<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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) SEPTEMBER 2, 1998
------------------------------
PERRY JUDD'S HOLDINGS, INC.
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
DELAWARE 333-45235 51-0365965
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
575 WEST MADISON STREET, WATERLOO, WISCONSIN 53594
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 920-478-3551
---------------------------
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
A. SALE OF PORT CITY PRESS, INC.
On September 2, 1998, a subsidiary of Perry Judd's Holdings, Inc. (the
"COMPANY"), Perry Judd's Incorporated ("PERRY JUDD'S"), consummated the sale of
all of the outstanding shares of capital stock (the "STOCK") of its wholly-owned
subsidiary, Port City Press, Inc. ("PORT CITY PRESS"), to Mack Printing Company
pursuant to that certain Stock Purchase Agreement, dated as of July 31, 1998,
among Mack Printing Company, Port City Press and Perry Judd's, as amended (the
"STOCK PURCHASE AGREEMENT"). The aggregate cash consideration received by Perry
Judd's in the transaction totaled approximately $29,374,000, which amount is net
of closing costs and fees of Perry Judd's. The Stock Purchase Agreement also
contained customary indemnities and guarantees.
B. SALE AND LEASEBACK
In connection with the Stock Purchase Agreement, on August 17, 1998, Perry
Judd's consummated an Agreement of Purchase and Sale with 1323 Greenwood, L.L.C.
(the "BUYER") relating to the sale and leaseback by Perry Judd's of a parcel of
real property and industrial building located in Pikesville, Maryland (the
"PROPERTY") which had been used in the operations of Port City Press (the
"SALE/LEASEBACK TRANSACTION"). As part of the Sale/Leaseback transaction, the
Company and Perry Judd's entered into a long-term lease as lessees, with the
Buyer as lessor, for the Property (the "LEASE"). The Company and Perry Judd's
then subleased the Property to Port City Press (the "SUBLEASE") under
substantially the same economic terms as those contained in the Lease.
Perry Judd's received cash consideration from the Buyer for the Property of
approximately $9,534,000, net of closing costs and fees. The terms of the Lease
include a twenty year term with an initial annual lease payment of $977,407 and
14.5% escalations scheduled at the start of the sixth, eleventh and sixteenth
years.
The foregoing descriptions of the Stock Purchase Agreement, the Lease
and the Sublease do not purport to be complete statements of the parties' rights
and obligations thereunder, and are qualified in their entirety by reference to
the definitive agreements, copies of which are attached as exhibits hereto and
the contents of which are incorporated herein by reference.
2
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ITEM 5. OTHER MATTERS
Effective July 9, 1998, Judd and Detweiler, Inc., a wholly-owned subsidiary
of Judd's Incorporated (a predecessor company to Perry Judd's), merged with and
into Judd's Incorporated.
Effective July 16, 1998, the Company and its subsidiaries completed the
following transactions:
a) The Company changed its name from Perry-Judd's Incorporated to Perry Judd's
Holdings, Inc.
b) Mount Jackson Press, Inc. and Shenandoah Valley Press, Inc., wholly-owned
subsidiaries of Judd's Incorporated, merged with and into Judd's
Incorporated.
c) Judd's Incorporated merged with and into another wholly-owned subsidiary of
the Company, Perry Graphic Communications, Inc. The surviving company,
Perry Graphic Communications, Inc., changed its name to Perry Judd's
Incorporated, which continues to be a wholly-owned subsidiary of the
Company.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Financial Statements.
None required.
(b) Pro Forma Financial Information.
Basis of Presentation
The unaudited pro forma condensed consolidated financial statements have
been prepared to illustrate the effects of adjustments relating to the sale of
the Company's wholly-owned subsidiary, Port City Press, which was consummated
effective September 2, 1998, and the Sale/Leaseback transaction, which was
consummated effective August 17, 1998.
The unaudited pro forma condensed consolidated balance sheet as of June 30,
1998 assumes that the sale of Port City Press and the Sale/Leaseback transaction
occurred as of June 30, 1998, and the unaudited pro forma condensed consolidated
statement of operations for the six month period ended June 30, 1998 assumes
that the sale of Port City Press and the Sale/Leaseback transaction were
consummated as of the first day of the period presented.
The unaudited pro forma condensed consolidated statement of operations for
the year ended December 31, 1997 has not been presented, since the assets and
liabilities involved in the sale of Port City Press and the Sale/Leaseback
transaction were acquired or assumed effective December 16, 1997, and therefore
the effects of any pro forma adjustments for the year ended
3
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December 31, 1997 would not have been material to the Company's results of
operations for such year.
The unaudited pro forma condensed consolidated financial statements
presented herein should be read in conjunction with the condensed consolidated
financial statements of the Company included in the Company's Quarterly Report
on Form 10-Q for the quarter ended June 30, 1998.
The pro forma consolidated financial information presented herein is not
necessarily indicative of the consolidated results of operations or the
consolidated financial position of the Company that would have resulted had the
transactions described herein occurred as described above in this Item 7, nor is
it necessarily indicative of the Company's consolidated results of operations
for future periods or its future consolidated financial position.
4
<PAGE>
PERRY JUDD'S HOLDINGS, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
SIX MONTHS ENDED JUNE 30, 1998
(DOLLARS IN THOUSANDS)
- --------------------------------------------------------------------
<TABLE>
<CAPTION>
Historical Pro Forma Adjustments Pro Forma
---------- --------------------- ---------
<S> <C> <C> <C>
NET SALES. . . . . . . . . . . . . . . . . . $146,805 $(18,353) (A) $128,452
OPERATING EXPENSES:
Costs of production . . . . . . . . . . 115,791 (11,891) (A) 103,900
Selling, general and administrative . . 16,381 (3,327) (A) 13,054
Depreciation. . . . . . . . . . . . . . 6,123 (646) (A) 5,477
Amortization of intangibles . . . . . . 980 (165) (B) 815
------- ------- -------
139,275 (16,029) 123,246
------- ------- -------
INCOME FROM OPERATIONS . . . . . . . . . . . 7,530 (2,324) 5,206
------- ------- -------
OTHER (INCOME) EXPENSES:
Interest expense. . . . . . . . . . . . 7,701 7,701
Amortization of deferred financing costs 586 586
Interest income . . . . . . . . . . . . (142) 6 (A) (1,206)
(1,070) (C)
Loss (gain) on sale of assets . . . . . (99) (99)
Other, net. . . . . . . . . . . . . . . 202 (3) (A) 199
------- ------- -------
8,248 (1,067) 7,181
------- ------- -------
LOSS BEFORE INCOME TAXES . . . . . . . . . . (718) (1,257) (1,975)
BENEFIT FOR INCOME TAXES . . . . . . . . . . (1) (569) (D) (570)
------- ------- -------
LOSS BEFORE DIVIDENDS ON
REDEEMABLE PREFERRED STOCK. . . . . . . (717) (688) (1,405)
DIVIDENDS ON REDEEMABLE
PREFERRED STOCK . . . . . . . . . . . . 522 522
------- ------- -------
NET LOSS . . . . . . . . . . . . . . . . . . $ (1,239) $ (688) $ (1,927)
------- ------- -------
------- ------- -------
</TABLE>
See accompanying notes to pro forma condensed consolidated financial statements.
5
<PAGE>
PERRY JUDD'S HOLDINGS, INC.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
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<TABLE>
<CAPTION>
June 30, June 30,
ASSETS 1998 1998
(Unaudited) Pro Forma Adjustments Pro Forma
---------- --------------------- ---------
<S> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents . . . . . . . . . . . $ 416 $ 9,534 (E) $ 39,322
29,374 (H)
(2) (I)
Accounts receivable - net of allowance for
doubtful accounts of $796. . . . . . . . . . 43,781 (5,173) (I) 38,608
Inventories . . . . . . . . . . . . . . . . . . 21,156 (2,724) (I) 18,432
Deferred income taxes . . . . . . . . . . . . . 539 (21) (I) 518
Other current assets. . . . . . . . . . . . . . 2,928 (79) (I) 2,849
------- ------- -------
Total current assets . . 68,820 30,909 99,729
Property, plant and equipment, at cost. . . . . 147,091 (9,675) (F) 125,650
(11,766) (I)
Accumulated depreciation and amortization . . . (20,446) 141 (F) (19,767)
538 (I)
------- ------- -------
Property, plant and equipment - net . . . . . 126,645 (20,762) 105,883
Goodwill - net. . . . . . . . . . . . . . . . . 27,664 (1,114) (G) 16,141
(10,409) (I)
Other assets - net. . . . . . . . . . . . . . . 12,621 12,621
------- ------- -------
TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . $235,750 $ (1,376) $234,374
------- ------- -------
------- ------- -------
</TABLE>
See accompanying notes to pro forma condensed consolidated financial statements.
6
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LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
CURRENT LIABILITIES:
<S> <C> <C> <C>
Accounts payable and accrued expenses . . . . . . $ 35,014 $ (2,739) (I) $ 32,275
Income taxes payable. . . . . . . . . . . . . . . (440) 1,856 (G) 5,423
4,007 (J)
Borrowings under revolving credit facility. . . . 5,026 5,026
Current maturities of long-term debt. . . . . . . 3,081 3,081
------- ------- -------
Total current liabilities. . . 42,681 3,124 45,805
Long-term debt. . . . . . . . . . . . . . . . . . 141,144 141,144
Deferred income taxes . . . . . . . . . . . . . . 10,851 (2,970) (G) 6,351
(1,530) (I)
Other long-term liabilities . . . . . . . . . . . 8,923 8,923
------- ------- -------
Total liabilities. . . . . . . 203,599 (1,376) 202,223
------- ------- -------
MINORITY INTERESTS: Redeemable Preferred Stock
Series A, B and D with stated redemption value
of $100 per share, aggregate liquidation value of
$7,625 at June 30, 1998 . . . . . . . . . . . . . 7,016 7,016
------- ------- -------
STOCKHOLDERS' EQUITY:
Preferred stock - par value $0.001 per share,
775,000 shares authorized, 102,926
shares issued and outstanding . . . . . . . . . 10,293 10,293
Common stock - par value $0.001 per share,
1,000,000 shares authorized, 860,010
shares issued and outstanding . . . . . . . . . 1 1
Additional paid-in capital. . . . . . . . . . . . 21,500 21,500
Accumulated deficit . . . . . . . . . . . . . . . (6,659) (6,659)
------- ------- -------
Total stockholders' equity . . 25,135 25,135
------- ------- -------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY . . . . . . $235,750 $ (1,376) $234,374
------- ------- -------
------- ------- -------
</TABLE>
See accompanying notes to pro forma condensed consolidated financial statements.
7
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Perry Judd's Holdings, Inc.
Notes to Pro Forma Condensed Consolidated
Financial Statements (Unaudited)
Note A Reflects the elimination of actual sales, operating, and other
expenses and interest income for the Port City Press, Inc. operation
for the six months ended June 30, 1998. There is no effect from
additional lease expense related to the Sale/Leaseback transaction as
both the Sale/Leaseback and sale of Port City Press, Inc. have been
assumed to be consummated as of the first day of the period presented.
Note B Reflects the adjustment of goodwill amortization related to the
goodwill eliminated in connection with the sale of Port City Press,
Inc. and the Sale/Leaseback transaction.
Note C Reflects interest income at 5.5% per annum on the estimated sale
proceeds (net of closing costs and fees) of $29,374,000 and
$9,534,000, respectively, for the sale of Port City Press, Inc. and
the Sale/Leaseback transaction.
Note D Reflects the tax effect of the pro forma adjustments (excluding
goodwill amortization) using a tax rate of 40%.
Note E Reflects estimated sale proceeds (net of closing costs and fees) for
land and buildings in the Sale/Leaseback transaction. These proceeds,
net of income taxes payable, are available only for future
acquisitions and capital expenditures, subject to certain limitations,
for 270 days subsequent to the receipt of proceeds. Any proceeds not
utilized for such purposes must be used to prepay term debt.
Note F Reflects net book value of land and buildings sold in the
Sale/Leaseback transaction.
Note G Reflects the following estimated tax effects related to land and
buildings sold:
<TABLE>
<S> <C>
Current income taxes payable on taxable gain $ 1,856
(including AMT tax at 20% rate)
Elimination of deferred taxes on cumulative timing
differences at 40% effective rate (2,970)
--------
Adjustment to purchase accounting allocation -
goodwill reduction $ (1,114)
</TABLE>
Note H Reflects estimated sale proceeds (net of closing costs and fees)
from the sale of stock of Port City Press, Inc. These proceeds, net
of income taxes payable, are available only for future acquisitions
and capital expenditures, subject to certain limitations, for 270 days
subsequent to the receipt of proceeds. Any proceeds not utilized for
such purposes must be used to prepay term debt.
Note I Reflects the elimination of actual assets and liabilities sold or
assumed in connection with the stock sale of Port City Press, Inc.
Note J Reflects the current income taxes expected to be paid on the taxable
gain resulting from the sale of Port City Press, Inc. at an estimated
rate of 25%.
8
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<TABLE>
<CAPTION>
(c) Exhibits.
<C> <S>
2.1 Stock Purchase Agreement, dated as of July 31, 1998, among Mack
Printing Company, Port City Press, Inc., and Perry Judd's
Incorporated, and Amendment No. 1 to Stock Purchase Agreement,
dated as of August 28, 1998.
10.7 Lease, dated as of August 13, 1998, between 1323 Greenwood, L.L.C., a
Delaware limited liability company, as Landlord, and Perry Judd's
Holdings, Inc. and Perry Judd's Incorporated as Tenants.
10.8 Lease/Sublease, dated as of August 14, 1998, by and between Perry
Judd's Incorporated and Perry Judd's Holdings, Inc., as Sublandlord,
and Port City Press, Inc., a Maryland corporation, as Subtenant.
</TABLE>
9
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ANNEXES
Certain annexes to the exhibits set forth above have been omitted. The Company
hereby agrees to furnish such annexes supplementally upon the request of the
Securities and Exchange Commission.
<TABLE>
<CAPTION>
ANNEXES OMITTED:
EXHIBIT 2.1
<S> <C>
Schedule I Knowledge
Schedule II Target Working Capital
Schedule III Capital Expenditures Amount
Schedule IV Elections Amount Illustration
Exhibit A Form of Opinion of the Purchaser's Counsel
Exhibit B Form of Opinion of the Seller's Counsel
Exhibit C Form of Employment Agreement
Exhibit D Form of Non-Competition Agreement
Exhibit E Form of Lease/Sublease
EXHIBIT 10.7
Exhibit 1 Legal Description
Exhibit 5-1 Primary Term Basic Rent
Exhibit 5-2 Extension Term Basic Rent
Exhibit 9 Permitted Exceptions
Exhibit 15-1 Purchase Price Schedule
Exhibit 15-2 Additional Sales Closing Requirements
Exhibit 25-1 Estoppel Certificate
Exhibit 25-2 Estoppel Certificate
Exhibit 36 Representations and Warranties
EXHIBIT 10.8
Exhibit "A" Legal Description of the Premises
Exhibit "B" Master Lease
</TABLE>
10
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
PERRY JUDD'S HOLDINGS INC.
Date: September 17, 1998 By: /s/ Verne F. Schmidt
-------------------------------
Verne F. Schmidt
Senior Vice President and
Chief Financial Officer
11
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- --------------------------------------------------------------------------------
STOCK PURCHASE AGREEMENT
Dated as of July 31, 1998
among
----------------
PURCHASER:
MACK PRINTING COMPANY
----------------
COMPANY:
PORT CITY PRESS, INC.
AND
----------------
SELLER:
PERRY JUDD'S INCORPORATED
----------------
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- --------------------------------------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
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<S> <C>
ARTICLE I DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . .1
1.1 Defined Terms. . . . . . . . . . . . . . . . . . . . . . . . . . . .1
ARTICLE II PURCHASE AND SALE OF STOCK. . . . . . . . . . . . . . . . . . . .9
2.1 Transfer of Stock. . . . . . . . . . . . . . . . . . . . . . . . . 10
2.2 Consideration. . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.3 Adjustments to Consideration.. . . . . . . . . . . . . . . . . . . 10
2.4 Post-Closing Audit.. . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE III CLOSING. . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.1 Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.2 Deliveries at Closing. . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SELLER. . 15
4.1 Corporate Organization and Standing. . . . . . . . . . . . . . . . 15
4.2 Capitalization of the Company. . . . . . . . . . . . . . . . . . . 16
4.3 No Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.4 No Conflict. . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.5 Financial Information. . . . . . . . . . . . . . . . . . . . . . . 17
4.6 Undisclosed Liabilities. . . . . . . . . . . . . . . . . . . . . . 17
4.7 Accounts Receivable. . . . . . . . . . . . . . . . . . . . . . . . 17
4.8 Inventory. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.9 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.10 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.11 Governmental Authorizations; Compliance with Laws. . . . . . . . . 18
4.12 Tax Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.13 Brokers; Finders . . . . . . . . . . . . . . . . . . . . . . . . . 19
4.14 Absence of Certain Changes . . . . . . . . . . . . . . . . . . . . 19
4.15 Properties and Assets. . . . . . . . . . . . . . . . . . . . . . . 20
4.16 Material Contracts . . . . . . . . . . . . . . . . . . . . . . . . 20
4.17 Intellectual Property Rights.. . . . . . . . . . . . . . . . . . . 20
4.18 Labor Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.19 No Consent . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.20 Authorization. . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.21 Compliance with ERISA. . . . . . . . . . . . . . . . . . . . . . . 23
4.22 Environmental Matters. . . . . . . . . . . . . . . . . . . . . . . 26
4.23 Books and Records. . . . . . . . . . . . . . . . . . . . . . . . . 27
4.24 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
4.25 Schedule IV. . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. . . . . . . . . 28
5.1 Organization of the Purchaser. . . . . . . . . . . . . . . . . . . 28
5.2 Authorization; No Conflict.. . . . . . . . . . . . . . . . . . . . 28
5.3 Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.4 Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.5 Brokers or Finders . . . . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE VI ACTIONS OF THE SELLER, THE COMPANY AND THE PURCHASER
BEFORE AND AFTER THE CLOSING DATE. . . . . . . . . . . . . . . . . . . . . 29
6.1 Access and Investigation . . . . . . . . . . . . . . . . . . . . . 29
6.2 Conduct of Business. . . . . . . . . . . . . . . . . . . . . . . . 30
6.3 Required Approvals . . . . . . . . . . . . . . . . . . . . . . . . 31
6.4 Notification . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
6.5 No Negotiation . . . . . . . . . . . . . . . . . . . . . . . . . . 31
6.6 Best Efforts . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
6.7 Employee Benefits. . . . . . . . . . . . . . . . . . . . . . . . . 32
i.
<PAGE>
TABLE OF CONTENTS (CONTINUED)
Page
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6.8 Termination of Security Interests. . . . . . . . . . . . . . . . . 32
ARTICLE VII CONDITIONS PRECEDENT TO THE PURCHASER'S OBLIGATION TO CLOSE . 32
7.1 Accuracy of Representations. . . . . . . . . . . . . . . . . . . . 32
7.2 The Seller's and the Company's Performance.. . . . . . . . . . . . 33
7.3 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
7.4 Additional Documents . . . . . . . . . . . . . . . . . . . . . . . 33
7.5 No Proceeding. . . . . . . . . . . . . . . . . . . . . . . . . . . 33
7.6 No Prohibition . . . . . . . . . . . . . . . . . . . . . . . . . . 33
7.7 HSR Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
7.8 No Claim Regarding Stock Ownership or Sale Proceeds. . . . . . . . 33
7.9 Material Adverse Change. . . . . . . . . . . . . . . . . . . . . . 34
7.10 Employment Agreements. . . . . . . . . . . . . . . . . . . . . . . 34
7.11 Non-Competition Agreement. . . . . . . . . . . . . . . . . . . . . 34
7.12 BT Commercial Corporation Liens and Obligations. . . . . . . . . . 34
7.13 Lease/Sublease and Non-Disturbance and Attornment Agreement. . . . 34
ARTICLE VIII CONDITIONS PRECEDENT TO THE SELLER'S AND THE
COMPANY'S OBLIGATION TO CLOSE. . . . . . . . . . . . . . . . . . . . . . . 34
8.1 Accuracy of Representations. . . . . . . . . . . . . . . . . . . . 35
8.2 The Purchaser's Performance. . . . . . . . . . . . . . . . . . . . 35
8.3 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
8.4 Additional Documents . . . . . . . . . . . . . . . . . . . . . . . 35
8.5 No Prohibition . . . . . . . . . . . . . . . . . . . . . . . . . . 35
8.6 HSR Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
ARTICLE IX INDEMNIFICATION; REMEDIES . . . . . . . . . . . . . . . . . . . 36
9.1 Indemnification of the Purchaser.. . . . . . . . . . . . . . . . . 36
9.2 Indemnification of the Seller. . . . . . . . . . . . . . . . . . . 37
9.3 Notice of Claim; Right to Defend . . . . . . . . . . . . . . . . . 37
9.4 Limitation on Indemnity. . . . . . . . . . . . . . . . . . . . . . 38
9.5 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
9.6 Sole and Exclusive Remedy. . . . . . . . . . . . . . . . . . . . . 39
9.7 Tax Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
ARTICLE X TERMINATION. . . . . . . . . . . . . . . . . . . . . . . . . . . 42
10.1 Termination Events.. . . . . . . . . . . . . . . . . . . . . . . . 42
10.2 Effect of Termination. . . . . . . . . . . . . . . . . . . . . . . 42
ARTICLE XI MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . 43
11.1 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
11.2 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
11.3 Choice of Law. . . . . . . . . . . . . . . . . . . . . . . . . . . 44
11.4 Entire Agreement; Amendments and Waivers . . . . . . . . . . . . . 44
11.5 Multiple Counterparts. . . . . . . . . . . . . . . . . . . . . . . 44
11.6 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
11.7 Invalidity . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
11.8 Titles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
11.9 Publicity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
11.10 Confidential Information.. . . . . . . . . . . . . . . . . . . . . 45
11.11 Burden and Benefit . . . . . . . . . . . . . . . . . . . . . . . . 47
11.12 Service of Process; Consent to Jurisdiction. . . . . . . . . . . . 47
11.13 Attorneys' Fees. . . . . . . . . . . . . . . . . . . . . . . . . . 47
11.14 Representation by Counsel. . . . . . . . . . . . . . . . . . . . . 47
11.15 Limitation of Liability. . . . . . . . . . . . . . . . . . . . . . 48
11.16 Additional Survival. . . . . . . . . . . . . . . . . . . . . . . . 48
ii.
<PAGE>
SCHEDULES AND EXHIBITS
Schedule I Knowledge
Schedule II Target Working Capital
Schedule III Capital Expenditures Amount
Schedule IV Elections Amount Illustration
Exhibit A Form of Opinion of the Purchaser's Counsel
Exhibit B Form of Opinion of the Seller's Counsel
Exhibit C Form of Employment Agreement
Exhibit D Form of Non-Competition Agreement
Exhibit E Form of Lease/Sublease
</TABLE>
iii.
<PAGE>
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT dated as of July 31, 1998 (this
"AGREEMENT"), is by and among (i) Mack Printing Company (doing business as the
Mack Printing Group), a Pennsylvania corporation (the "PURCHASER"); (ii) Perry
Judd's Incorporated, a Delaware corporation formerly known as Perry Graphic
Communications, Inc. (the "SELLER"); (iii) Port City Press, Inc., a Maryland
corporation (the "COMPANY").
RECITALS
A. The Purchaser desires to purchase from the Seller, and the Seller
desires to sell to the Purchaser all of the issued and outstanding shares of
capital stock of the Company (the "SHARES"), upon the terms and subject to the
conditions contained herein (the "ACQUISITION").
B. In connection with the Acquisition, the parties desire to set
forth certain representations, warranties and covenants made by each to the
other or others as an inducement to the consummation of the Acquisition, upon
the terms and subject to the conditions contained herein.
C. In connection with the Acquisition, the Seller is willing to
indemnify the Purchaser, and the Purchaser is willing to indemnify the Seller,
against certain losses and liabilities they may incur as a result of the
Acquisition, upon the terms and subject to the conditions contained herein.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, and intending to be legally bound
hereby the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.1 DEFINED TERMS.
As used herein, the terms below shall have the following meanings.
Any of such terms, unless the context otherwise requires, may be used in the
singular or plural, depending upon the reference.
"ACCOUNTING PRINCIPLES" shall have the meaning set forth in SECTION
2.4(a).
"ACCOUNTS RECEIVABLE" shall have the meaning set forth in SECTION 4.7.
"ACQUISITION" shall have the meaning set forth in the Recitals.
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"ACQUISITION DOCUMENTS" shall mean this Agreement and all instruments
executed, filed or otherwise prepared, exchanged or delivered in accordance with
this Agreement.
"ADJUSTED WORKING CAPITAL" shall have the meaning set forth in SECTION
2.3(a).
"ADJUSTMENT AMOUNT" shall have the meaning set forth in SECTION
2.3(a).
"AFFILIATE" shall have the meaning set forth in the Securities
Exchange Act of 1934, as amended, and the rules and regulations thereunder.
Without limiting the foregoing, all directors and officers of a Person that is a
corporation and all managing members of a Person that is a limited liability
company, shall be deemed Affiliates of such Person for all purposes hereunder.
"AGREEMENT" shall mean this Stock Purchase Agreement.
"ASSET ALLOCATION" shall have the meaning set forth in SECTION 9.7(f).
"BENEFIT PLAN" shall have the meaning set forth in SECTION 4.21.
"BEST EFFORTS" shall mean the efforts that a prudent Person desirous
of achieving a result would use in similar circumstances to ensure that such
result is achieved as expeditiously as possible; PROVIDED, HOWEVER, that an
obligation to use Best Efforts under this Agreement does not require the Person
subject to that obligation to take actions that would have a Material Adverse
Effect on the benefits to such Person of this Agreement and the Acquisition or
to pay any monies.
"CAPITAL EXPENDITURES AMOUNT" shall have the meaning set forth in
SECTION 2.3(a).
"CERCLA" shall mean the United States Comprehensive Environmental
Response, Compensation and Liability Act, 42 U.S.C. Section 9601 et seq., as
amended.
"CLAIM" shall mean any claim for Damages made pursuant to the terms of
this Agreement.
"CLEANUP" shall mean any investigation, cleanup, removal, containment,
monitoring or other remediation or response actions.
"CLOSING" shall have the meaning set forth in SECTION 3.1.
"CLOSING BALANCE SHEET" shall have the meaning set forth in SECTION
2.4(b).
"CLOSING DATE" shall have the meaning set forth in SECTION 10.1(d).
"COBRA" shall have the meaning set forth in SECTION 4.21.
"COMPANY" shall have the meaning set forth in the first paragraph of
this Agreement.
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<PAGE>
"COMPANY ADJUSTMENT AMOUNT" shall have the meaning set forth in
SECTION 2.4(a).
"COMPANY'S ACCOUNTANT" shall have the meaning set forth in SECTION
2.4(b).
"COMPANY'S COMPUTATION" shall have the meaning set forth in SECTION
2.4(b).
"CONFIDENTIAL INFORMATION" shall have the meaning set forth in SECTION
11.10(b).
"CONFIDENTIALITY AGREEMENT" shall mean that certain Confidentiality
Agreement, dated as of March 25, 1998, by and between the Purchaser and Parent.
"CONSENT" shall mean any approval, consent, ratification, waiver, or
other authorization (including any Governmental Authorization).
"CONSIDERATION" shall have the meaning set forth in SECTION 2.2.
"CONTRACT" shall mean any agreement, contract, obligation, promise, or
undertaking (whether written or oral and whether express or implied) that is
legally binding.
"DAMAGES" shall mean any and all costs, losses, Liabilities,
obligations, damages, lawsuits, deficiencies, claims, demands and expenses
(whether or not arising out of third-party claims), including without limitation
interest, penalties, costs of mitigation, losses in connection with or arising
out of CERCLA, any equivalent state statute or any other Environmental Law
(including without limitation any Cleanup), damages to the Environment,
reasonable attorneys' fees and all amounts paid in investigation, defense or
settlement of any of the foregoing.
"DEDUCTIBLE AMOUNT" shall have the meaning set forth in SECTION 9.1.
"DISCLOSURE SCHEDULES" shall mean the schedules prepared and delivered
by the Company and the Seller for and to the Purchaser and dated as of the date
hereof which set forth the exceptions to the representations and warranties
contained herein and certain other information called for by this Agreement.
Unless otherwise specified, each reference in this Agreement to any numbered
schedule is a reference to that numbered schedule which is included in the
Disclosure Schedules. All matters disclosed on any Schedule to this Agreement
are deemed disclosed on all Schedules to this Agreement, to the extent
applicable and to the extent such disclosure can be reasonably interpreted as
having application.
"ELECTION" shall have the meaning set forth in SECTION 9.7(f).
"ELECTION FORM" shall have the meaning set forth in SECTION 9.7(f).
"ELECTIONS AMOUNT" shall have the meaning set forth in SECTION 2.3(a).
"ENCUMBRANCE" shall mean any charge, claim, community property
interest, condition, equitable interest, lien, option, pledge, assignment,
conditional sale agreement, mortgage, security agreement, security interest,
right of first refusal or restriction or encumbrance of any kind whatsoever,
including, without limitation, any restriction on use,
3
<PAGE>
voting, transfer (other than restrictions on transfer imposed by the Securities
Act and state securities laws), receipt of income or exercise of any other
attribute of ownership.
"ENVIRONMENT" shall mean soil, land surface or subsurface strata,
surface waters (including navigable waters, ocean waters, streams, ponds,
drainage basins and wetlands), groundwater, drinking water supply, stream
sediments, ambient air (including indoor air), plant and animal life and any
other environmental medium or natural resource.
"ENVIRONMENTAL LAW" shall mean all federal, state, district, local and
foreign laws, all codes, rules or regulations promulgated thereunder and all
Orders, consent orders, judgments, notices, notice requirements, agency
directives, guidelines or restrictions and demand letters issued, promulgated or
entered pursuant thereto, in effect on or prior to the Closing Date, relating to
pollution or protection of the Environment, including without limitation (i)
laws relating to emissions, discharges, releases or threatened releases of
Materials into the Environment and (ii) laws relating to the identification,
generation, manufacture, processing, distribution, use, treatment, storage,
disposal, recovery, transport or other handling of Materials. Environmental
Laws shall include, without limitation, CERCLA, the Federal Water Pollution
Control Act (33 U.S.C. Section 1251 et seq.), RCRA, the Safe Drinking Water Act
(21 U.S.C. Section 349, 42 U.S.C. Sections 201, 300f), the Toxic Substances
Control Act (15 U.S.C. Section 2601 et seq.), the Clean Air Act (42 U.S.C.
Section 7401 et seq.), the California Health and Safety Code (Section 25100 et
seq., Section 39000 et seq.) and the California Water Code (Section 13000 et
seq.) or any other federal, state or local law of similar effect, each as
amended.
"ENVIRONMENTAL NOTICE" shall mean any written notice by any Person
alleging potential civil or criminal liability (including, without limitation,
potential liability for Cleanup costs, governmental costs, harm or Damages to
person, property, natural resources or other fines or penalties) arising out of,
based on or resulting from (a) the emission, discharge, treatment, storage,
disposal, release or threatened release in or into the Environment of any
Material or (b) circumstances forming the basis of any violation, or alleged
violation, of any applicable Environmental Law or Environmental Permit
provision.
"ENVIRONMENTAL PERMITS" shall mean all licenses, permits, approvals,
authorizations, waivers, consents or Orders of, or filings with, any
Governmental Body, whether federal, state or local, required for the operation
of the facilities under Environmental Laws.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974
or any successor law, and regulations and rules issued pursuant to that Act or
any successor law.
"ERISA AFFILIATE" shall mean any other Person that, together with the
Company, would be treated as a single employer under IRC Section 414(b) or (c),
and solely for the purposes of potential liability under ERISA Section
302(c)(ii) and IRC Section 412(c)(ii) and the lien created under ERISA Section
302(f) and IRC Section 412(n), under IRC Section 414(m) or (o).
"ESTIMATED ADJUSTMENT AMOUNT" shall have the meaning set forth in
SECTION 2.3(b).
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
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<PAGE>
"FINAL ELECTIONS AMOUNT" shall have the meaning set forth in SECTION
2.4(c).
"FINANCIAL STATEMENTS" shall have the meaning set forth in SECTION
4.5(a).
"GAAP" shall mean United States generally accepted accounting
principles and practices, as such principles and practices are applied on a
consistent basis with those principles and practices on which the Interim
Financials were prepared.
"GOVERNMENTAL AUTHORIZATION" shall mean any approval, Consent,
license, permit, franchise, waiver or other authorization issued, granted, given
or otherwise made available by or under the authority of any Governmental Body
or pursuant to any Legal Requirement.
"GOVERNMENTAL BODY" shall mean any:
(a) nation, state, county, city, town, village, district or other
jurisdiction of any nature;
(b) federal, state, local, municipal, foreign or other government;
(c) governmental or quasi-governmental authority of any nature
(including any governmental agency, branch, department, official or entity
and any court or other tribunal);
(d) multi-national organization or body; or
(e) body exercising, or entitled to exercise, any administrative,
executive, judicial, legislative, police, regulatory or taxing authority or
power of any nature.
"GREENWOOD" shall have the meaning set forth in SECTION 7.13.
"HSR ACT" shall mean the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended, or any successor law, and regulations and rules issued
pursuant to that Act or any successor law.
"INDEMNITEE" shall have the meaning set forth in SECTION 9.3.
"INDEMNITOR" shall have the meaning set forth in SECTION 9.3.
"INDEPENDENT ACCOUNTANT" shall have the meaning set forth in SECTION
2.4(c).
"INITIAL CASH CONSIDERATION" shall have the meaning set forth in
SECTION 2.2.
"INTELLECTUAL PROPERTY" shall have the meaning set forth in SECTION
4.17(c).
"INTERIM BALANCE SHEET" shall have the meaning set forth in SECTION
4.5(b).
"INTERIM ELECTIONS AMOUNT" shall mean $1,528,000.
5
<PAGE>
"INTERIM FINANCIALS" shall have the meaning set forth in SECTION
4.5(b).
"IRC" shall mean the Internal Revenue Code of 1986, as amended, or any
successor law.
"IRS" shall have the meaning set forth in SECTION 4.21.
"KNOWLEDGE" shall mean, with respect to an individual making a
representation to his or her "knowledge" or having "knowledge," those facts and
circumstances actually known by such individual, and with respect to the Seller
or the Company making a representation to its "knowledge" or having "knowledge,"
those facts and circumstances actually known by the officers of such entity
identified on SCHEDULE I attached hereto.
"LEASE" shall have the meaning set forth in SECTION 7.13.
"LEGAL REQUIREMENT" shall mean any federal, state, local, municipal,
foreign, international, multinational or other administrative order,
constitution, law, ordinance, regulation, rule, statute or treaty.
"LIABILITY" shall mean any direct or indirect liability, indebtedness,
obligation, commitment, expense, claim, deficiency, deferred income, guaranty or
endorsement of or by any Person of any type, whether known, unknown, accrued,
absolute, contingent, matured or unmatured.
"LIABILITY CAP" shall have the meaning set forth in SECTION 9.1.
"LOSS" shall have the meaning set forth in SECTION 9.1.
"MATERIAL ADVERSE EFFECT" with respect to any Person shall be deemed
to occur if any event, change or effect, individually or in the aggregate with
such other events, changes or effects, has occurred which could reasonably be
expected to have a material adverse effect (i) on the business, assets (taken as
a whole) (including intangible assets), liabilities (contingent or otherwise),
results of operations, or financial condition of such Person or (ii) or on the
ability of a party hereto or on its stockholders or shareholders, as the case
may be, to consummate the Acquisition.
"MATERIAL CONTRACTS" shall mean any oral or written (a) leases or
other Contracts under which the Company is lessee of, or holds or operates, any
machinery, equipment, vehicle or other tangible personal property owned by a
third party and which entails annual payments, in the case of any such lease or
other agreement, in excess of $50,000, (b) Contract to which the Company is a
party and which are (i) outstanding Contracts with any of its present or former
Representatives other than (x) Contracts involving payments of $10,000 or less
which by their terms are cancelable by the Company with notice of not more than
sixty (60) days and without cancellation penalties, severance or other
termination payments and (y) Contracts which provide for payments based solely
on commissions and require no minimum payments which by their terms are
cancelable by the Company with notice of not more than sixty (60) days and
without cancellation penalties, severance or other termination payments, (ii)
pension, profit-sharing, bonus, retirement, stock option or employee benefit
plans or other similar Plan or arrangement of
6
<PAGE>
the Company, (c) mortgage, indenture, security agreement, pledge, note, bond,
debenture, loan agreement or guaranty relating to the Company, (d) Contract
between the Company and its stockholders or between the Company and any
Affiliate of the Company, (e) guaranty of any obligation for borrowings or
performances, or guaranty or warranty of products or services of any Person,
excluding endorsements or guaranties of instruments made in the Ordinary Course
of Business in connection with the deposit of items for collection and express
product and statutory warranties, (f) Contracts for the purchase of any real
estate, machinery, equipment or other capital assets with a purchase price
exceeding $50,000, (g) Contract pursuant to which it is or may be obligated to
make payments, contingent or otherwise, on account of or arising out of prior
acquisitions or sales of businesses, assets, or stock of other entities, (h)
sales commitment which continues for a period of more than twelve (12) months,
(i) Contract which restricts the Company's ability to do business in any
geographic area, with any particular Person, or in any particular line of
business or industry and (j) other Contracts to which the Company is a party
(other than (i) Governmental Authorizations listed in SCHEDULE 4.11 and (ii)
leases of real property listed in SCHEDULE 4.15) with respect to which the
aggregate amount reasonably expected to be received or paid by the Company
thereunder exceeds $50,000.
