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):
February 17, 1999
CUNNINGHAM GRAPHICS INTERNATIONAL, INC.
(Exact name of Registrant as specified in Charter)
New Jersey 0-24021 22-3561164
(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
629 Grove Street, Jersey City, New Jersey 07310
(Address of principal executive office) (Zip Code)
Registrant's telephone number including area code: (201) 217-1990
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(Former name or Former Address, if Changed Since Last Report)
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Item 2. Acquisition or Disposition of Assets
Pursuant to an Asset Purchase Agreement dated as of February 17, 1999 (the
"Agreement") among Boston Towne Press, Inc. (the "Seller"), John R. Henesey, Jr.
(the "Shareholder"), Cunningham Graphics International, Inc. (the "Company") and
BTP Acquisition Corp. (the "Acquisition Subsidiary"), the Company, through the
Acquisition Subsidiary, purchased certain of the assets and assumed certain
liabilities of the Seller.
The purchase price of the acquisition was $5.3 million, which was paid as
follows: (i) a cash payment in the amount of $4.9 million and (ii) the
assumption of $0.4 million of indebtedness. The Company borrowed $3.3 million
from its revolving line of credit to fund a portion of the purchase price.
Pursuant to the Agreement, the Company may be required to pay to the Shareholder
up to an additional $0.7 million, depending upon the earnings of Boston Towne
Press during the years 1999 and 2000.
The Company intends to have Boston Towne Press continue its operations in
the manner conducted prior to the acquisition. The Acquisition Subsidiary will
change its name to Boston Towne Press, Inc.
In connection with the Agreement, the Acquisition Subsidiary entered into
an employment agreement dated as of February 17, 1999 with the Shareholder.
A copy of the press release is attached hereto as Exhibit 99.1.
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Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a) Financial Statements of Business Acquired
Audited financial statements of the acquired business for the years ending
December 31, 1997 and 1998 and additional financial information required under
Rule 3-14 of Regulation S-X are not included in this report and will be filed by
amendment.
(b) Pro Forma Financial Information
Pro forma financial information for the Company after giving effect to the
acquisition of Boston Towne Press is not included in this report and will be
filed by amendment.
(c) Exhibits
Exhibit No. Description
10.29 Asset purchase agreement dated February 17, 1999 for the
sale and purchase of certain assets and the assumption of
certain liabilities of Boston Towne Press, Inc. by and among
Boston Towne Press, Inc., John R. Henesey, Jr., Cunningham
Graphics International, Inc. and BTP Acquisition Corp.
10.30 Employment Agreement dated as of February 17, 1999 between
BTP Acquisition Corp. and John R. Henesey Jr.
99.1 Press release of Cunningham Graphics International, Inc.
dated February 17, 1999 with respect to the completion of
the acquisition of Boston Towne Press, Inc.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Cunningham Graphics International, Inc.
(Registrant)
Dated: February 23, 1999 By: /s/ Robert M. Okin
-----------------------------------
Name: Robert M. Okin
Title: Senior Vice-President and
Chief Financial Officer
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ASSET PURCHASE AGREEMENT
DATED
FEBRUARY 17, 1999
BY AND AMONG
BOSTON TOWNE PRESS, INC.
JOHN R. HENESEY, JR.
CUNNINGHAM GRAPHICS INTERNATIONAL, INC.
AND
BTP ACQUISITION CORP.
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TABLE OF CONTENTS
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ARTICLE I - Certain Definitions...............................................................................1
Section 1.1. Certain Definitions.....................................................................1
Section 1.2. Interpretation..........................................................................9
ARTICLE II - Purchase and Sale of Assets; Assumption of Liabilities;
Additional Covenants......................................................................9
Section 2.1. Purchase and Sale of Assets.............................................................9
Section 2.2. Purchase Price..........................................................................9
Section 2.3. Purchase Price Adjustments; Resolution of Conflicts.....................................11
Section 2.4. Allocation of the Purchase Price........................................................13
Section 2.5. Closing.................................................................................13
ARTICLE III - Representations and Warranties of the Seller and the Shareholder................................13
Section 3.1. Organization and Qualification..........................................................13
Section 3.2. Authorization...........................................................................13
Section 3.3. Non-contravention.......................................................................14
Section 3.4. No Consents.............................................................................14
Section 3.5. The Purchased Assets....................................................................14
Section 3.6. Personal Property.......................................................................14
Section 3.7. Real Property...........................................................................14
Section 3.8. Intentionally Omitted...................................................................15
Section 3.9. Inventory...............................................................................15
Section 3.10. Financial Statements...................................................................15
Section 3.11. Absence of Certain Developments........................................................15
Section 3.12. Governmental Authorizations; Licenses; Etc.............................................16
Section 3.13. Litigation.............................................................................16
Section 3.14. Undisclosed Liabilities................................................................17
Section 3.15. Taxes..................................................................................17
Section 3.16. Insurance..............................................................................18
Section 3.17. Environmental Matters..................................................................18
Section 3.18. Employee Matters.......................................................................19
Section 3.19. Employee Benefit Plans.................................................................19
Section 3.20. Proprietary Rights.....................................................................21
Section 3.21. Accounts Receivable....................................................................21
Section 3.22. Contracts..............................................................................21
Section 3.23. Customers and Suppliers................................................................23
Section 3.24. Ability to Conduct Business............................................................23
Section 3.25. Books and Records......................................................................23
Section 3.26. Year 2000..............................................................................23
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Section 3.27. Cash Accounts..........................................................................24
Section 3.28. Brokers................................................................................24
Section 3.29. Full Disclosure........................................................................24
Section 3.30. Absence of Questionable Payments.......................................................24
ARTICLE IV - Representations and Warranties of the Parent and the Acquisition Sub.............................24
Section 4.1. Organization............................................................................24
Section 4.2. Authorization...........................................................................25
Section 4.3. Non-contravention.......................................................................25
Section 4.4. No Consents.............................................................................25
Section 4.5. Brokers.................................................................................25
ARTICLE V - Covenants and Agreements..........................................................................26
Section 5.1. Transfer and Property Taxes.............................................................26
Section 5.2. Change of Name..........................................................................27
Section 5.3. Non-Competition and Confidentiality Agreement...........................................27
Section 5.4. Guarantee of Accounts Receivable........................................................28
Section 5.5. Employment Agreement....................................................................29
Section 5.6. Further Assurances......................................................................29
Section 5.7. Employment Matters......................................................................29
Section 5.8. Cooperation regarding SEC and other Governmental Filings................................29
Section 5.9. Access to Records after the Closing.....................................................29
ARTICLE VI - Deliveries at Closing............................................................................30
Section 6.1. Deliveries by the Seller and the Shareholder............................................30
Section 6.2. Deliveries by the Parent and the Acquisition Sub........................................31
ARTICLE VII - Survival of Representations and Warranties; Indemnificaiton.....................................32
Section 7.1. Survival of Representations and Warranties..............................................32
Section 7.2. Indemnification.........................................................................32
Section 7.3. Procedures for Third Party Claims.......................................................33
Section 7.4. Procedures for Inter-Party Claims.......................................................34
Section 7.5. Right of Set-Off........................................................................34
ARTICLE VIII - Miscelleanous..................................................................................34
Section 8.1. Notices.................................................................................34
Section 8.2. Expenses................................................................................35
Section 8.3. Governing Law; Consent to Jurisdiction..................................................35
Section 8.4. Assignment; Successors and Assigns; No Third Party Rights...............................35
Section 8.5. Counterparts............................................................................36
Section 8.6. Titles and Headings.....................................................................36
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Section 8.7. Entire Agreement........................................................................36
Section 8.8. Amendment and Modification..............................................................36
Section 8.9. Public Announcement.....................................................................36
Section 8.10. Waiver.................................................................................36
Section 8.11. Severability...........................................................................36
Section 8.12. No Strict Construction.................................................................37
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Schedules
Schedule 1.1(i) Real Property
Schedule 1.1(ii) Personal Property
Schedule 1.1(iii) Retained Assets
Schedule 3.4 Consents
Schedule 3.5 Permitted Encumbrances
Schedule 3.9 Inventory
Schedule 3.11 Certain Developments
Schedule 3.12 Authorizations
Schedule 3.13 Litigation
Schedule 3.15 Tax Matters
Schedule 3.16 Insurance
Schedule 3.17 Environmental Matters
Schedule 3.18 Employee Matters
Schedule 3.19 Employee Benefit Plans
Schedule 3.20 Proprietary Rights
Schedule 3.21 Accounts Receivable
Schedule 3.22 Contracts
Schedule 3.23 Customers and Suppliers
Schedule 3.26 Year 2000 Compliance
Schedule 3.27 Bank and Cash Accounts
Exhibits
Exhibit 1.1A Assignment and Assumption Agreement
Exhibit 1.1B Bill of Sale
Exhibit 2.4 Allocation of Purchase Price
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ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT, dated February 17, 1999 by and among Boston Towne
Press, Inc., a Massachusetts corporation, with its principal executive offices
located at 215 A Street, Boston, Massachusetts 02210 (the "Seller"), John R.
Henesey, Jr., an individual residing at 131 Lazell Street, Hingham,
Massachusetts 02043 (the "Shareholder"), Cunningham Graphics International,
Inc., a New Jersey corporation with its principal executive offices located at
629 Grove Street, Jersey City, New Jersey 07310 (the "Parent") and BTP
Acquisition Corp., a New Jersey corporation with its principal executive offices
located at 629 Grove Street, Jersey City, New Jersey 07310 (the "Acquisition
Sub").
W I T N E S S E T H:
WHEREAS, prior to the date hereof, the Seller has engaged in the business
of providing graphics and design communications services, printing, binding and
mailing services to customers, the majority of which are located in the greater
Boston metropolitan area of The Commonwealth of Massachusetts (the "Business");
and
WHEREAS, the Shareholder is the sole shareholder of the Seller; and
WHEREAS, the Seller and the Shareholder desire to sell and transfer to the
Parent, and the Parent desires to purchase and assume from the Seller and the
Shareholder, certain of the assets and liabilities relating to the Business;
WHEREAS, the Parent has organized the Acquisition Sub, a wholly owned
subsidiary of the Parent, in order to effectuate the foregoing, all as more
specifically provided herein;
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
and intending to be legally bound, the parties hereto agree as follows:
ARTICLE I
Certain Definitions
Section 1.1. Certain Definitions. As used in this Agreement, the following
terms have the respective meanings set forth below.
"Accountants" means H.R. Margolis Company.
"Accounts Receivable" means all accounts and notes receivable of the Seller
or otherwise relating to the Business and all reserves related thereto,
deposits, advances and manufacturer and supplier rebates.
"Adjusted EBITDA" has the meaning ascribed to such term in Section 2.2.
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"Affected Property" has the meaning ascribed to such term in Section 3.17.
"Affiliate" means, with respect to any Person, any other Person who
directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, such Person. The term "control"
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise, and the terms
"controlled" and "controlling" have meanings correlative thereto.
"Agreement" means this Asset Purchase Agreement.
"Assignment and Assumption Agreement" means the assignment and assumption
agreement, dated as of the date hereof, between the Seller and the Acquisition
Sub, a copy of which is set forth as attached Exhibit 1.1A.
"Assumed Liabilities" means only (i) the current liabilities and
obligations of the Seller (other than Excluded Liabilities) fully disclosed on
the Financial Statements relating to the year ended December 31, 1998 previously
provided to the Parent and the Acquisition Sub, together with such other current
liabilities and obligations of the Seller (other than Excluded Liabilities) that
are fully reflected on the Closing Balance Sheet in accordance with the terms of
Section 2.3 and that arise in the ordinary course of business after December 31,
1998 and prior to the date hereof, but only to the extent that such liabilities
or obligations arise out of or relate to the Business; (ii) all liabilities and
obligations of the Seller for the assumption and/or satisfaction, at the option
of the Acquisition Sub, of the outstanding balances, as of the date hereof, of
the Borrowed Money Obligations; (iii) all liabilities and obligations of the
Seller as of the Closing Date with respect to accrued unused vacation and sick
days and accrued unpaid wages of employees of the Seller employed on the Closing
Date, to the extent that such liabilities and obligations are fully reflected on
the Closing Balance Sheet and (iv) all liabilities and obligations of the Seller
pursuant to the Lease, which accrue after the date hereof. Notwithstanding
anything set forth above to the contrary, any and all liabilities or obligations
pursuant to or arising out of the Retained Assets shall not be Assumed
Liabilities hereunder.
"Audit" has the meaning ascribed to such term in Section 2.3.
"Auditor" has the meaning ascribed to such term in Section 2.3.
"Audit Notice" has the meaning ascribed to such term in Section 2.3.
"Authorizations" has the meaning ascribed to such term in Section 3.12.
"Bill of Sale" means the general bill of sale, dated as of the date hereof,
executed by the Seller, a copy of which is set forth as attached Exhibit 1.1B.
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"Borrowed Money Obligations" means, collectively, (i) those certain
promissory notes from the Seller in favor of BankBoston, N.A., dated as of
February 20, 1996 in the original principal amount of $350,000, dated as of
December 22, 1997 in the original principal amount of $71,400, dated as of
December 24, 1996 in the original principal amount of $121,000 and dated as of
February 17, 1998 in the original principal amount of $239,000 and (ii) the
obligations of the Seller pursuant to the note payable to US Trust due September
2001.
"Business" has the meaning ascribed to such term in the first recital to
this Agreement.
"Business Day" means a day, other than a Saturday or Sunday, on which
commercial banks in New Jersey are open for the general transaction of business.
"Cash Portion" has the meaning ascribed to such term in Section 2.2.
"Certificate of Amendment" has the meaning ascribed thereto in Section 5.2.
"Closing" has the meaning ascribed to such term in Section 2.7.
"Closing Balance Sheet" has the meaning ascribed to such term in Section
2.3.
"Closing Date" has the meaning ascribed to such term in Section 2.7.
"Closing Financial Documents" has the meaning ascribed thereto in Section
2.3.
"Closing Net Worth" has the meaning ascribed to such term in Section 2.3.
"Code" means the Internal Revenue Code of 1986, as amended.
"Confidential Information" has the meaning ascribed to such term in Section
5.3.
"Contracts" has the meaning ascribed to such term in Section 3.22.
"Damages" has the meaning ascribed to such term in Section 7.2.
"Earn-Out" has the meaning ascribed to such term in Section 2.2.
"Employee Benefit Plan" has the meaning ascribed to such term in Section
3.19.
"Employees" has the meaning ascribed to such term in Section 3.18.
"Employment Agreement" has the meaning ascribed to such term in Section
5.5.
"Encumbrances" has the meaning ascribed to such term in Section 3.3.
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"Environmental Laws" means any federal, state and local law,
statute, ordinance, rule, regulation, license, permit, authorization, approval,
consent, court order, judgment, decree, injunction, code, requirement or
agreement with any Governmental Authority, (x) relating to pollution (or the
cleanup thereof or the filing of information with respect thereto), human health
or the protection of air, surface water, ground water, drinking water supply,
land (including land surface or subsurface), plant and animal life or any other
natural resource, or (y) concerning exposure to, or the use, storage, recycling,
treatment, generation, transportation, processing, handling, labeling,
production or disposal of Regulated Substances, in each case as amended and as
now or hereafter in effect. The term Environmental Law includes, without
limitation, (i) the Comprehensive Environmental Response Compensation and
Liability Act of 1980, the Water Pollution Control Act, the Clean Air Act, the
Clean Water Act, the Solid Waste Disposal Act (including the Resource
Conservation and Recovery Act of 1976 and the Hazardous and Solid Waste
Amendments of 1984), the Toxic Substances Control Act, the Insecticide,
Fungicide and Rodenticide Act, the Occupational Safety and Health Act of 1970,
Massachusetts Environmental Policy Act, Massachusetts Clean Air Act,
Massachusetts Clean Waters Act, Massachusetts Rivers Protection Act,
Massachusetts Wetlands Protection Act, Massachusetts Coastal Zone Management
Program Massachusetts Hazardous Waste Management Act; underground and above
ground storage tank requirements, Massachusetts Oil and Hazardous Material
Release Prevention and Response Act, Massachusetts Right-to-Know Act,
Massachusetts Toxics Use Reduction Act, Massachusetts Water Management Act, each
as amended and as now or hereafter in effect, and (ii) any common law or
equitable doctrine (including, without limitation, injunctive relief and tort
doctrines such as negligence, nuisance, trespass and strict liability) that may
impose liability or obligations for injuries or damages due to or threatened as
a result of the presence of, exposure to, or ingestion of, any Regulated
Substance.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" has the meaning ascribed to such term in Section 3.19.
