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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
Date of Report (date of earliest event reported) May 14, 1996.
Champion Industries, Inc.
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(Exact name of registrant as specified in its charter)
West Virginia 0-21084 55-0717455
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(State or other juris- (Commission File No.) (IRS Employer Identi-
diction of corporation) fication No.)
2450 First Avenue
P. O. Box 2968
Huntington, West Virginia 25728
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (304) 528-2791
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Not Applicable
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(Former name or former address, if changes since last report)
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INFORMATION TO BE INCLUDED IN THE REPORT
Item 2. ACQUISITION OR DISPOSITION OF ASSETS
On May 14, 1996, Champion Industries, Inc. ("Champion"), a West Virginia
corporation, announced that it had executed a definitive Agreement of Merger
providing for the merger of Smith & Butterfield Co., Inc. ("Butterfield") with a
wholly owned subsidiary of Champion to be chartered for the purpose of effecting
such merger. The Agreement of Merger provides that Champion will issue shares
of its common stock, par value $1.00, having at consummation a market value of
$1,200,000 (approximately 66,666 shares if based on the closing trade price of
Champion common stock on May 13, 1996) in exchange for all 500 issued and
outstanding shares of common stock of Butterfield, and that upon consummation of
such merger, Butterfield would become a wholly owned subsidiary of Champion and
shareholders of Butterfield will become shareholders of Champion. The merger is
contingent upon approval by Butterfield shareholders and satisfaction of other
conditions set forth in the Agreement of Merger.
Immediately prior to the announcement of the Agreement of Merger, Champion
had outstanding 6,417,260 shares of common stock. As a result of the
contemplated issuance of 66,666 shares to shareholders of Butterfield (if based
on the closing trade price of Champion common stock on May 13, 1996, as reported
on the NASDAQ National Market System), Champion will have outstanding
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6,483,926 shares of common stock at consummation of the merger. The shares of
Champion common stock will be issued and sold pursuant to exemptions from
registration under the Securities Act of 1933 and the Indiana Securities Act.
Butterfield is engaged in the sale of office products and office furniture.
Headquartered in Evansville, Indiana, it has been in operation for over 100
years, and serves the southern Indiana and northern Kentucky region from four
locations.
Item 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits
The exhibits listed on the Exhibit Index on page 4 of this Form 8-K are
filed herewith.
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.
CHAMPION INDUSTRIES, INC.
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(Registrant)
/s/ Joseph C. Worth, III
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Date: May 15, 1996 Joseph C. Worth, III, Vice President
and Chief Financial Officer
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EXHIBIT INDEX
2.1 Agreement of Merger between Champion Industries, Inc. and Smith &
Butterfield Co., Inc., dated May 14, 1996. Filed herewith.
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EXHIBIT 2.1
AGREEMENT OF MERGER
THIS AGREEMENT OF MERGER (hereinafter sometimes referred to as the
"Agreement"), made and entered into as of the _____ day of May, 1996, by and
between CHAMPION INDUSTRIES, INC. ("Champion") and SMITH & BUTTERFIELD CO., INC.
("Company"), and its directors, or a majority of them, and JAMES D. BUTTERFIELD,
its sole stockholder ("Stockholder");
W I T N E S S E T H:
WHEREAS, Champion is a corporation duly organized and validly existing
under the laws of the State of West Virginia, with authorized capital stock
consisting of 10,000,000 common shares, $1.00 par value per share ("Champion
Common Stock"), of which 6,417,260 shares are currently outstanding; and
WHEREAS, Company is a corporation duly organized and validly existing under
the laws of the State of Indiana with authorized capital stock consisting of
1,000 common shares, without par value, of which 500 shares are currently
outstanding and 500 preferred shares, $10.00 par value, of which no shares are
outstanding, and no shares are held as treasury stock ("Company Stock"); and
WHEREAS, Champion and Company have agreed to the merger of Company with a
wholly-owned subsidiary of Champion, to be organized under the laws of the State
of Indiana, so that upon consummation of the merger Company will be a wholly-
owned subsidiary of Champion; and
WHEREAS, the Board of Directors of Champion has approved this agreement and
has authorized the execution hereof in counterparts; and
WHEREAS, the Board of Directors of Company has approved this agreement,
authorized the execution hereof in counterparts, and directed that it be
submitted to its Stockholder for approval, ratification and confirmation; and
WHEREAS, Champion has agreed to cause a new Indiana corporation to be
organized which shall be named SB Acquisition Company, Inc. ("Interim Company"),
with its principal office and place of business to be located in the City of
Evansville, State of Indiana, and all shares of its capital stock to be owned by
Champion; and
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WHEREAS, Champion has agreed to cause Interim Company to approve this
Agreement and authorize the execution of an Adoption Agreement substantially in
the form attached hereto as "Exhibit A" which is incorporated herein by
reference.
NOW, THEREFORE, in consideration of the foregoing premises, which are not
mere recitals but an integral part hereof, and in consideration of the mutual
agreements hereinafter set forth, the parties hereto agree as follows:
SECTION 1. MERGER
1.1 GENERAL EFFECT OF MERGER; ASSETS. At the Effective Time (hereinafter
defined in Section 7.2) and subject to the terms and conditions hereof and of
the attendant Plan of Merger ("Plan of Merger") attached hereto as "Exhibit B",
Interim Company shall merge with and into Company (the "Merger") under the
charter of Company pursuant to the provisions of and with the effect provided in
the Indiana Corporation Act, IC 23-1-40. Company shall be (and is hereinafter
called when reference is made to it at and after the consummation of the Merger)
the Surviving Company and shall retain the name and title of "Smith &
Butterfield Co., Inc.". At the Effective Time of the Merger, the corporate
existence of Interim Company shall, as provided in the Indiana Corporation Act,
IC 23-1-40-6, be merged with and into Company and continued in the Surviving
Company and the separate existence of Interim Company shall cease. The
Surviving Company shall thereupon and thereafter possess all of the rights,
privileges, immunities and franchises, of a public as well as of a private
nature, of the Interim Company and Company; and all property, real, personal and
mixed, and all debts due on whatever account, including subscriptions to shares,
if any, and all other choses in action, and all and every other interest of or
belonging to or due to the Interim Company and Company, and each of them, shall
be deemed to be transferred to and vested in the Surviving Company without
further act or deed; and the title to any real estate, or any interest therein,
vested in the Interim Company and Company and each of them, before the Merger,
shall not revert or in any way be impaired by reason of the Merger.
1.2 LIABILITIES OF SURVIVING COMPANY. From and after the Effective Time
of the Merger, the Surviving Company shall be liable for all liabilities of
Company and Interim Company and all deposits, debts, liabilities, obligations
and contracts of Company and Interim Company, respectively, matured or
unmatured, whether accrued, absolute, contingent or otherwise, and whether or
not reflected or reserved against on balance sheets, books of account or records
of Company or Interim Company, as the case may be, shall be those of and are
hereby expressly assumed by the Surviving Company and shall not be released or
impaired by the Merger,
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and all rights of creditors and other obligees and all liens on property of
either Company or Interim Company shall be preserved unimpaired, and the
Surviving Company shall have all rights and shall be liable for all obligations
of Company under all employee benefit plans and arrangements of Company and such
plans and related trusts shall continue in effect without any interruption or
termination unless and until changed as therein or by law provided or permitted
or as mutually agreed to by the parties hereto.
1.3 NAME, DIRECTORS AND OFFICERS OF SURVIVING COMPANY. From and after the
Effective Time, the name of the Surviving Company shall be "Smith & Butterfield
Co., Inc.". The Articles of Incorporation and the By-laws of Company in effect
immediately prior to the Effective Time shall be the Articles of Incorporation
and By-laws of the Surviving Company until changed as therein or by law
provided. The directors and officers of the Surviving Company at the Effective
Time shall be those persons who are directors and officers respectively of
Interim Company immediately before the Effective Time. The committees of the
Board of Directors of the Surviving Company at the Effective Time shall be the
same as and shall be composed of the same persons who are serving on committees
appointed by the Board of Directors of Interim Company as they exist immediately
before the Effective Time. The committees of officers of the Surviving Company
at the Effective Time shall be the same as and shall be composed of the same
officers who are serving on the committees of officers of Interim Company as
they exist immediately before the Effective Time.
1.4 OFFICES, POLICIES OF SURVIVING COMPANY. From and after the Effective
Time, the business and location of the Surviving Company shall be the same as
that of Company. Unless contrary to law, all corporate acts, plans, policies,
applications, agreements, loan commitments, orders, registrations, licenses,
approvals and authorizations of Company and Interim Company, their respective
shareholders, boards of directors, committees elected or appointed by their
boards of directors, officers and agents, which were valid and effective
immediately before the Effective Time shall be taken for all purposes at and
after the Effective Time as the acts, plans, policies, applications, agreements,
orders, registrations, licenses, approvals, and authorizations of Surviving
Company and shall be effective and binding thereon as the same were with respect
to Company and Interim Company immediately before the Effective Time.
1.5 CAPITAL STRUCTURE OF SURVIVING COMPANY. The capital structure of the
Surviving Company shall be the same as the capital structure of Company.
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SECTION 2. CONVERSION, EXCHANGE AND CANCELLATION OF SHARES
2.1 GENERAL. The manner of converting and exchanging Company Stock, all
of which is represented by outstanding share certificates into Champion Common
Stock shall be as hereinafter provided in this Section 2.
2.2 CONVERSION RATE. At the Effective Time, each of the shares of Company
Stock that shall be issued and outstanding immediately prior to the Effective
Time shall thereupon and without further action be converted into shares of
Champion Common Stock at the Exchange Rate which shall be calculated as set
forth in this Section 2; provided, however, that the number of shares of Company
Stock that shall be issued and outstanding immediately prior to the Effective
Time shall not be more than 500 shares. All shares of Champion Common Stock
into which the aforesaid Company Stock is so converted shall be fully paid and
non-assessable. Company's stockholders of record at the Effective Time, for the
shares of Company Stock then held by them, respectively, shall be allocated and
entitled to receive (a) shares of Champion Common Stock, which total number of
shares of Champion Common Stock shall have an aggregate Market Value as of the
Valuation Date of One Million Two Hundred Thousand Dollars ($1,200,000.00). The
Market Value shall be determined by averaging the daily closing trade prices of
Champion Common Stock as reported on the Nasdaq National Market System ("NMS")
during the five (5) consecutive days on which shares of Champion Common Stock
are traded on the Nasdaq National Market System ("NMS") immediately prior to the
Valuation Date as reported in THE WALL STREET JOURNAL. The Valuation Date shall
be the Nasdaq NMS trading day immediately prior to the Closing Date.
For purposes of establishing the Exchange Rate (the number of shares of
Champion Common Stock into which each share of Company Stock shall be converted
at the Effective Time), the Market Value of one (1) share of Champion Common
Stock shall be divided into the aggregate Market Value to establish to the
nearest whole share the aggregate number of shares of Champion Common Stock into
which all of the then issued and outstanding shares of Company Stock shall be
converted at the Effective Time. Such number of shares of Champion Common Stock
shall then be divided by the number of shares of Company Stock that shall be
issued and outstanding immediately prior to the Effective Time with the quotient
therefrom being the number of shares of Champion Common Stock into which each
share of Company Stock shall be converted at the effective time.
All shares of Company Stock held by Company as treasury stock immediately
prior to the Effective Time shall be cancelled and shall not be exchanged for
shares of Champion Common Stock.
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2.3 MANNER OF EXCHANGE. After the Effective Time of the Merger, except
for persons exercising their rights as dissenting shareholders of Company, and
subject to the Escrow Agreement attached hereto as Exhibit D, each holder of a
certificate theretofore evidencing outstanding shares of Company Stock, upon
surrender of such certificate, accompanied by a Letter of Transmittal and
Investment Letter in the form attached hereto as Exhibit C, to Champion shall be
entitled to receive in exchange therefor a certificate or certificates
representing the number of full shares of Champion Common Stock for which shares
of Company Stock theretofore represented by the certificate or certificates so
surrendered shall have been exchanged as provided in this Section 2. Until so
surrendered, each outstanding certificate which, prior to the Effective Time of
the Merger, represented Company Stock will be deemed to evidence the right to
receive the number of full shares of Champion Common Stock into which the shares
of Company Stock represented thereby may be converted, and will be deemed for
all corporate purposes of Champion to evidence ownership of the number of full
shares of Champion Common Stock into which the shares of Company Stock
represented thereby were converted. Until such outstanding certificates
formerly representing Company Stock are surrendered, no dividend payable to
holders of record of Champion Common Stock for any period as of any date
subsequent to the Effective Time of the Merger shall be paid to the holder of
such outstanding certificates in respect thereof. After the Effective Time of
the Merger there shall be no further registry of transfers on the records of
Company of shares of Company Stock. Upon surrender of certificates of Company
Stock for exchange for Champion Common Stock, there shall be paid to the record
holder of the certificates of Champion Common Stock issued in exchange therefor
(i) the amount of dividends theretofore paid with respect to such full shares of
Champion Common Stock as of any date subsequent to the Effective Time of the
Merger which have not yet been paid to a public official pursuant to abandoned
property laws and (ii) at the appropriate payment date the amount of dividends
with a record date after the Effective Time of the Merger, but prior to
surrender and a payment date subsequent to surrender. No interest shall be
payable with respect to such dividends upon surrender of outstanding
certificates.
