SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-K
FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Mark One)
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the fiscal year ended June 30, 1998
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-12954
CADMUS COMMUNICATIONS CORPORATION
(Exact Name of Registrant as specified in its charter)
VIRGINIA 54-1274108
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6620 West Broad Street, Suite 240
Richmond, Virginia 23230
(Address of principal executive offices, including zip code)
------------
Registrant's telephone number, including area code: (804) 287-5680
------------
Securities registered pursuant to Section 12(g) of the Act:
Cadmus Communications Corporation Common Stock, $.50 par value, and
Preferred Stock Purchase Rights
(Title of Class)
------------
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes x No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. { }
As of July 31, 1998, 7,921,251 shares of Registrant's common stock
were outstanding, and the aggregate market value of the Registrant's common
stock held by non-affiliates was approximately $176,979,500 based on the last
sale price on July 31, 1998.
Documents Incorporated by Reference:
Portions of the Registrant's Annual Report to Shareholders for the
fiscal year ended June 30, 1998 are incorporated in Parts I and II of this
report. Portions of the Proxy Statement of Registrant for the Annual Meeting of
Shareholders to be held on November 12, 1998 are incorporated in Part III of
this report.
1
<PAGE>
INDEX
PART I
Page
Item 1. Business.......................................................3
Item 2. Properties.....................................................6
Item 3. Legal Proceedings..............................................6
Item 4. Submission of Matters to a Vote of Security Holders............6
PART II
Item 5. Market for the Registrant's Common Equity and
Related Stockholder Matters................................8
Item 6. Selected Financial Data........................................8
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations..............8
Item 7A. Quantitative and Qualitative Disclosures about Market Risk..8
Item 8. Financial Statements and Supplementary Data....................8
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure........................8
PART III
Item 10. Directors and Executive Officers of the Registrant.........9
Item 11. Executive Compensation.....................................9
Item 12. Security Ownership of Certain Beneficial Owners
and Management.............................................9
Item 13. Certain Relationships and Related Transactions.............9
PART IV
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K........................................9
<PAGE>
PART I
ITEM 1. BUSINESS
Introduction
Cadmus Communications Corporation, a Virginia corporation, ("Cadmus" or
the "Company"), provides customers with integrated, end-to-end information and
communications solutions. These end-to-end solutions involve a full range of
creative, production and distribution services. The Company is organized around
two business sectors: Professional Communications, serving customers who publish
information, and Marketing Communications, serving customers who convey
marketing messages. Headquartered in Richmond, Virginia, Cadmus is the 22nd
largest graphic communications company in North America.
Cadmus was formed in 1984 through the merger of The William Byrd Press,
Incorporated ("Byrd"), a leading regional publications printer in Virginia, and
Washburn Graphics, Inc. ("Washburn"), a graphic arts firm based in North
Carolina. Since the merger, Cadmus has grown through enhancement of existing
products, internal development of new products, and acquisitions. The Company's
principal executive offices are located at 6620 West Broad Street, Suite 240,
Richmond, Virginia 23230, and its telephone number is (804) 287-5680. The
Company's Internet address is http://www.cadmus.com. Unless the context
otherwise requires, references herein to Cadmus or the Company shall refer to
Cadmus Communications Corporation and its consolidated subsidiaries.
Cadmus began as a printing organization that, through strategic mergers
and acquisitions, Cadmus has augmented this core printing competency with full
creative expertise, distribution, and fulfillment capabilities. The most
significant acquisitions to date include the following: in 1986, American
Graphics Inc., a company located in Atlanta, Georgia, providing graphic design
services, promotional printing and production of point of purchase advertising
materials; in 1987, Three Score, Inc., an Atlanta-based company offering retail
and other direct mail catalog design and production services; in 1992,
Marblehead Communications, Inc., a Boston, Massachusetts, custom publisher of
newsletters and magazines; in 1993, the assets of the Waverly Press Division of
Waverly, Inc., a division located in Baltimore and Easton, Maryland, engaged in
the printing of scientific, technical, and medical journals; in 1995, certain
assets of The Software Factory, Inc., an Atlanta-based provider of software
packaging and media duplication services; in 1996, Lancaster Press, Inc. and its
subsidiaries, a Pennsylvania-based producer of scientific, technical and medical
journals, and O'Keefe Marketing, a Richmond-based advertising and marketing
service provider; and in 1998, Germersheim, Inc., an Atlanta-based national
point of purchase marketing service provider.
Cadmus is organized today to provide customers with a full range of
communication alternatives. It offers end-to-end services by combining its core
competency of production with the ability to create and distribute products.
Organizational Structure
The Company's current organizational structure was effected during fiscal
1997, when it announced a major restructuring plan designed to exit or reshape
those businesses that were not performing or were not core to its strategy, and
to create a more efficient and cost effective organizational structure. In
conjunction with the restructuring, the Company reorganized its organizational
and operational structure to form Cadmus Marketing Communications and Cadmus
Professional Communications. The Company's previous organizational structure
consisted of the Periodicals, Graphic Communications, Marketing, and Publishing
groups.
Cadmus Marketing Communications provides commercial printing, graphic
solutions, print and broadcast advertising, direct marketing, catalog and
collateral design, publication development, financial communications, point of
purchase, specialty packaging and promotional printing, software duplication and
distribution, and interactive services to customers who convey marketing
messages. Cadmus Professional Communications provides a full range of
composition, editorial, production, distribution, and related services for
publishers of scientific, technical, and medical journals, magazines, trade
association publications and commercial publications.
3
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Product Lines
Product offerings as of June 30, 1998 were organized around the sectors of
Marketing Communications and Professional Communications.
Cadmus Marketing Communications
Cadmus Marketing Communications includes end-to-end marketing services
under the following product lines: CadmusCom, Cadmus Financial Communications,
Cadmus Graphic Solutions, Cadmus Point of Purchase, Cadmus Specialty Packaging
and Promotional Printing, and Cadmus Technology Solutions. Marketing
Communications generated approximately 49% of the Company's net sales in fiscal
1998.
CadmusCom. CadmusCom is an integrated marketing organization that
provides creative development and integrated marketing strategies for its
clients. Its tactical capabilities include branding research and implementation,
marketing strategy, print and broadcast advertising, direct marketing, catalog
and collateral design, communications design, custom publishing and new media.
CadmusCom is comprised of five divisions that provide these services: Cadmus
Custom Publishing (formerly Marblehead Communications), Cadmus Direct Marketing,
Cadmus Identity Marketing, CadmusCom Atlanta (formerly Cadmus 3-Score, catalog
production and design services), and CadmusCom Richmond (formerly O'Keefe
Marketing, advertising and new media).
Cadmus Financial Communications. Cadmus Financial Communications
specializes in the creation, production and distribution of documents
(electronic and traditional) to regulatory agencies and the investing community.
In addition to the private and public business sectors, Cadmus Financial
Communications primary markets include commercial and investment banking
institutions, mutual fund companies, legal firms and insurance companies. Its
products include corporate annual reports, securities offerings and corporate
restructuring materials, mutual fund materials, SEC-related documentation,
mutual fund reports, bank marketing materials, and other financially related
collateral, electronic data and software programs. The product line also
includes fulfillment and distribution services.
Cadmus Graphic Solutions. Cadmus Graphic Solutions integrates printing
solutions with a wide variety of graphic communications services and
consultation. Its target markets include Fortune 1000 companies, catalog
publishers, associations, advertising agencies and retail organizations. Its
primary products and services include catalogs, annual reports, promotional
literature and digital products. Cadmus Graphic Solutions offers
state-of-the-art commercial pre-press and printing, data archiving and
management for repurposing content for the Internet and other electronic
applications, finishing and binding, and a full array of mailing services.
Cadmus Point of Purchase. Cadmus Point of Purchase offers creative designs
and promotional concepts, a full range of production capabilities for
merchandising materials of all sizes and shapes, and distribution and
fulfillment services that include maintaining a database of point of purchase
requirements for each client's store locations. Its primary markets include the
fast food, beverage, retail, hospitality and travel, and motorsports industries.
This product line handles in-house design, print production and assembly,
on-demand production services, kit-packing, fulfillment and database management.
Cadmus Specialty Packaging and Promotional Printing. Cadmus Specialty
Packaging and Promotional Printing produces packages that serve as
distinguishable advertising copy and collateral materials that communicate
marketing messages. Its services include structural design, production and
distribution of high-quality, full-color external and internal packaging,
dimensional mailers, corporate identity materials, product literature, computer
documentation and catalogs. Its primary markets include the apparel, technology,
pharmaceutical, transportation, travel and furniture industries.
Cadmus Technology Solutions. Cadmus Technology Solutions is a turnkey
operation for software solutions. It handles CD and floppy disk duplication,
label printing, fulfillment and distribution, inventory and logistics
management. This product line provides auxiliary services for clients in the
high-tech industry and those who want to incorporate technology into customer
offerings.
4
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Cadmus Professional Communications
Cadmus Professional Communications includes the Cadmus Journal Services
product line. Professional Communications generated approximately 51% of the
Company's net sales in fiscal 1998.
Cadmus Journal Services. Cadmus Journal Services ("CJS") is a producer of
scientific, technical and medical ("STM") journals. CJS forms partnerships with
publishers, and thoroughly understands the publishing process and how
information is used. CJS provides traditional composition, printing and
distribution services as well as a full complement of digital and ancillary
services. CJS offers customers Abstracts Online; CD-ROM services; CJSNet;
composition services; content management; Digital Direct; EdiTech Services;
Editorial Production Services; online publishing services; journal, magazine and
reprint services; mail lists and postal support; Virtual Journals and Reference
Books online; and World-Wide Destination Services.
Other Factors Affecting the Business of Cadmus
Seasonal Fluctuations
Seasonal fluctuations occur in the overall demand for printing. Printing
of both periodicals for the educational and scholarly market and promotional
materials tends to decline in the summer months. Consumer publications tend to
peak before Christmas and before Easter. Printing of interim financial
statements clusters around the end of the first month in each calendar quarter
and printing of annual reports tends to fall into the first and second calendar
quarters. All of these factors combine to give Cadmus a seasonal pattern with
the months October through June typically stronger than the months July through
September.
Raw Materials
The principal raw material used in Cadmus' business is paper. Significant
stock inventories are not maintained except at Cadmus Journal Services, where a
supply of roll paper stock is required to operate the web presses. The other
companies generally purchase paper on a direct order basis for specific jobs.
Cadmus purchases its paper requirements under agreements that guarantee tonnage
and provide short range price protection for three to six month intervals. The
price of paper charged to customers is subject to escalation so that, except in
rare instances, Cadmus does not have exposure to changes in the cost of paper.
The Company uses a variety of other raw materials including ink, film,
offset plates, chemicals and solvents, glue, wire, and subcontracted components.
In general, the Company has not experienced any significant difficulty in
obtaining raw materials.
Competition
Cadmus is subject to competition from a large number of companies, some of
which have greater resources and capacity. In recent years, there has been an
excess of capacity in the printing industry that has increased competition.
Rapid technological change has brought new competitors to the marketplace.
The markets served by Cadmus face competition based on a combination of
factors including quality, service levels, and price.
Employees
As of July 31, 1998, Cadmus employed approximately 3,000 persons,
approximately 9% of which are currently covered by collective bargaining
agreements. Cadmus believes its relationship with its employees is excellent.
Regulation
The printing business uses or generates substantial quantities of inks,
solvents, and other waste products that require disposal. Cadmus usually returns
salvageable waste ink to its suppliers and contracts for the removal of other
waste products.
Cadmus believes it is in substantial compliance with all applicable air
quality, waste disposal, and other environment-related rules and regulations, as
well as with other general employee health and safety laws and regulations.
5
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ITEM 2. PROPERTIES
The Company considers all of its properties, together with the related machinery
and equipment contained therein, to be well-maintained, in good operating
condition, and adequate for its present needs. The Company will expand as
necessary for the continued development of its operations. The following table
contains information regarding the Company's primary facilities as of June 30,
1998:
<TABLE>
<CAPTION>
Location Cadmus Product Lines Served Building
-------- ---------------------------- ----------
<S> <C>
Akron, Pennsylvania Cadmus Journal Services Owned; 46,000 sq. ft.
Atlanta, Georgia CadmusCom Leased; 60,000 sq. ft.
Atlanta, Georgia Cadmus Point of Purchase Owned; 198,000 sq. ft.
Atlanta, Georgia Cadmus Point of Purchase Leased;106,000 sq. ft.
Atlanta, Georgia Cadmus Technology Solutions Leased; 88,000 sq. ft.
Baltimore, Maryland Cadmus Journal Services Leased; 51,700 sq. ft.
Easton, Maryland Cadmus Journal Services Owned; 196,000 sq. ft.
Lancaster, Pennsylvania Cadmus Journal Services Owned; 176,000 sq. ft.
Richmond, Virginia Cadmus Graphic Solutions, Owned; 89,100 sq. ft.
Cadmus Financial
Communications
Richmond, Virginia Cadmus Journal Services Leased; 72,000 sq. ft.
Richmond, Virginia Cadmus Journal Services, Owned; 274,000 sq. ft.
Cadmus Graphic Solutions
</TABLE>
ITEM 3. LEGAL PROCEEDINGS
The Company is a party to various legal actions that are ordinary and
incidental to its business. While the outcome of legal actions cannot be
predicted with certainty, management believes the outcome of any of these
proceedings, or all of them combined, will not have a materially adverse effect
on its consolidated financial position or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
None.
6
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EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of Cadmus are elected by the Board of Directors
("Board") of the Company to serve one-year terms. The following table contains
information about the executive officers of Cadmus:
<TABLE>
<CAPTION>
Position and Length of Other Business Experience
Name (Age) Service During Past Five Years
- ---------- ---------------------- -------------------------
<S> <C>
C. Stephenson Gillispie, Chairman of the Board, President and Chief Operating
Jr. (56) President, and Chief Officer, Cadmus, 1990-1992.
Executive Officer, Cadmus
1992- present.
David G. Wilson, Jr. (57) Chairman, Professional Executive Vice President,
Communications Sector, Professional Communications,
Cadmus, effective July, Cadmus, 1997-1998; President and
1998. CEO of Cadmus Journal Services,
Cadmus, 1994-1998;
Senior Vice President
& General Manager of
the Company's Byrd Journal
division, Cadmus, 1993-1994.
Steven R. Isaac (50) Executive Vice President Group President, Cadmus
Marketing Communications Marketing Group, Cadmus,
Sector, Cadmus, 1996 - 1997; Executive
1997-present. Vice President
and Chief Operating Officer,
The Martin Agency, 1996;
Chairman and CEO, Martin
Direct, 1979-1996.
Joseph J. Ward (51) Executive Vice President President, Direct Response for
Professional Communications Europe & North America,
Sector, Cadmus, effective Bertelsmann Book Group,
July, 1998. Group President Bertelsmann AG, 1996-1998;
and CEO of Cadmus Journal President & CEO, JWard
Services, Cadmus, effective Consulting, 1995-1996;
July, 1998. President, Meredith Book Group,
Meredith Corporation, 1991-1995.
Bruce V. Thomas (41) Senior Vice President and Vice President and Chief
Chief Financial Officer, Financial Officer, Cadmus,
Cadmus 1997- present. 1996-1997; Vice President, Law
and Development, Cadmus,
1992-1996.
David E. Bosher (45) Vice President and Vice President, Treasurer, and
Treasurer, Cadmus Chief Financial Officer, Cadmus,
1993-present. 1990-1993.
Edward B. Fernstrom (49) Vice President, Information Vice President, Chief
Technology, Cadmus Information Officer, Dyncorp,
1995-present. 1990-1995.
John H. Phillips (54) Vice President, Procurement Vice President, Support and
and Operations Finance, Development, Cadmus, 1996-1997;
Cadmus 1997-present. Vice President and Regional
Manufacturing Officer, Cadmus,
1994-1996; Vice President -
Operations, Cadmus, 1992-1994.
</TABLE>
7
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
Cadmus common stock is traded in the over-the-counter market and has been
quoted in the National Association of Securities Dealers, Inc. Automated
Quotation System ("NASDAQ") under the symbol "CDMS" since July 2, 1984 and in
the NASDAQ National Market since April 16, 1985. Information with respect to
market prices is presented on page 27 of the Annual Report and is incorporated
herein by reference.
As of August 31, 1998, the approximate number of beneficial holders of
Cadmus common stock was 4,400, which includes stockholders recorded on security
position listings.
On August 12, 1998 Cadmus declared a regular quarterly cash dividend of
$.05 per share, payable on September 4, 1998, to shareholders of record as of
August 21, 1998. Additional information with respect to dividends declared is
presented on page 27 of the Annual Report and is incorporated herein by
reference.
Cadmus anticipates that it will continue its policy of paying regular
quarterly dividends. The amount of any future dividends will depend on general
business conditions encountered by Cadmus, as well as the financial condition,
earnings and capital requirements of Cadmus, and such other factors as the Board
of Directors may deem relevant. For additional information regarding
restrictions on payment of dividends, see the Notes to Consolidated Financial
Statements (Note 7) referenced in Item 8 of this report.
ITEM 6. SELECTED FINANCIAL DATA
The information presented under the caption "Selected Financial Data" on
page 21 of the Annual Report to Shareholders is incorporated herein by
reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The information presented under the caption "Management's Discussion and
Analysis" on pages 22 through 26 of the Annual Report to Shareholders is
incorporated herein by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
For quantitative and qualitative disclosures about market risk, see the
Notes to Consolidated Financial Statements (Note 7) referenced in Item 8 of this
report, and the information presented under the caption "Management's Discussion
and Analysis Liquidity and Capital Resources" on pages 24 and 25 of the Annual
Report to Shareholders, incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements of the registrant and subsidiaries
contained on pages 28 through 45 of the Annual Report to Shareholders is
incorporated herein by reference. The supplementary data regarding quarterly
results presented under the caption "Selected Quarterly Data" on page 27 of the
Annual Report to Shareholders is incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
8
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PART III
Except as otherwise indicated, information called for by the following
items under Part III is contained in the Proxy Statement for the Annual Meeting
of Cadmus Stockholders ("Proxy Statement") to be mailed to the Stockholders on
or about October 2, 1998.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information on the directors of the Registrant is contained on pages 5
through 9 and page 22 of the Proxy Statement and is incorporated herein by
reference.
Executive Officers
For more information regarding the executive officers of Cadmus, see
"Executive Officers of the Registrant" at the end of Part I of this report.
ITEM 11. EXECUTIVE COMPENSATION
Information on Executive Compensation is contained on pages 12 through 17
of the Proxy Statement and is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
Information on Security Ownership of Certain Beneficial Owners and
Management is contained on pages 2 through 5 of the Proxy Statement and is
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information on Certain Relationships and Related Transactions is contained
on pages 10 through 12 of the Proxy Statement and is incorporated herein by
reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES,
AND REPORTS ON FORM 8-K
(a) Financial Statements and Schedules
The financial statements incorporated by reference into item 8 of this
report and the financial statement schedules filed as part of this report are
listed in the Index to Financial Statements and Schedules on page 12 hereof.
(b) Reports on Form 8-K
On April 23, 1998, the Company filed a Form 8-K, which included the press
release regarding fiscal 1998 third quarter financial results, as well as a copy
of the prepared remarks made on a conference call to analysts on the same date.
(c) Exhibits
The Exhibits listed in the accompanying "Index of Exhibits" on pages 15
through 16 hereof are filed as a part of this report.
9
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Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, as of the 25th day of
September, 1998.
CADMUS COMMUNICATIONS CORPORATION
/s/ C. Stephenson Gillispie, Jr.
---------------------------------------------
C. Stephenson Gillispie, Jr.
Chairman of the Board, President, and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated, as of the 25th day of September
1998.
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
/s/ C. Stephenson Gillispie, Jr. Chairman of the Board, President, and
------------------------------- Chief Executive Officer
C. Stephenson Gillispie, Jr. (Principal Executive Officer)
/s/ Bruce V. Thomas Senior Vice President and Chief Financial
------------------------- Officer (Principal Financial and Accounting Officer)
Bruce V. Thomas
*/s/ Frank Daniels, III Director
-------------------------
Frank Daniels, III
*/s/ G. Waddy Garrett Director
-------------------------
G. Waddy Garrett
*/s/ Price H. Gwynn, III Director
-------------------------
Price H. Gwynn, III
*/s/ Jeanne M. Liedtka Director
-------------------------
Jeanne M. Liedtka
*/s/ John D. Munford, II Director
-------------------------
John D. Munford, II
*/s/ John C. Purnell, Jr. Director
-------------------------
John C. Purnell, Jr.
*/s/ Jerry I. Reitman Director
-------------------------
Jerry I. Reitman
*/s/ Russell M. Robinson, II Director
-------------------------
Russell M. Robinson, II
10
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*/s/ John W. Rosenblum Director
-------------------------
John W. Rosenblum
*/s/ Wallace Stettinius Director
-------------------------
Wallace Stettinius
*/s/ Bruce A. Walker Director
-------------------------
Bruce A. Walker
______________________________ Director
David G. Wilson, Jr.
*By /s/ C. Stephenson Gillispie, Jr.
-----------------------------------------
C. Stephenson Gillispie, Jr.
Attorney-in-fact
</TABLE>
11
<PAGE>
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
The Consolidated Balance Sheets of Cadmus Communications Corporation and
Subsidiaries as of June 30, 1998 and 1997, and the related Consolidated
Statements of Income and Cash Flows for each of the three years in the period
ended June 30, 1998, including the notes thereto, are included on pages 28
through 44 of the Registrant's Annual Report to Shareholders and are
incorporated herein by reference. With the exception of the information
incorporated by reference in numbered items 5, 6, 7 and 8, no other data
appearing in the Annual Report is deemed to be "filed" as part of this 10K. The
following additional financial data should be read in conjunction with these
consolidated financial statements.
Page
Report of Independent Accountants on Schedule II...... 13
Financial Statement Schedules: *
II - Valuation and Qualifying Accounts .............. 14
* All other schedules have been omitted since the required information is not
present in amounts sufficient to require submission of the schedules, or
because the information required is included in the consolidated financial
statements, including the notes thereto.
12
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Report of Independent Public Accountants on Schedule II
To the Shareholders and Board of Directors of
Cadmus Communications Corporation
We have audited in accordance with generally accepted auditing standards, the
consolidated financial statements included in Cadmus Communication Corporation's
annual report to shareholders incorporated by reference in this Form 10-K, and
have issued our report thereon dated July 28, 1998. Our audit was made for the
purpose of forming an opinion on those statements taken as a whole. The schedule
listed in the accompanying index is the responsibility of the Company's
management and is presented for purposes of complying with the Securities and
Exchange Commission's rules and is not part of the basic financial statements.
The schedule has been subjected to the auditing procedures applied in the audit
of the basic financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Richmond, Virginia
July 28, 1998
13
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SCHEDULE II
CADMUS COMMUNICATIONS CORPORATION
VALUATION AND QUALIFYING ACCOUNTS
(in thousands)
<TABLE>
<CAPTION> (---------Additions----------)
Reserves and Allowances Charged to Charged
Deducted from Asset Balance at Costs and to Other Balance
Accounts: Allowance Beginning Other Accounts- Deductions- at End of
for Doubtful Accounts of Period Expenses Describe Describe (A) Period
- ---------------------- --------- --------- --------- ------------- ----------
<S> <C>
Years Ended:
June 30, 1996 $1,153 $ 963 $1,005(B) $ 811 $2,310
June 30, 1997 2,310 1,046 497(C) 1,603 2,250
June 30, 1998 2,250 1,299 307(D) 1,281 2,575
</TABLE>
(A) Uncollectible accounts charged off, net of recoveries.
(B) Includes allowance for doubtful accounts purchase accounting adjustments for
fiscal 1996 acquisitions, which included Lancaster Press, Inc., and
Subsidiary.
(C) Includes allowance for doubtful accounts purchase accounting adjustments for
Lancaster Press, Inc., and Subsidiaries.
(D) Includes allowance for doubtful accounts purchase accounting adjustments
for Germersheim, Inc.
14
<PAGE>
INDEX OF EXHIBITS
3.1 Restated Articles of Incorporation of Cadmus Communications Corporation,
as amended -- incorporated herein by reference from Exhibit 3.1 of the
Form 10-K for the fiscal year ended June 30, 1993.
3.2 Bylaws of Cadmus Communications Corporation, as amended - incorporated
herein by reference from Exhibit 3.2 of the Form 10-Q for the quarterly
period ended December 31, 1997.
4.1 Cadmus agrees to furnish to the Commission upon request any instrument
with respect to long-term debt as to which the total amount of securities
authorized thereunder does not exceed 10% of Cadmus total consolidated
assets.
4.2 $160,000,000 Revolving Credit/Term Loan Facility Agreement dated as of
October 15, 1996, incorporated herein by reference from Exhibit 4 of the
Form 10-Q for the fiscal quarter ended September 30, 1997.
10.1 Cadmus Executive Incentive Plan dated November 11, 1997, filed herewith.
10.2 Cadmus Supplemental Executive Retirement Plan, as restated effective July
1, 1992 -- incorporated herein by reference from Exhibit 10.2 of Form SE
dated September 25, 1992.
10.3 Cadmus 1984 Stock Option Plan -- incorporated herein by reference from
Exhibit 10.3 of the Form 10-K for the fiscal year ended June 30, 1985
(Commission File No. 0-12954).
10.4 Cadmus 1992 Non-Employee Director Stock Compensation Plan -- incorporated
herein by reference from Exhibit 10.5 of the Form SE dated September 25,
1992.
10.5 Cadmus 1997 Non-Employee Director Stock Compensation Plan, filed
herewith.
10.6 Cadmus 1990 Long Term Stock Incentive Plan, as amended effective August
12, 1998, filed herewith.
10.7 Cadmus Deferred Compensation Plan, as amended through February 16, 1996,
filed herewith.
10.8 Cadmus Non-Qualified Thrift Plan, as amended through March 26, 1997,
filed herewith.
10.9 Employee Retention Agreement dated as of June 25, 1998, between Cadmus
Communications Corporation and C. Stephenson Gillispie, Jr., filed
herewith.
10.10 Employee Retention Agreement dated as of June 25, 1998, between Cadmus
Communications Corporation and David E. Bosher, filed herewith.
10.11 Employee Retention Agreement dated as of June 25, 1998, between Cadmus
Communications Corporation and Bruce V. Thomas, filed herewith.
10.12 Employee Retention Agreement dated as of June 25, 1998, between Cadmus
Communications Corporation and John H. Phillips, filed herewith.
10.13 Employee Retention Agreement dated as of June 25, 1998, between Cadmus
Communications Corporation and Edward B. Fernstrom, filed herewith.
10.14 Employee Retention Agreement dated as of June 25, 1998, between Cadmus
Communications Corporation and Steven R. Isaac, filed herewith.
15
<PAGE>
10.15 Employee Retention Agreement dated as of June 25, 1998, between Cadmus
Communications Corporation and David G. Wilson, Jr., filed herewith.
10.16 Employee Retention Agreement dated as of August 11, 1998, between Cadmus
Communications Corporation and Joseph J. Ward, filed herewith.
13. Portions of the Annual Report to Shareholders for the fiscal year ended
June 30, 1998 which are incorporated by reference in this report on Form
10K, filed herewith.
18. Letter re change in accounting principles, filed herewith.
21. Subsidiaries of the Registrant, filed herewith.
23. Consent of Arthur Andersen LLP, filed herewith.
24. Powers of Attorney, filed herewith.
27. Financial Data Schedule, filed herewith.
Note: Exhibits 10.1-10.16 are management contracts or compensatory plans
and arrangements
Copies of exhibits listed above may be obtained by writing to David E. Bosher,
Vice President and Treasurer, at P.O. Box 27367, Richmond, Virginia 23261-7367.
16
EXHIBIT 10.1
FY1998 EXECUTIVE INCENTIVE PLAN
for
CADMUS COMMUNICATIONS CORPORATION
Approved by:
Executive Compensation and Organization Committee (ECOC)
of the
Board of Directors
November 11, 1997
17
<PAGE>
FY 1998 Executive Incentive Plan Description
Purpose
The Executive Incentive Plan is designed to motivate and reward senior
executives for the achievement of fiscal year financial and non-financial
objectives that directly contribute to the success of Cadmus and its various
organizational units.
Eligibility
Participation in the Plan is limited to key executives at the Corporate, Sector,
Group and Division level who have accountability for and significant impact on
business strategy, business growth and profitability. Executives in salary band
21 and above and salary band 20 level executives with a direct reporting
relationship to an executive vice president are eligible for participation in
the Plan. Executives selected for participation are confirmed at the beginning
of each Plan year. A minimum of six months service in an eligible position is
required for participation in the Plan. Awards to individuals with less than one
year's participation will be prorated based on the tenure in the eligible
position.
Target Incentive Award
The Target Incentive Award is the amount that the participant receives if the
combined, weighted performance against Plan objectives equals an overall
achievement level of 100%. This amount is established for each participant based
on the percentage of base salary that is determined to be competitive for the
participant's position in relationship to a competitive level of performance for
the organization. Depending upon the scope and impact of the executive's
position, Target Incentive Awards range from 30% to 50% of base salary. The
actual award received by the executive could be substantially higher or lower
than the target amount.
Performance Measures and Weightings
In order to reinforce the importance of supporting Cadmus-wide objectives a
portion of the award potential for all executives is based on Cadmus EPS
performance. The measures and weightings applicable to Sector, Group and
Division executives are as follows: Sector executives' awards will be weighted
50% Sector ROC and 50% Cadmus EPS; Group and Division executives will be
weighted 75% Group/Division ROC (or ROS in the case of the marketing divisions)
and 25% Cadmus EPS. Corporate executives' awards will be based 100% on Cadmus
EPS performance.
The accomplishment of individual objectives is an important part of each
participant's overall performance for the year. A factor of up to plus or minus
10% will be applied to the executive's financial-based award to reflect the
extent to which individual objectives are accomplished. These objectives
typically number from five to seven and comprise specific, measurable
performance criteria. Individual objectives cover areas such as: systems and
process improvement initiatives; customer satisfaction; development of associate
capability and satisfaction; and support for Cadmus strategy.
18
<PAGE>
Incentive Award Curves
Incentive Award Curves reflect the relationship between the organization's
financial performance and the size of the incentive pool. Group and Division
curves are based on the percentage of ROC (or ROS) achieved in excess of hurdle
operating profit. Generally, organizations that deliver a higher return on
capital will have a larger share of the operating profit accrued for incentive
awards. The incentive pool at the 100% ROC (or ROS) achievement level is
sufficient to pay a Target Incentive Award to all participants. The curves also
provide an award range above and below the target level. The organization must
achieve the threshold ROC (or ROS) level before any participant in the
organization is eligible for an award. Cadmus must achieve the threshold EPS
level in order for this portion of the total award pool to be paid.
Organizations that achieve "exceptional" ROC (or ROS) results will generate an
incentive pool that will provide participants with awards of up to a maximum of
150% of their individual target award level. On the downside of the incentive
curve, performance at the "marginal" level, or threshold, will result in an
incentive pool equal to only 50% of the target award level. An individual
incentive award curve is established for each executive in the Plan.
First Half Awards
The FY 1998 Plan contains a special First Half award feature. First Half ROC (or
ROS) performance targets will be established for each organization, as well as,
a First Half EPS target for Cadmus. At the end of the first half, actual ROC (or
ROS) and EPS performance will be compared to the targets and an award payout
percentage will be calculated and applied to the organization's "Target"
incentive accrual for the first half. Fifty percent of the total actual accrual
for the half will be made available for distribution to Plan participants. At
year end, the full fiscal year performance against target will be measured and a
total annual award will be determined. The individual participant's year-end
incentive award will be the total incentive earned for the year less the First
Half payment, if any, that was made.
General Plan Provisions
Participation in the Plan terminates on the date the associate terminates
employment with Cadmus, whether voluntary or involuntary.
With the exception of disability, retirement or death, participants must be
actively employed on the date the awards are paid in order to receive an
incentive award. Cadmus, at its sole discretion, may make an award to a former
associate, or to the former associate's estate, in such amount as it deems
appropriate.
Should a participant transfer to another organizational unit during the Plan
year, the final award will be jointly determined and prorated for the time spent
in each organization.
Incentive award recommendations for all Plan participants are to be submitted to
the Corporate Vice President , Human Resources and Quality, by the end of
January, 1998 for first half payments and by the end of July, 1998 for year-end
awards. Award payments require approval by the CEO and the Executive
Compensation and Organization Committee (ECOC) of the Board. Documentation of
individual objectives and accomplishments will be required to be submitted along
with the award recommendations at year-end.
The CEO and ECOC reserve the right to adjust the overall incentive pool, and in
turn, individual incentive awards in an amount deemed necessary to meet
minimally acceptable EPS requirements. The CEO and ECOC also reserve the right
to make discretionary awards for performance that falls below the Plan threshold
or above the Plan maximum.
19
<PAGE>
Payments will be made to participants in cash as soon as practical after the
Executive Compensation and Organization Committee meeting in February and August
1998.
Nothing in this Plan Description or in any action taken thereunder shall affect
the Company's right to terminate at any time and for any reason the employment
of any associate who is a participant in the Plan.
Definitions
- ------------
Base Salary The base annual salary rate of a participant as
of July 1 of the Plan Year or, if later, the time he or
she is approved as a participant for a given year,
exclusive of bonuses, commissions or any special
payments
Capital Employed All capital employed in the business, which is total
assets less non-interest bearing liabilities
Earnings Per
Share (EPS) Net earnings, post incentive, divided by average common
shares outstanding
Hurdle Operating
Profit Operating profit required to earn a minimally acceptable
return on capital
Operating Profit Pre-incentive, pre-tax operating earnings
Plan Year The period commencing July 1, 1997 and ending June 30,
1998 for which performance is being measured
Return on Capital (ROC) Operating profit divided by capital employed
Return on Sales (ROS) Operating profit divided by sales
20
EXHIBIT 10.5
CADMUS COMMUNICATIONS CORPORATION
1997 NON-EMPLOYEE DIRECTOR STOCK COMPENSATION PLAN
ARTICLE I
DEFINITIONS
<TABLE>
<S> <C>
1.01. Agreement means a written agreement (including any amendment or
supplement thereto) between the Company and a Participant specifying
the terms and conditions of an Award granted to such Participant.
1.02. Award means an award of Options as provided for hereunder.
1.03. Board means the Board of Directors of the Company.
1.04. Change in Control means a "change in control" as defined in the Company's
1990 Long Term Incentive Stock Plan, as amended from time to time.
or any successor plan thereto.
1.05. Code means the Internal Revenue Code of 1986, as amended.
1.06. Common Stock means the common stock of the Company.
1.07. Company means Cadmus Communications Corporation.
1.08. Date of Grant means each November 15 beginning November 15, 1998, and
ending November 15, 2002.
1.09. Fair Market Value means the average closing sales price of the
Common Stock on the NASDAQ over the counter market for the twenty
trading days immediately preceding an Option's Date of Grant.
1.10. Option means a stock option granted pursuant to Article IV that
entitles the holder to purchase from the Company a stated number of
shares of Common Stock at the shares' Fair Market Value.
1.11. Participant means a member of the Board who is not an employee of
the Company on the applicable Date of Grant.
1.12. Plan means the Cadmus Communications Corporation 1997 Non-Employee
Director Stock Compensation Plan.
</TABLE>
21
<PAGE>
ARTICLE II
PURPOSE
The Plan is intended to promote a greater identity of interest between
Participants and the Company's shareholders by increasing the Participants'
proprietary interest in the Company through the receipt of Awards in the form of
Options in lieu of cash payments for a portion of each Participant's annual
director's fees.
ARTICLE III
ADMINISTRATION
The Plan shall be administered by the employee directors of the Board
("Employee Directors"), who shall have complete authority to interpret all
provisions of this Plan; to prescribe the form of Agreements; to adopt, amend,
and rescind rules and regulations pertaining to the administration of the Plan;
and to make all other determinations necessary or advisable for the
administration of this Plan. Any decision made, or action taken, by the Employee
Directors in connection with the administration of this Plan shall be final and
conclusive. All expenses of administering this Plan shall be borne by the
Company.
ARTICLE IV
GRANT OF OPTIONS
On each Date of Grant during the term of the Plan, each Participant
automatically will receive an Option for shares of Common Stock determined in
accordance with the following schedule:
Number of Shares
Date of Grant Subject to Option
------------ ------------------
November 15, 1998 1,000
November 15, 1999 1,000
November 15, 2000 1,000
November 15, 2001 1,000
November 15, 2002 1,000
All Options shall be evidenced by Agreements which shall be subject to the
applicable provisions of this Plan and to such other provisions as the Employee
Directors may adopt.
22
<PAGE>
ARTICLE V
STOCK SUBJECT TO OPTIONS
Upon the exercise of any Option, the Company may deliver to the
Participant (or the Participant's broker if the Participant so directs)
authorized but unissued Common Stock. The maximum aggregate number of shares of
Common Stock that may be issued pursuant to the exercise of Options under this
Plan is 60,000, subject to adjustment as provided in Article X. If an Option is
terminated, in whole or in part, for any reason other than its exercise, the
number of shares of Common Stock allocated to the Option or portion thereof may
be reallocated to other Options to be granted under this Plan.
ARTICLE VI
OPTION PRICE
The price per share for Common Stock purchased on the exercise of an
Option shall be the share's Fair Market Value.
ARTICLE VII
EXERCISE OF OPTIONS
7.01. Maximum Option Period. No Option shall be exercisable after the
expiration of ten years from its Date of Grant.
7.02. Nontransferability. Options granted under this Plan shall be
nontransferable except by will or by the laws of descent and distribution.
During the lifetime of the Participant to whom the Option is granted, the Option
may be exercised only by the Participant. No right or interest of a Participant
in any Option shall be liable for, or subject to, any lien, obligation, or
liability of such Participant.
ARTICLE VIII
METHOD OF EXERCISE OF OPTIONS
8.01. Exercisability of Options. Subject to the provisions of Articles VII
and XI, an Option becomes exercisable six months after its Date of Grant.
However, an Option granted to a Participant shall be immediately exercisable if
the Participant's membership on the Board terminates as a result of the
Participant's retirement in accordance with Company policy, death or permanent
and total disability (as such term is defined in Section 22(e)(3) of the Code)
or in the event of a Change in Control. An Option shall be forfeited if, as of
the termination of the Participant's membership on the Board, the Option is not
then exercisable and such termination occurs for any reason other than the
23
<PAGE>
Participant's retirement in accordance with Company policy, death or disability
(as defined above) or a Change in Control. Options that are exercisable or that
become exercisable upon the Participant's termination of membership on the Board
will remain exercisable until the tenth anniversary of the Option's Date of
Grant. An Option may be exercised with respect to any number of whole shares
less than the full number for which the Option could be exercised. A partial
exercise of an Option shall not affect the right to exercise the Option from
time to time in accordance with this Plan and the applicable Agreement with
respect to the shares remaining subject to the Option.
8.02. Payment. Unless otherwise provided by the Agreement, payment of the
Option price shall be made in cash or a cash equivalent acceptable to the Board.
In addition, all or part of the Option price may be made by surrendering shares
of Common Stock to the Company, including shares acquired upon the exercise of
the Option, or through a broker-assisted cashless exercise. If Common Stock is
used to pay all or part of the Option price, the shares surrendered to the
Company must have a fair market value (determined as of the day before the date
of exercise and based on the closing sales price recorded by the NASDAQ over the
counter market on such date) that is not less than such price or part thereof.
8.03. Shareholder Rights. No Participant shall have any rights as a
stockholder with respect to shares subject to his Option until the date of
exercise of such Option.
ARTICLE IX
INCREASES IN COMPENSATION AFTER JUNE 30, 1998
In the event the Company determines, for fiscal years beginning after June
30, 1998, to increase annual retainer fees or meeting fees for attendance at
Board meetings or meetings of Committees thereof, or otherwise to increase the
compensation payable to Participants, the Company shall have the right, but not
the obligation, to pay such increased compensation in the form of Awards under
this Plan, provided, however, that in such event any Options granted hereunder
shall be valued for such purposes at $3.00 per share of Common Stock for which
an Option is granted, and provided, further, that in no event may Awards be made
for a number of shares of Common Stock exceeding the maximum number of shares of
Common Stock authorized under this Plan.
ARTICLE X
ADJUSTMENT UPON CHANGE IN COMMON STOCK
The maximum number of shares for which Awards may be granted under this
Plan shall be proportionately adjusted, and the terms of outstanding Awards
shall be adjusted, as the Employee Directors shall determine to be equitably
required in the event that the Company (a) effects one or more stock dividends,
stock split-ups, subdivisions or
24
<PAGE>
consolidations of shares or (b) engages in a transaction to which Section 424 of
the Code applies. Any determination made under this Article X by the Board shall
be final and conclusive.
The issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, for cash or property, or for
labor or services, either upon direct sale or upon the exercise of right or
warrants to subscribe therefor, or upon conversion of shares of obligations of
the Company convertible into such shares or other securities, shall not affect,
and no adjustment by reason thereof shall be made with respect to, outstanding
Awards.
ARTICLE XI
COMPLIANCE WITH LAW AND APPROVAL OF REGULATORY BODIES
No Option shall be exercisable, no Common Stock shall be delivered, and no
payment shall be made under this Plan except in compliance with all applicable
federal and state laws and regulations (including, without limitation,
withholding tax requirements), and applicable requirements of any exchange or
other market having authority over the trading of the Company's shares.
ARTICLE XII
GENERAL PROVISIONS
12.01. Effect on Service. Neither the adoption of this Plan, its
operation, documents describing or referring to this Plan (or any part thereof)
shall confer on any Participant any right to continue service as a member of the
Board.
12.02. Unfunded Plan. The Plan, insofar as it provides for grants, shall
be unfunded and the Company shall not be required to segregate any assets that
may be represented at any time by grants under this Plan. Any liability of the
Company to any person with respect to any grant under this Plan shall be based
solely upon any contractual obligations that are created pursuant to this Plan.
No such obligation of the Company shall be deemed to be secured by any pledge
of, or other encumbrance on, any property of the Company.
12.03. Rules of Construction. Headings are given to the articles and
sections of the Plan solely as a convenience to facilitate reference. The
reference to any statute, regulation, or provision of law shall be construed to
refer to any amendment to or successor of such provision of law.
ARTICLE XIII
AMENDMENT
The Board may amend this Plan from time to time; provided that no
amendment may become effective until shareholder approval is obtained if the
amendment (i) materially increases the aggregate number of shares of Common
Stock that may be issued under the Plan, (ii) materially changes the class of
individuals eligible to become Participants or
25
<PAGE>
(iii) materially increases the benefits that may accrue to Participants under
the Plan, and provided further that the Board may not amend the Plan more than
once in any six month period unless such amendment is required to comply with
the Code or the Employee Retirement Income Security Act of 1974. No amendment
shall, without a Participant's consent, adversely affect any rights of such
Participant under any Option outstanding at the time such amendment is made.
ARTICLE XIV
TERMINATION
The Board may terminate this Plan at any time. This Plan will terminate
automatically, without any action of the Board, if, on any Date of Grant, there
are insufficient shares available for the grant of Awards in accordance with the
terms of the Plan. The termination of this Plan shall not affect any rights of a
Participant under any Option outstanding at the time of such termination.
ARTICLE XV
DURATION OF PLAN
No Award may be granted under this Plan after November 15, 2002. Options
granted on or before November 15, 2002 shall remain valid in accordance with
their terms.
ARTICLE XVI
EFFECTIVE DATE OF PLAN
No Award will be granted under this Plan before this Plan is approved by a
majority of the votes cast by the Company's shareholders, voting either in
person or by proxy, at a duly held shareholders' meeting.
26
EXHIBIT 10.6
CADMUS COMMUNICATIONS CORPORATION
1990 LONG TERM INCENTIVE STOCK PLAN
(As Amended through August 12, 1998)
ARTICLE I.
Establishment, Purpose and Duration
<TABLE>
<S> <C>
1.1 Establishment of the Plan. Cadmus Communications Corporation (hereinafter
referred to as the "Company"), a Virginia corporation, hereby establishes an
incentive compensation plan to be known as the "1990 Long Term Incentive Stock
Plan" (hereinafter referred to as the "Plan"), as set forth in this document.
Unless otherwise defined herein, all capitalized terms shall have the meanings
set forth in Section 2.1 herein. The Plan permits the grant of Incentive Stock
Options, Nonqualified Stock Options, Stock Appreciation Rights, Restricted
Stock, Performance Awards in the form of Performance Units and Performance
Shares and Other Stock Unit Awards.
The Plan was adopted by the Board of Directors on, and shall become
effective, as of August 1, 1990 (the "Effective Date"), subject to the
approval by vote of shareholders of the Company in accordance with
applicable laws. Awards may be granted prior to shareholder approval of
the Plan, but each such Award shall be subject to the approval of the Plan
by the shareholders.
1.2 Purpose of the Plan. The purpose of the Plan is to promote the success of the
Company and its Subsidiaries by providing incentives to Key Employees that will
promote the identification of their personal interest with the long-term
financial success of the Company and with growth in shareholder value. The Plan
is designed to provide flexibility to the Company in its ability to motivate,
attract, and retain the services of Key Employees upon whose judgment, interest,
and special effort the successful conduct of its operation is largely dependent.
1.3 Duration of the Plan. The Plan shall commence on the Effective Date, as
described in Section 1.1 herein, and shall remain in effect, subject to
the right of the Board of Directors to terminate the Plan at any time
pursuant to Article 14 herein, until July 31, 2000, at which time it shall
terminate except with respect to Awards made prior to, and outstanding on,
that date which shall remain valid in accordance with their terms.
ARTICLE II.
Definitions
2.1 Definitions. Except as otherwise defined in the Plan, the following terms
shall have the meanings set forth below:
(a) "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 under the Securities Exchange
Act of 1934, as amended (the "Exchange Act").
(b) "Agreement" means a written agreement implementing the grant of each
Award signed by an authorized officer of the Company and by the
Participant.
(c) "Award" means, individually or collectively, a grant under this Plan
of Incentive Stock Options, Nonqualified Stock Options, Stock
Appreciation Rights, Restricted Stock, Performance Units,
Performance Shares or Other
Stock Unit Awards.
(d) "Award Date" or "Grant Date" means the date on which an Award is
made by the Committee under this Plan.
27
<PAGE>
(e) "Beneficial Owner" shall have the meaning ascribed to such term in
Rule 13d-3 under the Exchange Act.
(f) "Board" or "Board of Directors" means the Board of Directors of the
Company.
(g) "Change in Control" shall be deemed to have occurred if the
conditions set forth in any one of the following paragraphs shall
have been satisfied:
(i) any Person (other than the Company, any Subsidiary, a trustee
or other fiduciary holding securities under an employee
benefit plan of the Company or its Subsidiaries), who or
which, together with all affiliates and Associates of such
Person is or becomes the Beneficial Owner, directly or
indirectly, of securities of the Company representing 20% or
more of the combined voting power of the Company's then
outstanding securities; or
(ii) if, at any time after the Effective Date, the composition of
the Board of Directors shall change such that a majority of
the Board shall no longer consist of Continuing Directors; or
(iii) if at any time, (w) the Company shall consolidate with, or
merge with, any other Person and the Company shall not be the
continuing or surviving corporation, (x) any Person shall
consolidate with, or merge with, the Company, and the Company
shall be the continuing or surviving corporation and in
connection therewith, all or part of the outstanding Stock
shall be changed into or exchanged for stock or other
securities of any other Person or cash or any other property,
(y) the Company shall be a party to a statutory share exchange
with any other Person after which the Company is Subsidiary of
any other Person, or (z) the Company shall sell or otherwise
transfer 50% or more of the assets or earning power of the
Company and its Subsidiaries (taken as a whole) to any Person
or Persons.
(h) "Code" means the Internal Revenue Code of 1986, as amended from time
to time.
(i) "Committee" means the committee of the Board appointed to administer
the Plan pursuant to Article 3 herein, all of the members of which
shall be "disinterested persons" as defined in Rule 16b-3 under the
Exchange Act or any similar or successor rule. Unless otherwise
determined by the Board, the members of the committee responsible
for executive compensation who are not employees of the Company or
its Subsidiaries shall constitute the Committee.
(j) "Company" means Cadmus Communications Corporation, or any successor
thereto as provided in Article 16 herein.
(k) "Continuing Director" means an individual who was a member of the
Board of Directors on the Effective Date or whose subsequent
nomination for election or election to the Board of Directors was
recommended or approved by the affirmative vote of two-thirds of the
Continuing Directors then in office.
(l) "Fair Market Value" of a Share means the mean between the high and
low sales price of the Stock on the relevant date if it is a trading
date, or if not, on the most recent date on which the Stock was
traded prior to such date, as reported by the NASDAQ National Market
System, or if, in the opinion of the Committee, this method is
inapplicable or inappropriate for any reason, the fair market value
as determined pursuant to a reasonable method adopted by the
Committee in good faith for such purpose.
27
<PAGE>
(m) "Incentive Stock Option" or "ISO" means an option to purchase Stock,
granted under Article 6 herein, which is designated as an incentive
stock option and is intended to meet the requirements of Section
422A of the Code.
(n) "Key Employee" means an officer or other key employee of the Company
or its Subsidiaries who, in the opinion of the Committee, can
contribute significantly to the growth and profitability of, or
perform services of major importance to, the Company and its
Subsidiaries. "Key Employees" does not include directors of the
Company who are not also employees of the Company or its
Subsidiaries.
(o) "Nonqualified Stock Option" or "NQSO" means an option to purchase
Stock, granted under Article 6 herein, which is not intended to be
an incentive Stock Option.
(p) "Option" means an Incentive Stock Option or a Nonqualified Stock
Option.
(q) "Other Stock Unit Award" means awards of Stock or other awards that
are valued in whole or in part by reference to, or are otherwise
based on, Shares or other securities of the Company.
(r) "Participant" means a Key Employee who has been granted an Award
under the Plan.
(s) "Performance Award" means a performance-based Award, which may be in
the form of either Performance Shares or Performance Units.
(t) "Performance Share" means an Award, designated as a performance
share, granted to a Participant pursuant to Article 9 herein.
(u) "Performance Unit" means an Award, designated as a performance unit,
granted to a Participant pursuant to Article 9 herein.
(v) "Period of Restriction" means the period during which the transfer
of Shares of Restricted Stock is restricted, pursuant to Article 8
herein.
(w) "Person" shall have the meaning ascribed to such term in Section
3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d)
thereof, including a "group" as defined in Section 13(d).
(x) "Plan" means the Cadmus Communications Corporation 1990 Long Term
Incentive Stock Plan, as herein described and as hereafter from time
to time amended.
(y) "Related Option" means an Option with respect to which a Stock
Appreciation Right has been granted.
(z) "Restricted Stock" means an Award of Stock granted to a Participant
pursuant to Article 8 herein.
(aa) "Subsidiary" shall mean a corporation at least 50% of the total
combined voting power of all classes of stock of which is owned by
the Company, either directly or through one or more of its
Subsidiaries.
(bb) "Stock" or "Shares" means the common stock of the Company.
(cc) "Stock Appreciation Right" or "SAR" means an Award, designated as a
stock appreciation right, granted to a Participant pursuant to
Article 7 herein.
</TABLE>
29
<PAGE>
ARTICLE III.
Administration
<TABLE>
<S> <C>
3.1 The Committee. The Plan shall be administered by the Committee which shall have
all powers necessary or desirable for such administration. The express grant in
this Plan of any specific power to the Committee shall not be construed as
limiting any power or authority of the Committee. In addition to any other
powers and, subject to the provisions of the Plan, the Committee shall have the
following specific powers: (i) to determine the terms and conditions upon which
the Awards may be made and exercised; (ii) to determine all terms and provisions
of each Agreement, which need not be identical; (iii) to construe and interpret
the Agreements and the Plan; (iv) to establish, amend or waive rules or
regulations for the Plan's administration; (v) to accelerate the exercisability
of any Award, the end of a Performance Period or termination of any Period of
Restriction; and (vi) to make all other determinations and take all other
actions necessary or advisable for the administration of the Plan.
3.2 Selection of Participants. The Committee shall have the authority to grant
Awards under the Plan, from time to time, to such Key Employees as may be
selected by it. Each Award shall be evidenced by an Agreement.
3.3 Decisions Binding. All determinations and decisions made by the Board or
the Committee pursuant to the provisions of the Plan shall be final,
conclusive and binding.
3.4 Rule 16b-3 Requirements. Notwithstanding any other provision of the Plan,
the Board or the Committee may impose such conditions on any Award, and
amend the Plan in any such respects, as may be required to satisfy the
requirements of Rule 16b-3, as amended (or any successor or similar rule),
under the Exchange Act.
3.5 Indemnification of Committee. In addition to such other rights of
indemnification as they may have as directors or as members of the Committee,
the members of the Committee shall be indemnified by the Company against
reasonable expenses, including attorneys' fees, actually and reasonably incurred
in connection with the defense of any action, suit or proceeding, or in
connection with any appeal therein, to which they or any of them may be a party
by reason of any action taken or failure to act under or in connection with the
Plan or any Award granted or made hereunder, and against all amounts reasonably
paid by them in settlement thereof or paid by them in satisfaction of a judgment
in any such action, suit or proceeding, if such members acted in good faith and
in a manner which they believed to be in, and not opposed to, the best interests
of the Company and its Subsidiaries.
ARTICLE IV.
Stock Subject to the Plan
4.1 Number of Shares. Subject to adjustment as provided in Section 4.4 herein, the
maximum aggregate number of Shares that may be issued pursuant to Awards made
under the Plan shall not exceed 1,450,000. No more than one-third of the
aggregate number of such Shares shall be issued in connection with Restricted
Stock Awards, Performance Awards or Other Stock Unit Awards. Except as provided
in Sections 4.2 and 4.3 herein, the issuance of Shares in connection with the
exercise of, or as other payment for Awards, under the Plan shall reduce the
number of Shares available for future Awards under the Plan.
4.2 Lapsed Awards or Forfeited Shares. If any Award granted under this Plan
terminates, expires, or lapses for any reason other than by virtue of
exercise of the Award, or if Shares issued pursuant to Awards are
forfeited, any Stock subject to such Award again shall be available for
the grant of an Award under the Plan, subject to Section 7.2.
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4.3 Delivery of Shares as Payment. In the event a Participant pays the Option
Price for Shares pursuant to the exercise of an Option with previously
acquired Shares, the number of Shares available for future Awards under
the Plan shall be reduced only by the net number of new Shares issued upon
the exercise of the Option.
4.4 Capital Adjustments. The number and class of Shares subject to each
outstanding Award, the Option Price and the aggregate number and class of
Shares for which Awards thereafter may be made shall be subject to such
adjustment, if any, as the Committee in its sole discretion deems
appropriate to reflect such events as stock dividends, stock splits,
recapitalizations, mergers, consolidations or reorganizations of or by the
Company.
ARTICLE V.
Eligibility
Persons eligible to participate in the Plan include all employees of the
Company and its Subsidiaries who, in the opinion of the Committee, are Key
Employees. Key Employees may not include directors of the Company who are
not employees of the Company or its Subsidiaries.
ARTICLE VI.
Stock Options
6.1 Grant of Options. Subject to the terms and provisions of the Plan, Options may
be granted to Key Employees at any time and from time to time as shall be
determined by the Committee. The Committee shall have complete discretion in
determining the number of Shares subject to Options granted to each
Participant, provided, however, that (a) no Participant may be granted Options
in any calendar year for more than 75,000 shares of Common Stock and (b) the
aggregate Fair Market Value (determined at the time the Award is made) of Shares
with respect to which any Participant may first exercise ISOs granted under the
Plan during any calendar year may not exceed $100,000 or such amount as shall be
specified in Section 422A of the Code and rules and regulation thereunder.
6.2 Option Agreement. Each Option grant shall be evidenced by an Agreement that
shall specify the type of Option granted, the Option Price (as hereinafter
defined), the duration of the Option, the number of Shares to which the Option
pertains, any conditions imposed upon the exercisability of Options in the event
of retirement, death, disability or other termination of employment, and such
other provisions as the Committee shall determine. The Agreement shall specify
whether the Option is intended to be an Incentive Stock Option within the
meaning of Section 422A of the Code, or a Nonqualified Stock Option not intended
to be within the provisions of Section 422A of the Code.
6.3 Option Price. The exercise price per share of Stock covered by an Option
("Option Price") shall be determined by the Committee subject to the following
limitations. In the case of an ISO, the Option Price shall not be less than
100% of the Fair Market Value of such Stock on the Grant Date. An ISO granted
to an Employee who, at the time of grant, owns (within the meaning of Section
425(d) of the Code) Stock possessing more than 10% of the total combined voting
power of all classes of Stock of the Company, shall have an Option Price which
is at least equal to 110% of the Fair Market Value of the Stock. In the case of
a NQSO, the Option Price shall not be less than 85% of the Fair Market Value of
the Stock on the Grant Date.
6.4 Duration of Options. Each Option shall expire at such time as the
Committee shall determine at the time of grant provided, however, that no
ISO shall be exercisable later than the tenth (10th) anniversary date of
its Award Date.
6.5 Exercisability. Options granted under the Plan shall be exercisable at
such times and be subject to such restrictions and conditions as the
Committee shall determine, which need not be the same for all
Participants.
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6.6 Method of Exercise. Options shall be exercised by the delivery of a written
notice to the Company in the form prescribed by the Committee setting forth the
number of Shares with respect to which the Option is to be exercised,
accompanied by full payment for the Shares. The Option Price shall be payable
to the Company in full either in cash, by delivery of Shares of Stock valued at
Fair Market Value at the time of exercise, delivery of a promissory note or by a
combination of the foregoing. As soon as practicable, after receipt of written
notice and payment, the Company shall deliver to the Participant, stock
certificates in an appropriate amount based upon the number of Options
exercised, issued in the Participant's name. No Participant who is awarded
Options shall have rights as a shareholder until the date of exercise of the
Options.
6.7 Restrictions on Stock Transferability. The Committee shall impose such
restrictions on any Shares acquired pursuant to the exercise of an Option under
the Plan as it may deem advisable, including, without by limitation,
restrictions under applicable Federal securities law, under the requirements of
the National Association of Securities Dealers, Inc. or any stock exchange upon
which such Shares are then listed and under any blue sky or state securities
laws applicable to such Shares.
6.8 Nontransferability of Options. No Option granted under the Plan may be
sold, transferred, pledged, assigned, or otherwise alienated or
hypothecated, otherwise than by will or by the laws of descent and
distribution. Further, all Options granted to a Participant under the Plan
shall be exercisable during his lifetime only by such Participant or his
guardian or legal representative.
ARTICLE VII.
Stock Appreciation Rights
7.1 Grant of Stock Appreciation Rights. Subject to the terms and conditions of
the Plan. Stock Appreciation Rights may be granted to Participants, at the
discretion of the Committee, in any of the following forms:
(a) In connection with the grant, and exercisable in lieu of Options
("Tandem SARs");
(b) In connection with and exercisable in addition to the grant of
Options ("Additive SARs");
(c) Independent of grant of the Options ("Freestanding SARs"); or
(d) In any combination of the foregoing.
7.2 Exercise of Tandem SARs. Tandem SARs may be exercised with respect to all or
part of the Shares subject to the Related Option. The exercise of Tandem SARs
shall cause a reduction in the number of Shares subject to the Related Option
equal to the number of Shares with respect to which the Tandem SAR is
exercised. Conversely, the exercise, in whole or part, of a Related Option,
shall cause a reduction in the number of Shares subject to the Tandem Option
equal to the number of Shares with respect to which the Related Option is
exercised. Shares with respect to which the Tandem SAR shall have been
exercised may not be subject again to an Award under the Plan.
Notwithstanding any other provision of the Plan to the contrary, a Tandem
SAR shall expire no later than the expiration of the Related Option, shall
be transferable only when and under the same conditions as the Related
Option and shall be exercisable only when the Related Option is eligible
to be exercised. In addition, if the Related Option is an ISO, a Tandem
SAR shall be exercised for no more than 100% of the difference between the
Option Price of the Related Option and the Fair Market Value of Shares
subject to the Related Option at the time the Tandem SAR is exercised.
32
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7.3 Exercise of Additive SARs. Additive SARs shall be deemed to be exercised
upon, and in addition to, the exercise of the Related Options. The deemed
exercise of Additive SARs shall not reduce the number of Shares with
respect to which the Related Options remains unexercised.
7.4 Exercise of Freestanding SARs. Freestanding SARs may be exercised upon
whatever terms and conditions the Committee, in its sole discretion,
imposes upon such SARs.
7.5 Other Conditions Applicable to SARs. No SAR granted under the Plan shall be
exercisable until the expiration of at least six months after the Grant Date,
except that such limitation shall not apply in the case of the death or
disability of the Participant. In no event shall the term of any SAR granted
under the Plan exceed ten years from the Grant Date. A SAR may be exercised
only when the Fair Market Value of a Share exceeds either (a) the Fair Market
Value per Share on the Grant Date in the case of a Freestanding SAR or (b) the
Option Price of the Related Option in the case of either a Tandem or Additive
SAR. A SAR shall be exercised by delivery to the Committee of a notice of
exercise in the form prescribed by the Committee.
