<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER __, 1995
REGISTRATION NO. 33-______
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________________
FORM S-3
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
____________________
GRAPHIC INDUSTRIES, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
GEORGIA 58-1101633
------------------------------- ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2155 Monroe Drive, N.E.
Atlanta, Georgia 30324
(404) 874-3327
----------------------------------------------------------------
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
MARK C. POPE, III
Chairman of the Board
Graphic Industries, Inc.
2155 Monroe Drive, N.E.
Atlanta, Georgia 30324
(404) 874-3327
--------------------------------------------------
(Name, address, including zip code, and telephone
number, including area code, of agent for service)
____________________
Copies of Communications to:
G. WILLIAM SPEER, Esq. CHARLES SCHAEFER, Esq.
Powell, Goldstein, Frazer & Murphy Walter & Haverfield
Sixteenth Floor 1300 Terminal Tower
191 Peachtree Street, N.E. Cleveland, Ohio 44113-2253
Atlanta, Georgia 30303 (216) 781-1212
(404) 572-6600
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after the Registration Statement becomes effective.
____________________
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
____________________
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
TITLE OF EACH CLASS OF SECURITIES AMOUNT PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TO BE TO BE OFFERING PRICE PER AGGREGATE OFFERING REGISTRATION
REGISTERED REGISTERED SHARE(1) PRICE(1) FEE(1)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.10 par value 246,154 shares $12.06 $2,968,617.24 $1,023.67
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Pursuant to Rule 457(c), the proposed offering price and registration fee
are based upon the average of the high and low prices of the Common Stock on
December 19, 1995 as reported by the Nasdaq National Market System.
____________________
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<PAGE>
P R O S P E C T U S
-------------------
246,154 SHARES
GRAPHIC INDUSTRIES, INC.
COMMON STOCK
____________________
This Prospectus relates to 246,154 shares (the "Shares") of common stock,
$.10 par value ("Common Stock"), of Graphic Industries, Inc. (the "Company").
The Shares may be offered by certain shareholders of the Company (the "Selling
Shareholders") from time to time in transactions in the open market, in
negotiated transactions or a combination of such methods of sale, at fixed
prices which may be changed, at market prices prevailing at the time of sale,
at prices related to such prevailing market prices or at negotiated prices.
The Selling Shareholders may effect such transactions by selling the Shares to
or through broker-dealers, and such broker-dealers may receive compensation in
the form of discounts, concessions or commissions from the Selling
Shareholders and/or the purchasers of the Shares for whom such broker-dealers
may act as agents or to whom they sell as principals, or both (which
compensation as to a particular broker-dealer might be in excess of customary
commissions). See "Sale of Shares."
The Selling Shareholders acquired 221,539 of the Shares (the "Original
Shares") from the Company on September 29, 1995 in connection with the
Company's acquisition of a company owned by the Selling Shareholders. See
"Recent Development." The remaining 24,615 Shares (the "Escrow Shares") were
issued in escrow in connection with such acquisition and may be distributed to
the Selling Shareholders after a six month escrow period. The Selling
Shareholders may be deemed to be an "underwriter" within the meaning of the
Securities Act of 1933, as amended (the "Securities Act"). See "Selling
Shareholders" and "Sale of the Shares."
None of the proceeds from the sale of the Shares by the Selling
Shareholders will be received by the Company. The Company has agreed to bear
all expenses (other than selling commissions) in connection with the
registration and sale of the Shares being offered by the Selling Shareholders
and to indemnify the Selling Shareholders against certain liabilities,
including liabilities under the Securities Act.
The Common Stock is listed on the Nasdaq National Market System. On
December 19, 1995, the last reported sale price of the Common Stock of the
Company reported on the Nasdaq National Market System was $11.50 per share.
____________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMIS-
SION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
____________________
The date of this Prospectus is ________ __, 199_.
<PAGE>
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-3 (the "Registration
Statement"), of which this Prospectus forms a part, covering the Shares to be
sold pursuant to this offering.
As permitted by the rules and regulations of the Commission, this Prospectus
omits certain information, exhibits and undertakings contained in the
Registration Statement. Such additional information, exhibits and
undertakings can be inspected at and obtained from the Commission as set forth
below. For additional information regarding the Company, the Common Stock and
related matters and documents, reference is made to the Registration Statement
and exhibits thereto.
CERTAIN DOCUMENTS PREVIOUSLY FILED BY THE COMPANY WITH THE COMMISSION
PURSUANT TO THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED (THE "EXCHANGE
ACT"), ARE INCORPORATED BY REFERENCE IN THIS PROSPECTUS. SEE "INCORPORATION
OF CERTAIN DOCUMENTS BY REFERENCE." COPIES OF ANY DOCUMENTS INCORPORATED
HEREIN BY REFERENCE, OTHER THAN EXHIBITS TO SUCH DOCUMENTS UNLESS THEY ARE
SPECIFICALLY INCORPORATED BY REFERENCE THEREIN, ARE AVAILABLE WITHOUT CHARGE
TO ANY PERSON TO WHOM A PROSPECTUS IS DELIVERED UPON REQUEST TO THE SECRETARY,
GRAPHIC INDUSTRIES, INC., 2155 MONROE DRIVE, N.E., ATLANTA, GEORGIA 30324
(TELEPHONE: (404) 874-3327).
The Company is subject to the informational and reporting requirements of
the Exchange Act, and accordingly files reports, proxy statements and other
information with the Commission. Such reports, proxy statements and other
information filed with the Commission, as well as the Registration Statement,
are available for inspection and copying at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Judiciary
Plaza, Washington, D.C. 20549 and at certain regional offices of the
Commission located at 500 West Madison Street, Suite 1400, Chicago, Illinois
60661 and 7 World Trade Center, New York, New York 10048. Copies of such
material can be obtained from the Public Reference Section of the Commission,
Room 1024, 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549 at
prescribed rates.
-2-
<PAGE>
THE COMPANY
The Company engages in all aspects of financial and corporate printing,
reprographic services, commercial printing, direct mail printing and other
graphic communications. It ranks approximately 17th in sales among commercial
printing firms in North America. The Company's competitive position has been
strengthened in recent years by its substantial capital investments in
advanced equipment, including computerized multicolor presses, prepress
equipment and laser scanners for color separations.
The Company has expanded its printing and graphic arts services and its
markets through a continuing program of acquisitions of established companies
in its industry and through internal growth and development. Since its
incorporation in 1970, the Company has grown from a regionally based business
with six operating companies to a network of 19 commercial printing companies
and a reprographics division with operations in the major U.S. market regions
of the Southeast, Northeast, Midwest and Southwest.
The Company's principal executive offices are located at 2155 Monroe Drive,
N.E., Atlanta, Georgia 30324. Its telephone number is (404) 874-3327.
RECENT DEVELOPMENT
On September 29, 1995, the Company acquired Carpenter Reserve Printing
Company ("Carpenter") pursuant to an Agreement and Plan Merger (the "Merger
Agreement") dated September 21, 1995 among the Company, Carpenter Acquisition
Company ("Acquisition"), Carpenter and the Selling Shareholders, who are the
former shareholders of Carpenter. Pursuant to the Merger Agreement, the
Company issued the Shares to the Selling Shareholders (including the Escrow
Shares into escrow) and Carpenter was merged with and into Acquisition.
Under the terms of the Merger Agreement, the Selling Shareholders acquired
the Original Shares in the acquisition and may receive some or all of the
Escrow Shares after a six-month escrow period if certain conditions to release
are met. The Escrow Shares are being held in escrow to cover potential
breaches in the representations and warranties of Carpenter and the Selling
Shareholders contained in the Merger Agreement, any downward adjustment in the
purchase price and certain other matters. Under the Merger Agreement, the
Company agreed to register the Shares for resale by the Selling Shareholders
and to indemnify the Selling Shareholders against certain liabilities,
including liabilities under the Securities Act. The Registration Statement of
which this Prospectus is a part was filed with the Commission pursuant to the
registration provisions of the Merger Agreement.
SELLING SHAREHOLDERS
The following table sets forth the name of each Selling Shareholder and the
number of shares of Common Stock beneficially owned by each such Selling
Shareholder prior to the offering and being offered hereby. Prior to the
offering, each Selling Shareholder beneficially owned less than one percent of
the number of shares of Common Stock of the Company outstanding on the date of
this Prospectus (calculated without regard to the shares of Common Stock
issuable upon conversion of shares of Class B Common Stock or any of the
Company's convertible debentures.) Upon completion of the offering, assuming
all of the Shares being offered hereby are sold and that no other changes in
the Selling Shareholders' beneficial ownership occur prior to completion of
this offering, none of the Selling Shareholders will beneficially own any
shares of Common Stock of the Company.
-3-
<PAGE>
Number of Shares Beneficially
Owned Prior to Offering and
Selling Shareholder Being Offered
------------------- -----------------------------
Richard A. Amendola 92,259/1/
Ronald R. Meredith 92,259/1/
Jack W. Kothera 19,396/2/
Sandra L. Kothera 13,563/3/
Geraldine R. Steger 14,548/4/
Rose Mary Bour 4,849/5/
Robert E. Highman 4,849/5/
Thomas D. Stewart 2,781/6/
E. Alfred Schroeder 1,379/7/
Russell C. Shaw 271/8/
______________
/1/ Includes 83,033 Original Shares and 9,226 Escrow Shares
/2/ Includes 17,457 Original Shares and 1,939 Escrow Shares
/3/ Includes 12,207 Original Shares and 1,356 Escrow Shares
/4/ Includes 13,093 Original Shares and 1,455 Escrow Shares
/5/ Includes 4,364 Original Shares and 485 Escrow Shares
/6/ Includes 2,503 Original Shares and 278 Escrow Shares
/7/ Includes 1,241 Original Shares and 138 Escrow Shares
/8/ Includes 244 Original Shares and 27 Escrow Shares
SALE OF THE SHARES
The sale of the Shares by the Selling Shareholders may be effected from
time to time in transactions in the open market, in negotiated transactions
or through a combination of such methods of sale, at fixed prices, which may
be changed, at market prices prevailing at the time of sale, at prices
related to such prevailing market prices or at negotiated prices. The
Selling Shareholders may effect such transactions by selling the Shares to
or through broker-dealers, and such broker-dealers may receive compensation
in the form of discounts, concessions or commissions from the Selling
Shareholders and/or the purchasers of the Shares for which such broker-
dealers may act as agents or to whom they sell as principals, or both (which
compensation as to a particular broker-dealer may be in excess of customary
compensation).
The Selling Shareholders and any broker-dealers who act in connection
with the sale of the Shares hereunder may be deemed to be "underwriters"
within the meaning of Section 2(11) of the Securities Act, and any
commissions received by them and profit on any resale of the Shares as
principals might be deemed to be underwriting discounts and commissions
under the Securities Act. The Company agreed to indemnify the Selling
Shareholders against certain liabilities, including liabilities under
Securities Act.
-4-
<PAGE>
LEGAL MATTERS
A legal opinion to the effect that the Shares are legally issued, fully
paid and nonassessable has been rendered by Powell, Goldstein, Frazer &
Murphy, Sixteenth Floor, 191 Peachtree Street, N.E., Atlanta, Georgia 30303.
EXPERTS
The consolidated financial statements and schedules of the Company
appearing or incorporated by reference in the Company's Annual Report on
Form 10-K for the year ended January 31, 1995 have been audited by Ernst &
Young LLP, independent auditors, as set forth in their report thereon
included therein and incorporated herein by reference. Such consolidated
financial statements and schedule are incorporated herein by reference in
reliance upon such report given upon the authority of such firm as experts
in accounting and auditing.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed by the Company with the
Commission pursuant to the Exchange Act are incorporated herein by this
reference:
(1) The Company's Annual Report on Form 10-K for the year ended
January 31, 1995 (Commission File No. 0-12204);
(2) The Company's Quarterly Report on Form 10-Q for the period ended
April 30, 1995 (Commission File No. 0-12204);
(3) The Company's Quarterly Report on Form 10-Q for the period ended
July 31, 1995 (Commission File No. 0-12204);
(4) The Company's Quarterly Report on Form 10-Q for the period ended
October 31, 1995 (Commission File No. 0-12204);
(5) The description of the Company's Common Stock contained in the
Company's Registration Statement filed pursuant to Section 12 of the
Exchange Act on Form 8-A, as amended (Commission File No. 0-12204).
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date hereof and prior to the
date upon which this offering is terminated shall be deemed to be
incorporated by reference herein and to be part hereof from the date any
such document is filed.
Any statements contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or
superseded for purposes hereof to the extent that a statement contained
herein (or in any other subsequently filed document which also incorporated
by reference herein) modifies or supersedes such statement. Any statement
so modified or superseded shall not be deemed to constitute a part hereof
except as so modified or superseded. All information appearing in this
Prospectus is qualified in its entirety by the information and financial
statements (including notes thereto) appearing in the documents incorporated
herein by reference, except to the extent set forth in this paragraph.
-5-
<PAGE>
_________________________________________
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS IN CONNECTION WITH THE OFFERING COVERED BY THIS
PROSPECTUS. IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE SELLING
SHAREHOLDERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, THE SHARES OF COMMON STOCK IN ANY
JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH
OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE
MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT
THERE HAS NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR
IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
_________________________________________
-6-
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 1. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Registration fee to the Securities
and Exchange Commission............... $ 1,023.67
Nasdaq Additional Listing fee........... 4,923.08
Accounting fees and expenses............ 2,500.00
Legal fees and expenses................. 4,000.00
Miscellaneous expenses.................. 200.00
Total.......................... $12,646.75
==========
The foregoing items, except for the SEC registration fee and the Nasdaq
additional listing fee, are estimated. The Registrant has agreed to bear all
expenses (other than selling commissions) in connection with the registration
and sale of the Shares.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 14-2-850 et seq. of the Georgia Business Corporation Code and
Article IX of the Registrant's Bylaws set forth the extent to which the
Registrant's directors and officers may be indemnified by the Registrant
against liability that they may incur while serving in such capacity. These
provisions generally provide that the directors and officers of the Registrant
will be indemnified by the Registrant against any losses incurred in
connection with any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative (other
than an action by or in the right of the Registrant) by reason of the fact
that he is or was a director or officer of the Registrant or served with
another corporation, partnership, joint venture, trust or other enterprise at
the request of the Registrant if such director or officer acted in a manner he
reasonably believed to be in or not opposed to the best interest of the
Registrant, and with respect to any criminal proceeding, had no reasonable
cause to believe his conduct was unlawful. Under these provisions, the
Registrant may provide advances for expenses incurred in defending any such
action, suit or proceeding, upon receipt of an undertaking by or on behalf of
such officer or director to repay such advances unless it is ultimately
determined that he is entitled to indemnification by the Registrant.
The Registrant maintains an insurance policy insuring the Registrant and its
directors and officers against certain liabilities, including liabilities
under the Securities Act of 1933.
ITEM 16. EXHIBITS.
3(a) Amended and Restated Articles of Incorporation. (1)
3(b) Bylaws. (2)
4(a) See Articles V and VI of the Amended and Restated Articles of
Incorporation contained in Exhibit 3(a) and Articles II and VII of the
Bylaws contained in Exhibit 3(b).
II-1
<PAGE>
4(b) Form of Indenture, including Form of Debenture, between the Registrant
and the First National Bank of Atlanta. (3)
5 Opinion of Powell, Goldstein, Frazer & Murphy as to the legality of the
securities being registered.
23(a) Consent of Ernst & Young LLP (see page immediately preceding signature
page to this Registration Statement).
23(b) The consent of Powell, Goldstein, Frazer & Murphy is contained in its
opinion filed as Exhibit 5 hereto.
24 Power of Attorney (see signature page to this Registration Statement).
99 Agreement and Plan of Merger dated September 21, 1995 among Graphic
Industries, Inc., Carpenter Acquisition Company, Carpenter Reserve
Printing Company, and the former shareholders of Carpenter Reserve
Printing Company named below.