2.4 SHARES OF CHAMPION COMMON STOCK NOT REGISTERED. Company acknowledges
and agrees, and Company Stockholder will acknowledge and agree in his Investment
Letter that the Champion Common Stock will not be registered under the
Securities Act of 1933 or any state securities laws, and must be held
indefinitely unless such Champion Common Stock is subsequently registered under
the Securities Act of 1933 or under state securities acts, or unless an
exemption from such registration is available. Company further acknowledges and
agrees, and Company Stockholder will further acknowledge and agree in his
Investment Letter that Champion is
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under no obligation, and shall assume no obligation, to cause such shares of
Champion Common Stock to be so registered, and that each certificate
representing shares of Champion Common Stock issued to Company Stockholder shall
be stamped or otherwise imprinted with, or contain a legend in substantially the
following form:
"The securities represented by this instrument have not been
registered under the Federal Securities Act of 1933, or any
state securities statute and may not be sold, assigned, or
transferred unless (i) registered for resale or (ii) the
issuer hereof has received the written opinion of counsel
for said issuer that after investigation of relevant facts,
such counsel is of the opinion that such sale, assignment or
transfer does not involve a transaction requiring a
registration of such securities under the Federal Securities
Act of 1933 or any applicable state securities laws. The
restrictions of this paragraph shall become null and void
and this paragraph shall have no effect on and after June
_____, 1999."
Company Stockholder shall further acknowledge in his Investment Letter that
Champion's issuance of such Champion Common Stock is made in reliance upon an
exemption from registration under the Federal Securities Act of 1933, which
registration is in part premised upon and relied upon as a result of the
representations made by each stockholder in the Investment Letter attached
hereto as Exhibit C, and each Stockholder shall review and truthfully and
accurately complete and execute same and deliver same to Champion.
2.5 FRACTIONAL SHARES. Champion will not issue fractional shares or
fractional share certificates, but in lieu of the issuance of fractional shares
will pay cash, without interest, to any Company shareholder otherwise entitled
to receive such fractional shares. The amount of such cash payment will be
determined by multiplying the fractional share interest to which a Company
shareholder would otherwise be entitled by the Market Value of Champion Common
Stock determined pursuant to Section 2.2. Payment for fractional shares will be
made with respect to each shareholder at the time such shareholder's
certificates of Company Stock are exchanged.
2.6 LOST CERTIFICATES. If a certificate evidencing outstanding shares of
Company Stock is lost, stolen or destroyed, the registered owner thereof shall
be entitled to receive the Champion certificate and cash to which he would
otherwise be
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entitled on exchange of such certificate, by notifying Champion in writing of
such lost, stolen or destroyed certificate and giving Champion evidence of loss
and a bond sufficient to indemnify Champion against any claim that may be made
against it on account of the alleged lost, stolen and destroyed certificate and
the issuance of the certificate and cash.
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SECTION 3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF
CHAMPION
Except as disclosed in writing, Champion hereby represents and warrants to
and covenants with Company that:
3.1 ORGANIZATION, STANDING AND AUTHORITY. Champion is a corporation duly
organized, validly existing and in good standing under the laws of the State of
West Virginia. Champion has the corporate power to execute and deliver this
Agreement, and has taken all action required by law, its Articles of
Incorporation, its By-laws or otherwise, to authorize such execution and
delivery, the Merger and the consummation of the transactions contemplated
hereby, and this Agreement is a valid and binding agreement of Champion in
accordance with its terms. No action of Champion's shareholders is or will be
required to approve this Agreement or the Merger. At the Effective Time,
Champion will have corporate power to carry on its business as then to be
conducted and will be qualified to do business in every jurisdiction in which
the character and location of the assets to be owned by it or the nature of the
business to be transacted by it require qualification.
3.2 CAPITAL STRUCTURE. The authorized capital stock of Champion consists
of 10,000,000 shares of Champion Common Stock, of which 6,417,260 shares are
currently issued and outstanding. All of such shares are fully paid and
non-assessable. Champion does not have any other shares of Champion Common
Stock or any other capital stock issued or outstanding. Champion does not have
any outstanding subscriptions, options or other agreements or commitments
obligating it to issue shares of its capital stock except for (a) its 1993 Stock
Option Plan, or as may be otherwise provided herein. The holders of Champion
Common Stock have no preemptive rights with respect to the issuance of
additional authorized shares of Champion Common Stock. Nothing in this
Agreement shall prohibit or impair the ability and right of Champion to increase
its authorized capital stock, or issue or agree to commit to issue additional
shares of its capital stock, and any increase in authorized capital stock, or
issuance, or agreement or commitment to issue, additional shares of Champion
Common Stock shall not alter or affect the Conversion Rate set forth in Section
2.2 hereof.
3.3 AUTHORITY. The execution and delivery of this Agreement do not, and
the consummation of the Merger and transactions contemplated hereby will not,
violate any provision of the Articles of Incorporation or By-laws of Champion,
or any provision of, or result in the acceleration of any obligation under, any
material mortgage, deed of trust, note, lien, lease, franchise, license, permit,
agreement, instrument, order, arbitration award,
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judgment, injunction or decree, or result in the termination of any material
license, franchise, lease, or permit to which Champion is a party or by which it
is bound, and will not violate or conflict with any other material restriction
of any kind or character to which Champion is subject.
3.4 INTERIM COMPANY FORMATION; ADOPTION AGREEMENT. Champion at its sole
cost and expense shall cause to be organized Interim Company as an Indiana
corporation and shall cause Interim Company to execute and enter into an
Adoption Agreement in substantially the form attached hereto as "Exhibit A" and
a Plan of Merger in substantially the form annexed hereto as "Exhibit B" and
cause Interim Company to take such action as is provided in this Agreement or in
said Adoption Agreement or Plan of Merger upon Interim Company's part to be
taken. Immediately prior to the Effective Time, Champion will own all of the
issued and outstanding shares of Interim Company's capital stock.
3.5 BEST EFFORTS. On or prior to the Closing Date (hereinafter defined in
Section 7.1 hereof), Champion will, to the extent permitted by applicable laws,
rules and regulations, take such actions, and execute and deliver all such
agreements, documents, certificates or amendments to this Agreement as may be
necessary or desirable to effectuate the provisions and intent of this
Agreement.
3.6 STOCKHOLDER EMPLOYMENT BY SURVIVING COMPANY; TERMINATION UNDER CERTAIN
CIRCUMSTANCES. In the event the employment of Stockholder by Surviving Company
is terminated within three (3) years after the Effective Time for reasons other
than (i) retirement of Stockholder; (ii) death of Stockholder, or other
incapacity or disability of Stockholder sufficient to prevent Stockholders's
full and adequate performance of his employment obligations, (iii) Stockholder's
voluntary resignation from employment, or (iv) termination of Stockholder's
employment for cause, then Surviving Company shall pay to Stockholder the cash
sum of Ninety Nine Thousand Dollars ($99,000.00), in exchange for which
Stockholder will execute and deliver to Surviving Company an agreement that, for
a period of three (3) years after such termination, he will maintain the
confidentiality of Surviving Company customer lists and will not enter into or
engage directly or indirectly in any business competitive with the business of
Surviving Company as it exists at the time of termination of employment, either
as an individual on his own account or as a partner or joint venturer or as an
employee, agent, consultant or salesman for any person, firm or corporation or
as an officer, director or stockholder of a corporation or otherwise, in any
market area of the Surviving Company as it exists at the time of termination of
employment or with respect to any customer of the Company to which the Surviving
Company has sold its products or
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performed services in the course of its business within the two years preceding
the time of termination of employment, without first having obtained the written
consent of Surviving Company, which may be arbitrarily withheld.
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SECTION 4. REPRESENTATIONS, WARRANTIES AND COVENANTS OF
COMPANY
Company and its Stockholder hereby jointly and severally represent and
warrant to, to their best knowledge and belief, and covenant with Champion that:
4.1 ORGANIZATION, STANDING AND AUTHORITY. Company is a corporation duly
organized and validly existing under the laws of the State of Indiana. Company
has the corporate power to execute and deliver this Agreement, and has taken all
action required by law, its Articles of Incorporation, its By-laws or otherwise,
to authorize such execution and delivery, the Merger and the consummation of the
transactions contemplated hereby, and this Agreement is a valid and binding
agreement of Company in accordance with its terms, subject only to the
requirement of ratification, confirmation and approval by Company's Stockholder.
At the Effective Time, Company will have corporate power to carry on its
business as then to be conducted and will be qualified to do business in every
jurisdiction in which the character and location of the assets to be owned by it
or the nature of the business to be transacted by it require qualification.
4.2 CAPITAL STRUCTURE. The authorized capital stock of Company consists
of 1,000 shares of Company Stock, without par value, of which 500 shares are
issued and outstanding and are fully paid and non-assessable, and 500 shares of
preferred stock, of which no shares are outstanding, and no shares are owned and
held by the Company as treasury stock and thus not outstanding. Company does
not have any subscriptions, options, warrants, calls, or other agreements or
commitments, of any kind relating to or obligating it to issue any shares of its
capital stock. Further, there are no securities outstanding which are
convertible into capital stock of Company. None of the shares of Company Stock
has been issued in violation of any preemptive rights of shareholders.
4.3 NO SUBSIDIARIES. Company has no subsidiaries and Company will not
organize or acquire any subsidiaries prior to the Effective Time of the Merger
without the written consent of Champion.
4.4 AUTHORITY. The execution and delivery of this Agreement do not, and
the consummation of the Merger and transactions contemplated hereby will not,
violate any provision of the Articles of Incorporation or By-laws of Company, or
any provision of, or result in the acceleration of any obligation or forfeiture
of any benefit under, any material mortgage, deed of trust, note, lien, lease,
franchise, license, permit, agreement, instrument, order, arbitration award,
judgment, injunction or decree, or result in the termination of any material
license, franchise,
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lease, or permit to which Company is a party or by which it is bound, and will
not violate or conflict with any other material restriction of any kind or
character to which Company is subject.
4.5 COMPANY FINANCIAL STATEMENTS. Company has delivered to Champion prior
to the execution of this Agreement copies of the following financial statements
of Company (which, together with all future financial statements to be furnished
are collectively referred to herein as the "Company Financial Statements"): the
unaudited Balance Sheets of Company as of December 31, 1995, March 31, 1995,
March 31, 1994 and March 31, 1993, and the related Statements of Income and Cash
Flows for the periods then ended, and the notes thereto. The Company Financial
Statements (as of the dates thereof and for the periods covered thereby):
(a) are in accordance with the books and records of Company, which
are complete and correct in all material respects that are required by generally
accepted accounting principles (except as otherwise required or approved by
applicable regulatory authorities or by applicable law) and which have been
maintained in accordance with good business practice; and
(b) present fairly the financial position and results of operations
and cash flows of Company as of the dates and for the periods indicated, in
accordance with generally accepted accounting principles (except as otherwise
required or approved by applicable authorities or by applicable law), applied on
a basis consistent with prior years, and do not fail to disclose any material
extraordinary or out-of-period items.
Company's unaudited Balance Sheet and the related unaudited Consolidated
Statements of Income and Changes in Shareholder Equity and Cash Flows, and the
notes thereto, for the fiscal quarter ended June 30, 1996, and for each fiscal
quarter thereafter until the Effective Time, all of which Company shall deliver
to Champion as soon as practicable, will be prepared in accordance with
generally accepted accounting principles consistently applied and will fairly
present Company's financial condition and results of operations as of such date
and for such period.
4.6 ABSENCE OF UNDISCLOSED LIABILITIES. At March 31, 1995, the Company
had no obligation or liability (contingent or otherwise) which was material, or
which when combined with all similar obligations or liabilities would have been
material, to Company except as disclosed in the Company Financial Statements or
as previously disclosed to Champion in writing; nor does there exist a set of
circumstances resulting from transactions effected or events occurring on or
prior to March 31, 1995, or from any
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action omitted to be taken during such period that, to the knowledge of Company,
could reasonably be expected to result in any such material obligation or
liability, except as previously disclosed to Champion in writing, or as
disclosed or provided for in the Company Financial Statements. The amounts set
up as liabilities for taxes in the Company Financial Statements are sufficient
for the payment of all respective taxes (including, without limitation, federal,
state, local and foreign excise, franchise, property, payroll, income, capital
stock and sales and use taxes) accrued in accordance with generally accepted
accounting principles and unpaid at March 31, 1995. Since March 31, 1995, the
Company has not incurred or paid any obligation or liability which would be
material (on a consolidated basis) to Company, except for obligations incurred
or paid in connection with transactions by it in the ordinary course of its
business consistent with generally accepted practices or except as disclosed
herein.
4.7 TAX MATTERS.
(a) All federal, state, local and foreign tax returns, (including,
without limitation, estimated tax returns, withholding tax returns with respect
to employees, and FICA and FUTA returns) required to be filed by or on behalf of
Company have been timely filed or requests for extensions have been timely
filed, granted and have not expired and all returns filed are complete and
accurate to the best information and belief of Company management. All taxes
shown on filed returns have been paid. As of the date hereof, and as of the
Effective Time, there is and shall be no audit examination, deficiency or refund
litigation or matter in controversy with respect to any taxes that might result
in a determination adverse to Company, except as reserved against in the Company
Financial Statements, or as previously disclosed to Champion in writing. All
taxes, interest, additions and penalties due with respect to completed and
settled examinations or concluded litigation have been paid.
(b) Except as previously disclosed to Champion in writing, the
Company has not executed an extension or waiver of any statute of limitations on
the assessment or collection of any tax due that is currently in effect.
(c) To the extent any federal, state, local or foreign taxes are due
from Company for the period or periods beginning April 1, 1995, or thereafter
through and including the Effective Time, adequate provision on an estimated
basis has been or will be made for the payment of such taxes by establishment of
appropriate tax liability accounts on the last monthly financial statements of
Company, prepared before the Effective Time.
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(d) Deferred taxes of the Company have been provided for in
accordance with generally accepted accounting principles.
