<PAGE>
As filed with the Securities and Exchange Commission on August 30, 1996
Registration Statement No. 333-9291
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------------------
AMENDMENT NO. 1 TO
FORM S-3
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
BUSH INDUSTRIES, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware
- --------------------------------------------------------------------------------
(State or other jurisdiction of incorporation or organization)
16-0837346
- --------------------------------------------------------------------------------
(I.R.S. Employer Identification No.)
One Mason Drive
Jamestown, New York 14702
(716) 665-2000
- --------------------------------------------------------------------------------
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
Robert L. Ayres, Chief Financial Officer
Bush Industries, Inc.
One Mason Drive
Jamestown, New York 14702
(716) 665-2000
- --------------------------------------------------------------------------------
(Name, address, including zip code, and telephone
number, including area code, of agent for service)
Copy to:
Alan H. Aronson, Esq.
Akerman, Senterfitt & Eidson, P.A.
One S.E. 3rd Avenue, 27th Floor
Miami, Florida 33131-1704
(305) 374-5600
- --------------------------------------------------------------------------------
Approximate date of proposed sale to the public: As soon as practicable after
this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [_]
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reimbursement plans, check the following box. [X]
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to
Rule 434, please check the following box [_].
Calculation Of Registration Fee
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Title of each Amount to be Proposed Proposed Amount of
class of registered (1) maximum maximum registration
securities to offering price aggregate
be registered per share (2) offering
price (2)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A 197,753 $19.375 $ 3,831,464.38 $1,321.19
Common Stock, shares
par value $.10
per share
- --------------------------------------------------------------------------------
Class A 84,376 $ 8.91 (3) $ 751,790.16 $ 259.24
Common Stock, shares (3)
par value $.10
per share (3)
- --------------------------------------------------------------------------------
Total: $ 4,583,254.54 $ 1,580.43
- --------------------------------------------------------------------------------
</TABLE>
(1) Pursuant to Rule 416(c), promulgated under the Securities Act of 1933, as
amended, this Registration Statement also covers an indeterminate amount of
securities to be offered or sold as a result of any adjustments for stock
splits, stock dividends or similar events.
(2) Estimated solely for the purpose of calculating the registration fee.
(3) Represents shares of the Registrant's Class A Common Stock issuable upon
exercise of outstanding stock options at an exercise price of $ 8.91 per share.
-------------------------------------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
(ii)
<PAGE>
BUSH INDUSTRIES, INC.
CROSS REFERENCE SHEET
Pursuant to Item 501(b) of Regulation S-K
<TABLE>
<CAPTION>
Registration Statement Caption or
Item Number and Caption Location in Prospectus
----------------------- ----------------------
<S> <C> <C>
1. Forepart of the Registration
Statement and Outside Front Cover Page of Prospectus.
Cover Page of Prospectus.
2. Inside Front and Outside Back Inside Front and Outside Back Cover
Cover Pages of Prospectus. Pages of Prospectus.
3. Summary Information, Risk Prospectus Summary;
Factors and Ratio of Earnings Summary Financial Information;
to Fixed Charges. Risk Factors
4. Use of Proceeds. Use of Proceeds.
5. Determination of Offering Price. Not Applicable.
6. Dilution. Not Applicable.
7. Selling Securityholders. Selling Securityholders.
8. Plan of Distribution. Selling Securityholders.
9. Description of Securities to be Not Applicable.
Registered.
10. Interests of Named Experts and Legal Opinion.
Counsel.
11. Material Changes. Not Applicable.
12. Incorporation of Certain Incorporation of Documents by
Information by Reference. Reference.
13. Disclosure of Commission Position Not Applicable.
on Indemnification for Securities
Act Liabilities.
</TABLE>
(iii)
<PAGE>
PRELIMINARY PROSPECTUS, DATED AUGUST 30, 1996
SUBJECT TO COMPLETION
-----------------
BUSH INDUSTRIES, INC.
282,129 Shares of Class A Common Stock, $.10 par value
This Prospectus relates to 282,129 shares of Class A Common Stock, par
value $.10 per share (the "Common Stock"), of Bush Industries, Inc., a Delaware
corporation (the "Registrant" or the "Company"). Of the shares of Class A
Common Stock offered hereby, 282,129 shares are to be sold by certain security
holders of the Company (the "Selling Securityholders"). Of such shares, 84,376
shares of Class A Common Stock in the aggregate to be sold by Selling
Securityholders are issuable to the Selling Securityholders upon exercise of a
like number of outstanding stock options, exercisable at $ 8.91 per share. The
Company will not receive any of the proceeds from any of the shares sold by the
Selling Securityholders, but will receive gross proceeds of $ 751,790.16, upon
the exercise of all of the stock options by the Selling Securityholders
described above. See "Selling Securityholders".
The Company will pay all the expenses of this offering. The Selling
Securityholders, however, will bear the cost of all brokerage commissions and
discounts incurred in connection with the sale of their shares of Class A Common
Stock and their respective legal expenses. The shares of Class A Common Stock
may be sold by Selling Securityholders directly or through underwriters, dealers
or agents in market transactions or in privately-negotiated transactions. See
"Plan of Distribution". This Registration Statement also covers the exercise of
the above-described stock options by certain of the Selling Securityholders.
The Class A Common Stock is listed on the New York Stock Exchange under the
symbol "BSH." On August 27, 1996, the closing price of the Class A Common Stock
was $16.25 per share.
AN INVESTMENT IN THE SECURITIES OFFERED HEREBY INVOLVES CERTAIN RISKS.
PROSPECTIVE INVESTORS SHOULD CONSIDER CAREFULLY THE DISCUSSION UNDER "RISK
FACTORS" COMMENCING ON PAGE 8.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR BY ANY STATE SECURITIES COMMISSION, NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
The date of this Prospectus is , 1996
------------
1
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934 (the "Exchange Act"), and, in accordance therewith, files
reports and other information with the Securities and Exchange Commission (the
"Commission"). Such reports and other information can be inspected and copied
at the public reference facilities maintained by the Commission at 450 Fifth
Street, N.W., Washington, D.C., and at its following regional offices: Suite
788, 1375 Peachtree St. N.E., Atlanta, Georgia 30367; Suite 1400, 500 West
Madison Street, Chicago, Illinois; and 7 World Trade Center, New York, New York.
Copies of such material can also be obtained at prescribed rates from the Public
Reference Section of the Commission at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549.
The Company has filed with the Commission a Registration Statement on Form
S-3 under the Securities Act of 1933, as amended (the "Act") with respect to the
securities being offered by this Prospectus. This Prospectus does not contain
all of the information set forth in the Registration Statement and the exhibits
thereto. For further information about the Company and the securities offered
hereby, reference is made to the Registration Statement and to the exhibits
filed as a part thereof. The statements contained in this Prospectus as to the
contents of any contract or other document identified as exhibits in this
Prospectus are not necessarily complete and, in each instance, reference is made
to a copy of such contract or document filed as an exhibit to the Registration
Statement, each statement being qualified in any and all respects by such
reference. The Registration Statement, including exhibits, may be inspected
without charge at the principal reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, and copies of all
or any part thereof may be obtained upon payment of fees prescribed by the
Commission from the Public Reference Section of the Commission at its principal
office in Washington, D.C. set forth above. In addition, the Commission
maintains a Web site that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission (http://www.sec.gov).
The Company's Common Stock is listed on the New York Stock Exchange under
the symbol "BSH." All of the reports required to be filed by the Company with
the New York Stock Exchange and other information concerning the Company can be
inspected at 20 Broad Street, New York, New York 10005.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission are hereby incorporated
by reference in this Prospectus: (1) the Company's Annual Report on Form 10-K
for the year ended December 30, 1995, and (2) the Company's Quarterly Report on
Form 10-Q for the quarter ended June 29, 1996. Each document filed by the
Company pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act,
subsequent to the date of this Prospectus but prior to the termination of this
offering to which this Prospectus relates, shall be deemed to be incorporated by
reference in this Prospectus and made a part of this Prospectus from the date
any such document is filed. Any statement contained in a
2
<PAGE>
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
The Company will provide without charge to each person to whom this
Prospectus is delivered, upon written or oral request of such person, a copy of
any or all of the documents described above, other than exhibits to such
documents (unless such exhibits have been specifically incorporated by reference
therein). Requests for such copies should be directed to the Company's
Treasurer, at the principal executive offices of the Company at One Mason Drive,
Jamestown, New York 14702, telephone (716) 665-2000.
3
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to the
detailed information, financial statements and related notes appearing elsewhere
in this Prospectus. Each investor is urged to read this Prospectus in its
entirety. Unless the context otherwise requires, all information in this
Prospectus (i) has been adjusted to reflect the three-for-two stock split
effectuated in the form of a fifty (50%) percent stock dividend which became
effective as of June 14, 1996 and (ii) assumes no exercise of any outstanding
options or warrants. Investors should carefully consider the information set
forth under the heading "Risk Factors".
The Company
Bush Industries, Inc. (the "Company" or the "Registrant"), and through its
subsidiaries, is primarily engaged in the design, manufacture and sale of ready-
to-assemble ("RTA") furniture products in various price ranges for both business
and consumer use. The Company also designs, manufactures and sells assembled
furniture. The Company's RTA furniture product line includes audio/video home
entertainment centers, home theater furniture systems, audio cabinets,
television/VCR carts, room dividers, wall units, bookcases, bedroom and
kitchen/utility furniture, microwave carts, computer desks and workstations,
hutches, printer stands, double pedestal executive desks, credenzas, storage
armoires and file cabinets. The Company's assembled products include home
entertainment centers, home theater furniture systems, and furniture for the
home and commercial office.
The Company's varied RTA furniture product line is designed for ease of
assembly, so that such products can be readily assembled by following simple,
easy to read diagramed instructions, contained with each RTA product sold. In
addition, the Company maintains a toll free number to assist consumers with any
questions with respect to the assembly of any product.
The Company was incorporated under the laws of the State of Delaware on
February 5, 1985. The Company was a successor to a corporation of the same name
incorporated under the laws of the State of New York in 1959.
In January 1994, the Company expanded its operations with the acquisition
of approximately 450,000 square feet of manufacturing and warehouse space in
Jamestown, New York. In 1995, the Company began the first phase of a two phase
expansion program which will ultimately include a new approximately one million
square-foot manufacturing and distribution facility in Erie County,
Pennsylvania, which is about 50 miles west of the Company's main manufacturing
complex in Jamestown, New York. The first phase of this expansion, or
approximately 500,000 square feet, which was completed in April 1996, replaced
the Company's leased distribution and warehouse facility in Saybrook, Ohio.
Construction of the second phase of the expansion program, for an additional
approximately 500,000 square feet is scheduled to be completed in the later part
of 1996. Manufacturing capacity, incorporating advanced technology, will be
added to this facility as demand requires.
4
<PAGE>
As of May 30, 1996, the Company consummated the purchase of a majority
interest in The Color Works, Inc., a North Carolina corporation, for $5,481,603,
payable principally in the Company's Class A Common Stock, as described below.
The Color Works, Inc., a North Carolina based finishing and decorating firm,
holds the master license to the "HydroGraFix" film processing technology in
North and South America, Central Europe and South Africa. Such technology
involves three-dimensional dipping and color decorating of various substrate
materials. Pursuant to the terms of a stock purchase agreement, the Company
acquired approximately 67.1% of the issued and outstanding capital stock of The
Color Works, Inc. for an aggregate 197,753 shares of the Company's Class A
Common Stock and a cash payment of $826,692. The shares that were issued in
connection with such acquisition are being registered hereunder for the benefit
of the Selling Securityholders. Such shares are subject to an escrow agreement,
pursuant to which ten percent of the shares may be released from escrow every
quarter commencing May 30, 1997. See "Selling Securityholders".
The Company's principal place of business is located at One Mason Drive,
Jamestown, New York 14702 (716-665-2000).
5
<PAGE>
<TABLE>
<CAPTION>
The Offering
<S> <C>
Shares of Class A Common Stock
offered by Selling Securityholders 282,129 shares (1)
Number of Selling Securityholders 16 persons (1)
Number of Shares of Class A Common
Stock outstanding before the 9,634,571 shares (2)
Offering
Number of Shares of Class A Common
Stock outstanding after the 9,718,947 shares (1)(2)
Offering
Gross Proceeds to the Company $ 751,790.16 See "Use of Proceeds" (3)
Risk Factors The offering involves certain risks.
See "Risk Factors".
New York Stock Exchange symbol "BSH"
- ----------------
</TABLE>
(1) Assumes the issuance of an aggregate 84,376 shares of Class A Common Stock
issuable upon the exercise of a like number of outstanding stock options.
(2) Excludes the issuance of an aggregate 3,855,365 shares of Class A Common
Stock issuable upon conversion of a like number of outstanding shares of the
Company's Class B Common Stock, par value $.10 per share. In addition, excludes
up to an aggregate 1,855,660 shares of Class A Common Stock issuable upon the
exercise of outstanding stock options granted under the Company's 1985 Stock
Plan and 1985 Incentive Stock Option Plan. Also excludes up to an aggregate
375,000 shares of Class A Common Stock issuable upon the grant of shares or upon
the exercise of options to be granted and/or currently outstanding under the
Company's 1995 Stock Plan.
(3) Represents gross proceeds to be received by the Company upon the exercise
of 84,376 outstanding stock options by certain of the Selling Securityholders.
See "Selling Securityholders". The Company will not receive any proceeds from
the sale of shares of Class A Common Stock by the Selling Securityholders apart
from the exercise of the above-described outstanding stock options.
6
<PAGE>
SUMMARY FINANCIAL DATA
The following summary financial data of the Company for the 1991 through
1995 fiscal years and for the interim periods listed below have been derived
from the Consolidated Financial Statements of the Company. This summary
financial data should be read in conjunction with the Consolidated Financial
Statements and notes thereto included elsewhere herein.
<TABLE>
<CAPTION>
(In Thousands, except share and per share data)
-----------------------------------------------
Twenty-Six Weeks Ended Fiscal Year Ended
June 29, 1996 July 1, 1995 1995 1994 1993 1992 1991
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings
Data (1)
Net Sales........ $ 120,232 $ 95,181 $ 220,014 $ 213,216 $ 170,285 $ 127,990 $ 126,459
Earnings Before
Income Taxes..... $ 14,652 $ 7,410 $ 20,744 $ 19,842 $ 11,908 $ 4,569 $ 4,249
Net Earnings..... $ 9,077 $ 4,481 $ 12,550 $ 12,004 $ 7,145 $ 2,771 $ 2,405
Earnings Per Share
Primary $ 0.65 $ 0.34 $ 0.95 $ 0.86 $ 0.55 $ 0.21 $ 0.19
Fully Diluted $ 0.64 $ 0.34 $ 0.91 $ 0.86 $ 0.55 $ 0.21 $ 0.19
Weighted Average
Shares Outstanding
Primary 13,938,293 13,279,816 13,270,543 14,012,071 13,021,512 13,041,012 12,870,270
Fully Diluted 14,175,596 13,279,816 13,841,191 14,012,071 13,045,116 13,042,845 12,936,207
Balance Sheet
Data
Working Capital.. $ 33,634 $ 33,263 $ 24,018 $ 34,421 $ 26,903 $ 23,634 $ 11,130
Net Plant, Property
and Equipment... $ 64,546 $ 37,254 $ 49,616 $ 34,417 $ 29,041 $ 27,524 $ 28,835
Total Assets..... $ 135,796 $ 94,914 $ 102,606 $ 100,958 $ 83,522 $ 72,161 $ 78,017
Long-term Debt... $ 29,418 $ 15,358 $ 15,031 $ 16,774 $ 16,108 $ 18,809 $ 10,284
Stockholders'
Equity........... $ 74,688 $ 55,494 $ 59,113 $ 52,265 $ 39,938 $ 31,852 $ 29,249
- --------------------------
</TABLE>
(1) Earnings per share and the number of weighted average Class A and Class B
Shares of Common Stock outstanding have been adjusted to reflect the 3-for-2
stock split effectuated in the form of a fifty percent dividend paid on June 28,
1996 to stockholders of record as of June 14, 1996; the 5-for-4 stock split
effectuated in the form of a twenty-five percent dividend paid on January 20,
1995 to stockholders of record as of January 6, 1995; and the 3-for-2 stock
split effectuated in the form of a fifty percent dividend paid on January 7,
1994 to stockholders of record as of December 20, 1993.
7
<PAGE>
RISK FACTORS
An investment in the shares of Class A Common Stock offered hereby
involves a certain degree of risk. Therefore, in evaluating the Company and its
business prospects, prospective investors should carefully consider the
following risk factors in addition to the other information set forth elsewhere
in this Prospectus before purchasing shares of Class A Common Stock in this
offering.
Financial Conditions; Results of Operations. Although the Company
achieved record second quarter sales for the 13 week period ending June 29,
1996, no assurance can be given that the Company will be able to sustain such
record growth in the future. In addition, although the Company achieved seven
consecutive years of increased sales, no assurance can be given that such trend
will continue. The Company's results of operations are affected by numerous
factors, many of which are beyond the control of the Company. These factors
include general business and economic conditions, factors generally affecting
consumer spending, and factors generally affecting the level of retail sales.
New Product Development. The Company's results of operations depend,
in part, upon its continued ability to develop, market and launch new products
in the RTA furniture industry. New products must be developed, tested and
manufactured on a cost-effective basis before such products can be successfully
marketed. The development and marketing process is time consuming and costly.
Although the Company expends time and resources to develop products in an effort
to satisfy changing consumer demand, no assurance can be given that new products
can be developed on a cost-effective basis to meet such consumer demand. In
addition, no assurance can be given that any new products developed would be
commercially accepted.
Competition. The Company competes with numerous companies that
manufacture, sell and distribute RTA furniture. Some of these companies have
greater assets and possess greater financial resources than the Company.
Dependence on Principal Customer. For the fiscal year ended December
30, 1995, the Company had one customer, which accounted for approximately 14% of
the Company's total gross sales. No other single customer accounted for more
than 10% of the Company's total gross sales. While the loss of any substantial
customer could have a material short-term impact on the Company's business, the
Company believes that its diverse distribution channels would minimize the long-
term impact of any such loss.
Sources and Availability of Raw Materials. The Company purchases the
raw materials used in the manufacture of its furniture product lines from
various sources located throughout the United States and abroad. Although the
Company believes that none of the materials required for its manufacturing
operations are proprietary in nature and that an adequate supply of raw
materials is available from multiple sources, no assurances can be given that
shortages in these raw materials will not occur in the future.
8
<PAGE>
Reliance on Executive Officers and Key Employees. The continued
success of the Company is dependent to a significant degree upon the services of
its executive officers and upon the Company's ability to attract and retain
qualified personnel experienced in the various phases of the Company's business.
The Company has employment agreements with certain of its executive officers.
The ability of the Company to operate successfully could be jeopardized if one
or more of its executive officers were unavailable and capable successors were
not found. The employment agreements between the Company and its executive
officers are individually terminable by each executive officer upon a change of
control of the Company.
Price Volatility of Stock Market. The market price of the Class A
Common Stock is subject to significant fluctuations. From time to time in
recent years, the securities markets have experienced significant price and
volume fluctuations that have often been unrelated or disproportionate to the
operating performance of particular companies. These broad fluctuations may
adversely affect the market price of the Company's Class A Common Stock.
Credit Facility Restrictions; Future Availability. The Company has a
$75 million revolving line of credit with a financial institution. The
agreement governing the line of credit contains covenants that impose
limitations on the Company, and requires the Company to be in compliance with
certain financial ratios. If the Company fails to make required payments, or if
the Company fails to comply with the various covenants contained in its
agreement, the lender may be able to accelerate the maturity of such
indebtedness. As of March 30, 1996, the Company was in compliance with the
required financial ratios and the Company believes that it is presently in
compliance with all other covenants under this agreement. The revolving line of
credit agreement expires on July 31, 2000.