"Excluded Liabilities" means any and all liabilities or obligations of the
Seller or its Affiliates, of any kind or nature, whether or not relating to the
Business or the Purchased Assets, and whether known or unknown, absolute,
accrued, contingent or otherwise, or whether due or to become due, arising out
of events or transactions or facts occurring on, prior to, or after the Closing
Date, other than Assumed Liabilities. Excluded Liabilities shall include,
without limitation, the following:
(i) all liabilities and obligations of any kind existing as of the
Closing of a nature properly characterized under GAAP as an inter-company
liability or otherwise owed or owing by the Business to the Seller, the
Shareholder, any officer of the Seller or any of their respective
Affiliates;
(ii) all liabilities and obligations with respect to the Employee
Benefit Plans;
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(iii) all liabilities and obligations of the Seller under any welfare
plan or policy for continuing health coverage;
(iv) all liabilities and obligations of the Seller under the WARN Act
or the Massachusetts Plant Closings Law and obligations or agreements to
rehire or give preferential treatment to laid-off or terminated employees;
(v) all liabilities and obligations, whether absolute, accrued,
contingent or otherwise, for (A) federal, state, county, local, foreign or
other income Taxes relating to the Business for periods up to and including
the date hereof and (B) any income, use or similar Taxes resulting from the
transactions contemplated by this Agreement;
(vi) any and all damages, losses, liabilities, actions, claims, costs
and expenses (including, without limitation, closure costs, fines,
penalties, expenses of investigation and remediation and ongoing monitoring
and reasonable attorneys' fees) directly or indirectly based upon, arising
out of, resulting from or relating to (i) any violation of any
Environmental Law by the Seller, the Shareholder or any Person or entity
acting on behalf of the Seller or the Shareholder (including, without
limitation, any failure to obtain or comply with any permit, license or
other operating authorization under provisions of any Environmental Law),
(ii) any and all liabilities under any Environmental Law arising out of or
otherwise in respect of any act, omission, event, condition or circumstance
occurring or existing in connection with the Business or the Purchased
Assets on or prior to the Closing (including, without limitation,
liabilities relating to (X) removal, remediation, containment, cleanup or
abatement of the presence of any Regulated Substance, whether on-site or
off-site and (Y) any claim by any third party, including without
limitation, tort suits for personal or bodily injury, property damage or
injunctive relief;
(vii) all liabilities and obligations, including without limitation
any personal injury or property damage, product liability or strict
liability, arising out of any lawsuit, action, proceeding, inquiry, claim,
order or investigation by or before any Governmental Authority related to
the Business arising out of events, transactions, facts, acts or omissions
which occurred prior to or on the Closing Date, including, without
limitation, all liabilities and obligations with respect to Laurel A.
Babine v. Boston Towne Press, Inc. et.al., Docket No. 98133206;
(viii) any liabilities or obligations of the Seller or the Shareholder
under the Lease accruing prior to or on the Closing Date, whether or not
yet payable;
(ix) any liabilities or obligations of the Seller, the Shareholder or
any of their respective Affiliates related to the Business or the Purchased
Assets, not fully disclosed herein, in the Financial Statements or in the
Closing Balance Sheet of any kind or nature, whether known or unknown,
absolute, accrued, contingent or otherwise, or whether due or to become
due, arising out of events, transactions, facts, acts or omissions which
occurred prior to or on the date hereof; and
(x) any liabilities or obligations of the Seller, the Shareholder or
any of their respective Affiliates of any kind or nature, whether known or
unknown, absolute, accrued,
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contingent or otherwise, arising out of events, transactions, facts, acts
or omissions which occur subsequent to the Closing.
"Facility" shall mean the facility utilized by the Seller in conducting the
Business and located at 215 A Street, Boston Massachusetts 02210, all as more
fully described on attached Schedule 1.1(i).
"Financial Statements" has the meaning ascribed to such term in Section
3.10.
"GAAP" means generally accepted accounting principles as in effect in the
United States on the date of this Agreement.
"Governmental Authority" means any national, federal, state, provincial,
county, municipal or local government, foreign or domestic, or the government of
any political subdivision of any of the foregoing, or any entity, authority,
agency, ministry or other similar body exercising executive, legislative,
judicial, regulatory or administrative authority or functions of or pertaining
to government, including any authority or other quasi-governmental entity
established to perform any of such functions.
"Hired Employees" has the meaning ascribed to such term in Section 5.7.
"Indemnified Party" has the meaning ascribed to such term in Section 7.2.
"Indemnifying Party" has the meaning ascribed to such term in Section 7.2.
"Inventory" means all raw material inventories, warehouse stock, parts,
inventories, material, supplies, work-in-progress and finished products,
including without limitation, packaging and shipping materials, which are good
and merchantable and of a quality and quantity usable and saleable in the
regular and ordinary course of the Business consistent with past practices.
"Lease" means the lease between the Seller and Boston Wharf Co., dated
December 14, 1998, relating to the Facility, a true and complete copy of which
was provided to the Parent and the Acquisition Sub previously.
"Material Adverse Change" means a material adverse change in the business,
financial condition, results of operations or prospects (financial and other) of
the Seller.
"Net Income" has the meaning ascribed to such term in Section 2.2.
"Outstanding Accounts Receivable" has the meaning ascribed to such term in
Section 5.4.
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"Person" means an individual, partnership, corporation, joint stock
company, unincorporated organization or association, trust or joint venture, or
a governmental agency or political subdivision thereof.
"Proprietary Rights" mean all patents, patent registrations, patent
applications, trademarks, service marks, trademark and service mark
registrations and applications therefor, copyrights, copyright registrations,
copyrights applications, trade names, corporate names, technology, inventions,
computer software and hardware, data and documentation (including electronic
media), product drawings, trade secrets, know-how, customer lists, processes,
other intellectual property and proprietary information or rights related to or
used in the conduct of the Business and permits, licenses or other agreements to
or from third parties regarding the foregoing.
"Purchase Price" has the meaning ascribed to such term in Section 2.2.
"Purchase Price Adjustment" has the meaning ascribed thereto in Section
2.3.
"Purchased Assets" means all of the right, title and interest in and to all
assets used in the conduct of the Business, of every kind and description,
wherever located, whether now owned or acquired on or after the date hereof and
prior to the Closing, whether tangible or intangible (including, without
limitation, goodwill), personal or mixed, excluding the Retained Assets. The
Purchased Assets include, without limitation, the following:
(a) all of the Seller's cash, money on deposit or in the process of
collection with banks, factors and others, certificates of deposit,
commercial paper, letters of credit, stock, bonds and other investment
securities;
(b) all machinery and equipment (including spare parts) and business
machines, automobiles, trucks, trailers, fork-lift trucks, and other
vehicles, furniture, fixtures, supplies, capital improvements in process,
tools and all other tangible personal property employed in the conduct of
the Business, including without limitation those assets listed on Schedule
1.1(ii);
(c) all Inventory;
(d) all easements, rights of way, servitudes, leases, permits,
licenses or options used or held by the Business;
(e) all Accounts Receivable;
(f) all prepaid rentals, deposits, advances and other prepaid
expenses;
(g) all right, title and interest of the Seller in mortgages,
indentures, promissory notes, evidences of indebtedness, other debt, deeds
of trust, loan or credit agreements or similar agreements or instruments
evidencing indebtedness of customers;
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(h) all rights and claims of the Seller, whether mature, contingent or
otherwise, against third parties, whether in tort, contract or otherwise,
including without limitation, causes of action, unliquidated rights and
claims under or pursuant to all warranties, representations and guarantees
made by manufacturers, suppliers or vendors, claims for refunds, rights of
off-set and credits of all kinds and all other general intangibles,
excluding, however, any of the foregoing which specifically relate to any
Excluded Liability;
(i) all authorizations, consents, approvals, licenses, orders,
permits, exemptions of, filings or registrations with, any Governmental
Authority;
(j) all Proprietary Rights;
(k) all rights under any executory contract related to the Business to
which the Seller or any of its Affiliates is a party, including without
limitation, any license agreement, security agreement, indemnity agreement,
subordination agreement, mortgage, equipment lease or other lease or
sublease (whether or not capitalized) including without limitation the
Lease, conditional sale or title retention agreement and any purchase order
from, or contract with, any customer or supplier, including the Contracts
listed on Schedule 3.22; and
(l) all other assets used in the conduct of the Business, whether or
not reflected on the books and records of the Seller, including without
limitation, the Business as a going concern, its goodwill and franchises,
all credit balances of or inuring to the Seller under any state
unemployment compensation plan or fund, its employment contracts,
restrictive covenants and obligations of present and former employees,
agents, representatives, independent contractors and others, all books,
records, files and papers relating to, or necessary to the conduct of, the
Business, including without limitation, drawings, engineering,
manufacturing and assembly information, operating and training manuals,
computer programs, manuals and data, catalogs, quotations, bids, sales and
promotional materials, correspondence, trade association memberships (to
the extent transferable), research and development records, prototypes and
models, lists of present and former customers and suppliers, customer
credit information, customers' pricing information, business plans, studies
and analyses, whether prepared by the Seller or a third party, relating to
the Business, books of account, accounting records and personnel,
employment and other records relating to the Business.
"Regulated Substances" means pollutants, contaminants, hazardous or toxic
substances, compounds or related materials or chemicals, hazardous materials,
hazardous waste, flammable explosives, radon, radioactive materials, asbestos,
urea formaldehyde foam insulation, polychlorinated biphenyls, petroleum and
petroleum products (including, but not limited to, waste petroleum and petroleum
products) as regulated under applicable Environmental Laws.
"Retained Assets" means the assets listed on Schedule 1.1(iii).
"SEC" means the Securities and Exchange Commission.
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"Survival Period" has the meaning ascribed to such term in Section 7.1
"Taxes" means any of the following imposed by or payable to any
Governmental Authority: any income, gross receipts, license, payroll,
employment, excise, severance, stamp, business, occupation, premium, windfall
profits, environmental (including taxes under section 59A of the Code), capital
stock, franchise, profits, withholding, social security (or similar),
unemployment, disability, real property, personal property, sales, use,
transfer, registration, or value added tax, any alternative or add-on minimum
tax, any estimated tax, and any levy, impost, duty, assessment, withholding or
any other governmental charge of any kind whatsoever, in each case including any
interest, penalty, or addition thereto, whether disputed or not.
"Tax Return" means any return, declaration, report, claim for refund, or
information return or statement relating to any Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"Territory" has the meaning ascribed to such term in Section 5.3.
"Third Party Claim" has the meaning ascribed to such term in Section 7.3.
"WARN Act" means the Worker Adjustment Retraining and Notification Act of
1988, as amended.
"Year 2000 Compliant" has meaning ascribed to such term in Section 3.26.
Section 1.2. Interpretation. Unless otherwise indicated to the contrary
herein by the context or use thereof: (i) the words, "herein," "hereto,"
"hereof" and words of similar import refer to this Agreement as a whole and not
to any particular Section or paragraph hereof; (ii) words importing the
masculine gender shall also include the feminine and neutral genders, and vice
versa; and (iii) words importing the singular shall also include the plural, and
vice versa.
ARTICLE II
Purchase and Sale of Assets; Assumption of Liabilities;
Additional Covenants
Section 2.1. Purchase and Sale of Assets. Upon the terms and subject to the
conditions of this Agreement and on the basis of the representations, warranties
and agreements contained herein, simultaneously with the execution hereof, the
Seller shall sell, assign, transfer, convey and deliver to the Acquisition Sub
all of the Seller's right, title and interest in and to the Purchased Assets and
the Acquisition Sub shall purchase such Purchased Assets from the Seller.
Section 2.2. Purchase Price. (a) The aggregate purchase price (the
"Purchase Price") to be paid by the Acquisition Sub for the Purchased Assets
shall be an amount equal to the sum of the following, subject to adjustment as
set forth below in this Article II:
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(i) Four Million Nine Hundred Forty Seven Thousand Two Hundred Seven
Dollars ($4,947,207) payable in cash (the "Cash Portion");
(ii) subject to the provisions of Section 2.3(d) and the terms of the
executed Employment Agreement, including without limitation the provisions
of Section 3(e) thereof regarding the release of the obligations of the
Acquisition Sub to make payment of the Earn-Out under certain
circumstances, Seven Hundred Fifteen Thousand Dollars ($715,000) (the
"Earn-Out") payable as follows: (A) the first installment of $600,000 shall
be payable in the event that the Adjusted EBITDA of the Business for the
year ended December 31, 1999 (which shall include the Adjusted EBITDA of
the Seller from January 1, 1999 through the Closing Date and the Adjusted
EBITDA of the Acquisition Sub relating to the Business from the Closing
Date through December 31, 1999) is equal to or exceeds $1,100,000 and (B)
the second installment of $115,000 shall be payable in the event that the
Adjusted EBITDA of the Business for the year ended December 31, 2000 is
equal to or exceeds $1,100,000; the parties hereto hereby acknowledge that
(x) no pro rata payments shall be made on any installment of the Earn-Out
and (y) if the calculation of the Adjusted EBITDA for either of the two
years of the Earn-Out exceeds the targets set forth above, any such excess
Adjusted EBITDA shall not be applied to the calculation of the Adjusted
EBITDA target for any other year; and
(iii) the assumption or satisfaction by the Acquisition Sub, at its
option, of the Assumed Liabilities.
NOTWITHSTANDING THE FOREGOING, EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN THIS
AGREEMENT, NEITHER THE PARENT NOR THE ACQUISITION SUB IS ASSUMING OR SATISFYING,
NOR SHALL EITHER IN ANY MANNER BECOME LIABLE FOR, ANY OTHER LIABILITIES OR
OBLIGATIONS OF ANY KIND OR NATURE WHATSOEVER OF THE SELLER, THE SHAREHOLDER OR
THEIR RESPECTIVE AFFILIATES.
(b) The Acquisition Sub shall pay (i) the Cash Portion to the Seller at the
Closing, (ii) the first and second installment of the Earn-Out, if any, to the
Seller on the thirtieth (30th) day following the delivery of the audit report to
the Acquisition Sub and the Seller concerning the fiscal year pursuant to which
such installment relates; provided however that if the due date of such
installment as calculated hereunder is not a Business Day, then the payment
shall be made on the next Business Day thereafter. Notwithstanding anything set
forth herein to the contrary, if any installment payment of the Earn-Out,
including without limitation the calculation of the Adjusted EBITDA of the
Business, is disputed pursuant to Section 2.3(d), then such payment shall be
made on the later of (A) the thirtieth (30th) day following the delivery of the
audit report to the Acquisition Sub concerning the fiscal year pursuant to which
such installment relates or (B) the tenth (10th) Business Day following the date
of the final determination of the amount of such payment under Section 2.3(d).
(c) For purposes of this Section, "Adjusted EBITDA" shall mean, for any
period, the sum (without duplication) of (i) Net Income and (ii) to the extent
Net Income (as defined below) has been reduced thereby, all income Taxes paid
and accrued for such period
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(other than income Taxes attributable to extraordinary or non-recurring gains or
losses), all interest expenses paid or accrued, amortization expenses and
depreciation expenses paid or accrued for such period. For purposes of this
Section, "Net Income" shall mean, for any period, the aggregate net income (or
loss) for such period, determined in accordance with GAAP, consistently applied
for all relevant periods, plus or minus (i) gains and losses from the sale,
lease, conveyance, transfer or other disposition of any fixed assets, including
the Tax effects thereof and (ii) items classified under GAAP, consistently
applied for all relevant periods, as extraordinary or non-recurring gains and
losses, and the related Tax effects thereof. Notwithstanding anything set forth
herein to the contrary, in calculating Adjusted EBITDA, (i) actual profits
generated on sales by the salespersons of the Parent or any of its subsidiaries
(other than the Acquisition Sub) by or on behalf of the Acquisition Sub
following the Closing only shall be included in the calculation of the Adjusted
EBITDA of the Business after deducting (A) commissions paid or payable on such
sales to such persons in accordance with the respective policies of the Parent
or its subsidiaries (other than the Acquisition Sub), as revised from time to
time, and (B) commissions paid or payable to the Parent on such sales at a rate
of five percent (5%); (ii) estimated gross profit, as determined in accordance
with the policies and procedures of the Parent, generated by the salespersons of
the Acquisition Sub by or on behalf of the Parent or its subsidiaries (other
than the Acquisition Sub) shall be included in the calculation of the Adjusted
EBITDA of the Business after deducting commissions paid or payable to such
persons in accordance with the respective policies of the Acquisition Sub, as
revised from time to time and (iii) any expenses incident to the consummation of
this Agreement and the transactions contemplated hereby incurred by the
Acquisition Sub shall not be included in the calculation of Adjusted EBITDA.