"MATERIALS" shall mean pollutants, contaminants, or chemicals, or
industrial, hazardous, or toxic materials, substances or wastes, and includes,
without limitation, petroleum products and their constituent parts.
"MULTIEMPLOYER PLAN" shall have the meaning set forth in ERISA
Sections 3(37)(A) and 4001(a)(3).
"NOTICE OF CLAIM" shall have the meaning set forth in SECTION 9.1.
"OBJECTION NOTICE" shall have the meaning set forth in SECTION 2.4(b).
"ORDER" shall mean any award, decision, injunction, judgment, order,
decree, ruling or verdict entered, issued, made or rendered by any court,
administrative agency or other Governmental Body or by any arbitrator.
"ORDINARY COURSE OF BUSINESS" shall describe any action taken by a
Person if:
(a) such action is consistent with the past practices of such Person
and is taken in the ordinary course of the normal day-to-day operations of
such Person; and
(b) such action is not required to be authorized by the board of
directors of such Person (or by any Person or group of Persons exercising
similar authority) and is not required to be authorized by the parent
company (if any) of such Person.
"ORGANIZATIONAL DOCUMENTS" shall mean (a) the articles or certificate
of incorporation, all certificates of determination and designation, and the
bylaws of a corporation; (b) the partnership agreement and any statement of
partnership of a general partnership; (c) the limited partnership agreement and
the certificate or articles of limited partnership of a limited or limited
liability partnership; (d) the operating agreement, limited liability company
agreement and the certificate or articles of organization or formation of a
limited liability company; (e) any agreement governing the operation of a trust;
(f) any charter or similar document adopted or filed
7
<PAGE>
in connection with the creation, formation or organization of any other Person;
and (g) any amendment to any of the foregoing.
"OTHER BENEFIT PLANS" shall mean any written or oral plan, contract,
or other arrangement of benefit to any group of employees, including without
limitation, profit-sharing, deferred compensation, stock purchase, stock option,
severance or termination pay, supplemental unemployment benefits or similar
arrangement.
"PARENT" shall mean Perry Judd's Holdings, Inc., a Delaware
corporation (formerly known as Perry-Judd's Incorporated) and the sole
stockholder of the Seller.
"PBGC" shall have the meaning set forth in SECTION 4.21(j).
"PENSION PLAN" shall have the meaning set forth in ERISA Section
3(2)(A).
"PERSON" shall mean any individual, corporation (including any
non-profit corporation), general, limited or limited liability partnership,
limited liability company, joint venture, estate, trust, association,
organization, labor union or other entity or Governmental Body.
"PLAN" shall have the meaning set forth in ERISA Section 3(3).
"POST-CLOSING PARTIAL PERIOD" shall have the meaning set forth in
SECTION 9.7(b).
"PRE-CLOSING BALANCE SHEET" shall have the meaning set forth in
SECTION 2.3(b).
"PRE-CLOSING PARTIAL PERIOD" shall have the meaning set forth in
SECTION 9.7(a).
"PROCEEDING" shall mean any action, arbitration, audit, hearing,
proceeding, investigation, litigation or suit (whether civil, criminal,
administrative, investigative or informal or at law or in equity) commenced,
brought, conducted or heard by or before, or otherwise involving, any
Governmental Body or arbitrator.
"PROPOSED ACQUISITION" shall have the meaning set forth in SECTION
6.6.
"PURCHASER" shall have the meaning set forth in the first paragraph of
this Agreement.
"PURCHASER CLOSING DOCUMENTS" shall have the meaning set forth in
SECTION 5.2.
"RCRA" shall mean the Resource Conservation and Recovery Act, 42
U.S.C. Section 6901 et seq., as amended.
"RELEASE" shall mean and include any spilling, leaking, pumping,
pouring, injecting, emitting, discharging, depositing, escaping, leaching,
migrating, dumping or other releasing into the Environment or the workplace,
whether intentional or unintentional, including without limitation as defined in
any Environmental Law.
8
<PAGE>
"REPRESENTATIVE" shall mean any officer, director, principal,
attorney, agent, employee or other representative.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.
"SELLER" shall have the meaning set forth in the first paragraph of
this Agreement.
"SELLER CLOSING DOCUMENTS" shall have the meaning set forth in SECTION
4.4.
"SELLER'S ACCOUNTANT" shall have the meaning set forth in SECTION
2.4(b).
"SHARES" shall have the meaning set forth in the Recitals.
"STRADDLE PERIOD" shall have the meaning set forth in SECTION 9.7(b).
"TARGET WORKING CAPITAL" shall have the meaning set forth in SECTION
2.3(a).
"TAX" or "TAXES" shall mean any federal, state, local, foreign or
other tax, levy, impost, fee, assessment or other governmental charge, including
without limitation income, estimated income, gross receipts, business,
occupation, franchise, property, payroll, personal property, sales, transfer,
use, employment, commercial rent, occupancy, franchise or withholding taxes, and
any premium, together with any interest, penalties and additions in connection
with the foregoing.
"TAX RETURN" shall mean any return (including any information return),
report, statement, schedule, notice, form or other document or information filed
with or submitted to, or required to be filed with or submitted to, any
Governmental Body in connection with the determination, assessment, collection
or payment of any Tax or in connection with the administration, implementation
or enforcement of, or compliance with, any Legal Requirement relating to any
Tax.
"THIRD PARTY CLAIM" shall have the meaning set forth in SECTION 9.3.
"TRUSTEE" shall have the meaning set forth in SECTION 7.12.
"WARN ACT" shall mean the Worker Adjustment and Retraining
Notification Act of 1988.
"WELFARE PLAN" shall have the meaning set forth in ERISA Section 3(1).
ARTICLE II
PURCHASE AND SALE OF STOCK
9
<PAGE>
2.1 TRANSFER OF STOCK. Upon the terms and subject to the conditions
set forth herein, on the Closing Date the Seller shall sell, convey, transfer,
assign and deliver to the Purchaser, and the Purchaser shall purchase from the
Seller, the Shares, free and clear of any Encumbrance.
2.2 CONSIDERATION. Upon the terms and subject to the conditions set
forth herein, in consideration for the transfer of the Shares pursuant to
SECTION 2.1 of this Agreement, on the Closing Date the Purchaser shall pay to
the Seller the aggregate amount of Thirty Million Five Hundred Thousand Dollars
($30,500,000) in cash (the "INITIAL CASH CONSIDERATION"), subject to the
adjustments set forth in SECTION 2.3 and SECTION 2.4 below. On the Closing
Date, the Purchaser shall pay to the Seller the aggregate amount of the Initial
Cash Consideration increased or decreased, as applicable, by the Estimated
Adjustment Amount determined in accordance with SECTION 2.3(b) and subject to
further adjustment as set forth in SECTIONS 2.3 and 2.4 below, and paid by wire
transfer of immediately available funds to an account designated by the Seller
at least two (2) days prior to the Closing. The Initial Cash Consideration, as
adjusted pursuant to SECTION 2.3 and SECTION 2.4 below, is referred to herein as
the "CONSIDERATION."
2.3 ADJUSTMENTS TO CONSIDERATION.
(a) ADJUSTMENT FORMULA. The Initial Cash Consideration shall be
subject to adjustment as follows: (i) if (x) the current assets of the
Company excluding receivables due from Affiliates and all prepaid expenses
in connection with the Acquisition, minus (y) the current liabilities of
the Company excluding payables to Affiliates and that portion of funded
indebtedness included in current liabilities, determined in accordance with
GAAP, subject to normal, recurring year-end adjustments as if the Company's
fiscal year-end ended on the Closing Date (as so determined, the "ADJUSTED
WORKING CAPITAL") immediately prior to the Closing Date prior to giving
effect to the Acquisition, is less than $4,624,000 (the "TARGET WORKING
CAPITAL," as set forth on SCHEDULE II attached hereto), the Initial Cash
Consideration shall be reduced by an amount equal to such deficiency; (ii)
if the Adjusted Working Capital immediately prior to the Closing Date prior
to giving effect to the Acquisition is in excess of the Target Working
Capital, the Initial Cash Consideration shall be increased by an amount
equal to such excess; (iii) the Initial Cash Consideration shall be
increased by that amount equal to the aggregate capital expenditures, if
any, actually made by the Company during the period from March 31, 1998
through and including the Closing Date, as to those items set forth on
SCHEDULE III attached hereto (the "CAPITAL EXPENDITURES AMOUNT") and (iv)
the Initial Cash Consideration shall be increased by the amounts necessary
to reimburse the Seller for the incremental Taxes incurred or to be
incurred by the Seller as a result of the Elections made in accordance with
SECTION 9.7(f) below (the "ELECTIONS AMOUNT"). The amount of such
adjustment to the Initial Cash Consideration is hereinafter referred to as
the "ADJUSTMENT AMOUNT." By way of illustration, the Adjusted Working
Capital of the Company determined in the manner required in this SECTION
2.3(a) based on the Interim Financials, was $4,624,000 as set forth on
SCHEDULE II attached hereto.
(b) INTERIM ADJUSTMENT. Not less than five (5) business days prior
to the Closing Date, the Company shall deliver to the Purchaser a balance
sheet for the Company as of June 30, 1998 (the "PRE-CLOSING BALANCE
SHEET"), together with a
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calculation of the estimated Company Adjustment Amount determined based
upon the Pre-Closing Balance Sheet. The Pre-Closing Balance Sheet shall be
an unaudited balance sheet prepared by the Company, consistent with the
Accounting Principles. The sum of the estimated Company Adjustment Amount
and the Interim Elections Amount is the "ESTIMATED ADJUSTMENT AMOUNT".
(c) FINAL ADJUSTMENT. In the event that there is any difference
between the Estimated Adjustment Amount and the Adjustment Amount (as
calculated pursuant to SECTION 2.4 below), the amount of such difference
shall be paid to the Purchaser in the event that the Adjustment Amount is
less than the Estimated Adjustment Amount or by the Purchaser in the event
that the Adjustment Amount is more than the Estimated Adjustment Amount.
Any amount required to be paid in accordance with this SECTION 2.3(c) shall
be paid by certified or bank check or wire transfer to a bank account
designated by the other party on or before the fifth business day following
the final determination of the Adjustment Amount under SECTION 2.4.
2.4 POST-CLOSING AUDIT.
(a) The determination of the Adjustment Amount (other than the Final
Elections Amount, the "COMPANY ADJUSTMENT AMOUNT") shall be made in
accordance with GAAP, applied consistently with the practices applied in
the preparation of the Interim Financials, subject to normal year-end
adjustments as if the fiscal year of the Company ended on the Closing Date,
prior to giving effect to the Acquisition (the "ACCOUNTING PRINCIPLES").
(b) The Purchaser will cause the Company to prepare and deliver to
the Seller, within ninety (90) calendar days after the Closing Date, a
balance sheet of the Company immediately prior to the Closing Date (the
"CLOSING BALANCE SHEET"), and the Company's calculation of the Adjusted
Working Capital immediately prior to the Closing Date (the "COMPANY'S
COMPUTATION"), all as audited by Ernst & Young LLP (the "COMPANY'S
ACCOUNTANT") and all as prepared in accordance with the Accounting
Principles. The Seller will have sixty (60) days after receipt of the
Company's Computation to review and deliver a written notice of objection
(the "OBJECTION NOTICE") to the Company. The Objection Notice shall state
each item to which the Seller takes exception; PROVIDED, HOWEVER, that the
Seller's only bases for such objection shall be (i) that an item has not
been prepared in accordance with the Accounting Principles or (ii) a
computational error. The Objection Notice shall specify in reasonable
detail the nature and amount of any such exception. Any amounts not
disputed in the Objection Notice shall be paid promptly in accordance with
SECTION 2.3(c). In connection with such review, the Seller and Deloitte &
Touche LLP (the "SELLER'S ACCOUNTANT") will have the right to review the
methods used in the preparation of the Closing Balance Sheet, including the
right to review all work papers related to the review by the Company's
Accountant, and to confer with the Company and the Company's Accountant.
If the Seller does not provide an Objection Notice to the Company within
such thirty (30) days after receipt of the Closing Balance Sheet and the
Company's Computation, the Seller will be deemed to have accepted and
agreed to the Company's Computation as the Company Adjustment Amount. If
the Seller delivers an Objection Notice to the
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Company within such time period, then within thirty (30) days after the
Objection Notice is received by the Company, the Seller and the Purchaser
shall (i) meet to consider such objections and may agree to revise the
Company's Computation, in which case the amount so agreed will be the
Company Adjustment Amount and will be binding on the Seller and the
Purchaser, or (ii) specify that an independent firm of public accountants
of nationally recognized standing (the "INDEPENDENT ACCOUNTANT") will
review the Company's Computation and the Objection Notice and report to the
Company and the Seller the Independent Accountant's determination of the
Company Adjustment Amount, which determination will be made within thirty
(30) days after the date that the Independent Accountant receives the
Company's Computation and the Objection Notice. Such determination by the
Independent Accountant will be final and binding on the Purchaser, the
Seller and the Company.
(c) Prior to the later of (i) ninety (90) calendar days after the
Closing Date and (ii) ten (10) calendar days after the final determination
of the Company Adjustment Amount (in accordance with SECTION 2.4(b)), the
Purchaser shall deliver to the Seller the final calculation of the
Elections Amount (the "FINAL ELECTIONS AMOUNT"). The Purchaser's
calculation of the Final Elections Amount shall be made by revising
SCHEDULE IV attached hereto based only on the Closing Balance Sheet and the
Company Adjustment Amount, in each case as finally determined under this
SECTION 2.4. In no event shall the Final Elections Amount be less than
Zero Dollars ($0) and in no event shall the Purchaser's calculation of the
Final Elections Amount require that the Seller pay to the Purchaser an
amount greater than the Interim Elections Amount calculated in accordance
with SECTION 2.3(b).
The Seller may object to the Purchaser's calculation of the Final
Elections Amount by delivery of an Objection Notice prepared and delivered
in accordance with SECTION 2.4(b) above. The Seller's only bases for
objecting to the Purchaser's calculation of the Final Elections Amount
shall be (i) that an item has not been included in such calculation
consistent with SCHEDULE IV or in accordance with the terms of this
Agreement or (ii) a computational error. Any amounts not disputed in the
Objection Notice shall be paid promptly in accordance with SECTION 2.3(C).
In connection with such review, the Seller and the Seller's Accountant
shall have the right to review the methods used in the preparation of the
Final Elections Amount. If the Seller does not provide an Objection Notice
to the Purchaser within such thirty (30) days after receipt of the Final
Elections Amount, the Seller will be deemed to have accepted and agreed to
the Final Elections Amount. If the Seller delivers an Objection Notice to
the Purchaser within such time period, then within thirty (30) days after
the Objection Notice is received by the Purchaser, the Seller and the
Purchaser shall (i) meet to consider such objections and may agree to
revise the Final Elections Amount, in which case the amount so agreed will
be the Final Elections Amount and will be binding on the Seller and the
Purchaser, or (ii) specify that an Independent Accountant will review the
Final Elections Amount and the Objection Notice and report to the Purchaser
and the Seller the Independent Accountant's determination of the Final
Elections Amount, which determination will be made within thirty (30) days
after the date that the Independent Accountant receives the Final Elections
Amount and the Objection Notice. Such determination by the
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Independent Accountant will be final and binding on the Purchaser, the
Seller and the Company.
(d) All of the fees and expenses of the Independent Accountant, if
any, shall be paid equally by the Purchaser, on the one hand, and the
Seller, on the other hand; PROVIDED, HOWEVER, that, if the Independent
Accountant determines that either party's position is totally correct, then
the other party shall pay one hundred percent (100%) of the costs and
expenses incurred by the Independent Accountant in connection with any such
determination.
ARTICLE III
CLOSING
3.1 CLOSING. Upon the terms and subject to the conditions set forth
herein, the closing of the Acquisition (the "CLOSING") shall be held at 10:00
a.m. local time on the Closing Date at the offices of Brobeck, Phleger &
Harrison LLP at 1633 Broadway, 47th Floor, New York, New York 10019 unless the
parties hereto otherwise agree.
3.2 DELIVERIES AT CLOSING.
(a) CONSIDERATION. The Purchaser will deliver to the Seller the
Consideration in accordance with the terms of ARTICLE II hereof.
(b) STOCK CERTIFICATES. At the Closing, the Seller shall deliver to
the Purchaser certificates evidencing all of the Shares, free and clear of
any Encumbrances, duly endorsed in blank for transfer or accompanied by
stock powers duly executed in blank.
(c) OTHER DELIVERIES OF THE PURCHASER. In addition to the delivery
of the Consideration in accordance with SECTION 3.2(a) hereof, the
Purchaser shall have executed (where applicable) and delivered to the
Seller (or shall have caused to be executed and delivered by the
appropriate Person), the following:
(i) a copy of the Articles of Incorporation of the Purchaser
which is certified as of a recent date by the Secretary of State of the
Commonwealth of Pennsylvania;
(ii) a customary certificate issued by the Secretary of State of
the Commonwealth of Pennsylvania certifying to such matters as the due
incorporation and good standing of, and payment of all applicable franchise
taxes by the Purchaser;
(iii) a certificate of the Secretary of the Purchaser,
certifying that the attached copies of the by-laws of the Purchaser and the
resolutions of its board of directors authorizing the execution of this
Agreement and the transactions contemplated hereby are true, correct and
complete copies and are each in full force and effect and have
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not been amended or modified, and that the officers of the Purchaser are
those persons named in the certificate;
(iv) a certificate dated as of the Closing Date signed by the
president, chief executive officer or senior vice-president of the
Purchaser certifying that all of the conditions contained in ARTICLE VIII
have been fulfilled prior to or on the Closing Date; and
(v) such other certificates, documents and agreements in
connection with the consummation of the transactions contemplated hereby
which are reasonably requested by the Seller, all in form and substance
reasonably satisfactory to the Seller.
(d) OTHER DELIVERIES OF THE SELLER. In addition to those documents
and instruments which are required to be delivered to the Purchaser at the
Closing pursuant to SECTION 3.2(b) hereof, the Seller shall have executed
(where applicable) and delivered to the Purchaser (or shall have caused to
be executed and delivered by the appropriate Person), the following:
(i) a copy of the Certificate of Incorporation or Articles of
Incorporation of both the Seller and the Company, each of which is
certified as of a recent date by the Secretary of State of the State of
Maryland or the State of Delaware, as applicable;
(ii) customary certificates issued by the Secretary of State of
the State of Maryland and the State of Delaware certifying to such matters
as the due incorporation and good standing of, and payment of all
applicable franchise taxes by each of the Seller and the Company, as
applicable;
(iii) a certificate of the Secretary of each of the Seller and
the Company, certifying that the attached copies of the by-laws of the
Seller and the Company, respectively, and the resolutions of each of their
respective boards of directors authorizing the execution of this Agreement
and the transactions contemplated hereby are true, correct and complete
copies and are each in full force and effect and have not been amended or
modified, and that the officers of the Seller and the Company are those
persons named in such certificate;
(iv) a certificate dated as of the Closing Date signed by the
president, chief executive officer or executive vice president of the
Seller certifying that all of the conditions contained in ARTICLE VII have
been fulfilled prior to or on the Closing Date;
(v) all corporate record books of the Company, including minutes
of all meetings of stockholders, directors and committees of the board of
directors, if any, and the stock records of the Company and the
resignations of all of the directors and officers of the Company effective
as of the date prior to the Closing Date; and
(vi) such other certificates, documents and agreements in
connection with the consummation of the transactions contemplated hereby
which are reasonably requested by the Purchaser, all in form and substance
reasonably satisfactory to the Purchaser.
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(vii) A certificate of each appropriate Secretary of State
certifying the good standing of the Seller and the Company in its state of
incorporation and all states in which it is qualified to do business.
(e) OPINION OF THE PURCHASER'S COUNSEL. At the Closing, the
Purchaser shall deliver to the Seller an opinion of Dechert Price & Rhoads,
counsel to the Purchaser, dated as of the Closing Date, substantially in
the form of EXHIBIT A attached hereto and containing such qualifications,
limitations and assumptions as are reasonably acceptable to the Seller.
(f) OPINION OF THE SELLER'S COUNSEL. At the Closing, the Seller
shall deliver to the Purchaser an opinion of Brobeck, Phleger & Harrison
LLP, counsel to the Seller and the Company, dated as of the Closing Date,
substantially in the form of EXHIBIT B attached hereto and containing such
qualifications, limitations and assumptions as are reasonably acceptable to
the Purchaser. As to matters of Maryland law, such opinion may rely on an
opinion from local counsel.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
THE COMPANY AND THE SELLER
The Company and the Seller hereby, jointly and severally, represent
and warrant to the Purchaser that the following representations and warranties
are, as of the date hereof, and will be, as of the Closing Date, true and
correct:
4.1 CORPORATE ORGANIZATION AND STANDING.
(a) The Seller is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware and has all
corporate power and authority to own or lease its properties and to carry
on its business as presently conducted. The Seller is duly qualified and
in good standing as a foreign corporation duly authorized to conduct
business in all jurisdictions in which the failure to be so qualified could
reasonably be expected to have a Material Adverse Effect.
(b) The Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of Maryland and has all
corporate power and authority to own or lease its properties and to carry
on its business as presently conducted. The Company has delivered to the
Purchaser true, complete and correct copies of its Organizational
Documents. The Company is duly qualified and in good standing as a foreign
corporation duly authorized to conduct business in all jurisdictions in
which the failure to be so qualified could reasonably be expected to have a
Material Adverse Effect. SCHEDULE 4.1(b) accurately sets forth all
jurisdictions in which the Company is so qualified.
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4.2 CAPITALIZATION OF THE COMPANY.
(a) All of the authorized, issued and outstanding capital stock of
the Company, and the record and beneficial ownership thereof, is as set
forth on SCHEDULE 4.2(a) hereto. All issued and outstanding shares of
capital stock of the Company have been duly authorized and validly issued
and are fully paid and non-assessable and have not been issued in violation
of any preemptive or similar rights. No options, warrants, puts, calls,
conversion or other rights, agreements or commitments of any kind
obligating the Company, contingently or otherwise, to issue or sell any
shares of its capital stock of any class or any securities convertible into
or exchangeable for any such shares, are outstanding, and no authorization
therefor has been given. Except as to those Encumbrances set forth on
SCHEDULE 4.2(a) hereto, all of which will terminate upon transfer of the
Shares to the Purchaser, all of the Shares held by the Seller are held free
and clear of any Encumbrances.
(b) There are no preemptive or similar rights, and there are no
claims or any basis therefor, in either case whether by contractual
agreement, under applicable law or otherwise, on the part of any holder or
former holder of any class of securities of the Company in connection with
any transactions between the Company and any such holder involving any of
the securities of the Company.
4.3 NO SUBSIDIARIES. The Company does not own, beneficially or of
record, any capital stock of any corporation or other business entity nor does
the Company own, beneficially or of record, any partnership interests in any
general, limited or limited liability partnerships or any units or other
membership interests in any limited liability companies.
4.4 NO CONFLICT. Except as set forth on SCHEDULE 4.4, the execution
and delivery of this Agreement and the Seller Closing Documents (as defined in
SECTION 4.20) by each of the Seller and the Company, the consummation by the
Seller and the Company of the Acquisition in the manner contemplated herein and
compliance by the Seller and the Company with any of the provisions hereof, will
not (a) conflict with or result in any violation of or default under any
provision of the respective Organizational Documents of the Seller and the
Company or any resolution adopted by their respective boards of directors or
shareholders, (b) result in a breach of, or a default under, or give rise to any
right of termination, cancellation or acceleration under any of the terms,
conditions or provisions of any Material Contract, except for such breaches or
defaults or rights of termination, cancellation or acceleration as to which
requisite waivers or Consents listed on SCHEDULE 4.4 have been obtained or will
be obtained prior to the Closing Date or which could not reasonably be expected
to have a Material Adverse Effect, (c) violate any Order or Legal Requirement
applicable to either the Seller or the Company, or any of the businesses,
properties or assets of either the Seller or the Company or (d) contravene,
conflict with or result in a violation of, or give any Governmental Body or
other Person the right to challenge, the Acquisition or to exercise any remedy
or obtain any relief under, any Legal Requirement or any Order to which the
Company or any of the assets owned or used by the Company, may be subject.
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4.5 FINANCIAL INFORMATION.
(a) The Company has delivered to the Purchaser the unaudited balance
sheet of the Company as of December 31, 1997 and the related statement of
income and statement of cash flows for the year then ended (the "FINANCIAL
STATEMENTS"). The Financial Statements are included as SCHEDULE 4.5(a)
hereto. The Financial Statements present fairly the financial condition of
the Company at the date indicated and the results of its operations for the
period indicated, subject, however, to normal, recurring year-end
adjustments consistent with past practices (which will not be material in
the aggregate); PROVIDED, HOWEVER, that the Financial Statements omit
footnotes required under GAAP.
(b) The Company has delivered to the Purchaser the balance sheet of
the Company as of March 31, 1998 (the "INTERIM BALANCE SHEET"), and the
related statement of income for the period then ended, examined and
reported upon by Deloitte & Touche LLP ("INTERIM FINANCIALS"). The Interim
Financials are included as SCHEDULE 4.5(b) hereto. The Interim Financials
have been prepared in accordance with GAAP and present fairly the financial
condition of the Company at the date indicated and the results of its
operations for the period indicated.
4.6 UNDISCLOSED LIABILITIES. The Company has no Liabilities except
(i) as set forth in SCHEDULE 4.6 or on any other Schedule hereto, or reflected
or reserved against in either the Interim Financials (or the notes thereto) or
the Interim Balance Sheet; and (ii) for current Liabilities incurred in the
Ordinary Course of Business since the date of the Interim Financials.
4.7 ACCOUNTS RECEIVABLE. Except as set forth in SCHEDULE 4.7, the
accounts receivable and all other receivables shown on the Interim Financials
and the Interim Balance Sheet and all receivables acquired or generated by the
Company since March 31, 1998 (in each case subject to reserves for
non-collectibility as reflected on the Interim Financials, the Interim Balance
Sheet or as adjusted, in the Ordinary Course of Business of the Company for
operations and transactions through the Closing Date) ("ACCOUNTS RECEIVABLE"),
(a) are reflected properly on the books and Interim Financials of the Company,
and (b) are valid receivables subject, to the Knowledge of either the Company or
the Seller, to no set-offs or counterclaims. The reserves for
non-collectibility referenced above have been reflected on the Interim
Financials or the Interim Balance Sheet in accordance with GAAP. The Company
has provided the Purchaser with a true, complete and correct schedule of the
names of the twenty (20) largest customers of the Company in terms of sales
volume, for the year to date period ended April 30, 1998.
4.8 INVENTORY. Except as set forth on SCHEDULE 4.8, the inventories
reported on the Interim Financials and the Interim Balance Sheet are stated at
the lower of cost (first in, first out method) or market in accordance with
GAAP. Except as set forth in SCHEDULE 4.8, all inventories used in or relating
to the conduct of the business of the Company are usable or saleable in the
Ordinary Course of Business (subject to reserves for obsolescence as reflected
on the Interim Financials of the Company and as adjusted, in the Ordinary Course
of Business, for operations and transactions through the Closing Date) and are
owned by the Company free and clear of any Encumbrance. Such reserves have been
reflected on the books and Interim Financials of the Company in accordance with
GAAP.
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4.9 INSURANCE. SCHEDULE 4.9 hereto completely and accurately lists
all primary, excess and umbrella policies, bonds and other forms of insurance
currently owned or held by or on behalf of and/or providing insurance coverage
to the Company, or its properties, assets and operations, or any of its
directors, officers, agents or employees. No notice of termination or
cancellation of any such policy has been received by the Company, all such
policies are in full force and effect and, with respect to all such policies,
all premiums currently payable or previously due have been paid. Except as set
forth on SCHEDULE 4.9, none of such policies contains any provision that would
permit the termination, limitation, lapse, exclusion or change in the terms of
coverage (including, without limitation, a change in the limits of liability) by
reason of the execution and delivery of this Agreement or the consummation of
the Acquisition. Complete and accurate copies of all such policies and related
documentation have been provided to the Purchaser.
4.10 LITIGATION. Except as set forth on SCHEDULE 4.10 hereto, the
Company has not received written notice of any Proceeding, pending or threatened
against, or affecting the properties, assets or operations of the Company that
could reasonably be expected, either individually or in the aggregate, to have a
Material Adverse Effect on the Company or that questions the validity of this
Agreement or of any action taken or to be taken in connection herewith or the
consummation of the Acquisition. There are no Orders currently in force (a)
which could reasonably be expected, either individually or in the aggregate, (i)
to result in any material liability on the part of the Company or (ii) to have a
Material Adverse Effect on the Company; or (b) with respect to which the Company
is in default.
4.11 GOVERNMENTAL AUTHORIZATIONS; COMPLIANCE WITH LAWS. The Company
owns, holds or possesses in its own name, all Governmental Authorizations (other
than those the absence of which could not reasonably be expected to have a
Material Adverse Effect) which are necessary to entitle it to use its corporate
name, to own or lease, operate and use its assets and properties and to carry on
and conduct its business and operations as presently conducted. All such
Governmental Authorizations, and the relevant issuing agency, are listed on
SCHEDULE 4.11 hereto. Each Governmental Authorization listed on SCHEDULE 4.11
is valid, subsisting and in full force and effect and, to the best of the
Company's or the Seller's Knowledge, no suspension or cancellation of any such
Governmental Authorization is pending or threatened and there is no basis for
believing that any such Governmental Authorization subject to renewal will not
be renewed upon expiration.
Except as set forth on SCHEDULE 4.11 hereto, the Company is not in
violation of or default under any Governmental Authorization, any Legal
Requirement applicable to it, which could reasonably be expected, either
individually or in the aggregate, to have a Material Adverse Effect.
4.12 TAX MATTERS. The Company has filed all Tax Returns required to
be filed and will have filed prior to the Closing Date all Tax Returns required
to have been filed by it on or before the Closing Date, and each such return is
or will be true, correct and complete in all material respects. The Company has
paid all Taxes when required to be paid. The reserves for Taxes reflected in
the Interim Financials and the Interim Balance Sheet are sufficient for the
payment of all unpaid Taxes (whether or not currently disputed) accrued through
the date thereof and nothing has occurred subsequent to such dates to make any
of such reserves inadequate.
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Except as set forth on SCHEDULE 4.12 hereto, the Company has not received
written notice that the Internal Revenue Service or any other taxing authority
has asserted against the Company any deficiency or claim for additional Taxes
which has not been fully paid or finally settled, and any such deficiency or
assessment shown on such SCHEDULE 4.12 is being contested in good faith through
appropriate proceedings. No issue has been raised in writing by any federal,
state, local or foreign taxing authority in any examination of the Company
which, by application of the same or similar principles to similar transactions
by the Company could reasonably be expected to result in a proposed deficiency
for any period. To the best of the Company's Knowledge, no state of facts
exists or has existed which would constitute grounds for the assessment of any
Liability for Taxes with respect to the periods prior to the Closing Date which
have not been audited by any taxing authority. No power of attorney has been
executed by the Company with respect to any matter relating to Taxes which is
currently in force. The Company is not a party to any Contract or other
arrangement that would result, separately or in the aggregate, in the payment of
any "EXCESS PARACHUTE PAYMENTS" within the meaning of IRC Section 280G. The
Company has not filed (nor will it file prior to the Closing Date) a consent
pursuant to IRC Section 341(f) and the Company has not agreed to have IRC
Section 341(f) apply to any disposition of a subsection (f) asset (as such term
is defined in IRC Section 341(f)(4)) owned by the Company. Except as set forth
on SCHEDULE 4.12, the Company has not granted or requested, as the case may be,
any waiver of any statute of limitations with respect to, or any extension of a
period for the assessment or filing of, any Tax. Except as disclosed on
SCHEDULE 4.12, no Tax Return of the Company or of any consolidated, combined, or
unitary group that includes the Company is currently the subject of examination
by a taxing authority and the Company has not received notice from any taxing
authority of its intent to conduct such an examination. No claim has been made
by a taxing authority in which the Company does not file Tax Returns that the
Company is or may be subject to taxation by that jurisdiction. Except as
disclosed on SCHEDULE 4.12, the Company has never (a) joined in or been required
to join in the filing of a consolidated, combined or unitary federal, state, or
local income Tax Return or (b) been the subject of a closing agreement or ruling
with respect to Taxes that has continuing effect. Neither the Company nor the
Seller is a foreign person within the meaning of IRC Section 1445 and the
regulations promulgated thereunder. The Company does not own an interest in any
entity characterized as a partnership for federal income tax purposes. True
copies of the pro forma consolidating federal income Tax Returns and state
income Tax Returns of the Company for the taxable years ended December 31, 1992
through December 31, 1996 have been delivered to the Purchaser.
4.13 BROKERS; FINDERS. Except as set forth on SCHEDULE 4.13, the fees
of which shall be the sole responsibility of the Seller, neither the Seller nor
the Company has retained any broker or finder in connection with this Agreement
or the Acquisition so as to give rise to any valid claim for any brokerage or
finder's commission, fee or similar compensation.
4.14 ABSENCE OF CERTAIN CHANGES. Except as set forth on SCHEDULE
4.14, (a) since March 31, 1998, no event, occurrence or development has occurred
with respect to the Company which has had, or could reasonably be expected to
have, a Material Adverse Effect or (b) since the date of the Interim Balance
Sheet, the Company has not taken any action which would violate SECTION 6.2
hereof.
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4.15 PROPERTIES AND ASSETS. SCHEDULE 4.15 hereto sets forth a
complete and correct list of (a) all real property owned by the Company, (b) any
lease pursuant to which the Company is the lessee of real property and (c) each
item of tangible personal property used in or relating to the conduct of the
business of the Company that has been capitalized for accounting purposes. The
Company has (a) good and valid title to all of its personal assets and property,
including, without limitation, all those listed on SCHEDULE 4.15, reflected in
the Interim Financials or acquired after the date of the Interim Balance Sheet
(except for inventories and other assets sold or otherwise disposed of in the
Ordinary Course of Business since such date), and (b) good and marketable title
to all the real property listed in SCHEDULE 4.15 as owned by it, and valid
leasehold interests in all real properties listed in SCHEDULE 4.15 as leased by
it, in each case free and clear of all Encumbrances other than (i) those
reflected in the Interim Financials or listed in SCHEDULE 4.15 and (ii) those
which do not, individually or in the aggregate, (x) materially interfere with
the operation of its business as presently conducted or (y) otherwise have, or
could reasonably be expected to have, a Material Adverse Effect. The Company
enjoys peaceful and undisturbed possession under all real property leases under
which it operates. The Company has not received written notice that the
ownership or lease of real property by the Company and the use thereof, as
presently used by the Company, violates any local zoning or similar land use
laws or governmental regulations. The Company has not received written notice
of violation of or noncompliance with any covenant, condition, restriction,
order or easement affecting the real property owned or leased by the Company.
The Company has not received written notice of condemnation or threatened
condemnation affecting the real property owned or leased by it. The Company has
made available to the Purchaser complete and correct copies of the lease
agreements referred to in SCHEDULE 4.15. The personal property, equipment,
plants, buildings, structures, facilities and all other assets and properties
that will be owned or leased by the Company after the Closing Date will include
all personal property, equipment, plants, buildings, structures, facilities and
all other assets and properties necessary to permit the Company to conduct its
business as presently conducted, except for such changes as are permitted by
SECTION 6.2.
4.16 MATERIAL CONTRACTS. SCHEDULE 4.16 hereto lists all of the
Material Contracts to which the Company is a party, or by which it is bound.
The Company has made available to the Purchaser true, complete and correct
copies of all Material Contracts. Neither the Company nor, to the Knowledge of
the Company or the Seller, any other Person is in default under any Material
Contract which default has had, or could reasonably be expected to have
individually or in connection with any other such default, a Material Adverse
Effect on the Company. To the Company's and the Seller's Knowledge, there is no
basis for any default or claim under any Material Contract that could reasonably
be expected to have, individually or in connection with any other such default,
a Material Adverse Effect on the Company, or event which, with the giving of
notice, the passage of time, or otherwise could reasonably be expected,
individually or in connection with any other such default, to have a Material
Adverse Effect on the Company.
4.17 INTELLECTUAL PROPERTY RIGHTS.
(a) There are no trade names, trademarks, patents, copyrights,
service marks, patent applications or patent licenses owned by or
registered in the name of the Company or necessary to the business of the
Company other than those listed in SCHEDULE 4.17(a)
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hereto, which also lists (i) the federal or foreign registration (or
application) number and the date of registration (or application)
concerning registrations of any such trade names, trademarks, copyrights,
patents and any other registered trade right, and any and all applications
for any of the foregoing. The Company has delivered to the Purchaser true,
correct and complete copies of all registrations, applications and related
documents set forth on SCHEDULE 4.17(a)
(b) SCHEDULE 4.17(b) (i) lists all material intellectual property
rights owned by any third party which are not generally commercially
available and are currently used by the Company in the conduct of its
business and (ii) states whether such use is or will be pursuant to
license, sublicense, agreement or permission. The Company has delivered to
the Purchaser true and complete copies of all agreements and other
documents relating to the intellectual property rights set forth on
SCHEDULE 4.17(b).