7.6 Payment Upon Exercise of SARs. Subject to the provisions of the Agreement, upon
the exercise of a SAR, the Participant is entitled to receive, without any
payment to the Company (other than required tax withholding amounts), an amount
equal to the product of multiplying (i) the number of Shares with respect to
which the SAR is exercised by (ii) an amount equal to the excess of (A) the Fair
Market Value per Share on the date of exercise of the SAR over (B) either (x)
the Fair Market Value per Share on the Award Date in the case of a Freestanding
SAR or (y) the Option Price of the Related Option in the case of either a Tandem
or additive SAR.
Payment to the Participant shall be made in Shares, valued at the Fair
Market Value of the date of exercise, in cash if the Participant has so
elected in his written notice of exercise and Committee has consented
thereto, or a combination thereof. To the extent required to satisfy the
conditions of Rule 16b-3(e) under the Exchange Act, or any successor or
similar rule, or as otherwise provided in the Agreement, the Committee
shall have the sole discretion to consent to or disapprove the election of
any Participant to receive cash in full or partial settlement of a SAR. In
cases where an election of settlement in cash must be consented to by the
Committee, the Committee may consent to, or disapprove, such election at
any time after such election, or within such period for taking action as
is specified in the election, and failure to give consent shall be
disapproval. Consent may be given in whole or as to a portion of the SAR
surrendered by the Participant. If the election to receive cash is
disapproved in whole or in part, the SAR shall be deemed to have been
exercised for Shares, or, if so specified in the notice of exercise and
election, not to have been exercised to the extent the election to receive
cash is disapproved.
7.7 Nontransferability of SARs. No SAR granted under the Plan may be sold,
transferred, pledged, assigned, or otherwise alienated or hypothecated,
otherwise than by will or by the laws of descent and distribution.
Further, all SARs granted to a Participant under the Plan shall be
exercisable during his lifetime only by such Participant or his guardian
or legal representative.
ARTICLE VIII.
Restricted Stock
8.1 Grant of Restricted Stock. Subject to the terms and provisions of the
Plan, the Committee, at any time and from time to time, may grant shares
of Restricted Stock under the Plan to such Participants and in such
amounts as it shall determine. Participants receiving Restricted Stock
Awards are not required to the pay the Company therefor (except for
applicable tax withholding) other than the rendering of services.
33
<PAGE>
8.2 Restricted Stock Agreement. Each Restricted Stock grant shall be evidenced
by an Agreement that shall specify the Period of Restriction, the number
of Restricted Stock Shares granted, and such other provisions as the
Committee shall determine.
8.3 Transferability. Except as provided in this Article 8 and subject to the
limitation in the next sentence, the Shares of Restricted Stock granted
hereunder may not be sold, transferred, pledged, assigned, or otherwise
alienated or hypothecated until the termination of the applicable Period of
Restriction or upon earlier satisfaction of other conditions as specified by
the Committee in its sole discretion and set forth in the Agreement. No shares
of Restricted Stock shall be sold until the expiration of at least six months
after the Award Date, except that such limitation shall not apply in the case of
death or disability of the Participant. All rights with respect to the
Restricted Stock granted to a Participant under the Plan shall be exercisable
during his lifetime only by such Participant or his guardian or legal
representative.
8.4 Other Restrictions. The Committee shall impose such other restrictions on
any Shares of Restricted Stock granted pursuant to the Plan as it may deem
advisable including, without limitation, restrictions under applicable
Federal or state securities laws, and may legend the certificates
representing Restricted Stock to give appropriate notice of such
restrictions.
8.5 Certificate Legend. In addition to any legends placed on certificates
pursuant to Section 8.4 herein, each certificate representing shares of
Restricted Stock granted pursuant to the Plan shall bear the following
legend:
The sale or other transfer of the Shares of Stock represented by this
certificate, whether voluntary, involuntary, or by operation of law, is
subject to certain restrictions on transfer set forth in the 1990 Long
Term Incentive Stock Plan of Cadmus Communications Corporation, in the
rules and administrative procedures adopted pursuant to such Plan, and in
an Agreement dated ___________________. A copy of the Plan, such rules and
procedures, and such Restricted Stock Agreement may be obtained from the
Secretary of Cadmus Communications Corporation.
8.6 Removal of Restrictions. Except as otherwise provided in this Article,
Shares of Restricted Stock covered by each Restricted Stock Award made
under the Plan shall become freely transferable by the Participant after
the last day of the Period of Restriction. Once the Shares are released
from the restrictions, the Participant shall be entitled to have the
legend required by Section 8.5 herein removed from his Stock certificate.
8.7 Voting Rights. During the Period of Restriction, Participants holding
Shares of Restricted Stock granted hereunder may exercise full voting
rights with respect to those Shares.
8.8 Dividends and Other Distributions. During the Period of Restriction,
Participants holding shares of Restricted Stock granted hereunder shall be
entitled to receive all dividends and other distributions paid with respect to
those shares while they are so held. If any such dividends or distributions are
paid in Shares, the Shares shall be subject to the same restrictions on
transferability as the Shares of Restricted Stock with respect to which they
were distributed.
8.9 Termination of Employment Due to Retirement. Unless otherwise provided in the
Agreement, in the event that a Participant terminates his employment with the
Company or one of its Subsidiaries because of normal retirement (as defined in
the rules of the Company in effect at the time), any remaining Period of
Restriction applicable to the Restricted Stock Shares pursuant to Section 8.3
herein shall automatically terminate and, except as otherwise provided in
Section 8.4 herein the Shares of Restricted Stock shall thereby be free of
restrictions and freely transferable. Unless otherwise provided in the
Agreement, in the event that a Participant terminates his employment with the
Company because of early retirement (as defined in the rules of the Company in
effect at the time), the Committee, in its sole discretion, may waive the
restrictions remaining on any or all Shares of Restricted Stock pursuant to
Section 8.3 herein and add such new restrictions to those Shares of Restricted
Stock as it deems appropriate.
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<PAGE>
8.10 Termination of Employment Due to Death or Disability. In the event a
Participant's employment is terminated because of death or disability
during the Period of Restriction, any remaining Period of Restriction
applicable to the Restricted Stock pursuant to Section 8.3 herein shall
automatically terminate and, except as otherwise provided in Section 8.4
herein the shares of Restricted Stock shall thereby be free of
restrictions and fully transferable.
8.11 Termination of Employment for Other Reasons. Unless otherwise provided in
the Agreement, in the event that a Participant terminates his employment
with the Company for any reason other than for death, disability, or
retirement, as set forth in Sections 8.9 and 8.10 herein, during the
Period of Restriction, then any shares of Restricted Stock still subject
to restrictions as of the date of such termination shall automatically be
forfeited and returned to the Company.
ARTICLE IX.
Performance Awards
9.1 Grant of Performance Awards. Subject to the terms and provisions of the Plan,
Performance Awards in the form of either Performance Units or Performance Shares
may be granted to Participants at any time and from time to time as shall be
determined by the Committee. The Committee shall have complete discretion in
determining the number of Performance Units or Performance Shares granted to
each Participant. Participants receiving Performance Awards are not required to
pay the Company therefor (except for applicable tax withholding) other than the
rendering of services.
9.2 Value of Performance Awards. The Committee shall set performance goals in its
discretion for each Participant who is granted a Performance Award. The extent
to which such performance goals are met will determine the value of the
Performance Unit or Performance Share to the Participant. Such performance
goals may be Particular to a Participant, may relate to the performance of the
Subsidiary which employs him, or may be based on the performance of the Company
generally. The performance goals may be based on earnings or earnings growth,
return on assets, equity, capital employed or investment, regulatory compliance,
satisfactory internal or external audits, improvement of financial ratings,
achievement of balance sheet or income statement objectives, or any other
objective goals established by the Committee. The performance goals may be
absolute in their terms or measured against or in relationship to other
companies comparably, similarly or otherwise situated. The Committee shall
determine the time period during which the performance goals must be met
("Performance Period"), provided, however, that the Performance Period may not
be less than six months from the Award Date. The terms and conditions of each
Performance Award will be set forth in an Agreement.
9.3 Settlement of Performance Awards. After a Performance Period has ended,
the holder of a Performance Unit or Performance Share shall be entitled to
receive the value thereof based on the degree to which the performance
goals established by the Committee and set forth in the Agreement have
been satisfied.
9.4 Form of Payment. Payment of the amount to which a Participant shall be
entitled upon the settlement of Performance Award shall be made in cash,
Stock, or a combination thereof as determined by the Committee. Payment
may be made in a lump sum or installments as prescribed by the Committee.
9.5 Nontransferability. No Performance Units or Performance Shares granted under
the Plan may be sold, transferred, pledged, assigned, or otherwise alienated or
hypothecated, otherwise than by will or by the laws of descent and
distribution. All rights with respect to Performance Units and Performance
Shares granted to a Participant under the Plan shall not be exercisable until
the expiration of six months after the Award Date and thereafter during his
lifetime only by such Participant or his guardian or personal representative.
35
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ARTICLE X.
Other Stock Unit Awards
10.1 Grant. The Committee is authorized to grant to Participants, either alone or in
addition to other Awards made under the Plan, Other Stock Unit Awards to be
issued at such times, subject to or based upon achievement of such performance
or other goals and on such other terms and conditions as the Committee shall
deem appropriate and specify in the Agreement relating thereto, which need not
be the same with respect to each Participant. Stock or other securities granted
pursuant to Other Stock Unit Awards may be issued for no cash consideration or
for such minimum consideration as may be required by applicable law. Stock or
other securities purchased pursuant to Other Stock Unit Awards may be purchased
for such purchase Price as the Committee shall determine, which Price shall be
not less than 50% of the Fair Market Value of the Stock or other securities on
the Award Date.
10.2 Sale and Transferability. Stock or other securities issued pursuant to Other
Stock Unit Awards may not be sold by a Participant until the expiration of at
least six months from the Award Date, except that such limitation shall not
apply in the case of death or disability of a Participant. To the extent Other
Stock Unit Awards are deemed to be derivative securities within the meaning of
Rule 16b-3 under the Exchange Act, a Participant's rights with respect to such
Awards shall not vest or be exercisable until the expiration of at least six
months from the Award Date. To the extent an Other Stock Unit Award granted
under the Plan is deemed to be a derivative security within the meaning of Rule
16b-3 of the Exchange Act, it may not be sold, transferred, pledged, assigned,
or otherwise alienated or hypothecated, otherwise than by will or by the laws of
descent and distribution. All rights with respect to such Other Stock Unit
Awards granted to a Participant under the Plan shall be exercisable during his
lifetime only by such Participant or his guardian or personal representative.
ARTICLE XI.
Loans to Participants
The Committee is authorized to make loans to Participants, upon such terms
and conditions as deemed appropriate by the Committee, for the purpose of
enabling Participants to pay the Option Price for Shares or other purchase
price of Awards made under the Plan. Such loans may include amounts
necessary to pay Participant's tax liability in connection with an Award.
ARTICLE XII.
Change in Control
In the event of a Change in Control of the Company, the Committee, as
constituted before such Change in Control, in its sole discretion may, as
to any outstanding Award, either at the time the Award is made or any time
thereafter, take any one or more of the following actions: (i) provide for
the acceleration of any time periods relating to the exercise or
realization of any such Award so that such Award may be exercised or
realized in full on or before a date initially fixed by the Committee;
(ii) provide for the purchase or settlement of any such Award by the
Company, upon a Participant's request, for an amount of cash equal to the
amount which could have been obtained upon the exercise of such Award or
realization of such Participant's rights had such Award been currently
exercisable or payable; (iii) make such adjustment to any such Award then
outstanding as the Committee deems appropriate to reflect such Change in
Control; or (iv) cause any such Award then outstanding to be assumed, or
new rights substituted therefor, by the acquiring or surviving corporation
in such Change in Control.
ARTICLE XIII.
Modification, Extension and Renewal of Awards
Subject to the terms and conditions and within the limitations of the
Plan, the Committee may modify, extend or renew outstanding Awards, or, if
authorized by the Board, accept the surrender of outstanding Awards (to
the extent not yet exercised) granted under the Plan and authorize the
granting of new Awards pursuant to the Plan in substitution therefor, and
the substituted Awards may specify a longer term than the surrendered
Awards or may contain any other provisions that are authorized by the
Plan, provided, however, that the substituted Awards may not specify a
lower exercise price than the surrendered Awards. The Committee may also
modify, the terms of an outstanding Agreement. Notwithstanding the
foregoing, however, no modification of an Award, shall, without the
consent of the Participant, adversely affect the rights or obligations of
the Participant.
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ARTICLE XIV.
Amendment, Modification and Termination of the Plan
14.1 Amendment, Modification and Termination. At any time and from time to time, the
Board may terminate, amend, or modify the Plan. Such amendment or modification
may be without shareholder approval except to the extent that such approval is
required by the Code, pursuant to the rules under Section 16 of the Exchange
Act, by any national securities exchange or system on which the Stock is then
listed or reported, by any regulatory body having jurisdiction with respect
thereto or under any other applicable laws, rules or regulations.
14.2 Awards Previously Granted. No termination, amendment or modification of
the Plan other than pursuant to Section 4.4 herein shall in any manner
adversely affect any Award theretofore granted under the Plan, without the
written consent of the Participant.
37
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ARTICLE XV.
Withholding
15.1 Tax Withholding. The Company shall have the power and the right to deduct
or withhold, or require a Participant to remit to the Company, an amount
sufficient to satisfy Federal, State and local taxes (including the
Participant's FICA obligation) required by law to be withheld with respect
to any grant, exercise, or payment made under or as a result of this Plan.
15.2 Stock Withholding. With respect to withholding required upon the exercise of
Nonqualified Stock Options, or upon the lapse of restrictions on Restricted
Stock, or upon the occurrence of any other similar taxable event, participants
may elect, subject to the approval of the Committee, to satisfy the withholding
requirement, in whole or in part, by having the Company withhold Shares of
Stock having a Fair Market Value equal to the amount required to be withheld.
The value of the Shares to be withheld shall be based on Fair Market Value of
the Shares on the date that the amount of tax to be withheld is to be
determined. All elections shall be irrevocable and be made in writing, signed
by the Participant on forms approved by the Committee in advance of the day that
the transaction becomes taxable.
ARTICLE XVI.
Successors
All obligations of the Company under the Plan, with respect to Awards
granted hereunder, shall be binding on any successor to the Company,
whether the existence of such successor is the result of a direct or
indirect purchase, merger, consolidation or otherwise, of all or
substantially all of the business and or assets of the Company.
ARTICLE XVII.
General
17.1 Requirements of Law. The granting of Awards and the issuance of Shares of
Stock under this Plan shall be subject to all applicable laws, rules, and
regulations, and to such approvals by any governmental agencies or SROs as
may be required.
17.2 Effect of Plan. The establishment of the Plan shall not confer upon any Key
Employee any legal or equitable right against the Company, a Subsidiary or the
Committee, except as expressly provided in the Plan. The Plan does not
constitute an inducement or consideration for the employment of any Key
Employee, nor is it a contract between the Company or any of its Subsidiaries
and any Key Employee. Participation in the Plan shall not give any Key Employee
any right to be retained in the service of the Company or any of its
Subsidiaries.
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17.3 Creditors. The interests of any Participant under the Plan or any
Agreement are not subject to the claims of creditors and may not, in any
way, be assigned, alienated or encumbered.
17.4 Governing Law. The Plan, and all Agreements hereunder, shall be governed,
construed and administered in accordance with and governed by the laws of
the Commonwealth of Virginia and the intention of the Company is that ISOs
granted under the Plan qualify as such under Section 422A of the Code.
17.5 Severability. In the event any provision of the Plan shall be held illegal
or invalid for any reason, the illegality or invalidity shall not affect
the remaining parts of the Plan, and the Plan shall be construed and
enforced as if the illegal or invalid provision had not been included.
</TABLE>
39
EXHIBIT 10.7
WORKING COPY OF
CADMUS DEFERRED COMPENSATION PLAN
(As Adopted Effective July 1, 1995)
As of April 1, 1996 Including:
First Amendment dated June 30, 1995
Second Amendment dated December 18, 1995
Third Amendment dated February 16, 1996
40
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I
Definition of Terms
1.1 Accrued Benefit........................................................ 1
1.2 Act.................................................................... 1
1.3 Active Participant..................................................... 1
1.4 Administrator.......................................................... 1
1.5 Affiliate.............................................................. 1
1.6 Beneficiary............................................................ 1
1.7 Board.................................................................. 1
1.8 Code................................................................... 1
1.9 Compensation........................................................... 2
1.10 Deferral Account....................................................... 2
1.11 Deferral Contributions................................................. 2
1.12 Effective Date......................................................... 2
1.13 Eligible Employee...................................................... 2
1.14 Employee............................................................... 2
1.15 Employer............................................................... 2
1.16 Fund................................................................... 2
1.17 Inactive Participant................................................... 3
1.18 Participant............................................................ 3
1.19 Plan................................................................... 3
1.20 Plan Sponsor........................................................... 3
1.21 Plan Year.............................................................. 3
1.22 Trust Agreement........................................................ 3
1.23 Trustee................................................................ 3
1.24 Valuation Date......................................................... 3
1.25 Valuation Period....................................................... 3
ARTICLE II
Eligibility and Participation
2.1 Eligibility............................................................ 3
2.2 Annual Election Required for Annual Active Participation............... 3
2.3 Commencement of Active Participation................................... 4
2.4 Termination of Active Participation.................................... 4
2.5 Length of Participation................................................ 4
41
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ARTICLE III
Deferral Account, Contributions and Adjustments
3.1 Deferral Account....................................................... 4
3.2 Deferral Contributions................................................. 4
3.3 Subtractions from Deferral Account..................................... 5
3.4 Crediting of Deemed Earnings or Loss to Deferral Accounts.............. 5
3.5 Equitable Adjustment in Case of Error or Omission...................... 5
3.6 Statement of Deferral Account Balance.................................. 6
ARTICLE IV
Vesting
4.1 Vesting in Accrued Benefit............................................. 6
ARTICLE V
Death Benefit
5.1 Death after Benefit Commencement....................................... 6
5.2 Death before Benefit Commencement...................................... 6
5.3 Beneficiary Designation................................................ 6
ARTICLE VI
Payment of Benefits
6.1 Time and Form of Payment............................................... 7
6.2 Benefit Determination and Payment Procedure............................ 8
6.3 Payments to Minors and Incompetents.................................... 8
6.4 Distribution of Benefit When Distributee Cannot Be Located............. 8
6.5 Claims Procedure....................................................... 8
ARTICLE VII
Withdrawals
7.1 Hardship Withdrawals................................................... 9
7.2 No Other Withdrawals Permitted......................................... 10
ARTICLE VIII
Funding
8.1 Funding................................................................ 10
8.2 Use of Trust........................................................... 11
8.3 Fund Divisions......................................................... 11
8.4 Participant Investment Directions...................................... 11
42
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ARTICLE IX
Fiduciaries
9.1 Fiduciaries and Duties and Responsibilities............................ 12
9.2 Limitation of Duties and Responsibilities of Fiduciaries............... 13
9.3 Service by Fiduciaries in More Than One Capacity....................... 13
9.4 Allocation or Delegation of Duties and Responsibilities by Fiduciaries. 13
9.5 Assistance and Consultation............................................ 13
9.6 Compensation and Expenses.............................................. 13
9.7 Indemnification........................................................ 13
ARTICLE X
Plan Administrator
10.1 Appointment of Plan Administrator...................................... 13
10.2 Plan Sponsor as Plan Administrator..................................... 13
10.3 Procedure if a Committee............................................... 13
10.4 Action by Majority Vote if a Committee................................. 14
10.5 Appointment of Successors.............................................. 14
10.6 Duties and Responsibilities of Plan Administrator...................... 14
10.7 Power and Authority.................................................... 14
10.8 Availability of Records................................................ 14
10.9 No Action with Respect to Own Benefit.................................. 14
ARTICLE XI
Amendment and Termination of Plan
11.1 Amendment or Termination of the Plan................................... 15
11.2 Effect of Employer Merger, Consolidation or Liquidation................ 15
ARTICLE XII
Miscellaneous
12.1 Headings............................................................... 15
12.2 Gender and Number...................................................... 15
12.3 Governing Law.......................................................... 15
12.4 Employment Rights...................................................... 16
12.5 Conclusiveness of Employer Records..................................... 16
12.6 Right to Require Information and Reliance Thereon...................... 16
12.7 Alienation and Assignment.............................................. 16
12.8 Notices and Elections.................................................. 16
12.9 Delegation of Authority................................................ 16
12.10 Service of Process..................................................... 16
12.11 Construction........................................................... 16
ARTICLE XIII
Adoption by Additional Employers
13.1 Adoption by Additional Employers....................................... 17
13.2 Termination Events with Respect to Employers Other
Than the Plan Sponsor.................................................. 17
Appendix A - List of Available Investment Funds
</TABLE>
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THIS PLAN is adopted as of July 1, 1995 by Cadmus Communications
Corporation, a Virginia corporation (the "Plan Sponsor"), for itself and for
other participating employers who may participate in the Plan as provided herein
(collectively or individually hereinafter called the "Employer");
WITNESSETH:
WHEREAS, the Employer deems it appropriate to provide for the deferral of
compensation by certain of its key management and highly compensated employees
pursuant to the terms of the Plan in consideration for each such person's future
services;
NOW, THEREFORE, this Plan provides as follows:
ARTICLE I
Definition of Terms
The following words and terms as used in this Plan shall have the meaning
set forth below, unless a different meaning is clearly required by the context:
1.1 "Accrued Benefit": The balance in a Participant's Deferral Account, as
adjusted pursuant to the provisions of the Plan.
1.2 "Act": The Employee Retirement Income Security Act of 1974, as the same
may be amended from time to time, or the corresponding section of any
subsequent legislation which replaces it, and, to the extent not
inconsistent therewith, the regulations issued thereunder.
1.3 "Active Participant": A Participant who is an Eligible Employee with an
election in force to make Deferral Contributions to the Plan at the time
in question.
1.4 "Administrator": The Plan Administrator provided for in ARTICLE X hereof.
1.5 "Affiliate": Any subsidiary, parent, affiliate or other business entity
related to the Plan Sponsor by at least eighty percent (80%) ownership (as
determined by the Plan Sponsor).
1.6 "Beneficiary": The person or persons designated by a Participant or
otherwise entitled pursuant to paragraph 5.3 to receive benefits under the
Plan attributable to the Participant after the death of the Participant.
1.7 "Board": The present and any succeeding Board of Directors of the Plan
Sponsor, unless such term is used with respect to a particular Employer
and its Employees, in which event it shall mean the present and any
succeeding Board of Directors of that Employer. Any Executive Committee or
other committee of the Board may act on the Board's behalf in any matter
pertaining to the Plan where such committee is duly empowered to do so.
1.8 "Code": The Internal Revenue Code of 1986, as the same may be amended from
time to time, or the corresponding section of any subsequent Internal
Revenue Code, and, to the extent not inconsistent therewith, regulations
issued thereunder.
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<TABLE>
<S><C>
1.9 "Compensation":
1.9(a)With respect to all aspects of the Plan other than 1996 Vacation
Cashout Deferrals, a Participant's incentive pay under the Plan
Sponsor's executive compensation plan paid or payable with respect
to a Plan Year for personal services rendered to the Employer as an
Eligible Employee, including that portion of such compensation which
is electively deferred under or contributed to this Plan or any
other plan, whether a deferred compensation or cafeteria plan, of
the Employer for such Plan Year, but excluding any such compensation
deferred or contributed from a prior period, expense reimbursement
and allowances, stock option or stock right income and benefits not
normally paid in cash to the Participant. This Compensation is
sometimes referred to as Incentive Pay Compensation.
1.9(b)With respect to 1996 Vacation Cashout Deferrals, a Participant's
available cashout from the Employer of accrued vacation scheduled to
be made on or about April 1, 1996. This Compensation is sometimes
referred to as 1996 Vacation Accrual Cashout Compensation.
1.10 "Deferral Account": The bookkeeping account of a Participant
attributable to his Deferral Contributions, and any deemed earnings
thereon, under the Plan. Separate subdivisions of each Participant's
Deferral Account shall be maintained to reflect each Plan Year's Deferral
Contributions attributable to Incentive Pay Compensation. A separate
subdivision of each Participant's Deferral Account shall be maintained
to reflect Deferral Contributions attributable to 1996 Vacation Accrual
Cashout Compensation.
1.11 "Deferral Contributions": The amount of Compensation deferred by a Participant
pursuant to his election under the Plan.
1.12 "Effective Date": July 1, 1995.
1.13 "Eligible Employee": An Employee who is covered by the Plan Sponsor's
executive compensation plan, unless designated as ineligible for active
participation by the Plan Sponsor. The Plan Sponsor in its discretion may
from time to time exclude one or more Employees from active participation
in the Plan by name or job description or may set pay level or other
additional criteria for eligibility for active participation in the Plan.
1.14 "Employee": An individual who is employed in the service of the Employer
as a common law employee.
1.15 "Employer":
1.15(a) With respect to determining active participation in the Plan,
Eligible Employees and Compensation, the Plan Sponsor and each Affiliate
with one or more employees covered by the Plan Sponsor's executive
compensation plan.
1.15(b) Employment with an Affiliate shall be considered employment with
the Employer for all purposes of the Plan other than determining active
participation in the Plan, Eligible Employees and Compensation.
1.16 "Fund":
1.16(a) If a trust fund is established and maintained for the Plan
pursuant to a Trust Agreement, that trust fund, which shall consist
of the Fund divisions described in paragraph 8.3 and Appendix A to
the Plan.
1.16(b) If a trust fund is not established and maintained for the Plan
pursuant to a Trust Agreement, that separate account maintained by
the Plan Sponsor to hold and invest contributions to the Plan, which
shall consist of the Fund divisions described in paragraph 8.3 and
Appendix A to the Plan.
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<PAGE>
1.17 "Inactive Participant": A Participant who is not an Active Participant.
1.18 "Participant": An Eligible Employee who elects to participate in the Plan,
for so long as he is considered a Participant, as provided in ARTICLE II
hereof.
1.19 "Plan": This document as contained herein or duly amended. The plan
maintained pursuant hereto shall be known as the "Cadmus Deferred
Compensation Plan".
1.20 "Plan Sponsor": Cadmus Communications Corporation, a Virginia corporation,
or any successor thereto.
1.21 "Plan Year": The year commencing on the first day of July of each year.
1.22 "Trust Agreement": The agreement, if any, by and between the Plan Sponsor
and the Trustee under which the Fund, if any, is maintained. No such
agreement has been entered into as of the Effective Date of the Plan.
1.23 "Trustee": The person(s) serving from time to time as trustee of the Fund
pursuant to any trust Agreement.
1.24 "Valuation Date": Each business day (based on the days the underlying
investment funds are valued and transactions are effectuated in the
applicable financial markets) of the Plan Year (which Valuation Date is
sometimes referred to as a "daily" Valuation Date), or such other dates
(which must be at least annually) as the Administrator may designate from
time to time.
1.25 "Valuation Period": The period from one Valuation Date to and including
the next following Valuation Date.
ARTICLE II
Eligibility and Participation
2.1 Eligibility. Each Eligible Employee shall be eligible to participate in
the Plan by becoming an Active Participant.
2.2 Annual Election Required for Annual Active Participation.
2.2(a) Active participation in the Plan is available and must be elected
on a Plan Year by Plan Year basis. An Eligible Employee may elect
to become an Active Participant for a Plan Year by executing a
"Deferred Compensation Election" for that Plan Year and timely
filing it with the Administrator at such time as the Administrator
may require by the 15th day of the sixth month of the Plan Year or,
in the case of his commencement of eligibility to participate as
provided in clause (ii) of paragraph 2.3, within thirty (30) days
after he is first eligible to become an Active Participant for the
Plan Year.
2.2(b) In addition to elections pursuant to subparagraph 2.2(a), an
Eligible Employee may elect to become an Active Participant, and an
Active Participant may elect to enhance his Deferral Contributions,
for the July 1, 1995 through June 30, 1996 Plan Year (the "1995-96
Plan Year") by executing a special "Deferred Compensation Election"
known as a "1996 Vacation Cashout Deferred Compensation Election"
for that Plan Year and timely filing it with the Administrator at
such time as the Administrator may require by the 30th day of
December, 1995.
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2.3 Commencement of Active Participation.
2.3(a) An Eligible Employee shall become an Active Participant for a Plan
Year as of the following applicable time for which he timely files
a Deferred Compensation Election:
(i) As of the first day of the Plan Year, or
(ii) In the case of his first becoming eligible for the Plan Year
as of a date after the 15th day of the fifth month of the Plan
Year, as of the date he becomes an Eligible Employee.
2.3(b) In addition to elections pursuant to subparagraph 2.3(a), an
Eligible Employee may elect to become an Active Participant for
the 1995-96 Plan Year solely with respect to his 1996 Vacation
Accrual Cashout Compensation by executing a "1996 Vacation Cashout
Deferred Compensation Election" for that Plan Year and timely
filing it with the Administrator at such time as the Administrator
may require by the 30th day of December, 1995.
2.4 Termination of Active Participation. A Participant who is an Active
Participant for a Plan Year shall cease to be an Active Participant for
the Plan Year if and when he ceases to be an Eligible Employee during the
Plan Year, in which case he may not again become an Active Participant
until a subsequent Plan Year. A leave of absence (whether paid or unpaid)
shall not be considered cessation of status as an Eligible Employee for
this purpose.
2.5 Length of Participation. An Eligible Employee who becomes a Participant
shall be or remain a Participant for so long as he is an Eligible Employee
with a Deferral Contribution Election in effect or is entitled to future
benefits under the terms of the Plan.
ARTICLE III
Deferral Account, Contributions and Adjustments
3.1 Deferral Account.
3.1(a) The Employer shall establish and maintain on its books a Deferral
Account, and appropriate subdivisions thereof, for each Participant
to reflect the Participant's Accrued Benefit under the Plan.
3.1(b) The balance in the Deferral Account of a Participant shall consist
of his Deferral Contributions credited to him under paragraph 3.2,
subtractions pursuant to paragraph 3.3 and deemed earnings or loss
thereon determined pursuant to paragraph 3.4.
3.2 Deferral Contributions.
3.2(a) An Active Participant shall elect to make Deferral Contributions
with respect to each Plan Year in that amount or percentage of his
Compensation equal to all or that portion of his Compensation as is
permitted to be contributed and as is specified by him in his
Deferred Compensation Election. Deferral Contributions shall be
based only on Compensation earned and payable for periods the
Deferred Compensation Election is in effect.
3.2(b) A Participant shall have no unilateral right to change or terminate
his election to make Deferral Contributions during a Plan Year once
the election filing deadline has passed.
3.2(c) Each Deferral Contribution is intended to be an elective salary
reduction contribution which shall be withheld from a Participant's
Compensation otherwise payable to him for a Plan Year.
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<PAGE>
3.2(d) Deferral Contributions made by a Participant for a Valuation Period
shall be credited to his Deferral Account as of the date an amount
equal to each Deferral Contribution is credited on the accounting
records of the Plan as directed by the Administrator, which date
shall be no later than the end of the calendar month following the
month the Compensation from which such contribution is deducted
would otherwise have been paid to him. Notwithstanding the
foregoing, if the Participant does not have other compensation from
which any taxes required to be withheld with respect to his
Deferral Contributions can be withheld or the Participant does not
make other arrangements satisfactory to the Administrator for
payment of the same, the amount of the Participant's Deferral
Contributions credited to his Deferral Account under the Plan may
at the direction of the Administrator be reduced by any taxes
required to be withheld therefrom and not otherwise provided for.
3.3 Subtractions from Deferral Account. All distributions (including any
withheld income or other taxes) shall be subtracted from a Participant's
Deferral Account and the applicable subdivision thereof when made.
3.4 Crediting of Deemed Earnings or Loss to Deferral Accounts.
3.4(a) As of each Valuation Date, there shall be credited to each
Participant's Deferral Account an amount representing deemed
earnings or loss on the "valuation balance" of such account for the
Valuation Period. A Participant's "valuation balance" is the total
of the balance in the account as of the beginning of the Valuation
Period, plus that portion, if any, of his Deferral Contributions
for the Valuation Period (as determined by the Administrator in its
discretion to approximate the portion of the Valuation Period
during which such contributions were held in the Fund during the
Valuation Period), less distributions from his account during the
Valuation Period.
3.4(b) Such deemed earnings or loss shall be determined as follows:
(i) For Valuation Periods during which the Fund is maintained and Plan
benefits may be paid therefrom because the Plan Sponsor or any other
Employer is not insolvent, such earnings or loss shall be based on
the net investment rate of return or loss of the Fund division(s) in
which the Participant's Accrued Benefit under the Plan is considered
invested for the Valuation Period, determined separately for each
Fund division and the portion of the Participant's Accrued Benefit
considered invested in each such Fund division, based on the
Participant's applicable or deemed investment directions pursuant to
paragraph 8.4. The net investment rate of return or loss means
earnings or loss (including valuation changes) for the Valuation
Period of the Fund compared to the aggregate valuation balances
sharing in those earnings or loss.
(ii) For Valuation Periods during which the Fund is not maintained or
Plan benefits may not be paid therefrom because the Plan Sponsor or
any other Employer is insolvent, such earnings or loss shall be
based on an annual rate determined for each Plan Year and equal to
the prime rate of interest published in The Wall Street Journal in
effect on the first day of the Plan Year containing the period in
question. If such rate is not published for any Plan Year, the
Administrator shall determine the annual rate for such Plan Year
with reference to the average prime lending rate of NationsBank of
North Carolina, N.A. or its successor, determined at the end of each
Valuation Period, less one percent.
3.4(c) Notwithstanding the other provisions of this ARTICLE III, whenever
the Plan accounting is based on daily Valuation Dates, the valuation
adjustments to Participants' accounts shall be effected on such
basis and subject to such rules and procedures as the Administrator
may determine to reflect daily accounting.
3.5 Equitable Adjustment in Case of Error or Omission. Where an error or
omission is discovered in the account of a Participant, the Administrator
shall be authorized to make such equitable adjustment as it deems
appropriate.
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<PAGE>
3.6 Statement of Deferral Account Balance. Within ninety (90) days after the
end of each Plan Year and at the date a Participant's Accrued Benefit
becomes payable under the Plan, the Administrator shall provide to each
Participant (or, if deceased, to his Beneficiary) a statement of the
balance as of such date of his Accrued Benefit.
ARTICLE IV
Vesting
4.1 Vesting in Accrued Benefit. A Participant's Accrued Benefit shall be fully
vested and non-forfeitable at all times.
ARTICLE V
Death Benefit
5.1 Death after Benefit Commencement. If a Participant dies after his Accrued
Benefit has begun to be paid to him, the benefits payable under the Plan
after his death shall be the remainder of his Accrued Benefit, if any,
payable as provided under the form of payment being made to him at his
death. Such benefits shall be paid to his Beneficiary.
5.2 Death before Benefit Commencement. If a Participant dies before his
Accrued Benefit has begun to be paid to him, his Accrued Benefit under the
Plan shall be paid to his Beneficiary at the time and in the manner
described in ARTICLE VI.
5.3 Beneficiary Designation.
5.3(a) Each Participant shall have the right to notify the Administrator
in writing of any designation of a Beneficiary to receive, if
alive, benefits under the Plan in the event of his death. Such
designation may be changed from time to time by notice in writing
to the Administrator.
5.3(b) If a Participant dies without having designated a Beneficiary, or
if the Beneficiary so designated has predeceased the Participant
or, except when his Beneficiary is his spouse, cannot be located by
the Administrator within one year after the date when the
Administrator commenced making a reasonable effort to locate such
Beneficiary, then his surviving spouse, or if none, then his
descendants, per stirpes, or if none, then the executor or the
administrator of his estate shall be deemed to be his Beneficiary.
5.3(c) Any Beneficiary designation may include multiple, contingent or
successive Beneficiaries and may specify the proportionate
distribution to each Beneficiary. If a Beneficiary shall survive
the Participant, but shall die before the entire benefit payable to
such Beneficiary has been distributed, then absent any other
provision by the Participant, the unpaid amount of such benefit
shall be distributed to the estate of the deceased Beneficiary. If
multiple Beneficiaries are designated, absent provisions by the
Participant, those named or the survivors of them shall share
equally any benefits payable under the Plan. Any Beneficiary,
including the Participant's spouse, shall be entitled to disclaim
any benefit otherwise payable to him under the Plan.
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<PAGE>
ARTICLE VII
Payment of Benefits
6.1 Time and Form of Payment.
6.1(a) The portion of a Participant's Accrued Benefit attributable to his
Deferral Contributions for a Plan Year shall be payable to the
Participant at the time and in the manner elected by the
Participant or otherwise provided in his Deferred Compensation
Election for such Plan Year or herein. The available time and form
of payment options are as follows: (i) Time of Payment - The
Participant shall have the following election choices:
(A) In the first month of the calendar quarter following the
calendar quarter of the earlier of the Participant's
retirement, disability or other cessation of employment
with the Employer.
(B) In a specified month and year, which generally must
provide for deferral for the lesser of two (2) years or
until age sixty-five (65) and must be the first month of
a calendar quarter, whether or not the Participant has
ceased to be employed by the Employer.
(C) At the later of (A) or (B). (D) At the earlier of (A) or
(B).
Notwithstanding the foregoing, if the Participant ceases to be
an Employee on account of his voluntary resignation or his
termination by the Employer and the Participant is neither
considered to retire on a "Retirement Date" nor to be
"Disabled" for purposes of the Cadmus Pension Plan (as those
terms are defined for purposes of the Cadmus Pension Plan, as
amended from time to time, which plan is a defined benefit
plan maintained by the Plan Sponsor and qualified under
Section 401 of the Code), payment of the Participant's entire
Accrued Benefit shall be made in the first month of the
calendar quarter following the calendar quarter in which the
Participant's cessation of employment with the Employer
occurs.
(ii) Form of Payment - The only form of payment available is a lump
sum payment. Under this form of payment, the term "lump sum
payment" generally means a single payment of the entire or, as
applicable, the designated portion of the Accrued Benefit. In
the event an Accrued Benefit is to be paid in a lump sum
payment and the amount thereof has not been determined, the
Administrator is authorized to make one or more interim
payments prior to the time the amount of such lump sum
payment is finally determined.
Notwithstanding the foregoing, separate payment election shall
be made with respect to Deferral Contributions attributable to
Incentive Pay Compensation for the Plan Year ending June 30,
1996 and to Deferral Contributions attributable to 1996
Vacation Accrual Cashout Compensation.
6.1(b) If the Participant is deceased, payment of the Participant's entire
Accrued Benefit shall be made to his Beneficiary in a lump sum
payment (as defined in clause (ii) of subparagraph 6.1(a)) in the
first month of the calendar quarter following the calendar quarter
of the Participant's death.
6.1(c) Notwithstanding the time and form of benefit payment provisions of
subparagraph 6.1(a), in the sole discretion of the Administrator, a
Participant's Accrued Benefit may be cashed-out in a lump sum
payment (as defined in clause (ii) of subparagraph 6.1(a)) in the
first month of the calendar quarter following the calendar quarter
in which the Participant ceases to be employed by the Employer if,
at the time of cessation of employment, the Participant's Accrued
Benefit is not over $10,000.
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6.2 Benefit Determination and Payment Procedure.
6.2(a) The Administrator shall make all determinations concerning
eligibility for benefits under the Plan, the time or terms of
payment, and the form or manner of payment to the Participant or,
in the event of the death of the Participant, the Participant's
Beneficiary. The Administrator shall promptly notify the Employer
and, where payments are to be made by the Trustee from the Fund,
the Trustee of each such determination that benefit payments are
due and provide to the Employer and, where applicable, the Trustee
all other information necessary to allow the Employer or the
Trustee, as the case may be, to carry out said determination,
whereupon the Employer or the Trustee, as the case may be, shall
pay such benefits in accordance with the Administrator's
determination.
6.2(b) Benefit payments shall normally be made from the Fund to such
payee(s), in such amounts, at such times and in such manner as the
Administrator shall from time to time direct; provided, however,
that the Employer may advance any payment due subject to a right of
reimbursement from the Fund. The payor may reserve such reasonable
amount as it shall deem necessary, based upon information provided
by the Administrator upon which the payor may rely, to pay any
income or other taxes attributable to the payment or required to be
withheld from the payment. If any payment is returned unclaimed,
the payor shall notify the Administrator and shall dispose of the
payment as the Administrator shall direct.
6.2(c) Benefit payments normally shall be made in cash. However, the
benefit payee and the Administrator may mutually agree to make
in-kind distributions of assets held in the Fund if the sponsor of
the investment fund in question permits such in-kind distributions.
6.3 Payments to Minors and Incompetents. If a Participant or
Beneficiary entitled to receive any benefits hereunder is a minor
or is adjudged to be legally incapable of giving valid receipt and
discharge for such benefits, or is deemed so by the Administrator,
benefits will be paid to such person as the Administrator may
designate for the benefit of such Participant or Beneficiary. Such
payments shall be considered a payment to such Participant or
Beneficiary and shall, to the extent made, be deemed a complete
discharge of any liability for such payments under the Plan.
6.4 Distribution of Benefit When Distributee Cannot Be Located. The
Administrator shall make all reasonable attempts to determine the
identity and/or whereabouts of a Participant or a Participant's
spouse entitled to benefits under the Plan, including the mailing
by certified mail of a notice to the last known address shown on
the Employer's or the Administrator's records. If the
Administrator is unable to locate such a person entitled to
benefits hereunder, or if there has been no claim made for such
benefits, the benefit due such person shall continue to be held
under the Plan, subject to any applicable statute of escheats.
6.5 Claims Procedure.
6.5(a) A Participant or Beneficiary (the "claimant") shall have the right
to request any benefit under the Plan by filing a written claim for
any such benefit with the Administrator on a form provided by the
Administrator for such purpose. The Administrator shall give such
claim due consideration and shall either approve or deny it in
whole or in part. Within ninety (90) days following receipt of such
claim by the Administrator, notice of any approval or denial
thereof, in whole or in part, shall be delivered to the claimant or
his duly authorized representative or such notice of denial shall
be sent by mail to the claimant or his duly authorized
representative at the address shown on the claim form or such
individual's last known address. The aforesaid ninety (90) day
response period may be extended to one hundred eighty (180) days
after receipt of the
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claimant's claim if special circumstances exist and if written
notice of the extension to one hundred eighty (180) days indicating
the special circumstances involved and the date by which a decision
is expected to be made is furnished to the claimant within ninety
(90) days after receipt of the claimant's claim. Any notice of
denial shall be written in a manner calculated to be understood by
the claimant and shall: (i) Set forth a specific reason or reasons
for the denial, (ii) Make specific reference to the pertinent
provisions of the Plan on which any denial of benefits is based,
(iii) Describe any additional material or information necessary for
the claimant to perfect the claim and explain why such
material or information is necessary, and
(iv) Explain the claim review procedure of subparagraph 6.5(b).
If a notice of approval or denial is not provided to the claimant
within the applicable ninety (90) day or one hundred eighty (180)
day period, the claimant's claim shall be considered denied for
purposes of the claim review procedure of subparagraph 6.5(b).
6.5(b) A Participant or Beneficiary whose claim filed pursuant to
subparagraph 6.5(a) has been denied, in whole or in part, may,
within sixty (60) days following receipt of notice of such denial,
or following the expiration of the applicable period provided for
in subparagraph 6.5(a) for notifying the claimant of the decision
on the claim if no notice of denial is provided, make written
application to the Administrator for a review of such claim, which
application shall be filed with the Administrator. For purposes of
such review, the claimant or his duly authorized representative may
review Plan documents pertinent to such claim and may submit to the
Administrator written issues and comments respecting such claim.
The Administrator may schedule and hold a hearing. The
Administrator shall make a full and fair review of any denial of a
claim for benefits and issue its decision thereon promptly, but no
later than sixty (60) days after receipt by the Administrator of
the claimant's request for review, or one hundred twenty (120) days
after such receipt if a hearing is to be held or if other special
circumstances exist and if written notice of the extension to one
hundred twenty (120) days is furnished to the claimant within sixty
(60) days after the receipt of the claimant's request for a review.
Such decision shall be in writing, shall be delivered or mailed by
the Administrator to the claimant or his duly authorized
representative in the manner prescribed in subparagraph 6.5(a) for
notices of approval or denial of claims, and shall:
(i) Include specific reasons for the decision,
(ii) Be written in a manner calculated to be understood by the
claimant, and
(iii) Contain specific references to the pertinent Plan provisions
on which the decision is based.
The Administrator's decision made in good faith shall be final.
ARTICLE VI
Withdrawals
7.1 Hardship Withdrawals.
7.1(a) In the event of any unforeseeable emergency and upon written
request of the Participant (or, if subsequent to his death, his
Beneficiary), the Administrator in its sole discretion may direct
the payment in one lump sum to the Participant or his Beneficiary
of all or any portion of the Participant's Accrued Benefit which
the Administrator determines is necessary to alleviate the
financial need related to the unforeseeable emergency.
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7.1(b) For purposes hereof:
(i) An unforeseeable emergency shall be defined in a manner consistent
with the meaning ascribed thereto under Section 457 of the Code as
a severe financial hardship to the Participant (or, if subsequent
to his death, his Beneficiary) resulting from a sudden and
unexpected illness, accident or loss of property due to casualty,
or any other similar extraordinary and unforeseeable circumstance
arising as a result of events beyond the control of the
Participant (or, if subsequent to his death, his Beneficiary).
(ii) The existence of an unforeseeable emergency shall be determined by
the Administrator on the basis of the facts and circumstances of
each case, but, in any event, payment may not be made to the
extent that the hardship is or may be relieved: (A) Through
reimbursement or compensation by insurance or otherwise, (B) By
liquidation of the Participant's assets, to the extent such
liquidation would not itself cause a severe financial hardship, or
(C) By cessation of elective deferrals under the Plan.
(iii) Examples of what are not considered unforeseeable emergencies
include the need to send a Participant's child to college or the
desire to purchase a home.
7.2 No Other Withdrawals Permitted. No withdrawals or other distributions
shall be permitted except as provided in ARTICLE VI or paragraph 7.1.
ARTICLE VIII
Funding
8.1 Funding.
8.1(a) The undertaking to pay benefits hereunder shall be an unfunded
obligation payable solely from the general assets of the Employer
and, subject to the claims of the Employer's creditors, from each
Employer's portion of the Fund. Deferral Accounts shall be
maintained as book reserve accounts on the books of the Employer
solely for accounting purposes. The payment obligation hereunder
(whether on not payment is made from the Fund) with respect to the
Accrued Benefit attributable to Deferral Contributions made from
Compensation payable by one Employer shall be the liability of that
Employer only, but payment thereof shall be guaranteed by the Plan
Sponsor.
8.1(b) Nothing contained in the Plan or Trust Agreement and no action
taken pursuant to the provisions of the Plan or Trust Agreement
shall give any Participant or Beneficiary any right, title or
interest in any specific asset or assets of the Employer or the
Fund at any time or any priority of payment in the event of the
Employer's insolvency. To the extent that any person acquires a
right to receive payments from the Employer or the Fund under the
Plan, such rights shall be no greater than the right of any
unsecured general creditor of the Employer.
8.1(c) Subject to the other provisions of this paragraph, the Plan Sponsor
shall make, or cause to be made out of the Fund, the payment of all
benefits under the Plan. The Plan Sponsor may require contributions
by participating Employers be delivered to the Plan Sponsor at such
times (whether before, at or after the time of payment), in such
amounts and on such basis as it may from time to time determine in
order to defray the costs of benefits under and administration of
the Plan.
8.1(d) The Employer shall pay over Deferral Contributions to the Fund at
least monthly or at such other time or times as the Plan Sponsor
may direct. 10
53
<PAGE>
8.2 Use of Trust.
8.2(a) Notwithstanding any provision herein to the contrary, the Plan
Sponsor may in its sole discretion direct the establishment and
holding of assets in the Fund pursuant to a Trust Agreement for the
purpose of providing benefits under the Plan.
8.2(b) The Employers acknowledge that any Trust Agreement, if established,
will be established by the Plan Sponsor (who may be referred to as
the Trust Sponsor in the Trust Agreement) for the benefit of all
participating Employers, that being a participating Employer in the
Plan automatically makes the Employer an Employer for purposes of
any Trust Agreement (unless the Trust Agreement otherwise
provides), and that any Trust Agreement may be amended by
appropriate action of the Plan Sponsor (without any action required
by the other participating Employers).
8.3 Fund Divisions.
8.3(a) It is contemplated that the Fund will be held in divisions
(sometimes referred to as "divisions of the Fund", "Fund divisions"
or "investments funds" herein) as hereinafter provided, and each
Participant's Accrued Benefit shall be subdivided to reflect its
deemed interest in each Fund division.
8.3(b) The Fund divisions which shall be maintained in the Fund are those
regulated investment companies, collective trust funds and/or other
pooled investment funds listed from time to time on Appendix A to
the Plan, each of which shall be treated as a separate Fund
division.
8.4 Participant Investment Directions. The Accrued Benefit of a Participant in
the Plan shall be divided or allocated to reflect the amount of each such
Participant's deemed interest in each Fund division as hereinafter
provided for the purpose of determining the earnings or loss to be
credited to his account, but any such direction shall not give the
Participant any right, title or interest in any specific asset or assets
of the Fund:
8.4(a) Upon becoming a Participant without a contribution investment
direction in force, a Participant may direct that his future
Directable Contributions be invested, in whole multiples of the
Permitted Direction Percentage (equalling one hundred percent
(100%) in the aggregate), in the Available Investment Funds by
filing a "contribution investment direction" with the Administrator
at such time.
8.4(b) In accordance with procedures established by the Administrator from
time to time:
(i) Contribution Investment Direction - A Participant may make a
"contribution investment direction" by directing that whole
multiples of the Permitted Direction Percentage (equalling one
hundred percent (100%) in the aggregate) of his future Directable
Contributions be invested in the Available Investment Funds. Any
such contribution investment direction shall be effected for
contributions made after commencement of participation or
contributions, as the case may be, and thereafter as of each
subsequent Contribution Investment Direction Change Date for which
such direction is timely delivered to the Administrator (or its
designee); and/or
(ii) Account Balance Investment Direction - A Participant (or, if
deceased, his Beneficiary) may make an "account balance investment
direction" by directing that whole multiples of the Permitted
Direction Percentage (equalling one hundred percent (100%) in the
aggregate) of his Directable Accounts be invested in the Available
Investment Funds. Any such account balance investment direction
shall be effective as of and for the Account Balance Investment
Direction Change Date for which such direction is timely delivered
to the Administrator (or its designee).
54
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The Administrator (or its designee) generally will process
investment directions on a current basis after received, but shall
not be obligated to process any investment directions on a
retroactive basis.
8.4(c) If or to the extent a Participant (or if deceased, his Beneficiary)
has no investment direction in effect, his Directable Contributions
and Directable Accounts shall be invested in the Default Fund
designated on Appendix A.
8.4(d) For purposes of this paragraph:
(i) The term "Account Balance Investment Direction Change Date" means
each Valuation Date.
(ii) The term "Available Investment Funds" means the investment funds
listed in Appendix A to the Plan.
(iii) The term "Directable Accounts" means the entire Accrued
Benefit of the Participant.
(iv) The term "Directable Contributions" means contributions made by
the Participant
(v) The term "Contribution Investment Direction Change Date" means
each Valuation Date.
(vi) The term "Permitted Direction Percentage" means one percent (1%).
8.4(e) The Administrator may, on a uniform and non-discriminatory basis
from time to time, set or change the advance notice requirement for
effecting investment directions, may limit the number of investment
direction changes made in a Plan Year, may limit investment
directions, if any, which can be made by telephone, and generally
may change any of the investment direction procedures.
ARTICLE IX
Fiduciaries
9.1 Fiduciaries and Duties and Responsibilities. Authority to control and
manage the operation and administration of the Plan shall be vested in the
following persons or entities, who, together with their membership, if
any, shall be the fiduciaries under the Plan ("Fiduciaries") with those
powers, duties, and responsibilities specifically allocated to them by the
Plan:
9.1(a) Plan Administrator - The Plan Administrator in connection with its
fiduciary obligations and rights relating to the Plan and the Fund.
9.1(b) Plan Sponsor - The Plan Sponsor in connection with its fiduciary
obligations and rights relating to the Plan and the Fund.
9.1(c) Trustee - The Trustee, if any, in connection with its fiduciary
obligations and rights relating to the Fund.
55
<PAGE>
9.2 Limitation of Duties and Responsibilities of Fiduciaries. The duties
and responsibilities, and any liability therefor, of the Fiduciaries
provided for in paragraph 9.1 shall be severally limited to the duties
and responsibilities specifically allocated to each such Fiduciary in
accordance with the terms of the Plan, and there shall be no joint duty,
responsibility, or liability among any such groups of Fiduciaries in the
control and management of the operation and administration of the Plan.
9.3 Service by Fiduciaries in More Than One Capacity. Any person or group
of persons may serve in more than one Fiduciary capacity with respect to
the Plan.
9.4 Allocation or Delegation of Duties and Responsibilities by
Fiduciaries. By written agreement filed with the Administrator and the
Plan Sponsor, any duties and responsibilities of any Fiduciary may be
allocated among Fiduciaries or may be delegated to persons other than
Fiduciaries. Any written agreement shall specifically set forth the
duties and responsibilities so allocated or delegated, shall contain
reasonable provisions for termination, and shall be executed by the
parties thereto.
9.5 Assistance and Consultation. A Fiduciary, and any delegate named
pursuant to paragraph 9.4, may engage agents to assist in its duties and
may consult with counsel, who may be counsel for the Employer, with
respect to any matter affecting the Plan or its obligations and
responsibilities hereunder, or with respect to any action or proceeding
affecting the Plan.
9.6 Compensation and Expenses. All compensation and expenses of the
Fiduciaries and their agents and counsel shall be paid or reimbursed by
the Employer on such basis as the Plan Sponsor shall determine; provided,
however, that each person or committeeman serving as a Fiduciary shall
serve without compensation for such service unless otherwise determined
by the Plan Sponsor or, in the case of the Trustee, unless otherwise
provided in the Trust Agreement.
9.7 Indemnification. The Employer, on such basis as the Plan Sponsor
shall determine, shall indemnify and hold harmless any individual who is
an employee of the Employer or an Affiliate and who is a Fiduciary or a
member of a Fiduciary under the Plan and any other individual who is an
employee of the Employer or an Affiliate and to whom duties of a
Fiduciary are delegated pursuant to paragraph 9.4, to the extent
permitted by law, from and against any liability, loss, cost or expense
arising from their good faith action or inaction in connection with their
responsibilities under the Plan. ARTICLE X Plan Administrator
10.1 Appointment of Plan Administrator. The Plan Sponsor may appoint one
or more persons to serve as the Plan Administrator (the "Administrator")
for the purpose of carrying out the duties specifically imposed on the
Administrator by the Plan and the Code. In the event more than one person
is appointed, the persons shall form a committee for the purpose of
functioning as the Administrator of the Plan. The person or committeemen
serving as Administrator shall serve for indefinite terms at the pleasure
of the Plan Sponsor, and may, by thirty (30) days prior written notice to
the Plan Sponsor, terminate such appointment. The Plan Sponsor shall
inform the Trustee of any such appointment or termination, and the
Trustee may assume that any person appointed continues in office until
notified of any change.
10.2 Plan Sponsor as Plan Administrator. In the event that no Administrator is
appointed or in office pursuant to paragraph 10.1, the Plan Sponsor shall
be the Administrator.
10.3 Procedure if a Committee. If the Administrator is a committee, it
shall appoint from its members a Chairman and a Secretary. The Secretary
shall keep records as may be necessary of the acts and resolutions of
such committee and be prepared to furnish reports thereof to the Plan
Sponsor and the Trustee. Except as otherwise provided, all instruments
executed on behalf of such committee may be executed by its Chairman or
Secretary, and the Trustee may assume that such committee, its Chairman
or Secretary are the persons who were last designated as such to them in
writing by the Plan Sponsor or its Chairman or Secretary.
56
<PAGE>
10.4 Action by Majority Vote if a Committee. If the Administrator is a
committee, its action in all matters, questions and decisions shall be
determined by a majority vote of its members qualified to act thereon.
They may meet informally or take any action without the necessity of
meeting as a group.
10.5 Appointment of Successors. Upon the death, resignation or removal of a
person serving as, or on a committee which is, the Administrator, the
Employer may, but need not, appoint a successor.
10.6 Duties and Responsibilities of Plan Administrator. The Administrator shall
have the following duties and responsibilities under the Plan:
10.6(a) The Administrator shall be responsible for the fulfillment of all
relevant reporting and disclosure requirements set forth in the
Plan, the Code and the Act the distribution thereof to
Participants and their Beneficiaries and the filing thereof with
the appropriate governmental officials and agencies.
10.6(b) The Administrator shall maintain and retain necessary records
respecting its administration of the Plan and matters upon which
disclosure is required under the Plan, the Code and the Act.
10.6(c) The Administrator shall make any elections for the Plan required
to be made by it under the Plan, the Code and the Act.
10.6(d) The Administrator is empowered to settle claims against the Plan
and to make such equitable adjustments in a Participant's or
Beneficiary's rights or entitlements under the Plan as it deems
appropriate in the event an error or omission is discovered or
claimed in the operation or administration of the Plan.
10.6(e) The Administrator may construe the Plan, correct defects, supply
omissions or reconcile inconsistencies to the extent necessary to
effectuate the Plan and such action shall be conclusive.
10.7 Power and Authority. The Administrator is hereby vested with all the power
and authority necessary in order to carry out its duties and
responsibilities in connection with the administration of the Plan imposed
hereunder. For such purpose, the Administrator shall have the power to
adopt rules and regulations consistent with the terms of the Plan.
10.8 Availability of Records. The Employer and the Trustee shall, at the
request of the Administrator, make available necessary records or other
information they possess which may be required by the Administrator in
order to carry out its duties hereunder.
10.9 No Action with Respect to Own Benefit. No Administrator who is a
Participant shall take any part as the Administrator in any discretionary
action in connection with his participation as an individual. Such action
shall be taken by the remaining Administrator, if any, or otherwise by the
Plan Sponsor.
57
<PAGE>
ARTICLE XI
Amendment and Termination of Plan
11.1 Amendment or Termination of the Plan.
11.1(a) The Plan may be terminated at any time by the Board. The Plan may
be amended in whole or in part from time to time by the Board
effective as of any date specified. No amendment or termination
shall operate to decrease a Participant's vested Accrued Benefit
as of the earlier of the date on which the amendment or
termination is approved by the Board or the date on which an
instrument of amendment or termination is signed on behalf of the
Plan Sponsor. No amendment shall increase the Trustee's duties or
obligations or decrease its compensation unless contained in an
amendment of, or document expressly pertaining to, the Trust
Agreement which includes the Trustee's written consent or for
which the Trustee's written consent is separately obtained. Any
such termination of or amendment to the Plan may provide for the
acceleration of payment of benefits under the Plan to one or more
Participants or Beneficiaries. Any such termination of or
amendment to the Plan shall be in writing and shall be adopted
pursuant to action by the Board (including pursuant to any
standing authorization for any officer, director or committee to
adopt amendments) in accordance with its applicable procedures,
including where applicable by majority vote or consent in writing.
11.1(b) In addition, and as an alternative, to amendment of the Plan by
action of the Board, but subject to the limitations on amendment
contained in subparagraph 11.1(a), the Chief Executive Officer of
the Plan Sponsor shall be and is hereby authorized to adopt on
behalf of the Board and to execute any technical amendment or
amendments to the Plan which in the opinion of counsel for the
Plan Sponsor are required by law and are deemed advisable by the
Chief Executive Officer of the Plan Sponsor and to so adopt and
execute any other discretionary amendment or amendments to the
Plan which are deemed advisable by the Chief Executive Officer of
the Plan Sponsor so long as any such amendments do not, in view of
the Chief Executive Officer of the Plan Sponsor, materially
increase costs of the Plan to the Employer. 11.1(c) Termination of
the Plan shall mean termination of active participation by
Participants, but shall not mean immediate payment of all Accrued
Benefits unless the Plan Sponsor so directs. On termination of the
Plan, the Board of the Plan Sponsor may provide for the
acceleration of payment of the Accrued Benefits of all affected
Participants on such basis as it may direct.
11.2 Effect of Employer Merger, Consolidation or Liquidation.
Notwithstanding the foregoing provisions of this ARTICLE XI, the merger
or liquidation of any Employer into any other Employer or the
consolidation of two (2) or more of the Employers shall not cause the
Plan to terminate with respect to the merging, liquidating or
consolidating Employers, provided that the Plan has been adopted or is
continued by and has not terminated with respect to the surviving or
continuing Employer.
ARTICLE XII
Miscellaneous
12.1 Headings. The headings in the Plan have been inserted for convenience of
reference only and are to be ignored in any construction of the provisions
hereof.
12.2 Gender and Number. In the construction of the Plan, the masculine shall
include the feminine or neuter and the singular shall include the plural
and vice-versa in all cases where such meanings would be appropriate.