4.8 PROPERTIES. Except as previously disclosed to Champion in writing or
disclosed in Company Financial Statements, Company has good and marketable
title, free and clear of all liens, encumbrances, charges, defaults or equities
of whatever character, to all of the respective properties and assets, tangible
or intangible, whether real, personal or mixed, reflected in the Company
Financial Statements as being owned by it at March 31, 1995 or acquired by it
after March 31, 1995. All buildings, and all fixtures, equipment and other
property and assets which in the opinion of management are material to its
business, held under leases or subleases by Company are held under valid
instruments enforceable in accordance with their respective terms which shall
survive the merger (except as previously disclosed in writing to Champion and
except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors' rights generally and except that the availability of the equitable
remedy of specific performance or injunctive relief is subject to the discretion
of the court before which any proceedings may be brought). The policies of
fire, theft, liability and other insurance maintained with respect to the assets
or businesses of Company provide adequate coverage against loss.
4.9 COMPLIANCE WITH LAWS. Except as previously disclosed in writing to
Champion, the Company:
(a) is in compliance with all laws, regulations, reporting and
licensing requirements and orders applicable to its business or any of its
employees (because of such employee's activities on behalf of it), the breach or
violation of which could have a material adverse effect on such business; and
(b) has received no notification (not previously disclosed to
Champion in writing) from any agency or department of federal, state or local
government or regulatory authorities or the staff thereof asserting that any
such entity is not in compliance with any of the statutes, regulations, rules or
ordinances which such governmental authority or regulatory authority enforces,
or threatening to revoke any license, franchise, permit or governmental
authorization, and is subject to no agreement with any regulatory authorities
with respect to its assets or business.
4.10 EMPLOYEE BENEFIT PLANS. Except as previously disclosed in writing to
Champion, and except as set forth in subsection (e) below, with respect to any
plan or arrangement of Company which constitutes an employee benefit plan within
the meaning of Section
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3(3) of The Employees Retirement Income Security Act of 1974 ("ERISA"):
(a) Except for liabilities to the Pension Benefit Guaranty
Corporation pursuant to Section 4007 of ERISA, all of which have been fully
paid, and except for liabilities to the Internal Revenue Service under Section
4971 of the Internal Revenue Code of 1986, if any, all of which have been fully
paid, the Company has no liability to the Pension Benefit Guaranty Corporation
or to the Internal Revenue Service with respect to any pension plan qualified
under Section 401 of the Internal Revenue Code of 1986.
(b) All "employee benefit plans", as defined in Section 3(3) of
ERISA, which cover one or more employees employed by Company (each individually,
a "Plan", and collectively, the "Plan") comply in all material respects with
ERISA and, where applicable for tax-qualified or tax-favored treatment, with the
Internal Revenue Code of 1986. As of March 31, 1995, no material liability
under any Plan that is not reflected on the audited statements of financial
condition of Company as of such date, or in the notes thereto (other than such
normally unrecorded liabilities under the Plans for sick leave, holiday,
education, bonus, vacation, incentive compensation and anniversary awards,
provided that such liabilities are not in any event material). Neither the
Plans nor any trustee or administrator thereof has engaged in a "prohibited
transaction" within the meaning of Section 406 of ERISA or, where applicable,
Section 4975 of the Internal Revenue Code of 1986 for which no exemption is
applicable, nor have there been any "reportable events" within the meaning of
Section 4043 of ERISA for which the 30-day notice therefor has not been waived.
(c) No litigation is pending against any plan or plan fiduciary
seeking the payment of benefits or alleging a breach of trust or fiduciary duty
by any plan fiduciary.
(d) Company is not a party to any multiemployer pension plan as
defined in Section 414(f) of the Code and Section 3(37) of ERISA.
(e) Company currently sponsors a defined benefit pension plan
covering certain of its employees (the "Plan"). The Plan is currently in
process of termination, and actuarial studies project an underfunding of
approximately Two Hundred Fifty Thousand Dollars ($250,000.00). Without regard
to his indemnity obligations under Section 12.16 of this Agreement, and
independent from and without regard to any limitation, monetary or otherwise, or
other condition on Stockholder's indemnification obligations thereunder,
Stockholder James D. Butterfield, by signing this
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Agreement, hereby covenants and agrees (i) that the Plan shall be terminated and
full provision made for adequate funding of all benefits thereunder within two
(2) years after the Effective Time; and (ii) that he shall absolutely and
unconditionally indemnify and save harmless Champion, Company and Surviving
Company from and against any and all losses, liabilities, damages, costs,
claims, penalties, judgments and expenses (including attorneys' fees) whatsoever
arising out of or resulting from any underfunding of the Plan or any other
aspect of the funding, operation or termination of the Plan, except that the
amount of his aggregate liability for indemnification under this section shall
not exceed the lesser of (i) Two Hundred Fifty Thousand Dollars ($250,000.00),
or (ii) the market value of Champion Common Stock held as Escrow Property under
the Escrow Agreement attached hereto as Exhibit D. Without in any fashion
diminishing or modifying the foregoing indemnification obligations, but in
furtherance of same, Stockholder James D. Butterfield shall execute and deliver
the Escrow Agreement attached hereto as Exhibit D. Champion covenants and
agrees with stockholder James D. Butterfield that he shall have sole and
absolute control and discretion to select the date for termination of the Plan
within the aforementioned period of two (2) years after the Effective Time.
4.11 COMMITMENTS AND CONTRACTS. Except as previously disclosed in writing
to Champion, the Company is not a party or subject to any of the following
(whether written or oral, express or implied):
(i) any employment contract or understanding (including any
understandings or obligations with respect to severance or termination pay
liabilities or fringe benefits) with any present or former officer, director,
employee or consultant (other than those which are terminable at will by
Company);
(ii) any plan, contract or understanding providing for bonuses,
pensions, options, deferred compensation, retirement payments, profit sharing or
similar understandings with respect to any present or former officer, director
or consultant;
(iii) any contract or agreement with any labor union;
(iv) any contract not made in the ordinary course of business
containing covenants limiting the freedom of Company to compete in any line of
business or with any person or involving any restriction of the area in which,
or method by which, Company will carry on its business (other than as may be
required by law or applicable authorities);
(v) any lease or other contract with annual rental payments or
payments aggregating $5,000 or more.
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4.12 LABOR. No work stoppage involving Company is pending or, to the best
of Company's knowledge, threatened. Company is not involved in, or threatened
with or affected by, any labor dispute, arbitration, lawsuit or administrative
proceeding which could materially and adversely affect the business of Company.
Employees of Company are not represented by any labor union nor are any
collective bargaining agreements otherwise in effect with respect to such
employees.
4.13 MATERIAL CONTRACTS FURNISHED. Company has made available to Champion
true and complete copies of all material contracts, leases and other agreements
to which Company is a party or by which it is bound and of all employment,
pension, retirement, stock option, profit sharing, deferred compensation,
consultant, bonus, group insurance, or similar plans with respect to any of the
directors, officers, or other employees of Company.
4.14 MATERIAL CONTRACTS. Except as previously disclosed to Champion in
writing and except as is otherwise provided in this Agreement, neither the
Company or any of its respective assets, businesses or operations is, as of the
date hereof, a party to, or is bound or affected by, or receives benefits under,
(i) any material agreement, arrangement or commitment not cancellable by it
without penalty, other than agreements, arrangements or commitments entered into
in the ordinary course of its business and negotiated on an arms-length basis,
or (ii) any material agreement, arrangement or commitment relating to the
employment, election or retention in office of any director or officer other
than agreements, arrangements or commitments entered into in the ordinary course
of its business and negotiated on an arms-length basis.
4.15 MATERIAL CONTRACT DEFAULTS. Company is not in default in any material
respect under any contract, agreement, commitment, arrangement, lease, insurance
policy or other instrument to which it is a party or by which its respective
assets, business or operations may be bound or affected or under which it or its
respective assets, business or operations receive benefits, and there has not
occurred any event which with the lapse of time or the giving of notice or both
would constitute such a default, except as previously disclosed to Champion in
writing.
4.16 LEGAL PROCEEDINGS. Except as previously disclosed to Champion by
Company in writing, there are no actions, suits or proceedings instituted or
pending, or to the best knowledge of Company threatened (or unasserted but
considered probable of assertion and which if asserted would have at least a
reasonable probability of an unfavorable outcome), including eminent domain
proceedings, against or relating to Company, or against any property, asset,
interest or right of Company, that could have a
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material and adverse effect on the condition (financial or other, present or
prospective), business, properties, assets, operations, liabilities or prospects
of Company, or that threaten or would impede the consummation of the
transactions contemplated by this Agreement. The Company is not a party to any
agreement or instrument or subject to any charter or other corporate restriction
or any judgment, order, writ, injunction, stay, decree, rule, regulation, code
or ordinance that threatens or might impede the consummation of the transactions
contemplated by this Agreement.
4.17 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since March 31, 1995, the
Company has not: (i) incurred any material liability, except in the ordinary
course of its business, consistent with generally acceptable practice and except
as permitted pursuant to this Agreement; (ii) suffered any material adverse
change in its business, operations, assets or condition (financial or other); or
(iii) failed to operate its business consistent with generally acceptable
practice.
4.18 ACCOUNTS RECEIVABLE. All notes and accounts receivable of the Company
shown on the Company Financial Statements or thereafter acquired have been
collected or are current and collectible subject to returns and allowances in
the ordinary course of business (in the case of each note in accordance with its
terms, and in the case of each account within 30 days after billing, except for
those accounts previously disclosed in writing to Champion for which customary
payment terms are 60 or 90 days, in which case within 60 or 90 days after
billing) at the aggregate recorded amounts thereof on the books of the Company
and are subject to no counterclaims or set-offs. On March 31, 1996, the
aggregate amount of all such receivables is $________ of which $________ has not
been paid on the date due.
4.19 INVENTORIES. All inventories of the Company, whether or not reflected
in the Company Balance Sheet, are of a quality and quantity usable and salable
in the ordinary course of business, except for obsolete items and items of
below-standard quality, all of which, in the aggregate, are immaterial in
amount. Items included in such inventories are carried on the books of the
Company, and are valued on the Company Balance Sheet, at the lower of cost or
market and, in any event, at not greater than their net realizable value, on an
item by item basis, after appropriate deduction for costs of completion,
marketing costs, transportation expense, and allocation of overhead.
4.20 PROPRIETARY RIGHTS. The Company owns or possesses adequate licenses
or other rights to use all patents, trademarks, trade names, copyrights,
inventions, formulae, methods and processes (all such items being hereinafter
referred to as "Intangible Property") currently used by it in the conduct of its
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business, without any known conflict with the rights of others. No royalties,
honoraria or fees are payable by the Company to any person by reason of the
ownership or use of the Intangible Property. All items of Intangible Property
are valid and in good standing and are adequate and sufficient to permit the
Company to conduct its business as now operated, and no other rights of the
kinds enumerated are due or required by the Company in its operations. There
are no licenses, sublicenses or agreements relating to their use now in effect,
and none of the aforesaid are being infringed by others in any material way. No
claim is pending or threatened or has been made within the past five years, to
the effect that operation by the Company of its business or the manufacture or
sale of any of its products, or any formula, method, process, part or material
it employs, infringes or conflicts in any way upon any rights of the type
enumerated above owned or claimed by others.
4.21 ENVIRONMENTAL MATTERS.
(a) The operations of the business of the Company and the buildings
in which it is conducted conform with all applicable Federal, state and local
laws, ordinances and regulations (including those relating to zoning and
environmental protection), and all buildings or operations of the Company and
the business that are subject to the Occupational Safety and Health Act of 1970,
as amended, comply with employee working conditions as prescribed by such Act.
(b) The Company has no underground storage tanks, either empty or
containing any liquid, including but without limitation solvents, fuel or waste
oil, on any premises used in its business.
(c) The Company has obtained all permits, licenses and other
authorizations and filed all notices which are required to be obtained or filed
by Company for the operation of its business under Federal, state and local laws
relating to pollution, protection of the environment or waste disposal
("Environmental Laws"). The Company is in compliance in all respects (i) with
all terms and conditions of all required permits, licenses and authorizations;
and (ii) all other applicable limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules and timetables contained in
the Environmental Laws or contained in any law, regulation, code, plan, order,
decree, judgment, notice or demand letter issued, entered, promulgated or
approved thereunder. There are no past or present events, conditions,
circumstances, activities, practices, incidents, actions or plans which may
interfere with or prevent continued compliance in all respects, or which may
give rise to any common law or statutory liability, or otherwise form the basis
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of any claim, action, suit, proceeding, hearing or investigation, based on or
related to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport, or handling, or the emission, discharge, release or
threatened release into the environment, of any pollutant, contaminant, waste or
hazardous or toxic material with respect to the Corporation or its businesses,
properties or plants.
(d) There are no actions, suits or proceedings, or demands, claims,
notices or investigations (including, without limitation, notices, demand
letters or requests for information from any environmental agency) instituted or
pending, or threatened relating to the liability of the Company or any of its
operations or buildings under any Environmental Law.
4.22 NO BROKER. The Company has not incurred any liability for finder's,
agent's or brokerage fees, commissions or compensation in connection with this
Agreement or the transactions contemplated hereby.
4.23 BEST EFFORTS. On or prior to the Closing Date (hereinafter defined),
Company will, to the extent permitted by applicable laws, rules and regulations,
take such actions and execute and deliver all such agreements, documents,
certificates or amendments to this Agreement as may be necessary or desirable to
effectuate the provisions and intent of this Agreement.
4.24 CONDUCT OF BUSINESS - NEGATIVE COVENANTS OF COMPANY. Except as
otherwise contemplated hereby, between the date hereof and the Effective Time,
or the time when this Agreement terminates as provided herein, the Company will
not, without the prior written approval of the President of Champion:
(a) Make any change in its authorized capital stock.
(b) Issue any shares of its capital stock, securities convertible
into its capital stock, or any long term debt securities.