Environmental Compliance. In November 1995, the Company was notified by
the New York State Department of Environmental Conservation ("DEC") of an
alleged violation of a certain environmental regulation concerning the presence
of contaminates in the groundwater, including trichloroethene ("TCE"), beneath
the Company's plant located in Little Valley, New York. Based on available
data, the Company believes that there is no conclusive evidence that its plant
is the source of such contamination, nor has the Company ever used TCE in its
manufacturing operations. The Company has proposed to the DEC in a "Statement of
Work", certain monitoring and testing procedures to be undertaken by the Company
to obtain more reliable data as to the extent and sources of the TCE
contamination. Such "Statement of Work", if acceptable to the DEC, may form the
basis of an Order On Consent with the DEC with respect to those measures to be
undertaken by the Company. As of this date, the DEC is still reviewing the
Company's proposed "Statement of Work." On June 17, 1996, an approximate five-
mile area in Little Valley, New York was added to the federal Superfund national
priorities list, and with respect thereto, no potentially responsible parties
have been identified as of the date hereof. Although no assurance can be
given, the Company believes that its operations will not be adversely affected
by the foregoing. The Company has also become aware of the possible presence of
certain levels of contaminates on the Greensboro, North Carolina property owned
by The Color Works, Inc., a North Carolina corporation, of which the Company
recently became the majority stockholder. The Company has been indemnified to a
certain extent by the
9
<PAGE>
former shareholders of The Color Works, Inc., which include certain of the
Selling Securityholders hereunder, and James H. Peeples, the President of such
entity, and has procured a $20,000,000 environmental insurance policy relating
thereto. In the unlikely event any such environmental costs are not covered by
such indemnification or insurance, the Company may be responsible for certain
costs. However, based on an initial assessment of the situation, the Company
believes, although no assurance can be given, that the Company's operations will
not be materially adversely affected by the foregoing.
10
<PAGE>
USE OF PROCEEDS
The Company will not receive any of the proceeds from the sale of the
shares of Class A Common Stock being offered by the Selling Securityholders
hereunder, except with respect to the exercise of up to an aggregate 84,376
outstanding stock options by certain Selling Securityholders. Upon exercise of
all of said stock options, the Company will realize an aggregate $ 751,790.16 in
gross proceeds. The Company intends to use any such proceeds realized from the
exercise of such stock options for working capital purposes.
11
<PAGE>
SELLING SECURITYHOLDERS
<TABLE>
<CAPTION>
Number of
Number of Shares (and
Shares Owned Number of percentage of
Prior to Share to be Shares) After
Offering Sold Offering
------------ ----------- -------------
<S> <C> <C> <C>
Paul R. Bleiberg (1) 658 658 0
Judith Bleiberg (1) 658 658 0
Arthur Bluethenthal (1) 2,199 2,199 0
Arthur Bluethenthal, 49,494 49,494 0
Trustee (1)(2)
Joanne K. Bluethenthal (1) 2,199 2,199 0
Deborah J. Bost (1) 10,165 10,165 0
David Dawson (4) 66,330(4) 42,188 24,142(5)
Anne G. Peeples (1)(3) 6,675 6,675 0
The Peeples Family Trust 5,890 5,890 0
(1)(3)
Joseph H. Sherrill, Jr. (1) 34,065 34,065 0
Carolyn S. Sloan (1) 15,399 15,399 0
Linda E. Sloan (1) 15,381 15,381 0
Tamara F. Sloan (1) 15,399 15,399 0
Thomas R. Sloan (1) 24,172 24,172 0
Thomas R. Styers, III,
As Trustee for
Allison M. Sloan (1) 15,399 15,399 0
Francis Weinaug (4) 42,188 42,188 0
</TABLE>
(1) Of the aggregate 282,129 shares of Class A Common Stock being sold by the
Selling Securityholders, except with respect to those shares of Class A Common
Stock issuable upon exercise of outstanding stock options, such shares were
issued in connection with the Company's acquisition of The Color Works, Inc., a
North Carolina corporation, on May 30, 1996. Said shares are being held in
escrow pursuant to the terms of the stock purchase agreement, entered into by
and between the Company and the shareholders of The Color Works, Inc., and
pursuant to the terms thereof, ten percent of such shares are to be released
from escrow every quarter commencing May 30, 1997, provided there are no
unsatisfied or unresolved claims against such shares. Irrespective of the
foregoing, any Selling Securityholder who owns such shares may sell such shares
and remit the proceeds from such sale back into escrow, which proceeds will be
released in accordance with the terms of such agreement.
(2) Mr. Bluethenthal serves as trustee pursuant to the terms of a February 15,
1995 voting trust.
(3) Anne G. Peeples and James H. Peeples are the trustees of The Peeples Family
Trust. Anne G. Peeples is the mother of James H. Peeples, the President of The
Color Works, Inc.
(4) Represents 42,188 shares of Class A Common Stock issuable upon exercise of
outstanding stock options. Excludes an aggregate 287,072 shares of the Company's
Class A Common Stock and an aggregate 46,681 shares of the Company's Class B
Common Stock held in trusts for the benefit of the children of Paul S. Bush, the
President of the Company, and with respect to such trusts, Mr. Dawson serves as
a co-trustee.
(5) Less than one percent.
12
<PAGE>
PLAN OF DISTRIBUTION
The distribution of the shares of Class A Common Stock by the Selling
Securityholders may be effectuated from time to time in one or more transactions
(which may involve block transactions), on the New York Stock Exchange, or on
any exchange on which the shares of Class A Common Stock may then be listed, in
negotiated private transactions, or a combination of such methods of sale, at
market prices prevailing at the time of sale, or at prices relating to such
prevailing market prices or at negotiated prices. The Selling Securityholders
may effectuate such transactions by selling shares to or through broker-dealers,
and such broker-dealers may receive compensation in the form of underwriting
discounts, concessions or commissions from the Selling Securityholders and/or
purchasers of shares of Common Stock for whom they may act as agent (which
compensation may be in excess of customary commissions).
The Selling Securityholders and any broker-dealers that act in connection
with the sale of the shares of Class A Common Stock may be deemed to be
"underwriters" within the meaning of Section 2(11) of the Act and the
commissions received by them and any profit on the resale of such shares might
be deemed to be underwriting discounts or commissions under the Act. The
Selling Securityholders may agree to indemnify any agent, dealer or broker-
dealer that participates in transactions involving sales of the shares of Class
A Common Stock against certain liabilities including liabilities arising under
the Act.
13
<PAGE>
EXPERTS
The financial statements for the fiscal years ending as of December 30,
1995 and December 31, 1994 and for each of the three years in the period ended
December 30, 1995 included in this Prospectus have been so included in reliance
on the report of Deloitte & Touche, LLP, independent certified public
accountants, given on the authority of said firm as experts in auditing and
accounting.
LEGAL MATTERS
Akerman, Senterfitt & Eidson, P.A., Miami, Florida, has acted as counsel to
the Company in connection with the Registration Statement and has rendered an
opinion as to the validity of the shares of Common Stock offered hereby.
14
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following table sets forth the estimated expenses to be incurred in
connection with the Offering:
<TABLE>
<CAPTION>
Amount*
-------
<S> <C>
SEC Registration Fee....................... $ 1,580.43
Printing and Engraving..................... 1,000.00
Legal Fees and Expenses.................... 5,000.00
Accounting Fees and Expenses............... 5,000.00
Blue Sky Fees and Expenses................. 500.00
Miscellaneous.............................. 1,000.00
----------
Total...................................
$14,080.43
==========
</TABLE>
- ----------------------
* Estimated, except SEC Registration Fee.
Item 15. Indemnification of Directors and Officers.
In accordance with the provisions of the General Corporation Law of
the State of Delaware (the "Act"), Article VI of the Registrant's Bylaws
requires indemnification of Directors and Officers of the Company to the fullest
extent provided by Section 145 of the Act, and also provides that such rights to
indemnification are not exclusive of any other right to which Directors and
Officers may otherwise be entitled.
In addition to the above-described provisions, Section 145 of the Act
contains provisions prescribing the extent to which directors and officers shall
or may be indemnified. Section 145 of the Act permits a corporation, with
certain exceptions, to indemnify a present or former director against liability
if (i) he acted in good faith, and in a manner he reasonably believed to be in
or not opposed to the best interests of the corporation, and (ii) in the case of
any criminal proceeding, he had no reasonable cause to believe his conduct was
unlawful. A corporation may not indemnify a person in respect of a claim, issue
or matter as to which such person shall have been adjudged liable to the
corporation unless and only to the extent that the Court of Chancery or the
court in which such action or suit was brought shall determine upon application
that, despite the adjudication of liability but in view of all the circumstances
of the case, such person is fairly and reasonably entitled to indemnification or
such expenses which the Court of Chancery or such other court shall deem proper.
Section 145 of the Act requires a corporation to indemnify a director
or officer in the defense of any proceeding to which he was a party against
expenses actually and reasonably incurred by him when he is successful in his
defense on the merits or otherwise.
II-1
<PAGE>
Further, the Registrant has adopted a charter provision pursuant to
Delaware law which purports to limit the liability of Directors for monetary
damages.
Item 16. Exhibits and Financial Statement Schedules.
(a) Exhibits
--------
5.1* Opinion of Akerman, Senterfitt & Eidson, P.A., as to the legality
of the securities being offered hereby.
23.1* Consent of Akerman, Senterfitt & Eidson, P.A. (included as part of
Exhibit 5.1).
23.2 Consent of Deloitte & Touche, LLP, independent certified public
accountants.
99.1 Stock Purchase Agreement, dated as of May 30 1996 by and between
Bush Industries, Inc., The Color Works, Inc. and certain
shareholders of The Color Works, Inc.
(b) Financial Statement Schedules
-----------------------------
All schedules are omitted because they are not applicable, or
not required because the required information is included in the Consolidated
Financial Statements or notes thereto.
- --------------------
*Previously filed.
II-2
<PAGE>
Item 17. Undertakings.
(A) The Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement to include
any material information with respect to the plan of distribution
not previously disclosed in the registration statement or any
material change to such information in the registration statement.
(2) For the purposes of determining any liability under the Securities
Act of 1933, as amended, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of post-effective amendment any
of the securities being registered which remain unsold at the
termination of the offering .
(4) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing
provisions, or otherwise, the registrant has been advised that in
the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and
is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer
or controlling person of the registrant in the successful defense of
any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities
being registered, the registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit
to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the
Act and will be governed by the final adjudication of such issue.
(5) For purposes of determining any liability under the Securities Act
of 1933, each filing of the registrant's annual report pursuant to
Section 13(a) or Section 15(d) of the Securities Exchange Act of
1934 (and, where applicable, each filing of an employee benefit
plans' annual report pursuant to Section 15(d) of the Securities
Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Jamestown, State of New York, on this 28th day of
August, 1996.
BUSH INDUSTRIES, INC.
----------------------------------------------
Registrant
By: /s/ Paul S. Bush
-------------------------------------------
Paul S. Bush, Chairman of the Board of
Directors, President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Paul S. Bush Chairman of the Board of Directors, August 28, 1996
- --------------------- President and Chief Executive Officer
Paul S. Bush
/s/ Robert L. Ayres Executive Vice President, Chief August 28, 1996
- --------------------- Operating Officer, Chief Financial
Robert L. Ayres Officer and Director
/s/ Lewis H. Aronson Vice President of Corporate August 28, 1996
- --------------------- Development and Director
Lewis H. Aronson
/s/ Douglas S. Bush Vice President of Merchandising and August 28, 1996
- --------------------- Director
Douglas S. Bush
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Gregory P. Bush Vice President of Administration and August 28, 1996
- ---------------------- New Business Development and
Gregory P. Bush Director
/s/ Donald F. Hauck Senior Vice President and Director August 28, 1996
- ----------------------
Donald F. Hauck
/s/ David G. Messinger Senior Vice President of Sales and August 28, 1996
- ---------------------- Marketing and Director
David G. Messinger
/s/ Jerald D. Bidlack Director August 28, 1996
- ----------------------
Jerald D. Bidlack
/s/ Paul A. Benke Director August 28, 1996
- ----------------------
Paul A. Benke
/s/ Robert E. Hallagan Director August 28, 1996
- ----------------------
Robert E. Hallagan
</TABLE>
II-5
<PAGE>
DELOITTE &
TOUCHE LLP
- ----------- -------------------------------------------------
Suite 250 Telephone: (716) 843-7200
Key Bank Tower Facsimile: (716) 856-7760
50 Fountain Plaza
Buffalo, New York 14202
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
Bush Industries, Inc. on Form S-3 of our report dated February 9, 1996,
appearing in the Annual Report on Form 10-K of Bush Industries, Inc. for the
year ended December 30, 1995 and to the reference to us under the heading
"Experts" in the Prospectus, which is part of this Registration Statement.
/s/ DELOITTE & TOUCHE LLP
August 28, 1996
<PAGE>
STOCK PURCHASE AGREEMENT
------------------------
STOCK PURCHASE AGREEMENT ("Agreement"), dated as of this 30th day of May,
1996, by and among Bush Industries, Inc., a Delaware corporation with its
principal place of business at One Mason Drive, Jamestown, New York 14702 (the
"Company" or "Bush"); The Color Works, Inc., a North Carolina corporation with
its principal place of business at 3010 Executive Drive, Greensboro, North
Carolina 27401 ("ColorWorks"); those shareholders of ColorWorks listed on
Exhibit A (the "Selling Shareholders"), annexed hereto and incorporated herein
by reference (the Selling Shareholders are also collectively hereinafter
referred to as the "Sellers"); James H. Peeples, residing at 915 Forest Hill,
Greensboro, North Carolina ("Jim Peeples"); Anne G. Peeples, residing at 230
Hill Road, Southern Pines, North Carolina ("Anne Peeples"); and the Peeples
Family Trust, with its principal offices at 915 Forest Hill, Greensboro, North
Carolina (the "Peeples Family Trust") (Jim Peeples, Anne Peeples and the Peeples
Family Trust are collectively hereinafter referred to as "Peeples").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, ColorWorks, through its wholly-owned subsidiary, HydroGrafix,
Inc., is a licensee, pursuant to a master license agreement with Cubic
Engineering Co. Ltd. ("Cubic"), of that certain cubic technology and know-how
(the "Hydrographics Technology"), with respect to three dimensional dipping and
color decorating of various substrate materials; and
<PAGE>
WHEREAS, the Sellers own an aggregate 421,424 shares of the capital stock
(the "Shares") of ColorWorks, which Shares represent approximately 60.935% of
the issued and outstanding Shares of ColorWorks;
WHEREAS, Peeples owns an aggregate 270,171 shares of capital stock of
ColorWorks (the "Peeples Shares"), which shares represent approximately 39.065%
of the issued and outstanding shares of capital stock of ColorWorks;
WHEREAS, the Sellers are desirous of selling all of their Shares to Bush,
and Bush is desirous of acquiring all of said Shares, in accordance with the
terms and conditions contained hereinafter; and
WHEREAS, Peeples is desirous of selling an aggregate 42,671 Peeples Shares
to Bush, and Bush is desirous of acquiring all of said 42,671 Peeples Shares, in
accordance with the terms and conditions contained hereinafter.
NOW, THEREFORE, in consideration of the foregoing and the mutual promises
of the parties hereto, and in consideration of the representations, warranties
and covenants herein contained, the parties hereto, intending to be legally
bound, hereby agree as follows:
2
<PAGE>
I. Sale and Purchase of the Shares.
-------------------------------
A. Sale of Shares. As of the Closing Date, as hereinafter defined,
--------------
the Selling Shareholders hereby agree to sell to Bush all of the Shares
beneficially owned by the Selling Shareholders, consisting of an aggregate
421,424 shares of capital stock of ColorWorks (which Shares are inclusive of
shares of Common Stock and Preferred Stock of all classes), and which Shares
constitute approximately 60.935% of the outstanding Shares of capital stock of
ColorWorks, and Peeples hereby agrees to sell to Bush an aggregate 42,671
Peeples Shares beneficially owned by Peeples (and which Peeples Shares
constitute approximately 6.17% of the outstanding shares of capital stock of
ColorWorks), all for the aggregate consideration described hereinafter (the
"Purchase Price"). Unless the context otherwise requires, the term "Shares"
shall mean all of the Shares being sold hereunder by the Selling Shareholders
and the aggregate 42,671 Peeples Shares being sold hereunder by Peeples.
B. Purchase Price. The Purchase Price to be paid by Bush to the
--------------
Selling Shareholders and Peeples for the Shares, described above, shall be in
the aggregate $5,408,295 (or approximately $11.65 per Share). Of such Purchase
Price, $4,581,603 (approximately 84.7% of the Purchase Price) will be satisfied
by Bush by the tendering of shares of Class A Common Stock of Bush (the "Bush
Shares"), as more fully described below, and the remainder of such Purchase
Price ($826,692) will be paid in cash as of the Closing Date. Of said cash
Purchase Price, an aggregate $275,564 shall be distributed to the Selling
Shareholders and Peeples at Closing in accordance with the schedule set forth on
Exhibit F, attached hereto and incorporated herein by reference. The
3
<PAGE>
remaining portion of the cash Purchase Price (or an aggregate $551,128) will be
held in escrow as provided below, pursuant to the Cash Escrow Agreement,
attached hereto as Exhibit H, and incorporated herein by reference, to fund, in
part, environmental clean-up, remediation and response costs. Of said cash
portion of the Purchase Price, an aggregate $369,806.89 (or 67.1% of the cash
portion of the Purchase Price to be held in escrow) shall be placed in escrow
from the Selling Shareholders, and an aggregate $181,321.11 of said cash portion
of the Purchase Price (or 32.9% of the cash portion of the Purchase Price to be
held in escrow) shall be placed in escrow from Peeples. The Purchase Price to be
paid to the Selling Shareholders shall be paid to the Selling Shareholders, on a
pro-rata basis, based on their ownership of Shares in ColorWorks, as set forth
on Exhibit A. The Purchase Price to be paid to Peeples shall be paid to Jim
Peeples, Anne Peeples and the Peeples Family Trust, on a pro-rata basis based on
that portion of the aggregate 42,671 Shares being sold by Peeples to Bush
hereunder as of the Closing Date and owned respectively by Jim Peeples, Anne
Peeples and the Peeples Family Trust, as set forth in Exhibit A, provided,
however, that notwithstanding anything contained herein to the contrary, the
cash portion of the Purchase Price to be paid to Peeples in the aggregate shall
not be less than $181,321.11, the amount of cash to be placed in escrow
hereunder by Peeples. As of the Closing Date, Bush will cause to be issued in
the name of the Selling Shareholders and Peeples on a pro rata basis, as
described above, such number of Bush Shares which in the aggregate have a value,
as determined below, equal to $4,581,603. No fractional Bush Shares shall be
issued to any Selling Shareholder hereunder, including Peeples, and accordingly,
in the event any fractional Bush Shares are to be issued hereunder, in lieu
thereof, Bush shall pay the cash equivalent based upon the per Bush Share
valuation, as set forth herein. For purposes hereof, the value of the Bush
Shares to be issued as of the Closing Date shall be determined
4
<PAGE>
based solely upon the closing price of the Bush Shares as of the trading date
immediately preceding the Closing Date, as quoted on the New York Stock
Exchange.
C. Closing. The closing (the "Closing") of the transactions
-------
contemplated by this Agreement shall take place as of May 30, 1996 (the "Closing
Date"), at 10:00 a.m., at the offices of Tuggle Duggins & Meschan, P.A., 228
West Market Street, Greensboro, North Carolina 27401, or such other date and/or
place as Bush and the Sellers may mutually determine.