(c) The Company owns or possesses adequate and enforceable licenses
or other rights to use (i) all intellectual property rights listed on
SCHEDULES 4.17(a) and 4.17(b), (ii) all computer software used by the
Company in the conduct of its business and (iii) all other trade names,
trademarks, patents, copyrights, service marks, all applications for any of
the foregoing, and all other trade secrets, designs, plans, specifications
and other intellectual property rights of every kind (whether or not
registered) that are used in, possessed by or necessary for the conduct of
its business (all of the items referred to in this SECTION 4.17(c) being
the "INTELLECTUAL PROPERTY").
(d) Entry into this Agreement and consummation of the Acquisition
will not impair the Company's ownership or use of the Intellectual
Property. No Person has a right to receive a royalty or similar payment in
respect of any item of Intellectual Property pursuant to any contractual
arrangements entered into by the Company other than as set forth on
SCHEDULE 4.17(b) hereto. The Company has not granted any license,
sublicense or other similar agreement relating in whole or in part to any
Intellectual Property other than as set forth on SCHEDULE 4.17(b) hereto.
The Company has not received written notice that the Company's use of any
item of Intellectual Property is interfering with, infringing upon or
otherwise violating the rights of any third party in or to such
Intellectual Property, and no written notice has been received by the
Company alleging that the use or proposed use of any item of Intellectual
Property by the Company infringes upon or otherwise violates any rights of
a third party in or to such Intellectual Property and, to the Knowledge of
the Company and the Seller, no Proceedings have been instituted or
threatened against the Company alleging any such claim. The Company and
the Seller have no Knowledge of any infringement, interference or other
violation by any third person of the Company's rights in and to any of the
Intellectual Property.
4.18 LABOR MATTERS. Except as set forth on SCHEDULE 4.18, there are
(a) not in existence or threatened any labor strikes, disputes, slowdowns,
lockouts or work stoppages by employees of the Company, and during the past five
(5) years there has not been any such action in existence or, to the Knowledge
of the Company and the Seller, threatened, (b) no collective bargaining
agreements to which the Company is a party, nor any other Contract or work rules
or practices agreed to, with any labor organization or employee association, (c)
no grievance or
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arbitration Proceedings arising out of any arrangements, formal or informal, to
which the Company is a party relating to employment policies, (d) no unfair
labor practice charges or complaints against the Company pending or threatened,
before the National Labor Relations Board or any similar Governmental Body, (e)
no charges with respect to or relating to the Company pending or threatened
before the Equal Employment Opportunity Commission or any other Governmental
Body responsible for the prevention of unlawful employment practices, (f) no
representation of the employees of the Company by any labor organization, and to
the Knowledge of the Company and the Seller, no union organizing activities
among such employees nor, to the Company's and the Seller's Knowledge, any
question concerning such representation concerning such employees, (g) no
notices received by the Company of the intent of any Governmental Body
responsible for the enforcement of any labor or employment laws to conduct an
investigation with respect to or relating to the Company, nor, to the Company's
and the Seller's Knowledge, is any such investigation in progress, (h) no
written personnel policies, rules or procedures applicable to any employees of
the Company, except as set forth in employee handbooks, true, correct and
complete copies of which have been provided to the Purchaser, nor any
representation regarding longevity of employment to any such employee, or (i) no
instances of noncompliance by the Company with any applicable Legal Requirement
respecting employment or employment practices, terms and conditions of
employment, wages, hours of work and, to the Company's and the Seller's
Knowledge, occupational safety and health, except where such noncompliance would
not individually or in the aggregate have, or could not reasonably be expected
to have, a Material Adverse Effect. Since the enactment of the WARN Act, the
Company has not effectuated or experienced (x) a "PLANT CLOSING" (as defined in
the WARN Act) affecting any site of employment or one (1) or more facilities or
operating units within any site of employment or facility used by the Company or
(y) a "MASS LAYOFF" (as defined in the WARN Act) affecting any site of
employment or facility used by the Company, nor has the Company been affected by
any transaction or engaged in layoffs or employment terminations sufficient in
number to trigger application of any similar state, local or foreign law.
4.19 NO CONSENT. Other than as set forth on SCHEDULE 4.19 hereto, and
other than compliance with the applicable requirements of the HSR Act, no
Consent of any Person is required to be obtained nor notification given by the
Company in connection with the execution and delivery of this Agreement by the
Company, or the consummation by the Company of the Acquisition, or the
performance by the Company of any of the provisions hereof, other than any
Consent where the failure of the Company to obtain such Consent, either in any
case or in the aggregate, could not reasonably be expected to have a Material
Adverse Effect on the Company.
4.20 AUTHORIZATION. Each of the Seller and the Company has all
requisite corporate power and authority to executive, deliver and perform this
Agreement and the other Acquisition Documents to which the Company or the Seller
is a party (the "SELLER CLOSING DOCUMENTS") and to consummate the Acquisition,
and each of this Agreement and the Seller Closing Documents has been duly
executed and delivered by each of the Seller and the Company pursuant to all
necessary corporate authorization and is the legal, valid and binding obligation
of the Seller and the Company, enforceable in accordance with its terms, except
as enforcement may be limited by equitable principles limiting the right to
obtain specific performance or other equitable remedies (whether raised in a
Proceeding at law or in equity), or by applicable bankruptcy or insolvency laws
and related decisions affecting creditors' rights generally.
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4.21 COMPLIANCE WITH ERISA.
(a) The only employee pension benefit plans (as defined in Section
3(2) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")), welfare benefit plans (as defined in Section 3(1) of ERISA),
bonus, stock purchase, stock ownership, stock option, deferred
compensation, incentive, severance, termination or other compensation plan
or arrangement, or other material employee fringe benefit plans presently
maintained by, or contributed to by the Company or any other employer (an
"ERISA AFFILIATE") that is, or at any relevant time was, together with the
Company, treated as a "SINGLE EMPLOYER" under IRC Section 414(b), 414(c) or
414(m), for the benefit of employees or former employees of the Company,
other than a multiemployer plan as defined in Section 3(37) of ERISA, are
those listed in SCHEDULE 4.21 (the "BENEFIT PLANS"), a true and complete
copy of each of which, and, where applicable, a copy of the most recent IRS
Determination Letter received, and the three most recent IRS Forms 5500
filed, with respect to each such Benefit Plan, has been furnished to
Purchaser.
(b) To the best of the Company's Knowledge or any ERISA Affiliate's
Knowledge, the Company and, with respect to the Benefit Plans each ERISA
Affiliate, and each of the Benefit Plans, are in compliance in all material
respects with the applicable provisions of ERISA, and those IRC provisions
applicable to the Benefit Plans.
(c) Except as may be disclosed in SCHEDULE 4.21, all contributions
to, and payments from, the Benefit Plans which may have been required to be
made in accordance with the Benefit Plans and, when applicable, Section 302
of ERISA or IRC Section 412, have been timely made. All such contributions
to the Benefit Plans, and all payments under the Benefit Plans, except
those to be made from a trust qualified under IRC Section 401(a), for any
period ending before the Closing Date that are not yet, but will be,
required to be made are properly accrued and reflected on the Balance Sheet
or are disclosed on SCHEDULE 4.21. No asset of the Company or any ERISA
Affiliate, is subject to any lien under Code Section 401 (a)(29), ERISA
Section 302(f) or Code Section 412(n), ERISA Section 4068 or arising out of
any action filed under ERISA Section 4301(b).
(d) Except as indicated on SCHEDULE 4.21, all material reports,
returns and similar documents with respect to the Benefit Plans required to
be filed with any government agency or distributed to any Benefit Plan
participant have been duly and timely filed or distributed.
(e) The Company and each ERISA Affiliate have complied with the
notice and continuation coverage requirements of IRC Section 4980B and the
regulations thereunder with respect to each Benefit Plan that is, or was
during any taxable year of the Company or any ERISA Affiliate for which the
statute of limitations on the assessment of federal income taxes remains
open, by consent or otherwise, a group health plan within the meaning of
IRC Section 5000(b)(1).
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(f) Except as indicated on SCHEDULE 4.21, all of the Benefit Plans
which are pension benefit plans have received determination letters from
the Internal Revenue Service ("IRS") to the effect that such plans are
qualified and exempt from federal income taxes under IRC Sections 401(a)
and 501(a), respectively, of , as amended through December 31, 1994, and no
determination letter with respect to any Benefit Plan has been revoked nor
has the Company or any ERISA Affiliate received notice of threatened
revocation, nor has any Benefit Plan been amended in a manner that would
require security to be provided in accordance with IRC Section 401 (a)(29).
(g) To the best of the Company's Knowledge or any ERISA Affiliate's
Knowledge, each of the Benefit Plans has been administered at all times,
and in all material respects, in accordance with its terms except that in
any case in which any Benefit Plan is currently required to comply with a
provision of ERISA or of the IRC, but is not yet required to be amended to
reflect such provision, it has been administered in accordance with such
provision.
(h) To the best of the Company's Knowledge or any ERISA Affiliate's
Knowledge, except as indicated on SCHEDULE 4.21, there are no pending
investigations by any governmental agency involving the Benefit Plans, no
termination proceedings involving the Benefit Plans, and no threatened or
pending claims (except for claims for benefits payable in the normal
operation of the Benefit Plans), suits or proceedings against any Benefit
Plan or asserting any rights or claims to benefits under any Benefit Plan
which could give rise to any material liability, nor, to the best of the
Company's or any ERISA Affiliate's knowledge are there any facts which
could give rise to any material liability in the event of any such
investigation, claim, suit or proceeding.
(i) To the best of the Company's Knowledge or any ERISA Affiliate's
Knowledge, neither the Benefit Plans, the Company, any ERISA Affiliate, nor
any employee of the foregoing, any trusts created thereunder, nor any
trustee, administrator or other fiduciary thereof, has engaged in a
"PROHIBITED TRANSACTION" (as such term is defined in IRC Section 4975 or
Section 406 of ERISA) which could subject any thereof to the tax or penalty
on prohibited transactions imposed by such Section 4975 or the sanctions
imposed under Title 1 of ERISA. Except as indicated on SCHEDULE 4.21,
neither the Benefit Plans nor any such trust has been terminated nor have
there been any "REPORTABLE EVENTS" (as defined in Section 4043 of ERISA and
the regulations thereunder) with respect to either thereof.
(j) Neither the Company nor any ERISA Affiliate has incurred any
material liability to the Pension Benefit Guaranty Corporation ("PBGC")
with respect to any Benefit Plan subject to Title IV of ERISA, other than
for the payment of premiums, all of which have been paid when due. No
Benefit Plan has applied for or received a waiver of the minimum funding
standards imposed by IRC Section 412. The Company has furnished to
Purchaser the most recent actuarial report with respect to each Benefit
Plan that is a defined benefit pension plan, as defined by Section 3(35) of
ERISA. The information supplied to the actuary by the Company and its
ERISA Affiliates for use in preparing those reports was complete and
accurate and neither the Company nor any ERISA Affiliate has any reason to
believe that the conclusions expressed in those reports
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are incorrect. No event has occurred since the date of any such actuarial
report that had, or is likely to have, a materially adverse effect on the
ratio of plan assets to the actuarial present value of plan obligations for
accumulated benefits shown in such report.
(k) Set forth on SCHEDULE 4.21 are the unfunded liabilities and
projected costs, as of the date of this Agreement, of each of the Benefit
Plans that either will require payment by the Company or any ERISA
Affiliate as a result of the transactions contemplated by this Agreement or
that are to be continued by the Purchaser pursuant to any provision of this
Agreement for the period of such continuation. Unfunded liabilities
include, but are not limited to, (1) the excess of the liabilities,
determined using the accumulated benefit obligation methodology of
Statement of Financial Accounting Standards No. 87, of any Benefit Plan
subject to Title IV of ERISA over the fair market value of such Benefit
Plan's assets, (2) the amount of any unfunded deferred compensation and (3)
the actuarially determined present value of any obligation to provide
retiree medical or life insurance benefits. For the purposes of this
SECTION 4.21 unfunded liabilities and projected costs have been determined
by the Company and its actuaries using actuarial methods and assumptions
that are, singly and in the aggregate, reasonable taking into account
circumstances known to them on the date of this Agreement, and, except as
adjusted to satisfy the requirements that such assumptions be reasonable,
consistent with prior practice.
(l) At no time since January 1, 1992 has (i) the Company or (ii) any
ERISA Affiliate, incurred any liability which could subject the Purchaser
to material liability under Section 4062, 4063 or 4064 of ERISA.
(m) Except as indicated on SCHEDULE 4.21, at no time since December
31, 1991, has the Company or any ERISA Affiliate been required to
contribute to, or incurred any withdrawal liability, within the meaning of
Section 4201 of ERISA, to any multiemployer pension plan, within the
meaning of Section 3(37) of ERISA nor does the Company or any ERISA
Affiliate have any potential withdrawal liability arising from a
transaction described in Section 4204 of ERISA. All required
contributions, withdrawal liability payments or other payments of any type
that the Company or any ERISA Affiliate have been obligated to make to any
multiemployer plan have been duly and timely made. Any withdrawal
liability incurred with respect to any multiemployer plan has been fully
paid as of the date hereof. Neither the Company nor any ERISA Affiliate
has undertaken any course of action that could reasonably be expected to
lead to a complete or partial withdrawal from any multiemployer plan. Set
forth next to each multiemployer plan listed on SCHEDULE 4.21 which is to
be assumed by Purchaser is the amount of the withdrawal liability that
would be incurred by the Company or any ERISA Affiliate with respect to
such plan, under Section 4201 of ERISA, if the Company or any ERISA
Affiliate were to completely withdraw from such multiemployer plan on the
date hereof.
(n) Neither the Company nor any ERISA Affiliate has incurred or is
reasonably likely to incur any liability with respect to any plan or
arrangement that would be included within the definition of "Benefit Plan"
hereunder but for the fact that such plan or arrangement was terminated
before the date of this Agreement.
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(o) Except as listed on SCHEDULE 4.21, no payment which is or may be
made by from or with respect to any Benefit Plan, to any employee, former
employee, director or agent of the Company or any ERISA Affiliate, either
alone or in conjunction with any other payment, will or could properly be
characterized as an excess parachute payment under IRC Section 280G.
(p) There are no material pension, welfare, bonus, stock-purchase,
stock ownership, stock option, deferred compensation, incentive, severance,
termination or other compensation plan or arrangement, or other material
employee fringe benefit plan presently maintained by, or contributed to by
the Company, or any ERISA Affiliate for the benefit of any employee of the
Company or any ERISA Affiliate, including any such plan required to be
maintained or contributed to by the law of the relevant jurisdiction, which
would be described in (a) above, but for the fact that such plans are
maintained outside the jurisdiction of the United States.
4.22 ENVIRONMENTAL MATTERS.
(a) Except as set forth in SCHEDULE 4.22, the Company and the
properties and assets used in its business are in compliance with all
applicable Environmental Laws and, to the Knowledge of the Company, there
are no circumstances which may materially prevent or interfere with
compliance in the future. Except as set forth or referred to in SCHEDULE
4.22, in the last five (5) years, the Company has not received any
communication (whether written or, to the Knowledge of the Company, oral),
whether from a Governmental Body, citizen group, employee or otherwise,
that alleges that the Company or any of the properties or assets used in
its business is not in full compliance with Environmental Laws. The
Company holds all Environmental Permits necessary for the conduct of the
business and operations as currently conducted prior to the Closing Date.
The Company has made available to the Purchaser the Environmental Permits,
or copies thereof. Except as set forth on SCHEDULE 4.22, the Company is,
and has been for the previous five (5) years, in compliance with all
Environmental Permits except where the failure so to comply could not
reasonably be expected to have a Material Adverse Effect. The Company has
not been notified by any relevant Governmental Body that any Environmental
Permit will be modified, suspended or revoked or cannot be renewed in the
Ordinary Course of Business.
(b) Except as set forth on SCHEDULE 4.22, there is no Environmental
Notice that is pending or, to the Knowledge of the Company, threatened
against the Company. The Company has not received any written notice (nor
to its Knowledge, any oral notice) with respect to any Environmental Notice
pending or threatened against any Person whose liability for such
Environmental Notice may have been retained or assumed by or could
reasonably be imputed or attributed, in whole or in part, to the Company.
(c) Except as set forth on SCHEDULE 4.22, there are no past or
present actions, activities, circumstances, conditions, events or incidents
arising from the operation, ownership or use by the Company of any property
currently or, formerly owned, operated or used by the Company (or, to the
Knowledge of the Company, any entity formerly an affiliate of the Company),
including, without limitation, the Release of any Material into
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the Environment, that have formed or could reasonably be expected to form
the basis of any Environmental Notice against or with respect to the
Company.
(d) Except as set forth on SCHEDULE 4.22, to the Knowledge of the
Company, there have been no suspected or acknowledged Releases of Materials
at, from or onto any property adjacent to any property currently or
formerly owned, operated or used by the Company (or, to the Knowledge of
the Company, any entity formerly an affiliate of the Company).
(e) Without in any way limiting the generality of the foregoing, to
the Knowledge of the Company, (i) all underground storage tanks, and the
capacity and contents of such tanks, located on property owned, leased or
used by the Company are identified in SCHEDULE 4.22, (ii) except as
provided in SCHEDULE 4.22, there is no asbestos contained in or forming
part of any building, building component, structure or office space owned,
leased or used by the Company, (iii) except as provided in SCHEDULE 4.22,
no polychlorinated biphenyls are used or stored on any property owned,
leased or used by the Company, and (iv) all locations currently or formerly
owned, leased or used by the Company (or any former affiliate of the
Company) at which any Material generated, used, owned or controlled by the
Company or any former Affiliate of the Company (or by any previous owner or
operator) may have been Released into the Environment are identified and
described in SCHEDULE 4.22.
(f) The Company has provided to the Purchaser all environmental
audits, assessments, inspections, or occupational health studies of which
the Company has Knowledge relating to the properties and assets used in the
business or the conduct of the business undertaken by, or at the direction
of, any Governmental Body, the Company, any predecessor-in-interest or any
prior potential purchaser.
4.23 BOOKS AND RECORDS. The minute books and other similar records of
the Company contain true and complete records of all actions taken at any
meetings of the stockholders of the Company, Board of Directors or any committee
thereof and of all written consents executed in lieu of the holding of any such
meeting, except for those occurring before March 26, 1976.
4.24 DISCLOSURE. No representation or warranty of the Seller or the
Company contained in this Agreement and no written statement contained in any
Schedule, Exhibit or certificate, instrument and other writings furnished or
delivered or to be furnished or delivered by the Company or the Seller, or any
Affiliate or Representative of the Company or the Seller pursuant hereto or in
connection with the Acquisition contains any untrue statement of material fact
or omits to state any material fact necessary to make the statements contained
therein, in the light of the circumstances in which they were made, not
misleading.
4.25 SCHEDULE IV. SCHEDULE IV presents fairly in all material
respects the calculation of the Interim Elections Amount as of March 31, 1998.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser hereby represents and warrants to the Seller as follows:
5.1 ORGANIZATION OF THE PURCHASER. The Purchaser is a corporation
duly organized, validly existing and in good standing under the laws of the
Commonwealth of Pennsylvania and has all corporate power and authority to own or
lease its properties and to carry on its business as presently conducted.
5.2 AUTHORIZATION; NO CONFLICT.
(a) This Agreement and the other Acquisition Documents to which the
Purchaser is a party (the "PURCHASER CLOSING DOCUMENTS") have been duly
executed and delivered by the Purchaser and constitute the legal, valid,
and binding obligations of the Purchaser, enforceable against the Purchaser
in accordance with their respective terms, in each case except as
enforcement may be limited by equitable principles limiting the right to
obtain specific performance or other equitable remedies, whether raised in
a Proceeding at law or in equity, or by applicable bankruptcy or insolvency
laws and related decisions affecting creditors' rights generally. The
Purchaser has all requisite power and authority to execute and deliver this
Agreement and the Purchaser Closing Documents and to perform its
obligations under this Agreement and the Purchaser Closing Documents.
(b) Except as set forth in SCHEDULE 5.2, neither the execution and
delivery of this Agreement and the Purchaser Closing Documents nor the
consummation or performance of the Acquisition will, directly or indirectly
(with or without notice or lapse of time):
(i) contravene, conflict with or result in a violation of (A)
any provision of the Organizational Documents of the Purchaser or (B) any
resolution adopted by the board of directors or the shareholders of the
Purchaser;
(ii) contravene, conflict with or result in a violation of, or
give any Governmental Body or other Person the right to enjoin, the
Acquisition or to exercise any remedy or obtain any relief under, any Legal
Requirement or any Order to which the Purchaser or any of the assets owned
or used by the Purchaser, may be subject; or
(iii) contravene, conflict with or result in a violation or
breach of any provision of, or give any Person the right to declare a
default or exercise any remedy under, or to accelerate the maturity or
performance of, or to cancel, terminate or modify, any Contract to which
the Purchaser is a party or by which the Purchaser may be bound;
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except in the case of each of clauses (ii) and (iii) above, for such
contraventions, conflicts, violations or breaches which, individually and in the
aggregate, could not reasonably be expected to have a Material Adverse Effect on
the Purchaser.
Except as set forth in SCHEDULE 5.2 and pursuant to any provision of
the HSR Act, the Purchaser is not, or will not be, required to give any notice
to or obtain any Consent from any Person in connection with the execution and
delivery of this Agreement or the consummation or performance of the
Acquisition.
5.3 PROCEEDINGS. There is no pending Proceeding that has been
commenced against the Purchaser and that challenges, or may have the effect of
preventing, delaying, making illegal, or otherwise impeding, the Acquisition.
To the Purchaser's Knowledge, no such Proceeding has been threatened.
5.4 INVESTMENT. The Purchaser is acquiring the Shares for its own
account for investment, without a view to their distribution.
5.5 BROKERS OR FINDERS. The Purchaser and its officers and agents
have not retained any broker or finder in connection with this Agreement or the
Acquisition so as to give rise to any valid claim for any brokerage or finder's
commission, fee or similar compensation and the Purchaser will indemnify and
hold the Seller and the Company harmless from any such payment alleged to be due
by or through the Purchaser as a result of the action of the Purchaser or its
officers or agents.
ARTICLE VI
ACTIONS OF THE SELLER, THE COMPANY AND THE PURCHASER
BEFORE AND AFTER THE CLOSING DATE
Each of the Seller, the Company and the Purchaser covenant and agree
with each other as follows:
6.1 ACCESS AND INVESTIGATION. Between the date of this Agreement and
the Closing, the Seller and the Company will (a) afford the Purchaser and its
Representatives reasonable access, with prior notice to the Seller and the
Company, to the Company's personnel, properties, Contracts, books and records
and other documents and data, (b) furnish the Purchaser with copies of all such
Contracts, books and records and other existing documents and data as it may
reasonably request and (c) furnish the Purchaser with such additional financial,
operating and other data and information as it may reasonably request; PROVIDED,
HOWEVER, that (i) any such investigation shall be conducted in such a manner as
not to interfere unreasonably with the operation of the Company; (ii) contacts
with any customer, agent, sales representative organization or supplier of the
Company shall be made upon a schedule mutually agreed upon by the Purchaser and
the Seller; and (iii) no contact shall be made with any employee of the
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Company (other than Patricia Fallon, Kris Koch and Pamela Faries) without the
prior approval of the Seller, which approval shall not be unreasonably withheld,
conditioned or delayed.
6.2 CONDUCT OF BUSINESS.
(a) From the date hereof to the Closing, the Company will (i) conduct
its operations and business only in the Ordinary Course of Business, (ii)
maintain and keep its properties and equipment in good repair, working
order and condition, except for ordinary wear and tear, (iii) keep in full
force and effect all insurance now maintained, (iv) perform in all material
respects all of its obligations under all Material Contracts and other
commitments applicable to its business, (v) use commercially reasonable
efforts to maintain and preserve all material Intellectual Property, (vi)
use commercially reasonable efforts to maintain and preserve its business
organization intact, retain its present employees so that they may be
available after the Closing, and maintain its relationships with suppliers
and customers so that they may be preserved after the Closing, (vii)
maintain its books of account and records in the usual and regular manner,
(viii) comply in all material respects with all laws and regulations
applicable to it and to the conduct of its business, and (ix) promptly
advise the Purchaser in writing of any event or development that has, or
could reasonably be expected to have, a Material Adverse Effect, including
without limitation any damage, destruction or loss of any property or
assets (whether or not covered by insurance) and any breach, default,
termination, or nay notice thereof, under any Material Contract.
(b) In addition, from and after the date hereof, the Company shall
not, without the prior written consent of the Purchaser, (i) issue, sell or
deliver, or agree to issue, sell or deliver any additional shares of its
capital stock or any options, warrants, puts, calls or rights to acquire
any such capital stock, or securities convertible into or exchangeable for
such capital stock, (ii) mortgage, pledge or subject to any Encumbrance,
its assets, tangible or intangible, other than in the Ordinary Course of
Business, (iii) dispose of any assets or properties having a fair market
value, individually or in the aggregate, in excess of $50,000, or enter
into any agreement or other arrangements for any such disposition, other
than in the Ordinary Course of Business, (iv) declare, make, pay or set
apart any sum for any dividend or other distribution to its stockholders or
purchase or redeem any shares of its capital stock or any option, warrant,
put, call or right to purchase any of its capital stock, or reclassify its
capital stock, (v) increase the wages, salaries, compensation, pension or
other benefits payable to any employee or grant any severance or
termination pay (except such as shall have occurred in the Ordinary Course
of Business including normal period performance review and related
compensation and benefit increases), or enter into any employment agreement
with any officer or salaried employee which is not terminable by the
employer, without cause and without penalty, upon notice of thirty (30)
days or less, (vi) forgive or cancel any debts or claims or waive, amend,
cancel or terminate any rights of material value, (vii) incur any material
Liability, except in the Ordinary Course of Business, (viii) amend its
Organizational Documents, (ix) merge or consolidate with or agree to merge
or consolidate with, or purchase substantially all of the assets of, or
otherwise acquire, any business or any business organization or division
thereof or (x) amend or modify any agreement, understanding, arrangement or
policy respecting indemnification of its directors or officers.
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6.3 REQUIRED APPROVALS. As promptly as practicable after the date of
this Agreement, each party will make all filings required by Legal Requirements
to be made by it in order to consummate the Acquisition (including all filings
under the HSR Act, if any). Between the date of this Agreement and the Closing,
the parties will (a) cooperate with respect to all filings that they may elect
to make or may be required by Legal Requirements to make in connection with the
Acquisition and (b) cooperate in obtaining all Consents identified in SCHEDULES
4.19 or 5.2 (including taking all actions reasonably requested to cause early
termination of any applicable waiting period under the HSR Act).
6.4 NOTIFICATION. Between the date of this Agreement and the
Closing, each party to this Agreement will promptly notify each other party
hereto in writing if such party becomes aware of any fact or condition that
causes or constitutes a breach of any of its representations and warranties as
of the date of this Agreement, or if such party becomes aware of the occurrence
after the date of this Agreement of any fact or condition that would (except as
expressly contemplated by this Agreement) cause or constitute a breach of any
such representation or warranty had such representation or warranty been made as
of the time of occurrence or discovery of such fact or condition; PROVIDED,
HOWEVER, that such disclosure shall not be deemed to cure any breach of a
representation or warranty. Should any such fact or condition require any
change in the Disclosure Schedules if such Schedules were dated the date of the
occurrence or discovery of any such fact or condition, the discovering party
will promptly deliver to each other party a supplement to the Disclosure
Schedules specifying such change; PROVIDED, HOWEVER, that such disclosure shall
not be deemed to cure any breach of a representation or warranty. During the
same period, each party to this Agreement will promptly notify each other party
hereto of the occurrence of any breach of any covenant or agreement by such
party in this ARTICLE VI or of the occurrence of any event that may make the
satisfaction of the conditions in ARTICLES VII and VIII impossible or unlikely;
PROVIDED, HOWEVER, that such disclosure shall not be deemed to cure any breach
of a covenant or agreement or to satisfy a condition. To the extent that a
party to this Agreement has knowledge of such matters, such party shall promptly
notify each other party hereto of any default, the threat or commencement of any
Proceeding or any development that occurs before the Closing that could in any
way have a Material Adverse Effect.
6.5 NO NEGOTIATION. Unless this Agreement is earlier terminated
pursuant to ARTICLE X, until the later of (i) August 31, 1998 and (ii) thirty
(30) days from the date hereof, neither the Company nor the Seller nor any of
their respective Affiliates or Representatives will directly or indirectly
solicit, initiate or encourage any inquiries or proposals from, discuss or
negotiate with, provide any non-public information to or consider the merits of
any unsolicited inquiries or proposals from, any Person (other than the
Purchaser) nor enter into any arrangement, agreement, understanding or contract
relating to any transaction involving the sale of all or a substantial portion
of the business or assets of the Company or any of its capital stock or any
merger, consolidation, business combination or similar transaction involving the
Company (each such transaction referred to herein as a "PROPOSED ACQUISITION").
The Company and the Seller will immediately notify the Purchaser if any
discussions or negotiations are sought to be initiated, any inquiry or proposal
is made, or any information is requested with respect to any Proposed
Acquisition and notify the Purchaser of the terms of any proposal which it or
its Representatives may receive in respect of any such Proposed Acquisition,
including
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without limitation the identity of the prospective purchaser or soliciting
party. The Company and the Seller shall also provide the Purchaser with a copy
of any written offer.
6.6 BEST EFFORTS. Between the date of this Agreement and the
Closing, each of the parties to this Agreement will use its Best Efforts to
cause the conditions in ARTICLES VII and VIII to be satisfied.
6.7 EMPLOYEE BENEFITS.
(a) The Purchaser shall (i) give each employee of the Company credit
for all past service for all purposes (including for purposes of
determining eligibility, vesting, computation of benefits and any
applicable waiting and entitlement periods) and (ii) waive any pre-existing
condition restricting benefits in connection with its employee benefit
plans to the same extent as if such employees had been employees of the
Purchaser during the times of their respective employment by the Company.
(b) Effective as of the Closing Date, the Company shall cease to be a
participating employer in any Benefit Plans maintained by the Seller.
(c) PENSION BENEFIT PLANS. Effective as of the Closing Date, the
Seller shall assume all liability and responsibility with respect to any
defined benefit pension plan as defined in ERISA Section 3(35) maintained
by the Seller or by the Company through the Closing Date.
6.8 TERMINATION OF SECURITY INTERESTS. The Company shall take all
reasonable action necessary to terminate those certain security interests on the
assets of the property that are set forth on SCHEDULE 4.15 and the status of
which are identified as "In the process of being terminated."
ARTICLE VII
CONDITIONS PRECEDENT TO THE PURCHASER'S
OBLIGATION TO CLOSE
The Purchaser's obligation to pay the Consideration and to purchase
the Shares and to take the other actions required to be taken by the Purchaser
at the Closing is subject to the satisfaction, at or prior to the Closing, of
each of the following conditions (any of which may be waived by the Purchaser,
in whole or in part):
7.1 ACCURACY OF REPRESENTATIONS. Each of the representations and
warranties of the Company and the Seller contained in this Agreement and in any
Schedule attached hereto and in each other agreement, document, instrument or
certificate contemplated hereby shall, in the ease of those representations and
warranties that are not qualified by materiality, be true, complete and correct
in all material respects, and in the case of these representations and
warranties that are qualified by materiality shall be true, complete and correct
in all respects, as
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of each of (i) the date of this Agreement and (ii) the Closing Date, in each
case as though newly made at such time.
7.2 THE SELLER'S AND THE COMPANY'S PERFORMANCE.
(a) All of the covenants and obligations that the Seller and the
Company are required to perform or to comply with pursuant to this
Agreement at or prior to the Closing (considered collectively) and each of
these covenants and obligations (considered individually), must have been
performed and complied with in all material respects.
(b) The Seller and the Company must have delivered each of the
documents required to be delivered by the Seller and the Company,
respectively, pursuant to SECTION 2.3(b) and ARTICLE III.
7.3 CONSENTS. Each of the Consents identified in SCHEDULE 4.19 must
have been obtained and must be in full force and effect and must not contain any
provision which, in the reasonable judgment of the Purchaser, is unreasonable.
7.4 ADDITIONAL DOCUMENTS. The Purchaser must have received such
other documents as the Purchaser may reasonably request for the purpose of (i)
evidencing the accuracy of any representation or warranty of the Seller and the
Company, (ii) evidencing the performance by the Seller and the Company, or the
compliance by the Seller and the Company with, any covenant or obligation
required to be performed or complied with by the Seller and the Company, (iii)
evidencing the satisfaction of any condition referred to in this ARTICLE VII or
(iv) otherwise facilitating the consummation of the Acquisition.
7.5 NO PROCEEDING. Since the date of this Agreement, there must not
have been commenced or threatened against the Company or against any Person
affiliated with the Company, any Proceeding (a) involving any challenge to, or
seeking Damages or other relief in connection with, the Acquisition or (b) that
may have the effect of preventing, delaying, making illegal or otherwise
interfering with the Acquisition.
7.6 NO PROHIBITION. Neither the consummation nor the performance of
the Acquisition will, directly or indirectly (with or without notice or lapse of
time), materially contravene, or conflict with, or result in a material
violation of, or cause the Purchaser to suffer any Material Adverse Effect under
(a) any applicable Legal Requirement or Order, including the HSR Act and federal
and state securities laws or (b) any Legal Requirement or Order that has been
rendered, published, introduced, or otherwise formally proposed by or before any
Governmental Body.
7.7 HSR ACT. All applicable waiting periods (and any extensions
thereof) under the HSR Act shall have expired or otherwise been terminated.
7.8 NO CLAIM REGARDING STOCK OWNERSHIP OR SALE PROCEEDS. There must
not have been made or threatened by any Person any claim asserting that such
Person (a) is the record holder or the beneficial owner of, or has the right to
acquire or to obtain record or beneficial ownership of, any stock of, or any
other voting, equity, or ownership interest in, the Company, or (b) is entitled
to all or any portion of the Consideration payable for the Shares.
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7.9 MATERIAL ADVERSE CHANGE. Since the date of this Agreement, there
shall have been no event or condition or events or conditions, which, either
individually or in the aggregate, has had or could reasonably be expected to
have a Material Adverse Effect on the Company, and the Purchaser shall be
provided with a certificate from the President of the Company to that effect at
the Closing.
7.10 EMPLOYMENT AGREEMENTS. Patricia Fallon and Kris Koch shall have
entered into employment agreements with the Company in the form of EXHIBIT C as
of the Closing Date.
7.11 NON-COMPETITION AGREEMENT. The Seller shall have entered into a
non-competition agreement in the form of EXHIBIT D as of the Closing Date.
7.12 BT COMMERCIAL CORPORATION LIENS AND OBLIGATIONS. Documentation,
in form and substance reasonably satisfactory to the Purchaser, shall have been
executed and delivered by (a) BT Commercial Corporation evidencing (i) the
termination of all liens on the assets on the Company in favor of BT Commercial
Corporation (which termination shall be effective upon the Closing of the
Acquisition) and (ii) the release of the Company from all obligations listed as
items 1 through 17 on SCHEDULE 4.16 and (b) U.S. Trust Company of California,
N.A. (the "TRUSTEE") evidencing the release of the Company pursuant to Section
11.04 of that certain Indenture, dated as of December 16, 1997, among Parent,
the Trustee and the Subsidiary Guarantors named therein.
7.13 LEASE/SUBLEASE AND NON-DISTURBANCE AND ATTORNMENT AGREEMENT. The
Seller and the Company shall have executed and delivered to the Purchaser the
Lease/Sublease in the form of EXHIBIT E (the "LEASE") as of the Closing Date,
and the Company, the Seller and 1323 Greenwood, L.L.C., a Delaware limited
liability company ("GREENWOOD"), shall have executed and delivered a
Non-Disturbance Agreement in form and substance satisfactory to the Purchaser;
PROVIDED, HOWEVER, that in the event the Master Lease (as defined in the Lease)
has not been entered into as of the Closing Date, the Company, the Seller and
Greenwood shall have agreed to a form of non-disturbance and attornment
agreement satisfactory to the Purchaser.
ARTICLE VIII
CONDITIONS PRECEDENT TO THE SELLER'S
AND THE COMPANY'S OBLIGATION TO CLOSE
The Seller's obligation to sell the Shares in exchange for the
Consideration and to take the other actions required to be taken by the Seller
at the Closing and the Company's obligation to take the actions required to be
taken by the Company at the Closing are subject to the satisfaction, at or prior
to the Closing, of each of the following conditions (any of which may be waived
by the Seller in whole or in part):
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8.1 ACCURACY OF REPRESENTATIONS.
(a) Each of the representations and warranties of the Purchaser
contained in this Agreement and in any Schedule attached hereto and in each
other agreement, document, instrument or certificate contemplated hereby
shall, in the ease of those representations and warranties that are not
qualified by materiality, be true, complete and correct in all material
respects, and in the case of those representations and warranties that are
qualified by materiality shall be true, complete and correct in all
respects, as of each of (i) the date of this Agreement and (ii) the Closing
Date, in each case as though newly made at such time.
(b) The Purchaser shall not have given any notification to the
Company or the Seller pursuant to SECTION 6.4 of any fact or condition
which would cause the condition precedent contained in SECTION 7.1 not to
be satisfied, regardless of any waiver of such condition by the Purchaser.