(c) Issue or grant any options, warrants, or other rights to purchase
shares of its common stock.
(d) Declare or pay any dividends or other distributions on any shares
of common stock.
(e) Purchase or otherwise acquire or agree to acquire for a
consideration any share of Company Stock (other than in a fiduciary capacity).
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(f) Enter into or amend any employment, pension, retirement, stock
option, profit sharing, deferred compensation, consultant, bonus, group
insurance, or similar plan in respect of any of its directors, officers, or
other employees, or increase the current level of contributions to any such plan
now in effect.
(g) Take any action materially and adversely affecting this Agreement
or the transactions contemplated hereby or the financial condition (present or
prospective), businesses, properties, or operations of Company.
(h) Acquire, consolidate or merge with any other company,
corporation, or association, or acquire, other than in the ordinary course of
business, any assets of any other company, corporation, or association.
(i) Mortgage, pledge, or subject to a lien or any other encumbrance,
any of its assets, dispose of any of its assets, incur or cancel any debts or
claims, or increase the current level of compensation or benefits payable to its
officers, employees or directors except in the ordinary course of business as
heretofore conducted or take any other action not in the ordinary course of
their business as heretofore conducted or incur any material obligation or enter
into any material contract not in the ordinary course of business.
(j) Amend its Articles of Incorporation, By-laws or Charter.
(k) Take any action to solicit, initiate, encourage, or authorize any
person, including directors, officers and other employees, to solicit from any
third party any inquiries or proposals relating to the disposition of the
business or assets of Company, or the acquisition of their Company Stock, or the
merger of Company with any person other than Champion, and Company shall
promptly notify Champion orally of all the relevant details relating to all
inquiries and proposals which it may receive relating to any of such matters.
Nothing herein shall be construed to limit or affect the fiduciary obligation of
Company's officers and directors to Company shareholders.
4.25 CONDUCT OF BUSINESS - AFFIRMATIVE COVENANTS OF COMPANY. Company
covenants and agrees that:
(a) It will promptly advise Champion in writing of the name and
address of and number of shares of Company Stock held by each shareholder who
elects to exercise his, her or its rights to appraisal in connection with the
Merger pursuant to the Indiana Corporation Act.
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(b) Subsequent to the date of this Agreement and prior to the
Effective Time it will operate its business only in the normal course and
manner.
(c) From and after the execution of this Agreement, Company will
promptly advise Champion of any material adverse change in the financial
condition, assets, business operations or key personnel of Company and of any
material breach of any representation or warranty made by Company in this
Agreement.
(d) Immediately upon the execution of this Agreement, it will direct
its accountants to give Champion access to all information, documents and
working papers pertaining to Company.
(e) Subsequent to the date of this Agreement and prior to the
Effective Time, Company shall maintain in full force and effect adequate fire,
casualty, public liability, employee fidelity and other insurance coverage in
effect on the date of this Agreement in order to protect Company against losses
for which insurance protection can reasonably be obtained.
(f) Within ten days from the execution of this Agreement, Company
shall furnish to Champion a list, accurate as of the close of business on a date
not more than ten (10) days prior to the date on which such list is furnished,
containing the names and addresses of all holders of Company Stock as the same
appear on the stock registration books of Company and the number of shares held
by each. At the Effective Time, Company shall furnish to Champion a list, true,
correct and complete as of the close of business on the preceding day,
containing the names and addresses of all holders of Company Stock as the same
appear on Company's stock registration books and the number of shares held by
each.
(g) It will use its best efforts in good faith to take or cause to be
taken all action required under this Agreement on its part to be taken as
promptly as practicable so as to permit the consummation of the Merger and the
transactions contemplated hereby at the earliest possible date and cooperate
fully with Champion to that end.
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SECTION 5. INDEMNIFICATION AND CONFIDENTIALITY
5.1 ACCESS AND INFORMATION. Company and Champion shall each afford to the
other, and to the other's accountants, counsel and other representatives, full
access during normal business hours throughout the period prior to the Closing
Date to all of its properties, books, contracts, commitments and records
(including but not limited to tax returns), and, during such period, each shall
furnish promptly to the other (i) a copy of each report, schedule and other
document filed or received by it pursuant to the requirements of federal or
state securities and banking laws and (ii) all other information concerning its
business, properties and personnel as such other party may reasonably request,
provided that no investigation pursuant to this Section 5.1 shall affect any
representations or warranties or the conditions to the obligations of the
parties to consummate the Merger.
5.2 FURNISHING INFORMATION AND INDEMNIFICATION. Champion and the Company
have furnished or will furnish as soon as practicable after the date of this
Agreement, to each other all the information (including financial statements,
information and schedules) concerning themselves required for inclusion in:
(a) any registration statement or other statement to be filed with
the Securities and Exchange Commission on behalf of Champion under the
Securities Act of 1933 in connection with the Merger and any proxy statement to
solicit the approval of Company shareholders to the Merger, and any documents to
be filed with the Securities and Exchange Commission in connection therewith;
(b) any filings to be made by Champion with state securities
authorities in connection with the transactions contemplated hereunder; and
(c) any other request, application, statement, report or material to
be made or filed by any party to or with any regulatory authority or any
governmental agency, department or instrumentality in connection with the
transactions contemplated hereunder.
Champion represents and warrants to Company, and Company represents and
warrants to Champion, that all information so furnished for such requests,
statements, applications, reports and materials shall be true and correct in all
material respects without omission of any material fact required to be stated to
make the information therein not false or misleading. Champion will indemnify
and hold harmless Company, and Company will indemnify and hold harmless Champion
and each of their respective directors and officers, and each person, if any,
who controls such entities within the meaning of the Securities Act of 1933,
from
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and against any and all losses, damages, expenses or liabilities to which such
entity, or any such director, officer or controlling person may become subject
under applicable laws (including the Securities Act of 1933 and the Securities
Exchange Act of 1934) and rules and regulations thereunder and will reimburse
the other, and any such director, officer or controlling person, for any legal
or other expenses reasonably incurred in connection with investigating or
defending any actions, whether or not resulting in liability, insofar as such
losses, damages, expenses, liabilities or actions arise out of or are based upon
any untrue statement or alleged untrue statement of a material fact contained in
any such request, statement, application, report or material or arise out of or
are based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary in order to make the statements
therein not misleading, but only insofar as any such statement or omission was
made in reliance upon and in conformity with information furnished in writing in
connection therewith by such indemnifying party for use therein.
5.3 CONFIDENTIALITY. It is hereby agreed that, except (i) as otherwise
required in the performance by the parties of their respective obligations
hereunder or under the Merger and (ii) as otherwise required by law, any
non-public information received from the other party during the course of the
investigation contemplated pursuant hereto shall remain and be kept as
confidential information by it and all copies thereof will be returned promptly
at the request of the party furnishing such information in the event of the
termination of this Agreement and the Merger. Each of the parties may disclose
such information to its respective employees, affiliates, counsel, accountants,
representatives, professional advisors and consultants, and shall require each
of them to agree to keep all such information confidential.
5.4 UPDATES TO INFORMATION. At the reasonable request of any party
hereto, any other party will update by amendment or supplement any disclosure
made in writing by such party to the other party and each party hereby
represents and warrants that such written disclosures, as so amended or
supplemented, shall be true, correct and complete as of the date or dates
thereof.
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SECTION 6. CONDITIONS PRECEDENT
The consummation of this Agreement and the Merger is conditioned upon the
following:
(a) SHAREHOLDER APPROVAL. The shareholders of Company and Interim
Company shall have ratified, confirmed and approved this Agreement and the terms
and conditions herein contained by the affirmative vote of shareholders of each
such corporation, owning at least a majority of its capital stock outstanding,
and final approval of this Agreement shall have taken place as provided in
Section 10 hereof, and all provisions of Section 10 shall have been fully
complied with.
(b) AFFILIATES. Company agrees to deliver to Champion a letter
identifying all persons whom it believes to be, at the time the Merger is
submitted to a vote of Company stockholders, "affiliates" of Company, for
purposes of Rule 145 or Rule 144 (as applicable) under the Securities Act of
1933, and shall use its best efforts to cause each person who is identified as
an "affiliate" in such letter to deliver to Champion prior to the Closing Date
an Investment Letter containing a written agreement providing that such person
will agree not to sell, pledge, transfer or otherwise dispose of the shares of
Champion Common Stock or Notes to be received by such person in the Merger
except in compliance with the applicable provisions of the Securities Act of
1933 and the rules and regulations thereunder.
(c) INVESTMENT LETTERS. Champion shall have received Investment
Letters in the form set forth in Exhibit C executed by all holders of Company
Stock.
(d) NO DIVESTITURE OR ADVERSE CONDITION. The consummation of the
Merger shall not have required the divestiture or cessation of any significant
part of the present operations conducted by Champion and shall not have imposed
any other condition, which divestiture, cessation or condition Champion deems to
be materially disadvantageous or burdensome.
(e) ACCURACY OF REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF
OBLIGATIONS AND COVENANTS - CHAMPION. Unless waived by Company, the
representations and warranties of Champion contained in this Agreement shall be
correct on and as of the Closing Date and thereafter until the Effective Time in
all material respects with the same effect as though made on and as of such
Effective Time except for changes which are not in the aggregate material and
adverse to the financial condition, businesses, properties, or operations of
Champion and Champion shall have performed in all material respects all of its
obligations and agreements hereunder theretofore to be performed
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by it and Company shall have received on the Closing Date an appropriate
certificate (in affidavit form) to the foregoing effect dated as of the Closing
Date and executed on behalf of Champion by one or more appropriate executive
officers of Champion.
(f) ACCURACY OF REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF
OBLIGATIONS AND COVENANTS - COMPANY. Unless waived by Champion, the
representations and warranties of Company contained in this Agreement shall be
correct on and as of the Closing Date and thereafter until the Effective Time
with the same effect as though made on and as of such Effective Time except for
changes which are not in the aggregate material and adverse to the financial
condition, businesses, properties or operations of Company, and Company shall
have performed in all material respects all of its obligations and agreements
hereunder theretofore to be performed by it and Champion shall have received on
the Closing Date an appropriate certificate (in affidavit form) to the foregoing
effect dated as of the Closing Date and executed on behalf of Company by one or
more appropriate executive officers of Company.
(g) OPINION OF COUNSEL FOR COMPANY. Champion shall have received an
opinion of Bamberger, Foreman, Oswald & Hahn, counsel for Company, dated the
Closing Date, with respect to such matters as Champion may reasonably request
and to the effect that:
(1) Company is a corporation duly organized and validly existing
under the laws of the State of Indiana and is duly authorized to own its
properties and to conduct its business as then being conducted.
(2) The authorized capitalization of Company is as set forth in such
opinion and the shares of Company Stock issued and outstanding or held as
treasury shares (as of a date specified in such opinion not more than 5 days
prior to the date of such opinion) are as stated in such opinion. Such issued
and outstanding shares of stock are validly issued, fully paid and non-
assessable, and were not issued in violation of any preemptive rights of the
shareholders of Company. As of such date, there are, to the best of such
counsel's knowledge, no options, warrants, rights, commitments or convertible
securities outstanding or authorized on behalf of Company, calling for the
purchase from it of shares of unissued capital stock or capital stock held as
treasury shares.
(3) Company had the corporate power and authority to execute, deliver
and perform its obligations under this Agreement. This Agreement has been duly
authorized, executed and delivered by
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Company and constitutes the legal, valid and binding obligation of Company,
enforceable in accordance with its terms.
(4) All necessary corporate proceedings of the board of directors and
the shareholders of Company, to the extent required by law, its Articles of
Incorporation and Bylaws or otherwise, to authorize the execution and delivery
of this Agreement by Company and the consummation of the Merger by Company
pursuant to this Agreement have been duly and validly taken. The number of
shares of stock of Company voted for and against the Merger are as stated in
such counsel's opinion; and the number of shares of such stock as to which
shareholders have perfected their rights to dissent and appraisal under the
Indiana Corporation Act, are as stated in such counsel's opinion.
(5) The consummation of the Merger will not violate or result in a
breach of, or constitute a default under, the Articles of Incorporation or
By-Laws of Company or constitute a breach or termination of, or default under,
any agreement or instrument of which such counsel has knowledge and which would
have a material adverse affect on the business of Company, and to which Company
is a party or by which it or any of its property is bound.
(6) Such counsel does not know of any breach of any warranty
contained in this Agreement on the part of Company or any failure on the part of
Company to perform any of the conditions precedent to the consummation of the
Merger imposed upon it herein.
(h) OPINION OF COUNSEL FOR CHAMPION. Company shall have received the
opinion of Huddleston, Bolen, Beatty, Porter & Copen, counsel for Champion,
dated the Closing Date, with respect to such matters as Company may reasonably
request and to the effect that:
(1) Champion is a corporation duly organized, validly existing and in
good standing under the laws of the State of West Virginia, and is duly
authorized to own its properties and to conduct its business as then being
conducted.
(2) The authorized capitalization of Champion is as set forth in such
opinion and the shares of Champion Common Stock issued and outstanding (as of a
date specified in such opinion not more than 5 days prior to the date of such
opinion) are as stated in such opinion. Such issued and outstanding shares of
stock are validly issued, fully paid and non-assessable, and were not issued in
violation of any preemptive rights of the shareholders of Champion. As of such
date, there are, to the best of such counsel's knowledge, no options, warrants,
rights, commitments or convertible securities outstanding or authorized on
behalf of
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Champion, calling for the purchase from any of them of shares of unissued
capital stock or capital stock held as treasury shares, except as otherwise
permitted by the Agreement.
