SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
______________
FORM 8-K
______________
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): NOVEMBER 8, 1995
CADMUS COMMUNICATIONS CORPORATION
(Exact Name of Registrant as Specified in Charter)
VIRGINIA 0-12954 54-1274108
(State or Other Jurisdiction (Commission (I.R.S. Employer
of Incorporation) File Number) Identification No.)
6620 WEST BROAD STREET, SUITE 500
RICHMOND, VIRGINIA 23230
(Address of Principal Executive Offices)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE
(804) 287-5680
<PAGE>
Item 2. Acquisition or Disposition of Assets
On November 1, 1995, Cadmus Communications Corporation ("Cadmus" or the
"Company") consummated the purchase of the assets of The Software Factory, Inc.
("the Software Factory"), a provider of software packaging and media duplication
services. Pursuant to the terms and conditions of the Asset Purchase Agreement
dated October 13, 1995 (the "Agreement"), among Cadmus, the Software Factory,
and its shareholders, a copy of which is filed as Exhibit 2 hereto and
incorporated herein by reference , Cadmus acquired substantially all of the
assets and assumed certain liabilities and contractual obligations of the
Software Factory.
The purchase price for the assets was $13.5 million, which included $2.0
million value of Cadmus common stock and $11.5 million in current and future
cash payments.
The purchase price was established through arms-length negotiations among
the parties. The source of funds used to acquire the Software Factory will be
provided from the proceeds of the issuance of 1.7 million shares of Cadmus
common stock to be received on or about November 7, 1995, pursuant to
registration statement on Form S-3 (File No. 33-62655).
There are no material relationships between the Software Factory and
Cadmus, or any of Cadmus' affiliates, officers, directors or their associates.
Cadmus has formed Cadmus Software Services, Inc., doing business as the
Software Factory, to market software packaging and media duplication services.
Cadmus intends to continue to use the Norcross, Georgia facilities for the same
or similar purposes.
Item 7. Financial Statements and Exhibits
(a) Financial statements of The Software Factory, Inc.
The financial statements of Software Factory are incorporated by
reference from Item 7 (a) included in Current Report on Form 8-K
dated October 16, 1995.
(b) Pro forma financial statements of Cadmus Communications Corporation
The pro forma financial statements of Cadmus are incorporated by
reference from Item 7 (b) included in the Current Report on Form 8-K
dated October 16, 1995.
(c) Exhibits
Index of Exhibits
Exhibit 2. Asset Purchase Agreement dated as of October 13,
1995 among Cadmus Communications Corporation and Software
Factory - The exhibits to this Agreement are omitted in
accordance with the instructions to Item 601 of Regulation
S-K. A listing of such exhibits is found on page (vi) of the
Agreement and Cadmus hereby undertakes to supply the
Commission supplementary with a copy of any such exhibits upon
request.
<PAGE>
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized on November 8, 1995.
CADMUS COMMUNICATIONS CORPORATION
By: /s./ C. Stephenson Gillispie, Jr.
C. Stephenson Gillispie, Jr.
Chairman of the Board, President,
and Chief Executive Officer
<PAGE>
Exhibit Index
Exhibit Page
2 Asset Purchase Agreement dated as of October 13, 1995
among Cadmus Communications Corporation and The Software
Factory, Inc.
<PAGE>
ASSET PURCHASE AGREEMENT
by and among
CADMUS COMMUNICATIONS CORPORATION,
SOFTWARE ACQUISITION SUBSIDIARY, INC.,
THE SOFTWARE FACTORY, INC.,
MICHAEL F. HEAZEL,
FRANK D. CANNON,
RUSSELL J. COOK,
FRANK B. HASTY,
and
MICHAEL PARKS MEDLOCK
<PAGE>
TABLE OF CONTENTS
Page
RECITALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE I
DEFINITIONS
1.1 Accounts Receivable . . . . . . . . . . . . . . . . . . . . 2
1.2 Agreement . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.3 Assignment and Assumption Agreement . . . . . . . . . . . . 2
1.4 Assumed Contracts . . . . . . . . . . . . . . . . . . . . . 2
1.5 Assumed Liabilities . . . . . . . . . . . . . . . . . . . . 2
1.6 Bill of Sale . . . . . . . . . . . . . . . . . . . . . . . . 2
1.7 Books and Records . . . . . . . . . . . . . . . . . . . . . 2
1.8 Business . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.9 Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.10 Buyer's Closing Certificate . . . . . . . . . . . . . . . . 3
1.11 Cadmus . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.12 Cadmus Common Stock . . . . . . . . . . . . . . . . . . . . 3
1.13 Cash Consideration . . . . . . . . . . . . . . . . . . . . . 3
1.14 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.15 Closing Balance Sheet . . . . . . . . . . . . . . . . . . . 4
1.16 Closing Date . . . . . . . . . . . . . . . . . . . . . . . . 4
1.17 Closing Net Working Capital . . . . . . . . . . . . . . . . 4
1.18 Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.19 Effective Time of Closing . . . . . . . . . . . . . . . . . 4
1.20 Employee Benefit Plan . . . . . . . . . . . . . . . . . . . 4
1.21 Employees . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.22 Employment Date . . . . . . . . . . . . . . . . . . . . . . 5
1.23 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.24 ERISA Affiliate . . . . . . . . . . . . . . . . . . . . . . 5
1.25 Escrow . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.26 Escrow Agent . . . . . . . . . . . . . . . . . . . . . . . . 5
1.27 Escrow Agreement . . . . . . . . . . . . . . . . . . . . . . 5
1.28 Fixtures and Equipment . . . . . . . . . . . . . . . . . . . 5
1.29 GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.30 Intellectual Property . . . . . . . . . . . . . . . . . . . 5
1.31 Inventory . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.32 Knowledge . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.33 Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.34 Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.35 Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.36 Material Adverse Effect . . . . . . . . . . . . . . . . . . 7
1.37 Other Intangibles . . . . . . . . . . . . . . . . . . . . . 7
1.38 Permits . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.39 Permitted Liens . . . . . . . . . . . . . . . . . . . . . . 7
1.40 Phantom Shareholders . . . . . . . . . . . . . . . . . . . . 7
1.41 Prepaid Expenses . . . . . . . . . . . . . . . . . . . . . . 7
1.42 Purchased Assets . . . . . . . . . . . . . . . . . . . . . . 8
1.43 Securities Act . . . . . . . . . . . . . . . . . . . . . . . 8
1.44 Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.45 Seller's Closing Certificate . . . . . . . . . . . . . . . . 8
<PAGE>
Page
1.46 SFI Shareholder's Pro Rata Amount . . . . . . . . . . . . . 8
1.47 SFI Shareholders . . . . . . . . . . . . . . . . . . . . . . 8
1.48 Significant Customer . . . . . . . . . . . . . . . . . . . . 8
1.49 Stock Consideration . . . . . . . . . . . . . . . . . . . . 9
1.50 Working Capital Adjustment Holdback . . . . . . . . . . . . 9
ARTICLE II
PURCHASE AND SALE; ASSIGNMENT AND ASSUMPTION
2.1 Sale of Purchased Assets . . . . . . . . . . . . . . . . . . 9
2.2 Adjustment of Purchase Price . . . . . . . . . . . . . . . . 10
2.3 Escrow . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER AND SFI SHAREHOLDERS
3.1 Organization . . . . . . . . . . . . . . . . . . . . . . . . 12
3.2 Qualification . . . . . . . . . . . . . . . . . . . . . . . 12
3.3 Authorization; Enforceability . . . . . . . . . . . . . . . 12
3.4 No Conflict or Violation; Required Consents . . . . . . . . 13
3.5 No Litigation . . . . . . . . . . . . . . . . . . . . . . . 13
3.6 Compliance with Law . . . . . . . . . . . . . . . . . . . . 13
3.7 Environmental Conditions . . . . . . . . . . . . . . . . . . 14
3.8 Permits . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.9 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.10 Title to Purchased Assets . . . . . . . . . . . . . . . . . 15
3.11 Condition of Fixtures and Equipment . . . . . . . . . . . . 15
3.12 Significant Customers . . . . . . . . . . . . . . . . . . . 16
3.13 Assumed Contracts . . . . . . . . . . . . . . . . . . . . . 16
3.14 Intellectual Property . . . . . . . . . . . . . . . . . . . 17
3.15 Inventory . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.16 Books and Records . . . . . . . . . . . . . . . . . . . . . 18
3.17 Employment Agreements and Benefits . . . . . . . . . . . . . 18
3.18 Employee Matters . . . . . . . . . . . . . . . . . . . . . . 19
3.19 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.20 Orders, Commitments and Returns . . . . . . . . . . . . . . 20
3.21 Affiliated Transactions . . . . . . . . . . . . . . . . . . 20
3.22 Subsidiaries, Affiliated Companies and Investments . . . . . 21
3.23 No Broker . . . . . . . . . . . . . . . . . . . . . . . . . 21
3.24 Financial Statements . . . . . . . . . . . . . . . . . . . . 21
3.25 Absence of Certain Events . . . . . . . . . . . . . . . . . 21
3.26 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER AND CADMUS
4.1 Organization . . . . . . . . . . . . . . . . . . . . . . . . 22
4.2 Authorization; Enforceability . . . . . . . . . . . . . . . 22
4.3 No Conflict or Violation . . . . . . . . . . . . . . . . . . 22
4.4 Capitalization . . . . . . . . . . . . . . . . . . . . . . . 23
4.5 No Litigation . . . . . . . . . . . . . . . . . . . . . . . 23
ii
<PAGE>
Page
4.6 SEC Reports . . . . . . . . . . . . . . . . . . . . . . . . 23
4.7 No Broker . . . . . . . . . . . . . . . . . . . . . . . . . 24
4.8 Absence of Certain Events . . . . . . . . . . . . . . . . . 24
4.9 Investigation . . . . . . . . . . . . . . . . . . . . . . . 24
4.10 Adequacy of Funds . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE V
CERTAIN UNDERSTANDINGS AND AGREEMENTS
5.1 Conduct of Seller Prior to Closing . . . . . . . . . . . . . 24
5.2 Negative Covenants . . . . . . . . . . . . . . . . . . . . . 25
5.3 Access . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.4 Title Assurances, Etc. . . . . . . . . . . . . . . . . . . . 26
5.5 Best Efforts . . . . . . . . . . . . . . . . . . . . . . . . 27
5.6 Publicity . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.7 Cadmus Guarantee . . . . . . . . . . . . . . . . . . . . . . 27
5.8 Registration Rights . . . . . . . . . . . . . . . . . . . . 28
ARTICLE VI
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF BUYER AND CADMUS
6.1 Compliance with Law . . . . . . . . . . . . . . . . . . . . 28
6.2 No Litigation . . . . . . . . . . . . . . . . . . . . . . . 28
6.3 Accuracy of Representations and Warranties . . . . . . . . . 29
6.4 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . 29
6.5 No Material Adverse Change . . . . . . . . . . . . . . . . . 29
6.6 Seller's Performance . . . . . . . . . . . . . . . . . . . . 29
ARTICLE VII
CONDITIONS PRECEDENT TO THE
OBLIGATIONS OF SELLER AND SFI SHAREHOLDERS
7.1 Compliance with Law . . . . . . . . . . . . . . . . . . . . 29
7.2 No Litigation . . . . . . . . . . . . . . . . . . . . . . . 30
7.3 Accuracy of Representations and Warranties . . . . . . . . . 30
7.4 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . 30
7.5 No Material Adverse Change . . . . . . . . . . . . . . . . . 30
7.6 Buyer's Performance . . . . . . . . . . . . . . . . . . . . 30
ARTICLE VIII
ACTIONS AT CLOSING
8.1 Seller's Deliveries at Closing . . . . . . . . . . . . . . . 31
8.2 Buyer's Deliveries at Closing . . . . . . . . . . . . . . . 31
ARTICLE IX