8.2 THE PURCHASER'S PERFORMANCE.
(a) All of the covenants and obligations that the Purchaser is
required to perform or to comply with pursuant to this Agreement at or
prior to the Closing (considered collectively), and each of these covenants
and obligations (considered individually), must have been duly performed
and complied with in all material respects.
(b) Each document required to be delivered by the Purchaser pursuant
to ARTICLE III must have been delivered.
8.3 CONSENTS. Each of the Consents identified in SCHEDULE 5.2 must
have been obtained and must be in full force and effect.
8.4 ADDITIONAL DOCUMENTS. The Seller must have received such other
documents as the Seller may reasonably request for the purpose of (i) evidencing
the accuracy of any of the Purchaser's representations and warranties, (ii)
evidencing the performance by the Purchaser of, or the compliance by the
Purchaser with, any covenant or obligation required to be performed or complied
with by the Purchaser, (iii) evidencing the satisfaction of any condition
referred to in this ARTICLE VIII or (iv) otherwise facilitating the consummation
or performance of the Acquisition.
8.5 NO PROHIBITION. Neither the consummation nor the performance of
the Acquisition will, directly or indirectly (with or without notice or lapse of
time), materially contravene, or conflict with, or result in a material
violation of, or cause the Purchaser to suffer any Material Adverse Effect
under, (a) any applicable Legal Requirement or Order, including the HSR Act and
federal and state securities laws or (b) any Legal Requirement or Order that has
been rendered, published, introduced, or otherwise formally proposed by or
before any Governmental Body.
8.6 HSR ACT. All applicable waiting periods (and any extensions
thereof) under the HSR Act shall have expired or otherwise been terminated.
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ARTICLE IX
INDEMNIFICATION; REMEDIES
9.1 INDEMNIFICATION OF THE PURCHASER.
(a) Subject to the terms, conditions and limitations hereinafter
provided in this SECTION 9.1, the Seller hereby agrees to indemnify, defend
and hold harmless the Purchaser from and against any Loss, as hereinafter
defined, and agree to pay to the Purchaser as provided herein the amount of
any Loss. As used herein, "LOSS" means any and all losses, Damages,
Liabilities, claims, Proceedings, penalties, fines and all other expenses,
including without limitation the costs of defense thereof (including
reasonable attorneys' fees and disbursements), suffered or incurred by the
Purchaser or any of its respective shareholders, officers, directors or
agents by reason of or arising out of (i) the breach of any representation
or warranty of the Company or the Seller set forth in ARTICLE IV (other
than the warranty set forth in SECTIONS 4.24 and 4.25, which shall not
survive the Closing), such breach being determined for purposes of this
ARTICLE IX without regard to any materiality or Material Adverse Effect
qualification set forth in such warranties (as if such qualifications were
not part of such warranties), and with respect to the warranty set forth in
SECTION 4.22, without regard to the matters set forth on SCHEDULE 4.22 (as
if such schedule were not part of this Agreement), or (ii) the breach of
any covenant or agreement made by the Seller or the Company in this
Agreement, but subject to each and all of the terms, conditions and
limitations set forth in this ARTICLE IX.
(b) The obligation of the Seller to indemnify the Purchaser pursuant
to this SECTION 9.1 shall be limited in each of the following respects:
(1) Anything in this Agreement to the contrary
notwithstanding, except as set forth in SECTION 9.7, the Purchaser may not
recover Damages from the Seller until, and only to the extent that, the
aggregate amount of Damages relating to all Claims for which the Purchaser
is seeking indemnification exceeds One Hundred Seventy-Five Thousand
Dollars ($175,000) (the "DEDUCTIBLE AMOUNT"); PROVIDED, HOWEVER, that such
Deductible Amount shall not apply to Damages incurred as a result of a
breach by the Seller of SECTION 4.2. The maximum amount of aggregate
Damages for which the Seller shall be liable pursuant to this ARTICLE IX
other than based upon the breach of a representation or warranty of the
Seller or the Company contained in SECTIONS 4.1, 4.2, 4.12, and 4.13 shall
be Two Million Dollars ($2,000,000) (the "LIABILITY CAP"); PROVIDED,
HOWEVER, that the Liability Cap shall be increased by an additional One
Million Dollars ($1,000,000) for Damages based upon breaches of the
representations and warranties contained in SECTION 4.22.
(2) Unless written notice specifying the warranty or
covenant or agreement alleged to have been breached by reference to a
specific subsection or subsections of this Agreement and/or the relevant
Schedule, certificate, document, instrument or other agreement, together
with a description in reasonable detail of the nature and basis of the
asserted breach (a "NOTICE OF CLAIM") is made by the Purchaser
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and received by the Seller in accordance with the provisions of SECTION
11.2 prior to the first anniversary of the Closing Date, (or, with respect
to breaches of (i) SECTION 4.22, which shall be received prior to the
second anniversary of the Closing Date, (ii) SECTION 4.12, which shall be
received prior to ninety (90) days following the expiration of the
applicable statute of limitations relating to such tax matters, or (iii)
SECTION 4.2, which may be received at any time after the Closing Date), the
Purchaser shall not have a Claim for any Loss resulting from a breach of
such warranty; PROVIDED, HOWEVER, that in no event shall the Purchaser have
a Claim for any Loss resulting from a breach of SECTION 4.24.
(c) Notwithstanding anything to the contrary herein, no limitation or
condition of liability shall apply with respect to any liability under any
Benefit Plan retained by the Seller or any Benefit Plan pursuant to SECTION
6.7(c).
(d) The Seller agrees that following the Closing Date, the Seller
shall have no claim for contribution from the Company for any breach of
this Agreement by the Company prior to the Closing Date.
9.2 INDEMNIFICATION OF THE SELLER. The Purchaser shall indemnify,
defend, and hold the Seller harmless from and against any Claims, expenses,
Damages, Liabilities, Losses, and expenses (including reasonable attorneys' fees
and disbursements) by reason of, or arising out of the Breach of any
representation, warranty or covenant of the Purchaser contained in this
Agreement, or the conduct of the business and operations of the Company after
the Closing Date; PROVIDED, that a Notice of Claim with respect to or arising
out of the Breach of any representation or warranty of the Purchaser must be
delivered by the Seller and received by the Purchaser prior to the first
anniversary of the Closing Date.
9.3 NOTICE OF CLAIM; RIGHT TO DEFEND. If a third party commences any
Proceeding or asserts any claim, demand or assessment (hereinafter individually
or collectively referred to as a "THIRD PARTY CLAIM") in respect of which the
Purchaser or Seller (the "INDEMNITEE") claims or proposes to claim a Loss, the
other party (the "INDEMNITOR") shall be given prompt notice thereof by the
Indemnitee. Thereafter, the Indemnitee shall furnish to the Indemnitor, in
reasonable detail, such information as it may have with respect to such claim,
or Proceeding, including copies of any summons, complaint, or other pleading
which many have been served or any written claim, demand, invoice, billing or
other document evidencing or asserting the same. The Indemnitee shall designate
in writing all information and documents which it furnishes to the Indemnitor
pursuant to this SECTION 9.3 as being with respect to a claim or Proceeding
under this SECTION 9.3. The Indemnitor shall have the right, subject to the
provisions of this SECTION 9.3, to assume control of the defense, compromise or
settlement thereof if (a) the amount of the Third Party Claim does not exceed
the then remaining amount under the Liability Cap, (b) the Indemnitor
acknowledges the intention of the Indemnitor to so defend by written notice to
the Indemnitee within twenty (20) days after receipt of the notice of the Third
Party Claim and (c) the claim involves only monetary damages. The Indemnitee
shall be entitled to defend such claim until it receives such notice. If the
Indemnitor is entitled to assume such defense and control and elect to do so,
(i) the defense against the Third Party Claim shall be conducted by the
Indemnitor, at the expense of the Indemnitor, with counsel selected by the
Indemnitor and reasonably satisfactory to the Indemnitee, (ii) the Indemnitee
shall be entitled
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to participate in (but not control) such defense with its counsel and at its
expense, (iii) the Indemnitor shall keep the Indemnitee fully advised as to the
conduct of the defense if the Indemnitee has chosen not to participate in the
defense, and (iv) no compromise or settlement shall be agreed to or made without
the Indemnitee's written consent, which shall not be unreasonably withheld,
delayed or conditioned. If the Indemnitor elects to assume control of the
defense, but fails to defend against the Third Party Claim as aforesaid, the
Indemnitee may assume control of the defense and settle the Third Party Claim at
the Indemnitor's expense (up to the then remaining amount under the Liability
Cap).
If the Indemnitor does not elect, or does not have the right, to
assume control of the defense, (x) the Indemnitee shall conduct the defense,
with counsel selected by the Indemnitee and reasonably satisfactory to the
Indemnitor, (y) the Indemnitor shall be entitled to participate in (but not
control) such defense at its expense, and (z) the Indemnitee shall keep the
Indemnitor fully advised as to its conduct of such defense, if the Indemnitor
has chosen not to participate in the defense. The Indemnitee shall be free to
compromise or settle such claim unless the Indemnitor within ten (10) days after
notice of the proposed compromise or settlement admits in writing that the full
amount of such claim, if adversely determined, shall constitute a Loss for which
indemnity shall be due to the Indemnitee hereunder. If such admission is made,
no compromise shall be agreed to or made without the written consent of the
Indemnitor, which consent shall not be unreasonably withheld.
9.4 LIMITATION ON INDEMNITY.
(a) The Purchaser shall have the right to make a Claim pursuant to
SECTION 9.1(a) and 9.1(b) prior to the time at which the Deductible Amount
that is applicable to such Claim has been surpassed for the purpose of
asserting such Claim within the relevant survival period of the applicable
indemnification obligation and any such Claim made within such period
shall, to the extent such Deductible Amount ultimately is met, survives
until its final resolution.
(b) Neither (i) the termination of the representations or warranties
contained herein, nor (ii) the expiration of the indemnification
obligations described above, will affect the rights of a Person in respect
of any Claim made by such Person received by the indemnifying party prior
to the expiration of the applicable survival period provided herein.
9.5 INSURANCE.
(a) In determining the amount for which any party is entitled to
indemnification under this Agreement, the gross amount thereof will be
reduced by any proceeds actually realized by such party under insurance
policies; PROVIDED, HOWEVER, that such party shall use commercially
reasonable efforts to make and pursue claims under such party's insurance
policies, it being understood, however, that such party shall have no
obligation to commence litigation or to take any other extraordinary
measures in connection with such claims. If such party does not actually
receive such insurance proceeds until after being indemnified, such party
will reimburse the indemnifying party for amounts paid to or on behalf of
such indemnified party to the extent of the insurance
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proceeds so received. In all cases, the timing of the receipt or
realization of the insurance proceeds shall be taken into account in
determining the amount of reduction of such Losses, Damages, Liabilities or
Claims; and
(b) If both the indemnifying party and the indemnified party have
insurance coverage respecting a particular Loss, Damage, Liability or Claim
for which indemnification is provided pursuant to this ARTICLE IX, the
Seller and the Purchaser agree that the insurance coverage of the
indemnifying party will be called upon before the insurance coverage of the
indemnified party is called upon.
9.6 SOLE AND EXCLUSIVE REMEDY. Except as set forth in SECTION 9.5
above, the provisions for indemnification as provided in this ARTICLE IX shall
constitute the Purchaser's sole and exclusive remedy for any Losses sustained by
the Purchaser or any of its shareholders, officers, directors or agents and
shall be limited as provided in this ARTICLE IX.
9.7 TAX MATTERS.
(a) TAX INDEMNIFICATION. The Seller shall be responsible for and pay
and shall indemnify, save and hold harmless the Purchaser and the Company
(and each of their respective Affiliates, successors and assigns) from and
against (i) all Taxes imposed on the Company, or for which the Company is
liable, with respect to (A) all periods ending on or prior to the Closing
Date, (B) any period beginning before the Closing Date and ending after the
Closing Date, but only with respect to the portion of such period up to and
including the Closing Date (such portion, a "PRE-CLOSING PARTIAL PERIOD"),
or (C) all Taxes for which the Company may be liable under Treas. Reg.
Section 1.1502-6 or analogous provision under state or local law by reason
of the Company being a member of a consolidated, combined or unitary group
of corporations; and (ii) any costs or expenses with respect to the Taxes
indemnified hereunder; PROVIDED, HOWEVER, that the Seller shall not have
any such indemnification obligations with respect to such Taxes, costs and
expenses to the extent (x) of any reserves for Taxes on the Closing Balance
Sheet and (y) such amounts are otherwise taken into account in the
post-Closing adjustment pursuant to SECTION 2.3 and SECTION 2.4 hereof.
For purposes of this SECTION 9.7(a), Taxes shall include the amount of
Taxes which would have been paid but for the application of any credit or
net operating or capital loss deduction attributable to any period (or
portion thereof) ending after the Closing Date, but shall not include
amounts which would have been paid but for the application of any credit or
net operating or capital loss deductions attributable to any period (or
portion thereof) ending on or before the Closing Date.
(b) STRADDLE PERIODS. Any Taxes (other than federal and state income
Taxes in the event that a short period Tax Return is filed with respect to
such Taxes) with respect to the Company that relate to a Tax period which
begins on or before the Closing Date and ends after the Closing Date (a
"STRADDLE PERIOD") shall be apportioned between the Pre-Closing Partial
Period and the portion of such Straddle Period beginning on the day after
the Closing Date (the "POST-CLOSING PARTIAL PERIOD"), (i) in the case of
real or personal property Taxes (and any other ad valorem Taxes on a per
diem basis) and, (ii) in the case of other Taxes, on an "INTERIM CLOSING OF
THE BOOKS" method. The Purchaser
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shall cause the Company to file any Tax Returns for any Straddle Period,
and the Purchaser shall pay all Taxes shown as due on any such Tax Returns.
With respect to any such Tax Returns for any Straddle Period required to be
filed by the Company and not required to be filed prior to the Closing
Date, the Company shall provide the Seller with copies of any such
completed Tax Return at least thirty (30) business days prior to the due
date for filing of such Tax Return and the Seller shall have the right to
review such Tax Return prior to the filing of such Tax Return. The Seller
and the Purchaser agree to consult and resolve in good faith any issues
arising as a result of such review. The Seller shall pay the Purchaser all
such Taxes apportioned to the Pre-Closing Partial Period (to the extent not
paid by the Company prior to the Closing Date or reflected in the
Post-Closing adjustment under SECTIONS 2.3 and 2.4) due pursuant to the
filing of any such Tax Returns under the provisions of this SECTION 9.7(b)
within fifteen (15) business days of receipt of notice of such filing by
the Purchaser, which notice shall set forth in reasonable detail the
calculations regarding the Seller's share of such Taxes.
(c) REFUNDS. The Purchaser agrees to assign and promptly remit (and
to cause the Company to assign and promptly remit) all refunds (including
interest thereon) net of any Tax effect to the Purchaser or the Company,
received by the Purchaser or the Company of any Taxes for which the Seller
has indemnified the Purchaser or the Company hereunder; PROVIDED, HOWEVER,
that the Purchaser shall be entitled to the portion of any refund reflected
in the Post-Closing adjustment under SECTIONS 2.3 and 2.4 or resulting from
a carryback of a net operating loss, net capital loss, Tax credit or
similar item sustained or arising in any period ending after the Closing
Date or in any Post-Closing Partial Period.
(d) TAX RETURNS FOR PRE-CLOSING PERIODS. The Seller shall prepare or
cause to be prepared and shall include in its consolidated federal income
Tax Return and all other consolidated, combined or unitary income Tax
Returns that include the Company and timely file or cause to be filed, all
income Tax Returns of the Company for all taxable periods of the Company
ending on or prior to the Closing Date and the Seller shall pay or cause to
be paid all Taxes due with respect to such income Tax Returns. All such
income Tax Returns shall be prepared in a manner consistent with past
practice. The Company shall provide the Seller with all records and
information necessary to prepare such income Tax Returns. With respect to
any such income Tax Returns required to be filed by the Seller and not
required to be filed before the Closing Date, the Seller shall provide the
Company with copies of all information pertaining to the Company used in
the preparation of the completed income Tax Returns at least fifteen (15)
business days prior to the due date for filing of such income Tax Returns.
The Seller and the Purchaser agree to consult and resolve in good faith any
issues arising as a result of the Company's review of such information.
(e) TERMINATION OF TAX SHARING AGREEMENT. Except as otherwise
provided in this Agreement, all tax sharing agreements, arrangements,
policies and guidelines, formal or informal, express or implied, that may
exist between the Company and any other person and any obligations
thereunder shall terminate as of the Closing Date and the Company shall
have no liability thereunder for any and all amounts due in respect of
periods on or before the Closing Date.
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(f) SECTION 338 MATTERS. The Seller and the Purchaser agree that
they shall jointly make or cause to be made the election under IRC Section
338(h)(10) and Treasury Regulations Section 1.338(h)(10)-1(d) and any
corresponding election under state, local or foreign tax law (the
"ELECTIONS") with respect to the purchase and sale of the stock of the
Company. Seller and Purchaser agree that MADSP (as such term is used in
Treasury Regulations Section 1.338(h)(10)-1(f)) for the Purchaser's
purchase of the stock of the Company shall be allocated among the assets in
accordance with the provisions of that section. SCHEDULE 9.7(f) attached
hereto sets forth the Seller's and the Purchaser's preliminary estimate of
such allocation as of the Closing Date. The final allocation as of the
Closing Date (the "ASSET ALLOCATION") shall be agreed to by the Seller and
the Purchaser as soon as practicable after the Closing Date. If the Seller
and the Purchaser are unable to agree on the Asset Allocation, such
allocation shall be determined on the basis of an appraisal prepared by the
Independent Accountant. The Purchaser shall prepare IRS Form 8023 (and any
required attachments) and any similar state, local or foreign tax forms
(and any required attachments) required to make the Elections
(collectively, the "ELECTION FORMS" and each singularly, the "ELECTION
FORM") and shall submit the Election Forms to the Seller no later than
seventy-five (75) days prior to the date the Election Forms are required to
be filed. In the event of any dispute with regard to the content of any
Election Form (including any dispute concerning the Asset Allocation), the
parties shall diligently attempt to resolve such dispute. If they have not
done so by the thirtieth (30th) day prior to the date the Election Form in
question is required to be filed, the dispute shall be resolved by the
Independent Accountant at least ten (10) days prior to the time the
Election Form is required to be filed. The Seller shall promptly cause the
Election Forms to be duly executed by the appropriate authorized person and
shall return such Election Forms to the Purchaser. The Purchaser shall
duly and timely file the Election Forms in accordance with applicable tax
laws and the terms of this Agreement. The Seller and the Purchaser shall
take or cause to be taken any other actions that are necessary for making
or perfecting the Elections. The Purchaser shall provide the Seller with a
copy of the Election Forms as filed. The Seller and the Purchaser shall
report all transactions pursuant to this Agreement in a manner that is
consistent with the Elections and shall take no position contrary thereto
unless required to do so pursuant to a "determination" within the meaning
of IRC Section 1313 or an analogous provision under state, local or foreign
tax law. The Purchaser and the Seller shall each pay one-half of the cost
of any fees and expenses of the Independent Accountant. The parties agree
that a violation of the provisions of this SECTION 9.7(f) is a proper
subject of injunctive relief.
(g) TAX EFFECT OF PAYMENTS. The Purchaser and the Seller agree that
any indemnification payments made pursuant to this SECTION 9.7 or ARTICLE
IX shall be treated for tax purposes as an adjustment to the Consideration
unless otherwise required by applicable law.
41
<PAGE>
ARTICLE X
TERMINATION
10.1 TERMINATION EVENTS.
This Agreement may, by notice given prior to or at the Closing, be
terminated:
(a) by the Seller, on the one hand, or by the Purchaser, on the other
hand, if a breach of any provision of this Agreement has been committed by
the other party or its Affiliates and such breach has not been expressly
waived in writing;
(b) (i) by the Purchaser if any of the conditions in ARTICLE VII have
not been satisfied as of the Closing or if satisfaction of such a condition
is or becomes impossible (other than through the failure of the Purchaser
to comply with its obligations under this Agreement) and the Purchaser has
not expressly waived such condition in writing on or before the Closing; or
(ii) by the Seller, if any of the conditions in ARTICLE VIII has not been
satisfied as of the Closing or if satisfaction of such a condition is or
becomes impossible (other than through the failure of the Seller or the
Company to comply with its obligations under this Agreement) and the Seller
has not expressly waived such condition in writing on or before the
Closing;
(c) by mutual consent of the Purchaser and the Seller; or
(d) by either the Purchaser or the Seller 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 August 31, 1998 (the "CLOSING DATE"), or such later date as
the parties may agree upon.
10.2 EFFECT OF TERMINATION. Each party's right of termination under
SECTION 10.1 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 terminated pursuant to SECTION 10.1, all
further obligations of the parties under this Agreement will terminate, except
that the obligations in SECTION 9.1 will survive; PROVIDED, HOWEVER, that if
this Agreement is terminated by a party because of the breach of this Agreement
by the 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 the
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.
42
<PAGE>
ARTICLE XI
MISCELLANEOUS
11.1 ASSIGNMENT. Neither this Agreement nor any of the rights or
obligations hereunder may be assigned by any party without the prior written
consent of the other party; PROVIDED, HOWEVER, that the Purchaser may assign its
rights but not its obligations hereunder to an Affiliate of the Purchaser.
Subject to the foregoing, this Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and permitted
assigns.
11.2 NOTICES. All notices, requests, demands and other communications
which are required or may be given under this Agreement shall be in writing and
shall be deemed to have been duly given when received if personally delivered;
when transmitted if transmitted by telecopy, electronic or digital transmission
method; the day after it is sent, if sent for next day delivery to a domestic
address by a recognized overnight delivery service (E.G., Federal Express); and
upon receipt, if sent by certified or registered mail, return receipt requested.
In each case notice shall be sent to:
If to the Company before the Closing Date, or to the Seller, addressed
to:
Perry Judd's Incorporated
575 West Madison
Waterloo, WI 53594
Attn: Mr. Craig A. Hutchison
Telephone: (920) 478-1701
Telecopy: (920) 478-1511
with a copy to:
The Milhous Group
1160 Nicole Court
Glendora, CA 91740
Attn: Mr. Thomas V. Bressan
Telephone: (909) 599-2020
Telecopy: (909) 599-8391
and to:
Brobeck, Phleger & Harrison LLP
550 South Hope Street
Los Angeles, CA 90071-2064
Attn: Kenneth R. Bender, Esq.
Telephone: (213) 489-4060
Telecopy: (213) 745-3345
43
<PAGE>
If to the Purchaser or the Company after the Closing Date, addressed
to:
The Mack Printing Group
1991 Northampton Street
Easton, PA 18042-3189
Attn: Mr. John C. Coconougher
Telephone: (610) 250-7235
Telecopy: (610) 250-7285
With a copy to:
Dechert Price & Rhoads
4300 Bell Atlantic Tower
1717 Arch Street
Philadelphia, PA 19143
Attn: Christopher G. Karras, Esq.
Telephone: (215) 994-4000
Telecopy: (215) 994-2222
or to such other place and with such other copies as any party may designate as
to itself by written notice to the others.
11.3 CHOICE OF LAW. This Agreement shall be construed in accordance
with and governed by the internal laws of the State of New York (without giving
effect to its choice of law principles), except with respect to matters of law
concerning the internal corporate affairs of any corporate entity which is a
party to or the subject of this Agreement, and as to those matters the law of
the jurisdiction under which the respective entity derives its powers shall
govern.
11.4 ENTIRE AGREEMENT; AMENDMENTS AND WAIVERS. This Agreement,
together with all exhibits and schedules hereto (including the Disclosure
Schedule and the other agreements referred to herein) constitutes the entire
agreement among the parties pertaining to the subject matter hereof and
supersedes all prior agreements, understandings, negotiations and discussions,
whether oral or written, of the parties. This Agreement may not be amended
except in an instrument in writing signed on behalf of each of the parties
hereto. No amendment, supplement, modification or waiver of this Agreement
shall be binding unless executed in writing by the party to be bound thereby.
No waiver of any of the provisions of this Agreement shall be deemed or shall
constitute a waiver of any other provision hereof (whether or not similar), nor
shall such waiver constitute a continuing waiver unless otherwise expressly
provided.
11.5 MULTIPLE COUNTERPARTS. This Agreement may be executed in one (1)
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
11.6 EXPENSES. Each party to this Agreement will bear its respective
expenses incurred in connection with the preparation, execution and performance
of this Agreement and
44
<PAGE>
the Acquisition. In the event of termination of this Agreement, the obligation
of each party to pay its own expenses will be subject to any rights of such
party arising from a breach of this Agreement by the other party.
11.7 INVALIDITY. In the event that any one or more of the provisions
contained in this Agreement or in any other instrument referred to herein,
shall, for any reason, be held to be invalid, illegal or unenforceable in any
respect, then to the maximum extent permitted by law, such invalidity,
illegality or unenforceability shall not affect any other provision of this
Agreement or any other such instrument.
11.8 TITLES. The titles, captions or headings of the Articles and
Sections herein are inserted for convenience of reference only and are not
intended to be a part of or to affect the meaning or interpretation of this
Agreement.
11.9 PUBLICITY. Except as required by law, none of the Purchaser, the
Company nor the Seller shall issue any press release or make any public
statement regarding this Agreement or the Acquisition, without prior written
approval of the other parties; PROVIDED, HOWEVER, that in the case of
announcements, statements, acknowledgments or revelations which any party is
required by law to make, issue or release, the making, issuing or releasing of
any such announcement, statement, acknowledgment or revelation by the party so
required to do so by law shall not constitute a breach of this Agreement if such
party shall have given, to the extent reasonably possible, not less than two (2)
calendar days prior notice to the other party, and shall have attempted, to the
extent reasonably possible, to clear such announcement, statement,
acknowledgment or revelation with the other party. Each party hereto agrees
that it will not unreasonably withhold any such consent or clearance. The
Purchaser may, with the consent of the Seller, issue or make an appropriate
press release or public announcement after the Closing.
11.10 CONFIDENTIAL INFORMATION.
(a) NO DISCLOSURE. Each party hereto acknowledges that the execution
and delivery of the Confidentiality Agreement binds the parties hereto with
its terms and shall survive the termination of any discussions or
negotiations which are the subject of this Agreement. Additionally, the
parties acknowledge that this Agreement and the Acquisition described
herein are of a confidential nature and shall not be disclosed except to
Representatives and Affiliates or as required by law, until such time as
the parties make a public announcement regarding the Acquisition as
provided in SECTION 11.9; PROVIDED, HOWEVER, that the Purchaser may make
such disclosure to lenders, potential lenders, investors and potential
investors in the Purchaser or its Affiliates, who shall be deemed to be
Representatives of the Purchaser for purposes of this SECTION 11.10.
(b) PRESERVATION OF CONFIDENTIALITY. In connection with the
negotiation of this Agreement, the preparation for the consummation of the
Acquisition, and the performance of obligations hereunder, (i) the
Purchaser acknowledges that it will have access to confidential and
proprietary information relating to the Company and the Seller and the
Company and (ii) the Seller acknowledge that they will have access to
confidential information relating to the Purchaser and its Affiliates, in
each case, including technical, manufacturing or marketing information,
ideas, methods,
45
<PAGE>
developments, inventions, improvements, business plans, trade secrets,
scientific or statistical data, diagrams, drawings, specifications or other
proprietary information relating thereto, together with all analyses,
compilations, studies or other documents, records or data prepared by the
Seller, the Company or the Purchaser, as the case may be, or their
respective Representatives or Affiliates, which contain or otherwise
reflect or are generated from such information ("CONFIDENTIAL
INFORMATION"). The term "CONFIDENTIAL INFORMATION" does not include
information received by one party in connection with the Acquisition which
(i) is or becomes generally available to the public other than as a result
of a disclosure by such party or its Representatives, (ii) was within such
party's possession prior to its being furnished to such party by or on
behalf of the other party in connection with the Acquisition, provided that
the source of such information was not known by such party to be bound by a
confidentiality agreement with or other contractual, legal or fiduciary
obligation of confidentiality to the other party or any other Person with
respect to such information or (iii) becomes available to such party on a
non-confidential basis from a source other than the other party or any of
their respective Representatives, provided that such source is not bound by
a confidentiality agreement with or other contractual, legal or fiduciary
obligation of confidentiality to the other party or any other Person with
respect to such information.
(c) Each party shall treat all Confidential Information of the other
party as confidential, preserve the confidentiality thereof and not
disclose any such Confidential Information, except to its Representatives
and Affiliates who need to know such Confidential Information in connection
with the Acquisition. Each party shall use all reasonable efforts to cause
its Representatives to treat all such Confidential Information of the other
party as confidential, preserve the confidentiality thereof and not
disclose any such Confidential Information. Each party shall be
responsible for any breach of this Agreement by any of its Representatives.
If, however, Confidential Information is disclosed, the party responsible
for such disclosure shall immediately notify the other party in writing and
take all reasonable steps required to prevent further disclosure.
(d) Until the Closing or the termination of this Agreement, all
Confidential Information shall remain the property of the party who
originally possessed such information. In the event of the termination of
this Agreement for any reason whatsoever, each party shall, and shall cause
its Representatives to, return to the other party all Confidential
Information (including all copies, summaries and extracts thereof)
furnished to such party by the other party in connection with the
Acquisition.
(i) If one party or any of its Representatives or Affiliates is
requested or required (by oral questions, interrogatories, requests for
information or documents in legal proceedings, subpoena, civil
investigative demand or other similar process) or is required by operation
of law to disclose any Confidential Information, such party shall provide
the other party with prompt written notice of such request or requirement,
which notice shall, if practicable, be at least forty-eight (48) hours
prior to making such disclosure, so that the other party may seek a
protective order or other appropriate remedy and/or waive compliance with
the provisions of this Agreement. If, in the absence of a protective order
or other remedy or the receipt of such a waiver, such party or any of its
Representatives are nonetheless, in the opinion of counsel, legally
compelled
46
<PAGE>
to disclose Confidential Information, then such party may disclose that
portion of the Confidential Information which such counsel advises is
legally required to be disclosed, provided that such party uses its
reasonable efforts to preserve the confidentiality of the Confidential
Information, whereupon such disclosure shall not constitute a breach of
this Agreement.
11.11 BURDEN AND BENEFIT. This Agreement shall be binding upon
and shall inure to the benefit of, the parties hereto and their respective
successors and permitted assigns. There are no third party beneficiaries of
this Agreement; PROVIDED, HOWEVER, that any Person that is not a party to this
Agreement but, by the terms of SECTION 9.2, is entitled to indemnification,
shall be considered a third party beneficiary of this Agreement, with full
rights of enforcement as though such Person was a signatory to this Agreement.
11.12 SERVICE OF PROCESS; CONSENT TO JURISDICTION.
(a) SERVICE OF PROCESS. Each of the parties hereto irrevocably
consents to the service of any process, pleading, notices or other papers
by the mailing of copies thereof by registered, certified or first class
mail, postage prepaid, to such party at such party's address set forth
herein, or by any other method provided or permitted under New York law.
(b) CONSENT AND JURISDICTION. Each party hereto irrevocably and
unconditionally (i) agrees that any Proceeding arising out of this
Agreement may be brought in the United States District Court for the
Southern District of New York or, if such court does not have jurisdiction
or will not accept jurisdiction, in any court of general jurisdiction in
the County of New York, New York; (ii) consents to the jurisdiction of any
such court in any such Proceeding; and (iii) waives any objection which
such party may have to the laying of venue of any such Proceeding in any
such court.
11.13 ATTORNEYS' FEES. If any party to this Agreement brings an
action to enforce its rights under this Agreement, the prevailing party shall be
entitled to recover its costs and expenses, including without limitation
reasonable attorneys' fees, incurred in connection with such action, including
any appeal of such action.
11.14 REPRESENTATION BY COUNSEL. Each party hereto represents and
agrees with each other that it has been represented by or had the opportunity to
be represented by, independent counsel of its own choosing, and that it has had
the full right and opportunity to consult with its respective attorney(s), that
to the extent, if any, that it desired, it availed itself of this right and
opportunity, that it or its authorized officers (as the case may be) have
carefully read and fully understand this Agreement in its entirety and have had
it fully explained to them by such party's respective counsel, that each is
fully aware of the contents thereof and its meaning, intent and legal effect,
and that it or its authorized officer (as the case may be) is competent to
execute this Agreement and has executed this Agreement free from coercion,
duress or undue influence.
47
<PAGE>
11.15 LIMITATION OF LIABILITY. Notwithstanding anything to the
contrary in this Agreement, in no event shall any party hereto be liable for any
incidental or consequential Damages occasioned by any failure to perform or the
breach of any obligation under this Agreement.
11.16 ADDITIONAL SURVIVAL. In addition to the survival of
representations and warranties and other provisions referenced in SECTION 10.2
of this Agreement, which shall survive pursuant to the terms of such Section,
the obligations of the Seller and the Purchaser contained in ARTICLE II and
ARTICLE IX of this Agreement shall survive the Closing Date indefinitely.
[Signature page follows.]
48
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Stock
Purchase Agreement to be duly executed on their respective behalf, by their
respective officers thereunto duly authorized, all as of the day and year
first above written.
THE PURCHASER: THE SELLER:
MACK PRINTING COMPANY PERRY JUDD'S INCORPORATED
By: /s/ JOHN COCONOUGHER By: /s/ THOMAS BRESSAN
---------------------- ----------------------
Name: John Coconougher Name: Thomas V. Bressan
---------------------- ----------------------
Title: President Title: Secretary
---------------------- ----------------------
THE COMPANY:
PORT CITY PRESS, INC.
By: /s/ THOMAS BRESSAN
---------------------
Name: Thomas V. Bressan
---------------------
Title: Secretary
---------------------
GUARANTEE:
The undersigned hereby represents and warrants that (i) it is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Delaware, (ii) it has all requisite corporate power and corporate authority to
execute, deliver and perform the following guarantee and (iii) the following
guarantee constitutes the valid and binding obligation of the undersigned,
enforceable against the undersigned in accordance with its terms. In accordance
with and subject to the terms and limitations set forth in this Agreement, and
subject to any claims or defenses available to the Seller, the undersigned
hereby unconditionally and irrevocably guarantees and agrees to act as surety
for (i) the full and punctual payment of all monetary obligations of the Seller
under this Agreement and (ii) the performance by the Seller of all of its
covenants, liabilities and obligations under this Agreement (including without
limitation its indemnification obligations under ARTICLE IX). The foregoing
constitutes a guarantee of payment and performance when due (and not a guarantee
of collection).
PERRY JUDD'S HOLDINGS, INC.
By: /s/ THOMAS BRESSAN
----------------------
Name: Thomas V. Bressan
----------------------
Title: Secretary
----------------------------
49
<PAGE>
AMENDMENT NUMBER ONE TO STOCK PURCHASE AGREEMENT
This Amendment (this "AMENDMENT") is entered into as of this 28th day
of August, 1998, by and among Mack Printing Company (doing business as the Mack
Printing Group), a Pennsylvania corporation (the "PURCHASER"), Perry Judd's
Incorporated, a Delaware corporation formerly known as Perry Graphic
Communications, Inc. (the "SELLER"), and Port City Press, Inc., a Maryland
corporation (the "COMPANY"), and constitutes an amendment to that certain Stock
Purchase Agreement (the "STOCK PURCHASE AGREEMENT"), dated as of July 31, 1998,
by and among the Purchaser, the Seller and the Company. Capitalized terms used
herein and not defined herein shall have the meanings ascribed to them in the
Stock Purchase Agreement, as amended hereby.
W I T N E S S E T H
WHEREAS, the parties desire to amend the Stock Purchase Agreement as
set forth herein in accordance with the amendment provisions of Section 11.4
thereof;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and intending to be legally bound
hereby, the parties agree to amend the Stock Purchase Agreement, effective
immediately, as follows:
1. AMENDMENT TO SECTION 1.1. The definition of "Knowledge"
contained in Section 1.1 of the Stock Purchase Agreement shall be deleted in its
entirety and the following substituted in lieu thereof:
"KNOWLEDGE" shall mean, with respect to an individual making a
representation to his or her "knowledge" or having "knowledge," those facts
and circumstances actually known by such individual, and with respect to
the Seller or the Company making a representation to its "knowledge" or
having "knowledge" (other than representations made in SECTION 4.22, as to
which this definition shall have no effect), those facts and circumstances
actually known by the officers of such entity identified on SCHEDULE I
attached hereto.
2. AMENDMENT TO SECTION 4.22. The word "Knowledge" wherever set
forth in Section 4.22 of the Stock Purchase Agreement shall be replaced with the
word "knowledge."
3. CONSTRUCTION. This Amendment shall be governed by and construed
in accordance with the laws of the State of New York.
4. ENTIRE AMENDMENT. This Amendment, and the terms and provisions
hereof, constitute the entire agreement among the parties pertaining to the
subject matter hereof and supersedes any and all prior or contemporaneous
amendments relating to the subject matter hereof. Except as expressly amended
hereby, The Stock Purchase Agreement shall remain unchanged
<PAGE>
and in full force and effect. This Amendment shall be deemed part of and is
hereby incorporated into the Stock Purchase Agreement.
5. COUNTERPARTS. This Amendment may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Amendment by signing
any such counterpart. Delivery of an executed counterpart of this Amendment by
telefacsimile shall be equally as effective as delivery of an original executed
counterpart of this Amendment. Any party delivering an executed counterpart of
this Amendment by telefacsimile also shall deliver an original executed
counterpart of this Amendment, but the failure to deliver an original executed
counterpart shall not affect the validity, enforceability, and binding effect of
this Amendment.