(3) All necessary corporate proceedings of the Boards of Directors
and the shareholders of Champion and Interim Company to the extent required by
law, their Articles of Incorporation or By-Laws or otherwise, to authorize the
execution and delivery of this Agreement or the Adoption Agreement and the
consummation of the Merger pursuant to this Agreement have been duly and validly
taken. Champion and Interim Company have the corporate power and authority to
execute, deliver and perform this Agreement or the Adoption Agreement. This
Agreement has been duly authorized, executed and delivered by Champion and
Interim Company (by virtue of the Adoption Agreement) and constitutes the legal,
valid and binding obligation of Champion and Interim Company enforceable in
accordance with its terms.
(4) The consummation of the Merger will not violate or result in a
breach of, or constitute a default under the Articles of Incorporation or
By-Laws of Champion or constitute a breach or termination of, or default under,
any agreement or instrument of which such counsel has knowledge and to which
Champion is a party or by which it or its property is bound.
(5) To the best of such counsel's knowledge, all approvals of public
authorities, federal, state or local, the granting of which is necessary for the
consummation of the Merger by Champion have been obtained.
(6) The shares of Champion Common Stock into which shares of Company
Stock are to be converted upon the Effective Time will upon the Effective Time
be duly authorized, and such shares, when transferred to holders of Company
Stock pursuant to the terms of the Merger, will be validly issued, fully paid
and nonassessable shares of Champion Common Stock.
(7) Such counsel does not know of any breach of any warranty
contained in this Agreement on the part of Champion or Interim Company or any
failure on the part of Champion or Interim Company to perform any of the
conditions precedent to the consummation of the Merger imposed upon them herein.
(i) LESS THAN 10% DISSENTERS. Unless waived by Champion, the holders
of no more than 10% of the outstanding shares of Company Stock shall have
elected to exercise their statutory rights to appraisal in connection with the
transactions contemplated hereby, pursuant to the Indiana Corporation Act.
28
<PAGE>
(j) COMFORT LETTER - COMPANY. Ernst & Young or other Certified
Public Accountants satisfactory to Company shall have audited the financial
statements of Champion for the year ended October 31, 1995 and, based on such
audit, Company shall have reasonably determined that such statements are
satisfactory to Company.
(k) COMFORT LETTER - CHAMPION. Ernst & Young or other certified
public accountants satisfactory to Champion shall have audited the financial
statements of Company as of and for the year ended March 30, 1996 and, based on
such audit, Champion shall have reasonably determined that such statements are
satisfactory to Champion.
(l) OPINION LETTER. Company shall have received an opinion of tax
counsel acceptable to it and Champion shall have received an opinion of tax
counsel acceptable to it, to the effect that:
(1) The Merger shall constitute and qualify as a reorganization
within the meaning of Sections 368(a)(1)(A) and 368(a)(2)(E) of the Internal
Revenue Code and Company, Surviving Company and Champion will each qualify as "a
party to a reorganization" as that term is defined in the Internal Revenue Code;
(2) No gain or loss will be recognized by Champion, Company, or
Surviving Company by reason of the Merger;
(3) No gain or loss will be recognized by the shareholders of Company
who exchange Company Stock for Champion Common Stock pursuant to the Merger;
(4) Provided that the Company Stock is held as a capital asset at the
Effective Time, the holding period of Champion Common Stock received by Company
shareholders in exchange for Company Stock will include the holding period of
the shares of Company Stock so exchanged;
(5) The basis of the Champion Common Stock received by shareholders
of Company will be the same as the basis of the Company Stock surrendered in
exchange therefor.
(m) The Escrow Agreement in all material respects identical to the
form attached hereto as Exhibit D shall have been executed and delivered by
Stockholder James D. Butterfield to Champion.
(n) ABSENCE OF MATERIAL ADVERSE CHANGES - CHAMPION. Unless waived by
Company at or before the Effective Time, there
29
<PAGE>
shall have been no material adverse change in the financial condition, business
or assets of Champion since October 31, 1995, and there shall be no suit, action
or proceeding pending or threatened against Champion which, if successful, would
have a material adverse effect on Champion or the Surviving Company after the
consummation of the Merger.
(o) ABSENCE OF MATERIAL ADVERSE CHANGES - COMPANY. Unless waived by
Champion at or before the Effective Time, there shall have been no material
adverse change in the financial condition, business or assets of Company since
December 31, 1995, and there shall be no suit, action or proceeding pending or
threatened against Company which if successful would have a material adverse
effect on Company or the Surviving Company after the consummation of the Merger.
30
<PAGE>
SECTION 7. CLOSING DATE AND EFFECTIVE TIME
7.1 CLOSING DATE. The closing shall be effected as soon as practicable
after all of the conditions contained herein shall have been satisfied. The
closing shall be held at the offices of Company in Evansville, Indiana, and the
closing date ("Closing Date") shall be a mutually agreeable date, but, in no
event, later than forty-five (45) days following the date when all such
conditions are satisfied.
7.2 EFFECTIVE TIME. Subject to the terms and upon satisfaction on or
before the Closing Date of all conditions specified in this Agreement, the
Merger shall be effective at the time specified in the certificate of merger to
be issued by the Secretary of State of Indiana (such time herein called
"Effective Time").
31
<PAGE>
SECTION 8. TERMINATION OF AGREEMENT
8.1 GROUNDS FOR TERMINATION. This Agreement and the transactions
contemplated hereby may be terminated at any time prior to the Closing Date,
either before or after the meeting of the shareholders of Company:
(a) By mutual consent in writing of Company and Champion; or
(b) By Company by giving written notice thereof to Champion if (i) a
material adverse change shall have occurred in the financial condition, results
of operations or business of Champion since October 31, 1995, or (ii) Champion
has in any material respect breached any covenant, undertaking, representation
or warranty contained in this Agreement and such breach has not been cured
within thirty (30) days after the giving of such notice; or
(c) By Champion by giving written notice thereof to Company if (i) a
material adverse change shall have occurred in the financial condition, results
of operations or business of Company since March 31, 1995 or (ii) either Company
or the Stockholder has in any material respect breached any covenant,
undertaking, representation or warranty contained in this Agreement and such
breach has not been cured within thirty (30) days after the giving of such
notice; or
(d) By either Company or Champion upon written notice to the other if
any regulatory agency whose approval of the transactions contemplated by this
Agreement is required denies such application for approval by final order or
ruling (which order or ruling shall not be considered final until expiration or
waiver of all periods for review or appeal); or
(e) By either Company or Champion upon written notice to the other if
any condition precedent to either party's performance hereunder is not satisfied
or fulfilled; or
(f) By either Company or Champion if the Merger shall violate any
non-appealable final order, decree or judgment of any court or governmental body
having competent jurisdiction; or
(g) By either Company or Champion upon the bankruptcy, insolvency or
assignment for the benefit of creditors of Company, the Stockholder or Champion;
or
(h) By either Company or Champion, if the shareholders of Company
shall fail to approve the Merger by the vote required
32
<PAGE>
under the Indiana Business Corporation Act and the Articles of Incorporation and
Bylaws of Company.
8.2 EFFECT OF TERMINATION. In the event of termination of this Agreement
for any reason other than a breach thereof, neither party hereto shall have any
liability to the other of any nature whatsoever, including any liability for
loss, damages, or expenses suffered or claimed to be suffered by reason thereof,
except as provided in Section 8.3.
8.3 TERMINATION FEE; RESTRICTIVE COVENANT.
(a) In the event Champion terminates this Agreement for any reason
other than (i) mutual consent of Company and Champion as set forth in Section
8.1(a); (ii) a material adverse change in the financial condition, results of
operations or business of Company or any material breach by Company or
Stockholder of any covenant, undertaking, representation or warranty as set
forth in Section 8.1(c); (iii) failure by Company or Stockholder to satisfy or
fulfill any condition precedent to any party's performance as set forth in
Section 8.1(e); (iv) any of the occurrences set forth in Section 8.1(f), (g) or
(h), then Champion shall promptly pay to Company a termination fee of One
Hundred Thousand Dollars ($100,000.00) cash as liquidated damages, and Champion
shall be relieved and released of all further liability under or arising from
this Agreement.
(b) In the event Champion terminates this Agreement for any reason
other than as set forth in Section 8.3(a) above, it shall not directly or
indirectly enter into any business which is in competition with the business
currently being conducted by Company within one hundred (100) miles of the City
of Evansville, Indiana for a period of three (3) years following such
termination.
8.4. RETURN OF INFORMATION. In the event of the termination of this
Agreement for any reason, each party shall deliver to the other party, and shall
require each of its officers, agents, employees and independent advisers
(including legal, financial and accounting advisers) to deliver to the other
party all documents, work papers, and other material obtained from such other
party relating to the transactions contemplated hereby, whether obtained before
or after the execution hereof, including information obtained pursuant to
Section 5 hereof. Each party agrees that notwithstanding any other provision
contained in this Agreement, the undertakings and covenants regarding
confidentiality contained in Section 5 shall survive termination of this
Agreement.
33
<PAGE>
SECTION 9. WAIVER AND AMENDMENT
Except with respect to required approvals of the applicable governmental
authorities and shareholders, Champion or Company by written instrument signed
by its President at any time (whether before or after approval of the Agreement
or the Merger by the shareholders of Company), may extend the time for the
performance of any of the obligations or other acts of the other and may waive,
with respect to the other: (i) any inaccuracies in the representations or
warranties contained in this Agreement or in any document delivered pursuant
hereto, (ii) compliance with any of the covenants, undertakings or agreements,
or satisfaction of any of the conditions to its obligations, contained in this
Agreement, and/or (iii) the performance (including performance to the
satisfaction of a party or its counsel) of any obligations set out herein. This
Agreement may be amended or supplemented at any time by mutual agreement of the
parties (except that they may not be amended in any material respect after
approval by the shareholders of the parties without further approval by such
shareholders). Any waiver, amendment or supplement hereof shall be in writing.
Any waiver by Champion or Company of a condition to its obligation to perform
this Agreement and the subsequent Closing hereunder shall be without prejudice
to the rights or remedies it may have arising out of any breach of any
representation, warranty, covenant or other agreement hereunder.
34
<PAGE>
SECTION 10. MEETING OF SHAREHOLDERS OF COMPANY
Company shall take all steps necessary to call and hold a meeting of its
shareholders in accordance with applicable law and the Articles of Incorporation
and By-laws of Company as soon as practicable for the purpose of submitting this
Agreement to its shareholders for their ratification, approval and confirmation.
35
<PAGE>
SECTION 11. RIGHTS OF DISSENTING SHAREHOLDERS
Any shareholder of Company who properly exercises his right to dissent and
perfects his appraisal rights under Indiana law shall be entitled, with respect
to any shares as to which he or she shall so dissent, to the fair value of such
shares as of the day prior to the date on which the shareholders of Company
voted to approve the Merger, excluding any appreciation or depreciation in
anticipation of the Merger. The procedures to be followed and the rights of
such dissenting shareholders shall be those set forth in the Indiana Business
Corporation Act, Sections IC 23-1-44, et seq.
36
<PAGE>
SECTION 12. MISCELLANEOUS
12.1 PUBLIC ANNOUNCEMENTS. Prior to the Closing Date, each party shall use
its best efforts to consult with the other party with respect to any prepared
public announcement, statement or release to the press, or statement to a
competitor, customer or other third party (except to its consultants or to the
regulatory authorities in connection with applications for governmental
approvals or filings) with respect to this Agreement or the Merger or the
transactions contemplated hereby or thereby, except as may be necessary, in the
opinion of counsel, to comply with any law, governmental order or regulation.
12.2 BROKERS AND FINDERS. Company and Champion represent each to the other
that this Agreement and the Merger contemplated hereby are the result of direct
negotiations between them and that neither Company nor Champion has incurred any
liability for any broker's, finder's or similar fees in connection with this
Agreement or the Merger.
12.3 DISCLOSED IN WRITING. As used in this Agreement, the phrase
"disclosed in writing" shall mean disclosed or delivered prior to or within 20
days after, the date of this Agreement by means of a writing describing in
reasonable detail the matters contained therein and delivered in accordance with
Section 12.8 hereof. For purposes of this Agreement, anything appearing,
contained, disclosed or described (i) in any Champion Financial Statement or
Company Financial Statement (including the notes thereto), (ii) in any periodic
report or other document filed with the Securities and Exchange Commission
(including, but not limited to, Forms 8-K, Forms 10-K, Forms 10-Q, Annual
Reports, and proxy statements) by either of Champion or Company, shall be deemed
to be previously disclosed in writing.
12.4 ENTIRE AGREEMENT. This Agreement embodies the entire agreement among
the parties and there have been no agreements, representations, or warranties
among the parties other than those set forth herein or those provided for
herein.
12.5 COUNTERPARTS. This Agreement has been executed in a number of
identical counterparts, and each such counterpart shall be deemed to be an
original instrument, but in making proof of this Agreement, it shall not be
necessary to produce or account for more than one such counterpart.
12.6 INVALID PROVISIONS. The invalidity or unenforceability of any
particular provision of this Agreement shall not affect the other provisions
hereof, and this Agreement shall be construed in all respects as if such invalid
or unenforceable provision were omitted.
37
<PAGE>
12.7 NOTICES. Any notices or other communication required or permitted
hereunder shall be sufficiently given if sent by registered or certified mail,
postage prepaid, addressed as follows:
TO COMPANY:
Smith & Butterfield Co., Inc.
2800 Lynch Road
Evansville, Indiana ________
with a copy to:
Robert M. Becker, Esquire
Bamberger, Foreman, Oswald & Hahn
708 Hulman Building
P. O. Box 657
Evansville, Indiana 47704-0657
TO CHAMPION:
Champion Industries, Inc.
