.........................................................x
KENNETH SHERMAN :
:
Plaintiff, : SUPERIOR COURT OF
: NEW JERSEY
v. : CHANCERY DIVISION
: HUDSON COUNTY
MICHAEL R. CUNNINGHAM, GORDON MAYS, :
LAURENCE GERBER, JAMES J. CUNNINGHAM, : DOCKET NO. C-67-00
ARNOLD SPINNER, STANLEY MOSS and :
CUNNINGHAM GRAPHICS INTERNATIONAL INC. : CLASS ACTION
:
Defendants. :
.........................................................x
NAT ORME, :
:
Plaintiff, : SUPERIOR COURT OF
: NEW JERSEY
v. : CHANCERY DIVISION
: HUDSON COUNTY
MICHAEL R. CUNNINGHAM, GORDON MAYS, :
LAURENCE GERBER, JAMES J. CUNNINGHAM, : DOCKET NO. C-69-00
ARNOLD SPINNER, STANLEY MOSS and :
CUNNINGHAM GRAPHICS INTERNATIONAL INC. : CLASS ACTION
:
Defendants. :
.........................................................x
MEMORANDUM OF UNDERSTANDING
The parties to the actions entitled Sherman v. Cunningham, et al.,
Docket No. C-67-00, and Orme v. Cunningham, et al., Docket No. C-69-00, pending
in the Superior Court of the State of New Jersey, Chancery Division, County of
Hudson (the "Actions"), Automatic Data Processing, Inc. ("ADP") and FIS
Acquisition Corp. ("Acquisition") (collectively, the "Parties"), by their
respective attorneys, have reached an agreement in
<PAGE>
principle providing for the settlement of the Actions on the terms and subject
to the conditions set forth below:
1. As a result of the negotiations between the undersigned attorneys
for the Parties, the following measures shall be taken in connection with the
proposed merger (the "Merger"') provided for in the Agreement and Plan of Merger
dated as of May 2, 2000 (the "Merger Agreement') among ADP, Acquisition, and
Cunningham Graphics International, Inc. ("Cunningham" or the "Company"):
a. Cunningham, ADP, and Acquisition shall cause Section
8.03 of the Merger Agreement to be amended to (i)
reduce the termination fee set forth in subparagraph
(b) of Section 8.03 from $4,000,000 to $2,500,000;
and (ii) reduce the expense reimbursement limit set
forth in subparagraph (b) of Section 8.03 from
$1,000,000 to $750,000; and
b. As promptly as practicable, ADP and Acquisition shall
file with the Securities and Exchange Commission (the
"SEC") an amendment (the "Amendment") to the Schedule
TO filed by them with the SEC in connection with the
tender offer contemplated by the Merger Agreement
(the "Tender Offer") which describes the following in
a manner reasonably acceptable to counsel for all
Parties:
(i) the amendments to the Merger Agreement set
forth in paragraph 1(a) of this Memorandum;
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<PAGE>
(ii) additional facts relating to the divestiture of
the "Designated Business" (as defined in Item
4(b)(i) on page 5 of the Company's SC 14D-9
filed on May 11, 2000) including but not
limited to the identity of the "Designated
Business," the relationship, if any, between
Cunningham and the entity to which the
Designated Business is being sold, and whether
any Cunningham officers or directors will
benefit either directly or indirectly from the
divestiture; and
(iii) Cunningham's Results of Operations for the
fiscal first quarter ended March 31, 2000.
2. Subject to such reasonable and appropriate confirmatory discovery as
the Parties' counsel determines is satisfactory, the parties will attempt in
good faith to agree upon and execute a Stipulation of Settlement and such other
documentation as may be required in order to obtain the approval of the Superior
Court of the State of New Jersey of the settlement and the dismissal of the
Actions upon the terms set forth in this Memorandum of Understanding. The
Stipulation of Settlement will expressly provide, inter alia, that Defendants in
the Actions (as well as ADP and Acquisition) have denied, and continue to deny,
that they have committed or have threatened to commit any violations of law and
that they are entering into the Stipulation because the proposed settlement
would eliminate the burden, risk and expense of further litigation. The
Stipulation will also acknowledge that plaintiffs' actions have caused the
amendments to the Merger Agreement and the supplemental disclosures described
herein.