(d) The Shareholder, on the one hand, and the Acquisition Sub and the
Parent, on the other, shall cooperate to maximize the Net Income of the Business
during the term of the Earn-Out. During the term of the Earn-Out, neither the
Parent nor the Acquisition Sub shall take any unilateral action solely designed
to prevent the payment of the Earn-Out.
Section 2.3. Purchase Price Adjustments; Resolution of Conflicts.
(a) As soon as practicable, but in no event more than thirty (30) days
after the date hereof, the Seller shall deliver to the Parent and the
Acquisition Sub (i) a statement of the net worth of the Business as of the date
hereof, (ii) a balance sheet of the Seller as of the date hereof and (iii) a
statement of income for the period January 1, 1999 through the date hereof
(collectively, the "Closing Financial Documents"). The balance sheet of the
Seller referenced in clause (ii) of the preceding sentence shall be referred to
herein as the "Closing Balance Sheet". Each of the Closing Financial Documents
shall be prepared by the Seller in conformity with GAAP, applied on a basis
consistent with the Seller's audited financial statements. In connection with
the delivery of the Closing Financial Documents, as soon as practicable, but in
no event more than thirty (30) days after the date hereof, the Seller shall
deliver to the Parent and the Acquisition Sub (i) a true and complete schedule
of all Inventory used or held for sale in the Business as of the date hereof and
(ii) a true and complete schedule of all Accounts Receivable as of the date
hereof and an aging schedule reflecting the aggregate amount of all Accounts
Receivable outstanding (W) 30 days or less, (X) more than 30 days but less than
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or equal to 60 days, (Y) more than 60 days but less than or equal to 90 days and
(Z) more than 90 days.
(b) The Parent and the Acquisition Sub shall have the right, in their sole
discretion, to cause the Closing Financial Documents to be audited (the "Audit")
by the Accountants, at the Acquisition Sub's sole expense, provided that any
such audit shall be completed within forty five (45) days after the Parent and
the Acquisition Sub receive the Closing Financial Statements. If, as a result of
the Audit, the Parent and the Acquisition Sub reasonably believe that the
Closing Financial Documents were not derived in accordance with GAAP applied on
a consistent basis as were applied in the preparation of the Seller's audited
Financial Statements, the Parent and the Acquisition Sub shall so notify the
Seller within ten (10) Business Days after completion of the Audit (the "Audit
Notice"). If an Audit Notice is received by the Seller within the time period
specified above, the Parent, the Acquisition Sub and the Seller shall promptly
attempt in good faith to reconcile the differences between the Closing Financial
Documents and the Audit, and any such reconciliation shall be final, binding and
conclusive. If the Parent, the Acquisition Sub and the Seller are unable to
reconcile the differences between the Closing Financial Documents and the Audit
within ten (10) Business Days after the Seller receives the Audit Notice, the
Parent and the Acquisition Sub, on the one hand, and the Seller and the
Shareholder, on the other, shall jointly select and engage, and shall pay
one-half of the expense of, an independent auditor (other than the Accountants
and the independent accountants of the Parent or the Acquisition Sub) (the
"Auditor") to resolve any remaining differences between the Closing Financial
Documents and the Audit and to determine the net worth of the Business as of the
Closing Date. In the event that within ten (10) Business Days after the Seller
receives the Audit Notice the Parent, the Acquisition Sub and the Seller cannot
agree on the Auditor, then the Accountants and the Parent's independent
accountants shall select the Auditor, such selection to take place no later than
forty five (45) days after the Seller receives the Audit Notice. The
determination of the net worth of the Business as of the Closing Date by the
Auditor, which shall be completed within thirty (30) days after the selection of
the Auditor, shall be final, binding and conclusive. The net worth of the
Business as finally determined pursuant to this Section 2.3 shall constitute the
"Closing Net Worth."
(c) If the Closing Net Worth is less than One Million Five Hundred Ninety
One Thousand Dollars ($1,591,000) (other than as the result of distributions of
Two Hundred Fifty Nine Thousand Dollars ($259,000), in the aggregate, previously
made during 1999 by the Seller to the Shareholder for the payment of his Federal
and State Subchapter S Taxes for 1998 and the period January 1, 1999 through the
Closing Date), then the Seller and the Shareholder shall pay to the Acquisition
Sub an amount equal to such deficit on a dollar for dollar basis (the "Purchase
Price Adjustment"). Any Purchase Price Adjustment shall be paid by the Seller
and the Shareholder by certified check or checks payable to the order of the
Acquisition Sub not more than five (5) Business Days following the final
determination of the Closing Net Worth.
(d) If the Seller and the Acquisition Sub are unable to agree in good faith
on any amount payable pursuant to either the first or second installments of the
Earn-Out within forty five (45) days following delivery to the Acquisition Sub
and the Seller of the audit report concerning the fiscal year pursuant to which
such installment relates, then the disputed issues
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shall be submitted to the Auditor for resolution. Any such resolution shall be
completed within thirty (30) days of the date of submission. The decision of the
Auditor shall be final and binding upon the parties hereto. The Seller and the
Shareholder, on the one hand, and the Acquisition Sub and the Parent, on the
other hand, each shall pay one-half of the costs and fees of the Auditor and
shall cooperate with the Auditor in connection with its resolution of the
disputed issues.
Section 2.4. Allocation of the Purchase Price. The Purchase Price shall be
allocated as set forth in Exhibit 2.4 hereto. The Acquisition Sub and the Seller
shall use such allocation in filing their respective Internal Revenue Service
Form 8594s.
Section 2.5. Closing. The closing of the transactions contemplated hereby
(the "Closing") shall take place simultaneously with the execution of this
Agreement at the offices of Hinckley, Allen & Snyder, at 10:00 A.M. The time and
date of the Closing is herein called the "Closing Date".
ARTICLE III
Representations and Warranties of the Seller and the Shareholder
The Seller and the Shareholder, jointly and severally, represent and
warrant to the Parent and the Acquisition Sub as follows:
Section 3.1. Organization and Qualification. The Seller is a corporation
duly organized, validly existing and in good standing under the laws of The
Commonwealth of Massachusetts, with full power and authority, corporate and
other, to own or lease its property and assets and to carry on the Business as
presently conducted. The Seller is not required to be qualified as a foreign
corporation in any other jurisdiction in order to carry on the Business as
presently conducted, except such jurisdictions where the failure to be so
qualified would not result in a Material Adverse Change. The Business is
conducted solely through the Seller, and the Seller does not own, directly or
indirectly, any subsidiaries.
Section 3.2. Authorization.
(a) The Seller has full power and authority, corporate and other, to
execute and deliver this Agreement, the Bill of Sale and the Assignment and
Assumption Agreement and the other documents to be delivered by it pursuant to
this Agreement and to perform its obligations hereunder and thereunder, all of
which have been duly authorized by all requisite corporate action. Each of this
Agreement, the Bill of Sale and the Assignment and Assumption Agreement and the
other documents to be delivered by it pursuant to this Agreement has been or, at
the time of delivery will be, duly authorized, executed and delivered by the
Seller and constitutes or, at the time of delivery will constitute, a valid and
binding agreement of the Seller, enforceable against the Seller in accordance
with its terms.
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(b) The Shareholder has the capacity to execute and deliver this Agreement
and the other documents to be delivered by him pursuant to this Agreement and to
perform his obligations hereunder and thereunder. The Shareholder is not under
any impairment or other disability, legal, physical, mental or otherwise, that
would preclude or limit the ability of the Shareholder to perform his
obligations hereunder or thereunder. This Agreement constitutes a valid and
binding obligation of the Shareholder, enforceable against him in accordance
with its terms.
Section 3.3. Non-contravention. Neither the execution and delivery of this
Agreement, the Bill of Sale and the Assignment and Assumption Agreement and the
other documents to be delivered by it pursuant to this Agreement nor the
performance by the Seller of its obligations hereunder and thereunder will (i)
contravene any provision contained in the Seller's Articles of Organization or
by-laws, (ii) violate or result in a breach (with or without the lapse of time,
the giving of notice or both) of or constitute a default under (A) except as set
forth on Schedule 3.4, any contract, agreement, commitment, indenture, mortgage,
lease, pledge, note, license, permit or other instrument or obligation or (B)
any judgment, order, decree, law, rule or regulation or other restriction of any
Governmental Authority, in each case to which the Seller is a party or by which
it is bound or to which any of its assets or properties are subject, (iii)
result in the creation or imposition of any lien, claim, charge, mortgage,
pledge, security interest, equity, restriction or other encumbrance
(collectively, "Encumbrances") on any of the Seller's assets or properties, or
(iv) result in the acceleration of, or permit any Person to accelerate or
declare due and payable prior to its stated maturity, any Assumed Liability.
Section 3.4. No Consents. Except as set forth in Schedule 3.4, no notice
to, filing with, or authorization, registration, consent or approval of any
Governmental Authority or other Person is necessary for the execution, delivery
or performance of this Agreement, the Bill of Sale and the Assignment and
Assumption Agreement and the other documents to be delivered by it pursuant to
this Agreement or the consummation of the transactions contemplated hereby or
thereby by the Seller.
Section 3.5. The Purchased Assets. The Purchased Assets constitute all of
the rights, properties and assets (personal or mixed, tangible or intangible)
which are necessary for the conduct of the Business. Except as set forth on
Schedule 3.5, no third party (including any Affiliate) owns or has any interest
by lease, license or otherwise in any of the Purchased Assets. Except as set
forth on Schedule 3.5, the documents of transfer to be executed and delivered by
the Seller at the Closing will be sufficient to convey good and marketable title
to the Purchased Assets to the Acquisition Sub, free and clear of all
Encumbrances, other than Assumed Liabilities.
Section 3.6 Personal Property. The Seller has good and marketable title to
(or valid leasehold or contractual interests in) all personal property
comprising the Purchased Assets, free and clear of any Encumbrances. All
machinery, equipment, furniture, fixtures and other personal property used in
the Business is in good operating condition and fit for operation in the
ordinary course of business (subject to normal wear and tear) with no defects
that could interfere
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with the conduct of normal operations of such equipment, furniture, fixtures and
other personal property and are suitable for the purposes for which they are
currently being used.
Section 3.7. Real Property. The Seller does not own any real property or
real estate. The Seller has a valid leasehold interest in the Facility free and
clear of all Encumbrances (other than the leasehold interest). The Seller
operates the Business solely out of the Facility and has satisfied with all of
its obligations under the Lease with respect to the Facility. The Seller has
delivered to the Parent and the Acquisition Sub true and complete copies of any
documents related to the Facility, including without limitation the Lease. To
the best knowledge of the Seller, the Facility is in good condition with no
structural or other defects that could materially interfere with the conduct of
normal operations of the Business and is suitable for the purposes for which it
is currently being used by the Seller. The Seller is not in violation of any
building, zoning, health, occupational safety or other law, ordinance or
regulation in respect of the Facility or its equipment or their operations.
Section 3.8. Intentionally Omitted.
Section 3.9. Inventory. Schedule 3.9 sets forth a true and complete listing
of all Inventory used or held for sale in the Business as of January 30, 1999.
Except as set forth on Schedule 3.9, all of the Seller's Inventory consists of
items which are good and merchantable and of a quantity and quality usable and
saleable in the regular and ordinary course of the Business consistent with past
practices at prices at least equal to their value on the Seller's books. The
Seller has good and marketable title to all of such Inventory, free and clear of
any Encumbrances. The Seller is not under any liability or obligation with
respect to the return of Inventory in the possession of its customers.
Section 3.10. Financial Statements. The Seller has previously furnished to
the Parent and the Acquisition Sub (i) a true and complete copy of the Seller's
unaudited balance sheet as of November 30, 1998 and the related unaudited
statement of income for the eleven month period then ended, certified by the
Seller, (ii) a true and complete copy of the Seller's audited balance sheet as
of December 31, 1998 and the related audited statements of income, cash flows
and changes in stockholders' equity for the twelve month period then ended,
certified by the Accountants and (iii) a true and complete copy of the Seller's
audited balance sheet as of December 31, 1997 and the related audited statements
of income, cash flows and changes in stockholders' equity for the twelve month
period then ended, certified by the Accountants (collectively, the "Financial
Statements"). The Financial Statements have been prepared in conformity with
GAAP, applied on a consistent basis and present fairly the financial condition
and results of operations of the Seller as of and for the periods included
therein.
Section 3.11. Absence of Certain Developments. Except as set forth in
Schedule 3.11, since December 31, 1998, there has not been any Material Adverse
Change, or any development which could reasonably be expected to result in a
Material Adverse Change. Except as set forth in Schedule 3.11, since December
31, 1998, the Seller has conducted the Business in the ordinary and usual course
consistent with past practices and has not (i) sold, leased, transferred or
otherwise disposed of any of the assets of the Business (other than
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dispositions in the ordinary course of business consistent with past practices),
(ii) terminated or amended in any material respect any contract or lease to
which the Seller is a party or to which it is bound or to which its properties
are subject, (iii) suffered any material loss, damage or destruction whether or
not covered by insurance, (iv) made any change in the accounting methods or
practices it follows, whether for general financial or Tax purposes, (v)
incurred any liabilities (other than in the ordinary course of business) none of
which, individually or in the aggregate, are material, (vi) incurred, created or
suffered to exist any Encumbrances on the Purchased Assets or created in the
ordinary course of business, none of which, individually or in the aggregate,
are material, (vii) increased the compensation payable or to become payable to
any of the officers or employees of the Business or increased any bonus,
severance, accrued vacation, insurance, pension or other Employee Benefit Plan,
payment or arrangement made by the Seller for or with any such officers or
employees, (viii) suffered any labor dispute, strike or other work stoppage,
(ix) made or obligated itself to make any capital expenditures in excess of
$5,000 individually or in the aggregate, (x) entered into any contract or other
agreement requiring the Seller to make payments in excess of $5,000 per annum,
individually or in the aggregate, other than in the ordinary course of business
consistent with past practices, or (xi) entered into any agreement to do any of
the foregoing.
Section 3.12. Governmental Authorizations; Licenses; Etc. The Business has
been operated in compliance in all material respects with all applicable laws,
rules, regulations, codes, ordinances, orders, policies and guidelines of all
Governmental Authorities, including but not limited to, those related to: fire,
safety, labeling of products, pricing, sales or distribution of products,
antitrust, trade regulation, trade practices, sanitation, land use, employment
or employment practices, energy and similar laws. The Seller has all permits,
licenses, approvals, certificates and other authorizations, and has made all
notifications, registrations, certifications and filings with all Governmental
Authorities, necessary or advisable for the operation of the Business as
currently conducted by the Seller. There is no action, case or proceeding
pending or, to the Seller's best knowledge, threatened by any Governmental
Authority with respect to (i) any alleged violation by the Seller or its
Affiliates of any law, rule, regulation, code, ordinance, order, policy or
guideline of any Governmental Authority, or (ii) any alleged failure by the
Seller or its Affiliates to have any permit, license, approval, certification or
other authorization required in connection with the operation of the Business.
No notice of any violation of such laws has been received by the Seller or any
Affiliate of the Seller and neither the Seller nor any such Affiliate has
received any notice that the products manufactured or sold by the Business are
not in compliance with, or do not meet the standards of, all applicable laws.