12.3 Governing Law. The Plan and the Fund shall be construed, enforced
and administered in accordance with the laws of the Commonwealth of
Virginia, and any federal law pre-empting the same. Unless federal law
specifically addresses the issue, federal law shall not pre-empt
applicable state law preventing an individual or person claiming through
him from acquiring property or receiving benefits as a result of the
death of a decedent where such individual caused the death. 58
<PAGE>
12.4 Employment Rights. Participation in the Plan shall not give any employee
the right to be retained in the Employer's employ nor, upon dismissal or
upon his voluntary termination of employment, to have any right or
interest in the Fund other than as herein provided.
12.5 Conclusiveness of Employer Records. The records of the Employer with
respect to age, service, employment history, compensation, absences,
illnesses and all other relevant matters shall be conclusive for purposes
of the administration of the Plan.
12.6 Right to Require Information and Reliance Thereon. The Plan Sponsor
and the Administrator shall have the right to require any Participant,
Beneficiary or other person receiving benefit payments to provide it with
such information, in writing, and in such form as it may deem necessary
to the administration of the Plan and may rely thereon in carrying out
its duties hereunder. Any payment to or on behalf of a Participant or
Beneficiary in accordance with the provisions of the Plan in good faith
reliance upon any such written information provided by a Participant or
any other person to whom such payment is made shall be in full
satisfaction of all claims by such Participant and his Beneficiary; and
any payment to or on behalf of a Beneficiary in accordance with the
provisions of the Plan in good faith reliance upon any such written
information provided by such Beneficiary or any other person to whom such
payment is made shall be in full satisfaction of all claims by such
Beneficiary.
12.7 Alienation and Assignment. The interests of each Participant under the
Plan are not subject to claims of the Participant's creditors; and neither
the Participant, nor his Beneficiary, shall have any right to sell,
assign, transfer or otherwise convey the right to receive any payments
hereunder or any interest under the Plan, which payments and interest are
expressly declared to be non-assignable and non-transferable.
12.8 Notices and Elections.
12.8(a) Except as provided in subparagraph 12.8(b), all notices required
to be given in writing and all elections, consents, applications
and the like required to be made in writing, under any provision
of the Plan, shall be invalid unless made on such forms as may be
provided or approved by the Administrator and, in the case of a
notice, election, consent or application by a Participant or
Beneficiary, unless executed by the Participant or Beneficiary
giving such notice or making such election, consent or
application.
12.8(b) Subject to limitations under applicable provisions of the Code or
the Act (such as the requirement that spousal consent be in
writing), the Administrator is authorized in its discretion to
accept other means for receipt of effective notices, elections,
consent and/or application by Participants and/or Beneficiaries,
including but not limited to interactive voice systems, on such
basis and for such purposes as it determines from time to time.
12.9 Delegation of Authority. Whenever the Plan Sponsor or any Employer is
permitted or required to perform any act, such act may be performed by its
Chief Executive Officer, its President or its Board of Directors or by any
other person duly authorized by any of the foregoing.
12.10 Service of Process. The Administrator shall be the agent for service of
process on the Plan.
12.11 Construction. This Plan and the Fund are created for the exclusive
benefit of Eligible Employees of the Employer and their Beneficiaries and
shall be interpreted and administered in a manner consistent with their
being an unfunded deferred compensation plan maintained for a select group
of management or highly compensated employees (sometimes referred to as a
"top-hat" plan) described in Sections 201(2), 301(a)(3) and 401(a)(1) of
the Act. If the fund is maintained pursuant to a Trust Agreement, it is
intended to be a grantor trust, of which the Plan Sponsor or, if so
provided, the Employer is the grantor, within the meaning of subpart E,
part I, subchapter J, chapter 1, subtitle A of the Code, and shall be
construed accordingly.
59
<PAGE>
ARTICLE XIII
Participation by Additional Employers
13.1 Adoption by Additional Employers. Any Affiliate with employees covered by
the Plan Sponsor's executive compensation plan shall automatically be
considered to adopt and participate in the Plan, unless otherwise
expressly provided by the Plan Sponsor.
13.2 Termination Events with Respect to Employers Other Than the Plan Sponsor.
13.2(a) The Plan shall terminate with respect to any Employer other than
the Plan Sponsor, and such Employer shall automatically cease to
be a participating Employer in the Plan, upon the happening of any
of the following events:
(i) The Employer's ceasing to have employees covered by the Plan
Sponsor's executive compensation plan
(ii) The Employer's ceasing to be an Affiliate.
(iii) Action by the Board or Chief Executive Officer of the Plan
Sponsor terminating an Employer's participation in the Plan
and specifying the date of such termination. Notice of such
termination shall be delivered to the Administrator and the
former participating Employer.
13.2(b) Termination of the Plan with respect to any Employer shall mean
termination of active participation of the Participants employed
by such Employer, but shall not mean immediate payment of all
Accrued Benefits with respect to the Employees of such Employer
unless the Plan Sponsor so directs. On termination of the Plan
with respect to any Employer, the Board of the Plan Sponsor may
provide for the acceleration of payment of the Accrued Benefits of
all affected Participants of that former participating Employer on
such basis as it may direct.
IN WITNESS WHEREOF, the Plan Sponsor and each other participating
Employer, pursuant to the resolution duly adopted by its Board, has caused
this Plan to be signed on its behalf by its duly authorized officer or
member of its Board of Directors as of this 20 day of June, 1995.
CADMUS COMMUNICATIONS CORPORATION,
Plan Sponsor and participating Employer
By: C. S. Gillispie, Jr.
--------------------------------------
(SEAL)
Its Chairman & Chief Executive Officer
60
<PAGE>
CADMUS DEFERRED COMPENSATION PLAN
Appendix A
(As of April 1, 1996)
List of Available Investment Funds
A-1.1 Available Investment Funds. The Available Investments Funds, each of which
shall be considered a separate Fund division, are the following regulated
investment companies and/or collective trust funds sponsored by T. Rowe Price
Associates, Inc. or any of its affiliates (sometimes referred to as the "T. Rowe
Price investment funds" or "T. Rowe Price Fund divisions"):
(i) T. Rowe Price Prime Reserve Fund (replacing the T. Rowe Price Stable
Value Fund).
(ii) T. Rowe Price Balanced Fund.
(iii) T. Rowe Price Equity Index Fund.
(iv) T. Rowe Price International Stock Fund.
(v) T. Rowe Price Growth Stock Fund.
(vi) T. Rowe Price Small-Cap Value Fund.
(vii) T. Rowe Price U.S. Treasury Intermediate Fund (first available
April 1, 1996).
(viii) T. Rowe Price New Horizons Fund (first available April 1,
1996).
A-1.2 Default Fund. The Default Fund is the T. Rowe Price Balanced Fund.
61
</TABLE>
EXHIBIT 10.8
WORKING COPY OF
CADMUS NON-QUALIFIED THRIFT PLAN
(As Adopted Effective July 1, 1995)
As of April 1, 1996 Including:
First Amendment dated June 30, 1995
Second Amendment dated December 18, 1995
Third Amendment dated February 16, 1996
Fourth Amendment dated March 26, 1997
62
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
ARTICLE I
Definition of Terms
<S> <C>
1.1 Accrued Benefit........................................................ 1
1.2 Act.................................................................... 1
1.3 Active Participant..................................................... 1
1.4 Administrator.......................................................... 1
1.5 Affiliate.............................................................. 1
1.6 Beneficiary............................................................ 1
1.7 Board.................................................................. 1
1.8 Code................................................................... 1
1.9 Compensation........................................................... 1
1.10 Effective Date......................................................... 2
1.11 Eligible Employee...................................................... 2
1.12 Employee............................................................... 2
1.13 Employer............................................................... 2
1.14 Fund................................................................... 2
1.15 Inactive Participant................................................... 2
1.16 Participant............................................................ 2
1.17 Plan................................................................... 2
1.18 Plan Sponsor........................................................... 2
1.19 Plan Year.............................................................. 2
1.20 Thrift Account......................................................... 2
1.21 Thrift Contributions................................................... 3
1.22 Thrift Savings Plan.................................................... 3
1.23 Trust Agreement........................................................ 3
1.24 Trustee................................................................ 3
1.25 Valuation Date......................................................... 3
1.26 Valuation Period....................................................... 3
ARTICLE II
Eligibility and Participation
2.1 Eligibility and Commencement of Participation.......................... 3
2.2 Election Required for Participation in Thrift Contribution Portion
of the Plan........................................................... 3
2.3 Length of Participation................................................ 4
63
<PAGE>
ARTICLE III
Thrift Account, Contributions and Adjustments
3.1 Thrift Account......................................................... 4
3.2 Thrift Contributions by the Participant................................ 4
3.3 Contributions by the Employer.......................................... 5
3.4 Subtractions from Thrift Account....................................... 7
3.5 Crediting of Deemed Earnings or Loss to Thrift Accounts................ 7
3.6 Equitable Adjustment in Case of Error or Omission...................... 8
3.7 Statement of Thrift Account Balance.................................... 8
ARTICLE IV
Vesting
4.1 Vesting Generally...................................................... 8
4.2 Forfeiture of Benefits................................................. 8
4.3 No Restoration of Forfeited Benefits................................... 8
4.4 Determination of Benefits after Forfeiture Followed by Re-employment... 8
ARTICLE V
Death Benefit
5.1 Death after Benefit Commencement....................................... 9
5.2 Death before Benefit Commencement...................................... 9
5.3 Beneficiary Designation................................................ 9
ARTICLE VI
Payment of Benefits
6.1 Time and Form of Payment............................................... 9
6.2 Benefit Determination and Payment Procedure............................ 10
6.3 Payments to Minors and Incompetents.................................... 10
6.4 Distribution of Benefit When Distributee Cannot Be Located............. 10
6.5 Claims Procedure....................................................... 10
ARTICLE VII
Withdrawals
7.1 Hardship Withdrawals................................................... 12
7.2 No Other Withdrawals Permitted......................................... 12
64
<PAGE>
ARTICLE VIII
Funding
8.1 Funding................................................................ 12
8.2 Use of Trust........................................................... 13
8.3 Fund Divisions......................................................... 13
8.4 Participant Investment Directions...................................... 13
ARTICLE IX
Fiduciaries
9.1 Fiduciaries and Duties and Responsibilities............................ 14
9.2 Limitation of Duties and Responsibilities of Fiduciaries............... 15
9.3 Service by Fiduciaries in More Than One Capacity....................... 15
9.4 Allocation or Delegation of Duties and Responsibilities by Fiduciaries. 15
9.5 Assistance and Consultation............................................ 15
9.6 Compensation and Expenses.............................................. 15
9.7 Indemnification........................................................ 15
ARTICLE X
Plan Administrator
10.1 Appointment of Plan Administrator...................................... 15
10.2 Plan Sponsor as Plan Administrator..................................... 16
10.3 Procedure if a Committee............................................... 16
10.4 Action by Majority Vote if a Committee................................. 16
10.5 Appointment of Successors.............................................. 16
10.6 Duties and Responsibilities of Plan Administrator...................... 16
10.7 Power and Authority.................................................... 16
10.8 Availability of Records................................................ 16
10.9 No Action with Respect to Own Benefit.................................. 17
ARTICLE XI
Amendment and Termination of Plan
11.1 Amendment or Termination of the Plan................................... 17
11.2 Effect of Employer Merger, Consolidation or Liquidation................ 17
65
<PAGE>
ARTICLE XII
Miscellaneous
12.1 Headings............................................................... 17
12.2 Gender and Number...................................................... 18
12.3 Governing Law.......................................................... 18
12.4 Employment Rights...................................................... 18
12.5 Conclusiveness of Employer Records..................................... 18
12.6 Right to Require Information and Reliance Thereon...................... 18
12.7 Alienation and Assignment.............................................. 18
12.8 Notices and Elections.................................................. 18
12.9 Delegation of Authority................................................ 18
12.10 Service of Process..................................................... 19
12.11 Construction........................................................... 19
ARTICLE XIII
Adoption by Additional Employers
13.1 Adoption by Additional Employers....................................... 19
13.2 Termination Events with Respect to Employers Other Than the
Plan Sponsor......................................................... 19
</TABLE>
Appendix A - List of Available Investment Funds
66
<PAGE>
<TABLE>
<S> <C>
THIS PLAN is adopted as of July 1, 1995 by Cadmus Communications Corporation, a
Virginia corporation (the "Plan Sponsor"), for itself and for other
participating employers who may participate in the Plan as provided herein
(collectively or individually hereinafter called the "Employer");
WITNESSETH:
WHEREAS, the Employer deems it appropriate to provide for the deferral of
compensation by or on behalf of certain of its key management and highly
compensated employees pursuant to the terms of the Plan in consideration
for each such person's future services;
NOW, THEREFORE, this Plan provides as follows:
ARTICLE I
Definition of Terms
The following words and terms as used in this Plan shall have the meaning set
forth below, unless a different meaning is clearly required by the
context:
1.1 "Accrued Benefit": The balance in a Participant's Thrift Account, as adjusted
pursuant to the provisions of the Plan.
1.2 "Act": The Employee Retirement Income Security Act of 1974, as the same
may be amended from time to time, or the corresponding section of any
subsequent legislation which replaces it, and, to the extent not
inconsistent therewith, the regulations issued thereunder.
1.3 "Active Participant": A Participant who is an Eligible Employee with an
election in force to make Thrift Contributions to the Plan at the time in
question.
1.4 "Administrator": The Plan Administrator provided for in ARTICLE X hereof.
1.5 "Affiliate": Any subsidiary, parent, affiliate or other business entity
related to the Plan Sponsor by at least eighty percent (80%) ownership (as
determined by the Plan Sponsor).
1.6 "Beneficiary": The person or persons designated by a Participant or
otherwise entitled pursuant to paragraph 5.3 to receive benefits under the
Plan attributable to the Participant after the death of the Participant.
1.7 "Board": The present and any succeeding Board of Directors of the Plan
Sponsor, unless such term is used with respect to a particular Employer
and its Employees, in which event it shall mean the present and any
succeeding Board of Directors of that Employer. Any Executive Committee or
other committee of the Board may act on the Board's behalf in any matter
pertaining to the Plan where such committee is duly empowered to do so.
1.8 "Code": The Internal Revenue Code of 1986, as the same may be amended from
time to time, or the corresponding section of any subsequent Internal
Revenue Code, and, to the extent not inconsistent therewith, regulations
issued thereunder.
1.9 "Compensation": A Participant's "Compensation" as defined for purposes of
the Thrift Savings Plan, but determined without regard to the
"Compensation Limit" therein, plus amounts which would have been
"Compensation" as defined therein but for their contribution to this Plan
or to the Cadmus Deferred Compensation Plan. For purposes of determining
Thrift Contributions to the Plan, "Compensation" shall be based only on
periods the Participant is an Active Participant.
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1.10 "Effective Date": July 1, 1995.
1.11 "Eligible Employee": An Employee who is covered by the Plan Sponsor's
executive compensation plan, unless designated as ineligible for active
participation by the Plan Sponsor. The Plan Sponsor in its discretion may
from time to time exclude one or more Employees from active participation
in the Plan by name or job description or may set pay level or other
additional criteria for eligibility for active participation in the Plan.
1.12 "Employee": An individual who is employed in the service of the Employer
as a common law employee.
1.13 "Employer":
1.13(a) With respect to determining active participation in the Plan,
Eligible Employees and Compensation, the Plan Sponsor and each
Affiliate with one or more employees covered by the Plan Sponsor's
executive compensation plan.
1.13(b) Employment with an Affiliate shall be considered employment with
the Employer for all purposes of the Plan other than determining
active participation in the Plan, Eligible Employees and
Compensation.
1.14 "Fund":
1.14(a) If a trust fund is established and maintained for the Plan
pursuant to a Trust Agreement, that trust fund, which shall
consist of the Fund divisions described in paragraph 8.3 and
Appendix A to the Plan.
1.14(b) If a trust fund is not established and maintained for the Plan
pursuant to a Trust Agreement, that separate account maintained by
the Plan Sponsor to hold and invest contributions to the Plan,
which shall consist of the Fund divisions described in paragraph
8.3 and Appendix A to the Plan.
1.15 "Inactive Participant": A Participant who is not an Active Participant.
1.16 "Participant": An Eligible Employee who elects to participate in the Plan,
for so long as he is considered a Participant, as provided in ARTICLE II
hereof.
1.17 "Plan": This document as contained herein or duly amended. The plan
maintained pursuant hereto shall be known as the "Cadmus Non-Qualified
Thrift Plan".
1.18 "Plan Sponsor": Cadmus Communications Corporation, a Virginia corporation, or
any successor thereto.
1.19 "Plan Year": The calendar year.
1.20 "Thrift Account": The bookkeeping account of a Participant attributable to
Company Thrift Contributions and Participant Thrift Contributions, and any
deemed earnings thereon, under the Plan, consisting of the following
subdivisions:
(i) "Company Thrift Account": The Participant's account attributable to
Non-Qualified Matching Contributions, Non-Qualified Profit Sharing
Contributions and Excess Annual Addition Contributions allocated pursuant
to ARTICLE III hereof.
(ii) "Participant Thrift Account": The Participant's account attributable
to Thrift Contributions made pursuant to ARTICLE III hereof.
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1.21 "Thrift Contributions": The amount of Compensation deferred by a Participant
pursuant to his election under the Plan.
1.22 "Thrift Savings Plan": The Cadmus Thrift Savings Plan, as amended from
time to time, which plan is a defined contribution plan maintained by the
Plan Sponsor and qualified under Section 401 of the Code.
1.23 "Trust Agreement": The agreement, if any, by and between the Plan Sponsor
and the Trustee under which the Fund, if any, is maintained. No such
agreement has been entered into as of the Effective Date of the Plan.
1.24 "Trustee": The person(s) serving from time to time as trustee of the Fund
pursuant to any Trust Agreement.
1.25 "Valuation Date": Each business day (based on the days the underlying
investment funds are valued and transactions are effectuated in the
applicable financial markets) of the Plan Year (which Valuation Date is
sometimes referred to as a "daily" Valuation Date), or such other dates
(which must be at least annually) as the Administrator may designate from
time to time.
1.26 "Valuation Period": The period from one Valuation Date to and including
the next following Valuation Date.
ARTICLE II
Eligibility and Participation
2.1 Eligibility and Commencement of Participation. Each Eligible Employee
shall be automatically be a Participant in the Plan.
2.2 Election Required for Participation in Thrift Contribution Portion of the Plan.
2.2(a) Active participation in the Thrift Contribution portion of the Plan
is available to each Participant who is an Eligible Employee and
must be elected. An Eligible Employee may elect to become an Active
Participant by executing a "Thrift Contribution Election" and
timely filing it with the Administrator.
2.2(b) Unless otherwise provided in the Thrift Contribution Election, any
Thrift Contribution Election shall be a continuing election
applicable to succeeding Plan Years during continued status as an
Eligible Employee until changed by the filing of a new election. If
a Participant ceases to be an Eligible Employee and thereafter
again becomes an Eligible Employee, a new election shall be
required.
2.2(c) As of the beginning of a Plan Year, a Participant may file a new
Thrift Contribution Election, without any restriction on the amount
or percentage of his elected Thrift Contribution (other than those
contained in the Thrift Contribution Election). During a Plan Year,
a Participant may file a new Thrift Contribution Election which
increases the amount of his Thrift Contributions for the remainder
of the Plan Year. During a Plan Year, a Participant also may file a
new Thrift Contribution Election which terminates his Thrift
Contributions for the remainder of the Plan Year, in which event he
shall not be entitled to file a new election for balance of the
Plan Year.
2.2(d) Any Thrift Contribution Election must be filed by the 15th day of
the calendar month preceding the calendar month (or at such time as
the Administrator may require) before the calendar month it is to
become effective.
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2.3 Length of Participation. An Eligible Employee who becomes a Participant
shall be or remain a Participant for so long as he is an Eligible Employee
with a Thrift Contribution Election in effect or he is entitled to future
benefits under the terms of the Plan.
ARTICLE III
Thrift Account, Contributions and Adjustments
3.1 Thrift Account.
3.1(a) The Employer shall establish and maintain on its books a Thrift
Account, and appropriate subdivisions thereof, for each Participant
to reflect the Participant's Accrued Benefit under the Plan.
3.1(b) The balance in the Thrift Account of a Participant shall consist of
his Thrift Contributions credited to him under paragraph 3.2,
contributions by the Employer credited to him under paragraph 3.3,
subtractions pursuant to paragraph 3.4 and deemed earnings or loss
thereon determined pursuant to paragraph 3.5.
3.2 Thrift Contributions by the Participant.
3.2(a) An Active Participant shall elect to make Thrift Contributions in
that amount or percentage of his Compensation equal to all or that
portion of his Compensation as is permitted to be contributed and
as is specified by him in his Thrift Compensation Election. The
following rules shall apply:
(i) Thrift Contributions shall be based only on Compensation
earned and payable for periods the Thrift Compensation
Election is in effect.
(ii) The Administrator may permit separate elections with respect
to salary, one or more bonus(es) and/or Compensation which is
not "Compensation" for purposes of the Thrift Savings Plan,
may permit deferrals on the basis of anticipated Compensation
for a Plan Year, and may permit deferral of one hundred
percent (100%) of one or more bonus(es) (subject to a
reduction in the Participant's other deferrals in order not
to exceed the maximum contribution of Compensation percentage
limit).
(iii) Unless otherwise permitted and elected in his Thrift
Compensation Election, Thrift Contributions based on
Compensation which is not "Compensation" for purposes of the
Thrift Savings Plan shall be made as such Compensation is
otherwise due to be paid.
(iv) Thrift Contributions for a Plan Year based on Compensation
which is "Compensation" for purposes of the Thrift Savings
Plan shall be made only after the Participant has made the
maximum elective deferrals under Section 402(g) of the Code
for the Plan Year or the maximum elective contributions
permitted under the terms of the Thrift Savings Plan for the
Plan Year (including any maximums based on any special
limitation imposed by the plan administrator of the Thrift
Savings Plan pursuant to subparagraph 3.6(g) of the Thrift
Savings Plan).
(v) If the same Compensation is covered by a deferral election
under this Plan and the Cadmus Deferred Compensation Plan, the
election under this Plan shall be applied before the election
under the Cadmus Deferred Compensation Plan.
3.2(b) Each Thrift Contribution is intended to be an elective salary
reduction contribution which shall be withheld from a Participant's
Compensation otherwise payable to him for a Plan Year.
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3.2(c) Thrift Contributions made by a Participant for a Valuation Period
shall be credited to his Thrift Account as of the date an amount
equal to each Thrift Contribution is credited on the accounting
records of the Plan as directed by the Administrator, which date
shall be no later than the end of the calendar month following the
month the Compensation from which such contribution is deducted
would otherwise have been paid to him. Notwithstanding the
foregoing, if the Participant does not have other compensation from
which any taxes required to be withheld with respect to his Thrift
Contributions can be withheld or the Participant does not make
other arrangements satisfactory to the Administrator for payment of
the same, the amount of the Participant's Thrift Contributions
credited to his Thrift Account under the Plan may at the direction
of the Administrator be reduced by any taxes required to be
withheld therefrom and not otherwise provided for.
3.3 Contributions by the Employer.
3.3(a) With respect to each Plan Year, Non-Qualified Basic Matching
Contributions and Non-Qualified Discretionary Matching
Contributions shall be credited by the Employer to the Company
Thrift Account of each Participant who has made Thrift
Contributions for the Plan Year and who has satisfied the service
and employment benefit accrual requirements for entitlement to a
"Basic Matching Contribution" and a "Discretionary Matching
Contribution", respectively, under the Thrift Savings Plan for the
Plan Year as follows:
(i) The Non-Qualified Basic Matching Contribution for a
Participant for a Plan Year shall equal the sum of:
(A) The product obtained by multiplying the applicable
"basic matching percentage" for the Plan Year under the
Thrift Savings Plan by the first six percent (6%) of his
Compensation for the Plan Year which is not
"Compensation" for purposes of the Thrift Savings Plan
and which is contributed as a Thrift Contribution for
the Plan Year, plus
(B) The product obtained by multiplying the applicable
"basic matching percentage" for the Plan Year under the
Thrift Savings Plan by the first six percent (6%) of
his Compensation for the Plan Year which is
"Compensation" for purposes of the Thrift Savings Plan
and which is contributed as a Thrift Contribution for
the Plan Year, provided that the amount determined
under this clause (i)(B) shall be reduced by the
product obtained by multiplying the applicable "basic
matching percentage" for the Plan Year under the Thrift
Savings Plan by that percentage, if any, of the first
six percent (6%) of such Compensation for the Plan Year
which he may contribute as a "Savings Contribution" to
the Thrift Savings Plan.
The Non-Qualified Basic Matching Contribution for a Plan Year
credited on behalf of a Participant shall be allocated to his
Company Thrift Account as of the date the amount of such
contribution is credited on the accounting records of the Plan
as directed by the Administrator, which date shall be no later
than the later of the last day of the calendar quarter of the
Plan Year for which contributed or the end of the calendar
month following the month as of which the "Basic Matching
Contribution" under the Thrift Savings Plan for the calendar
quarter of the Plan Year is made to the Thrift Savings Plan.
(ii) The Non-Qualified Discretionary Matching Contribution for a
Participant for a Plan Year shall equal the sum of:
(A) The product obtained by multiplying the applicable
"discretionary matching percentage" for the Plan Year
under the Thrift Savings Plan by the first six percent
(6%) of his Compensation for the Plan Year which is not
"Compensation" for purposes of the Thrift Savings Plan
and which is contributed as a Thrift Contribution for
the Plan Year, plus
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(B) The product obtained by multiplying the applicable
"discretionary matching percentage" for the Plan Year
under the Thrift Savings Plan by the first six percent
(6%) of his Compensation for the Plan Year which is
"Compensation" for purposes of the Thrift Savings Plan
and which is contributed as a Thrift Contribution for
the Plan Year, provided that the amount determined
under this clause (ii)(B) shall be reduced by the
product obtained by multiplying the applicable
"discretionary matching percentage" for the Plan Year
under the Thrift Savings Plan by that percentage, if
any, of the first six percent (6%) of such Compensation
for the Plan Year which he may contribute as a "Savings
Contribution" to the Thrift Savings Plan.
The Non-Qualified Discretionary Matching Contribution for a
Plan Year credited on behalf of a Participant shall be
allocated to his Company Thrift Account as of the date the
amount of such contribution is credited on the accounting
records of the Plan as directed by the Administrator, which
date shall be no later than the later of the last day of the
Plan Year or the end of the calendar month following the month
as of which the "Discretionary Matching Contribution" under
the Thrift Savings Plan for the Plan Year is made to the
Thrift Savings Plan.
3.3(b) With respect to each Plan Year, a Non-Qualified Profit Sharing
Contribution shall be credited to the Company Thrift Account of
each Participant who is an Eligible Employee and a Participant
during the Plan Year and who has satisfied the service and
employment benefit accrual requirements for entitlement to a
"Profit Sharing Contribution" under the Thrift Savings Plan for the
Plan Year equal to the product of:
(i) The applicable "Profit Sharing Contribution" allocation rate
under the Thrift Savings Plan for the Plan Year, multiplied by
(ii) His Compensation for the Plan Year which is not
"Compensation" for purposes of the Thrift Savings Plan
because of application of the limitation on compensation
imposed by Section 401(a)(17) of the Code and because of the
exclusion from covered "Compensation" under the Thrift
Savings Plan of his elective Thrift Contributions to this
Plan and his elective "Deferral Contributions" to the Cadmus
Deferred Compensation Plan (based on the normal time of
payment but for such deferral election).
The Non-Qualified Profit Sharing Contribution for a Plan Year
credited on behalf of a Participant shall be allocated to his
Company Thrift Account as of the date the amount of such
contribution is credited on the accounting records of the Plan as
directed by the Administrator, which date shall be no later than the
later of the last day of the Plan Year or the end of the calendar
month following the month as of which the "Profit Sharing
Contribution" under the Thrift Savings Plan for the Plan Year is
made to the Thrift Savings Plan.
3.3(c) With respect to each Plan Year, an Excess Annual Additions
Contribution shall be credited to the Company Thrift Account of
each Participant who is an Eligible Employee and a Participant
during the Plan Year equal to the sum of:
(i) The "Matching Contribution" and
(ii) The "Profit Sharing Contribution" which would have been
allocated to, or would have remained allocated to, his account
under the Thrift Savings Plan for such Plan Year but for the
limitation on contributions and benefits imposed by Section
415 of the Code, provided that there shall be no duplication
of contributions under this subparagraph and the preceding
subparagraphs of this paragraph. The Excess Annual Additions
Contribution for a Plan Year described in clause (i) above
credited on behalf of a Participant shall be allocated to his
Company Thrift Account as of the date the amount of such
contribution is credited on the accounting records of the Plan
as directed by the Administrator, which date shall be no later
than the later of the last day of the Plan Year or the
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end of the calendar month following the month as of which the
"Matching Contribution" under the Thrift Savings Plan for the
Plan Year is made to the Thrift Savings Plan. The Excess Annual
Additions Contribution for a Plan Year described in clause (ii)
above credited on behalf of a Participant shall be allocated to
his Company Thrift Account as of the date the amount of such
contribution is credited on the accounting records of the Plan,
which date shall be no later than the later of the last day of
the Plan Year or the end of the calendar month following the
month as of which the "Profit Sharing Contribution" under the
Thrift Savings Plan for the Plan Year is made to the Thrift
Savings Plan.
3.3(d) The Administrator shall limit contributions under this paragraph in
any manner he deems appropriate in order that the benefits under
the Plan not be considered directly or indirectly contingent on a
Participant's making or not making "Savings Contributions" to the
Thrift Savings Plan in violation of the requirements of Section
401(k) of the Code.
3.4 Subtractions from Thrift Account. All distributions (including any
withheld income or other taxes) shall be subtracted from a Participant's
Thrift Account and the applicable subdivision thereof when made.
3.5 Crediting of Deemed Earnings or Loss to Thrift Accounts.
3.5(a) As of each Valuation Date, there shall be credited to each
Participant's Thrift Account an amount representing deemed earnings
or loss on the "valuation balance" of such account for the
Valuation Period. A Participant's "valuation balance" is the total
of the balance in the account as of the beginning of the Valuation
Period, plus that portion, if any, of his Thrift Contributions for
the Valuation Period (as determined by the Administrator in its
discretion to approximate the portion of the Valuation Period
during which such contributions were held in the Fund during the
Valuation Period), less distributions from his account during the
Valuation Period.
3.5(b) Such deemed earnings or loss shall be determined as follows:
(i) For Valuation Periods during which the Fund is maintained and
Plan benefits may be paid therefrom because the Plan Sponsor
or any other Employer is not insolvent, such earnings or loss
shall be based on the net investment rate of return or loss
of the Fund division(s) in which the Participant's Accrued
Benefit under the Plan is considered invested for the
Valuation Period, determined separately for each Fund
division and the portion of the Participant's Accrued Benefit
considered invested in each such Fund division, based on the
Participant's applicable or deemed investment directions
pursuant to paragraph 8.4. The net investment rate of return
or loss means earnings or loss (including valuation changes)
for the Valuation Period of the Fund compared to the
aggregate valuation balances sharing in those earnings or
loss.
(ii) For Valuation Periods during which the Fund is not maintained
or Plan benefits may not be paid therefrom because the Plan
Sponsor or any other Employer is insolvent, such earnings or
loss shall be based on an annual rate determined for each
Plan Year and equal to the prime rate of interest published
in The Wall Street Journal in effect on the first day of the
Plan Year containing the period in question. If such rate is
not published for any Plan Year, the Administrator shall
determine the annual rate for such Plan Year with reference
to the average prime lending rate of NationsBank of North
Carolina, N.A. or its successor, determined at the end of
each Valuation Period, less one percent.
3.5(c) Notwithstanding the other provisions of this ARTICLE III, whenever
the Plan accounting is based on daily Valuation Dates, the
valuation adjustments to Participants' accounts shall be effected
on such basis and subject to such rules and procedures as the
Administrator may determine to reflect daily accounting.
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3.6 Equitable Adjustment in Case of Error or Omission. Where an error or
omission is discovered in the account of a Participant, the Administrator
shall be authorized to make such equitable adjustment as it deems
appropriate.
3.7 Statement of Thrift Account Balance. Within ninety (90) days after the end
of each Plan Year and at the date a Participant's Accrued Benefit becomes
payable under the Plan, the Administrator shall provide to each
Participant (or, if deceased, to his Beneficiary) a statement of the
balance as of such date of his Accrued Benefit and the percent thereof
which is vested.
ARTICLE IV
Vesting
4.1 Vesting Generally.
4.1(a) The Participant Thrift Account of a Participant shall be fully
vested and non-forfeitable at all times.
4.1(b) The Company Thrift Account of a Participant shall be vested as
follows:
(i) Vesting in Company Thrift Accounts shall normally be based on
the rules for vesting in the Participant's "Matching Account"
under the Thrift Savings Plan (including, without limitation,
the rules for vesting based on the Thrift Savings Plan's
vesting schedule and the rules for vesting at attainment of
normal retirement age, retirement, death or disability), but
with the cash-out, forfeiture and restoration rules thereunder
being inapplicable.
(ii) The Board of the Plan Sponsor may provide for vesting of the
Company Thrift Account of a Participant who ceases to be an
Eligible Employee due to the Participant's voluntary
termination of employment with the consent of the Board so
long as such consent expressly provides for such vesting.
(iii) All Company Thrift Accounts shall be fully vested as of the
date of termination of the Plan as to all Employers.
(iv) In the event a participating Employer ceases to participate in
the Plan, the Board of the Plan Sponsor may provide for
vesting of the Company Thrift Accounts of all affected
Participants of that former participating Employer on such
basis as it may direct.
4.2 Forfeiture of Benefits. Notwithstanding any contrary provision hereof, the
non-vested portion of the Company Thrift Account of a Participant shall be
forfeited upon the Participant's voluntary or involuntary cessation of
employment with the Employer or death, but his vesting shall include any
additional vesting provided under the rules of the Thrift Savings Plan or
this Plan with respect to such cessation of employment or death.
4.3 No Restoration of Forfeited Benefits. There shall be no restoration of
forfeited benefits.
4.4 Determination of Benefits after Forfeiture Followed by Re-employment. If
a Participant incurs a forfeiture and subsequently is an Eligible
Employee and a Participant, a new Company Thrift Account shall be
established for the Participant to reflect his subsequent participation
in the Plan, and the Participant's vested Company Thrift Account at any
time shall equal the sum of any remaining portion of his prior vested
Company Thrift Account and his new vested Company Thrift Account at such
time.
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ARTICLE V
Death Benefit
5.1 Death after Benefit Commencement. If a Participant dies after his vested
Accrued Benefit has begun to be paid to him, the benefits payable under
the Plan after his death shall be the remainder of his vested Accrued
Benefit, if any, payable as provided under the form of payment being made
to him at his death.
Such benefits shall be paid to his Beneficiary.
5.2 Death before Benefit Commencement. If a Participant dies before his vested
Accrued Benefit has begun to be paid to him, his vested Accrued Benefit
under the Plan shall be paid to his Beneficiary at the time and in the
manner described in ARTICLE VI.
5.3 Beneficiary Designation.
5.3(a) Each Participant shall have the right to notify the Administrator
in writing of any designation of a Beneficiary to receive, if alive,
benefits under the Plan in the event of his death. Such designation
may be changed from time to time by notice in writing to the
Administrator.
5.3(b) If a Participant dies without having designated a Beneficiary, or
if the Beneficiary so designated has predeceased the Participant or,
except when his Beneficiary is his spouse, cannot be located by the
Administrator within one year after the date when the Administrator
commenced making a reasonable effort to locate such Beneficiary,
then his surviving spouse, or if none, then his descendants, per
stirpes, or if none, then the executor or the administrator of his
estate shall be deemed to be his Beneficiary.
5.3(c) Any Beneficiary designation may include multiple, contingent or
successive Beneficiaries and may specify the proportionate
distribution to each Beneficiary. If a Beneficiary shall survive
the Participant, but shall die before the entire benefit payable to
such Beneficiary has been distributed, then absent any other
provision by the Participant, the unpaid amount of such benefit
shall be distributed to the estate of the deceased Beneficiary. If
multiple Beneficiaries are designated, absent provisions by the
Participant, those named or the survivors of them shall share
equally any benefits payable under the Plan. Any Beneficiary,
including the Participant's spouse, shall be entitled to disclaim
any benefit otherwise payable to him under the Plan.
ARTICLE VII
Payment of Benefits
6.1 Time and Form of Payment.
6.1(a) A Participant's vested Accrued Benefit shall be payable to the
Participant at the following time and in the following manner:
(i) Time of Payment - The time of payment is in the first month
of the calendar quarter following the calendar quarter of the
earlier of the Participant's retirement, disability or other
cessation of employment with the Employer.
(ii) Form of Payment - The form of payment is a lump sum payment.
Under this form of payment, the term "lump sum payment"
generally means a single payment of the entire or, as
applicable, the designated portion of the vested Accrued
Benefit. In the event a vested Accrued Benefit is to be paid
in a lump sum payment and the amount thereof has not been
determined, the Administrator is authorized to make one or
more interim payments prior to the time the amount of such
lump sum payment is finally determined.
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6.1(b) If the Participant is deceased, payment of the Participant's
entire vested Accrued Benefit shall be made to his Beneficiary in
a lump sum payment (as defined in clause (ii) of subparagraph
6.1(a)) in the first month of the calendar quarter following the
calendar quarter of the Participant's death.
6.2 Benefit Determination and Payment Procedure.
6.2(a) The Administrator shall make all determinations concerning
eligibility for benefits under the Plan, the time or terms of
payment, and the form or manner of payment to the Participant or,
in the event of the death of the Participant, the Participant's
Beneficiary. The Administrator shall promptly notify the Employer
and, where payments are to be made by the Trustee from the Fund,
the Trustee of each such determination that benefit payments are
due and provide to the Employer and, where applicable, the Trustee
all other information necessary to allow the Employer or the
Trustee, as the case may be, to carry out said determination,
whereupon the Employer or the Trustee, as the case may be, shall
pay such benefits in accordance with the Administrator's
determination.
6.2(b) Benefit payments shall normally be made from the Fund to such
payee(s), in such amounts, at such times and in such manner as the
Administrator shall from time to time direct; provided, however,
that the Employer may advance any payment due subject to a right of
reimbursement from the Fund. The payor may reserve such reasonable
amount as it shall deem necessary, based upon information provided
by the Administrator upon which the payor may rely, to pay any
income or other taxes attributable to the payment or required to be
withheld from the payment. If any payment is returned unclaimed,
the payor shall notify the Administrator and shall dispose of the
payment as the Administrator shall direct.
6.2(c) Benefit payments normally shall be made in cash. However, the
benefit payee and the Administrator may mutually agree to make
in-kind distributions of assets held in the Fund if the sponsor of
the investment fund in question permits such in-kind distributions.
6.3 Payments to Minors and Incompetents. If a Participant or Beneficiary
entitled to receive any benefits hereunder is a minor or is adjudged to
be legally incapable of giving valid receipt and discharge for such
benefits, or is deemed so by the Administrator, benefits will be paid to
such person as the Administrator may designate for the benefit of such
Participant or Beneficiary. Such payments shall be considered a payment
to such Participant or Beneficiary and shall, to the extent made, be
deemed a complete discharge of any liability for such payments under the
Plan.
6.4 Distribution of Benefit When Distributee Cannot Be Located. The
Administrator shall make all reasonable attempts to determine the
identity and/or whereabouts of a Participant or a Participant's spouse
entitled to benefits under the Plan, including the mailing by certified
mail of a notice to the last known address shown on the Employer's or the
Administrator's records. If the Administrator is unable to locate such a
person entitled to benefits hereunder, or if there has been no claim made
for such benefits, the benefit due such person shall continue to be held
under the Plan, subject to any applicable statute of escheats.
6.5 Claims Procedure.
6.5(a) A Participant or Beneficiary (the "claimant") shall have the right
to request any benefit under the Plan by filing a written claim for
any such benefit with the Administrator on a form provided by the
Administrator for such purpose. The Administrator shall give such
claim due consideration and shall either approve or deny it in
whole or in part. Within ninety (90) days following receipt of such
claim by the Administrator, notice of any approval or denial
thereof, in whole or in part, shall be delivered to the claimant or
his duly authorized representative or such notice of denial shall
be sent by mail to the claimant or his duly authorized
representative at the address shown on the claim form or such
individual's last known address. The aforesaid ninety (90) day
response period may be extended to one hundred eighty (180) days
after receipt of the
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claimant's claim if special circumstances exist and if written
notice of the extension to one hundred eighty (180) days indicating
the special circumstances involved and the date by which a decision
is expected to be made is furnished to the claimant within ninety
(90) days after receipt of the claimant's claim. Any notice of
denial shall be written in a manner calculated to be understood by
the claimant and shall:
(i) Set forth a specific reason or reasons for the denial,
(ii) Make specific reference to the pertinent provisions of the
Plan on which any denial of benefits is based,
(iii) Describe any additional material or information necessary for
the claimant to perfect the claim and explain why such
material or information is necessary, and
(iv) Explain the claim review procedure of subparagraph 6.5(b).
If a notice of approval or denial is not provided to the claimant
within the applicable ninety (90) day or one hundred eighty (180)
day period, the claimant's claim shall be considered denied for
purposes of the claim review procedure of subparagraph 6.5(b).
6.5(b) A Participant or Beneficiary whose claim filed pursuant to
subparagraph 6.5(a) has been denied, in whole or in part, may,
within sixty (60) days following receipt of notice of such denial,
or following the expiration of the applicable period provided for
in subparagraph 6.5(a) for notifying the claimant of the decision
on the claim if no notice of denial is provided, make written
application to the Administrator for a review of such claim, which
application shall be filed with the Administrator. For purposes of
such review, the claimant or his duly authorized representative may
review Plan documents pertinent to such claim and may submit to the
Administrator written issues and comments respecting such claim.
The Administrator may schedule and hold a hearing. The
Administrator shall make a full and fair review of any denial of a
claim for benefits and issue its decision thereon promptly, but no
later than sixty (60) days after receipt by the Administrator of
the claimant's request for review, or one hundred twenty (120) days
after such receipt if a hearing is to be held or if other special
circumstances exist and if written notice of the extension to one
hundred twenty (120) days is furnished to the claimant within sixty
(60) days after the receipt of the claimant's request for a review.
Such decision shall be in writing, shall be delivered or mailed by
the Administrator to the claimant or his duly authorized
representative in the manner prescribed in subparagraph 6.5(a) for
notices of approval or denial of claims, and shall:
(i) Include specific reasons for the decision,
(ii) Be written in a manner calculated to be understood by the
claimant,
and
(iii) Contain specific references to the pertinent Plan provisions
on which the decision is based.
The Administrator's decision made in good faith shall be final.
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ARTICLE VI
Withdrawals
7.1 Hardship Withdrawals.
7.1(a) In the event of any unforeseeable emergency and upon written
request of the Participant (or, if subsequent to his death, his
Beneficiary), the Administrator in its sole discretion may direct
the payment in one lump sum to the Participant or his Beneficiary
of all or any portion of the Participant's vested Accrued Benefit
which the Administrator determines is necessary to alleviate the
financial need related to the unforeseeable emergency.
7.1(b) For purposes hereof:
(i) An unforeseeable emergency shall be defined in a manner
consistent with the meaning ascribed thereto under Section
457 of the Code as a severe financial hardship to the
Participant (or, if subsequent to his death, his Beneficiary)
resulting from a sudden and unexpected illness, accident or
loss of property due to casualty, or any other similar
extraordinary and unforeseeable circumstance arising as a
result of events beyond the control of the Participant (or,
if subsequent to his death, his Beneficiary).
(ii) The existence of an unforeseeable emergency shall be
determined by the Administrator on the basis of the facts and
circumstances of each case, but, in any event, payment may not
be made to the extent that the hardship is or may be relieved:
(A) Through reimbursement or compensation by insurance or
otherwise,
(B) By liquidation of the Participant's assets, to the
extent such liquidation would not itself cause a severe
financial hardship, or
(C) By cessation of elective deferrals under the Plan.
(iii) Examples of what are not considered unforeseeable emergencies
include the need to send a Participant's child to college or
the desire to purchase a home.
7.2 No Other Withdrawals Permitted. No withdrawals or other distributions
shall be permitted except as provided in ARTICLE VI or paragraph 7.1.
ARTICLE VIII
Funding
8.1 Funding.
8.1(a) The undertaking to pay benefits hereunder shall be an unfunded
obligation payable solely from the general assets of the Employer
and, subject to the claims of the Employer's creditors, from each
Employer's portion of the Fund. Thrift Accounts shall be maintained
as book reserve accounts on the books of the Employer solely for
accounting purposes. The payment obligation hereunder (whether on
not payment is made from the Fund) with respect to the Accrued
Benefit attributable to Thrift Contributions made from Compensation
payable, and other contributions made, by one Employer shall be the
liability of that Employer only, but payment thereof shall be
guaranteed by the Plan Sponsor.
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8.1(b) Nothing contained in the Plan or Trust Agreement and no action
taken pursuant to the provisions of the Plan or Trust Agreement
shall give any Participant or Beneficiary any right, title or
interest in any specific asset or assets of the Employer or the
Fund at any time or any priority of payment in the event of the
Employer's insolvency. To the extent that any person acquires a
right to receive payments from the Employer or the Fund under the
Plan, such rights shall be no greater than the right of any
unsecured general creditor of the Employer.
8.1(c) Subject to the other provisions of this paragraph, the Plan Sponsor
shall make, or cause to be made out of the Fund, the payment of all
benefits under the Plan. The Plan Sponsor may require contributions
by participating Employers be delivered to the Plan Sponsor at such
times (whether before, at or after the time of payment), in such
amounts and on such basis as it may from time to time determine in
order to defray the costs of benefits under and administration of
the Plan.
8.1(d) The Employer shall pay over contributions to the Fund at least
monthly or at such other time or times as the Plan Sponsor may
direct.
8.2 Use of Trust.
8.2(a) Notwithstanding any provision herein to the contrary, the Plan
Sponsor may in its sole discretion direct the establishment and
holding assets in the Fund pursuant to a Trust Agreement for the
purpose of providing benefits under the Plan.
8.2(b) The Employers acknowledge that any Trust Agreement, if established,
will be established by the Plan Sponsor (who may be referred to as
the Trust Sponsor in the Trust Agreement) for the benefit of all
participating Employers, that being a participating Employer in the
Plan automatically makes the Employer an Employer for purposes of
any Trust Agreement (unless the Trust Agreement otherwise
provides), and that any Trust Agreement may be amended by
appropriate action of the Plan Sponsor (without any action required
by the other participating Employers).
8.3 Fund Divisions.
8.3(a) It is contemplated that the Fund will be held in divisions
(sometimes referred to as "divisions of the Fund", "Fund divisions"
or "investments funds" herein) as hereinafter provided, and each
Participant's Accrued Benefit shall be subdivided to reflect its
deemed interest in each Fund division.
8.3(b) The Fund divisions which shall be maintained in the Fund are those
regulated investment companies, collective trust funds and/or other
pooled investment funds listed from time to time on Appendix A to
the Plan, each of which shall be treated as a separate Fund
division.
8.4 Participant Investment Directions. The Accrued Benefit of a Participant in
the Plan shall be divided or allocated to reflect the amount of each such
Participant's deemed interest in each Fund division as hereinafter
provided for the purpose of determining the earnings or loss to be
credited to his account, but any such direction shall not give the
Participant any right, title or interest in any specific asset or assets
of the Fund:
8.4(a) Upon becoming a Participant without a contribution investment
direction in force, a Participant may direct that his future
Directable Contributions be invested, in whole multiples of the
Permitted Direction Percentage (equalling one hundred percent
(100%) in the aggregate), in the Available Investment Funds by
filing a "contribution investment direction" with the Administrator
at such time.
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8.4(b) In accordance with procedures established by the Administrator from
time to time:
(i) Contribution Investment Direction - A Participant may
make a "contribution investment direction" by directing
that whole multiples of the Permitted Direction
Percentage (equalling one hundred percent (100%) in the
aggregate) of his future Directable Contributions be
invested in the Available Investment Funds. Any such
contribution investment direction shall be effected
for contributions made after commencement of
participation or contributions, as the case may be, and
thereafter as of each subsequent Contribution Investment
Direction Change Date for which such direction is timely
delivered to the Administrator (or its designee); and/or
(ii) Account Balance Investment Direction - A Participant
(or, if deceased, his Beneficiary) may make an "account
balance investment direction" by directing that whole
multiples of the Permitted Direction Percentage (equalling
one hundred percent (100%) in the aggregate) of his
Directable Accounts be invested in the Available Investment
Funds. Any such account balance investment direction shall
be effective as of and for the Account Balance Investment
Direction Change Date for which such direction is timely
delivered to the Administrator (or its designee).
The Administrator (or its designee) generally will process
investment directions on a current basis after received, but shall
not be obligated to process any investment directions on a
retroactive basis.
8.4(c) If or to the extent a Participant (or if deceased, his
Beneficiary) has no investment direction in effect, his Directable
Contributions and Directable Accounts shall be invested in the
Default Fund designated on Appendix A.
8.4(d) For purposes of this paragraph:
(i) The term "Account Balance Investment Direction Change Date"
means each Valuation Date.
(ii) The term "Available Investment Funds" means the investment
funds listed in Appendix A to the Plan.
(iii) The term "Directable Accounts" means the entire Accrued
Benefit of the Participant.
(iv) The term "Directable Contributions" means contributions made
by the Participant
(v) The term "Contribution Investment Direction Change Date"
means each Valuation Date.
(vi) The term "Permitted Direction Percentage" means one percent
(1%).
8.4(e) The Administrator may, on a uniform and non-discriminatory basis
from time to time, set or change the advance notice requirement for
effecting investment directions, may limit the number of investment
direction changes made in a Plan Year, may limit investment
directions, if any, which can be made by telephone, and generally
may change any of the investment direction procedures.
ARTICLE IX
Fiduciaries
9.1 Fiduciaries and Duties and Responsibilities. Authority to control and
manage the operation and administration of the Plan shall be vested in the
following persons or entities, who, together with their membership, if
any, shall be the fiduciaries under the Plan ("Fiduciaries") with those
powers, duties, and responsibilities specifically allocated to them by the
Plan:
9.1(a) Plan Administrator - The Plan Administrator in connection with its
fiduciary obligations and rights relating to the Plan and the Fund.
9.1(b)Plan Sponsor - The Plan Sponsor in connection with its
fiduciary obligations and rights relating to the Plan and the Fund.
9.1(c)Trustee - The Trustee, if any, in connection with its
fiduciary obligations and rights relating to the Fund.
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9.2 Limitation of Duties and Responsibilities of Fiduciaries. The
duties and responsibilities, and any liability therefor, of the
Fiduciaries provided for in paragraph 9.1 shall be severally limited
to the duties and responsibilities specifically allocated to each
such Fiduciary in accordance with the terms of the Plan, and there
shall be no joint duty, responsibility, or liability among any such
groups of Fiduciaries in the control and management of the operation
and administration of the Plan.
9.3 Service by Fiduciaries in More Than One Capacity. Any person or group of
persons may serve in more than one Fiduciary capacity with respect to the
Plan.
9.4 Allocation or Delegation of Duties and Responsibilities by
Fiduciaries. By written agreement filed with the Administrator and the
Plan Sponsor, any duties and responsibilities of any Fiduciary may be
allocated among Fiduciaries or may be delegated to persons other than
Fiduciaries. Any written agreement shall specifically set forth the
duties and responsibilities so allocated or delegated, shall
contain reasonable provisions for termination, and shall be executed
by the parties thereto.
9.5 Assistance and Consultation. A Fiduciary, and any delegate named pursuant
to paragraph 9.4, may engage agents to assist in its duties and may
consult with counsel, who may be counsel for the Employer, with respect to
any matter affecting the Plan or its obligations and responsibilities
hereunder, or with respect to any action or proceeding affecting the Plan.
9.6 Compensation and Expenses. All compensation and expenses of the
Fiduciaries and their agents and counsel shall be paid or reimbursed by
the Employer on such basis as the Plan Sponsor shall determine; provided,
however, that each person or committeeman serving as a Fiduciary shall
serve without compensation for such service unless otherwise determined by
the Plan Sponsor or, in the case of the Trustee, unless otherwise provided
in the Trust Agreement.
9.7 Indemnification. The Employer, on such basis as the Plan Sponsor
shall determine, shall indemnify and hold harmless any individual who
is an employee of the Employer or an Affiliate and who is a
Fiduciary or a member of a Fiduciary under the Plan and any other
individual who is an employee of the Employer or an Affiliate and to
whom duties of a Fiduciary are delegated pursuant to paragraph 9.4,
to the extent permitted by law, from and against any liability, loss,
cost or expense arising from their good faith action or inaction in
connection with their responsibilities under the Plan.
ARTICLE X
Plan Administrator
Appointment of Plan Administrator. The Plan Sponsor may appoint one or more
persons to serve as the Plan Administrator (the "Administrator") for the
purpose of carrying out the duties specifically imposed on the
Administrator by the Plan and the Code. In the event more than one person
is appointed, the persons shall form a committee for the purpose of
functioning as the Administrator of the Plan. The person or committeemen
serving as Administrator shall serve for indefinite terms at the pleasure
of the Plan Sponsor, and may, by thirty (30) days prior written notice to
the Plan Sponsor, terminate such appointment. The Plan Sponsor shall
inform the Trustee of any such appointment or termination, and the Trustee
may assume that any person appointed continues in office until notified of
any change.
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10.2 Plan Sponsor as Plan Administrator. In the event that no Administrator is
appointed or in office pursuant to paragraph 10.1, the Plan Sponsor shall
be the Administrator.
10.3 Procedure if a Committee. If the Administrator is a committee, it shall
appoint from its members a Chairman and a Secretary. The Secretary
shall keep records as may be necessary of the acts and resolutions of
such committee and be prepared to furnish reports thereof to the Plan
Sponsor and the Trustee. Except as otherwise provided, all instruments
executed on behalf of such committee may be executed by its Chairman or
Secretary, and the Trustee may assume that such committee, its Chairman
or Secretary are the persons who were last designated as such to them in
writing by the Plan Sponsor or its Chairman or Secretary.
10.4 Action by Majority Vote if a Committee. If the Administrator is a
committee, its action in all matters, questions and decisions shall be
determined by a majority vote of its members qualified to act thereon.
They may meet informally or take any action without the necessity of
meeting as a group.
10.5 Appointment of Successors. Upon the death, resignation or removal of a
person serving as, or on a committee which is, the Administrator, the
Employer may, but need not, appoint a successor.
10.6 Duties and Responsibilities of Plan Administrator. The Administrator shall
have the following duties and responsibilities under the Plan:
10.6(a) The Administrator shall be responsible for the fulfillment of all
relevant reporting and disclosure requirements set forth in the
Plan, the Code and the Act the distribution thereof to
Participants and their Beneficiaries and the filing thereof with
the appropriate governmental officials and agencies.
10.6(b) The Administrator shall maintain and retain necessary records
respecting its administration of the Plan and matters upon which
disclosure is required under the Plan, the Code and the Act.
10.6(c) The Administrator shall make any elections for the Plan required
to be made by it under the Plan, the Code and the Act.
10.6(d) The Administrator is empowered to settle claims against the Plan
and to make such equitable adjustments in a Participant's or
Beneficiary's rights or entitlements under the Plan as it deems
appropriate in the event an error or omission is discovered or
claimed in the operation or administration of the Plan.
10.6(e) The Administrator may construe the Plan, correct defects, supply
omissions or reconcile inconsistencies to the extent necessary to
effectuate the Plan and such action shall be conclusive.
10.7 Power and Authority. The Administrator is hereby vested with all the power
and authority necessary in order to carry out its duties and
responsibilities in connection with the administration of the Plan imposed
hereunder. For such purpose, the Administrator shall have the power to
adopt rules and regulations consistent with the terms of the Plan.
10.8 Availability of Records. The Employer and the Trustee shall, at the
request of the Administrator, make available necessary records or other
information they possess which may be required by the Administrator in
order to carry out its duties hereunder.
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10.9 No Action with Respect to Own Benefit. No Administrator who is a
Participant shall take any part as the Administrator in any discretionary
action in connection with his participation as an individual. Such action
shall be taken by the remaining Administrator, if any, or otherwise by the
Plan Sponsor.
ARTICLE XI
Amendment and Termination of Plan
11.1 Amendment or Termination of the Plan.
11.1(a) The Plan may be terminated at any time by the Board. The Plan may
be amended in whole or in part from time to time by the Board
effective as of any date specified. No amendment or termination
shall operate to decrease a Participant's vested Accrued Benefit
as of the earlier of the date on which the amendment or
termination is approved by the Board or the date on which an
instrument of amendment or termination is signed on behalf of the
Plan Sponsor. No amendment shall increase the Trustee's duties or
obligations or decrease its compensation unless contained in an
amendment of, or document expressly pertaining to, the Trust
Agreement which includes the Trustee's written consent or for
which the Trustee's written consent is separately obtained. Any
such termination of or amendment to the Plan may provide for the
acceleration of payment of benefits under the Plan to one or more
Participants or Beneficiaries. Any such termination of or
amendment to the Plan shall be in writing and shall be adopted
pursuant to action by the Board (including pursuant to any
standing authorization for any officer, director or committee to
adopt amendments) in accordance with its applicable procedures,
including where applicable by majority vote or consent in writing.
11.1(b) In addition, and as an alternative, to amendment of the Plan by
action of the Board, but subject to the limitations on amendment
contained in subparagraph 11.1(a), the Chief Executive Officer of
the Plan Sponsor shall be and is hereby authorized to adopt on
behalf of the Board and to execute any technical amendment or
amendments to the Plan which in the opinion of counsel for the
Plan Sponsor are required by law and are deemed advisable by the
Chief Executive Officer of the Plan Sponsor and to so adopt and
execute any other discretionary amendment or amendments to the
Plan which are deemed advisable by the Chief Executive Officer of
the Plan Sponsor so long as any such amendments do not, in view of
the Chief Executive Officer of the Plan Sponsor, materially
increase costs of the Plan to the Employer.
11.1(c) Termination of the Plan shall mean termination of active
participation by Participants, but shall not mean immediate
payment of all vested Accrued Benefits unless the Plan Sponsor so
directs. On termination of the Plan, the Board of the Plan Sponsor
may provide for the acceleration of payment of the vested Accrued
Benefits of all affected Participants on such basis as it may
direct.
11.2 Effect of Employer Merger, Consolidation or Liquidation.
Notwithstanding the foregoing provisions of this ARTICLE XI, the
merger or liquidation of any Employer into any other Employer or the
consolidation of two (2) or more of the Employers shall not cause the
Plan to terminate with respect to the merging, liquidating or
consolidating Employers, provided that the Plan has been adopted or is
continued by and has not terminated with respect to the surviving or
continuing Employer.
ARTICLE XII
Miscellaneous
12.1 Headings. The headings in the Plan have been inserted for convenience of
reference only and are to be ignored in any construction of the provisions
hereof.
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12.2 Gender and Number. In the construction of the Plan, the masculine shall
include the feminine or neuter and the singular shall include the plural
and vice-versa in all cases where such meanings would be appropriate.
12.3 Governing Law. The Plan and the Fund shall be construed,
enforced and administered in accordance with the laws of the
Commonwealth of Virginia, and any federal law pre-empting the same.
Unless federal law specifically addresses the issue, federal law shall
not pre-empt applicable state law preventing an individual or person
claiming through him from acquiring property or receiving benefits as a
result of the death of a decedent where such individual caused the death.
12.4 Employment Rights. Participation in the Plan shall not give any employee
the right to be retained in the Employer's employ nor, upon dismissal or
upon his voluntary termination of employment, to have any right or
interest in the Fund other than as herein provided.
12.5 Conclusiveness of Employer Records. The records of the Employer with
respect to age, service, employment history, compensation, absences,
illnesses and all other relevant matters shall be conclusive for purposes
of the administration of the Plan.
12.6 Right to Require Information and Reliance Thereon. The Plan Sponsor
and the Administrator shall have the right to require any Participant,
Beneficiary or other person receiving benefit payments to provide it with
such information, in writing, and in such form as it may deem necessary
to the administration of the Plan and may rely thereon in carrying out
its duties hereunder. Any payment to or on behalf of a Participant or
Beneficiary in accordance with the provisions of the Plan in good faith
reliance upon any such written information provided by a Participant or
any other person to whom such payment is made shall be in full
satisfaction of all claims by such Participant and his Beneficiary;
and any payment to or on behalf of a Beneficiary in accordance with the
provisions of the Plan in good faith reliance upon any such written
information provided by such Beneficiary or any other person to whom
such payment is made shall be in full satisfaction of all claims by such
Beneficiary.
12.7 Alienation and Assignment. The interests of each Participant under the
Plan are not subject to claims of the Participant's creditors; and neither
the Participant, nor his Beneficiary, shall have any right to sell,
assign, transfer or otherwise convey the right to receive any payments
hereunder or any interest under the Plan, which payments and interest are
expressly declared to be non-assignable and non-transferable.