D. Deliveries at the Closing. At the Closing, (i) the Sellers and
-------------------------
Peeples will deliver to Bush the various certificates, instruments, and
documents referred to in Section VIII below; (ii) Bush will deliver to the
Sellers and Peeples the various certificates, instruments, and documents
referred to in Section VII below; (iii) the Sellers and Peeples will deliver to
Bush stock certificates representing the Shares, endorsed in blank and
accompanied by duly executed assignment documents with signatures medallion
guaranteed or notarized; (iv) Bush shall deliver the Purchase Price, a portion
of which is to be held in escrow pursuant to the terms of this Agreement, as
described herein; and (v) ColorWorks shall deliver to the parties hereto an
insurance binder evidencing a five-year insurance policy providing coverage for
environmental costs, remediation, response, and clean-up, and such binder
evidencing such policy shall be in force as of the Closing Date in an amount not
less than $10,000,000 per occurrence, and shall be in form satisfactory to the
parties hereto. Notwithstanding anything contained herein to the contrary, the
parties hereto hereby acknowledge and agree that given the mechanism set forth
herein for determining the amount of
5
<PAGE>
Bush Shares to be issued at Closing, in lieu of delivering the certificates
evidencing the Bush Shares at the Closing, Bush may instead execute and deliver
the requisite authorization to its transfer agent to cause the expeditious
delivery thereof post-closing. If no certificates evidencing the Bush Shares
are delivered at the Closing as provided above, Bush shall provide to the
Selling Shareholders and Peeples a signed statement certifying the per Bush
Share valuation, the respective number of Bush Shares to be issued to each
Selling Shareholder and Peeples, the cash equivalent in lieu of any fractional
Bush Shares, and that Bush shall execute and deliver the requisite authorization
to its transfer agent to effectuate the foregoing. In addition, the parties
hereto hereby acknowledge and agree that the afore-described binder might not be
available at Closing, and in such an event any documents evidencing this
transaction executed in contemplation of Closing will be held in escrow pending
such delivery in accordance with the terms of a letter agreement to be executed
and delivered in such an event.
E. Recapitalization of ColorWorks. Immediately after the Closing,
------------------------------
Peeples and Bush agree that the capitalization of ColorWorks will be
recapitalized so that only one class of capital stock, designated as Common
Stock, shall be outstanding, and that such recapitalization will not increase
the number of outstanding shares of capital stock immediately after the Closing
or increase the number of shares of capital stock beneficially owned by Peeples
at or subsequent to Closing. Furthermore, all of the parties hereto hereby
agree and acknowledge that notwithstanding the different classes of capital
stock of ColorWorks currently outstanding, for purposes hereunder in determining
the Purchase Price each share of capital stock shall be treated identically, and
that no
6
<PAGE>
additional or special rights shall be afforded any class of capital stock
relative to any other class of capital stock of ColorWorks.
F. Environmental Remediation and Response.
--------------------------------------
1. As part of the due diligence conducted in connection with the
transaction contemplated hereunder, contamination at ColorWorks' real
property known as 3010 Executive Drive, Greensboro, North Carolina has been
discovered which requires environmental remediation, response, and clean-
up to return the property to a lawful condition as required by federal,
state and/or local environmental laws and regulations. At the present time
it is not known whether the contamination was caused by ColorWorks or by a
third party, but as among the parties to this Agreement, it is agreed that
the Selling Shareholders and Peeples shall have the sole responsibility for
conducting any remediation or other response required by law as a result of
that contamination. It is agreed that pursuant to their indemnification
obligations under Section IX, and subject to the applicable limitations set
forth in Sections IX.A.4 and IX.E., provided, however, that the $25,000
basket thereunder shall not be applicable, the cost of any remediation,
clean-up, or response to return the property to a lawful condition as
required by applicable law as a result of any contamination which occurred
at any facility of ColorWorks and/or its Subsidiaries prior to the Closing
(and/or continuing after the Closing if the condition giving rise to such
remediation or response existed prior to the Closing) shall be borne solely
by the Selling Shareholders and Peeples except to the extent such costs are
covered by the insurance referred to below and except those drilling and
testing costs to be borne by Bush subsequent
7
<PAGE>
to the Closing Date at the Rutherfordton, North Carolina facility. All
costs of drilling and testing at the Executive Drive locations which has
occurred since February 1, 1996 and all further drilling, testing, cleanup,
containment, removal, response, or restoration work at the Executive Drive
locations which is required to bring the Executive Drive locations in
compliance with applicable law shall be borne by the Selling Shareholders
and Peeples in accordance with their obligations under Section IX, subject
to the applicable limitations of that Section, provided, however, that the
$25,000 basket thereunder shall not be applicable, and subject to the
insurance provisions below. Bush, at its own expense subsequent to the
Closing Date, shall conduct such drilling and testing and environmental
review as it deems necessary (and shall use its best efforts to so conduct
such drilling, testing and environmental review as soon as practicable) to
establish whether there is contamination requiring remediation or a
response at the Rutherfordton, North Carolina facility of ColorWorks. If
there is any contamination which occurred prior to the Closing (and/or
continued after the Closing if such condition giving rise to such
remediation or response existed prior to the Closing), which requires
remediation or a response in order to return the property to a lawful
condition, any and all costs of such remediation or response shall be paid
by the Selling Shareholders and Peeples pursuant to their indemnification
obligations under Section IX, subject to the applicable limitations of that
Section (provided, however, that the $25,000 basket thereunder shall not be
applicable), and the insurance provisions below. The Selling Shareholders
and Peeples shall also be responsible under Section IX (subject to its
applicable limitations, provided, however, that the $25,000 basket
thereunder shall not be applicable, and the insurance referred to below)
for any claims, damages, losses, clean-up, remediation and/or response
costs required and/or incurred or suffered by ColorWorks and/or the
8
<PAGE>
Subsidiaries prior to the Closing Date (and/or continuing after the Closing
Date if the condition giving rise to such claims, damages, losses, required
clean-up, remediation and/or response costs existed prior to the Closing
Date) with respect to the transportation, storage, dumping or other
disposition of hazardous or potentially hazardous chemicals, pollutants
and/or substances, irrespective of whether such storage, dumping or
disposition was on property owned by ColorWorks and/or its Subsidiaries.
The Selling Shareholders and Peeples shall not have liability hereunder for
costs, damages, liability, losses, clean-up or remediation with respect to
the transportation, storage, disposal, dumping or other disposition of
hazardous or potentially hazardous chemicals, pollutants and/or substances
which occurs after the Closing, except with respect to such costs, damages,
liability, losses, clean-up, or remediation with respect to the
transportation, storage, disposal, dumping or other disposition of
hazardous or potentially hazardous chemicals, pollutants and/or substances
which occurs after the Closing as a result of any clean-up, remediation
and/or response required hereunder to bring any property to a lawful
condition.
2. ColorWorks will procure at its sole expense as of the Closing
a five-year insurance policy to cover the cost of any clean-up and
environmental remediation or response in substantially the form as
described on Exhibit G, attached hereto and incorporated herein by
reference, and which policy shall provide for not more than a $500,000
deductible per occurrence and for coverage of at least $10,000,000 per
occurrence. The Selling Shareholders and Peeples, jointly and severally,
hereby agree to bear the premium costs of such policy (for a five-year
term, $500,000 deductible and $10,000,000 per occurrence) in excess of
$205,970. If Bush or ColorWorks chooses to obtain more extensive coverage,
the additional cost for the expanded coverage shall be the sole expense of
9
<PAGE>
ColorWorks. The Selling Shareholders and Peeples, jointly and severally,
do hereby represent and warrant that they are familiar with the aforesaid
insurance coverage, including its exclusions and limitations, and that they
have reviewed the insurance application and have had the opportunity to ask
all relevant questions of the insurance broker and/or underwriter.
3. The Selling Shareholders and Peeples shall be jointly and
severally liable pursuant to the indemnification provisions of Section IX
(and subject to its applicable limitations, and provided, however, that the
$25,000 basket thereunder shall not be applicable) for all environmental
costs, clean-up, remediation and response, claims, damages, liability and
losses as described in this Section F, which is not covered by the
insurance, including the amount of the deductible under the policy. Funds
to pay for the deductible portion shall be provided first from the $551,128
portion of the purchase price which is being escrowed for a five year term
pursuant to Section 1.B for environmental cleanup, and if such escrow is
depleted, then from the escrow of Bush Shares (or any cash substitute
therefor), and if such Bush Share escrow is depleted, then from the
personal assets of the Selling Shareholders and Peeples.
4. The parties hereto shall use their best efforts to timely and
properly file all required notices with the insurer and shall use their
best efforts to timely and properly file all claims permissible under the
environmental insurance policy and shall deposit such insurance proceeds
upon receipt to the environmental escrow for distribution in accordance
with the terms of the escrow agreement to the extent such proceeds are
paid with respect to any environmental claim for which the Selling
Shareholders and/or Peeples are entitled to be reimbursed.
10
<PAGE>
5. The Selling Shareholders and Peeples shall provide prompt
notice to Bush and to ColorWorks with respect to any environmental matter
and shall consult with Bush and ColorWorks with respect to any such
decision relating to any environmental matter hereunder, prior to the
implementation of any action and prior to the finalization of any such
decision. The parties hereto further agree that any decisions to be made
with respect to any such remediation, clean-up, and/or response shall be
made with the unanimous approval of the Selling Shareholders, Peeples and
Bush. Notwithstanding anything contained herein to the contrary, for
purposes hereunder the Selling Shareholders shall be deemed to have
consented or agreed in the event such holders of a majority in interest of
the ColorWorks shares of capital stock owned of record by the Selling
Shareholders as of the date of this Agreement evidence their assent to any
such action. In addition, and anything contained herein to the contrary
notwithstanding, for purposes hereunder Peeples shall be deemed to have
consented or agreed in the event the holders of a majority in interest of
the ColorWorks shares of capital stock owned of record by Peeples,
exclusive of the Shares being sold hereunder by Peeples, as of the date of
this Agreement evidence their assent to any such action. In the event any
party hereto does not give notice of its non-consent or disagreement to any
action within fifteen (15) days, or such shorter period if any such consent
is required to be obtained sooner to avoid any potential adverse
consequences (provided such shorter period is specified in the following
notice), after written notice to that party of any such action, then such
party shall have been deemed to have consented or agreed to any such
action. No such consent or agreement shall be required hereunder with
respect to any actions taken or performed in the normal course of
remediation, clean-up and/or response to be performed by the afore-said
insurance carrier. In the event unanimity cannot be reached
11
<PAGE>
among the afore-described parties, then said parties agree to follow any
recommended advice by the afore-said insurance carrier. In the event the
insurance carrier is unable or unwilling to give said advice, and provided
unanimity cannot be reached among the afore-described parties, then Bush,
on one hand, and the Selling Shareholders and Peeples on the other hand,
shall each engage an independent environmental consultant to render such
advice. The mutual agreement of both independent environmental consultants
shall control the advice to be followed. In the event both independent
environmental consultants cannot agree on the advice to be followed, both
consultants shall mutually agree on a third independent environmental
consultant, and whose advice, which shall be rendered in accordance with
the terms and conditions of this Agreement, the parties hereto shall
follow. Bush, on one hand, and the Selling Shareholders and Peeples, on
the other hand, shall each be responsible for the respective costs and
expenses of engaging an independent environmental consultant, and if
needed, the expenses and costs of the third independent consultant shall be
borne equally by Bush, on one hand, and the Selling Shareholders and
Peeples on the other. Any said expenses and costs relating to the
engagement and/or retention of such environmental consultants shall not be
disbursed nor paid from the escrows established under and pursuant to the
terms of this Agreement. Peeples hereby acknowledges and agrees that to
avoid any conflict of interest, all environmental decisions relating to the
drilling, testing or review of environmental matters to the extent to be
made by ColorWorks subsequent to the Closing Date shall be made by the
Chairman of the Board of Directors of ColorWorks.
6. The parties hereto agree to cooperate in effectuating any
clean-up, remediation, or response, and to use their best efforts to obtain
the cooperation of the afore-
12
<PAGE>
said insurance carrier. In addition, the parties hereto agree to use their
best efforts to minimize the costs (without adversely affecting the level
of any clean-up, remediation and/or response hereunder), and to minimize
any interruption of the then day-to-day business operations being conducted
at any such clean-up, remediation or response location.
7. Denial of environmental insurance coverage by the insurer or
unavailability of coverage for any occurrence and for whatever reason other
than ColorWorks' failure to pay its portion of the premium shall not
obviate the Selling Shareholders' and Peeples' obligations hereunder.
8. Any environmental clean-up, remediation and/or response to
be effectuated hereunder to return any contaminated site and/or location to
a lawful condition shall be promptly undertaken by the Selling Shareholders
and Peeples in accordance to the extent such is practicable with applicable
federal, state and local laws and regulations. The Selling Shareholders,
Peeples, Bush and ColorWorks shall cooperate in meeting any reporting
requirements prescribed by applicable law and regulation with respect to
the contamination, clean-up, remediation and response and in obtaining, if
possible, written notice from the appropriate governmental authority that
no further remediation or response is required at a specific site or
location. If obtainable, the Selling Shareholders and/or Peeples shall
further cooperate with and assist Bush and/or ColorWorks in obtaining
confirmation from any applicable governmental authority that any such
clean-up, remediation or response was effectuated in accordance with
applicable law and regulations.
9. Notwithstanding anything contained herein to the contrary,
the obligations and responsibilities of the Selling Shareholders and/or
Peeples hereunder shall in no fashion be obviated, diminished or otherwise
reduced in the event any third party is
13
<PAGE>
responsible, in whole or in part, for any of the aforesaid pollution or
contamination, including without limitation, any former owner of the real
property owned by ColorWorks and/or its Subsidiaries.
10. ColorWorks hereby agrees to assign its rights to the Selling
Shareholders and Peeples to pursue claims against any former owners and
tenants of the property to be cleaned up, remediated and/or responded to
hereunder, to the extent such assignment does not violate or contravene the
terms of the environmental insurance policy, described above, and to the
extent of any costs and/or expenses incurred by the Selling Shareholders
and Peeples with respect to any such clean-up, remediation and/or response.
II. Representations and Warranties by the Sellers and by Peeples.
------------------------------------------------------------
ColorWorks, Jim Peeples, Anne Peeples, the Peeples Family Trust, and the Selling
Shareholders, jointly and severally (unless otherwise expressly stated), hereby
represent and warrant, as of the date hereof and as at the time of the Closing,
as follows, except as set forth in the Disclosure Schedule attached hereto as
Exhibit B, and incorporated herein by reference:
A. Authorization of Transaction. The Selling Shareholders and
----------------------------
Peeples have full power and authority to execute and deliver this Agreement and
to perform their respective obligations hereunder, and to consummate the
transactions contemplated hereunder. This Agreement constitutes a valid and
legal obligation of the Selling Shareholders and Peeples, enforceable in
accordance with its terms and conditions.
14
<PAGE>
B. Shares of the Sellers. The Selling Shareholders own
---------------------
approximately 60.935% of the issued and outstanding Shares of capital stock of
ColorWorks, and Peeples owns the balance of the issued and outstanding capital
stock of ColorWorks. The Selling Shareholders and Peeples, each respectively,
represents that he or she owns the shares of capital stock of ColorWorks free
and clear of any restrictions on transfer, claims, liens, encumbrances or
charges, of any kind whatsoever, taxes, security interests, options, warrants,
rights, contracts, calls, commitments, equities, and demands (collectively, the
"Liens"). In addition, the Selling Shareholders and Peeples, each hereby
represent and warrant, respectively, that to the best of their knowledge, all of
the other shareholders of ColorWorks own their respective shares of ColorWorks
free and clear of any Liens. The Selling Shareholders and Peeples have full
power and authority to sell the Shares to Bush in accordance with the terms and
provisions of this Agreement and, upon delivery of the Shares to Bush at the
Closing and payment therefor at Closing, as contemplated by this Agreement, Bush
shall acquire good and marketable title to the Shares, free and clear of all
Liens. ColorWorks, Peeples and/or the Selling Shareholders are not a party to
any option, warrant, right, contract, call, put, or other agreement or
commitment providing for the disposition or acquisition of any shares of capital
stock of ColorWorks (other than this Agreement). ColorWorks, Peeples and/or the
Selling Shareholders are not a party to any voting trust, proxy, or other
agreement or understanding with respect to the voting of any Shares. In
addition, Peeples and the Selling Shareholders hereby acknowledge, represent,
warrant and agree that as of the date hereof and as of the Closing Date, neither
Peeples nor any of the Selling Shareholders are owed any cumulative dividend,
accrued interest payment or other obligation in respect of their respective
capital stock ownership in ColorWorks, and no dividend, accrued interest payment
or other obligation in respect of the Shares so sold hereunder shall have
accrued and/or become payable subsequent to the Closing. In addition, Peeples
hereby represents,
15
<PAGE>
warrants, agrees, and acknowledges that no dividend, accrued interest payment or
other obligation in respect of the Peeples' Shares not being sold hereunder
shall have accrued, and/or become payable subsequent to the Closing.
C. Organization, Qualification, and Corporate Power. ColorWorks
------------------------------------------------
and its Subsidiaries (the "Subsidiaries"), are corporations duly organized,
validly existing and in good standing under, with respect to ColorWorks, the
laws of the State of North Carolina, and with respect to the Subsidiaries, their
respective states of incorporation. ColorWorks and the Subsidiaries are each
respectively duly authorized to conduct business, are qualified and are in good
standing under the laws of each jurisdiction in which the nature of their
respective businesses require such qualification, and such representation with
respect to the Selling Shareholders is hereby qualified to the best of their
knowledge. ColorWorks and the Subsidiaries, respectively, have the full power
and authority (corporate or otherwise) to carry on their respective businesses
in which they are engaged. The Disclosure Schedule lists the directors and
officers of ColorWorks and each Subsidiary as of the date hereof and as of the
Closing Date. ColorWorks has delivered to Bush correct and complete copies of
ColorWorks' and each Subsidiary's articles of incorporation, as amended, and
bylaws, as amended. The minute books of ColorWorks and of the Subsidiaries
containing all material records of meetings of the shareholders, the board of
directors, committees of the board of directors of ColorWorks and the
Subsidiaries, respectively, and the stock certificate books, and the stock
record books of ColorWorks and the Subsidiaries, respectively, which materials
have been delivered to Bush, are true, correct and complete as of the date
hereof and as of the Closing Date, except for several sets of resolutions and
minutes of the Shareholders and Board of Directors of ColorWorks which are not
fully signed, and with respect to such unsigned resolutions
16
<PAGE>
and minutes the Selling Shareholders, Peeples, and the Board of Directors of
ColorWorks have subsequently ratified all actions specified therein. ColorWorks
and the Subsidiaries are not in default under or in violation of any provision
of their respective articles of incorporation, as amended, or bylaws, as
amended.
D. Selling Shareholders. The Selling Shareholders, including
--------------------
Peeples, are residents of the State of North Carolina, except for Joseph
Sherrill, Jr., who is a resident of the State of Florida, and Carolyn S. Sloan
and Tamara F. Sloan who are residents of the State of Georgia. The Selling
Shareholders, including Peeples, hereby represent and warrant, that they each
are acquiring the Bush Shares for investment purposes only and without the
intent toward the further sale and/or distribution thereof. The Selling
Shareholders, including Peeples, further represent and warrant that they each
possess the sophistication, business acumen and ability to make an informed
judgment, or have relied upon advisors who have the sophistication, business
acumen and ability to make an informed judgment for said Selling Shareholders,
including Peeples, with respect to the acquisition of the Bush Shares hereunder
and the transactions contemplated hereunder; and each of the Selling
Shareholders, including Peeples, further represents and warrants that he or she
has received and reviewed the Annual Report on Form 10-K for Bush for the fiscal
year ended December 30, 1995, the Quarterly Reports on Form 10-Q for Bush for
the quarters ended April 1, 1995, July 1, 1995, September 30, 1995, March 30,
1996, and the Proxy Statement for the Bush Annual Meeting to be held on May 22,
1996, and are aware of the business and financial condition of Bush, and have
had the opportunity to ask questions and receive answers from Bush management
concerning the business and financial condition of Bush. Furthermore, each
Selling Shareholder, including Anne Peeples and the Peeples Family Trust, hereby
acknowledges that he or she understands that Peeples
17
<PAGE>
will retain an equity interest in ColorWorks subsequent to the Closing, and that
Jim Peeples will have entered into an employment agreement with ColorWorks
and/or Bush as of the Closing Date. Each Selling Shareholder, including Peeples,
further represents, warrants and acknowledges that each is familiar with the
business and financial condition of ColorWorks and the Subsidiaries and the
respective business and financial prospects, and/or each had the opportunity to
ask any relevant questions of ColorWorks, its Subsidiaries and of management of
ColorWorks and its Subsidiaries regarding the same. Peeples represents and
warrants that the Peeples Family Trust has not been formed for the sole purpose
of acquiring the Bush Shares hereunder. The Selling Shareholders, including
Peeples, further represent and warrant, jointly and severally, that Bush is
relying on the foregoing and on the other representations and warranties set
forth herein to ensure compliance with applicable securities laws and
regulations with respect to the transactions contemplated hereunder.