Schedule 3.12 sets forth a true and complete list of all permits, licenses,
approvals, certificates, registrations and other authorizations relating to the
Business (the "Authorizations"). Such Authorizations are in full force and
effect and the Seller has received no notification of the suspension or
cancellation of any thereof. The Seller has no grounds to believe that any of
the Authorizations listed on Schedule 3.12 will not be transferable to the
Acquisition Sub.
Section 3.13. Litigation. Except as set forth in Schedule 3.13, there are
no lawsuits, actions, proceedings, claims, orders or investigations by or before
any Governmental Authority pending or, to the Seller's best knowledge,
threatened against the Seller or its Affiliates relating to the Business, the
Purchased Assets, the Assumed Liabilities or any product alleged to
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have been manufactured or sold by the Business or seeking to enjoin the
transactions contemplated hereby and, except as set forth in Schedule 3.13,
there are no facts or circumstances known to the Seller that could result in a
claim for damages or equitable relief which, if decided adversely, could
reasonably be expected to result in a Material Adverse Change, individually or
in the aggregate.
Section 3.14. Undisclosed Liabilities. Other than those reflected in the
Financial Statements, there are no liabilities of the Seller of any kind or
nature whatsoever, whether known or unknown, absolute, accrued, contingent or
otherwise, or whether due or to become due, other than liabilities incurred in
the ordinary course of business and consistent with past practices since the
date of the Financial Statements, and there exists no facts or circumstances
(other than general economic conditions) that could reasonably be expected to
result in any such liability.
Section 3.15. Taxes.
(a) All Tax Returns which the Seller is required to file have been filed by
the Seller with the appropriate Governmental Authority; and all Taxes owed by
the Seller have been paid. To the best knowledge of the Seller, the Tax Returns
were correct as filed. The Financial Statements include adequate provision for
Taxes accrued but not yet due and payable as of the date of the most recent
balance sheet included therein. True and complete copies of the most recent Tax
Returns of the Seller have been delivered to the Acquisition Sub.
(b) The federal Tax Returns of the Seller have been audited or examined by
the IRS through the date set forth in Schedule 3.15 annexed hereto. The Seller's
state and local franchise and sales Tax Returns have been audited through the
date set forth in Schedule 3.15 annexed hereto. No assessments or additional
Taxes have been proposed or threatened against the Seller or the Purchased
Assets, and Seller has not executed any waiver of the statute of limitations on
the assessment or collection of any Tax liabilities. No issue has been raised in
any such examination which can reasonably be expected to result in a deficiency
in any years not covered by that examination. Adjustments, if any, to all such
returns have been agreed upon and paid by the Seller or are being contested as
indicated on such Schedule 3.15.
(c) To the best knowledge of the Seller, there are no pending
investigations of the Seller or its Tax Returns by any Governmental Authority.
(d) There are no Tax liens on any of the Purchased Assets.
(e) There are no elections which the Seller has made with respect to the
income Tax treatment of any items which cannot be revoked without the consent of
the applicable Governmental Authority.
(f) The Seller has withheld and paid all Taxes required to have been
withheld and paid in connection with amounts paid or owing to any employee,
independent contractor, creditor, stockholder or other third party.
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(g) The Seller is not a party to any Tax allocation or Tax sharing
agreement. The Seller has never been a member of an affiliated group filing a
consolidated federal income Tax Return. The Seller has no liability for any
Taxes of any Person under Treas. Reg. ss.1.1502-6 or any comparable provision of
state, local or foreign law, as a transferee or successor, by contract, or
otherwise.
(h) The Seller has not filed, nor has it participated in the filing of,
with respect to any item, any disclosure statement pursuant to Section 6662 of
the Code or any comparable disclosure with respect to foreign, state or local
Tax statutes.
(i) None of the Assumed Liabilities is an obligation to make a payment that
will be nondeductible under Section 280G of the Code.
Section 3.16. Insurance. Schedule 3.16 sets forth a true and correct list
of all insurance policies or binders maintained by the Seller on the date hereof
relating to the Business or the Purchased Assets showing, as to each policy or
binder, the carrier, policy number, coverage limits, expiration dates, annual
premiums, deductibles or retention levels and a general description of the type
of coverage provided. Such policies and binders are, and at all times prior to
the Closing will be, in full force and effect. At all times prior to the Closing
Date, the Seller has maintained appropriate and adequate insurance policies
covering the Purchased Assets and all aspects of the Business.
Section 3.17. Environmental Matters. Except as set forth on Schedule 3.17,
(i) the Business is being and has been conducted in compliance with all
Environmental Laws, (ii) the Business has, and at all times has had, all
permits, licenses and other approvals and authorizations required under
applicable Environmental Laws for the operation of the Business, (iii) the
Seller has not received any notice from any Governmental Authority that the
Seller or any of its Affiliates may be a potentially responsible party in
connection with any waste disposal site or facility used, directly or
indirectly, by or otherwise related to the Business, (iv) no reports have been
filed, or have been required to be filed, by the Seller concerning the release
of any Regulated Substance or the violation of any Environmental Law on or at
the properties used in the Business, including without limitation soil,
groundwater or surface water on or adjacent to the properties and buildings
thereon (collectively, the "Affected Property"), (v) the Seller has not disposed
of, transferred, released or transported any Regulated Substance from the
Affected Property, other than as permitted under applicable Environmental Law
pursuant to appropriate regulations, permits or authorizations, (vi) there have
been no environmental investigations, studies, audits, tests, reviews, or other
analyses conducted by or which are in the possession of the Seller or any
Affiliate of the Seller relating to the Business, true and complete copies of
which have not been delivered to the Parent prior to the date hereof, (vii) the
Seller does not utilize any underground storage tanks on, in or under any
Affected Property and, to the best knowledge of the Seller, no underground
storage tanks have been closed or removed from any Affected Property, (viii) the
Seller has not presently incurred any liabilities (fixed or contingent) relating
to any suit, settlement, judgment or claim asserted or arising under any
Environmental Law and (ix) there are no civil, criminal or administrative
actions, suits, demands, claims, hearings, to the best of Seller's knowledge,
investigations or other proceedings pending or, to the best of Seller's
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knowledge, threatened against the Business or the Seller or any Affiliate of the
Seller with respect to the Business or the Purchased Assets relating to any
violations, or alleged violations, of any Environmental Law, and neither the
Business nor the Seller or any Affiliate of the Seller have received any
notices, demand letters or requests for information, arising out of, in
connection with, or resulting from, a violation, or alleged violation, of any
Environmental Law, and neither the Business nor the Seller or any Affiliate of
the Seller have been notified by any Governmental Authority or any other Person
that the Business or the Purchased Assets have, or may have, any liability
pursuant to any Environmental Law. The sale of the Business to the Acquisition
Sub, and the other transactions contemplated hereby, do not require any filing
or registration with, notice to, or approval or consent by any Governmental
Authority under any Environmental law, except as disclosed in Schedule 3.4.
Section 3.18. Employee Matters.
(a) As of the date of this Agreement, Schedule 3.18 contains an accurate
and complete list of (i) all of the employees of the Business (the "Employees"),
including each such Employees' area of employment, salary or hourly rate and
annual bonuses, (ii) any employment contract or special arrangement with any
Employee and (iii) all personnel policies, manuals, employee handbooks, summary
plan descriptions and similar materials pertaining to the Business. Except as
set forth on Schedule 3.18, there are no other material forms of compensation
paid to any Employee. The Seller has delivered to the Acquisition Sub all
documents referred to in clauses (ii) and (iii) of the preceding sentence.
(b) Except as specifically described in Schedule 3.18, all Employees are
actively at work (or on vacation) and no Employee is currently on a leave of
absence, layoff, suspension, long-term sick leave, workers compensation, short
or long term disability, family leave, military leave, or otherwise not actively
performing his or her work during all normally scheduled business hours (other
than vacation).
(c) The Seller has not entered into any collective bargaining agreements
with respect to any of the Employees, (ii) there are no written personnel
policies applicable to any of the Employees generally, other than employee
manuals, true and complete copies of which have previously been provided to the
Acquisition Sub, (iii) there is no labor strike, dispute, slowdown or work
stoppage or lockout pending or, to the Seller's best knowledge, threatened
against or affecting the Business and during the past three years there has been
no such action, (iv) no union organization campaign, to the best knowledge of
the Seller, is in progress with respect to any of the employees, and no question
concerning representation exists respecting any of the Employees, (v) there is
no unfair labor practice, charge or complaint pending or, to the Seller's best
knowledge, threatened against the Seller arising out of the conduct of the
Business, and (vi) the Seller has not entered into any agreement, arrangement or
understanding restricting its ability to terminate the employment of any or all
of its employees, including the Employees, at any time, for any lawful or no
reason, without penalty or liability.
Section 3.19. Employee Benefit Plans.
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(a) Schedule 3.19 contains a list of all "employee benefit plans" (as
defined in Section 3(3) of ERISA) and any other written or oral plan, contract,
or other arrangement of benefit or advantage, including all bonus, stock option,
stock purchase, deferred compensation plans or arrangements and other employee
fringe benefit plans, maintained, sponsored or contributed to, by the Seller or
any of its affiliates for the benefit of any officer or employee of the Business
(each of the foregoing being herein called an "Employee Benefit Plan"). The
Seller has delivered to the Acquisition Sub true, complete and correct copies of
(i) each Employee Benefit Plan (or, in the case of any unwritten Employee
Benefit Plan, a written description thereof), and any amendments thereto, (ii)
the three most recent annual reports on Form 5500 (including all schedules and
attachments thereto) filed with the Internal Revenue Service with respect to
each Employee Benefit Plan (if any such report was required), (iii) the current
summary plan description for each Employee Benefit Plan for which such a summary
plan description is required, and (iv) each trust agreement, group annuity
contract or other funding and financing arrangement relating to any Employee
Benefit Plan. No Employee Benefit Plan has terms requiring assumption by the
Acquisition Sub or its affiliates.
(b) No changes in any Employee Benefit Plan applicable to any Employee of
the Seller, and no new Employee Benefit Plan or Plans with respect to such
Employees are contemplated or have been communicated to any Employee as being
contemplated.
(c) There are no actions or claims existing or pending (other than routine
claims for benefits) or threatened with respect to any Employee Benefit Plan
that could have an effect on this transaction, and neither Seller nor any other
ERISA Affiliate has been notified of any audit or investigation of an Employee
Benefit Plan by any governmental entity that could effect this transaction,
result in liability to the Buyer or result in the imposition of a lien or other
claim against any of the assets of the Business. For purposes of this Agreement,
"ERISA Affiliate" means any entity trade or business that would be treated as
under common control with the Seller or as a member of a controlled group
including the Seller within the meaning of Section 414 of the Code or Section
4001 of ERISA.
(d) There are no multi-employer plans (as defined in ERISA Section
4001(a)(3)) to which the Seller or any ERISA Affiliate is or has been required
to make a contribution or other payment.
(e) The Seller has paid and discharged promptly when due all liabilities
and obligations arising under ERISA or the Code of a character which if unpaid
or unperformed could result in the imposition of a lien or any other claim
against any of the assets of the Business.
(f) The Seller is in compliance with the Immigration Reform and Control Act
of 1986, as amended, and have ready for transfer as part of the assets of the
Business any and all Employment Eligibility Verification Forms (I- 9) for
Employees hired by Seller since November 6, 1986, employed in the Business on or
after June 1, 1987, and hired by the Acquisition Sub at or after the Closing.
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(g) Except as described on Schedule 3.19, or as otherwise provided in this
Agreement, with respect to any Employee who is hired by the Acquisition Sub
immediately after the Closing (regardless of whether such employment is
thereafter continued), the sale of assets contemplated by the Agreement in and
of itself will not: (i) entitle any Employee to severance pay, unemployment
compensation or similar payment from the Acquisition Sub; (ii) increase the
amount of compensation payable by the Acquisition Sub to any Employee; or (iii)
entitle any Employee to an "excess parachute payment" within the meaning of
Section 280G of the Code.
(h) There has not been in respect of the Business any plant closing or mass
layoff of employees as those terms are defined in the WARN Act, the
Massachusetts Plant Closings Law or any similar state or local law or regulation
within the one hundred twenty (120) days prior to the execution of this
Agreement, and Seller, within the ninety (90) day period prior to the Closing,
has not laid off or terminated more than ten (10) employees at any location
subject to this Agreement.
Section 3.20. Proprietary Rights.
(a) All of the Seller's Proprietary Rights are listed in Schedule 3.20.
Except as disclosed therein, the Seller owns and possesses all right, title and
interest in, and upon consummation of the transactions contemplated hereby, the
Acquisition Sub will own all right, title and interest in, the Proprietary
Rights. The Seller has taken all necessary or desirable action to protect the
Proprietary Rights and the transactions contemplated by this Agreement will have
no material adverse effect on the Seller's right, title and interest in the
Proprietary Rights.
(b) No claim by any third party contesting the validity, enforceability,
use or ownership of any Proprietary Right has been made, is currently pending
or, to the Seller's best knowledge, is threatened. The Seller has not received
any notice of, nor is it aware of any fact which indicates a likelihood of, any
infringement or misappropriation by, or conflict with, any third party with
respect to any of the Proprietary Rights. The Seller has not infringed,
misappropriated or otherwise conflicted with any rights of any third parties,
nor is it aware of any infringement, misappropriation or conflict which will
occur as a result of the continued operation of the Business as presently
conducted.
Section 3.21. Accounts Receivable. Schedule 3.21 sets forth a true and
complete listing of all Accounts Receivable as of December 31, 1998 and an aging
schedule reflecting the aggregate amount of all Accounts Receivable outstanding
(i) 30 days or less, (ii) more than 30 days but less than or equal to 60 days,
(iii) more than 60 days but less than or equal to 90 days, and (iv) more than 90
days. All of the Accounts Receivable have arisen in the ordinary and regular
course of business, represent bona fide transactions with third parties and, to
the best knowledge of the Seller, are not subject to any counterclaims or
offsets (except for those for which adequate reserves have been established in
accordance with GAAP), have been billed and are collectible within 90 days of
the date created.
Section 3.22. Contracts. (a) Schedule 3.22 describes all contracts (except
for usual and ordinary purchase orders executed in the normal course of
business), agreements,
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leases, commitments, instruments, plans, permits or licenses, whether written or
oral, with respect to the Business to which the Seller is a party or is
otherwise bound, of the type described below (the "Contracts"):
(i) all agreements or commitments for the sale by the Business of
products or services, or the purchase by the Business of raw materials,
products or services, other than those that are for amounts not to exceed
$3,000;
(ii) all agreements or commitments for the purchase by the Business of
machinery, equipment or other personal property other than those that are
for amounts not to exceed $3,000;
(iii) all capitalized leases, pledges, conditional sale or title
retention agreements;
(iv) all employment agreements and commitments and all consulting or
severance agreements or arrangements;
(v) all agreements relating to the consignment or lease of personal
property (whether the Seller is lessee, sublessee, lessor or sublessor),
other than such agreements that provide for annual payments of less than
$1,000;
(vi) all license, royalty or other agreements relating to the
Proprietary Rights;
(vii) all agreements prohibiting the Seller from freely engaging in
the Business in any geographic area;
(viii) all agreements to provide rebates to customers of the Business;
and
(ix) any agreement other than those covered by clauses (i) through
(viii) above relating to the Business and involving payment or receipt of
more than $2,500 in the aggregate and all agreements which otherwise
materially affect the Business.
(b) Except as disclosed in Schedule 3.22, all of the Contracts which are
intended to be assigned to the Acquisition Sub hereunder are fully assignable to
the Acquisition Sub by the Seller without the consent of any third party. All
consents of third parties required for the assignment of such Contracts to the
Acquisition Sub have been obtained, or will have been obtained prior to or on
the Closing Date. To the Seller's best knowledge, none of the other parties to
any such Contracts intends to terminate or materially alter the provisions of
such Contracts either as a result of transactions contemplated hereby or
otherwise, except as disclosed in Schedule 3.22.
(c) Except as disclosed in Schedule 3.22, the Seller is not in, nor has the
Seller given or received notice of, any default or claimed, purported or alleged
default, or facts that, with notice or lapse of time, or both, would constitute
a default (or give rise to a termination
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right) on the part of any party in the performance of any obligation to be
performed under any of the Contracts.