2450 First Avenue
P. O. Box 2968
Huntington, West Virginia 25728-2968
Attention: Marshall T. Reynolds, President and
Chief Executive Officer
with a copy to:
Thomas J. Murray, Esquire
Huddleston, Bolen, Beatty, Porter & Copen
P. O. Box 2185
Huntington, West Virginia 25722
or such other addresses as shall be furnished in writing by either party to the
other party. Any such notice or communication shall be deemed to have been
given as of the date so mailed.
12.8 HEADINGS. The captions contained in this Agreement are inserted
solely for convenience of reference and shall not affect the meaning or
interpretation of this Agreement.
12.9 EXPENSES. Each of the parties hereto will pay its own fees and
expenses incurred in connection with the transactions contemplated by this
Agreement, except as otherwise specifically provided herein.
38
<PAGE>
12.10 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Indiana and the United States of
America.
12.11 NO ASSIGNMENT. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors and
assigns; provided, however, that this Agreement may not be assigned by either
party without the written consent of the other party.
12.12 EFFECTIVENESS OF AGREEMENT. This Agreement shall become
effective and binding as to Champion and Company when one or more counterparts
shall have been signed and delivered by Champion and Company, and shall become
effective and binding as to Interim Company when Interim Company has executed an
Adoption Agreement in substantially the form attached hereto as Exhibit "A".
12.13 FURTHER ACTS. Champion and Company each agree to execute and
deliver on or before the Closing Date such other documents, certificates,
agreements, or other writings and to take such other actions as may be necessary
or desirable in order to consummate or implement expeditiously the transactions
contemplated by this Agreement.
12.14 CERTAIN REPRESENTATIONS AND WARRANTIES NOT TO SURVIVE. The
representations, warranties and covenants contained in Sections 3, 4 (except for
the representations and warranties contained in Section 4.21, which shall not
survive), 5, 8.2, 8.3, 8.4, 12.9, 12.15 and 12.16 shall survive for a period of
two (2) years after the Effective Time and any investigation at any time made on
behalf of any party. All other representations, warranties and covenants
included or provided in this Agreement shall not survive the Effective Time.
12.15 INDIVIDUAL DIRECTORS. The several Directors of Company who are
signatories to this Agreement have joined into this Agreement to evidence their
assent hereto, and for the express purpose of binding themselves, and each of
them, to the fulfillment of each of the terms and conditions hereof by the
respective parties and to the diligent, expeditious and good faith pursuit, and
timely consummation, of the transactions herein contemplated. Each of the
Directors hereby agrees to cooperate fully with the parties, their assistants
and agents, in consummating the Merger, to vote appropriately upon all corporate
resolutions toward that end, and to take no action inconsistent with the
purposes of this Agreement or the consummation of the Merger. Nothing in this
Agreement shall be construed to limit or affect the fiduciary obligation of
Company's officers and directors to Company shareholders.
39
<PAGE>
12.16 STOCKHOLDER REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION. The
Stockholder of Company who is signatory to this Agreement has joined into this
Agreement for the express purpose of adopting and joining with the Company in
making the representations and warranties contained in Section 4 of this
Agreement, and hereby expressly does so. Without limiting any other right of
indemnification or any other cause of action, Stockholder shall jointly and
severally defend, indemnify and hold Champion, Surviving Company and Company
harmless from and against any and all losses, liabilities, damages, costs,
claims, judgments and expenses (including attorney's fees) whatsoever arising
out of or resulting from any material breach of warranty or misrepresentation by
Company contained herein and from any material misrepresentation, omission or
inaccuracy in any schedule, exhibit, certificate, instrument or paper delivered
or to be delivered by Company hereunder in connection with the transactions
herein contemplated. For purposes of this Section 12.16, "material" shall mean
any one or more events or occurrences involving claims or liability of more than
Five Thousand Dollars ($5,000.00), singly or in the aggregate. Stockholder's
aggregate liability with respect to all indemnity claims under this section
shall not exceed the sum of Fifty Thousand Dollars ($50,000.00). This limit
shall not apply to the indemnification obligations of Stockholder under Section
4.10, which are separate, independent and in addition to the obligations
provided in this Section 12.16. Stockholder shall have the right to control the
defense of any claim or proceeding by any third party as to which it shall have
acknowledged its obligation to indemnify the other party, and the Indemnified
Party hereunder shall not settle or compromise any such claim or proceeding
without the written consent of the Indemnifying Party, which consent shall not
unreasonably be withheld or delayed. The withholding by the Indemnifying Party
of consent to settle shall be deemed reasonable for so long as the Indemnifying
Party is diligently contesting such claim or proceeding in good faith. The
Indemnified Party may in any event participate in any such defense, with its own
counsel and at its own expense. The Stockholder of Company has joined into this
Agreement for the express purpose of binding himself to the fulfillment of the
terms and conditions of this Section 12.16.
IN WITNESS WHEREOF, Champion and Company have caused this Agreement to be
executed by their duly authorized officers and their corporate seals to be
hereunto affixed as of the date first above written, pursuant to resolutions
adopted by the boards of directors of Champion and Company, acting by a majority
thereof, and WITNESS also the signatures hereto of a majority of the board of
directors of Company, and the sole Stockholder of Company.
40
<PAGE>
CHAMPION INDUSTRIES, INC.
By
--------------------------------------
Joseph C. Worth, III, Vice President
and Chief Financial Officer
SMITH & BUTTERFIELD CO., INC.
By
--------------------------------------
, President and
-----------------------
Chief Executive Officer
ATTEST:
- - ----------------------------------
, Secretary
- - -------------------
The following Directors of Smith & Butterfield Co., Inc.
do hereby join in the foregoing Agreement to
evidence their consent and agreement thereto:
- - ----------------------------------
, Director
- - -------------------
- - ----------------------------------
, Director
- - -------------------
- - ----------------------------------
, Director
- - -------------------
- - ----------------------------------
, Director
- - -------------------
The following Stockholder of Smith & Butterfield Co., Inc. does hereby join in
the foregoing Agreement pursuant to Section 12.16 hereof.
- - ----------------------------------
James D. Butterfield
41
<PAGE>
EXHIBIT A
ADOPTION AGREEMENT
THIS ADOPTION AGREEMENT, made and entered into as of this _____ day of
_______________, 1996, by and among SB ACQUISITION COMPANY, INC. ("Interim
Company"), CHAMPION INDUSTRIES, INC. ("Champion"), and SMITH & BUTTERFIELD CO.,
INC. ("Company");
WHEREAS, Champion and Company have entered into an Agreement of Merger
dated as of the _____ day of _______________, 1996 ("Agreement"), to which this
Adoption Agreement is attached, and which Agreement is incorporated herein by
reference; and
WHEREAS, it is provided in Section 3.4 of the Agreement that Champion shall
cause Interim Company to be organized and shall cause Interim Company to execute
and enter into an Adoption Agreement in substantially the form of this Adoption
Agreement so as to cause Interim Company to be bound by the applicable terms and
provisions of the Agreement; and
WHEREAS, Interim Company has been organized;
NOW, THEREFORE, in consideration of the foregoing premises which are not
mere recitals but an integral part hereof and in consideration of the mutual
agreements hereinafter set forth, the parties hereto agree as follows:
1. Interim Company hereby joins in and agrees to be bound by the terms
and conditions of the Agreement applicable to it to the same extent as if
Interim Company were an original party thereto.
<PAGE>
2. Interim Company agrees that it shall use its best efforts in good
faith to take or cause to be taken as promptly as practicable all actions on its
part to be taken so as to permit the consummation of the Agreement and the
Merger (as defined in the Agreement) at the earliest possible date, and that it
shall cooperate fully with Champion and Company to that end.
3. Interim Company represents and warrants to and covenants with Champion
and Company that:
3.1 Interim Company is a corporation, duly organized, validly
existing and in good standing under the laws of the State of Indiana.
3.2 Interim Company has the corporate power to execute and deliver
this Adoption Agreement and to merge with Company pursuant to the Agreement and
has taken or will have taken at the Effective Time of the Merger all action
required by law, its Articles of Incorporation, its By-laws or otherwise, to
authorize such execution and delivery, the Merger and the consummation of the
transactions contemplated hereby; and this Adoption Agreement and the Agreement
are or at the Effective Time of the Merger will be valid and binding agreements
of Interim Company in accordance with their terms.
IN WITNESS WHEREOF, Champion, Company and Interim Company have caused this
Agreement to be executed by their duly authorized officers as of the date first
above written, pursuant to
2
<PAGE>
resolutions adopted by the boards of directors of Champion, Company and Interim
Company, acting by a majority thereof.
CHAMPION INDUSTRIES, INC.
By
--------------------------------
Marshall T. Reynolds, President
and Chief Executive Officer
ATTEST
- - -----------------------------
Its Secretary
SMITH & BUTTERFIELD CO., INC.
By
--------------------------------------
----------------------, President
ATTEST
- - -----------------------------
Its Secretary
SB ACQUISITION COMPANY, INC.
By
--------------------------------------
----------------------, President
ATTEST
- - -----------------------------
Its Secretary
3
<PAGE>
The undersigned, being all of the Directors of Interim
Company, do hereby join in the foregoing Agreement to
evidence their consent and agreement thereto:
----------------------------------------
----------------------------------------
----------------------------------------
----------------------------------------
----------------------------------------
4
<PAGE>
EXHIBIT B
PLAN OF MERGER
OF
SMITH & BUTTERFIELD CO., INC.
AND
SB ACQUISITION COMPANY, INC.
1. THE PARTIES. SB Acquisition Company, Inc., an Indiana corporation
("Interim Company") shall merge with and into Smith & Butterfield Co., Inc., an
Indiana corporation ("Company") (both corporations are sometimes collectively
referred to herein as the "Constituent Corporations") under the articles of
incorporation of Company. Company shall be (and is hereinafter called when
reference is made to it at and after the consummation of the Merger) the
Surviving Company and as such shall retain the name and title of "Smith &
Butterfield Co., Inc.". The Merger shall become effective at the time when a
certificate of merger shall be issued by the Secretary of State of Indiana (the
"Effective Time of the Merger").
2. ARTICLES OF INCORPORATION; BYLAWS. At the Effective Time of the
Merger, the Articles of Incorporation and Bylaws of the Company in effect at the
Effective Time of the Merger shall be the Articles of Incorporation and Bylaws
of the Surviving Company until altered, amended or repealed in accordance with
applicable law.
3. ASSETS AND RIGHTS. At the Effective Time of the Merger, the corporate
existence of Interim Company shall, as provided in the Indiana Business
Corporation Act, be merged with and into
<PAGE>
Company and continued in the Surviving Company. The Surviving Company shall
thereupon and thereafter possess all of the rights, privileges, immunities and
franchises, of a public as well as of a private nature, of the Constituent
Corporations; and all property, real, personal and mixed, and all debts due on
whatever account, including subscriptions to shares, if any, and all other
choses in action, and all and every other interest of or belonging to or due to
the Constituent Corporations, and each of them, shall be deemed to be
transferred to and vested in the Surviving Company without further act or deed;
and the title to any real estate, or any interest therein, vested in the
Constituent Corporations, and each of them, before the Merger, shall not revert
or in any way be impaired by reason of the Merger.
4. LIABILITIES AND OBLIGATIONS. At the Effective Time of the Merger,
Company as the Surviving Company shall henceforth be and remain responsible and
liable for all the liabilities and obligations of the Constituent Corporations;
and neither the rights of creditors nor any liens upon the property of either of
the Constituent Corporations shall be impaired by the Merger.
5. CONVERSION, EXCHANGE AND CANCELLATION OF SHARES
(a) CONVERSION RATES. At the Effective Time of the Merger each
outstanding share of Company Stock shall IPSO FACTO, without any action on the
part of the holder thereof, become and be converted into shares of Champion
Industries, Inc. ("Champion") Common Stock at the Exchange Rate which shall be
calculated, as provided hereinafter and in Section 2.2 of the Agreement of
Merger dated _______________, 1996 between Champion and Company (the
2
<PAGE>
"Agreement of Merger"). All shares of Champion Common Stock into which the
aforesaid Company Stock is so converted shall be fully paid and non-assessable.
Company's stockholders of record at the Effective Time, for the shares of
Company Stock then held by them, respectively, shall be allocated and entitled
to receive shares of Champion Common Stock, which total number of shares of
Champion Common Stock shall have an aggregate Market Value as of the Valuation
Date of One Million Two Hundred Thousand Dollars ($1,200,000.00). The Market
Value shall be determined by averaging the daily closing trade prices of
Champion Common Stock as reported on the Nasdaq National Market System ("NMS")
during the five (5) consecutive days on which shares of Champion Common Stock
are traded on the Nasdaq National Market System ("NMS") immediately prior to the
Valuation Date as reported in THE WALL STREET JOURNAL. The Valuation Date shall
be the Nasdaq NMS trading day immediately prior to the Closing Date.
For purposes of establishing the Exchange Rate (the number of shares
of Champion Common Stock into which each share of Company Stock shall be
converted at the Effective Time), the Market Value of one (1) share of Champion
Common Stock shall be divided into the aggregate Market Value to establish to
the nearest whole share the aggregate number of shares of Champion Common Stock
into which all of the then issued and outstanding shares of Company Stock shall
be converted at the Effective Time. Such number of shares of Champion Common
Stock shall then be divided by the number of shares of Company Stock that shall
be issued and outstanding immediately prior to the Effective Time
3
<PAGE>
with the quotient therefrom being the number of shares of Champion Common Stock
into which each share of Company Stock shall be converted at the effective
time. All shares of Company Stock held by Company as treasury stock immediately
prior to the Effective Time shall be cancelled and shall not be exchanged for
shares of Champion Common Stock.