__________________
(1) Incorporated by reference to Exhibit 3(a) of the Registrant's Annual
Report on Form 10-K for the fiscal year ended January 31, 1991 (File No.
0-12204).
(2) Incorporated by reference to Exhibit 3(b) of the Registrant's Annual
Report on Form 10-K for the fiscal year ended January 31, 1992 (File No.
0-12204).
(3) Incorporated by reference to Exhibit 4(b) of the Registrant's
Registration Statement on Form S-1 filed on April 30, 1986 (Reg. No. 33-
5277).
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;
Provided, however, that paragraphs (1)(i) and (1)(ii) do not apply
-----------------
if the information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed by the Registrant
pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934
that are incorporated by reference in the Registration Statement.
II-2
<PAGE>
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of
the offering.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the
Registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with
the securities being registered, the Registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction to the questions whether such
indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Atlanta, State of Georgia, on December 5, 1995.
GRAPHIC INDUSTRIES, INC.
By: /s/ Mark C. Pope III
----------------------------------
Mark C. Pope III
Chairman of the Board and
Chief Executive Officer
<PAGE>
EXHIBIT INDEX
-------------
<TABLE>
<CAPTION>
Exhibit
Number Description Page
- --------- ------------------------------------------------------------------------------------- ----
<S> <C> <C>
3(a) Amended and Restated Articles of Incorporation. (1) N/A
3(b) Bylaws. (2) N/A
4(a) See Articles V and VI of the Amended and Restated Articles of Incorporation N/A
contained in Exhibit 3(a) and Articles II and VII of the Bylaws
contained in Exhibit 3(b).
4(b) Form of Indenture, including Form of Debenture, between the Registrant and First N/A
National Bank of Atlanta. (3)
5 Opinion of Powell, Goldstein, Frazer & Murphy as to the legality of the securities __
being registered.
23(a) Consent of Ernst & Young LLP (see page immediately preceding signature page to this __
Registration Statement).
23(b) The consent of Powell, Goldstein, Frazer & Murphy is contained in its opinion filed __
as Exhibit 5 hereto.
24 Power of Attorney (see signature page to this Registration Statement). __
99 Agreement and Plan of Merger dated September 21, 1995 among Graphic Industries, __
Inc., Carpenter Acquisition Company, Carpenter Reserve Printing Company, and the
former shareholders of Carpenter Reserve Printing Company named therein.
</TABLE>
___________________
(1) Incorporated by reference to Exhibit 3(a) of the Registrant's Annual
Report on Form 10-K for the fiscal year ended January 31, 1991 (File No.
0-12204).
(2) Incorporated by reference to Exhibit 3(b) of the Registrant's Annual
Report on Form 10-K for the fiscal year ended January 31, 1992 (File No.
0-12204).
(3) Incorporated by reference to Exhibit 4(b) of the Registrant's
Registration Statement on Form S-1 filed on April 30, 1986 (Reg. No. 33-
5277).
<PAGE>
December 20, 1995
Graphic Industries, Inc.
2155 Monroe Drive, N.E.
Atlanta, Georgia 30324
Re: Registration Statement on Form S-3
----------------------------------
Ladies and Gentlemen:
We have served as counsel for Graphic Industries, Inc., a Georgia
corporation (the "Company"), in connection with the registration under the
Securities Act of 1933, as amended, pursuant to a Registration Statement on Form
S-3 (the "Registration Statement"), of an aggregate of 246,154 shares (the
"Shares") of common stock, $.10 par value, of the Company to be sold by the
selling shareholders named in the Registration Statement.
We have examined and are familiar with originals or copies (certified,
photostatic or otherwise identified to our satisfaction) of such documents,
corporate records and other instruments relating to the incorporation of the
Company and to the authorization for issuance of the Shares as we have deemed
necessary or advisable.
In all such examinations, we have assumed the genuineness of all signatures
on all originals and copies of documents we have examined, the authenticity of
all documents submitted to us as originals and the conformity to original
documents of all certified, conformed or photostatic copies. As to questions of
fact material and relevant to our opinion, we have relied upon certificates or
representations of Company officials and of appropriate state, local and federal
officials.
We express no opinion as to matters under or involving laws other than the
laws of the State of Georgia.
Based upon and subject to the foregoing and having regard for such legal
considerations as we have deemed relevant, it is our opinion that the Shares are
validly issued, fully paid and non-assessable.
<PAGE>
We hereby consent to the reference to our Firm under the heading "Legal
Matters" in the Prospectus contained in the Registration Statement and to the
filing of this opinion as Exhibit 5 to the Registration Statement.
Very truly yours,
POWELL, GOLDSTEIN, FRAZER & MURPHY
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3) and related Prospectus of Graphic
Industries, Inc. for the registration of 246,154 shares of its common stock
and to the incorporation by reference therein of our report dated March 13,
1995, with respect to the consolidated financial statements and schedule of
Graphic Industries, Inc. included or incorporated by reference in its Annual
Report (Form 10-K) for the year ended January 31, 1995, filed with the
Securities and Exchange Commission.
ERNST & YOUNG LLP
Atlanta, Georgia
December 18, 1995
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each person whose signature appears
below constitutes and appoints MARK C. POPE, III and MARK C. POPE, IV, and
each of them, as his true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution, for him and in his name, place and
stead, in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and to file the
same with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said attorneys-in-
fact and agents, and each of them, full power and authority to do and perform
each and every act and thing requisite necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or either of them, or their or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
<PAGE>
AGREEMENT AND
PLAN OF MERGER
by and among
GRAPHIC INDUSTRIES, INC.,
CARPENTER RESERVE PRINTING COMPANY,
CARPENTER ACQUISITION COMPANY
and
THE STOCKHOLDERS OF CARPENTER
RESERVE PRINTING COMPANY
SEPTEMBER ___, 1995
<PAGE>
TABLE OF CONTENTS
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ARTICLE 1 DEFINITIONS..................................................... 1
Section 1.1 "AAA"..................................................... 1
Section 1.2 "Acquisition Proposal".................................... 1
Section 1.3 The "Act"................................................. 1
Section 1.4 "Area".................................................... 1
Section 1.5 "Authorizations".......................................... 1
Section 1.6 "Certificate of Merger"................................... 1
Section 1.7 "Claim Notice"............................................ 1
Section 1.8 The "Closing"............................................. 1
Section 1.9 "Closing Audit"........................................... 1
Section 1.10 "Closing Balance Sheet"................................... 2
Section 1.11 "Closing Date"............................................ 2
Section 1.12 "Code".................................................... 2
Section 1.13 "Commission".............................................. 2
Section 1.14 "Competing Business"...................................... 2
Section 1.15 "Contracts"............................................... 2
Section 1.16 "Damages"................................................. 2
Section 1.17 "Deliverable Consideration"............................... 2
Section 1.18 "Effective Period"........................................ 2
Section 1.19 "Effective Time".......................................... 2
Section 1.20 "Employment Agreement".................................... 2
Section 1.21 "Environmental Laws"...................................... 2
Section 1.22 "Environmental Permits"................................... 2
Section 1.23 "ERISA"................................................... 2
Section 1.24 "Escrow Agent"............................................ 2
Section 1.25 "Escrow Agreement"........................................ 3
Section 1.26 "Escrow Period"........................................... 3
Section 1.27 "Escrow Consideration".................................... 3
Section 1.28 "Estimated Net Book Value"................................ 3
Section 1.29 "Existing Facility Lease"................................. 3
Section 1.30 "Financial Schedule"...................................... 3
Section 1.31 "Financial Statements".................................... 3
Section 1.32 "Graphic Common Stock".................................... 3
Section 1.33 "Guaranties".............................................. 3
Section 1.34 "Indemnified Party"....................................... 3
Section 1.35 "Indemnifying Party"...................................... 3
Section 1.36 "Intellectual Property"................................... 3
Section 1.37 "Interim Balance Sheet"................................... 3
Section 1.38 "Lease Agreement"......................................... 4
Section 1.39 "Merger Consideration".................................... 4
Section 1.40 "Net Book Value".......................................... 4
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Section 1.41 "Non Third Party Claim".................................... 4
Section 1.42 "Ohio Corporate Law"....................................... 4
Section 1.43 "Plans".................................................... 4
Section 1.44 "Preliminary Closing Balance Sheet"........................ 4
Section 1.45 "Principal Stockholders"................................... 4
Section 1.46 "Proprietary Information".................................. 4
Section 1.47 "Purchase Adjustments"..................................... 4
Section 1.48 "Registration Statement"................................... 4
Section 1.49 "Response Notice Period"................................... 4
Section 1.50 "Restricted Period"........................................ 4
Section 1.51 "Stock Price".............................................. 4
Section 1.52 "Surviving Corporation".................................... 5
Section 1.53 "Tax Returns".............................................. 5
Section 1.54 "Taxes".................................................... 5
Section 1.55 "Transaction Documents".................................... 5
Section 1.56 "Third Party Claim"........................................ 5
Section 1.57 "Undisclosed Liabilities".................................. 5
ARTICLE 2 THE MERGER 5
Section 2.1 The Merger................................................. 5
Section 2.2 Effective Time............................................. 5
Section 2.3 Tax Consequences........................................... 5
Section 2.4 Articles of Incorporation; Regulations; Directors
and Officers............................................... 6
Section 2.5 Merger Consideration....................................... 6
Section 2.6 Payment of the Merger Consideration........................ 6
Section 2.7 Adjustment of Merger Consideration......................... 6
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS................... 8
Section 3.1 Organization; Power; Qualification......................... 8
Section 3.2 Authority.................................................. 9
Section 3.3 Capital Structure.......................................... 9
Section 3.4 Title to Shares............................................ 9
Section 3.5 No Third Party Options..................................... 9
Section 3.6 Compliance with Laws and Validity of Contemplated
Transactions............................................... 9
Section 3.7 Financial Statements....................................... 10
Section 3.8 Tax and Other Returns and Reports.......................... 11
Section 3.9 Personal Property.......................................... 12
Section 3.10 Real Property.............................................. 12
Section 3.11 Intellectual Property...................................... 12
Section 3.12 Insurance.................................................. 13
Section 3.13 Litigation................................................. 13
Section 3.14 Compliance with Laws....................................... 13
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Section 3.15 Environmental Matters...................................... 13
Section 3.16 Absence of Changes......................................... 15
Section 3.17 Absence of Undisclosed Liabilities......................... 15
Section 3.18 Assets..................................................... 15
Section 3.19 Employees.................................................. 15
Section 3.20 Employee Benefit Plans..................................... 16
Section 3.21 Labor Matters.............................................. 16
Section 3.22 Contracts and Commitments.................................. 16
Section 3.23 Banks...................................................... 18
Section 3.24 Transactions with Affiliates............................... 18
Section 3.25 Corporate Names............................................ 18
Section 3.26 Customer Relations......................................... 18
Section 3.27 Consents................................................... 18
Section 3.28 Broker's or Finder's Fees.................................. 18
Section 3.29 Securities Representations................................. 18
Section 3.30 Correctness of Representations............................. 20
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF ACQUISITION AND
GRAPHIC.................................................................. 20
Section 4.1 Organization; Power; Qualification......................... 20
Section 4.2 Authority.................................................. 20
Section 4.3 Compliance with Laws and Validity of Contemplated
Transactions............................................... 20
Section 4.4 Investment Representation.................................. 21
Section 4.5 Merger Consideration....................................... 21
Section 4.6 Broker's or Finders Fees................................... 21
Section 4.7 Graphic Reports............................................ 21
ARTICLE 5A OBLIGATIONS AND COVENANTS OF THE STOCKHOLDERS AND
THE COMPANY.............................................................. 21
Section 5A.1 Conduct of the Company's Business Prior to Closing......... 21
Section 5A.2 No Solicitation............................................ 22
Section 5A.3 Access and Information..................................... 22
Section 5A.4 Notification of Changes.................................... 23
Section 5A.5 No Default................................................. 23
Section 5A.6 Tax Returns................................................ 23
Section 5A.7 Allocation of Taxable Income to Short Period............... 23
Section 5A.8 Other Pre-Closing Returns.................................. 23
Section 5A.9 Tax Free Reorganization Treatment.......................... 24
Section 5A.10 General Cooperation in Tax Matters......................... 24
Section 5A.11 Compliance with Laws....................................... 24
Section 5A.12 Consent of Others.......................................... 24
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ARTICLE 5B COVENANTS OF GRAPHIC AND ACQUISITION............................ 24
Section 5B.1 Release of Guaranties...................................... 24
Section 5B.2 Filing of Notice........................................... 24
Section 5B.3 Post-Closing Returns....................................... 24
Section 5B.4 Tax Free Reorganization Treatment.......................... 25
Section 5B.5 General Cooperation in Tax Matters......................... 25
Section 5B.6 Employee Bonuses........................................... 25
ARTICLE 6 CONDITIONS TO CONSUMMATION OF MERGER............................. 26
Section 6.1 Conditions to Obligations of Acquisition and Graphic....... 26
Section 6.2 Conditions to Obligations of the Stockholders.............. 27
ARTICLE 7 REGISTRATION OF MERGER CONSIDERATION............................. 28
Section 7.1 Registration of Merger Consideration....................... 28
Section 7.2 Furnishing Information..................................... 28
Section 7.3 Prospectus Requirements.................................... 28
Section 7.4 Registration Rights, Etc................................... 29
Section 7.5 Indemnification............................................ 30
Section 7.6 Fees and Expenses of Registration.......................... 31
ARTICLE 8 INDEMNIFICATION.................................................. 31
Section 8.1 Definitions................................................ 31
Section 8.2 Indemnification of Acquisition and Graphic by the
Stockholders............................................... 31
Section 8.3 Method of Asserting Claims................................. 32
Section 8.4 Payment.................................................... 34
Section 8.5 Arbitration................................................ 34
ARTICLE 9 COVENANT NOT TO COMPETE.......................................... 34
Section 9.1 Definitions................................................ 34
Section 9.2 Agreement Not to Compete................................... 35
Section 9.3 Agreement Not to Solicit Employees......................... 35
Section 9.4 Agreement Not to Solicit Customers......................... 35
Section 9.5 Confidentiality............................................ 35
Section 9.6 Remedies................................................... 36
ARTICLE 10 TERMINATION; AMENDMENTS; WAIVER................................. 36
Section 10.1 Termination................................................ 36
Section 10.2 Effect of Termination...................................... 36
ARTICLE 11 MISCELLANEOUS................................................... 36
Section 11.1 Entire Agreement; Assignment............................... 36
Section 11.2 Validity................................................... 37
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Section 11.3 Notices.................................................... 37
Section 11.4 Governing Law.............................................. 38
Section 11.5 Descriptive Headings....................................... 38
Section 11.6 Counterparts............................................... 38
Section 11.7 Expenses................................................... 39
Section 11.8 Parties in Interest........................................ 39
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Exhibits
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A Employment Agreement
B Escrow Agreement
C Guaranties
D Lease Agreement
E W&H Opinion
F PGF&M Opinion
Schedules
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1 List of Stockholders
1.33 Guaranties
3.1 Qualifications
3.3 Shares of Capital Stock Reacquired
3.4 Title to Shares
3.7 Financial Statements
3.7(b) Liens on Accounts Receivable Shown in the Financial Statements
3.7(c) Inventory
3.9(a) Owned Personal Property
3.9(b) Leased Personal Property
3.10(b) Real Property Lease Defaults
3.11 Intellectual Property
3.12 Insurance
3.13 Litigation
3.14 Authorizations
3.15(a) Environmental Matters
3.16 Absence of Changes
3.19 Employees
3.20 Employee Benefit Plans
3.21 Labor Claims
3.22 Contracts
3.23 Banks
3.24 Transactions with Affiliates
3.25 Corporate Names
3.27 Consents
3.29(c) Stockholders' States of Residence
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<PAGE>
AGREEMENT AND PLAN OF MERGER
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THIS AGREEMENT AND PLAN OF MERGER (the "Agreement"), made and entered into
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this _______ day of September, 1995 by and among Graphic Industries, Inc., a
Georgia corporation ("Graphic"), Carpenter Acquisition Company, an Ohio
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corporation and wholly-owned subsidiary of Graphic ("Acquisition"), Carpenter
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Reserve Printing Company, an Ohio corporation (the "Company") and the
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stockholders of the Company listed on Schedule 1 hereto (collectively, referred
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to herein as the "Stockholders" and individually as a "Stockholder").
