<PAGE>
As filed with the Securities and Exchange Commission on January 30, 1996
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:
LAWRENCE M. GOLD, Esq.
Lawrence M. Gold, P.C.
100 Galleria Parkway
Suite 695
Atlanta, Georgia 30339
(770) 933-9600
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 to Proposed maximum Proposed maximum Amount of
to be registered be registered offering price aggregate offering registration fee(1)
per share (1) price
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.10 par value 306,612 Shares $9.875 $3,027,793.50 $1,044.07
- ----------------------------------------------------------------------------------------------------------------------------
</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
January 25, 1996, 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>
PROSPECTUS
- ----------
306,612 SHARES
GRAPHIC INDUSTRIES, INC.
COMMON STOCK
_____________________
THIS PROSPECTUS RELATES TO 306,612 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 THE SHARES."
THE SELLING SHAREHOLDERS ACQUIRED THE SHARES FROM THE COMPANY ON
NOVEMBER 1, 1995, IN CONNECTION WITH THE COMPANY'S ACQUISITION OF A COMPANY
OWNED BY THE SELLING SHAREHOLDERS. INCLUDED IN THE SHARES COVERED BY THIS
PROSPECTUS ARE 30,661 SHARES OF COMMON STOCK ISSUED INTO ESCROW IN CONNECTION
WITH THIS ACQUISITION. SEE "RECENT DEVELOPMENTS." THE SELLING SHAREHOLDERS MAY
BE DEEMED TO BE "UNDERWRITERS" 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 THE COMPANY AND THE SELLING SHAREHOLDERS HAVE AGREED TO INDEMNIFY EACH OTHER
AGAINST CERTAIN LIABILITIES, INCLUDING LIABILITIES UNDER THE SECURITIES ACT.
THE COMMON STOCK IS LISTED ON THE NASDAQ NATIONAL MARKET SYSTEM. ON
JANUARY 25, 1996, THE LAST REPORTED SALE PRICE OF THE COMMON STOCK OF THE
COMPANY REPORTED ON THE NASDAQ NATIONAL MARKET SYSTEM WAS $ 9.75 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 COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
_______________________
The date of this Prospectus is February __, 1996.
<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, 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 continuous 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 17 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 DEVELOPMENTS
On November 1, 1995, the Company acquired Quadras, Inc. ("Quadras")
pursuant to an Agreement and Plan of Reorganization (the "Agreement") dated
November 1, 1995. Pursuant to the Agreement, QQQ, Inc., a corporation which
owned all of the outstanding stock of Quadras, was merged into Quadras
Acquisition Company, a wholly-owned subsidiary of the Company (the "Merger").
The Merger was effective on November 1, 1995, and the Shares were issued on that
date in exchange for all of the outstanding stock of QQQ, Inc., which was owned
by Ms. Sara S. Harris ("Harris") and Ms. Cynthia A. Morgan ("Morgan"). Of the
total Shares issued, 137,976 Shares were issued to Harris; 137,975 Shares were
issued to Morgan and 30,661 Shares were issued to NationsBank of Georgia, N.A.
as escrow agent (the "Escrow Shares"). The Escrow Shares are being held
pursuant to an Escrow Agreement dated November 1, 1995 (the "Escrow Agreement")
for six months from November 1, 1995 (which period may be extended if any claims
as defined in the Escrow Agreement are then pending) to cover any claims for
breaches of representations, warranties and covenants in the Agreement and
certain other matters. The Escrow Agreement provides for the release of the
Shares held in escrow either to Harris and Morgan, in which case they may be
sold hereunder, or to the Company, in which event they will be canceled. The
Escrow Shares may not be sold or transferred while they are subject to the
Escrow Agreement. Under the terms of the Agreement, the Company agreed to
register the Shares under the Securities Act for resale by the Selling
Shareholders and to indemnify the Selling Shareholders against certain
liabilities, including liabilities under the Securities Act. The Selling
Shareholders have also agreed to indemnify the Company 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 Agreement.
On December 21, 1995, the Company entered into a $110 million
revolving credit facility with a group of lenders led by Nationsbank. The new
facility refinances the Company's floating rate borrowings and provides
additional borrowing capacity. The initial term of this revolving facility is
two years, renewable each year for an additional one year period. The interest
rate on this indebtedness is a floating rate which, at the Company's option from
time to time, will equal Nationsbank's prime rate or a specified margin (based
upon a specific financial ratio) over LIBOR. This indebtedness is secured by
substantially all the accounts receivable and inventories of the Company and its
subsidiaries.
3
<PAGE>
SELLING SHAREHOLDERS
Mesdames Harris and Morgan (the "Selling Shareholders") beneficially
owned the following Shares prior to this offering, and such Shares (including
the Escrow Shares when and if released to the Selling Shareholders pursuant to
the Escrow Agreement) are being offered hereby:
<TABLE>
<CAPTION>
Name of Selling Number of Shares Number of
Shareholder Owned Directly Escrow Shares* TOTAL
- ------------------- ---------------- -------------- -------
<S> <C> <C> <C>
Sara S. Harris 137,976 15,330 153,306
Cynthia A. Morgan 137,975 15,331 153,306
</TABLE>
__________
*Assumes complete release of all Escrow Shares to the Selling Shareholders.
Prior to the offering, each Selling Shareholder beneficially owned
approximately 2.2 percent of the outstanding shares of Common Stock as of the
date of this Prospectus (assuming complete release of the Escrow Shares to the
Selling Shareholders and 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, the Selling Shareholders will not beneficially own any shares of
Common Stock of the Company. Ms. Morgan currently serves as Chairman of Quadras
and Ms. Harris serves as President of Quadras.
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.
LEGAL MATTERS
A legal opinion to the effect that the Shares are legally issued,
fully paid and nonassessable has been rendered by Lawrence M. Gold, P.C., 100
Galleria Parkway, Suite 695, Atlanta, Georgia 30339.
EXPERTS
The consolidated financial statements and schedule 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
4
<PAGE>
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 is 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 14. Other Expenses of Insurance and Distribution.
Registration fee to the Securities
and Exchange Commission ................................ $ 1,044.07
NASDAQ Additional Listing fee ............................ 6,132.24
Accounting fees and expenses ............................. 2,500.00
Legal fees and expenses .................................. 3,500.00
Miscellaneous expenses ................................... 200.00
----------
Total .............................................. $13,376.31
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 and up to $2,500 in legal expenses
for the Selling Shareholders) 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 of
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 any 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.
2 Agreement and Plan of Reorganization dated November 1, 1995, among Graphic
Industries, Inc., Quadras Acquisition Company, QQQ, Inc., Quadras, Inc.,
Sara Senie Harris and Cynthia A. Morgan.
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).
4(b) Form of Indenture, including Form of Debenture, between the Registrant and
the First National Bank of Atlanta. (3)
II-1
<PAGE>
5 Opinion of Lawrence M. Gold, P.C. 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).
24 Power of Attorney (see signature page to this Registration Statement).
99 Escrow Agreement dated November 1, 1995, among Graphic Industries, Inc.,
Quadras Acquisition Company, Sara Senie Harris, Cynthia A. Morgan and
NationsBank of Georgia, N.A.
_________________________
(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.
(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.
II-2
<PAGE>
(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 the question 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 January 29, 1996.
GRAPHIC INDUSTRIES, INC.
BY: /s/ Mark C. Pope, III
-------------------------------------
Mark C. Pope, III
Chairman of the Board and
Chief Executive Officer
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 or 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.
II-5
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Mark C. Pope, III Chairman of the Board and January 29, 1996
- ------------------------------ Chief Executive Officer
Mark C. Pope, III (Principal Executive Officer)
/s/ David S. Fraser Chief Financial Officer and January 29, 1996
- ------------------------------ Treasurer (Principal
David S. Fraser Financial and Accounting
Officer)
/s/ Mark C. Pope, IV President and Director January 29, 1996
- ------------------------------
Mark C. Pope, IV
/s/ William A. Wood, Jr. Director January 29, 1996
- ------------------------------
William A. Wood, Jr.
/s/ John R. Pope Director January 12, 1996
- ------------------------------
John R. Pope
/s/ Clifford M. Kirtland, Jr. Director January 29, 1996
- ------------------------------
Clifford M. Kirtland, Jr.
/s/ James A. Hatcher Director January 29, 1996
- ------------------------------
James A. Hatcher
/s/ Ralph N. Strayhorn, Jr. Director January 29, 1996
- ------------------------------
Ralph N. Strayhorn, Jr.
/s/ Warren E. Andrews Director January 15, 1996
- ------------------------------
Warren E. Andrews
/s/ Carter D. Pope Director January 29, 1996
- ------------------------------
Carter D. Pope
/s/ Alvan A. Herring, Jr. Director January 29, 1996
- ------------------------------
Alvan A. Herring, Jr.
II-6
<PAGE>
Exhibit "2"
AGREEMENT AND PLAN OF REORGANIZATION
------------------------------------
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement"), made and
entered into as of the 1st day of November, 1995, by and among Graphic
Industries, Inc., a Georgia corporation ("Graphic"), Quadras Acquisition
Company, a Georgia corporation and wholly-owned subsidiary of Graphic ("QAC"),
QQQ, Inc., a Georgia corporation ("QQQ"), Quadras, Inc. ("Quadras"), a Georgia
corporation and wholly-owned subsidiary of QQQ; and Sara Senie Harris ("Harris")
and Cynthia A. Morgan ("Morgan"), individual residents of the State of Georgia
(collectively, referred to herein as the "Stockholders" and individually as a
"Stockholder").
W I T N E S S E T H:
--------------------
WHEREAS, the Stockholders own 100% of the outstanding shares of the common
stock, $1.00 par value per share, of QQQ (the "Shares"); and
WHEREAS, QQQ owns all of the issued and outstanding stock of Quadras; and
WHEREAS, the Stockholders, Graphic, QAC and QQQ wish to enter into a
transaction pursuant to which QQQ shall be merged with and into QAC on the terms
and conditions set forth herein (the "Merger").
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
1.1 The capitalized terms used in this Agreement (and not otherwise
expressly defined herein) shall have the meanings set forth in the Glossary
attached hereto and expressly made a part hereof.
ARTICLE 2
MERGER AND EXCHANGE OF STOCK
2.1 Agreement to Merge. Graphic, QAC and QQQ agree to effect the Merger
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as provided for herein, subject to the terms and conditions set forth herein.
2.2 Merger of QQQ Into QAC. On the Effective Date, QQQ shall be merged
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into and with QAC in accordance with the provisions of the Georgia Business
Corporation Code. QAC shall be the surviving corporation in the Merger.
2.3 Manner of Converting Shares.
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(a) Each share of stock of QAC issued and outstanding on the Effective
Date, by virtue of the Merger and without any action on the part of the holders
thereof, shall continue to remain outstanding and shall continue to be fully
paid and non-assessable.
(b) The manner and basis of converting the outstanding shares of QQQ Stock
upon consummation of the Merger shall be as follows:
(i) Except as provided in Section 2.3(b)(ii) below, each share of QQQ Stock
issued and outstanding on the Effective Date (other than treasury shares) shall,
as of the Effective Date, and without any action on the part of the holder
thereof, be converted into and exchanged for the number of shares of Graphic
Stock set forth on Schedule 2.3 hereof. Any and all shares of QQQ Stock held as
treasury shares shall automatically be canceled and retired on the Effective
Date, and no consideration shall be issued in exchange therefor.
(ii) No fractional shares of Graphic Stock will be issued as a result of
the Merger. In lieu of fractional shares, the total number of shares of Graphic
Stock to be issued in the Merger shall be rounded up to the nearest whole number
of shares.
2.4 Exchange of Stock Certificates. On the Effective Date, each holder of
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any outstanding certificate or certificates theretofore representing QQQ Stock
shall surrender the same to Graphic, and such holder shall be entitled upon such
surrender to receive a certificate or certificates representing the number of
full Initial Shares that she is entitled to receive pursuant to this Agreement
and an acknowledgement of deposit into escrow pursuant to the Escrow Agreement
of a certificate for the maximum number of Escrow Shares to which such
Stockholder is entitled pursuant to the terms of this Agreement.
