<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
-------------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): MAY 4, 1998
GEOGRAPHICS, INC.
-----------------
(Exact Name of Registrant as Specified in Charter)
WYOMING 0-26756 87-0305614
------- ------- ----------
(State or Other Jurisdiction of (Commission (IRS Employer
Incorporation) File Number) Identification No.)
1555 ODELL ROAD, P.O. BOX 1750, BLAINE, WASHINGTON; 98231
---------------------------------------------------------
(Address of Principal Executive Offices; Zip Code)
(360) 332-6711
--------------
(Registrant's telephone number, including area code)
NOT APPLICABLE
--------------
(Former Name or Former Address, if Changed Since Last Report)
Page 1 of 37 Pages
Exhibit Index at Page 9.
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On May 4, 1998, Geographics, Inc. (the "Company"), along with U.S. Bank of
Washington National Association (the "Bank"), the Company's primary lending
institution and lienholder on its assets, executed an Amended and Restated
Asset Purchase Agreement (the "Agreement") for the sale of the Company's
lettering and signage product line business to Identity Group, Inc.
("Identity"), an unaffiliated Tennessee corporation. The adjusted aggregate
purchase price of $6,820,000, including a $25,000 inventory valuation
adjustment and less an amount of $200,000 placed in an Escrow Fund, was paid
on May 6, 1998 (the "Closing Date") by wire transfer of immediately available
funds to an account designated by the Bank. The inventory valuation
adjustment was the result of a provision in the Agreement to adjust the
aggregate purchase price upward or downward at the Closing Date to the extent
that the value of the eligible inventory of the lettering and signage
products business was more or less than an amount equal to $666,767. Eligible
inventory at the Closing Date amounted to approximately $691,200, resulting
in the $25,000 increase in the aggregate purchase price. The holdback of
$200,000 placed in the Escrow Fund will be used to offset (1) an agreed
amount representing obsolete inventory determined within 45 days after the
Closing Date (the "Determination Period"), and (2) claims made by Identity
within 90 days after the Closing Date for certain unassumed liabilities, or
specified costs and expenses of the lettering and signage product line
business. As of the date of this filing, the Determination Period has expired
and no additional obsolete inventory was identified which would require
adjustment of the purchase price. Also as of the date of this filing, no
claims have been submitted by Identity to the Escrow Agent, although it is
not possible to determine at this time if any claims will be submitted prior
to the expiration of the 90-day claim period. After 90 days from the Closing
Date, the Escrow Agent will pay any amounts remaining in the Escrow Fund,
less an amount to cover submitted claims pending final resolution, to an
account designated by the Bank.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements of business acquired.
Not Applicable
(b) Pro Forma Financial Information
The following unaudited pro forma condensed consolidated financial
statements are filed with this report:
(i) Pro Forma Condensed Consolidated Balance Sheet (unaudited) as of
March 31, 1998
(ii) Pro Forma Condensed Consolidated Statement of Operations
(unaudited) for the year ended March 31, 1998
<PAGE>
The unaudited pro forma condensed consolidated balance sheet at March 31,
1998, and the unaudited pro forma condensed consolidated statement of
operations for the year ended March 31, 1998 give pro forma effect to the
estimated financial effects of the Transaction. The pro forma condensed
consolidated balance sheet as of March 31, 1998 gives pro forma effect to the
Agreement as if the transactions resulting from the Agreement were
consummated on that date. The pro forma condensed consolidated statement of
operations for the year ended March 31, 1998 presents the results of
operations of the Company as if the Transaction had occurred at the beginning
of the period presented. In order to assist readers in evaluating the effect
of the Transaction on continuing operations, the pro forma balance sheet
shows a gain of $5,888,800 resulting from the Transaction. The pro forma
statement of operations excludes this gain because it will not be a
continuing source of income to the Company. The pro forma information is
based on the historical financial information of the Company giving effect to
the assumptions and adjustments set forth in the accompanying notes.
The unaudited pro forma condensed financial data have been prepared by the
Company's management and are not necessarily indicative of how the Company's
balance sheet and results of operations would have been presented had the
transactions with Identity and the Bank actually been consummated at the assumed
dates, nor are they necessarily indicative of the Company's balance sheet and
results of operations for any future period. The unaudited pro forma condensed
financial data should be read in conjunction with the financial statements and
related notes thereto and Management's Discussion and Analysis of Financial
Condition and Results of Operations contained in the Company's Form 10-K for the
fiscal year ended March 31, 1997 and Form 10-Q for the nine-month period ended
December 31, 1997, incorporated herein by reference.
(c) Exhibits
<TABLE>
<CAPTION>
EXHIBIT NUMBER
(REFERENCED TO
ITEM 601 OF
REGISTRATION S-K) DESCRIPTION OF DOCUMENT
- ----------------- -----------------------
<S> <C>
10.18 Amended and Restated Asset Purchase Agreement by and among
Geographics, Inc., Identity Group, Inc. and U.S. Bank National
Association, dated May 4, 1998 (1)
10.19 Escrow Agreement by and among Geographics, Inc., Identity
Group, Inc., U.S. Bank National Association and Lawyers Title
Insurance Corporation, dated May 4, 1998.
</TABLE>
- ------------------------------------------------------------------------------
(1) Replaces an identically numbered exhibit to the Quarterly Report on Form
10-Q for the fiscal quarter ended December 31, 1997, as filed with the
Securities and Exchange Commission on April 29, 1998 (SEC File No.
0-26756).
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this Report to be signed on its behalf by the
undersigned hereunto duly authorized.
GEOGRAPHICS, INC.
DATE: JUNE 29, 1998 By: /S/ RONALD S. DEANS
Ronald S. Deans
CHAIRMAN OF THE BOARD, PRESIDENT,
CHIEF EXECUTIVE OFFICER, CHIEF FINANCIAL
OFFICER AND SECRETARY
<PAGE>
PRO FORMA FINANCIAL INFORMATION
GEOGRAPHICS, INC.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AT MARCH 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
CONSOLIDATED LETTERING
ASSETS BALANCE & SIGNAGE PRO FORMA
SHEET PRO FORMA ADJ'S AS ADJUSTED
-------------- --------------- -------------
<S> <C> <C> <C>
CURRENT ASSETS
Cash $ 316,078 316,078
Accounts receivable, net 3,951,448 3,951,448
Inventory, net of allowance for obsolete inventory (b) 6,955,780 (843,900) 6,111,880
Prepaid expenses, deposits, and other current assets 969,385 969,385
-------------- --------------- -------------
Total current assets 12,192,691 (843,900) 11,348,791
Property, Plant and Equipment, net ( c ) 13,090,115 (25,000) 13,065,115
Other Assets 512,956 512,956
-------------- --------------- -------------
TOTAL ASSETS $ 25,795,762 $ (868,900) $ 24.926,862
-------------- --------------- -------------
-------------- --------------- -------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Bank overdrafts $ 301,716 $ 301,716
Current portion of long-term debt 1,526,508 1,526,508
Note payable to bank 11,300,808 6,542,700 4,758,108
Accounts payable 3,206,631 215,000 2,991,631
Accrued liabilities 2,254,117 2,254,117
-------------- --------------- -------------
Total current liabilities 18,589,780 6,757,700 11,832,080
Long-Term Debt 6,677,090 6,677,090
-------------- --------------- -------------
Total liabilities 25,266,870 6,757,700 18,509,170
Stockholders' Equity
No par common stock 15,573,434 15,573,434
Retained earnings (accumulated deficit) (f) (15,044,542) (5,888,800) (9,155,742)
Foreign currency translation adjustment - -
-------------- --------------- -------------
Total stockholders' equity 528,892 (5,888,800) 6,417,692
-------------- --------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 25,795,762 $ 868,900 $ 24,926,862
-------------- --------------- -------------
-------------- --------------- -------------
</TABLE>
See accompanying notes to these pro forma condensed
consolidated Financial Statements.
<PAGE>
GEOGRAPHICS, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED MARCH 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
CONSOLIDATED LETTERING
STATEMENT OF & SIGNAGE PRO FORMA
OPERATIONS PRO FORMA ADJ'S AS ADJUSTED
------------ --------------- -----------
<S> <C> <C> <C>
Sales (a) 31,027,152 6,598,881 24,428,271
Cost of Sales (b) 24,789,619 3,822,243 20,967,376
------------ --------------- -----------
Gross margin 6,237,533 2,776,638 3,460,895
Selling, General and Administrative Expenses (c) 11,705,767 1,553,950 10,151,806
------------ --------------- -----------
Income (loss) from operations (5,468,234) 1,222,688 (6,690,911)
Other Income (Expense)
Interest expense (d) (1,663,978) (249,597) (1,414,381)
Loss on sales of property and equipment (23,516) - (23,516)
Other income (expense) (78,400) - (78,400)
------------ --------------- -----------
Total other income (expense) (1,765,893) (249,597) (1,516,297)
------------ --------------- -----------
Income (Loss) Before Provision for Income Taxes (7,234,128) 973,088 (8,207,208)
Income Tax Provision (Benefit) (e) - - -
------------ --------------- -----------
Net Income (Loss) $(7,234,128) 973,088 (8,207,208)
------------ --------------- -----------
------------ --------------- -----------
Earnings Per Common and Common Equivalent Share
Primary $(.75) $.10 $(.85)
Assuming full dilution $(.75) $.10 $(.85)
Shares Used in Computing Earnings Per Common and Common
Equivalent Share
Primary 9,626,335 9,626,335 9,626,335
Assuming full dilution 9,626,335 9,716,179 9,626,335
</TABLE>
See accompanying notes to these pro forma
condensed consolidated financial statements.
<PAGE>
GEOGRAPHICS, INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
1. ADJUSTMENTS RELATED TO THE PRO FORMA BALANCE SHEET
The pro forma balance sheet reflects the effects of adjustments related to the
sale of the assets of the Company's lettering and signage product lines as if
the Transaction had taken effect on March 31, 1998. The adjustments related to
the pro forma balance sheet consist of allocations of certain assets,
liabilities and stockholders' equity to the Company's lettering and signage
product lines as set forth below:
(a) The terms of the Transaction require Identity Group, Inc. to pay at the
Closing Date an adjusted aggregate purchase price of $6,820,000, less a
holdback of $200,000 subject to certain adjustments, to an account
designated by U.S. Bank. On May 6, 1998, the Closing Date, the adjusted
aggregate purchase price net of the holdback, amounting to $6,620,000,
was paid against the Company's outstanding credit facility.
(b) The terms of the Agreement assume an inventory value on the Closing Date
of $666,767. The aggregate purchase price was adjusted up, on a
dollar-for-dollar basis, to the extent that good and salable inventory,
as defined in the Agreement, was higher than $666,767. Lettering and
signage inventory at May 6, 1998, the Closing Date, amounted to
approximately $691,200, resulting in an actual increase in the purchase
price of $25,000. Lettering and signage inventory at March 31, 1998 was
approximately $843,900, resulting in a pro forma increase in the
purchase price of approximately $177,200.
(c) The net book value of equipment sold under terms of the Transaction
amounted to approximately $25,000 at March 31, 1998.
(d) Records the use of available net proceeds from the Transaction to reduce
the outstanding balance on the Company's revolving credit facility.
(e) Records the use of certain proceeds for the anticipated reductions in
Accounts Payable balances related to the Transaction.
(f) Records the pro forma effect of the Transaction on Retained Earnings.
2. ADJUSTMENTS RELATED TO THE PRO FORMA STATEMENT OF OPERATIONS
The pro forma statement of operations for the year ended March 31, 1998
reflects the effects of adjustments related to the sale of the assets of the
Company's lettering and signage product lines as if the Transaction had taken
effect at April 1, 1997. The pro forma balance sheet reflects a gain of
$5,888,800 resulting from the Transaction. The pro forma statement of
operations excludes this gain because it will not be a continuing source of
income to the Company. The adjustments related to the pro forma statement of
operations consist of allocations of sales, cost of sales, selling, general and
administrative expenses, and interest expense to the Company's lettering and
signage product lines as set forth below:
(a) Records the pro forma reduction in revenues related to the Company's
lettering and signage
<PAGE>
business.