ACTIONS BY SELLER, THE SFI SHAREHOLDERS
AND BUYER AFTER THE CLOSING
9.1 Seller's and SFI Shareholders' Indemnity . . . . . . . . . . 32
9.2 Buyer's Indemnity . . . . . . . . . . . . . . . . . . . . . 35
iii
<PAGE>
Page
9.3 Brokers or Finders . . . . . . . . . . . . . . . . . . . . . 37
9.4 Books and Records . . . . . . . . . . . . . . . . . . . . . 37
9.5 Name Change . . . . . . . . . . . . . . . . . . . . . . . . 38
9.6 Further Assurances . . . . . . . . . . . . . . . . . . . . . 38
9.7 Litigation Support . . . . . . . . . . . . . . . . . . . . . 39
9.8 Employment Matters . . . . . . . . . . . . . . . . . . . . . 39
9.9 Bulk Sales Compliance . . . . . . . . . . . . . . . . . . . 42
9.10 Taxes and Fees . . . . . . . . . . . . . . . . . . . . . . . 42
9.11 Allocation of Purchase Price . . . . . . . . . . . . . . . . 43
9.12 Acquisition for Investment . . . . . . . . . . . . . . . . . 43
9.13 Reporting Requirements . . . . . . . . . . . . . . . . . . . 44
9.14 Accounts Receivable Guarantee . . . . . . . . . . . . . . . 45
9.15 Prorations . . . . . . . . . . . . . . . . . . . . . . . . . 46
9.16 SFI Shareholders' Release . . . . . . . . . . . . . . . . . 46
9.17 Customer Credits . . . . . . . . . . . . . . . . . . . . . . 47
ARTICLE X
MISCELLANEOUS
10.1 Entire Agreement; Amendment . . . . . . . . . . . . . . . . 47
10.2 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 47
10.3 Governing Law . . . . . . . . . . . . . . . . . . . . . . . 48
10.4 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . 48
10.5 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . 48
10.6 Counterparts; Headings . . . . . . . . . . . . . . . . . . . 49
10.7 Severability . . . . . . . . . . . . . . . . . . . . . . . . 49
10.8 No Reliance . . . . . . . . . . . . . . . . . . . . . . . . 50
iv
<PAGE>
SCHEDULES AND EXHIBITS
SCHEDULE DESCRIPTION
1.4 Assumed Contracts
1.5 Assumed Liabilities
1.21 Employees
1.28 Fixtures and Equipment
1.30 Intellectual Property
1.34 Lease
1.37 Other Intangibles
1.38 Permits
1.39 Permitted Liens
1.46 SFI Shareholder's Pro Rata Amount
1.48 Significant Customer
3.2 Qualification
3.4 No Conflict or Violation; Required Consents
3.5 No Litigation
3.6 Compliance with Law
3.7 Environmental Conditions
3.12 Significant Customers
3.17 Employment Agreements and Benefits
3.18 Employee Matters
3.20 Orders, Commitments and Returns
3.21 Affiliated Transactions
3.24 Financial Statements
3.25 Absence of Certain Events
4.3 No Conflict or Violation
5.1 Conduct of Seller Prior to Closing
6.4 Consents
7.4 Consents
9.11 Allocation of Purchase Price
v
<PAGE>
EXHIBIT DESCRIPTION
A Assignment and Assumption Agreement
B Bill of Sale
C Buyer's Closing Certificate
D Escrow Agreement
E Seller's Closing Certificate
F Employment Agreement with Mike Heazel
G Form of Employment Agreement with Phantom Shareholders
H Closing Net Working Capital Worksheet
I Note
J General Release and Covenant Not to Sue
vi
<PAGE>
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT, made as of October 13, 1995 by and among
Cadmus Communications Corporation, a Virginia corporation ("Cadmus"), Software
Acquisition Subsidiary, Inc., a Virginia corporation ("Buyer") and wholly-owned
subsidiary of Cadmus, The Software Factory, Inc., a Georgia corporation
("Seller"), Michael F. Heazel, the sole shareholder of Seller ("Shareholder"),
and Frank D. Cannon, Russell J. Cook, Frank B. Hasty, and Michael Parks Medlock
(collectively, "Phantom Shareholders"), provides as follows:
RECITALS
1. Seller is engaged in the business of providing software packaging and
media duplication services to small- and medium-sized software publishers and
corporations (the "Business").
2. Seller desires to sell certain of its assets and to be relieved of
certain of its liabilities, and Buyer desires to purchase those assets and to
assume those liabilities.
NOW, THEREFORE, in consideration of the Recitals and of the mutual
covenants, conditions and agreements set forth herein and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree that:
ARTICLE I
DEFINITIONS
When used in this Agreement, the following terms shall have the meanings
specified:
1.1 Accounts Receivable. "Accounts Receivable" shall mean all
accounts receivable arising from the sale or lease of goods and services in
the ordinary course of the Business and outstanding on the Closing Date.
1.2 Agreement. "Agreement" shall mean this Asset Purchase Agreement,
together with the Exhibits and Schedules attached hereto, as the same may be
amended from time to time in accordance with the terms hereof.
1.3 Assignment and Assumption Agreement. "Assignment and Assumption
Agreement" shall mean the Assignment and Assumption Agreement between
Seller and Buyer in the form of Exhibit A hereto.
1.4 Assumed Contracts. "Assumed Contracts" shall mean those
contracts, agreements, purchase orders, leases and license agreements
listed on Schedule 1.4 hereto.
1.5 Assumed Liabilities. "Assumed Liabilities" shall mean those current and
long-term obligations and current and long-term liabilities of Seller described
on Schedule 1.5 hereto, which shall be assumed by Buyer on the Closing Date, in
the amounts reflected on the Closing Balance Sheet, and liabilities under the
Assumed Contracts that are incurred or accrued after the Closing Date.
<PAGE>
1.6 Bill of Sale. "Bill of Sale" shall mean the bill of sale for the
Purchased Assets to be delivered by Seller to Buyer substantially in the
form of Exhibit B hereto.
1.7 Books and Records. "Books and Records" shall mean original or true and
complete copies of all of the books, records, data and information of Seller,
including, without limitation, all customer lists, financial and accounting
records, purchase orders and invoices, sales orders and sales order log books,
credit and collection records, correspondence and miscellaneous records with
respect to customers and supply sources and all other general correspondence,
records, books and files now or hereafter owned by Seller, or maintained by or
with respect to the Employee Benefit Plans, but specifically excluding originals
of Seller's corporate minute books and stock transfer records.
1.8 Business. "Business" shall mean Seller's business of providing
software packaging and media duplication services to small- and medium-
sized software publishers and corporations.
1.9 Buyer. "Buyer" shall mean Software Acquisition Subsidiary, Inc.,
a Virginia corporation and wholly-owned subsidiary of Cadmus.
1.10 Buyer's Closing Certificate. "Buyer's Closing Certificate" shall
mean the certificate of Buyer substantially in the form of Exhibit C
hereto.
1.11 Cadmus. "Cadmus" shall mean Cadmus Communications Corporation, a
Virginia corporation.
1.12 Cadmus Common Stock. "Cadmus Common Stock" shall mean the common
stock, $.50 par value per share, of Cadmus.
1.13 Cash Consideration. "Cash Consideration" shall mean
$10.5 million.
1.14 Closing. "Closing" shall mean the meeting of the parties held at 10:00
a.m., local time, on the Closing Date, at the offices of Hunton & Williams,
NationsBank Plaza, Suite 4100, 600 Peachtree Street, N.E., Atlanta, Georgia
30308-2216, or such other time and place as the parties may mutually agree in
writing.
1.15 Closing Balance Sheet. "Closing Balance Sheet" shall mean the balance
sheet of Seller, as of the Closing Date, prepared by Arthur Andersen LLP in
accordance with GAAP, (except (a) there shall not be a reserve for the
uncollectability of any Accounts Receivable and (b) the customer credits listed
on Schedule 3.20 hereto shall be excluded) as finally determined pursuant to
Section 2.2 hereof.
1.16 Closing Date. "Closing Date" shall mean November 1, 1995, or
such other date as the parties may mutually agree in writing.
1.17 Closing Net Working Capital. "Closing Net Working Capital" shall mean
the current assets included in the Purchased Assets (without reserve for the
uncollectability of any Accounts Receivable) less the current liabilities
included in the Assumed Liabilities (excluding the customer credits listed on
Schedule 3.20), all as reflected on the Closing Balance Sheet and determined in
accordance with Exhibit H hereto.
1.18 Code. "Code" shall mean the Internal Revenue Code of 1986, as
amended, and any predecessor thereto.
1.19 Effective Time of Closing. "Effective Time of Closing" shall
mean 11:59 p.m., Eastern time, on the Closing Date.
1.20 Employee Benefit Plan. "Employee Benefit Plan" shall mean an
"employee benefit plan" as defined in Section 3(3) of ERISA and any other
plan, agreement, arrangement or program pursuant to which Seller has any
continuing obligation to provide compensation or other benefits to any
-2-
<PAGE>
present or former employee of Seller, or any dependent or beneficiary
thereof.
1.21 Employees. "Employees" shall mean the employees of Seller listed
on Schedule 1.21 hereto.
1.22 Employment Date. "Employment Date" shall mean the day following
the Closing Date.
1.23 ERISA. "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended.
1.24 ERISA Affiliate. "ERISA Affiliate" shall mean each entity that is a
member of a controlled group or affiliated service group of which Seller is a
member or that is under common control with Seller (within the meaning of
Sections 414(b), 414(c), 414(m) or 414(o) of the Code).
1.25 Escrow. "Escrow" shall mean $500,000 to be deposited, held and
disposed of pursuant hereto and the Escrow Agreement.
1.26 Escrow Agent. "Escrow Agent" shall mean Wachovia Bank of
Georgia, N.A.
1.27 Escrow Agreement. "Escrow Agreement" shall mean the agreement
substantially in the form of Exhibit D hereto, dated as of the Closing Date
by and among Buyer, Seller and Escrow Agent.
1.28 Fixtures and Equipment. "Fixtures and Equipment" shall mean all of the
furniture, fixtures, furnishings, leasehold improvements, supplies, machinery,
equipment, motor vehicles and all other tangible personal property owned by
Seller as of the Closing Date, including but not limited to the items listed on
Schedule 1.28, but excluding tickets to the 1996 Olympics held by Seller.
1.29 GAAP. "GAAP" shall mean generally accepted accounting principles
as applied by Seller in a manner consistent with prior periods.
1.30 Intellectual Property. "Intellectual Property" shall mean (a) all
inventions, patents and patent applications, (b) all trademarks, service marks,
trade dress, logos, trade names and corporate names, including the name "The
Software Factory, Inc.", including all goodwill associated therewith and all
applications, registrations and renewals in connection therewith, (c) all
copyrightable works, all copyrights and all applications, registrations and
renewals in connection therewith, (d) all trade secrets and confidential
business information (including ideas, research and development, know-how,
compositions, designs, drawings, specifications, customer and supplier lists,
pricing and cost information and business and marketing plans and proposals),
(e) all computer software and source code (including hard copy and soft copy as
well as all data and related documentation), (f) all other intellectual property
and (g) all rights as a licensee or authorized user of the Intellectual Property
of any third party used in the Business, including, without limitation, the
Intellectual Property listed on Schedule 1.30 attached hereto. Schedule 1.30
sets forth separately (x) all Intellectual Property licensed by Seller to a
third party, (y) all Intellectual Property of which Seller is the exclusive
owner, and (z) all Intellectual Property that Seller owns jointly with a third
party.