E. Capitalization. The total number of shares of the authorized
--------------
capital stock of ColorWorks is 2,000,000 shares of all classes of which 691,595
shares of capital stock are outstanding as of the Closing; and all of such
outstanding Shares of ColorWorks have been duly and validly issued, fully paid
and non-assessable; and none of the shares of capital stock of ColorWorks has
been issued in violation of the preemptive rights of any person, and all
documentary stamp taxes due with respect to the issuance and transfer of such
shares, if any, have been paid. There is not outstanding any security, option,
warrant, right, instrument convertible into or exchangeable for, employee
benefit plan or arrangement, agreement, understanding or commitment of any kind
entitling any person, corporation or entity to purchase, subscribe for or
otherwise acquire, or relating to the voting of, any shares or other equity
interests of ColorWorks or its Subsidiaries.
18
<PAGE>
F. Noncontravention. To the best of ColorWorks', Peeples', and/or
----------------
the Selling Shareholders' knowledge, except as set forth on the Disclosure
Schedule, neither the execution and the delivery of this Agreement, nor the
consummation of the transactions contemplated hereby, will (a) violate any
statute, regulation, rule, judgment, order, decree, stipulation, injunction,
charge, or other restriction of any government, governmental agency, or court to
which ColorWorks, the Subsidiaries, Peeples and/or the Selling Shareholders are
subject, or any provision of the articles of incorporation or bylaws of
ColorWorks and/or the Subsidiaries, as the same may have been amended, or (b)
conflict with, result in breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate, modify,
or cancel, or require any notice under any contract, lease, sublease, license,
sublicense, franchise, permit, indenture, agreement, understanding, or mortgage
for borrowed money, instrument of indebtedness, security interest, or any other
arrangement to which ColorWorks, its Subsidiaries, Peeples, and/or the Selling
Shareholders are a party or by which any are bound or to which any of their
respective assets are subject. To the best of ColorWorks', Peeples', and/or the
Selling Shareholders' knowledge, and except as set forth in the Disclosure
Schedule, ColorWorks, the Subsidiaries, Peeples, and/or the Selling Shareholders
are not required to give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any government or governmental agency or
from any third party, including without limitation, any licensee or sublicensee
of ColorWorks, in order for the parties to consummate the transactions
contemplated by this Agreement. To the best of ColorWorks', Peeples' and/or the
Selling Shareholders' knowledge, ColorWorks and/or the Subsidiaries' businesses
have respectively been operated in conformity and in compliance with all
applicable law and regulation, and ColorWorks and/or the Subsidiaries have
obtained all required permits and licenses with respect thereto; and the
transactions contemplated herein will not result
19
<PAGE>
in or otherwise adversely affect the ability of ColorWorks and/or the
Subsidiaries to continue to carry on and conduct their respective businesses as
currently being conducted.
G. Subsidiaries. All of the Subsidiaries, including their respective
------------
jurisdictions where incorporated, the jurisdictions where qualified to do
business, and the number of shares of capital stock outstanding, and the number
of shares of capital stock owned by ColorWorks, including the percentage
thereof, and if less than 100%, the names of the other shareholders, are set
forth on the Disclosure Schedule. Except as otherwise set forth on the
Disclosure Schedule, ColorWorks and/or the Subsidiaries do not have any direct
or indirect beneficial ownership in, and do not control, directly or indirectly,
any corporation, partnership, association or other business entity or venture.
In addition, except as set forth on the Disclosure Schedule, Peeples represents
that Peeples does not have any direct or indirect beneficial ownership in, and
does not control, directly or indirectly, any corporation, partnership,
association or other business entity or venture relating to, directly or
indirectly, the Hydrographics Technology process or the purchase and/or supply
of films relating thereto. In addition, each of the Selling Shareholders hereby
represents and warrants that to the best of their knowledge, and except as set
forth in the Disclosure Schedule, Peeples does not have any direct or indirect
beneficial ownership in, and does not control, directly or indirectly, any
corporation, partnership, association or other business entity or venture
relating to, directly or indirectly, the Hydrographics Technology process or the
purchase and/or supply of films relating thereto. For purposes of this
Agreement, the term "Hydrographics Technology" shall include all the technology
and processes utilized by ColorWorks and/or the Subsidiaries with respect to or
related to the Cubic Master License Agreement, and all improvements related
thereto.
20
<PAGE>
H. Financial Statements. Attached hereto as Exhibit C, and
--------------------
incorporated herein by reference, are the audited consolidated financial
statements of ColorWorks for the fiscal years ended January 31, 1995, and 1994,
and the unaudited consolidated financial statements for the ten months ended
November 25, 1995 (such statements shall be hereinafter collectively referred to
as the "Financial Statements"). The audited Financial Statements have been
prepared in accordance with generally accepted accounting principles, applied on
a consistent basis throughout the periods covered thereby, are correct and
complete, and except as set forth in the audited Financial Statements or the
notes thereto are consistent in all material respects with the books and records
of ColorWorks and its Subsidiaries (which books and records, to the best
knowledge of ColorWorks, Peeples and the Selling Shareholders, respectively, are
materially correct and complete). The Selling Shareholders and Peeples will
cooperate, to the extent reasonably necessary, with Bush and/or ColorWorks to
cause to be prepared and delivered to Bush as soon as possible after the
Closing, audited financial statements for the fiscal year ended January 31,
1996. To the best of the Selling Shareholders' and Peeples' knowledge, the
unaudited Financial Statements for the ten months ended November 25, 1995, are
true and correct in all material respects. The stockholders' equity of
ColorWorks and its Subsidiaries, as set forth on the audited financial
statements for the fiscal year ended January 31, 1996 shall not materially
differ from the stockholders' equity of ColorWorks and its Subsidiaries, as set
forth on the unaudited Financial Statements for the ten months ended November
25, 1995 previously delivered to Bush. In the event the stockholders' equity
set forth on the audited financial statements as of January 31, 1996 differs
from the unaudited Financial Statements for the ten months ended November 25,
1995, by more than $105,000 (the "Threshold Amount"), then the Purchase Price
shall be reduced by an amount equal to said difference, less the Threshold
Amount, and said number of Bush Shares equal to said difference, as valued as of
the date
21
<PAGE>
of Closing, as set forth herein, or the cash equivalent thereof, if cash is
substituted therefor in accordance with the terms and provisions contained
herein shall be released by the Escrow Agent to Bush upon notification thereof
by Bush to the Escrow Agent. The audited financial statements for the fiscal
year ended January 31, 1996 as described above, shall be prepared by Dixon, Odom
& Co., L.L.P., the independent public accountants of ColorWorks in accordance
with generally accepted accounting principles, applied on a consistent basis.
Bush shall have the right to have Bush's independent public accountants examine
the books and records of ColorWorks, including the work papers of ColorWorks'
independent public accountants. If Bush's independent public accountants
dispute the results of such audit and such dispute cannot be resolved between
the accountants, then at Bush's election, a third independent public accounting
firm shall be appointed acceptable to both ColorWorks' and Bush's independent
public accountants to examine such books, and such third party independent
public accounting firm's determination shall be binding upon the parties hereto,
absent a manifest showing of fraud. To the best knowledge of ColorWorks,
Peeples and the Selling Shareholders, the audited Financial Statements present
fairly the financial condition of ColorWorks and its Subsidiaries as of the
dates of such statements. To the best knowledge of Peeples and the Selling
Shareholders, respectively, the unaudited financial statements of ColorWorks and
its Subsidiaries for periods subsequent to the ten month period ending November
25, 1995, and prior to the Closing Date, previously delivered to Bush hereunder
present fairly the financial condition of ColorWorks and its Subsidiaries as of
the dates of such statements.
I. Events Subsequent to Most Recent Fiscal Year-End. Since the
------------------------------------------------
fiscal year ended January 31, 1995, there has not been any adverse change in the
assets, liabilities, business, financial condition, operations, result of
operations, or future prospects of ColorWorks and its
22
<PAGE>
Subsidiaries, on a consolidated basis, except as otherwise set forth on the
Disclosure Schedule or the Financial Statements. Without limiting the
generality of the foregoing, since that date, and except as otherwise set forth
on the Disclosure Schedule, or the Financial Statements:
1. ColorWorks and/or its Subsidiaries have not sold, leased,
transferred, or assigned any of its assets, tangible or intangible, other
than for full and fair consideration in the ordinary course of business;
2. ColorWorks and/or its Subsidiaries have not entered into any
contract, lease, sublease, license or sublicense (or series of related
contracts, leases, subleases, licenses or sublicenses) outside of the
ordinary course of business, and which contracts, leases, subleases,
licenses or sublicenses are set forth on the Disclosure Schedule;
3. ColorWorks and/or its Subsidiaries have not imposed any
security interests upon any of its assets, tangible or intangible;
4. ColorWorks and/or its Subsidiaries have not made any capital
expenditures (or series of related capital expenditures) outside of the
ordinary course of business in excess of $10,000 and said expenditures in
excess of $10,000 will be set forth on the Disclosure Schedule;
23
<PAGE>
5. ColorWorks and/or its Subsidiaries have not created,
incurred, assumed or guaranteed any indebtedness for borrowed money outside
the ordinary course of business;
6. ColorWorks and/or its Subsidiaries have not cancelled,
compromised, waived or released any material right or material claim (or a
series of related rights and claims) outside the ordinary course of
business, including without limitation, ColorWorks and/or its Subsidiaries
have not written off any accounts receivables;
7. there have been no changes made or authorized in the
articles of incorporation, as amended, or bylaws, as amended, of ColorWorks
and/or its Subsidiaries;
8. ColorWorks and/or its Subsidiaries have not issued, granted,
sold, or otherwise disposed of any of its shares of capital stock, or
issued or granted any options, or obtained (including upon conversion or
exercise) any of its shares of capital stock, or redeemed any shares of
capital stock, except with respect to the redemption of all of the shares
of capital stock owned of record by Joseph Bryan, Jr., for the aggregate
redemption price of $1.00, and which redemption of the shares of capital
stock owned of record by Joseph Bryan, Jr. by ColorWorks was effectuated
and consummated in accordance with applicable law and regulation and did
not violate the Articles of Incorporation, as amended, the By-laws, as
amended, of ColorWorks, or any material contract or agreement that
ColorWorks or the Selling Shareholders and/or Peeples is a party to;
24
<PAGE>
9. ColorWorks and/or its Subsidiaries have not made any loan
to, or entered into any other transaction with, any of its directors,
officers, and employees outside the ordinary course of business giving rise
to any claim or right on its part against the person or on the part of the
person against it; and/or
10. there has not been any occurrence, event, incident, action,
failure to act or transaction outside the ordinary course of business
involving ColorWorks and/or its Subsidiaries, its properties or its assets,
except the repayment of loans in the aggregate principal amount of
$356,637.36 to Joseph Bryan, Jr., and which repayment was effectuated and
consummated in accordance with applicable law and regulation and did not
violate the Articles of Incorporation, as amended, the By-laws, as amended,
of ColorWorks, or any material contract or agreement that ColorWorks or the
Selling Shareholders and/or Peeples is a party to;
J. Undisclosed Liabilities. ColorWorks and/or its Subsidiaries do
-----------------------
not have any liability (whether known or unknown, whether absolute or
contingent, whether liquidated or unliquidated, and whether due or to become
due), including any liability for taxes (hereinafter "Liability"), which have
not been disclosed on the Financial Statements, and except for Liabilities which
have arisen after the ten month period ended November 25, 1995 in the ordinary
course of business.
K. Tax Matters. All federal, state, local and foreign tax returns
-----------
(including, without limitation, estimated tax returns, and, with respect to
employees, FICA and FUTA returns)
25
<PAGE>
required to be filed by or on behalf of ColorWorks and/or its Subsidiaries have
been timely filed, or requests for extensions have been timely filed, and
granted, and all returns filed are complete and accurate in all material
respects. All taxes shown on filed returns have been paid. ColorWorks and/or
its Subsidiaries are not the beneficiary of any extension of time within which
to file any report and return. As of the date hereof, there is no deficiency or
refund litigation, matter in controversy, or audit examination with respect to
any taxes that might result in a determination adverse to ColorWorks and/or its
Subsidiaries, except as reserved in the Financial Statements. All taxes,
interest, additions and penalties due with respect to completed and settled
examinations or concluded litigation have been paid. ColorWorks and/or its
Subsidiaries have not executed an extension or waiver of any statute of
limitations on the assessment or collection of any tax due that is currently in
effect. To the extent any federal, state, local or foreign taxes are due from
or, for any periods through and including November 25, 1995, adequate provision
has been made for the payment of such taxes by establishing appropriate
liability accounts on the Financial Statements. To the extent that any federal,
state, local or foreign taxes may be due from or assessed against ColorWorks
and/or its Subsidiaries for the period from February 1, 1995 through the date of
the Closing, adequate provision will be made for the payment of such taxes by
establishing appropriate liability accounts on ColorWorks' and/or its
Subsidiaries' last monthly financial statements prepared before the date of the
Closing, and which has been disclosed to Bush in writing prior to the date of
this Agreement. ColorWorks and/or its Subsidiaries have withheld and paid all
taxes required to have been withheld and paid in connection with the amounts
paid or owing to any employee, creditor, independent contractor or other third-
party.
26
<PAGE>
The Disclosure Schedule sets forth the following information with respect
to ColorWorks and/or its Subsidiaries as of the last tax return required to be
filed:
1. the amount of any net operating loss, net capital loss,
unused investment or other credit, unused foreign tax, or excess charitable
contribution allocable to ColorWorks and its Subsidiaries.
L. Employment Contracts and Employee Benefit Plans. There are no
-----------------------------------------------
pension, retirement, stock purchase, stock bonuses, stock ownership, stock
option, major medical, disability, hospitalization, insurance, savings or profit
sharing plans, any employment agreement for a fixed or guaranteed term, deferred
compensation, consultant, bonus, or collective bargaining agreement, or group
insurance contract or any other incentive, welfare or employee benefit plan,
policy, agreement, commitment, arrangement, or practice maintained by ColorWorks
and its Subsidiaries for any of their respective employees or former employees,
except as disclosed on the Disclosure Schedule.
M. Legal and Other Proceedings. To the best knowledge of
---------------------------
ColorWorks, Peeples and the Selling Shareholders, neither ColorWorks, the
Subsidiaries, Peeples, nor the Selling Shareholders, nor any of the directors or
officers of ColorWorks and the Subsidiaries (in their capacity as directors or
officers of ColorWorks and/or its Subsidiaries), is a party to any pending or,
threatened claim, action, suit, investigation, arbitration or proceeding, or is
subject to any order, judgment or decree that is reasonably expected to have,
either individually or in the aggregate, a material adverse effect on the
condition (financial or otherwise), earnings or results of operations of
27
<PAGE>
ColorWorks and/or the Subsidiaries, except as set forth on the Disclosure
Schedule. Notwithstanding anything contained herein to the contrary, the
aforesaid representation and warranty with respect to an unasserted claim,
action, suit, investigation, arbitration or proceeding is herein qualified to
the best of Peeples' and/or the Selling Shareholder's knowledge. ColorWorks, the
Subsidiaries, Peeples and/or the Selling Shareholders are not, as of the date
hereof, a party to or subject to any enforcement action instituted by, any
agreement or memorandum of understanding with, any federal or state regulatory
authority restricting their operations or requiring that actions be taken, and
no such regulatory authority has threatened any such action, memorandum or order
against ColorWorks, the Subsidiaries, Peeples and/or the Selling Shareholders,
and ColorWorks, the Subsidiaries, Peeples and/or the Selling Shareholders have
not received any report of examination from any federal or state or foreign
regulatory agency which requires that they address any problem or take any
action which has not already been addressed or taken in a manner satisfactory to
the regulatory agency, and such representations with respect to the Selling
Shareholders are hereby qualified to the best of their knowledge.
N. Affiliate Loans; Conflicts of Interest. The Disclosure
--------------------------------------
Schedule lists the amounts of, and all material information relating to, any
indebtedness or other obligations, liabilities or commitments (fixed or
contingent and direct or indirect) existing on the date hereof to ColorWorks and
the Subsidiaries from any of the executive officers or directors or shareholders
of ColorWorks and/or its Subsidiaries, Peeples, any of the Selling Shareholders,
or any member of their respective immediate families (consisting of their spouse
and children), any trust of which such person is a trustee or beneficiary, or
any corporation or other business entity of which any such person has control.
In addition, and except as set forth on the Disclosure Schedule, neither Peeples
28
<PAGE>
nor any of the Selling Shareholders is engaged in business, directly or
indirectly, with any entity or person who is engaged, directly or indirectly, in
business with ColorWorks and/or the Subsidiaries, excluding beneficial ownership
interests of 5% or less of the outstanding capital stock of publicly traded
corporations, and provided said beneficial ownership is not deemed to be part of
a larger group within the meaning of Section 13 of the Securities Act of 1933,
as amended, and which group does not beneficially own more than 5% of the
outstanding capital stock of any said entity.
O. Investment Portfolios. All investment securities held by
---------------------
ColorWorks and the Subsidiaries for their own account, respectively, as
reflected in the latest balance sheet of such entities included in the Financial
Statements, are carried in accordance with generally accepted accounting
principles consistently applied.
P. Properties. Except for any lien for current taxes not yet
----------
delinquent, and except as otherwise set forth on the Disclosure Schedule,
ColorWorks and the Subsidiaries have good title, free and clear of all liens,
encumbrances, charges, defaults or equities of whatever character to all of its
property, real and personal, and other material properties and assets, tangible
or intangible, respectively owned by such entities, including those reflected in
the Financial Statements, except the property and assets disposed of in the
ordinary course of business and for full and fair value. To the best knowledge
of ColorWorks, Peeples and the Selling Shareholders, all material leases or
material subleases of which ColorWorks and/or the Subsidiaries are a party are
valid and enforceable in accordance with their terms (except as enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or other similar laws affecting the enforcement of creditors' rights generally
and except that the availability of the equitable remedy of specific performance
or
29
<PAGE>
injunctive relief is subject to the discretion of the court before which any
proceedings may be brought). ColorWorks and the Subsidiaries are, respectively,
the lessee or the sublessee in possession under each such lease or sublease. All
rentals due under each such lease or sublease have been paid, and there are no
material defaults under any such lease or sublease or any event or condition
which, with the giving of notice, lapse of time or occurrence of any further
event or condition, would become a material default under any such lease or
sublease. The Disclosure Schedule lists and describes all material leases or
subleases. True, complete and correct copies of all such leases have been
delivered to Bush prior to the date hereof.