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WITNESSETH:
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WHEREAS, the Stockholders own 100% of the outstanding shares of the common
stock of the Company (the "Common Stock"), no par value per share (the
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"Shares"); and
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WHEREAS, the Stockholders and Acquisition wish to enter into a transaction
pursuant to which the Company shall be merged with and into Acquisition on the
terms and conditions set forth herein (the "Merger");
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NOW, THEREFORE, in consideration of the premises and the mutual covenants
set forth below and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and intending to be legally bound,
the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
The following terms used in this Agreement shall have the meaning set forth
below:
Section 1.1 "AAA" shall have that meaning set forth in Section 8.5 hereof.
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Section 1.2 "Acquisition Proposal" shall have that meaning set forth in
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Section 5.2 hereof.
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Section 1.3 The "Act" shall mean the Securities Act of 1933, as amended.
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Section 1.4 "Area" shall have that meaning set forth in Section 9.1(a)
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hereof.
Section 1.5 "Authorizations" shall have that meaning set forth in Section
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3.14 hereof.
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Section 1.6 "Certificate of Merger" shall have that meaning set forth in
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Section 2.2 hereof.
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Section 1.7 "Claim Notice" shall have that meaning set forth in Section
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8.3(a) hereof.
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Section 1.8 The "Closing" shall have that meaning set forth in Section 2.2
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hereof.
Section 1.9 "Closing Audit" shall have that meaning set forth in Section
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2.7(b) hereof.
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Section 1.10 "Closing Balance Sheet" shall have that meaning set forth in
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Section 2.7(b) hereof.
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Section 1.11 "Closing Date" shall mean the date upon which the Closing (as
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defined herein) shall occur.
Section 1.12 "Code" shall mean the Internal Revenue Code of 1986, as
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amended.
Section 1.13 "Commission" shall mean the Securities and Exchange
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Commission, or any other federal agency at the time administering the Act.
Section 1.14 "Competing Business" shall have that meaning set forth in
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Section 9.1(b) hereof.
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Section 1.15 "Contracts" shall mean the contracts, leases, licenses,
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warranties, commitments, agreements, arrangements, credit guaranties, purchase
and sale orders and contracts for the provision of services, whether oral or
written, to which the Company is a party, or pursuant to which the Company has
any right, benefit or obligation.
Section 1.16 "Damages" shall have that meaning set forth in Section 8.1(a)
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hereof.
Section 1.17 "Deliverable Consideration" shall mean that number of shares
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of Graphic Common Stock determined by subtracting the Escrow Consideration
(defined below) from the Merger Consideration (defined below).
Section 1.18 "Effective Period" shall have that meaning set forth in
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Section 7.4(a) hereof.
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Section 1.19 "Effective Time" shall mean such time as the Merger shall
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become effective pursuant to Section 1701.78 of the Ohio Corporate Law.
Section 1.20 "Employment Agreement" shall mean that certain Employment
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Agreement to be entered into by and between Richard A. Amendola and Acquisition,
substantially in the form of Exhibit A hereto.
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Section 1.21 "Environmental Laws" shall have that meaning set forth in
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Section 3.15(a) hereof.
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Section 1.22 "Environmental Permits" shall have that meaning set forth in
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Section 3.15(c) hereof.
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Section 1.23 "ERISA" shall mean the Employee Retirement Income Security
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Act of 1974, as amended.
Section 1.24 "Escrow Agent" shall mean National City Bank of Cleveland and
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its successors and assigns.
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Section 1.25 "Escrow Agreement" shall mean that certain Escrow Agreement
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to be entered into by and among Graphic, Acquisition, Stockholders and the
Escrow Agent, substantially in the form of Exhibit B hereto.
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Section 1.26 "Escrow Period" shall mean the period beginning on the
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Closing Date, and ending six (6) months thereafter except as such period may be
extended pursuant to the terms of the Escrow Agreement.
Section 1.27 "Escrow Consideration" shall mean that number of shares of
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Graphic Common Stock determined by multiplying 10% by the Merger Consideration
rounded to the nearest whole number.
Section 1.28 "Estimated Net Book Value" shall have that meaning set forth
------------------------
in Section 2.7(a) hereof.
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Section 1.29 "Existing Facility Lease" shall refer to the lease for the
-----------------------
Company's facility between the Company and RAM Enterprises dated April 1, 1995.
Section 1.30 "Financial Schedule" shall have that meaning set forth in
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Section 2.7(a) hereof.
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Section 1.31 "Financial Statements" shall mean the financial statements of
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the Company for the years ended December 31, 1992, December 31, 1993, December
31, 1994 and for the period ended May 31, 1995, all of which are attached hereto
as Schedule 3.7.
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Section 1.32 "Graphic Common Stock" shall mean shares of Common Stock,
--------------------
$0.10 par value per share, of Graphic.
Section 1.33 "Guaranties" shall mean the Guaranties of Graphic
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substantially in the form of Exhibit C hereto, which shall be issued to
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financial institutions or other entities or individuals at the Closing to secure
those certain guaranties of the Stockholders for obligations of the Company set
forth on Schedule 1.33.
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Section 1.34 "Indemnified Party" shall have that meaning set forth in
-----------------
Section 8.1(b) hereof.
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Section 1.35 "Indemnifying Party" shall have that meaning set forth in
------------------
Section 8.1(c) hereof.
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Section 1.36 "Intellectual Property" shall have that meaning set forth in
---------------------
Section 3.11 hereof.
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Section 1.37 "Interim Balance Sheet" shall mean the May 31, 1995 Balance
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Sheet of the Company.
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Section 1.38 "Lease Agreement" shall mean that certain Lease Agreement
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between the Company and RAM Enterprises, substantially in the form of Exhibit D
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hereto.
Section 1.39 "Merger Consideration" shall mean that number of shares of
--------------------
Graphic Common Stock determined by dividing $2,500,000 by the Stock Price and
rounding such number up to the nearest whole number.
Section 1.40 "Net Book Value" shall mean the total assets of the Company
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minus the total liabilities (contingent or otherwise) of the Company, as
determined in accordance with generally accepted accounting principles
consistently applied.
Section 1.41 "Non Third Party Claim" shall have that meaning set forth in
---------------------
Section 8.3(a) hereof.
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Section 1.42 "Ohio Corporate Law" shall means the General Corporation Law
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of Ohio.
Section 1.43 "Plans" shall have that meaning set forth in Section 3.20(a)
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hereof.
Section 1.44 "Preliminary Closing Balance Sheet" shall have that meaning
---------------------------------
set forth in Section 2.7(a) hereof.
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Section 1.45 "Principal Stockholders" shall mean Richard A. Amendola and
----------------------
Ronald R. Meredith, stockholders collectively owning 6660 shares of Common
Stock.
Section 1.46 "Proprietary Information" shall have that meaning set forth
-----------------------
in Section 9.1(c) hereof.
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Section 1.47 "Purchase Adjustments" shall means those adjustments, if any,
--------------------
to the Merger Consideration as set forth in Section 2.7 herein.
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Section 1.48 "Registration Statement" shall mean the Registration
----------------------
Statement on Form S-3, including any prospectus, supplements, amendments or
post-effective amendments and exhibits to be filed by Graphic with the
Securities Exchange Commission relating to the resell of the Merger
Consideration by the Stockholders.
Section 1.49 "Response Notice Period" shall have that meaning set forth in
----------------------
Section 8.3(a) hereof.
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Section 1.50 "Restricted Period" shall have that meaning set forth in
-----------------
Section 9.1(d) hereof.
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Section 1.51 "Stock Price" means the average closing price per share of
-----------
Graphic Common Stock as reported in the Wall Street Journal for each of the
-------------------
twenty (20) consecutive trading days preceding the third trading day prior to
the Closing.
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Section 1.52 "Surviving Corporation" shall mean the corporation that
---------------------
survives the Merger as set forth in the Certificate of Merger.
Section 1.53 "Tax Returns" shall have that meaning set forth in Section
----------- -------
3.8 hereof.
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Section 1.54 "Taxes" shall have that meaning set forth in Section 3.8
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hereof.
Section 1.55 "Transaction Documents" shall mean this Agreement, the Escrow
---------------------
Agreement, the Lease Agreement, the Employment Agreement and the Guaranties.
Section 1.56 "Third Party Claim" shall have that meaning set forth in
-----------------
Section 8.3(a) hereof.
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Section 1.57 "Undisclosed Liabilities" shall mean any other liability or
-----------------------
obligation of the Company of any nature, direct or indirect, matured or
unmatured, absolute or contingent or otherwise, whether accrued, due, to become
due or otherwise, whether or not incurred in respect of or measured by the
income of the Company and whether or not normally shown in a financial statement
prepared in accordance with generally accepted accounting principles, not
disclosed or reflected, or specifically reserved against, in any financial
statement delivered by the Company in accordance with this Agreement.
ARTICLE 2
THE MERGER
Section 2.1 The Merger. The Merger shall occur at the Effective Time upon
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the terms and subject to the conditions hereof and in accordance with Ohio
Corporate Law. Following the Merger, Acquisition shall continue as the
Surviving Corporation and be a wholly-owned subsidiary of Graphic, and the
separate corporate existence of the Company shall cease. Notwithstanding this
Section 2.1, Graphic may elect to merge the Company into another direct
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subsidiary of Graphic. In such event, the parties agree to execute an
appropriate amendment to this Agreement in order to reflect the foregoing.
Section 2.2 Effective Time. As soon as practicable after satisfaction or
--------------
waiver of all conditions to the Merger, the parties shall cause a certificate of
merger (the "Certificate of Merger") with respect to the Merger to be filed and
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recorded with the Secretary of the State of Ohio in accordance with Section
1701.78 of Ohio Corporate Law and shall take all such further actions as may be
required by law to make the Merger effective. The Merger shall be effective at
the Effective Time. Immediately prior to the filing of the Certificate of
Merger, a closing (the "Closing") will be held on [SEPTEMBER ____, 1995] at the
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offices of Walter & Haverfield, Cleveland, Ohio or such other time and place as
the parties agree, provided that in no event shall the Closing be held later
than [OCTOBER 31, 1995].
Section 2.3 Tax Consequences. It is intended that the Merger shall
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constitute a reorganization within the meaning of Sections 368(a)(1)(A) and
368(a)(2)(D) of the Code and that this Agreement shall constitute a "plan of
reorganization" for purposes of Section 368 of the Code.
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Section 2.4 Articles of Incorporation; Regulations; Directors and
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Officers. The Articles of Incorporation of Acquisition and the Regulations of
- --------
Acquisition as in effect at the Effective Time shall be the Articles of
Incorporation and Regulations of the Surviving Corporation, except that the name
of the Surviving Corporation shall be Carpenter Reserve Printing Company. The
Board of Directors and officers of Acquisition at the Effective Time shall be
the Board of Directors and officers of the Surviving Corporation.
Section 2.5 Merger Consideration. In exchange for the Shares, each of the
--------------------
Stockholders shall be entitled to receive a number of shares of Graphic Common
Stock determined by the following formula, subject to adjustment as set forth in
Section 2.7 below:
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A x B
-
C
where:
A = Merger Consideration
B = Number of Shares held by such Stockholder as set forth on Schedule 1
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C = Aggregate Number of Shares or 8,885
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Section 2.6 Payment of the Merger Consideration. At the Closing, upon
-----------------------------------
surrender by each of the Stockholders of the stock certificates representing the
Shares to be conveyed to Acquisition by each such Stockholder, each such
certificate being duly endorsed or accompanied by a stock power duly executed by
the Stockholder conveying such certificate, the Merger Consideration shall be
paid and distributed by Acquisition as follows:
(a) Each Stockholder shall receive a stock certificate representing
that portion of the Deliverable Consideration as is determined using the
formula set forth in Section 2.5 above, with any fractional share being
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rounded to the nearest whole number; and
(b) The Escrow Agent shall receive stock certificates representing the
Escrow Consideration, which it shall hold for the Escrow Period, as set
forth in the Escrow Agreement.
Section 2.7 Adjustment of Merger Consideration.
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(a) Within 30 days following the Closing Date, the Stockholders shall
prepare and deliver to Acquisition (i) an unaudited balance sheet of the
Company dated as of the Closing Date (the "Preliminary Closing Balance
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Sheet") which shall be prepared in accordance with generally accepted
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accounting principles consistently applied and which shall include the Net
Book Value of the Company as of the Closing Date (the "Estimated Net Book
------------------
Value") and (ii) a schedule (the "Financial Schedule") setting forth any
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proposed adjustment to the Merger Consideration based upon the difference
between the Net Book Value of the Company shown on the Interim Balance
Sheet and the Estimated Net Book Value; provided, however, that accounts
receivable may subsequently be valued in the manner described in Section
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2.7(c)(ii) hereof.
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(b) Graphic shall, at its expense, cause its certified public accountants,
Kanes Benator & Company L.L.C., to conduct an audit of the Preliminary
Closing Balance Sheet of the Company (the "Closing Audit"). The Closing
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Audit shall be completed within sixty (60) days after the receipt of the
Preliminary Closing Balance Sheet. The audited closing balance sheet
resulting from the Closing Audit (the "Closing Balance Sheet") shall be
---------------------
prepared in accordance with generally accepted accounting principles
consistently applied; provided, however, that if any portion of the
liability of the Company for deferred compensation payable in part to
Ronald Meredith pursuant to that certain agreement between the Company and
Ronald Meredith dated __________, 1990 as set forth on the Interim Balance
Sheet is extinguished by reason of the consummation of the Merger, Graphic
agrees that the amount so extinguished shall be included as income for the
Company on the Closing Balance Sheet, regardless of whether such inclusion
is in accordance with GAAP.
(c) Subject to Section 8.2 hereof, the Merger Consideration to be paid
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to the Stockholders for the Merger shall be adjusted, dollar for dollar, as
follows: (i) upward or downward, by the amount by which the Net Book Value
of the Company as shown on the Closing Balance Sheet, is more or less than
(whichever is the case) the Net Book Value of the Company as shown on the
Interim Balance Sheet; (ii) downward, by the face value of any accounts or
notes receivable in favor of the Company which are A) shown on the Closing
Balance Sheet, B) in excess of any bad debt reserve provided for in the
Closing Balance Sheet, and C) remain uncollected one hundred and twenty
(120) days after the date of the Closing Balance Sheet; (iii) downward, by
an amount equal to any loss, damage, cost or expense (including, but not
limited to, reasonable attorney's fees and court costs) incurred by Graphic
or Acquisition as a result of the breach of any representation, warranty or
covenant of the Company or of the Stockholders contained herein, in the
schedules attached hereto, in the Secretary's Certificate, in the
Employment Agreement (in the case of Richard A. Amendola) or in the Escrow
Agreement.
(d) The Stockholders holding a majority of the Shares shall, within 15
days following receipt by the Stockholders of the Closing Balance Sheet,
accept or reject the calculation of the Net Book Value reflected therein.
If the Stockholders holding a majority of the Shares accept the calculation
of Net Book Value, any payment due as a result of any adjustment to the
Merger Consideration as set forth in Section 2.7(c) above shall be made as
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provided in Section 2.7(e) hereof. If the Stockholders holding a majority
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of the Shares disagree with such calculation of Net Book Value, they shall
give written notice of such disagreement and the reason(s) therefore within
such 15 day period. Should the Stockholders holding a majority of the
Shares fail to notify Acquisition of a disagreement within such 15 day
period, all of the Stockholders shall be deemed to agree with any
adjustment to the Merger Consideration made in accordance with Section
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2.7(c) hereof. Any disagreement shall be resolved by arbitration, as set
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forth in Section 8.5 hereof.