12.8 Notices and Elections.
12.8(a) Except as provided in subparagraph 12.8(b), all notices required
to be given in writing and all elections, consents, applications
and the like required to be made in writing, under any provision
of the Plan, shall be invalid unless made on such forms as may be
provided or approved by the Administrator and, in the case of a
notice, election, consent or application by a Participant or
Beneficiary, unless executed by the Participant or Beneficiary
giving such notice or making such election, consent or
application.
12.8(b) Subject to limitations under applicable provisions of the Code or
the Act (such as the requirement that spousal consent be in
writing), the Administrator is authorized in its discretion to
accept other means for receipt of effective notices, elections,
consent and/or application by Participants and/or Beneficiaries,
including but not limited to interactive voice systems, on such
basis and for such purposes as it determines from time to time.
12.9 Delegation of Authority. Whenever the Plan Sponsor or any Employer is
permitted or required to perform any act, such act may be performed by its
Chief Executive Officer, its President or its Board of Directors or by any
other person duly authorized by any of the foregoing.
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12.10 Service of Process. The Administrator shall be the agent for service of
process on the Plan.
12.11 Construction. This Plan and the Fund are created for the exclusive benefit
of Eligible Employees of the Employer and their Beneficiaries and shall be
interpreted and administered in a manner consistent with their being an
unfunded deferred compensation plan maintained for a select group of
management or highly compensated employees (sometimes referred to as a
"top-hat" plan) described in Sections 201(2), 301(a)(3) and 401(a)(1) of
the Act. If the fund is maintained pursuant to a Trust Agreement, it is
intended to be a grantor trust, of which the Plan Sponsor or, if so
provided, the Employer is the grantor, within the meaning of subpart E,
part I, subchapter J, chapter 1, subtitle A of the Code, and shall be
construed accordingly.
ARTICLE XIII
Participation by Additional Employers
13.1 Adoption by Additional Employers. Any Affiliate with employees covered by
the Plan Sponsor's executive compensation plan shall automatically be
considered to adopt and participate in the Plan, unless otherwise
expressly provided by the Plan Sponsor.
13.2 Termination Events with Respect to Employers Other Than the Plan Sponsor.
13.2(a) The Plan shall terminate with respect to any Employer other than
the Plan Sponsor, and such Employer shall automatically cease to
be a participating Employer in the Plan, upon the happening of any
of the following events:
(i) The Employer's ceasing to have employees covered by the Plan
Sponsor's executive compensation plan
(ii) The Employer's ceasing to be an Affiliate.
(iii) Action by the Board or Chief Executive Officer of the Plan
Sponsor terminating an Employer's participation in the Plan
and specifying the date of such termination. Notice of such
termination shall be delivered to the Administrator and the
former participating Employer.
13.2(b) Termination of the Plan with respect to any Employer shall mean
termination of active participation of the Participants employed
by such Employer, but shall not mean immediate payment of all
vested Accrued Benefits with respect to the Employees of such
Employer unless the Plan Sponsor so directs. On termination of the
Plan with respect to any Employer, the Board of the Plan Sponsor
may provide for the acceleration of payment of the vested Accrued
Benefits of all affected Participants of that former participating
Employer on such basis as it may direct.
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CADMUS NON-QUALIFIED THRIFT PLAN
IN WITNESS WHEREOF, the Plan Sponsor and each other participating
Employer, pursuant to the resolution duly adopted by its Board, has caused
this Plan to be signed on its behalf by its duly authorized officer or
member of its Board of Directors as of this 20 day of June, 1995.
CADMUS COMMUNICATIONS CORPORATION,
Plan Sponsor and participating Employer
By: C. S. Gillispie, Jr.
--------------------------------(SEAL)
Its Chairman & Chief Executive Officer
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CADMUS NON-QUALIFIED THRIFT PLAN
Appendix A
(As of April 1, 1996)
List of Available Investment Funds
A-1.1 Available Investment Funds. The Available Investments Funds, each
of which shall be considered a separate Fund division, are the
following regulated investment companies and/or collective trust
funds sponsored by T. Rowe Price Associates, Inc. or any of its
affiliates (sometimes referred to as the "T. Rowe Price investment funds"
or "T. Rowe Price Fund divisions"):
(i) T. Rowe Price Prime Reserve Fund (replacing the T. Rowe Price
Stable Value Fund).
(ii) T. Rowe Price Balanced Fund.
(iii) T. Rowe Price Equity Index Fund.
(iv) T. Rowe Price International Stock Fund.
(v) T. Rowe Price Growth Stock Fund.
(vi) T. Rowe Price Small-Cap Value Fund.
(vii) T. Rowe Price U.S. Treasury Intermediate Fund (first
available April 1, 1996).
(viii) T. Rowe Price New Horizons Fund (first available
April 1, 1996).
A-1.2 Default Fund. The Default Fund is the T. Rowe Price Balanced Fund.
87
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<S> <C>
EXHIBIT 10.9
June 25, 1998
Charles S. Gillispie, Jr.
102 North Erlwood Court
Richmond,, VA 23229
Re: Employee Retention Agreement
Dear Steve:
Cadmus Communications Corporation (the "Corporation") considers it
essential to the best interests of its shareholders to foster the continuous
employment of its key management personnel and that of its direct and indirect
subsidiaries (collectively the "Cadmus Companies" or individually a "Cadmus
Company"). In this connection, the Board of Directors of the Corporation (the
"Board") recognizes that the possibility of a change in control of the
Corporation may exist and that such possibility, and the uncertainty and
questions which it may raise among management, may result in the departure or
distraction of management personnel to the detriment of the Corporation and its
shareholders.
The Board has determined that appropriate steps should be taken to
reinforce and encourage the continued attention and dedication of members of the
Cadmus Companies' management, including yourself, to their assigned duties
without distraction in the face of potentially disturbing circumstances arising
from the possibility of a change in control of the Corporation.
In order to induce you to remain in the employ of the Cadmus Companies,
the Corporation agrees that you shall receive the severance benefits set forth
in this letter agreement (the "Agreement") in the event your employment with the
Cadmus Companies is terminated under the circumstances described below
subsequent to a Change in Control (as defined in Section 2) of the Corporation.
1. Certain Definitions.
(a) "Change in Control Period" means the period commencing on the date hereof
and ending on the second anniversary of such date; provided, however, that
commencing on the date one year after the date hereof, and on each
anniversary of such date (such date and each annual anniversary thereof
shall be hereinafter referred to as the "Renewal Date"), the Change in
Control Period shall be automatically extended so as to terminate two
years from such Renewal Date, unless at least 60 days prior to the Renewal
Date the Corporation shall give notice to you that the Change in Control
Period shall not be so extended.
(b) "Effective Date" means the first date during the Change in Control Period
(as defined in Section 1(b)) on which a Change in Control occurs.
Anything in this Agreement to the contrary notwithstanding, if a Change in
Control occurs and if your employment with the Cadmus Companies is
terminated prior to the date on which the Change in Control occurs, and if
it is reasonably demonstrated by you that such termination of employment
(i) was at the request of a third party who has taken steps reasonably
calculated to effect the Change in Control, or (ii) otherwise arose in
connection with or anticipation of the Change in Control, then for all
purposes of this Agreement the "Effective Date" shall mean the date
immediately prior to the date of such termination of employment.
(c) "Employment Period" means the period commencing on the Effective
Date and ending on the second anniversary of such date.
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(d) "Date of Termination" means (i) if your employment with the
Cadmus Companies is terminated by the Corporation for Cause or is
terminated by you for Good Reason, the date of receipt of the
Notice of Termination or any later date specified therein, as
the case may be, (ii) if your employment with the Cadmus
Companies is terminated by the Corporation other than for Cause
or Disability, the Date of Termination shall be the date on which
the Corporation notifies you of such termination, and (iii) if
your employment is terminated by reason of death or Disability,
the Date of Termination shall be the date of your death or the
Disability Effective Date, as the case may be.
(e) "Termination" means a notice which (i) indicates the specific
termination provision in this Agreement relied upon, (ii) sets forth
in reasonable detail the facts and circumstances claimed to provide
a basis for termination of your employment under the provision so
indicated, and (iii) if the Date of Termination is other than the
date of receipt of such notice, specifies the termination date.
2. Change in Control. No benefits shall be payable hereunder unless there
shall have been a Change in Control of the Corporation, as set forth
below. For purposes of this Agreement, a "Change in Control" shall mean:
(a) The acquisition by any individual, entity or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) (a "Person") of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or
more of either (i) the then outstanding shares of common stock of the
Corporation (the "Outstanding Cadmus Common Stock") or (ii) the combined
voting power of the then outstanding voting securities of the Corporation
entitled to vote generally in the election of directors (the "Outstanding
Cadmus Voting Securities"). Notwithstanding the foregoing, the following
acquisitions shall not constitute a Change in Control: (i) any
acquisition directly from the Corporation, (ii) any acquisition by the
Corporation, (iii) any acquisition by, or benefit distribution from, any
employee benefit plan (or related trust) sponsored or maintained by the
Corporation or any corporation controlled by the Corporation, (iv) any
acquisition pursuant to any compensatory stock option, stock purchase or
other stock plan for employees, or (v) any acquisition pursuant to a
reorganization, merger or consolidation, if, following such
reorganization, merger or consolidation, the conditions described in
clauses (i), (ii), and (iii) of Subsection (c) of this Section 2 are
satisfied; or
(b) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority
of the Board; provided, however, that any individual becoming a director
subsequent to the date hereof whose election or nomination for election
was approved by a vote of at least a majority of the directors then
comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board (with his predecessor
thereafter ceasing to be a member); or
(c) Approval by the shareholders of the Corporation of the reorganization,
merger, or consolidation of the Corporation unless, following such
reorganization, merger, or consolidation, (i) more than 60% of the then
outstanding shares of common stock and the then outstanding voting
securities of the resulting corporation is then beneficially owned by all
or substantially all of the beneficial owners, respectively, of the
Outstanding Cadmus Common Stock and Outstanding Cadmus Voting Securities
immediately prior to such reorganization, merger, or consolidation, (ii)
no Person (excluding (A) the Corporation, (B) any employee benefit plan
(or related trust) of the Corporation or such corporation resulting from
such reorganization, merger, or consolidation, and (C) any Person
beneficially owning, immediately prior to such reorganization, merger, or
consolidation, 20% or more of the Outstanding Cadmus Common Stock or
Outstanding Cadmus Voting Securities, as the case may be) beneficially
owns 20% or more of the then outstanding shares of common stock or the
combined voting power of the then outstanding voting securities of the
resulting corporation, and (iii) at least a majority of the members of the
board of directors of the resulting corporation were members of the
Incumbent Board at the time of the execution of the initial agreement
providing for such reorganization, merger, or consolidation; or
(d) Approval by the shareholders of the Corporation of (i) a complete
liquidation or dissolution of the Corporation, or (ii) the sale or other
disposition of all or substantially all of the assets of the Corporation
other than to a corporation with respect to which, following such sale or
other disposition, (A) more than 60% of the outstanding shares of common
stock and the then outstanding voting securities of such corporation is
beneficially owned by all or substantially all of the beneficial owners,
respectively, of the Outstanding Cadmus Common Stock and Outstanding
Cadmus Voting Securities immediately prior to such sale or disposition;
(B) no Person (excluding (I) the Corporation, (II) any employee benefit
plan (or related trust) of the Corporation or such corporation, and (III)
any Person beneficially owning, immediately prior to such sale or other
disposition, 20% or more of the Outstanding Cadmus Common Stock or
Outstanding Cadmus Voting Securities, as the case may be) beneficially
owns 20% or more of the then outstanding shares of common stock or the
combined voting power of the then outstanding voting securities of such
corporation, and (C) at least a majority of the members of the board of
directors of such corporation were members of the Incumbent Board at the
time of the execution of the initial agreement providing for such sale or
other disposition of the assets of the corporation.
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3. Employment Period. The Corporation hereby agrees to continue, or cause to
be continued, your employment with the Cadmus Companies for the Employment
Period.
4. Termination of Employment.
(a) Your employment with the Cadmus Companies shall terminate
automatically upon your death during the Employment Period.
(b) If, as a result of your incapacity due to physical or mental illness (as
determined by the Corporation), you shall have been absent from the
full-time performance of your duties with the Cadmus Companies for six (6)
consecutive months (your "Disability"), the Cadmus Company by which you
are then employed may give you written notice of its intention to
terminate your employment. In such event, your employment with the Cadmus
Companies shall terminate effective on the 30th day after your receipt of
such notice (the "Disability Effective Date"), provided that within 30
days after your receipt of such notice you have not returned to full-time
performance of your duties.
(c) Your employment with the Cadmus Companies may be terminated by the
Corporation during the Employment Period with or without Cause. For
purposes hereof, "Cause" shall mean (i) the willful and continued failure
by you to substantially perform your duties with the Cadmus Companies
(other than any such failure resulting from your incapacity due to
physical or mental illness or any such actual or anticipated failure after
the issuance of a Notice of Termination by you for Good Reason (as defined
in Section 4(d)), after a written demand for substantial performance is
delivered to you by the Board, which demand specifically identifies the
manner in which the Board believes that you have not substantially
performed your duties, (ii) the willful engagement by you in conduct which
is demonstrably and materially injurious to the Cadmus Companies,
monetarily or otherwise, or (iii) your conviction of a felony involving
moral turpitude. For purposes of this subsection, no act, or failure to
act, on your part shall be deemed "willful" unless done, or omitted to be
done, by you not in good faith and without reasonable belief that your
action or omission was in the best interest of the Cadmus Companies.
(d) You may terminate your employment with the Cadmus Companies during
the Employment Period for any reason, including without limitation
Good Reason. For purposes of this Agreement, "Good Reason" shall
mean:
(i) the assignment to you of any duties inconsistent with the
position (including status, offices, titles, and reporting
requirements) or authority in the Cadmus Companies that you
held immediately prior to the Change in Control, or a
significant adverse alteration in the nature or status of your
responsibilities or the conditions of your employment from
those in effect immediately prior to such Change in Control;
(ii) a reduction by the Corporation in your annual base salary as
in effect on the date hereof or as the same may be increased
from time to time;
(iii) if your principal office location is at the Corporation's
principal executive offices immediately prior to the Change in
Control, the relocation of the Corporation's principal
executive offices to a location outside the Richmond
Metropolitan Area, or if your principal office location is not
at the Corporation's principal executive offices immediately
prior to the Change in Control, the Corporation's requiring
you to be based anywhere other than your principal office
location immediately prior to the Change in Control except for
required travel on the Cadmus Companies' business to an extent
substantially consistent with your present business travel
obligations;
(iv) except in the event of reasonable administrative delay, the
failure by the Cadmus Companies to pay to you any portion of
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your current compensation or to pay to you any portion of an
installment of deferred compensation under any deferred
compensation program of the Cadmus Companies within seven (7)
days of the date such compensation is due;
(v) the failure by the Cadmus Companies to continue in effect for
you any compensation plan in which you participate immediately
prior to the Change in Control that is material to your total
compensation or any substitute plan adopted prior to the
Change in Control, unless an equitable arrangement (embodied
in an ongoing substitute or alternative plan) has been made
with respect to such plan, or the failure by the Cadmus
Companies to continue your participation therein (or in such
substitute or alternative plan) on a basis not materially less
favorable, both in terms of the amount of benefits provided
and the level of your participation relative to other
participants, as it existed at the time of the Change in
Control;
(vi) the failure by the Cadmus Companies to continue to provide you
with benefits substantially similar to those enjoyed by you
under any of the Cadmus Companies' life insurance, medical,
health and accident, or disability plans in which you were
participating at the time of the Change in Control, the taking
of any action by any Cadmus Company which would directly or
indirectly materially reduce any of such benefits or deprive
you of any material fringe benefit enjoyed by you at the time
of the Change in Control, or the failure by the Cadmus
Companies to provide you with the number of paid vacation days
to which you are entitled on the basis of years of service
with the Cadmus Companies in accordance with the normal
vacation policy of the Cadmus Company employing you in effect
at the time of the Change in Control;
(vii) the failure of the Corporation to obtain a satisfactory
agreement from any successor to assume and agree to perform
this Agreement, as contemplated in Section 6 hereof;
(viii)any purported termination of your employment that is not
effected pursuant to a Notice of Termination satisfying the
requirements of Subsection (e) hereof (and, if applicable, the
requirements of Subsections (b) and (c) hereof), which
purported termination shall not be effective for purposes of
this Agreement; or
(ix) so long as no Cause for your termination by the Corporation
exists (or would exist assuming the Board made a determination
of Cause), a voluntary cessation by you of your employment for
any reason during the 60-day period commencing on the first
anniversary of the occurrence of the Change in Control.
For purposes of this subsection, any good faith determination of
"Good Reason" made by you shall be conclusive. In addition, your
right to terminate your employment pursuant to this subsection shall
not be affected by your incapacity due to physical or mental illness
and your continued employment shall not constitute consent to, or a
waiver of rights with respect to, any circumstance constituting Good
Reason hereunder.
(e) Any purported termination of your employment with the Cadmus
Companies by the Corporation or by you shall be communicated by
written Notice of Termination to the other party hereto in
accordance with Section 8.
5. Compensation upon Termination during the Employment Period. Following a
Change in Control, you shall be entitled to the following benefits upon
termination of your employment with the Cadmus Companies provided that
such termination occurs during the Employment Period:
(a) If your employment is terminated by reason of your death
during the Employment Period, this Agreement shall terminate
without further obligations to your legal representatives under
this Agreement, other than for (i) payment of your Base Salary (as
defined in Section 5(g) hereof)
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through the Date of Termination at the same rate in effect at
such date, and (ii) all other amounts to which you are
entitled under any compensation plan or any other plan, policy,
or arrangement of the Cadmus Companies, at the time such payments
are due.
(b) During any period that you fail to perform your full-time duties
with the Cadmus Companies as a result of incapacity due to
physical or mental illness, you shall continue to receive, until
this Agreement is terminated pursuant to Section 4(b) hereof, your
Base Salary (as defined in Section 5(g)) at the rate in effect at
the commencement of any such period, together with all
compensation payable to you under any long-term disability
plan maintained by the Cadmus Companies in your name or for your
benefit or other similar plan during such period. Thereafter,
your benefits shall be determined under the retirement,
insurance and other compensation programs of the Cadmus Companies
in which you participate in accordance with the terms of such
programs; however, your receipt of benefits under any long-term
disability plan maintained by the Cadmus Companies in your name
or for your benefit will not be affected by your termination
under this Agreement.
(c) If, during the Employment Period, your employment with the
Cadmus Companies shall be terminated by the Corporation for Cause
or by you other than for Good Reason, you shall be entitled to
your full Base Salary (as defined in Section 5(g)) through the
Date of Termination at the rate in effect at the time Notice of
Termination is given, plus all other amounts to which you are
entitled under any compensation plan of the Cadmus Companies at
the time such payments are due, and the Cadmus Companies shall
have no further obligations to you under this Agreement.
(d) If, during the Employment Period, your employment with the Cadmus
Companies shall be terminated by you for Good Reason or by the
Corporation other than for Cause, death, or Disability, then you
shall be entitled to the benefits provided below:
(i) you the Corporation shall pay to you your full Base Salary (as
defined in Section 5(g) hereof) through the Date of
Termination at the rate in effect at the time Notice of
Termination is given, no later than the fifth day following
the Date of Termination, plus all other amounts to which you
are entitled under any compensation plan of the Cadmus
Companies, at the time such payments are due;
(ii) in lieu of any further salary or bonus payments to you for
periods subsequent to the Date of Termination, you shall be
paid as severance pay to you, at the time and in the manner
specified in Subsection (e), a severance payment (the
"Severance Payment") equal to the product of (A) your Base
Salary (as defined in Section 5(g) hereof), and (B) a number
(the "Payment/Benefit Factor") determined by dividing by 52
the sum of (I) three times the number of full years that you
have been employed by the Cadmus Companies, and (II) three
times each $10,000 of your annual salary (that is, excluding
bonus) as in effect at the Date of Termination; provided,
however, that in no event shall such Payment/Benefit Factor be
less than .5 nor greater than 2.99, and provided, further,
that in no event shall such amount exceed the amount of your
Base Salary (as defined in Section 5(g)), on an undiscounted
basis, which you would have received had you remained in the
employ of the Cadmus Companies until your "Normal Retirement
Date" (as defined in the Corporation's Pension Plan (or any
successor thereto) (the "Pension Plan");
(iii) a separate lump-sum supplemental retirement benefit (the
amount of such benefit shall be hereinafter referred to as the
"Supplemental Retirement Amount") equal to the difference
between (A) the actuarial equivalent (utilizing for this
purpose the actuarial assumptions utilized in determining
benefit cash-outs with respect to the Corporation's Pension
Plan during the 90-day period immediately preceding the
Effective Date) of the benefit payable under the Pension Plan
and any supplemental and/or excess benefit plan of the
Corporation providing benefits for you (the "SERP") which you
would receive if your employment continued at the compensation
level in effect at the Date of Termination for the remainder
of the Employment Period, assuming for this purpose that all
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accrued benefits are fully vested and that benefit accrual
formulas are no less advantageous to you than those in effect
during the 90-day period immediately proceeding the Effective
Date, and (B) the actuarial equivalent (utilizing for this
purpose the actuarial assumptions utilized in determining
benefit cash outs with respect to the Pension Plan during the
90-day period immediately preceding the Effective Date) of
your actual vested benefit (paid or payable), if any, under
the Pension Plan and the SERP;
(iv) Except as provided in (iii) above, your participation in, and
terminating distribution and vested rights under, the
Corporation's Pension Plan and other plans of deferred
compensation of the Cadmus Companies shall be governed by the
terms of those respective plans;
(v) the Corporation shall pay to you all legal fees and expenses
incurred by you as a result of such termination, including all
such fees and expenses, if any, incurred in seeking to obtain
or enforce any right or benefit provided by this Agreement or
in connection with any tax audit or proceeding to the extent
attributable to the application of Section 4999 of the
Internal Revenue Code of 1986, as amended (the "Code") to any
payment or benefit provided hereunder;
(vi) for a period of years (or portion thereof) (the "Payment
Period") equal to the Payment/Benefit Factor after such
termination or until your "Normal Retirement Date" (as defined
in the Corporation's Pension Plan, whichever first occurs, the
Corporation shall arrange to provide you with life,
disability, accident and group health insurance benefits
substantially similar to those which you were receiving under
the welfare programs of the Cadmus Companies immediately prior
to the Notice of Termination. Benefits otherwise receivable
by you pursuant to this clause (vi) shall be reduced to the
extent comparable benefits are actually received by you from
any source (including a subsequent employer) during such
period following your termination, and any such benefits
actually received by you shall be reported to the Corporation;
(vii) in the event that the payments and benefits provided to you,
or for your benefit, under this Agreement (determined without
regard to the Gross-Up Payment described below) or under any
other plan or agreement which become payable or are taken into
account as "parachute payments" within the meaning of Section
280G of the Code as a result of a Change in Control or your
termination of employment relating thereto (the "Total
Parachute Payments") would result in your being entitled to
"excess parachute payments" as defined in Section 280G of the
Code, the following applicable reduction shall occur or
additional payment shall be made:
(A) in the event the Change in Control occurs before July 1,
1999, you shall be entitled to receive an additional
payment (a "Gross-Up Payment") in an amount such that
after payment by you of all taxes (including any
interest or penalties incurred by you with respect to
such taxes), including, without limitation, any federal,
state and local income taxes, any employment taxes, and
the excise tax imposed by Section 4999 of the Code (such
excise tax, together with any interest or penalties
relating to such excise tax, are hereinafter
collectively referred to as the "Excise Tax"), you
retain an amount of the Gross-Up Payment equal to the
Excise Tax imposed upon the Total Parachute Payments; or
(B) in the event the Change in Control occurs on or after
July 1, 1999, the payments and benefits provided to you,
or for your benefit, under this Agreement shall be
reduced (but not below zero) to the extent necessary so
that no payment to be made, or benefit to be provided,
to you or for your benefit under this Agreement or any
other plan or agreement would result in "excess
parachute payments" as defined in Section 280G of the
Code, provided, however that the reduction provided in
this clause shall not apply unless your net after-tax
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benefit if such reduction were made shall exceed your
net after-tax benefit if such reduction were not made.
"Net after-tax benefit" shall mean the sum of (I) the
Total Parachute Payments which you receive or are then
entitled to receive, less (II) the amount of federal,
state and local income and employment taxes payable by
you with respect to the Total Parachute Payments, less
(III) the amount of excise taxes imposed with respect to
the Total Parachute Payments by Section 4999 of the Code.
All determinations regarding the reductions or additional
payment called for in this clause (vii) shall be made by tax
counsel selected by the Corporation and shall be based on the
maximum applicable marginal tax rates for each year in which
such payments and benefits shall be paid or provided to you or
for your benefit (based upon the rate in effect for such year
at the time of the first payment of the foregoing and, as
appropriate as determined by such tax counsel, the taxable
wage base for employment tax purposes); and
(viii) for a period of twelve (12) months following such termination,
the Corporation shall pay the expenses of such outplacement
services as you may require, with such services to be
performed by such agency as the Corporation shall designate.
(e) The payment provided for in Subsection (d)(ii), shall be made in a
lump-sum not later than the 30th day following the Date of Termination.
Notwithstanding anything contained in this Subsection (e) or in Subsection
(d)(ii), you may elect to receive, in lieu of a lump-sum Severance
Payment, the benefits described in Subsection (d)(ii) in equal monthly
installments commencing on the first day of the month following the Date
of Termination and ending on the first to occur of (A) the first day of
the last month within the Payment Period, or (B) the first day of the
month in which occurs your "Normal Retirement Date" (as defined in the
Corporation's Pension Plan.
(f) Except as provided in Subsection (d)(vi) hereof you shall not be
required to mitigate the amount of any payment provided for in this
Section 5 by seeking other employment or otherwise, nor shall the
amount of any payment or benefit provided for in this Section 5 be
reduced by any compensation earned by you as the result of
employment by another employer, by retirement benefits, by offset
against any amount claimed to be owed by you to any Cadmus Company,
or otherwise.
(g) For purposes of this Agreement, your "Base Salary" shall mean the
greater of (i) the annual salary and bonus paid to you by the Cadmus
Companies at the date of this Agreement, or (ii) the annual salary
and bonus payable to you by the Cadmus Companies during the fiscal
year in which a Change in Control occurs.
6. Successors: Binding Agreement.
(a) This Agreement is personal to you and without the prior written
consent of the Corporation shall not be assignable by you otherwise
than by will or the laws of descent and distribution. This Agreement
shall inure to the benefit of, and be enforceable by, your legal
representatives.
(b) This Agreement shall inure to the benefit of, and be binding upon,
the Corporation and its successors and assigns.
(c) The Corporation will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all
of the business and/or assets of the Corporation to assume expressly and
agree to perform this Agreement in the same manner and to the same extent
that the Corporation would be required to perform it if no such succession
had taken place. As used in this Agreement, "Corporation" shall mean the
Corporation as hereinbefore defined and any successor to its business
and/or assets as aforesaid which assumes and agrees to perform this
Agreement by operation of law, or otherwise.
7. Resolution of Disputes. If there shall be any dispute between the Corporation
and you (i) in the event of any termination of your employment with the Cadmus
Companies by the Corporation, whether such termination was for Cause, or (ii) in
the event of any termination of employment with the Cadmus Companies by you,
whether Good Reason existed, then, unless and until there is a final,
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nonappealable judgment by a court of competent jurisdiction declaring that such
termination was for Cause or that the determination by you of the existence of
Good Reason was not made in good faith, the Corporation shall pay all amounts,
and provide all benefits, to you and/or your family or other beneficiaries, as
the case may be, that the Corporation would be required to pay or provide
pursuant to Section 5(d) as though such termination were by the Corporation
without Cause or by you with Good Reason; provided, however, that the
Corporation shall not be required to pay any disputed amounts pursuant to this
Section 7 except upon receipt of an undertaking by or on behalf of you to repay
all such amounts to which you are ultimately adjudged by such court not to be
entitled.
8. Notice. For the purpose of this Agreement, notices and all other communications
provided for in this Agreement shall be in writing and shall be deemed to have
been duly given when delivered or mailed by United States certified or
registered mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth on the first page of this Agreement, provided
that all notice to the Corporation shall be directed to the attention of the
Board with a copy to the Secretary of the Corporation, or to such other address
as either party may have furnished to the other in writing in accordance
herewith, except that notice of change of address shall be effective only upon
receipt.
9. Miscellaneous.
(a) This Agreement shall be governed by and construed in accordance with
the laws of the Commonwealth of Virginia, without reference to
principles of conflict of laws. The captions of this Agreement are
not part of the provisions hereof and shall have no force or effect.
(b) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any
other provision of this Agreement.
(c) The Corporation may withhold from any amounts payable under this
Agreement such Federal, state or local taxes as shall be required to
be withheld pursuant to any applicable law or regulation.
(d) Your or the Corporation's failure to insist upon strict compliance with
any provision hereof or any other provision of this Agreement or the
failure to assert any right you or the Corporation may have hereunder,
including, without limitation, your right to terminate your employment for
Good Reason pursuant to Section 4(d) or the Corporation's right to
terminate your employment for Cause pursuant to Section 4(c), shall not be
deemed to be a waiver of such provision or right or any other provision or
right of this Agreement.
(e) You and the Corporation acknowledge that, except as may otherwise be
provided under any other written agreement between you and the
Corporation, your employment by the Cadmus Companies is "at will"
and if, prior to the Effective Date, your employment with the Cadmus
Companies terminates, then you shall have no rights under this
Agreement.
(f) Prior to the Effective Date, this Agreement may be amended,
modified, or terminated by the Corporation, which amendment,
modification, or termination shall be binding and effective without
any requirement for notification of, or consent by, you.
Notwithstanding the foregoing, on or after the Effective Date, this
Agreement may not be amended, modified, or terminated otherwise than
by a written agreement executed by the parties hereto or their
respective successors and legal representatives.
10. Entire Agreement. This Agreement sets forth the entire agreement of the
parties hereto in respect of the subject matter contained herein and
supersedes all prior agreements, promises, covenants, arrangements,
communications, representations or warranties, whether oral or written, by
any officer, employee or representative of any party hereto; and any prior
agreement of the parties hereto in respect of the subject matter contained
herein is hereby terminated and canceled.
If this letter sets forth our agreement on the subject matter hereof,
kindly sign and return to the Corporation the enclosed copy of this
letter, which will then constitute our agreement on this subject.
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Sincerely,
CADMUS COMMUNICATIONS CORPORATION
By
------------------------------
Name:
Title:
Accepted and agreed to:
- -------------------------------
Charles S. Gillispie, Jr.
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EXHIBIT 10.10
June 25, 1998
David Bosher
8266 Ellerson Green Circle
Mechanicsville,, VA 23116
Re: Employee Retention Agreement
Dear Dave:
Cadmus Communications Corporation (the "Corporation") considers it
essential to the best interests of its shareholders to foster the continuous
employment of its key management personnel and that of its direct and indirect
subsidiaries (collectively the "Cadmus Companies" or individually a "Cadmus
Company"). In this connection, the Board of Directors of the Corporation (the
"Board") recognizes that the possibility of a change in control of the
Corporation may exist and that such possibility, and the uncertainty and
questions which it may raise among management, may result in the departure or
distraction of management personnel to the detriment of the Corporation and its
shareholders.
The Board has determined that appropriate steps should be taken to
reinforce and encourage the continued attention and dedication of members of the
Cadmus Companies' management, including yourself, to their assigned duties
without distraction in the face of potentially disturbing circumstances arising
from the possibility of a change in control of the Corporation.
In order to induce you to remain in the employ of the Cadmus Companies,
the Corporation agrees that you shall receive the severance benefits set forth
in this letter agreement (the "Agreement") in the event your employment with the
Cadmus Companies is terminated under the circumstances described below
subsequent to a Change in Control (as defined in Section 2) of the Corporation.
1. Certain Definitions.
(a) "Change in Control Period" means the period commencing on the date hereof
and ending on the second anniversary of such date; provided, however, that
commencing on the date one year after the date hereof, and on each
anniversary of such date (such date and each annual anniversary thereof
shall be hereinafter referred to as the "Renewal Date"), the Change in
Control Period shall be automatically extended so as to terminate two
years from such Renewal Date, unless at least 60 days prior to the Renewal
Date the Corporation shall give notice to you that the Change in Control
Period shall not be so extended.
(b) "Effective Date" means the first date during the Change in Control Period
(as defined in Section 1(b)) on which a Change in Control occurs.
Anything in this Agreement to the contrary notwithstanding, if a Change in
Control occurs and if your employment with the Cadmus Companies is
terminated prior to the date on which the Change in Control occurs, and if
it is reasonably demonstrated by you that such termination of employment
(i) was at the request of a third party who has taken steps reasonably
calculated to effect the Change in Control, or (ii) otherwise arose in
connection with or anticipation of the Change in Control, then for all
purposes of this Agreement the "Effective Date" shall mean the date
immediately prior to the date of such termination of employment.
(c) "Employment Period" means the period commencing on the Effective
Date and ending on the second anniversary of such date.
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(d) "Date of Termination" means (i) if your employment with the Cadmus
Companies is terminated by the Corporation for Cause or is terminated by
you for Good Reason, the date of receipt of the Notice of Termination or
any later date specified therein, as the case may be, (ii) if your
employment with the Cadmus Companies is terminated by the Corporation
other than for Cause or Disability, the Date of Termination shall be the
date on which the Corporation notifies you of such termination, and (iii)
if your employment is terminated by reason of death or Disability, the
Date of Termination shall be the date of your death or the Disability
Effective Date, as the case may be.
(e) "Termination" means a notice which (i) indicates the specific
termination provision in this Agreement relied upon, (ii) sets forth
in reasonable detail the facts and circumstances claimed to provide
a basis for termination of your employment under the provision so
indicated, and (iii) if the Date of Termination is other than the
date of receipt of such notice, specifies the termination date.
2. Change in Control. No benefits shall be payable hereunder unless there
shall have been a Change in Control of the Corporation, as set forth
below. For purposes of this Agreement, a "Change in Control" shall mean:
(a) The acquisition by any individual, entity or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) (a "Person") of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or
more of either (i) the then outstanding shares of common stock of the
Corporation (the "Outstanding Cadmus Common Stock") or (ii) the combined
voting power of the then outstanding voting securities of the Corporation
entitled to vote generally in the election of directors (the "Outstanding
Cadmus Voting Securities"). Notwithstanding the foregoing, the following
acquisitions shall not constitute a Change in Control: (i) any
acquisition directly from the Corporation, (ii) any acquisition by the
Corporation, (iii) any acquisition by, or benefit distribution from, any
employee benefit plan (or related trust) sponsored or maintained by the
Corporation or any corporation controlled by the Corporation, (iv) any
acquisition pursuant to any compensatory stock option, stock purchase or
other stock plan for employees, or (v) any acquisition pursuant to a
reorganization, merger or consolidation, if, following such
reorganization, merger or consolidation, the conditions described in
clauses (i), (ii), and (iii) of Subsection (c) of this Section 2 are
satisfied; or
(b) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority
of the Board; provided, however, that any individual becoming a director
subsequent to the date hereof whose election or nomination for election
was approved by a vote of at least a majority of the directors then
comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board (with his predecessor
thereafter ceasing to be a member); or
(c) Approval by the shareholders of the Corporation of the reorganization,
merger, or consolidation of the Corporation unless, following such
reorganization, merger, or consolidation, (i) more than 60% of the then
outstanding shares of common stock and the then outstanding voting
securities of the resulting corporation is then beneficially owned by all
or substantially all of the beneficial owners, respectively, of the
Outstanding Cadmus Common Stock and Outstanding Cadmus Voting Securities
immediately prior to such reorganization, merger, or consolidation, (ii)
no Person (excluding (A) the Corporation, (B) any employee benefit plan
(or related trust) of the Corporation or such corporation resulting from
such reorganization, merger, or consolidation, and (C) any Person
beneficially owning, immediately prior to such reorganization, merger, or
consolidation, 20% or more of the Outstanding Cadmus Common Stock or
Outstanding Cadmus Voting Securities, as the case may be) beneficially
owns 20% or more of the then outstanding shares of common stock or the
combined voting power of the then outstanding voting securities of the
resulting corporation, and (iii) at least a majority of the members of the
board of directors of the resulting corporation were members of the
Incumbent Board at the time of the execution of the initial agreement
providing for such reorganization, merger, or consolidation; or
(d) Approval by the shareholders of the Corporation of (i) a complete
liquidation or dissolution of the Corporation, or (ii) the sale or other
disposition of all or substantially all of the assets of the Corporation
other than to a corporation with respect to which, following such sale or
other disposition, (A) more than 60% of the outstanding shares of common
stock and the then outstanding voting securities of such corporation is
beneficially owned by all or substantially all of the beneficial owners,
respectively, of the Outstanding Cadmus Common Stock and Outstanding
Cadmus Voting Securities immediately prior to such sale or disposition;
(B) no Person (excluding (I) the Corporation, (II) any employee benefit
plan (or related trust) of the Corporation or such corporation, and (III)
any Person beneficially owning, immediately prior to such sale or other
disposition, 20% or more of the Outstanding Cadmus Common Stock or
Outstanding Cadmus Voting Securities, as the case may be) beneficially
owns 20% or more of the then outstanding shares of common stock or the
combined voting power of the then outstanding voting securities of such
corporation, and (C) at least a majority of the members of the board of
directors of such corporation were members of the Incumbent Board at the
time of the execution of the initial agreement providing for such sale or
other disposition of the assets of the corporation.
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3. Employment Period. The Corporation hereby agrees to continue, or cause to
be continued, your employment with the Cadmus Companies for the Employment
Period.
4. Termination of Employment.
(a) Your employment with the Cadmus Companies shall terminate
automatically upon your death during the Employment Period.
(b) If, as a result of your incapacity due to physical or mental illness (as
determined by the Corporation), you shall have been absent from the
full-time performance of your duties with the Cadmus Companies for six (6)
consecutive months (your "Disability"), the Cadmus Company by which you
are then employed may give you written notice of its intention to
terminate your employment. In such event, your employment with the Cadmus
Companies shall terminate effective on the 30th day after your receipt of
such notice (the "Disability Effective Date"), provided that within 30
days after your receipt of such notice you have not returned to full-time
performance of your duties.
(c) Your employment with the Cadmus Companies may be terminated by the
Corporation during the Employment Period with or without Cause. For
purposes hereof, "Cause" shall mean (i) the willful and continued failure
by you to substantially perform your duties with the Cadmus Companies
(other than any such failure resulting from your incapacity due to
physical or mental illness or any such actual or anticipated failure after
the issuance of a Notice of Termination by you for Good Reason (as defined
in Section 4(d)), after a written demand for substantial performance is
delivered to you by the Board, which demand specifically identifies the
manner in which the Board believes that you have not substantially
performed your duties, (ii) the willful engagement by you in conduct which
is demonstrably and materially injurious to the Cadmus Companies,
monetarily or otherwise, or (iii) your conviction of a felony involving
moral turpitude. For purposes of this subsection, no act, or failure to
act, on your part shall be deemed "willful" unless done, or omitted to be
done, by you not in good faith and without reasonable belief that your
action or omission was in the best interest of the Cadmus Companies.
(d) You may terminate your employment with the Cadmus Companies during
the Employment Period for any reason, including without limitation
Good Reason. For purposes of this Agreement, "Good Reason" shall
mean:
(i) the assignment to you of any duties inconsistent with the
position (including status, offices, titles, and reporting
requirements) or authority in the Cadmus Companies that you
held immediately prior to the Change in Control, or a
significant adverse alteration in the nature or status of your
responsibilities or the conditions of your employment from
those in effect immediately prior to such Change in Control;
(ii) a reduction by the Corporation in your annual base salary as
in effect on the date hereof or as the same may be increased
from time to time;
(iii) if your principal office location is at the Corporation's
principal executive offices immediately prior to the Change in
Control, the relocation of the Corporation's principal
executive offices to a location outside the Richmond
Metropolitan Area, or if your principal office location is not
at the Corporation's principal executive offices immediately
prior to the Change in Control, the Corporation's requiring
you to be based anywhere other than your principal office
location immediately prior to the Change in Control except for
required travel on the Cadmus Companies' business to an extent
substantially consistent with your present business travel
obligations;
(iv) except in the event of reasonable administrative delay, the
failure by the Cadmus Companies to pay to you any portion of
your current compensation or to pay to you any portion of an
installment of deferred compensation under any deferred
compensation program of the Cadmus Companies within seven (7)
days of the date such compensation is due;
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(v) the failure by the Cadmus Companies to continue in effect
for you any compensation plan in which you participate
immediately prior to the Change in Control that is material
to your total compensation or any substitute plan adopted
prior to the Change in Control, unless an equitable
arrangement (embodied in an ongoing substitute or
alternative plan) has been made with respect to such
plan, or the failure by the Cadmus Companies to continue
your participation therein (or in such substitute or
alternative plan) on a basis not materially less favorable,
both in terms of the amount of benefits provided and the
level of your participation relative to other
participants, as it existed at the time of the Change
in Control;
(vi) the failure by the Cadmus Companies to continue to provide
you with benefits substantially similar to those enjoyed
by you under any of the Cadmus Companies' life insurance,
medical, health and accident, or disability plans in
which you were participating at the time of the Change in
Control, the taking of any action by any Cadmus Company
which would directly or indirectly materially reduce any
of such benefits or deprive you of any material fringe
benefit enjoyed by you at the time of the Change in
Control, or the failure by the Cadmus Companies to
provide you with the number of paid vacation days to which
you are entitled on the basis of years of service with
the Cadmus Companies in accordance with the normal
vacation policy of the Cadmus Company employing you in
effect at the time of the Change in Control;
(vii) the failure of the Corporation to obtain a satisfactory
agreement from any successor to assume and agree to perform
this Agreement, as contemplated in Section 6 hereof; or
(viii) any purported termination of your employment that is not
effected pursuant to a Notice of Termination satisfying the
requirements of Subsection (e) hereof (and, if applicable,
the requirements of Subsections (b) and (c) hereof), which
purported termination shall not be effective for purposes of
this Agreement.
For purposes of this subsection, any good faith determination
of "Good Reason" made by you shall be conclusive. In addition,
your right to terminate your employment pursuant to this
subsection shall not be affected by your incapacity due to
physical or mental illness and your continued employment shall
not constitute consent to, or a waiver of rights with respect
to, any circumstance constituting Good Reason hereunder.
(e) Any purported termination of your employment with the Cadmus
Companies by the Corporation or by you shall be communicated by
written Notice of Termination to the other party hereto in
accordance with Section 8.
5. Compensation upon Termination during the Employment Period. Following a
Change in Control, you shall be entitled to the following benefits upon
termination of your employment with the Cadmus Companies provided that
such termination occurs during the Employment Period:
(a) If your employment is terminated by reason of your death during the
Employment Period, this Agreement shall terminate without further
obligations to your legal representatives under this Agreement, other than
for (i) payment of your Base Salary (as defined in Section 5(g) hereof)
through the Date of Termination at the same rate in effect at such date,
and (ii) all other amounts to which you are entitled under any
compensation plan or any other plan, policy, or arrangement of the Cadmus
Companies, at the time such payments are due.
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(b) During any period that you fail to perform your full-time duties with the
Cadmus Companies as a result of incapacity due to physical or mental
illness, you shall continue to receive, until this Agreement is terminated
pursuant to Section 4(b) hereof, your Base Salary (as defined in Section
5(g)) at the rate in effect at the commencement of any such period,
together with all compensation payable to you under any long-term
disability plan maintained by the Cadmus Companies in your name or for
your benefit or other similar plan during such period. Thereafter, your
benefits shall be determined under the retirement, insurance and other
compensation programs of the Cadmus Companies in which you participate in
accordance with the terms of such programs; however, your receipt of
benefits under any long-term disability plan maintained by the Cadmus
Companies in your name or for your benefit will not be affected by your
termination under this Agreement.
(c) If, during the Employment Period, your employment with the Cadmus
Companies shall be terminated by the Corporation for Cause or by you other
than for Good Reason, you shall be entitled to your full Base Salary (as
defined in Section 5(g)) through the Date of Termination at the rate in
effect at the time Notice of Termination is given, plus all other amounts
to which you are entitled under any compensation plan of the Cadmus
Companies at the time such payments are due, and the Cadmus Companies
shall have no further obligations to you under this Agreement.
(d) If, during the Employment Period, your employment with the Cadmus
Companies shall be terminated by you for Good Reason or by the
Corporation other than for Cause, death, or Disability, then you
shall be entitled to the benefits provided below:
(i) you the Corporation shall pay to you your full Base Salary (as
defined in Section 5(g) hereof) through the Date of
Termination at the rate in effect at the time Notice of
Termination is given, no later than the fifth day following
the Date of Termination, plus all other amounts to which you
are entitled under any compensation plan of the Cadmus
Companies, at the time such payments are due;
(ii) in lieu of any further salary or bonus payments to you for
periods subsequent to the Date of Termination, you shall be
paid as severance pay to you, at the time and in the manner
specified in Subsection (e), a severance payment (the
"Severance Payment") equal to the product of (A) your Base
Salary (as defined in Section 5(g) hereof), and (B) a number
(the "Payment/Benefit Factor") determined by dividing by 52
the sum of (I) three times the number of full years that you
have been employed by the Cadmus Companies, and (II) three
times each $10,000 of your annual salary (that is, excluding
bonus) as in effect at the Date of Termination; provided,
however, that in no event shall such Payment/Benefit Factor be
less than .5 nor greater than 2, and provided, further, that
in no event shall such amount exceed the amount of your Base
Salary (as defined in Section 5(g)), on an undiscounted basis,
which you would have received had you remained in the employ
of the Cadmus Companies until your "Normal Retirement Date"
(as defined in the Corporation's Pension Plan (or any
successor thereto) (the "Pension Plan");
(iii) a separate lump-sum supplemental retirement benefit (the
amount of such benefit shall be hereinafter referred to as the
"Supplemental Retirement Amount") equal to the difference
between (A) the actuarial equivalent (utilizing for this
purpose the actuarial assumptions utilized in determining
benefit cash-outs with respect to the Corporation's Pension
Plan during the 90-day period immediately preceding the
Effective Date) of the benefit payable under the Pension Plan
and any supplemental and/or excess benefit plan of the
Corporation providing benefits for you (the "SERP") which you
would receive if your employment continued at the compensation
level in effect at the Date of Termination for the remainder
of the Employment Period, assuming for this purpose that all
accrued benefits are fully vested
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and that benefit accrual formulas are no less advantageous to
you than those in effect during the 90-day period immediately
proceeding the Effective Date, and (B) the actuarial
equivalent (utilizing for this purpose the actuarial
assumptions utilized in determining benefit cash outs with
respect to the Pension Plan during the 90-day period
immediately preceding the Effective Date) of your actual
vested benefit (paid or payable), if any, under the Pension
Plan and the SERP;
(iv) Except as provided in (iii) above, your participation in, and
terminating distribution and vested rights under, the
Corporation's Pension Plan and other plans of deferred
compensation of the Cadmus Companies shall be governed by the
terms of those respective plans;
(v) the Corporation shall pay to you all legal fees and expenses
incurred by you as a result of such termination, including all
such fees and expenses, if any, incurred in seeking to obtain
or enforce any right or benefit provided by this Agreement or
in connection with any tax audit or proceeding to the extent
attributable to the application of Section 4999 of the
Internal Revenue Code of 1986, as amended (the "Code") to any
payment or benefit provided hereunder;
(vi) for a period of years (or portion thereof) (the "Payment
Period") equal to the Payment/Benefit Factor after such
termination or until your "Normal Retirement Date" (as defined
in the Corporation's Pension Plan, whichever first occurs, the
Corporation shall arrange to provide you with life,
disability, accident and group health insurance benefits
substantially similar to those which you were receiving under
the welfare programs of the Cadmus Companies immediately prior
to the Notice of Termination. Benefits otherwise receivable
by you pursuant to this clause (vi) shall be reduced to the
extent comparable benefits are actually received by you from
any source (including a subsequent employer) during such
period following your termination, and any such benefits
actually received by you shall be reported to the Corporation;
(vii) in the event that the payments and benefits provided to you,
or for your benefit, under this Agreement or under any other
plan or agreement which become payable or are taken into
account as "parachute payments" within the meaning of Section
280G of the Code as a result of a Change in Control or your
termination of employment relating thereto (the "Total
Parachute Payments") would result in your being entitled to
"excess parachute payments" as defined in Section 280G of the
Code, the payments and benefits provided to you, or for your
benefit, under this Agreement shall be reduced (but not below
zero) to the extent necessary so that no payment to be made,
or benefit to be provided, to you or for your benefit under
this Agreement or any other plan or agreement would result in
"excess parachute payments" as defined in Section 280G of the
Code, provided, however that the reduction provided in this
clause shall not apply unless your net after-tax benefit if
such reduction were made shall exceed your net after-tax
benefit if such reduction were not made. "Net after-tax
benefit" shall mean the sum of (A) the Total Parachute
Payments which you receive or are then entitled to receive,
less (B) the amount of federal, state and local income and
employment taxes payable by you with respect to the Total
Parachute Payments, less (C) the amount of excise taxes
imposed with respect to the Total Parachute Payments by
Section 4999 of the Code. All determinations regarding the
reductions or additional payment called for in this clause
(vii) shall be made by tax counsel selected by the Corporation
and shall be based on the maximum applicable marginal tax
rates for each year in which such payments rate in effect for
such year at the and benefits shall be paid or provided to you
or for your benefit (based upon the time of the first payment
of the foregoing and, as appropriate as determined by such tax
counsel, the taxable wage base for employment tax purposes);
and
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(viii)for a period of twelve (12) months following such
termination, the Corporation shall pay the expenses of such
outplacement services as you may require, with such services
to be performed by such agency as the Corporation shall
designate.
(e) The payment provided for in Subsection (d)(ii), shall be made in a
lump-sum not later than the 30th day following the Date of Termination.
Notwithstanding anything contained in this Subsection (e) or in Subsection
(d)(ii), you may elect to receive, in lieu of a lump-sum Severance
Payment, the benefits described in Subsection (d)(ii) in equal monthly
installments commencing on the first day of the month following the Date
of Termination and ending on the first to occur of (A) the first day of
the last month within the Payment Period, or (B) the first day of the
month in which occurs your "Normal Retirement Date" (as defined in the
Corporation's Pension Plan.
(f) Except as provided in Subsection (d)(vi) hereof you shall not be
required to mitigate the amount of any payment provided for in this
Section 5 by seeking other employment or otherwise, nor shall the
amount of any payment or benefit provided for in this Section 5 be
reduced by any compensation earned by you as the result of
employment by another employer, by retirement benefits, by offset
against any amount claimed to be owed by you to any Cadmus Company,
or otherwise.
(g) For purposes of this Agreement, your "Base Salary" shall mean the
greater of (i) the annual salary and bonus paid to you by the Cadmus
Companies at the date of this Agreement, or (ii) the annual salary
and bonus payable to you by the Cadmus Companies during the fiscal
year in which a Change in Control occurs.
6. Successors: Binding Agreement.
(a) This Agreement is personal to you and without the prior written
consent of the Corporation shall not be assignable by you otherwise
than by will or the laws of descent and distribution. This Agreement
shall inure to the benefit of, and be enforceable by, your legal
representatives.
(b) This Agreement shall inure to the benefit of, and be binding upon,
the Corporation and its successors and assigns.
(c) The Corporation will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all
of the business and/or assets of the Corporation to assume expressly and
agree to perform this Agreement in the same manner and to the same extent
that the Corporation would be required to perform it if no such succession
had taken place. As used in this Agreement, "Corporation" shall mean the
Corporation as hereinbefore defined and any successor to its business
and/or assets as aforesaid which assumes and agrees to perform this
Agreement by operation of law, or otherwise.
7. Resolution of Disputes. If there shall be any dispute between the Corporation
and you (i) in the event of any termination of your employment with the Cadmus
Companies by the Corporation, whether such termination was for Cause, or (ii) in
the event of any termination of employment with the Cadmus Companies by you,
whether Good Reason existed, then, unless and until there is a final,
nonappealable judgment by a court of competent jurisdiction declaring that such
termination was for Cause or that the determination by you of the existence of
Good Reason was not made in good faith, the Corporation shall pay all amounts,
and provide all benefits, to you and/or your family or other beneficiaries, as
the case may be, that the Corporation would be required to pay or provide
pursuant to Section 5(d) as though such termination were by the Corporation
without Cause or by you with Good Reason; provided, however, that the
Corporation shall not be required to pay any disputed amounts pursuant to this
Section 7 except upon receipt of an undertaking by or on behalf of you to repay
all such amounts to which you are ultimately adjudged by such court not to be
entitled.
8. Notice. For the purpose of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and
shall be deemed to have been duly given when delivered or mailed by United
States certified or registered mail, return receipt requested, postage
prepaid, addressed to the respective addresses set forth on the
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first page of this Agreement, provided that all notice to the Corporation
shall be directed to the attention of the Board with a copy to the
Secretary of the Corporation, or to such other address as either party may
have furnished to the other in writing in accordance herewith, except that
notice of change of address shall be effective only upon receipt.
9. Miscellaneous.
(a) This Agreement shall be governed by and construed in accordance with
the laws of the Commonwealth of Virginia, without reference to
principles of conflict of laws. The captions of this Agreement are
not part of the provisions hereof and shall have no force or effect.
(b) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any
other provision of this Agreement.
(c) The Corporation may withhold from any amounts payable under this
Agreement such Federal, state or local taxes as shall be required to
be withheld pursuant to any applicable law or regulation.
(d) Your or the Corporation's failure to insist upon strict compliance with
any provision hereof or any other provision of this Agreement or the
failure to assert any right you or the Corporation may have hereunder,
including, without limitation, your right to terminate your employment for
Good Reason pursuant to Section 4(d) or the Corporation's right to
terminate your employment for Cause pursuant to Section 4(c), shall not be
deemed to be a waiver of such provision or right or any other provision or
right of this Agreement.
(e) You and the Corporation acknowledge that, except as may otherwise be
provided under any other written agreement between you and the
Corporation, your employment by the Cadmus Companies is "at will"
and if, prior to the Effective Date, your employment with the Cadmus
Companies terminates, then you shall have no rights under this
Agreement.
(f) Prior to the Effective Date, this Agreement may be amended,
modified, or terminated by the Corporation, which amendment,
modification, or termination shall be binding and effective without
any requirement for notification of, or consent by, you.
Notwithstanding the foregoing, on or after the Effective Date, this
Agreement may not be amended, modified, or terminated otherwise than
by a written agreement executed by the parties hereto or their
respective successors and legal representatives.
10. Entire Agreement. This Agreement sets forth the entire agreement of the
parties hereto in respect of the subject matter contained herein and
supersedes all prior agreements, promises, covenants, arrangements,
communications, representations or warranties, whether oral or written, by
any officer, employee or representative of any party hereto; and any prior
agreement of the parties hereto in respect of the subject matter contained
herein is hereby terminated and canceled.
If this letter sets forth our agreement on the subject matter hereof,
kindly sign and return to the Corporation the enclosed copy of this letter,
which will then constitute our agreement on this subject.
Sincerely,
CADMUS COMMUNICATIONS CORPORATION
By __________________________________
Name:
Title:
Accepted and agreed to:
_______________________________
David Bosher
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<S> <C>
EXHIBIT 10.11
June 25, 1998
Bruce V. Thomas
21 Clarke Road
Richmond, , VA 23226
Re: Employee Retention Agreement
Dear Bruce:
Cadmus Communications Corporation (the "Corporation") considers it
essential to the best interests of its shareholders to foster the continuous
employment of its key management personnel and that of its direct and indirect
subsidiaries (collectively the "Cadmus Companies" or individually a "Cadmus
Company"). In this connection, the Board of Directors of the Corporation (the
"Board") recognizes that the possibility of a change in control of the
Corporation may exist and that such possibility, and the uncertainty and
questions which it may raise among management, may result in the departure or
distraction of management personnel to the detriment of the Corporation and its
shareholders.
The Board has determined that appropriate steps should be taken to
reinforce and encourage the continued attention and dedication of members of the
Cadmus Companies' management, including yourself, to their assigned duties
without distraction in the face of potentially disturbing circumstances arising
from the possibility of a change in control of the Corporation.
In order to induce you to remain in the employ of the Cadmus Companies,
the Corporation agrees that you shall receive the severance benefits set forth
in this letter agreement (the "Agreement") in the event your employment with the
Cadmus Companies is terminated under the circumstances described below
subsequent to a Change in Control (as defined in Section 2) of the Corporation.
1. Certain Definitions.
(a) "Change in Control Period" means the period commencing on the date hereof
and ending on the second anniversary of such date; provided, however, that
commencing on the date one year after the date hereof, and on each
anniversary of such date (such date and each annual anniversary thereof
shall be hereinafter referred to as the "Renewal Date"), the Change in
Control Period shall be automatically extended so as to terminate two
years from such Renewal Date, unless at least 60 days prior to the Renewal
Date the Corporation shall give notice to you that the Change in Control
Period shall not be so extended.
(b) "Effective Date" means the first date during the Change in Control Period
(as defined in Section 1(b)) on which a Change in Control occurs.
Anything in this Agreement to the contrary notwithstanding, if a Change in
Control occurs and if your employment with the Cadmus Companies is
terminated prior to the date on which the Change in Control occurs, and if
it is reasonably demonstrated by you that such termination of employment
(i) was at the request of a third party who has taken steps reasonably
calculated to effect the Change in Control, or (ii) otherwise arose in
connection with or anticipation of the Change in Control, then for all
purposes of this Agreement the "Effective Date" shall mean the date
immediately prior to the date of such termination of employment.
(c) "Employment Period" means the period commencing on the Effective
Date and ending on the second anniversary of such date.
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(d) "Date of Termination" means (i) if your employment with the Cadmus
Companies is terminated by the Corporation for Cause or is terminated by
you for Good Reason, the date of receipt of the Notice of Termination or
any later date specified therein, as the case may be, (ii) if your
employment with the Cadmus Companies is terminated by the Corporation
other than for Cause or Disability, the Date of Termination shall be the
date on which the Corporation notifies you of such termination, and (iii)
if your employment is terminated by reason of death or Disability, the
Date of Termination shall be the date of your death or the Disability
Effective Date, as the case may be.
(e) "Termination" means a notice which (i) indicates the specific
termination provision in this Agreement relied upon, (ii) sets forth
in reasonable detail the facts and circumstances claimed to provide
a basis for termination of your employment under the provision so
indicated, and (iii) if the Date of Termination is other than the
date of receipt of such notice, specifies the termination date.
2. Change in Control. No benefits shall be payable hereunder unless there
shall have been a Change in Control of the Corporation, as set forth
below. For purposes of this Agreement, a "Change in Control" shall mean:
(a) The acquisition by any individual, entity or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) (a "Person") of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or
more of either (i) the then outstanding shares of common stock of the
Corporation (the "Outstanding Cadmus Common Stock") or (ii) the combined
voting power of the then outstanding voting securities of the Corporation
entitled to vote generally in the election of directors (the "Outstanding
Cadmus Voting Securities"). Notwithstanding the foregoing, the following
acquisitions shall not constitute a Change in Control: (i) any
acquisition directly from the Corporation, (ii) any acquisition by the
Corporation, (iii) any acquisition by, or benefit distribution from, any
employee benefit plan (or related trust) sponsored or maintained by the
Corporation or any corporation controlled by the Corporation, (iv) any
acquisition pursuant to any compensatory stock option, stock purchase or
other stock plan for employees, or (v) any acquisition pursuant to a
reorganization, merger or consolidation, if, following such
reorganization, merger or consolidation, the conditions described in
clauses (i), (ii), and (iii) of Subsection (c) of this Section 2 are
satisfied; or
(b) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority
of the Board; provided, however, that any individual becoming a director
subsequent to the date hereof whose election or nomination for election
was approved by a vote of at least a majority of the directors then
comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board (with his predecessor
thereafter ceasing to be a member); or
(c) Approval by the shareholders of the Corporation of the reorganization,
merger, or consolidation of the Corporation unless, following such
reorganization, merger, or consolidation, (i) more than 60% of the then
outstanding shares of common stock and the then outstanding voting
securities of the resulting corporation is then beneficially owned by all
or substantially all of the beneficial owners, respectively, of the
Outstanding Cadmus Common Stock and Outstanding Cadmus Voting Securities
immediately prior to such reorganization, merger, or consolidation, (ii)
no Person (excluding (A) the Corporation, (B) any employee benefit plan
(or related trust) of the Corporation or such corporation resulting from
such reorganization, merger, or consolidation, and (C) any Person
beneficially owning, immediately prior to such reorganization, merger, or
consolidation, 20% or more of the Outstanding Cadmus Common Stock or
Outstanding Cadmus Voting Securities, as the case may be) beneficially
owns 20% or more of the then outstanding shares of common stock or the
combined voting power of the then outstanding voting securities of the
resulting corporation, and (iii) at least a majority of the members of the
board of directors of the resulting corporation were members of the
Incumbent Board at the time of the execution of the initial agreement
providing for such reorganization, merger, or consolidation; or
(d) Approval by the shareholders of the Corporation of (i) a complete
liquidation or dissolution of the Corporation, or (ii) the sale or other
disposition of all or substantially all of the assets of the Corporation
other than to a corporation with respect to which, following such sale or
other disposition, (A) more than 60% of the outstanding shares of common
stock and the then outstanding voting securities of such corporation is
beneficially owned by all or substantially all of the beneficial owners,
respectively, of the Outstanding Cadmus Common Stock and Outstanding
Cadmus Voting Securities immediately prior to such sale or disposition;
(B) no Person (excluding (I) the Corporation, (II) any employee benefit
plan (or related trust) of the Corporation or such corporation, and (III)
any Person beneficially owning, immediately prior to such sale or other
disposition, 20% or more of the Outstanding Cadmus Common Stock or
Outstanding Cadmus Voting
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Securities, as the case may be) beneficially owns 20% or more of the
then outstanding shares of common stock or the combined voting power
of the then outstanding voting securities of such corporation, and
(C) at least a majority of the members of the board of directors of
such corporation were members of the Incumbent Board at the time of
the execution of the initial agreement providing for such sale or
other disposition of the assets of the corporation.
