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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): JULY 3, 1996
CONSOLIDATED GRAPHICS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
TEXAS 0-24068 76-0190827
(STATE OR OTHER JURISDICTION (COMMISSION FILE NUMBER) (I.R.S. EMPLOYER
OF INCORPORATION) IDENTIFICATION NO.)
2210 WEST DALLAS STREET
HOUSTON, TEXAS 77019
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES AND ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (713) 529-4200
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On July 3, 1996, Consolidated Graphics, Inc. (the "Company") acquired all
of the issued and outstanding stock of Garner Publishing Company ("Garner
Printing"), a commercial printing company located in Des Moines, Iowa. The
Company issued 177,780 shares of its common stock in connection with the
acquisition. The Company expects to continue operating Garner Printing without
making any significant changes in its operations.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(A) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED.
As of the date of this Form 8-K, it is impracticable for the Company to
file the required financial statements of the acquired business. The Company
intends to file such required information as soon as the financial statements
become available but in any event not later than September 16, 1996.
(B) PRO FORMA FINANCIAL INFORMATION.
As of the date of this Form 8-K, it is impracticable for the Company to
file the pro forma information with respect to the acquired business. The
information required hereunder will be filed concurrently with the filing of the
financial statements discussed above.
(C) EXHIBITS
The following exhibits are furnished with this report:
1 -- Agreement and Plan of Reorganization by and among Consolidated
Graphics, Inc., Garner Acquisition Co., Garner Publishing
Company and the stockholders of Garner Publishing Company, dated
July 3, 1996.
2 -- Plan of Merger by and between Garner Publishing Company, an Iowa
corporation, and Garner Acquisition Co., an Iowa corporation,
dated July 3, 1996.
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SIGNATURE
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934,
CONSOLIDATED GRAPHICS, INC. HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED HEREUNTO DULY AUTHORIZED.
CONSOLIDATED GRAPHICS, INC.
(Registrant)
By: /s/ G. CHRISTOPHER COLVILLE
G. CHRISTOPHER COLVILLE
VICE PRESIDENT -- MERGERS AND
ACQUISITIONS
CHIEF FINANCIAL AND ACCOUNTING
OFFICER
Date: July 18, 1996
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AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
CONSOLIDATED GRAPHICS, INC.
GARNER ACQUISITION CO.
GARNER PUBLISHING COMPANY
AND
THE STOCKHOLDERS OF
GARNER PUBLISHING COMPANY
DATED JULY 3, 1996
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TABLE OF CONTENTS
AGREEMENT AND PLAN OF REORGANIZATION
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ARTICLE 1 THE CLOSING; THE MERGER.............................................. 2
1.1 Closing.............................................................. 2
1.2 The Merger........................................................... 2
1.3 Terms of Merger...................................................... 2
1.4 Public Announcements................................................. 2
ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF
THE COMPANY AND THE STOCKHOLDERS.................................... 3
2.1 Organization and Good Standing....................................... 3
2.2 Capitalization of the Company........................................ 3
2.3 Ownership; Voting Rights............................................. 3
2.4 No Subsidiaries or Other Ownership Interests......................... 3
2.5 Authority of Stockholders and Company................................ 3
2.6 No Conflicts......................................................... 4
2.7 Consents and Approvals............................................... 4
2.8 Title to Properties; Condition....................................... 4
2.9 Financial Statements................................................. 5
2.10 Customary Business Practice.......................................... 6
2.11 Absence of Certain Changes or Events................................. 6
2.12 Absence of Defaults.................................................. 7
2.13 Compliance with Laws................................................. 7
2.14 Tax Returns and Reports.............................................. 7
2.15 Litigation........................................................... 8
2.16 Customers and Suppliers.............................................. 8
2.17 Accounts Receivable and Accounts Payable............................. 9
2.18 Inventories.......................................................... 9
2.19 ERISA and Related Matters............................................ 9
2.20 Contracts and Commitments............................................ 11
2.21 Patents, Trademarks and Copyrights................................... 12
2.22 Insurance............................................................ 12
2.23 Employees............................................................ 12
2.24 Labor Agreements; Disputes........................................... 13
2.25 Regulatory Filings................................................... 13
2.26 Environmental and Health and Safety Matters.......................... 13
2.27 Brokers.............................................................. 16
2.28 Disclosure........................................................... 16
2.29 Transactions With Affiliates......................................... 17
2.30 Consolidated Group................................................... 17
2.31 Investment Representation............................................ 17
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2.32 Rights Against Company Stock......................................... 17
2.33 No Trading in CGI Common Stock....................................... 17
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF CGI AND NEWCO...................... 18
3.1 Organization and Good Standing....................................... 18
3.2 Authority of CGI and Newco........................................... 18
3.3 No Conflicts......................................................... 18
3.4 Consents and Approvals............................................... 19
3.5 Brokers.............................................................. 19
3.6 Litigation........................................................... 19
3.7 Due Authorization.................................................... 19
3.8 SEC Reports.......................................................... 19
3.9 Due Diligence........................................................ 20
ARTICLE 4 ACTIONS BY THE STOCKHOLDERS AND
THE COMPANY PENDING CLOSING......................................... 20
4.1 Conduct of Business.................................................. 20
4.2 Continued Administration............................................. 21
4.3 Records.............................................................. 21
4.4 Maintenance of Insurance............................................. 21
ARTICLE 5 COVENANTS OF THE STOCKHOLDERS AND THE COMPANY........................ 21
5.1 Approvals............................................................ 21
5.2 Compliance with Legal Requirements................................... 21
5.3 Books and Records.................................................... 22
5.4 Investigation by CGI and Newco....................................... 22
5.5 Certain Acts or Omissions............................................ 22
5.6 Reports.............................................................. 22
5.7 Confidentiality...................................................... 22
5.8 Additional Disclosure................................................ 23
5.9 Required Financial Statements........................................ 23
ARTICLE 6 COVENANTS OF CGI AND NEWCO........................................... 23
6.1 Approvals............................................................ 23
6.2 Compliance with Legal Requirements................................... 24
6.3 Certain Acts or Omissions............................................ 24
6.4 Release from Personal Liability...................................... 24
ARTICLE 7 CONDITIONS TO OBLIGATIONS OF CGI AND NEWCO........................... 24
7.1 Representations and Warranties....................................... 24
7.2 Compliance with Agreement............................................ 24
7.3 Stockholder and Officer's Certificates............................... 25
7.4 No Action or Proceeding.............................................. 25
7.5 Consents, Authorizations, Etc........................................ 25
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7.6 Stockholder Employment and Noncompetition Agreements................. 25
7.7 Noncompetition Agreements............................................ 25
7.8 Opinion of Counsel................................................... 25
7.9 Opinion of Accounting Firm........................................... 25
7.10 No Material Adverse Change........................................... 26
7.11 Corporate Action by CGI and Newco.................................... 26
7.12 Delivery of Other Documents and Instruments.......................... 26
7.13 CGI Review and Approval of Stockholder Distributions................. 26
ARTICLE 8 CONDITIONS TO OBLIGATIONS OF THE
COMPANY AND THE STOCKHOLDERS........................................ 26
8.1 Representations and Warranties....................................... 26
8.2 Compliance with Agreement............................................ 26
8.3 Officer's Certificate................................................ 27
8.4 No Action or Proceeding.............................................. 27
8.5 Consents, Authorizations, Etc........................................ 27
8.6 Corporate Action By CGI and Newco.................................... 27
8.7 Stockholders Employment/Noncompetition Agreements.................... 27
8.8 Noncompetition Agreements. ......................................... 27
8.9 Delivery of CGI Common Stock......................................... 27
8.10 Opinion of Counsel. ................................................ 28
ARTICLE 9 SURVIVAL OF REPRESENTATIONS AND WARRANTIES........................... 28
ARTICLE 10 INDEMNIFICATION...................................................... 28
10.1 Indemnification of Purchaser Indemnitees............................. 28
10.2 Indemnification of Seller Indemnitees................................ 29
10.3 Method of Asserting Claims, Etc...................................... 29
10.4 Payment of Indemnity................................................. 32
10.5 Maximum Liability for Breach of Warranty or Representation........... 32
10.6 Indemnification Basket............................................... 32
ARTICLE 11 TERMINATION.......................................................... 33
ARTICLE 12 NOTICES.............................................................. 34
ARTICLE 13 MISCELLANEOUS........................................................ 35
13.1 Incorporation of Schedules and Appendices; Entire Agreement.......... 35
13.2 Waiver............................................................... 35
13.3 Amendment............................................................ 35
13.4 Counterparts......................................................... 35
13.5 Headings............................................................. 35
13.6 Governing Law........................................................ 35
13.7 Binding Effect....................................................... 35
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13.8 Expenses............................................................. 35
13.9 Further Assurances................................................... 35
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SCHEDULES
Schedule 2.4 Other Ownership Interests
Schedule 2.6 Conflicts
Schedule 2.8 Assets and Material Agreements, Liens and Conditions Relating
Thereto
Schedule 2.11 Certain Changes and Events
Schedule 2.16 Customers and Suppliers
Schedule 2.18 Pledged Inventory
Schedule 2.19 Employee Plans
Schedule 2.20 Certain Contracts and Commitments
Schedule 2.22 Insurance
Schedule 2.23 Employee Matters
Schedule 2.24 Labor Agreements
APPENDICES
Appendix A Plan of Merger
Appendix B Financial Statements
Appendix C Form of Employment and Noncompetition Agreement
Appendix D Form of Noncompetition Agreement
Appendix E Opinion of Dreher, Simpson & Jensen, P.C.