1.31 Inventory. "Inventory" shall mean all of Seller's inventories of raw
materials, work in process and finished goods as of the Closing Date held for
sale in the ordinary course of the Business, and determined in accordance with
GAAP.
1.32 Knowledge. "Knowledge" as to Buyer or Cadmus shall mean actual
knowledge of C. Stephenson Gillispie, Jr., Michael Dinkins, David Bosher
and Bruce V. Thomas, and as to Seller, actual knowledge of Michael F.
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Heazel, Michael Zimmerman, Frank D. Cannon, Russell J. Cook, Frank B. Hasty
and Michael Parks Medlock, in each case without the duty to conduct any
investigation or inquiry as to matters to which such knowledge relates.
1.33 Law. "Law" shall mean any federal, state, local or other law or
governmental requirement of any kind, and the rules, regulations and orders
promulgated thereunder.
1.34 Lease. "Lease" shall mean the lease covering the land and buildings
used in the operation of the Business and located in Norcross, Georgia, as more
particularly described on Schedule 1.34.
1.35 Note. "Note" shall mean the Note made by Buyer dated the Closing Date
in an aggregate principal amount equal to $5,000,000 payable to Seller in the
form attached hereto as Exhibit I.
1.36 Material Adverse Effect. "Material Adverse Effect" shall mean a
material adverse effect to the Purchased Assets or the Business taken as a
whole.
1.37 Other Intangibles. "Other Intangibles" shall mean those intangible
assets listed on Schedule 1.37 hereto, which includes all intangible assets of
any nature (other than the Intellectual Property, the Assumed Contracts, the
Books and Records, Accounts Receivable, Prepaid Expenses, and the deposit for
Seller's golf membership at the Golf Club of Georgia) used by Seller.
1.38 Permits. "Permits" shall mean all governmental approvals,
authorizations, registrations, permits and licenses that Seller now possesses in
relation to Seller, which Permits are listed on Schedule 1.38 hereto.
1.39 Permitted Liens. "Permitted Liens" shall mean the liens listed
on Schedule 1.39 hereto.
1.40 Phantom Shareholders. "Phantom Shareholders" shall mean Frank D.
Cannon, Russell J. Cook, Frank B. Hasty, and Michael Parks Medlock.
1.41 Prepaid Expenses. "Prepaid Expenses" shall mean all deposits and
other unaccrued expenses prepaid by Seller that are outstanding as of the
Closing Date, but excluding the deposit for Seller's golf membership at The
Golf Club of Georgia.
1.42 Purchased Assets. "Purchased Assets" shall mean all of Seller's
right, title and interest in and to the following:
(a) Accounts Receivable;
(b) Books and Records;
(c) Fixtures and Equipment;
(d) Intellectual Property;
(e) Inventory;
(f) Other Intangibles; and
(g) Prepaid Expenses.
1.43 Securities Act. "Securities Act" shall mean the Securities Act
of 1933, as amended.
1.44 Seller. "Seller" shall mean The Software Factory, Inc., a
Georgia corporation.
1.45 Seller's Closing Certificate. "Seller's Closing Certificate"
shall mean the certificate of Seller substantially in the form of Exhibit E
hereto.
1.46 SFI Shareholder's Pro Rata Amount. "SFI Shareholder's Pro Rata Amount"
shall mean each SFI Shareholder's pro rata amount of the Stock Consideration and
their respective pro rata obligations to indemnify Buyer's Indemnitees pursuant
to Section 9.1, as set forth on Schedule 1.46 hereto
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1.47 SFI Shareholders. "SFI Shareholders" shall mean Shareholder and
Phantom Shareholders, collectively.
1.48 Significant Customer. "Significant Customer" shall mean each
customer whose annual sales for 1994 or projected annual sales for 1995 are
in excess of $500,000, as set forth on Schedule 1.48.
1.49 Stock Consideration. "Stock Consideration" shall mean the number of
shares of Cadmus Common Stock, valued at $2.0 million, as determined by
averaging the closing prices for Cadmus Common Stock on The Nasdaq National
Market, as reported in The Wall Street Journal, for the ten consecutive trading
days ending two business days prior to the Closing Date.
1.50 Working Capital Adjustment Holdback. "Working Capital Adjustment
Holdback" shall mean $500,000 to be held and disbursed in accordance with
Section 2.2 hereof.
ARTICLE II
PURCHASE AND SALE; ASSIGNMENT AND ASSUMPTION
2.1 Sale of Purchased Assets.
(a) At the Closing, Seller shall sell, convey, transfer, assign and
deliver to Buyer the Purchased Assets and the Assumed Contracts by deed, bill of
sale, assignment or other appropriate instrument, free and clear of all liens,
claims, mortgages or encumbrances, other than Permitted Liens.
(b) At the Closing, Buyer shall purchase, and Cadmus shall cause Buyer
to purchase, the Purchased Assets and assume the Assumed Contracts and in full
payment therefor Buyer shall (i) assume the Assumed Liabilities, (ii) deposit
the Escrow with the Escrow Agent, (iii) retain the Working Capital Adjustment
Holdback, (iv) pay Seller by wire transfer of immediately available funds the
Cash Consideration less $5,000,000, (v) deliver the Note to Seller and (vi)
deliver to the SFI Shareholders, for the benefit of Seller, the Stock
Consideration in the name of each SFI Shareholder in accordance with each SFI
Shareholder's Pro Rata Amount. Such payment of the Stock Consideration directly
to the SFI Shareholders shall be deemed to be paid to Seller and distributed by
Seller to the SFI Shareholders. Except for the Assumed Liabilities, Buyer will
not assume any liability or obligation of any kind of Seller, or any obligation
relating to Seller or the use of the Purchased Assets or Assumed Contracts prior
to the Closing, whether absolute or contingent, accrued or unaccrued, asserted
or unasserted, disclosed in this Agreement or otherwise known or unknown, or
otherwise. Seller shall be responsible for the payment of any withholding taxes
resulting from the payment of the Stock Consideration to the SFI Shareholders
for the benefit of Seller.
2.2 Adjustment of Purchase Price.
(a) Within 20 days after the Closing Date, Arthur Andersen LLP shall
prepare and deliver, at Buyer's expense, to Buyer and Seller a draft Closing
Balance Sheet. If Buyer or Seller shall have any objections to the draft Closing
Balance Sheet, such objecting party will deliver a detailed statement describing
its objections to the other party within 15 days after receiving the draft
Closing Balance Sheet. Buyer and Seller will use their reasonable best efforts
to resolve any such objections. If a final resolution is not obtained within
five business days after Seller or Buyer, as the case may be, has received the
statement of objections, Buyer and Seller will select an accounting firm
mutually acceptable to them to resolve any remaining objections. If Buyer and
Seller are unable to agree
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on the choice of an accounting firm, they will select a nationally-recognized
accounting firm by lot (after excluding Arthur Andersen LLP).
(b) Arthur Andersen LLP will revise the draft Closing Balance Sheet as
appropriate to reflect the resolution of Seller's or Buyer's objections (as
agreed upon by the parties or directed by such accounting firm) and deliver it
to Buyer and Seller within five business days after the resolution of such
objections. Such revised statement shall constitute the Closing Balance Sheet.
(c) If Closing Net Working Capital is equal to or greater than
$450,000, Buyer shall pay Seller the entire Working Capital Adjustment Holdback
plus the amount, if any, by which Closing Net Working Capital exceeds $500,000.
If Closing Net Working Capital is less than $450,000 but greater than ($50,000),
Buyer shall pay Seller the Working Capital Adjustment Holdback less the amount,
if any, by which Closing Net Working Capital is less than $450,000. If Closing
Net Working Capital is less than ($50,000), Buyer shall retain the Working
Capital Adjustment Holdback and Seller shall pay Buyer the amount by which
Closing Net Working Capital is less than ($50,000). Any payment required by this
subsection shall be made within five days after the Closing Balance Sheet is
finally determined.
(d) If any unresolved objections are submitted to an accounting firm
for resolution as provided above, the fees and expenses of such accounting firm
shall be borne by the objecting party in proportion to the relative dollar
amount of the objections of such party that are not approved by such accounting
firm, and any remaining fees and expenses shall be borne by the non-objecting
party.
(e) Arthur Andersen LLP will make the work papers used in preparing
the draft Closing Balance Sheet available to Buyer and Seller at reasonable
times and upon reasonable notice at any time after the draft Closing Balance
Sheet is prepared and prior to the resolution of any objections with respect
thereto.
2.3 Escrow. Buyer shall deposit the Escrow with the Escrow Agent pursuant
to the Escrow Agreement. The Escrow shall be (i) held for application against
indemnity matters pursuant to Section 9.1 hereof, and (ii) disbursed in
accordance with the Escrow Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER AND SFI SHAREHOLDERS
Each of Seller and SFI Shareholders hereby represents and warrants to Buyer
and Cadmus that:
3.1 Organization. Seller is a corporation duly organized, validly existing
and in good standing under the laws of the State of Georgia and has full
corporate power to enter into and perform its obligations hereunder. Seller has
full corporate power to carry on the Business as it is now being conducted and
to own, operate and hold under lease assets and properties as, and in the places
where, such properties and assets now are owned, operated or held. Complete
copies of Seller's Articles of Incorporation and Bylaws, as currently in effect,
have been delivered to Buyer.
3.2 Qualification. Seller is qualified to do business in the
jurisdictions listed on Schedule 3.2 attached hereto. Such jurisdictions
are the only jurisdictions in which the character of the Purchased Assets,
the Assumed Contracts or the nature of the business conducted by Seller
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requires such qualification, except where the failure to so qualify would not
have a Material Adverse Effect.
3.3 Authorization; Enforceability. The execution, delivery and performance
by Seller of this Agreement and of all of the documents and instruments
contemplated hereby to which Seller is a party are within the corporate power of
Seller and have been duly authorized by all necessary corporate action of
Seller. This Agreement is, and the other documents and instruments required
hereby to which Seller is a party will be, when executed and delivered by
Seller, the valid and binding obligations of Seller, enforceable against Seller
in accordance with their respective terms, except as enforceability may be
limited by applicable equitable principles or by bankruptcy, insolvency,
reorganization, moratorium, or similar laws from time to time in effect
affecting the enforcement of creditor's rights generally.
3.4 No Conflict or Violation; Required Consents. Assuming that any consents
required by the Assumed Contracts are obtained, the execution, delivery and
performance of this Agreement by Seller do not and will not violate or conflict
with any provision of the Articles of Incorporation or Bylaws of Seller, any
Law, judgment, order or decree binding on Seller or any contract, lease,
mortgage, deed of trust, indenture, Permit, license, franchise, commitment,
authorization or concession, or other agreement or instrument applicable to
Seller, any of the Purchased Assets, the Assumed Contracts or the Assumed
Liabilities.
Except as set forth on Schedule 3.4 hereto, no consent of any other person,
and no notice to, filing or registration with, or authorization, consent or
approval of, any governmental, regulatory or self-regulatory agency is necessary
or is required to be made or obtained by Seller in connection with the
consummation of the transactions contemplated in this Agreement.
3.5 No Litigation. Except as set forth on Schedule 3.5 hereto, there is no
litigation, arbitration proceeding, governmental investigation, citation or
action of any kind pending or, to the Knowledge of Seller, proposed or
threatened against Seller or related to the Purchased Assets, the Assumed
Contracts, the Assumed Liabilities, this Agreement or the transactions
contemplated hereby.