3. Employment Period. The Corporation hereby agrees to continue, or cause to
be continued, your employment with the Cadmus Companies for the Employment
Period.
4. Termination of Employment.
(a) Your employment with the Cadmus Companies shall terminate
automatically upon your death during the Employment Period.
(b) If, as a result of your incapacity due to physical or mental illness (as
determined by the Corporation), you shall have been absent from the
full-time performance of your duties with the Cadmus Companies for six (6)
consecutive months (your "Disability"), the Cadmus Company by which you
are then employed may give you written notice of its intention to
terminate your employment. In such event, your employment with the Cadmus
Companies shall terminate effective on the 30th day after your receipt of
such notice (the "Disability Effective Date"), provided that within 30
days after your receipt of such notice you have not returned to full-time
performance of your duties.
(c) Your employment with the Cadmus Companies may be terminated by the
Corporation during the Employment Period with or without Cause. For
purposes hereof, "Cause" shall mean (i) the willful and continued failure
by you to substantially perform your duties with the Cadmus Companies
(other than any such failure resulting from your incapacity due to
physical or mental illness or any such actual or anticipated failure after
the issuance of a Notice of Termination by you for Good Reason (as defined
in Section 4(d)), after a written demand for substantial performance is
delivered to you by the Board, which demand specifically identifies the
manner in which the Board believes that you have not substantially
performed your duties, (ii) the willful engagement by you in conduct which
is demonstrably and materially injurious to the Cadmus Companies,
monetarily or otherwise, or (iii) your conviction of a felony involving
moral turpitude. For purposes of this subsection, no act, or failure to
act, on your part shall be deemed "willful" unless done, or omitted to be
done, by you not in good faith and without reasonable belief that your
action or omission was in the best interest of the Cadmus Companies.
(d) You may terminate your employment with the Cadmus Companies during
the Employment Period for any reason, including without limitation
Good Reason. For purposes of this Agreement, "Good Reason" shall
mean:
(i) the assignment to you of any duties inconsistent with the
position (including status, offices, titles, and reporting
requirements) or authority in the Cadmus Companies that you
held immediately prior to the Change in Control, or a
significant adverse alteration in the nature or status of your
responsibilities or the conditions of your employment from
those in effect immediately prior to such Change in Control;
(ii) a reduction by the Corporation in your annual base salary as
in effect on the date hereof or as the same may be increased
from time to time;
(iii) if your principal office location is at the Corporation's
principal executive offices immediately prior to the Change in
Control, the relocation of the Corporation's principal
executive offices to a location outside the Richmond
Metropolitan Area, or if your principal office location is not
at the Corporation's principal executive offices immediately
prior to the Change in Control, the Corporation's requiring
you to be based anywhere other than your principal office
location immediately prior to the Change in Control except for
required travel on the Cadmus Companies' business to an extent
substantially consistent with your present business travel
obligations;
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(iv) except in the event of reasonable administrative delay, the
failure by the Cadmus Companies to pay to you any portion of
your current compensation or to pay to you any portion of an
installment of deferred compensation under any deferred
compensation program of the Cadmus Companies within seven (7)
days of the date such compensation is due;
(v) the failure by the Cadmus Companies to continue in effect
for you any compensation plan in which you participate
immediately prior to the Change in Control that is material
to your total compensation or any substitute plan adopted
prior to the Change in Control, unless an equitable
arrangement (embodied in an ongoing substitute or
alternative plan) has been made with respect to such
plan, or the failure by the Cadmus Companies to continue
your participation therein (or in such substitute or
alternative plan) on a basis not materially less favorable,
both in terms of the amount of benefits provided and the
level of your participation relative to other
participants, as it existed at the time of the Change
in Control;
(vi) the failure by the Cadmus Companies to continue to provide
you with benefits substantially similar to those enjoyed
by you under any of the Cadmus Companies' life insurance,
medical, health and accident, or disability plans in
which you were participating at the time of the Change in
Control, the taking of any action by any Cadmus Company
which would directly or indirectly materially reduce any
of such benefits or deprive you of any material fringe
benefit enjoyed by you at the time of the Change in
Control, or the failure by the Cadmus Companies to
provide you with the number of paid vacation days to which
you are entitled on the basis of years of service with
the Cadmus Companies in accordance with the normal
vacation policy of the Cadmus Company employing you in
effect at the time of the Change in Control;
(vii) the failure of the Corporation to obtain a satisfactory
agreement from any successor to assume and agree to perform
this Agreement, as contemplated in Section 6 hereof;
(viii) any purported termination of your employment that is not
effected pursuant to a Notice of Termination satisfying the
requirements of Subsection (e) hereof (and, if applicable,
the requirements of Subsections (b) and (c) hereof), which
purported termination shall not be effective for purposes of
this Agreement; or
(ix) so long as no Cause for your termination by the Corporation
exists (or would exist assuming the Board made a
determination of Cause), a voluntary cessation by you of your
employment for any reason during the 60-day period commencing
on the first anniversary of the occurrence of the Change in
Control.
For purposes of this subsection, any good faith determination
of "Good Reason" made by you shall be conclusive. In
addition, your right to terminate your employment pursuant to
this subsection shall not be affected by your incapacity due
to physical or mental illness and your continued employment
shall not constitute consent to, or a waiver of rights with
respect to, any circumstance constituting Good Reason
hereunder.
(e) Any purported termination of your employment with the Cadmus
Companies by the Corporation or by you shall be communicated by
written Notice of Termination to the other party hereto in
accordance with Section 8.
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5. Compensation upon Termination during the Employment Period. Following a
Change in Control, you shall be entitled to the following benefits upon
termination of your employment with the Cadmus Companies provided that
such termination occurs during the Employment Period:
(a) If your employment is terminated by reason of your death during the
Employment Period, this Agreement shall terminate without further
obligations to your legal representatives under this Agreement, other than
for (i) payment of your Base Salary (as defined in Section 5(g) hereof)
through the Date of Termination at the same rate in effect at such date,
and (ii) all other amounts to which you are entitled under any
compensation plan or any other plan, policy, or arrangement of the Cadmus
Companies, at the time such payments are due.
(b) During any period that you fail to perform your full-time duties with the
Cadmus Companies as a result of incapacity due to physical or mental
illness, you shall continue to receive, until this Agreement is terminated
pursuant to Section 4(b) hereof, your Base Salary (as defined in Section
5(g)) at the rate in effect at the commencement of any such period,
together with all compensation payable to you under any long-term
disability plan maintained by the Cadmus Companies in your name or for
your benefit or other similar plan during such period. Thereafter, your
benefits shall be determined under the retirement, insurance and other
compensation programs of the Cadmus Companies in which you participate in
accordance with the terms of such programs; however, your receipt of
benefits under any long-term disability plan maintained by the Cadmus
Companies in your name or for your benefit will not be affected by your
termination under this Agreement.
(c) If, during the Employment Period, your employment with the Cadmus
Companies shall be terminated by the Corporation for Cause or by you other
than for Good Reason, you shall be entitled to your full Base Salary (as
defined in Section 5(g)) through the Date of Termination at the rate in
effect at the time Notice of Termination is given, plus all other amounts
to which you are entitled under any compensation plan of the Cadmus
Companies at the time such payments are due, and the Cadmus Companies
shall have no further obligations to you under this Agreement.
(d) If, during the Employment Period, your employment with the Cadmus
Companies shall be terminated by you for Good Reason or by the
Corporation other than for Cause, death, or Disability, then you
shall be entitled to the benefits provided below:
(i) you the Corporation shall pay to you your full Base Salary (as
defined in Section 5(g) hereof) through the Date of
Termination at the rate in effect at the time Notice of
Termination is given, no later than the fifth day following
the Date of Termination, plus all other amounts to which you
are entitled under any compensation plan of the Cadmus
Companies, at the time such payments are due;
(ii) in lieu of any further salary or bonus payments to you for
periods subsequent to the Date of Termination, you shall be
paid as severance pay to you, at the time and in the manner
specified in Subsection (e), a severance payment (the
"Severance Payment") equal to the product of (A) your Base
Salary (as defined in Section 5(g) hereof), and (B) a number
(the "Payment/Benefit Factor") determined by dividing by 52
the sum of (I) three times the number of full years that you
have been employed by the Cadmus Companies, and (II) three
times each $10,000 of your annual salary (that is, excluding
bonus) as in effect at the Date of Termination; provided,
however, that in no event shall such Payment/Benefit Factor be
less than .5 nor greater than 2, and provided, further, that
in no event shall such amount exceed the amount of your Base
Salary (as defined in Section 5(g)), on an undiscounted basis,
which you would have received had you remained in the employ
of the Cadmus Companies until your "Normal Retirement Date"
(as defined in the Corporation's Pension Plan (or any
successor thereto) (the "Pension Plan");
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(iii) a separate lump-sum supplemental retirement benefit (the
amount of such benefit shall be hereinafter referred to as the
"Supplemental Retirement Amount") equal to the difference
between (A) the actuarial equivalent (utilizing for this
purpose the actuarial assumptions utilized in determining
benefit cash-outs with respect to the Corporation's Pension
Plan during the 90-day period immediately preceding the
Effective Date) of the benefit payable under the Pension Plan
and any supplemental and/or excess benefit plan of the
Corporation providing benefits for you (the "SERP") which you
would receive if your employment continued at the compensation
level in effect at the Date of Termination for the remainder
of the Employment Period, assuming for this purpose that all
accrued benefits are fully vested and that benefit accrual
formulas are no less advantageous to you than those in effect
during the 90-day period immediately proceeding the Effective
Date, and (B) the actuarial equivalent (utilizing for this
purpose the actuarial assumptions utilized in determining
benefit cash outs with respect to the Pension Plan during the
90-day period immediately preceding the Effective Date) of
your actual vested benefit (paid or payable), if any, under
the Pension Plan and the SERP;
(iv) Except as provided in (iii) above, your participation in, and
terminating distribution and vested rights under, the
Corporation's Pension Plan and other plans of deferred
compensation of the Cadmus Companies shall be governed by the
terms of those respective plans;
(v) the Corporation shall pay to you all legal fees and expenses
incurred by you as a result of such termination, including all
such fees and expenses, if any, incurred in seeking to obtain
or enforce any right or benefit provided by this Agreement or
in connection with any tax audit or proceeding to the extent
attributable to the application of Section 4999 of the
Internal Revenue Code of 1986, as amended (the "Code") to any
payment or benefit provided hereunder;
(vi) for a period of years (or portion thereof) (the "Payment
Period") equal to the Payment/Benefit Factor after such
termination or until your "Normal Retirement Date" (as defined
in the Corporation's Pension Plan, whichever first occurs, the
Corporation shall arrange to provide you with life,
disability, accident and group health insurance benefits
substantially similar to those which you were receiving under
the welfare programs of the Cadmus Companies immediately prior
to the Notice of Termination. Benefits otherwise receivable
by you pursuant to this clause (vi) shall be reduced to the
extent comparable benefits are actually received by you from
any source (including a subsequent employer) during such
period following your termination, and any such benefits
actually received by you shall be reported to the Corporation;
(vii) in the event that the payments and benefits provided to you,
or for your benefit, under this Agreement (determined without
regard to the Gross-Up Payment described below) or under any
other plan or agreement which become payable or are taken into
account as "parachute payments" within the meaning of Section
280G of the Code as a result of a Change in Control or your
termination of employment relating thereto (the "Total
Parachute Payments") would result in your being entitled to
"excess parachute payments" as defined in Section 280G of the
Code, the following applicable reduction shall occur or
additional payment shall be made:
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(A) in the event the Change in Control occurs before July 1,
1999, you shall be entitled to receive an additional
payment (a "Gross-Up Payment") in an amount such that
after payment by you of all taxes (including any
interest or penalties incurred by you with respect to
such taxes), including, without limitation, any federal,
state and local income taxes, any employment taxes, and
the excise tax imposed by Section 4999 of the Code (such
excise tax, together with any interest or penalties
relating to such excise tax, are hereinafter
collectively referred to as the "Excise Tax"), you
retain an amount of the Gross-Up Payment equal to the
Excise Tax imposed upon the Total Parachute Payments; or
(B) in the event the Change in Control occurs on or after
July 1, 1999, the payments and benefits provided to you,
or for your benefit, under this Agreement shall be
reduced (but not below zero) to the extent necessary so
that no payment to be made, or benefit to be provided,
to you or for your benefit under this Agreement or any
other plan or agreement would result in "excess
parachute payments" as defined in Section 280G of the
Code, provided, however that the reduction provided in
this clause shall not apply unless your net after-tax
benefit if such reduction were made shall exceed your
net after-tax benefit if such reduction were not made.
"Net after-tax benefit" shall mean the sum of (I) the
Total Parachute Payments which you receive or are then
entitled to receive, less (II) the amount of federal,
state and local income and employment taxes payable by
you with respect to the Total Parachute Payments, less
(III) the amount of excise taxes imposed with respect to
the Total Parachute Payments by Section 4999 of the Code.
All determinations regarding the reductions or additional
payment called for in this clause (vii) shall be made by tax
counsel selected by the Corporation and shall be based on the
maximum applicable marginal tax rates for each year in which
such payments and benefits shall be paid or provided to you or
for your benefit (based upon the rate in effect for such year
at the time of the first payment of the foregoing and, as
appropriate as determined by such tax counsel, the taxable
wage base for employment tax purposes); and
(viii)for a period of twelve (12) months following such
termination, the Corporation shall pay the expenses of such
outplacement services as you may require, with such services
to be performed by such agency as the Corporation shall
designate.
(e) The payment provided for in Subsection (d)(ii), shall be made in a
lump-sum not later than the 30th day following the Date of Termination.
Notwithstanding anything contained in this Subsection (e) or in Subsection
(d)(ii), you may elect to receive, in lieu of a lump-sum Severance
Payment, the benefits described in Subsection (d)(ii) in equal monthly
installments commencing on the first day of the month following the Date
of Termination and ending on the first to occur of (A) the first day of
the last month within the Payment Period, or (B) the first day of the
month in which occurs your "Normal Retirement Date" (as defined in the
Corporation's Pension Plan.
(f) Except as provided in Subsection (d)(vi) hereof you shall not be
required to mitigate the amount of any payment provided for in this
Section 5 by seeking other employment or otherwise, nor shall the
amount of any payment or benefit provided for in this Section 5 be
reduced by any compensation earned by you as the result of
employment by another employer, by retirement benefits, by offset
against any amount claimed to be owed by you to any Cadmus Company,
or otherwise.
(g) For purposes of this Agreement, your "Base Salary" shall mean the
greater of (i) the annual salary and bonus paid to you by the Cadmus
Companies at the date of this Agreement, or (ii) the annual salary
and bonus payable to you by the Cadmus Companies during the fiscal
year in which a Change in Control occurs.
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6. Successors: Binding Agreement.
(a) This Agreement is personal to you and without the prior written
consent of the Corporation shall not be assignable by you otherwise
than by will or the laws of descent and distribution. This Agreement
shall inure to the benefit of, and be enforceable by, your legal
representatives.
(b) This Agreement shall inure to the benefit of, and be binding upon,
the Corporation and its successors and assigns.
(c) The Corporation will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all
of the business and/or assets of the Corporation to assume expressly and
agree to perform this Agreement in the same manner and to the same extent
that the Corporation would be required to perform it if no such succession
had taken place. As used in this Agreement, "Corporation" shall mean the
Corporation as hereinbefore defined and any successor to its business
and/or assets as aforesaid which assumes and agrees to perform this
Agreement by operation of law, or otherwise.
7. Resolution of Disputes. If there shall be any dispute between the Corporation
and you (i) in the event of any termination of your employment with the Cadmus
Companies by the Corporation, whether such termination was for Cause, or (ii) in
the event of any termination of employment with the Cadmus Companies by you,
whether Good Reason existed, then, unless and until there is a final,
nonappealable judgment by a court of competent jurisdiction declaring that such
termination was for Cause or that the determination by you of the existence of
Good Reason was not made in good faith, the Corporation shall pay all amounts,
and provide all benefits, to you and/or your family or other beneficiaries, as
the case may be, that the Corporation would be required to pay or provide
pursuant to Section 5(d) as though such termination were by the Corporation
without Cause or by you with Good Reason; provided, however, that the
Corporation shall not be required to pay any disputed amounts pursuant to this
Section 7 except upon receipt of an undertaking by or on behalf of you to repay
all such amounts to which you are ultimately adjudged by such court not to be
entitled.
8. Notice. For the purpose of this Agreement, notices and all other communications
provided for in this Agreement shall be in writing and shall be deemed to have
been duly given when delivered or mailed by United States certified or
registered mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth on the first page of this Agreement, provided
that all notice to the Corporation shall be directed to the attention of the
Board with a copy to the Secretary of the Corporation, or to such other address
as either party may have furnished to the other in writing in accordance
herewith, except that notice of change of address shall be effective only upon
receipt.
9. Miscellaneous.
(a) This Agreement shall be governed by and construed in accordance with
the laws of the Commonwealth of Virginia, without reference to
principles of conflict of laws. The captions of this Agreement are
not part of the provisions hereof and shall have no force or effect.
(b) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any
other provision of this Agreement.
(c) The Corporation may withhold from any amounts payable under this
Agreement such Federal, state or local taxes as shall be required to
be withheld pursuant to any applicable law or regulation.
(d) Your or the Corporation's failure to insist upon strict compliance with
any provision hereof or any other provision of this Agreement or the
failure to assert any right you or the Corporation may have hereunder,
including, without limitation, your right to terminate your employment for
Good Reason pursuant to Section 4(d) or the Corporation's right to
terminate your employment for Cause pursuant to Section 4(c), shall not be
deemed to be a waiver of such provision or right or any other provision or
right of this Agreement.
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(e) You and the Corporation acknowledge that, except as may otherwise be
provided under any other written agreement between you and the
Corporation, your employment by the Cadmus Companies is "at will"
and if, prior to the Effective Date, your employment with the Cadmus
Companies terminates, then you shall have no rights under this
Agreement.
(f) Prior to the Effective Date, this Agreement may be amended,
modified, or terminated by the Corporation, which amendment,
modification, or termination shall be binding and effective without
any requirement for notification of, or consent by, you.
Notwithstanding the foregoing, on or after the Effective Date, this
Agreement may not be amended, modified, or terminated otherwise than
by a written agreement executed by the parties hereto or their
respective successors and legal representatives.
10. Entire Agreement. This Agreement, together with a letter agreement between you
and the Corporation dated as of the date hereof, sets forth the entire agreement
of the parties hereto in respect of the subject matter contained herein and
supersedes all prior agreements, promises, covenants, arrangements,
communications, representations or warranties, whether oral or written, by any
officer, employee or representative of any party hereto; and any prior agreement
of the parties hereto in respect of the subject matter contained herein is
hereby terminated and canceled.
If this letter sets forth our agreement on the subject matter hereof,
kindly sign and return to the Corporation the enclosed copy of this letter,
which will then constitute our agreement on this subject.
Sincerely,
CADMUS COMMUNICATIONS CORPORATION
By ________________________________
Name:
Title:
Accepted and agreed to:
_________________________
Bruce V. Thomas
<PAGE>
June 24, 1998
Bruce V. Thomas
21 Clarke Road
Richmond, , VA 23226
Re: Employee Retention Agreement
Dear Bruce:
On June 24, 1998 you and Cadmus Communications Corporation (the
"Corporation") entered into an Employee Retention Agreement agreement (a copy of
which is attached hereto) designed to reinforce and to encourage your continued
attention and dedication to your assigned duties without distraction by certain
potentially disturbing circumstances arising from the possibility of a change in
control of the Corporation (the "Retention Agreement"). All capitalized terms
herein not otherwise defined, shall have the meanings ascribed to them in the
Retention Agreement.
Pursuant to the Retention Agreement, you are entitled to receive certain
severance and other benefits in the event that, during the Employment Period and
following a Change in Control of the Corporation, your employment with the
Cadmus Companies shall be terminated by you for Good Reason or by the
Corporation other than for Cause, death, or Disability. Those severance and
other benefits are set forth in, and conclusively fixed by, the express terms of
the Retention Agreement.
The Corporation has determined, however, that it desires to augment the
Severance Payment otherwise payable to you under Section 5(d)(ii) of the
Retention Agreement. Specifically, the Corporation shall pay to you a separate
lump-sum severance payment equal to the difference between (A) an amount equal
to two times your Base Salary, and (B) the amount payable to you pursuant to
Section 5(d)(ii) of the Retention Agreement. The Corporation's intent is to
provide you, by means of a combination of Section 5(d)(ii) of the Retention
Agreement and this agreement, a severance payment equal to twice your Base
Salary.
The payment, if any, to be made hereunder shall be made in a lump-sum not
later than the 30th day following the Date of Termination; provided, however,
that you may elect to receive said payment in equal monthly installments
commencing on the first day of the month following the Date of Termination and
ending on the first occur of (A) the first day of the last month within the
Payment Period or (B) the first day of the month in which occurs your Normal
Retirement Date.
Please note that the payment, if any, to be made hereunder is subject to
any applicable "cut-back" provisions of Section 5(d)(vii) of the Retention
Agreement, which provisions are expressly incorporated herein by reference. In
addition, please note that this agreement will expire or terminate upon the
earlier of (i) Bruce V.or (ii) the expiration or termination of your Retention
Agreement according or pursuant to its terms.
This letter replaces and supersedes any prior letter between you and the
Corporation dated regarding this matter.
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If this letter sets forth our agreement on the subject matter hereof,
kindly sign and return to the Corporation the enclosed copy of this letter,
which will then constitute our agreement on this subject.
Sincerely,
CADMUS COMMUNICATIONS CORPORATION
By _______________________________
Name:
Title:
Accepted and agreed to:
___________________________
Bruce V. Thomas
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<S> <C>
EXHIBIT 10.12
June 25, 1998
John H. Phillips
1338 Swift Creek Lane
Manakin-Sabot, , VA 23221
Re: Employee Retention Agreement
Dear John:
Cadmus Communications Corporation (the "Corporation") considers it
essential to the best interests of its shareholders to foster the continuous
employment of its key management personnel and that of its direct and indirect
subsidiaries (collectively the "Cadmus Companies" or individually a "Cadmus
Company"). In this connection, the Board of Directors of the Corporation (the
"Board") recognizes that the possibility of a change in control of the
Corporation may exist and that such possibility, and the uncertainty and
questions which it may raise among management, may result in the departure or
distraction of management personnel to the detriment of the Corporation and its
shareholders.
The Board has determined that appropriate steps should be taken to
reinforce and encourage the continued attention and dedication of members of the
Cadmus Companies' management, including yourself, to their assigned duties
without distraction in the face of potentially disturbing circumstances arising
from the possibility of a change in control of the Corporation.
In order to induce you to remain in the employ of the Cadmus Companies,
the Corporation agrees that you shall receive the severance benefits set forth
in this letter agreement (the "Agreement") in the event your employment with the
Cadmus Companies is terminated under the circumstances described below
subsequent to a Change in Control (as defined in Section 2) of the Corporation.
1. Certain Definitions.
(a) "Change in Control Period" means the period commencing on the date hereof
and ending on the second anniversary of such date; provided, however, that
commencing on the date one year after the date hereof, and on each
anniversary of such date (such date and each annual anniversary thereof
shall be hereinafter referred to as the "Renewal Date"), the Change in
Control Period shall be automatically extended so as to terminate two
years from such Renewal Date, unless at least 60 days prior to the Renewal
Date the Corporation shall give notice to you that the Change in Control
Period shall not be so extended.
(b) "Effective Date" means the first date during the Change in Control Period
(as defined in Section 1(b)) on which a Change in Control occurs.
Anything in this Agreement to the contrary notwithstanding, if a Change in
Control occurs and if your employment with the Cadmus Companies is
terminated prior to the date on which the Change in Control occurs, and if
it is reasonably demonstrated by you that such termination of employment
(i) was at the request of a third party who has taken steps reasonably
calculated to effect the Change in Control, or (ii) otherwise arose in
connection with or anticipation of the Change in Control, then for all
purposes of this Agreement the "Effective Date" shall mean the date
immediately prior to the date of such termination of employment.
(c) "Employment Period" means the period commencing on the Effective
Date and ending on the second anniversary of such date.
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(d) "Date of Termination" means (i) if your employment with the Cadmus
Companies is terminated by the Corporation for Cause or is terminated by
you for Good Reason, the date of receipt of the Notice of Termination or
any later date specified therein, as the case may be, (ii) if your
employment with the Cadmus Companies is terminated by the Corporation
other than for Cause or Disability, the Date of Termination shall be the
date on which the Corporation notifies you of such termination, and (iii)
if your employment is terminated by reason of death or Disability, the
Date of Termination shall be the date of your death or the Disability
Effective Date, as the case may be.
(e) "Termination" means a notice which (i) indicates the specific
termination provision in this Agreement relied upon, (ii) sets forth
in reasonable detail the facts and circumstances claimed to provide
a basis for termination of your employment under the provision so
indicated, and (iii) if the Date of Termination is other than the
date of receipt of such notice, specifies the termination date.
2. Change in Control. No benefits shall be payable hereunder unless there
shall have been a Change in Control of the Corporation, as set forth
below. For purposes of this Agreement, a "Change in Control" shall mean:
(a) The acquisition by any individual, entity or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) (a "Person") of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or
more of either (i) the then outstanding shares of common stock of the
Corporation (the "Outstanding Cadmus Common Stock") or (ii) the combined
voting power of the then outstanding voting securities of the Corporation
entitled to vote generally in the election of directors (the "Outstanding
Cadmus Voting Securities"). Notwithstanding the foregoing, the following
acquisitions shall not constitute a Change in Control: (i) any
acquisition directly from the Corporation, (ii) any acquisition by the
Corporation, (iii) any acquisition by, or benefit distribution from, any
employee benefit plan (or related trust) sponsored or maintained by the
Corporation or any corporation controlled by the Corporation, (iv) any
acquisition pursuant to any compensatory stock option, stock purchase or
other stock plan for employees, or (v) any acquisition pursuant to a
reorganization, merger or consolidation, if, following such
reorganization, merger or consolidation, the conditions described in
clauses (i), (ii), and (iii) of Subsection (c) of this Section 2 are
satisfied; or
(b) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority
of the Board; provided, however, that any individual becoming a director
subsequent to the date hereof whose election or nomination for election
was approved by a vote of at least a majority of the directors then
comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board (with his predecessor
thereafter ceasing to be a member); or
(c) Approval by the shareholders of the Corporation of the reorganization,
merger, or consolidation of the Corporation unless, following such
reorganization, merger, or consolidation, (i) more than 60% of the then
outstanding shares of common stock and the then outstanding voting
securities of the resulting corporation is then beneficially owned by all
or substantially all of the beneficial owners, respectively, of the
Outstanding Cadmus Common Stock and Outstanding Cadmus Voting Securities
immediately prior to such reorganization, merger, or consolidation, (ii)
no Person (excluding (A) the Corporation, (B) any employee benefit plan
(or related trust) of the Corporation or such corporation resulting from
such reorganization, merger, or consolidation, and (C) any Person
beneficially owning, immediately prior to such reorganization, merger, or
consolidation, 20% or more of the Outstanding Cadmus Common Stock or
Outstanding Cadmus Voting Securities, as the case may be) beneficially
owns 20% or more of the then outstanding shares of common stock or the
combined voting power of the then outstanding voting securities of the
resulting corporation, and (iii) at least a majority of the members of the
board of directors of the resulting corporation were members of the
Incumbent Board at the time of the execution of the initial agreement
providing for such reorganization, merger, or consolidation; or
(d) Approval by the shareholders of the Corporation of (i) a complete
liquidation or dissolution of the Corporation, or (ii) the sale or other
disposition of all or substantially all of the assets of the Corporation
other than to a corporation with respect to which, following such sale or
other disposition, (A) more than 60% of the outstanding shares of common
stock and the then outstanding voting securities of such corporation is
beneficially owned by all or substantially all of the beneficial owners,
respectively, of the Outstanding Cadmus Common Stock and Outstanding
Cadmus Voting Securities immediately prior to such sale or disposition;
(B) no Person (excluding (I) the Corporation, (II) any employee benefit
plan (or related trust) of the Corporation or such corporation, and (III)
any Person beneficially owning, immediately prior to such sale or other
disposition, 20% or more of the Outstanding Cadmus Common Stock or
Outstanding Cadmus Voting Securities, as the case may be) beneficially
owns 20% or more of the then outstanding shares of common stock or the
combined voting power of the then outstanding voting securities of such
corporation, and (C) at least a majority of the members of the board of
directors of such corporation were members of the Incumbent Board at the
time of the execution of the initial agreement providing for such sale or
other disposition of the assets of the corporation.
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3. Employment Period. The Corporation hereby agrees to continue, or cause to
be continued, your employment with the Cadmus Companies for the Employment
Period.
4. Termination of Employment.
(a) Your employment with the Cadmus Companies shall terminate
automatically upon your death during the Employment Period.
(b) If, as a result of your incapacity due to physical or mental illness (as
determined by the Corporation), you shall have been absent from the
full-time performance of your duties with the Cadmus Companies for six (6)
consecutive months (your "Disability"), the Cadmus Company by which you
are then employed may give you written notice of its intention to
terminate your employment. In such event, your employment with the Cadmus
Companies shall terminate effective on the 30th day after your receipt of
such notice (the "Disability Effective Date"), provided that within 30
days after your receipt of such notice you have not returned to full-time
performance of your duties.
(c) Your employment with the Cadmus Companies may be terminated by the
Corporation during the Employment Period with or without Cause. For
purposes hereof, "Cause" shall mean (i) the willful and continued failure
by you to substantially perform your duties with the Cadmus Companies
(other than any such failure resulting from your incapacity due to
physical or mental illness or any such actual or anticipated failure after
the issuance of a Notice of Termination by you for Good Reason (as defined
in Section 4(d)), after a written demand for substantial performance is
delivered to you by the Board, which demand specifically identifies the
manner in which the Board believes that you have not substantially
performed your duties, (ii) the willful engagement by you in conduct which
is demonstrably and materially injurious to the Cadmus Companies,
monetarily or otherwise, or (iii) your conviction of a felony involving
moral turpitude. For purposes of this subsection, no act, or failure to
act, on your part shall be deemed "willful" unless done, or omitted to be
done, by you not in good faith and without reasonable belief that your
action or omission was in the best interest of the Cadmus Companies.
(d) You may terminate your employment with the Cadmus Companies during
the Employment Period for any reason, including without limitation
Good Reason. For purposes of this Agreement, "Good Reason" shall
mean:
(i) the assignment to you of any duties inconsistent with the
position (including status, offices, titles, and reporting
requirements) or authority in the Cadmus Companies that you
held immediately prior to the Change in Control, or a
significant adverse alteration in the nature or status of your
responsibilities or the conditions of your employment from
those in effect immediately prior to such Change in Control;
(ii) a reduction by the Corporation in your annual base salary as
in effect on the date hereof or as the same may be increased
from time to time;
(iii) if your principal office location is at the Corporation's
principal executive offices immediately prior to the Change in
Control, the relocation of the Corporation's principal
executive offices to a location outside the Richmond
Metropolitan Area, or if your principal office location is not
at the Corporation's principal executive offices immediately
prior to the Change in Control, the Corporation's requiring
you to be based anywhere other than your principal office
location immediately prior to the Change in Control except for
required travel on the Cadmus Companies' business to an extent
substantially consistent with your present business travel
obligations;
(iv) except in the event of reasonable administrative delay, the
failure by the Cadmus Companies to pay to you any portion of
your current compensation or to pay to you any portion of an
installment of deferred compensation under any deferred
compensation program of the Cadmus Companies within seven (7)
days of the date such compensation is due;
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(v) the failure by the Cadmus Companies to continue in effect
for you any compensation plan in which you participate
immediately prior to the Change in Control that is material
to your total compensation or any substitute plan adopted
prior to the Change in Control, unless an equitable
arrangement (embodied in an ongoing substitute or
alternative plan) has been made with respect to such
plan, or the failure by the Cadmus Companies to continue
your participation therein (or in such substitute or
alternative plan) on a basis not materially less favorable,
both in terms of the amount of benefits provided and the
level of your participation relative to other
participants, as it existed at the time of the Change
in Control;
(vi) the failure by the Cadmus Companies to continue to provide
you with benefits substantially similar to those enjoyed
by you under any of the Cadmus Companies' life insurance,
medical, health and accident, or disability plans in
which you were participating at the time of the Change in
Control, the taking of any action by any Cadmus Company
which would directly or indirectly materially reduce any
of such benefits or deprive you of any material fringe
benefit enjoyed by you at the time of the Change in
Control, or the failure by the Cadmus Companies to
provide you with the number of paid vacation days to which
you are entitled on the basis of years of service with
the Cadmus Companies in accordance with the normal
vacation policy of the Cadmus Company employing you in
effect at the time of the Change in Control;
(vii) the failure of the Corporation to obtain a satisfactory
agreement from any successor to assume and agree to perform
this Agreement, as contemplated in Section 6 hereof; or
(viii) any purported termination of your employment that is not
effected pursuant to a Notice of Termination satisfying the
requirements of Subsection (e) hereof (and, if applicable,
the requirements of Subsections (b) and (c) hereof), which
purported termination shall not be effective for purposes of
this Agreement.
For purposes of this subsection, any good faith determination
of "Good Reason" made by you shall be conclusive. In
addition, your right to terminate your employment pursuant to
this subsection shall not be affected by your incapacity due
to physical or mental illness and your continued employment
shall not constitute consent to, or a waiver of rights with
respect to, any circumstance constituting Good Reason
hereunder.
(e) Any purported termination of your employment with the Cadmus
Companies by the Corporation or by you shall be communicated by
written Notice of Termination to the other party hereto in
accordance with Section 8.
5. Compensation upon Termination during the Employment Period. Following a
Change in Control, you shall be entitled to the following benefits upon
termination of your employment with the Cadmus Companies provided that
such termination occurs during the Employment Period:
(a) If your employment is terminated by reason of your death during the
Employment Period, this Agreement shall terminate without further
obligations to your legal representatives under this Agreement, other than
for (i) payment of your Base Salary (as defined in Section 5(g) hereof)
through the Date of Termination at the same rate in effect at such date,
and (ii) all other amounts to which you are entitled under any
compensation plan or any other plan, policy, or arrangement of the Cadmus
Companies, at the time such payments are due.
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(b) During any period that you fail to perform your full-time duties with the
Cadmus Companies as a result of incapacity due to physical or mental
illness, you shall continue to receive, until this Agreement is terminated
pursuant to Section 4(b) hereof, your Base Salary (as defined in Section
5(g)) at the rate in effect at the commencement of any such period,
together with all compensation payable to you under any long-term
disability plan maintained by the Cadmus Companies in your name or for
your benefit or other similar plan during such period. Thereafter, your
benefits shall be determined under the retirement, insurance and other
compensation programs of the Cadmus Companies in which you participate in
accordance with the terms of such programs; however, your receipt of
benefits under any long-term disability plan maintained by the Cadmus
Companies in your name or for your benefit will not be affected by your
termination under this Agreement.
(c) If, during the Employment Period, your employment with the Cadmus
Companies shall be terminated by the Corporation for Cause or by you other
than for Good Reason, you shall be entitled to your full Base Salary (as
defined in Section 5(g)) through the Date of Termination at the rate in
effect at the time Notice of Termination is given, plus all other amounts
to which you are entitled under any compensation plan of the Cadmus
Companies at the time such payments are due, and the Cadmus Companies
shall have no further obligations to you under this Agreement.
(d) If, during the Employment Period, your employment with the Cadmus
Companies shall be terminated by you for Good Reason or by the
Corporation other than for Cause, death, or Disability, then you
shall be entitled to the benefits provided below:
(i) you the Corporation shall pay to you your full Base Salary (as
defined in Section 5(g) hereof) through the Date of
Termination at the rate in effect at the time Notice of
Termination is given, no later than the fifth day following
the Date of Termination, plus all other amounts to which you
are entitled under any compensation plan of the Cadmus
Companies, at the time such payments are due;
(ii) in lieu of any further salary or bonus payments to you for
periods subsequent to the Date of Termination, you shall be
paid as severance pay to you, at the time and in the manner
specified in Subsection (e), a severance payment (the
"Severance Payment") equal to the product of (A) your Base
Salary (as defined in Section 5(g) hereof), and (B) a number
(the "Payment/Benefit Factor") determined by dividing by 52
the sum of (I) three times the number of full years that you
have been employed by the Cadmus Companies, and (II) three
times each $10,000 of your annual salary (that is, excluding
bonus) as in effect at the Date of Termination; provided,
however, that in no event shall such Payment/Benefit Factor be
less than .5 nor greater than 2, and provided, further, that
in no event shall such amount exceed the amount of your Base
Salary (as defined in Section 5(g)), on an undiscounted basis,
which you would have received had you remained in the employ
of the Cadmus Companies until your "Normal Retirement Date"
(as defined in the Corporation's Pension Plan (or any
successor thereto) (the "Pension Plan");
(iii) a separate lump-sum supplemental retirement benefit (the
amount of such benefit shall be hereinafter referred to as the
"Supplemental Retirement Amount") equal to the difference
between (A) the actuarial equivalent (utilizing for this
purpose the actuarial assumptions utilized in determining
benefit cash-outs with respect to the Corporation's Pension
Plan during the 90-day period immediately preceding the
Effective Date) of the benefit payable under the Pension Plan
and any supplemental and/or excess benefit plan of the
Corporation providing benefits for you (the "SERP") which you
would receive if your employment continued at the compensation
level in effect at the Date of Termination for the remainder
of the Employment Period, assuming for this purpose that all
accrued benefits are fully vested and that benefit accrual
formulas are no less advantageous to you than those in effect
during the 90-day period immediately proceeding the Effective
Date, and (B) the actuarial equivalent (utilizing for this
purpose the actuarial assumptions utilized in determining
benefit cash outs with respect to the Pension Plan during the
90-day period immediately preceding the Effective Date) of
your actual vested benefit (paid or payable), if any, under
the Pension Plan and the SERP;
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(iv) Except as provided in (iii) above, your participation in,
and terminating distribution and vested rights under, the
Corporation's Pension Plan and other plans of deferred
compensation of the Cadmus Companies shall be governed by
the terms of those respective plans;
(v) the Corporation shall pay to you all legal fees and
expenses incurred by you as a result of such termination,
including all such fees and expenses, if any, incurred in
seeking to obtain or enforce any right or benefit provided
by this Agreement or in connection with any tax audit or
proceeding to the extent attributable to the application
of Section 4999 of the Internal Revenue Code of 1986,
as amended (the "Code") to any payment or benefit provided
hereunder;
(vi) for a period of years (or portion thereof) (the
"Payment Period") equal to the Payment/Benefit Factor
after such termination or until your "Normal Retirement
Date" (as defined in the Corporation's Pension Plan,
whichever first occurs, the Corporation shall arrange to
provide you with life, disability, accident and group
health insurance benefits substantially similar to those
which you were receiving under the welfare programs of the
Cadmus Companies immediately prior to the Notice of
Termination. Benefits otherwise receivable by you
pursuant to this clause (vi) shall be reduced to the
extent comparable benefits are actually received by you
from any source (including a subsequent employer)
during such period following your termination, and any
such benefits actually received by you shall be reported to
the Corporation;
(vii) in the event that the payments and benefits provided to you,
or for your benefit, under this Agreement or under any other
plan or agreement which become payable or are taken into
account as "parachute payments" within the meaning of
Section 280G of the Code as a result of a Change in Control
or your termination of employment relating thereto (the
"Total Parachute Payments") would result in your being
entitled to "excess parachute payments" as defined in
Section 280G of the Code, the payments and benefits provided
to you, or for your benefit, under this Agreement shall be
reduced (but not below zero) to the extent necessary so that
no payment to be made, or benefit to be provided, to you or
for your benefit under this Agreement or any other plan or
agreement would result in "excess parachute payments" as
defined in Section 280G of the Code, provided, however that
the reduction provided in this clause shall not apply unless
your net after-tax benefit if such reduction were made shall
exceed your net after-tax benefit if such reduction were not
made. "Net after-tax benefit" shall mean the sum of (A) the
Total Parachute Payments which you receive or are then
entitled to receive, less (B) the amount of federal, state
and local income and employment taxes payable by you with
respect to the Total Parachute Payments, less (C) the amount
of excise taxes imposed with respect to the Total Parachute
Payments by Section 4999 of the Code. All determinations
regarding the reductions or additional payment called for in
this clause (vii) shall be made by tax counsel selected by
the Corporation and shall be based on the maximum applicable
marginal tax rates for each year in which such payments rate
in effect for such year at the and benefits shall be paid or
provided to you or for your benefit (based upon the time of
the first payment of the foregoing and, as appropriate as
determined by such tax counsel, the taxable wage base for
employment tax purposes); and
(viii) for a period of twelve (12) months following such
termination, the Corporation shall pay the expenses of such
outplacement services as you may require, with such services
to be performed by such agency as the Corporation shall
designate.
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(e) The payment provided for in Subsection (d)(ii), shall be made in a
lump-sum not later than the 30th day following the Date of Termination.
Notwithstanding anything contained in this Subsection (e) or in Subsection
(d)(ii), you may elect to receive, in lieu of a lump-sum Severance
Payment, the benefits described in Subsection (d)(ii) in equal monthly
installments commencing on the first day of the month following the Date
of Termination and ending on the first to occur of (A) the first day of
the last month within the Payment Period, or (B) the first day of the
month in which occurs your "Normal Retirement Date" (as defined in the
Corporation's Pension Plan.
(f) Except as provided in Subsection (d)(vi) hereof you shall not be
required to mitigate the amount of any payment provided for in this
Section 5 by seeking other employment or otherwise, nor shall the
amount of any payment or benefit provided for in this Section 5 be
reduced by any compensation earned by you as the result of
employment by another employer, by retirement benefits, by offset
against any amount claimed to be owed by you to any Cadmus Company,
or otherwise.
(g) For purposes of this Agreement, your "Base Salary" shall mean the
greater of (i) the annual salary and bonus paid to you by the Cadmus
Companies at the date of this Agreement, or (ii) the annual salary
and bonus payable to you by the Cadmus Companies during the fiscal
year in which a Change in Control occurs.
6. Successors: Binding Agreement.
(a) This Agreement is personal to you and without the prior written
consent of the Corporation shall not be assignable by you otherwise
than by will or the laws of descent and distribution. This Agreement
shall inure to the benefit of, and be enforceable by, your legal
representatives.
(b) This Agreement shall inure to the benefit of, and be binding upon,
the Corporation and its successors and assigns.
(c) The Corporation will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all
of the business and/or assets of the Corporation to assume expressly and
agree to perform this Agreement in the same manner and to the same extent
that the Corporation would be required to perform it if no such succession
had taken place. As used in this Agreement, "Corporation" shall mean the
Corporation as hereinbefore defined and any successor to its business
and/or assets as aforesaid which assumes and agrees to perform this
Agreement by operation of law, or otherwise.
7. Resolution of Disputes. If there shall be any dispute between the Corporation
and you (i) in the event of any termination of your employment with the Cadmus
Companies by the Corporation, whether such termination was for Cause, or (ii) in
the event of any termination of employment with the Cadmus Companies by you,
whether Good Reason existed, then, unless and until there is a final,
nonappealable judgment by a court of competent jurisdiction declaring that such
termination was for Cause or that the determination by you of the existence of
Good Reason was not made in good faith, the Corporation shall pay all amounts,
and provide all benefits, to you and/or your family or other beneficiaries, as
the case may be, that the Corporation would be required to pay or provide
pursuant to Section 5(d) as though such termination were by the Corporation
without Cause or by you with Good Reason; provided, however, that the
Corporation shall not be required to pay any disputed amounts pursuant to this
Section 7 except upon receipt of an undertaking by or on behalf of you to repay
all such amounts to which you are ultimately adjudged by such court not to be
entitled.
8. Notice. For the purpose of this Agreement, notices and all other communications
provided for in this Agreement shall be in writing and shall be deemed to have
been duly given when delivered or mailed by United States certified or
registered mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth on the first page of this Agreement, provided
that all notice to the Corporation shall be directed to the attention of the
Board with a copy to the Secretary of the Corporation, or to such other address
as either party may have furnished to the other in writing in accordance
herewith, except that notice of change of address shall be effective only upon
receipt.
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9. Miscellaneous.
(a) This Agreement shall be governed by and construed in accordance with
the laws of the Commonwealth of Virginia, without reference to
principles of conflict of laws. The captions of this Agreement are
not part of the provisions hereof and shall have no force or effect.
(b) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any
other provision of this Agreement.
(c) The Corporation may withhold from any amounts payable under this
Agreement such Federal, state or local taxes as shall be required to
be withheld pursuant to any applicable law or regulation.
(d) Your or the Corporation's failure to insist upon strict compliance with
any provision hereof or any other provision of this Agreement or the
failure to assert any right you or the Corporation may have hereunder,
including, without limitation, your right to terminate your employment for
Good Reason pursuant to Section 4(d) or the Corporation's right to
terminate your employment for Cause pursuant to Section 4(c), shall not be
deemed to be a waiver of such provision or right or any other provision or
right of this Agreement.
(e) You and the Corporation acknowledge that, except as may otherwise be
provided under any other written agreement between you and the
Corporation, your employment by the Cadmus Companies is "at will"
and if, prior to the Effective Date, your employment with the Cadmus
Companies terminates, then you shall have no rights under this
Agreement.
(f) Prior to the Effective Date, this Agreement may be amended,
modified, or terminated by the Corporation, which amendment,
modification, or termination shall be binding and effective without
any requirement for notification of, or consent by, you.
Notwithstanding the foregoing, on or after the Effective Date, this
Agreement may not be amended, modified, or terminated otherwise than
by a written agreement executed by the parties hereto or their
respective successors and legal representatives.
10. Entire Agreement. This Agreement sets forth the entire agreement of the
parties hereto in respect of the subject matter contained herein and
supersedes all prior agreements, promises, covenants, arrangements,
communications, representations or warranties, whether oral or written, by
any officer, employee or representative of any party hereto; and any prior
agreement of the parties hereto in respect of the subject matter contained
herein is hereby terminated and canceled.
If this letter sets forth our agreement on the subject matter
hereof, kindly sign and return to the Corporation the enclosed copy of this
letter, which will then constitute our agreement on this subject.
Sincerely,
CADMUS COMMUNICATIONS CORPORATION
By ______________________________
Name:
Title:
Accepted and agreed to:
____________________________
John H. Phillips
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<S> <C>
EXHIBIT 10.13
June 25, 1998
Edward Fernstrom
9011 Clay Springs Drive
Ashland,, VA 23005
Re: Employee Retention Agreement
Dear Butch:
Cadmus Communications Corporation (the "Corporation") considers it
essential to the best interests of its shareholders to foster the continuous
employment of its key management personnel and that of its direct and indirect
subsidiaries (collectively the "Cadmus Companies" or individually a "Cadmus
Company"). In this connection, the Board of Directors of the Corporation (the
"Board") recognizes that the possibility of a change in control of the
Corporation may exist and that such possibility, and the uncertainty and
questions which it may raise among management, may result in the departure or
distraction of management personnel to the detriment of the Corporation and its
shareholders.
The Board has determined that appropriate steps should be taken to
reinforce and encourage the continued attention and dedication of members of the
Cadmus Companies' management, including yourself, to their assigned duties
without distraction in the face of potentially disturbing circumstances arising
from the possibility of a change in control of the Corporation.
In order to induce you to remain in the employ of the Cadmus Companies,
the Corporation agrees that you shall receive the severance benefits set forth
in this letter agreement (the "Agreement") in the event your employment with the
Cadmus Companies is terminated under the circumstances described below
subsequent to a Change in Control (as defined in Section 2) of the Corporation.
1. Certain Definitions.
(a) "Change in Control Period" means the period commencing on the date hereof
and ending on the second anniversary of such date; provided, however, that
commencing on the date one year after the date hereof, and on each
anniversary of such date (such date and each annual anniversary thereof
shall be hereinafter referred to as the "Renewal Date"), the Change in
Control Period shall be automatically extended so as to terminate two
years from such Renewal Date, unless at least 60 days prior to the Renewal
Date the Corporation shall give notice to you that the Change in Control
Period shall not be so extended.
(b) "Effective Date" means the first date during the Change in Control Period
(as defined in Section 1(b)) on which a Change in Control occurs.
Anything in this Agreement to the contrary notwithstanding, if a Change in
Control occurs and if your employment with the Cadmus Companies is
terminated prior to the date on which the Change in Control occurs, and if
it is reasonably demonstrated by you that such termination of employment
(i) was at the request of a third party who has taken steps reasonably
calculated to effect the Change in Control, or (ii) otherwise arose in
connection with or anticipation of the Change in Control, then for all
purposes of this Agreement the "Effective Date" shall mean the date
immediately prior to the date of such termination of employment.
(c) "Employment Period" means the period commencing on the Effective
Date and ending on the second anniversary of such date.
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(d) "Date of Termination" means (i) if your employment with the Cadmus
Companies is terminated by the Corporation for Cause or is terminated by
you for Good Reason, the date of receipt of the Notice of Termination or
any later date specified therein, as the case may be, (ii) if your
employment with the Cadmus Companies is terminated by the Corporation
other than for Cause or Disability, the Date of Termination shall be the
date on which the Corporation notifies you of such termination, and (iii)
if your employment is terminated by reason of death or Disability, the
Date of Termination shall be the date of your death or the Disability
Effective Date, as the case may be.
(e) "Termination" means a notice which (i) indicates the specific
termination provision in this Agreement relied upon, (ii) sets forth
in reasonable detail the facts and circumstances claimed to provide
a basis for termination of your employment under the provision so
indicated, and (iii) if the Date of Termination is other than the
date of receipt of such notice, specifies the termination date.
2. Change in Control. No benefits shall be payable hereunder unless there
shall have been a Change in Control of the Corporation, as set forth
below. For purposes of this Agreement, a "Change in Control" shall mean:
(a) The acquisition by any individual, entity or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) (a "Person") of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or
more of either (i) the then outstanding shares of common stock of the
Corporation (the "Outstanding Cadmus Common Stock") or (ii) the combined
voting power of the then outstanding voting securities of the Corporation
entitled to vote generally in the election of directors (the "Outstanding
Cadmus Voting Securities"). Notwithstanding the foregoing, the following
acquisitions shall not constitute a Change in Control: (i) any
acquisition directly from the Corporation, (ii) any acquisition by the
Corporation, (iii) any acquisition by, or benefit distribution from, any
employee benefit plan (or related trust) sponsored or maintained by the
Corporation or any corporation controlled by the Corporation, (iv) any
acquisition pursuant to any compensatory stock option, stock purchase or
other stock plan for employees, or (v) any acquisition pursuant to a
reorganization, merger or consolidation, if, following such
reorganization, merger or consolidation, the conditions described in
clauses (i), (ii), and (iii) of Subsection (c) of this Section 2 are
satisfied; or
(b) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority
of the Board; provided, however, that any individual becoming a director
subsequent to the date hereof whose election or nomination for election
was approved by a vote of at least a majority of the directors then
comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board (with his predecessor
thereafter ceasing to be a member); or
(c) Approval by the shareholders of the Corporation of the reorganization,
merger, or consolidation of the Corporation unless, following such
reorganization, merger, or consolidation, (i) more than 60% of the then
outstanding shares of common stock and the then outstanding voting
securities of the resulting corporation is then beneficially owned by all
or substantially all of the beneficial owners, respectively, of the
Outstanding Cadmus Common Stock and Outstanding Cadmus Voting Securities
immediately prior to such reorganization, merger, or consolidation, (ii)
no Person (excluding (A) the Corporation, (B) any employee benefit plan
(or related trust) of the Corporation or such corporation resulting from
such reorganization, merger, or consolidation, and (C) any Person
beneficially owning, immediately prior to such reorganization, merger, or
consolidation, 20% or more of the Outstanding Cadmus Common Stock or
Outstanding Cadmus Voting Securities, as the case may be) beneficially
owns 20% or more of the then outstanding shares of common stock or the
combined voting power of the then outstanding voting securities of the
resulting corporation, and (iii) at least a majority of the members of the
board of directors of the resulting corporation were members of the
Incumbent Board at the time of the execution of the initial agreement
providing for such reorganization, merger, or consolidation; or
(d) Approval by the shareholders of the Corporation of (i) a complete
liquidation or dissolution of the Corporation, or (ii) the sale or other
disposition of all or substantially all of the assets of the Corporation
other than to a corporation with respect to which, following such sale or
other disposition, (A) more than 60% of the outstanding shares of common
stock and the then outstanding voting securities of such corporation is
beneficially owned by all or substantially all of the beneficial owners,
respectively, of the Outstanding Cadmus Common Stock and Outstanding
Cadmus Voting Securities immediately prior to such sale or disposition;
(B) no Person (excluding (I) the Corporation, (II) any employee benefit
plan (or related trust) of the Corporation or such corporation, and (III)
any Person beneficially owning, immediately prior to such sale or other
disposition, 20% or more of the Outstanding Cadmus Common Stock or
Outstanding Cadmus Voting Securities, as the case may be) beneficially
owns 20% or more of the then outstanding shares of common stock or the
combined voting power of the then outstanding voting securities of such
corporation, and (C) at least a majority of the members of the board of
directors of such corporation were members of the Incumbent Board at the
time of the execution of the initial agreement providing for such sale or
other disposition of the assets of the corporation.
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3. Employment Period. The Corporation hereby agrees to continue, or cause to
be continued, your employment with the Cadmus Companies for the Employment
Period.
4. Termination of Employment.
(a) Your employment with the Cadmus Companies shall terminate
automatically upon your death during the Employment Period.
(b) If, as a result of your incapacity due to physical or mental illness (as
determined by the Corporation), you shall have been absent from the
full-time performance of your duties with the Cadmus Companies for six (6)
consecutive months (your "Disability"), the Cadmus Company by which you
are then employed may give you written notice of its intention to
terminate your employment. In such event, your employment with the Cadmus
Companies shall terminate effective on the 30th day after your receipt of
such notice (the "Disability Effective Date"), provided that within 30
days after your receipt of such notice you have not returned to full-time
performance of your duties.
(c) Your employment with the Cadmus Companies may be terminated by the
Corporation during the Employment Period with or without Cause. For
purposes hereof, "Cause" shall mean (i) the willful and continued failure
by you to substantially perform your duties with the Cadmus Companies
(other than any such failure resulting from your incapacity due to
physical or mental illness or any such actual or anticipated failure after
the issuance of a Notice of Termination by you for Good Reason (as defined
in Section 4(d)), after a written demand for substantial performance is
delivered to you by the Board, which demand specifically identifies the
manner in which the Board believes that you have not substantially
performed your duties, (ii) the willful engagement by you in conduct which
is demonstrably and materially injurious to the Cadmus Companies,
monetarily or otherwise, or (iii) your conviction of a felony involving
moral turpitude. For purposes of this subsection, no act, or failure to
act, on your part shall be deemed "willful" unless done, or omitted to be
done, by you not in good faith and without reasonable belief that your
action or omission was in the best interest of the Cadmus Companies.
(d) You may terminate your employment with the Cadmus Companies during
the Employment Period for any reason, including without limitation
Good Reason. For purposes of this Agreement, "Good Reason" shall
mean:
(i) the assignment to you of any duties inconsistent with the
position (including status, offices, titles, and reporting
requirements) or authority in the Cadmus Companies that you
held immediately prior to the Change in Control, or a
significant adverse alteration in the nature or status of your
responsibilities or the conditions of your employment from
those in effect immediately prior to such Change in Control;
(ii) a reduction by the Corporation in your annual base salary as
in effect on the date hereof or as the same may be increased
from time to time;
(iii) if your principal office location is at the Corporation's
principal executive offices immediately prior to the Change in
Control, the relocation of the Corporation's principal
executive offices to a location outside the Richmond
Metropolitan Area, or if your principal office location is not
at the Corporation's principal executive offices immediately
prior to the Change in Control, the Corporation's requiring
you to be based anywhere other than your principal office
location immediately prior to the Change in Control except for
required travel on the Cadmus Companies' business to an extent
substantially consistent with your present business travel
obligations;
(iv) except in the event of reasonable administrative delay, the
failure by the Cadmus Companies to pay to you any portion of
your current compensation or to pay to you any portion of an
installment of deferred compensation under any deferred
compensation program of the Cadmus Companies within seven (7)
days of the date such compensation is due;
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(v) the failure by the Cadmus Companies to continue in effect for
you any compensation plan in which you participate immediately
prior to the Change in Control that is material to your total
compensation or any substitute plan adopted prior to the
Change in Control, unless an equitable arrangement (embodied
in an ongoing substitute or alternative plan) has been made
with respect to such plan, or the failure by the Cadmus
Companies to continue your participation therein (or in such
substitute or alternative plan) on a basis not materially less
favorable, both in terms of the amount of benefits provided
and the level of your participation relative to other
participants, as it existed at the time of the Change in
Control;
(vi) the failure by the Cadmus Companies to continue to provide you
with benefits substantially similar to those enjoyed by you
under any of the Cadmus Companies' life insurance, medical,
health and accident, or disability plans in which you were
participating at the time of the Change in Control, the taking
of any action by any Cadmus Company which would directly or
indirectly materially reduce any of such benefits or deprive
you of any material fringe benefit enjoyed by you at the time
of the Change in Control, or the failure by the Cadmus
Companies to provide you with the number of paid vacation days
to which you are entitled on the basis of years of service
with the Cadmus Companies in accordance with the normal
vacation policy of the Cadmus Company employing you in effect
at the time of the Change in Control;
(vii) the failure of the Corporation to obtain a satisfactory
agreement from any successor to assume and agree to perform
this Agreement, as contemplated in Section 6 hereof; or
(viii)any purported termination of your employment that is not
effected pursuant to a Notice of Termination satisfying the
requirements of Subsection (e) hereof (and, if applicable, the
requirements of Subsections (b) and (c) hereof), which
purported termination shall not be effective for purposes of
this Agreement.
For purposes of this subsection, any good faith determination
of "Good Reason" made by you shall be conclusive. In addition,
your right to terminate your employment pursuant to this
subsection shall not be affected by your incapacity due to
physical or mental illness and your continued employment shall
not constitute consent to, or a waiver of rights with respect
to, any circumstance constituting Good Reason hereunder.
(e) Any purported termination of your employment with the Cadmus
Companies by the Corporation or by you shall be communicated by
written Notice of Termination to the other party hereto in
accordance with Section 8.
5. Compensation upon Termination during the Employment Period. Following a
Change in Control, you shall be entitled to the following benefits upon
termination of your employment with the Cadmus Companies provided that
such termination occurs during the Employment Period:
(a) If your employment is terminated by reason of your death during the
Employment Period, this Agreement shall terminate without further
obligations to your legal representatives under this Agreement, other than
for (i) payment of your Base Salary (as defined in Section 5(g) hereof)
through the Date of Termination at the same rate in effect at such date,
and (ii) all other amounts to which you are entitled under any
compensation plan or any other plan, policy, or arrangement of the Cadmus
Companies, at the time such payments are due.
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(b) During any period that you fail to perform your full-time duties with the
Cadmus Companies as a result of incapacity due to physical or mental
illness, you shall continue to receive, until this Agreement is terminated
pursuant to Section 4(b) hereof, your Base Salary (as defined in Section
5(g)) at the rate in effect at the commencement of any such period,
together with all compensation payable to you under any long-term
disability plan maintained by the Cadmus Companies in your name or for
your benefit or other similar plan during such period. Thereafter, your
benefits shall be determined under the retirement, insurance and other
compensation programs of the Cadmus Companies in which you participate in
accordance with the terms of such programs; however, your receipt of
benefits under any long-term disability plan maintained by the Cadmus
Companies in your name or for your benefit will not be affected by your
termination under this Agreement.