Appendix F Form of Release
Appendix G Opinion of Winstead Sechrest & Minick P.C.
Appendix H Opinion of Davis, Brown, Koehn, Shors & Roberts, P.C.
Appendix I Registration Rights Agreement
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AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization, dated as of July 3, 1996
(together with the appendices and schedules attached hereto, the "Agreement") is
by and among CONSOLIDATED GRAPHICS, INC., a Texas corporation ("CGI"), GARNER
ACQUISITION CO., an Iowa corporation ("Newco"), GARNER PUBLISHING COMPANY, an
Iowa corporation (the "Company"), and ROBERT GARNER, BERNIE NEVINS, GERALD ROSS,
THOMAS KRUGER and JOHN W. DURO (each a "Stockholder" and together the
"Stockholders"), together the holders of all of the outstanding shares of the
Company.
W I T N E S S E T H:
WHEREAS, CGI, the Company, and the Stockholders executed and delivered a
letter of intent (the "Letter") dated May 22, 1996, pursuant to which their
intent was expressed for CGI to acquire the Company;
WHEREAS, the Letter contemplates the negotiation and execution of a
legally binding, written "Definitive Agreement" setting forth the terms and
conditions of such transaction;
WHEREAS, CGI, the Company, and the Stockholders intend that this Agreement
constitute the "Definitive Agreement" to which the Letter refers;
WHEREAS, CGI, Newco, the Company and the Stockholders desire to effect the
transaction by merging Newco with and into the Company with the Company becoming
a wholly owned subsidiary of CGI and the Stockholders receiving the
consideration set forth herein upon and subject to the terms and conditions set
forth herein; and
WHEREAS, CGI, Newco, the Company and the Stockholders intend that the
merger constitute a reorganization under Section 368 of the Internal Revenue
Code of 1986, as amended (the "Code"), and that this Agreement constitute a plan
of reorganization thereunder;
NOW, THEREFORE, in consideration of the mutual premises, covenants and
agreements set forth herein and in reliance upon the representations and
warranties contained herein, the parties hereto covenant and agree as follows:
1
ARTICLE 1
THE CLOSING; THE MERGER
1.1 CLOSING. The closing of the transactions contemplated herein
(the "Closing") will take place, assuming satisfaction or waiver of each of the
conditions set forth in Articles 7 and 8 hereof, at the offices of Winstead
Sechrest & Minick P.C., 910 Travis, Suite 1700, Houston, Texas , at 10:00 a.m.
(Central Time) on a date to be mutually agreed upon between the parties, which
shall be no later than July 3, 1996 (the date of the Closing being referred to
herein as the "Closing Date").
1.2 THE MERGER. Subject to compliance by CGI, Newco, the Company,
and the Stockholders with the covenants and satisfaction of the conditions
contained in this Agreement, Newco shall be merged (the "Merger") into the
Company pursuant to the Plan of Merger attached hereto as Appendix A, and the
separate existence of Newco shall cease. The Plan of Merger or articles of
merger shall be delivered to the Secretary of State of the State of Iowa for
filing as provided in Sections 490.1101 and 490.1105 of the Iowa Business
Corporation Act ("IBCA") on such date as all conditions to the Merger shall have
been fulfilled or waived as provided herein. The date and time at which such
filings have been completed and the Secretary of the State of Iowa has issued a
Certificate of Merger is hereinafter referred to as the "Effective Time". CGI,
Newco, the Company, and the Stockholders shall, and the Stockholders shall cause
the Company to, execute, acknowledge, and deliver such other documents or
certificates as may be required to effect the Merger.
1.3 TERMS OF MERGER. The total consideration to be received by the
stockholders of the Company at the Effective Time shall be 176,280 shares of CGI
common stock, $.10 par value per share (the "CGI Common Stock").
1.4 PUBLIC ANNOUNCEMENTS. Before making any public announcements
with respect to this Agreement or the transactions contemplated hereby, each of
CGI, Newco, the Company and the Stockholders shall, and the Stockholders shall
cause the Company to, consult with the other parties and use good faith efforts
to agree upon the text of a joint announcement to be made by CGI, Newco, the
Stockholders, and the Company or use good faith efforts to obtain each other
party's approval of the text of any public announcement to be made on behalf of
any one party; PROVIDED that CGI shall have final approval with respect to any
public announcements. Except as provided in this Section 1.4 and except as
otherwise agreed in writing by each of CGI, Newco, the Company and the
Stockholders or required by law, each of CGI, Newco, the Company, and the
Stockholders shall, and the Stockholders shall cause the Company to, maintain as
confidential the terms and conditions of this Agreement and the Letter.
2
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF
THE COMPANY AND THE STOCKHOLDERS
The Company and the Stockholders hereby jointly and severally represent
and warrant to CGI and Newco as set forth in this Article 2. As used herein, the
phrase "to the knowledge of the Stockholders" shall mean the knowledge of any
such Stockholders after due inquiry on behalf of such Stockholders.
2.1 ORGANIZATION AND GOOD STANDING. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Iowa. The Company has all requisite corporate power and authority to own, hold,
use and lease its properties and assets and to conduct its business as it is now
being conducted. The Company is duly qualified as a foreign corporation and is
in good standing in all jurisdictions in which the character of the properties
and assets now owned or leased by it or the nature of the business now conducted
by it requires it to be so qualified. The Stockholders and the Company have made
available to CGI and Newco true, complete and correct copies of the Company's
articles or certificate of incorporation and bylaws, as amended to the date of
this Agreement.
2.2 CAPITALIZATION OF THE COMPANY. The authorized capital stock of the
Company consists of 200,000 shares of common stock, no par value per share, of
which 50,000 shares are issued and outstanding. All of the shares are validly
issued, fully paid and nonassessable. There are no outstanding subscriptions,
options, rights, warrants, convertible securities, or other agreements or
commitments obligating the Company to issue or to transfer from treasury any
additional shares of its capital stock of any class. All shares of authorized
capital stock of the Company issued and outstanding are held of record and
beneficially by the Stockholders.
2.3 OWNERSHIP; VOTING RIGHTS. Each Stockholder is the record and
beneficial holder of 10,000 shares (20%) of the issued and outstanding capital
stock of the Company free and clear of all liens, claims, encumbrances, pledges,
security interests, options, puts, calls, rights or other agreements of any
nature whatsoever, recorded or unrecorded (individually a "Lien" and
collectively, "Liens"). The shares of capital stock of the Company are not
subject to any voting trust, voting agreement or other agreement regarding the
right or obligation to vote such shares.