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<PAGE>
3. The Parties will present the Settlement to the Superior Court of the
State of New Jersey for final approval following appropriate notice to the class
members on whose behalf the Actions were instituted (the "Class"), and will use
their best efforts to obtain final court approval of the settlement, and the
dismissal with prejudice of the Actions, as against the named plaintiffs and the
Class.
4. The Stipulation of Settlement will also provide as follows:
a. for the complete discharge, dismissal with prejudice,
settlement and release of, and an injunction barring,
all claims, demands, rights, actions or causes of
action, rights, liabilities, damages, losses,
obligations, judgments, suits, matters and issues of
any kind or nature whatsoever, better known or
unknown, contingent or absolute, suspected or
unsuspected, disclosed or undisclosed, hidden or
concealed, matured or unmatured, that have been,
could have been, or in the future can or might be
asserted in the Actions or in any court, tribunal or
proceeding (including, but not limited to, any claims
arising under federal or state law relating to
alleged fraud, breach of any duty, negligence,
violations of the federal securities laws or
otherwise) by or on behalf of any member of the
Class, whether individual, class, derivative,
representative, legal, equitable or any other type or
in any other capacity against the Parties or any or
all of their respective past, present or future
officers, directors, stockholders, representatives,
families, parent entities, associates,
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<PAGE>
affiliates, subsidiaries, employees, financial or
investment advisors, consultants, accountants,
attorneys, investment bankers, engineers, advisors or
agents, heirs, executors, trustees, general or
limited partners or partnerships, personal
representatives, estates, administrators,
predecessors, successors, and assigns (collectively,
the "Released Persons") which have arisen, could have
arisen, arise now or hereafter arise out of, or
relate in any manner to, the allegations, facts,
events, transactions, acts, occurrences, statements,
representations, misrepresentations, omissions or any
other matter, thing or cause whatsoever, or any
series thereof, embraced, involved, set forth or
otherwise related, directly or indirectly, to any of
the complaints filed at any time in the Actions, to
the Merger, to the Merger Agreement, to the Tender
Offer or to any offering or proxy material, public
filings or statements (including, but not limited to,
public statements) by any of the defendants in the
Actions or any other Released Persons in connection
with the Merger, the Merger Agreement or the Tender
Offer (collectively, the "Settled Claims"); and
b. subject to the Order of the Court, pending final
determination of whether the Settlement provided for
in the Stipulation of Settlement should be approved,
that plaintiffs and all members of the Class, or any
of them, are barred and enjoined from commencing,
prosecuting,
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<PAGE>
instigating, or in any way participating in the
commencement or prosecution of any action asserting
any Settled Claims, either directly,
representatively, derivatively, or in any other
capacity, against any Released Persons which have
been or could have been asserted, or which arise out
of or relate in any way to any of the transactions or
events described in any complaint in the Actions, to
the Merger, to the Merger Agreement or to the Tender
Offer.
5. The consummation of the Settlement is subject to the drafting and
execution of an appropriate Stipulation of Settlement and such other
documentation as may be required to obtain final court approval of the
settlement and the dismissal of the Actions with prejudice as to all claims
asserted therein as against the named Defendants and their affiliates without
costs to any party (except as provided for in paragraph 7 below).
6. The Settlement contemplated by this Memorandum of Understanding is
binding upon all Parties, but it is understood that it is subject to (a) court
approval; (b) the good faith documentation and execution of an appropriate
Stipulation of Settlement; and (c) the closing of the Merger. This Memorandum of
Understanding shall be null and void and of no force and effect should any of
these conditions not be met and, in that event, this Memorandum of Understanding
shall not be admissible in any proceeding or be deemed to prejudice any of the
positions of the parties with respect to any action.