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(e) If the Net Book Value set forth in the Closing Balance Sheet
exceeds the amount set forth in Section 2.7(c)(i) above, Acquisition shall
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pay to the Stockholders additional consideration in the form of Graphic
Common Stock determined by dividing the
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amount of such excess by the Stock Price and each Stockholder shall be
entitled to that portion of such additional consideration as corresponds to
the proportionate interest of such Stockholder as is set forth opposite
such Stockholder's name on Schedule 1 hereto. If the Net Book Value set
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forth in the Closing Balance Sheet is less than the amount set forth in
Section 2.7(c)(i) above, each of the Stockholders shall pay Acquisition
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additional consideration in the form of Graphic Common Stock determined by
dividing the amount of such deficiency by the Stock Price and each
Stockholder shall pay Acquisition that portion of such additional
consideration as corresponds to the proportionate interest of such
Stockholder as is set forth opposite such Stockholder's name on Schedule 1
hereto. Any payment in the form of Graphic Common Stock under this Section
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2.7(e) shall be made by rounding the number of shares of Graphic Common
------
Stock to the closest whole number and no fractional shares shall be paid or
payable.
(f) Nothing in this Section 2.7 shall in any way limit or decrease the
-----------
liability of the Stockholders and the Company to Graphic and Acquisition
for any default or breach of this Agreement or the documents mentioned in
Section 2.7(c)(iii) above (with the exception of the Employment Agreement),
-------------------
except as set forth in subsection (g) below.
(g) In the event there is a reduction in the Merger Consideration to
be paid the Stockholders as set forth in this Agreement, the amount of such
reduction shall be first paid to Graphic or Acquisition from the Escrow
Consideration in accordance with the Escrow Agreement, and if the Escrow
Consideration is not sufficient to pay such deficiency, the Principal
Stockholders shall remain jointly and severally liable therefor and the
remaining Stockholders shall be severally liable therefore; provided,
however, that the liability of each of the Principal Stockholders in
connection with such deficiency shall be limited to the combined total
amount of Merger Consideration payable to all of the Principal
Stockholders, and the liability of each of the remaining Stockholders in
connection with such deficiency shall be limited to the aggregate amount of
Merger Consideration payable to such Stockholders pursuant to this
Agreement. Such payment from the Escrow Consideration, however, shall not
be the exclusive remedy of Graphic or Acquisition for the payment of such
reduction.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS
The Stockholders, jointly and severally, represent and warrant to
Acquisition and Graphic as follows:
Section 3.1 Organization; Power; Qualification: The Company is a
----------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the State of Ohio. The Company has no subsidiaries and is not a party to any
joint venture nor a partner of any partnership. The Company has the corporate
power and authority to own or lease and operate its properties and to carry on
its business as now being conducted, and is duly qualified and in good standing
and
-8-
<PAGE>
authorized to do business as a foreign corporation in each jurisdiction set
forth on Schedule 3.1, which constitutes each jurisdiction in which the
------------
character of its properties or the nature of its business requires such
qualification and authorization.
Section 3.2 Authority. The execution and delivery of this Agreement by
---------
the Company and each Stockholder constitute valid and legally binding
obligations of the Stockholders and the Company, enforceable in accordance with
its terms. The execution and delivery of the Lease Agreement by the Company
will constitute the valid and legally binding obligation of the Company,
enforceable in accordance with its terms. The execution and delivery of the
Escrow Agreement by each Stockholder will constitute the valid and legally
binding obligation of such Stockholder, enforceable in accordance with its
terms. Richard A. Amendola represents that the execution and delivery of the
Employment Agreement by Mr. Amendola will constitute a valid and legally binding
obligation of Mr. Amendola, enforceable in accordance with its terms.
Section 3.3 Capital Structure. The authorized capital stock of the
-----------------
Company consists of 20,000 shares, no par value common voting stock, of which
8,885 shares are issued and outstanding on the date of this Agreement. The
Company does not hold any shares of its authorized capital stock in its
treasury. All of the shares of the Company's stock issued and outstanding as of
the date hereof are duly authorized, validly issued and fully paid and
nonassessable under Ohio Corporate Law and all predecessor statutes. There are
no warrants, rights, options, subscriptions or agreements to issue shares of any
class of capital stock, securities convertible into capital stock or property of
the Company or other securities of the Company. As of the date hereof, there is
not any liability or dividends declared or accumulated but unpaid with respect
to the Company's capital stock. Between the date of the Company's incorporation
and the date hereof, the Company has not directly or indirectly redeemed,
purchased or otherwise acquired any shares of its capital stock except as listed
in Schedule 3.3. All shares of the Company's capital stock have been issued in
------------
compliance with applicable and available exemptions from the registration
requirements of the Act and applicable state securities laws.
Section 3.4 Title to Shares. Each of the Stockholders owns the Shares set
---------------
forth opposite such Stockholder's name on Schedule 1 hereto and, except as
----------
disclosed on Schedule 3.4 hereto, each Stockholder has good, valid and
------------
marketable title to such Shares, free and clear of any and all liens, options,
contracts, calls, commitments, demands, encumbrances, equities, pledges or
claims whatsoever. The Shares represent all of the issued and outstanding
shares of the capital stock of the Company, and the Shares are duly authorized,
validly issued, fully paid and nonassessable. Upon consummation of the Merger,
Graphic will obtain good and valid title to the Shares, free and clear of any
and all liens, encumbrances, equities and claims whatsoever.
Section 3.5 No Third Party Options. There are no existing agreements,
----------------------
options, commitments or rights with, of or to any person to acquire any
securities of the Company, or any of the Company's assets, properties, or
rights.
Section 3.6 Compliance with Laws and Validity of Contemplated
-------------------------------------------------
Transactions. The execution, delivery and performance of this Agreement by the
Company and the Stockholders in accordance with its terms and the consummation
of the transactions contemplated hereby does not
-9-
<PAGE>
and will not (a) violate any law applicable to the Company or the Stockholders;
(b) conflict with, result in a breach of, or constitute a default under the
Articles of Incorporation or Regulations of the Company or under any indenture,
agreement, or other instrument to which the Company or any of the Stockholders
is a party or by which they or any portion of their respective properties may be
bound, or (c) result in or require the creation or imposition of any lien upon
or with respect to any property now owned or hereafter acquired by the Company
or any of the Stockholders. No authorization, approval, or consent of, and no
registration or filing with, any governmental or regulatory official body or
authority is required in connection with the execution, delivery or performance
by Stockholders or the Company of this Agreement or the Escrow Agreement.
Section 3.7 Financial Statements.
--------------------
(a) The Financial Statements and the Interim Balance Sheet (i) are in
accordance with the books and records of the Company; (ii) are complete and
correct and present fairly the financial condition of the Company as of the
respective dates indicated and the results of operations for the respective
periods indicated; (iii) with respect to the determination of Net Book
Value, have been prepared in accordance with generally accepted accounting
principles consistently applied; and (iv) reflect adequate reserves for all
known liabilities and reasonably anticipated losses, except the Net Book
Value of the Company as shown on the Interim Balance Sheet is subject to
adjustment for applicable income taxes in an amount to be agreed in writing
between Graphic and the Stockholders.
(b) The accounts receivable shown on Financial Statements or acquired
by the Company after the date thereof and prior to the date hereof have
been, and all accounts receivable acquired after the date hereof and prior
to the Closing Date will be, acquired or created only in the ordinary
course of business and represent or will represent bona fide transactions
completed in accordance with the terms and provisions contained in any
documents related thereto. Except as set forth on Schedule 3.7(b), all
---------------
accounts receivable shown on the Financial Statements or acquired by the
Company after the date thereof and prior to the date hereof are free and
clear of any and all liens, claims, charges, encumbrances, security
interests or other rights against such accounts receivable in favor of
others. There are no setoffs, counterclaims or disputes asserted or
conditions precedent to payment therefor with respect to any such account
receivable, no discount or allowance from any such account receivable has
been made or agreed to and no account receivable represents billings prior
to actual shipment of goods, including "bill and hold" accounts. The
Company has established a bad debt reserve, as shown on the Financial
Statements, and there is no fact or circumstance which would impair the
validity or collectibility of the Company's accounts receivable in an
amount in excess of such bad debt reserve.
(c) Except as set forth on Schedule 3.7(c), inventories reflected on
---------------
the Financial Statements or acquired or to be acquired by the Company
thereafter and prior to the Closing Date, (i) are and will on the Closing
Date be in good condition, consist and will consist of materials and
supplies, of a quality and quantity which are usable or salable in the
ordinary course of its business, and meet and will meet all applicable
government standards, (ii) are now and will on the Closing Date be located
on the regular business premises of the
-10-
<PAGE>
Company, (iii) are now and will on the Closing Date be owned by the Company
free of any liens, claims, charges, encumbrances, security interests or
other rights to or against such inventories in favor of others, except as
set forth on Schedule 3.7(c), and (iv) have been or will be acquired by the
---------------
Company only in bona fide transactions entered into in the ordinary course
of business. None of such inventory is now, or on the Closing Date will
be, held by the Company on consignment.
(d) The books and records of the Company have been maintained in all
material respects in accordance with sound business practices.
Section 3.8 Tax and Other Returns and Reports.
---------------------------------
(a) All federal, state, local and foreign tax returns, reports,
statements and other similar filings required to be filed by the Company or
by the Stockholders with respect to the business of the Company (the "Tax
---
Returns") in connection with any federal, state, local or foreign taxes,
-------
assessments, interest, penalties, deficiencies, fees and other governmental
charges or impositions with respect to the business of the Company,
(including without limitation all income tax, unemployment compensation,
social security, payroll, sales and use, excise, privilege, property, ad
valorem, franchise, license, school and any other tax or similar
governmental charge or imposition under laws of the United States or any
state or municipal or political subdivision thereof or any foreign country
or political subdivision thereof) (the "Taxes") have been filed with the
-----
appropriate governmental agencies in all jurisdictions in which such Tax
Returns are required to be filed, and all such Tax Returns properly reflect
the liabilities for Taxes for the periods, property or events covered
thereby. All Taxes, including, without limitation, those which are called
for by the Tax Returns, or heretofore or hereafter claimed to be due by any
taxing authority have been properly paid or accrued in the Financial
Statements including, without limitation, deferred taxes accrued in
accordance with generally accepted accounting principles. The Company has
not received any notice of assessment or proposed assessment in connection
with any Tax Returns and there are not pending tax examinations of or tax
claims asserted with respect to the Company. There has been no extension
or waiver of the application of, any statute of limitations of any
jurisdiction regarding the assessment or collection of any Taxes. There
are no tax liens (other than any lien for current taxes not yet due and
payable) on any of the assets or properties of the Company. None of the
Stockholders nor the Company has any knowledge of any basis for any
additional assessment of any Taxes.
(b) The Company has withheld and paid all taxes required to have been
withheld and paid in connection with amounts paid or owing to any employee,
independent contractor, creditor, stockholder, or other third party.
-11-
<PAGE>
Section 3.9 Personal Property.
-----------------
(a) Schedule 3.9(a) contains an accurate and complete list of all
---------------
machinery, vehicles and equipment and other items of personal property
owned by the Company including a description of the location of such
personal property. Except as set forth on Schedule 3.9(a), the Company has
---------------
good title to all such items, free and clear of all liens, claims, charges,
security interests and other encumbrances of any kind or nature. All such
items of personal property are in good operating condition and conform to
all applicable laws, ordinances, codes, rules, regulations and
authorizations relating to their construction, use or operation.
(b) Schedule 3.9(b) contains an accurate and complete list of all
---------------
leases for machinery, vehicles, equipment or other items of personal
property leased by the Company. Each of the leases disclosed in Schedule
--------
3.9(b) is in full force and effect and there are no existing defaults or
------
events of default, real or claimed, or events which with notice or lapse of
time or both would constitute a default. All items of leased personal
property are in good operating condition and in a state of reasonable
maintenance and repair. The continuation, validity and effectiveness of
these personal property leases will in no way be affected by the
transactions contemplated by this Agreement.
Section 3.10 Real Property.
-------------
(a) The Company does not own any real property.
(b) The Existing Facility Lease is the only real property lease to
which the Company is a party. Such Existing Facility Lease is in full
force and effect and, except as disclosed on Schedule 3.10(b), there are no
----------------
existing defaults or events of default, real or claimed, or events which
with notice or lapse of time or both would constitute defaults. The
Existing Facility Lease is free and clear of any mortgages or liens and is
not subject to any deeds of trust, assignments, subleases, or rights of any
third parties other than the lessor thereof.
(c) The Existing Facility Lease will be in full force and effect on
the Closing Date.
Section 3.11 Intellectual Property. Schedule 3.11 contains an accurate
--------------------- -------------
and complete list of all trade names, trademarks, trade styles and service
marks, patents, patent applications, copyrights, copyright applications,
trademark registrations and trademark applications (the "Intellectual Property")
---------------------
used or useful in the business of the Company that are owned by or registered in
the name of the Company or to which the Company has any rights as licensee or
otherwise, giving in each case a brief description of the terms of such license
or other arrangement. The Company has not infringed or made any unlawful use or
received notice of any such claimed infringement or unlawful use of any such
Intellectual Property. The Company has not received notice that the
manufacture, use or sale by the Company of its products, or any component or
part thereof, nor any manufacturing operation or machinery employed by the
Company, violates or
-12-
<PAGE>
infringes upon any claims of any United States or foreign patent or patent
application owned or held by any third party. The Company owns (or possesses
adequate and enforceable rights to use without payment of royalties) all
Intellectual Property necessary for the conduct of, or used in, its business as
the same is presently being conducted.
Section 3.12 Insurance. Schedule 3.12 contains a list and brief
--------- -------------
description of the policies of fire, liability and other forms of insurance
owned or held by the Company, or in which the Company is named as an insured
party. The properties and business of the Company of an insurable nature are
insured to the extent and against such risks customarily insured against by
corporations of similar size and in similar businesses. All policies listed on
Schedule 3.12 will be outstanding and in full force and effect on the Closing
- -------------
Date, and there does not exist, and will not exist as of the Closing Date, any
claims with respect to such policies.
Section 3.13 Litigation. Except as set forth on Schedule 3.13, there is
---------- -------------
no litigation, arbitration or other similar proceeding pending or, to the
knowledge of the Stockholders, threatened against or affecting the Company, its
properties or its rights or which pertains to the transactions contemplated by
this Agreement. The Stockholders do not know of any reasonably likely basis for
any such litigation, arbitration or similar proceeding, the result of which
would adversely affect the Company or the transactions contemplated hereby.
Neither the Stockholders nor the Company is a party or subject to the provisions
of any judgement, order, writ, injunction decree or award of any court,
arbitrator, or governmental or regulatory official body or authority which may
adversely affect the Company or the transactions contemplated hereby.
Section 3.14 Compliance with Laws. The Company is not in default under
--------------------
any order of any court, governmental authority or arbitration board or tribunal,
or under any laws, ordinances, governmental rules or regulations to which it is
subject. The Company has obtained all licenses, permits, easements, rights,
applications, registrations, filings and franchises or other governmental
authorizations ("Authorizations") necessary to the ownership of its properties
--------------
or the conduct of its business. Set forth on Schedule 3.14 is a complete list
-------------
all such Authorizations. The Company is not in default nor has it received any
notice of any claim of default with respect to any such Authorization. All of
such Authorizations are renewable in the ordinary course of business without the
need to comply with any special qualification procedures or to pay any amounts
other than routine filing fees. None of such Authorizations will be adversely
affected by consummation of the transactions contemplated hereby.
Section 3.15 Environmental Matters.