2.4 NO SUBSIDIARIES OR OTHER OWNERSHIP INTERESTS. Except as set forth on
Schedule 2.4, none of the Company or any one or more of the Stockholders owns or
controls, directly or indirectly, except as a passive investment without any
aspect of control or operation in connection with such ownership, shares of
capital stock, debt instruments or other securities of any corporation or holds,
directly or indirectly, any interest in any trust, partnership, limited
partnership, joint venture, business association, limited liability company,
unincorporated business, proprietorship, business enterprise or other business
entity whatsoever.
2.5 AUTHORITY OF STOCKHOLDERS AND COMPANY. Each Stockholder has the full
right, power, legal capacity and authority to enter into, execute and deliver
this Agreement and the
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documents contemplated hereby to be executed by such Stockholder and to perform
the obligations to be performed by such Stockholder hereunder and thereunder,
respectively. This Agreement and all such documents have been duly executed and
delivered by each Stockholder and constitute the legal, valid and binding
obligations of such Stockholder, enforceable against such Stockholder in
accordance with their respective terms.
2.6 NO CONFLICTS. Except as set forth on Schedule 2.6, the execution and
delivery of this Agreement and the documents contemplated hereby to be executed
by the Stockholders and the Company do not, and compliance by the Stockholders
and the Company with the terms hereof and thereof and consummation by any or all
of the Stockholders and the Company of the transactions contemplated hereby and
thereby will not, (a) violate or conflict with any existing term or provision of
any law, statute, ordinance, rule, regulation, order, writ, judgment, injunction
or decree applicable to the Company or any one or more of the Stockholders; (b)
conflict with or result in a breach of or default under any of the terms,
conditions or provisions of the articles or certificate of incorporation or
bylaws of the Company or any agreement or instrument to which the Company or any
one or more of the Stockholders is a party or otherwise subject, or by which the
Company or any one or more of the Stockholders may be bound; (c) result in the
creation or imposition of any Lien upon any of the assets of the Company; (d)
give to others any right of termination, cancellation, acceleration or
modification in or with respect to any agreement or instrument to which the
Company or any one or more of the Stockholders is a party or otherwise subject,
or by which the Company or any one or more of the Stockholders may be bound; or
(e) breach any fiduciary duty owed by the Company or any one or more of the
Stockholders to any person or entity.
2.7 CONSENTS AND APPROVALS. The execution and delivery by the Stockholders
and the Company of this Agreement and the documents contemplated hereby to be
executed by the Stockholders and/or the Company, compliance by the Stockholders
and the Company with the terms hereof and thereof and consummation by the
Stockholders and the Company of the transactions contemplated hereby and thereby
do not require the Company or any one or more of the Stockholders to obtain any
consent, approval or action of, make any filings with or give any notice to any
corporation, person, firm or other entity, or any public, governmental or
judicial authority.
2.8 TITLE TO PROPERTIES; CONDITION. The Company has good title to all of
its properties and assets (the "Assets"). The Assets are free and clear of any
Liens except as set forth on Schedule 2.8. Schedule 2.8 lists all material
Assets of the Company and details of any Liens thereon. The Assets have been
installed, operated and maintained in accordance with accepted industry
practice, are free from latent defects or defects of workmanship or materials,
are suitable for the purposes for which they have been and are being employed in
the operation of the business of the Company and are in good operating condition
and repair. Nothing has occurred to the Assets since December 31, 1995 that
would have any material adverse effect on the value of the Assets or the
suitability of the Assets for the purposes for which they have been and are
being employed in the operation of the business of the Company. Schedule 2.8
lists all material leases, real estate contract on installment payment
("contract for deed"), operating agreements,
4
maintenance agreements, management agreements, mortgages and other documents or
agreements applicable to the Assets, and copies of each such document have been
provided to CGI. There are no actual, pending or threatened claims against the
Assets that could give rise to a Lien (other than Liens that would be covered by
valid and collectible insurance, including applicable deductibles), or acts or
incidents which could give rise to any such claims, relating to or arising out
of the Assets or the operation of the business of the Company. All assets used
in the business of the Company as presently operated by the Company are owned of
record and beneficially or leased by the Company and not by any affiliate of the
Company or other party. The contracts covering all such assets leased by the
Company are included in the Assets and are set forth on Schedule 2.8. As to each
material contract that constitutes part of the Assets, such contract is in full
force and effect, no notice of cancellation or termination or default has been
received by the Company and no event or condition has occurred or exists which,
with notice or lapse of time or both, would constitute a default thereunder. The
transfer contemplated hereby will not affect the validity or enforceability of
such contracts. As to each lease, license or contract for deed the leasehold,
licensee's or buyer's equitable interest in which constitutes part of the
Assets, such lease, license or contract for deed is in full force and effect, no
notice of cancellation or termination under any option or right reserved to the
lessor, licensor or seller under such lease, license or contract for deed or
notice of default has been received by the Company and no event or condition has
occurred or exists which, with notice or lapse of time or both would constitute
a default hereunder. The Company has not assigned its interest under any such
lease, license or contract for deed or subleased the premises demised thereby or
sublicensed the right or license granted thereby. Except as set forth on
Schedule 2.8, the change in ownership of the Company will not affect the
validity or enforceability of the leases, licenses and contract for deed
included in the Assets. Each of the parcels of land a leasehold estate in,
equitable interest in or fee title to which is included in the Assets has free
and uninterrupted access to and from a dedicated public right-of-way by reason
of the fact that such parcel either adjoins such dedicated public right-of-way
or connects to such right-of-way through a valid and subsisting easement, and
such access is adequate for the use being made of the parcel being accessed.
2.9 FINANCIAL STATEMENTS. Appendix B attached hereto contains true and
complete copies of the financial statements of the Company as of and for the
years ended December 31 1994 and 1995, audited by Denman & Company, L.L.P., the
independent accountants of the Company, and the Company's internal statements as
of and for the five months ended May 31, 1996 (collectively, the "Financial
Statements"). The Financial Statements are true and correct and fairly present,
in accordance with generally accepted accounting principles consistently
applied, the financial position of the Company as of the dates indicated and the
results of operations and cash flows of the Company for the periods then ended.
All detailed schedules accompanying the Financial Statements or otherwise
provided to CGI with respect thereto, including without limitation schedules
with respect to accounts payable, accounts receivable, accrued liabilities,
inventory, fixed assets, prepaid expenses and other assets and liabilities, are
true and correct and have been prepared on a basis consistent with the Company's
past practice and with standard accounting practices. To the knowledge of the
Stockholders, there are no
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liabilities, contingent or definite, and no assets of the Company that are not
reflected in the Financial Statements and such detailed schedules.
2.10 CUSTOMARY BUSINESS PRACTICE. None of the Company or any one or more
of the Stockholders has conducted or maintained in connection with the business
of the Company any business practices or relationships in any manner other than
is customary or standard in the industry, and there are no special relationships
with any suppliers or customers that are inconsistent with customary and
standard practice in the industry.
2.11 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth on Schedule
2.11 or as previously approved in writing by CGI, there has not been, occurred
or arisen any of the following as they relate to the Company since December 31,
1995;
(a) any transaction by the Company except in the ordinary course of
business;
(b) any change in, or any event, condition or state of facts of any
character peculiar to the Assets or the operation of the business of the
Company that individually or in the aggregate materially and adversely
affects the Company or the Assets, or that affects the validity or
enforceability of this Agreement;
(c) any destruction, damage, or loss suffered by the Company or with
respect to any Asset (whether or not covered by insurance);
(d) except as set forth on Schedule 2.11, any increase in the salary
or other compensation including, without limitation, all wages, salary,
deferred payment arrangements, bonus payments and accruals, profit sharing
arrangements, payment in respect of stock option or phantom stock option
or similar arrangements, stock appreciation rights or similar rights,
incentive payments, pension or employment benefit contributions or similar
payments, payable or to become payable by the Company to any of its
officers, directors or employees, or the declaration, payment or
commitment or obligation of any kind for the payment by the Company of a
bonus or increased or additional salary or compensation to any such
person; PROVIDED THAT since May 22, 1996, there shall have been made no
payment of any type whatsoever to any one or more of the Stockholders and
no non-mandatory benefit plan contribution;
(e) any sale, lease or other disposition of any Asset, except for
sales or other dispositions of inventory in the normal course of business;
(f) except as set forth on Schedule 2.11, any mortgage, pledge, or
other encumbrance of any Asset;
(g) any labor trouble or claim of wrongful discharge or other
unlawful labor practice or action;
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(h) any transactions by the Company or any one or more of the
Stockholders with an affiliate or related party of the Company;
(i) any change by the Company in accounting methods or principles
that would be required to be disclosed under generally accepted accounting
principles;
(j) any borrowing of funds, agreement to borrow funds or guaranty by
the Company or any one or more of the Stockholders affecting or relating
to the Company or the Assets or any termination or amendment of any
evidence of indebtedness, contract, agreement, deed, mortgage, lease,
license or other instrument to which the Company or any one or more of the
Stockholders is bound or by which any of the Assets is bound or to which
any of the Assets is subject other than in the ordinary course of business
consistent with past practices;
(k) any payment for executive or similar perquisites, such as
automobile expenses, sports tickets or the payment of any expense reports
of any officer of the Company not accurately documented by legible and
appropriate receipts;
(l) except as set forth on Schedule 2.11, any payment to any one or
more of the Stockholders; or
(m) any contract, commitment or agreement to do any of the
foregoing.