7. Plaintiffs' Counsel in the Actions intend to apply to the Superior
Court of the State of New Jersey for an award of attorneys' fees and reasonable
out-of-pocket disbursements (together, the "Fees") in an aggregate amount not to
exceed $390,000.00.
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<PAGE>
Subject to the terms and conditions of this Memorandum of Understanding and the
Stipulation of Settlement contemplated hereby, ADP, Acquisition and/or their
successors in interest will pay Plaintiffs' Counsel the Fees, up to such amount
of $390,000.00 as may be awarded by the Superior Court of the State of New
Jersey. ADP and Acquisition and/or their successors in interest agree not to
oppose Plaintiffs' Counsel's application for Fees up to the amount of
$390,000.00.
8. Pending negotiation, execution and Court approval of the Settlement,
the plaintiffs in the Actions agree to stay any discovery and to stay any and
all other proceedings other than those incident to the Settlement itself. The
Parties also agree to use their best efforts to prevent, stay or seek dismissal
of or oppose entry of any interim or final relief in favor of any member of the
Class in any other litigation against any of the Parties to the Memorandum which
challenges the Settlement or otherwise involves a Settled Claim.
9. The Parties shall agree to extensions of time with respect to
pleadings and other court filings as are appropriate in the context of this
agreement.
10. This Memorandum of Understanding may be executed in any number of
counterparts with the same effect as if all Parties hereto had executed the same
document. All such counterparts shall be construed together and shall constitute
one instrument.
11. This Memorandum of Understanding constitutes the entire agreement
among the Parties with respect to the subject matter hereof, and may not be
amended nor any of its provisions waived except by a writing signed by all of
the signatories hereto.
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<PAGE>
12. This Memorandum of Understanding and the Settlement contemplated by
it shall be governed by, and construed in accordance with, the laws of the State
of New Jersey, without regard to conflict of laws principles.
13. The Plaintiffs and Plaintiffs' counsel in the Actions represent and
warrant that none of Plaintiffs' claims or causes of action referred to in any
complaint in the Actions or in this Memorandum of Understanding, including any
Settled Claims, have been assigned, encumbered or in any manner transferred in
whole or in part.
Dated:
----------------------
William J. Pinilis, Esquire
237 South Street
Morristown, NJ 07960
(973) 401-1111
Co-Counsel for Plaintiffs and the Class
SCHIFFRIN & BARROWAY, LLP
By:
-----------------
Marc A. Topaz, Esquire
3 Bala Plaza East, Suite 400
Bala Cynwyd, PA
(610) 667-7706
Co-Counsel for Plaintiffs and the Class
CAULEY & GELLER, LLP
By:
---------------
Paul Geller, Esquire
7200 West Camino Real, Suite 203
Boca Raton, FL 33433
(561) 740-3000
Co-Counsel for Plaintiffs and the Class
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<PAGE>
PAUL, WEISS, RIFKIND, WHARTON & GARRISON
By:
------------------
Allan J. Arffa, Esquire
1285 Avenue of the Americas
New York, NY 10019
(212) 373-3000
Counsel for Automatic Data Processing, Inc.
and FIS Acquisition Corp.
CLEARY, GOTTLIEB, STEEN & HAMILTON
By:
-----------------------
Daniel S. Sternberg, Esquire
One Liberty Plaza
New York, NY 10006
(212) 225-2000
GIBBONS, DEL DEO, DOLAN, GRIFFINGER &
VECCHIONE
By:
--------------------
Brian J. McMahon
One Riverfront Plaza
Newark, New Jersey 07102-5497
(973) 596-4500
Counsel for Defendants Cunningham Graphics
International, Inc., Michael R. Cunningham, and
other Individual Defendants
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