6. Amendments. This Amendment cannot be altered, amended, changed
or modified in any respect or particular unless each such alteration, amendment,
change or modification shall have been agreed to by each of the parties and
reduced to writing in its entirety and signed and delivered by each party.
[Signature page follows.]
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Amendment Number One
to Stock Purchase Agreement to be executed and delivered as of the date first
written above.
THE PURCHASER: THE SELLER:
THE PURCHASER: THE SELLER:
MACK PRINTING COMPANY PERRY JUDD'S INCORPORATED
By: /s/ JOHN COCONOUGHER By: /s/ THOMAS BRESSAN
---------------------- ----------------------
Name: John Coconougher Name: Thomas V. Bressan
---------------------- ----------------------
Title: President Title: Secretary
---------------------- ----------------------
THE COMPANY:
PORT CITY PRESS, INC.
By: /s/ THOMAS BRESSAN
---------------------
Name: Thomas V. Bressan
---------------------
Title: Secretary
---------------------
<PAGE>
LEASE
BETWEEN
1323 GREENWOOD, L.C.C.,
A DELAWARE LIMITED LIABILITY COMPANY
AS LANDLORD
AND
PERRY JUDD'S HOLDINGS, INC.,
AND
PERRY JUDD'S INCORPORATED,
EACH A DELAWARE CORPORATION,
AS TENANT
DATED AS OF AUGUST 13, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
1. Demise of Premises..................................................... 1
2. Title and Condition.................................................... 1
3. Use of Premises........................................................ 1
4. Term................................................................... 2
5. Rent................................................................... 2
6. Net Lease; Non-Terminability........................................... 4
7. Taxes and Assessments; Tax and Insurance Escrow; Compliance with Law;
Environmental Matters................................................ 5
8. Indemnification........................................................ 11
9. Liens.................................................................. 12
10. Maintenance and Repair................................................. 13
11. Alterations............................................................ 15
12. Insurance.............................................................. 19
13. Casualty............................................................... 22
14. Condemnation........................................................... 23
15. Termination of Lease Following Condemnation or Substantial Casualty.... 25
16. Assignment and Subletting.............................................. 26
17. Intentionally Omitted.................................................. 28
18. Financial Statements................................................... 28
19. Permitted Contests..................................................... 29
20. Default Provisions..................................................... 30
21. Additional Rights of Landlord.......................................... 34
22. Notices, Demands and Other Instruments................................. 35
<PAGE>
23. Transfer by Landlord................................................... 36
24. Mortgaging by Landlord................................................. 38
25. Estoppel Certificates.................................................. 39
26. No Merger.............................................................. 40
27. Surrender.............................................................. 40
28. Severability........................................................... 40
29. Savings Clause......................................................... 41
30. Binding Effect......................................................... 41
31. Intentionally Omitted.................................................. 41
32. Table of Contents; Headings............................................ 41
33. Governing Law.......................................................... 41
34. Certain Definitions.................................................... 41
35. Assignment of Intangibles.............................................. 42
36. Representation and Warranties.......................................... 43
37. Exhibits............................................................... 43
38. Exculpatory Clause..................................................... 43
39. Jury Waiver............................................................ 43
40. Intentionally Omitted.................................................. 43
41. Eviction by Paramount Title............................................ 43
42. Quiet Enjoyment........................................................ 44
43. Prevailing Party's Costs............................................... 44
44. Asbestos Plan.......................................................... 44
45. Joint and Several...................................................... 44
</TABLE>
-ii-
<PAGE>
<TABLE>
<CAPTION>
Exhibits
- --------
<S> <C>
Exhibit 1 Legal Description
Exhibit 5-1 Primary Term Basic Rent
Exhibit 5-2 Extension Term Basic Rent
Exhibit 9 Permitted Exceptions
Exhibit 15-1 Purchase Price Schedule
Exhibit 15-2 Additional Sales Closing Requirements
Exhibit 25-1 Estoppel Certificate
Exhibit 25-2 Estoppel Certificate
Exhibit 36 Representations and Warranties
</TABLE>
-iii-
<PAGE>
INDEX OF DEFINITIONS
<TABLE>
<CAPTION>
PARAGRAPH
<S> <C>
Additional Coverages . . . . . . . . . . . . . . . . . . . . . . . . . 12(a)(ii)
Additional Rent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5(b)
Affiliate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Ex. 36
Alterations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
Assignment of Leases and Rents . . . . . . . . . . . . . . . . .Ex. 25, Preamble
Bankruptcy Law . . . . . . . . . . . . . . . . . . . . . . . . . . . .20(a)(iii)
Basic Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5(a)
Basic Rent Payment Dates . . . . . . . . . . . . . . . . . . . . . . . . . .5(a)
Tenant's knowledge . . . . . . . . . . . . . . . . . . . . . . . . . . . .Ex. 36
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
Damages. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8(a)
Deed of Trust. . . . . . . . . . . . . . . . . . . . . . . . . .Ex. 25, Preamble
Discount Rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20(b)(v)
Discounted Rental Amount . . . . . . . . . . . . . . . . . . . . . . . . . 15(b)
Easements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10(a)
Environmental Laws . . . . . . . . . . . . . . . . . . . . . . . . . . .7(d)(iv)
Event of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20(a)
Existing Hazardous Material. . . . . . . . . . . . . . . . . . . . . . . . .7(f)
Existing/Migrating Hazardous Material. . . . . . . . . . . . . . . . . . . .7(f)
Extended Term. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Extension Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Fair Market Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . Ex. 5-2
Fence Restriction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7(c)
Financial Event. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .40
Financing Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
Hazardous Material . . . . . . . . . . . . . . . . . . . . . . . . . . .7(d)(iv)
Holdings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Preamble
Imposition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34(b)
Improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Indemnified Parties. . . . . . . . . . . . . . . . . . . . . . . . . . . 7(d)(i)
Indemnified Party. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7(d)(i)
Interim Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Landlord . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble, 34(d)
Landlord Reminder Notice . . . . . . . . . . . . . . . . . . . . . . Exhibit 5-2
Landlord's Financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
Late Charge. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5(b)
Lease. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34(c)
Legal Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34(a)
Lender . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Ex. 25, Preamble
Lien . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Ex. 36
<PAGE>
Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Ex. 25, Preamble
Migrating Hazardous Material . . . . . . . . . . . . . . . . . . . . . . . .7(f)
Mortgage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24
Mortgagee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24
Net Award. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14(c)
New Improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Ex. 25, Preamble
Person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Ex. 36
PJI. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Preamble
Premises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Prepayment Premiums. . . . . . . . . . . . . . . . . . . . . . . . . . 20(b)(vi)
Primary Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Prohibited SIC Code. . . . . . . . . . . . . . . . . . . . . . . . . . . . 23(a)
Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Ex. 36
Purchaser. . . . . . . . . . . . . . . . . . . . . . . . . . . .Ex. 25, Preamble
Required Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12(a)
SEC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
SIC Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23
Section 168(h) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
Short-Term Extension Period. . . . . . . . . . . . . . . . . . . . . Exhibit 5-2
Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Ex. 36
Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7(a)
Tenant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Preamble
Tenant Coverages . . . . . . . . . . . . . . . . . . . . . . . . . . . 12(a)(ii)
Tenant's Interest Notice . . . . . . . . . . . . . . . . . . . . . . Exhibit 5-2
Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Termination Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15(a)
Termination Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15(a)
Vesting Deed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7(c)
Voting Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Ex. 36
</TABLE>
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<PAGE>
LEASE
This LEASE, dated as of August 13, 1998, between 1323 GREENWOOD,
L.L.C., a Delaware limited liability company (herein, as further defined in
Paragraph 34, called "LANDLORD"), having a address at 350 North Clark Street,
Chicago, Illinois 60610, and PERRY JUDD'S HOLDINGS, INC., a Delaware
corporation formerly known as Perry Judd's Incorporated ("HOLDINGS"), a PERRY
JUDD'S INCORPORATED, a Delaware corporation ("PJI") (Holdings and PJI being
referred to herein jointly and severally as "TENANT"), each having an address
at 575 West Madison Street, Waterloo, Wisconsin 53594.
1. DEMISE OF PREMISES.
In consideration of the rents and covenants herein stipulated to be
paid and performed, Landlord hereby demises and lets to Tenant, and Tenant
hereby lets from Landlord, for the term herein described, the premises
(herein called the "PREMISES") consisting of (a) the land described in
EXHIBIT 1 hereto (herein called the "LAND"); (b) all buildings, structures
and other improvements constructed and to be constructed thereon (including
all building equipment and fixtures owned by Landlord, but excluding personal
property, trade equipment and fixtures owned by Tenant or any of its
subtenants which are not necessary to the operation of the building (which is
a part of the Premises), as a building (including without limitation,
Tenant's printing equipment)) (herein called the "IMPROVEMENTS"); and (c) all
easements, rights and appurtenances relating thereto, all upon the terms and
conditions herein specified.
2. TITLE AND CONDITION.
The Premises are demised and let subject to (a) the rights of any
parties in possession and the existing state of the title as of the
commencement of the Term of this Lease, (b) any state of facts which an
accurate survey or physical inspection thereof might show, (c) all zoning
regulations, restrictions, rules and ordinances, building restrictions and
other laws and regulations now in effect or hereafter adopted by any
governmental authority having jurisdiction, and (d) the condition of any
buildings, structures and other improvements located thereon, as of the
commencement of the Term of this Lease, without representation or warranty by
Landlord. Tenant represents that it is in possession of the Premises, has
thoroughly familiarized itself with the Premises in all respects and has
examined the title to, zoning and other restrictions applicable to and the
condition of the Premises and has found the same to be satisfactory to it.
3. USE OF PREMISES.
Subject to applicable Legal Requirements, Tenant may use the
Premises only for printing and warehouse, distribution and all other legal,
related purposes (together with office use ancillary to such purposes).
Landlord shall not unreasonable withheld, condition or delay its consent to
any other legal use of the Premises, so long as such other use would not (i)
materially increase the risk of any Hazardous Material being released or
discharged at or from the Premises or otherwise materially increase the
environmental risk to the Premises (and
<PAGE>
for purposes hereof, materiality will be determined by comparing such changed
use to the Tenant's use of the Premises at the commencement of the Term),
(ii) result in Tenant or Landlord being obligated to perform any remediation
of any Hazardous Material, (iii) result in the rescinding or modification or
any waiver or stand-still agreement with any governmental agency, or (iv)
impair, in Landlord's reasonable judgment, the fair market value of the
Premises, either at the time such request for a different use is made by
Tenant or as of the end of the Term.
4. TERM
Subject to the terms and conditions hereof, Tenant shall have and
hold the Premises for an interim term (herein called the "INTERIM TERM")
commencing on August 17, 1998, and continuing until the last day of the
calendar month in which the date hereof occurs (provided that if the Lease
commences on the first day of calendar month there shall be no Interim Term)
and a primary term (herein called the "PRIMARY TERM") commencing on the first
day of the first calendar month following the date hereof (except if this
Lease commences on the first day of a calendar month, the Primary Term shall
commence on said first day), and continuing for twenty (20) years. Provided
an Event of Default is not continuing as of the time any option is exercised,
Tenant shall have the option to extend this Lease for four (4) consecutive
terms of five (5) years each (herein individually called an "EXTENDED TERM"
and, together with the Interim Term, if any, the Primary Term, and the
Short-Term Extension Period (as defined below), if any, called the "TERM"),
unless this Lease shall be sooner terminated pursuant to the terms hereof.
Tenant shall exercise is option to extend the Term for an Extended Term only
by giving written notice ("EXTENSION NOTICE") to Landlord within the period
specified for such notice in EXHIBIT 5-2. Upon the giving of an Extension
Notice, the Term shall be automatically extended for such Extended Term on
the terms and conditions provided in this Lease, except that Tenant shall
have no further option to extend the Term beyond said four (4) additional
periods of five (5) years each. If Tenant does not give a Tenant's Interest
Notice (as defined in EXHIBIT 5-2) or an Extension Notice in accordance with
the provisions of this Paragraph 4 and EXHIBIT 5-2, Tenant shall thereafter
have no right to extend the Term. Upon the request of Landlord or Tenant, the
parities hereto will execute and exchange an instrument in recordable form
setting forth any extension of the Term in accordance with this Paragraph 4.
If Tenant does not exercise any such option in a timely manner, then Landlord
shall have the right during the remainder of the Term to advertise the
availability of the Premises for sale or reletting and to erect upon the
Premises signs appropriate for the purpose of indicating such availability;
provided, that such advertising and signs do not unreasonably interfere with
the use of the Premises by Tenant.
5. RENT
(a) Tenant covenants to pay to Landlord, as rent for the Premises
during the Interim Term and the Primary Term of this Lease, the amounts set
forth on EXHIBIT 5-1 hereto, and during each Extended Term the amounts
determined pursuant to EXHIBIT 5-2 hereto, and during a Short-Term Extension
Period the amounts determined below (herein
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<PAGE>
called the "BASIC RENT") in monthly installments in advance on the first day
of each calendar month (herein called the "BASIC RENT PAYMENT DATES") by wire
or other electronic transfer of immediately available funds to the Landlord
at the address set forth above and/or to such other person or such other
place or account at Landlord from time to time may designate to Tenant in
writing; provided, Landlord may designate to Tenant in writing that all of
the monthly Basic Rent be paid directly to a Mortgagee. The monthly Basic
Rent during the Short-Term Extension Period, if any, shall be at the rate of
the monthly Basic Rent payable for the last full calendar month prior to the
commencement of the Short-Term Extension Period. Subject to the second
sentence of subparagraph 7(a), Tenant shall pay when due all taxes payable on
Basic Rent and Additional Rent (as defined below), whether imposed on
Landlord or Tenant, including without limitation, all sales taxes on such
Basic Rent and Additional Rent, but calculated as if the Basic Rent and the
Additional Rent were the sole income of Landlord.
(b) Tenant covenants that all other amounts, liabilities and
obligations which Tenant assumes or agrees to pay or discharge pursuant to
this Lease together with every fine, penalty, interest and cost which may be
added for nonpayment or late payment thereof in accordance with this Lease,
shall constitute additional rent hereunder (herein called "ADDITIONAL RENT").
In the event of any failure by Tenant to pay or discharge any Additional
Rent, Landlord shall have all rights, powers and remedies provided herein or
by law in the case of nonpayment of Basic Rent. Tenant also covenants to pay
to Landlord on demand an amount (the "LATE CHARGE") equal to four percent
(4%) of the payment amount then due on all installments of Basic Rent or
Additional Rent which are more than five (5) days overdue, to cover
Landlord's administrative expenses. The actual amount of Landlord's
administrative expenses arising by reason of a later payment will be
difficult to ascertain and the parties agree that the Late Charge as
calculated above is a reasonable estimate thereof. In addition, Tenant
further covenants to pay to Landlord on demand interest at the per annum rate
of interest equal to five percent (5%) plus the "prime rate" as reported by
the WALL STREET JOURNAL, or at the maximum rate permitted by applicable law,
whichever is less, on all overdue Basic Rent and Additional Rent from the
date due until such amount is paid in full. If the WALL STREET JOURNAL
discontinues publication or publication of "prime rate," then Landlord shall
substitute a comparable prime rate. Notwithstanding the two prior sentences
of this subparagraph 5(b) to the contrary, so long as any debt secured by a
first Mortgage against the Premises remains outstanding (including such debt
as exists on the date hereof and any such debt incurred in the future), the
rate of interest that shall apply under this Lease to all overdue Basic Rent
and Additional Rent shall be the least of (i) the maximum rate permitted by
applicable law, (ii) fourteen percent (14%) per annum, and (iii) the interest
rate applicable to late payments of interest or principle due with respect to
such debt (which interest rate under the existing first Mortgage, is
referred to as the "Default Rate"); said lowest rate described in clauses
(i), (ii) and (iii) being referred to as the "Mortgage Default Rate";
provided, however, such Mortgage Default Rate shall only apply thereto while
Landlord is obligated to pay interest at the Default Rate on said Mortgage
debt (and at all
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<PAGE>
other times the rate described in the two prior sentences of this
subparagraph 5(b) shall continue to apply to overdue Basic Rent and
Additional Rent).
6. NET LEASE; NON-TERMINABILITY.
(a) This is an absolutely net lease to Landlord. It is the intent
of the parties hereto that the Basic Rent payable under this lease shall be
an absolutely net return to the Landlord and that the Tenant shall pay all
costs and expense relating to the Premises and the business carried on
therein, unless otherwise expressly provided to the contrary in this Lease.
Any amount or obligation herein relating to the Premises which is not
expressly declared to be that of the Landlord shall be deemed to be an
obligation of the Tenant to be performed by the Tenant at the Tenant's
expense. Except as provided in Paragraph 15 and EXHIBIT 15-2, Basic Rent and
Additional Rent shall be paid by Tenant without notice or demand (except as
expressly provided herein with respect to notices and demands), setoff,
counterclaim, abatement, suspension, deduction or defense.
(b) Except as provided in Paragraphs 15 and 41 and EXHIBIT 15-2,
this Lease shall not terminate, nor shall Tenant have any right to terminate
this Lease, nor shall Tenant be entitled to any abatement of rent, nor shall
the obligations of Tenant under this Lease be affected, by reason of any of
the following: (i) any damage to or destruction of all or any part of the
Premises from whatever cause regardless of whether the improvements may be
rebuilt following such damage or destruction to be the same as they were
before such event because of applicable Legal Requirements; (ii) the taking
of the Premises or any portion thereof by condemnation, requisition or
otherwise; (iii) the prohibition, limitation or restriction of Tenant's use
of all or any part of the Premises, or any interference with such use; (iv)
any eviction by paramount title or otherwise; (v) Tenant's acquisition or
ownership of all or any part of the Premises otherwise than as expressly
provided herein; (vi) any default on the part of Landlord under this Lease,
or under any other agreement to which Landlord and Tenant may be parties;
(vii) the failure of Landlord to deliver possession of the Premises on the
commencement of the Term; or (viii) any other cause whether similar or
dissimilar to the foregoing, any present or future law to the contrary
notwithstanding. It is the intention of the parties hereto that the
obligations of Tenant hereunder shall be separate and independent covenants
and agreements, that the Basic Rent and the Additional Rent shall continue to
be payable in all events and that the obligations of Tenant hereunder shall
continue unaffected, unless the requirement to pay or perform the same shall
have been terminated pursuant to an express provision of this Lease.
Notwithstanding anything to the contrary contained above in this Paragraph,
Tenant does retain a separate and independent right to sue Landlord and
receive payment of damages in connection therewith or seek equitable remedies
against Landlord with respect to any claim Tenant may have against Landlord
in any way relating to this Lease or the Premises; provided, however, any
judgment, order or injunctive or equitable relief granted in favor of Tenant
shall not abate or otherwise affect Tenant's obligation to pay Basic Rent or
Additional Rent or terminate this Lease or otherwise affect any of Tenant's
obligations hereunder.
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<PAGE>
(c) Tenant agrees that it will remain obligated under this Lease
in accordance with its terms, and that it will not take any action to
terminate, rescind or avoid this Lease, notwithstanding (i) the bankruptcy,
insolvency, reorganization, composition, readjustment, liquidation,
dissolution, or winding-up or other proceeding affecting Landlord or its
successors in interest or (ii) any action with respect to this Lease which
may be taken by any trustee or receiver of Landlord or its successors in
interest or by any court in any such proceeding.
(d) Except as provided in Paragraphs 15 and 41 and EXHIBIT 15-2,
Tenant waives all rights which may now or hereafter be conferred by law (i)
to quit, terminate or surrender this Lease or the Premises or any part
thereof or (ii) to any abatement, suspension, deferment or reduction of the
Basic Rent or Additional Rent.
7. TAXES AND ASSESSMENTS; TAX AND INSURANCE ESCROW; COMPLIANCE
WITH LAW; ENVIRONMENTAL MATTERS.
(a) Subject to Paragraph 19 below, Tenant shall pay or discharge
all Impositions, as hereinafter defined, prior to delinquency.
Notwithstanding the foregoing provision of this subparagraph 7(a), Tenant
shall not be required to pay any franchise, corporate, estate, inheritance,
succession, transfer, net income, capital gains or excess profits taxes of
Landlord hereunder (other than (i) transfer and documentary taxes, intangible
taxes, recording fees, or similar charges payable in connection with a
conveyance to Tenant pursuant to this Lease, the execution of this Lease or
the recording of any memorandum or notice of this Lease, (ii) any taxes on
gross receipts or similar taxes imposed or levied upon, assessed against or
measured by the Basic Rent or Additional Rent or levied upon or assessed
against the Premises, and (iii) any such tax, assessment, charge or levy
imposed or levied upon or assessed against Landlord in substitution for or in
place of an Imposition). Tenant agrees to furnish to Landlord, within thirty
(30) days after written request therefor, evidence of the payment of all
Impositions. Subject to Paragraph 19 below, Tenant shall pay all real estate
taxes and other ad valorem taxes on the Premises ("TAXES") and charges for
utilities consumed on the Premises which become due during the Term (even if
such Taxes and charges accrued or pertain to a period prior to the
commencement of this Lease) and also all Taxes which accrue and charges which
relate to utilities consumed during the Term. Taxes shall be prorated at the
end of the Term and Tenant shall pay its estimated share of accrued Taxes, if
any, with the last installment of Basic Rent due hereunder (such share to be
reprorated upon issuance of the actual bill therefor). In the event that any
Taxes levied or assessed against the Premises becomes due and payable during
the Term hereof and may be legally paid in installments, Tenant shall have
the option to pay such Taxes in installments. In such event, Tenant shall be
liable only for those installments and the accrued interest which become due
and payable during the Term.
(b) If required by Landlord or a Mortgagee following an Event of
Default or following the second instance that Tenant fails to timely pay any
Taxes due or any insurance premiums due for Required Insurance (as defined
below) within a three-year
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<PAGE>
period, or following the third such instance during the Term, Tenant shall
pay all Taxes and insurance premiums for the Required Insurance accruing
during the Term to Landlord (or as Landlord directs in writing to Tenant) in
monthly installments on or before the first day of each calendar month, in
advance, in an amount reasonably estimated by Landlord or the Mortgagee
holding a first Mortgage to be sufficient to create an available fund to pay
such Taxes and premiums as they become due; provided, if such installments
are required by the first Mortgagee, Tenant shall pay such installments in
the amount reasonably estimated by such Mortgagee to such Mortgagee as
directed by such Mortgagee in writing to Tenant. Upon receipt of bills for
Taxes and/or insurance premiums due during a calendar year, Tenant shall
submit to Landlord (and the first Mortgagee if it so requests) a written
statement of the actual amount of the Taxes and insurance premiums then due
and the amount, if any, theretofore deposited by Tenant in respect thereof.
If the total amount theretofore deposited by Tenant under this subparagraph
7(b) in respect thereto shall be less than the actual amount due from Tenant
for such year, as shown in such statement, Tenant shall pay to Landlord (or
the first Mortgagee, as applicable) the shortfall at the time of submission
of such statement. If it appears, in the reasonable judgment of Landlord or
the first Mortgagee, as applicable, that the monthly deposits made by Tenant
have created a reserve in excess of the amount necessary to pay Taxes and
insurance premiums as they become due, the excess shall be credited against
the next deposit or deposits of Taxes and insurance premiums due from Tenant
hereunder. All amounts due under this subparagraph 7(b) shall be payable to
Landlord at the place where the Basic Rent is payable (or to the first
Mortgagee, as provided above, as applicable) and shall be held for the
benefit of Tenant with either, at the Landlord's option, the first Mortgagee
or a financial institution designated by Landlord or the first Mortgagee,
provided that, following the occurrence of an Event of Default by Tenant
under this Lease, any balance existing in the account, may be applied by
Landlord or the first Mortgagee to any amount then owed by Tenant pursuant to
this Lease; but neither Landlord nor the first Mortgagee shall be obligated
to do so. Tenant shall have no authority to direct Landlord or the first
Mortgagee to apply such deposits against any obligation of Tenant under this
Lease, and any such application by Landlord or the first Mortgagee shall not
have the effect of curing the Event of Default. Said amounts payable by
Tenant under this subparagraph 7(b) may be held in commingled accounts, and
no interest shall be payable thereon. A copy of a bill for Taxes or insurance
premiums shall at all times be sufficient evidence of the amount of Taxes
levied, assessed or imposed against the Premises to which such bill relates
or the amount of insurance premiums for some or all of the Required
Insurance. Landlord's and Tenant's obligations under this subparagraph 7(b)
(except for the obligation of Tenant to make Tax and insurance premium
deposits for any period after the Term) shall survive the expiration or early
termination of this Lease. Any balance of funds remaining on deposit with
Landlord or the first Mortgagee at the expiration of the Term shall be
returned to Tenant by the holder thereof.
(c) Tenant shall, at its expense, comply with, cause the Premises
to comply with, and cause the use of the Premises to comply with all Legal
Requirements, including those which require the making of any structural,
unforeseen or extraordinary changes,
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<PAGE>
whether or not any of the same involve a change of policy on the part of the
body enacting the same, including, but not limited to the Americans With
Disabilities Act of 1990, 42 U.S.C. Section 12101 ET SEQ. Tenant shall, at its
expense, comply with all changes required in order to obtain the Required
Insurance (as hereinafter defined), and comply with the provisions of all
contracts, agreements, instruments and restrictions existing at the
commencement of this Lease or thereafter suffered or permitted by Tenant
affecting the Premises or any part thereof or the ownership, occupancy or use
thereof. Tenant shall provide Landlord and any first Mortgagee with prompt
notice of any written complaints pertaining to any alleged violation of any
Legal Requirements and/or the commencement of any proceedings or
investigation under any Legal Requirements (of which Tenant has knowledge)
affecting or pertaining to the Premises.
(d) Tenant shall:
(i) Subject to subparagraphs 7(f) and 7(g) below, not cause, suffer
or permit any Hazardous Material (as defined below) to exist on or discharge
from or be released at the Premises in violation of Environmental Laws
(whether originating thereon, brought onto the Premises by third parties or
migrating to the Premises from other property), except Tenant shall be
allowed (subject to Paragraph 3) to bring onto the Premises, use and dispose
of Hazardous Materials in the ordinary course of Tenant's business so long as
the same is done in accordance with all Environmental Laws, and Tenants shall
promptly: (A) remove, remediate and dispose of any Hazardous Material existing
on, discharged from or released at the Premises in violation of
Environmental Laws, as required by all Environmental Laws, whether during or
after the Term, (B) pay any claim against Tenant, any Indemnified Party, (as
defined below) or the Premises arising therefrom, (C) remove any charge or
lien upon any of the Premises relating thereto, (D) defend (with counsel
reasonably acceptable to Landlord), indemnify and hold harmless Landlord, any
Mortgagee and their respective officers, directors, trustees, members,
partners, shareholders, beneficiaries, employees and agents (herein
collectively called "INDEMNIFIED PARTIES" and individually an "INDEMNIFIED
PARTY") from any and all claims, expenses, liability, loss or damage,
including all reasonable attorneys' fees and expenses, resulting from any
Hazardous Material that now or hereafter exists on or is discharged from or is
released at the Premises, and (E) prior to the expiration or earlier
termination of this Lease, remove and dispose of all Hazardous Material which
then exists on the Premises, in compliance with all Environmental Laws;
provided, however, under this clause (E) Tenant may elect to remediate
Hazardous Material which then exists on the Premises as required by all
Environmental Laws (as opposed to otherwise being required under this clause
(E) to remove and dispose of all Hazardous Material), if such remediation
program required by Environmental Laws (as opposed to removal and disposal
of all Hazardous Material) does not adversely affect Landlord's ability to
use the Premises for any purpose (including a change of use) and does not
adversely affect the market value of the Premises.
(ii) Not cause, suffer or permit any Hazardous Material to exist on
or be discharged from or be released at any property owned or used by Tenant
which would result
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<PAGE>
in any charge or lien upon the Premises and shall promptly: (A) pay any claim
against Tenant, any Indemnified Party or the Premises arising therefrom, (B)
remove any charge or lien upon the Premises relating thereto, and (C) defend
(with counsel reasonably acceptable to Landlord), indemnify and hold harmless
each Indemnified Party from any and all claims, expenses, liability, loss or
damage (including all reasonable attorneys' fees and expenses) resulting
therefrom;
(iii) Notify Landlord and any Mortgagee in writing of any Hazardous
Material (other than Hazardous Materials which are stored or transported to or
from the Premises in the ordinary course of Tenant's or Tenant's subtenant's
business and in compliance with all Environmental Laws) that exists on or is
discharged from or onto or released at the Premises (whether originating
thereon, placed therein by third parties or migrating to the Premises from
other property) within ten (10) days after Tenant first has knowledge of such
existence or discharge;
(iv) Tenant shall give Landlord and each Mortgagee prompt notice of
(A) any proceeding or inquiry of which Tenant becomes aware during the Term
by any party with respect to the presence of any Hazardous Material on,
under, from or about the Premises, (B) all claims made or threatened by any
third party against Tenant or the Premises relating to any loss or injury
resulting from any Hazardous Material of which Tenant becomes aware during the
Term, and (C) Tenant's discovery of any occurrence or condition on any real
property adjoining or in the vicinity of the Premises that Tenant reasonably
determines is likely to cause the Premises to be subject to any investigation
or cleanup pursuant to any Environmental Law. Tenant shall permit Landlord
and Mortgagee to join and participate in, as a party if it so elects, any
legal proceedings or action initiated with respect to the Premises in
connection with any Environmental Law or Hazardous Material, and Tenant shall
pay all attorneys' fees and disbursements incurred by Landlord and Mortgagee
in connection therewith.
(v) Not change its use of the Premises or permit the use of the
Premises to be changed to any purpose other than the use on the date hereof,
or change the Tenant's business operations conducted at the Premises from
that conducted on the date hereof, if any such change of use or operations
would (i) materially increase the risk of any Hazardous Material being
released or discharged at or from the Premises or otherwise materially
increase the environmental risk to the Premises (and for purposes hereof,
materiality will be determined by comparing such changed use to the Tenant's
use of the Premises at the commencement of the Term), (ii) result in Tenant
or Landlord being obligated to perform any remediation of any Hazardous
Material or (iii) result in the rescinding or modification of any waiver or
stand-still agreement as to environmental compliance matters granted by any
governmental agency.
(vi) "HAZARDOUS MATERIAL" means any hazardous or toxic material,
substance or waste which is defined by those or similar terms or is regulated
as such under any Environmental Laws. "ENVIRONMENTAL LAWS" means any statute,
law, ordinance, rule or
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regulation of any local, county, state or federal authority having
jurisdiction over the Premises or any portion thereof or its use, which
pertains to environmental, health or safety matters and/or the regulation of
any hazardous or toxic materials, substance or waste, including but not
limited to: (A) the Federal Water Pollution Control Act (33 U.S.C.
Section 1317 ET SEQ.) as amended; (B) the Federal Resource Conservation and
Recovery Act (42 U.S.C. Section 6901 ET SEQ.) as amended; (C) the
Comprehensive Environmental Response Compensation and Liability Act (42
U.S.C. Section 9601 ET SEQ.) as amended; (D) the Toxic Substance Control Act
(15 U.S.C. Section 2601 ET SEQ.), as amended; (E) the Clean Air Act (42, U.S.
Section 7401 ET SEQ.), as amended; (F) Md. Code Ann., Environment Article,
Title 4, Subtitle 4, as amended; (G) Md. Code Ann., Environment Article,
Section 7-201(b), as amended; (H) Md. Code Ann., Environment Article, Title
6, Subtitle 4, as amended and (I) Md. Code Ann., Environment Article, Section
9-277, as amended.
(vii) Tenant's obligations and liabilities under this subparagraph
7(d) shall survive the expiration or earlier termination of this Lease with
respect to any obligation accruing prior to the end of the Term (or if
earlier than the end of the Term, the date on which Landlord (or any party
acting by, through or under Landlord) actually retakes possession of the
Premises under clause (ii) of subparagraph 20(b)) and any Hazardous Material
which exists or is discharged from or onto or released at the Premises prior
to the end of the Term (or if earlier than the end of the Term, the date on
which Landlord (or any party acting by, through or under Landlord) actually
retakes possession of the Premises under clause (ii) of subparagraph 20(b))
of this Lease.
(e) (i) Upon Landlord's or any first Mortgagee's request at any
time (but not more frequently under this clause (i) than once every five
calendar years), (ii) upon Landlord's or any first Mortgagee's request at any
time an Event of Default has occurred and is continuing and at such other
times as Landlord or a first Mortgagee has reasonable grounds to believe that
(A) Hazardous Materials have been released, stored or disposed on or around
the Premises (other than as permitted under this Lease) or (B) the Premises
may be in violation of Environmental Laws, and (iii) not more than fifteen
(15) months and not less than twelve (12) months prior to the scheduled
expiration of the Term (as it may be extended) and upon the termination of
this Lease, Tenant shall, at Tenant's sole cost, deliver to Landlord and any
first Mortgagee a current inspection or audit of the Premises prepared by a
hydrogeologist or environmental engineer or other appropriate consultant
reasonably approved by Landlord (which inspection or audit may be an onsite
update of an earlier inspection or audit) indicating the presence or absence
of Hazardous Materials at the Premises or an inspection or audit of the
Premises prepared by an engineering or consulting firm reasonably approved by
Landlord indicating the presence or absence of friable asbestos or substances
containing asbestos at the Premises. If Tenant fails to provide any required
inspection or audit within thirty (30) days after any such request or any due
date, as the case may be, Landlord may order same, in which event (i) Tenant
shall reimbursement Landlord upon demand for the reasonable cost thereof, and
(ii) Landlord, any first Mortgagee and such hydrogeologists, engineers and/or
consultants shall have the right to come onto the Premises to perform such
inspection and/or audit. Tenant shall promptly deliver to Landlord copies of
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all monitoring results and environmental inspections and reports which Tenant
performs or receives with respect to Hazardous Materials at the Premises.
(f) Notwithstanding the provisions of subparagraph 7(d) or any other
provision of this Lease, Tenant shall not be required to remove, remediate and
dispose of (i) Hazardous Materials which exist on the Premises at the
commencement of the Term to the extent that either (A) they are expressly
disclosed in that certain Phase I Environmental Site Assessment report dated
June 17, 1998, on-site date June 3, 1998, prepared by EMG and known as EMB
Project No. 40090 or (B) Tenant was not aware of their existence at the
Premises at the commencement of the Term and such Hazardous Materials were
not released or discharged by the initial Tenant hereunder or its Affiliates
(collectively, the "EXISTING HAZARDOUS MATERIAL"), or (ii) Hazardous
Materials which migrate onto the Premises after the commencement of the Term
and are not released or discharged by the initial Tenant hereunder or its
Affiliates or their respective successors or assigns (including any subsequent
Tenant hereunder) (the "MIGRATING HAZARDOUS MATERIAL"), unless and until (but
subject to Paragraph 19) Landlord, a Mortgagee, Tenant or an Affiliate of
Tenant receives a notice or demand from a governmental agency requiring
Landlord, a Mortgagee, Tenant or an Affiliate of Tenant to remove, remediate
or dispose of such Existing Hazardous Material or Migrating Hazardous
Material (collectively, "EXISTING/MIGRATING HAZARDOUS MATERIAL"), or
Landlord, a Mortgagee, Tenant or an Affiliate of Tenant is otherwise required
to remove, remediate or dispose of such Existing/ Migrating Hazardous
Material by a third party action (which action neither Landlord nor such
Mortgagee shall have any obligation to dispute). If removal, remediation or
disposal of such Existing/Migrating Hazardous Material is required hereunder,
the standard for such removal, remediation or disposal shall be the standards
and requirements imposed by applicable Environmental Laws, taking into
account any change (or proposed change) of use of the Premises. Except as
expressly provided above in this subparagraph 7(f) with respect to
Existing/Migrating Hazardous Material, nothing in this subparagraph 7(f) shall
diminish in any respect (x) Tenant's obligation (subject to Paragraph 19) to
comply with all of the provisions of subparagraph 7(d) once Landlord, a
Mortgagee, Tenant or an Affiliate of Tenant receives such a governmental
notice or demand or is otherwise required to take remedial action with
respect to the Existing/Migrating Hazardous Material or (y) Tenant's
indemnification obligations under clauses (i)(D) and (ii) of subparagraph
7(d) or Paragraph 8.
(g) If at the end of the Term of this Lease, (i) Hazardous
Materials are at, on or under the Premises in breach of the foregoing
provisions of subparagraphs 7(d) and 7(f), (ii) the presence of such
Hazardous Materials adversely affects Landlord's ability to use the Premises
for any purpose (including a change of use) or adversely affects the market
value of the Premises, and (iii) Tenant is contesting diligently, in good
faith and in accordance with the provisions of Paragraph 19 below the
remediation requirements, standards or methods being required by an applicable
governmental entity with respect to such Hazardous Materials, then at
Landlord's option (to be elected, if at all, by written notice thereof from
Landlord to Tenant), the Term shall be automatically extended on all of the
terms and conditions of this Lease, except as follows:
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(A) such extension period shall expire automatically and the
Term shall therefor end when any of the conditions described in
clauses (i), (ii) or (iii) above are no longer continuing, or if earlier,
upon thirty (30) days prior written notice from Landlord to Tenant that
such extension period shall expire;
(B) the monthly Base Rent due during such extension period
shall be in the same amount as the Base Rent payable during the last full
calendar month of the Term prior to such extension period;
(C) Tenant shall have no right to further extend the Term of
this Lease, notwithstanding any other provision of this Lease to the
contrary, including Paragraph 4 above; and
(D) Tenant shall diligently continue to prosecute said dispute
and to otherwise comply with the provisions of subparagraphs 7(d) and
7(f).