(b) MANNER OF EXCHANGE. After the Effective Time of the Merger,
except for persons exercising their rights as dissenting shareholders of
Company, each shareholder of Company, upon surrender to Champion of certificates
representing Company Stock, accompanied by a Letter of Transmittal and
Investment Letter in the form attached as Exhibit C to the Agreement of Merger
shall be entitled to receive in exchange therefor a certificate or certificates
representing the number of full shares of Champion Common Stock for which shares
of Company Stock theretofore represented by the certificate or certificates so
surrendered shall have been exchanged as provided in this Section 5. After the
Effective Time of the Merger, each outstanding certificate which, prior to the
Effective Time of the Merger, represented Company Stock, will be deemed for all
corporate purposes of Champion to evidence ownership of the number of full
shares of Champion Common Stock into which the shares of Company Stock
represented thereby were converted. Until such outstanding certificates
formerly representing company Stock are surrendered, no dividend payable to
holders of record of Champion Common Stock for any period as of any date
subsequent to the Effective Time of the Merger shall be paid to the holder of
such outstanding
4
<PAGE>
certificates in respect thereof. After the Effective Time of the Merger there
shall be no further registry of transfers on the records of Company of shares of
Company Stock. Upon surrender of certificates of Company Stock for exchange for
Champion Common Stock, there shall be paid to the record holder of the
certificates of Champion Common Stock issued in exchange therefor (i) the amount
of dividends theretofore paid with respect to such full shares of Champion
Common Stock as of any date subsequent to the Effective Time of the Merger which
have not yet been paid to a public official pursuant to abandoned property laws
and (ii) at the appropriate payment date the amount of dividends with a record
date after the Effective Time of the Merger, but prior to surrender and a
payment date subsequent to surrender. No interest shall be payable with respect
to such dividends upon surrender of outstanding certificates.
(c) FRACTIONAL SHARES. Champion will not issue fractional shares or
fractional share certificates, but in lieu of the issuance of fractional shares
will pay cash, without interest, to any Company shareholder otherwise entitled
to receive such fractional shares. The amount of such cash payment will be
determined by multiplying the fractional share interest to which a Company
shareholder would otherwise be entitled by the Market Value of Champion Common
Stock as determined pursuant to Section 5(a). Payment for fractional shares
will be made with respect to each shareholder at the time such shareholder's
certificates of Company Stock are exchanged.
5
<PAGE>
(d) LOST CERTIFICATES. If a certificate evidencing outstanding
shares of Company Stock is lost, stolen or destroyed, the registered owner
thereof shall be entitled to receive the Champion certificate to which he would
otherwise be entitled on surrender of such certificate, by notifying Champion in
writing of such lost, stolen or destroyed certificate and giving Champion
evidence of loss and a bond sufficient to indemnify Champion against any claim
that may be made against it on account of the alleged lost, stolen and destroyed
certificate and the issuance of the certificate.
6. FURTHER ASSURANCES. If at any time the Surviving Company shall
consider or be advised that any further assignments, conveyances or assurances
are necessary or desirable to vest, perfect or confirm in the Surviving Company
the title to any property or rights of Interim Company or Company or any
subsidiary thereof, or otherwise to carry out the provisions hereof, the proper
officers and directors of Interim Company or Company, as the case may be, as of
the Effective Time of the Merger, and thereafter the officers of the Surviving
Company acting on behalf of Interim Company or Company, as the case may be,
shall execute and deliver any and all proper assignments, conveyances and
assurances, and do all things necessary or desirable to vest, perfect or confirm
title to such property or rights in the Surviving Company and otherwise carry
out the provisions hereof.
7. TERMINATION AND ABANDONMENT. This Plan of Merger may be terminated
and the Merger abandoned as provided in the Agreement of Merger.
6
<PAGE>
8. OTHER TERMS AND CONDITIONS. All other terms and conditions to the
Merger are as provided in the Agreement of Merger.
IN WITNESS WHEREOF, each of the parties hereto has caused this Plan of
Merger to be executed on its behalf and its corporate seal to be hereunto
affixed and attested by its corporate officers thereunto duly authorized, all as
of the day and year first above written.
SMITH & BUTTERFIELD CO., INC.,
a corporation
By
-------------------------------------
President
ATTEST:
- - -----------------------------
Its Secretary
SB ACQUISITION COMPANY, INC.,
a corporation
By
-------------------------------------
President
ATTEST:
- - -----------------------------
Its Secretary
7
<PAGE>
EXHIBIT C (Per Sections 2.3, 2.4 and 6(c))
INVESTMENT LETTER
Champion Industries, Inc.
Post Office Box 2968
Huntington, West Virginia 25728
RE: ISSUANCE OF SHARES OF COMMON STOCK OF CHAMPION INDUSTRIES, INC. PURSUANT TO
MERGER AGREEMENT DATED _______________, 1996 WITH RESPECT TO SMITH &
BUTTERFIELD CO., INC.
Gentlemen:
The undersigned hereby represents, warrants, covenants and agrees as
follows:
(a) Pursuant to that certain Merger Agreement between Smith & Butterfield
Co., Inc. ("Company") and Champion Industries, Inc. ("Champion"), dated as of
_______________, 1996 (hereinafter the "Agreement") (all capitalized terms not
defined herein having the meaning ascribed to them in the Agreement), to which
this Investment Letter is attached and incorporated as an exhibit, whereby the
Company will merge with a wholly owned subsidiary of Champion and the
outstanding shares of Company Stock shall be exchanged for shares of common
stock of Champion (hereinafter the "Restricted Shares") the undersigned, the
holder of ________ shares of the issued and outstanding Company Stock (the
"Shareholder") hereby represents, warrants, covenants and agrees as follows:
(1) The undersigned acknowledges that Champion has furnished to Company
and to the Shareholder the following:
(a) The information contained in its annual report on Securities and
Exchange Commission Form 10-K for fiscal year ended October 31,
1995, together with
<PAGE>
exhibits and its proxy statement for annual meeting of
shareholders held March 18, 1996, portions of which are
incorporated by reference into such Form 10-K; and
(b) Copies of all reports filed by Champion under Sections 13(a),
14(a), 14(c) and 15(d) of the Securities Exchange Act of 1934
since the filing of the annual report on Form 10-K described in
subparagraph (a) above.
(b) The undersigned is purchasing the Restricted Shares for investment, for
its or his own account only, and not for resale, fractionalization, subdivision,
or other disposition.
(c) Although I do not presently plan to resell the Restricted Shares, if
such sale should later be proposed, I agree that the Restricted Shares may be
resold only in a transaction or transactions in accordance with Rule 144 or Rule
145 (if applicable) or any other exemption rule promulgated by the Securities
and Exchange Commission under the Securities Act of 1933, as amended, as the
same may from time to time be in effect, and also only in accordance with any
regulations and interpretations under the securities laws of Indiana, or other
applicable state laws. The undersigned acknowledges that in the event of
conflicting state and federal restrictions on resale, the undersigned will be
governed by the most restrictive applicable rule or statute.
(d) The undersigned acknowledges being informed by Champion that the
Restricted Shares delivered pursuant to the Agreement are
2
<PAGE>
not registered under the Securities Act of 1933 and must be held indefinitely
unless they are subsequently registered under the Securities Act of 1933, or
under state securities acts, or unless an exemption from such registration is
available. The undersigned understands that any routine sale of Restricted
Shares made in reliance upon Rule 144 or Rule 145 promulgated under the
Securities Act of 1933 can be made only in limited amounts, in accordance with
the terms and conditions of those Rules and that in the case of securities to
which those Rules are not applicable, public resale may require compliance with
some other disclosure or registration exemption under such statutes.
(e) Champion may, if it so desires, permit the transfer of the Restricted
Shares out of the name of the undersigned, only when the request for transfer is
accompanied by an opinion of counsel for, or acceptable to, Champion (said
counsel to be retained by and the cost incurred therefor to be paid by the
undersigned) that neither the sale nor the proposed transfer results in
violation of the Indiana Securities Law or the securities laws of another
jurisdiction or of the Federal Securities Act of 1933.
(f) Each certificate or any other instrument representing the Restricted
Shares now or hereafter issued pursuant to the Agreement may be stamped or
otherwise imprinted with, or contain, a legend in substantially the following
form:
"The securities represented by this instrument have not been
registered under the Federal Securities Act of 1933, or any
state securities statute and may not be sold, assigned, or
transferred unless (i) registered for resale or (ii) the
issuer hereof has re-
3
<PAGE>
ceived the written opinion of counsel for said issuer that after
investigation of relevant facts, such counsel is of the opinion that
such sale, assignment, or transfer does not involve a transaction
requiring a registration of such securities under the Federal
Securities Act of 1933 or any applicable state securities laws. The
restrictions of this paragraph shall become null and void and this
paragraph shall have no effect on and after _______________, 1999.
(g) The undersigned is: (Please initial the alternative that applies to
your particular investment situation. By so initialing, you acknowledge that
Champion is entitled to rely upon your representations hereunder).
________ (i) An accredited investor as that term is defined in Rule 501 of
Regulation D promulgated under the Securities Act of 1933
(See "Investor Suitability Standards" attached hereto); or
_______ (ii) Not an accredited investor (as defined in (i) above) but
hereby represents and warrants that:
______ a. The undersigned has sufficient knowledge and experience
in financial and business matters to be capable of
evaluating the merits and risks of an investment in the
Restricted Shares; the undersigned is not utilizing any
other person as his/her purchaser representative in
connection with evaluating such merits and risks. The
undersigned offers as evidence of knowledge and
experience in these matters the information set forth
on this questionnaire; or
______ b. The undersigned may not have sufficient knowledge and
experience in financial and business matters to
evaluate the merits hereof, and the undersigned
represents that the undersigned has retained a
purchaser representative(s) (as defined in Rule 506 of
Regulation D promulgated under the Securities Act of
1933) in connection with the evaluation of the
4
<PAGE>
merits and risks of an investment in the Restricted
Shares as follows:
NAME:
---------------------------------------------------------
FIRM:
---------------------------------------------------------
PROFESSION:
---------------------------------------------------
ADDRESS:
------------------------------------------------------
If represented by a purchaser representative, please request a Purchaser
Representative Questionnaire from Champion and have it completed by your
representative and returned to Champion. The undersigned with the above-named
purchaser representative(s) has such knowledge and experience in financial and
business matters that they are capable of evaluating the merits and risks of an
investment in the Restricted Shares.
(h) The undersigned is presently a bona fide resident of the state
indicated below and the address and social security number set forth below are
his true and correct residence and correct social security number, and he has no
present intention of becoming a resident of any other state or jurisdiction.
(i) The undersigned acknowledges that he has been furnished with a package
of information and disclosures described in paragraph 1 hereof, and has been
given access to all underlying documents in connection with this transaction as
well as such other information as he or his representative, if retained, deems
necessary or appropriate as a prudent and knowledgeable investor in evaluating
the purchase of the Restricted Shares. The undersigned acknowledges that
Champion or its authorized representatives have made available to him or his
purchaser representative, if retained, the opportunity to obtain additional
information to verify the accuracy of the information contained in the above-
mentioned materials furnished the undersigned in
5
<PAGE>
connection with such nonpublic offering, and to evaluate the merits and risks of
this investment including, but not limited to, the economic consequences of the
investment. The undersigned acknowledges that he or his purchaser
representative, if retained, had the opportunity to ask questions of and receive
satisfactory answers from Champion or its authorized representatives concerning
the terms and conditions of the investment in the Restricted Shares and
information in the above-mentioned materials furnished the undersigned in
connection with such nonpublic offering. In reaching the conclusion that he
desires to acquire the Restricted Shares, the undersigned has carefully
evaluated his financial resources and investment position and goals, and the
risks associated with this investment and acknowledges that he is able to bear
the economic risks of the entire loss of this investment.
(j) The undersigned understands that he is purchasing the Restricted Shares
without being furnished any offering literature or prospectus other than the
documents and materials referred to in Paragraph 9 above, that the transaction
and that the materials furnished the undersigned have not been scrutinized or
approved by the United States Securities and Exchange Commission or by any state
securities regulatory agency, and that any such scrutiny or registration does
not imply approval or disapproval of the same.
(k) Because of the reliance by Champion on Section 3 (b) and Section 4(2)
of the Securities Act of 1933 and Regulation D as promulgated by the Securities
and Exchange Commission as well as provisions of applicable state securities
laws and rules covering
6
<PAGE>
the offering of such Restricted Shares, the undersigned acknowledges and is
aware of the following:
(i) There are substantial restrictions on the transferability of the
Restricted Shares. Accordingly, it may not be possible for the
undersigned to readily liquidate his investment in Champion.
(ii) The investor has been informed by Champion that the Restricted
Shares have not been registered under the Securities Act of 1933 and
must be held indefinitely unless subsequently registered under the
1933 Act or an exemption from such registration under the 1933 Act is
made available; that Champion is not obligated to file a notification
under Regulation A of the 1933 Act or a registration statement under
the 1933 Act; and that Champion has not covenanted to take any action
necessary for qualification of a limited resale of the Restricted
Shares under applicable securities rules and regulations.
(l) The undersigned is executing this letter and all other documents as an
inducement to Champion to issue the Restricted Shares to the undersigned, and
Champion may rely on such documents and the information contained herein or
furnished by the undersigned to determine the qualifications of the undersigned
to purchase the Restricted Shares.
(m) This letter shall be binding upon the heirs, estate, legal
representatives, successors and assigns of the undersigned.
Date: , 1996
----------------- ----------------------------------
----------------------------------
7
<PAGE>
QUESTIONNAIRE
The purpose of this questionnaire is to assure Champion that each investor
will meet the standards imposed by Regulation D promulgated under the Securities
Act of 1933, as amended (the "Act"), and by applicable state securities law
since the Restricted Shares will not be registered under the Act or under such
state securities laws.
If the answer to any question is "None" or "Not Applicable", please so
state. Please answer each question.