---------------------
(a) Except as set forth on Schedule 3.15(a), operations of the Company
----------------
have been in the past and are now in compliance with all federal, state and
local laws, statutes, rules, regulations, ordinances, codes, orders, decrees,
judgments and all other governmental requirements and restrictions, now in
existence or hereafter amended or promulgated, relating to pollution,
contamination or protection of the environment or public or employee health or
safety (collectively, the "Environmental Laws") including, without limitation,
------------------
those relating to the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, 42 U.S.C. (S) 9601 et seq., the Resource Conservation and
Recovery Act of 1976, 42 U.S.C. (S) 6901 et seq., the Hazardous
-13-
<PAGE>
Materials Transportation Act, 49 U.S.C. (S) 6901 et seq., the Federal Water
Pollution Control Act, 33 U.S.C. (S) 1251 et seq., the Safe Water Drinking Act,
42, U.S.C. (S) 300f-300j, the Clean Air Act, 42 U.S.C. (S) 7401 et seq., the
Occupational Safety and Health Act, and all other statutory and all common law
(including, without limitation, nuisance, trespass, negligence and toxic torts).
(b) Neither the Company nor any Stockholder has been notified or is
aware of any violation of any Environmental Laws; neither the Company nor any
Stockholder is otherwise aware that the Company may be potentially responsible
or otherwise liable under the Environmental Laws; and neither the Company nor
any Stockholder has received any requests for information, notices, pleadings or
other documents (including, without limitation, consent orders, consent decrees,
judgments, orders, complaints or injunctions) relating to (i) the Environmental
Laws, (ii) environmental protection or health or safety matters, or (iii) any
statutory or common law theory of liability involving environmental or health or
safety matters.
(c) The Company has had in the past and presently has all governmental
permits, licenses, consents, approvals and authorizations relating to
environmental protection or health or safety matters (collectively,
"Environmental Permits") necessary to conduct its operations and has been in the
- ----------------------
past and is presently in compliance with all the Environmental Permits
(including, without limitation, any information provided on the applications
therefor and all restrictions or limitations therein) and has made all
appropriate filings for issuance or renewal of all the Environmental Permits.
(d) No use, storage, treatment, generation recycling, disposal,
releases, threatened releases, handling, burial or placement of any materials
regulated under or defined by any Environmental Laws has occurred in the past or
is presently occurring on, in, at, under, over or about any property, building
or other structure currently or formerly owned, leased, operated or otherwise
used by the Company or the Stockholders; and no materials regulated under or
defined by Environmental Laws have been in the past or are presently on, in, at,
under, over or about any property, building or other structure currently or
formerly owned, leased, operated or otherwise used by the Company or the
Stockholders.
(e) No under or above ground tanks have been in the past or are
presently on, in, at, under, over or about any property, building or other
structure currently or formerly owned, leased, operated or otherwise used by the
Company or the Stockholders.
(f) Neither the Company nor any Stockholder has used any waste
disposal site or otherwise disposed of, transported, or arranged for the
transportation of any material regulated under or defined by any Environmental
Laws to any place or location.
(g) There are no past or present conditions, events, circumstances,
facts, activities, incidents, actions, omissions or plans: (i) that may
interfere with or prevent continued compliance with Environmental Laws and
Environmental Permits; or (ii) that give or may give rise to any liability or
other obligation under any Environmental Laws; or (iii) that form or may form
the basis of any claim, action, suit, proceeding, hearing, investigation or
inquiry against or involving
-14-
<PAGE>
the Company or the Stockholders based on or related to any Environmental Laws or
Environmental Permits.
(h) No lien exists, and no condition exists which could result in
filing a lien, under any Environmental Laws against any property owned, leased,
operated or otherwise used by the Company.
Section 3.16 Absence of Changes. Since May 31, 1995 except as described
------------------
on Schedule 3.16, there has not been any transaction or occurrence in which the
-------------
Company has: (a) issued or delivered any stock or other securities or granted
any options or rights to purchase any securities; (b) borrowed any amount or
incurred any material liabilities (absolute or contingent), except in the
ordinary course of business; (c) made any loans or extended any credit to any
individual or entity except in the ordinary course of business; (d) discharged
or satisfied any lien or incurred or paid any obligation or liability (absolute
or contingent) other than current liabilities shown on the Interim Balance Sheet
or current liabilities incurred since such date in the ordinary course of
business; (e) declared any dividend or made any payment or distribution to the
Stockholders or purchased or redeemed any shares of its capital stock or other
securities; (f) mortgaged, pledged or subjected to lien any of its assets,
tangible or intangible, other than liens for current real property taxes not yet
due and payable; (g) sold, assigned or transferred any of its tangible assets,
except for sale of inventory in the ordinary course of business, or entered into
any discussions or negotiations for the sale, assignment or transfer of any such
assets, or cancelled any debts or claims; (h) sold, assigned or transferred any
patents, trademarks, trade names, copyrights, or other Intellectual Property;
(i) suffered any material adverse change in its business or financial position;
(j) made any change in its accounting policies or practices; (k) made any change
in employee compensation; (l) entered into any transaction with a Stockholder,
director, officer or employee of the Company or any member of such person's
immediate family; or (m) entered into any transaction other than in the ordinary
course of business or as otherwise contemplated hereby.
Section 3.17 Absence of Undisclosed Liabilities. The Company has no
----------------------------------
Undisclosed Liabilities.
Section 3.18 Assets. The Company owns or leases all equipment, furniture,
------
fixtures, and other personal property and assets necessary for the continued
operation of the business of the Company as presently conducted, where the
absence of such property would materially and adversely affect the Company as a
whole.
Section 3.19 Employees. Schedule 3.19 contains a true and complete list
--------- -------------
of all employees of the Company, their salaries or wage rates, accrued vacation
and their location of employment as of _______________, 1995 and a description
of all pension, profit sharing, bonus, medical benefits, group insurance
programs or similar arrangements in effect for employees of the Company. The
Company is not in default with respect to any of its obligations relating to
attached salaries, wages or group insurance programs in respect of employees of
the Company.
-15-
<PAGE>
Section 3.20 Employee Benefit Plans.
----------------------
(a) Except as set forth on Schedule 3.20, the Company has complied,
-------------
and currently is in compliance, in all material respects with the
applicable provisions of ERISA and the Code with respect to each employee
benefit plan (as defined under Section 3(3) of ERISA) and all other
pension, profit sharing, retirement, deferred compensation, stock purchase,
stock option, incentive, bonus, vacation, severance, disability,
hospitalization, medical, life insurance or other employee benefit plans,
whether written or unwritten, now or previously maintained by the Company
(the "Plans") and a brief description of each such Plan now maintained is
-----
set forth on Schedule 3.20 hereto;
-------------
(b) The Company has not maintained, adopted or established,
contributed to or been required to contribute to, or otherwise participated
in or been required to participate in, any employee benefit plan or other
program or arrangement subject to Title IV of ERISA;
(c) The Company has not incurred any material liability with respect
to the Plans which has not been satisfied in full or been accrued on the
Financial Statements pending full satisfaction, and no event has occurred,
and there exists no condition or set of circumstances, which could result
in the imposition of any material liability with respect to such Plans.
Each plan could be terminated on the Closing Date without liability to the
Company or Acquisition, including, without limitation, any additional
contributions, penalties, premiums, fees or other charges.
Section 3.21 Labor Matters. Schedule 3.21 contains a complete and
------------- -------------
accurate list of all claims brought by employees against the Company in the past
three (3) years, including, without limitation, (i) workers compensation claims;
(ii) claims brought by employees of the Company before the Equal Employment
Opportunity Commission; (iii) claims brought by employees under the Americans
with Disabilities Act, 49 U.S.C. (S) 1201.01 et seq.; (iv) claims brought by
employees under the Age Discrimination in Employment Act 29 U.S.C. (S) 621 et
seq.; (v) charges brought by employees before the National Labor Relations Board
under the National Labor Relations Act, 29 U.S.C. (S) 151 et seq.; (vi) charges
brought against the Company by the Occupational Safety and Health Administration
or complaints filed against the Company by employees with such administration;
(vii) claims brought by employees under the Occupational Safety and Health Act,
29 U.S.C. (S) 651 et seq.; (viii) claims brought by employees under the Fair
Labor Standards Act before the Department of Labor, 29 U.S.C. (S) 201 et seq.;
or (ix) claims brought by employees asserting violations of state law or state
common law.
Section 3.22 Contracts and Commitments.
-------------------------
(a) Schedule 3.22 sets forth an accurate and complete list of each
-------------
Contract, true and complete copies of which have been previously provided
to Graphic or Acquisition, which is a:
(i) Contract for employment, or a non-competition agreement with
any present or former employee of the Company;
-16-
<PAGE>
(ii) Contract with any labor union or other representative of
employees;
(iii) Contract for the lease or use of equipment;
(iv) Contract for the purchase, sale, production or supply of
goods or services (other than purchase orders in amounts not exceeding
$10,000);
(v) Distributor, sales agency or vendor Contract or any
franchise or license agreement;
(vi) Note, debenture, bond, equipment trust agreement, letter
of credit agreement, loan agreement, or other Contract for borrowing
or lending of money, or agreement or arrangement for a line of credit
or guaranty, pledge, or undertaking of the indebtedness of any other
person;
(vii) Contract under the terms of which the Company is, directly
or indirectly, liable upon or with respect thereto or is obligated in
any other way to provide funds with respect of, or to guaranty or
assume, any debt or obligation of any other person or entity, except
endorsements made in the ordinary course of business in connection
with the deposit of items for collection; or
(viii) Contract upon which the business, rights or assets, or
condition, financial or otherwise, of the Company depends or is
materially affected.
(ix) Contract for the provision of services by any individual
or entity in excess of $10,000 (including, but not limited to, any
Contracts with attorneys, accountants, consultants or contractors).
(b) Each of the Contracts listed in Schedule 3.22 is in full force and
-------------
effect and there are no existing defaults or events of default, real or
claimed, or events which with notice or lapse of time or both would
constitute a default. Except as set forth on Schedule 3.22, none of the
-------------
Contracts listed in Schedule 3.22, in the reasonable opinion of the
-------------
Stockholders contain any provision with which there is a reasonable
likelihood the Stockholders, the Company or any other party thereto will be
unable to comply. Except as reflected in such Schedule 3.22, the
-------------
continuation, validity and effectiveness of such Contracts, and all other
material terms thereof, will in no way be affected by the transactions
contemplated by this Agreement. Except as set forth on Schedule 3.22, none
-------------
of the Contracts listed in Schedule 3.22 requires the consent of any party
-------------
to its assignment in connection with the transactions contemplated hereby
except those consents which have been obtained.
(c) There exists no actual or threatened termination, cancellation or
limitation of, or any modification or change in, (i) the business
relationship of the Company with any customer or group of customers of the
Company whose purchases individually or in the aggregate are material to
the operations and financial condition of the Company, (ii) the
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<PAGE>
business relationship of the Company with any material supplier to the
Company, or (iii) the relationship between the Company and any of its
employees not occurring in the ordinary course of business.
Section 3.23 Banks. Schedule 3.23 lists all banks or other financial
----- -------------
institutions with which the Company has an account, line of credit or safe
deposit box and the account numbers thereof and names of persons authorized to
act in connection therewith.
Section 3.24 Transactions with Affiliates. Except as set forth in
----------------------------
Schedule 3.24, no Stockholder or any officer, director or employee of the
- -------------
Company, or any member of their immediate families or any other of their
affiliates, has had, during the past three years, a relationship or an ownership
interest in any corporation or other entity that is or was during the past three
years a party to any Contract, agreement, business arrangement or relationship
with the Company.
Section 3.25 Corporate Names. The Company has not, during the preceding
---------------
five years, been known as or used, directly or through any predecessor,
affiliate or any acquired entity, any other corporate or fictitious name, except
as disclosed on Schedule 3.25 hereof.
-------------
Section 3.26 Customer Relations. To the best knowledge of the
------------------
Stockholders and the Company, relations with customers or suppliers are
continuing in good order, and there are no known outstanding disputes with
customers or suppliers.
Section 3.27 Consents. Except as listed on Schedule 3.27 hereto, no
-------- -------------
consent, approval or authorization of any governmental authority or other
persons or entities is required in connection with the execution, delivery or
performance of this Agreement, the Escrow Agreement, or the Employment Agreement
on the part of the Company or any of the Stockholders or the consummation of the
transactions contemplated herein and therein, other than corporate authority on
behalf of the Company.
Section 3.28 Broker's or Finder's Fees. Neither the Company nor any
-------------------------
Stockholder nor any of the Company's directors or employees has employed any
broker, agent or finder or incurred any liability for brokerage fees, agents'
commissions or finder's fees in connection with the transactions contemplated by
this Agreement.
Section 3.29 Securities Representations.
--------------------------
(a) Each Stockholder either alone or with his or her purchaser
representative has such knowledge and experience in financial and business
matters that he or she is capable of evaluating the merits and risks of
obtaining the Graphic Common Stock and making an investment in Graphic. No
assurances have been made as to the future income or success of Graphic.
Each Stockholder has had an opportunity to ask questions and receive
satisfactory answers from the officers and directors of Graphic concerning
Graphic and the terms and conditions of his or her investment in capital
stock of Graphic.
-18-
<PAGE>
(b) No Stockholder has received any representations or warranties,
other than those set forth in this Agreement, from the officers, directors,
affiliates, agents or representatives of Graphic in making his or her
decision to exchange his or her capital stock in the Company for the Merger
Consideration, and each Stockholder is relying solely on the information
contained in this Agreement, in any prospectus delivered to him or her, and
personal investigation.
(c) Each Stockholder is presently a bona fide resident of the state
listed on Schedule 3.29(c) attached hereto and has no present intention of
----------------
becoming a resident of any other state or jurisdiction.
(d) Each Stockholder has made other investments of this type and, by
reason of his or her business and financial experience and of the business
and financial experience of those persons he or she has retained to advise
him or her with respect to his or her acquisition of the Merger
Consideration he or she has obtained the capacity to protect his or her own
interest in investments of this nature. In reaching the conclusion that he
or she desires to acquire the Merger Consideration, each Stockholder has
carefully evaluated his or her financial resources and investment position
and the risks associated with his or her investment in Graphic and
acknowledges that he or she is familiar with and able to bear any economic
risk of such investment.
(e) Each Stockholder understands and agrees that the Merger
Consideration is to be issued to him or her without registration under any
state or federal law relating to the registration of securities and will be
issued to him or her in reliance on exemptions from registration under
appropriate state and federal laws and that reliance by Graphic on such
exemptions is predicated in part on the representations set forth in this
Section 3.29. Each Stockholder is acquiring the Merger Consideration for
------------
his or her own account, to hold for investment, and with no present
intention of dividing his or her participation with others or reselling or
otherwise participating, directly or indirectly, in the distribution of the
Merger Consideration and shall not make any transfer, sale, or other
disposition of the Merger Consideration: (i) other than pursuant to an
effective registration under applicable state securities laws or in a
transaction which is otherwise in compliance with those laws; (ii) other
than pursuant to an effective registration under the Act or a transaction
otherwise in compliance with the Act; and (iii) in a manner so that the
disposition of such Merger Consideration does not cause the transactions
contemplated by this Agreement to fail to qualify as a reorganization under
Section 368 of the Code.
(f) No Stockholder has received any public solicitation or
advertisement concerning an offer to sell Graphic Common Stock. Each
Stockholder has received and reviewed copies of Graphic's Annual Report on
Form 10-K (including the Annual Report to Shareholders) for the fiscal year
ended January 31, 1995, all Quarterly Reports on Form 10-Q for fiscal year
ended January 31, 1995, and Graphic's Proxy Statement for the 1995 Annual
Meeting of Shareholders.
