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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
MAY 30, 1998
MAIL-WELL, INC.
(Exact Name of Registrant as Specified in its Charter)
COLORADO
(State or Other Jurisdiction of Incorporation)
1-12551 84-1250533
(Commission File Number) (IRS Employer Identification Number)
23 INVERNESS WAY EAST, ENGLEWOOD, CO 80112
(Address of principal executive offices) (Zip Code)
303-790-8023
(Registrant's telephone number, including area code)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
Effective May 30, 1998, the Registrant acquired the following businesses,
through a merger of each respective company with and into a newly formed
wholly-owned subsidiary, Mail-Well Commercial Printing, Inc. ("Mail-Well")
(all share amounts have been adjusted to reflect the two-for-one forward
stock split payable to Registrant's shareholders of record on June 1, 1998):
Color-Art, Inc., a commercial printing company based in St. Louis,
Missouri. The merger consideration consisted of 2,351,980 shares of the
Registrant's Common Stock (the "Common Stock"), subject to certain contingencies
regarding delivered working capital and indemnities. The acquisition also
included substantially all of the assets of an affiliated real estate holding
company.
Accu-Color, Inc., a commercial printing company based in St. Louis,
Missouri. The merger consideration consisted of 622,392 shares of Common Stock,
subject to certain contingencies regarding delivered working capital and
indemnities. The acquisition also included substantially all of the assets of
an affiliated real estate holding company.
Clarke Printing Co., a commercial printing company based in San Antonio,
Texas. The merger consideration consisted of 437,984 shares of Common Stock,
subject to certain contingencies regarding delivered working capital and
indemnities. The acquisition also included certain real estate assets of an
affiliated investment limited partnership.
United Lithograph, Inc., a commercial printing company based in Boston,
Massachusetts. The merger consideration consisted of 523,820 shares of Common
Stock, subject to certain contingencies regarding delivered working capital and
indemnities. The acquisition also included substantially all of the assets of
an affiliated real estate holding company.
Industrial Printing Co., a commercial printing company, and IPC Graphics,
Inc., a commercial pre-press company, both based in Toledo, Ohio. The merger
consideration consisted of 896,136 shares of Common Stock, subject to certain
contingencies regarding delivered working capital and indemnities. The
acquisition also included substantially all of the assets of an affiliated
investment limited partnership.
French Bray Printing Co., a commercial printing company based in Maryland
serving the Baltimore and Washington, D.C. markets. The merger consideration
consisted of 538,062 shares of Common Stock, subject to certain contingencies
regarding delivered working capital and indemnities.
Each of these separate transactions was accounted for by the Registrant as
a pooling of interests. The Registrant is obligated to use its best efforts to
cause an aggregate of 5,366,092 shares issued in these transactions (after
adjusting for dissenting shareholders' and fractional shares, which were paid in
cash) to become registered for public resale within a reasonable time after
closing. None of these entities had any prior business or other relationship
with the Registrant, Mail-Well or any of their respective officers, directors or
affiliates.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements of business acquired. To be filed by amendment
hereto not later than August 11, 1998.
(b) Pro forma financial information. To be filed by amendment hereto not
later than August 11, 1998.
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(c) Exhibits.
2.1 Acquisition Agreement and Plan of Merger among Mail-Well, Inc.,
Mail-Well I Corporation, Color Art, Inc. and certain controlling
shareholders thereof, dated May 15, 1998.
2.2 Acquisition Agreement and Plan of Merger among Mail-Well, Inc.,
Mail-Well I Corporation, Accu-Color, Inc. and certain controlling
shareholders thereof, dated May 15, 1998.
2.3 Acquisition Agreement and Plan of Merger among Mail-Well, Inc.,
Mail-Well I Corporation, Clarke Printing Co. and the controlling
shareholder thereof, dated May 15, 1998.
2.4 Acquisition Agreement and Plan of Merger among Mail-Well, Inc.,
Mail-Well I Corporation, United Lithograph, Inc. and certain
controlling shareholders thereof, dated May 15, 1998.
2.5 Acquisition Agreement and Plan of Merger among Mail-Well, Inc.,
Mail-Well I Corporation, Industrial Printing Co. and certain
controlling shareholders thereof, dated May 19, 1998.
2.6 Acquisition Agreement and Plan of Merger among Mail-Well, Inc.,
Mail-Well I Corporation, IPC Graphics, Inc. and certain controlling
shareholders thereof, dated May 19, 1998.
2.7 Acquisition Agreement and Plan of Merger among Mail-Well, Inc.,
Mail-Well I Corporation, French Bray Printing Co. and certain
controlling shareholders thereof, dated May 15, 1998.
The Registrant undertakes to furnish supplementally to the Commission upon
request a copy of any omitted schedule to the foregoing Exhibits.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized
Mail-Well, Inc.
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(Registrant)
By: /s/ Paul V. Reilly
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Paul V. Reilly, President and
Chief Operating Officer
Date: June 10, 1998
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EXHIBIT INDEX
2.1 Acquisition Agreement and Plan of Merger among Mail-Well, Inc.,
Mail-Well I Corporation, Color Art, Inc. and certain controlling
shareholders thereof, dated May 15, 1998.
2.2 Acquisition Agreement and Plan of Merger among Mail-Well, Inc.,
Mail-Well I Corporation, Accu-Color, Inc. and certain controlling
shareholders thereof, dated May 15, 1998.
2.3 Acquisition Agreement and Plan of Merger among Mail-Well, Inc.,
Mail-Well I Corporation, Clarke Printing Co. and the controlling
shareholder thereof, dated May 15, 1998.
2.4 Acquisition Agreement and Plan of Merger among Mail-Well, Inc.,
Mail-Well I Corporation, United Lithograph, Inc. and certain
controlling shareholders thereof, dated May 15, 1998.
2.5 Acquisition Agreement and Plan of Merger among Mail-Well, Inc.,
Mail-Well I Corporation, Industrial Printing Co. and certain
controlling shareholders thereof, dated May 19, 1998.
2.6 Acquisition Agreement and Plan of Merger among Mail-Well, Inc.,
Mail-Well I Corporation, IPC Graphics, Inc. and certain controlling
shareholders thereof, dated May 19, 1998.
2.7 Acquisition Agreement and Plan of Merger among Mail-Well, Inc.,
Mail-Well I Corporation, French Bray Printing Co. and certain
controlling shareholders thereof, dated May 15, 1998.
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ACQUISITION AGREEMENT
AND
PLAN OF MERGER
by and among
MAIL-WELL INC.,
a Colorado corporation,
MAIL-WELL I CORPORATION,
a Delaware corporation,
COLOR-ART, INC.,
a Missouri corporation
and
Certain Shareholders of Color-Art, Inc.
Identified Herein As
Controlling Shareholders.
May 15, 1998
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TABLE OF CONTENTS
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ARTICLE 1 -- PRINCIPAL TERMS OF THE MERGER . . . . . . . . . . . . . . . . .1
1.1 Plan of Merger. . . . . . . . . . . . . . . . . . . . . . . .1
1.2 No Further Rights of Transfer . . . . . . . . . . . . . . . .3
1.3 Surviving Corporation . . . . . . . . . . . . . . . . . . . .3
1.4 Dissenting Shareholders . . . . . . . . . . . . . . . . . . .3
1.5 The Closing . . . . . . . . . . . . . . . . . . . . . . . . .4
1.6 Surrender of Certificates . . . . . . . . . . . . . . . . . .6
1.7 Working Capital Settlement. . . . . . . . . . . . . . . . . .7
1.8 Additional Post-Closing Adjustments.. . . . . . . . . . . . .9
1.9 Transfer Taxes. . . . . . . . . . . . . . . . . . . . . . . 10
1.10 MW Common Stock.. . . . . . . . . . . . . . . . . . . . . . 11
1.11 Investment Letter.. . . . . . . . . . . . . . . . . . . . . 13
ARTICLE 2 -- REPRESENTATIONS AND WARRANTIES OF THE COMPANY
AND CONTROLLING SHAREHOLDERS. . . . . . . . . . . . . . . . 13
2.1 Organization, Standing, Corporate Authorization,
and Enforceability. . . . . . . . . . . . . . . . . . . . . 13
2.2 Capitalization. . . . . . . . . . . . . . . . . . . . . . . 14
2.3 Articles of Incorporation and Bylaws; Certain Records . . . 15
2.4 Compliance with Other Instruments and Laws. . . . . . . . . 15
2.5 Governmental Authorizations; Consents . . . . . . . . . . . 16
2.6 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . 16
2.7 Financial Statements; Conduct of the Business; No
Undisclosed Liabilities . . . . . . . . . . . . . . . . . . 16
2.8 Absence of Certain Changes or Events. . . . . . . . . . . . 17
2.9 Title to Property, Absence of Liens and Encumbrances. . . . 18
2.10 Full Authority; Compliance with Laws. . . . . . . . . . . . 19
2.11 Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . 20
2.12 Claims. . . . . . . . . . . . . . . . . . . . . . . . . . . 22
2.13 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
2.14 Contracts . . . . . . . . . . . . . . . . . . . . . . . . . 24
2.15 Environmental Quality . . . . . . . . . . . . . . . . . . . 26
2.16 Intellectual Property . . . . . . . . . . . . . . . . . . . 28
2.17 Prepaid Expenses. . . . . . . . . . . . . . . . . . . . . . 28
2.18 Related Party Transactions. . . . . . . . . . . . . . . . . 28
2.19 Labor Matters . . . . . . . . . . . . . . . . . . . . . . . 28
2.20 Customers and Vendors . . . . . . . . . . . . . . . . . . . 29
2.21 Other Disclosures . . . . . . . . . . . . . . . . . . . . . 30
2.22 Parachute Payments. . . . . . . . . . . . . . . . . . . . . 30
2.23 Product Warranty and Liability. . . . . . . . . . . . . . . 30
2.24 Accuracy. . . . . . . . . . . . . . . . . . . . . . . . . . 30
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2.25 Brokers and Finders . . . . . . . . . . . . . . . . . . . . 31
ARTICLE 3 -- ADDITIONAL REPRESENTATIONS AND WARRANTIES
OF CONTROLLING SHAREHOLDERS . . . . . . . . . . . . . . . . 31
3.1 Ownership of Shares . . . . . . . . . . . . . . . . . . . . 31
3.2 Authorization . . . . . . . . . . . . . . . . . . . . . . . 31
3.3 Enforceability. . . . . . . . . . . . . . . . . . . . . . . 31
ARTICLE 4 -- REPRESENTATIONS AND WARRANTIES OF PURCHASER
AND PARENT. . . . . . . . . . . . . . . . . . . . . . . . . 31
4.1 Organization and Standing of Purchaser. . . . . . . . . . . 31
4.2 Authorization . . . . . . . . . . . . . . . . . . . . . . . 32
4.3 Enforceability. . . . . . . . . . . . . . . . . . . . . . . 32
4.4 Compliance with Other Instruments and Laws. . . . . . . . . 32
4.5 Governmental Authorizations, Consents . . . . . . . . . . . 32
4.6 MW Common Stock . . . . . . . . . . . . . . . . . . . . . . 32
4.7 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . 32
4.8 Securities Act of 1933. . . . . . . . . . . . . . . . . . . 33
4.9 Brokers and Finders . . . . . . . . . . . . . . . . . . . . 33
4.10 Purchaser's Knowledge . . . . . . . . . . . . . . . . . . . 33
4.11 SEC Documents . . . . . . . . . . . . . . . . . . . . . . . 33
4.12 Accuracy. . . . . . . . . . . . . . . . . . . . . . . . . . 33
4.13 Investigation . . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE 5 -- COVENANTS OF THE COMPANY AND THE CONTROLLING
SHAREHOLDERS. . . . . . . . . . . . . . . . . . . . . . . . 34
5.1 Conduct of Business . . . . . . . . . . . . . . . . . . . . 34
5.2 Access. . . . . . . . . . . . . . . . . . . . . . . . . . . 36
5.3 No Solicitation or Negotiation. . . . . . . . . . . . . . . 36
5.4 Filings and Consents. . . . . . . . . . . . . . . . . . . . 36
5.5 Updated Disclosure Schedules. . . . . . . . . . . . . . . . 37
ARTICLE 6 -- COVENANTS OF PARENT AND PURCHASER . . . . . . . . . . . . . . 37
6.1 Confidentiality . . . . . . . . . . . . . . . . . . . . . . 37
6.2 Filings and Consents. . . . . . . . . . . . . . . . . . . . 37
6.3 Filing of Final Tax Returns . . . . . . . . . . . . . . . . 38
ARTICLE 7 -- COVENANTS OF ALL PARTIES. . . . . . . . . . . . . . . . . . . 38
7.1 Commercially Reasonable Efforts; Further Assurances . . . . 39
7.2 Pooling of Interests. . . . . . . . . . . . . . . . . . . . 39
7.3 Certain Filings, Etc. . . . . . . . . . . . . . . . . . . . 39
7.4 Public Announcements. . . . . . . . . . . . . . . . . . . . 39
7.5 Real Estate . . . . . . . . . . . . . . . . . . . . . . . . 39
7.6 Graphic Links, L.L.C. . . . . . . . . . . . . . . . . . . . 40
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ARTICLE 8 -- CONDITIONS TO OBLIGATION OF PURCHASER TO CLOSE. . . . . . . . 40
8.1 Accuracy of Representations and Warranties. . . . . . . . . 40
8.2 Shareholder Approval. . . . . . . . . . . . . . . . . . . . 40
8.3 Performance . . . . . . . . . . . . . . . . . . . . . . . . 41
8.4 Certificate . . . . . . . . . . . . . . . . . . . . . . . . 41
8.5 Debt Certificates and Payoff Letters. . . . . . . . . . . . 41
8.6 No Injunction . . . . . . . . . . . . . . . . . . . . . . . 41
8.7 No Material Adverse Effect. . . . . . . . . . . . . . . . . 41
8.8 Consents. . . . . . . . . . . . . . . . . . . . . . . . . . 41
8.9 Shareholder Representation and Affiliate Letter . . . . . . 41
8.10 Legal Opinions. . . . . . . . . . . . . . . . . . . . . . . 41
8.11 Certificate of Secretary. . . . . . . . . . . . . . . . . . 41
8.12 Escrow Agreements . . . . . . . . . . . . . . . . . . . . . 41
8.13 Non-Compete Agreements. . . . . . . . . . . . . . . . . . . 41
8.14 UCC-3s. . . . . . . . . . . . . . . . . . . . . . . . . . . 42
8.15 HSR Act . . . . . . . . . . . . . . . . . . . . . . . . . . 42
8.16 Accounting, Tax Matters . . . . . . . . . . . . . . . . . . 42
8.17 CAPCO Merger. . . . . . . . . . . . . . . . . . . . . . . . 42
8.18 No Discovery. . . . . . . . . . . . . . . . . . . . . . . . 42
8.19 Documentation . . . . . . . . . . . . . . . . . . . . . . . 42
8.20 Approval of Purchaser's Board . . . . . . . . . . . . . . . 42
ARTICLE 9 -- CONDITIONS TO OBLIGATIONS OF THE COMPANY TO CLOSE . . . . . . 42
9.1 Accuracy of Representations and Warranties. . . . . . . . . 42
9.2 Performance . . . . . . . . . . . . . . . . . . . . . . . . 43
9.3 Certificate . . . . . . . . . . . . . . . . . . . . . . . . 43
9.4 No Injunction . . . . . . . . . . . . . . . . . . . . . . . 43
9.5 Legal Opinion . . . . . . . . . . . . . . . . . . . . . . . 43
9.6 Tax Opinion . . . . . . . . . . . . . . . . . . . . . . . . 43
9.7 Escrow Agreements . . . . . . . . . . . . . . . . . . . . . 43
9.8 HSR Act . . . . . . . . . . . . . . . . . . . . . . . . . . 43
9.9 Documentation . . . . . . . . . . . . . . . . . . . . . . . 43
9.10 Material Adverse Effect . . . . . . . . . . . . . . . . . . 43
9.11 CAPCO Merger... . . . . . . . . . . . . . . . . . . . . . . 43
9.12 Graphic Links, L.L.C. . . . . . . . . . . . . . . . . . . . 44
ARTICLE 10 -- TERMINATION OF AGREEMENT . . . . . . . . . . . . . . . . . . 44
10.1 Right to Terminate Agreement. . . . . . . . . . . . . . . . 44
10.2 Effect of Termination . . . . . . . . . . . . . . . . . . . 44
ARTICLE 11 -- CERTAIN REMEDIES AND LIMITATIONS . . . . . . . . . . . . . . 45
11.1 Survival of Representations, Warranties and Covenants . . . 45
11.2 Indemnification by Shareholders . . . . . . . . . . . . . . 45
11.3 Limitations on Representations, Warranties and Liabilities
of Shareholders . . . . . . . . . . . . . . . . . . . . . . 46
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11.4 Indemnification by Parent and Purchaser . . . . . . . . . . 47
11.5 Limitations on Liability of Purchaser . . . . . . . . . . . 48
11.6 Indemnification Claims. . . . . . . . . . . . . . . . . . . 48
11.7 Defense of Third Party Actions. . . . . . . . . . . . . . . 49
11.8 Subrogation . . . . . . . . . . . . . . . . . . . . . . . . 50
11.9 Exclusivity . . . . . . . . . . . . . . . . . . . . . . . . 50
11.10 Retention of Records. . . . . . . . . . . . . . . . . . . . 51
ARTICLE 12 -- MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . 51
12.1 Certain Definitions . . . . . . . . . . . . . . . . . . . . 51
12.2 Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . 51
12.3 Notices; Etc. . . . . . . . . . . . . . . . . . . . . . . . 52
12.4 Assignment. . . . . . . . . . . . . . . . . . . . . . . . . 53
12.5 Entire Agreement; Amendment; Governing Law; Etc . . . . . . 53
12.6 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . 53
12.7 Third Party Rights. . . . . . . . . . . . . . . . . . . . . 53
12.8 Exhibits and Schedules. . . . . . . . . . . . . . . . . . . 53
12.9 Pronouns. . . . . . . . . . . . . . . . . . . . . . . . . . 54
12.10 Authority and Execution . . . . . . . . . . . . . . . . . . 54
12.11 Severability. . . . . . . . . . . . . . . . . . . . . . . . 54
12.12 Time of Essence . . . . . . . . . . . . . . . . . . . . . . 54
12.13 Interpretation. . . . . . . . . . . . . . . . . . . . . . . 54
12.14 Arbitration . . . . . . . . . . . . . . . . . . . . . . . . 54
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Exhibit A Certificate of Merger
Exhibit B Escrow Agreement
Exhibit C Affiliate Letter
Exhibit D Legal Opinion of Company's Counsel
Exhibit E Non-Compete Agreement
Exhibit F Legal Opinion of Purchaser's Counsel
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ACQUISITION AGREEMENT AND PLAN OF MERGER
THIS ACQUISITION AGREEMENT AND PLAN OF MERGER (this "Agreement") is made
and entered into as of May 15, 1998, by and among MAIL-WELL, INC., a Colorado
corporation ("Parent"), MAIL-WELL I CORPORATION, a Delaware corporation
("Mail-Well" or "Purchaser"), and Color-Art, Inc., a Missouri corporation, (the
"Company") and Gary P. Reim, Gary L. Lorenz, Robert C. Fox and James R. Marr
(collectively, the "Controlling Shareholders").
WITNESSETH:
WHEREAS, the Company, together with its Subsidiaries (defined below) is
engaged in the commercial printing business (the "Business");
WHEREAS, the respective Boards of Directors of Parent, Mail-Well, and the
Company have approved the acquisition of the Company by Mail-Well;
WHEREAS, to complete such acquisition the respective Boards of Directors of
Parent, Mail-Well and the Company have approved the merger of the Company with
and into Mail-Well (the "Merger"), pursuant to and subject to the terms and
conditions of this Agreement;
WHEREAS, the Directors of the Company have unanimously determined that the
Merger is fair to and in the best interests of its shareholders (collectively,
the "Shareholders"), approved the Merger and this Agreement and the transactions
contemplated hereby, and recommended the approval of the Merger and approval and
adoption of this Agreement by the Shareholders; and
WHEREAS, the Merger is intended to be accounted for as a pooling of
interests.
NOW, THEREFORE, in consideration of the mutual covenants, representations
and warranties made herein and of the mutual benefits to be derived herefrom,
the Company, Parent and Purchaser hereby agree as follows:
ARTICLE 1
PRINCIPAL TERMS OF THE MERGER
1.1 PLAN OF MERGER. Subject to the terms and conditions of this
Agreement, the Merger will be carried out in the following manner:
(a) The Company, Parent and Purchaser will cooperate and use their
respective best efforts to consummate the transactions contemplated by this
Agreement.
(b) Subject to the provisions of this Agreement, a Certificate of
Merger, substantially in the form of EXHIBIT A, shall be duly executed and, on
the Closing Date (as defined in Section 1.5 hereof), or as soon thereafter as
reasonably practicable, filed with the Delaware Secretary of State in accordance
with the General Corporation Law of the State of Delaware (the
<PAGE>
"DGCL"). In addition, Articles of Merger shall be duly prepared, executed and
acknowledged by the Company in accordance with the General and Business
Corporation Law of the State of Missouri (the "MGBCL") and shall be filed on the
Closing Date with the Missouri Secretary of State. The Merger shall become
effective at the date and time set forth in the Certificate of Merger and the
Articles of Merger (the "Effective Time").
(c) At the Effective Time, the Company shall merge with and into
Mail-Well, the separate existence of the Company shall cease, and Mail-Well
shall continue as the surviving corporation. (Mail-Well, in its capacity as the
corporation surviving the Merger, is hereinafter sometimes referred to as the
"Surviving Corporation.")
(d) From and after the Effective Time, the Merger shall have the
effects set forth in Section 259 of the DGCL and Section 351.450 of the MGBCL.
(e) The "Merger Consideration" which shall be paid by Parent and
Purchaser in the Merger, to be paid to the Shareholders other than Dissenting
Shareholders, shall be equal to (i) $63,018,000 less (ii) the amount of Debt as
defined in Section 1.5; less (iii) the amount of unpaid Company Expenses, as
defined in Section 12.2; plus or minus (iv) the adjustment under Section 1.7(b)
hereof; less (v) the amount, if any, paid by the Surviving Corporation to
Dissenting Shareholders. The Merger Consideration plus the amount, if any, paid
to Dissenting Shareholders by the Surviving Corporation is herein referred to as
the "Total Shareholder Consideration." The Merger Consideration shall be paid
in duly authorized, validly issued, fully paid and nonassessable Parent common
stock ("MW Common Stock") valued at $43.93 per share (the "MW Common Stock
Valuation"), which MW Common Stock shall be issued of record on the Closing Date
on the Parent's (and its transfer agent's) books.
(f) In the event of any stock split, combination, reclassification or
stock dividend with respect to MW Common Stock, any change or conversion of MW
Common Stock into other securities or any other dividend or distribution with
respect to MW Common Stock (other than quarterly cash dividends issued in the
ordinary course consistent with past practice), including without limitation,
any distribution by Parent of shares of capital stock of any of its Affiliates
(as defined in Section 2.18), or if a record date with respect to any of the
foregoing should occur, prior to the Effective Time, appropriate adjustments
shall be made to the MW Common Stock Valuation, and thereafter all references in
this Agreement to the MW Common Stock Valuation shall be deemed to be the MW
Common Stock Valuation as so adjusted.
(g) At the Effective Time and subject to the terms of this Agreement,
each share of common stock, par value $.142857 per share, of the Company (the
"Common Stock") then issued and outstanding (other than (x) any shares of Common
Stock which are held by any Subsidiary or in the treasury of the Company, or
which are held, directly or indirectly, by Mail-Well or any direct or indirect
subsidiary of Mail-Well, all of which shall be canceled and none of which shall
receive any payment with respect thereto (hereinafter such shares are
collectively referred to as "Subsidiary Shares") and (y) shares of Common Stock
held by Dissenting Shareholders (as defined in Section 1.4 hereof) (hereinafter
such shares are collectively referred to as "Dissenting Shares") shall, by
virtue of the Merger and without any action on the
2
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part of the holder thereof, be converted into and represent the right to receive
a pro rata share of the Merger Consideration ("Pro Rata Share") which shall be
equal to the fraction obtained by dividing one by the total number of shares of
Common Stock outstanding at the Effective Time (other than the Subsidiary Shares
and Dissenting Shares).
1.2 NO FURTHER RIGHTS OF TRANSFER. At and after the Effective Time, each
holder of a certificate for Common Stock (a "Certificate") shall cease to have
any rights as a Shareholder, except for the right to surrender his or her
Certificate (other than Certificates representing Dissenting Shares or
Subsidiary Shares) in exchange for payment of the Merger Consideration
deliverable in respect thereof, or, in the case of a Dissenting Shareholder, to
perfect his or her right to receive payment for his or her shares pursuant to
applicable law if such holder has validly perfected and not withdrawn his or her
right to receive payment for his or her shares, and no transfer of shares of
Common Stock shall be made on the stock transfer books of the Company.
Certificates presented to the Surviving Corporation after the Effective Time
shall be canceled and exchanged for MW Common Stock and cash as provided in this
Article I. At the close of business on the day of the Effective Time, the stock
ledger of the Company with respect to Common Stock shall be closed.
1.3 SURVIVING CORPORATION. The Certificate of Incorporation of Mail-Well,
as in effect immediately prior to the Effective Time, shall be the Certificate
of Incorporation of the Surviving Corporation. The Bylaws of Mail-Well, as in
effect immediately prior to the Effective Time, shall be the Bylaws of the
Surviving Corporation. At the Effective Time, the directors and officers of
Mail-Well immediately prior to the Effective Time shall be the directors and
officers of the Surviving Corporation, each of such directors to hold office,
subject to the applicable provisions of the Certificate of Incorporation and
Bylaws of the Surviving Corporation, until the next annual shareholders' meeting
of the Surviving Corporation and until their respective successors shall be duly
elected or appointed and qualified.
1.4 DISSENTING SHAREHOLDERS. Notwithstanding anything in this Agreement
to the contrary but only to the extent required by applicable state law, shares
of Common Stock that are issued and outstanding immediately prior to the
Effective Time and are held by holders of Common Stock who comply with all the
provisions of applicable law concerning the right of holders of Common Stock to
dissent from the Merger and require appraisal of their shares of Common Stock
("Dissenting Shareholders") shall not be converted into the right to receive the
Merger Consideration but shall become the right to receive such consideration as
may be determined to be due such Dissenting Shareholder pursuant to the law of
the State of Missouri; provided, however, that (i) if any Dissenting Shareholder
shall subsequently deliver a written withdrawal of his or her demand for
appraisal (with the written approval of the Surviving Corporation, if such
withdrawal is not tendered within 60 days after the Effective Time), or (ii) if
any Dissenting Shareholder fails to establish and perfect his or her entitlement
to appraisal rights as provided by applicable law, or (iii) if within 120 days
of the Effective Time neither any Dissenting Shareholder nor the Surviving
Corporation has filed a petition demanding a determination of the value of all
shares of the Common Stock that are issued and outstanding at the Effective Time
and held by Dissenting Shareholders, then such Dissenting Shareholder or
Shareholders, as the case may be, shall forfeit the right to appraisal of such
shares and each such
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share shall thereupon be deemed to have been converted into the right to receive
the Merger Consideration, without interest, according to the terms of this
Agreement. The Company shall give Purchaser (A) prompt notice of any written
demands for appraisal, withdrawals of demands for appraisal and any other
related instruments received by the Company, and (B) the opportunity to direct
all negotiations and proceedings with respect to demands for appraisal. The
Company will not voluntarily make any payment with respect to any demands for
appraisal and will not, except with the prior written consent of Purchaser,
settle or offer to settle any such demand.
1.5 THE CLOSING. The closing of the transactions contemplated by this
Article 1 (the "Closing") shall be held at the offices of Rothgerber Johnson &
Lyons LLP in Denver, Colorado at 9:00 a.m. (local time) on May 29, 1998, or at
such other place, time and date as may be jointly designated by Purchaser, the
Company and the Shareholders (the date on which the Closing takes place, the
"Closing Date"). At or before the Closing, each of the following shall occur:
(a) As soon as practicable but no later than four business days
before the scheduled Closing Date, the Company shall deliver to Purchaser (i) a
certificate (the "Debt Certificate") executed by the chief financial officers of
the Company and the Subsidiaries setting forth the amount of the outstanding
principal balance and the interest of any kind, as well as the amount of early
retirement or prepayment fees and/or penalties of any kind (the "Prepayment
Fees") that will be due and payable as of the Closing Date by the Company and
the Subsidiaries pursuant to any Debt that will be outstanding as of the Closing
Date to each creditor to whom any such Debt is owed (the "Creditors") and (ii) a
letter (the "Payoff Letters"), executed by the Company and an authorized
representative of each Creditor that is a bank, leasing company or other
financial institution or who is listed in SCHEDULE 1.5(a) to whom any Debt by
the Company and the Subsidiaries is owed (other than the Debt set forth on
Schedule 1.5(b)), setting forth the amount of principal, interest and Prepayment
Fees, that will be due and payable by the Company to each of such Creditors as
of the Closing Date and undertaking to terminate, either at or immediately after
the Closing, all liens or other security interests securing such Debt upon
payment of the amounts due and owing. "Debt" shall include all funded long
term, short term or "line of credit" indebtedness, to banks and financial
institutions, Shareholders and other third parties, including the current
portion thereof, accrued interest thereon, and Prepayment Fees, together with
the unamortized principal amount including the current portion, interest expense
required to be accrued thereon and Prepayment Fees of all capitalized lease
obligations that are properly classified as liabilities on the balance sheet of
the Company at Closing in conformity with GAAP, the amounts of which shall be
determined consistent with the Company's audited Financial Statements; provided,
however, that Debt shall not include those prepayment fees for Debt listed on
SCHEDULE 1.5(b) which is not going to be discharged at Closing.
(b) At the Closing, that portion of the Debt owed to each Creditor
executing a Payoff Letter or whose Debt is otherwise acknowledged to Parent's
reasonable satisfaction, except that listed in SCHEDULE 1.5(b), shall be paid by
Purchaser to such Creditor by wire transfer of immediately available funds to an
account or accounts designated by such Creditors and in the amounts specified in
the Payoff Letters or otherwise established with such Creditors.
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(c) At the Closing, Purchaser shall pay any unpaid Company Expenses
accrued on the books of the Company by wire transfer of immediately available
funds or by certified bank check.
(d) The Purchaser shall place in escrow with the Escrow Agent acting
pursuant to the Escrow Agreement (as defined in Section 1.5(g)) (such amount,
together with interest and dividends thereon, additions thereto, and releases
therefrom, as more specifically set forth in such Escrow Agreement, is referred
to herein as the "Dissenting Shareholders Escrow Amount") immediately available
funds representing 100% of the cash value of the Merger Consideration which
would have been due Dissenting Shareholders under Section 1.1 as of the Closing
Date if such Dissenting Shareholders had not exercised their rights of appraisal
and MW Common Stock (based on the MW Common Stock Valuation) representing 25% of
the amount of the Merger Consideration which would have been due Dissenting
Shareholders under Section 1.1 as of the Closing Date. Any amounts payable by
Purchaser as the Surviving Corporation to Dissenting Shareholders subsequent to
the Closing Date shall be first payable out of the cash portion of the
Dissenting Shareholders Escrow Amount. Any amounts paid to Dissenting
Shareholders by Purchaser as the Surviving Corporation in excess of the cash
amount in the Dissenting Shareholder Escrow Amount shall be payable to Purchaser
in MW Common Stock (based on the MW Common Stock Valuation) out of, first the
Dissenting Shareholder Escrow Amount, and then out of, the Escrow Amount (as
defined below) in reduction of such Escrow Amount (as defined below). Any cash
remaining in the Dissenting Shareholders Escrow Amount after the payment of all
amounts due to Dissenting Shareholders shall be exchanged for shares of MW
Common Stock, rounded up to the nearest whole share, having a value (based on
the MW Common Stock Valuation) equal to the value of such cash. Any amounts
remaining in the Dissenting Shareholders Escrow Amount after resolution of all
Dissenting Shareholder claims shall be payable to the Shareholders surrendering
Certificates pursuant to Section 1.6 in MW Common Stock (based on the MW Common
Stock Valuation) at the direction of the Shareholders' Representative (as
defined in Section 12.1).
(e) At the Closing, from the Merger Consideration the Purchaser shall
deliver stock certificates representing 108,549 shares of MW Common Stock to
the Escrow Agent acting pursuant to the Escrow Agreement referred to below (such
amount, together with dividends thereon, additions thereto, and releases
therefrom, as more specifically set forth in such Escrow Agreement, is referred
to herein as the "Indemnification Escrow Amount"). A portion of the
Indemnification Escrow Amount in the amount of 27,316 shares (the "Tax Escrow")
shall be held in escrow to indemnify Purchaser for certain identified potential
tax claims. The Tax Escrow will be held by the Escrow Agent until the later of
May 10, 2001, or the date at which all claims asserted against the Tax Escrow
for which a Claim Notice (as defined in Section 11.6) has been delivered to
Shareholders on or prior to May 10, 2001 (but only to the extent of the
claim(s)) have been resolved, unless the amount of the Tax Escrow has been
earlier distributed to Purchaser in satisfaction of claims made by Purchaser to
the Indemnification Escrow Amount including the Tax Escrow.
(f) At the Closing, from the Merger Consideration the Purchaser shall
deliver stock certificates representing 10,338 shares of MW Common Stock to the
Escrow Agent acting
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pursuant to the Escrow Agreement referred to below (such amount, together with
dividends thereon, additions thereto, and releases therefrom, as more
specifically set forth in such Escrow Agreement, is referred to herein as the
"Working Capital Escrow Amount").
(g) The Dissenting Shareholders Escrow Amount, the Working Capital
Escrow Amount and the Indemnification Escrow Amount (collectively, the "Escrow
Amount") shall be held and distributed by such Escrow Agent in accordance with
the terms of the Escrow Agreement, substantially in the form attached hereto as
EXHIBIT B (the "Escrow Agreement"), which shall be entered into by the Escrow
Agent named therein, Purchaser and the Shareholders' Representative prior to or
on the Closing Date.
1.6 SURRENDER OF CERTIFICATES.
(a) At any time after the Effective Time upon surrender for
cancellation to the Purchaser of the Certificate(s) held by any record holder of
a Certificate, together with a duly executed letter of transmittal in a form
reasonably acceptable to Purchaser, such holder shall be entitled to receive in
exchange for each share of Common Stock represented by such surrendered
Certificate a Pro Rata Share of the Initial Distribution Amount to Shareholders.
The "Initial Distribution Amount" shall be the Total Shareholder Consideration
less the Escrow Amount delivered to the Escrow Agent pursuant to Section 1.5.
Promptly upon termination of each of the escrows pursuant to the terms of this
Agreement, each such Shareholder shall be entitled to receive his, her or its
Pro Rata Share of the particular Escrow Amount distributed to Shareholders. The
amounts so payable to a holder of a Certificate(s) shall be paid with a
certificate for the number of shares of MW Common Stock having a value (based on
the MW Common Stock Value and rounded down to the nearest whole share) equal to
the amount so due plus cash in lieu of fractional shares and in the amount of
any unpaid dividends or other distributions payable on such shares of MW Common
Stock with a record date after the Effective Time. The Certificate(s) so
surrendered shall be canceled. Until so surrendered, each Certificate shall be
deemed, for all corporate purposes, to evidence only the right to receive the
Merger Consideration deliverable in respect thereof to which such Person is
entitled pursuant to this Article 1. A Certificate surrendered will be
registered in the name of the beneficial owner of said Certificate (as set forth
in Schedule 2.2) in the event the voting trust to which such shareholder was a
party is terminated prior to or at Closing.
For purposes of this Agreement, "Person" shall mean and include an
individual, a partnership, a joint venture, a corporation, a trust, an
unincorporated organization, a group and a government or other department or
agency thereof.
(b) If the Merger Consideration (or any portion thereof) is to be
delivered to a Person other than the Person in whose name the Certificates
surrendered in exchange therefor are registered, it shall be a condition to the
payment of the Merger Consideration that the Certificates so surrendered shall
be properly endorsed or accompanied by appropriate stock powers and otherwise in
proper form for transfer, that such transfer otherwise be proper and that the
Person requesting such transfer pay to Mail-Well any transfer or other taxes
payable by reason of the
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foregoing or establish to the satisfaction of Mail-Well that such taxes have
been paid or are not required to be paid.
(c) In the event any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the Person claiming
such Certificate to be lost, stolen or destroyed, and upon such Person's
agreement to indemnify the Parent and Mail-Well against any claim that may be
made against the Parent or Mail-Well with respect to the Certificate claimed to
have been lost, stolen or destroyed, or, if required by Mail-Well, upon such
Person's obtaining a lost instrument bond in form and amount satisfactory to
Mail-Well, Mail-Well will issue in exchange for such lost, stolen or destroyed
Certificate the Merger Consideration deliverable in respect thereof as
determined in accordance with this Article 1.
(d) No certificates or scrip representing fractional shares of MW
Common Stock shall be issued upon the surrender for exchange of Certificates
pursuant to this Article 1 or as part of a distribution from the Escrow Amount;
no dividend or other distribution by Parent and no stock split, combination or
reclassification shall relate to any such fractional share; and no such
fractional share shall entitle the record or beneficial owner thereof to vote or
to any other rights of a stockholder of Parent. In lieu of any such fractional
share, each holder of Shares who would otherwise have been entitled thereto upon
the surrender of Certificate(s) for exchange pursuant to this Article 1 will be
paid an amount in cash (without interest) rounded to the nearest whole cent,
determined by multiplying (i) the MW Common Stock Valuation by (ii) the
fractional share to which such holder would otherwise be entitled. Purchaser
shall make available the cash necessary for this purpose at the Effective Time.
1.7 WORKING CAPITAL SETTLEMENT.
(a) Prior to the Closing Date, the Company shall estimate its
consolidated working capital position (the "Working Capital") as of the close of
business on the Closing Date (the "Computation Date"). Working Capital shall
mean (x) the sum of (i) the book value of current assets plus (ii) the amount of
capital expenditures listed on SCHEDULE 1.7, if any; less (y) the book value of
current liabilities excluding any amount of Debt or Company Expenses paid by
Purchaser at Closing pursuant to Section 1.5(c). The Company shall provide
Purchaser a copy of the calculation of the estimated Working Capital (the
"Estimated Working Capital Statement") three business days prior to the Closing
Date. The book value of all amounts and the determination of Working Capital
shall be determined in accordance with generally accepted accounting principles,
consistently applied ("GAAP") on a basis consistent with the Company's last
audited Financial Statements.
(b) If the amount of the Working Capital as shown on the Estimated
Working Capital Statement (the "Estimated Working Capital") is greater than
$8,691,000 the Merger Consideration shall be increased by the difference between
the Estimated Working Capital and $8,691,000. If the amount of the Estimated
Working Capital is less than $8,691,000, the Merger Consideration shall be
reduced by the difference between $8,691,000 and the Estimated Working Capital.
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(c) Purchaser shall prepare and deliver to Shareholders a "Final
Working Capital Statement" on or before the thirtieth day following Closing. In
preparing the Final Working Capital Statement, inventory shall be valued at the
lesser of cost or market using FIFO in accordance with GAAP, and shall be based
upon a physical count taken by Shareholders and observed by the Purchaser
(one-half the cost of which shall be a Company Expense) within three business
days prior to the Closing Date. Except as provided in the preceding sentence,
all amounts set forth on the Final Working Capital Statement shall be determined
in accordance with GAAP on a basis consistent with the accounting principles
used in connection with determining the Estimated Working Capital. The Final
Working Capital Statement shall become final and binding on Shareholders and
Purchaser (in such instance, the "Final Closing Statement") unless the
Shareholders' Representative gives written notice to the Purchaser of his
disagreement with respect to any matter contained therein ("Notice of Working
Capital Disagreement") within 10 days after the receipt thereof. A Notice of
Working Capital Disagreement shall not be permitted unless the aggregate amount
in dispute exceeds Ten Thousand Dollars ($10,000). A Notice of Working Capital
Disagreement shall specify in reasonable detail the nature of any disagreement
so asserted. For a period of 30 days after the delivery of the Notice of
Working Capital Disagreement, the Shareholders' Representative and the Purchaser
shall attempt to resolve in writing all of the differences with respect to each
matter specified in the Notice of Working Capital Disagreement, in which case
any such resolution of the Final Working Capital Statement shall be final and
binding on the parties (in such instance, the "Final Closing Statement"). If,
at the end of such 30-day period, the Shareholders' Representative and Purchaser
have not resolved in writing all of the differences with respect to any such
matter, then each unresolved matter ("Disputed Working Capital Matter") shall be
submitted to and reviewed by the accounting firm of Price Waterhouse LLP or, if
such firm is unwilling or unable to act, to another "big six" accounting firm
selected by a panel of three arbitrators in accordance with the rules of the
American Arbitration Association (the "Neutral Accountant"). The Neutral
Accountant shall consider only the Disputed Working Capital Matters and shall
act promptly to resolve in writing all Disputed Working Capital Matters, and its
decisions with respect to the Disputed Working Capital Matters shall be final
and binding on each of the Shareholders and Purchaser; provided that no such
resolution of the Disputed Working Capital Matters shall require payment of an
amount greater than the highest amount or less than the lowest amount suggested
for such resolution by either the Shareholders' Representative or the Purchaser.
The Neutral Accountant shall notify the Shareholders and the Purchaser of its
resolution of the Disputed Working Capital Matters and shall prepare a revised
Working Capital Statement reflecting the resolution of all Disputed Working
Capital Matters promptly after such resolution (in such instance the "Final
Closing Statement") and shall deliver it to Purchaser and Shareholders'
Representative.
(d) Purchaser shall be responsible for and shall pay the fees and
expenses incurred in connection with the Neutral Accountant. Upon payment by
the Purchaser, one-half of such fees of the Neutral Accountant will be a claim
of Purchaser against the Escrow Amount payable first from the Working Capital
Escrow Amount and then from the Indemnification Escrow Amount.
(e) Within 10 days after receipt of the Final Closing Statement:
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(i) if the Working Capital as set forth in the Final Closing
Statement is less than the Estimated Working Capital, the Merger
Consideration payable to Shareholders shall be adjusted by the difference
(based on the MW Common Stock Valuation) by the Shareholders'
Representative giving instructions to the Escrow Agent to distribute to
Purchaser the MW Common Stock representing such adjustment, first from the
Working Capital Escrow Amount and, to the extent there is not a sufficient
amount in the Working Capital Escrow Amount, then from the Indemnification
Escrow Amount.
(ii) If the Working Capital as set forth in the Final Closing
Statement is greater than the Estimated Working Capital, Purchaser, subject
to the provisions of Section 1.6(d), shall issue additional MW Common Stock
(based on the MW Common Stock Valuation) as additional Merger Consideration
to each Shareholder surrendering Certificate(s) after the Effective Time,
the Pro Rata Share of the difference for each share represented by such
Certificate(s).
1.8 ADDITIONAL POST-CLOSING ADJUSTMENTS.
(a) If Purchaser reasonably determines, within 90 days of the Closing
Date, in accordance with GAAP and consistent with the Company's past practices
and historical turnover rates, that the allowance for obsolete or unsaleable
items in the raw materials, work-in-progress and finished goods inventory, as
reflected in the Working Capital included in the Final Closing Statement, was
insufficient based upon facts known at the date of such subsequent
determination, the Purchaser shall provide the Shareholders' Representative with
written notice thereof. The Shareholders' Representative shall have 10 days
after receipt of Purchaser's notice to give written notice to the Purchaser of
his disagreement ("Notice of Inventory Disagreement"). If a Notice of Inventory
Disagreement is issued by Shareholders' Representative, it shall specify in
reasonable detail the nature of any disagreement so asserted. For a period of
30 days after the delivery of such Notice of Inventory Disagreement, the
Shareholders' Representative and the Purchaser shall attempt to resolve in
writing all of the differences with respect to each matter specified in the
Notice of Inventory Disagreement, in which case any such resolution of such
matters shall be final and binding on the parties. If, at the end of such
30-day period, the Shareholders' Representative and Purchaser have not resolved
in writing all of the differences with respect to any such matter, then each
unresolved matter ("Disputed Inventory Matter") shall be submitted to and
reviewed by the Neutral Accountant. The Neutral Accountant shall consider only
the Disputed Inventory Matters and shall act promptly to resolve in writing all
Disputed Inventory Matters, and its decisions with respect to the Disputed
Inventory Matters shall be final and binding on each of the Shareholders and
Purchaser; provided that no such resolution of the Disputed Inventory Matters
shall require payment of an amount greater than the highest amount or less than
the lowest amount suggested for such resolution by either the Shareholders'
Representative or the Purchaser. The Neutral Accountant shall notify the
Shareholders and the Purchaser of its resolution of the Disputed Inventory
Matters and shall deliver written confirmation of same to Purchaser and
Shareholders' Representative. If Shareholders' Representative does not issue a
Notice of Inventory Disagreement or upon the resolution of the Disputed
Inventory Matters by the Neutral Accountant, the Purchaser, at Shareholders'
Representative's written instructions, shall sell such obsolete and/or
unsaleable inventory. The Merger Consideration payable to Shareholders shall be
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adjusted by the difference (based on the MW Common Stock Valuation) by an amount
equivalent to the additional payment, if any, that would have been payable by
the Shareholders to the Purchaser pursuant 1.7(e)(i) on the basis of the
difference between the allowance for obsolete or unsaleable items as restated
pursuant to this Section 1.8(a) and as originally stated at in the Final Closing
Statement, less the aggregate proceeds from the sale of said obsolete and/or
unsaleable inventory through the Shareholders' Representative giving
instructions to the Escrow Agent to distribute to Purchaser the MW Common Stock
representing such adjustment, first from the Working Capital Escrow Amount and,
to the extent there is not a sufficient amount in the Working Capital Escrow
Amount, then from the Indemnification Escrow Amount.
(b) If the gross amount collected by Purchaser upon the accounts
receivable reflected in the Working Capital included in the Final Closing
Statement ("Accounts Receivable") during the 120 days after the Closing Date is
less than the book value of such Accounts Receivable after giving effect to the
allowance for doubtful accounts as reflected on the Final Closing Statement,
Shareholders shall pay to Purchaser, by giving instructions to the Escrow Agent
to distribute to Purchaser MW Common Stock (based on the MW Common Stock
Valuation) first from the Working Capital Escrow Amount and, to the extent there
is not a sufficient amount in the Working Capital Escrow Amount, then from the
Indemnification Escrow Amount, on the basis of the difference between the amount
collected and the book value of such Accounts Receivable after giving effect to
the allowance for doubtful accounts as reflected as originally stated at in the
Final Closing Statement; provided, however, that during the aforementioned
120-day period Purchaser shall not write off or settle any uncollected Accounts
Receivable or retain a collector to collect any such Accounts Receivable without
written consent of Shareholders' Representative. Subsequent to such 120 days
after the Closing Date, Purchaser shall continue to use reasonable efforts to
collect any Accounts Receivable not collected during the 120 days after the
Closing Date, and the net amounts of such Accounts Receivable collected by
Purchaser, after accounting for third party collection costs, shall be remitted
to the Shareholders, other than Dissenting Shareholders, in MW Common Stock
(based on the MW Common Stock Valuation) after the payment by Shareholders of
the amounts due Purchaser under this Section 1.8(b). On or prior to the 15th
day of each month, Purchaser shall deliver to Shareholders' Representative an
Accounts Receivable report identifying the gross collections made by Purchaser
through and including the end of the preceding calendar month. Any amounts
collected by Purchaser shall be applied against the longest outstanding
receivables except as to any receivable as to which the Person paying such
amount has given Purchaser notice of a dispute.
(c) Upon the later of the 135th day after the Closing Date, or the
10th day after receipt by both Shareholders and Purchaser of the Final Closing
Statement, or the payment by Shareholders to Purchaser of any amount claimed by
Purchaser pursuant to Section 1.7 or this Section 1.8, any remaining Working
Capital Escrow Amount shall be distributed from the Working Capital Escrow
Account to Shareholders surrendering Certificates pursuant to Section 1.6 as
directed by the Shareholders' Representative.
1.9 TRANSFER TAXES. Any transfer taxes or stamp duties, or other similar
taxes, fees, charges or expenses (collectively "Transfer Taxes") imposed on the
Company shall be divided
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equally between the Purchaser and the Company, and the total accrued and unpaid
amount thereof allocated to the Company shall be treated as a Company Expense.
Any Transfer Taxes imposed on the Shareholders shall be paid by the
Shareholders.
1.10 MW COMMON STOCK.
(a) The MW Common Stock to be delivered to Shareholders will not be
registered under federal or state securities laws, but rather, issued pursuant
to an exemption therefrom. As a result, Shareholders acknowledge and agree that
such MW Common Stock is "restricted" stock as such term is defined under such
securities laws and cannot be sold, pledged or transferred unless subsequently
registered or unless an exemption is available allowing its resale.
(b) Parent, at its expense, shall file a shelf registration statement
(the "Registration Statement") as soon as reasonably practicable after the
Closing Date, pursuant to Rule 415 under the Securities Act of 1933, as amended
(the "Securities Act") with respect to all the MW Common Stock issued by Parent
in connection with consummating the transactions contemplated by this Agreement
(including, without limitation, those shares deposited in escrow under the
Escrow Agreement) (collectively, "Registrable Shares"). Parent shall use its
best efforts to: (i) have the Registration Statement declared effective on or
before July 15, 1998; and (ii) keep the Registration Statement continuously
effective and to supplement and amend it as required by the Securities Act and
the regulations thereunder from the date the Registration Statement is declared
effective (the "Initial Effective Date") until the earliest to occur of the
following events: (A) such time as Shareholders holding Registrable Shares may
transfer the MW Common Stock pursuant to the safe harbor provisions of Rule 144
under the Securities Act without having to comply with any volume limitations
under such rule; (B) notification to Parent that all Registrable Shares have
been sold for the accounts of the participating Shareholders; or (C) a request
by all participating Shareholders having unsold Registrable Shares that the
Registration Statement be terminated (the period between the Initial Effective
Date and earliest to occur of such events is hereinafter referred to as the
"Registration Statement Period"). If the Registration Statement ceases to be
effective at any time during the Registration Statement Period, Parent, at its
expense, shall within thirty days of such cessation cause to be filed an
additional shelf registration statement covering the unsold balance of the
Registrable Shares and shall use its best efforts to have such registration
statement declared effective as soon as practicable thereafter and keep such
registration statement effective until the end of the Registration Statement
Period.
(c) Parent agrees to furnish each participating Shareholder with such
number of conformed copies of any registration statement and prospectus included
therein (including each preliminary prospectus) covering the Registrable Shares
as each such Shareholder reasonably may request in order to facilitate the
public sale of the Registrable Shares covered by such registration statement.
(d) All expenses incurred by Parent, Purchaser and the Shareholders
in connection with any registration under this Agreement shall be paid by Parent
and Purchaser, including without limitation all registration and filing fees,
printing expense, fees and
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disbursements of counsel and independent public accountants for the Parent and
the Purchaser, fees and expenses (including counsel fees) incurred in connection
with complying with state securities or "blue sky" laws, fees of securities
exchanges or the National Association of Securities Dealers, Inc., fees of
transfer agents and registrars, but excluding any selling commissions and
transfer taxes applicable to the sale of the MW Common Stock and any legal fees
and expenses of counsel or other advisers and agents of the selling
Shareholders.
(e) To ensure that the Shareholders are able to benefit from the
Registration Statement and to make available the benefits of certain rules and
regulations of the Securities and Exchange Commission ("SEC") that may permit
the offer and/or sale of MW Common Stock to the public without registration by
the Shareholders, Parent agrees to:
(i) supplement and amend the Registration Statement in a
timely manner if required by the registration form utilized by the Parent,
or by the instructions applicable to such form or by the Securities Act or
the rules and regulations thereunder or if reasonably requested by a
majority in aggregate amount of the holders of Registrable Shares and to
furnish the Shareholders' Representative with copies of any such amendment
or supplement at least twenty-four hours prior to its being filed with the
SEC;
(ii) file with the SEC in a timely manner all reports and
other documents required of Parent under the Securities Act and the
Securities Exchange Act of 1934, as amended ("Exchange Act");
(iii) make and keep public information regarding Parent
available (as those terms are understood and defined in Rule 144) at all
times during the Registration Period or such longer period ending on the
date upon which the Shareholders no longer need to rely on Rule 144; and
(iv) so long as any Shareholder owns any MW Common Stock,
furnish to each Shareholder upon written request a written statement by
Parent that all reports and filings that are necessary to be filed by
Parent for any Shareholder to avail himself or herself of Rule 144 or 145
have been filed, and provide a copy of the most recent annual or quarterly
report of Parent, and any other reports and documents as a Shareholder may
reasonably request in availing himself or herself of any rule or regulation
of the SEC.
(f) Parent and Mail-Well, jointly and severally, shall indemnify the
Shareholders (and any Person who is an Affiliate of such Shareholders within the
meaning of the Securities Act) whose shares of MW Common Stock are included in
any registration statement as Registrable Shares against all expenses, claims,
losses, damages, or liabilities, including, without limitation, reasonable
attorneys' fees and court costs (collectively, a "Liability"), to which the
Shareholder may become subject under the Securities Act, the Exchange Act or any
rule or regulation under either of them or other statute or at common law,
arising out of or based upon: (i) any untrue statement or alleged untrue
statement of any material fact contained in any registration statement, any
preliminary prospectus or final prospectus contained therein, or any amendment
or supplement, and any document incorporated by reference therein (a
"Registration
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Document"); or (ii) any omission or alleged omission to state a material fact
required to be stated in any Registration Document or necessary in order to make
any statement in any Registration Document not misleading. Notwithstanding the
foregoing, neither Parent nor Mail-Well will be liable to a Shareholder to the
extent that any liability arises out of or is based upon any untrue statement or
omission made in any Registration Document in reliance upon and in conformity
with written information furnished to Parent or Mail-Well for incorporation in
any such Registration Document by or on behalf of such Shareholder. Parent and
Mail-Well's joint and several indemnification obligation will remain in full
force and effect regardless of any investigation made by or on behalf of a
Shareholder and will survive transfer of the Registrable Shares by the
Shareholders.
1.11 INVESTMENT LETTER. Pursuant to Section 8.9 hereof, and in
acknowledgment of the restrictions on transfer of the MW Common Stock
(i) described in this Section 1.10 above; and (ii) if applicable, required by
the pooling of interests accounting method contemplated herein, each Shareholder
shall deliver to Purchaser prior to Closing an executed letter in the form of
Exhibit C hereto.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND CONTROLLING SHAREHOLDERS
The Schedules attached to this Agreement are sometimes referred to herein
as the "Disclosure Schedules." The Company and Controlling Shareholders
represent and warrant to Purchaser that except as otherwise disclosed in the
Disclosure Schedules the following statements are true as of the date of this
Agreement and as of the Closing Date:
2.1 ORGANIZATION, STANDING, CORPORATE AUTHORIZATION, AND ENFORCEABILITY.
(a) Each of the Company and its Subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and each such corporation has all requisite
corporate power and authority to own, lease and operate its properties and to
carry on its business as now being conducted. Each of the Company and its
Subsidiaries is duly qualified or licensed to do business and is in good
standing in each jurisdiction in which the property owned, leased or operated by
it or the nature of the business conducted by it makes such qualification
necessary, except where the failure to so qualify would not have a Material
Adverse Effect on the financial condition or business of the Company or a
Subsidiary.
(b) This Agreement and all other agreements, documents and
instruments executed or to be executed by the Company in connection herewith
(the "Related Agreements") constitute the valid and legally binding obligations
of the Company and are enforceable in accordance with their terms, except as
such enforceability may be limited by equitable principles and by applicable
bankruptcy, insolvency, reorganization, arrangement, moratorium or similar laws
relating to or affecting the rights of creditors generally. The Company has the
requisite corporate power and authority to enter into this Agreement and the
Related Agreements.
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(c) The execution and delivery of this Agreement, the Related
Agreements, and all other documents and instruments executed or to be executed
by the Company pursuant to this Agreement, and the consummation of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary corporate and other action on the part of the Company, subject to
obtaining the requisite approvals from Shareholders in accordance with
applicable law. This Agreement and the Related Agreements have been or will
have been, at the time of their respective executions and deliveries, duly
executed and delivered by a duly authorized officer of the Company.
(d) SCHEDULE 2.1(d) hereto lists all of the Company's subsidiaries
(each a "Subsidiary" and collectively the "Subsidiaries"). All of the
outstanding shares of capital stock of each of the Subsidiaries have been duly
authorized and validly issued, are fully paid and nonassessable and are owned,
of record and beneficially, by the Company, free and clear of all liens,
encumbrances, options or claims whatsoever. No shares of capital stock of any
of the Subsidiaries are reserved for issuance and there are no outstanding or
authorized options, warrants, rights, subscriptions, claims of any character,
agreements, obligations, convertible or exchangeable securities, or other
commitments, contingent or otherwise, relating to the capital stock of any
Subsidiary, pursuant to which such Subsidiary is or may become obligated to
issue any shares of capital stock of such Subsidiary or any securities
convertible into, exchangeable for, or evidencing the right to subscribe for,
any shares of such Subsidiary. Other than those exceptions under applicable
corporate law described in SCHEDULE 2.1(d) or as otherwise set forth in SCHEDULE
2.1(d), there are no restrictions of any kind which prevent the payment of
dividends by any of the Subsidiaries. Except as set forth in SCHEDULE 2.1(d),
neither the Company nor any Subsidiary owns, directly or indirectly, any capital
stock or other equity interest in any Person or have any direct or indirect
equity or ownership interest in any Person, and neither the Company nor any of
its Subsidiaries is subject to any obligation or requirement to provide funds
for or to make any investment (in the form of a loan, capital contribution or
otherwise) to or in any Person. The Subsidiaries have no Voting Debt (as
defined below).
2.2 CAPITALIZATION. As of the date of this Agreement, the capitalization
of the Company (including all capital stock authorized, issued and outstanding)
is as set forth on SCHEDULE 2.2. All of the outstanding shares of the Company's
Common Stock are owned by the Shareholders as set forth on SCHEDULE 2.2. The
Company has no authorized or outstanding bonds, debentures, notes or other
indebtedness the holders of which have the right to vote (or convertible or
exchangeable into or exercisable for securities having the right to vote) with
the Shareholders on any matter ("Voting Debt"). Except as contemplated by this
Agreement, after the Effective Time, the Surviving Corporation will have no
obligation to issue, transfer or sell any shares of MW Common Stock as a result
of any obligation existing, or created by the Company, at or prior to the
Effective Time, including pursuant to any stock incentive plan or warrant. All
prior issuances of securities by the Company and all prior repurchases,
redemptions or exchanges affecting the outstanding securities of the Company
have complied with all applicable Legal Requirements (as defined below)
(including federal and state securities laws), preemptive rights and contractual
restrictions. All issued and outstanding shares of capital stock of the Company
have been duly authorized and validly issued and are fully paid and
nonassessable. Except as
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disclosed on SCHEDULE 2.2, the Company does not have shares of its capital
stock authorized, issued or outstanding and there are no outstanding
convertible or exchangeable securities, subscriptions, calls, options,
warrants, rights (contractual or arising by operation of law, including,
without limitation, rights of first refusal and preemptive rights), or other
agreements or commitments of any character to which the Company is a party or
by which it is bound, relating to the issuance, purchase, other acquisition
or voting of any shares of the capital stock of, or other equity or ownership
interest (collectively, "Equity Rights") in the Company. Except as disclosed
on SCHEDULE 2.2 and on SCHEDULE 2.11, there are no agreements, arrangements
or commitments of any character (contingent or otherwise) pursuant to which
any person or entity is or may be entitled to receive any payment based on
the revenues or earnings, or calculated in accordance therewith, of the
Company. Except as set forth in SCHEDULE 2.2, there are no voting trusts,
proxies or other agreements or understandings to which the Company or
Shareholders is a party or by which the Company or Shareholders is bound with
respect to the voting of any shares of capital stock or other Equity
Interests of the Company. Except as set forth on Schedule 2.2, any such
voting trusts will be terminated as of the Closing.
For purposes of this Agreement, the term "Legal Requirement" shall mean any
federal, state or local law, statute, legislation, ordinance, code, rule,
regulation, decree, award, order, permit, franchise, consent or authorization
of, any federal, state, local or other governmental body or agency, department,
commission, bureau, board, council, court, magistrate, panel or instrumentality
of the United States, any political subdivision thereof or any state or local
governmental authority in effect as of the date hereof.
2.3 ARTICLES OF INCORPORATION AND BYLAWS; CERTAIN RECORDS. Copies of the
Articles of Incorporation, Bylaws, minute books and stock records of the Company
and its Subsidiaries have been made available to Purchasers, and each such copy
is true, correct and complete as amended to date. All material records of any
type and description in whatever form or medium that presently exist and that
relate to the business or properties of the Company and the Subsidiaries and
which in the ordinary course of business the Company or the Subsidiaries would
normally retain are in the possession or control of the Company or the
Subsidiaries and are located at the offices of the Company or the Subsidiaries
or of its counsel, independent auditors, consultants, or other advisors, and the
Surviving Corporation will have the right to possession of all such records upon
the consummation of the transactions contemplated by this Agreement.
2.4 COMPLIANCE WITH OTHER INSTRUMENTS AND LAWS. Except as set forth in
SCHEDULE 2.4, the execution and delivery of this Agreement and the Related
Agreements and the consummation of the transactions contemplated hereby and
thereby will not conflict with or result in any violation of or default under
any provision of the Articles of Incorporation or Bylaws of the Company, or
the comparable governing documents of any Subsidiary, or any material
violation of, or default under, any mortgage, indenture, trust, lease,
partnership or other agreement or other instrument, permit, concession,
grant, franchise, license, judgment, order, decree, or Legal Requirement
applicable to the Company, any Subsidiary, or Shareholder or any of the
properties of the Company or Subsidiaries, nor will they result in the
creation or imposition of any lien, security interest, charge, claim or other
encumbrance of any nature whatsoever on any of the
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properties or assets of the Company or Subsidiaries or the Common Stock, nor
will they prevent or materially delay the consummation of the transactions
contemplated hereby.
2.5 GOVERNMENTAL AUTHORIZATIONS; CONSENTS. Except as set forth on
SCHEDULE 2.5, no consents, licenses, approvals or authorizations of, or
registrations or declarations with, any governmental authority, agency, bureau
or commission, or any third party which have not already been obtained, are
required to be obtained or made by the Company, the Subsidiaries or Shareholders
in connection with the execution, delivery, performance, validity and
enforceability of this Agreement or any Related Agreement or the sale or
transfer of the Common Stock and will not prevent or materially delay the
consummation of the transactions contemplated hereby other than and except for
consents, licenses, approvals, authorizations or registrations which are not
material.
2.6 LITIGATION. No action, suit, proceeding or governmental investigation
is pending or, to the Knowledge (as defined below) of the Company and the
Controlling Shareholders, threatened, at law or in equity, which seeks to
question, delay or prevent, or could have the effect of delaying or preventing,
the consummation of all or any portion of the transactions contemplated hereby.
2.7 FINANCIAL STATEMENTS; CONDUCT OF THE BUSINESS; NO UNDISCLOSED
LIABILITIES. Except as set forth on SCHEDULE 2.7:
(a) The Company has delivered to Purchaser (i) the audited
consolidated balance sheets of the Company and the Subsidiaries as of December
31, 1997, 1996 and 1995 and the related audited statements of income, retained
earnings and cash flows for the fiscal years then ended, accompanied in each
case by an opinion thereon of the independent certified public accountant of the
Company (such financial statements, including the notes thereto, hereinafter
being referred to as the "Annual Financial Statements"), and (ii) the unaudited
consolidated balance sheet of the Company and the Subsidiaries as of March 31,
1998, and the related unaudited statements of income for the three months ended
March 31, 1998 (the "Interim Financial Statements"). (The Annual Financial
Statements and the Interim Financial Statements including the notes thereto
together hereinafter being referred to as the "Financial Statements"). All of
the Financial Statements have been prepared in accordance with GAAP (subject to
the modifications and exceptions set forth in SCHEDULE 2.7 and, in the case of
Interim Financial Statements, to end of year audit adjustments and preparation
of footnotes) consistently applied for all relevant periods (except as indicated
therein) and present fairly in all material respects the financial position of
the Company and the Subsidiaries as of the dates thereof and the results of its
operations for the periods then ended.
(b) Neither the Company nor the Subsidiaries have any debts,
obligations, guaranties of the obligations of others or liabilities except: (i)
debts, obligations, guaranties and liabilities to the extent reflected or
reserved against in the Financial Statements, (ii) debts, obligations,
guaranties and liabilities incurred or entered into subsequent to March 31,
1998, in the ordinary course of business and otherwise not in contravention of
this Agreement, and (iii) debts, obligations and liabilities relating to this
Agreement and the Related Agreements and
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instruments being executed and delivered in connection herewith and the
transactions referred to herein and therein (including obligations to pay legal
fees, financial advisory fees, bank fees, accounting fees and other amounts in
connection therewith) so long as such obligations are included in determining
Company Expenses.
2.8 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except for (i) matters set
forth on SCHEDULE 2.8, (ii) matters disclosed in the Annual Financial Statements
or (iii) as contemplated by this Agreement, neither the Company nor the
Subsidiaries has, since December 31, 1997, except as otherwise specified herein:
(a) undergone any change in its condition (financial or otherwise),
properties, assets, liabilities, business or operations, except for changes in
the ordinary course of business which have not either individually or in the
aggregate had a Material Adverse Effect;
(b) except as set forth on SCHEDULE 2.8, changed any of its methods
of accounting or accounting practices or classifications of assets or
liabilities, or failed to maintain its books of account in the usual, regular
and ordinary manner in accordance with GAAP unless required by regulation or
GAAP;
(c) modified the material terms of, or canceled or terminated, any
Material Contract (as defined below) other than in the ordinary course of
business;
(d) terminated, discharged or received any written notice regarding
the resignation, discharge or termination of any officer other than in the
ordinary course of business or as contemplated by this Agreement;
(e) since December 31, 1995, established or adopted any Benefit Plan
(as defined below), or increased the amount of the wages, bonus, salary,
commissions, fringe benefits or other compensation or remuneration payable to,
any of its directors, officers or employees, except in any case in the ordinary
course of business in accordance with past practice and, in the case of the
senior management employees and Shareholders (listed on SCHEDULE 2.8(e)), in an
amount not exceeding 3% in any one case or a payment of bonuses in an aggregate
amount of $25,000;
(f) since December 31, 1995, declared, set aside, made or paid any
dividend or other distribution in respect of its capital stock or purchased or
redeemed, directly or indirectly, any shares of its capital stock, or split up,
combined, reclassified, redeemed, repurchased or otherwise reacquired any of its
capital stock other than distributions to shareholders to pay income taxes and
charged against their respective Accumulated Adjustments Account, if applicable;
(g) since December 31, 1995, issued or sold any shares of its capital
stock of any class or any subscriptions, options, warrants, calls or other
rights to purchase directly or indirectly any such shares or any securities
directly or indirectly convertible into or exchangeable for such shares or made
any other change in its capital structure;
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(h) since December 31, 1995, except for borrowings under its normal
line of credit and Debt described in SCHEDULE 2.8(h), incurred any direct or
contingent liability for borrowed money or guaranteed the monetary obligations
of any other person or entity other than indebtedness to be included in the Debt
to be discharged at Closing, or made any monetary investment in, advance to or
loan to any person or entity other than in the ordinary course of business;
(i) mortgaged, pledged or subjected to any material lien, lease,
security interest or other charge or encumbrance any of its properties or
assets, tangible or intangible, except those securing Debt to be discharged at
Closing and except for Permitted Liens (as defined below);
(j) made any material change in its practices, operations or policies
with respect to the method for selling goods or services, or other method for
accounting for sales, the conduct of accounts receivable collection or accounts
payable payment activities or the maintenance of inventory levels other than
changes in the ordinary course of business;
(k) since December 31, 1995, merged or consolidated with or into any
other entity or initiated or participated in negotiations with any person or
entity with respect to any of the foregoing;
(l) implemented or adopted any change in its tax methods, principles
or elections;
(m) since December 31, 1995, acquired or disposed of any material
assets or properties or made any capital improvement other than in the ordinary
course of business; or
(n) suffered any damage, destruction or loss (whether or not covered
by insurance) which has had or could reasonably be expected to have a Material
Adverse Effect on the Company or the Subsidiaries.
2.9 TITLE TO PROPERTY, ABSENCE OF LIENS AND ENCUMBRANCES.
(a) The Company and the Subsidiaries have good title to their owned
material assets, including the owned tangible assets reflected on the balance
sheet included in the Company's most recent Financial Statements, other than
assets disposed of or used after the date thereof in the ordinary course of
business for fair value. Except as disclosed in SCHEDULE 2.9(a), the tangible
assets owned by the Company and the Subsidiaries are owned free and clear, of
all liens, mortgages, pledges, charges, security interests or encumbrances,
except for Permitted Liens (as defined below). Each of the Company and the
Subsidiaries own, lease or license, and have adequate rights to use all material
real and personal property and other material assets necessary to conduct the
business of the Company and Subsidiaries as a going concern on a basis
consistent with past practices. To the Knowledge of the Company, the assets of
the Company and the Subsidiaries necessary for the operation of their business
consistent with past practices are in
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operating condition and repair (subject to normal wear and tear). Neither the
whole nor any part of the real property used in the Business have been condemned
by any public authority, nor, to the Knowledge of the Company and the
Controlling Shareholders, is any such condemnation or taking threatened or
contemplated. There exists free and uninterrupted egress and ingress over a
public roadway to all operating facilities.
For the purposes of this Agreement, the term "Permitted Liens" shall
mean (i) liens for current taxes, assessments or governmental charges not yet
due, (ii) deposits or pledges to secure bids, tenders, contracts, leases,
statutory obligations, surety and appeal bonds, and other obligations of like
nature arising in the ordinary course of the Company's and/or any of its
Subsidiaries' business, (iii) liens arising out of deposits in connection with
workers' compensation, unemployment insurance, old age pensions or other social
security or retirement benefits legislation, (iv) liens imposed by law, such as
mechanics', workers', materialmen's, carriers' or other like liens arising in
the ordinary course of the Company's and/or any of its Subsidiaries' business
which secure the payment of obligations which are not past due or which are
being diligently contested in good faith by appropriate proceedings and for
which adequate reserves in accordance with GAAP are maintained on the Financial
Statements, (v) imperfections of title, liens and encumbrances which do not
materially and adversely affect the use, value or marketability of the property
affected thereby, and (vi) the imperfections of title, liens, mortgages,
pledges, charges, security interests and encumbrances set forth on SCHEDULE
2.9(a).
(b) The Company and the Subsidiaries validly hold the real property
described on SCHEDULE 2.9(b) (the "Real Property") free and clear of all liens,
encumbrances, mortgages or security interests, except for Permitted Liens.
(c) Except as set forth on SCHEDULE 2.9(c), neither the Company nor
the Subsidiaries is a party to any leases of real property. The Company and the
Subsidiaries validly hold the leaseholds created by the leases (true, complete
and correct copies of which have been provided to Purchaser) as described on
SCHEDULE 2.9(c) (the "Leased Property"), and such leases are enforceable by the
Company or the Subsidiaries as the lessee thereunder in accordance with their
terms.
(d) Neither the Company nor any of the Subsidiaries is a party to any
agreement granting any third party the right or an option to purchase or lease
all or any portion of the Real Property, Leased Property or any personal
property of any of the Company or the Subsidiaries.
(e) There is not pending, nor has the Company or any Subsidiary
received any written notice of, (i) any Claim or proceeding asserting or seeking
to establish a title interest in the Real Property or Leased Property, or any
Claim of default under any of the leases under which leaseholds have been
created ("Title Notice"), or (ii) the existence of any facts or proceedings of
which the Company or any of the Controlling Shareholders has Knowledge which may
result in the issuance of such a Title Notice.
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2.10 FULL AUTHORITY; COMPLIANCE WITH LAWS. Except as set forth on SCHEDULE
2.10, the Company and the Subsidiaries are in compliance in all material
respects with all applicable Legal Requirements. Set forth on SCHEDULE 2.10 is a
list of any and all material permits, licenses, consents, orders, approvals,
franchises, certificates or other authorizations under any applicable Legal
Requirement (collectively the "Permits"), issued to the Company or the
Subsidiaries in connection with the ownership, operation and maintenance of
their businesses or assets. The Company and the Subsidiaries have obtained and
maintained all Permits. Each of the Permits is in full force and effect, and
the Company and the Subsidiaries are in compliance in all material respects with
all the provisions of such Permits.
2.11 BENEFIT PLANS.
(a) Except as set forth in SCHEDULE 2.11, neither the Company nor the
Subsidiaries maintain, sponsor, participate in or contribute to, or is required
to contribute to, directly or indirectly, or has any obligation under:
(i) Any employee benefit plan, employee pension benefit plan,
employee welfare benefit plan (including any medical, dental, disability,
accident or sickness, salary continuation or life insurance plan or
arrangement), or multiemployer plan, all as defined in the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), regardless of
whether or not a plan is exempt from some or all of the otherwise
applicable requirements of ERISA; or
(ii) Except as disclosed on the Financial Statements, any
material bonus, commission, deferred compensation, incentive compensation,
restricted stock, stock purchase, stock option, stock appreciation right,
debenture, supplemental pension, profit sharing, royalty pool, vacation,
sick leave, severance or termination pay policies, supplemental
unemployment benefits plan, loan guarantee, relocation assistance, employee
loan or other extensions of credit, or other similar material plan,
program, agreement, policy, commitment, arrangement or benefit currently in
effect under which current or former employees or their dependents,
beneficiaries, representatives or estates are currently or will in the
future be entitled to benefits.
(b) With respect to each plan, program, agreement, policy,
commitment, arrangement or benefit described on SCHEDULE 2.11 (a "Benefit
Plan"), the Company and the Subsidiaries have furnished to the Purchaser true,
correct and complete copies of such Benefit Plans that are in written form,
including amendments, if applicable, summary plan descriptions, if applicable,
the Internal Revenue Service determination letter, if applicable, and the two
most recent Forms 5500, 5500-C or 5500-R, as applicable, and has made available
to the Purchaser the most recent actuarial reports of or regarding such Benefit
Plan. As to each Benefit Plan not reduced to writing, the Company and the
Subsidiaries have made available to the Purchaser a description of all material
elements of such plan.
(c) Except as set forth in SCHEDULE 2.11:
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(i) Each Benefit Plan has been operated and administered in
all material respects in accordance with its terms and applicable laws,
including but not limited to ERISA and the Internal Revenue Code of 1986 as
amended (the "Code") (as defined below). Each Benefit Plan that is intended
to be qualified under Section 401(a) of the Code either has received from
the Internal Revenue Service, or timely applied for, a determination letter
on such Benefit Plan's qualified status.
(ii) Neither the Company nor the Subsidiaries nor any other
party in interest (within the meaning of ERISA) has engaged in any
non-exempt prohibited transaction with respect to any Benefit Plan under
ERISA, the Code, and there is no pending assertion of the occurrence of any
such transaction.
(iii) All contributions required under applicable law or the
terms of any Benefit Plan, collective bargaining agreement or other
agreement relating to a Benefit Plan to be paid by the Company or the
Subsidiaries for all periods prior to the Closing Date have been or will
have been completely and timely made to each Benefit Plan when due, and the
Company and the Subsidiaries have established adequate reserves on their
books (which will be treated as a current liability for purposes of
determining Working Capital at Closing) to meet liabilities for
contributions accrued but that have not been made because they are not yet
due and payable.
(iv) To the Knowledge of the Company and the Controlling
Shareholders, there is no current or pending investigation or audit by the
Internal Revenue Service, the Department of Labor or any other governmental
entity of any Benefit Plan, nor has the Company or the Subsidiaries
received notification from any such governmental entity of such a pending
audit or investigation, and there are no actions, suits or claims pending
(other than routine claims for benefits) or threatened, with respect to any
Benefit Plan or against the assets of any such Benefit Plan.
(v) No Benefit Plan is or ever has been a plan subject to
Title IV of ERISA, Part 3 of Subtitle B of Title I of ERISA or Section 412
of the Code ("Pension Plan"), or is or ever has been a multiemployer plan
as defined in Section 3(37) of ERISA or Section 414(f) of the Code
("Multiemployer Plans"); neither the Company nor any Subsidiary has
incurred any liability to the Pension Benefit Guaranty Corporation ("PBGC")
with respect to any Pension Plan, except for required premium payments,
which payments have been made when due; no accumulated funding deficiency
(within the meaning of Section 412 of the Code or Section 302 of ERISA) or
reportable event (as defined in Section 4043 of ERISA) has occurred with
respect to any Pension Plan; no event has occurred in connection with any
Pension Plan which could subject any Company or any Pension Plan, or
Purchaser, its Affiliates or any of their respective benefit plans, to
liability under Section 4062, 4063 or 4064 of ERISA, and, no event has
occurred which might give rise to any liability of the Company or the
Subsidiaries or any Pension Plan, or Purchaser, its Affiliates or any of
their respective benefit plans, to the PBGC under Title IV of ERISA or
which could reasonably be anticipated to result in any claims being made
against the Company or the Subsidiaries or any Pension Plan; and neither
the
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Company nor the Subsidiaries has incurred nor, as a result of the
transactions contemplated by this Agreement, will incur any
withdrawal liability (including any contingent or secondary
withdrawal liability) within the meaning of Section 4201 and 4204
of ERISA to any Multiemployer Plan; upon a complete withdrawal or a
partial withdrawal (as those terms are defined in Section 4203 and
4205, respectively, of ERISA) from a Multiemployer Plan occurring
on or before the close of the most recent fiscal year of each such
Multiemployer Plan ended prior to the Closing Date, to the
Knowledge of the Company and Controlling Shareholders neither the
Company nor the Subsidiaries would have been subject to withdrawal
liability under Title IV, Subtitle E, Part 1 of ERISA and, there
has been no material change in the financial condition of any
Multiemployer Plan that would result in the imposition of such
liability due to such complete or partial withdrawal on or before
the Closing Date.
(vi) The Company and the Subsidiaries have complied in all
material respects with all notice and continuation coverage requirements
applicable to group health plans under the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended ("COBRA"), with respect to all
medical and health benefits provided by the Company and the Subsidiaries
that are subject to COBRA.
(vii) No Benefit Plan amendments have been adopted nor will any
such amendments be adopted prior to the Closing Date except as may be
necessary for compliance purposes with the Code or ERISA and there is no
arrangement, commitment or understanding to create any additional plan
which would constitute a Benefit Plan or increase the rate of benefit
accrual or contribution requirement under any of the Benefit Plans or
modify, change or terminate any existing Benefit Plan.
(viii) Neither the Company nor the Subsidiaries is a member of a
"controlled group" of organizations (as defined in Sections 414(b), (c),
(m) or (o) of the Code) which sponsors or maintains any employee benefit
plan within the meaning of Section 3(3) of ERISA which under Title IV of
ERISA or any section of the Code or ERISA would subject Purchaser, Company
or any Subsidiary, or any of their respective employee benefit plans or the
fiduciaries thereof or their respective assets to any taxes, encumbrances,
penalties or other liabilities.
2.12 CLAIMS. There are no Claims against, or to the Knowledge of the
Controlling Shareholders or the Company, threatened against, the Company or any
Subsidiary or their properties, at law or in equity or before any court,
governmental department, commission, board, agency, authority, instrumentality,
domestic or foreign which, if adversely determined, could be reasonably
expected to have, individually or in the aggregate, a Material Adverse Effect on
the Company or the Subsidiaries before or after the Closing Date. Neither the
Company nor any Subsidiary is subject to any judgment, stipulation, order or
decree arising from any action, suit, proceeding or any investigation of which
it has Knowledge which could be reasonably expected to have, individually or in
the aggregate, a Material Adverse Effect on the business or financial condition
of the Company or a Subsidiary before or after the Closing Date.
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As used in this Agreement, "Claim" means any and all claims, causes of
action, arbitrations, audits, hearings, investigations, proceedings, complaints,
litigation or suits, whether in contract, tort or otherwise, whether statutory
or common law, whether civil, criminal, administrative, investigative, formal or
informal, fixed or contingent.
2.13 TAXES.
(a) For purposes of this Agreement, "Taxes" in the plural and "Tax"
in the singular shall refer to any and all taxes, charges, fees, levies, or
other assessments of whatever kind or nature, including, but not limited to, any
federal, state, local or foreign net income, gross income, gross receipts,
unitary, license, payroll, unemployment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including, but not limited to, taxes
under section 59A of the Code), occupational, leasing, lease, fuel, customs,
duties, capital stock, franchise, profits, withholding, Social Security,
unemployment, disability, ad valorem, real property, personal property (tangible
and intangible), sales, use, transfer, registration, value added, alternative or
minimum, estimated, or any other kind of tax whatsoever, including the recapture
of any tax items, and including any interest, addition, penalty or other
associated charge thereto, whether disputed or not.
(b) Except as set forth on SCHEDULE 2.13
(i) The Company and each Subsidiary has filed or will file or
cause to be filed, within the applicable period prescribed by law, (i) all
federal, state, local, foreign or other material Tax Returns, as that term
is defined below, required by such law to be filed by the Company and the
Subsidiaries for all taxable periods ending on or prior to the Closing Date
or (ii) valid extensions of the time for filing such Tax Returns. For
purposes of this Agreement, "Tax Returns" shall mean any returns, reports
or statements with respect to Taxes which are required to be filed with any
taxing authority.
(ii) Neither the Company nor the Subsidiaries have obtained
nor will obtain prior to the Closing Date any extensions of time in which
to file any Tax Returns for any taxable period ending on or prior to the
Closing Date.
(iii) The Company and the Subsidiaries have paid, within the
time and in the manner prescribed by law, all Taxes shown as due on all
such Tax Returns and, with respect to all Tax Returns which the Company or
a Subsidiary has not yet filed, but will file prior to the Closing Date,
shall pay, within the time and in the manner prescribed by law, all Taxes
shown as due on such Tax Returns.
(iv) No written notice has been received by the Company or the
Subsidiaries from any Tax authority in any jurisdiction in which the
Company or the Subsidiaries have not filed a Tax Return that the Company or
a Subsidiary is or may be subject to taxation of any sort in such
jurisdiction or otherwise is required to file a Tax Return in such
jurisdiction.
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(v) Except for Permitted Liens, there are no Tax liens or
other security interests or encumbrances of any type resulting from Tax
liabilities on any of the assets of the Company or the Subsidiaries.
(vi) There is no dispute, Claim or any other controversy
concerning any material Tax liability of the Company or the Subsidiaries
raised or asserted by any Tax authority in writing.
(vii) No income Tax Returns of the Company or the Subsidiaries
for any open tax year has been audited by any taxing authority. The Company
and the Subsidiaries have made available to Purchaser a correct and
complete copy of each federal income Tax Return, examination report,
statement of deficiency, or any other administrative or judicial assertion,
assessment or determination of federal income Tax liability with respect to
the Company and the Subsidiaries for the past three years.
(viii) The Company and the Subsidiaries have employed a
permissible method of Tax accounting, validly elected for each taxable
period ending on or prior to the Closing Date. Neither the Company nor any
Subsidiary has changed, nor requested to be permitted to change, any method
of Tax accounting.
(ix) Neither the Company nor any Subsidiary has waived any
statute of limitations with respect to any Taxes or has agreed to any
extension of time with respect to a Tax assessment or deficiency, except
for such waivers or extensions which, by their terms, have elapsed as of
the date of this Agreement, nor are any requests for such waivers or
extensions pending.
(x) Neither the Company nor any Subsidiary (i) has filed a
consent under Section 341(f) of the Code concerning collapsible
corporations, (ii) has made any payments, is obligated to make any
payments, or is a party to any agreement that will render it (or the payor
of compensation under the agreement) subject to the provision of section
280G of the Code regarding payments as a result of a change in control,
(iii) has been a United States real property holding company within the
meaning of section 897(c)(2) of the Code and (iv) is a party to any Tax
allocation or Tax sharing agreement.
(xi) The unpaid Taxes of the Company and the Subsidiaries,
including Taxes attributable to all periods ending on or prior to the
Closing Date which are not yet due and payable, do not materially exceed
the reserve on the Financial Statements for the Company's tax liability as
of the respective dates of such Financial Statements.
2.14 CONTRACTS. Except as set forth in this Agreement or on SCHEDULE 2.14
(the agreements listed thereon being referred to as the "Material Contracts"),
neither the Company nor the Subsidiaries are a party to, bound by or obligated
under any:
(a) material mortgage, indenture, note or installment obligation or
other instrument or contract for or relating to any borrowing by the Company or
the Subsidiaries;
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(b) material guaranty by the Company or the Subsidiaries of any
obligation (excluding any endorsement made in the ordinary course of business
for collection);
(c) material license agreement;
(d) material lease of real or personal property under which the
Company or the Subsidiaries is a lessor or lessee;
(e) material agreement for the purchase by the Company or the
Subsidiaries of equipment;
(f) agreement purporting to limit the right of the Company or the
Subsidiaries to compete in any line of business, with any person or other entity
or in any geographic area;
(g) material agreement for the purchase or sale of raw materials,
products or goods or the provision of services at prices that vary from the
prices therefor generally prevailing in customary, arms-length transactions;
(h) material contract with any governmental or quasi-governmental
authority;
(i) material bond, deposit, financial assurance requirement or
insurance coverage individually required to be submitted to customers of the
Company or the Subsidiaries, under any sale, lease or service arrangement or to
any governmental authority under any Permit or Legal Requirement;
(j) agreement or instrument relating to the acquisition by the
Company or the Subsidiaries of any entity or all or substantially all of the
assets of any person or entity;
(k) other material agreement, contract or obligation of the Company
or the Subsidiaries;
(l) agreement or commitment relating to the borrowing of money or the
guaranty or indemnity (direct or indirect) in respect of or the granting of
security for any obligation for the borrowing of money, by the Company or the
Subsidiaries or any other person or entity, in excess of, including, without
limitation, guarantees, accommodation collateral, letters of credit, mortgages,
deeds of trust, indentures, loan agreements and credit agreements;
(m) agreement or commitment relating to clean-up or remediation
involving Hazardous Materials (as hereinafter defined);
(n) agreement that creates an encumbrance or any restriction on the
ability of the Company or any Subsidiary to (i) pay dividends or make similar
distributions; (ii) make loans or advances to any person or entity, or (iii)
sell, lease or transfer any of its properties or assets, except (in each case)
for such restrictions or encumbrances existing under or by reason of (1)
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applicable Legal Requirements, (2) customary non-assignment provisions in
leases and other contracts entered into in the ordinary course of business,
or (3) any instrument governing the Debt;
(o) indemnification obligations in favor of any person or entity, and
any escrow agreements related to any indemnification or obligation;
(p) confidentiality, secrecy, screening, development or settlement
agreement pertaining to any Intellectual Property; or
(q) contract with any customer of the Company or the Subsidiaries
other than contacts for the purchase and sale of goods, products and services
entered into in the ordinary course of business.
All of the Material Contracts are legal, valid, binding and in full force and
effect, no default exists thereunder on the part of the Company or the
Subsidiary a party thereto, and except as set forth in Schedule 2.14, the
consummation of the transactions contemplated by this Agreement will not cause
any default or condition in respect of any such Material Contracts, the effect
of which is to cause, permit, create or perfect the right in any party (a) to
repudiate or disavow its obligations to the Company or the Subsidiaries
thereunder, (b) to require or have the right to require the Company or the
Subsidiaries to perform its obligations thereunder (including obligations to pay
indebtedness) prior to such time on which, or on terms and conditions otherwise
different from those that, are provided therein or (c) to recover from the
Company or the Subsidiaries any damages or fines. To the Knowledge of the
Company and the Controlling Shareholders, no party to any such Material Contract
is in default thereunder. True, correct and complete copies of all the Material
Contracts have been delivered to the Purchaser.
2.15 ENVIRONMENTAL QUALITY.
(a) Except as set forth in SCHEDULE 2.15, to the Knowledge of the
Company and the Controlling Shareholders, neither the Company nor the
Subsidiaries nor any previous (to the Company) owner, tenant, occupant, user or
operator of any real property now or ever owned or leased by the Company or the
Subsidiaries (the "Property") released or disposed of any "Hazardous Materials"
(as defined below) on, under, in or about the site of the Property, except in
compliance in all material respects with applicable Environmental Laws (as
defined below). For the purposes of this Agreement, the term "Hazardous
Materials" shall mean any substance, material or waste which is regulated by any
local government authority or state with jurisdiction, or the United States
Government, including, without limitation, any material or substance which is
(a) defined as a "hazardous waste," "hazardous material," "hazardous
substances," "extremely hazardous waste," "regulated substance" or "restricted
hazardous waste" under any provision of the existing laws of any state, or any
other applicable existing law, including, but not limited to, the Resource
Conservation and Recovery Act, 42 U.S.C. Section 6901 ET SEQ. ("RCRA"), and the
Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C.
Section 9601 ET SEQ. ("CERCLA") and (b) petroleum, including crude oil and any
fraction thereof and any refined petroleum products and derivatives thereof.
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(b) To the Knowledge of the Company and the Controlling Shareholders,
except as set forth in SCHEDULE 2.15, the Property complies in all respects with
all applicable Environmental Laws. For purposes of this Agreement, the term
"Environmental Laws" shall mean all federal, state and local laws, ordinances
and regulations pertaining to air and water quality, soils and subsurface
strata, natural resources, Hazardous Materials, waste generation, management,
transportation and disposal or other environmental matters, including the Clean
Water Act, the Clean Air Act, the Federal Water Pollution Control Act, the Solid
Waste Disposal Act, RCRA, CERCLA, and the applicable environmental protection
rules, regulations and ordinances of the city and county in which the Property
is located, the Environmental Protection Agency and all other applicable
federal, state, regional and local agencies which are in existence, and are in
effect as of the date hereof. Without limiting the generality of the foregoing,
to the Knowledge of the Company and the Controlling Shareholders, Company is not
liable nor potentially liable for any response costs or natural resource damages
under Sections 107(a) or 113(f) of CERCLA, or under any other so-called
"superfund" or "superlien" law or similar Legal Requirement currently in
existence, at or with respect to the Property and, to the Knowledge of the
Company and the Controlling Shareholders, no circumstances exist, which with
notice or lapse of time or both would result in such liability.
(c) To the Knowledge of the Company and the Controlling Shareholders,
the conduct of the businesses of the Company and the Subsidiaries complies in
all respects with all applicable Environmental Laws.
(d) To the Knowledge of the Company and the Controlling Shareholders,
except as set forth in SCHEDULE 2.15, neither the Company nor the Subsidiaries
has sent any Hazardous Material to a site that, pursuant to any applicable
Environmental Laws, (i) has been placed on the "National Priorities List" of
hazardous waste sites or any similar state list, (ii) is otherwise designated or
identified as a potential site for remediation, cleanup, closure or other
environmental remedial activity, or (iii) is subject to a claim, an
administrative order or other request to take "removal" or "remedial" action, as
defined in any applicable Environmental Laws, or to make payment for the costs
of cleaning up the site.
(e) Except as set forth in SCHEDULE 2.15, neither the Company nor the
Subsidiaries (i) is involved in any suit or proceeding with respect to a release
or threatened release of any Hazardous Material or a violation or alleged
violation of any applicable Environmental Laws, nor has the Company or any
Subsidiary received any notice of any claims from any person or entity relating
to property damage or to personal injuries from exposure to any Hazardous
Material, nor has the Company or any Subsidiary received any notice or request
for information from any governmental agency or authority or other third party
with respect to any of the foregoing, nor (ii) has not failed to timely file any
report required to be filed, failed to acquire all necessary certificates,
approvals and permits or failed to generate and maintain all required data,
documentation and records under all applicable Environmental Laws.
(f) To the Knowledge of the Company and the Controlling Shareholders,
except as set forth in SCHEDULE 2.15, there are currently no underground storage
tanks in or under
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the Property, and no underground storage tank was removed from the Property
during the period that the Company and the Subsidiaries maintained an interest
in such Property.
(g) The Company has made available to Purchaser all information in
its and, to the Knowledge of the Company and the Controlling Shareholders, its
Shareholders' possession regarding the environmental condition of the Property.
2.16 INTELLECTUAL PROPERTY. The Company and the Subsidiaries either own or
have the right to use by license, sublicense, or other tangible agreement, all
of the inventions, improvements, domestic and foreign patents and applications
therefor, customer lists, copyrights, copyright-registrations and applications
therefor, trademarks, trade names, service marks, trade dress, logos, rights in
computer software, and all rights granted or retained in licenses under any of
the foregoing which are material to the conduct of the businesses of the Company
and the Subsidiaries as presently conducted (collectively the "Intellectual
Property"). None of the Intellectual Property used in connection with the
conduct of the businesses of the Company and the Subsidiaries is, or has been in
the past five years, involved in, or the subject of, any pending or, to the
Knowledge of the Company and the Controlling Shareholders, threatened
infringement, interference, opposition or similar action, suit or proceeding to
which the Company or any Subsidiary was a party. The material license fees,
royalties and other amounts payable by the Company and the Subsidiaries in
connection with the use of the Intellectual Property, together with the terms
and conditions on which, and periods for which such amounts are payable, are set
forth in SCHEDULE 2.16.
2.17 PREPAID EXPENSES. All prepaid expenses shown on the balance sheet of
the most recent Financial Statements or subsequently paid by the Company and the
Subsidiaries and shown on the Final Closing Statement have been incurred solely
in connection with the businesses and assets of the Company and the
Subsidiaries.
2.18 RELATED PARTY TRANSACTIONS. Set forth on SCHEDULE 2.18 is a list of
all material transactions (including, without limitation, employment contracts,
debts, loans, advances, or other obligations, guarantees, indemnities, accounts
and notes payable or receivable and service agreements) between the Company or
the Subsidiaries and any current officer, director or employee, Shareholders, or
Affiliate of the Company or of the Subsidiaries (collectively, "Related
Parties") which (a) were entered into and/or consummated subsequent to
January 1, 1998; (b) are or will be effective as of the date hereof or at
Closing, (c) constitutes a present or future liability or obligation of the
Company or the Subsidiaries to any Related Party; or (d) constitutes a present
or future liability of any Related Party to the Company or a Subsidiary. For
purposes of this Agreement, an "Affiliate" of a party is any individual, company
or other entity that owns five percent (5%) or more of the voting or capital
stock or other equity interest of such party or of which five percent (5%) of
the voting or capital stock or other equity interest is owned or otherwise
controlled by that party or an Affiliate of that party, as the case may be.
2.19 LABOR MATTERS. Except as set forth on SCHEDULE 2.19, (a) neither the
Company nor the Subsidiaries has entered into or is a party to any collective
bargaining agreement, memorandum of understanding or other written document
binding on the Company or the
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Subsidiaries respecting terms and conditions of employment with respect to an
identified group of employees with any labor union that would cover any
employees of the Company or the Subsidiaries and (b) none of the employees of
the Company or the Subsidiaries are subject to any collective bargaining
agreement, memorandum of understanding or other written document binding on the
Company or the Subsidiaries respecting terms and conditions of employment with
respect to an identified group of employees nor are any such employees, in their
capacities as employees, represented by any labor union. As to the collective
bargaining agreements disclosed on SCHEDULE 2.19, neither the Company nor the
Subsidiaries is in material default thereunder. Except as set forth in SCHEDULE
2.19, there are no Claims, controversies, labor disturbances, or investigations
pending, or to the Knowledge of the Company and the Controlling Shareholders,
threatened, by any governmental agency or by employees of the Company or the
Subsidiaries or any party or parties representing any of such employees against
the Company or the Subsidiaries before any court, arbitrator or other tribunal.
To the Knowledge of the Company and the Controlling Shareholders, there are no
organizational efforts presently being made or threatened by or on behalf of any
labor union with respect to the employees of the Company or the Subsidiaries
nor has there been in the last five (5) years. Neither the Company nor the
Subsidiaries has experienced a work stoppage, strike, lock-out or other labor
disturbance within the past five (5) years, and there is no work stoppage,
strike, lock-out or other labor disturbance presently occurring, or, to the
Knowledge of the Company and the Controlling Shareholders, threatened. The
Company and the Subsidiaries have complied in all material respects with all
applicable Legal Requirements relating to their respective employees, the
employment of labor, and the safety and health of employees, including, without
limitation, all applicable Legal Requirements relating to occupational health
and safety, discrimination, unemployment, wages, hours, the Family and Medical
Leave Act, collective bargaining, and the collection and payment of withholding
taxes and similar taxes in respect of the business of the Company and the
Subsidiaries. Except as set forth in SCHEDULE 2.19, there are no unfair labor
practice charges, charges of discrimination, or other complaints pending against
the Company or the Subsidiaries involving employees now or previously employed
by the Company or the Subsidiaries.
2.20 CUSTOMERS AND VENDORS. SCHEDULE 2.20 hereto is a correct and current
list of the 20 largest customers and the 10 largest vendors of each of the
Company and the Subsidiaries during the 12-month period ended December 31, 1997,
with the amount of sales made to each such customer or by each such vendor, as
the case may be, during such period as reasonably ascertained from readily
available information, such amounts being estimated in good faith as being
within five percent (5%) of the actual sales made to or by such customer or
vendor, as the case may be. Except as set forth on SCHEDULE 2.20, the Company
and Subsidiaries do not have any information indicating that any of such
customers or such vendors intends to cease doing business with the Company or
the Subsidiaries or materially alter the amount of the business that it conducts
with the Company and the Subsidiaries from the amount of business such customers
or such vendors conducted with the Company and the Subsidiaries during the last
fiscal year.
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2.21 OTHER DISCLOSURES. In addition to the other disclosures required
hereby, the following documents and information pertaining to the Company and
the Subsidiaries have been made available to the Purchaser:
(a) true, correct and complete copies of each policy of insurance
maintained by the Company and the Subsidiaries, together with information on
premiums, coverage, insurers, expiration dates and deductibles;
(b) the location and name of each bank or other financial institution
in which the Company or the Subsidiaries has an account or line of credit, and
the identity of each such account or line of credit, and each bank in which the
Company and the Subsidiaries has a safe deposit box, together with the names of
all persons authorized to draw upon or have access thereto;
(c) SCHEDULE 2.21(c) lists each corporate or trade name under which
the Company and the Subsidiaries or their predecessors, if any, has conducted
business and the state and county in which any Real Property or personal
property of the Company or the Subsidiaries is located or has been located.
(d) SCHEDULE 2.21(d) lists each power-of-attorney given by or on
behalf of the Company or the Subsidiaries.
2.22 PARACHUTE PAYMENTS. Any bonuses or other compensation or amounts paid
or payable by the Company or the Subsidiaries including amounts payable as a
result of the transaction contemplated by this Agreement, have not resulted in
and will not result in payments to "Disqualified Individuals" (as defined in
Section 280G(c) of the Code) of the Company or the Subsidiaries which,
individually or in the aggregate, will constitute "excess parachute payments"
(as defined in Section 280G(b) of the Code) resulting in the imposition of the
excise tax under Section 4999 of the Code or the disallowance of deductions
under Section 280G of the Code.
2.23 PRODUCT WARRANTY AND LIABILITY. All finished goods inventories
manufactured by the Company and the Subsidiaries in the operation of the
Business (the "Products") have been in material conformity with all applicable
contractual commitments and all express or implied warranties (including
warranties imposed by the application of law) and, to the Knowledge of the
Company and the Controlling Shareholders, no material liability exists or will
arise for replacement or damage in connection with such sales or deliveries,
except as are adequately reserved for on the Financial Statements. No Products
heretofore sold by the Company or the Subsidiaries are now subject to any
guaranty, warranty, claim for product liability or patent or other indemnity,
other than those sold in accordance with the standard terms and conditions of
sale of the Business, true and complete copies of which have been made available
to the Purchaser.
2.24 ACCURACY. The representations and warranties made by the Company, the
Subsidiaries and the Shareholders to Purchaser set forth in this Agreement, the
Disclosure Schedules to this Agreement, including any Updated Disclosure
Schedule (as defined below)
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delivered to Purchaser prior to Closing, and the Related Agreements delivered
and to be delivered pursuant to or in connection with this Agreement, do not
include an untrue statement of material fact or omit to state any material fact
necessary to make them, when taken together and in light of the circumstances in
which they were or are made, not misleading in any material respect.
2.25 BROKERS AND FINDERS. Except as set forth in SCHEDULE 2.25, no person
or entity is entitled to any brokerage commission, finder's fee or like payment
in connection with the transactions contemplated in this Agreement.
ARTICLE 3
ADDITIONAL REPRESENTATIONS AND WARRANTIES OF CONTROLLING SHAREHOLDERS
Each Controlling Shareholders represents and warrants to Purchaser as
follows:
3.1 OWNERSHIP OF SHARES. Such Controlling Shareholder is now, and
immediately prior to the Closing, such Controlling Shareholder will be, the
owner of the Shares of the Company as set forth opposite the name of such
Shareholder on SCHEDULE 2.2.
3.2 AUTHORIZATION. Such Controlling Shareholder has full right and power
to execute and deliver this Agreement and perform his obligations hereunder.
This Agreement and all other documents and instruments executed or to be
executed by such Controlling Shareholder pursuant to this Agreement have been,
or will have been, duly executed and delivered by such Controlling Shareholder.
3.3 ENFORCEABILITY. This Agreement constitutes the valid and legally
binding obligation of such Controlling Shareholder, enforceable in accordance
with its terms, except as such enforceability may be limited by equitable
principles and by applicable bankruptcy, insolvency, reorganization,
arrangement, moratorium or similar laws relating to or affecting the rights of
creditors generally.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PURCHASER AND PARENT
Parent and Purchaser, jointly and severally, represent and warrant to
Shareholders and the Company as follows:
4.1 ORGANIZATION AND STANDING OF PURCHASER. Parent is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Colorado. Purchaser is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware. Parent and Purchaser
have all requisite corporate power and authority to enter into this Agreement,
to carry out the transactions contemplated hereby and to perform their
obligations hereunder. Parent owns all the outstanding capital stock of
Purchaser.
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4.2 AUTHORIZATION. The execution and delivery of this Agreement, and all
other agreements, documents and instruments executed or to be executed by the
Purchaser and Parent in connection herewith (the "Purchaser Related
Agreements"), and the consummation of the transactions contemplated hereby and
thereby, have been duly authorized by all necessary corporate and other action
on the part of Parent and Purchaser. This Agreement, and the Purchaser Related
Agreements have been, or will have been, at the time of their respective
executions and deliveries, duly executed and delivered by a duly authorized
officer of Parent and Purchaser.
4.3 ENFORCEABILITY. This Agreement constitutes, and each of the Purchaser
Related Agreements when duly executed and delivered will constitute, the valid
and legally binding joint and several obligations of Parent and Purchaser,
enforceable against Parent and Purchaser, jointly and severally, in accordance
with its terms, except as such enforceability may be limited by equitable
principles and by applicable bankruptcy, insolvency, reorganization,
arrangement, moratorium or similar laws relating to or affecting the rights of
creditors generally.
4.4 COMPLIANCE WITH OTHER INSTRUMENTS AND LAWS. The execution and delivery
of this Agreement, and the Purchaser Related Agreements, and the consummation of
the transactions contemplated hereby and thereby, will not conflict with or
result in any violation or default under any provision of the Certificate of
Incorporation or Bylaws of Parent or Purchaser, or of any material mortgage,
indenture, trust, lease, agreement or other instrument, permit, concession,
grant, franchise, license, judgment, order, decree, statute, law, ordinance,
rule or regulation applicable to Parent or Purchaser or any of their respective
properties, the result of which (either individually or in the aggregate) will
prevent or materially delay the consummation of the transactions contemplated
hereby.
4.5 GOVERNMENTAL AUTHORIZATIONS, CONSENTS. No consents, licenses,
approvals or authorizations of, and registrations or declarations with, any
governmental authority, bureau, agency or commission, or any third party, are
required to be obtained or made by Parent or Purchaser in connection with the
execution, delivery, performance, validity and enforceability of this Agreement
or the Purchaser Related Agreements or the Merger contemplated hereby.
4.6 MW COMMON STOCK. The MW Common Stock when issued will have been duly
authorized, validly issued, fully paid and nonassessable, and the record date of
issuance on the Parent's (and its transfer agent's) books shall be the Closing
Date, and each share of MW Common Stock issued to Shareholders hereunder shall
be free and clear of any lien, pledge, charge, adverse claim, security interest,
restriction, encumbrance (including any imposed by law in any jurisdiction),
title retention agreement, option or right to purchase of any kind.
4.7 LITIGATION. No action, suit, proceeding or governmental investigation
is pending or, to the best of Parent's and Purchaser's knowledge, threatened, at
law or in equity, which seeks to question, delay or prevent the consummation of
all or any portion of the transactions contemplated hereby.
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4.8 SECURITIES ACT OF 1933. Purchaser is an "accredited investor" as
defined under Rule 501 of Regulation D under the Securities Act of 1933, as
amended
4.9 BROKERS AND FINDERS. No person or entity is entitled to any brokerage
commission, finder's fee or like payment from Parent or Purchaser in connection
with the transactions contemplated in this Agreement.
4.10 PURCHASER'S KNOWLEDGE. No officer or director of Parent or Purchaser
has actual knowledge, as of the date hereof, of any state of facts which, in the
judgment of Parent or Purchaser, will give rise to a Shareholder Indemnified
Obligation or a Purchaser Indemnified Obligation, except for such matters as
have been previously disclosed in writing to the Shareholders, the Company or
their representatives.
4.11 SEC DOCUMENTS. Parent has timely filed all required reports,
schedules, forms, statements, exhibits and other documents with the SEC since
December 31, 1996 (the "SEC Documents") and is qualified, and has obtained or
will obtain, without delay to the registration process, all appropriate waivers
necessary to allow Parent to register the MW Common Stock on SEC Form S-3. As
of their respective dates, the SEC Documents complied in all material respects
with the requirements of the Securities Act and the Exchange Act, as the case
may be, and the rules and regulations of the SEC promulgated thereunder
applicable to such SEC Documents, and none of the SEC Documents contained any
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading. The
consolidated financial statements of Parent and its subsidiaries included in the
SEC Documents comply as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto, have been prepared in accordance with GAAP (except, in the case
of unaudited financial statements, as permitted by SEC Form 10-Q) applied on a
consistent basis during the period involved (except as may be indicated in the
notes thereto) and fairly present the financial position of Parent and its
subsidiaries as of the date thereof and their statements of operations, changes
in shareholders' equity and cash flows for the periods then ended (subject, in
the case of unaudited statements, to normal year-end audit adjustments). Except
as set forth in the SEC Documents, neither Parent nor any of its subsidiaries
has any liabilities or obligations of any nature (whether accrued, absolute,
contingent or otherwise) required by GAAP to be set forth on a consolidated
balance sheet of Parent and its subsidiaries or in the notes thereto, other than
liabilities and obligations incurred in the ordinary course of business
consistent with past practice since the date of its last filed Form 10-K or
10-Q.
4.12 ACCURACY. The representations and warranties made by the Parent and
Purchaser to Company and Shareholders set forth in this Agreement and the
Purchaser Related Agreements, instruments and documents delivered and to be
delivered pursuant to or in connection with this Agreement do not include an
untrue statement of material fact or omit to state any material fact necessary
to make them, when taken together and in light of the circumstances in which
they were or are made, not misleading in any material respect.
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4.13 INVESTIGATION. Parent and Purchaser have conducted inspections of the
properties and financial and other records of the Company and other due
diligence with respect to the Company. Parent and Purchaser have had an
opportunity to ask questions of the Company and the Shareholder relating to the
Company and management and financial affairs of the Company, which questions
have been answered to Parent and Purchaser's satisfaction, and to examine all
books and records of the Company. Parent and Purchaser acknowledge that they
have made their own independent investigation, examination, analysis and
evaluation of the Company including, without limitation, Parent and Purchaser's
own estimate of the value of the Company's business.
ARTICLE 5
COVENANTS OF THE COMPANY AND THE CONTROLLING SHAREHOLDERS
5.1 CONDUCT OF BUSINESS. The Company agrees that, between the date of
this Agreement and the Closing Date, except as contemplated by this Agreement or
referred to in a Disclosure Schedule, and except as may be necessary to carry
out the transactions contemplated by this Agreement, the Company without
Purchaser's written consent (which consent will not be unreasonably withheld or
delayed) or as requested by Purchaser, did not or will not:
(a) amend its Articles of Incorporation or Bylaws;
(b) make any material change in its practices, operations or policies
with respect to the selling of goods or services, collecting accounts receivable
and/or paying accounts payable except in the ordinary course of business;
(c) conduct its business in a manner that materially departs from the
manner in which such business was being conducted prior to the date of this
Agreement;
(d) except as set forth in SCHEDULE 2.8 increase the rate or change
the form of compensation payable to any director, officer or employee of the
Company or the Subsidiaries or increase any employee benefits, except in the
ordinary course of business in accordance with past practice in an amount not to
exceed 3% in any one case or the payment of bonuses in an aggregate amount of
$25,000;
(e) purchase or dispose of any properties or other assets, except in
the ordinary course of business or as set forth in SCHEDULE 1.7;
(f) declare, set aside, pay or make any dividend or other
distribution in respect of any outstanding shares of the Company's or any
Subsidiary's capital stock other than distributions to Shareholders to pay
income taxes and distributions to Shareholders charged against their respective
Accumulated Adjustments Account, if applicable;
(g) issue or sell any shares of the Company's or any Subsidiary's
capital stock (whether or not from the treasury) or any other securities; grant
any options, convertibility rights, rights to subscribe for shares of capital
stock or securities convertible into or exchangeable for
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shares of capital stock, warrants, calls or other agreements relating to the
Company's or Subsidiaries' capital stock; split up, combine, reclassify, redeem,
repurchase or otherwise reacquire any of the Company's or any Subsidiary's
capital stock, or otherwise change its capitalization;
(h) except as required by regulation or generally accepted accounting
principles, maintain its books of account other than in the usual, regular and
ordinary manner in accordance with generally accepted accounting principles and
on a basis consistent with prior periods, make any change in any of its books,
accounting methods or practices, or reclassify any assets or liabilities;
(i) cancel, terminate, renew or amend any Material Contract or enter
into any contract, agreement, lease, license or commitment which would be a
Material Contract if such had existed on the date hereof, except in the ordinary
course of business;
(j) merge or consolidate with or into any other person or entity or
sell or dispose of all or substantially all of the Company's or any Subsidiary's
assets to any person or entity, or initiate or participate in negotiations with
any person or entity with respect to any of the foregoing;
(k) invest in certificates of deposit in any one bank if such
investment in the aggregate exceeds $100,000 at any time;
(l) incur any direct or contingent liability for borrowed money or
guarantee the monetary obligations of any other person or entity, other than
indebtedness to be included in the Debt, or make any monetary investment in,
advance to or loan to any person or entity other than in the ordinary course of
business;
(m) fail to make maintenance expenditures and maintain inventories in
the amounts and at the times required to operate its business in the ordinary
course consistent with past practice;
(n) implement or adopt any change in its tax methods, principles or
elections;
(o) fail to pay accounts payable or collect accounts receivable in
accordance with past practices;
(p) enter into any transaction outside the ordinary course of
business; or
(q) agree or commit to do any of the foregoing.
Nothing contained in this Section 5.1 or elsewhere in this Agreement shall
be deemed in any way as prohibiting the Company from using cash, cash
equivalents or other current assets to reduce or pay off Debt prior to Closing.
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5.2 ACCESS. The Company agrees that, between the date of this Agreement
and the Closing Date, the Company and the Subsidiaries shall, after receiving
reasonable advance notice from Purchaser, give Parent, Purchaser and their
Associates (as defined in Section 6.1) reasonable access (during normal business
hours) to the books, records, contracts and offices of the Company and the
Subsidiaries for the purpose of enabling such parties to further investigate and
inspect the business, operations and financial and legal affairs of the Company
and the Subsidiaries.
5.3 NO SOLICITATION OR NEGOTIATION. The Company and Controlling
Shareholders agree that between the date of this Agreement and the earlier of
the Closing Date or the date this Agreement otherwise terminates, they will not,
nor will they permit any officer, director, Shareholder or agent of
Shareholders, the Company or the Subsidiaries to, (i) solicit any proposal or
offer from any person or entity (other than Purchaser) relating to the sale of
the Company or the Subsidiaries, their capital stock or any material portion of
their assets, (ii) provide any non-public information to any person or entity
(other than Purchaser) for use in preparing any proposal or offer relating to
the sale of the Company or the Subsidiaries, their capital stock or any
material portion of their assets, or (iii) respond to or enter into any
negotiations regarding any proposal or offer from any person or entity (other
than Purchaser) with respect to the foregoing.
5.4 FILINGS AND CONSENTS. Where required by applicable law, the Company
and the Controlling Shareholders shall use commercially reasonable efforts to do
each of the following:
(a) as soon as practicable after the date of this Agreement, file
with the appropriate governmental authority any notification form required to be
filed by the Company under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR Act") with respect to this Agreement and the
transactions contemplated hereby, together with a request for early termination
of the applicable waiting period;
(b) after consultation with Purchaser, make any additional filing
required to be made by the Company under the HSR Act and promptly furnish to the
appropriate governmental authority such additional information as may be
requested under the HSR Act;
(c) make or give each filing or notice required to be made or given
pursuant to any applicable Legal Requirement, Material Contract or Permit by the
Company or Shareholders in connection with the execution and delivery of any of
this Agreement or in connection with the consummation or performance of any of
the transactions contemplated hereby; and
(d) obtain an agreement from each Creditor to terminate its lien and
lien filings upon payment of the amounts specified in such Creditor's respective
Payoff Letter to the extent that Purchaser decides to pay off a Debt at Closing
and each consent required to be obtained pursuant to any applicable Legal
Requirement, Permit or Material Contract by the Company or Shareholders in
connection with the execution and delivery of any of this Agreement or in
connection with the consummation or performance of the transactions contemplated
hereby. Except as to liens related to Leased Property to be acquired by
Purchaser pursuant to Section 7.5,
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Company shall pay all reasonable costs of obtaining such releases and consents
which costs shall be a Company Expense.
5.5 UPDATED DISCLOSURE SCHEDULES. Between the date of this Agreement and
the Closing Date, if any Controlling Shareholder or the Company becomes aware of
any fact or condition that causes any of the representations and warranties in
this Agreement to become untrue, misleading, or inaccurate in any material
respect, such party will promptly deliver to Purchaser an updated Disclosure
Schedule ("Updated Disclosure Schedule") setting forth the facts or conditions
that cause such representation, warranty, or Disclosure Schedule to become
untrue, misleading, or inaccurate.
ARTICLE 6
COVENANTS OF PARENT AND PURCHASER
Parent and Purchaser each agree with the Company that:
6.1 CONFIDENTIALITY. Parent and Purchaser shall hold in strict
confidence, and cause their respective affiliates, directors, officers,
employees, agents, attorneys, accountants, financing sources and representatives
and those of its affiliates ("Associates") to hold in strict confidence, all
documents and information obtained with respect to the Company and the
Subsidiaries ("Confidential Information"). Neither Parent nor Purchaser shall
permit any Confidential Information to be utilized or to be disclosed or
conveyed to any other person or entity other than their Associates in
furtherance of this Agreement. Without limiting the generality of the foregoing,
and except as required by law or as permitted by Section 7.4, (i) neither Parent
nor Purchaser shall disclose to any person or entity, and shall not permit any
of their Associates to disclose to any person or entity, the existence of this
Agreement or any of the terms or provisions hereof and (ii) except in the
ordinary course of business, neither Parent nor Purchaser shall contact any
customers or employees of the Company, and neither Parent nor Purchaser shall
not permit any of their Associates to contact any customers or employees of the
Company, without the prior consent of an officer of the Company. This Section
6.1 shall terminate if and when the Closing occurs in accordance with Article 1
of this Agreement, or within three years of the date of execution of this
Agreement, whichever occurs first.
6.2 FILINGS AND CONSENTS. Where required by applicable law, Parent and
Purchaser shall use commercially reasonable efforts to do each of the following:
(a) as soon as practicable after the date of this Agreement, file
with the appropriate governmental authority any notification form required to be
filed by Parent or Purchaser under the HSR Act with respect to this Agreement
and the transactions contemplated hereby, together with a request for early
termination of the applicable waiting period;
(b) after consultation with the Controlling Shareholders, make any
additional filing required to be made by Parent or Purchaser under the HSR Act
and promptly furnish to the
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appropriate governmental authority such additional information as may be
requested under the HSR Act;
(c) make or give each other filing or notice required to be made or
given pursuant to any applicable Legal Requirement by Purchaser in connection
with the execution and delivery of this Agreement or in connection with the
consummation or performance of any of the transactions contemplated hereby; and
(d) obtain each consent required to be obtained by Parent or
Purchaser pursuant to any applicable Legal Requirement or material contract to
which Parent or Purchaser is a party or by which either of them is bound in
connection with the execution and delivery of any of this Agreement or in
connection with the consummation or performance of the transactions contemplated
hereby.
6.3 FILING OF FINAL TAX RETURNS. Parent and Purchaser agree to timely
file all final Tax Returns for and on behalf of the Company which are required
to be filed subsequent to the Closing, and to deliver copies thereof to the
Shareholders' Representative promptly after filing the same.
6.4 OFFICER AND DIRECTOR INDEMNIFICATION. Parent and Purchaser agree to
include and maintain provisions in the Certificate of Incorporation and Bylaws
of the Surviving Corporation which provide indemnification for the directors and
officers of the Company and Subsidiaries immediately prior to the Effective Time
to the maximum extent provided by such documents and applicable corporate law
and to indemnify such directors and officers to the maximum extent provided by
applicable corporate law. In addition, Parent and Purchaser shall include such
persons as additional insureds under Parent's Director and Officer Insurance
Policy if they can do so without substantial additional cost.
6.5 BENEFIT PLANS AND RELATED MATTERS. Except for employees subject to
collective bargaining agreements and subject to the provisions of Parent's
policies and programs, any employee of the Company retained by Purchaser or its
affiliates after the Closing Date (each, a "Transferred Employee") shall be
eligible to participate or eligible for accrual of benefits, vesting and
contributions or accruals to be made or credited following the Closing Date
under each of Parent's employee benefit plans, programs or arrangements
available to all or substantially all of Parent's employees, subject to the
terms upon which such plans allow new participation by Purchaser's employees.
Each Transferred Employee shall be credited with the time-in-service that the
employee accrued with the Company.
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ARTICLE 7
COVENANTS OF ALL PARTIES
The parties hereto agree that:
7.1 COMMERCIALLY REASONABLE EFFORTS; FURTHER ASSURANCES. Subject to the
terms and conditions of this Agreement, each party will use commercially
reasonable efforts to take, or cause to be taken, all actions and to do, or
cause to be done, all things necessary or desirable under applicable Legal
Requirements to consummate the transactions contemplated by this Agreement. The
Company, Controlling Shareholders, Parent and Purchaser each agree to execute
and deliver such other documents, certificates, agreements and other writings
and to take such other actions as may be necessary or desirable in order to
consummate or implement expeditiously the transactions contemplated by this
Agreement.
7.2 POOLING OF INTERESTS. Each of Parent, Purchaser and the Company shall
use its respective commercially reasonable efforts to cause the transactions
contemplated by this Agreement, including the Merger, to be accounted for as a
pooling of interests under Opinion 16 of the Accounting Principles Board and
applicable SEC rules and regulations, and such accounting treatment to be
accepted by each of Parent's and the Company's independent certified public
accountants, respectively, and to be accepted by the SEC, and each of Parent,
Purchaser and the Company and the Controlling Shareholders agree that they will
not knowingly take any action that would cause such accounting treatment not to
be obtained.
7.3 CERTAIN FILINGS, ETC. The Company, Parent and Purchaser shall
cooperate with one another (a) in determining whether any action by or in
respect of, or filing with, any governmental body, agency, official or authority
is required, or any actions, consents, approvals or waivers are required to be
obtained from parties to any material contracts, in connection with the
consummation of the transactions contemplated by this Agreement and (b) in
taking such actions or making any such filings, in furnishing such information
as may be required in connection therewith, and in seeking timely to obtain any
such actions, consents, approvals or waivers.
7.4 PUBLIC ANNOUNCEMENTS. The parties agree not to issue any press
release or make any public statement with respect to this Agreement or the
transactions contemplated hereby prior to the Closing without the prior consent
of Purchaser and Company (which consent shall not be unreasonably withheld or
delayed), except to the extent that any party hereto is required by law to make
any such disclosure and such party notifies the other parties hereto a
reasonable time before making such disclosure of the nature and content of the
intended disclosure, and consults with such other parties regarding the nature
and content of such disclosure.
7.5 REAL ESTATE. The parties agree to negotiate, execute and deliver
prior to Closing, mutually acceptable merger agreements and related documents
(the "CAPCO Documents") for the acquisition of CAPCO, Inc., which owns the
Leased Property currently occupied by the Company or a Subsidiary and which is
owned, in whole or in part, by Related Parties of the Company and therefore must
be acquired by the Purchaser as part of the acquisition of the
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Company in order for the transactions described herein to be accounted for as a
pooling of interests. The CAPCO Documents shall contain (a) terms and
conditions which are essential to effectuate such transfer (and the transfer of
any ancillary assets) in a form acceptable to Purchaser and (b) provisions
similar to those set forth in Sections 1.1(f) and 1.10 hereof relating to the MW
Common Stock delivered in connection therewith. The CAPCO Documents shall
provide for a purchase price of the greater of nine times current annual rentals
on, or the fair market value of, the Leased Property. In addition, the purchase
price shall be increased by all cash and cash equivalents acquired by Purchaser
pursuant to the CAPCO Documents valued at their U.S. dollar value. The purchase
price shall be net of any mortgages or other debt assumed by Purchaser. The
purchase price and the amount of any pre-payment penalties incurred by the
sellers of CAPCO (the "Sellers") for pre-paying any mortgages shall be paid by
Purchaser to the Sellers in MW Common Stock based on the MW Common Valuation.
7.6 GRAPHIC LINKS, L.L.C. The parties agree to negotiate, execute and
deliver prior to Closing mutually acceptable assignments of all the membership
interests in Graphic Links, L.L.C. which are not owned by Plus Communications,
Inc. (collectively, the "Assignments"). The Assignments shall provide for a
purchase price of $564,000, and shall contain representations only as to
ownership, authority to transfer and free and clear of encumbrances. The
purchase price shall be payable to the assignors by Purchaser in MW Common Stock
based upon the MW Common Stock Valuation, and will be registered in accordance
with Section 1.10 of the Acquisition Agreement.
ARTICLE 8
CONDITIONS TO OBLIGATION OF PURCHASER TO CLOSE
The obligation of Purchaser to consummate the Merger, pay the Merger
Consideration, discharge the Debt, and otherwise consummate the transactions
contemplated hereunder is subject to the satisfaction as of the Closing Date, of
the following conditions (any of which may be waived by Purchasers in whole or
in part):
8.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES. The representations,
warranties and covenants set forth in Articles 2 and 3 and Section 5.1, without
giving effect to any Updated Disclosure Schedule delivered to Purchaser after
the date hereof, do not contain any misrepresentation or breach of warranty
which is likely to cause a Material Adverse Effect as of the date of this
Agreement and as of the Closing Date, with the same effect as though made on and
as of the Closing Date, except to the extent that (a) any of such
representations and warranties refers specifically to a date other than the
Closing Date or (b) the accuracy of any of such representations and warranties
is affected by any of the transactions contemplated by this Agreement.
8.2 SHAREHOLDER APPROVAL. Approval of this Agreement and the transactions
contemplated hereby shall have been validly obtained by the requisite vote of
the shareholders of the Company under applicable law.
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8.3 PERFORMANCE. Shareholders and the Company having performed, in all
material respects, all obligations required by this Agreement to be performed by
Shareholders and the Company on or before the Closing Date including without
limitation the covenants set forth in Article 5.
8.4 CERTIFICATE. Purchaser having received from a duly authorized officer
of the Company a certificate dated the Closing Date confirming that the
conditions in Section 8.1 and 8.2 have been met and confirming, to the best of
such persons' knowledge, that the condition of Section 8.3 has been met.
8.5 DEBT CERTIFICATES AND PAYOFF LETTERS. Purchaser having received the
Debt Certificate and the Payoff Letters.
8.6 NO INJUNCTION. There not being in effect, at the Closing, any
injunction or other binding order of any court or other tribunal having
jurisdiction over Purchaser that prohibits the consummation of the transactions
contemplated in this Agreement.
8.7 NO MATERIAL ADVERSE EFFECT. There having been no Material Adverse
Effect on the Company since December 31, 1997.
8.8 CONSENTS. All required consents, licenses, approvals, estoppel
certificates, releases of Encumbrances, acknowledgments of payment in full and
authorizations, as set forth on SCHEDULE 2.5, having been obtained and delivered
to Purchaser.
8.9 SHAREHOLDER REPRESENTATION AND AFFILIATE LETTER. Shareholders having
executed letters in the form of EXHIBIT C.
8.10 LEGAL OPINIONS. Purchaser having received from counsel to the Company
an opinion in substantially the form of EXHIBIT D attached hereto.
8.11 CERTIFICATE OF SECRETARY. The Company having delivered a certificate,
signed by the secretary of the Company, certifying (i) current copies, as
amended, of the Articles of Incorporation and Bylaws of the Company and (ii) the
resolutions of the board of directors and the shareholders of the Company
authorizing this Agreement and the transactions contemplated hereby.
8.12 ESCROW AGREEMENTS. Shareholders, the Company, and the Escrow Agent
(as defined in the Escrow Agreement) having executed and delivered the Escrow
Agreement.
8.13 NON-COMPETE AGREEMENTS. The Controlling Shareholders having executed
non-compete agreements in the form attached as EXHIBIT E providing for a
covenant not to compete of five years from the date of Closing and three years
from the date of such Shareholder's termination of employment with Purchaser or
one of its Affiliates, whichever is later. The form of Non-Compete Agreement
will be modified to specifically allow the Controlling Shareholders to
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own, manage, invest and/or be employed by Point of Purchase Corporation and/or
its wholly owned entity, Signet Graphics Products LLC ("Signet") to engage in
the business of Signet only as now being conducted by Signet.
8.14 UCC-3S. The Company having delivered UCC-3 Termination Statements for
all the secured Debt to be paid off at Closing, or a Payoff Letter from the
holder thereof agreeing to deliver the same after receipt of immediately
available funds sufficient to pay off in full the secured Debt.
8.15 HSR ACT. All applicable waiting periods under the HSR Act relating to
transactions contemplated hereby having expired or been terminated.
8.16 ACCOUNTING, TAX MATTERS. Purchaser is not aware of any fact or
circumstance that would (i) prevent the transactions contemplated hereby from
qualifying as a tax-free reorganization under the Code, or (ii) prevent the
transaction from qualifying for the pooling of interests method of accounting.
8.17 CAPCO MERGER. The CAPCO Documents shall have been executed and
delivered by the Purchaser and the Sellers, the conditions to purchase of CAPCO
shall have been satisfied and the closing of the CAPCO Merger shall have
occurred simultaneously with the Closing of the transactions contemplated
hereby.
8.18 NO DISCOVERY. Purchaser not being informed of or otherwise having
discovered any matter or matters which would constitute a Purchaser Indemnified
Obligation or which would represent a Material Adverse Effect on the Company or
the Subsidiaries.
8.19 DOCUMENTATION. All agreements, documents and instruments incidental
to the performance of the transactions contemplated by this Agreement being in a
form and substance reasonably satisfactory to Purchaser and its legal counsel
and Purchaser having received copies of all documents that they may have
reasonably requested in connection with such transactions.
8.20 APPROVAL OF PURCHASER'S BOARD. The Board of Directors of Purchaser
and Parent shall have approved this Agreement and the transactions contemplated
herein.
ARTICLE 9
CONDITIONS TO OBLIGATIONS OF THE COMPANY TO CLOSE
The obligation of the Company to consummate the transactions that are to be
consummated at the Closing is subject to the satisfaction, as of the Closing
Date, of the following conditions (any of which may be waived in whole or in
part by Shareholders):
9.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Parent and Purchaser set forth in Article 4 being accurate in all
material respects (except for the representations and warranties set forth in
Section 4.6, which shall be true and
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accurate) as of the date of this Agreement and as of the Closing, as though made
on and as of the Closing Date.
9.2 PERFORMANCE. Parent and Purchaser having performed, in all material
respects, all obligations required by this Agreement to be performed by Parent
and Purchaser on or before the Closing Date.
9.3 CERTIFICATE. The Company having received from duly authorized
officers of Purchaser a certificate dated the Closing Date confirming that the
condition in Section 9.1 has been met and confirming, to the best of such
persons' knowledge, that the condition of 9.2 has been met.
9.4 NO INJUNCTION. There not being in effect, at the Closing, any
injunction or other binding order of any court or other tribunal having
jurisdiction over Shareholders or the Company that prohibits the consummation of
the transactions contemplated by this Agreement.
9.5 LEGAL OPINION. The Company having received from counsel to Purchaser
and Parent an opinion in substantially the form of EXHIBIT F attached hereto.
9.6 TAX OPINION. The Company and Shareholders having received an opinion
of Rothgerber Johnson & Lyons LLP, in form and substance reasonably satisfactory
to the Company, to the effect that the Merger and the issuance of shares of MW
Common Stock in connection therewith, as described herein, shall constitute a
tax-free reorganization under Section 368 of the Internal Revenue Code of 1986,
as amended.
9.7 ESCROW AGREEMENTS. Purchaser and the Escrow Agent having executed and
delivered the Escrow Agreement and the Working Capital Escrow Agreement.
9.8 HSR ACT. All applicable waiting periods under the HSR Act relating to
transactions contemplated hereby having expired or been terminated.
9.9 DOCUMENTATION. All agreements, documents and instruments incidental
to Purchaser's and Parent's performance of the transactions contemplated by this
Agreement, being in a form and substance reasonably satisfactory to Shareholders
and their legal counsel.
9.10 MATERIAL ADVERSE EFFECT. There having been no material adverse effect
on Purchaser or Parent since December 31, 1997.
9.11 CAPCO MERGER. The CAPCO Documents shall have been executed and
delivered by the Purchaser and the Sellers, the conditions to purchase of CAPCO
shall have been satisfied and the closing of the CAPCO Merger shall have
occurred simultaneously with the Closing of the transactions contemplated
hereby.
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9.12 GRAPHIC LINKS, L.L.C. The Assignments shall have been executed and
delivered by the Purchaser, Parent and the other parties thereto and the
conditions to purchase, if any, shall have been satisfied and the purchase shall
have occurred simultaneously with the Closing of the transactions contemplated
hereby.
ARTICLE 10
TERMINATION OF AGREEMENT
10.1 RIGHT TO TERMINATE AGREEMENT. This Agreement may be terminated
prior to the Closing:
(a) by the mutual agreement of the Company and Purchaser;
(b) by Purchaser at any time after June 30, 1998 if any condition
set forth in Article 8 shall not have been satisfied or waived and Parent or
Purchaser is not in material breach of this Agreement;
(c) by the Company at any time after May 29, 1998 if any condition
set forth in Article 9 shall not have been satisfied or waived and the Company
is not in material breach of this Agreement;
(d) by Purchaser at any time if the results of it determines that
any representation or warranty set forth in Section 2 or Section 3 is inaccurate
in any material respect;
(e) by Purchaser if any Updated Disclosure Schedule delivered to
Purchaser under Section 5.5 causes any representation or warranty set forth in
Section 2 or 3 to be inaccurate in any material respect; or
(f) by the Company at any time if it determines that any
representation or warranty set forth in Section 4 is inaccurate in any material
respect.