2.5 Agreement to Issue Graphic Stock.
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(a) Subject to the terms and conditions herein and in exchange for QQQ
Stock outstanding on the Effective Date, Graphic shall issue and deliver: (a)
the Initial Shares to the Stockholders and (b) the Escrow Shares to the Escrow
Agent, pursuant to the Escrow Agreement, in the name of the Escrow Agent as set
forth in Section 2.6 herein.
(b) During the Escrow Period and subject to the terms and conditions of the
Escrow Agreement, the Stockholders shall be entitled to vote the Escrow Shares
in all respects and on all matters as to which shareholders of Graphic are
entitled to vote and any and all dividends or other distributions declared and
paid with respect to the Escrow Shares shall be deposited into escrow and shall
be distributed pursuant to Section 2.6 hereof and the Escrow Agreement.
2.6 Escrow Shares.
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(a) On the Effective Date, Graphic shall issue and deliver to the Escrow
Agent the Escrow Shares to be held in escrow for the Escrow Period. The Escrow
Shares and the dividends
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thereon shall be used for the purposes set forth in the Escrow Agreement,
including, but not limited to: (i) repurchase certain uncollectible accounts
receivable of QQQ or Quadras as determined under Section 2.10(c) hereof; (ii)
adjust the consideration as set forth in Section 2.10 hereof; and (iii)
compensate, in whole or in part, Graphic and QAC for a breach of any
representation, warranty or covenant by QQQ or any Stockholder.
(b) During the Escrow Period no party to the Escrow Agreement shall be
entitled to sell, pledge, hypothecate, assign or otherwise dispose of any Escrow
Shares.
2.7 Effective Date. As soon as practicable after satisfaction or waiver
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of all conditions to the Merger, the parties shall cause the Certificate of
Merger (the "Certificate of Merger") with respect to the Merger to be filed and
recorded with the Secretary of the State of Georgia in accordance with the
Georgia Business Corporation Code and shall take all such further actions as may
be required by law to make the Merger effective. The Merger shall be effective
on the Effective Date. Immediately prior to the filing of the Certificate of
Merger, a closing (the "Closing") will be held on November 1, 1995, at the
offices of Gray, Gilliland & Gold, P.C., Atlanta, Georgia, or such other time
and place as the parties agree, provided that in no event shall the Closing be
held later than November 1, 1995.
2.8 Tax Consequences. It is intended that the Merger shall constitute a
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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.
2.9 Articles of Incorporation; Bylaws; Directors and Officers. The
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Articles of Incorporation and bylaws of QAC as in effect on the Effective Date
shall be the Articles of Incorporation and bylaws of the Surviving Corporation.
The Board of Directors and officers of QAC on the Effective Date shall be the
Board of Directors and officers of the Surviving Corporation.
2.10 Adjustment of Graphic Stock.
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(a) Within 30 days following the Closing Date, the Stockholders shall
prepare and deliver to QAC (i) an unaudited, consolidated balance sheet of QQQ
dated as of October 31, 1995 (the "Preliminary Closing Balance Sheet"), which
shall be prepared in accordance with generally accepted accounting principles
consistently applied (except for the revenue recognition method relating to
percentage of completion for contracts which shall be applied consistently with
past practices of QQQ and Quadras) and which shall include the Net Book Value of
QQQ as of the Closing Date (the "Estimated Net Book Value") and (ii) a schedule
(the "Financial Schedule") setting forth any proposed adjustment to the number
of shares of Graphic Stock based upon the difference between the Net Book Value
of QQQ 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 2.10(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 QQQ (the "Closing Audit"). The Closing Audit shall be
completed and delivered to the Stockholders within sixty (60) days after the
receipt of the Preliminary Closing Balance Sheet, provided that the Stockholders
shall fully cooperate with Graphic and its auditors in completing the Closing
Audit. 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. The results of the Closing Audit
shall be final, binding and conclusive on all parties hereto unless the
Stockholders shall have notified QAC and Graphic in writing within thirty (30)
days of receipt of the Closing Balance Sheet that they dispute any of the
adjustments or entries set forth on the Closing Balance Sheet. In the event the
Stockholders notify QAC and Graphic of any such dispute, and the parties cannot
resolve such dispute within thirty (30) days after QAC and Graphic receive such
notice, the parties shall submit such disputes to the accounting firm of Price
Waterhouse & Co. ("PW") for resolution. All parties shall cooperate fully with
PW in such firm's review and investigation of such disputes; including, without
limitation, divulging and delivering to PW all such records, data, workpapers,
documents, computer discs and other information as PW may request. PW's decision
regarding any such disputes shall be final, binding and conclusive on the
parties and shall have the same force and effect as an arbitration award issued
in accordance with a formal arbitration proceeding. Such decision may be
enforced and entered as a judgment in any proceeding brought to enforce such
decision and the parties hereby acknowledge and agree that PW's decision shall
have the same effect as a final judgment. The liability of the Stockholders for
matters identified in the Closing Audit shall not extend beyond the amounts
determined through the Closing Audit, or through the decisions of PW in
connection with any disputes arising from the Closing Audit; provided, however,
that such limitation shall not apply to the extent that any such matters also
give rise to a claim or claims for indemnification by Graphic or QAC hereunder.
In that event, Graphic or QAC shall be entitled to recover pursuant to such
indemnification only those amounts for which Graphic or QAC have not been fully
compensated through the Closing Audit. The fees and expenses of PW shall be
borne by the party whose position in such dispute resolution proceeding does not
prevail. In the event it is not possible to determine which position prevails,
PW shall allocate its fees and expenses among the parties in reasonable relation
to the substantive decision.
(c) Subject to Section 9.2 hereof, the consideration to be paid 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 QQQ as
shown on the Closing Balance Sheet, is more or less (whichever is the case) than
the Net Book Value of QQQ as shown on the Interim Balance Sheet (including any
downward adjustment due to any payments based upon the claims asserted against
Quadras by Charles Stroupe and referred to on Schedule 3.7(b) hereto; (ii)
downward, by the face value of any accounts or notes receivable of Quadras or
QQQ 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; provided however, that any customers of Quadras, which, as of the
Closing Date, are making periodic payments on their obligations to Quadras (all
of which shall be identified and the payment plans listed on Schedule 2.10(c)
hereto) and which are current with respect to such payments up to
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and including the end of such 120 day period shall not be considered delinquent
and such accounts receivable shall not be subject to adjustment hereunder; (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 QAC as a result of the breach of any representation, warranty or
covenant of QQQ or of the Stockholders contained herein, in the schedules
attached hereto, in the Secretary's Certificate, in the Employment Agreements or
in the Escrow Agreement. The foregoing adjustment criteria shall be applied so
as to preclude duplicative adjustments.
(d) If the Net Book Value set forth in the Closing Balance Sheet exceeds
the amount set as shown on the Interim Balance Sheet, Graphic shall pay to the
Stockholders additional consideration in the form of Graphic Common Stock
determined by dividing the amount of such excess by the Market Value Per Share
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 2.3 hereto. If any
additional shares of Graphic Common Stock are issued pursuant to these
adjustments, such shares shall be issued to the Stockholders and to the Escrow
Agent to be held pursuant to the Escrow Agreement in the same ratio as the
Graphic Stock was originally issued hereunder. If the Net Book Value set forth
in the Closing Balance Sheet is less than the amount set forth as shown on the
Interim Balance Sheet, each of the Stockholders shall pay QAC the amount of any
such deficiency in the form of Graphic Common Stock determined by dividing the
amount of such deficiency by the Market Value Per Share and each Stockholder
shall pay QAC 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 2.3 hereto. Any payment in the form of Graphic
Common Stock under this Section 2.10(d) 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. Payment by the Stockholders of any
deficiencies hereunder may be made in cash or with shares of Graphic Stock, and
if with Graphic Stock, shall first be made from the Escrow Shares, and if such
payment through Escrow Shares is not sufficient to fully pay such deficiencies,
then payment shall be made from other shares of Graphic Stock held by the
Stockholders. Any deficiency not satisfied with Graphic Stock shall be paid in
cash by the Stockholders.
(e) Nothing in this Section 2.10 shall in any way limit or decrease the
liability of the Stockholders and QQQ (except to the extent of any recovery
hereunder) to Graphic and QAC for any default or breach of this Agreement or the
documents mentioned in Section 2.10(c)(iii) above.
(f) In the event there is a reduction in the consideration to be paid the
Stockholders as set forth in this Agreement, the amount of such reduction shall
be first paid to Graphic or QAC from the Escrow Shares in accordance with the
Escrow Agreement, and if the Escrow Shares are not sufficient to pay such
deficiency, the Stockholders shall remain jointly and severally liable therefor.
Such payment from the Escrow Shares however, shall not be the exclusive remedy
of Graphic or QAC for the payment of such reduction.
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(g) QAC agrees to use its reasonable efforts, following the Effective Date,
to collect, in the ordinary course of business, all of the accounts or notes
receivable of QQQ or Quadras shown on the Closing Balance Sheet. Any Accounts
Receivable that are subject to adjustment in consideration pursuant to Section
2.10(c)(ii) above, shall be assigned to the Stockholders following such
adjustment in consideration of $1.00.
(h) Following the Effective Date, and at such time as Graphic or QAC shall
determine that they are no longer should be maintained, or upon termination of
employment of a Stockholder pursuant to the Employment Agreement for such
Stockholder, whichever occurs first, QAC shall give reasonable notice to such
Stockholder to permit them, or either of them, to purchase, at their then full
cash surrender values, certain life insurance policies now owned by QQQ or
Quadras on the lives of the Stockholders as set forth on Schedule 3.12 attached
hereto.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS
The Stockholders, jointly and severally, represent and warrant to QAC and
Graphic as follows:
3.1 Organization; Power; Qualification. QQQ and Quadras are each
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corporations duly organized, validly existing and in good standing under the
laws of the State of Georgia. QQQ has no subsidiaries other than Quadras and is
not a party to any joint venture or other entity nor a partner of any
partnership. Quadras has no subsidiaries and is not a party to any joint
venture or other entity nor a partner of any partnership. QQQ has no assets
other than the stock of Quadras. QQQ and Quadras each have the corporate power
and authority to own or lease and operate their respective properties and to
carry on their respective business as now being conducted, and are duly
qualified and in good standing and 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 their respective properties or the
nature of their respective business requires such qualification and
authorization.
3.2 Authority. The execution and delivery of this Agreement by QQQ,
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Quadras and each Stockholder constitute valid and legally binding obligations of
the Stockholders, QQQ and Quadras, as the case may be, 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. The execution and
delivery of the Employment Agreements by the Stockholders will constitute valid
and legally binding obligations of the Stockholders, enforceable in accordance
with its terms.
3.3 Capital Structure.
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(a) The authorized capital stock of QQQ consists of 100,000 shares, $1.00
par value, common voting stock, of which 400 shares are issued and outstanding
on the date of this Agreement. QQQ holds 200 treasury shares. All of the
shares of QQQ's stock issued and
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outstanding as of the date hereof are duly authorized, validly issued and fully
paid and nonassessable under Georgia law. 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 QQQ or other
securities of QQQ. As of the date hereof, there is not any liability for or
dividends declared or accumulated but unpaid with respect to QQQ's capital
stock. Between the date of QQQ's incorporation and the date hereof, QQQ has not
directly or indirectly redeemed, purchased or otherwise acquired any shares of
its capital stock. All shares of QQQ'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.
(b) The authorized capital stock of Quadras consists of 100,000 shares,
$0.10 par value, of which 5,000 shares are issued and outstanding and are owned
by record and beneficially by QQQ. There no warrants, rights, options,
subscriptions or agreements to issue shares of any class of capital stock,
securities convertible into capital stock or property of Quadras or other
securities of Quadras. As of the date hereof, there is not any liability for or
dividends declared or accumulated but unpaid with respect to Quadras' capital
stock. Between the date of Quadras' incorporation and the date hereof, Quadras
has not directly or indirectly redeemed, purchased or otherwise acquired any
shares of its capital stock. All shares of Quadras'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.
3.4 Title to Shares. Each of the Stockholders owns the Shares set forth
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opposite such Stockholder's name on Schedule 2.3 hereto, and 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. 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.
3.5 No Third Party Options. There are no existing agreements, options,
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commitments or rights with, of or to any person to acquire any securities of QQQ
or Quadras or any of QQQ's or Quadras's assets, properties, or rights, other
than this Agreement.