If Landlord does not make such election to extend the Term, or Landlord
elects to terminate such extension pursuant to clause (A) above, then so long
as Tenant continues to diligently prosecute such contest and otherwise performs
its obligations in accordance with the provisions of Paragraph 19 (including
without limitation, diligently curing such breach, if it still exists, upon
the conclusion of such contest), such breach shall not constitute an Event of
Default. Nothing herein shall limit Tenant's obligations under clauses
(i)(D) or (ii) of subparagraph 7(d) or Paragraph 8.
8. INDEMNIFICATION.
(a) Tenant agrees to pay, and to protect, defend (with counsel
reasonably acceptable to Landlord), indemnify and hold harmless Landlord and
the other Indemnified Parties from and against any and all liabilities,
losses, damages, costs, expenses (including all reasonable attorneys' fees
and expenses), causes of action, suits, claims demands or judgments of any
nature (herein collectively called "DAMAGES") whatsoever arising from (i) any
use, condition or event occurring on the Premises prior to or during the Term
(including without limitation, the construction of any Alterations), (ii) any
injury to, or the death of, any person or damage to property on the Premises
prior to or during the Term, (iii) any injury to, or the death of, any
person or damage to property upon adjoining sidewalks, streets or right of
ways, in any manner growing out of or connected with the use, non-use,
condition or occupation of the Premises, adjoining sidewalks, streets or right
of ways prior to or during the Term, (iv) any violation by Tenant of any
agreement or condition of this Lease (subject to Paragraph 20 below), or
(subject to the second grammatical paragraph of Paragraph 9 below) any
contract or agreement to which Tenant is a party or which pertains to the
Premises or any part thereof or the ownership, occupancy or use thereof, and
(v) any violation by Tenant of any Legal Requirement; provided, however, the
foregoing indemnity shall not apply as to an Indemnified Party with respect
to claims arising solely from the grossly negligent affirmative acts or
willful misconduct of such Indemnified Party, or as to Landlord and its
officers, directors, trustees, members, partners, shareholders, beneficiaries,
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employees and agents only, the failure of Landlord to send Tenant copies of
any written notices received by Landlord from governmental agencies or third
parties, which notices pertain to the Premises. If an Indemnified Party shall
be made a party to any such litigation commenced against Tenant, Tenant shall
pay all reasonable costs and attorneys' fees and expenses incurred or paid by
Landlord or such other Indemnified Party in connection with such litigation.
(b) Tenant shall indemnify each Indemnified Party with respect to
any loss or damage suffered by Landlord or such other Indemnified Party by
reason of any material inaccuracy or misstatement in any representation or
warranty of Tenant set forth in this Lease or in any document, notice,
certificate, demand or request delivered to any Indemnified Party pursuant
to this Lease.
(c) The Tenant's obligations and liabilities under this Paragraph 8
shall survive expiration or earlier termination of this Lease.
9. LIENS.
Tenant will not, directly or indirectly, create or permit to be
created and to remain for more than thirty (30) days after the creation
thereof, and will, subject to Paragraph 19 below, promptly discharge (or bond
over, if the legal effect of bonding over will act as a discharge), at its
expense, within thirty (30) days after the creation thereof, any mortgage,
lien, encumbrance or charge on, pledge of, or conditional sale or other title
retention agreement with respect to, the Premises or any part thereof or
Tenant's interest therein or the Basic Rent, Additional Rent or other sums
payable by Tenant under this Lease, other than any Mortgage (as defined
herein) or other encumbrance created by Landlord or the encumbrances and
easements set forth on EXHIBIT 9 attached hereto. Nothing contained in this
Lease shall be construed as constituting the consent or request,
expressed or implied, by Landlord to or for the performance of any labor or
services or of the furnishing of any materials for any construction,
alteration, addition, repair or demolition of or to the Premises or any part
thereof by any contractor, subcontractor, laborer, materialman or vendor.
Notice is hereby given that Landlord will not be liable for any labor,
services or materials furnished or to be furnished to Tenant, or to anyone
holding the Premises or any part thereof, by, through or under Tenant, and
that no mechanic's, construction or other liens for any such labor, services
or materials shall attach to or affect the interest of Landlord in and to the
Premises.
Landlord shall not affirmatively create any liens or encumbrances
with respect to the Premises other than Mortgages (and documents evidencing
or securing debt secured by a Mortgage), which liens or encumbrances affect
the Premises during the Term, without the prior written consent of Tenant,
which consent shall not be unreasonably withheld, conditioned or delayed. If
either Landlord or Tenant desires to grant an encumbrance on the Premises
which is reasonably required for the operation of the Premises or the
increased value of the Premises (such as, but not limited to, a utility
easement to bring additional services to the Premises or a cross access
easement with an adjoining property), then Landlord and Tenant shall cooperate
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with each other to grant such easement and/or consent thereto, as applicable,
so long as such encumbrance does not unreasonably interfere with Tenant's
business operations at the Premises and will not, in Landlord's reasonable
judgment, impair the value of the Premises (either at the time of the
granting of the encumbrance or as of the end of the Term). As to any
encumbrance requested by Tenant, Tenant shall promptly reimburse Landlord for
all of Landlord's costs reasonably incurred in connection therewith,
including without limitation, Landlord's reasonable legal fees and expenses
and any amounts payable to any Mortgagee in connection therewith, costs of
providing a survey showing such encumbrance reasonably requested by Landlord
or a Mortgagee, and title insurance insuring any easement or right benefiting
the Premises which may be granted in connection therewith.
Although Landlord shall have no obligation whatsoever to contest any
assessment of real estate taxes or any assessed valuation pertaining to the
Premises or to contest the creation of any new assessment district which
would include the Premises, Landlord shall not, without Tenant's prior
written consent, voluntarily affirmatively consent in writing to any
increased real estate taxes or assessed valuation with respect to the
Premises, or to the creation of any new governmental assessment district,
except to the extent the same may be required by applicable Legal
Requirements. For purposes hereof, the payment by Landlord of any Imposition
shall not be deemed to constitute such voluntary affirmative consent.
10. MAINTENANCE AND REPAIR.
(a) Tenant acknowledges that, with full awareness of its
obligations under this Lease, Tenant has accepted the condition, state of
repair and appearance of the Premises. Tenant agrees that, at its expense, it
shall put, keep and maintain the Premises, including any altered, rebuilt,
additional or substituted buildings, structures and other improvements
thereto or thereon, in good repair and appearance and in safe condition, and
shall make all repairs and replacements necessary therefor. Tenant shall also
make promptly, all structural and nonstructural, foreseen and unforeseen,
ordinary and extraordinary changes, replacements and repairs of every kind
and correct any patent or latent defects in the Premises or which may be
required to be made to put, keep and maintain the Premises in good, safe
condition, repair and appearance and it will keep the Premises orderly and
free and clear of rubbish. Tenant covenants to perform or observe all terms,
covenants or conditions of any easement, restriction, covenant, declaration
or maintenance agreement (collectively, "EASEMENTS") to which it may at any
time be a party or to which the Premises are currently (or with Tenant's
consent, which shall not be unreasonably withheld or delayed, to which the
Premises may hereafter become) subject, whether or not such performance is
required of Landlord under such Easements, including without limitation,
payment of all amounts due from Landlord or Tenant (whether as assessments,
service fees or other charges) under such Easements. Tenant shall, at its
expense, use reasonable efforts to enforce compliance with any Easements
benefiting the Premises by any other person or entity or property subject to
such Easement. Landlord shall not be required to maintain, repair or rebuild,
or to make any alterations, replacements or renewals of any nature to the
Premises, or any part thereof, whether ordinary or extraordinary, structural
or nonstructural, foreseen or not foreseen, or to maintain the
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Premises or any part thereof in any way or to correct any patent or latent
defect therein. Tenant hereby expressly waives any right to make repairs at
the expense of Landlord which may be provided for in any law in effect at the
time of the commencement of the Term or which may thereafter be enacted. If
Tenant shall abandon the Premises, it shall give Landlord and any Mortgagee
immediate notice thereof.
(b) Subject to Paragraph 19 below, if any Improvements situated on
the Premises at any time during the Term shall encroach upon any property,
street or right-of-way adjoining or adjacent to the Premises, shall violate
any Legal Requirement or shall impair the rights of others under or hinder or
obstruct any Easement or right-of-way to which the Premises is subject, then,
promptly after the written request of any applicable governmental authority,
Landlord or any person or entity affected by any such encroachment,
violation, impairment, hindrance or obstruction (which other party may be
Landlord with respect to any such encroachment, violation or impairment which
first arises after the date of this Lease), Tenant shall, at its expense,
either (i) obtain legally effective variances of such legal requirements or
waivers or settlements of all claims, liabilities and damages resulting from
each such encroachment, violation, impairment, hindrance or obstruction
whether the same shall affect Landlord, Tenant or both, or (ii) make such
changes in the Improvements on the Premises and take such other action as
shall be necessary to remove such encroachments, hindrances or obstructions
and to end such violations or impairments, including, if necessary, the
alteration or removal of any Improvement on the Premises; provided, however,
Tenant shall do so only in a manner that does not lessen the market value of
the Premises. Except as provided in the proviso at the end of the preceding
sentence, any such alteration or removal shall be made in conformity with the
requirements of Paragraph 11 to the same extent as if such alteration or
removal were an alteration under the provisions of Paragraph 11.
Notwithstanding the foregoing provisions of this subparagraph 10(b) to the
contrary, Landlord shall not have the right to make such request to take
action with respect to such encroachment, violation, impairment, hindrance or
obstruction if the same was expressly disclosed on the ALTA/ACSM Land Title
Survey dated June 3, 1998, revised on July 28, 1998, and known as Network
Project No. 980301.1, prepared by Dewberry & Davis. The preceding sentence
shall not, however, negate Tenant's obligations under this subparagraph 10(b)
if request is made by any governmental authority or any third-party.
(c) Landlord, any Mortgagee and their respective agents and
designees may enter upon and inspect the Premises at reasonable times and on
reasonable prior notice (being at least one-day's prior notice) and show the
Premises to prospective Mortgagees and/or purchasers; provided, however, at
Tenant's direction, Tenant may reasonably require that such individuals be
escorted while at the Premises, in which event Tenant shall provide adequate
personnel for such purposes; and provided, further, that entrants onto the
Premises shall maintain as confidential any third party confidential
information viewed by them at the Premises (for example, confidential
offering memoranda being printed at the Premises). Tenant may designate an
employee to accompany Landlord, any Mortgagee and their respective agents and
designees on such examinations. Tenant will provide, upon Landlord's request
within two (2) years prior to the end of the then-scheduled Term, all records
in
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Tenant's possession (or otherwise reasonably available to Tenant) for the
prior twelve (12) months with respect to all expenses paid to utility
companies and third party vendors (such as scavengers, landscape contractors
and HVAC maintenance contractors) relating solely to the operation of the
Premises as opposed to Tenant's business. All such information will be
certified as true, complete and correct to Tenant's knowledge by an
appropriate officer of Tenant.
(d) Landlord acknowledges that so long as no Event of Default is
continuing, Landlord shall have no right to enter the Premises during the
Term for the purpose of constructing alterations, additions or improvements
to the Premises, without the prior written consent of Tenant. As set forth
above, Landlord shall have no obligation under any circumstances whatsoever,
to construct any alterations, additions or improvements to the Premises.
(e) Intentionally Omitted.
11. ALTERATIONS.
Tenant shall not make or suffer to be made, any alterations,
additions or improvements ("ALTERATIONS") in, on or to the Premises or any
part thereof which Alterations cost in excess of Two Hundred Thousand Dollars
($200,000) or which Alterations alter the footprint of the Improvements or
the structural components of the Improvements without, in each case, the
prior written consent of Landlord and each Mortgagee (as hereinafter
defined), which consents shall not be unreasonably withheld, conditioned or
delayed. Such consent may be conditioned on the requirement that Tenant
remove any such Alterations at the end of the Term (as it may be extended)
and put the Premises back into its former condition, and repair any damage to
the Premises caused thereby; provided, however, Landlord will not require
Tenant to put the Premises back into its former condition unless either (i)
the Alterations in question reduce either the footprint or usable square
footage of the Improvements or (ii) the Alterations would result in a
decrease in the market value of the Premises (either at the time of
completion of the Improvements or at the end of the Term). In the event
Tenant makes any changes in or to any mechanical component of the Premises
(for example, a portion of the HVAC system), Tenant shall replace the same
with new mechanicals of equal or greater value and utility. In the event
Tenant makes any Alterations of the Premises in connection with the use of
the Premises (or a portion thereof) for any permitted purpose which is
materially different from Tenant's use upon the commencement of this Lease,
then upon Landlord's request at the end of the Term (as it may be extended ),
Tenant shall remove any such Alterations and put the Premises back into its
former condition suitable for use for printing and warehouse/distribution
purposes, and repair any damage to the Premises caused thereby; provided,
however, if Tenant provides Landlord with reasonable prior notice of such
Alterations (including all information and drawings pertaining thereto as
Landlord may reasonably request), and Tenant expressly requests in such
notice that Landlord do so, then Landlord shall, within ten (10) business
days after receipt of such notice (and related information and drawings),
give Tenant notice as to whether or not Landlord will require
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Tenant to remove any such Alterations at the end of the Term and repair any
damage caused thereby. Minor decorations to the Premises, such as painting
and wallpapering, shall not constitute Alterations for purposes of this
Lease. If Landlord's consent to Alterations is required, Landlord's consent
shall be contingent upon Tenant satisfying the following minimum conditions
and any other reasonable conditions imposed by Landlord or any Mortgagee:
(a) No Event of Default shall be continuing under this Lease;
(b) Tenant shall pay or cause to be paid the entire cost of such
Alterations;
(c) Prior to commencement of the work, plans and specifications
for such Alterations shall be submitted to Landlord for prior written
approval, which approval shall not be unreasonably withheld, conditioned or
delayed;
(d) Tenant shall take all necessary steps to prevent the imposition
of liens against the Premises as a result of such Alterations;
(e) Tenant shall obtain and pay for all necessary permits and shall
comply with all applicable governmental requirements;
(f) The market value of the Premises shall not be lessened by
reason of the proposed Alterations;
(g) All Alterations shall be constructed in a good and
workmanlike manner in compliance with all Legal Requirements;
(h) Tenant shall cause the construction of Alterations, once
commenced, to be diligently pursued to completion;
(i) If the Alterations are reasonably expected to cost in excess
of Two Hundred Thousand Dollars ($200,000.00) in aggregate, Tenant shall
provide a construction budget showing all "hard" and "soft" costs to be
incurred in connection with such Alterations, plus a reasonable contingency
(the "Alterations Budget"), together with evidence reasonably acceptable to
the Landlord and any Mortgagee supporting the total costs reflected in the
Alterations Budget, which may include, among other things, one or more fixed
price or guaranteed maximum price contract(s), completion and labor and
materials bonds and costs analyses by reputable architects and engineers; and
(j) With respect to Alterations which are reasonably anticipated
by Tenant, Landlord or first Mortgagee to cost, in aggregate, more than One
Million Dollars ($1,000,000.000), Tenant shall demonstrate to the reasonable
satisfaction of the Landlord and any first Mortgagee the availability of
liquid funds in an amount sufficient to complete such Alterations and pay all
costs and expenses in connection therewith, which may be in the form of:
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(i) a segregated bank account, containing an amount at
least equal to the total costs (including contingency) shown in the
Alterations Budget, at a bank whose financial condition is
reasonably acceptable to Landlord and any first Mortgagee, which
account shall be pledged to Landlord and its first Mortgagee as
security for the performance by Tenant of its obligation to
complete and pay for such Alterations (it being agreed that the
funds in any such account shall be available for application by
Tenant to the costs of the Alterations as such costs are incurred,
subject to receipt of customary evidence of completion of the work
for which payment is being made, receipt of appropriate lien
waivers, and the sufficiency of the funds remaining in the account
to complete the Alterations); OR
(ii) an irrevocable letter of credit, in an amount at
least equal to the total costs (including contingency) shown in the
Alterations Budget, from a bank or other financial institution
regularly in the business of issuing letters of credit and whose
financial condition is reasonably acceptable to Landlord and any
first Mortgagee, which letter of credit shall be in form and
content reasonably acceptable to Landlord and any first Mortgagee
and which shall secure the performance by Tenant of its obligation
to complete and pay for such Alterations (it being agreed that the
amount of such letter of credit may be reduced as costs of the
Alterations are paid, subject to receipt of customary evidence of
completion of the work for which payment has been made, receipt of
appropriate lien waivers, and the sufficiency of the remaining
balance of the letter of credit to complete the Alterations); OR
(iii) subject to the further provisions of the last
grammatical paragraph of this Paragraph 11, a loan, in an amount at
least equal to the total costs (including contingency) shown in the
Alterations Budget, from a bank or other financial institution
regularly in the business of making loans for construction,
alterations, or improvements to commercial or industrial properties
and whose financial condition is reasonably acceptable to Landlord
and any first Mortgagee, with such loan to be evidenced by legally
binding loan documents executed by Tenant and such lender that
provide for disbursement of the necessary funds on a regular basis
as required for payment of such costs and that are otherwise in a
form customary for such loans; or
(iv) any combination of clauses (i), (ii) and/or (iii)
above.
For purposes of this Paragraph 11, the financial condition of a
bank or other financial institution shall be reasonably acceptable if it
meets guidelines published from time to time by Standard & Poors or another
nationally recognized credit rating agency for holders of deposits in
connection with issues of rated debt instruments. In addition, any such bank
or financial institution shall have its principal offices in the continental
United States or shall have substantial branch operations and substantial
assets in the continental United States.
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Notwithstanding anything to the contrary stated in this Paragraph
11, in the event Tenant is required to make Alterations to the Premises in
order to comply with any Legal Requirements, Tenant may make or cause to be
made such Alterations without the prior written consent (but upon the prior
notification) of Landlord. Tenant shall (to the maximum extent possible in
compliance with all Legal Requirements) satisfy the conditions specified in
the clauses (b) through (j) (except only clause (f)) of this Paragraph 11 with
respect to such Alterations and Tenant shall use commercially reasonable
efforts to make or cause to make such Alterations in the manner which will
have the least negative impact on the market value of the Premises.
All Alterations shall at once become a part of the realty and belong
to Landlord. Tenant shall provide Landlord with "as built" plans for all
Alterations (excluding merely decorative work), or if no "as built" plans are
prepared in connection with such work, then Tenant shall provide Landlord
with marked record sets in lieu thereof. Movable furniture, furnishings,
decorations, trade fixtures and other personal property of Tenant and its
subtenants, including without limitation, Tenant's printing equipment, may be
removed from the Premises at any time prior to the expiration or earlier
termination of this Lease, provided that Tenant shall repair any damage to
the Premises resulting from such removal. The obligations of Tenant under
this Paragraph 11 shall survive expiration or earlier termination of this
Lease. Tenant shall promptly upon request therefor reimburse Landlord and any
Mortgagee the amount of all reasonable fees and expenses incurred by them
(including without limitation reasonable attorneys' fees and expenses and
reasonable architects' and engineers' fees and expenses) in connection with
any requests by Tenant to perform Alterations, review any plans and
specifications and/or budgets with respect thereto, the performance of any
Alterations and any other matters addressed in this Paragraph 11.
In the event Tenant proposes to make Alterations the cost of which
will exceed Two Hundred Thousand Dollars ($200,000) and which have been
approved by Landlord as provided above in this Paragraph 11, Tenant shall be
permitted to obtain financing therefor provided that, prior to making a
non-refundable deposit in respect of an application or commitment, or
accepting a binding commitment, for such financing, Tenant shall give
Landlord written notice ("FINANCING NOTICE") of the financial and other
material terms thereof and Landlord shall have thirty (30) days to attempt to
obtain a commitment for financing (but Landlord shall not have any obligation
to obtain such commitment) at an interest rate and other material terms equal
to or more favorable to Tenant than that described in Tenant's notice. If
Landlord advises Tenant in writing within such thirty (30) day period that
Landlord has obtained a commitment for such financing, Tenant shall not
consummate the financing described in its notice but rather the parties shall
use reasonable commercial efforts to consummate the financing arrangement
described in Landlord's notice ("LANDLORD'S FINANCING"). In connection with
the closing of Landlord's Financing, Tenant and Landlord shall amend this
Lease in writing to increase Basic Rent by an amount sufficient to amortize
Landlord's Financing over the remaining Term (without regard to unexercised
extensions thereof) and Tenant shall further provide such documents
(including an estoppel, attornment and nondisturbance agreement and the
like) as are reasonably requested by the lender, Landlord
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and any existing Mortgagee and are reasonably acceptable to Tenant. Landlord
shall not have any liability to Tenant if such financing does not close. In
the event that Landlord does not obtain a commitment for such financing or if
the financing does not close, Tenant shall be free to consummate, during the
one hundred-twenty (120) day period following the aforementioned thirty (30)
day period, the financing described in its notice. If the Tenant is Perry
Judd's Holdings, Inc. and/or an Affiliate thereof, Tenant shall be entitled
to pledge its leasehold as security for such financing, provided in no event
shall any other Tenant shall be permitted to create a leasehold mortgage.
Subject to the foregoing (and Paragraph 3), Landlord shall agree to accept an
institutional leasehold lender (which is not an Affiliate of Tenant) as an
assignee of Tenant's interest under this Lease; provided, however, that (i)
in no event, shall Landlord be required to amend this Lease to provide any
additional notices (other than notices given concurrently with notices to
Tenant) or cure rights (other than cure periods which run concurrently with
those given Tenant hereunder) to the leasehold lender, and (ii) such
leasehold lender shall regularly in the business of making loans for
construction, alterations, or improvements to industrial or other commercial
properties. Any such assignment, as well as Tenant's and such assignee's
rights and obligations resulting therefrom, shall be governed by Paragraph 16
below. At Tenant's request, Landlord will issue an estoppel certificate to
such permitted leasehold lender pursuant to Paragraph 25 hereof. If Tenant
does not consummate such financing within such one hundred-twenty (120) day
period, Tenant shall not thereafter consummate financing with respect to such
Alterations without first giving Landlord a Financing Notice in accordance
with this Paragraph 11. Nothing in this Paragraph 11 shall prohibit Tenant
from financing the cost of Alterations which have been approved pursuant to
this Paragraph 11 with Tenant's own funds.
12. INSURANCE.
(a) Tenant shall maintain, or cause to be maintained, at its sole
expense, the following insurance on the Premises (herein called the "REQUIRED
INSURANCE"):
(i) Property insurance insuring the Improvements for all
risks of direct physical loss and for perils covered by the causes of
loss-special form (all risk, extended coverage) and in addition, ordinance or
law coverage and boiler and machinery (if applicable). Such insurance shall
be written on a replacement cost basis with an agreed value equal to the full
insurable replacement value of the Improvements. The policy shall name
Landlord and any Mortgagee as insureds and loss payees. Not more frequently
than every twenty-four (24) months, if in the reasonable opinion of the
Landlord the amount of the Tenant's property insurance is found to be
inadequate to comply with the second sentence of this subparagraph 12(a)(i),
the Tenant will increase the insurance to an amount sufficient to comply
therewith as reasonably determined by the Landlord.
(ii) Commercial general liability insurance naming the
Landlord (and each of its shareholders, members, partners and beneficiaries,
as applicable) and any Mortgagee as additional insureds against any and all
claims as are customarily covered under a standard policy form routinely
accepted, for bodily injury, death and property damage occurring in, or
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about the Premises and adjoining streets and sidewalks arising out of Tenant's
use and occupancy of the Premises. Such insurance shall have a combined single
limit of not less than One Million Dollars ($1,000,000) per occurrence with a
Five Million Dollar ($5,000,000) aggregate limit and excess umbrella liability
insurance in the amount of at least Thirty Million Dollars ($30,000,000).
Tenant shall be required to increase its insurance limits from time to time
consistent with coverage on properties similarly constructed, occupied and
maintained. Such liability insurance shall be primary and not contributing to
any insurance available to Landlord and Landlord's insurance, if any, shall be
in excess thereto. In no event shall the limits of such insurance be considered
as limiting the liability of Tenant under this Lease.
(iii) Workers' compensation insurance in accordance with statutory
law and employers' liability insurance with a limit of not less than Five
Hundred Thousand Dollars ($500,000) per occurrence.
(iv) During any period of construction on the Premises,
builder's risk insurance insuring perils covered by the loss-special form
(all risk, extended coverage) shall be purchased for the value of the
alteration and/or additions made to the Premises when the work is not insured
under the Tenant's property insurance policy.
(v) Flood insurance in an amount reasonably agreed to by
Landlord and Tenant if the Premises are located in a special flood hazard
zone.
(vi) If the Premises are located in an earthquake zone,
earthquake insurance in amounts sufficient to prevent Landlord and Tenant
from becoming a coinsurer of any loss but in any event in amounts equal to
100% of the actual replacement value of the Improvements including
foundations and excavations, with a prudent deductible considering the gross
insurance coverage, the cost of the insurance and the financial strength of
the Tenant, the amount of such deductible to be reasonable acceptable to
Landlord (it being agreed that as of the date of this Lease, One Hundred
Thousand Dollars ($100,000) is a prudent deductible) and with a replacement
cost endorsement.
(vii) Such other insurance (excluding business interruption
insurance) as Landlord may, from time to time, reasonably require, or which
may, from time to time, be required by Landlord so long as such other
insurance is customarily required to be carried on similar properties by
institutional landlords or mortgagees in the industry.
(b) The policies required to be maintained by Tenant shall be with
companies having (i) an insurance company claims paying rating equal to or
greater than A by Standard & Poors Corporation or A2 by Moody's Investment
Service or be considered equivalent to an NAIC 1 or other acceptable rating
acceptable to the Securities Valuation Office of the National Association of
Insurance Commissioners, and (ii) a general policy rating of A or better and a
financial class of XI or better by A.M. Best Company, Inc. Insurers shall be
licensed to do business in the state in which the Premises are located and
domiciled in the USA. Except as may be otherwise specified in subparagraph
12(a), any
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deductible amounts under any insurance policies required hereunder shall not
exceed Fifty Thousand Dollars ($50,000). Certificates of insurance (as to
property insurance, using Accord Form No. 27 (or equivalent thereof), and as
to liability insurance, using Accord Form 25-S (or the equivalent thereof)),
together with reasonable evidence of payment of the premiums therefor, shall
be delivered to Landlord and each Mortgagee prior to the commencement date of
this Lease and thereafter at least thirty (30) days prior to the expiration
date each required policy, and such certificates shall include such
information as is necessary to evidence compliance of such policies with the
provisions of this Paragraph 12. Tenant shall have the right to provide
insurance coverage which it is obligated to carry pursuant to the terms
hereof in a blanket policy, provided such blanket policy expressly affords
coverage to the Premises and to Landlord and any Mortgagee as required by
this Lease. Each policy of insurance shall provide notification to Landlord
and any first Mortgagee at least thirty (30) days prior to any non-renewal,
cancellation or modification to reduce the insurance coverage.
(c)(i) Insurance claims by reason of damage to or destruction of
any portion of the Premises shall be adjusted by Tenant if an Event of
Default is not then continuing, and by Landlord if an Event of Default is
then continuing. Tenant shall, promptly after any damage or destruction to
the Premises, advise Landlord any first Mortgagee of such occurrence and
consult with Landlord and any first Mortgagee throughout the process of
adjusting any such claim. Landlord shall not be required to prosecute any
claim against, or to contest any settlement proposed by, an insurer. Tenant
may, at its expense, prosecute any such claim or contest any such settlement
in the name of Landlord, Tenant or both, and Landlord will join therein at
Tenant's written request upon the receipt by Landlord of an indemnity from
Tenant against costs, liabilities and expenses in connection therewith.
(ii) Subject to the provisions of Paragraph 13, proceeds from
the property insurance policy (net of Tenant's and if applicable, Landlord's
and Mortgagee's, reasonable expenses incurred in adjusting and collecting
such proceeds) shall be made available from Landlord or Mortgagee to Tenant,
but only upon submission to Landlord and any Mortgagee (A) prior to
commencement of work, of plans and specifications covering all repair and
restoration work in form and substance reasonably acceptable to Landlord and
Mortgagee, and (B) prior to each periodic disbursement: (1) reasonable
evidence that the remaining unapplied proceeds of the insurance will be
sufficient to pay the remaining cost of the reconstruction or repair and
provide a reasonable reserve for contingencies, (2) certificates of Tenant
delivered to Landlord from time to time as such work or repair progresses,
each such certificate describing the work or repair for which Tenant is
requesting payment and the cost incurred by Tenant in connection therewith
and stating that Tenant has not theretofore received payment for such work
and has sufficient funds remaining to complete the work free of liens or
claims, (3) owner's and contractor's sworn statements in customary form and
appropriate waivers of mechanic's or construction liens, (4) architect's
certificates in customary form covering the work from which payment is
requested, and (5) such other requirements as may be imposed by any Mortgagee
so long as such requirements are consistent with customary construction
lending practices. Subject to the provisions of Paragraph 13, any proceeds
remaining after
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Tenant has repaired the Premises pursuant to Paragraph 13 shall be delivered to
Tenant. No payment shall be made to Tenant pursuant to this subparagraph 12(c)
if any monetary default is continuing or any Event of Default is continuing in
the performance by Tenant of its obligations under this Lease.
(d) In the event Tenant does not purchase the insurance required by
this Lease or keep the same in full force and effect, Landlord may, but shall
not be obligated to, purchase the necessary insurance and pay the premium
therefor. The Tenant shall repay to Landlord, as Additional Rent, the amount so
paid promptly upon demand. In addition, Landlord may recover from Tenant and
Tenant agrees to pay, as Additional Rent, any and all reasonable expenses
(including reasonable attorneys' fees) and damages which Landlord may sustain by
reason of the failure of Tenant to obtain and maintain such insurance.
(e) Landlord shall not be limited in the proof of any damages which
Landlord may claim against Tenant arising out of or by reason of Tenant's
failure to provide and keep in force any of the Required Insurance to the amount
of the insurance premium or premiums not paid or incurred by Tenant and which
would have been payable under such insurance; but Landlord shall also be
entitled to recover as damages for such breach, the uninsured amount of any
loss, to the extent of any deficiency in the Required Insurance and damages,
costs and expenses of suit suffered or incurred by reason of or damage to, or
destruction of the Premises, occurring during any period when the Tenant may
have failed or neglected to obtain the Required Insurance. Tenant shall
indemnify and hold harmless Landlord and any Mortgagee for any liability
incurred by Landlord or any Mortgagee arising out of any deductibles for
Required Insurance.
(f) All policies of insurance required under this Paragraph 12
(except, workers' compensation insurance) shall contain clauses or endorsements
to the effect that:
(i) no act or negligence of Landlord, or anyone acting for Landlord
or of Tenant or any subtenant or other occupant of the Premises, or failure to
comply with the provisions of any policy which might otherwise result in a
forfeiture of the insurance or any part thereof, shall in any way affect the
validity or enforceability of the insurance insofar as Landlord and any
Mortgagee is concerned; and
(ii) Neither Landlord nor any Mortgagee shall be liable for any
insurance premiums thereon or subject to any assessments thereunder.
13. CASUALTY.
(a) If a part of the Premises shall be damaged or destroyed by
casualty, and if the estimated cost of rebuilding, replacing and repairing the
same shall be or exceed Two Hundred Thousand Dollars ($200,000), Tenant shall
promptly notify Landlord and Mortgagee thereof; and subject to subparagraph
13(b) and Paragraph 15 below (whether or not such estimated cost shall be or
exceed Two Hundred Thousand Dollars ($200,000) and whether or not insurance
proceeds are or will ever be available therefor) Tenant shall, with
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reasonable promptness and diligence, rebuild, replace and repair any damage or
destruction to the Premises, at its expense, in conformity with the requirements
of Paragraph 11 in such manner as to restore the same to the same or better
condition, as nearly as possible, as existed immediately prior to such casualty
and there shall be no abatement of Basic Rent or Additional Rent.
(b) Notwithstanding anything if Paragraph 13 to the contrary, during
any period of time when there continues to exist an Event of Default, Landlord,
in the exercise of its sole and absolute discretion, shall have the right,
without limiting Tenant's obligations under subparagraph 13(a), to receive and
retain any insurance proceeds from any casualty and to apply same in any manner
Landlord, in its sole discretion, may determine, instead of making such proceeds
available to Tenant for the rebuilding or restoration of the damaged portion of
the Premises. However, if Tenant cures all Tenant defaults under this Lease
before Landlord or a first Mortgagee exercises its remedies under clauses (i) or
(ii) of subparagraph 20(b), then Landlord shall make the net casualty insurance
proceeds available to Tenant to rebuild and restore the Premises as provided
above.
14. CONDEMNATION.
(a) Subject to the rights of Tenant set forth in this Paragraph 14
and in subparagraph 15(b), Tenant hereby irrevocably assigns to Landlord any
award or payment to which Tenant may be or become entitled with respect to the
taking of the Premises or any part thereof, by condemnation or other eminent
domain proceedings pursuant to any law, general or special, or by reason of the
temporary taking of the use or occupancy of the Premises or any part thereof, by
any governmental authority, civil or military, whether the same shall be paid or
payable in respect of Tenant's leasehold interest hereunder or otherwise;
provided, however, the foregoing assignment shall not apply to any separate
award which Tenant may be entitled to claim against the condemnor with respect
to Tenant's relocation expenses or with respect to the value of Tenant's
personal property, trade fixtures and printing equipment so long as such
separate award does not reduce the Net Award to which Landlord is otherwise
entitled. Landlord and any first Mortgagee shall be entitled to participate in
any such proceeding and the reasonable expenses of Landlord (including
reasonable counsel fees and expenses) shall be paid by Tenant.
(b) If during the Term (i) a portion of the Premises shall be taken
by condemnation or other eminent domain proceedings, which taking does not
result in a termination of Lease pursuant to Paragraph 15 or (ii) the use or
occupancy of the Premises or any part thereof shall be temporarily taken by any
governmental authority; then this Lease shall continue in full force and effect
without abatement or reduction of Basic Rent or Additional Rent notwithstanding
such partial or temporary taking. Subject to the following provisions of this
subparagraph 14(b) as to Tenant's use of the Net Award from a temporary taking,
Tenant shall, promptly after any such temporary taking ceases, at its expense,
repair any damage caused thereby in conformity with the requirements of
Paragraph 11 so that, thereafter, the Premises shall be, as nearly as possible,
in a condition as good as
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the condition thereof immediately prior to such taking. In the event of any
such partial taking, Landlord shall made the Net Award (as defined in
subparagraph 14(c)) available to Tenant to make such repair but, if such Net
Award shall be in excess of Two Hundred Thousand Dollars ($200,000), only
upon submission to Landlord and any Mortgagee (A) prior to commencement of
work, plans and specifications covering all repair work in form and substance
reasonably acceptable to Landlord and Mortgagee, and (B) prior to each
periodic disbursement: (1) reasonable evidence that the remaining unapplied
Net Award will be sufficient to pay the remaining unpaid cost of the repair
and provide a reasonable contingency reserve, (2) certificates of Tenant
delivered to Landlord from time to time as such work or repair progresses,
each such certificate describing the work or repair for which Tenant is
requesting payment and the cost incurred by Tenant in connection therewith
and stating that Tenant has not theretofore received payment for such work,
(3) owner's and contractor's sworn statements in customary form and
appropriate waivers of mechanic's or construction liens, (4) architect's
certificates in customary form covering the work for which payment is
requested, and (5) such other requirements as may be imposed by any Mortgagee
so long as such requirements are consistent with customary construction
lending practices. Any Net Award remaining after such repairs have been made,
shall be delivered to Landlord. In the event of such temporary taking,
Tenant shall be entitled to receive the entire Net Award payable by reason of
such temporary taking or portion of such temporary taking occurring during
the Term hereof, less any reasonable costs incurred by Landlord in connection
therewith. If the cost of any repairs required to be made by Tenant pursuant
to this subparagraph 14(b) shall exceed the amount of the Net Award, the
deficiency shall be paid be Tenant. Notwithstanding anything herein to the
contrary, no payments shall be made to Tenant pursuant to this subparagraph
14(b) if any continuing monetary default by Tenant hereunder or any Event of
Default is then continuing.
(c) For the purposes of this Lease the term "NET AWARD" shall mean:
(i) all amounts payable as a result of any condemnation or other eminent domain
proceeding, less all reasonable expenses for such proceeding not otherwise paid
by Tenant in the collection of such amounts (including without limitation, all
reasonable costs and expenses (including reasonable counsel fees and expenses)
incurred by Landlord and a first Mortgagee in participating in any condemnation
or eminent domain proceedings) plus (ii) all amounts payable pursuant to any
agreement with any condemning authority (which agreement shall be deemed to be a
taking) which has been made in settlement of or under threat of any condemnation
or other eminent domain proceeding affecting the Premises, less all reasonable
expenses incurred as a result thereof not otherwise paid by Tenant in the
collection of such amounts (including without limitation, all reasonable costs
and expenses (including reasonable counsel fees and expenses) incurred by
Landlord in participating in any condemnation or eminent domain proceedings).
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15. TERMINATION OF LEASE FOLLOWING CONDEMNATION OR SUBSTANTIAL
CASUALTY.