(b) Records the Company's corresponding pro forma reduction in cost of
sales.
(c) Records the pro forma reduction in selling, general and administrative
expense. Selling expenses consist of volume, advertising and other
payments or credits to customers, along with sales commissions and
direct selling expenses. General and administrative expenses include
professional fees and other direct administrative expenses. Such pro
forma expenses for the year ended March 31, 1998 were estimated to be
approximately $1,369,950 for selling expenses and approximately $184,000
for general and administrative expenses, for a total of approximately
$1,553,950.
(d) Records the pro forma reduction in interest expense. Such expense was
estimated based on management estimates of working capital employed
relative to the specialty paper business and a corresponding pro forma
allocation of the relative use of the Company's revolving credit
facility and equipment capital lease facilities to support the lettering
and signage product business.
(e) Based on the Company's pro forma current operating results for the year
ended March 31, 1998, along with projections of future net pre-tax
losses, management determined that future operating and taxable income
may not be sufficient to fully recognize all existing deferred tax
assets and, as a result, the carrying value of the net deferred tax
assets is fully reserved at March 31, 1998. The amounts reflected
represent the pro forma elimination of any potential tax benefit due to
the sale of the lettering and signage business for the year ended March
31, 1998.
<PAGE>
EXHIBIT INDEX
GEOGRAPHICS, INC.
Current Report on Form 8-K
<TABLE>
<CAPTION>
Description of Exhibit Page No.
---------------------- --------
<S> <C>
Amended and Restated Asset Purchase Agreement by and among 10
Geographics, Inc., Identity Group, Inc., and U.S. Bank National
Association, dated May 4, 1998
Escrow Agreement by and among Geographics, Inc., Identity Group, 30
Inc., U.S. Bank National Association and Lawyers Title Insurance
Corporation, dated May 4, 1998
</TABLE>
<PAGE>
AMENDED AND RESTATED
ASSET PURCHASE AGREEMENT
BY AND AMONG
GEOGRAPHICS, INC.,
IDENTITY GROUP, INC.
AND
U.S. BANK NATIONAL ASSOCIATION
DATED MAY 4, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
- ------- ----
<S> <C>
1. SALE AND PURCHASE OF ASSETS . . . . . . . . . . . . . . . . . . . . .1
1.1 Possession by the Bank. . . . . . . . . . . . . . . . . . .1
1.2 Transfer of Assets. . . . . . . . . . . . . . . . . . . . .2
1.3 No Assumption of Liabilities by Identity;
Responsibility for Customer Returns . . . . . . . . . . .2
1.4 Excluded Assets . . . . . . . . . . . . . . . . . . . . . .3
1.5 Employees . . . . . . . . . . . . . . . . . . . . . . . . .3
1.6 Inventory . . . . . . . . . . . . . . . . . . . . . . . . .3
1.7 Transition Period . . . . . . . . . . . . . . . . . . . . .4
1.9 Conveyance by Geographics . . . . . . . . . . . . . . . . .4
2. PURCHASE PRICE; PAYMENT TERMS . . . . . . . . . . . . . . . . . . . .4
2.1 Purchase Price. . . . . . . . . . . . . . . . . . . . . . .4
2.2 Payment of Purchase Price . . . . . . . . . . . . . . . . .4
2.3 Allocation of Purchase Price. . . . . . . . . . . . . . . .4
2.4 Ad Valorem Personal Property Tax. . . . . . . . . . . . . .4
3. CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
3.1 Time and Place of Closing; Escrow . . . . . . . . . . . . .5
3.2 Items to be Delivered at the Closing. . . . . . . . . . . .5
3.3 Closing Costs . . . . . . . . . . . . . . . . . . . . . . .6
3.4 Further Assurances. . . . . . . . . . . . . . . . . . . . .6
4. CONDITIONS TO CLOSING . . . . . . . . . . . . . . . . . . . . . . . .6
4.1 Conditions Precedent to Obligations of Identity . . . . . .6
4.2 Conditions Precedent to Obligations of Geographics. . . . .7
4.3 Conditions Precedent to Obligations of the Bank . . . . . .7
-i-
<PAGE>
5. REPRESENTATIONS AND WARRANTIES OF GEOGRAPHICS . . . . . . . . . . . .7
5.1 Organization, Standing and Authority of Geographics . . . .8
5.2 Authorization of Agreement. . . . . . . . . . . . . . . . .8
5.3 No Conflict, Consents . . . . . . . . . . . . . . . . . . .8
5.4 Financial Statements. . . . . . . . . . . . . . . . . . . .8
5.5 Absence of Certain Liabilities and Changes. . . . . . . . .8
5.6 Title to Assets . . . . . . . . . . . . . . . . . . . . . .8
5.7 Condition of Assets . . . . . . . . . . . . . . . . . . . .9
5.8 Intellectual Property Rights. . . . . . . . . . . . . . . .9
5.9 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . .9
5.10 Contracts . . . . . . . . . . . . . . . . . . . . . . . . .9
5.11 Employee Matters. . . . . . . . . . . . . . . . . . . . . .9
5.12 Litigation; Compliance with Laws. . . . . . . . . . . . . 10
5.13 Insurance . . . . . . . . . . . . . . . . . . . . . . . . 10
5.14 Foreign Sales . . . . . . . . . . . . . . . . . . . . . . 10
5.15 Disclosure. . . . . . . . . . . . . . . . . . . . . . . . 10
6. REPRESENTATIONS AND WARRANTIES OF IDENTITY. . . . . . . . . . . . . 10
6.1 Identity's Organization . . . . . . . . . . . . . . . . . 10
6.2 Authorization of Agreement. . . . . . . . . . . . . . . . 10
6.3 No Conflict, Consents . . . . . . . . . . . . . . . . . . 11
6.4 Litigation. . . . . . . . . . . . . . . . . . . . . . . . 11
7. REPRESENTATIONS AND WARRANTIES OF THE BANK. . . . . . . . . . . . . 11
7.1 The Bank's Organization . . . . . . . . . . . . . . . . . 11
7.2 Authorization of Agreement. . . . . . . . . . . . . . . . 11
7.3 First Priority Lien and Possession of Assets. . . . . . . 11
8. FURTHER COVENANTS OF THE PARTIES. . . . . . . . . . . . . . . . . . 11
8.1 Access to Information . . . . . . . . . . . . . . . . . . 12
8.2 Cooperation . . . . . . . . . . . . . . . . . . . . . . . 12
-ii-
<PAGE>
8.3 Conduct of the Business Pending the Closing . . . . . . . 12
8.4 Use of Packaging Material . . . . . . . . . . . . . . . . 12
8.5 Advice of Claims. . . . . . . . . . . . . . . . . . . . . 12
8.6 Notice by Identity. . . . . . . . . . . . . . . . . . . . 12
8.7 Publicity . . . . . . . . . . . . . . . . . . . . . . . . 12
8.9 Preservation of Records . . . . . . . . . . . . . . . . . 12
8.10 Termination Fee . . . . . . . . . . . . . . . . . . . . . 13
8.11 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . 13
8.12 No Solicitation . . . . . . . . . . . . . . . . . . . . . 13
8.13 Post-Closing Cooperation. . . . . . . . . . . . . . . . . 13
8.14 Post-Closing Customer Orders. . . . . . . . . . . . . . . 13
8.15 Post-Closing Payments . . . . . . . . . . . . . . . . . . 14
8.16 Basic Assumptions . . . . . . . . . . . . . . . . . . . . 14
9. INDEMNIFICATION AND RELATED MATTERS . . . . . . . . . . . . . . . . 14
9.1 Indemnification . . . . . . . . . . . . . . . . . . . . . 14
9.2 Survival of Representations and Warranties. . . . . . . . 15
9.3 Claims Procedure. . . . . . . . . . . . . . . . . . . . . 15
10. CONFIDENTIALITY . . . . . . . . . . . . . . . . . . . . . . . . . . 16
11. TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
11.1 Termination Events. . . . . . . . . . . . . . . . . . . . 16
11.2 Effect of Termination . . . . . . . . . . . . . . . . . . 16
12. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
12.1 Notices . . . . . . . . . . . . . . . . . . . . . . . . . 17
12.2 Full Understanding. . . . . . . . . . . . . . . . . . . . 17
12.3 Entire Agreement. . . . . . . . . . . . . . . . . . . . . 18
12.4 Modification. . . . . . . . . . . . . . . . . . . . . . . 18
12.5 No Waiver . . . . . . . . . . . . . . . . . . . . . . . . 18
-iii-
<PAGE>
12.6 Captions and Construction . . . . . . . . . . . . . . . . 18
12.7 Survival. . . . . . . . . . . . . . . . . . . . . . . . . 18
12.8 Governing Law . . . . . . . . . . . . . . . . . . . . . . 18
12.9 Expenses. . . . . . . . . . . . . . . . . . . . . . . . . 18
12.10 Execution in Counterparts . . . . . . . . . . . . . . . . 18
12.11 Invalid Provisions. . . . . . . . . . . . . . . . . . . . 18
12.12 Time of the Essence . . . . . . . . . . . . . . . . . . . 18
12.13 Binding Effect, Assignment, No Third Party Rights . . . . 18
12.14 Arbitration . . . . . . . . . . . . . . . . . . . . . . . 19
12.15 Non-Competition . . . . . . . . . . . . . . . . . . . . . 19
</TABLE>
-iv-
<PAGE>
AMENDED AND RESTATED
ASSET PURCHASE AGREEMENT
This AMENDED AND RESTATED ASSET PURCHASE AGREEMENT is entered into as of
May 4, 1998 by and among Geographics, Inc., a Wyoming corporation
("Geographics"), Identity Group, Inc., a Tennessee corporation ("Identity") and
U.S. Bank National Association, a national banking association (the "Bank").
RECITALS
A. Geographics, through its signage products business segment, is
engaged in the business of developing, manufacturing, marketing, supporting and
distributing various rub-on and stick-on lettering, stencils, graphic arts
products, non-electric signs and other signage products (the "Business").
B. Geographics and Identity have previously entered into that
certain Asset Purchase Agreement, dated December 23, 1997 whereby Identity
agreed to purchase, and Geographics agreed to sell, substantially all of the
assets of Geographics employed or held exclusively in connection with the
Business.
C. The Bank holds a valid and perfected first priority lien on all
of the assets of Geographics employed or held exclusively in connection with the
Business.
D. Pursuant to Section 62A.9-503 of the Revised Code of Washington
(the "RCW"), Geographics has agreed to allow the Bank to repossess all of the
assets of Geographics employed or held exclusively in connection with the
Business.
E. The Bank has agreed to dispose of such assets acquired from
Geographics employed or held exclusively in connection with the Business in a
contractual private sale to Identity in accordance with the terms of this
Agreement, pursuant to 62A.9-504 of the RCW.
F. Geographics has voluntarily consented to the Bank's taking
possession of all of the assets of Geographics employed or held exclusively in
connection with the Business and to the sale to Identity and acknowledges and
agrees that the Bank has acted in a commercially reasonable manner and that
Identity is purchasing the such assets in good faith.
NOW THEREFORE, in consideration of the premises and of the mutual
covenants herein contained and intending to be legally bound hereby, the parties
hereto agree as follows:
AGREEMENT
1. SALE AND PURCHASE OF ASSETS.
1.1 POSSESSION BY THE BANK. In accordance with Sections 62A.9-503
and 62A.9-504 of the RCW and on or before the Closing Date, Geographics will
surrender lawful possession of the Assets (as defined below) to the Bank and the
Bank will comply with all applicable legal requirements in connection therewith.