Q. Legal Compliance. The Disclosure Schedule sets forth all
----------------
material licenses which ColorWorks and the Subsidiaries possess. To the best
knowledge of ColorWorks, Peeples and the Selling Shareholders, ColorWorks and
the Subsidiaries possess all licenses and permits necessary to carry on their
respective businesses, including, without limitation, all licenses and permits
necessary to enter into sublicenses and/or exclusivity agreements with respect
to the Hydrographics Technology. In addition:
1. To the best of ColorWorks', Peeples', and the Selling
Shareholders' knowledge, ColorWorks and/or the Subsidiaries are in
compliance in all material respects with all laws, regulations, reporting
and licensing requirements and orders applicable to their respective
businesses or any of their respective employees;
2. To the best of ColorWorks', Peeples', and the Selling
Shareholders' knowledge, ColorWorks and/or the Subsidiaries are in
compliance in all material respects
30
<PAGE>
with all federal, state, local and foreign employment laws and regulations
(including, without limitation all employment discrimination laws and
regulations, immigration and naturalization laws and regulations)
applicable to their respective businesses or any of their respective
employees; and
3. Except as reflected on the Disclosure Schedule, ColorWorks
and/or the Subsidiaries have received no notification from any agency or
department of any federal, state, local, or foreign government or any
regulatory authority or the staff thereof asserting that ColorWorks and/or
the Subsidiaries is not in material compliance with or has violated any of
the statutes, regulations or ordinances which such governmental authority
or regulatory authority enforces, or threatening to revoke any license,
franchise, permit or governmental authorization of ColorWorks and/or the
Subsidiaries; and ColorWorks and/or the Subsidiaries are not subject to any
material agreement or consent decree with any regulatory authority arising
out of previously asserted violations with respect to ColorWorks and/or the
Subsidiaries assets or businesses, and such representations with respect to
the Selling Shareholders are hereby qualified to the best of their
knowledge;
4. To the best of Peeples' and the Selling Shareholders'
knowledge, ColorWorks and the Subsidiaries have filed in a timely manner
all reports, documents and other materials they were required to file (and
the information contained therein was correct and complete in all material
respects) under all applicable laws (including rules and regulations
thereunder);
31
<PAGE>
5. To the best of Peeples' and the Selling Shareholders'
knowledge, ColorWorks and the Subsidiaries have possession of all records
and documents they were required to retain under all applicable laws
(including rules and regulations thereunder); and
6. Except with respect to any consent required under the master
license agreement with Cubic, ColorWorks' executed loan agreements with
financial institutions, and the Industrial Revenue Bond, referred to
hereinafter, to the best of Peeples' and the Selling Shareholders'
knowledge, the transactions contemplated herein will not violate or
contravene any of such licenses, permits or applicable laws, or
regulations.
R. Contracts. The Disclosure Schedule lists all material contracts,
---------
including, without limitation, all licenses, sublicenses, exclusivity
agreements, tank agreements, marketing contracts, and/or lease agreements,
written or oral, except purchase orders entered into in the ordinary course of
business (and which do not provide for any penalties if not adhered to,
including without limitation, due to inability to timely deliver product or
quality control problems), to which ColorWorks and/or the Subsidiaries are a
party or with respect to which ColorWorks and/or the Subsidiaries are bound. As
of the date hereof and as of the Closing Date, and except as set forth on the
Disclosure Schedule, ColorWorks and/or the Subsidiaries are not a party to, nor
bound by, nor receives benefits under (a) any agreement, arrangement or
commitment that is material to the financial condition or results of operations
of ColorWorks and/or the Subsidiaries, except those entered into in the ordinary
course of business or cancelable by ColorWorks and/or the Subsidiaries without
penalty, (b) any agreement, arrangement or commitment relating to the
employment, election or retention in office of any employee, director or officer
of ColorWorks and/or the
32
<PAGE>
Subsidiaries, including, without limitation, any agreement, arrangement or
commitment with any consultant or former employee, former consultant, or former
officer or former director of ColorWorks and/or the Subsidiaries; (c) any
contract, agreement or understanding with any labor union or with any collective
bargaining agent; (d) any bonus, deferred compensation, profit sharing, pension,
retirement, stock option, stock purchase, hospitalization, insurance or other
plans or arrangements providing employee benefits; (e) any material leases with
respect to any property, real or personal, whether as landlord or tenant; (f)
any dealers, manufacturer's representative or distributor's agreements which are
not terminable by ColorWorks and/or the Subsidiaries on 60 days' or less notice;
(g) any contracts or commitments made in the ordinary course of business for the
purchase of materials or supplies or the performance of services for delivery or
performance over a period of more than 45 days from the date hereof; (h) any
non-cancelable contracts substantial in nature granting rights to, or sale or
lease of, products or services for delivery or use over a period of more than 90
days from the date hereof; or (i) any contracts continuing over a period of more
than three months from their respective dates. None of the material contracts,
including without limitation, all licenses, all sublicenses, all exclusivity
agreements, and/or all marketing agreements, contravene or infringe in a
material way upon any other contracts and/or agreements, including any other
licenses, sublicenses, exclusivity agreements, tank agreements and/or marketing
contracts, entered into or with respect to which ColorWorks and/or the
Subsidiaries may be bound. All of the licenses, sublicenses, exclusivity
agreements, tank agreements, and/or marketing contracts, entered into by
ColorWorks and/or the Subsidiaries and with respect to the Hydrographics
Technology, do not materially contravene or violate in a material way any of the
licensing contracts or other arrangements by and between ColorWorks, its
Subsidiaries and Cubic Engineering Co. Ltd., and its affiliates (Cubic
Engineering Co. Ltd. and its affiliates hereinafter "Cubic"), and all of said
licensing,
33
<PAGE>
sublicensing and other agreements entered into by ColorWorks and/or its
Subsidiaries with third parties do not exceed the scope of the license agreement
by and between ColorWorks, its Subsidiaries and Cubic. Cubic has acknowledged,
formally or informally, any and all sublicenses granted by ColorWorks and/or the
Subsidiaries with respect to the Hydrographics Technology and related
technology, exclusive of sample tank agreements. To the best of Peeples' and/or
the Selling Shareholders' knowledge, and except possibly with respect to the
letter of intent with Cubic Components Ltd. ("Cubic Components"), there are no
exclusivity agreements, and except with respect to Spectrum Industries, Inc.
("Spectrum"), Steelcase, Inc. ("Steelcase"), United Industries Nederland, B.V.
(with respect to outdoor garden furniture only) ("United"), Esmoal, S.A.
("Esmoal"), and Hydrografix Design & Surface Technologie, GMBH ("HDST"), there
are no sublicensing agreements, currently in force with respect to the
Hydrographics Technology with respect to ready-to-assemble furniture; and there
are no contractual obligations and/or commitments which would impede and/or
otherwise affect the ability of Bush and/or the ColorWorks, and its
Subsidiaries, from utilizing the Hydrographics Technology with respect to ready-
to-assemble furniture currently or in the future, subject to the continuation of
the licensing agreement with Cubic. To the best of Peeples' and/or the Selling
Shareholders' knowledge, there are no restrictions or other impediments with
respect to the ability of ColorWorks and/or its Subsidiaries from granting, if
Bush desires, an exclusivity agreement to Bush or its affiliates with respect to
ready-to-assemble furniture, except possibly with respect to the letter of
intent with Cubic Components and the sublicense agreements with Spectrum,
Steelcase, Esmoal, United and HDST.
S. Subsequent Events. Except as reflected on the Disclosure
-----------------
Schedule, since February 1, 1995, ColorWorks and/or the Subsidiaries have
respectively not (i) issued or sold any
34
<PAGE>
of its shares of capital stock, debt obligations or other corporate securities;
(ii) granted any options for the purchase of its shares of capital stock; (iii)
incurred any obligations or liabilities (fixed or contingent), except
obligations or liabilities in the ordinary course of business, obligations under
documents referred to in the Disclosure Schedule and obligations under this
Agreement; (iv) discharged or satisfied any lien or encumbrance, or paid any
obligations or liabilities (fixed or contingent), other than current liabilities
included in its balance sheet as at January 31, 1995, current liabilities
incurred since that date in the ordinary course of business, liabilities
incurred in carrying out the transactions contemplated by this Agreement, and
obligations or liabilities under contracts, leases or documents referred to in
the Disclosure Schedule; (v) declared or made any payment or distribution or
purchased or redeemed any shares of its capital stock, except as otherwise
provided herein; (vi) made any general wage or salary increase from those wage
and salary levels set forth on the Disclosure Schedule with respect to exempt
employees under the Fair Labor Standards Act, or entered into any employment
contract for a fixed term with any officer or salaried employee, except as noted
in the Disclosure Schedule; (vii) mortgaged, pledged or subjected to lien or any
other encumbrance any of its assets, tangible or intangible; (viii) sold or
transferred any of its tangible assets or cancelled any debts or material
claims, except in each case in the ordinary course of business; (ix) sold,
assigned, or transferred or granted rights under any patents, trademarks, trade
names, copyrights, licenses or other intangible assets, except in each case in
the ordinary course of business; (x) waived any rights of substantial value or
(xi) entered into any material transaction other than in the ordinary course of
business, except those documents which are referred to in the Disclosure
Schedule. Except as reflected on the Disclosure Schedule, ColorWorks and/or the
Subsidiaries are respectively not in material default, under any material
contract, agreement, commitment, loan, lease, or insurance policy to which they
respectively are a party or by which their
35
<PAGE>
respective assets, business or operations are bound, and there has not occurred
any event which, with the lapse of time or the giving of notice or both, would
constitute such a default.
T. Insurance. The Disclosure Schedule contains a complete and
---------
correct list of all insurance policies and bonds, including the amounts of
coverage carried on the date hereof by ColorWorks and the Subsidiaries, and the
premiums therefor. All premiums due on such policies have been paid prior to
expiration of any applicable grace period and all such policies are valid,
enforceable and in full force and effect, and ColorWorks and the Subsidiaries
have not received any notice of premium increases, from the premiums listed on
the Disclosure Schedule, or notice of cancellations of any said policies.
ColorWorks, Peeples, and/or the Selling Shareholders have no reason to believe
that ColorWorks' and the Subsidiaries' insurance and bond coverage will not be
renewed by its carriers on substantially the same terms as the existing
coverage. With respect to the environmental insurance referred to above, to the
best of the Selling Shareholders' and/or Peeples' knowledge, the application to
procure said policy does not contain any misrepresentation or fail to state a
material fact to render such application misleading, and to the best of Selling
Shareholders' and/or Peeples' knowledge, there is no fact or event known to said
Selling Shareholders and/or Peeples which if disclosed to such insurance carrier
or underwriter would cause said carrier or underwriter to deny any and/or all
claims under said policy. To the best of Peeples' and/or the Selling
Shareholders' knowledge, said environmental insurance coverage is valid.
U. Books of Account. To the best of Peeples' and the Selling
----------------
Shareholders' respective knowledge, the books of account and other records of
ColorWorks and the Subsidiaries are complete and correct in all material
respects and accurately present and reflect all of the material
36
<PAGE>
transactions entered into by ColorWorks and/or the Subsidiaries or to which
ColorWorks and/or the Subsidiaries is a party. Except with respect to the loans
with ColorWorks' primary lenders, and any consent required under the master
license agreement with Cubic, and any past due amounts invoiced by Cubic to
ColorWorks and its Subsidiaries under the master license agreement, ColorWorks,
Peeples, and/or the Selling Shareholders do not have any knowledge of any
condition which would have a material adverse effect upon ColorWorks' and/or the
Subsidiaries' business or prevent such business from being carried on in
substantially the same manner in which it is presently carried on.
V. No Misrepresentations. To the best of Peeples' and/or the
---------------------
Selling Shareholders' knowledge, none of the information contained in the
representations and warranties of ColorWorks, Peeples, and/or the Selling
Shareholders set forth in this Agreement, or in any of the documents delivered
or to be delivered to any party prior to or after the execution hereof as set
forth in any provision of this Agreement, contains or will contain any untrue
statement of a material fact or omits or will omit to state a material fact
necessary to make the statements contained herein or therein not misleading as
of the date hereof and as of the date of the Closing.
W. Guarantees. ColorWorks, Peeples, and/or the Selling
----------
Shareholders are not a guarantor or otherwise liable for any Liability or
obligation (including indebtedness) of any other person or entity with respect
to ColorWorks and/or the Subsidiaries, except as otherwise disclosed on the
Disclosure Schedule.
X. Environmental, Health, and Safety. Except as set forth herein,
---------------------------------
to the best of Peeples' and/or the Selling Shareholders' knowledge, ColorWorks
and/or the Subsidiaries have
37
<PAGE>
complied with all laws (including rules and regulations thereunder) of federal,
state, local, and foreign governments (and all agencies thereof) concerning the
environment (public health and safety, and employee health and safety) and no
charge, complaint, action, suit, proceeding, hearing, investigation, claim,
demand, or notice has been filed or commenced against, or sent to ColorWorks
and/or the Subsidiaries alleging any failure to comply with any such law or
regulation for which the requisite remedial action has not been taken. Except
as set forth on the Disclosure Schedule, no federal, state, local, and/or
foreign government (and any agency thereof) has recommended, demanded, or
notified ColorWorks and/or the Subsidiaries that any remedial environmental
measures must be taken to ensure compliance by ColorWorks and/or the
Subsidiaries with any applicable environmental law, rule, and/or regulation
which has not already been taken. In addition, except as otherwise set forth
herein, Peeples and/or the Selling Shareholders have no knowledge of any
hazardous material discharge, hazardous waste, or hazardous environmental
condition created, incurred, or acquiesced in by ColorWorks and/or the
Subsidiaries for which remedial action by ColorWorks and/or the Subsidiaries
will be required. In the event any such requisite remedial action was required
to be taken hereunder, to the best of Peeples' and/or the Selling Shareholders'
knowledge, and except as set forth herein, such action was properly taken to
comply and conform with any such law or regulation.
Y. Government Officers. ColorWorks, Peeples, and/or the Selling
-------------------
Shareholders have not respectively offered, paid, or agreed to pay to any person
or entity, including, without limitation, any governmental official, or any
officer, director or employee of Cubic and/or DiNippon, directly or indirectly,
any money or thing of value for the purpose or with the intent of obtaining or
maintaining business for ColorWorks and/or the Subsidiaries or otherwise
affecting its business,
38
<PAGE>
operations, prospects, properties, assets or condition (financial or otherwise)
which is in violation of any law or governmental rule or regulation or is not
properly and correctly recorded or disclosed on the books and records of
ColorWorks and/or the Subsidiaries.
Z. Local Ordinances. To the best of ColorWorks', Peeples', and/or
----------------
the Selling Shareholders' knowledge, ColorWorks and/or the Subsidiaries are in
substantial compliance with all rules, regulations, statutes and ordinances of
the Federal, state, county and city governments, and all subdivisions, bureaus
and agencies thereof, applicable to ColorWorks and/or the Subsidiaries or to the
conduct of their respective businesses, including, without limitation,
applicable zoning and environmental rules, regulations, statutes and ordinances,
a violation of which would have a material adverse effect on the business or
financial condition of ColorWorks and/or the Subsidiaries.
AA. ERISA. To the best of ColorWorks', Peeples', and the Selling
-----
Shareholders' knowledge, ColorWorks and/or the Subsidiaries have made all
payments and performed all acts, if any, required to comply with and have
complied in all material respects with the applicable provisions, if any, of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and the
related provisions of the Internal Revenue Code of 1986, as amended (the
"Code"), including without limitation, the timely filing of Form 5500. To the
best of ColorWorks', Peeples' and the Selling Shareholders' knowledge,
ColorWorks and the Subsidiaries have no unfunded liability or accumulated
funding deficiency (within the meaning of ERISA and the Code), whether or not
waived, with respect to any employee plan previously maintained by ColorWorks
and/or the Subsidiaries and/or to which ColorWorks and/or the Subsidiaries have
previously contributed. A true and correct copy of all summary plan
descriptions ("SPDs") required to be
39
<PAGE>
provided under ERISA with respect to employee benefit plans of ColorWorks and/or
the Subsidiaries have been delivered to Bush prior to closing. To the best of
Peeples' and/or the Selling Shareholders' knowledge, ColorWorks and/or the
Subsidiaries have complied in all material respects with all applicable
provisions of the Comprehensive Omnibus Budget Reconciliation Act of 1988, as
amended ("COBRA").
BB. Accounts Receivables; Inventory. Except as reflected on the
-------------------------------
Disclosure Schedule, ColorWorks' accounts receivables, on a consolidated basis,
are bona-fide accounts receivables and, since February 1, 1995, have not been
diminished in any manner other than by cash collections and write-offs in the
ordinary course of business. In addition, ColorWorks inventory, on a
consolidated basis, as set forth on the Financial Statements, represents bona
fide inventory, and since February 1, 1995, has not been diminished in any
manner other than the sale in the ordinary course of business, except as
otherwise set forth in the Disclosure Schedule. Except as reflected on the
Disclosure Schedule, said inventory, as reflected on the Financial Statements,
does not include any material amount of inventory that is either obsolete (due
to among other things and without limitation, the design of the pattern on the
film), or represents inventory, including, without limitation, film, that is no
longer viable for pattern transfer utilizing the Hydrographics Technology, due
to shelf life limitations, or inability to maintain the same in controlled
environmental conditions.
CC. Patents. ColorWorks and/or the Subsidiaries own or possess
-------
rights to use the patents, copyrights, trademarks and trade names set forth on
the Disclosure Schedule. To Peeples' and the Selling Shareholders' best
knowledge, ColorWorks and/or the Subsidiaries have not now and
40
<PAGE>
have not in the past violated or infringed any patent, copyright, trademark,
trade name or other proprietary rights of a third party, except as disclosed on
the Disclosure Schedule.
DD. Customer Relationships; Hydrographic Technology. Except as set
-----------------------------------------------
forth on the Disclosure Schedule, to the best of ColorWorks', Peeples' and/or
the Selling Shareholders' knowledge, ColorWorks' and the Subsidiaries'
relationships with their respective customers, vendors, employees, licensees,
and sublicensees, including without limitation, the manufacturer and
distribution of those films and chemicals used in the Hydrographics Technology,
are in all material respects satisfactory. In addition to the best of
ColorWorks', Peeples' and/or the Selling Shareholders' knowledge, the
Hydrographics Technology is a viable technology, permitting the three
dimensional decorating and coating of various substrate materials utilizing
printed films; and to the best of their knowledge, the proper use of such
technology does not create or enhance any significant health or environmental
risks.
EE. Warranties; Film Usage. Except as set forth on the Disclosure
----------------------
Schedule, neither ColorWorks and/or the Subsidiaries have issued, granted,
and/or extended any warranties with respect to any products and/or services
offered, sold, manufactured, or supplied by ColorWorks and/or the Subsidiaries.
With respect to any warranties so issued, granted and/or extended, and except as
set forth on the Disclosure Schedule, ColorWorks and/or the Subsidiaries have
not received any notice of claim or threatened claim, and no claim has been
made, threatened, or is pending with respect to any such warranty. The
Disclosure Schedule also sets forth the monthly film usage used and/or sold by
ColorWorks and/or the Subsidiaries during the prior two calendar years, with
respect to the Hydrographics Technology.
41
<PAGE>
III. Representations and Warranties of Bush. Bush hereby represents and
--------------------------------------
warrants, as of the date hereof, and as of the Closing Date, as follows:
A. Organization of Bush. Bush is a corporation duly organized,
--------------------
validly existing and in good standing under the laws of the State of Delaware.
B. Authorization of Transaction. Bush has the full power and
----------------------------
authority (including full corporate power and authority) to execute and deliver
this Agreement and to perform its obligations hereunder. This Agreement
constitutes a valid and legally binding obligation of Bush, enforceable in
accordance with its terms and conditions. All corporate and other actions
required to be taken by Bush to authorize the execution, delivery and
performance of this Agreement have been duly and properly taken.
C. Noncontravention. To the best of Bush's knowledge, neither the
----------------
execution nor the delivery of this Agreement, nor the consummation of the
transactions contemplated hereby, will (a) violate any statute, regulation,
rule, judgment, order, decree, stipulation, injunction, charge, or other
restriction of any government, governmental agency, or court to which Bush is
subject or (b) conflict with, result in breach of, constitute a default under,
result in the acceleration of, create in any party the right to accelerate,
terminate, modify, or cancel, or require any notice under any contract, lease,
sublease, license, sublicense, franchise, permit, indenture, agreement, or
mortgage for borrowed money, instrument of indebtedness, security interest, or
any other arrangement to which Bush is a party or by which it is bound or to
which any of its assets are subject.
42
<PAGE>
Notwithstanding the foregoing, the parties hereto hereby acknowledge that the
consent of Bush's primary lenders is required prior to the consummation of the
transactions contemplated herein.
D. Investment. Bush is acquiring the Shares for investment
----------
purpose only and not with a view toward the further sale or distribution
thereof.
E. Financial Information. The financial statements contained in
---------------------
the Form 10-K and Form 10-Qs provided by Bush and referred to in Section II.D.
were prepared in conformity with generally accepted accounting principles
consistently applied and present fairly the consolidated financial position of
Bush at, and its consolidated operating results for, the periods covered by such
Reports.