3.6 Compliance with Law. Except as set forth on Schedule 3.6 hereto,
Seller's conduct of the Business, Seller's use of the Purchased Assets and
performance under the Assumed Contracts do not violate or conflict with, and
have not violated or conflicted with, any Law.
3.7 Environmental Conditions. Except as set forth on Schedule 3.7, (a)
Seller has not used, stored, treated, transported, manufactured, refined,
handled, produced or disposed of any petroleum products or any hazardous or
toxic waste, substance or materials ("Hazardous Materials") on, under, at, from
or in any way affecting its properties or assets (including, without limitation,
any properties or assets now or previously owned or operated by Seller), or
otherwise, in any manner which at the time of the action in question violated
any Law or that could result in any cost or liability under any Law, and (b) to
the Knowledge of Seller, no prior owner of such property or asset or any tenant,
subtenant, prior tenant or prior subtenant thereof has used Hazardous Materials
on, from or in any way affecting any such property or asset, or otherwise, in
any manner which at the time of the action in question violated any Law or that
could result in any cost or liability under any Law. Except as set forth on
Schedule 3.7, Seller has no obligations or liabilities, whether absolute or
contingent,
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accrued or unaccrued, asserted or unasserted, known or unknown, or otherwise,
and no pending claims have been made against Seller and no presently outstanding
citations or notices have been issued against Seller or have been or are imposed
by reason of or based upon any provision of any Laws related to environmental
protection or remediation.
3.8 Permits. The Permits possessed by Seller represent all permits required
to operate the Business as currently operated, and there are no additional
permits that the failure of which to obtain would have a Material Adverse
Effect. The Permits are in full force and effect, and are being complied with in
all respects. Seller agrees to use its reasonable best efforts to assist Buyer
in effecting the replacement, renewal or transfer of the Permits.
3.9 Taxes. There is not, and there will not be through the Effective Time
of Closing, any liability for income, sales, payroll, employment, or other taxes
of Seller or arising out of, attributable to, or affecting the Purchased Assets,
the Assumed Contracts or the conduct of the Business to which the Purchased
Assets, the Assumed Contracts or the Business will be subject after the Closing
or for which Buyer will or could have any liability for payment or otherwise.
The Books and Records to be transferred to Buyer contain all information and
documents (including, without limitation, properly completed Forms W-9)
necessary to comply with all tax information reporting and tax withholding
requirements relating to Seller and the Purchased Assets and the Assumed
Contracts, and such Books and Records identify with specificity all accounts
subject to backup withholding under Section 3406 of the Code. Seller is not a
foreign person for purposes of Section 1445 of the Code. None of the Purchased
Assets or Assumed Contracts are subject to a "safe harbor lease" under former
Section 168(f)(8) of the Code.
3.10 Title to Purchased Assets. Seller owns good and valid title to all of
the Purchased Assets, free and clear of any and all mortgages, liens,
encumbrances, charges, claims, restrictions, pledges, security interests or
impositions, except Permitted Liens. Upon delivery of the Purchased Assets to
Buyer at the Closing and upon Buyer's payment of the Cash Consideration and
Stock Consideration and Buyer's assumption of the Assumed Liabilities, good and
valid title to the Purchased Assets, free and clear of all mortgages, liens,
encumbrances, charges, claims, restrictions, pledges, security interests or
impositions, except Permitted Liens, will pass to Buyer.
3.11 Condition of Fixtures and Equipment. The Fixtures and Equipment are in
good operating condition and repair, subject to ordinary wear and tear, and are
fit for the purposes for which they are being utilized by Seller. The Fixtures
and Equipment listed on Schedule 1.28 hereto constitute all Fixtures and
Equipment with a book value in excess of $2,000 per item. Together with the
tangible personal property leased pursuant to the Assumed Contracts, the
Fixtures and Equipment constitute all tangible personal property used or held
for use by Seller in connection with the operation of the Business.
3.12 Significant Customers. Except as described on Schedule 3.12 hereto,
since December 31, 1994, Seller has not received notice of, nor to the Knowledge
of Seller is there, any threatened loss with respect to 1995 annual sales or
future sales of (a) more than $500,000 of annual sales to Significant Customers
or (b) more than 20% of either 1994 annual sales or projected 1995 sales to a
Significant Customer.
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3.13 Assumed Contracts. The Assumed Contracts include each of the
contracts, agreements, purchase orders, leases and license agreements to which
Seller is a party that (i) is a lease of real property, (ii) relates to (a) the
purchase of products for resale or delivery to customers of amounts in excess of
$25,000 or having a duration in excess of 90 days or (b) the supply of products
to customers with actual sales in calendar year 1994 or expected sales in
calendar year 1995 of $100,000 or more, (iii) relates to the purchase of goods,
equipment or services used in support of Seller's business or operations of
amounts in excess of $25,000 per year or having a duration in excess of 90 days,
(iv) contains covenants not to compete by any party to the contract and (v) upon
which the Business is dependent or which, if breached, could have a Material
Adverse Effect. Each purchase order included in the Assumed Contracts has been
entered into in the ordinary course of the Business on customary terms. Seller
has provided to Buyer true and complete copies of all of the written Assumed
Contracts (except purchase orders, the Avista License Agreement, a copier
maintenance contract and the second page of the Agreement with Friden Post)
(including all amendments or modifications thereto) and, in the case of oral
Assumed Contracts, true and complete written summaries of the terms thereof.
Each Assumed Contract is in full force and effect and is enforceable in
accordance with its terms, except as the enforcement thereof may be limited or
otherwise affected by bankruptcy, insolvency, reorganization, moratorium or
other laws generally affecting the rights of creditors and subject to general
equity principles (whether considered at law or in equity). Seller is not (and
to the Knowledge of Seller no other party is) in breach or violation of, or
default under, and to the Knowledge of Seller, there is no valid basis for a
claim of breach or violation of, or default under, any such contracts, and no
event has occurred that constitutes or, with the lapse of time or the giving of
notice, or both, would constitute such a breach or violation or default by
Seller, or, to the Knowledge of Seller, any other party under any of the Assumed
Contracts, thereunder. Seller has performed each material term, covenant and
condition of each such Assumed Contract that is to be performed by it prior to
the Closing Date. To Seller's Knowledge, no party to any of the Assumed
Contracts intends to cancel, terminate or exercise any option under any such
contract. Seller has made no prior assignment of any Assumed Contract or any of
Seller's rights or obligations thereunder.
3.14 Intellectual Property. (a) Except as set forth on Schedule 1.30
hereto, Seller owns exclusively or has the exclusive right to use, pursuant to
license, sublicense, agreement or permission, all Intellectual Property
necessary or customarily used for the operation of the Business as presently
conducted. Except as set forth on Schedule 1.30, each item of Intellectual
Property owned or used by Seller immediately prior to the Effective Time of
Closing will be owned or available for use by Buyer on identical terms and
conditions immediately subsequent to the Effective Time of Closing. Seller has
taken all necessary action to maintain and protect each item of Intellectual
Property that it owns or uses. No owned item of Intellectual Property has been
abandoned. Each item of Intellectual Property used by Seller pursuant to license
or other authorization of a third party is used with the authorization of such
third party and, to the Knowledge of Seller, every other claimant to such
Intellectual Property thereto. (b) Except as set forth on Schedule 1.30: (i)
Seller has not interfered with, infringed upon, misappropriated or otherwise
come into conflict with any intellectual property rights of any third party;
(ii) Seller has never received any charge, complaint, claim, demand or notice
alleging any such interference, infringement, misappropriation or violation
(including any claim that Seller must license or refrain from using any
intellectual property rights of any third party); and (iii) to the Knowledge of
Seller, no third party has interfered with, infringed upon, misappropriated or
otherwise come into conflict with any Intellectual Property rights of Seller.
3.15 Inventory. All Inventory (a) is fit for the purpose for which it was
procured or, in the case of finished goods, produced, (b) has been recorded in
the Books and Records or Seller's accounting records in accordance with GAAP and
(c) is saleable or useable by Seller in the ordinary course of business.
3.16 Books and Records. The Books and Records are complete and correct in
all material respects.
3.17 Employment Agreements and Benefits. Schedule 3.17 hereto is a true and
complete list of the terms and conditions of employment, including compensation
and other benefits of present and former employees and salesmen terminated
within the last 18 months (other than independent sales representatives) of
Seller and the dependents or beneficiaries of any such persons relating to the
use of the Purchased Assets, the Assumed Contracts or the Business, including,
without limitation, collective bargaining
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agreements and the Employee Benefit Plans. Neither Seller nor any ERISA
Affiliate maintains any pension, retirement, bonus, stock option, profit
sharing, health, disability, life insurance, hospitalization, education or other
similar employee benefit plans or arrangements (whether or not subject to ERISA)
other than the Employee Benefit Plans. True copies of each Employee Benefit Plan
and all other documents governing the Employee Benefit Plans have been delivered
by Seller to Buyer. Neither Seller nor any ERISA Affiliate of Seller nor any
trade or business, whether or not incorporated, that formerly was treated as a
single employer with Seller or an ERISA Affiliate contributes to or contributed
to, maintains or maintained, or has or had an obligation to contribute to (a) a
"multi-employer plan" (as defined in ERISA Section 3(37)), (b) a single employer
pension plan (as defined in ERISA Section 4001(a)(15)), (c) a plan that is
subject to Title IV of ERISA or (d) a plan that is subject to ERISA Section 302
or Section 412 of the Code. None of the Purchased Assets, the Business, or Buyer
will be subject to any liability for contributions under the Employee Benefits
Plans after the Closing.
3.18 Employee Matters. Except as set forth on Schedule 3.18, Seller is not
indebted to, nor a creditor of, any employee of Seller. All of the independent
contractors engaged by Seller are set forth on Schedule 3.18 hereto. Seller is
in compliance with all applicable federal and state laws respecting employment,
wages and hours with respect to its employees. Within the last 18 months, no
employment discrimination or unfair labor practice complaints have been filed
against Seller or, to Seller's Knowledge, threatened to be filed with any
federal or state agency having jurisdiction over Seller's labor matters. Seller
has not been threatened in writing or, to the Knowledge of Seller, threatened
orally by any former employee with any suit alleging wrongful termination and,
to Seller's Knowledge, there are no facts which might form a basis for such a
suit.
3.19 Insurance. Seller has delivered to Buyer complete copies of all
insurance policies of Seller related to the Purchased Assets.
3.20 Orders, Commitments and Returns. All accepted and unfilled orders for
the provision of software packaging and media duplication services to customers
of Seller were made in bona fide transactions in the ordinary course of
business. Except as set forth on Schedule 3.20 hereto, there are no outstanding
claims against Seller by any of its customers related to credits, damaged goods
and related billing errors or otherwise related to the shipment of goods or
provision of services by Seller to its customers and all such outstanding claims
have been appropriately accrued in accordance with GAAP on the June 30, 1995
balance sheet included in Schedule 3.24 hereto. Seller has not delivered goods
to its customers under an understanding that such products would be returnable,
except as set forth on Schedule 3.20 hereto.
3.21 Affiliated Transactions. Except as set forth on Schedule 3.21 hereto,
Seller has not, in the ordinary course of business or otherwise, purchased,
licensed or leased or otherwise acquired any property or assets or obtained any
services from, or sold, licensed, leased or otherwise disposed of any property
or assets or provided any services to any Employee (except with respect to
remuneration for services as an employee of Seller), shareholder, officer, or
director, or affiliate of any of the foregoing. Except as set forth on Schedule
3.21 hereto, Seller does not owe any contractual obligation or commitment to any
of the foregoing (other than compensation for current services not yet due and
payable and reimbursement expenses arising in the ordinary course of business)
and none
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of the foregoing owes any amount or has any contractual obligation to
Seller.