<PAGE>
1.2 TRANSFER OF ASSETS. Subject to the terms and conditions of this
Agreement, at the closing referred to in Section 3 (the "Closing"), the Bank
shall sell, assign, grant and transfer to Identity, with Geographics' consent,
and Identity shall purchase and accept from the Bank, all of Geographics' right,
title and interest in and to the following assets owned by Geographics (the
"Assets"), not including the Excluded Assets (as defined below):
(i) all of the furnishings, furniture, office supplies,
tools, machinery and equipment used primarily in the operation of the Business
including without limitation the assets listed on SCHEDULE 1.2(i) hereto (all of
the foregoing being collectively referred to as the "Equipment");
(ii) all quantities of inventory, including raw materials,
works-in-process, finished goods, stores and supplies, used primarily in the
operation of the Business (the "Inventory");
(iii) all research, development, trade secrets, know-how,
inventions, and designs, and other technical information whether owned or
licensed from third parties, used primarily in the Business and all records,
reports and data relating thereto;
(iv) all trademarks, trade names and service marks, and
registrations and applications for such trademarks, trade names, service marks
primarily used in the Business listed in SCHEDULE L.(iv) (collectively, the
"Intellectual Property");
(v) all contracts, purchase orders, arrangements and
commitments of any kind which relate to the Business or Assets, including,
without limitation, those contracts listed on SCHEDULE 5.10 (the "Contracts");
(vi) all customer and vendor lists relating to the Business
and all files and documents (including credit information) relating to customers
and vendors of the Business;
(vii) all other assets used primarily in the conduct of the
Business; and
(viii) all other business and financial records, files, books
and documents relating to the Assets or the Business, including without
limitation, all product and marketing plans, procedural and technical manuals,
user's guides, servicing routines, parts lists, advertisements, brochures and
promotional materials.
The purchase and sale of the foregoing Assets on the terms and
conditions set forth in this Agreement is referred to herein as the
"Acquisition."
1.3 NO ASSUMPTION OF LIABILITIES BY IDENTITY; RESPONSIBILITY FOR
CUSTOMER RETURNS. (a) Identity is not assuming and does not agree to pay,
perform or discharge, any liabilities of Geographics or the Bank, including, but
not limited to the litigation identified on SCHEDULE 5.12, other than ongoing
obligations under any executory contracts expressly assumed hereunder by
Identity. All liabilities shall be retained by, and remain the sole
responsibility of Geographics or the Bank, as the case may be, other than
ongoing obligations under any executory contracts expressly assumed by Identity.
(b) Geographics shall be responsible for all costs, liabilities
and expenses associated with any customer returns of goods shipped prior to
April 27, 1998 (the "Inventory Date"), and shall promptly reimburse Identity
for any such costs, liabilities and expenses incurred by Identity.
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1.4 EXCLUDED ASSETS. The parties to this Agreement expressly
understand and agree that the Bank is not hereunder selling, assigning,
transferring or conveying to Identity any assets, rights or properties of
Geographics not referred to in Section 1.2 or as otherwise provided under this
Agreement. Without limiting the foregoing, the following assets, rights and
properties (the "Excluded Assets") shall be specifically excluded from the
transactions contemplated by this Agreement:
(a) cash;
(b) receivables, pension or other funded employee benefit plan
assets, or amounts owed to Geographics by or claims by Geographics against
third parties, including any right or claim to refund of any deposits,
prepayments or tax abatements for which Geographics may have a claim with
respect to the Assets or Business conducted prior to the Inventory Date;
(c) any assets, rights or properties used primarily in connection
with Geographics' paper products business segment;
(d) the LED sign portion of Geographics' business; and
(e) any equipment in which a creditor of Geographics, other than
the Bank, has a perfected purchase money security interest that is senior to
the Bank's interest, as listed on SCHEDULE 1.4 hereof.
1.5 EMPLOYEES. Identity shall not be obligated to hire any
employees of Geographics or the Business. Geographics will be solely
responsible for terminating employees who work in the Business. All
employee-related costs and expenses will be retained by Geographics,
including without limitation all severance or separation costs.
1.6 INVENTORY. The Purchase Price (as hereafter defined) will be
adjusted dollar-for-dollar as set forth herein, if, on the Closing Date, the
value of the Inventory that is good, usable and salable in the ordinary course
of business, as determined in accordance with generally accepted accounting
principles (the "Inventory Value"), on a cost basis (based on unit cost at
September 30, 1997, except raw materials which are valued at current costs, as
determined by Geographics) is more or less than $666,767. In order to assess
Geographics' Inventory Value, Identity may, at its option, conduct a physical
count of the Inventory immediately prior to the Closing Date. The Inventory
Value will not be reduced prior to the Closing to account for Obsolete Inventory
unless Identity and the Bank mutually agree otherwise. The purchase price for
the Assets will be reduced or increased on the Closing Date by the amount of any
mutually agreed variation in Inventory Value based upon the physical count. Not
later than 45 days after the Closing (the "Determination Period"), Geographics
shall deliver to Identity and the Bank, Geographics' calculation of Obsolete
Inventory (defined below) value to the extent not previously taken into account
in calculating Inventory Value. For purposes of determining the Obsolete
Inventory value, items which are determined to not be good, useable or salable
in the ordinary course of business and the value of any amounts of finished
goods inventory (based on unit cost at September 30, 1997, as determined by
Geographics) which exceed the actual sales of the Business for the 12 month
period immediately preceding the Closing (the "Obsolete FG Inventory") will be
deemed to be Obsolete Inventory. Any new stock keeping units ("SKUs") that have
been added to the plan-o-grams of major customers since October 1997 will not be
considered to be Obsolete Inventory and any returns of any such SKUs will not be
charged back to Geographics (the "Plan-o-Grams Inventory"). Any work in process
inventory which is mutually determined to be not salable in the ordinary course
of business (the "Obsolete WIP Inventory", and, collectively with the Obsolete
FG Inventory, the "Obsolete Inventory") will be deemed to be Obsolete Inventory.
In the event that Identity disagrees with Geographics' determination of the
Obsolete Inventory value and Identity and the Bank cannot agree as to the
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Obsolete Inventory value within 30 business days after the end of the
Determination Period, then Identity and the Bank shall select a firm of
independent accountants reasonably acceptable to Identity and the Bank and such
firm shall be responsible for determining the Obsolete Inventory value for
purposes of this Section 1.6. The undisputed amount of any downward adjustment
for Obsolete Inventory shall be immediately paid to Identity out of the Escrow
Fund (as hereafter defined). The balance of the Obsolete Inventory value, if
any, as finally determined will be promptly paid to Identity out of the Escrow
Fund or, if the Escrow Fund has been fully disbursed, promptly paid by the Bank
to Identity.
1.7 TRANSITION PERIOD. Title to all the Assets and risk of loss
shall pass to Identity as of the Closing Date. However, in order to facilitate
the transfer of the Assets and Business, Geographics shall permit Identity to
maintain the Assets in Geographics' plant after Closing for such period to be
determined by Identity in its discretion but in any event not longer than 90
days after the Closing Date (the "Transition Period"). During the Transition
Period, manufacturing of products for the Business shall continue to be
performed in Geographics' plant by Geographics' employees under the direction of
Identity. Identity shall reimburse Geographics for (i) actual, direct labor
costs, including, but not limited to direct supervisory costs, the cost of one
customer service representative, payroll taxes and benefits incurred by
Geographics in manufacturing and shipping products for Identity and (ii) actual
shipping expenses. Identity shall pay to Geographics the sum of $1.00 as rent
for the Transition Period in consideration for the use of a portion of
Geographics' plant to manufacture, store and ship products for the Business,
which rent amount shall be the sole payment to Geographics for all costs
(including without limitation utilities), other than direct labor costs and
actual shipping expenses associated with Identity's use of Geographics'
manufacturing plant during the Transition Period. During the Transition Period,
Identity shall be named as an additional insured under Geographics' casualty and
liability insurance policies.
1.9 CONVEYANCE BY GEOGRAPHICS. In consideration of Identity's
execution and performance of this Agreement, including delivery of the Purchase
Price, Geographics hereby quitclaims to Identity Geographics' remaining interest
(if any) in the Assets following the foreclosure sale contemplated hereunder.
In addition, Geographics hereby sells, conveys and transfers directly to
Identity the Assets listed on SCHEDULE 1.9.
2. PURCHASE PRICE; PAYMENT TERMS.
2.1 PURCHASE PRICE. The aggregate purchase price for the Assets
shall be $6,795,000, subject to adjustment in accordance with Section 1.6 above.
The purchase price as determined pursuant to this Section 2.1 and subject to
adjustment in accordance with Section 1.6 is referred to herein as the "Purchase
Price".
2.2 PAYMENT OF PURCHASE PRICE. At the Closing, Identity shall pay
to the Bank the Purchase Price (less the amount of the Escrow Fund) by wire
transfer of immediately available funds to an account designated by the Bank.
2.3 ALLOCATION OF PURCHASE PRICE. The Purchase Price shall be
allocated among the Assets in accordance with SCHEDULE 2.3. The parties shall
report consistently with such allocations on all income tax returns and other
statements (including, without limitation, filing of Form 8594) and in the
course of any tax audit, tax review or tax litigation relating thereto.
2.4 AD VALOREM PERSONAL PROPERTY TAX. At the Closing, ad valorem
property taxes with respect to the Assets shall be prorated for the calendar
year in which the Closing occurs and Geographics shall be responsible for any ad
valorem property tax incurred prior to the Closing.
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3. CLOSING.
3.1 TIME AND PLACE OF CLOSING; ESCROW.
(a) The Closing of the sale and purchase of the Assets
provided for in Section 1 shall take place on such date and at such place as may
be mutually agreed by the parties but in no event later than the earlier of
May 6, 1998 or three business days after all of the conditions specified in
Section 4 have been fulfilled. The date of the Closing is herein referred to as
the "Closing Date".
(b) At the Closing $200,000 will be placed in escrow (the
"Escrow Fund") in accordance with the terms and provisions of an escrow
agreement between Identity, Geographics, the Bank and Lawyers Title Insurance
Corporation, as escrow agent (the "Escrow Agent") in the form attached hereto as
EXHIBIT 3.1(b) (the "Escrow Agreement"). The terms and conditions relating to
disbursement of the Escrow Fund will be as set forth in the Escrow Agreement.
3.2 ITEMS TO BE DELIVERED AT THE CLOSING.
(a) ITEMS TO BE DELIVERED BY THE BANK. At the Closing, the
Bank shall deliver or cause to be delivered to Identity:
(i) an executed Bill of Sale in the form of
EXHIBIT 3.2(a)(i)(A) attached hereto, an Assignment of Intellectual Property
Rights in the form of EXHIBIT 3.2(a)(i)(B) attached hereto, and such other
assignments and other instruments or documents as may be requested by Identity
as necessary to effect the transfer of all the Bank's right, title and interest
in and to the Assets to Identity;
(ii) all third party consents and releases of liens
necessary for the consummation of the transactions contemplated hereby;
(iii) the Escrow Agreement and such other documents as
Identity shall reasonably request.
(b) ITEMS TO BE DELIVERED BY GEOGRAPHICS. At the Closing,
Geographics shall deliver or cause to be delivered to Identity:
(i) a copy of resolutions of the board of directors
of Geographics authorizing the execution, delivery and performance of this
Agreement by Geographics, and an executed certificate of its secretary or
assistant secretary that such resolutions were duly adopted and are in full
force and effect as of the Closing Date;
(ii) an executed certificate of Geographics, dated as
of the Closing Date, certifying that (A) all conditions and covenants which
Geographics was required to have complied with prior to the Closing have been
fulfilled and (B) all of the representations and warranties of Geographics
contained in Section 5 are true and accurate;
(iii) all third party consents and releases of liens
necessary for the consummation of the transactions contemplated hereby;
(iv) an opinion of counsel to Geographics in
substantially the form of EXHIBIT 3.2(b)(iv) attached hereto; and
(v) the Escrow Agreement and such other documents as
Identity and/or the Bank shall reasonably request.