2.12 ABSENCE OF DEFAULTS. None of the Company or any one or more of the
Stockholders is in default, and no event has occurred which with notice or lapse
of time or both would constitute a default, in any way under any term or
provision of any agreement or instrument to which the Company or any one or more
of the Stockholders is a party or by which the Company or any one or more of the
Stockholders is bound or by or to which any of the Assets is bound or subject
that relates to or would materially affect the Company that could materially and
adversely affect the ability of the Company or any one or more of the
Stockholders to consummate the transactions contemplated hereby.
2.13 COMPLIANCE WITH LAWS. There has been no failure by the Company or any
one or more of the Stockholders to comply with any federal, state or local law,
statute, ordinance, rule or regulation applicable through the Closing Date in
any respect that could have a material adverse effect on CGI's ability to
conduct normal operations after the Closing or on the ability of the Company or
any one or more of the Stockholders to consummate the transactions contemplated
hereby.
2.14 TAX RETURNS AND REPORTS. All federal, state, local and foreign
income, excise, property, sales, use, payroll, informational and other tax
returns and reports of the Company (collectively, the "Tax Returns") have been
timely filed (including pursuant to extensions) with the appropriate
governmental agencies in all jurisdictions in which such returns and reports are
required to be filed, and all such returns and reports, as amended through May
31, 1996, properly
7
reflect the taxes of the Company for the periods covered thereby. There have
been no amendments since May 31, 1996. All federal income, excise and payroll
taxes, and all state, local and foreign income, excise, property, sales and use
taxes, assessments, interest, penalties, deficiencies, fees and other
governmental charges or impositions which are called for as due by the Tax
Returns, or which are claimed to be due with respect to the periods covered
thereby, from the Company (the "Taxes"), have been properly accrued or paid.
The Company has not received any notice of assessment or proposed
assessment by the Internal Revenue Service ("IRS") or any other taxing authority
in connection with any Tax Returns and there are no pending tax examinations of
any Tax Returns of or tax claims in respect of the Tax Returns asserted against
the Company or its properties. There has been no intentional disregard of any
applicable statute, regulation, rule or revenue ruling in the preparation of any
Tax Return applicable to the Company.
There are no tax liens on any of the Assets except for Liens for current
taxes not yet due and payable. There is no reasonable basis for any additional
assessment of any Taxes, penalties or interest with respect to the Company. The
Company has not waived any law or regulation fixing, or consented to the
extension of, any period of time for assessment of any Taxes which waiver or
consent is currently in effect.
The Company and the Stockholders have complied with all applicable
requirements under the Code for the Company to be treated as an "S" Corporation
for all taxable years since June 1, 1991.
2.15 LITIGATION. (a) There are no actions, claims, suits, investigations,
inquiries or proceedings pending against the Company or any one or more of the
Stockholders or in rem against any of the Assets or threatened against the
Company or any one or more of the Stockholders or in rem against any of the
Assets, at law or in equity, in any court, or before or by any federal, state,
municipal or other governmental department, commission, board, bureau, agency or
other instrumentality which could reasonably be expected to (i) affect the
validity or enforceability of this Agreement or the documents contemplated
hereby to be executed by any one or more the Stockholders, (ii) restrict the
continuing transaction of business with the customers of Company; (iii) delay
consummation of the transactions contemplated hereby or (iv) establish a Lien
against any of the Assets; and (b) none of the Company or any one or more of the
Stockholders is in violation of any order, decree, judgment, award,
determination, ruling or regulation of any court, governmental department,
commission, board, bureau, agency or other instrumentality, the result of which
violation individually or violations in the aggregate has had or could
reasonably be expected to have a material adverse effect on the Company or the
Assets or could reasonably be expected to (i) affect the validity or
enforceability of this Agreement, (ii) restrict the continuing transaction of
business with the customers of Company; or (iii) delay consummation of the
transactions contemplated hereby.
2.16 CUSTOMERS AND SUPPLIERS. Schedule 2.16 lists the names and addresses
of the customers and suppliers of the Company since January 1, 1995. The
relationships of the
8
Company with the customers and suppliers listed in Schedule 2.16 are
satisfactory, and none of the Stockholders is aware of any unresolved disputes
with any of such customers or suppliers. Since January 1, 1995, no customer or
supplier has cancelled or notified the Company in writing of its intent to
cancel its relationship with the Company, and no customer or supplier has,
except in the normal course of business, modified or given notice of its intent
to modify its relationship with the Company.
2.17 ACCOUNTS RECEIVABLE AND ACCOUNTS PAYABLE. The accounts receivable of
the Company reflected in the Company's Financial Statements and all accounts
receivable arising thereafter and on or before the Closing Date arose from BONA
FIDE transactions in the ordinary course of business, and the reserves against
such accounts receivable reflected in the Financial Statements are commercially
reasonable and have been determined in accordance with past practice. No
counterclaims or offsetting claims with respect to such accounts receivable are
pending or threatened. The accounts payable reflected in the Company's Financial
Statements, and all accounts payable arising thereafter and before the date
hereof arose from BONA FIDE transactions in the ordinary course of business, and
all such accounts payable (i) have either been paid, (ii) are not yet due and
payable under the standard procedures of the Company for payment of accounts
payable, which procedures have been previously furnished to CGI, or (iii) are
being contested by the Company in good faith.
2.18 INVENTORIES. As of the Closing Date, the inventories of the Company
consist of raw materials, goods in process and finished goods sellable in the
ordinary course of business of the Company, and the inventories are not
excessive in kind or amount in light of such business. All inventories are
carried on the books of the Company at the lower of cost or market pursuant to
the normal inventory valuation policy of the Company. Except as set forth on
Schedule 2.18, no items included in inventory of the Company are or will be
pledged as collateral or are held by the Company on consignment from others. The
Company is not committed as of the date hereof, and will not be committed as of
the Closing Date, to purchase inventories in amounts greater than are required
in the ordinary course of its business. With respect to inventories in the hands
of suppliers for which the Company will be committed as of the Closing Date,
such inventories on the Closing Date will be usable in the ordinary course of
business as presently being conducted. All such inventories referred to above
are usable within one (1) year of the Closing Date.
2.19 ERISA AND RELATED MATTERS.
(a) Schedule 2.19 lists all employee welfare and employee pension
benefit plans of the Company, as defined under Sections 3(1) and 3(2) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
respectively, and other material employee benefit plans, programs, or
arrangements (whether written or not) which have been sponsored by,
maintained by, or contributed to by the Company, in effect as of the date
hereof or during the five-year period ending on the Closing Date,
including without limitation all pension, profit sharing, savings and
thrift, bonus, incentive or deferred compensation, severance pay and
medical and life insurance plans in which
9
any current or former employees of the Company ("Affected Employees")
participate other than the multi-employer pension plan identified on
Schedule 2.19 ("Employee Plans") written copies of all of which Employee
Plans have been provided to CGI. Except as set forth on Schedule 2.19, no
Employee Plans are pension plans within the meaning of Section 3(2) of
ERISA and intended to be "qualified plans" ("Qualified Plans") under
Section 401(a) of the Code..