3.6 Compliance with Laws and Validity of Contemplated Transactions. The
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execution, delivery and performance of this Agreement by QQQ, Quadras and the
Stockholders in accordance with its terms and the consummation of the
transactions contemplated hereby does not and will not (a) to the Knowledge of
the Stockholders violate any law applicable to QQQ, Quadras or the Stockholders;
(b) conflict with, result in a breach of, or constitute a default under the
Articles of Incorporation or bylaws of QQQ or Quadras or under any indenture,
agreement, or other instrument to which QQQ, Quadras 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 QQQ, Quadras
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,
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delivery or performance by Stockholders, QQQ or Quadras of this Agreement or the
Escrow Agreement.
3.7 Financial Statements.
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(a) The Financial Statements and the Interim Balance Sheet (i) are in
accordance with the books and records of QQQ; (ii) present fairly the
consolidated financial condition of QQQ 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) to
the Knowledge of the Stockholders, reflect adequate reserves for all known
liabilities and reasonably anticipated losses.
(b) The accounts receivable shown on the Interim Balance Sheet or acquired
by Quadras 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 Interim
Balance Sheet or acquired by Quadras after the date thereof and prior to the
date hereof are fully collectible and free and clear of any and all liens,
claims, charges, encumbrances, security interests or other rights against such
accounts receivable in favor of others. To the Knowledge of the Stockholders
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,
except for certain advance retainer payments (none of which is refundable), no
account receivable represents billings prior to actual shipment of goods,
including "bill and hold" accounts. QQQ has established a bad debt reserve, as
shown on the Interim Balance Sheet and, to the Knowledge of the Stockholders,
there is no fact or circumstance which would impair the validity or
collectibility of Quadras' accounts receivable in an amount in excess of such
bad debt reserve.
(c) Except as set forth on Schedule 3.7(c), all inventories, including raw
materials, work-in-process and finished goods, reflected on the Interim Balance
Sheet or acquired or to be acquired by Quadras 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, (ii) are now and will
on the Closing Date be located on the regular business premises of Quadras,
(iii) are now and will on the Closing Date be owned by Quadras 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), (iv) have been or will be acquired by Quadras only in bona fide
transactions entered into in the ordinary course of business, and (v) no
material portion thereof is obsolete, damaged or unusable by Quadras in the
ordinary course of its business and are valued at the lower of cost or net
realizable market value thereof. None of such inventory is now, or on the
Closing Date will be, held by Quadras on consignment.
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(d) The books and records of QQQ and Quadras have been maintained in all
material respects in accordance with sound business practices.
(e) The representations and warranties set forth above in this Section 3.7
shall apply with equal force and effect to the Preliminary Closing Balance Sheet
and to the Closing Balance Sheet and shall be deemed given and made
contemporaneously with the delivery thereof.
3.8 Tax and Other Returns and Reports.
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(a) All federal, state, local and foreign tax returns, reports, statements
and other similar filings required to be filed by QQQ, Quadras or by the
Stockholders with respect to the business of QQQ or Quadras (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 QQQ or Quadras, (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 have been properly paid or accrued in the Financial
Statements including, without limitation, deferred taxes accrued in accordance
with generally accepted accounting principles. Neither QQQ nor Quadras has
received any notice of any assessment, tax examination, tax claim or proposed
assessment in connection with any Tax Returns, and, to the Knowledge of the
Stockholders, there are not pending tax examinations of or tax claims asserted
with respect to QQQ or Quadras. 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 QQQ or Quadras. None of the Stockholders, QQQ or Quadras has any
knowledge of any basis for any additional assessment of any Taxes.
(b) QQQ and Quadras have 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.
3.9 Personal Property.
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(a) Schedule 3.9(a) contains an accurate and complete, in all material
respects, list of all machinery, vehicles and equipment and other items of
personal property owned by QQQ or Quadras including a description of the
location of such personal property. Except as set forth on Schedule 3.9(a), QQQ
and Quadras, as the case may be, have good title to all such items, free and
clear of all liens, claims, charges, security interests and other encumbrances
of any kind or nature.
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All such items of personal property are adequate for the continued operation of
the business of Quadras as it is presently being conducted and neither QQQ nor
Quadras has received any written notification or advice that any of such
personal property does not 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
QQQ or Quadras. 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 adequate for the continued
operation of the business of Quadras as it is presently being conducted and
neither QQQ nor Quadras has received any written notification or advice that any
of such personal property does not conform to all applicable laws, ordinances,
codes, rules, regulations and authorizations relating to their construction, use
or operation. The continuation, validity and effectiveness of these personal
property leases will in no way be affected by the transactions contemplated by
this Agreement.
3.10 Real Property.
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(a) Neither QQQ nor Quadras owns any real property.
(b) The Lease is in full force and effect and Quadras is not in default
with respect thereto. Quadras is not aware of any default under the Lease by
the landlord.
3.11 Intellectual Property. Schedule 3.11 contains an accurate and
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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 QQQ or Quadras that are owned by or registered in the
name of QQQ or Quadras or to which QQQ or Quadras has any rights as licensee or
otherwise, giving in each case a brief description of the terms of such license
or other arrangement. Neither QQQ nor Quadras has infringed or made any
unlawful use or received notice of any such claimed infringement or unlawful use
of any such Intellectual Property. Neither QQQ nor Quadras has received notice
that the manufacture, use or sale by QQQ or Quadras of its products, or any
component or part thereof, nor any manufacturing operation or machinery employed
by QQQ or Quadras, nor any service rendered by QQQ or Quadras violates or
infringes upon any claims of any United States or foreign patent or patent
application owned or held by any third party. QQQ and Quadras own (or possess
adequate and enforceable rights to use without payment of royalties) all
Intellectual Property necessary for the conduct of, or used in, the business as
the same is presently being conducted.
3.12 Insurance. Schedule 3.12 contains a list and brief description of
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the policies of fire, liability and other forms of insurance owned or held by
QQQ or Quadras, or in which QQQ or Quadras is named as an insured party. The
properties and business of QQQ or Quadras of an
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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.
3.13 Litigation. Except as set forth on Schedule 3.13, there is no
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litigation, arbitration or other similar proceeding pending or, to the Knowledge
of the Stockholders, threatened against or affecting QQQ or Quadras, their
respective 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 QQQ, Quadras or the transactions
contemplated hereby. Neither the Stockholders, QQQ nor Quadras is a party or
subject to the provisions of any judgment, order, writ, injunction decree or
award of any court, arbitrator, or governmental or regulatory official body or
authority which may adversely affect QQQ, Quadras or the transactions
contemplated hereby.
3.14 Compliance with Laws. To the Knowledge of the Stockholders, neither
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QQQ nor Quadras is 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 either of them is subject. Neither
QQQ nor Quadras has received any notice of any such default. QQQ and Quadras
have obtained all licenses, permits, easements, rights, applications,
registrations, filings and franchises or other governmental authorizations
("Authorizations") necessary to the ownership of their respective properties or
the conduct of their respective business. Set forth on Schedule 3.14 is a
complete list of all such Authorizations. Neither QQQ nor Quadras is in default
or has 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.
3.15 Environmental Matters.
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(a) Except as set forth on Schedule 3.15, to the Knowledge of the
Stockholders, the operations of QQQ and Quadras 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 (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 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 common law (including, without limitation, nuisance, trespass,
negligence and toxic torts).
11
<PAGE>
(b) Neither QQQ, Quadras nor any Stockholder has been notified or is aware
of any violation of any Environmental Laws; neither QQQ, Quadras nor any
Stockholder is otherwise aware that QQQ or Quadras may be potentially
responsible or otherwise liable under any Environmental Laws; and neither QQQ,
Quadras 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) To the Knowledge of the Stockholders, QQQ and Quadras have had in the
past and presently have all governmental permits, licenses, consents, approvals
and authorizations relating to environmental protection or health or safety
matters (the "Environmental Permits") necessary to conduct their respective
operations. QQQ and Quadras have been in the past and are 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 have made all appropriate filings for issuance or
renewal of all the Environmental Permits.
(d) To the Knowledge of the Stockholders: (i) no use, storage, treatment,
generation recycling, disposal, releases, threatened releases, handling, burial
or placement of any materials regulated under any Environmental Laws has
occurred in the past or is presently occurring on any property, building or
other structure currently or formerly owned, leased, operated or otherwise used
by QQQ or Quadras other than in compliance with applicable Environmental Laws;
and (ii) no materials regulated under any Environmental Laws have been in the
past or are presently on any property, building or other structure currently or
formerly owned, leased, operated or otherwise used by QQQ or Quadras other than
in compliance with applicable Environmental Laws.
(e) To the Knowledge of the Stockholders 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 QQQ or Quadras.
(f) To the Knowledge of the Stockholders, neither QQQ nor Quadras has used
any waste disposal site or otherwise disposed of, transported, or arranged for
the transportation of any material regulated under any Environmental Laws in
violation of any Environmental Laws. Neither QQQ nor Quadras has received any
notice of any violation thereof.
(g) To the Knowledge of the Stockholders, 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 QQQ, Quadras or the Stockholders
based on or related to any Environmental Laws or Environmental Permits.
12
<PAGE>
(h) No lien exists, and, to the Knowledge of the Stockholders, no condition
exists which could result in filing a lien, under any Environmental Laws against
any property owned, leased, operated or otherwise used by QQQ or Quadras.
3.16 Absence of Changes. Since July 31, 1995, except as described on
------------------
Schedule 3.16 and except as Graphic may have consented to in writing, there has
not been any transaction or occurrence in which QQQ or Quadras 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 (excluding regular compensation which shall not
have changed since July 31, 1995) 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 other than normal adjustments to
customer accounts in the ordinary course of business and which, in the aggregate
do not exceed $10,000; (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 QQQ 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.
3.17 Absence of Undisclosed Liabilities.
----------------------------------
(a) QQQ has no liabilities, claims, charges, encumbrances, liens or any
other obligations of any nature whatsoever, known or unknown, absolute or
contingent, due or to become due. Further, QQQ has no employees and has no
obligations, financial or otherwise to any officer, director, stockholder or any
former employee.
(b) Neither QQQ nor Quadras has any Undisclosed Liabilities.
3.18 Assets. QQQ and Quadras own or lease all equipment, furniture,
------
fixtures, and other personal property and assets necessary for the continued
operation of their respective businesses as presently conducted.
3.19 Employees. Schedule 3.19 contains a true and complete list of all
---------
employees of Quadras, their salaries or wage rates, accrued vacation and their
location of employment as of
13
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November 1, 1995, and a description of all pension, profit sharing, bonus,
medical benefits, group insurance programs or similar arrangements in effect for
employees of Quadras. Quadras is not in default with respect to any of its
obligations relating to salaries, wages or group insurance programs in respect
of its employees.
3.20 Employee Benefit Plans.
----------------------
(a) QQQ or Quadras has no Benefit Plans (as defined below) except as set
forth on Schedule 3.20.
(b) Except as set forth on Schedule 3.20, QQQ and Quadras have complied,
and currently are 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 QQQ or Quadras (the "Benefit Plans") and a brief description of
each Benefit Plan now maintained is set forth on Schedule 3.20 hereto;
(c) QQQ and Quadras have 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;
(d) QQQ and Quadras have not incurred any material liability with respect
to the Benefit 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 Benefit Plans. Each
plan can be terminated on the Closing Date without liability to QQQ, Quadras or
QAC including, without limitation, any additional contributions, penalties,
premiums, fees or other charges.
3.21 Labor Matters. Schedule 3.21 contains a complete and accurate list
-------------
of all claims brought by employees against QQQ or Quadras in the past three (3)
years, including, without limitation, (i) workers compensation claims; (ii)
claims brought by employees 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 QQQ or
Quadras by the Occupational Safety and Health Administration or complaints filed
against QQQ or Quadras 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
14
<PAGE>
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.
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 QAC, which is a:
(i) Contract for employment, or a non-competition agreement with any
present or former employee of QQQ or Quadras:
(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 of goods or services in amounts exceeding
$5,000;
(v) Contract for the sale, production or supply of goods or services (other
than purchase orders in amounts not exceeding $10,000);
(vi) Distributor, sales agency or vendor Contract or any franchise or
license agreement;
(vii) 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;
(viii) Contract under the terms of which QQQ or Quadras 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
(ix) Contract upon which the business, rights or assets, or condition,
financial or otherwise, of QQQ or Quadras depends or is materially affected.