10.2 EFFECT OF TERMINATION. Upon the termination of this Agreement
pursuant to Section 10.1:
(a) Purchaser shall promptly destroy or cause to be returned to
the Company all Confidential Information, including any copies made by or
supplied to Purchaser or any of Purchaser' Associates of any such Confidential
Information;
(b) Each party shall pay its own costs and expenses and no party
hereto shall have any obligation or liability to the other parties hereto;
PROVIDED, HOWEVER that the parties hereto shall remain bound by the provisions
of Sections 6.1 and 7.4 and Article 12.
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ARTICLE 11
CERTAIN REMEDIES AND LIMITATIONS
11.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. All
representations and warranties made by the Company and Controlling Shareholders
in this Agreement, in any Schedule or in any certificate delivered pursuant
hereto, shall survive the Closing until May 10, 1999, provided that there shall
be no termination of the obligation to indemnify for a claim involving any such
representation or warranty provided a Claim Notice has been delivered prior to
May 10, 1999. The representations and warranties of any party shall be
unaffected by any investigation made by or on behalf of the other parties or by
knowledge obtained as a result thereof or otherwise. All representations and
warranties made by Parent and the Purchaser as to any fact or condition on or
before the Closing Date, in this Agreement, or in any certificate delivered
pursuant hereto, shall survive the Closing.
11.2 INDEMNIFICATION BY SHAREHOLDERS.
(a) The Purchaser, the Company, the Subsidiaries and their
respective Affiliates and their respective officers, directors, shareholders,
agents, representatives, consultants, employees and affiliates, and all of their
respective heirs, successors and permitted assigns (collectively, the "Purchaser
Indemnified Parties") shall be indemnified and held harmless, jointly and
severally by the Shareholders entitled to receive the Merger Consideration,
solely out of the portion of the Merger Consideration deposited in the Escrow
Account, against and in respect of the net amount (determined after deduction of
the amount of any insurance proceeds recovered and any benefits inuring to the
Purchaser as a result of the timing for income tax purposes of deductions for
such losses as compared to the timing of recoveries under insurance or this
Section 11.2):
(i) of any and all liabilities, obligations, losses,
damages, diminutions of value, liens and deficiencies of any kind or nature
("Losses") not accrued or reserved for in the Final Closing Statement which
exist, or which are imposed on, incurred by or asserted against any one or
more of the Purchaser Indemnified Parties,
(A) based upon, resulting from or arising out of, or
as to which there was, any breach or inaccuracy of any
representation, warranty, statement, certification, agreement or
covenant made by the Company or any Shareholder in this Agreement,
any Related Agreement, any Disclosure Schedule hereto or thereto;
(B) based upon, resulting from or arising out of any
claim, litigation or proceeding brought by any third-party based
upon, resulting from, arising out of or concerning any event, fact
or circumstance, if and to the extent that such event, fact or
circumstance arises out of or relates to the ownership or operation
of the Company or the Subsidiaries prior to Closing;
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(C) arising out of the cost of any required
remediation under Environmental Laws of any of the properties now or
previously owned, leased, used, occupied or contaminated by the
Company or the Subsidiaries, if the materials and/or conditions
requiring such remediation existed as of the Closing;
(D) in the nature of Taxes for periods through the
Closing for which the Company or the Subsidiaries is liable to the
extent that an appropriate tax authority has asserted a claim and
(i) such Taxes are not reflected on the Financial Statements and did
not arise in the ordinary course of business after the date thereof,
(ii) such Taxes should have been but were not reflected in any
return filed by the Company or the Subsidiaries prior to the
Closing, (iii) such Taxes were required to be paid prior to the
Closing and were not so paid, or (iv) such Taxes result from the
failure by the Company or the Subsidiaries prior to the Closing to
comply with any legal requirements relating to information reporting
or withholding and payment over of taxes with respect to payments
made to third parties;
(E) the amount of any brokerage commission, finder's
fee or like payment in connection with the transactions contemplated
in this Agreement to the extent not included in Company Expenses
included in the calculation of the Merger Consideration;
(ii) of any cost or expenses (including, without limitation,
settlement costs and reasonable attorneys', accountants' and experts' fees
and court costs) incurred by Purchaser Indemnified Parties in connection
with any of the foregoing (including, without limitation, any reasonable
cost or expense incurred by Purchaser Indemnified Parties in enforcing
their rights pursuant to this Section 11.2).
Each of the above is for purposes of this Agreement a "Purchaser
Indemnified Obligation."
(b) Claims for indemnification under Section 11.2(a)(i)(B), (C) or
(D), above, may be made regardless of whether or not the matter giving rise to
such claim would constitute a breach of a representation and warranty made in
this Agreement, any Related Agreement, any Disclosure Schedule hereto and
thereto or any other written document. No Purchaser Indemnified Party shall be
required to make any claim or demand against any other person or entity prior to
the making of any claim or demand for indemnification or at any other time.
Shareholders agree that, notwithstanding any other provision of this Agreement,
any Related Agreement or applicable Legal Requirements, Purchaser Indemnified
Parties shall offset all valid claims for indemnification against the Escrow
Account in accordance with the terms of the Escrow Agreement.
11.3 LIMITATIONS ON REPRESENTATIONS, WARRANTIES AND LIABILITIES OF
SHAREHOLDERS.
(a) Notwithstanding anything to the contrary in this Agreement,
Shareholders shall not be liable to the Purchaser Indemnified Parties, except
under the Escrow Agreement as
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provided therein. The total amount of payments that the Shareholders may be
required to make thereunder shall be limited in the aggregate to the Escrow
Amount, which is the sole source of Purchaser's indemnification and the
Shareholders' cumulative liability shall in no event exceed the Escrow Amount.
(b) No payment shall be required to be made for Purchaser
Indemnified Obligations unless a Claim Notice (as defined below) with respect
thereto has been delivered to Shareholders on or prior to May 10, 1999, except
for claims related to currently identified potential tax claims up to the amount
of the Tax Escrow, and then only if a Claim Notice with respect thereto has been
delivered to Shareholders on or prior to May 10, 2001.
(c) Notwithstanding anything to the contrary in this Agreement,
and except for "willful," knowing or intentional breaches of the representations
and warranties contained herein, no claim for indemnification may be made by any
Purchaser Indemnified Party unless and until the aggregate amount of Losses
and/or other amounts claimed for indemnification by the Purchaser Indemnified
Parties exceeds $50,000, and then only for the amount by which such Losses and
other amounts claimed exceed $50,000.
11.4 INDEMNIFICATION BY PARENT AND PURCHASER.
(a) Parent and Purchaser will, jointly and severally, indemnify
and hold harmless Shareholders and their respective affiliates, officers,
directors, partners, stockholders, agents, representatives, consultants and
employees, and all of their respective heirs, successors and permitted assigns
(collectively, the "Shareholder Indemnified Parties") from and against the net
amount (determined after deduction of the amount of any insurance proceeds
recovered):
(i) of any and all Losses which exist, or which are imposed
on, incurred by or asserted against any one or more of the Shareholder
Indemnified Parties:
(A) based upon, resulting from or arising out of or as
to which there was any breach or inaccuracy of any representation,
warranty, statement, certification, agreement, obligation or
covenant made by Parent or Purchaser in this Agreement, any
Purchaser Related Agreement or in any other written document;
(B) based upon, resulting from or arising out of any
claim, litigation or proceeding brought by any third party based
upon, resulting from arising out of or concerning any event, fact or
circumstance, if and to the extent that such event, fact or
circumstance arises out of or relates to the ownership or operation
of the Company or the Subsidiaries after the Closing;
(C) arising out of the cost of remediating under
Environmental Laws any of the properties now owned, leased, used,
occupied or contaminated by the Company or the Subsidiaries, if the
conditions requiring such remediation did not exist prior to the
Closing;
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(D) in the nature of Taxes which arise subsequent to
the Closing;
(E) the amount of any brokerage commission, finder's
fee or like payment in connection with the transactions contemplated
in this Agreement;
(ii) of any cost or expenses (including, without limitation,
settlement costs and reasonable attorneys', accountants' and experts' fees
and court costs) incurred by Shareholder Indemnified Parties in connection
with any of the foregoing (including, without limitation, any reasonable
cost or expense incurred by Shareholder Indemnified Parties in enforcing
their rights pursuant to this Section 11.4).
Each of the above is for purposes of this Agreement a "Shareholder
Indemnified Obligation."
(b) Claims for indemnification under Section 11.4(a)(i)(B), (C) or
(D), above, may be made regardless of whether or not the matter giving rise to
such claim would constitute a breach of a representation and warranty made in
this Agreement, any Related Agreement, any Disclosure Schedule hereto and
thereto or any other written document. No Shareholder Indemnified Party shall
be required to make any claim or demand against any other person or entity prior
to the making of any claim or demand for indemnification or at any other time.
11.5 LIMITATIONS ON LIABILITY OF PURCHASER.
(a) No payment shall be required to be made for Shareholders
Indemnified Obligations unless a Claim Notice with respect thereto has been
delivered to Purchaser on or prior to the third anniversary of the Closing.
(b) Any amounts payable by Purchaser to Shareholders under this
Article 11 shall be payable in MW Common Stock at the MW Common Stock Valuation.
11.6 INDEMNIFICATION CLAIMS.
(a) If either a Purchaser Indemnified Party, on the one hand, or a
Shareholder Indemnified Party, on the other hand, (the "Claimants") wishes to
assert an indemnification claim hereunder, the Claimant shall deliver to
Shareholders, if a Purchaser Indemnified Party, or to Purchaser, if the Claimant
is a Shareholder Indemnified Party, a written notice (a "Claim Notice") setting
forth:
(i) the matter giving rise to the Claim for indemnification,
(ii) a detailed description of all of the facts and
circumstances known to Claimant giving rise to the Claim, and
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(iii) a detailed description of, and a reasonable estimate of
the total amount of, the monetary amounts actually incurred or expected to
be incurred for which indemnification is sought.
(b) Purchaser Indemnified Parties and Shareholder Indemnified
Parties are referred to herein as "Indemnified Parties," and the persons from
whom indemnification may be sought pursuant to this Section 11.6 are referred to
as an "Indemnifying Party"). Within twenty (20) days after receipt of any Claim
Notice, the Indemnifying Parties will (i) acknowledge in writing their
responsibility for all or part of such matter for which indemnification is
sought under this Article 11, and will either (x) pay or otherwise satisfy the
portion of such matter as to which responsibility is acknowledged, or (y) take
such other action as is reasonably satisfactory to the Indemnified Party to
provide reasonable security or other assurances for the performance of their
obligations hereunder, and/or (ii) give written notice to the Indemnified Party
of their intention to dispute or contest all or part of such responsibility.
Upon delivery of such notice of intention to contest, the parties will negotiate
in good faith to resolve as promptly as possible any dispute as to
responsibility for, or the amount of, any such matter.
11.7 DEFENSE OF THIRD PARTY ACTIONS. If an Indemnified Party receives
notice or otherwise obtains Knowledge of any Claim or any threatened Claim that
may give rise to an indemnification claim against an Indemnifying Party, then
the Indemnified Party shall promptly deliver to the Indemnifying Party a written
notice describing such Claim in reasonable detail. The untimely delivery of such
written notice by the Indemnified Party to the Indemnifying Party shall relieve
the Indemnifying Party of liability with respect to such Claim to the extent it
has been prejudiced by lack of timely notice under this Article 11 with respect
to such Claim. The Indemnifying Party shall have the right, at its option to
assume the defense of any such Claim with its own counsel, reasonably
satisfactory to the Indemnified Party, provided that Shareholders may not assume
the defense of any Claim unless there are sufficient amounts in the
Indemnification Escrow Amount to fully indemnify Purchaser Indemnified Parties
against the amount of such Claim and all other pending Claims against the Escrow
Amount. If the Indemnifying Party elects to assume the defense of and
indemnification for any such Claim, then:
(a) notwithstanding anything to the contrary contained in this
Agreement, the Indemnifying Party shall not be required to pay or otherwise
indemnify the Indemnified Party against any attorneys' fees or other expenses
incurred on behalf of the Indemnified Party in connection with such matter
following the Indemnifying Party's election to assume the defense of such matter
so long as the Indemnifying Party continues to diligently conduct such defense;
(b) the Indemnified Party shall make available to the Indemnifying
Party all books, records and other documents and materials that are under the
direct or indirect control of the Indemnified Party or any of the Indemnified
Party's Associates that the Indemnifying Party considers such necessary or
desirable for the defense of such matter at the expense of the Indemnifying
Party and shall make available to the Indemnifying Party reasonable access to
Indemnified Party's personnel;
49
<PAGE>
(c) the Indemnified Party shall execute such documents and take
such other actions as the Indemnifying Party may reasonably request for the
purpose of facilitating the defense of, or any settlement, compromise or
adjustment relating to, such Claim (with the Indemnifying Party to reimburse
Indemnified Party for third-party, out-of-pocket expenses) and the Indemnified
Party shall not be required to take any such action or execute any document
which imposes any equitable or unindemnified liability remedy on any Indemnified
Party or would adversely affect the business or operations of the Company or the
Subsidiaries;
(d) the Indemnified Party shall otherwise fully cooperate as
reasonably requested by the Indemnifying Party in the defense of such Claim
(with the Indemnifying Party to reimburse Indemnified Party for third-party,
out-of-pocket expenses); and
(e) the Indemnified Party shall not admit any liability with
respect to such Claim.
If the Indemnifying Party fails or refuses to assume the defense of and
indemnification for such Claim, then the Indemnified Party shall proceed
diligently to defend such Claim with the assistance of counsel, and the
Indemnifying Party shall thereafter reimburse Indemnified Party on a current
basis, in accordance with the procedures set forth in this Agreement, as
requested by Indemnified Party for all costs and expenses of defense for which
Indemnified Party is entitled to indemnification pursuant to the terms of this
Agreement. No third party Claim may be settled by the Indemnified Party without
notice to, and the written consent of, the Indemnifying Party which consent must
not be unreasonably withheld. If such consent is not given, or written notice
that it is being withheld and the reasons therefor has not been received by the
Indemnified Party within 15 days after such notice has been received, by the
Indemnifying Party, the consent of the Indemnifying Party to such settlement
shall be deemed given.
11.8 SUBROGATION. To the extent that the Indemnifying Party makes or is
required to make any indemnification payment to any Indemnified Party, the
Indemnifying Party shall be entitled to exercise, and shall be subrogated to,
any rights and remedies (including rights of indemnity, rights of contribution
and other rights of recovery) that the Indemnified Party or any of the
Indemnified Party affiliates may have against any other person (other than any
Purchaser Indemnified Party or Shareholders Indemnified Party) with respect to
any Losses, circumstances or matter to which such indemnification payment is
directly or indirectly related. The Indemnified Party shall permit the
Indemnifying Party to use the name of the Indemnified Party and the names of the
Indemnified Party's affiliates in any transaction or in any proceeding or other
matter involving any of such rights or remedies; and the Indemnified Party shall
take such actions as the Indemnifying Party may reasonably request for the
purpose of enabling the Indemnified Party to perfect or exercise the
Indemnifying Party's right of subrogation hereunder.
11.9 EXCLUSIVITY. The right of each party hereto to assert
indemnification claims and receive indemnification payments pursuant to this
Article 11 shall be the sole and exclusive right and remedy exercisable by any
person or entity entitled to indemnification hereunder with respect to any
breach by the other party hereto of any representation or warranty or any other
indemnity obligation hereunder.
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<PAGE>
11.10 RETENTION OF RECORDS. From and after the date of this Agreement,
Purchaser shall preserve, and shall cause the Company to preserve, all books,
records and other documents, materials and information relevant to the
representations, warranties and covenants set forth in this Agreement until the
later of four (4) years following the Closing Date or for such longer period as
the rights of the parties hereunder may exist. At all times after the Closing
Date, Purchaser and the Company shall give Shareholders and Shareholders'
Associates reasonable access to such books, records and other documents,
materials and information of the Company and the Subsidiaries relating to the
operation of the business of the Company and the Subsidiaries up to and
including the Closing Date.
ARTICLE 12
MISCELLANEOUS
12.1 CERTAIN DEFINITIONS. For purposes of this Agreement, a contract,
obligation, liability, transaction, change, breach, encumbrance, proceeding or
other matter or event shall not be deemed "material" if the monetary amount
involved is less than 0.1% of the Merger Consideration. A "Material Adverse
Effect" is a material adverse effect on the business, operations, assets or
financial condition or results of the Company and its Subsidiaries taken as a
whole. "Knowledge" means, with respect to an individual, the actual present
Knowledge of such individual. A Person (other than an individual), including
the Company, will be deemed to have Knowledge of a particular fact or matter if
any individual who serves as an officer or director of such Person has actual
present Knowledge of such fact or matter. "Shareholders' Representative" shall
mean any two of GARY P. REIM, GARY L. LORENZ and ROBERT C. FOX acting together
and their successors and/or assigns.
12.2 EXPENSES. The term "Company Expenses" shall mean: (i) all costs and
expenses of the Company in connection with the negotiation of this Agreement and
the consummation of the transactions contemplated hereby including any broker's
fee set forth in SCHEDULE 2.25; (ii) one-half of the Company's costs of all HSR
filings, and any transfer taxes or stamp incurred by the Company in connection
with the transactions contemplated by this Agreement and of Neutral Accountants;
and (iii) all other costs and expenses required to be borne by the Company under
the terms of this Agreement. Company Expenses shall not include costs, expenses
or fees of Shareholders incurred in connection with the Merger or other
transactions contemplated by this Agreement which costs, expenses and fees shall
be paid directly by the Shareholders. The Company shall pay the fees and
expenses of the Company incidental to the preparation of this Agreement, the
performance and compliance with all agreements contained in this Agreement to be
performed or complied with by it and the consummation of the transactions
contemplated hereby, including the legal and accounting fees and expenses.
Purchaser shall be responsible for its fees and expenses incidental to the
preparation of this Agreement, the performance and compliance with all
agreements contained in this Agreement to be performed or complied with by it
and the consummation of the transactions contemplated hereby, including the
legal and accounting fees and expenses and the fees and expenses associated with
any environmental assessment conducted in connection with this transaction.
51
<PAGE>
12.3 NOTICES; ETC. All notices, instructions and other communications
given hereunder or in connection herewith shall be in writing. Any such notice,
instruction or communication shall be sent either (i) by registered or certified
mail, return receipt requested, postage prepaid, or (ii) via a reputable
nationwide overnight courier service, in each case to the address set forth
below. Any such notice, instruction or communication shall be deemed to have
been delivered three business days after it is sent prepaid, or one business day
after it is sent via a reputable nationwide overnight courier service.
If to Purchaser, to:
Mail-Well, Inc.
23 Inverness Way East
Englewood, CO 80112
Attention: Gerald F. Mahoney, Chairman
Tel: (303) 397-7410
Fax: (303) 397-7400
with a copy to:
Mail-Well, Inc.
23 Inverness Way East
Englewood, CO 80112
Attention: Roger Wertheimer, Vice President, General Counsel
Tel: (303) 397-7440
Fax: (303) 768-7380
If to Company, Controlling Shareholders, or to the Shareholders' Representative:
Gary P. Reim, Gary L. Lorenz and Robert C. Fox
c/o Robert C. Fox
415 Somerset
Webster Groves, Missouri 63119
With a copy to:
Joseph D. Lehrer
Greensfelder, Hemker & Gale, P.C.
10 South Broadway, Suite 2000
St. Louis, Missouri 63102
or, in each case, to such other address as may be specified in writing to the
other parties.
Any party may give any notice, instruction or communication in connection
with this Agreement using any other means (including personal delivery, telecopy
or ordinary mail), but no such notice, instruction or communication shall be
deemed to have been delivered unless and until
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it is actually received by the party to whom it was sent. Any party may change
the address to which notices, instructions or communications are to be delivered
by giving the other parties to this Agreement notice thereof in the manner set
forth in this Section 12.3.
12.4 ASSIGNMENT. Neither the Company nor any Shareholder may assign or
otherwise transfer this Agreement or any of their rights hereunder to any person
or entity, without the prior written consent of Purchaser. Subject to the
foregoing, this Agreement shall inure to the benefit of and be binding upon
Shareholders and their successors, personal representatives, heirs, and
permitted assigns. Notwithstanding the foregoing, this Agreement shall not be
terminated by the death or incapacity of any Shareholder, and if, after the
execution hereof, any Shareholder shall die or become incapacitated, this
Agreement shall be binding upon the successors and assigns of any Shareholder as
if such death or incapacity had not occurred and regardless of notice thereof.
Except as expressly permitted by this Section 12.4, Purchaser shall not
voluntarily or by operation of law assign or otherwise transfer this Agreement
or any of its rights or obligations hereunder except to Parent or any of its
wholly owned subsidiaries, without the prior written consent of Shareholders'
Representative and provided that any permitted assignment or transfer shall not
relieve Purchaser or Parent of any of their joint and several obligations
hereunder. Purchaser may collaterally assign and/or grant a security interest in
its rights under this Agreement and under other closing documents to any
financial institution(s) or their affiliates as required pursuant to any
existing or future financing arrangements with the prior written consent of the
Shareholders' Representative (which consent will not be unreasonably withheld or
delayed).
12.5 ENTIRE AGREEMENT; AMENDMENT; GOVERNING LAW; ETC. This Agreement
(together with the Exhibits and Disclosure Schedules) embodies the entire
agreement and understanding among the parties hereto with respect to the subject
matter hereof. This Agreement may be amended, modified, waived, discharged or
terminated only by (and any consent hereunder shall be effective only if
contained in) an instrument in writing signed by the party against which
enforcement of such amendment, modification, waiver, discharge, termination or
consent is sought. This Agreement shall be construed in accordance with and
governed by the laws of the State of Delaware as it applies to contracts to be
performed entirely with the State of Delaware. No representation or warranty
(either express, implied or otherwise) is being made by any party with respect
to the subject matter hereof other than as expressly set forth herein.
12.6 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which is an original, but all of which shall constitute
one instrument. Facsimile signatures to this Agreement shall be binding upon
the parties.
12.7 THIRD PARTY RIGHTS. The parties do not intend to confer any benefit
hereunder on any person or entity other than the parties hereto, the Indemnified
Parties and their respective successors in interest.
12.8 EXHIBITS AND SCHEDULES. Each of the Exhibits and Schedules referred
to herein and attached hereto is an integral part of this Agreement and is
incorporated herein by this reference.
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12.9 PRONOUNS. All pronouns and any variations thereof used in this
Agreement shall be deemed to refer to the masculine, feminine or neuter,
singular or plural, as appropriate.
12.10 AUTHORITY AND EXECUTION. Each person executing this Agreement on
behalf of a party hereto represents and warrants that he is duly and validly
authorized to do so on behalf of such party, with full right and authority to
execute this Agreement and to bind such party with respect to all of its
obligations hereunder.
12.11 SEVERABILITY. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction, as to such jurisdiction, shall be
ineffective to the extent of such invalidity or unenforceability, without
rendering invalid or unenforceable the retraining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction.
12.12 TIME OF ESSENCE. Time is of the essence of this Agreement.
12.13 INTERPRETATION. Each party acknowledges that such party, either
directly or through such party's representatives, has participated in the
drafting of this Agreement, and any applicable rule of constructions that
ambiguities are to be resolved against the drafting party should not be applied
in connection with the construction or interpretation of this Agreement.
12.14 ARBITRATION.
(a) Any controversy or claim arising out of or related to this
Agreement, or a breach hereof, is to be settled by arbitration in accordance
with the procedures set forth in SCHEDULE 12.14.
(b) Notices of demand for arbitration must be filed in writing
with the other parties hereto and in accordance with SCHEDULE 12.14. A demand
for arbitration is to be made within a reasonable time after the claim or
controversy has arisen, but in no event later than the date when institution of
legal or equitable proceedings based on such claim or controversy would be
barred by the applicable statute of limitations.
(c) No arbitration hereunder may include, by consolidation,
joinder or any other manner, any Person other than Parent, Purchaser, Company,
the Shareholders, and other Persons substantially involved in a common question
of fact or law whose presence is required if complete relief is to be accorded
in arbitration. No Person other than Parent, Purchaser, Company or the
Shareholders may be included as an original third party or additional third
party to an arbitration whose interest or responsibility is insubstantial.
Consent to arbitration involving an additional Person does not constitute
consent to arbitration of a dispute not described therein or with a Person not
named or described therein. This Section 12.14 is enforceable by specific
performance under applicable law in a court of competent jurisdiction.
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(d) The award rendered by the arbitrators, including as to legal
fees in accordance with SCHEDULE 12.14, is final, and judgment may be entered
upon it in accordance with applicable law in any court of competent
jurisdiction.
THIS AGREEMENT CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY BE ENFORCED BY
THE PARTIES.
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IN WITNESS WHEREOF, the parties hereto have duly caused this Agreement to
be executed as of the date first above written.
PARENT
MAIL-WELL, INC., a Colorado corporation
By:
---------------------------------------------
Name: Paul V. Reilly
Title: President
PURCHASER
MAIL-WELL I CORPORATION, a Delaware corporation
By:
----------------------------------------------
Name: Paul V. Reilly
Title: President
THE COMPANY
COLOR-ART, INC.
By:
----------------------------------------------
Name: Gary P. Reim
Title: President
CONTROLLING SHAREHOLDERS
-------------------------------------------------
Gary P. Reim
-------------------------------------------------
Gary L. Lorenz
-------------------------------------------------
Robert C. Fox
-------------------------------------------------
James R. Marr
56
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SCHEDULE 12.14
ARBITRATION PROCEDURES
Purchaser and Shareholders hereto agree that in the event of a dispute
between them relating to or arising out of this Agreement, the involved parties
shall submit such dispute to binding arbitration as provided herein. All
arbitrations would be conducted in Denver, Colorado, or at another location
mutually approved by the parties, pursuant to the Commercial Arbitration Rules
of the American Arbitration Association except as herein may be provided. If
the panel used will consist of three arbitrators, such arbitrators will have
experience in the printing industry and the decision of the arbitrators would be
final and binding on all parties. All arbitration shall be undertaken pursuant
to the Federal Arbitration Act, where applicable, and the decision of the
arbitrators shall be enforceable in any court of competent jurisdiction. All of
the parties shall agree to waive their respective rights to further appeal or
redress in any other court or tribunal except solely for the purpose of
obtaining execution of the decision resulting from the arbitration proceeding.
In any dispute where a party seeks $200,000.00 or more in damages or if the
dispute involves whether the Purchaser or the Company properly determined to
terminate the Agreement or refused to close the transactions contemplated by
this Agreement, three arbitrators shall be employed to arbitrate the dispute.
In the event that the dispute involves less than $200,000.00, there shall be one
arbitrator. In the event of any arbitration or other legal proceeding brought
by any party against another party with regard to any matter arising out of or
related to this Agreement, each party hereby expressly agrees that the final
award decision would also provide for all allocation and division between or
among the parties to the arbitration, on a basis which is just and equitable
under the circumstances, of all costs and expenses of the dispute, including
without limitation court costs and arbitrators', reasonable attorneys',
accountants' and expert witness fees, costs and expenses (including
disbursements) incurred in connection with such proceedings. In resolving all
disputes between the parties, the arbitrators shall apply the substantive law of
the State of Delaware. The arbitrators are directed, by this Agreement, to
conduct the arbitration hearing no later than three months from the service of
the statement of claim and demand for arbitration unless good cause is shown
establishing that the hearing cannot fairly and practically be so convened.
Depositions shall be taken only as deemed appropriate by the arbitrator(s)
and only where good cause is shown. Good cause is agreed to exist with respect
to the depositions of officers and management personnel to the extent Knowledge,
as defined in the Agreement at Section 12.1 therein, is relevant to the issue.
Parties shall be entitled to conduct document discovery by requesting production
of documents. Responses or objections shall be served twenty days after receipt
of a request. The arbitrators shall resolve any discovery disputes of such
preheating conferences as may be needed. All parties shall agree that the
arbitrators and any counsel of record to the proceeding shall have the power or
subpoena process as provided by law.
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DEFINITIONS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Accounts Receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Affiliate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Annual Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . 16
Assignments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Associates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Benefit Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
CAPCO Documents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
CERCLA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Certificate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Claim. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Claim Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Claimants. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
COBRA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Company. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Company Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Computation Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Confidential Information . . . . . . . . . . . . . . . . . . . . . . . . . 37
Controlling Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . 1
Creditors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Debt Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Debt Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
DGCL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Disclosure Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Disputed Inventory Matter. . . . . . . . . . . . . . . . . . . . . . . . . 9
Disputed Working Capital Matter. . . . . . . . . . . . . . . . . . . . . . 8
Dissenting Shareholders. . . . . . . . . . . . . . . . . . . . . . . . . . 3
Dissenting Shareholders Escrow Amount. . . . . . . . . . . . . . . . . . . 5
Dissenting Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Environmental Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Equity Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Escrow Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Escrow Amount. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
</TABLE>
58
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PAGE
----
<S> <C>
Estimated Working Capital Statement. . . . . . . . . . . . . . . . . . . . 7
Estimated Working Capital. . . . . . . . . . . . . . . . . . . . . . . . . 7
Exchange Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Final Closing Statement. . . . . . . . . . . . . . . . . . . . . . . . . . 8
Final Closing Statement. . . . . . . . . . . . . . . . . . . . . . . . . . 8
Final Closing Statement. . . . . . . . . . . . . . . . . . . . . . . . . . 8
Final Working Capital Statement. . . . . . . . . . . . . . . . . . . . . . 7
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Hazardous Materials. . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
HSR Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Indemnification Escrow Amount. . . . . . . . . . . . . . . . . . . . . . . 5
Indemnified Parties. . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Indemnifying Party . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Initial Distribution Amount. . . . . . . . . . . . . . . . . . . . . . . . 6
Initial Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Intellectual Property. . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Interim Financial Statements . . . . . . . . . . . . . . . . . . . . . . . 16
Knowledge. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Leased Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Legal Requirement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Liability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Mail-Well. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Material Adverse Effect. . . . . . . . . . . . . . . . . . . . . . . . . . 51
Material Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Merger Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
MGBCL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Multiemployer Plans. . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
MW Common Stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
MW Common Stock Valuation. . . . . . . . . . . . . . . . . . . . . . . . . 2
Neutral Accountant . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Notice of Working Capital Disagreement . . . . . . . . . . . . . . . . . . 8
Notice of Inventory Disagreement . . . . . . . . . . . . . . . . . . . . . 9
Parent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Payoff Letters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
PBGC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Pension Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Permits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Permitted Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Prepayment Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Pro Rata Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
</TABLE>
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<TABLE>
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PAGE
----
<S> <C>
Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Purchaser. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Purchaser Indemnified Obligation . . . . . . . . . . . . . . . . . . . . . 46
Purchaser Indemnified Parties. . . . . . . . . . . . . . . . . . . . . . . 45
Purchaser Related Agreements . . . . . . . . . . . . . . . . . . . . . . . 32
RCRA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Real Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Registrable Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Registration Document. . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Registration Statement Period. . . . . . . . . . . . . . . . . . . . . . . 11
Registration Statement . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Related Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Related Parties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SEC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SEC Documents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Securities Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Sellers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Shareholder Indemnified Obligation . . . . . . . . . . . . . . . . . . . . 48
Shareholder Indemnified Parties. . . . . . . . . . . . . . . . . . . . . . 47
Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Shareholders' Representative . . . . . . . . . . . . . . . . . . . . . . . 51
Signet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Subsidiary Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Surviving Corporation. . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Tax Escrow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Tax Returns. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Title Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Total Shareholder Consideration. . . . . . . . . . . . . . . . . . . . . . 2
Transfer Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Transferred Employee . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Updated Disclosure Schedule. . . . . . . . . . . . . . . . . . . . . . . . 37
Voting Debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Working Capital Escrow Amount. . . . . . . . . . . . . . . . . . . . . . . 6
Working Capital. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
</TABLE>
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<PAGE>
ACQUISITION AGREEMENT
AND
PLAN OF MERGER
by and among
MAIL-WELL INC.,
a Colorado corporation,
MAIL-WELL I CORPORATION,
a Delaware corporation,
ACCU-COLOR, INC.,
a Missouri corporation
and
Certain Shareholders of Accu-Color, Inc.
Identified herein
as Controlling Shareholders
May 15, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
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----
<S> <C> <C> <C>
ARTICLE 1
PRINCIPAL TERMS OF THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 PLAN OF MERGER. . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 NO FURTHER RIGHTS OF TRANSFER . . . . . . . . . . . . . . . . 3
1.3 SURVIVING CORPORATION . . . . . . . . . . . . . . . . . . . . 3
1.4 DISSENTING SHAREHOLDERS . . . . . . . . . . . . . . . . . . . 3
1.5 THE CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.6 Surrender of Certificates . . . . . . . . . . . . . . . . . . 6
1.7 Working Capital Settlement. . . . . . . . . . . . . . . . . . 7
1.8 ADDITIONAL POST-CLOSING ADJUSTMENTS.. . . . . . . . . . . . . 9
1.9 TRANSFER TAXES. . . . . . . . . . . . . . . . . . . . . . . . 10
1.10 MW COMMON STOCK.. . . . . . . . . . . . . . . . . . . . . . . 10
1.11 INVESTMENT LETTER.. . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND CONTROLLING SHAREHOLDERS. . 13
2.1 Organization, Standing, Corporate Authorization, and
Enforceability. . . . . . . . . . . . . . . . . . . . . . . 13
2.2 CAPITALIZATION. . . . . . . . . . . . . . . . . . . . . . . . 14
2.3 ARTICLES OF INCORPORATION AND BYLAWS; CERTAIN RECORDS . . . . 15
2.4 COMPLIANCE WITH OTHER INSTRUMENTS AND LAWS. . . . . . . . . . 15
2.5 GOVERNMENTAL AUTHORIZATIONS; CONSENTS . . . . . . . . . . . . 15
2.6 LITIGATION. . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.7 FINANCIAL STATEMENTS; CONDUCT OF THE BUSINESS; NO UNDISCLOSED
LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . 16
2.8 ABSENCE OF CERTAIN CHANGES OR EVENTS. . . . . . . . . . . . . 16
2.9 TITLE TO PROPERTY, ABSENCE OF LIENS AND ENCUMBRANCES. . . . . 18
2.10 FULL AUTHORITY; COMPLIANCE WITH LAWS. . . . . . . . . . . . . 19
2.11 BENEFIT PLANS . . . . . . . . . . . . . . . . . . . . . . . . 19
2.12 CLAIMS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
2.13 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
2.14 CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . 24
2.15 ENVIRONMENTAL QUALITY . . . . . . . . . . . . . . . . . . . . 25
2.16 INTELLECTUAL PROPERTY . . . . . . . . . . . . . . . . . . . . 27
2.17 PREPAID EXPENSES. . . . . . . . . . . . . . . . . . . . . . . 27
2.18 RELATED PARTY TRANSACTIONS. . . . . . . . . . . . . . . . . . 27
2.19 LABOR MATTERS . . . . . . . . . . . . . . . . . . . . . . . . 28
2.20 CUSTOMERS AND VENDORS . . . . . . . . . . . . . . . . . . . . 28
2.21 OTHER DISCLOSURES . . . . . . . . . . . . . . . . . . . . . . 29
2.22 PARACHUTE PAYMENTS. . . . . . . . . . . . . . . . . . . . . . 29
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<PAGE>
2.23 PRODUCT WARRANTY AND LIABILITY. . . . . . . . . . . . . . . . 29
2.24 ACCURACY. . . . . . . . . . . . . . . . . . . . . . . . . . . 29
2.25 BROKERS AND FINDERS . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE 3
ADDITIONAL REPRESENTATIONS AND WARRANTIES OF CONTROLLING SHAREHOLDERS . . . . 30
3.1 Ownership of Shares . . . . . . . . . . . . . . . . . . . . . 30
3.2 Authorization . . . . . . . . . . . . . . . . . . . . . . . . 30
3.3 Enforceability. . . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PURCHASER AND PARENT. . . . . . . . . . . . 30
4.1 Organization and Standing of Purchaser. . . . . . . . . . . . 30
4.2 AUTHORIZATION . . . . . . . . . . . . . . . . . . . . . . . . 31
4.3 ENFORCEABILITY. . . . . . . . . . . . . . . . . . . . . . . . 31
4.4 COMPLIANCE WITH OTHER INSTRUMENTS AND LAWS. . . . . . . . . . 31
4.5 GOVERNMENTAL AUTHORIZATIONS, CONSENTS . . . . . . . . . . . . 31
4.6 MW COMMON STOCK . . . . . . . . . . . . . . . . . . . . . . . 31
4.7 LITIGATION. . . . . . . . . . . . . . . . . . . . . . . . . . 31
4.8 SECURITIES ACT OF 1933. . . . . . . . . . . . . . . . . . . . 32
4.9 BROKERS AND FINDERS . . . . . . . . . . . . . . . . . . . . . 32
4.10 PURCHASER'S KNOWLEDGE . . . . . . . . . . . . . . . . . . . . 32
4.11 SEC DOCUMENTS . . . . . . . . . . . . . . . . . . . . . . . . 32
4.12 ACCURACY. . . . . . . . . . . . . . . . . . . . . . . . . . . 32
4.13 INVESTIGATION . . . . . . . . . . . . . . . . . . . . . . . . 33
ARTICLE 5
COVENANTS OF THE COMPANY AND THE CONTROLLING SHAREHOLDERS . . . . . . . . . . 33
5.1 Conduct of Business . . . . . . . . . . . . . . . . . . . . . 33
5.2 ACCESS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
5.3 NO SOLICITATION OR NEGOTIATION. . . . . . . . . . . . . . . . 35
5.4 FILINGS AND CONSENTS. . . . . . . . . . . . . . . . . . . . . 35
5.5 UPDATED DISCLOSURE SCHEDULES. . . . . . . . . . . . . . . . . 36
ARTICLE 6
COVENANTS OF PARENT AND PURCHASER . . . . . . . . . . . . . . . . . . . . . . 36
6.1 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . 36
6.2 FILINGS AND CONSENTS. . . . . . . . . . . . . . . . . . . . . 36
6.3 Filing of Final Tax Returns . . . . . . . . . . . . . . . . . 37
ARTICLE 7
COVENANTS OF ALL PARTIES. . . . . . . . . . . . . . . . . . . . . . . . . . . 37
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<PAGE>
7.1 Commercially Reasonable Efforts; Further Assurances . . . . . 37
7.2 POOLING OF INTERESTS. . . . . . . . . . . . . . . . . . . . . 38
7.3 Certain Filings, Etc. . . . . . . . . . . . . . . . . . . . . 38
7.4 Public Announcements. . . . . . . . . . . . . . . . . . . . . 38
7.5 Real Estate . . . . . . . . . . . . . . . . . . . . . . . . . 38
ARTICLE 8
CONDITIONS TO OBLIGATION OF PURCHASER TO CLOSE. . . . . . . . . . . . . . . . 39
8.1 Accuracy of Representations and Warranties. . . . . . . . . . 39
8.2 SHAREHOLDER APPROVAL. . . . . . . . . . . . . . . . . . . . . 39
8.3 Performance . . . . . . . . . . . . . . . . . . . . . . . . . 39
8.4 CERTIFICATE . . . . . . . . . . . . . . . . . . . . . . . . . 39
8.5 DEBT CERTIFICATES AND PAYOFF LETTERS. . . . . . . . . . . . . 39
8.6 NO INJUNCTION . . . . . . . . . . . . . . . . . . . . . . . . 39
8.7 NO MATERIAL ADVERSE EFFECT. . . . . . . . . . . . . . . . . . 40
8.8 CONSENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . 40
8.9 SHAREHOLDER REPRESENTATION AND AFFILIATE LETTER . . . . . . . 40
8.10 LEGAL OPINIONS. . . . . . . . . . . . . . . . . . . . . . . . 40
8.11 CERTIFICATE OF SECRETARY. . . . . . . . . . . . . . . . . . . 40
8.12 ESCROW AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . 40
8.13 NON-COMPETE AGREEMENTS. . . . . . . . . . . . . . . . . . . . 40
8.14 UCC-3S. . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
8.15 HSR ACT . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
8.16 ACCOUNTING, TAX MATTERS . . . . . . . . . . . . . . . . . . . 40
8.17 REAL ESTATE PURCHASES . . . . . . . . . . . . . . . . . . . . 41
8.18 NO DISCOVERY. . . . . . . . . . . . . . . . . . . . . . . . . 41
8.19 DOCUMENTATION . . . . . . . . . . . . . . . . . . . . . . . . 41
8.20 APPROVAL OF PURCHASER'S BOARD . . . . . . . . . . . . . . . . 41
ARTICLE 9
CONDITIONS TO OBLIGATIONS OF THE COMPANY TO CLOSE . . . . . . . . . . . . . . 41
9.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES. . . . . . . . . . 41
9.2 PERFORMANCE . . . . . . . . . . . . . . . . . . . . . . . . . 41
9.3 CERTIFICATE . . . . . . . . . . . . . . . . . . . . . . . . . 41
9.4 NO INJUNCTION . . . . . . . . . . . . . . . . . . . . . . . . 41
9.5 LEGAL OPINION . . . . . . . . . . . . . . . . . . . . . . . . 42
9.6 TAX OPINION . . . . . . . . . . . . . . . . . . . . . . . . . 42
9.7 ESCROW AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . 42
9.8 HSR ACT . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
9.9 DOCUMENTATION . . . . . . . . . . . . . . . . . . . . . . . . 42
9.10 MATERIAL ADVERSE EFFECT . . . . . . . . . . . . . . . . . . . 42
ARTICLE 10
TERMINATION OF AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . 42
-iii-
<PAGE>
10.1 RIGHT TO TERMINATE AGREEMENT. . . . . . . . . . . . . . . . . 42
10.2 EFFECT OF TERMINATION . . . . . . . . . . . . . . . . . . . . 43
ARTICLE 11
CERTAIN REMEDIES AND LIMITATIONS. . . . . . . . . . . . . . . . . . . . . . . 43
11.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS . . . . 43
11.2 INDEMNIFICATION BY SHAREHOLDERS . . . . . . . . . . . . . . . 43
11.3 LIMITATIONS ON REPRESENTATIONS, WARRANTIES AND LIABILITIES OF
SHAREHOLDERS. . . . . . . . . . . . . . . . . . . . . . . . 45
11.4 INDEMNIFICATION BY PARENT AND PURCHASER . . . . . . . . . . . 45
11.5 LIMITATIONS ON LIABILITY OF PURCHASER . . . . . . . . . . . . 46
11.6 INDEMNIFICATION CLAIMS. . . . . . . . . . . . . . . . . . . . 47
11.7 DEFENSE OF THIRD PARTY ACTIONS. . . . . . . . . . . . . . . . 47
11.8 SUBROGATION . . . . . . . . . . . . . . . . . . . . . . . . . 48
11.9 EXCLUSIVITY . . . . . . . . . . . . . . . . . . . . . . . . . 49
11.10 RETENTION OF RECORDS . . . . . . . . . . . . . . . . . . . . 49
ARTICLE 12
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
12.1 CERTAIN DEFINITIONS . . . . . . . . . . . . . . . . . . . . . 49
12.2 EXPENSES. . . . . . . . . . . . . . . . . . . . . . . . . . . 49
12.3 NOTICES; ETC. . . . . . . . . . . . . . . . . . . . . . . . . 50
12.4 ASSIGNMENT. . . . . . . . . . . . . . . . . . . . . . . . . . 51
12.5 ENTIRE AGREEMENT; AMENDMENT; GOVERNING LAW; ETC . . . . . . . 51
12.6 COUNTERPARTS. . . . . . . . . . . . . . . . . . . . . . . . . 52
12.7 THIRD PARTY RIGHTS. . . . . . . . . . . . . . . . . . . . . . 52
12.8 EXHIBITS AND SCHEDULES. . . . . . . . . . . . . . . . . . . . 52
12.9 PRONOUNS. . . . . . . . . . . . . . . . . . . . . . . . . . . 52
12.10 AUTHORITY AND EXECUTION . . . . . . . . . . . . . . . . . . . 52
12.11 SEVERABILITY. . . . . . . . . . . . . . . . . . . . . . . . . 52
12.12 TIME OF ESSENCE . . . . . . . . . . . . . . . . . . . . . . . 52
12.13 INTERPRETATION . . . . . . . . . . . . . . . . . . . . . . . 52
12.14 ARBITRATION . . . . . . . . . . . . . . . . . . . . . . . . . 52
</TABLE>
Exhibit A Certificate of Merger
Exhibit B Escrow Agreement
Exhibit C Affiliate Letter
Exhibit D Legal Opinion of Company's Counsel
Exhibit E Non-Compete Agreement
Exhibit F Legal Opinion of Purchaser's Counsel
-iv-
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ACQUISITION AGREEMENT AND PLAN OF MERGER
THIS ACQUISITION AGREEMENT AND PLAN OF MERGER (this "Agreement") is made
and entered into as of May 15, 1998, by and among MAIL-WELL, INC., a Colorado
corporation ("Parent"), MAIL-WELL I CORPORATION, a Delaware corporation
("Mail-Well" or "Purchaser"), and ACCU-COLOR, INC., a Missouri corporation,
(the "Company") and STEPHEN D. KODNER, MICHAEL B. SMITH, GARY P. REIM, GARY
L. LORENZ and ROBERT C. FOX (collectively, the "Controlling Shareholders").
WITNESSETH:
WHEREAS the Company is engaged in the commercial printing business (the
"Business");
WHEREAS, the respective Boards of Directors of Parent, Mail-Well, and the
Company have approved the acquisition of the Company by Mail-Well;
WHEREAS, to complete such acquisition the respective Boards of Directors of
Parent, Mail-Well and the Company have approved the merger of the Company with
and into Mail-Well (the "Merger"), pursuant to and subject to the terms and
conditions of this Agreement;
WHEREAS, the Directors of the Company have unanimously determined that the
Merger is fair to and in the best interests of its shareholders (collectively,
the "Shareholders"), approved the Merger and this Agreement and the transactions
contemplated hereby, and recommended the approval of the Merger and approval and
adoption of this Agreement by the Shareholders; and
WHEREAS, the Merger is intended to be accounted for as a pooling of
interests.
NOW, THEREFORE, in consideration of the mutual covenants, representations
and warranties made herein and of the mutual benefits to be derived herefrom,
the Company, Parent and Purchaser hereby agree as follows:
ARTICLE 1
PRINCIPAL TERMS OF THE MERGER
1.1 PLAN OF MERGER. Subject to the terms and conditions of this
Agreement, the Merger will be carried out in the following manner:
(a) The Company, Parent and Purchaser will cooperate and use their
respective best efforts to consummate the transactions contemplated by this
Agreement.
(b) Subject to the provisions of this Agreement, a Certificate of
Merger, substantially in the form of EXHIBIT A, shall be duly executed and, on
the Closing Date (as defined in Section 1.5 hereof), or as soon thereafter as
reasonably practicable, filed with the Delaware Secretary of State in accordance
with the General Corporation Law of the State of Delaware (the
<PAGE>
"DGCL"). In addition, Articles of Merger shall be duly prepared, executed
and acknowledged by the Company in accordance with the General and Business
Corporation Law of the State of Missouri (the "MGBCL") and shall be filed on
the Closing Date with the Missouri Secretary of State. The Merger shall
become effective at the date and time set forth in the Certificate of Merger
and the Articles of Merger (the "Effective Time").
(c) At the Effective Time, the Company shall merge with and into
Mail-Well, the separate existence of the Company shall cease, and Mail-Well
shall continue as the surviving corporation. (Mail-Well, in its capacity as the
corporation surviving the Merger, is hereinafter sometimes referred to as the
"Surviving Corporation.")
(d) From and after the Effective Time, the Merger shall have the
effects set forth in Section 259 of the DGCL and Section 351.450 of the MGBCL.
(e) The "Merger Consideration" which shall be paid by Parent and
Purchaser in the Merger, to be paid to the Shareholders other than Dissenting
Shareholders, shall be equal to (i) $13,922,235 less (ii) the amount of Debt as
defined in Section 1.5; less (iii) the amount of unpaid Company Expenses, as
defined in Section 12.2; plus or minus (iv) the adjustment under Section 1.7(b)
hereof; less (v) the amount, if any, paid by the Surviving Corporation to
Dissenting Shareholders. The Merger Consideration plus the amount, if any, paid
to Dissenting Shareholders by the Surviving Corporation is herein referred to as
the "Total Shareholder Consideration." The Merger Consideration shall be paid
in duly authorized, validly issued, fully paid and nonassessable Parent common
stock ("MW Common Stock") valued at $43.93 per share (the "MW Common Stock
Valuation"), which MW Common Stock shall be issued of record on the Closing Date
on the Parent's (and its transfer agent's books).
(f) In the event of any stock split, combination, reclassification or
stock dividend with respect to MW Common Stock, any change or conversion of MW
Common Stock into other securities or any other dividend or distribution with
respect to MW Common Stock (other than quarterly cash dividends issued in the
ordinary course consistent with past practice), including without limitation,
any distribution by Parent of shares of capital stock of any of its Affiliates
(as defined in Section 2.18), or if a record date with respect to any of the
foregoing should occur, prior to the Effective Time, appropriate adjustments
shall be made to the MW Common Stock Valuation, and thereafter all references in
this Agreement to the MW Common Stock Valuation shall be deemed to be the MW
Common Stock Valuation as so adjusted.
(g) At the Effective Time and subject to the terms of this Agreement,
each share of common stock, par value $1.00 per share, of the Company (the
"Common Stock") then issued and outstanding (other than (x) any shares of Common
Stock which are held in the treasury of the Company, or which are held, directly
or indirectly, by Mail-Well or any direct or indirect subsidiary of Mail-Well,
all of which shall be canceled and none of which shall receive any payment with
respect thereto (hereinafter such shares are collectively referred to as
"Subsidiary Shares") and (y) shares of Common Stock held by Dissenting
Shareholders (as defined in Section 1.4 hereof) (hereinafter such shares are
collectively referred to as "Dissenting Shares") shall, by virtue of the Merger
and without any action on the part of the holder thereof, be converted into
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<PAGE>
and represent the right to receive a pro rata share of the Merger
Consideration ("Pro Rata Share") which shall be equal to the fraction
obtained by dividing one by the total number of shares of Common Stock
outstanding at the Effective Time (other than the Subsidiary Shares and
Dissenting Shares).
1.2 NO FURTHER RIGHTS OF TRANSFER. At and after the Effective Time, each
holder of a certificate for Common Stock (a "Certificate") shall cease to have
any rights as a Shareholder, except for the right to surrender his or her
Certificate (other than Certificates representing Dissenting Shares or
Subsidiary Shares) in exchange for payment of the Merger Consideration
deliverable in respect thereof, or, in the case of a Dissenting Shareholder, to
perfect his or her right to receive payment for his or her shares pursuant to
applicable law if such holder has validly perfected and not withdrawn his or her
right to receive payment for his or her shares, and no transfer of shares of
Common Stock shall be made on the stock transfer books of the Company.
Certificates presented to the Surviving Corporation after the Effective Time
shall be canceled and exchanged for MW Common Stock and cash as provided in this
Article I. At the close of business on the day of the Effective Time, the stock
ledger of the Company with respect to Common Stock shall be closed.
1.3 SURVIVING CORPORATION. The Certificate of Incorporation of Mail-Well,
as in effect immediately prior to the Effective Time, shall be the Certificate
of Incorporation of the Surviving Corporation. The Bylaws of Mail-Well, as in
effect immediately prior to the Effective Time, shall be the Bylaws of the
Surviving Corporation. At the Effective Time, the directors and officers of
Mail-Well immediately prior to the Effective Time shall be the directors and
officers of the Surviving Corporation, each of such directors to hold office,
subject to the applicable provisions of the Certificate of Incorporation and
Bylaws of the Surviving Corporation, until the next annual shareholders' meeting
of the Surviving Corporation and until their respective successors shall be duly
elected or appointed and qualified.
1.4 DISSENTING SHAREHOLDERS. Notwithstanding anything in this Agreement
to the contrary but only to the extent required by applicable state law, shares
of Common Stock that are issued and outstanding immediately prior to the
Effective Time and are held by holders of Common Stock who comply with all the
provisions of applicable law concerning the right of holders of Common Stock to
dissent from the Merger and require appraisal of their shares of Common Stock
("Dissenting Shareholders") shall not be converted into the right to receive the
Merger Consideration but shall become the right to receive such consideration as
may be determined to be due such Dissenting Shareholder pursuant to the law of
the State of Missouri; provided, however, that (i) if any Dissenting Shareholder
shall subsequently deliver a written withdrawal of his or her demand for
appraisal (with the written approval of the Surviving Corporation, if such
withdrawal is not tendered within 60 days after the Effective Time), or (ii) if
any Dissenting Shareholder fails to establish and perfect his or her entitlement
to appraisal rights as provided by applicable law, or (iii) if within 120 days
of the Effective Time neither any Dissenting Shareholder nor the Surviving
Corporation has filed a petition demanding a determination of the value of all
shares of the Common Stock that are issued and outstanding at the Effective Time
and held by Dissenting Shareholders, then such Dissenting Shareholder or
Shareholders, as the case may be, shall forfeit the right to appraisal of such
shares and each such
3
<PAGE>
share shall thereupon be deemed to have been converted into the right to
receive the Merger Consideration, without interest, according to the terms of
this Agreement. The Company shall give Purchaser (A) prompt notice of any
written demands for appraisal, withdrawals of demands for appraisal and any
other related instruments received by the Company, and (B) the opportunity to
direct all negotiations and proceedings with respect to demands for
appraisal. The Company will not voluntarily make any payment with respect
to any demands for appraisal and will not, except with the prior written
consent of Mail-Well, settle or offer to settle any such demand.
1.5 THE CLOSING. The closing of the transactions contemplated by this
Article 1 (the "Closing") shall be held at the offices of Rothgerber Johnson &
Lyons LLP in Denver, Colorado at 9:00 a.m. (local time) on May 29, 1998, or at
such other place, time and date as may be jointly designated by Purchaser, the
Company and the Shareholders (the date on which the Closing takes place, the
"Closing Date"). At or before the Closing, each of the following shall occur:
(a) As soon as practicable but no later than four business days
before the scheduled Closing Date, the Company shall deliver to Purchaser (i) a
certificate (the "Debt Certificate") executed by the chief financial officer of
the Company setting forth the amount of the outstanding principal balance and
the interest of any kind, as well as the amount of early retirement or
prepayment fees and/or penalties of any kind (the "Prepayment Fees") that will
be due and payable as of the Closing Date by the Company pursuant to any Debt
that will be outstanding as of the Closing Date to each creditor to whom any
such Debt is owed (the "Creditors") and (ii) a letter (the "Payoff Letters"),
executed by the Company and an authorized representative of each Creditor that
is a bank, leasing company or other financial institution or who is listed in
SCHEDULE 1.5(a) to whom any Debt is owed (other than the Debt set forth on
Schedule 1.5(b)), setting forth the amount of principal, interest and Prepayment
Fees, that will be due and payable by the Company to each of such Creditors as
of the Closing Date and undertaking to terminate, either at or immediately after
the Closing, all liens or other security interests securing such Debt upon
payment of the amounts due and owing. "Debt" shall include all funded long
term, short term or "line of credit" indebtedness, to banks and financial
institutions, Shareholders and other third parties, including the current
portion thereof, accrued interest thereon, and Prepayment Fees, together with
the unamortized principal amount including the current portion, interest expense
required to be accrued thereon and Prepayment Fees of all capitalized lease
obligations that are properly classified as liabilities on the balance sheet of
the Company at Closing in conformity with GAAP, the amounts of which shall be
determined consistent with the Company's audited Financial Statements; provided,
however, that Debt shall not include those prepayment fees for Debt listed on
SCHEDULE 1.5(b) which is not going to be discharged at Closing.
(b) At the Closing, that portion of the Debt owed to each Creditor
executing a Payoff Letter or whose Debt is otherwise acknowledged to Parent's
reasonable satisfaction, except that listed in SCHEDULE 1.5(b), shall be paid by
Purchaser to such Creditor by wire transfer of immediately available funds to an
account or accounts designated by such Creditors and in the amounts specified in
the Payoff Letters or otherwise established with such Creditors.
4
<PAGE>
(c) At the Closing, Purchaser shall pay any unpaid Company Expenses
accrued on the books of the Company by wire transfer of immediately available
funds or by certified bank check.
(d) The Purchaser shall place in escrow with the Escrow Agent acting
pursuant to the Escrow Agreement (as defined in Section 1.5(g)) (such amount,
together with interest and dividends thereon, additions thereto, and releases
therefrom, as more specifically set forth in such Escrow Agreement, is referred
to herein as the "Dissenting Shareholders Escrow Amount") immediately available
funds representing 100% of the cash value of the Merger Consideration which
would have been due Dissenting Shareholders under Section 1.1 as of the Closing
Date if such Dissenting Shareholders had not exercised their rights of appraisal
and MW Common Stock (based on the MW Common Stock Valuation) representing 25% of
the amount of the Merger Consideration which would have been due Dissenting
Shareholders under Section 1.1 as of the Closing Date. Any amounts payable by
Purchaser as the Surviving Corporation to Dissenting Shareholders subsequent to
the Closing Date shall be first payable out of the cash portion of the
Dissenting Shareholders Escrow Amount. Any amounts paid to Dissenting
Shareholders by Purchaser as the Surviving Corporation in excess of the cash
amount in the Dissenting Shareholder Escrow Amount shall be payable to Purchaser
in MW Common Stock (based on the MW Common Stock Valuation) out of, first the
Dissenting Shareholder Escrow Amount, and then out of, the Escrow Amount (as
defined below) in reduction of such Escrow Amount (as defined below). Any cash
remaining in the Dissenting Shareholders Escrow Amount after the payment of all
amounts due to Dissenting Shareholders shall be exchanged for shares of MW
Common Stock, rounded up to the nearest whole share, having a value (based on
the MW Common Stock Valuation) equal to the value of such cash. Any amounts
remaining in the Dissenting Shareholders Escrow Amount after resolution of all
Dissenting Shareholder claims shall be payable to the Shareholders surrendering
Certificates pursuant to Section 1.6 in MW Common Stock (based on the MW Common
Stock Valuation) at the direction of the Shareholders' Representative (as
defined in Section 12.1).
(e) At the Closing, from the Merger Consideration the Purchaser shall
deliver stock certificates representing 23,531 shares of MW Common Stock to the
Escrow Agent acting pursuant to the Escrow Agreement referred to below (such
amount, together with dividends thereon, additions thereto, and releases
therefrom, as more specifically set forth in such Escrow Agreement, is referred
to herein as the "Indemnification Escrow Amount").
(f) At the Closing, from the Merger Consideration the Purchaser shall
deliver stock certificates representing 2,241 shares of MW Common Stock to the
Escrow Agent acting pursuant to the Escrow Agreement referred to below (such
amount, together with dividends thereon, additions thereto, and releases
therefrom, as more specifically set forth in such Escrow Agreement, is referred
to herein as the "Working Capital Escrow Amount").
(g) The Dissenting Shareholders Escrow Amount, the Working Capital
Escrow Amount and the Indemnification Escrow Amount (collectively, the "Escrow
Amount") shall be held and distributed by such Escrow Agent in accordance with
the terms of the Escrow Agreement, substantially in the form attached hereto as
EXHIBIT B (the "Escrow Agreement"),
5
<PAGE>
which shall be entered into by the Escrow Agent named therein, Purchaser and
the Shareholders' Representative prior to or on the Closing Date.
1.6 SURRENDER OF CERTIFICATES.
(a) At any time after the Effective Time upon surrender for
cancellation to the Purchaser of the Certificate(s) held by any record holder of
a Certificate, together with a duly executed letter of transmittal in a form
reasonably acceptable to Purchaser, such holder shall be entitled to receive in
exchange for each share of Common Stock represented by such surrendered
Certificate a Pro Rata Share of the Initial Distribution Amount to Shareholders.
The "Initial Distribution Amount" shall be the Total Shareholder Consideration
less the Escrow Amount delivered to the Escrow Agent pursuant to Section 1.5.
Promptly upon termination of each of the escrows pursuant to the terms of this
Agreement, each such Shareholder shall be entitled to receive his, her or its
Pro Rata Share of the particular Escrow Amount distributed to Shareholders. The
amounts so payable to a holder of a Certificate(s) shall be paid with a
certificate for the number of shares of MW Common Stock having a value (based on
the MW Common Stock Value and rounded down to the nearest whole share) equal to
the amount so due plus cash in lieu of fractional shares and in the amount of
any unpaid dividends or other distributions payable on such shares of MW Common
Stock with a record date after the Effective Time. The Certificate(s) so
surrendered shall be canceled. Until so surrendered, each Certificate shall be
deemed, for all corporate purposes, to evidence only the right to receive the
Merger Consideration deliverable in respect thereof to which such Person is
entitled pursuant to this Article 1. A Certificate surrendered will be
registered in the name of the beneficial owner of said Certificate (as set forth
in Schedule 2.2) in the event the voting trust to which such shareholder was a
party is terminated prior to or at Closing.
For purposes of this Agreement, "Person" shall mean and include an
individual, a partnership, a joint venture, a corporation, a trust, an
unincorporated organization, a group and a government or other department or
agency thereof.
(b) If the Merger Consideration (or any portion thereof) is to be
delivered to a Person other than the Person in whose name the Certificates
surrendered in exchange therefor are registered, it shall be a condition to the
payment of the Merger Consideration that the Certificates so surrendered shall
be properly endorsed or accompanied by appropriate stock powers and otherwise in
proper form for transfer, that such transfer otherwise be proper and that the
Person requesting such transfer pay to Mail-Well any transfer or other taxes
payable by reason of the foregoing or establish to the satisfaction of Mail-Well
that such taxes have been paid or are not required to be paid.
(c) In the event any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the Person claiming
such Certificate to be lost, stolen or destroyed, and upon such Person's
agreement to indemnify the Parent and Mail-Well against any claim that may be
made against the Parent or Mail-Well with respect to the Certificate claimed to
have been lost, stolen or destroyed, or, if required by Mail-Well, upon such
Person's obtaining a lost instrument bond in form and amount satisfactory to
Mail-Well, Mail-Well will issue in
6
<PAGE>
exchange for such lost, stolen or destroyed Certificate the Merger
Consideration deliverable in respect thereof as determined in accordance with
this Article 1.
(d) No certificates or scrip representing fractional shares of MW
Common Stock shall be issued upon the surrender for exchange of Certificates
pursuant to this Article 1 or as part of a distribution from the Escrow Amount;
no dividend or other distribution by Parent and no stock split, combination or
reclassification shall relate to any such fractional share; and no such
fractional share shall entitle the record or beneficial owner thereof to vote or
to any other rights of a stockholder of Parent. In lieu of any such fractional
share, each holder of Shares who would otherwise have been entitled thereto upon
the surrender of Certificate(s) for exchange pursuant to this Article 1 will be
paid an amount in cash (without interest) rounded to the nearest whole cent,
determined by multiplying (i) the MW Common Stock Valuation by (ii) the
fractional share to which such holder would otherwise be entitled. Purchaser
shall make available the cash necessary for this purpose at the Effective Time.
1.7 WORKING CAPITAL SETTLEMENT.
(a) Prior to the Closing Date, the Company shall estimate its working
capital position (the "Working Capital") as of the close of business on the
Closing Date (the "Computation Date"). Working Capital shall mean (x) the sum
of (i) the book value of current assets plus (ii) the amount of capital
expenditures listed on Schedule 1.7; less (y) the book value of current
liabilities excluding any amount of Debt or Company Expenses paid by Purchaser
at Closing pursuant to Section 1.5(c). The Company shall provide Purchaser a
copy of the calculation of the estimated Working Capital (the "Estimated Working
Capital Statement") three business days prior to the Closing Date. The book
value of all amounts and the determination of Working Capital shall be
determined in accordance with generally accepted accounting principles,
consistently applied ("GAAP") on a basis consistent with the Company's last
audited Financial Statements.
(b) If the amount of the Working Capital as shown on the Estimated
Working Capital Statement (the "Estimated Working Capital") is greater than
$1,754,463, the Merger Consideration shall be increased by the difference
between the Estimated Working Capital and $1,754,463. If the amount of the
Estimated Working Capital is less than $1,754,463, the Merger Consideration
shall be reduced by the difference between $1,754,463 and the Estimated Working
Capital.
(c) Purchaser shall prepare and deliver to Shareholders a "Final
Working Capital Statement" on or before the thirtieth day following Closing.
In preparing the Final Working Capital Statement, inventory shall be valued
at the lesser of cost or market using FIFO in accordance with GAAP, and shall
be based upon a physical count taken by Shareholders and observed by the
Purchaser (one-half the cost of which shall be a Company Expense) within
three business days prior to the Closing Date. Except as provided in the
preceding sentence, all amounts set forth on the Final Working Capital
Statement shall be determined in accordance with GAAP on a basis consistent
with the accounting principles used in connection with determining the
Estimated Working Capital. The Final Working Capital Statement shall become
final and
7
<PAGE>
binding on Shareholders and Purchaser (in such instance, the "Final
Closing Statement") unless the Shareholders' Representative gives written
notice to the Purchaser of his disagreement with respect to any matter
contained therein ("Notice of Working Capital Disagreement") within 10 days
after the receipt thereof. A Notice of Working Capital Disagreement shall
not be permitted unless the aggregate amount in dispute exceeds Ten Thousand
Dollars ($10,000). A Notice of Working Capital Disagreement shall specify in
reasonable detail the nature of any disagreement so asserted. For a period
of 30 days after the delivery of the Notice of Working Capital Disagreement,
the Shareholders' Representative and the Purchaser shall attempt to resolve
in writing all of the differences with respect to each matter specified in
the Notice of Working Capital Disagreement, in which case any such resolution
of the Final Working Capital Statement shall be final and binding on the
parties (in such instance, the "Final Closing Statement"). If, at the end of
such 30-day period, the Shareholders' Representative and Purchaser have not
resolved in writing all of the differences with respect to any such matter,
then each unresolved matter ("Disputed Working Capital Matter") shall be
submitted to and reviewed by the accounting firm of Price Waterhouse LLP or,
if such firm is unwilling or unable to act, to another "big six" accounting
firm selected by a panel of three arbitrators in accordance with the rules of
the American Arbitration Association (the "Neutral Accountant"). The Neutral
Accountant shall consider only the Disputed Working Capital Matters and shall
act promptly to resolve in writing all Disputed Working Capital Matters, and
its decisions with respect to the Disputed Working Capital Matters shall be
final and binding on each of the Shareholders and Purchaser; provided that no
such resolution of the Disputed Working Capital Matters shall require payment
of an amount greater than the highest amount or less than the lowest amount
suggested for such resolution by either the Shareholders' Representative or
the Purchaser. The Neutral Accountant shall notify the Shareholders and the
Purchaser of its resolution of the Disputed Working Capital Matters and shall
prepare a revised Working Capital Statement reflecting the resolution of all
Disputed Working Capital Matters promptly after such resolution (in such
instance the "Final Closing Statement") and shall deliver it to Purchaser and
Shareholders' Representative.
(d) Purchaser shall be responsible for and shall pay the fees and
expenses incurred in connection with the Neutral Accountant. Upon payment by
the Purchaser, one-half of such fees of the Neutral Accountant will be a claim
of Purchaser against the Escrow Amount payable first from the Working Capital
Escrow Amount and then from the Indemnification Escrow Amount.
(e) Within 10 days after receipt of the Final Closing Statement:
(i) if the Working Capital as set forth in the Final Closing
Statement is less than the Estimated Working Capital, the Merger
Consideration payable to Shareholders shall be adjusted by the difference
(based on the MW Common Stock Valuation) by the Shareholders'
Representative giving instructions to the Escrow Agent to distribute to
Purchaser the MW Common Stock representing such adjustment, first from the
Working Capital Escrow Amount and, to the extent there is not a sufficient
amount in the Working Capital Escrow Amount, then from the Indemnification
Escrow Amount.
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<PAGE>
(ii) If the Working Capital as set forth in the Final Closing
Statement is greater than the Estimated Working Capital, Purchaser, subject
to the provisions of Section 1.6(d), shall issue additional MW Common Stock
(based on the MW Common Stock Valuation) as additional Merger Consideration
to each Shareholder surrendering Certificate(s) after the Effective Time,
the Pro Rata Share of the difference for each share represented by such
Certificate(s).
1.8 ADDITIONAL POST-CLOSING ADJUSTMENTS.
(a) If Purchaser reasonably determines, within 90 days of the
Closing Date, in accordance with GAAP and consistent with the Company's past
practices and historical turnover rates, that the allowance for obsolete or
unsaleable items in the raw materials, work-in-progress and finished goods
inventory, as reflected in the Working Capital included in the Final Closing
Statement, was insufficient based upon facts known at the date of such
subsequent determination, the Purchaser shall provide the Shareholders'
Representative with written notice thereof. The Shareholders' Representative
shall have 10 days after receipt of Purchaser's notice to give written notice
to the Purchaser of his disagreement ("Notice of Inventory Disagreement").
If a Notice of Inventory Disagreement is issued by Shareholders'
Representative, it shall specify in reasonable detail the nature of any
disagreement so asserted. For a period of 30 days after the delivery of such
Notice of Inventory Disagreement, the Shareholders' Representative and the
Purchaser shall attempt to resolve in writing all of the differences with
respect to each matter specified in the Notice of Inventory Disagreement, in
which case any such resolution of such matters shall be final and binding on
the parties. If, at the end of such 30-day period, the Shareholders'
Representative and Purchaser have not resolved in writing all of the
differences with respect to any such matter, then each unresolved matter
("Disputed Inventory Matter") shall be submitted to and reviewed by the
Neutral Accountant. The Neutral Accountant shall consider only the Disputed
Inventory Matters and shall act promptly to resolve in writing all Disputed
Inventory Matters, and its decisions with respect to the Disputed Inventory
Matters shall be final and binding on each of the Shareholders and Purchaser;
provided that no such resolution of the Disputed Inventory Matters shall
require payment of an amount greater than the highest amount or less than the
lowest amount suggested for such resolution by either the Shareholders'
Representative or the Purchaser. The Neutral Accountant shall notify the
Shareholders and the Purchaser of its resolution of the Disputed Inventory
Matters and shall deliver written confirmation of same to Purchaser and
Shareholders' Representative. If Shareholders' Representative does not issue
a Notice of Inventory Disagreement or upon the resolution of the Disputed
Inventory Matters by the Neutral Accountant, the Purchaser, at Shareholders'
Representative's written instructions, shall sell such obsolete and/or
unsaleable inventory. The Merger Consideration payable to Shareholders shall
be adjusted by the difference (based on the MW Common Stock Valuation) by an
amount equivalent to the additional payment, if any, that would have been
payable by the Shareholders to the Purchaser pursuant 1.7(e)(i) on the basis
of the difference between the allowance for obsolete or unsaleable items as
restated pursuant to this Section 1.8(a) and as originally stated at in the
Final Closing Statement, less the aggregate proceeds from the sale of said
obsolete and/or unsaleable inventory through the Shareholders' Representative
giving instructions to the Escrow Agent to distribute to Purchaser the MW
Common Stock representing such adjustment, first from the
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<PAGE>
Working Capital Escrow Amount and, to the extent there is not a sufficient
amount in the Working Capital Escrow Amount, then from the Indemnification
Escrow Amount.
(b) If the gross amount collected by Purchaser upon the accounts
receivable reflected in the Working Capital included in the Final Closing
Statement ("Accounts Receivable") during the 120 days after the Closing Date
is less than the book value of such Accounts Receivable after giving effect
to the allowance for doubtful accounts as reflected on the Final Closing
Statement, Shareholders shall pay to Purchaser, by giving instructions to the
Escrow Agent to distribute to Purchaser MW Common Stock (based on the MW
Common Stock Valuation) first from the Working Capital Escrow Amount and, to
the extent there is not a sufficient amount in the Working Capital Escrow
Amount, then from the Indemnification Escrow Amount, on the basis of the
difference between the amount collected and the book value of such Accounts
Receivable after giving effect to the allowance for doubtful accounts as
reflected as originally stated at in the Final Closing Statement; provided,
however, that during the aforementioned 120-day period Purchaser shall not
write off or settle any uncollected Accounts Receivable or retain a collector
to collect any such Accounts Receivable without written consent of
Shareholders' Representative. Subsequent to such 120 days after the Closing
Date, Purchaser shall continue to use reasonable efforts to collect any
Accounts Receivable not collected during the 120 days after the Closing Date,
and the net amounts of such Accounts Receivable collected by Purchaser, after
accounting for third party collection costs, shall be remitted to the
Shareholders, other than Dissenting Shareholders, in MW Common Stock (based
on the MW Common Stock Valuation) after the payment by Shareholders of the
amounts due Purchaser under this Section 1.8(b). On or prior to the 15th day
of each month, Purchaser shall deliver to Shareholders' Representative an
Accounts Receivable report identifying the gross collections made by
Purchaser through and including the end of the preceding calendar month. Any
amounts collected by Purchaser shall be applied against the longest
outstanding receivables except as to any receivable as to which the Person
paying such amount has given Purchaser notice of a dispute.
(c) Upon the later of the 135th day after the Closing Date, or the
10th day after receipt by both Shareholders and Purchaser of the Final Closing
Statement, or the payment by Shareholders to Purchaser of any amount claimed by
Purchaser pursuant to Section 1.7 or this Section 1.8, any remaining Working
Capital Escrow Amount shall be distributed from the Working Capital Escrow
Account to Shareholders surrendering Certificates pursuant to Section 1.6 as
directed by the Shareholders' Representative.
1.9 TRANSFER TAXES. Any transfer taxes or stamp duties, or other similar
taxes, fees, charges or expenses (collectively "Transfer Taxes") imposed on the
Company shall be divided equally between the Purchaser and the Company, and the
total accrued and unpaid amount thereof allocated to the Company shall be
treated as a Company Expense. Any Transfer Taxes imposed on the Shareholders
shall be paid by the Shareholders.
1.10 MW COMMON STOCK.
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(a) The MW Common Stock to be delivered to Shareholders will not be
registered under federal or state securities laws, but rather, issued pursuant
to an exemption therefrom. As a result, Shareholders acknowledge and agree that
such MW Common Stock is "restricted" stock as such term is defined under such
securities laws and cannot be sold, pledged or transferred unless subsequently
registered or unless an exemption is available allowing its resale.
(b) Parent, at its expense, shall file a shelf registration statement
(the "Registration Statement") as soon as reasonably practicable after the
Closing Date, pursuant to Rule 415 under the Securities Act of 1933, as amended
(the "Securities Act") with respect to all the MW Common Stock issued by Parent
in connection with consummating the transactions contemplated by this Agreement
(including, without limitation, those shares deposited in escrow under the
Escrow Agreement) (collectively, "Registrable Shares"). Parent shall use its
best efforts to: (i) have the Registration Statement declared effective on or
before July 15, 1998; and (ii) keep the Registration Statement continuously
effective and to supplement and amend it as required by the Securities Act and
the regulations thereunder from the date the Registration Statement is declared
effective (the "Initial Effective Date") until the earliest to occur of the
following events: (A) such time as Shareholders holding Registrable Shares may
transfer the MW Common Stock pursuant to the safe harbor provisions of Rule 144
under the Securities Act without having to comply with any volume limitations
under such rule; (B) notification to Parent that all Registrable Shares have
been sold for the accounts of the participating Shareholders; or (C) a request
by all participating Shareholders having unsold Registrable Shares that the
Registration Statement be terminated (the period between the Initial Effective
Date and earliest to occur of such events is hereinafter referred to as the
"Registration Statement Period"). If the Registration Statement ceases to be
effective at any time during the Registration Statement Period, Parent, at its
expense, shall within thirty days of such cessation cause to be filed an
additional shelf registration statement covering the unsold balance of the
Registrable Shares and shall use its best efforts to have such registration
statement declared effective as soon as practicable thereafter and keep such
registration statement effective until the end of the Registration Statement
Period.
(c) Parent agrees to furnish each participating Shareholder with such
number of conformed copies of any registration statement and prospectus included
therein (including each preliminary prospectus) covering the Registrable Shares
as each such Shareholder reasonably may request in order to facilitate the
public sale of the Registrable Shares covered by such registration statement.
(d) All expenses incurred by Parent, Purchaser and the Shareholders
in connection with any registration under this Agreement shall be paid by Parent
and Purchaser, including without limitation all registration and filing fees,
printing expense, fees and disbursements of counsel and independent public
accountants for the Parent and the Purchaser, fees and expenses (including
counsel fees) incurred in connection with complying with state securities or
"blue sky" laws, fees of securities exchanges or the National Association of
Securities Dealers, Inc., fees of transfer agents and registrars, but excluding
any selling commissions and transfer taxes applicable to the sale of the MW
Common Stock and any legal fees and expenses of counsel or other advisers and
agents of the selling Shareholders.
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(e) To ensure that the Shareholders are able to benefit from the
Registration Statement and to make available the benefits of certain rules and
regulations of the Securities and Exchange Commission ("SEC") that may permit
the offer and/or sale of MW Common Stock to the public without registration by
the Shareholders, Parent agrees to:
(i) supplement and amend the Registration Statement in a timely
manner if required by the registration form utilized by the Parent, or by
the instructions applicable to such form or by the Securities Act or the
rules and regulations thereunder or if reasonably requested by a majority
in aggregate amount of the holders of Registrable Shares and to furnish the
Shareholders' Representative with copies of any such amendment or
supplement at least twenty-four hours prior to its being filed with the
SEC;
(ii) file with the SEC in a timely manner all reports and other
documents required of Parent under the Securities Act and the Securities
Exchange Act of 1934, as amended ("Exchange Act");
(iii) make and keep public information regarding Parent
available (as those terms are understood and defined in Rule 144) at all
times during the Registration Period or such longer period ending on the
date upon which the Shareholders no longer need to rely on Rule 144; and
(iv) so long as any Shareholder owns any MW Common Stock,
furnish to each Shareholder upon written request a written statement by
Parent that all reports and filings that are necessary to be filed by
Parent for any Shareholder to avail himself or herself of Rule 144 or 145
have been filed, and provide a copy of the most recent annual or quarterly
report of Parent, and any other reports and documents as a Shareholder may
reasonably request in availing himself or herself of any rule or regulation
of the SEC.
(f) Parent and Mail-Well, jointly and severally, shall indemnify the
Shareholders (and any Person who is an Affiliate of such Shareholders within the
meaning of the Securities Act) whose shares of MW Common Stock are included in
any registration statement as Registrable Shares against all expenses, claims,
losses, damages, or liabilities, including, without limitation, reasonable
attorneys' fees and court costs (collectively, a "Liability"), to which the
Shareholder may become subject under the Securities Act, the Exchange Act or any
rule or regulation under either of them or other statute or at common law,
arising out of or based upon: (i) any untrue statement or alleged untrue
statement of any material fact contained in any registration statement, any
preliminary prospectus or final prospectus contained therein, or any amendment
or supplement, and any document incorporated by reference therein (a
"Registration Document"); or (ii) any omission or alleged omission to state a
material fact required to be stated in any Registration Document or necessary in
order to make any statement in any Registration Document not misleading.
Notwithstanding the foregoing, neither Parent nor Mail-Well will be liable to a
Shareholder to the extent that any liability arises out of or is based upon any
untrue statement or omission made in any Registration Document in reliance upon
and in conformity with written information furnished to Parent or Mail-Well for
incorporation in any such
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Registration Document by or on behalf of such Shareholder. Parent and
Mail-Well's joint and several indemnification obligation will remain in full
force and effect regardless of any investigation made by or on behalf of a
Shareholder and will survive transfer of the Registrable Shares by the
Shareholders.
1.11 INVESTMENT LETTER. Pursuant to Section 8.9 hereof, and in
acknowledgment of the restrictions on transfer of the MW Common Stock
(i) described in this Section 1.10 above; and (ii) if applicable, required by
the pooling of interests accounting method contemplated herein, each Shareholder
shall deliver to Purchaser prior to Closing an executed letter in the form of
Exhibit C hereto.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND CONTROLLING SHAREHOLDERS
The Schedules attached to this Agreement are sometimes referred to herein
as the "Disclosure Schedules." The Company and Controlling Shareholders
represent and warrant to Purchaser that except as otherwise disclosed in the
Disclosure Schedules the following statements are true as of the date of this
Agreement and as of the Closing Date:
2.1 ORGANIZATION, STANDING, CORPORATE AUTHORIZATION, AND ENFORCEABILITY.
(a) The Company is a corporation duly organized, validly existing and
in good standing under the laws of the jurisdiction of its incorporation and has
all requisite corporate power and authority to own, lease and operate its
properties and to carry on its business as now being conducted. The Company is
duly qualified or licensed to do business and is in good standing in each
jurisdiction in which the property owned, leased or operated by it or the nature
of the business conducted by it makes such qualification necessary, except where
the failure to so qualify would not have a Material Adverse Effect on the
financial condition or business of the Company.
(b) This Agreement and all other agreements, documents and
instruments executed or to be executed by the Company in connection herewith
(the "Related Agreements") constitute the valid and legally binding obligations
of the Company and are enforceable in accordance with their terms, except as
such enforceability may be limited by equitable principles and by applicable
bankruptcy, insolvency, reorganization, arrangement, moratorium or similar laws
relating to or affecting the rights of creditors generally. The Company has the
requisite corporate power and authority to enter into this Agreement and the
Related Agreements.
(c) The execution and delivery of this Agreement, the Related
Agreements, and all other documents and instruments executed or to be executed
by the Company pursuant to this Agreement, and the consummation of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary corporate and other action on the part of the Company, subject to
obtaining the requisite approvals from Shareholders in accordance with
applicable law.
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This Agreement and the Related Agreements have been or will
have been, at the time of their respective executions and deliveries, duly
executed and delivered by a duly authorized officer of the Company.
(d) Except as set forth in SCHEDULE 2.1(d), the Company does not
own, directly or indirectly, any capital stock or other equity interest in any
Person or have any direct or indirect equity or ownership interest in any
Person, and the Company is not subject to any obligation or requirement to
provide funds for or to make any investment (in the form of a loan, capital
contribution or otherwise) to or in any Person.
2.2 CAPITALIZATION. As of the date of this Agreement, the capitalization
of the Company (including all capital stock authorized, issued and outstanding)
is as set forth on SCHEDULE 2.2. All of the outstanding shares of the Company's
Common Stock are owned by the Shareholders as set forth on SCHEDULE 2.2. The
Company has no authorized or outstanding bonds, debentures, notes or other
indebtedness the holders of which have the right to vote (or convertible or
exchangeable into or exercisable for securities having the right to vote) with
the Shareholders on any matter ("Voting Debt"). Except as contemplated by this
Agreement, after the Effective Time, the Surviving Corporation will have no
obligation to issue, transfer or sell any shares of MW Common Stock as a result
of any obligation existing, or created by the Company, at or prior to the
Effective Time, including pursuant to any stock incentive plan or warrant. All
prior issuances of securities by the Company and all prior repurchases,
redemptions or exchanges affecting the outstanding securities of the Company
have complied with all applicable Legal Requirements (as defined below)
(including federal and state securities laws), preemptive rights and contractual
restrictions. All issued and outstanding shares of capital stock of the Company
have been duly authorized and validly issued and are fully paid and
nonassessable. Except as disclosed on SCHEDULE 2.2, the Company does not have
shares of its capital stock authorized, issued or outstanding and there are no
outstanding convertible or exchangeable securities, subscriptions, calls,
options, warrants, rights (contractual or arising by operation of law,
including, without limitation, rights of first refusal and preemptive rights),
or other agreements or commitments of any character to which the Company is a
party or by which it is bound, relating to the issuance, purchase, other
acquisition or voting of any shares of the capital stock of, or other equity or
ownership interest (collectively, "Equity Rights") in the Company. Except as
disclosed on SCHEDULE 2.2 and on SCHEDULE 2.11, there are no agreements,
arrangements or commitments of any character (contingent or otherwise) pursuant
to which any person or entity is or may be entitled to receive any payment based
on the revenues or earnings, or calculated in accordance therewith, of the
Company. Except as set forth in SCHEDULE 2.2, there are no voting trusts,
proxies or other agreements or understandings to which the Company or
Shareholders is a party or by which the Company or Shareholders is bound with
respect to the voting of any shares of capital stock or other Equity Interests
of the Company. Except as set forth on Schedule 2.2, any such voting trusts
will be terminated as of the Closing.
For purposes of this Agreement, the term "Legal Requirement" shall mean any
federal, state or local law, statute, legislation, ordinance, code, rule,
regulation, decree, award, order, permit, franchise, consent or authorization
of, any federal, state, local or other governmental body or agency, department,
commission, bureau, board, council, court, magistrate, panel or
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instrumentality of the United States, any political subdivision thereof or
any state or local governmental authority in effect as of the date hereof.
2.3 ARTICLES OF INCORPORATION AND BYLAWS; CERTAIN RECORDS. Copies of the
Articles of Incorporation, Bylaws, minute books and stock records of the Company
have been made available to Purchasers, and each such copy is true, correct and
complete as amended to date. All material records of any type and description
in whatever form or medium that presently exist and that relate to the business
or properties of the Company and which in the ordinary course of business the
Company would normally retain are in the possession or control of the Company
and are located at the offices of the Company or of its counsel, independent
auditors, consultants, or other advisors, and the Surviving Corporation will
have the right to possession of all such records upon the consummation of the
transactions contemplated by this Agreement.
2.4 COMPLIANCE WITH OTHER INSTRUMENTS AND LAWS. Except as set forth in
SCHEDULE 2.4, the execution and delivery of this Agreement and the Related
Agreements and the consummation of the transactions contemplated hereby and
thereby will not conflict with or result in any violation of or default under
any provision of the Articles of Incorporation or Bylaws of the Company or any
material violation of, or default under, any mortgage, indenture, trust, lease,
partnership or other agreement or other instrument, permit, concession, grant,
franchise, license, judgment, order, decree, or Legal Requirement applicable to
the Company or any Shareholder or any of the properties of the Company, nor will
they result in the creation or imposition of any lien, security interest,
charge, claim or other encumbrance of any nature whatsoever on any of the
properties or assets of the Company or the Common Stock, nor will they prevent
or materially delay the consummation of the transactions contemplated hereby.
2.5 GOVERNMENTAL AUTHORIZATIONS; CONSENTS. Except as set forth on
SCHEDULE 2.5, no consents, licenses, approvals or authorizations of, or
registrations or declarations with, any governmental authority, agency, bureau
or commission, or any third party which have not already been obtained, are
required to be obtained or made by the Company or Shareholders in connection
with the execution, delivery, performance, validity and enforceability of this
Agreement or any Related Agreement or the sale or transfer of the Common Stock
and will not prevent or materially delay the consummation of the transactions
contemplated hereby other than and except for consents, licenses, approvals,
authorizations or registrations which are not material.
2.6 LITIGATION. No action, suit, proceeding or governmental investigation
is pending or, to the Knowledge (as defined below) of the Company and the
Controlling Shareholders, threatened, at law or in equity, which seeks to
question, delay or prevent, or could have the effect of delaying or preventing,
the consummation of all or any portion of the transactions contemplated hereby.
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2.7 FINANCIAL STATEMENTS; CONDUCT OF THE BUSINESS; NO UNDISCLOSED
LIABILITIES. Except as set forth on SCHEDULE 2.7:
(a) The Company has delivered to Purchaser (i) the audited balance
sheets of the Company as of December 31, 1997, 1996 and 1995 and the related
audited statements of income, retained earnings and cash flows for the fiscal
years then ended, accompanied in each case by an opinion thereon of the
independent certified public accountant of the Company (such financial
statements, including the notes thereto, hereinafter being referred to as the
"Annual Financial Statements"), and (ii) the unaudited balance sheet of the
Company as of March 31, 1998, and the related unaudited statements of income for
the three months ended March 31, 1998 (the "Interim Financial Statements").
(The Annual Financial Statements and the Interim Financial Statements including
the notes thereto together hereinafter being referred to as the "Financial
Statements"). All of the Financial Statements have been prepared in accordance
with GAAP (subject to the modifications and exceptions set forth in SCHEDULE 2.7
and, in the case of Interim Financial Statements, to end of year audit
adjustments and preparation of footnotes) consistently applied for all relevant
periods (except as indicated therein) and present fairly in all material
respects the financial position of the Company as of the dates thereof and the
results of its operations for the periods then ended.
(b) The Company does not have any debts, obligations, guaranties of
the obligations of others or liabilities except: (i) debts, obligations,
guaranties and liabilities to the extent reflected or reserved against in the
Financial Statements, (ii) debts, obligations, guaranties and liabilities
incurred or entered into subsequent to March 31, 1998, in the ordinary course of
business and otherwise not in contravention of this Agreement, and (iii) debts,
obligations and liabilities relating to this Agreement and the Related
Agreements and instruments being executed and delivered in connection herewith
and the transactions referred to herein and therein (including obligations to
pay legal fees, financial advisory fees, bank fees, accounting fees and other
amounts in connection therewith) so long as such obligations are included in
determining Company Expenses.
2.8 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except for (i) matters set
forth on SCHEDULE 2.8, (ii) matters disclosed in the Annual Financial Statements
or (iii) as contemplated by this Agreement, the Company has not, since December
31, 1997, except as otherwise specified herein:
(a) undergone any change in its condition (financial or otherwise),
properties, assets, liabilities, business or operations, except for changes in
the ordinary course of business which have not either individually or in the
aggregate had a Material Adverse Effect;
(b) except as set forth on SCHEDULE 2.8, changed any of its methods
of accounting or accounting practices or classifications of assets or
liabilities, or failed to maintain its books of account in the usual, regular
and ordinary manner in accordance with GAAP unless required by regulation or
GAAP;
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(c) modified the material terms of, or canceled or terminated, any
Material Contract (as defined below) other than in the ordinary course of
business;
(d) terminated, discharged or received any written notice regarding
the resignation, discharge or termination of any officer other than in the
ordinary course of business or as contemplated by this Agreement;
(e) since December 31, 1995, established or adopted any Benefit Plan
(as defined below), or increased the amount of the wages, bonus, salary,
commissions, fringe benefits or other compensation or remuneration payable to,
any of its directors, officers or employees, except in any case in the ordinary
course of business in accordance with past practice and, in the case of the
senior management employees and Shareholders (listed on SCHEDULE 2.8(e)), in an
amount not exceeding 3% in any one case or a payment of bonuses in an aggregate
amount of $25,000;
(f) since December 31, 1995, declared, set aside, made or paid any
dividend or other distribution in respect of its capital stock or purchased or
redeemed, directly or indirectly, any shares of its capital stock, or split up,
combined, reclassified, redeemed, repurchased or otherwise reacquired any of its
capital stock other than distributions to shareholders to pay income taxes and
charged against their respective Accumulated Adjustments Account, if applicable;
(g) since December 31, 1995, issued or sold any shares of its capital
stock of any class or any subscriptions, options, warrants, calls or other
rights to purchase directly or indirectly any such shares or any securities
directly or indirectly convertible into or exchangeable for such shares or made
any other change in its capital structure;
(h) since December 31, 1995, except for borrowings under its normal
line of credit and Debt described in SCHEDULE 2.8(h), incurred any direct or
contingent liability for borrowed money or guaranteed the monetary obligations
of any other person or entity other than indebtedness to be included in the Debt
to be discharged at Closing, or made any monetary investment in, advance to or
loan to any person or entity other than in the ordinary course of business;
(i) mortgaged, pledged or subjected to any material lien, lease,
security interest or other charge or encumbrance any of its properties or
assets, tangible or intangible, except those securing Debt to be discharged at
Closing and except for Permitted Liens (as defined below);
(j) made any material change in its practices, operations or policies
with respect to the method for selling goods or services, or other method for
accounting for sales, the conduct of accounts receivable collection or accounts
payable payment activities or the maintenance of inventory levels other than
changes in the ordinary course of business;
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(k) since December 31, 1995, merged or consolidated with or into
any other entity or initiated or participated in negotiations with any person
or entity with respect to any of the foregoing;
(l) implemented or adopted any change in its tax methods, principles
or elections;
(m) since December 31, 1995, acquired or disposed of any material
assets or properties or made any capital improvement other than in the ordinary
course of business; or
(n) suffered any damage, destruction or loss (whether or not covered
by insurance) which has had or could reasonably be expected to have a Material
Adverse Effect on the Company.
2.9 TITLE TO PROPERTY, ABSENCE OF LIENS AND ENCUMBRANCES.
(a) The Company has good title to its owned material assets,
including the owned tangible assets reflected on the balance sheet included in
the Company's most recent Financial Statements, other than assets disposed of or
used after the date thereof in the ordinary course of business for fair value.
Except as disclosed in SCHEDULE 2.9(a), the tangible assets owned by the Company
are owned free and clear, of all liens, mortgages, pledges, charges, security
interests or encumbrances, except for Permitted Liens (as defined below). The
Company owns, leases or licenses, and has adequate rights to use all material
real and personal property and other material assets necessary to conduct its
business as a going concern on a basis consistent with past practices. To the
Knowledge of the Company, the assets of the Company necessary for the operation
of its business consistent with past practices are in operating condition and
repair (subject to normal wear and tear). Neither the whole nor any part of the
real property used in the Business have been condemned by any public authority,
nor, to the Knowledge of the Company and the Controlling Shareholders, is any
such condemnation or taking threatened or contemplated. There exists free and
uninterrupted egress and ingress over a public roadway to all operating
facilities.
For the purposes of this Agreement, the term "Permitted Liens" shall
mean (i) liens for current taxes, assessments or governmental charges not yet
due, (ii) deposits or pledges to secure bids, tenders, contracts, leases,
statutory obligations, surety and appeal bonds, and other obligations of like
nature arising in the ordinary course of the Company's business, (iii) liens
arising out of deposits in connection with workers' compensation, unemployment
insurance, old age pensions or other social security or retirement benefits
legislation, (iv) liens imposed by law, such as mechanics', workers',
materialmen's, carriers' or other like liens arising in the ordinary course of
the Company's business which secure the payment of obligations which are not
past due or which are being diligently contested in good faith by appropriate
proceedings and for which adequate reserves in accordance with GAAP are
maintained on the Financial Statements, (v) imperfections of title, liens and
encumbrances which do not materially and adversely affect the use, value or
marketability of the property affected thereby, and (vi) the imperfections of
title,
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liens, mortgages, pledges, charges, security interests and encumbrances set
forth on SCHEDULE 2.9(a).
(b) The Company validly holds the real property described on SCHEDULE
2.9(b) (the "Real Property") free and clear of all liens, encumbrances,
mortgages or security interests, except for Permitted Liens.
(c) Except as set forth on SCHEDULE 2.9(c), the Company is not a
party to any leases of real property. The Company validly holds the leaseholds
created by the leases (true, complete and correct copies of which have been
provided to Purchaser) as described on SCHEDULE 2.9(c) (the "Leased Property"),
and such leases are enforceable by the Company as the lessee thereunder in
accordance with their terms.
(d) The Company is not a party to any agreement granting any third
party the right or an option to purchase or lease all or any portion of the Real
Property, Leased Property or any personal property of the Company.
(e) There is not pending, nor has the Company received any written
notice of, (i) any Claim or proceeding asserting or seeking to establish a title
interest in the Real Property or Leased Property, or any Claim of default under
any of the leases under which leaseholds have been created ("Title Notice"), or
(ii) the existence of any facts or proceedings of which the Company or any of
the Controlling Shareholders has Knowledge which may result in the issuance of
such a Title Notice.
2.10 FULL AUTHORITY; COMPLIANCE WITH LAWS. Except as set forth on SCHEDULE
2.10, the Company is in compliance in all material respects with all applicable
Legal Requirements. Set forth on SCHEDULE 2.10 is a list of any and all material
permits, licenses, consents, orders, approvals, franchises, certificates or
other authorizations under any applicable Legal Requirement (collectively the
"Permits"), issued to the Company in connection with the ownership, operation
and maintenance of its business or assets. The Company has obtained and
maintained all Permits. Each of the Permits is in full force and effect, and
the Company is in compliance in all material respects with all the provisions of
such Permits.
2.11 BENEFIT PLANS.
(a) Except as set forth in SCHEDULE 2.11, the Company does not
maintain, sponsor, participate in or contribute to, or is required to contribute
to, directly or indirectly, or has any obligation under:
(i) Any employee benefit plan, employee pension benefit plan,
employee welfare benefit plan (including any medical, dental, disability,
accident or sickness, salary continuation or life insurance plan or
arrangement), or multiemployer plan, all as defined in the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), regardless of
whether or not a plan is exempt from some or all of the otherwise
applicable requirements of ERISA; or
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(ii) Except as disclosed on the Financial Statements, any
material bonus, commission, deferred compensation, incentive compensation,
restricted stock, stock purchase, stock option, stock appreciation right,
debenture, supplemental pension, profit sharing, royalty pool, vacation,
sick leave, severance or termination pay policies, supplemental
unemployment benefits plan, loan guarantee, relocation assistance, employee
loan or other extensions of credit, or other similar material plan,
program, agreement, policy, commitment, arrangement or benefit currently in
effect under which current or former employees or their dependents,
beneficiaries, representatives or estates are currently or will in the
future be entitled to benefits.
(b) With respect to each plan, program, agreement, policy,
commitment, arrangement or benefit described on SCHEDULE 2.11 (a "Benefit
Plan"), the Company has furnished to the Purchaser true, correct and complete
copies of such Benefit Plans that are in written form, including amendments, if
applicable, summary plan descriptions, if applicable, the Internal Revenue
Service determination letter, if applicable, and the two most recent Forms 5500,
5500-C or 5500-R, as applicable, and has made available to the Purchaser the
most recent actuarial reports of or regarding such Benefit Plan. As to each
Benefit Plan not reduced to writing, the Company has made available to the
Purchaser a description of all material elements of such plan.
(c) Except as set forth in SCHEDULE 2.11:
(i) Each Benefit Plan has been operated and administered in all
material respects in accordance with its terms and applicable laws,
including but not limited to ERISA and the Internal Revenue Code of 1986 as
amended (the "Code") (as defined below). Each Benefit Plan that is intended
to be qualified under Section 401(a) of the Code either has received from
the Internal Revenue Service, or timely applied for, a determination letter
on such Benefit Plan's qualified status.
(ii) Neither the Company nor any other party in interest (within
the meaning of ERISA) has engaged in any non-exempt prohibited transaction
with respect to any Benefit Plan under ERISA, the Code, and there is no
pending assertion of the occurrence of any such transaction.
(iii) All contributions required under applicable law or the
terms of any Benefit Plan, collective bargaining agreement or other
agreement relating to a Benefit Plan to be paid by the Company for all
periods prior to the Closing Date have been or will have been completely
and timely made to each Benefit Plan when due, and the Company has
established adequate reserves on its books (which will be treated as a
current liability for purposes of determining Working Capital at Closing)
to meet liabilities for contributions accrued but that have not been made
because they are not yet due and payable.
(iv) To the Knowledge of the Company and the Controlling
Shareholders, there is no current or pending investigation or audit by the
Internal Revenue Service, the Department of Labor or any other governmental
entity of any Benefit Plan,
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nor has the Company received notification from any such governmental
entity of such a pending audit or investigation, and there are no
actions, suits or claims pending (other than routine claims for
benefits) or threatened, with respect to any Benefit Plan or against the
assets of any such Benefit Plan.
(v) No Benefit Plan is or ever has been a plan subject to Title
IV of ERISA, Part 3 of Subtitle B of Title I of ERISA or Section 412 of the
Code ("Pension Plan"), or is or ever has been a multiemployer plan as
defined in Section 3(37) of ERISA or Section 414(f) of the Code
("Multiemployer Plans"); neither the Company nor any other party in
interest has incurred any liability to the Pension Benefit Guaranty
Corporation ("PBGC") with respect to any Pension Plan, except for required
premium payments, which payments have been made when due; no accumulated
funding deficiency (within the meaning of Section 412 of the Code or
Section 302 of ERISA) or reportable event (as defined in Section 4043 of
ERISA) has occurred with respect to any Pension Plan; no event has occurred
in connection with any Pension Plan which could subject any Company or any
Pension Plan, or Purchaser, its Affiliates or any of their respective
benefit plans, to liability under Section 4062, 4063 or 4064 of ERISA, and,
no event has occurred which might give rise to any liability of the Company
or any Pension Plan, or Purchaser, its Affiliates or any of their
respective benefit plans, to the PBGC under Title IV of ERISA or which
could reasonably be anticipated to result in any claims being made against
the Company or any Pension Plan; and the Company has not incurred nor, as a
result of the transactions contemplated by this Agreement, will incur any
withdrawal liability (including any contingent or secondary withdrawal
liability) within the meaning of Section 4201 and 4204 of ERISA to any
Multiemployer Plan; upon a complete withdrawal or a partial withdrawal (as
those terms are defined in Section 4203 and 4205, respectively, of ERISA)
from a Multiemployer Plan occurring on or before the close of the most
recent fiscal year of each such Multiemployer Plan ended prior to the
Closing Date, to the Knowledge of the Company and Controlling Shareholders,
the Company would not have been subject to withdrawal liability under
Title IV, Subtitle E, Part 1 of ERISA and, there has been no material
change in the financial condition of any Multiemployer Plan that would
result in the imposition of such liability due to such complete or partial
withdrawal on or before the Closing Date.
(vi) The Company have complied in all material respects with
all notice and continuation coverage requirements applicable to group
health plans under the Consolidated Omnibus Budget Reconciliation Act of
1985, as amended ("COBRA"), with respect to all medical and health
benefits provided by the Company that are subject to COBRA.
(vii) No Benefit Plan amendments have been adopted nor will
any such amendments be adopted prior to the Closing Date except as may be
necessary for compliance purposes with the Code or ERISA and there is no
arrangement, commitment or understanding to create any additional plan
which would constitute a Benefit Plan or increase the rate of benefit
accrual or contribution requirement under any of the Benefit Plans or
modify, change or terminate any existing Benefit Plan.
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(viii) The Company is not a member of a "controlled group" of
organizations (as defined in Sections 414(b), (c), (m) or (o) of the Code)
which sponsors or maintains any employee benefit plan within the meaning of
Section 3(3) of ERISA which under Title IV of ERISA or any section of the
Code or ERISA would subject Purchaser or Company or any of their respective
employee benefit plans or the fiduciaries thereof or their respective
assets to any taxes, encumbrances, penalties or other liabilities.
2.12 CLAIMS. There are no Claims against, or to the Knowledge of the
Controlling Shareholders or the Company, threatened against, the Company or its
properties, at law or in equity or before any court, governmental department,
commission, board, agency, authority, instrumentality, domestic or foreign
which, if adversely determined, could be reasonably expected to have,
individually or in the aggregate, a Material Adverse Effect on the Company
before or after the Closing Date. The Company is not subject to any judgment,
stipulation, order or decree arising from any action, suit, proceeding or any
investigation of which it has Knowledge which could be reasonably expected to
have, individually or in the aggregate, a Material Adverse Effect on the
business or financial condition of the Company before or after the Closing Date.
As used in this Agreement, "Claim" means any and all claims, causes of
action, arbitrations, audits, hearings, investigations of which the Company has
knowledge, proceedings, complaints, litigation or suits, whether in contract,
tort or otherwise, whether statutory or common law, whether civil, criminal,
administrative, investigative, formal or informal, fixed or contingent.
2.13 TAXES.
(a) For purposes of this Agreement, "Taxes" in the plural and
"Tax" in the singular shall refer to any and all taxes, charges, fees,
levies, or other assessments of whatever kind or nature, including, but not
limited to, any federal, state, local or foreign net income, gross income,
gross receipts, unitary, license, payroll, unemployment, excise, severance,
stamp, occupation, premium, windfall profits, environmental (including, but
not limited to, taxes under section 59A of the Code), occupational, leasing,
lease, fuel, customs, duties, capital stock, franchise, profits, withholding,
Social Security, unemployment, disability, ad valorem, real property,
personal property (tangible and intangible), sales, use, transfer,
registration, value added, alternative or minimum, estimated, or any other
kind of tax whatsoever, including the recapture of any tax items, and
including any interest, addition, penalty or other associated charge thereto,
whether disputed or not.
(b) Except as set forth on SCHEDULE 2.13
(i) The Company has filed or will file or cause to be
filed, within the applicable period prescribed by law, (i) all federal,
state, local, foreign or other material Tax Returns, as that term is
defined below, required by such law to be filed by the Company for all
taxable periods ending on or prior to the Closing Date or (ii) valid
extensions of the time for filing such Tax Returns. For purposes of
this Agreement, "Tax
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Returns" shall mean any returns, reports or statements with respect to
Taxes which are required to be filed with any taxing authority.
(ii) The Company has not obtained nor will it obtain prior
to the Closing Date any extensions of time in which to file any Tax
Returns for any taxable period ending on or prior to the Closing Date.
(iii) The Company has paid, within the time and in the manner
prescribed by law, all Taxes shown as due on all such Tax Returns and,
with respect to all Tax Returns which the Company has not yet filed, but
will file prior to the Closing Date, shall pay, within the time and in
the manner prescribed by law, all Taxes shown as due on such Tax Returns.
(iv) No written notice has been received by the Company from
any Tax authority in any jurisdiction in which the Company has not filed
a Tax Return that the Company is or may be subject to taxation of any
sort in such jurisdiction or otherwise is required to file a Tax Return
in such jurisdiction.
(v) Except for Permitted Liens, there are no Tax liens or
other security interests or encumbrances of any type resulting from Tax
liabilities on any of the assets of the Company.
(vi) There is no dispute, Claim or any other controversy
concerning any material Tax liability of the Company raised or asserted by
any Tax authority in writing.
(vii) No income Tax Returns of the Company for any open tax
year has been audited by any taxing authority. The Company has made
available to Purchaser a correct and complete copy of each federal
income Tax Return, examination report, statement of deficiency, or any
other administrative or judicial assertion, assessment or determination
of federal income Tax liability with respect to the Company for the past
three years.
(viii) The Company has employed a permissible method of Tax
accounting, validly elected for each taxable period ending on or prior to
the Closing Date. The Company has not changed, nor requested to be
permitted to change, any method of Tax accounting.
(ix) The Company has not waived any statute of limitations
with respect to any Taxes or has agreed to any extension of time with
respect to a Tax assessment or deficiency, except for such waivers or
extensions which, by their terms, have elapsed as of the date of this
Agreement, nor are any requests for such waivers or extensions pending.
(x) The Company (i) has not filed a consent under Section
341(f) of the Code concerning collapsible corporations, (ii) has not
made any payments, is obligated to make any payments, or is a party to
any agreement that will render it (or the payor of
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compensation under the agreement) subject to the provision of section
280G of the Code regarding payments as a result of a change in control,
(iii) has not been a United States real property holding company within
the meaning of section 897(c)(2) of the Code and (iv) is not a party to
any Tax allocation or Tax sharing agreement.
(xi) The unpaid Taxes of the Company, including Taxes
attributable to all periods ending on or prior to the Closing Date which
are not yet due and payable, do not materially exceed the reserve on the
Financial Statements for the Company's tax liability as of the respective
dates of such Financial Statements.
2.14 CONTRACTS. Except as set forth in this Agreement or on SCHEDULE 2.14
(the agreements listed thereon being referred to as the "Material Contracts"),
the Company is not a party to, bound by or obligated under any:
(a) material mortgage, indenture, note or installment obligation or
other instrument or contract for or relating to any borrowing by the Company;
(b) material guaranty by the Company of any obligation (excluding
any endorsement made in the ordinary course of business for collection);
(c) material license agreement;
(d) material lease of real or personal property under which the
Company is a lessor or lessee;
(e) material agreement for the purchase by the Company of equipment;
(f) agreement purporting to limit the right of the Company to compete
in any line of business, with any person or other entity or in any geographic
area;
(g) material agreement for the purchase or sale of raw materials,
products or goods or the provision of services at prices that vary from the
prices therefor generally prevailing in customary, arms-length transactions;
(h) material contract with any governmental or quasi-governmental
authority;
(i) material bond, deposit, financial assurance requirement or
insurance coverage individually required to be submitted to customers of the
Company under any sale, lease or service arrangement or to any governmental
authority under any Permit or Legal Requirement;
(j) agreement or instrument relating to the acquisition by the
Company of any entity or all or substantially all of the assets of any person or
entity;
(k) other material agreement, contract or obligation of the Company;
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(l) agreement or commitment relating to the borrowing of money or the
guaranty or indemnity (direct or indirect) in respect of or the granting of
security for any obligation for the borrowing of money, by the Company or any
other person or entity, in excess of, including, without limitation,
guarantees, accommodation collateral, letters of credit, mortgages, deeds of
trust, indentures, loan agreements and credit agreements;
(m) agreement or commitment relating to clean-up or remediation
involving Hazardous Materials (as hereinafter defined);
(n) agreement that creates an encumbrance or any restriction on the
ability of the Company to (i) pay dividends or make similar distributions; (ii)
make loans or advances to any person or entity, or (iii) sell, lease or transfer
any of its properties or assets, except (in each case) for such restrictions or
encumbrances existing under or by reason of (1) applicable Legal Requirements,
(2) customary non-assignment provisions in leases and other contracts entered
into in the ordinary course of business, or (3) any instrument governing the
Debt;
(o) indemnification obligations in favor of any person or entity, and
any escrow agreements related to any indemnification or obligation;
(p) confidentiality, secrecy, screening, development or settlement
agreement pertaining to any Intellectual Property; or
(q) contract with any customer of the Company other than contacts for
the purchase and sale of goods, products and services entered into in the
ordinary course of business.
All of the Material Contracts are legal, valid, binding and in full force and
effect, no default exists thereunder on the part of the Company, and except as
set forth in Schedule 2.14, the consummation of the transactions contemplated by
this Agreement will not cause any default or condition in respect of any such
Material Contracts, the effect of which is to cause, permit, create or perfect
the right in any party (a) to repudiate or disavow its obligations to the
Company thereunder, (b) to require or have the right to require the Company to
perform its obligations thereunder (including obligations to pay indebtedness)
prior to such time on which, or on terms and conditions otherwise different from
those that, are provided therein or (c) to recover from the Company any damages
or fines. To the Knowledge of the Company and the Controlling Shareholders, no
party to any such Material Contract is in default thereunder. True, correct and
complete copies of all the Material Contracts have been delivered to the
Purchaser.
2.15 ENVIRONMENTAL QUALITY.
(a) Except as set forth in SCHEDULE 2.15, to the Knowledge of the
Company and the Controlling Shareholders, neither the Company nor any previous
(to the Company) owner, tenant, occupant, user or operator of any real property
now or ever owned or leased by the Company (the "Property") released or disposed
of any "Hazardous Materials" (as defined below) on, under, in or about the site
of the Property, except in compliance in all material respects with applicable
Environmental Laws (as defined below). For the purposes of this Agreement, the
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term "Hazardous Materials" shall mean any substance, material or waste which is
regulated by any local government authority or state with jurisdiction, or the
United States Government, including, without limitation, any material or
substance which is (a) defined as a "hazardous waste," "hazardous material,"
"hazardous substances," "extremely hazardous waste," "regulated substance" or
"restricted hazardous waste" under any provision of the existing laws of any
state, or any other applicable existing law, including, but not limited to, the
Resource Conservation and Recovery Act, 42 U.S.C. Section 6901 ET SEQ. ("RCRA"),
and the Comprehensive Environmental Response, Compensation, and Liability Act,
42 U.S.C. Section 9601 ET SEQ. ("CERCLA") and (b) petroleum, including crude oil
and any fraction thereof and any refined petroleum products and derivatives
thereof.
(b) To the Knowledge of the Company and the Controlling Shareholders,
except as set forth in SCHEDULE 2.15, the Property complies in all respects with
all applicable Environmental Laws. For purposes of this Agreement, the term
"Environmental Laws" shall mean all federal, state and local laws, ordinances
and regulations pertaining to air and water quality, soils and subsurface
strata, natural resources, Hazardous Materials, waste generation, management,
transportation and disposal or other environmental matters, including the Clean
Water Act, the Clean Air Act, the Federal Water Pollution Control Act, the Solid
Waste Disposal Act, RCRA, CERCLA, and the applicable environmental protection
rules, regulations and ordinances of the city and county in which the Property
is located, the Environmental Protection Agency and all other applicable
federal, state, regional and local agencies which are in existence, and are in
effect as of the date hereof. Without limiting the generality of the foregoing,
to the Knowledge of the Company and the Controlling Shareholders, Company is not
liable nor potentially liable for any response costs or natural resource damages
under Sections 107(a) or 113(f) of CERCLA, or under any other so-called
"superfund" or "superlien" law or similar Legal Requirement currently in
existence, at or with respect to the Property and, to the Knowledge of the
Company and the Controlling Shareholders, no circumstances exist, which with
notice or lapse of time or both would result in such liability.
(c) To the Knowledge of the Company and the Controlling Shareholders,
the conduct of the business of the Company complies in all respects with all
applicable Environmental Laws.
(d) To the Knowledge of the Company and the Controlling Shareholders,
except as set forth in SCHEDULE 2.15, the Company has not sent any Hazardous
Material to a site that, pursuant to any applicable Environmental Laws, (i) has
been placed on the "National Priorities List" of hazardous waste sites or any
similar state list, (ii) is otherwise designated or identified as a potential
site for remediation, cleanup, closure or other environmental remedial activity,
or (iii) is subject to a claim, an administrative order or other request to take
"removal" or "remedial" action, as defined in any applicable Environmental Laws,
or to make payment for the costs of cleaning up the site.
(e) Except as set forth in SCHEDULE 2.15, the Company (i) is not
involved in any suit or proceeding with respect to a release or threatened
release of any Hazardous Material or a violation or alleged violation of any
applicable Environmental Laws, nor has the Company
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received any notice of any claims from any person or entity relating to
property damage or to personal injuries from exposure to any Hazardous
Material, nor has the Company received any notice or request for information
from any governmental agency or authority or other third party with respect
to any of the foregoing, nor (ii) has it failed to timely file any report
required to be filed, failed to acquire all necessary certificates, approvals
and permits or failed to generate and maintain all required data,
documentation and records under all applicable Environmental Laws.
(f) To the Knowledge of the Company and the Controlling Shareholders,
except as set forth in SCHEDULE 2.15, there are currently no underground storage
tanks in or under the Property, and no underground storage tank was removed from
the Property during the period that the Company maintained an interest in such
Property.
(g) The Company has made available to Purchaser all information in
its and, to the Knowledge of the Company and the Controlling Shareholders, its
Shareholders' possession regarding the environmental condition of the Property.
2.16 INTELLECTUAL PROPERTY. The Company either own or have the right to
use by license, sublicense, or other tangible agreement, all of the inventions,
improvements, domestic and foreign patents and applications therefor, customer
lists, copyrights, copyright-registrations and applications therefor,
trademarks, trade names, service marks, trade dress, logos, rights in computer
software, and all rights granted or retained in licenses under any of the
foregoing which are material to the conduct of the business of the Company as
presently conducted (collectively the "Intellectual Property"). None of the
Intellectual Property used in connection with the conduct of the business of the
Company is, or has been in the past five years, involved in, or the subject of,
any pending or, to the Knowledge of the Company and the Controlling
Shareholders, threatened infringement, interference, opposition or similar
action, suit or proceeding to which the Company was a party. The material
license fees, royalties and other amounts payable by the Company in connection
with the use of the Intellectual Property, together with the terms and
conditions on which, and periods for which such amounts are payable, are set
forth in SCHEDULE 2.16.
2.17 PREPAID EXPENSES. All prepaid expenses shown on the balance sheet of
the most recent Financial Statements or subsequently paid by the Company and
shown on the Final Closing Statement have been incurred solely in connection
with the business and assets of the Company.
2.18 RELATED PARTY TRANSACTIONS. Set forth on SCHEDULE 2.18 is a list of
all material transactions (including, without limitation, employment contracts,
debts, loans, advances, or other obligations, guarantees, indemnities, accounts
and notes payable or receivable and service agreements) between the Company and
any current officer, director or employee, Shareholders, or Affiliate of the
Company (collectively, "Related Parties") which (a) were entered into and/or
consummated subsequent to January 1, 1998; (b) are or will be effective as of
the date hereof or at Closing, (c) constitutes a present or future liability or
obligation of the Company to any Related Party; or (d) constitutes a present or
future liability of any Related Party to the Company. For purposes of this
Agreement, an "Affiliate" of a party is any individual, company or other entity
that owns five percent (5%) or more of the voting or capital stock or other
equity interest of such
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party or of which five percent (5%) of the voting or capital stock or other
equity interest is owned or otherwise controlled by that party or an
Affiliate of that party, as the case may be. The Notes from Shareholders
listed therein (the "Shareholder Notes") in the amount of approximately
$139,235 are collectible and will be paid in full in accordance with their
terms prior to May 10, 1999.
2.19 LABOR MATTERS. Except as set forth on SCHEDULE 2.19, (a) the Company
has not entered into nor is a party to any collective bargaining agreement,
memorandum of understanding or other written document binding on the Company
respecting terms and conditions of employment with respect to an identified
group of employees with any labor union that would cover any employees of the
Company and (b) none of the employees of the Company is subject to any
collective bargaining agreement, memorandum of understanding or other written
document binding on the Company respecting terms and conditions of employment
with respect to an identified group of employees nor are any such employees, in
their capacities as employees, represented by any labor union. As to the
collective bargaining agreements disclosed on SCHEDULE 2.19, the Company is not
in material default thereunder. Except as set forth in SCHEDULE 2.19, there are
no Claims, controversies, labor disturbances, or investigations pending, or to
the Knowledge of the Company and the Controlling Shareholders, threatened, by
any governmental agency or by employees of the Company or any party or parties
representing any of such employees against the Company before any court,
arbitrator or other tribunal. To the Knowledge of the Company and the
Controlling Shareholders, there are no organizational efforts presently being
made or threatened by or on behalf of any labor union with respect to the
employees of the Company nor has there been in the last five (5) years. The
Company has not experienced a work stoppage, strike, lock-out or other labor
disturbance within the past five (5) years, and there is no work stoppage,
strike, lock-out or other labor disturbance presently occurring, or, to the
Knowledge of the Company and the Controlling Shareholders, threatened. The
Company has complied in all material respects with all applicable Legal
Requirements relating to its employees, the employment of labor, and the safety
and health of employees, including, without limitation, all applicable Legal
Requirements relating to occupational health and safety, discrimination,
unemployment, wages, hours, the Family and Medical Leave Act, collective
bargaining, and the collection and payment of withholding taxes and similar
taxes in respect of the business of the Company. Except as set forth in
SCHEDULE 2.19, there are no unfair labor practice charges, charges of
discrimination, or other complaints pending against the Company involving
employees now or previously employed by the Company.
2.20 CUSTOMERS AND VENDORS. SCHEDULE 2.20 hereto is a correct and current
list of the 20 largest customers and the 10 largest vendors of the Company
during the 12-month period ended December 31, 1997, with the amount of sales
made to each such customer or by each such vendor, as the case may be, during
such period as reasonably ascertained from readily available information, such
amounts being estimated in good faith as being within five percent (5%) of the
actual sales made to or by such customer or vendor, as the case may be. Except
as set forth on SCHEDULE 2.20, the Company does not have any information
indicating that any of such customers or such vendors intends to cease doing
business with the Company or materially alter the amount of the business that it
conducts with the Company from the amount of business such customers or such
vendors conducted with the Company during the last fiscal year.
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2.21 OTHER DISCLOSURES. In addition to the other disclosures required
hereby, the following documents and information pertaining to the Company have
been made available to the Purchaser:
(a) true, correct and complete copies of each policy of insurance
maintained by the Company, together with information on premiums, coverage,
insurers, expiration dates and deductibles;
(b) the location and name of each bank or other financial institution
in which the Company has an account or line of credit, and the identity of each
such account or line of credit, and each bank in which the Company has a safe
deposit box, together with the names of all persons authorized to draw upon or
have access thereto;
(c) SCHEDULE 2.21(c) lists each corporate or trade name under which
the Company or its predecessors, if any, has conducted business and the state
and county in which any Real Property or personal property of the Company is
located or has been located.
(d) SCHEDULE 2.21(d) lists each power-of-attorney given by or on
behalf of the Company.
2.22 PARACHUTE PAYMENTS. Any bonuses or other compensation or amounts paid
or payable by the Company, including amounts payable as a result of the
transaction contemplated by this Agreement, have not resulted in and will not
result in payments to "Disqualified Individuals" (as defined in Section 280G(c)
of the Code) of the Company which, individually or in the aggregate, will
constitute "excess parachute payments" (as defined in Section 280G(b) of the
Code) resulting in the imposition of the excise tax under Section 4999 of the
Code or the disallowance of deductions under Section 280G of the Code.
2.23 PRODUCT WARRANTY AND LIABILITY. All finished goods inventories
manufactured by the Company in the operation of the Business (the "Products")
have been in material conformity with all applicable contractual commitments and
all express or implied warranties (including warranties imposed by the
application of law) and, to the Knowledge of the Company and the Controlling
Shareholders, no material liability exists or will arise for replacement or
damage in connection with such sales or deliveries, except as are adequately
reserved for on the Financial Statements. No Products heretofore sold by the
Company are now subject to any guaranty, warranty, claim for product liability
or patent or other indemnity, other than those sold in accordance with the
standard terms and conditions of sale of the Business, true and complete copies
of which have been made available to the Purchaser.
2.24 ACCURACY. The representations and warranties made by the Company and
the Shareholders to Purchaser set forth in this Agreement, the Disclosure
Schedules to this Agreement, including any Updated Disclosure Schedule (as
defined below) delivered to Purchaser prior to Closing, and the Related
Agreements delivered and to be delivered pursuant to or in connection with this
Agreement, do not include an untrue statement of material fact or omit to
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state any material fact necessary to make them, when taken together and in
light of the circumstances in which they were or are made, not misleading in
any material respect.
2.25 BROKERS AND FINDERS. Except as set forth in SCHEDULE 2.25, no person
or entity is entitled to any brokerage commission, finder's fee or like payment
in connection with the transactions contemplated in this Agreement.
ARTICLE 3
ADDITIONAL REPRESENTATIONS AND WARRANTIES OF CONTROLLING SHAREHOLDERS
Each Controlling Shareholder represents and warrants to Purchaser as
follows:
3.1 OWNERSHIP OF SHARES. Such Controlling Shareholder is now, and
immediately prior to the Closing, such Controlling Shareholder will be, the
owner of the Shares of the Company as set forth opposite the name of such
Shareholder on SCHEDULE 2.2.
3.2 AUTHORIZATION. Such Controlling Shareholder has full right and power
to execute and deliver this Agreement and perform his obligations hereunder.
This Agreement and all other documents and instruments executed or to be
executed by such Controlling Shareholder pursuant to this Agreement have been,
or will have been, duly executed and delivered by such Controlling Shareholder.
3.3 ENFORCEABILITY. This Agreement constitutes the valid and legally
binding obligation of such Controlling Shareholder, enforceable in accordance
with its terms, except as such enforceability may be limited by equitable
principles and by applicable bankruptcy, insolvency, reorganization,
arrangement, moratorium or similar laws relating to or affecting the rights of
creditors generally.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PURCHASER AND PARENT
Parent and Purchaser, jointly and severally, represent and warrant to
Shareholders and the Company as follows:
4.1 ORGANIZATION AND STANDING OF PURCHASER. Parent is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Colorado. Purchaser is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware. Parent and Purchaser
have all requisite corporate power and authority to enter into this Agreement,
to carry out the transactions contemplated hereby and to perform their
obligations hereunder. Parent owns all the outstanding capital stock of
Purchaser.
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4.2 AUTHORIZATION. The execution and delivery of this Agreement, and all
other agreements, documents and instruments executed or to be executed by the
Purchaser and Parent in connection herewith (the "Purchaser Related
Agreements"), and the consummation of the transactions contemplated hereby and
thereby, have been duly authorized by all necessary corporate and other action
on the part of Parent and Purchaser. This Agreement, and the Purchaser Related
Agreements have been, or will have been, at the time of their respective
executions and deliveries, duly executed and delivered by a duly authorized
officer of Parent and Purchaser.
4.3 ENFORCEABILITY. This Agreement constitutes, and each of the Purchaser
Related Agreements when duly executed and delivered will constitute, the valid
and legally binding joint and several obligations of Parent and Purchaser,
enforceable against Parent and Purchaser, jointly and severally, in accordance
with its terms, except as such enforceability may be limited by equitable
principles and by applicable bankruptcy, insolvency, reorganization,
arrangement, moratorium or similar laws relating to or affecting the rights of
creditors generally.
4.4 COMPLIANCE WITH OTHER INSTRUMENTS AND LAWS. The execution and delivery
of this Agreement, and the Purchaser Related Agreements, and the consummation of
the transactions contemplated hereby and thereby, will not conflict with or
result in any violation or default under any provision of the Certificate of
Incorporation or Bylaws of Parent or Purchaser, or of any material mortgage,
indenture, trust, lease, agreement or other instrument, permit, concession,
grant, franchise, license, judgment, order, decree, statute, law, ordinance,
rule or regulation applicable to Parent or Purchaser or any of their respective
properties, the result of which (either individually or in the aggregate) will
prevent or materially delay the consummation of the transactions contemplated
hereby.
4.5 GOVERNMENTAL AUTHORIZATIONS, CONSENTS. No consents, licenses,
approvals or authorizations of, and registrations or declarations with, any
governmental authority, bureau, agency or commission, or any third party, are
required to be obtained or made by Parent or Purchaser in connection with the
execution, delivery, performance, validity and enforceability of this Agreement
or the Purchaser Related Agreements or the Merger contemplated hereby.
4.6 MW COMMON STOCK. The MW Common Stock when issued will have been duly
authorized, validly issued, fully paid and nonassessable, and the record date of
issuance on the Parent's (and its transfer agent's) books shall be the Closing
Date, and each share of MW Common Stock issued to Shareholders hereunder shall
be free and clear of any lien, pledge, charge, adverse claim, security interest,
restriction, encumbrance (including any imposed by law in any jurisdiction),
title retention agreement, option or right to purchase of any kind.
4.7 LITIGATION. No action, suit, proceeding or governmental investigation
is pending or, to the best of Parent's and Purchaser's knowledge, threatened, at
law or in equity, which seeks to question, delay or prevent the consummation of
all or any portion of the transactions contemplated hereby.
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4.8 SECURITIES ACT OF 1933. Purchaser is an "accredited investor" as
defined under Rule 501 of Regulation D under the Securities Act of 1933, as
amended
4.9 BROKERS AND FINDERS. No person or entity is entitled to any brokerage
commission, finder's fee or like payment from Parent or Purchaser in connection
with the transactions contemplated in this Agreement.
4.10 PURCHASER'S KNOWLEDGE. No officer or director of Parent or Purchaser
has actual knowledge, as of the date hereof, of any state of facts which, in the
judgment of Parent or Purchaser, will give rise to a Shareholder Indemnified
Obligation or a Purchaser Indemnified Obligation, except for such matters as
have been previously disclosed in writing to the Shareholders, the Company or
their representatives.
4.11 SEC DOCUMENTS. Parent has timely filed all required reports,
schedules, forms, statements, exhibits and other documents with the SEC since
December 31, 1996 (the "SEC Documents") and is qualified, and has obtained or
will obtain, without delay to the registration process, all appropriate
waivers necessary to allow Parent to register the MW Common Stock on SEC Form
S-3. As of their respective dates, the SEC Documents complied in all
material respects with the requirements of the Securities Act and the
Exchange Act, as the case may be, and the rules and regulations of the SEC
promulgated thereunder applicable to such SEC Documents, and none of the SEC
Documents contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they
were made, not misleading. The consolidated financial statements of Parent
and its subsidiaries included in the SEC Documents comply as to form in all
material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto, have been prepared in
accordance with GAAP (except, in the case of unaudited financial statements,
as permitted by SEC Form 10-Q) applied on a consistent basis during the
period involved (except as may be indicated in the notes thereto) and fairly
present the financial position of Parent and its subsidiaries as of the date
thereof and their statements of operations, changes in shareholders' equity
and cash flows for the periods then ended (subject, in the case of unaudited
statements, to normal year-end audit adjustments). Except as set forth in
the SEC Documents, neither Parent nor any of its subsidiaries has any
liabilities or obligations of any nature (whether accrued, absolute,
contingent or otherwise) required by GAAP to be set forth on a consolidated
balance sheet of Parent and its subsidiaries or in the notes thereto, other
than liabilities and obligations incurred in the ordinary course of business
consistent with past practice since the date of its last filed Form 10-K or
10-Q.
4.12 ACCURACY. The representations and warranties made by the Parent
and Purchaser to Company and Shareholders set forth in this Agreement and the
Purchaser Related Agreements, instruments and documents delivered and to be
delivered pursuant to or in connection with this Agreement do not include an
untrue statement of material fact or omit to state any material fact
necessary to make them, when taken together and in light of the circumstances
in which they were or are made, not misleading in any material respect.
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4.13 INVESTIGATION. Parent and Purchaser have conducted inspections of
the properties and financial and other records of the Company and other due
diligence with respect to the Company. Parent and Purchaser have had an
opportunity to ask questions of the Company and the Controlling Shareholders
relating to the Company and management and financial affairs of the Company,
which questions have been answered to Parent and Purchaser's satisfaction,
and to examine all books and records of the Company. Parent and Purchaser
acknowledge that they have made their own independent investigation,
examination, analysis and evaluation of the Company including, without
limitation, Parent and Purchaser's own estimate of the value of the Company's
business.
ARTICLE 5
COVENANTS OF THE COMPANY AND THE CONTROLLING SHAREHOLDERS
5.1 CONDUCT OF BUSINESS. The Company agrees that, between the date of
this Agreement and the Closing Date, except as contemplated by this Agreement or
referred to in a Disclosure Schedule, and except as may be necessary to carry
out the transactions contemplated by this Agreement, the Company without
Purchaser's written consent (which consent will not be unreasonably withheld or
delayed) or as requested by Purchaser, did not or will not:
(a) amend its Articles of Incorporation or Bylaws;
(b) make any material change in its practices, operations or policies
with respect to the selling of goods or services, collecting accounts receivable
and/or paying accounts payable except in the ordinary course of business;
(c) conduct its business in a manner that materially departs from the
manner in which such business was being conducted prior to the date of this
Agreement;
(d) except as set forth in SCHEDULE 2.8 increase the rate or change
the form of compensation payable to any director, officer or employee of the
Company or increase any employee benefits, except in the ordinary course of
business in accordance with past practice in an amount not to exceed 3% in any
one case or the payment of bonuses in an aggregate amount of $25,000;
(e) purchase or dispose of any properties or other assets, except in
the ordinary course of business or as set forth in SCHEDULE 1.7;
(f) declare, set aside, pay or make any dividend or other
distribution in respect of any outstanding shares of the Company's capital stock
other than distributions to Shareholders to pay income taxes and distributions
to Shareholders charged against their respective Accumulated Adjustments
Account, if applicable;
(g) issue or sell any shares of the Company's capital stock (whether
or not from the treasury) or any other securities; grant any options,
convertibility rights, rights to
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subscribe for shares of capital stock or securities convertible into or
exchangeable for shares of capital stock, warrants, calls or other agreements
relating to the Company's capital stock; split up, combine, reclassify,
redeem, repurchase or otherwise reacquire any of the Company's capital stock,
or otherwise change its capitalization;
(h) except as required by regulation or generally accepted accounting
principles, maintain its books of account other than in the usual, regular and
ordinary manner in accordance with generally accepted accounting principles and
on a basis consistent with prior periods, make any change in any of its books,
accounting methods or practices, or reclassify any assets or liabilities;
(i) cancel, terminate, renew or amend any Material Contract or enter
into any contract, agreement, lease, license or commitment which would be a
Material Contract if such had existed on the date hereof, except in the ordinary
course of business;
(j) merge or consolidate with or into any other person or entity or
sell or dispose of all or substantially all of the Company's assets to any
person or entity, or initiate or participate in negotiations with any person or
entity with respect to any of the foregoing;
(k) invest in certificates of deposit in any one bank if such
investment in the aggregate exceeds $100,000 at any time;
(l) incur any direct or contingent liability for borrowed money or
guarantee the monetary obligations of any other person or entity, other than
indebtedness to be included in the Debt, or make any monetary investment in,
advance to or loan to any person or entity other than in the ordinary course of
business;
(m) fail to make maintenance expenditures and maintain inventories in
the amounts and at the times required to operate its business in the ordinary
course consistent with past practice;
(n) implement or adopt any change in its tax methods, principles or
elections;
(o) fail to pay accounts payable or collect accounts receivable in
accordance with past practices;
(p) enter into any transaction outside the ordinary course of
business; or
(q) agree or commit to do any of the foregoing.