(d) True and complete copies of all written Contracts, including any
amendments thereto, have been delivered to the Parent and the Acquisition Sub
and such documents constitute the legal, valid and binding obligation of the
Seller and, to the Seller's best knowledge, each other party intended to be
obligated thereunder.
Section 3.23 Customers and Suppliers. Schedule 3.23 sets forth a list of
(a) the fifteen (15) largest customers of the Seller in terms of gross sales
during the preceding twelve month period and (b) the ten (10) largest suppliers
of the Seller in terms of purchases during the preceding twelve month period.
Except as set forth on Schedule 3.23, (a) no customer has notified or otherwise
indicated to the Seller or the Shareholder that it will stop, or decrease the
rate of, its purchases of materials, products or services from the Seller, and
no customer has, during 1998, ceased or decreased its purchases of any such
materials, products or services from the Seller, expect where the cessation or
decrease would not result in a Material Adverse Change to the Business; and (b)
no supplier of the Business has notified or otherwise indicated to the Seller or
the Shareholder that it will stop, or decrease the rate of, or, other than
publicly announced generally applicable price increases, materially increase the
cost of, its supply of materials, products or services used by the Business, and
no supplier has, during 1998, ceased, decreased the rate of or raised the cost
of, any such materials, products or services, expect where such action would not
result in a Material Adverse Change to the Business. The Seller is not a party
to any contract or commitment to purchase products from any supplier, other than
contracts or commitments that are terminable by Seller in its sole discretion,
without cost or penalty, on or prior to July 1, 1999. Schedule 3.23 also sets
forth a true and complete list of (i) all rebates to be provided by the Seller
to its customers, including the material terms thereof and (ii) all rebates to
be received from suppliers of the Seller, including the material terms thereof.
Section 3.24. Ability to Conduct Business. The consummation of the
transactions contemplated hereby will enable the Acquisition Sub to conduct the
Business substantially as it is currently being conducted.
Section 3.25. Books and Records. The books and records of the Seller,
including financial records and books of account, are complete and accurate and
have been maintained in accordance with GAAP, to the extent applicable, and
sound business practices.
Section 3.26. Year 2000. Except as set forth on Schedule 3.26, to the
extent that any functionality of any computer system or software used by the
Seller is dependent upon or interdependent with the use or specification of any
calendar date, the Seller has used commercially reasonable efforts (including
without limitation seeking written confirmations from all material customers of
and vendors to the Seller that such customers' and vendors' computer systems are
"Year 2000 Compliant") in implementing, and has implemented, a plan pursuant to
which any such computer system shall be "Year 2000 Complaint". For purposes of
this Section, the term "Year 2000 Compliant" means that neither the performance
nor the functionality of such computer systems or software shall be materially
affected by dates in, into and between th
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20th and 21st centuries. To be deemed "Year 2000 Compliant", such computer
systems shall conform in all material respects to the following basic
requirements: (i) no value for a current date shall cause any interruption in
the operations of the Seller (or of the Seller's vendors or customers) in which
computer systems or software are used; and (ii) any date-based functions shall
operate and perform in a consistent manner for dates in, into and between the
20th and 21st centuries and such computer systems and software shall calculate,
manipulate and represent dates correctly, although no such computer systems
shall use particular date values for special meanings.
Section 3.27. Cash Accounts. Schedule 3.27 is a true and complete list of
all bank accounts of the Seller or utilized in connection with the Business,
including the respective balances thereof as of the date of this Agreement.
Section 3.28. Brokers. No Person is or will be entitled to a broker's,
finder's, investment banker's, financial adviser's or similar fee from the
Seller or the Shareholder in connection with this Agreement or any of the
transactions contemplated hereby.
Section 3.29. Full Disclosure. No representation or warranty made by the
Seller in this Agreement, any Schedule, any Exhibit or any certificate
delivered, or to be delivered, by or on behalf of the Seller pursuant hereto
contains or will contain any untrue statement of a material fact or omits or
will omit to state a material fact necessary to make the statements contained
herein or therein not misleading. There is no fact or circumstance that the
Seller has not disclosed to the Parent and the Acquisition Sub in writing that
the Seller presently believes has resulted in a Material Adverse Change or could
reasonably be expected to have a material adverse effect on the ability of the
Seller to perform its obligations under this Agreement, the instruments of
transfer or the other documents to be delivered by the Seller pursuant to this
Agreement.
Section 3.30. Absence of Questionable Payments. Neither the Seller nor any
Affiliate, director, officer, employee, agent, representative or other Person
acting on behalf of the Seller has: (i) used any corporate or other funds for
unlawful contributions, payments, gifts or entertainment, or made any unlawful
expenditures relating to political activities to government officials or others,
or (ii) accepted or received any unlawful contributions, payments, gifts or
expenditures.
ARTICLE IV
Representations and Warranties of the Parent and the Acquisition Sub
The Parent and the Acquisition Sub, jointly and severally, represent and
warrant to the Seller and the Shareholder as follows:
Section 4.1. Organization.
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(a) The Parent is a corporation duly organized, validly existing and in
good standing under the laws of the State of New Jersey and has full power and
authority, corporate and other, to own or lease its property and assets and to
carry on its business as presently conducted.
(b) The Acquisition Sub is a corporation duly organized, validly existing
and in good standing under the laws of the State of New Jersey and has full
power and authority, corporate and other, to own or lease its property and
assets and to carry on its business as presently conducted.
Section 4.2. Authorization.
(a) The Parent has full power and authority, corporate and other, to
execute and deliver this Agreement and the other documents to be delivered by it
pursuant to this Agreement and to perform its obligations hereunder and
thereunder, all of which have been duly authorized by all requisite corporate
action. Each of this Agreement and the other documents to be delivered by it
pursuant to this Agreement has been or, at the time of delivery will be, duly
authorized, executed and delivered by the Parent and constitutes or, at the time
of delivery will constitute, a valid and binding agreement of the Parent,
enforceable against the Parent in accordance with its terms.
(b) The Acquisition Sub has full power and authority, corporate and other,
to execute and deliver this Agreement, the Assignment and Assumption Agreement
and the other documents to be delivered by it pursuant to this Agreement and to
perform its obligations hereunder and thereunder, all of which have been duly
authorized by all requisite corporate action. Each of this Agreement, the
Assignment and Assumption Agreement and the other documents to be delivered by
it pursuant to this Agreement has been or, at the time of delivery will be, duly
authorized, executed and delivered by the Acquisition Sub and constitutes or, at
the time of delivery will constitute, a valid and binding agreement of the
Acquisition Sub, enforceable against the Acquisition Sub in accordance with its
terms.
Section 4.3. Non-contravention. Neither the Parent nor the Acquisition Sub
is subject to any provision of its respective Certificate of Incorporation or
by-laws or any agreement, instrument, law, rule, regulation, order, decree or
judgment of any Governmental Authority or other restriction that would prevent
the consummation of the transactions contemplated by this Agreement, the
instruments of transfer or the other documents to be delivered by the Parent or
the Acquisition Sub pursuant hereto.
Section 4.4. No Consents. Except for any consents required in connection
with the Acquisition Sub's assumption of the Assumed Liabilities, including,
without limitation, the assumption of the Lease by the Acquisition Sub, no
notice to, filing with, or authorization, registration, consent or approval of
any Governmental Authority or other Person, including without limitation the
Federal Trade Commission pursuant to the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, is necessary for the execution, delivery
or performance of this Agreement, the Assignment and Assumption Agreement or the
other documents to be
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delivered by the Parent or the Acquisition Sub pursuant hereto or the
consummation of the transactions contemplated hereby and thereby by the Parent
or the Acquisition Sub.
Section 4.5. Brokers. With the exception of Compass Capital Partners, Ltd.,
no Person is or will entitled to a broker's, finder's, investment banker's,
financial adviser's or similar fee from the Parent or the Acquisition Sub in
connection with this Agreement or any of the transactions contemplated hereby.
The fees and expenses of Compass Capital Partners, Ltd. are the sole
responsibility of, and shall be paid by, the Parent and the Acquisition Sub.
ARTICLE V
Covenants and Agreements
Section 5.1. Transfer and Property Taxes.
(a) Except for transfer and sales Taxes, the Seller shall pay all Taxes
arising out of or resulting from the purchase of the Purchased Assets and the
assumption or satisfaction of the Assumed Liabilities. The Seller shall prepare
and timely file the required Tax Returns with respect to such Taxes and shall
promptly provide the Parent with evidence of the payment of such Taxes.
(b) The Seller shall (i) prepare and timely file all Tax Returns with
respect to the Purchased Assets and the operation of the Business for all
periods ending prior to or on the Closing Date, (ii) prepare and timely file all
Tax Returns reporting the income of the Seller arising on the Closing Date from
the sale to the Acquisition Sub of the Purchased Assets and the assumption or
satisfaction by the Acquisition Sub of the Assumed Liabilities and (iii) pay all
Taxes attributable to the Purchased Assets or the operation of the Business due
with respect to the Tax Returns referred to in (i) and (ii) above. The
Acquisition Sub shall prepare and file all Tax Returns with respect to the
ownership of the Purchased Assets and the operation of the Business for all
periods beginning after the Closing and shall be liable for and pay all Taxes
due in respect of such Tax Returns.
(c) All personal property, motor vehicle (including road use) and ad
valorem taxes, water charges and sewer rents, if any, vault charges, if any, and
all other Taxes, charges or assessments levied or imposed upon the Purchased
Assets by any Governmental Authority, for the taxable year beginning before and
ending on or after the Closing Date shall be apportioned and pro rated on a per
diem basis between the Acquisition Sub and the Seller as of 11:59 p.m. on the
day before the Closing Date. The Seller shall be responsible for the payment of
all ad valorem Taxes and any other Taxes and assessments against the Purchased
Assets for all taxable periods ending prior to the Closing Date. The Acquisition
Sub shall be responsible for the payment of all ad valorem Taxes and any other
Taxes and assessments against the Purchased Assets for all periods beginning on
or after the Closing Date. If the Closing Date shall occur before the Tax rate
for the year of Closing is fixed by the appropriate Governmental Authority, the
apportionment of any such Taxes shall be upon the basis of the Tax rate for the
preceding year
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applied to the latest assessed valuation and shall be readjusted promptly after
such Tax rates are known. The Tax proration amount due from the Seller at the
Closing shall be paid by the Seller to the Acquisition Sub at the Closing. Such
obligation to readjust shall survive the Closing.
(d) The Seller or the Shareholder shall conduct the defense of any Tax
audits or Tax claims against the Seller with respect to any Tax period of the
Seller ending on or before the Closing Date. The Seller and the Shareholder,
jointly and severally, shall indemnify and defend the Acquisition Sub and the
Parent against any loss, including without limitation any loss resulting from a
Tax adjustment having an adverse impact on the Tax liabilities of the
Acquisition Sub, the Parent or any of their Affiliates for any period ending
after the Closing Date, which they may sustain as a result of any such audit or
claim. The Shareholder shall notify the Acquisition Sub of any Tax adjustment
proposed by any Governmental Authority which the Shareholder is prepared to
accept.
Section 5.2. Change of Name. Promptly after the Closing, the Seller shall
change its name to a new name bearing no resemblance to its present name and not
containing the words "Boston Towne Press, Inc." or any combination or variation
thereof or name similar thereto. After the Closing, the Seller shall not use any
such names or any name similar thereto or which is reasonably believed by the
Parent or the Acquisition Sub to be confused with any such names or the
Business. At the Closing, the Seller shall deliver to the Parent and the
Acquisition Sub a duly adopted and executed Certificate of Amendment to the
Seller's Articles of Organization effectuating such name change, in form and
substance satisfactory to the Parent and the Acquisition Sub (the "Certificate
of Amendment"), and the Seller hereby appoints the Parent and the Acquisition
Sub as its agents to effect the filing of the Certificate of Amendment with the
appropriate Governmental Authorities at the Seller's sole cost and expense. From
and after the Closing, the Seller consents to the use by the Parent or the
Acquisition Sub of the corporate name and any assumed names, fictitious names,
trade names or other similar names of the Seller, each of which is and shall be
included in the Purchased Assets.
Section 5.3. Non-Competition and Confidentiality Agreement.
(a) For a period of three years (or, with respect to the Shareholder, such
other period of time as may be indicated in the Employment Agreement) after the
Closing Date, each of the Seller, the Shareholder and their respective
Affiliates will not (i) directly or indirectly, anywhere within a fifty (50)
mile radius of Boston (the "Territory") engage in the printing, binding or
mailing business for Persons providing financial services; (ii) directly or
indirectly, call upon any Person (x) which is, at that time, or which has been,
within one (1) year prior to that time, a customer of the Parent or the
Acquisition Sub (including the subsidiaries of either thereof) or (y) which was
a customer of the Seller in the 18 month period preceding the Closing, for the
purpose of soliciting or selling products or services in direct competition with
the Parent or the Acquisition Sub anywhere in the Territory; (iii) directly or
indirectly, employ, engage, contract for or solicit the services in any capacity
of any Person (other than the Shareholder) who is employed by the Seller in the
operation of the Business on the date hereof, unless the employment of such
Person is terminated by the Parent, the Acquisition Sub or such employee at
least six months prior to any solicitation of employment or employment; or (iv)
use for its own
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benefit or divulge or convey to any third party, any Confidential Information
(as hereinafter defined) relating to the Business. For purposes of this
Agreement, "Confidential Information" consists of all information, knowledge or
data relating to the Business including, without limitation, customer and
supplier lists, formulae, trade know-how, processes, secrets, consultant
contracts, pricing information, marketing plans, product development plans,
business acquisition plans and all other information relating to the operation
of the Business not in the public domain or otherwise publicly available.
Information which enters the public domain or is publicly available loses its
confidential status hereunder so long as neither the Seller, the Shareholder nor
any of their respective Affiliates directly or indirectly cause such information
to enter the public domain.
(b) The Seller and the Shareholder acknowledge that the restrictions
contained in this Section 5.3 are reasonable and necessary to protect the
legitimate interests of the Parent and the Acquisition Sub and that any breach
by the Seller of any provision hereof will result in irreparable injury to the
Parent and the Acquisition Sub. The Seller acknowledges that, in addition to all
remedies available at law, the Parent and the Acquisition Sub shall be entitled
to equitable relief, including injunctive relief, and an equitable accounting of
all earnings, profits or other benefits arising from such breach and shall be
entitled to receive such other damages, direct or consequential, as may be
appropriate. Neither the Parent nor the Acquisition Sub shall be required to
post any bond or other security in connection with any proceeding to enforce
this Section 5.3.
(c) Without limiting the generality of Section 8.4, the provisions of this
Section 5.3 shall inure to the benefit of any subsequent transferee of the
Business or any substantial portion thereof, whether or not this Agreement is
assigned to such transferee. In the event that the Seller, the Shareholder or
any of their respective Affiliates (i) dissolves, liquidates or winds up the
affairs of the Seller, (ii) sells the capital stock of the Seller, (iii) merges,
consolidates or otherwise combines the Seller with any other entity, or (iv)
otherwise leases, transfers, sells or disposes of all or any substantial portion
of the remaining assets of the Seller, whether in one transaction or a series of
related transactions, then as a condition to such transaction or transactions,
the Seller, the Shareholder or the Affiliate party to such transaction, as the
case may be, shall procure from any successor to the Seller or any purchaser or
other transferee of all or any substantial portion of its remaining assets, as
the case may be, a written agreement (which written agreement shall expressly
make the Parent and the Acquisition Sub and their respective successors and
assigns third-party beneficiaries thereof) to comply with the provisions of this
Section 5.8, including this paragraph, as if such successor, purchaser or other
transferee were a party hereto.