(b) The Company (i) has made all payments due from it to date under
or with respect to each Employee Plan; (ii) has performed all obligations
required to be performed by it under each Employee Plan and there is no
claimed or existing default or violation under any Employee Plan or event
or condition which, upon giving of notice or the lapse of time or both,
would constitute such a default or violation; and (iii) is in compliance
in all material respects with the requirements prescribed by all statutes,
orders or governmental rules or regulations applicable to the Employee
Plans, including without limitation ERISA and the Code. There are no
actions, suits or claims pending (other than routine claims for benefits)
or threatened against any Employee Plan or against the assets of any
Employee Plan.
(c) All Employee Plans are in compliance with and have been
administered in compliance with all applicable requirements of law,
including without limitation the Code and ERISA, and all contributions
required to be made to each such plan under the terms of such plan, ERISA
or the Code for all periods of time before the Closing Date have been or
will be, as the case may be, made or accrued.
(d) With respect to any Qualified Plan, a favorable Tax Reform Act
of 1986 determination letter as to the qualification under Section 401(a)
of the Code has been issued and the related trust has been determined to
be exempt from taxation under Section 501(a) of the Code and any amendment
made to or action taken with respect to any Qualified Plan subsequent to
the date of such determination letter has not adversely affected the
qualified status of any such plan. The Company has performed all material
obligations required to be performed by it under, and is not in default
under or in violation of, the terms of any of the Employee Plans in any
material respect. Neither the Company nor any other "disqualified person"
(as defined in Section 4975 of the Code) or "party in interest" (as
defined in Section 3(14) of ERISA) has engaged in any "prohibited
transaction" (as such term is defined in Section 4975 of the Code or
Section 406 of ERISA), which could subject any Employee Plan (or its
related trust, if any), the Company or any officer, director or employee
of the Company to the excise tax or penalty imposed under Section 4975 of
the Code or Section 502(i) of ERISA. The Company has not incurred, and
will not incur, any liability to the Pension Benefit Guaranty Corporation
including plan termination liability under Sections 4062, 4063 or 4064 of
ERISA or the creation of a Lien against the property of the Company under
Section 4068 of ERISA, whether directly or on a controlled group basis by
virtue of Section 4001(b)(l) of ERISA or otherwise (except for required
premium payments, which payments have been made when due) with respect to
the termination of any Qualified
10
Plan. The Company does not have a liability attributable to an
"accumulated funding deficiency," as such term is defined in Section 302
of ERISA and Section 412(a) of the Code, whether or not waived, with
respect to any Qualified Plan either directly or on a controlled group
basis or otherwise, and has not incurred any liability attributable to an
accumulated funding deficiency under Section 4971 of the Code or Section
302 of ERISA including the lien under Section 302(f) of ERISA whether
directly or on a controlled group basis or otherwise and will not have any
liability (except for professional fees) with respect to the termination
of any Qualified Plan.
2.20 CONTRACTS AND COMMITMENTS. Schedule 2.20 contains a true, complete
and correct list (and the Company has previously delivered to CGI true, complete
and correct copies) of all of the following documents or agreements, or
summaries of material oral agreements or understandings, relating to the
business of the Company, or the Assets to which, on the date of this Agreement,
the Company or any one or more of the Stockholders is a party, or which relate
to or affect the Company or any one or more of the Stockholders or the Assets or
the transactions contemplated hereby and all documents or agreements which may
require any action or consent in connection with such transactions, as they may
have been amended to the date hereof:
(a) any written employment or consulting agreement, contract or
commitment with any employee, officer or director or any contract or
agreement with other consultants;
(b) any agreement, contract or commitment with any party containing
any covenant limiting the ability of the Company, any one or more of the
Stockholders or any employee of the Company to engage in business or to
compete in any location or with any person;
(c) any partnership or joint venture agreement with any party or any
arrangements with any party with respect to the sharing of or in the
profits or revenues of the Company, including without limitation any
licensing or royalty agreements;
(d) any agreement or instrument relating to the borrowing of money,
or the direct or indirect guarantee of any obligation for, or an agreement
to service the repayment of, borrowed money or any other contingent
obligations in respect of indebtedness of any other party;
(e) any agreement, contract or commitment relating to the future
disposition or acquisition of any investment in any party or of any
interest in any business enterprise involving the business of the Company
or the Assets;
(f) any contract or commitment for capital expenditures or the
acquisition or construction of fixed assets;
11
(g) any contract or commitment for the sale or furnishing of
materials, supplies, merchandise, equipment or services;
(h) any written agreement, instrument or other arrangement, or any
material unwritten agreement, contract, commitment or other arrangement,
between or among the Company and any of the affiliates of the Company or
any one or more of the Stockholders;
(i) any contract which grants to any person a preferential right to
purchase any of the assets of the Company;
(j) any contract, agreement or commitment with respect to the
discharge or removal of a Contaminant (as defined in Section 2.26 below)
other than in the ordinary course of business; and
(k) any other material agreement or instrument not made in the
ordinary course of business.
There is no material course of dealing, waiver, side agreement, arrangement or
understanding applicable to any such contract of the Company or any one or more
of the Stockholders not disclosed therein or in Schedule 2.20.
2.21 PATENTS, TRADEMARKS AND COPYRIGHTS. None of the Company or any one or
more of the Stockholders owns or is a licensee or sublicensee of any patents,
trademarks, copyrights or other intellectual property rights except for such
rights that are incorporated by the manufacturers into the Assets, without
granting the Company or any one or more of the Stockholders any specified rights
therein. There have been no claims made, and none of the Company or any one or
more of the Stockholders has received any notice and none of the Company or any
one or more of the Stockholders otherwise knows or has reason to believe that
the operation of the business of the Company or any of the Assets is in conflict
with the rights of others.
2.22 INSURANCE. Schedule 2.22 sets forth a true, complete and correct list
of all insurance policies of any kind or nature covering the Company with
respect to the business of the Company, and the Assets, including without
limitation policies of life, fire, theft, employee fidelity, worker's
compensation, property and other casualty and liability insurance, and indicates
the type of coverage, name of insured, the insurer, the premium, the expiration
date of each policy and the amount of coverage for statutory workers'
compensation. Schedule 2.22 also sets forth a list of any currently pending
claims and any claims asserted under such policies or similar policies within
the last three (3) years. The premiums for the insurance policies listed in
Schedule 2.22 have been fully paid. The insurance afforded under such policies
or certificates is in full force and effect and will continue to cover the
Company with respect to the business of the Company, and the Assets through the
Closing. True, complete and correct copies of each
12
such policy have been made available to CGI. None of such insurance policies are
subject to retroactive premium adjustment in respect of prior periods.
2.23 EMPLOYEES. Schedule 2.23 lists all employees of the Company, the
rates of pay for each employee of the Company, and all commission, bonus or
other compensation or expense reimbursement or allowance arrangements between
the Company and any of its employees. Schedule 2.23 lists each management or
employment contract or contract for personal services and a description of any
understanding or commitment between the Company and any officer, consultant,
director, employee, independent contractor or other person or entity. A true and
complete copy of such contracts and a description of such understandings and
commitments has been delivered to CGI. None of the Company or any one or more of
the Stockholders has through the Closing Date made, and none will thereafter
make, any statement or communication of any kind regarding whether, or the terms
and conditions upon which, any such employee may continue to be employed by the
Company.
2.24 LABOR AGREEMENTS; DISPUTES. Except as set forth on Schedule 2.24, the
Company is not a party to and has no obligation under any collective bargaining
agreement or other labor union contract, white paper or side agreement with any
labor union or organization, nor any obligation to recognize or deal with any
labor union or organization. There are no pending or overtly threatened
representation campaigns, elections or proceedings or questions concerning union
representation involving any employees of the Company engaged in the business of
the Company. Other than with respect to the unions referred to on Schedule 2.24,
none of the Stockholders has any knowledge of any overt activities or efforts of
any labor union or organization (or representatives thereof) to organize any
employees engaged in the business of the Company, nor of any demands for
recognition or collective bargaining, and none of the Stockholders has any
knowledge of any strikes, slowdowns, work stoppages or lock-outs of any kind, or
overt threats thereof, by or with respect to any of its employees, or any actual
or claimed representatives thereof, and no such activities, efforts, demands,
strikes, slowdowns, work stoppages or lock-outs occurred during the three-year
period preceding the date hereof.