Nothing contained in this Section 5.1 or elsewhere in this Agreement shall
be deemed in any way as prohibiting the Company from using cash, cash
equivalents or other current assets to reduce or pay off Debt prior to Closing.
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5.2 ACCESS. The Company agrees that, between the date of this Agreement
and the Closing Date, the Company shall, after receiving reasonable advance
notice from Purchaser, give Parent, Purchaser and their Associates (as defined
in Section 6.1) reasonable access (during normal business hours) to the books,
records, contracts and offices of the Company for the purpose of enabling such
parties to further investigate and inspect the business, operations and
financial and legal affairs of the Company.
5.3 NO SOLICITATION OR NEGOTIATION. The Company and Controlling
Shareholders agree that between the date of this Agreement and the earlier of
the Closing Date or the date this Agreement otherwise terminates, they will
not, nor will they permit any officer, director, Shareholder or agent of
Shareholders the Company to, (i) solicit any proposal or offer from any
person or entity (other than Purchaser) relating to the sale of the Company,
its capital stock or any material portion of its assets, (ii) provide any
non-public information to any person or entity (other than Purchaser) for use
in preparing any proposal or offer relating to the sale of the Company or
its capital stock or any material portion of its assets, or (iii) respond to
or enter into any negotiations regarding any proposal or offer from any
person or entity (other than Purchaser) with respect to the foregoing.
5.4 FILINGS AND CONSENTS. Where required by applicable law, the Company
and the Controlling Shareholders shall use commercially reasonable efforts to do
each of the following:
(a) as soon as practicable after the date of this Agreement, file
with the appropriate governmental authority any notification form required to be
filed by the Company under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR Act") with respect to this Agreement and the
transactions contemplated hereby, together with a request for early termination
of the applicable waiting period;
(b) after consultation with Purchaser, make any additional filing
required to be made by the Company under the HSR Act and promptly furnish to the
appropriate governmental authority such additional information as may be
requested under the HSR Act;
(c) make or give each filing or notice required to be made or given
pursuant to any applicable Legal Requirement, Material Contract or Permit by the
Company or Shareholders in connection with the execution and delivery of any of
this Agreement or in connection with the consummation or performance of any of
the transactions contemplated hereby; and
(d) obtain an agreement from each Creditor to terminate its lien and
lien filings upon payment of the amounts specified in such Creditor's respective
Payoff Letter to the extent that Purchaser decides to pay off a Debt at Closing
and each consent required to be obtained pursuant to any applicable Legal
Requirement, Permit or Material Contract by the Company or Shareholders in
connection with the execution and delivery of any of this Agreement or in
connection with the consummation or performance of the transactions contemplated
hereby. Except as to liens related to Leased Property to be acquired by
Purchaser pursuant to Section 7.5, Company shall pay all reasonable costs of
obtaining such releases and consents which costs shall be a Company Expense.
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5.5 UPDATED DISCLOSURE SCHEDULES. Between the date of this Agreement and
the Closing Date, if any Controlling Shareholder or the Company becomes aware of
any fact or condition that causes any of the representations and warranties in
this Agreement to become untrue, misleading, or inaccurate in any material
respect, such party will promptly deliver to Purchaser an updated Disclosure
Schedule ("Updated Disclosure Schedule") setting forth the facts or conditions
that cause such representation, warranty, or Disclosure Schedule to become
untrue, misleading, or inaccurate.
ARTICLE 6
COVENANTS OF PARENT AND PURCHASER
Parent and Purchaser each agree with the Company that:
6.1 CONFIDENTIALITY. Parent and Purchaser shall hold in strict
confidence, and cause their respective affiliates, directors, officers,
employees, agents, attorneys, accountants, financing sources and representatives
and those of its affiliates ("Associates") to hold in strict confidence, all
documents and information obtained with respect to the Company ("Confidential
Information"). Neither Parent nor Purchaser shall permit any Confidential
Information to be utilized or to be disclosed or conveyed to any other person or
entity other than their Associates in furtherance of this Agreement. Without
limiting the generality of the foregoing, and except as required by law or as
permitted by Section 7.4, (i) neither Parent nor Purchaser shall disclose to any
person or entity, and shall not permit any of their Associates to disclose to
any person or entity, the existence of this Agreement or any of the terms or
provisions hereof and (ii) except in the ordinary course of business, neither
Parent nor Purchaser shall contact any customers or employees of the Company,
and neither Parent nor Purchaser shall not permit any of their Associates to
contact any customers or employees of the Company, without the prior consent of
an officer of the Company. This Section 6.1 shall terminate if and when the
Closing occurs in accordance with Article 1 of this Agreement, or within three
years of the date of execution of this Agreement, whichever occurs first.
6.2 FILINGS AND CONSENTS. Where required by applicable law, Parent and
Purchaser shall use commercially reasonable efforts to do each of the following:
(a) as soon as practicable after the date of this Agreement, file
with the appropriate governmental authority any notification form required to be
filed by Parent or Purchaser under the HSR Act with respect to this Agreement
and the transactions contemplated hereby, together with a request for early
termination of the applicable waiting period;
(b) after consultation with the Controlling Shareholders, make any
additional filing required to be made by Parent or Purchaser under the HSR
Act and promptly furnish to the appropriate governmental authority such
additional information as may be requested under the HSR Act;
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(c) make or give each other filing or notice required to be made
or given pursuant to any applicable Legal Requirement by Purchaser in
connection with the execution and delivery of this Agreement or in connection
with the consummation or performance of any of the transactions contemplated
hereby; and
(d) obtain each consent required to be obtained by Parent or
Purchaser pursuant to any applicable Legal Requirement or material contract
to which Parent or Purchaser is a party or by which either of them is bound
in connection with the execution and delivery of any of this Agreement or in
connection with the consummation or performance of the transactions
contemplated hereby.
6.3 FILING OF FINAL TAX RETURNS. Parent and Purchaser agree to timely
file all final Tax Returns for and on behalf of the Company which are required
to be filed subsequent to the Closing, and to deliver copies thereof to the
Shareholders' Representative promptly after filing the same.
6.4 OFFICER AND DIRECTOR INDEMNIFICATION. Parent and Purchaser agree to
include and maintain provisions in the Certificate of Incorporation and Bylaws
of the Surviving Corporation which provide indemnification for the directors and
officers of the Company immediately prior to the Effective Time to the maximum
extent provided by such documents and applicable corporate law and to indemnify
such directors and officers to the maximum extent provided by applicable
corporate law. In addition, Parent and Purchaser shall include such persons as
additional insureds under Parent's Director and Officer Insurance Policy if they
can do so without substantial additional cost.
6.5 BENEFIT PLANS AND RELATED MATTERS. Except for employees subject to
collective bargaining agreements and subject to the provisions of Parent's
policies and programs, any employee of the Company retained by Purchaser or its
affiliates after the Closing Date (each, a "Transferred Employee") shall be
eligible to participate or eligible for accrual of benefits, vesting and
contributions or accruals to be made or credited following the Closing Date
under each of Parent's employee benefit plans, programs or arrangements
available to all or substantially all of Parent's employees, subject to the
terms upon which such plans allow new participation by Purchaser's employees.
Each Transferred Employee shall be credited with the time-in-service that the
employee accrued with the Company.
ARTICLE 7
COVENANTS OF ALL PARTIES
The parties hereto agree that:
7.1 COMMERCIALLY REASONABLE EFFORTS; FURTHER ASSURANCES. Subject to the
terms and conditions of this Agreement, each party will use commercially
reasonable efforts to take, or cause to be taken, all actions and to do, or
cause to be done, all things necessary or desirable under applicable Legal
Requirements to consummate the transactions contemplated by this
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Agreement. The Company, Controlling Shareholders, Parent and Purchaser each
agree to execute and deliver such other documents, certificates, agreements
and other writings and to take such other actions as may be necessary or
desirable in order to consummate or implement expeditiously the transactions
contemplated by this Agreement.
7.2 POOLING OF INTERESTS. Each of Parent, Purchaser and the Company shall
use its respective commercially reasonable efforts to cause the transactions
contemplated by this Agreement, including the Merger, to be accounted for as a
pooling of interests under Opinion 16 of the Accounting Principles Board and
applicable SEC rules and regulations, and such accounting treatment to be
accepted by each of Parent's and the Company's independent certified public
accountants, respectively, and to be accepted by the SEC, and each of Parent,
Purchaser and the Company and the Controlling Shareholders agree that they will
not knowingly take any action that would cause such accounting treatment not to
be obtained.
7.3 CERTAIN FILINGS, ETC. The Company, Parent and Purchaser shall
cooperate with one another (a) in determining whether any action by or in
respect of, or filing with, any governmental body, agency, official or authority
is required, or any actions, consents, approvals or waivers are required to be
obtained from parties to any material contracts, in connection with the
consummation of the transactions contemplated by this Agreement and (b) in
taking such actions or making any such filings, in furnishing such information
as may be required in connection therewith, and in seeking timely to obtain any
such actions, consents, approvals or waivers.
7.4 PUBLIC ANNOUNCEMENTS. The parties agree not to issue any press
release or make any public statement with respect to this Agreement or the
transactions contemplated hereby prior to the Closing without the prior consent
of Purchaser and Company (which consent shall not be unreasonably withheld or
delayed), except to the extent that any party hereto is required by law to make
any such disclosure and such party notifies the other parties hereto a
reasonable time before making such disclosure of the nature and content of the
intended disclosure, and consults with such other parties regarding the nature
and content of such disclosure.
7.5 REAL ESTATE. The parties agree to negotiate, execute and deliver
prior to Closing, mutually acceptable purchase and sale contracts (the
"Westline Documents") for the purchase by Purchaser of all the membership
interests of Westline Properties, LLC ("Westline") which owns the Leased
Property currently occupied by the Company which is owned in whole or in part
by Related Parties of the Company and which must be acquired by the Purchaser
as part of the acquisition of the Company in order for the transactions
described herein to be accounted for as a pooling of interests.
Notwithstanding the form of the transaction pursuant to which the Leased
Property is to be so transferred, the Westline Documents shall contain (a)
terms and conditions which are essential to effectuate such transfer in a
form acceptable to Purchaser and (b) provisions similar to those set forth in
Sections 1.1(f) and 1.10 hereof relating to the MW Common Stock delivered in
connection therewith. The Westline Documents shall provide for a purchase
price of the greater of nine times current annual rentals for fair market
value of the Leased Property. In addition, the purchase price shall be
increased by $214,920 if 2,985 square feet of space of the Leased Property
currently unleased has not been leased by the Closing and by all cash and
cash
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equivalents acquired by Purchaser pursuant to the Westline Documents valued
at their U.S. dollar value. The purchase price shall be net of any mortgages
assumed by Purchaser. The purchase price and the amount of any pre-payment
penalties incurred by the Sellers for pre-paying any mortgages shall be paid
by Purchaser to the Sellers in MW Common Stock based on the MW Common
Valuation.
ARTICLE 8
CONDITIONS TO OBLIGATION OF PURCHASER TO CLOSE
The obligation of Purchaser to consummate the Merger, pay the Merger
Consideration, discharge the Debt, and otherwise consummate the transactions
contemplated hereunder is subject to the satisfaction as of the Closing Date, of
the following conditions (any of which may be waived by Purchasers in whole or
in part):
8.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES. The representations,
warranties and covenants set forth in Articles 2 and 3 and Section 5.1, without
giving effect to any Updated Disclosure Schedule delivered to Purchaser after
the date hereof, do not contain any misrepresentation or breach of warranty
which is likely to cause a Material Adverse Effect as of the date of this
Agreement and as of the Closing Date, with the same effect as though made on and
as of the Closing Date, except to the extent that (a) any of such
representations and warranties refers specifically to a date other than the
Closing Date or (b) the accuracy of any of such representations and warranties
is affected by any of the transactions contemplated by this Agreement.
8.2 SHAREHOLDER APPROVAL. Approval of this Agreement and the transactions
contemplated hereby shall have been validly obtained by the requisite vote of
the shareholders of the Company under applicable law.
8.3 PERFORMANCE. Shareholders and the Company having performed, in all
material respects, all obligations required by this Agreement to be performed by
Shareholders and the Company on or before the Closing Date including without
limitation the covenants set forth in Article 5.
8.4 CERTIFICATE. Purchaser having received from a duly authorized officer
of the Company a certificate dated the Closing Date confirming that the
conditions in Section 8.1 and 8.2 have been met and confirming, to the best of
such persons' knowledge, that the condition of Section 8.3 has been met.
8.5 DEBT CERTIFICATES AND PAYOFF LETTERS. Purchaser having received the
Debt Certificate and the Payoff Letters.
8.6 NO INJUNCTION. There not being in effect, at the Closing, any
injunction or other binding order of any court or other tribunal having
jurisdiction over Purchaser that prohibits the consummation of the transactions
contemplated in this Agreement.
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8.7 NO MATERIAL ADVERSE EFFECT. There having been no Material Adverse
Effect on the Company since December 31, 1997.
8.8 CONSENTS. All required consents, licenses, approvals, estoppel
certificates, releases of Encumbrances, acknowledgments of payment in full and
authorizations, as set forth on SCHEDULE 2.5, having been obtained and delivered
to Purchaser.
8.9 SHAREHOLDER REPRESENTATION AND AFFILIATE LETTER. Shareholders having
executed letters in the form of EXHIBIT C.
8.10 LEGAL OPINIONS. Purchaser having received from counsel to the Company
an opinion in substantially the form of EXHIBIT D attached hereto.
8.11 CERTIFICATE OF SECRETARY. The Company having delivered a certificate,
signed by the secretary of the Company, certifying (i) current copies, as
amended, of the Articles of Incorporation and Bylaws of the Company and (ii) the
resolutions of the board of directors and the shareholders of the Company
authorizing this Agreement and the transactions contemplated hereby.
8.12 ESCROW AGREEMENTS. Shareholders, the Company, and the Escrow Agent
(as defined in the Escrow Agreement) having executed and delivered the Escrow
Agreement.
8.13 NON-COMPETE AGREEMENTS. Stephen D. Kodner and Michael B. Smith having
executed non-compete agreements in the form attached as EXHIBIT E providing for
a covenant not to compete of five years from the date of Closing and three years
from the date of such Shareholder's termination of employment with Purchaser or
one of its Affiliates, whichever is later. The form of Non-Compete Agreement
will be modified to specifically allow the Controlling Shareholders to own,
manage, invest and/or be employed by Point of Purchase Corporation and/or its
wholly owned entity, Signet Graphics Products LLC ("Signet") to engage in the
business of Signet only as now being conducted by Signet.
8.14 UCC-3S. The Company having delivered UCC-3 Termination Statements for
all the secured Debt to be paid off at Closing, or a Payoff Letter from the
holder thereof agreeing to deliver the same after receipt of immediately
available funds sufficient to pay off in full the secured Debt.
8.15 HSR ACT. All applicable waiting periods under the HSR Act relating to
transactions contemplated hereby having expired or been terminated.
8.16 ACCOUNTING, TAX MATTERS. Purchaser is not aware of any fact or
circumstance that would (i) prevent the transactions contemplated hereby from
qualifying as a tax-free reorganization under the Code, or (ii) prevent the
transaction from qualifying for the pooling of interests method of accounting.
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8.17 REAL ESTATE PURCHASES. The Westline Documents shall have been executed
and delivered by the Purchaser and the other parties thereto, the conditions to
purchase of the subject real estate shall have been satisfied and the
acquisition of Westline shall have occurred simultaneously with the Closing of
the Merger.
8.18 NO DISCOVERY. Purchaser not being informed of or otherwise having
discovered any matter or matters which would constitute a Purchaser Indemnified
Obligation or which would represent a Material Adverse Effect on the Company.
8.19 DOCUMENTATION. All agreements, documents and instruments incidental
to the performance of the transactions contemplated by this Agreement being in a
form and substance reasonably satisfactory to Purchaser and its legal counsel
and Purchaser having received copies of all documents that they may have
reasonably requested in connection with such transactions.
8.20 APPROVAL OF PURCHASER'S BOARD. The Board of Directors of Purchaser
and Parent shall have approved this Agreement and the transactions contemplated
herein.
ARTICLE 9
CONDITIONS TO OBLIGATIONS OF THE COMPANY TO CLOSE
The obligation of the Company to consummate the transactions that are to be
consummated at the Closing is subject to the satisfaction, as of the Closing
Date, of the following conditions (any of which may be waived in whole or in
part by Shareholders):
9.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Parent and Purchaser set forth in Article 4 being accurate in all
material respects (except for the representations and warranties set forth in
Section 4.6, which shall be true and accurate) as of the date of this Agreement
and as of the Closing, as though made on and as of the Closing Date.
9.2 PERFORMANCE. Parent and Purchaser having performed, in all material
respects, all obligations required by this Agreement to be performed by Parent
and Purchaser on or before the Closing Date.
9.3 CERTIFICATE. The Company having received from duly authorized
officers of Purchaser a certificate dated the Closing Date confirming that the
condition in Section 9.1 has been met and confirming, to the best of such
persons' knowledge, that the condition of 9.2 has been met.
9.4 NO INJUNCTION. There not being in effect, at the Closing, any
injunction or other binding order of any court or other tribunal having
jurisdiction over Shareholders or the Company that prohibits the consummation of
the transactions contemplated by this Agreement.
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9.5 LEGAL OPINION. The Company having received from counsel to Purchaser
and Parent an opinion in substantially the form of EXHIBIT F attached hereto.
9.6 TAX OPINION. The Company and Shareholder having received an opinion
of Rothgerber Johnson & Lyons LLP, in form and substance reasonably satisfactory
to the Company, to the effect that the Merger and the issuance of shares of MW
Common Stock in connection therewith, as described herein, shall constitute a
tax-free reorganization under Section 368 of the Internal Revenue Code of 1986,
as amended.
9.7 ESCROW AGREEMENTS. Purchaser and the Escrow Agent
having executed and delivered the Escrow Agreement and the Working Capital
Escrow Agreement.
9.8 HSR ACT. All applicable waiting periods under the HSR Act relating to
transactions contemplated hereby having expired or been terminated.
9.9 DOCUMENTATION. All agreements, documents and instruments incidental
to Purchaser's and Parent's performance of the transactions contemplated by this
Agreement, being in a form and substance reasonably satisfactory to Shareholders
and their legal counsel.
9.10 MATERIAL ADVERSE EFFECT. There having been no material adverse effect
on Purchaser or Parent since December 31, 1997.
9.11 REAL ESTATE PURCHASES. The Westline Documents shall have been
executed and delivered by the Purchaser and the other parties thereto, the
conditions to purchase of the subject real estate shall have been satisfied and
the acquisition of Westline shall have occurred simultaneously with the Closing
of the Merger.
ARTICLE 10
TERMINATION OF AGREEMENT
10.1 Right to Terminate Agreement. This Agreement may be terminated prior
to the Closing:
(a) by the mutual agreement of the Company and Purchaser;
(b) by Purchaser at any time after June 30, 1998 if any condition set
forth in Article 8 shall not have been satisfied or waived and Parent or
Purchaser is not in material breach of this Agreement;
(c) by the Company at any time after May 29, 1998 if any condition
set forth in Article 9 shall not have been satisfied or waived and the Company
is not in material breach of this Agreement;
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(d) by Purchaser at any time if it determines that any representation
or warranty set forth in Section 2 or Section 3 is inaccurate in any material
respect;
(e) by Purchaser if any Updated Disclosure Schedule delivered to
Purchaser under Section 5.5 causes any representation or warranty set forth in
Section 2 or 3 to be inaccurate in any material respect; or
(f) by the Company at any time if it determines that any
representation or warranty set forth in Section 4 is inaccurate in any material
respect.
10.2 EFFECT OF TERMINATION. Upon the termination of this Agreement
pursuant to Section 10.1:
(a) Purchaser shall promptly destroy or cause to be returned to the
Company all Confidential Information, including any copies made by or supplied
to Purchaser or any of Purchaser' Associates of any such Confidential
Information;
(b) Each party shall pay its own costs and expenses and no party
hereto shall have any obligation or liability to the other parties hereto;
PROVIDED, HOWEVER that the parties hereto shall remain bound by the provisions
of Sections 6.1 and 7.4 and Article 12.
ARTICLE 11
CERTAIN REMEDIES AND LIMITATIONS
11.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. All
representations and warranties made by the Company and Controlling Shareholders
in this Agreement, in any Schedule or in any certificate delivered pursuant
hereto, shall survive the Closing until May 10, 1999, provided that there shall
be no termination of the obligation to indemnify for a claim involving any such
representation or warranty provided a Claim Notice has been delivered prior to
May 10, 1999. The representations and warranties of any party shall be
unaffected by any investigation made by or on behalf of the other parties or by
knowledge obtained as a result thereof or otherwise. All representations and
warranties made by Parent and the Purchaser as to any fact or condition on or
before the Closing Date, in this Agreement, or in any certificate delivered
pursuant hereto, shall survive the Closing.
11.2 INDEMNIFICATION BY SHAREHOLDERS.
(a) The Purchaser and the Company and their respective Affiliates and
their respective officers, directors, shareholders, agents, representatives,
consultants, employees and affiliates, and all of their respective heirs,
successors and permitted assigns (collectively, the "Purchaser Indemnified
Parties") shall be indemnified and held harmless, jointly and severally by the
Shareholders entitled to receive the Merger Consideration, solely out of the
portion of the Merger Consideration deposited in the Escrow Account, against and
in respect of the net amount (determined after deduction of the amount of any
insurance proceeds recovered and any benefits
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inuring to the Purchaser as a result of the timing for income tax purposes of
deductions for such losses as compared to the timing of recoveries under
insurance or this Section 11.2):
(i) of any and all liabilities, obligations, losses, damages,
diminutions of value, liens and deficiencies of any kind or nature
("Losses") not accrued or reserved for in the Final Closing Statement which
exist, or which are imposed on, incurred by or asserted against any one or
more of the Purchaser Indemnified Parties,
(A) based upon, resulting from or arising out of, or as to
which there was, any breach or inaccuracy of any representation,
warranty, statement, certification, agreement or covenant made by the
Company or any Shareholder in this Agreement, any Related Agreement,
any Disclosure Schedule hereto or thereto;
(B) based upon, resulting from or arising out of any claim,
litigation or proceeding brought by any third-party based upon,
resulting from, arising out of or concerning any event, fact or
circumstance, if and to the extent that such event, fact or
circumstance arises out of or relates to the ownership or operation of
the Company prior to Closing;
(C) arising out of the cost of any required remediation
under Environmental Laws of any of the properties now or previously
owned, leased, used, occupied or contaminated by the Company, if the
materials and/or conditions requiring such remediation existed as of
the Closing;
(D) in the nature of Taxes for periods through the Closing
for which the Company is liable to the extent that an appropriate tax
authority has asserted a claim and (i) such Taxes are not reflected on
the Financial Statements and did not arise in the ordinary course of
business after the date thereof, (ii) such Taxes should have been but
were not reflected in any return filed by the Company prior to the
Closing, (iii) such Taxes were required to be paid prior to the
Closing and were not so paid, or (iv) such Taxes result from the
failure by the Company prior to the Closing to comply with any legal
requirements relating to information reporting or withholding and
payment over of taxes with respect to payments made to third parties;
(E) the amount of any brokerage commission, finder's fee or
like payment in connection with the transactions contemplated in this
Agreement to the extent not included in Company Expenses included in
the calculation of the Merger Consideration;
(ii) of any cost or expenses (including, without limitation,
settlement costs and reasonable attorneys', accountants' and experts' fees
and court costs) incurred by Purchaser Indemnified Parties in connection
with any of the foregoing (including, without
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limitation, any reasonable cost or expense incurred by Purchaser
Indemnified Parties in enforcing their rights pursuant to this Section
11.2).
Each of the above is for purposes of this Agreement a "Purchaser
Indemnified Obligation."
(b) Claims for indemnification under Section 11.2(a)(i)(B), (C) or
(D), above, may be made regardless of whether or not the matter giving rise to
such claim would constitute a breach of a representation and warranty made in
this Agreement, any Related Agreement, any Disclosure Schedule hereto and
thereto or any other written document. No Purchaser Indemnified Party shall be
required to make any claim or demand against any other person or entity prior to
the making of any claim or demand for indemnification or at any other time.
Shareholders agree that, notwithstanding any other provision of this Agreement,
any Related Agreement or applicable Legal Requirements, Purchaser Indemnified
Parties shall offset all valid claims for indemnification against the Escrow
Account in accordance with the terms of the Escrow Agreement.
11.3 LIMITATIONS ON REPRESENTATIONS, WARRANTIES AND LIABILITIES OF
SHAREHOLDERS.
(a) Notwithstanding anything to the contrary in this Agreement,
Shareholders shall not be liable to the Purchaser Indemnified Parties, except
under the Escrow Agreement as provided therein. The total amount of payments
that the Shareholders may be required to make thereunder shall be limited in the
aggregate to the Escrow Amount, which is the sole source of Purchaser's
indemnification and the Shareholders' cumulative liability shall in no event
exceed the Escrow Amount.
(b) No payment shall be required to be made for Purchaser Indemnified
Obligations unless a Claim Notice (as defined below) with respect thereto has
been delivered to Shareholders on or prior to May 10, 1999.
(c) Notwithstanding anything to the contrary in this Agreement, and
except for "willful," knowing or intentional breaches of the representations and
warranties contained herein or a breach of the representation and warranty in
Section 2.18 regarding the Shareholder Notes, no claim for indemnification may
be made by any Purchaser Indemnified Party unless and until the aggregate amount
of Losses and/or other amounts claimed for indemnification by the Purchaser
Indemnified Parties exceeds $25,000, and then only for the amount by which such
Losses and other amounts claimed exceed $25,000.
11.4 INDEMNIFICATION BY PARENT AND PURCHASER.
(a) Parent and Purchaser will, jointly and severally, indemnify and
hold harmless Shareholders and their respective affiliates, officers, directors,
partners, stockholders, agents, representatives, consultants and employees, and
all of their respective heirs, successors and permitted assigns (collectively,
the "Shareholder Indemnified Parties") from and against the net amount
(determined after deduction of the amount of any insurance proceeds recovered):
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(i) of any and all Losses which exist, or which are imposed on,
incurred by or asserted against any one or more of the Shareholder
Indemnified Parties:
(A) based upon, resulting from or arising out of or as to
which there was any breach or inaccuracy of any representation,
warranty, statement, certification, agreement, obligation or covenant
made by Parent or Purchaser in this Agreement, any Purchaser Related
Agreement or in any other written document;
(B) based upon, resulting from or arising out of any claim,
litigation or proceeding brought by any third party based upon,
resulting from arising out of or concerning any event, fact or
circumstance, if and to the extent that such event, fact or
circumstance arises out of or relates to the ownership or operation of
the Company after the Closing;
(C) arising out of the cost of remediating under
Environmental Laws any of the properties now owned, leased, used,
occupied or contaminated by the Company, if the conditions requiring
such remediation did not exist prior to the Closing;
(D) in the nature of Taxes which arise subsequent to the
Closing;
(E) the amount of any brokerage commission, finder's fee or
like payment in connection with the transactions contemplated in this
Agreement;
(ii) of any cost or expenses (including, without limitation,
settlement costs and reasonable attorneys', accountants' and experts' fees
and court costs) incurred by Shareholder Indemnified Parties in connection
with any of the foregoing (including, without limitation, any reasonable
cost or expense incurred by Shareholder Indemnified Parties in enforcing
their rights pursuant to this Section 11.4).
Each of the above is for purposes of this Agreement a "Shareholder
Indemnified Obligation."
(b) Claims for indemnification under Section 11.4(a)(i)(B), (C) or
(D), above, may be made regardless of whether or not the matter giving rise to
such claim would constitute a breach of a representation and warranty made in
this Agreement, any Related Agreement, any Disclosure Schedule hereto and
thereto or any other written document. No Shareholder Indemnified Party shall
be required to make any claim or demand against any other person or entity prior
to the making of any claim or demand for indemnification or at any other time.
11.5 LIMITATIONS ON LIABILITY OF PURCHASER.
(a) No payment shall be required to be made for Shareholders
Indemnified Obligations unless a Claim Notice with respect thereto has been
delivered to Purchaser on or prior to the third anniversary of the Closing.
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(b) Any amounts payable by Purchaser to Shareholders under this
Article 11 shall be payable in MW Common Stock at the MW Common Stock Valuation.
11.6 INDEMNIFICATION CLAIMS.
(a) If either a Purchaser Indemnified Party, on the one hand, or a
Shareholder Indemnified Party, on the other hand, (the "Claimants") wishes to
assert an indemnification claim hereunder, the Claimant shall deliver to
Shareholders, if a Purchaser Indemnified Party, or to Purchaser, if the Claimant
is a Shareholder Indemnified Party, a written notice (a "Claim Notice") setting
forth:
(i) the matter giving rise to the Claim for indemnification,
(ii) a detailed description of all of the facts and
circumstances known to Claimant giving rise to the Claim, and
(iii) a detailed description of, and a reasonable estimate of
the total amount of, the monetary amounts actually incurred or expected to
be incurred for which indemnification is sought.
(b) Purchaser Indemnified Parties and Shareholder Indemnified Parties
are referred to herein as "Indemnified Parties," and the persons from whom
indemnification may be sought pursuant to this Section 11.6 are referred to as
an "Indemnifying Party"). Within twenty (20) days after receipt of any Claim
Notice, the Indemnifying Parties will (i) acknowledge in writing their
responsibility for all or part of such matter for which indemnification is
sought under this Article 11, and will either (x) pay or otherwise satisfy the
portion of such matter as to which responsibility is acknowledged, or (y) take
such other action as is reasonably satisfactory to the Indemnified Party to
provide reasonable security or other assurances for the performance of their
obligations hereunder, and/or (ii) give written notice to the Indemnified Party
of their intention to dispute or contest all or part of such responsibility.
Upon delivery of such notice of intention to contest, the parties will negotiate
in good faith to resolve as promptly as possible any dispute as to
responsibility for, or the amount of, any such matter.
11.7 DEFENSE OF THIRD PARTY ACTIONS. If an Indemnified Party receives
notice or otherwise obtains Knowledge of any Claim or any threatened Claim that
may give rise to an indemnification claim against an Indemnifying Party, then
the Indemnified Party shall promptly deliver to the Indemnifying Party a written
notice describing such Claim in reasonable detail. The untimely delivery of such
written notice by the Indemnified Party to the Indemnifying Party shall relieve
the Indemnifying Party of liability with respect to such Claim to the extent it
has been prejudiced by lack of timely notice under this Article 11 with respect
to such Claim. The Indemnifying Party shall have the right, at its option to
assume the defense of any such Claim with its own counsel, reasonably
satisfactory to the Indemnified Party, provided that Shareholders may not assume
the defense of any Claim unless there are sufficient amounts in the
Indemnification Escrow Amount to fully indemnify Purchaser Indemnified Parties
against the amount of such Claim
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<PAGE>
and all other pending Claims against the Escrow Amount. If the Indemnifying
Party elects to assume the defense of and indemnification for any such Claim,
then:
(a) notwithstanding anything to the contrary contained in this
Agreement, the Indemnifying Party shall not be required to pay or otherwise
indemnify the Indemnified Party against any attorneys' fees or other expenses
incurred on behalf of the Indemnified Party in connection with such matter
following the Indemnifying Party's election to assume the defense of such matter
so long as the Indemnifying Party continues to diligently conduct such defense;
(b) the Indemnified Party shall make available to the Indemnifying
Party all books, records and other documents and materials that are under the
direct or indirect control of the Indemnified Party or any of the Indemnified
Party's Associates that the Indemnifying Party considers such necessary or
desirable for the defense of such matter at the expense of the Indemnifying
Party and shall make available to the Indemnifying Party reasonable access to
Indemnified Party's personnel;
(c) the Indemnified Party shall execute such documents and take such
other actions as the Indemnifying Party may reasonably request for the purpose
of facilitating the defense of, or any settlement, compromise or adjustment
relating to, such Claim (with the Indemnifying Party to reimburse Indemnified
Party for third-party, out-of-pocket expenses) and the Indemnified Party shall
not be required to take any such action or execute any document which imposes
any equitable or unindemnified liability remedy on any Indemnified Party or
would adversely affect the business or operations of the Company;
(d) the Indemnified Party shall otherwise fully cooperate as
reasonably requested by the Indemnifying Party in the defense of such Claim
(with the Indemnifying Party to reimburse Indemnified Party for third-party,
out-of-pocket expenses); and
(e) the Indemnified Party shall not admit any liability with respect
to such Claim.
If the Indemnifying Party fails or refuses to assume the defense of and
indemnification for such Claim, then the Indemnified Party shall proceed
diligently to defend such Claim with the assistance of counsel, and the
Indemnifying Party shall thereafter reimburse Indemnified Party on a current
basis, in accordance with the procedures set forth in this Agreement, as
requested by Indemnified Party for all costs and expenses of defense for which
Indemnified Party is entitled to indemnification pursuant to the terms of this
Agreement. No third party Claim may be settled by the Indemnified Party without
notice to, and the written consent of, the Indemnifying Party which consent must
not be unreasonably withheld. If such consent is not given, or written notice
that it is being withheld and the reasons therefor has not been received, by the
Indemnified Party within 15 days after such notice has been received by the
Indemnifying Party, the consent of the Indemnifying Party to such settlement
shall be deemed given.
11.8 SUBROGATION. To the extent that the Indemnifying Party makes or
is required to make any indemnification payment to any Indemnified Party, the
Indemnifying Party shall be
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<PAGE>
entitled to exercise, and shall be subrogated to, any rights and remedies
(including rights of indemnity, rights of contribution and other rights of
recovery) that the Indemnified Party or any of the Indemnified Party
affiliates may have against any other person (other than any Purchaser
Indemnified Party or Shareholders Indemnified Party) with respect to any
Losses, circumstances or matter to which such indemnification payment is
directly or indirectly related. The Indemnified Party shall permit the
Indemnifying Party to use the name of the Indemnified Party and the names of
the Indemnified Party's affiliates in any transaction or in any proceeding or
other matter involving any of such rights or remedies; and the Indemnified
Party shall take such actions as the Indemnifying Party may reasonably
request for the purpose of enabling the Indemnified Party to perfect or
exercise the Indemnifying Party's right of subrogation hereunder.
11.9 EXCLUSIVITY. The right of each party hereto to assert
indemnification claims and receive indemnification payments pursuant to this
Article 11 shall be the sole and exclusive right and remedy exercisable by
any person or entity entitled to indemnification hereunder with respect to
any breach by the other party hereto of any representation or warranty or any
other indemnity obligation hereunder.
11.10 RETENTION OF RECORDS. From and after the date of this Agreement,
Purchaser shall preserve, and shall cause the Company to preserve, all books,
records and other documents, materials and information relevant to the
representations, warranties and covenants set forth in this Agreement until
the later of four (4) years following the Closing Date or for such longer
period as the rights of the parties hereunder may exist. At all times after
the Closing Date, Purchaser and the Company shall give Shareholders and
Shareholders' Associates reasonable access to such books, records and other
documents, materials and information of the Company relating to the operation
of the business of the Company up to and including the Closing Date.
ARTICLE 12
MISCELLANEOUS
12.1 CERTAIN DEFINITIONS. For purposes of this Agreement, a contract,
obligation, liability, transaction, change, breach, encumbrance, proceeding
or other matter or event shall not be deemed "material" if the monetary
amount involved is less than 0.1% of the Merger Consideration. A "Material
Adverse Effect" is a material adverse effect on the business, operations,
assets or financial condition or results of the Company taken as a whole.
"Knowledge" means, with respect to an individual, the actual present
Knowledge of such individual. A Person (other than an individual), including
the Company, will be deemed to have Knowledge of a particular fact or matter
if any individual who serves as an officer or director of such Person has
actual present Knowledge of such fact or matter. "Shareholders'
Representative" shall mean Stephen D. Kodner or Michael B. Smith and their
successors and/or assigns.
12.2 EXPENSES. The term "Company Expenses" shall mean: (i) all costs
and expenses of the Company in connection with the negotiation of this
Agreement and the consummation of the transactions contemplated hereby
including any broker's fee set forth in SCHEDULE 2.25; (ii) one-half of the
Company's costs of all HSR filings, and any transfer taxes or stamp incurred
by the Company in connection with the transactions contemplated by this
Agreement and of Neutral
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<PAGE>
Accountants; and (iii) all other costs and expenses required to be borne by
the Company under the terms of this Agreement. Company Expenses shall not
include costs, expenses or fees of Shareholders incurred in connection with
the Merger or other transactions contemplated by this Agreement which costs,
expenses and fees shall be paid directly by the Shareholders. The Company
shall pay the fees and expenses of the Company incidental to the preparation
of this Agreement, the performance and compliance with all agreements
contained in this Agreement to be performed or complied with by it and the
consummation of the transactions contemplated hereby, including the legal and
accounting fees and expenses. Purchaser shall be responsible for its fees and
expenses incidental to the preparation of this Agreement, the performance and
compliance with all agreements contained in this Agreement to be performed or
complied with by it and the consummation of the transactions contemplated
hereby, including the legal and accounting fees and expenses and the fees and
expenses associated with any environmental assessment conducted in connection
with this transaction.
12.3 NOTICES; ETC. All notices, instructions and other communications
given hereunder or in connection herewith shall be in writing. Any such
notice, instruction or communication shall be sent either (i) by registered
or certified mail, return receipt requested, postage prepaid, or (ii) via a
reputable nationwide overnight courier service, in each case to the address
set forth below. Any such notice, instruction or communication shall be
deemed to have been delivered three business days after it is sent prepaid,
or one business day after it is sent via a reputable nationwide overnight
courier service.
If to Purchaser, to:
Mail-Well, Inc.
23 Inverness Way East
Englewood, CO 80112
Attention: Gerald F. Mahoney, Chairman
Tel: (303) 397-7410
Fax: (303) 397-7400
with a copy to:
Mail-Well, Inc.
23 Inverness Way East
Englewood, CO 80112
Attention: Roger Wertheimer, Vice President, General Counsel
Tel: (303) 397-7440
Fax: (303) 768-7380
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If to Company, Controlling Shareholders, or to the Shareholders' Representative:
Stephen D. Kodner or
Michael B. Smith
c/o Stephen D. Kodner
10066 Carter Manor Drive
St. Louis, MO 63124
With a copy to:
Joseph D. Lehrer
Greensfelder, Hemker & Gale, P.C.
10 South Broadway, Suite 2000
St. Louis, Missouri 63102
or, in each case, to such other address as may be specified in writing to the
other parties.
Any party may give any notice, instruction or communication in
connection with this Agreement using any other means (including personal
delivery, telecopy or ordinary mail), but no such notice, instruction or
communication shall be deemed to have been delivered unless and until it is
actually received by the party to whom it was sent. Any party may change the
address to which notices, instructions or communications are to be delivered
by giving the other parties to this Agreement notice thereof in the manner
set forth in this Section 12.3.
12.4 ASSIGNMENT. Neither the Company nor any Shareholder may assign or
otherwise transfer this Agreement or any of their rights hereunder to any
person or entity, without the prior written consent of Purchaser. Subject to
the foregoing, this Agreement shall inure to the benefit of and be binding
upon Shareholders and their successors, personal representatives, heirs, and
permitted assigns. Notwithstanding the foregoing, this Agreement shall not be
terminated by the death or incapacity of any Shareholder, and if, after the
execution hereof, any Shareholder shall die or become incapacitated, this
Agreement shall be binding upon the successors and assigns of any Shareholder
as if such death or incapacity had not occurred and regardless of notice
thereof. Except as expressly permitted by this Section 12.4, Purchaser shall
not voluntarily or by operation of law assign or otherwise transfer this
Agreement or any of its rights or obligations hereunder except to Parent or
any of its wholly owned subsidiaries, without the prior written consent of
Shareholders' Representative and provided that any permitted assignment or
transfer shall not relieve Purchaser or Parent of any of their joint and
several obligations hereunder. Purchaser may collaterally assign and/or grant
a security interest in its rights under this Agreement and under other
closing documents to any financial institution(s) or their affiliates as
required pursuant to any existing or future financing arrangements with the
prior written consent of the Shareholders' Representative (which consent will
not be unreasonably withheld or delayed).
12.5 ENTIRE AGREEMENT; AMENDMENT; GOVERNING LAW; ETC. This Agreement
(together with the Exhibits and Disclosure Schedules) embodies the entire
agreement and understanding among the parties hereto with respect to the
subject matter hereof. This Agreement
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may be amended, modified, waived, discharged or terminated only by (and any
consent hereunder shall be effective only if contained in) an instrument in
writing signed by the party against which enforcement of such amendment,
modification, waiver, discharge, termination or consent is sought. This
Agreement shall be construed in accordance with and governed by the laws of
the State of Delaware as it applies to contracts to be performed entirely
with the State of Delaware. No representation or warranty (either express,
implied or otherwise) is being made by any party with respect to the subject
matter hereof other than as expressly set forth herein.
12.6 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which is an original, but all of which shall constitute
one instrument. Facsimile signatures to this Agreement shall be binding upon
the parties.
12.7 THIRD PARTY RIGHTS. The parties do not intend to confer any
benefit hereunder on any person or entity other than the parties hereto, the
Indemnified Parties and their respective successors in interest.
12.8 EXHIBITS AND SCHEDULES. Each of the Exhibits and Schedules
referred to herein and attached hereto is an integral part of this Agreement
and is incorporated herein by this reference.
12.9 PRONOUNS. All pronouns and any variations thereof used in this
Agreement shall be deemed to refer to the masculine, feminine or neuter,
singular or plural, as appropriate.
12.10 AUTHORITY AND EXECUTION. Each person executing this Agreement on
behalf of a party hereto represents and warrants that he is duly and validly
authorized to do so on behalf of such party, with full right and authority to
execute this Agreement and to bind such party with respect to all of its
obligations hereunder.
12.11 SEVERABILITY. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction, as to such jurisdiction, shall
be ineffective to the extent of such invalidity or unenforceability, without
rendering invalid or unenforceable the retraining terms and provisions of
this Agreement or affecting the validity or enforceability of any of the
terms or provisions of this Agreement in any other jurisdiction.
12.12 TIME OF ESSENCE. Time is of the essence of this Agreement.
12.13 INTERPRETATION. Each party acknowledges that such party, either
directly or through such party's representatives, has participated in the
drafting of this Agreement, and any applicable rule of constructions that
ambiguities are to be resolved against the drafting party should not be
applied in connection with the construction or interpretation of this
Agreement.
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12.14 ARBITRATION.
(a) Any controversy or claim arising out of or related to this
Agreement, or a breach hereof, is to be settled by arbitration in accordance
with the procedures set forth in SCHEDULE 12.14.
(b) Notices of demand for arbitration must be filed in writing with
the other parties hereto and in accordance with SCHEDULE 12.14. A demand for
arbitration is to be made within a reasonable time after the claim or
controversy has arisen, but in no event later than the date when institution of
legal or equitable proceedings based on such claim or controversy would be
barred by the applicable statute of limitations.
(c) No arbitration hereunder may include, by consolidation, joinder
or any other manner, any Person other than Parent, Purchaser, Company, the
Shareholders, and other Persons substantially involved in a common question of
fact or law whose presence is required if complete relief is to be accorded in
arbitration. No Person other than Parent, Purchaser, Company or the
Shareholders may be included as an original third party or additional third
party to an arbitration whose interest or responsibility is insubstantial.
Consent to arbitration involving an additional Person does not constitute
consent to arbitration of a dispute not described therein or with a Person not
named or described therein. This Section 12.14 is enforceable by specific
performance under applicable law in a court of competent jurisdiction.
(d) The award rendered by the arbitrators, including as to legal fees
in accordance with SCHEDULE 12.14, is final, and judgment may be entered upon it
in accordance with applicable law in any court of competent jurisdiction.
THIS AGREEMENT CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY BE ENFORCED BY
THE PARTIES.
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IN WITNESS WHEREOF, the parties hereto have duly caused this Agreement to
be executed as of the date first above written.
PARENT
MAIL-WELL, INC., a Colorado corporation
By:
-------------------------------------------
Name: Paul V. Reilly
Title: President
PURCHASER
MAIL-WELL I CORPORATION, a Delaware corporation
By:
-------------------------------------------
Name: Paul V. Reilly
Title: President
THE COMPANY
ACCU-COLOR, INC.
By:
-------------------------------------------
Name: Stephen D. Kodner
Title: President
CONTROLLING SHAREHOLDERS
--------------------------------------------------
Stephen D. Kodner
--------------------------------------------------
Michael B. Smith
--------------------------------------------------
Gary P. Reim
--------------------------------------------------
Gary L. Lorenz
--------------------------------------------------
Robert C. Fox
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<PAGE>
SCHEDULE 12.14
ARBITRATION PROCEDURES
Purchaser and Shareholders hereto agree that in the event of a dispute
between them relating to or arising out of this Agreement, the involved parties
shall submit such dispute to binding arbitration as provided herein. All
arbitrations would be conducted in Denver, Colorado, or at another location
mutually approved by the parties, pursuant to the Commercial Arbitration Rules
of the American Arbitration Association except as herein may be provided. If
the panel used will consist of three arbitrators, such arbitrators will have
experience in the printing industry and the decision of the arbitrators would be
final and binding on all parties. All arbitration shall be undertaken pursuant
to the Federal Arbitration Act, where applicable, and the decision of the
arbitrators shall be enforceable in any court of competent jurisdiction. All of
the parties shall agree to waive their respective rights to further appeal or
redress in any other court or tribunal except solely for the purpose of
obtaining execution of the decision resulting from the arbitration proceeding.
In any dispute where a party seeks $200,000.00 or more in damages or if the
dispute involves whether the Purchaser or the Company properly determined to
terminate the Agreement or refused to close the transactions contemplated by
this Agreement, three arbitrators shall be employed to arbitrate the dispute.
In the event that the dispute involves less than $200,000.00, there shall be one
arbitrator. In the event of any arbitration or other legal proceeding brought
by any party against another party with regard to any matter arising out of or
related to this Agreement, each party hereby expressly agrees that the final
award decision would also provide for all allocation and division between or
among the parties to the arbitration, on a basis which is just and equitable
under the circumstances, of all costs and expenses of the dispute, including
without limitation court costs and arbitrators', reasonable attorneys',
accountants' and expert witness fees, costs and expenses (including
disbursements) incurred in connection with such proceedings. In resolving all
disputes between the parties, the arbitrators shall apply the substantive law of
the State of Delaware. The arbitrators are directed, by this Agreement, to
conduct the arbitration hearing no later than three months from the service of
the statement of claim and demand for arbitration unless good cause is shown
establishing that the hearing cannot fairly and practically be so convened.
Depositions shall be taken only as deemed appropriate by the arbitrator(s)
and only where good cause is shown. Good cause is agreed to exist with respect
to the depositions of officers and management personnel to the extent Knowledge,
as defined in the Agreement at Section 12.1 therein, is relevant to the issue.
Parties shall be entitled to conduct document discovery by requesting production
of documents. Responses or objections shall be served twenty days after receipt
of a request. The arbitrators shall resolve any discovery disputes of such
preheating conferences as may be needed. All parties shall agree that the
arbitrators and any counsel of record to the proceeding shall have the power or
subpoena process as provided by law.
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DEFINITIONS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Parent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Mail-Well. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Purchaser. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Company. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Controlling Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
DGCL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
MGBCL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
Surviving Corporation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
Merger Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
Total Shareholder Consideration. . . . . . . . . . . . . . . . . . . . . . . . . . .2
MW Common Stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
MW Common Stock Valuation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
Subsidiary Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
Dissenting Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
Pro Rata Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
Certificate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
Dissenting Shareholders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
Debt Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
Prepayment Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
Creditors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
Payoff Letters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
Dissenting Shareholders Escrow Amount. . . . . . . . . . . . . . . . . . . . . . . .5
Indemnification Escrow Amount. . . . . . . . . . . . . . . . . . . . . . . . . . . .5
Working Capital Escrow Amount. . . . . . . . . . . . . . . . . . . . . . . . . . . .5
Escrow Amount. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
Escrow Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
Initial Distribution Amount. . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
Person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
Working Capital. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
Computation Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
Estimated Working Capital Statement. . . . . . . . . . . . . . . . . . . . . . . . .7
GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
56
<PAGE>
Estimated Working Capital. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
Final Working Capital Statement. . . . . . . . . . . . . . . . . . . . . . . . . . .7
Final Closing Statement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
Notice of Working Capital Disagreement . . . . . . . . . . . . . . . . . . . . . . .8
Final Closing Statement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
Disputed Working Capital Matter. . . . . . . . . . . . . . . . . . . . . . . . . . .8
Neutral Accountant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
Final Closing Statement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
Notice of Inventory Disagreement . . . . . . . . . . . . . . . . . . . . . . . . . .9
Disputed Inventory Matter. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
Accounts Receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Transfer Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Registration Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Securities Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Registrable Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Initial Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Registration Statement Period. . . . . . . . . . . . . . . . . . . . . . . . . . . 11
SEC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Exchange Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Liability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Registration Document. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Disclosure Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Related Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Voting Debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Equity Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Legal Requirement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Annual Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Interim Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Permitted Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Real Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Leased Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Title Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Permits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Benefit Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Pension Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Multiemployer Plans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
PBGC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
COBRA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Claim. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Tax. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Tax Returns. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
57
<PAGE>
Material Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Hazardous Materials. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
RCRA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
CERCLA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Environmental Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Intellectual Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Related Parties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Affiliate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Shareholder Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Purchaser Related Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SEC Documents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
HSR Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Updated Disclosure Schedule. . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Associates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Confidential Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Transferred Employee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Westline Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Debt Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Signet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Purchaser Indemnified Parties. . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Purchaser Indemnified Obligation . . . . . . . . . . . . . . . . . . . . . . . . . 45
Shareholder Indemnified Parties. . . . . . . . . . . . . . . . . . . . . . . . . . 45
Shareholder Indemnified Obligation . . . . . . . . . . . . . . . . . . . . . . . . 46
Claimants. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Claim Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Indemnified Parties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Indemnifying Party . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Material Adverse Effect. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Knowledge. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Shareholders' Representative . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Company Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
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ACQUISITION AGREEMENT
AND
PLAN OF MERGER
by and among
MAIL-WELL INC.,
a Colorado corporation,
MAIL-WELL I CORPORATION,
a Delaware corporation,
CLARKE PRINTING, CO.,
a Texas corporation
and
RUSSELL L. C. HILL,
the sole shareholder of Clarke Printing, Co.
May 15, 1998
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C> <C>
ARTICLE 1 - PRINCIPAL TERMS OF THE MERGER. . . . . . . . . . . . . . . . . . 1
1.1 Plan of Merger . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 No Further Rights of Transfer. . . . . . . . . . . . . . . . . . 2
1.3 Surviving Corporation. . . . . . . . . . . . . . . . . . . . . . 3
1.4 [Intentionally omitted.] . . . . . . . . . . . . . . . . . . . . 3
1.5 The Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.6 Surrender of Certificates. . . . . . . . . . . . . . . . . . . . 4
1.7 Working Capital Settlement . . . . . . . . . . . . . . . . . . . 5
1.8 Additional Post-Closing Adjustments. . . . . . . . . . . . . . . 7
1.9 Transfer Taxes . . . . . . . . . . . . . . . . . . . . . . . . . 9
1.10 MW Common Stock. . . . . . . . . . . . . . . . . . . . . . . . . 9
1.11 Investment Letter. . . . . . . . . . . . . . . . . . . . . . . .11
ARTICLE 2 - REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND
SHAREHOLDER. . . . . . . . . . . . . . . . . . . . . . . . . . .11
2.1 Organization, Standing, Corporate Authorization,
and Enforceability . . . . . . . . . . . . . . . . . . . . . . .11
2.2 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . .12
2.3 Articles of Incorporation and Bylaws; Certain Records. . . . . .13
2.4 Compliance with Other Instruments and Laws . . . . . . . . . . .13
2.5 Governmental Authorizations; Consents. . . . . . . . . . . . . .13
2.6 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . .14
2.7 Financial Statements; Conduct of the Business;
No Undisclosed Liabilities . . . . . . . . . . . . . . . . . . .14
2.8 Absence of Certain Changes or Events . . . . . . . . . . . . . .14
2.9 Title to Property, Absence of Liens and Encumbrances . . . . . .16
2.10 Full Authority; Compliance with Laws . . . . . . . . . . . . . .17
2.11 Benefit Plans. . . . . . . . . . . . . . . . . . . . . . . . . .18
2.12 Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20
2.13 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20
2.14 Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . .22
2.15 Environmental Quality. . . . . . . . . . . . . . . . . . . . . .24
2.16 Intellectual Property. . . . . . . . . . . . . . . . . . . . . .25
2.17 Prepaid Expenses . . . . . . . . . . . . . . . . . . . . . . . .25
2.18 Related Party Transactions . . . . . . . . . . . . . . . . . . .25
2.19 Labor Matters. . . . . . . . . . . . . . . . . . . . . . . . . .26
2.20 Customers and Vendors. . . . . . . . . . . . . . . . . . . . . .26
2.21 Other Disclosures. . . . . . . . . . . . . . . . . . . . . . . .27
2.22 Parachute Payments . . . . . . . . . . . . . . . . . . . . . . .27
2.23 Product Warranty and Liability.. . . . . . . . . . . . . . . . .27
2.24 Accuracy . . . . . . . . . . . . . . . . . . . . . . . . . . . .27
2.25 Brokers and Finders. . . . . . . . . . . . . . . . . . . . . . .28
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ARTICLE 3 - ADDITIONAL REPRESENTATIONS AND WARRANTIES OF SHAREHOLDER . . . .28
3.1 Ownership of Shares. . . . . . . . . . . . . . . . . . . . . . .28
3.2 Authorization. . . . . . . . . . . . . . . . . . . . . . . . . .28
3.3 Enforceability . . . . . . . . . . . . . . . . . . . . . . . . .28
ARTICLE 4 - REPRESENTATIONS AND WARRANTIES OF PURCHASER AND PARENT . . . . .28
4.1 Organization and Standing of Purchaser . . . . . . . . . . . . .28
4.2 Authorization. . . . . . . . . . . . . . . . . . . . . . . . . .29
4.3 Enforceability . . . . . . . . . . . . . . . . . . . . . . . . .29
4.4 Compliance with Other Instruments and Laws . . . . . . . . . . .29
4.5 Governmental Authorizations, Consents. . . . . . . . . . . . . .29
4.6 MW Common Stock. . . . . . . . . . . . . . . . . . . . . . . . .29
4.7 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . .29
4.8 Securities Act of 1933 . . . . . . . . . . . . . . . . . . . . .30
4.9 Brokers and Finders. . . . . . . . . . . . . . . . . . . . . . .30
4.10 Purchaser's Knowledge. . . . . . . . . . . . . . . . . . . . . .30
4.11 SEC Documents. . . . . . . . . . . . . . . . . . . . . . . . . .30
4.12 Accuracy . . . . . . . . . . . . . . . . . . . . . . . . . . . .30
4.13 Investigation. . . . . . . . . . . . . . . . . . . . . . . . . .31
ARTICLE 5 - COVENANTS OF THE COMPANY AND SHAREHOLDER . . . . . . . . . . . .31
5.1 Conduct of Business. . . . . . . . . . . . . . . . . . . . . . .31
5.2 Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . .32
5.3 No Solicitation or Negotiation . . . . . . . . . . . . . . . . .33
5.4 Filings and Consents . . . . . . . . . . . . . . . . . . . . . .33
5.5 Updated Disclosure Schedules . . . . . . . . . . . . . . . . . .34
ARTICLE 6 - COVENANTS OF PARENT AND PURCHASER. . . . . . . . . . . . . . . .34
6.1 Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . .34
6.2 Filings and Consents . . . . . . . . . . . . . . . . . . . . . .34
6.3 Filing of Final Tax Returns. . . . . . . . . . . . . . . . . . .35
ARTICLE 7 - COVENANTS OF ALL PARTIES . . . . . . . . . . . . . . . . . . . .35
7.1 Commercially Reasonable Efforts; Further Assurances. . . . . . .35
7.2 Pooling of Interests . . . . . . . . . . . . . . . . . . . . . .36
7.3 Certain Filings, Etc . . . . . . . . . . . . . . . . . . . . . .36
7.4 Public Announcements . . . . . . . . . . . . . . . . . . . . . .36
7.5 Real Estate. . . . . . . . . . . . . . . . . . . . . . . . . . .36
ARTICLE 8 - CONDITIONS TO OBLIGATION OF PURCHASER TO CLOSE . . . . . . . . .37
8.1 Accuracy of Representations and Warranties . . . . . . . . . . .37
8.2 Shareholder Approval . . . . . . . . . . . . . . . . . . . . . .37
8.3 Performance. . . . . . . . . . . . . . . . . . . . . . . . . . .37
</TABLE>
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8.4 Certificate. . . . . . . . . . . . . . . . . . . . . . . . . . .37
8.5 Debt Certificates and Payoff Letters.. . . . . . . . . . . . . .37
8.6 No Injunction. . . . . . . . . . . . . . . . . . . . . . . . . .37
8.7 No Material Adverse Effect . . . . . . . . . . . . . . . . . . .37
8.8 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . .37
8.9 Shareholder Representation and Affiliate Letter. . . . . . . . .38
8.10 Legal Opinions . . . . . . . . . . . . . . . . . . . . . . . . .38
8.11 Certificate of Secretary . . . . . . . . . . . . . . . . . . . .38
8.12 Escrow Agreements. . . . . . . . . . . . . . . . . . . . . . . .38
8.13 Non-Compete Agreements . . . . . . . . . . . . . . . . . . . . .38
8.14 UCC-3s . . . . . . . . . . . . . . . . . . . . . . . . . . . . .38
8.15 HSR Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . .38
8.16 Accounting, Tax Matters. . . . . . . . . . . . . . . . . . . . .38
8.17 Real Estate Purchases. . . . . . . . . . . . . . . . . . . . . .38
8.18 No Discovery . . . . . . . . . . . . . . . . . . . . . . . . . .38
8.19 Documentation. . . . . . . . . . . . . . . . . . . . . . . . . .38
8.20 Approval of Purchaser's Board. . . . . . . . . . . . . . . . . .39
ARTICLE 9 - CONDITIONS TO OBLIGATIONS OF THE COMPANY TO CLOSE. . . . . . . .39
9.1 Accuracy of Representations and Warranties . . . . . . . . . . .39
9.2 Performance. . . . . . . . . . . . . . . . . . . . . . . . . . .39
9.3 Certificate. . . . . . . . . . . . . . . . . . . . . . . . . . .39
9.4 No Injunction. . . . . . . . . . . . . . . . . . . . . . . . . .39
9.5 Legal Opinion. . . . . . . . . . . . . . . . . . . . . . . . . .39
9.6 Tax Opinion. . . . . . . . . . . . . . . . . . . . . . . . . . .39
9.7 Escrow Agreements. . . . . . . . . . . . . . . . . . . . . . . .39
9.8 HSR Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . .40
9.9 Documentation. . . . . . . . . . . . . . . . . . . . . . . . . .40
9.10 Material Adverse Effect. . . . . . . . . . . . . . . . . . . . .40
ARTICLE 10 - TERMINATION OF AGREEMENT. . . . . . . . . . . . . . . . . . . .40
10.1 Right to Terminate Agreement . . . . . . . . . . . . . . . . . .40
10.2 Effect of Termination. . . . . . . . . . . . . . . . . . . . . .40
ARTICLE 11 - CERTAIN REMEDIES AND LIMITATIONS. . . . . . . . . . . . . . . .41
11.1 Survival of Representations, Warranties and Covenants. . . . . .41
11.2 Indemnification by Shareholder . . . . . . . . . . . . . . . . .41
11.3 Limitations on Representations, Warranties and
Liabilities of Shareholder . . . . . . . . . . . . . . . . . . .43
11.4 Indemnification by Parent and Purchaser. . . . . . . . . . . . .43
11.5 Limitations on Liability of Purchaser. . . . . . . . . . . . . .44
11.6 Indemnification Claims . . . . . . . . . . . . . . . . . . . . .44
11.7 Defense of Third Party Actions . . . . . . . . . . . . . . . . .45
11.8 Subrogation. . . . . . . . . . . . . . . . . . . . . . . . . . .46
11.9 Exclusivity. . . . . . . . . . . . . . . . . . . . . . . . . . .46
11.10 Retention of Records . . . . . . . . . . . . . . . . . . . . . .47
</TABLE>
-iii-
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<TABLE>
<S> <C> <C>
ARTICLE 12 - MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . .47
12.1 Certain Definitions. . . . . . . . . . . . . . . . . . . . . . .47
12.2 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . .47
12.3 Notices; Etc . . . . . . . . . . . . . . . . . . . . . . . . . .48
12.4 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . .49
12.5 Entire Agreement; Amendment; Governing Law; Etc. . . . . . . . .49
12.6 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . .49
12.7 Third Party Rights . . . . . . . . . . . . . . . . . . . . . . .49
12.8 Exhibits and Schedules . . . . . . . . . . . . . . . . . . . . .50
12.9 Pronouns . . . . . . . . . . . . . . . . . . . . . . . . . . . .50
12.10 Authority and Execution. . . . . . . . . . . . . . . . . . . . .50
12.11 Severability . . . . . . . . . . . . . . . . . . . . . . . . . .50
12.12 Time of Essence. . . . . . . . . . . . . . . . . . . . . . . . .50
12.13 Interpretation . . . . . . . . . . . . . . . . . . . . . . . . .50
12.14 Arbitration. . . . . . . . . . . . . . . . . . . . . . . . . . .50
</TABLE>
Exhibit A Certificate of Merger
Exhibit B Escrow Agreement
Exhibit C Affiliate Letter
Exhibit D Legal Opinion of Company's Counsel
Exhibit E Non-Compete Agreement
Exhibit F Legal Opinion of Purchaser's Counsel
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ACQUISITION AGREEMENT AND PLAN OF MERGER
THIS ACQUISITION AGREEMENT AND PLAN OF MERGER (this "Agreement") is made
and entered into as of May 15, 1998, by and among MAIL-WELL, INC., a Colorado
corporation ("Parent"), MAIL-WELL I CORPORATION, a Delaware corporation
("Mail-Well" or "Purchaser"), and CLARKE PRINTING, CO., a Texas corporation
(the "Company"), and RUSSELL L. C. HILL, the sole shareholder of the Company
("Shareholder").
WITNESSETH:
WHEREAS the Company is engaged in the commercial printing business (the
"Business");
WHEREAS, the respective Boards of Directors of Parent, Mail-Well, and the
Company have approved the acquisition of the Company by Mail-Well;
WHEREAS, to complete such acquisition the respective Boards of Directors of
Parent, Mail-Well and the Company have approved the merger of the Company with
and into Mail-Well (the "Merger"), pursuant to and subject to the terms and
conditions of this Agreement;
WHEREAS, the Directors of the Company have unanimously determined that the
Merger is fair to and in the best interests of its Shareholder, approved the
Merger and this Agreement and the transactions contemplated hereby, and
recommended the approval of the Merger and approval and adoption of this
Agreement by Shareholder; and
WHEREAS, the Merger is intended to be accounted for as a pooling of
interests.
NOW, THEREFORE, in consideration of the mutual covenants, representations
and warranties made herein and of the mutual benefits to be derived herefrom,
the Company, Parent and Purchaser hereby agree as follows:
ARTICLE 1
PRINCIPAL TERMS OF THE MERGER
1.1 PLAN OF MERGER. Subject to the terms and conditions of this
Agreement, the Merger will be carried out in the following manner:
(a) The Company, Parent and Purchaser will cooperate and use their
respective best efforts to consummate the transactions contemplated by this
Agreement.
(b) Subject to the provisions of this Agreement, a Certificate of
Merger, substantially in the form of EXHIBIT A, shall be duly executed and, on
the Closing Date (as defined in Section 1.5 hereof), or as soon thereafter as
reasonably practicable, filed with the Delaware Secretary of State in accordance
with the General Corporation Law of the State of Delaware (the "DGCL"). In
addition, Articles of Merger shall be duly prepared, executed and acknowledged
by
<PAGE>
the Company in accordance with the Texas Business Corporation Act (the "TBCA")
and shall be filed on the Closing Date with the Texas Secretary of State. The
Merger shall become effective at the date and time set forth in the Certificate
of Merger and the Articles of Merger (the "Effective Time").
(c) At the Effective Time, the Company shall merge with and into
Mail-Well, the separate existence of the Company shall cease, and Mail-Well
shall continue as the surviving corporation. (Mail-Well, in its capacity as the
corporation surviving the Merger, is hereinafter sometimes referred to as the
"Surviving Corporation.")
(d) From and after the Effective Time, the Merger shall have the
effects set forth in Section 259 of the DGCL and Article 5.06 of the TBCA.
(e) The "Merger Consideration" which shall be paid by Parent and
Purchaser in the Merger, to be paid to Shareholder, shall be equal to (i)
$11,387,000 less (ii) the amount of Debt as defined in Section 1.5; less (iii)
the amount of unpaid Company Expenses, as defined in Section 12.2; plus or minus
(iv) the adjustment under Section 1.7(b) hereof. The Merger Consideration shall
be paid in duly authorized, validly issued, fully paid and nonassessable Parent
common stock ("MW Common Stock") valued at $43.93 per share (the "MW Common
Stock Valuation"), which MW Common Stock shall be issued of record on the
Closing Date on the Parent's (and its transfer agent's) books.
(f) In the event of any stock split, combination, reclassification
or stock dividend with respect to MW Common Stock, any change or conversion of
MW Common Stock into other securities or any other dividend or distribution with
respect to MW Common Stock (other than quarterly cash dividends issued in the
ordinary course consistent with past practice), including without limitation,
any distribution by Parent of shares of capital stock of any of its Affiliates
(as defined in Section 2.18), or if a record date with respect to any of the
foregoing should occur, prior to the Effective Time, appropriate adjustments
shall be made to the MW Common Stock Valuation, and thereafter all references in
this Agreement to the MW Common Stock Valuation shall be deemed to be the MW
Common Stock Valuation as so adjusted.
(g) At the Effective Time and subject to the terms of this
Agreement, each share of common stock, par value $10.00 per share, of the
Company (the "Common Stock") then issued and outstanding (other than any shares
of Common Stock which are held in the treasury of the Company (the "Treasury
Shares") shall, by virtue of the Merger and without any action on the part of
the holder thereof, be converted into and represent the right to receive a pro
rata share of the Merger Consideration ("Pro Rata Share") which shall be equal
to the fraction obtained by dividing one by the total number of shares of Common
Stock outstanding at the Effective Time (other than the Treasury Shares).
1.2 NO FURTHER RIGHTS OF TRANSFER. At and after the Effective Time,
each holder of a certificate for Common Stock (a "Certificate") shall cease to
have any rights as a shareholder, except for the right to surrender his or her
Certificate (other than Certificates representing Treasury Shares) in exchange
for payment of the Merger Consideration deliverable in respect
2
<PAGE>
thereof, and no transfer of shares of Common Stock shall be made on the stock
transfer books of the Company. Certificates presented to the Surviving
Corporation after the Effective Time shall be canceled and exchanged for MW
Common Stock and cash as provided in this Article I. At the close of business
on the day of the Effective Time, the stock ledger of the Company with respect
to Common Stock shall be closed.
1.3 SURVIVING CORPORATION. The Certificate of Incorporation of
Mail-Well, as in effect immediately prior to the Effective Time, shall be the
Certificate of Incorporation of the Surviving Corporation. The Bylaws of
Mail-Well, as in effect immediately prior to the Effective Time, shall be the
Bylaws of the Surviving Corporation. At the Effective Time, the directors and
officers of Mail-Well immediately prior to the Effective Time shall be the
directors and officers of the Surviving Corporation, each of such directors to
hold office, subject to the applicable provisions of the Certificate of
Incorporation and Bylaws of the Surviving Corporation, until the next annual
shareholder's meeting of the Surviving Corporation and until their respective
successors shall be duly elected or appointed and qualified.
1.4 [INTENTIONALLY OMITTED.]
1.5 THE CLOSING. The closing of the transactions contemplated by this
Article 1 (the "Closing") shall be held at the offices of Rothgerber Johnson &
Lyons LLP in Denver, Colorado at 9:00 a.m. (local time) on May 29, 1998, or at
such other place, time and date as may be jointly designated by Purchaser, the
Company and Shareholder (the date on which the Closing takes place, the "Closing
Date"). At or before the Closing, each of the following shall occur:
(a) As soon as practicable but no later than four business days
before the scheduled Closing Date, the Company shall deliver to Purchaser (i) a
certificate (the "Debt Certificate") executed by the president of the Company
setting forth the amount of the outstanding principal balance and the interest
of any kind, as well as the amount of early retirement or prepayment fees and/or
penalties of any kind (the "Prepayment Fees") that will be due and payable as of
the Closing Date by the Company pursuant to any Debt that will be outstanding as
of the Closing Date to each creditor to whom any such Debt is owed (the
"Creditors") and (ii) a letter (the "Payoff Letters"), executed by the Company
and an authorized representative of each Creditor that is a bank, leasing
company or other financial institution or who is listed in SCHEDULE 1.5(a) to
whom any Debt is owed (other than the Debt set forth on Schedule 1.5(b)),
setting forth the amount of principal, interest and Prepayment Fees, that will
be due and payable by the Company to each of such Creditors as of the Closing
Date and undertaking to terminate, either at or immediately after the Closing,
all liens or other security interests securing such Debt upon payment of the
amounts due and owing. "Debt" shall include all funded long term, short term or
"line of credit" indebtedness, to banks and financial institutions, Shareholder
and other third parties, including the current portion thereof, accrued interest
thereon, and Prepayment Fees, together with the unamortized principal amount
including the current portion, interest expense required to be accrued thereon
and Prepayment Fees of all capitalized lease obligations that are properly
classified as liabilities on the balance sheet of the Company at Closing in
conformity with GAAP, the amounts of which shall be determined consistent with
the Company's audited Financial Statements; provided, however, that Debt shall
3
<PAGE>
not include those prepayment fees for Debt listed on SCHEDULE 1.5(b) which is
not going to be discharged at Closing.
(b) At the Closing, that portion of the Debt owed to each Creditor
executing a Payoff Letter or whose Debt is otherwise acknowledged to Parent's
reasonable satisfaction, except that listed in SCHEDULE 1.5(b), shall be paid by
Purchaser to such Creditor by wire transfer of immediately available funds to an
account or accounts designated by such Creditors and in the amounts specified in
the Payoff Letters or otherwise established with such Creditors.
(c) At the Closing, Purchaser shall pay any unpaid Company Expenses
accrued on the books of the Company by wire transfer of immediately available
funds or by certified bank check.
(d) [INTENTIONALLY OMITTED.]
(e) At the Closing, from the Merger Consideration the Purchaser
shall deliver stock certificates representing 19,441 shares of MW Common Stock
to the Escrow Agent acting pursuant to the Escrow Agreement referred to below
(such amount, together with dividends thereon, additions thereto, and releases
therefrom, as more specifically set forth in such Escrow Agreement, is referred
to herein as the "Indemnification Escrow Amount").
(f) At the Closing, from the Merger Consideration the Purchaser
shall deliver stock certificates representing 1,852 shares of MW Common Stock to
the Escrow Agent acting pursuant to the Escrow Agreement referred to below (such
amount, together with dividends thereon, additions thereto, and releases
therefrom, as more specifically set forth in such Escrow Agreement, is referred
to herein as the "Working Capital Escrow Amount").
(g) The Working Capital Escrow Amount and the Indemnification
Escrow Amount (collectively, the "Escrow Amount") shall be held and distributed
by such Escrow Agent in accordance with the terms of the Escrow Agreement,
substantially in the form attached hereto as EXHIBIT B (the "Escrow Agreement"),
which shall be entered into by the Escrow Agent named therein, Purchaser and
Shareholder prior to or on the Closing Date.
1.6 SURRENDER OF CERTIFICATES.
(a) At any time after the Effective Time, upon surrender for
cancellation to the Purchaser of his Certificate(s), Shareholder shall be
entitled to receive in exchange for each share of Common Stock represented by
such surrendered Certificate the Initial Distribution Amount. The "Initial
Distribution Amount" shall be the Merger Consideration less the Escrow Amount
delivered to the Escrow Agent pursuant to Section 1.5. Promptly upon
termination of each of the escrows pursuant to the terms of this Agreement,
Shareholder shall be entitled to receive the particular Escrow Amount
distributed to Shareholder. The amounts so payable to a holder of a
Certificate(s) shall be paid with a certificate for the number of shares of MW
Common Stock having a value (based on the MW Common Stock Value and rounded down
to the nearest whole share) equal to the amount so due plus cash in lieu of
fractional shares and in the amount of any
4
<PAGE>
unpaid dividends or other distributions payable on such shares of MW Common
Stock with a record date after the Effective Time. The Certificate(s) so
surrendered shall be canceled. Until so surrendered, each Certificate shall be
deemed, for all corporate purposes, to evidence only the right to receive the
Merger Consideration deliverable in respect thereof.
For purposes of this Agreement, "Person" shall mean and include an
individual, a partnership, a joint venture, a corporation, a trust, an
unincorporated organization, a group and a government or other department or
agency thereof.
(b) If the Merger Consideration (or any portion thereof) is to be
delivered to a Person other than the Person in whose name the Certificates
surrendered in exchange therefor are registered, it shall be a condition to the
payment of the Merger Consideration that the Certificates so surrendered shall
be properly endorsed or accompanied by appropriate stock powers and otherwise in
proper form for transfer, that such transfer otherwise be proper and that the
Person requesting such transfer pay to Mail-Well any transfer or other taxes
payable by reason of the foregoing or establish to the satisfaction of Mail-Well
that such taxes have been paid or are not required to be paid.
(c) In the event any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the Person claiming
such Certificate to be lost, stolen or destroyed, and upon such Person's
agreement to indemnify the Parent and Mail-Well against any claim that may be
made against the Parent or Mail-Well with respect to the Certificate claimed to
have been lost, stolen or destroyed, or, if required by Mail-Well, upon such
Person's obtaining a lost instrument bond in form and amount satisfactory to
Mail-Well, Mail-Well will issue in exchange for such lost, stolen or destroyed
Certificate the Merger Consideration deliverable in respect thereof as
determined in accordance with this Article 1.
(d) No certificates or scrip representing fractional shares of MW
Common Stock shall be issued upon the surrender for exchange of Certificates
pursuant to this Article 1 or as part of a distribution from the Escrow Amount;
no dividend or other distribution by Parent and no stock split, combination or
reclassification shall relate to any such fractional share; and no such
fractional share shall entitle the record or beneficial owner thereof to vote or
to any other rights of a stockholder of Parent. In lieu of any such fractional
share, each holder of Shares who would otherwise have been entitled thereto upon
the surrender of Certificate(s) for exchange pursuant to this Article 1 will be
paid an amount in cash (without interest) rounded to the nearest whole cent,
determined by multiplying (i) the MW Common Stock Valuation by (ii) the
fractional share to which such holder would otherwise be entitled. Purchaser
shall make available the cash necessary for this purpose at the Effective Time.
1.7 WORKING CAPITAL SETTLEMENT.
(a) Prior to the Closing Date, the Company shall estimate its
working capital position (the "Working Capital") as of the close of business on
the Closing Date (the "Computation Date"). Working Capital shall mean (x) the
sum of (i) the book value of current assets plus (ii) the amount of capital
expenditures listed on SCHEDULE 1.7; less (y) the book value
5
<PAGE>
of current liabilities excluding any amount of Debt or Company Expenses paid by
Purchaser at Closing pursuant to Section 1.5(c). The Company shall provide
Purchaser a copy of the calculation of the estimated Working Capital (the
"Estimated Working Capital Statement") three business days prior to the Closing
Date. The book value of all amounts and the determination of Working Capital
shall be determined in accordance with generally accepted accounting principles,
consistently applied ("GAAP") on a basis consistent with the Company's last
audited Financial Statements.
(b) If the amount of the Working Capital as shown on the Estimated
Working Capital Statement (the "Estimated Working Capital") is greater than
$2,331,000, the Merger Consideration shall be increased by the difference
between the Estimated Working Capital and $2,331,000. If the amount of the
Estimated Working Capital is less than $2,331,000, the Merger Consideration
shall be reduced by the difference between $2,331,000 and the Estimated Working
Capital.
(c) Purchaser shall prepare and deliver to Shareholder a "Final
Working Capital Statement" on or before the thirtieth day following Closing. In
preparing the Final Working Capital Statement, inventory shall be valued at the
lesser of cost or market using FIFO in accordance with GAAP, and shall be based
upon a physical count taken by the Company and observed by the Purchaser
(one-half the cost of which shall be a Company Expense) within three business
days prior to the Closing Date. Except as provided in the preceding sentence,
all amounts set forth on the Final Working Capital Statement shall be determined
in accordance with GAAP on a basis consistent with the accounting principles
used in connection with determining the Estimated Working Capital. The Final
Working Capital Statement shall become final and binding on Shareholder and
Purchaser (in such instance, the "Final Closing Statement") unless Shareholder
gives written notice to the Purchaser of his disagreement with respect to any
matter contained therein ("Notice of Working Capital Disagreement") within 10
days after the receipt thereof. A Notice of Working Capital Disagreement shall
not be permitted unless the aggregate amount in dispute exceeds Ten Thousand
Dollars ($10,000). A Notice of Working Capital Disagreement shall specify in
reasonable detail the nature of any disagreement so asserted. For a period of
30 days after the delivery of the Notice of Working Capital Disagreement,
Shareholder and the Purchaser shall attempt to resolve in writing all of the
differences with respect to each matter specified in the Notice of Working
Capital Disagreement, in which case any such resolution of the Final Working
Capital Statement shall be final and binding on the parties (in such instance,
the "Final Closing Statement"). If, at the end of such 30-day period,
Shareholder and Purchaser have not resolved in writing all of the differences
with respect to any such matter, then each unresolved matter ("Disputed Working
Capital Matter") shall be submitted to and reviewed by the accounting firm of
Price Waterhouse LLP or, if such firm is unwilling or unable to act, to another
"big six" accounting firm selected by a panel of three arbitrators in accordance
with the rules of the American Arbitration Association (the "Neutral
Accountant"). The Neutral Accountant shall consider only the Disputed Working
Capital Matters and shall act promptly to resolve in writing all Disputed
Working Capital Matters, and its decisions with respect to the Disputed Working
Capital Matters shall be final and binding on Shareholder and Purchaser;
provided that no such resolution of the Disputed Working Capital Matters shall
require payment of an amount greater than the highest amount or less than the
lowest amount suggested for such
6
<PAGE>
resolution by Shareholder or the Purchaser. The Neutral Accountant shall notify
Shareholder and the Purchaser of its resolution of the Disputed Working Capital
Matters and shall prepare a revised Working Capital Statement reflecting the
resolution of all Disputed Working Capital Matters promptly after such
resolution (in such instance the "Final Closing Statement") and shall deliver it
to Purchaser and Shareholder.
(d) Purchaser shall be responsible for and shall pay the fees and
expenses incurred in connection with the Neutral Accountant. Upon payment by
the Purchaser, one-half of such fees of the Neutral Accountant will be a claim
of Purchaser against the Escrow Amount payable first from the Working Capital
Escrow Amount and then from the Indemnification Escrow Amount.
(e) Within 10 days after receipt of the Final Closing Statement:
(i) if the Working Capital as set forth in the Final Closing
Statement is less than the Estimated Working Capital, the Merger
Consideration payable to Shareholder shall be adjusted by the difference
(based on the MW Common Stock Valuation) by Shareholder giving instructions
to the Escrow Agent to distribute to Purchaser the MW Common Stock
representing such adjustment, first from the Working Capital Escrow Amount
and, to the extent there is not a sufficient amount in the Working Capital
Escrow Amount, then from the Indemnification Escrow Amount.
(ii) If the Working Capital as set forth in the Final Closing
Statement is greater than the Estimated Working Capital, Purchaser, subject
to the provisions of Section 1.6(d), shall issue additional MW Common Stock
(based on the MW Common Stock Valuation) as additional Merger Consideration
to Shareholder.
1.8 ADDITIONAL POST-CLOSING ADJUSTMENTS.
(a) If Purchaser reasonably determines, within 90 days of the
Closing Date, in accordance with GAAP and consistent with the Company's past
practices and historical turnover rates, that the allowance for obsolete or
unsaleable items in the raw materials, work-in-progress and finished goods
inventory, as reflected in the Working Capital included in the Final Closing
Statement, was insufficient based upon facts known at the date of such
subsequent determination, the Purchaser shall provide Shareholder with written
notice thereof. Shareholder shall have 10 days after receipt of Purchaser's
notice to give written notice to the Purchaser of his disagreement ("Notice of
Inventory Disagreement"). If a Notice of Inventory Disagreement is issued by
Shareholder, it shall specify in reasonable detail the nature of any
disagreement so asserted. For a period of 30 days after the delivery of such
Notice of Inventory Disagreement, Shareholder and the Purchaser shall attempt to
resolve in writing all of the differences with respect to each matter specified
in the Notice of Inventory Disagreement, in which case any such resolution of
such matters shall be final and binding on the parties. If, at the end of such
30-day period, Shareholder and Purchaser have not resolved in writing all of the
differences with respect to any such matter, then each unresolved matter
("Disputed Inventory Matter") shall be submitted to and reviewed by the Neutral
Accountant. The Neutral Accountant shall consider only the Disputed Inventory
7
<PAGE>
Matters and shall act promptly to resolve in writing all Disputed Inventory
Matters, and its decisions with respect to the Disputed Inventory Matters shall
be final and binding on each of Shareholder and Purchaser; provided that no such
resolution of the Disputed Inventory Matters shall require payment of an amount
greater than the highest amount or less than the lowest amount suggested for
such resolution by either Shareholder or the Purchaser. The Neutral Accountant
shall notify Shareholder and the Purchaser of its resolution of the Disputed
Inventory Matters and shall deliver written confirmation of same to Purchaser
and Shareholder. If Shareholder does not issue a Notice of Inventory
Disagreement or upon the resolution of the Disputed Inventory Matters by the
Neutral Accountant, the Purchaser, at Shareholder's written instructions, shall
sell such obsolete and/or unsaleable inventory. The Merger Consideration
payable to Shareholder shall be adjusted by the difference (based on the MW
Common Stock Valuation) by an amount equivalent to the additional payment, if
any, that would have been payable by Shareholder to the Purchaser pursuant to
Section 1.7(e)(i) on the basis of the difference between the allowance for
obsolete or unsaleable items as restated pursuant to this Section 1.8(a) and as
originally stated at in the Final Closing Statement, less the aggregate proceeds
from the sale of said obsolete and/or unsaleable inventory through Shareholder
giving instructions to the Escrow Agent to distribute to Purchaser the MW Common
Stock representing such adjustment, first from the Working Capital Escrow Amount
and, to the extent there is not a sufficient amount in the Working Capital
Escrow Amount, then from the Indemnification Escrow Amount.
(b) If the gross amount collected by Purchaser upon the accounts
receivable reflected in the Working Capital included in the Final Closing
Statement ("Accounts Receivable") during the 120 days after the Closing Date is
less than the book value of such Accounts Receivable after giving effect to the
allowance for doubtful accounts as reflected on the Final Closing Statement,
Shareholder shall pay to Purchaser, by giving instructions to the Escrow Agent
to distribute to Purchaser MW Common Stock (based on the MW Common Stock
Valuation) first from the Working Capital Escrow Amount and, to the extent there
is not a sufficient amount in the Working Capital Escrow Amount, then from the
Indemnification Escrow Amount, on the basis of the difference between the amount
collected and the book value of such Accounts Receivable after giving effect to
the allowance for doubtful accounts as reflected as originally stated at in the
Final Closing Statement; provided, however, that during the aforementioned
120-day period Purchaser shall not write off or settle any uncollected Accounts
Receivable or retain a collector to collect any such Accounts Receivable without
written consent of Shareholder. Subsequent to such 120 days after the Closing
Date, Purchaser shall continue to use reasonable efforts to collect any Accounts
Receivable not collected during the 120 days after the Closing Date, and the net
amounts of such Accounts Receivable collected by Purchaser, after accounting for
third party collection costs, shall be remitted to Shareholder, in MW Common
Stock (based on the MW Common Stock Valuation) after the payment by Shareholder
of the amounts due Purchaser under this Section 1.8(b). On or prior to the 15th
day of each month, Purchaser shall deliver to Shareholder an Accounts Receivable
report identifying the gross collections made by Purchaser through and including
the end of the preceding calendar month. Any amounts collected by Purchaser
shall be applied against the longest outstanding receivables except as to any
receivable as to which the Person paying such amount has given Purchaser notice
of a dispute.
8
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(c) Upon the later of the 135th day after the Closing Date, or the
10th day after receipt by both Shareholder and Purchaser of the Final Closing
Statement, or the payment by Shareholder to Purchaser of any amount claimed by
Purchaser pursuant to Section 1.7 or this Section 1.8, any remaining Working
Capital Escrow Amount shall be distributed from the Working Capital Escrow
Account to Shareholder.
1.9 TRANSFER TAXES. Any transfer taxes or stamp duties, or other similar
taxes, fees, charges or expenses (collectively "Transfer Taxes") imposed on the
Company shall be divided equally between the Purchaser and the Company, and the
total accrued and unpaid amount thereof allocated to the Company shall be
treated as a Company Expense. Any Transfer Taxes imposed on Shareholder shall
be paid by Shareholder.
1.10 MW COMMON STOCK.
(a) The MW Common Stock to be delivered to Shareholder will not be
registered under federal or state securities laws, but rather, issued pursuant
to an exemption therefrom. As a result, Shareholder acknowledges and agrees
that such MW Common Stock is "restricted" stock as such term is defined under
such securities laws and cannot be sold, pledged or transferred unless
subsequently registered or unless an exemption is available allowing its resale.
(b) Parent, at its expense, shall file a shelf registration
statement (the "Registration Statement") as soon as reasonably practicable after
the Closing Date, pursuant to Rule 415 under the Securities Act of 1933, as
amended (the "Securities Act") with respect to all the MW Common Stock issued by
Parent in connection with consummating the transactions contemplated by this
Agreement (including, without limitation, those shares deposited in escrow under
the Escrow Agreement) (collectively, "Registrable Shares"). Parent shall use
its best efforts to: (i) have the Registration Statement declared effective on
or before July 15, 1998; and (ii) keep the Registration Statement continuously
effective and to supplement and amend it as required by the Securities Act and
the regulations thereunder from the date the Registration Statement is declared
effective (the "Initial Effective Date") until the earliest to occur of the
following events: (A) such time as Shareholder may transfer the MW Common Stock
pursuant to the safe harbor provisions of Rule 144 under the Securities Act
without having to comply with any volume limitations under such rule;
(B) notification to Parent that all Registrable Shares have been sold for the
account of Shareholder; or (C) a request by Shareholder that the Registration
Statement be terminated (the period between the Initial Effective Date and
earliest to occur of such events is hereinafter referred to as the "Registration
Statement Period"). If the Registration Statement ceases to be effective at any
time during the Registration Statement Period, Parent, at its expense, shall
within thirty days of such cessation cause to be filed an additional shelf
registration statement covering the unsold balance of the Registrable Shares and
shall use its best efforts to have such registration statement declared
effective as soon as practicable thereafter and keep such registration statement
effective until the end of the Registration Statement Period.
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(c) Parent agrees to furnish Shareholder with such number of
conformed copies of any registration statement and prospectus included therein
(including each preliminary prospectus) covering the Registrable Shares as
Shareholder reasonably may request in order to facilitate the public sale of the
Registrable Shares covered by such registration statement.
(d) All expenses incurred by Parent, Purchaser and Shareholder in
connection with any registration under this Agreement shall be paid by Parent
and Purchaser, including without limitation all registration and filing fees,
printing expense, fees and disbursements of counsel and independent public
accountants for the Parent and the Purchaser, fees and expenses (including
counsel fees) incurred in connection with complying with state securities or
"blue sky" laws, fees of securities exchanges or the National Association of
Securities Dealers, Inc., fees of transfer agents and registrars, but excluding
any selling commissions and transfer taxes applicable to the sale of the MW
Common Stock and any legal fees and expenses of counsel or other advisers and
agents of the selling Shareholder.
(e) To ensure that Shareholder is able to benefit from the
Registration Statement and to make available the benefits of certain rules and
regulations of the Securities and Exchange Commission ("SEC") that may permit
the offer and/or sale of MW Common Stock to the public without registration by
Shareholder, Parent agrees to:
(i) supplement and amend the Registration Statement in a
timely manner if required by the registration form utilized by the Parent,
or by the instructions applicable to such form or by the Securities Act or
the rules and regulations thereunder or if reasonably requested by
Shareholder and to furnish Shareholder with copies of any such amendment or
supplement at least twenty-four hours prior to its being filed with the
SEC;
(ii) file with the SEC in a timely manner all reports and
other documents required of Parent under the Securities Act and the
Securities Exchange Act of 1934, as amended ("Exchange Act");
(iii) make and keep public information regarding Parent
available (as those terms are understood and defined in Rule 144) at all
times during the Registration Period or such longer period ending on the
date upon which Shareholder no longer need rely on Rule 144; and
(iv) so long as Shareholder owns any MW Common Stock, furnish
to Shareholder upon written request a written statement by Parent that all
reports and filings that are necessary to be filed by Parent for
Shareholder to avail himself of Rule 144 or 145 have been filed, and
provide a copy of the most recent annual or quarterly report of Parent, and
any other reports and documents as Shareholder may reasonably request in
availing himself of any rule or regulation of the SEC.
(f) Parent and Mail-Well, jointly and severally, shall indemnify
Shareholder (and any Person who is an Affiliate of Shareholder within the
meaning of the Securities Act) whose shares of MW Common Stock are included in
any registration statement as Registrable
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Shares against all expenses, claims, losses, damages, or liabilities, including,
without limitation, reasonable attorneys' fees and court costs (collectively, a
"Liability"), to which Shareholder may become subject under the Securities Act,
the Exchange Act or any rule or regulation under either of them or other statute
or at common law, arising out of or based upon: (i) any untrue statement or
alleged untrue statement of any material fact contained in any registration
statement, any preliminary prospectus or final prospectus contained therein, or
any amendment or supplement, and any document incorporated by reference therein
(a "Registration Document"); or (ii) any omission or alleged omission to state a
material fact required to be stated in any Registration Document or necessary in
order to make any statement in any Registration Document not misleading.
Notwithstanding the foregoing, neither Parent nor Mail-Well will be liable to a
Shareholder to the extent that any liability arises out of or is based upon any
untrue statement or omission made in any Registration Document in reliance upon
and in conformity with written information furnished to Parent or Mail-Well for
incorporation in any such Registration Document by or on behalf of Shareholder.
Parent and Mail-Well's joint and several indemnification obligation will remain
in full force and effect regardless of any investigation made by or on behalf of
Shareholder and will survive transfer of the Registrable Shares by Shareholder.
1.11 INVESTMENT LETTER. Pursuant to Section 8.9 hereof, and in
acknowledgment of the restrictions on transfer of the MW Common Stock
(i) described in this Section 1.10 above; and (ii) if applicable, required by
the pooling of interests accounting method contemplated herein, Shareholder
shall deliver to Purchaser prior to Closing an executed letter in the form of
Exhibit C hereto.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND SHAREHOLDER
The Schedules attached to this Agreement are sometimes referred to herein
as the "Disclosure Schedules." The Company and Shareholder represent and
warrant to Purchaser that except as otherwise disclosed in the Disclosure
Schedules the following statements are true as of the date of this Agreement and
as of the Closing Date:
2.1 ORGANIZATION, STANDING, CORPORATE AUTHORIZATION, AND ENFORCEABILITY.
(a) The Company is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its incorporation and
has all requisite corporate power and authority to own, lease and operate its
properties and to carry on its business as now being conducted. The Company is
duly qualified or licensed to do business and is in good standing in each
jurisdiction in which the property owned, leased or operated by it or the nature
of the business conducted by it makes such qualification necessary, except where
the failure to so qualify would not have a Material Adverse Effect on the
financial condition or business of the Company.
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(b) This Agreement and all other agreements, documents and
instruments executed or to be executed by the Company in connection herewith
(the "Related Agreements") constitute the valid and legally binding obligations
of the Company and are enforceable in accordance with their terms, except as
such enforceability may be limited by equitable principles and by applicable
bankruptcy, insolvency, reorganization, arrangement, moratorium or similar laws
relating to or affecting the rights of creditors generally. The Company has the
requisite corporate power and authority to enter into this Agreement and the
Related Agreements.
(c) The execution and delivery of this Agreement, the Related
Agreements, and all other documents and instruments executed or to be executed
by the Company pursuant to this Agreement, and the consummation of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary corporate and other action on the part of the Company, subject to
obtaining the requisite approvals from Shareholder in accordance with applicable
law. This Agreement and the Related Agreements have been or will have been, at
the time of their respective executions and deliveries, duly executed and
delivered by a duly authorized officer of the Company.
(d) Except as set forth in SCHEDULE 2.1(d), the Company does not
own, directly or indirectly, any capital stock or other equity interest in any
Person or have any direct or indirect equity or ownership interest in any
Person, and the Company is not subject to any obligation or requirement to
provide funds for or to make any investment (in the form of a loan, capital
contribution or otherwise) to or in any Person.
2.2 CAPITALIZATION. As of the date of this Agreement, the
capitalization of the Company (including all capital stock authorized, issued
and outstanding) is as set forth on SCHEDULE 2.2. All of the outstanding shares
of the Company's Common Stock are owned by Shareholder as set forth on SCHEDULE
2.2. The Company has no authorized or outstanding bonds, debentures, notes or
other indebtedness the holders of which have the right to vote (or convertible
or exchangeable into or exercisable for securities having the right to vote)
with Shareholder on any matter ("Voting Debt"). Except as contemplated by this
Agreement, after the Effective Time, the Surviving Corporation will have no
obligation to issue, transfer or sell any shares of MW Common Stock as a result
of any obligation existing, or created by the Company, at or prior to the
Effective Time, including pursuant to any stock incentive plan or warrant. All
prior issuances of securities by the Company and all prior repurchases,
redemptions or exchanges affecting the outstanding securities of the Company
have complied with all applicable Legal Requirements (as defined below)
(including federal and state securities laws), preemptive rights and contractual
restrictions. All issued and outstanding shares of capital stock of the Company
have been duly authorized and validly issued and are fully paid and
nonassessable. Except as disclosed on SCHEDULE 2.2, the Company does not have
shares of its capital stock authorized, issued or outstanding and there are no
outstanding convertible or exchangeable securities, subscriptions, calls,
options, warrants, rights (contractual or arising by operation of law,
including, without limitation, rights of first refusal and preemptive rights),
or other agreements or commitments of any character to which the Company is a
party or by which it is bound, relating to the issuance, purchase, other
acquisition or voting of any shares of the capital stock of, or other equity or
ownership interest (collectively, "Equity Rights") in the Company. Except as
disclosed on
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SCHEDULE 2.2 and on SCHEDULE 2.11, there are no agreements, arrangements or
commitments of any character (contingent or otherwise) pursuant to which any
person or entity is or may be entitled to receive any payment based on the
revenues or earnings, or calculated in accordance therewith, of the Company.
Except as set forth in SCHEDULE 2.2, there are no voting trusts, proxies or
other agreements or understandings to which the Company or Shareholder is a
party or by which the Company or Shareholder is bound with respect to the voting
of any shares of capital stock or other Equity Interests of the Company. Except
as set forth on Schedule 2.2, any such voting trusts will be terminated as of
the Closing.
For purposes of this Agreement, the term "Legal Requirement" shall mean any
federal, state or local law, statute, legislation, ordinance, code, rule,
regulation, decree, award, order, permit, franchise, consent or authorization
of, any federal, state, local or other governmental body or agency, department,
commission, bureau, board, council, court, magistrate, panel or instrumentality
of the United States, any political subdivision thereof or any state or local
governmental authority in effect as of the date hereof.
2.3 ARTICLES OF INCORPORATION AND BYLAWS; CERTAIN RECORDS. Copies of the
Articles of Incorporation, Bylaws, minute books and stock records of the Company
have been made available to Purchasers, and each such copy is true, correct and
complete as amended to date. All material records of any type and description
in whatever form or medium that presently exist and that relate to the business
or properties of the Company and which in the ordinary course of business the
Company would normally retain are in the possession or control of the Company
and are located at the offices of the Company or of its counsel, independent
auditors, consultants, or other advisors, and the Surviving Corporation will
have the right to possession of all such records upon the consummation of the
transactions contemplated by this Agreement.
2.4 COMPLIANCE WITH OTHER INSTRUMENTS AND LAWS. Except as set forth in
SCHEDULE 2.4, the execution and delivery of this Agreement and the Related
Agreements and the consummation of the transactions contemplated hereby and
thereby will not conflict with or result in any violation of or default under
any provision of the Articles of Incorporation or Bylaws of the Company or any
material violation of, or default under, any mortgage, indenture, trust, lease,
partnership or other agreement or other instrument, permit, concession, grant,
franchise, license, judgment, order, decree, or Legal Requirement applicable to
the Company or Shareholder or any of the properties of the Company, nor will
they result in the creation or imposition of any lien, security interest,
charge, claim or other encumbrance of any nature whatsoever on any of the
properties or assets of the Company or the Common Stock, nor will they prevent
or materially delay the consummation of the transactions contemplated hereby.
2.5 GOVERNMENTAL AUTHORIZATIONS; CONSENTS. Except as set forth on
SCHEDULE 2.5, no consents, licenses, approvals or authorizations of, or
registrations or declarations with, any governmental authority, agency, bureau
or commission, or any third party which have not already been obtained, are
required to be obtained or made by the Company or Shareholder in connection with
the execution, delivery, performance, validity and enforceability of this
Agreement or any Related Agreement or the sale or transfer of the Common Stock
and will not prevent or materially
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delay the consummation of the transactions contemplated hereby other than and
except for consents, licenses, approvals, authorizations or registrations which
are not material.
2.6 LITIGATION. No action, suit, proceeding or governmental
investigation is pending or, to the Knowledge (as defined below) of the Company
and Shareholder, threatened, at law or in equity, which seeks to question, delay
or prevent, or could have the effect of delaying or preventing, the consummation
of all or any portion of the transactions contemplated hereby.
2.7 FINANCIAL STATEMENTS; CONDUCT OF THE BUSINESS; NO UNDISCLOSED
LIABILITIES. Except as set forth on SCHEDULE 2.7:
(a) The Company has delivered to Purchaser (i) the audited balance
sheets of the Company as of December 31, 1997, 1996 and 1995 and the related
audited statements of income, retained earnings and cash flows for the fiscal
years then ended, accompanied in each case by an opinion thereon of the
independent certified public accountant of the Company (such financial
statements, including the notes thereto, hereinafter being referred to as the
"Annual Financial Statements"), and (ii) the unaudited balance sheet of the
Company as of March 31, 1998, and the related unaudited statements of income for
the three months ended March 31, 1998 (the "Interim Financial Statements").
(The Annual Financial Statements and the Interim Financial Statements including
the notes thereto together hereinafter being referred to as the "Financial
Statements"). All of the Financial Statements have been prepared in accordance
with GAAP (subject to the modifications and exceptions set forth in SCHEDULE 2.7
and, in the case of Interim Financial Statements, to end of year audit
adjustments and preparation of footnotes) consistently applied for all relevant
periods (except as indicated therein) and present fairly in all material
respects the financial position of the Company as of the dates thereof and the
results of its operations for the periods then ended.
(b) The Company does not have any debts, obligations, guaranties of
the obligations of others or liabilities except: (i) debts, obligations,
guaranties and liabilities to the extent reflected or reserved against in the
Financial Statements, (ii) debts, obligations, guaranties and liabilities
incurred or entered into subsequent to March 31, 1998, in the ordinary course of
business and otherwise not in contravention of this Agreement, and (iii) debts,
obligations and liabilities relating to this Agreement and the Related
Agreements and instruments being executed and delivered in connection herewith
and the transactions referred to herein and therein (including obligations to
pay legal fees, financial advisory fees, bank fees, accounting fees and other
amounts in connection therewith) so long as such obligations are included in
determining Company Expenses.
2.8 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except for (i) matters set
forth on SCHEDULE 2.8, (ii) matters disclosed in the Annual Financial Statements
or (iii) as contemplated by
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this Agreement, the Company has not, since December 31, 1997, except as
otherwise specified herein:
(a) undergone any change in its condition (financial or otherwise),
properties, assets, liabilities, business or operations, except for changes in
the ordinary course of business which have not either individually or in the
aggregate had a Material Adverse Effect;
(b) except as set forth on SCHEDULE 2.8, changed any of its methods
of accounting or accounting practices or classifications of assets or
liabilities, or failed to maintain its books of account in the usual, regular
and ordinary manner in accordance with GAAP unless required by regulation or
GAAP;
(c) modified the material terms of, or canceled or terminated, any
Material Contract (as defined below) other than in the ordinary course of
business;
(d) terminated, discharged or received any written notice regarding
the resignation, discharge or termination of any officer other than in the
ordinary course of business or as contemplated by this Agreement;
(e) since December 31, 1995, established or adopted any Benefit
Plan (as defined below), or increased the amount of the wages, bonus, salary,
commissions, fringe benefits or other compensation or remuneration payable to,
any of its directors, officers or employees, except in any case in the ordinary
course of business in accordance with past practice and, in the case of the
senior management employees and Shareholder (listed on SCHEDULE 2.8(e)), in an
amount not exceeding 3% in any one case or a payment of bonuses in an aggregate
amount of $25,000;
(f) since December 31, 1995, declared, set aside, made or paid any
dividend or other distribution in respect of its capital stock or purchased or
redeemed, directly or indirectly, any shares of its capital stock, or split up,
combined, reclassified, redeemed, repurchased or otherwise reacquired any of its
capital stock other than distributions to Shareholder to pay income taxes and
charged against their respective Accumulated Adjustments Account, if applicable;
(g) since December 31, 1995, issued or sold any shares of its
capital stock of any class or any subscriptions, options, warrants, calls or
other rights to purchase directly or indirectly any such shares or any
securities directly or indirectly convertible into or exchangeable for such
shares or made any other change in its capital structure;
(h) since December 31, 1995, except for borrowings under its normal
line of credit and Debt described in SCHEDULE 2.8(h), incurred any direct or
contingent liability for borrowed money or guaranteed the monetary obligations
of any other person or entity other than indebtedness to be included in the Debt
to be discharged at Closing, or made any monetary investment in, advance to or
loan to any person or entity other than in the ordinary course of business;
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(i) mortgaged, pledged or subjected to any material lien, lease,
security interest or other charge or encumbrance any of its properties or
assets, tangible or intangible, except those securing Debt to be discharged at
Closing and except for Permitted Liens (as defined below);
(j) made any material change in its practices, operations or
policies with respect to the method for selling goods or services, or other
method for accounting for sales, the conduct of accounts receivable collection
or accounts payable payment activities or the maintenance of inventory levels
other than changes in the ordinary course of business;
(k) since December 31, 1995, merged or consolidated with or into
any other entity or initiated or participated in negotiations with any person or
entity with respect to any of the foregoing;
(l) implemented or adopted any change in its tax methods,
principles or elections;
(m) since December 31, 1995, acquired or disposed of any material
assets or properties or made any capital improvement other than in the ordinary
course of business; or
(n) suffered any damage, destruction or loss (whether or not
covered by insurance) which has had or could reasonably be expected to have a
Material Adverse Effect on the Company.
2.9 TITLE TO PROPERTY, ABSENCE OF LIENS AND ENCUMBRANCES.
(a) The Company has good title to its owned material assets,
including the owned tangible assets reflected on the balance sheet included in
the Company's most recent Interim Financial Statements, other than assets
disposed of or used after the date thereof in the ordinary course of business
for fair value. Except as disclosed in SCHEDULE 2.9(a), the tangible assets
owned by the Company are owned free and clear, of all liens, mortgages, pledges,
charges, security interests or encumbrances, except for Permitted Liens (as
defined below). The Company owns, leases or licenses, and has adequate rights
to use all material real and personal property and other material assets
necessary to conduct its business as a going concern on a basis consistent with
past practices. To the Knowledge of the Company, the assets of the Company
necessary for the operation of its business consistent with past practices are
in operating condition and repair (subject to normal wear and tear). Neither
the whole nor any part of the real property used in the Business have been
condemned by any public authority, nor, to the Knowledge of the Company and
Shareholder, is any such condemnation or taking threatened or contemplated.
There exists free and uninterrupted egress and ingress over a public roadway to
all operating facilities.
For the purposes of this Agreement, the term "Permitted Liens" shall
mean (i) liens for current taxes, assessments or governmental charges not yet
due, (ii) deposits or pledges to secure bids, tenders, contracts, leases,
statutory obligations, surety and appeal bonds, and other obligations of like
nature arising in the ordinary course of the Company's business, (iii) liens
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arising out of deposits in connection with workers' compensation, unemployment
insurance, old age pensions or other social security or retirement benefits
legislation, (iv) liens imposed by law, such as mechanics', workers',
materialmen's, carriers' or other like liens arising in the ordinary course of
the Company's business which secure the payment of obligations which are not
past due or which are being diligently contested in good faith by appropriate
proceedings and for which adequate reserves in accordance with GAAP are
maintained on the Financial Statements, (v) imperfections of title, liens and
encumbrances which do not materially and adversely affect the use, value or
marketability of the property affected thereby, and (vi) the imperfections of
title, liens, mortgages, pledges, charges, security interests and encumbrances
set forth on SCHEDULE 2.9(a).
(b) The Company validly holds the real property described on
SCHEDULE 2.9(b) (the "Real Property") free and clear of all liens, encumbrances,
mortgages or security interests, except for Permitted Liens.
(c) Except as set forth on SCHEDULE 2.9(c), the Company is not a
party to any leases of real property. The Company validly holds the leaseholds
created by the leases (true, complete and correct copies of which have been
provided to Purchaser) as described on SCHEDULE 2.9(c) (the "Leased Property"),
and such leases are enforceable by the Company as the lessee thereunder in
accordance with their terms.
(d) The Company is not a party to any agreement granting any third
party the right or an option to purchase or lease all or any portion of the Real
Property, Leased Property or any personal property of the Company.
(e) There is not pending, nor has the Company received any written
notice of, (i) any Claim or proceeding asserting or seeking to establish a title
interest in the Real Property or Leased Property, or any Claim of default under
any of the leases under which leaseholds have been created ("Title Notice"), or
(ii) the existence of any facts or proceedings of which the Company or
Shareholder has Knowledge which may result in the issuance of such a Title
Notice.
2.10 FULL AUTHORITY; COMPLIANCE WITH LAWS. Except as set forth on
SCHEDULE 2.10, the Company is in compliance in all material respects with all
applicable Legal Requirements. Set forth on SCHEDULE 2.10 is a list of any and
all material permits, licenses, consents, orders, approvals, franchises,
certificates or other authorizations under any applicable Legal Requirement
(collectively the "Permits"), issued to the Company in connection with the
ownership, operation and maintenance of its business or assets. The Company has
obtained and maintained all Permits. Each of the Permits is in full force and
effect, and the Company is in compliance in all material respects with all the
provisions of such Permits.
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2.11 BENEFIT PLANS.
(a) Except as set forth in SCHEDULE 2.11, the Company does not
maintain, sponsor, participate in or contribute to, or is required to contribute
to, directly or indirectly, or has any obligation under:
(i) Any employee benefit plan, employee pension benefit
plan, employee welfare benefit plan (including any medical, dental,
disability, accident or sickness, salary continuation or life insurance
plan or arrangement), or multiemployer plan, all as defined in the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), regardless of
whether or not a plan is exempt from some or all of the otherwise
applicable requirements of ERISA; or
(ii) Except as disclosed on the Financial Statements, any
material bonus, commission, deferred compensation, incentive compensation,
restricted stock, stock purchase, stock option, stock appreciation right,
debenture, supplemental pension, profit sharing, royalty pool, vacation,
sick leave, severance or termination pay policies, supplemental
unemployment benefits plan, loan guarantee, relocation assistance, employee
loan or other extensions of credit, or other similar material plan,
program, agreement, policy, commitment, arrangement or benefit currently in
effect under which current or former employees or their dependents,
beneficiaries, representatives or estates are currently or will in the
future be entitled to benefits.
(b) With respect to each plan, program, agreement, policy,
commitment, arrangement or benefit described on SCHEDULE 2.11 (a "Benefit
Plan"), the Company has furnished to the Purchaser true, correct and complete
copies of such Benefit Plans that are in written form, including amendments, if
applicable, summary plan descriptions, if applicable, the Internal Revenue
Service determination letter, if applicable, and the two most recent Forms 5500,
5500-C or 5500-R, as applicable, and has made available to the Purchaser the
most recent actuarial reports of or regarding such Benefit Plan. As to each
Benefit Plan not reduced to writing, the Company has made available to the
Purchaser a description of all material elements of such plan.
(c) Except as set forth in SCHEDULE 2.11:
(i) Each Benefit Plan has been operated and administered in
all material respects in accordance with its terms and applicable laws,
including but not limited to ERISA and the Internal Revenue Code of 1986 as
amended (the "Code") (as defined below). Each Benefit Plan that is intended
to be qualified under Section 401(a) of the Code either has received from
the Internal Revenue Service, or timely applied for, a determination letter
on such Benefit Plan's qualified status.
(ii) Neither the Company nor any other party in interest
(within the meaning of ERISA) has engaged in any non-exempt prohibited
transaction with respect to any Benefit Plan under ERISA, the Code, and
there is no pending assertion of the occurrence of any such transaction.
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(iii) All contributions required under applicable law or the
terms of any Benefit Plan, collective bargaining agreement or other
agreement relating to a Benefit Plan to be paid by the Company for all
periods prior to the Closing Date have been or will have been completely
and timely made to each Benefit Plan when due, and the Company has
established adequate reserves on its books (which will be treated as a
current liability for purposes of determining Working Capital at Closing)
to meet liabilities for contributions accrued but that have not been made
because they are not yet due and payable.
(iv) To the Knowledge of the Company and Shareholder, there
is no current or pending investigation or audit by the Internal Revenue
Service, the Department of Labor or any other governmental entity of any
Benefit Plan, nor has the Company received notification from any such
governmental entity of such a pending audit or investigation, and there are
no actions, suits or claims pending (other than routine claims for
benefits) or threatened, with respect to any Benefit Plan or against the
assets of any such Benefit Plan.
(v) No Benefit Plan is or ever has been a plan subject to
Title IV of ERISA, Part 3 of Subtitle B of Title I of ERISA or Section 412
of the Code ("Pension Plan"), or is or ever has been a multiemployer plan
as defined in Section 3(37) of ERISA or Section 414(f) of the Code
("Multiemployer Plans"); neither the Company nor any other party in
interest has incurred any liability to the Pension Benefit Guaranty
Corporation ("PBGC") with respect to any Pension Plan, except for required
premium payments, which payments have been made when due; no accumulated
funding deficiency (within the meaning of Section 412 of the Code or
Section 302 of ERISA) or reportable event (as defined in Section 4043 of
ERISA) has occurred with respect to any Pension Plan; no event has occurred
in connection with any Pension Plan which could subject any Company or any
Pension Plan, or Purchaser, its Affiliates or any of their respective
benefit plans, to liability under Section 4062, 4063 or 4064 of ERISA, and,
no event has occurred which might give rise to any liability of the Company
or any Pension Plan, or Purchaser, its Affiliates or any of their
respective benefit plans, to the PBGC under Title IV of ERISA or which
could reasonably be anticipated to result in any claims being made against
the Company or any Pension Plan; and the Company has not incurred nor, as a
result of the transactions contemplated by this Agreement, will incur any
withdrawal liability (including any contingent or secondary withdrawal
liability) within the meaning of Section 4201 and 4204 of ERISA to any
Multiemployer Plan; upon a complete withdrawal or a partial withdrawal (as
those terms are defined in Section 4203 and 4205, respectively, of ERISA)
from a Multiemployer Plan occurring on or before the close of the most
recent fiscal year of each such Multiemployer Plan ended prior to the
Closing Date, to the Knowledge of the Company and Shareholder, the Company
would not have been subject to withdrawal liability under Title IV,
Subtitle E, Part 1 of ERISA and, there has been no material change in the
financial condition of any Multiemployer Plan that would result in the
imposition of such liability due to such complete or partial withdrawal on
or before the Closing Date.
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(vi) The Company has complied in all material respects with
all notice and continuation coverage requirements applicable to group
health plans under the Consolidated Omnibus Budget Reconciliation Act of
1985, as amended ("COBRA"), with respect to all medical and health benefits
provided by the Company that are subject to COBRA.
(vii) No Benefit Plan amendments have been adopted nor will
any such amendments be adopted prior to the Closing Date except as may be
necessary for compliance purposes with the Code or ERISA and there is no
arrangement, commitment or understanding to create any additional plan
which would constitute a Benefit Plan or increase the rate of benefit
accrual or contribution requirement under any of the Benefit Plans or
modify, change or terminate any existing Benefit Plan.
(viii) The Company is not a member of a "controlled group" of
organizations (as defined in Sections 414(b), (c), (m) or (o) of the Code)
which sponsors or maintains any employee benefit plan within the meaning of
Section 3(3) of ERISA which under Title IV of ERISA or any section of the
Code or ERISA would subject Purchaser or Company or any of their respective
employee benefit plans or the fiduciaries thereof or their respective
assets to any taxes, encumbrances, penalties or other liabilities.
2.12 CLAIMS. There are no Claims against, or to the Knowledge of
Shareholder or the Company, threatened against, the Company or its properties,
at law or in equity or before any court, governmental department, commission,
board, agency, authority, instrumentality, domestic or foreign which, if
adversely determined, could be reasonably expected to have, individually or in
the aggregate, a Material Adverse Effect on the Company before or after the
Closing Date. The Company is not subject to any judgment, stipulation, order or
decree arising from any action, suit, proceeding or any investigation of which
it has Knowledge which could be reasonably expected to have, individually or in
the aggregate, a Material Adverse Effect on the business or financial condition
of the Company before or after the Closing Date.
As used in this Agreement, "Claim" means any and all claims, causes of
action, arbitrations, audits, hearings, investigations of which the Company has
Knowledge, proceedings, complaints, litigation or suits, whether in contract,
tort or otherwise, whether statutory or common law, whether civil, criminal,
administrative, investigative, formal or informal, fixed or contingent.
2.13 TAXES.
(a) For purposes of this Agreement, "Taxes" in the plural and "Tax"
in the singular shall refer to any and all taxes, charges, fees, levies, or
other assessments of whatever kind or nature, including, but not limited to, any
federal, state, local or foreign net income, gross income, gross receipts,
unitary, license, payroll, unemployment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including, but not limited to, taxes
under section 59A of the Code), occupational, leasing, lease, fuel, customs,
duties, capital stock, franchise, profits, withholding, Social Security,
unemployment, disability, ad valorem, real
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property, personal property (tangible and intangible), sales, use, transfer,
registration, value added, alternative or minimum, estimated, or any other kind
of tax whatsoever, including the recapture of any tax items, and including any
interest, addition, penalty or other associated charge thereto, whether disputed
or not.
(b) Except as set forth on SCHEDULE 2.13
(i) The Company has filed or will file or cause to be filed,
within the applicable period prescribed by law, (i) all federal, state,
local, foreign or other material Tax Returns, as that term is defined
below, required by such law to be filed by the Company for all taxable
periods ending on or prior to the Closing Date or (ii) valid extensions of
the time for filing such Tax Returns. For purposes of this Agreement, "Tax
Returns" shall mean any returns, reports or statements with respect to
Taxes which are required to be filed with any taxing authority.
(ii) The Company has not obtained nor will it obtain prior to
the Closing Date any extensions of time in which to file any Tax Returns
for any taxable period ending on or prior to the Closing Date.
(iii) The Company has paid, within the time and in the manner
prescribed by law, all Taxes shown as due on all such Tax Returns and, with
respect to all Tax Returns which the Company has not yet filed, but will
file prior to the Closing Date, shall pay, within the time and in the
manner prescribed by law, all Taxes shown as due on such Tax Returns.
(iv) No written notice has been received by the Company from
any Tax authority in any jurisdiction in which the Company has not filed a
Tax Return that the Company is or may be subject to taxation of any sort in
such jurisdiction or otherwise is required to file a Tax Return in such
jurisdiction.
(v) Except for Permitted Liens, there are no Tax liens or
other security interests or encumbrances of any type resulting from Tax
liabilities on any of the assets of the Company.
(vi) There is no dispute, Claim or any other controversy
concerning any material Tax liability of the Company raised or asserted by
any Tax authority in writing.
(vii) No income Tax Returns of the Company for any open tax
year has been audited by any taxing authority. The Company has made
available to Purchaser a correct and complete copy of each federal income
Tax Return, examination report, statement of deficiency, or any other
administrative or judicial assertion, assessment or determination of
federal income Tax liability with respect to the Company for the past three
years.
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(viii) The Company has employed a permissible method of Tax
accounting, validly elected for each taxable period ending on or prior to
the Closing Date. The Company has not changed, nor requested to be
permitted to change, any method of Tax accounting.
(ix) The Company has not waived any statute of limitations
with respect to any Taxes or has agreed to any extension of time with
respect to a Tax assessment or deficiency, except for such waivers or
extensions which, by their terms, have elapsed as of the date of this
Agreement, nor are any requests for such waivers or extensions pending.
(x) The Company (i) has not filed a consent under Section
341(f) of the Code concerning collapsible corporations, (ii) has not made
any payments, is obligated to make any payments, or is a party to any
agreement that will render it (or the payor of compensation under the
agreement) subject to the provision of section 280G of the Code regarding
payments as a result of a change in control, (iii) has not been a United
States real property holding company within the meaning of section
897(c)(2) of the Code and (iv) is not a party to any Tax allocation or Tax
sharing agreement.
(xi) The unpaid Taxes of the Company, including Taxes
attributable to all periods ending on or prior to the Closing Date which
are not yet due and payable, do not materially exceed the reserve on the
Financial Statements for the Company's tax liability as of the respective
dates of such Financial Statements.
2.14 CONTRACTS. Except as set forth in this Agreement or on SCHEDULE
2.14 (the agreements listed thereon being referred to as the "Material
Contracts"), the Company is not a party to, bound by or obligated under any:
(a) material mortgage, indenture, note or installment obligation or
other instrument or contract for or relating to any borrowing by the Company;
(b) material guaranty by the Company of any obligation (excluding
any endorsement made in the ordinary course of business for collection);
(c) material license agreement;
(d) material lease of real or personal property under which the
Company is a lessor or lessee;
(e) material agreement for the purchase by the Company of
equipment;
(f) agreement purporting to limit the right of the Company to
compete in any line of business, with any person or other entity or in any
geographic area;
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(g) material agreement for the purchase or sale of raw materials,
products or goods or the provision of services at prices that vary from the
prices therefor generally prevailing in customary, arms-length transactions;
(h) material contract with any governmental or quasi-governmental
authority;
(i) material bond, deposit, financial assurance requirement or
insurance coverage individually required to be submitted to customers of the
Company under any sale, lease or service arrangement or to any governmental
authority under any Permit or Legal Requirement;
(j) agreement or instrument relating to the acquisition by the
Company of any entity or all or substantially all of the assets of any person or
entity;
(k) other material agreement, contract or obligation of the
Company;
(l) agreement or commitment relating to the borrowing of money or
the guaranty or indemnity (direct or indirect) in respect of or the granting of
security for any obligation for the borrowing of money, by the Company or any
other person or entity, in excess of, including, without limitation,
guarantees, accommodation collateral, letters of credit, mortgages, deeds of
trust, indentures, loan agreements and credit agreements;
(m) agreement or commitment relating to clean-up or remediation
involving Hazardous Materials (as hereinafter defined);
(n) agreement that creates an encumbrance or any restriction on the
ability of the Company to (i) pay dividends or make similar distributions; (ii)
make loans or advances to any person or entity, or (iii) sell, lease or transfer
any of its properties or assets, except (in each case) for such restrictions or
encumbrances existing under or by reason of (1) applicable Legal Requirements,
(2) customary non-assignment provisions in leases and other contracts entered
into in the ordinary course of business, or (3) any instrument governing the
Debt;
(o) indemnification obligations in favor of any person or entity,
and any escrow agreements related to any indemnification or obligation;
(p) confidentiality, secrecy, screening, development or settlement
agreement pertaining to any Intellectual Property; or
(q) contract with any customer of the Company other than contacts
for the purchase and sale of goods, products and services entered into in the
ordinary course of business.
All of the Material Contracts are legal, valid, binding and in full force and
effect, no default exists thereunder on the part of the Company, and except as
set forth in Schedule 2.14, the consummation of the transactions contemplated by
this Agreement will not cause any default or condition in respect of any such
Material Contracts, the effect of which is to cause, permit, create or perfect
the right in any party (a) to repudiate or disavow its obligations to the
Company
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thereunder, (b) to require or have the right to require the Company to perform
its obligations thereunder (including obligations to pay indebtedness) prior to
such time on which, or on terms and conditions otherwise different from those
that, are provided therein or (c) to recover from the Company any damages or
fines. To the Knowledge of the Company and Shareholder, no party to any such
Material Contract is in default thereunder. True, correct and complete copies of
all the Material Contracts have been delivered to the Purchaser.
2.15 ENVIRONMENTAL QUALITY.
(a) Except as set forth in SCHEDULE 2.15, to the Knowledge of the
Company and Shareholder, neither the Company nor any previous (to the Company)
owner, tenant, occupant, user or operator of any real property now or ever owned
or leased by the Company (the "Property") released or disposed of any "Hazardous
Materials" (as defined below) on, under, in or about the site of the Property,
except in compliance in all material respects with applicable Environmental Laws
(as defined below). For the purposes of this Agreement, the term "Hazardous
Materials" shall mean any substance, material or waste which is regulated by any
local government authority or state with jurisdiction, or the United States
Government, including, without limitation, any material or substance which is
(a) defined as a "hazardous waste," "hazardous material," "hazardous
substances," "extremely hazardous waste," "regulated substance" or "restricted
hazardous waste" under any provision of the existing laws of any state, or any
other applicable existing law, including, but not limited to, the Resource
Conservation and Recovery Act, 42 U.S.C. Section 6901 ET SEQ. ("RCRA"), and the
Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C.
Section 9601 ET SEQ. ("CERCLA") and (b) petroleum, including crude oil and any
fraction thereof and any refined petroleum products and derivatives thereof.
(b) To the Knowledge of the Company and Shareholder, except as set
forth in SCHEDULE 2.15, the Property complies in all respects with all
applicable Environmental Laws. For purposes of this Agreement, the term
"Environmental Laws" shall mean all federal, state and local laws, ordinances
and regulations pertaining to air and water quality, soils and subsurface
strata, natural resources, Hazardous Materials, waste generation, management,
transportation and disposal or other environmental matters, including the Clean
Water Act, the Clean Air Act, the Federal Water Pollution Control Act, the Solid
Waste Disposal Act, RCRA, CERCLA, and the applicable environmental protection
rules, regulations and ordinances of the city and county in which the Property
is located, the Environmental Protection Agency and all other applicable
federal, state, regional and local agencies which are in existence, and are in
effect as of the date hereof. Without limiting the generality of the foregoing,
to the Knowledge of the Company and Shareholder, Company is not liable nor
potentially liable for any response costs or natural resource damages under
Sections 107(a) or 113(f) of CERCLA, or under any other so-called "superfund" or
"superlien" law or similar Legal Requirement currently in existence, at or with
respect to the Property and, to the Knowledge of the Company and Shareholder, no
circumstances exist, which with notice or lapse of time or both would result in
such liability.
(c) To the Knowledge of the Company and Shareholder, the conduct of
the business of the Company complies in all respects with all applicable
Environmental Laws.
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(d) To the Knowledge of the Company and Shareholder, except as set
forth in SCHEDULE 2.15, the Company has not sent any Hazardous Material to a
site that, pursuant to any applicable Environmental Laws, (i) has been placed on
the "National Priorities List" of hazardous waste sites or any similar state
list, (ii) is otherwise designated or identified as a potential site for
remediation, cleanup, closure or other environmental remedial activity, or (iii)
is subject to a claim, an administrative order or other request to take
"removal" or "remedial" action, as defined in any applicable Environmental Laws,
or to make payment for the costs of cleaning up the site.
(e) Except as set forth in SCHEDULE 2.15, the Company (i) is not
involved in any suit or proceeding with respect to a release or threatened
release of any Hazardous Material or a violation or alleged violation of any
applicable Environmental Laws, nor has the Company received any notice of any
claims from any person or entity relating to property damage or to personal
injuries from exposure to any Hazardous Material, nor has the Company received
any notice or request for information from any governmental agency or authority
or other third party with respect to any of the foregoing, and (ii) has not
failed to timely file any report required to be filed, failed to acquire all
necessary certificates, approvals and permits or failed to generate and maintain
all required data, documentation and records under all applicable Environmental
Laws.
(f) To the Knowledge of the Company and Shareholder, except as set
forth in SCHEDULE 2.15, there are currently no underground storage tanks in or
under the Property, and no underground storage tank was removed from the
Property during the period that the Company maintained an interest in such
Property.
(g) The Company has made available to Purchaser all information in
its and, to the Knowledge of the Company and Shareholder, Shareholder's
possession regarding the environmental condition of the Property.
2.16 INTELLECTUAL PROPERTY. The Company either owns or has the right to
use by license, sublicense, or other tangible agreement, all of the inventions,
improvements, domestic and foreign patents and applications therefor, customer
lists, copyrights, copyright-registrations and applications therefor,
trademarks, trade names, service marks, trade dress, logos, rights in computer
software, and all rights granted or retained in licenses under any of the
foregoing which are material to the conduct of the business of the Company as
presently conducted (collectively, the "Intellectual Property"). None of the
Intellectual Property used in connection with the conduct of the business of the
Company is, or has been in the past five years, involved in, or the subject of,
any pending or, to the Knowledge of the Company and Shareholder, threatened
infringement, interference, opposition or similar action, suit or proceeding to
which the Company was a party. The material license fees, royalties and other
amounts payable by the Company in connection with the use of the Intellectual
Property, together with the terms and conditions on which, and periods for which
such amounts are payable, are set forth in SCHEDULE 2.16.
2.17 PREPAID EXPENSES. All prepaid expenses shown on the balance sheet
of the most recent Financial Statements or subsequently paid by the Company and
shown on the Final Closing Statement have been incurred solely in connection
with the business and assets of the Company.
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2.18 RELATED PARTY TRANSACTIONS. Set forth on SCHEDULE 2.18 is a list of
all material transactions (including, without limitation, employment contracts,
debts, loans, advances, or other obligations, guarantees, indemnities, accounts
and notes payable or receivable and service agreements) between the Company and
any current officer, director or employee, Shareholder, or Affiliate of the
Company (collectively, "Related Parties") which (a) were entered into and/or
consummated subsequent to January 1, 1998; (b) are or will be effective as of
the date hereof or at Closing, (c) constitutes a present or future liability or
obligation of the Company to any Related Party; or (d) constitutes a present or
future liability of any Related Party to the Company. For purposes of this
Agreement, an "Affiliate" of a party is any individual, company or other entity
that owns five percent (5%) or more of the voting or capital stock or other
equity interest of such party or of which five percent (5%) of the voting or
capital stock or other equity interest is owned or otherwise controlled by that
party or an Affiliate of that party, as the case may be.
2.19 LABOR MATTERS. Except as set forth on SCHEDULE 2.19, (a) the
Company has not entered into and is not a party to any collective bargaining
agreement, memorandum of understanding or other written document binding on the
Company respecting terms and conditions of employment with respect to an
identified group of employees with any labor union that would cover any
employees of the Company and (b) none of the employees of the Company is
subject to any collective bargaining agreement, memorandum of understanding or
other written document binding on the Company respecting terms and conditions
of employment with respect to an identified group of employees nor are any such
employees, in their capacities as employees, represented by any labor union. As
to the collective bargaining agreements disclosed on SCHEDULE 2.19, the Company
is not in material default thereunder. Except as set forth in SCHEDULE 2.19,
there are no Claims, controversies, labor disturbances, or investigations
pending, or to the Knowledge of the Company and Shareholder, threatened, by any
governmental agency or by employees of the Company or any party or parties
representing any of such employees against the Company before any court,
arbitrator or other tribunal. To the Knowledge of the Company and Shareholder,
there are no organizational efforts presently being made or threatened by or on
behalf of any labor union with respect to the employees of the Company nor has
there been in the last five (5) years. The Company has not experienced a work
stoppage, strike, lock-out or other labor disturbance within the past five (5)
years, and there is no work stoppage, strike, lock-out or other labor
disturbance presently occurring, or, to the Knowledge of the Company and
Shareholder, threatened. The Company has complied in all material respects
with all applicable Legal Requirements relating to its employees, the employment
of labor, and the safety and health of employees, including, without limitation,
all applicable Legal Requirements relating to occupational health and safety,
discrimination, unemployment, wages, hours, the Family and Medical Leave Act,
collective bargaining, and the collection and payment of withholding taxes and
similar taxes in respect of the business of the Company. Except as set forth in
SCHEDULE 2.19, there are no unfair labor practice charges, charges of
discrimination, or other complaints pending against the Company involving
employees now or previously employed by the Company.
2.20 CUSTOMERS AND VENDORS. SCHEDULE 2.20 hereto is a correct and
current list of the 20 largest customers and the 10 largest vendors of the
Company during the 12-month period ended December 31, 1997, with the amount of
sales made to each such customer or by each such
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vendor, as the case may be, during such period as reasonably ascertained from
readily available information, such amounts being estimated in good faith as
being within five percent (5%) of the actual sales made to or by such customer
or vendor, as the case may be. Except as set forth on SCHEDULE 2.20, the
Company does not have any information indicating that any of such customers or
such vendors intends to cease doing business with the Company or materially
alter the amount of the business that it conducts with the Company from the
amount of business such customers or such vendors conducted with the Company
during the last fiscal year.
2.21 OTHER DISCLOSURES. In addition to the other disclosures required
hereby, the following documents and information pertaining to the Company have
been made available to the Purchaser:
(a) true, correct and complete copies of each policy of insurance
maintained by the Company, together with information on premiums, coverage,
insurers, expiration dates and deductibles;
(b) the location and name of each bank or other financial
institution in which the Company has an account or line of credit, and the
identity of each such account or line of credit, and each bank in which the
Company has a safe deposit box, together with the names of all persons
authorized to draw upon or have access thereto;
(c) SCHEDULE 2.21(c) lists each corporate or trade name under which
the Company or its predecessors, if any, has conducted business and the state
and county in which any Real Property or personal property of the Company is
located or has been located.
(d) SCHEDULE 2.21(d) lists each power-of-attorney given by or on
behalf of the Company.
2.22 PARACHUTE PAYMENTS. Any bonuses or other compensation or amounts
paid or payable by the Company, including amounts payable as a result of the
transaction contemplated by this Agreement, have not resulted in and will not
result in payments to "Disqualified Individuals" (as defined in Section 280G(c)
of the Code) of the Company which, individually or in the aggregate, will
constitute "excess parachute payments" (as defined in Section 280G(b) of the
Code) resulting in the imposition of the excise tax under Section 4999 of the
Code or the disallowance of deductions under Section 280G of the Code.
2.23 PRODUCT WARRANTY AND LIABILITY. All finished goods inventories
manufactured by the Company in the operation of the Business (the "Products")
have been in material conformity with all applicable contractual commitments and
all express or implied warranties (including warranties imposed by the
application of law) and, to the Knowledge of the Company and Shareholder, no
material liability exists or will arise for replacement or damage in connection
with such sales or deliveries, except as are adequately reserved for on the
Financial Statements. No Products heretofore sold by the Company are now
subject to any guaranty, warranty, claim for product liability or patent or
other indemnity, other than those sold in accordance with the
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standard terms and conditions of sale of the Business, true and complete copies
of which have been made available to the Purchaser.