3.22 Subsidiaries, Affiliated Companies and Investments. Seller does not
own, directly or indirectly, of record or beneficially, any capital stock or
other equity or ownership or proprietary interest in any corporation,
partnership, association, trust, joint venture or other entity.
3.23 No Broker. Seller is not committed to any liability for any brokers'
or finders' fees or any similar fees in connection with the transactions
contemplated by this Agreement other than the fees due to The Robinson-Humphrey
Company, which will be paid by Seller prior to the Closing Date. Seller has not
retained, nor had any dealings, negotiations or communications with, any broker
or other intermediary in connection with the transactions contemplated by this
Agreement other than The Robinson- Humphrey Company, Inc.
3.24 Financial Statements. Seller's unaudited financial statements attached
hereto as Schedule 3.24 are true and correct in all material respects, present
fairly the financial condition and results of operations of Seller as of the
dates and for the periods indicated, and were prepared in accordance with GAAP,
except for variations in Seller's method of determining costs of goods sold and
related accounts, as previously described to Buyer, except that they do not
contain any notes thereto, and the interim financial statements contained
therein are subject to normal year-end adjustments.
3.25 Absence of Certain Events. Except as set forth on Schedule 3.25, since
March 31, 1995, there has not been any material adverse change in Seller, the
Business or in any of the Purchased Assets, the Assumed Contracts or the Assumed
Liabilities.
3.26 Disclosure. To the Knowledge of Seller, neither this Agreement nor any
Schedule or Exhibit hereto nor any certificate or other document referenced
herein or therein and furnished to Buyer by Seller contains any untrue statement
of a material fact or omits to state a material fact necessary in order to make
the statements contained therein or herein, in light of the circumstances under
which they were made, not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER AND CADMUS
Buyer and Cadmus hereby represent and warrant to Seller and SFI
Shareholders that:
4.1 Organization. Each of Cadmus and Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the state of its
incorporation, and has full corporate power to enter into and perform its
obligations hereunder.
4.2 Authorization; Enforceability. The execution, delivery and performance
by each of Cadmus and Buyer of this Agreement and of all of the documents and
instruments contemplated hereby to which Cadmus or Buyer is a party are within
the corporate power of Cadmus and Buyer, as applicable, and have been duly
authorized by all necessary corporate action by Cadmus and Buyer, as applicable.
This Agreement is, and the other documents and instruments required hereby to
which Cadmus or Buyer is a party will be, when executed and delivered by Cadmus
or Buyer, as applicable, the valid and binding obligations of Cadmus or Buyer,
as applicable, enforceable against each of Cadmus or Buyer, as applicable, in
accordance with their
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respective terms, except as enforceability may be limited by applicable
equitable principles or by bankruptcy, insolvency, reorganization, moratorium or
similar laws from time to time in effect affecting the enforcement of creditors'
rights generally.
4.3 No Conflict or Violation. The execution, delivery and performance of
this Agreement by Cadmus and Buyer do not and will not violate or conflict with
any provision of the Articles of Incorporation or Bylaws of Cadmus and Buyer,
respectively, any Law, judgment, order or decree binding on either of Cadmus or
Buyer or any contract, lease, mortgage, deed of trust, indenture, permit,
license, franchise, commitment, authorization or concession, or other agreement
or instrument applicable to either of Cadmus or Buyer.
Except as set forth on Schedule 4.3 hereto, no consent of any other person,
and no notice to, filing or registration with, or authorization, consent or
approval of, any governmental, regulatory or self-regulatory agency is necessary
or is required to be made or obtained by Cadmus or Buyer in connection with the
consummation of the transactions contemplated in this Agreement.
4.4 Capitalization. The shares of Cadmus Common Stock to be issued as the
Stock Consideration have been duly authorized and, when issued to the SFI
Shareholders on behalf of Seller pursuant to this Agreement, will be validly
issued, fully paid and nonassessable and free of preemptive or other rights that
entitle any person to acquire such shares.
4.5 No Litigation. There is no litigation, arbitration proceeding,
governmental investigation, citation or action of any kind pending or, to the
Knowledge of Buyer, proposed or threatened against Buyer relating to this
Agreement or the transactions contemplated hereby.
4.6 SEC Reports. Cadmus has filed with the Securities and Exchange
Commission and delivered to Seller complete copies of the Annual Report on Form
10-K of Cadmus for the year ended June 30, 1995, and Reports on Form 8-K filed
thereafter, if any. Such reports did not at the time they were filed contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they are made, not misleading. The financial
statements of Cadmus included in the Annual Report on Form 10-K of Cadmus for
the year ended June 30, 1995 have been prepared in accordance with GAAP applied
on a consistent basis during the period related thereto and present fairly, in
all material respects, the financial position of Cadmus as at June 30, 1995 and
the results of operations and cash flows for the year then ended.
4.7 No Broker. Neither Cadmus nor Buyer has retained, nor had any
dealings, negotiations or communications with, any broker or other
intermediary in connection with the transactions contemplated by this
Agreement.
4.8 Absence of Certain Events. Since June 30, 1995, there has not
been any material adverse change in the financial condition or business of
Cadmus.
4.9 Investigation. Neither Cadmus nor Buyer is aware of any inaccuracies in
the representations or warranties made by Seller and the SFI Shareholders in
this Agreement.
4.10 Adequacy of Funds. Buyer and Cadmus have sufficient funds available to
enable them to consummate the transactions contemplated hereby.
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ARTICLE V
CERTAIN UNDERSTANDINGS AND AGREEMENTS
5.1 Conduct of Seller Prior to Closing. Prior to the Closing Date, Seller
shall conduct the Business in the ordinary course and substantially in
accordance with past practice, except as otherwise permitted by this Agreement
or consented to by Buyer in writing. Without limiting the generality of the
foregoing, Seller will: (a) at all times keep full and complete Books and
Records, both consistent with past practice and in accordance with GAAP, except
as indicated in Section 3.24 hereof; (b) use its reasonable best efforts to
maintain in full force and effect the insurance policies heretofore maintained
by Seller on the Purchased Assets (or policies providing substantially the same
coverage); (c) take such action as may reasonably have been necessary to
preserve the Purchased Assets in good condition, ordinary wear and tear
excepted; (d) promptly advise Buyer in writing of any loss or, to the Knowledge
of Seller, threatened loss of an Employee listed on Schedule 5.1 hereto or a
Significant Customer or any other material adverse change in the Business,
Purchased Assets that has occurred or which Seller reasonably believes will
occur; (e) use its reasonable best efforts to preserve Seller's business
organization intact, and to preserve for Buyer the existing goodwill of the
suppliers, customers and others having business relations with Seller; and (f)
conduct the Business in substantial compliance with all Laws applicable to
Seller.
5.2 Negative Covenants. Prior to the Closing Date, Seller will not, except
as otherwise permitted by this Agreement or consented to by Buyer in writing:
(a) incur any trade accounts payable or make any commitment to purchase
quantities of any item of Inventory in excess of the respective levels normal in
the ordinary course of its business; (b) borrow any money secured by any of the
Purchased Assets; (c) pledge or hypothecate any of the Purchased Assets to
secure indebtedness of Seller or any other person; (d) merge or consolidate
with, purchase substantially all of the assets of, or otherwise acquire any
business or any proprietorship, firm, association, corporation or other business
organization or division thereof; (e) other than in the ordinary course of the
business for annual or other customary periodic compensation reviews, increase
or decrease the rate of compensation of or pay any unusual compensation to any
officer or employee, or enter into any agreement to increase or decrease the
rate of compensation of or to pay any unusual compensation to any such officer
or employee; (f) enter into any collective bargaining agreement, amend any
Employee Benefit Plan to increase the benefits or its obligations thereunder, or
create or modify any pension or profit sharing plan, bonus, deferred
compensation, death benefit, health, or retirement plan, or increase the level
of benefits under any such plan, or increase or decrease any severance or
termination pay benefit or any other fringe benefit; (g) make any representation
to anyone indicating that any officer or employee of Seller will be employed by
Buyer after the Closing except as contemplated by this Agreement; (h) declare or
make any dividend, stock repurchase or other distribution to its shareholder,
except that Seller may pay cash dividends to Shareholder as necessary to pay
taxes owing by Shareholder that are related to the Business; or (i) sell or
dispose of any of the Purchased Assets otherwise than in the ordinary course of
the Business.
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5.3 Access. Prior to the Closing Date, Seller shall give to authorized
representatives of Buyer full access to the Purchased Assets, the Assumed
Contracts and the Assumed Liabilities during normal business hours and upon
reasonable notice, in such a manner as not to disrupt normal business
activities. Such review shall not affect or limit the representations and
warranties made by Seller in this Agreement, except to the extent of the
inaccuracy of the representation made by Buyer and Cadmus in Section 4.9. Seller
will also cause its officers to furnish to Buyer any and all financial,
technical and operating data and other information pertaining to Seller, the
Purchased Assets, the Assumed Contracts and the Assumed Liabilities as is
reasonably available and as Buyer shall from time to time reasonably request for
such purpose. Buyer agrees that all data and information obtained by Buyer as a
result of the access described herein shall be subject to the Confidentiality
Agreement dated September 13, 1995 between The Robinson-Humphrey Company, Inc.
and Cadmus (the "Confidentiality Agreement").
5.4 Title Assurances, Etc. Prior to the Closing Date, Buyer shall,
at its expense, obtain UCC search reports with respect to the Purchased
Assets.
5.5 Best Efforts. Seller and Buyer shall each use its reasonable best
efforts, and shall cooperate with and assist the other party in its efforts, to
obtain such consents and approvals of third parties to the transaction
contemplated hereby as may be necessary to transfer the Purchased Assets and the
Assumed Contracts to Buyer.
5.6 Publicity. All general notices, releases, statements and communications
to employees, suppliers, distributors and customers of Seller and to the general
public and the press relating to the transactions covered by this Agreement
shall be made only at such times and in such manner as shall be mutually agreed
upon by Buyer and Seller; provided, however, Seller agrees that Cadmus may
describe the transactions contemplated hereby in a Registration Statement and
the sales meetings related thereto and Cadmus may issue a press release mutually
agreeable to Buyer, Cadmus and Seller upon execution of this Agreement;
provided, further, that either party shall be entitled to make a public
announcement of the proposed transaction if, in the opinion of its legal
counsel, such announcement is required to comply with applicable laws; provided,
further, that such party shall give the other party reasonable advance notice of
such announcement, which other party shall be entitled to review and comment on
such announcement.
5.7 Cadmus Guarantee. Cadmus, as the parent of Buyer, does hereby
absolutely, unconditionally and irrevocably guarantee the prompt payment and
performance of all of the obligations of Buyer (i) under and pursuant to this
Agreement, as it may be amended in accordance with its terms, and (ii) under and
pursuant to the Note, in accordance with its terms, which Note will not be
subject to any right of set-off that Cadmus may have, whether arising at common
law or otherwise, upon demand by Seller and agrees that this guarantee shall be
an obligation for full and prompt payment and performance rather than a
secondary guarantee of collectibility. The liability of Cadmus under this
guarantee is continuing
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and shall only be discharged by the full performance of Buyer or Cadmus of all
of its obligations under this Agreement.