F. Bush Shares. The Bush Shares to be issued to the Selling
-----------
Shareholders, including Peeples, as part of the Purchase Price will upon
issuance, be duly authorized, validly issued and outstanding, fully paid and
non-assessable, and upon their registration as required by this Agreement shall
be free and clear of any restrictions on transfer, options, warrants or calls,
except for the escrow provisions of this Agreement, and except with respect to
the current prospectus delivery requirement upon the sale of said Bush Shares
pursuant to the Securities Act of 1933, as amended, and except for applicable
state blue sky laws, Bush is entitled to use Form S-3 to register the Bush
Shares for sale by the Selling Shareholders, including Peeples, provided that
any requisite financials of ColorWorks and its Subsidiaries required to be filed
under cover of Form 8-K by Bush are available on a timely basis for filing.
43
<PAGE>
G. No Misrepresentations. To the best of Bush's knowledge, none of
---------------------
the information contained in the representations and warranties of Bush set
forth in this Agreement, or in any of the documents delivered or to be delivered
to any other party prior to or after the execution hereof as set forth in any
provision of this Agreement, contains or will contain any untrue statement of a
material fact or omits or will omit to state a material fact necessary to make
the statements contained herein or therein not misleading as of the date hereof
and as of the date of the Closing.
H. Absence of Certain Changes. Except as specifically contemplated
---------------------------
by this Agreement, since December 31, 1995, Bush has not suffered any material
adverse change in its business, financial condition, properties, assets,
liabilities (absolute, accrued, contingent or otherwise, whether due or to
become due), reserves, operations or prospects nor has any event occurred nor is
anything pending or threatened that will have a materially adverse effect on any
of the foregoing. Notwithstanding anything contained herein to the contrary, the
aforesaid representation and warranty with respect to contingent or unknown
liabilities is herein qualified to the knowledge of Bush after reasonable
inquiry.
IV. Covenants to Survive Closing. All covenants, agreements,
----------------------------
representations and warranties made hereunder and in any certificates delivered
as of the Closing in accordance with the terms of this Agreement shall be deemed
to be material and to have been relied upon by the party to whom such covenants,
agreements, representations and warranties were made and/or certificates
delivered, notwithstanding any investigation heretofore or hereafter made by
Bush, Peeples, ColorWorks, and/or the Selling Shareholders or on their
respective behalf and shall survive the Closing.
44
<PAGE>
V. Pre-Closing Covenants. The parties agree as follows with respect to
---------------------
the period between the execution of this Agreement and the Closing (or
termination of this Agreement, if sooner terminated pursuant to the terms and
conditions contained herein):
A. General. Each of the parties will use its best efforts to take
-------
all action and to do all things necessary, proper, or advisable to consummate
the transactions contemplated by this Agreement. Peeples and the Selling
Shareholders will cooperate fully with Bush to enable Bush to adequately
complete its due diligence investigation with respect to ColorWorks and the
Subsidiaries. Bush will provide sufficient funds or arrange the necessary
financing so that the Selling Shareholders' loans referred to in Section VII.G.
are paid in full at the Closing, and so that the Selling Shareholders'
guarantees and letters of credit referred to in Section VII.H. are released at
the Closing, except as otherwise provided herein with respect to the letters of
credit that secure the Industrial Revenue Bond of ColorWorks. In addition, Bush
will provide sufficient funds or arrange the necessary financing so that
ColorWorks can obtain the environmental insurance referred to in Section I.F.(2)
hereto.
B. Notices and Consents. Peeples and the Selling Shareholders will
--------------------
cause ColorWorks and the Subsidiaries to give any notices to third parties, and
will use their best efforts to obtain any third-party consents, that may be
required hereunder to effectuate the Closing or with respect to which Bush may
reasonably request.
45
<PAGE>
C. Operation of Business. Peeples and/or the Selling Shareholders
---------------------
will not cause ColorWorks and/or the Subsidiaries to engage in any practice,
take any action, or enter into any transaction outside the ordinary course of
their respective businesses, except as contemplated by this Agreement or with
the express consent of Bush. In addition, Peeples and/or the Selling
Shareholders shall cause ColorWorks and/or the Subsidiaries not to materially
alter their respective methods of operations of their respective businesses,
except as reasonably necessary, given the current financial status of
ColorWorks. Peeples and the Selling Shareholders shall also ensure that
ColorWorks and the Subsidiaries shall not, without Bush's permission, which
permission shall not be unreasonably withheld, enter into any material agreement
or contract, including any license, sublicense, exclusivity, tank, marketing or
distribution agreement. To the extent permissible given the financial condition
of ColorWorks, Peeples and/or the Selling Shareholders shall preserve intact
ColorWorks' and its Subsidiaries' business and goodwill. In addition, Peeples
and/or the Selling Shareholders shall not permit the waste or destruction of the
business or goodwill of ColorWorks and/or the Subsidiaries.
D. Preservation of Assets. To the extent permissible given the
----------------------
financial condition of ColorWorks, Peeples and the Selling Shareholders will
cause ColorWorks and the Subsidiaries to keep its assets and properties
substantially intact, reasonable wear and tear excepted, including their
physical facilities, working conditions, and relationships with customers and
employees. In addition, to the extent permissible given the financial condition
of ColorWorks, Peeples and the Selling Shareholders shall not permit ColorWorks
and/or the Subsidiaries to waste or destroy any of the assets of ColorWorks
and/or the Subsidiaries and will ensure that ColorWorks will continue
46
<PAGE>
to maintain insurance with respect to the assets of ColorWorks and/or the
Subsidiaries, in substantially the form as in place as of the date of this
Agreement.
E. Full Access. Peeples and the Selling Shareholders will permit
-----------
representatives of Bush to have full access at all reasonable times and in a
manner so as not to interfere with the normal business operations of ColorWorks
and the Subsidiaries to all premises, properties, books, records, contracts, tax
records, and documents of or pertaining to ColorWorks and/or the Subsidiaries so
that Bush may conduct a reasonable due diligence.
F. Notice of Developments. To the extent they have knowledge,
----------------------
Peeples and/or the Selling Shareholders will give prompt written notice to Bush
of any material development affecting the assets, liabilities, business,
financial condition, operations, results of operations, or future prospects of
ColorWorks and/or the Subsidiaries. Each party will give prompt written notice
to the others of any material development affecting the ability of the other
party to consummate the transactions contemplated by this Agreement. In the
event of any material development, and said material development renders any
such representation, warranty or covenant contained herein not to be true and
correct, then the party hereto to whom said representation, warrant or covenant
is given or who receives the benefit thereof, may terminate this Agreement
without penalty, upon written notice to the other party hereto.
G. Exclusivity. Except as otherwise provided hereunder, Peeples
-----------
and/or the Selling Shareholders will not (i) solicit, initiate, or encourage the
submission of any proposal or offer from any person relating to ColorWorks
and/or the Subsidiaries with respect any (a) liquidation,
47
<PAGE>
dissolution, or recapitalization, (b) merger or consolidation, or (c)
acquisition or purchase of ColorWorks' and/or the Subsidiaries' securities or
assets; or (d) participate in any discussions or negotiations regarding, furnish
any information with respect to, assist or participate in, or facilitate in any
other manner any effort or attempt by any person to do or seek any of the
foregoing. Peeples and/or the Selling Shareholders will notify Bush immediately
if any person makes any proposal, offer, inquiry, or contact with respect to any
of the foregoing.
VI. Post-Closing Covenants. The parties agree as follows with respect to
----------------------
the period following the Closing:
A. General. In case at any time after the Closing any further
-------
action is necessary or desirable to carry out the purposes of this Agreement,
each of the parties will take such further action (including the execution and
delivery of such further instruments and documents) as any other party may
reasonably request, all at the sole cost and expense of the requesting party
(unless the requesting party is entitled to indemnification therefor under
Section IX below). Peeples and the Selling Shareholders acknowledge and agree
that from and after the Closing, Bush will be entitled to possession of all
documents, books, records, agreements, and financial data of any sort relating
to ColorWorks and/or the Subsidiaries.
B. Confidentiality. The Selling Shareholders shall enter into
---------------
confidentiality agreements as of the Closing Date with respect to the business
of ColorWorks and/or the Subsidiaries in the form attached hereto as Exhibit D,
and incorporated herein by reference.
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C. Registration of Bush Shares. Bush shall use its best efforts to
---------------------------
cause to be filed as soon as possible after the Closing Date, a Form S-3
Registration Statement with the Securities and Exchange Commission ("SEC") to
permit the public resale of the Bush Shares. Bush shall use its best efforts to
respond promptly to the comments of the SEC thereon, if any, and will promptly
make such further filings (including any amendments and supplements) in
connection therewith and take such further actions as may be necessary to permit
the public resale of the Bush Shares as soon as practicable. Nothing in this
subsection, however, shall be deemed to negate or otherwise qualify or confer
any limitation on the escrow of said Bush Shares in accordance with Section
IX.F. All expenses incurred in connection with the registration of the Bush
Shares, including, without limitation, all SEC and all blue sky registration (up
to a maximum of five states) and filing fees, legal fees, printing expenses,
fees of experts used by Bush in connection with such registration and expenses
incidental to any post-effective amendment to the Registration Statement, shall
be borne and paid by Bush. Notwithstanding anything contained herein to the
contrary, Bush shall use its best efforts to keep such Registration Statement
current for the lesser of (i) two years from the date of Closing or (ii) the
date that all of the Selling Shareholders, including Peeples, have sold,
transferred, assigned or otherwise disposed of their Bush Shares.
VII. Conditions Precedent to the Sellers' and Peeples' Obligations. The
-------------------------------------------------------------
Selling Shareholders', including Peeples', obligations to consummate the
transactions contemplated by this Agreement at the Closing shall be subject to
the satisfaction of the following conditions precedent (each of which may be
waived by the Selling Shareholders, including Peeples, in writing):
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A. The representations and warranties of Bush set forth in Section
III above shall be true and correct in all material respects at and as of the
Closing as though made on such date.
B. All agreements of Bush contained in this Agreement shall have
been complied with in all material respects.
C. No action, suit, or proceeding shall be pending before any court
or quasi-judicial or administrative agency of any federal, state, local, or
foreign jurisdiction, wherein an unfavorable judgment, order, decree,
stipulation, injunction, or charge would:
1. prevent consummation of the transaction contemplated by this
Agreement; or
2. cause any of the transactions contemplated by this Agreement
to be rescinded following consummation (and no judgment, order, decree,
stipulation, injunction, or charge shall be in effect).
D. Bush shall have delivered to the Selling Shareholders, including
Peeples, a certificate to the effect that each of the conditions specified above
in Subsections VII(A)-(C) is satisfied in all respects.
E. All actions to be taken by Bush in connection with the
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents
50
<PAGE>
required to affect the transactions contemplated hereby will be reasonably
satisfactory in form and substance to the Selling Shareholders, including
Peeples, and to Tuggle Duggins & Meschan, P.A., counsel to the Selling
Shareholders, and such counsel shall have been furnished with such certified
copies of actions and proceedings and such other instruments and documents as
they shall have reasonably requested.
F. The Selling Shareholders, including Peeples, shall have received
an opinion of Akerman, Senterfitt & Eidson, P.A., counsel to Bush, dated as of
the Closing Date in form and substance satisfactory to the Selling Shareholders,
including Peeples, and their counsel, to the effect that:
1. Bush is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware and has the corporate
power to perform its obligations hereunder, to own its properties and to
carry on its business as now being conducted;
2. This Agreement has been duly authorized, executed and
delivered by Bush and is valid and enforceable against Bush in accordance
with its terms; however, the validity, binding effect and enforceability of
this Agreement may be limited or otherwise affected by bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance or other
similar statutes, rules, regulations, or other laws affecting the
enforcement of creditors' rights and remedies generally; or the
unavailability of, or limitation on the availability of, a particular right
or remedy (whether in a proceeding in equity or at law) because of an
51
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equitable principle or a requirement as to commercial reasonableness,
conscionability or good faith.
3. The Bush Shares, when issued to the Selling Shareholders,
including Peeples, pursuant to this Agreement, will be duly authorized,
validly issued and outstanding, fully paid and non-assessable.
G. The Selling Shareholders shall have received as of the Closing
Date repayment in full of their respective loans made to ColorWorks in the
aggregate principal amount of $425,592.11 plus accrued interest, which amounts
are set forth on the Disclosure Schedule, and which loans were outstanding as of
November 30, 1995 (the date of the letter of intent with respect to the
transactions contemplated hereunder).
H. The Selling Shareholders and Joseph Bryan, Jr. shall be released
as of the Closing Date from any and all personal guarantees securing debt
obligations of ColorWorks to financial institutions, in the aggregate principal
amount of $950,000 and which personal guarantees were outstanding as of November
25, 1995. In addition, the Selling Shareholders and Joseph Bryan, Jr. shall be
released as of the Closing Date from any obligations under letters of credit
issued by the Selling Shareholders and which were outstanding as of November 25,
1995 and which in the aggregate totaled $112,500, and which secured ColorWorks'
outstanding Industrial Revenue Bond. Notwithstanding the foregoing, in the event
said letters of credit are not capable of being released as of the Closing Date,
the Selling Shareholders hereby agree that such inability shall not prevent the
consummation of the transactions contemplated hereunder; it being the agreement
of all the
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parties hereto that Bush and ColorWorks shall jointly and severally indemnify
said Selling Shareholders from any and all claims with respect to such letters
of credit, if the same are called subsequent to the Closing Date due to the
failure of ColorWorks or any of its Subsidiaries to timely meet its obligation
under the aforesaid Industrial Revenue Bond or any other default thereunder.
Bush further agrees to use its best efforts to cause ColorWorks to have said
obligations of the Selling Shareholders and Joseph Bryan, Jr., represented by
such letters of credit, released as soon as practicable after the Closing.
I. Payment of the Purchase Price, as provided herein.
J. A binder evidencing the environmental insurance policy, as
described above, in form satisfactory to the Selling Shareholders and Peeples
shall have been procured.
VIII. Conditions Precedent to Bush's Obligations.
------------------------------------------
The obligations of Bush to consummate the transactions contemplated
by this Agreement at the Closing shall be subject to the satisfaction of the
following conditions precedent (each of which may be waived by Bush in writing):
A. All representations and warranties of Peeples and/or the Selling
Shareholders contained in this Agreement shall be true and correct on and as of
the Closing Date as though made on such date.
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B. The Selling Shareholders, including Peeples, shall have complied
in all material respects with all agreements of the Selling Shareholders,
including Peeples, contained in this Agreement.
C. No action, suit, or proceeding shall be pending before any court
or quasi-judicial or administrative agency of any federal, state, local, or
foreign jurisdiction, wherein an unfavorable judgment, order, decree,
stipulation, injunction, or charge would
1. materially adversely affect the business and financial
condition of ColorWorks and/or the Subsidiaries and/or prevent consummation
of any of the transactions contemplated by this Agreement; or
2. cause any of the transactions contemplated by this Agreement
to be rescinded following consummation (and no judgment, order, decree,
stipulation, injunction, or charge shall be in effect).
D. The Selling Shareholders shall have delivered to Bush a
certificate to the effect that each of the conditions specified in Subsections
VIII(A)-(C) is satisfied in all respects, with the representation in Subsection
VIII(C) qualified to the best of the Selling Shareholders' knowledge; and
Peeples shall have delivered to Bush a certificate to the effect that each of
the conditions specified in Subsections VIII(A) and (C) is satisfied in all
respects.
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E. The Selling Shareholders, including Peeples, shall have duly
tendered all the Shares and stock powers as required by Subsection I(A) hereof,
to Bush.
F. Bush shall have received all of the Financial Statements
required, as described in Subsection II(H) above, except for the audited
Financial Statement for the year ended January 31, 1996, and Bush shall have
received the financial statements of Cubic Components LLC.
G. All actions to be taken by the Selling Shareholders, including
Peeples, in connection with the consummation of the transactions contemplated
hereby, and all certificates, opinions, instruments, and other documents
required to effect the transactions contemplated hereby will be reasonably
satisfactory in form and substance to Bush and to Akerman, Senterfitt & Eidson,
P.A., counsel to Bush, and said counsel shall have been furnished with such
certified copies of actions and proceedings and such other instruments and
documents as they shall have reasonably requested.
H. Bush shall have received an opinion of Tuggle Duggins & Meschan,
P.A., counsel for the Selling Shareholders, dated the Closing Date, in form and
substance satisfactory to Bush and its counsel and to the effect that:
1. ColorWorks and the Subsidiaries are corporations duly
organized, validly existing and in good standing under the laws of the
State of North Carolina or their respective states of incorporation; and
ColorWorks and the Subsidiaries have the corporate
55
<PAGE>
power to perform their respective obligations hereunder, to own their
respective properties and to carry on their respective businesses as now
being conducted.
2. The Shares constitute all of the duly issued and outstanding
shares of ColorWorks' capital stock, beneficially owned by the Selling
Shareholders, and are fully paid and non-assessable.
3. Each of the Selling Shareholders has the full power and
authority to sell and deliver the Shares to Bush as provided in this
Agreement;
4. This Agreement has been duly executed and delivered by each
of the Selling Shareholders, and is valid and enforceable against the
Selling Shareholders in accordance with its terms; however, the validity,
binding effect and enforceability of this Agreement may be limited or
otherwise affected by bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance or other similar statutes, rules, regulations, or
other laws affecting the enforcement of creditors' rights and remedies
generally; or the unavailability of, or limitation on the availability of,
a particular right or remedy (whether in a proceeding in equity or at law)
because of an equitable principle or a requirement as to commercial
reasonableness, conscionability or good faith.
I. Bush shall have received an opinion of Womble Carlyle Sandredge &
Rice, counsel for Peeples, dated the Closing Date, in form and substance
satisfactory to Bush and its counsel and to the effect that:
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<PAGE>
1. The Shares to be sold by Peeples hereunder are beneficially
owned by Peeples and are fully paid and non-assessable;
2. Peeples has the full power and authority to sell and deliver
the Shares to Bush as provided in this Agreement;
3. This Agreement has been duly executed and delivered by Jim
Peeples, Anne Peeples, and the Peeples Family Trust, and is valid and
enforceable against Peeples in accordance with its terms; however, the
validity, binding effect and enforceability of this Agreement may be
limited or otherwise affected by bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance or other similar statutes, rules,
regulations, or other laws affecting the enforcement of creditors' rights
and remedies generally; or the unavailability of, or limitation on the
availability of, a particular right or remedy (whether in a proceeding in
equity or at law) because of an equitable principle or a requirement as to
commercial reasonableness, conscionability or good faith.
J. Bush shall have received certified copies, reasonably
satisfactory in form and substance to Bush of all such corporate documents of
ColorWorks and/or the Subsidiaries as Bush shall reasonably require, including
without limitation, the following:
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1. a good standing certificate of the Secretary of State of
North Carolina certifying as of a recent date that ColorWorks is a
corporation in good standing under the laws of the State of North Carolina;
2. a certificate from the appropriate state corporate taxing
agency certifying as of a recent date that ColorWorks is in good standing
with such taxing agency and that it has paid all franchise and other taxes
then due; and
3. a good standing certificate from their respective states of
incorporation, and a certificate from the appropriate state corporate
taxing authority with respect to each of the Subsidiaries.
K. In addition to the foregoing, at the Closing, the Selling
Shareholders, including Peeples, shall deliver to Bush, among other things,
certificates, duly endorsed, evidencing all of the issued and outstanding Shares
beneficially owned by the Selling Shareholders, and the Shares to be sold
hereunder by Peeples, certified resolutions of the Board of Directors of
ColorWorks and the Subsidiaries authorizing any transactions contemplated herein
which require Board approval, including cancellation of any shareholders
agreement that ColorWorks and/or the Subsidiaries may be a party to, and such
other certificates, instruments or papers as Bush may reasonably request,
including resignations of the Officers and Directors of ColorWorks and of the
Subsidiaries.
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L. Bush shall have, in its sole discretion, completed to its
satisfaction its due diligence with respect to ColorWorks and the Subsidiaries
and their respective businesses.