2.24 ACCURACY. The representations and warranties made by the Company
and Shareholder to Purchaser set forth in this Agreement, the Disclosure
Schedules to this Agreement, including any Updated Disclosure Schedule (as
defined below) delivered to Purchaser prior to Closing, and the Related
Agreements delivered and to be delivered pursuant to or in connection with this
Agreement, do not include an untrue statement of material fact or omit to state
any material fact necessary to make them, when taken together and in light of
the circumstances in which they were or are made, not misleading in any material
respect.
2.25 BROKERS AND FINDERS. Except as set forth in SCHEDULE 2.25, no person
or entity is entitled to any brokerage commission, finder's fee or like payment
in connection with the transactions contemplated in this Agreement.
ARTICLE 3
ADDITIONAL REPRESENTATIONS AND WARRANTIES OF SHAREHOLDER
Shareholder represents and warrants to Purchaser as follows:
3.1 OWNERSHIP OF SHARES. Shareholder is now, and immediately prior to
the Closing, Shareholder will be, the owner of the Shares of the Company as set
forth opposite the name of Shareholder on SCHEDULE 2.2.
3.2 AUTHORIZATION. Shareholder has full right and power to execute and
deliver this Agreement and perform his obligations hereunder. This Agreement and
all other documents and instruments executed or to be executed by Shareholder
pursuant to this Agreement have been, or will have been, duly executed and
delivered by Shareholder.
3.3 ENFORCEABILITY. This Agreement constitutes the valid and legally
binding obligation of Shareholder, enforceable in accordance with its terms,
except as such enforceability may be limited by equitable principles and by
applicable bankruptcy, insolvency, reorganization, arrangement, moratorium or
similar laws relating to or affecting the rights of creditors generally.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PURCHASER AND PARENT
Parent and Purchaser, jointly and severally, represent and warrant to
Shareholder and the Company as follows:
4.1 ORGANIZATION AND STANDING OF PURCHASER. Parent is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Colorado. Purchaser is a corporation duly organized, validly existing
and in good standing under the laws of
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the State of Delaware. Parent and Purchaser have all requisite corporate power
and authority to enter into this Agreement, to carry out the transactions
contemplated hereby and to perform their obligations hereunder. Parent owns all
of the outstanding capital stock of Purchaser.
4.2 AUTHORIZATION. The execution and delivery of this Agreement, and
all other agreements, documents and instruments executed or to be executed by
the Purchaser and Parent in connection herewith (the "Purchaser Related
Agreements"), and the consummation of the transactions contemplated hereby and
thereby, have been duly authorized by all necessary corporate and other action
on the part of Parent and Purchaser. This Agreement, and the Purchaser Related
Agreements have been, or will have been, at the time of their respective
executions and deliveries, duly executed and delivered by a duly authorized
officer of Parent and Purchaser.
4.3 ENFORCEABILITY. This Agreement constitutes, and each of the
Purchaser Related Agreements when duly executed and delivered will constitute,
the valid and legally binding joint and several obligations of Parent and
Purchaser, enforceable against Parent and Purchaser, jointly and severally, in
accordance with its terms, except as such enforceability may be limited by
equitable principles and by applicable bankruptcy, insolvency, reorganization,
arrangement, moratorium or similar laws relating to or affecting the rights of
creditors generally.
4.4 COMPLIANCE WITH OTHER INSTRUMENTS AND LAWS. The execution and
delivery of this Agreement, and the Purchaser Related Agreements, and the
consummation of the transactions contemplated hereby and thereby, will not
conflict with or result in any violation or default under any provision of the
Certificate of Incorporation or Bylaws of Parent or Purchaser, or of any
material mortgage, indenture, trust, lease, agreement or other instrument,
permit, concession, grant, franchise, license, judgment, order, decree, statute,
law, ordinance, rule or regulation applicable to Parent or Purchaser or any of
their respective properties, the result of which (either individually or in the
aggregate) will prevent or materially delay the consummation of the transactions
contemplated hereby.
4.5 GOVERNMENTAL AUTHORIZATIONS, CONSENTS. No consents, licenses,
approvals or authorizations of, and registrations or declarations with, any
governmental authority, bureau, agency or commission, or any third party, are
required to be obtained or made by Parent or Purchaser in connection with the
execution, delivery, performance, validity and enforceability of this Agreement
or the Purchaser Related Agreements or the Merger contemplated hereby.
4.6 MW COMMON STOCK. The MW Common Stock when issued will have been
duly authorized, validly issued, fully paid and nonassessable, and the record
date of issuance on the Parent's (and its transfer agent's) books shall be the
Closing Date, and each share of MW Common Stock issued to Shareholder hereunder
shall be free and clear of any lien, pledge, charge, adverse claim, security
interest, restriction, encumbrance (including any imposed by law in any
jurisdiction), title retention agreement, option or right to purchase of any
kind.
4.7 LITIGATION. No action, suit, proceeding or governmental
investigation is pending or, to the best of Parent's and Purchaser's knowledge,
threatened, at law or in equity, which seeks
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to question, delay or prevent the consummation of all or any portion of the
transactions contemplated hereby.
4.8 SECURITIES ACT OF 1933. Purchaser is an "accredited investor" as
defined under Rule 501 of Regulation D under the Securities Act of 1933, as
amended
4.9 BROKERS AND FINDERS. No person or entity is entitled to any
brokerage commission, finder's fee or like payment from Parent or Purchaser in
connection with the transactions contemplated in this Agreement.
4.10 PURCHASER'S KNOWLEDGE. No officer or director of Parent or
Purchaser has actual knowledge, as of the date hereof, of any state of facts
which, in the judgment of Parent or Purchaser, will give rise to a Shareholder
Indemnified Obligation or a Purchaser Indemnified Obligation, except for such
matters as have been previously disclosed in writing to Shareholder, the Company
or their representatives.
4.11 SEC DOCUMENTS. Parent has timely filed all required reports,
schedules, forms, statements, exhibits and other documents with the SEC since
December 31, 1996 (the "SEC Documents") and is qualified, and has obtained or
will obtain, without delay to the registration process, all appropriate waivers
necessary to allow Parent to register the MW Common Stock on SEC Form S-3. As
of their respective dates, the SEC Documents complied in all material respects
with the requirements of the Securities Act and the Exchange Act, as the case
may be, and the rules and regulations of the SEC promulgated thereunder
applicable to such SEC Documents, and none of the SEC Documents contained any
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading. The
consolidated financial statements of Parent and its subsidiaries included in the
SEC Documents comply as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto, have been prepared in accordance with GAAP (except, in the case
of unaudited financial statements, as permitted by SEC Form 10-Q) applied on a
consistent basis during the period involved (except as may be indicated in the
notes thereto) and fairly present the financial position of Parent and its
subsidiaries as of the date thereof and their statements of operations, changes
in Shareholder's equity and cash flows for the periods then ended (subject, in
the case of unaudited statements, to normal year-end audit adjustments). Except
as set forth in the SEC Documents, neither Parent nor any of its subsidiaries
has any liabilities or obligations of any nature (whether accrued, absolute,
contingent or otherwise) required by GAAP to be set forth on a consolidated
balance sheet of Parent and its subsidiaries or in the notes thereto, other than
liabilities and obligations incurred in the ordinary course of business
consistent with past practice since the date of its last filed
Form 10-K or 10-Q.
4.12 ACCURACY. The representations and warranties made by the Parent and
Purchaser to Company and Shareholder set forth in this Agreement and the
Purchaser Related Agreements, instruments and documents delivered and to be
delivered pursuant to or in connection with this Agreement do not include an
untrue statement of material fact or omit to state any material fact
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necessary to make them, when taken together and in light of the circumstances in
which they were or are made, not misleading in any material respect.
4.13 INVESTIGATION. Parent and Purchaser have conducted inspections of
the properties and financial and other records of the Company and other due
diligence with respect to the Company. Parent and Purchaser have had an
opportunity to ask questions of the Company and Shareholder relating to the
Company and management and financial affairs of the Company, which questions
have been answered to Parent and Purchaser's satisfaction, and to examine all
books and records of the Company. Parent and Purchaser acknowledge that they
have made their own independent investigation, examination, analysis and
evaluation of the Company including, without limitation, Parent and Purchaser's
own estimate of the value of the Company's business.
ARTICLE 5
COVENANTS OF THE COMPANY AND SHAREHOLDER
5.1 CONDUCT OF BUSINESS. The Company agrees that, between the date of
this Agreement and the Closing Date, except as contemplated by this Agreement or
referred to in a Disclosure Schedule, and except as may be necessary to carry
out the transactions contemplated by this Agreement, the Company without
Purchaser's written consent (which consent will not be unreasonably withheld or
delayed) or as requested by Purchaser, did not or will not:
(a) amend its Articles of Incorporation or Bylaws;
(b) make any material change in its practices, operations or
policies with respect to the selling of goods or services, collecting accounts
receivable and/or paying accounts payable except in the ordinary course of
business;
(c) conduct its business in a manner that materially departs from
the manner in which such business was being conducted prior to the date of this
Agreement;
(d) except as set forth in SCHEDULE 2.8 increase the rate or change
the form of compensation payable to any director, officer or employee of the
Company or increase any employee benefits, except in the ordinary course of
business in accordance with past practice in an amount not to exceed 3% in any
one case or the payment of bonuses in an aggregate amount of $25,000;
(e) purchase or dispose of any properties or other assets, except
in the ordinary course of business or as set forth in SCHEDULE 1.7;
(f) declare, set aside, pay or make any dividend or other
distribution in respect of any outstanding shares of the Company's capital stock
other than distributions to Shareholder to pay income taxes and distributions to
Shareholder charged against his Sub-S accumulated adjustments account, if
applicable;
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(g) issue or sell any shares of the Company's capital stock
(whether or not from the treasury) or any other securities; grant any options,
convertibility rights, rights to subscribe for shares of capital stock or
securities convertible into or exchangeable for shares of capital stock,
warrants, calls or other agreements relating to the Company's capital stock;
split up, combine, reclassify, redeem, repurchase or otherwise reacquire any of
the Company's capital stock, or otherwise change its capitalization;
(h) except as required by regulation or generally accepted
accounting principles, maintain its books of account other than in the usual,
regular and ordinary manner in accordance with generally accepted accounting
principles and on a basis consistent with prior periods, make any change in any
of its books, accounting methods or practices, or reclassify any assets or
liabilities;
(i) cancel, terminate, renew or amend any Material Contract or
enter into any contract, agreement, lease, license or commitment which would be
a Material Contract if such had existed on the date hereof, except in the
ordinary course of business;
(j) merge or consolidate with or into any other person or entity or
sell or dispose of all or substantially all of the Company's assets to any
person or entity, or initiate or participate in negotiations with any person or
entity with respect to any of the foregoing;
(k) invest in certificates of deposit in any one bank if such
investment in the aggregate exceeds $100,000 at any time;
(l) incur any direct or contingent liability for borrowed money or
guarantee the monetary obligations of any other person or entity, other than
indebtedness to be included in the Debt, or make any monetary investment in,
advance to or loan to any person or entity other than in the ordinary course of
business;
(m) fail to make maintenance expenditures and maintain inventories
in the amounts and at the times required to operate its business in the ordinary
course consistent with past practice;
(n) implement or adopt any change in its tax methods, principles or
elections;
(o) fail to pay accounts payable or collect accounts receivable in
accordance with past practices;
(p) enter into any transaction outside the ordinary course of
business; or
(q) agree or commit to do any of the foregoing.
Nothing contained in this Section 5.1 or elsewhere in this Agreement shall
be deemed in any way as prohibiting the Company from using cash, cash
equivalents or other current assets to reduce or pay off Debt prior to Closing.
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5.2 ACCESS. The Company agrees that, between the date of this Agreement
and the Closing Date, the Company shall, after receiving reasonable advance
notice from Purchaser, give Parent, Purchaser and their Associates (as defined
in Section 6.1) reasonable access (during normal business hours) to the books,
records, contracts and offices of the Company for the purpose of enabling such
parties to further investigate and inspect the business, operations and
financial and legal affairs of the Company.
5.3 NO SOLICITATION OR NEGOTIATION. The Company and Shareholder agree
that between the date of this Agreement and the earlier of the Closing Date or
the date this Agreement otherwise terminates, they will not, nor will they
permit any officer, director, Shareholder or agent of Shareholder or the Company
to, (i) solicit any proposal or offer from any person or entity (other than
Purchaser) relating to the sale of the Company, its capital stock or any
material portion of its assets, (ii) provide any non-public information to any
person or entity (other than Purchaser) for use in preparing any proposal or
offer relating to the sale of the Company or its capital stock or any material
portion of its assets, or (iii) respond to or enter into any negotiations
regarding any proposal or offer from any person or entity (other than Purchaser)
with respect to the foregoing.
5.4 FILINGS AND CONSENTS. Where required by applicable law, the Company
and Shareholder shall use commercially reasonable efforts to do each of the
following:
(a) as soon as practicable after the date of this Agreement, file
with the appropriate governmental authority any notification form required to be
filed by the Company under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR Act") with respect to this Agreement and the
transactions contemplated hereby, together with a request for early termination
of the applicable waiting period;
(b) after consultation with Purchaser, make any additional filing
required to be made by the Company under the HSR Act and promptly furnish to the
appropriate governmental authority such additional information as may be
requested under the HSR Act;
(c) make or give each filing or notice required to be made or given
pursuant to any applicable Legal Requirement, Material Contract or Permit by the
Company or Shareholder in connection with the execution and delivery of any of
this Agreement or in connection with the consummation or performance of any of
the transactions contemplated hereby; and
(d) obtain an agreement from each Creditor to terminate its lien
and lien filings upon payment of the amounts specified in such Creditor's
respective Payoff Letter to the extent that Purchaser decides to pay off a Debt
at Closing and each consent required to be obtained pursuant to any applicable
Legal Requirement, Permit or Material Contract by the Company or Shareholder in
connection with the execution and delivery of any of this Agreement or in
connection with the consummation or performance of the transactions contemplated
hereby. Except as to liens related to Leased Property to be acquired by
Purchaser pursuant to Section 7.5, Company shall pay all reasonable costs of
obtaining such releases and consents which costs shall be a Company Expense.
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5.5 UPDATED DISCLOSURE SCHEDULES. Between the date of this Agreement
and the Closing Date, if Shareholder or the Company becomes aware of any fact or
condition that causes any of the representations and warranties in this
Agreement to become untrue, misleading, or inaccurate in any material respect,
such party will promptly deliver to Purchaser an updated Disclosure Schedule
("Updated Disclosure Schedule") setting forth the facts or conditions that cause
such representation, warranty, or Disclosure Schedule to become untrue,
misleading, or inaccurate.
ARTICLE 6
COVENANTS OF PARENT AND PURCHASER
Parent and Purchaser each agree with the Company that:
6.1 CONFIDENTIALITY. Parent and Purchaser shall hold in strict
confidence, and cause their respective affiliates, directors, officers,
employees, agents, attorneys, accountants, financing sources and representatives
and those of its affiliates ("Associates") to hold in strict confidence, all
documents and information obtained with respect to the Company ("Confidential
Information"). Neither Parent nor Purchaser shall permit any Confidential
Information to be utilized or to be disclosed or conveyed to any other person or
entity other than their Associates in furtherance of this Agreement. Without
limiting the generality of the foregoing, and except as required by law or as
permitted by Section 7.4, (i) neither Parent nor Purchaser shall disclose to any
person or entity, and shall not permit any of their Associates to disclose to
any person or entity, the existence of this Agreement or any of the terms or
provisions hereof and (ii) except in the ordinary course of business, neither
Parent nor Purchaser shall contact any customers or employees of the Company,
and neither Parent nor Purchaser shall not permit any of their Associates to
contact any customers or employees of the Company, without the prior consent of
an officer of the Company. This Section 6.1 shall terminate if and when the
Closing occurs in accordance with Article 1 of this Agreement, or within three
years of the date of execution of this Agreement, whichever occurs first.
6.2 FILINGS AND CONSENTS. Where required by applicable law, Parent and
Purchaser shall use commercially reasonable efforts to do each of the following:
(a) as soon as practicable after the date of this Agreement, file
with the appropriate governmental authority any notification form required to be
filed by Parent or Purchaser under the HSR Act with respect to this Agreement
and the transactions contemplated hereby, together with a request for early
termination of the applicable waiting period;
(b) after consultation with Shareholder, make any additional filing
required to be made by Parent or Purchaser under the HSR Act and promptly
furnish to the appropriate governmental authority such additional information as
may be requested under the HSR Act;
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(c) make or give each other filing or notice required to be made or
given pursuant to any applicable Legal Requirement by Purchaser in connection
with the execution and delivery of this Agreement or in connection with the
consummation or performance of any of the transactions contemplated hereby; and
(d) obtain each consent required to be obtained by Parent or
Purchaser pursuant to any applicable Legal Requirement or material contract to
which Parent or Purchaser is a party or by which either of them is bound in
connection with the execution and delivery of any of this Agreement or in
connection with the consummation or performance of the transactions contemplated
hereby.
6.3 FILING OF FINAL TAX RETURNS. Parent and Purchaser agree to timely
file all final Tax Returns for and on behalf of the Company which are required
to be filed subsequent to the Closing, and to deliver copies thereof to
Shareholder promptly after filing the same.
6.4 OFFICER AND DIRECTOR INDEMNIFICATION. Parent and Purchaser agree to
include and maintain provisions in the Certificate of Incorporation and Bylaws
of the Surviving Corporation which provide indemnification for the directors and
officers of the Company immediately prior to the Effective Time to the maximum
extent provided by such documents and applicable corporate law and to indemnify
such directors and officers to the maximum extent provided by applicable
corporate law. In addition, Parent and Purchaser shall include such persons as
additional insureds under Parent's Director and Officer Insurance Policy if they
can do so without substantial additional cost.
6.5 BENEFIT PLANS AND RELATED MATTERS. Except for employees subject to
collective bargaining agreements and subject to the provisions of Parent's
policies and programs, any employee of the Company retained by Purchaser or its
affiliates after the Closing Date (each, a "Transferred Employee") shall be
eligible to participate or eligible for accrual of benefits, vesting and
contributions or accruals to be made or credited following the Closing Date
under each of Parent's employee benefit plans, programs or arrangements
available to all or substantially all of Parent's employees, subject to the
terms upon which such plans allow new participation by Purchaser's employees.
Each Transferred Employee shall be credited with the time-in-service that the
employee accrued with the Company.
ARTICLE 7
COVENANTS OF ALL PARTIES
The parties hereto agree that:
7.1 COMMERCIALLY REASONABLE EFFORTS; FURTHER ASSURANCES. Subject to the
terms and conditions of this Agreement, each party will use commercially
reasonable efforts to take, or cause to be taken, all actions and to do, or
cause to be done, all things necessary or desirable under applicable Legal
Requirements to consummate the transactions contemplated by this Agreement. The
Company, Shareholder, Parent and Purchaser each agree to execute and deliver
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such other documents, certificates, agreements and other writings and to take
such other actions as may be necessary or desirable in order to consummate or
implement expeditiously the transactions contemplated by this Agreement.
7.2 POOLING OF INTERESTS. Each of Parent, Purchaser and the Company
shall use its respective commercially reasonable efforts to cause the
transactions contemplated by this Agreement, including the Merger, to be
accounted for as a pooling of interests under Opinion 16 of the Accounting
Principles Board and applicable SEC rules and regulations, and such accounting
treatment to be accepted by each of Parent's and the Company's independent
certified public accountants, respectively, and to be accepted by the SEC, and
each of Parent, Purchaser and the Company and Shareholder agree that they will
not knowingly take any action that would cause such accounting treatment not to
be obtained.
7.3 CERTAIN FILINGS, ETC. The Company, Parent and Purchaser shall
cooperate with one another (a) in determining whether any action by or in
respect of, or filing with, any governmental body, agency, official or authority
is required, or any actions, consents, approvals or waivers are required to be
obtained from parties to any material contracts, in connection with the
consummation of the transactions contemplated by this Agreement and (b) in
taking such actions or making any such filings, in furnishing such information
as may be required in connection therewith, and in seeking timely to obtain any
such actions, consents, approvals or waivers.
7.4 PUBLIC ANNOUNCEMENTS. The parties agree not to issue any press
release or make any public statement with respect to this Agreement or the
transactions contemplated hereby prior to the Closing without the prior consent
of Purchaser and Company (which consent shall not be unreasonably withheld or
delayed), except to the extent that any party hereto is required by law to make
any such disclosure and such party notifies the other parties hereto a
reasonable time before making such disclosure of the nature and content of the
intended disclosure, and consults with such other parties regarding the nature
and content of such disclosure.
7.5 REAL ESTATE. The parties agree to negotiate, execute and deliver
prior to Closing, mutually acceptable real estate purchase and sale contracts
(the "Real Estate Documents") for the Leased Property currently occupied by the
Company which is owned directly or indirectly by Shareholder and which must be
acquired by the Purchaser as part of the acquisition of the Company in order for
the transactions described herein to be accounted for as a pooling of interests.
Notwithstanding the form of the transaction pursuant to which the Leased
Property is to be so transferred, the Real Estate Documents shall contain
(a) terms and conditions which are essential to effectuate the transfer of the
Leased Property in a form acceptable to Purchaser and (b) provisions similar to
those set forth in Sections 1.1(f) and 1.10 hereof relating to the MW Common
Stock delivered in connection therewith. The Real Estate Documents shall
provide for a purchase price of the greater of nine times current annual rentals
or fair market value and shall be net of any mortgages assumed by Purchaser.
The purchase price and the amount of any pre-payment penalties incurred by
Shareholder for pre-paying any mortgages shall be paid by Purchaser to
Shareholder in MW Common Stock based on the MW Common Valuation.
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ARTICLE 8
CONDITIONS TO OBLIGATION OF PURCHASER TO CLOSE
The obligation of Purchaser to consummate the Merger, pay the Merger
Consideration, discharge the Debt, and otherwise consummate the transactions
contemplated hereunder is subject to the satisfaction as of the Closing Date, of
the following conditions (any of which may be waived by Purchasers in whole or
in part):
8.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES. The representations,
warranties and covenants set forth in Articles 2 and 3 and Section 5.1, without
giving effect to any Updated Disclosure Schedule delivered to Purchaser after
the date hereof, do not contain any misrepresentation or breach of warranty
which is likely to cause a Material Adverse Effect as of the date of this
Agreement and as of the Closing Date, with the same effect as though made on and
as of the Closing Date, except to the extent that (a) any of such
representations and warranties refers specifically to a date other than the
Closing Date or (b) the accuracy of any of such representations and warranties
is affected by any of the transactions contemplated by this Agreement.
8.2 SHAREHOLDER APPROVAL. Approval of this Agreement and the
transactions contemplated hereby shall have been validly obtained by the
requisite vote of Shareholder of the Company under applicable law.
8.3 PERFORMANCE. Shareholder and the Company having performed, in all
material respects, all obligations required by this Agreement to be performed by
Shareholder and the Company on or before the Closing Date including without
limitation the covenants set forth in Article 5.
8.4 CERTIFICATE. Purchaser having received from a duly authorized
officer of the Company a certificate dated the Closing Date confirming that the
conditions in Section 8.1 and 8.2 have been met and confirming, to the best of
such persons' knowledge, that the condition of Section 8.3 has been met.
8.5 DEBT CERTIFICATES AND PAYOFF LETTERS. Purchaser having received the
Debt Certificate and the Payoff Letters.
8.6 NO INJUNCTION. There not being in effect, at the Closing, any
injunction or other binding order of any court or other tribunal having
jurisdiction over Purchaser that prohibits the consummation of the transactions
contemplated in this Agreement.
8.7 NO MATERIAL ADVERSE EFFECT. There having been no Material Adverse
Effect on the Company since December 31, 1997.
8.8 CONSENTS. All required consents, licenses, approvals, estoppel
certificates, releases of Encumbrances, acknowledgments of payment in full and
authorizations, as set forth on SCHEDULE 2.5, having been obtained and delivered
to Purchaser.
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8.9 SHAREHOLDER REPRESENTATION AND AFFILIATE LETTER. Shareholder having
executed and delivering a letter in the form of EXHIBIT C.
8.10 LEGAL OPINIONS. Purchaser having received from counsel to the
Company an opinion in substantially the form of EXHIBIT D attached hereto.
8.11 CERTIFICATE OF SECRETARY. The Company having delivered a
certificate, signed by the secretary of the Company, certifying (i) current
copies, as amended, of the Articles of Incorporation and Bylaws of the Company
and (ii) the resolutions of the board of directors and Shareholder of the
Company authorizing this Agreement and the transactions contemplated hereby.
8.12 ESCROW AGREEMENTS. Shareholder, the Company, and the Escrow Agent
(as defined in the Escrow Agreement) having executed and delivered the Escrow
Agreement.
8.13 NON-COMPETE AGREEMENTS. Shareholder having executed non-compete
agreements in the form attached as EXHIBIT E providing for a covenant not to
compete of five years from the date of Closing and three years from the date of
Shareholder's termination of employment with Purchaser or one of its Affiliates,
whichever is later.
8.14 UCC-3S. The Company having delivered UCC-3 Termination Statements
for all the secured Debt to be paid off at Closing, or a Payoff Letter from the
holder thereof agreeing to deliver the same after receipt of immediately
available funds sufficient to pay off in full the secured Debt.
8.15 HSR ACT. All applicable waiting periods under the HSR Act relating
to transactions contemplated hereby having expired or been terminated.
8.16 ACCOUNTING, TAX MATTERS. Purchaser is not aware of any fact or
circumstance that would (i) prevent the transactions contemplated hereby from
qualifying as a tax-free reorganization under the Code, or (ii) prevent the
transaction from qualifying for the pooling of interests method of accounting.
8.17 REAL ESTATE PURCHASES. The Real Estate Documents shall have been
executed and delivered by the Purchaser and Shareholder and the conditions to
purchase of the subject real estate shall have been satisfied.
8.18 NO DISCOVERY. Purchaser not being informed of or otherwise having
discovered any matter or matters which would constitute a Purchaser Indemnified
Obligation or which would represent a Material Adverse Effect on the Company.
8.19 DOCUMENTATION. All agreements, documents and instruments incidental
to the performance of the transactions contemplated by this Agreement being in a
form and substance
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reasonably satisfactory to Purchaser and its legal counsel and Purchaser having
received copies of all documents that they may have reasonably requested in
connection with such transactions.
8.20 APPROVAL OF PURCHASER'S BOARD. The Board of Directors of Purchaser
and Parent shall have approved this Agreement and the transactions contemplated
herein.
ARTICLE 9
CONDITIONS TO OBLIGATIONS OF THE COMPANY TO CLOSE
The obligation of the Company to consummate the transactions that are to be
consummated at the Closing is subject to the satisfaction, as of the Closing
Date, of the following conditions (any of which may be waived in whole or in
part by Shareholder):
9.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Parent and Purchaser set forth in Article 4 being accurate in all
material respects (except for the representations and warranties set forth in
Section 4.6, which shall be true and accurate) as of the date of this Agreement
and as of the Closing, as though made on and as of the Closing Date.
9.2 PERFORMANCE. Parent and Purchaser having performed, in all material
respects, all obligations required by this Agreement to be performed by Parent
and Purchaser on or before the Closing Date.
9.3 CERTIFICATE. The Company having received from duly authorized
officers of Purchaser a certificate dated the Closing Date confirming that the
condition in Section 9.1 has been met and confirming, to the best of such
persons' knowledge, that the condition of 9.2 has been met.
9.4 NO INJUNCTION. There not being in effect, at the Closing, any
injunction or other binding order of any court or other tribunal having
jurisdiction over Shareholder or the Company that prohibits the consummation of
the transactions contemplated by this Agreement.
9.5 LEGAL OPINION. The Company having received from counsel to
Purchaser and Parent an opinion in substantially the form of EXHIBIT F attached
hereto.
9.6 TAX OPINION. The Company and Shareholder having received an opinion
of Rothgerber Johnson & Lyons LLP, in form and substance reasonably satisfactory
to the Company, to the effect that the Merger and the issuance of shares of MW
Common Stock in connection therewith, as described herein, shall constitute a
tax-free reorganization under Section 368 of the Internal Revenue Code of 1986,
as amended.
9.7 ESCROW AGREEMENTS. Purchaser and the Escrow Agent having executed
and delivered the Escrow Agreement and the Working Capital Escrow Agreement.
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9.8 HSR ACT. All applicable waiting periods under the HSR Act relating
to transactions contemplated hereby having expired or been terminated.
9.9 DOCUMENTATION. All agreements, documents and instruments incidental
to Purchaser's and Parent's performance of the transactions contemplated by this
Agreement, being in a form and substance reasonably satisfactory to Shareholder
and their legal counsel.
9.10 MATERIAL ADVERSE EFFECT. There having been no material adverse
effect on Purchaser or Parent since December 31, 1997.
9.11 REAL ESTATE PURCHASES. The Real Estate Documents shall have been
executed and delivered by the Purchaser and Shareholder and the conditions to
purchase of the subject real estate shall have been satisfied.
ARTICLE 10
TERMINATION OF AGREEMENT
10.1 RIGHT TO TERMINATE AGREEMENT. This Agreement may be terminated
prior to the Closing:
(a) by the mutual agreement of the Company and Purchaser;
(b) by Purchaser at any time after June 30, 1998 if any condition
set forth in Article 8 shall not have been satisfied or waived and Parent or
Purchaser is not in material breach of this Agreement;
(c) by the Company at any time after May 29, 1998 if any condition
set forth in Article 9 shall not have been satisfied or waived and the Company
is not in material breach of this Agreement;
(d) by Purchaser at any time if it determines that any
representation or warranty set forth in Section 2 or Section 3 is inaccurate in
any material respect;
(e) by Purchaser if any Updated Disclosure Schedule delivered to
Purchaser under Section 5.5 causes any representation or warranty set forth in
Section 2 or 3 to be inaccurate in any material respect; or
(f) by the Company at any time if it determines that any
representation or warranty set forth in Section 4 is inaccurate in any material
respect.
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10.2 EFFECT OF TERMINATION. Upon the termination of this Agreement
pursuant to Section 10.1:
(a) Purchaser shall promptly destroy or cause to be returned to the
Company all Confidential Information, including any copies made by or supplied
to Purchaser or any of Purchaser' Associates of any such Confidential
Information;
(b) Each party shall pay its own costs and expenses and no party
hereto shall have any obligation or liability to the other parties hereto;
PROVIDED, HOWEVER that the parties hereto shall remain bound by the provisions
of Sections 6.1 and 7.4 and Article 12.
ARTICLE 11
CERTAIN REMEDIES AND LIMITATIONS
11.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. All
representations and warranties made by the Company and Shareholder in this
Agreement, in any Schedule or in any certificate delivered pursuant hereto,
shall survive the Closing until May 10, 1999, provided that there shall be no
termination of the obligation to indemnify for a claim involving any such
representation or warranty provided a Claim Notice has been delivered prior to
May 10, 1999. The representations and warranties of any party shall be
unaffected by any investigation made by or on behalf of the other parties or by
knowledge obtained as a result thereof or otherwise. All representations and
warranties made by Parent and the Purchaser as to any fact or condition on or
before the Closing Date, in this Agreement, or in any certificate delivered
pursuant hereto, shall survive the Closing.
11.2 INDEMNIFICATION BY SHAREHOLDER.
(a) The Purchaser and the Company and their respective Affiliates
and their respective officers, directors, shareholders, agents, representatives,
consultants, employees and affiliates, and all of their respective heirs,
successors and permitted assigns (collectively, the "Purchaser Indemnified
Parties") shall be indemnified and held harmless by Shareholder solely out of
the portion of the Merger Consideration deposited in the Escrow Account, against
and in respect of the net amount (determined after deduction of the amount of
any insurance proceeds recovered and any benefits inuring to the Purchaser as a
result of the timing for income tax purposes of deductions for such losses as
compared to the timing of recoveries under insurance or this Section 11.2):
(i) of any and all liabilities, obligations, losses,
damages, diminutions of value, liens and deficiencies of any kind or nature
("Losses") not accrued or reserved for in the Final Closing Statement which
exist, or which are imposed on, incurred by or asserted against any one or
more of the Purchaser Indemnified Parties,
(A) based upon, resulting from or arising out of, or as to
which there was, any breach or inaccuracy of any representation,
warranty, statement,
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certification, agreement or covenant made by the Company or
Shareholder in this Agreement, any Related Agreement, any Disclosure
Schedule hereto or thereto;
(B) based upon, resulting from or arising out of any claim,
litigation or proceeding brought by any third-party based upon,
resulting from, arising out of or concerning any event, fact or
circumstance, if and to the extent that such event, fact or
circumstance arises out of or relates to the ownership or operation
of the Company prior to Closing;
(C) arising out of the cost of any required remediation
under Environmental Laws of any of the properties now or previously
owned, leased, used, occupied or contaminated by the Company, if
the materials and/or conditions requiring such remediation existed
as of the Closing;
(D) in the nature of Taxes for periods through the Closing
for which the Company is liable to the extent that an appropriate
tax authority has asserted a claim and (i) such Taxes are not
reflected on the Financial Statements and did not arise in the
ordinary course of business after the date thereof, (ii) such Taxes
should have been but were not reflected in any return filed by the
Company prior to the Closing, (iii) such Taxes were required to be
paid prior to the Closing and were not so paid, or (iv) such Taxes
result from the failure by the Company prior to the Closing to
comply with any legal requirements relating to information reporting
or withholding and payment over of taxes with respect to payments
made to third parties;
(E) the amount of any brokerage commission, finder's fee or
like payment in connection with the transactions contemplated in
this Agreement to the extent not included in Company Expenses
included in the calculation of the Merger Consideration;
(ii) of any cost or expenses (including, without limitation,
settlement costs and reasonable attorneys', accountants' and experts' fees
and court costs) incurred by Purchaser Indemnified Parties in connection
with any of the foregoing (including, without limitation, any reasonable
cost or expense incurred by Purchaser Indemnified Parties in enforcing
their rights pursuant to this Section 11.2).
Each of the above is for purposes of this Agreement a "Purchaser
Indemnified Obligation."
(b) Claims for indemnification under Section 11.2(a)(i)(B), (C) or
(D), above, may be made regardless of whether or not the matter giving rise to
such claim would constitute a breach of a representation and warranty made in
this Agreement, any Related Agreement, any Disclosure Schedule hereto and
thereto or any other written document. No Purchaser Indemnified Party shall be
required to make any claim or demand against any other person or entity prior to
the making of any claim or demand for indemnification or at any other time.
Shareholder agrees that, notwithstanding any other provision of this Agreement,
any Related
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Agreement or applicable Legal Requirements, Purchaser Indemnified Parties shall
offset all valid claims for indemnification against the Escrow Account in
accordance with the terms of the Escrow Agreement.
11.3 LIMITATIONS ON REPRESENTATIONS, WARRANTIES AND LIABILITIES OF
SHAREHOLDER.
(a) Notwithstanding anything to the contrary in this Agreement,
Shareholder shall not be liable to the Purchaser Indemnified Parties, except
under the Escrow Agreement as provided therein. The total amount of payments
that Shareholder may be required to make thereunder shall be limited in the
aggregate to the Escrow Amount, which is the sole source of Purchaser's
indemnification and Shareholder's cumulative liability shall in no event exceed
the Escrow Amount.
(b) No payment shall be required to be made for Purchaser
Indemnified Obligations unless a Claim Notice (as defined below) with respect
thereto has been delivered to Shareholder on or prior to May 10, 1999.
(c) Notwithstanding anything to the contrary in this Agreement, and
except for "willful," knowing or intentional breaches of the representations and
warranties contained herein, no claim for indemnification may be made by any
Purchaser Indemnified Party unless and until the aggregate amount of Losses
and/or other amounts claimed for indemnification by the Purchaser Indemnified
Parties exceeds $25,000, and then only for the amount by which such Losses and
other amounts claimed exceed $25,000.
11.4 INDEMNIFICATION BY PARENT AND PURCHASER.
(a) Parent and Purchaser will, jointly and severally, indemnify and
hold harmless Shareholder and his respective affiliates, officers, directors,
partners, stockholders, agents, representatives, consultants and employees, and
all of their respective heirs, successors and permitted assigns (collectively,
the "Shareholder Indemnified Parties") from and against the net amount
(determined after deduction of the amount of any insurance proceeds recovered):
(i) of any and all Losses which exist, or which are imposed
on, incurred by or asserted against any one or more of Shareholder
Indemnified Parties:
(A) based upon, resulting from or arising out of or as to
which there was any breach or inaccuracy of any representation,
warranty, statement, certification, agreement, obligation or
covenant made by Parent or Purchaser in this Agreement, any
Purchaser Related Agreement or in any other written document;
(B) based upon, resulting from or arising out of any claim,
litigation or proceeding brought by any third party based upon,
resulting from arising out of or concerning any event, fact or
circumstance, if and to the extent that such event, fact or
circumstance arises out of or relates to the ownership or operation
of the Company after the Closing;
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(C) arising out of the cost of remediating under
Environmental Laws any of the properties now owned, leased, used,
occupied or contaminated by the Company, if the conditions requiring
such remediation did not exist prior to the Closing;
(D) in the nature of Taxes which arise subsequent to the
Closing;
(E) the amount of any brokerage commission, finder's fee or
like payment in connection with the transactions contemplated in
this Agreement;
(ii) of any cost or expenses (including, without limitation,
settlement costs and reasonable attorneys', accountants' and experts' fees
and court costs) incurred by Shareholder Indemnified Parties in connection
with any of the foregoing (including, without limitation, any reasonable
cost or expense incurred by Shareholder Indemnified Parties in enforcing
their rights pursuant to this Section 11.4).
Each of the above is for purposes of this Agreement a "Shareholder
Indemnified Obligation."
(b) Claims for indemnification under Section 11.4(a)(i)(B), (C) or
(D), above, may be made regardless of whether or not the matter giving rise to
such claim would constitute a breach of a representation and warranty made in
this Agreement, any Related Agreement, any Disclosure Schedule hereto and
thereto or any other written document. No Shareholder Indemnified Party shall
be required to make any claim or demand against any other person or entity prior
to the making of any claim or demand for indemnification or at any other time.
11.5 LIMITATIONS ON LIABILITY OF PURCHASER.
(a) No payment shall be required to be made for Shareholder
Indemnified Obligations unless a Claim Notice with respect thereto has been
delivered to Purchaser on or prior to the third anniversary of the Closing.
(b) Any amounts payable by Purchaser to Shareholder under this
Article 11 shall be payable in MW Common Stock at the MW Common Stock Valuation.
11.6 INDEMNIFICATION CLAIMS.
(a) If either a Purchaser Indemnified Party, on the one hand, or a
Shareholder Indemnified Party, on the other hand, (the "Claimants") wishes to
assert an indemnification claim hereunder, the Claimant shall deliver to
Shareholder, if a Purchaser Indemnified Party, or to Purchaser, if the Claimant
is a Shareholder Indemnified Party, a written notice (a "Claim Notice") setting
forth:
(i) the matter giving rise to the Claim for indemnification,
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(ii) a detailed description of all of the facts and
circumstances known to Claimant giving rise to the Claim, and
(iii) a detailed description of, and a reasonable estimate of
the total amount of, the monetary amounts actually incurred or expected to
be incurred for which indemnification is sought.
(b) Purchaser Indemnified Parties and Shareholder Indemnified
Parties are referred to herein as "Indemnified Parties," and the persons from
whom indemnification may be sought pursuant to this Section 11.6 are referred to
as an "Indemnifying Party". Within twenty (20) days after receipt of any Claim
Notice, the Indemnifying Parties will (i) acknowledge in writing their
responsibility for all or part of such matter for which indemnification is
sought under this Article 11, and will either (x) pay or otherwise satisfy the
portion of such matter as to which responsibility is acknowledged, or (y) take
such other action as is reasonably satisfactory to the Indemnified Party to
provide reasonable security or other assurances for the performance of their
obligations hereunder, and/or (ii) give written notice to the Indemnified Party
of their intention to dispute or contest all or part of such responsibility.
Upon delivery of such notice of intention to contest, the parties will negotiate
in good faith to resolve as promptly as possible any dispute as to
responsibility for, or the amount of, any such matter.
11.7 DEFENSE OF THIRD PARTY ACTIONS. If an Indemnified Party receives
notice or otherwise obtains Knowledge of any Claim or any threatened Claim that
may give rise to an indemnification claim against an Indemnifying Party, then
the Indemnified Party shall promptly deliver to the Indemnifying Party a written
notice describing such Claim in reasonable detail. The untimely delivery of such
written notice by the Indemnified Party to the Indemnifying Party shall relieve
the Indemnifying Party of liability with respect to such Claim to the extent it
has been prejudiced by lack of timely notice under this Article 11 with respect
to such Claim. The Indemnifying Party shall have the right, at its option to
assume the defense of any such Claim with its own counsel, reasonably
satisfactory to the Indemnified Party, provided that Shareholder may not assume
the defense of any Claim unless there are sufficient amounts in the
Indemnification Escrow Amount to fully indemnify Purchaser Indemnified Parties
against the amount of such Claim and all other pending Claims against the Escrow
Amount. If the Indemnifying Party elects to assume the defense of and
indemnification for any such Claim, then:
(a) notwithstanding anything to the contrary contained in this
Agreement, the Indemnifying Party shall not be required to pay or otherwise
indemnify the Indemnified Party against any attorneys' fees or other expenses
incurred on behalf of the Indemnified Party in connection with such matter
following the Indemnifying Party's election to assume the defense of such matter
so long as the Indemnifying Party continues to diligently conduct such defense;
(b) the Indemnified Party shall make available to the Indemnifying
Party all books, records and other documents and materials that are under the
direct or indirect control of the Indemnified Party or any of the Indemnified
Party's Associates that the Indemnifying Party considers such necessary or
desirable for the defense of such matter at the expense of the
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Indemnifying Party and shall make available to the Indemnifying Party reasonable
access to Indemnified Party's personnel;
(c) the Indemnified Party shall execute such documents and take
such other actions as the Indemnifying Party may reasonably request for the
purpose of facilitating the defense of, or any settlement, compromise or
adjustment relating to, such Claim (with the Indemnifying Party to reimburse
Indemnified Party for third-party, out-of-pocket expenses) and the Indemnified
Party shall not be required to take any such action or execute any document
which imposes any equitable or unindemnified liability remedy on any Indemnified
Party or would adversely affect the business or operations of the Company;
(d) the Indemnified Party shall otherwise fully cooperate as
reasonably requested by the Indemnifying Party in the defense of such Claim
(with the Indemnifying Party to reimburse Indemnified Party for third-party,
out-of-pocket expenses); and
(e) the Indemnified Party shall not admit any liability with
respect to such Claim.
If the Indemnifying Party fails or refuses to assume the defense of and
indemnification for such Claim, then the Indemnified Party shall proceed
diligently to defend such Claim with the assistance of counsel, and the
Indemnifying Party shall thereafter reimburse Indemnified Party on a current
basis, in accordance with the procedures set forth in this Agreement, as
requested by Indemnified Party for all costs and expenses of defense for which
Indemnified Party is entitled to indemnification pursuant to the terms of this
Agreement. No third party Claim may be settled by the Indemnified Party without
notice to, and the written consent of, the Indemnifying Party which consent must
not be unreasonably withheld. If such consent is not given, or written notice
that it is being withheld and the reasons therefor has not been received, by the
Indemnified Party within 15 days after such notice has been received by the
Indemnifying Party, the consent of the Indemnifying Party to such settlement
shall be deemed given.
11.8 SUBROGATION. To the extent that the Indemnifying Party makes or is
required to make any indemnification payment to any Indemnified Party, the
Indemnifying Party shall be entitled to exercise, and shall be subrogated to,
any rights and remedies (including rights of indemnity, rights of contribution
and other rights of recovery) that the Indemnified Party or any of the
Indemnified Party affiliates may have against any other person (other than any
Purchaser Indemnified Party or Shareholder Indemnified Party) with respect to
any Losses, circumstances or matter to which such indemnification payment is
directly or indirectly related. The Indemnified Party shall permit the
Indemnifying Party to use the name of the Indemnified Party and the names of the
Indemnified Party's affiliates in any transaction or in any proceeding or other
matter involving any of such rights or remedies; and the Indemnified Party shall
take such actions as the Indemnifying Party may reasonably request for the
purpose of enabling the Indemnified Party to perfect or exercise the
Indemnifying Party's right of subrogation hereunder.
11.9 EXCLUSIVITY. The right of each party hereto to assert
indemnification claims and receive indemnification payments pursuant to this
Article 11 shall be the sole and exclusive right
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and remedy exercisable by any person or entity entitled to indemnification
hereunder with respect to any breach by the other party hereto of any
representation or warranty or any other indemnity obligation hereunder.
11.10 RETENTION OF RECORDS. From and after the date of this Agreement,
Purchaser shall preserve, and shall cause the Company to preserve, all books,
records and other documents, materials and information relevant to the
representations, warranties and covenants set forth in this Agreement until the
later of four (4) years following the Closing Date or for such longer period as
the rights of the parties hereunder may exist. At all times after the Closing
Date, Purchaser and the Company shall give Shareholder and Shareholder's
Associates reasonable access to such books, records and other documents,
materials and information of the Company relating to the operation of the
business of the Company up to and including the Closing Date.
ARTICLE 12
MISCELLANEOUS
12.1 CERTAIN DEFINITIONS. For purposes of this Agreement, a contract,
obligation, liability, transaction, change, breach, encumbrance, proceeding or
other matter or event shall not be deemed "material" if the monetary amount
involved is less than 0.1% of the Merger Consideration. A "Material Adverse
Effect" is a material adverse effect on the business, operations, assets or
financial condition or results of the Company taken as a whole. "Knowledge"
means, with respect to an individual, the actual present Knowledge of such
individual. A Person (other than an individual), including the Company, will be
deemed to have Knowledge of a particular fact or matter if any individual who
serves as an officer or director of such Person has actual present Knowledge of
such fact or matter.
12.2 EXPENSES. The term "Company Expenses" shall mean: (i) all costs and
expenses of the Company in connection with the negotiation of this Agreement and
the consummation of the transactions contemplated hereby including any broker's
fee set forth in SCHEDULE 2.25; (ii) one-half of the Company's costs of all HSR
filings, and any transfer taxes or stamp incurred by the Company in connection
with the transactions contemplated by this Agreement and of Neutral Accountants;
and (iii) all other costs and expenses required to be borne by the Company under
the terms of this Agreement. Company Expenses shall not include costs, expenses
or fees of Shareholder incurred in connection with the Merger or other
transactions contemplated by this Agreement which costs, expenses and fees shall
be paid directly by Shareholder. The Company shall pay the fees and expenses of
the Company incidental to the preparation of this Agreement, the performance and
compliance with all agreements contained in this Agreement to be performed or
complied with by it and the consummation of the transactions contemplated
hereby, including the legal and accounting fees and expenses. Purchaser shall
be responsible for its fees and expenses incidental to the preparation of this
Agreement, the performance and compliance with all agreements contained in this
Agreement to be performed or complied with by it and the consummation of the
transactions contemplated hereby, including the legal and accounting fees and
expenses and the fees and expenses associated with any environmental assessment
conducted in connection with this transaction.
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12.3 NOTICES; ETC. All notices, instructions and other communications
given hereunder or in connection herewith shall be in writing. Any such notice,
instruction or communication shall be sent either (i) by registered or certified
mail, return receipt requested, postage prepaid, or (ii) via a reputable
nationwide overnight courier service, in each case to the address set forth
below. Any such notice, instruction or communication shall be deemed to have
been delivered three business days after it is sent prepaid, or one business day
after it is sent via a reputable nationwide overnight courier service.
If to Purchaser, to:
Mail-Well, Inc.
23 Inverness Way East
Englewood, CO 80112
Attention: Gerald F. Mahoney, Chairman
Tel: (303) 397-7410
Fax: (303) 397-7400
with a copy to:
Mail-Well, Inc.
23 Inverness Way East
Englewood, CO 80112
Attention: Roger Wertheimer, Vice President, General Counsel
Tel: (303) 397-7440
Fax: (303) 768-7380
If to Company or to Shareholder:
Russell L. C. Hill
5101 South Zarzamora
San Antonio, Texas 78211
Tel: (210) 923-7591
Fax: (210) 923-3388
With a copy to:
Steven R. Jacobs
Cox & Smith Incorporated
112 East Pecan, Suite 1800
San Antonio, Texas 78205
Tel: (210) 554-5500
Fax: (210) 226-8395
or, in each case, to such other address as may be specified in writing to the
other parties.
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Any party may give any notice, instruction or communication in connection
with this Agreement using any other means (including personal delivery, telecopy
or ordinary mail), but no such notice, instruction or communication shall be
deemed to have been delivered unless and until it is actually received by the
party to whom it was sent. Any party may change the address to which notices,
instructions or communications are to be delivered by giving the other parties
to this Agreement notice thereof in the manner set forth in this Section 12.3.
12.4 ASSIGNMENT. Neither the Company nor Shareholder may assign or
otherwise transfer this Agreement or any of their rights hereunder to any person
or entity, without the prior written consent of Purchaser. Subject to the
foregoing, this Agreement shall inure to the benefit of and be binding upon
Shareholder and his successors, personal representatives, heirs, and permitted
assigns. Notwithstanding the foregoing, this Agreement shall not be terminated
by the death or incapacity of Shareholder, and if, after the execution hereof,
Shareholder shall die or become incapacitated, this Agreement shall be binding
upon the successors and assigns of Shareholder as if such death or incapacity
had not occurred and regardless of notice thereof. Except as expressly permitted
by this Section 12.4, Purchaser shall not voluntarily or by operation of law
assign or otherwise transfer this Agreement or any of its rights or obligations
hereunder except to Parent or any of its wholly owned subsidiaries, without the
prior written consent of Shareholder and provided that any permitted assignment
or transfer shall not relieve Purchaser or Parent of any of their joint and
several obligations hereunder. Purchaser may collaterally assign and/or grant a
security interest in its rights under this Agreement and under other closing
documents to any financial institution(s) or their affiliates as required
pursuant to any existing or future financing arrangements with the prior written
consent of Shareholder (which consent will not be unreasonably withheld or
delayed).
12.5 ENTIRE AGREEMENT; AMENDMENT; GOVERNING LAW; ETC. This Agreement
(together with the Exhibits and Disclosure Schedules) embodies the entire
agreement and understanding among the parties hereto with respect to the subject
matter hereof. This Agreement may be amended, modified, waived, discharged or
terminated only by (and any consent hereunder shall be effective only if
contained in) an instrument in writing signed by the party against which
enforcement of such amendment, modification, waiver, discharge, termination or
consent is sought. This Agreement shall be construed in accordance with and
governed by the laws of the State of Delaware as it applies to contracts to be
performed entirely with the State of Delaware. No representation or warranty
(either express, implied or otherwise) is being made by any party with respect
to the subject matter hereof other than as expressly set forth herein.
12.6 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which is an original, but all of which shall constitute
one instrument. Facsimile signatures to this Agreement shall be binding upon
the parties.
12.7 THIRD PARTY RIGHTS. The parties do not intend to confer any benefit
hereunder on any person or entity other than the parties hereto, the Indemnified
Parties and their respective successors in interest.
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12.8 EXHIBITS AND SCHEDULES. Each of the Exhibits and Schedules referred
to herein and attached hereto is an integral part of this Agreement and is
incorporated herein by this reference.
12.9 PRONOUNS. All pronouns and any variations thereof used in this
Agreement shall be deemed to refer to the masculine, feminine or neuter,
singular or plural, as appropriate.
12.10 AUTHORITY AND EXECUTION. Each person executing this Agreement on
behalf of a party hereto represents and warrants that he is duly and validly
authorized to do so on behalf of such party, with full right and authority to
execute this Agreement and to bind such party with respect to all of its
obligations hereunder.
12.11 SEVERABILITY. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction, as to such jurisdiction, shall be
ineffective to the extent of such invalidity or unenforceability, without
rendering invalid or unenforceable the retraining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction.
12.12 TIME OF ESSENCE. Time is of the essence of this Agreement.
12.13 INTERPRETATION. Each party acknowledges that such party, either
directly or through such party's representatives, has participated in the
drafting of this Agreement, and any applicable rule of constructions that
ambiguities are to be resolved against the drafting party should not be applied
in connection with the construction or interpretation of this Agreement.
12.14 ARBITRATION.
(a) Any controversy or claim arising out of or related to this
Agreement, or a breach hereof, is to be settled by arbitration in accordance
with the procedures set forth in SCHEDULE 12.14.
(b) Notices of demand for arbitration must be filed in writing with
the other parties hereto and in accordance with SCHEDULE 12.14. A demand for
arbitration is to be made within a reasonable time after the claim or
controversy has arisen, but in no event later than the date when institution of
legal or equitable proceedings based on such claim or controversy would be
barred by the applicable statute of limitations.
(c) No arbitration hereunder may include, by consolidation, joinder
or any other manner, any Person other than Parent, Purchaser, Company,
Shareholder, and other Persons substantially involved in a common question of
fact or law whose presence is required if complete relief is to be accorded in
arbitration. No Person other than Parent, Purchaser, Company or Shareholder may
be included as an original third party or additional third party to an
arbitration whose interest or responsibility is insubstantial. Consent to
arbitration involving an additional Person does not constitute consent to
arbitration of a dispute not described therein or with a
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Person not named or described therein. This Section 12.14 is enforceable by
specific performance under applicable law in a court of competent jurisdiction.
(d) The award rendered by the arbitrators, including as to legal
fees in accordance with SCHEDULE 12.14, is final, and judgment may be entered
upon it in accordance with applicable law in any court of competent
jurisdiction.
THIS AGREEMENT CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY BE ENFORCED BY
THE PARTIES.
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IN WITNESS WHEREOF, the parties hereto have duly caused this Agreement to
be executed as of the date first above written.
PARENT
MAIL-WELL, INC., a Colorado corporation
By:
------------------------------------------------
Name: Paul V. Reilly
Title: President
PURCHASER
MAIL-WELL I CORPORATION, a Delaware corporation
By:
------------------------------------------------
Name: Paul V. Reilly
Title: President
THE COMPANY
CLARKE PRINTING, CO.
By:
------------------------------------------------
Name: Russell L. C. Hill
Title: President
SHAREHOLDER
-------------------------------------------------------
Russell L. C. Hill
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SCHEDULE 12.14
ARBITRATION PROCEDURES
Purchaser and Shareholder hereto agree that in the event of a dispute
between them relating to or arising out of this Agreement, the involved parties
shall submit such dispute to binding arbitration as provided herein. All
arbitrations would be conducted in Denver, Colorado, or at another location
mutually approved by the parties, pursuant to the Commercial Arbitration Rules
of the American Arbitration Association except as herein may be provided. If
the panel used will consist of three arbitrators, such arbitrators will have
experience in the printing industry and the decision of the arbitrators would be
final and binding on all parties. All arbitration shall be undertaken pursuant
to the Federal Arbitration Act, where applicable, and the decision of the
arbitrators shall be enforceable in any court of competent jurisdiction. All of
the parties shall agree to waive their respective rights to further appeal or
redress in any other court or tribunal except solely for the purpose of
obtaining execution of the decision resulting from the arbitration proceeding.
In any dispute where a party seeks $200,000.00 or more in damages or if the
dispute involves whether the Purchaser or the Company properly determined to
terminate the Agreement or refused to close the transactions contemplated by
this Agreement, three arbitrators shall be employed to arbitrate the dispute.
In the event that the dispute involves less than $200,000.00, there shall be one
arbitrator. In the event of any arbitration or other legal proceeding brought
by any party against another party with regard to any matter arising out of or
related to this Agreement, each party hereby expressly agrees that the final
award decision would also provide for all allocation and division between or
among the parties to the arbitration, on a basis which is just and equitable
under the circumstances, of all costs and expenses of the dispute, including
without limitation court costs and arbitrators', reasonable attorneys',
accountants' and expert witness fees, costs and expenses (including
disbursements) incurred in connection with such proceedings. In resolving all
disputes between the parties, the arbitrators shall apply the substantive law of
the State of Delaware. The arbitrators are directed, by this Agreement, to
conduct the arbitration hearing no later than three months from the service of
the statement of claim and demand for arbitration unless good cause is shown
establishing that the hearing cannot fairly and practically be so convened.
Depositions shall be taken only as deemed appropriate by the arbitrator(s)
and only where good cause is shown. Good cause is agreed to exist with respect
to the depositions of officers and management personnel to the extent Knowledge,
as defined in the Agreement at Section 12.1 therein, is relevant to the issue.
Parties shall be entitled to conduct document discovery by requesting production
of documents. Responses or objections shall be served twenty days after receipt
of a request. The arbitrators shall resolve any discovery disputes of such
preheating conferences as may be needed. All parties shall agree that the
arbitrators and any counsel of record to the proceeding shall have the power or
subpoena process as provided by law.
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DEFINITIONS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Parent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Mail-Well. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Purchaser. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Company. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Shareholde . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
DGCL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
TBCA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Surviving Corporation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Merger Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
MW Common Stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
MW Common Stock Valuation. . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Treasury Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Pro Rata Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Certificate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Debt Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Prepayment Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Creditors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Payoff Letters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Indemnification Escrow Amount. . . . . . . . . . . . . . . . . . . . . . . . . 4
Working Capital Escrow Amount. . . . . . . . . . . . . . . . . . . . . . . . . 4
Escrow Amount. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Escrow Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Initial Distribution Amount. . . . . . . . . . . . . . . . . . . . . . . . . . 4
Person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Working Capital. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Computation Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Estimated Working Capital Statement. . . . . . . . . . . . . . . . . . . . . . 6
GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Estimated Working Capital. . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Final Working Capital Statement. . . . . . . . . . . . . . . . . . . . . . . . 6
Final Closing Statement. . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Notice of Working Capital Disagreement . . . . . . . . . . . . . . . . . . . . 6
Disputed Working Capital Matter. . . . . . . . . . . . . . . . . . . . . . . . 6
</TABLE>
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<TABLE>
<S> <C>
Neutral Accountant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Final Closing Statement. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Notice of Inventory Disagreement . . . . . . . . . . . . . . . . . . . . . . . 7
Disputed Inventory Matter. . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Accounts Receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Transfer Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Registration Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Securities Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Registrable Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Initial Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Registration Statement Period. . . . . . . . . . . . . . . . . . . . . . . . . 9
SEC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
Exchange Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
Liability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
Registration Document. . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
Disclosure Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
Related Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
Voting Debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
Equity Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
Legal Requirement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
Annual Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . .14
Interim Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . .14
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
Permitted Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
Real Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
Leased Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
Title Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
Permits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
Benefit Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
Pension Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19
Multiemployer Plans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19
PBGC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19
COBRA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20
Claim. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20
Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20
Tax. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20
Tax Returns. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
Material Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22
Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24
Hazardous Materials. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24
RCRA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24
CERCLA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24
Environmental Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24
</TABLE>
55
<PAGE>
<TABLE>
<S> <C>
Intellectual Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . .25
Related Parties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .26
Affiliate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .26
Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27
Purchaser Related Agreements . . . . . . . . . . . . . . . . . . . . . . . . .29
SEC Documents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .30
HSR Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .33
Updated Disclosure Schedule. . . . . . . . . . . . . . . . . . . . . . . . . .34
Associates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .34
Confidential Information . . . . . . . . . . . . . . . . . . . . . . . . . . .34
Transferred Employee . . . . . . . . . . . . . . . . . . . . . . . . . . . . .35
Real Estate Documents. . . . . . . . . . . . . . . . . . . . . . . . . . . . .36
Debt Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .37
Purchaser Indemnified Parties. . . . . . . . . . . . . . . . . . . . . . . . .41
Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .41
Purchaser Indemnified Obligation . . . . . . . . . . . . . . . . . . . . . . .42
Shareholder Indemnified Parties. . . . . . . . . . . . . . . . . . . . . . . .43
Shareholder Indemnified Obligation . . . . . . . . . . . . . . . . . . . . . .44
Claimants. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .44
Claim Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .44
Indemnified Parties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .45
Indemnifying Party . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .45
Material Adverse Effect. . . . . . . . . . . . . . . . . . . . . . . . . . . .47
Knowledge. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .47
Company Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .47
</TABLE>
56
<PAGE>
ACQUISITION AGREEMENT
AND
PLAN OF MERGER
by and among
MAIL-WELL INC.,
a Colorado corporation,
MAIL-WELL I CORPORATION,
a Delaware corporation,
UNITED LITHOGRAPH, INC.
a Massachusetts corporation
and
Leonard A. Bernheimer
as Controlling Shareholder of
United Lithograph, Inc.
May 15, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
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<S> <S> <C>
ARTICLE 1
PRINCIPAL TERMS OF THE MERGER. . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 PLAN OF MERGER . . . . . . . . . . . . . . . . . . . . . 1
1.2 NO FURTHER RIGHTS OF TRANSFER. . . . . . . . . . . . . . 3
1.3 SURVIVING CORPORATION. . . . . . . . . . . . . . . . . . 3
1.4 DISSENTING SHAREHOLDERS. . . . . . . . . . . . . . . . . 3
1.5 THE CLOSING. . . . . . . . . . . . . . . . . . . . . . . 4
1.6 Surrender of Certificates. . . . . . . . . . . . . . . . 6
1.7 Working Capital Settlement . . . . . . . . . . . . . . . 7
1.8 ADDITIONAL POST-CLOSING ADJUSTMENTS. . . . . . . . . . . 9
1.9 TRANSFER TAXES . . . . . . . . . . . . . . . . . . . . .11
1.10 MW COMMON STOCK. . . . . . . . . . . . . . . . . . . . .11
1.11 INVESTMENT LETTER. . . . . . . . . . . . . . . . . . . .13
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND
CONTROLLING SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . .13
2.1 Organization, Standing, Corporate Authorization, and
Enforceability . . . . . . . . . . . . . . . . . . . .13
2.2 CAPITALIZATION . . . . . . . . . . . . . . . . . . . . .14
2.3 ARTICLES OF INCORPORATION AND BYLAWS; CERTAIN RECORDS. .15
2.4 COMPLIANCE WITH OTHER INSTRUMENTS AND LAWS . . . . . . .15
2.5 GOVERNMENTAL AUTHORIZATIONS; CONSENTS. . . . . . . . . .15
2.6 LITIGATION . . . . . . . . . . . . . . . . . . . . . . .16
2.7 FINANCIAL STATEMENTS; CONDUCT OF THE BUSINESS;
NO UNDISCLOSED LIABILITIES . . . . . . . . . . . . . .16
2.8 ABSENCE OF CERTAIN CHANGES OR EVENTS . . . . . . . . . .16
2.9 TITLE TO PROPERTY, ABSENCE OF LIENS AND ENCUMBRANCES . .18
2.10 FULL AUTHORITY; COMPLIANCE WITH LAWS . . . . . . . . . .19
2.11 BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . .19
2.12 CLAIMS . . . . . . . . . . . . . . . . . . . . . . . . .22
2.13 TAXES. . . . . . . . . . . . . . . . . . . . . . . . . .22
2.14 CONTRACTS. . . . . . . . . . . . . . . . . . . . . . . .24
2.15 ENVIRONMENTAL QUALITY. . . . . . . . . . . . . . . . . .25
2.16 INTELLECTUAL PROPERTY. . . . . . . . . . . . . . . . . .27
2.17 PREPAID EXPENSES . . . . . . . . . . . . . . . . . . . .27
2.18 RELATED PARTY TRANSACTIONS . . . . . . . . . . . . . . .27
2.19 LABOR MATTERS. . . . . . . . . . . . . . . . . . . . . .28
2.20 CUSTOMERS AND VENDORS. . . . . . . . . . . . . . . . . .28
2.21 OTHER DISCLOSURES. . . . . . . . . . . . . . . . . . . .29
2.22 PARACHUTE PAYMENTS . . . . . . . . . . . . . . . . . . .29
</TABLE>
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2.23 PRODUCT WARRANTY AND LIABILITY.. . . . . . . . . . . . .29
2.24 ACCURACY . . . . . . . . . . . . . . . . . . . . . . . .29
2.25 BROKERS AND FINDERS. . . . . . . . . . . . . . . . . . .30
ARTICLE 3
ADDITIONAL REPRESENTATIONS AND WARRANTIES OF CONTROLLING SHAREHOLDERS. . . .30
3.1 Ownership of Shares. . . . . . . . . . . . . . . . . . .30
3.2 Authorization. . . . . . . . . . . . . . . . . . . . . .30
3.3 Enforceability . . . . . . . . . . . . . . . . . . . . .30
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PURCHASER AND PARENT . . . . . . . . . . .30
4.1 Organization and Standing of Purchaser . . . . . . . . .30
4.2 AUTHORIZATION. . . . . . . . . . . . . . . . . . . . . .31
4.3 ENFORCEABILITY . . . . . . . . . . . . . . . . . . . . .31
4.4 COMPLIANCE WITH OTHER INSTRUMENTS AND LAWS . . . . . . .31
4.5 GOVERNMENTAL AUTHORIZATIONS, CONSENTS. . . . . . . . . .31
4.6 MW COMMON STOCK. . . . . . . . . . . . . . . . . . . . .31
4.7 LITIGATION . . . . . . . . . . . . . . . . . . . . . . .31
4.8 SECURITIES ACT OF 1933 . . . . . . . . . . . . . . . . .32
4.9 BROKERS AND FINDERS. . . . . . . . . . . . . . . . . . .32
4.10 PURCHASER'S KNOWLEDGE. . . . . . . . . . . . . . . . . .32
4.11 SEC DOCUMENTS. . . . . . . . . . . . . . . . . . . . . .32
4.12 ACCURACY . . . . . . . . . . . . . . . . . . . . . . . .32
4.13 INVESTIGATION. . . . . . . . . . . . . . . . . . . . . .33
ARTICLE 5
COVENANTS OF THE COMPANY AND THE CONTROLLING SHAREHOLDERS. . . . . . . . . .33
5.1 Conduct of Business. . . . . . . . . . . . . . . . . . .33
5.2 ACCESS . . . . . . . . . . . . . . . . . . . . . . . . .35
5.3 NO SOLICITATION OR NEGOTIATION . . . . . . . . . . . . .35
5.4 FILINGS AND CONSENTS . . . . . . . . . . . . . . . . . .35
5.5 UPDATED DISCLOSURE SCHEDULES . . . . . . . . . . . . . .36
ARTICLE 6
COVENANTS OF PARENT AND PURCHASER. . . . . . . . . . . . . . . . . . . . . .36
6.1 Confidentiality. . . . . . . . . . . . . . . . . . . . .36
6.2 FILINGS AND CONSENTS . . . . . . . . . . . . . . . . . .36
6.3 Filing of Final Tax Returns. . . . . . . . . . . . . . .37
ARTICLE 7
COVENANTS OF ALL PARTIES . . . . . . . . . . . . . . . . . . . . . . . . . .37
</TABLE>
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<TABLE>
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7.1 Commercially Reasonable Efforts; Further Assurances. . .37
7.2 POOLING OF INTERESTS . . . . . . . . . . . . . . . . . .38
7.3 Certain Filings, Etc . . . . . . . . . . . . . . . . . .38
7.4 Public Announcements . . . . . . . . . . . . . . . . . .38
7.5 Real Estate. . . . . . . . . . . . . . . . . . . . . . .38
ARTICLE 8
CONDITIONS TO OBLIGATION OF PURCHASER TO CLOSE . . . . . . . . . . . . . . .39
8.1 Accuracy of Representations and Warranties . . . . . . .39
8.2 SHAREHOLDER APPROVAL . . . . . . . . . . . . . . . . . .39
8.3 Performance. . . . . . . . . . . . . . . . . . . . . . .39
8.4 CERTIFICATE. . . . . . . . . . . . . . . . . . . . . . .39
8.5 DEBT CERTIFICATES AND PAYOFF LETTERS.. . . . . . . . . .39
8.6 NO INJUNCTION. . . . . . . . . . . . . . . . . . . . . .39
8.7 NO MATERIAL ADVERSE EFFECT . . . . . . . . . . . . . . .39
8.8 CONSENTS . . . . . . . . . . . . . . . . . . . . . . . .40
8.9 SHAREHOLDER REPRESENTATION AND AFFILIATE LETTER. . . . .40
8.10 LEGAL OPINIONS . . . . . . . . . . . . . . . . . . . . .40
8.11 CERTIFICATE OF SECRETARY . . . . . . . . . . . . . . . .40
8.12 ESCROW AGREEMENTS. . . . . . . . . . . . . . . . . . . .40
8.13 NON-COMPETE AGREEMENT. . . . . . . . . . . . . . . . . .40
8.14 UCC-3S . . . . . . . . . . . . . . . . . . . . . . . . .40
8.15 HSR ACT. . . . . . . . . . . . . . . . . . . . . . . . .40
8.16 ACCOUNTING, TAX MATTERS. . . . . . . . . . . . . . . . .40
8.17 LEASED PROPERTY PURCHASE . . . . . . . . . . . . . . . .40
8.18 NO DISCOVERY . . . . . . . . . . . . . . . . . . . . . .41
8.19 DOCUMENTATION. . . . . . . . . . . . . . . . . . . . . .41
8.20 APPROVAL OF PURCHASER'S BOARD. . . . . . . . . . . . . .41
ARTICLE 9
CONDITIONS TO OBLIGATIONS OF THE COMPANY TO CLOSE. . . . . . . . . . . . . .41
9.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES . . . . . . .41
9.2 PERFORMANCE. . . . . . . . . . . . . . . . . . . . . . .41
9.3 CERTIFICATE. . . . . . . . . . . . . . . . . . . . . . .41
9.4 NO INJUNCTION. . . . . . . . . . . . . . . . . . . . . .41
9.5 LEGAL OPINION. . . . . . . . . . . . . . . . . . . . . .41
9.6 TAX OPINION. . . . . . . . . . . . . . . . . . . . . . .41
9.7 ESCROW AGREEMENTS. . . . . . . . . . . . . . . . . . . .42
9.8 HSR ACT. . . . . . . . . . . . . . . . . . . . . . . . .42
9.9 DOCUMENTATION. . . . . . . . . . . . . . . . . . . . . .42
9.10 MATERIAL ADVERSE EFFECT. . . . . . . . . . . . . . . . .42
ARTICLE 10
TERMINATION OF AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . .42
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
<C>
10.1 RIGHT TO TERMINATE AGREEMENT . . . . . . . . . . . . . .42
10.2 EFFECT OF TERMINATION. . . . . . . . . . . . . . . . . .43
ARTICLE 11
CERTAIN REMEDIES AND LIMITATIONS . . . . . . . . . . . . . . . . . . . . . .43
11.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. .43
11.2 INDEMNIFICATION BY SHAREHOLDERS. . . . . . . . . . . . .43
11.3 LIMITATIONS ON REPRESENTATIONS, WARRANTIES AND
LIABILITIES OF SHAREHOLDERS. . . . . . . . . . . . . .45
11.4 INDEMNIFICATION BY PARENT AND PURCHASER. . . . . . . . .45
11.5 LIMITATIONS ON LIABILITY OF PURCHASER. . . . . . . . . .46
11.6 INDEMNIFICATION CLAIMS . . . . . . . . . . . . . . . . .46
11.7 DEFENSE OF THIRD PARTY ACTIONS . . . . . . . . . . . . .47
11.8 SUBROGATION. . . . . . . . . . . . . . . . . . . . . . .48
11.9 EXCLUSIVITY. . . . . . . . . . . . . . . . . . . . . . .49
11.10 RETENTION OF RECORDS . . . . . . . . . . . . . . . . . .49
ARTICLE 12
MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .49
12.1 CERTAIN DEFINITIONS. . . . . . . . . . . . . . . . . . .49
12.2 EXPENSES . . . . . . . . . . . . . . . . . . . . . . . .49
12.3 NOTICES; ETC . . . . . . . . . . . . . . . . . . . . . .50
12.4 ASSIGNMENT . . . . . . . . . . . . . . . . . . . . . . .51
12.5 ENTIRE AGREEMENT; AMENDMENT; GOVERNING LAW; ETC. . . . .51
12.6 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . .51
12.7 THIRD PARTY RIGHTS . . . . . . . . . . . . . . . . . . .51
12.8 EXHIBITS AND SCHEDULES . . . . . . . . . . . . . . . . .52
12.9 PRONOUNS . . . . . . . . . . . . . . . . . . . . . . . .52
12.10 AUTHORITY AND EXECUTION. . . . . . . . . . . . . . . . .52
12.11 SEVERABILITY . . . . . . . . . . . . . . . . . . . . . .52
12.12 TIME OF ESSENCE. . . . . . . . . . . . . . . . . . . . .52
12.13 INTERPRETATION . . . . . . . . . . . . . . . . . . . . .52
12.14 ARBITRATION. . . . . . . . . . . . . . . . . . . . . . .52
</TABLE>
Exhibit A Certificate of Merger
Exhibit B Escrow Agreement
Exhibit C Affiliate Letter
Exhibit D Legal Opinion of Company's Counsel
Exhibit E Non-Compete Agreement
Exhibit F Legal Opinion of Purchaser's Counsel
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<PAGE>
ACQUISITION AGREEMENT AND PLAN OF MERGER
THIS ACQUISITION AGREEMENT AND PLAN OF MERGER (this "Agreement") is made
and entered into as of May 15, 1998, by and among MAIL-WELL, INC., a Colorado
corporation ("Parent"), MAIL-WELL I CORPORATION, a Delaware corporation
("Mail-Well" or "Purchaser"), and UNITED LITHOGRAPH, INC., a Massachusetts
corporation, (the "Company") and Leonard A. Bernheimer, the Controlling
Shareholder of the Company (the "Controlling Shareholder").
WITNESSETH:
WHEREAS the Company is engaged in the commercial printing business (the
"Business");
WHEREAS, the respective Boards of Directors of Parent, Mail-Well, and the
Company have approved the acquisition of the Company by Mail-Well;
WHEREAS, to complete such acquisition the respective Boards of Directors of
Parent, Mail-Well and the Company have approved the merger of the Company with
and into Mail-Well (the "Merger"), pursuant to and subject to the terms and
conditions of this Agreement;
WHEREAS, the Directors of the Company have unanimously determined that the
Merger is fair to and in the best interests of its shareholders (collectively,
the "Shareholders"), approved the Merger and this Agreement and the transactions
contemplated hereby, and recommended the approval of the Merger and approval and
adoption of this Agreement by the Shareholders; and
WHEREAS, the Merger is intended to be accounted for as a pooling of
interests.
NOW, THEREFORE, in consideration of the mutual covenants, representations
and warranties made herein and of the mutual benefits to be derived herefrom,
the Company, Parent and Purchaser hereby agree as follows:
ARTICLE 1
PRINCIPAL TERMS OF THE MERGER
1.1 PLAN OF MERGER. Subject to the terms and conditions of this
Agreement, the Merger will be carried out in the following manner:
(a) The Company, Parent and Purchaser will cooperate and use their
respective best efforts to consummate the transactions contemplated by this
Agreement.
(b) Subject to the provisions of this Agreement, a Certificate of
Merger, substantially in the form of EXHIBIT A, shall be duly executed and, on
the Closing Date (as defined in Section 1.5 hereof), or as soon thereafter as
reasonably practicable, filed with the Delaware Secretary of State in accordance
with the General Corporation Law of the State of Delaware (the
<PAGE>
"DGCL"). In addition, Articles of Merger shall be duly prepared, executed and
acknowledged by the Company in accordance with the Massachusetts Business
Corporation Law of the State of Massachusetts (the "MBCL") and shall be filed on
the Closing Date with the Massachusetts Secretary of State. The Merger shall
become effective at the date and time set forth in the Certificate of Merger and
the Articles of Merger (the "Effective Time").
(c) At the Effective Time, the Company shall merge with and into
Mail-Well, the separate existence of the Company shall cease, and Mail-Well
shall continue as the surviving corporation. (Mail-Well, in its capacity as the
corporation surviving the Merger, is hereinafter sometimes referred to as the
"Surviving Corporation.")
(d) From and after the Effective Time, the Merger shall have the
effects set forth in Section 259 of the DGCL and Section 79 of the MBCL.
(e) The "Merger Consideration" which shall be paid by Parent and
Purchaser in the Merger, to be paid to the Shareholders other than Dissenting
Shareholders, shall be equal to (i) $13,499,000 less (ii) the amount of Debt as
defined in Section 1.5; less (iii) the amount of unpaid Company Expenses, as
defined in Section 12.2; plus or minus (iv) the adjustment under Section 1.7(b)
hereof; less (v) the amount, if any, paid by the Surviving Corporation to
Dissenting Shareholders. The Merger Consideration plus the amount, if any, paid
to Dissenting Shareholders by the Surviving Corporation is herein referred to as
the "Total Shareholder Consideration." The Merger Consideration shall be paid
in duly authorized, validly issued, fully paid and nonassessable Parent common
stock ("MW Common Stock") valued at $43.93 per share (the "MW Common Stock
Valuation"), which MW Common Stock shall be issued of record on the Closing Date
on the Parent's (and its transfer agent's )books.
(f) In the event of any stock split, combination, reclassification
or stock dividend with respect to MW Common Stock, any change or conversion of
MW Common Stock into other securities or any other dividend or distribution with
respect to MW Common Stock (other than quarterly cash dividends issued in the
ordinary course consistent with past practice), including without limitation,
any distribution by Parent of shares of capital stock of any of its Affiliates
(as defined in Section 2.18), or if a record date with respect to any of the
foregoing should occur, prior to the Effective Time, appropriate adjustments
shall be made to the MW Common Stock Valuation, and thereafter all references in
this Agreement to the MW Common Stock Valuation shall be deemed to be the MW
Common Stock Valuation as so adjusted.
(g) At the Effective Time and subject to the terms of this
Agreement, each share of common stock, par value $.01 per share, of the
Company (the "Common Stock") then issued and outstanding (other than (x) any
shares of Common Stock which are held in the treasury of the Company, or
which are held, directly or indirectly, by Mail-Well or any direct or
indirect subsidiary of Mail-Well, all of which shall be canceled and none of
which shall receive any payment with respect thereto (hereinafter such shares
are collectively referred to as "Subsidiary Shares") and (y) shares of Common
Stock held by Dissenting Shareholders (as defined in Section 1.4 hereof)
(hereinafter such shares are collectively referred to as "Dissenting Shares")
shall, by virtue of the Merger and without any action on the part of the
holder thereof, be converted into
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and represent the right to receive a pro rata share of the Merger Consideration
("Pro Rata Share") which shall be equal to the fraction obtained by dividing one
by the total number of shares of Common Stock outstanding at the Effective Time
(other than the Subsidiary Shares and Dissenting Shares).
1.2 NO FURTHER RIGHTS OF TRANSFER. At and after the Effective Time,
each holder of a certificate for Common Stock (a "Certificate") shall cease to
have any rights as a Shareholder, except for the right to surrender his or her
Certificate (other than Certificates representing Dissenting Shares or
Subsidiary Shares) in exchange for payment of the Merger Consideration
deliverable in respect thereof, or, in the case of a Dissenting Shareholder, to
perfect his or her right to receive payment for his or her shares pursuant to
applicable law if such holder has validly perfected and not withdrawn his or her
right to receive payment for his or her shares, and no transfer of shares of
Common Stock shall be made on the stock transfer books of the Company.
Certificates presented to the Surviving Corporation after the Effective Time
shall be canceled and exchanged for MW Common Stock and cash as provided in this
Article I. At the close of business on the day of the Effective Time, the stock
ledger of the Company with respect to Common Stock shall be closed.
1.3 SURVIVING CORPORATION. The Certificate of Incorporation of
Mail-Well, as in effect immediately prior to the Effective Time, shall be the
Certificate of Incorporation of the Surviving Corporation. The Bylaws of
Mail-Well, as in effect immediately prior to the Effective Time, shall be the
Bylaws of the Surviving Corporation. At the Effective Time, the directors and
officers of Mail-Well immediately prior to the Effective Time shall be the
directors and officers of the Surviving Corporation, each of such directors to
hold office, subject to the applicable provisions of the Certificate of
Incorporation and Bylaws of the Surviving Corporation, until the next annual
shareholders' meeting of the Surviving Corporation and until their respective
successors shall be duly elected or appointed and qualified.
1.4 DISSENTING SHAREHOLDERS. Notwithstanding anything in this Agreement
to the contrary but only to the extent required by applicable state law, shares
of Common Stock that are issued and outstanding immediately prior to the
Effective Time and are held by holders of Common Stock who comply with all the
provisions of applicable law concerning the right of holders of Common Stock to
dissent from the Merger and require appraisal of their shares of Common Stock
("Dissenting Shareholders") shall not be converted into the right to receive the
Merger Consideration but shall become the right to receive such consideration as
may be determined to be due such Dissenting Shareholder pursuant to the law of
the State of Massachusetts; provided, however, that (i) if any Dissenting
Shareholder shall subsequently deliver a written withdrawal of his or her demand
for appraisal (with the written approval of the Surviving Corporation, if such
withdrawal is not tendered within 60 days after the Effective Time), or (ii) if
any Dissenting Shareholder fails to establish and perfect his or her entitlement
to appraisal rights as provided by applicable law, or (iii) if within 120 days
of the Effective Time neither any Dissenting Shareholder nor the Surviving
Corporation has filed a petition demanding a determination of the value of all
shares of the Common Stock that are issued and outstanding at the Effective Time
and held by Dissenting Shareholders, then such Dissenting Shareholder or
Shareholders, as the case may be, shall forfeit the right to appraisal of such
shares and each such
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share shall thereupon be deemed to have been converted into the right to receive
the Merger Consideration, without interest, according to the terms of this
Agreement. The Company shall give Purchaser (A) prompt notice of any written
demands for appraisal, withdrawals of demands for appraisal and any other
related instruments received by the Company, and (B) the opportunity to direct
all negotiations and proceedings with respect to demands for appraisal. The
Company will not voluntarily make any payment with respect to any demands for
appraisal and will not, except with the prior written consent of Mail-Well,
settle or offer to settle any such demand.
1.5 THE CLOSING. The closing of the transactions contemplated by this
Article 1 (the "Closing") shall be held at the offices of Rothgerber Johnson &
Lyons LLP in Denver, Colorado at 9:00 a.m. (local time) on May 29, 1998, or at
such other place, time and date as may be jointly designated by Purchaser, the
Company and the Shareholders (the date on which the Closing takes place, the
"Closing Date"). At or before the Closing, each of the following shall occur:
(a) As soon as practicable but no later than four business days
before the scheduled Closing Date, the Company shall deliver to Purchaser (i) a
certificate (the "Debt Certificate") executed by the chief financial officer of
the Company setting forth the amount of the outstanding principal balance and
the interest of any kind, as well as the amount of early retirement or
prepayment fees and/or penalties of any kind (the "Prepayment Fees") that will
be due and payable as of the Closing Date by the Company pursuant to any Debt
that will be outstanding as of the Closing Date to each creditor to whom any
such Debt is owed (the "Creditors") and (ii) a letter (the "Payoff Letters"),
executed by the Company and an authorized representative of each Creditor that
is a bank, leasing company or other financial institution or who is listed in
SCHEDULE 1.5(a) to whom any Debt is owed (other than the Debt set forth on
Schedule 1.5(b)), setting forth the amount of principal, interest and Prepayment
Fees, that will be due and payable by the Company to each of such Creditors as
of the Closing Date and undertaking to terminate, either at or immediately after
the Closing, all liens or other security interests securing such Debt upon
payment of the amounts due and owing. "Debt" shall include all funded long
term, short term or "line of credit" indebtedness, to banks and financial
institutions, Shareholders and other third parties, including the current
portion thereof, accrued interest thereon, and Prepayment Fees, together with
the unamortized principal amount including the current portion, interest expense
required to be accrued thereon and Prepayment Fees of all capitalized lease
obligations that are properly classified as liabilities on the balance sheet of
the Company at Closing in conformity with GAAP, the amounts of which shall be
determined consistent with the Company's audited Financial Statements; provided,
however, that Debt shall not include those prepayment fees for Debt listed on
SCHEDULE 1.5(b) which is not going to be discharged at Closing.
(b) At the Closing, that portion of the Debt owed to each Creditor
executing a Payoff Letter or whose Debt is otherwise acknowledged to Parent's
reasonable satisfaction, except that listed in SCHEDULE 1.5(b), shall be paid by
Purchaser to such Creditor by wire transfer of immediately available funds to an
account or accounts designated by such Creditors and in the amounts specified in
the Payoff Letters or otherwise established with such Creditors. The Debt owed
to certain Shareholders in the amount of $173,810 shall be paid at Closing in MW
Common Stock valued for such purposes at the MW Common Stock Valuation (i.e.,
the aggregate number
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of shares of MW Common Stock exchanged for such purposes shall be 3,957 except
that cash shall be paid in lieu of fractional shares at the rate of $43.93 per
share).
(c) At the Closing, Purchaser shall pay any unpaid Company Expenses
accrued on the books of the Company by wire transfer of immediately available
funds or by certified bank check.
(d) The Purchaser shall place in escrow with the Escrow Agent
acting pursuant to the Escrow Agreement (as defined in Section 1.5(g)) (such
amount, together with interest and dividends thereon, additions thereto, and
releases therefrom, as more specifically set forth in such Escrow Agreement, is
referred to herein as the "Dissenting Shareholders Escrow Amount") immediately
available funds representing 100% of the cash value of the Merger Consideration
which would have been due Dissenting Shareholders under Section 1.1 as of the
Closing Date if such Dissenting Shareholders had not exercised their rights of
appraisal (the "Dissenters' Portion") and MW Common Stock (based on the MW
Common Stock Valuation) representing 25% of the amount of the Merger
Consideration which would have been due Dissenting Shareholders under
Section 1.1 as of the Closing Date. Any amounts payable by Purchaser as the
Surviving Corporation to Dissenting Shareholders subsequent to the Closing Date
shall be first payable out of the cash portion of the Dissenting Shareholders
Escrow Amount. Any amounts paid to Dissenting Shareholders by Purchaser as the
Surviving Corporation in excess of the cash amount in the Dissenting Shareholder
Escrow Amount shall be payable to Purchaser in MW Common Stock (based on the MW
Common Stock Valuation) out of, first the Dissenting Shareholder Escrow Amount,
and then out of, the Escrow Amount (as defined below) in reduction of such
Escrow Amount (as defined below). Any cash remaining in the Dissenting
Shareholders Escrow Amount after the payment of all amounts due to Dissenting
Shareholders shall be exchanged for shares of MW Common Stock, rounded up to the
nearest whole share, having a value (based on the MW Common Stock Valuation)
equal to the value of such cash. Any amounts remaining in the Dissenting
Shareholders Escrow Amount after resolution of all Dissenting Shareholder claims
shall be payable to the Shareholders surrendering Certificates pursuant to
Section 1.6 in MW Common Stock (based on the MW Common Stock Valuation) at the
direction of the Shareholders' Representative (as defined in Section 12.1).
(e) At the Closing, from the Merger Consideration the Purchaser
shall deliver stock certificates representing 23,046 shares of MW Common Stock
to the Escrow Agent acting pursuant to the Escrow Agreement referred to below
(such amount, together with dividends thereon, additions thereto, and releases
therefrom, as more specifically set forth in such Escrow Agreement, is referred
to herein as the "Indemnification Escrow Amount").
(f) At the Closing, from the Merger Consideration the Purchaser
shall deliver stock certificates representing 2,218 shares of MW Common Stock to
the Escrow Agent acting pursuant to the Escrow Agreement referred to below (such
amount, together with dividends thereon, additions thereto, and releases
therefrom, as more specifically set forth in such Escrow Agreement, is referred
to herein as the "Working Capital Escrow Amount").
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(g) The Dissenting Shareholders Escrow Amount, the Working Capital
Escrow Amount and the Indemnification Escrow Amount (collectively, the "Escrow
Amount") shall be held and distributed by such Escrow Agent in accordance with
the terms of the Escrow Agreement, substantially in the form attached hereto as
EXHIBIT B (the "Escrow Agreement"), which shall be entered into by the Escrow
Agent named therein, Purchaser and the Shareholders' Representative prior to or
on the Closing Date.
(h) Notwithstanding the other provisions of this Section 1.5, the
shares of MW Common Stock deposited in the Indemnification Escrow Amount shall
not exceed such amount that when added to the other shares of MW Common Stock
deposited in the Escrow Amount results in the value of the total shares of MW
Common Stock (based on the MW Common Stock Valuation so deposited) in the Escrow
Amount being in excess of 10% of the sum of the Merger Consideration and the
Dissenters' Portion.
1.6 SURRENDER OF CERTIFICATES.
(a) At any time after the Effective Time upon surrender for
cancellation to the Purchaser of the Certificate(s) held by any record holder of
a Certificate, together with a duly executed letter of transmittal in a form
reasonably acceptable to Purchaser, such holder shall be entitled to receive in
exchange for each share of Common Stock represented by such surrendered
Certificate a Pro Rata Share of the Initial Distribution Amount to Shareholders.
The "Initial Distribution Amount" shall be the Total Shareholder Consideration
less the Escrow Amount delivered to the Escrow Agent pursuant to Section 1.5.
Promptly upon termination of each of the escrows pursuant to the terms of this
Agreement, each such Shareholder shall be entitled to receive his, her or its
Pro Rata Share of the particular Escrow Amount distributed to Shareholders. The
amounts so payable to a holder of a Certificate(s) shall be paid with a
certificate for the number of shares of MW Common Stock having a value (based on
the MW Common Stock Value and rounded down to the nearest whole share) equal to
the amount so due plus cash in lieu of fractional shares and in the amount of
any unpaid dividends or other distributions payable on such shares of MW Common
Stock with a record date after the Effective Time. The Certificate(s) so
surrendered shall be canceled. Until so surrendered, each Certificate shall be
deemed, for all corporate purposes, to evidence only the right to receive the
Merger Consideration deliverable in respect thereof to which such Person is
entitled pursuant to this Article 1. A Certificate surrendered will be
registered in the name of the beneficial owner of said Certificate (as set forth
in Schedule 2.2) in the event the voting trust to which such shareholder was a
party is terminated prior to or at Closing.
For purposes of this Agreement, "Person" shall mean and include an
individual, a partnership, a joint venture, a corporation, a trust, an
unincorporated organization, a group and a government or other department or
agency thereof.
(b) If the Merger Consideration (or any portion thereof) is to be
delivered to a Person other than the Person in whose name the Certificates
surrendered in exchange therefor are registered, it shall be a condition to the
payment of the Merger Consideration that the Certificates so surrendered shall
be properly endorsed or accompanied by appropriate stock powers and
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otherwise in proper form for transfer, that such transfer otherwise be proper
and that the Person requesting such transfer pay to Mail-Well any transfer or
other taxes payable by reason of the foregoing or establish to the satisfaction
of Mail-Well that such taxes have been paid or are not required to be paid.
(c) In the event any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the Person claiming
such Certificate to be lost, stolen or destroyed, and upon such Person's
agreement to indemnify the Parent and Mail-Well against any claim that may be
made against the Parent or Mail-Well with respect to the Certificate claimed to
have been lost, stolen or destroyed, or, if required by Mail-Well, upon such
Person's obtaining a lost instrument bond in form and amount satisfactory to
Mail-Well, Mail-Well will issue in exchange for such lost, stolen or destroyed
Certificate the Merger Consideration deliverable in respect thereof as
determined in accordance with this Article 1.
(d) No certificates or scrip representing fractional shares of MW
Common Stock shall be issued upon the surrender for exchange of Certificates
pursuant to this Article 1 or as part of a distribution from the Escrow Amount;
no dividend or other distribution by Parent and no stock split, combination or
reclassification shall relate to any such fractional share; and no such
fractional share shall entitle the record or beneficial owner thereof to vote or
to any other rights of a stockholder of Parent. In lieu of any such fractional
share, each holder of Shares who would otherwise have been entitled thereto upon
the surrender of Certificate(s) for exchange pursuant to this Article 1 will be
paid an amount in cash (without interest) rounded to the nearest whole cent,
determined by multiplying (i) the MW Common Stock Valuation by (ii) the
fractional share to which such holder would otherwise be entitled. Purchaser
shall make available the cash necessary for this purpose at the Effective Time.
1.7 WORKING CAPITAL SETTLEMENT.
(a) Prior to the Closing Date, the Company shall estimate its
working capital position (the "Working Capital") as of the close of business on
the Closing Date (the "Computation Date"). Working Capital shall mean (x) the
sum of (i) the book value of current assets plus (ii) the amount of capital
expenditures listed on SCHEDULE 1.7; less (y) the book value of current
liabilities excluding any amount of Debt or Company Expenses paid by Purchaser
at Closing pursuant to Section 1.5(c). The Company shall provide Purchaser a
copy of the calculation of the estimated Working Capital (the "Estimated Working
Capital Statement") three business days prior to the Closing Date. The book
value of all amounts and the determination of Working Capital shall be
determined in accordance with generally accepted accounting principles,
consistently applied ("GAAP") on a basis consistent with the Company's last
audited Financial Statements..
(b) If the amount of the Working Capital as shown on the Estimated
Working Capital Statement (the "Estimated Working Capital") is greater than
$1,660,000, the Merger Consideration shall be increased by the difference
between the Estimated Working Capital and $1,660,000. If the amount of the
Estimated Working Capital is less than $1,660,000, the Merger
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Consideration shall be reduced by the difference between $1,660,000 and the
Estimated Working Capital.
(c) Purchaser shall prepare and deliver to Shareholders a "Final
Working Capital Statement" on or before the thirtieth day following Closing. In
preparing the Final Working Capital Statement, inventory shall be valued at the
lesser of cost or market using FIFO in accordance with GAAP, and shall be based
upon a physical count taken by Shareholders and observed by the Purchaser
(one-half the cost of which shall be a Company Expense) within three business
days prior to the Closing Date. Except as provided in the preceding sentence,
all amounts set forth on the Final Working Capital Statement shall be determined
in accordance with GAAP on a basis consistent with the accounting principles
used in connection with determining the Estimated Working Capital. The Final
Working Capital Statement shall become final and binding on Shareholders and
Purchaser (in such instance, the "Final Closing Statement") unless the
Shareholders' Representative gives written notice to the Purchaser of his
disagreement with respect to any matter contained therein ("Notice of Working
Capital Disagreement") within 10 days after the receipt thereof. A Notice of
Working Capital Disagreement shall not be permitted unless the aggregate amount
in dispute exceeds Ten Thousand Dollars ($10,000). A Notice of Working Capital
Disagreement shall specify in reasonable detail the nature of any disagreement
so asserted. For a period of 30 days after the delivery of the Notice of
Working Capital Disagreement, the Shareholders' Representative and the Purchaser
shall attempt to resolve in writing all of the differences with respect to each
matter specified in the Notice of Working Capital Disagreement, in which case
any such resolution of the Final Working Capital Statement shall be final and
binding on the parties (in such instance, the "Final Closing Statement"). If,
at the end of such 30-day period, the Shareholders' Representative and Purchaser
have not resolved in writing all of the differences with respect to any such
matter, then each unresolved matter ("Disputed Working Capital Matter") shall be
submitted to and reviewed by the accounting firm of Price Waterhouse LLP or, if
such firm is unwilling or unable to act, to another "big six" accounting firm
selected by a panel of three arbitrators in accordance with the rules of the
American Arbitration Association (the "Neutral Accountant"). The Neutral
Accountant shall consider only the Disputed Working Capital Matters and shall
act promptly to resolve in writing all Disputed Working Capital Matters, and its
decisions with respect to the Disputed Working Capital Matters shall be final
and binding on each of the Shareholders and Purchaser; provided that no such
resolution of the Disputed Working Capital Matters shall require payment of an
amount greater than the highest amount or less than the lowest amount suggested
for such resolution by either the Shareholders' Representative or the Purchaser.
The Neutral Accountant shall notify the Shareholders and the Purchaser of its
resolution of the Disputed Working Capital Matters and shall prepare a revised
Working Capital Statement reflecting the resolution of all Disputed Working
Capital Matters promptly after such resolution (in such instance the "Final
Closing Statement") and shall deliver it to Purchaser and Shareholders'
Representative.
(d) Purchaser shall be responsible for and shall pay the fees and
expenses incurred in connection with the Neutral Accountant. Upon payment by
the Purchaser, one-half of such fees of the Neutral Accountant will be a claim
of Purchaser against the Escrow Amount payable first from the Working Capital
Escrow Amount and then from the Indemnification Escrow Amount.
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(e) Within 10 days after receipt of the Final Closing Statement:
(i) if the Working Capital as set forth in the Final Closing
Statement is less than the Estimated Working Capital, the Merger
Consideration payable to Shareholders shall be adjusted by the difference
(based on the MW Common Stock Valuation) by the Shareholders'
Representative giving instructions to the Escrow Agent to distribute to
Purchaser the MW Common Stock representing such adjustment, first from the
Working Capital Escrow Amount and, to the extent there is not a sufficient
amount in the Working Capital Escrow Amount, then from the Indemnification
Escrow Amount.
(ii) If the Working Capital as set forth in the Final Closing
Statement is greater than the Estimated Working Capital, Purchaser, subject
to the provisions of Section 1.6(d), shall issue additional MW Common Stock
(based on the MW Common Stock Valuation) as additional Merger Consideration
to each Shareholder surrendering Certificate(s) after the Effective Time,
the Pro Rata Share of the difference for each share represented by such
Certificate(s).
1.8 ADDITIONAL POST-CLOSING ADJUSTMENTS.
(a) If Purchaser reasonably determines, within 90 days of the
Closing Date, in accordance with GAAP and consistent with the Company's past
practices and historical turnover rates, that the allowance for obsolete or
unsaleable items in the raw materials, work-in-progress and finished goods
inventory, as reflected in the Working Capital included in the Final Closing
Statement, was insufficient based upon facts known at the date of such
subsequent determination, the Purchaser shall provide the Shareholders'
Representative with written notice thereof. The Shareholders' Representative
shall have 10 days after receipt of Purchaser's notice to give written notice to
the Purchaser of his disagreement ("Notice of Inventory Disagreement"). If a
Notice of Inventory Disagreement is issued by Shareholders' Representative, it
shall specify in reasonable detail the nature of any disagreement so asserted.
For a period of 30 days after the delivery of such Notice of Inventory
Disagreement, the Shareholders' Representative and the Purchaser shall attempt
to resolve in writing all of the differences with respect to each matter
specified in the Notice of Inventory Disagreement, in which case any such
resolution of such matters shall be final and binding on the parties. If, at
the end of such 30-day period, the Shareholders' Representative and Purchaser
have not resolved in writing all of the differences with respect to any such
matter, then each unresolved matter ("Disputed Inventory Matter") shall be
submitted to and reviewed by the Neutral Accountant. The Neutral Accountant
shall consider only the Disputed Inventory Matters and shall act promptly to
resolve in writing all Disputed Inventory Matters, and its decisions with
respect to the Disputed Inventory Matters shall be final and binding on each of
the Shareholders and Purchaser; provided that no such resolution of the Disputed
Inventory Matters shall require payment of an amount greater than the highest
amount or less than the lowest amount suggested for such resolution by either
the Shareholders' Representative or the Purchaser. The Neutral Accountant shall
notify the Shareholders and the Purchaser of its resolution of the Disputed
Inventory Matters and shall deliver written confirmation of same to Purchaser
and Shareholders' Representative. If Shareholders' Representative does not
issue a Notice of
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Inventory Disagreement or upon the resolution of the Disputed Inventory Matters
by the Neutral Accountant, the Purchaser, at Shareholders' Representative's
written instructions, shall sell such obsolete and/or unsaleable inventory. The
Merger Consideration payable to Shareholders shall be adjusted by the difference
(based on the MW Common Stock Valuation) by an amount equivalent to the
additional payment, if any, that would have been payable by the Shareholders to
the Purchaser pursuant 1.7(e)(i) on the basis of the difference between the
allowance for obsolete or unsaleable items as restated pursuant to this Section
1.8(a) and as originally stated at in the Final Closing Statement, less the
aggregate proceeds from the sale of said obsolete and/or unsaleable inventory
through the Shareholders' Representative giving instructions to the Escrow Agent
to distribute to Purchaser the MW Common Stock representing such adjustment,
first from the Working Capital Escrow Amount and, to the extent there is not a
sufficient amount in the Working Capital Escrow Amount, then from the
Indemnification Escrow Amount.
(b) If the gross amount collected by Purchaser upon the accounts
receivable reflected in the Working Capital included in the Final Closing
Statement ("Accounts Receivable") during the 120 days after the Closing Date is
less than the book value of such Accounts Receivable after giving effect to the
allowance for doubtful accounts as reflected on the Final Closing Statement,
Shareholders shall pay to Purchaser, by giving instructions to the Escrow Agent
to distribute to Purchaser MW Common Stock (based on the MW Common Stock
Valuation) first from the Working Capital Escrow Amount and, to the extent there
is not a sufficient amount in the Working Capital Escrow Amount, then from the
Indemnification Escrow Amount, on the basis of the difference between the amount
collected and the book value of such Accounts Receivable after giving effect to
the allowance for doubtful accounts as reflected as originally stated at in the
Final Closing Statement; provided, however, that during the aforementioned
120-day period Purchaser shall not write off or settle any uncollected Accounts
Receivable or retain a collector to collect any such Accounts Receivable without
written consent of Shareholders' Representative. Subsequent to such 120 days
after the Closing Date, Purchaser shall continue to use reasonable efforts to
collect any Accounts Receivable not collected during the 120 days after the
Closing Date, and the net amounts of such Accounts Receivable collected by
Purchaser, after accounting for third party collection costs, shall be remitted
to the Shareholders, other than Dissenting Shareholders, in MW Common Stock
(based on the MW Common Stock Valuation) after the payment by Shareholders of
the amounts due Purchaser under this Section 1.8(b). On or prior to the 15th
day of each month, Purchaser shall deliver to Shareholders' Representative an
Accounts Receivable report identifying the gross collections made by Purchaser
through and including the end of the preceding calendar month. Any amounts
collected by Purchaser shall be applied against the longest outstanding
receivables except as to any receivable as to which the Person paying such
amount has given Purchaser notice of a dispute.
(c) Upon the later of the 135th day after the Closing Date, or the
10th day after receipt by both Shareholders and Purchaser of the Final Closing
Statement, or the payment by Shareholders to Purchaser of any amount claimed by
Purchaser pursuant to Section 1.7 or this Section 1.8, any remaining Working
Capital Escrow Amount shall be distributed from the Working Capital Escrow
Account to Shareholders surrendering Certificates pursuant to Section 1.6 as
directed by the Shareholders' Representative.
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1.9 TRANSFER TAXES. Any transfer taxes or stamp duties, or other similar
taxes, fees, charges or expenses (collectively "Transfer Taxes") imposed on the
Company shall be divided equally between the Purchaser and the Company, and the
total accrued and unpaid amount thereof allocated to the Company shall be
treated as a Company Expense. Any Transfer Taxes imposed on the Shareholders
shall be paid by the Shareholders.
1.10 MW COMMON STOCK.
(a) The MW Common Stock to be delivered to Shareholders will not be
registered under federal or state securities laws, but rather, issued pursuant
to an exemption therefrom. As a result, Shareholders acknowledge and agree that
such MW Common Stock is "restricted" stock as such term is defined under such
securities laws and cannot be sold, pledged or transferred unless subsequently
registered or unless an exemption is available allowing its resale.
(b) Parent, at its expense, shall file a shelf registration
statement (the "Registration Statement") as soon as reasonably practicable after
the Closing Date, pursuant to Rule 415 under the Securities Act of 1933, as
amended (the "Securities Act") with respect to all the MW Common Stock issued by
Parent in connection with consummating the transactions contemplated by this
Agreement (including, without limitation, those shares deposited in escrow under
the Escrow Agreement) (collectively, "Registrable Shares"). Parent shall use
its best efforts to: (i) have the Registration Statement declared effective on
or before July 15, 1998; and (ii) keep the Registration Statement continuously
effective and to supplement and amend it as required by the Securities Act and
the regulations thereunder from the date the Registration Statement is declared
effective (the "Initial Effective Date") until the earliest to occur of the
following events: (A) such time as Shareholders holding Registrable Shares may
transfer the MW Common Stock pursuant to the safe harbor provisions of Rule 144
under the Securities Act without having to comply with any volume limitations
under such rule; (B) notification to Parent that all Registrable Shares have
been sold for the accounts of the participating Shareholders; or (C) a request
by all participating Shareholders having unsold Registrable Shares that the
Registration Statement be terminated (the period between the Initial Effective
Date and earliest to occur of such events is hereinafter referred to as the
"Registration Statement Period"). If the Registration Statement ceases to be
effective at any time during the Registration Statement Period, Parent, at its
expense, shall within thirty days of such cessation cause to be filed an
additional shelf registration statement covering the unsold balance of the
Registrable Shares and shall use its best efforts to have such registration
statement declared effective as soon as practicable thereafter and keep such
registration statement effective until the end of the Registration Statement
Period.
(c) Parent agrees to furnish each participating Shareholder with
such number of conformed copies of any registration statement and prospectus
included therein (including each preliminary prospectus) covering the
Registrable Shares as each such Shareholder reasonably may request in order to
facilitate the public sale of the Registrable Shares covered by such
registration statement.
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(d) All expenses incurred by Parent, Purchaser and the Shareholders
in connection with any registration under this Agreement shall be paid by Parent
and Purchaser, including without limitation all registration and filing fees,
printing expense, fees and disbursements of counsel and independent public
accountants for the Parent and the Purchaser, fees and expenses (including
counsel fees) incurred in connection with complying with state securities or
"blue sky" laws, fees of securities exchanges or the National Association of
Securities Dealers, Inc., fees of transfer agents and registrars, but excluding
any selling commissions and transfer taxes applicable to the sale of the MW
Common Stock and any legal fees and expenses of counsel or other advisers and
agents of the selling Shareholders.
(e) To ensure that the Shareholders are able to benefit from the
Registration Statement and to make available the benefits of certain rules and
regulations of the Securities and Exchange Commission ("SEC") that may permit
the offer and/or sale of MW Common Stock to the public without registration by
the Shareholders, Parent agrees to:
(i) supplement and amend the Registration Statement in a
timely manner if required by the registration form utilized by the Parent,
or by the instructions applicable to such form or by the Securities Act or
the rules and regulations thereunder or if reasonably requested by a
majority in aggregate amount of the holders of Registrable Shares and to
furnish the Shareholders' Representative with copies of any such amendment
or supplement at least twenty-four hours prior to its being filed with the
SEC;
(ii) file with the SEC in a timely manner all reports and
other documents required of Parent under the Securities Act and the
Securities Exchange Act of 1934, as amended ("Exchange Act");
(iii) make and keep public information regarding Parent
available (as those terms are understood and defined in Rule 144) at all
times during the Registration Period or such longer period ending on the
date upon which the Shareholders no longer need to rely on Rule 144; and
(iv) so long as any Shareholder owns any MW Common Stock,
furnish to each Shareholder upon written request a written statement by
Parent that all reports and filings that are necessary to be filed by
Parent for any Shareholder to avail himself or herself of Rule 144 or 145
have been filed, and provide a copy of the most recent annual or quarterly
report of Parent, and any other reports and documents as a Shareholder may
reasonably request in availing himself or herself of any rule or regulation
of the SEC.
(f) Parent and Mail-Well, jointly and severally, shall indemnify
the Shareholders (and any Person who is an Affiliate of such Shareholders within
the meaning of the Securities Act) whose shares of MW Common Stock are included
in any registration statement as Registrable Shares against all expenses,
claims, losses, damages, or liabilities, including, without limitation,
reasonable attorneys' fees and court costs (collectively, a "Liability"), to
which the Shareholder may become subject under the Securities Act, the Exchange
Act or any rule or regulation under either of them or other statute or at common
law, arising out of or based upon:
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(i) any untrue statement or alleged untrue statement of any material fact
contained in any registration statement, any preliminary prospectus or final
prospectus contained therein, or any amendment or supplement, and any document
incorporated by reference therein (a "Registration Document"); or (ii) any
omission or alleged omission to state a material fact required to be stated in
any Registration Document or necessary in order to make any statement in any
Registration Document not misleading. Notwithstanding the foregoing, neither
Parent nor Mail-Well will be liable to a Shareholder to the extent that any
liability arises out of or is based upon any untrue statement or omission made
in any Registration Document in reliance upon and in conformity with written
information furnished to Parent or Mail-Well for incorporation in any such
Registration Document by or on behalf of such Shareholder. Parent and
Mail-Well's joint and several indemnification obligation will remain in full
force and effect regardless of any investigation made by or on behalf of a
Shareholder and will survive transfer of the Registrable Shares by the
Shareholders.
1.11 INVESTMENT LETTER. Pursuant to Section 8.9 hereof, and in
acknowledgment of the restrictions on transfer of the MW Common Stock
(i) described in this Section 1.10 above; and (ii) if applicable, required by
the pooling of interests accounting method contemplated herein, each Shareholder
shall deliver to Purchaser prior to Closing an executed letter in the form of
Exhibit C hereto.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND
CONTROLLING SHAREHOLDERS
The Schedules attached to this Agreement are sometimes referred to herein
as the "Disclosure Schedules." The Company and Controlling Shareholder
represent and warrant to Purchaser that except as otherwise disclosed in the
Disclosure Schedules the following statements are true as of the date of this
Agreement and as of the Closing Date:
2.1 ORGANIZATION, STANDING, CORPORATE AUTHORIZATION, AND ENFORCEABILITY.
(a) The Company is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its incorporation and
has all requisite corporate power and authority to own, lease and operate its
properties and to carry on its business as now being conducted. The Company is
duly qualified or licensed to do business and is in good standing in each
jurisdiction in which the property owned, leased or operated by it or the nature
of the business conducted by it makes such qualification necessary, except where
the failure to so qualify would not have a Material Adverse Effect on the
financial condition or business of the Company.
(b) This Agreement and all other agreements, documents and
instruments executed or to be executed by the Company in connection herewith
(the "Related Agreements") constitute the valid and legally binding obligations
of the Company and are enforceable in accordance with their terms, except as
such enforceability may be limited by equitable principles
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and by applicable bankruptcy, insolvency, reorganization, arrangement,
moratorium or similar laws relating to or affecting the rights of creditors
generally. The Company has the requisite corporate power and authority to enter
into this Agreement and the Related Agreements.
(c) The execution and delivery of this Agreement, the Related
Agreements, and all other documents and instruments executed or to be executed
by the Company pursuant to this Agreement, and the consummation of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary corporate and other action on the part of the Company, subject to
obtaining the requisite approvals from Shareholders in accordance with
applicable law. This Agreement and the Related Agreements have been or will
have been, at the time of their respective executions and deliveries, duly
executed and delivered by a duly authorized officer of the Company.
(d) Except as set forth in SCHEDULE 2.1(d) , the Company does not
own, directly or indirectly, any capital stock or other equity interest in any
Person or have any direct or indirect equity or ownership interest in any
Person, and the Company is not subject to any obligation or requirement to
provide funds for or to make any investment (in the form of a loan, capital
contribution or otherwise) to or in any Person.
2.2 CAPITALIZATION. As of the date of this Agreement, the
capitalization of the Company (including all capital stock authorized, issued
and outstanding) is as set forth on SCHEDULE 2.2. All of the outstanding shares
of the Company's Common Stock are owned by the Shareholders as set forth on
SCHEDULE 2.2. The Company has no authorized or outstanding bonds, debentures,
notes or other indebtedness the holders of which have the right to vote (or
convertible or exchangeable into or exercisable for securities having the right
to vote) with the Shareholders on any matter ("Voting Debt"). Except as
contemplated by this Agreement, after the Effective Time, the Surviving
Corporation will have no obligation to issue, transfer or sell any shares of MW
Common Stock as a result of any obligation existing, or created by the Company,
at or prior to the Effective Time, including pursuant to any stock incentive
plan or warrant. All prior issuances of securities by the Company and all prior
repurchases, redemptions or exchanges affecting the outstanding securities of
the Company have complied with all applicable Legal Requirements (as defined
below) (including federal and state securities laws), preemptive rights and
contractual restrictions. All issued and outstanding shares of capital stock of
the Company have been duly authorized and validly issued and are fully paid and
nonassessable. Except as disclosed on SCHEDULE 2.2, the Company does not have
shares of its capital stock authorized, issued or outstanding and there are no
outstanding convertible or exchangeable securities, subscriptions, calls,
options, warrants, rights (contractual or arising by operation of law,
including, without limitation, rights of first refusal and preemptive rights),
or other agreements or commitments of any character to which the Company is a
party or by which it is bound, relating to the issuance, purchase, other
acquisition or voting of any shares of the capital stock of, or other equity or
ownership interest (collectively, "Equity Rights") in the Company. Except as
disclosed on SCHEDULE 2.2 and on SCHEDULE 2.11, there are no agreements,
arrangements or commitments of any character (contingent or otherwise) pursuant
to which any person or entity is or may be entitled to receive any payment based
on the revenues or earnings, or calculated in accordance therewith, of the
Company. Except as set forth in SCHEDULE 2.2, there are no voting trusts,
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proxies or other agreements or understandings to which the Company or
Shareholders is a party or by which the Company or Shareholders is bound with
respect to the voting of any shares of capital stock or other Equity Interests
of the Company. Except as set forth on Schedule 2.2, any such voting trusts
will be terminated as of the Closing.
For purposes of this Agreement, the term "Legal Requirement" shall mean any
federal, state or local law, statute, legislation, ordinance, code, rule,
regulation, decree, award, order, permit, franchise, consent or authorization
of, any federal, state, local or other governmental body or agency, department,
commission, bureau, board, council, court, magistrate, panel or instrumentality
of the United States, any political subdivision thereof or any state or local
governmental authority in effect as of the date hereof.
2.3 ARTICLES OF INCORPORATION AND BYLAWS; CERTAIN RECORDS. Copies of the
Articles of Incorporation, Bylaws, minute books and stock records of the Company
have been made available to Purchasers, and each such copy is true, correct and
complete as amended to date. All material records of any type and description
in whatever form or medium that presently exist and that relate to the business
or properties of the Company and which in the ordinary course of business the
Company would normally retain are in the possession or control of the Company
and are located at the offices of the Company or of its counsel, independent
auditors, consultants, or other advisors, and the Surviving Corporation will
have the right to possession of all such records upon the consummation of the
transactions contemplated by this Agreement.
2.4 COMPLIANCE WITH OTHER INSTRUMENTS AND LAWS. Except as set forth in
SCHEDULE 2.4, the execution and delivery of this Agreement and the Related
Agreements and the consummation of the transactions contemplated hereby and
thereby will not conflict with or result in any violation of or default under
any provision of the Articles of Incorporation or Bylaws of the Company or any
material violation of, or default under, any mortgage, indenture, trust, lease,
partnership or other agreement or other instrument, permit, concession, grant,
franchise, license, judgment, order, decree, or Legal Requirement applicable to
the Company or any Shareholder or any of the properties of the Company, nor will
they result in the creation or imposition of any lien, security interest,
charge, claim or other encumbrance of any nature whatsoever on any of the
properties or assets of the Company or the Common Stock, nor will they prevent
or materially delay the consummation of the transactions contemplated hereby.
2.5 GOVERNMENTAL AUTHORIZATIONS; CONSENTS. Except as set forth on
SCHEDULE 2.5, no consents, licenses, approvals or authorizations of, or
registrations or declarations with, any governmental authority, agency, bureau
or commission, or any third party which have not already been obtained, are
required to be obtained or made by the Company or Shareholders in connection
with the execution, delivery, performance, validity and enforceability of this
Agreement or any Related Agreement or the sale or transfer of the Common Stock
and will not prevent or materially delay the consummation of the transactions
contemplated hereby other than and except for consents, licenses, approvals,
authorizations or registrations which are not material.
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2.6 LITIGATION. No action, suit, proceeding or governmental
investigation is pending or, to the Knowledge (as defined below) of the Company
and the Controlling Shareholder, threatened, at law or in equity, which seeks to
question, delay or prevent, or could have the effect of delaying or preventing,
the consummation of all or any portion of the transactions contemplated hereby.
2.7 FINANCIAL STATEMENTS; CONDUCT OF THE BUSINESS; NO UNDISCLOSED
LIABILITIES. Except as set forth on SCHEDULE 2.7:
(a) The Company has delivered to Purchaser (i) the audited balance
sheets of the Company as of June 30, 1997, 1996 and 1995 and the related audited
statements of income, retained earnings and cash flows for the fiscal years then
ended, accompanied in each case by an opinion thereon of the independent
certified public accountant of the Company (such financial statements, including
the notes thereto, hereinafter being referred to as the "Annual Financial
Statements"), and (ii) the unaudited balance sheet of the Company as of March
31, 1998, and the related unaudited statements of income for the nine months
ended March 31, 1998 (the "Interim Financial Statements"). (The Annual
Financial Statements and the Interim Financial Statements including the notes
thereto together hereinafter being referred to as the "Financial Statements").
All of the Financial Statements have been prepared in accordance with GAAP
(subject to the modifications and exceptions set forth in SCHEDULE 2.7 and, in
the case of Interim Financial Statements, to end of year audit adjustments and
preparation of footnotes) consistently applied for all relevant periods (except
as indicated therein) and present fairly in all material respects the financial
position of the Company as of the dates thereof and the results of its
operations for the periods then ended.
(b) The Company does not have any debts, obligations, guaranties of
the obligations of others or liabilities except: (i) debts, obligations,
guaranties and liabilities to the extent reflected or reserved against in the
Financial Statements, (ii) debts, obligations, guaranties and liabilities
incurred or entered into subsequent to March 31, 1998, in the ordinary course of
business and otherwise not in contravention of this Agreement, and (iii) debts,
obligations and liabilities relating to this Agreement and the Related
Agreements and instruments being executed and delivered in connection herewith
and the transactions referred to herein and therein (including obligations to
pay legal fees, financial advisory fees, bank fees, accounting fees and other
amounts in connection therewith) so long as such obligations are included in
determining Company Expenses.
2.8 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except for (i) matters set
forth on SCHEDULE 2.8, (ii) matters disclosed in the Annual Financial Statements
or (iii) as contemplated by this Agreement, the Company has not, since December
31, 1997, except as otherwise specified herein:
(a) undergone any change in its condition (financial or otherwise),
properties, assets, liabilities, business or operations, except for changes in
the ordinary course of business which have not either individually or in the
aggregate had a Material Adverse Effect;
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(b) except as set forth on SCHEDULE 2.8, changed any of its methods
of accounting or accounting practices or classifications of assets or
liabilities, or failed to maintain its books of account in the usual, regular
and ordinary manner in accordance with GAAP unless required by regulation or
GAAP;
(c) modified the material terms of, or canceled or terminated, any
Material Contract (as defined below) other than in the ordinary course of
business;
(d) terminated, discharged or received any written notice regarding
the resignation, discharge or termination of any officer other than in the
ordinary course of business or as contemplated by this Agreement;
(e) since December 31, 1995, established or adopted any Benefit
Plan (as defined below), or increased the amount of the wages, bonus, salary,
commissions, fringe benefits or other compensation or remuneration payable to,
any of its directors, officers or employees, except in any case in the ordinary
course of business in accordance with past practice and, in the case of the
senior management employees and Shareholders (listed on SCHEDULE 2.8(e)), in an
amount not exceeding 3% in any one case or a payment of bonuses in an aggregate
amount of $25,000;
(f) since December 31, 1995, declared, set aside, made or paid any
dividend or other distribution in respect of its capital stock or purchased or
redeemed, directly or indirectly, any shares of its capital stock, or split up,
combined, reclassified, redeemed, repurchased or otherwise reacquired any of its
capital stock other than distributions to shareholders to pay income taxes and
charged against their respective Accumulated Adjustments Account, if applicable;
(g) since December 31, 1995, issued or sold any shares of its
capital stock of any class or any subscriptions, options, warrants, calls or
other rights to purchase directly or indirectly any such shares or any
securities directly or indirectly convertible into or exchangeable for such
shares or made any other change in its capital structure;
(h) since December 31, 1995, except for borrowings under its normal
line of credit and Debt described in SCHEDULE 2.8(h), incurred any direct or
contingent liability for borrowed money or guaranteed the monetary obligations
of any other person or entity other than indebtedness to be included in the Debt
to be discharged at Closing, or made any monetary investment in, advance to or
loan to any person or entity other than in the ordinary course of business;
(i) mortgaged, pledged or subjected to any material lien, lease,
security interest or other charge or encumbrance any of its properties or
assets, tangible or intangible, except those securing Debt to be discharged at
Closing and except for Permitted Liens (as defined below);
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(j) made any material change in its practices, operations or
policies with respect to the method for selling goods or services, or other
method for accounting for sales, the conduct of accounts receivable collection
or accounts payable payment activities or the maintenance of inventory levels
other than changes in the ordinary course of business;
(k) since December 31, 1995, merged or consolidated with or into
any other entity or initiated or participated in negotiations with any person or
entity with respect to any of the foregoing;
(l) implemented or adopted any change in its tax methods,
principles or elections;
(m) since December 31, 1995, acquired or disposed of any material
assets or properties or made any capital improvement other than in the ordinary
course of business; or
(n) suffered any damage, destruction or loss (whether or not
covered by insurance) which has had or could reasonably be expected to have a
Material Adverse Effect on the Company.
2.9 TITLE TO PROPERTY, ABSENCE OF LIENS AND ENCUMBRANCES.
(a) The Company has good title to its owned material assets,
including the owned tangible assets reflected on the balance sheet included in
the Company's most recent Financial Statements, other than assets disposed of or
used after the date thereof in the ordinary course of business for fair value.
Except as disclosed in SCHEDULE 2.9(a), the tangible assets owned by the Company
are owned free and clear, of all liens, mortgages, pledges, charges, security
interests or encumbrances, except for Permitted Liens (as defined below). The
Company owns, leases or licenses, and has adequate rights to use all material
real and personal property and other material assets necessary to conduct its
business as a going concern on a basis consistent with past practices. To the
Knowledge of the Company, the assets of the Company necessary for the operation
of its business consistent with past practices are in operating condition and
repair (subject to normal wear and tear). Neither the whole nor any part of the
real property used in the Business have been condemned by any public authority,
nor, to the Knowledge of the Company and the Controlling Shareholder, is any
such condemnation or taking threatened or contemplated. There exists free and
uninterrupted egress and ingress over a public roadway to all operating
facilities.
For the purposes of this Agreement, the term "Permitted Liens" shall
mean (i) liens for current taxes, assessments or governmental charges not yet
due, (ii) deposits or pledges to secure bids, tenders, contracts, leases,
statutory obligations, surety and appeal bonds, and other obligations of like
nature arising in the ordinary course of the Company's business, (iii) liens
arising out of deposits in connection with workers' compensation, unemployment
insurance, old age pensions or other social security or retirement benefits
legislation, (iv) liens imposed by law, such as mechanics', workers',
materialmen's, carriers' or other like liens arising in the ordinary course of
the Company's business which secure the payment of obligations which are not
past due
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or which are being diligently contested in good faith by appropriate proceedings
and for which adequate reserves in accordance with GAAP are maintained on the
Financial Statements, (v) imperfections of title, liens and encumbrances which
do not materially and adversely affect the use, value or marketability of the
property affected thereby, and (vi) the imperfections of title, liens,
mortgages, pledges, charges, security interests and encumbrances set forth on
SCHEDULE 2.9(a).
(b) The Company validly holds the real property described on
SCHEDULE 2.9(b) (the "Real Property") free and clear of all liens, encumbrances,
mortgages or security interests, except for Permitted Liens.
(c) Except as set forth on SCHEDULE 2.9(c), the Company is not a
party to any leases of real property. The Company validly holds the leaseholds
created by the leases (true, complete and correct copies of which have been
provided to Purchaser) as described on SCHEDULE 2.9(c) (the "Leased Property"),
and such leases are enforceable by the Company as the lessee thereunder in
accordance with their terms.
(d) The Company is not a party to any agreement granting any third
party the right or an option to purchase or lease all or any portion of the Real
Property, Leased Property or any personal property of the Company.
(e) There is not pending, nor has the Company received any written
notice of, (i) any Claim or proceeding asserting or seeking to establish a title
interest in the Real Property or Leased Property, or any Claim of default under
any of the leases under which leaseholds have been created ("Title Notice"), or
(ii) the existence of any facts or proceedings of which the Company or any of
the Controlling Shareholder has Knowledge which may result in the issuance of
such a Title Notice.
2.10 FULL AUTHORITY; COMPLIANCE WITH LAWS. Except as set forth on
SCHEDULE 2.10, the Company is in compliance in all material respects with all
applicable Legal Requirements. Set forth on SCHEDULE 2.10 is a list of any and
all material permits, licenses, consents, orders, approvals, franchises,
certificates or other authorizations under any applicable Legal Requirement
(collectively the "Permits"), issued to the Company in connection with the
ownership, operation and maintenance of its business or assets. The Company has
obtained and maintained all Permits. Each of the Permits is in full force and
effect, and the Company is in compliance in all material respects with all the
provisions of such Permits.
2.11 BENEFIT PLANS.
(a) Except as set forth in SCHEDULE 2.11, the Company does not
maintain, sponsor, participate in or contribute to, or is required to contribute
to, directly or indirectly, or has any obligation under:
(i) Any employee benefit plan, employee pension benefit
plan, employee welfare benefit plan (including any medical, dental,
disability, accident or
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sickness, salary continuation or life insurance plan or arrangement), or
multiemployer plan, all as defined in the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), regardless of whether or not a
plan is exempt from some or all of the otherwise applicable requirements of
ERISA; or
(ii) Except as disclosed on the Financial Statements, any
material bonus, commission, deferred compensation, incentive compensation,
restricted stock, stock purchase, stock option, stock appreciation right,
debenture, supplemental pension, profit sharing, royalty pool, vacation,
sick leave, severance or termination pay policies, supplemental
unemployment benefits plan, loan guarantee, relocation assistance, employee
loan or other extensions of credit, or other similar material plan,
program, agreement, policy, commitment, arrangement or benefit currently in
effect under which current or former employees or their dependents,
beneficiaries, representatives or estates are currently or will in the
future be entitled to benefits.
(b) With respect to each plan, program, agreement, policy,
commitment, arrangement or benefit described on SCHEDULE 2.11 (a "Benefit
Plan"), the Company has furnished to the Purchaser true, correct and complete
copies of such Benefit Plans that are in written form, including amendments, if
applicable, summary plan descriptions, if applicable, the Internal Revenue
Service determination letter, if applicable, and the two most recent Forms 5500,
5500-C or 5500-R, as applicable, and has made available to the Purchaser the
most recent actuarial reports of or regarding such Benefit Plan. As to each
Benefit Plan not reduced to writing, the Company has made available to the
Purchaser a description of all material elements of such plan.
(c) Except as set forth in SCHEDULE 2.11:
(i) Each Benefit Plan has been operated and administered in
all material respects in accordance with its terms and applicable laws,
including but not limited to ERISA and the Internal Revenue Code of 1986 as
amended (the "Code") (as defined below). Each Benefit Plan that is intended
to be qualified under Section 401(a) of the Code either has received from
the Internal Revenue Service, or timely applied for, a determination letter
on such Benefit Plan's qualified status.
(ii) Neither the Company nor any other party in interest
(within the meaning of ERISA) has engaged in any non-exempt prohibited
transaction with respect to any Benefit Plan under ERISA, the Code, and
there is no pending assertion of the occurrence of any such transaction.
(iii) All contributions required under applicable law or the
terms of any Benefit Plan, collective bargaining agreement or other
agreement relating to a Benefit Plan to be paid by the Company for all
periods prior to the Closing Date have been or will have been completely
and timely made to each Benefit Plan when due, and the Company has
established adequate reserves on its books (which will be treated as a
current liability for purposes of determining Working Capital at Closing)
to meet liabilities for contributions accrued but that have not been made
because they are not yet due and payable.
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(iv) To the Knowledge of the Company and the Controlling
Shareholder, there is no current or pending investigation or audit by the
Internal Revenue Service, the Department of Labor or any other governmental
entity of any Benefit Plan, nor has the Company received notification from
any such governmental entity of such a pending audit or investigation, and
there are no actions, suits or claims pending (other than routine claims
for benefits) or threatened, with respect to any Benefit Plan or against
the assets of any such Benefit Plan.
(v) No Benefit Plan is or ever has been a plan subject to
Title IV of ERISA, Part 3 of Subtitle B of Title I of ERISA or Section 412
of the Code ("Pension Plan"), or is or ever has been a multiemployer plan
as defined in Section 3(37) of ERISA or Section 414(f) of the Code
("Multiemployer Plans"); neither the Company nor any other party in
interest has incurred any liability to the Pension Benefit Guaranty
Corporation ("PBGC") with respect to any Pension Plan, except for required
premium payments, which payments have been made when due; no accumulated
funding deficiency (within the meaning of Section 412 of the Code or
Section 302 of ERISA) or reportable event (as defined in Section 4043 of
ERISA) has occurred with respect to any Pension Plan; no event has occurred
in connection with any Pension Plan which could subject any Company or any
Pension Plan, or Purchaser, its Affiliates or any of their respective
benefit plans, to liability under Section 4062, 4063 or 4064 of ERISA, and,
no event has occurred which might give rise to any liability of the Company
or any Pension Plan, or Purchaser, its Affiliates or any of their
respective benefit plans, to the PBGC under Title IV of ERISA or which
could reasonably be anticipated to result in any claims being made against
the Company or any Pension Plan; and the Company has not incurred nor, as a
result of the transactions contemplated by this Agreement, will incur any
withdrawal liability (including any contingent or secondary withdrawal
liability) within the meaning of Section 4201 and 4204 of ERISA to any
Multiemployer Plan; upon a complete withdrawal or a partial withdrawal (as
those terms are defined in Section 4203 and 4205, respectively, of ERISA)
from a Multiemployer Plan occurring on or before the close of the most
recent fiscal year of each such Multiemployer Plan ended prior to the
Closing Date, to the Knowledge of the Company and Controlling Shareholder,
the Company would not have been subject to withdrawal liability under
Title IV, Subtitle E, Part 1 of ERISA and, there has been no material
change in the financial condition of any Multiemployer Plan that would
result in the imposition of such liability due to such complete or partial
withdrawal on or before the Closing Date.
(vi) The Company have complied in all material respects with
all notice and continuation coverage requirements applicable to group
health plans under the Consolidated Omnibus Budget Reconciliation Act of
1985, as amended ("COBRA"), with respect to all medical and health benefits
provided by the Company that are subject to COBRA.
(vii) No Benefit Plan amendments have been adopted nor will
any such amendments be adopted prior to the Closing Date except as may be
necessary for
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compliance purposes with the Code or ERISA and there is no arrangement,
commitment or understanding to create any additional plan which would
constitute a Benefit Plan or increase the rate of benefit accrual or
contribution requirement under any of the Benefit Plans or modify, change
or terminate any existing Benefit Plan.
(viii) The Company is not a member of a "controlled group" of
organizations (as defined in Sections 414(b), (c), (m) or (o) of the Code)
which sponsors or maintains any employee benefit plan within the meaning of
Section 3(3) of ERISA which under Title IV of ERISA or any section of the
Code or ERISA would subject Purchaser or Company or any of their respective
employee benefit plans or the fiduciaries thereof or their respective
assets to any taxes, encumbrances, penalties or other liabilities.
2.12 CLAIMS. There are no Claims against, or to the Knowledge of the
Controlling Shareholder or the Company, threatened against, the Company or its
properties, at law or in equity or before any court, governmental department,
commission, board, agency, authority, instrumentality, domestic or foreign
which, if adversely determined, could be reasonably expected to have,
individually or in the aggregate, a Material Adverse Effect on the Company
before or after the Closing Date. The Company is not subject to any judgment,
stipulation, order or decree arising from any action, suit, proceeding or any
investigation of which it has Knowledge which could be reasonably expected to
have, individually or in the aggregate, a Material Adverse Effect on the
business or financial condition of the Company before or after the Closing Date.
As used in this Agreement, "Claim" means any and all claims, causes of
action, arbitrations, audits, hearings, investigations of which it has
Knowledge, proceedings, complaints, litigation or suits, whether in contract,
tort or otherwise, whether statutory or common law, whether civil, criminal,
administrative, investigative, formal or informal, fixed or contingent.