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(c) ITEMS TO BE DELIVERED BY IDENTITY. At the Closing,
Identity shall deliver or cause to be delivered to Geographics and/or the Bank:
(i) evidence of the wire transfer referred to in
Section 2.2;
(ii) a copy of resolutions of the board of directors
of Identity authorizing the execution, delivery and performance of this
Agreement by Identity, and an executed certificate of its secretary or assistant
secretary that such resolutions were duly adopted and are in full force and
effect as of the Closing Date;
(iii) an executed certificate of Identity, dated as of
the Closing Date, certifying that (A) all conditions and covenants which
Identity was required to have complied with prior to the Closing have been
fulfilled and (B) all of the representations and warranties of Identity
contained in Section 6 are true and accurate;
(iv) an opinion of counsel to Identity in
substantially the form of EXHIBIT 3.2(c)(iv) attached hereto; and
(v) the Escrow Agreement and such other documents as
the Bank and/or Geographics shall reasonably request.
3.3 CLOSING COSTS. All sales, use or similar taxes, of any nature
whatsoever, applicable to, or resulting from, the sale and purchase of the
Assets shall be paid by Geographics, except that ad valorem personal property
taxes shall be prorated for the calendar year in which the Closing occurs as
provided in Section 2.4 above.
3.4 FURTHER ASSURANCES. On and after the Closing Date, each party
shall execute all certificates, instruments and documents and take all actions
reasonably requested by one of the other parties to effectuate the purposes of
this Agreement and to consummate and evidence the consummation of the
transactions contemplated hereby.
4. CONDITIONS TO CLOSING.
4.1 CONDITIONS PRECEDENT TO OBLIGATIONS OF IDENTITY. The
obligations of Identity to consummate the purchase of the Assets under this
Agreement is subject to the fulfillment, prior to or at the Closing, of each of
the following conditions (any or all of which may be waived solely by Identity):
(a) all representations and warranties of Geographics shall
be true and correct as of the Closing Date with the same effect as though made
again at and as of the Closing Date;
(b) Geographics shall have performed and complied with all
obligations and covenants required by this Agreement to be performed or complied
with by Geographics prior to or at the Closing;
(c) Identity shall have received, in form and substance
satisfactory to Identity and its counsel, each and every other closing document
required to be delivered to it by Geographics under this Agreement, including
without limitation, copies of all third party consents and releases of liens
required for consummation of the transactions contemplated hereby;
(d) there shall not have been commenced any action or
proceeding in state or federal court or by or before any administrative body
challenging or seeking to prevent the consummation of this Agreement, and there
shall not be in effect any injunction or restraining
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order issued by a court of competent jurisdiction in an action or proceeding
against the consummation of the sale and purchase of the Assets pursuant to
this Agreement;
(e) the transactions contemplated by this Agreement shall
have been approved by any federal, state, local and foreign governmental or
regulatory authority or self-regulatory body the approval of which is required
to permit consummation thereof,
(f) Identity shall have received a certificate dated the
Closing Date from the Secretary of Geographics as to bylaws and incumbency;
(g) Identity shall have received (i) a copy, certified by
the Secretary of State of Wyoming, of the articles of incorporation of
Geographics and (ii) a good standing certificate for Geographics from the
Secretary of State of Wyoming;
(h) there shall not have occurred any material adverse
change in the Business or Assets since September 30, 1997;
(i) all representations and warranties of the Bank shall be
true and correct as of the Closing Date with the same effect as though made
again at and as of the Closing Date;
(j) the Bank shall have performed and complied with all
obligations and covenants required by this Agreement to be performed or complied
with by the Bank prior to or at the Closing;
(k) Identity shall have received, in form and substance
satisfactory to Identity and its counsel, each and every other closing document
required to be delivered to it by the Bank under this Agreement, including
without limitation, copies of all third party consents and releases of liens
required for consummation of the transactions contemplated hereby; and
(l) Identity shall have received a copy of the Core Business
Collateral Surrender and Foreclosure Agreement executed by the Bank and
Geographics.
4.2 CONDITIONS PRECEDENT TO OBLIGATIONS OF GEOGRAPHICS. The
obligations of Geographics to consummate the purchase of the Assets under this
Agreement is subject to the fulfillment, prior to or at the Closing, of the
following condition (which may be waived solely by Geographics):
(a) settlement shall have occurred in connection with all
OfficeMax invoices credited to Identity.
4.3 CONDITIONS PRECEDENT TO OBLIGATIONS OF THE BANK. The
obligations of the Bank to consummate the purchase of the Assets under this
Agreement is subject to the fulfillment, prior to or at the Closing, of the
following condition (which may be waived solely by the Bank):
(a) Geographics has surrendered possession to the Assets to
the Bank and there is no stay under 11 USC Section 362 that would prevent the
Closing; and
(b) No party with the right to redeem the Assets under
Section 62A.9-506 has redeemed in accordance with such section prior to the
Closing.
5. REPRESENTATIONS AND WARRANTIES OF GEOGRAPHICS. Geographics
represents and warrants as follows:
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5.1 ORGANIZATION, STANDING AND AUTHORITY OF GEOGRAPHICS.
Geographics is a corporation duly organized, validly existing and in good
standing under the laws of the State of Wyoming and where the Business is now
being conducted, except where the failure to do so would not have a material
adverse effect on Geographics, and has full corporate power and authority to
enter into and perform this Agreement.
5.2 AUTHORIZATION OF AGREEMENT. On the Closing Date, the execution,
delivery and performance of this Agreement by Geographics shall have been duly
authorized by all necessary corporate action of Geographics. This Agreement
constitutes the valid and binding obligation of Geographics enforceable against
it in accordance with its terms, except as may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights in general and subject to general principles of
equity (regardless of whether such enforceability is considered in a proceeding
in equity or at law).
5.3 NO CONFLICT, CONSENTS. The execution, delivery and performance
of this Agreement by Geographics will not (i) conflict with its articles of
incorporation or by-laws; (ii) conflict with, or result in the breach or
termination of, or constitute a default under, any lease, agreement, commitment
or other instrument, or any order, judgment or decree, to which Geographics is a
party or by which any of its properties is bound, except for any conflicts,
breaches, terminations or defaults that would not in the aggregate have a
material adverse effect on Geographics' ability to consummate the sale of the
Assets or on the Business; (iii) violate any law or regulation applicable to
Geographics the enforcement of which would have a material adverse effect on
Geographics' ability to consummate the sale of the Assets pursuant to this
Agreement or on the Business; or (iv) result in the creation of any lien, charge
or encumbrance upon any of the Assets other than liens, charges or encumbrances
that do not in the aggregate materially detract from the value of, or materially
interfere with, the Business. No consent, approval or authorization of, or
designation, declaration or filing with, any governmental authority is required
on the part of Geographics in connection with the execution, delivery and
performance of this Agreement.
5.4 FINANCIAL STATEMENTS. The unaudited statements of assets,
liabilities, revenue, direct labor costs and direct material purchases for the 6
month period ended on September 30, 1997 of the Business, a copy of which is
included in SCHEDULE 5.4 (the "Financial Statement"), accurately represents the
financial position and the results of operations of the Business as at such date
and for the period then ended. Geographics makes no representation as to, and
expressly disclaims, any forecast of future results, whether verbal or written.
5.5 ABSENCE OF CERTAIN LIABILITIES AND CHANGES. Since the date of
the Financial Statement and other than the voluntary transfer of the Assets to
the Bank, there has not been any material adverse change in the Assets or in the
financial condition, business or results of operations of Geographics. Without
limiting the foregoing, since the date of the Financial Statement, there has not
occurred any:
(a) sale, mortgage, encumbrance, lease, license or other
disposition of any of the Assets, except for sales of inventory in the ordinary
course of business;
(b) damage, destruction or loss affecting the Assets; or
(c) any incurrence of indebtedness or other liabilities
other than trade payables in the ordinary course of business.
5.6 TITLE TO ASSETS. Geographics has good title to the Assets, free
and clear of any and all liens, claims and encumbrances other than (i) the
Bank's security interest and interests junior thereto; (ii) minor imperfections
of title, if any, that are not substantial in
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character, amount or extent and do not materially detract from the value of
the property subject thereto, or materially interfere with the manner in
which it is currently being used by the Business, or materially impair the
operations of the Business and (iii) taxes and general and special
assessments not in default and payable without penalty or interest.
5.7 CONDITION OF ASSETS. The Assets constitute all of the property,
plant and equipment necessary for the manufacture of the products sold in the
Business as currently conducted. The Inventory is of a quantity and quality
usable in the ordinary course of business. The Equipment is useful in the
conduct of the Business and is in good condition and working order, except for
(i) normal wear and tear and (ii) obsolete items or items below standard quality
as to which appropriate provision has been made on the books of the Business in
accordance with generally accepted accounting principles.
5.8 INTELLECTUAL PROPERTY RIGHTS. SCHEDULE 5.8 lists all
trademarks, service marks, service names, trade names, design rights, patents,
copyrights, trade secrets, inventions, processes, formulae, and other
intellectual property rights (collectively, the "Intellectual Property") which
are owned, used or licensed by Geographics and used in the Business except that
Intellectual Property shall specifically exclude Seller's intellectual property
rights to the Prism design and the Colorlights trademark. To Geographics'
knowledge, except as set forth in SCHEDULE 5.8, none of the Intellectual
Property conflicts with or infringes in any material respect any United States,
Canadian or Australian proprietary right of any third party, and no one has
asserted a claim against Geographics alleging any such conflict or infringement.
5.9 TAXES. Geographics has timely filed with the appropriate
governmental agencies all tax returns and reports required to have been filed by
Geographics on or before the Closing Date. Geographics has paid or adequately
reserved for all taxes, interest and other governmental charges which have
become due pursuant to such returns and all other taxes, interest and
governmental charges which have become due and payable on or before the Closing
Date. To the best of Geographics' knowledge, there are no audit examination,
deficiency, refund litigation or matter in controversy with respect to which an
adjustment to any tax item has been asserted in writing, except as set forth in
SCHEDULE 5.9.
5.10 CONTRACTS. SCHEDULE 5.10 contains a list of all Contracts,
including without limitation contracts, understandings, licenses or leases
(written and oral) that are material to the Assets or the Business, including
(a) all commitments and agreements for the purchase of any materials or supplies
that involve an expenditure by Geographics of more than $25,000 for any one
contract; (b) all leases and other rental agreements under which Geographics is
either lessor or lessee that involve annual payments or receipts of $25,000 or
more; and (c) all other orders, leases, commitments, agreements, instruments
(including but not limited to mortgages, indentures and other agreements and
instruments relating to indebtedness for borrowed money) to which Geographics is
a party or by which it or the Assets are bound that require a payment by
Geographics of more than $25,000. Geographics has provided Identity with copies
of all material written Contracts. To the best of Geographics' knowledge, all
Contracts are valid and binding and in full force and effect, except as noted in
SCHEDULE 5.10. Neither Geographics nor, to Geographics' knowledge, any other
party to such Contracts is in default, nor to the knowledge of Geographics is
there any basis for any claim of default.
5.11 EMPLOYEE MATTERS. Geographics is not a party to or bound by any
employment agreement or any collective bargaining or other labor agreement, or
any pension, retirement, stock option, stock purchase, savings, profit sharing,
deferred compensation, retainer, consultant, bonus, group insurance or other
incentive or welfare contract, plan or arrangement relating to the Business
except as set forth on SCHEDULE 5.11 (the "Plans"). Except as set forth on
SCHEDULE 5.11, Geographics has (and upon consummation of the transactions
contemplated by this Agreement will have) no liability with respect to the
applicable provisions of the Employee
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Retirement Income Security Act of 1974, as amended ("ERISA"), any other
similar federal or state statute, or under the Plans to the Pension Benefit
Guarantee Corporation. None of the Plans is a "multiemployer plan" as
defined in Section 4001(a)(3) of ERISA. Except as set forth on SCHEDULE
5.11, to the best knowledge of Geographics, Geographics has complied with
respect to the Plans in all material respects with the reporting and
disclosure requirements of ERISA.