5.8 Registration Rights. Cadmus and the SFI Shareholders agree to execute
and deliver on the Closing Date a Registration Rights Agreement that shall
provide for piggyback registration rights for the SFI Shareholders with respect
to any registration statement (other than on Form S-4 or S-8) under the
Securities Act, filed by Cadmus after the Closing Date and before the third
anniversary of the Closing Date, that register shares of Cadmus Common Stock for
sale by any selling shareholders other than the SFI Shareholders and shall
otherwise contain terms and conditions reasonably satisfactory to Cadmus and the
SFI Shareholders.
ARTICLE VI
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF BUYER AND CADMUS
Each and every obligation of Buyer to be performed on the Closing Date
shall be subject to the satisfaction prior to or at the Closing of the following
express conditions precedent:
6.1 Compliance with Law. There shall have been obtained any and all
permits, approvals and consents of any governmental body or agency which counsel
for Buyer may reasonably deem necessary or appropriate so that consummation of
the transactions contemplated by this Agreement will be in compliance with
applicable laws.
6.2 No Litigation. No investigation, suit, action or other proceeding shall
be threatened or pending before any court or governmental agency that seeks
restraint, prohibition, damages or other relief in connection with this
Agreement or the consummation of the transactions contemplated hereby.
6.3 Accuracy of Representations and Warranties. The representations and
warranties of Seller and SFI Shareholders made in this Agreement shall be true
and correct in all material respects at and as of the time of Closing as if made
at and as of such time.
6.4 Consents. All consents, approvals and waivers from third parties and
governmental authorities and other parties listed on Schedule 6.4 hereto shall
have been obtained and shall be in form and substance reasonably satisfactory to
Buyer.
6.5 No Material Adverse Change. During the period from March 31, 1995,
through the Closing Date, there shall not have been any material adverse change
in the financial condition, results of operations of Seller, nor any material
loss or damage to the Purchased Assets, whether or not insured.
6.6 Seller's Performance. Each of the obligations of Seller to be performed
or complied with on or before the Closing Date, pursuant to the terms of this
Agreement, shall have been duly performed or complied with on or before the
Closing Date.
ARTICLE VII
CONDITIONS PRECEDENT TO THE
OBLIGATIONS OF SELLER AND SFI SHAREHOLDERS
Each and every obligation of Seller and SFI Shareholders to be performed on
the Closing Date shall be subject to the satisfaction prior to or at the Closing
of the following express conditions precedent:
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7.1 Compliance with Law. There shall have been obtained any and all
permits, approvals and consents of any governmental body or agency which counsel
for Seller may reasonably deem necessary or appropriate so that consummation of
the transactions contemplated by this Agreement will be in compliance with
applicable laws.
7.2 No Litigation. No investigation, suit, action or other proceeding shall
be threatened or pending before any court or governmental agency that seeks
restraint, prohibition, damages or other relief in connection with this
Agreement or the consummation of the transactions contemplated hereby.
7.3 Accuracy of Representations and Warranties. The representations and
warranties of Buyer and Cadmus made in this Agreement shall be true and correct
in all material respects at and as of the time of Closing as if made at and as
of such time.
7.4 Consents. All consents, approvals and waivers from governmental
authorities and other parties listed on Schedule 7.4 shall have been obtained
and shall be in form and substance reasonably acceptable to Seller.
7.5 No Material Adverse Change. During the period from June 30, 1995,
through the Closing Date, there shall not have been any material adverse change
in the financial condition or results of operations of Cadmus, except any change
due to a decrease in the price of the Cadmus Common Stock.
7.6 Buyer's Performance. Each of the obligations of Buyer to be performed
or complied with on or before the Closing Date, pursuant to the terms of this
Agreement, shall have been duly performed or complied with on or before the
Closing Date.
ARTICLE VIII
ACTIONS AT CLOSING
At the Closing, upon satisfaction or waiver of the conditions contained
herein, the deliveries described in this Article shall be made; all such
documents required to be so delivered shall be reasonably satisfactory in form
and substance to the party to whom they are to be delivered; all such deliveries
will be deemed to take place simultaneously; and no delivery made at the Closing
will be deemed to have been consummated until all actions at the Closing have
been consummated.
8.1 Seller's Deliveries at Closing. Seller shall deliver, or cause
to be delivered, to Buyer the following documents, each properly executed
and dated as of the Closing Date:
(a) Seller's Closing Certificate;
(b) the Bill of Sale or such other appropriate documents to sell and
convey to Buyer the Purchased Assets, free and clear of all
security interests, charges or encumbrances except Permitted
Liens;
(c) the Assignment and Assumption Agreement or such other appropriate
assignment agreements to convey to Buyer the Assumed Contracts,
the Intellectual Property, interests of Seller in the Lease and
the Other Intangibles, free and clear of all security interests,
charges or encumbrances except Permitted Liens;
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(d) the Escrow Agreement;
(e) the Employment Agreement executed by Michael F. Heazel in
substantially the form of Exhibit F hereto;
(f) the Employment Agreements executed by each of the Phantom
Shareholders, other than Frank B. Hasty, in substantially
the form of Exhibit G hereto; and
(g) An Internal Revenue Service Form W-9 executed by each of the SFI
Shareholders.
8.2 Buyer's Deliveries at Closing. In addition to the payment of the Cash
Consideration, Buyer shall deliver, or cause to be delivered, to Seller the
following documents, each properly executed and dated as of the Closing Date:
(a) stock certificates representing the Stock Consideration;
(b) the Note;
(c) Buyer's Closing Certificate;
(d) the Assignment and Assumption Agreement or such other appropriate
assumption agreements for Buyer to assume the Assumed Liabilities
and the interests of Seller in the Lease; and
(e) the Escrow Agreement.
ARTICLE IX
ACTIONS BY SELLER, THE SFI SHAREHOLDERS
AND BUYER AFTER THE CLOSING
9.1 Seller's and SFI Shareholders' Indemnity.
(a) Seller and each of the SFI Shareholders, jointly and
severally, hereby agrees to indemnify and hold Buyer and Cadmus, their
affiliates, successors and assigns and their respective representatives
("Buyer's Indemnitees") harmless from and against, and agrees to defend promptly
Buyer's Indemnitees from and reimburse Buyer's Indemnitees for, any and all
losses, damages, costs, expenses, liabilities, obligations and claims of any
kind, including, without limitation, reasonable attorneys' fees and other legal
costs and expenses (hereinafter referred to collectively as "Losses"), that
Buyer's Indemnitees may at any time suffer or incur, or become subject to, as a
result of or in connection with: (i) any breach or inaccuracy of any of the
representations and warranties made by Seller and the SFI Shareholders in or
pursuant to this Agreement; and (ii) any failure of Seller to carry out,
perform, satisfy and discharge any of its covenants, agreements, undertakings,
liabilities or obligations under this Agreement or under any of the documents
and instruments delivered by Seller, other than the Escrow Agreement, pursuant
to this Agreement; provided, however, that Buyer's Indemnitees shall have the
right
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to be indemnified, held harmless from, defended or reimbursed (X) under Section
9.1(a)(ii) hereof only if such right is asserted (whether or not such Losses
have actually been incurred) 18 months after the Closing Date and (Y) under
Section 9.1(a)(i) hereof in respect of the representations and warranties made
by Seller only if such right is asserted (whether or not such Losses have
actually been incurred) on or before the respective dates set forth below:
Representations and Warranties All Claims Must be
Set Forth in the Following Sections Asserted by:
Sections 3.9 and 3.17 60 days after expiration
date of applicable statute
of limitations
Sections 3.1, 3.3 and 3.10 Three years after the
Closing Date
Remainder of Article III 18 months after the Closing
Date
Notwithstanding the foregoing, Seller and the SFI Shareholders shall not be
required to indemnify Buyer's Indemnitees under Section 9.1(a) hereof unless and
until the amount of all Losses for which indemnification is sought with respect
thereto shall exceed $200,000, at which point Seller and the SFI Shareholders
will be obligated to indemnify Buyer's Indemnitees for all additional Losses in
excess of $200,000. In no event shall Seller and the SFI Shareholders be liable
to Buyer's Indemnitees pursuant to this Section 9.1(a) hereof in an amount in
excess of $7,250,000 (the "Maximum Aggregate Liability Amount"); provided,
further, that, in no event, shall any SFI Shareholder be liable to Buyer's
Indemnitees in an amount in excess of an amount equal to the SFI Shareholder's
Pro Rata Amount multiplied by the Maximum Aggregate Liability Amount.
(b) In the event a claim against Buyer's Indemnitees arises that is
covered by the indemnity provisions of Section 9.1(a) hereof, notice shall be
given promptly by Buyer to Seller and Shareholder. Provided that Seller or
Shareholder admits in writing to Buyer that such claim is covered by the
indemnity provisions of Section 9.1(a) hereof, Seller or Shareholder, as the
case may be, shall have the right to contest and defend by all appropriate legal
proceedings such claim and to control all settlements (unless Buyer agrees to
assume the cost of settlement and to forgo such indemnity) and to select lead
counsel to defend any and all such claims at the sole cost and expense of Seller
or Shareholder, as the case may be; provided, however, that neither Seller nor
Shareholder may effect any settlement that could result in any cost, expense or
liability to Buyer unless Buyer consents in writing to such settlement and
Seller and Shareholder agree to indemnify Buyer therefor. Any of Buyer's
Indemnities may select and engage counsel to participate in any defense, in
which event such counsel shall be at the sole cost and expense of the party
selecting and engaging such counsel. In connection with any such claim, action
or proceeding, the parties shall cooperate with each other and provide each
other with access to relevant books and records in their possession.
(c) In the event Buyer or Buyer's Indemnitees is entitled to
indemnification pursuant to Section 9.1(a) hereof prior to disbursement of
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the Escrow, Buyer shall deliver a certificate to the Escrow Agent, as provided
in the Escrow Agreement. Upon receipt of such certificate, the Escrow Agent
shall pay to Buyer the amount set forth on such certificate, plus interest
accrued thereon, as set forth in the Escrow Agreement.
(d) The amount otherwise payable by Seller and the SFI Shareholders
under Section 9.1(a) hereof (i) shall first be satisfied by resort to the Escrow
until it is exhausted and (ii) shall be reduced by the amount of (or, in the
case of a tax benefit to be realized subsequently, the then-present value of)
any federal or state income tax benefit to Buyer or Buyer's Indemnitees
resulting from such Losses, net of any state or federal income tax required to
be paid by Buyer or Buyer's Indemnitees with respect to receipt by Buyer's
Indemnitees of payment of the Losses. Such present value shall be based on a
discount rate of 5%.
(e) Buyer's Indemnitees shall not be entitled to pursue
indemnification pursuant to Section 9.1(a) hereof, for the breach of any
representation or warranty to the extent that (i) to the Knowledge of Buyer at
the time of Closing, the representation or warranty was inaccurate and the Buyer
proceeds with Closing and (ii) the amount of the Losses represented thereby have
been included as liabilities in the computation of Closing Net Working Capital
pursuant to Section 2.2 hereof.
(f) The sole remedy for the breach of any representation or warranty
contained herein shall be governed by and limited to the provisions of this
Section 9.1.