2.13 TAXES.
(a) For purposes of this Agreement, "Taxes" in the plural and "Tax"
in the singular shall refer to any and all taxes, charges, fees, levies, or
other assessments of whatever kind or nature, including, but not limited to, any
federal, state, local or foreign net income, gross income, gross receipts,
unitary, license, payroll, unemployment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including, but not limited to, taxes
under section 59A of the Code), occupational, leasing, lease, fuel, customs,
duties, capital stock, franchise, profits, withholding, Social Security,
unemployment, disability, ad valorem, real property, personal property (tangible
and intangible), sales, use, transfer, registration, value added, alternative or
minimum, estimated, or any other kind of tax whatsoever, including the recapture
of any tax items, and including any interest, addition, penalty or other
associated charge thereto, whether disputed or not.
(b) Except as set forth on SCHEDULE 2.13
(i) The Company has filed or will file or cause to be filed,
within the applicable period prescribed by law, (i) all federal, state,
local, foreign or other material
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Tax Returns, as that term is defined below, required by such law to be
filed by the Company for all taxable periods ending on or prior to the
Closing Date or (ii) valid extensions of the time for filing such Tax
Returns. For purposes of this Agreement, "Tax Returns" shall mean any
returns, reports or statements with respect to Taxes which are required to
be filed with any taxing authority.
(ii) The Company has not obtained nor will it obtain prior to
the Closing Date any extensions of time in which to file any Tax Returns
for any taxable period ending on or prior to the Closing Date.
(iii) The Company has paid, within the time and in the manner
prescribed by law, all Taxes shown as due on all such Tax Returns and, with
respect to all Tax Returns which the Company has not yet filed, but will
file prior to the Closing Date, shall pay, within the time and in the
manner prescribed by law, all Taxes shown as due on such Tax Returns.
(iv) No written notice has been received by the Company from
any Tax authority in any jurisdiction in which the Company has not filed a
Tax Return that the Company is or may be subject to taxation of any sort in
such jurisdiction or otherwise is required to file a Tax Return in such
jurisdiction.
(v) Except for Permitted Liens, there are no Tax liens or
other security interests or encumbrances of any type resulting from Tax
liabilities on any of the assets of the Company.
(vi) There is no dispute, Claim or any other controversy
concerning any material Tax liability of the Company raised or asserted by
any Tax authority in writing.
(vii) No income Tax Returns of the Company for any open tax
year has been audited by any taxing authority. The Company has made
available to Purchaser a correct and complete copy of each federal income
Tax Return, examination report, statement of deficiency, or any other
administrative or judicial assertion, assessment or determination of
federal income Tax liability with respect to the Company for the past three
years.
(viii) The Company has employed a permissible method of Tax
accounting, validly elected for each taxable period ending on or prior to
the Closing Date. The Company has not changed, nor requested to be
permitted to change, any method of Tax accounting.
(ix) The Company has not waived any statute of limitations
with respect to any Taxes or has agreed to any extension of time with
respect to a Tax assessment or deficiency, except for such waivers or
extensions which, by their terms, have elapsed as of the date of this
Agreement, nor are any requests for such waivers or extensions pending.
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(x) The Company (i) has not filed a consent under Section
341(f) of the Code concerning collapsible corporations, (ii) has not made
any payments, is obligated to make any payments, or is a party to any
agreement that will render it (or the payor of compensation under the
agreement) subject to the provision of section 280G of the Code regarding
payments as a result of a change in control, (iii) has not been a United
States real property holding company within the meaning of section
897(c)(2) of the Code and (iv) is not a party to any Tax allocation or Tax
sharing agreement.
(xi) The unpaid Taxes of the Company, including Taxes
attributable to all periods ending on or prior to the Closing Date which
are not yet due and payable, do not materially exceed the reserve on the
Financial Statements for the Company's tax liability as of the respective
dates of such Financial Statements.
2.14 CONTRACTS. Except as set forth in this Agreement or on
SCHEDULE 2.14 (the agreements listed thereon being referred to as the "Material
Contracts"), the Company is not a party to, bound by or obligated under any:
(a) material mortgage, indenture, note or installment obligation or
other instrument or contract for or relating to any borrowing by the Company;
(b) material guaranty by the Company of any obligation (excluding
any endorsement made in the ordinary course of business for collection);
(c) material license agreement;
(d) material lease of real or personal property under which the
Company is a lessor or lessee;
(e) material agreement for the purchase by the Company of
equipment;
(f) agreement purporting to limit the right of the Company to
compete in any line of business, with any person or other entity or in any
geographic area;
(g) material agreement for the purchase or sale of raw materials,
products or goods or the provision of services at prices that vary from the
prices therefor generally prevailing in customary, arms-length transactions;
(h) material contract with any governmental or quasi-governmental
authority;
(i) material bond, deposit, financial assurance requirement or
insurance coverage individually required to be submitted to customers of the
Company under any sale, lease or service arrangement or to any governmental
authority under any Permit or Legal Requirement;
(j) agreement or instrument relating to the acquisition by the
Company of any entity or all or substantially all of the assets of any person or
entity;
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(k) other material agreement, contract or obligation of the
Company;
(l) agreement or commitment relating to the borrowing of money or
the guaranty or indemnity (direct or indirect) in respect of or the granting of
security for any obligation for the borrowing of money, by the Company or any
other person or entity, in excess of , including, without limitation,
guarantees, accommodation collateral, letters of credit, mortgages, deeds of
trust, indentures, loan agreements and credit agreements;
(m) agreement or commitment relating to clean-up or remediation
involving Hazardous Materials (as hereinafter defined);
(n) agreement that creates an encumbrance or any restriction on the
ability of the Company to (i) pay dividends or make similar distributions; (ii)
make loans or advances to any person or entity, or (iii) sell, lease or transfer
any of its properties or assets, except (in each case) for such restrictions or
encumbrances existing under or by reason of (1) applicable Legal Requirements,
(2) customary non-assignment provisions in leases and other contracts entered
into in the ordinary course of business, or (3) any instrument governing the
Debt;
(o) indemnification obligations in favor of any person or entity,
and any escrow agreements related to any indemnification or obligation;
(p) confidentiality, secrecy, screening, development or settlement
agreement pertaining to any Intellectual Property; or
(q) contract with any customer of the Company other than contacts
for the purchase and sale of goods, products and services entered into in the
ordinary course of business.
All of the Material Contracts are legal, valid, binding and in full force and
effect, no default exists thereunder on the part of the Company, and except as
set forth in Schedule 2.14, the consummation of the transactions contemplated by
this Agreement will not cause any default or condition in respect of any such
Material Contracts, the effect of which is to cause, permit, create or perfect
the right in any party (a) to repudiate or disavow its obligations to the
Company thereunder, (b) to require or have the right to require the Company to
perform its obligations thereunder (including obligations to pay indebtedness)
prior to such time on which, or on terms and conditions otherwise different from
those that, are provided therein or (c) to recover from the Company any damages
or fines. To the Knowledge of the Company and the Controlling Shareholder, no
party to any such Material Contract is in default thereunder. True, correct and
complete copies of all the Material Contracts have been delivered to the
Purchaser.
2.15 ENVIRONMENTAL QUALITY.
(a) Except as set forth in SCHEDULE 2.15, to the Knowledge of the
Company and the Controlling Shareholder, neither the Company nor any previous
(to the Company) owner, tenant, occupant, user or operator of any real property
now or ever owned or leased by the
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Company (the "Property") released or disposed of any "Hazardous Materials" (as
defined below) on, under, in or about the site of the Property, except in
compliance in all material respects with applicable Environmental Laws (as
defined below). For the purposes of this Agreement, the term "Hazardous
Materials" shall mean any substance, material or waste which is regulated by any
local government authority or state with jurisdiction, or the United States
Government, including, without limitation, any material or substance which is
(a) defined as a "hazardous waste," "hazardous material," "hazardous
substances," "extremely hazardous waste," "regulated substance" or "restricted
hazardous waste" under any provision of the existing laws of any state, or any
other applicable existing law, including, but not limited to, the Resource
Conservation and Recovery Act, 42 U.S.C. Section 6901 ET SEQ. ("RCRA"), and the
Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C.
Section 9601 ET SEQ. ("CERCLA") and (b) petroleum, including crude oil and any
fraction thereof and any refined petroleum products and derivatives thereof.
(b) To the Knowledge of the Company and the Controlling
Shareholder, except as set forth in SCHEDULE 2.15, the Property complies in all
respects with all applicable Environmental Laws. For purposes of this Agreement,
the term "Environmental Laws" shall mean all federal, state and local laws,
ordinances and regulations pertaining to air and water quality, soils and
subsurface strata, natural resources, Hazardous Materials, waste generation,
management, transportation and disposal or other environmental matters,
including the Clean Water Act, the Clean Air Act, the Federal Water Pollution
Control Act, the Solid Waste Disposal Act, RCRA, CERCLA, and the applicable
environmental protection rules, regulations and ordinances of the city and
county in which the Property is located, the Environmental Protection Agency and
all other applicable federal, state, regional and local agencies which are in
existence, and are in effect as of the date hereof. Without limiting the
generality of the foregoing, to the Knowledge of the Company and the Controlling
Shareholder, Company is not liable nor potentially liable for any response costs
or natural resource damages under Sections 107(a) or 113(f) of CERCLA, or under
any other so-called "superfund" or "superlien" law or similar Legal Requirement
currently in existence, at or with respect to the Property and, to the Knowledge
of the Company and the Controlling Shareholder, no circumstances exist, which
with notice or lapse of time or both would result in such liability.
(c) To the Knowledge of the Company and the Controlling
Shareholder, the conduct of the business of the Company complies in all respects
with all applicable Environmental Laws.
(d) To the Knowledge of the Company and the Controlling
Shareholder, except as set forth in SCHEDULE 2.15, the Company has not sent any
Hazardous Material to a site that, pursuant to any applicable Environmental
Laws, (i) has been placed on the "National Priorities List" of hazardous waste
sites or any similar state list, (ii) is otherwise designated or identified as a
potential site for remediation, cleanup, closure or other environmental remedial
activity, or (iii) is subject to a claim, an administrative order or other
request to take "removal" or "remedial" action, as defined in any applicable
Environmental Laws, or to make payment for the costs of cleaning up the site.
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(e) Except as set forth in SCHEDULE 2.15, the Company (i) is not
involved in any suit or proceeding with respect to a release or threatened
release of any Hazardous Material or a violation or alleged violation of any
applicable Environmental Laws, nor has the Company received any notice of any
claims from any person or entity relating to property damage or to personal
injuries from exposure to any Hazardous Material, nor has the Company received
any notice or request for information from any governmental agency or authority
or other third party with respect to any of the foregoing, nor (ii) has it
failed to timely file any report required to be filed, failed to acquire all
necessary certificates, approvals and permits or failed to generate and maintain
all required data, documentation and records under all applicable Environmental
Laws.
(f) To the Knowledge of the Company and the Controlling
Shareholder, except as set forth in SCHEDULE 2.15, there are currently no
underground storage tanks in or under the Property, and no underground storage
tank was removed from the Property during the period that the Company maintained
an interest in such Property.
(g) The Company has made available to Purchaser all information in
its and, to the Knowledge of the Company and the Controlling Shareholder, its
Shareholders' possession regarding the environmental condition of the Property.
2.16 INTELLECTUAL PROPERTY. The Company either own or have the right to
use by license, sublicense, or other tangible agreement, all of the inventions,
improvements, domestic and foreign patents and applications therefor, customer
lists, copyrights, copyright-registrations and applications therefor,
trademarks, trade names, service marks, trade dress, logos, rights in computer
software, and all rights granted or retained in licenses under any of the
foregoing which are material to the conduct of the business of the Company as
presently conducted (collectively the "Intellectual Property"). None of the
Intellectual Property used in connection with the conduct of the business of the
Company is, or has been in the past five years, involved in, or the subject of,
any pending or, to the Knowledge of the Company and the Controlling Shareholder,
threatened infringement, interference, opposition or similar action, suit or
proceeding to which the Company was a party. The material license fees,
royalties and other amounts payable by the Company in connection with the use of
the Intellectual Property, together with the terms and conditions on which, and
periods for which such amounts are payable, are set forth in SCHEDULE 2.16.
2.17 PREPAID EXPENSES. All prepaid expenses shown on the balance sheet
of the most recent Financial Statements or subsequently paid by the Company and
shown on the Final Closing Statement have been incurred solely in connection
with the business and assets of the Company.
2.18 RELATED PARTY TRANSACTIONS. Set forth on SCHEDULE 2.18 is a list of
all material transactions (including, without limitation, employment contracts,
debts, loans, advances, or other obligations, guarantees, indemnities, accounts
and notes payable or receivable and service agreements) between the Company and
any current officer, director or employee, Shareholders, or Affiliate of the
Company (collectively, "Related Parties") which (a) were entered into and/or
consummated subsequent to January 1, 1998; (b) are or will be effective as of
the date hereof or at Closing, (c) constitutes a present or future liability or
obligation of the Company to any Related
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Party; or (d) constitutes a present or future liability of any Related Party to
the Company. For purposes of this Agreement, an "Affiliate" of a party is any
individual, company or other entity that owns five percent (5%) or more of the
voting or capital stock or other equity interest of such party or of which five
percent (5%) of the voting or capital stock or other equity interest is owned or
otherwise controlled by that party or an Affiliate of that party, as the case
may be.
2.19 LABOR MATTERS. Except as set forth on SCHEDULE 2.19, (a) the
Company has not entered into nor is a party to any collective bargaining
agreement, memorandum of understanding or other written document binding on the
Company respecting terms and conditions of employment with respect to an
identified group of employees with any labor union that would cover any
employees of the Company and (b) none of the employees of the Company is
subject to any collective bargaining agreement, memorandum of understanding or
other written document binding on the Company respecting terms and conditions
of employment with respect to an identified group of employees nor are any such
employees, in their capacities as employees, represented by any labor union. As
to the collective bargaining agreements disclosed on SCHEDULE 2.19, the Company
is not in material default thereunder. Except as set forth in SCHEDULE 2.19,
there are no Claims, controversies, labor disturbances, or investigations
pending, or to the Knowledge of the Company and the Controlling Shareholder,
threatened, by any governmental agency or by employees of the Company or any
party or parties representing any of such employees against the Company before
any court, arbitrator or other tribunal. To the Knowledge of the Company and
the Controlling Shareholder, there are no organizational efforts presently being
made or threatened by or on behalf of any labor union with respect to the
employees of the Company nor has there been in the last five (5) years. The
Company has not experienced a work stoppage, strike, lock-out or other labor
disturbance within the past five (5) years, and there is no work stoppage,
strike, lock-out or other labor disturbance presently occurring, or, to the
Knowledge of the Company and the Controlling Shareholder, threatened. The
Company has complied in all material respects with all applicable Legal
Requirements relating to its employees, the employment of labor, and the safety
and health of employees, including, without limitation, all applicable Legal
Requirements relating to occupational health and safety, discrimination,
unemployment, wages, hours, the Family and Medical Leave Act, collective
bargaining, and the collection and payment of withholding taxes and similar
taxes in respect of the business of the Company. Except as set forth in
SCHEDULE 2.19, there are no unfair labor practice charges, charges of
discrimination, or other complaints pending against the Company involving
employees now or previously employed by the Company.
2.20 CUSTOMERS AND VENDORS. SCHEDULE 2.20 hereto is a correct and
current list of the 20 largest customers and the 10 largest vendors of the
Company during the 12-month period ended December 31, 1997, with the amount of
sales made to each such customer or by each such vendor, as the case may be,
during such period as reasonably ascertained from readily available information,
such amounts being estimated in good faith as being within five percent (5%) of
the actual sales made to or by such customer or vendor, as the case may be.
Except as set forth on SCHEDULE 2.20, the Company does not have any information
indicating that any of such customers or such vendors intends to cease doing
business with the Company or materially alter the amount of the business that it
conducts with the Company from the amount of business such customers or such
vendors conducted with the Company during the last fiscal year.
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2.21 OTHER DISCLOSURES. In addition to the other disclosures required
hereby, the following documents and information pertaining to the Company have
been made available to the Purchaser:
(a) true, correct and complete copies of each policy of insurance
maintained by the Company, together with information on premiums, coverage,
insurers, expiration dates and deductibles;
(b) the location and name of each bank or other financial
institution in which the Company has an account or line of credit, and the
identity of each such account or line of credit, and each bank in which the
Company has a safe deposit box, together with the names of all persons
authorized to draw upon or have access thereto;
(c) SCHEDULE 2.21(c) lists each corporate or trade name under which
the Company or its predecessors, if any, has conducted business and the state
and county in which any Real Property or personal property of the Company is
located or has been located.
(d) SCHEDULE 2.21(d) lists each power-of-attorney given by or on
behalf of the Company.
2.22 PARACHUTE PAYMENTS. Any bonuses or other compensation or amounts
paid or payable by the Company, including amounts payable as a result of the
transaction contemplated by this Agreement, have not resulted in and will not
result in payments to "Disqualified Individuals" (as defined in Section 280G(c)
of the Code) of the Company which, individually or in the aggregate, will
constitute "excess parachute payments" (as defined in Section 280G(b) of the
Code) resulting in the imposition of the excise tax under Section 4999 of the
Code or the disallowance of deductions under Section 280G of the Code.
2.23 PRODUCT WARRANTY AND LIABILITY. All finished goods inventories
manufactured by the Company in the operation of the Business (the "Products")
have been in material conformity with all applicable contractual commitments and
all express or implied warranties (including warranties imposed by the
application of law) and, to the Knowledge of the Company and the Controlling
Shareholder, no material liability exists or will arise for replacement or
damage in connection with such sales or deliveries, except as are adequately
reserved for on the Financial Statements. No Products heretofore sold by the
Company are now subject to any guaranty, warranty, claim for product liability
or patent or other indemnity, other than those sold in accordance with the
standard terms and conditions of sale of the Business, true and complete copies
of which have been made available to the Purchaser.
2.24 ACCURACY. The representations and warranties made by the Company
and the Shareholders to Purchaser set forth in this Agreement, the Disclosure
Schedules to this Agreement, including any Updated Disclosure Schedule (as
defined below) delivered to Purchaser prior to Closing, and the Related
Agreements delivered and to be delivered pursuant to or in connection with this
Agreement, do not include an untrue statement of material fact or omit to
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state any material fact necessary to make them, when taken together and in light
of the circumstances in which they were or are made, not misleading in any
material respect.
2.25 BROKERS AND FINDERS. Except as set forth in SCHEDULE 2.25, no person
or entity is entitled to any brokerage commission, finder's fee or like payment
in connection with the transactions contemplated in this Agreement.
ARTICLE 3
ADDITIONAL REPRESENTATIONS AND WARRANTIES OF CONTROLLING SHAREHOLDERS
Each Controlling Shareholder represents and warrants to Purchaser as
follows:
3.1 OWNERSHIP OF SHARES. Such Controlling Shareholder is now, and
immediately prior to the Closing, such Controlling Shareholder will be, the
owner of the Shares of the Company as set forth opposite the name of such
Shareholder on SCHEDULE 2.2.
3.2 AUTHORIZATION. Such Controlling Shareholder has full right and
power to execute and deliver this Agreement and perform his obligations
hereunder. This Agreement and all other documents and instruments executed or to
be executed by such Controlling Shareholder pursuant to this Agreement have
been, or will have been, duly executed and delivered by such Controlling
Shareholder.
3.3 ENFORCEABILITY. This Agreement constitutes the valid and legally
binding obligation of such Controlling Shareholder, enforceable in accordance
with its terms, except as such enforceability may be limited by equitable
principles and by applicable bankruptcy, insolvency, reorganization,
arrangement, moratorium or similar laws relating to or affecting the rights of
creditors generally.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PURCHASER AND PARENT
Parent and Purchaser, jointly and severally, represent and warrant to
Shareholders and the Company as follows:
4.1 ORGANIZATION AND STANDING OF PURCHASER. Parent is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Colorado. Purchaser is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware. Parent and
Purchaser have all requisite corporate power and authority to enter into this
Agreement, to carry out the transactions contemplated hereby and to perform
their obligations hereunder. Parent owns all of the outstanding capital stock
of Purchaser.
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4.2 AUTHORIZATION. The execution and delivery of this Agreement, and
all other agreements, documents and instruments executed or to be executed by
the Purchaser and Parent in connection herewith (the "Purchaser Related
Agreements"), and the consummation of the transactions contemplated hereby and
thereby, have been duly authorized by all necessary corporate and other action
on the part of Parent and Purchaser. This Agreement, and the Purchaser Related
Agreements have been, or will have been, at the time of their respective
executions and deliveries, duly executed and delivered by a duly authorized
officer of Parent and Purchaser.
4.3 ENFORCEABILITY. This Agreement constitutes, and each of the
Purchaser Related Agreements when duly executed and delivered will constitute,
the valid and legally binding joint and several obligations of Parent and
Purchaser, enforceable against Parent and Purchaser, jointly and severally, in
accordance with its terms, except as such enforceability may be limited by
equitable principles and by applicable bankruptcy, insolvency, reorganization,
arrangement, moratorium or similar laws relating to or affecting the rights of
creditors generally.
4.4 COMPLIANCE WITH OTHER INSTRUMENTS AND LAWS. The execution and
delivery of this Agreement, and the Purchaser Related Agreements, and the
consummation of the transactions contemplated hereby and thereby, will not
conflict with or result in any violation or default under any provision of the
Certificate of Incorporation or Bylaws of Parent or Purchaser, or of any
material mortgage, indenture, trust, lease, agreement or other instrument,
permit, concession, grant, franchise, license, judgment, order, decree, statute,
law, ordinance, rule or regulation applicable to Parent or Purchaser or any of
their respective properties, the result of which (either individually or in the
aggregate) will prevent or materially delay the consummation of the transactions
contemplated hereby.
4.5 GOVERNMENTAL AUTHORIZATIONS, CONSENTS. No consents, licenses,
approvals or authorizations of, and registrations or declarations with, any
governmental authority, bureau, agency or commission, or any third party, are
required to be obtained or made by Parent or Purchaser in connection with the
execution, delivery, performance, validity and enforceability of this Agreement
or the Purchaser Related Agreements or the Merger contemplated hereby.
4.6 MW COMMON STOCK. The MW Common Stock when issued will have been
duly authorized, validly issued, fully paid and nonassessable, and the record
date of issuance on the Parent's (and its transfer agent's) books shall be the
Closing Date, and each share of MW Common Stock issued to Shareholders hereunder
shall be free and clear of any lien, pledge, charge, adverse claim, security
interest, restriction, encumbrance (including any imposed by law in any
jurisdiction), title retention agreement, option or right to purchase of any
kind.
4.7 LITIGATION. No action, suit, proceeding or governmental
investigation is pending or, to the best of Parent's and Purchaser's knowledge,
threatened, at law or in equity, which seeks to question, delay or prevent the
consummation of all or any portion of the transactions contemplated hereby.
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4.8 SECURITIES ACT OF 1933. Purchaser is an "accredited investor" as
defined under Rule 501 of Regulation D under the Securities Act of 1933, as
amended
4.9 BROKERS AND FINDERS. No person or entity is entitled to any
brokerage commission, finder's fee or like payment from Parent or Purchaser in
connection with the transactions contemplated in this Agreement.
4.10 PURCHASER'S KNOWLEDGE. No officer or director of Parent or
Purchaser has actual knowledge, as of the date hereof, of any state of facts
which, in the judgment of Parent or Purchaser, will give rise to a Shareholder
Indemnified Obligation or a Purchaser Indemnified Obligation, except for such
matters as have been previously disclosed in writing to the Shareholders, the
Company or their representatives.
4.11 SEC DOCUMENTS. Parent has timely filed all required reports,
schedules, forms, statements, exhibits and other documents with the SEC since
December 31, 1996 (the "SEC Documents") and is qualified, and has obtained or
will obtain, without delay to the registration process, all appropriate waivers
necessary to allow Parent to register the MW Common Stock on SEC Form S-3. As
of their respective dates, the SEC Documents complied in all material respects
with the requirements of the Securities Act and the Exchange Act, as the case
may be, and the rules and regulations of the SEC promulgated thereunder
applicable to such SEC Documents, and none of the SEC Documents contained any
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading. The
consolidated financial statements of Parent and its subsidiaries included in the
SEC Documents comply as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto, have been prepared in accordance with GAAP (except, in the case
of unaudited financial statements, as permitted by SEC Form 10-Q) applied on a
consistent basis during the period involved (except as may be indicated in the
notes thereto) and fairly present the financial position of Parent and its
subsidiaries as of the date thereof and their statements of operations, changes
in shareholders' equity and cash flows for the periods then ended (subject, in
the case of unaudited statements, to normal year-end audit adjustments). Except
as set forth in the SEC Documents, neither Parent nor any of its subsidiaries
has any liabilities or obligations of any nature (whether accrued, absolute,
contingent or otherwise) required by GAAP to be set forth on a consolidated
balance sheet of Parent and its subsidiaries or in the notes thereto, other than
liabilities and obligations incurred in the ordinary course of business
consistent with past practice since the date of its last filed
Form 10-K or 10-Q.
4.12 ACCURACY. The representations and warranties made by the Parent and
Purchaser to Company and Shareholders set forth in this Agreement and the
Purchaser Related Agreements, instruments and documents delivered and to be
delivered pursuant to or in connection with this Agreement do not include an
untrue statement of material fact or omit to state any material fact necessary
to make them, when taken together and in light of the circumstances in which
they were or are made, not misleading in any material respect.
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4.13 INVESTIGATION. Parent and Purchaser have conducted inspections of
the properties and financial and other records of the Company and other due
diligence with respect to the Company. Parent and Purchaser have had an
opportunity to ask questions of the Company and the Controlling Shareholder
relating to the Company and management and financial affairs of the Company,
which questions have been answered to Parent and Purchaser's satisfaction, and
to examine all books and records of the Company. Parent and Purchaser
acknowledge that they have made their own independent investigation,
examination, analysis and evaluation of the Company including, without
limitation, Parent and Purchaser's own estimate of the value of the Company's
business.
ARTICLE 5
COVENANTS OF THE COMPANY AND THE CONTROLLING SHAREHOLDERS
5.1 CONDUCT OF BUSINESS. The Company agrees that, between the date of
this Agreement and the Closing Date, except as contemplated by this Agreement or
referred to in a Disclosure Schedule, and except as may be necessary to carry
out the transactions contemplated by this Agreement, the Company without
Purchaser's written consent (which consent will not be unreasonably withheld or
delayed) or as requested by Purchaser, did not or will not:
(a) amend its Articles of Incorporation or Bylaws;
(b) make any material change in its practices, operations or
policies with respect to the selling of goods or services, collecting accounts
receivable and/or paying accounts payable except in the ordinary course of
business;
(c) conduct its business in a manner that materially departs from
the manner in which such business was being conducted prior to the date of this
Agreement;
(d) except as set forth in SCHEDULE 2.8 increase the rate or change
the form of compensation payable to any director, officer or employee of the
Company or increase any employee benefits, except in the ordinary course of
business in accordance with past practice in an amount not to exceed 3% in any
one case or the payment of bonuses in an aggregate amount of $25,000;
(e) purchase or dispose of any properties or other assets, except
in the ordinary course of business or as set forth in SCHEDULE 1.7;
(f) declare, set aside, pay or make any dividend or other
distribution in respect of any outstanding shares of the Company's capital stock
other than distributions to Shareholders to pay income taxes and distributions
to Shareholders charged against their respective Accumulated Adjustments
Account, if applicable;
(g) issue or sell any shares of the Company's capital stock
(whether or not from the treasury) or any other securities; grant any options,
convertibility rights, rights to
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subscribe for shares of capital stock or securities convertible into or
exchangeable for shares of capital stock, warrants, calls or other agreements
relating to the Company's capital stock; split up, combine, reclassify, redeem,
repurchase or otherwise reacquire any of the Company's capital stock, or
otherwise change its capitalization;
(h) except as required by regulation or generally accepted
accounting principles, maintain its books of account other than in the usual,
regular and ordinary manner in accordance with generally accepted accounting
principles and on a basis consistent with prior periods, make any change in any
of its books, accounting methods or practices, or reclassify any assets or
liabilities;
(i) cancel, terminate, renew or amend any Material Contract or
enter into any contract, agreement, lease, license or commitment which would be
a Material Contract if such had existed on the date hereof, except in the
ordinary course of business;
(j) merge or consolidate with or into any other person or entity or
sell or dispose of all or substantially all of the Company's assets to any
person or entity, or initiate or participate in negotiations with any person or
entity with respect to any of the foregoing;
(k) invest in certificates of deposit in any one bank if such
investment in the aggregate exceeds $100,000 at any time;
(l) incur any direct or contingent liability for borrowed money or
guarantee the monetary obligations of any other person or entity, other than
indebtedness to be included in the Debt, or make any monetary investment in,
advance to or loan to any person or entity other than in the ordinary course of
business;
(m) fail to make maintenance expenditures and maintain inventories
in the amounts and at the times required to operate its business in the ordinary
course consistent with past practice;
(n) implement or adopt any change in its tax methods, principles or
elections;
(o) fail to pay accounts payable or collect accounts receivable in
accordance with past practices;
(p) enter into any transaction outside the ordinary course of
business; or
(q) agree or commit to do any of the foregoing.
Nothing contained in this Section 5.1 or elsewhere in this Agreement shall
be deemed in any way as prohibiting the Company from using cash, cash
equivalents or other current assets to reduce or pay off Debt prior to Closing.
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5.2 ACCESS. The Company agrees that, between the date of this Agreement
and the Closing Date, the Company shall, after receiving reasonable advance
notice from Purchaser, give Parent, Purchaser and their Associates (as defined
in Section 6.1) reasonable access (during normal business hours) to the books,
records, contracts and offices of the Company for the purpose of enabling such
parties to further investigate and inspect the business, operations and
financial and legal affairs of the Company.
5.3 NO SOLICITATION OR NEGOTIATION. The Company and Controlling
Shareholder agree that between the date of this Agreement and the earlier of the
Closing Date or the date this Agreement otherwise terminates, they will not, nor
will they permit any officer, director, Shareholder or agent of Shareholders the
Company to, (i) solicit any proposal or offer from any person or entity (other
than Purchaser) relating to the sale of the Company, its capital stock or any
material portion of its assets, (ii) provide any non-public information to any
person or entity (other than Purchaser) for use in preparing any proposal or
offer relating to the sale of the Company or its capital stock or any material
portion of its assets, or (iii) respond to or enter into any negotiations
regarding any proposal or offer from any person or entity (other than Purchaser)
with respect to the foregoing.
5.4 FILINGS AND CONSENTS. Where required by applicable law, the Company
and the Controlling Shareholder shall use commercially reasonable efforts to do
each of the following:
(a) as soon as practicable after the date of this Agreement, file
with the appropriate governmental authority any notification form required to be
filed by the Company under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR Act") with respect to this Agreement and the
transactions contemplated hereby, together with a request for early termination
of the applicable waiting period;
(b) after consultation with Purchaser, make any additional filing
required to be made by the Company under the HSR Act and promptly furnish to the
appropriate governmental authority such additional information as may be
requested under the HSR Act;
(c) make or give each filing or notice required to be made or given
pursuant to any applicable Legal Requirement, Material Contract or Permit by the
Company or Shareholders in connection with the execution and delivery of any of
this Agreement or in connection with the consummation or performance of any of
the transactions contemplated hereby; and
(d) obtain an agreement from each Creditor to terminate its lien
and lien filings upon payment of the amounts specified in such Creditor's
respective Payoff Letter to the extent that Purchaser decides to pay off a Debt
at Closing and each consent required to be obtained pursuant to any applicable
Legal Requirement, Permit or Material Contract by the Company or Shareholders in
connection with the execution and delivery of any of this Agreement or in
connection with the consummation or performance of the transactions contemplated
hereby. Except as to liens related to Leased Property to be acquired by
Purchaser pursuant to Section 7.5, Company shall pay all reasonable costs of
obtaining such releases and consents which costs shall be a Company Expense.
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5.5 UPDATED DISCLOSURE SCHEDULES. Between the date of this Agreement
and the Closing Date, if any Controlling Shareholder or the Company becomes
aware of any fact or condition that causes any of the representations and
warranties in this Agreement to become untrue, misleading, or inaccurate in any
material respect, such party will promptly deliver to Purchaser an updated
Disclosure Schedule ("Updated Disclosure Schedule") setting forth the facts or
conditions that cause such representation, warranty, or Disclosure Schedule to
become untrue, misleading, or inaccurate.
ARTICLE 6
COVENANTS OF PARENT AND PURCHASER
Parent and Purchaser each agree with the Company that:
6.1 CONFIDENTIALITY. Parent and Purchaser shall hold in strict
confidence, and cause their respective affiliates, directors, officers,
employees, agents, attorneys, accountants, financing sources and representatives
and those of its affiliates ("Associates") to hold in strict confidence, all
documents and information obtained with respect to the Company ("Confidential
Information"). Neither Parent nor Purchaser shall permit any Confidential
Information to be utilized or to be disclosed or conveyed to any other person or
entity other than their Associates in furtherance of this Agreement. Without
limiting the generality of the foregoing, and except as required by law or as
permitted by Section 7.4, (i) neither Parent nor Purchaser shall disclose to any
person or entity, and shall not permit any of their Associates to disclose to
any person or entity, the existence of this Agreement or any of the terms or
provisions hereof and (ii) except in the ordinary course of business, neither
Parent nor Purchaser shall contact any customers or employees of the Company,
and neither Parent nor Purchaser shall not permit any of their Associates to
contact any customers or employees of the Company, without the prior consent of
an officer of the Company. This Section 6.1 shall terminate if and when the
Closing occurs in accordance with Article 1 of this Agreement, or within three
years of the date of execution of this Agreement, whichever occurs first.
6.2 FILINGS AND CONSENTS. Where required by applicable law, Parent and
Purchaser shall use commercially reasonable efforts to do each of the following:
(a) as soon as practicable after the date of this Agreement, file
with the appropriate governmental authority any notification form required to be
filed by Parent or Purchaser under the HSR Act with respect to this Agreement
and the transactions contemplated hereby, together with a request for early
termination of the applicable waiting period;
(b) after consultation with the Controlling Shareholder, make any
additional filing required to be made by Parent or Purchaser under the HSR Act
and promptly furnish to the appropriate governmental authority such additional
information as may be requested under the HSR Act;
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(c) make or give each other filing or notice required to be made or
given pursuant to any applicable Legal Requirement by Purchaser in connection
with the execution and delivery of this Agreement or in connection with the
consummation or performance of any of the transactions contemplated hereby; and
(d) obtain each consent required to be obtained by Parent or
Purchaser pursuant to any applicable Legal Requirement or material contract to
which Parent or Purchaser is a party or by which either of them is bound in
connection with the execution and delivery of any of this Agreement or in
connection with the consummation or performance of the transactions contemplated
hereby.
6.3 FILING OF FINAL TAX RETURNS. Parent and Purchaser agree to timely
file all final Tax Returns for and on behalf of the Company which are required
to be filed subsequent to the Closing, and to deliver copies thereof to the
Shareholders' Representative promptly after filing the same.
6.4 OFFICER AND DIRECTOR INDEMNIFICATION. Parent and Purchaser agree to
include and maintain provisions in the Certificate of Incorporation and Bylaws
of the Surviving Corporation which provide indemnification for the directors and
officers of the Company immediately prior to the Effective Time to the maximum
extent provided by such documents and applicable corporate law and to indemnify
such directors and officers to the maximum extent provided by applicable
corporate law. In addition, Parent and Purchaser shall include such persons as
additional insureds under Parent's Director and Officer Insurance Policy if they
can do so without substantial additional cost.
6.5 BENEFIT PLANS AND RELATED MATTERS. Except for employees subject to
collective bargaining agreements and subject to the provisions of Parent's
policies and programs, any employee of the Company retained by Purchaser or its
affiliates after the Closing Date (each, a "Transferred Employee") shall be
eligible to participate or eligible for accrual of benefits, vesting and
contributions or accruals to be made or credited following the Closing Date
under each of Parent's employee benefit plans, programs or arrangements
available to all or substantially all of Parent's employees, subject to the
terms upon which such plans allow new participation by Purchaser's employees.
Each Transferred Employee shall be credited with the time-in-service that the
employee accrued with the Company.
ARTICLE 7
COVENANTS OF ALL PARTIES
The parties hereto agree that:
7.1 COMMERCIALLY REASONABLE EFFORTS; FURTHER ASSURANCES. Subject to the
terms and conditions of this Agreement, each party will use commercially
reasonable efforts to take, or cause to be taken, all actions and to do, or
cause to be done, all things necessary or desirable under applicable Legal
Requirements to consummate the transactions contemplated by this
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Agreement. The Company, Controlling Shareholder, Parent and Purchaser each agree
to execute and deliver such other documents, certificates, agreements and other
writings and to take such other actions as may be necessary or desirable in
order to consummate or implement expeditiously the transactions contemplated by
this Agreement.
7.2 POOLING OF INTERESTS. Each of Parent, Purchaser and the Company
shall use its respective commercially reasonable efforts to cause the
transactions contemplated by this Agreement, including the Merger, to be
accounted for as a pooling of interests under Opinion 16 of the Accounting
Principles Board and applicable SEC rules and regulations, and such accounting
treatment to be accepted by each of Parent's and the Company's independent
certified public accountants, respectively, and to be accepted by the SEC, and
each of Parent, Purchaser and the Company and the Controlling Shareholder agree
that they will not knowingly take any action that would cause such accounting
treatment not to be obtained.
7.3 CERTAIN FILINGS, ETC. The Company, Parent and Purchaser shall
cooperate with one another (a) in determining whether any action by or in
respect of, or filing with, any governmental body, agency, official or authority
is required, or any actions, consents, approvals or waivers are required to be
obtained from parties to any material contracts, in connection with the
consummation of the transactions contemplated by this Agreement and (b) in
taking such actions or making any such filings, in furnishing such information
as may be required in connection therewith, and in seeking timely to obtain any
such actions, consents, approvals or waivers.
7.4 PUBLIC ANNOUNCEMENTS. The parties agree not to issue any press
release or make any public statement with respect to this Agreement or the
transactions contemplated hereby prior to the Closing without the prior consent
of Purchaser and Company (which consent shall not be unreasonably withheld or
delayed), except to the extent that any party hereto is required by law to make
any such disclosure and such party notifies the other parties hereto a
reasonable time before making such disclosure of the nature and content of the
intended disclosure, and consults with such other parties regarding the nature
and content of such disclosure.
7.5 REAL ESTATE. The parties agree to negotiate, execute and deliver
prior to Closing, mutually acceptable purchase and sale contracts (the "Real
Estate Documents") for the purchase of Leased Property currently occupied by the
Company and which is owned directly or indirectly by Related Parties of the
Company and which must be acquired by the Purchaser as part of the acquisition
of the Company in order for the transactions described herein to be accounted
for as a pooling of interests. Notwithstanding the form of the transaction
pursuant to which the Leased Property is to be so acquired, the Real Estate
Documents shall contain (a) terms and conditions which are essential to
effectuate such transfer in a form acceptable to Purchaser and (b) provisions
similar to those set forth in Sections 1.1(f) and 1.10 hereof relating to the MW
Common Stock delivered in connection therewith. The Real Estate Documents shall
provide for a purchase price of the greater of nine times current annual rentals
or fair market value of the Leased Property. The purchase price shall be net of
any mortgages assumed by Purchaser. The purchase price and the amount of any
pre-payment penalties incurred by the sellers of the Leased Property (the
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"Sellers") for pre-paying any mortgages shall be paid by Purchaser to the
Sellers in MW Common Stock based on the MW Common Valuation.
ARTICLE 8
CONDITIONS TO OBLIGATION OF PURCHASER TO CLOSE
The obligation of Purchaser to consummate the Merger, pay the Merger
Consideration, discharge the Debt, and otherwise consummate the transactions
contemplated hereunder is subject to the satisfaction as of the Closing Date, of
the following conditions (any of which may be waived by Purchasers in whole or
in part):
8.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES. The representations,
warranties and covenants set forth in Articles 2 and 3 and Section 5.1, without
giving effect to any Updated Disclosure Schedule delivered to Purchaser after
the date hereof, do not contain any misrepresentation or breach of warranty
which is likely to cause a Material Adverse Effect as of the date of this
Agreement and as of the Closing Date, with the same effect as though made on and
as of the Closing Date, except to the extent that (a) any of such
representations and warranties refers specifically to a date other than the
Closing Date or (b) the accuracy of any of such representations and warranties
is affected by any of the transactions contemplated by this Agreement.
8.2 SHAREHOLDER APPROVAL. Approval of this Agreement and the
transactions contemplated hereby shall have been validly obtained by the
requisite vote of the shareholders of the Company under applicable law.
8.3 PERFORMANCE. Shareholders and the Company having performed, in all
material respects, all obligations required by this Agreement to be performed by
Shareholders and the Company on or before the Closing Date including without
limitation the covenants set forth in Article 5.
8.4 CERTIFICATE. Purchaser having received from a duly authorized
officer of the Company a certificate dated the Closing Date confirming that the
conditions in Section 8.1 and 8.2 have been met and confirming, to the best of
such persons' knowledge, that the condition of Section 8.3 has been met.
8.5 DEBT CERTIFICATES AND PAYOFF LETTERS. Purchaser having received the
Debt Certificate and the Payoff Letters.
8.6 NO INJUNCTION. There not being in effect, at the Closing, any
injunction or other binding order of any court or other tribunal having
jurisdiction over Purchaser that prohibits the consummation of the transactions
contemplated in this Agreement.
8.7 NO MATERIAL ADVERSE EFFECT. There having been no Material Adverse
Effect on the Company since June 30, 1997.
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8.8 CONSENTS. All required consents, licenses, approvals, estoppel
certificates, releases of Encumbrances, acknowledgments of payment in full and
authorizations, as set forth on SCHEDULE 2.5, having been obtained and delivered
to Purchaser.
8.9 SHAREHOLDER REPRESENTATION AND AFFILIATE LETTER. Shareholders
having executed letters in the form of EXHIBIT C.
8.10 LEGAL OPINIONS. Purchaser having received from counsel to the
Company an opinion in substantially the form of EXHIBIT D attached hereto.
8.11 CERTIFICATE OF SECRETARY. The Company having delivered a
certificate, signed by the secretary of the Company, certifying (i) current
copies, as amended, of the Articles of Incorporation and Bylaws of the Company
and (ii) the resolutions of the board of directors and the shareholders of the
Company authorizing this Agreement and the transactions contemplated hereby.
8.12 ESCROW AGREEMENTS. Shareholders, the Company, and the Escrow Agent
(as defined in the Escrow Agreement) having executed and delivered the Escrow
Agreement.
8.13 NON-COMPETE AGREEMENT. The Controlling Shareholder having executed
a non-compete agreement in the form attached as EXHIBIT E providing for a
covenant not to compete of five years from the date of Closing and three years
from the date of such Shareholder's termination of employment with Purchaser or
one of its Affiliates, whichever is later.
8.14 UCC-3S. The Company having delivered UCC-3 Termination Statements
for all the secured Debt to be paid off at Closing, or a Payoff Letter from the
holder thereof agreeing to deliver the same after receipt of immediately
available funds sufficient to pay off in full the secured Debt.
8.15 HSR ACT. All applicable waiting periods under the HSR Act relating
to transactions contemplated hereby having expired or been terminated.
8.16 ACCOUNTING, TAX MATTERS. Purchaser is not aware of any fact or
circumstance that would (i) prevent the transactions contemplated hereby from
qualifying as a tax-free reorganization under the Code, or (ii) prevent the
transaction from qualifying for the pooling of interests method of accounting.
8.17 LEASED PROPERTY PURCHASE. The Real Estate Documents shall have been
executed and delivered by the Purchaser and the Sellers and the conditions to
purchase of Leased Property shall have been satisfied.
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8.18 NO DISCOVERY. Purchaser not being informed of or otherwise having
discovered any matter or matters which would constitute a Purchaser Indemnified
Obligation or which would represent a Material Adverse Effect on the Company.
8.19 DOCUMENTATION. All agreements, documents and instruments incidental
to the performance of the transactions contemplated by this Agreement being in a
form and substance reasonably satisfactory to Purchaser and its legal counsel
and Purchaser having received copies of all documents that they may have
reasonably requested in connection with such transactions.
8.20 APPROVAL OF PURCHASER'S BOARD. The Board of Directors of Purchaser
and Parent shall have approved this Agreement and the transactions contemplated
herein.
ARTICLE 9
CONDITIONS TO OBLIGATIONS OF THE COMPANY TO CLOSE
The obligation of the Company to consummate the transactions that are to be
consummated at the Closing is subject to the satisfaction, as of the Closing
Date, of the following conditions (any of which may be waived in whole or in
part by Shareholders):
9.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Parent and Purchaser set forth in Article 4 being accurate in all
material respects (except for the representations and warranties set forth in
Section 4.6, which shall be true and accurate) as of the date of this Agreement
and as of the Closing, as though made on and as of the Closing Date.
9.2 PERFORMANCE. Parent and Purchaser having performed, in all material
respects, all obligations required by this Agreement to be performed by Parent
and Purchaser on or before the Closing Date.
9.3 CERTIFICATE. The Company having received from duly authorized
officers of Purchaser a certificate dated the Closing Date confirming that the
condition in Section 9.1 has been met and confirming, to the best of such
persons' knowledge, that the condition of 9.2 has been met.
9.4 NO INJUNCTION. There not being in effect, at the Closing, any
injunction or other binding order of any court or other tribunal having
jurisdiction over Shareholders or the Company that prohibits the consummation of
the transactions contemplated by this Agreement.
9.5 LEGAL OPINION. The Company having received from counsel to
Purchaser and Parent an opinion in substantially the form of EXHIBIT F attached
hereto.
9.6 TAX OPINION. The Company and Shareholders having received an
opinion of Rothgerber Johnson & Lyons LLP, in form and substance reasonable
satisfactory to the Company, to the effect that the Merger and the issuance of
shares of MW Common Stock in
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connection therewith, as described herein, shall constitute a tax-free
reorganization under Section 368 of the Internal Revenue Code of 1986, as
amended.
9.7 ESCROW AGREEMENTS. Purchaser and the Escrow Agent having executed
and delivered the Escrow Agreement and the Working Capital Escrow Agreement.
9.8 HSR ACT. All applicable waiting periods under the HSR Act relating
to transactions contemplated hereby having expired or been terminated.
9.9 DOCUMENTATION. All agreements, documents and instruments incidental
to Purchaser's and Parent's performance of the transactions contemplated by this
Agreement, being in a form and substance reasonably satisfactory to Shareholders
and their legal counsel.
9.10 MATERIAL ADVERSE EFFECT. There having been no material adverse
effect on Purchaser or Parent since December 31, 1997.
9.11 LEASED PROPERTY PURCHASE. The Real Estate Documents shall have been
executed and delivered by the Purchaser and the Sellers and the conditions to
purchase of Leased Property shall have been satisfied.
ARTICLE 10
TERMINATION OF AGREEMENT
10.1 Right to Terminate Agreement. This Agreement may be terminated
prior to the Closing:
(a) by the mutual agreement of the Company and Purchaser;
(b) by Purchaser at any time after June 30, 1998 if any condition
set forth in Article 8 shall not have been satisfied or waived and Parent or
Purchaser is not in material breach of this Agreement;
(c) by the Company at any time after May 29, 1998 if any condition
set forth in Article 9 shall not have been satisfied or waived and the Company
is not in material breach of this Agreement;
(d) by Purchaser at any time if it determines that any
representation or warranty set forth in Section 2 or Section 3 is inaccurate in
any material respect;
(e) by Purchaser if any Updated Disclosure Schedule delivered to
Purchaser under Section 5.5 causes any representation or warranty set forth in
Section 2 or 3 to be inaccurate in any material respect; or
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(f) by the Company at any time if it determines that any
representation or warranty set forth in Section 4 is inaccurate in any material
respect.
10.2 EFFECT OF TERMINATION. Upon the termination of this Agreement
pursuant to Section 10.1:
(a) Purchaser shall promptly destroy or cause to be returned to the
Company all Confidential Information, including any copies made by or supplied
to Purchaser or any of Purchaser' Associates of any such Confidential
Information;
(b) Each party shall pay its own costs and expenses and no party
hereto shall have any obligation or liability to the other parties hereto;
PROVIDED, HOWEVER that the parties hereto shall remain bound by the provisions
of Sections 6.1 and 7.4 and Article 12.
ARTICLE 11
CERTAIN REMEDIES AND LIMITATIONS
11.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. All
representations and warranties made by the Company and Controlling Shareholder
in this Agreement, in any Schedule or in any certificate delivered pursuant
hereto, shall survive the Closing until May 10, 1999, provided that there shall
be no termination of the obligation to indemnify for a claim involving any such
representation or warranty provided a Claim Notice has been delivered prior to
May 10, 1999. The representations and warranties of any party shall be
unaffected by any investigation made by or on behalf of the other parties or by
knowledge obtained as a result thereof or otherwise. All representations and
warranties made by Parent and the Purchaser as to any fact or condition on or
before the Closing Date, in this Agreement, or in any certificate delivered
pursuant hereto, shall survive the Closing.
11.2 INDEMNIFICATION BY SHAREHOLDERS.
(a) The Purchaser and the Company and their respective Affiliates
and their respective officers, directors, shareholders, agents, representatives,
consultants, employees and affiliates, and all of their respective heirs,
successors and permitted assigns (collectively, the "Purchaser Indemnified
Parties") shall be indemnified and held harmless, jointly and severally by the
Shareholders entitled to receive the Merger Consideration, solely out of the
portion of the Merger Consideration deposited in the Escrow Account, against and
in respect of the net amount (determined after deduction of the amount of any
insurance proceeds recovered and any benefits inuring to the Purchaser as a
result of the timing for income tax purposes of deductions for such losses as
compared to the timing of recoveries under insurance or this Section 11.2):
(i) of any and all liabilities, obligations, losses, damages,
diminutions of value, liens and deficiencies of any kind or nature
("Losses") not accrued or reserved for in the Final Closing Statement which
exist, or which are imposed on, incurred by or asserted against any one or
more of the Purchaser Indemnified Parties,
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(A) based upon, resulting from or arising out of, or as to
which there was, any breach or inaccuracy of any representation,
warranty, statement, certification, agreement or covenant made by
the Company or any Shareholder in this Agreement, any Related
Agreement, any Disclosure Schedule hereto or thereto;
(B) based upon, resulting from or arising out of any claim,
litigation or proceeding brought by any third-party based upon,
resulting from, arising out of or concerning any event, fact or
circumstance, if and to the extent that such event, fact or
circumstance arises out of or relates to the ownership or operation
of the Company prior to Closing;
(C) arising out of the cost of any required remediation
under Environmental Laws of any of the properties now or previously
owned, leased, used, occupied or contaminated by the Company, if
the materials and/or conditions requiring such remediation existed
as of the Closing;
(D) in the nature of Taxes for periods through the Closing
for which the Company is liable to the extent that an appropriate
tax authority has asserted a claim and (i) such Taxes are not
reflected on the Financial Statements and did not arise in the
ordinary course of business after the date thereof, (ii) such Taxes
should have been but were not reflected in any return filed by the
Company prior to the Closing, (iii) such Taxes were required to be
paid prior to the Closing and were not so paid, or (iv) such Taxes
result from the failure by the Company prior to the Closing to
comply with any legal requirements relating to information reporting
or withholding and payment over of taxes with respect to payments
made to third parties;
(E) the amount of any brokerage commission, finder's fee or
like payment in connection with the transactions contemplated in
this Agreement to the extent not included in Company Expenses
included in the calculation of the Merger Consideration;
(ii) of any cost or expenses (including, without limitation,
settlement costs and reasonable attorneys', accountants' and experts' fees
and court costs) incurred by Purchaser Indemnified Parties in connection
with any of the foregoing (including, without limitation, any reasonable
cost or expense incurred by Purchaser Indemnified Parties in enforcing
their rights pursuant to this Section 11.2).
Each of the above is for purposes of this Agreement a "Purchaser
Indemnified Obligation."
(b) Claims for indemnification under Section 11.2(a)(i)(b), (c) or
(d), above, may be made regardless of whether or not the matter giving rise to
such claim would constitute a breach of a representation and warranty made in
this Agreement, any Related Agreement, any
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Disclosure Schedule hereto and thereto or any other written document. No
Purchaser Indemnified Party shall be required to make any claim or demand
against any other person or entity prior to the making of any claim or demand
for indemnification or at any other time. Shareholders agree that,
notwithstanding any other provision of this Agreement, any Related Agreement or
applicable Legal Requirements, Purchaser Indemnified Parties shall offset all
valid claims for indemnification against the Escrow Account in accordance with
the terms of the Escrow Agreement.
11.3 LIMITATIONS ON REPRESENTATIONS, WARRANTIES AND LIABILITIES OF
SHAREHOLDERS.
(a) Notwithstanding anything to the contrary in this Agreement,
Shareholders shall not be liable to the Purchaser Indemnified Parties, except
under the Escrow Agreement as provided therein. The total amount of payments
that the Shareholders may be required to make thereunder shall be limited in the
aggregate to the Escrow Amount, which is the sole source of Purchaser's
indemnification and the Shareholders' cumulative liability shall in no event
exceed the Escrow Amount.
(b) No payment shall be required to be made for Purchaser
Indemnified Obligations unless a Claim Notice (as defined below) with respect
thereto has been delivered to Shareholders on or prior to May 10, 1999.
(c) Notwithstanding anything to the contrary in this Agreement, and
except for "willful," knowing or intentional breaches of the representations and
warranties contained herein, no claim for indemnification may be made by any
Purchaser Indemnified Party unless and until the aggregate amount of Losses
and/or other amounts claimed for indemnification by the Purchaser Indemnified
Parties exceeds $25,000, and then only for the amount by which such Losses and
other amounts claimed exceed $25,000.
11.4 INDEMNIFICATION BY PARENT AND PURCHASER.
(a) Parent and Purchaser will, jointly and severally, indemnify and
hold harmless Shareholders and their respective affiliates, officers, directors,
partners, stockholders, agents, representatives, consultants and employees, and
all of their respective heirs, successors and permitted assigns (collectively,
the "Shareholder Indemnified Parties") from and against the net amount
(determined after deduction of the amount of any insurance proceeds recovered):
(i) of any and all Losses which exist, or which are imposed
on, incurred by or asserted against any one or more of the Shareholder
Indemnified Parties:
(A) based upon, resulting from or arising out of or as to
which there was any breach or inaccuracy of any representation,
warranty, statement, certification, agreement, obligation or
covenant made by Parent or Purchaser in this Agreement, any
Purchaser Related Agreement or in any other written document;
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(B) based upon, resulting from or arising out of any claim,
litigation or proceeding brought by any third party based upon,
resulting from arising out of or concerning any event, fact or
circumstance, if and to the extent that such event, fact or
circumstance arises out of or relates to the ownership or operation
of the Company after the Closing;
(C) arising out of the cost of remediating under
Environmental Laws any of the properties now owned, leased, used,
occupied or contaminated by the Company, if the conditions requiring
such remediation did not exist prior to the Closing;
(D) in the nature of Taxes which arise subsequent to the
Closing;
(E) the amount of any brokerage commission, finder's fee or
like payment in connection with the transactions contemplated in
this Agreement;
(ii) of any cost or expenses (including, without limitation,
settlement costs and reasonable attorneys', accountants' and experts' fees
and court costs) incurred by Shareholder Indemnified Parties in connection
with any of the foregoing (including, without limitation, any reasonable
cost or expense incurred by Shareholder Indemnified Parties in enforcing
their rights pursuant to this Section 11.4).
Each of the above is for purposes of this Agreement a "Shareholder
Indemnified Obligation."
(b) Claims for indemnification under Section 11.4(a)(i)(B), (C) or
(D), above, may be made regardless of whether or not the matter giving rise to
such claim would constitute a breach of a representation and warranty made in
this Agreement, any Related Agreement, any Disclosure Schedule hereto and
thereto or any other written document. No Shareholder Indemnified Party shall
be required to make any claim or demand against any other person or entity prior
to the making of any claim or demand for indemnification or at any other time.
11.5 LIMITATIONS ON LIABILITY OF PURCHASER.
(a) No payment shall be required to be made for Shareholders
Indemnified Obligations unless a Claim Notice with respect thereto has been
delivered to Purchaser on or prior to the third anniversary of the Closing.
(b) Any amounts payable by Purchaser to Shareholders under this
Article 11 shall be payable in MW Common Stock at the MW Common Stock Valuation.
11.6 INDEMNIFICATION CLAIMS.
(a) If either a Purchaser Indemnified Party, on the one hand, or a
Shareholder Indemnified Party, on the other hand, (the "Claimants") wishes to
assert an indemnification claim
46
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hereunder, the Claimant shall deliver to Shareholders, if a Purchaser
Indemnified Party, or to Purchaser, if the Claimant is a Shareholder Indemnified
Party, a written notice (a "Claim Notice") setting forth:
(i) the matter giving rise to the Claim for indemnification,
(ii) a detailed description of all of the facts and
circumstances known to Claimant giving rise to the Claim, and
(iii) a detailed description of, and a reasonable estimate of
the total amount of, the monetary amounts actually incurred or expected to
be incurred for which indemnification is sought.
(b) Purchaser Indemnified Parties and Shareholder Indemnified
Parties are referred to herein as "Indemnified Parties," and the persons from
whom indemnification may be sought pursuant to this Section 11.6 are referred to
as an "Indemnifying Party"). Within twenty (20) days after receipt of any Claim
Notice, the Indemnifying Parties will (i) acknowledge in writing their
responsibility for all or part of such matter for which indemnification is
sought under this Article 11, and will either (x) pay or otherwise satisfy the
portion of such matter as to which responsibility is acknowledged, or (y) take
such other action as is reasonably satisfactory to the Indemnified Party to
provide reasonable security or other assurances for the performance of their
obligations hereunder, and/or (ii) give written notice to the Indemnified Party
of their intention to dispute or contest all or part of such responsibility.
Upon delivery of such notice of intention to contest, the parties will negotiate
in good faith to resolve as promptly as possible any dispute as to
responsibility for, or the amount of, any such matter.
11.7 DEFENSE OF THIRD PARTY ACTIONS. If an Indemnified Party receives
notice or otherwise obtains Knowledge of any Claim or any threatened Claim that
may give rise to an indemnification claim against an Indemnifying Party, then
the Indemnified Party shall promptly deliver to the Indemnifying Party a written
notice describing such Claim in reasonable detail. The untimely delivery of such
written notice by the Indemnified Party to the Indemnifying Party shall relieve
the Indemnifying Party of liability with respect to such Claim to the extent it
has been prejudiced by lack of timely notice under this Article 11 with respect
to such Claim. The Indemnifying Party shall have the right, at its option to
assume the defense of any such Claim with its own counsel, reasonably
satisfactory to the Indemnified Party, provided that Shareholders may not assume
the defense of any Claim unless there are sufficient amounts in the
Indemnification Escrow Amount to fully indemnify Purchaser Indemnified Parties
against the amount of such Claim and all other pending Claims against the Escrow
Amount. If the Indemnifying Party elects to assume the defense of and
indemnification for any such Claim, then:
(a) notwithstanding anything to the contrary contained in this
Agreement, the Indemnifying Party shall not be required to pay or otherwise
indemnify the Indemnified Party against any attorneys' fees or other expenses
incurred on behalf of the Indemnified Party in connection with such matter
following the Indemnifying Party's election to assume the defense of such matter
so long as the Indemnifying Party continues to diligently conduct such defense;
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<PAGE>
(b) the Indemnified Party shall make available to the Indemnifying
Party all books, records and other documents and materials that are under the
direct or indirect control of the Indemnified Party or any of the Indemnified
Party's Associates that the Indemnifying Party considers such necessary or
desirable for the defense of such matter at the expense of the Indemnifying
Party and shall make available to the Indemnifying Party reasonable access to
Indemnified Party's personnel;
(c) the Indemnified Party shall execute such documents and take
such other actions as the Indemnifying Party may reasonably request for the
purpose of facilitating the defense of, or any settlement, compromise or
adjustment relating to, such Claim (with the Indemnifying Party to reimburse
Indemnified Party for third-party, out-of-pocket expenses) and the Indemnified
Party shall not be required to take any such action or execute any document
which imposes any equitable or unindemnified liability remedy on any Indemnified
Party or would adversely affect the business or operations of the Company;
(d) the Indemnified Party shall otherwise fully cooperate as
reasonably requested by the Indemnifying Party in the defense of such Claim
(with the Indemnifying Party to reimburse Indemnified Party for third-party,
out-of-pocket expenses); and
(e) the Indemnified Party shall not admit any liability with
respect to such Claim.
If the Indemnifying Party fails or refuses to assume the defense of and
indemnification for such Claim, then the Indemnified Party shall proceed
diligently to defend such Claim with the assistance of counsel, and the
Indemnifying Party shall thereafter reimburse Indemnified Party on a current
basis, in accordance with the procedures set forth in this Agreement, as
requested by Indemnified Party for all costs and expenses of defense for which
Indemnified Party is entitled to indemnification pursuant to the terms of this
Agreement. No third party Claim may be settled by the Indemnified Party without
notice to, and the written consent of, the Indemnifying Party which consent must
not be unreasonably withheld. If such consent is not given, or written notice
that it is being withheld and the reasons therefor has not been received, by the
Indemnified Party within 15 days after such notice has been received by the
Indemnifying Party, the consent of the Indemnifying Party to such settlement
shall be deemed given.
11.8 SUBROGATION. To the extent that the Indemnifying Party makes or is
required to make any indemnification payment to any Indemnified Party, the
Indemnifying Party shall be entitled to exercise, and shall be subrogated to,
any rights and remedies (including rights of indemnity, rights of contribution
and other rights of recovery) that the Indemnified Party or any of the
Indemnified Party affiliates may have against any other person (other than any
Purchaser Indemnified Party or Shareholders Indemnified Party) with respect to
any Losses, circumstances or matter to which such indemnification payment is
directly or indirectly related. The Indemnified Party shall permit the
Indemnifying Party to use the name of the Indemnified Party and the names of the
Indemnified Party's affiliates in any transaction or in any proceeding or other
matter involving any of such rights or remedies; and the Indemnified Party shall
take such actions as the
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<PAGE>
Indemnifying Party may reasonably request for the purpose of enabling the
Indemnified Party to perfect or exercise the Indemnifying Party's right of
subrogation hereunder.
11.9 EXCLUSIVITY. The right of each party hereto to assert
indemnification claims and receive indemnification payments pursuant to this
Article 11 shall be the sole and exclusive right and remedy exercisable by any
person or entity entitled to indemnification hereunder with respect to any
breach by the other party hereto of any representation or warranty or any other
indemnity obligation hereunder.
11.10 RETENTION OF RECORDS. From and after the date of this Agreement,
Purchaser shall preserve, and shall cause the Company to preserve, all books,
records and other documents, materials and information relevant to the
representations, warranties and covenants set forth in this Agreement until the
later of four (4) years following the Closing Date or for such longer period as
the rights of the parties hereunder may exist. At all times after the Closing
Date, Purchaser and the Company shall give Shareholders and Shareholders'
Associates reasonable access to such books, records and other documents,
materials and information of the Company relating to the operation of the
business of the Company up to and including the Closing Date.
ARTICLE 12
MISCELLANEOUS
12.1 CERTAIN DEFINITIONS. For purposes of this Agreement, a contract,
obligation, liability, transaction, change, breach, encumbrance, proceeding or
other matter or event shall not be deemed "material" if the monetary amount
involved is less than 0.1% of the Merger Consideration. A "Material Adverse
Effect" is a material adverse effect on the business, operations, assets or
financial condition or results of the Company taken as a whole. "Knowledge"
means, with respect to an individual, the actual present Knowledge of such
individual. A Person (other than an individual), including the Company, will be
deemed to have Knowledge of a particular fact or matter if any individual who
serves as an officer or director of such Person has actual present Knowledge of
such fact or matter. "Shareholders' Representative" shall mean Leonard A.
Bernheimer and his successors and/or assigns.
12.2 EXPENSES. The term "Company Expenses" shall mean: (i) all costs and
expenses of the Company in connection with the negotiation of this Agreement and
the consummation of the transactions contemplated hereby including any broker's
fee set forth in SCHEDULE 2.25; (ii) one-half of the Company's costs of all HSR
filings, and any transfer taxes or stamp incurred by the Company in connection
with the transactions contemplated by this Agreement and of Neutral Accountants;
and (iii) all other costs and expenses required to be borne by the Company under
the terms of this Agreement. Company Expenses shall not include costs, expenses
or fees of Shareholders incurred in connection with the Merger or other
transactions contemplated by this Agreement which costs, expenses and fees shall
be paid directly by the Shareholders. The Company shall pay the fees and
expenses of the Company incidental to the preparation of this Agreement, the
performance and compliance with all agreements contained in this Agreement to be
performed or complied with by it and the consummation of the transactions
contemplated hereby, including the legal and accounting fees and expenses.
Purchaser shall be responsible for its fees
49
<PAGE>
and expenses incidental to the preparation of this Agreement, the performance
and compliance with all agreements contained in this Agreement to be performed
or complied with by it and the consummation of the transactions contemplated
hereby, including the legal and accounting fees and expenses and the fees and
expenses associated with any environmental assessment conducted in connection
with this transaction.
12.3 NOTICES; ETC. All notices, instructions and other communications
given hereunder or in connection herewith shall be in writing. Any such notice,
instruction or communication shall be sent either (i) by registered or certified
mail, return receipt requested, postage prepaid, or (ii) via a reputable
nationwide overnight courier service, in each case to the address set forth
below. Any such notice, instruction or communication shall be deemed to have
been delivered three business days after it is sent prepaid, or one business day
after it is sent via a reputable nationwide overnight courier service.
If to Purchaser, to:
Mail-Well, Inc.
23 Inverness Way East
Englewood, CO 80112
Attention: Gerald F. Mahoney, Chairman
Tel: (303) 397-7410
Fax: (303) 397-7400
with a copy to:
Mail-Well, Inc.
23 Inverness Way East
Englewood, CO 80112
Attention: Roger Wertheimer, Vice President, General Counsel
Tel: (303) 397-7440
Fax: (303) 768-7380
If to Company, Controlling Shareholder, or to the Shareholders' Representative:
Leonard A. Bernheimer
73 Old Colony Road
Wellesley, MA 02181
With a copy to:
Gordon R. Penman, Esq.
Brown Rudnick Freed & Gesmer
One Financial Center
Boston, MA 02111
50
<PAGE>
or, in each case, to such other address as may be specified in writing to the
other parties.
Any party may give any notice, instruction or communication in connection
with this Agreement using any other means (including personal delivery, telecopy
or ordinary mail), but no such notice, instruction or communication shall be
deemed to have been delivered unless and until it is actually received by the
party to whom it was sent. Any party may change the address to which notices,
instructions or communications are to be delivered by giving the other parties
to this Agreement notice thereof in the manner set forth in this Section 12.3.
12.4 ASSIGNMENT. Neither the Company nor any Shareholder may assign or
otherwise transfer this Agreement or any of their rights hereunder to any person
or entity, without the prior written consent of Purchaser. Subject to the
foregoing, this Agreement shall inure to the benefit of and be binding upon
Shareholders and their successors, personal representatives, heirs, and
permitted assigns. Notwithstanding the foregoing, this Agreement shall not be
terminated by the death or incapacity of any Shareholder, and if, after the
execution hereof, any Shareholder shall die or become incapacitated, this
Agreement shall be binding upon the successors and assigns of any Shareholder as
if such death or incapacity had not occurred and regardless of notice thereof.
Except as expressly permitted by this Section 12.4, Purchaser shall not
voluntarily or by operation of law assign or otherwise transfer this Agreement
or any of its rights or obligations hereunder except to Parent or any of its
wholly owned subsidiaries, without the prior written consent of Shareholders'
Representative and provided that any permitted assignment or transfer shall not
relieve Purchaser or Parent of any of their joint and several obligations
hereunder. Purchaser may collaterally assign and/or grant a security interest in
its rights under this Agreement and under other closing documents to any
financial institution(s) or their affiliates as required pursuant to any
existing or future financing arrangements with the prior written consent of the
Shareholders' Representative (which consent will not be unreasonably withheld or
delayed).
12.5 ENTIRE AGREEMENT; AMENDMENT; GOVERNING LAW; ETC. This Agreement
(together with the Exhibits and Disclosure Schedules) embodies the entire
agreement and understanding among the parties hereto with respect to the subject
matter hereof. This Agreement may be amended, modified, waived, discharged or
terminated only by (and any consent hereunder shall be effective only if
contained in) an instrument in writing signed by the party against which
enforcement of such amendment, modification, waiver, discharge, termination or
consent is sought. This Agreement shall be construed in accordance with and
governed by the laws of the State of Delaware as it applies to contracts to be
performed entirely with the State of Delaware. No representation or warranty
(either express, implied or otherwise) is being made by any party with respect
to the subject matter hereof other than as expressly set forth herein.
12.6 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which is an original, but all of which shall constitute
one instrument. Facsimile signatures to this Agreement shall be binding upon
the parties.
12.7 THIRD PARTY RIGHTS. The parties do not intend to confer any benefit
hereunder on any person or entity other than the parties hereto, the Indemnified
Parties and their respective successors in interest.
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<PAGE>
12.8 EXHIBITS AND SCHEDULES. Each of the Exhibits and Schedules referred
to herein and attached hereto is an integral part of this Agreement and is
incorporated herein by this reference.
12.9 PRONOUNS. All pronouns and any variations thereof used in this
Agreement shall be deemed to refer to the masculine, feminine or neuter,
singular or plural, as appropriate.
12.10 AUTHORITY AND EXECUTION. Each person executing this Agreement on
behalf of a party hereto represents and warrants that he is duly and validly
authorized to do so on behalf of such party, with full right and authority to
execute this Agreement and to bind such party with respect to all of its
obligations hereunder.
12.11 SEVERABILITY. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction, as to such jurisdiction, shall be
ineffective to the extent of such invalidity or unenforceability, without
rendering invalid or unenforceable the retraining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction.
12.12 TIME OF ESSENCE. Time is of the essence of this Agreement.
12.13 INTERPRETATION. Each party acknowledges that such party, either
directly or through such party's representatives, has participated in the
drafting of this Agreement, and any applicable rule of constructions that
ambiguities are to be resolved against the drafting party should not be applied
in connection with the construction or interpretation of this Agreement.
12.14 ARBITRATION.
(a) Any controversy or claim arising out of or related to this
Agreement, or a breach hereof, is to be settled by arbitration in accordance
with the procedures set forth in SCHEDULE 12.14.
(b) Notices of demand for arbitration must be filed in writing with
the other parties hereto and in accordance with SCHEDULE 12.14. A demand for
arbitration is to be made within a reasonable time after the claim or
controversy has arisen, but in no event later than the date when institution of
legal or equitable proceedings based on such claim or controversy would be
barred by the applicable statute of limitations.
(c) No arbitration hereunder may include, by consolidation, joinder
or any other manner, any Person other than Parent, Purchaser, Company, the
Shareholders, and other Persons substantially involved in a common question of
fact or law whose presence is required if complete relief is to be accorded in
arbitration. No Person other than Parent, Purchaser, Company or the
Shareholders may be included as an original third party or additional third
party to an arbitration whose interest or responsibility is insubstantial.
Consent to arbitration involving an additional Person does not constitute
consent to arbitration of a dispute not described therein or with a
52
<PAGE>
Person not named or described therein. This Section 12.14 is enforceable by
specific performance under applicable law in a court of competent jurisdiction.
(d) The award rendered by the arbitrators, including as to legal
fees in accordance with SCHEDULE 12.14, is final, and judgment may be entered
upon it in accordance with applicable law in any court of competent
jurisdiction.
THIS AGREEMENT CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY BE ENFORCED BY
THE PARTIES.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly caused this Agreement to
be executed as of the date first above written.
PARENT
MAIL-WELL, INC., a Colorado corporation
By:
-----------------------------------------------
Name: Paul V. Reilly
Title: President
PURCHASER
MAIL-WELL I CORPORATION, a Delaware corporation
By:
-----------------------------------------------
Name: Paul V. Reilly
Title: President
THE COMPANY
UNITED LITHOGRAPH, INC.,
a Massachusetts corporation
By:
-----------------------------------------------
Name: Leonard A. Bernheimer
Title: President
CONTROLLING SHAREHOLDER
-------------------------------------------------------
Leonard A. Bernheimer
54
<PAGE>
SCHEDULE 12.14
ARBITRATION PROCEDURES
Purchaser and Shareholders hereto agree that in the event of a dispute
between them relating to or arising out of this Agreement, the involved parties
shall submit such dispute to binding arbitration as provided herein. All
arbitrations would be conducted in Denver, Colorado, or at another location
mutually approved by the parties, pursuant to the Commercial Arbitration Rules
of the American Arbitration Association except as herein may be provided. If
the panel used will consist of three arbitrators, such arbitrators will have
experience in the printing industry and the decision of the arbitrators would be
final and binding on all parties. All arbitration shall be undertaken pursuant
to the Federal Arbitration Act, where applicable, and the decision of the
arbitrators shall be enforceable in any court of competent jurisdiction. All of
the parties shall agree to waive their respective rights to further appeal or
redress in any other court or tribunal except solely for the purpose of
obtaining execution of the decision resulting from the arbitration proceeding.
In any dispute where a party seeks $200,000.00 or more in damages or if the
dispute involves whether the Purchaser or the Company properly determined to
terminate the Agreement or refused to close the transactions contemplated by
this Agreement, three arbitrators shall be employed to arbitrate the dispute.
In the event that the dispute involves less than $200,000.00, there shall be one
arbitrator. In the event of any arbitration or other legal proceeding brought
by any party against another party with regard to any matter arising out of or
related to this Agreement, each party hereby expressly agrees that the final
award decision would also provide for all allocation and division between or
among the parties to the arbitration, on a basis which is just and equitable
under the circumstances, of all costs and expenses of the dispute, including
without limitation court costs and arbitrators', reasonable attorneys',
accountants' and expert witness fees, costs and expenses (including
disbursements) incurred in connection with such proceedings. In resolving all
disputes between the parties, the arbitrators shall apply the substantive law of
the State of Delaware. The arbitrators are directed, by this Agreement, to
conduct the arbitration hearing no later than three months from the service of
the statement of claim and demand for arbitration unless good cause is shown
establishing that the hearing cannot fairly and practically be so convened.
Depositions shall be taken only as deemed appropriate by the arbitrator(s)
and only where good cause is shown. Good cause is agreed to exist with respect
to the depositions of officers and management personnel to the extent Knowledge,
as defined in the Agreement at Section 12.1 therein, is relevant to the issue.
Parties shall be entitled to conduct document discovery by requesting production
of documents. Responses or objections shall be served twenty days after receipt
of a request. The arbitrators shall resolve any discovery disputes of such
preheating conferences as may be needed. All parties shall agree that the
arbitrators and any counsel of record to the proceeding shall have the power or
subpoena process as provided by law.
55
<PAGE>
DEFINITIONS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Parent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Mail-Well. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Purchaser. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Company. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Controlling Shareholder. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
DGCL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
MBCL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Surviving Corporation. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Merger Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Total Shareholder Consideration. . . . . . . . . . . . . . . . . . . . . . . 2
MW Common Stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
MW Common Stock Valuation. . . . . . . . . . . . . . . . . . . . . . . . . . 2
Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Subsidiary Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Dissenting Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Pro Rata Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Certificate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Dissenting Shareholders. . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Debt Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Prepayment Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Creditors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Payoff Letters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Dissenting Shareholders Escrow Amount. . . . . . . . . . . . . . . . . . . . 5
Indemnification Escrow Amount. . . . . . . . . . . . . . . . . . . . . . . . 5
Working Capital Escrow Amount. . . . . . . . . . . . . . . . . . . . . . . . 5
Escrow Amount. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Escrow Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Initial Distribution Amount. . . . . . . . . . . . . . . . . . . . . . . . . 6
Person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Working Capital. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Computation Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Estimated Working Capital Statement. . . . . . . . . . . . . . . . . . . . . 7
GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
</TABLE>
56
<PAGE>
<TABLE>
<S> <C>
Estimated Working Capital. . . . . . . . . . . . . . . . . . . . . . . . . . 7
Final Working Capital Statement. . . . . . . . . . . . . . . . . . . . . . . 8
Final Closing Statement. . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Notice of Working Capital Disagreement . . . . . . . . . . . . . . . . . . . 8
Final Closing Statement. . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Disputed Working Capital Matter. . . . . . . . . . . . . . . . . . . . . . . 8
Neutral Accountant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Final Closing Statement. . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Notice of Inventory Disagreement . . . . . . . . . . . . . . . . . . . . . . 9
Disputed Inventory Matter. . . . . . . . . . . . . . . . . . . . . . . . . . 9
Accounts Receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
Transfer Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
Registration Statement . . . . . . . . . . . . . . . . . . . . . . . . . . .11
Securities Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
Registrable Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
Initial Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . . .11
Registration Statement Period. . . . . . . . . . . . . . . . . . . . . . . .11
SEC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
Exchange Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
Liability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
Registration Document. . . . . . . . . . . . . . . . . . . . . . . . . . . .13
Disclosure Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
Related Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
Voting Debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
Equity Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
Legal Requirement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
Annual Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . .16
Interim Financial Statements . . . . . . . . . . . . . . . . . . . . . . . .16
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
Permitted Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
Real Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19
Leased Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19
Title Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19
Permits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19
ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20
Benefit Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20
Pension Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
Multiemployer Plans. . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
PBGC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
COBRA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
Claim. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22
Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22
Tax. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22
Tax Returns. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23
</TABLE>
57
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Material Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24
Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .26
Hazardous Materials. . . . . . . . . . . . . . . . . . . . . . . . . . . . .26
RCRA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .26
CERCLA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .26
Environmental Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . .26
Intellectual Property. . . . . . . . . . . . . . . . . . . . . . . . . . . .27
Related Parties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27
Affiliate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .28
Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .29
Purchaser Related Agreements . . . . . . . . . . . . . . . . . . . . . . . .31
SEC Documents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .32
HSR Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .35
Updated Disclosure Schedule. . . . . . . . . . . . . . . . . . . . . . . . .36
Associates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .36
Confidential Information . . . . . . . . . . . . . . . . . . . . . . . . . .36
Transferred Employee . . . . . . . . . . . . . . . . . . . . . . . . . . . .37
Real Estate Documents. . . . . . . . . . . . . . . . . . . . . . . . . . . .38
Sellers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .39
Debt Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .39
Purchaser Indemnified Parties. . . . . . . . . . . . . . . . . . . . . . . .43
Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .43
Purchaser Indemnified Obligation . . . . . . . . . . . . . . . . . . . . . .44
Shareholder Indemnified Parties. . . . . . . . . . . . . . . . . . . . . . .45
Shareholder Indemnified Obligation . . . . . . . . . . . . . . . . . . . . .46
Claimants. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .46
Claim Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .47
Indemnified Parties. . . . . . . . . . . . . . . . . . . . . . . . . . . . .47
Indemnifying Party . . . . . . . . . . . . . . . . . . . . . . . . . . . . .47
Material Adverse Effect. . . . . . . . . . . . . . . . . . . . . . . . . . .49
Knowledge. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .49
Shareholders' Representative . . . . . . . . . . . . . . . . . . . . . . . .49
Company Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .49
</TABLE>
58
<PAGE>
ACQUISITION AGREEMENT
AND
PLAN OF MERGER
by and among
MAIL-WELL INC.,
a Colorado corporation,
MAIL-WELL I CORPORATION,
a Delaware corporation,
INDUSTRIAL PRINTING COMPANY
an Ohio corporation
and
Daniel W. Cain
May 19, 1998
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TABLE OF CONTENTS
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ARTICLE 1 -- PRINCIPAL TERMS OF THE MERGER . . . . . . . . . . . . . . . . 1
1.1 Plan of Merger. . . . . . . . . . . . . . . . . . . . . . . 1
1.2 No Further Rights of Transfer . . . . . . . . . . . . . . . 3
1.3 Surviving Corporation . . . . . . . . . . . . . . . . . . . 3
1.4 Dissenting Shareholders . . . . . . . . . . . . . . . . . . 3
1.5 The Closing . . . . . . . . . . . . . . . . . . . . . . . . 4
1.6 Surrender of Certificates . . . . . . . . . . . . . . . . . 6
1.7 Working Capital Settlement. . . . . . . . . . . . . . . . . 7
1.8 Additional Post-Closing Adjustments . . . . . . . . . . . . 9
1.9 Transfer Taxes. . . . . . . . . . . . . . . . . . . . . . . 10
1.10 MW Common Stock . . . . . . . . . . . . . . . . . . . . . . 10
1.11 Investment Letter . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE 2 -- REPRESENTATIONS AND WARRANTIES OF THE COMPANY
AND CONTROLLING SHAREHOLDER . . . . . . . . . . . . . . . . 13
2.1 Organization, Standing, Corporate Authorization, and
Enforceability. . . . . . . . . . . . . . . . . . . . . . 13
2.2 Capitalization. . . . . . . . . . . . . . . . . . . . . . . 14
2.3 Articles of Incorporation and Bylaws; Certain Records . . . 15
2.4 Compliance with Other Instruments and Laws. . . . . . . . . 15
2.5 Governmental Authorizations; Consents . . . . . . . . . . . 15
2.6 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . 15
2.7 Financial Statements; Conduct of the Business; No
Undisclosed Liabilities . . . . . . . . . . . . . . . . . 16
2.8 Absence of Certain Changes or Events. . . . . . . . . . . . 16
2.9 Title to Property, Absence of Liens and Encumbrances. . . . 18
2.10 Full Authority; Compliance with Laws. . . . . . . . . . . . 19
2.11 Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . 19
2.12 Claims. . . . . . . . . . . . . . . . . . . . . . . . . . . 22
2.13 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
2.14 Contracts . . . . . . . . . . . . . . . . . . . . . . . . . 24
2.15 Environmental Quality . . . . . . . . . . . . . . . . . . . 25
2.16 Intellectual Property . . . . . . . . . . . . . . . . . . . 27
2.17 Prepaid Expenses. . . . . . . . . . . . . . . . . . . . . . 27
2.18 Related Party Transactions. . . . . . . . . . . . . . . . . 27
2.19 Labor Matters . . . . . . . . . . . . . . . . . . . . . . . 28
2.20 Customers and Vendors . . . . . . . . . . . . . . . . . . . 28
2.21 Other Disclosures . . . . . . . . . . . . . . . . . . . . . 29
2.22 Parachute Payments. . . . . . . . . . . . . . . . . . . . . 29
2.23 Product Warranty and Liability. . . . . . . . . . . . . . . 29
2.24 Accuracy. . . . . . . . . . . . . . . . . . . . . . . . . . 29
2.25 Brokers and Finders . . . . . . . . . . . . . . . . . . . . 30
</TABLE>
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ARTICLE 3 -- ADDITIONAL REPRESENTATIONS AND WARRANTIES
OF CONTROLLING SHAREHOLDER. . . . . . . . . . . . . . . . . 30
3.1 Ownership of Shares . . . . . . . . . . . . . . . . . . . . 30
3.2 Authorization . . . . . . . . . . . . . . . . . . . . . . . 30
3.3 Enforceability. . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE 4 -- REPRESENTATIONS AND WARRANTIES OF PURCHASER
AND PARENT. . . . . . . . . . . . . . . . . . . . . . . . . 30
4.1 Organization and Standing of Purchaser. . . . . . . . . . . 30
4.2 Authorization . . . . . . . . . . . . . . . . . . . . . . . 31
4.3 Enforceability. . . . . . . . . . . . . . . . . . . . . . . 31
4.4 Compliance with Other Instruments and Laws. . . . . . . . . 31
4.5 Governmental Authorizations, Consents . . . . . . . . . . . 31
4.6 MW Common Stock . . . . . . . . . . . . . . . . . . . . . . 31
4.7 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . 31
4.8 Securities Act of 1933. . . . . . . . . . . . . . . . . . . 32
4.9 Brokers and Finders . . . . . . . . . . . . . . . . . . . . 32
4.10 Purchaser's Knowledge . . . . . . . . . . . . . . . . . . . 32
4.11 SEC Documents . . . . . . . . . . . . . . . . . . . . . . . 32
4.12 Accuracy. . . . . . . . . . . . . . . . . . . . . . . . . . 32
4.13 Investigation . . . . . . . . . . . . . . . . . . . . . . . 33
ARTICLE 5 -- COVENANTS OF THE COMPANY AND THE CONTROLLING
SHAREHOLDER . . . . . . . . . . . . . . . . . . . . . . . . 33
5.1 Conduct of Business . . . . . . . . . . . . . . . . . . . . 33
5.2 Access. . . . . . . . . . . . . . . . . . . . . . . . . . . 35
5.3 No Solicitation or Negotiation. . . . . . . . . . . . . . . 35
5.4 Filings and Consents. . . . . . . . . . . . . . . . . . . . 35
5.5 Updated Disclosure Schedules. . . . . . . . . . . . . . . . 36
ARTICLE 6 -- COVENANTS OF PARENT AND PURCHASER . . . . . . . . . . . . . . 36
6.1 Confidentiality . . . . . . . . . . . . . . . . . . . . . . 36
6.2 Filings and Consents. . . . . . . . . . . . . . . . . . . . 36
6.3 Filing of Final Tax Returns . . . . . . . . . . . . . . . . 37
ARTICLE 7 -- COVENANTS OF ALL PARTIES. . . . . . . . . . . . . . . . . . . 37
7.1 Commercially Reasonable Efforts; Further Assurances . . . . 37
7.2 Pooling of Interests. . . . . . . . . . . . . . . . . . . . 38
7.3 Certain Filings, Etc. . . . . . . . . . . . . . . . . . . . 38
7.4 Public Announcements. . . . . . . . . . . . . . . . . . . . 38
7.5 Real Estate and Equipment . . . . . . . . . . . . . . . . . 38
ARTICLE 8 -- CONDITIONS TO OBLIGATION OF PURCHASER TO CLOSE. . . . . . . . 39
8.1 Accuracy of Representations and Warranties. . . . . . . . . 39
</TABLE>
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8.2 Shareholder Approval. . . . . . . . . . . . . . . . . . . . 39
8.3 Performance . . . . . . . . . . . . . . . . . . . . . . . . 39
8.4 Certificate . . . . . . . . . . . . . . . . . . . . . . . . 39
8.5 Debt Certificates and Payoff Letters. . . . . . . . . . . . 39
8.6 No Injunction . . . . . . . . . . . . . . . . . . . . . . . 39
8.7 No Material Adverse Effect. . . . . . . . . . . . . . . . . 40
8.8 Consents. . . . . . . . . . . . . . . . . . . . . . . . . . 40
8.9 Shareholder Representation and Affiliate Letter . . . . . . 40
8.10 Legal Opinions. . . . . . . . . . . . . . . . . . . . . . . 40
8.11 Certificate of Secretary. . . . . . . . . . . . . . . . . . 40
8.12 Escrow Agreements . . . . . . . . . . . . . . . . . . . . . 40
8.13 Non-Compete Agreements. . . . . . . . . . . . . . . . . . . 40
8.14 UCC-3s. . . . . . . . . . . . . . . . . . . . . . . . . . . 40
8.15 HSR Act . . . . . . . . . . . . . . . . . . . . . . . . . . 40
8.16 Accounting, Tax Matters . . . . . . . . . . . . . . . . . . 40
8.17 Real Estate and Equipment Purchases . . . . . . . . . . . . 40
8.18 No Discovery. . . . . . . . . . . . . . . . . . . . . . . . 41
8.19 Documentation . . . . . . . . . . . . . . . . . . . . . . . 41
8.20 Approval of Purchaser's Board . . . . . . . . . . . . . . . 41
ARTICLE 9 -- CONDITIONS TO OBLIGATIONS OF THE COMPANY TO CLOSE . . . . . . 41
9.1 Accuracy of Representations and Warranties. . . . . . . . . 41
9.2 Performance . . . . . . . . . . . . . . . . . . . . . . . . 41
9.3 Certificate . . . . . . . . . . . . . . . . . . . . . . . . 41
9.4 No Injunction . . . . . . . . . . . . . . . . . . . . . . . 41
9.5 Legal Opinion . . . . . . . . . . . . . . . . . . . . . . . 41
9.6 Tax Opinion . . . . . . . . . . . . . . . . . . . . . . . . 42
9.7 Escrow Agreements . . . . . . . . . . . . . . . . . . . . . 42
9.8 HSR Act . . . . . . . . . . . . . . . . . . . . . . . . . . 42
9.9 Documentation . . . . . . . . . . . . . . . . . . . . . . . 42
9.10 Material Adverse Effect . . . . . . . . . . . . . . . . . . 42
ARTICLE 10 -- TERMINATION OF AGREEMENT . . . . . . . . . . . . . . . . . . 42
10.1 Right to Terminate Agreement. . . . . . . . . . . . . . . . 42
10.2 Effect of Termination . . . . . . . . . . . . . . . . . . . 43
ARTICLE 11 -- CERTAIN REMEDIES AND LIMITATIONS . . . . . . . . . . . . . . 43
11.1 Survival of Representations, Warranties and Covenants . . . 43
11.2 Indemnification by Shareholders . . . . . . . . . . . . . . 43
11.3 Limitations on Representations, Warranties and Liabilities
of Shareholders . . . . . . . . . . . . . . . . . . . . . . 45
11.4 Indemnification by Parent and Purchaser . . . . . . . . . . 45
11.5 Limitations on Liability of Purchaser . . . . . . . . . . . 47
11.6 Indemnification Claims. . . . . . . . . . . . . . . . . . . 47
11.7 Defense of Third Party Actions. . . . . . . . . . . . . . . 47
</TABLE>
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11.8 Subrogation . . . . . . . . . . . . . . . . . . . . . . . . 49
11.9 Exclusivity . . . . . . . . . . . . . . . . . . . . . . . . 49
11.10 Retention of Records. . . . . . . . . . . . . . . . . . . . 49
ARTICLE 12 -- MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . 49
12.1 Certain Definitions . . . . . . . . . . . . . . . . . . . . 49
12.2 Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . 50
12.3 Notices; Etc. . . . . . . . . . . . . . . . . . . . . . . . 50
12.4 Assignment. . . . . . . . . . . . . . . . . . . . . . . . . 51
12.5 Entire Agreement; Amendment; Governing Law; Etc . . . . . . 52
12.6 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . 52
12.7 Third Party Rights. . . . . . . . . . . . . . . . . . . . . 52
12.8 Exhibits and Schedules. . . . . . . . . . . . . . . . . . . 52
12.9 Pronouns. . . . . . . . . . . . . . . . . . . . . . . . . . 52
12.10 Authority and Execution . . . . . . . . . . . . . . . . . . 52
12.11 Severability. . . . . . . . . . . . . . . . . . . . . . . . 52
12.12 Time of Essence . . . . . . . . . . . . . . . . . . . . . . 52
12.13 Interpretation. . . . . . . . . . . . . . . . . . . . . . . 52
12.14 Arbitration . . . . . . . . . . . . . . . . . . . . . . . . 53
</TABLE>
Exhibit A Certificate of Merger
Exhibit B Escrow Agreement
Exhibit C Affiliate Letter
Exhibit D Legal Opinion of Company's Counsel
Exhibit E Non-Compete Agreement
Exhibit F Legal Opinion of Purchaser's Counsel
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<PAGE>
ACQUISITION AGREEMENT AND PLAN OF MERGER
THIS ACQUISITION AGREEMENT AND PLAN OF MERGER (this "Agreement") is made
and entered into as of May 19, 1998, by and among MAIL-WELL, INC., a Colorado
corporation ("Parent"), MAIL-WELL I CORPORATION, a Delaware corporation
("Mail-Well" or "Purchaser"), and INDUSTRIAL PRINTING COMPANY, an Ohio
corporation, (the "Company") and DANIEL W. CAIN (the "Controlling Shareholder").
WITNESSETH:
WHEREAS the Company is engaged in the commercial printing business (the
"Business");
WHEREAS, the respective Boards of Directors of Parent, Mail-Well, and the
Company have approved the acquisition of the Company by Mail-Well;
WHEREAS, to complete such acquisition the respective Boards of Directors of
Parent, Mail-Well and the Company have approved the merger of the Company with
and into Mail-Well (the "Merger"), pursuant to and subject to the terms and
conditions of this Agreement;
WHEREAS, the Directors of the Company have unanimously determined that the
Merger is fair to and in the best interests of its shareholders (collectively,
the "Shareholders"), approved the Merger and this Agreement and the transactions
contemplated hereby, and recommended the approval of the Merger and approval and
adoption of this Agreement by the Shareholders; and
WHEREAS, the Merger is intended to be accounted for as a pooling of
interests.
NOW, THEREFORE, in consideration of the mutual covenants, representations
and warranties made herein and of the mutual benefits to be derived herefrom,
the Company, Parent and Purchaser hereby agree as follows:
ARTICLE 1
PRINCIPAL TERMS OF THE MERGER
1.1 PLAN OF MERGER. Subject to the terms and conditions of this
Agreement, the Merger will be carried out in the following manner:
(a) The Company, Parent and Purchaser will cooperate and use their
respective best efforts to consummate the transactions contemplated by this
Agreement.
(b) Subject to the provisions of this Agreement, a Certificate of
Merger, substantially in the form of EXHIBIT A, shall be duly executed and, on
the Closing Date (as defined in Section 1.5 hereof), or as soon thereafter as
reasonably practicable, filed with the Delaware Secretary of State in accordance
with the General Corporation Law of the State of Ohio (the "DGCL"). In
addition, Articles of Merger shall be duly prepared, executed and acknowledged
by
<PAGE>
the Company in accordance with the Ohio Revised Code (the "ORC") and shall be
filed on the Closing Date with the Ohio Secretary of State. The Merger shall
become effective at the date and time set forth in the Certificate of Merger and
the Articles of Merger (the "Effective Time").
(c) At the Effective Time, the Company shall merge with and into
Mail-Well, the separate existence of the Company shall cease, and Mail-Well
shall continue as the surviving corporation. (Mail-Well, in its capacity as
the corporation surviving the Merger, is hereinafter sometimes referred to as
the "Surviving Corporation.")
(d) From and after the Effective Time, the Merger shall have the
effects set forth in Section 259 of the DGCL and Section 1701.79 of the ORC.
(e) The "Merger Consideration" which shall be paid by Parent and
Purchaser in the Merger, to be paid to the Shareholders other than Dissenting
Shareholders, shall be equal to (i) $11,812,350 less (ii) the amount of Debt as
defined in Section 1.5; less (iii) the amount of unpaid Company Expenses, as
defined in Section 12.2; plus or minus (iv) the adjustment under Section 1.7(b)
hereof; less (v) the amount, if any, paid by the Surviving Corporation to
Dissenting Shareholders. The Merger Consideration plus the amount, if any, paid
to Dissenting Shareholders by the Surviving Corporation is herein referred to as
the "Total Shareholder Consideration." The Merger Consideration shall be paid
in duly authorized, validly issued, fully paid and nonassessable Parent common
stock ("MW Common Stock") valued at $43.93 per share (the "MW Common Stock
Valuation"), which MW Common Stock shall be issued of record on the Closing Date
on the Parent's (and its transfer agent's books).
(f) In the event of any stock split, combination, reclassification
or stock dividend with respect to MW Common Stock, any change or conversion of
MW Common Stock into other securities or any other dividend or distribution with
respect to MW Common Stock (other than quarterly cash dividends issued in the
ordinary course consistent with past practice), including without limitation,
any distribution by Parent of shares of capital stock of any of its Affiliates
(as defined in Section 2.18), or if a record date with respect to any of the
foregoing should occur, prior to the Effective Time, appropriate adjustments
shall be made to the MW Common Stock Valuation, and thereafter all references in
this Agreement to the MW Common Stock Valuation shall be deemed to be the MW
Common Stock Valuation as so adjusted.
(g) At the Effective Time and subject to the terms of this
Agreement, each share of common stock, no par value per share, of the Company
(the "Common Stock") then issued and outstanding (other than (x) any shares of
Common Stock which are held in the treasury of the Company, or which are held,
directly or indirectly, by Mail-Well or any direct or indirect subsidiary of
Mail-Well, all of which shall be canceled and none of which shall receive any
payment with respect thereto (hereinafter such shares are collectively referred
to as "Subsidiary Shares") and (y) shares of Common Stock held by Dissenting
Shareholders (as defined in Section 1.4 hereof) (hereinafter such shares are
collectively referred to as "Dissenting Shares")) shall, by virtue of the Merger
and without any action on the part of the holder thereof, be converted into and
represent the right to receive a pro rata share of the Merger Consideration
("Pro Rata Share") which shall be equal to the fraction obtained by dividing one
by the total number of shares of
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Common Stock outstanding at the Effective Time (other than the Subsidiary Shares
and Dissenting Shares).
1.2 NO FURTHER RIGHTS OF TRANSFER. At and after the Effective Time,
each holder of a certificate for Common Stock (a "Certificate") shall cease to
have any rights as a Shareholder, except for the right to surrender his or her
Certificate (other than Certificates representing Dissenting Shares or
Subsidiary Shares) in exchange for payment of the Merger Consideration
deliverable in respect thereof, or, in the case of a Dissenting Shareholder, to
perfect his or her right to receive payment for his or her shares pursuant to
applicable law if such holder has validly perfected and not withdrawn his or her
right to receive payment for his or her shares, and no transfer of shares of
Common Stock shall be made on the stock transfer books of the Company.
Certificates presented to the Surviving Corporation after the Effective Time
shall be canceled and exchanged for MW Common Stock and cash as provided in this
Article I. At the close of business on the day of the Effective Time, the stock
ledger of the Company with respect to Common Stock shall be closed.
1.3 SURVIVING CORPORATION. The Certificate of Incorporation of
Mail-Well, as in effect immediately prior to the Effective Time, shall be the
Certificate of Incorporation of the Surviving Corporation. The Bylaws of
Mail-Well, as in effect immediately prior to the Effective Time, shall be the
Bylaws of the Surviving Corporation. At the Effective Time, the directors and
officers of Mail-Well immediately prior to the Effective Time shall be the
directors and officers of the Surviving Corporation, each of such directors to
hold office, subject to the applicable provisions of the Certificate of
Incorporation and Bylaws of the Surviving Corporation, until the next annual
shareholders' meeting of the Surviving Corporation and until their respective
successors shall be duly elected or appointed and qualified.
1.4 DISSENTING SHAREHOLDERS. Notwithstanding anything in this
Agreement to the contrary but only to the extent required by applicable state
law, shares of Common Stock that are issued and outstanding immediately prior to
the Effective Time and are held by holders of Common Stock who comply with all
the provisions of applicable law concerning the right of holders of Common Stock
to dissent from the Merger and require appraisal of their shares of Common Stock
("Dissenting Shareholders") shall not be converted into the right to receive the
Merger Consideration but shall become the right to receive such consideration as
may be determined to be due such Dissenting Shareholder pursuant to the law of
the State of Ohio; provided, however, that (i) if any Dissenting Shareholder
shall subsequently deliver a written withdrawal of his or her demand for
appraisal (with the written approval of the Surviving Corporation, if such
withdrawal is not tendered within 60 days after the Effective Time), or (ii) if
any Dissenting Shareholder fails to establish and perfect his or her entitlement
to appraisal rights as provided by applicable law, or (iii) if within 120 days
of the Effective Time neither any Dissenting Shareholder nor the Surviving
Corporation has filed a petition demanding a determination of the value of all
shares of the Common Stock that are issued and outstanding at the Effective Time
and held by Dissenting Shareholders, then such Dissenting Shareholder or
Shareholders, as the case may be, shall forfeit the right to appraisal of such
shares and each such share shall thereupon be deemed to have been converted into
the right to receive the Merger Consideration, without interest, according to
the terms of this Agreement. The Company shall
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give Purchaser (A) prompt notice of any written demands for appraisal,
withdrawals of demands for appraisal and any other related instruments
received by the Company, and (B) the opportunity to direct all negotiations
and proceedings with respect to demands for appraisal. The Company will not
voluntarily make any payment with respect to any demands for appraisal and
will not, except with the prior written consent of Mail-Well, settle or offer
to settle any such demand.
1.5 THE CLOSING. The closing of the transactions contemplated by this
Article 1 (the "Closing") shall be held at the offices of Rothgerber Johnson &
Lyons LLP in Denver, Colorado at 9:00 a.m. (local time) on May 29, 1998, or at
such other place, time and date as may be jointly designated by Purchaser, the
Company and the Shareholders (the date on which the Closing takes place, the
"Closing Date"). At or before the Closing, each of the following shall occur:
(a) As soon as practicable but no later than four business days
before the scheduled Closing Date, the Company shall deliver to Purchaser (i) a
certificate (the "Debt Certificate") executed by the chief financial officer of
the Company setting forth the amount of the outstanding principal balance and
the interest of any kind, as well as the amount of early retirement or
prepayment fees and/or penalties of any kind (the "Prepayment Fees") that will
be due and payable as of the Closing Date by the Company pursuant to any Debt
that will be outstanding as of the Closing Date to each creditor to whom any
such Debt is owed (the "Creditors") and (ii) a letter (the "Payoff Letters"),
executed by the Company and an authorized representative of each Creditor that
is a bank, leasing company or other financial institution or who is listed in
SCHEDULE 1.5(a) to whom any Debt is owed (other than the Debt set forth on
Schedule 1.5(b)), setting forth the amount of principal, interest and Prepayment
Fees, that will be due and payable by the Company to each of such Creditors as
of the Closing Date and undertaking to terminate, either at or immediately after
the Closing, all liens or other security interests securing such Debt upon
payment of the amounts due and owing. "Debt" shall include all funded long
term, short term or "line of credit" indebtedness, to banks and financial
institutions, Shareholders and other third parties, including the current
portion thereof, accrued interest thereon, and Prepayment Fees, together with
the unamortized principal amount including the current portion, interest expense
required to be accrued thereon and Prepayment Fees of all capitalized lease
obligations that are properly classified as liabilities on the balance sheet of
the Company at Closing in conformity with GAAP, the amounts of which shall be
determined consistent with the Company's audited Financial Statements; provided,
however, that Debt shall not include those prepayment fees for Debt listed on
SCHEDULE 1.5(b) which is not going to be discharged at Closing.
(b) At the Closing, that portion of the Debt owed to each Creditor
executing a Payoff Letter or whose Debt is otherwise acknowledged to Parent's
reasonable satisfaction, except that listed in SCHEDULE 1.5(b), shall be paid by
Purchaser to such Creditor by wire transfer of immediately available funds to an
account or accounts designated by such Creditors and in the amounts specified in
the Payoff Letters or otherwise established with such Creditors.
(c) At the Closing, Purchaser shall pay any unpaid Company
Expenses accrued on the books of the Company by wire transfer of immediately
available funds or by certified bank check.
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(d) The Purchaser shall place in escrow with the Escrow Agent
acting pursuant to the Escrow Agreement (as defined in Section 1.5(g)) (such
amount, together with interest and dividends thereon, additions thereto, and
releases therefrom, as more specifically set forth in such Escrow Agreement, is
referred to herein as the "Dissenting Shareholders Escrow Amount") immediately
available funds representing 100% of the cash value of the Merger Consideration
which would have been due Dissenting Shareholders under Section 1.1 as of the
Closing Date if such Dissenting Shareholders had not exercised their rights of
appraisal and MW Common Stock (based on the MW Common Stock Valuation)
representing 25% of the amount of the Merger Consideration which would have been
due Dissenting Shareholders under Section 1.1 as of the Closing Date. Any
amounts payable by Purchaser as the Surviving Corporation to Dissenting
Shareholders subsequent to the Closing Date shall be first payable out of the
cash portion of the Dissenting Shareholders Escrow Amount. Any amounts paid to
Dissenting Shareholders by Purchaser as the Surviving Corporation in excess of
the cash amount in the Dissenting Shareholder Escrow Amount shall be payable to
Purchaser in MW Common Stock (based on the MW Common Stock Valuation) out of,
first the Dissenting Shareholder Escrow Amount, and then out of, the Escrow
Amount (as defined below) in reduction of such Escrow Amount (as defined below).
Any cash remaining in the Dissenting Shareholders Escrow Amount after the
payment of all amounts due to Dissenting Shareholders shall be exchanged for
shares of MW Common Stock, rounded up to the nearest whole share, having a value
(based on the MW Common Stock Valuation) equal to the value of such cash. Any
amounts remaining in the Dissenting Shareholders Escrow Amount after resolution
of all Dissenting Shareholder claims shall be payable to the Shareholders
surrendering Certificates pursuant to Section 1.6 in MW Common Stock (based on
the MW Common Stock Valuation) at the direction of the Shareholders'
Representative (as defined in Section 12.1).
(e) At the Closing, from the Merger Consideration the Purchaser
shall deliver stock certificates representing 20,167 shares of MW Common
Stock to the Escrow Agent acting pursuant to the Escrow Agreement referred to
below (such amount, together with dividends thereon, additions thereto, and
releases therefrom, as more specifically set forth in such Escrow Agreement,
is referred to herein as the "Indemnification Escrow Amount").
(f) At the Closing, from the Merger Consideration the Purchaser
shall deliver stock certificates representing 1,921 shares of MW Common Stock to
the Escrow Agent acting pursuant to the Escrow Agreement referred to below (such
amount, together with dividends thereon, additions thereto, and releases
therefrom, as more specifically set forth in such Escrow Agreement, is referred
to herein as the "Working Capital Escrow Amount").
(g) The Dissenting Shareholders Escrow Amount, the Working Capital
Escrow Amount and the Indemnification Escrow Amount (collectively, the "Escrow
Amount") shall be held and distributed by such Escrow Agent in accordance with
the terms of the Escrow Agreement, substantially in the form attached hereto as
EXHIBIT B (the "Escrow Agreement"), which shall be entered into by the Escrow
Agent named therein, Purchaser and the Shareholders' Representative prior to or
on the Closing Date.
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1.6 SURRENDER OF CERTIFICATES.
(a) At any time after the Effective Time upon surrender for
cancellation to the Purchaser of the Certificate(s) held by any record holder of
a Certificate, together with a duly executed letter of transmittal in a form
reasonably acceptable to Purchaser, such holder shall be entitled to receive in
exchange for each share of Common Stock represented by such surrendered
Certificate a Pro Rata Share of the Initial Distribution Amount to Shareholders.
The "Initial Distribution Amount" shall be the Total Shareholder Consideration
less the Escrow Amount delivered to the Escrow Agent pursuant to Section 1.5.
Promptly upon termination of each of the escrows pursuant to the terms of this
Agreement, each such Shareholder shall be entitled to receive his, her or its
Pro Rata Share of the particular Escrow Amount distributed to Shareholders. The
amounts so payable to a holder of a Certificate(s) shall be paid with a
certificate for the number of shares of MW Common Stock having a value (based on
the MW Common Stock Value and rounded down to the nearest whole share) equal to
the amount so due plus cash in lieu of fractional shares and in the amount of
any unpaid dividends or other distributions payable on such shares of MW Common
Stock with a record date after the Effective Time. The Certificate(s) so
surrendered shall be canceled. Until so surrendered, each Certificate shall be
deemed, for all corporate purposes, to evidence only the right to receive the
Merger Consideration deliverable in respect thereof to which such Person is
entitled pursuant to this Article 1. A Certificate surrendered will be
registered in the name of the beneficial owner of said Certificate (as set forth
in Schedule 2.2) in the event the voting trust to which such shareholder was a
party is terminated prior to or at Closing.
For purposes of this Agreement, "Person" shall mean and include an
individual, a partnership, a joint venture, a corporation, a trust, an
unincorporated organization, a group and a government or other department or
agency thereof.
(b) If the Merger Consideration (or any portion thereof) is to be
delivered to a Person other than the Person in whose name the Certificates
surrendered in exchange therefor are registered, it shall be a condition to the
payment of the Merger Consideration that the Certificates so surrendered shall
be properly endorsed or accompanied by appropriate stock powers and otherwise in
proper form for transfer, that such transfer otherwise be proper and that the
Person requesting such transfer pay to Mail-Well any transfer or other taxes
payable by reason of the foregoing or establish to the satisfaction of Mail-Well
that such taxes have been paid or are not required to be paid.
(c) In the event any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the Person claiming
such Certificate to be lost, stolen or destroyed, and upon such Person's
agreement to indemnify the Parent and Mail-Well against any claim that may be
made against the Parent or Mail-Well with respect to the Certificate claimed to
have been lost, stolen or destroyed, or, if required by Mail-Well, upon such
Person's obtaining a lost instrument bond in form and amount satisfactory to
Mail-Well, Mail-Well will issue in exchange for such lost, stolen or destroyed
Certificate the Merger Consideration deliverable in respect thereof as
determined in accordance with this Article 1.
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(d) No certificates or scrip representing fractional shares of MW
Common Stock shall be issued upon the surrender for exchange of Certificates
pursuant to this Article 1 or as part of a distribution from the Escrow Amount;
no dividend or other distribution by Parent and no stock split, combination or
reclassification shall relate to any such fractional share; and no such
fractional share shall entitle the record or beneficial owner thereof to vote or
to any other rights of a stockholder of Parent. In lieu of any such fractional
share, each holder of Shares who would otherwise have been entitled thereto upon
the surrender of Certificate(s) for exchange pursuant to this Article 1 will be
paid an amount in cash (without interest) rounded to the nearest whole cent,
determined by multiplying (i) the MW Common Stock Valuation by (ii) the
fractional share to which such holder would otherwise be entitled. Purchaser
shall make available the cash necessary for this purpose at the Effective Time.
1.7 WORKING CAPITAL SETTLEMENT.
(a) Prior to the Closing Date, the Company shall estimate its
working capital position (the "Working Capital") as of the close of business on
the Closing Date (the "Computation Date"). Working Capital shall mean (x) the
sum of (i) the book value of current assets plus (ii) the amount of capital
expenditures listed on Schedule 1.7; less (y) the book value of current
liabilities excluding any amount of Debt or Company Expenses paid by Purchaser
at Closing pursuant to Section 1.5(c). The Company shall provide Purchaser a
copy of the calculation of the estimated Working Capital (the "Estimated Working
Capital Statement") three business days prior to the Closing Date. The book
value of all amounts and the determination of Working Capital shall be
determined in accordance with generally accepted accounting principles,
consistently applied ("GAAP") on a basis consistent with the Company's last
audited Financial Statements..
(b) If the amount of the Working Capital as shown on the
Estimated Working Capital Statement (the "Estimated Working Capital") is
greater than $1,417,000 the Merger Consideration shall be increased by the
difference between the Estimated Working Capital and $1,417,000. If the
amount of the Estimated Working Capital is less than $1,417,000, the Merger
Consideration shall be reduced by the difference between $1,417,000 and the
Estimated Working Capital.
(c) Purchaser shall prepare and deliver to Shareholders a "Final
Working Capital Statement" on or before the thirtieth day following Closing. In
preparing the Final Working Capital Statement, inventory shall be valued at the
lesser of cost or market using FIFO in accordance with GAAP, and shall be based
upon a physical count taken by Shareholders and observed by the Purchaser
(one-half the cost of which shall be a Company Expense) within three business
days prior to the Closing Date. Except as provided in the preceding sentence,
all amounts set forth on the Final Working Capital Statement shall be determined
in accordance with GAAP on a basis consistent with the accounting principles
used in connection with determining the Estimated Working Capital. The Final
Working Capital Statement shall become final and binding on Shareholders and
Purchaser (in such instance, the "Final Closing Statement") unless the
Shareholders' Representative gives written notice to the Purchaser of his
disagreement with respect to any matter contained therein ("Notice of Working
Capital Disagreement") within 10
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days after the receipt thereof. A Notice of Working Capital Disagreement shall
not be permitted unless the aggregate amount in dispute exceeds Ten Thousand
Dollars ($10,000). A Notice of Working Capital Disagreement shall specify in
reasonable detail the nature of any disagreement so asserted. For a period of
30 days after the delivery of the Notice of Working Capital Disagreement, the
Shareholders' Representative and the Purchaser shall attempt to resolve in
writing all of the differences with respect to each matter specified in the
Notice of Working Capital Disagreement, in which case any such resolution of the
Final Working Capital Statement shall be final and binding on the parties (in
such instance, the "Final Closing Statement"). If, at the end of such 30-day
period, the Shareholders' Representative and Purchaser have not resolved in
writing all of the differences with respect to any such matter, then each
unresolved matter ("Disputed Working Capital Matter") shall be submitted to and
reviewed by the accounting firm of Price Waterhouse LLP or, if such firm is
unwilling or unable to act, to another "big six" accounting firm selected by a
panel of three arbitrators in accordance with the rules of the American
Arbitration Association (the "Neutral Accountant"). The Neutral Accountant
shall consider only the Disputed Working Capital Matters and shall act promptly
to resolve in writing all Disputed Working Capital Matters, and its decisions
with respect to the Disputed Working Capital Matters shall be final and binding
on each of the Shareholders and Purchaser; provided that no such resolution of
the Disputed Working Capital Matters shall require payment of an amount greater
than the highest amount or less than the lowest amount suggested for such
resolution by either the Shareholders' Representative or the Purchaser. The
Neutral Accountant shall notify the Shareholders and the Purchaser of its
resolution of the Disputed Working Capital Matters and shall prepare a revised
Working Capital Statement reflecting the resolution of all Disputed Working
Capital Matters promptly after such resolution (in such instance the "Final
Closing Statement") and shall deliver it to Purchaser and Shareholders'
Representative.
(d) Purchaser shall be responsible for and shall pay the fees and
expenses incurred in connection with the Neutral Accountant. Upon payment by
the Purchaser, one-half of such fees of the Neutral Accountant will be a claim
of Purchaser against the Escrow Amount payable first from the Working Capital
Escrow Amount and then from the Indemnification Escrow Amount.
(e) Within 10 days after receipt of the Final Closing Statement:
(i) if the Working Capital as set forth in the Final
Closing Statement is less than the Estimated Working Capital, the Merger
Consideration payable to Shareholders shall be adjusted by the difference
(based on the MW Common Stock Valuation) by the Shareholders'
Representative giving instructions to the Escrow Agent to distribute to
Purchaser the MW Common Stock representing such adjustment, first from the
Working Capital Escrow Amount and, to the extent there is not a sufficient
amount in the Working Capital Escrow Amount, then from the Indemnification
Escrow Amount.
(ii) If the Working Capital as set forth in the Final
Closing Statement is greater than the Estimated Working Capital, Purchaser,
subject to the provisions of Section 1.6(d), shall issue additional MW
Common Stock (based on the MW Common Stock Valuation) as additional Merger
Consideration to each Shareholder surrendering
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Certificate(s) after the Effective Time, the Pro Rata Share of the difference
for each share represented by such Certificate(s).
1.8 ADDITIONAL POST-CLOSING ADJUSTMENTS.
(a) If Purchaser reasonably determines, within 90 days of the
Closing Date, in accordance with GAAP and consistent with the Company's past
practices and historical turnover rates, that the allowance for obsolete or
unsaleable items in the raw materials, work-in-progress and finished goods
inventory, as reflected in the Working Capital included in the Final Closing
Statement, was insufficient based upon facts known at the date of such
subsequent determination, the Purchaser shall provide the Shareholders'
Representative with written notice thereof. The Shareholders' Representative
shall have 10 days after receipt of Purchaser's notice to give written notice to
the Purchaser of his disagreement ("Notice of Inventory Disagreement"). If a
Notice of Inventory Disagreement is issued by Shareholders' Representative, it
shall specify in reasonable detail the nature of any disagreement so asserted.
For a period of 30 days after the delivery of such Notice of Inventory
Disagreement, the Shareholders' Representative and the Purchaser shall attempt
to resolve in writing all of the differences with respect to each matter
specified in the Notice of Inventory Disagreement, in which case any such
resolution of such matters shall be final and binding on the parties. If, at
the end of such 30-day period, the Shareholders' Representative and Purchaser
have not resolved in writing all of the differences with respect to any such
matter, then each unresolved matter ("Disputed Inventory Matter") shall be
submitted to and reviewed by the Neutral Accountant. The Neutral Accountant
shall consider only the Disputed Inventory Matters and shall act promptly to
resolve in writing all Disputed Inventory Matters, and its decisions with
respect to the Disputed Inventory Matters shall be final and binding on each of
the Shareholders and Purchaser; provided that no such resolution of the Disputed
Inventory Matters shall require payment of an amount greater than the highest
amount or less than the lowest amount suggested for such resolution by either
the Shareholders' Representative or the Purchaser. The Neutral Accountant shall
notify the Shareholders and the Purchaser of its resolution of the Disputed
Inventory Matters and shall deliver written confirmation of same to Purchaser
and Shareholders' Representative. If Shareholders' Representative does not
issue a Notice of Inventory Disagreement or upon the resolution of the Disputed
Inventory Matters by the Neutral Accountant, the Purchaser, at Shareholders'
Representative's written instructions, shall sell such obsolete and/or
unsaleable inventory. The Merger Consideration payable to Shareholders shall be
adjusted by the difference (based on the MW Common Stock Valuation) by an amount
equivalent to the additional payment, if any, that would have been payable by
the Shareholders to the Purchaser pursuant 1.7(e)(i) on the basis of the
difference between the allowance for obsolete or unsaleable items as restated
pursuant to this Section 1.8(a) and as originally stated at in the Final Closing
Statement, less the aggregate proceeds from the sale of said obsolete and/or
unsaleable inventory through the Shareholders' Representative giving
instructions to the Escrow Agent to distribute to Purchaser the MW Common Stock
representing such adjustment, first from the Working Capital Escrow Amount and,
to the extent there is not a sufficient amount in the Working Capital Escrow
Amount, then from the Indemnification Escrow Amount.
(b) If the gross amount collected by Purchaser upon the accounts
receivable reflected in the Working Capital included in the Final Closing
Statement ("Accounts Receivable")
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during the 120 days after the Closing Date is less than the book value of such
Accounts Receivable after giving effect to the allowance for doubtful accounts
as reflected on the Final Closing Statement, Shareholders shall pay to
Purchaser, by giving instructions to the Escrow Agent to distribute to Purchaser
MW Common Stock (based on the MW Common Stock Valuation) first from the Working
Capital Escrow Amount and, to the extent there is not a sufficient amount in the
Working Capital Escrow Amount, then from the Indemnification Escrow Amount, on
the basis of the difference between the amount collected and the book value of
such Accounts Receivable after giving effect to the allowance for doubtful
accounts as reflected as originally stated at in the Final Closing Statement;
provided, however, that during the aforementioned 120-day period Purchaser shall
not write off or settle any uncollected Accounts Receivable or retain a
collector to collect any such Accounts Receivable without written consent of
Shareholders' Representative. Subsequent to such 120 days after the Closing
Date, Purchaser shall continue to use reasonable efforts to collect any Accounts
Receivable not collected during the 120 days after the Closing Date, and the net
amounts of such Accounts Receivable collected by Purchaser, after accounting for
third party collection costs, shall be remitted to the Shareholders, other than
Dissenting Shareholders, in MW Common Stock (based on the MW Common Stock
Valuation) after the payment by Shareholders of the amounts due Purchaser under
this Section 1.8(b). On or prior to the 15th day of each month, Purchaser shall
deliver to Shareholders' Representative an Accounts Receivable report
identifying the gross collections made by Purchaser through and including the
end of the preceding calendar month. Any amounts collected by Purchaser shall
be applied against the longest outstanding receivables except as to any
receivable as to which the Person paying such amount has given Purchaser notice
of a dispute.
(c) Upon the later of the 135th day after the Closing Date, or the
10th day after receipt by both Shareholders and Purchaser of the Final Closing
Statement, or the payment by Shareholders to Purchaser of any amount claimed by
Purchaser pursuant to Section 1.7 or this Section 1.8, any remaining Working
Capital Escrow Amount shall be distributed from the Working Capital Escrow
Account to Shareholders surrendering Certificates pursuant to Section 1.6 as
directed by the Shareholders' Representative.
1.9 TRANSFER TAXES. Any transfer taxes or stamp duties, or other
similar taxes, fees, charges or expenses (collectively "Transfer Taxes") imposed
on the Company shall be divided equally between the Purchaser and the Company,
and the total accrued and unpaid amount thereof allocated to the Company shall
be treated as a Company Expense. Any Transfer Taxes imposed on the Shareholders
shall be paid by the Shareholders.
1.10 MW COMMON STOCK.
(a) The MW Common Stock to be delivered to Shareholders will not
be registered under federal or state securities laws, but rather, issued
pursuant to an exemption therefrom. As a result, Shareholders acknowledge and
agree that such MW Common Stock is "restricted" stock as such term is defined
under such securities laws and cannot be sold, pledged or transferred unless
subsequently registered or unless an exemption is available allowing its resale.
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(b) Parent, at its expense, shall file a shelf registration
statement (the "Registration Statement") as soon as reasonably practicable after
the Closing Date, pursuant to Rule 415 under the Securities Act of 1933, as
amended (the "Securities Act") with respect to all the MW Common Stock issued by
Parent in connection with consummating the transactions contemplated by this
Agreement (including, without limitation, those shares deposited in escrow under
the Escrow Agreement) (collectively, "Registrable Shares"). Parent shall use
its best efforts to: (i) have the Registration Statement declared effective on
or before July 15, 1998; and (ii) keep the Registration Statement continuously
effective and to supplement and amend it as required by the Securities Act and
the regulations thereunder from the date the Registration Statement is declared
effective (the "Initial Effective Date") until the earliest to occur of the
following events: (A) such time as Shareholders holding Registrable Shares may
transfer the MW Common Stock pursuant to the safe harbor provisions of Rule 144
under the Securities Act without having to comply with any volume limitations
under such rule; (B) notification to Parent that all Registrable Shares have
been sold for the accounts of the participating Shareholders; or (C) a request
by all participating Shareholders having unsold Registrable Shares that the
Registration Statement be terminated (the period between the Initial Effective
Date and earliest to occur of such events is hereinafter referred to as the
"Registration Statement Period"). If the Registration Statement ceases to be
effective at any time during the Registration Statement Period, Parent, at its
expense, shall within thirty days of such cessation cause to be filed an
additional shelf registration statement covering the unsold balance of the
Registrable Shares and shall use its best efforts to have such registration
statement declared effective as soon as practicable thereafter and keep such
registration statement effective until the end of the Registration Statement
Period.
(c) Parent agrees to furnish each participating Shareholder with
such number of conformed copies of any registration statement and prospectus
included therein (including each preliminary prospectus) covering the
Registrable Shares as each such Shareholder reasonably may request in order to
facilitate the public sale of the Registrable Shares covered by such
registration statement.
(d) All expenses incurred by Parent, Purchaser and the
Shareholders in connection with any registration under this Agreement shall be
paid by Parent and Purchaser, including without limitation all registration and
filing fees, printing expense, fees and disbursements of counsel and independent
public accountants for the Parent and the Purchaser, fees and expenses
(including counsel fees) incurred in connection with complying with state
securities or "blue sky" laws, fees of securities exchanges or the National
Association of Securities Dealers, Inc., fees of transfer agents and registrars,
but excluding any selling commissions and transfer taxes applicable to the sale
of the MW Common Stock and any legal fees and expenses of counsel or other
advisers and agents of the selling Shareholders.
(e) To ensure that the Shareholders are able to benefit from the
Registration Statement and to make available the benefits of certain rules and
regulations of the Securities and
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Exchange Commission ("SEC") that may permit the offer and/or sale of MW Common
Stock to the public without registration by the Shareholders, Parent agrees to:
(i) supplement and amend the Registration Statement in a
timely manner if required by the registration form utilized by the Parent,
or by the instructions applicable to such form or by the Securities Act or
the rules and regulations thereunder or if reasonably requested by a
majority in aggregate amount of the holders of Registrable Shares and to
furnish the Shareholders' Representative with copies of any such amendment
or supplement at least twenty-four hours prior to its being filed with the
SEC;
(ii) file with the SEC in a timely manner all reports and
other documents required of Parent under the Securities Act and the
Securities Exchange Act of 1934, as amended ("Exchange Act");
(iii) make and keep public information regarding Parent
available (as those terms are understood and defined in Rule 144) at all
times during the Registration Period or such longer period ending on the
date upon which the Shareholders no longer need to rely on Rule 144; and
(iv) so long as any Shareholder owns any MW Common Stock,
furnish to each Shareholder upon written request a written statement by
Parent that all reports and filings that are necessary to be filed by
Parent for any Shareholder to avail himself or herself of Rule 144 or 145
have been filed, and provide a copy of the most recent annual or quarterly
report of Parent, and any other reports and documents as a Shareholder may
reasonably request in availing himself or herself of any rule or regulation
of the SEC.
(f) Parent and Mail-Well, jointly and severally, shall indemnify
the Shareholders (and any Person who is an Affiliate of such Shareholders within
the meaning of the Securities Act) whose shares of MW Common Stock are included
in any registration statement as Registrable Shares against all expenses,
claims, losses, damages, or liabilities, including, without limitation,
reasonable attorneys' fees and court costs (collectively, a "Liability"), to
which the Shareholder may become subject under the Securities Act, the Exchange
Act or any rule or regulation under either of them or other statute or at common
law, arising out of or based upon: (i) any untrue statement or alleged untrue
statement of any material fact contained in any registration statement, any
preliminary prospectus or final prospectus contained therein, or any amendment
or supplement, and any document incorporated by reference therein (a
"Registration Document"); or (ii) any omission or alleged omission to state a
material fact required to be stated in any Registration Document or necessary in
order to make any statement in any Registration Document not misleading.
Notwithstanding the foregoing, neither Parent nor Mail-Well will be liable to a
Shareholder to the extent that any liability arises out of or is based upon any
untrue statement or omission made in any Registration Document in reliance upon
and in conformity with written information furnished to Parent or Mail-Well for
incorporation in any such Registration Document by or on behalf of such
Shareholder. Parent and Mail-Well's joint and several indemnification
obligation will remain in full force and effect regardless of any
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investigation made by or on behalf of a Shareholder and will survive transfer of
the Registrable Shares by the Shareholders.
1.11 INVESTMENT LETTER. Pursuant to Section 8.9 hereof, and in
acknowledgment of the restrictions on transfer of the MW Common Stock
(i) described in this Section 1.10 above; and (ii) if applicable, required by
the pooling of interests accounting method contemplated herein, each Shareholder
shall deliver to Purchaser prior to Closing an executed letter in the form of
Exhibit C hereto.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND CONTROLLING SHAREHOLDER
The Schedules attached to this Agreement are sometimes referred to herein
as the "Disclosure Schedules." The Company and Controlling Shareholder
represent and warrant to Purchaser that except as otherwise disclosed in the
Disclosure Schedules the following statements are true as of the date of this
Agreement and as of the Closing Date:
2.1 ORGANIZATION, STANDING, CORPORATE AUTHORIZATION, AND
ENFORCEABILITY.
(a) The Company is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its incorporation and
has all requisite corporate power and authority to own, lease and operate its
properties and to carry on its business as now being conducted. The Company is
duly qualified or licensed to do business and is in good standing in each
jurisdiction in which the property owned, leased or operated by it or the nature
of the business conducted by it makes such qualification necessary, except where
the failure to so qualify would not have a Material Adverse Effect on the
financial condition or business of the Company.
(b) This Agreement and all other agreements, documents and
instruments executed or to be executed by the Company in connection herewith
(the "Related Agreements") constitute the valid and legally binding obligations
of the Company and are enforceable in accordance with their terms, except as
such enforceability may be limited by equitable principles and by applicable
bankruptcy, insolvency, reorganization, arrangement, moratorium or similar laws
relating to or affecting the rights of creditors generally. The Company has the
requisite corporate power and authority to enter into this Agreement and the
Related Agreements.
(c) The execution and delivery of this Agreement, the Related
Agreements, and all other documents and instruments executed or to be executed
by the Company pursuant to this Agreement, and the consummation of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary corporate and other action on the part of the Company, subject to
obtaining the requisite approvals from Shareholders in accordance with
applicable law. This Agreement and the Related Agreements have been or will
have been, at the time of their
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respective executions and deliveries, duly executed and delivered by a duly
authorized officer of the Company.
(d) Except as set forth in SCHEDULE 2.1(d), the Company does not
own, directly or indirectly, any capital stock or other equity interest in
any Person or have any direct or indirect equity or ownership interest in any
Person, and the Company is not subject to any obligation or requirement to
provide funds for or to make any investment (in the form of a loan, capital
contribution or otherwise) to or in any Person.
2.2 CAPITALIZATION. As of the date of this Agreement, the
capitalization of the Company (including all capital stock authorized, issued
and outstanding) is as set forth on SCHEDULE 2.2. All of the outstanding shares
of the Company's Common Stock are owned by the Shareholders as set forth on
SCHEDULE 2.2. The Company has no authorized or outstanding bonds, debentures,
notes or other indebtedness the holders of which have the right to vote (or
convertible or exchangeable into or exercisable for securities having the right
to vote) with the Shareholders on any matter ("Voting Debt"). Except as
contemplated by this Agreement, after the Effective Time, the Surviving
Corporation will have no obligation to issue, transfer or sell any shares of MW
Common Stock as a result of any obligation existing, or created by the Company,
at or prior to the Effective Time, including pursuant to any stock incentive
plan or warrant. All prior issuances of securities by the Company and all prior
repurchases, redemptions or exchanges affecting the outstanding securities of
the Company have complied with all applicable Legal Requirements (as defined
below) (including federal and state securities laws), preemptive rights and
contractual restrictions. All issued and outstanding shares of capital stock of
the Company have been duly authorized and validly issued and are fully paid and
nonassessable. Except as disclosed on SCHEDULE 2.2, the Company does not have
shares of its capital stock authorized, issued or outstanding and there are no
outstanding convertible or exchangeable securities, subscriptions, calls,
options, warrants, rights (contractual or arising by operation of law,
including, without limitation, rights of first refusal and preemptive rights),
or other agreements or commitments of any character to which the Company is a
party or by which it is bound, relating to the issuance, purchase, other
acquisition or voting of any shares of the capital stock of, or other equity or
ownership interest (collectively, "Equity Rights") in the Company. Except as
disclosed on SCHEDULE 2.2 and on SCHEDULE 2.11, there are no agreements,
arrangements or commitments of any character (contingent or otherwise) pursuant
to which any person or entity is or may be entitled to receive any payment based
on the revenues or earnings, or calculated in accordance therewith, of the
Company. Except as set forth in SCHEDULE 2.2, there are no voting trusts,
proxies or other agreements or understandings to which the Company or
Shareholders is a party or by which the Company or Shareholders is bound with
respect to the voting of any shares of capital stock or other Equity Interests
of the Company. Except as set forth on Schedule 2.2, any such voting trusts
will be terminated as of the Closing.
For purposes of this Agreement, the term "Legal Requirement" shall mean any
federal, state or local law, statute, legislation, ordinance, code, rule,
regulation, decree, award, order, permit, franchise, consent or authorization
of, any federal, state, local or other governmental body or agency, department,
commission, bureau, board, council, court, magistrate, panel or
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instrumentality of the United States, any political subdivision thereof or any
state or local governmental authority in effect as of the date hereof.
2.3 ARTICLES OF INCORPORATION AND BYLAWS; CERTAIN RECORDS. Copies of
the Articles of Incorporation, Bylaws, minute books and stock records of the
Company have been made available to Purchasers, and each such copy is true,
correct and complete as amended to date. All material records of any type and
description in whatever form or medium that presently exist and that relate to
the business or properties of the Company and which in the ordinary course of
business the Company would normally retain are in the possession or control of
the Company and are located at the offices of the Company or of its counsel,
independent auditors, consultants, or other advisors, and the Surviving
Corporation will have the right to possession of all such records upon the
consummation of the transactions contemplated by this Agreement.