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<PAGE>
Section 3.30 Correctness of Representations. No representation or
------------------------------
warranty of the Stockholders in this Agreement or in any statement, certificate
or schedule furnished by the Stockholders pursuant hereto, or in connection with
the transactions contemplated hereby, contains or, on the Closing Date will
contain, any untrue statement of a material fact or omits or, on the Closing
Date will omit, to state any material fact necessary in order to make the
statements contained therein not misleading, and all such statements,
representations, warranties, certificates and schedules will be true and
complete on and as of the Closing Date as though made on that date. True copies
of all deeds, title insurance policies, mortgages, indentures, notes, plans,
Contracts and other instruments listed on or referred to, or otherwise related
to any item referred to, in the schedules delivered or furnished to Acquisition
pursuant to this Agreement have been delivered to or have been made available to
or will be made available for inspection by Acquisition and Acquisition's
attorneys and accountants.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF ACQUISITION AND GRAPHIC
Acquisition and Graphic, jointly and severally, represents and warrants to
the Stockholders as follows:
Section 4.1 Organization; Power; Qualification. Each of Acquisition and
----------------------------------
Graphic is a corporation duly organized, validly existing and in good standing
under the laws of the State of Ohio and Georgia, respectively. Each of
Acquisition and Graphic has the corporate power and authority to own or lease
and operate its properties to carry on its business as now being conducted, and
is duly qualified and in good standing and authorized to do business as a
foreign corporation in each jurisdiction in which the character of its
properties or the nature of its business requires such qualification and
authorization.
Section 4.2 Authority. Each of Acquisition and Graphic has the corporate
---------
power and has taken all necessary corporate action to authorize Acquisition or
Graphic, as the case may be, to execute, deliver and perform such of the
Transaction Documents to which it is a party and to consummate the transactions
contemplated hereby and thereby. The execution and delivery by each of
Acquisition and Graphic of each of the Transaction Documents to which it is a
party constitutes the valid and legally binding obligation of Acquisition or
Graphic, as the case maybe, enforceable in accordance with such Transaction
Documents' terms.
Section 4.3 Compliance with Laws and Validity of Contemplated
-------------------------------------------------
Transactions. The execution, delivery and performance of this Agreement by
Acquisition in accordance with its terms and the consummation of the
transactions contemplated hereby does not and will not (a) violate any
applicable law, (b) conflict with, result in a breach of, or constitute a
default under the Articles of Incorporation or By-Laws of Acquisition or under
any indenture, agreement or other instrument to which Acquisition is a party or
by which it or any of its properties may be bound; or (c) result in or require
the creation or imposition of any lien upon or with respect to any material
property now owned or hereinafter acquired by Acquisition. No authorization,
approval, or consent of and no
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registration or filing with, any governmental or regulatory official body or
authority is required in connection with the execution, delivery or performance
by Acquisition of this Agreement.
Section 4.4 Investment Representation. Acquisition is aware that the
-------------------------
Shares are not registered under the Act. Acquisition possesses such knowledge
and experience in business matters such that it is capable of evaluating the
merits and risks of an investment in the Shares hereunder. Acquisition is
acquiring the Shares for its own account, for investment purposes only and not
with a view to the distribution thereof. Acquisition agrees that the Shares
will not be sold, transferred, pledged, offered for sale or otherwise disposed
of without registration under the Act, except pursuant to a valid exemption from
registration under the Act.
Section 4.5 Merger Consideration. Each share of Merger Consideration,
--------------------
when issued and delivered as contemplated by this Agreement and the Escrow
Agreement, will be duly authorized, validly issued, fully paid and non-
assessable. None of the Merger Consideration is subject to any liens or other
rights, and there are no options, warrants, purchase agreements, put agreements,
call agreements or other agreements to which Acquisition or Graphic is a party
which relate to or affect the transfer of the Merger Consideration.
Section 4.6 Broker's or Finders Fees. Neither Graphic nor Acquisition nor
------------------------
any director or employee of Graphic or Acquisition has employed any broker,
agent or finder or incurred any liability for brokerage fees, agents'
commissions or finder's fees in connection with the transactions contemplated by
this Agreement; provided, however, that Graphic and Acquisition make no
representations or warranties with respect to the liability of Graphic to pay
David Whitacre. If any amounts are owed to David Whitacre with respect to the
transactions contemplated by this Agreement, the payment of such amounts shall
be the responsibility of Graphic.
Section 4.7 Graphic Reports. Graphic has delivered to Richard Amendola
---------------
for distribution to each of the Stockholders copies of Graphic's Annual Report
on Form 10-K (including the Annual Report to Shareholders) for the fiscal year
ended January 31, 1995, all Quarterly Reports on Form 10-Q for fiscal year ended
January 31, 1995, and Graphic's Proxy Statement for the 1995 Annual Meeting of
Shareholders. As of their respective dates, none of the above-mentioned reports
contained any untrue statement of material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements made
therein, in light of the circumstances in which they were made, not misleading.
ARTICLE 5A
OBLIGATIONS AND COVENANTS OF THE STOCKHOLDERS AND THE COMPANY
Section 5A.1 Conduct of the Company's Business Prior to Closing. From the
--------------------------------------------------
date hereof to the Closing Date, and except to the extent that Acquisition shall
otherwise consent in writing, the Stockholders and the Company shall:
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(a) operate the Company's business as presently operated and only in
the ordinary course, and use their best efforts to preserve intact its good
will, reputation and present business organization and to preserve its
relationships with persons having business dealings with it;
(b) maintain all of the Company's properties in good order and
condition, reasonable wear and use excepted;
(c) take all steps reasonably necessary to maintain the Company's
intangible assets, including without limitation, its patents, trademarks,
trade names, copyrights, licenses and any pending applications therefor;
(d) pay the liabilities or other obligations of the Company and
collect its accounts receivable in accordance with the Company's past
business practices;
(e) comply with all laws materially applicable to the conduct of the
business of the Company;
(f) not take any action that would constitute a breach of Section 3.16
------------
hereof;
(g) not enter into any settlement regarding any claim, dispute or
other cause of action brought against the Company by any third party except
for settlements of customer disputes made by the Company in the ordinary
course of business;
(h) not sell, or otherwise dispose of, any assets of the Company
(other than in the ordinary course of business; and
(i) submit all Contracts to which the Company is to become a party
between the date hereof and the Closing Date for approval by, or on behalf
of, Acquisition (other than Contracts entered into in the ordinary course
of business).
Section 5A.2 No Solicitation. From the date hereof to the earlier of the
---------------
Closing Date or termination date hereof, the Stockholders shall not nor shall
they permit the Company or any of its officers, directors, employees, agents, or
representatives, directly or indirectly, to (a) initiate, solicit or encourage
any inquiries or proposals by, or (b) enter into any discussions or negotiations
with, or disclose directly or indirectly any information concerning its business
and properties to, or afford any access to its properties, books and records to,
any person other than Acquisition in connection with any possible proposal (an
"Acquisition Proposal") regarding the sale, merger, consolidation, or similar
- ---------------------
transaction with respect to the Company. The Stockholders shall notify
Acquisition immediately if any discussions or negotiations are sought to be
initiated or such information is requested with respect to an Acquisition
Proposal.
Section 5A.3 Access and Information. From the date hereof to the Closing
----------------------
Date the Company shall afford to Acquisition, Graphic, and their counsel,
accountants and other representatives, free and full access to all the offices,
properties, books, Contracts, commitments and
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<PAGE>
records of the Company and to furnish such persons with all information
(including financial and operating data) concerning its affairs as they may, in
their sole discretion, request, including copies and extracts of pertinent
records, documents and Contracts. The Company and its employees shall assist
Acquisition, Graphic, and their counsel, accountants and representatives, in
their examination of the Company's books and records. To the extent that the
Company shall have control over same, the accountants of the Company shall
furnish to Acquisition and Graphic during such period any and all of their
statements, working papers and underlying records and data as Acquisition and
Graphic, in their sole discretion, may request.
Section 5A.4 Notification of Changes. From the date hereof to the Closing
-----------------------
Date, the Company shall promptly notify Acquisition and Graphic in writing of
any material adverse change in the financial condition of the Company, the
method of conducting its operations, any material damage to or loss of any
property used in the business of the Company, or the institution of or the
threat of institution of legal proceedings against the Company.
Section 5A.5 No Default. From the date hereof to the Closing date, the
----------
Company shall not do any act or omit to do any act, or knowingly permit any act
or omission to act, that would cause a material breach of any Contract.
Section 5A.6 Tax Returns. All Tax Returns of the Company required to be
-----------
filed by the Closing Date, taking into account any extensions of the filing
deadlines granted to the Company, that have not yet been filed prior to the date
hereof (including those relating to periods after the Closing Date) shall be
prepared by the Company but shall not be filed without prior examination by, or
on behalf of, Acquisition and Graphic. The Company shall use its best efforts
to obtain all extensions of time from governmental authorities necessary to
effect this provision.
Section 5A.7 Allocation of Taxable Income to Short Period. The
--------------------------------------------
Stockholders shall cause the Company to close its permanent books and records
(including work papers) as of the close of business on the date immediately
preceding the Closing Date in accordance with Treasury Regulation 1.1502-
76(b)(4)(1), in order to permit the Company's taxable income for the tax periods
ending on the date immediately preceding the Closing Date to be reported
determined on the basis of income shown on their permanent books and records
(including workpapers).
Section 5A.8 Other Pre-Closing Returns.
-------------------------
(a) The Stockholders shall cause the Company to prepare and file all
federal and state income tax returns for the Company for all tax periods ending
on or before the Closing Date. Such returns will be filed on the basis of the
income allocations described in Section 5A.7 above.
------------
(b) The Stockholders shall cause the Company to include the results of
the respective operations of the Company in any separate state or local income
tax return for any taxable year which is due on or before the Closing Date and
to file such returns on a timely basis.
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<PAGE>
Section 5A.9 Tax Free Reorganization Treatment. The Principal
---------------------------------
Stockholders shall cause all tax returns relating to the Company to be filed on
the basis of treating the Merger as a tax free merger pursuant to Sections
368(a)(1)(A) and 368(a)(2)(D) of the Code.
Section 5A.10 General Cooperation in Tax Matters. After the Closing Date,
----------------------------------
the Shareholders shall cooperate fully with Graphic and Acquisition and shall
make available to Graphic and Acquisition, as reasonably requested, and to any
taxing authority, all information, records, or documents relating to liabilities
or potential liabilities for taxes of, or related to, the Company, for all
periods ending on or before the Closing Date and shall preserve all such
information, records, and documents until the expiration of any applicable
statute of limitations or extensions thereof.
Section 5A.11 Compliance with Laws. From the date hereof to the Closing
--------------------
Date the Company shall comply with all applicable laws and regulations including
without limitation, those as may be required for the consummation of the
transactions contemplated by this Agreement.
Section 5A.12 Consent of Others. From the date hereof to the Closing
-----------------
Date, to the extent that the consummation of the transactions provided for
herein requires the consent or approval of a third party, whether to avoid the
occurrence of an event of default under any Contract, license, lease or
agreement to which the Company is a party or by which its assets are bound or
otherwise, or under any governmental law or regulation, the Company shall use
its best efforts to obtain any such consent or approval prior to the Closing
Date.
ARTICLE 5B
COVENANTS OF GRAPHIC AND ACQUISITION
Section 5B.1 Release of Guaranties. From the date hereof to the Closing
---------------------
Date, Acquisition and Graphic shall each use their best efforts to cause Richard
A. Amendola to be released from the guaranties, set forth in Schedule 1.33,
provided that such efforts shall not include the payment of money in
consideration for such release. In any event, Acquisition and Graphic shall
deliver the guaranties.
Section 5B.2 Filing of Notice. Graphic shall file a NASDAQ National
----------------
Market Notification for Listing Additional Shares pursuant to SEC Rule 10(b)-17
as soon as practicable after the determination of the number of shares of
Graphic Common Stock to be issued in the Merger.
Section 5B.3 Post-Closing Returns.
--------------------
(a) Graphic shall cause Acquisition to prepare and file all federal
and state income tax returns for the Surviving Corporation for all tax periods
beginning on or after the Closing Date. Such returns will be filed on the basis
of the income allocations described in Section 5A.7 above.
------------
(b) Graphic shall cause Acquisition to include the results of the
respective operations of the Surviving Corporation in any separate state or
local income tax return for any
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<PAGE>
taxable year which is due after the Closing Date and to file such returns on a
timely basis. Graphic shall pay, or cause to be paid, all local income taxes
(including interest and penalties relating thereto) shown as due on any such
return with respect to the Surviving Corporation.
Section 5B.4 Tax Free Reorganization Treatment. Graphic shall cause all
---------------------------------
tax returns relating to the Company and Acquisition to be filed on the basis of
treating the Merger as a tax free merger pursuant to Sections 368(a)(1)(A) and
368(a)(2)(D) of the Code.
At the Closing, Graphic and Acquisition shall deliver a certificate
executed by an officer regarding Graphic's current intentions and plans with
regard to conduct of Acquisition following the Closing. Such certificate shall
be in form and content reasonably acceptable to the Principal Stockholders and
shall provide, among other things, that neither Graphic nor Acquisition (i)
currently intends to issue any Acquisition Common Stock to any independent third
party, (ii) currently intends to reacquire any of the Graphic Common Stock to be
issued in connection with the Merger, (iii) currently intends to dispose of the
stock of Acquisition, other than to itself or an affiliate, (iv) currently
intends to liquidate or sell its assets otherwise than in the ordinary course of
Acquisition's business and (v) currently intends to cause Acquisition, following
the Closing, to discontinue conducting the businesses conducted by the Company
prior to the Closing.
Section 5B.5 General Cooperation in Tax Matters. After the Closing Date,
----------------------------------
Graphic and Acquisition shall cooperate fully with the Shareholders and shall
make available to the Shareholders, as reasonably requested, and to any taxing
authority, all information, records, or documents relating to liabilities or
potential liabilities for taxes of, or related to, the Company, for all periods
ending on or before the Closing Date and shall preserve all such information,
records, and documents until the expiration of any applicable statute of
limitations or extensions thereof. So long as taxable periods of, or related to
the Company ending on or before the Closing Date remain open, Graphic shall
promptly notify the Principal Stockholders in writing of any pending or
threatened tax audits or assessments for which the Principal Stockholders have
or may have sole, joint or several liability within thirty (30) days following
the receipt by Graphic or any affiliate of notice of such pending or threatened
audit or assessment. Graphic shall keep the Principal Stockholders reasonably
informed as to all aspects of any administrative or judicial proceeding that may
result in the payments by the Shareholders of any tax.
Section 5B.6 Employee Bonuses. Graphic shall cause the Surviving
----------------
Corporation to pay to the employees of the Surviving Corporation all bonus
amounts earned by such employees from January 1, 1995 through the Closing Date
as set forth on the Closing Balance Sheet, and in accordance with the Surviving
Corporation's policies regarding the payment of such bonuses.
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<PAGE>
ARTICLE 6
CONDITIONS TO CONSUMMATION OF MERGER
Section 6.1 Conditions to Obligations of Acquisition and Graphic.
----------------------------------------------------
The obligation of Acquisition and Graphic to consummate the Merger is subject to
the satisfaction at or prior to the Closing of each of the following conditions:
(a) Each of the representations and warranties of the Stockholders
shall be true and correct in all respects as of, and shall not have been
violated in any respect at, the Closing as though made on and as of the
Closing; the Stockholders and the Company shall, on or before the Closing,
have performed all of their obligations under this Agreement which by the
terms hereof are to be performed on or before the Closing, and the
Stockholders shall have delivered to Acquisition and Graphic a certificate
dated as of the date of the Closing to the foregoing effect.
(b) The Merger shall have been approved by the Board of Directors of
Acquisition and Graphic, or an Executive Committee of the Board of
Directors of Acquisition and Graphic.
(c) No action or proceeding by or before any court or other
governmental body shall have been instituted by any governmental body or
other person or entity or threatened in writing which seeks to restrain,
prohibit or invalidate the Merger or which would have a material adverse
effect on Acquisition's ability to conduct the business of the Company as
presently conducted or which claims material damages from Acquisition or
Graphic with respect to the Merger.