(c) If, during the Employment Period, your employment with the Cadmus
Companies shall be terminated by the Corporation for Cause or by you other
than for Good Reason, you shall be entitled to your full Base Salary (as
defined in Section 5(g)) through the Date of Termination at the rate in
effect at the time Notice of Termination is given, plus all other amounts
to which you are entitled under any compensation plan of the Cadmus
Companies at the time such payments are due, and the Cadmus Companies
shall have no further obligations to you under this Agreement.
(d) If, during the Employment Period, your employment with the Cadmus
Companies shall be terminated by you for Good Reason or by the
Corporation other than for Cause, death, or Disability, then you
shall be entitled to the benefits provided below:
(i) you the Corporation shall pay to you your full Base Salary (as
defined in Section 5(g) hereof) through the Date of
Termination at the rate in effect at the time Notice of
Termination is given, no later than the fifth day following
the Date of Termination, plus all other amounts to which you
are entitled under any compensation plan of the Cadmus
Companies, at the time such payments are due;
(ii) in lieu of any further salary or bonus payments to you for
periods subsequent to the Date of Termination, you shall be
paid as severance pay to you, at the time and in the manner
specified in Subsection (e), a severance payment (the
"Severance Payment") equal to the product of (A) your Base
Salary (as defined in Section 5(g) hereof), and (B) a number
(the "Payment/Benefit Factor") determined by dividing by 52
the sum of (I) three times the number of full years that you
have been employed by the Cadmus Companies, and (II) three
times each $10,000 of your annual salary (that is, excluding
bonus) as in effect at the Date of Termination; provided,
however, that in no event shall such Payment/Benefit Factor be
less than .5 nor greater than 2, and provided, further, that
in no event shall such amount exceed the amount of your Base
Salary (as defined in Section 5(g)), on an undiscounted basis,
which you would have received had you remained in the employ
of the Cadmus Companies until your "Normal Retirement Date"
(as defined in the Corporation's Pension Plan (or any
successor thereto) (the "Pension Plan");
(iii) a separate lump-sum supplemental retirement benefit (the
amount of such benefit shall be hereinafter referred to as the
"Supplemental Retirement Amount") equal to the difference
between (A) the actuarial equivalent (utilizing for this
purpose the actuarial assumptions utilized in determining
benefit cash-outs with respect to the Corporation's Pension
Plan during the 90-day period immediately preceding the
Effective Date) of the benefit payable under the Pension Plan
and any supplemental and/or excess benefit plan of the
Corporation providing benefits for you (the "SERP") which you
would receive if your employment continued at the compensation
level in effect at the Date of Termination for the remainder
of the Employment Period, assuming for this purpose that all
accrued benefits are fully vested and that benefit accrual
formulas are no less advantageous to you than those in effect
during the 90-day period immediately proceeding the Effective
Date, and (B) the actuarial equivalent (utilizing for this
purpose the actuarial assumptions utilized in determining
benefit cash outs with respect to the Pension Plan during the
90-day period immediately preceding the Effective Date) of
your actual vested benefit (paid or payable), if any, under
the Pension Plan and the SERP;
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(iv) Except as provided in (iii) above, your participation in, and
terminating distribution and vested rights under, the
Corporation's Pension Plan and other plans of deferred
compensation of the Cadmus Companies shall be governed by the
terms of those respective plans;
(v) the Corporation shall pay to you all legal fees and
expenses incurred by you as a result of such termination,
including all such fees and expenses, if any, incurred in
seeking to obtain or enforce any right or benefit provided
by this Agreement or in connection with any tax audit or
proceeding to the extent attributable to the application
of Section 4999 of the Internal Revenue Code of 1986, as
amended (the "Code") to any payment or benefit provided
hereunder;
(vi) for a period of years (or portion thereof) (the
"Payment Period") equal to the Payment/Benefit Factor
after such termination or until your "Normal Retirement
Date" (as defined in the Corporation's Pension Plan,
whichever first occurs, the Corporation shall arrange to
provide you with life, disability, accident and group
health insurance benefits substantially similar to those
which you were receiving under the welfare programs of the
Cadmus Companies immediately prior to the Notice of
Termination. Benefits otherwise receivable by you pursuant
to this clause (vi) shall be reduced to the extent
comparable benefits are actually received by you from any
source (including a subsequent employer) during such
period following your termination, and any such
benefits actually received by you shall be reported to the
Corporation;
(vii) in the event that the payments and benefits provided to you,
or for your benefit, under this Agreement or under any other
plan or agreement which become payable or are taken into
account as "parachute payments" within the meaning of Section
280G of the Code as a result of a Change in Control or your
termination of employment relating thereto (the "Total
Parachute Payments") would result in your being entitled to
"excess parachute payments" as defined in Section 280G of the
Code, the payments and benefits provided to you, or for your
benefit, under this Agreement shall be reduced (but not below
zero) to the extent necessary so that no payment to be made,
or benefit to be provided, to you or for your benefit under
this Agreement or any other plan or agreement would result in
"excess parachute payments" as defined in Section 280G of the
Code, provided, however that the reduction provided in this
clause shall not apply unless your net after-tax benefit if
such reduction were made shall exceed your net after-tax
benefit if such reduction were not made. "Net after-tax
benefit" shall mean the sum of (A) the Total Parachute
Payments which you receive or are then entitled to receive,
less (B) the amount of federal, state and local income and
employment taxes payable by you with respect to the Total
Parachute Payments, less (C) the amount of excise taxes
imposed with respect to the Total Parachute Payments by
Section 4999 of the Code. All determinations regarding the
reductions or additional payment called for in this clause
(vii) shall be made by tax counsel selected by the
Corporation and shall be based on the maximum applicable
marginal tax rates for each year in which such payments rate
in effect for such year at the and benefits shall be paid or
provided to you or for your benefit (based upon the time of
the first payment of the foregoing and, as appropriate as
determined by such tax counsel, the taxable wage base for
employment tax purposes); and
(viii) for a period of twelve (12) months following such
termination, the Corporation shall pay the expenses of such
outplacement services as you may require, with such services
to be performed by such agency as the Corporation shall
designate.
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(e) The payment provided for in Subsection (d)(ii), shall be made in a
lump-sum not later than the 30th day following the Date of Termination.
Notwithstanding anything contained in this Subsection (e) or in Subsection
(d)(ii), you may elect to receive, in lieu of a lump-sum Severance
Payment, the benefits described in Subsection (d)(ii) in equal monthly
installments commencing on the first day of the month following the Date
of Termination and ending on the first to occur of (A) the first day of
the last month within the Payment Period, or (B) the first day of the
month in which occurs your "Normal Retirement Date" (as defined in the
Corporation's Pension Plan.
(f) Except as provided in Subsection (d)(vi) hereof you shall not be
required to mitigate the amount of any payment provided for in this
Section 5 by seeking other employment or otherwise, nor shall the
amount of any payment or benefit provided for in this Section 5 be
reduced by any compensation earned by you as the result of
employment by another employer, by retirement benefits, by offset
against any amount claimed to be owed by you to any Cadmus Company,
or otherwise.
(g) For purposes of this Agreement, your "Base Salary" shall mean the
greater of (i) the annual salary and bonus paid to you by the Cadmus
Companies at the date of this Agreement, or (ii) the annual salary
and bonus payable to you by the Cadmus Companies during the fiscal
year in which a Change in Control occurs.
6. Successors: Binding Agreement.
(a) This Agreement is personal to you and without the prior written
consent of the Corporation shall not be assignable by you otherwise
than by will or the laws of descent and distribution. This Agreement
shall inure to the benefit of, and be enforceable by, your legal
representatives.
(b) This Agreement shall inure to the benefit of, and be binding upon,
the Corporation and its successors and assigns.
(c) The Corporation will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all
of the business and/or assets of the Corporation to assume expressly and
agree to perform this Agreement in the same manner and to the same extent
that the Corporation would be required to perform it if no such succession
had taken place. As used in this Agreement, "Corporation" shall mean the
Corporation as hereinbefore defined and any successor to its business
and/or assets as aforesaid which assumes and agrees to perform this
Agreement by operation of law, or otherwise.
7. Resolution of Disputes. If there shall be any dispute between the Corporation
and you (i) in the event of any termination of your employment with the Cadmus
Companies by the Corporation, whether such termination was for Cause, or (ii) in
the event of any termination of employment with the Cadmus Companies by you,
whether Good Reason existed, then, unless and until there is a final,
nonappealable judgment by a court of competent jurisdiction declaring that such
termination was for Cause or that the determination by you of the existence of
Good Reason was not made in good faith, the Corporation shall pay all amounts,
and provide all benefits, to you and/or your family or other beneficiaries, as
the case may be, that the Corporation would be required to pay or provide
pursuant to Section 5(d) as though such termination were by the Corporation
without Cause or by you with Good Reason; provided, however, that the
Corporation shall not be required to pay any disputed amounts pursuant to this
Section 7 except upon receipt of an undertaking by or on behalf of you to repay
all such amounts to which you are ultimately adjudged by such court not to be
entitled.
8. Notice. For the purpose of this Agreement, notices and all other communications
provided for in this Agreement shall be in writing and shall be deemed to have
been duly given when delivered or mailed by United States certified or
registered mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth on the first page of this Agreement, provided
that all notice to the Corporation shall be directed to the attention of the
Board with a copy to the Secretary of the Corporation, or to such other address
as either party may have furnished to the other in writing in accordance
herewith, except that notice of change of address shall be effective only upon
receipt.
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9. Miscellaneous.
(a) This Agreement shall be governed by and construed in accordance with
the laws of the Commonwealth of Virginia, without reference to
principles of conflict of laws. The captions of this Agreement are
not part of the provisions hereof and shall have no force or effect.
(b) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any
other provision of this Agreement.
(c) The Corporation may withhold from any amounts payable under this
Agreement such Federal, state or local taxes as shall be required to
be withheld pursuant to any applicable law or regulation.
(d) Your or the Corporation's failure to insist upon strict compliance with
any provision hereof or any other provision of this Agreement or the
failure to assert any right you or the Corporation may have hereunder,
including, without limitation, your right to terminate your employment for
Good Reason pursuant to Section 4(d) or the Corporation's right to
terminate your employment for Cause pursuant to Section 4(c), shall not be
deemed to be a waiver of such provision or right or any other provision or
right of this Agreement.
(e) You and the Corporation acknowledge that, except as may otherwise be
provided under any other written agreement between you and the
Corporation, your employment by the Cadmus Companies is "at will"
and if, prior to the Effective Date, your employment with the Cadmus
Companies terminates, then you shall have no rights under this
Agreement.
(f) Prior to the Effective Date, this Agreement may be amended,
modified, or terminated by the Corporation, which amendment,
modification, or termination shall be binding and effective without
any requirement for notification of, or consent by, you.
Notwithstanding the foregoing, on or after the Effective Date, this
Agreement may not be amended, modified, or terminated otherwise than
by a written agreement executed by the parties hereto or their
respective successors and legal representatives.
10. Entire Agreement. This Agreement sets forth the entire agreement of the
parties hereto in respect of the subject matter contained herein and
supersedes all prior agreements, promises, covenants, arrangements,
communications, representations or warranties, whether oral or written, by
any officer, employee or representative of any party hereto; and any prior
agreement of the parties hereto in respect of the subject matter contained
herein is hereby terminated and canceled.
If this letter sets forth our agreement on the subject matter hereof,
kindly sign and return to the Corporation the enclosed copy of this letter,
which will then constitute our agreement on this subject.
Sincerely,
CADMUS COMMUNICATIONS CORPORATION
By _____________________________
Name:
Title:
Accepted and agreed to:
______________________________
Edward Fernstrom
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<S> <C>
EXHIBIT 10.14
June 25, 1998
Steven R. Isaac
5630 Country Hills Lane
Glen Allen,, VA 23060
Re: Employee Retention Agreement
Dear Steve:
Cadmus Communications Corporation (the "Corporation") considers it
essential to the best interests of its shareholders to foster the continuous
employment of its key management personnel and that of its direct and indirect
subsidiaries (collectively the "Cadmus Companies" or individually a "Cadmus
Company"). In this connection, the Board of Directors of the Corporation (the
"Board") recognizes that the possibility of a change in control of the
Corporation may exist and that such possibility, and the uncertainty and
questions which it may raise among management, may result in the departure or
distraction of management personnel to the detriment of the Corporation and its
shareholders.
The Board has determined that appropriate steps should be taken to
reinforce and encourage the continued attention and dedication of members of the
Cadmus Companies' management, including yourself, to their assigned duties
without distraction in the face of potentially disturbing circumstances arising
from the possibility of a change in control of the Corporation.
In order to induce you to remain in the employ of the Cadmus Companies,
the Corporation agrees that you shall receive the severance benefits set forth
in this letter agreement (the "Agreement") in the event your employment with the
Cadmus Companies is terminated under the circumstances described below
subsequent to a Change in Control (as defined in Section 2) of the Corporation.
1. Certain Definitions.
(a) "Change in Control Period" means the period commencing on the date hereof
and ending on the second anniversary of such date; provided, however, that
commencing on the date one year after the date hereof, and on each
anniversary of such date (such date and each annual anniversary thereof
shall be hereinafter referred to as the "Renewal Date"), the Change in
Control Period shall be automatically extended so as to terminate two
years from such Renewal Date, unless at least 60 days prior to the Renewal
Date the Corporation shall give notice to you that the Change in Control
Period shall not be so extended.
(b) "Effective Date" means the first date during the Change in Control Period
(as defined in Section 1(b)) on which a Change in Control occurs.
Anything in this Agreement to the contrary notwithstanding, if a Change in
Control occurs and if your employment with the Cadmus Companies is
terminated prior to the date on which the Change in Control occurs, and if
it is reasonably demonstrated by you that such termination of employment
(i) was at the request of a third party who has taken steps reasonably
calculated to effect the Change in Control, or (ii) otherwise arose in
connection with or anticipation of the Change in Control, then for all
purposes of this Agreement the "Effective Date" shall mean the date
immediately prior to the date of such termination of employment.
(c) "Employment Period" means the period commencing on the Effective
Date and ending on the second anniversary of such date.
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(d) "Date of Termination" means (i) if your employment with the Cadmus
Companies is terminated by the Corporation for Cause or is terminated by
you for Good Reason, the date of receipt of the Notice of Termination or
any later date specified therein, as the case may be, (ii) if your
employment with the Cadmus Companies is terminated by the Corporation
other than for Cause or Disability, the Date of Termination shall be the
date on which the Corporation notifies you of such termination, and (iii)
if your employment is terminated by reason of death or Disability, the
Date of Termination shall be the date of your death or the Disability
Effective Date, as the case may be.
(e) "Termination" means a notice which (i) indicates the specific
termination provision in this Agreement relied upon, (ii) sets forth
in reasonable detail the facts and circumstances claimed to provide
a basis for termination of your employment under the provision so
indicated, and (iii) if the Date of Termination is other than the
date of receipt of such notice, specifies the termination date.
2. Change in Control. No benefits shall be payable hereunder unless there
shall have been a Change in Control of the Corporation, as set forth
below. For purposes of this Agreement, a "Change in Control" shall mean:
(a) The acquisition by any individual, entity or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) (a "Person") of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or
more of either (i) the then outstanding shares of common stock of the
Corporation (the "Outstanding Cadmus Common Stock") or (ii) the combined
voting power of the then outstanding voting securities of the Corporation
entitled to vote generally in the election of directors (the "Outstanding
Cadmus Voting Securities"). Notwithstanding the foregoing, the following
acquisitions shall not constitute a Change in Control: (i) any
acquisition directly from the Corporation, (ii) any acquisition by the
Corporation, (iii) any acquisition by, or benefit distribution from, any
employee benefit plan (or related trust) sponsored or maintained by the
Corporation or any corporation controlled by the Corporation, (iv) any
acquisition pursuant to any compensatory stock option, stock purchase or
other stock plan for employees, or (v) any acquisition pursuant to a
reorganization, merger or consolidation, if, following such
reorganization, merger or consolidation, the conditions described in
clauses (i), (ii), and (iii) of Subsection (c) of this Section 2 are
satisfied; or
(b) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority
of the Board; provided, however, that any individual becoming a director
subsequent to the date hereof whose election or nomination for election
was approved by a vote of at least a majority of the directors then
comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board (with his predecessor
thereafter ceasing to be a member); or
(c) Approval by the shareholders of the Corporation of the reorganization,
merger, or consolidation of the Corporation unless, following such
reorganization, merger, or consolidation, (i) more than 60% of the then
outstanding shares of common stock and the then outstanding voting
securities of the resulting corporation is then beneficially owned by all
or substantially all of the beneficial owners, respectively, of the
Outstanding Cadmus Common Stock and Outstanding Cadmus Voting Securities
immediately prior to such reorganization, merger, or consolidation, (ii)
no Person (excluding (A) the Corporation, (B) any employee benefit plan
(or related trust) of the Corporation or such corporation resulting from
such reorganization, merger, or consolidation, and (C) any Person
beneficially owning, immediately prior to such reorganization, merger, or
consolidation, 20% or more of the Outstanding Cadmus Common Stock or
Outstanding Cadmus Voting Securities, as the case may be) beneficially
owns 20% or more of the then outstanding shares of common stock or the
combined voting power of the then outstanding voting securities of the
resulting corporation, and (iii) at least a majority of the members of the
board of directors of the resulting corporation were members of the
Incumbent Board at the time of the execution of the initial agreement
providing for such reorganization, merger, or consolidation; or
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(d) Approval by the shareholders of the Corporation of (i) a complete
liquidation or dissolution of the Corporation, or (ii) the sale or other
disposition of all or substantially all of the assets of the Corporation
other than to a corporation with respect to which, following such sale or
other disposition, (A) more than 60% of the outstanding shares of common
stock and the then outstanding voting securities of such corporation is
beneficially owned by all or substantially all of the beneficial owners,
respectively, of the Outstanding Cadmus Common Stock and Outstanding
Cadmus Voting Securities immediately prior to such sale or disposition;
(B) no Person (excluding (I) the Corporation, (II) any employee benefit
plan (or related trust) of the Corporation or such corporation, and (III)
any Person beneficially owning, immediately prior to such sale or other
disposition, 20% or more of the Outstanding Cadmus Common Stock or
Outstanding Cadmus Voting Securities, as the case may be) beneficially
owns 20% or more of the then outstanding shares of common stock or the
combined voting power of the then outstanding voting securities of such
corporation, and (C) at least a majority of the members of the board of
directors of such corporation were members of the Incumbent Board at the
time of the execution of the initial agreement providing for such sale or
other disposition of the assets of the corporation.
3. Employment Period. The Corporation hereby agrees to continue, or cause to
be continued, your employment with the Cadmus Companies for the Employment
Period.
4. Termination of Employment.
(a) Your employment with the Cadmus Companies shall terminate
automatically upon your death during the Employment Period.
(b) If, as a result of your incapacity due to physical or mental illness (as
determined by the Corporation), you shall have been absent from the
full-time performance of your duties with the Cadmus Companies for six (6)
consecutive months (your "Disability"), the Cadmus Company by which you
are then employed may give you written notice of its intention to
terminate your employment. In such event, your employment with the Cadmus
Companies shall terminate effective on the 30th day after your receipt of
such notice (the "Disability Effective Date"), provided that within 30
days after your receipt of such notice you have not returned to full-time
performance of your duties.
(c) Your employment with the Cadmus Companies may be terminated by the
Corporation during the Employment Period with or without Cause. For
purposes hereof, "Cause" shall mean (i) the willful and continued failure
by you to substantially perform your duties with the Cadmus Companies
(other than any such failure resulting from your incapacity due to
physical or mental illness or any such actual or anticipated failure after
the issuance of a Notice of Termination by you for Good Reason (as defined
in Section 4(d)), after a written demand for substantial performance is
delivered to you by the Board, which demand specifically identifies the
manner in which the Board believes that you have not substantially
performed your duties, (ii) the willful engagement by you in conduct which
is demonstrably and materially injurious to the Cadmus Companies,
monetarily or otherwise, or (iii) your conviction of a felony involving
moral turpitude. For purposes of this subsection, no act, or failure to
act, on your part shall be deemed "willful" unless done, or omitted to be
done, by you not in good faith and without reasonable belief that your
action or omission was in the best interest of the Cadmus Companies.
(d) You may terminate your employment with the Cadmus Companies during
the Employment Period for any reason, including without limitation
Good Reason. For purposes of this Agreement, "Good Reason" shall
mean:
(i) the assignment to you of any duties inconsistent with the
position (including status, offices, titles, and reporting
requirements) or authority in the Cadmus Companies that you
held immediately prior to the Change in Control, or a
significant adverse alteration in the nature or status of your
responsibilities or the conditions of your employment from
those in effect immediately prior to such Change in Control;
(ii) a reduction by the Corporation in your annual base salary as
in effect on the date hereof or as the same may be increased
from time to time;
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(iii) if your principal office location is at the Corporation's
principal executive offices immediately prior to the Change
in Control, the relocation of the Corporation's principal
executive offices to a location outside the Richmond
Metropolitan Area, or if your principal office location is
not at the Corporation's principal executive offices
immediately prior to the Change in Control, the Corporation's
requiring you to be based anywhere other than your principal
office location immediately prior to the Change in Control
except for required travel on the Cadmus Companies' business
to an extent substantially consistent with your present
business travel obligations;
(iv) except in the event of reasonable administrative delay, the
failure by the Cadmus Companies to pay to you any portion of
your current compensation or to pay to you any portion of an
installment of deferred compensation under any deferred
compensation program of the Cadmus Companies within seven (7)
days of the date such compensation is due;
(v) the failure by the Cadmus Companies to continue in effect
for you any compensation plan in which you participate
immediately prior to the Change in Control that is material
to your total compensation or any substitute plan adopted
prior to the Change in Control, unless an equitable
arrangement (embodied in an ongoing substitute or
alternative plan) has been made with respect to such
plan, or the failure by the Cadmus Companies to continue
your participation therein (or in such substitute or
alternative plan) on a basis not materially less favorable,
both in terms of the amount of benefits provided and the
level of your participation relative to other
participants, as it existed at the time of the Change
in Control;
(vi) the failure by the Cadmus Companies to continue to provide
you with benefits substantially similar to those enjoyed
by you under any of the Cadmus Companies' life insurance,
medical, health and accident, or disability plans in
which you were participating at the time of the Change in
Control, the taking of any action by any Cadmus Company
which would directly or indirectly materially reduce any
of such benefits or deprive you of any material fringe
benefit enjoyed by you at the time of the Change in
Control, or the failure by the Cadmus Companies to
provide you with the number of paid vacation days to which
you are entitled on the basis of years of service with
the Cadmus Companies in accordance with the normal
vacation policy of the Cadmus Company employing you in
effect at the time of the Change in Control;
(vii) the failure of the Corporation to obtain a satisfactory
agreement from any successor to assume and agree to perform
this Agreement, as contemplated in Section 6 hereof;
(viii) any purported termination of your employment that is not
effected pursuant to a Notice of Termination satisfying the
requirements of Subsection (e) hereof (and, if applicable,
the requirements of Subsections (b) and (c) hereof), which
purported termination shall not be effective for purposes of
this Agreement; or
(ix) so long as no Cause for your termination by the Corporation
exists (or would exist assuming the Board made a
determination of Cause), a voluntary cessation by you of your
employment for any reason during the 60-day period commencing
on the first anniversary of the occurrence of the Change in
Control.
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For purposes of this subsection, any good faith determination of
"Good Reason" made by you shall be conclusive. In addition,
your right to terminate your employment pursuant to this
subsection shall not be affected by your incapacity due to
physical or mental illness and your continued employment shall
not constitute consent to, or a waiver of rights with respect
to, any circumstance constituting Good Reason hereunder.
(e) Any purported termination of your employment with the Cadmus
Companies by the Corporation or by you shall be communicated by
written Notice of Termination to the other party hereto in
accordance with Section 8.
5. Compensation upon Termination during the Employment Period. Following a
Change in Control, you shall be entitled to the following benefits upon
termination of your employment with the Cadmus Companies provided that
such termination occurs during the Employment Period:
(a) If your employment is terminated by reason of your death during the
Employment Period, this Agreement shall terminate without further
obligations to your legal representatives under this Agreement, other than
for (i) payment of your Base Salary (as defined in Section 5(g) hereof)
through the Date of Termination at the same rate in effect at such date,
and (ii) all other amounts to which you are entitled under any
compensation plan or any other plan, policy, or arrangement of the Cadmus
Companies, at the time such payments are due.
(b) During any period that you fail to perform your full-time duties with the
Cadmus Companies as a result of incapacity due to physical or mental
illness, you shall continue to receive, until this Agreement is terminated
pursuant to Section 4(b) hereof, your Base Salary (as defined in Section
5(g)) at the rate in effect at the commencement of any such period,
together with all compensation payable to you under any long-term
disability plan maintained by the Cadmus Companies in your name or for
your benefit or other similar plan during such period. Thereafter, your
benefits shall be determined under the retirement, insurance and other
compensation programs of the Cadmus Companies in which you participate in
accordance with the terms of such programs; however, your receipt of
benefits under any long-term disability plan maintained by the Cadmus
Companies in your name or for your benefit will not be affected by your
termination under this Agreement.
(c) If, during the Employment Period, your employment with the Cadmus
Companies shall be terminated by the Corporation for Cause or by you other
than for Good Reason, you shall be entitled to your full Base Salary (as
defined in Section 5(g)) through the Date of Termination at the rate in
effect at the time Notice of Termination is given, plus all other amounts
to which you are entitled under any compensation plan of the Cadmus
Companies at the time such payments are due, and the Cadmus Companies
shall have no further obligations to you under this Agreement.
(d) If, during the Employment Period, your employment with the Cadmus
Companies shall be terminated by you for Good Reason or by the
Corporation other than for Cause, death, or Disability, then you
shall be entitled to the benefits provided below:
(i) you the Corporation shall pay to you your full Base Salary (as
defined in Section 5(g) hereof) through the Date of
Termination at the rate in effect at the time Notice of
Termination is given, no later than the fifth day following
the Date of Termination, plus all other amounts to which you
are entitled under any compensation plan of the Cadmus
Companies, at the time such payments are due;
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(ii) in lieu of any further salary or bonus payments to you for
periods subsequent to the Date of Termination, you shall be
paid as severance pay to you, at the time and in the manner
specified in Subsection (e), a severance payment (the
"Severance Payment") equal to the product of (A) your Base
Salary (as defined in Section 5(g) hereof), and (B) a number
(the "Payment/Benefit Factor") determined by dividing by 52
the sum of (I) three times the number of full years that you
have been employed by the Cadmus Companies, and (II) three
times each $10,000 of your annual salary (that is, excluding
bonus) as in effect at the Date of Termination; provided,
however, that in no event shall such Payment/Benefit Factor be
less than .5 nor greater than 2, and provided, further, that
in no event shall such amount exceed the amount of your Base
Salary (as defined in Section 5(g)), on an undiscounted basis,
which you would have received had you remained in the employ
of the Cadmus Companies until your "Normal Retirement Date"
(as defined in the Corporation's Pension Plan (or any
successor thereto) (the "Pension Plan");
(iii) a separate lump-sum supplemental retirement benefit (the
amount of such benefit shall be hereinafter referred to as the
"Supplemental Retirement Amount") equal to the difference
between (A) the actuarial equivalent (utilizing for this
purpose the actuarial assumptions utilized in determining
benefit cash-outs with respect to the Corporation's Pension
Plan during the 90-day period immediately preceding the
Effective Date) of the benefit payable under the Pension Plan
and any supplemental and/or excess benefit plan of the
Corporation providing benefits for you (the "SERP") which you
would receive if your employment continued at the compensation
level in effect at the Date of Termination for the remainder
of the Employment Period, assuming for this purpose that all
accrued benefits are fully vested and that benefit accrual
formulas are no less advantageous to you than those in effect
during the 90-day period immediately proceeding the Effective
Date, and (B) the actuarial equivalent (utilizing for this
purpose the actuarial assumptions utilized in determining
benefit cash outs with respect to the Pension Plan during the
90-day period immediately preceding the Effective Date) of
your actual vested benefit (paid or payable), if any, under
the Pension Plan and the SERP;
(iv) Except as provided in (iii) above, your participation in, and
terminating distribution and vested rights under, the
Corporation's Pension Plan and other plans of deferred
compensation of the Cadmus Companies shall be governed by the
terms of those respective plans;
(v) the Corporation shall pay to you all legal fees and expenses
incurred by you as a result of such termination, including all
such fees and expenses, if any, incurred in seeking to obtain
or enforce any right or benefit provided by this Agreement or
in connection with any tax audit or proceeding to the extent
attributable to the application of Section 4999 of the
Internal Revenue Code of 1986, as amended (the "Code") to any
payment or benefit provided hereunder;
(vi) for a period of years (or portion thereof) (the "Payment
Period") equal to the Payment/Benefit Factor after such
termination or until your "Normal Retirement Date" (as defined
in the Corporation's Pension Plan, whichever first occurs, the
Corporation shall arrange to provide you with life,
disability, accident and group health insurance benefits
substantially similar to those which you were receiving under
the welfare programs of the Cadmus Companies immediately prior
to the Notice of Termination. Benefits otherwise receivable
by you pursuant to this clause (vi) shall be reduced to the
extent comparable benefits are actually received by you from
any source (including a subsequent employer) during such
period following your termination, and any such benefits
actually received by you shall be reported to the Corporation;
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(vii) in the event that the payments and benefits provided to you,
or for your benefit, under this Agreement (determined without
regard to the Gross-Up Payment described below) or under any
other plan or agreement which become payable or are taken into
account as "parachute payments" within the meaning of Section
280G of the Code as a result of a Change in Control or your
termination of employment relating thereto (the "Total
Parachute Payments") would result in your being entitled to
"excess parachute payments" as defined in Section 280G of the
Code, the following applicable reduction shall occur or
additional payment shall be made:
(A) in the event the Change in Control occurs before July 1,
1999, you shall be entitled to receive an additional
payment (a "Gross-Up Payment") in an amount such that
after payment by you of all taxes (including any
interest or penalties incurred by you with respect to
such taxes), including, without limitation, any federal,
state and local income taxes, any employment taxes, and
the excise tax imposed by Section 4999 of the Code (such
excise tax, together with any interest or penalties
relating to such excise tax, are hereinafter
collectively referred to as the "Excise Tax"), you
retain an amount of the Gross-Up Payment equal to the
Excise Tax imposed upon the Total Parachute Payments; or
(B) in the event the Change in Control occurs on or after
July 1, 1999, the payments and benefits provided to you,
or for your benefit, under this Agreement shall be
reduced (but not below zero) to the extent necessary so
that no payment to be made, or benefit to be provided,
to you or for your benefit under this Agreement or any
other plan or agreement would result in "excess
parachute payments" as defined in Section 280G of the
Code, provided, however that the reduction provided in
this clause shall not apply unless your net after-tax
benefit if such reduction were made shall exceed your
net after-tax benefit if such reduction were not made.
"Net after-tax benefit" shall mean the sum of (I) the
Total Parachute Payments which you receive or are then
entitled to receive, less (II) the amount of federal,
state and local income and employment taxes payable by
you with respect to the Total Parachute Payments, less
(III) the amount of excise taxes imposed with respect to
the Total Parachute Payments by Section 4999 of the Code.
All determinations regarding the reductions or additional
payment called for in this clause (vii) shall be made by tax
counsel selected by the Corporation and shall be based on the
maximum applicable marginal tax rates for each year in which
such payments and benefits shall be paid or provided to you or
for your benefit (based upon the rate in effect for such year
at the time of the first payment of the foregoing and, as
appropriate as determined by such tax counsel, the taxable
wage base for employment tax purposes); and
(viii) for a period of twelve (12) months following such
termination, the Corporation shall pay the expenses of such
outplacement services as you may require, with such services
to be performed by such agency as the Corporation shall
designate.
(e) The payment provided for in Subsection (d)(ii), shall be made in a
lump-sum not later than the 30th day following the Date of Termination.
Notwithstanding anything contained in this Subsection (e) or in Subsection
(d)(ii), you may elect to receive, in lieu of a lump-sum Severance
Payment, the benefits described in Subsection (d)(ii) in equal monthly
installments commencing on the first day of the month following the Date
of Termination and ending on the first to occur of (A) the first day of
the last month within the Payment Period, or (B) the first day of the
month in which occurs your "Normal Retirement Date" (as defined in the
Corporation's Pension Plan.
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(f) Except as provided in Subsection (d)(vi) hereof you shall not be
required to mitigate the amount of any payment provided for in this
Section 5 by seeking other employment or otherwise, nor shall the
amount of any payment or benefit provided for in this Section 5 be
reduced by any compensation earned by you as the result of
employment by another employer, by retirement benefits, by offset
against any amount claimed to be owed by you to any Cadmus Company,
or otherwise.
(g) For purposes of this Agreement, your "Base Salary" shall mean the
greater of (i) the annual salary and bonus paid to you by the Cadmus
Companies at the date of this Agreement, or (ii) the annual salary
and bonus payable to you by the Cadmus Companies during the fiscal
year in which a Change in Control occurs.
6. Successors: Binding Agreement.
(a) This Agreement is personal to you and without the prior written
consent of the Corporation shall not be assignable by you otherwise
than by will or the laws of descent and distribution. This Agreement
shall inure to the benefit of, and be enforceable by, your legal
representatives.
(b) This Agreement shall inure to the benefit of, and be binding upon,
the Corporation and its successors and assigns.
(c) The Corporation will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all
of the business and/or assets of the Corporation to assume expressly and
agree to perform this Agreement in the same manner and to the same extent
that the Corporation would be required to perform it if no such succession
had taken place. As used in this Agreement, "Corporation" shall mean the
Corporation as hereinbefore defined and any successor to its business
and/or assets as aforesaid which assumes and agrees to perform this
Agreement by operation of law, or otherwise.
7. Resolution of Disputes. If there shall be any dispute between the Corporation
and you (i) in the event of any termination of your employment with the Cadmus
Companies by the Corporation, whether such termination was for Cause, or (ii) in
the event of any termination of employment with the Cadmus Companies by you,
whether Good Reason existed, then, unless and until there is a final,
nonappealable judgment by a court of competent jurisdiction declaring that such
termination was for Cause or that the determination by you of the existence of
Good Reason was not made in good faith, the Corporation shall pay all amounts,
and provide all benefits, to you and/or your family or other beneficiaries, as
the case may be, that the Corporation would be required to pay or provide
pursuant to Section 5(d) as though such termination were by the Corporation
without Cause or by you with Good Reason; provided, however, that the
Corporation shall not be required to pay any disputed amounts pursuant to this
Section 7 except upon receipt of an undertaking by or on behalf of you to repay
all such amounts to which you are ultimately adjudged by such court not to be
entitled.
8. Notice. For the purpose of this Agreement, notices and all other communications
provided for in this Agreement shall be in writing and shall be deemed to have
been duly given when delivered or mailed by United States certified or
registered mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth on the first page of this Agreement, provided
that all notice to the Corporation shall be directed to the attention of the
Board with a copy to the Secretary of the Corporation, or to such other address
as either party may have furnished to the other in writing in accordance
herewith, except that notice of change of address shall be effective only upon
receipt.
9. Miscellaneous.
(a) This Agreement shall be governed by and construed in accordance with
the laws of the Commonwealth of Virginia, without reference to
principles of conflict of laws. The captions of this Agreement are
not part of the provisions hereof and shall have no force or effect.
(b) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any
other provision of this Agreement.
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(c) The Corporation may withhold from any amounts payable under this
Agreement such Federal, state or local taxes as shall be required to
be withheld pursuant to any applicable law or regulation.
(d) Your or the Corporation's failure to insist upon strict compliance with
any provision hereof or any other provision of this Agreement or the
failure to assert any right you or the Corporation may have hereunder,
including, without limitation, your right to terminate your employment for
Good Reason pursuant to Section 4(d) or the Corporation's right to
terminate your employment for Cause pursuant to Section 4(c), shall not be
deemed to be a waiver of such provision or right or any other provision or
right of this Agreement.
(e) You and the Corporation acknowledge that, except as may otherwise be
provided under any other written agreement between you and the
Corporation, your employment by the Cadmus Companies is "at will"
and if, prior to the Effective Date, your employment with the Cadmus
Companies terminates, then you shall have no rights under this
Agreement.
(f) Prior to the Effective Date, this Agreement may be amended,
modified, or terminated by the Corporation, which amendment,
modification, or termination shall be binding and effective without
any requirement for notification of, or consent by, you.
Notwithstanding the foregoing, on or after the Effective Date, this
Agreement may not be amended, modified, or terminated otherwise than
by a written agreement executed by the parties hereto or their
respective successors and legal representatives.
10. Entire Agreement. This Agreement, together with a letter agreement between you
and the Corporation dated as of the date hereof, sets forth the entire agreement
of the parties hereto in respect of the subject matter contained herein and
supersedes all prior agreements, promises, covenants, arrangements,
communications, representations or warranties, whether oral or written, by any
officer, employee or representative of any party hereto; and any prior agreement
of the parties hereto in respect of the subject matter contained herein is
hereby terminated and canceled.
If this letter sets forth our agreement on the subject matter hereof,
kindly sign and return to the Corporation the enclosed copy of this letter,
which will then constitute our agreement on this subject.
Sincerely,
CADMUS COMMUNICATIONS CORPORATION
By ______________________________
Name:
Title:
Accepted and agreed to:
_____________________________
Steven R. Isaac
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June 24, 1998
Steven R. Isaac
5630 Country Hills Lane
Glen Allen,, VA 23060
Re: Employee Retention Agreement
Dear Steve:
On June 24, 1998 you and Cadmus Communications Corporation (the
"Corporation") entered into an Employee Retention Agreement agreement (a copy of
which is attached hereto) designed to reinforce and to encourage your continued
attention and dedication to your assigned duties without distraction by certain
potentially disturbing circumstances arising from the possibility of a change in
control of the Corporation (the "Retention Agreement"). All capitalized terms
herein not otherwise defined, shall have the meanings ascribed to them in the
Retention Agreement.
Pursuant to the Retention Agreement, you are entitled to receive certain
severance and other benefits in the event that, during the Employment Period and
following a Change in Control of the Corporation, your employment with the
Cadmus Companies shall be terminated by you for Good Reason or by the
Corporation other than for Cause, death, or Disability. Those severance and
other benefits are set forth in, and conclusively fixed by, the express terms of
the Retention Agreement.
The Corporation has determined, however, that it desires to augment the
Severance Payment otherwise payable to you under Section 5(d)(ii) of the
Retention Agreement. Specifically, the Corporation shall pay to you a separate
lump-sum severance payment equal to the difference between (A) an amount equal
to two times your Base Salary, and (B) the amount payable to you pursuant to
Section 5(d)(ii) of the Retention Agreement. The Corporation's intent is to
provide you, by means of a combination of Section 5(d)(ii) of the Retention
Agreement and this agreement, a severance payment equal to twice your Base
Salary.
The payment, if any, to be made hereunder shall be made in a lump-sum not
later than the 30th day following the Date of Termination; provided, however,
that you may elect to receive said payment in equal monthly installments
commencing on the first day of the month following the Date of Termination and
ending on the first occur of (A) the first day of the last month within the
Payment Period or (B) the first day of the month in which occurs your Normal
Retirement Date.
Please note that the payment, if any, to be made hereunder is subject to
any applicable "cut-back" provisions of Section 5(d)(vii) of the Retention
Agreement, which provisions are expressly incorporated herein by reference. In
addition, please note that this agreement will expire or terminate upon the
earlier of (i) Steven R.or (ii) the expiration or termination of your Retention
Agreement according or pursuant to its terms.
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This letter replaces and supersedes any prior letter between you and the
Corporation dated regarding this matter.
If this letter sets forth our agreement on the subject matter hereof,
kindly sign and return to the Corporation the enclosed copy of this letter,
which will then constitute our agreement on this subject.
Sincerely,
CADMUS COMMUNICATIONS CORPORATION
By _______________________________
Name:
Title:
Accepted and agreed to:
_____________________________
Steven R. Isaac
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<S> <C>
EXHIBIT 10.15
June 25, 1998
David G. Wilson, Jr.
3104 Monument Avenue
Richmond,, VA 23221
Re: Employee Retention Agreement
Dear Dave:
Cadmus Communications Corporation (the "Corporation") considers it
essential to the best interests of its shareholders to foster the continuous
employment of its key management personnel and that of its direct and indirect
subsidiaries (collectively the "Cadmus Companies" or individually a "Cadmus
Company"). In this connection, the Board of Directors of the Corporation (the
"Board") recognizes that the possibility of a change in control of the
Corporation may exist and that such possibility, and the uncertainty and
questions which it may raise among management, may result in the departure or
distraction of management personnel to the detriment of the Corporation and its
shareholders.
The Board has determined that appropriate steps should be taken to
reinforce and encourage the continued attention and dedication of members of the
Cadmus Companies' management, including yourself, to their assigned duties
without distraction in the face of potentially disturbing circumstances arising
from the possibility of a change in control of the Corporation.
In order to induce you to remain in the employ of the Cadmus Companies,
the Corporation agrees that you shall receive the severance benefits set forth
in this letter agreement (the "Agreement") in the event your employment with the
Cadmus Companies is terminated under the circumstances described below
subsequent to a Change in Control (as defined in Section 2) of the Corporation.
1. Certain Definitions.
(a) "Change in Control Period" means the period commencing on the date hereof
and ending on the second anniversary of such date; provided, however, that
commencing on the date one year after the date hereof, and on each
anniversary of such date (such date and each annual anniversary thereof
shall be hereinafter referred to as the "Renewal Date"), the Change in
Control Period shall be automatically extended so as to terminate two
years from such Renewal Date, unless at least 60 days prior to the Renewal
Date the Corporation shall give notice to you that the Change in Control
Period shall not be so extended.
(b) "Effective Date" means the first date during the Change in Control Period
(as defined in Section 1(b)) on which a Change in Control occurs.
Anything in this Agreement to the contrary notwithstanding, if a Change in
Control occurs and if your employment with the Cadmus Companies is
terminated prior to the date on which the Change in Control occurs, and if
it is reasonably demonstrated by you that such termination of employment
(i) was at the request of a third party who has taken steps reasonably
calculated to effect the Change in Control, or (ii) otherwise arose in
connection with or anticipation of the Change in Control, then for all
purposes of this Agreement the "Effective Date" shall mean the date
immediately prior to the date of such termination of employment.
(c) "Employment Period" means the period commencing on the Effective
Date and ending on the second anniversary of such date.
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(d) "Date of Termination" means (i) if your employment with the Cadmus
Companies is terminated by the Corporation for Cause or is terminated by
you for Good Reason, the date of receipt of the Notice of Termination or
any later date specified therein, as the case may be, (ii) if your
employment with the Cadmus Companies is terminated by the Corporation
other than for Cause or Disability, the Date of Termination shall be the
date on which the Corporation notifies you of such termination, and (iii)
if your employment is terminated by reason of death or Disability, the
Date of Termination shall be the date of your death or the Disability
Effective Date, as the case may be.
(e) "Termination" means a notice which (i) indicates the specific
termination provision in this Agreement relied upon, (ii) sets forth
in reasonable detail the facts and circumstances claimed to provide
a basis for termination of your employment under the provision so
indicated, and (iii) if the Date of Termination is other than the
date of receipt of such notice, specifies the termination date.
2. Change in Control. No benefits shall be payable hereunder unless there
shall have been a Change in Control of the Corporation, as set forth
below. For purposes of this Agreement, a "Change in Control" shall mean:
(a) The acquisition by any individual, entity or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) (a "Person") of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or
more of either (i) the then outstanding shares of common stock of the
Corporation (the "Outstanding Cadmus Common Stock") or (ii) the combined
voting power of the then outstanding voting securities of the Corporation
entitled to vote generally in the election of directors (the "Outstanding
Cadmus Voting Securities"). Notwithstanding the foregoing, the following
acquisitions shall not constitute a Change in Control: (i) any
acquisition directly from the Corporation, (ii) any acquisition by the
Corporation, (iii) any acquisition by, or benefit distribution from, any
employee benefit plan (or related trust) sponsored or maintained by the
Corporation or any corporation controlled by the Corporation, (iv) any
acquisition pursuant to any compensatory stock option, stock purchase or
other stock plan for employees, or (v) any acquisition pursuant to a
reorganization, merger or consolidation, if, following such
reorganization, merger or consolidation, the conditions described in
clauses (i), (ii), and (iii) of Subsection (c) of this Section 2 are
satisfied; or
(b) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority
of the Board; provided, however, that any individual becoming a director
subsequent to the date hereof whose election or nomination for election
was approved by a vote of at least a majority of the directors then
comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board (with his predecessor
thereafter ceasing to be a member); or
(c) Approval by the shareholders of the Corporation of the reorganization,
merger, or consolidation of the Corporation unless, following such
reorganization, merger, or consolidation, (i) more than 60% of the then
outstanding shares of common stock and the then outstanding voting
securities of the resulting corporation is then beneficially owned by all
or substantially all of the beneficial owners, respectively, of the
Outstanding Cadmus Common Stock and Outstanding Cadmus Voting Securities
immediately prior to such reorganization, merger, or consolidation, (ii)
no Person (excluding (A) the Corporation, (B) any employee benefit plan
(or related trust) of the Corporation or such corporation resulting from
such reorganization, merger, or consolidation, and (C) any Person
beneficially owning, immediately prior to such reorganization, merger, or
consolidation, 20% or more of the Outstanding Cadmus Common Stock or
Outstanding Cadmus Voting Securities, as the case may be) beneficially
owns 20% or more of the then outstanding shares of common stock or the
combined voting power of the then outstanding voting securities of the
resulting corporation, and (iii) at least a majority of the members of the
board of directors of the resulting corporation were members of the
Incumbent Board at the time of the execution of the initial agreement
providing for such reorganization, merger, or consolidation; or
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(d) Approval by the shareholders of the Corporation of (i) a complete
liquidation or dissolution of the Corporation, or (ii) the sale or other
disposition of all or substantially all of the assets of the Corporation
other than to a corporation with respect to which, following such sale or
other disposition, (A) more than 60% of the outstanding shares of common
stock and the then outstanding voting securities of such corporation is
beneficially owned by all or substantially all of the beneficial owners,
respectively, of the Outstanding Cadmus Common Stock and Outstanding
Cadmus Voting Securities immediately prior to such sale or disposition;
(B) no Person (excluding (I) the Corporation, (II) any employee benefit
plan (or related trust) of the Corporation or such corporation, and (III)
any Person beneficially owning, immediately prior to such sale or other
disposition, 20% or more of the Outstanding Cadmus Common Stock or
Outstanding Cadmus Voting Securities, as the case may be) beneficially
owns 20% or more of the then outstanding shares of common stock or the
combined voting power of the then outstanding voting securities of such
corporation, and (C) at least a majority of the members of the board of
directors of such corporation were members of the Incumbent Board at the
time of the execution of the initial agreement providing for such sale or
other disposition of the assets of the corporation.
3. Employment Period. The Corporation hereby agrees to continue, or cause to
be continued, your employment with the Cadmus Companies for the Employment
Period.
4. Termination of Employment.
(a) Your employment with the Cadmus Companies shall terminate
automatically upon your death during the Employment Period.
(b) If, as a result of your incapacity due to physical or mental illness (as
determined by the Corporation), you shall have been absent from the
full-time performance of your duties with the Cadmus Companies for six (6)
consecutive months (your "Disability"), the Cadmus Company by which you
are then employed may give you written notice of its intention to
terminate your employment. In such event, your employment with the Cadmus
Companies shall terminate effective on the 30th day after your receipt of
such notice (the "Disability Effective Date"), provided that within 30
days after your receipt of such notice you have not returned to full-time
performance of your duties.
(c) Your employment with the Cadmus Companies may be terminated by the
Corporation during the Employment Period with or without Cause. For
purposes hereof, "Cause" shall mean (i) the willful and continued failure
by you to substantially perform your duties with the Cadmus Companies
(other than any such failure resulting from your incapacity due to
physical or mental illness or any such actual or anticipated failure after
the issuance of a Notice of Termination by you for Good Reason (as defined
in Section 4(d)), after a written demand for substantial performance is
delivered to you by the Board, which demand specifically identifies the
manner in which the Board believes that you have not substantially
performed your duties, (ii) the willful engagement by you in conduct which
is demonstrably and materially injurious to the Cadmus Companies,
monetarily or otherwise, or (iii) your conviction of a felony involving
moral turpitude. For purposes of this subsection, no act, or failure to
act, on your part shall be deemed "willful" unless done, or omitted to be
done, by you not in good faith and without reasonable belief that your
action or omission was in the best interest of the Cadmus Companies.
(d) You may terminate your employment with the Cadmus Companies during
the Employment Period for any reason, including without limitation
Good Reason. For purposes of this Agreement, "Good Reason" shall
mean:
(i) the assignment to you of any duties inconsistent with the
position (including status, offices, titles, and reporting
requirements) or authority in the Cadmus Companies that you
held immediately prior to the Change in Control, or a
significant adverse alteration in the nature or status of your
responsibilities or the conditions of your employment from
those in effect immediately prior to such Change in Control;
(ii) a reduction by the Corporation in your annual base salary as
in effect on the date hereof or as the same may be increased
from time to time;
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(iii) if your principal office location is at the Corporation's
principal executive offices immediately prior to the Change
in Control, the relocation of the Corporation's principal
executive offices to a location outside the Richmond
Metropolitan Area, or if your principal office location is
not at the Corporation's principal executive offices
immediately prior to the Change in Control, the
Corporation's requiring you to be based anywhere other than
your principal office location immediately prior to the
Change in Control except for required travel on the Cadmus
Companies' business to an extent substantially consistent
with your present business travel obligations;
(iv) except in the event of reasonable administrative delay, the
failure by the Cadmus Companies to pay to you any portion of
your current compensation or to pay to you any portion of an
installment of deferred compensation under any deferred
compensation program of the Cadmus Companies within seven
(7) days of the date such compensation is due;
(v) the failure by the Cadmus Companies to continue in effect
for you any compensation plan in which you participate
immediately prior to the Change in Control that is material
to your total compensation or any substitute plan
adopted prior to the Change in Control, unless an
equitable arrangement (embodied in an ongoing substitute
or alternative plan) has been made with respect to such
plan, or the failure by the Cadmus Companies to continue
your participation therein (or in such substitute or
alternative plan) on a basis not materially less favorable,
both in terms of the amount of benefits provided and the
level of your participation relative to other
participants, as it existed at the time of the Change
in Control;
(vi) the failure by the Cadmus Companies to continue to provide
you with benefits substantially similar to those enjoyed by
you under any of the Cadmus Companies' life insurance,
medical, health and accident, or disability plans in which
you were participating at the time of the Change in Control,
the taking of any action by any Cadmus Company which would
directly or indirectly materially reduce any of such
benefits or deprive you of any material fringe benefit
enjoyed by you at the time of the Change in Control, or the
failure by the Cadmus Companies to provide you with the
number of paid vacation days to which you are entitled on
the basis of years of service with the Cadmus Companies in
accordance with the normal vacation policy of the Cadmus
Company employing you in effect at the time of the Change in
Control;
(vii) the failure of the Corporation to obtain a satisfactory
agreement from any successor to assume and agree to perform
this Agreement, as contemplated in Section 6 hereof;
(viii) any purported termination of your employment that is not
effected pursuant to a Notice of Termination satisfying the
requirements of Subsection (e) hereof (and, if applicable,
the requirements of Subsections (b) and (c) hereof), which
purported termination shall not be effective for purposes of
this Agreement; or
(ix) so long as no Cause for your termination by the Corporation
exists (or would exist assuming the Board made a
determination of Cause), a voluntary cessation by you of
your employment for any reason during the 60-day period
commencing on the first anniversary of the occurrence of the
Change in Control.
For purposes of this subsection, any good faith determination of
"Good Reason" made by you shall be conclusive. In addition, your
right to terminate your employment pursuant to this subsection shall
not be affected by your incapacity due to physical or mental illness
and your continued employment shall not constitute consent to, or a
waiver of rights with respect to, any circumstance constituting Good
Reason hereunder.
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(e) Any purported termination of your employment with the Cadmus
Companies by the Corporation or by you shall be communicated by
written Notice of Termination to the other party hereto in
accordance with Section 8.
5. Compensation upon Termination during the Employment Period. Following a
Change in Control, you shall be entitled to the following benefits upon
termination of your employment with the Cadmus Companies provided that
such termination occurs during the Employment Period:
(a) If your employment is terminated by reason of your death during the
Employment Period, this Agreement shall terminate without further
obligations to your legal representatives under this Agreement, other than
for (i) payment of your Base Salary (as defined in Section 5(g) hereof)
through the Date of Termination at the same rate in effect at such date,
and (ii) all other amounts to which you are entitled under any
compensation plan or any other plan, policy, or arrangement of the Cadmus
Companies, at the time such payments are due.
(b) During any period that you fail to perform your full-time duties with the
Cadmus Companies as a result of incapacity due to physical or mental
illness, you shall continue to receive, until this Agreement is terminated
pursuant to Section 4(b) hereof, your Base Salary (as defined in Section
5(g)) at the rate in effect at the commencement of any such period,
together with all compensation payable to you under any long-term
disability plan maintained by the Cadmus Companies in your name or for
your benefit or other similar plan during such period. Thereafter, your
benefits shall be determined under the retirement, insurance and other
compensation programs of the Cadmus Companies in which you participate in
accordance with the terms of such programs; however, your receipt of
benefits under any long-term disability plan maintained by the Cadmus
Companies in your name or for your benefit will not be affected by your
termination under this Agreement.
(c) If, during the Employment Period, your employment with the Cadmus
Companies shall be terminated by the Corporation for Cause or by you other
than for Good Reason, you shall be entitled to your full Base Salary (as
defined in Section 5(g)) through the Date of Termination at the rate in
effect at the time Notice of Termination is given, plus all other amounts
to which you are entitled under any compensation plan of the Cadmus
Companies at the time such payments are due, and the Cadmus Companies
shall have no further obligations to you under this Agreement.
(d) If, during the Employment Period, your employment with the Cadmus
Companies shall be terminated by you for Good Reason or by the
Corporation other than for Cause, death, or Disability, then you
shall be entitled to the benefits provided below:
(i) you the Corporation shall pay to you your full Base Salary (as
defined in Section 5(g) hereof) through the Date of
Termination at the rate in effect at the time Notice of
Termination is given, no later than the fifth day following
the Date of Termination, plus all other amounts to which you
are entitled under any compensation plan of the Cadmus
Companies, at the time such payments are due;
(ii) in lieu of any further salary or bonus payments to you for
periods subsequent to the Date of Termination, you shall be
paid as severance pay to you, at the time and in the manner
specified in Subsection (e), a severance payment (the
"Severance Payment") equal to the product of (A) your Base
Salary (as defined in Section 5(g) hereof), and (B) a number
(the "Payment/Benefit Factor") determined by dividing by 52
the sum of (I) three times the number of full years that you
have been employed by the Cadmus Companies, and (II) three
times each $10,000 of your annual salary (that is, excluding
bonus) as in effect at the Date of Termination; provided,
however, that in no event shall such Payment/Benefit Factor be
less than .5 nor greater than 2, and provided, further, that
in no event shall such amount exceed the amount of your Base
Salary (as defined in Section 5(g)), on an undiscounted basis,
which you would have received had you remained in the employ
of the Cadmus Companies until your "Normal Retirement Date"
(as defined in the Corporation's Pension Plan (or any
successor thereto) (the "Pension Plan");
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(iii) a separate lump-sum supplemental retirement benefit (the
amount of such benefit shall be hereinafter referred to as the
"Supplemental Retirement Amount") equal to the difference
between (A) the actuarial equivalent (utilizing for this
purpose the actuarial assumptions utilized in determining
benefit cash-outs with respect to the Corporation's Pension
Plan during the 90-day period immediately preceding the
Effective Date) of the benefit payable under the Pension Plan
and any supplemental and/or excess benefit plan of the
Corporation providing benefits for you (the "SERP") which you
would receive if your employment continued at the compensation
level in effect at the Date of Termination for the remainder
of the Employment Period, assuming for this purpose that all
accrued benefits are fully vested and that benefit accrual
formulas are no less advantageous to you than those in effect
during the 90-day period immediately proceeding the Effective
Date, and (B) the actuarial equivalent (utilizing for this
purpose the actuarial assumptions utilized in determining
benefit cash outs with respect to the Pension Plan during the
90-day period immediately preceding the Effective Date) of
your actual vested benefit (paid or payable), if any, under
the Pension Plan and the SERP;
(iv) Except as provided in (iii) above, your participation in, and
terminating distribution and vested rights under, the
Corporation's Pension Plan and other plans of deferred
compensation of the Cadmus Companies shall be governed by the
terms of those respective plans;
(v) the Corporation shall pay to you all legal fees and expenses
incurred by you as a result of such termination, including all
such fees and expenses, if any, incurred in seeking to obtain
or enforce any right or benefit provided by this Agreement or
in connection with any tax audit or proceeding to the extent
attributable to the application of Section 4999 of the
Internal Revenue Code of 1986, as amended (the "Code") to any
payment or benefit provided hereunder;
(vi) for a period of years (or portion thereof) (the "Payment
Period") equal to the Payment/Benefit Factor after such
termination or until your "Normal Retirement Date" (as defined
in the Corporation's Pension Plan, whichever first occurs, the
Corporation shall arrange to provide you with life,
disability, accident and group health insurance benefits
substantially similar to those which you were receiving under
the welfare programs of the Cadmus Companies immediately prior
to the Notice of Termination. Benefits otherwise receivable
by you pursuant to this clause (vi) shall be reduced to the
extent comparable benefits are actually received by you from
any source (including a subsequent employer) during such
period following your termination, and any such benefits
actually received by you shall be reported to the Corporation;
(vii) in the event that the payments and benefits provided to you,
or for your benefit, under this Agreement (determined without
regard to the Gross-Up Payment described below) or under any
other plan or agreement which become payable or are taken into
account as "parachute payments" within the meaning of Section
280G of the Code as a result of a Change in Control or your
termination of employment relating thereto (the "Total
Parachute Payments") would result in your being entitled to
"excess parachute payments" as defined in Section 280G of the
Code, the following applicable reduction shall occur or
additional payment shall be made:
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(A) in the event the Change in Control occurs before July 1,
1999, you shall be entitled to receive an additional
payment (a "Gross-Up Payment") in an amount such that
after payment by you of all taxes (including any
interest or penalties incurred by you with respect to
such taxes), including, without limitation, any federal,
state and local income taxes, any employment taxes, and
the excise tax imposed by Section 4999 of the Code (such
excise tax, together with any interest or penalties
relating to such excise tax, are hereinafter
collectively referred to as the "Excise Tax"), you
retain an amount of the Gross-Up Payment equal to the
Excise Tax imposed upon the Total Parachute Payments; or
(B) in the event the Change in Control occurs on or after
July 1, 1999, the payments and benefits provided to you,
or for your benefit, under this Agreement shall be
reduced (but not below zero) to the extent necessary so
that no payment to be made, or benefit to be provided,
to you or for your benefit under this Agreement or any
other plan or agreement would result in "excess
parachute payments" as defined in Section 280G of the
Code, provided, however that the reduction provided in
this clause shall not apply unless your net after-tax
benefit if such reduction were made shall exceed your
net after-tax benefit if such reduction were not made.
"Net after-tax benefit" shall mean the sum of (I) the
Total Parachute Payments which you receive or are then
entitled to receive, less (II) the amount of federal,
state and local income and employment taxes payable by
you with respect to the Total Parachute Payments, less
(III) the amount of excise taxes imposed with respect to
the Total Parachute Payments by Section 4999 of the Code.
All determinations regarding the reductions or additional
payment called for in this clause (vii) shall be made by tax
counsel selected by the Corporation and shall be based on the
maximum applicable marginal tax rates for each year in which
such payments and benefits shall be paid or provided to you or
for your benefit (based upon the rate in effect for such year
at the time of the first payment of the foregoing and, as
appropriate as determined by such tax counsel, the taxable
wage base for employment tax purposes); and
(viii) for a period of twelve (12) months following such
termination, the Corporation shall pay the expenses of such
outplacement services as you may require, with such services
to be performed by such agency as the Corporation shall
designate.
(e) The payment provided for in Subsection (d)(ii), shall be made in a
lump-sum not later than the 30th day following the Date of Termination.
Notwithstanding anything contained in this Subsection (e) or in Subsection
(d)(ii), you may elect to receive, in lieu of a lump-sum Severance
Payment, the benefits described in Subsection (d)(ii) in equal monthly
installments commencing on the first day of the month following the Date
of Termination and ending on the first to occur of (A) the first day of
the last month within the Payment Period, or (B) the first day of the
month in which occurs your "Normal Retirement Date" (as defined in the
Corporation's Pension Plan.
(f) Except as provided in Subsection (d)(vi) hereof you shall not be
required to mitigate the amount of any payment provided for in this
Section 5 by seeking other employment or otherwise, nor shall the
amount of any payment or benefit provided for in this Section 5 be
reduced by any compensation earned by you as the result of
employment by another employer, by retirement benefits, by offset
against any amount claimed to be owed by you to any Cadmus Company,
or otherwise.