Section 5.4. Guarantee of Accounts Receivable. The Seller and the
Shareholder guarantee payment of any Accounts Receivable existing on and as of
the date hereof, that remains outstanding for more than 180 days after it is due
and payable; provided, however, that such guarantee shall not be applicable to
the first Fifty Thousand Dollars ($50,000) in the aggregate in uncollectible
Accounts Receivable transferred to the Acquisition Sub pursuant hereto. The
aggregate outstanding Accounts Receivable less the initial $50,000 in Accounts
Receivable covered by the Acquisition Sub shall be referred to herein as the
"Outstanding
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Accounts Receivable." The Seller and the Shareholder shall remit to the
Acquisition Sub the aggregate amount of any Outstanding Accounts Receivable or a
written objection thereto within ten days of receipt of the written notice of
the Acquisition Sub indicating the aggregate amount of Outstanding Accounts
Receivable. If, upon receipt of a written objection from the Seller regarding
the payment of any Outstanding Accounts Receivable, the Acquisition Sub and the
Seller are unable to agree in good faith on the resolution of the disputed
issues, then such issues shall be submitted to the Auditor for resolution, which
resolution shall be completed within ten (10) days of the date of submission.
The decision of the Auditor shall be final and binding upon the parties hereto.
The Seller and the Shareholder, on the one hand, and the Acquisition Sub and the
Parent, on the other hand, each shall pay one-half of the costs and fees of the
Auditor and shall cooperate with the Auditor in connection with its resolution
of the disputed issues. The Acquisition Sub shall assign to the Seller and the
Shareholder any Outstanding Accounts Receivable paid by the Seller and the
Shareholder to the Acquisition Sub; provided however that the Acquisition Sub
and the Seller and the Shareholder shall cooperate with respect to the
collection of any Outstanding Accounts Receivable so assigned.
Section 5.5. Employment Agreement. Simultaneously with the execution of
this Agreement, the Shareholder shall enter an employment agreement with the
Acquisition Sub to serve as the Senior Vice President - General Manager of the
Acquisition Sub at an annual base salary of One Hundred Ten Thousand Dollars
($110,000) (the "Employment Agreement").
Section 5.6. Further Assurances. In the event that at any time after
Closing any further action is necessary to carry out the purposes of this
Agreement, the Seller, the Shareholder, the Parent or the Acquisition Sub, as
the case may be, shall take all such action without any further consideration
therefor.
Section 5.7. Employment Matters.
(a) The Acquisition Sub shall offer employment on at "at will" basis to the
Employees listed on Schedule 3.18. Each such Employee who accepts such offer of
employment is hereinafter referred to as a "Hired Employee". Notwithstanding
anything contained in this Agreement to the contrary, neither the Acquisition
Sub nor the Parent shall have any obligation to retain the employment of any
Hired Employee for any specified period following the Closing Date (other than
the obligation of the Acquisition Sub to the Shareholder pursuant to the
Employment Agreement).
(b) The Seller hereby releases all Hired Employees from any employment,
non-compete and/or confidentiality agreement previously entered into between the
Seller and such Hired Employees to the extent necessary to allow such Hired
Employees to serve the Acquisition Sub.
(c) Effective as of the Closing Date, the Employees shall cease to actively
participate in the Boston Towne Press 401(k) Profit Sharing Plan (the "401K
Plan") and the Seller shall cause all accounts under the 401K Plan to be fully
vested. The Seller shall take such
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actions as are appropriate to terminate the 401K Plan and distribute benefits
thereunder as soon as administratively practicable following the Closing Date.
Section 5.8. Cooperation regarding SEC and other Governmental Filings. The
Seller and the Shareholder shall furnish the Parent and Acquisition Sub, upon
request, with all information concerning the Seller reasonably required for
inclusion in any report, filing or application made by the Parent or the
Acquisition Sub (as the case may be) with the SEC or any other governmental or
regulatory body in connection with the transactions contemplated by the this
Agreement.
Section 5.9. Access to Records after the Closing. After the Closing, upon
request, the Seller and its representatives shall be permitted reasonable
access, during normal business hours, to and to make inspection of the books and
records of the Seller transferred to the Acquisition Sub hereunder for a period
of five (5) years and to make copies thereof as is reasonably necessary to allow
the Seller to obtain information in the Acquisition Sub's possession (but
excluding attorney work product or other privileged communications). The Seller
shall pay the Purchaser's out-of-pocket costs and expenses in connection with
satisfying such requests.
ARTICLE VI
Deliveries at Closing
Section 6.1 Deliveries by the Seller and the Shareholder. Simultaneously
with the execution hereof, the Seller and the Shareholder shall have delivered
to the Parent and the Acquisition Sub all instruments of assignment, transfer
and conveyance identified herein and such other closing documents as shall be
requested by the Parent and the Acquisition Sub in form and substance acceptable
to the their counsel, including the following:
(a) such instruments of sale, transfer, assignment, conveyance and
delivery (including all vehicle titles), in form and substance reasonably
satisfactory to counsel for the Parent and the Acquisition Sub (including
without limitation the Bill of Sale and the Assignment and Assumption
Agreement) as are required in order to transfer to the Acquisition Sub good
and marketable title to the Purchased Assets, free and clear of all
Encumbrances except as provided herein;
(b) a certificate of the Clerk of the Seller, dated the date hereof,
as to the incumbency of any officer of the Seller executing this Agreement,
the instruments of transfer, or the other document to be delivered pursuant
to this Agreement or any document related thereto and covering such other
matters as the Parent and the Acquisition Sub may reasonably request;
(c) a certified copy of (i) the Articles of Organization and by-laws
of the Seller and all of the respective amendments thereto and (ii) the
joint resolutions of the Seller's Board of Directors and the Shareholder
authorizing the execution, delivery
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and consummation of this Agreement, the Bill of Sale, the Assignment and
Assumption Agreement and the other documents to be delivered pursuant to
this Agreement and the transactions contemplated hereby and thereby;
(d) a copy of the Employment Agreement, dated the date hereof, duly
executed by the Shareholder;
(e) a copy of the Certificate of Amendment, duly executed by the
Seller;
(f) copies of the Estoppel Certificate and the Assignment of Lease and
Landlord's Consent relating to the transfer of the Lease from the Seller to
the Acquisition Sub, dated the date hereof and which shall be duly executed
by the landlord of the Facility indicated on the Lease;
(g) evidence that a certificate of tax lien waiver issued by the
Massachusetts Department of Revenue under Massachusetts General Laws, ch.
62C, sections 51 and 52 with respect to the sale contemplated by this
Agreement has been ordered by the Seller;
(h) an opinion of Hinckley, Allen & Snyder, dated the date hereof,
counsel to the Seller and the Shareholder; and
(i) such other documents or instruments as the Parent and the
Acquisition Sub reasonably requests to effect the transactions contemplated
hereby.
Section 6.2. Deliveries by the Parent and the Acquisition Sub.
Simultaneously with the execution of the Agreement, the Parent and the
Acquisition Sub shall deliver to the Seller such closing documents as shall be
reasonably requested by the Seller in form and substance reasonably acceptable
to the Seller's counsel, including the following:
(a) the Assignment and Assumption Agreement executed by the
Acquisition Sub and dated the date hereof;
(b) a certificate of the Secretary or Assistant Secretary of the
Parent, dated the date hereof, as to the incumbency of any officer of the
Parent executing this Agreement, any other document to be delivered by the
Parent pursuant to this Agreement or any document related thereto and
covering such other matters as the Seller may reasonably request;
(c) a certificate of the Secretary or Assistant Secretary of the
Acquisition Sub, dated the date hereof, as to the incumbency of any officer
of the Acquisition Sub executing this Agreement, the Assignment and
Assumption Agreement, any other document to be delivered by the Acquisition
Sub pursuant to this Agreement
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or any document related thereto and covering such other matters as the
Seller may reasonably request;
(d) a certified copy of (i) the Certificate of Incorporation and
by-laws of the Parent and all of the respective amendments thereto and (ii)
the resolutions of the Parent's Board of Directors authorizing the
execution, delivery and consummation of this Agreement, any other document
to be delivered by the Parent pursuant to this Agreement and the
transactions contemplated hereby and thereby;
(e) a certified copy of (i) the Certificate of Incorporation and
by-laws of the Acquisition Sub and all of the respective amendments thereto
and (ii) the resolutions of the Acquisition Sub's Board of Directors
authorizing the execution, delivery and consummation of this Agreement, the
Assignment and Assumption Agreement, any other document to be delivered by
the Acquisition Sub pursuant to this Agreement and the transactions
contemplated hereby and thereby;
(f) the Cash Portion of the Purchase Price by a wire transfer as
specified by the Seller prior to the date hereof;
(g) a copy of the Employment Agreement, dated the date hereof, duly
executed by the Acquisition Sub;
(h) an opinion of Lowenstein Sandler PC, dated the date hereof,
counsel to the Parent and the Acquisition Sub; and
(i) such other documents or instruments as the Seller reasonably
requests to effect the transactions contemplated hereby.
ARTICLE VII
Survival of Representations and Warranties; Indemnification
Section 7.1. Survival of Representations and Warranties. Except as set
forth below, the representations and warranties provided for in this Agreement
shall survive the Closing for thirty (30) months from the Closing Date for the
benefit of the parties hereto and their successors and assigns. The
representations and warranties provided for in Sections 3.13, 3.15, 3.17 and
3.19 shall survive the Closing and remain in full force and effect for a period
of six (6) years from the Closing Date. The survival period of each
representation or warranty as provided in this Section 7.1 is hereinafter
referred to as the "Survival Period."
Section 7.2. Indemnification. (a) The Seller and the Shareholder, jointly
and severally, shall indemnify and hold harmless the Parent, the Acquisition
Sub, and their respective Affiliates, officers, directors, employees, agents and
representatives, and any Person claiming by or through any of them, against and
in respect of any and all claims, costs, expenses, damages,
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<PAGE>
liabilities, losses or deficiencies (including, without limitation, counsel's
fees and other costs and expenses incident to any suit, action or proceeding)
(the "Damages") arising out of, resulting from or incurred in connection with
(i) any material inaccuracy in any representation or the breach of any warranty
made by the Seller or the Shareholder in this Agreement for the applicable
Survival Period (disregarding, for this purpose, any materiality limitation
contained therein), (ii) the breach by the Seller or the Shareholder of any of
the respective covenants or agreements to be performed by them hereunder for
four years from the Closing Date, (iii) any Retained Asset and (iv) any Excluded
Liability. Except as specifically provided herein and in Section 7.1, the Seller
and the Shareholder indemnification obligations set forth in this Section 7.2(a)
shall continue in full force and effect forever.
(b) The Parent and the Acquisition Sub, jointly and severally, shall
indemnify and hold harmless the Seller, the Shareholder and their respective
Affiliates, officers, directors, employees, agents and representatives, and any
Person claiming by or through any of them, against and in respect of any and all
Damages arising out of, resulting from or incurred in connection with (i) any
material inaccuracy in any representation or the breach of any warranty made by
the Parent or the Acquisition Sub in this Agreement for the applicable Survival
Period (disregarding, for this purpose, any materiality limitation contained
therein), (ii) the breach by the Parent or the Acquisition Sub of any of the
respective covenants or agreements to be performed by them hereunder for four
years from the Closing Date, (iii) any Assumed Liability, and (iv) the operation
of the Business following the Closing. Except as specifically provided herein,
the indemnification obligations of the Parent and the Acquisition Sub set forth
in this Section 7.2(b) shall continue in full force and effect forever.
(c) The Seller and the Shareholder's indemnification obligations contained
in Section 7.2(a)(i) shall not apply to any claim for Damages until the
aggregate of all such claims total Seventy Five Thousand Dollars ($75,000)
(including, for purposes of calculating such amount, any uncollectible Accounts
Receivable covered by the Acquisition Sub pursuant to Section 5.4 above) in
which case the Seller and the Shareholder's indemnity obligation shall apply to
the total amount of such claims, including without limitation all claims for
Damages included in calculating the $75,000 threshold to indemnification;
provided however that the Seller and the Shareholder's maximum indemnification
obligation for all claims for Damages pursuant to Section 7.2(a)(i) shall not
exceed the aggregate amount of the Purchase Price. Notwithstanding anything set
forth herein to the contrary, no claim for Damages in an amount of less than One
Thousand Dollars ($1,000) shall be included in calculation of the $75,000
threshold to indemnification set forth in the first sentence of this Section
7.2(c).
(c) Any Person providing indemnification pursuant to the provisions of this
Section 7.2 is hereinafter referred to as an "Indemnifying Party" and any Person
entitled to be indemnified pursuant to the provisions of this Section 7.2 is
hereinafter referred to as an "Indemnified Party."
Section 7.3. Procedures for Third Party Claims. In the case of any claim
for indemnification arising from a claim of a third party (a "Third Party
Claim"), an Indemnified Party shall give prompt written notice to the
Indemnifying Party of any claim or demand which
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such Indemnified Party has knowledge and as to which it may request
indemnification hereunder. The Indemnifying Party shall have the right to defend
and to direct the defense against any such Third Party Claim, in its name or in
the name of the Indemnified Party, as the case may be, at the expense of the
Indemnifying Party, and with counsel selected by the Indemnifying Party unless
(i) such Third Party Claim seeks an order, injunction or other equitable relief
against the Indemnified Party, or (ii) the Indemnified Party shall have
reasonably concluded that (x) there is a conflict of interest between the
Indemnified Party and the Indemnifying Party in the conduct of the defense of
such Third Party Claim or (y) the Indemnified Party has one or more defenses not
available to the Indemnifying Party. Notwithstanding anything in this Agreement
to the contrary, the Indemnified Party shall, at the expense of the Indemnifying
Party, cooperate with the Indemnifying Party, and keep the Indemnifying Party
fully informed, in the defense of such Third Party Claim. The Indemnified Party
shall have the right to participate in the defense of any Third Party Claim with
counsel employed at its own expense; provided, however, that, in the case of any
Third Party Claim or demand described in clause (i) or (ii) of the second
preceding sentence or as to which the Indemnifying Party shall not in fact have
employed counsel to assume the defense of such Third Party Claim, the reasonable
fees and disbursements of such counsel shall be at the expense of the
Indemnifying Party. The Indemnifying Party shall have no indemnification
obligations with respect to any such Third Party Claim or demand which shall be
settled by the Indemnified Party without the prior written consent of the
Indemnifying Party, which consent shall not be unreasonably withheld or delayed.
Section 7.4. Procedures for Inter-Party Claims. In the event that an
Indemnified Party determines that it has a claim for Damages against an
Indemnifying Party hereunder (other than as a result of a Third Party Claim),
the Indemnified Party shall give prompt written notice thereof to the
Indemnifying Party, specifying the amount of such claim and any relevant facts
and circumstances relating thereto. The Indemnified Party shall provide the
Indemnifying Party with reasonable access to its books and records for the
purpose of allowing the Indemnifying Party a reasonable opportunity to verify
any such claim for Damages. The Indemnified Party and the Indemnifying Party
shall negotiate in good faith regarding the resolution of any disputed claims
for Damages. Promptly following the final determination of the amount of any
Damages claimed by the Indemnified Party, the Indemnifying Party shall pay such
Damages to the Indemnified Party by wire transfer or check made payable to the
order of the Indemnified Party, without interest. In the event that the
Indemnified Party is required to institute legal proceedings in order to recover
Damages hereunder, the cost of such proceedings (including costs of
investigation and reasonable attorneys' fees and disbursements) shall be added
to the amount of Damages payable to the Indemnified Party.
Section 7.5. Right of Set-Off. The Parent and the Acquisition Sub shall
have the right to set-off, against any amount which may be owed by the Parent or
the Acquisition Sub to the Seller, the Shareholder or any other Person pursuant
to this Agreement, whether unpaid or paid into escrow at the time of such
set-off; provided however that the Parent and the Acquisition Sub's right of
set-off shall not apply to the compensation payable to the Shareholder pursuant
to the Employment Agreement; provided, further, however that the term
"compensation" shall not include any Earn-Out payments to be made by the
Acquisition Sub pursuant to this Agreement but also referenced in the Employment
Agreement. The exercise of
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such right of set-off by either the Parent or the Acquisition Sub shall not
constitute a breach by them of this Agreement or the agreement underlying such
obligation.