2.25 REGULATORY FILINGS. The Company has filed all reports, statements,
documents, registrations, filings or submissions required, in connection with
the operation of the business of the Company or the Assets, to be filed by the
Company with any federal, state, municipal or other governmental department,
commission, board, bureau, agency or other instrumentality. All such filings
complied with applicable law when filed and no deficiencies have been asserted
by any such regulatory authority with respect to such filings or submissions.
2.26 ENVIRONMENTAL AND HEALTH AND SAFETY MATTERS.
(a) As used in this Section 2.26(a) and Section 10.1(b), all terms
appearing in initial capitals shall have the meaning given them in Section
2.26(b) hereof. With respect to the business of the Company, and the
Facilities,
13
(i) the operations of the Company comply in all material
respects with all applicable environmental, health and safety
statutes, treaties, conventions, rules, ordinances, and regulations
in all jurisdictions in which the Company conducts business,
including without limitation all Environmental Laws applicable to
the jurisdictions in which operations are conducted;
(ii) none of the operations of the Company are subject to any
judicial or administrative proceeding alleging the violation of any
Environmental Law;
(iii) none of the operations of the Company are the subject of
any federal or state investigation evaluating whether any Remedial
Action is needed to respond to a Release of any Contaminant or other
substance into the environment;
(iv) the Company has not filed any notice under any
Environmental Law applicable to the jurisdiction in which operations
of the Company are conducted indicating past or present treatment,
storage or disposal of a hazardous waste or reporting a Release of a
Contaminant or other substance into the environment;
(v) the Company has no contingent liability in connection with
any Release of any Contaminant or other substance into the
environment, including without limitation any contingent liability
for failure to report a Release;
(vi) none of the operations of the Company involve the
generation, transportation, treatment or disposal of hazardous
waste, as defined under 40 C.F.R. Parts 260-270 (in effect as of the
date of this Agreement) or any state equivalent thereof, or the
arrangement for transportation, treatment or disposal of hazardous
waste in violation of any Environmental Law applicable to the
jurisdiction in which operations of the Company are conducted,
including without limitation statutes, regulations and laws
pertaining to permits and manifests;
(vii) the Company has not disposed of any hazardous waste or
substance or other material by placing it in or on the ground or
waters of any premises owned, leased or used by the Company in
violation of any Environmental Law applicable to the jurisdiction in
which operations of the Company are conducted nor has any lessee or
prior owner;
(viii) no underground storage tanks or surface impoundments
are, on any of the locations upon which the operations of the
Company are conducted, in violation of any Environmental Law
applicable to the jurisdiction in which operations of the Company
are conducted; and
(ix) no Lien in favor of any governmental authority for (A)
any liability under Environmental Laws applicable to the
jurisdiction in which operations of the Company with respect to the
business of the Company is conducted, or
14
(B) damages arising from or costs incurred by such governmental
authority in response to a release of a Contaminant or other
substance into the environment has been filed or attached to any of
the assets of the Company or any of the locations upon which the
operations of the Company with respect to the business of the
Company is conducted.
(b) ENVIRONMENTAL DEFINITIONS. Each of the following terms shall
have the meaning indicated below:
"Contaminant" shall mean those substances or materials that
are defined as hazardous or toxic or that are regulated by or form
the basis of liability under any Environmental Law, including
without limitation asbestos, polychlorinated biphenyls ("PCBs"), and
radioactive substances, or any other material or substance that
constitutes a health, safety or environmental hazard to any person
or property.
"Environmental Claim" shall mean any accusation, allegation,
notice of violation, claim, demand, abatement or other order or
direction (conditional or otherwise) by an governmental authority or
any person for personal injury (including sickness, disease or
death), tangible or intangible property damage, damage to the
environment, nuisance, pollution, contamination or other adverse
effects on the environment, or for fines, penalties or restrictions,
resulting from or based upon (i) the existence, or the continuation
of the existence, of a Release (including without limitation sudden
or non-sudden, accidental or non-accidental Releases) of or exposure
to any Contaminant, odor or audible noise, into or onto the
environment (including without limitation the air, ground, water or
any surface) at, in, by, from or related to the Facilities, (ii) the
transportation, storage, treatment or disposal of materials or the
arrangement for same in connection with the operation of the
Facilities or (iii) the violation or alleged violation of any
statutes, ordinances, orders, rules, regulations, Permits or
licenses of or from any governmental authority, agency or court
relating to environmental matters connected with the Facilities.
"Environmental Laws" shall mean all federal, state or local
laws relating to health, safety or the environment, including
without limitation the Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA") (42 U.S.C. ss. 9601 ET
SEQ.), the Hazardous Material Transportation Act (49 U.S.C. ss. 1801
ET SEQ.), the Resource Conservation and Recovery Act (42 U.S.C. ss.
6901 ET SEQ.), the Clean Air Act (42 U.S.C. ss. 7401 ET SEQ.), the
Clean Water Act (33 U.S.C. ss. 1251 ET SEQ.), the Toxic Substances
Control Act, as amended (15 U.S.C. ss. 2601 ET SEQ.), the National
Environmental Policy Act (42 U.S.C. ss. 4321 ET SEQ.), the Oil
Pollution Act (33 U.S.C. ss. 2701 ET SEQ), and the Occupational
Safety and Health Act (29 U.S.C. ss. 651 ET SEQ.), as these laws
have been amended or supplemented through the Closing Date, and any
analogous state
15
or local statutes, rules or ordinances and the regulations
promulgated pursuant thereto.
"Facilities" shall mean real and personal property owned,
leased or used by the Company with respect to the business of the
Company, including without limitation the Assets.
"Permit" shall mean any permit, approval, authorization,
license variance, or permission required from a governmental
authority under any applicable Environmental Laws.
"Release" shall mean any release, spill, emission, leaking,
pumping, injection, deposit, disposal, discharge, dispersal,
leaching, or migration into the indoor or outdoor environment, or
into or out of any property owned or leased by the Company,
including the movement of any Contaminant through or in the air,
soil, surface water, groundwater, or property and including without
limitation the meanings of such words as set forth in the laws,
applicable treaties, rules, ordinances or regulations or analogous
governmental provisions referred to under Environmental Laws.
"Remedial Action" shall mean all actions required or
voluntarily undertaken to (1) clean up, remove, treat, or in any
other way address any Contaminant in the indoor or outdoor
environment; (2) prevent the Release or threat of Release, or
minimize the further Release of any Contaminant so it does not
migrate or endanger or threaten to endanger public health or welfare
of the indoor or outdoor environment; or (3) perform pre-remedial
studies and investigations and post-remedial monitoring and care.
2.27 BROKERS. All negotiations with respect to this Agreement and the
transactions contemplated hereby have been carried out by the Stockholders and
the Company directly with CGI and Newco, without the intervention of any person
on behalf of the Company or the Stockholders in such manner as to give rise to
any valid claim by any person against CGI or Newco for a finder's fee, brokerage
commission or similar payment. With respect to fees to brokers, CGI shall issue
1,500 shares of CGI Common Stock to Niederhoffer -- Henkel & Co. L.L.C. ("NH"),
the Company shall be solely responsible for any other fee payable to NH with
respect to the transactions contemplated by this Agreement up to $50,000, and
the Stockholders shall be solely responsible for any fee to any broker or
brokers in excess of such amounts.
2.28 DISCLOSURE. Information provided by the Company by or through its
officers, employees or other representatives or by any one or more of the
Stockholders for themselves or by or through their agents or other
representatives in response to inquiries in connection with the due diligence
performed by representatives of CGI, as revised or updated by subsequent
disclosures and this Agreement, was complete and accurate in all material
respects. Copies of all documents and other written information referred to
herein or in the Schedules that have been
16
delivered or made available to CGI are true, correct and complete copies thereof
and include all amendments, supplements or modifications thereto or waivers
thereunder. Such documents and other written information do not omit any
material facts necessary, in light of the circumstances under which such
information was furnished, to make the statements set forth therein not
misleading. Except as expressly set forth in this Agreement and the Schedules or
in the certificates or other documents delivered pursuant hereto, none of the
Company or any one or more of the Stockholders has any knowledge of any facts
which will have any material adverse effect on the value of the business of the
Company or the Assets.