(g) For purposes of this Agreement, your "Base Salary" shall mean the
greater of (i) the annual salary and bonus paid to you by the Cadmus
Companies at the date of this Agreement, or (ii) the annual salary
and bonus payable to you by the Cadmus Companies during the fiscal
year in which a Change in Control occurs.
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6. Successors: Binding Agreement.
(a) This Agreement is personal to you and without the prior written
consent of the Corporation shall not be assignable by you otherwise
than by will or the laws of descent and distribution. This Agreement
shall inure to the benefit of, and be enforceable by, your legal
representatives.
(b) This Agreement shall inure to the benefit of, and be binding upon,
the Corporation and its successors and assigns.
(c) The Corporation will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all
of the business and/or assets of the Corporation to assume expressly and
agree to perform this Agreement in the same manner and to the same extent
that the Corporation would be required to perform it if no such succession
had taken place. As used in this Agreement, "Corporation" shall mean the
Corporation as hereinbefore defined and any successor to its business
and/or assets as aforesaid which assumes and agrees to perform this
Agreement by operation of law, or otherwise.
7. Resolution of Disputes. If there shall be any dispute between the Corporation
and you (i) in the event of any termination of your employment with the Cadmus
Companies by the Corporation, whether such termination was for Cause, or (ii) in
the event of any termination of employment with the Cadmus Companies by you,
whether Good Reason existed, then, unless and until there is a final,
nonappealable judgment by a court of competent jurisdiction declaring that such
termination was for Cause or that the determination by you of the existence of
Good Reason was not made in good faith, the Corporation shall pay all amounts,
and provide all benefits, to you and/or your family or other beneficiaries, as
the case may be, that the Corporation would be required to pay or provide
pursuant to Section 5(d) as though such termination were by the Corporation
without Cause or by you with Good Reason; provided, however, that the
Corporation shall not be required to pay any disputed amounts pursuant to this
Section 7 except upon receipt of an undertaking by or on behalf of you to repay
all such amounts to which you are ultimately adjudged by such court not to be
entitled.
8. Notice. For the purpose of this Agreement, notices and all other communications
provided for in this Agreement shall be in writing and shall be deemed to have
been duly given when delivered or mailed by United States certified or
registered mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth on the first page of this Agreement, provided
that all notice to the Corporation shall be directed to the attention of the
Board with a copy to the Secretary of the Corporation, or to such other address
as either party may have furnished to the other in writing in accordance
herewith, except that notice of change of address shall be effective only upon
receipt.
9. Miscellaneous.
(a) This Agreement shall be governed by and construed in accordance with
the laws of the Commonwealth of Virginia, without reference to
principles of conflict of laws. The captions of this Agreement are
not part of the provisions hereof and shall have no force or effect.
(b) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any
other provision of this Agreement.
(c) The Corporation may withhold from any amounts payable under this
Agreement such Federal, state or local taxes as shall be required to
be withheld pursuant to any applicable law or regulation.
(d) Your or the Corporation's failure to insist upon strict compliance with
any provision hereof or any other provision of this Agreement or the
failure to assert any right you or the Corporation may have hereunder,
including, without limitation, your right to terminate your employment for
Good Reason pursuant to Section 4(d) or the Corporation's right to
terminate your employment for Cause pursuant to Section 4(c), shall not be
deemed to be a waiver of such provision or right or any other provision or
right of this Agreement.
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(e) You and the Corporation acknowledge that, except as may otherwise be
provided under any other written agreement between you and the
Corporation, your employment by the Cadmus Companies is "at will"
and if, prior to the Effective Date, your employment with the Cadmus
Companies terminates, then you shall have no rights under this
Agreement.
(f) Prior to the Effective Date, this Agreement may be amended,
modified, or terminated by the Corporation, which amendment,
modification, or termination shall be binding and effective without
any requirement for notification of, or consent by, you.
Notwithstanding the foregoing, on or after the Effective Date, this
Agreement may not be amended, modified, or terminated otherwise than
by a written agreement executed by the parties hereto or their
respective successors and legal representatives.
10. Entire Agreement. This Agreement sets forth the entire agreement of the
parties hereto in respect of the subject matter contained herein and
supersedes all prior agreements, promises, covenants, arrangements,
communications, representations or warranties, whether oral or written, by
any officer, employee or representative of any party hereto; and any prior
agreement of the parties hereto in respect of the subject matter contained
herein is hereby terminated and canceled.
If this letter sets forth our agreement on the subject matter hereof,
kindly sign and return to the Corporation the enclosed copy of this letter,
which will then constitute our agreement on this subject.
Sincerely,
CADMUS COMMUNICATIONS CORPORATION
By ______________________________
Name:
Title:
Accepted and agreed to:
____________________________
David G. Wilson, Jr.
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<S> <C>
EXHIBIT 10.16
August 11, 1998
Joseph J. Ward
7871 South Majestic Ridge Drive
Salt Lake City, UT 84121
Re: Employee Retention Agreement
Dear Joe:
Cadmus Communications Corporation (the "Corporation") considers it
essential to the best interests of its shareholders to foster the continuous
employment of its key management personnel and that of its direct and indirect
subsidiaries (collectively the "Cadmus Companies" or individually a "Cadmus
Company"). In this connection, the Board of Directors of the Corporation (the
"Board") recognizes that the possibility of a change in control of the
Corporation may exist and that such possibility, and the uncertainty and
questions which it may raise among management, may result in the departure or
distraction of management personnel to the detriment of the Corporation and its
shareholders.
The Board has determined that appropriate steps should be taken to
reinforce and encourage the continued attention and dedication of members of the
Cadmus Companies' management, including yourself, to their assigned duties
without distraction in the face of potentially disturbing circumstances arising
from the possibility of a change in control of the Corporation.
In order to induce you to remain in the employ of the Cadmus Companies,
the Corporation agrees that you shall receive the severance benefits set forth
in this letter agreement (the "Agreement") in the event your employment with the
Cadmus Companies is terminated under the circumstances described below
subsequent to a Change in Control (as defined in Section 2) of the Corporation.
1. Certain Definitions.
(a) "Change in Control Period" means the period commencing on the date hereof
and ending on the second anniversary of such date; provided, however, that
commencing on the date one year after the date hereof, and on each
anniversary of such date (such date and each annual anniversary thereof
shall be hereinafter referred to as the "Renewal Date"), the Change in
Control Period shall be automatically extended so as to terminate two
years from such Renewal Date, unless at least 60 days prior to the Renewal
Date the Corporation shall give notice to you that the Change in Control
Period shall not be so extended.
(b) "Effective Date" means the first date during the Change in Control Period
(as defined in Section 1(b)) on which a Change in Control occurs.
Anything in this Agreement to the contrary notwithstanding, if a Change in
Control occurs and if your employment with the Cadmus Companies is
terminated prior to the date on which the Change in Control occurs, and if
it is reasonably demonstrated by you that such termination of employment
(i) was at the request of a third party who has taken steps reasonably
calculated to effect the Change in Control, or (ii) otherwise arose in
connection with or anticipation of the Change in Control, then for all
purposes of this Agreement the "Effective Date" shall mean the date
immediately prior to the date of such termination of employment.
(c) "Employment Period" means the period commencing on the Effective
Date and ending on the second anniversary of such date.
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(d) "Date of Termination" means (i) if your employment with the Cadmus
Companies is terminated by the Corporation for Cause or is terminated by
you for Good Reason, the date of receipt of the Notice of Termination or
any later date specified therein, as the case may be, (ii) if your
employment with the Cadmus Companies is terminated by the Corporation
other than for Cause or Disability, the Date of Termination shall be the
date on which the Corporation notifies you of such termination, and (iii)
if your employment is terminated by reason of death or Disability, the
Date of Termination shall be the date of your death or the Disability
Effective Date, as the case may be.
(e) "Termination" means a notice which (i) indicates the specific
termination provision in this Agreement relied upon, (ii) sets forth
in reasonable detail the facts and circumstances claimed to provide
a basis for termination of your employment under the provision so
indicated, and (iii) if the Date of Termination is other than the
date of receipt of such notice, specifies the termination date.
2. Change in Control. No benefits shall be payable hereunder unless there
shall have been a Change in Control of the Corporation, as set forth
below. For purposes of this Agreement, a "Change in Control" shall mean:
(a) The acquisition by any individual, entity or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) (a "Person") of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or
more of either (i) the then outstanding shares of common stock of the
Corporation (the "Outstanding Cadmus Common Stock") or (ii) the combined
voting power of the then outstanding voting securities of the Corporation
entitled to vote generally in the election of directors (the "Outstanding
Cadmus Voting Securities"). Notwithstanding the foregoing, the following
acquisitions shall not constitute a Change in Control: (i) any
acquisition directly from the Corporation, (ii) any acquisition by the
Corporation, (iii) any acquisition by, or benefit distribution from, any
employee benefit plan (or related trust) sponsored or maintained by the
Corporation or any corporation controlled by the Corporation, (iv) any
acquisition pursuant to any compensatory stock option, stock purchase or
other stock plan for employees, or (v) any acquisition pursuant to a
reorganization, merger or consolidation, if, following such
reorganization, merger or consolidation, the conditions described in
clauses (i), (ii), and (iii) of Subsection (c) of this Section 2 are
satisfied; or
(b) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority
of the Board; provided, however, that any individual becoming a director
subsequent to the date hereof whose election or nomination for election
was approved by a vote of at least a majority of the directors then
comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board (with his predecessor
thereafter ceasing to be a member); or
(c) Approval by the shareholders of the Corporation of the reorganization,
merger, or consolidation of the Corporation unless, following such
reorganization, merger, or consolidation, (i) more than 60% of the then
outstanding shares of common stock and the then outstanding voting
securities of the resulting corporation is then beneficially owned by all
or substantially all of the beneficial owners, respectively, of the
Outstanding Cadmus Common Stock and Outstanding Cadmus Voting Securities
immediately prior to such reorganization, merger, or consolidation, (ii)
no Person (excluding (A) the Corporation, (B) any employee benefit plan
(or related trust) of the Corporation or such corporation resulting from
such reorganization, merger, or consolidation, and (C) any Person
beneficially owning, immediately prior to such reorganization, merger, or
consolidation, 20% or more of the Outstanding Cadmus Common Stock or
Outstanding Cadmus Voting Securities, as the case may be) beneficially
owns 20% or more of the then outstanding shares of common stock or the
combined voting power of the then outstanding voting securities of the
resulting corporation, and (iii) at least a majority of the members of the
board of directors of the resulting corporation were members of the
Incumbent Board at the time of the execution of the initial agreement
providing for such reorganization, merger, or consolidation; or
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<PAGE>
(d) Approval by the shareholders of the Corporation of (i) a complete
liquidation or dissolution of the Corporation, or (ii) the sale or other
disposition of all or substantially all of the assets of the Corporation
other than to a corporation with respect to which, following such sale or
other disposition, (A) more than 60% of the outstanding shares of common
stock and the then outstanding voting securities of such corporation is
beneficially owned by all or substantially all of the beneficial owners,
respectively, of the Outstanding Cadmus Common Stock and Outstanding
Cadmus Voting Securities immediately prior to such sale or disposition;
(B) no Person (excluding (I) the Corporation, (II) any employee benefit
plan (or related trust) of the Corporation or such corporation, and (III)
any Person beneficially owning, immediately prior to such sale or other
disposition, 20% or more of the Outstanding Cadmus Common Stock or
Outstanding Cadmus Voting Securities, as the case may be) beneficially
owns 20% or more of the then outstanding shares of common stock or the
combined voting power of the then outstanding voting securities of such
corporation, and (C) at least a majority of the members of the board of
directors of such corporation were members of the Incumbent Board at the
time of the execution of the initial agreement providing for such sale or
other disposition of the assets of the corporation.
3. Employment Period. The Corporation hereby agrees to continue, or cause to
be continued, your employment with the Cadmus Companies for the Employment
Period.
4. Termination of Employment.
(a) Your employment with the Cadmus Companies shall terminate
automatically upon your death during the Employment Period.
(b) If, as a result of your incapacity due to physical or mental illness (as
determined by the Corporation), you shall have been absent from the
full-time performance of your duties with the Cadmus Companies for six (6)
consecutive months (your "Disability"), the Cadmus Company by which you
are then employed may give you written notice of its intention to
terminate your employment. In such event, your employment with the Cadmus
Companies shall terminate effective on the 30th day after your receipt of
such notice (the "Disability Effective Date"), provided that within 30
days after your receipt of such notice you have not returned to full-time
performance of your duties.
(c) Your employment with the Cadmus Companies may be terminated by the
Corporation during the Employment Period with or without Cause. For
purposes hereof, "Cause" shall mean (i) the willful and continued failure
by you to substantially perform your duties with the Cadmus Companies
(other than any such failure resulting from your incapacity due to
physical or mental illness or any such actual or anticipated failure after
the issuance of a Notice of Termination by you for Good Reason (as defined
in Section 4(d)), after a written demand for substantial performance is
delivered to you by the Board, which demand specifically identifies the
manner in which the Board believes that you have not substantially
performed your duties, (ii) the willful engagement by you in conduct which
is demonstrably and materially injurious to the Cadmus Companies,
monetarily or otherwise, or (iii) your conviction of a felony involving
moral turpitude. For purposes of this subsection, no act, or failure to
act, on your part shall be deemed "willful" unless done, or omitted to be
done, by you not in good faith and without reasonable belief that your
action or omission was in the best interest of the Cadmus Companies.
(d) You may terminate your employment with the Cadmus Companies during
the Employment Period for any reason, including without limitation
Good Reason. For purposes of this Agreement, "Good Reason" shall
mean:
(i) the assignment to you of any duties inconsistent with the
position (including status, offices, titles, and reporting
requirements) or authority in the Cadmus Companies that you
held immediately prior to the Change in Control, or a
significant adverse alteration in the nature or status of your
responsibilities or the conditions of your employment from
those in effect immediately prior to such Change in Control;
(ii) a reduction by the Corporation in your annual base salary as
in effect on the date hereof or as the same may be increased
from time to time;
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<PAGE>
(iii) if your principal office location is at the Corporation's
principal executive offices immediately prior to the Change
in Control, the relocation of the Corporation's principal
executive offices to a location outside the Richmond
Metropolitan Area, or if your principal office location is
not at the Corporation's principal executive offices
immediately prior to the Change in Control, the
Corporation's requiring you to be based anywhere other than
your principal office location immediately prior to the
Change in Control except for required travel on the Cadmus
Companies' business to an extent substantially consistent
with your present business travel obligations;
(iv) except in the event of reasonable administrative delay, the
failure by the Cadmus Companies to pay to you any portion of
your current compensation or to pay to you any portion of an
installment of deferred compensation under any deferred
compensation program of the Cadmus Companies within seven
(7) days of the date such compensation is due;
(v) the failure by the Cadmus Companies to continue in effect
for you any compensation plan in which you participate
immediately prior to the Change in Control that is material
to your total compensation or any substitute plan
adopted prior to the Change in Control, unless an
equitable arrangement (embodied in an ongoing substitute
or alternative plan) has been made with respect to such
plan, or the failure by the Cadmus Companies to continue
your participation therein (or in such substitute or
alternative plan) on a basis not materially less favorable,
both in terms of the amount of benefits provided and the
level of your participation relative to other
participants, as it existed at the time of the Change
in Control;
(vi) the failure by the Cadmus Companies to continue to provide
you with benefits substantially similar to those enjoyed by
you under any of the Cadmus Companies' life insurance,
medical, health and accident, or disability plans in which
you were participating at the time of the Change in Control,
the taking of any action by any Cadmus Company which would
directly or indirectly materially reduce any of such
benefits or deprive you of any material fringe benefit
enjoyed by you at the time of the Change in Control, or the
failure by the Cadmus Companies to provide you with the
number of paid vacation days to which you are entitled on
the basis of years of service with the Cadmus Companies in
accordance with the normal vacation policy of the Cadmus
Company employing you in effect at the time of the Change in
Control;
(vii) the failure of the Corporation to obtain a satisfactory
agreement from any successor to assume and agree to perform
this Agreement, as contemplated in Section 6 hereof;
(viii) any purported termination of your employment that is not
effected pursuant to a Notice of Termination satisfying the
requirements of Subsection (e) hereof (and, if applicable,
the requirements of Subsections (b) and (c) hereof), which
purported termination shall not be effective for purposes of
this Agreement; or
(ix) so long as no Cause for your termination by the Corporation
exists (or would exist assuming the Board made a
determination of Cause), a voluntary cessation by you of
your employment for any reason during the 60-day period
commencing on the first anniversary of the occurrence of the
Change in Control.
For purposes of this subsection, any good faith determination of
"Good Reason" made by you shall be conclusive. In addition, your
right to terminate your employment pursuant to this subsection shall
not be affected by your incapacity due to physical or mental illness
and your continued employment shall not constitute consent to, or a
waiver of rights with respect to, any circumstance constituting Good
Reason hereunder.
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<PAGE>
(e) Any purported termination of your employment with the Cadmus
Companies by the Corporation or by you shall be communicated by
written Notice of Termination to the other party hereto in
accordance with Section 8.
5. Compensation upon Termination during the Employment Period. Following a
Change in Control, you shall be entitled to the following benefits upon
termination of your employment with the Cadmus Companies provided that
such termination occurs during the Employment Period:
(a) If your employment is terminated by reason of your death during the
Employment Period, this Agreement shall terminate without further
obligations to your legal representatives under this Agreement, other than
for (i) payment of your Base Salary (as defined in Section 5(g) hereof)
through the Date of Termination at the same rate in effect at such date,
and (ii) all other amounts to which you are entitled under any
compensation plan or any other plan, policy, or arrangement of the Cadmus
Companies, at the time such payments are due.
(b) During any period that you fail to perform your full-time duties with the
Cadmus Companies as a result of incapacity due to physical or mental
illness, you shall continue to receive, until this Agreement is terminated
pursuant to Section 4(b) hereof, your Base Salary (as defined in Section
5(g)) at the rate in effect at the commencement of any such period,
together with all compensation payable to you under any long-term
disability plan maintained by the Cadmus Companies in your name or for
your benefit or other similar plan during such period. Thereafter, your
benefits shall be determined under the retirement, insurance and other
compensation programs of the Cadmus Companies in which you participate in
accordance with the terms of such programs; however, your receipt of
benefits under any long-term disability plan maintained by the Cadmus
Companies in your name or for your benefit will not be affected by your
termination under this Agreement.
(c) If, during the Employment Period, your employment with the Cadmus
Companies shall be terminated by the Corporation for Cause or by you other
than for Good Reason, you shall be entitled to your full Base Salary (as
defined in Section 5(g)) through the Date of Termination at the rate in
effect at the time Notice of Termination is given, plus all other amounts
to which you are entitled under any compensation plan of the Cadmus
Companies at the time such payments are due, and the Cadmus Companies
shall have no further obligations to you under this Agreement.
(d) If, during the Employment Period, your employment with the Cadmus
Companies shall be terminated by you for Good Reason or by the
Corporation other than for Cause, death, or Disability, then you
shall be entitled to the benefits provided below:
(i) you the Corporation shall pay to you your full Base Salary (as
defined in Section 5(g) hereof) through the Date of
Termination at the rate in effect at the time Notice of
Termination is given, no later than the fifth day following
the Date of Termination, plus all other amounts to which you
are entitled under any compensation plan of the Cadmus
Companies, at the time such payments are due;
(ii) in lieu of any further salary or bonus payments to you for
periods subsequent to the Date of Termination, you shall be
paid as severance pay to you, at the time and in the manner
specified in Subsection (e), a severance payment (the
"Severance Payment") equal to the product of (A) your Base
Salary (as defined in Section 5(g) hereof), and (B) a number
(the "Payment/Benefit Factor") determined by dividing by 52
the sum of (I) three times the number of full years that you
have been employed by the Cadmus Companies, and (II) three
times each $10,000 of your annual salary (that is, excluding
bonus) as in effect at the Date of Termination; provided,
however, that in no event shall such Payment/Benefit Factor be
less than .5 nor greater than 2, and provided, further, that
in no event shall such amount exceed the amount of your Base
Salary (as defined in Section 5(g)), on an undiscounted basis,
which you would have received had you remained in the employ
of the Cadmus Companies until your "Normal Retirement Date"
(as defined in the Corporation's Pension Plan (or any
successor thereto) (the "Pension Plan");
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(iii) a separate lump-sum supplemental retirement benefit (the
amount of such benefit shall be hereinafter referred to as the
"Supplemental Retirement Amount") equal to the difference
between (A) the actuarial equivalent (utilizing for this
purpose the actuarial assumptions utilized in determining
benefit cash-outs with respect to the Corporation's Pension
Plan during the 90-day period immediately preceding the
Effective Date) of the benefit payable under the Pension Plan
and any supplemental and/or excess benefit plan of the
Corporation providing benefits for you (the "SERP") which you
would receive if your employment continued at the compensation
level in effect at the Date of Termination for the remainder
of the Employment Period, assuming for this purpose that all
accrued benefits are fully vested and that benefit accrual
formulas are no less advantageous to you than those in effect
during the 90-day period immediately proceeding the Effective
Date, and (B) the actuarial equivalent (utilizing for this
purpose the actuarial assumptions utilized in determining
benefit cash outs with respect to the Pension Plan during the
90-day period immediately preceding the Effective Date) of
your actual vested benefit (paid or payable), if any, under
the Pension Plan and the SERP;
(iv) Except as provided in (iii) above, your participation in, and
terminating distribution and vested rights under, the
Corporation's Pension Plan and other plans of deferred
compensation of the Cadmus Companies shall be governed by the
terms of those respective plans;
(v) the Corporation shall pay to you all legal fees and expenses
incurred by you as a result of such termination, including all
such fees and expenses, if any, incurred in seeking to obtain
or enforce any right or benefit provided by this Agreement or
in connection with any tax audit or proceeding to the extent
attributable to the application of Section 4999 of the
Internal Revenue Code of 1986, as amended (the "Code") to any
payment or benefit provided hereunder;
(vi) for a period of years (or portion thereof) (the "Payment
Period") equal to the Payment/Benefit Factor after such
termination or until your "Normal Retirement Date" (as defined
in the Corporation's Pension Plan, whichever first occurs, the
Corporation shall arrange to provide you with life,
disability, accident and group health insurance benefits
substantially similar to those which you were receiving under
the welfare programs of the Cadmus Companies immediately prior
to the Notice of Termination. Benefits otherwise receivable
by you pursuant to this clause (vi) shall be reduced to the
extent comparable benefits are actually received by you from
any source (including a subsequent employer) during such
period following your termination, and any such benefits
actually received by you shall be reported to the Corporation;
(vii) in the event that the payments and benefits provided to you,
or for your benefit, under this Agreement (determined without
regard to the Gross-Up Payment described below) or under any
other plan or agreement which become payable or are taken into
account as "parachute payments" within the meaning of Section
280G of the Code as a result of a Change in Control or your
termination of employment relating thereto (the "Total
Parachute Payments") would result in your being entitled to
"excess parachute payments" as defined in Section 280G of the
Code, the following applicable reduction shall occur or
additional payment shall be made:
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(A) in the event the Change in Control occurs before July 1,
1999, you shall be entitled to receive an additional
payment (a "Gross-Up Payment") in an amount such that
after payment by you of all taxes (including any
interest or penalties incurred by you with respect to
such taxes), including, without limitation, any federal,
state and local income taxes, any employment taxes, and
the excise tax imposed by Section 4999 of the Code (such
excise tax, together with any interest or penalties
relating to such excise tax, are hereinafter
collectively referred to as the "Excise Tax"), you
retain an amount of the Gross-Up Payment equal to the
Excise Tax imposed upon the Total Parachute Payments; or
(B) in the event the Change in Control occurs on or after
July 1, 1999, the payments and benefits provided to you,
or for your benefit, under this Agreement shall be
reduced (but not below zero) to the extent necessary so
that no payment to be made, or benefit to be provided,
to you or for your benefit under this Agreement or any
other plan or agreement would result in "excess
parachute payments" as defined in Section 280G of the
Code, provided, however that the reduction provided in
this clause shall not apply unless your net after-tax
benefit if such reduction were made shall exceed your
net after-tax benefit if such reduction were not made.
"Net after-tax benefit" shall mean the sum of (I) the
Total Parachute Payments which you receive or are then
entitled to receive, less (II) the amount of federal,
state and local income and employment taxes payable by
you with respect to the Total Parachute Payments, less
(III) the amount of excise taxes imposed with respect to
the Total Parachute Payments by Section 4999 of the Code.
All determinations regarding the reductions or additional
payment called for in this clause (vii) shall be made by tax
counsel selected by the Corporation and shall be based on the
maximum applicable marginal tax rates for each year in which
such payments and benefits shall be paid or provided to you or
for your benefit (based upon the rate in effect for such year
at the time of the first payment of the foregoing and, as
appropriate as determined by such tax counsel, the taxable
wage base for employment tax purposes); and
(viii) for a period of twelve (12) months following such
termination, the Corporation shall pay the expenses of such
outplacement services as you may require, with such services
to be performed by such agency as the Corporation shall
designate.
(e) The payment provided for in Subsection (d)(ii), shall be made in a
lump-sum not later than the 30th day following the Date of Termination.
Notwithstanding anything contained in this Subsection (e) or in Subsection
(d)(ii), you may elect to receive, in lieu of a lump-sum Severance
Payment, the benefits described in Subsection (d)(ii) in equal monthly
installments commencing on the first day of the month following the Date
of Termination and ending on the first to occur of (A) the first day of
the last month within the Payment Period, or (B) the first day of the
month in which occurs your "Normal Retirement Date" (as defined in the
Corporation's Pension Plan.
(f) Except as provided in Subsection (d)(vi) hereof you shall not be
required to mitigate the amount of any payment provided for in this
Section 5 by seeking other employment or otherwise, nor shall the
amount of any payment or benefit provided for in this Section 5 be
reduced by any compensation earned by you as the result of
employment by another employer, by retirement benefits, by offset
against any amount claimed to be owed by you to any Cadmus Company,
or otherwise.
(g) For purposes of this Agreement, your "Base Salary" shall mean the
greater of (i) the annual salary and bonus paid to you by the Cadmus
Companies at the date of this Agreement, or (ii) the annual salary
and bonus payable to you by the Cadmus Companies during the fiscal
year in which a Change in Control occurs.
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6. Successors: Binding Agreement.
(a) This Agreement is personal to you and without the prior written
consent of the Corporation shall not be assignable by you otherwise
than by will or the laws of descent and distribution. This Agreement
shall inure to the benefit of, and be enforceable by, your legal
representatives.
(b) This Agreement shall inure to the benefit of, and be binding upon,
the Corporation and its successors and assigns.
(c) The Corporation will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all
of the business and/or assets of the Corporation to assume expressly and
agree to perform this Agreement in the same manner and to the same extent
that the Corporation would be required to perform it if no such succession
had taken place. As used in this Agreement, "Corporation" shall mean the
Corporation as hereinbefore defined and any successor to its business
and/or assets as aforesaid which assumes and agrees to perform this
Agreement by operation of law, or otherwise.
7. Resolution of Disputes. If there shall be any dispute between the Corporation
and you (i) in the event of any termination of your employment with the Cadmus
Companies by the Corporation, whether such termination was for Cause, or (ii) in
the event of any termination of employment with the Cadmus Companies by you,
whether Good Reason existed, then, unless and until there is a final,
nonappealable judgment by a court of competent jurisdiction declaring that such
termination was for Cause or that the determination by you of the existence of
Good Reason was not made in good faith, the Corporation shall pay all amounts,
and provide all benefits, to you and/or your family or other beneficiaries, as
the case may be, that the Corporation would be required to pay or provide
pursuant to Section 5(d) as though such termination were by the Corporation
without Cause or by you with Good Reason; provided, however, that the
Corporation shall not be required to pay any disputed amounts pursuant to this
Section 7 except upon receipt of an undertaking by or on behalf of you to repay
all such amounts to which you are ultimately adjudged by such court not to be
entitled.
8. Notice. For the purpose of this Agreement, notices and all other communications
provided for in this Agreement shall be in writing and shall be deemed to have
been duly given when delivered or mailed by United States certified or
registered mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth on the first page of this Agreement, provided
that all notice to the Corporation shall be directed to the attention of the
Board with a copy to the Secretary of the Corporation, or to such other address
as either party may have furnished to the other in writing in accordance
herewith, except that notice of change of address shall be effective only upon
receipt.
9. Miscellaneous.
(a) This Agreement shall be governed by and construed in accordance with
the laws of the Commonwealth of Virginia, without reference to
principles of conflict of laws. The captions of this Agreement are
not part of the provisions hereof and shall have no force or effect.
(b) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any
other provision of this Agreement.
(c) The Corporation may withhold from any amounts payable under this
Agreement such Federal, state or local taxes as shall be required to
be withheld pursuant to any applicable law or regulation.
(d) Your or the Corporation's failure to insist upon strict compliance with
any provision hereof or any other provision of this Agreement or the
failure to assert any right you or the Corporation may have hereunder,
including, without limitation, your right to terminate your employment for
Good Reason pursuant to Section 4(d) or the Corporation's right to
terminate your employment for Cause pursuant to Section 4(c), shall not be
deemed to be a waiver of such provision or right or any other provision or
right of this Agreement.
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(e) You and the Corporation acknowledge that, except as may otherwise be
provided under any other written agreement between you and the
Corporation, your employment by the Cadmus Companies is "at will"
and if, prior to the Effective Date, your employment with the Cadmus
Companies terminates, then you shall have no rights under this
Agreement.
(f) Prior to the Effective Date, this Agreement may be amended,
modified, or terminated by the Corporation, which amendment,
modification, or termination shall be binding and effective without
any requirement for notification of, or consent by, you.
Notwithstanding the foregoing, on or after the Effective Date, this
Agreement may not be amended, modified, or terminated otherwise than
by a written agreement executed by the parties hereto or their
respective successors and legal representatives.
10. Entire Agreement. This Agreement sets forth the entire agreement of the
parties hereto in respect of the subject matter contained herein and
supersedes all prior agreements, promises, covenants, arrangements,
communications, representations or warranties, whether oral or written, by
any officer, employee or representative of any party hereto; and any prior
agreement of the parties hereto in respect of the subject matter contained
herein is hereby terminated and canceled.
If this letter sets forth our agreement on the subject matter
hereof, kindly sign and return to the Corporation the enclosed copy of this
letter, which will then constitute our agreement on this subject.
Sincerely,
CADMUS COMMUNICATIONS CORPORATION
By _________________________________
Name:
Title:
Accepted and agreed to:
__________________________
Joseph J. Ward
160
</TABLE>
EXHIBIT 13
CADMUS COMMUNICATIONS CORPORATION AND SUBSIDIARIES
SELECTED FINANCIAL DATA(2)
- --------------------------------------------------------------------------------
The following data should be read in conjunction with the consolidated
financial statements of the Company and management's discussion and analysis
that appear elsewhere in this report.
<TABLE>
<CAPTION>
(Dollars in thousands, except per share data) Years Ended June 30
- ---------------------------------------------------------- ---------------------------------------------------------------------
1998 1997 1996 1995 1994
---------- (as adjusted, see note 1) -------------
<S> <C> <C> <C> <C> <C>
OPERATIONS
Net sales $393,823 $384,942 $ 336,655 $279,641 $ 247,730
Cost of sales 304,014 299,840 258,947 209,259 184,488
Gross profit 89,809 85,102 77,708 70,382 63,242
Selling and administrative expenses 62,141 63,123 61,204 52,172 48,824
Operating income
- as reported 23,718 2,280 16,504 18,210 12,518
- before restructuring charge(3) 27,668 21,979 16,504 18,210 14,418
Income (loss) before income taxes, extraordinary item and
cumulative effect of changes in accounting principles
- as reported 14,780 (7,436) 10,547 12,838 7,533
- before restructuring charge(3) 18,730 12,263 10,547 12,838 9,433
Income (loss) before extraordinary item and cumulative
effect of changes in accounting principles(4)
- as reported 9,090 (5,217) 6,591 7,575 4,565
- before restructuring charge(3) 11,541 7,556 6,591 7,575 5,665
Net income (loss)(4)
- as reported 9,090 (5,217) 5,796 7,575 4,966
- before restructuring charge(3) 11,541 7,556 5,796 7,575 6,066
- ------------------------------------------------------------------------------------------------------------------------------
PER SHARE DATA(5)
Income (loss) before extraordinary item and cumulative
effect of changes in accounting principles(4)
- as reported $ 1.11 $ (.65) $ .88 $ 1.22 $ .75
- before restructuring charge(3) 1.41 .94 .88 1.22 .93
Net income (loss)(4)
- as reported 1.11 (.65) .77 1.22 .82
- before restructuring charge(3) 1.41 .94 .77 1.22 1.00
Cash dividends .20 .20 .20 .20 .20
Shareholders' equity 13.86 12.85 13.72 10.41 9.31
- ------------------------------------------------------------------------------------------------------------------------------
FINANCIAL POSITION
Working capital(3) $ 35,315 $ 49,774 $ 60,517 $ 33,286 $ 26,033
Property, plant and equipment, net 133,836 118,621 116,365 84,570 77,072
Goodwill and other intangibles, net 48,158 42,572 52,846 8,281 7,617
Total assets 291,752 266,916 283,723 172,443 160,906
Short-term borrowings 2,100 1,650 3,323 3,775 --
Long-term debt, including current maturities 99,655 94,469 106,801 56,342 58,440
Total shareholders' equity 109,816 100,643 108,528 62,755 55,706
Total capital 211,571 196,762 218,652 122,872 114,146
- -------------------------------------------------------------------------------------------------------------------------------
SELECTED RATIOS
Gross profit margin 22.8% 22.1% 23.1% 25.2% 25.5%
Operating income margin(3) 7.0% 5.7% 4.9% 6.5% 5.8%
Effective tax rate 38.5% 38.4% 37.5% 41.0% 39.9%
Sales to average total capital 1.9 1.9 2.0 2.4 2.3
Current ratio(3) 1.5 2.0 2.2 1.8 1.7
Debt as a percent of total capital 48.1% 48.8% 50.4% 48.9% 51.2%
Operating income return on average total capital(3) 13.6% 10.6% 9.7% 15.4% 13.3%
Net income return on average shareholders' equity (3)(4) 11.0% 7.2% 6.8% 12.8% 11.3%
- --------------------------------------------------------------------------------------------------------------------------------
OTHER DATA
Weighted-average common shares outstanding 8,176 8,035 7,495 6,195 6,085
Shares outstanding at fiscal year end 7,921 7,830 7,908 6,030 5,984
Stock market price data:
High $ 28 $ 17 3/4 $ 29 7/8 $ 24 3/4 $ 19 1/2
Low 14 12 1/4 13 1/4 14 1/2 8 1/2
Close (at fiscal year end) 24 1/4 15 1/2 15 3/8 23 5/8 17 3/4
Number of associates (approximate) 3,000 3,000 3,200 2,400 2,400
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) During the fourth quarter of fiscal 1998, the Company changed its method of
accounting for certain of its inventories from the last-in, first-out
method to the first-in, first-out method. As required by generally
accepted accounting principles, the Company has retroactively adjusted
prior years' financial statements for the change. This table reflects the
retroactively adjusted financial statements for the change. The
restatement had no effect on net income in fiscal 1998, increased the net
loss in fiscal 1997 by $194,000 or $0.02 per share, increased net income
in fiscal 1996 by $87,000 or $0.01 per share, increased net income in
fiscal 1995 by $96,000 or $0.01 per share, and decreased net income in
fiscal 1994 by $242,000, or $0.04 per share.
(2) Certain reclassifications were made to prior years' amounts to conform to
current year presentation.
(3) Excludes the effects of restructuring charges of $3.95 million ($2.5
million net of tax) in fiscal 1998, $19.7 million ($12.7 million after
tax) in fiscal 1997, and $1.9 million ($1.1 million after tax) in fiscal
1994.
(4) After extraordinary loss on early extinguishment of debt in fiscal 1996 of
$0.8 million (net of tax) and income from cumulative effect of changes in
accounting principles in fiscal 1994 of $0.4 million (net of tax).
(5) Income per share data assumes dilution.
- -------
21
<PAGE>
CADMUS COMMUNICATIONS CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
- --------------------------------------------------------------------------------
GENERAL
Cadmus Communications Corporation provides customers with integrated,
end-to-end information and communications solutions. These end-to-end solutions
involve a full range of creative, production and distribution services. The
Company is organized around two business sectors: Professional Communications,
serving customers who publish information and Marketing Communications, serving
customers who convey marketing messages. Headquartered in Richmond, Virginia,
Cadmus is the 22nd largest graphic communications company in North America.
ORGANIZATIONAL STRUCTURE
The Company's current organizational structure was effected during fiscal 1997,
when it announced a major restructuring plan designed to exit or reshape those
businesses that were not performing or were not core to its strategy, and to
create a more efficient and cost effective organizational structure. In
conjunction with the restructuring, the Company reorganized its organizational
and operational structure to form Cadmus Marketing Communications and Cadmus
Professional Communications. The Company's previous organizational structure
consisted of the Periodicals, Graphic Communications, Marketing, and Publishing
groups.
Cadmus Marketing Communications provides commercial printing, graphic
solutions, print and broadcast advertising, direct marketing, catalog and
collateral design, publication development, financial communication, point of
purchase, specialty packaging and promotional printing, software duplication
and distribution, and interactive services to customers who convey marketing
messages. Cadmus Professional Communications provides a full range of
composition, editorial, production, distribution, and related services for
publishers of scientific, technical, and medical journals, magazines, trade
association publications and commercial publications.
RESULTS OF OPERATIONS
The following table presents the major components from the Consolidated
Statements of Income as a percent of sales for the three fiscal years discussed
herein:
<TABLE>
<CAPTION>
Years Ended June 30
- ---------------------------------------------------------------------------------------------------------------------
1998 1997 1996
(as adjusted - (as adjusted -
note 1) note 1)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales 100.0% 100.0% 100.0%
Cost of sales 77.2 77.9 76.9
----- ----- -----
Gross profit 22.8 22.1 23.1
Selling and administrative expenses 15.8 16.4 18.2
Restructuring charge 1.0 5.1 --
----- ----- -----
Operating income 6.0 0.6 4.9
Interest expense 1.9 2.0 1.5
Other expenses, net 0.3 0.5 0.3
----- ----- -----
Income (loss) before income taxes and extraordinary item 3.8 ( 1.9) 3.1
Income tax expense (benefit) 1.5 ( 0.6) 1.2
----- ----- -----
Income (loss) before extraordinary item 2.3 ( 1.3) 1.9
Extraordinary loss on early extinguishment of debt, net of tax -- -- 0.2
- ---------------------------------------------------------------------------------------------------------------------
Net income (loss) 2.3% ( 1.3)% 1.7%
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) During the fourth quarter of fiscal 1998, the Company changed its method of
accounting for certain of its inventories from the last-in, first-out method
to the first-in, first-out method. As required by generally accepted
accounting principles, the Company has retroactively adjusted prior years'
financial statements for the change. This table reflects the retroactively
adjusted financial statements for the change. The restatement had no effect on
net income in fiscal 1998 and increased the net loss in fiscal 1997 by
$194,000 or $0.02 per share. See Note 4 in the Notes to Consolidated Financial
Statements.
-------
22
<PAGE>
- --------------------------------------------------------------------------------
Each of these major components is discussed in additional detail in the
subsections below:
RESTRUCTURING ACTIVITIES
In April 1998, the Company acquired Germersheim, Inc., an Atlanta-based
national point of purchase marketing service provider. During the fourth
quarter of fiscal 1998, the Company recorded a one-time restructuring charge of
$3.95 million ($2.5 million net of tax) related to the integration of
Germersheim, Inc. with its existing point of purchase operations. The charge
included costs to consolidate facilities, eliminate duplicate assets, and
provide severance costs.
During the fourth quarter of fiscal 1997, the Company adopted a
restructuring plan that impacted a number of its operations. The plan included
the following actions: closure of the Baltimore promotional printing facility
and the Long Beach-based direct marketing agency; consolidation of Atlanta and
Richmond-based interactive divisions and certain journal fulfillment and
distribution operations; realignment of certain management, production and
administrative personnel; write-down of certain tangible and intangible assets;
and exiting certain nonstrategic customer relationships and product lines. In
connection with the restructuring plan, the Company recorded a restructuring
charge of $19.9 million ($12.9 million net of tax) in the fourth quarter of
fiscal 1997. Operations that were discontinued as a result of the restructuring
reported sales of $16.4 million and $15.9 million in fiscal 1997 and fiscal
1996, respectively. The fiscal 1997 restructuring charge was offset by a $0.3
million restructuring gain ($0.2 million net of tax) recorded in the first
quarter of fiscal 1997 related to the restructuring of the former publishing
operations.
COMPARISON OF FISCAL 1998 WITH FISCAL 1997
Sales rose 2% to $393.8 million for fiscal 1998. Adjusted for businesses
discontinued in connection with the 1997 restructuring and for the 1998
acquisition of Germersheim, Inc., sales growth was 7%.
Sales for the Professional Communications sector were $203 million for
1998, essentially flat with sales in 1997. This flat performance was due to
lower paper prices and the planned downsizing of the magazine product line,
offset by increases in sales in trade association/educational institution
publications and a 1% increase in journal sales.
Sales for the Marketing Communications sector were $199 million for fiscal
1998, compared to $184 million for fiscal 1997, representing an increase of 8%.
Adjusting for the impact of discontinued operations and the Germersheim, Inc.,
acquisition, sales increased by 17%. This increase in Marketing Communications
sales was led primarily by the (i) Specialty Packaging and Promotional group,
which recorded a 19% increase in sales, (ii) CadmusCom, which posted an 18%
increase in agency fees, (iii) the Financial Communications group, which
recorded a 31% sales increase, and (iv) strong performance by the Graphic
Solutions and Point of Purchase groups, particularly in the latter half of the
fiscal year. The solid growth in the packaging and promotional product line,
due primarily to growth from new customers, occurred despite disruption in
first quarter production related to the relocation of this operation to a
newly-constructed facility. The revenue increase in the CadmusCom group was
driven by a 32% increase in Direct Marketing agency fees resulting from new
account development and growth from existing customers, a 19% increase in
Custom Publishing agency fees due to growth from existing customers, and an
increase in catalog design and photography agency fees due to increased
billings to existing customers. The growth in the Financial Communications
group was driven by strong capital markets activity, growth in mutual fund
services, and growth in full service banking relationships.
Gross profit margins for the Company improved to $89.8 million in fiscal
1998, or 22.8% of sales, up from $85.1 million, or 22.1% of sales in the prior
year. This increase was primarily attributable to the benefits resulting from
restructuring actions taken by the Company in the fourth quarter of fiscal
1997, a favorable change in product mix, and lower paper prices.
Selling and administrative expenses were $62.1 million for fiscal 1998,
representing a decrease of $1 million from the prior year. As a percent of
sales, selling and administrative expenses decreased from 16.4% in fiscal 1997
to 15.8% in this fiscal year. This improvement was driven by efficiencies
resulting from restructuring actions taken by the Company in the fourth quarter
of fiscal 1997.
Operating income was $23.7 million for fiscal 1998, as compared to $2.3
million for fiscal 1997. Operating income was affected by restructuring charges
taken of $3.95 million and $19.7 million in fiscal 1998 and 1997, respectively.
Operating income, before restructuring charges, rose to $27.7 million, or 7% of
sales, from $22.0 million, or 5.7% of sales in the prior year. This increase in
operating margins was driven by a 110 basis point improvement over last year in
the Professional Communications sector and a 200 basis point improvement over
fiscal 1997 in the Marketing Communications sector.
- --------------
23
<PAGE>
CADMUS COMMUNICATIONS CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
- --------------------------------------------------------------------------------
Interest expense decreased to $7.6 million in fiscal 1998 from $7.8
million in 1997, primarily due to lower average debt levels for the Company
throughout the year.
The effective tax rate was 38.5% in fiscal 1998, compared to 29.8% in
fiscal 1997. The increase in the effective tax rate is due primarily to the
income tax benefit recognized in fiscal 1997 as a result of the net
restructuring charge.
COMPARISON OF FISCAL 1997 WITH FISCAL 1996
Fiscal 1997 net sales increased 14.3% to $384.9 million from $336.7 million in
fiscal 1996. Professional Communications sales increased by 26.4% and Marketing
Communications sales rose by 7.2%. Offsetting these increases were lower
publishing sales resulting from the sale of the consumer publishing business
during the first quarter of fiscal 1997. Fiscal 1997 net sales were flat with
fiscal 1996 when adjusted for the impact of acquisitions, divestitures, and
lower paper prices.
The 26.4% increase in Professional Communications sales was primarily due
to the acquisition of Lancaster Press, Inc. in the fourth quarter of fiscal
1996, and continued growth in other research journal operations. Excluding
Lancaster sales and the impact of lower paper prices, other research journal
revenues increased by 3.0%. Magazine sales declined by 27.3% as a result of the
Company's decision to refocus its sales mix and discontinue relationships with
nonstrategic customers and also as a result of lower paper prices. In
connection with the 1997 restructuring actions, the magazine product line has
been integrated with research journals.
Marketing Communications sales rose 7.2%, driven by a full year's
inclusion of sales from Cadmus Technology Solutions (formerly, The Software
Factory) which was purchased during the second quarter of fiscal 1996, and
internal growth. Specialty Packaging and Promotional Printing sales rose by
22.9% in fiscal 1997 as compared to 1996 due to the inclusion of Cadmus
Technology Solutions and continued growth from existing clients. Financial
Communications sales increased 22.8%, primarily due to continued strength in
financial markets, an increase in shareholder communication sales, and growth
in full-service contracts with financial institutions. These increases were
partially offset by a 16.5% decline in Point of Purchase revenues due to lower
sales to quick service restaurant and beverage customers, the loss of a
significant account during fiscal 1997, and a longer than anticipated selling
cycle for new business. CadmusCom sales were flat as the inclusion of sales
from CadmusCom Richmond was more than offset by lower sales from the Company's
custom publishing, direct marketing and interactive operations. The decline in
direct marketing sales was the result of the Company's decision to change the
sales mix to higher margin, lower volume creative services revenues from lower
margin, higher volume production revenues.
Gross profit margin was 22.1% of sales in fiscal 1997 compared to 23.1% in
fiscal 1996. The margin decline was due to margin erosion in the Company's
point of purchase, interactive, and custom publishing operations, which
resulted from the combination of lower sales and higher production costs. Cost
of sales also was negatively impacted by excess capacity at certain Marketing
Communications printing facilities. These factors were partially offset by
significant gross margin improvement in Professional Communications resulting
from improved sales mix, continued efficiency improvements from the Richmond
manufacturing facility and the successful integration of Lancaster operations.
Selling and administrative expenses declined to 16.4% of sales compared to
18.2% in fiscal 1996. The decrease in the selling and administrative expense
ratio in 1997 was primarily attributable to the full-year impact of the
acquisition of Lancaster, which had a lower selling and administrative expense
ratio than the Company in the aggregate, and to cost control measures
implemented in fiscal 1997.
Interest expense increased by $2.6 million, or 51.4% in fiscal 1997, due
to additional debt incurred to fund the acquisition of Lancaster during the
fourth quarter of fiscal 1996.
Other expenses increased by $1.1 million in fiscal 1997 due to additional
amortization of goodwill related to fiscal 1996 acquisitions.
The effective tax rate was 29.8% in fiscal 1997 compared to 37.5 % in
fiscal 1996. The decrease in the effective tax rate is due primarily to the
income tax benefit recognized as a result of the restructuring charge.
LIQUIDITY AND CAPITAL RESOURCES
Management believes that the Company has the financial resources and access to
capital necessary to fund internal growth and acquisitions. The Company's major
demands on capital are for investments in property, plant and equipment,
working capital, and acquisitions.
Net cash provided by operating activities in fiscal 1998 increased to
$35.3 million, from $31.6 million in fiscal 1997. The increase was due
primarily to the Company's continued focus on management of working capital.
Working capital reductions generated $3.6 million in cash during fiscal 1998,
as compared to $6.1 million during fiscal 1997. Working capital reductions in
fiscal 1998 resulted principally from decreases in accounts receivable (net of
acquisitions), as the Company continued to focus on shortening the collection
-----------
24
<PAGE>
- --------------------------------------------------------------------------------
period of accounts receivable, as well as increases in accounts payable and
accrued expenses, resulting primarily from the deferral of payments on certain
major equipment purchases. Working capital was used to fund increased
work-in-process inventory levels at year end, as well as payments to fund the
restructuring actions from fiscal 1998 and 1997. Net cash provided by operating
activities in fiscal 1997 increased to $31.6 million, from $13.8 million in
fiscal 1996. This increase was due primarily to the reduction of cash
requirements to fund the Company's working capital investment. Working capital
reductions generated $6.1 million in cash during fiscal 1997, as compared to
the use of $10.5 million during fiscal 1996 to fund the Company's working
capital. Working capital reductions in 1997 resulted principally from decreases
in accounts receivable, due to improvements in the Company's credit and
collection efforts and accounts receivable mix, and in inventory, due primarily
to the Company's successful efforts to reduce the level of paper inventory
balances.
Net cash used in investing activities totaled $38.5 million during 1998,
as compared to $15.5 million in fiscal 1997. Cash used in fiscal 1998 included
$33.6 million to fund fiscal 1998 capital expenditures and $11.1 million to
acquire Germersheim, Inc. Major capital projects for fiscal 1998 included two
new presses (a full size web press and a six-unit press) and a die cutter to
support the Company's Specialty Packaging and Promotional product line, the
expansion of the Company's Charlotte manufacturing and fulfillment facilities,
a new sheetfeed press for the journal business, and investment in new business
and manufacturing systems. These cash outlays were partially offset by the
proceeds of $6.8 million from the sale of two of the Company's manufacturing
facilities in Charlotte and Baltimore. During fiscal 1997, net cash used for
investing activities included $22.9 million to fund capital expenditures,
offset by proceeds of $6.5 million resulting from the sale of the Company's
consumer publishing division. The Company anticipates that capital spending in
fiscal 1999 will be approximately $20 to $22 million.
Net cash provided by financing activities was $3.0 million in fiscal 1998,
compared to net cash used in financing activities of $17.1 million in fiscal
1997. During fiscal 1998, the Company repaid $5 million in debt, and paid $1.6
million in cash dividends. Net cash used in financing activities in fiscal 1997
included primarily the repayment of $14.0 million in debt and $1.6 million in
cash dividends.
Total indebtedness at June 30, 1998 was $99.7 million, up from $94.5
million at June 30, 1997. Debt as a percent of total capital decreased to 48.1%
at the end of fiscal 1998 from 48.8% at the end of fiscal 1997.
In October 1996, the Company entered into a new $160 million bank credit
agreement with six major banks. This credit agreement consists of a $40 million
term loan facility, expiring in 2003, and a $120 million revolving credit
facility, expiring in 2001. This agreement replaced an existing $115 million
bank credit agreement entered into with four of the same banks in January 1996.
Using the additional capacity available under the new agreement, the Company
repaid $40 million of 6.74% senior unsecured notes which were borrowed from two
insurance companies during fiscal 1994 primarily to fund 1994 acquisitions.
Bank borrowings under the bank credit agreement at June 30, 1998, totaled $93.5
million, leaving $63.5 million available under the facility.
Total outstanding long-term debt at June 30, 1998, included approximately
$95 million in variable rate obligations. As of June 30, 1998, the Company had
outstanding interest rate swap agreements that effectively convert $53.7
million of the Company's variable rate obligations to fixed rate obligations.
The effect of the swaps was an increase in interest expense of $1.3 million in
fiscal 1998. These contracts expire between fiscal 1999 and fiscal 2003. As of
June 30, 1998, the interest rate swaps had a net fair value of negative $2.0
million. The notional amount of each swap contract does not represent exposure
to credit loss. In the event of default by the counterparties, the risk, if
any, is the cost of replacing the swap agreement at current market rates. The
Company continually monitors its positions and the credit rating of its
counterparties and limits the amount of agreements it enters into with any one
party. Management does not anticipate nonperformance by the counterparties;
however, if incurred, any such loss would be immaterial. Additional information
on the interest rate swaps is provided in Note 7 of Notes to Consolidated
Financial Statements.
The Company's debt agreements contain covenants regarding fixed charge
coverage and net worth and contain other restrictions, including limitations of
additional borrowings, and the acquisition, disposition and securitization of
assets. The Company was in compliance with all debt covenants at June 30, 1998.
Management believes that its cash flows from operations, together with its
borrowing capacity under the credit facility, are sufficient to fund its
planned capital expenditures, working capital needs, dividends, stock
repurchases, acquisitions, and other cash requirements. Management also
believes the Company's credit facility could be amended to provide additional
cash resources, if needed.
- --------------
25
<PAGE>
CADMUS COMMUNICATIONS CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
- --------------------------------------------------------------------------------
YEAR 2000 ISSUE
Many computer systems in use today were designed and developed using two
digits, rather than four, to specify the year. As a result, such systems will
recognize the year 2000 as "00." This could cause many computer applications to
fail completely or to create erroneous results unless corrective measures are
taken. The Company recognizes the need to ensure its operations will not be
adversely impacted by Year 2000 software failures, and is in the process of
preparing for the Year 2000. A formal Year 2000 Monitoring Team has been
designated to coordinate, identify, evaluate, and implement changes to computer
systems and applications necessary to achieve a Year 2000 date conversion with
minimal effect on customers or disruption to business operations. Both
information technology ("IT") systems and operational systems (presses,
environmental control, telecommunications equipment, etc.) are being addressed.
The Company believes that the risk of having non-compliant systems is low.
Planned financial and administrative system upgrades and replacements (which
are Year 2000 compliant) are in process, and will be complete by March 31,
1999. The Company has two higher level manufacturing systems that also are
being replaced. However, because the replacement systems are not expected to be
operational by the Year 2000, the Company is making Year 2000 programming
modifications to the two existing major legacy manufacturing systems.
Programming modifications are currently in process, and are expected to be
completed, tested, and placed back into production by March 31, 1999. Formal
inventories and Year 2000 assessments of all other systems are expected to be
complete by October 1, 1998. Results to date indicate low risk for
non-compliance. Remediation, testing and implemention (for other systems
requiring remediation) is expected to be completed by March 31, 1999.
The Company believes that its most reasonably, likely worst-case Year 2000
scenario may involve non-compliant vendors or non-compliant customers who may
experience business outages. Accordingly, the Company is currently
communicating with all third parties with which it has a material relationship
(including vendors, financial institutions and customers) and identifying
potentially non-compliant parties. The Company then will compile a list of non-
compliant parties for the purpose of assessing the degree of exposure and risk.
Contingency plans specific to those parties (including, with respect to
vendors, alternative vendor relationships) will be developed at that time. This
process is expected to be complete during the second quarter of fiscal 1999.
The Company estimates the total cost of achieving Year 2000 compliance to
be in the range of $400,000 to $600,000 over the cost of normal software
upgrades and replacements. Some of these costs already have been incurred
during fiscal 1998. The remainder will be incurred in fiscal 1999, and will be
expensed through operations.
THE PREVIOUS DISCUSSIONS CONTAIN FORWARD-LOOKING INFORMATION. READERS ARE
CAUTIONED THAT SUCH INFORMATION INVOLVES RISKS AND UNCERTAINTIES, INCLUDING
THOSE CREATED BY GENERAL MARKET CONDITIONS, COMPETITION AND THE POSSIBILITY
THAT EVENTS MAY OCCUR THAT LIMIT THE ABILITY OF THE COMPANY TO MAINTAIN OR
IMPROVE ITS OPERATING RESULTS OR EXECUTE ITS STRATEGY. ALTHOUGH THE COMPANY
BELIEVES THAT THE ASSUMPTIONS UNDERLYING THE FORWARD-LOOKING STATEMENTS ARE
REASONABLE, ANY OF THE ASSUMPTIONS COULD BE INACCURATE, AND THEREFORE, THERE
CAN BE NO ASSURANCE THAT THE FORWARD-LOOKING STATEMENTS INCLUDED HEREIN WILL
PROVE TO BE ACCURATE. THE INCLUSION OF SUCH INFORMATION SHOULD NOT BE REGARDED
AS A REPRESENTATION BY THE COMPANY OR ANY OTHER PERSON THAT THE OBJECTIVES AND
PLANS OF THE COMPANY WILL BE ACHIEVED.
----------
26
<PAGE>
CADMUS COMMUNICATIONS CORPORATION AND SUBSIDIARIES
SELECTED QUARTERLY DATA (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(In thousands, except per share data)
- -------------------------------------------------------------------------------------------------------
1998 QUARTERS ENDED Sept 30 Dec 31 Mar 31 June 30
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $ 92,362 $ 96,048 $101,234 $ 104,179
Gross profit 20,548 21,667 23,722 23,871
Restructuring charge -- -- -- (3,950)
Operating income 5,690 6,800 7,515 3,713
Net income 2,036 2,919 3,275 860
Net income per share(2) $ .25 $ .36 $ .40 $ .10
Cash dividends per share .05 .05 .05 .05
Stock market price data:
High $ 22 $ 23 $ 25 7/8 $ 28
Low 14 19 3/4 19 3/4 23 3/8
Close 20 1/2 20 1/2 23 3/4 24 1/4
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
1997 QUARTERS ENDED
(as adjusted, see note 1) Sept 30 Dec 31 Mar 31 June 30
- -------------------------------------------------------------------------------------------------------
Net sales $ 93,922 $ 97,232 $ 97,018 $ 96,770
Gross profit 21,215 21,065 21,400 21,422
Restructuring gain (charge) 250 -- -- (19,949)
Operating income (loss) 5,364 5,890 5,472 (14,446)
Net income (loss) 1,694 2,182 1,849 (10,942)
Net income (loss) per share(2) $ .21 $ .27 $ .23 $ (1.36)
Cash dividends per share .05 .05 .05 .05
Stock market price data:
High $ 17 3/4 $ 17 3/4 $ 17 $ 15 7/8
Low 12 1/4 14 3/4 13 1/4 12 1/2
Close 16 3/4 15 1/2 14 1/8 15 1/2
- -------------------------------------------------------------------------------------------------------
</TABLE>
(1) During the fourth quarter of fiscal 1998, the Company changed its method of
accounting for certain of its inventories from the last-in, first-out method
to the first-in, first-out method. As required by generally accepted
accounting principles, the Company has retroactively adjusted prior years'
financial statements for the change. This table reflects the retroactively
adjusted financial statements for the change. The restatement had no effect on
net income in fiscal 1998 and increased the net loss in fiscal 1997 by
$194,000 or $0.02 per share.
(2) Net income (loss) per share assumes dilution.