ARTICLE VIII
Miscellaneous
Section 8.1. Notices. All notices or other communications required or
permitted hereunder shall be in writing and shall be delivered personally, by
facsimile or sent by certified, registered or express air mail, postage prepaid,
and shall be deemed given when so delivered personally, or by facsimile, or if
mailed, five days after the date of mailing, as follows:
If to the Parent
or the Acquisition Sub: 629 Grove Street
Jersey Cite, New Jersey 07310
Telephone: 201-217-1990
Facsimile: 201-792-6981
Attention: Robert M. Okin
With a copy to: Lowenstein Sandler PC
65 Livingston Avenue
Roseland, New Jersey 07068
Telephone: (973) 597-2500
Facsimile: (973) 597-2400
Attention: John D. Schupper, Esq.
If to the Seller or
the Shareholder: 131 Lazell Street
Hingham, Massachusetts 02043
Telephone: 781-740-0587
With a copy to: Hinckley, Allen & Snyder
28 State Street, 29th Floor
Boston, Massachusetts 02109
Telephone: 617-345-9000
Facsimile: 617-345-9020
Attention: Paul O'Donnell, Esq.
or to such other address as any party hereto shall notify the other parties
hereto (as provided above) from time to time.
Section 8.2. Expenses. Regardless of whether the transactions provided for
in this Agreement are consummated, except as otherwise provided herein, each
party hereto shall pay its own expenses incident to this Agreement and the
transactions contemplated herein;
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provided, however, that the fees and expenses of the Accountants incurred in
connection with the preparation of the Financial Statements for the fiscal years
ended December 31, 1997 and 1998, respectively, shall be paid by the Acquisition
Sub.
Section 8.3. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the internal laws of the State of New Jersey,
without reference to the choice of law principles thereof.
Section 8.4. Assignment; Successors and Assigns; No Third Party Rights.
Except as otherwise provided herein, this Agreement may not be assigned by
operation of law or otherwise, and any attempted assignment shall be null and
void. The Parent and the Acquisition Sub may assign all of their respective
rights under this Agreement to any Affiliate; provided such Affiliate assumes
all of the obligations of the Parent or the Acquisition Sub hereunder, as
applicable. This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors, assigns and legal
representatives. This Agreement shall be for the sole benefit of the parties to
this Agreement and their respective successors, assigns and legal
representatives and is not intended, nor shall be construed, to give any Person,
other than the parties hereto and their respective successors, assigns and legal
representatives, any legal or equitable right, remedy or claim hereunder.
Section 8.5. Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original agreement, but all of which together
shall constitute one and the same instrument.
Section 8.6. Titles and Headings. The headings and table of contents in
this Agreement are for reference purposes only, and shall not in any way affect
the meaning or interpretation of this Agreement.
Section 8.7. Entire Agreement. This Agreement, including the Schedules and
Exhibits attached thereto, and the Employment Agreement constitute the entire
agreement among the parties with respect to the matters covered hereby and
thereby and supersede all previous written, oral or implied understandings among
them with respect to such matters.
Section 8.8. Amendment and Modification. This Agreement may only be amended
or modified in writing signed by the party against whom enforcement of such
amendment or modification is sought.
Section 8.9. Public Announcement. Except as may be required by law or
appropriate Governmental Authority, neither the Seller or the Shareholder, on
the one hand, nor the Parent or the Acquisition Sub, on the other hand, shall
issue any press release or otherwise publicly disclose any dealings between or
among the parties in connection with the subject matter hereof without the prior
approval of the other. In the event that any such press release or other public
disclosure shall be required, the party required to issue such release or other
disclosure shall consult in good faith with the other party hereto with respect
to the form and substance of such release or other disclosure prior to the
public dissemination thereof. Notwithstanding
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anything set forth herein to the contrary, the Parent and the Acquisition Sub,
as applicable, shall be permitted to issue a press release and file such related
reports with the SEC as they deem necessary or desirable with regard to the
consummation of the transactions set forth herein.
Section 8.10. Waiver. Any of the terms or conditions of this Agreement may
be waived at any time by the party or parties entitled to the benefit thereof,
but only by a writing signed by the party or parties waiving such terms or
conditions.
Section 8.11. Severability. The invalidity of any portion hereof shall not
affect the validity, force or effect of the remaining portions hereof. If it is
ever held that any restriction hereunder is too broad to permit enforcement of
such restriction to its fullest extent, such restriction shall be enforced to
the maximum extent permitted by law.
Section 8.12. No Strict Construction. Each of the Parent and the
Acquisition Sub, on the one hand, and the Seller and the Shareholder, on the
other, acknowledge that this Agreement has been prepared jointly by the parties
hereto, and shall not be strictly construed against either party.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
BOSTON TOWNE PRESS, INC.
By: /s/ John R. Henesey, Jr.
-------------------------------------
John R. Henesey, Jr., President
By: /s/ John R. Henesey, Jr.
-------------------------------------
John R. Henesey, Jr., Individually
CUNNINGHAM GRAPHICS
INTERNATIONAL, INC.
By: /s/ Robert M. Okin
-------------------------------------
Robert M. Okin, Senior Vice President
and Chief Financial Officer
BTP ACQUISITION CORP.
By: /s/ Robert M. Okin
-------------------------------------
Robert M. Okin, Vice President
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EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (this "Agreement"), dated February 17, 1999, by and
between BTP Acquisition Corp., (the "Company"), Cunningham Graphics
International, Inc. ("CGII") and John R. Henesey, Jr. (the "Executive"), an
individual residing at 131 Lazell Street, Hingham, Massachusetts 02043.
W I T N E S S E T H:
WHEREAS, the Executive is the sole shareholder of Boston Towne Press, Inc.
("BTPI") and is serving currently as the President of BTPI; and
WHEREAS, simultaneously with the execution of this Agreement, CGII, the
Company (a wholly owned subsidiary of CGII), BTPI and the Executive will enter
into an Asset Purchase Agreement, dated as of the date hereof (the "Asset
Purchase Agreement"), pursuant to which, among other things, the Company will
purchase substantially all of the assets of BTPI (the "Transaction"); and
WHEREAS, effective upon consummation of the Transaction, the Company
desires to retain the Executive as the Senior Vice President - General Manager
of the Company and the Executive wishes to serve in that capacity on the terms
and conditions herein set forth;
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
the parties hereto agree as follows:
Section 1. Term of Employment. (a) The Executive's employment shall
commence on the date hereof (the "Commencement Date") and, subject to earlier
termination pursuant to Section 5 hereof, shall continue until December 31, 2001
(the "Term"). The Executive hereby represents and warrants that (i) he has the
legal capacity to execute and perform this Agreement, (ii) this Agreement is a
valid and binding agreement enforceable against him according to its terms, and
(iii) the execution and performance of this Agreement by him does not violate
the terms of any existing agreement or understanding to which the Executive is a
party or by which he may be bound.
(b) The principal place of employment of the Executive shall be within a
thirty (30) mile radius of Boston, Massachusetts or such other location as is
mutually agreed upon by the Executive and the Company. Notwithstanding the
foregoing, the Executive may be required, in connection with the performance of
his duties hereunder, to work from time to time at other locations designated by
the Company, including without limitation at the then-current principal
executive offices of the CGII; provided however that the Executive shall not be
required to work at any other location for more than five (5) days in any one
month of the Term.
Section 2. Position and Duties. During the Term, the Executive shall serve
as the Senior Vice President - General Manager of the Company and shall have
such powers and duties as are commensurate with such position and as may be
conferred upon him from time to
<PAGE>
time by the Board of Directors of the Company (the "Board"), the Chief Executive
Officer and the President of the Company. During the Term, and except for
illness or incapacity and reasonable paid vacation periods of four (4) weeks in
any calendar year (or such other, longer period as shall be consistent with the
Company's policies for other executives), the Executive shall devote all of his
business time, attention, skill and efforts exclusively to the business and
affairs of the Company, CGII and their respective subsidiaries and affiliates;
provided, however, that the Executive may engage in charitable, educational,
religious, civic and similar types of activities to the extent that such
activities do not inhibit or prohibit the performance of his duties hereunder.
Section 3. Compensation. For all services rendered by the Executive in any
capacity required hereunder during the Term, including, without limitation,
services as an executive officer, director, or member of any committee of the
Company, CGII or any subsidiary, affiliate or division thereof, respectively,
the Executive shall be compensated as follows:
(a) The Company shall pay the Executive a fixed salary at the rate of
One Hundred Ten Thousand Dollars ($110,000) per annum ("Base Salary") and
such periodic increases as the Board shall deem appropriate in accordance
with the Company's customary procedures and practices regarding the
salaries of executives. Base Salary shall be payable in accordance with the
customary payroll practices of the Company, but in no event less frequently
than monthly.
(b) During the Term and for use in connection with his duties
hereunder, the Company shall provide the Executive with a monthly car
allowance in the amount of Eight Hundred Twenty Five Dollars ($825), which
allowance shall cover all expenses incurred by the Executive for the
maintenance and operation of such vehicle, including without limitation all
fees relating to insurance of such vehicle.
(c) During the Term, the Company shall reimburse the Executive for
fees incurred by him for parking at the Company's facility. In addition,
during the Term, the Company shall reimburse the Executive for the costs of
the Executive's health club membership; provided however that such costs
shall not exceed $1,500 per annum. All requests for reimbursement made
pursuant to this Section 3(c) shall be submitted in accordance with the
terms of Section 4 below.
(d) The Executive shall be entitled to participate in all compensation
and employee benefit plans or programs, and to receive all benefits,
perquisites and emoluments, for which the senior management of the Company
are eligible under any plan or program now or hereafter established and
maintained by the Company, to the fullest extent permissible under the
general terms and provisions of such plans or programs and in accordance
with the provisions thereof; provided however that such plans, programs and
benefits shall be comparable to those provided by CGII to its senior
management. Notwithstanding the foregoing, nothing in this Agreement shall
preclude the amendment or termination of any such plan or program, provided
that such amendment or termination is applicable generally to the senior
officers of the Company.
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(e) The Executive shall obtain (i) a term insurance policy (the "Life
Insurance Policy") insuring the life of the Executive with a mutually
acceptable insurance company in an amount of Seven Hundred Fifteen Thousand
Dollars ($715,000), the beneficiary of which shall be named by the
Executive and (ii) a term insurance policy (the "Disability Policy", and
together with the Life Insurance Policy, the "Policies") insuring against
the Permanent Disability (as defined below) of the Executive with a
mutually acceptable insurance company in an amount of Seven Hundred Fifteen
Thousand Dollars ($715,000), the beneficiary of which shall be named by the
Executive. Upon obtaining the Policies, the Company shall reimburse the
Executive for the reasonable costs of the Policies (not to exceed $3,000
each). Each of the Policies shall remain in effect through December 31,
1999. As a result of the reimbursement of the costs of the Policies by the
Company, the Company and CGII shall be relieved of any obligation under the
Asset Purchase Agreement to pay any portion of the Earn-Out (as defined in
the Asset Purchase Agreement) to any legal representative of the Executive
in the event that the Executive's employment hereunder terminates as a
result of the death or Permanent Disability of the Executive on or prior to
December 31, 1999.
Section 4. Business Expenses. The Company shall pay or reimburse the
Executive for all reasonable travel or other expenses incurred by the Executive
in connection with the performance of his duties and obligations under this
Agreement, subject to the Executive's presentation of appropriate vouchers in
accordance with such procedures as the Company may from time to time establish
for senior officers and to preserve any deductions for Federal income taxation
purposes to which the Company may be entitled.
Section 5. Termination of Employment; Effects Thereof.
(a) The Company shall have the right, upon delivery of written notice to
the Executive, to terminate the Executive's employment hereunder prior to the
expiration of the Term (i) pursuant to a Termination for Cause, (ii) upon the
Executive's Permanent Disability, or (iii) pursuant to a Without Cause
Termination. The Executive shall have the right, upon delivery of written notice
to the Company, to terminate his employment hereunder prior to the expiration of
the Term in his sole discretion; provided, however, that, without the Company's
written consent, no termination of the Executive's employment pursuant to this
sentence shall be effective without the Company's consent until 60 days after
receipt by the Company of written notice of termination from the Executive. The
Executive's employment hereunder shall terminate automatically without action by
any party hereto upon the Executive's death.
(b) In the event that the Company terminates the Executive's employment
pursuant to a Without Cause Termination:
(i) the Company shall continue to pay to the Executive the Base Salary
as in effect at the time of such termination for a period of six months
from the effective date of such termination;
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(ii) earned but unpaid Base Salary as of the date of termination of
employment shall be payable in full;
(iii) effective on or prior to December 31, 2000, the Company shall
pay to the Executive within fifteen (15) days of the effective date of such
termination the full amount of the Earn Out without regard to the final
calculation of the Adjusted EBITDA targets set forth in the Asset Purchase
Agreement; and
(iv) if the Executive is eligible to elect continued health coverage
under Company's group health plan following the Executive's termination of
employment pursuant to the provisions of Sections 601 et seq. of the
Employee Retirement Income Security Act of 1974 ("COBRA Coverage") and
elects such COBRA Coverage, then for the first six months of COBRA
Coverage, the Executive shall not be required to pay more than the
applicable cost that active employees of the Company are charged for group
health coverage under such plan. After such six month period and for the
remainder of the applicable COBRA Coverage period, the Executive shall be
required to pay the full cost of such COBRA Coverage.
(v) no other payments shall be made, or benefits provided, by the
Company under this Agreement except as set forth in this Section 5(b) or
otherwise required by law.
(c) In the event that the Company terminates the Executive's employment
pursuant to a Permanent Disability, the Company shall pay the Executive any
earned but unpaid Base Salary as of the date of termination of employment. No
other payments shall be made, or benefits provided, by the Company under this
Agreement except as otherwise required by law.
(d) In the event that the Company terminates the Executive's employment
hereunder due to a Termination for Cause or the Executive terminates employment
with the Company for reasons other than a Permanent Disability, the Company
shall pay the Executive any earned but unpaid Base Salary as of the date of
termination of employment. No other payments shall be made, or benefits
provided, by the Company whether under this Agreement or otherwise except to the
extent required by law.
(e) In the event that the Executive's employment hereunder is terminated
due to the Executive's death, the Company shall pay the Executive's executor or
other legal representative any earned but unpaid Base Salary as of the date of
termination of employment. No other payments shall be made, or benefits
provided, by the Company under this Agreement except as otherwise required by
law.
(f) For purposes of this Agreement, the following terms have the following
meanings:
(i) The term "Termination for Cause" means, to the maximum extent
permitted by applicable law, a termination of the Executive's employment by
the Company because the Executive has (a) committed an action which
constitutes
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<PAGE>
intentional misconduct or a knowing violation of law if such action results
both in an improper personal benefit to the Executive and a material injury
to the Company, (b) been convicted of a felony, (c) repeatedly failed to
follow written directives relating to material operations of the Company
issued by the Board, the Chief Executive Officer or the President, which
failures the Executive shall fail to remedy within 10 days after written
demand from the Company, (d) materially breached or materially failed to
perform his obligations and duties hereunder, which breach or failure the
Executive shall fail to remedy within 30 days after written demand from the
Company, or (e) violated in any material respect the representations made
in Section 1 above or the provisions of Section 6 below.
(ii) The term "Without Cause Termination" means a termination of the
Executive's employment by the Company other than due to (i) a Termination
for Cause, (ii) Permanent Disability, (iii) the Executive's death, or (iv)
the expiration of this Agreement.
(iii) The term "Permanent Disability" means permanently disabled so as
to qualify for full benefits under any disability insurance policy then
maintained by the Company; provided, however, that if no such disability
policy is in effect on the date of determination, "Permanent Disability"
shall mean the inability of the Executive to perform his duties hereunder
on a full-time basis for a period of six full calendar months during any
twelve consecutive calendar months due to illness or injury of a physical
or mental nature, supported by the completion by a physician selected by
the Company and reasonably satisfactory to the Executive or his legal
representative of a medical certification form outlining the disability and
treatment.
(g) Any payments to be made or benefits to be provided by the Company
pursuant to this Section are subject to the receipt by the Company of an
effective general release and agreement not to sue in a form reasonably
satisfactory to the Company (the "Release") pursuant to which the Executive
agrees (i) to release all claims against the Company, CGII and certain related
parties (excluding claims for any severance benefits payable hereunder), (ii)
not to maintain any action, suit, claim or proceeding against the Company, CGII,
their respective subsidiaries and affiliates and certain related parties, and
(iii) to be bound by certain confidentiality and mutual non-disparagement
covenants specified therein; provided however that any such Release shall not
relieve (x) CGII or the Company from their obligations to indemnify the
Executive pursuant to the Asset Purchase Agreement or (y) diminish the Company's
obligation to provide the Executive with such indemnification as may be required
under New Jersey law or provided for in the Certificate of Incorporation and
by-laws of the Company, as amended from time to time. Notwithstanding the due
date of any post-employment payment, the Company shall not be obligated to make
any payments under this Section until after the expiration of any revocation
period applicable to the Release.