M. Peeples shall have entered into an employment agreement with
ColorWorks or Bush, mutually acceptable to Bush and to Peeples.
N. The Selling Shareholders shall have entered into as of the
Closing, confidentiality agreements with Bush and/or ColorWorks in the form
attached hereto as Exhibit D.
O. Cubic shall have entered into an extension of the licensing
agreement with ColorWorks and/or its Subsidiaries on terms satisfactory to Bush,
and which terms shall at a minimum provide for an extension of the licensing
agreement for a minimum of ten (10) years; re-affirm the exclusivity of the
licensing agreements in the Western Hemisphere including parts of Europe
(exclusive of the rights of Spectrum with respect to the licensing of the
Hydrographics Technology for automotive parts); and re-affirm the relationship
by and between DiNippon and Cubic to ensure the uninterrupted supply of film,
which film underlies the use of the Hydrographic Technology.
P. Bush shall have received written approval from its primary
lenders with respect to loaning funds to ColorWorks in order to enable
ColorWorks to repay ColorWorks' primary lenders.
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Q. The environmental insurance policy, as described above, in form
satisfactory to Bush and/or ColorWorks shall have been procured.
IX. Indemnification.
---------------
A. Jim Peeples, Anne Peeples, the Peeples Family Trust and the
Selling Shareholders, jointly and severally, hereby agree to indemnify and hold
harmless Bush, their officers, directors, principal shareholders and their
successors and assigns from and against and in respect of:
1. any and all claims, losses, damages or deficiencies
(including reasonable attorney's fees and court costs) resulting from any
misrepresentation, breach of warranty or non-fulfillment of any agreement
on the part of ColorWorks, its Subsidiaries, Peeples and the Selling
Shareholders under this Agreement or any instrument or document delivered
to Bush pursuant hereto;
2. any and all liabilities or obligations, including assessments
against or tax liabilities, of ColorWorks and the Subsidiaries existing as
of and/or arising as of or prior to the date of the Closing, of any nature,
whether accrued, absolute, contingent or otherwise, and whether asserted
before or after the Closing, except as disclosed in this Agreement or the
Exhibits hereto, including reasonable attorney's fees and court costs; and
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3. all liabilities or obligations of ColorWorks, the
Subsidiaries, Peeples and/or the Selling Shareholders, existing as of the
date of or accruing prior to the Closing, except as disclosed in this
Agreement or the Exhibits hereto. Notwithstanding anything contained herein
to the contrary, with respect to any existing litigation, including without
limitation, the Stamford, Inc. and Connie Wright matters, and irrespective
of disclosure in this Agreement and the Schedules and Exhibits hereto, the
Selling Shareholders and/or Peeples shall not be relieved and/or released
of any obligation to indemnify Bush, its officers, directors and/or
principal shareholders and their successors and assigns, and such
obligation to indemnify shall not terminate irrespective of any other
provision contained hereinafter, provided, however, that the amount of such
indemnification by the Selling Shareholders with respect to any existing
litigation shall be subject to Sections IX.A.4. and IX.E. hereto. In
addition, and notwithstanding anything contained herein to the contrary,
with respect to any liability or obligation relating to environmental
matters, including any clean-up, remediation or response work required in
order to comply with applicable federal, state and/or local law and
regulation with respect to contamination or pollution which occurred prior
to Closing (and/or continuing subsequent to the Closing Date if the
condition giving rise to such claims, damages, losses, clean-up and/or
remediation costs existed prior to the Closing Date), all as more fully
described in Section 1.F hereto, and irrespective of disclosure in this
Agreement and the Schedules and Exhibits hereto, the Selling Shareholders
and/or Peeples shall not be relieved and/or released of any obligation to
indemnify Bush, its officers, directors and/or principal shareholders and
their successors and assigns, provided said indemnification shall be
diminished to the extent such costs, damages, losses, liabilities, claims
and/or obligations are paid under and pursuant to the environmental
insurance policy
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being procured by ColorWorks and/or Bush as described herein, and such
obligation to indemnify shall not terminate irrespective of any other
provision contained hereinafter, provided, however, that the amount of such
indemnification by the Selling Shareholders with respect to such
environmental matters shall be subject to Section IX.A.4. and IX.E. hereto,
to the extent applicable, and provided further that the $25,000 basket
hereunder shall not be applicable to said claims for indemnification. The
parties hereto further acknowledge that ColorWorks has retained independent
counsel to represent ColorWorks with respect to existing litigation in
Pennsylvania, and the parties further agree that such counsel shall
continue to represent ColorWorks with reference to such litigation. In
addition, the parties agree that no settlement shall be entered into with
respect to the current litigation without the mutual written consent of
Peeples, ColorWorks and the Selling Shareholders, which consent shall not
be unreasonably withheld. The parties further agree that any business
decisions to be made with respect to such litigation shall be made with the
unanimous approval of the Selling Shareholders, Peeples and ColorWorks.
Notwithstanding anything contained herein to the contrary, for purposes
hereunder the Selling Shareholders shall be deemed to have consented or
agreed in the event such holders of a majority in interest of the
ColorWorks shares of capital stock owned of record by the Selling
Shareholders as of the date of this Agreement evidence their assent to any
such action. In addition, and anything contained herein to the contrary
notwithstanding, for purposes hereunder Peeples shall be deemed to have
consented or agreed in the event the holders of a majority in interest of
the ColorWorks shares of capital stock owned of record by Peeples,
exclusive of the Shares being sold hereunder by Peeples, as of the date of
this Agreement evidence their assent to any such action. In the event any
party hereto does not evidence their consent or agreement to any
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action within fifteen (15) days, or such shorter period if any such consent
is required to be obtained sooner to avoid any potential adverse
consequences (provided such shorter period is specified in the following
notice), after written notice of any such action, then such party shall
have been deemed to have consented or agreed to any such action. No such
consent or agreement shall be required hereunder with respect to any
actions taken or performed in the normal course of representation by the
then existing counsel representing ColorWorks with respect to such
litigation. In the event unanimity cannot be reached among the parties,
then the parties agree to follow any recommended advice by the attorneys
representing ColorWorks in the existing litigation. The parties further
agree to cooperate fully in the defense of such litigation and to promptly
notify each other with respect to developments concerning the same. In
addition, and notwithstanding anything contained herein to the contrary,
subject to the $25,000 basket and Purchase Price ceiling limitations set
forth in Section IX.E. and the other limitations set forth in Section
IX.A.4. hereto, all expenses, costs and fees incurred by ColorWorks in
connection with such litigation, including attorney fees and court costs,
shall be promptly reimbursed to ColorWorks by Peeples and the Selling
Shareholders.
4. Notwithstanding anything contained herein to the contrary, the
parties agree that in the event of any claim or claims for indemnification
hereunder against the Selling Shareholders, the indemnification obligation
of the Selling Shareholders shall not exceed 67.1% of the monetary amount
of the damages for which Bush is entitled to indemnification hereunder with
respect to said claim, that being the percentage of the Selling
Shareholders' aggregate ownership interest in ColorWorks prior to the
redemption of the
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capital stock of Joseph Bryan, Jr., described above; however, the 67.1%
limitation shall not apply in the case of claims arising out of fraud
committed by the Selling Shareholders, or fraud committed by ColorWorks or
Peeples which was known by the Selling Shareholders or which should have
been known by the Selling Shareholders. In accordance with Section IX.E.,
the aggregate indemnification obligation of the Selling Shareholders,
(after multiplying the 67.1% by said claim, if that is applicable), shall
not exceed the Purchase Price.
B. Bush hereby agrees to indemnify and hold harmless the Selling
Shareholders from and against and in respect of:
1. any and all claims, losses, damages or deficiencies
(including reasonable attorneys' fees and court costs) resulting from any
misrepresentation, breach of warranty or non-fulfillment of any agreement
on the part of Bush under this Agreement or any instrument or document
delivered to the Selling Shareholders pursuant hereto.
C. If any claim is hereafter made against a party to this Agreement
by a third party which if valid and satisfied would result in a right to
indemnification under this Section (herein called the "Loss"), the party
entitled to indemnity (the "Indemnified Party") shall promptly after receipt of
such notice of a potential Loss give written notice to the party required to
provide indemnity (the "Indemnifying Party") stating in reasonable detail the
nature and amount of the claim and providing a copy of the complaint or other
documents asserting the claim (the "claim notice"); provided, however, that no
-------- -------
delay on the part of the Indemnified Party in notifying any Indemnifying
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Party shall relieve the Indemnifying Party of any obligation or liability
hereunder unless (and then solely to the extent) the Indemnifying Party thereby
is damaged. Within twenty (20) days after giving of the claim notice, the
Indemnifying Party shall give written notice to the Indemnified Party as to
whether it elects to contest such claim at its own expense; provided, however,
during the interim the Indemnified Party shall take any action with respect to
such claim which is necessary to protect against further damage or default,
including, without limitation, the filing of an answer to any such complaint. If
the Indemnifying Party does not undertake the defense of such claim, the
Indemnified Party shall have the discretion to satisfy, compromise, arbitrate or
otherwise deal with such claim as, in its good faith discretion, it deems
appropriate. At the request of the Indemnifying Party, the Indemnified Party
shall cooperate with the Indemnifying Party in the defense of any claim,
provided that the Indemnifying Party has assumed the defense of such claim in
accordance with the preceding sentence and that all reasonable costs of the
Indemnified Party shall be reimbursed by the Indemnifying Party. The Indemnified
Party shall have the right to offset any obligation of the Indemnified Party to
the Indemnifying Party against any indemnity payable under this Section IX,
provided that the obligations set forth in this Section IX(C) are materially
complied with by the Indemnified Party. The Indemnified Party may retain
separate co-counsel at its sole cost and expense (except that the Indemnifying
Party will be responsible for all of the fees and expenses of the separate co-
counsel to the extent the Indemnified Party concludes reasonably that the
counsel the Indemnifying Party has selected has a conflict of interest). The
Indemnified Party will not consent to the entry of any judgment or enter into
any settlement with respect to the matter without the written consent of the
Indemnifying Party (not to be withheld unreasonably). The Indemnifying Party
will not consent to the entry of any judgment with respect to the matter, or
enter into any settlement without the written consent of the Indemnified Party
(not to be withheld unreasonably).
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If any claim for indemnification arises out of a claim by the
Indemnified Party rather than a third party claim, it shall notify the
Indemnifying Party of the nature and, to the extent feasible, of the amount of
the loss suffered or that may be suffered (the "claim notice"). The Indemnifying
Party shall have twenty (20) days from the Indemnified Party's claim notice to
notify the Indemnified Party of the Indemnifying Party's objection to the nature
or amount of the proposed claim for indemnification, specifying the ground for
such objection. If no such notice of objection is timely given by the
Indemnifying Party, the Indemnified Party shall be entitled to indemnification
hereunder. If objection is timely given, the dispute may be resolved through
litigation, arbitration, if all parties so agree, or by agreement of the
Indemnified Party and the Indemnifying Party. The prevailing party in such
litigation shall be indemnified by the other for its reasonable counsel fees,
court costs and filing fees, however, in the event of arbitration, the
arbitrator shall determine the allocation of such fees and costs. If the matter
is resolved by agreement of the parties, the parties shall determine how their
respective reasonably necessary legal fees and costs are borne.
Notwithstanding anything contained herein to the contrary, in the
event and to the extent any of the procedures herein relating to indemnification
are inconsistent with the procedures set forth in the Escrow Agreement or Cash
Escrow Agreement, entered into as of the same date herewith, the procedures set
forth in said Escrow Agreements shall govern.
D. Indemnification rights hereunder shall terminate upon the later
of three (3) years from the Closing Date or the applicable statute of
limitations period relative to any such claim.
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E. Except as otherwise required under the terms of this Agreement,
the Selling Shareholders shall not be obligated to pay any amounts for
indemnification until the aggregate amount of such claims exceeds $25,000,
whereupon the Selling Shareholders shall be jointly and severally obligated to
pay to Bush 67.1% of such claims in excess of $25,000 (or 100% of such excess
claims based on fraud, as defined in Section IX.A.4.). The Selling Shareholders
shall not be liable for any amounts for indemnification in excess of the
Purchase Price. Bush shall not be liable to the Selling Shareholders for any
amounts for indemnification until the aggregate amount of such claims exceeds
$25,000. Bush shall not be liable for any amounts for indemnification in excess
of that portion of the Purchase Price initially ascribed to the Bush Shares.
F. Escrow of Bush Shares. Notwithstanding anything contained
---------------------
herein to the contrary, the parties hereto hereby agree that the Bush Shares to
be issued as of the Closing Date, on a pro rata basis to the Selling
Shareholders, and the Bush Shares to be issued to Peeples, shall be delivered to
Tuggle Duggins & Meschan, P.A. (the "Escrow Agent"), in accordance with the
terms and conditions of that certain escrow agreement which shall be entered
into as of the Closing Date, a copy of which is attached hereto as Exhibit E,
and incorporated herein by reference. All of said Bush Shares are to be held in
escrow as security for any payments due to Bush by the Selling Shareholders,
including Peeples, under the indemnification provisions of this Agreement
including, without limitation, any claims or payments with respect to
environmental matters, as provided below, and the escrow shall not be construed
as a measure of any limitation of damages. The Bush Shares shall be released to
the Selling Shareholders, including Peeples, in accordance with the terms and
conditions of said escrow agreement.
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Ten percent of the initial escrow from each Selling Shareholder,
including Peeples, shall be distributed to that Selling Shareholder, including
Peeples, quarterly, commencing on the first anniversary of the Closing Date in
accordance with this Section. Upon the first anniversary of the Closing Date and
every ninety (90) days thereafter, the Escrow Agent shall release to each
Selling Shareholder and Peeples, respectively, ten percent (10%) of the number
of Bush Shares held and placed in escrow by said Selling Shareholder and
Peeples, respectively, as of the Closing Date (as equitably adjusted for any
stock split, stock dividend, or recapitalization since the Closing Date),
provided there are no unsatisfied or unresolved claims for indemnification by
the Selling Shareholders and/or Peeples, respectively, of which the Escrow Agent
has received notice, and provided further only with respect to that portion of
the Bush Shares held in escrow and ascribed to Peeples, there are no other
unsatisfied or unresolved claims arising out of, pursuant to, and/or in
accordance with, any other agreements by and between Bush and/or its affiliates
and Peeples of which the Escrow Agent has received notice. If there is any
unsatisfied or unresolved claim for indemnification of Bush, and/or its
affiliates, against the Selling Shareholders and/or Peeples, as provided above,
then the Escrow Agent shall not make the distributions described above, to the
extent that the Escrow Agent, in its reasonable judgment based on the written
notice it has received of the nature and amount of any such claim, believes such
distribution would leave an insufficient amount in escrow to fully satisfy the
unsatisfied or unresolved claims, but no Bush Shares of a Selling Shareholder
(or cash substitute therefor) shall be retained for the sole purpose of
satisfying a claim arising out of any other agreement between Bush and/or its
affiliates and Peeples. Notwithstanding the foregoing, environmental claims
shall only be made against and pursuant to the afore-described escrow in
accordance with Section IX.J. below, and except and to the extent of any said
claims made in accordance with said Section IX.J., claims made against and
pursuant to the
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separate cash escrow, described herein, established by the parties hereto for
environmental claims shall not constitute unsatisfied or unresolved claims
against the Bush Share escrow established hereunder.
The Escrow Agent shall make such determination as to the sufficiency
of the Bush Shares and/or cash substitute in lieu thereof to remain in escrow,
based upon the then value of the Bush Shares, which shall be valued based upon
the average of the closing price of Class A Bush Common Stock, for the five (5)
trading days immediately preceding the date of said anticipated distribution to
the Selling Shareholders and/or Peeples from the Escrow Agent, as reported on
the New York Stock Exchange, or if such shares of Bush Class A Common Stock are
not so reported on the New York Stock Exchange, then on such exchange or inter-
dealer quotation system where such shares are then so traded.
Following the registration of the Bush Shares for the public resale
thereof, as provided herein, upon request of a Selling Shareholder and/or
Peeples to sell a specified number of Bush Shares, the Escrow Agent shall
forward said amount of Bush Shares to be sold by the Selling Shareholder and/or
Peeples to a broker-dealer, selected by the Selling Shareholder or Peeples,
provided said broker-dealer agrees not to commingle the Bush Shares with another
account of the Selling Shareholder or Peeples, or a third party. Said Bush
Shares shall not, notwithstanding the foregoing, be disseminated to said broker-
dealer if at the time of the request to sell the Bush Shares by a Selling
Shareholder or Peeples, the Selling Shareholder or Peeples is unable to sell the
same due to the inability of the Selling Shareholder or Peeples, to satisfy the
current prospectus delivery requirement under the Securities Act of 1933, as
amended. In the event any said Bush Shares are
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<PAGE>
not sold by such broker-dealer within thirty (30) days after delivery of the
same by the Escrow Agent to the broker-dealer, the Bush Shares shall be returned
by the broker-dealer to the Escrow Agent. The broker-dealer shall agree not to
release any of the Bush Shares or the proceeds received therefrom upon sale to
any party other than to the Escrow Agent. As soon as practicable following the
broker-dealer's receipt of any sale proceeds, less commissions, from the sale of
the Bush Shares, the proceeds shall be disseminated to the Escrow Agent to be
deposited in an interest-bearing account at a federally insured banking
institution. Ten percent of the sale proceeds deposited, together with any cash
substituted for Bush Shares, as provided below, with respect to a Selling
Shareholder and/or Peeples shall be distributed every ninety (90) days to such
Selling Shareholder and/or Peeples, respectively, commencing one year from the
Closing Date, subject to the Escrow Agent's obligation to withhold distribution
of amounts provided herein for unsatisfied or unresolved claims, as provided
herein. Interest earned on the deposited sale proceeds, or the substituted cash
and dividends on the Bush Shares shall be distributed every ninety (90) days to
the Selling Shareholder and/or Peeples, respectively, commencing one year from
the Closing Date, subject to the afore-described Escrow Agent's obligation to
withhold distributions hereunder for unsatisfied or unresolved claims, as
described herein.
Notwithstanding the foregoing, any Selling Shareholder and/or Peeples
may in lieu of having Bush Shares held in escrow, seek to substitute the cash
equivalent thereof in escrow. In such event, a Selling Shareholder and/or
Peeples must request in writing that the Escrow Agent release said Bush Shares
from escrow in substitution for cash therefor. Said written notification, with a
copy sent to Bush, shall specify the number of Bush Shares to be released from
escrow and the cash consideration to be substituted therefor. For purposes
hereof, the cash consideration to be
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<PAGE>
substituted therefore per Bush Share shall be equal to the average of the
closing price of shares of Class A Common Stock of Bush for the twenty (20)
trading days immediately preceding the date of such notice, as reported on the
New York Stock Exchange, or if such shares of Bush Class A Common Stock are not
so reported on the New York Stock Exchange, then on such exchange or inter-
dealer quotation system where such shares are then so traded. Such cash payment,
by bank, certified or cashier's check shall accompany said notice. The Escrow
Agent will then verify with Bush upon receipt of the same of the calculations
that the appropriate amount of cash has been received. Said notice shall be
irrevocable by the Selling Shareholder and/or Peeples, and provided the
requisite cash payment is received and upon such date as any said checks clear,
the Escrow Agent will release said requisite number of Bush Shares to the
Selling Shareholder and/or Peeples. Any such cash so received will be placed by
the Escrow Agent in a segregated interest bearing account at a federally insured
banking institution, together with any proceeds received from any sale of Bush
Shares as provided above, and said aggregate cash balance, exclusive of accrued
interest, with respect to the Selling Shareholder and/or Peeples, who deposits
the same, will be used to determine the 10% of the cash portion of the escrow to
be released every ninety days from escrow, as described above. In addition, the
parties hereto hereby agree and acknowledge that in lieu of selling any of the
Bush Shares or providing a cash substitute as described herein, or in lieu of
selling the Bush Shares on the open market or in privately negotiated
transactions subsequent to the Bush Shares being released from escrow, upon the
then mutual agreement of Bush and a party hereto, the Bush Shares may be
redeemed by Bush upon such terms and conditions to be agreed upon by such party
and Bush.