(a) If a condemnation (other than a temporary taking) or a casualty
shall affect all or a substantial portion of the Premises and shall render
the Premises unsuitable for continued use and occupancy in Tenant's business,
and in the case of a casualty, the Premises cannot be restored within two
hundred seventy (270) days after the date on which the Premises is available
to Tenant to begin such restoration, then Tenant may at its option (but
Tenant shall, if such condemnation affects all or substantially all of the
Premises) deliver to Landlord, not later than thirty (30) days after the date
of such condemnation or ninety (90) days after the date of such casualty, as
applicable, the following documents:
(i) Notice (a "TERMINATION NOTICE") of its intention to terminate
this Lease on the next rental payment date which occurs not less than sixty
(60) days after the delivery of such notice (the "TERMINATION DATE").
(ii) A certificate of an authorized officer of Tenant describing
the event giving rise to such termination and stating that Tenant has
determined, in Tenant's reasonable and good faith judgment, that such
condemnation or casualty has rendered the Premises unsuitable for restoration
for continued use and occupancy in Tenant's business.
(iii) In the case of a casualty, the certificate of an architect
licensed in the state in which the Premises is located stating that the
architect has determined, in his or her good faith judgment, that the
Premises cannot be restored for continued use and occupancy in Tenant's
business within two hundred seventy (270) days after the date the Premises is
available to Tenant to commence such restoration.
(iv) In the case of a casualty, if the Termination Notice is given
by Tenant prior to the final adjustment and payment of the casualty insurance
claims with respect to the Premises, an assignment from Tenant, in form and
substance reasonable acceptable to Landlord and acknowledged by the insurers,
of all insurance proceeds.
(v) In the case of condemnation, an assignment from Tenant, in
form and substance reasonably acceptable to Landlord and acknowledged by the
condemning authority, of all condemnation awards (except as provided in the
proviso in the proviso at the end of the first sentence in subparagraph
14(a)).
(vi) If the Termination Date is a date within the Primary Term, an
irrevocable offer ("C/C PURCHASE OFFER") by Tenant to Landlord to purchase
the Premises on the Termination Date.
(b) If either (A) Landlord shall reject the C/C Purchase Offer by
written notice given to Tenant not later than fifteen (15) days prior to the
Termination Date or (B) the Termination Date occurs during any Extended Term,
this Lease shall terminate on the
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Termination Date, except with respect to obligations and liabilities of
Tenant or Landlord hereunder, actual or contingent, which have arisen on or
prior to the Termination Date, upon payment by Tenant of all Basic Rent and
Additional Rent and other sums then due and payable hereunder to and
including the Termination Date and the Net Award or all applicable insurance
proceeds, as the case may be, shall belong to Landlord (except as provided in
the proviso at the end of the first sentence in subparagraph 14(a)). Tenant
shall, on or before the Termination Date, (C) execute and deliver to Landlord
an outright assignment of such award or proceeds in form and substance
reasonably acceptable to Landlord, and (D) pay Landlord the amount of any
insurance deductible or self-insured amount. Unless Landlord shall have
rejected the C/C Purchase Offer in accordance with this Paragraph 15 (which
rejection, to be effective, must be accompanied by the written notice of the
first Mortgagee to the effect that it consents to such rejection), Landlord
shall be conclusively considered to have accepted the C/C Purchase Offer. In
the event Landlord accepts the C/C Purchase Offer, then on the Termination
Date, (1) Tenant shall pay to Landlord a purchase price determined pursuant
to EXHIBIT 15-1 attached hereto (provided, however, if Landlord has received
and retained net casualty insurance proceeds stemming from such casualty
pursuant to subparagraph 13(b) above or Landlord has received and retained
the Net Award stemming from such condemnation, and does not deliver such net
casualty insurance proceeds or Net Award, as applicable, to Tenant at or
before such purchase of the Premises by Tenant, then the purchase price shall
be reduced by the amount of such net casualty insurance proceeds or Net
Award, as applicable, received and retained by Landlord), (2) Landlord shall
convey to Tenant or its designee the Premises and (3) Landlord shall assign
to Tenant or its designee all of Landlord's interest in the Net Award or
insurance proceeds, as applicable, in form and substance reasonably
acceptable to Tenant. Such sale shall otherwise be consummated in accordance
with EXHIBIT 15-2 attached hereto. In the event Tenant fails to deliver the
items specified in this Paragraph 15 strictly in accordance with the time
deadlines set forth in this Paragraph 15, and (except as to the items
described in clauses (i), (ii) and (iii) of subparagraph 15(a) above, as to
which there is no notice or cure period) said failure continues for more than
five (5) business days following written notice thereof to Tenant from
Landlord, then, at Landlord's election (which election in order to be
effective must be accompanied by the written notice of first Mortgagee to the
effect that such first Mortgagee also makes such election), Tenant shall have
no right to terminate this Lease and the Lease will continue in full force
and effect.
16. ASSIGNMENT AND SUBLETTING.
Provided no Event of Default is then continuing, Tenant may sublet
all or any part of the Premises (provided, that each such sublease shall
expressly be made subject to the provisions of this Lease, including
Paragraph 3) and may assign all its rights and interests under this Lease
without Landlord's prior consent, except as may be required below in this
Paragraph 16. If Tenant assigns all its rights and interests under this Lease,
the assignee under such assignment shall expressly assume all the obligations
of Tenant hereunder in an instrument, approved by Landlord as to form and
substance (which approval will not be unreasonably withheld, conditioned or
delayed) and delivered to Landlord at the time of such assignment. No
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assignment or sublease made as permitted by this Paragraph 16 shall affect or
reduce any of the obligations of Tenant hereunder and the Tenant shall remain
unconditionally liable, and all such obligations shall continue in full force
and effect as obligations of a principal and not as obligations of a
guarantor or surety, to the same extent as though no assignment or subletting
had been made; provided that performance by any such assignee or sublessee of
any of the obligations of Tenant under this Lease shall be deemed to be
performance by Tenant. No sublease or assignment made as permitted by this
Paragraph 16 shall impose any obligations on Landlord or otherwise affect any
of the rights of Landlord under this Lease. Subject to Paragraph 11 above,
neither this Lease nor the Term hereby demised shall be mortgaged, pledged or
hypothecated by Tenant, nor shall Tenant mortgage or pledge the interest of
Tenant in and to any sublease of the Premises or the rentals payable
thereunder. Any mortgage, pledge, sublease or assignment made in violation of
this Paragraph 16 shall be void. Tenant shall, within ten (10) days after the
execution and delivery of any such assignment or sublease of all or
substantially all of the Premises, deliver a conformed copy thereof to
Landlord. Within ten (10) days after the execution and delivery of any
sublease of a portion of the Premises, Tenant shall give notice to Landlord
of the existence and term thereof, and of the name and address of the
sublessee thereunder. Notwithstanding the foregoing provisions of this
Paragraph 16 to the contrary, Tenant shall not, without the prior written
consent (which consent, to be effective, must expressly state Landlord is
aware that the subject assignee or subtenant, as the case may be, is a
tax-exempt entity) of Landlord in each instance (which Landlord may grant or
withhold in its sole discretion), assign all or any part of its interest in
this Lease or sublet all or any part of the Premises, or in any other manner
grant any right to use, occupy or otherwise "lease" (within the meaning of
Section 168(h) of the Internal Revenue Code of 1986, as amended (the "CODE"),
or any successor section thereof or of any successor statute, which pertains
to matters addressed in Section 168(h) ("SECTION 168(h)")) all or any part of
the Premises, to any "tax-exempt entity," as defined in Section 168(h), to
the extent that the aggregate portion of the Premises sublet, assigned, used,
occupied or "leased" by all such tax-exempt entities shall be more than 35%
(or such lessor or greater percentage as may be specified in clause
(1)(B)(iii) of Section 168(h) or any successor clause which specifies such a
percentage) of the Premises. Tenant agrees that any assignment or subletting
made in violation of the foregoing sentence will be deemed initially void,
and Tenant acknowledges that, notwithstanding such voiding, Landlord may
incur damages as a result of such violations and Tenant agrees to indemnify
Landlord with respect to any such damages or claims in respect thereof,
including reasonable attorneys' fees. In no event shall the term of a
sublease of all or part of the Premises extend beyond the last day of the
then scheduled end of the Term of this Lease. Tenant hereby irrevocably,
absolutely and unconditionally assigns, and grants a security interest in,
all rents and other sums of money payable under any sublease of any part or
all of the Premises. Further, Landlord shall have the right to collect and
enjoy all such rents and money; provided, however, Tenant is hereby granted a
license to collect and enjoy such rents and money, except when an Event of
Default shall be continuing under this Lease. Tenant shall execute such
financing statements as Landlord may reasonably request to perfect the
foregoing assignment as a security interest.
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17. INTENTIONALLY OMITTED.
18. FINANCIAL STATEMENTS.
Tenant will deliver to Landlord and each Mortgagee copies of all 8-K,
10-K and 10-Q reports filed with the Securities and Exchange Commission ("SEC")
by Tenant, in each case within fifteen (15) days following delivery to the SEC;
provided, however, that if Tenant does not file such reports with the SEC,
Tenant will deliver to Landlord and each Mortgagee the following:
(a) QUARTERLY STATEMENTS. Within sixty (60) days after the end of
each quarterly fiscal period (except the last) in each fiscal year of Tenant,
duplicate copies of:
(i) a consolidated balance sheet of Tenant and its consolidated
subsidiaries as at the end of such quarter,
(ii) a consolidated statement of profits and losses of Tenant and its
consolidated subsidiaries for the current quarter and the portion of the fiscal
year ending with such quarter, and
(iii) a consolidated statement of cash flows of Tenant and its
consolidated subsidiaries for the portion of the fiscal year ending with the
current quarter;
setting forth in each case in comparative for the figures for the corresponding
periods a year earlier, all in reasonable detail and certified as having been
prepared in accordance with generally accepted accounting principles
consistently applied and certified as complete and correct by a senior financial
officer of Tenant;
(b) ANNUAL STATEMENTS. Within ninety (90) days after the end of
each fiscal year of Tenant, duplicate copies of:
(i) A consolidated balance sheet of Tenant and its consolidated
subsidiaries as at the end of such year,
(ii) consolidated statements of profits and losses of Tenant and its
consolidated subsidiaries for such year, and
(iii) a consolidated statement of cash flows of Tenant and its
consolidated subsidiaries for such year;
setting forth in each case in comparative form the figures for the previous
fiscal year, all in reasonable details and accompanied by the report thereon,
containing an opinion unqualified as to limitations imposed by Tenant on the
scope of the audit, of a firm of independent certified public accountants of
recognized national standing selected by Tenant which opinion shall state that
the consolidated financial statements of Tenant and its consolidated
subsidiaries fairly present the financial condition of the companies (including
the results of their operations and
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changes in financial position) being reported upon, have been prepared in
accordance with generally accepted accounting principles consistently applied
and that the examination of such accounts in connection with such financial
statements has been made in accordance with generally accepted auditing
standards, and accordingly included such tests of the accounting records and
such other auditing procedures as were considered necessary in the
circumstances.
(c) ADDITIONAL INFORMATION. With reasonable promptness, Tenant will
provide Landlord and any Mortgagee such additional financial statements and
information regarding the business affairs and financial condition of Tenant as
Landlord and such Mortgagee may reasonably request; provided, Tenant shall not
be required to generate financial statements under this sentence which it does
not otherwise generate for some other purpose (including internal purposes). In
addition, Tenant shall submit to Landlord copies of all financial information
submitted by Tenant to its institutional lenders, bondholders and other
institutional investors as and when such information is delivered to such other
parties. Upon the prior written request of Landlord or any Mortgagee, but not
more frequently than once per calendar year, Tenant shall cause a senior
financial officer of Tenant to meet at Tenant's offices with representatives of
Landlord or Mortgagee to discuss the business and financial affairs of Tenant
and the financial statements and other information submitted by Tenant to
Landlord pursuant to this Lease. Notwithstanding the foregoing provisions of
subparagraphs 18(a) and (b) to the contrary, in the event the original Tenant
assigns its interest in this Lease, then the quarterly and annual financial
statements and reports described in subparagraphs 18(a) and (b) will also be
required of the then Tenant, in addition to the original Tenant.
(d) FAILURE TO TIMELY DELIVER. If Tenant fails to timely deliver to
Landlord and/or Mortgagee, as applicable, any of the financial statements,
certificates and other reports or information required under this Paragraph 18,
and such default continues for thirty (30) days, then provided Landlord has
given Tenant at least fifteen (15) days written notice of such failure to timely
deliver, then at Landlord's option and in its sole discretion, Tenant shall pay
Landlord a fee in the amount of five thousand dollars ($5,000.00). Said fee
shall be in addition to, and not in substitution for, any and all other remedies
otherwise available to Landlord as a result of such a default.
19. PERMITTED CONTESTS.
So long as no Event of Default is then continuing, Tenant shall not be
required to (i) pay any Imposition (as hereinafter defined); (ii) comply with
any Legal Requirements, including without limitation any requirements (whether
imposed by a governmental entity or any other party other than Landlord or a
Mortgagee) with respect to remediation of Hazardous Materials; (iii) discharge
or remove any lien, encumbrance or charge or (iv) obtain any waivers or
settlements or make any changes to take any action with respect to any
encroachment, hindrance, obstruction, violation or impairment referred to in
subparagraph 10(b), so long as Tenant shall contest, in good faith and at its
expense, the existence, the amount or the validity thereof, the amount of the
damages caused thereby, or the extent of its liability therefor, by
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appropriate proceedings provided that (A) during the pendency of the contest
there is prevented (1) the collection of, or other realization upon, the tax,
assessment, levy, fee, rent or charge or lien, encumbrance or charge so
contested (or in the alternative, Tenant pays the full amount in dispute under
protest); (2) the sale, forfeiture or loss of the Premises, or any part thereof,
or the Basic Rent or any Additional Rent, or any portion thereof; and (3) any
interference with the payment of the Basic Rent or any Additional Rent, or any
portion thereof; and (3) any interference with the payment of the Basic Rent or
any Additional Rent, or any portion thereof, (B) if the amount of the lien,
encumbrance or charge in question exceeds Two Hundred Fifty Thousand Dollars
($250,000), Tenant provides to Landlord and any Mortgagee such security against
any such lien, encumbrance or charge as Landlord or any Mortgagee shall
reasonably request and (C) such contest shall not subject Landlord or any
Mortgagee to the risk of any criminal liability. Landlord acknowledges and
agrees that Tenant shall have the right to contest any Imposition, subject to
the provisions of clauses (A), (B) and (C) of the immediately preceding
sentence. While any such proceedings are pending, so long as all of the
foregoing conditions continue to be met, Landlord shall not pay, remove or cause
to be discharged the tax, assessment, levy, fee, rent or charge or lien,
encumbrance or charge thereby being contested. Tenant further agrees that each
such contest shall be diligently prosecuted to a final conclusion. Landlord
shall use reasonable efforts, at Tenant's sole expense, to cooperate with Tenant
in order for Tenant to prosecute such a contest, including without limitation,
executing such documents in connection with such a contest as Tenant may
reasonably request which impose no liability on Landlord. Tenant shall pay,
indemnify, defend (with counsel reasonably acceptable to Landlord and any first
Mortgagee) and hold harmless the Indemnified Parties against, any and all
losses, judgments, decrees and costs (including all reasonable attorneys' fees
and expenses) in connection with any such contest and shall, promptly after the
final settlement, compromise or determination of such contest, fully pay and
discharge the amounts which shall be levied, assessed, charged or imposed or be
determined to be payable therein or in connection therewith, together will all
penalties, fines, interests, costs and expenses thereof or in connection
therewith, and perform all acts, the performance of which shall be ordered or
decreed as a result thereof.
20. DEFAULT PROVISIONS.
(a) Any of the following occurrences or acts shall constitute an
event of default (herein called an "EVENT OF DEFAULT") under this Lease:
(i) If Tenant, at any time during the continuance of this Lease (and
regardless of the pendency of any bankruptcy, reorganization, receivership,
insolvency or other proceedings, at law, in equity, or before any administrative
tribunal, which have or might have the effect of preventing Tenant from
complying with the terms of this Lease), shall (A) fail to make any payment when
due of Basic Rent or Additional Rent and such failure continues for five (5)
days after written notice to Tenant thereof, or (B) fail to observe or perform
any other provision hereof for thirty (30) days after written notice to Tenant
of such failure has been given, provided, that in the case of any default
referred to in this Lease which is reasonably susceptible of cure but cannot
with diligence reasonably be cured within such 30-day period, then upon receipt
by Landlord of a certificate of Tenant signed by an
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officer of Tenant stating the reason such default cannot be cured within
thirty (30) days, describing the efforts being undertaken by Tenant to cure
such default and reasonably estimating the cure period and provided that
Tenant is proceeding with due diligence to cure such default, the time within
which such failure may be cured shall be extended for such period as may be
necessary to complete the curing of the same with continuous, good faith due
diligence (provided further that Tenant shall provide Landlord with an update
of such original certificate, signed by an officer of Tenant, upon Landlord's
request, which update shall include a reasonably detailed description of what
Tenant is continuing to do and what Tenant has then accomplished, and a
reasonable estimate of how long it will take to complete the cure); or
(ii) If any material representation or warranty of Tenant set forth
in any notice, certificate, demand, request or other instrument delivered
pursuant to, or in connection with, this Lease shall prove to be either false
or misleading in any material respect as of the time when the same shall have
been made; or
(iii) If Tenant shall file a petition commencing a voluntary case
under the Federal Bankruptcy Code or any other federal or state law (as now
or hereafter in effect) relating to bankruptcy, insolvency, reorganization,
winding-up or adjustment of debts (hereinafter collectively called
"BANKRUPTCY LAW") or if Tenant shall (A) apply for or consent to the
appointment of, or the taking of possession by, any receiver, custodian,
trustee, United States Trustee or liquidator (or other similar official) of
the Premises or any part thereof or of any substantial portion of Tenant's
property, or (B) generally not pay its debts as they become due, or admit in
writing its inability to pay its debts generally as they become due or (C)
make a general assignment for the benefit of its creditors, or (D) fail to
controvert in timely and appropriate manner, or in writing acquiesce to, any
petition commencing an involuntary case against Tenant or otherwise filed
against Tenant pursuant to any Bankruptcy Law, or (E) take any significant
action in furtherance of any of the foregoing; or
(iv) If any order for relief against Tenant shall be entered in any
involuntary case under the Federal Bankruptcy Code or any similar order
against Tenant shall be entered pursuant to any other Bankruptcy Law, or if a
petition commencing an involuntary case against Tenant or proposing the
reorganization of Tenant under any Bankruptcy Law shall be filed and not be
discharged or denied within sixty (60) days after such filing, or if a
proceeding or case shall be commenced in any court of competent jurisdiction
seeking (A) the liquidation, reorganization, dissolution, winding-up or
adjustment of debts of Tenant, or (B) the appointment of a receiver,
custodian, trustee, United States Trustee or liquidator (or any similar
official) of the Premises or any part thereof or of Tenant or of any
substantial portion of Tenant's property, or (C) any similar relief as to
Tenant pursuant to any Bankruptcy Law, and any such proceeding or case shall
continue undismissed, or an order, judgment or decree approving or ordering
any of the foregoing shall be entered and continue unstayed and in effect for
sixty (60) days; or
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(v) Tenant shall be in default with respect to any obligations for
borrowed money under which an aggregate principal amount of Twenty-Five
Million Dollars ($25,000,000) or more is then outstanding or under any
agreement securing or relating to such borrowed money, and a lender with
respect thereto has either accelerated the debt or exercised any other remedy
with respect to such default; provided that the foregoing shall not
constitute an Event of Default unless and until Tenant shall not have, within
thirty (30) days thereafter (A) caused such obligation to be paid in full or
(B) cured such default.
(b) If an Event of Default shall have happened and be continuing,
Landlord shall have, in its sole discretion, the following rights:
(i) To give Tenant at least one (1) days' written notice of
Landlord's intention to terminate the Term of this Lease on a date specified
in such notice. Thereupon, the Term of this Lease and the estate hereby
granted shall terminate on such date as completely and with the same effect
as if such date were the date fixed herein for the expiration of the term of
this Lease, and all rights of Tenant hereunder shall terminate, but Tenant
shall remain liable as provided herein.
(ii) To (A) re-enter and repossess the Premises or any part thereof
by force, summary proceedings, ejections or otherwise and (B) remove all
persons and property therefrom, whether or not the Lease has been terminated
pursuant to clause (i) above, Tenant hereby expressly waiving any and all
notices to quit, cure or vacate provided by current or any future law, to the
extent permitted by any such law. Landlord shall have no liability by reason
of any such re-entry, repossession or removal. No such re-entry or taking of
possession of the Premises by Landlord shall be construed as an election on
Landlord's part to terminate the Term of this Lease unless a written notice
of such intention by given to Tenant pursuant to clause (i) above.
(iii) To use reasonable efforts to relet the Premises or any part
thereof for the account of Tenant, in the name of Tenant or Landlord or
otherwise, without notice to Tenant, for such term or terms (which may be
greater or less than the period which would otherwise have constituted the
balance of the term of this Lease) and on such conditions (which may include
concessions or free rent) and for such uses Landlord, in its absolute
discretion, may determine; provided Landlord shall not be required to make
any effort to relet the Premises except as required by applicable law.
Landlord may collect and receive any rents payable by reason of such
reletting. Landlord shall not be responsible or liable for any failure to
relet the Premises or any part thereof or for any failure to collect any rent
due upon any such reletting.
(iv) In the event of re-entry or repossession of the Premises or
removal of persons or property therefrom by reason of the occurrence of an
Event of Default, Tenant shall pay to Landlord all Basic Rent and Additional
Rent, in each case to and including the date of such re-entry, repossession
or removal; and, thereafter, until the Term has expired or has been
terminated, Tenant shall, whether or not the Premises shall have been relet,
be liable
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to Landlord for, and shall pay to Landlord, as liquidated and agreed current
damages (A) all Basic Rent and all Additional Rent as and when such amounts
would be payable under this Lease by Tenant in the absence of any such
re-entry, repossession or removal, together with all reasonable expenses of
Landlord in connection with such reletting efforts, if any (including,
without limitation, all repossession costs, brokerage commissions, reasonable
attorneys' fees and expenses, employee's expenses, alteration costs and
expenses of preparation for such reletting), less (B) the net proceeds, if
any, of any reletting effected for the account of Tenant pursuant to
subparagraph 20(b)(iii) above; provided, however, if Landlord fails to make
such efforts as may be required under applicable law, if any, to relet the
Premises, then the damages calculated under this sentence may be reduced by a
court of competent jurisdiction to take into account the effect of such
failure by Landlord. Notwithstanding the foregoing, in the event any such
reletting is for a term longer than the balance of the Term, Tenant shall be
responsible for only a proportionate part of the expenses based on the
balance of the Term as compared to the fixed minimum term of the reletting.
Tenant shall pay such liquidated and agreed current damages on the dates on
which Rent would be payable under this Lease in the absence of such re-entry,
repossession or removal, and Landlord shall be entitled to recover the same
from Tenant on each such date.
(v) In the event of the termination of the Term by reason of the
occurrence of an Event of Default, whether or not Landlord shall have
collected any damages pursuant to clause (iv) above with respect to the
period prior to such termination, Landlord shall be entitled to recover from
Tenant, and Tenant shall pay to Landlord on demand, as and for liquidated and
agreed final damages for Tenant's default and in lieu of all liquidated and
agreed current damages in respect of Basic Rent and Additional Rent due
beyond the date of such termination (it being agreed that it would be
impracticable or extremely difficult to fix the actual damages), an amount
equal to the sum of (A) the excess, if any, of (I) the aggregate of all Basic
Rent and Additional Rent, in each case from the date of such termination for
what is or would have been, in the absence of such termination, the then
unexpired Term, discounted on a monthly basis at the then quoted semi-annual
yields (which shall be converted to monthly yields) on U.S. Treasury
securities maturing nearest the end of the Term (as if no termination had
occurred) (the "DISCOUNT RATE") over (II) the then fair rental value of the
Premises for the same period, discounted on a monthly basis at the Discount
Rate, plus (B) the amount of all Prepayment Premiums (as defined in EXHIBIT
15-2)) which may be payable to any Mortgagee due to a default or required
prepayment under any Mortgage (or under any other loan document entered into
in connection with or pursuant to such Mortgage) which results from such
Event of Default or termination of the Lease, plus (C) Landlord's other
actual, reasonable expenses incurred as a result of such Event of Default. If
any applicable law shall limit the amount of liquidated final damages to less
than the foregoing amount, Landlord shall be entitled to the maximum amount
allowable under such law. In no event will Landlord be obligated to pay any
amount to Tenant or otherwise account to Tenant if the amount specified in
clause (A)(II) of this subparagraph 20(b)(v) is greater than the amount
specified in clause (A)(I) of this subparagraph 20(b)(v). Tenant agrees that
the credit
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provided to Tenant under clause (A)(II) of this subparagraph 20(b)(v) shall
fulfill any obligation imposed by law on Landlord to mitigate its damages.
(vi) To accept Tenant's irrevocable purchase offer to purchase the
Premises which Tenant shall be conclusively presumed to have made at the price
determined pursuant to EXHIBIT 15-1 upon the occurrence of an Event of Default
(the "DEFAULT PURCHASE OFFER"). The Default Purchase Offer shall be deemed to
contain a closing date of sixty (60) days following the Event of Default and the
purchase shall be governed by the terms and conditions set forth in
EXHIBIT 15-2.
(c) No termination of this Lease pursuant to subparagraph 20(b)(i),
by operation of law or otherwise, and no repossession of the Premises or any
part thereof pursuant to subparagraph 20(b)(ii) or otherwise, and no reletting
of the Premises or any part thereof pursuant to subparagraph 20(b)(iii), and no
payment of any amounts by Tenant under subparagraph 20(b) or the exercise by
Landlord of any of its other rights under subparagraph 20(b) shall relieve
Tenant of either (i) its unpaid or unperformed liabilities and obligations
hereunder, all of which shall survive such expiration, termination,
repossession, reletting or purchase or (ii) any unpaid or unperformed
liabilities and obligations under this Lease which by express provision of this
Lease survive such expiration, termination, repossession, reletting or purchase.
21. ADDITIONAL RIGHTS OF LANDLORD.
(a) The rights and remedies set forth in subparagraph 20(b) may be
exercised in any order and in any combination whatsoever. No right or remedy
herein conferred upon or reserved to Landlord is intended to be exclusive of any
other right or remedy, and each and every right and remedy shall be cumulative
and in addition to any other, right or remedy given hereunder or now or
hereafter existing at law or in equity. The failure of Landlord to insist at any
time upon the strict performance of any covenant or agreement or to exercise any
option, right, power or remedy contained in this Lease shall not be construed as
a waiver or a relinquishment thereof for the future. A receipt by Landlord of
any Basic Rent, any Additional Rent or any other sum payable hereunder with
knowledge of the breach of any covenant or agreement contained in this Lease
shall not be deemed a waiver of such breach, and no waiver by Landlord of any
provision of this Lease shall be deemed to have been made unless expressed in
writing and signed by Landlord. In addition to other remedies provided in this
Lease, Landlord shall be entitled, to the extent permitted by applicable law, to
injunctive relief in case of the violation, or attempted or threatened
violation, of any of the covenants, agreements, conditions or provision of this
Lease, or to decree compelling performance of any of the covenants, agreements,
conditions or provisions of this Lease, or to any other remedy allowed to
Landlord at law or in equity.
(b) Tenant hereby waives and surrenders for itself and all those
claiming under it, including creditors of all kinds, (i) any right or privilege
which it or any of them may have under any present or future constitution,
statute or rule of law to redeem the
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Premises or to have a continuance of this Lease for the Term hereby demised
after termination of Tenant's right of occupancy by order or judgment of any
court or by any legal process or writ, or under the terms of this Lease or after
the termination of the Term of this Lease as herein provided, and (ii) the
benefits of any present or future constitution, statute or rule of law which
exempts property from liability for debt or for distress for rent.
(c) Tenant shall promptly (upon receipt of any invoices therefor)
reimburse Landlord and each Mortgagee for any reasonable costs and expenses it
incurs in connection with any consents, approvals, waivers or amendments
requested by Tenant of Landlord and/or any Mortgagee or otherwise required under
or in connection with this Lease. If reasonably practical, Landlord shall use
such outside consultants (other than attorneys) as Mortgagee uses hereunder, in
order to minimize Tenant's costs hereunder.
22. NOTICES, DEMANDS AND OTHER INSTRUMENTS.
All notices, demands, requests, consents, approvals and other
instruments required or permitted to be given pursuant to the terms of this
Lease shall be in writing and shall be deemed to have been properly given if
sent by overnight express courier (in which event they shall be deemed delivered
on the next business day), or delivered by hand (in which event they shall be
deemed delivered on the date of actual delivery or refusal to accept delivery),
addressed as follows:
If to Tenant: Perry Judd's Holdings, Inc.
575 West Madison Street
Waterloo, Wisconsin 53594
Attention: Craig Hutchinson
Facsimile: (920) 478-1848
With a copy to: Liner, Yankelevitz, Sunshine, Weinhart
& Regenstreif
3130 Wilshire Boulevard
2nd Floor
Santa Monica, California 90403
Attention: Mitchell Regenstreif, Esq.
Facsimile: (310) 453-5901
And with a copy to: The Milhous Group
1160 Nicole Court
Glendora, California 91740
Attention: Tom Bressan
Facsimile: (909) 599-2390
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If to Landlord: 1323 Greenwood, L.L.C.
c/o Mesirow Realty Sale-Leaseback, Inc.
350 North Clark Street
Suite 300
Chicago, Illinois 60610
Attention: Garry W. Cohen
With a copy to: Mesirow Realty Sale-Leaseback, Inc.
8211 West Broward Boulevard
Suite 370
Plantation, Florida 33324
Attention: Gregg A. Fox
With a copy to: Goldberg, Kohn, Bell, Black,
Rosenbloom & Moritz, Ltd.
55 East Monroe Street
Suite 3700
Chicago, Illinois 60603
Attention: Gary N. Ruben
Landlord and Tenant shall each have the right from time to time to specify as
its address for purposes of this Lease any other address in the United States of
America upon fifteen (15) days written notice thereof, similarly given, to the
other party. To be effective, copies of all notices to Landlord must be given to
any first Mortgagee of which Tenant has received notice pursuant to Paragraph 24
hereof at the address and/or fax number specified by such first Mortgagee.
23. TRANSFER BY LANDLORD.
(a) Landlord shall be free to transfer its fee interest in the
Premises or any part thereof or interest therein, subject, however, to the terms
of this Paragraph 23. Landlord shall be released from the responsibility for
the performance of any liabilities and obligations which shall arise under the
terms, covenants and conditions of this Lease subsequent to the date of any such
permitted transfer. In no event shall a transfer or sale of Landlord's interest
under any of the provisions of this Paragraph be binding upon Tenant until
Tenant has received a copy of the original instrument assigning Landlord's
interest in this Lease. Such instrument shall evidence the fact that such
assignee or transferee has assumed full and complete liability for all future
obligations and responsibilities of Landlord, which will arise under, out of
and/or in connection with this Lease from and after the effective date of such
assignment or transfer. In the event that Landlord transfers its interest in
this Lease, Tenant agrees to attorn to such assignee or transferee with respect
to Tenant's obligations under this Lease so long as such assignee or transferee
recognizes Tenant's rights under this Lease. Notwithstanding the foregoing
provisions of this subparagraph 23(a) to the contrary, Landlord shall not
transfer its fee interest in the Premises, nor shall the ownership interests in
Landlord be transferred, to an entity (other than a Mortgagee or other secured
lender or its
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designee, a purchaser at a foreclosure or a purchaser accepting a deed in
lieu of foreclosure, or a real estate investment trust or other real estate
company of any kind, or a pension plan or fund or other tax exempt entity, or
a financial institution or insurance company) unless such entity has
represented in writing to Landlord and Tenant that such entity does not have
as its primary Standard Industrial Classification Code ("SIC CODE") 2721 (the
"PROHIBITED SIC CODE"). By written notice to Landlord, Tenant may substitute
(but not add) a different SIC Code category or group for the Prohibited SIC
Code, provided that (A) not more than one such substitution shall be made
within any five (5)-year period, (B) no such substitution shall preclude a
transfer to a real estate investment trust or other real estate company of
any kind, or to a pension plan or fund or other tax exempt entity, or to a
financial institution or insurance company, (C) any such substituted category
or group shall be a business in which Tenant or an Affiliate of Tenant is
then engaged or proposing to engage, and (D) the substitution shall be
effective for the purposes if this Paragraph 23 on the date Landlord receives
written notice thereof from Tenant, provided, however, with respect to any
Person which Landlord (or the owners of Landlord) has contacted about a
proposed transfer of the Premises (or ownership interests in Landlord),
whether orally, in writing, electronically or otherwise, prior to receipt of
such notice by Landlord, then such substitution shall not become effective
with regard to such Person (or its affiliates) until six (6) months after
Landlord receives such written notice, and provided, further, that if during
such six(6)-month period Landlord (or the owners of Landlord) enters into a
contract for transfer with any such Person (or its affiliates), then such
substitution will not be effective as to the transferee named in such
contract if a closing under such contract (as it may be amended) occurs.
Tenant shall respond in writing to any inquiries from Landlord within fifteen
(15) days from receipt of any inquiry as to the propriety of a sale to an
identified prospective purchaser pursuant to this subparagraph 23(a). Any
such prospective purchaser identified by Landlord in good faith in any such
inquiry as not having as its primary SIC Code the Prohibited SIC Code, which
assertion is not contested in good faith in a written notice by Tenant to
Landlord within such fifteen (15)-day period following such inquiry by
Landlord, shall be considered a permitted transferee under this subparagraph
23(a) until the later of: (x) the date which is six (6) months after (I) the
date of receipt by Landlord of Tenant's response to such inquiry, or (II) the
date of expiration of such fifteen (15)-day period as to any such inquiry to
which Tenant fails to timely respond, or (y) if Landlord (or the owners of
Landlord) enters into a contract for transfer within such six (6) month
period, the date such contract for transfer is closed, terminated or expires
(taking into account any extensions of such expiry date).
(b) If, during the Term, Landlord intends to sell the Premises,
Landlord shall give Tenant written notice thereof which shall include a
proposed purchase price for the Premises (the "SALE NOTICE"). So long as no
Event of Default has occurred and is continuing, Tenant shall have the right
to purchase Landlord's entire interest in the Premises (but not less than
such entire interest) upon the same terms and conditions set forth in the
Sale Notice and this subparagraph 23(b), which right shall be exercised, if
at all, only by giving Landlord written notice thereof (the "TENANT'S
PURCHASE NOTICE") within fifteen (15) business days after Tenant's receipt of
the Sale Notice. Upon giving the Tenant's Purchase Notice to
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Landlord, Tenant shall be obligated to purchase Landlord's interest in the
Premises at the price and on the terms and conditions set forth in the Sale
Notice and this subparagraph 23(b), such purchase to be consummated as soon
as is reasonable but in any event within ninety (90) days after the Tenant's
Purchase Notice is received by Landlord. The provisions of EXHIBIT 15-2
shall be applicable to such a purchase as if the purchase was occurring
pursuant to Paragraph 15, except that (i) the purchase price shall be as set
forth in the Sale Notice and (ii) the expenses of sale shall be shared
equally, other than attorney's fees as to which each party shall pay its own
counsel. The foregoing provisions of this subparagraph 23(b) shall not apply
to the sale by Landlord to any Affiliate of Landlord or any Affiliate of any
partner, shareholder, member or beneficiary of Landlord, but any such
Affiliate shall remain subject to the provisions of this subparagraph 23(b).
If Tenant fails to give Landlord Tenant's Purchase Notice within said fifteen
(15) business day period or if Tenant otherwise fails to comply with the
provisions of this subparagraph 23(b), time being of the essence herein,
Landlord shall not be obligated to sell in its interest in the Premises to
Tenant and Landlord, so long as it shall have strictly complied with the
provisions hereof, shall be free to transfer its interest in the Premises to
any Person permitted under subparagraph 23(a) so long as the purchase price
of Landlord's interest in the Premises is not less than ninety-two percent
(92%) of the purchase price set forth in the Sale Notice, and the sale does
not include Landlord financing or any substantial capital markets
accommodation by Landlord.
24. MORTGAGING BY LANDLORD.
Notwithstanding any provision of Paragraph 23 to the contrary,
Landlord shall be free to grant one or more mortgages, deeds of trust or like
security interest in the Premises and this Lease (individually a "MORTGAGE")
to one or more mortgagees, deed of trust trustees or other grantees
(individually, together with each holder of any note secured thereby, a
"MORTGAGEE") on the condition that either (a) this Lease shall be superior to
the Mortgage, or (b) if this Lease is to be subordinate to the Mortgage,
Tenant receives from the Mortgagee a nondisturbance agreement reasonably
acceptable to Tenant, provided that in no event shall this Lease be
subordinated to a junior mortgage and any attempted subordination of this
Lease to a junior mortgage shall, at the option of the first Mortgagee, be
void and of no effect. Tenant agrees to attorn, upon the terms of this
Lease, at the request of any Mortgagee, to such Mortgagee of other transferee
upon a transfer of title by reason of foreclosure of such Mortgage or deed in
lieu of foreclosure thereof. No such transfer shall be effective as to
Tenant until Tenant receives written notice thereof and a copy of the deed or
other instrument evidencing such transfer. In connection with any proposed
transfer, pledge or mortgage of Landlord's fee interest in the Premises or
any portion of the ownership interests in Landlord, Tenant shall, within
fifteen (15) days after Landlord's written request therefor, provide Landlord
and the proposed transferee and/or Mortgagee with confirmation in writing
that Tenant shall recognize such transferee and Mortgagee as such in the
event of the consummation of the transaction described in such notice.