9.2 Buyer's Indemnity.
(a) Buyer hereby agrees to indemnify and hold Seller, its affiliates,
successors and assigns and their respective representatives (collectively,
"Seller's Indemnitees") harmless from and against, and agrees to defend promptly
Seller's Indemnitees from and reimburse Seller's Indemnitees for, any and all
Losses that Seller's Indemnitees may at any time suffer or incur, or become
subject to, as a result of or in connection with: (i) any breach or inaccuracy
of any of the representations and warranties made by Buyer in or pursuant to
this Agreement; (ii) any failure by Buyer to carry out, perform, satisfy and
discharge any of its covenants, agreements, undertakings, liabilities or
obligations under this Agreement other than the Escrow Agreement, Note, the
Employment Agreement executed by Michael Heazel in substantially the form of
Exhibit F hereto and the Employment Agreements executed by each of the Phantom
Shareholders in substantially the form of Exhibit G hereto, or under any of the
documents and materials delivered by Buyer pursuant to this Agreement; and (iii)
claims by third parties against Seller relating to the operation and ownership
by Buyer of the Purchased Assets, the performance by Buyer under the Assumed
Contracts and the conduct of the Business by Buyer from and after the Effective
Time of Closing; provided, however, that Seller's Indemnitees shall have no
right to be indemnified, held harmless from, defended or reimbursed under
Section 9.2(a) hereof unless such right is asserted (whether or not such Losses
have actually been incurred) within 18 months of the Closing Date; and provided,
further, that Buyer shall not be required to indemnify Seller's Indemnitees
under Section 9.2(a)(i) hereof in respect of such representations and warranties
unless and until the amount of all Losses for which indemnification is sought
with respect thereto shall exceed $200,000, at which point Buyer will be
obligated to indemnify Seller's Indemnitees for all additional Losses in excess
of $200,000. In no event shall Buyer be liable to Seller's Indemnitees pursuant
to this Section 9.2(a) in an amount in excess of $7,250,000.
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(b) In the event a claim against Seller's Indemnitees arises that is
covered by the indemnity provisions of Section 9.2(a) hereof, notice shall be
given promptly by Seller to Buyer. Provided that Buyer admits in writing to
Seller that such claim is covered by the indemnity provisions of Section 9.2(a)
hereof, Buyer shall have the right to contest and defend by all appropriate
legal proceedings such claim and to control all settlements (unless Seller
agrees to assume the cost of settlement and to forgo such indemnity) and to
select lead counsel to defend any and all such claims at the sole cost and
expense of Buyer; provided, however, that Buyer may not effect any settlement
that could result in any cost, expense or liability to Seller's Indemnitees
unless Seller consents in writing to such settlement and Buyer agrees to
indemnify Seller's Indemnitees therefor. Any of Seller's Indemnitees may select
and engage counsel to participate in any defense, in which event such counsel
shall be at the sole cost and expense of the party selecting and engaging such
counsel. In connection with any such claim, action or proceeding, the parties
shall cooperate with each other and provide each other with access to relevant
books and records in their possession.
(c) The amount otherwise payable by Buyer under Section 9.2(a) hereof
shall be reduced by the amount of (or, in the case of a tax benefit to be
realized subsequently, the then-present value of) any federal or state income
tax benefit to Seller or Seller's Indemnitees resulting from such Losses, net of
any state or federal income tax required to be paid by Seller or Seller's
Indemnitees with respect to the receipt by Seller's Indemnitees of payment of
the Losses. Such present value shall be based on a discount rate of 5%.
(d) Seller's Indemnitees shall not be entitled to indemnification
pursuant to Section 9.2(a) hereof for the breach of any representation or
warranty to the extent that, to the Knowledge of Seller at the time Closing, the
representation or warranty was inaccurate and Seller proceeds with Closing.
(e) The sole remedy for the breach of any representation or warranty
contained herein shall be governed by and limited to the provisions of this
Section 9.1.
9.3 Brokers or Finders. Seller and SFI Shareholders agree to hold Buyer and
Cadmus, and Buyer and Cadmus agree to hold Seller and SFI Shareholders, harmless
and indemnify them or it, as the case may be, against the claims of any persons
or entities claiming to be entitled to any brokerage commission, finder's fee,
advisory fee or like payment from Buyer or Cadmus or Seller or SFI Shareholders,
as the case may be, based upon actions of the indemnifying party in connection
with the transaction contemplated by this Agreement, including but not limited
to The Robinson- Humphrey Company, Inc., which will be paid by Seller.
9.4 Books and Records. For a period of three years after the Closing Date,
Seller agrees to cooperate with and make available to Buyer and Buyer agrees to
cooperate with and make available to Seller, during normal business hours, all
books, records, information (including the Books and Records) relating to its
business and employees (without substantial disruption of employment) retained
by the respective parties and remaining in existence after the Closing Date that
are necessary or useful in connection with any tax inquiry, audit, investigation
or dispute, any litigation or investigation or any other matter requiring any
such books, records, information or employees for any reasonable business
purpose. The party requesting any such books, records, information or employees
shall
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bear all of the out-of-pocket costs and expenses (including, without limitation,
attorneys' fees, but excluding reimbursement for salaries and employee benefits)
reasonably incurred in connection with providing such books, records,
information or employees. In the event Seller or Buyer desires to dispose of any
such books, records or information prior to the third anniversary of the Closing
Date, it shall give notice of such action to the other party who shall be
entitled, at its own cost and expense, to receive such books, records and
information.
9.5 Name Change. Immediately after the Closing Date, Seller and Shareholder
will take whatever action necessary to transfer the name "The Software Factory"
to Buyer, including, but not limited to, necessary name change filings with the
State of Georgia and any other appropriate governmental agency. Seller further
covenants that it will not conduct any business under the name "The Software
Factory, Inc." subsequent to the Closing Date.
9.6 Further Assurances. After the Closing Date, each party will cooperate
in good faith with the other and will take all appropriate action and execute
and deliver any documents, instruments or conveyances of any kind which may be
reasonably necessary or advisable to carry out any of the transactions
contemplated hereby.
9.7 Litigation Support. In the event and for so long as Buyer or Seller
actively is contesting or defending against any action, suit, proceeding,
hearing, investigation, charge, complaint, claim or demand in connection with
(a) any transaction contemplated under this Agreement, or (b) the Purchased
Assets or the Assumed Contracts, the other parties will cooperate with it and
its counsel in the contest or defense, make available its personnel and provide
such testimony and access to its books and records as shall be necessary in
connection with the contest or defense, all at the sole cost and expense of the
contesting or defending party.
9.8 Employment Matters.
(a) The parties hereto agree that Buyer shall offer employment with
Buyer to the Employees in comparable positions to those held by each Employee
immediately prior to the Closing Date. The employment of Employees who accept
employment with Buyer shall commence at 12:01 a.m. on the Employment Date.
The preceding provision does not establish, as to any Employee, a
contract of employment for a definite term or any term or a contractual right
that his or her employment can only be terminated for just cause. Except as may
otherwise be provided in an employment contract entered into by Buyer with any
Employee, the parties hereto intend that every Employee shall be employed at the
will of Buyer, such that either the Employee or Buyer may terminate such
employment at any time, for any reason or no reason.
As to the Employees and other current or former employees of Seller,
Seller shall be responsible for: (i) employer obligations with respect of
"COBRA" continuation coverage as defined in Section 4980B of the Code for such
Employees and employees and their dependents and qualifying beneficiaries, and
obligations under all other applicable federal, state and local laws,
regulations, ordinances and the like, in connection with an Employee's or other
current or former employee's employment or termination of employment before the
Employment Date; and (ii) all other costs, expenses, liabilities and claims
incurred in connection with an Employee's or other current or former employee's
employment or termination of employment before the Employment Date. Buyer shall
be responsible for all
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costs, expenses, liabilities and claims incurred in connection with the
Employees' or other current or former employees' employment or termination of
employment with Buyer.
(b) For the period commencing on the Employment Date and ending on
December 31, 1995, Buyer shall provide to Employees who are employed by Buyer
and their dependents medical, dental, life, and accidental death and
dismemberment insurance benefits and dependant care spending accounts, medical
reimbursement spending accounts (but not other welfare benefits) on
substantially the same terms and conditions (including employer and employee
cost sharing) as applicable to Employees under Seller's plans providing such
benefits at the Closing Date, provided each applicable insurance company
providing such benefits agrees to issue an insurance policy to Buyer which
provides for such coverage at substantially the same cost and with substantially
the same terms as applicable to Seller or agrees to Buyer's assumption of the
applicable insurance policies for the coverage of such Employees and their
dependents. Buyer shall not be liable for any premiums or other charges relating
to such insurance coverage or for any expenses or deficits in dependant care
spending accounts and medical reimbursement spending accounts for periods before
the Employment Date. Notwithstanding the foregoing, Buyer shall not be obligated
to provide dependant care spending accounts and medical reimbursement spending
accounts unless Seller transfers to Buyer or its designee an amount of cash
equal to the unused balances as of the Employment Date in the spending accounts
of Employees who are employed by Buyer on the Employment Date and either the
person providing recordkeeping and related services for the spending accounts is
hired by the Buyer to continue such services or the Buyer is able to make
arrangements satisfactory to it for recordkeeping and related services for the
spending accounts.
(c) As of January 1, 1996, Buyer shall provide benefits to Employees
who are employed by Buyer as of the Employment Date and as of January 1, 1996
similar to either, at Buyer's option, (i) those benefits generally available to
Buyer's employees (based on Buyer's applicable covered employee classifications
and criteria) at January 1, 1996 or (ii) those benefits generally available to
Seller's employees at the Closing Date.
(d) As to Employees who are employed by Buyer as of the Employment
Date, and as of January 1, 1996, any employee benefit plans and programs
maintained or participated in by Buyer shall provide, subject to applicable law
and acceptance by the applicable insurance company providing benefits, if any,
or stop loss insurance with respect to such benefits that effective commencing
as of January 1, 1996:
(i) all Employees covered by Seller's medical and dental care
plan at the Employment Date shall be eligible for medical and dental care
coverage under Buyer's medical and dental care plan as of January 1, 1996
without regard to any waiting period or preexisting condition exclusion or
limitation which would not be applicable to them under Seller's applicable plan
immediately prior to January 1, 1996 (assuming continuing coverage thereunder
through December 31, 1995), and without regard to any actively at work
requirement (based on active employment with Buyer); and
(ii) all Employees covered by Seller's welfare plans (other than
medical and dental care) at the Employment Date shall be eligible for coverage
under Buyer's similar plans (if any) as of January 1, 1996 without regard to any
waiting period or preexisting condition exclusion or
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limitation not otherwise applicable to them under Seller's applicable plan
immediately prior to January 1, 1996 (assuming continuing coverage thereunder
through December 31, 1995), and without regard to any actively at work
requirement (based on active employment with Buyer).
(e) Effective January 1, 1996, as to Employees who are employed by
Buyer as of the Employment Date, and as of January 1, 1996, service with Seller
and with any of affiliates of Seller before the Employment Date shall be treated
as service with Buyer (for purposes of eligibility to begin participation and
vesting and for purposes of benefit accruals except that no such service for
accrual of benefits shall be credited under Buyer's Thrift Savings, Pension and
Supplemental Executive Retirement Plans and any other qualified or nonqualified
deferred compensation plans) for purposes of all employee benefit and seniority
based plans and programs, including but not limited to annual, sick and personal
leave accruing following employment with Buyer.
(f) The parties hereto agree that the rights and obligations in this
Section to provide benefits for Employees of Seller and their dependents are not
intended to provide third party beneficiary contractual rights for such
Employees and their dependents, but that enforcement of and lawsuits regarding
such rights may only be instituted by the Shareholder.
9.9 Bulk Sales Compliance. The parties agree to use their reasonable
best efforts to comply with their respective obligations of transferor and
transferee under the Uniform Commercial Code-Bulk Transfers (OCGA 11-6-
101 et. seq.).
9.10 Taxes and Fees. Seller and Buyer will share equally all transfer,
sales, recording and filing taxes or fees resulting from the transfer of the
Purchased Assets and the Assumed Contracts and assumption of the Assumed
Liabilities hereunder. Seller and Buyer shall cooperate to the extent reasonably
necessary to minimize the amount of any such taxes or fees.