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Notwithstanding anything contained herein to the contrary, in the
event any of the Bush Shares held in escrow are substituted for the cash
equivalent thereof or sold for cash, as provided above, the number of Bush
Shares to be released from escrow as provided above shall equal ten percent
(10%) of the difference between (i) the Bush Shares initially placed in escrow
as of the Closing Date and (ii) the total number of Bush Shares that were sold
or substituted for cash as of or prior to the date of any such release.
The parties agree that if acceptable to Bush, in its sole discretion,
any Selling Shareholder and/or Peeples may substitute a letter of credit, in
form and substance satisfactory to Bush for any Bush Shares or cash so escrowed.
G. In the event that Bush contends that it is entitled to
indemnification from the Selling Shareholders pursuant to the indemnification
provisions of this Agreement, including, without limitation, any amounts
relating to environmental matters, the Escrow Agent shall disburse Bush Shares
and/or cash from the escrow account upon receipt of evidence of the amount of
such damage or loss (reflecting the application of the $25,000 basket, if
applicable, the 67.1% limitation, if applicable, and the Purchase Price
ceiling), evidence that Bush gave the required notice to the Selling
Shareholders of the loss and receipt by the Escrow Agent of an affidavit from
Bush or written confirmation from the Selling Shareholders that no notice of
objection was given by the Selling Shareholders to the payment or disbursement.
If no notice of objection is received by Bush within fifteen (15) days from the
date said notice is deemed to have been given hereunder, the parties hereto to
which said notice was given shall be deemed not to have objected. If, however,
notice of
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<PAGE>
objection was given, the Escrow Agent shall retain the disputed portion in the
escrow account until it receives written notice from Bush and the Selling
Shareholders that the dispute has been resolved, or until entry of a final
judgment in the matter by a court from which no further appeal can be taken or
entry of a binding arbitration order from which no further appeal can be taken,
and the Escrow Agent shall thereupon make distribution of the disputed amount in
accordance with the signed agreement or order and with the provisions of this
Agreement and the Escrow Agreement. Any notice from Bush to the Escrow Agent
shall also be given by Bush to the Selling Shareholders. Notwithstanding
anything contained herein to the contrary, in accordance with Section II.H. of
the Stock Purchase Agreement, any required adjustment in the Purchase Price, as
set forth therein, shall be released by the Escrow Agent to Bush upon
notification thereof by Bush to the Escrow Agent, in proportion, to the extent
possible, with respect to the Selling Shareholders on one hand and Peeples on
the other, to the aggregate number of shares of capital stock of ColorWorks sold
to Bush as of the Closing Date by the Selling Shareholders and by Peeples,
respectively. To the extent possible, the Escrow Agent shall pay any
indemnification obligation of the Selling Shareholders pro rata from the Selling
Shareholders' escrowed assets based on their stock ownership in ColorWorks as of
the date of this Agreement, or if any prior indemnification payment is not made
pro rata, the Escrow Agent shall, if possible, adjust the escrow accounts
subsequently so that the obligation is ultimately borne pro rata. If the Escrow
Agent withholds distribution of any amounts from one or more distributions to
the Selling Shareholders in order to provide sufficient assets for unsatisfied
or unresolved claims, upon resolution and satisfaction of the claims (provided
there remain no additional unsatisfied or unresolved claims which require
continued retention of the withheld amount), any excess withheld amount that
should have been distributed shall be promptly distributed by the Escrow Agent
to the Selling Shareholders. In the event of any indemnification
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<PAGE>
payments to be made under and in accordance with this Agreement by the Selling
Shareholders, Bush hereby agrees that any claims made by Bush would first be
made against the assets of the Selling Shareholders held in escrow, as described
herein, with the exception of environmental claims which shall first be made
against the insurer and the cash escrow referred to in Section IX.J. below.
H. In the event that Bush and/or its affiliates contends that it is
entitled to indemnification from Peeples pursuant to the indemnification
provisions of this Agreement, including, without limitation, any amounts
relating to environmental matters, or in the event that Peeples, jointly and/or
severally, is obligated to Bush and/or its affiliates under any other agreement
by and between Bush, its affiliates and Peeples, the Escrow Agent shall disburse
Bush Shares and/or cash from the escrow account upon receipt of evidence of the
amount, of such damages or loss in the case of this Agreement, or pursuant to
the written consent of Bush and Peeples, with respect to any other agreement,
evidence that Bush gave the required notice to Peeples of the loss pursuant to
the terms of this Agreement, if applicable, and receipt by the Escrow Agent of
an affidavit from Bush or written confirmation from Peeples that no notice or
objection was given by Peeples to the payment or disbursement pursuant to the
indemnification provisions of this Agreement or pursuant to the provisions of
any other applicable agreement. If no notice of objection is received by Bush
within fifteen (15) days from the date said notice is deemed to have been given
hereunder, the parties hereto to which said notice was given shall be deemed not
to have objected. If, however, notice of objection was given, the Escrow Agent
shall retain the disputed portion in the Escrow Account until it receives
written notice from Bush and Peeples that the dispute has been resolved, or
until entry of a final judgment in the matter by a court from which no further
appeal can be taken or entry of a
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<PAGE>
binding arbitration order from which no further appeal can be taken, and the
Escrow Agent shall thereupon make distribution of the disputed amount in
accordance with the signed agreement or order and with the provisions of this
Agreement and the Escrow Agreement. Any notice from Bush to the Escrow Agent
shall also be given by Bush to Peeples. To the extent possible, the Escrow Agent
shall pay any indemnification obligation of Peeples under this Agreement pro
rata from Peeples' escrowed assets based upon the number of shares of capital
stock of ColorWorks being sold by Jim Peeples, Anne Peeples and the Peeples
Family Trust as of the date of this Agreement to Bush. If the Escrow Agent
withholds distributions of any amounts from one or more distributions to Peeples
in order to provide sufficient assets for unsatisfied or unresolved claims, upon
resolution and satisfaction of the claims, (provided there remain no additional
unsatisfied or unresolved claims) any excess withheld amount that should have
been distributed shall be promptly distributed by the Escrow Agent to Peeples.
I. The Selling Shareholders and Peeples hereby acknowledge and agree
that the Escrowed Shares are being held in escrow to secure, in part, the
indemnification provisions set forth herein. Accordingly, the Selling
Shareholders and Peeples hereby agree, represent and warrant that they will not
encumber, pledge, hypothecate or otherwise cause any lien or charge, of any
nature whatsoever, to be placed on or against any of the Escrowed Shares (or
cash substitute held by the Escrow Agent), by any person.
J. The parties hereto hereby acknowledge that a cash escrow
agreement is being entered into by and among the parties hereto, as of the date
hereof, to fund, in part, any indemnification claims for or related to
environmental matters, and that an insurance policy is also
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<PAGE>
being acquired for that purpose, as described herein. The parties further agree
and acknowledge that to the extent the cash escrow account, as maintained under
said cash escrow agreement, and the insurance proceeds, if any, are insufficient
to fund any indemnification relating to said environmental matters, then the
Bush Shares (or cash substitute therefor), being maintained pursuant to the
terms of the Escrow Agreement, may be used to satisfy any of such environmental
claims, provided the terms of the this Agreement are satisfied. The parties
acknowledge and agree that to the extent of any indemnification for
environmental claims, such claims will be first satisfied using the afore-
described insurance proceeds and the cash proceeds of the cash escrow account,
described above, prior to the release or disbursement of any Bush Shares and/or
the cash substitute therefor hereunder, unless any Selling Shareholder and/or
Jim Peeples, Anne Peeples, the Peeples Family Trust and Bush agree otherwise.
Claims for indemnification for environmental matters shall not be made against
the escrow established and maintained under the Escrow Agreement, unless the
afore-described insurance proceeds, if any, and the cash escrow, described
above, are inadequate for that purpose in Bush's reasonable judgment.
K. In the event of any release of Bush Shares pursuant to the terms
of the Escrow Agreement pursuant to any claim under this Agreement or otherwise,
as provided pursuant to the terms of the Escrow Agreement and/or this Agreement,
the Bush Shares will be valued based upon the market price of the Class A Common
Stock of Bush as of the close of business on the business day immediately
preceding the date of release or disbursement of the Bush Shares. The market
value shall be the closing price of the Class A Bush Common Stock, as reported
on the New York Stock Exchange, or if such shares of Class A Bush Common Stock
are not so reported on the New York Stock Exchange, then on such Exchange or
inter-dealer
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<PAGE>
quotation system where such shares are then traded. In the event the Bush Shares
are not traded on the date immediately preceding the distribution of the Bush
Shares hereunder, then the first date immediately preceding the date of
distribution of the Bush Shares hereunder shall be the date as to which the
market value of the shares shall be determined. The Selling Shareholders and
Peeples hereby agree that they will not engage and/or effectuate, directly or
indirectly, any public transaction involving the Class A Common Stock of Bush
for at least the five (5) day trading days immediately preceding the release of
any Bush Shares hereunder from escrow pursuant to any indemnification claim.
L. The Selling Shareholders hereby authorize Tuggle Duggins &
Meschan, P.A. to be their agent to deliver any and all notices by the Selling
Shareholders to Bush pursuant to this Section IX. Peeples hereby authorize James
H. Peeples to be their agent to deliver any and all notices by Peeples to Bush
pursuant to this Section IX. The Selling Shareholders and Peeples hereby
represent and warrant that Bush may rely on any notice delivered pursuant to
this Section IX from Tuggle Duggins & Meschan, P.A. and James H. Peeples,
respectively, as their respective agents for and on behalf of all the Selling
Shareholders and Peeples, respectively, and that any such notice so provided
will be effective and binding upon all the Selling Shareholders and/or Peeples.
M. The parties hereto hereby acknowledge and agree that in event the
cash escrow provided for hereunder to fund any environmental matters (to the
extent any insurance proceeds are insufficient), as described above, is
insufficient to cover the cost of such clean-up, remediation or response
matters, as described above, then the Bush Shares held in escrow (or any cash
substitute therefore) shall be released by the Escrow Agent to Bush in
accordance with the procedure set forth
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<PAGE>
above to cover the cost of such clean-up, remediation or response. To the extent
possible, the Escrow Agent shall pay any indemnification obligation of the
Selling Shareholders and Peeples, including, without limitation, any costs
relating to any environmental matters in the following aggregate proportion:
67.1% for the Selling Shareholders and 33.9% for Peeples.
X. Termination.
-----------
A. Termination of Agreement. The parties may terminate this
------------------------
Agreement as provided below:
1. Bush and the Selling Shareholders and/or Peeples may
terminate this Agreement by mutual written consent at any time prior to the
Closing;
2. Bush may terminate this Agreement by giving written notice
to the Selling Shareholders and Peeples, at any time prior to the Closing
in the event the Selling Shareholders and/or Peeples are in breach, and the
Selling Shareholders and/or Peeples, may terminate this Agreement by giving
written notice to Bush at any time prior to the Closing in the event Bush
is in breach, of any material representation, warranty, or covenant
contained in this Agreement in any material respect;
3. Bush may terminate this Agreement by giving written notice
to the Selling Shareholders and Peeples at any time prior to the Closing if
the Closing shall not have occurred on or before the thirtieth day
following the date of this Agreement by reason
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<PAGE>
of the failure of any condition precedent under Section VIII hereof (unless
the failure results primarily from Bush itself breaching any
representation, warranty, or covenant contained in this Agreement); or
4. The Sellers and/or Peeples, may terminate this Agreement by
giving written notice to Bush at any time prior to the Closing if the
Closing shall not have occurred on or before the thirtieth day following
the date of this Agreement by reason of the failure of any condition
precedent under Section VII hereof (unless the failure results primarily
from the Selling Shareholders and/or Peeples, themselves breaching any
representation, warranty, or covenant contained in this Agreement).
B. Effect of Termination. If any party terminates this Agreement
---------------------
pursuant to Subsection X(A) above, all obligations of the parties hereunder
shall terminate without any liability of any party to any other party (except
for any liability of any party then in breach), other than the Confidentiality
Agreements previously executed by Bush, Peeples, and the Selling Shareholders.
XI. Miscellaneous.
-------------
A. Indulgences, Etc. Neither the failure nor any delay on the part
----------------
of either party to exercise any right, remedy, power or privilege under this
Agreement shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, remedy, power or privilege preclude any other or further
exercise of the same or of any other right, remedy, power or privilege, nor
shall any waiver of any right, remedy, power or privilege with respect to any
occurrence be construed as a
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<PAGE>
waiver of such right, remedy, power or privilege with respect to any other
occurrence. No waiver shall be effective unless it is in writing and is signed
by the party asserted to have granted such waiver.
B. Controlling Law. This Agreement and all questions relating to
---------------
its validity, interpretation, performance and enforcement (including, without
limitation, provisions concerning limitations of actions), shall be governed by
and construed in accordance with the laws of the State of North Carolina,
without application to the principles of conflict of laws.
C. Notices. All notices, requests, demands and other communications
-------
required or permitted under this Agreement shall be in writing and shall be
deemed to have been duly given, made and received only when personally
delivered, one day following the day when deposited with an overnight courier
service for overnight priority service, such as Federal Express, for delivery to
the intended addressee or three days following the day when deposited in the
United States mails, first class postage prepaid, addressed as set forth below:
If to Bush: Mr. Lewis H. Aronson
Vice President - Corporate
Development
Bush Industries, Inc.
One Mason Drive
Jamestown, New York 14702
With a Copy to: Alan H. Aronson, Esq.
Akerman, Senterfitt & Eidson, P.A.
One Southeast Third Avenue, 28th Floor
Miami, Florida 33131
If to the Selling See Exhibit A.
Shareholders:
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With a Copy to: Barbara Ruby, Esq.
Tuggle Duggins & Meschan, P.A.
P.O. Box 2888
228 West Market Street
Greensboro, North Carolina 27401
If to Peeples: Mr. James H. Peeples
3010 Executive Drive
Greensboro, North Carolina
Any person may alter the address to which communications or
copies are to be sent by giving notice of such change of address in conformity
with the provisions of this Section for the giving of notice.
D. Binding Nature of Agreement; No Assignment. This Agreement shall
------------------------------------------
be binding upon and inure to the benefit of the parties hereto and their
respective heirs, personal representatives, successors and assigns, except that
no party may assign or transfer its rights under this Agreement without the
prior written consent of the other parties hereto.
E. Provisions Separable. The provisions of this Agreement are
--------------------
independent of and separable from each other, and no provision shall be affected
or rendered invalid or unenforce able by virtue of the fact that for any reason
any other or others of them may be invalid or unenforceable in whole or in part.
F. Section Headings. The section headings in this Agreement are for
----------------
convenience only; they form no part of this Agreement and shall not affect its
interpretation.
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G. Gender, Etc. Words used herein, regardless of the number and
-----------
gender specifically used, shall be deemed and construed to include any other
number, singular or plural, and any other gender, masculine, feminine or neuter,
as the context indicates is appropriate.
H. Exhibits and Schedules. All Exhibits and Schedules attached
----------------------
hereto are hereby incorporated by reference into, and made a part of, this
Agreement.
I. Number of Days. In computing the number of days for purposes of
--------------
this Agreement, all days shall be counted, including Saturdays, Sundays and
holidays; provided, however that if the final day of any time period falls on a
-------- -------
Saturday, Sunday or holiday on which federal banks are or may elect to be
closed, then the final day shall be deemed to be the next day which is not a
Saturday, Sunday or such holiday.
J. No Third-Party Beneficiaries. This Agreement shall not confer
----------------------------
any rights or remedies upon any person other than the parties and their
respective successors, heirs, personal representatives and permitted assigns.
K. Entire Agreement; Amendments. This Agreement (including the
----------------------------
documents and exhibits referred to herein) constitutes the entire agreement
among the parties and supersedes any prior understandings, agreements, or
representations by or among the parties, written or oral, that may have related
in any way to the subject matter hereof with the exception of the
confidentiality provisions of the November 30, 1995 letter of intent. This
Agreement may not be amended,
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supplemented or modified in whole or in part except by an instrument in writing
signed by the party or parties against whom enforcement of any such amendment,
supplement or modification is sought.
L. Construction. The language used in this Agreement will be deemed
------------
to be the language chosen by the parties to express their mutual intent, and
thereof strict construction shall be applied against any party. Any reference to
any federal, state, local or foreign statute or law shall be deemed also to
refer to the rules and regulations promulgated thereunder, unless the context
requires otherwise. The parties intend that each representation, warranty, and
covenant contained herein shall have independent significance. If any party has
breached any representation, warranty, or covenant contained herein in any
respect, the fact that there exists another representation, warranty or covenant
relating to the same subject matter (regardless of the relative levels of
specificity) which the party has not breached shall not detract from or mitigate
the fact that the party is in breach of the first representation, warranty or
covenant. This Agreement shall be neither construed against nor in favor of any
of the parties hereto, but rather in accordance with the fair meaning of its
content.
M. Litigation Costs. The parties hereto further agree that in the
----------------
event of any litigation to enforce the terms and conditions of this Agreement,
the successful party shall be awarded reasonable attorney's fees at all trial
and appellate levels, costs and expenses.
N. Finders' Fees. The parties hereto further agree that no third
-------------
party acted as a finder or broker in connection with this Agreement and/or the
transactions contemplated herein, and that no obligation is due any third party
with respect thereto.
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O. Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which will be deemed an original and all of which together
will constitute one and the same instrument.
P. Shareholders' Agreements. The parties hereto hereby acknowledge
------------------------
and agree that by execution of this Agreement they hereby agree that any and all
existing shareholders' agreements with respects to the capital stock of
ColorWorks will be automatically cancelled and terminated effective as of the
Closing Date.
Q. Expenses. The parties hereto hereby agree that each party shall
--------
bear its own legal and accounting expenses incurred in the preparation of this
Agreement and the consummation of the transactions hereunder, except ColorWorks
shall bear the first $10,000 of the Selling Shareholders' said legal expenses
upon receipt of billings reflecting the services rendered.
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IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
on the date first above written.
BUSH INDUSTRIES, INC.
By: /s/ L. H. Aronson
-----------------
Name: L.H.Aronson
-----------
Title: Vice President
--------------
THE COLORWORKS, INC.
By:/s/ James H. Peeples
--------------------
Name: James H. Peeples
----------------
Title: President
---------
/s/ James H. Peeples
--------------------
James H. Peeples
/s/ Anne G. Peeples
-------------------
Anne G. Peeples
The Peeples Family Trust
By:/s/ James H. Peeples
--------------------
James H. Peeples, Trustee
By:/s/ Anne G. Peeples
-------------------
Anne G. Peeples, Trustee
/s/ Thomas R. Sloan
-------------------
Thomas R. Sloan
/s/ Linda E. Sloan
------------------
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Linda E. Sloan
/s/ Thomas R. Styers, III
-------------------------
Thomas R. Styers, III, as Trustee for
Allison M. Sloan
/s/ Carolyn S. Sloan
--------------------
Carolyn S. Sloan
/s/ Tamara F. Sloan
-------------------
Tamara F. Sloan
/s/ Arthur Bluethenthal
-----------------------
Arthur Bluethenthal
/s/ Arthur Bluethenthal
-----------------------
Arthur Bluethenthal, as Trustee under
voting trust agreement, dated
February 15, 1995
/s/ Joanne K. Bluethenthal
--------------------------
Joanne K. Bluethenthal
/s/ Joseph Sherrill, Jr.
------------------------
Joseph Sherrill, Jr.
/s/ Deborah J. Bost
-------------------
Deborah J. Bost
/s/ Paul R. Bleiberg
--------------------
Paul R. Bleiberg
/s/ Judy Bleiberg
-----------------
Judy Bleiberg
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EXHIBIT/SCHEDULE LIST
---------------------
EXHIBIT/SCHEDULE DESCRIPTION
- ---------------- -----------
A Schedule of Selling Shareholders
B Disclosure Schedule
C Financial Statements
D Confidentiality Agreement
E Stock Escrow Agreement
F Cash Disbursement
G Environmental Insurance Policy
H Cash Escrow Agreement