5.12 LITIGATION; COMPLIANCE WITH LAWS. There are no judicial or
administrative actions, proceedings or investigations pending or, to the best of
Geographics' knowledge, threatened against Geographics, the Assets or the
Business or that would enjoin, restrain, condition or prohibit consummation of
this Agreement or any of the transactions contemplated herein, or which, if
adversely determined, would have a material adverse effect upon the Business
except as set forth on SCHEDULE 5.12. (i) Geographics is not in violation of any
applicable law, regulation, ordinance, or any other applicable requirement of
any governmental body or court, including, without limitation, antitrust,
environmental and securities laws, which violation would have a material adverse
effect upon the Business (ii) no notice has been received by Geographics
alleging any such violation and (iii) Geographics is not aware of any allegation
of any such violation.
5.13 INSURANCE. Geographics maintains and will maintain through the
Closing Date levels of coverage under policies of insurance now in effect and
which Geographics believes to be adequate with respect to the Business and the
Assets. SCHEDULE 5.13 sets forth all such policies of insurance which are in
effect with respect thereto.
5.14 FOREIGN SALES. To Geographics' knowledge, part 1 of
SCHEDULE 5.14 lists all sales by Geographics' foreign subsidiaries and
affiliates for each of 1996 and 1997 (through October 31), categorized to
provide monthly dollar equivalent and unit sales by product and customer for
each such year. Part 2 of SCHEDULE 5.14 sets forth current selling prices for
each product by customer and current rebates, advertising and/or other similar
allowances, if any, for each customer.
5.15 DISCLOSURE. (a) No representation or warranty made by
Geographics in this Agreement or any document delivered pursuant hereto or in
connection herewith omits to state a material fact necessary to make the
statements contained herein or therein not misleading.
(b) There is no fact known to Geographics (other than
general economic or industry conditions) that may materially adversely affect
the Assets or the Business that has not been disclosed in this Agreement.
6. REPRESENTATIONS AND WARRANTIES OF IDENTITY. Identity represents
and warrants as follows:
6.1 IDENTITY'S ORGANIZATION. Identity is a corporation duly
organized, validly existing and in good standing under the law of the State of
Tennessee and has the full corporate power and authority to enter into and to
perform this Agreement.
6.2 AUTHORIZATION OF AGREEMENT. The execution, delivery and
performance of this Agreement by Identity have been duly authorized by all
necessary corporate action of Identity and this Agreement constitutes the valid
and binding obligation of Identity enforceable against it in accordance with its
terms, except as may be limited by bankruptcy, insolvency or other similar laws
affecting the enforcement of creditors' rights in general and subject to general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law).
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6.3 NO CONFLICT, CONSENTS. The execution, delivery and performance
of this Agreement by Identity will not (i) conflict with its charter or by-laws;
(ii) conflict with, or result in the breach or termination of, or constitute a
default under, any lease, agreement, commitment or other instrument, or any
order, judgment or decree, to which Identity is a party or by which any of its
properties is bound, except for any conflicts, breaches, terminations or
defaults that would not in the aggregate have a material adverse effect on
Identity's ability to consummate the purchase of the Assets; or (iii) violate
any law or regulation applicable to Identity the enforcement of which would have
a material adverse effect on Identity's ability to consummate the purchase of
the Assets pursuant to this Agreement. No consent, approval or authorization
of, or designation, declaration or filing with, any governmental authority is
required on the part of Identity in connection with the execution, delivery and
performance of this Agreement.
6.4 LITIGATION. There are no judicial or administrative actions,
proceedings or investigations pending or, to the best of Identity's knowledge,
threatened against or with respect to Identity that question the validity of
this Agreement or any action taken or to be taken by Identity in connection with
this Agreement or that, if adversely determined, would have a material adverse
effect upon Identity's ability to perform its obligations under this Agreement.
7. REPRESENTATIONS AND WARRANTIES OF THE BANK.
7.1 THE BANK'S ORGANIZATION. The Bank is a national banking
association duly organized and validly existing and has the full corporate power
and authority to enter into and to perform this Agreement and the Foreclosure.
7.2 AUTHORIZATION OF AGREEMENT. The execution, delivery and
performance of this Agreement by the Bank and the taking of possession of the
Assets from Geographics have been duly authorized by all necessary corporate
action of the Bank and this Agreement constitutes the valid and binding
obligation of the Bank enforceable against it in accordance with its terms,
except as may be limited by bankruptcy, insolvency or other similar laws
affecting the enforcement of creditors' rights in general and subject to general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law).
7.3 FIRST PRIORITY LIEN AND POSSESSION OF ASSETS. The Bank warrants
and represents that, subject to the conditions stated below: (i) it has a
valid, perfected, security interest in the Assets, which is senior to any other
interest in the Assets arising under Article 9 of the Uniform Commercial Code
("UCC") as adopted in the State of Washington; and (ii) the Assets hereby
transferred are the collateral of the Bank pursuant to such security interests;
and (iii) it has effectively taken possession of the Assets in full compliance
with Article 9 of the UCC as adopted in Washington; and (iv) it is making
disposition to Identity pursuant to and in full compliance with the private sale
provisions of UCC Section 9-504, as adopted in Washington, including without
limitation the notice provisions thereof, and, accordingly, to the extent
Identity is a good faith purchaser for value, Identity is acquiring all of the
rights provided in such Sections to a good faith purchaser for value.
Notwithstanding the foregoing, the transfer and sale provided herein, and the
above warranties and representations shall apply to the Assets only to the
extent that: (a) a security interest in the Assets was capable of being created
through the execution and delivery of one or more security agreements (assuming
the existence of the conditions otherwise required for the creation of a
security interest under Article 9 of the UCC as adopted in Washington); and
(b) such security interest was capable of being perfected by appropriate filings
being made in the filing offices of the appropriate offices in Washington; and
(c) with respect to assets such as contract rights, personal property leases and
licenses, repossession, foreclosure and sale under UCC Section 9-504 may be
accomplished without prior notice to the parties (other than Geographics) to
such contracts, leases and licenses.
8. FURTHER COVENANTS OF THE PARTIES.
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8.1 ACCESS TO INFORMATION. From the date of this Agreement to and
including the Closing Date, Geographics shall (a) give to Identity and its
counsel, accountants and other representatives reasonable access during normal
business hours to examine and make copies of all books, agreements, records,
files and documents relating exclusively to the Business and the Assets and
(b) cause its employees, officers, attorneys and accountants to furnish such
additional information with respect to the Business and the Assets as Identity
may reasonably request.
8.2 COOPERATION. From the date of this Agreement to and including
the Closing Date, each party shall cooperate with the other parties and such
other parties' counsel and accountants in connection with any steps required to
be taken as part of its obligations under this Agreement. Each party shall use
its best efforts to cause all conditions to the parties' obligations to effect
the Closing under this Agreement to be satisfied and to obtain all consents and
approvals necessary for the due and punctual performance of this Agreement and
for the satisfaction of the conditions hereof.
8.3 CONDUCT OF THE BUSINESS PENDING THE CLOSING. From the date of
this Agreement to and including the Closing Date, except as otherwise permitted
in SCHEDULE 8.3, Geographics shall operate the Business in the ordinary course
and so as to maintain the value of the Business and the Assets. Without
limiting the generality of the foregoing, from the date of this Agreement to and
including the Closing Date Geographics shall not (a) transfer, sell or dispose
of the Assets to or on account of any person, (b) make any changes (whether by
sale, destruction, pledge, lease or otherwise) in or with respect to the Assets
or (c) establish or adopt any employee benefit plan, or pay any bonus or similar
payment to, or increase the compensation of any employee of the Business in each
case except in the ordinary course of business.
8.4 USE OF PACKAGING MATERIAL. Identity shall have the right to use
in the ordinary conduct of the Business after the Closing all existing packaging
and printed materials included in the Assets. Identity also shall have the
right to reorder similar packaging and printed materials to meet its needs
during the ninety days after the Closing. Geographics hereby grants to Identity
a limited, non-exclusive right to use any of Geographics' trademarks and
tradenames, except the Colorlights trademark, which appear on any such presently
existing or reordered packaging and materials in the ordinary course of business
for two years after the Closing. Identity shall have a limited use of the Prism
design exclusively in the Retail Sign portion of the Business until all
inventory existing as of the Closing possessing the Prism design is depleted.
8.5 ADVICE OF CLAIMS. From the date of this Agreement to and
including the Closing Date, Geographics shall promptly advise Identity of the
commencement or notice of any material litigation or proceeding affecting the
Business or the Assets of which Geographics has knowledge.
8.6 NOTICE BY IDENTITY. From the date of this Agreement to and
including the Closing Date, Identity shall promptly advise Geographics of any
material adverse change in, or any event (other than one generally known to the
public) that is reasonably foreseeable may have a material adverse effect on,
Identity or that would impair Identity's ability to perform its obligations
under this Agreement.
8.7 PUBLICITY. None of the parties hereto shall issue any press
release or public announcement of any kind concerning this Agreement or the
transactions contemplated hereby without the prior written consent of the other
parties.
8.9 PRESERVATION OF RECORDS. Identity agrees that it shall preserve
and keep the records of the Business acquired by it pursuant to this Agreement
for a period consistent with its customary practice of record retention, or for
any longer period as may be required by any government agency or ongoing
litigation, and shall make such records available to Geographics
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as may be reasonably required by Geographics in connection with, among other
things, any insurance claims by, legal proceedings against or governmental
investigations of Geographics or in connection with any tax examination of or
preparation of a tax return by Geographics. In particular, Identity will
permit Geographics to have full access at any reasonable time and on
reasonable notice for one year after the Closing Date, to all tax returns and
supporting papers therefore acquired from Geographics relating to the
Business.
8.10 TERMINATION FEE. In the event that this Agreement is terminated
by Geographics pursuant to Section 11.1(e) below, and, on or before May 6, 1998,
Geographics has entered into a definitive agreement with respect to such a
Superior Offer (as defined in Section 8.12 below), Geographics shall immediately
pay to Identity a termination fee of $500,000 as compensation for Identity's
efforts in connection with the Acquisition.
8.11 BROKERS. Each of the parties shall be solely responsible for
its respective costs and expenses of any broker or finder retained by it in
connection with the transactions contemplated by this Agreement.
8.12 NO SOLICITATION. Neither the Bank nor Geographics will
(i) initiate, solicit, or encourage, directly or indirectly, any inquiries or
the making of any proposals that constitutes or is reasonably likely to lead to,
any Acquisition Proposal (as hereinafter defined), (ii) engage in negotiations
or discussions with any third party relating to an Acquisition Proposal, or
(iii) enter into any agreement with respect to any Acquisition Proposal.
Notwithstanding anything to the contrary contained herein, Geographics and its
Board of Directors may participate in discussions or negotiations with, or
furnish information to, any third party making an unsolicited Acquisition
Proposal (a "Potential Acquiror") if Geographics' Board of Directors is advised
by its financial advisor that such Potential Acquiror is reasonably financially
capable of consummating the Acquisition Proposal, and the Board determines in
good faith (A) after receiving advice from its financial advisor that such
Acquisition Proposal is a Superior Proposal (as defined below), and (B) based
upon the advice of outside legal counsel, that the failure to participate in
such discussions or negotiations or to approve an Acquisition Proposal would
violate the Board's fiduciary duties under applicable law. For purposes of this
Agreement, "Acquisition Proposal" shall mean any bona fide proposal, whether in
writing or otherwise, made by a third party to acquire all or a material portion
of the Business, pursuant to a merger, consolidation or other business
combination, sale of shares of capital stock, sale of assets, tender offer,
exchange offer or any similar transaction, including any single or multiple step
transaction or series of related transactions. The term "Superior Proposal"
means any "Acquisition Proposal" which the Board of Directors determines in good
faith to be more favorable to Geographics and its stockholders than the purchase
and sale pursuant to the terms of this Agreement (based on the advice of
Geographics' financial advisor that the value of the consideration provided for
in such proposal is superior to the value of the consideration provided for
herein), which, in the good faith reasonable judgment of the Board of Directors,
after receiving advice from its financial advisor, is reasonably capable of
being financed by such third party.