(x) 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).
15
<PAGE>
(b) Each of the Contracts listed in Schedule 3.22 is in full force and
effect and to the Knowledge of the Stockholders, 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 thereunder. 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, QQQ,
Quadras 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. 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, to the Knowledge of the Stockholders,
threatened termination, cancellation or limitation of, or any modification or
change in: (i) the business relationship of QQQ or Quadras with any customer or
group of customers of QQQ or Quadras whose purchases individually or in the
aggregate are material to the operations and financial condition of QQQ or
Quadras, (ii) the business relationship of QQQ or Quadras with any material
supplier to QQQ or Quadras, or (iii) the relationship between QQQ or Quadras and
any of its employees not occurring in the ordinary course of business.
3.23 Banks. Schedule 3.23 lists all banks or other financial institutions
-----
with which QQQ or Quadras 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.
3.24 Transactions with Affiliates. Except as set forth in Schedule 3.24,
----------------------------
no Stockholder or any officer, director or employee of QQQ or Quadras, 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 QQQ or
Quadras.
3.25 Corporate Names. Neither QQQ nor Quadras has 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.
3.26 Customer Relations. To the Knowledge of the Stockholders, QQQ and
------------------
Quadras, relations with customers or suppliers are continuing in good order, and
there are no known outstanding disputes with customers or suppliers.
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, the Employment Agreements or the
Printing Agreement on the part of QQQ, Quadras or any of the Stockholders or the
consummation of the transactions contemplated herein and therein, other than
corporate authority on behalf of QQQ or Quadras.
16
<PAGE>
3.28 Broker's or Finder's Fees. Neither QQQ, Quadras nor any Stockholder
-------------------------
nor any of the directors, officers or employees of QQQ or Quadras 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.
3.29 Securities Representations.
--------------------------
(a) Each Stockholder either alone or with her purchaser representative has
such knowledge and experience in financial and business matters that she is
capable of evaluating the merits and risks of obtaining the Graphic 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 answers from the officers and directors of Graphic
concerning Graphic and the terms and conditions of her investment in Graphic.
(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 her decision to
exchange her capital stock in QQQ as set forth herein, and each Stockholder is
relying solely on the information contained in this Agreement, and personal
investigation.
(c) Each Stockholder is presently a bona fide resident of the State of
Georgia and has no present intention of becoming a resident of any other state
or jurisdiction.
(d) Each Stockholder has carefully evaluated her financial resources and
investment position and the risks associated with her investment in Graphic and
acknowledges that she is familiar with and able to bear any economic risk of
such investment.
(e) Each Stockholder understands and agrees that the Graphic Stock to be
issued to her without registration under any state or federal law relating to
the registration of securities, except as set forth in Article 8 herein and will
be issued to 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 Graphic Stock for her own account, to hold for
investment, and with no present intention of dividing her participation with
others or reselling or otherwise participating, directly or indirectly, in the
distribution thereof and shall not make any transfer, sale, or other disposition
thereof: (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 stock 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 Stock.
17
<PAGE>
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, 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 QAC pursuant
to this Agreement have been delivered to or have been made available to or will
be made available for inspection by Graphic, QAC and their attorneys and
accountants.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF QAC AND GRAPHIC
QAC and Graphic, jointly and severally, represent and warrant to the
Stockholders as follows:
4.1 Organization; Power; Qualification. Each of QAC and Graphic is a
----------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the State of Georgia. Each of QAC 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.
4.2 Authority. Each of QAC and Graphic has the corporate power and has
---------
taken all necessary corporate action to authorize QAC 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 QAC and Graphic of each of the
Transaction Documents to which it is a party constitutes the valid and legally
binding obligation of QAC or Graphic, as the case maybe, enforceable in
accordance with such Transaction Documents' terms.
4.3 Compliance with Laws and Validity of Contemplated Transactions. The
--------------------------------------------------------------
execution, delivery and performance of this Agreement by Graphic and QAC 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 their respective Articles
of Incorporation or By-Laws or under any indenture, agreement or other
instrument to which either of them is a party or by which they or any of their
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 Graphic or QAC. 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 Graphic or QAC of this Agreement.
18
<PAGE>
4.4 Investment Representation. Graphic and QAC are aware that QQQ Stock
-------------------------
is not registered under the Act. QAC and Graphic possess such knowledge and
experience in business matters such that they are capable of evaluating the
merits and risks of an investment in QQQ Stock hereunder. QAC is acquiring QQQ
Stock for its own account, for investment purposes only and not with a view to
the distribution thereof. QAC agrees that QQQ Stock 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.
4.5 Graphic Stock. Each share of Graphic Stock, 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 Graphic
Stock 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 QAC or Graphic is a party which relate to or affect the
transfer of the Graphic Stock.
4.6 Broker's or Finders Fees. Neither Graphic nor QAC nor any director,
------------------------
officer or employee of Graphic or QAC 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.
4.7 Graphic Reports. Graphic has delivered to 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 for the fiscal quarters
ended April 30, 1995 and July 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.
4.8 Litigation. Except as set forth in the Graphic Disclosure Documents,
----------
there is no litigation, arbitration or other similar proceeding pending or, to
the Knowledge of Graphic, threatened, against or affecting Graphic, its
properties or rights or which pertains to the transactions contemplated by this
Agreement and which would have a material adverse effect on Graphic or its
consolidated financial condition. Graphic is not a party or subject to the
provisions of any judgment, order, writ, injunction, decree or award of any
court, arbitration, or governmental or regulatory official body or authority
which may adversely affect Graphic or the transactions contemplated hereby.
4.9 Availability of Form S-3. Graphic satisfies all of the conditions
------------------------
precedent for the use of Form S-3 to register for resale the Graphic Stock as
contemplated herein.
19
<PAGE>
4.10 Reporting Obligations. Graphic has filed all periodic and other
---------------------
reports and information required to be filed by Graphic with the Commission
pursuant to the Securities Exchange Act of 1934, as amended.
4.11 Compliance with Laws. To the Knowledge of Graphic, Graphic 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 and Graphic has not received any notice of
any such default. Graphic 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. Graphic is not in default or has not
received any notice of any claim of default with respect to any such
Authorization.
4.12 No Other Representations. Neither Graphic nor QAC has received any
------------------------
representations or warranties, other than those set forth in this Agreement,
from the officers, directors, affiliates, agents, representatives or
Stockholders of QQQ or Quadras in making its decision to engage in the
transaction contemplated herein and Graphic and QAC are relying solely on the
information contained in this Agreement and personal investigation.
4.13 Absence of Changes. Since July 31, 1995, and except as set forth in
------------------
the Graphic Disclosure Documents, Graphic has not engaged in any transactions or
suffered any events which, on a consolidated basis, would have a material
adverse effect upon Graphic or its consolidated financial condition.
4.14 Correctness of Representations. No representation or warranty of
------------------------------
Graphic or QAC in this Agreement or in any statement, certificate or schedule
furnished by Graphic or QAC pursuant hereto, 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.
ARTICLE 5
OBLIGATIONS AND COVENANTS OF THE STOCKHOLDERS,
QQQ, AND QUADRAS
5.1 Conduct of Quadras's Business Prior to Closing. From the date hereof
----------------------------------------------
to the Closing Date, and except to the extent that Graphic and QAC shall
otherwise consent in writing, which consent shall not be unreasonably withheld,
delayed or conditioned, the Stockholders, QQQ and Quadras shall, in good faith
and in all commercially reasonable respects:
20
<PAGE>
(a) operate Quadras'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 Quadras's properties in good order and condition,
reasonable wear and use excepted;
(c) take all steps reasonably necessary to maintain Quadras'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 Quadras and collect its
accounts receivable in accordance with Quadras's past business practices;
(e) comply with all laws materially applicable to the conduct of the
business of QQQ or Quadras;
(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 QQQ or Quadras by any third party except for
settlements of customer disputes made by QQQ or Quadras in the ordinary course
of business;
(h) not sell, or otherwise dispose of, any assets of QQQ or Quadras other
than in the ordinary course of business; and
(i) submit all Contracts to which QQQ or Quadras is to become a party
between the date hereof and the Closing Date for approval by, or on behalf of,
QAC (other than Contracts entered into in the ordinary course of business).
5.2 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 QQQ 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 QAC in connection with any possible proposal (an
"Acquisition Proposal") regarding the sale, merger, consolidation, or similar
transaction with respect to QQQ. The Stockholders shall notify QAC immediately
if any discussions or negotiations are sought to be initiated or such
information is requested with respect to an Acquisition Proposal.
5.3 Access and Information. From the date hereof to the Closing Date QQQ
----------------------
shall afford to QAC, Graphic, and their counsel, accountants and other
representatives, free and full access to
21
<PAGE>
all the offices, properties, books, Contracts, commitments and records of QQQ
and Quadras and to furnish such persons with all information (including
financial and operating data) concerning their affairs as they may, in their
sole discretion, request, including copies and extracts (at Graphic's expense)
of pertinent records, documents and Contracts. QQQ, Quadras and their employees
shall assist QAC, Graphic, and their counsel, accountants and representatives,
in their examination of QQQ's and Quadras's books and records. To the extent
that QQQ shall have control over same, the accountants of QQQ shall furnish to
QAC and Graphic during such period any and all of their statements, working
papers and underlying records and data as QAC and Graphic, in their sole
discretion, may request.
5.4 Notification of Changes. From the date hereof to the Closing Date,
-----------------------
QQQ shall promptly notify QAC and Graphic in writing of any material adverse
change in the financial condition of QQQ or Quadras, the method of conducting
their respective operations, any material damage to or loss of any property used
in the business of QQQ or Quadras, or the institution of or the threat of
institution of legal proceedings against QQQ or Quadras.
5.5 No Default. From the date hereof to the Closing Date, neither QQQ nor
----------
Quadras shall 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.
5.6 Tax Returns. All Tax Returns of QQQ or Quadras required to be filed
-----------
by the Closing Date, taking into account any extensions of the filing deadlines
granted to QQQ or Quadras, that have not yet been filed prior to the date hereof
(including those relating to periods after the Closing Date) shall be prepared
by QQQ but shall not be filed without prior examination by, or on behalf of, QAC
and Graphic. QQQ shall use its best efforts to obtain all extensions of time
from governmental authorities necessary to effect this provision.
5.7 Allocation of Taxable Income to Short Period. The Stockholders shall
--------------------------------------------
cause QQQ 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 QQQ'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).
5.8 Other Pre-Closing Returns.
-------------------------
(a) The Stockholders shall cause QQQ and Quadras to prepare and file all
federal and state income tax returns 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 5.7 above.
(b) The Stockholders shall cause QQQ to include the results of the
respective operations of QQQ and Quadras 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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5.9 Reorganization Treatment. The Stockholders shall cause all tax
------------------------
returns relating to QQQ to be filed on the basis of treating the Merger as a
reorganization pursuant to Sections 368(a)(1)(A) and 368(a)(2)(D) of the Code.
5.10 General Cooperation in Tax Matters. After the Closing Date, the
----------------------------------
Stockholders shall cooperate fully with Graphic and QAC and shall make available
to Graphic and QAC, 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, QQQ or Quadras, 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.
5.11 Compliance with Laws. From the date hereof to the Closing Date QQQ
--------------------
and Quadras 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.
5.12 Consents 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 QQQ or
Quadras is a party or by which its assets are bound or otherwise, or under any
governmental law or regulation, QQQ and Quadras shall use their best efforts to
obtain any such consent or approval prior to the Closing Date.
ARTICLE 6
COVENANTS OF GRAPHIC AND QAC
6.1 Release of Guaranties; Indemnification Continuation. From the date
---------------------------------------------------
hereof to the Closing Date, QAC and Graphic shall each use their best efforts to
cause the Stockholders to be released from any guaranties, provided that such
efforts shall not include the payment of money in consideration for such
release. The existing indemnification provisions of QQQ's and Quadras's by-laws
for their respective officers and directors shall be retained or replaced for up
to three (3) years after the Closing Date to cover any claims asserted by third
parties (other than claims by Graphic or QAC pursuant to this Agreement) after
the Closing Date and relating to acts or omissions that occurred prior to the
Closing Date and for which such officers or directors would be entitled to
indemnification pursuant to such by-law provisions. To the Knowledge of the
Stockholders, no such claims are pending or threatened.