2.4 COMPLIANCE WITH OTHER INSTRUMENTS AND LAWS. Except as set forth in
SCHEDULE 2.4, the execution and delivery of this Agreement and the Related
Agreements and the consummation of the transactions contemplated hereby and
thereby will not conflict with or result in any violation of or default under
any provision of the Articles of Incorporation or Bylaws of the Company or any
material violation of, or default under, any mortgage, indenture, trust, lease,
partnership or other agreement or other instrument, permit, concession, grant,
franchise, license, judgment, order, decree, or Legal Requirement applicable to
the Company or any Shareholder or any of the properties of the Company, nor will
they result in the creation or imposition of any lien, security interest,
charge, claim or other encumbrance of any nature whatsoever on any of the
properties or assets of the Company or the Common Stock, nor will they prevent
or materially delay the consummation of the transactions contemplated hereby.
2.5 GOVERNMENTAL AUTHORIZATIONS; CONSENTS. Except as set forth on
SCHEDULE 2.5, no consents, licenses, approvals or authorizations of, or
registrations or declarations with, any governmental authority, agency, bureau
or commission, or any third party which have not already been obtained, are
required to be obtained or made by the Company or Shareholders in connection
with the execution, delivery, performance, validity and enforceability of this
Agreement or any Related Agreement or the sale or transfer of the Common Stock
and will not prevent or materially delay the consummation of the transactions
contemplated hereby other than and except for consents, licenses, approvals,
authorizations or registrations which are not material.
2.6 LITIGATION. No action, suit, proceeding or governmental
investigation is pending or, to the Knowledge (as defined below) of the Company
and the Controlling Shareholder, threatened, at law or in equity, which seeks to
question, delay or prevent, or could have the effect of delaying or preventing,
the consummation of all or any portion of the transactions contemplated hereby.
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2.7 FINANCIAL STATEMENTS; CONDUCT OF THE BUSINESS; NO UNDISCLOSED
LIABILITIES. Except as set forth on SCHEDULE 2.7:
(a) The Company has delivered to Purchaser (i) the audited balance
sheets of the Company as of September 30, 1997, 1996 and 1995 and the related
audited statements of income, retained earnings and cash flows for the fiscal
years then ended, accompanied in each case by an opinion thereon of the
independent certified public accountant of the Company (such financial
statements, including the notes thereto, hereinafter being referred to as the
"Annual Financial Statements"), and (ii) the unaudited balance sheet of the
Company as of March 31, 1998, and the related unaudited statements of income for
the six months ended March 31, 1998 (the "Interim Financial Statements"). (The
Annual Financial Statements and the Interim Financial Statements including the
notes thereto together hereinafter being referred to as the "Financial
Statements"). All of the Financial Statements have been prepared in accordance
with GAAP (subject to the modifications and exceptions set forth in SCHEDULE 2.7
and, in the case of Interim Financial Statements, to end of year audit
adjustments and preparation of footnotes) consistently applied for all relevant
periods (except as indicated therein) and present fairly in all material
respects the financial position of the Company as of the dates thereof and the
results of its operations for the periods then ended.
(b) The Company does not have any debts, obligations, guaranties
of the obligations of others or liabilities except: (i) debts, obligations,
guaranties and liabilities to the extent reflected or reserved against in the
Financial Statements, (ii) debts, obligations, guaranties and liabilities
incurred or entered into subsequent to March 31, 1998, in the ordinary course of
business and otherwise not in contravention of this Agreement, and (iii) debts,
obligations and liabilities relating to this Agreement and the Related
Agreements and instruments being executed and delivered in connection herewith
and the transactions referred to herein and therein (including obligations to
pay legal fees, financial advisory fees, bank fees, accounting fees and other
amounts in connection therewith) so long as such obligations are included in
determining Company Expenses.
2.8 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except for (i) matters set
forth on SCHEDULE 2.8, (ii) matters disclosed in the Annual Financial Statements
or (iii) as contemplated by this Agreement, the Company has not, since September
30, 1997, except as otherwise specified herein:
(a) undergone any change in its condition (financial or
otherwise), properties, assets, liabilities, business or operations, except for
changes in the ordinary course of business which have not either individually or
in the aggregate had a Material Adverse Effect;
(b) except as set forth on SCHEDULE 2.8, changed any of its
methods of accounting or accounting practices or classifications of assets or
liabilities, or failed to maintain its books of account in the usual, regular
and ordinary manner in accordance with GAAP unless required by regulation or
GAAP;
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(c) modified the material terms of, or canceled or terminated, any
Material Contract (as defined below) other than in the ordinary course of
business;
(d) terminated, discharged or received any written notice
regarding the resignation, discharge or termination of any officer other than in
the ordinary course of business or as contemplated by this Agreement;
(e) since December 31, 1995, established or adopted any Benefit
Plan (as defined below), or increased the amount of the wages, bonus, salary,
commissions, fringe benefits or other compensation or remuneration payable to,
any of its directors, officers or employees, except in any case in the ordinary
course of business in accordance with past practice and, in the case of the
senior management employees and Shareholders (listed on SCHEDULE 2.8(e)), in an
amount not exceeding 3% in any one case or a payment of bonuses in an aggregate
amount of $25,000;
(f) since December 31, 1995, declared, set aside, made or paid any
dividend or other distribution in respect of its capital stock or purchased or
redeemed, directly or indirectly, any shares of its capital stock, or split up,
combined, reclassified, redeemed, repurchased or otherwise reacquired any of its
capital stock other than distributions to shareholders to pay income taxes and
charged against their respective Accumulated Adjustments Account, if applicable;
(g) since December 31, 1995, issued or sold any shares of its
capital stock of any class or any subscriptions, options, warrants, calls or
other rights to purchase directly or indirectly any such shares or any
securities directly or indirectly convertible into or exchangeable for such
shares or made any other change in its capital structure;
(h) since December 31, 1995, except for borrowings under its
normal line of credit and Debt described in SCHEDULE 2.8(h), incurred any direct
or contingent liability for borrowed money or guaranteed the monetary
obligations of any other person or entity other than indebtedness to be included
in the Debt to be discharged at Closing, or made any monetary investment in,
advance to or loan to any person or entity other than in the ordinary course of
business;
(i) mortgaged, pledged or subjected to any material lien, lease,
security interest or other charge or encumbrance any of its properties or
assets, tangible or intangible, except those securing Debt to be discharged at
Closing and except for Permitted Liens (as defined below);
(j) made any material change in its practices, operations or
policies with respect to the method for selling goods or services, or other
method for accounting for sales, the conduct of accounts receivable collection
or accounts payable payment activities or the maintenance of inventory levels
other than changes in the ordinary course of business;
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(k) since December 31, 1995, merged or consolidated with or into
any other entity or initiated or participated in negotiations with any person or
entity with respect to any of the foregoing;
(l) implemented or adopted any change in its tax methods,
principles or elections;
(m) since December 31, 1995, acquired or disposed of any material
assets or properties or made any capital improvement other than in the ordinary
course of business; or
(n) suffered any damage, destruction or loss (whether or not
covered by insurance) which has had or could reasonably be expected to have a
Material Adverse Effect on the Company.
2.9 TITLE TO PROPERTY, ABSENCE OF LIENS AND ENCUMBRANCES.
(a) The Company has good title to its owned material assets,
including the owned tangible assets reflected on the balance sheet included in
the Company's most recent Financial Statements, other than assets disposed of or
used after the date thereof in the ordinary course of business for fair value.
Except as disclosed in SCHEDULE 2.9(a), the tangible assets owned by the Company
are owned free and clear, of all liens, mortgages, pledges, charges, security
interests or encumbrances, except for Permitted Liens (as defined below). The
Company owns, leases or licenses, and has adequate rights to use all material
real and personal property and other material assets necessary to conduct its
business as a going concern on a basis consistent with past practices. To the
Knowledge of the Company, the assets of the Company necessary for the operation
of its business consistent with past practices are in operating condition and
repair (subject to normal wear and tear). Neither the whole nor any part of the
real property used in the Business have been condemned by any public authority,
nor, to the Knowledge of the Company and the Controlling Shareholder, is any
such condemnation or taking threatened or contemplated. There exists free and
uninterrupted egress and ingress over a public roadway to all operating
facilities.
For the purposes of this Agreement, the term "Permitted Liens"
shall mean (i) liens for current taxes, assessments or governmental charges not
yet due, (ii) deposits or pledges to secure bids, tenders, contracts, leases,
statutory obligations, surety and appeal bonds, and other obligations of like
nature arising in the ordinary course of the Company's business, (iii) liens
arising out of deposits in connection with workers' compensation, unemployment
insurance, old age pensions or other social security or retirement benefits
legislation, (iv) liens imposed by law, such as mechanics', workers',
materialmen's, carriers' or other like liens arising in the ordinary course of
the Company's business which secure the payment of obligations which are not
past due or which are being diligently contested in good faith by appropriate
proceedings and for which adequate reserves in accordance with GAAP are
maintained on the Financial Statements, (v) imperfections of title, liens and
encumbrances which do not materially and adversely affect the use, value or
marketability of the property affected thereby, and (vi) the imperfections of
title,
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liens, mortgages, pledges, charges, security interests and encumbrances set
forth on SCHEDULE 2.9(a).
(b) The Company validly holds the real property described on
SCHEDULE 2.9(b) (the "Real Property") free and clear of all liens, encumbrances,
mortgages or security interests, except for Permitted Liens.
(c) Except as set forth on SCHEDULE 2.9(c), the Company is not a
party to any leases of real property. The Company validly holds the leaseholds
created by the leases (true, complete and correct copies of which have been
provided to Purchaser) as described on SCHEDULE 2.9(c) (the "Leased Property"),
and such leases are enforceable by the Company as the lessee thereunder in
accordance with their terms.
(d) The Company is not a party to any agreement granting any third
party the right or an option to purchase or lease all or any portion of the Real
Property, Leased Property or any personal property of the Company.
(e) There is not pending, nor has the Company received any written
notice of, (i) any Claim or proceeding asserting or seeking to establish a title
interest in the Real Property or Leased Property, or any Claim of default under
any of the leases under which leaseholds have been created ("Title Notice"), or
(ii) the existence of any facts or proceedings of which the Company or any of
the Controlling Shareholder has Knowledge which may result in the issuance of
such a Title Notice.
2.10 FULL AUTHORITY; COMPLIANCE WITH LAWS. Except as set forth on
SCHEDULE 2.10, the Company is in compliance in all material respects with all
applicable Legal Requirements. Set forth on SCHEDULE 2.10 is a list of any and
all material permits, licenses, consents, orders, approvals, franchises,
certificates or other authorizations under any applicable Legal Requirement
(collectively the "Permits"), issued to the Company in connection with the
ownership, operation and maintenance of its business or assets. The Company has
obtained and maintained all Permits. Each of the Permits is in full force and
effect, and the Company is in compliance in all material respects with all the
provisions of such Permits.
2.11 BENEFIT PLANS.
(a) Except as set forth in SCHEDULE 2.11, the Company does not
maintain, sponsor, participate in or contribute to, or is required to contribute
to, directly or indirectly, or has any obligation under:
(i) Any employee benefit plan, employee pension benefit
plan, employee welfare benefit plan (including any medical, dental,
disability, accident or sickness, salary continuation or life insurance
plan or arrangement), or multiemployer plan, all as defined in the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), regardless of
whether or not a plan is exempt from some or all of the otherwise
applicable requirements of ERISA; or
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(ii) Except as disclosed on the Financial Statements, any
material bonus, commission, deferred compensation, incentive compensation,
restricted stock, stock purchase, stock option, stock appreciation right,
debenture, supplemental pension, profit sharing, royalty pool, vacation,
sick leave, severance or termination pay policies, supplemental
unemployment benefits plan, loan guarantee, relocation assistance, employee
loan or other extensions of credit, or other similar material plan,
program, agreement, policy, commitment, arrangement or benefit currently in
effect under which current or former employees or their dependents,
beneficiaries, representatives or estates are currently or will in the
future be entitled to benefits.
(b) With respect to each plan, program, agreement, policy,
commitment, arrangement or benefit described on SCHEDULE 2.11 (a "Benefit
Plan"), the Company has furnished to the Purchaser true, correct and complete
copies of such Benefit Plans that are in written form, including amendments, if
applicable, summary plan descriptions, if applicable, the Internal Revenue
Service determination letter, if applicable, and the two most recent Forms 5500,
5500-C or 5500-R, as applicable, and has made available to the Purchaser the
most recent actuarial reports of or regarding such Benefit Plan. As to each
Benefit Plan not reduced to writing, the Company has made available to the
Purchaser a description of all material elements of such plan.
(c) Except as set forth in SCHEDULE 2.11:
(i) Each Benefit Plan has been operated and administered in
all material respects in accordance with its terms and applicable laws,
including but not limited to ERISA and the Internal Revenue Code of 1986 as
amended (the "Code") (as defined below). Each Benefit Plan that is intended
to be qualified under Section 401(a) of the Code either has received from
the Internal Revenue Service, or timely applied for, a determination letter
on such Benefit Plan's qualified status.
(ii) Neither the Company nor any other party in interest
(within the meaning of ERISA) has engaged in any non-exempt prohibited
transaction with respect to any Benefit Plan under ERISA, the Code, and
there is no pending assertion of the occurrence of any such transaction.
(iii) All contributions required under applicable law or the
terms of any Benefit Plan, collective bargaining agreement or other
agreement relating to a Benefit Plan to be paid by the Company for all
periods prior to the Closing Date have been or will have been completely
and timely made to each Benefit Plan when due, and the Company has
established adequate reserves on its books (which will be treated as a
current liability for purposes of determining Working Capital at Closing)
to meet liabilities for contributions accrued but that have not been made
because they are not yet due and payable.
(iv) To the Knowledge of the Company and the Controlling
Shareholder, there is no current or pending investigation or audit by the
Internal Revenue Service, the Department of Labor or any other governmental
entity of any Benefit Plan,
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nor has the Company received notification from any such governmental entity
of such a pending audit or investigation, and there are no actions, suits
or claims pending (other than routine claims for benefits) or threatened,
with respect to any Benefit Plan or against the assets of any such Benefit
Plan.
(v) No Benefit Plan is or ever has been a plan subject to
Title IV of ERISA, Part 3 of Subtitle B of Title I of ERISA or Section 412
of the Code ("Pension Plan"), or is or ever has been a multiemployer plan
as defined in Section 3(37) of ERISA or Section 414(f) of the Code
("Multiemployer Plans"); neither the Company nor any other party in
interest has incurred any liability to the Pension Benefit Guaranty
Corporation ("PBGC") with respect to any Pension Plan, except for required
premium payments, which payments have been made when due; no accumulated
funding deficiency (within the meaning of Section 412 of the Code or
Section 302 of ERISA) or reportable event (as defined in Section 4043 of
ERISA) has occurred with respect to any Pension Plan; no event has occurred
in connection with any Pension Plan which could subject any Company or any
Pension Plan, or Purchaser, its Affiliates or any of their respective
benefit plans, to liability under Section 4062, 4063 or 4064 of ERISA, and,
no event has occurred which might give rise to any liability of the Company
or any Pension Plan, or Purchaser, its Affiliates or any of their
respective benefit plans, to the PBGC under Title IV of ERISA or which
could reasonably be anticipated to result in any claims being made against
the Company or any Pension Plan; and the Company has not incurred nor, as a
result of the transactions contemplated by this Agreement, will incur any
withdrawal liability (including any contingent or secondary withdrawal
liability) within the meaning of Section 4201 and 4204 of ERISA to any
Multiemployer Plan; upon a complete withdrawal or a partial withdrawal (as
those terms are defined in Section 4203 and 4205, respectively, of ERISA)
from a Multiemployer Plan occurring on or before the close of the most
recent fiscal year of each such Multiemployer Plan ended prior to the
Closing Date, to the Knowledge of the Company and Controlling Shareholder,
the Company would not have been subject to withdrawal liability under
Title IV, Subtitle E, Part 1 of ERISA and, there has been no material
change in the financial condition of any Multiemployer Plan that would
result in the imposition of such liability due to such complete or partial
withdrawal on or before the Closing Date.
(vi) The Company have complied in all material respects with
all notice and continuation coverage requirements applicable to group
health plans under the Consolidated Omnibus Budget Reconciliation Act of
1985, as amended ("COBRA"), with respect to all medical and health benefits
provided by the Company that are subject to COBRA.
(vii) No Benefit Plan amendments have been adopted nor will
any such amendments be adopted prior to the Closing Date except as may be
necessary for compliance purposes with the Code or ERISA and there is no
arrangement, commitment or understanding to create any additional plan
which would constitute a Benefit Plan or increase the rate of benefit
accrual or contribution requirement under any of the Benefit Plans or
modify, change or terminate any existing Benefit Plan.
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(viii) The Company is not a member of a "controlled group" of
organizations (as defined in Sections 414(b), (c), (m) or (o) of the Code)
which sponsors or maintains any employee benefit plan within the meaning of
Section 3(3) of ERISA which under Title IV of ERISA or any section of the
Code or ERISA would subject Purchaser or Company or any of their respective
employee benefit plans or the fiduciaries thereof or their respective
assets to any taxes, encumbrances, penalties or other liabilities.
2.12 CLAIMS. There are no Claims against, or to the Knowledge of the
Controlling Shareholder or the Company, threatened against, the Company or
its properties, at law or in equity or before any court, governmental
department, commission, board, agency, authority, instrumentality, domestic
or foreign which, if adversely determined, could be reasonably expected to
have, individually or in the aggregate, a Material Adverse Effect on the
Company before or after the Closing Date. The Company is not subject to any
judgment, stipulation, order or decree arising from any action, suit,
proceeding or any investigation of which it has Knowledge which could be
reasonably expected to have, individually or in the aggregate, a Material
Adverse Effect on the business or financial condition of the Company before
or after the Closing Date.
As used in this Agreement, "Claim" means any and all claims, causes of
action, arbitrations, audits, hearings, investigations of which the Company has
knowledge, proceedings, complaints, litigation or suits, whether in contract,
tort or otherwise, whether statutory or common law, whether civil, criminal,
administrative, investigative, formal or informal, fixed or contingent.
2.13 TAXES.
(a) For purposes of this Agreement, "Taxes" in the plural and
"Tax" in the singular shall refer to any and all taxes, charges, fees, levies,
or other assessments of whatever kind or nature, including, but not limited to,
any federal, state, local or foreign net income, gross income, gross receipts,
unitary, license, payroll, unemployment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including, but not limited to, taxes
under section 59A of the Code), occupational, leasing, lease, fuel, customs,
duties, capital stock, franchise, profits, withholding, Social Security,
unemployment, disability, ad valorem, real property, personal property (tangible
and intangible), sales, use, transfer, registration, value added, alternative or
minimum, estimated, or any other kind of tax whatsoever, including the recapture
of any tax items, and including any interest, addition, penalty or other
associated charge thereto, whether disputed or not.
(b) Except as set forth on SCHEDULE 2.13
(i) The Company has filed or will file or cause to be
filed, within the applicable period prescribed by law, (i) all federal,
state, local, foreign or other material Tax Returns, as that term is
defined below, required by such law to be filed by the Company for all
taxable periods ending on or prior to the Closing Date or (ii) valid
extensions of the time for filing such Tax Returns. For purposes of this
Agreement, "Tax
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Returns" shall mean any returns, reports or statements with respect to
Taxes which are required to be filed with any taxing authority.
(ii) The Company has not obtained nor will it obtain prior
to the Closing Date any extensions of time in which to file any Tax Returns
for any taxable period ending on or prior to the Closing Date.
(iii) The Company has paid, within the time and in the manner
prescribed by law, all Taxes shown as due on all such Tax Returns and, with
respect to all Tax Returns which the Company has not yet filed, but will
file prior to the Closing Date, shall pay, within the time and in the
manner prescribed by law, all Taxes shown as due on such Tax Returns.
(iv) No written notice has been received by the Company from
any Tax authority in any jurisdiction in which the Company has not filed a
Tax Return that the Company is or may be subject to taxation of any sort in
such jurisdiction or otherwise is required to file a Tax Return in such
jurisdiction.
(v) Except for Permitted Liens, there are no Tax liens or
other security interests or encumbrances of any type resulting from Tax
liabilities on any of the assets of the Company.
(vi) There is no dispute, Claim or any other controversy
concerning any material Tax liability of the Company raised or asserted by
any Tax authority in writing.
(vii) No income Tax Returns of the Company for any open tax
year has been audited by any taxing authority. The Company has made
available to Purchaser a correct and complete copy of each federal income
Tax Return, examination report, statement of deficiency, or any other
administrative or judicial assertion, assessment or determination of
federal income Tax liability with respect to the Company for the past three
years.
(viii) The Company has employed a permissible method of Tax
accounting, validly elected for each taxable period ending on or prior to
the Closing Date. The Company has not changed, nor requested to be
permitted to change, any method of Tax accounting.
(ix) The Company has not waived any statute of limitations
with respect to any Taxes or has agreed to any extension of time with
respect to a Tax assessment or deficiency, except for such waivers or
extensions which, by their terms, have elapsed as of the date of this
Agreement, nor are any requests for such waivers or extensions pending.
(x) The Company (i) has not filed a consent under Section
341(f) of the Code concerning collapsible corporations, (ii) has not made
any payments, is obligated to make any payments, or is a party to any
agreement that will render it (or the payor of
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compensation under the agreement) subject to the provision of section 280G
of the Code regarding payments as a result of a change in control, (iii)
has not been a United States real property holding company within the
meaning of section 897(c)(2) of the Code and (iv) is not a party to any Tax
allocation or Tax sharing agreement.
(xi) The unpaid Taxes of the Company, including Taxes
attributable to all periods ending on or prior to the Closing Date which
are not yet due and payable, do not materially exceed the reserve on the
Financial Statements for the Company's tax liability as of the respective
dates of such Financial Statements.
2.14 CONTRACTS. Except as set forth in this Agreement or on SCHEDULE
2.14 (the agreements listed thereon being referred to as the "Material
Contracts"), the Company is not a party to, bound by or obligated under any:
(a) material mortgage, indenture, note or installment obligation
or other instrument or contract for or relating to any borrowing by the Company;
(b) material guaranty by the Company of any obligation
(excluding any endorsement made in the ordinary course of business for
collection);
(c) material license agreement;
(d) material lease of real or personal property under which the
Company is a lessor or lessee;
(e) material agreement for the purchase by the Company of
equipment;
(f) agreement purporting to limit the right of the Company to
compete in any line of business, with any person or other entity or in any
geographic area;
(g) material agreement for the purchase or sale of raw
materials, products or goods or the provision of services at prices that vary
from the prices therefor generally prevailing in customary, arms-length
transactions;
(h) material contract with any governmental or
quasi-governmental authority;
(i) material bond, deposit, financial assurance requirement or
insurance coverage individually required to be submitted to customers of the
Company under any sale, lease or service arrangement or to any governmental
authority under any Permit or Legal Requirement;
(j) agreement or instrument relating to the acquisition by the
Company of any entity or all or substantially all of the assets of any person
or entity;
(k) other material agreement, contract or obligation of the
Company;
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(l) agreement or commitment relating to the borrowing of money
or the guaranty or indemnity (direct or indirect) in respect of or the
granting of security for any obligation for the borrowing of money, by the
Company or any other person or entity, in excess of, including, without
limitation, guarantees, accommodation collateral, letters of credit,
mortgages, deeds of trust, indentures, loan agreements and credit agreements;
(m) agreement or commitment relating to clean-up or remediation
involving Hazardous Materials (as hereinafter defined);
(n) agreement that creates an encumbrance or any restriction on
the ability of the Company to (i) pay dividends or make similar distributions;
(ii) make loans or advances to any person or entity, or (iii) sell, lease or
transfer any of its properties or assets, except (in each case) for such
restrictions or encumbrances existing under or by reason of (1) applicable Legal
Requirements, (2) customary non-assignment provisions in leases and other
contracts entered into in the ordinary course of business, or (3) any instrument
governing the Debt;
(o) indemnification obligations in favor of any person or entity,
and any escrow agreements related to any indemnification or obligation;
(p) confidentiality, secrecy, screening, development or settlement
agreement pertaining to any Intellectual Property; or
(q) contract with any customer of the Company other than contacts
for the purchase and sale of goods, products and services entered into in the
ordinary course of business.
All of the Material Contracts are legal, valid, binding and in full force and
effect, no default exists thereunder on the part of the Company, and except as
set forth in Schedule 2.14, the consummation of the transactions contemplated by
this Agreement will not cause any default or condition in respect of any such
Material Contracts, the effect of which is to cause, permit, create or perfect
the right in any party (a) to repudiate or disavow its obligations to the
Company thereunder, (b) to require or have the right to require the Company to
perform its obligations thereunder (including obligations to pay indebtedness)
prior to such time on which, or on terms and conditions otherwise different from
those that, are provided therein or (c) to recover from the Company any damages
or fines. To the Knowledge of the Company and the Controlling Shareholder, no
party to any such Material Contract is in default thereunder. True, correct and
complete copies of all the Material Contracts have been delivered to the
Purchaser.
2.15 ENVIRONMENTAL QUALITY.
(a) Except as set forth in SCHEDULE 2.15, to the Knowledge of the
Company and the Controlling Shareholder, neither the Company nor any previous
(to the Company) owner, tenant, occupant, user or operator of any real property
now or ever owned or leased by the Company (the "Property") released or disposed
of any "Hazardous Materials" (as defined below) on, under, in or about the site
of the Property, except in compliance in all material respects with applicable
Environmental Laws (as defined below). For the purposes of this Agreement, the
term
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"Hazardous Materials" shall mean any substance, material or waste which is
regulated by any local government authority or state with jurisdiction, or the
United States Government, including, without limitation, any material or
substance which is (a) defined as a "hazardous waste," "hazardous material,"
"hazardous substances," "extremely hazardous waste," "regulated substance" or
"restricted hazardous waste" under any provision of the existing laws of any
state, or any other applicable existing law, including, but not limited to, the
Resource Conservation and Recovery Act, 42 U.S.C. Section 6901 ET SEQ. ("RCRA"),
and the Comprehensive Environmental Response, Compensation, and Liability Act,
42 U.S.C. Section 9601 ET SEQ. ("CERCLA") and (b) petroleum, including crude oil
and any fraction thereof and any refined petroleum products and derivatives
thereof.
(b) To the Knowledge of the Company and the Controlling
Shareholder, except as set forth in SCHEDULE 2.15, the Property complies in all
respects with all applicable Environmental Laws. For purposes of this Agreement,
the term "Environmental Laws" shall mean all federal, state and local laws,
ordinances and regulations pertaining to air and water quality, soils and
subsurface strata, natural resources, Hazardous Materials, waste generation,
management, transportation and disposal or other environmental matters,
including the Clean Water Act, the Clean Air Act, the Federal Water Pollution
Control Act, the Solid Waste Disposal Act, RCRA, CERCLA, and the applicable
environmental protection rules, regulations and ordinances of the city and
county in which the Property is located, the Environmental Protection Agency and
all other applicable federal, state, regional and local agencies which are in
existence, and are in effect as of the date hereof. Without limiting the
generality of the foregoing, to the Knowledge of the Company and the Controlling
Shareholder, Company is not liable nor potentially liable for any response costs
or natural resource damages under Sections 107(a) or 113(f) of CERCLA, or under
any other so-called "superfund" or "superlien" law or similar Legal Requirement
currently in existence, at or with respect to the Property and, to the Knowledge
of the Company and the Controlling Shareholder, no circumstances exist, which
with notice or lapse of time or both would result in such liability.
(c) To the Knowledge of the Company and the Controlling
Shareholder, the conduct of the business of the Company complies in all respects
with all applicable Environmental Laws.
(d) To the Knowledge of the Company and the Controlling
Shareholder, except as set forth in SCHEDULE 2.15, the Company has not sent any
Hazardous Material to a site that, pursuant to any applicable Environmental
Laws, (i) has been placed on the "National Priorities List" of hazardous waste
sites or any similar state list, (ii) is otherwise designated or identified as a
potential site for remediation, cleanup, closure or other environmental remedial
activity, or (iii) is subject to a claim, an administrative order or other
request to take "removal" or "remedial" action, as defined in any applicable
Environmental Laws, or to make payment for the costs of cleaning up the site.
(e) Except as set forth in SCHEDULE 2.15, the Company (i) is not
involved in any suit or proceeding with respect to a release or threatened
release of any Hazardous Material or a violation or alleged violation of any
applicable Environmental Laws, nor has the Company
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received any notice of any claims from any person or entity relating to property
damage or to personal injuries from exposure to any Hazardous Material, nor has
the Company received any notice or request for information from any governmental
agency or authority or other third party with respect to any of the foregoing,
nor (ii) has it failed to timely file any report required to be filed, failed to
acquire all necessary certificates, approvals and permits or failed to generate
and maintain all required data, documentation and records under all applicable
Environmental Laws.
(f) To the Knowledge of the Company and the Controlling
Shareholder, except as set forth in SCHEDULE 2.15, there are currently no
underground storage tanks in or under the Property, and no underground storage
tank was removed from the Property during the period that the Company maintained
an interest in such Property.
(g) The Company has made available to Purchaser all information in
its and, to the Knowledge of the Company and the Controlling Shareholder, its
Shareholders' possession regarding the environmental condition of the Property.
2.16 INTELLECTUAL PROPERTY. The Company either own or have the right to
use by license, sublicense, or other tangible agreement, all of the inventions,
improvements, domestic and foreign patents and applications therefor, customer
lists, copyrights, copyright-registrations and applications therefor,
trademarks, trade names, service marks, trade dress, logos, rights in computer
software, and all rights granted or retained in licenses under any of the
foregoing which are material to the conduct of the business of the Company as
presently conducted (collectively the "Intellectual Property"). None of the
Intellectual Property used in connection with the conduct of the business of the
Company is, or has been in the past five years, involved in, or the subject of,
any pending or, to the Knowledge of the Company and the Controlling Shareholder,
threatened infringement, interference, opposition or similar action, suit or
proceeding to which the Company was a party. The material license fees,
royalties and other amounts payable by the Company in connection with the use of
the Intellectual Property, together with the terms and conditions on which, and
periods for which such amounts are payable, are set forth in SCHEDULE 2.16.
2.17 PREPAID EXPENSES. All prepaid expenses shown on the balance sheet
of the most recent Financial Statements or subsequently paid by the Company and
shown on the Final Closing Statement have been incurred solely in connection
with the business and assets of the Company.
2.18 RELATED PARTY TRANSACTIONS. Set forth on SCHEDULE 2.18 is a list
of all material transactions (including, without limitation, employment
contracts, debts, loans, advances, or other obligations, guarantees,
indemnities, accounts and notes payable or receivable and service agreements)
between the Company and any current officer, director or employee, Shareholders,
or Affiliate of the Company (collectively, "Related Parties") which (a) were
entered into and/or consummated subsequent to January 1, 1998; (b) are or will
be effective as of the date hereof or at Closing, (c) constitutes a present or
future liability or obligation of the Company to any Related Party; or
(d) constitutes a present or future liability of any Related Party to the
Company. For purposes of this Agreement, an "Affiliate" of a party is any
individual, company or other entity that owns five percent (5%) or more of the
voting or capital stock or other equity interest of such
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party or of which five percent (5%) of the voting or capital stock or other
equity interest is owned or otherwise controlled by that party or an Affiliate
of that party, as the case may be.
2.19 LABOR MATTERS. Except as set forth on SCHEDULE 2.19, (a) the
Company has not entered into nor is a party to any collective bargaining
agreement, memorandum of understanding or other written document binding on
the Company respecting terms and conditions of employment with respect to an
identified group of employees with any labor union that would cover any
employees of the Company and (b) none of the employees of the Company is
subject to any collective bargaining agreement, memorandum of understanding
or other written document binding on the Company respecting terms and
conditions of employment with respect to an identified group of employees nor
are any such employees, in their capacities as employees, represented by any
labor union. As to the collective bargaining agreements disclosed on
SCHEDULE 2.19, the Company is not in material default thereunder. Except as
set forth in SCHEDULE 2.19, there are no Claims, controversies, labor
disturbances, or investigations pending, or to the Knowledge of the Company
and the Controlling Shareholder, threatened, by any governmental agency or by
employees of the Company or any party or parties representing any of such
employees against the Company before any court, arbitrator or other tribunal.
To the Knowledge of the Company and the Controlling Shareholder, there are
no organizational efforts presently being made or threatened by or on behalf
of any labor union with respect to the employees of the Company nor has there
been in the last five (5) years. The Company has not experienced a work
stoppage, strike, lock-out or other labor disturbance within the past five
(5) years, and there is no work stoppage, strike, lock-out or other labor
disturbance presently occurring, or, to the Knowledge of the Company and the
Controlling Shareholder, threatened. The Company has complied in all
material respects with all applicable Legal Requirements relating to its
employees, the employment of labor, and the safety and health of employees,
including, without limitation, all applicable Legal Requirements relating to
occupational health and safety, discrimination, unemployment, wages, hours,
the Family and Medical Leave Act, collective bargaining, and the collection
and payment of withholding taxes and similar taxes in respect of the business
of the Company. Except as set forth in SCHEDULE 2.19, there are no unfair
labor practice charges, charges of discrimination, or other complaints
pending against the Company involving employees now or previously employed by
the Company.
2.20 CUSTOMERS AND VENDORS. SCHEDULE 2.20 hereto is a correct and
current list of the 20 largest customers and the 10 largest vendors of the
Company during the 12-month period ended September 30, 1997, with the amount of
sales made to each such customer or by each such vendor, as the case may be,
during such period as reasonably ascertained from readily available information,
such amounts being estimated in good faith as being within five percent (5%) of
the actual sales made to or by such customer or vendor, as the case may be.
Except as set forth on SCHEDULE 2.20, the Company does not have any information
indicating that any of such customers or such vendors intends to cease doing
business with the Company or materially alter the amount of the business that it
conducts with the Company from the amount of business such customers or such
vendors conducted with the Company during the last fiscal year.
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2.21 OTHER DISCLOSURES. In addition to the other disclosures required
hereby, the following documents and information pertaining to the Company have
been made available to the Purchaser:
(a) true, correct and complete copies of each policy of insurance
maintained by the Company, together with information on premiums, coverage,
insurers, expiration dates and deductibles;
(b) the location and name of each bank or other financial
institution in which the Company has an account or line of credit, and the
identity of each such account or line of credit, and each bank in which the
Company has a safe deposit box, together with the names of all persons
authorized to draw upon or have access thereto;
(c) SCHEDULE 2.21(c) lists each corporate or trade name under
which the Company or its predecessors, if any, has conducted business and the
state and county in which any Real Property or personal property of the Company
is located or has been located.
(d) SCHEDULE 2.21(d) lists each power-of-attorney given by or on
behalf of the Company.
2.22 PARACHUTE PAYMENTS. Any bonuses or other compensation or amounts
paid or payable by the Company, including amounts payable as a result of the
transaction contemplated by this Agreement, have not resulted in and will not
result in payments to "Disqualified Individuals" (as defined in Section 280G(c)
of the Code) of the Company which, individually or in the aggregate, will
constitute "excess parachute payments" (as defined in Section 280G(b) of the
Code) resulting in the imposition of the excise tax under Section 4999 of the
Code or the disallowance of deductions under Section 280G of the Code.
2.23 PRODUCT WARRANTY AND LIABILITY. All finished goods inventories
manufactured by the Company in the operation of the Business (the "Products")
have been in material conformity with all applicable contractual commitments and
all express or implied warranties (including warranties imposed by the
application of law) and, to the Knowledge of the Company and the Controlling
Shareholder, no material liability exists or will arise for replacement or
damage in connection with such sales or deliveries, except as are adequately
reserved for on the Financial Statements. No Products heretofore sold by the
Company are now subject to any guaranty, warranty, claim for product liability
or patent or other indemnity, other than those sold in accordance with the
standard terms and conditions of sale of the Business, true and complete copies
of which have been made available to the Purchaser.
2.24 ACCURACY. The representations and warranties made by the Company
and the Shareholders to Purchaser set forth in this Agreement, the Disclosure
Schedules to this Agreement, including any Updated Disclosure Schedule (as
defined below) delivered to Purchaser prior to Closing, and the Related
Agreements delivered and to be delivered pursuant to or in connection with this
Agreement, do not include an untrue statement of material fact or omit to
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state any material fact necessary to make them, when taken together and in light
of the circumstances in which they were or are made, not misleading in any
material respect.
2.25 BROKERS AND FINDERS. Except as set forth in SCHEDULE 2.25, no
person or entity is entitled to any brokerage commission, finder's fee or like
payment in connection with the transactions contemplated in this Agreement.
ARTICLE 3
ADDITIONAL REPRESENTATIONS AND WARRANTIES OF CONTROLLING SHAREHOLDER
Each Controlling Shareholder represents and warrants to Purchaser as
follows:
3.1 OWNERSHIP OF SHARES. Such Controlling Shareholder is now, and
immediately prior to the Closing, such Controlling Shareholder will be, the
owner of the Shares of the Company as set forth opposite the name of such
Shareholder on SCHEDULE 2.2.
3.2 AUTHORIZATION. Such Controlling Shareholder has full right and
power to execute and deliver this Agreement and perform his obligations
hereunder. This Agreement and all other documents and instruments executed or to
be executed by such Controlling Shareholder pursuant to this Agreement have
been, or will have been, duly executed and delivered by such Controlling
Shareholder.
3.3 ENFORCEABILITY. This Agreement constitutes the valid and legally
binding obligation of such Controlling Shareholder, enforceable in accordance
with its terms, except as such enforceability may be limited by equitable
principles and by applicable bankruptcy, insolvency, reorganization,
arrangement, moratorium or similar laws relating to or affecting the rights of
creditors generally.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PURCHASER AND PARENT
Parent and Purchaser, jointly and severally, represent and warrant to
Shareholders and the Company as follows:
4.1 ORGANIZATION AND STANDING OF PURCHASER. Parent is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Colorado. Purchaser is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware. Parent and
Purchaser have all requisite corporate power and authority to enter into this
Agreement, to carry out the transactions contemplated hereby and to perform
their obligations hereunder. Parent owns all the outstanding capital stock of
Purchaser.
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4.2 AUTHORIZATION. The execution and delivery of this Agreement, and
all other agreements, documents and instruments executed or to be executed by
the Purchaser and Parent in connection herewith (the "Purchaser Related
Agreements"), and the consummation of the transactions contemplated hereby and
thereby, have been duly authorized by all necessary corporate and other action
on the part of Parent and Purchaser. This Agreement, and the Purchaser Related
Agreements have been, or will have been, at the time of their respective
executions and deliveries, duly executed and delivered by a duly authorized
officer of Parent and Purchaser.
4.3 ENFORCEABILITY. This Agreement constitutes, and each of the
Purchaser Related Agreements when duly executed and delivered will constitute,
the valid and legally binding joint and several obligations of Parent and
Purchaser, enforceable against Parent and Purchaser, jointly and severally, in
accordance with its terms, except as such enforceability may be limited by
equitable principles and by applicable bankruptcy, insolvency, reorganization,
arrangement, moratorium or similar laws relating to or affecting the rights of
creditors generally.
4.4 COMPLIANCE WITH OTHER INSTRUMENTS AND LAWS. The execution and
delivery of this Agreement, and the Purchaser Related Agreements, and the
consummation of the transactions contemplated hereby and thereby, will not
conflict with or result in any violation or default under any provision of the
Certificate of Incorporation or Bylaws of Parent or Purchaser, or of any
material mortgage, indenture, trust, lease, agreement or other instrument,
permit, concession, grant, franchise, license, judgment, order, decree, statute,
law, ordinance, rule or regulation applicable to Parent or Purchaser or any of
their respective properties, the result of which (either individually or in the
aggregate) will prevent or materially delay the consummation of the transactions
contemplated hereby.
4.5 GOVERNMENTAL AUTHORIZATIONS, CONSENTS. No consents, licenses,
approvals or authorizations of, and registrations or declarations with, any
governmental authority, bureau, agency or commission, or any third party, are
required to be obtained or made by Parent or Purchaser in connection with the
execution, delivery, performance, validity and enforceability of this Agreement
or the Purchaser Related Agreements or the Merger contemplated hereby.
4.6 MW COMMON STOCK. The MW Common Stock when issued will have been
duly authorized, validly issued, fully paid and nonassessable, and the record
date of issuance on the Parent's (and its transfer agent's) books shall be the
Closing Date, and each share of MW Common Stock issued to Shareholders hereunder
shall be free and clear of any lien, pledge, charge, adverse claim, security
interest, restriction, encumbrance (including any imposed by law in any
jurisdiction), title retention agreement, option or right to purchase of any
kind.
4.7 LITIGATION. No action, suit, proceeding or governmental
investigation is pending or, to the best of Parent's and Purchaser's knowledge,
threatened, at law or in equity, which seeks to question, delay or prevent the
consummation of all or any portion of the transactions contemplated hereby.
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4.8 SECURITIES ACT OF 1933. Purchaser is an "accredited investor" as
defined under Rule 501 of Regulation D under the Securities Act of 1933, as
amended
4.9 BROKERS AND FINDERS. No person or entity is entitled to any
brokerage commission, finder's fee or like payment from Parent or Purchaser in
connection with the transactions contemplated in this Agreement.
4.10 PURCHASER'S KNOWLEDGE. No officer or director of Parent or
Purchaser has actual knowledge, as of the date hereof, of any state of facts
which, in the judgment of Parent or Purchaser, will give rise to a Shareholder
Indemnified Obligation or a Purchaser Indemnified Obligation, except for such
matters as have been previously disclosed in writing to the Shareholders, the
Company or their representatives.
4.11 SEC DOCUMENTS. Parent has timely filed all required reports,
schedules, forms, statements, exhibits and other documents with the SEC since
December 31, 1996 (the "SEC Documents") and is qualified, and has obtained or
will obtain, without delay to the registration process, all appropriate waivers
necessary to allow Parent to register the MW Common Stock on SEC Form S-3. As
of their respective dates, the SEC Documents complied in all material respects
with the requirements of the Securities Act and the Exchange Act, as the case
may be, and the rules and regulations of the SEC promulgated thereunder
applicable to such SEC Documents, and none of the SEC Documents contained any
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading. The
consolidated financial statements of Parent and its subsidiaries included in the
SEC Documents comply as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto, have been prepared in accordance with GAAP (except, in the case
of unaudited financial statements, as permitted by SEC Form 10-Q) applied on a
consistent basis during the period involved (except as may be indicated in the
notes thereto) and fairly present the financial position of Parent and its
subsidiaries as of the date thereof and their statements of operations, changes
in shareholders' equity and cash flows for the periods then ended (subject, in
the case of unaudited statements, to normal year-end audit adjustments). Except
as set forth in the SEC Documents, neither Parent nor any of its subsidiaries
has any liabilities or obligations of any nature (whether accrued, absolute,
contingent or otherwise) required by GAAP to be set forth on a consolidated
balance sheet of Parent and its subsidiaries or in the notes thereto, other than
liabilities and obligations incurred in the ordinary course of business
consistent with past practice since the date of its last filed Form 10-K or
10-Q.
4.12 ACCURACY. The representations and warranties made by the Parent
and Purchaser to Company and Shareholders set forth in this Agreement and the
Purchaser Related Agreements, instruments and documents delivered and to be
delivered pursuant to or in connection with this Agreement do not include an
untrue statement of material fact or omit to state any material fact necessary
to make them, when taken together and in light of the circumstances in which
they were or are made, not misleading in any material respect.
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4.13 INVESTIGATION. Parent and Purchaser have conducted inspections of
the properties and financial and other records of the Company and other due
diligence with respect to the Company. Parent and Purchaser have had an
opportunity to ask questions of the Company and the Controlling Shareholder
relating to the Company and management and financial affairs of the Company,
which questions have been answered to Parent and Purchaser's satisfaction, and
to examine all books and records of the Company. Parent and Purchaser
acknowledge that they have made their own independent investigation,
examination, analysis and evaluation of the Company including, without
limitation, Parent and Purchaser's own estimate of the value of the Company's
business.
ARTICLE 5
COVENANTS OF THE COMPANY AND THE CONTROLLING SHAREHOLDER
5.1 CONDUCT OF BUSINESS. The Company agrees that, between the date of
this Agreement and the Closing Date, except as contemplated by this Agreement or
referred to in a Disclosure Schedule, and except as may be necessary to carry
out the transactions contemplated by this Agreement, the Company without
Purchaser's written consent (which consent will not be unreasonably withheld or
delayed) or as requested by Purchaser, did not or will not:
(a) amend its Articles of Incorporation or Bylaws;
(b) make any material change in its practices, operations or
policies with respect to the selling of goods or services, collecting accounts
receivable and/or paying accounts payable except in the ordinary course of
business;
(c) conduct its business in a manner that materially departs from
the manner in which such business was being conducted prior to the date of this
Agreement;
(d) except as set forth in SCHEDULE 2.8 increase the rate or
change the form of compensation payable to any director, officer or employee of
the Company or increase any employee benefits, except in the ordinary course of
business in accordance with past practice in an amount not to exceed 3% in any
one case or the payment of bonuses in an aggregate amount of $25,000;
(e) purchase or dispose of any properties or other assets, except
in the ordinary course of business or as set forth in SCHEDULE 1.7;
(f) declare, set aside, pay or make any dividend or other
distribution in respect of any outstanding shares of the Company's capital stock
other than distributions to Shareholders to pay income taxes and distributions
to Shareholders charged against their respective Accumulated Adjustments
Account, if applicable;
(g) issue or sell any shares of the Company's capital stock
(whether or not from the treasury) or any other securities; grant any options,
convertibility rights, rights to
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subscribe for shares of capital stock or securities convertible into or
exchangeable for shares of capital stock, warrants, calls or other agreements
relating to the Company's capital stock; split up, combine, reclassify, redeem,
repurchase or otherwise reacquire any of the Company's capital stock, or
otherwise change its capitalization;
(h) except as required by regulation or generally accepted
accounting principles, maintain its books of account other than in the usual,
regular and ordinary manner in accordance with generally accepted accounting
principles and on a basis consistent with prior periods, make any change in any
of its books, accounting methods or practices, or reclassify any assets or
liabilities;
(i) cancel, terminate, renew or amend any Material Contract or
enter into any contract, agreement, lease, license or commitment which would be
a Material Contract if such had existed on the date hereof, except in the
ordinary course of business;
(j) merge or consolidate with or into any other person or entity
or sell or dispose of all or substantially all of the Company's assets to any
person or entity, or initiate or participate in negotiations with any person or
entity with respect to any of the foregoing;
(k) invest in certificates of deposit in any one bank if such
investment in the aggregate exceeds $100,000 at any time;
(l) incur any direct or contingent liability for borrowed money or
guarantee the monetary obligations of any other person or entity, other than
indebtedness to be included in the Debt, or make any monetary investment in,
advance to or loan to any person or entity other than in the ordinary course of
business;
(m) fail to make maintenance expenditures and maintain inventories
in the amounts and at the times required to operate its business in the ordinary
course consistent with past practice;
(n) implement or adopt any change in its tax methods, principles
or elections;
(o) fail to pay accounts payable or collect accounts receivable in
accordance with past practices;
(p) enter into any transaction outside the ordinary course of
business; or
(q) agree or commit to do any of the foregoing.
Nothing contained in this Section 5.1 or elsewhere in this Agreement shall
be deemed in any way as prohibiting the Company from using cash, cash
equivalents or other current assets to reduce or pay off Debt prior to Closing.
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5.2 ACCESS. The Company agrees that, between the date of this
Agreement and the Closing Date, the Company shall, after receiving reasonable
advance notice from Purchaser, give Parent, Purchaser and their Associates (as
defined in Section 6.1) reasonable access (during normal business hours) to the
books, records, contracts and offices of the Company for the purpose of enabling
such parties to further investigate and inspect the business, operations and
financial and legal affairs of the Company.
5.3 NO SOLICITATION OR NEGOTIATION. The Company and Controlling
Shareholder agree that between the date of this Agreement and the earlier of the
Closing Date or the date this Agreement otherwise terminates, they will not, nor
will they permit any officer, director, Shareholder or agent of Shareholders the
Company to, (i) solicit any proposal or offer from any person or entity (other
than Purchaser) relating to the sale of the Company, its capital stock or any
material portion of its assets, (ii) provide any non-public information to any
person or entity (other than Purchaser) for use in preparing any proposal or
offer relating to the sale of the Company or its capital stock or any material
portion of its assets, or (iii) respond to or enter into any negotiations
regarding any proposal or offer from any person or entity (other than Purchaser)
with respect to the foregoing.
5.4 FILINGS AND CONSENTS. Where required by applicable law, the
Company and the Controlling Shareholder shall use commercially reasonable
efforts to do each of the following:
(a) as soon as practicable after the date of this Agreement, file
with the appropriate governmental authority any notification form required to be
filed by the Company under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR Act") with respect to this Agreement and the
transactions contemplated hereby, together with a request for early termination
of the applicable waiting period;
(b) after consultation with Purchaser, make any additional filing
required to be made by the Company under the HSR Act and promptly furnish to the
appropriate governmental authority such additional information as may be
requested under the HSR Act;
(c) make or give each filing or notice required to be made or
given pursuant to any applicable Legal Requirement, Material Contract or Permit
by the Company or Shareholders in connection with the execution and delivery of
any of this Agreement or in connection with the consummation or performance of
any of the transactions contemplated hereby; and
(d) obtain an agreement from each Creditor to terminate its lien
and lien filings upon payment of the amounts specified in such Creditor's
respective Payoff Letter to the extent that Purchaser decides to pay off a Debt
at Closing and each consent required to be obtained pursuant to any applicable
Legal Requirement, Permit or Material Contract by the Company or Shareholders in
connection with the execution and delivery of any of this Agreement or in
connection with the consummation or performance of the transactions contemplated
hereby. Except as to liens related to Leased Property to be acquired by
Purchaser pursuant to Section 7.5, Company shall pay all reasonable costs of
obtaining such releases and consents which costs shall be a Company Expense.
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5.5 UPDATED DISCLOSURE SCHEDULES. Between the date of this Agreement
and the Closing Date, if any Controlling Shareholder or the Company becomes
aware of any fact or condition that causes any of the representations and
warranties in this Agreement to become untrue, misleading, or inaccurate in any
material respect, such party will promptly deliver to Purchaser an updated
Disclosure Schedule ("Updated Disclosure Schedule") setting forth the facts or
conditions that cause such representation, warranty, or Disclosure Schedule to
become untrue, misleading, or inaccurate.
ARTICLE 6
COVENANTS OF PARENT AND PURCHASER
Parent and Purchaser each agree with the Company that:
6.1 CONFIDENTIALITY. Parent and Purchaser shall hold in strict
confidence, and cause their respective affiliates, directors, officers,
employees, agents, attorneys, accountants, financing sources and representatives
and those of its affiliates ("Associates") to hold in strict confidence, all
documents and information obtained with respect to the Company ("Confidential
Information"). Neither Parent nor Purchaser shall permit any Confidential
Information to be utilized or to be disclosed or conveyed to any other person or
entity other than their Associates in furtherance of this Agreement. Without
limiting the generality of the foregoing, and except as required by law or as
permitted by Section 7.4, (i) neither Parent nor Purchaser shall disclose to any
person or entity, and shall not permit any of their Associates to disclose to
any person or entity, the existence of this Agreement or any of the terms or
provisions hereof and (ii) except in the ordinary course of business, neither
Parent nor Purchaser shall contact any customers or employees of the Company,
and neither Parent nor Purchaser shall not permit any of their Associates to
contact any customers or employees of the Company, without the prior consent of
an officer of the Company. This Section 6.1 shall terminate if and when the
Closing occurs in accordance with Article 1 of this Agreement, or within three
years of the date of execution of this Agreement, whichever occurs first.
6.2 FILINGS AND CONSENTS. Where required by applicable law, Parent and
Purchaser shall use commercially reasonable efforts to do each of the following:
(a) as soon as practicable after the date of this Agreement, file
with the appropriate governmental authority any notification form required to be
filed by Parent or Purchaser under the HSR Act with respect to this Agreement
and the transactions contemplated hereby, together with a request for early
termination of the applicable waiting period;
(b) after consultation with the Controlling Shareholder, make any
additional filing required to be made by Parent or Purchaser under the HSR Act
and promptly furnish to the appropriate governmental authority such additional
information as may be requested under the HSR Act;
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(c) make or give each other filing or notice required to be made
or given pursuant to any applicable Legal Requirement by Purchaser in connection
with the execution and delivery of this Agreement or in connection with the
consummation or performance of any of the transactions contemplated hereby; and
(d) obtain each consent required to be obtained by Parent or
Purchaser pursuant to any applicable Legal Requirement or material contract to
which Parent or Purchaser is a party or by which either of them is bound in
connection with the execution and delivery of any of this Agreement or in
connection with the consummation or performance of the transactions contemplated
hereby.
6.3 FILING OF FINAL TAX RETURNS. Parent and Purchaser agree to timely
file all final Tax Returns for and on behalf of the Company which are required
to be filed subsequent to the Closing, and to deliver copies thereof to the
Shareholders' Representative promptly after filing the same.
6.4 OFFICER AND DIRECTOR INDEMNIFICATION. Parent and Purchaser agree
to include and maintain provisions in the Certificate of Incorporation and
Bylaws of the Surviving Corporation which provide indemnification for the
directors and officers of the Company immediately prior to the Effective Time to
the maximum extent provided by such documents and applicable corporate law and
to indemnify such directors and officers to the maximum extent provided by
applicable corporate law. In addition, Parent and Purchaser shall include such
persons as additional insureds under Parent's Director and Officer Insurance
Policy if they can do so without substantial additional cost.
6.5 BENEFIT PLANS AND RELATED MATTERS. Except for employees subject to
collective bargaining agreements and subject to the provisions of Parent's
policies and programs, any employee of the Company retained by Purchaser or its
affiliates after the Closing Date (each, a "Transferred Employee") shall be
eligible to participate or eligible for accrual of benefits, vesting and
contributions or accruals to be made or credited following the Closing Date
under each of Parent's employee benefit plans, programs or arrangements
available to all or substantially all of Parent's employees, subject to the
terms upon which such plans allow new participation by Purchaser's employees.
Each Transferred Employee shall be credited with the time-in-service that the
employee accrued with the Company.
ARTICLE 7
COVENANTS OF ALL PARTIES
The parties hereto agree that:
7.1 COMMERCIALLY REASONABLE EFFORTS; FURTHER ASSURANCES. Subject to
the terms and conditions of this Agreement, each party will use commercially
reasonable efforts to take, or cause to be taken, all actions and to do, or
cause to be done, all things necessary or desirable under applicable Legal
Requirements to consummate the transactions contemplated by this
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Agreement. The Company, Controlling Shareholder, Parent and Purchaser each agree
to execute and deliver such other documents, certificates, agreements and other
writings and to take such other actions as may be necessary or desirable in
order to consummate or implement expeditiously the transactions contemplated by
this Agreement.
7.2 POOLING OF INTERESTS. Each of Parent, Purchaser and the Company
shall use its respective commercially reasonable efforts to cause the
transactions contemplated by this Agreement, including the Merger, to be
accounted for as a pooling of interests under Opinion 16 of the Accounting
Principles Board and applicable SEC rules and regulations, and such accounting
treatment to be accepted by each of Parent's and the Company's independent
certified public accountants, respectively, and to be accepted by the SEC, and
each of Parent, Purchaser and the Company and the Controlling Shareholder agree
that they will not knowingly take any action that would cause such accounting
treatment not to be obtained.
7.3 CERTAIN FILINGS, ETC. The Company, Parent and Purchaser shall
cooperate with one another (a) in determining whether any action by or in
respect of, or filing with, any governmental body, agency, official or authority
is required, or any actions, consents, approvals or waivers are required to be
obtained from parties to any material contracts, in connection with the
consummation of the transactions contemplated by this Agreement and (b) in
taking such actions or making any such filings, in furnishing such information
as may be required in connection therewith, and in seeking timely to obtain any
such actions, consents, approvals or waivers.
7.4 PUBLIC ANNOUNCEMENTS. The parties agree not to issue any press
release or make any public statement with respect to this Agreement or the
transactions contemplated hereby prior to the Closing without the prior consent
of Purchaser and Company (which consent shall not be unreasonably withheld or
delayed), except to the extent that any party hereto is required by law to make
any such disclosure and such party notifies the other parties hereto a
reasonable time before making such disclosure of the nature and content of the
intended disclosure, and consults with such other parties regarding the nature
and content of such disclosure.
7.5 REAL ESTATE AND EQUIPMENT. The parties agree to negotiate, execute
and deliver prior to Closing, mutually acceptable purchase and sale contracts
(the "Sale Documents") for the purchase by Purchaser of the Leased Property
currently occupied by the Company, and equipment leased and used by the Company
(the "Equipment") which is owned in whole or in part by Related Parties of the
Company and which must be acquired by the Purchaser as part of the acquisition
of the Company in order for the transactions described herein to be accounted
for as a pooling of interests. Notwithstanding the form of the transaction
pursuant to which the Leased Property is to be so transferred, the Sale
Documents shall contain (a) terms and conditions which are essential to
effectuate such transfer in a form acceptable to Purchaser and (b) provisions
similar to those set forth in Sections 1.1(f) and 1.10 hereof relating to the MW
Common Stock delivered in connection therewith. The Sale Documents shall
provide for a purchase price for the Leased Property of the greater of nine
times current annual rentals for, or fair market value of, the Leased Property
and the fair market value for the Equipment. The fair market value of the
Leased Property and Equipment shall be based on third-party appraisals. In
addition, the purchase price
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shall be increased by all cash and cash equivalents acquired by Purchaser
pursuant to the Sale Documents valued at their U.S. dollar value. The purchase
price shall be net of any mortgages assumed by Purchaser. The purchase price
and the amount of any pre-payment penalties incurred by the Sellers for
pre-paying any mortgages shall be paid by Purchaser to the Sellers in additional
MW Common Stock based on the MW Common Valuation.
ARTICLE 8
CONDITIONS TO OBLIGATION OF PURCHASER TO CLOSE
The obligation of Purchaser to consummate the Merger, pay the Merger
Consideration, discharge the Debt, and otherwise consummate the transactions
contemplated hereunder is subject to the satisfaction as of the Closing Date, of
the following conditions (any of which may be waived by Purchasers in whole or
in part):
8.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES. The representations,
warranties and covenants set forth in Articles 2 and 3 and Section 5.1, without
giving effect to any Updated Disclosure Schedule delivered to Purchaser after
the date hereof, do not contain any misrepresentation or breach of warranty
which is likely to cause a Material Adverse Effect as of the date of this
Agreement and as of the Closing Date, with the same effect as though made on and
as of the Closing Date, except to the extent that (a) any of such
representations and warranties refers specifically to a date other than the
Closing Date or (b) the accuracy of any of such representations and warranties
is affected by any of the transactions contemplated by this Agreement.
8.2 SHAREHOLDER APPROVAL. Approval of this Agreement and the
transactions contemplated hereby shall have been validly obtained by the
requisite vote of the shareholders of the Company under applicable law.
8.3 PERFORMANCE. Shareholders and the Company having performed, in all
material respects, all obligations required by this Agreement to be performed by
Shareholders and the Company on or before the Closing Date including without
limitation the covenants set forth in Article 5.
8.4 CERTIFICATE. Purchaser having received from a duly authorized
officer of the Company a certificate dated the Closing Date confirming that the
conditions in Section 8.1 and 8.2 have been met and confirming, to the best of
such persons' knowledge, that the condition of Section 8.3 has been met.
8.5 DEBT CERTIFICATES AND PAYOFF LETTERS. Purchaser having received
the Debt Certificate and the Payoff Letters.
8.6 NO INJUNCTION. There not being in effect, at the Closing, any
injunction or other binding order of any court or other tribunal having
jurisdiction over Purchaser that prohibits the consummation of the transactions
contemplated in this Agreement.
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8.7 NO MATERIAL ADVERSE EFFECT. There having been no Material Adverse
Effect on the Company since September 30, 1997.
8.8 CONSENTS. All required consents, licenses, approvals, estoppel
certificates, releases of Encumbrances, acknowledgments of payment in full and
authorizations, as set forth on SCHEDULE 2.5, having been obtained and delivered
to Purchaser.
8.9 SHAREHOLDER REPRESENTATION AND AFFILIATE LETTER. Shareholders
having executed letters in the form of EXHIBIT C.
8.10 LEGAL OPINIONS. Purchaser having received from counsel to the
Company an opinion in substantially the form of EXHIBIT D attached hereto.
8.11 CERTIFICATE OF SECRETARY. The Company having delivered a
certificate, signed by the secretary of the Company, certifying (i) current
copies, as amended, of the Articles of Incorporation and Bylaws of the Company
and (ii) the resolutions of the board of directors and the shareholders of the
Company authorizing this Agreement and the transactions contemplated hereby.
8.12 ESCROW AGREEMENTS. Shareholders, the Company, and the Escrow Agent
(as defined in the Escrow Agreement) having executed and delivered the Escrow
Agreement.
8.13 NON-COMPETE AGREEMENTS. Daniel W. Cain and Louis A. Mayle having
executed non-compete agreements in the form attached as EXHIBIT E providing for
a covenant not to compete of five years from the date of Closing and three years
from the date of such Shareholder's termination of employment with Purchaser or
one of its Affiliates, whichever is later.
8.14 UCC-3S. The Company having delivered UCC-3 Termination Statements
for all the secured Debt to be paid off at Closing, or a Payoff Letter from the
holder thereof agreeing to deliver the same after receipt of immediately
available funds sufficient to pay off in full the secured Debt.
8.15 HSR ACT. All applicable waiting periods under the HSR Act relating
to transactions contemplated hereby having expired or been terminated.
8.16 ACCOUNTING, TAX MATTERS. Purchaser is not aware of any fact or
circumstance that would (i) prevent the transactions contemplated hereby from
qualifying as a tax-free reorganization under the Code, or (ii) prevent the
transaction from qualifying for the pooling of interests method of accounting.
8.17 REAL ESTATE AND EQUIPMENT PURCHASES. The Sale Documents shall have
been executed and delivered by the Purchaser and the other parties thereto, the
conditions to purchase
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of the subject real estate shall have been satisfied and the acquisition of the
Leased Property and equipment shall have occurred simultaneously with the
Closing of the Merger.
8.18 NO DISCOVERY. Purchaser not being informed of or otherwise having
discovered any matter or matters which would constitute a Purchaser Indemnified
Obligation or which would represent a Material Adverse Effect on the Company.
8.19 DOCUMENTATION. All agreements, documents and instruments
incidental to the performance of the transactions contemplated by this Agreement
being in a form and substance reasonably satisfactory to Purchaser and its legal
counsel and Purchaser having received copies of all documents that they may have
reasonably requested in connection with such transactions.
8.20 APPROVAL OF PURCHASER'S BOARD. The Board of Directors of Purchaser
and Parent shall have approved this Agreement and the transactions contemplated
herein.
ARTICLE 9
CONDITIONS TO OBLIGATIONS OF THE COMPANY TO CLOSE
The obligation of the Company to consummate the transactions that are to be
consummated at the Closing is subject to the satisfaction, as of the Closing
Date, of the following conditions (any of which may be waived in whole or in
part by Shareholders):
9.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES. The representations
and warranties of Parent and Purchaser set forth in Article 4 being accurate in
all material respects (except for the representations and warranties set forth
in Section 4.6, which shall be true and accurate) as of the date of this
Agreement and as of the Closing, as though made on and as of the Closing Date.
9.2 PERFORMANCE. Parent and Purchaser having performed, in all
material respects, all obligations required by this Agreement to be performed by
Parent and Purchaser on or before the Closing Date.
9.3 CERTIFICATE. The Company having received from duly authorized
officers of Purchaser a certificate dated the Closing Date confirming that the
condition in Section 9.1 has been met and confirming, to the best of such
persons' knowledge, that the condition of 9.2 has been met.
9.4 NO INJUNCTION. There not being in effect, at the Closing, any
injunction or other binding order of any court or other tribunal having
jurisdiction over Shareholders or the Company that prohibits the consummation of
the transactions contemplated by this Agreement.
9.5 LEGAL OPINION. The Company having received from counsel to
Purchaser and Parent an opinion in substantially the form of EXHIBIT F attached
hereto.
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9.6 TAX OPINION. The Company and Shareholder having received an
opinion of Rothgerber Johnson & Lyons LLP, in form and substance reasonably
satisfactory to the Company, to the effect that the Merger and the issuance of
shares of MW Common Stock in connection therewith, as described herein, shall
constitute a tax-free reorganization under Section 368 of the Internal Revenue
Code of 1986, as amended.
9.7 ESCROW AGREEMENTS. Purchaser and the Escrow Agent
having executed and delivered the Escrow Agreement and the Working Capital
Escrow Agreement.
9.8 HSR ACT. All applicable waiting periods under the HSR Act relating
to transactions contemplated hereby having expired or been terminated.
9.9 DOCUMENTATION. All agreements, documents and instruments
incidental to Purchaser's and Parent's performance of the transactions
contemplated by this Agreement, being in a form and substance reasonably
satisfactory to Shareholders and their legal counsel.
9.10 MATERIAL ADVERSE EFFECT. There having been no material adverse
effect on Purchaser or Parent since September 30, 1997.
9.11 REAL ESTATE AND EQUIPMENT PURCHASES. The Sale Documents shall have
been executed and delivered by the Purchaser and the other parties thereto, the
conditions to purchase of the subject real estate shall have been satisfied and
the acquisition of the Leased Property and equipment shall have occurred
simultaneously with the Closing of the Merger.
ARTICLE 10
TERMINATION OF AGREEMENT
10.1 Right to Terminate Agreement. This Agreement may be terminated
prior to the Closing:
(a) by the mutual agreement of the Company and Purchaser;
(b) by Purchaser at any time after June 30, 1998 if any condition
set forth in Article 8 shall not have been satisfied or waived and Parent or
Purchaser is not in material breach of this Agreement;
(c) by the Company at any time after May 29, 1998 if any condition
set forth in Article 9 shall not have been satisfied or waived and the Company
is not in material breach of this Agreement;
(d) by Purchaser at any time if it determines that any
representation or warranty set forth in Section 2 or Section 3 is inaccurate in
any material respect;
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(e) by Purchaser if any Updated Disclosure Schedule delivered to
Purchaser under Section 5.5 causes any representation or warranty set forth in
Section 2 or 3 to be inaccurate in any material respect; or
(f) by the Company at any time if it determines that any
representation or warranty set forth in Section 4 is inaccurate in any material
respect.
10.2 EFFECT OF TERMINATION. Upon the termination of this Agreement
pursuant to Section 10.1:
(a) Purchaser shall promptly destroy or cause to be returned to
the Company all Confidential Information, including any copies made by or
supplied to Purchaser or any of Purchaser' Associates of any such Confidential
Information;
(b) Each party shall pay its own costs and expenses and no party
hereto shall have any obligation or liability to the other parties hereto;
PROVIDED, HOWEVER that the parties hereto shall remain bound by the provisions
of Sections 6.1 and 7.4 and Article 12.
ARTICLE 11
CERTAIN REMEDIES AND LIMITATIONS
11.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. All
representations and warranties made by the Company and Controlling Shareholder
in this Agreement, in any Schedule or in any certificate delivered pursuant
hereto, shall survive the Closing until May 10, 1999, provided that there shall
be no termination of the obligation to indemnify for a claim involving any such
representation or warranty provided a Claim Notice has been delivered prior to
May 10, 1999. The representations and warranties of any party shall be
unaffected by any investigation made by or on behalf of the other parties or by
knowledge obtained as a result thereof or otherwise. All representations and
warranties made by Parent and the Purchaser as to any fact or condition on or
before the Closing Date, in this Agreement, or in any certificate delivered
pursuant hereto, shall survive the Closing.
11.2 INDEMNIFICATION BY SHAREHOLDERS.
(a) The Purchaser and the Company and their respective Affiliates
and their respective officers, directors, shareholders, agents, representatives,
consultants, employees and affiliates, and all of their respective heirs,
successors and permitted assigns (collectively, the "Purchaser Indemnified
Parties") shall be indemnified and held harmless, jointly and severally by the
Shareholders entitled to receive the Merger Consideration, solely out of the
portion of the Merger Consideration deposited in the Escrow Account, against and
in respect of the net amount (determined after deduction of the amount of any
insurance proceeds recovered and any benefits
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inuring to the Purchaser as a result of the timing for income tax purposes of
deductions for such losses as compared to the timing of recoveries under
insurance or this Section 11.2):
(i) of any and all liabilities, obligations, losses,
damages, diminutions of value, liens and deficiencies of any kind or nature
("Losses") not accrued or reserved for in the Final Closing Statement which
exist, or which are imposed on, incurred by or asserted against any one or
more of the Purchaser Indemnified Parties,
(A) based upon, resulting from or arising out of, or as to
which there was, any breach or inaccuracy of any representation,
warranty, statement, certification, agreement or covenant made by
the Company or any Shareholder in this Agreement, any Related
Agreement, any Disclosure Schedule hereto or thereto;
(B) based upon, resulting from or arising out of any claim,
litigation or proceeding brought by any third-party based upon,
resulting from, arising out of or concerning any event, fact or
circumstance, if and to the extent that such event, fact or
circumstance arises out of or relates to the ownership or operation
of the Company prior to Closing;
(C) arising out of the cost of any required remediation
under Environmental Laws of any of the properties now or previously
owned, leased, used, occupied or contaminated by the Company, if
the materials and/or conditions requiring such remediation existed
as of the Closing;
(D) in the nature of Taxes for periods through the Closing
for which the Company is liable to the extent that an appropriate
tax authority has asserted a claim and (i) such Taxes are not
reflected on the Financial Statements and did not arise in the
ordinary course of business after the date thereof, (ii) such Taxes
should have been but were not reflected in any return filed by the
Company prior to the Closing, (iii) such Taxes were required to be
paid prior to the Closing and were not so paid, or (iv) such Taxes
result from the failure by the Company prior to the Closing to
comply with any legal requirements relating to information
reporting or withholding and payment over of taxes with respect to
payments made to third parties;
(E) the amount of any brokerage commission, finder's fee or
like payment in connection with the transactions contemplated in
this Agreement to the extent not included in Company Expenses
included in the calculation of the Merger Consideration;
(ii) of any cost or expenses (including, without limitation,
settlement costs and reasonable attorneys', accountants' and experts' fees
and court costs) incurred by Purchaser Indemnified Parties in connection
with any of the foregoing (including, without
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limitation, any reasonable cost or expense incurred by Purchaser Indemnified
Parties in enforcing their rights pursuant to this Section 11.2).
Each of the above is for purposes of this Agreement a "Purchaser
Indemnified Obligation."
(b) Claims for indemnification under Section 11.2(a)(i)(B), (C) or
(D), above, may be made regardless of whether or not the matter giving rise to
such claim would constitute a breach of a representation and warranty made in
this Agreement, any Related Agreement, any Disclosure Schedule hereto and
thereto or any other written document. No Purchaser Indemnified Party shall be
required to make any claim or demand against any other person or entity prior to
the making of any claim or demand for indemnification or at any other time.
Shareholders agree that, notwithstanding any other provision of this Agreement,
any Related Agreement or applicable Legal Requirements, Purchaser Indemnified
Parties shall offset all valid claims for indemnification against the Escrow
Account in accordance with the terms of the Escrow Agreement.
11.3 LIMITATIONS ON REPRESENTATIONS, WARRANTIES AND LIABILITIES OF
SHAREHOLDERS.
(a) Notwithstanding anything to the contrary in this Agreement,
Shareholders shall not be liable to the Purchaser Indemnified Parties, except
under the Escrow Agreement as provided therein. The total amount of payments
that the Shareholders may be required to make thereunder shall be limited in the
aggregate to the Escrow Amount, which is the sole source of Purchaser's
indemnification and the Shareholders' cumulative liability shall in no event
exceed the Escrow Amount.
(b) No payment shall be required to be made for Purchaser
Indemnified Obligations unless a Claim Notice (as defined below) with respect
thereto has been delivered to Shareholders on or prior to May 10, 1999.
(c) Notwithstanding anything to the contrary in this Agreement,
and except for "willful," knowing or intentional breaches of the representations
and warranties contained herein, no claim for indemnification may be made by any
Purchaser Indemnified Party unless and until the aggregate amount of Losses
and/or other amounts claimed for indemnification by the Purchaser Indemnified
Parties exceeds $25,000, and then only for the amount by which such Losses and
other amounts claimed exceed $25,000.
11.4 INDEMNIFICATION BY PARENT AND PURCHASER.
(a) Parent and Purchaser will, jointly and severally, indemnify
and hold harmless Shareholders and their respective affiliates, officers,
directors, partners, stockholders, agents, representatives, consultants and
employees, and all of their respective heirs, successors and
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permitted assigns (collectively, the "Shareholder Indemnified Parties") from and
against the net amount (determined after deduction of the amount of any
insurance proceeds recovered):
(i) of any and all Losses which exist, or which are imposed
on, incurred by or asserted against any one or more of the Shareholder
Indemnified Parties:
(A) based upon, resulting from or arising out of or as to
which there was any breach or inaccuracy of any representation,
warranty, statement, certification, agreement, obligation or
covenant made by Parent or Purchaser in this Agreement, any
Purchaser Related Agreement or in any other written document;
(B) based upon, resulting from or arising out of any claim,
litigation or proceeding brought by any third party based upon,
resulting from arising out of or concerning any event, fact or
circumstance, if and to the extent that such event, fact or
circumstance arises out of or relates to the ownership or operation
of the Company after the Closing;
(C) arising out of the cost of remediating under
Environmental Laws any of the properties now owned, leased, used,
occupied or contaminated by the Company, if the conditions
requiring such remediation did not exist prior to the Closing;
(D) in the nature of Taxes which arise subsequent to the
Closing;
(E) the amount of any brokerage commission, finder's fee or
like payment in connection with the transactions contemplated in
this Agreement;
(ii) of any cost or expenses (including, without limitation,
settlement costs and reasonable attorneys', accountants' and experts' fees
and court costs) incurred by Shareholder Indemnified Parties in connection
with any of the foregoing (including, without limitation, any reasonable
cost or expense incurred by Shareholder Indemnified Parties in enforcing
their rights pursuant to this Section 11.4).
Each of the above is for purposes of this Agreement a "Shareholder
Indemnified Obligation."
(b) Claims for indemnification under Section 11.4(a)(i)(B), (C) or
(D), above, may be made regardless of whether or not the matter giving rise to
such claim would constitute a breach of a representation and warranty made in
this Agreement, any Related Agreement, any Disclosure Schedule hereto and
thereto or any other written document. No Shareholder Indemnified Party shall
be required to make any claim or demand against any other person or entity prior
to the making of any claim or demand for indemnification or at any other time.
46
<PAGE>
11.5 LIMITATIONS ON LIABILITY OF PURCHASER.
(a) No payment shall be required to be made for Shareholders
Indemnified Obligations unless a Claim Notice with respect thereto has been
delivered to Purchaser on or prior to the third anniversary of the Closing.
(b) Any amounts payable by Purchaser to Shareholders under this
Article 11 shall be payable in MW Common Stock at the MW Common Stock Valuation.
11.6 INDEMNIFICATION CLAIMS.
(a) If either a Purchaser Indemnified Party, on the one hand, or a
Shareholder Indemnified Party, on the other hand, (the "Claimants") wishes to
assert an indemnification claim hereunder, the Claimant shall deliver to
Shareholders, if a Purchaser Indemnified Party, or to Purchaser, if the Claimant
is a Shareholder Indemnified Party, a written notice (a "Claim Notice") setting
forth:
(i) the matter giving rise to the Claim for
indemnification,
(ii) a detailed description of all of the facts and
circumstances known to Claimant giving rise to the Claim, and
(iii) a detailed description of, and a reasonable estimate of
the total amount of, the monetary amounts actually incurred or expected to
be incurred for which indemnification is sought.
(b) Purchaser Indemnified Parties and Shareholder Indemnified
Parties are referred to herein as "Indemnified Parties," and the persons from
whom indemnification may be sought pursuant to this Section 11.6 are referred to
as an "Indemnifying Party"). Within twenty (20) days after receipt of any Claim
Notice, the Indemnifying Parties will (i) acknowledge in writing their
responsibility for all or part of such matter for which indemnification is
sought under this Article 11, and will either (x) pay or otherwise satisfy the
portion of such matter as to which responsibility is acknowledged, or (y) take
such other action as is reasonably satisfactory to the Indemnified Party to
provide reasonable security or other assurances for the performance of their
obligations hereunder, and/or (ii) give written notice to the Indemnified Party
of their intention to dispute or contest all or part of such responsibility.
Upon delivery of such notice of intention to contest, the parties will negotiate
in good faith to resolve as promptly as possible any dispute as to
responsibility for, or the amount of, any such matter.
11.7 DEFENSE OF THIRD PARTY ACTIONS. If an Indemnified Party receives
notice or otherwise obtains Knowledge of any Claim or any threatened Claim that
may give rise to an indemnification claim against an Indemnifying Party, then
the Indemnified Party shall promptly deliver to the Indemnifying Party a written
notice describing such Claim in reasonable detail. The untimely delivery of such
written notice by the Indemnified Party to the Indemnifying Party shall relieve
the Indemnifying Party of liability with respect to such Claim to the extent it
has been
47
<PAGE>
prejudiced by lack of timely notice under this Article 11 with respect to such
Claim. The Indemnifying Party shall have the right, at its option to assume the
defense of any such Claim with its own counsel, reasonably satisfactory to the
Indemnified Party, provided that Shareholders may not assume the defense of any
Claim unless there are sufficient amounts in the Indemnification Escrow Amount
to fully indemnify Purchaser Indemnified Parties against the amount of such
Claim and all other pending Claims against the Escrow Amount. If the
Indemnifying Party elects to assume the defense of and indemnification for any
such Claim, then:
(a) notwithstanding anything to the contrary contained in this
Agreement, the Indemnifying Party shall not be required to pay or otherwise
indemnify the Indemnified Party against any attorneys' fees or other expenses
incurred on behalf of the Indemnified Party in connection with such matter
following the Indemnifying Party's election to assume the defense of such matter
so long as the Indemnifying Party continues to diligently conduct such defense;
(b) the Indemnified Party shall make available to the Indemnifying
Party all books, records and other documents and materials that are under the
direct or indirect control of the Indemnified Party or any of the Indemnified
Party's Associates that the Indemnifying Party considers such necessary or
desirable for the defense of such matter at the expense of the Indemnifying
Party and shall make available to the Indemnifying Party reasonable access to
Indemnified Party's personnel;
(c) the Indemnified Party shall execute such documents and take
such other actions as the Indemnifying Party may reasonably request for the
purpose of facilitating the defense of, or any settlement, compromise or
adjustment relating to, such Claim (with the Indemnifying Party to reimburse
Indemnified Party for third-party, out-of-pocket expenses) and the Indemnified
Party shall not be required to take any such action or execute any document
which imposes any equitable or unindemnified liability remedy on any Indemnified
Party or would adversely affect the business or operations of the Company;
(d) the Indemnified Party shall otherwise fully cooperate as
reasonably requested by the Indemnifying Party in the defense of such Claim
(with the Indemnifying Party to reimburse Indemnified Party for third-party,
out-of-pocket expenses); and
(e) the Indemnified Party shall not admit any liability with
respect to such Claim.
If the Indemnifying Party fails or refuses to assume the defense of and
indemnification for such Claim, then the Indemnified Party shall proceed
diligently to defend such Claim with the assistance of counsel, and the
Indemnifying Party shall thereafter reimburse Indemnified Party on a current
basis, in accordance with the procedures set forth in this Agreement, as
requested by Indemnified Party for all costs and expenses of defense for which
Indemnified Party is entitled to indemnification pursuant to the terms of this
Agreement. No third party Claim may be settled by the Indemnified Party without
notice to, and the written consent of, the Indemnifying Party which consent must
not be unreasonably withheld. If such consent is not given, or written notice
that it is being withheld and the reasons therefor has not been received, by the
Indemnified Party within 15
48
<PAGE>
days after such notice has been received by the Indemnifying Party, the consent
of the Indemnifying Party to such settlement shall be deemed given.
11.8 SUBROGATION. To the extent that the Indemnifying Party makes or is
required to make any indemnification payment to any Indemnified Party, the
Indemnifying Party shall be entitled to exercise, and shall be subrogated to,
any rights and remedies (including rights of indemnity, rights of contribution
and other rights of recovery) that the Indemnified Party or any of the
Indemnified Party affiliates may have against any other person (other than any
Purchaser Indemnified Party or Shareholders Indemnified Party) with respect to
any Losses, circumstances or matter to which such indemnification payment is
directly or indirectly related. The Indemnified Party shall permit the
Indemnifying Party to use the name of the Indemnified Party and the names of the
Indemnified Party's affiliates in any transaction or in any proceeding or other
matter involving any of such rights or remedies; and the Indemnified Party shall
take such actions as the Indemnifying Party may reasonably request for the
purpose of enabling the Indemnified Party to perfect or exercise the
Indemnifying Party's right of subrogation hereunder.
11.9 EXCLUSIVITY. The right of each party hereto to assert
indemnification claims and receive indemnification payments pursuant to this
Article 11 shall be the sole and exclusive right and remedy exercisable by any
person or entity entitled to indemnification hereunder with respect to any
breach by the other party hereto of any representation or warranty or any other
indemnity obligation hereunder.
11.10 RETENTION OF RECORDS. From and after the date of this Agreement,
Purchaser shall preserve, and shall cause the Company to preserve, all books,
records and other documents, materials and information relevant to the
representations, warranties and covenants set forth in this Agreement until the
later of four (4) years following the Closing Date or for such longer period as
the rights of the parties hereunder may exist. At all times after the Closing
Date, Purchaser and the Company shall give Shareholders and Shareholders'
Associates reasonable access to such books, records and other documents,
materials and information of the Company relating to the operation of the
business of the Company up to and including the Closing Date.
ARTICLE 12
MISCELLANEOUS
12.1 CERTAIN DEFINITIONS. For purposes of this Agreement, a contract,
obligation, liability, transaction, change, breach, encumbrance, proceeding or
other matter or event shall not be deemed "material" if the monetary amount
involved is less than 0.1% of the Merger Consideration. A "Material Adverse
Effect" is a material adverse effect on the business, operations, assets or
financial condition or results of the Company taken as a whole. "Knowledge"
means, with respect to an individual, the actual present Knowledge of such
individual. A Person (other than an individual), including the Company, will be
deemed to have Knowledge of a particular fact or matter if any individual who
serves as an officer or director of such Person has actual present Knowledge of
such fact or matter. "Shareholders' Representative" shall mean Daniel W. Cain
and his successors and/or assigns.
49
<PAGE>
12.2 EXPENSES. The term "Company Expenses" shall mean: (i) all costs
and expenses of the Company in connection with the negotiation of this Agreement
and the consummation of the transactions contemplated hereby including any
broker's fee set forth in SCHEDULE 2.25; (ii) one-half of the Company's costs of
all HSR filings, and any transfer taxes or stamp incurred by the Company in
connection with the transactions contemplated by this Agreement and of Neutral
Accountants; and (iii) all other costs and expenses required to be borne by the
Company under the terms of this Agreement. Company Expenses shall not include
costs, expenses or fees of Shareholders incurred in connection with the Merger
or other transactions contemplated by this Agreement which costs, expenses and
fees shall be paid directly by the Shareholders. The Company shall pay the fees
and expenses of the Company incidental to the preparation of this Agreement, the
performance and compliance with all agreements contained in this Agreement to be
performed or complied with by it and the consummation of the transactions
contemplated hereby, including the legal and accounting fees and expenses.
Purchaser shall be responsible for its fees and expenses incidental to the
preparation of this Agreement, the performance and compliance with all
agreements contained in this Agreement to be performed or complied with by it
and the consummation of the transactions contemplated hereby, including the
legal and accounting fees and expenses and the fees and expenses associated with
any environmental assessment conducted in connection with this transaction.
12.3 NOTICES; ETC. All notices, instructions and other communications
given hereunder or in connection herewith shall be in writing. Any such notice,
instruction or communication shall be sent either (i) by registered or certified
mail, return receipt requested, postage prepaid, or (ii) via a reputable
nationwide overnight courier service, in each case to the address set forth
below. Any such notice, instruction or communication shall be deemed to have
been delivered three business days after it is sent prepaid, or one business day
after it is sent via a reputable nationwide overnight courier service.
If to Purchaser, to:
Mail-Well, Inc.
23 Inverness Way East
Englewood, CO 80112
Attention: Gerald F. Mahoney, Chairman
Tel: (303) 397-7410
Fax: (303) 397-7400
with a copy to:
Mail-Well, Inc.
23 Inverness Way East
Englewood, CO 80112
Attention: Roger Wertheimer, Vice President, General Counsel
Tel: (303) 397-7440
Fax: (303) 768-7380
50
<PAGE>
If to Company, Controlling Shareholder, or to the Shareholders' Representative:
Daniel W. Cain
6109 Shadow Lake Drive
Toledo, Ohio 43623
With copies to:
Louis A. Mayle
6051 Glenbeigh Drive
Sylvania, Ohio 43560
Russell R. Miller, Esq.
Barkan & Robon
405 Spitzer Building
Toledo, Ohio 43604
or, in each case, to such other address as may be specified in writing to the
other parties.
Any party may give any notice, instruction or communication in connection
with this Agreement using any other means (including personal delivery, telecopy
or ordinary mail), but no such notice, instruction or communication shall be
deemed to have been delivered unless and until it is actually received by the
party to whom it was sent. Any party may change the address to which notices,
instructions or communications are to be delivered by giving the other parties
to this Agreement notice thereof in the manner set forth in this Section 12.3.
12.4 ASSIGNMENT. Neither the Company nor any Shareholder may assign or
otherwise transfer this Agreement or any of their rights hereunder to any person
or entity, without the prior written consent of Purchaser. Subject to the
foregoing, this Agreement shall inure to the benefit of and be binding upon
Shareholders and their successors, personal representatives, heirs, and
permitted assigns. Notwithstanding the foregoing, this Agreement shall not be
terminated by the death or incapacity of any Shareholder, and if, after the
execution hereof, any Shareholder shall die or become incapacitated, this
Agreement shall be binding upon the successors and assigns of any Shareholder as
if such death or incapacity had not occurred and regardless of notice thereof.
Except as expressly permitted by this Section 12.4, Purchaser shall not
voluntarily or by operation of law assign or otherwise transfer this Agreement
or any of its rights or obligations hereunder except to Parent or any of its
wholly owned subsidiaries, without the prior written consent of Shareholders'
Representative and provided that any permitted assignment or transfer shall not
relieve Purchaser or Parent of any of their joint and several obligations
hereunder. Purchaser may collaterally assign and/or grant a security interest in
its rights under this Agreement and under other closing documents to any
financial institution(s) or their affiliates as required pursuant to any
existing or future financing arrangements with the prior written consent of the
Shareholders' Representative (which consent will not be unreasonably withheld or
delayed).
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<PAGE>
12.5 ENTIRE AGREEMENT; AMENDMENT; GOVERNING LAW; ETC. This Agreement
(together with the Exhibits and Disclosure Schedules) embodies the entire
agreement and understanding among the parties hereto with respect to the subject
matter hereof. This Agreement may be amended, modified, waived, discharged or
terminated only by (and any consent hereunder shall be effective only if
contained in) an instrument in writing signed by the party against which
enforcement of such amendment, modification, waiver, discharge, termination or
consent is sought. This Agreement shall be construed in accordance with and
governed by the laws of the State of Delaware as it applies to contracts to be
performed entirely with the State of Delaware. No representation or warranty
(either express, implied or otherwise) is being made by any party with respect
to the subject matter hereof other than as expressly set forth herein.
12.6 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which is an original, but all of which shall constitute
one instrument. Facsimile signatures to this Agreement shall be binding upon
the parties.
12.7 THIRD PARTY RIGHTS. The parties do not intend to confer any
benefit hereunder on any person or entity other than the parties hereto, the
Indemnified Parties and their respective successors in interest.
12.8 EXHIBITS AND SCHEDULES. Each of the Exhibits and Schedules
referred to herein and attached hereto is an integral part of this Agreement and
is incorporated herein by this reference.
12.9 PRONOUNS. All pronouns and any variations thereof used in this
Agreement shall be deemed to refer to the masculine, feminine or neuter,
singular or plural, as appropriate.
12.10 AUTHORITY AND EXECUTION. Each person executing this Agreement on
behalf of a party hereto represents and warrants that he is duly and validly
authorized to do so on behalf of such party, with full right and authority to
execute this Agreement and to bind such party with respect to all of its
obligations hereunder.
12.11 SEVERABILITY. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction, as to such jurisdiction, shall be
ineffective to the extent of such invalidity or unenforceability, without
rendering invalid or unenforceable the retraining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction.
12.12 TIME OF ESSENCE. Time is of the essence of this Agreement.
12.13 INTERPRETATION. Each party acknowledges that such party, either
directly or through such party's representatives, has participated in the
drafting of this Agreement, and any applicable rule of constructions that
ambiguities are to be resolved against the drafting party should not be applied
in connection with the construction or interpretation of this Agreement.
52
<PAGE>
12.14 ARBITRATION.
(a) Any controversy or claim arising out of or related to this
Agreement, or a breach hereof, is to be settled by arbitration in accordance
with the procedures set forth in SCHEDULE 12.14.
(b) Notices of demand for arbitration must be filed in writing
with the other parties hereto and in accordance with SCHEDULE 12.14. A demand
for arbitration is to be made within a reasonable time after the claim or
controversy has arisen, but in no event later than the date when institution of
legal or equitable proceedings based on such claim or controversy would be
barred by the applicable statute of limitations.
(c) No arbitration hereunder may include, by consolidation,
joinder or any other manner, any Person other than Parent, Purchaser, Company,
the Shareholders, and other Persons substantially involved in a common question
of fact or law whose presence is required if complete relief is to be accorded
in arbitration. No Person other than Parent, Purchaser, Company or the
Shareholders may be included as an original third party or additional third
party to an arbitration whose interest or responsibility is insubstantial.
Consent to arbitration involving an additional Person does not constitute
consent to arbitration of a dispute not described therein or with a Person not
named or described therein. This Section 12.14 is enforceable by specific
performance under applicable law in a court of competent jurisdiction.
(d) The award rendered by the arbitrators, including as to legal
fees in accordance with SCHEDULE 12.14, is final, and judgment may be entered
upon it in accordance with applicable law in any court of competent
jurisdiction.
THIS AGREEMENT CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY BE ENFORCED BY
THE PARTIES.
53
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly caused this Agreement to
be executed as of the date first above written.
PARENT
MAIL-WELL, INC., a Colorado corporation
By:
-------------------------------------------------
Name: Paul V. Reilly
Title: President
PURCHASER
MAIL-WELL I CORPORATION, a Delaware corporation
By:
-------------------------------------------------
Name: Paul V. Reilly
Title: President
THE COMPANY
INDUSTRIAL PRINTING COMPANY
By:
-------------------------------------------------
Name: Daniel W. Cain
Title: Chairman of the Board and Chief Executive
Officer
CONTROLLING SHAREHOLDER
----------------------------------------------------
Daniel W. Cain
54
<PAGE>
SCHEDULE 12.14
ARBITRATION PROCEDURES
Purchaser and Shareholders hereto agree that in the event of a dispute
between them relating to or arising out of this Agreement, the involved parties
shall submit such dispute to binding arbitration as provided herein. All
arbitrations would be conducted in Denver, Colorado, or at another location
mutually approved by the parties, pursuant to the Commercial Arbitration Rules
of the American Arbitration Association except as herein may be provided. If
the panel used will consist of three arbitrators, such arbitrators will have
experience in the printing industry and the decision of the arbitrators would be
final and binding on all parties. All arbitration shall be undertaken pursuant
to the Federal Arbitration Act, where applicable, and the decision of the
arbitrators shall be enforceable in any court of competent jurisdiction. All of
the parties shall agree to waive their respective rights to further appeal or
redress in any other court or tribunal except solely for the purpose of
obtaining execution of the decision resulting from the arbitration proceeding.
In any dispute where a party seeks $200,000.00 or more in damages or if the
dispute involves whether the Purchaser or the Company properly determined to
terminate the Agreement or refused to close the transactions contemplated by
this Agreement, three arbitrators shall be employed to arbitrate the dispute.
In the event that the dispute involves less than $200,000.00, there shall be one
arbitrator. In the event of any arbitration or other legal proceeding brought
by any party against another party with regard to any matter arising out of or
related to this Agreement, each party hereby expressly agrees that the final
award decision would also provide for all allocation and division between or
among the parties to the arbitration, on a basis which is just and equitable
under the circumstances, of all costs and expenses of the dispute, including
without limitation court costs and arbitrators', reasonable attorneys',
accountants' and expert witness fees, costs and expenses (including
disbursements) incurred in connection with such proceedings. In resolving all
disputes between the parties, the arbitrators shall apply the substantive law of
the State of Delaware. The arbitrators are directed, by this Agreement, to
conduct the arbitration hearing no later than three months from the service of
the statement of claim and demand for arbitration unless good cause is shown
establishing that the hearing cannot fairly and practically be so convened.
Depositions shall be taken only as deemed appropriate by the arbitrator(s)
and only where good cause is shown. Good cause is agreed to exist with respect
to the depositions of officers and management personnel to the extent Knowledge,
as defined in the Agreement at Section 12.1 therein, is relevant to the issue.
Parties shall be entitled to conduct document discovery by requesting production
of documents. Responses or objections shall be served twenty days after receipt
of a request. The arbitrators shall resolve any discovery disputes of such
preheating conferences as may be needed. All parties shall agree that the
arbitrators and any counsel of record to the proceeding shall have the power or
subpoena process as provided by law.
55
<PAGE>
DEFINITIONS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Accounts Receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Affiliate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Annual Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . 16
Associates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Benefit Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
CERCLA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Certificate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Claim. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Claim Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Claimants. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
COBRA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Company. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Company Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Computation Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Confidential Information . . . . . . . . . . . . . . . . . . . . . . . . . 36
Controlling Shareholder. . . . . . . . . . . . . . . . . . . . . . . . . . 1
Creditors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Debt Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Debt Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
DGCL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Disclosure Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Disputed Inventory Matter. . . . . . . . . . . . . . . . . . . . . . . . . 9
Disputed Working Capital Matter. . . . . . . . . . . . . . . . . . . . . . 8
Dissenting Shareholders. . . . . . . . . . . . . . . . . . . . . . . . . . 3
Dissenting Shareholders Escrow Amount. . . . . . . . . . . . . . . . . . . 5
Dissenting Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Environmental Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Equity Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Escrow Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Escrow Amount. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Estimated Working Capital Statement. . . . . . . . . . . . . . . . . . . . 7
Estimated Working Capital. . . . . . . . . . . . . . . . . . . . . . . . . 7
</TABLE>
56
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Exchange Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Final Closing Statement. . . . . . . . . . . . . . . . . . . . . . . . . . 7
Final Closing Statement. . . . . . . . . . . . . . . . . . . . . . . . . . 8
Final Closing Statement. . . . . . . . . . . . . . . . . . . . . . . . . . 8
Final Working Capital Statement. . . . . . . . . . . . . . . . . . . . . . 7
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Hazardous Materials. . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
HSR Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Indemnification Escrow Amount. . . . . . . . . . . . . . . . . . . . . . . 5
Indemnified Parties. . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Indemnifying Party . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Initial Distribution Amount. . . . . . . . . . . . . . . . . . . . . . . . 6
Initial Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Intellectual Property. . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Interim Financial Statements . . . . . . . . . . . . . . . . . . . . . . . 16
Knowledge. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Leased Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Legal Requirement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Liability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Mail-Well. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Material Adverse Effect. . . . . . . . . . . . . . . . . . . . . . . . . . 49
Material Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Merger Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Multiemployer Plans. . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
MW Common Stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
MW Common Stock Valuation. . . . . . . . . . . . . . . . . . . . . . . . . 2
Neutral Accountant . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Notice of Inventory Disagreement . . . . . . . . . . . . . . . . . . . . . 9
Notice of Working Capital Disagreement . . . . . . . . . . . . . . . . . . 7
ORC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Parent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Payoff Letters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
PBGC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Pension Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Permits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Permitted Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Prepayment Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Pro Rata Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Purchaser. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
</TABLE>
57
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Purchaser Indemnified Parties. . . . . . . . . . . . . . . . . . . . . . . 43
Purchaser Indemnified Obligation . . . . . . . . . . . . . . . . . . . . . 45
Purchaser Related Agreements . . . . . . . . . . . . . . . . . . . . . . . 31
RCRA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Real Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Registrable Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Registration Document. . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Registration Statement . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Registration Statement Period. . . . . . . . . . . . . . . . . . . . . . . 11
Related Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Related Parties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Sale Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
SEC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SEC Documents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Securities Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Shareholder Indemnified Obligation . . . . . . . . . . . . . . . . . . . . 46
Shareholder Indemnified Parties. . . . . . . . . . . . . . . . . . . . . . 46
Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Shareholders' Representative . . . . . . . . . . . . . . . . . . . . . . . 49
Subsidiary Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Surviving Corporation. . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Tax. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Tax Returns. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Title Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Total Shareholder Consideration. . . . . . . . . . . . . . . . . . . . . . 2
Transfer Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Transferred Employee . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Updated Disclosure Schedule. . . . . . . . . . . . . . . . . . . . . . . . 36
Voting Debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Working Capital. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Working Capital Escrow Amount. . . . . . . . . . . . . . . . . . . . . . . 5
</TABLE>
58
<PAGE>
ACQUISITION AGREEMENT
AND
PLAN OF MERGER
by and among
MAIL-WELL INC.,
a Colorado corporation,
MAIL-WELL I CORPORATION,
a Delaware corporation,
IPC GRAPHICS, INC.
an Ohio corporation
and
Daniel W. Cain
May 19, 1998
<PAGE>
TABLE OF CONTENTS
PAGE
----
ARTICLE 1 -- PRINCIPAL TERMS OF THE MERGER . . . . . . . . . . . . . . . . . . 1
1.1 Plan of Merger. . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 No Further Rights of Transfer . . . . . . . . . . . . . . . . . 3
1.3 Surviving Corporation . . . . . . . . . . . . . . . . . . . . . 3
1.4 Dissenting Shareholders . . . . . . . . . . . . . . . . . . . . 3
1.5 The Closing . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.6 Surrender of Certificates . . . . . . . . . . . . . . . . . . . 6
1.7 Working Capital Settlement. . . . . . . . . . . . . . . . . . . 7
1.8 Additional Post-Closing Adjustments.. . . . . . . . . . . . . . 9
1.9 Transfer Taxes. . . . . . . . . . . . . . . . . . . . . . . . .10
1.10 MW Common Stock.. . . . . . . . . . . . . . . . . . . . . . . .10
1.11 Investment Letter.. . . . . . . . . . . . . . . . . . . . . . .13
ARTICLE 2 -- REPRESENTATIONS AND WARRANTIES OF THE COMPANY
AND CONTROLLING SHAREHOLDER . . . . . . . . . . . . . . . . . .13
2.1 Organization, Standing, Corporate Authorization, and
Enforceability. . . . . . . . . . . . . . . . . . . . . . . . .13
2.2 Capitalization. . . . . . . . . . . . . . . . . . . . . . . . .14
2.3 Articles of Incorporation and Bylaws; Certain Records . . . . .15
2.4 Compliance with Other Instruments and Laws. . . . . . . . . . .15
2.5 Governmental Authorizations; Consents . . . . . . . . . . . . .15
2.6 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . .15
2.7 Financial Statements; Conduct of the Business; No
Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . .16
2.8 Absence of Certain Changes or Events. . . . . . . . . . . . . .16
2.9 Title to Property, Absence of Liens and Encumbrances. . . . . .18
2.10 Full Authority; Compliance with Laws. . . . . . . . . . . . . .19
2.11 Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . .19
2.12 Claims. . . . . . . . . . . . . . . . . . . . . . . . . . . . .22
2.13 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22
2.14 Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . .24
2.15 Environmental Quality . . . . . . . . . . . . . . . . . . . . .25
2.16 Intellectual Property . . . . . . . . . . . . . . . . . . . . .27
2.17 Prepaid Expenses. . . . . . . . . . . . . . . . . . . . . . . .27
2.18 Related Party Transactions. . . . . . . . . . . . . . . . . . .27
2.19 Labor Matters . . . . . . . . . . . . . . . . . . . . . . . . .28
2.20 Customers and Vendors . . . . . . . . . . . . . . . . . . . . .28
2.21 Other Disclosures . . . . . . . . . . . . . . . . . . . . . . .29
2.22 Parachute Payments. . . . . . . . . . . . . . . . . . . . . . .29
2.23 Product Warranty and Liability. . . . . . . . . . . . . . . . .29
2.24 Accuracy. . . . . . . . . . . . . . . . . . . . . . . . . . . .29
2.25 Brokers and Finders . . . . . . . . . . . . . . . . . . . . . .30
-i-
<PAGE>
ARTICLE 3 -- ADDITIONAL REPRESENTATIONS AND WARRANTIES
OF CONTROLLING SHAREHOLDER. . . . . . . . . . . . . . . . . . .30
3.1 Ownership of Shares . . . . . . . . . . . . . . . . . . . . . .30
3.2 Authorization . . . . . . . . . . . . . . . . . . . . . . . . .30
3.3 Enforceability. . . . . . . . . . . . . . . . . . . . . . . . .30
ARTICLE 4 -- REPRESENTATIONS AND WARRANTIES OF PURCHASER
AND PARENT. . . . . . . . . . . . . . . . . . . . . . . . . . .30
4.1 Organization and Standing of Purchaser. . . . . . . . . . . . .30
4.2 Authorization . . . . . . . . . . . . . . . . . . . . . . . . .31
4.3 Enforceability. . . . . . . . . . . . . . . . . . . . . . . . .31
4.4 Compliance with Other Instruments and Laws. . . . . . . . . . .31
4.5 Governmental Authorizations, Consents . . . . . . . . . . . . .31
4.6 MW Common Stock . . . . . . . . . . . . . . . . . . . . . . . .31
4.7 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . .31
4.8 Securities Act of 1933. . . . . . . . . . . . . . . . . . . . .32
4.9 Brokers and Finders . . . . . . . . . . . . . . . . . . . . . .32
4.10 Purchaser's Knowledge . . . . . . . . . . . . . . . . . . . . .32
4.11 SEC Documents . . . . . . . . . . . . . . . . . . . . . . . . .32
4.12 Accuracy. . . . . . . . . . . . . . . . . . . . . . . . . . . .32
4.13 Investigation . . . . . . . . . . . . . . . . . . . . . . . . .33
ARTICLE 5 -- COVENANTS OF THE COMPANY AND THE CONTROLLING
SHAREHOLDER . . . . . . . . . . . . . . . . . . . . . . . . . .33
5.1 Conduct of Business . . . . . . . . . . . . . . . . . . . . . .33
5.2 Access. . . . . . . . . . . . . . . . . . . . . . . . . . . . .35
5.3 No Solicitation or Negotiation. . . . . . . . . . . . . . . . .35
5.4 Filings and Consents. . . . . . . . . . . . . . . . . . . . . .35
5.5 Updated Disclosure Schedules. . . . . . . . . . . . . . . . . .36
ARTICLE 6 -- COVENANTS OF PARENT AND PURCHASER . . . . . . . . . . . . . . . .36
6.1 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . .36
6.2 Filings and Consents. . . . . . . . . . . . . . . . . . . . . .36
6.3 Filing of Final Tax Returns . . . . . . . . . . . . . . . . . .37
ARTICLE 7 -- COVENANTS OF ALL PARTIES. . . . . . . . . . . . . . . . . . . . .37
7.1 Commercially Reasonable Efforts; Further Assurances . . . . . .37
7.2 Pooling of Interests. . . . . . . . . . . . . . . . . . . . . .38
7.3 Certain Filings, Etc. . . . . . . . . . . . . . . . . . . . . .38
7.4 Public Announcements. . . . . . . . . . . . . . . . . . . . . .38
7.5 Real Estate and Equipment . . . . . . . . . . . . . . . . . . .38
ARTICLE 8 -- CONDITIONS TO OBLIGATION OF PURCHASER TO CLOSE. . . . . . . . . .39
8.1 Accuracy of Representations and Warranties. . . . . . . . . . .39
-ii-
<PAGE>
8.2 Shareholder Approval. . . . . . . . . . . . . . . . . . . . . .39
8.3 Performance . . . . . . . . . . . . . . . . . . . . . . . . . .39
8.4 Certificate . . . . . . . . . . . . . . . . . . . . . . . . . .39
8.5 Debt Certificates and Payoff Letters. . . . . . . . . . . . . .39
8.6 No Injunction . . . . . . . . . . . . . . . . . . . . . . . . .39
8.7 No Material Adverse Effect. . . . . . . . . . . . . . . . . . .40
8.8 Consents. . . . . . . . . . . . . . . . . . . . . . . . . . . .40
8.9 Shareholder Representation and Affiliate Letter . . . . . . . .40
8.10 Legal Opinions. . . . . . . . . . . . . . . . . . . . . . . . .40
8.11 Certificate of Secretary. . . . . . . . . . . . . . . . . . . .40
8.12 Escrow Agreements . . . . . . . . . . . . . . . . . . . . . . .40
8.13 Non-Compete Agreements. . . . . . . . . . . . . . . . . . . . .40
8.14 UCC-3s. . . . . . . . . . . . . . . . . . . . . . . . . . . . .40
8.15 HSR Act . . . . . . . . . . . . . . . . . . . . . . . . . . . .40
8.16 Accounting, Tax Matters . . . . . . . . . . . . . . . . . . . .40
8.17 Real Estate and Equipment Purchases . . . . . . . . . . . . . .40
8.18 No Discovery. . . . . . . . . . . . . . . . . . . . . . . . . .41
8.19 Documentation . . . . . . . . . . . . . . . . . . . . . . . . .41
8.20 Approval of Purchaser's Board . . . . . . . . . . . . . . . . .41
ARTICLE 9 -- CONDITIONS TO OBLIGATIONS OF THE COMPANY TO CLOSE . . . . . . . .41
9.1 Accuracy of Representations and Warranties. . . . . . . . . . .41
9.2 Performance . . . . . . . . . . . . . . . . . . . . . . . . . .41
9.3 Certificate . . . . . . . . . . . . . . . . . . . . . . . . . .41
9.4 No Injunction . . . . . . . . . . . . . . . . . . . . . . . . .41
9.5 Legal Opinion . . . . . . . . . . . . . . . . . . . . . . . . .41
9.6 Tax Opinion . . . . . . . . . . . . . . . . . . . . . . . . . .42
9.7 Escrow Agreements . . . . . . . . . . . . . . . . . . . . . . .42
9.8 HSR Act . . . . . . . . . . . . . . . . . . . . . . . . . . . .42
9.9 Documentation . . . . . . . . . . . . . . . . . . . . . . . . .42
9.10 Material Adverse Effect . . . . . . . . . . . . . . . . . . . .42
ARTICLE 10 -- TERMINATION OF AGREEMENT . . . . . . . . . . . . . . . . . . . .42
10.1 Right to Terminate Agreement. . . . . . . . . . . . . . . . . .42
10.2 Effect of Termination . . . . . . . . . . . . . . . . . . . . .43
ARTICLE 11 -- CERTAIN REMEDIES AND LIMITATIONS . . . . . . . . . . . . . . . .43
11.1 Survival of Representations, Warranties and Covenants . . . . .43
11.2 Indemnification by Shareholders . . . . . . . . . . . . . . . .43
11.3 Limitations on Representations, Warranties and Liabilities
of Shareholders . . . . . . . . . . . . . . . . . . . . . . . .45
11.4 Indemnification by Parent and Purchaser . . . . . . . . . . . .45
11.5 Limitations on Liability of Purchaser . . . . . . . . . . . . .47
11.6 Indemnification Claims. . . . . . . . . . . . . . . . . . . . .47
11.7 Defense of Third Party Actions. . . . . . . . . . . . . . . . .47
-iii-
<PAGE>
11.8 Subrogation. . . . . . . . . . . . . . . . . . . . . . . . . .49
11.9 Exclusivity. . . . . . . . . . . . . . . . . . . . . . . . . .49
11.10 Retention of Records . . . . . . . . . . . . . . . . . . . . .49
ARTICLE 12 -- MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . .49
12.1 Certain Definitions. . . . . . . . . . . . . . . . . . . . . .49
12.2 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . .50
12.3 Notices; Etc . . . . . . . . . . . . . . . . . . . . . . . . .50
12.4 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . .51
12.5 Entire Agreement; Amendment; Governing Law; Etc. . . . . . . .52
12.6 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . .52
12.7 Third Party Rights . . . . . . . . . . . . . . . . . . . . . .52
12.8 Exhibits and Schedules . . . . . . . . . . . . . . . . . . . .52
12.9 Pronouns . . . . . . . . . . . . . . . . . . . . . . . . . . .52
12.10 Authority and Execution. . . . . . . . . . . . . . . . . . . .52
12.11 Severability . . . . . . . . . . . . . . . . . . . . . . . . .52
12.12 Time of Essence. . . . . . . . . . . . . . . . . . . . . . . .52
12.13 Interpretation . . . . . . . . . . . . . . . . . . . . . . . .52
12.14 Arbitration. . . . . . . . . . . . . . . . . . . . . . . . . .53
Exhibit A Certificate of Merger
Exhibit B Escrow Agreement
Exhibit C Affiliate Letter
Exhibit D Legal Opinion of Company's Counsel
Exhibit E Non-Compete Agreement
Exhibit F Legal Opinion of Purchaser's Counsel
-iv-
<PAGE>
ACQUISITION AGREEMENT AND PLAN OF MERGER
THIS ACQUISITION AGREEMENT AND PLAN OF MERGER (this "Agreement") is made
and entered into as of May 19, 1998, by and among MAIL-WELL, INC., a Colorado
corporation ("Parent"), MAIL-WELL I CORPORATION, a Delaware corporation ("Mail-
Well" or "Purchaser"), and IPC GRAPHICS, INC., an Ohio corporation, (the
"Company") and DANIEL W. CAIN (the "Controlling Shareholder").
WITNESSETH:
WHEREAS the Company is engaged in the commercial printing business (the
"Business");
WHEREAS, the respective Boards of Directors of Parent, Mail-Well, and the
Company have approved the acquisition of the Company by Mail-Well;
WHEREAS, to complete such acquisition the respective Boards of Directors of
Parent, Mail-Well and the Company have approved the merger of the Company with
and into Mail-Well (the "Merger"), pursuant to and subject to the terms and
conditions of this Agreement;
WHEREAS, the Directors of the Company have unanimously determined that the
Merger is fair to and in the best interests of its shareholders (collectively,
the "Shareholders"), approved the Merger and this Agreement and the transactions
contemplated hereby, and recommended the approval of the Merger and approval and
adoption of this Agreement by the Shareholders; and
WHEREAS, the Merger is intended to be accounted for as a pooling of
interests.
NOW, THEREFORE, in consideration of the mutual covenants, representations
and warranties made herein and of the mutual benefits to be derived herefrom,
the Company, Parent and Purchaser hereby agree as follows:
ARTICLE 1
PRINCIPAL TERMS OF THE MERGER
1.1 PLAN OF MERGER. Subject to the terms and conditions of this
Agreement, the Merger will be carried out in the following manner:
(a) The Company, Parent and Purchaser will cooperate and use their
respective best efforts to consummate the transactions contemplated by this
Agreement.
(b) Subject to the provisions of this Agreement, a Certificate of
Merger, substantially in the form of EXHIBIT A, shall be duly executed and,
on the Closing Date (as defined in Section 1.5 hereof), or as soon thereafter
as reasonably practicable, filed with the Delaware Secretary of State in
accordance with the General Corporation Law of the State of Ohio (the
"DGCL"). In addition, Articles of Merger shall be duly prepared, executed
and acknowledged by
<PAGE>
the Company in accordance with the Ohio Revised Code (the "ORC") and shall be
filed on the Closing Date with the Ohio Secretary of State. The Merger shall
become effective at the date and time set forth in the Certificate of Merger and
the Articles of Merger (the "Effective Time").
(c) At the Effective Time, the Company shall merge with and into
Mail-Well, the separate existence of the Company shall cease, and Mail-Well
shall continue as the surviving corporation. (Mail-Well, in its capacity as
the corporation surviving the Merger, is hereinafter sometimes referred to as
the "Surviving Corporation.")
(d) From and after the Effective Time, the Merger shall have the
effects set forth in Section 259 of the DGCL and Section 1701.79 of the ORC.
(e) The "Merger Consideration" which shall be paid by Parent and
Purchaser in the Merger, to be paid to the Shareholders other than Dissenting
Shareholders, shall be equal to (i) $9,664,650 less (ii) the amount of Debt as
defined in Section 1.5; less (iii) the amount of unpaid Company Expenses, as
defined in Section 12.2; plus or minus (iv) the adjustment under Section 1.7(b)
hereof; less (v) the amount, if any, paid by the Surviving Corporation to
Dissenting Shareholders. The Merger Consideration plus the amount, if any, paid
to Dissenting Shareholders by the Surviving Corporation is herein referred to as
the "Total Shareholder Consideration." The Merger Consideration shall be paid
in duly authorized, validly issued, fully paid and nonassessable Parent common
stock ("MW Common Stock") valued at $43.93 per share (the "MW Common Stock
Valuation"), which MW Common Stock shall be issued of record on the Closing Date
on the Parent's (and its transfer agent's books).
(f) In the event of any stock split, combination, reclassification
or stock dividend with respect to MW Common Stock, any change or conversion of
MW Common Stock into other securities or any other dividend or distribution with
respect to MW Common Stock (other than quarterly cash dividends issued in the
ordinary course consistent with past practice), including without limitation,
any distribution by Parent of shares of capital stock of any of its Affiliates
(as defined in Section 2.18), or if a record date with respect to any of the
foregoing should occur, prior to the Effective Time, appropriate adjustments
shall be made to the MW Common Stock Valuation, and thereafter all references in
this Agreement to the MW Common Stock Valuation shall be deemed to be the MW
Common Stock Valuation as so adjusted.
(g) At the Effective Time and subject to the terms of this
Agreement, each share of common stock, no par value per share, of the Company
(the "Common Stock") then issued and outstanding (other than (x) any shares of
Common Stock which are held in the treasury of the Company, or which are held,
directly or indirectly, by Mail-Well or any direct or indirect subsidiary of
Mail-Well, all of which shall be canceled and none of which shall receive any
payment with respect thereto (hereinafter such shares are collectively referred
to as "Subsidiary Shares") and (y) shares of Common Stock held by Dissenting
Shareholders (as defined in Section 1.4 hereof) (hereinafter such shares are
collectively referred to as "Dissenting Shares")) shall, by virtue of the Merger
and without any action on the part of the holder thereof, be converted into and
represent the right to receive a pro rata share of the Merger Consideration
("Pro Rata Share") which shall be equal to the fraction obtained by dividing one
by the total number of shares of
2
<PAGE>
Common Stock outstanding at the Effective Time (other than the Subsidiary Shares
and Dissenting Shares).
1.2 NO FURTHER RIGHTS OF TRANSFER. At and after the Effective Time, each
holder of a certificate for Common Stock (a "Certificate") shall cease to have
any rights as a Shareholder, except for the right to surrender his or her
Certificate (other than Certificates representing Dissenting Shares or
Subsidiary Shares) in exchange for payment of the Merger Consideration
deliverable in respect thereof, or, in the case of a Dissenting Shareholder, to
perfect his or her right to receive payment for his or her shares pursuant to
applicable law if such holder has validly perfected and not withdrawn his or her
right to receive payment for his or her shares, and no transfer of shares of
Common Stock shall be made on the stock transfer books of the Company.
Certificates presented to the Surviving Corporation after the Effective Time
shall be canceled and exchanged for MW Common Stock and cash as provided in this
Article I. At the close of business on the day of the Effective Time, the stock
ledger of the Company with respect to Common Stock shall be closed.
1.3 SURVIVING CORPORATION. The Certificate of Incorporation of Mail-Well,
as in effect immediately prior to the Effective Time, shall be the Certificate
of Incorporation of the Surviving Corporation. The Bylaws of Mail-Well, as in
effect immediately prior to the Effective Time, shall be the Bylaws of the
Surviving Corporation. At the Effective Time, the directors and officers of
Mail-Well immediately prior to the Effective Time shall be the directors and
officers of the Surviving Corporation, each of such directors to hold office,
subject to the applicable provisions of the Certificate of Incorporation and
Bylaws of the Surviving Corporation, until the next annual shareholders' meeting
of the Surviving Corporation and until their respective successors shall be duly
elected or appointed and qualified.
1.4 DISSENTING SHAREHOLDERS. Notwithstanding anything in this Agreement
to the contrary but only to the extent required by applicable state law, shares
of Common Stock that are issued and outstanding immediately prior to the
Effective Time and are held by holders of Common Stock who comply with all the
provisions of applicable law concerning the right of holders of Common Stock to
dissent from the Merger and require appraisal of their shares of Common Stock
("Dissenting Shareholders") shall not be converted into the right to receive the
Merger Consideration but shall become the right to receive such consideration as
may be determined to be due such Dissenting Shareholder pursuant to the law of
the State of Ohio; provided, however, that (i) if any Dissenting Shareholder
shall subsequently deliver a written withdrawal of his or her demand for
appraisal (with the written approval of the Surviving Corporation, if such
withdrawal is not tendered within 60 days after the Effective Time), or (ii) if
any Dissenting Shareholder fails to establish and perfect his or her entitlement
to appraisal rights as provided by applicable law, or (iii) if within 120 days
of the Effective Time neither any Dissenting Shareholder nor the Surviving
Corporation has filed a petition demanding a determination of the value of all
shares of the Common Stock that are issued and outstanding at the Effective Time
and held by Dissenting Shareholders, then such Dissenting Shareholder or
Shareholders, as the case may be, shall forfeit the right to appraisal of such
shares and each such share shall thereupon be deemed to have been converted into
the right to receive the Merger Consideration, without interest, according to
the terms of this Agreement. The Company shall
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give Purchaser (A) prompt notice of any written demands for appraisal,
withdrawals of demands for appraisal and any other related instruments received
by the Company, and (B) the opportunity to direct all negotiations and
proceedings with respect to demands for appraisal. The Company will not
voluntarily make any payment with respect to any demands for appraisal and will
not, except with the prior written consent of Mail-Well, settle or offer to
settle any such demand.
1.5 THE CLOSING. The closing of the transactions contemplated by this
Article 1 (the "Closing") shall be held at the offices of Rothgerber Johnson &
Lyons LLP in Denver, Colorado at 9:00 a.m. (local time) on May 29, 1998, or at
such other place, time and date as may be jointly designated by Purchaser, the
Company and the Shareholders (the date on which the Closing takes place, the
"Closing Date"). At or before the Closing, each of the following shall occur:
(a) As soon as practicable but no later than four business days
before the scheduled Closing Date, the Company shall deliver to Purchaser (i) a
certificate (the "Debt Certificate") executed by the chief financial officer of
the Company setting forth the amount of the outstanding principal balance and
the interest of any kind, as well as the amount of early retirement or
prepayment fees and/or penalties of any kind (the "Prepayment Fees") that will
be due and payable as of the Closing Date by the Company pursuant to any Debt
that will be outstanding as of the Closing Date to each creditor to whom any
such Debt is owed (the "Creditors") and (ii) a letter (the "Payoff Letters"),
executed by the Company and an authorized representative of each Creditor that
is a bank, leasing company or other financial institution or who is listed in
SCHEDULE 1.5(a) to whom any Debt is owed (other than the Debt set forth on
Schedule 1.5(b)), setting forth the amount of principal, interest and Prepayment
Fees, that will be due and payable by the Company to each of such Creditors as
of the Closing Date and undertaking to terminate, either at or immediately after
the Closing, all liens or other security interests securing such Debt upon
payment of the amounts due and owing. "Debt" shall include all funded long
term, short term or "line of credit" indebtedness, to banks and financial
institutions, Shareholders and other third parties, including the current
portion thereof, accrued interest thereon, and Prepayment Fees, together with
the unamortized principal amount including the current portion, interest expense
required to be accrued thereon and Prepayment Fees of all capitalized lease
obligations that are properly classified as liabilities on the balance sheet of
the Company at Closing in conformity with GAAP, the amounts of which shall be
determined consistent with the Company's audited Financial Statements; provided,
however, that Debt shall not include those prepayment fees for Debt listed on
SCHEDULE 1.5(b) which is not going to be discharged at Closing.
(b) At the Closing, that portion of the Debt owed to each Creditor
executing a Payoff Letter or whose Debt is otherwise acknowledged to Parent's
reasonable satisfaction, except that listed in SCHEDULE 1.5(b), shall be paid by
Purchaser to such Creditor by wire transfer of immediately available funds to an
account or accounts designated by such Creditors and in the amounts specified in
the Payoff Letters or otherwise established with such Creditors.
(c) At the Closing, Purchaser shall pay any unpaid Company Expenses
accrued on the books of the Company by wire transfer of immediately available
funds or by certified bank check.
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(d) The Purchaser shall place in escrow with the Escrow Agent acting
pursuant to the Escrow Agreement (as defined in Section 1.5(g)) (such amount,
together with interest and dividends thereon, additions thereto, and releases
therefrom, as more specifically set forth in such Escrow Agreement, is referred
to herein as the "Dissenting Shareholders Escrow Amount") immediately available
funds representing 100% of the cash value of the Merger Consideration which
would have been due Dissenting Shareholders under Section 1.1 as of the Closing
Date if such Dissenting Shareholders had not exercised their rights of appraisal
and MW Common Stock (based on the MW Common Stock Valuation) representing 25% of
the amount of the Merger Consideration which would have been due Dissenting
Shareholders under Section 1.1 as of the Closing Date. Any amounts payable by
Purchaser as the Surviving Corporation to Dissenting Shareholders subsequent to
the Closing Date shall be first payable out of the cash portion of the
Dissenting Shareholders Escrow Amount. Any amounts paid to Dissenting
Shareholders by Purchaser as the Surviving Corporation in excess of the cash
amount in the Dissenting Shareholder Escrow Amount shall be payable to Purchaser
in MW Common Stock (based on the MW Common Stock Valuation) out of, first the
Dissenting Shareholder Escrow Amount, and then out of, the Escrow Amount (as
defined below) in reduction of such Escrow Amount (as defined below). Any cash
remaining in the Dissenting Shareholders Escrow Amount after the payment of all
amounts due to Dissenting Shareholders shall be exchanged for shares of MW
Common Stock, rounded up to the nearest whole share, having a value (based on
the MW Common Stock Valuation) equal to the value of such cash. Any amounts
remaining in the Dissenting Shareholders Escrow Amount after resolution of all
Dissenting Shareholder claims shall be payable to the Shareholders surrendering
Certificates pursuant to Section 1.6 in MW Common Stock (based on the MW Common
Stock Valuation) at the direction of the Shareholders' Representative (as
defined in Section 12.1).
(e) At the Closing, from the Merger Consideration the Purchaser
shall deliver stock certificates representing 16,500 shares of MW Common Stock
to the Escrow Agent acting pursuant to the Escrow Agreement referred to below
(such amount, together with dividends thereon, additions thereto, and releases
therefrom, as more specifically set forth in such Escrow Agreement, is referred
to herein as the "Indemnification Escrow Amount").
(f) At the Closing, from the Merger Consideration the Purchaser
shall deliver stock certificates representing 1,572 shares of MW Common Stock to
the Escrow Agent acting pursuant to the Escrow Agreement referred to below (such
amount, together with dividends thereon, additions thereto, and releases
therefrom, as more specifically set forth in such Escrow Agreement, is referred
to herein as the "Working Capital Escrow Amount").
(g) The Dissenting Shareholders Escrow Amount, the Working Capital
Escrow Amount and the Indemnification Escrow Amount (collectively, the "Escrow
Amount") shall be held and distributed by such Escrow Agent in accordance with
the terms of the Escrow Agreement, substantially in the form attached hereto as
EXHIBIT B (the "Escrow Agreement"), which shall be entered into by the Escrow
Agent named therein, Purchaser and the Shareholders' Representative prior to or
on the Closing Date.
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1.6 SURRENDER OF CERTIFICATES.
(a) At any time after the Effective Time upon surrender for
cancellation to the Purchaser of the Certificate(s) held by any record holder of
a Certificate, together with a duly executed letter of transmittal in a form
reasonably acceptable to Purchaser, such holder shall be entitled to receive in
exchange for each share of Common Stock represented by such surrendered
Certificate a Pro Rata Share of the Initial Distribution Amount to Shareholders.
The "Initial Distribution Amount" shall be the Total Shareholder Consideration
less the Escrow Amount delivered to the Escrow Agent pursuant to Section 1.5.
Promptly upon termination of each of the escrows pursuant to the terms of this
Agreement, each such Shareholder shall be entitled to receive his, her or its
Pro Rata Share of the particular Escrow Amount distributed to Shareholders. The
amounts so payable to a holder of a Certificate(s) shall be paid with a
certificate for the number of shares of MW Common Stock having a value (based on
the MW Common Stock Value and rounded down to the nearest whole share) equal to
the amount so due plus cash in lieu of fractional shares and in the amount of
any unpaid dividends or other distributions payable on such shares of MW Common
Stock with a record date after the Effective Time. The Certificate(s) so
surrendered shall be canceled. Until so surrendered, each Certificate shall be
deemed, for all corporate purposes, to evidence only the right to receive the
Merger Consideration deliverable in respect thereof to which such Person is
entitled pursuant to this Article 1. A Certificate surrendered will be
registered in the name of the beneficial owner of said Certificate (as set forth
in Schedule 2.2) in the event the voting trust to which such shareholder was a
party is terminated prior to or at Closing.
For purposes of this Agreement, "Person" shall mean and include an
individual, a partnership, a joint venture, a corporation, a trust, an
unincorporated organization, a group and a government or other department or
agency thereof.
(b) If the Merger Consideration (or any portion thereof) is to be
delivered to a Person other than the Person in whose name the Certificates
surrendered in exchange therefor are registered, it shall be a condition to the
payment of the Merger Consideration that the Certificates so surrendered shall
be properly endorsed or accompanied by appropriate stock powers and otherwise in
proper form for transfer, that such transfer otherwise be proper and that the
Person requesting such transfer pay to Mail-Well any transfer or other taxes
payable by reason of the foregoing or establish to the satisfaction of Mail-Well
that such taxes have been paid or are not required to be paid.
(c) In the event any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the Person claiming
such Certificate to be lost, stolen or destroyed, and upon such Person's
agreement to indemnify the Parent and Mail-Well against any claim that may be
made against the Parent or Mail-Well with respect to the Certificate claimed to
have been lost, stolen or destroyed, or, if required by Mail-Well, upon such
Person's obtaining a lost instrument bond in form and amount satisfactory to
Mail-Well, Mail-Well will issue in exchange for such lost, stolen or destroyed
Certificate the Merger Consideration deliverable in respect thereof as
determined in accordance with this Article 1.
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(d) No certificates or scrip representing fractional shares of MW
Common Stock shall be issued upon the surrender for exchange of Certificates
pursuant to this Article 1 or as part of a distribution from the Escrow Amount;
no dividend or other distribution by Parent and no stock split, combination or
reclassification shall relate to any such fractional share; and no such
fractional share shall entitle the record or beneficial owner thereof to vote or
to any other rights of a stockholder of Parent. In lieu of any such fractional
share, each holder of Shares who would otherwise have been entitled thereto upon
the surrender of Certificate(s) for exchange pursuant to this Article 1 will be
paid an amount in cash (without interest) rounded to the nearest whole cent,
determined by multiplying (i) the MW Common Stock Valuation by (ii) the
fractional share to which such holder would otherwise be entitled. Purchaser
shall make available the cash necessary for this purpose at the Effective Time.
1.7 WORKING CAPITAL SETTLEMENT.
(a) Prior to the Closing Date, the Company shall estimate its
working capital position (the "Working Capital") as of the close of business on
the Closing Date (the "Computation Date"). Working Capital shall mean (x) the
sum of (i) the book value of current assets plus (ii) the amount of capital
expenditures listed on Schedule 1.7; less (y) the book value of current
liabilities excluding any amount of Debt or Company Expenses paid by Purchaser
at Closing pursuant to Section 1.5(c). The Company shall provide Purchaser a
copy of the calculation of the estimated Working Capital (the "Estimated Working
Capital Statement") three business days prior to the Closing Date. The book
value of all amounts and the determination of Working Capital shall be
determined in accordance with generally accepted accounting principles,
consistently applied ("GAAP") on a basis consistent with the Company's last
audited Financial Statements..
(b) If the amount of the Working Capital as shown on the Estimated
Working Capital Statement (the "Estimated Working Capital") is greater than
$1,221,000 the Merger Consideration shall be increased by the difference between
the Estimated Working Capital and $1,221,000. If the amount of the Estimated
Working Capital is less than $1,221,000, the Merger Consideration shall be
reduced by the difference between $1,221,000 and the Estimated Working Capital.
(c) Purchaser shall prepare and deliver to Shareholders a "Final
Working Capital Statement" on or before the thirtieth day following Closing. In
preparing the Final Working Capital Statement, inventory shall be valued at the
lesser of cost or market using FIFO in accordance with GAAP, and shall be based
upon a physical count taken by Shareholders and observed by the Purchaser (one-
half the cost of which shall be a Company Expense) within three business days
prior to the Closing Date. Except as provided in the preceding sentence, all
amounts set forth on the Final Working Capital Statement shall be determined in
accordance with GAAP on a basis consistent with the accounting principles used
in connection with determining the Estimated Working Capital. The Final Working
Capital Statement shall become final and binding on Shareholders and Purchaser
(in such instance, the "Final Closing Statement") unless the Shareholders'
Representative gives written notice to the Purchaser of his disagreement with
respect to any matter contained therein ("Notice of Working Capital
Disagreement") within 10
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days after the receipt thereof. A Notice of Working Capital Disagreement shall
not be permitted unless the aggregate amount in dispute exceeds Ten Thousand
Dollars ($10,000). A Notice of Working Capital Disagreement shall specify in
reasonable detail the nature of any disagreement so asserted. For a period of
30 days after the delivery of the Notice of Working Capital Disagreement, the
Shareholders' Representative and the Purchaser shall attempt to resolve in
writing all of the differences with respect to each matter specified in the
Notice of Working Capital Disagreement, in which case any such resolution of the
Final Working Capital Statement shall be final and binding on the parties (in
such instance, the "Final Closing Statement"). If, at the end of such 30-day
period, the Shareholders' Representative and Purchaser have not resolved in
writing all of the differences with respect to any such matter, then each
unresolved matter ("Disputed Working Capital Matter") shall be submitted to and
reviewed by the accounting firm of Price Waterhouse LLP or, if such firm is
unwilling or unable to act, to another "big six" accounting firm selected by a
panel of three arbitrators in accordance with the rules of the American
Arbitration Association (the "Neutral Accountant"). The Neutral Accountant
shall consider only the Disputed Working Capital Matters and shall act promptly
to resolve in writing all Disputed Working Capital Matters, and its decisions
with respect to the Disputed Working Capital Matters shall be final and binding
on each of the Shareholders and Purchaser; provided that no such resolution of
the Disputed Working Capital Matters shall require payment of an amount greater
than the highest amount or less than the lowest amount suggested for such
resolution by either the Shareholders' Representative or the Purchaser. The
Neutral Accountant shall notify the Shareholders and the Purchaser of its
resolution of the Disputed Working Capital Matters and shall prepare a revised
Working Capital Statement reflecting the resolution of all Disputed Working
Capital Matters promptly after such resolution (in such instance the "Final
Closing Statement") and shall deliver it to Purchaser and Shareholders'
Representative.
(d) Purchaser shall be responsible for and shall pay the fees and
expenses incurred in connection with the Neutral Accountant. Upon payment by
the Purchaser, one-half of such fees of the Neutral Accountant will be a claim
of Purchaser against the Escrow Amount payable first from the Working Capital
Escrow Amount and then from the Indemnification Escrow Amount.
(e) Within 10 days after receipt of the Final Closing Statement:
(i) if the Working Capital as set forth in the Final
Closing Statement is less than the Estimated Working Capital, the Merger
Consideration payable to Shareholders shall be adjusted by the difference
(based on the MW Common Stock Valuation) by the Shareholders'
Representative giving instructions to the Escrow Agent to distribute to
Purchaser the MW Common Stock representing such adjustment, first from the
Working Capital Escrow Amount and, to the extent there is not a sufficient
amount in the Working Capital Escrow Amount, then from the Indemnification
Escrow Amount.
