE OR DEFEND ANY RIGHTS UNDER OR IN
CONNECTION WITH THIS AGREEMENT OR ANY AMENDMENT, INSTRUMENT, DOCUMENT OR
AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION
HEREWITH, OR (II) ARISING FROM ANY DISPUTE OR CONTROVERSY IN CONNECTION WITH OR
RELATED TO THIS AGREEMENT OR ANY SUCH AMENDMENT, INSTRUMENT, DOCUMENT OR
AGREEMENT, AND AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A
COURT AND NOT BEFORE A JURY.
52
8.15 Other Definitions. The following capitalized terms used herein without
definition shall have the meanings set forth below:
"401(K) PLAN SPINOFF AGREEMENT" shall mean that certain 401(k) Plan Spinoff
Agreement to be executed and delivered on the Closing Date by Schawk, Inc. and
Buyer in the form attached hereto and incorporated herein as Exhibit H.
"KERO ROAD TRANSFERRED ACCOUNTS" shall mean the following five ad agency
pre-press accounts: (i) Foote, Cone & Belding; (ii) Grey Worldwide/Ericcson
Fina; (iii) the Lancome division of L'Oreal USA related to advertising and
POP/POS; (iv) Merrill Lynch; (v) Bumble & Bumble; (vi) DeVito Fitterman; (vii)
Managed Solutions; and (viii) Elizabeth Arden, including the onsite, which at
Closing shall be transferred from Seller's operating unit located at One Kero
Road, Carlstadt, New Jersey to Seller's operating unit at 450 West 33rd Street,
11th Floor, New York, New York.
"PERMITTED ENCUMBRANCES" shall mean (a) Encumbrances for current Taxes not
yet due and payable, (b) Encumbrances in favor of or which otherwise are owed to
materialmen, workmen, carriers, warehousepersons or laborers not currently due
or not in excess of $5,000 individually or $15,000 in the aggregate and (c)
rights of lessors or licensors with respect to leased or licenses property
included within the Acquired Assets.
"WAIVER" shall mean the release and waiver of Seller regarding any
pre-Closing Date obligations of employees in the form attached hereto and
incorporated herein as Exhibit I.
8.16 Arbitration. If there is any dispute or claim concerning the
interpretation of this Agreement, and the relative rights and obligations of the
parties hereunder, the parties agree that each party will provide written notice
of any claim or dispute under this Agreement, and will use Reasonable Efforts
for a period of 15 days following delivery of such notice to agree upon a
mutually acceptable attorney to act as an arbitrator of such claim or dispute.
If the parties are not able to agree on a mutually satisfactory arbitrator
within the foregoing 15-day period, each party will designate an attorney and
the two attorneys so designated will select a third attorney to act as an
arbitrator of such claim or dispute. Any such arbitration shall be conducted in
accordance with the rules of the American Arbitration Association. The decision
of any arbitrator selected in accordance with this Section 8.16 will be final
and binding upon the parties. In order to be selected as an arbitrator pursuant
to this Section 8.16, an attorney must be an equity partner (or comparable) of a
law firm located in Chicago, Illinois and must be experienced in commercial
transactions.