6.2 Filing of NASDAQ 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 Stock
to be issued in the Merger.
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6.3 Post-Closing Returns.
--------------------
(a) Graphic shall cause QAC 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 5.7 above.
(b) Graphic shall cause QAC to include the results of the respective
operations of the Surviving Corporation in any separate state or local income
tax return for any 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.
6.4 Reorganization Treatment. Graphic shall cause all tax returns
------------------------
relating to QQQ and QAC to be filed on the basis of treating the Merger as a
reorganization pursuant to Sections 368(a)(1)(A) and 368(a)(2)(D) of the Code.
Further, following the Closing Date, Graphic shall use its best efforts to
preserve the reorganization treatment of the Merger and shall not take any
action that would defeat such treatment.
At the Closing, Graphic and QAC shall deliver a certificate executed by an
officer regarding Graphic's current intentions and plans with regard to conduct
of QAC following the Closing. Such certificate shall be in form and content
reasonably acceptable to the Stockholders and shall provide, among other things,
that neither Graphic nor QAC (i) currently intends to issue any QAC Common Stock
to any independent third party, (ii) currently intends to reacquire any of the
Graphic Stock to be issued in connection with the Merger, (iii) currently
intends to dispose of the stock of QAC, other than to itself or an affiliate,
(iv) currently intends to liquidate or sell its assets otherwise than in the
ordinary course of QAC's business and (v) currently intends to cause QAC,
following the Closing, to discontinue conducting the businesses conducted by
Quadras prior to the Closing.
6.5 General Cooperation in Tax Matters. After the Closing Date, Graphic
----------------------------------
and QAC shall cooperate fully with the Stockholders and shall make available to
the Stockholders, 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, QQQ or Quadras, 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 QQQ or Quadras
ending on or before the Closing Date remain open, Graphic shall promptly notify
the Stockholders in writing of any pending or threatened tax audits or
assessments for which the 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 Stockholders reasonably informed as to all aspects of any
administrative or judicial proceeding that may result in the payments by the
Stockholders of any tax.
6.6 Notification of Changes. From the date hereof to the Closing Date,
-----------------------
Graphic and QAC shall promptly notify the Stockholders in writing of any
material adverse change in the financial
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condition of Graphic or QAC, the method of conducting their respective
operations, any material damage to or loss of any property used in the business
of Graphic or QAC, or the institution of or the threat of institution of legal
proceedings against Graphic or QAC.
6.7 Compliance with Laws. From the date hereof to the Closing Date,
--------------------
Graphic and QAC 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.
6.8 Consents 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
Graphic or QAC is a party or by which its assets are bound or otherwise, or
under any governmental law or regulation, Graphic and QAC shall use their best
efforts to obtain any such consent or approval prior to the Closing Date.
ARTICLE 7
CONDITIONS TO CONSUMMATION OF MERGER
7.1 Conditions to Obligations of QAC and Graphic. The obligation of
--------------------------------------------
QAC 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
contained in this Agreement shall be true and correct in all material respects
as of, and shall not have been violated in any material respect at, the Closing
Date as though made on and as of the Closing Date; the Stockholders, QQQ and
Quadras shall, on or before the Closing Date, 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 the Stockholders shall have
delivered to QAC and Graphic a certificate dated as of the date of the Closing
to the foregoing effect.
(b) 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 QAC's
ability to conduct the business of Quadras as presently conducted or which
claims material damages from QAC or Graphic with respect to the Merger.
(c) The Stockholders shall have delivered to QAC and Graphic a
certificate of QQQ'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.
(d) The Stockholders shall have submitted to QAC and Graphic
resignations of all current officers and directors of QQQ and Quadras.
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(e) Mesdames Harris and Morgan shall have executed and delivered to
QAC and Graphic the Employment Agreements (which contains certain non-compete
provisions), substantially in the form of Exhibit "A" hereto.
(f) The Stockholders shall have executed and delivered to QAC and
Graphic the Escrow Agreement, substantially in the form of Exhibit "B" hereto.
(g) QAC and Graphic shall have received the opinion of Johnson &
Montgomery, counsel to QQQ and the Stockholders, substantially in the form of
Exhibit "D" hereto.
(h) The Certificate of Merger shall be prepared for filing with the
Secretary of State of Georgia.
(i) QAC and Graphic shall have executed the Printing Agreement
substantially in the form of Exhibit "E" attached hereto providing for
substantial quantities of commercial printing for Quadras's clients, for which
Quadras performs creative, design, photography or pre-press services, to be
performed by Graphic or its subsidiaries, with Quadras receiving as
consideration therefor a commission equal to eight percent (8%) of Value Added
Sales.
(j) Quadras shall have terminated its lease for its studio at 239-B
Locust Street, Atlanta, Georgia.
7.2 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 QAC and Graphic
shall be true and correct in all material respects as of, and shall not have
been violated in any material respect at, the Closing Date as though made on and
as of the Closing Date; QAC 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 Date; and
each of QAC 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) 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.
(c) QAC 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.
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(d) QAC shall have executed and delivered to the Stockholders the
Escrow Agreement, substantially in the form of Exhibit "B" hereto.
(e) The Stockholders shall have received the opinion of Messrs. Gray,
Gilliland & Gold, P.C., counsel to QAC and Graphic, substantially in the form of
Exhibit "G" hereto.
(f) The Certificate of Merger shall be prepared for filing with the
Secretary of State of Georgia.
(g) QAC and Graphic shall have executed and delivered the Employment
Agreements substantially in the form of Exhibit "A" hereto.
(h) QAC and Graphic shall have executed and delivered the Printing
Agreement substantially in the form of Exhibit "E" hereto.
7.3 Fulfillment of Conditions. Each party to this Agreement shall
-------------------------
use his, her or its best efforts to satisfy each and every condition to such
party's obligation to consummate the transactions contemplated herein.
ARTICLE 8
REGISTRATION OF GRAPHIC STOCK
8.1 Registration. Graphic shall prepare and file with the Commission
------------
a Registration Statement on Form S-3 as soon as practicable after the Closing
Date, and in no event later than ninety (90) days after the Effective Date,
which shall cause the Graphic Stock 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. If at any time during the Effective Period, Graphic is
unable to maintain such registration on Form S-3, Graphic shall utilize Form S-1
or such other registration form as Graphic deems appropriate in order to fulfill
its obligations under this Article 8.
8.2 Furnishing Information. The Stockholders shall furnish to Graphic
----------------------
such information regarding Stockholders or the Graphic Stock and the intended
method of disposition of such securities, as shall be reasonably requested by
Graphic in order to effect such registration.
8.3 Prospectus Requirements. Each Stockholder hereby covenants with
-----------------------
Graphic that 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 Graphic Stock 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
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<PAGE>
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 Graphic Stock
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 she 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.
8.4 Maintenance.
-----------
(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 Graphic Stock
until the third anniversary of the Closing Date or the sale by the Stockholders
of all of the Graphic Stock, 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 registration
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 8.2 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;
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<PAGE>
(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 Graphic Stock
under such other securities or blue sky laws of such 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 Graphic Stock 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.
8.5 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 8.2 or based upon information furnished to
Graphic in writing by or on behalf of any of the Stockholders expressly for use
therein.
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<PAGE>
(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 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 8.2 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 8.3 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.
8.6 Fees and Expenses of Registration. Graphic will pay all expenses and
---------------------------------
fees incident to the performance of its obligations in Sections 8.1, 8.3 and
8.4 other than selling commissions and fees and expenses of advisors to any of
the Stockholders. Graphic shall pay for the fees and expenses of one counsel
for the Stockholders in connection with its registration obligations hereunder
up to $2,500, in the aggregate.
ARTICLE 9
INDEMNIFICATION
9.1 Definitions. As used in this Article 9:
-----------
(a) "Damages" shall mean actual losses, liabilities, damages, claims,
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 9.2 hereof.
(c) "Indemnifying Party" means the Stockholders, jointly and
severally.
9.2 Indemnification of QAC and Graphic by the Stockholders.
------------------------------------------------------
(a) The Stockholders shall, jointly and severally, from and after the
Closing Date, indemnify, defend, and hold QAC 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
30
<PAGE>
or in connection with any breach of any representation, warranty or covenant
made by the Stockholders in this Agreement or due to any amounts paid by Graphic
or QAC pursuant to the indemnification continuation provisions of Section 6.1
hereof; provided, however, that the liability of each of the Stockholders to
indemnify Graphic or QAC 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 or in connection with such indemnification
continuation provisions: (i) must be asserted by Graphic or QAC during the
period such representations, warranties and covenants survive this Agreement as
set forth in Sections 6.1 and 12.11 herein; and (ii), although the liability of
the Stockholders hereunder shall be joint and several, the liability of each
Stockholder shall be limited to the total amount of Graphic Stock (at the Market
Value Per Share used for the Closing) payable to such Stockholder.
(b) No Damages shall be recoverable hereunder unless the aggregate
amount of all Damages exceeds $50,000; provided, however, that once such
threshold is met, the full amount of all Damages over and above the first
$25,000 thereof shall be recoverable.
9.3 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 (collectively, and including Third Party Claims, a "Claim"),
the Indemnified Party shall use reasonable efforts to notify the Indemnifying
Party in writing of such Claim, specifying the nature of such 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
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 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 Claim and (B) notwithstanding any such dispute, if it is a
Third Party Claim, whether or not it will defend, at its sole cost and expense,
the Indemnified Party against such 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 Claim or the amount thereof (whether or not the Indemnifying Party desires
to defend the Indemnified Party against such Claim as provided in paragraphs (c)
and (d) below), such dispute shall be resolved in accordance with Section 9.5
hereof. Pending the resolution of any dispute by the Indemnifying Party
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<PAGE>
of its liability with respect to any Third Party Claim, such 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
crosscomplaint against any person (unless such counterclaim or crosscomplaint
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
Graphic, provided Graphic is 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 a 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
Indemnified 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 9.5 hereof.
(e) In the event an Indemnified Party has a claim for indemnification
against the Indemnifying Party hereunder with respect to a Claim other than a
Third Party Claim, the
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<PAGE>
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, such dispute shall be resolved in accordance with Section
9.5 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.
(f) The use of the indemnification provisions of this Agreement by
any Indemnified Party shall be the exclusive method of recovering for any
Damages sustained by an Indemnified Party due to a breach of any representation,
warranty or covenant contained in this Agreement; provided, however, that if
such indemnification does not fully satisfy the Damages incurred by an
Indemnified Party hereunder, such Indemnified Party may resort to any other
legal remedy available to such party to recover any such Damages not satisfied
through indemnification hereunder, subject, in each instance, to all the
limitations contained in this Agreement on recovery of Damages (including,
without limitation, limitations on time for asserting claims, threshold amounts,
maximum recovery from an individual Indemnifying Party, credits for insurance
benefits and any tax benefits or payments included in the definition of Damages
in this Article 9) set forth in this Agreement. Further, if any dispute
regarding indemnification hereunder is submitted to arbitration as set forth in
Section 9.5 herein, the result of such arbitration shall be final, binding and
conclusive, and no party may resort to other remedies to obtain recovery of any
Damages not awarded through such arbitration.
9.4 Payment. The Indemnifying Party shall pay the Indemnified Party,
-------
within ten days after the final determination of liability under this Article 9,
the amount of any indemnification to which the Indemnified Party is entitled.
Payment may be made by an Indemnifying Party in cash or with Graphic Stock (at
its then current market value). 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.
9.5 Arbitration. All disputes under this Article 9 shall be settled
-----------
by arbitration in Atlanta, Georgia, 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 9.5. 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 for
commercial disputes. 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.
33
<PAGE>
ARTICLE 10
COVENANT NOT TO COMPETE
10.1 Definitions. Capitalized terms used in this Article 10 shall have
-----------
the following meanings:
(a) "Area" shall mean the States of Georgia, Florida, North Carolina,
South Carolina, Alabama, Tennessee, Mississippi and Illinois.
(b) "Competing Business" shall mean any business engaged in the
production for the account of others of advertising materials and sales catalogs
featuring clothing and accessories and industrial and household products,
including required design, copy writing and photography, but excluding color
separation and printing services.