8.13 POST-CLOSING COOPERATION. After the Closing, without further
consideration: Geographics and the Bank shall take all such further actions and
execute, acknowledge and deliver all such further consents and other documents
as Identity may reasonably request to facilitate or effect the transactions
contemplated by this Agreement, including without limitation and such further
acts, deeds, transfers, conveyances, assignments, powers of attorney or
assurances as may be required to transfer, assign, convey and grant to Identity
all of the Assets in accordance with the terms hereof.
8.14 POST-CLOSING CUSTOMER ORDERS. (a) Geographics shall transmit
to Identity, promptly upon receipt, any customer orders for products relating
to the Business received by Geographics after the Closing Date.
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(b) With respect to any customer orders which are received by
Geographics electronically or otherwise prior to conversion of customer
ordering procedures to reflect sale of the Business to Identity, Geographics
will promptly transmit such orders to Identity for completion. During the
Transition Period, if requested by Identity, the products will be shipped and
invoiced to the customer by Geographics. Identity shall invoice Geographics
daily (or at such other intervals not more frequently than daily) as Identity
may elect and each invoice shall be payable in full not later than 45 days
after the invoice date.
8.15 POST-CLOSING PAYMENTS. After the Closing, Geographics shall
promptly remit to Identity any payments received for products relating to the
Business shipped after the Closing.
8.16 BASIC ASSUMPTIONS. Identity and Geographics shall comply with
the additional procedures and plans of action specified on SCHEDULE 8.16 in
connection with the treatment of transactions occurring subsequent to the
Inventory Date and to the extent that the terms hereunder conflict with such
SCHEDULE 8.16, SCHEDULE 8.16 shall control.
9. INDEMNIFICATION AND RELATED MATTERS.
9.1 INDEMNIFICATION.
(a) Geographics agrees to indemnify, defend and hold
Identity harmless from and against any and all liabilities, losses, damages,
costs and expenses, including reasonable attorneys' fees, incurred by Identity
resulting from any of the following: (i) a breach of any of the representations
and warranties of Geographics contained in this Agreement or in any written
statement, agreement or certificate delivered to Identity in connection with
this Agreement or the transactions contemplated hereby, (ii) any breach of any
covenants or agreements made by Geographics in this Agreement, (iii) any
liabilities and obligations of Geographics, except for obligations under
executory contracts expressly assumed by Identity, (iv) the conduct of the
Business, or any occurrence in connection with the Assets, prior to the Closing,
including any injury or damage to person or property resulting or arising from
products manufactured or sold by Geographics, (v) failure by Geographics to
comply with any applicable bulk sales law, (vi) any damages incurred by Identity
as a result of a breach by Geographics of Section 5.6 hereof and in connection
with any claim of a security interest senior to the Bank in the Assets
transferred to Identity hereunder, (vii) any costs or expenses related to
employees of Geographics or the Business, including without limitation any
severance or separation costs, except those costs reimbursed pursuant to
Section 1.7 hereof, or (viii) any liability associated with the litigation
identified on SCHEDULE 5.12; (all of the foregoing being collectively referred
to as "Geographics' Indemnified Liabilities") provided, however, that
Geographics shall not have any liability under this Section 9.1(a) until
Geographics' Indemnified Liabilities exceed in the aggregate $25,000, and then
only for the amount by which such Liabilities exceed $25,000; provided, however,
that the aggregate amount of Geographics' Indemnified Liabilities under this
Section 9.1(a) shall in no event exceed the Purchase Price. Notwithstanding the
foregoing, subsection (vi) above is not subject to the $25,000 basket. Any
amounts payable by Geographics pursuant to this Section 9.1(a) shall be net of
insurance proceeds, if any, received by Identity in respect of Geographics'
Indemnified Liabilities.
(b) Identity agrees to indemnify, defend and hold
Geographics harmless from and against any and all liabilities, losses, damages,
costs and expenses, including reasonable attorneys' fees, incurred by
Geographics resulting from any of the following: (i) a breach of any of the
representations and warranties of Identity contained in this Agreement or in any
written statement, agreement or certificate delivered to Geographics in
connection with this Agreement or the transactions contemplated hereby, (ii) any
breach of any covenants or agreements made by Identity in this Agreement,
(iii) any gross negligence or willful misconduct by Identity in managing the
Business during the Transition Period, or (iv) the conduct of Identity's
business
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after the Closing, or Identity's ownership or use of the Assets after the
Closing (other than injury or damage to person or property resulting or
arising from products manufactured or sold by Geographics or claims asserting
that the sale of the Assets to Identity was in violation of applicable legal
requirements) (all of the foregoing being collectively referred to as
"Identity's Indemnified Liabilities"); provided, however that Identity shall
not have any liability under this Section 9.1(b) until Identity's Indemnified
Liabilities exceed in the aggregate $25,000, and then only for the amount by
which such Liabilities exceed $25,000; provided, however that the aggregate
amount of Identity's Indemnified Liabilities under this Section 9.1(b) shall
in no event exceed the Purchase Price. Any amount payable by Identity
pursuant to this Section 9.1(b) shall be net of insurance proceeds, if any,
received by Geographics in respect of Identity's Indemnified Liabilities.
(c) The Bank agrees to indemnify, defend and hold Identity
harmless from and against any and all liabilities, losses, damages, costs and
expenses, including reasonable attorneys' fees, incurred by Identity resulting
from any of the following: (i) a breach of any of the representations and
warranties of the Bank contained in this Agreement or in any written statement,
agreement or certificate of the Bank delivered to Identity in connection with
this Agreement or the transactions contemplated hereby, (ii) any breach of any
covenants or agreements made by the Bank in this Agreement, (iii) any failure or
alleged failure by the Bank to comply with any applicable legal requirements
including without limitation Article 9 of the RCW, in connection with the
perfection of its security interest in the Assets, the taking of possession of
the Assets by the Bank, or the sale of the Assets to Identity as contemplated by
this Agreement or (iv) any damages incurred by Identity as a result of a breach
of Section 7.3 hereof and in connection with any claim of a security interest
superior to the Bank in the Assets transferred to Identity hereunder.
Notwithstanding the foregoing, the Bank's aggregate liability hereunder shall be
limited to the net Purchase Price received by the Bank.
(d) Identity agrees to indemnify, defend and hold the Bank
harmless from and against any and all liabilities, losses, damages, costs and
expenses, including reasonable attorneys' fees, incurred by the Bank resulting
from any of the following: (i) a breach of any of the representations and
warranties of Identity contained in this Agreement or in any written statement,
agreement or certificate of Identity delivered to the Bank in connection with
this Agreement or the transactions contemplated hereby and (ii) any breach of
any covenants or agreements made by Identity in this Agreement. Notwithstanding
the foregoing, Identity's aggregate liability hereunder shall be limited to the
net Purchase Price received by the Bank.
9.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations
and warranties of Geographics, Identity or the Bank contained in this Agreement
or any written statement, certificate, instrument, schedule or other document
delivered pursuant hereto shall survive the Closing until the expiration of
three years from the Closing Date and any claim based upon said representations
and warranties shall thereupon be of no further force and effect, except to the
extent the claiming party shall have asserted in writing a specific claim prior
to the expiration of such rights, in which event the other party shall remain
liable with respect to such claim. Identity acknowledges and agrees that it has
been furnished with or given adequate access to such information about the
Equipment as it shall have requested and that it has made its own investigation
into, and based thereon it has formed an independent judgment concerning, the
Equipment. It is therefore expressly understood and agreed that, except as
otherwise specifically set forth Section 5.6 and 5.7, Identity accepts the
condition of the Equipment "AS IS, WHERE IS" and Geographics makes no
representations, warranties or guarantees as to the condition, size, extent,
quantity, type or value of the Equipment.
9.3 CLAIMS PROCEDURE. If a party (the "Indemnified Party") is
threatened in writing with any claim, or any claim is presented in writing to or
any action or proceeding formally commenced against such party, which may give
rise to the right of indemnification hereunder (a "Claim"), the Indemnified
Party shall promptly give written notice thereof
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(specifying in reasonable detail the basis for the Claim and, to the extent
known, the amount thereof) to the other party (the "Indemnifying Party").
The Indemnifying Party shall have the right, at its sole cost and expense, to
participate, and, to the extent the Indemnifying Party so desires, assume the
defense of such Claim with counsel mutually satisfactory to the parties upon
prompt notice to the Indemnified Party of its intent to defend such Claim.
If the Indemnified Party requests in writing that such Claim not be
contested, then it shall not be contested but shall not be covered by the
indemnities provided herein. The Indemnifying Party may settle a Claim which
it has duly elected to contest without the consent of the Indemnified Party
unless such settlement will have a material adverse effect upon the
Indemnified Party, in which case such Claim shall be settled only with the
consent of the Indemnified Party. In the event that the Indemnified Party
unreasonably declines to consent to such settlement, then the Indemnified
Party shall have no right to indemnification beyond the amount of the
proposed settlement. The Indemnified Party shall cooperate with the
Indemnifying Party in the defense of any Claim, including, without
limitation, by making records available to the Indemnifying Party and its
legal counsel and permitting interview, depositions and testimony at trial of
the Indemnified Party's employees. The Indemnifying Party shall keep the
Indemnified Party fully informed regarding the progress and status of any
Claim. In the event the Indemnified Party fails to follow the claim
procedure specified in this Section 9.3 with respect to a Claim by any third
party against the Indemnified Party, such failure shall not relieve the
Indemnifying Party from liability hereunder except and solely to the extent
the Indemnifying Party shall have been actually prejudiced as a result of
such failure.
10. CONFIDENTIALITY.
The obligations of the parties set forth in that certain Confidentiality
Agreement dated July 11, 1997 between Geographics and Identity shall survive the
execution and performance of this Agreement.
11. TERMINATION.
11.1 TERMINATION EVENTS. This Agreement may, by notice given prior
to or at the Closing, be terminated:
(a) by Identity, the Bank or Geographics if a material breach of
any provision of this Agreement that materially adversely affects such party
has been committed by one of the other parties and such breach has not been
waived;
(b) by Identity if any of the conditions in Section 4.1 has not
been satisfied as of the Closing Date or if satisfaction of such a condition
is or becomes impossible (other than through the failure of Identity to
comply with its obligations under this Agreement) and Identity has not waived
such condition on or before the Closing Date;
(c) by mutual consent of Identity, Geographics and the Bank; or
(d) by Identity if the Closing has not occurred (other than
through the failure of any party seeking to terminate this Agreement to
comply fully with its obligations under this Agreement) on or before May 6,
1998, or such later date as the parties may agree upon;
(e) by the Bank if Geographics commences, or there is commenced
against Geographics, a bankruptcy, reorganization, insolvency, receivership
or similar proceeding.
11.2 EFFECT OF TERMINATION. Each party's right of termination under
Section 11.1 is in addition to any other rights it may have under this Agreement
or otherwise, and the exercise of a right of termination will not be an election
of remedies. If this Agreement is
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terminated pursuant to Section 11.1, all further obligations of the parties
under this Agreement will terminate, except that the obligations in Section
8.10 and Section 9 will survive; provided that if this Agreement is
terminated by a party hereto because of the breach of the Agreement by any
other party or because one or more of the conditions to the terminating
party's obligations under this Agreement is not satisfied as a result of any
other party's failure to comply with its obligations under this Agreement,
the terminating party's right to pursue all legal remedies will survive such
termination unimpaired.