Your answers will at all times be kept strictly confidential. However, by
signing this Questionnaire, you agree that Champion may present this
Questionnaire, with such confidentiality precautions as are possible under the
circumstances, to such parties as it deems appropriate if called upon under law
to establish the availability under the Act of an exemption from registration of
the private placement.
Please complete, sign and date this Questionnaire as part of the Investment
Letter.
1. Name
-------------------------------------------------------
Residence Address
------------------------------------------
Mailing Address
--------------------------------------------
Date of Birth
----------------------------------------------
Residence Phone Number
-------------------------------------
2. Occupation
-------------------------------------------------
Business Address
-------------------------------------------
------------------------------------------------------------
Business Phone Number
--------------------------------------
3. In which state, if any:
Do you hold a driver's license?
----------------------------
Do you pay state income taxes?
-----------------------------
Are you registered to vote?
--------------------------------
4. Bank Reference
---------------------------------------------
Bank Office
------------------------------------------------
8
<PAGE>
5. Business or Professional Education (college AND post-college;
if no college, then give highest levels achieved):
School Major Subject Degree
------ ------------- ------
------------------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
6. Please describe briefly the principal positions you have held during the
past ten years or since graduation from the schools listed in paragraph 5:
------------------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
7. Other similar investment holdings of yours:
------------------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
8. My estimated net worth (exclusive of residence, furnishings,
and personal automobiles) is in excess of $________________.
9. My income for the year 1996 is estimated to be in excess of
$______________________; my income for the years 1994 and 1994 was in
excess of:
1995 1994
Individually
---------- ----------
Jointly with my spouse
---------- ----------
10. In the past tax year, the highest marginal federal income
tax rate at which some portion of my taxable income was
taxed was ___________ percent.
9
<PAGE>
11. Please indicate in the space provided below any additional information
about yourself which you think may be helpful in enabling the Purchaser to
determine that your knowledge and experience in financial and business
matters is sufficient to enable you to evaluate the merits and risks of
this investment:
------------------------------------------------------------
------------------------------------------------------------
To the best of my information and belief, the above and attached information
supplied by me is true and correct in all respects.
----------------------------------------
Date:
---------------- ----------------------------------------
10
<PAGE>
EXHIBIT D
ESCROW AGREEMENT
THIS ESCROW AGREEMENT is made as of the ________ day of _______________,
1996, by and between JAMES D. BUTTERFIELD (the "Stockholder"), CHAMPION
INDUSTRIES, INC., a West Virginia corporation ("Champion") and _______________,
in _______________, as Escrow Agent ("Escrow Agent").
W I T N E S S E T H:
--------------------
WHEREAS, Stockholder is the sole stockholder of Smith & Butterfield Co.,
Inc., an Indiana corporation (the "Company"); and
WHEREAS, pursuant to an Agreement of Merger dated the ________ day of
_______________, 1996 (the "Agreement"), Company will be merged with a wholly
owned subsidiary of Champion (the "Merger"); and
WHEREAS, all capitalized terms not defined in this Escrow Agreement shall
have the meaning as defined in the Agreement; and
WHEREAS, Stockholder will receive Champion Common Stock with an aggregate
market value at the Effective Time of $1,200,000.00; and
WHEREAS, the Stockholder has agreed in Section 4.10 of the Agreement to
indemnify and hold harmless Champion, the Company and the Surviving Company from
and against certain liabilities related to or arising from the Plan sponsored by
the Company, all as more fully set forth in Section 4.10 of the Agreement; and
WHEREAS, the parties to the Agreement and to this Escrow Agreement desire
to enter into this Escrow Agreement to provide a source of payment of such
Section 4.10 indemnification for a
<PAGE>
period of seven hundred thirty (730) days from the date hereof, without in any
fashion diminishing or modifying the indemnification obligations of Stockholder
theretofore or thereafter.
NOW, THEREFORE, in consideration of the covenants and mutual agreements
contained in this Escrow Agreement and the Agreement and in reliance upon the
representations and warranties hereinafter set forth, the parties do hereby
agree as follows:
SECTION 1.
1.1 APPOINTMENT OF ESCROW AGENT. Champion and Stockholder hereby
designate and appoint _______________ in ________, ________ and _______________
accepts such appointment, as the Escrow Agent for the purposes herein set forth.
1.2 DEPOSIT OF CHAMPION COMMON STOCK. Stockholder has concurrently with
the execution of this Agreement deposited with Escrow Agent a certificate
registered in the name of the Escrow Agent or its nominee, representing Champion
Common Stock having an aggregate Market Value of Three Hundred Thousand Dollars
($300,000.00), constituting a portion of the Champion Common Stock to be issued
to Stockholder pursuant to Section 2.2 of the Agreement. Such escrowed Champion
Common Stock is hereinafter referred to as "Escrow Shares", to be held and
disbursed by Escrow Agent upon the terms of this Escrow Agreement and the
Agreement.
1.3 INVESTMENT OF DIVIDENDS. During the term of this Escrow Agreement,
the Escrow Agent shall invest all proceeds of the Escrow Shares received by it
and all other funds held by it under the Escrow Agreement, at its rate in daily
Repurchase Agreements
2
<PAGE>
of obligations of the United States government or its agencies. The earned
interest shall be accumulated, reinvested, held and disposed of by the Escrow
Agent as hereinafter set forth.
1.4 ESCROW PROPERTY. The Escrow Shares, all stock dividends and
distributions thereon, and all income and property resulting therefrom ("Escrow
Property") shall be held by the Escrow Agent for the benefit of the Stockholder,
Champion and Surviving Company on the terms set out herein.
1.5 VOTING RIGHTS OF SHARES IN ESCROW. All voting rights with respect to
the Escrow Shares comprising a part of the Escrow Property may be exercised by
the Stockholder, and the Escrow Agent shall from time to time execute and
deliver to the Stockholder such proxies, consents or other documents as may be
necessary to enable the Stockholder to exercise such rights.
1.6 DISTRIBUTIONS ON ESCROW PROPERTY. All cash dividends and other cash
distributions paid on the Escrow Shares shall be paid to the Stockholder
promptly after receipt by the Escrow Agent. All other dividends and
distributions (whether in securities or other property) paid or made on the
Escrow Property shall be deemed to have been paid or made to the Stockholder for
income tax purposes, but shall be received by the Escrow Agent and constitute
part of the Escrow Property.
1.7 TAXES AND CHARGES ON ESCROW PROPERTY. The Stockholder shall maintain
the Escrow Property free and clear of all liens and encumbrances and shall,
promptly upon request by the Escrow Agent, pay and discharge all taxes,
assessments and governmental charges imposed on or with respect to the Escrow
Property.
3
<PAGE>
SECTION 2. INDEMNIFICATION OF CHAMPION AND SURVIVING COMPANY
2.1 SCOPE OF INDEMNIFICATION. Subject to the conditions set out in
Section 2.2 and in the Agreement, Champion and Surviving Company shall be
entitled to indemnification from the Escrow Property for all losses (including
reasonable attorney's fees and other out-of-pocket expenses) ("Indemnified
Losses"). The aggregate amount of Indemnified Losses shall not exceed the
lesser of (i) Two Hundred Fifty Thousand Dollars ($250,000.00) or (ii) the
market value of Escrow Property.
2.2 CONDITIONS TO INDEMNIFICATION. Champion and Surviving Company shall
be entitled to recover under this Escrow Agreement in respect to any Indemnified
Loss if either shall have given notice in writing ("Claim Notice") to the Escrow
Agent and the Stockholder promptly after learning of the claim on which the
Indemnified Loss is based and in any event on or before _______________, 1998
(the "Termination Date"), which Claim Notice shall include a brief description
of the nature of the claim, the identity of the party by whom it is being
asserted and an estimate of the amount of loss (the "Estimated Loss") which may
be sustained by Champion or Surviving Company by reason of such breach.
Champion or Surviving Company shall from time to time prior to the Termination
Date amend each such Claim Notice to reflect any change in its estimate of the
Estimated Loss as theretofore referred to in that Claim Notice. Champion or
Surviving Company shall deliver to the Stockholder copies of all pleadings and
amended pleadings filed in connection with any such claim and will provide the
Stockholder and its counsel with such
4
<PAGE>
further information concerning the proceedings relating to such claim as the
Stockholder or such counsel may reasonably request.
SECTION 3. DISTRIBUTION OF ESCROW PROPERTY
3.1 INTERIM DISTRIBUTIONS. If Champion or Surviving Company shall sustain
one or more Indemnified Losses in respect of which they are secured by the
Escrow Property as provided in Section 2, Champion or Surviving Company shall be
entitled to receive, promptly after sustaining each such Indemnified Loss,
Escrow Property having an aggregate value (as determined under Section 3.4) as
of the date of distribution to Champion or Surviving Company equal to the amount
of such Indemnified Loss, with interest thereon at the rate of 8 percent per
annum between the date such Indemnified Loss is sustained and the date of the
distribution to Champion or Surviving Company.
3.2 PAYMENT PROCEDURE. Upon receiving a request from Champion or
Surviving Company for indemnification under Section 3.1, the Escrow Agent shall
notify the Stockholder of the request. If the Stockholder does not object to
the request in writing within thirty days after such notice, the Escrow Agent
shall proceed forthwith to make payment from the Escrow Property in the manner
set out in Section 3.3. If the Stockholder objects to payment, the Escrow Agent
may determine whether payment is required by this Agreement (which determination
shall be conclusive unless made in bad faith) or may submit the matter for
determination by an arbitrator designated by the American Arbitration
Association. Arbitration proceedings shall be held in the City of Evansville,
Indiana.
5
<PAGE>
3.3 SELECTION OF ESCROW PROPERTY. In making payment to Surviving Company
under Section 3.2, the Escrow Agent shall designate the items of Escrow Property
to be used, resorting first to cash and its Repurchase Agreements to the extent
reasonably available. If the Escrow Agent shall propose to designate any Escrow
Shares or other property to be used for making payment under Section 3.2, it
shall notify the Stockholder, who shall have a period of three days to withdraw
such property from escrow on payment to the Escrow Agent of an amount of cash
equal to the fair market value thereof (as determined by the Escrow Agent).
Otherwise, payment shall be made from the Escrow Shares.
3.4 VALUATION OF ESCROW PROPERTY. For purposes of this Agreement, the
Escrow Shares shall be valued at the weighted arithmetic average of their
closing prices on the twenty-one trading days immediately preceding the date of
valuation as reported on the NASDAQ NMS, and other property shall be valued as
determined by the Escrow Agent, whose determination shall be conclusive unless
made in bad faith.
SECTION 4. TERMINATION
4.1 TERMINATION DATE. The escrow created by this Agreement shall
terminate on _______________, 1998 ("Termination Date").
4.2 DISTRIBUTION OF ESCROW PROPERTY. If there are no Claim Notices
pending with the Escrow Agent on the Termination Date, all Escrow Property,
after payment of the Escrow Agent's fees and expenses under Section 5, shall be
distributed to the Stockholder. If there are any Claim Notices pending with the
Escrow Agent on the Termination Date, the reasonable settlement value thereof
6
<PAGE>
shall be determined by the Escrow Agent by submission to an arbitrator
designated by the American Arbitration Association or in such other manner as
the Escrow Agent may deem appropriate. The amount so determined shall be
treated as an Indemnified Loss within the meaning of Section 2 and shall be paid
to Surviving Company as provided in Section 3. The balance of the Escrow
Property, if any, after payment of the Escrow Agent's fees and expenses under
Section 5, shall be distributed to the Stockholder.
SECTION 5. RIGHTS AND OBLIGATIONS OF THE ESCROW AGENT
The Escrow Agent (1) shall not be liable for any error of judgment, act
done or omitted by it in good faith, or mistake of fact or law unless caused by
its own gross negligence or willful misconduct; (2) shall be entitled to treat
as genuine any letter or other document furnished to it by Champion, Surviving
Company or Stockholder, and believed by it to be genuine and to have been signed
and presented by the property party or parties; and (3) shall have been paid by
Surviving Company and Stockholder in equal shares fees for its services at its
customary rates as in effect from time to time and its out-of-pocket expenses
(including but not limited to the fees of counsel).
SECTION 6. MISCELLANEOUS
6.1 NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed to have been given if delivered in person or sent by
prepaid first-class registered or certified mail, return receipt requested, as
follows:
TO STOCKHOLDER:
James D. Butterfield
--------------------
7
<PAGE>
--------------------
with a copy to:
Robert M. Becker, Esquire
Bamberger, Foreman, Oswald & Hahn
708 Hulman Building
P. O. Box 657
Evansville, Indiana 47704-0657
TO COMPANY:
Smith & Butterfield Co., Inc.
2800 Lynch Road
Evansville, Indiana
---------
with a copy to:
Thomas J. Murray, Esquire
Huddleston, Bolen, Beatty, Porter & Copen
P. O. Box 2185
Huntington, West Virginia 25722
TO CHAMPION:
Champion Industries, Inc.
2450 First Avenue
P. O. Box 2968
Huntington, West Virginia 25728-2968
Attention: Marshall T. Reynolds, President and
Chief Executive Officer
with a copy to:
Thomas J. Murray, Esquire
Huddleston, Bolen, Beatty, Porter & Copen
P. O. Box 2185
Huntington, West Virginia 25722
TO ESCROW AGENT:
--------------------
--------------------
--------------------
6.2 HEADINGS. The section and subsection headings in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
8
<PAGE>
6.3 GOVERNING LAW. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Indiana.
6.4 COUNTERPARTS. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
---------------------------------------------
JAMES D. BUTTERFIELD
CHAMPION INDUSTRIES, INC., a West Virginia
corporation
By:
------------------------------------------
Its:
------------------------------------
-------------------------
By:
--------------------------------
Its:
--------------------------
9