(c) "Proprietary Information" shall mean information related to QQQ,
Quadras, or the business of QQQ or Quadras (i) which derives economic value,
actual or potential, from not being generally known to, or readily ascertainable
by, other persons who can obtain 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 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 QQQ or Quadras. Proprietary
Information will not include any information or data which before being divulged
by the Stockholders (i) has become generally known to the public through no
wrongful act of the Stockholders; (ii) has been rightfully received by the
Stockholders from a third party without restriction on disclosure and without
breach of an obligation of confidentiality running either directly or indirectly
to QQQ or Quadras; (iii) has been approved for release and released to the
general public by written authorization of the QQQ or Quadras; (iv) has been
disclosed pursuant to a requirement of a governmental agency or of law without
similar restrictions or other protections against public disclosure, or has been
required to be disclosed by operation of law; provided, however, that the
Stockholders must first have given written notice of such required disclosure to
QAC, and taken reasonable steps to allow QAC to seek to protect the
confidentiality of the information required to be disclosed including, without
limitation, to allow QAC to obtain a protective order requiring that the
Proprietary Information so disclosed be used only for the purposes for which
disclosure is required; or (v) is independently developed by the Stockholders
without use, directly or indirectly, of Proprietary Information and does not
relate to the Business of the Company. Proprietary Information may include
information disclosed to QQQ or Quadras by a third party which QQQ or Quadras is
obliged to treat as confidential.
(d) "Restricted Period" shall mean the period commencing with the
Closing Date and ending on the seven (7) year anniversary thereof.
34
<PAGE>
10.2 Agreement Not to Compete. Unless otherwise consented to in writing
------------------------
by QAC, the 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.
10.3 Agreement Not to Solicit Employees. The Stockholders agree that
----------------------------------
during the Restricted Period, they will not, without the prior written consent
of QAC, 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 QAC, any person employed by QQQ or
Quadras on the Closing Date.
10.4 Agreement Not to Solicit Customers. The 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, in or for a Competing
Business, solicit or attempt to solicit any person, firm or corporation who was
a customer of QQQ or Quadras during the one-year period immediately preceding
the Closing Date (as shown on the books and records of QQQ).
10.5 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 QAC (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, to the extent practicable.
(c) The Stockholders covenant and agree that on or before the Closing
Date, the Stockholders will deliver to QAC all tangible copies and embodiments
of the Proprietary Information in their possession or control.
10.6 Remedies. The parties hereto specifically acknowledge and agree
--------
that the remedy at law for breach of this Article 10 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.
35
<PAGE>
ARTICLE 11
TERMINATION; AMENDMENTS; WAIVER
11.1 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 QAC and the Stockholders;
(b) by QAC or the Stockholders if, without a material breach of the
terminating party, the Closing shall not have occurred on or before November 1,
1995, which date may be extended by mutual consent of the parties;
(c) by QAC if there has been a misrepresentation, breach of warranty
or breach of covenant or agreement by the Stockholders, QQQ or Quadras in their
representations, warranties, covenants or agreements set forth herein; or
(d) by the Stockholders if there has been a misrepresentation, breach
of warranty or breach of covenant or agreement by QAC or Graphic in its
representations, warranties, covenants or agreements set forth herein.
11.2 Effect of Termination. In the event of the termination and
---------------------
abandonment of this Agreement pursuant to Section 11.1 hereof, this Agreement
shall forthwith become void and have no effect, other than the provisions of
Section 12.7 which shall survive. Nothing contained in this Section 11.2 shall
relieve any party from liability for any breach of this Agreement occurring
before such termination.
ARTICLE 12
MISCELLANEOUS
12.1 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 operation of law or otherwise, provided that QAC may assign its respective
rights and obligations to any direct subsidiary of Graphic, but no such
assignment shall relieve QAC of its obligations hereunder.
12.2 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.
12.3 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
36
<PAGE>
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 QAC:
Quadras 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:
Gray, Gilliland & Gold, P.C.
400 Perimeter Center Terrace
Suite 1050, North Terraces
Atlanta, Georgia 30346
Telecopy: (404) 392-4808
Attention: Lawrence M. Gold, 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
with a copy to:
Gray, Gilliland & Gold, P.C.
400 Perimeter Center Terrace
Suite 1050, North Terraces
Atlanta, Georgia 30346
Telecopy: (404) 392-4808
Attention: Lawrence M. Gold, Esq.
If to the Stockholders, at the address
listed on the signature pages hereof.
37
<PAGE>
If to QQQ or Quadras at:
Quadras, Inc.
3176 Marjan Drive
Atlanta, Georgia 30340
with a copy to:
Johnson & Montgomery
One Buckhead Plaza, Suite 400
3060 Peachtree Road, N.W.
Atlanta, Georgia 30305
Telecopy (404) 262-1222
Attention: Thomas E. Jones, Jr., Esq.
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.
12.4 Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of Georgia, regardless of the
laws that might otherwise govern under applicable principles of conflicts of
laws thereof.
12.5 Descriptive Captions. The descriptive captions 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.
12.6 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.
12.7 Expenses. All costs and expenses of Graphic or QAC associated
--------
with legal and audit services incurred in connection with the Merger shall be
paid by Graphic. The Stockholders and QQQ will each pay their respective legal
and other expenses. Any expense incurred by QQQ in connection with the
transactions contemplated by this Agreement shall be accrued in full on the
financial records of QQQ as of the Closing Date and constitute an adjustment to
the Closing Balance Sheet.
12.8 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.
38
<PAGE>
12.9 No Waiver. No failure on the part of any party hereto to
---------
exercise, and no delay in exercising any right, power or remedy hereunder, shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right, power or remedy by any party hereto preclude any other or further
exercise thereof or the exercise of any other right, power or remedy. No
express waiver or assent by any party of any breach of or any default in any
term, covenant, or condition which this Agreement requires to be performed or
observed by any other party shall constitute a waiver of or assent to any
succeeding breach of or default in the same or any other term, covenant or
condition hereof.
12.10 Best Efforts. All parties to this Agreement hereby covenant
------------
and agree to use their best efforts to perform all of their respective
covenants, agreements and obligations hereunder and to cooperate fully with each
other to consummate the Merger and the related transactions referred to herein.
39
<PAGE>
12.11 Survivability. The Stockholders' representations, warranties
-------------
and covenants set forth in this Agreement shall survive for a three (3) year
period following the Closing Date, except for the representations, warranties
and covenants set forth in Sections 3.4, 3.5, 3.8, 3.20 and 3.29 which shall
survive for the period of seven (7) years after the Closing Date.
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: MARK C. POPE, IV
-----------------------------
Name: Mark C. Pope, IV
----------------------------
Title: President
---------------------------
QUADRAS ACQUISITION COMPANY
By: MARK C. POPE, IV
-----------------------------
Name: Mark C. Pope, IV
----------------------------
Title: President
---------------------------
QQQ, INC.
By: SARA S. HARRIS
---------------------------
Name: Sara S. Harris
---------------------------
Title: President
---------------------------
QUADRAS, INC.
By: SARA S. HARRIS
---------------------------
Name: Sara S. Harris
---------------------------
Title: President
---------------------------
[SIGNATURES CONTINUED ON THE FOLLOWING PAGE]
40
<PAGE>
[SIGNATURES CONTINUED FROM THE PRECEDING PAGE]
SARA S. HARRIS
------------------------------------
Sara Senie Harris
Social Security Number: ###-##-####
Address: 261 King Road, N.W.
Atlanta, Georgia 30342
CYNTHIA A. MORGAN
------------------------------------
Cynthia A. Morgan
Social Security Number:
Address: 1026 Coronado Drive, N.W.
Atlanta, Georgia 30327
41
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION WITH QQQ, INC.
---------------------------------------------------
EXHIBITS
--------
Exhibit "A" - Employment Agreements
Exhibit "B" - Escrow Agreement
Exhibit "C" - Interim Balance Sheet
Exhibit "D" - Opinion of QQQ and Stockholders Counsel
Exhibit "E" - Printing Agreement
Exhibit "F" - DELETED
Exhibit "G" - Opinion of Gray, Gilliland & Gold, P.C.
42
<PAGE>
SCHEDULES
---------
Schedule 2.3 Stockholders
Schedule 3.1 Foreign Qualifications
Schedule 3.7(b) Claims Against Accounts Receivable
Schedule 3.7(c) Inventory Claims
Schedule 3.9(a) Personal Property
Schedule 3.9(b) Leases
Schedule 3.11 Intellectual Property
Schedule 3.12 Insurance
Schedule 3.13 Litigation
Schedule 3.14 Authorizations
Schedule 3.15 Environmental Matters
Schedule 3.16 Changes Since July 31, 1995
Schedule 3.19 Employees
Schedule 3.20 Benefit Plans
Schedule 3.21 Labor Claims
Schedule 3.22 Contracts
Schedule 3.23 Bank Accounts
Schedule 3.24 Transactions with Affiliates
Schedule 3.27 Consents
ALL OF THE FOREGOING EXHIBITS AND SCHEDULES HAVE BEEN OMITTED FROM THIS
FILING. THE REGISTRANT WILL SUPPLEMENTALLY PROVIDE TO THE SECURITIES AND
EXCHANGE COMMISSION, UPON REQUEST, COPIES OF ANY OF THE FOREGOING EXHIBITS AND
SCHEDULES.
43
<PAGE>
GLOSSARY
- --------
1. "Acquisition Proposal" shall have the meaning set forth in Section 5.2
herein.
2. "Act" shall mean the Securities Act of 1933, as amended.
3. "Affiliate(s)" shall mean any Person that directly, or indirectly
through one or more other Persons, controls, is controlled by or is under common
control with any other Person.
4. "Agreement" shall mean this Agreement and Plan of Reorganization as
now existing or as hereafter amended.
5. "Arbitration" and "AAA" shall have the meanings set forth in Section
9.5 herein.
6. "Area"; "Competing Business"; "Proprietary Information"; and
"Restricted Period" shall have the respective meanings set forth in Section 10.1
herein.
7. "Authorizations" shall have the meaning set forth in Section 3.14
herein.
8. "Benefit Plans" shall have the meaning set forth in Section 3.20
herein.
9. "Certificate of Merger" shall have the meaning set forth in Section
2.7 herein.
10. "Claim" and "Third Party Claim" shall have the respective meanings set
forth in Section 9.3(a) herein.
11. "Claim Notice" and "Response Notice Period" shall have the respective
meanings set forth in Section 9.3(a) herein.
12. "Closing" shall mean the closing of the transactions contemplated in
this Agreement to be held at the date, time and place set forth in Section 2.7
herein.
13. "Closing Audit" shall mean the audit of the Preliminary Balance Sheet
to be conducted by Graphic pursuant to Section 2.10(b) herein.
14. "Closing Balance Sheet" shall mean the audited closing balance sheet
resulting from the Closing Audit.
15. "Closing Date" shall mean the date of Closing.
44
<PAGE>
16. "Code" shall mean the Internal Revenue Code of 1986, as amended.
17. "Commission" shall mean the Securities and Exchange Commission, or any
other federal agency at the time administering the Act.
18. "QQQ Stock" shall mean the common stock, $1.00 par value, of QQQ.
19. "Competing Business" shall have that meaning set forth in Section
10.1(b) hereof.
20. "Contracts" shall mean the contracts, leases, licenses, warranties,
commitments, agreements, arrangements, credit guaranties, purchase and sale
orders and contracts for the provision of services, whether oral or written, to
which Quadras or QQQ is a party, or pursuant to which Quadras or QQQ has any
right, benefit or obligation.
21. "Daily Market Value Per Share" shall mean the closing price for
Graphic Common Stock as reported on the NASDAQ national market system as
published in The Wall Street Journal for any trading day.
-----------------------
22. "Damages"; "Indemnified Party" and "Indemnifying Party" shall have the
respective meanings set forth in Section 9.1 herein.
23. "Effective Date" shall mean the date on which the Articles of Merger
are filed with the Secretary of State of Georgia.
24. "Effective Period" shall have the meaning set forth in Section 8.4
herein.
25. "Employment Agreements" shall mean the Employment Agreements
substantially in the form of Exhibit "A" attached hereto and incorporated herein
by reference between Harris and Morgan, respectively, and the Surviving
Corporation.
26. "Environmental Laws" shall have the meaning set forth in Section
3.15(a) herein.
27. "Environmental Permits" shall have the meaning set forth in Section
3.15(c) herein.