12. MISCELLANEOUS.
12.1 NOTICES. All notices, demands and other communications called
for or required by this Agreement shall be in writing and shall be addressed to
the parties at their respective addresses stated below or to such other address
as a party may subsequently designate by ten (10) days' advance written notice
to the other parties. Communications hereunder she be deemed to have been
received (i) upon delivery in person, (ii) five (5) days after mailing by U.S.
certified mail, return receipt requested and postage prepaid, (iii) the second
business day after depositing it with a commercial overnight carrier which
provides written verification of delivery or (iv) the day of transmission by
telefacsimile if sent before 2:00 p.m. recipient's time provided that a copy of
such notice is sent on the same day by U.S. certified mail, return receipt
requested and postage prepaid, with an indication that the original was sent by
facsimile and the date of its transmittal:
To: Geographics, Inc.
Attention: Ronald S. Deans
1555 Odell Road, P.O. Box 1750
Blaine, WA 98231
Phone: (360) 332-6711
Facsimile: (360) 332-6352
To: Identity Group, Inc.
Attention: Donald J. Polak
1480 Gould Drive
Cookeville, TN 38506
Phone: (931) 432-4000
Facsimile: (931) 432-6477
To: U.S. Bank National Association
Attention: Roger Lundeen
Special Assets Group
U.S. Bank National Association
111 Southwest 5th Avenue, Suite 810
Portland, OR 97208
Phone: (503) 275-6756
Facsimile: (503) 275-5923
12.2 FULL UNDERSTANDING. In executing this Agreement, each member of
each party fully, completely and unconditionally acknowledges and agrees that it
(a) has had an equal opportunity to participate in drafting of this Agreement,
(b) has consulted with and had the advice and counsel of a duly licensed and
competent attorney and that it has executed this Agreement after independent
investigation, voluntarily and without fraud, duress or undue influence,
(c) expressly consents that this Agreement be given full force and effect
according to
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each and every of its express terms and provisions and (d) agrees that no
ambiguity shall be construed against any party based upon a claim that such
party drafted the applicable language.
12.3 ENTIRE AGREEMENT. This Agreement and all schedules and exhibits
hereto contain all of the terms and conditions agreed upon by the parties
relating to the subject matter hereof and supersede and cancel all prior
agreements, negotiations, correspondence, undertakings, communications and
understandings of the parties, whether written or oral, respecting that subject
matter other than the Confidentiality Agreement referred to in Section 10
hereof.
12.4 MODIFICATION. No waiver or modification of this Agreement or
any provision contained herein shall be valid unless in writing and duly
executed by all parties hereto.
12.5 NO WAIVER. Failure or delay on the part of any party in
exercising any rights, power or privileges under this Agreement shall not be
deemed a waiver of any exercise of any right, power or privilege.
12.6 CAPTIONS AND CONSTRUCTION. Captions in this Agreement are for
the convenience of the reader and are not to be considered in the interpretation
of the terms of this Agreement.
12.7 SURVIVAL. Neither the investigation by a party or the
acceptance of delivery of property hereunder shall constitute a waiver of any
covenant, representation, warranty, agreement, obligation or undertaking of a
party hereunder, and the same shall survive and continue after the date hereof.
12.8 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Washington, without regard
to its conflict of laws principles.
12.9 EXPENSES. Each of the parties shall pay its respective
expenses, costs and fees (including, without limitation, attorneys' and
accountants' fees) incurred in connection with the negotiation, preparation,
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby.
12.10 EXECUTION IN COUNTERPARTS. This Agreement may be executed in
one or more counterparts, all of which shall be considered one and the same
agreement, and shall become a binding agreement when one or more counterparts
have been signed by each of the parties and either original or facsimile
counterparts have been delivered to the other party.
12.11 INVALID PROVISIONS. If any one or more provisions of this
Agreement, or the applicability of any such provision to a specific situation,
shall be held invalid or unenforceable, such provision shall be modified to the
minimum extent necessary to make it or its application valid and enforceable,
and the validity and enforceability of all other provisions of this Agreement
and all other applications of any such provisions shall not be affected thereby.
12.12 TIME OF THE ESSENCE. Time is of the essence in the performance
of each of the terms hereof with respect to the obligations and rights of each
party hereto.
12.13 BINDING EFFECT, ASSIGNMENT, NO THIRD PARTY RIGHTS. None of the
parties shall assign or delegate or in any way transfer any rights, interests or
obligations hereunder without the prior written consent of the other party;
provided, however, that no such consent shall be required for Identity to assign
part or all of its rights and duties hereunder to a subsidiary of Identity but
no such assignment by Identity of its rights hereunder shall relieve Identity of
any of
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its obligations under this Agreement. Subject to the foregoing restrictions,
this Agreement shall be binding upon and inure to the benefit of each of
Identity, Geographics, the Bank and their respective successors and assigns.
Nothing expressed or referred to in this Agreement will be construed to give
any person or entity other than Geographics, Identity and the Bank any legal
or equitable right, remedy, or claim under or with respect to this Agreement.
12.14 ARBITRATION. Any dispute, controversy or claim arising out of,
relating to, or in connection with this Agreement shall be finally settled by
binding arbitration before a single arbitrator in accordance with the Commercial
Arbitration Rules of the American Arbitration Association ("AAA") in effect at
the time of the arbitration, or other such rules as mutually agreed. The
arbitration shall be conducted in Chicago, Illinois, unless the Bank is a party
thereto in which case arbitration shall be held in Portland, Oregon.
The arbitrator shall permit such discovery as he or she determines is
appropriate in the circumstances, taking into account the needs of the parties
and the desirability of making discovery expeditions and cost effective. The
arbitrator's award shall be in writing, shall set forth the findings and
conclusions upon which the arbitrator based the award, and shall be final and
binding on the parties. The arbitrator will have the authority to grant any
equitable and legal remedies that would be available in any judicial proceeding
instituted to resolve a dispute, controversy or claim hereunder. Each party
will bear its own costs and expenses in connection with any arbitration and 50%
of the compensation to be paid to the arbitrator except that the arbitrator, in
its sole discretion, may award reasonable attorney's fees to the prevailing
party. Judgment upon the arbitrator's award may be entered in any federal or
state court having jurisdiction thereof or having jurisdiction over the parties
or their assets.
Nothing contained in this Section 12.14 shall be construed to limit or
preclude a party from bringing any action in any court of competent jurisdiction
for injustice or other provisional relief to compel another party to comply with
its obligations under this Agreement during the pendency of the arbitration
proceedings.
12.15 NON-COMPETITION. Geographics covenants and agrees that for a
period of five (5) years following the Closing, Geographics shall not, directly
or indirectly, in the United States of America, Australia, Canada or in any
other country of the world in which the Geographics has done business at any
time during the last three (3) years prior to the Closing, engage, whether as
principal or as agent, alone or in association with any other Person in a
Competing Business. For purposes of this Agreement, the term "Competing
Business" shall mean any person, corporation or other entity which sells or
attempts to sell any products or services which are the same or substantially
similar to the products sold by Geographics at any time and from time to time
during the last three (3) years prior to the Closing in connection with the
Business. Identity acknowledges and agrees that products or services currently
offered for sale by Geographics' paper products business segment, and products
and services that are substantially similar to those currently offered for sale
by the Geographics' paper products business segment, (including, without
limitation, the products currently known as geoposterboard, geopostersign and
retailsign) are not competing products. Identity further agrees that it will
not use the trademarks and tradenames purchased hereunder on paper products
which are substantially similar to paper products sold by Geographics.
Geographics further agrees that after the Closing it will not, directly or
indirectly, purchase for resale any products of Identity with out Identity's
prior consent in each instance.
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IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first set forth above.
GEOGRAPHICS, INC.
By: /s/ Ronald S. Deans
---------------------------
Name: Ronald S. Deans
Title: President
IDENTITY GROUP, INC.
By: /s/ Donald J. Polak
---------------------------
Name: Donald J. Polak
Title: President/CEO
U.S. BANK NATIONAL ASSOCIATION
By: /s/ Roger C. Lundeen
---------------------------
Name: Roger C. Lundeen
Title: Vice President
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ESCROW AGREEMENT
THIS ESCROW AGREEMENT made as of this 4th day of May, 1998, by and
among Identity Group, Inc., a Tennessee corporation ("Identity"),
Geographics, Inc., a Wyoming corporation ("Geographics"), U.S. Bank National
Association, a national banking association (the "Bank") and Lawyers Title
Insurance Corporation, a Virginia corporation, as escrow agent (the "Escrow
Agent").
WITNESSETH
WHEREAS, Identity, Geographics and the Bank have entered into that
certain Amended and Restated Asset Purchase Agreement, dated as of May 4,
1998 (the "Agreement"); and
WHEREAS, pursuant to the Agreement, Identity has agreed to place
$200,000 in escrow, and Escrow Agent has agreed to accept, hold and disburse
such funds under the terms and conditions set forth herein;
WHEREAS, capitalized terms used herein but not otherwise defined,
shall have the meanings ascribed to such terms in the Agreement;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained and intending to be legally bound, the parties
hereto agree as follows:
1. APPOINTMENT OF ESCROW AGENT AND ACCEPTANCE BY ESCROW AGENT.
Identity, the Bank and Geographics hereby appoint Escrow Agent to serve as
escrow agent for purposes of the Agreement and Escrow Agent hereby accepts
the appointment as escrow agent hereunder and agrees to act on the terms and
conditions hereinafter set forth.
2. ESCROW FUND. Identity shall deliver or cause to be delivered
to Escrow Agent $200,000 pursuant to and subject to the terms and conditions
of the Agreement, and upon receipt of such amounts Escrow Agent shall
acknowledge receipt of such amounts and agrees to hold and disburse said
amounts and interest and income earned thereon (collectively, the "Escrow
Fund") in accordance with the terms and conditions of this Escrow Agreement
and for the uses and purposes stated herein.
3. INVESTMENT. Escrow Agent shall, pending the disbursement of
the Escrow Fund pursuant to this Escrow Agreement, invest the Escrow Fund in
a money market account, unless and until otherwise instructed by Identity,
the Bank and Geographics.
4. RIGHTS AND RESPONSIBILITIES OF ESCROW AGENT. The acceptance
by the Escrow Agent of its duties hereunder is subject to the following terms
and conditions, which the parties to this Escrow Agreement hereby agree shall
govern and control with respect to the Escrow Agent's rights, duties,
liabilities and immunities.
(a) The Escrow Agent shall act hereunder as a depositary
only, and it shall not be responsible or liable in any manner whatever
for the sufficiency, correctness, genuineness or validity of any
document furnished to the Escrow Agent or any asset deposited with it.
(b) The Escrow Agent shall be protected in acting upon
written instructions from Identity, the Bank and Geographics if it, in
good faith,
<PAGE>
believes such written instructions to be genuine and what they purport
to be.
(c) The Escrow Agent shall not be liable for any error of
judgment or for any action taken or omitted by it in good faith, or
for any mistake of fact or law, or for anything which it may do or
refrain from doing in connection herewith, except its own gross
negligence or willful misconduct.
(d) The Escrow Agent may confer with legal counsel, including
its own in-house counsel, in the event of any dispute or question as
to the construction of any of the provisions hereof, or its legal
duties hereunder, and Escrow Agent shall incur no liability and it
shall be fully protected in acting in accordance with the written
opinions of such counsel.
(e) Identity, the Bank and Geographics agree to indemnify the
Escrow Agent and hold it harmless from and against any loss,
liability, expenses (including, without limitation, reasonable
attorneys' fees and expenses), claim or demand arising out of or in
connection with the performance of its obligations in accordance with
the provisions of this Escrow Agreement, except for the gross
negligence or willful misconduct of the Escrow Agent (provided that if
either Identity, the Bank or Geographics pay more than one-third of
the total amount of the foregoing, the party paying in excess of
one-third shall have a right of contribution from the other two
parties such that the parties each pay one-third of such amount).
These indemnities shall survive the resignation of the Escrow Agent or
the termination of this Escrow Agreement.