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SIGNATURE PAGE FOLLOWS . . .]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
SCHAWK, INC., CAPS GROUP ACQUISITION, LLC,
a Delaware corporation an Illinois limited liability company
By: /s/ A. Alex Sarkisian By: /s/ John Reilly
--------------------------------- ------------------------------------
Print Name: A. Alex Sarkisian John Reilly, Manager
Title: Executive Vice President
SCHAWK HOLDINGS, INC., SCHAWK USA, INC.,
a Delaware corporation a Delaware corporation
By: /s/ A. Alex Sarkisian By: /s/ A. Alex Sarkisian
--------------------------------- ------------------------------------
Print Name: A. Alex Sarkisian Print Name: A. Alex Sarkisian
Title: Executive Vice President Title: Executive Vice President
GUARANTY (LIMITED AMOUNT)
In order to induce Seller to enter into the foregoing Asset Purchase
Agreement ("ACQUISITION AGREEMENT"), to be executed by and between CAPS Group
Acquisition, LLC ("BUYER"), Schawk, Inc. and certain of its direct or indirect
wholly-owned subsidiaries (collectively, ("SELLER") dated as of March 3, 2006
and for other good and valuable consideration, receipt of which is hereby
acknowledged, the undersigned (hereinafter referred to as "GUARANTOR") hereby
unconditionally guarantees to Seller the full and prompt performance by Buyer
and payment of all obligations and amounts due Seller from Buyer pursuant to
said foregoing Asset Purchase Agreement. The foregoing notwithstanding,
Guarantor's liability under this Guaranty (Limited Amount) shall not exceed the
sum of (i) $250,000 plus (ii) reasonable attorneys' fees incurred by Seller in
enforcing this Guaranty (Limited Amount) plus (iii) interest on any such amounts
computed from the date on which Seller demands payment under this Guaranty
(Limited Amount) at the per annum interest rate stated in Section 6.3 of the
Acquisition Agreement.
GROUP 329, LLC, an Illinois limited
liability company
By: /s/ John Reilly
------------------------------------
John Reilly, Manager
i
Terms
401(k) Plan Spinoff Agreement......................................... 52
Acquired Assets....................................................... 2
Adjustment Objection Notice........................................... 7
Affiliates............................................................ 18
Agreement............................................................. 1
Arbitrator............................................................ 8
Assumed Contracts..................................................... 2
Assumed Liabilities................................................... 2, 5
Authorizations........................................................ 3
Benefit Arrangement................................................... 20
Best Efforts.......................................................... 31
Business.............................................................. 1
Buyer................................................................. 1
Cash Purchase Price................................................... 7
CERCLA................................................................ 26
Closing............................................................... 37
Closing Balance Sheet................................................. 7
Closing Date.......................................................... 37
Confidential Information.............................................. 47
Contracts............................................................. 18
Control............................................................... 18
Customers............................................................. 2
Damages............................................................... 41
Employee.............................................................. 20
Employee Plans........................................................ 20
Encumbrances.......................................................... 10
Equipment............................................................. 2
ERISA................................................................. 20
ERISA Affiliate....................................................... 20
Excluded Assets....................................................... 1, 4
Excluded Liabilities.................................................. 5
Financial Statements.................................................. 12
Furniture and Fixtures................................................ 3
Hazardous Substance................................................... 26
Indemnitee............................................................ 42
Indemnitor............................................................ 42
Intellectual Property................................................. 4
Interim Balance Sheet................................................. 12
Interim Balance Sheet Date............................................ 12
Inventory............................................................. 2
Kero Road Transferred Accounts........................................ 52
Knowledge of Seller................................................... 30
Leased Real Property.................................................. 24
Leases................................................................ 24
Liabilities........................................................... 12
1
License Agreement..................................................... 35
Material Adverse Effect............................................... 9
Material Supplier..................................................... 10
Multi-employer Plan................................................... 20
Noncompete Period..................................................... 47
Noncompetition Agreement.............................................. 46
Notice of Claim....................................................... 42
Notice of Objection................................................... 42
Owned Real Property................................................... 24
PBGC.................................................................. 20
Pension Plan.......................................................... 20
Permitted Encumbrances................................................ 53
Post-Closing Adjustment............................................... 7
Proscribed Business................................................... 46
Purchase Price........................................................ 6
Purchased Assets...................................................... 2
RCRA.................................................................. 26
Real Property......................................................... 24
Reasonable Best Efforts............................................... 31
Receivables........................................................... 3
Regulations........................................................... 15
Release............................................................... 26
Retained Business..................................................... 1
Seller................................................................ 1
Seller's Estimated Closing Balance Sheet.............................. 7
Seller's Knowledge.................................................... 30
Settlement Statement.................................................. 38
Software.............................................................. 27
Subsidiary............................................................ 21
Target Working Capital................................................ 7
Taxes................................................................. 13
Transition Services Agreement......................................... 36
Waiver................................................................ 53
Welfare Plan.......................................................... 21
2