28. "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
29. "Escrow Agent" shall mean NationsBank of Georgia, N.A., including its
successors and assigns.
30. "Escrow Agreement" shall mean the Escrow Agreement substantially in
the form of Exhibit "B" attached hereto and incorporated herein by reference.
45
<PAGE>
31. "Escrow Period" shall mean the period beginning on the Effective Date
and continuing for six (6) months thereafter, unless sooner terminated or
extended, as provided in the Escrow Agreement.
32. "Escrow Shares" shall mean ten percent (10%) of the value (as
determined pursuant to this Agreement as of the Closing Date) of the Graphic
Stock, rounded to the nearest whole number of shares (which shall be registered
in the name of Escrow Agent), or any proceeds or substitutions therefor, in
accordance with this Agreement and the Escrow Agreement.
33. "Estimated Net Book Value" shall mean the Net Book Value of QQQ as
shown or reflected in the Preliminary Closing Balance Sheet.
34. "Financial Schedule" shall have the meaning set forth in Section
2.10(a) herein.
35. "Financial Statements" shall mean collectively: (i) the consolidated
and consolidating interim unaudited balance sheet of QQQ as at July 31, 1995,
together with the related statement of income and changes in financial condition
for the period then ended; (ii) the unaudited interim balance sheet of Quadras
as of July 31, 1995, and the related statements of income and changes in
financial position for the period then ended; (iii) unaudited balance sheets and
the related statements of income and changes in financial condition of Quadras
for the fiscal years ended October 31, 1994, and October 31, 1993, respectively.
36. "Graphic Common Stock" shall mean the Common Stock, $0.10 par value
per share, of Graphic.
37. "Graphic Disclosure Documents" shall mean the reports and information
referred to in Section 4.7 of this Agreement.
38. "Graphic Stock" shall mean the total number of shares of Graphic
Common Stock, to be issued hereunder, including the Initial Shares and the
Escrow Shares and which, in the aggregate shall equal the quotient obtained by
dividing the sum of $3,000,000 (subject to adjusted upwards or downwards
pursuant to Section 2.10 hereof) by the Market Value Per Share of Graphic Common
Stock, rounded up to the nearest whole number of shares.
39. "Initial Shares" shall mean the Graphic Stock minus the Escrow Shares.
40. "Intellectual Property" shall have the meaning set forth in Section
3.11 herein.
41. "Interim Balance Sheet" shall mean, collectively, the consolidating
and consolidated interim unaudited balance sheets of QQQ as of July 31, 1995 in
the form attached to this Agreement as Exhibit "C".
46
<PAGE>
42. "Knowledge" shall mean information, data, material or knowledge
actually known to a Person or which such Person should have known after
reasonable inquiry or investigation.
43. "Lease" shall mean, collectively, those certain lease agreements dated
March 27, 1987 with Herbert Tabb & Associates as landlord and Quadras as Tenant,
including all amendments, extensions and options relating thereto, October, 1993
and February, 1995 (and any prior leases relating thereto) between Henry M.
Hatcher, Jr. d/b/a/ HMH Enterprises as landlord and Quadras as tenant covering
the premises and improvements at 3176-3190 and 3190A Marjan Drive, DeKalb
County, Georgia.
44. "Market Value Per Share" shall mean the average of the Daily Market
Value Per Share for each of the twenty (20) consecutive trading days preceding
the third trading day prior to the Closing Date.
45. "Merger" shall mean the merger of QQQ into and with QAC as set forth
herein.
46. "Net Book Value" shall mean the total assets of QQQ minus the total
liabilities of QQQ, as determined in accordance with generally accepted
accounting principles consistently applied.
47. "Person" or "Persons" shall mean any individual, joint venture,
partnership, firm, corporation, trust, unincorporated organization or other
organization or entity, or a governmental body or any department or agency
thereof, and shall include both the singular or the plural.
48. "Preliminary Closing Balance Sheet" shall mean the unaudited,
consolidated balance sheet of QQQ dated as of the Closing Date and prepared and
delivered in accordance with Section 2.10(a) herein.
49. "Printing Agreement" shall mean the Printing Agreement substantially
in the form of Exhibit "E" attached hereto and incorporated herein by reference.
50. "Registration Statement" shall mean the Registration Statement on Form
S-3, including any prospectuses, supplements, amendments or post-effective
amendments and exhibits to be filed by Graphic with the Commission in accordance
with this Agreement and relating to the resale of the Graphic Stock by each
Stockholder.
51. "Surviving Corporation" shall mean QAC, the name of which shall be
changed in the Merger to "Quadras, Inc."
52. "Taxes" shall have the meaning set forth in Section 3.8(a) herein.
47
<PAGE>
53. "Tax Returns" shall mean all federal, state, local and foreign tax
returns, reports, statements and other similar filings required to be filed by
QQQ, Quadras or the Stockholders with respect to the business of QQQ or Quadras.
54. "Transaction Documents" shall mean this Agreement, the Escrow
Agreement, the Employment Agreements, the Printing Agreement and the other
documents and agreements called for by this Agreement.
55. "Undisclosed Liabilities" shall mean any liability or obligation of
Quadras or QQQ of any nature (whether accrued, absolute, contingent, due, to
become due or otherwise, whether or not incurred in respect of or measured by
the income of Quadras or QQQ 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 QQQ or Quadras in accordance with this Agreement or in
any schedule or exhibit to this Agreement.
56. "Value Added Sales" shall mean the gross collected revenues from the
printing work to be performed pursuant to the Printing Agreement less all direct
materials, costs, freight and outside purchases.
48
<PAGE>
EXHIBIT 5
LAWRENCE M. GOLD, P.C.
100 GALLERIA PARKWAY
SUITE 695
ATLANTA, GEORGIA 30339
January , 1996
Graphic Industries, Inc.
2155 Monroe Drive, NE
Atlanta, Georgia 30324
Re: Registration on Form S-3 of Certain Shares of Graphic
Industries, Inc. Common Stock
Gentlemen:
We have served as counsel for Graphic Industries, Inc. ("Graphic") in
connection with the registration on Form S-3 under the Securities Act of 1933,
as amended, of 306,612 outstanding shares (the "Shares") of Common Stock, $.10
par value, of Graphic.
We have examined originals or copies certified or otherwise identified to
our satisfaction of such documents, corporate records and other instruments
relating to the incorporation of Graphic and to the authorization and issuance
of the Shares as we have deemed necessary or appropriate.
Based upon the foregoing, it is our opinion that the Shares have been duly
authorized, validly issued and are fully paid and non-assessable.
We do hereby consent to the reference to our firm under the heading "Legal
Matters" in the prospectus contained in the above-referenced registration
statement and to the filing of this opinion as Exhibit 5 thereto.
Sincerely,
LAWRENCE M. GOLD, P.C.
s/ LAWRENCE M. GOLD
Lawrence M. Gold
<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 306,612 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
January 26, 1996
II-4
<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 January 29, 1996.
GRAPHIC INDUSTRIES, INC.
BY: /s/ Mark C. Pope, III
-------------------------------------
Mark C. Pope, III
Chairman of the Board and
Chief Executive Officer
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 or 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.
II-5
<PAGE>
Exhibit "99"
ESCROW AGREEMENT
----------------
THIS AGREEMENT (the "Escrow Agreement") is made as of the 1st day of
November, 1995, by and among SARA SENIE HARRIS AND CYNTHIA A. MORGAN, both
individual residents of the State of Georgia (collectively, the "Shareholders"),
GRAPHIC INDUSTRIES, INC., a Georgia corporation ("Graphic"), QUADRAS ACQUISITION
COMPANY, a Georgia corporation and wholly-owned subsidiary of Graphic
("Quadras"), and NATIONSBANK OF GEORGIA, N.A., as Escrow Agent ("Escrow Agent").
Graphic, Quadras, the Shareholders and QQQ, Inc., a Georgia corporation
("QQQ") have entered into that certain Agreement and Plan of Reorganization of
even date (the "Agreement"), pursuant to which QQQ will be merged into and with
Quadras (the "Merger") and the Shareholders will receive, in exchange for their
stock in QQQ, certain shares of the Common Stock, $.10 par value, of Graphic
("Graphic Common Stock"), of which, a certain number are to be issued and held
in escrow as provided for in the Agreement and herein.
The Merger is to become effective upon the filing of Articles of Merger
with the Secretary of State of Georgia, which filing will be made on or about
the date hereof. The date of such filing shall be the "Effective Date" for
purposes of this Escrow Agreement.
Escrow Agent has agreed to serve in such capacity in accordance with the
terms and conditions hereof.
Any capitalized terms used in this Escrow Agreement and not defined herein
shall not be binding upon the Escrow Agent.
THEREFORE, in consideration of the mutual promises and covenants contained
herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto do hereby agree
as follows.
1. Deposit of Escrow Shares.
------------------------
(a) On the Effective Date, Graphic shall cause to be issued to and
deposited with Escrow Agent, a total of 30,661 shares of Graphic Common Stock
(the "Escrow Shares") in connection with the Merger. The number of Escrow
Shares shall equal, rounded to the nearest whole number of shares, ten percent
(10%) of the total
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number of shares of Graphic Common Stock to be issued in connection with the
Merger. The Escrow Shares shall be issued in the name of Escrow Agent or in
such nominee name as Escrow Agent may elect, all for the benefit of the parties
to this Agreement, and the Escrow Shares shall be held by Escrow Agent pursuant
to the terms and conditions hereof, and not disposed of or disbursed except in
accordance with the terms and conditions of this Agreement.
(b) The term "Escrow Shares" shall also include any dividends, other
distributions or proceeds thereof and all interest or income earned on such
dividends or proceeds relating to the Escrow Shares, and any additional shares
of Graphic Common Stock delivered to Escrow Agent due to an increase in the
number of shares of Graphic Common Stock to be issued in the Merger in
accordance with the Agreement.
2. Escrow Shares. Upon receipt of the Escrow Shares, Escrow Agent shall
-------------
hold the Escrow Shares and invest any such proceeds, interest and dividends as
set forth herein. The Escrow Shares and the proceeds thereof, including
interest and dividends, shall be held intact and delivered to Graphic or the
Shareholders or both, pursuant to the terms hereof. Escrow Agent shall make no
distributions of any Escrow Shares except in strict compliance with the terms
and conditions of this Agreement.
3. No Dispositions. During the term of this Agreement no party shall be
---------------
entitled to, and Escrow Agent shall not, sell, assign, hypothecate, encumber or
otherwise dispose of any of the Escrow Shares.
4. Voting Rights. During the term of this Agreement, and pending any
-------------
distribution of any of the Escrow Shares to Graphic as herein provided, the
Escrow Agent shall vote the Escrow Shares in accordance with the instructions
given, which must be unanimous, by the Shareholders; provided, however, that if
the Escrow Agent does not receive such instructions on or before five (5) days
prior to any shareholder meeting date, the Escrow Agent shall not be required to
vote the Escrow Shares. Escrow Agent shall execute proxies or other voting
instruments so as to follow the voting instructions given by the Shareholders.
5. Term. The term of this Escrow Agreement shall be six (6) months from
----
the Effective Date or until there are no Escrow Shares held pursuant hereto,
whichever occurs sooner (the "Term") , unless the term hereof is extended by the
mutual written consent of the
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parties hereto or unless there shall be Claims, as defined below, pending at the
original termination date, in which event, the Term shall automatically be
extended until all such Claims that arose and were made known in writing to the
Shareholders within six (6) months from the Effective Date are resolved.
Notwithstanding the foregoing, the indemnification to Escrow Agent set forth in
Section 9 hereof shall survive the termination of this Escrow Agreement or the
resignation of Escrow Agent.
6. Releases from Escrow.
--------------------
(a) The Escrow Shares, or the appropriate portion thereof, shall be
returned to Graphic in accordance with the procedures set forth herein and upon
the occurrence of any of the following events: (i) any reductions in the
consideration to be paid the Shareholders as set forth in Section 2.10 of the
Agreement; (ii) any and all claims for indemnification by Graphic pursuant to
the Agreement; (iii) in the event any accounts or notes receivable of QQQ shown
on the Closing Balance Sheet (as defined in the Agreement and net of any bad
debt reserves set forth on such Closing Balance Sheet) remain uncollected for
more than 120 days after the date of such Closing Balance Sheet; or (iv) any
breach(es) has or have occurred by the Shareholders in their respective
employment agreements with Quadras after the Closing Date. All of the foregoing
matters are hereinafter referred to collectively as "Claims" or individually as
a "Claim."