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<PAGE>
Section 6. Other Duties of Executive During and After Term.
(a) The Executive recognizes and acknowledges that all information
pertaining to the affairs, business, clients, or customers of the Company, CGII
or any of their respective subsidiaries or affiliates (any or all of such
entities being hereinafter referred to as the "Business"), as such information
may exist from time to time, other than information that the Company or CGII has
previously made publicly available, is confidential information and is a unique
and valuable asset of the Business, access to and knowledge of which are
essential to the performance of the Executive's duties under this Agreement. In
consideration of the payments made to him hereunder, the Executive shall not,
except to the extent reasonably necessary in the performance of his duties under
this Agreement, divulge to any person, firm, association, corporation, or
governmental agency, any information concerning the affairs, businesses,
clients, or customers of the Business (except such information as is required by
law to be divulged to a government agency or pursuant to lawful process), or
make use of any such information for his own purposes or for the benefit of any
person, firm, association or corporation (except the Business) and shall use his
reasonable best efforts to prevent the disclosure of any such information by
others. All records, memoranda, letters, books, papers, reports, accountings,
experience or other data, and other records and documents relating to the
Business, whether made by the Executive or otherwise coming into his possession,
are confidential information and are, shall be, and shall remain the property of
the Business. No copies thereof shall be made which are not retained by the
Business, and the Executive agrees, on termination of his employment or on
demand of the Company, to deliver the same to the Company.
(b)(i) The Executive recognizes and acknowledges that the Company shall own
all Work Product created by the Executive during the Term, subject to the
limitations set forth in Section 6(b)(iv) below. As used herein, "Work Product"
includes, but is not limited to, all intellectual property rights, U.S. and
international copyrights, patentable inventions, creations, discoveries and
improvements, works of authorship and ideas, whether or not patentable or
copyrightable and regardless of their form or state of development. All Work
Product shall be considered work made for hire by the Executive and shall be
owned by the Company.
(ii) If any of the Work Product may not, by operation of law, be considered
a work made for hire by the Executive for the Company, or if ownership of all
right, title and interest of the intellectual property rights therein shall not
otherwise vest exclusively in the Company, the Executive shall assign, and upon
creation thereof shall be deemed to have automatically assigned, without further
consideration, the ownership of all such Work Product to the Company and its
successors and assigns. The Company, its successors and assigns shall have the
right to obtain and hold in its or their own name copyrights, patents,
registrations and other protections available to the Work Product. The Executive
shall assist the Company in obtaining and maintaining patent, copyright,
trademark and other appropriate protection for all Work Product in all
countries, at the Company's expense. The Executive hereby irrevocably
relinquishes for the benefit of the Company, its successors and assigns any
moral rights in the Work Product recognized under applicable law.
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<PAGE>
(iii) The Executive shall disclose all Work Product promptly to the Company
and shall not disclose the Work Product to anyone other than authorized Company
personnel without the Company's prior written consent. The Executive shall not
disclose to the Company or induce the Company to use any secret or confidential
information or material belonging to others.
(iv) The provisions of this Section 6(b) cover Work Product of any kind
that is conceived or made by the Executive that are conceived or made with the
use of facilities or materials provided by the Company, its subsidiaries and
affiliates and (A) relates to the business of the Company, its subsidiaries and
affiliates or (B) results from tasks assigned to the Executive by the Company,
its subsidiaries and affiliates.
(c) In consideration of the payments made to him hereunder and pursuant to
the Asset Purchase Agreement, during the longer of (i) the two-year period
commencing on the effective date of the termination of this Agreement or (ii)
the three year period following the date hereof, the Executive shall not (A)
without express prior written approval of the Board, directly or indirectly, own
or hold any proprietary interest in, or be employed by or receive remuneration
from, any corporation, partnership, sole proprietorship or other entity engaged
in competition anywhere in a fifty (50) mile radius of Boston, Massachusetts
with the Company, CGII or any of their respective affiliates (a "Competitor");
(B) solicit for the account of any Competitor, any customer or client of the
Company, CGII or any of their respective affiliates, or, in the event of the
Executive's termination of his employment, any entity or individual that was
such a customer or client during the twelve-month period immediately preceding
the Executive's termination of employment or (C) act on behalf of any Competitor
to interfere with the relationship between the Company, CGII or their respective
subsidiaries and affiliates and their respective employees. Notwithstanding
anything set forth herein to the contrary, in the event of a Without Cause
Termination, the Executive shall be subject to the restrictions set forth in (A)
above for six months from the effective date of the Without Cause Termination;
however, the restrictions set forth in (B) and (C) above shall remain in full
force and effect for the entirety of the time period set forth above.
For purposes of the preceding paragraph, (i) the term "proprietary
interest" means legal or equitable ownership, whether through stockholding or
otherwise, of an equity interest in a business, firm or entity other than
ownership of less than five percent of any class of equity interest in a
publicly held business, firm or entity and (ii) an entity shall be considered to
be "engaged in competition" if such entity is, or is a holding company for, a
company engaged in the printing, binding or mailing business for financial
services persons or entities.
(d) The Company's obligation to make payments, or provide for any benefits
under this Agreement (except to the extent vested or exercisable) shall cease
upon a violation of the preceding provisions of this Section. The provisions of
this Section 6 shall survive the Executive's termination of his employment with
the Company.
Section 7. Withholdings. The Company may directly or indirectly withhold
from any payments made under this Agreement all Federal, state, city or other
taxes and all
7
<PAGE>
other deductions as shall be required pursuant to any law or governmental
regulation or ruling or pursuant to any contributory benefit plan maintained by
or on behalf of the Company.
Section 8. Consolidation, Merger, or Sale of Assets. Nothing in this
Agreement shall preclude the Company from consolidating or merging into or with,
or transferring all or substantially all of its assets to, or engaging in any
other business combination with, any other person or entity which assumes this
Agreement and all obligations and undertakings of the Company hereunder. Upon
such a consolidation, merger, transfer of assets or other business combination
and assumption, the term "Company" as used herein shall mean such other person
or entity and this Agreement shall continue in full force and effect; provided
however that, with respect to Section 6(c), the term "Company" shall not include
any such person or entity with whom the Company executes a letter of intent or
binding agreement after the effective date of termination of the Executive's
employment hereunder.
Section 9. Notices. All notices, requests, demands and other communications
required or permitted hereunder shall be given in writing and shall be deemed to
have been duly given if delivered or mailed, postage prepaid, by same day or
overnight mail (i) if to the Executive, at the address set forth above, with a
copy to Paul O'Donnell, Hinckley Allen & Snyder, 28 State Street, 29th Floor,
Boston, Massachusetts 02109 or (ii) if to the Company, at BTP Acquisition Corp.,
629 Grove Street, Jersey City, New Jersey 07310, with a copy to John D.
Schupper, Lowenstein Sandler PC, 65 Livingston Avenue, Roseland, New Jersey
07068, or to such other address as either party shall have previously specified
in writing to the other.
Section 10. No Attachment. Except as required by law, no right to receive
payments under this Agreement shall be subject to anticipation, commutation,
alienation, sale, assignment, encumbrance, charge, pledge, or hypothecation or
to execution, attachment, levy, or similar process or assignment by operation of
law, and any attempt, voluntary or involuntary, to effect any such action shall
be null, void and of no effect; provided, however, that nothing in this Section
10 shall preclude the assumption of such rights by executors, administrators or
other legal representatives of the Executive or his estate and their assigning
any rights hereunder to the person or persons entitled thereto.
Section 11. Source of Payment. All payments provided for under this
Agreement shall be paid in cash from the general funds of the Company. The
Company shall not be required to establish a special or separate fund or other
segregation of assets to assure such payments, and, if the Company shall make
any investments to aid it in meeting its obligations hereunder, the Executive
shall have no right, title or interest whatever in or to any such investments
except as may otherwise be expressly provided in a separate written instrument
relating to such investments. Nothing contained in this Agreement, and no action
taken pursuant to its provisions, shall create or be construed to create a trust
of any kind, or a fiduciary relationship, between the Company and the Executive
or any other person. To the extent that any person acquires a right to receive
payments from the Company hereunder, such right, without prejudice to rights
which employees may have, shall be no greater than the right of an unsecured
creditor of the Company.
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<PAGE>
Section 12. Dispute Resolution. At the option of either the Company or the
Executive, any dispute, controversy or question arising under, out of or
relating to this Agreement or the breach, other than pursuant to Section 6
hereof, shall be referred for decision by arbitration in The Commonwealth of
Massachusetts by a neutral arbitrator mutually selected by the parties hereto.
Any arbitration proceeding shall be governed by the Rules of the American
Arbitration Association then in effect or such rules last in effect (in the
event such Association is in existence). If the parties are unable to agree upon
such a neutral arbitrator within 30 days after either party has given the other
written notice of the desire to submit the dispute, controversy or question for
decision as aforesaid, then either party may apply to the American Arbitration
Association for an appointment of a neutral arbitrator, or if such Association
is not then in existence or does not act in the matter within 30 days of any
such application, either party may apply to the Presiding Judge of the Superior
Courts of Suffolk or Middlesex counties in Massachusetts for an appointment of a
neutral arbitrator to hear the parties and settle the dispute, controversy or
question, and such Judge is hereby authorized to make such appointment. In the
event that either party exercises the right to submit a dispute, controversy or
question arising hereunder to arbitration, the decision of the neutral
arbitrator shall be final, conclusive and binding on all interested persons and
no action at law or in equity shall be instituted or, if instituted, further
prosecuted by either party other than to enforce the award of the neutral
arbitrator. The award of the neutral arbitrator may be entered in any court that
has jurisdiction. The Executive and the Company shall each bear all their own
costs (including the fees and disbursements of counsel) incurred in connection
with any such arbitration and shall each pay one-half of the costs of any
arbitrator appointed hereunder.
Section 13. Guarantee. CGII hereby guarantees the obligations of the
Company to make payments to the Executive pursuant to Sections 5 of this
Agreement.
Section 14. Binding Agreement; No Assignment. This Agreement shall be
binding upon, and shall inure to the benefit of, the Executive and the Company
and their respective permitted successors, assigns, heirs, beneficiaries and
representatives. This Agreement is personal to the Executive and may not be
assigned by him without the prior written consent of the Company. Any attempted
assignment in violation of this Section 13 shall be null and void.
Section 15. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the internal laws of The Commonwealth of
Massachusetts, without reference to the choice of law principles thereof.
Section 16. Entire Agreement. This Agreement and the Asset Purchase
Agreement shall constitute the entire agreement among the parties with respect
to the matters covered hereby and thereby and shall supersede all previous
written, oral or implied understandings among them with respect to such matters.
Section 17. Amendments. This Agreement may only be amended or otherwise
modified, and compliance with any provision hereof may only be waived, by a
writing executed by all of the parties hereto. The provisions of this Section 16
may only be amended or otherwise modified by such a writing.
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<PAGE>
Section 18. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, and all of which
shall together be deemed to constitute one and the same instrument.
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<PAGE>
IN WITNESS WHEREOF, the Company has caused this Agreement to be duly
executed by the undersigned, thereunto duly authorized, and the Executive has
signed this Agreement, all as of the date first written above.
CUNNINGHAM GRAPHICS
INTERNATIONAL, INC.
By: /s/ Robert M. Okin
-------------------------------------------
Robert M. Okin, Senior Vice President
and Chief Financial Officer
BTP ACQUISITION CORP.
By: /s/ Robert M. Okin
-------------------------------------------
Robert M. Okin, Senior Vice President
and Chief Financial Officer
/s/ John R. Henesey, Jr.
-------------------------------------------
John R. Henesey, Jr.
11
NEWS RELEASE
FOR IMMEDIATE RELEASE Contact: Robert Okin
Chief Financial Officer
201-217-1990 Ext. 305
Vince Daniels / John Nesbett
Lippert/Heilshorn & Associates
212-838-3777
CUNNINGHAM GRAPHICS INTERNATIONAL ACQUIRES BOSTON PRINTER
JERSEY CITY, NJ - February 17, 1999 - Cunningham Graphics International,
Inc. (NASDAQ NM: CGII) announced today that it has completed the acquisition of
Boston Towne Press, Inc., a high quality, commercial printer.
Boston Towne Press is a leading provider of printing and distribution
services for major institutional customers in New England including mutual fund
companies, insurance companies and many of the colleges and universities located
in the area. The Company's facilities are strategically located within walking
distance of the Boston financial district and are capable of increasing
production without the need for additional investment in plant and equipment.
John R. Henesey Jr., President of Boston Towne Press, will continue to direct
the operations of the Company, as a subsidiary of Cunningham Graphics
International.
Management expects the acquisition of Boston Towne Press to be accretive to
Cunningham Graphics International's 1999 earnings. Inclusive of this
acquisition, Cunningham Graphics International's annualized revenues are in
excess of $75 million. Terms of the transaction were not disclosed.
Boston Towne Press is Cunningham Graphics International's second
acquisition in the first two months of this year. The Company previously
announced the acquisition of Workable Company Limited, a full service printing
company with operations in Hong Kong and Singapore specializing in the printing
of financial research reports.
Michael Cunningham, Chairman and Chief Executive Officer of Cunningham
Graphics, commented, "We are very pleased to establish our presence in the
important New England market with the acquisition of this well-run, successful
printing company that has demonstrated strong and consistent revenue and
earnings growth. With the acquisition of Boston Towne Press,
<PAGE>
Cunningham Graphics International will now be able to provide customers in the
Boston area with its unique distribution and print technologies and capitalize
on cross-selling opportunities."
John R. Henesey Jr. commented, "All of us at Boston Towne Press are very
excited to be part of the Cunningham Graphics International team. The
exceptional growth, advancements in technology and worldwide distribution
capabilities demonstrated by Cunningham Graphics International gives us a
significant platform to continue to grow Boston Towne Press to new levels."
Cunningham Graphics International continues to seek complementary
operations in the United States, the United Kingdom and other international
markets which possess attractive characteristics, including major customers with
significant document needs, such as insurance companies, publishing companies
and universities. The Company is targeting acquisition candidates with; (i)
annual net sales ranging from $3 to $25 million; (ii) attractive growth
prospects within their respective markets; (iii) complementary technological
capabilities; (iv) opportunities for economies of scale and synergies with
existing operations; (v) a solid reputation with established customer
relationships; and (vi) an experienced management team.
The Company is also pursuing "tuck-in" acquisitions in the New York metro
market as means to expand its existing operations, add product lines and
services as well as expand its customer base. Consistent with this strategy, on
February 3, 1999, Cunningham Graphics International acquired a 150,000 square
foot facility in Jersey City, NJ for $5.5 million with the intent of
consolidating its midtown New York and New Jersey operations into one facility.
Cunningham continued, "Our pipeline of acquisition candidates remains full.
We continue to be very responsible with our due diligence and selection process
and are on track with our plans to close a number of additional transactions
this year."
Cunningham Graphics International provides time-sensitive printing and
distribution, commercial printing, and outsourcing services to a blue-chip
client base in the financial services, insurance and publishing industries. The
Company currently operates in select international markets through its
facilities in the United States, the United Kingdom, Hong Kong and Singapore.
Graphic communication services provided by the Company include digital
communications, document management, offset printing, digital printing, data
output, bindery, fulfillment services, mailing services and outsource services.
<PAGE>
This press release may contain forward-looking statements, which involve
known and unknown risks, uncertainties or other factors that could cause actual
results to materially differ from the results, performance or other expectations
implied by these forward-looking statements. Factors which could cause or
contribute to such differences include, but are not limited to, continued demand
for its services, the availability of raw materials, the impact of competitive
services and pricing, risks in technology development, changing economic
conditions and other risk factors detailed in the Company's filings with the
Securities and Exchange Commission.
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