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27
<PAGE>
CADMUS COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(In thousands, except per share data) Years Ended June 30
- ----------------------------------------------------------------------------------------------------------------
1998 1997 1996
(as adjusted - (as adjusted -
Note 4) Note 4)
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $ 393,823 $ 384,942 $ 336,655
- ----------------------------------------------------------------------------------------------------------------
Operating expenses:
Cost of sales 304,014 299,840 258,947
Selling and administrative 62,141 63,123 61,204
Restructuring charge, net 3,950 19,699 --
- ----------------------------------------------------------------------------------------------------------------
370,105 382,662 320,151
- ----------------------------------------------------------------------------------------------------------------
Operating income 23,718 2,280 16,504
Interest and other expenses:
Interest 7,595 7,788 5,144
Other, net 1,343 1,928 813
- ----------------------------------------------------------------------------------------------------------------
8,938 9,716 5,957
- ----------------------------------------------------------------------------------------------------------------
Income (loss) before income taxes and extraordinary item 14,780 (7,436) 10,547
Income tax expense (benefit) 5,690 (2,219) 3,956
- ----------------------------------------------------------------------------------------------------------------
Income (loss) before extraordinary item 9,090 (5,217) 6,591
Extraordinary loss on early extinguishment of debt
(net of income tax benefit of $487) -- -- (795)
- ----------------------------------------------------------------------------------------------------------------
Net income (loss) $ 9,090 $ (5,217) $ 5,796
- ----------------------------------------------------------------------------------------------------------------
Earnings per share - basic:
Income (loss) before extraordinary item $ 1.16 $ (.66) $ .91
Extraordinary loss on early extinguishment of debt -- -- ( .11)
- ----------------------------------------------------------------------------------------------------------------
Net income (loss) $ 1.16 $ (.66) $ .80
- ----------------------------------------------------------------------------------------------------------------
Weighted-average common shares outstanding 7,860 7,900 7,249
- ----------------------------------------------------------------------------------------------------------------
Earnings per share - diluted:
Income (loss) before extraordinary item $ 1.11 $ (.65) $ .88
Extraordinary loss on early extinguishment of debt -- -- ( .11)
- ----------------------------------------------------------------------------------------------------------------
Net income (loss) $ 1.11 $ (.65) $ .77
- ----------------------------------------------------------------------------------------------------------------
Weighted-average common shares
outstanding - assuming dilution 8,176 8,035 7,495
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
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28
<PAGE>
CADMUS COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(In thousands, except share data) At June 30
- -----------------------------------------------------------------------------------------------------------
1998 1997
(as adjusted -
ASSETS Note 4)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ -- $ 184
Accounts receivable, less allowance for doubtful accounts
($2,575 in 1998 and $2,250 in 1997) 70,571 69,093
Inventories 25,610 20,673
Deferred income taxes 3,832 7,789
Prepaid expenses and other 4,107 3,969
- -----------------------------------------------------------------------------------------------------------
Total current assets 104,120 101,708
- -----------------------------------------------------------------------------------------------------------
Property, plant and equipment, net 133,836 118,621
Goodwill and other intangibles, net 48,158 42,572
Other assets 5,638 4,015
- -----------------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 291,752 $ 266,916
- -----------------------------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
- -----------------------------------------------------------------------------------------------------------
Current liabilities:
Short-term borrowings $ 2,100 $ 1,650
Current maturities of long-term debt 6,431 5,017
Accounts payable 41,981 29,593
Accrued expenses 18,293 15,674
Restructuring reserve 4,378 7,612
- -----------------------------------------------------------------------------------------------------------
Total current liabilities 73,183 59,546
- -----------------------------------------------------------------------------------------------------------
Long-term debt, less current maturities 93,224 89,452
Other long-term liabilities 8,867 7,811
Deferred income taxes 6,662 9,464
Shareholders' equity:
Common stock ($.50 par value; authorized shares-16,000,000; issued and
outstanding shares - 7,921,000 in 1998 and 7,830,000 in 1997) 3,961 3,915
Capital in excess of par value 53,532 51,923
Retained earnings 52,323 44,805
- -----------------------------------------------------------------------------------------------------------
Total shareholders' equity 109,816 100,643
- -----------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 291,752 $ 266,916
- -----------------------------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
- -------
29
<PAGE>
CADMUS COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(In thousands) Years Ended June 30
- -------------------------------------------------------------------------------------------------------------------------------
1998 1997 1996
(as adjusted - (as adjusted -
Note 4) Note 4)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ 9,090 $ (5,217) $ 5,796
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
Extraordinary loss on early extinguishment of debt -- -- 795
Depreciation and amortization 18,444 18,188 14,563
Restructuring charge 3,950 19,699 --
Deferred income taxes 679 (5,580) 1,836
Other, net 997 112 1,942
- -------------------------------------------------------------------------------------------------------------------------------
33,160 27,202 24,932
- -------------------------------------------------------------------------------------------------------------------------------
Changes in assets and liabilities, excluding debt and effects of acquisitions:
Accounts receivable, net 4,675 5,544 (7,064)
Inventories (4,158) 4,455 (2,735)
Accounts payable and accrued expenses 7,873 (3,071) 1,680
Restructure reserve (due to cash payments) (4,745) (2,850) --
Other current assets (138) 2,018 (2,391)
Other long-term liabilities (due to pension plan payments) (1,774) (3,400) (300)
Other, net 414 1,742 (302)
- -------------------------------------------------------------------------------------------------------------------------------
2,147 4,438 (11,112)
- -------------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 35,307 31,640 13,820
- -------------------------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Proceeds from sale of consumer publishing division -- 6,500 --
Purchases of property, plant and equipment (33,588) (22,883) (25,289)
Proceeds from sales of property, plant and equipment 6,765 2,860 651
Purchase of license agreement -- (482) --
Payments for businesses acquired (11,139) -- (73,372)
Other, net (543) (1,520) (303)
- -------------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (38,505) (15,525) (98,313)
- -------------------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Proceeds from stock offering, net -- -- 38,376
Penalty on early extinguishment of debt -- -- (1,282)
Proceeds from (repayment of) short-term borrowings, net 450 (1,673) (452)
Proceeds from long-term revolving credit facility 8,500 18,000 30,000
Proceeds from long-term borrowings -- 40,415 32,724
Repayment of long-term borrowings (5,018) (70,747) (12,502)
Dividends paid (1,572) (1,581) (1,485)
Repurchase and retirement of common stock (118) (1,185) --
Proceeds from exercise of stock options 772 98 631
Other, net -- (399) (602)
- -----------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities 3,014 (17,072) 85,408
- -------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents (184) (957) 915
- -------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at beginning of year 184 1,141 226
Cash and cash equivalents at end of year $ -- $ 184 $ 1,141
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
-------
30
<PAGE>
CADMUS COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
BASIS OF CONSOLIDATION. The consolidated financial statements include the
accounts and operations of Cadmus Communications Corporation and Subsidiaries
(the "Company"), a Virginia corporation. All significant intercompany accounts
and transactions have been eliminated in consolidation.
USE OF ESTIMATES. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements. Estimates also affect the reported amounts of revenue and expenses
during the reporting period. Actual results could differ from those estimates.
NATURE OF OPERATIONS. The Company is an integrated communications company
offering products and services in the areas of marketing communications and
professional communications.
REVENUE RECOGNITION. Substantially all products are produced to customer
specifications. The Company recognizes revenue when service projects are
completed or products are shipped.
CASH AND CASH EQUIVALENTS. Cash and cash equivalents include all cash balances
and highly liquid investments with an original maturity of three months or
less.
INVENTORIES. Inventories are valued at the lower of cost or market. Inventory
costs have been determined by the first-in, first-out method (see Note 4).
PROPERTY, PLANT AND EQUIPMENT. Property, plant and equipment are stated at
cost, net of accumulated depreciation. Major renewals and improvements are
capitalized, whereas ordinary maintenance and repair costs are expensed as
incurred. Gains or losses on disposition of assets are reflected in earnings
and the related asset costs and accumulated depreciation are removed from the
respective accounts. Depreciation is calculated by the straight-line method
based on useful lives of 30 years for buildings and 3 to 10 years for
machinery, equipment, and fixtures.
GOODWILL. The Company amortizes costs in excess of fair value of net assets of
businesses acquired using the straight-line method over a period not to exceed
40 years. Recoverability is reviewed annually or sooner if events or changes in
circumstances indicate that the carrying amount may exceed fair value. If
recoverability is deemed to be potentially impaired, recoverability is then
determined by comparing the undiscounted net cash flows of the assets to which
the goodwill applies to the net book value including goodwill of those assets.
Accumulated amortization at June 30, 1998 and 1997 was $8.1 million and $6.4
million, respectively.
INCOME TAXES. The Company uses the asset and liability method of Statement of
Financial Accounting Standards ("SFAS") No. 109 to account for income taxes.
SFAS No. 109 requires the recognition of deferred tax liabilities and assets
for the expected future tax consequences of temporary differences between the
financial reporting basis and tax basis of assets and liabilities.
EARNINGS PER SHARE. During the second quarter of fiscal 1998, the Company
adopted SFAS No. 128, "Earnings per Share," which establishes new standards for
computing and presenting earnings per share. The impact of adopting the new
standard was not material. Basic earnings per share is computed on the basis of
weighted-average common shares outstanding from the date of issue. Diluted
earnings per share is computed on the basis of weighted-average common shares
outstanding plus common shares contingently issuable upon the exercise of
dilutive stock options. Incremental shares for dilutive stock options, computed
under the treasury stock method, were 316,000, 135,000, and 246,000, in fiscal
1998, 1997, and 1996, respectively.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS. In June 1997, the Financial
Accounting Standards Board (FASB) issued SFAS No. 130, "Reporting Comprehensive
Income," and SFAS No. 131, "Disclosures about Segments of an Enterprise and
Related Information." In February 1998, the FASB issued SFAS No. 132,
"Employers' Disclosures about Pensions and Other
- -------
31
<PAGE>
CADMUS COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
Postretirement Benefits - an amendment of FASB Statements No. 87, 88, and 106."
The Company plans to adopt these three pronouncements in fiscal 1999. In June
1998, the FASB issued SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities." The Company plans to adopt this pronouncement in fiscal
2000. These statements will affect the Company's financial statement
disclosures. Management believes that the adoption of these pronouncements is
not expected to have a material impact on the Company's financial position or
results of operations.
RECLASSIFICATIONS. Certain previously reported amounts have been reclassified
to conform to the current-year presentation.
2. RESTRUCTURING CHARGES
During the fourth quarter of fiscal 1998, the Company recorded a one-time
restructuring charge of $3.95 million ($2.5 million net of tax) related to the
integration of Germersheim, Inc. (see Note 3) with its existing point of
purchase operations. The charge included costs to consolidate facilities,
eliminate duplicate assets and provide severance costs. These actions were
initiated in fiscal 1998 and are expected to be completed within one year.
Management believes that the remaining restructuring reserve at June 30, 1998
of $3.2 million is adequate to complete the restructuring plan.
During the fourth quarter of fiscal 1997, the Company adopted a restructuring
plan that impacted a number of its operations. The plan included the following
actions: closure of the Baltimore promotional printing facility and the Long
Beach-based direct marketing agency; consolidation of Atlanta and
Richmond-based interactive divisions and certain journal fulfillment and
distribution operations; realignment of certain management, production and
administrative personnel; write-down of certain tangible and intangible assets;
and exiting certain nonstrategic customer relationships and product lines. In
connection with the restructuring plan, the Company recorded a restructuring
charge of $19.9 million ($12.9 million net of tax) in the fourth quarter of
fiscal 1997. The restructuring charge consisted of tangible and intangible
asset write-downs of $11.5 million, severance and other employee costs of $4.5
million, facility closure and consolidation costs of $2.9 million and exit
costs of $1.0 million. Severance and other employee costs relate to
approximately 250 associates at various operating and corporate facilities.
Operations that were discontinued as a result of the restructuring reported
sales of $16.4 million and $15.9 million in fiscal 1997 and fiscal 1996,
respectively. All restructuring actions were taken by the end of fiscal 1998.
The restructuring reserve balance remaining at June 30, 1998 totaled $1.2
million, and relates primarily to continuing excess rent and lease termination
costs related to the restructuring. Management believes the remaining
restructuring reserve is adequate to cover such costs.
The fiscal 1997 restructuring charge was offset by a $0.3 million restructuring
gain ($0.2 million net of tax) recorded in the first quarter of fiscal 1997
related to the restructuring of the former publishing operations. The $0.3
million gain consisted of a $0.7 million gain from the sale of the consumer
publishing operation, offset by a $0.4 million charge related to the strategic
repositioning of the custom publishing product line into the Marketing
Communications sector.
3. ACQUISITIONS AND DISPOSITIONS
On April 1, 1998, the Company acquired Germersheim, Inc., an Atlanta-based
national point of purchase marketing service provider. The $13.7 million
purchase price consisted of 41,195 shares of the Company's common stock, at an
aggregate value of $1 million, $11 million in cash payments (including direct
acquisition costs), and $1.7 million in debt (primarily capital lease
obligations). Of the $11 million in cash payments, $2 million was held in
escrow at June 30, 1998, as contingent consideration, and will only be released
if specified sales performance levels are met during each of the next two
years. The purchase agreement also provides for additional contingent
consideration payable to the seller based upon future profitability of the
business. Such contingent consideration has been excluded from the purchase
price above. The acquisition was accounted for under the purchase method and,
accordingly, the costs of the acquisition were allocated to the assets acquired
and the liabilities assumed based upon their respective fair values at the date
of purchase. The operating results of Germersheim, Inc. have been included in
the consolidated operating results since the date of acquisition.
In September 1996, the Company sold the net assets of its consumer publishing
division for total consideration of $6.5 million. The sale resulted in a pretax
gain of $0.7 million (see Note 2).
-------
32
<PAGE>
- --------------------------------------------------------------------------------
In May 1996, the Company acquired all of the outstanding stock of Lancaster
Press, Inc. and Subsidiary, a Pennsylvania-based producer of scientific,
technical and medical journals, for total consideration, including assumed debt
and transaction costs, of approximately $58.7 million. Debt assumed included a
$2.7 million mortgage payable obligation. The acquisition was funded by
borrowings under the Company's revolving credit/term loan facility with its
banks (see Note 7).
In November 1995, the Company acquired substantially all of the assets and
assumed certain liabilities of The Software Factory, Inc., an Atlanta-based
provider of software packaging and media duplication services. The $14.1
million purchase price consisted of 79,681 shares of the Company's common
stock, at an aggregate value of $2.0 million, and $12.1 million in cash
payments, including direct acquisition costs. In fiscal 1996, the Company
acquired certain assets of four other companies. Total cash paid for these
acquisitions was $3.4 million.
The funds used to acquire fiscal 1996 acquisitions were primarily provided from
the proceeds of the issuance of 1.725 million shares of the Company's common
stock (see Note 11). All of the fiscal 1996 acquisitions were accounted for
under the purchase method and, accordingly, the costs of the acquisitions were
allocated to the assets acquired and liabilities assumed based on their
respective fair values. The results of operations of each of the acquired
companies have been included in the Company's consolidated results of
operations since each respective date of acquisition.
The unaudited consolidated results of operations on a pro forma basis, as
though Lancaster Press, Inc. and The Software Factory, Inc. had been acquired
as of the beginning of fiscal year 1996 are as follows:
<TABLE>
<CAPTION>
1996
(In thousands, except per share data) (as adjusted, see Note 4)
- --------------------------------------------------------------------
<S> <C>
Revenues $ 391,804
Income before extraordinary item 8,459
Net income 7,664
Earnings per share, assuming dilution:
Income before extraordinary item $ 1.13
Net income 1.02
=============================================================
</TABLE>
4. INVENTORIES
Inventories as of June 30, 1998 and 1997 consist of the following:
<TABLE>
<CAPTION>
(In thousands) 1998 1997
- -----------------------------------------------------
<S> <C> <C>
Raw materials and supplies $ 4,841 $ 5,341
Work in process:
Materials 6,567 2,838
Other manufacturing costs 11,331 9,451
Finished goods 2,871 3,043
- -----------------------------------------------------
Inventories $ 25,610 $ 20,673
=====================================================
</TABLE>
During the fourth quarter of fiscal 1998, the Company changed its method of
accounting for certain of its inventories from the last-in, first-out (LIFO)
method to the first-in, first-out (FIFO) method. As of June 30, 1997, the
Company had valued approximately 15% of its inventories using LIFO. This change
standardizes the method of accounting for all Company inventory. As required by
generally accepted accounting principles, the Company has retroactively
adjusted prior years' financial statements for the change. The restatement had
no effect on net income in fiscal 1998, increased the net loss in fiscal 1997
by $194,000, or $0.02 per share, and increased net income in fiscal 1996 by
$87,000, or $0.01 per share. The restatement also had the effect of increasing
retained earnings as of June 30, 1995 by $873,000.
- -------
33
<PAGE>
CADMUS COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
5. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment as of June 30, 1998 and 1997 consist of the
following:
<TABLE>
<CAPTION>
(In thousands) 1998 1997
- -----------------------------------------------------------------
<S> <C> <C>
Land and improvements $ 6,041 $ 5,040
Buildings and improvements 49,985 45,856
Machinery, equipment and fixtures 185,079 167,283
- -----------------------------------------------------------------
Total property, plant and equipment 241,105 218,179
Less: Accumulated depreciation 107,269 99,558
- -----------------------------------------------------------------
Property, plant and equipment, net $ 133,836 $ 118,621
=================================================================
</TABLE>
Commitments outstanding for capital expenditures at June 30, 1998 totaled $9.9
million.
The Company leases office, production and storage space, and equipment under
various noncancelable operating leases. A number of leases contain renewal
options and some contain purchase options. Certain leases require the Company
to pay utilities, taxes, and other operating expenses. Future minimum rental
payments required under operating leases that have initial or remaining
noncancelable lease terms in excess of one year as of June 30, 1998 are as
follows: 1999 - $6.2 million; 2000 - $4.7 million; 2001 - $3.5 million; 2002 -
$3.0 million; 2003 - $2.7 million and thereafter - $4.4 million.
Total rental expense charged to operations was $6.5 million, $7.0 million, and
$5.7 million in fiscal 1998, 1997 and 1996, respectively. Substantially all
such rental expense represented the minimum rental payments under operating
leases.
Depreciation expense was $16.7 million, $16.2 million, and $13.4 million for
fiscal 1998, 1997 and 1996, respectively.
6. OTHER BALANCE SHEET INFORMATION
Accrued expenses at June 30, 1998 and 1997 consist of the following:
<TABLE>
<CAPTION>
(In thousands) 1998 1997
- --------------------------------------------
<S> <C> <C>
Compensation $ 12,737 $ 11,029
Deferred revenue 818 1,576
Other 4,738 3,069
- --------------------------------------------
Accrued expenses $ 18,293 $ 15,674
============================================
</TABLE>
Other long-term liabilities consist principally of amounts recorded under
deferred compensation arrangements with certain executive officers and other
employees and amounts recorded under the pension and other postretirement
benefit plans (see Notes 9 and 10).
-------
34
<PAGE>
- --------------------------------------------------------------------------------
7. DEBT
Long-term debt at June 30, 1998 and 1997 consists of the following:
<TABLE>
<CAPTION>
(In thousands) 1998 1997
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
Bank borrowings:
Term loan facility, weighted-average interest rate of 6.38% $ 37,000 $ 40,000
Revolving credit facility, weighted-average interest rate of 6.15% 56,500 48,000
Tax-exempt variable rate industrial development bonds, weighted-average
interest rate of 4.4%, due 2016 1,600 3,315
Mortgage payable, 10%, due 2002 2,669 2,696
Other 1,886 458
- --------------------------------------------------------------------------------------------------
Total long-term debt 99,655 94,469
Less: current maturities of long-term debt 6,431 5,017
- --------------------------------------------------------------------------------------------------
Long-term debt $ 93,224 $ 89,452
==================================================================================================
</TABLE>
In October 1996, the Company entered into a new $160 million bank credit
agreement with six major banks. The $160 million bank credit agreement consists
of a $40 million term loan facility, expiring in 2003, and a $120 million
revolving credit facility, expiring in 2001. This agreement replaced an
existing $115 million bank credit agreement, consisting of a $30 million term
loan facility and an $85 million revolving credit facility, entered into with
four of the same banks in January 1996. The term of the facility, interest rate
spreads and commitment fees were essentially the same under both the current
and former bank credit agreements.
The term loan facility requires the Company to make quarterly installment
payments beginning January 1998 through expiration. The revolving credit
facility requires the Company to pay commitment fees at an annual rate ranging
from 1/8 to 1/4 of 1% (based on the level of certain debt covenants) of the
total amount of the facility. The rate of interest payable under the bank
credit agreement is a function of (i) LIBOR, (ii) prime rate or (iii) money
market rate, each as defined under the agreement.
Using the additional capacity available under the new $160 million bank credit
agreement, the Company repaid $40 million of 6.74% senior unsecured notes.
These notes were originally due in 2003. There was no prepayment penalty
associated with the debt retirement in fiscal 1997.
In December 1995, the Company retired $11.2 million principal of 9.76% senior
notes originally due June 2000 and recorded a $1.3 million ($0.8 million net of
tax) extraordinary loss relating to the early retirement of this debt. The
funds used for the debt retirement were provided from the proceeds of the
issuance of 1.725 million shares of the Company's common stock (see Note 11).
The Company's debt agreements contain covenants regarding fixed charge coverage
and net worth and contain other restrictions, including limitations of
additional borrowings, and the acquisition, disposition and securitization of
assets. The Company was in compliance with all debt covenants at June 30, 1998.
The fair value of long-term debt as of June 30, 1998 and 1997 approximated
their recorded values.
Maturities of long-term debt are as follows: 1999 - $6.4 million; 2000 - $6.4
million; 2001 - $6.4 million; 2002 - $66.3 million; 2003 - $8.3 million;
thereafter - $5.9 million. The net book value of all encumbered properties as
of June 30, 1998 and 1997 totaled $4.2 million and $4.4 million, respectively.
The Company had uncommitted bank lines of credit which provide for unsecured
borrowings of up to $10 million, of which $2.1 million was outstanding at June
30, 1998.
- -------
35
<PAGE>
CADMUS COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
The Company incurred interest costs of $8.2 million, $8.5 million, and $5.4
million for fiscal 1998, 1997 and 1996, respectively, of which $0.6 million for
1998, $0.7 million for 1997, and $0.3 million for 1996 were capitalized.
Interest paid, net of amounts capitalized, totaled $7.7 million, $7.9 million,
and $5.0 million for fiscal 1998, 1997 and 1996 respectively.
The Company has a strategy to optimize the ratio of the Company's
fixed-to-variable rate financing consistent with maintaining an acceptable
level of exposure to the risk of interest rate fluctuations. To achieve this
mix, the Company, from time to time, enters into interest rate swap agreements
with various banks to exchange fixed and variable rate interest payment
obligations without the exchange of the underlying principal amounts (the
"notional amounts"). These agreements are hedged against the Company's
long-term borrowings and have the effect of converting the Company's long-term
borrowings from variable rate to fixed rate, or fixed rate to variable rate, as
required. The differential to be paid or received is accrued as interest rates
change and recognized as an adjustment to interest expense related to the debt.
The related amount payable to or receivable from counterparties is included in
other liabilities or assets. The Company's strategy to effectively convert
variable rate financing to fixed rate financing through the use of the
aforementioned swap agreements resulted in additional interest cost of $1.3
million in fiscal 1998, $1.2 million in fiscal 1997, and $0.7 million in fiscal
1996.
At June 30, 1998, the Company had one fixed-to-floating interest rate swap
agreement outstanding with a notional amount of $35 million. This swap was
entered into in fiscal 1994 to convert $35 million of the 6.74% Senior Notes
due in 2003 to floating-rate debt. Under the terms of this agreement, the
Company receives interest payments at a fixed rate of 5.265% and pays interest
at a variable rate that is based on six-month LIBOR. The initial term of this
swap agreement expires in fiscal 1999, and is renewable at the bank's option
for an additional two years. The fair value of this contract (which is not
recognized in the consolidated financial statements) at June 30, 1998 and 1997
was negative $0.1 million, and negative $0.4 million, respectively. In fiscal
1997, the Company repaid the fixed rate debt hedged by this swap with variable
rate debt. To adjust the ratio of the Company's fixed to variable rate
financing, the Company entered into additional floating-to-fixed rate swap
agreements in fiscal 1997.
At June 30, 1998, the Company had various floating-to-fixed interest rate swap
agreements outstanding with notional amounts totaling $88.7 million. These
swaps effectively convert a portion of the Company's variable-rate debt and
aforementioned fixed-to-floating rate swap to a fixed-rate. The swap agreements
have individual notional amounts ranging from $6.5 million to $40 million.
Under the terms of each of the agreements, the Company receives interest
payments at a variable rate based on either 30-day or six-month LIBOR and pays
interest at a fixed rate ranging from 6.54% to 8.09%. The fair value of these
contracts (which is not recognized in the consolidated financial statements) at
June 30, 1998 and 1997 totaled negative $2.0 million and negative $1.1 million,
respectively. These swap agreements are scheduled to expire as follows: 1999:
$18.7 million; 2002: $40 million; 2003: $30 million.
------
36
<PAGE>
- --------------------------------------------------------------------------------
The notional amounts and applicable rates of the Company's interest rate swap
agreements are as follows:
<TABLE>
<CAPTION>
Paid Fixed, Paid Floating,
Received Floating Received Fixed
---------------------------------------------------------------------------------
(In thousands) 1998 1997 1996 1998 1997 1996
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Notional amount:
Beginning balance $ 88,700 $ 47,900 $ 17,375 $ 35,000 $ 35,000 $ 35,000
New contracts -- 40,800 37,900 -- -- --
Expired contracts -- -- (7,375) -- -- --
- -----------------------------------------------------------------------------------------------------
Ending Balance $ 88,700 $ 88,700 $ 47,900 $ 35,000 $ 35,000 $ 35,000
=====================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Weighted-Average
Interest Rates for
1998
---------------------
Type of swap: Paid Received
- -------------------------------------------------------
<S> <C> <C>
Paid fixed, received floating 7.0% 5.8%
Paid floating, received fixed 5.9% 5.3%
======================================================
</TABLE>
The notional amount of each swap contract does not represent exposure to credit
loss. In the event of default by the counterparties, the risk, if any, is the
cost of replacing the swap agreement at current market rates. The Company
continually monitors its positions and the credit rating of its counterparties
and limits the amount of agreements it enters into with any one party.
Management does not anticipate nonperformance by the counterparties; however,
if incurred, any such loss would be immaterial.
8. INCOME TAXES
Income tax expense (benefit), for the years ended June 30, 1998, 1997, and 1996
consists of the following:
<TABLE>
<CAPTION>
1998 1997 1996
(In thousands) (as adjusted, see Note 4)
- ----------------------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal $ 4,069 $ 2,878 $ 2,139
State 1,098 483 418
- ----------------------------------------------------------------------
Total current 5,167 3,361 2,557
- ----------------------------------------------------------------------
Deferred:
Federal 456 (4,168) 1,228
State 67 (1,412) 171
- ----------------------------------------------------------------------
Total deferred 523 (5,580) 1,399
- ----------------------------------------------------------------------
Income tax expense (benefit) $ 5,690 $ (2,219) $ 3,956
======================================================================
</TABLE>
- -------
37
<PAGE>
CADMUS COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
The amount of income tax expense (benefit) differs from the amount obtained by
application of the statutory U.S. rates to income (loss) before income taxes
and extraordinary item for the reasons shown in the following table:
<TABLE>
<CAPTION>
1998 1997 1996
(In thousands) (as adjusted, see Note 4)
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Computed at statutory U.S. rate $ 5,059 $ (2,573) $ 3,591
State income taxes, net of Federal tax benefit 341 (613) 388
Goodwill amortization 450 924 251
Research tax credit (50) (75) (217)
Other (110) 118 (57)
- ------------------------------------------------ ------- --------- -------
Income tax expense (benefit) $ 5,690 $ (2,219) $ 3,956
================================================ ======= ========= =======
</TABLE>
Cash paid for income taxes totaled $5.0 million, $2.3 million, and $2.4
million, for fiscal 1998, 1997, and 1996, respectively.
The Company has state net operating loss carryforwards aggregating
approximately $52.6 million, which expire during fiscal years 2004 to 2013. A
valuation allowance of $0.8 million has been established for state net
operating loss benefits that are not expected to be realized. The valuation
allowance increased by $0.1 million in fiscal 1998 and $0.2 million in fiscal
1997.
The tax effects of the significant temporary differences that comprise the
deferred tax assets and liabilities in the consolidated balance sheets at June
30, 1998 and 1997 are as follows:
<TABLE>
<CAPTION>
1998 1997
(as adjusted,
(In thousands) see Note 4)
- ----------------------------------------------------------------------
<S> <C> <C>
Assets:
Allowance for doubtful accounts $ 1,067 $ 857
Employee benefits 5,028 3,510
State net operating loss carryforwards 1,545 1,354
Goodwill 2,625 2,576
Accrued restructuring costs 2,133 3,318
Other 51 308
- --------------------------------------------------------------------
Gross deferred tax assets 12,449 11,923
- --------------------------------------------------------------------
Liabilities:
Property, plant, and equipment 14,171 12,450
Other 346 501
- --------------------------------------------------------------------
Gross deferred tax liabilities 14,517 12,951
- --------------------------------------------------------------------
Valuation allowance 762 647
- --------------------------------------------------------------------
Net liability $ 2,830 $ 1,675
====================================================================
</TABLE>
-------
38
<PAGE>
- --------------------------------------------------------------------------------
9. RETIREMENT PLANS
DEFINED BENEFIT PLANS
The Company sponsors a noncontributory defined benefit pension plan that covers
substantially all employees, and participates in a multiemployer retirement
plan that provides defined benefits to employees covered under a collective
bargaining agreement (collectively, the "core plans"). The Company also
sponsors a supplemental pension plan for certain key executives (the
"supplemental plan"). All plans provide benefit payments using formulas based
on an employee's compensation and length of service, or stated amounts for each
year of service. The Company makes contributions to its core plans sufficient
to meet the minimum funding requirements of applicable laws and regulations.
The supplemental plan for key executives is a nonqualified, nonfunded pension
plan, and is provided for by charges to earnings sufficient to meet the
projected benefit obligation. Contributions to the multiemployer plan are
generally based on a negotiated labor contract. The Company's contributions
totaled $1.8 million, $3.4 million, and $0.3 million in fiscal 1998, 1997 and
1996, respectively. The core plans' assets consist primarily of equity and debt
securities.
The components of net pension costs for fiscal 1998, 1997, and 1996 for all
plans follow:
<TABLE>
<CAPTION>
(In thousands) 1998 1997 1996
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
Present value of benefits earned $ 2,550 $ 2,341 $ 2,010
Interest cost on plan liabilities 3,288 2,783 2,305
Return on plan assets:
Actual (9,546) (3,567) (4,522)
Deferred 6,154 838 2,382
Net amortization (41) (86) (104)
Contributions to multiemployer plan 64 59 --
- ---------------------------------------------------------------------------
Net pension costs $ 2,469 $ 2,368 $ 2,071
===========================================================================
</TABLE>
The actuarial assumptions used in determining net pension cost and the related
benefit obligations for all plans were as follows:
<TABLE>
<CAPTION>
1998 1997 1996
-----------------------------------
<S> <C> <C> <C>
Discount rate 7.25% 8.25% 8.25%
Rate of increase in compensation 4.5% 4.5% 4.5%
Long-term rate of return on plan assets 9.75% 9.0% 9.0%
- -------------------------------------------------------------------------------
</TABLE>
- -------
39
<PAGE>
CADMUS COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
A summary of the funded status of pension plans at June 30, 1998 and 1997
follows:
<TABLE>
<CAPTION>
Core Plans Supplemental Plan
---------------------------------------------------
(In thousands) 1998 1997 1998 1997
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Actuarial present value of benefit obligations:
Vested benefits $ 38,612 $ 29,581 $ 4,073 $ 3,360
Nonvested benefits 2,498 1,733 362 341
- -------------------------------------------------------------------------------------------------------------
Accumulated benefit obligation 41,110 31,314 4,435 3,701
Effect of projected salary increases 6,516 4,975 1,132 868
- -------------------------------------------------------------------------------------------------------------
Projected benefit obligation 47,626 36,289 5,567 4,569
- -------------------------------------------------------------------------------------------------------------
Plan assets at market value 44,860 35,057 * *
- -------------------------------------------------------------------------------------------------------------
Excess of projected benefit obligation over plan assets 2,766 1,232 5,567 4,569
Unrecognized net asset (obligation) at transition 1,723 1,875 (578) (649)
Unrecognized prior service cost (365) (40) -- --
Unrecognized losses (1,609) (867) (1,306) (474)
Additional minimum pension liability -- 238 577 255
- -------------------------------------------------------------------------------------------------------------
Accrued pension costs $ 2,515 $ 2,438 $ 4,260 $ 3,701
=============================================================================================================
</TABLE>
* The supplemental plan is technically a nonfunded plan. However, the Company
has acquired life insurance contracts ($14.5 million face amount at June 30,
1998 and 1997) intended to be adequate to fund future benefits. The cash
surrender value of these contracts, net of policy loans, was $2.2 million
and $1.9 million at June 30, 1998 and 1997, respectively, and is included in
other assets in the consolidated balance sheets.
DEFINED CONTRIBUTION PLAN
The thrift savings plan enables employees to save a portion of their earnings
on a tax-deferred basis and also provides for matching contributions from the
Company for a portion of the employees' savings. Additionally, the plan
provides for individual subsidiary companies to make profit-sharing
contributions. The Company's expense under this plan was $1.9 million in fiscal
1998, and $1.8 million in fiscal 1997 and fiscal 1996.
10. OTHER POSTRETIREMENT BENEFITS
All employees of the Company are eligible for retiree medical coverage if they
retire on or after attaining age 55 with ten or more years of service. Benefits
differ depending upon the date of retirement. For those employees who retired
prior to April 1, 1988, and are under age 65, coverage is available at a cost
to the retiree equal to the cost to the Company for an active employee less the
fixed Company subsidy. Once employees in this group have reached age 65,
coverage is available at a cost to the retiree equal to the cost to the Company
for a post-65 retiree less the fixed Company subsidy. For those employees who
retired on or after April 1, 1988, but before January 1, 1994, coverage is
available until age 65. The retiree contributes the full active rate. Upon
reaching age 65, coverage under the Company's plan ceases and the retiree
becomes covered by Medicare. For those employees who retire on or after January
1, 1994, coverage is available until age 65. The retiree contributes the full
retiree rate, which is equal to the cost to the Company for a pre-65 retired
employee. Upon reaching age 65, coverage under the Company's plan ceases, and
the retiree becomes covered by Medicare.
-------
40
<PAGE>
- --------------------------------------------------------------------------------
The following table sets forth the components of the accrued postretirement
benefit obligation as of June 30, 1998 and 1997:
<TABLE>
<CAPTION>
(In thousands) 1998 1997
- ------------------------------------------------------------------------------------------
<S> <C> <C>
Accrued postretirement benefit obligation attributable to retirees $ 337 $ 356
Unrecognized net gain 206 274
- ----------------------------------------------------------------------------------------
Accrued postretirement benefit cost $ 543 $ 630
========================================================================================
</TABLE>
Amounts recognized as net periodic postretirement benefit cost in fiscal 1998
and 1997 were not material.
The discount rate used in determining the accumulated postretirement benefit
obligation as of June 30, 1998 was 7.25%. The assumed healthcare cost trend
rate used in measuring the accumulated benefit obligation was 8% in fiscal
1998, gradually decreasing to 5.75% in the year 2003 and remaining level
thereafter. A one percentage-point increase in the assumed healthcare cost
trend rates would not change the accumulated postretirement benefit obligation.
11. SHAREHOLDERS' EQUITY
Shareholders' equity consists of the following:
<TABLE>
<CAPTION>
Common Stock Capital in Excess Retained
(Dollars in thousands, except per share data) Shares Amount of Par Value Earnings
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance at June 30, 1995 (as previously reported) 6,030,000 $ 3,015 $ 12,448 $ 46,419
Adjustment for the cumulative effect on prior years of
applying retroactively the new method of accounting for
inventory (see note 4) -- -- -- 873
- ---------------------------------------------------------------------------------------------------------------------------
Balance at June 30, 1995, as adjusted 6,030,000 3,015 12,448 47,292
Net income (as adjusted, see note 4) -- -- -- 5,796
Cash dividends - $.20 per share -- -- -- (1,485)
Issuance of common stock 1,805,000 902 39,459 --
Net shares issued upon exercise of stock options 73,000 37 1,064 --
- ---------------------------------------------------------------------------------------------------------------------------
Balance at June 30, 1996, as adjusted 7,908,000 3,954 52,971 51,603
Net loss (as adjusted, see note 4) -- -- -- (5,217)
Cash dividends - $.20 per share -- -- -- (1,581)
Repurchase of common stock (88,000) (44) (1,141) --
Net shares issued upon exercise of stock options 10,000 5 93 --
- ---------------------------------------------------------------------------------------------------------------------------
Balance at June 30, 1997, as adjusted 7,830,000 3,915 51,923 44,805
Net income -- -- -- 9,090
Cash dividends - $.20 per share -- -- -- (1,572)
Repurchase of common stock (8,000) (4) (114) --
Issuance of common stock for business acquisition
(see note 3) 41,000 21 980 --
Net shares issued upon exercise of stock options 58,000 29 743 --
- ---------------------------------------------------------------------------------------------------------------------------
Balance at June 30, 1998 7,921,000 $ 3,961 $ 53,532 $ 52,323
===========================================================================================================================
</TABLE>
In fiscal 1997, the Board of Directors authorized the repurchase of up to
750,000 shares of the Company's common stock, or about 9% of shares
outstanding. Shares may be repurchased from time to time in the open market or
through privately negotiated transactions. As of June 30, 1998, 96,000 shares
had been repurchased under this authorization.
- -------
41
<PAGE>
CADMUS COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
In November 1995, the Company completed the issuance of an additional 1.725
million shares of the Company's common stock through a public offering,
resulting in net proceeds (after deducting issuance costs) of $38.4 million.
The Company used the net proceeds to (i) repay the $11.2 million of 9.76%
Senior Notes due in June 2000, plus a $1.3 million ($0.8 million net of tax)
prepayment penalty, (ii) fund the cash portion of certain acquisitions and
(iii) repay short-term borrowings used to fund seasonal working capital needs.
In 1989 and 1990, the Board of Directors authorized the purchase of up to
200,000 shares of the Company's stock from time to time on the open market. The
shares, if and when purchased, may be used for the funding of employee benefit
plans. As of June 30, 1998, 133,000 shares had been repurchased under this
authorization.
In February 1989, as part of a shareholder rights plan, the Board of Directors
declared a dividend distribution of one preferred share purchase right for each
outstanding share of common stock. Each right entitles the shareholder to buy
one unit (one one-thousandth of a share) of Series A Preferred Stock at a
purchase price of $45 per share (the "Purchase Price"), subject to adjustment.
The rights will become exercisable initially if a person or group acquires or
announces a tender offer for 20% or more of the Company's common stock
("Acquiring Person"), at which time each right will be exercisable to purchase
one unit of Series A Preferred at the Purchase Price. At any time after a
person becomes an Acquiring Person, the Company may issue a share of common
stock in exchange for each right other than those held by the Acquiring Person.
If an Acquiring Person acquires 30% or more of the Company's common stock or an
Acquiring Person merges into or combines with the Company, each right will
entitle the holder, other than the Acquiring Person, upon payment of the
Purchase Price, to acquire Series A Preferred or, at the option of the Company,
common stock, having a market value equal to twice the Purchase Price. If the
Company is acquired in a merger or other business combination in which it does
not survive or if 50% of its earnings power is sold, each right will entitle
the holder, other than the Acquiring Person, to purchase securities of the
surviving company having a market value equal to twice the Purchase Price.
Unless redeemed earlier, the rights expire on February 13, 1999. The rights may
be redeemed by the Board of Directors at any time prior to the tenth day after
a person becomes an Acquiring Person, subject to the Board of Directors'
ability to extend or reinstate the redemption period under certain
circumstances. The rights may have certain anti-takeover effects. An Acquiring
Person will experience substantial dilution under certain circumstances.
However, the rights should not interfere with any merger or other business
combination approved by the Board of Directors because the rights are generally
redeemable at the discretion of the Board.
In addition to its common stock, the Company's authorized capital includes
1,000,000 shares of preferred stock ($1.00 par value), issuable in series, of
which 100,000 shares are designated as Series A Preferred.
12. STOCK OPTIONS
Under the Company's stock option plans, selected employees and nonemployee
directors may be granted options to purchase its common stock at prices equal
to the fair market value of the stock at the date the options are granted. In
fiscal 1997, the Company adopted the disclosure-only provisions of SFAS No.
123, "Accounting for Stock-Based Compensation." As permitted by the provisions
of SFAS No. 123, the Company continues to follow Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees," and related
interpretations in accounting for its stock-based awards. Accordingly, since
stock options are issued at fair market value on the date of grant, the Company
does not recognize charges to earnings resulting from the plans.
The following information is provided solely in connection with the disclosure
requirements of SFAS No. 123. If the Company had elected to recognize
compensation cost related to its stock options granted in fiscal 1998 and 1997
in accordance with the provisions of SFAS No. 123, there would have been a pro
forma net income of $8,436,000 in fiscal 1998 ($1.03 per share, assuming
dilution) and a pro forma net loss of $5,450,000 during fiscal 1997 (($0.68)
per share, assuming dilution). The fair value of these options was estimated at
the date of grant using a Black-Scholes option pricing model with the following
weighted-average assumptions for fiscal 1998 and 1997, respectively: risk-free
interest rates of 5.97% and 6.61%; dividend
-------
42
<PAGE>
- --------------------------------------------------------------------------------
yields of 0.82% and 1.42%; volatility factors of .340 and .390 and an expected
life of 8 years. The weighted-average fair value of options was $11.52 and
$6.71 per option during fiscal 1998 and 1997, respectively.
A summary of the Company's stock option activity and related information for
the fiscal years ended June 30, 1998, 1997 and 1996 follows:
<TABLE>
<CAPTION>
Number of Option Price Weighted-Average
Shares Per Share Exercise Price(A)
----------------------------------------------------------
<S> <C> <C> <C>
Outstanding at June 30, 1995 607,000 $ 6.38 to $28.00
Exercised (73,000) 6.38 to 9.75
Granted 169,000 16.75 to 25.06
Lapsed or canceled (30,000) 16.75 to 25.06
- --------------------------------------------------------------------------------------
Outstanding at June 30, 1996 673,000 8.25 to 28.00 $ 14.12
Exercised (10,000) 9.81 9.81
Granted 258,000 13.18 to 16.13 14.06
Lapsed or canceled (24,000) 9.13 to 19.19 16.30
- --------------------------------------------------------------------------------------
Outstanding at June 30, 1997 897,000 8.25 to 28.00 14.08
Exercised (58,000) 9.00 to 17.13 13.21
Granted 251,000 16.14 to 26.88 24.46
Lapsed or canceled (88,000) 13.25 to 19.19 16.78
- --------------------------------------------------------------------------------------
Outstanding at June 30, 1998 1,002,000 $ 8.25 to $28.00 $ 16.50
- --------------------------------------------------------------------------------------
- -----
Exercisable at June 30:
1996 436,000 $ 8.25 to $24.05
1997 403,000 8.25 to 24.05 $ 11.44
1998 590,000 8.25 to 26.88 13.67
======================================================================================
</TABLE>
(A) Disclosure of weighted-average exercise price information is required by
SFAS No. 123 for fiscal years beginning after December 15, 1995.
The weighted-average remaining contractual life of options outstanding at June
30, 1998 is 7 years. At June 30, 1998, 1,129,000 shares of authorized but
unissued common stock were reserved for issuance upon exercise of options
granted or grantable under the plans. Options are generally exercisable under
the plans for periods of 5 to 10 years from the date of grant. The following
table provides additional detail of the 1,002,000 options outstanding at June
30, 1998:
<TABLE>
<CAPTION>
Weighted-
Number of Average Weighted- Number of Weighted-
Range of Options Remaining Average Options Average
Exercise Prices Outstanding Life (years) Exercise Price Exercisable Exercise Price
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 8.25 to $13.25 322,000 4.0 $ 9.66 297,000 $ 9.36
14.25 to 19.19 465,000 8.0 16.50 252,000 16.73
24.05 to 28.00 215,000 9.2 26.75 41,000 26.12
=========================================================================================================
</TABLE>
- -------
43
<PAGE>
CADMUS COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
13. CONCENTRATIONS OF CREDIT RISK
Financial instruments that potentially subject the Company to concentrations of
credit risk consist principally of trade receivables. Concentrations of credit
risk with respect to trade receivables are limited due to the large number of
customers comprising the Company's customer base, and their dispersion across
different businesses and geographic regions. As of June 30, 1998 and 1997, the
Company had no significant concentrations of credit risk.
14. CONTINGENCIES
The Company is party to various legal actions which are ordinary and incidental
to its business. While the outcome of legal actions cannot be predicted with
certainty, management believes the outcome of any of these proceedings, or all
of them combined, will not have a materially adverse effect on its consolidated
financial position or results of operations.
-------
44
<PAGE>
CADMUS COMMUNICATIONS CORPORATION AND SUBSIDIARIES
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders and Board of Directors of
Cadmus Communications Corporation:
We have audited the accompanying consolidated balance sheets of Cadmus
Communications Corporation (a Virginia corporation), and Subsidiaries as of
June 30, 1998 and 1997, and the related consolidated statements of income and
cash flows for each of the three years in the period ended June 30, 1998. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Cadmus Communications
Corporation and Subsidiaries as of June 30, 1998 and 1997, and the results of
their operations and their cash flows for each of the three years in the period
ended June 30, 1998, in conformity with generally accepted accounting
principles.
As explained in Note 4 to the financial statements, the Company has given
retroactive effect to the change in accounting for certain of its inventories
from the last-in, first-out method to the first-in, first-out method.
/s/ ARTHUR ANDERSEN LLP
--------------------------
ARTHUR ANDERSEN LLP
Richmond, Virginia
July 28, 1998
- -------
45
EXHIBIT 18
Cadmus Communications Corporation
Re: Form 10-K Report for the year ended June 30, 1998
This letter is written to meet the requirements of Regulations S-K calling for a
letter from a registrant's independent accountants whenever there has been a
change in accounting principle or practice.
During the fourth quarter of fiscal 1998, the Company changed from the last-in,
first-out method of accounting for inventory to the first-in, first-out method.
According to the management of the Company, this change was made to standardize
the method of accounting for all company inventory.
A complete coordinated set of financial and reporting standards for determining
the preferability of accounting principles among acceptable alternative
principles has not been established by the accounting profession. Thus, we
cannot make an objective determination of whether the change in accounting
described in the preceding paragraph is to a preferable method. However, we have
reviewed the pertinent factors, including those related to financial reporting,
in this particular case on a subjective basis, and our opinion stated below is
based on our determination made in this manner.
We are of the opinion that the Company's change in method of accounting is to an
acceptable alternative method of accounting, which, based upon the reasons
stated for the change and our discussions with you, is also preferable under the
circumstances in this particular case. In arriving at this opinion, we have
relied on the business judgment and business planning of your management.
Very truly yours,
ARTHUR ANDERSEN LLP
Richmond, Virginia
July 28, 1998
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
American Graphics, Inc., incorporated under the laws of Georgia;
Cadmus Custom Publishing, Inc., incorporated under the laws of Delaware;
Cadmus Direct Marketing, Inc., incorporated under the laws of North Carolina;
Cadmus Financial Distribution, Inc., incorporated under the laws of Virginia;
Cadmus Interactive, Inc., incorporated under the laws of Georgia;
Cadmus Investment Corporation, incorporated under the laws of Delaware;
Cadmus Journal Services, Inc., incorporated under the laws of Virginia;
Cadmus Marketing Group, Inc., incorporated under the laws of Virginia;
Cadmus Marketing, Inc., incorporated under the laws of Virginia;
Cadmus O'Keefe Marketing, Inc., incorporated under the laws of Virginia
Cadmus Printing Group, Inc. incorporated under the laws of Virginia;
Cadmus Publishing Group, Inc., incorporated under the laws of Virginia;
Cadmus Publishing Holding Corporation, incorporated under the laws of Delaware;
Cadmus Technology Solutions, Inc., incorporated under the laws of Virginia;
E-DOC(SM), Inc., incorporated under the laws of Pennsylvania;
Electronic Document Services, Inc., incorporated under the laws of Pennsylvania;
Expert Graphics, Inc., incorporated under the laws of Virginia;
Garamond/Pridemark Press, Inc., incorporated under the laws of Maryland;
Lancaster Information Group, Inc., incorporated under the laws of Delaware;
Lancaster Information Group, Inc., incorporated under the laws of Pennsylvania;
Three Score, Inc., incorporated under the laws of Georgia;
Vaughan Printers, Incorporated, incorporated under the laws of Florida;
VSUB Holding Company, incorporated under the laws of Virginia;
Washburn Graphics, Inc., incorporated under the laws of North Carolina;
Washburn of New York, Inc., incorporated under the laws of New York; and
163
EXHIBIT 23
Consent of Independent Public Accountants
As independent public accountants, we hereby consent to the incorporation
by reference in this Form 10-K of our report dated July 28, 1998 on the
consolidated financial statements dated June 30, 1998 and the inclusion of
our report dated July 28, 1998 on Schedule II in this Form 10-K. We also
consent to the incorporation by reference of our reports incorporated by
reference or included in this Form 10-K, into the Company's previously
filed registration statements File Nos. 333-39185, 033-50871, 333-23099,
033-56653, 33-10214, 33-87690 and 2-90742. It should be noted that we have
not audited any financial statements of Cadmus Communications Corporation
subsequent to June 30, 1998, or performed any audit procedures subsequent
to the date of our report.
ARTHUR ANDERSEN LLP
Richmond, Virginia,
September 28, 1998
164
EXHIBIT 24
POWER OF ATTORNEY
I, Jeanne M. Liedtka, do hereby constitute and appoint C. Stephenson Gillispie,
Jr., David E. Bosher and Bruce V. Thomas, my true and lawful attorneys-in-fact,
any of whom acting singly is hereby authorized for me and in my name and on my
behalf as a director and/or officer of Cadmus Communications Corporation
("Cadmus"), to act and to execute any and all instruments as such attorneys or
attorney deem necessary or advisable to enable Cadmus to comply with the
Securities Exchange Act of 1934, and any rules, regulations, policies or
requirements of the Securities and Exchange Commission (the "Commission") in
respect thereof, in connection with the preparation and filing with the
Commission of Cadmus' Annual Report on Form 10-K for the fiscal year ended June
30, 1998, and any and all amendments to such Report, together with such other
supplements, statements, instruments and documents as such attorneys or attorney
deem necessary or appropriate.
I do hereby ratify and confirm all my said attorneys or attorney shall do or
cause to be done by the virtue hereof.
WITNESS the execution hereof this 28th day of July, 1998.
/s/ Jeanne M. Liedtka
----------------------------
Jeanne M. Liedtka
165
<PAGE>
POWER OF ATTORNEY
I, John D. Munford, II, do hereby constitute and appoint C. Stephenson
Gillispie, Jr., David E. Bosher and Bruce V. Thomas, my true and lawful
attorneys-in-fact, any of whom acting singly is hereby authorized for me and in
my name and on my behalf as a director and/or officer of Cadmus Communications
Corporation ("Cadmus"), to act and to execute any and all instruments as such
attorneys or attorney deem necessary or advisable to enable Cadmus to comply
with the Securities Exchange Act of 1934, and any rules, regulations, policies
or requirements of the Securities and Exchange Commission (the "Commission") in
respect thereof, in connection with the preparation and filing with the
Commission of Cadmus' Annual Report on Form 10-K for the fiscal year ended June
30, 1998, and any and all amendments to such Report, together with such other
supplements, statements, instruments and documents as such attorneys or attorney
deem necessary or appropriate.
I do hereby ratify and confirm all my said attorneys or attorney shall do or
cause to be done by the virtue hereof.
WITNESS the execution hereof this 21st day of July, 1998.
/s/ John D. Munford, II
---------------------------------
John D. Munford, II
166
<PAGE>
POWER OF ATTORNEY
I, Wallace Stettinius, do hereby constitute and appoint C. Stephenson Gillispie,
Jr., David E. Bosher and Bruce V. Thomas, my true and lawful attorneys-in-fact,
any of whom acting singly is hereby authorized for me and in my name and on my
behalf as a director and/or officer of Cadmus Communications Corporation
("Cadmus"), to act and to execute any and all instruments as such attorneys or
attorney deem necessary or advisable to enable Cadmus to comply with the
Securities Exchange Act of 1934, and any rules, regulations, policies or
requirements of the Securities and Exchange Commission (the "Commission") in
respect thereof, in connection with the preparation and filing with the
Commission of Cadmus' Annual Report on Form 10-K for the fiscal year ended June
30, 1998, and any and all amendments to such Report, together with such other
supplements, statements, instruments and documents as such attorneys or attorney
deem necessary or appropriate.
I do hereby ratify and confirm all my said attorneys or attorney shall do or
cause to be done by the virtue hereof.
WITNESS the execution hereof this 28th day of July, 1998.
/s/ Wallace Stettinius
---------------------------
Wallace Stettinius
167
<PAGE>
POWER OF ATTORNEY
I, Frank Daniels, III, do hereby constitute and appoint C. Stephenson Gillispie,
Jr., David E. Bosher and Bruce V. Thomas, my true and lawful attorneys-in-fact,
any of whom acting singly is hereby authorized for me and in my name and on my
behalf as a director and/or officer of Cadmus Communications Corporation
("Cadmus"), to act and to execute any and all instruments as such attorneys or
attorney deem necessary or advisable to enable Cadmus to comply with the
Securities Exchange Act of 1934, and any rules, regulations, policies or
requirements of the Securities and Exchange Commission (the "Commission") in
respect thereof, in connection with the preparation and filing with the
Commission of Cadmus' Annual Report on Form 10-K for the fiscal year ended June
30, 1998, and any and all amendments to such Report, together with such other
supplements, statements, instruments and documents as such attorneys or attorney
deem necessary or appropriate.
I do hereby ratify and confirm all my said attorneys or attorney shall do or
cause to be done by the virtue hereof.
WITNESS the execution hereof this 6th day of August, 1998.
/s/ Frank Daniels, III
--------------------------
Frank Daniels, III
168
<PAGE>
POWER OF ATTORNEY
I, Bruce A. Walker, do hereby constitute and appoint C. Stephenson Gillispie,
Jr., David E. Bosher and Bruce V. Thomas, my true and lawful attorneys-in-fact,
any of whom acting singly is hereby authorized for me and in my name and on my
behalf as a director and/or officer of Cadmus Communications Corporation
("Cadmus"), to act and to execute any and all instruments as such attorneys or
attorney deem necessary or advisable to enable Cadmus to comply with the
Securities Exchange Act of 1934, and any rules, regulations, policies or
requirements of the Securities and Exchange Commission (the "Commission") in
respect thereof, in connection with the preparation and filing with the
Commission of Cadmus' Annual Report on Form 10-K for the fiscal year ended June
30, 1998, and any and all amendments to such Report, together with such other
supplements, statements, instruments and documents as such attorneys or attorney
deem necessary or appropriate.
I do hereby ratify and confirm all my said attorneys or attorney shall do or
cause to be done by the virtue hereof.
WITNESS the execution hereof this 27th day of July, 1998.
/s/ Bruce A. Walker
----------------------------
Bruce A. Walker
169
<PAGE>
POWER OF ATTORNEY
I, Price H. Gwynn, III, do hereby constitute and appoint C. Stephenson
Gillispie, Jr., David E. Bosher and Bruce V. Thomas, my true and lawful
attorneys-in-fact, any of whom acting singly is hereby authorized for me and in
my name and on my behalf as a director and/or officer of Cadmus Communications
Corporation ("Cadmus"), to act and to execute any and all instruments as such
attorneys or attorney deem necessary or advisable to enable Cadmus to comply
with the Securities Exchange Act of 1934, and any rules, regulations, policies
or requirements of the Securities and Exchange Commission (the "Commission") in
respect thereof, in connection with the preparation and filing with the
Commission of Cadmus' Annual Report on Form 10-K for the fiscal year ended June
30, 1998, and any and all amendments to such Report, together with such other
supplements, statements, instruments and documents as such attorneys or attorney
deem necessary or appropriate.
I do hereby ratify and confirm all my said attorneys or attorney shall do or
cause to be done by the virtue hereof.
WITNESS the execution hereof this 19th day of July, 1998.
/s/ Price H. Gwynn, III
-----------------------------
Price H. Gwynn, III
<PAGE>
POWER OF ATTORNEY
I, John C. Purnell, Jr., do hereby constitute and appoint C. Stephenson
Gillispie, Jr., David E. Bosher and Bruce V. Thomas, my true and lawful
attorneys-in-fact, any of whom acting singly is hereby authorized for me and in
my name and on my behalf as a director and/or officer of Cadmus Communications
Corporation ("Cadmus"), to act and to execute any and all instruments as such
attorneys or attorney deem necessary or advisable to enable Cadmus to comply
with the Securities Exchange Act of 1934, and any rules, regulations, policies
or requirements of the Securities and Exchange Commission (the "Commission") in
respect thereof, in connection with the preparation and filing with the
Commission of Cadmus' Annual Report on Form 10-K for the fiscal year ended June
30, 1998, and any and all amendments to such Report, together with such other
supplements, statements, instruments and documents as such attorneys or attorney
deem necessary or appropriate.
I do hereby ratify and confirm all my said attorneys or attorney shall do or
cause to be done by the virtue hereof.
WITNESS the execution hereof this 21st day of July, 1998.
/s/ John C. Purnell, Jr.
-----------------------------
John C. Purnell, Jr.
171
<PAGE>
POWER OF ATTORNEY
I, Russell M. Robinson, II, do hereby constitute and appoint C. Stephenson
Gillispie, Jr., David E. Bosher and Bruce V. Thomas, my true and lawful
attorneys-in-fact, any of whom acting singly is hereby authorized for me and in
my name and on my behalf as a director and/or officer of Cadmus Communications
Corporation ("Cadmus"), to act and to execute any and all instruments as such
attorneys or attorney deem necessary or advisable to enable Cadmus to comply
with the Securities Exchange Act of 1934, and any rules, regulations, policies
or requirements of the Securities and Exchange Commission (the "Commission") in
respect thereof, in connection with the preparation and filing with the
Commission of Cadmus' Annual Report on Form 10-K for the fiscal year ended June
30, 1998, and any and all amendments to such Report, together with such other
supplements, statements, instruments and documents as such attorneys or attorney
deem necessary or appropriate.
I do hereby ratify and confirm all my said attorneys or attorney shall do or
cause to be done by the virtue hereof.
WITNESS the execution hereof this 20th day of July, 1998.
/s/ Russell M. Robinson, II
---------------------------------
Russell M. Robinson, II
172
<PAGE>
POWER OF ATTORNEY
I, John W. Rosenblum, do hereby constitute and appoint C. Stephenson Gillispie,
Jr., David E. Bosher and Bruce V. Thomas, my true and lawful attorneys-in-fact,
any of whom acting singly is hereby authorized for me and in my name and on my
behalf as a director and/or officer of Cadmus Communications Corporation
("Cadmus"), to act and to execute any and all instruments as such attorneys or
attorney deem necessary or advisable to enable Cadmus to comply with the
Securities Exchange Act of 1934, and any rules, regulations, policies or
requirements of the Securities and Exchange Commission (the "Commission") in
respect thereof, in connection with the preparation and filing with the
Commission of Cadmus' Annual Report on Form 10-K for the fiscal year ended June
30, 1998, and any and all amendments to such Report, together with such other
supplements, statements, instruments and documents as such attorneys or attorney
deem necessary or appropriate.
I do hereby ratify and confirm all my said attorneys or attorney shall do or
cause to be done by the virtue hereof.
WITNESS the execution hereof this 23rd day of July, 1998.
/s/ John W. Rosenblum
---------------------------
John W. Rosenblum
173
<PAGE>
POWER OF ATTORNEY
I, Jerry I. Reitman, do hereby constitute and appoint C. Stephenson Gillispie,
Jr., David E. Bosher and Bruce V. Thomas, my true and lawful attorneys-in-fact,
any of whom acting singly is hereby authorized for me and in my name and on my
behalf as a director and/or officer of Cadmus Communications Corporation
("Cadmus"), to act and to execute any and all instruments as such attorneys or
attorney deem necessary or advisable to enable Cadmus to comply with the
Securities Exchange Act of 1934, and any rules, regulations, policies or
requirements of the Securities and Exchange Commission (the "Commission") in
respect thereof, in connection with the preparation and filing with the
Commission of Cadmus' Annual Report on Form 10-K for the fiscal year ended June
30, 1998, and any and all amendments to such Report, together with such other
supplements, statements, instruments and documents as such attorneys or attorney
deem necessary or appropriate.
I do hereby ratify and confirm all my said attorneys or attorney shall do or
cause to be done by the virtue hereof.
WITNESS the execution hereof this 10th day of August, 1998.
/s/ Jerry I. Reitman
---------------------------
Jerry I. Reitman
174
<PAGE>
POWER OF ATTORNEY
I, G. Waddy Garrett, do hereby constitute and appoint C. Stephenson Gillispie,
Jr., David E. Bosher and Bruce V. Thomas, my true and lawful attorneys-in-fact,
any of whom acting singly is hereby authorized for me and in my name and on my
behalf as a director and/or officer of Cadmus Communications Corporation
("Cadmus"), to act and to execute any and all instruments as such attorneys or
attorney deem necessary or advisable to enable Cadmus to comply with the
Securities Exchange Act of 1934, and any rules, regulations, policies or
requirements of the Securities and Exchange Commission (the "Commission") in
respect thereof, in connection with the preparation and filing with the
Commission of Cadmus' Annual Report on Form 10-K for the fiscal year ended June
30, 1998, and any and all amendments to such Report, together with such other
supplements, statements, instruments and documents as such attorneys or attorney
deem necessary or appropriate.
I do hereby ratify and confirm all my said attorneys or attorney shall do or
cause to be done by the virtue hereof.
WITNESS the execution hereof this 30th day of July, 1998.
/s/ G. Waddy Garrett
-----------------------------
G. Waddy Garrett
175
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
CADMUS COMMUNICATIONS CORPORATION'S CONSOLIDATED BALANCE SHEETS AND
CONSOLIDATED STATEMENTS OF INCOME AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> JUN-30-1998
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 73,146
<ALLOWANCES> 2,575
<INVENTORY> 25,610
<CURRENT-ASSETS> 104,120
<PP&E> 241,105
<DEPRECIATION> 107,269
<TOTAL-ASSETS> 291,752
<CURRENT-LIABILITIES> 73,183
<BONDS> 93,224
0
0
<COMMON> 3,961
<OTHER-SE> 105,855
<TOTAL-LIABILITY-AND-EQUITY> 291,752
<SALES> 393,823
<TOTAL-REVENUES> 393,823
<CGS> 370,105
<TOTAL-COSTS> 379,043
<OTHER-EXPENSES> 1,343
<LOSS-PROVISION> 1,299
<INTEREST-EXPENSE> 7,595
<INCOME-PRETAX> 8,938
<INCOME-TAX> 5,690
<INCOME-CONTINUING> 9,090
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,090
<EPS-PRIMARY> 1.16
<EPS-DILUTED> 1.11
</TABLE>