(b) Upon the occurrence of a Claim, Graphic shall deliver written
notice thereof to Escrow Agent and the Shareholders, which notice shall set
forth the nature and amount of the Claim and the number of Escrow Shares, plus
cash, which equals the amount of each Claim. If the Shareholders do not notify
Escrow Agent of their objection to a Claim, in writing, within fifteen (15) days
after receipt of such written notice, Escrow Agent shall forthwith charge the
Escrow Shares with the full amount of such Claim, remit the applicable Escrow
Shares directly to Graphic and give written notice of such action to the
Shareholders. During the Term, Escrow Agent shall be authorized to rely solely
upon said written notice from Graphic, and in accordance with such written
notice shall charge the Escrow Shares for the amount specified in such written
notice if it receives no timely written objection from the Shareholders.
(c) In the event any Shareholder shall inform Escrow Agent that there
is any dispute between Graphic and the
3
<PAGE>
Shareholders with respect to any Claim, such dispute shall be resolved as
provided for in the Agreement, to-wit: (i) if such Claim relates to any
adjustments made in the Closing Balance Sheet (as defined in the Agreement),
such dispute shall be resolved in the manner set forth in Section 2.10(b) of the
Agreement; and (ii) if such Claim relates to any matter for which Graphic claims
the right to indemnification under the Agreement (other than for uncollected
accounts or notes receivable as set forth above and in Section 2.10(c) of the
Agreement), or for breach of the employment agreements, such dispute shall be
resolved in the manner set forth in Section 9.5 of the Agreement. Upon
resolution of any such disputes as herein provided, Escrow Agent shall
distribute the Escrow Shares in accordance with such resolution. If the amount
in dispute does not represent the full value of the Escrow Shares (determined as
of the Closing Date in accordance with the Agreement), Escrow Agent shall
distribute to Graphic such number of Escrow Shares (rounded to the nearest whole
number of such shares) as may be in excess of the amount in dispute.
(d) If the amount of Claims asserted by Graphic by the end of the Escrow
Period does not equal the value of the Escrow Shares (at the then current market
value of Graphic Common Stock), then the Escrow Agent shall distribute to the
Shareholders that number of Escrow Shares that are in excess of the amount of
Claims then pending.
(e) Upon the expiration of the Term (including any extensions), if all the
Escrow Shares have not been returned to Graphic in accordance with the foregoing
provisions of this Section 6, Escrow Agent shall deliver the remaining Escrow
Shares to the Shareholders based upon the percentages set forth on Exhibit "A"
attached hereto. If the calculation for distribution purposes results in an odd
number of Escrow Shares, the Escrow Agent shall be authorized to sell one Escrow
Share at the market so that the final distribution shall be equal between the
Shareholders. Graphic agrees to take such action as shall be necessary to assist
Escrow Agent in reissuing the Escrow Shares, if any, in the names of the
Shareholders at the end of the Term.
(f) Nothing contained in this Agreement shall require the Escrow Agent to
make any calculation or determination with respect to the number of Escrow
Shares to be held or distributed (except with respect to the final distribution
as set forth in subparagraph (e) above), and all such calculations shall be the
4
<PAGE>
responsibility of the parties hereto other than the Escrow Agent.
7. Investment of Escrow Funds. Escrow Agent shall hold the Escrow Shares
--------------------------
delivered to it under the terms of this Escrow Agreement, and to invest any
income or dividends thereon held by it hereunder in a mutual fund which invests
solely in U.S. Government securities.
8. Agreement of Escrow Agent. Escrow Agent shall be responsible only for
-------------------------
the safekeeping and the investment of the Escrow Shares and the disbursements or
delivery thereof in accordance with the terms of this Escrow Agreement. Escrow
Agent shall not be responsible for the appropriateness, sufficiency or accuracy
of information contained in any written notice given to Escrow Agent.
9. Performance of Escrow Agent.
---------------------------
(a) In performing its duties under this Escrow Agreement, or upon the
claimed failure to perform its duties hereunder, Escrow Agent shall not be
liable to anyone for any damages, losses, or expenses which they may incur as a
result of Escrow Agent so acting, or failing to act; provided, however, Escrow
Agent shall be liable for damages arising out of its willful default or gross
negligence under this Agreement. Accordingly, Escrow Agent shall not incur any
such liability with respect to: (i) any action taken or omitted to be taken in
good faith upon advice of its counsel or counsel for any other party hereto
given with respect to any questions relating to the duties and responsibilities
of Escrow Agent hereunder; or (ii) to any action taken or omitted to be taken in
reliance upon any document, including any written notice or instructions
provided for in this Escrow Agreement, not only as to its due execution and to
the validity and effectiveness of its provisions but also as to the truth and
accuracy of any information contained therein, which Escrow Agent shall in good
faith believe to be genuine, to have been signed or presented by proper person
or persons and to conform with the provisions of this Escrow Agreement.
(b) Graphic, Quadras and the Shareholders agree to indemnify and hold
harmless Escrow Agent (each party being one-half responsible) against any and
all losses, claims, damages, liabilities and expenses, including without
limitation, reasonable costs of investigation and reasonable counsel fees and
disbursements which may be imposed by Escrow Agent or incurred by
5
<PAGE>
it in connection with its acceptance of this appointment as Escrow Agent
hereunder or the performance of the duties hereunder, including, without
limitation any litigation arising from this Escrow Agreement or involving the
subject matter hereof; except, that if Escrow Agent shall be found guilty of
willful default or gross negligence under this Agreement, then, in that event,
Escrow Agent shall bear all such losses, claims, damages and expenses.
(c) In the event of a dispute between any of the parties hereto
sufficient in the discretion of Escrow Agent to justify its doing so, Escrow
Agent shall be entitled to tender into the registry or custody of any court or
arbitrator of competent jurisdiction all money or property in its hands under
the terms of this Agreement, and may commence such legal proceedings as it deems
appropriate, and thereupon to be discharged from all further duties under this
Agreement. Any such legal action may be brought in any such court as Escrow
Agent shall determine to have jurisdiction thereof. The filing of any such legal
proceedings shall not deprive Escrow Agent of its compensation earned prior to
such filing.
10. Fees of Escrow Agent. For its ordinary services hereunder (which
--------------------
shall include receipt, investment and disbursement of the Escrow Shares in the
manner described herein), Escrow Agent shall receive compensation in accordance
with the Schedule of Fees set forth on Exhibit "B" attached hereto. Graphic and
the Stockholders, as a group, shall each pay one-half of such fees.
11. Resignation of Escrow Agent. Escrow Agent or any successor may resign
---------------------------
its position hereunder by giving ten (10) business days written notice to the
parties hereto, and such resignation shall take effect at the end of such ten
(10) business days, provided the Escrow Shares have been tendered into the
registry or custody of any court of competent jurisdiction or upon the earlier
appointment of, and delivery of the Escrow Shares to, a successor. From and
after the effective date of such resignation or appointment of a successor,
Escrow Agent shall not be obligated to perform any of the duties of Escrow Agent
hereunder and will not be liable for any nonperformance thereof nor for any act
or failure to act whatsoever on the part of any successor Escrow Agent.
12. Successor to Escrow Agent. Any corporation resulting from any merger
-------------------------
or consolidation to which Escrow Agent or any successor to it shall be a party,
or any corporation in any manner succeeding to all or substantially all of the
business of Escrow
6
<PAGE>
Agent or any successor, provided such corporation shall be a banking
corporation, with trust powers, organized under the laws of the United States of
America or of the State of Georgia, shall be the successor escrow agent
hereunder without the execution or filing of any paper or any further acts on
the part of any of the parties hereto.
13. Instructions and Notices. In executing and performing its duties
------------------------
hereunder, Escrow Agent shall be entitled to rely upon instructions of Graphic
and the Shareholders. Any notice, payment, demand, instruction or communication
required or permitted to be given by this Escrow Agreement shall be in writing
and shall be given by hand delivery, overnight messenger, by facsimile, or
certified mail, return receipt requested, addressed to the appropriate party at
the address stated below:
If to Graphic or Quadras:
Graphic Industries, Inc.
2155 Monroe Drive, N.E.
Atlanta, Georgia 30324
Attention: Mark C. Pope, IV, President
telecopy: 404-874-7589
With a copy to:
Gray, Gilliland & Gold, P.C.
400 Perimeter Center Terrace
Suite 1050
Atlanta, Georgia 30346
Attention: Lawrence M. Gold, Esq.
telecopy: 404-392-4808
If to the Shareholders:
Ms. Sara Senie Harris Ms. Cynthia A. Morgan
261 King Road, N.W. and 1026 Coronado Drive, N.W.
Atlanta, Georgia 30342 Atlanta, Georgia 30327
telecopy: telecopy:
With a copy to:
7
<PAGE>
Johnson & Montgomery
One Buckhead Plaza
Suite 400
3060 Peachtree Road, N.W.
Atlanta, Georgia 30305
Attention: Thomas E. Jones, Jr., Esquire
telecopy: 404-262-1222
If to Escrow Agent:
NationsBank of Georgia, N.A.
600 Peachtree Street, N.E.
Suite 900
Atlanta, Georgia 30308
Attention: Peggy McWhorter, Vice-President
telecopy: 404-607-6534
Any notice sent by facsimile, overnight messenger or hand delivery shall be
deemed made on the date received, and any notice sent by certified mail shall be
deemed made three (3) days after mailing.
14. Governing Law. This Escrow Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of Georgia.
15. Headings. The headings in this Escrow Agreement are inserted for
--------
convenience and identification only and are in no way intended to interpret,
define or limit the scope, extent or intent of this Escrow Agreement or any
provision hereof.
16. Severability. Each provision of this Escrow Agreement is
------------
intended to be severable. If any term or provision hereof is illegal or invalid
for any reason whatsoever, such illegality or invalidity shall not affect the
validity or enforcement of the remainder of this Escrow Agreement.
17. Counterparts. This Escrow Agreement, and any amendment hereto, may be
------------
executed in one or more counterparts, each of which shall be deemed an original,
but all of which together shall constitute one and the same instrument.
18. Amendment. No modification or amendment to this Escrow
---------
8
<PAGE>
Agreement shall be valid unless produced in writing and signed by all of the
parties hereto.
19. Successors. This Agreement shall be binding upon and inure to the
----------
benefit of the parties hereto and their respective heirs, legatees, assigns and
transferees, as the case may be. Escrow Agent shall not be bound by or incur any
liability with respect to the Agreement or any other agreement or understanding
between Graphic and the Shareholders, except as herein expressly provided.
Escrow Agent shall not have any duties hereunder except those specifically set
forth herein.
20. Taxes. The Shareholders shall indemnify Graphic for any tax liability
-----
relating to the income (other than from dividends) earned on the Escrow Shares
which will be reported for tax purposes by Graphic, based upon the portion of
Escrow Shares distributed to each party and such indemnification may be
withdrawn from the income (other than from dividends) earned. Escrow Agent
shall cause the Form 1099-Div to be issued to the Shareholders for the dividends
paid on the Escrow Shares during the term of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Escrow Agreement to
be executed under seal as of the date first above written by the respective
officers thereunder duly authorized.
9
<PAGE>
SARA SENIE HARRIS (SEAL)
-------------------------
SARA SENIE HARRIS
CYNTHIA A. MORGAN (SEAL)
-------------------------
CYNTHIA A. MORGAN
[SIGNATURES CONTINUED ON THE FOLLOWING PAGE]
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<PAGE>
[SIGNATURES CONTINUED FROM THE PREVIOUS PAGE]
GRAPHIC INDUSTRIES, INC.
By: MARK C. POPE
-------------------------------
Its:
-------------------------------
[Corporate Seal]
QUADRAS, INC.
By: MARK C. POPE
--------------------------------
Its:
--------------------------------
[Corporate Seal]
ESCROW AGENT:
NATIONSBANK OF GEORGIA, N.A.
By: PEGGY T. MCWHORTER
---------------------------------
Its: VICE PRESIDENT
----------------------------------
11
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EXHIBIT "A"
Sara Senie Harris 50%
Cynthia A. Morgan 50%
12