2.29 TRANSACTIONS WITH AFFILIATES. There are no contracts or arrangements
(formal or informal, written or oral) related directly or indirectly to the
business of the Company or the Assets between the Company or any one or more of
the Stockholders and any other persons controlling, under common control with or
controlled by the Company other than the employment arrangements otherwise
disclosed pursuant to the terms of this Agreement.
2.30 CONSOLIDATED GROUP. The Company is not and has not since its
incorporation been treated as a member of a consolidated group for purposes of
the preparation of financial statements or of tax returns including the Company.
2.31 INVESTMENT REPRESENTATION. The shares of CGI Common Stock to be
acquired by each Stockholder pursuant to the Merger will be acquired for such
Stockholder's own account, for investment purposes only and not with a view to
the distribution thereof. None of the Stockholders is participating, directly or
indirectly, in any distribution or transfer of such CGI Common Stock, nor is any
Stockholder participating, directly or indirectly, in underwriting any such
distribution of CGI Common Stock within the meaning of the Securities Act. Each
Stockholder has such knowledge and experience in business matters that such
Stockholder is capable of evaluating the merits and risks of an investment in
CGI and the acquisition of the shares of CGI Common Stock, and such Stockholder
is making an informed investment decision with respect thereto. Each Stockholder
has been informed by CGI that the shares of CGI Common Stock to be issued
pursuant to this Agreement and the documents to be executed in connection
herewith will not be registered under the Securities Act at the time of their
issuance and may not be transferred, assigned or otherwise disposed of absent
registration under the Securities Act or availability of an appropriate
exemption therefrom. Each Stockholder has further been informed that, except as
set forth under the Registration Rights Agreement called for by Section 8.11,
CGI will be under no obligation to register the shares of CGI Common Stock under
the Securities Act or to take any steps to assist such Stockholder to comply
with any applicable exemption under the Securities Act with respect to the
shares of CGI Common Stock.
2.32 RIGHTS AGAINST COMPANY STOCK. Except as set forth in the releases
described in Section 7.12 below, there are no persons who by reason of any past
or present relationship with any of the Stockholders may have any rights or
claims with respect to the capital stock of the Company or against the Company.
17
2.33 NO TRADING IN CGI COMMON STOCK. From and after May 22, 1996, the date
of execution of the Letter, through the date hereof, none of the Stockholders,
directly or indirectly in his own name or beneficially, has effected, or has
caused any other person to effect, any trading in the public market for CGI
Common Stock.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF CGI AND NEWCO
Each of CGI and Newco represents and warrants to the Stockholders that:
3.1 ORGANIZATION AND GOOD STANDING. CGI is a corporation duly organized,
validly existing and in good standing under the laws of the State of Texas.
Newco is a corporation duly organized, validly existing and in good standing
under the laws of the State of Iowa.
3.2 AUTHORITY OF CGI AND NEWCO. Each of CGI and Newco has all requisite
corporate power and authority to enter into this Agreement and the documents
contemplated hereby to be executed by CGI and Newco, respectively, and to
perform the obligations to be performed by CGI and Newco, respectively,
hereunder and thereunder. The execution, delivery and compliance by CGI and
Newco with the terms of this Agreement and the documents contemplated hereby to
be executed by CGI and Newco, respectively, and the consummation by CGI and
Newco, of the transactions contemplated hereby and thereby have been, or will be
before the Closing, duly authorized by all necessary corporate action by CGI and
Newco, respectively. This Agreement has been duly executed and delivered by CGI.
This Agreement constitutes, and the documents contemplated hereby to be executed
by CGI and Newco, respectively, upon their execution and delivery as herein
provided will constitute the legal, valid and binding obligations of CGI and
Newco, respectively, enforceable against the same in accordance with their
respective terms.
3.3 NO CONFLICTS. The execution and delivery of this Agreement by CGI and
Newco and the consummation of the transactions contemplated hereby, and the
execution and delivery by CGI and Newco of, and the consummation of the
transactions contemplated by, the documents contemplated hereby to be executed
by CGI and Newco, respectively, will not (a) violate or conflict with any
existing term or provision of any law, statute, ordinance, rule, regulation,
order, writ, judgment, injunction or decree applicable to CGI or Newco,
respectively, where such violation or conflict may reasonably be expected to
materially and adversely affect the ability of CGI or Newco to consummate the
transactions contemplated hereby; (b) conflict with or result in a breach of or
default under any of the terms, conditions or provisions of the articles of
incorporation or bylaws of CGI or Newco, respectively, or any agreement or
instrument to which CGI or Newco, respectively, is a party or by which CGI or
Newco, respectively, or any of the assets or properties thereof may be bound or
subject, where such breach or default could reasonably be expected to materially
and adversely affect the ability of CGI or Newco to consummate the transactions
contemplated hereby; (c) result in the creation or imposition of any Lien upon
the assets or properties of CGI or Newco, where such Lien could reasonably be
expected to materially and adversely affect the ability of CGI or Newco to
consummate the transactions contemplated hereby; (d) give to others any right of
termination, cancellation,
18
acceleration or modification in or with respect to any agreement or instrument
to which CGI or Newco, respectively, is a party, or by which CGI and Newco, or
any of the assets or properties of the same may be bound or subject, where such
termination, cancellation, acceleration or modification of any such agreement or
instrument could reasonably be expected to materially and adversely affect the
ability of CGI or Newco to consummate the transactions contemplated hereby; or
(e) breach any fiduciary duty of CGI or Newco to any person or entity, where
such breach could reasonably be expected to materially and adversely affect the
ability of CGI or Newco to consummate the transactions contemplated hereby.
3.4 CONSENTS AND APPROVALS. Except for such consents as have been
previously obtained, the execution and delivery by CGI and Newco of this
Agreement and the documents contemplated hereby to be executed by CGI and Newco,
respectively, compliance by CGI and Newco with the terms hereof and thereof, and
the consummation by CGI and Newco of the transactions contemplated hereby and
thereby, do not require CGI or Newco, respectively, to obtain any consent,
approval or action of, or make any filing with or give any notice to (other than
filings and press releases required under applicable securities laws) any
corporation, person or firm or other entity or any public, governmental or
judicial authority, the failure to obtain which could reasonably be expected to
materially and adversely affect the ability of CGI or Newco to consummate the
transactions contemplated hereby.
3.5 BROKERS. All negotiations with respect to this Agreement and the
transactions contemplated hereby have been carried out by CGI and Newco directly
with the Stockholders and the Company, without the intervention of any person on
behalf of CGI or Newco in such manner as to give rise to any valid claim by any
person against the Company or the Stockholders for a finder's fee, brokerage
commission or similar payment.
3.6 LITIGATION. There are no actions, claims, suits, investigations,
inquiries or proceedings pending against CGI or Newco or, to the knowledge of
CGI or Newco, overtly threatened against CGI or Newco, at law or in equity, in
any court, or before or by any federal, state, municipal or other governmental
department, commission, board, bureau, agency or other instrumentality which
could reasonably be expected to affect the validity or enforceability of this
Agreement or the documents contemplated hereby to be executed by CGI or Newco
and neither CGI nor Newco is in violation of any order, decree, judgment, award,
determination, ruling or regulation of any court, governmental department,
commission, board, bureau, agency or other instrumentality, where such violation
could reasonably be expected to affect the validity or enforceability of this
Agreement.
3.7 DUE AUTHORIZATION. The CGI Common Stock to be delivered at the Closing
will be duly authorized, validly issued, fully paid and nonassessable, with no
personal liability attaching thereto, and free and clear of any Liens.