(ii) If the Working Capital as set forth in the Final
Closing Statement is greater than the Estimated Working Capital, Purchaser,
subject to the provisions of Section 1.6(d), shall issue additional MW
Common Stock (based on the MW Common Stock Valuation) as additional Merger
Consideration to each Shareholder surrendering
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Certificate(s) after the Effective Time, the Pro Rata Share of the
difference for each share represented by such Certificate(s).
1.8 ADDITIONAL POST-CLOSING ADJUSTMENTS.
(a) If Purchaser reasonably determines, within 90 days of the
Closing Date, in accordance with GAAP and consistent with the Company's past
practices and historical turnover rates, that the allowance for obsolete or
unsaleable items in the raw materials, work-in-progress and finished goods
inventory, as reflected in the Working Capital included in the Final Closing
Statement, was insufficient based upon facts known at the date of such
subsequent determination, the Purchaser shall provide the Shareholders'
Representative with written notice thereof. The Shareholders' Representative
shall have 10 days after receipt of Purchaser's notice to give written notice to
the Purchaser of his disagreement ("Notice of Inventory Disagreement"). If a
Notice of Inventory Disagreement is issued by Shareholders' Representative, it
shall specify in reasonable detail the nature of any disagreement so asserted.
For a period of 30 days after the delivery of such Notice of Inventory
Disagreement, the Shareholders' Representative and the Purchaser shall attempt
to resolve in writing all of the differences with respect to each matter
specified in the Notice of Inventory Disagreement, in which case any such
resolution of such matters shall be final and binding on the parties. If, at
the end of such 30-day period, the Shareholders' Representative and Purchaser
have not resolved in writing all of the differences with respect to any such
matter, then each unresolved matter ("Disputed Inventory Matter") shall be
submitted to and reviewed by the Neutral Accountant. The Neutral Accountant
shall consider only the Disputed Inventory Matters and shall act promptly to
resolve in writing all Disputed Inventory Matters, and its decisions with
respect to the Disputed Inventory Matters shall be final and binding on each of
the Shareholders and Purchaser; provided that no such resolution of the Disputed
Inventory Matters shall require payment of an amount greater than the highest
amount or less than the lowest amount suggested for such resolution by either
the Shareholders' Representative or the Purchaser. The Neutral Accountant shall
notify the Shareholders and the Purchaser of its resolution of the Disputed
Inventory Matters and shall deliver written confirmation of same to Purchaser
and Shareholders' Representative. If Shareholders' Representative does not
issue a Notice of Inventory Disagreement or upon the resolution of the Disputed
Inventory Matters by the Neutral Accountant, the Purchaser, at Shareholders'
Representative's written instructions, shall sell such obsolete and/or
unsaleable inventory. The Merger Consideration payable to Shareholders shall be
adjusted by the difference (based on the MW Common Stock Valuation) by an amount
equivalent to the additional payment, if any, that would have been payable by
the Shareholders to the Purchaser pursuant 1.7(e)(i) on the basis of the
difference between the allowance for obsolete or unsaleable items as restated
pursuant to this Section 1.8(a) and as originally stated at in the Final Closing
Statement, less the aggregate proceeds from the sale of said obsolete and/or
unsaleable inventory through the Shareholders' Representative giving
instructions to the Escrow Agent to distribute to Purchaser the MW Common Stock
representing such adjustment, first from the Working Capital Escrow Amount and,
to the extent there is not a sufficient amount in the Working Capital Escrow
Amount, then from the Indemnification Escrow Amount.
(b) If the gross amount collected by Purchaser upon the accounts
receivable reflected in the Working Capital included in the Final Closing
Statement ("Accounts Receivable")
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during the 120 days after the Closing Date is less than the book value of such
Accounts Receivable after giving effect to the allowance for doubtful accounts
as reflected on the Final Closing Statement, Shareholders shall pay to
Purchaser, by giving instructions to the Escrow Agent to distribute to Purchaser
MW Common Stock (based on the MW Common Stock Valuation) first from the Working
Capital Escrow Amount and, to the extent there is not a sufficient amount in the
Working Capital Escrow Amount, then from the Indemnification Escrow Amount, on
the basis of the difference between the amount collected and the book value of
such Accounts Receivable after giving effect to the allowance for doubtful
accounts as reflected as originally stated at in the Final Closing Statement;
provided, however, that during the aforementioned 120-day period Purchaser shall
not write off or settle any uncollected Accounts Receivable or retain a
collector to collect any such Accounts Receivable without written consent of
Shareholders' Representative. Subsequent to such 120 days after the Closing
Date, Purchaser shall continue to use reasonable efforts to collect any Accounts
Receivable not collected during the 120 days after the Closing Date, and the net
amounts of such Accounts Receivable collected by Purchaser, after accounting for
third party collection costs, shall be remitted to the Shareholders, other than
Dissenting Shareholders, in MW Common Stock (based on the MW Common Stock
Valuation) after the payment by Shareholders of the amounts due Purchaser under
this Section 1.8(b). On or prior to the 15th day of each month, Purchaser shall
deliver to Shareholders' Representative an Accounts Receivable report
identifying the gross collections made by Purchaser through and including the
end of the preceding calendar month. Any amounts collected by Purchaser shall
be applied against the longest outstanding receivables except as to any
receivable as to which the Person paying such amount has given Purchaser notice
of a dispute.
(c) Upon the later of the 135th day after the Closing Date, or the
10th day after receipt by both Shareholders and Purchaser of the Final Closing
Statement, or the payment by Shareholders to Purchaser of any amount claimed by
Purchaser pursuant to Section 1.7 or this Section 1.8, any remaining Working
Capital Escrow Amount shall be distributed from the Working Capital Escrow
Account to Shareholders surrendering Certificates pursuant to Section 1.6 as
directed by the Shareholders' Representative.
1.9 TRANSFER TAXES. Any transfer taxes or stamp duties, or other similar
taxes, fees, charges or expenses (collectively "Transfer Taxes") imposed on the
Company shall be divided equally between the Purchaser and the Company, and the
total accrued and unpaid amount thereof allocated to the Company shall be
treated as a Company Expense. Any Transfer Taxes imposed on the Shareholders
shall be paid by the Shareholders.
1.10 MW COMMON STOCK.
(a) The MW Common Stock to be delivered to Shareholders will not be
registered under federal or state securities laws, but rather, issued pursuant
to an exemption therefrom. As a result, Shareholders acknowledge and agree that
such MW Common Stock is "restricted" stock as such term is defined under such
securities laws and cannot be sold, pledged or transferred unless subsequently
registered or unless an exemption is available allowing its resale.
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(b) Parent, at its expense, shall file a shelf registration
statement (the "Registration Statement") as soon as reasonably practicable after
the Closing Date, pursuant to Rule 415 under the Securities Act of 1933, as
amended (the "Securities Act") with respect to all the MW Common Stock issued by
Parent in connection with consummating the transactions contemplated by this
Agreement (including, without limitation, those shares deposited in escrow under
the Escrow Agreement) (collectively, "Registrable Shares"). Parent shall use
its best efforts to: (i) have the Registration Statement declared effective on
or before July 15, 1998; and (ii) keep the Registration Statement continuously
effective and to supplement and amend it as required by the Securities Act and
the regulations thereunder from the date the Registration Statement is declared
effective (the "Initial Effective Date") until the earliest to occur of the
following events: (A) such time as Shareholders holding Registrable Shares may
transfer the MW Common Stock pursuant to the safe harbor provisions of Rule 144
under the Securities Act without having to comply with any volume limitations
under such rule; (B) notification to Parent that all Registrable Shares have
been sold for the accounts of the participating Shareholders; or (C) a request
by all participating Shareholders having unsold Registrable Shares that the
Registration Statement be terminated (the period between the Initial Effective
Date and earliest to occur of such events is hereinafter referred to as the
"Registration Statement Period"). If the Registration Statement ceases to be
effective at any time during the Registration Statement Period, Parent, at its
expense, shall within thirty days of such cessation cause to be filed an
additional shelf registration statement covering the unsold balance of the
Registrable Shares and shall use its best efforts to have such registration
statement declared effective as soon as practicable thereafter and keep such
registration statement effective until the end of the Registration Statement
Period.
(c) Parent agrees to furnish each participating Shareholder with
such number of conformed copies of any registration statement and prospectus
included therein (including each preliminary prospectus) covering the
Registrable Shares as each such Shareholder reasonably may request in order to
facilitate the public sale of the Registrable Shares covered by such
registration statement.
(d) All expenses incurred by Parent, Purchaser and the Shareholders
in connection with any registration under this Agreement shall be paid by Parent
and Purchaser, including without limitation all registration and filing fees,
printing expense, fees and disbursements of counsel and independent public
accountants for the Parent and the Purchaser, fees and expenses (including
counsel fees) incurred in connection with complying with state securities or
"blue sky" laws, fees of securities exchanges or the National Association of
Securities Dealers, Inc., fees of transfer agents and registrars, but excluding
any selling commissions and transfer taxes applicable to the sale of the MW
Common Stock and any legal fees and expenses of counsel or other advisers and
agents of the selling Shareholders.
(e) To ensure that the Shareholders are able to benefit from the
Registration Statement and to make available the benefits of certain rules and
regulations of the Securities and
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Exchange Commission ("SEC") that may permit the offer and/or sale of MW Common
Stock to the public without registration by the Shareholders, Parent agrees to:
(i) supplement and amend the Registration Statement in a
timely manner if required by the registration form utilized by the
Parent, or by the instructions applicable to such form or by the
Securities Act or the rules and regulations thereunder or if reasonably
requested by a majority in aggregate amount of the holders of
Registrable Shares and to furnish the Shareholders' Representative with
copies of any such amendment or supplement at least twenty-four hours
prior to its being filed with the SEC;
(ii) file with the SEC in a timely manner all reports and
other documents required of Parent under the Securities Act and the
Securities Exchange Act of 1934, as amended ("Exchange Act");
(iii) make and keep public information regarding Parent
available (as those terms are understood and defined in Rule 144) at all
times during the Registration Period or such longer period ending on the
date upon which the Shareholders no longer need to rely on Rule 144; and
(iv) so long as any Shareholder owns any MW Common Stock,
furnish to each Shareholder upon written request a written statement by
Parent that all reports and filings that are necessary to be filed by
Parent for any Shareholder to avail himself or herself of Rule 144 or 145
have been filed, and provide a copy of the most recent annual or quarterly
report of Parent, and any other reports and documents as a Shareholder may
reasonably request in availing himself or herself of any rule or regulation
of the SEC.
(f) Parent and Mail-Well, jointly and severally, shall indemnify the
Shareholders (and any Person who is an Affiliate of such Shareholders within the
meaning of the Securities Act) whose shares of MW Common Stock are included in
any registration statement as Registrable Shares against all expenses, claims,
losses, damages, or liabilities, including, without limitation, reasonable
attorneys' fees and court costs (collectively, a "Liability"), to which the
Shareholder may become subject under the Securities Act, the Exchange Act or any
rule or regulation under either of them or other statute or at common law,
arising out of or based upon: (i) any untrue statement or alleged untrue
statement of any material fact contained in any registration statement, any
preliminary prospectus or final prospectus contained therein, or any amendment
or supplement, and any document incorporated by reference therein (a
"Registration Document"); or (ii) any omission or alleged omission to state a
material fact required to be stated in any Registration Document or necessary in
order to make any statement in any Registration Document not misleading.
Notwithstanding the foregoing, neither Parent nor Mail-Well will be liable to a
Shareholder to the extent that any liability arises out of or is based upon any
untrue statement or omission made in any Registration Document in reliance upon
and in conformity with written information furnished to Parent or Mail-Well for
incorporation in any such Registration Document by or on behalf of such
Shareholder. Parent and Mail-Well's joint and several indemnification
obligation will remain in full force and effect regardless of any
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investigation made by or on behalf of a Shareholder and will survive transfer
of the Registrable Shares by the Shareholders.
1.11 INVESTMENT LETTER. Pursuant to Section 8.9 hereof, and in
acknowledgment of the restrictions on transfer of the MW Common Stock
(i) described in this Section 1.10 above; and (ii) if applicable, required by
the pooling of interests accounting method contemplated herein, each Shareholder
shall deliver to Purchaser prior to Closing an executed letter in the form of
Exhibit C hereto.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND CONTROLLING SHAREHOLDER
The Schedules attached to this Agreement are sometimes referred to herein
as the "Disclosure Schedules." The Company and Controlling Shareholder
represent and warrant to Purchaser that except as otherwise disclosed in the
Disclosure Schedules the following statements are true as of the date of this
Agreement and as of the Closing Date:
2.1 ORGANIZATION, STANDING, CORPORATE AUTHORIZATION, AND ENFORCEABILITY.
(a) The Company is a corporation duly organized, validly existing and
in good standing under the laws of the jurisdiction of its incorporation and has
all requisite corporate power and authority to own, lease and operate its
properties and to carry on its business as now being conducted. The Company is
duly qualified or licensed to do business and is in good standing in each
jurisdiction in which the property owned, leased or operated by it or the nature
of the business conducted by it makes such qualification necessary, except where
the failure to so qualify would not have a Material Adverse Effect on the
financial condition or business of the Company.
(b) This Agreement and all other agreements, documents and
instruments executed or to be executed by the Company in connection herewith
(the "Related Agreements") constitute the valid and legally binding obligations
of the Company and are enforceable in accordance with their terms, except as
such enforceability may be limited by equitable principles and by applicable
bankruptcy, insolvency, reorganization, arrangement, moratorium or similar laws
relating to or affecting the rights of creditors generally. The Company has the
requisite corporate power and authority to enter into this Agreement and the
Related Agreements.
(c) The execution and delivery of this Agreement, the Related
Agreements, and all other documents and instruments executed or to be executed
by the Company pursuant to this Agreement, and the consummation of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary corporate and other action on the part of the Company, subject to
obtaining the requisite approvals from Shareholders in accordance with
applicable law. This Agreement and the Related Agreements have been or will
have been, at the time of their
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respective executions and deliveries, duly executed and delivered by a duly
authorized officer of the Company.
(d) Except as set forth in SCHEDULE 2.1(d), the Company does not
own, directly or indirectly, any capital stock or other equity interest in any
Person or have any direct or indirect equity or ownership interest in any
Person, and the Company is not subject to any obligation or requirement to
provide funds for or to make any investment (in the form of a loan, capital
contribution or otherwise) to or in any Person.
2.2 CAPITALIZATION. As of the date of this Agreement, the capitalization
of the Company (including all capital stock authorized, issued and outstanding)
is as set forth on SCHEDULE 2.2. All of the outstanding shares of the Company's
Common Stock are owned by the Shareholders as set forth on SCHEDULE 2.2. The
Company has no authorized or outstanding bonds, debentures, notes or other
indebtedness the holders of which have the right to vote (or convertible or
exchangeable into or exercisable for securities having the right to vote) with
the Shareholders on any matter ("Voting Debt"). Except as contemplated by this
Agreement, after the Effective Time, the Surviving Corporation will have no
obligation to issue, transfer or sell any shares of MW Common Stock as a result
of any obligation existing, or created by the Company, at or prior to the
Effective Time, including pursuant to any stock incentive plan or warrant. All
prior issuances of securities by the Company and all prior repurchases,
redemptions or exchanges affecting the outstanding securities of the Company
have complied with all applicable Legal Requirements (as defined below)
(including federal and state securities laws), preemptive rights and contractual
restrictions. All issued and outstanding shares of capital stock of the Company
have been duly authorized and validly issued and are fully paid and
nonassessable. Except as disclosed on SCHEDULE 2.2, the Company does not have
shares of its capital stock authorized, issued or outstanding and there are no
outstanding convertible or exchangeable securities, subscriptions, calls,
options, warrants, rights (contractual or arising by operation of law,
including, without limitation, rights of first refusal and preemptive rights),
or other agreements or commitments of any character to which the Company is a
party or by which it is bound, relating to the issuance, purchase, other
acquisition or voting of any shares of the capital stock of, or other equity or
ownership interest (collectively, "Equity Rights") in the Company. Except as
disclosed on SCHEDULE 2.2 and on SCHEDULE 2.11, there are no agreements,
arrangements or commitments of any character (contingent or otherwise) pursuant
to which any person or entity is or may be entitled to receive any payment based
on the revenues or earnings, or calculated in accordance therewith, of the
Company. Except as set forth in SCHEDULE 2.2, there are no voting trusts,
proxies or other agreements or understandings to which the Company or
Shareholders is a party or by which the Company or Shareholders is bound with
respect to the voting of any shares of capital stock or other Equity Interests
of the Company. Except as set forth on Schedule 2.2, any such voting trusts
will be terminated as of the Closing.
For purposes of this Agreement, the term "Legal Requirement" shall mean any
federal, state or local law, statute, legislation, ordinance, code, rule,
regulation, decree, award, order, permit, franchise, consent or authorization
of, any federal, state, local or other governmental body or agency, department,
commission, bureau, board, council, court, magistrate, panel or
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instrumentality of the United States, any political subdivision thereof or
any state or local governmental authority in effect as of the date hereof.
2.3 ARTICLES OF INCORPORATION AND BYLAWS; CERTAIN RECORDS. Copies of the
Articles of Incorporation, Bylaws, minute books and stock records of the Company
have been made available to Purchasers, and each such copy is true, correct and
complete as amended to date. All material records of any type and description
in whatever form or medium that presently exist and that relate to the business
or properties of the Company and which in the ordinary course of business the
Company would normally retain are in the possession or control of the Company
and are located at the offices of the Company or of its counsel, independent
auditors, consultants, or other advisors, and the Surviving Corporation will
have the right to possession of all such records upon the consummation of the
transactions contemplated by this Agreement.
2.4 COMPLIANCE WITH OTHER INSTRUMENTS AND LAWS. Except as set forth in
SCHEDULE 2.4, the execution and delivery of this Agreement and the Related
Agreements and the consummation of the transactions contemplated hereby and
thereby will not conflict with or result in any violation of or default under
any provision of the Articles of Incorporation or Bylaws of the Company or any
material violation of, or default under, any mortgage, indenture, trust, lease,
partnership or other agreement or other instrument, permit, concession, grant,
franchise, license, judgment, order, decree, or Legal Requirement applicable to
the Company or any Shareholder or any of the properties of the Company, nor will
they result in the creation or imposition of any lien, security interest,
charge, claim or other encumbrance of any nature whatsoever on any of the
properties or assets of the Company or the Common Stock, nor will they prevent
or materially delay the consummation of the transactions contemplated hereby.
2.5 GOVERNMENTAL AUTHORIZATIONS; CONSENTS. Except as set forth on
SCHEDULE 2.5, no consents, licenses, approvals or authorizations of, or
registrations or declarations with, any governmental authority, agency, bureau
or commission, or any third party which have not already been obtained, are
required to be obtained or made by the Company or Shareholders in connection
with the execution, delivery, performance, validity and enforceability of this
Agreement or any Related Agreement or the sale or transfer of the Common Stock
and will not prevent or materially delay the consummation of the transactions
contemplated hereby other than and except for consents, licenses, approvals,
authorizations or registrations which are not material.
2.6 LITIGATION. No action, suit, proceeding or governmental investigation
is pending or, to the Knowledge (as defined below) of the Company and the
Controlling Shareholder, threatened, at law or in equity, which seeks to
question, delay or prevent, or could have the effect of delaying or preventing,
the consummation of all or any portion of the transactions contemplated hereby.
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2.7 FINANCIAL STATEMENTS; CONDUCT OF THE BUSINESS; NO UNDISCLOSED
LIABILITIES. Except as set forth on SCHEDULE 2.7:
(a) The Company has delivered to Purchaser (i) the audited balance
sheets of the Company as of September 30, 1997, 1996 and 1995 and the related
audited statements of income, retained earnings and cash flows for the fiscal
years then ended, accompanied in each case by an opinion thereon of the
independent certified public accountant of the Company (such financial
statements, including the notes thereto, hereinafter being referred to as the
"Annual Financial Statements"), and (ii) the unaudited balance sheet of the
Company as of March 31, 1998, and the related unaudited statements of income for
the six months ended March 31, 1998 (the "Interim Financial Statements"). (The
Annual Financial Statements and the Interim Financial Statements including the
notes thereto together hereinafter being referred to as the "Financial
Statements"). All of the Financial Statements have been prepared in accordance
with GAAP (subject to the modifications and exceptions set forth in SCHEDULE 2.7
and, in the case of Interim Financial Statements, to end of year audit
adjustments and preparation of footnotes) consistently applied for all relevant
periods (except as indicated therein) and present fairly in all material
respects the financial position of the Company as of the dates thereof and the
results of its operations for the periods then ended.
(b) The Company does not have any debts, obligations, guaranties of
the obligations of others or liabilities except: (i) debts, obligations,
guaranties and liabilities to the extent reflected or reserved against in the
Financial Statements, (ii) debts, obligations, guaranties and liabilities
incurred or entered into subsequent to March 31, 1998, in the ordinary course of
business and otherwise not in contravention of this Agreement, and (iii) debts,
obligations and liabilities relating to this Agreement and the Related
Agreements and instruments being executed and delivered in connection herewith
and the transactions referred to herein and therein (including obligations to
pay legal fees, financial advisory fees, bank fees, accounting fees and other
amounts in connection therewith) so long as such obligations are included in
determining Company Expenses.
2.8 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except for (i) matters set
forth on SCHEDULE 2.8, (ii) matters disclosed in the Annual Financial Statements
or (iii) as contemplated by this Agreement, the Company has not, since September
30, 1997, except as otherwise specified herein:
(a) undergone any change in its condition (financial or otherwise),
properties, assets, liabilities, business or operations, except for changes in
the ordinary course of business which have not either individually or in the
aggregate had a Material Adverse Effect;
(b) except as set forth on SCHEDULE 2.8, changed any of its methods
of accounting or accounting practices or classifications of assets or
liabilities, or failed to maintain its books of account in the usual, regular
and ordinary manner in accordance with GAAP unless required by regulation or
GAAP;
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(c) modified the material terms of, or canceled or terminated, any
Material Contract (as defined below) other than in the ordinary course of
business;
(d) terminated, discharged or received any written notice regarding
the resignation, discharge or termination of any officer other than in the
ordinary course of business or as contemplated by this Agreement;
(e) since December 31, 1995, established or adopted any Benefit Plan
(as defined below), or increased the amount of the wages, bonus, salary,
commissions, fringe benefits or other compensation or remuneration payable to,
any of its directors, officers or employees, except in any case in the ordinary
course of business in accordance with past practice and, in the case of the
senior management employees and Shareholders (listed on SCHEDULE 2.8(e)), in an
amount not exceeding 3% in any one case or a payment of bonuses in an aggregate
amount of $25,000;
(f) since December 31, 1995, declared, set aside, made or paid any
dividend or other distribution in respect of its capital stock or purchased or
redeemed, directly or indirectly, any shares of its capital stock, or split up,
combined, reclassified, redeemed, repurchased or otherwise reacquired any of its
capital stock other than distributions to shareholders to pay income taxes and
charged against their respective Accumulated Adjustments Account, if applicable;
(g) since December 31, 1995, issued or sold any shares of its capital
stock of any class or any subscriptions, options, warrants, calls or other
rights to purchase directly or indirectly any such shares or any securities
directly or indirectly convertible into or exchangeable for such shares or made
any other change in its capital structure;
(h) since December 31, 1995, except for borrowings under its normal
line of credit and Debt described in SCHEDULE 2.8(h), incurred any direct or
contingent liability for borrowed money or guaranteed the monetary obligations
of any other person or entity other than indebtedness to be included in the Debt
to be discharged at Closing, or made any monetary investment in, advance to or
loan to any person or entity other than in the ordinary course of business;
(i) mortgaged, pledged or subjected to any material lien, lease,
security interest or other charge or encumbrance any of its properties or
assets, tangible or intangible, except those securing Debt to be discharged at
Closing and except for Permitted Liens (as defined below);
(j) made any material change in its practices, operations or policies
with respect to the method for selling goods or services, or other method for
accounting for sales, the conduct of accounts receivable collection or accounts
payable payment activities or the maintenance of inventory levels other than
changes in the ordinary course of business;
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(k) since December 31, 1995, merged or consolidated with or into any
other entity or initiated or participated in negotiations with any person or
entity with respect to any of the foregoing;
(l) implemented or adopted any change in its tax methods, principles
or elections;
(m) since December 31, 1995, acquired or disposed of any material
assets or properties or made any capital improvement other than in the ordinary
course of business; or
(n) suffered any damage, destruction or loss (whether or not covered
by insurance) which has had or could reasonably be expected to have a Material
Adverse Effect on the Company.
2.9 TITLE TO PROPERTY, ABSENCE OF LIENS AND ENCUMBRANCES.
(a) The Company has good title to its owned material assets,
including the owned tangible assets reflected on the balance sheet included in
the Company's most recent Financial Statements, other than assets disposed of or
used after the date thereof in the ordinary course of business for fair value.
Except as disclosed in SCHEDULE 2.9(a), the tangible assets owned by the Company
are owned free and clear, of all liens, mortgages, pledges, charges, security
interests or encumbrances, except for Permitted Liens (as defined below). The
Company owns, leases or licenses, and has adequate rights to use all material
real and personal property and other material assets necessary to conduct its
business as a going concern on a basis consistent with past practices. To the
Knowledge of the Company, the assets of the Company necessary for the operation
of its business consistent with past practices are in operating condition and
repair (subject to normal wear and tear). Neither the whole nor any part of the
real property used in the Business have been condemned by any public authority,
nor, to the Knowledge of the Company and the Controlling Shareholder, is any
such condemnation or taking threatened or contemplated. There exists free and
uninterrupted egress and ingress over a public roadway to all operating
facilities.
For the purposes of this Agreement, the term "Permitted Liens" shall
mean (i) liens for current taxes, assessments or governmental charges not yet
due, (ii) deposits or pledges to secure bids, tenders, contracts, leases,
statutory obligations, surety and appeal bonds, and other obligations of like
nature arising in the ordinary course of the Company's business, (iii) liens
arising out of deposits in connection with workers' compensation, unemployment
insurance, old age pensions or other social security or retirement benefits
legislation, (iv) liens imposed by law, such as mechanics', workers',
materialmen's, carriers' or other like liens arising in the ordinary course of
the Company's business which secure the payment of obligations which are not
past due or which are being diligently contested in good faith by appropriate
proceedings and for which adequate reserves in accordance with GAAP are
maintained on the Financial Statements, (v) imperfections of title, liens and
encumbrances which do not materially and adversely affect the use, value or
marketability of the property affected thereby, and (vi) the imperfections of
title,
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liens, mortgages, pledges, charges, security interests and encumbrances
set forth on SCHEDULE 2.9(a).
(b) The Company validly holds the real property described on SCHEDULE
2.9(b) (the "Real Property") free and clear of all liens, encumbrances,
mortgages or security interests, except for Permitted Liens.
(c) Except as set forth on SCHEDULE 2.9(c), the Company is not a
party to any leases of real property. The Company validly holds the leaseholds
created by the leases (true, complete and correct copies of which have been
provided to Purchaser) as described on SCHEDULE 2.9(c) (the "Leased Property"),
and such leases are enforceable by the Company as the lessee thereunder in
accordance with their terms.
(d) The Company is not a party to any agreement granting any third
party the right or an option to purchase or lease all or any portion of the Real
Property, Leased Property or any personal property of the Company.
(e) There is not pending, nor has the Company received any written
notice of, (i) any Claim or proceeding asserting or seeking to establish a title
interest in the Real Property or Leased Property, or any Claim of default under
any of the leases under which leaseholds have been created ("Title Notice"), or
(ii) the existence of any facts or proceedings of which the Company or any of
the Controlling Shareholder has Knowledge which may result in the issuance of
such a Title Notice.
2.10 FULL AUTHORITY; COMPLIANCE WITH LAWS. Except as set forth on SCHEDULE
2.10, the Company is in compliance in all material respects with all applicable
Legal Requirements. Set forth on SCHEDULE 2.10 is a list of any and all material
permits, licenses, consents, orders, approvals, franchises, certificates or
other authorizations under any applicable Legal Requirement (collectively the
"Permits"), issued to the Company in connection with the ownership, operation
and maintenance of its business or assets. The Company has obtained and
maintained all Permits. Each of the Permits is in full force and effect, and
the Company is in compliance in all material respects with all the provisions of
such Permits.
2.11 BENEFIT PLANS.
(a) Except as set forth in SCHEDULE 2.11, the Company does not
maintain, sponsor, participate in or contribute to, or is required to contribute
to, directly or indirectly, or has any obligation under:
(i) Any employee benefit plan, employee pension benefit plan,
employee welfare benefit plan (including any medical, dental, disability,
accident or sickness, salary continuation or life insurance plan or
arrangement), or multiemployer plan, all as defined in the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), regardless of
whether or not a plan is exempt from some or all of the otherwise
applicable requirements of ERISA; or
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(ii) Except as disclosed on the Financial Statements, any
material bonus, commission, deferred compensation, incentive compensation,
restricted stock, stock purchase, stock option, stock appreciation right,
debenture, supplemental pension, profit sharing, royalty pool, vacation,
sick leave, severance or termination pay policies, supplemental
unemployment benefits plan, loan guarantee, relocation assistance, employee
loan or other extensions of credit, or other similar material plan,
program, agreement, policy, commitment, arrangement or benefit currently in
effect under which current or former employees or their dependents,
beneficiaries, representatives or estates are currently or will in the
future be entitled to benefits.
(b) With respect to each plan, program, agreement, policy,
commitment, arrangement or benefit described on SCHEDULE 2.11 (a "Benefit
Plan"), the Company has furnished to the Purchaser true, correct and complete
copies of such Benefit Plans that are in written form, including amendments, if
applicable, summary plan descriptions, if applicable, the Internal Revenue
Service determination letter, if applicable, and the two most recent Forms 5500,
5500-C or 5500-R, as applicable, and has made available to the Purchaser the
most recent actuarial reports of or regarding such Benefit Plan. As to each
Benefit Plan not reduced to writing, the Company has made available to the
Purchaser a description of all material elements of such plan.
(c) Except as set forth in SCHEDULE 2.11:
(i) Each Benefit Plan has been operated and administered in all
material respects in accordance with its terms and applicable laws,
including but not limited to ERISA and the Internal Revenue Code of 1986 as
amended (the "Code") (as defined below). Each Benefit Plan that is intended
to be qualified under Section 401(a) of the Code either has received from
the Internal Revenue Service, or timely applied for, a determination letter
on such Benefit Plan's qualified status.
(ii) Neither the Company nor any other party in interest (within
the meaning of ERISA) has engaged in any non-exempt prohibited transaction
with respect to any Benefit Plan under ERISA, the Code, and there is no
pending assertion of the occurrence of any such transaction.
(iii) All contributions required under applicable law or the
terms of any Benefit Plan, collective bargaining agreement or other
agreement relating to a Benefit Plan to be paid by the Company for all
periods prior to the Closing Date have been or will have been completely
and timely made to each Benefit Plan when due, and the Company has
established adequate reserves on its books (which will be treated as a
current liability for purposes of determining Working Capital at Closing)
to meet liabilities for contributions accrued but that have not been made
because they are not yet due and payable.
(iv) To the Knowledge of the Company and the Controlling
Shareholder, there is no current or pending investigation or audit by the
Internal Revenue Service, the Department of Labor or any other governmental
entity of any Benefit Plan,
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nor has the Company received notification from any such governmental
entity of such a pending audit or investigation, and there are no
actions, suits or claims pending (other than routine claims for benefits)
or threatened, with respect to any Benefit Plan or against the assets of
any such Benefit Plan.
(v) No Benefit Plan is or ever has been a plan subject to Title
IV of ERISA, Part 3 of Subtitle B of Title I of ERISA or Section 412 of the
Code ("Pension Plan"), or is or ever has been a multiemployer plan as
defined in Section 3(37) of ERISA or Section 414(f) of the Code
("Multiemployer Plans"); neither the Company nor any other party in
interest has incurred any liability to the Pension Benefit Guaranty
Corporation ("PBGC") with respect to any Pension Plan, except for required
premium payments, which payments have been made when due; no accumulated
funding deficiency (within the meaning of Section 412 of the Code or
Section 302 of ERISA) or reportable event (as defined in Section 4043 of
ERISA) has occurred with respect to any Pension Plan; no event has occurred
in connection with any Pension Plan which could subject any Company or any
Pension Plan, or Purchaser, its Affiliates or any of their respective
benefit plans, to liability under Section 4062, 4063 or 4064 of ERISA, and,
no event has occurred which might give rise to any liability of the Company
or any Pension Plan, or Purchaser, its Affiliates or any of their
respective benefit plans, to the PBGC under Title IV of ERISA or which
could reasonably be anticipated to result in any claims being made against
the Company or any Pension Plan; and the Company has not incurred nor, as a
result of the transactions contemplated by this Agreement, will incur any
withdrawal liability (including any contingent or secondary withdrawal
liability) within the meaning of Section 4201 and 4204 of ERISA to any
Multiemployer Plan; upon a complete withdrawal or a partial withdrawal (as
those terms are defined in Section 4203 and 4205, respectively, of ERISA)
from a Multiemployer Plan occurring on or before the close of the most
recent fiscal year of each such Multiemployer Plan ended prior to the
Closing Date, to the Knowledge of the Company and Controlling Shareholder,
the Company would not have been subject to withdrawal liability under
Title IV, Subtitle E, Part 1 of ERISA and, there has been no material
change in the financial condition of any Multiemployer Plan that would
result in the imposition of such liability due to such complete or partial
withdrawal on or before the Closing Date.
(vi) The Company have complied in all material respects with all
notice and continuation coverage requirements applicable to group health
plans under the Consolidated Omnibus Budget Reconciliation Act of 1985, as
amended ("COBRA"), with respect to all medical and health benefits provided
by the Company that are subject to COBRA.
(vii) No Benefit Plan amendments have been adopted nor will
any such amendments be adopted prior to the Closing Date except as may be
necessary for compliance purposes with the Code or ERISA and there is no
arrangement, commitment or understanding to create any additional plan
which would constitute a Benefit Plan or increase the rate of benefit
accrual or contribution requirement under any of the Benefit Plans or
modify, change or terminate any existing Benefit Plan.
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(viii) The Company is not a member of a "controlled group" of
organizations (as defined in Sections 414(b), (c), (m) or (o) of the Code)
which sponsors or maintains any employee benefit plan within the meaning of
Section 3(3) of ERISA which under Title IV of ERISA or any section of the
Code or ERISA would subject Purchaser or Company or any of their respective
employee benefit plans or the fiduciaries thereof or their respective
assets to any taxes, encumbrances, penalties or other liabilities.
2.12 CLAIMS. There are no Claims against, or to the Knowledge of the
Controlling Shareholder or the Company, threatened against, the Company or
its properties, at law or in equity or before any court, governmental
department, commission, board, agency, authority, instrumentality, domestic
or foreign which, if adversely determined, could be reasonably expected to
have, individually or in the aggregate, a Material Adverse Effect on the
Company before or after the Closing Date. The Company is not subject to any
judgment, stipulation, order or decree arising from any action, suit,
proceeding or any investigation of which it has Knowledge which could be
reasonably expected to have, individually or in the aggregate, a Material
Adverse Effect on the business or financial condition of the Company before
or after the Closing Date.
As used in this Agreement, "Claim" means any and all claims, causes of
action, arbitrations, audits, hearings, investigations of which the Company has
knowledge, proceedings, complaints, litigation or suits, whether in contract,
tort or otherwise, whether statutory or common law, whether civil, criminal,
administrative, investigative, formal or informal, fixed or contingent.
2.13 TAXES.
(a) For purposes of this Agreement, "Taxes" in the plural and "Tax"
in the singular shall refer to any and all taxes, charges, fees, levies, or
other assessments of whatever kind or nature, including, but not limited to, any
federal, state, local or foreign net income, gross income, gross receipts,
unitary, license, payroll, unemployment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including, but not limited to, taxes
under section 59A of the Code), occupational, leasing, lease, fuel, customs,
duties, capital stock, franchise, profits, withholding, Social Security,
unemployment, disability, ad valorem, real property, personal property (tangible
and intangible), sales, use, transfer, registration, value added, alternative or
minimum, estimated, or any other kind of tax whatsoever, including the recapture
of any tax items, and including any interest, addition, penalty or other
associated charge thereto, whether disputed or not.
(b) Except as set forth on SCHEDULE 2.13
(i) The Company has filed or will file or cause to be filed,
within the applicable period prescribed by law, (i) all federal, state,
local, foreign or other material Tax Returns, as that term is defined
below, required by such law to be filed by the Company for all taxable
periods ending on or prior to the Closing Date or (ii) valid extensions of
the time for filing such Tax Returns. For purposes of this Agreement, "Tax
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Returns" shall mean any returns, reports or statements with respect to
Taxes which are required to be filed with any taxing authority.
(ii) The Company has not obtained nor will it obtain prior to the
Closing Date any extensions of time in which to file any Tax Returns for
any taxable period ending on or prior to the Closing Date.
(iii) The Company has paid, within the time and in the manner
prescribed by law, all Taxes shown as due on all such Tax Returns and, with
respect to all Tax Returns which the Company has not yet filed, but will
file prior to the Closing Date, shall pay, within the time and in the
manner prescribed by law, all Taxes shown as due on such Tax Returns.
(iv) No written notice has been received by the Company from any
Tax authority in any jurisdiction in which the Company has not filed a Tax
Return that the Company is or may be subject to taxation of any sort in
such jurisdiction or otherwise is required to file a Tax Return in such
jurisdiction.
(v) Except for Permitted Liens, there are no Tax liens or other
security interests or encumbrances of any type resulting from Tax
liabilities on any of the assets of the Company.
(vi) There is no dispute, Claim or any other controversy
concerning any material Tax liability of the Company raised or asserted by
any Tax authority in writing.
(vii) No income Tax Returns of the Company for any open tax
year has been audited by any taxing authority. The Company has made
available to Purchaser a correct and complete copy of each federal income
Tax Return, examination report, statement of deficiency, or any other
administrative or judicial assertion, assessment or determination of
federal income Tax liability with respect to the Company for the past three
years.
(viii) The Company has employed a permissible method of Tax
accounting, validly elected for each taxable period ending on or prior to
the Closing Date. The Company has not changed, nor requested to be
permitted to change, any method of Tax accounting.
(ix) The Company has not waived any statute of limitations with
respect to any Taxes or has agreed to any extension of time with respect to
a Tax assessment or deficiency, except for such waivers or extensions
which, by their terms, have elapsed as of the date of this Agreement, nor
are any requests for such waivers or extensions pending.
(x) The Company (i) has not filed a consent under Section 341(f)
of the Code concerning collapsible corporations, (ii) has not made any
payments, is obligated to make any payments, or is a party to any agreement
that will render it (or the payor of
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compensation under the agreement) subject to the provision of section 280G
of the Code regarding payments as a result of a change in control, (iii)
has not been a United States real property holding company within the
meaning of section 897(c)(2) of the Code and (iv) is not a party to any Tax
allocation or Tax sharing agreement.
(xi) The unpaid Taxes of the Company, including Taxes
attributable to all periods ending on or prior to the Closing Date which
are not yet due and payable, do not materially exceed the reserve on the
Financial Statements for the Company's tax liability as of the respective
dates of such Financial Statements.
2.14 CONTRACTS. Except as set forth in this Agreement or on SCHEDULE 2.14
(the agreements listed thereon being referred to as the "Material Contracts"),
the Company is not a party to, bound by or obligated under any:
(a) material mortgage, indenture, note or installment obligation or
other instrument or contract for or relating to any borrowing by the Company;
(b) material guaranty by the Company of any obligation (excluding
any endorsement made in the ordinary course of business for collection);
(c) material license agreement;
(d) material lease of real or personal property under which the
Company is a lessor or lessee;
(e) material agreement for the purchase by the Company of equipment;
(f) agreement purporting to limit the right of the Company to compete
in any line of business, with any person or other entity or in any geographic
area;
(g) material agreement for the purchase or sale of raw materials,
products or goods or the provision of services at prices that vary from the
prices therefor generally prevailing in customary, arms-length transactions;
(h) material contract with any governmental or quasi-governmental
authority;
(i) material bond, deposit, financial assurance requirement or
insurance coverage individually required to be submitted to customers of the
Company under any sale, lease or service arrangement or to any governmental
authority under any Permit or Legal Requirement;
(j) agreement or instrument relating to the acquisition by the
Company of any entity or all or substantially all of the assets of any person or
entity;
(k) other material agreement, contract or obligation of the Company;
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(l) agreement or commitment relating to the borrowing of money or
the guaranty or indemnity (direct or indirect) in respect of or the granting
of security for any obligation for the borrowing of money, by the Company or
any other person or entity, in excess of, including, without limitation,
guarantees, accommodation collateral, letters of credit, mortgages, deeds of
trust, indentures, loan agreements and credit agreements;
(m) agreement or commitment relating to clean-up or remediation
involving Hazardous Materials (as hereinafter defined);
(n) agreement that creates an encumbrance or any restriction on the
ability of the Company to (i) pay dividends or make similar distributions; (ii)
make loans or advances to any person or entity, or (iii) sell, lease or transfer
any of its properties or assets, except (in each case) for such restrictions or
encumbrances existing under or by reason of (1) applicable Legal Requirements,
(2) customary non-assignment provisions in leases and other contracts entered
into in the ordinary course of business, or (3) any instrument governing the
Debt;
(o) indemnification obligations in favor of any person or entity, and
any escrow agreements related to any indemnification or obligation;
(p) confidentiality, secrecy, screening, development or settlement
agreement pertaining to any Intellectual Property; or
(q) contract with any customer of the Company other than contacts for
the purchase and sale of goods, products and services entered into in the
ordinary course of business.
All of the Material Contracts are legal, valid, binding and in full force and
effect, no default exists thereunder on the part of the Company, and except as
set forth in Schedule 2.14, the consummation of the transactions contemplated by
this Agreement will not cause any default or condition in respect of any such
Material Contracts, the effect of which is to cause, permit, create or perfect
the right in any party (a) to repudiate or disavow its obligations to the
Company thereunder, (b) to require or have the right to require the Company to
perform its obligations thereunder (including obligations to pay indebtedness)
prior to such time on which, or on terms and conditions otherwise different from
those that, are provided therein or (c) to recover from the Company any damages
or fines. To the Knowledge of the Company and the Controlling Shareholder, no
party to any such Material Contract is in default thereunder. True, correct and
complete copies of all the Material Contracts have been delivered to the
Purchaser.
2.15 ENVIRONMENTAL QUALITY.
(a) Except as set forth in SCHEDULE 2.15, to the Knowledge of the
Company and the Controlling Shareholder, neither the Company nor any previous
(to the Company) owner, tenant, occupant, user or operator of any real property
now or ever owned or leased by the Company (the "Property") released or disposed
of any "Hazardous Materials" (as defined below) on, under, in or about the site
of the Property, except in compliance in all material respects with applicable
Environmental Laws (as defined below). For the purposes of this Agreement, the
term
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"Hazardous Materials" shall mean any substance, material or waste which is
regulated by any local government authority or state with jurisdiction, or the
United States Government, including, without limitation, any material or
substance which is (a) defined as a "hazardous waste," "hazardous material,"
"hazardous substances," "extremely hazardous waste," "regulated substance" or
"restricted hazardous waste" under any provision of the existing laws of any
state, or any other applicable existing law, including, but not limited to, the
Resource Conservation and Recovery Act, 42 U.S.C. Section 6901 ET SEQ. ("RCRA"),
and the Comprehensive Environmental Response, Compensation, and Liability Act,
42 U.S.C. Section 9601 ET SEQ. ("CERCLA") and (b) petroleum, including crude oil
and any fraction thereof and any refined petroleum products and derivatives
thereof.
(b) To the Knowledge of the Company and the Controlling Shareholder,
except as set forth in SCHEDULE 2.15, the Property complies in all respects with
all applicable Environmental Laws. For purposes of this Agreement, the term
"Environmental Laws" shall mean all federal, state and local laws, ordinances
and regulations pertaining to air and water quality, soils and subsurface
strata, natural resources, Hazardous Materials, waste generation, management,
transportation and disposal or other environmental matters, including the Clean
Water Act, the Clean Air Act, the Federal Water Pollution Control Act, the Solid
Waste Disposal Act, RCRA, CERCLA, and the applicable environmental protection
rules, regulations and ordinances of the city and county in which the Property
is located, the Environmental Protection Agency and all other applicable
federal, state, regional and local agencies which are in existence, and are in
effect as of the date hereof. Without limiting the generality of the foregoing,
to the Knowledge of the Company and the Controlling Shareholder, Company is not
liable nor potentially liable for any response costs or natural resource damages
under Sections 107(a) or 113(f) of CERCLA, or under any other so-called
"superfund" or "superlien" law or similar Legal Requirement currently in
existence, at or with respect to the Property and, to the Knowledge of the
Company and the Controlling Shareholder, no circumstances exist, which with
notice or lapse of time or both would result in such liability.
(c) To the Knowledge of the Company and the Controlling Shareholder,
the conduct of the business of the Company complies in all respects with all
applicable Environmental Laws.
(d) To the Knowledge of the Company and the Controlling Shareholder,
except as set forth in SCHEDULE 2.15, the Company has not sent any Hazardous
Material to a site that, pursuant to any applicable Environmental Laws, (i) has
been placed on the "National Priorities List" of hazardous waste sites or any
similar state list, (ii) is otherwise designated or identified as a potential
site for remediation, cleanup, closure or other environmental remedial activity,
or (iii) is subject to a claim, an administrative order or other request to take
"removal" or "remedial" action, as defined in any applicable Environmental Laws,
or to make payment for the costs of cleaning up the site.
(e) Except as set forth in SCHEDULE 2.15, the Company (i) is not
involved in any suit or proceeding with respect to a release or threatened
release of any Hazardous Material or a violation or alleged violation of any
applicable Environmental Laws, nor has the Company
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received any notice of any claims from any person or entity relating to
property damage or to personal injuries from exposure to any Hazardous
Material, nor has the Company received any notice or request for information
from any governmental agency or authority or other third party with respect
to any of the foregoing, nor (ii) has it failed to timely file any report
required to be filed, failed to acquire all necessary certificates, approvals
and permits or failed to generate and maintain all required data,
documentation and records under all applicable Environmental Laws.
(f) To the Knowledge of the Company and the Controlling Shareholder,
except as set forth in SCHEDULE 2.15, there are currently no underground storage
tanks in or under the Property, and no underground storage tank was removed from
the Property during the period that the Company maintained an interest in such
Property.
(g) The Company has made available to Purchaser all information in
its and, to the Knowledge of the Company and the Controlling Shareholder, its
Shareholders' possession regarding the environmental condition of the Property.
2.16 INTELLECTUAL PROPERTY. The Company either own or have the right to
use by license, sublicense, or other tangible agreement, all of the inventions,
improvements, domestic and foreign patents and applications therefor, customer
lists, copyrights, copyright-registrations and applications therefor,
trademarks, trade names, service marks, trade dress, logos, rights in computer
software, and all rights granted or retained in licenses under any of the
foregoing which are material to the conduct of the business of the Company as
presently conducted (collectively the "Intellectual Property"). None of the
Intellectual Property used in connection with the conduct of the business of the
Company is, or has been in the past five years, involved in, or the subject of,
any pending or, to the Knowledge of the Company and the Controlling Shareholder,
threatened infringement, interference, opposition or similar action, suit or
proceeding to which the Company was a party. The material license fees,
royalties and other amounts payable by the Company in connection with the use of
the Intellectual Property, together with the terms and conditions on which, and
periods for which such amounts are payable, are set forth in SCHEDULE 2.16.
2.17 PREPAID EXPENSES. All prepaid expenses shown on the balance sheet of
the most recent Financial Statements or subsequently paid by the Company and
shown on the Final Closing Statement have been incurred solely in connection
with the business and assets of the Company.
2.18 RELATED PARTY TRANSACTIONS. Set forth on SCHEDULE 2.18 is a list of
all material transactions (including, without limitation, employment contracts,
debts, loans, advances, or other obligations, guarantees, indemnities, accounts
and notes payable or receivable and service agreements) between the Company and
any current officer, director or employee, Shareholders, or Affiliate of the
Company (collectively, "Related Parties") which (a) were entered into and/or
consummated subsequent to January 1, 1998; (b) are or will be effective as of
the date hereof or at Closing, (c) constitutes a present or future liability or
obligation of the Company to any Related Party; or (d) constitutes a present or
future liability of any Related Party to the Company. For purposes of this
Agreement, an "Affiliate" of a party is any individual, company or other entity
that owns five percent (5%) or more of the voting or capital stock or other
equity interest of such
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party or of which five percent (5%) of the voting or capital stock or other
equity interest is owned or otherwise controlled by that party or an
Affiliate of that party, as the case may be.
2.19 LABOR MATTERS. Except as set forth on SCHEDULE 2.19, (a) the
Company has not entered into nor is a party to any collective bargaining
agreement, memorandum of understanding or other written document binding on
the Company respecting terms and conditions of employment with respect to an
identified group of employees with any labor union that would cover any
employees of the Company and (b) none of the employees of the Company is
subject to any collective bargaining agreement, memorandum of understanding
or other written document binding on the Company respecting terms and
conditions of employment with respect to an identified group of employees nor
are any such employees, in their capacities as employees, represented by any
labor union. As to the collective bargaining agreements disclosed on
SCHEDULE 2.19, the Company is not in material default thereunder. Except as
set forth in SCHEDULE 2.19, there are no Claims, controversies, labor
disturbances, or investigations pending, or to the Knowledge of the Company
and the Controlling Shareholder, threatened, by any governmental agency or by
employees of the Company or any party or parties representing any of such
employees against the Company before any court, arbitrator or other
tribunal. To the Knowledge of the Company and the Controlling Shareholder,
there are no organizational efforts presently being made or threatened by or
on behalf of any labor union with respect to the employees of the Company
nor has there been in the last five (5) years. The Company has not
experienced a work stoppage, strike, lock-out or other labor disturbance
within the past five (5) years, and there is no work stoppage, strike,
lock-out or other labor disturbance presently occurring, or, to the Knowledge
of the Company and the Controlling Shareholder, threatened. The Company has
complied in all material respects with all applicable Legal Requirements
relating to its employees, the employment of labor, and the safety and health
of employees, including, without limitation, all applicable Legal
Requirements relating to occupational health and safety, discrimination,
unemployment, wages, hours, the Family and Medical Leave Act, collective
bargaining, and the collection and payment of withholding taxes and similar
taxes in respect of the business of the Company. Except as set forth in
SCHEDULE 2.19, there are no unfair labor practice charges, charges of
discrimination, or other complaints pending against the Company involving
employees now or previously employed by the Company.
2.20 CUSTOMERS AND VENDORS. SCHEDULE 2.20 hereto is a correct and current
list of the 20 largest customers and the 10 largest vendors of the Company
during the 12-month period ended September 30, 1997, with the amount of sales
made to each such customer or by each such vendor, as the case may be, during
such period as reasonably ascertained from readily available information, such
amounts being estimated in good faith as being within five percent (5%) of the
actual sales made to or by such customer or vendor, as the case may be. Except
as set forth on SCHEDULE 2.20, the Company does not have any information
indicating that any of such customers or such vendors intends to cease doing
business with the Company or materially alter the amount of the business that it
conducts with the Company from the amount of business such customers or such
vendors conducted with the Company during the last fiscal year.
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2.21 OTHER DISCLOSURES. In addition to the other disclosures required
hereby, the following documents and information pertaining to the Company have
been made available to the Purchaser:
(a) true, correct and complete copies of each policy of insurance
maintained by the Company, together with information on premiums, coverage,
insurers, expiration dates and deductibles;
(b) the location and name of each bank or other financial institution
in which the Company has an account or line of credit, and the identity of each
such account or line of credit, and each bank in which the Company has a safe
deposit box, together with the names of all persons authorized to draw upon or
have access thereto;
(c) SCHEDULE 2.21(c) lists each corporate or trade name under which
the Company or its predecessors, if any, has conducted business and the state
and county in which any Real Property or personal property of the Company is
located or has been located.
(d) SCHEDULE 2.21(d) lists each power-of-attorney given by or on
behalf of the Company.
2.22 PARACHUTE PAYMENTS. Any bonuses or other compensation or amounts
paid or payable by the Company, including amounts payable as a result of the
transaction contemplated by this Agreement, have not resulted in and will not
result in payments to "Disqualified Individuals" (as defined in Section
280G(c) of the Code) of the Company which, individually or in the aggregate,
will constitute "excess parachute payments" (as defined in Section 280G(b) of
the Code) resulting in the imposition of the excise tax under Section 4999 of
the Code or the disallowance of deductions under Section 280G of the Code.
2.23 PRODUCT WARRANTY AND LIABILITY. All finished goods inventories
manufactured by the Company in the operation of the Business (the "Products")
have been in material conformity with all applicable contractual commitments
and all express or implied warranties (including warranties imposed by the
application of law) and, to the Knowledge of the Company and the Controlling
Shareholder, no material liability exists or will arise for replacement or
damage in connection with such sales or deliveries, except as are adequately
reserved for on the Financial Statements. No Products heretofore sold by the
Company are now subject to any guaranty, warranty, claim for product
liability or patent or other indemnity, other than those sold in accordance
with the standard terms and conditions of sale of the Business, true and
complete copies of which have been made available to the Purchaser.
2.24 ACCURACY. The representations and warranties made by the Company
and the Shareholders to Purchaser set forth in this Agreement, the Disclosure
Schedules to this Agreement, including any Updated Disclosure Schedule (as
defined below) delivered to Purchaser prior to Closing, and the Related
Agreements delivered and to be delivered pursuant to or in connection with
this Agreement, do not include an untrue statement of material fact or omit
to
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state any material fact necessary to make them, when taken together and in
light of the circumstances in which they were or are made, not misleading in
any material respect.
2.25 BROKERS AND FINDERS. Except as set forth in SCHEDULE 2.25, no
person or entity is entitled to any brokerage commission, finder's fee or
like payment in connection with the transactions contemplated in this
Agreement.
ARTICLE 3
ADDITIONAL REPRESENTATIONS AND WARRANTIES OF CONTROLLING SHAREHOLDER
Each Controlling Shareholder represents and warrants to Purchaser as
follows:
3.1 OWNERSHIP OF SHARES. Such Controlling Shareholder is now, and
immediately prior to the Closing, such Controlling Shareholder will be, the
owner of the Shares of the Company as set forth opposite the name of such
Shareholder on SCHEDULE 2.2.
3.2 AUTHORIZATION. Such Controlling Shareholder has full right and
power to execute and deliver this Agreement and perform his obligations
hereunder. This Agreement and all other documents and instruments executed or
to be executed by such Controlling Shareholder pursuant to this Agreement
have been, or will have been, duly executed and delivered by such Controlling
Shareholder.
3.3 ENFORCEABILITY. This Agreement constitutes the valid and legally
binding obligation of such Controlling Shareholder, enforceable in accordance
with its terms, except as such enforceability may be limited by equitable
principles and by applicable bankruptcy, insolvency, reorganization,
arrangement, moratorium or similar laws relating to or affecting the rights
of creditors generally.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PURCHASER AND PARENT
Parent and Purchaser, jointly and severally, represent and warrant to
Shareholders and the Company as follows:
4.1 ORGANIZATION AND STANDING OF PURCHASER. Parent is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Colorado. Purchaser is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware.
Parent and Purchaser have all requisite corporate power and authority to
enter into this Agreement, to carry out the transactions contemplated hereby
and to perform their obligations hereunder. Parent owns all the outstanding
capital stock of Purchaser.
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4.2 AUTHORIZATION. The execution and delivery of this Agreement, and
all other agreements, documents and instruments executed or to be executed by
the Purchaser and Parent in connection herewith (the "Purchaser Related
Agreements"), and the consummation of the transactions contemplated hereby
and thereby, have been duly authorized by all necessary corporate and other
action on the part of Parent and Purchaser. This Agreement, and the Purchaser
Related Agreements have been, or will have been, at the time of their
respective executions and deliveries, duly executed and delivered by a duly
authorized officer of Parent and Purchaser.
4.3 ENFORCEABILITY. This Agreement constitutes, and each of the
Purchaser Related Agreements when duly executed and delivered will
constitute, the valid and legally binding joint and several obligations of
Parent and Purchaser, enforceable against Parent and Purchaser, jointly and
severally, in accordance with its terms, except as such enforceability may be
limited by equitable principles and by applicable bankruptcy, insolvency,
reorganization, arrangement, moratorium or similar laws relating to or
affecting the rights of creditors generally.
4.4 COMPLIANCE WITH OTHER INSTRUMENTS AND LAWS. The execution and
delivery of this Agreement, and the Purchaser Related Agreements, and the
consummation of the transactions contemplated hereby and thereby, will not
conflict with or result in any violation or default under any provision of
the Certificate of Incorporation or Bylaws of Parent or Purchaser, or of any
material mortgage, indenture, trust, lease, agreement or other instrument,
permit, concession, grant, franchise, license, judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to Parent or Purchaser
or any of their respective properties, the result of which (either
individually or in the aggregate) will prevent or materially delay the
consummation of the transactions contemplated hereby.
4.5 GOVERNMENTAL AUTHORIZATIONS, CONSENTS. No consents, licenses,
approvals or authorizations of, and registrations or declarations with, any
governmental authority, bureau, agency or commission, or any third party, are
required to be obtained or made by Parent or Purchaser in connection with the
execution, delivery, performance, validity and enforceability of this
Agreement or the Purchaser Related Agreements or the Merger contemplated
hereby.
4.6 MW COMMON STOCK. The MW Common Stock when issued will have been
duly authorized, validly issued, fully paid and nonassessable, and the record
date of issuance on the Parent's (and its transfer agent's) books shall be
the Closing Date, and each share of MW Common Stock issued to Shareholders
hereunder shall be free and clear of any lien, pledge, charge, adverse claim,
security interest, restriction, encumbrance (including any imposed by law in
any jurisdiction), title retention agreement, option or right to purchase of
any kind.
4.7 LITIGATION. No action, suit, proceeding or governmental
investigation is pending or, to the best of Parent's and Purchaser's
knowledge, threatened, at law or in equity, which seeks to question, delay or
prevent the consummation of all or any portion of the transactions
contemplated hereby.
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4.8 SECURITIES ACT OF 1933. Purchaser is an "accredited investor" as
defined under Rule 501 of Regulation D under the Securities Act of 1933, as
amended
4.9 BROKERS AND FINDERS. No person or entity is entitled to any
brokerage commission, finder's fee or like payment from Parent or Purchaser
in connection with the transactions contemplated in this Agreement.
4.10 PURCHASER'S KNOWLEDGE. No officer or director of Parent or
Purchaser has actual knowledge, as of the date hereof, of any state of facts
which, in the judgment of Parent or Purchaser, will give rise to a
Shareholder Indemnified Obligation or a Purchaser Indemnified Obligation,
except for such matters as have been previously disclosed in writing to the
Shareholders, the Company or their representatives.
4.11 SEC DOCUMENTS. Parent has timely filed all required reports,
schedules, forms, statements, exhibits and other documents with the SEC since
December 31, 1996 (the "SEC Documents") and is qualified, and has obtained or
will obtain, without delay to the registration process, all appropriate
waivers necessary to allow Parent to register the MW Common Stock on SEC Form
S-3. As of their respective dates, the SEC Documents complied in all
material respects with the requirements of the Securities Act and the
Exchange Act, as the case may be, and the rules and regulations of the SEC
promulgated thereunder applicable to such SEC Documents, and none of the SEC
Documents contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they
were made, not misleading. The consolidated financial statements of Parent
and its subsidiaries included in the SEC Documents comply as to form in all
material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto, have been prepared in
accordance with GAAP (except, in the case of unaudited financial statements,
as permitted by SEC Form 10-Q) applied on a consistent basis during the
period involved (except as may be indicated in the notes thereto) and fairly
present the financial position of Parent and its subsidiaries as of the date
thereof and their statements of operations, changes in shareholders' equity
and cash flows for the periods then ended (subject, in the case of unaudited
statements, to normal year-end audit adjustments). Except as set forth in
the SEC Documents, neither Parent nor any of its subsidiaries has any
liabilities or obligations of any nature (whether accrued, absolute,
contingent or otherwise) required by GAAP to be set forth on a consolidated
balance sheet of Parent and its subsidiaries or in the notes thereto, other
than liabilities and obligations incurred in the ordinary course of business
consistent with past practice since the date of its last filed Form 10-K or
10-Q.
4.12 ACCURACY. The representations and warranties made by the Parent
and Purchaser to Company and Shareholders set forth in this Agreement and the
Purchaser Related Agreements, instruments and documents delivered and to be
delivered pursuant to or in connection with this Agreement do not include an
untrue statement of material fact or omit to state any material fact
necessary to make them, when taken together and in light of the circumstances
in which they were or are made, not misleading in any material respect.
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4.13 INVESTIGATION. Parent and Purchaser have conducted inspections of
the properties and financial and other records of the Company and other due
diligence with respect to the Company. Parent and Purchaser have had an
opportunity to ask questions of the Company and the Controlling Shareholder
relating to the Company and management and financial affairs of the Company,
which questions have been answered to Parent and Purchaser's satisfaction,
and to examine all books and records of the Company. Parent and Purchaser
acknowledge that they have made their own independent investigation,
examination, analysis and evaluation of the Company including, without
limitation, Parent and Purchaser's own estimate of the value of the Company's
business.
ARTICLE 5
COVENANTS OF THE COMPANY AND THE CONTROLLING SHAREHOLDER
5.1 CONDUCT OF BUSINESS. The Company agrees that, between the date of
this Agreement and the Closing Date, except as contemplated by this Agreement
or referred to in a Disclosure Schedule, and except as may be necessary to
carry out the transactions contemplated by this Agreement, the Company
without Purchaser's written consent (which consent will not be unreasonably
withheld or delayed) or as requested by Purchaser, did not or will not:
(a) amend its Articles of Incorporation or Bylaws;
(b) make any material change in its practices, operations or
policies with respect to the selling of goods or services, collecting
accounts receivable and/or paying accounts payable except in the ordinary
course of business;
(c) conduct its business in a manner that materially departs from
the manner in which such business was being conducted prior to the date of
this Agreement;
(d) except as set forth in SCHEDULE 2.8 increase the rate or
change the form of compensation payable to any director, officer or employee
of the Company or increase any employee benefits, except in the ordinary
course of business in accordance with past practice in an amount not to
exceed 3% in any one case or the payment of bonuses in an aggregate amount of
$25,000;
(e) purchase or dispose of any properties or other assets, except
in the ordinary course of business or as set forth in SCHEDULE 1.7;
(f) declare, set aside, pay or make any dividend or other
distribution in respect of any outstanding shares of the Company's capital
stock other than distributions to Shareholders to pay income taxes and
distributions to Shareholders charged against their respective Accumulated
Adjustments Account, if applicable;
(g) issue or sell any shares of the Company's capital stock
(whether or not from the treasury) or any other securities; grant any
options, convertibility rights, rights to
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subscribe for shares of capital stock or securities convertible into or
exchangeable for shares of capital stock, warrants, calls or other agreements
relating to the Company's capital stock; split up, combine, reclassify,
redeem, repurchase or otherwise reacquire any of the Company's capital stock,
or otherwise change its capitalization;
(h) except as required by regulation or generally accepted
accounting principles, maintain its books of account other than in the usual,
regular and ordinary manner in accordance with generally accepted accounting
principles and on a basis consistent with prior periods, make any change in
any of its books, accounting methods or practices, or reclassify any assets
or liabilities;
(i) cancel, terminate, renew or amend any Material Contract or
enter into any contract, agreement, lease, license or commitment which would
be a Material Contract if such had existed on the date hereof, except in the
ordinary course of business;
(j) merge or consolidate with or into any other person or entity
or sell or dispose of all or substantially all of the Company's assets to any
person or entity, or initiate or participate in negotiations with any person
or entity with respect to any of the foregoing;
(k) invest in certificates of deposit in any one bank if such
investment in the aggregate exceeds $100,000 at any time;
(l) incur any direct or contingent liability for borrowed money or
guarantee the monetary obligations of any other person or entity, other than
indebtedness to be included in the Debt, or make any monetary investment in,
advance to or loan to any person or entity other than in the ordinary course
of business;
(m) fail to make maintenance expenditures and maintain inventories
in the amounts and at the times required to operate its business in the
ordinary course consistent with past practice;
(n) implement or adopt any change in its tax methods, principles
or elections;
(o) fail to pay accounts payable or collect accounts receivable in
accordance with past practices;
(p) enter into any transaction outside the ordinary course of
business; or
(q) agree or commit to do any of the foregoing.
Nothing contained in this Section 5.1 or elsewhere in this Agreement
shall be deemed in any way as prohibiting the Company from using cash, cash
equivalents or other current assets to reduce or pay off Debt prior to
Closing.
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5.2 ACCESS. The Company agrees that, between the date of this
Agreement and the Closing Date, the Company shall, after receiving reasonable
advance notice from Purchaser, give Parent, Purchaser and their Associates
(as defined in Section 6.1) reasonable access (during normal business hours)
to the books, records, contracts and offices of the Company for the purpose
of enabling such parties to further investigate and inspect the business,
operations and financial and legal affairs of the Company.
5.3 NO SOLICITATION OR NEGOTIATION. The Company and Controlling
Shareholder agree that between the date of this Agreement and the earlier of
the Closing Date or the date this Agreement otherwise terminates, they will
not, nor will they permit any officer, director, Shareholder or agent of
Shareholders the Company to, (i) solicit any proposal or offer from any
person or entity (other than Purchaser) relating to the sale of the Company,
its capital stock or any material portion of its assets, (ii) provide any
non-public information to any person or entity (other than Purchaser) for use
in preparing any proposal or offer relating to the sale of the Company or its
capital stock or any material portion of its assets, or (iii) respond to or
enter into any negotiations regarding any proposal or offer from any person
or entity (other than Purchaser) with respect to the foregoing.
5.4 FILINGS AND CONSENTS. Where required by applicable law, the
Company and the Controlling Shareholder shall use commercially reasonable
efforts to do each of the following:
(a) as soon as practicable after the date of this Agreement, file
with the appropriate governmental authority any notification form required to
be filed by the Company under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended (the "HSR Act") with respect to this Agreement and
the transactions contemplated hereby, together with a request for early
termination of the applicable waiting period;
(b) after consultation with Purchaser, make any additional filing
required to be made by the Company under the HSR Act and promptly furnish to
the appropriate governmental authority such additional information as may be
requested under the HSR Act;
(c) make or give each filing or notice required to be made or
given pursuant to any applicable Legal Requirement, Material Contract or
Permit by the Company or Shareholders in connection with the execution and
delivery of any of this Agreement or in connection with the consummation or
performance of any of the transactions contemplated hereby; and
(d) obtain an agreement from each Creditor to terminate its lien
and lien filings upon payment of the amounts specified in such Creditor's
respective Payoff Letter to the extent that Purchaser decides to pay off a
Debt at Closing and each consent required to be obtained pursuant to any
applicable Legal Requirement, Permit or Material Contract by the Company or
Shareholders in connection with the execution and delivery of any of this
Agreement or in connection with the consummation or performance of the
transactions contemplated hereby. Except as to liens related to Leased
Property to be acquired by Purchaser pursuant to Section 7.5, Company shall
pay all reasonable costs of obtaining such releases and consents which costs
shall be a Company Expense.
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5.5 UPDATED DISCLOSURE SCHEDULES. Between the date of this Agreement
and the Closing Date, if any Controlling Shareholder or the Company becomes
aware of any fact or condition that causes any of the representations and
warranties in this Agreement to become untrue, misleading, or inaccurate in
any material respect, such party will promptly deliver to Purchaser an
updated Disclosure Schedule ("Updated Disclosure Schedule") setting forth the
facts or conditions that cause such representation, warranty, or Disclosure
Schedule to become untrue, misleading, or inaccurate.
ARTICLE 6
COVENANTS OF PARENT AND PURCHASER
Parent and Purchaser each agree with the Company that:
6.1 CONFIDENTIALITY. Parent and Purchaser shall hold in strict
confidence, and cause their respective affiliates, directors, officers,
employees, agents, attorneys, accountants, financing sources and
representatives and those of its affiliates ("Associates") to hold in strict
confidence, all documents and information obtained with respect to the
Company ("Confidential Information"). Neither Parent nor Purchaser shall
permit any Confidential Information to be utilized or to be disclosed or
conveyed to any other person or entity other than their Associates in
furtherance of this Agreement. Without limiting the generality of the
foregoing, and except as required by law or as permitted by Section 7.4, (i)
neither Parent nor Purchaser shall disclose to any person or entity, and
shall not permit any of their Associates to disclose to any person or entity,
the existence of this Agreement or any of the terms or provisions hereof and
(ii) except in the ordinary course of business, neither Parent nor Purchaser
shall contact any customers or employees of the Company, and neither Parent
nor Purchaser shall not permit any of their Associates to contact any
customers or employees of the Company, without the prior consent of an
officer of the Company. This Section 6.1 shall terminate if and when the
Closing occurs in accordance with Article 1 of this Agreement, or within
three years of the date of execution of this Agreement, whichever occurs
first.
6.2 FILINGS AND CONSENTS. Where required by applicable law, Parent and
Purchaser shall use commercially reasonable efforts to do each of the
following:
(a) as soon as practicable after the date of this Agreement, file
with the appropriate governmental authority any notification form required to
be filed by Parent or Purchaser under the HSR Act with respect to this
Agreement and the transactions contemplated hereby, together with a request
for early termination of the applicable waiting period;
(b) after consultation with the Controlling Shareholder, make any
additional filing required to be made by Parent or Purchaser under the HSR
Act and promptly furnish to the appropriate governmental authority such
additional information as may be requested under the HSR Act;
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(c) make or give each other filing or notice required to be made
or given pursuant to any applicable Legal Requirement by Purchaser in
connection with the execution and delivery of this Agreement or in connection
with the consummation or performance of any of the transactions contemplated
hereby; and
(d) obtain each consent required to be obtained by Parent or
Purchaser pursuant to any applicable Legal Requirement or material contract
to which Parent or Purchaser is a party or by which either of them is bound
in connection with the execution and delivery of any of this Agreement or in
connection with the consummation or performance of the transactions
contemplated hereby.
6.3 FILING OF FINAL TAX RETURNS. Parent and Purchaser agree to timely
file all final Tax Returns for and on behalf of the Company which are
required to be filed subsequent to the Closing, and to deliver copies thereof
to the Shareholders' Representative promptly after filing the same.
6.4 OFFICER AND DIRECTOR INDEMNIFICATION. Parent and Purchaser agree
to include and maintain provisions in the Certificate of Incorporation and
Bylaws of the Surviving Corporation which provide indemnification for the
directors and officers of the Company immediately prior to the Effective Time
to the maximum extent provided by such documents and applicable corporate law
and to indemnify such directors and officers to the maximum extent provided
by applicable corporate law. In addition, Parent and Purchaser shall include
such persons as additional insureds under Parent's Director and Officer
Insurance Policy if they can do so without substantial additional cost.
6.5 BENEFIT PLANS AND RELATED MATTERS. Except for employees subject to
collective bargaining agreements and subject to the provisions of Parent's
policies and programs, any employee of the Company retained by Purchaser or
its affiliates after the Closing Date (each, a "Transferred Employee") shall
be eligible to participate or eligible for accrual of benefits, vesting and
contributions or accruals to be made or credited following the Closing Date
under each of Parent's employee benefit plans, programs or arrangements
available to all or substantially all of Parent's employees, subject to the
terms upon which such plans allow new participation by Purchaser's employees.
Each Transferred Employee shall be credited with the time-in-service that the
employee accrued with the Company.
ARTICLE 7
COVENANTS OF ALL PARTIES
The parties hereto agree that:
7.1 COMMERCIALLY REASONABLE EFFORTS; FURTHER ASSURANCES. Subject to
the terms and conditions of this Agreement, each party will use commercially
reasonable efforts to take, or cause to be taken, all actions and to do, or
cause to be done, all things necessary or desirable under applicable Legal
Requirements to consummate the transactions contemplated by this
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Agreement. The Company, Controlling Shareholder, Parent and Purchaser each
agree to execute and deliver such other documents, certificates, agreements
and other writings and to take such other actions as may be necessary or
desirable in order to consummate or implement expeditiously the transactions
contemplated by this Agreement.
7.2 POOLING OF INTERESTS. Each of Parent, Purchaser and the Company
shall use its respective commercially reasonable efforts to cause the
transactions contemplated by this Agreement, including the Merger, to be
accounted for as a pooling of interests under Opinion 16 of the Accounting
Principles Board and applicable SEC rules and regulations, and such
accounting treatment to be accepted by each of Parent's and the Company's
independent certified public accountants, respectively, and to be accepted by
the SEC, and each of Parent, Purchaser and the Company and the Controlling
Shareholder agree that they will not knowingly take any action that would
cause such accounting treatment not to be obtained.
7.3 CERTAIN FILINGS, ETC. The Company, Parent and Purchaser shall
cooperate with one another (a) in determining whether any action by or in
respect of, or filing with, any governmental body, agency, official or
authority is required, or any actions, consents, approvals or waivers are
required to be obtained from parties to any material contracts, in connection
with the consummation of the transactions contemplated by this Agreement and
(b) in taking such actions or making any such filings, in furnishing such
information as may be required in connection therewith, and in seeking timely
to obtain any such actions, consents, approvals or waivers.
7.4 PUBLIC ANNOUNCEMENTS. The parties agree not to issue any press
release or make any public statement with respect to this Agreement or the
transactions contemplated hereby prior to the Closing without the prior
consent of Purchaser and Company (which consent shall not be unreasonably
withheld or delayed), except to the extent that any party hereto is required
by law to make any such disclosure and such party notifies the other parties
hereto a reasonable time before making such disclosure of the nature and
content of the intended disclosure, and consults with such other parties
regarding the nature and content of such disclosure.
7.5 REAL ESTATE AND EQUIPMENT. The parties agree to negotiate, execute
and deliver prior to Closing, mutually acceptable purchase and sale contracts
(the "Sale Documents") for the purchase by Purchaser of the Leased Property
currently occupied by the Company, and equipment leased and used by the
Company (the "Equipment") which is owned in whole or in part by Related
Parties of the Company and which must be acquired by the Purchaser as part of
the acquisition of the Company in order for the transactions described herein
to be accounted for as a pooling of interests. Notwithstanding the form of
the transaction pursuant to which the Leased Property is to be so
transferred, the Sale Documents shall contain (a) terms and conditions which
are essential to effectuate such transfer in a form acceptable to Purchaser
and (b) provisions similar to those set forth in Sections 1.1(f) and 1.10
hereof relating to the MW Common Stock delivered in connection therewith.
The Sale Documents shall provide for a purchase price for the Leased Property
of the greater of nine times current annual rentals for, or fair market value
of, the Leased Property and the fair market value for the Equipment. The
fair market value of the Leased Property and Equipment shall be based on
third-party appraisals. In addition, the purchase price
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shall be increased by all cash and cash equivalents acquired by Purchaser
pursuant to the Sale Documents valued at their U.S. dollar value. The
purchase price shall be net of any mortgages assumed by Purchaser. The
purchase price and the amount of any pre-payment penalties incurred by the
Sellers for pre-paying any mortgages shall be paid by Purchaser to the
Sellers in additional MW Common Stock based on the MW Common Valuation.
ARTICLE 8
CONDITIONS TO OBLIGATION OF PURCHASER TO CLOSE
The obligation of Purchaser to consummate the Merger, pay the Merger
Consideration, discharge the Debt, and otherwise consummate the transactions
contemplated hereunder is subject to the satisfaction as of the Closing Date,
of the following conditions (any of which may be waived by Purchasers in
whole or in part):
8.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES. The representations,
warranties and covenants set forth in Articles 2 and 3 and Section 5.1,
without giving effect to any Updated Disclosure Schedule delivered to
Purchaser after the date hereof, do not contain any misrepresentation or
breach of warranty which is likely to cause a Material Adverse Effect as of
the date of this Agreement and as of the Closing Date, with the same effect
as though made on and as of the Closing Date, except to the extent that (a)
any of such representations and warranties refers specifically to a date
other than the Closing Date or (b) the accuracy of any of such
representations and warranties is affected by any of the transactions
contemplated by this Agreement.
8.2 SHAREHOLDER APPROVAL. Approval of this Agreement and the
transactions contemplated hereby shall have been validly obtained by the
requisite vote of the shareholders of the Company under applicable law.
8.3 PERFORMANCE. Shareholders and the Company having performed, in all
material respects, all obligations required by this Agreement to be performed
by Shareholders and the Company on or before the Closing Date including
without limitation the covenants set forth in Article 5.
8.4 CERTIFICATE. Purchaser having received from a duly authorized
officer of the Company a certificate dated the Closing Date confirming that
the conditions in Section 8.1 and 8.2 have been met and confirming, to the
best of such persons' knowledge, that the condition of Section 8.3 has been
met.
8.5 DEBT CERTIFICATES AND PAYOFF LETTERS. Purchaser having received
the Debt Certificate and the Payoff Letters.
8.6 NO INJUNCTION. There not being in effect, at the Closing, any
injunction or other binding order of any court or other tribunal having
jurisdiction over Purchaser that prohibits the consummation of the
transactions contemplated in this Agreement.
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8.7 NO MATERIAL ADVERSE EFFECT. There having been no Material Adverse
Effect on the Company since September 30, 1997.
8.8 CONSENTS. All required consents, licenses, approvals, estoppel
certificates, releases of Encumbrances, acknowledgments of payment in full
and authorizations, as set forth on SCHEDULE 2.5, having been obtained and
delivered to Purchaser.
8.9 SHAREHOLDER REPRESENTATION AND AFFILIATE LETTER. Shareholders
having executed letters in the form of EXHIBIT C.
8.10 LEGAL OPINIONS. Purchaser having received from counsel to the
Company an opinion in substantially the form of EXHIBIT D attached hereto.
8.11 CERTIFICATE OF SECRETARY. The Company having delivered a
certificate, signed by the secretary of the Company, certifying (i) current
copies, as amended, of the Articles of Incorporation and Bylaws of the
Company and (ii) the resolutions of the board of directors and the
shareholders of the Company authorizing this Agreement and the transactions
contemplated hereby.
8.12 ESCROW AGREEMENTS. Shareholders, the Company, and the Escrow Agent
(as defined in the Escrow Agreement) having executed and delivered the Escrow
Agreement.
8.13 NON-COMPETE AGREEMENTS. Daniel W. Cain and Louis A. Mayle having
executed non-compete agreements in the form attached as EXHIBIT E providing
for a covenant not to compete of five years from the date of Closing and
three years from the date of such Shareholder's termination of employment
with Purchaser or one of its Affiliates, whichever is later.
8.14 UCC-3S. The Company having delivered UCC-3 Termination Statements
for all the secured Debt to be paid off at Closing, or a Payoff Letter from
the holder thereof agreeing to deliver the same after receipt of immediately
available funds sufficient to pay off in full the secured Debt.
8.15 HSR ACT. All applicable waiting periods under the HSR Act relating
to transactions contemplated hereby having expired or been terminated.
8.16 ACCOUNTING, TAX MATTERS. Purchaser is not aware of any fact or
circumstance that would (i) prevent the transactions contemplated hereby from
qualifying as a tax-free reorganization under the Code, or (ii) prevent the
transaction from qualifying for the pooling of interests method of accounting.
8.17 REAL ESTATE AND EQUIPMENT PURCHASES. The Sale Documents shall have
been executed and delivered by the Purchaser and the other parties thereto,
the conditions to purchase
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of the subject real estate shall have been satisfied and the acquisition of
the Leased Property and equipment shall have occurred simultaneously with the
Closing of the Merger.
8.18 NO DISCOVERY. Purchaser not being informed of or otherwise having
discovered any matter or matters which would constitute a Purchaser
Indemnified Obligation or which would represent a Material Adverse Effect on
the Company.
8.19 DOCUMENTATION. All agreements, documents and instruments
incidental to the performance of the transactions contemplated by this
Agreement being in a form and substance reasonably satisfactory to Purchaser
and its legal counsel and Purchaser having received copies of all documents
that they may have reasonably requested in connection with such transactions.
8.20 APPROVAL OF PURCHASER'S BOARD. The Board of Directors of Purchaser
and Parent shall have approved this Agreement and the transactions
contemplated herein.
ARTICLE 9
CONDITIONS TO OBLIGATIONS OF THE COMPANY TO CLOSE
The obligation of the Company to consummate the transactions that are to
be consummated at the Closing is subject to the satisfaction, as of the
Closing Date, of the following conditions (any of which may be waived in
whole or in part by Shareholders):
9.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES. The representations
and warranties of Parent and Purchaser set forth in Article 4 being accurate
in all material respects (except for the representations and warranties set
forth in Section 4.6, which shall be true and accurate) as of the date of
this Agreement and as of the Closing, as though made on and as of the Closing
Date.
9.2 PERFORMANCE. Parent and Purchaser having performed, in all
material respects, all obligations required by this Agreement to be performed
by Parent and Purchaser on or before the Closing Date.
9.3 CERTIFICATE. The Company having received from duly authorized
officers of Purchaser a certificate dated the Closing Date confirming that
the condition in Section 9.1 has been met and confirming, to the best of such
persons' knowledge, that the condition of 9.2 has been met.
9.4 NO INJUNCTION. There not being in effect, at the Closing, any
injunction or other binding order of any court or other tribunal having
jurisdiction over Shareholders or the Company that prohibits the consummation
of the transactions contemplated by this Agreement.
9.5 LEGAL OPINION. The Company having received from counsel to
Purchaser and Parent an opinion in substantially the form of EXHIBIT F
attached hereto.
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9.6 TAX OPINION. The Company and Shareholder having received an
opinion of Rothgerber Johnson & Lyons LLP, in form and substance reasonably
satisfactory to the Company, to the effect that the Merger and the issuance
of shares of MW Common Stock in connection therewith, as described herein,
shall constitute a tax-free reorganization under Section 368 of the Internal
Revenue Code of 1986, as amended.
9.7 ESCROW AGREEMENTS. Purchaser and the Escrow Agent having executed
and delivered the Escrow Agreement and the Working Capital Escrow Agreement.
9.8 HSR ACT. All applicable waiting periods under the HSR Act relating
to transactions contemplated hereby having expired or been terminated.
9.9 DOCUMENTATION. All agreements, documents and instruments
incidental to Purchaser's and Parent's performance of the transactions
contemplated by this Agreement, being in a form and substance reasonably
satisfactory to Shareholders and their legal counsel.
9.10 MATERIAL ADVERSE EFFECT. There having been no material adverse
effect on Purchaser or Parent since September 30, 1997.
9.11 REAL ESTATE AND EQUIPMENT PURCHASES. The Sale Documents shall have
been executed and delivered by the Purchaser and the other parties thereto,
the conditions to purchase of the subject real estate shall have been
satisfied and the acquisition of the Leased Property and equipment shall have
occurred simultaneously with the Closing of the Merger.
ARTICLE 10
TERMINATION OF AGREEMENT
10.1 Right to Terminate Agreement. This Agreement may be terminated
prior to the Closing:
(a) by the mutual agreement of the Company and Purchaser;
(b) by Purchaser at any time after June 30, 1998 if any condition
set forth in Article 8 shall not have been satisfied or waived and Parent or
Purchaser is not in material breach of this Agreement;
(c) by the Company at any time after May 29, 1998 if any condition
set forth in Article 9 shall not have been satisfied or waived and the
Company is not in material breach of this Agreement;
(d) by Purchaser at any time if it determines that any
representation or warranty set forth in Section 2 or Section 3 is inaccurate
in any material respect;
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(e) by Purchaser if any Updated Disclosure Schedule delivered to
Purchaser under Section 5.5 causes any representation or warranty set forth
in Section 2 or 3 to be inaccurate in any material respect; or
(f) by the Company at any time if it determines that any
representation or warranty set forth in Section 4 is inaccurate in any
material respect.
10.2 EFFECT OF TERMINATION. Upon the termination of this Agreement
pursuant to Section 10.1:
(a) Purchaser shall promptly destroy or cause to be returned to
the Company all Confidential Information, including any copies made by or
supplied to Purchaser or any of Purchaser' Associates of any such
Confidential Information;
(b) Each party shall pay its own costs and expenses and no party
hereto shall have any obligation or liability to the other parties hereto;
PROVIDED, HOWEVER that the parties hereto shall remain bound by the
provisions of Sections 6.1 and 7.4 and Article 12.
ARTICLE 11
CERTAIN REMEDIES AND LIMITATIONS
11.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. All
representations and warranties made by the Company and Controlling
Shareholder in this Agreement, in any Schedule or in any certificate
delivered pursuant hereto, shall survive the Closing until May 10, 1999,
provided that there shall be no termination of the obligation to indemnify
for a claim involving any such representation or warranty provided a Claim
Notice has been delivered prior to May 10, 1999. The representations and
warranties of any party shall be unaffected by any investigation made by or
on behalf of the other parties or by knowledge obtained as a result thereof
or otherwise. All representations and warranties made by Parent and the
Purchaser as to any fact or condition on or before the Closing Date, in this
Agreement, or in any certificate delivered pursuant hereto, shall survive the
Closing.
11.2 INDEMNIFICATION BY SHAREHOLDERS.
(a) The Purchaser and the Company and their respective Affiliates
and their respective officers, directors, shareholders, agents,
representatives, consultants, employees and affiliates, and all of their
respective heirs, successors and permitted assigns (collectively, the
"Purchaser Indemnified Parties") shall be indemnified and held harmless,
jointly and severally by the Shareholders entitled to receive the Merger
Consideration, solely out of the portion of the Merger Consideration
deposited in the Escrow Account, against and in respect of the net amount
(determined after deduction of the amount of any insurance proceeds recovered
and any benefits
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inuring to the Purchaser as a result of the timing for income tax purposes of
deductions for such losses as compared to the timing of recoveries under
insurance or this Section 11.2):
(i) of any and all liabilities, obligations, losses, damages,
diminutions of value, liens and deficiencies of any kind or nature
("Losses") not accrued or reserved for in the Final Closing Statement which
exist, or which are imposed on, incurred by or asserted against any one or
more of the Purchaser Indemnified Parties,
(A) based upon, resulting from or arising out of, or as to
which there was, any breach or inaccuracy of any representation,
warranty, statement, certification, agreement or covenant made by the
Company or any Shareholder in this Agreement, any Related Agreement,
any Disclosure Schedule hereto or thereto;
(B) based upon, resulting from or arising out of any claim,
litigation or proceeding brought by any third-party based upon,
resulting from, arising out of or concerning any event, fact or
circumstance, if and to the extent that such event, fact or
circumstance arises out of or relates to the ownership or operation of
the Company prior to Closing;
(C) arising out of the cost of any required remediation
under Environmental Laws of any of the properties now or previously
owned, leased, used, occupied or contaminated by the Company, if the
materials and/or conditions requiring such remediation existed as of
the Closing;
(D) in the nature of Taxes for periods through the Closing
for which the Company is liable to the extent that an appropriate tax
authority has asserted a claim and (i) such Taxes are not reflected on
the Financial Statements and did not arise in the ordinary course of
business after the date thereof, (ii) such Taxes should have been but
were not reflected in any return filed by the Company prior to the
Closing, (iii) such Taxes were required to be paid prior to the
Closing and were not so paid, or (iv) such Taxes result from the
failure by the Company prior to the Closing to comply with any legal
requirements relating to information reporting or withholding and
payment over of taxes with respect to payments made to third parties;
(E) the amount of any brokerage commission, finder's fee or
like payment in connection with the transactions contemplated in this
Agreement to the extent not included in Company Expenses included in
the calculation of the Merger Consideration;
(ii) of any cost or expenses (including, without limitation,
settlement costs and reasonable attorneys', accountants' and experts' fees
and court costs) incurred by Purchaser Indemnified Parties in connection
with any of the foregoing (including, without
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limitation, any reasonable cost or expense incurred by Purchaser
Indemnified Parties in enforcing their rights pursuant to this
Section 11.2).
Each of the above is for purposes of this Agreement a "Purchaser
Indemnified Obligation."
(b) Claims for indemnification under Section 11.2(a)(i)(B), (C) or
(D), above, may be made regardless of whether or not the matter giving rise
to such claim would constitute a breach of a representation and warranty made
in this Agreement, any Related Agreement, any Disclosure Schedule hereto and
thereto or any other written document. No Purchaser Indemnified Party shall
be required to make any claim or demand against any other person or entity
prior to the making of any claim or demand for indemnification or at any
other time. Shareholders agree that, notwithstanding any other provision of
this Agreement, any Related Agreement or applicable Legal Requirements,
Purchaser Indemnified Parties shall offset all valid claims for
indemnification against the Escrow Account in accordance with the terms of
the Escrow Agreement.
11.3 LIMITATIONS ON REPRESENTATIONS, WARRANTIES AND LIABILITIES OF
SHAREHOLDERS.
(a) Notwithstanding anything to the contrary in this Agreement,
Shareholders shall not be liable to the Purchaser Indemnified Parties, except
under the Escrow Agreement as provided therein. The total amount of payments
that the Shareholders may be required to make thereunder shall be limited in
the aggregate to the Escrow Amount, which is the sole source of Purchaser's
indemnification and the Shareholders' cumulative liability shall in no event
exceed the Escrow Amount.
(b) No payment shall be required to be made for Purchaser
Indemnified Obligations unless a Claim Notice (as defined below) with respect
thereto has been delivered to Shareholders on or prior to May 10, 1999.
(c) Notwithstanding anything to the contrary in this Agreement,
and except for "willful," knowing or intentional breaches of the
representations and warranties contained herein, no claim for indemnification
may be made by any Purchaser Indemnified Party unless and until the aggregate
amount of Losses and/or other amounts claimed for indemnification by the
Purchaser Indemnified Parties exceeds $25,000, and then only for the amount
by which such Losses and other amounts claimed exceed $25,000.
11.4 INDEMNIFICATION BY PARENT AND PURCHASER.
(a) Parent and Purchaser will, jointly and severally, indemnify
and hold harmless Shareholders and their respective affiliates, officers,
directors, partners, stockholders, agents, representatives, consultants and
employees, and all of their respective heirs, successors and
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permitted assigns (collectively, the "Shareholder Indemnified Parties") from
and against the net amount (determined after deduction of the amount of any
insurance proceeds recovered):
(i) of any and all Losses which exist, or which are imposed on,
incurred by or asserted against any one or more of the Shareholder
Indemnified Parties:
(A) based upon, resulting from or arising out of or as to
which there was any breach or inaccuracy of any representation,
warranty, statement, certification, agreement, obligation or covenant
made by Parent or Purchaser in this Agreement, any Purchaser Related
Agreement or in any other written document;
(B) based upon, resulting from or arising out of any claim,
litigation or proceeding brought by any third party based upon,
resulting from arising out of or concerning any event, fact or
circumstance, if and to the extent that such event, fact or
circumstance arises out of or relates to the ownership or operation of
the Company after the Closing;
(C) arising out of the cost of remediating under
Environmental Laws any of the properties now owned, leased, used,
occupied or contaminated by the Company, if the conditions requiring
such remediation did not exist prior to the Closing;
(D) in the nature of Taxes which arise subsequent to the
Closing;
(E) the amount of any brokerage commission, finder's fee or
like payment in connection with the transactions contemplated in this
Agreement;
(ii) of any cost or expenses (including, without limitation,
settlement costs and reasonable attorneys', accountants' and experts' fees
and court costs) incurred by Shareholder Indemnified Parties in connection
with any of the foregoing (including, without limitation, any reasonable
cost or expense incurred by Shareholder Indemnified Parties in enforcing
their rights pursuant to this Section 11.4).
Each of the above is for purposes of this Agreement a "Shareholder
Indemnified Obligation."
(b) Claims for indemnification under Section 11.4(a)(i)(B), (C) or
(D), above, may be made regardless of whether or not the matter giving rise to
such claim would constitute a breach of a representation and warranty made in
this Agreement, any Related Agreement, any Disclosure Schedule hereto and
thereto or any other written document. No Shareholder Indemnified Party shall
be required to make any claim or demand against any other person or entity prior
to the making of any claim or demand for indemnification or at any other time.
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11.5 LIMITATIONS ON LIABILITY OF PURCHASER.
(a) No payment shall be required to be made for Shareholders
Indemnified Obligations unless a Claim Notice with respect thereto has been
delivered to Purchaser on or prior to the third anniversary of the Closing.
(b) Any amounts payable by Purchaser to Shareholders under this
Article 11 shall be payable in MW Common Stock at the MW Common Stock Valuation.
11.6 INDEMNIFICATION CLAIMS.
(a) If either a Purchaser Indemnified Party, on the one hand, or a
Shareholder Indemnified Party, on the other hand, (the "Claimants") wishes to
assert an indemnification claim hereunder, the Claimant shall deliver to
Shareholders, if a Purchaser Indemnified Party, or to Purchaser, if the Claimant
is a Shareholder Indemnified Party, a written notice (a "Claim Notice") setting
forth:
(i) the matter giving rise to the Claim for indemnification,
(ii) a detailed description of all of the facts and circumstances
known to Claimant giving rise to the Claim, and
(iii) a detailed description of, and a reasonable estimate of
the total amount of, the monetary amounts actually incurred or expected to
be incurred for which indemnification is sought.
(b) Purchaser Indemnified Parties and Shareholder Indemnified Parties
are referred to herein as "Indemnified Parties," and the persons from whom
indemnification may be sought pursuant to this Section 11.6 are referred to as
an "Indemnifying Party"). Within twenty (20) days after receipt of any Claim
Notice, the Indemnifying Parties will (i) acknowledge in writing their
responsibility for all or part of such matter for which indemnification is
sought under this Article 11, and will either (x) pay or otherwise satisfy the
portion of such matter as to which responsibility is acknowledged, or (y) take
such other action as is reasonably satisfactory to the Indemnified Party to
provide reasonable security or other assurances for the performance of their
obligations hereunder, and/or (ii) give written notice to the Indemnified Party
of their intention to dispute or contest all or part of such responsibility.
Upon delivery of such notice of intention to contest, the parties will negotiate
in good faith to resolve as promptly as possible any dispute as to
responsibility for, or the amount of, any such matter.
11.7 DEFENSE OF THIRD PARTY ACTIONS. If an Indemnified Party receives
notice or otherwise obtains Knowledge of any Claim or any threatened Claim that
may give rise to an indemnification claim against an Indemnifying Party, then
the Indemnified Party shall promptly deliver to the Indemnifying Party a written
notice describing such Claim in reasonable detail. The untimely delivery of such
written notice by the Indemnified Party to the Indemnifying Party shall relieve
the Indemnifying Party of liability with respect to such Claim to the extent it
has been
47
<PAGE>
prejudiced by lack of timely notice under this Article 11 with respect to
such Claim. The Indemnifying Party shall have the right, at its option to
assume the defense of any such Claim with its own counsel, reasonably
satisfactory to the Indemnified Party, provided that Shareholders may not
assume the defense of any Claim unless there are sufficient amounts in the
Indemnification Escrow Amount to fully indemnify Purchaser Indemnified
Parties against the amount of such Claim and all other pending Claims against
the Escrow Amount. If the Indemnifying Party elects to assume the defense of
and indemnification for any such Claim, then:
(a) notwithstanding anything to the contrary contained in this
Agreement, the Indemnifying Party shall not be required to pay or otherwise
indemnify the Indemnified Party against any attorneys' fees or other expenses
incurred on behalf of the Indemnified Party in connection with such matter
following the Indemnifying Party's election to assume the defense of such matter
so long as the Indemnifying Party continues to diligently conduct such defense;
(b) the Indemnified Party shall make available to the Indemnifying
Party all books, records and other documents and materials that are under the
direct or indirect control of the Indemnified Party or any of the Indemnified
Party's Associates that the Indemnifying Party considers such necessary or
desirable for the defense of such matter at the expense of the Indemnifying
Party and shall make available to the Indemnifying Party reasonable access to
Indemnified Party's personnel;
(c) the Indemnified Party shall execute such documents and take such
other actions as the Indemnifying Party may reasonably request for the purpose
of facilitating the defense of, or any settlement, compromise or adjustment
relating to, such Claim (with the Indemnifying Party to reimburse Indemnified
Party for third-party, out-of-pocket expenses) and the Indemnified Party shall
not be required to take any such action or execute any document which imposes
any equitable or unindemnified liability remedy on any Indemnified Party or
would adversely affect the business or operations of the Company;
(d) the Indemnified Party shall otherwise fully cooperate as
reasonably requested by the Indemnifying Party in the defense of such Claim
(with the Indemnifying Party to reimburse Indemnified Party for third-party,
out-of-pocket expenses); and
(e) the Indemnified Party shall not admit any liability with respect
to such Claim.
If the Indemnifying Party fails or refuses to assume the defense of and
indemnification for such Claim, then the Indemnified Party shall proceed
diligently to defend such Claim with the assistance of counsel, and the
Indemnifying Party shall thereafter reimburse Indemnified Party on a current
basis, in accordance with the procedures set forth in this Agreement, as
requested by Indemnified Party for all costs and expenses of defense for which
Indemnified Party is entitled to indemnification pursuant to the terms of this
Agreement. No third party Claim may be settled by the Indemnified Party without
notice to, and the written consent of, the Indemnifying Party which consent must
not be unreasonably withheld. If such consent is not given, or written notice
that it is being withheld and the reasons therefor has not been received, by the
Indemnified Party within 15
48
<PAGE>
days after such notice has been received by the Indemnifying Party, the
consent of the Indemnifying Party to such settlement shall be deemed given.
11.8 SUBROGATION. To the extent that the Indemnifying Party makes or is
required to make any indemnification payment to any Indemnified Party, the
Indemnifying Party shall be entitled to exercise, and shall be subrogated to,
any rights and remedies (including rights of indemnity, rights of contribution
and other rights of recovery) that the Indemnified Party or any of the
Indemnified Party affiliates may have against any other person (other than any
Purchaser Indemnified Party or Shareholders Indemnified Party) with respect to
any Losses, circumstances or matter to which such indemnification payment is
directly or indirectly related. The Indemnified Party shall permit the
Indemnifying Party to use the name of the Indemnified Party and the names of the
Indemnified Party's affiliates in any transaction or in any proceeding or other
matter involving any of such rights or remedies; and the Indemnified Party shall
take such actions as the Indemnifying Party may reasonably request for the
purpose of enabling the Indemnified Party to perfect or exercise the
Indemnifying Party's right of subrogation hereunder.
11.9 EXCLUSIVITY. The right of each party hereto to assert
indemnification claims and receive indemnification payments pursuant to this
Article 11 shall be the sole and exclusive right and remedy exercisable by
any person or entity entitled to indemnification hereunder with respect to
any breach by the other party hereto of any representation or warranty or any
other indemnity obligation hereunder.
11.10 RETENTION OF RECORDS. From and after the date of this Agreement,
Purchaser shall preserve, and shall cause the Company to preserve, all books,
records and other documents, materials and information relevant to the
representations, warranties and covenants set forth in this Agreement until
the later of four (4) years following the Closing Date or for such longer
period as the rights of the parties hereunder may exist. At all times after
the Closing Date, Purchaser and the Company shall give Shareholders and
Shareholders' Associates reasonable access to such books, records and other
documents, materials and information of the Company relating to the operation
of the business of the Company up to and including the Closing Date.
ARTICLE 12
MISCELLANEOUS
12.1 CERTAIN DEFINITIONS. For purposes of this Agreement, a contract,
obligation, liability, transaction, change, breach, encumbrance, proceeding or
other matter or event shall not be deemed "material" if the monetary amount
involved is less than 0.1% of the Merger Consideration. A "Material Adverse
Effect" is a material adverse effect on the business, operations, assets or
financial condition or results of the Company taken as a whole. "Knowledge"
means, with respect to an individual, the actual present Knowledge of such
individual. A Person (other than an individual), including the Company, will be
deemed to have Knowledge of a particular fact or matter if any individual who
serves as an officer or director of such Person has actual present Knowledge of
such fact or matter. "Shareholders' Representative" shall mean Daniel W. Cain
and his successors and/or assigns.
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<PAGE>
12.2 EXPENSES. The term "Company Expenses" shall mean: (i) all costs and
expenses of the Company in connection with the negotiation of this Agreement and
the consummation of the transactions contemplated hereby including any broker's
fee set forth in SCHEDULE 2.25; (ii) one-half of the Company's costs of all HSR
filings, and any transfer taxes or stamp incurred by the Company in connection
with the transactions contemplated by this Agreement and of Neutral Accountants;
and (iii) all other costs and expenses required to be borne by the Company under
the terms of this Agreement. Company Expenses shall not include costs, expenses
or fees of Shareholders incurred in connection with the Merger or other
transactions contemplated by this Agreement which costs, expenses and fees shall
be paid directly by the Shareholders. The Company shall pay the fees and
expenses of the Company incidental to the preparation of this Agreement, the
performance and compliance with all agreements contained in this Agreement to be
performed or complied with by it and the consummation of the transactions
contemplated hereby, including the legal and accounting fees and expenses.
Purchaser shall be responsible for its fees and expenses incidental to the
preparation of this Agreement, the performance and compliance with all
agreements contained in this Agreement to be performed or complied with by it
and the consummation of the transactions contemplated hereby, including the
legal and accounting fees and expenses and the fees and expenses associated with
any environmental assessment conducted in connection with this transaction.
12.3 NOTICES; ETC. All notices, instructions and other communications
given hereunder or in connection herewith shall be in writing. Any such notice,
instruction or communication shall be sent either (i) by registered or certified
mail, return receipt requested, postage prepaid, or (ii) via a reputable
nationwide overnight courier service, in each case to the address set forth
below. Any such notice, instruction or communication shall be deemed to have
been delivered three business days after it is sent prepaid, or one business day
after it is sent via a reputable nationwide overnight courier service.
If to Purchaser, to:
Mail-Well, Inc.
23 Inverness Way East
Englewood, CO 80112
Attention: Gerald F. Mahoney, Chairman
Tel: (303) 397-7410
Fax: (303) 397-7400
with a copy to:
Mail-Well, Inc.
23 Inverness Way East
Englewood, CO 80112
Attention: Roger Wertheimer, Vice President, General Counsel
Tel: (303) 397-7440
Fax: (303) 768-7380
50
<PAGE>
If to Company, Controlling Shareholder, or to the Shareholders' Representative:
Daniel W. Cain
6109 Shadow Lake Drive
Toledo, Ohio 43623
With copies to:
Louis A. Mayle
6051 Glenbeigh Drive
Sylvania, Ohio 43560
Russell R. Miller, Esq.
Barkan & Robon
405 Spitzer Building
Toledo, Ohio 43604
or, in each case, to such other address as may be specified in writing to the
other parties.
Any party may give any notice, instruction or communication in connection
with this Agreement using any other means (including personal delivery, telecopy
or ordinary mail), but no such notice, instruction or communication shall be
deemed to have been delivered unless and until it is actually received by the
party to whom it was sent. Any party may change the address to which notices,
instructions or communications are to be delivered by giving the other parties
to this Agreement notice thereof in the manner set forth in this Section 12.3.
12.4 ASSIGNMENT. Neither the Company nor any Shareholder may assign
or otherwise transfer this Agreement or any of their rights hereunder to any
person or entity, without the prior written consent of Purchaser. Subject to
the foregoing, this Agreement shall inure to the benefit of and be binding
upon Shareholders and their successors, personal representatives, heirs, and
permitted assigns. Notwithstanding the foregoing, this Agreement shall not be
terminated by the death or incapacity of any Shareholder, and if, after the
execution hereof, any Shareholder shall die or become incapacitated, this
Agreement shall be binding upon the successors and assigns of any Shareholder
as if such death or incapacity had not occurred and regardless of notice
thereof. Except as expressly permitted by this Section 12.4, Purchaser shall
not voluntarily or by operation of law assign or otherwise transfer this
Agreement or any of its rights or obligations hereunder except to Parent or
any of its wholly owned subsidiaries, without the prior written consent of
Shareholders' Representative and provided that any permitted assignment or
transfer shall not relieve Purchaser or Parent of any of their joint and
several obligations hereunder. Purchaser may collaterally assign and/or grant
a security interest in its rights under this Agreement and under other
closing documents to any financial institution(s) or their affiliates as
required pursuant to any existing or future financing arrangements with the
prior written consent of the Shareholders' Representative (which consent will
not be unreasonably withheld or delayed).
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<PAGE>
12.5 ENTIRE AGREEMENT; AMENDMENT; GOVERNING LAW; ETC. This Agreement
(together with the Exhibits and Disclosure Schedules) embodies the entire
agreement and understanding among the parties hereto with respect to the
subject matter hereof. This Agreement may be amended, modified, waived,
discharged or terminated only by (and any consent hereunder shall be
effective only if contained in) an instrument in writing signed by the party
against which enforcement of such amendment, modification, waiver, discharge,
termination or consent is sought. This Agreement shall be construed in
accordance with and governed by the laws of the State of Delaware as it
applies to contracts to be performed entirely with the State of Delaware. No
representation or warranty (either express, implied or otherwise) is being
made by any party with respect to the subject matter hereof other than as
expressly set forth herein.
12.6 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which is an original, but all of which shall constitute
one instrument. Facsimile signatures to this Agreement shall be binding upon
the parties.
12.7 THIRD PARTY RIGHTS. The parties do not intend to confer any
benefit hereunder on any person or entity other than the parties hereto, the
Indemnified Parties and their respective successors in interest.
12.8 EXHIBITS AND SCHEDULES. Each of the Exhibits and Schedules
referred to herein and attached hereto is an integral part of this Agreement
and is incorporated herein by this reference.
12.9 PRONOUNS. All pronouns and any variations thereof used in this
Agreement shall be deemed to refer to the masculine, feminine or neuter,
singular or plural, as appropriate.
12.10 AUTHORITY AND EXECUTION. Each person executing this Agreement on
behalf of a party hereto represents and warrants that he is duly and validly
authorized to do so on behalf of such party, with full right and authority to
execute this Agreement and to bind such party with respect to all of its
obligations hereunder.
12.11 SEVERABILITY. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction, as to such jurisdiction, shall
be ineffective to the extent of such invalidity or unenforceability, without
rendering invalid or unenforceable the retraining terms and provisions of
this Agreement or affecting the validity or enforceability of any of the
terms or provisions of this Agreement in any other jurisdiction.
12.12 TIME OF ESSENCE. Time is of the essence of this Agreement.
12.13 INTERPRETATION. Each party acknowledges that such party, either
directly or through such party's representatives, has participated in the
drafting of this Agreement, and any applicable rule of constructions that
ambiguities are to be resolved against the drafting party should not be
applied in connection with the construction or interpretation of this
Agreement.
52
<PAGE>
12.14 ARBITRATION.
(a) Any controversy or claim arising out of or related to this
Agreement, or a breach hereof, is to be settled by arbitration in accordance
with the procedures set forth in SCHEDULE 12.14.
(b) Notices of demand for arbitration must be filed in writing
with the other parties hereto and in accordance with SCHEDULE 12.14. A
demand for arbitration is to be made within a reasonable time after the claim
or controversy has arisen, but in no event later than the date when
institution of legal or equitable proceedings based on such claim or
controversy would be barred by the applicable statute of limitations.
(c) No arbitration hereunder may include, by consolidation,
joinder or any other manner, any Person other than Parent, Purchaser,
Company, the Shareholders, and other Persons substantially involved in a
common question of fact or law whose presence is required if complete relief
is to be accorded in arbitration. No Person other than Parent, Purchaser,
Company or the Shareholders may be included as an original third party or
additional third party to an arbitration whose interest or responsibility is
insubstantial. Consent to arbitration involving an additional Person does not
constitute consent to arbitration of a dispute not described therein or with
a Person not named or described therein. This Section 12.14 is enforceable
by specific performance under applicable law in a court of competent
jurisdiction.
(d) The award rendered by the arbitrators, including as to legal
fees in accordance with SCHEDULE 12.14, is final, and judgment may be entered
upon it in accordance with applicable law in any court of competent
jurisdiction.
THIS AGREEMENT CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY BE ENFORCED
BY THE PARTIES.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly caused this Agreement to
be executed as of the date first above written.
PARENT
MAIL-WELL, INC., a Colorado corporation
By: __________________________________________________
Name: Paul V. Reilly
Title: President
PURCHASER
MAIL-WELL I CORPORATION, a Delaware corporation
By: __________________________________________________
Name: Paul V. Reilly
Title: President
THE COMPANY
IPC GRAPHICS, INC.
By: __________________________________________________
Name: Daniel W. Cain
Title: Chairman of the Board and Chief Executive
Officer
CONTROLLING SHAREHOLDER
______________________________________________________
Daniel W. Cain
54
<PAGE>
SCHEDULE 12.14
ARBITRATION PROCEDURES
Purchaser and Shareholders hereto agree that in the event of a dispute
between them relating to or arising out of this Agreement, the involved parties
shall submit such dispute to binding arbitration as provided herein. All
arbitrations would be conducted in Denver, Colorado, or at another location
mutually approved by the parties, pursuant to the Commercial Arbitration Rules
of the American Arbitration Association except as herein may be provided. If
the panel used will consist of three arbitrators, such arbitrators will have
experience in the printing industry and the decision of the arbitrators would be
final and binding on all parties. All arbitration shall be undertaken pursuant
to the Federal Arbitration Act, where applicable, and the decision of the
arbitrators shall be enforceable in any court of competent jurisdiction. All of
the parties shall agree to waive their respective rights to further appeal or
redress in any other court or tribunal except solely for the purpose of
obtaining execution of the decision resulting from the arbitration proceeding.
In any dispute where a party seeks $200,000.00 or more in damages or if the
dispute involves whether the Purchaser or the Company properly determined to
terminate the Agreement or refused to close the transactions contemplated by
this Agreement, three arbitrators shall be employed to arbitrate the dispute.
In the event that the dispute involves less than $200,000.00, there shall be one
arbitrator. In the event of any arbitration or other legal proceeding brought
by any party against another party with regard to any matter arising out of or
related to this Agreement, each party hereby expressly agrees that the final
award decision would also provide for all allocation and division between or
among the parties to the arbitration, on a basis which is just and equitable
under the circumstances, of all costs and expenses of the dispute, including
without limitation court costs and arbitrators', reasonable attorneys',
accountants' and expert witness fees, costs and expenses (including
disbursements) incurred in connection with such proceedings. In resolving all
disputes between the parties, the arbitrators shall apply the substantive law of
the State of Delaware. The arbitrators are directed, by this Agreement, to
conduct the arbitration hearing no later than three months from the service of
the statement of claim and demand for arbitration unless good cause is shown
establishing that the hearing cannot fairly and practically be so convened.
Depositions shall be taken only as deemed appropriate by the arbitrator(s)
and only where good cause is shown. Good cause is agreed to exist with respect
to the depositions of officers and management personnel to the extent Knowledge,
as defined in the Agreement at Section 12.1 therein, is relevant to the issue.
Parties shall be entitled to conduct document discovery by requesting production
of documents. Responses or objections shall be served twenty days after receipt
of a request. The arbitrators shall resolve any discovery disputes of such
preheating conferences as may be needed. All parties shall agree that the
arbitrators and any counsel of record to the proceeding shall have the power or
subpoena process as provided by law.
55
<PAGE>
DEFINITIONS
<TABLE>
PAGE
<S> <C>
Accounts Receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Affiliate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Annual Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Associates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Benefit Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
CERCLA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Certificate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Claim. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Claim Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Claimants. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
COBRA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Company. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Company Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Computation Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Confidential Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Controlling Shareholder. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Creditors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Debt Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Debt Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
DGCL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Disclosure Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Disputed Inventory Matter. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Disputed Working Capital Matter. . . . . . . . . . . . . . . . . . . . . . . . . . 8
Dissenting Shareholders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Dissenting Shareholders Escrow Amount. . . . . . . . . . . . . . . . . . . . . . . 5
Dissenting Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Environmental Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Equity Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Escrow Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Escrow Amount. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Estimated Working Capital Statement. . . . . . . . . . . . . . . . . . . . . . . . 7
Estimated Working Capital. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
56
<PAGE>
Exchange Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Final Closing Statement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Final Closing Statement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Final Closing Statement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Final Working Capital Statement. . . . . . . . . . . . . . . . . . . . . . . . . . 7
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Hazardous Materials. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
HSR Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Indemnification Escrow Amount. . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Indemnified Parties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Indemnifying Party . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Initial Distribution Amount. . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Initial Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Intellectual Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Interim Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Knowledge. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Leased Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Legal Requirement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Liability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Mail-Well. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Material Adverse Effect. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Material Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Merger Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Multiemployer Plans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
MW Common Stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
MW Common Stock Valuation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Neutral Accountant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Notice of Inventory Disagreement . . . . . . . . . . . . . . . . . . . . . . . . . 9
Notice of Working Capital Disagreement . . . . . . . . . . . . . . . . . . . . . . 7
ORC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Parent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Payoff Letters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
PBGC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Pension Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Permits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Permitted Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Prepayment Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Pro Rata Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Purchaser. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
57
<PAGE>
Purchaser Indemnified Parties. . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Purchaser Indemnified Obligation . . . . . . . . . . . . . . . . . . . . . . . . . 45
Purchaser Related Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
RCRA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Real Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Registrable Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Registration Document. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Registration Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Registration Statement Period. . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Related Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Related Parties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Sale Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
SEC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SEC Documents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Securities Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Shareholder Indemnified Obligation . . . . . . . . . . . . . . . . . . . . . . . . 46
Shareholder Indemnified Parties. . . . . . . . . . . . . . . . . . . . . . . . . . 46
Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Shareholders' Representative . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Subsidiary Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Surviving Corporation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Tax. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Tax Returns. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Title Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Total Shareholder Consideration. . . . . . . . . . . . . . . . . . . . . . . . . . 2
Transfer Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Transferred Employee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Updated Disclosure Schedule. . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Voting Debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Working Capital. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Working Capital Escrow Amount. . . . . . . . . . . . . . . . . . . . . . . . . . . 5
</TABLE>
58
<PAGE>
ACQUISITION AGREEMENT
AND
PLAN OF MERGER
by and among
MAIL-WELL INC.,
a Colorado corporation,
MAIL-WELL I CORPORATION,
a Delaware corporation,
FRENCH BRAY, INCORPORATED
a Maryland corporation
and
Certain Shareholders of French Bray, Incorporated
Identified Herein
As
Controlling Shareholders
May 15, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C> <C>
ARTICLE 1
PRINCIPAL TERMS OF THE MERGER. . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 PLAN OF MERGER . . . . . . . . . . . . . . . . . . . . . 1
1.2 NO FURTHER RIGHTS OF TRANSFER. . . . . . . . . . . . . . 3
1.3 SURVIVING CORPORATION. . . . . . . . . . . . . . . . . . 3
1.4 DISSENTING SHAREHOLDERS. . . . . . . . . . . . . . . . . 3
1.5 THE CLOSING. . . . . . . . . . . . . . . . . . . . . . . 4
1.6 Surrender of Certificates. . . . . . . . . . . . . . . . 6
1.7 Working Capital Settlement . . . . . . . . . . . . . . . 7
1.8 ADDITIONAL POST-CLOSING ADJUSTMENTS. . . . . . . . . . . 9
1.9 TRANSFER TAXES . . . . . . . . . . . . . . . . . . . . .10
1.10 MW COMMON STOCK. . . . . . . . . . . . . . . . . . . . .11
1.11 INVESTMENT LETTER. . . . . . . . . . . . . . . . . . . .13
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND
CONTROLLING SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . .13
2.1 Organization, Standing, Corporate Authorization, and
Enforceability . . . . . . . . . . . . . . . . . . . .13
2.2 CAPITALIZATION . . . . . . . . . . . . . . . . . . . . .14
2.3 ARTICLES OF INCORPORATION AND BYLAWS; CERTAIN RECORDS. .15
2.4 COMPLIANCE WITH OTHER INSTRUMENTS AND LAWS . . . . . . .15
2.5 GOVERNMENTAL AUTHORIZATIONS; CONSENTS. . . . . . . . . .15
2.6 LITIGATION . . . . . . . . . . . . . . . . . . . . . . .15
2.7 FINANCIAL STATEMENTS; CONDUCT OF THE BUSINESS;
NO UNDISCLOSED LIABILITIES . . . . . . . . . . . . . .16
2.8 ABSENCE OF CERTAIN CHANGES OR EVENTS . . . . . . . . . .16
2.9 TITLE TO PROPERTY, ABSENCE OF LIENS AND ENCUMBRANCES . .18
2.10 FULL AUTHORITY; COMPLIANCE WITH LAWS . . . . . . . . . .19
2.11 BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . .19
2.12 CLAIMS . . . . . . . . . . . . . . . . . . . . . . . . .22
2.13 TAXES. . . . . . . . . . . . . . . . . . . . . . . . . .22
2.14 CONTRACTS. . . . . . . . . . . . . . . . . . . . . . . .24
2.15 ENVIRONMENTAL QUALITY. . . . . . . . . . . . . . . . . .25
2.16 INTELLECTUAL PROPERTY. . . . . . . . . . . . . . . . . .27
2.17 PREPAID EXPENSES . . . . . . . . . . . . . . . . . . . .27
2.18 RELATED PARTY TRANSACTIONS . . . . . . . . . . . . . . .27
2.19 LABOR MATTERS. . . . . . . . . . . . . . . . . . . . . .28
2.20 CUSTOMERS AND VENDORS. . . . . . . . . . . . . . . . . .28
2.21 OTHER DISCLOSURES. . . . . . . . . . . . . . . . . . . .29
2.22 PARACHUTE PAYMENTS . . . . . . . . . . . . . . . . . . .29
</TABLE>
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<PAGE>
<TABLE>
<S> <C> <C> <C>
2.23 PRODUCT WARRANTY AND LIABILITY.. . . . . . . . . . . . .29
2.24 ACCURACY . . . . . . . . . . . . . . . . . . . . . . . .29
2.25 BROKERS AND FINDERS. . . . . . . . . . . . . . . . . . .30
ARTICLE 3
ADDITIONAL REPRESENTATIONS AND WARRANTIES OF CONTROLLING SHAREHOLDERS. . . .30
3.1 Ownership of Shares. . . . . . . . . . . . . . . . . . .30
3.2 Authorization. . . . . . . . . . . . . . . . . . . . . .30
3.3 Enforceability . . . . . . . . . . . . . . . . . . . . .30
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PURCHASER AND PARENT . . . . . . . . . . .30
4.1 Organization and Standing of Purchaser . . . . . . . . .30
4.2 AUTHORIZATION. . . . . . . . . . . . . . . . . . . . . .31
4.3 ENFORCEABILITY . . . . . . . . . . . . . . . . . . . . .31
4.4 COMPLIANCE WITH OTHER INSTRUMENTS AND LAWS . . . . . . .31
4.5 GOVERNMENTAL AUTHORIZATIONS, CONSENTS. . . . . . . . . .31
4.6 MW COMMON STOCK. . . . . . . . . . . . . . . . . . . . .31
4.7 LITIGATION . . . . . . . . . . . . . . . . . . . . . . .31
4.8 SECURITIES ACT OF 1933 . . . . . . . . . . . . . . . . .32
4.9 BROKERS AND FINDERS. . . . . . . . . . . . . . . . . . .32
4.10 PURCHASER'S KNOWLEDGE. . . . . . . . . . . . . . . . . .32
4.11 SEC DOCUMENTS. . . . . . . . . . . . . . . . . . . . . .32
4.12 ACCURACY . . . . . . . . . . . . . . . . . . . . . . . .32
4.13 INVESTIGATION. . . . . . . . . . . . . . . . . . . . . .33
ARTICLE 5
COVENANTS OF THE COMPANY AND THE CONTROLLING SHAREHOLDERS. . . . . . . . . .33
5.1 Conduct of Business. . . . . . . . . . . . . . . . . . .33
5.2 ACCESS . . . . . . . . . . . . . . . . . . . . . . . . .35
5.3 NO SOLICITATION OR NEGOTIATION . . . . . . . . . . . . .35
5.4 FILINGS AND CONSENTS . . . . . . . . . . . . . . . . . .35
5.5 UPDATED DISCLOSURE SCHEDULES . . . . . . . . . . . . . .36
ARTICLE 6
COVENANTS OF PARENT AND PURCHASER. . . . . . . . . . . . . . . . . . . . . .36
6.1 Confidentiality. . . . . . . . . . . . . . . . . . . . .36
6.2 FILINGS AND CONSENTS . . . . . . . . . . . . . . . . . .36
6.3 Filing of Final Tax Returns. . . . . . . . . . . . . . .37
ARTICLE 7
COVENANTS OF ALL PARTIES . . . . . . . . . . . . . . . . . . . . . . . . . .37
</TABLE>
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<PAGE>
<TABLE>
<S> <C> <C> <C>
7.1 Commercially Reasonable Efforts; Further Assurances. . .37
7.2 POOLING OF INTERESTS . . . . . . . . . . . . . . . . . .38
7.3 Certain Filings, Etc . . . . . . . . . . . . . . . . . .38
7.4 Public Announcements . . . . . . . . . . . . . . . . . .38
ARTICLE 8
CONDITIONS TO OBLIGATION OF PURCHASER TO CLOSE . . . . . . . . . . . . . . .38
8.1 Accuracy of Representations and Warranties . . . . . . .38
8.2 SHAREHOLDER APPROVAL . . . . . . . . . . . . . . . . . .39
8.3 Performance. . . . . . . . . . . . . . . . . . . . . . .39
8.4 CERTIFICATE. . . . . . . . . . . . . . . . . . . . . . .39
8.5 DEBT CERTIFICATES AND PAYOFF LETTERS.. . . . . . . . . .39
8.6 NO INJUNCTION. . . . . . . . . . . . . . . . . . . . . .39
8.7 NO MATERIAL ADVERSE EFFECT . . . . . . . . . . . . . . .39
8.8 CONSENTS . . . . . . . . . . . . . . . . . . . . . . . .39
8.9 SHAREHOLDER REPRESENTATION AND AFFILIATE LETTER. . . . .39
8.10 LEGAL OPINIONS . . . . . . . . . . . . . . . . . . . . .39
8.11 CERTIFICATE OF SECRETARY . . . . . . . . . . . . . . . .39
8.12 ESCROW AGREEMENTS. . . . . . . . . . . . . . . . . . . .40
8.13 NON-COMPETE AGREEMENTS . . . . . . . . . . . . . . . . .40
8.14 UCC-3S . . . . . . . . . . . . . . . . . . . . . . . . .40
8.15 HSR ACT. . . . . . . . . . . . . . . . . . . . . . . . .40
8.16 ACCOUNTING, TAX MATTERS. . . . . . . . . . . . . . . . .40
8.17 OPTIONS EXERCISED. . . . . . . . . . . . . . . . . . . .40
8.18 NO DISCOVERY . . . . . . . . . . . . . . . . . . . . . .40
8.19 DOCUMENTATION. . . . . . . . . . . . . . . . . . . . . .40
8.20 APPROVAL OF PURCHASER'S BOARD. . . . . . . . . . . . . .40
ARTICLE 9
CONDITIONS TO OBLIGATIONS OF THE COMPANY TO CLOSE. . . . . . . . . . . . . .40
9.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES . . . . . . .41
9.2 PERFORMANCE. . . . . . . . . . . . . . . . . . . . . . .41
9.3 CERTIFICATE. . . . . . . . . . . . . . . . . . . . . . .41
9.4 NO INJUNCTION. . . . . . . . . . . . . . . . . . . . . .41
9.5 LEGAL OPINION. . . . . . . . . . . . . . . . . . . . . .41
9.6 TAX OPINION. . . . . . . . . . . . . . . . . . . . . . .41
9.7 ESCROW AGREEMENTS. . . . . . . . . . . . . . . . . . . .41
9.8 HSR ACT. . . . . . . . . . . . . . . . . . . . . . . . .41
9.9 DOCUMENTATION. . . . . . . . . . . . . . . . . . . . . .41
9.10 MATERIAL ADVERSE EFFECT. . . . . . . . . . . . . . . . .41
ARTICLE 10
TERMINATION OF AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . .42
10.1 RIGHT TO TERMINATE AGREEMENT . . . . . . . . . . . . . .42
</TABLE>
-iii-
<PAGE>
<TABLE>
<S> <C> <C> <C>
10.2 EFFECT OF TERMINATION. . . . . . . . . . . . . . . . . .42
ARTICLE 11
CERTAIN REMEDIES AND LIMITATIONS . . . . . . . . . . . . . . . . . . . . . .42
11.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. .42
11.2 INDEMNIFICATION BY SHAREHOLDERS. . . . . . . . . . . . .43
11.3 LIMITATIONS ON REPRESENTATIONS, WARRANTIES AND
LIABILITIES OF SHAREHOLDERS. . . . . . . . . . . . . .44
11.4 INDEMNIFICATION BY PARENT AND PURCHASER. . . . . . . . .45
11.5 LIMITATIONS ON LIABILITY OF PURCHASER. . . . . . . . . .46
11.6 INDEMNIFICATION CLAIMS . . . . . . . . . . . . . . . . .46
11.7 DEFENSE OF THIRD PARTY ACTIONS . . . . . . . . . . . . .47
11.8 SUBROGATION. . . . . . . . . . . . . . . . . . . . . . .48
11.9 EXCLUSIVITY. . . . . . . . . . . . . . . . . . . . . . .48
11.10 RETENTION OF RECORDS . . . . . . . . . . . . . . . . . .48
ARTICLE 12
MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .49
12.1 CERTAIN DEFINITIONS. . . . . . . . . . . . . . . . . . .49
12.2 EXPENSES . . . . . . . . . . . . . . . . . . . . . . . .49
12.3 NOTICES; ETC . . . . . . . . . . . . . . . . . . . . . .49
12.4 ASSIGNMENT . . . . . . . . . . . . . . . . . . . . . . .50
12.5 ENTIRE AGREEMENT; AMENDMENT; GOVERNING LAW; ETC. . . . .51
12.6 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . .51
12.7 THIRD PARTY RIGHTS . . . . . . . . . . . . . . . . . . .51
12.8 EXHIBITS AND SCHEDULES . . . . . . . . . . . . . . . . .51
12.9 PRONOUNS . . . . . . . . . . . . . . . . . . . . . . . .51
12.10 AUTHORITY AND EXECUTION. . . . . . . . . . . . . . . . .51
12.11 SEVERABILITY . . . . . . . . . . . . . . . . . . . . . .52
12.12 TIME OF ESSENCE. . . . . . . . . . . . . . . . . . . . .52
12.13 INTERPRETATION . . . . . . . . . . . . . . . . . . . . .52
12.14 ARBITRATION. . . . . . . . . . . . . . . . . . . . . . .52
</TABLE>
Exhibit A Certificate of Merger
Exhibit B Escrow Agreement
Exhibit C Affiliate Letter
Exhibit D Legal Opinion of Company's Counsel
Exhibit E Non-Compete Agreement
Exhibit F Legal Opinion of Purchaser's Counsel
-iv-
<PAGE>
ACQUISITION AGREEMENT AND PLAN OF MERGER
THIS ACQUISITION AGREEMENT AND PLAN OF MERGER (this "Agreement") is made
and entered into as of May 15, 1998, by and among MAIL-WELL, INC., a Colorado
corporation ("Parent"), MAIL-WELL I CORPORATION, a Delaware corporation
("Mail-Well" or "Purchaser"), and FRENCH BRAY, INCORPORATED, a Maryland
corporation, (the "Company") and RONALD L. BRAY, HORACE A. BRAY, JR., HORACE A.
BRAY III, and GWEN ELLEN BRAY, (collectively, the "Controlling Shareholders").
WITNESSETH:
WHEREAS the Company is engaged in the commercial printing business (the
"Business");
WHEREAS, the respective Boards of Directors of Parent, Mail-Well, and the
Company have approved the acquisition of the Company by Mail-Well;
WHEREAS, to complete such acquisition the respective Boards of Directors of
Parent, Mail-Well and the Company have approved the merger of the Company with
and into Mail-Well (the "Merger"), pursuant to and subject to the terms and
conditions of this Agreement;
WHEREAS, the Directors of the Company have unanimously determined that the
Merger is fair to and in the best interests of its shareholders (collectively,
the "Shareholders"), approved the Merger and this Agreement and the transactions
contemplated hereby, and recommended the approval of the Merger and approval and
adoption of this Agreement by the Shareholders; and
WHEREAS, the Merger is intended to be accounted for as a pooling of
interests.
NOW, THEREFORE, in consideration of the mutual covenants, representations
and warranties made herein and of the mutual benefits to be derived herefrom,
the Company, Parent and Purchaser hereby agree as follows:
ARTICLE 1
PRINCIPAL TERMS OF THE MERGER
1.1 PLAN OF MERGER. Subject to the terms and conditions of this
Agreement, the Merger will be carried out in the following manner:
(a) The Company, Parent and Purchaser will cooperate and use their
respective best efforts to consummate the transactions contemplated by this
Agreement.
(b) Subject to the provisions of this Agreement, a Certificate of
Merger, substantially in the form of EXHIBIT A, shall be duly executed and, on
the Closing Date (as defined in Section 1.5 hereof), or as soon thereafter as
reasonably practicable, filed with the Delaware Secretary of State in accordance
with the General Corporation Law of the State of Delaware (the
<PAGE>
"DGCL"). In addition, Articles of Merger shall be duly prepared, executed and
acknowledged by the Company in accordance with the Maryland Code (the "MC") and
shall be filed on the Closing Date with the Maryland State Department of
Assessments and Taxation. The Merger shall become effective at the date and
time set forth in the Certificate of Merger and the Articles of Merger (the
"Effective Time").
(c) At the Effective Time, the Company shall merge with and into
Mail-Well, the separate existence of the Company shall cease, and Mail-Well
shall continue as the surviving corporation. (Mail-Well, in its capacity as the
corporation surviving the Merger, is hereinafter sometimes referred to as the
"Surviving Corporation.")
(d) From and after the Effective Time, the Merger shall have the
effects set forth in Section 259 of the DGCL and the Maryland Code, Corporations
and Associations, Article Title 3, Subtitle 1.
(e) The "Merger Consideration" which shall be paid by Parent and
Purchaser in the Merger, to be paid to the Shareholders other than Dissenting
Shareholders, shall be equal to (i) $16,270,000 less (ii) the amount of Debt as
defined in Section 1.5; less (iii) the amount of unpaid Company Expenses, as
defined in Section 12.2; plus or minus (iv) the adjustment under Section 1.7(b)
hereof; less (v) the amount, if any, paid by the Surviving Corporation to
Dissenting Shareholders. The Merger Consideration plus the amount, if any, paid
to Dissenting Shareholders by the Surviving Corporation is herein referred to as
the "Total Shareholder Consideration." The Merger Consideration shall be paid
in duly authorized, validly issued, fully paid and nonassessable Parent common
stock ("MW Common Stock") valued at $43.93 per share (the "MW Common Stock
Valuation"), which MW Common Stock shall be issued of record on the Closing Date
on the Parent's (and its transfer agent's) books.
(f) In the event of any stock split, combination, reclassification
or stock dividend with respect to MW Common Stock, any change or conversion of
MW Common Stock into other securities or any other dividend or distribution with
respect to MW Common Stock (other than quarterly cash dividends issued in the
ordinary course consistent with past practice), including without limitation,
any distribution by Parent of shares of capital stock of any of its Affiliates
(as defined in Section 2.18), or if a record date with respect to any of the
foregoing should occur, prior to the Effective Time, appropriate adjustments
shall be made to the MW Common Stock Valuation, and thereafter all references in
this Agreement to the MW Common Stock Valuation shall be deemed to be the MW
Common Stock Valuation as so adjusted.