9.11 Allocation of Purchase Price. The Cash Consideration, Stock
Consideration, the amount of the Escrow (excluding any portion thereof treated
as interest for federal income tax purposes), the amount of the Working Capital
Adjustment Holdback (excluding any portion thereof treated as interest for
federal income tax purposes), and the Assumed Liabilities (to the extent they
constitute part of the amount paid for the Purchased Assets or Assumed Contracts
for federal income tax purposes) shall be allocated among the Purchased Assets
and Assumed Contracts in accordance with Schedule 9.11 hereto; provided,
however, that Schedule 9.11 hereto shall be amended after the Closing Date to
reflect payments made pursuant to Section 2.2(c) hereof. This allocation is
intended to comply with the allocation method required by Section 1060 of the
Code and the regulations thereunder. The parties shall cooperate to comply with
all substantive and procedural requirements of Section 1060 of the Code and such
regulations, and the allocation shall be adjusted only if and to the extent
necessary to comply with such requirements. Buyer and Seller agree that they
will not take, or permit any affiliated person to take, any position
inconsistent with such allocation for income tax purposes.
9.12 Acquisition for Investment. Each SFI Shareholder represents and
warrants to Buyer that he (i) has such knowledge and experience in business and
financial matters that he is capable of evaluating Cadmus and the activities
thereof and the risks and merits of investment in the Cadmus Common Stock and of
making an informed investment decision thereon; (ii) has carefully reviewed and
evaluated and understands the risks of, and
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other considerations relating to, a purchase of the Cadmus Common Stock; (iii)
has been afforded the opportunity to obtain any information necessary to
evaluate an investment in the Cadmus Common Stock; (iv) is acquiring the shares
of Cadmus Common Stock as an investment for his own account and without any
intention of distributing all or any part of them and he has no present
intention, agreement or arrangement to resell, assign, transfer or otherwise
dispose of all or any of the shares acquired hereto; and (v) is at least 21
years of age. Seller and each SFI Shareholder acknowledge that the shares of
Cadmus Common Stock being acquired pursuant hereto will be issued pursuant to an
exemption from registration under the Securities Act, and the certificates
representing such shares will bear a legend indicating that they have not been
registered under the Securities Act and may not be transferred by Seller or an
SFI Shareholder, as the case may be, except pursuant to a effective registration
statement or pursuant to an exemption from registration. In the event Seller or
any SFI Shareholder determines to transfer, sell or otherwise convey any shares
of Cadmus Common Stock being acquired pursuant hereto pursuant to an exemption
from registration under the Securities Act, Seller or SFI Shareholder, as the
case may be will, prior to transferring such shares, cause counsel selected by
such party but satisfactory to Cadmus to deliver an opinion to Cadmus to the
effect that the transfer of such shares is exempt from the registration
provisions of the Securities Act, or, in the case of a transfer permitted by
Rule 144, Seller or SFI Shareholder, as the case may be, will provide evidence
satisfactory to Cadmus that the transfer, sale or other conveyance of such
shares is exempt from the registration provisions of the Securities Act.
9.13 Reporting Requirements. Cadmus shall file on a timely basis, all
reports required to be filed by it under the Securities Exchange Act of 1934, as
amended. Cadmus shall, upon request of Shareholder, promptly certify in writing
that it has complied with all such reporting requirements.
9.14 Accounts Receivable Guarantee.
(a) Buyer shall have the right, at any time after the 120th day and
before the 130th day following the Closing Date, to assign to Seller a face
amount of Accounts Receivable (the "Reassigned Receivables") equal to the
uncollected portion of any Accounts Receivable included on the Closing Balance
Sheet that have not been collected by Buyer within 120 days after the Closing
Date; provided, however, prior to such reassignment, Buyer shall cause the
Company, under the direction of the Shareholder, to use its reasonable best
efforts to collect the Accounts Receivables and Buyer shall not release any
party from liability for any unpaid Accounts Receivable without the prior
written consent of Seller. Buyer shall deliver to Seller all documents that
relate to the Reassigned Receivables and any similar documents generated by
Buyer after the Closing Date. Upon receipt of a document from Buyer transferring
the Reassigned Receivables to Seller, Seller shall promptly pay Buyer the face
amount of the Reassigned Receivables. Buyer shall cooperate with Seller in any
reasonable collection efforts relating to the Reassigned Receivables.
(b) The parties agree that, in the absence of specific customer
instructions to apply, or not to apply, payments to specific invoices, the
payments received by Buyer from customers of the Business subsequent to the
Closing Date shall be applied against the oldest outstanding balances of such
Accounts Receivables. After Buyer has assigned the Reassigned Receivables to
Seller, if Buyer receives payment from a customer for such
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Reassigned Receivable, Buyer shall pay Seller in cash the amount of such
payment. A payment from a customer shall only be deemed to be payment of a
Reassigned Receivable if (i) instructions received from the customer indicate
that the payment applies to the Reassigned Receivable, (ii) Buyer has not
continued to do business with the customer or (iii) for the first 30 days after
the assignment of the Reassigned Receivables written instructions received from
the customer do not indicate that the payment applies to a receivable other than
the Reassigned Receivables, provided such Reassigned Receivable is not in
dispute. After 30 days following the assignment of the Reassigned Receivables,
if it is unclear whether a payment applies to a Reassigned Receivable, it shall
only be deemed a payment of a Reassigned Receivable, if (i) written instructions
received from the customer indicate that the payment is to be applied to a
Reassigned Receivable or (ii) Buyer has not continued to do business with such
customer.
9.15 Prorations. All property and ad valorem taxes, leasehold rentals and
other customarily proratable items relating to the Purchased Assets payable
subsequent to the Closing Date and relating to a period of time both prior to
and subsequent to the Closing Date will be prorated as of the close of business
on the Closing Date between Buyer and Seller. If the actual amount of any such
item is not known as of the Closing Date, the aforesaid proration shall be based
on the previous year's assessment of such item and the parties agree to adjust
said proration and pay any underpayment or reimburse for any overpayment within
thirty days after the actual amount becomes known.
9.16 SFI Shareholders' Release. Effective upon the Closing, each of the
Phantom Shareholders release and forever discharge Seller, Shareholder, Buyer,
Cadmus and each of their successors, assigns and affiliates (collectively, the
"Released Parties"), to the full extent and subject to the terms set forth in
Exhibit J hereto (but, as to Buyer and Cadmus, only to the extent of matters
relating to the Phantom Stock Plans or non-qualified Stock Option Plans listed
in Schedule 3.17 hereto, or any other arrangements related to payments upon the
sale of stock or substantially all of the assets of Seller, applying to the
Phantom Shareholders).
9.17 Customer Credits. Seller and each of the SFI Shareholders, jointly and
severally, hereby agree to pay to Buyer the amount of any customer credit listed
on Schedule 3.20 hereto that Buyer, upon request of a customer, is required to
pay, at any time, to a customer. Buyer shall not inform customers of their right
to receive payment of a customer credit.
ARTICLE X
MISCELLANEOUS
10.1 Entire Agreement; Amendment. This Agreement and the documents referred
to herein and to be delivered pursuant hereto constitute the entire agreement
between the parties pertaining to the subject matter hereof, and supersede all
prior and contemporaneous agreements, understandings, negotiations and
discussions of the parties, whether oral or written, and there are no
warranties, representations or other agreements between the parties in
connection with the subject matter hereof, other than the Letter of Intent,
dated September 26, 1995, between Cadmus and Seller and the Confidentiality
Agreement. No amendment, supplement, modification, waiver or termination of this
Agreement shall be
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binding unless executed in writing by the party to be bound thereby. No waiver
of any of the provisions of this Agreement shall be deemed or shall constitute a
waiver of any other provision of this Agreement, whether or not similar, nor
shall such waiver constitute a continuing waiver unless otherwise expressly
provided. The representations and warranties of each party hereto shall be
deemed to be material and to have been relied upon by the other party
notwithstanding any investigation heretofore or hereafter made by the other
party.
10.2 Expenses. Except as otherwise specifically provided herein, each of
the parties hereto shall pay the fees and expenses of their respective counsel,
accountants and other experts and the other expenses incident to the negotiation
and preparation of this Agreement and consummation of the transactions
contemplated hereby.
10.3 Governing Law. This Agreement shall be construed and interpreted
according to the laws of the State of Georgia, without regard to the conflict of
law principles or rules thereof. All the parties hereto hereby irrevocably
submit to the jurisdiction of the United States Federal Court sitting in the
Northern District of Georgia over any suit, action or other proceeding brought
by either party arising out of or relating to this Agreement and irrevocably
agree that all claims with respect to such suit, action or proceeding may be
heard and determined in such court.
10.4 Assignment. This Agreement and each party's respective rights
hereunder may not be assigned by either party without the prior written consent
of the other party.
10.5 Notices. All communications, notices and disclosures required or
permitted by this Agreement shall be in writing and shall be deemed to have been
given at the earlier of the date (a) when delivered personally or by messenger
or by overnight delivery service to an officer of the other party or, (b) when
delivered by United States mail, certified or registered mail, postage prepaid,
return receipt requested, in all cases addressed to the person for whom it is
intended at his address set forth below, unless and until either of such parties
notifies the other in writing of a change of address; provided, however, if any
such communication, notice or disclosure is mailed or sent by messenger or
overnight delivery service to a party in accordance with this Section 10.5 and
is returned to the sender as nondeliverable, then such communication, notice or
disclosure shall be deemed to have been given on the fifth day following deposit
in the United States mail or delivery to the messenger or overnight delivery
service:
If to Seller or SFI Shareholders: Michael F. Heazel
3290 Ridgewood Road
Atlanta, GA 30327
With a copy to: Jones, Day, Reavis & Pogue
3500 Peachtree Center
303 Peachtree Street, N.E.
Atlanta, GA 30308-3242
Attention: Robert W. Smith, Esquire
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If to Buyer or Cadmus: Cadmus Communications Corporation
6620 West Broad Street, Suite 500
Richmond, Virginia 23230
Attention: Bruce V. Thomas, Esquire
With a copy to:
Hunton & Williams
Riverfront Plaza, East Tower
951 East Byrd Street
Richmond, Virginia 23219-4074
Attention: C. Porter Vaughan, III, Esquire
10.6 Counterparts; Headings. This Agreement may be executed in several
counterparts, each of which shall be deemed an original, but such counterparts
shall together constitute but one and the same Agreement. The Table of Contents
and Article and Section headings in this Agreement are inserted for convenience
of reference only and shall not constitute a part hereof.
10.7 Severability. If any provision, clause or part of this Agreement, or
the application thereof under certain circumstances, is held invalid, the
remainder of this Agreement, or the application of such provision, clause or
part under other circumstances, shall not be affected thereby.
10.8 No Reliance. Except as set forth in Section 9.8(f) hereof, no third
party is entitled to rely on any of the representations, warranties and
agreements contained in this Agreement. The parties hereto assume no liability
to any third party because of any reliance on the representations, warranties
and agreements of the parties hereto contained in this Agreement.
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IN WITNESS WHEREOF, each party has caused this Asset Purchase Agreement to
be duly executed in its name by its duly authorized officer as of the day and
year first above written.
CADMUS COMMUNICATIONS CORPORATION
By:
Name:
Title:
THE SOFTWARE FACTORY, INC.
By:
Name:
Title:
SOFTWARE ACQUISITION SUBSIDIARY, INC.
By:
Name:
Title:
Michael F. Heazel
Frank D. Cannon
Russell J. Cook
Frank B. Hasty
Michael Parks Medlock
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