(d) Acquisition and Graphic shall have been satisfied with its
examination of the books and records of the Company and all other due
diligence considered by Acquisition and Graphic.
(e) The Stockholders shall have delivered to Acquisition and Graphic a
certificate of the Company's Secretary certifying as to the requisite
corporate or other action authorizing the Merger, and the status of record
ownership of the Shares by the Stockholders.
(f) The Stockholders shall have submitted to Acquisition and Graphic
resignations of all current officers and directors of the Company.
(g) Mr. Richard A. Amendola shall have executed and delivered to
Acquisition and Graphic the Employment Agreement (which contains certain
non-compete provisions), substantially in the form of Exhibit A hereto.
---------
(h) The Stockholders shall have executed and delivered to Acquisition
and Graphic the Escrow Agreement, substantially in the form of Exhibit B
---------
hereto.
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<PAGE>
(i) Acquisition and Graphic shall have received the opinion of Walter
& Haverfield, counsel to the Company and the Principal Stockholders,
substantially in the form of Exhibit E hereto.
---------
(j) The Certificate of Merger shall be prepared for filing with the
Secretary of State of Ohio.
(k) RAM Enterprises shall have executed the Lease Agreement,
substantially in the form of Exhibit D hereto.
(l) Each of the agreements listed on Schedule 3.4 shall be terminated.
Section 6.2 Conditions to Obligations of the Stockholders. The obligation
---------------------------------------------
of the Stockholders to consummate the Merger is subject to the satisfaction at
or prior to the Closing of each of the following conditions:
(a) Each of the representations and warranties of Acquisition and
Graphic shall be true and correct in all respects as of, and shall not have
been violated in any respect at, the Closing as though made on and as of
the Closing; Acquisition and Graphic shall, on or before the Closing, have
performed in all material respects all of their obligations under this
Agreement which by the terms hereof are to be performed on or before the
Closing; and each of Acquisition and Graphic shall have delivered to the
Stockholders a certificate of one of its officers dated as of the date of
the Closing to the foregoing effect.
(b) The Merger shall be approved by the Stockholders.
(c) No action or proceeding by or before any court or other
governmental body shall have been instituted by any governmental body or
other person or entity or threatened in writing which seeks to restrain,
prohibit or invalidate the Merger or which would have a material adverse
effect on the right of the Stockholders to consummate the Merger or which
claims material damages from the Stockholders with respect to the Merger.
(d) Acquisition and Graphic shall have delivered to the Stockholders
certificates of their respective Secretaries certifying as to the requisite
corporate and other action authorizing the Merger and the incumbency of
their respective officers and directors.
(e) Acquisition shall have executed and delivered to the Stockholders
the Escrow Agreement, substantially in the form of Exhibit B hereto.
---------
(f) Acquisition and Graphic shall have executed and delivered to the
Stockholders the Guaranties, substantially in the form of Exhibit C hereto.
---------
(g) The Stockholders shall have received the opinion of Powell,
Goldstein, Frazer & Murphy, counsel to Acquisition, substantially in the
form of Exhibit F hereto.
---------
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<PAGE>
(h) The Certificate of Merger shall be prepared for filing with the
Secretary of State of Ohio.
(i) The Company and RAM Enterprises shall have executed the Lease
Agreement, substantially in the form of Exhibit D hereto.
(j) Graphic and Acquisition shall have executed and delivered to Mr.
Richard Amendola the Employment Agreement substantially in the form of
Exhibit A hereto.
---------
ARTICLE 7
REGISTRATION OF MERGER CONSIDERATION
Section 7.1 Registration of Merger Consideration. Graphic shall use its
------------------------------------
best efforts to prepare and file with the Commission a Registration Statement as
soon as practicable after the Closing Date, which shall cause the Merger
Consideration to be registered for resale by the Stockholders, and Graphic shall
use reasonable best efforts to have such registration become effective and not
abandon the filing. The Stockholders shall receive a copy of the Registration
Statement prior to filing for review, and the Stockholders shall represent and
warrant that the information contained in the Registration Statement concerning
each of them and the intended method of distribution of the securities covered
by the Registration Statement is true, complete, and correct.
Section 7.2 Furnishing Information. The Stockholders shall furnish to
----------------------
Graphic such information regarding Stockholders or the Merger Consideration, and
the intended method of disposition of such securities, as shall be reasonably
requested by Graphic in order to effect the registration of such Merger
Consideration.
Section 7.3 Prospectus Requirements. Each Stockholder hereby covenants
-----------------------
with Graphic that he or she will promptly advise Graphic of any changes in the
information concerning such Stockholder contained in the Registration Statement
and that each Stockholder will not make any sale of the Merger Consideration
pursuant to the Registration Statement without complying with the prospectus
delivery requirements of the Act. Each Stockholder acknowledges that
occasionally there may be times when Graphic must temporarily suspend the use of
the prospectus forming a part of the Registration Statement until such time as
an amendment to the Registration Statement has been filed by Graphic and
declared effective by the Commission, the relevant prospectus has been
supplemented by Graphic or until such time as Graphic has filed an appropriate
report with the Commission pursuant to the Securities Exchange Act of 1934, as
amended. During any such period in which sales are suspended and upon
reasonable prior notice of such suspension from Graphic, each Stockholder agrees
not to sell any shares of the Merger Consideration pursuant to any such
prospectus; provided however that Graphic shall use its reasonable best efforts
to file any required amendment, supplement, or report with the Commission within
30 days of such suspension. Each Stockholder covenants that they will not sell
any shares pursuant to any prospectus during the period commencing at the time
at which Graphic gives each Stockholder notice of the suspension of the use of a
given prospectus and ending at the time Graphic gives notice that each
Stockholder may thereafter effect sales pursuant to a given prospectus.
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<PAGE>
Section 7.4 Registration Rights, Etc.
-------------------------
(a) Graphic agrees to (i) use its best efforts to keep the
Registration Statement continuously effective (including by filing
amendments and supplements thereto) in order to permit the disposition of
the Merger Consideration until the third anniversary of the Closing Date or
the sale by the Stockholders of all of the Merger Consideration, whichever
is earlier (collectively, the "Effective Period"), and (ii) prepare and
----------------
file with the Commission, as soon as reasonably practicable, such
amendments and supplements to the Registration Statement as may be
necessary to keep the Registration Statement effective continuously during
the Effective Period.
(b) Graphic agrees to cause the Registration Statement and the related
prospectus, and any amendment or supplement thereto, as of the effective
date of the Registration Statement, amendment, or supplement during the
Effective Period, (1) to comply in all material respects with the
applicable requirements of the Act and the rules and regulations
promulgated by the Commission thereunder, and (2) not to contain any untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not
misleading, other than information confirmed by Stockholders pursuant to
Section 7.2 or statements or omissions made in reliance upon and in
-----------
conformity with information furnished to Graphic in writing by or on behalf
of any Stockholder expressly for use in the Registration Statement and the
related prospectus, or any amendment or supplement thereto.
(c) In connection with the Registration Statement, Graphic agrees, as
soon as reasonably practicable, to:
(i) furnish to each Stockholder such number of copies of the
Registration Statement, each amendment and supplement thereto,
and prospectus included in the Registration Statement and such
other related documents as each Stockholder may reasonably
request;
(ii) notify each Stockholder promptly of any request by the
Commission for the amending or supplementing of the Registration
Statement or prospectus forming a part thereof;
(iii) advise each Stockholder after Graphic receives notice
or otherwise obtains knowledge of the issuance of any order by
the Commission suspending the effectiveness of the Registration
Statement or amendment or supplement thereto or of the initiation
or threatening of any proceeding for that purpose, and promptly
use its best efforts to prevent the issuance of any stop order or
to obtain its withdrawal promptly if such stop order should be
issued;
(iv) use its best efforts to register or qualify the Merger
Consideration under such other securities or blue sky laws of
such
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<PAGE>
jurisdictions within the United States and Puerto Rico as any of
the Stockholders shall reasonably request (provided that Graphic
shall not be obligated to qualify as a foreign corporation to do
business under the laws of any jurisdiction in which it is not
then qualified or to file any general consent to service of
process), and do such other reasonable acts and things as may be
required of it to enable any of the Stockholders to consummate
the disposition of the Merger Consideration in any of the
aforementioned jurisdictions; and
(v) notify the Stockholders, at any time when a prospectus
relating to the Registration Statement is required to be
delivered under the Act, of the happening of any event as a
result of which the Registration Statement contains an untrue
statement of material fact or omits to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading, and prepare a supplement or amendment to
the Registration Statement so that the Registration Statement
will not contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or
necessary to make the statements therein not misleading.
Section 7.5 Indemnification.
---------------
(a) Graphic agrees to indemnify, defend and hold harmless the
Stockholders from and against all loss, damages, liabilities, expenses,
costs, fees and disbursements of counsel (including the reasonable fees and
expenses of legal counsel to the Stockholders), and actions to which they
may become subject, under the Act or otherwise, insofar as such loss,
damage, liability, expense or claim (or action in respect thereof) arises
out of or is based upon any untrue statement or alleged untrue statement of
a material fact contained in the Registration Statement or prospectus
contained therein (or any amendment or supplement thereto) or arises out of
or is based upon any omission or alleged omission to state in any thereof a
material fact required to be stated therein or necessary to make the
statements in any thereof not misleading, and will reimburse the
Stockholders and such other persons for any legal or any other expenses
incurred in connection with investigating or defending any such action or
claim, except insofar as the same may have been caused by any untrue
statement or omission contained in the information confirmed by any of the
Stockholders pursuant to Section 7.2 or based upon information furnished to
-----------
Graphic in writing by or on behalf of any of the Stockholders expressly for
use therein.
(b) The Stockholders, jointly and severally, agree to indemnify,
defend and hold harmless Graphic and its officers, directors, affiliates,
agents, employees and controlling persons (within the meaning of Section 15
of the Act) from and against all loss, damages, liabilities, expenses,
costs, fees and disbursements of counsel (including the reasonable fees and
expenses of legal counsel to Graphic), and actions to which they may become
subject, under the Act or otherwise, insofar as such loss, damage,
liability, expense or claim (or action in respect thereof) arises out of or
is based upon (i) any untrue statement of a material fact contained in the
Registration Statement or in any prospectus contained therein (or any
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amendment or supplement thereto) or which arises out of or is based upon
any omission to state in any thereof a material fact required to be stated
therein or necessary to make any statement contained therein not
misleading, to the extent that such untrue statement or omission is
contained in the information confirmed by any of the Stockholders pursuant
to Section 7.2 or is made in reliance upon or in conformity with
-----------
information furnished in writing by or on behalf of any of the Stockholders
expressly for inclusion in the Registration Statement or prospectus
contained therein (or any amendment or supplement thereto), and (ii) the
failure by any of the Stockholders to comply with the covenants contained
in Section 7.3 above, and will reimburse Graphic and such other persons for
-----------
any legal or any other expenses incurred in connection with investigating
or defending any such action or claim.
Section 7.6 Fees and Expenses of Registration. Graphic will pay all
---------------------------------
expenses and fees incident to the performance of its obligations in Sections
--------
7.1, 7.3 and 7.4 other than selling commissions and fees and expenses of counsel
- --- --- ---
or other advisors to any of the Stockholders.
ARTICLE 8
INDEMNIFICATION
Section 8.1 Definitions. As used in this Article 8:
----------- ---------
(a) "Damages" actual losses, liabilities, damages, deficiency costs or
-------
expenses (including reasonable attorneys fees and disbursements), less the
amount of any actual tax or insurance benefits then available to or
received by the Indemnified Party with respect thereto.
(b) "Indemnified Party" means the party seeking indemnification under
-----------------
Section 8.2 hereof.
-----------
(c) "Indemnifying Party" means the Stockholders, severally.
------------------
Section 8.2 Indemnification of Acquisition and Graphic by the
-------------------------------------------------
Stockholders.
- ------------
(a) On the terms set forth in this Agreement, the Principal
Stockholders shall, jointly and severally, and the remaining Stockholders
shall severally, from and after the Closing Date, indemnify, defend, and
hold Acquisition and Graphic and their respective subsidiaries and
affiliates harmless from, against and in respect of any and all Damages
incurred by any of them arising from or in connection with any breach of
any representation, warranty or covenant made by the Stockholders in this
Agreement; provided, however, that (i) the liability of each of the
Principal Stockholders to indemnify Graphic or Acquisition for any Damages
incurred by them arising from or in connection with any breach of any
representation, warranty or covenant made by the Stockholders in this
Agreement shall be limited to the combined total amount of Merger
Consideration payable to all of the Principal Stockholders, and (ii) the
liability of the Stockholders other than the Principal Stockholders to
indemnity Graphic or Acquisition for any Damages incurred by them arising
from or in
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connection with any breach of any representation, warranty or covenant made
by the Stockholders shall be limited to the Merger Consideration payable to
such Stockholders.
(b) The Stockholders' representations, warranties and covenants set
forth in this Agreement shall survive for a three (3) year period following
the Closing Date except with respect to the representations, warranties and
covenants set forth in Sections 3.1, 3.2, 3.3, 3.4, 3.5, 3.6, 3.8, 3.15 and
----------------------------------------------------
3.20, which shall survive for a period of eight (8) years following the
----
Closing Date.
(c) Notwithstanding anything to the contrary set forth in this Section
8.2, no Damages shall be recoverable hereunder unless the aggregate amount
of all Damages shall exceed $25,000; it being understood and agreed that
the full amount of any Damages shall be recoverable once such threshold is
met without regard to such threshold.
Section 8.3 Method of Asserting Claims.
--------------------------
(a) In the event that any claim or demand for which an Indemnifying
Party would be liable to an Indemnified Party hereunder is asserted against
or sought to be collected from an Indemnified Party by a third party (a
"Third Party Claim") or an Indemnified Party seeks indemnification from an
------------------
Indemnifying Party in connection with any other type of claim for which
indemnity may be sought hereunder (referred to herein as a "Non Third Party
Claim"), the Indemnified Party shall use reasonable efforts to notify the
Indemnifying Party in writing of such Third Party Claim or Non Third Party
Claim, specifying the nature of such Third Party Claim or Non Third Party
Claim arising hereunder and the amount or the estimated amount thereof to
the extent then feasible (which estimate shall not be conclusive of the
final amount of such Third Party Claim or Non Third Party Claim) (the
"Claim Notice"). The Indemnifying Party shall have twenty calendar days
-------------
(or such earlier period of time as may be required for the filing of
responsive pleadings to any legal action instituted with respect to the
Third Party Claim or Non Third Party Claim or required due to contractual
deadlines imposed upon the Indemnified Party by the contract in dispute but
in any event, not less than 10 days) from the receipt of the Claim Notice
(the "Response Notice Period") to notify the Indemnified Party, (A) whether
----------------------
or not it disputes its liability to the Indemnified Party hereunder with
respect to such Third Party Claim or Non Third Party Claim and (B)
notwithstanding any such dispute, whether or not it will defend, at its
sole cost and expense, the Indemnified Party against such Third Party
Claim. No failure by an Indemnified Party to notify the Indemnifying Party
of the existence or assertion of a claim for which indemnification may be
sought shall constitute a defense to or waiver of such claim for
indemnification except to the extent the Indemnifying Party may be able to
prove that it has been materially prejudiced by such failure or delay.
(b) If the Indemnifying Party disputes its liability with respect to
such Third Party Claim or Non Third Party Claim or the amount thereof
(whether or not the Indemnifying Party desires to defend the Indemnified
Party against such Third Party Claim as provided in paragraphs (c) and (d)
below), such dispute shall be resolved in accordance with Section 8.5
-----------
hereof. Pending the resolution of any dispute by the Indemnifying Party of
its liability with
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<PAGE>
respect to any Third Party Claim, such Third Party Claim shall not be
settled without the prior written consent of the Indemnified Party and the
Indemnifying Party, which consent shall not be unreasonably withheld or
delayed.