(f) The Escrow Agent shall have no duties except those
specifically set forth in this Escrow Agreement. This Escrow
Agreement represents the entire understanding of the parties hereto
with respect to the subject matter contained herein and supersedes any
and all other and prior agreements between them.
(g) The Escrow Agent shall have the right at any time it
deems appropriate to seek an adjudication in a court of competent
jurisdiction as to the respective rights of the parties hereto and
shall not be held liable by any party hereto for any delay or the
consequences of any delay occasioned by such resort to court.
(h) The fee of the Escrow Agent for its services hereunder
shall be paid equally by Identity and the Bank in accordance with the
standard schedule of charges in effect when services are rendered.
Such schedule will be furnished upon request.
(i) In addition to the fee described in paragraph 4(h), the
Escrow Agent shall be entitled to reimbursement for all reasonable
expenses, disbursements or advances made by it in the performance of
its duties hereunder, including reasonable counsel and court costs,
pursuant to paragraph 4(d). Identity and the Bank shall each pay
one-half of such expenses.
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<PAGE>
5. CLAIMS. The Escrow Fund will be held in escrow by the Escrow
Agent until the satisfaction of Sections 5 and 6.
(a) Identity may make one or more claims against the Escrow
Fund following the Closing under the following circumstances and in
accordance with the procedures outlined on Schedule 8.16 to the Agreement
(each, a "Claim"):
(i) for the amount of any liabilities of Geographics
which Identity has been required to pay after the Closing and which
were not assumed by Identity pursuant to the Agreement;
(ii) for the amount of all costs, liabilities and
expenses associated with any customer returns of goods shipped prior
to the Closing and not reimbursed by Geographics to Identity;
(iii) for the amount of any damages incurred by Identity
(net of insurance proceeds received by Identity) as a result of any
breach by Geographics of its covenants in the Agreement;
(iv) for the amount of any damages incurred by Identity
as a result of Geographics' failure to comply with any applicable bulk
sales law;
(v) for the amount of any customer rebates earned
prior to the Closing and charged to Identity; and
(vi) for the amount of any customer credits awarded by
Geographics prior to the Closing;
provided, however, that (x) Escrow Agent need not inquire into or consider
whether a claim complies with the requirements of the Agreement, and (y) any
Claims pursuant to clauses (i), (iii) and (iv) above shall be subject to the
$25,000 deductible amount referred to in Section 8.1(a) of the Agreement.
Notwithstanding anything contained herein, under no circumstances will
returns of SKUs added to plan-o-grams of major customers since October 1997
be deducted from the Escrow Fund.
(b) Upon the termination of this Escrow Agreement any amounts
due to Identity for any customer orders which are received by Geographics
electronically or otherwise prior to the conversion of customer orders as
contemplated in Section 8.14 of the Agreement and which have not been paid to
Identity shall be paid to Identity from the Escrow Fund. Identity shall
reimburse Geographics for any returns or credits with respect to such orders
that occur after the termination of this Escrow Agreement and for the amount
of any customer payments subsequently received by Identity which relate to
orders for which Identity has been paid from the Escrow Fund.
(c) Notwithstanding anything to the contrary contained
herein, Identity and Geographics shall comply with the additional procedures
and plans of action specified on Schedule 8.16 to the Agreement in connection
with the treatment of transactions occurring subsequent to April 27, 1998 and
to the extent that the terms of this Escrow Agreement conflict with such
Schedule 8.16, Schedule 8.16 shall control.
6. DISBURSEMENTS. (a) Notwithstanding anything contained in
Section 5, the Escrow Fund will be immediately paid to Identity by the Escrow
Agent in the event that the Closing does not occur due to a breach by the
Bank and/or Geographics of its respective covenants or agreements under the
Agreement or under the Core Business Collateral Surrender and Foreclosure
Agreement dated May 4, 1998 by and between the Bank and Geographics (the
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<PAGE>
"Collateral Surrender Agreement") or a failure of the Bank or Geographics to
satisfy any conditions precedent to Identity's obligation to consummate the
transactions contemplated under the Agreement. Additionally, the Escrow Fund
will be immediately paid to the Bank by the Escrow Agent in the event that
the Closing does not occur due to a breach by Identity of its covenants or
agreements under the Agreement or a failure of Identity to satisfy any
conditions precedent to Geographics' or the Bank's obligation to consummate
the transactions contemplated under the Agreement which is not cured within a
reasonable time.
(b) From time to time on or before a date which is 90 days
after the Closing, Identity may give a notice (a "Notice") to the Bank,
Geographics and Escrow Agent specifying in reasonable detail the nature and
dollar amount of any Claim it may have under the Agreement. If Geographics
or the Bank gives a notice to Identity and Escrow Agent disputing any Claim
(a "Counter Notice") within 10 days following receipt by Escrow Agent of the
Notice regarding such Claim, Escrow Agent shall proceed as provided in
Section 6(c) below. If no Counter Notice is received by Escrow Agent within
such 10-day period with respect to a Claim, then the dollar amount of
Identity's Claim as set forth in its Notice shall be deemed established for
purposes of this Escrow Agreement and the Agreement and, at the end of such
10-day period, Escrow Agent shall pay to Identity the dollar amount claimed
in the Notice from (and only to the extent of) such Escrow Fund.
(c) If a Counter Notice is given with respect to a Claim,
Escrow Agent shall make payment with respect thereto only in accordance with
(i) joint written instructions of Identity, the Bank and Geographics, (ii) a
final non-appealable order of a court of competent jurisdiction, or (iii) an
arbitrator's decision. Any court order shall be accompanied by a legal
opinion by counsel for the presenting party satisfactory to Escrow Agent to
the effect that the order is final and non-appealable. Escrow Agent shall
act on such court order and legal opinion without further question.
(d) Unless sooner terminated by distribution of the entire
Escrow Fund, on the earlier of (i) the date that is 90 days after the Closing
Date or (ii) termination of the Agreement pursuant to Section 10 thereof, the
Escrow Agent shall pay and distribute the then amount of the Escrow Fund to
the Bank (including any interest earned thereon) unless the Closing has
occurred and any Claims are then pending, in which case an amount equal to
the aggregate dollar amount of such Claims (as shown in the Notices of such
Claims) shall be retained by Escrow Agent in the Escrow Fund (and the balance
paid to the Bank) until it receives joint written instructions of Identity,
the Bank and Geographics, a final non-appealable order of a court of
competent jurisdiction or an arbitrator's decision. If the Agreement is
terminated pursuant to Section 12 thereof, except termination due to a
material breach by Identity, the entire Escrow Fund (including interest
earned thereon) will be promptly returned to Identity by the Escrow Agent.
7. DISPUTE. In the event that there shall be any disagreement
between Identity, the Bank and Geographics or between them or any of them and
any other person, resulting in adverse claims or demands being made in
connection with this Escrow Agreement, or in the event that Escrow Agent, in
good faith, shall be in doubt as to what action it should take hereunder,
Escrow Agent may, at its option, refuse to comply with any claims or demands
on it or refuse to take any other action hereunder, so long as such
disagreement continues or such doubt exists; and in any such event, Escrow
Agent shall not be or become liable in any way or to any person for its
failure or refusal to act, and Escrow Agent shall be entitled to continue to
so refrain from acting until Escrow Agent has received a non-appealable court
order from a court of competent jurisdiction or a final decision by an
arbitrator directing the disposition of such property, or until it has
received appropriate written instructions signed by Identity, the Bank and
Geographics. Any dispute arising between Identity, the Bank and Geographics
in connection
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<PAGE>
with the terms of this Escrow Agreement shall be subject to arbitration in
accordance with Section 11.14 of the Agreement.
8. INCOME. All income, including interest, earned on the Escrow
Fund deposited hereunder (hereinafter called the "Income") shall be added to
and held in the escrow account created hereunder.
9. TAX IDENTIFICATION NUMBER. All interest accrued in the Escrow
Fund shall be for the account of the Bank unless required to satisfy Claims.
10. INDEMNIFICATION AS TO TAXES, PENALTIES AND INTEREST. Identity
shall indemnify and hold harmless the Escrow Agent against and in respect of
any liability for taxes and for any penalties or interest in respect of taxes
attributable to the investment of funds held in escrow by the Escrow Agent
pursuant to this Escrow Agreement (provided, that if Identity pays any such
taxes, penalties or interest to Escrow Agent, Geographics and the Bank shall
reimburse Identity for one-third of such amounts, respectively).
11. AMENDMENT. This Escrow Agreement may not be amended or
supplemented and no provision hereof may be modified or waived, except by an
instrument in writing, signed by all of the parties hereto.
12. TERMINATION. The purpose of this Escrow Agreement and the
terms hereof shall terminate on the earlier of (a) the proper disbursement or
release of the entire Escrow Fund by the Escrow Agent in accordance with the
terms hereof, (b) receipt by the Escrow Agent of written unanimous consent
signed by Identity, the Bank and Geographics hereto or (c) receipt by Escrow
Agent of a non-appealable court order from a court of competent jurisdiction
in accordance with Section 7 hereof. Upon the termination of this Escrow
Agreement and upon the delivery of all or any portion of the Escrow Funds by
the Escrow Agent, in accordance with the terms hereof, the Escrow Agent shall
be relieved of any and all further obligations hereunder.
13. EXECUTION IN COUNTERPARTS AND BY FACSIMILE. This Escrow
Agreement may be executed in several counterparts and by facsimile, each of
which counterparts and facsimiles shall be deemed an original, but such
counterparts together shall constitute one and the same instrument.
14. MISCELLANEOUS. All covenants and agreements contained in this
Escrow Agreement by or on behalf of the parties hereto shall bind and inure
to the benefit of such parties and their respective heirs, administrators,
legal representatives, successors and assigns, as the case may be, and all
references to such parties herein shall be deemed to also refer to any
successors, assigns, heirs, administrators and legal representatives of said
parties, as the case may be. The headings in this Escrow Agreement are for
convenience of reference only and shall neither be considered as part of this
Escrow Agreement, or limit or otherwise affect the meaning hereof. This
Escrow Agreement shall be construed and enforced in accordance with the laws
of the State of Tennessee.
15. NOTICES. All instructions, notices and other communications
hereunder must be in writing and shall be deemed to have been duly given if
(i) delivered by hand or (ii) delivered by facsimile (confirmed in writing)
or (iii) mailed by recognized domestic and international courier express
service, in each case with charges and postage prepaid and addressed as
follows (or such other address provided pursuant to a valid notice hereunder):
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<PAGE>
(a) If to Identity:
Identity Group, Inc.
1480 Gould Drive
Cookeville, TN 38506
Attn: Donald J. Polak
Phone: 931-432-4000
Facsimile: 931-432-6477
(b) If to Geographics:
Geographics, Inc.
1555 Odell Road
P.O. Box 1750
Blaine, WA 98231
Attn: Ronald S. Deans
Phone: 360-332-6711
Facsimile: 360-332-6352
(c) If to the Bank:
U.S. Bank National Association
Attention: Roger Lundeen
Special Assets Group
U.S. Bank National Association
111 Southwest 5th Avenue, Suite 810
Portland, OR 97208
Phone: (503) 275-6756
Facsimile: (503) 275-5923
(d) If to the Escrow Agent:
Lawyers Title Insurance Corporation
Frick Building
Grant Street
Pittsburgh, PA 15219
Attn: Alfred V. Watterson, Jr., Esquire
Phone: 412-261-6410
Facsimile: 412-261-1160
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Escrow Agreement as of the date first above written.
IDENTITY GROUP, INC.
By: /s/ Donald J. Polak
-------------------------------------------
Title: President/CEO
----------------------------------------
GEOGRAPHICS, INC.
By:
-------------------------------------------
Title:
----------------------------------------
U.S. BANK NATIONAL ASSOCIATION
By:
-------------------------------------------
Title:
----------------------------------------
LAWYERS TITLE INSURANCE
CORPORATION, as Escrow Agent
By:
-------------------------------------------
Title:
----------------------------------------
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