(g) At the Effective Time and subject to the terms of this
Agreement, each share of Class A Voting and Class B Nonvoting common stock, par
value $1.00 per share, of the Company (collectively the "Common Stock") then
issued and outstanding (other than (x) any shares of Common Stock which are held
in the treasury of the Company, or which are held, directly or indirectly, by
Mail-Well or any direct or indirect subsidiary of Mail-Well, all of which shall
be canceled and none of which shall receive any payment with respect thereto
(hereinafter such shares are collectively referred to as "Subsidiary Shares")
and (y) shares of Common Stock held by Dissenting Shareholders (as defined in
Section 1.4 hereof) (hereinafter such shares are
2
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collectively referred to as "Dissenting Shares") shall, by virtue of the Merger
and without any action on the part of the holder thereof, be converted into and
represent the right to receive a pro rata share of the Merger Consideration
("Pro Rata Share") which shall be equal to the fraction obtained by dividing one
by the total number of shares of Common Stock outstanding at the Effective Time
(other than the Subsidiary Shares and Dissenting Shares).
1.2 NO FURTHER RIGHTS OF TRANSFER. At and after the Effective Time,
each holder of a certificate for Common Stock (a "Certificate") shall cease to
have any rights as a Shareholder, except for the right to surrender his or her
Certificate (other than Certificates representing Dissenting Shares or
Subsidiary Shares) in exchange for payment of the Merger Consideration
deliverable in respect thereof, or, in the case of a Dissenting Shareholder, to
perfect his or her right to receive payment for his or her shares pursuant to
applicable law if such holder has validly perfected and not withdrawn his or her
right to receive payment for his or her shares, and no transfer of shares of
Common Stock shall be made on the stock transfer books of the Company.
Certificates presented to the Surviving Corporation after the Effective Time
shall be canceled and exchanged for MW Common Stock and cash as provided in this
Article I. At the close of business on the day of the Effective Time, the stock
ledger of the Company with respect to Common Stock shall be closed.
1.3 SURVIVING CORPORATION. The Certificate of Incorporation of
Mail-Well, as in effect immediately prior to the Effective Time, shall be the
Certificate of Incorporation of the Surviving Corporation. The Bylaws of
Mail-Well, as in effect immediately prior to the Effective Time, shall be the
Bylaws of the Surviving Corporation. At the Effective Time, the directors and
officers of Mail-Well immediately prior to the Effective Time shall be the
directors and officers of the Surviving Corporation, each of such directors to
hold office, subject to the applicable provisions of the Certificate of
Incorporation and Bylaws of the Surviving Corporation, until the next annual
shareholders' meeting of the Surviving Corporation and until their respective
successors shall be duly elected or appointed and qualified.
1.4 DISSENTING SHAREHOLDERS. Notwithstanding anything in this Agreement
to the contrary but only to the extent required by applicable state law, shares
of Common Stock that are issued and outstanding immediately prior to the
Effective Time and are held by holders of Common Stock who comply with all the
provisions of applicable law concerning the right of holders of Common Stock to
dissent from the Merger and require appraisal of their shares of Common Stock
("Dissenting Shareholders") shall not be converted into the right to receive the
Merger Consideration but shall become the right to receive such consideration as
may be determined to be due such Dissenting Shareholder pursuant to the law of
the State of Maryland; provided, however, that (i) if any Dissenting Shareholder
shall subsequently deliver a written withdrawal of his or her demand for
appraisal (with the written approval of the Surviving Corporation, if such
withdrawal is not tendered within 60 days after the Effective Time), or (ii) if
any Dissenting Shareholder fails to establish and perfect his or her entitlement
to appraisal rights as provided by applicable law, or (iii) if within 120 days
of the Effective Time neither any Dissenting Shareholder nor the Surviving
Corporation has filed a petition demanding a determination of the value of all
shares of the Common Stock that are issued and outstanding at the Effective Time
and held by Dissenting Shareholders, then such Dissenting Shareholder or
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Shareholders, as the case may be, shall forfeit the right to appraisal of such
shares and each such share shall thereupon be deemed to have been converted into
the right to receive the Merger Consideration, without interest, according to
the terms of this Agreement. The Company shall give Purchaser (A) prompt notice
of any written demands for appraisal, withdrawals of demands for appraisal and
any other related instruments received by the Company, and (B) the opportunity
to direct all negotiations and proceedings with respect to demands for
appraisal. The Company will not voluntarily make any payment with respect to
any demands for appraisal and will not, except with the prior written consent of
Mail-Well, settle or offer to settle any such demand.
1.5 THE CLOSING. The closing of the transactions contemplated by this
Article 1 (the "Closing") shall be held at the offices of Rothgerber Johnson &
Lyons LLP in Denver, Colorado at 9:00 a.m. (local time) on May 29, 1998, or at
such other place, time and date as may be jointly designated by Purchaser, the
Company and the Shareholders (the date on which the Closing takes place, the
"Closing Date"). At or before the Closing, each of the following shall occur:
(a) As soon as practicable but no later than four business days
before the scheduled Closing Date, the Company shall deliver to Purchaser (i) a
certificate (the "Debt Certificate") executed by the chief financial officer of
the Company setting forth the amount of the outstanding principal balance and
the interest of any kind, as well as the amount of early retirement or
prepayment fees and/or penalties of any kind (the "Prepayment Fees") that will
be due and payable as of the Closing Date by the Company pursuant to any Debt
that will be outstanding as of the Closing Date to each creditor to whom any
such Debt is owed (the "Creditors") and (ii) a letter (the "Payoff Letters"),
executed by the Company and an authorized representative of each Creditor that
is a bank, leasing company or other financial institution or who is listed in
SCHEDULE 1.5(a) to whom any Debt is owed (other than the Debt set forth on
Schedule 1.5(b)), setting forth the amount of principal, interest and Prepayment
Fees, that will be due and payable by the Company to each of such Creditors as
of the Closing Date and undertaking to terminate, either at or immediately after
the Closing, all liens or other security interests securing such Debt upon
payment of the amounts due and owing. "Debt" shall include all funded long
term, short term or "line of credit" indebtedness, to banks and financial
institutions, Shareholders and other third parties, including the current
portion thereof, accrued interest thereon, and Prepayment Fees, together with
the unamortized principal amount including the current portion, interest expense
required to be accrued thereon and Prepayment Fees of all capitalized lease
obligations that are properly classified as liabilities on the balance sheet of
the Company at Closing in conformity with GAAP, the amounts of which shall be
determined consistent with the Company's audited Financial Statements; provided,
however, that Debt shall not include those prepayment fees for Debt listed on
SCHEDULE 1.5(b) which is not going to be discharged at Closing.
(b) At the Closing, that portion of the Debt owed to each Creditor
executing a Payoff Letter or whose Debt is otherwise acknowledged to Parent's
reasonable satisfaction, except that listed in SCHEDULE 1.5(b), shall be paid by
Purchaser to such Creditor by wire transfer of immediately available funds to an
account or accounts designated by such Creditors and in the amounts specified in
the Payoff Letters or otherwise established with such Creditors.
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(c) At the Closing, Purchaser shall pay any unpaid Company Expenses
accrued on the books of the Company by wire transfer of immediately available
funds or by certified bank check.
(d) The Purchaser shall place in escrow with the Escrow Agent
acting pursuant to the Escrow Agreement (as defined in Section 1.5(g)) (such
amount, together with interest and dividends thereon, additions thereto, and
releases therefrom, as more specifically set forth in such Escrow Agreement, is
referred to herein as the "Dissenting Shareholders Escrow Amount") immediately
available funds representing 100% of the cash value of the Merger Consideration
which would have been due Dissenting Shareholders under Section 1.1 as of the
Closing Date if such Dissenting Shareholders had not exercised their rights of
appraisal and MW Common Stock (based on the MW Common Stock Valuation)
representing 25% of the amount of the Merger Consideration which would have been
due Dissenting Shareholders under Section 1.1 as of the Closing Date. Any
amounts payable by Purchaser as the Surviving Corporation to Dissenting
Shareholders subsequent to the Closing Date shall be first payable out of the
cash portion of the Dissenting Shareholders Escrow Amount. Any amounts paid to
Dissenting Shareholders by Purchaser as the Surviving Corporation in excess of
the cash amount in the Dissenting Shareholder Escrow Amount shall be payable to
Purchaser in MW Common Stock (based on the MW Common Stock Valuation) out of,
first the Dissenting Shareholder Escrow Amount, and then out of, the Escrow
Amount (as defined below) in reduction of such Escrow Amount (as defined below).
Any cash remaining in the Dissenting Shareholders Escrow Amount after the
payment of all amounts due to Dissenting Shareholders shall be exchanged for
shares of MW Common Stock, rounded up to the nearest whole share, having a value
(based on the MW Common Stock Valuation) equal to the value of such cash. Any
amounts remaining in the Dissenting Shareholders Escrow Amount after resolution
of all Dissenting Shareholder claims shall be payable to the Shareholders
surrendering Certificates pursuant to Section 1.6 in MW Common Stock (based on
the MW Common Stock Valuation) at the direction of the Shareholders'
Representative (as defined in Section 12.1).
(e) At the Closing, from the Merger Consideration the Purchaser
shall deliver stock certificates representing 27,777 shares of MW Common
Stock to the Escrow Agent acting pursuant to the Escrow Agreement referred to
below (such amount, together with dividends thereon, additions thereto, and
releases therefrom, as more specifically set forth in such Escrow Agreement,
is referred to herein as the "Indemnification Escrow Amount"). A portion of
the Indemnification Escrow Amount in the amount of 9,106 shares (the "Tax
Escrow") shall be held in escrow to indemnify Purchaser for certain
identified potential tax claims (the "Tax Claims"). The Tax Escrow will be
held by the Escrow Agent until the later of May 10, 2001, or the date at
which all claims asserted against the Tax Escrow prior to May 10, 2001 have
been resolved, unless the amount of the Tax Escrow has been earlier
distributed to Purchaser in satisfaction of claims made by Purchaser to the
Indemnification Escrow Amount including the Tax Escrow.
(f) At the Closing, from the Merger Consideration the Purchaser
shall deliver stock certificates representing 2,646 shares of MW Common Stock to
the Escrow Agent acting pursuant to the Escrow Agreement referred to below (such
amount, together with dividends
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thereon, additions thereto, and releases therefrom, as more specifically set
forth in such Escrow Agreement, is referred to herein as the "Working Capital
Escrow Amount").
(g) The Dissenting Shareholders Escrow Amount, the Working Capital
Escrow Amount and the Indemnification Escrow Amount (collectively, the "Escrow
Amount") shall be held and distributed by such Escrow Agent in accordance with
the terms of the Escrow Agreement, substantially in the form attached hereto as
EXHIBIT B (the "Escrow Agreement"), which shall be entered into by the Escrow
Agent named therein, Purchaser and the Shareholders' Representative prior to or
on the Closing Date.
1.6 SURRENDER OF CERTIFICATES.
(a) At any time after the Effective Time upon surrender for
cancellation to the Purchaser of the Certificate(s) held by any record holder of
a Certificate, together with a duly executed letter of transmittal in a form
reasonably acceptable to Purchaser, such holder shall be entitled to receive in
exchange for each share of Common Stock represented by such surrendered
Certificate a Pro Rata Share of the Initial Distribution Amount to Shareholders.
The "Initial Distribution Amount" shall be the Total Shareholder Consideration
less the Escrow Amount delivered to the Escrow Agent pursuant to Section 1.5.
Promptly upon termination of each of the escrows pursuant to the terms of this
Agreement, each such Shareholder shall be entitled to receive his, her or its
Pro Rata Share of the particular Escrow Amount distributed to Shareholders. The
amounts so payable to a holder of a Certificate(s) shall be paid with a
certificate for the number of shares of MW Common Stock having a value (based on
the MW Common Stock Value and rounded down to the nearest whole share) equal to
the amount so due plus cash in lieu of fractional shares and in the amount of
any unpaid dividends or other distributions payable on such shares of MW Common
Stock with a record date after the Effective Time. The Certificate(s) so
surrendered shall be canceled. Until so surrendered, each Certificate shall be
deemed, for all corporate purposes, to evidence only the right to receive the
Merger Consideration deliverable in respect thereof to which such Person is
entitled pursuant to this Article 1. A Certificate surrendered will be
registered in the name of the beneficial owner of said Certificate (as set forth
in Schedule 2.2) in the event the voting trust to which such shareholder was a
party is terminated prior to or at Closing.
For purposes of this Agreement, "Person" shall mean and include an
individual, a partnership, a joint venture, a corporation, a trust, an
unincorporated organization, a group and a government or other department or
agency thereof.
(b) If the Merger Consideration (or any portion thereof) is to be
delivered to a Person other than the Person in whose name the Certificates
surrendered in exchange therefor are registered, it shall be a condition to the
payment of the Merger Consideration that the Certificates so surrendered shall
be properly endorsed or accompanied by appropriate stock powers and otherwise in
proper form for transfer, that such transfer otherwise be proper and that the
Person requesting such transfer pay to Mail-Well any transfer or other taxes
payable by reason of the foregoing or establish to the satisfaction of Mail-Well
that such taxes have been paid or are not required to be paid.
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(c) In the event any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the Person claiming
such Certificate to be lost, stolen or destroyed, and upon such Person's
agreement to indemnify the Parent and Mail-Well against any claim that may be
made against the Parent or Mail-Well with respect to the Certificate claimed to
have been lost, stolen or destroyed, or, if required by Mail-Well, upon such
Person's obtaining a lost instrument bond in form and amount satisfactory to
Mail-Well, Mail-Well will issue in exchange for such lost, stolen or destroyed
Certificate the Merger Consideration deliverable in respect thereof as
determined in accordance with this Article 1.
(d) No certificates or scrip representing fractional shares of MW
Common Stock shall be issued upon the surrender for exchange of Certificates
pursuant to this Article 1 or as part of a distribution from the Escrow Amount;
no dividend or other distribution by Parent and no stock split, combination or
reclassification shall relate to any such fractional share; and no such
fractional share shall entitle the record or beneficial owner thereof to vote or
to any other rights of a stockholder of Parent. In lieu of any such fractional
share, each holder of Shares who would otherwise have been entitled thereto upon
the surrender of Certificate(s) for exchange pursuant to this Article 1 will be
paid an amount in cash (without interest) rounded to the nearest whole cent,
determined by multiplying (i) the MW Common Stock Valuation by (ii) the
fractional share to which such holder would otherwise be entitled. Purchaser
shall make available the cash necessary for this purpose at the Effective Time.
1.7 WORKING CAPITAL SETTLEMENT.
(a) Prior to the Closing Date, the Company shall estimate its
working capital position (the "Working Capital") as of the close of business on
the Closing Date (the "Computation Date"). Working Capital shall mean (x) the
sum of (i) the book value of current assets [PLUS (ii) THE AMOUNT OF CAPITAL
EXPENDITURES LISTED ON SCHEDULE 1.7]; less (y) the book value of current
liabilities excluding any amount of Debt or Company Expenses paid by Purchaser
at Closing pursuant to Section 1.5(c). The Company shall provide Purchaser a
copy of the calculation of the estimated Working Capital (the "Estimated Working
Capital Statement") three business days prior to the Closing Date. The book
value of all amounts and the determination of Working Capital shall be
determined in accordance with generally accepted accounting principles,
consistently applied ("GAAP") on a basis consistent with the Company's last
audited Financial Statements..
(b) If the amount of the Working Capital as shown on the
Estimated Working Capital Statement (the "Estimated Working Capital") is
greater than $3,502,000, the Merger Consideration shall be increased by the
difference between the Estimated Working Capital and $3,502,000. If the
amount of the Estimated Working Capital is less than $3,502,000, the Merger
Consideration shall be reduced by the difference between $3,502,000 and the
Estimated Working Capital.
(c) Purchaser shall prepare and deliver to Shareholders a "Final
Working Capital Statement" on or before the thirtieth day following Closing. In
preparing the Final
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Working Capital Statement, inventory shall be valued at the lesser of cost or
market using FIFO in accordance with GAAP, and shall be based upon a physical
count taken by Shareholders and observed by the Purchaser (one-half the cost of
which shall be a Company Expense) within three business days prior to the
Closing Date. Except as provided in the preceding sentence, all amounts set
forth on the Final Working Capital Statement shall be determined in accordance
with GAAP on a basis consistent with the accounting principles used in
connection with determining the Estimated Working Capital. The Final Working
Capital Statement shall become final and binding on Shareholders and Purchaser
(in such instance, the "Final Closing Statement") unless the Shareholders'
Representative gives written notice to the Purchaser of his disagreement with
respect to any matter contained therein ("Notice of Working Capital
Disagreement") within 10 days after the receipt thereof. A Notice of Working
Capital Disagreement shall not be permitted unless the aggregate amount in
dispute exceeds Ten Thousand Dollars ($10,000). A Notice of Working Capital
Disagreement shall specify in reasonable detail the nature of any disagreement
so asserted. For a period of 30 days after the delivery of the Notice of
Working Capital Disagreement, the Shareholders' Representative and the Purchaser
shall attempt to resolve in writing all of the differences with respect to each
matter specified in the Notice of Working Capital Disagreement, in which case
any such resolution of the Final Working Capital Statement shall be final and
binding on the parties (in such instance, the "Final Closing Statement"). If,
at the end of such 30-day period, the Shareholders' Representative and Purchaser
have not resolved in writing all of the differences with respect to any such
matter, then each unresolved matter ("Disputed Working Capital Matter") shall be
submitted to and reviewed by the accounting firm of Price Waterhouse LLP or, if
such firm is unwilling or unable to act, to another "big six" accounting firm
selected by a panel of three arbitrators in accordance with the rules of the
American Arbitration Association (the "Neutral Accountant"). The Neutral
Accountant shall consider only the Disputed Working Capital Matters and shall
act promptly to resolve in writing all Disputed Working Capital Matters, and its
decisions with respect to the Disputed Working Capital Matters shall be final
and binding on each of the Shareholders and Purchaser; provided that no such
resolution of the Disputed Working Capital Matters shall require payment of an
amount greater than the highest amount or less than the lowest amount suggested
for such resolution by either the Shareholders' Representative or the Purchaser.
The Neutral Accountant shall notify the Shareholders and the Purchaser of its
resolution of the Disputed Working Capital Matters and shall prepare a revised
Working Capital Statement reflecting the resolution of all Disputed Working
Capital Matters promptly after such resolution (in such instance the "Final
Closing Statement") and shall deliver it to Purchaser and Shareholders'
Representative.
(d) Purchaser shall be responsible for and shall pay the fees and
expenses incurred in connection with the Neutral Accountant. Upon payment by
the Purchaser, one-half of such fees of the Neutral Accountant will be a claim
of Purchaser against the Escrow Amount payable first from the Working Capital
Escrow Amount and then from the Indemnification Escrow Amount.
(e) Within 10 days after receipt of the Final Closing Statement:
(i) if the Working Capital as set forth in the Final Closing
Statement is less than the Estimated Working Capital, the Merger
Consideration payable to
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Shareholders shall be adjusted by the difference (based on the MW Common
Stock Valuation) by the Shareholders' Representative giving instructions to
the Escrow Agent to distribute to Purchaser the MW Common Stock
representing such adjustment, first from the Working Capital Escrow Amount
and, to the extent there is not a sufficient amount in the Working Capital
Escrow Amount, then from the Indemnification Escrow Amount.
(ii) If the Working Capital as set forth in the Final Closing
Statement is greater than the Estimated Working Capital, Purchaser, subject
to the provisions of Section 1.6(d), shall issue additional MW Common Stock
(based on the MW Common Stock Valuation) as additional Merger Consideration
to each Shareholder surrendering Certificate(s) after the Effective Time,
the Pro Rata Share of the difference for each share represented by such
Certificate(s).
1.8 ADDITIONAL POST-CLOSING ADJUSTMENTS.
(a) If Purchaser reasonably determines, within 90 days of the
Closing Date, in accordance with GAAP and consistent with the Company's past
practices and historical turnover rates, that the allowance for obsolete or
unsaleable items in the raw materials, work-in-progress and finished goods
inventory, as reflected in the Working Capital included in the Final Closing
Statement, was insufficient based upon facts known at the date of such
subsequent determination, the Purchaser shall provide the Shareholders'
Representative with written notice thereof. The Shareholders' Representative
shall have 10 days after receipt of Purchaser's notice to give written notice to
the Purchaser of his disagreement ("Notice of Inventory Disagreement"). If a
Notice of Inventory Disagreement is issued by Shareholders' Representative, it
shall specify in reasonable detail the nature of any disagreement so asserted.
For a period of 30 days after the delivery of such Notice of Inventory
Disagreement, the Shareholders' Representative and the Purchaser shall attempt
to resolve in writing all of the differences with respect to each matter
specified in the Notice of Inventory Disagreement, in which case any such
resolution of such matters shall be final and binding on the parties. If, at
the end of such 30-day period, the Shareholders' Representative and Purchaser
have not resolved in writing all of the differences with respect to any such
matter, then each unresolved matter ("Disputed Inventory Matter") shall be
submitted to and reviewed by the Neutral Accountant. The Neutral Accountant
shall consider only the Disputed Inventory Matters and shall act promptly to
resolve in writing all Disputed Inventory Matters, and its decisions with
respect to the Disputed Inventory Matters shall be final and binding on each of
the Shareholders and Purchaser; provided that no such resolution of the Disputed
Inventory Matters shall require payment of an amount greater than the highest
amount or less than the lowest amount suggested for such resolution by either
the Shareholders' Representative or the Purchaser. The Neutral Accountant shall
notify the Shareholders and the Purchaser of its resolution of the Disputed
Inventory Matters and shall deliver written confirmation of same to Purchaser
and Shareholders' Representative. If Shareholders' Representative does not
issue a Notice of Inventory Disagreement or upon the resolution of the Disputed
Inventory Matters by the Neutral Accountant, the Purchaser, at Shareholders'
Representative's written instructions, shall sell such obsolete and/or
unsaleable inventory. The Merger Consideration payable to Shareholders shall be
adjusted by the difference (based on the MW Common Stock Valuation) by an amount
equivalent to the additional payment, if any, that would have been payable by
the Shareholders to the
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Purchaser pursuant 1.7(e)(i) on the basis of the difference between the
allowance for obsolete or unsaleable items as restated pursuant to this Section
1.8(a) and as originally stated at in the Final Closing Statement, less the
aggregate proceeds from the sale of said obsolete and/or unsaleable inventory
through the Shareholders' Representative giving instructions to the Escrow Agent
to distribute to Purchaser the MW Common Stock representing such adjustment,
first from the Working Capital Escrow Amount and, to the extent there is not a
sufficient amount in the Working Capital Escrow Amount, then from the
Indemnification Escrow Amount.
(b) If the gross amount collected by Purchaser upon the accounts
receivable reflected in the Working Capital included in the Final Closing
Statement ("Accounts Receivable") during the 120 days after the Closing Date is
less than the book value of such Accounts Receivable after giving effect to the
allowance for doubtful accounts as reflected on the Final Closing Statement,
Shareholders shall pay to Purchaser, by giving instructions to the Escrow Agent
to distribute to Purchaser MW Common Stock (based on the MW Common Stock
Valuation) first from the Working Capital Escrow Amount and, to the extent there
is not a sufficient amount in the Working Capital Escrow Amount, then from the
Indemnification Escrow Amount, on the basis of the difference between the amount
collected and the book value of such Accounts Receivable after giving effect to
the allowance for doubtful accounts as reflected as originally stated at in the
Final Closing Statement; provided, however, that during the aforementioned
120-day period Purchaser shall not write off or settle any uncollected Accounts
Receivable or retain a collector to collect any such Accounts Receivable without
written consent of Shareholders' Representative. Subsequent to such 120 days
after the Closing Date, Purchaser shall continue to use reasonable efforts to
collect any Accounts Receivable not collected during the 120 days after the
Closing Date, and the net amounts of such Accounts Receivable collected by
Purchaser, after accounting for third party collection costs, shall be remitted
to the Shareholders, other than Dissenting Shareholders, in MW Common Stock
(based on the MW Common Stock Valuation) after the payment by Shareholders of
the amounts due Purchaser under this Section 1.8(b). On or prior to the 15th
day of each month, Purchaser shall deliver to Shareholders' Representative an
Accounts Receivable report identifying the gross collections made by Purchaser
through and including the end of the preceding calendar month. Any amounts
collected by Purchaser shall be applied against the longest outstanding
receivables except as to any receivable as to which the Person paying such
amount has given Purchaser notice of a dispute.
(c) Upon the later of the 135th day after the Closing Date, or the
10th day after receipt by both Shareholders and Purchaser of the Final Closing
Statement, or the payment by Shareholders to Purchaser of any amount claimed by
Purchaser pursuant to Section 1.7 or this Section 1.8, any remaining Working
Capital Escrow Amount shall be distributed from the Working Capital Escrow
Account to Shareholders surrendering Certificates pursuant to Section 1.6 as
directed by the Shareholders' Representative.
1.9 TRANSFER TAXES. Any transfer taxes or stamp duties, or other similar
taxes, fees, charges or expenses (collectively "Transfer Taxes") imposed on the
Company shall be divided equally between the Purchaser and the Company, and the
total accrued and unpaid amount
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thereof allocated to the Company shall be treated as a Company Expense. Any
Transfer Taxes imposed on the Shareholders shall be paid by the Shareholders.
1.10 MW COMMON STOCK.
(a) The MW Common Stock to be delivered to Shareholders will not be
registered under federal or state securities laws, but rather, issued pursuant
to an exemption therefrom. As a result, Shareholders acknowledge and agree that
such MW Common Stock is "restricted" stock as such term is defined under such
securities laws and cannot be sold, pledged or transferred unless subsequently
registered or unless an exemption is available allowing its resale.
(b) Parent, at its expense, shall file a shelf registration
statement (the "Registration Statement") as soon as reasonably practicable after
the Closing Date, pursuant to Rule 415 under the Securities Act of 1933, as
amended (the "Securities Act") with respect to all the MW Common Stock issued by
Parent in connection with consummating the transactions contemplated by this
Agreement (including, without limitation, those shares deposited in escrow under
the Escrow Agreement) (collectively, "Registrable Shares"). Parent shall use
its best efforts to: (i) have the Registration Statement declared effective on
or before July 15, 1998; and (ii) keep the Registration Statement continuously
effective and to supplement and amend it as required by the Securities Act and
the regulations thereunder from the date the Registration Statement is declared
effective (the "Initial Effective Date") until the earliest to occur of the
following events: (A) such time as Shareholders holding Registrable Shares may
transfer the MW Common Stock pursuant to the safe harbor provisions of Rule 144
under the Securities Act without having to comply with any volume limitations
under such rule; (B) notification to Parent that all Registrable Shares have
been sold for the accounts of the participating Shareholders; or (C) a request
by all participating Shareholders having unsold Registrable Shares that the
Registration Statement be terminated (the period between the Initial Effective
Date and earliest to occur of such events is hereinafter referred to as the
"Registration Statement Period"). If the Registration Statement ceases to be
effective at any time during the Registration Statement Period, Parent, at its
expense, shall within thirty days of such cessation cause to be filed an
additional shelf registration statement covering the unsold balance of the
Registrable Shares and shall use its best efforts to have such registration
statement declared effective as soon as practicable thereafter and keep such
registration statement effective until the end of the Registration Statement
Period.
(c) Parent agrees to furnish each participating Shareholder with
such number of conformed copies of any registration statement and prospectus
included therein (including each preliminary prospectus) covering the
Registrable Shares as each such Shareholder reasonably may request in order to
facilitate the public sale of the Registrable Shares covered by such
registration statement.
(d) All expenses incurred by Parent, Purchaser and the Shareholders
in connection with any registration under this Agreement shall be paid by Parent
and Purchaser, including without limitation all registration and filing fees,
printing expense, fees and disbursements of counsel and independent public
accountants for the Parent and the Purchaser,
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fees and expenses (including counsel fees) incurred in connection with complying
with state securities or "blue sky" laws, fees of securities exchanges or the
National Association of Securities Dealers, Inc., fees of transfer agents and
registrars, but excluding any selling commissions and transfer taxes applicable
to the sale of the MW Common Stock and any legal fees and expenses of counsel or
other advisers and agents of the selling Shareholders.
(e) To ensure that the Shareholders are able to benefit from the
Registration Statement and to make available the benefits of certain rules and
regulations of the Securities and Exchange Commission ("SEC") that may permit
the offer and/or sale of MW Common Stock to the public without registration by
the Shareholders, Parent agrees to:
(i) supplement and amend the Registration Statement in a
timely manner if required by the registration form utilized by the Parent,
or by the instructions applicable to such form or by the Securities Act or
the rules and regulations thereunder or if reasonably requested by a
majority in aggregate amount of the holders of Registrable Shares and to
furnish the Shareholders' Representative with copies of any such amendment
or supplement at least twenty-four hours prior to its being filed with the
SEC;
(ii) file with the SEC in a timely manner all reports and
other documents required of Parent under the Securities Act and the
Securities Exchange Act of 1934, as amended ("Exchange Act");
(iii) make and keep public information regarding Parent
available (as those terms are understood and defined in Rule 144) at all
times during the Registration Period or such longer period ending on the
date upon which the Shareholders no longer need to rely on Rule 144; and
(iv) so long as any Shareholder owns any MW Common Stock,
furnish to each Shareholder upon written request a written statement by
Parent that all reports and filings that are necessary to be filed by
Parent for any Shareholder to avail himself or herself of Rule 144 or 145
have been filed, and provide a copy of the most recent annual or quarterly
report of Parent, and any other reports and documents as a Shareholder may
reasonably request in availing himself or herself of any rule or regulation
of the SEC.
(f) Parent and Mail-Well, jointly and severally, shall indemnify
the Shareholders (and any Person who is an Affiliate of such Shareholders within
the meaning of the Securities Act) whose shares of MW Common Stock are included
in any registration statement as Registrable Shares against all expenses,
claims, losses, damages, or liabilities, including, without limitation,
reasonable attorneys' fees and court costs (collectively, a "Liability"), to
which the Shareholder may become subject under the Securities Act, the Exchange
Act or any rule or regulation under either of them or other statute or at common
law, arising out of or based upon: (i) any untrue statement or alleged untrue
statement of any material fact contained in any registration statement, any
preliminary prospectus or final prospectus contained therein, or any amendment
or supplement, and any document incorporated by reference therein (a
"Registration Document"); or (ii) any omission or alleged omission to state a
material fact required to be stated
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in any Registration Document or necessary in order to make any statement in any
Registration Document not misleading. Notwithstanding the foregoing, neither
Parent nor Mail-Well will be liable to a Shareholder to the extent that any
liability arises out of or is based upon any untrue statement or omission made
in any Registration Document in reliance upon and in conformity with written
information furnished to Parent or Mail-Well for incorporation in any such
Registration Document by or on behalf of such Shareholder. Parent and
Mail-Well's joint and several indemnification obligation will remain in full
force and effect regardless of any investigation made by or on behalf of a
Shareholder and will survive transfer of the Registrable Shares by the
Shareholders.
1.11 INVESTMENT LETTER. Pursuant to Section 8.9 hereof, and in
acknowledgment of the restrictions on transfer of the MW Common Stock
(i) described in this Section 1.10 above; and (ii) if applicable, required by
the pooling of interests accounting method contemplated herein, each Shareholder
shall deliver to Purchaser prior to Closing an executed letter in the form of
Exhibit C hereto.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND
CONTROLLING SHAREHOLDERS
The Schedules attached to this Agreement are sometimes referred to herein
as the "Disclosure Schedules." The Company and Controlling Shareholders
represent and warrant to Purchaser that except as otherwise disclosed in the
Disclosure Schedules the following statements are true as of the date of this
Agreement and as of the Closing Date:
2.1 ORGANIZATION, STANDING, CORPORATE AUTHORIZATION, AND ENFORCEABILITY.
(a) The Company is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its incorporation and
has all requisite corporate power and authority to own, lease and operate its
properties and to carry on its business as now being conducted. Except as set
forth in Schedule 2.1(a), the Company is duly qualified or licensed to do
business and is in good standing in each jurisdiction in which the property
owned, leased or operated by it or the nature of the business conducted by it
makes such qualification necessary, except where the failure to so qualify would
not have a Material Adverse Effect on the financial condition or business of the
Company.
(b) This Agreement and all other agreements, documents and
instruments executed or to be executed by the Company in connection herewith
(the "Related Agreements") constitute the valid and legally binding obligations
of the Company and are enforceable in accordance with their terms, except as
such enforceability may be limited by equitable principles and by applicable
bankruptcy, insolvency, reorganization, arrangement, moratorium or similar laws
relating to or affecting the rights of creditors generally. The Company has the
requisite corporate power and authority to enter into this Agreement and the
Related Agreements.
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(c) The execution and delivery of this Agreement, the Related
Agreements, and all other documents and instruments executed or to be executed
by the Company pursuant to this Agreement, and the consummation of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary corporate and other action on the part of the Company, subject to
obtaining the requisite approvals from Shareholders in accordance with
applicable law. This Agreement and the Related Agreements have been or will
have been, at the time of their respective executions and deliveries, duly
executed and delivered by a duly authorized officer of the Company.
(d) Except as set forth in SCHEDULE 2.1(d), the Company does not
own, directly or indirectly, any capital stock or other equity interest in any
Person or have any direct or indirect equity or ownership interest in any
Person, and the Company is not subject to any obligation or requirement to
provide funds for or to make any investment (in the form of a loan, capital
contribution or otherwise) to or in any Person.
2.2 CAPITALIZATION. As of the date of this Agreement, the
capitalization of the Company (including all capital stock authorized, issued
and outstanding) is as set forth on SCHEDULE 2.2. All of the outstanding shares
of the Company's Common Stock are owned by the Shareholders as set forth on
SCHEDULE 2.2. The Company has no authorized or outstanding bonds, debentures,
notes or other indebtedness the holders of which have the right to vote (or
convertible or exchangeable into or exercisable for securities having the right
to vote) with the Shareholders on any matter ("Voting Debt"). Except as
contemplated by this Agreement, after the Effective Time, the Surviving
Corporation will have no obligation to issue, transfer or sell any shares of MW
Common Stock as a result of any obligation existing, or created by the Company,
at or prior to the Effective Time, including pursuant to any stock incentive
plan or warrant. All prior issuances of securities by the Company and all prior
repurchases, redemptions or exchanges affecting the outstanding securities of
the Company have complied with all applicable Legal Requirements (as defined
below) (including federal and state securities laws), preemptive rights and
contractual restrictions. All issued and outstanding shares of capital stock of
the Company have been duly authorized and validly issued and are fully paid and
nonassessable. Except as disclosed on SCHEDULE 2.2, the Company does not have
shares of its capital stock authorized, issued or outstanding. Except for stock
options for 7,750 shares of Class B common stock (the "Options") which will be
exercised in their entirety prior to Closing, there are no outstanding
convertible or exchangeable securities, subscriptions, calls, options, warrants,
rights (contractual or arising by operation of law, including, without
limitation, rights of first refusal and preemptive rights), or other agreements
or commitments of any character to which the Company is a party or by which it
is bound, relating to the issuance, purchase, other acquisition or voting of any
shares of the capital stock of, or other equity or ownership interest
(collectively, "Equity Rights") in the Company. Except as disclosed on
SCHEDULE 2.2 and on SCHEDULE 2.11, there are no agreements, arrangements or
commitments of any character (contingent or otherwise) pursuant to which any
person or entity is or may be entitled to receive any payment based on the
revenues or earnings, or calculated in accordance therewith, of the Company.
Except as set forth in SCHEDULE 2.2, there are no voting trusts, proxies or
other agreements or understandings to which the Company or Shareholders is a
party or by which the Company or Shareholders is bound with respect to the
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voting of any shares of capital stock or other Equity Interests of the Company.
Except as set forth on Schedule 2.2, any such voting trusts will be terminated
as of the Closing.
For purposes of this Agreement, the term "Legal Requirement" shall mean any
federal, state or local law, statute, legislation, ordinance, code, rule,
regulation, decree, award, order, permit, franchise, consent or authorization
of, any federal, state, local or other governmental body or agency, department,
commission, bureau, board, council, court, magistrate, panel or instrumentality
of the United States, any political subdivision thereof or any state or local
governmental authority in effect as of the date hereof.
2.3 ARTICLES OF INCORPORATION AND BYLAWS; CERTAIN RECORDS. Copies of the
Articles of Incorporation, Bylaws, minute books and stock records of the Company
have been made available to Purchasers, and each such copy is true, correct and
complete as amended to date. All material records of any type and description
in whatever form or medium that presently exist and that relate to the business
or properties of the Company and which in the ordinary course of business the
Company would normally retain are in the possession or control of the Company
and are located at the offices of the Company or of its counsel, independent
auditors, consultants, or other advisors, and the Surviving Corporation will
have the right to possession of all such records upon the consummation of the
transactions contemplated by this Agreement.
2.4 COMPLIANCE WITH OTHER INSTRUMENTS AND LAWS. Except as set forth in
SCHEDULE 2.4, the execution and delivery of this Agreement and the Related
Agreements and the consummation of the transactions contemplated hereby and
thereby will not conflict with or result in any violation of or default under
any provision of the Articles of Incorporation or Bylaws of the Company or any
material violation of, or default under, any mortgage, indenture, trust, lease,
partnership or other agreement or other instrument, permit, concession, grant,
franchise, license, judgment, order, decree, or Legal Requirement applicable to
the Company or any Shareholder or any of the properties of the Company, nor will
they result in the creation or imposition of any lien, security interest,
charge, claim or other encumbrance of any nature whatsoever on any of the
properties or assets of the Company or the Common Stock, nor will they prevent
or materially delay the consummation of the transactions contemplated hereby.
2.5 GOVERNMENTAL AUTHORIZATIONS; CONSENTS. Except as set forth on
SCHEDULE 2.5, no consents, licenses, approvals or authorizations of, or
registrations or declarations with, any governmental authority, agency, bureau
or commission, or any third party which have not already been obtained, are
required to be obtained or made by the Company or Shareholders in connection
with the execution, delivery, performance, validity and enforceability of this
Agreement or any Related Agreement or the sale or transfer of the Common Stock
and will not prevent or materially delay the consummation of the transactions
contemplated hereby other than and except for consents, licenses, approvals,
authorizations or registrations which are not material.
2.6 LITIGATION. No action, suit, proceeding or governmental
investigation is pending or, to the Knowledge (as defined below) of the Company
and the Controlling Shareholders, threatened, at law or in equity, which seeks
to question, delay or prevent, or could have the effect
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of delaying or preventing, the consummation of all or any portion of the
transactions contemplated hereby.
2.7 FINANCIAL STATEMENTS; CONDUCT OF THE BUSINESS; NO UNDISCLOSED
LIABILITIES. Except as set forth on SCHEDULE 2.7:
(a) The Company has delivered to Purchaser (i) the audited balance
sheets of the Company as of July 31, 1997, 1996 and 1995 and the related audited
statements of income, retained earnings and cash flows for the fiscal years then
ended, accompanied in each case by an opinion thereon of the independent
certified public accountant of the Company (such financial statements, including
the notes thereto, hereinafter being referred to as the "Annual Financial
Statements"), and (ii) the unaudited balance sheet of the Company as of March
31, 1998, and the related unaudited statements of income for the eight (8)
months ended March 31, 1998 (the "Interim Financial Statements"). (The Annual
Financial Statements and the Interim Financial Statements including the notes
thereto together hereinafter being referred to as the "Financial Statements").
All of the Financial Statements have been prepared in accordance with GAAP
(subject to the modifications and exceptions set forth in SCHEDULE 2.7 and, in
the case of Interim Financial Statements, to end of year audit adjustments and
preparation of footnotes) consistently applied for all relevant periods (except
as indicated therein) and present fairly in all material respects the financial
position of the Company as of the dates thereof and the results of its
operations for the periods then ended.
(b) The Company does not have any debts, obligations, guaranties of
the obligations of others or liabilities except: (i) debts, obligations,
guaranties and liabilities to the extent reflected or reserved against in the
Financial Statements, (ii) debts, obligations, guaranties and liabilities
incurred or entered into subsequent to March 31, 1998, in the ordinary course of
business and otherwise not in contravention of this Agreement, and (iii) debts,
obligations and liabilities relating to this Agreement and the Related
Agreements and instruments being executed and delivered in connection herewith
and the transactions referred to herein and therein (including obligations to
pay legal fees, financial advisory fees, bank fees, accounting fees and other
amounts in connection therewith) so long as such obligations are included in
determining Company Expenses.
2.8 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except for (i) matters set
forth on SCHEDULE 2.8, (ii) matters disclosed in the Annual Financial Statements
or (iii) as contemplated by this Agreement, the Company has not, since December
31, 1997, except as otherwise specified herein:
(a) undergone any change in its condition (financial or otherwise),
properties, assets, liabilities, business or operations, except for changes in
the ordinary course of business which have not either individually or in the
aggregate had a Material Adverse Effect;
(b) except as set forth on SCHEDULE 2.8, changed any of its methods
of accounting or accounting practices or classifications of assets or
liabilities, or failed to maintain its
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books of account in the usual, regular and ordinary manner in accordance with
GAAP unless required by regulation or GAAP;
(c) modified the material terms of, or canceled or terminated, any
Material Contract (as defined below) other than in the ordinary course of
business;
(d) terminated, discharged or received any written notice regarding
the resignation, discharge or termination of any officer other than in the
ordinary course of business or as contemplated by this Agreement;
(e) since December 31, 1995, established or adopted any Benefit
Plan (as defined below), or increased the amount of the wages, bonus, salary,
commissions, fringe benefits or other compensation or remuneration payable to,
any of its directors, officers or employees, except in any case in the ordinary
course of business in accordance with past practice and, in the case of the
senior management employees and Shareholders (listed on SCHEDULE 2.8(e)), in an
amount not exceeding 3% in any one case or a payment of bonuses in an aggregate
amount of $25,000;
(f) since December 31, 1995, declared, set aside, made or paid any
dividend or other distribution in respect of its capital stock or purchased or
redeemed, directly or indirectly, any shares of its capital stock, or split up,
combined, reclassified, redeemed, repurchased or otherwise reacquired any of its
capital stock other than distributions to shareholders to pay income taxes and
charged against their respective Accumulated Adjustments Account, if applicable;
(g) since December 31, 1995, issued or sold any shares of its
capital stock of any class or any subscriptions, options, warrants, calls or
other rights to purchase directly or indirectly any such shares or any
securities directly or indirectly convertible into or exchangeable for such
shares or made any other change in its capital structure;
(h) since December 31, 1995, except for borrowings under its normal
line of credit and Debt described in SCHEDULE 2.8(h), incurred any direct or
contingent liability for borrowed money or guaranteed the monetary obligations
of any other person or entity other than indebtedness to be included in the Debt
to be discharged at Closing, or made any monetary investment in, advance to or
loan to any person or entity other than in the ordinary course of business;
(i) mortgaged, pledged or subjected to any material lien, lease,
security interest or other charge or encumbrance any of its properties or
assets, tangible or intangible, except those securing Debt to be discharged at
Closing and except for Permitted Liens (as defined below);
(j) made any material change in its practices, operations or
policies with respect to the method for selling goods or services, or other
method for accounting for sales, the
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conduct of accounts receivable collection or accounts payable payment activities
or the maintenance of inventory levels other than changes in the ordinary course
of business;
(k) since December 31, 1995, merged or consolidated with or into
any other entity or initiated or participated in negotiations with any person or
entity with respect to any of the foregoing;
(l) implemented or adopted any change in its tax methods,
principles or elections;
(m) since December 31, 1995, acquired or disposed of any material
assets or properties or made any capital improvement other than in the ordinary
course of business; or
(n) suffered any damage, destruction or loss (whether or not
covered by insurance) which has had or could reasonably be expected to have a
Material Adverse Effect on the Company.
2.9 TITLE TO PROPERTY, ABSENCE OF LIENS AND ENCUMBRANCES.
(a) The Company has good title to its owned material assets,
including the owned tangible assets reflected on the balance sheet included in
the Company's most recent Financial Statements, other than assets disposed of or
used after the date thereof in the ordinary course of business for fair value.
Except as disclosed in SCHEDULE 2.9(a), the tangible assets owned by the Company
are owned free and clear, of all liens, mortgages, pledges, charges, security
interests or encumbrances, except for Permitted Liens (as defined below). The
Company owns, leases or licenses, and has adequate rights to use all material
real and personal property and other material assets necessary to conduct its
business as a going concern on a basis consistent with past practices. To the
Knowledge of the Company, the assets of the Company necessary for the operation
of its business consistent with past practices are in operating condition and
repair (subject to normal wear and tear). Neither the whole nor any part of the
real property used in the Business have been condemned by any public authority,
nor, to the Knowledge of the Company and the Controlling Shareholders, is any
such condemnation or taking threatened or contemplated. There exists free and
uninterrupted egress and ingress over a public roadway to all operating
facilities.
For the purposes of this Agreement, the term "Permitted Liens" shall
mean (i) liens for current taxes, assessments or governmental charges not yet
due, (ii) deposits or pledges to secure bids, tenders, contracts, leases,
statutory obligations, surety and appeal bonds, and other obligations of like
nature arising in the ordinary course of the Company's business, (iii) liens
arising out of deposits in connection with workers' compensation, unemployment
insurance, old age pensions or other social security or retirement benefits
legislation, (iv) liens imposed by law, such as mechanics', workers',
materialmen's, carriers' or other like liens arising in the ordinary course of
the Company's business which secure the payment of obligations which are not
past due or which are being diligently contested in good faith by appropriate
proceedings and for which adequate reserves in accordance with GAAP are
maintained on the Financial Statements, (v)
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imperfections of title, liens and encumbrances which do not materially and
adversely affect the use, value or marketability of the property affected
thereby, and (vi) the imperfections of title, liens, mortgages, pledges,
charges, security interests and encumbrances set forth on SCHEDULE 2.9(a).
(b) The Company validly holds the real property described on
SCHEDULE 2.9(b) (the "Real Property") free and clear of all liens, encumbrances,
mortgages or security interests, except for Permitted Liens.
(c) Except as set forth on SCHEDULE 2.9(c), the Company is not a
party to any leases of real property. The Company validly holds the leaseholds
created by the leases (true, complete and correct copies of which have been
provided to Purchaser) as described on SCHEDULE 2.9(c) (the "Leased Property"),
and such leases are enforceable by the Company as the lessee thereunder in
accordance with their terms.
(d) The Company is not a party to any agreement granting any third
party the right or an option to purchase or lease all or any portion of the Real
Property, Leased Property or any personal property of the Company.
(e) There is not pending, nor has the Company received any written
notice of, (i) any Claim or proceeding asserting or seeking to establish a title
interest in the Real Property or Leased Property, or any Claim of default under
any of the leases under which leaseholds have been created ("Title Notice"), or
(ii) the existence of any facts or proceedings of which the Company or any of
the Controlling Shareholders has Knowledge which may result in the issuance of
such a Title Notice.
2.10 FULL AUTHORITY; COMPLIANCE WITH LAWS. Except as set forth on
SCHEDULE 2.10, the Company is in compliance in all material respects with all
applicable Legal Requirements. Set forth on SCHEDULE 2.10 is a list of any and
all material permits, licenses, consents, orders, approvals, franchises,
certificates or other authorizations under any applicable Legal Requirement
(collectively the "Permits"), issued to the Company in connection with the
ownership, operation and maintenance of its business or assets. The Company has
obtained and maintained all Permits. Each of the Permits is in full force and
effect, and the Company is in compliance in all material respects with all the
provisions of such Permits.
2.11 BENEFIT PLANS.
(a) Except as set forth in SCHEDULE 2.11, the Company does not
maintain, sponsor, participate in or contribute to, or is required to contribute
to, directly or indirectly, or has any obligation under:
(i) Any employee benefit plan, employee pension benefit
plan, employee welfare benefit plan (including any medical, dental,
disability, accident or sickness, salary continuation or life insurance
plan or arrangement), or multiemployer plan, all as defined in the Employee
Retirement Income Security Act of 1974, as amended
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("ERISA"), regardless of whether or not a plan is exempt from some or all
of the otherwise applicable requirements of ERISA; or
(ii) Except as disclosed on the Financial Statements, any
material bonus, commission, deferred compensation, incentive compensation,
restricted stock, stock purchase, stock option, stock appreciation right,
debenture, supplemental pension, profit sharing, royalty pool, vacation,
sick leave, severance or termination pay policies, supplemental
unemployment benefits plan, loan guarantee, relocation assistance, employee
loan or other extensions of credit, or other similar material plan,
program, agreement, policy, commitment, arrangement or benefit currently in
effect under which current or former employees or their dependents,
beneficiaries, representatives or estates are currently or will in the
future be entitled to benefits.
(b) With respect to each plan, program, agreement, policy,
commitment, arrangement or benefit described on SCHEDULE 2.11 (a "Benefit
Plan"), the Company has furnished to the Purchaser true, correct and complete
copies of such Benefit Plans that are in written form, including amendments, if
applicable, summary plan descriptions, if applicable, the Internal Revenue
Service determination letter, if applicable, and the two most recent Forms 5500,
5500-C or 5500-R, as applicable, and has made available to the Purchaser the
most recent actuarial reports of or regarding such Benefit Plan. As to each
Benefit Plan not reduced to writing, the Company has made available to the
Purchaser a description of all material elements of such plan.
(c) Except as set forth in SCHEDULE 2.11:
(i) Each Benefit Plan has been operated and administered in
all material respects in accordance with its terms and applicable laws,
including but not limited to ERISA and the Internal Revenue Code of 1986 as
amended (the "Code") (as defined below). Each Benefit Plan that is intended
to be qualified under Section 401(a) of the Code either has received from
the Internal Revenue Service, or timely applied for, a determination letter
on such Benefit Plan's qualified status.
(ii) Neither the Company nor any other party in interest
(within the meaning of ERISA) has engaged in any non-exempt prohibited
transaction with respect to any Benefit Plan under ERISA, the Code, and
there is no pending assertion of the occurrence of any such transaction.
(iii) All contributions required under applicable law or the
terms of any Benefit Plan, collective bargaining agreement or other
agreement relating to a Benefit Plan to be paid by the Company for all
periods prior to the Closing Date have been or will have been completely
and timely made to each Benefit Plan when due, and the Company has
established adequate reserves on its books (which will be treated as a
current liability for purposes of determining Working Capital at Closing)
to meet liabilities for contributions accrued but that have not been made
because they are not yet due and payable.
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(iv) To the Knowledge of the Company and the Controlling
Shareholders, there is no current or pending investigation or audit by the
Internal Revenue Service, the Department of Labor or any other governmental
entity of any Benefit Plan, nor has the Company received notification from
any such governmental entity of such a pending audit or investigation, and
there are no actions, suits or claims pending (other than routine claims
for benefits) or threatened, with respect to any Benefit Plan or against
the assets of any such Benefit Plan.
(v) No Benefit Plan is or ever has been a plan subject to
Title IV of ERISA, Part 3 of Subtitle B of Title I of ERISA or Section 412
of the Code ("Pension Plan"), or is or ever has been a multiemployer plan
as defined in Section 3(37) of ERISA or Section 414(f) of the Code
("Multiemployer Plans"); neither the Company nor any other party in
interest has incurred any liability to the Pension Benefit Guaranty
Corporation ("PBGC") with respect to any Pension Plan, except for required
premium payments, which payments have been made when due; no accumulated
funding deficiency (within the meaning of Section 412 of the Code or
Section 302 of ERISA) or reportable event (as defined in Section 4043 of
ERISA) has occurred with respect to any Pension Plan; no event has occurred
in connection with any Pension Plan which could subject any Company or any
Pension Plan, or Purchaser, its Affiliates or any of their respective
benefit plans, to liability under Section 4062, 4063 or 4064 of ERISA, and,
no event has occurred which might give rise to any liability of the Company
or any Pension Plan, or Purchaser, its Affiliates or any of their
respective benefit plans, to the PBGC under Title IV of ERISA or which
could reasonably be anticipated to result in any claims being made against
the Company or any Pension Plan; and the Company has not incurred nor, as a
result of the transactions contemplated by this Agreement, will incur any
withdrawal liability (including any contingent or secondary withdrawal
liability) within the meaning of Section 4201 and 4204 of ERISA to any
Multiemployer Plan; upon a complete withdrawal or a partial withdrawal (as
those terms are defined in Section 4203 and 4205, respectively, of ERISA)
from a Multiemployer Plan occurring on or before the close of the most
recent fiscal year of each such Multiemployer Plan ended prior to the
Closing Date, to the Knowledge of the Company and Controlling Shareholders,
the Company would not have been subject to withdrawal liability under
Title IV, Subtitle E, Part 1 of ERISA and, there has been no material
change in the financial condition of any Multiemployer Plan that would
result in the imposition of such liability due to such complete or partial
withdrawal on or before the Closing Date.
(vi) The Company have complied in all material respects with
all notice and continuation coverage requirements applicable to group
health plans under the Consolidated Omnibus Budget Reconciliation Act of
1985, as amended ("COBRA"), with respect to all medical and health benefits
provided by the Company that are subject to COBRA.
(vii) No Benefit Plan amendments have been adopted nor will
any such amendments be adopted prior to the Closing Date except as may be
necessary for compliance purposes with the Code or ERISA and there is no
arrangement, commitment
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or understanding to create any additional plan which would constitute a
Benefit Plan or increase the rate of benefit accrual or contribution
requirement under any of the Benefit Plans or modify, change or terminate
any existing Benefit Plan.
(viii) The Company is not a member of a "controlled group" of
organizations (as defined in Sections 414(b), (c), (m) or (o) of the Code)
which sponsors or maintains any employee benefit plan within the meaning of
Section 3(3) of ERISA which under Title IV of ERISA or any section of the
Code or ERISA would subject Purchaser or Company or any of their respective
employee benefit plans or the fiduciaries thereof or their respective
assets to any taxes, encumbrances, penalties or other liabilities.
2.12 CLAIMS. There are no Claims against, or to the Knowledge of the
Controlling Shareholders or the Company, threatened against, the Company or
its properties, at law or in equity or before any court, governmental
department, commission, board, agency, authority, instrumentality, domestic
or foreign which, if adversely determined, could be reasonably expected to
have, individually or in the aggregate, a Material Adverse Effect on the
Company before or after the Closing Date. The Company is not subject to any
judgment, stipulation, order or decree arising from any action, suit,
proceeding or any investigation of which it has Knowledge which could be
reasonably expected to have, individually or in the aggregate, a Material
Adverse Effect on the business or financial condition of the Company before
or after the Closing Date.
As used in this Agreement, "Claim" means any and all claims, causes of
action, arbitrations, audits, hearings, investigations of which the Company has
Knowledge, proceedings, complaints, litigation or suits, whether in contract,
tort or otherwise, whether statutory or common law, whether civil, criminal,
administrative, investigative, formal or informal, fixed or contingent.
2.13 TAXES.
(a) For purposes of this Agreement, "Taxes" in the plural and "Tax"
in the singular shall refer to any and all taxes, charges, fees, levies, or
other assessments of whatever kind or nature, including, but not limited to, any
federal, state, local or foreign net income, gross income, gross receipts,
unitary, license, payroll, unemployment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including, but not limited to, taxes
under section 59A of the Code), occupational, leasing, lease, fuel, customs,
duties, capital stock, franchise, profits, withholding, Social Security,
unemployment, disability, ad valorem, real property, personal property (tangible
and intangible), sales, use, transfer, registration, value added, alternative or
minimum, estimated, or any other kind of tax whatsoever, including the recapture
of any tax items, and including any interest, addition, penalty or other
associated charge thereto, whether disputed or not.
(b) Except as set forth on SCHEDULE 2.13
(i) The Company has filed or will file or cause to be filed,
within the applicable period prescribed by law, (i) all federal, state,
local, foreign or other material
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Tax Returns, as that term is defined below, required by such law to be
filed by the Company for all taxable periods ending on or prior to the
Closing Date or (ii) valid extensions of the time for filing such Tax
Returns. For purposes of this Agreement, "Tax Returns" shall mean any
returns, reports or statements with respect to Taxes which are required to
be filed with any taxing authority.
(ii) The Company has not obtained nor will it obtain prior to
the Closing Date any extensions of time in which to file any Tax Returns
for any taxable period ending on or prior to the Closing Date.
(iii) The Company has paid, within the time and in the manner
prescribed by law, all Taxes shown as due on all such Tax Returns and, with
respect to all Tax Returns which the Company has not yet filed, but will
file prior to the Closing Date, shall pay, within the time and in the
manner prescribed by law, all Taxes shown as due on such Tax Returns.
(iv) No written notice has been received by the Company from
any Tax authority in any jurisdiction in which the Company has not filed a
Tax Return that the Company is or may be subject to taxation of any sort in
such jurisdiction or otherwise is required to file a Tax Return in such
jurisdiction.
(v) Except for Permitted Liens, there are no Tax liens or
other security interests or encumbrances of any type resulting from Tax
liabilities on any of the assets of the Company.
(vi) There is no dispute, Claim or any other controversy
concerning any material Tax liability of the Company raised or asserted by
any Tax authority in writing.
(vii) No income Tax Returns of the Company for any open tax
year has been audited by any taxing authority. The Company has made
available to Purchaser a correct and complete copy of each federal income
Tax Return, examination report, statement of deficiency, or any other
administrative or judicial assertion, assessment or determination of
federal income Tax liability with respect to the Company for the past three
years.
(viii) The Company has employed a permissible method of Tax
accounting, validly elected for each taxable period ending on or prior to
the Closing Date. The Company has not changed, nor requested to be
permitted to change, any method of Tax accounting.
(ix) The Company has not waived any statute of limitations
with respect to any Taxes or has agreed to any extension of time with
respect to a Tax assessment or deficiency, except for such waivers or
extensions which, by their terms, have elapsed as of the date of this
Agreement, nor are any requests for such waivers or extensions pending.
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(x) The Company (i) has not filed a consent under Section
341(f) of the Code concerning collapsible corporations, (ii) has not made
any payments, is obligated to make any payments, or is a party to any
agreement that will render it (or the payor of compensation under the
agreement) subject to the provision of section 280G of the Code regarding
payments as a result of a change in control, (iii) has not been a United
States real property holding company within the meaning of section
897(c)(2) of the Code and (iv) is not a party to any Tax allocation or Tax
sharing agreement.
(xi) The unpaid Taxes of the Company, including Taxes
attributable to all periods ending on or prior to the Closing Date which
are not yet due and payable, do not materially exceed the reserve on the
Financial Statements for the Company's tax liability as of the respective
dates of such Financial Statements.
2.14 CONTRACTS. Except as set forth in this Agreement or on
SCHEDULE 2.14 (the agreements listed thereon being referred to as the "Material
Contracts"), the Company is not a party to, bound by or obligated under any:
(a) material mortgage, indenture, note or installment obligation or
other instrument or contract for or relating to any borrowing by the Company;
(b) material guaranty by the Company of any obligation (excluding
any endorsement made in the ordinary course of business for collection);
(c) material license agreement;
(d) material lease of real or personal property under which the
Company is a lessor or lessee;
(e) material agreement for the purchase by the Company of
equipment;
(f) agreement purporting to limit the right of the Company to
compete in any line of business, with any person or other entity or in any
geographic area;
(g) material agreement for the purchase or sale of raw materials,
products or goods or the provision of services at prices that vary from the
prices therefor generally prevailing in customary, arms-length transactions;
(h) material contract with any governmental or quasi-governmental
authority;
(i) material bond, deposit, financial assurance requirement or
insurance coverage individually required to be submitted to customers of the
Company under any sale, lease or service arrangement or to any governmental
authority under any Permit or Legal Requirement;
(j) agreement or instrument relating to the acquisition by the
Company of any entity or all or substantially all of the assets of any person or
entity;
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(k) other material agreement, contract or obligation of the
Company;
(l) agreement or commitment relating to the borrowing of money or
the guaranty or indemnity (direct or indirect) in respect of or the granting of
security for any obligation for the borrowing of money, by the Company or any
other person or entity, in excess of, including, without limitation,
guarantees, accommodation collateral, letters of credit, mortgages, deeds of
trust, indentures, loan agreements and credit agreements;
(m) agreement or commitment relating to clean-up or remediation
involving Hazardous Materials (as hereinafter defined);
(n) agreement that creates an encumbrance or any restriction on the
ability of the Company to (i) pay dividends or make similar distributions; (ii)
make loans or advances to any person or entity, or (iii) sell, lease or transfer
any of its properties or assets, except (in each case) for such restrictions or
encumbrances existing under or by reason of (1) applicable Legal Requirements,
(2) customary non-assignment provisions in leases and other contracts entered
into in the ordinary course of business, or (3) any instrument governing the
Debt;
(o) indemnification obligations in favor of any person or entity,
and any escrow agreements related to any indemnification or obligation;
(p) confidentiality, secrecy, screening, development or settlement
agreement pertaining to any Intellectual Property; or
(q) contract with any customer of the Company other than contacts
for the purchase and sale of goods, products and services entered into in the
ordinary course of business.
All of the Material Contracts are legal, valid, binding and in full force and
effect, no default exists thereunder on the part of the Company, and except as
set forth in Schedule 2.14, the consummation of the transactions contemplated by
this Agreement will not cause any default or condition in respect of any such
Material Contracts, the effect of which is to cause, permit, create or perfect
the right in any party (a) to repudiate or disavow its obligations to the
Company thereunder, (b) to require or have the right to require the Company to
perform its obligations thereunder (including obligations to pay indebtedness)
prior to such time on which, or on terms and conditions otherwise different from
those that, are provided therein or (c) to recover from the Company any damages
or fines. To the Knowledge of the Company and the Controlling Shareholders, no
party to any such Material Contract is in default thereunder. True, correct and
complete copies of all the Material Contracts have been delivered to the
Purchaser.
2.15 ENVIRONMENTAL QUALITY.
(a) Except as set forth in SCHEDULE 2.15, to the Knowledge of the
Company and the Controlling Shareholders, neither the Company nor any previous
(to the Company) owner, tenant, occupant, user or operator of any real property
now or ever owned or leased by
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the Company (the "Property") released or disposed of any "Hazardous Materials"
(as defined below) on, under, in or about the site of the Property, except in
compliance in all material respects with applicable Environmental Laws (as
defined below). For the purposes of this Agreement, the term "Hazardous
Materials" shall mean any substance, material or waste which is regulated by any
local government authority or state with jurisdiction, or the United States
Government, including, without limitation, any material or substance which is
(a) defined as a "hazardous waste," "hazardous material," "hazardous
substances," "extremely hazardous waste," "regulated substance" or "restricted
hazardous waste" under any provision of the existing laws of any state, or any
other applicable existing law, including, but not limited to, the Resource
Conservation and Recovery Act, 42 U.S.C. Section 6901 ET SEQ. ("RCRA"), and the
Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C.
Section 9601 ET SEQ. ("CERCLA") and (b) petroleum, including crude oil and any
fraction thereof and any refined petroleum products and derivatives thereof.
(b) To the Knowledge of the Company and the Controlling
Shareholders, except as set forth in SCHEDULE 2.15, the Property complies in all
respects with all applicable Environmental Laws. For purposes of this Agreement,
the term "Environmental Laws" shall mean all federal, state and local laws,
ordinances and regulations pertaining to air and water quality, soils and
subsurface strata, natural resources, Hazardous Materials, waste generation,
management, transportation and disposal or other environmental matters,
including the Clean Water Act, the Clean Air Act, the Federal Water Pollution
Control Act, the Solid Waste Disposal Act, RCRA, CERCLA, and the applicable
environmental protection rules, regulations and ordinances of the city and
county in which the Property is located, the Environmental Protection Agency and
all other applicable federal, state, regional and local agencies which are in
existence, and are in effect as of the date hereof. Without limiting the
generality of the foregoing, to the Knowledge of the Company and the Controlling
Shareholders, Company is not liable nor potentially liable for any response
costs or natural resource damages under Sections 107(a) or 113(f) of CERCLA, or
under any other so-called "superfund" or "superlien" law or similar Legal
Requirement currently in existence, at or with respect to the Property and, to
the Knowledge of the Company and the Controlling Shareholders, no circumstances
exist, which with notice or lapse of time or both would result in such
liability.
(c) To the Knowledge of the Company and the Controlling
Shareholders, the conduct of the business of the Company complies in all
respects with all applicable Environmental Laws.
(d) To the Knowledge of the Company and the Controlling
Shareholders, except as set forth in SCHEDULE 2.15, the Company has not sent any
Hazardous Material to a site that, pursuant to any applicable Environmental
Laws, (i) has been placed on the "National Priorities List" of hazardous waste
sites or any similar state list, (ii) is otherwise designated or identified as a
potential site for remediation, cleanup, closure or other environmental remedial
activity, or (iii) is subject to a claim, an administrative order or other
request to take "removal" or "remedial" action, as defined in any applicable
Environmental Laws, or to make payment for the costs of cleaning up the site.
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(e) Except as set forth in SCHEDULE 2.15, the Company (i) is not
involved in any suit or proceeding with respect to a release or threatened
release of any Hazardous Material or a violation or alleged violation of any
applicable Environmental Laws, nor has the Company received any notice of any
claims from any person or entity relating to property damage or to personal
injuries from exposure to any Hazardous Material, nor has the Company
received any notice or request for information from any governmental agency
or authority or other third party with respect to any of the foregoing, nor
(ii) has it failed to timely file any report required to be filed, failed to
acquire all necessary certificates, approvals and permits or failed to
generate and maintain all required data, documentation and records under all
applicable Environmental Laws.
(f) To the Knowledge of the Company and the Controlling
Shareholders, except as set forth in SCHEDULE 2.15, there are currently no
underground storage tanks in or under the Property, and no underground storage
tank was removed from the Property during the period that the Company maintained
an interest in such Property.
(g) The Company has made available to Purchaser all information in
its and, to the Knowledge of the Company and the Controlling Shareholders, its
Shareholders' possession regarding the environmental condition of the Property.
2.16 INTELLECTUAL PROPERTY. The Company either own or have the right to
use by license, sublicense, or other tangible agreement, all of the inventions,
improvements, domestic and foreign patents and applications therefor, customer
lists, copyrights, copyright-registrations and applications therefor,
trademarks, trade names, service marks, trade dress, logos, rights in computer
software, and all rights granted or retained in licenses under any of the
foregoing which are material to the conduct of the business of the Company as
presently conducted (collectively the "Intellectual Property"). None of the
Intellectual Property used in connection with the conduct of the business of the
Company is, or has been in the past five years, involved in, or the subject of,
any pending or, to the Knowledge of the Company and the Controlling
Shareholders, threatened infringement, interference, opposition or similar
action, suit or proceeding to which the Company was a party. The material
license fees, royalties and other amounts payable by the Company in connection
with the use of the Intellectual Property, together with the terms and
conditions on which, and periods for which such amounts are payable, are set
forth in SCHEDULE 2.16.
2.17 PREPAID EXPENSES. All prepaid expenses shown on the balance sheet
of the most recent Financial Statements or subsequently paid by the Company and
shown on the Final Closing Statement have been incurred solely in connection
with the business and assets of the Company.
2.18 RELATED PARTY TRANSACTIONS. Set forth on SCHEDULE 2.18 is a list of
all material transactions (including, without limitation, employment contracts,
debts, loans, advances, or other obligations, guarantees, indemnities, accounts
and notes payable or receivable and service agreements) between the Company and
any current officer, director or employee, Shareholders, or Affiliate of the
Company (collectively, "Related Parties") which (a) were entered into and/or
consummated subsequent to January 1, 1998; (b) are or will be effective as of
the date hereof or at Closing, (c) constitutes a present or future liability or
obligation of the Company to any Related
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Party; or (d) constitutes a present or future liability of any Related Party to
the Company. For purposes of this Agreement, an "Affiliate" of a party is any
individual, company or other entity that owns five percent (5%) or more of the
voting or capital stock or other equity interest of such party or of which five
percent (5%) of the voting or capital stock or other equity interest is owned or
otherwise controlled by that party or an Affiliate of that party, as the case
may be.
2.19 LABOR MATTERS. Except as set forth on SCHEDULE 2.19, (a) the
Company has not entered into nor is a party to any collective bargaining
agreement, memorandum of understanding or other written document binding on the
Company respecting terms and conditions of employment with respect to an
identified group of employees with any labor union that would cover any
employees of the Company and (b) none of the employees of the Company is
subject to any collective bargaining agreement, memorandum of understanding or
other written document binding on the Company respecting terms and conditions
of employment with respect to an identified group of employees nor are any such
employees, in their capacities as employees, represented by any labor union. As
to the collective bargaining agreements disclosed on SCHEDULE 2.19, the Company
is not in material default thereunder. Except as set forth in SCHEDULE 2.19,
there are no Claims, controversies, labor disturbances, or investigations
pending, or to the Knowledge of the Company and the Controlling Shareholders,
threatened, by any governmental agency or by employees of the Company or any
party or parties representing any of such employees against the Company before
any court, arbitrator or other tribunal. To the Knowledge of the Company and
the Controlling Shareholders, there are no organizational efforts presently
being made or threatened by or on behalf of any labor union with respect to the
employees of the Company nor has there been in the last five (5) years. The
Company has not experienced a work stoppage, strike, lock-out or other labor
disturbance within the past five (5) years, and there is no work stoppage,
strike, lock-out or other labor disturbance presently occurring, or, to the
Knowledge of the Company and the Controlling Shareholders, threatened. The
Company has complied in all material respects with all applicable Legal
Requirements relating to its employees, the employment of labor, and the safety
and health of employees, including, without limitation, all applicable Legal
Requirements relating to occupational health and safety, discrimination,
unemployment, wages, hours, the Family and Medical Leave Act, collective
bargaining, and the collection and payment of withholding taxes and similar
taxes in respect of the business of the Company. Except as set forth in
SCHEDULE 2.19, there are no unfair labor practice charges, charges of
discrimination, or other complaints pending against the Company involving
employees now or previously employed by the Company.
2.20 CUSTOMERS AND VENDORS. SCHEDULE 2.20 hereto is a correct and
current list of the 20 largest customers and the 10 largest vendors of the
Company during the 12-month period ended December 31, 1997, with the amount of
sales made to each such customer or by each such vendor, as the case may be,
during such period as reasonably ascertained from readily available information,
such amounts being estimated in good faith as being within five percent (5%) of
the actual sales made to or by such customer or vendor, as the case may be.
Except as set forth on SCHEDULE 2.20, the Company does not have any information
indicating that any of such customers or such vendors intends to cease doing
business with the Company or materially alter the amount of the business that it
conducts with the Company from the amount of business such customers or such
vendors conducted with the Company during the last fiscal year.
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2.21 OTHER DISCLOSURES. In addition to the other disclosures required
hereby, the following documents and information pertaining to the Company have
been made available to the Purchaser:
(a) true, correct and complete copies of each policy of insurance
maintained by the Company, together with information on premiums, coverage,
insurers, expiration dates and deductibles;
(b) the location and name of each bank or other financial
institution in which the Company has an account or line of credit, and the
identity of each such account or line of credit, and each bank in which the
Company has a safe deposit box, together with the names of all persons
authorized to draw upon or have access thereto;
(c) SCHEDULE 2.21(c) lists each corporate or trade name under which
the Company or its predecessors, if any, has conducted business and the state
and county in which any Real Property or personal property of the Company is
located or has been located.
(d) SCHEDULE 2.21(d) lists each power-of-attorney given by or on
behalf of the Company.
2.22 PARACHUTE PAYMENTS. Any bonuses or other compensation or amounts
paid or payable by the Company, including amounts payable as a result of the
transaction contemplated by this Agreement, have not resulted in and will not
result in payments to "Disqualified Individuals" (as defined in Section 280G(c)
of the Code) of the Company which, individually or in the aggregate, will
constitute "excess parachute payments" (as defined in Section 280G(b) of the
Code) resulting in the imposition of the excise tax under Section 4999 of the
Code or the disallowance of deductions under Section 280G of the Code.
2.23 PRODUCT WARRANTY AND LIABILITY. All finished goods inventories
manufactured by the Company in the operation of the Business (the "Products")
have been in material conformity with all applicable contractual commitments and
all express or implied warranties (including warranties imposed by the
application of law) and, to the Knowledge of the Company and the Controlling
Shareholders, no material liability exists or will arise for replacement or
damage in connection with such sales or deliveries, except as are adequately
reserved for on the Financial Statements. No Products heretofore sold by the
Company are now subject to any guaranty, warranty, claim for product liability
or patent or other indemnity, other than those sold in accordance with the
standard terms and conditions of sale of the Business, true and complete copies
of which have been made available to the Purchaser.
2.24 ACCURACY. The representations and warranties made by the Company
and the Shareholders to Purchaser set forth in this Agreement, the Disclosure
Schedules to this Agreement, including any Updated Disclosure Schedule (as
defined below) delivered to Purchaser prior to Closing, and the Related
Agreements delivered and to be delivered pursuant to or in connection with this
Agreement, do not include an untrue statement of material fact or omit to
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state any material fact necessary to make them, when taken together and in light
of the circumstances in which they were or are made, not misleading in any
material respect.
2.25 BROKERS AND FINDERS. Except as set forth in SCHEDULE 2.25, no person
or entity is entitled to any brokerage commission, finder's fee or like payment
in connection with the transactions contemplated in this Agreement.
ARTICLE 3
ADDITIONAL REPRESENTATIONS AND WARRANTIES OF CONTROLLING SHAREHOLDERS
Each Controlling Shareholder represents and warrants to Purchaser as
follows:
3.1 OWNERSHIP OF SHARES. Such Controlling Shareholder is now, and
immediately prior to the Closing, such Controlling Shareholder will be, the
owner of the Shares of the Company as set forth opposite the name of such
Shareholder on SCHEDULE 2.2.
3.2 AUTHORIZATION. Such Controlling Shareholder has full right and
power to execute and deliver this Agreement and perform his obligations
hereunder. This Agreement and all other documents and instruments executed or to
be executed by such Controlling Shareholder pursuant to this Agreement have
been, or will have been, duly executed and delivered by such Controlling
Shareholder.
3.3 ENFORCEABILITY. This Agreement constitutes the valid and legally
binding obligation of such Controlling Shareholder, enforceable in accordance
with its terms, except as such enforceability may be limited by equitable
principles and by applicable bankruptcy, insolvency, reorganization,
arrangement, moratorium or similar laws relating to or affecting the rights of
creditors generally.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PURCHASER AND PARENT
Parent and Purchaser, jointly and severally, represent and warrant to
Shareholders and the Company as follows:
4.1 ORGANIZATION AND STANDING OF PURCHASER. Parent is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Colorado. Purchaser is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware. Parent and
Purchaser have all requisite corporate power and authority to enter into this
Agreement, to carry out the transactions contemplated hereby and to perform
their obligations hereunder.
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4.2 AUTHORIZATION. The execution and delivery of this Agreement, and
all other agreements, documents and instruments executed or to be executed by
the Purchaser and Parent in connection herewith (the "Purchaser Related
Agreements"), and the consummation of the transactions contemplated hereby and
thereby, have been duly authorized by all necessary corporate and other action
on the part of Parent and Purchaser. This Agreement, and the Purchaser Related
Agreements have been, or will have been, at the time of their respective
executions and deliveries, duly executed and delivered by a duly authorized
officer of Parent and Purchaser.
4.3 ENFORCEABILITY. This Agreement constitutes, and each of the
Purchaser Related Agreements when duly executed and delivered will constitute,
the valid and legally binding joint and several obligations of Parent and
Purchaser, enforceable against Parent and Purchaser, jointly and severally, in
accordance with its terms, except as such enforceability may be limited by
equitable principles and by applicable bankruptcy, insolvency, reorganization,
arrangement, moratorium or similar laws relating to or affecting the rights of
creditors generally.
4.4 COMPLIANCE WITH OTHER INSTRUMENTS AND LAWS. The execution and
delivery of this Agreement, and the Purchaser Related Agreements, and the
consummation of the transactions contemplated hereby and thereby, will not
conflict with or result in any violation or default under any provision of the
Certificate of Incorporation or Bylaws of Parent or Purchaser, or of any
material mortgage, indenture, trust, lease, agreement or other instrument,
permit, concession, grant, franchise, license, judgment, order, decree, statute,
law, ordinance, rule or regulation applicable to Parent or Purchaser or any of
their respective properties, the result of which (either individually or in the
aggregate) will prevent or materially delay the consummation of the transactions
contemplated hereby.
4.5 GOVERNMENTAL AUTHORIZATIONS, CONSENTS. No consents, licenses,
approvals or authorizations of, and registrations or declarations with, any
governmental authority, bureau, agency or commission, or any third party, are
required to be obtained or made by Parent or Purchaser in connection with the
execution, delivery, performance, validity and enforceability of this Agreement
or the Purchaser Related Agreements or the Merger contemplated hereby.
4.6 MW COMMON STOCK. The MW Common Stock when issued will have been
duly authorized, validly issued, fully paid and nonassessable, and the record
date of issuance on the Parent's (and its transfer agent's) books shall be the
Closing Date, and each share of MW Common Stock issued to Shareholders hereunder
shall be free and clear of any lien, pledge, charge, adverse claim, security
interest, restriction, encumbrance (including any imposed by law in any
jurisdiction), title retention agreement, option or right to purchase of any
kind.
4.7 LITIGATION. No action, suit, proceeding or governmental
investigation is pending or, to the best of Parent's and Purchaser's knowledge,
threatened, at law or in equity, which seeks to question, delay or prevent the
consummation of all or any portion of the transactions contemplated hereby.
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4.8 SECURITIES ACT OF 1933. Purchaser is an "accredited investor" as
defined under Rule 501 of Regulation D under the Securities Act of 1933, as
amended
4.9 BROKERS AND FINDERS. No person or entity is entitled to any
brokerage commission, finder's fee or like payment from Parent or Purchaser in
connection with the transactions contemplated in this Agreement.
4.10 PURCHASER'S KNOWLEDGE. No officer or director of Parent or
Purchaser has actual knowledge, as of the date hereof, of any state of facts
which, in the judgment of Parent or Purchaser, will give rise to a Shareholder
Indemnified Obligation or a Purchaser Indemnified Obligation, except for such
matters as have been previously disclosed in writing to the Shareholders, the
Company or their representatives.
4.11 SEC DOCUMENTS. Parent has timely filed all required reports,
schedules, forms, statements, exhibits and other documents with the SEC since
December 31, 1996 (the "SEC Documents") and is qualified, and has obtained or
will obtain, without delay to the registration process, all appropriate waivers
necessary to allow Parent to register the MW Common Stock on SEC Form S-3. As
of their respective dates, the SEC Documents complied in all material respects
with the requirements of the Securities Act and the Exchange Act, as the case
may be, and the rules and regulations of the SEC promulgated thereunder
applicable to such SEC Documents, and none of the SEC Documents contained any
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading. The
consolidated financial statements of Parent and its subsidiaries included in the
SEC Documents comply as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto, have been prepared in accordance with GAAP (except, in the case
of unaudited financial statements, as permitted by SEC Form 10-Q) applied on a
consistent basis during the period involved (except as may be indicated in the
notes thereto) and fairly present the financial position of Parent and its
subsidiaries as of the date thereof and their statements of operations, changes
in shareholders' equity and cash flows for the periods then ended (subject, in
the case of unaudited statements, to normal year-end audit adjustments). Except
as set forth in the SEC Documents, neither Parent nor any of its subsidiaries
has any liabilities or obligations of any nature (whether accrued, absolute,
contingent or otherwise) required by GAAP to be set forth on a consolidated
balance sheet of Parent and its subsidiaries or in the notes thereto, other than
liabilities and obligations incurred in the ordinary course of business
consistent with past practice since the date of its last filed Form 10-K or
10-Q.
4.12 ACCURACY. The representations and warranties made by the Parent and
Purchaser to Company and Shareholders set forth in this Agreement and the
Purchaser Related Agreements, instruments and documents delivered and to be
delivered pursuant to or in connection with this Agreement do not include an
untrue statement of material fact or omit to state any material fact necessary
to make them, when taken together and in light of the circumstances in which
they were or are made, not misleading in any material respect.
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4.13 INVESTIGATION. Parent and Purchaser have conducted inspections of
the properties and financial and other records of the Company and other due
diligence with respect to the Company. Parent and Purchaser have had an
opportunity to ask questions of the Company and the Controlling Shareholders
relating to the Company and management and financial affairs of the Company,
which questions have been answered to Parent and Purchaser's satisfaction, and
to examine all books and records of the Company. Parent and Purchaser
acknowledge that they have made their own independent investigation,
examination, analysis and evaluation of the Company including, without
limitation, Parent and Purchaser's own estimate of the value of the Company's
business.
ARTICLE 5
COVENANTS OF THE COMPANY AND THE CONTROLLING SHAREHOLDERS
5.1 CONDUCT OF BUSINESS. The Company agrees that, between the date of
this Agreement and the Closing Date, except as contemplated by this Agreement or
referred to in a Disclosure Schedule, and except as may be necessary to carry
out the transactions contemplated by this Agreement, the Company without
Purchaser's written consent (which consent will not be unreasonably withheld or
delayed) or as requested by Purchaser, did not or will not:
(a) amend its Articles of Incorporation or Bylaws;
(b) make any material change in its practices, operations or
policies with respect to the selling of goods or services, collecting accounts
receivable and/or paying accounts payable except in the ordinary course of
business;
(c) conduct its business in a manner that materially departs from
the manner in which such business was being conducted prior to the date of this
Agreement;
(d) except as set forth in SCHEDULE 2.8 increase the rate or change
the form of compensation payable to any director, officer or employee of the
Company or increase any employee benefits, except in the ordinary course of
business in accordance with past practice in an amount not to exceed 3% in any
one case or the payment of bonuses in an aggregate amount of $25,000;
(e) purchase or dispose of any properties or other assets, except
in the ordinary course of business or as set forth in SCHEDULE 1.7;
(f) declare, set aside, pay or make any dividend or other
distribution in respect of any outstanding shares of the Company's capital stock
other than distributions to Shareholders to pay income taxes and distributions
to Shareholders charged against their respective Accumulated Adjustments
Account, if applicable;
(g) issue or sell any shares of the Company's capital stock
(whether or not from the treasury) or any other securities; grant any options,
convertibility rights, rights to
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subscribe for shares of capital stock or securities convertible into or
exchangeable for shares of capital stock, warrants, calls or other agreements
relating to the Company's capital stock; split up, combine, reclassify, redeem,
repurchase or otherwise reacquire any of the Company's capital stock, or
otherwise change its capitalization;
(h) except as required by regulation or generally accepted
accounting principles, maintain its books of account other than in the usual,
regular and ordinary manner in accordance with generally accepted accounting
principles and on a basis consistent with prior periods, make any change in any
of its books, accounting methods or practices, or reclassify any assets or
liabilities;
(i) cancel, terminate, renew or amend any Material Contract or
enter into any contract, agreement, lease, license or commitment which would be
a Material Contract if such had existed on the date hereof, except in the
ordinary course of business;
(j) merge or consolidate with or into any other person or entity or
sell or dispose of all or substantially all of the Company's assets to any
person or entity, or initiate or participate in negotiations with any person or
entity with respect to any of the foregoing;
(k) invest in certificates of deposit in any one bank if such
investment in the aggregate exceeds $100,000 at any time;
(l) incur any direct or contingent liability for borrowed money or
guarantee the monetary obligations of any other person or entity, other than
indebtedness to be included in the Debt, or make any monetary investment in,
advance to or loan to any person or entity other than in the ordinary course of
business;
(m) fail to make maintenance expenditures and maintain inventories
in the amounts and at the times required to operate its business in the ordinary
course consistent with past practice;
(n) implement or adopt any change in its tax methods, principles or
elections;
(o) fail to pay accounts payable or collect accounts receivable in
accordance with past practices;
(p) enter into any transaction outside the ordinary course of
business; or
(q) agree or commit to do any of the foregoing.
Nothing contained in this Section 5.1 or elsewhere in this Agreement shall
be deemed in any way as prohibiting the Company from using cash, cash
equivalents or other current assets to reduce or pay off Debt prior to Closing.
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5.2 ACCESS. The Company agrees that, between the date of this Agreement
and the Closing Date, the Company shall, after receiving reasonable advance
notice from Purchaser, give Parent, Purchaser and their Associates (as defined
in Section 6.1) reasonable access (during normal business hours) to the books,
records, contracts and offices of the Company for the purpose of enabling such
parties to further investigate and inspect the business, operations and
financial and legal affairs of the Company.
5.3 NO SOLICITATION OR NEGOTIATION. The Company and Controlling
Shareholders agree that between the date of this Agreement and the earlier of
the Closing Date or the date this Agreement otherwise terminates, they will not,
nor will they permit any officer, director, Shareholder or agent of Shareholders
the Company to, (i) solicit any proposal or offer from any person or entity
(other than Purchaser) relating to the sale of the Company, its capital stock
or any material portion of its assets, (ii) provide any non-public information
to any person or entity (other than Purchaser) for use in preparing any proposal
or offer relating to the sale of the Company or its capital stock or any
material portion of its assets, or (iii) respond to or enter into any
negotiations regarding any proposal or offer from any person or entity (other
than Purchaser) with respect to the foregoing.
5.4 FILINGS AND CONSENTS. Where required by applicable law, the Company
and the Controlling Shareholders shall use commercially reasonable efforts to do
each of the following:
(a) as soon as practicable after the date of this Agreement, file
with the appropriate governmental authority any notification form required to be
filed by the Company under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR Act") with respect to this Agreement and the
transactions contemplated hereby, together with a request for early termination
of the applicable waiting period;
(b) after consultation with Purchaser, make any additional filing
required to be made by the Company under the HSR Act and promptly furnish to the
appropriate governmental authority such additional information as may be
requested under the HSR Act;
(c) make or give each filing or notice required to be made or given
pursuant to any applicable Legal Requirement, Material Contract or Permit by the
Company or Shareholders in connection with the execution and delivery of any of
this Agreement or in connection with the consummation or performance of any of
the transactions contemplated hereby; and
(d) obtain an agreement from each Creditor to terminate its lien
and lien filings upon payment of the amounts specified in such Creditor's
respective Payoff Letter to the extent that Purchaser decides to pay off a Debt
at Closing and each consent required to be obtained pursuant to any applicable
Legal Requirement, Permit or Material Contract by the Company or Shareholders in
connection with the execution and delivery of any of this Agreement or in
connection with the consummation or performance of the transactions contemplated
hereby. Except as to liens related to Leased Property to be acquired by
Purchaser pursuant to Section 7.5, Company shall pay all reasonable costs of
obtaining such releases and consents which costs shall be a Company Expense.
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5.5 UPDATED DISCLOSURE SCHEDULES. Between the date of this Agreement
and the Closing Date, if any Controlling Shareholder or the Company becomes
aware of any fact or condition that causes any of the representations and
warranties in this Agreement to become untrue, misleading, or inaccurate in any
material respect, such party will promptly deliver to Purchaser an updated
Disclosure Schedule ("Updated Disclosure Schedule") setting forth the facts or
conditions that cause such representation, warranty, or Disclosure Schedule to
become untrue, misleading, or inaccurate.
ARTICLE 6
COVENANTS OF PARENT AND PURCHASER
Parent and Purchaser each agree with the Company that:
6.1 CONFIDENTIALITY. Parent and Purchaser shall hold in strict
confidence, and cause their respective affiliates, directors, officers,
employees, agents, attorneys, accountants, financing sources and representatives
and those of its affiliates ("Associates") to hold in strict confidence, all
documents and information obtained with respect to the Company ("Confidential
Information"). Neither Parent nor Purchaser shall permit any Confidential
Information to be utilized or to be disclosed or conveyed to any other person or
entity other than their Associates in furtherance of this Agreement. Without
limiting the generality of the foregoing, and except as required by law or as
permitted by Section 7.4, (i) neither Parent nor Purchaser shall disclose to any
person or entity, and shall not permit any of their Associates to disclose to
any person or entity, the existence of this Agreement or any of the terms or
provisions hereof and (ii) except in the ordinary course of business, neither
Parent nor Purchaser shall contact any customers or employees of the Company,
and neither Parent nor Purchaser shall not permit any of their Associates to
contact any customers or employees of the Company, without the prior consent of
an officer of the Company. This Section 6.1 shall terminate if and when the
Closing occurs in accordance with Article 1 of this Agreement, or within three
years of the date of execution of this Agreement, whichever occurs first.
6.2 FILINGS AND CONSENTS. Where required by applicable law, Parent and
Purchaser shall use commercially reasonable efforts to do each of the following:
(a) as soon as practicable after the date of this Agreement, file
with the appropriate governmental authority any notification form required to be
filed by Parent or Purchaser under the HSR Act with respect to this Agreement
and the transactions contemplated hereby, together with a request for early
termination of the applicable waiting period;
(b) after consultation with the Controlling Shareholders, make any
additional filing required to be made by Parent or Purchaser under the HSR Act
and promptly furnish to the appropriate governmental authority such additional
information as may be requested under the HSR Act;
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(c) make or give each other filing or notice required to be made or
given pursuant to any applicable Legal Requirement by Purchaser in connection
with the execution and delivery of this Agreement or in connection with the
consummation or performance of any of the transactions contemplated hereby; and
(d) obtain each consent required to be obtained by Parent or
Purchaser pursuant to any applicable Legal Requirement or material contract to
which Parent or Purchaser is a party or by which either of them is bound in
connection with the execution and delivery of any of this Agreement or in
connection with the consummation or performance of the transactions contemplated
hereby.
6.3 FILING OF FINAL TAX RETURNS. Parent and Purchaser agree to timely
file all final Tax Returns for and on behalf of the Company which are required
to be filed subsequent to the Closing, and to deliver copies thereof to the
Shareholders' Representative promptly after filing the same.
6.4 OFFICER AND DIRECTOR INDEMNIFICATION. Parent and Purchaser agree to
include and maintain provisions in the Certificate of Incorporation and Bylaws
of the Surviving Corporation which provide indemnification for the directors and
officers of the Company immediately prior to the Effective Time to the maximum
extent provided by such documents and applicable corporate law and to indemnify
such directors and officers to the maximum extent provided by applicable
corporate law. In addition, Parent and Purchaser shall include such persons as
additional insureds under Parent's Director and Officer Insurance Policy if they
can do so without substantial additional cost.
6.5 BENEFIT PLANS AND RELATED MATTERS. Except for employees subject to
collective bargaining agreements and subject to the provisions of Parent's
policies and programs, any employee of the Company retained by Purchaser or its
affiliates after the Closing Date (each, a "Transferred Employee") shall be
eligible to participate or eligible for accrual of benefits, vesting and
contributions or accruals to be made or credited following the Closing Date
under each of Parent's employee benefit plans, programs or arrangements
available to all or substantially all of Parent's employees, subject to the
terms upon which such plans allow new participation by Purchaser's employees.
Each Transferred Employee shall be credited with the time-in-service that the
employee accrued with the Company.
ARTICLE 7
COVENANTS OF ALL PARTIES
The parties hereto agree that:
7.1 COMMERCIALLY REASONABLE EFFORTS; FURTHER ASSURANCES. Subject to the
terms and conditions of this Agreement, each party will use commercially
reasonable efforts to take, or cause to be taken, all actions and to do, or
cause to be done, all things necessary or desirable under applicable Legal
Requirements to consummate the transactions contemplated by this
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Agreement. The Company, Controlling Shareholders, Parent and Purchaser each
agree to execute and deliver such other documents, certificates, agreements and
other writings and to take such other actions as may be necessary or desirable
in order to consummate or implement expeditiously the transactions contemplated
by this Agreement.
7.2 POOLING OF INTERESTS. Each of Parent, Purchaser and the Company
shall use its respective commercially reasonable efforts to cause the
transactions contemplated by this Agreement, including the Merger, to be
accounted for as a pooling of interests under Opinion 16 of the Accounting
Principles Board and applicable SEC rules and regulations, and such accounting
treatment to be accepted by each of Parent's and the Company's independent
certified public accountants, respectively, and to be accepted by the SEC, and
each of Parent, Purchaser and the Company and the Controlling Shareholders agree
that they will not knowingly take any action that would cause such accounting
treatment not to be obtained.
7.3 CERTAIN FILINGS, ETC. The Company, Parent and Purchaser shall
cooperate with one another (a) in determining whether any action by or in
respect of, or filing with, any governmental body, agency, official or authority
is required, or any actions, consents, approvals or waivers are required to be
obtained from parties to any material contracts, in connection with the
consummation of the transactions contemplated by this Agreement and (b) in
taking such actions or making any such filings, in furnishing such information
as may be required in connection therewith, and in seeking timely to obtain any
such actions, consents, approvals or waivers.
7.4 PUBLIC ANNOUNCEMENTS. The parties agree not to issue any press
release or make any public statement with respect to this Agreement or the
transactions contemplated hereby prior to the Closing without the prior consent
of Purchaser and Company (which consent shall not be unreasonably withheld or
delayed), except to the extent that any party hereto is required by law to make
any such disclosure and such party notifies the other parties hereto a
reasonable time before making such disclosure of the nature and content of the
intended disclosure, and consults with such other parties regarding the nature
and content of such disclosure.
ARTICLE 8
CONDITIONS TO OBLIGATION OF PURCHASER TO CLOSE
The obligation of Purchaser to consummate the Merger, pay the Merger
Consideration, discharge the Debt, and otherwise consummate the transactions
contemplated hereunder is subject to the satisfaction as of the Closing Date, of
the following conditions (any of which may be waived by Purchasers in whole or
in part):
8.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES. The representations,
warranties and covenants set forth in Articles 2 and 3 and Section 5.1, without
giving effect to any Updated Disclosure Schedule delivered to Purchaser after
the date hereof, do not contain any misrepresentation or breach of warranty
which is likely to cause a Material Adverse Effect as of the date of this
Agreement and as of the Closing Date, with the same effect as though made on
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and as of the Closing Date, except to the extent that (a) any of such
representations and warranties refers specifically to a date other than the
Closing Date or (b) the accuracy of any of such representations and warranties
is affected by any of the transactions contemplated by this Agreement.
8.2 SHAREHOLDER APPROVAL. Approval of this Agreement and the
transactions contemplated hereby shall have been validly obtained by the
requisite vote of the shareholders of the Company under applicable law.
8.3 PERFORMANCE. Shareholders and the Company having performed, in all
material respects, all obligations required by this Agreement to be performed by
Shareholders and the Company on or before the Closing Date including without
limitation the covenants set forth in Article 5.
8.4 CERTIFICATE. Purchaser having received from a duly authorized
officer of the Company a certificate dated the Closing Date confirming that the
conditions in Section 8.1 and 8.2 have been met and confirming, to the best of
such persons' knowledge, that the condition of Section 8.3 has been met.
8.5 DEBT CERTIFICATES AND PAYOFF LETTERS. Purchaser having received the
Debt Certificate and the Payoff Letters.
8.6 NO INJUNCTION. There not being in effect, at the Closing, any
injunction or other binding order of any court or other tribunal having
jurisdiction over Purchaser that prohibits the consummation of the transactions
contemplated in this Agreement.
8.7 NO MATERIAL ADVERSE EFFECT. There having been no Material Adverse
Effect on the Company since July 31, 1997.
8.8 CONSENTS. All required consents, licenses, approvals, estoppel
certificates, releases of Encumbrances, acknowledgments of payment in full and
authorizations, as set forth on SCHEDULE 2.5, having been obtained and delivered
to Purchaser.
8.9 SHAREHOLDER REPRESENTATION AND AFFILIATE LETTER. Shareholders
having executed letters in the form of EXHIBIT C.
8.10 LEGAL OPINIONS. Purchaser having received from counsel to the
Company an opinion in substantially the form of EXHIBIT D attached hereto.
8.11 CERTIFICATE OF SECRETARY. The Company having delivered a
certificate, signed by the secretary of the Company, certifying (i) current
copies, as amended, of the Articles of Incorporation and Bylaws of the Company
and (ii) the resolutions of the board of directors and the shareholders of the
Company authorizing this Agreement and the transactions contemplated hereby.
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8.12 ESCROW AGREEMENTS. Shareholders, the Company, and the Escrow Agent
(as defined in the Escrow Agreement) having executed and delivered the Escrow
Agreement.
8.13 NON-COMPETE AGREEMENTS. The Controlling Shareholders having
executed non-compete agreements in the form attached as EXHIBIT E providing for
a covenant not to compete of five years from the date of Closing and three years
from the date of such Shareholder's termination of employment with Purchaser or
one of its Affiliates, whichever is later.
8.14 UCC-3S. The Company having delivered UCC-3 Termination Statements
for all the secured Debt to be paid off at Closing, or a Payoff Letter from the
holder thereof agreeing to deliver the same after receipt of immediately
available funds sufficient to pay off in full the secured Debt.
8.15 HSR ACT. All applicable waiting periods under the HSR Act relating
to transactions contemplated hereby having expired or been terminated.
8.16 ACCOUNTING, TAX MATTERS. Purchaser is not aware of any fact or
circumstance that would (i) prevent the transactions contemplated hereby from
qualifying as a tax-free reorganization under the Code, or (ii) prevent the
transaction from qualifying for the pooling of interests method of accounting.
8.17 OPTIONS EXERCISED. The Options shall have been exercised and there
shall be no options, warrants or similar rights to the Company's capital stock
outstanding.
8.18 NO DISCOVERY. Purchaser not being informed of or otherwise having
discovered any matter or matters which would constitute a Purchaser Indemnified
Obligation or which would represent a Material Adverse Effect on the Company.
8.19 DOCUMENTATION. All agreements, documents and instruments incidental
to the performance of the transactions contemplated by this Agreement being in a
form and substance reasonably satisfactory to Purchaser and its legal counsel
and Purchaser having received copies of all documents that they may have
reasonably requested in connection with such transactions.
8.20 APPROVAL OF PURCHASER'S BOARD. The Board of Directors of Purchaser
and Parent shall have approved this Agreement and the transactions contemplated
herein.
ARTICLE 9
CONDITIONS TO OBLIGATIONS OF THE COMPANY TO CLOSE
The obligation of the Company to consummate the transactions that are to be
consummated at the Closing is subject to the satisfaction, as of the Closing
Date, of the following conditions (any of which may be waived in whole or in
part by Shareholders):
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9.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Parent and Purchaser set forth in Article 4 being accurate in all
material respects (except for the representations and warranties set forth in
Section 4.6, which shall be true and accurate) as of the date of this Agreement
and as of the Closing, as though made on and as of the Closing Date.
9.2 PERFORMANCE. Parent and Purchaser having performed, in all material
respects, all obligations required by this Agreement to be performed by Parent
and Purchaser on or before the Closing Date.
9.3 CERTIFICATE. The Company having received from duly authorized
officers of Purchaser a certificate dated the Closing Date confirming that the
condition in Section 9.1 has been met and confirming, to the best of such
persons' knowledge, that the condition of 9.2 has been met.
9.4 NO INJUNCTION. There not being in effect, at the Closing, any
injunction or other binding order of any court or other tribunal having
jurisdiction over Shareholders or the Company that prohibits the consummation of
the transactions contemplated by this Agreement.
9.5 LEGAL OPINION. The Company having received from counsel to
Purchaser and Parent an opinion in substantially the form of EXHIBIT F attached
hereto.
9.6 TAX OPINION. The Company and Shareholder having received an opinion
of Rothgerber Johnson & Lyons LLP, in form and substance reasonably satisfactory
to the Company, to the effect that the Merger and the issuance of shares of MW
Common Stock in connection therewith, as described herein, shall constitute a
tax-free reorganization under Section 368 of the Internal Revenue Code of 1986,
as amended.
9.7 ESCROW AGREEMENTS. Purchaser and the Escrow Agent having executed
and delivered the Escrow Agreement and the Working Capital Escrow Agreement.
9.8 HSR ACT. All applicable waiting periods under the HSR Act relating
to transactions contemplated hereby having expired or been terminated.
9.9 DOCUMENTATION. All agreements, documents and instruments incidental
to Purchaser's and Parent's performance of the transactions contemplated by this
Agreement, being in a form and substance reasonably satisfactory to Shareholders
and their legal counsel.
9.10 MATERIAL ADVERSE EFFECT. There having been no material adverse
effect on Purchaser or Parent since December 31, 1997.
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ARTICLE 10
TERMINATION OF AGREEMENT
10.1 Right to Terminate Agreement. This Agreement may be terminated
prior to the Closing:
(a) by the mutual agreement of the Company and Purchaser;
(b) by Purchaser at any time after June 30, 1998 if any condition
set forth in Article 8 shall not have been satisfied or waived and Parent or
Purchaser is not in material breach of this Agreement;
(c) by the Company at any time after May 29, 1998 if any condition
set forth in Article 9 shall not have been satisfied or waived and the Company
is not in material breach of this Agreement;
(d) by Purchaser at any time if it determines that any
representation or warranty set forth in Section 2 or Section 3 is inaccurate in
any material respect;
(e) by Purchaser if any Updated Disclosure Schedule delivered to
Purchaser under Section 5.5 causes any representation or warranty set forth in
Section 2 or 3 to be inaccurate in any material respect; or
(f) by the Company at any time if it determines that any
representation or warranty set forth in Section 4 is inaccurate in any material
respect.
10.2 EFFECT OF TERMINATION. Upon the termination of this Agreement
pursuant to Section 10.1:
(a) Purchaser shall promptly destroy or cause to be returned to the
Company all Confidential Information, including any copies made by or supplied
to Purchaser or any of Purchaser' Associates of any such Confidential
Information;
(b) Each party shall pay its own costs and expenses and no party
hereto shall have any obligation or liability to the other parties hereto;
PROVIDED, HOWEVER that the parties hereto shall remain bound by the provisions
of Sections 6.1 and 7.4 and Article 12.
ARTICLE 11
CERTAIN REMEDIES AND LIMITATIONS
11.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. All
representations and warranties made by the Company and Controlling Shareholders
in this Agreement, in any Schedule or in any certificate delivered pursuant
hereto, shall survive the Closing until May 10, 1999, provided that there shall
be no termination of the obligation to indemnify for a claim
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involving any such representation or warranty provided a Claim Notice has been
delivered prior to May 10, 1999. The representations and warranties of any
party shall be unaffected by any investigation made by or on behalf of the other
parties or by knowledge obtained as a result thereof or otherwise. All
representations and warranties made by Parent and the Purchaser as to any fact
or condition on or before the Closing Date, in this Agreement, or in any
certificate delivered pursuant hereto, shall survive the Closing.
11.2 INDEMNIFICATION BY SHAREHOLDERS.
(a) The Purchaser and the Company and their respective Affiliates
and their respective officers, directors, shareholders, agents, representatives,
consultants, employees and affiliates, and all of their respective heirs,
successors and permitted assigns (collectively, the "Purchaser Indemnified
Parties") shall be indemnified and held harmless, jointly and severally by the
Shareholders entitled to receive the Merger Consideration, solely out of the
portion of the Merger Consideration deposited in the Escrow Account, against and
in respect of the net amount (determined after deduction of the amount of any
insurance proceeds recovered and any benefits inuring to the Purchaser as a
result of the timing for income tax purposes of deductions for such losses as
compared to the timing of recoveries under insurance or this Section 11.2):
(i) of any and all liabilities, obligations, losses, damages,
diminutions of value, liens and deficiencies of any kind or nature
("Losses") not accrued or reserved for in the Final Closing Statement which
exist, or which are imposed on, incurred by or asserted against any one or
more of the Purchaser Indemnified Parties,
(A) based upon, resulting from or arising out of, or as to
which there was, any breach or inaccuracy of any representation,
warranty, statement, certification, agreement or covenant made by
the Company or any Shareholder in this Agreement, any Related
Agreement, any Disclosure Schedule hereto or thereto;
(B) based upon, resulting from or arising out of any claim,
litigation or proceeding brought by any third-party based upon,
resulting from, arising out of or concerning any event, fact or
circumstance, if and to the extent that such event, fact or
circumstance arises out of or relates to the ownership or operation
of the Company prior to Closing;
(C) arising out of the cost of any required remediation
under Environmental Laws of any of the properties now or previously
owned, leased, used, occupied or contaminated by the Company, if
the materials and/or conditions requiring such remediation existed
as of the Closing;
(D) in the nature of Taxes for periods through the Closing
for which the Company is liable to the extent that an appropriate
tax authority has asserted a claim and (i) such Taxes are not
reflected on the Financial Statements and did not arise in the
ordinary course of business after the date thereof, (ii) such
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Taxes should have been but were not reflected in any return filed by
the Company prior to the Closing, (iii) such Taxes were required to
be paid prior to the Closing and were not so paid, or (iv) such
Taxes result from the failure by the Company prior to the Closing to
comply with any legal requirements relating to information reporting
or withholding and payment over of taxes with respect to payments
made to third parties;
(E) the amount of any brokerage commission, finder's fee or
like payment in connection with the transactions contemplated in
this Agreement to the extent not included in Company Expenses
included in the calculation of the Merger Consideration;
(ii) of any cost or expenses (including, without limitation,
settlement costs and reasonable attorneys', accountants' and experts' fees
and court costs) incurred by Purchaser Indemnified Parties in connection
with any of the foregoing (including, without limitation, any reasonable
cost or expense incurred by Purchaser Indemnified Parties in enforcing
their rights pursuant to this Section 11.2).
Each of the above is for purposes of this Agreement a "Purchaser
Indemnified Obligation."
(b) Claims for indemnification under Section 11.2(a)(i)(B), (C) or
(D), above, may be made regardless of whether or not the matter giving rise to
such claim would constitute a breach of a representation and warranty made in
this Agreement, any Related Agreement, any Disclosure Schedule hereto and
thereto or any other written document. No Purchaser Indemnified Party shall be
required to make any claim or demand against any other person or entity prior to
the making of any claim or demand for indemnification or at any other time.
Shareholders agree that, notwithstanding any other provision of this Agreement,
any Related Agreement or applicable Legal Requirements, Purchaser Indemnified
Parties shall offset all valid claims for indemnification against the Escrow
Account in accordance with the terms of the Escrow Agreement.
11.3 LIMITATIONS ON REPRESENTATIONS, WARRANTIES AND LIABILITIES OF
SHAREHOLDERS.
(a) Notwithstanding anything to the contrary in this Agreement,
Shareholders shall not be liable to the Purchaser Indemnified Parties, except
under the Escrow Agreement as provided therein. The total amount of payments
that the Shareholders may be required to make thereunder shall be limited in the
aggregate to the Escrow Amount, which is the sole source of Purchaser's
indemnification and the Shareholders' cumulative liability shall in no event
exceed the Escrow Amount.
(b) No payment shall be required to be made for Purchaser
Indemnified Obligations unless a Claim Notice (as defined below) with respect
thereto has been delivered to Shareholders on or prior to May 10, 1999, except
for the Tax Claims up to the amount of the Tax Escrow.
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(c) Notwithstanding anything to the contrary in this Agreement, and
except for "willful," knowing or intentional breaches of the representations and
warranties contained herein, no claim for indemnification may be made by any
Purchaser Indemnified Party unless and until the aggregate amount of Losses
and/or other amounts claimed for indemnification by the Purchaser Indemnified
Parties exceeds $25,000, and then only for the amount by which such Losses and
other amounts claimed exceed $25,000.
11.4 INDEMNIFICATION BY PARENT AND PURCHASER.
(a) Parent and Purchaser will, jointly and severally, indemnify and
hold harmless Shareholders and their respective affiliates, officers, directors,
partners, stockholders, agents, representatives, consultants and employees, and
all of their respective heirs, successors and permitted assigns (collectively,
the "Shareholder Indemnified Parties") from and against the net amount
(determined after deduction of the amount of any insurance proceeds recovered):
(i) of any and all Losses which exist, or which are imposed
on, incurred by or asserted against any one or more of the Shareholder
Indemnified Parties:
(A) based upon, resulting from or arising out of or as to
which there was any breach or inaccuracy of any representation,
warranty, statement, certification, agreement, obligation or
covenant made by Parent or Purchaser in this Agreement, any
Purchaser Related Agreement or in any other written document;
(B) based upon, resulting from or arising out of any claim,
litigation or proceeding brought by any third party based upon,
resulting from arising out of or concerning any event, fact or
circumstance, if and to the extent that such event, fact or
circumstance arises out of or relates to the ownership or operation
of the Company after the Closing;
(C) arising out of the cost of remediating under
Environmental Laws any of the properties now owned, leased, used,
occupied or contaminated by the Company, if the conditions requiring
such remediation did not exist prior to the Closing;
(D) in the nature of Taxes which arise subsequent to the
Closing;
(E) the amount of any brokerage commission, finder's fee or
like payment in connection with the transactions contemplated in
this Agreement;
(ii) of any cost or expenses (including, without limitation,
settlement costs and reasonable attorneys', accountants' and experts' fees
and court costs) incurred by Shareholder Indemnified Parties in connection
with any of the foregoing (including, without limitation, any reasonable
cost or expense incurred by Shareholder Indemnified Parties in enforcing
their rights pursuant to this Section 11.4).
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Each of the above is for purposes of this Agreement a "Shareholder
Indemnified Obligation."
(b) Claims for indemnification under Section 11.4(a)(i)(B), (C) or
(D), above, may be made regardless of whether or not the matter giving rise to
such claim would constitute a breach of a representation and warranty made in
this Agreement, any Related Agreement, any Disclosure Schedule hereto and
thereto or any other written document. No Shareholder Indemnified Party shall
be required to make any claim or demand against any other person or entity prior
to the making of any claim or demand for indemnification or at any other time.
11.5 LIMITATIONS ON LIABILITY OF PURCHASER.
(a) No payment shall be required to be made for Shareholders
Indemnified Obligations unless a Claim Notice with respect thereto has been
delivered to Purchaser on or prior to the third anniversary of the Closing.
(b) Any amounts payable by Purchaser to Shareholders under this
Article 11 shall be payable in MW Common Stock at the MW Common Stock Valuation.
11.6 INDEMNIFICATION CLAIMS.
(a) If either a Purchaser Indemnified Party, on the one hand, or a
Shareholder Indemnified Party, on the other hand, (the "Claimants") wishes to
assert an indemnification claim hereunder, the Claimant shall deliver to
Shareholders, if a Purchaser Indemnified Party, or to Purchaser, if the Claimant
is a Shareholder Indemnified Party, a written notice (a "Claim Notice") setting
forth:
(i) the matter giving rise to the Claim for indemnification,
(ii) a detailed description of all of the facts and
circumstances known to Claimant giving rise to the Claim, and
(iii) a detailed description of, and a reasonable estimate of
the total amount of, the monetary amounts actually incurred or expected to
be incurred for which indemnification is sought.
(b) Purchaser Indemnified Parties and Shareholder Indemnified
Parties are referred to herein as "Indemnified Parties," and the persons from
whom indemnification may be sought pursuant to this Section 11.6 are referred to
as an "Indemnifying Party"). Within twenty (20) days after receipt of any Claim
Notice, the Indemnifying Parties will (i) acknowledge in writing their
responsibility for all or part of such matter for which indemnification is
sought under this Article 11, and will either (x) pay or otherwise satisfy the
portion of such matter as to which responsibility is acknowledged, or (y) take
such other action as is reasonably satisfactory to the Indemnified Party to
provide reasonable security or other assurances for the performance of their
obligations hereunder, and/or (ii) give written notice to the Indemnified Party
of their intention to
46
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dispute or contest all or part of such responsibility. Upon delivery of such
notice of intention to contest, the parties will negotiate in good faith to
resolve as promptly as possible any dispute as to responsibility for, or the
amount of, any such matter.
11.7 DEFENSE OF THIRD PARTY ACTIONS. If an Indemnified Party receives
notice or otherwise obtains Knowledge of any Claim or any threatened Claim that
may give rise to an indemnification claim against an Indemnifying Party, then
the Indemnified Party shall promptly deliver to the Indemnifying Party a written
notice describing such Claim in reasonable detail. The untimely delivery of such
written notice by the Indemnified Party to the Indemnifying Party shall relieve
the Indemnifying Party of liability with respect to such Claim to the extent it
has been prejudiced by lack of timely notice under this Article 11 with respect
to such Claim. The Indemnifying Party shall have the right, at its option to
assume the defense of any such Claim with its own counsel, reasonably
satisfactory to the Indemnified Party, provided that Shareholders may not assume
the defense of any Claim unless there are sufficient amounts in the
Indemnification Escrow Amount to fully indemnify Purchaser Indemnified Parties
against the amount of such Claim and all other pending Claims against the Escrow
Amount. If the Indemnifying Party elects to assume the defense of and
indemnification for any such Claim, then:
(a) notwithstanding anything to the contrary contained in this
Agreement, the Indemnifying Party shall not be required to pay or otherwise
indemnify the Indemnified Party against any attorneys' fees or other expenses
incurred on behalf of the Indemnified Party in connection with such matter
following the Indemnifying Party's election to assume the defense of such matter
so long as the Indemnifying Party continues to diligently conduct such defense;
(b) the Indemnified Party shall make available to the Indemnifying
Party all books, records and other documents and materials that are under the
direct or indirect control of the Indemnified Party or any of the Indemnified
Party's Associates that the Indemnifying Party considers such necessary or
desirable for the defense of such matter at the expense of the Indemnifying
Party and shall make available to the Indemnifying Party reasonable access to
Indemnified Party's personnel;
(c) the Indemnified Party shall execute such documents and take
such other actions as the Indemnifying Party may reasonably request for the
purpose of facilitating the defense of, or any settlement, compromise or
adjustment relating to, such Claim (with the Indemnifying Party to reimburse
Indemnified Party for third-party, out-of-pocket expenses) and the Indemnified
Party shall not be required to take any such action or execute any document
which imposes any equitable or unindemnified liability remedy on any Indemnified
Party or would adversely affect the business or operations of the Company;
(d) the Indemnified Party shall otherwise fully cooperate as
reasonably requested by the Indemnifying Party in the defense of such Claim
(with the Indemnifying Party to reimburse Indemnified Party for third-party,
out-of-pocket expenses); and
(e) the Indemnified Party shall not admit any liability with
respect to such Claim.
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<PAGE>
If the Indemnifying Party fails or refuses to assume the defense of and
indemnification for such Claim, then the Indemnified Party shall proceed
diligently to defend such Claim with the assistance of counsel, and the
Indemnifying Party shall thereafter reimburse Indemnified Party on a current
basis, in accordance with the procedures set forth in this Agreement, as
requested by Indemnified Party for all costs and expenses of defense for which
Indemnified Party is entitled to indemnification pursuant to the terms of this
Agreement. No third party Claim may be settled by the Indemnified Party without
notice to, and the written consent of, the Indemnifying Party which consent must
not be unreasonably withheld. If such consent is not given, or written notice
that it is being withheld and the reasons therefor has not been received, by the
Indemnified Party within 15 days after such notice has been received by the
Indemnifying Party, the consent of the Indemnifying Party to such settlement
shall be deemed given.
11.8 SUBROGATION. To the extent that the Indemnifying Party makes or is
required to make any indemnification payment to any Indemnified Party, the
Indemnifying Party shall be entitled to exercise, and shall be subrogated to,
any rights and remedies (including rights of indemnity, rights of contribution
and other rights of recovery) that the Indemnified Party or any of the
Indemnified Party affiliates may have against any other person (other than any
Purchaser Indemnified Party or Shareholders Indemnified Party) with respect to
any Losses, circumstances or matter to which such indemnification payment is
directly or indirectly related. The Indemnified Party shall permit the
Indemnifying Party to use the name of the Indemnified Party and the names of the
Indemnified Party's affiliates in any transaction or in any proceeding or other
matter involving any of such rights or remedies; and the Indemnified Party shall
take such actions as the Indemnifying Party may reasonably request for the
purpose of enabling the Indemnified Party to perfect or exercise the
Indemnifying Party's right of subrogation hereunder.
11.9 EXCLUSIVITY. The right of each party hereto to assert
indemnification claims and receive indemnification payments pursuant to this
Article 11 shall be the sole and exclusive right and remedy exercisable by any
person or entity entitled to indemnification hereunder with respect to any
breach by the other party hereto of any representation or warranty or any other
indemnity obligation hereunder.
11.10 RETENTION OF RECORDS. From and after the date of this Agreement,
Purchaser shall preserve, and shall cause the Company to preserve, all books,
records and other documents, materials and information relevant to the
representations, warranties and covenants set forth in this Agreement until the
later of four (4) years following the Closing Date or for such longer period as
the rights of the parties hereunder may exist. At all times after the Closing
Date, Purchaser and the Company shall give Shareholders and Shareholders'
Associates reasonable access to such books, records and other documents,
materials and information of the Company relating to the operation of the
business of the Company up to and including the Closing Date.
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<PAGE>
ARTICLE 12
MISCELLANEOUS
12.1 CERTAIN DEFINITIONS. For purposes of this Agreement, a contract,
obligation, liability, transaction, change, breach, encumbrance, proceeding or
other matter or event shall not be deemed "material" if the monetary amount
involved is less than 0.1% of the Merger Consideration. A "Material Adverse
Effect" is a material adverse effect on the business, operations, assets or
financial condition or results of the Company taken as a whole. "Knowledge"
means, with respect to an individual, the actual present Knowledge of such
individual. A Person (other than an individual), including the Company, will be
deemed to have Knowledge of a particular fact or matter if any individual who
serves as an officer or director of such Person has actual present Knowledge of
such fact or matter. "Shareholders' Representative" shall mean Ronald L. Bray
and his successors and/or assigns.
12.2 EXPENSES. The term "Company Expenses" shall mean: (i) all costs and
expenses of the Company in connection with the negotiation of this Agreement and
the consummation of the transactions contemplated hereby including any broker's
fee set forth in SCHEDULE 2.25; (ii) one-half of the Company's costs of all HSR
filings, and any transfer taxes or stamp incurred by the Company in connection
with the transactions contemplated by this Agreement and of Neutral Accountants;
and (iii) all other costs and expenses required to be borne by the Company under
the terms of this Agreement. Company Expenses shall not include costs, expenses
or fees of Shareholders incurred in connection with the Merger or other
transactions contemplated by this Agreement which costs, expenses and fees shall
be paid directly by the Shareholders. The Company shall pay the fees and
expenses of the Company incidental to the preparation of this Agreement, the
performance and compliance with all agreements contained in this Agreement to be
performed or complied with by it and the consummation of the transactions
contemplated hereby, including the legal and accounting fees and expenses.
Purchaser shall be responsible for its fees and expenses incidental to the
preparation of this Agreement, the performance and compliance with all
agreements contained in this Agreement to be performed or complied with by it
and the consummation of the transactions contemplated hereby, including the
legal and accounting fees and expenses and the fees and expenses associated with
any environmental assessment conducted in connection with this transaction.
12.3 NOTICES; ETC. All notices, instructions and other communications
given hereunder or in connection herewith shall be in writing. Any such notice,
instruction or communication shall be sent either (i) by registered or certified
mail, return receipt requested, postage prepaid, or (ii) via a reputable
nationwide overnight courier service, in each case to the address set forth
below. Any such notice, instruction or communication shall be deemed to have
been delivered three business days after it is sent prepaid, or one business day
after it is sent via a reputable nationwide overnight courier service.
49
<PAGE>
If to Purchaser, to:
Mail-Well, Inc.
23 Inverness Way East
Englewood, CO 80112
Attention: Gerald F. Mahoney, Chairman
Tel: (303) 397-7410
Fax: (303) 397-7400
with a copy to:
Mail-Well, Inc.
23 Inverness Way East
Englewood, CO 80112
Attention: Roger Wertheimer, Vice President, General Counsel
Tel: (303) 397-7440
Fax: (303) 768-7380
If to Company, Controlling Shareholders, or to the Shareholders' Representative:
Ronald L. Bray
c/o French Bray, Incorporated
P.O. Box 698
Glen Burnie, MD 21060
With a copy to:
Hecht and Chapper
210 North Charles Street, Suite 1317
Baltimore, MD 21201
or, in each case, to such other address as may be specified in writing to the
other parties.
Any party may give any notice, instruction or communication in connection
with this Agreement using any other means (including personal delivery, telecopy
or ordinary mail), but no such notice, instruction or communication shall be
deemed to have been delivered unless and until it is actually received by the
party to whom it was sent. Any party may change the address to which notices,
instructions or communications are to be delivered by giving the other parties
to this Agreement notice thereof in the manner set forth in this Section 12.3.
12.4 ASSIGNMENT. Neither the Company nor any Shareholder may assign or
otherwise transfer this Agreement or any of their rights hereunder to any person
or entity, without the prior written consent of Purchaser. Subject to the
foregoing, this Agreement shall inure to the benefit of and be binding upon
Shareholders and their successors, personal representatives, heirs, and
permitted assigns. Notwithstanding the foregoing, this Agreement shall not be
terminated by the
50
<PAGE>
death or incapacity of any Shareholder, and if, after the execution hereof, any
Shareholder shall die or become incapacitated, this Agreement shall be binding
upon the successors and assigns of any Shareholder as if such death or
incapacity had not occurred and regardless of notice thereof. Except as
expressly permitted by this Section 12.4, Purchaser shall not voluntarily or by
operation of law assign or otherwise transfer this Agreement or any of its
rights or obligations hereunder except to Parent or any of its wholly owned
subsidiaries, without the prior written consent of Shareholders' Representative
and provided that any permitted assignment or transfer shall not relieve
Purchaser or Parent of any of their joint and several obligations hereunder.
Purchaser may collaterally assign and/or grant a security interest in its rights
under this Agreement and under other closing documents to any financial
institution(s) or their affiliates as required pursuant to any existing or
future financing arrangements with the prior written consent of the
Shareholders' Representative (which consent will not be unreasonably withheld or
delayed).
12.5 ENTIRE AGREEMENT; AMENDMENT; GOVERNING LAW; ETC. This Agreement
(together with the Exhibits and Disclosure Schedules) embodies the entire
agreement and understanding among the parties hereto with respect to the subject
matter hereof. This Agreement may be amended, modified, waived, discharged or
terminated only by (and any consent hereunder shall be effective only if
contained in) an instrument in writing signed by the party against which
enforcement of such amendment, modification, waiver, discharge, termination or
consent is sought. This Agreement shall be construed in accordance with and
governed by the laws of the State of Delaware as it applies to contracts to be
performed entirely with the State of Delaware. No representation or warranty
(either express, implied or otherwise) is being made by any party with respect
to the subject matter hereof other than as expressly set forth herein.
12.6 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which is an original, but all of which shall constitute
one instrument. Facsimile signatures to this Agreement shall be binding upon
the parties.
12.7 THIRD PARTY RIGHTS. The parties do not intend to confer any benefit
hereunder on any person or entity other than the parties hereto, the Indemnified
Parties and their respective successors in interest.
12.8 EXHIBITS AND SCHEDULES. Each of the Exhibits and Schedules referred
to herein and attached hereto is an integral part of this Agreement and is
incorporated herein by this reference.
12.9 PRONOUNS. All pronouns and any variations thereof used in this
Agreement shall be deemed to refer to the masculine, feminine or neuter,
singular or plural, as appropriate.
12.10 AUTHORITY AND EXECUTION. Each person executing this Agreement on
behalf of a party hereto represents and warrants that he is duly and validly
authorized to do so on behalf of such party, with full right and authority to
execute this Agreement and to bind such party with respect to all of its
obligations hereunder.
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<PAGE>
12.11 SEVERABILITY. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction, as to such jurisdiction, shall be
ineffective to the extent of such invalidity or unenforceability, without
rendering invalid or unenforceable the retraining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction.
12.12 TIME OF ESSENCE. Time is of the essence of this Agreement.
12.13 INTERPRETATION. Each party acknowledges that such party, either
directly or through such party's representatives, has participated in the
drafting of this Agreement, and any applicable rule of constructions that
ambiguities are to be resolved against the drafting party should not be applied
in connection with the construction or interpretation of this Agreement.
12.14 ARBITRATION.
(a) Any controversy or claim arising out of or related to this
Agreement, or a breach hereof, is to be settled by arbitration in accordance
with the procedures set forth in SCHEDULE 12.14.
(b) Notices of demand for arbitration must be filed in writing with
the other parties hereto and in accordance with SCHEDULE 12.14. A demand for
arbitration is to be made within a reasonable time after the claim or
controversy has arisen, but in no event later than the date when institution of
legal or equitable proceedings based on such claim or controversy would be
barred by the applicable statute of limitations.
(c) No arbitration hereunder may include, by consolidation, joinder
or any other manner, any Person other than Parent, Purchaser, Company, the
Shareholders, and other Persons substantially involved in a common question of
fact or law whose presence is required if complete relief is to be accorded in
arbitration. No Person other than Parent, Purchaser, Company or the
Shareholders may be included as an original third party or additional third
party to an arbitration whose interest or responsibility is insubstantial.
Consent to arbitration involving an additional Person does not constitute
consent to arbitration of a dispute not described therein or with a Person not
named or described therein. This Section 12.14 is enforceable by specific
performance under applicable law in a court of competent jurisdiction.
(d) The award rendered by the arbitrators, including as to legal
fees in accordance with SCHEDULE 12.14, is final, and judgment may be entered
upon it in accordance with applicable law in any court of competent
jurisdiction.
THIS AGREEMENT CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY BE ENFORCED BY
THE PARTIES.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly caused this Agreement to
be executed as of the date first above written.
PARENT
MAIL-WELL, INC., a Colorado corporation
By:
-----------------------------------------------
Name: Paul V. Reilly
Title: President
PURCHASER
MAIL-WELL I CORPORATION, a Delaware corporation
By:
-----------------------------------------------
Name: Paul V. Reilly
Title: President
THE COMPANY
FRENCH BRAY, INCORPORATED,
a Maryland corporation
By:
-----------------------------------------------
Name: Ronald L. Bray
Title: Chairman of the Board
CONTROLLING SHAREHOLDERS
-------------------------------------------------------
Ronald L. Bray
-------------------------------------------------------
Horace A. Bray III
-------------------------------------------------------
Gwen Ellen Bray
53
<PAGE>
SCHEDULE 12.14
ARBITRATION PROCEDURES
Purchaser and Shareholders hereto agree that in the event of a dispute
between them relating to or arising out of this Agreement, the involved parties
shall submit such dispute to binding arbitration as provided herein. All
arbitrations would be conducted in Denver, Colorado, or at another location
mutually approved by the parties, pursuant to the Commercial Arbitration Rules
of the American Arbitration Association except as herein may be provided. If
the panel used will consist of three arbitrators, such arbitrators will have
experience in the printing industry and the decision of the arbitrators would be
final and binding on all parties. All arbitration shall be undertaken pursuant
to the Federal Arbitration Act, where applicable, and the decision of the
arbitrators shall be enforceable in any court of competent jurisdiction. All of
the parties shall agree to waive their respective rights to further appeal or
redress in any other court or tribunal except solely for the purpose of
obtaining execution of the decision resulting from the arbitration proceeding.
In any dispute where a party seeks $200,000.00 or more in damages or if the
dispute involves whether the Purchaser or the Company properly determined to
terminate the Agreement or refused to close the transactions contemplated by
this Agreement, three arbitrators shall be employed to arbitrate the dispute.
In the event that the dispute involves less than $200,000.00, there shall be one
arbitrator. In the event of any arbitration or other legal proceeding brought
by any party against another party with regard to any matter arising out of or
related to this Agreement, each party hereby expressly agrees that the final
award decision would also provide for all allocation and division between or
among the parties to the arbitration, on a basis which is just and equitable
under the circumstances, of all costs and expenses of the dispute, including
without limitation court costs and arbitrators', reasonable attorneys',
accountants' and expert witness fees, costs and expenses (including
disbursements) incurred in connection with such proceedings. In resolving all
disputes between the parties, the arbitrators shall apply the substantive law of
the State of Delaware. The arbitrators are directed, by this Agreement, to
conduct the arbitration hearing no later than three months from the service of
the statement of claim and demand for arbitration unless good cause is shown
establishing that the hearing cannot fairly and practically be so convened.
Depositions shall be taken only as deemed appropriate by the arbitrator(s)
and only where good cause is shown. Good cause is agreed to exist with respect
to the depositions of officers and management personnel to the extent Knowledge,
as defined in the Agreement at Section 12.1 therein, is relevant to the issue.
Parties shall be entitled to conduct document discovery by requesting production
of documents. Responses or objections shall be served twenty days after receipt
of a request. The arbitrators shall resolve any discovery disputes of such
preheating conferences as may be needed. All parties shall agree that the
arbitrators and any counsel of record to the proceeding shall have the power or
subpoena process as provided by law.
54
<PAGE>
DEFINITIONS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Parent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Mail-Well. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Purchaser. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Company. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Controlling Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
DGCL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Surviving Corporation. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Merger Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Total Shareholder Consideration. . . . . . . . . . . . . . . . . . . . . . . 2
MW Common Stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
MW Common Stock Valuation. . . . . . . . . . . . . . . . . . . . . . . . . . 2
Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Subsidiary Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Dissenting Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Pro Rata Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Certificate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Dissenting Shareholders. . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Debt Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Prepayment Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Creditors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Payoff Letters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Dissenting Shareholders Escrow Amount. . . . . . . . . . . . . . . . . . . . 5
Indemnification Escrow Amount. . . . . . . . . . . . . . . . . . . . . . . . 5
Tax Escrow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Working Capital Escrow Amount. . . . . . . . . . . . . . . . . . . . . . . . 6
Escrow Amount. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Escrow Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Initial Distribution Amount. . . . . . . . . . . . . . . . . . . . . . . . . 6
Person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Working Capital. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Computation Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Estimated Working Capital Statement. . . . . . . . . . . . . . . . . . . . . 7
GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
</TABLE>
55
<PAGE>
<TABLE>
<S> <C>
Estimated Working Capital. . . . . . . . . . . . . . . . . . . . . . . . . . 7
Final Working Capital Statement. . . . . . . . . . . . . . . . . . . . . . . 7
Final Closing Statement. . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Notice of Working Capital Disagreement . . . . . . . . . . . . . . . . . . . 8
Final Closing Statement. . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Disputed Working Capital Matter. . . . . . . . . . . . . . . . . . . . . . . 8
Neutral Accountant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Final Closing Statement. . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Notice of Inventory Disagreement . . . . . . . . . . . . . . . . . . . . . . 9
Disputed Inventory Matter. . . . . . . . . . . . . . . . . . . . . . . . . . 9
Accounts Receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
Transfer Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
Registration Statement . . . . . . . . . . . . . . . . . . . . . . . . . . .11
Securities Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
Registrable Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
Initial Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . . .11
Registration Statement Period. . . . . . . . . . . . . . . . . . . . . . . .11
SEC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
Exchange Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
Liability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
Registration Document. . . . . . . . . . . . . . . . . . . . . . . . . . . .12
Disclosure Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
Related Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
Voting Debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
Equity Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
Legal Requirement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
Annual Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . .16
Interim Financial Statements . . . . . . . . . . . . . . . . . . . . . . . .16
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
Permitted Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
Real Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19
Leased Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19
Title Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19
Permits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19
ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20
Benefit Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20
Pension Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
Multiemployer Plans. . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
PBGC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
COBRA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
Claim. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22
Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22
Tax. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22
Tax Returns. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
Material Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24
Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .26
Hazardous Materials. . . . . . . . . . . . . . . . . . . . . . . . . . . . .26
RCRA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .26
CERCLA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .26
Environmental Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . .26
Intellectual Property. . . . . . . . . . . . . . . . . . . . . . . . . . . .27
Related Parties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27
Affiliate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .28
Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .29
Purchaser Related Agreements . . . . . . . . . . . . . . . . . . . . . . . .31
SEC Documents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .32
HSR Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .35
Updated Disclosure Schedule. . . . . . . . . . . . . . . . . . . . . . . . .36
Associates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .36
Confidential Information . . . . . . . . . . . . . . . . . . . . . . . . . .36
Transferred Employee . . . . . . . . . . . . . . . . . . . . . . . . . . . .37
Debt Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .39
Purchaser Indemnified Parties. . . . . . . . . . . . . . . . . . . . . . . .43
Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .43
Purchaser Indemnified Obligation . . . . . . . . . . . . . . . . . . . . . .44
Shareholder Indemnified Parties. . . . . . . . . . . . . . . . . . . . . . .45
Shareholder Indemnified Obligation . . . . . . . . . . . . . . . . . . . . .46
Claimants. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .46
Claim Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .46
Indemnified Parties. . . . . . . . . . . . . . . . . . . . . . . . . . . . .46
Indemnifying Party . . . . . . . . . . . . . . . . . . . . . . . . . . . . .46
Material Adverse Effect. . . . . . . . . . . . . . . . . . . . . . . . . . .49
Knowledge. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .49
Shareholders' Representative . . . . . . . . . . . . . . . . . . . . . . . .49
Company Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .49
</TABLE>
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