(c) In the event that the Indemnifying Party notifies the Indemnified
Party within the Response Notice Period that it will defend the Indemnified
Party against a Third Party Claim, then the Indemnifying Party shall assume
the defense thereof with counsel reasonably acceptable to the Indemnified
Party, and the Indemnified Party shall cooperate in all reasonable respects
in such defense, including without limitation in making any appropriate
counterclaim against the person asserting the Third Party Claim or any
appropriate cross-complaint against any person (unless such counterclaim or
cross-complaint would be against any other entity with which the
Indemnified Party has ongoing business relations and would have a
significant likelihood in the good faith judgment of the Indemnified Party
of damaging such business relationships); provided, however, the
Indemnifying Party shall not, without the prior written consent of the
Indemnified Party which consent shall not be unreasonably withheld, consent
to the entry of any judgment against the Indemnified Party or enter into
any settlement or compromise which does not include, as an unconditional
term thereof, the giving by the claimant or plaintiff to the Indemnified
Party of a release, in form and substance reasonably satisfactory to the
Indemnified Party, from all liability in respect of such Third Party Claim.
If any Indemnified Party desires to participate in, but not control, any
such defense or settlement, it may do so at its sole cost and expense. If,
in the reasonable opinion of the Indemnified Party, any such Third Party
Claim or the litigation or resolution of any such Third Party Claim
involves an issue or matter which could reasonably be expected to have a
material adverse effect on the Indemnified Party, then the Indemnified
Party shall have the right to control the defense or settlement of any such
Third Party Claim at its cost and expense, and such legal fees and expenses
shall be included as part of the indemnification obligation of the
Indemnifying Party hereunder. If the Indemnified Party should elect to
exercise such right, the Indemnifying Party shall have the right to
participate in, but not control, the defense or settlement of such Third
Party Claim at its sole cost and expense.
(d) If the Indemnifying Party elects not to defend the Indemnified
Party against such Third Party Claim, whether by not giving the Indemnified
Party timely notice within the Response Notice Period as provided above or
otherwise, then the Indemnified Party shall, at the expense of the
Indemnifying Party (if the Indemnified Party is entitled to indemnification
hereunder), have the right to defend, settle or compromise any such Third
Party Claim with counsel of its own choosing. In the event the Indemnified
Party proposes to settle a Third Party Claim, the Indemnified Party shall
deliver to the Indemnifying Party written notice of the proposed settlement
of the Third Party Claim, which the Indemnifying Party may reject in its
reasonable judgment within thirty days of receipt of such notice. In the
event the Indemnified Party settles such Third Party Claim over the
objection of Indemnifying Party, dispute over such settlement shall be
resolved as provided in Section 8.5 hereof.
-----------
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<PAGE>
(e) In the event an Indemnified Party has a claim for indemnification
against the Indemnifying Party hereunder with respect to a Non Third Party
Claim, the Indemnified Party shall send a Claim Notice with respect to such
claim to the Indemnifying Party. If the Indemnifying Party disputes its
liability with respect to such claim or demand, such dispute shall be
resolved in accordance with Section 8.5 hereof; if the Indemnifying Party
-----------
accepts or agrees with such claim or does not notify the Indemnified Party
within the Response Notice Period that it disputes such claim, the amount
of such claim shall be conclusively deemed a liability of the Indemnifying
Party hereunder.
Section 8.4 Payment. The Indemnifying Party shall pay the Indemnified
-------
Party, within ten days after the final determination of liability under this
Article 8, the amount of any indemnification to which the Indemnified Party is
- ---------
entitled. Upon the payment in full of any claim, the Indemnifying Party shall
be subrogated to the rights of the Indemnified Party against any person, firm or
corporation with respect to the subject matter of such claim.
Section 8.5 Arbitration. All disputes under this Article 8 or Section
----------- --------- -------
2.7, shall be settled by arbitration in Chicago, Illinois, before a single
arbitrator pursuant to the rules of the American Arbitration Association (the
"AAA"). Arbitration may be commenced at any time by any party hereto by giving
- -----
written notice to each other party to a dispute that such dispute has been
referred to arbitration under this Section 8.5. The arbitrator shall be
-----------
selected by the joint agreement of the parties, but if they do not so agree
within 20 days after the date of the notice referred to in the preceding
sentence, the selection shall be made pursuant to the rules of the AAA from the
panels of arbitrators maintained by the AAA. Any award rendered by the
arbitrator shall be conclusive and binding upon the parties hereto; provided,
however, that any such award shall be accompanied by a written opinion of the
arbitrator giving the reasons for the award. This provision for arbitration
shall be specifically enforceable by the parties, and the decision of the
arbitrator in accordance herewith shall be final and binding and there shall be
no right of appeal therefrom. Each party shall pay its own expenses of
arbitration and the expenses of the arbitrator shall be equally shared.
ARTICLE 9
COVENANT NOT TO COMPETE
Section 9.1 Definitions. Capitalized terms used in this Article 9 shall
----------- ---------
have the following meanings:
(a) "Area" shall mean the States of Ohio, Pennsylvania, and Kentucky.
----
(b) "Competing Business" shall mean graphic print communications,
------------------
including pre-press operations, printing on paper and other substates and
binding and finishing of printed products.
(c) "Proprietary Information" shall mean information related to the
-----------------------
Company or the business of the Company (i) which derives economic value,
actual or potential, from not being generally known to, or readily
ascertainable by, other persons who can obtain
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<PAGE>
economic value from its disclosure or use and, (ii) which is the subject of
efforts that are reasonable under the circumstances to maintain its
secrecy. Assuming the foregoing criteria are met, Proprietary Information
includes, but is not limited to, techniques or methods used in printing
labels for blow molded plastic containers, printing on plastic substrates,
the financial affairs, processes, services, customer lists, customer
information, employees, employees' compensation, research, development,
existing and future products and services, product and service plans and
designs, purchasing, accounting, distribution systems, marketing, formulae,
compilations, programs, methods, techniques, drawings, and suppliers of the
Company.
(d) "Restricted Period" shall mean the period commencing with the
-----------------
Closing Date and ending on the three (3) year anniversary thereof.
Section 9.2 Agreement Not to Compete. Unless otherwise consented to in
------------------------
writing by Acquisition, the Principal Stockholders agree that during the
Restricted Period they will not, within the Area, either directly or indirectly,
on their own behalf or in the service or on behalf of others, engage in any
Competing Business or provide managerial, supervisory, administrative, financial
or consulting services or assistance to, or own a beneficial interest in, any
Competing Business except for the ownership of less than five percent (5%) of a
publicly traded company.
Section 9.3 Agreement Not to Solicit Employees. The Principal
----------------------------------
Stockholders agree that during the Restricted Period, they will not, without the
prior written consent of Acquisition, either directly or indirectly, on their
own behalf or in the service or on behalf of others, solicit, divert, or hire
away, or attempt to solicit, divert, or hire away, from the employment of
Acquisition or the Company, any person employed by Acquisition or the Company on
the date of the Closing.
Section 9.4 Agreement Not to Solicit Customers. The Principal
----------------------------------
Stockholders agree that during the Restricted Period, they will not, either
directly or indirectly, on their own behalf or in the service or on behalf of
others, solicit or attempt to solicit any person, firm or corporation who was a
customer of the Company during the one-year period immediately preceding the
Closing Date (as shown on the books and records of the Company).
Section 9.5 Confidentiality.
---------------
(a) After the Closing, the Stockholders (i) will hold the Proprietary
Information in confidence, and (ii) will not use, duplicate, reproduce,
distribute, disclose or otherwise disseminate the Proprietary Information.
In the event that any of the Stockholders determine that they are required
by law to disclose any Proprietary Information, such Stockholder will not
make such disclosure unless (and then only to the extent that) such
Stockholder has been advised by independent legal counsel that such
disclosure is required by law and then only after prior written notice is
given to Acquisition (if reasonably practical) that such disclosure has
been requested and is required by law.
(b) Any and all reproductions of the Proprietary Information in the
custody or control of the Stockholders will prominently display a
confidentiality legend.
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<PAGE>
(c) The Stockholders covenant and agree that on or before the Closing Date,
the Stockholders will destroy or will deliver to Acquisition all tangible
copies and embodiments of the Proprietary Information in their possession
or control.
Section 9.6 Remedies. The parties hereto specifically acknowledge and
--------
agree that the remedy at law for breach of this Article 9 would be inadequate
---------
and that any party, in addition to any other relief available to it, shall be
entitled to temporary and permanent injunctive relief without the necessity of
proving actual damages.
ARTICLE 10
TERMINATION; AMENDMENTS; WAIVER
Section 10.1 Termination. This Agreement may be terminated, and the
-----------
transaction contemplated hereby may be abandoned, at any time prior to the
Closing Date:
(a) by the written consent of Acquisition and the Principal
Stockholders;
(b) by Acquisition or the Principal Stockholders if, without a
material breach of the terminating party, the Closing shall not have
occurred on or before October 31, 1995, which date may be extended by
mutual consent of the parties;
(c) by Acquisition if there has been a misrepresentation, breach of
warranty or breach of covenant or agreement by the Stockholders or the
Company in their representations, warranties, covenants or agreements set
forth herein; or
(d) by the Principal Stockholders if there has been a
misrepresentation, breach of warranty or breach of covenant or agreement by
Acquisition in its representations, warranties, covenants or agreements set
forth herein.
Section 10.2 Effect of Termination. In the event of the termination and
---------------------
abandonment of this Agreement pursuant to Section 10.1 hereof, this Agreement
------------
shall forthwith become void and have no effect, other than the provisions of
Section 11.7 which shall survive. Nothing contained in this Section 10.2 shall
- ------------ ------------
relieve any party from liability for any breach of this Agreement occurring
before such termination.
ARTICLE 11
MISCELLANEOUS
Section 11.1 Entire Agreement; Assignment. This Agreement, together
----------------------------
with any confidentiality agreements between the parties hereto, (a) constitutes,
with the schedules and the exhibits hereto, the entire agreement among the
parties with respect to the subject matter hereof and supersedes all prior
agreements and understandings, both written and oral, among the parties or any
of them with respect to the subject matter hereof and thereof and (b) shall not
be assigned by
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<PAGE>
operation of law or otherwise, provided that Acquisition may assign its
respective rights and obligations to any direct subsidiary of Graphic, but no
such assignment shall relieve Acquisition of its obligations hereunder.
Section 11.2 Validity. The invalidity or unenforceability of any
--------
provision of this Agreement shall not affect the validity or enforceability of
any other provisions of this Agreement, each of which shall remain in full force
and effect.
Section 11.3 Notices. All notices, requests, claims, demands and
-------
other communications hereunder shall be in writing and shall be deemed to have
been duly given, effective and received when delivered in person or by
electronic facsimile transmission, cable, telegram, telex, or a courier, or five
(5) days following the date such notice is mailed by registered or certified
mail (postage prepaid, return receipt requested), to the respective parties as
follows:
If to Acquisition, to it at:
Carpenter Acquisition Company
c/o Graphic Industries, Inc.
2155 Monroe Drive, N.E.
Atlanta, Georgia 30324
Attention: Mark C. Pope IV
President
with a copy to:
Powell, Goldstein, Frazer & Murphy
Sixteenth Floor
191 Peachtree Street, N.E.
Atlanta, Georgia 30303
Telecopy: 404/572-6999
Attention: Thomas R. McNeill, Esq.
If to Graphic, to:
Graphic Industries, Inc.
2155 Monroe Drive, N.E.
Atlanta, Georgia 30324
Telecopy: (404) 874-7589
Attention: Mark C. Pope IV
President
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<PAGE>
with a copy to:
Powell, Goldstein, Frazer & Murphy
Sixteenth Floor
191 Peachtree Street, N.E.
Atlanta, Georgia 30303
Telecopy: (404) 572-6999
Attention: Thomas R. McNeill, Esq.
If to the Stockholders, to each of them at the
address listed on the signature pages hereof.
If to the Company, to it at:
Carpenter Reserve Printing Company
7100 Euclid Avenue
Cleveland, Ohio 44103
with a copy to:
Walter & Haverfield
1300 Terminal Tower
50 Public Square
Cleveland, Ohio 44113
Telecopy: ___________
Attention: Russell C. Shaw
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above
(provided that notice of any change of address shall be effective only upon
actual receipt thereof).
Section 11.4 Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the internal laws of the State of Ohio, regardless
of the laws that might otherwise govern under applicable principles of conflicts
of laws thereof.
Section 11.5 Descriptive Headings. The descriptive headings herein are
--------------------
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or interpretation of this Agreement.
Section 11.6 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same agreement.
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<PAGE>
Section 11.7 Expenses. All costs and expenses of Graphic or Acquisition
--------
associated with legal and audit services incurred in connection with the Merger
shall be paid by Graphic. The Stockholders and the Company will each pay their
respective legal and other expenses. Any expense incurred by the Company in
connection with the transactions contemplated by this Agreement shall be accrued
in full on the financial records of the Company as of the Closing Date and
constitute an adjustment to the Closing Balance Sheet.
Section 11.8 Parties in Interest. This Agreement shall be binding upon
-------------------
and inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to confer upon any other person any
rights or remedies of any nature whatsoever under or by reason of this
Agreement.
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<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed as of the day and year first above written.
GRAPHIC INDUSTRIES, INC.
By: /s/ Mark C. Pope IV
-------------------
Name: Mark C. Pope IV
---------------
Title: President
---------
CARPENTER ACQUISITION COMPANY
By: /s/ Mark C. Pope IV
-------------------
Name: Mark C. Pope IV
---------------
Title: President
---------
CARPENTER RESERVE PRINTING COMPANY
By: /s/ Richard A. Amendola
-----------------------
Name: Richard A. Amendola
-------------------
Title: President/CEO
-------------
/s/ Richard A. Amendola
-----------------------
Richard A. Amendola
Social Security Number: ###-##-####
Address: 333 Inwood Trail
Aurora, Ohio 44202
/s/ Ronald R. Meredith
----------------------
Ronald R. Meredith
Social Security Number: ###-##-####
Address: 9 Laurel Drive
Rocky River, Ohio 44116
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<PAGE>
/s/ Jack W. Kothera
-------------------
Jack W. Kothera
Social Security Number: ###-##-####
Address: 5259 Case Avenue
Lyndhurst, Ohio 44124
/s/ Sandra L. Kothera
---------------------
Sandra L. Kothera
Social Security Number: ###-##-####
Address: 5259 Case Avenue
Lyndhurst, Ohio 44124
/s/ Geraldine R. Steger
-----------------------
Geraldine R. Steger
Social Security Number: ###-##-####
Address: 7560 Hollycroft Lane #1
Mentor, Ohio 44060
/s/ Rose Mary Bour
------------------
Rose Mary Bour
Social Security Number: ###-##-####
Address: 20991 Wilmore Avenue
Euclid, Ohio 44123
/s/ Robert E. Highman
---------------------
Robert E. Highman
Social Security Number: ###-##-####
Address: 1962 Hopehaven Drive
Parma, Ohio 44134
/s/ Thomas D. Stewart
---------------------
Thomas D. Stewart
Social Security Number: ###-##-####
Address: 3567 Northvale Blvd.
Cleveland Heights, Ohio 44112
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<PAGE>
/s/ E. Alfred Schroeder
-----------------------
E. Alfred Schroeder
Social Security Number: ###-##-####
Address: 485 Suite 14 Bent Creek Oval
Aurora, Ohio 44202
/s/ Russell C. Shaw
-------------------
Russell C. Shaw
Social Security Number: ###-##-####
Address: 401 Ravine Drive
Aurora, Ohio 44202
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ATTACHMENT A
List of Stockholders
--------------------
Richard A. Amendola
Ronald R. Meredith
Jack W. Kothera
Sandy L. Kothera
Geraldine R. Steger
Rose Mary Bour
Robert E. Highman
Thomas D. Stewart
E. Alfred Schroeder
Russell Shaw