Without limiting the generality of the foregoing, at the written
direction of Landlord, Tenant shall agree in writing in respect of a first
Mortgage for the benefit of the
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Mortgagee thereunder that (i) the Mortgagee is a direct assignee of
Landlord's interest under this Lease and (ii) that until said Mortgage has
been released of record, all payments of Basic Rent and Additional Rent
(including any payments in respect of a conveyance of the Premises to Tenant
pursuant to Paragraph 15 of subparagraph 21(b)(vi)) are to be made as set
forth in said direction and no subsequent direction by Landlord shall be
honored by Tenant until said Mortgage has been released of record unless the
Mortgagee consents in writing to such subsequent direction, election or
approval. Any Mortgagee which becomes an assignee of Landlord's interest in
this Lease, whether by foreclosure of a Mortgage or pursuant to a deed in
lieu thereof, or any successor of such assignee, shall not be obligated to
perform any duty, covenant or condition required to be performed by Landlord
under any of the terms hereof (except for obligations that arise on and after
such time as the Mortgagee shall obtain title to the Premises following
foreclosure or deed in lieu of foreclosure), but on the contrary, Tenant and
Landlord, by their respective executions hereof each acknowledge and agree
that notwithstanding any such assignment each and all of such duties,
covenants or conditions required to be performed by Landlord shall survive
any such assignment and shall be and remain the sole liability of Landlord.
Subject to the prior sentence, any transferee of Landlord's interest which
acquires such interest from a Mortgagee, and any purchaser of such interest
at a foreclosure sale in respect of a Mortgage (or transferee of a deed in
lieu of such a foreclosure), shall not be obligated to any duty, covenant or
condition required to be performed by Landlord under any of the terms hereof,
which obligation arises prior to said transferee's or purchaser's acquisition
of Landlord's interest under this Lease, shall not otherwise be liable for
the defaults of any prior Landlord hereunder and shall not be obligated to
account for or be subject to any offset in respect of any payment of rent
made more than thirty (30) days in advance of the due date thereof unless and
then only to the extent such rental payment is actually received by such
Mortgagee or transferee. Without limiting the foregoing, Tenant acknowledges
and agrees that the rights of all such assignees, purchasers and transferees
in and to Basic Rent and Additional Rent shall not be subject to any
abatement whatsoever, or be subject to any defense, setoff, counterclaim or
recoupment or reduction of any kind by reason of any event or circumstance
which occurred prior to the date upon which any such assignee, purchaser or
transferee obtained title to the Premises or the Landlord's interest in this
Lease. Tenant shall pay when due all reasonable fees and expenses of any
Mortgagee and its attorneys which are payable by Landlord pursuant to the
terms of the Mortgage and which arise by reason of any Event of Default under
this Lease or any request by Tenant for any amendment or modification of, or
waiver or consent relating to, the terms of this Lease, any assignment or
subletting or otherwise affecting the Premises.
25. ESTOPPEL CERTIFICATES.
(a) Tenant shall at any time and from time to time, upon not less
than ten (10) days prior request by Landlord or any Mortgagee, execute,
acknowledge and deliver to such requesting party executed Tenant's
Certificates substantially in the forms attached hereto as EXHIBITS 25-1 AND
25-2; provided, either such certificate may be amended by adding thereto
Tenant's certification as to other factually correct information pertaining
to this Lease as may be reasonably requested by Landlord or any Mortgagee.
Any such
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<PAGE>
certificate may be relied upon by any Mortgagee, prospective purchaser or
prospective Mortgagee of the Premises.
(b) Landlord shall at any time and from time to time, upon not
less than ten (10) days prior request by Tenant, execute, acknowledge and
deliver to Tenant (or as Tenant may reasonably direct), a certificate
providing for factually correct information pertaining to this Lease as
reasonably requested by Tenant, including, without limitation, whether to
Landlord's actual knowledge Tenant is then in default hereunder, the last
dates and amounts of Rent paid hereunder and the dates of any modifications
to this Lease. Such certificates may be relied upon by the parties to whom
Tenant requests that they be addressed, including Tenant's lenders or a
potential purchaser of Tenant.
26. NO MERGER.
There shall be no merger of this Lease or the leasehold estate
hereby created with the fee estate in the Premises or any part thereof by
reason of the same person acquiring or holding, directly or indirectly, this
Lease or the leasehold estate hereby created or any interest in this Lease or
in such leaseholder estate as well as the fee estate in the Premises or any
portion thereof.
27. SURRENDER.
Upon the termination of this Lease, Tenant shall peaceably
surrender the Premises to Landlord in the condition in which the Premises is
to be kept under the other provisions of this Lease, including without
limitation, Paragraph 10. Tenant shall, at Tenant's expense, remove from the
Premises prior to such termination all property not owned by Landlord
(including without limitation, all of Tenant's printing equipment), and
immediately repair any damage caused by such removal. Property not so removed
shall, at Landlord's election, become the property of Landlord. Landlord may
thereafter cause such property to be removed and disposed of and the cost of
repairing any damage caused by such removal shall be borne by Tenant.
Notwithstanding anything to the contrary contained herein, upon termination
of this Lease, all building fixtures, including, but not limited to, the
heating, ventilation and air conditioning systems, but in all events
excluding Tenant's printing equipment, shall remain on the Premises and shall
become the property of Landlord.
28. SEVERABILITY.
Each and every covenant and agreement contained in this Lease is
separate and independent, and the breach of any thereof by Landlord shall not
discharge or relieve Tenant from any obligation hereunder. If any term or
provision of this Lease or the application thereof to any person or
circumstances shall at any time be invalid and unenforceable, the remainder
of this Lease, or the application of such term or provision to persons or
circumstances or at any time other than those to which it is invalid or
unenforceable, shall not be affected thereby, and each term and provision of
this Lease shall be valid and shall be enforced to the extent permitted by
law.
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<PAGE>
29. SAVINGS CLAUSE.
No provision contained in this Lease which purports to obligate the
Tenant to pay any amount of interest or any fees, costs or expenses which are
in excess of the maximum permitted by applicable law, shall be effective to
the extent that it calls for payment of any interest or other sums in excess
of such maximum.
30. BINDING EFFECT.
All of the covenants, conditions and obligations contained in this
Lease shall be binding upon and inure to the benefit of the respective
successors and assigns of Landlord, Tenant and any Mortgagee.
31. INTENTIONALLY OMITTED.
32. TABLE OF CONTENTS; HEADINGS.
The table of contents and headings used in this Lease are for
convenient reference only and shall not to any extent have the effect of
modifying, amending or changing the provisions of this Lease.
33. GOVERNING LAW.
This Lease shall be governed by and interpreted under the laws of
the state in which the Premises are located.
34. CERTAIN DEFINITIONS.
(a) The term "LEGAL REQUIREMENTS" means collectively (i) all laws,
rules, regulations, ordinances or orders in effect from time to time, of all
federal, state, local, county and other governmental authorities having
authority over the Premises, any portion thereof, the use thereof, Tenant or
Landlord, including without limitation, all Environmental Laws and the
Americans With Disabilities Act of 1990, 42 U.S.C. Section 12101 ET SEQ. and
(ii) any covenants, restrictions or agreements to which the Premises are
subject (other than any which arise as a result of a breach by Landlord of
its obligations under the second grammatical paragraph of Paragraph 9 above).
(b) The term "IMPOSITION" means:
(i) all real estate taxes which become due and which accrue during
the Term and all other assessments (including assessments for benefits from
public works or improvements, whether or not begun or completed prior to the
commencement of the Term of this Lease and whether or not to be completed within
the Term), levies, fees, water and sewer rents and charges, and all other
governmental charges of every kind, general and special, ordinary and
extraordinary, whether or not the same shall have been within the express
contemplation of the parties hereto, together with any interest and penalties
thereon, which are, at any time, imposed or levied upon or assessed against
(A) the Premises or any part thereof, (B) any Basic Rent or any Additional
Rent, (C) this Lease or the leasehold estate
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<PAGE>
hereby created or which arise in respect of the ownership, operation,
possession, occupancy or use of the Premises; provided, however, Impositions
shall exclude real estate taxes and assessments to the extent such taxes and
assessments arise as a result of a breach by Landlord of its obligations
under the last grammatical paragraph of Paragraph 9 above;
(ii) any gross receipts or similar taxes imposed or levied upon,
assessed against or measured by the Basic Rent or Additional Rent hereunder
or levied upon or assessed against the Premises (but calculated assuming the
Basic Rent and Additional Rent are the only receipts of Landlord);
(iii) all sales and use taxes which may be levied or assessed
against, or payable by, Landlord or Tenant on account of the acquisition,
payment of rent or leasing or use of the Premises or any portion thereof; and
(iv) all charges for water, gas, light, heat, telephone,
electricity, power and other utilities and communications services rendered
or used on or about the Premises.
(c) The term "LEASE" means:
this Lease, as amended and modified from time to time, together
with any memorandum or short form of lease entered into for the
purpose of recording.
(d) The term "LANDLORD" means:
the owner of the rights of the Landlord under this Lease and,
subject to subparagraph 23(a) above, upon any assignment or
transfer of such rights, except an assignment or transfer made as
security for an obligation, any heirs, successors and assigns. The
assignor or transferor shall be relieved of all future duties and
obligations under this Lease provided the assignee or the
transferee shall expressly agree in writing to be bound by and to
assume all the covenants of Landlord hereunder arising from and
after such assignment or transfer.
35. ASSIGNMENT OF INTANGIBLES.
No later than ninety (90) days following the expiration or earlier
termination of this Lease, Landlord may require in a written notice to Tenant
that Tenant assign to Landlord, effective as of such expiration or earlier
termination of the Term, all rights of Tenant in and to such intangible
personal property used by Tenant in connection with the Premises (as a
building or property, as applicable) as is designated by Landlord in such
notice, including, without limitation, any contract rights, guaranties,
licenses, permits, registrations and warranties (including without limitation
licenses, permits and registrations pertaining to any clean-up or remediation
of Hazardous Materials on or about the Premises to the extent such licenses,
permits and registrations may be assigned to Landlord), but excluding any
trade names, service marks, corporate names, or business licenses used by
Tenant in the operation of its business, and in all events, subject to the
transferability of such intangible property. Except any obligation of
Tenant to Landlord under this Lease which by the terms of this Lease survives
the
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termination or expiration of this Lease, including without limitation
Tenant's indemnity obligations under Paragraph 7 and 8 of this Lease,
Landlord shall assume any future obligations of Tenant in respect of any such
assigned intangible personal property in form reasonably acceptable to
Landlord and Tenant. Tenant shall execute such assignments and/or bills of
sale of the intangible personal property as Landlord may reasonably request,
provided the same do not impose any additional liability on Tenant and are
otherwise reasonably acceptable to Tenant. The obligations of Tenant under
this Paragraph 35 shall survive the expiration or earlier termination of this
Lease.
36. REPRESENTATION AND WARRANTIES.
To induce Landlord to enter into this Lease, Tenant makes the
representations and warranties set forth in EXHIBIT 36 to this Lease.
37. EXHIBITS.
Exhibits 1, 5-1,5-2, 9, 15-1, 15-2, 25-1, 25-2 and 36 attached hereto
are hereby incorporated by reference in this Lease and made a part hereof.
38. EXCULPATORY CLAUSE.
Notwithstanding any provision of this Lease to the contrary, the
liability of Landlord under and with respect to this Lease shall be limited
to the interest of Landlord in the Premises and the then future rents and
profits therefrom, and any judgement in favor of Tenant or any party claiming
by, through or under Tenant against Landlord shall be collectible only out of
Landlord's interest in the Premises and the then future rents and profits
therefrom, and in no event shall any judgement for damages be entered against
Landlord which is in excess of such interest.
39. JURY WAIVER.
LANDLORD AND TENANT EACH HEREBY WAIVE ANY RIGHT IT MAY HAVE TO TRIAL BY
JURY IN ANY ACTION OR PROCEEDING ARISING FROM A DISPUTE UNDER THIS LEASE.
40. INTENTIONALLY OMITTED.
41. EVICTION BY PARAMOUNT TITLE.
If Tenant is evicted from the Premises as a result of any Person
holding title to the Land superior to that of Landlord (excluding any Person
holding such superior title as a direct result of a foreclosure of a lien
voluntarily created by Landlord, including any Mortgage); then Tenant shall
be conclusively presumed to have made Landlord an irrevocable offer to
purchase the Premises at the price determined pursuant to EXHIBIT 15-1 (a
"DEFEASANCE PURCHASE OFFER"). A Defeasance Purchase Offer shall be deemed
accepted unless rejected in writing by Landlord and the first Mortgagee
jointly within thirty (30) days after the date of Tenant's eviction from the
Premises. A Defeasance Purchase Offer shall be deemed to contain a closing
date of thirty (30) days following the date it is deemed made, and the
purchase shall be governed by the terms and conditions set forth in EXHIBIT
15-2.
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42. QUIET ENJOYMENT.
So long as Tenant is not in default of any of its covenants and
obligations under this Lease, Tenant shall be entitled to peaceful and quiet
enjoyment of the Premises, subject, however, to the express terms and
conditions of this Lease, including without limitation, Paragraph 6 hereof.
43. PREVAILING PARTY'S COSTS.
In the event of any dispute arising under this Lease between the
parties hereto (and whether or not such dispute shall involve actual
litigation or arbitration), the prevailing party shall be entitled to be
reimbursed upon demand by the non-prevailing party for all reasonable costs
and expenses, including reasonable attorneys' fees and expenses.
44. ASBESTOS PLAN.
Tenant shall, within a reasonable time after execution of this Lease,
develop and comply with an operation, inspection and maintenance plan with
respect to the asbestos at the Premises, which plan shall incorporate sound
environmental practices and be in compliance with all Environmental Laws.
45. JOINT AND SEVERAL.
The obligations and liability of Holdings and PJI under this Lease as
the Tenant hereunder are joint and several.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Lease as of
the day and year first above set forth.
LANDLORD:
1323 GREENWOOD, L.L.C., a Delaware limited
liability company
By MESIROW REALTY SALE-LEASEBACK, INC., an
Illinois corporation, an authorized signatory
By /s/ Garry W. Cohen
------------------------------
Name Garry W. Cohen
------------------------------
Its Exec VP
------------------------------
TENANT:
PERRY JUDD'S HOLDINGS, INC., a Delaware
corporation
By /s/ Verne Schmidt
------------------------------
Name Verne Schmidt
------------------------------
Its Sr. VP/CFO
------------------------------
PERRY JUDD'S INCORPORATED,
a Delaware corporation
By /s/ Verne Schmidt
------------------------------
Name Verne Schmidt
------------------------------
Its Sr. VP/CFO
------------------------------
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LEASE/SUBLEASE
BY AND BETWEEN
PERRY JUDD'S INCORPORATED,
a Delaware corporation, and
PERRY JUDD'S HOLDINGS, INC.
a Delaware corporation
COLLECTIVELY, AS SUBLANDLORD
AND
PORT CITY PRESS, INC.,
a Maryland corporation
AS SUBTENANT
DATED AS OF AUGUST 14, 1998
<PAGE>
LEASE/SUBLEASE
THIS LEASE/SUBLEASE ("Lease/Sublease") is entered into as of the
14th day of August, 1998 (the "Effective Date") by and between PERRY JUDD'S
INCORPORATED, a Delaware corporation, and PERRY JUDD'S HOLDINGS, INC., a
Delaware corporation (collectively, "Sublandlord"), and PORT CITY PRESS,
INC., a Maryland corporation ("Subtenant"), with reference to the following:
W I T N E S S E T H
WHEREAS, Sublandlord is the owner (or tenant, as described in the
succeeding recitals) of that certain premises (the "Premises") consisting of:
(a) land described in EXHIBIT "A" hereto, (b) all buildings, structures and
other improvements constructed and to be constructed thereon (including all
building equipment and fixtures owned by Sublandlord, but excluding personal
property, trade equipment and fixtures owned by Subtenant; and (c) all
easements, rights and appurtenances relating thereto.
WHEREAS, (i) Sublandlord has agreed to sell (the "Sale Transaction")
the Premises to 1323 Greenwood, L.L.C., a Delaware limited liability company
(herein "Landlord"); and (ii) Landlord, and Sublandlord, have agreed, at the
closing (the "Closing") of the Sale Transaction, to enter into that certain
lease agreement, dated August 13, 1998 (hereinafter, the "Master Lease"),
wherein Landlord has agreed to lease to Sublandlord and Sublandlord agreed to
lease back from Landlord, the Premises.
WHEREAS, a true and complete copy of the Master Lease is set forth
on EXHIBIT "B" attached hereto and incorporated by reference herein and the
same has been delivered to Subtenant, and Subtenant, by its execution hereof,
acknowledges receipt of the same; all capitalized terms not otherwise defined
herein shall have the meanings ascribed to such terms under the Master Lease.
WHEREAS, Sublandlord and Subtenant may enter into this
Lease/Sublease prior to the time Sublandlord and Purchaser enter into the
Master Lease at the Closing under the Purchase Agreement.
WHEREAS, (a) if the Closing has not occurred as of the Effective
Date, Sublandlord and Subtenant intend that this Lease/Sublease shall
constitute a direct, prime lease of the Premises by Sublandlord, as owner of
the Premises, to Subtenant, as tenant, until the date of the Closing and the
effectiveness of the Master Lease, at which time this Lease/Sublease shall
automatically be converted, without further action by the parties hereto, into
a sublease of the Premises by Purchaser, as Landlord, Sublandlord, as
Sublandlord, and Subtenant, as Subtenant, or (b) if the Closing has occurred,
this Lease/Sublease shall immediately upon execution be a
<PAGE>
sublease between Sublandlord, as Sublandlord, and Subtenant, as Subtenant; in
either case at a rent, and upon and subject to the covenants, agreements,
terms, conditions, limitations, exceptions and reservations contained in the
Master Lease.
NOW, THEREFORE, in consideration of the premises leased and/or
subleased herein, and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, Sublandlord and Subtenant hereby
covenant and agree as follows:
ARTICLE I.
LEASE PROVISIONS.
If the Effective Date is prior to the date that Landlord and
Sublandlord enter into the Master Lease (the "Master Lease Commencement
Date"), Sublandlord hereby leases pursuant to the terms of this Article I and
Article III (the "Lease") the Premises to Subtenant, and Subtenant hereby
hires the Premises from Sublandlord on the following terms, covenants and
conditions:
1.1. INCORPORATION OF TERMS OF MASTER LEASE. Each and every
provision of the unexecuted Master Lease as set forth on EXHIBIT "B" of this
Lease/Sublease is hereby incorporated by reference into the Lease with the
same force and effect as if set forth at length herein and shall apply to the
Premises at all times during the Lease Term as if the Lease Term and the Term
of the Master Lease were co-extensive. References in the Master Lease to
"Landlord", "Tenant", "Premises", "Lease", "Basic Rent" and "Additional Rent"
shall be deemed to refer to Sublandlord, Subtenant, Premises, Lease, Basic
Rent, Additional Rent applicable to the Lease Term hereunder,
respectively. All references to the Lease in this Article I shall be deemed
to be to the provisions of this Article I incorporating the terms of the
unexecuted Master Lease.
1.2. LEASE TERM. The Lease shall be for a term ("Lease Term")
commencing on the Effective Date and ending on the Master Lease Commencement
Date or on such earlier date upon which said term may expire or be canceled
or terminated pursuant to the terms of the Master Lease; provided, however,
that if for any reason Purchaser and Landlord do not enter into the Master
Lease, the Lease Term shall continue until the expiration of the Term (as
defined in the Master Lease), unless sooner terminated under the terms of the
Lease.
1.3. LEASE RENT.
(a) BASIC RENT. Subtenant shall pay as rent for the Premises
during the Lease Term an amount equal to the Basic Rent (which would
otherwise be applicable under the Master Lease if the Term of the Master Lease
and the Lease Term were co-extensive) in the amounts set forth on Exhibits
5-1 and 5-2 of the Master Lease, in monthly installments in advance on the
Basic Rent Payment Date.
(b) ADDITIONAL RENT. In addition to the Basic Rent provided
for in Paragraph 1.3(a) of this Article I, during the Lease Term, Subtenant
shall pay any and all Additional Rent and any other amounts payable by Tenant
under the Lease.
2.
<PAGE>
(c) PAYMENT OF RENT. During the Lease Term, Subtenant shall
pay the Basic Rent, the Additional Rent and any other amounts required to be
paid by Tenant under the Lease by wire or other electronic transfer of
immediately available funds to Sublandlord at the address of Sublandlord set
forth at Paragraph 1 of Article III hereof and/or to such other person or
such other place or account as Sublandlord may designate to Subtenant in
writing, without demand therefor, provided, Sublandlord may designate to
Subtenant in writing that all of the monthly Basic Rent be paid directly to a
mortgagee of Landlord (to the extent so provided in the Master Lease), and
such payment by Subtenant to Landlord or a mortgagee shall satisfy
Subtenant's rental obligations to the same extent as if such payment was
made to the Sublandlord.
(d) NO SET-OFF. Except as otherwise expressly provided in the
Lease, Basic Rent and Additional Rent shall be paid by Subtenant without notice
or demand (except as expressly provided in the Master Lease with respect to
notice and demands), setoff, counterclaim, abatement, suspension, deduction
or defense.
1.4 ARTICLE I NOT EFFECTIVE IF CLOSING HAS OCCURRED. Notwithstanding
anything to the contrary contained herein, the provisions of this Article I
shall immediately cease to be effective, in the event that the Closing has
occurred prior to the Effective Date hereof.
Article II.
SUBLEASE PROVISIONS.
If and when Landlord and Sublandlord enter into the Master Lease,
Sublandlord hereby subleases pursuant to the terms of this Article II and
Article III (the "Sublease") to Subtenant, and Subtenant hereby subleases from
Sublandlord the Premises on the following terms, covenants and conditions:
2.1 INCORPORATION OF MASTER LEASE TERMS. Except as otherwise
expressly provided herein, the provisions of the executed Master Lease in
identical form as set forth on EXHIBIT "B" of this Lease/Sublease are hereby
incorporated by reference with the same force and effect as if set forth at
length herein and shall apply to the Premises to the extent that the same are
applicable, except as modified and amended by this Lease/Sublease. References
in the Master Lease to "Landlord", "Tenant", "Premises", "Master Lease",
"Basic Rent" and "Additional Rent" shall be deemed to refer to Sublandlord,
Subtenant, Premises, this Lease/Sublease, Basic Rent and Additional Rent
hereunder, respectively. Subtenant hereby covenants to Sublandlord and agrees
for the benefit of Sublandlord that Subtenant shall perform and observe each
and every covenant and agreement to be observed or performed by the Tenant
under the Master Lease. Sublandlord hereby covenants to Subtenant and agrees
for the benefit of Subtenant that Sublandlord will not interfere with the
fulfillment by Landlord of any of its obligations to Subtenant under that
certain Non-Disturbance Agreement, dated on or about the date of the Closing,
by and among, Landlord, Sublandlord and Subtenant (the "Non-Disturbance
Agreement"), nor will Sublandlord have the right to take any action which
will result in a default under the Master Lease or in the termination of the
Master Lease. Notwithstanding the foregoing, Sublandlord shall have no
liability to Subtenant for any default under the Master Lease to the extent
the same is caused by Subtenant's failure to comply with its own obligations
3.
<PAGE>
under this Sublease. All references to the Sublease in this Article II shall
be deemed to be to the provisions of this Article II incorporating the terms
of the Master Lease. To the extent that any provisions of the Master Lease
may conflict or be inconsistent with the provisions of any provisions of this
Sublease, whether or not such inconsistency is expressly noted herein, the
provisions of this Sublease shall govern.
2.2. SUBLEASE TERM. The Sublease term ("Sublease Term") shall
commence on the Master Lease Commencement Date and shall, subject to the
terms of the Non-Disturbance Agreement, end on the day preceding the
expiration of the Term of the Master Lease (the "Sublease Expiration Date")
or on such earlier date upon which said term may expire or be canceled or
terminated pursuant to any of the provisions of the Master Lease and this
Sublease.
2.3. SUBLEASE RENT.
(a) BASIC RENT. Subtenant shall pay as rent for the Premises
during the Sublease Term an amount equal to the Basic Rent which would
otherwise be applicable under the Master Lease if the Term of the Master
Lease and the Sublease Term were coextensive in the amounts set forth on
Exhibits 5-1 and 5-2 of the Master Lease in monthly installments in advance
on the Basic Rent Payment Date.
(b) ADDITIONAL RENT. In addition to the Basic Rent provided
for in Paragraph 1.3(a) of this Article II, during the Sublease Term,
Subtenant shall pay any and all Additional Rent and any other amounts payable
by Tenant under the Lease when and if required under the Sublease.
(c) PAYMENT OF RENT. During the Sublease Term, Subtenant
shall pay the Basic Rent, the Additional Rent and any other amounts required
to be paid by the Tenant under the Sublease by wire or other electronic
transfer of immediately available funds directly to Landlord at 350 North
Clark Street, Chicago, Illinois 60610, and/or to such other person or such
other place or account as Landlord may designate to Subtenant in writing,
without demand therefor; provided, Landlord or Sublandlord may designate to
Subtenant in writing that all of the monthly Basic Rent and Additional Rent
be paid directly to Landlord or a mortgagee of Landlord (to the extent so
provided in the Master Lease), and such payment by Subtenant to Landlord or a
mortgagee shall satisfy Subtenant's rental obligations to the same extent as
if such payment was made to Sublandlord.
(d) NO SET-OFF. Except as otherwise expressly provided in
the Master Lease, Basic Rent and Additional Rent shall be paid by Subtenant
without notice or demand (except as expressly provided in the Master Lease
with respect to notice and demands), setoff, counterclaim, abatement,
suspension, deduction or defense.
//
//
4.
<PAGE>
2.4. CONDITION OF PREMISES.
(a) (i) Subtenant agrees that it enters into this Sublease
without any representations, warranties or promises by Sublandlord, its
agents, representatives, employees, servants or any other person with respect
to the Premises; and no rights, easements or licenses are acquired by
Subtenant by implication or otherwise, except as otherwise expressly set
forth in the Master Lease.
(ii) Subtenant further represents that it has made a
thorough examination of the Master Lease and that it is familiar with all the
terms, conditions and covenants contained therein.
(b) Sublandlord shall not be required to make any
alterations, installations, additions, decorations, repairs or improvements
to the Premises.
(c) In no event shall Sublandlord be required to repair any
damage to any equipment, furniture, furnishings, partitioning, carpeting,
wallpapering or other decorative finishings unless such damage is due to the
willful misconduct or negligence of Sublandlord.
(d) Sublandlord shall (i) promptly submit to Landlord an
extra copy or copies of plans, specifications and other items submitted by
Subtenant for consent and approval, and (ii) promptly submit to Subtenant,
all responses or inquiries from Landlord with respect to the foregoing.
(e) On the expiration, termination or cancellation of this
Sublease, all Alterations made by Subtenant, and all personal property left
by Subtenant, shall, unless Sublandlord elects otherwise, be dealt with as
provided in the Master Lease.
2.5. USE OF PREMISES. Subtenant may use the Premises only for such
use or uses as are permitted under the Master Lease.
2.6. ASSIGNMENT AND SUBLETTING. Subtenant shall not, directly,
indirectly, by operation of law or otherwise, assign, mortgage, pledge,
encumber or in any manner transfer this Sublease, or any part thereof, or any
interest of Subtenant hereunder, nor sublet or permit the Premises or any
part thereof to be used or occupied by others except as provided in Paragraph
16 of the Master Lease. Subtenant agrees to provide Sublandlord with written
notice of any proposed assignment or subletting concurrently with providing
any such notice to Landlord under the Master Lease.
2.7. SUBJECT TO MASTER LEASE.
(a) This Sublease is subject and subordinate to all of the
terms, covenants, provisions, conditions and agreements contained in the
Master Lease and in any amendments or supplements thereto now or hereafter
existing and the matters to which the Master Lease is subject and
subordinate. Sublandlord will not enter into any modification or amendment
of the Master Lease without Subtenant's prior written consent, which consent
shall
5.
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not be unreasonably withheld. Subtenant acknowledges and agrees that the
Master Lease may not be modified or amended without Sublandlord's prior
written consent. Sublandlord hereby agrees that in the event that Subtenant
requests the consent of Landlord or Sublandlord to any act or undertaking of
Subtenant (i) Sublandlord will reasonably cooperate with such request, at no
cost to Sublandlord, and (ii) provided that Landlord grants such consent,
Sublandlord shall also grant such consent, if the granting of such consent
will not increase, in any material way, the obligations, liabilities or
financial burdens (contingent or otherwise) of Sublandlord under the Master
Lease. Subtenant further covenants and agrees (iii) that Subtenant will not
do or cause to be done or suffer or permit any act or thing to be done which
would or might cause the Master Lease or the rights of Sublandlord as Tenant
thereunder to be canceled, terminated or forfeited or which would make
Sublandlord liable for any damages, claims or penalties; and (iv) except for
Sublandlord's willful misconduct, negligence or breach of the Master Lease,
to indemnify and hold harmless Sublandlord from and against any and all
liability, loss, damage, suits, penalties, claims and demands of every kind
or nature (including, without being limited to, reasonable attorneys' fees
and expenses of defense) by reason of Subtenant's failure to comply with the
terms of the Sublease.
(b) Subject to the terms of the Non-Disturbance Agreement, in
the event of, and upon the termination or cancellation of the Master Lease
pursuant to the terms and provisions thereof, this Lease/Sublease shall
automatically cease and terminate.
(c) In the event of any default on the part of either
Sublandlord or Subtenant under any of the terms, covenants, conditions,
provisions or agreements of the Master Lease or of this Sublease, Sublandlord
shall have the same rights and remedies against Subtenant under this Sublease
as are available to the Landlord against Sublandlord under the provisions of
the Master Lease, and Subtenant shall have the same rights and remedies
against Sublandlord under this Sublease as are available to the Tenant
against Landlord under the provisions of the Master Lease.
(d) The provisions of this Paragraph 2.7 shall survive the
expiration or sooner termination of this Sublease.
2.8 DAMAGE OR DESTRUCTION. If the Premises shall be partially or
totally damaged by fire or other cause, the consequences thereof shall be
governed by the Master Lease, including, without limitation, Paragraphs 13,
14 and 15 of the Master Lease. Subtenant's right to an apportionment or
abatement of rent and to repairs shall be dependent upon whether or not
Sublandlord has a right to apportionment or abatement of rents and/or repairs
under said Master Lease, including, without limitation, Paragraphs 13, 14 and
15, in respect of the Premises. Except as such rights are provided to
Sublandlord by Landlord in the Master Lease, no damage, compensation or
claims shall be payable by Sublandlord for inconvenience, loss of business or
annoyance arising from any repair or restoration of any portion of the
Premises.
2.9 SERVICES, REPAIRS, RESTORATIONS, ETC. Subject to the terms of
the Non-Disturbance Agreement, if Landlord shall default in any of its
obligations to Sublandlord with respect to the Premises, Subtenant shall be
entitled to enforce Sublandlord's rights against Landlord under the Master
Lease, at no cost or expense to Sublandlord; provided Subtenant shall
6.
<PAGE>
defend, indemnify, protect and hold Sublandlord harmless from and against any
and all claims, costs and expenses related to any such enforcement. Subject
to the terms of the Non-Disturbance Agreement, if, after written request from
Subtenant, Sublandlord shall fail or refuse to take appropriate action for
the enforcement of Sublandlord's rights against Landlord with respect to the
Premises within a reasonable period of time considering the nature of
Landlord's default, Subtenant shall, if the same right would be permissible
by Sublandlord under the Master Lease, have the right to pursue a claim,
action, proceeding or arbitration, for injunction, damages or other remedy in
its own name, and for that purpose and only to such extent all of the rights
of Sublandlord under the Master Lease hereby are conferred upon and assigned
to Subtenant and Subtenant hereby is subrogated to such rights to the extent
that the same shall apply to the Premises; provided Subtenant shall defend,
indemnify, protect and hold Sublandlord harmless from and against any and all
claims, costs and expenses related to any such actions by Subtenant; and,
provided, further, that notwithstanding anything herein to the contrary, in
no event shall Subtenant have the right to take any action which may result
in a default under the Master Lease or in a termination of the Master Lease,
in whole or in part or in a surrender of all or any portion of the Premises.
In connection with the defense of any indemnified claim hereunder,
Sublandlord agrees that Subtenant may, at its option, provide a joint defense
(with counsel reasonably acceptable to Sublandlord) to a claim which is
asserted against both Sublandlord and Subtenant.
2.10 EVENTS OF DEFAULT. The occurrence of any Event of Default
under the Master Lease shall constitute a material default hereunder.
ARTICLE III
PROVISIONS APPLICABLE TO BOTH LEASE AND SUBLEASE
The following terms, covenants and conditions shall apply to both the Lease
and the Sublease:
3.1 NOTICES. Any notice, demand, request or other communication
which under the terms of this Lease/Sublease or under any provision of law or
governmental regulation must or may be given either by Sublandlord to
Subtenant or by Subtenant to Sublandlord shall be in writing and hand
delivered or mailed by United States certified mail, return receipt
requested, postage prepaid, addressed as follows to the person entitled to
receive the same:
(a) if to Sublandlord:
Perry Judd's Incorporated
575 West Madison Street
Waterloo, Wisconsin 53594
Attention: Craig Hutchinson
Facsimile:
------------------
//
//
7.
<PAGE>
with a copy to:
Liner Yankelevitz Sunshine
Weinhart & Regenstreif LLP
3130 Wilshire Boulevard
2nd Floor
Santa Monica, California 90403
Attention: Mitchell Regenstreif, Esq.
Facsimile: (310) 453-5901
with a copy to:
The Milhous Group
1160 Nicole Court
Glendora, California 91740
Attention: Tom Bressan
Facsimile: (909) 599-2390
(b) if to Subtenant:
The Mack Printing Group
1991 Northampton Street
Easton, PA 18042-3189
Attention: John C. Coconougher
Facsimile: (610) 250-7285
with a copy to:
Dechert Price & Roads
4300 Bell Atlantic Tower
1717 Arch Street
Philadelphia, PA 19143
Attention: Christopher G. Karras, Esq.
Facsimile: (215) 994-2222
Any notice shall be deemed to have been validly given two (2) business days
after being deposited in the mail, postage prepaid. Either party by notice as
aforesaid may change the addresses set forth above for notices, requests,
demands or communications to it.
//
//
//
8.
<PAGE>
3.2. BROKERS. Sublandlord and Subtenant each warrant and represent
to the other, that it has dealt with no broker or other person in connection
with this lease transaction. Sublandlord and Subtenant each agree to
indemnify and save harmless the other from any costs, expenses, attorneys'
fees or liability for compensation or charges which may be claimed by any
broker or agent as a result of any conversations, correspondence, other
dealings or actions of the indemnifying party in connection with this
Lease/Sublease.
3.3. SUCCESSORS AND ASSIGNS. This Lease/Sublease shall be binding
upon and inure to the benefit of the parties hereto and, subject to the
limitations set forth in Paragraph 2.6 of Article II hereof, their
respective successors and assigns.
3.4. COUNTERPARTS. This Lease/Sublease may be executed in
counterpart originals and delivered by facsimile and all such counterparts
and facsimiles shall constitute one original Lease/Sublease. If this
Lease/Sublease is delivered by facsimile, the party delivering the
Lease/Sublease by facsimile shall deliver to the other party the executed
original by personal delivery or overnight courier in accordance with
Paragraph 1 of this Article III.
/ /
/ /
/ /
[SIGNATURES ON FOLLOWING PAGE]
9.
<PAGE>
IN WITNESS WHEREOF, Sublandlord and Subtenant have duly executed
this Lease/Sublease as of the day and year first above written.
"SUBLANDLORD": "SUBTENANT":
PERRY JUDD'S INCORPORATED, PORT CITY PRESS, INC.,
a Delaware corporation a Maryland corporation
By: /s/ Kenneth R. Duff By: /s/ THOMAS V. BRESSAN
---------------------------- --------------------------
Its: Assistant Secretary Its: Secretary
----------------------- --------------------------
PERRY JUDD'S HOLDINGS, INC.,
a Delaware corporation
By: /s/ Kenneth R. Duff
----------------------------
Its: Assistant Secretary
-----------------------
10.
<PAGE>
EXHIBIT "A"
(PREMISES)
Exhibit "A" to Lease/Sublease, dated as of August 14, 1998, by and
between by and between PERRY JUDD'S INCORPORATED, a Delaware corporation, and
PERRY JUDD'S HOLDINGS, INC., a Delaware corporation, collectively, as
Sublandlord, and PORT CITY PRESS, INC., a Maryland corporation, as Subtenant.
EXHIBIT "A"
<PAGE>
EXHIBIT "B"
(MASTER LEASE)
Exhibit "B" to Lease/Sublease, dated as of August 14, 1998, by and
between PERRY JUDD'S INCORPORATED, a Delaware corporation, and PERRY JUDD'S
HOLDINGS, INC., a Delaware corporation, collectively, as Sublandlord, and
PORT CITY PRESS, INC., a Maryland corporation, as Subtenant.
EXHIBIT "B"