3.8 SEC REPORTS. CGI has timely filed (including any extensions) all Forms
10-K, 10-Q and 8-K, proxy statements, registration statements and other reports,
schedules and statements required to be filed by the Securities Act of 1933, as
amended, or the Securities
19
Exchange Act of 1934, as amended, since January 1, 1995 (collectively, "SEC
Reports"). Such SEC Reports do not contain any misstatement of a material fact
or a omit stating a material fact necessary, in light of the circumstances under
which they were made, to make such statements not misleading. There has been no
material adverse change affecting CGI since the filing of its last Form 10-Q.
3.9 DUE DILIGENCE. CGI and Newco warrant and represent that their decision
to consummate this transaction is based on their due diligence and the
representations and warranties of the Stockholders included in this Agreement
and any certificate or document executed and delivered by the Stockholders
pursuant to this Agreement and not on any oral representations of the
Stockholders. As part of their "due diligence process" authorized
representatives of CGI and Newco have visited and inspected the Company's plant
and facilities and find them to be in acceptable condition. CGI and Newco
represent that they are aware of the presence of environmentally hazardous
material which is located at the plant and facilities of the Company and used
partially or wholly within the processes and procedures of producing the
Company's products, as well as the Company's waste disposal procedures.
NOTWITHSTANDING ANY SUCH INSPECTION OR KNOWLEDGE OR ANYTHING IN THIS AGREEMENT
OTHERWISE TO THE CONTRARY, NO SUCH INSPECTION, INVESTIGATION OR KNOWLEDGE SHALL
IN ANY WAY AFFECT OR BE CONSTRUED TO AFFECT ANY REPRESENTATIONS AND WARRANTIES
CONTAINED IN THIS AGREEMENT OR THE DOCUMENTS CONTEMPLATED HEREBY OR THE RIGHT OF
CGI AND/OR NEWCO TO RELY ON SUCH REPRESENTATIONS AND WARRANTIES.
3.10 REGARDING CODE SECTION 368. As indicated in the recitals, CGI
acknowledges that the transaction contemplated by this Agreement is intended to
comply with Code ss. 368. CGI represents that it is its present intention to (i)
continue the business of the Company, (ii) maintain operation of plants and
facilities of the Company, (iii) retain the assets of the Company and (iv)
retain the stock of the Company or the surviving corporation in the Merger.
Following the Merger, The Company or the surviving corporation will be a
wholly-owned subsidiary of CGI. Newco is a newly formed entity that has
transacted no business other than entry into this Agreement and the Plan of
Merger.
ARTICLE 4
ACTIONS BY THE STOCKHOLDERS AND THE COMPANY PENDING CLOSING
The Stockholders and the Company will, and the Stockholders shall cause
the Company to, between the date hereof and the Closing Date, comply with the
provisions of this Article 4, except to the extent that CGI may otherwise
consent in writing or to the extent otherwise required or permitted by this
Agreement.
4.1 CONDUCT OF BUSINESS. The Company shall operate its business only in
the usual, regular and ordinary manner and, to the extent consistent with such
operation, use its best efforts to maintain, preserve and protect the Assets and
the business organization of the Company, all
20
in coordination and cooperation with CGI and Newco, and shall keep available the
services of its present officers and employees and shall preserve the present
relationships with persons having dealings with the Company or any one or more
of the Stockholders as the same relate to the business of the Company. None of
the Company or any one or more of the Stockholders shall take any of the actions
enumerated in Section 2.11 hereof, nor shall the Company or any one or more of
the Stockholders authorize, agree to or commit to taking any such action.
4.2 CONTINUED ADMINISTRATION. The Company shall administer each and every
employee benefit plan described in Schedule 2.19 hereto in all material respects
in accordance with the provisions of the Code and ERISA.
4.3 RECORDS. The Company shall maintain its books, accounts and records in
the usual, regular and ordinary manner.
4.4 MAINTENANCE OF INSURANCE. The Company shall maintain in full force and
effect all of its presently existing insurance coverage described in Schedule
2.22 hereto, or insurance comparable to such existing coverage. The Company
shall cause CGI and Newco to be named as additional insureds and loss payees
under such policies effective from the signing of this Agreement.
ARTICLE 5
COVENANTS OF THE STOCKHOLDERS AND THE COMPANY
The Stockholders and the Company jointly and severally covenant and agree
with CGI and Newco that:
5.1 APPROVALS.
(a) The Stockholders and the Company shall, and the Stockholders
shall cause the Company to, obtain, and shall cooperate with CGI and Newco
in obtaining, as promptly as possible, all approvals, authorizations and
clearances of governmental and regulatory bodies and officials required to
consummate the transactions contemplated hereby;
(b) The Stockholders shall, and the Stockholders shall cause the
Company to, provide such other information and communications to
governmental and regulatory authorities, as such governmental and
regulatory authorities or CGI or Newco may request; and
(c) The Stockholders and the Company shall, and the Stockholders
shall cause the Company to, obtain the requisite consents of the Company's
lenders and other third parties required to consummate the transactions
contemplated hereby.
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Notwithstanding any other language herein, neither CGI nor Newco shall be
required to make any payment or other concession or to assume any obligation
(other than with respect to contracts expressly assumed hereunder) in connection
with obtaining such consents.
5.2 COMPLIANCE WITH LEGAL REQUIREMENTS. The Stockholders and the Company
shall comply promptly with all requirements which federal or state law may
impose on the Stockholders or the Company with respect to the transactions
contemplated by this Agreement, and the Company shall, and the Stockholders
shall cause the Company and its affiliates, if any, to, comply promptly with all
requirements which federal or state law may impose on the Company or any of its
affiliates before Closing with respect to the transactions contemplated by this
Agreement and will promptly cooperate with and furnish information to CGI and
Newco in connection with any such requirements imposed upon them in connection
therewith or on the Company, the Stockholders, and their affiliates, if any,
after Closing.
5.3 BOOKS AND RECORDS. Except as prohibited by law, the Company shall, and
the Stockholders shall cause the Company to, make its books and records related
to the operation of the business of the Company or the Assets available or to
deliver copies thereof to CGI and Newco during normal business hours for any
reasonable business purpose.
5.4 INVESTIGATION BY CGI AND NEWCO. From and after the date hereof and
until the Closing Date, the Company shall, and the Stockholders shall cause the
Company to, permit CGI and Newco and their counsel, accountants and other
representatives reasonable access during normal business hours to all of its
properties, books, contracts, commitments and other records, including without
limitation tax returns, declarations of estimated tax and tax reports, and
during such period the Company shall furnish promptly to CGI and Newco all other
information concerning its business, properties and personnel as CGI or Newco
may reasonably request; PROVIDED that no investigation pursuant to this Section
5.4 shall affect any representations or warranties contained in this Agreement.
5.5 CERTAIN ACTS OR OMISSIONS. Neither the Company nor any of the
Stockholders shall (a) omit to take any action called for by any of their
covenants contained in this Agreement, or (b) take any action which they are
required to refrain from taking by any of such covenants. The Company and each
of the Stockholders shall, before the Closing, cure any violation or breach of
any of their representations, warranties or covenants contained in this
Agreement which becomes known, occurs or arises subsequent to the date of this
Agreement and shall obtain the satisfaction of all conditions to Closing set
forth in this Agreement.
5.6 REPORTS. The Company shall, and the Stockholders shall cause the
Company to, deliver to CGI and Newco copies of all financial statements, reports
or analyses with respect to the business of the Company which are prepared or
received between the date hereof and the Closing Date promptly after such
preparation or receipt (to the extent normally provided to management of the
Company or reasonably requested by CGI or Newco, including without limitation
all internal daily, monthly or quarterly financial statements, reports and
analyses relating to the business of the Company regularly prepared) and
regardless of whether such
22
financial statements, reports or analyses are prepared internally or by third
parties. The Stockholders shall ensure that the Company does not change the
nature and timing of financial statements, reports and analyses with respect to
the Company which have historically been regularly prepared.
5.7 CONFIDENTIALITY. The Stockholders and the Company shall not, and the
Stockholders shall ensure that the Company does not, before the Closing Date,
disclose or allow any of their respective affiliates to disclose to third
parties any information that the Company or the Stockholders have obtained from
CGI in connection with this Agreement with respect to CGI, Newco or any of their
affiliates, and from and after the Closing Date none of the Company or any
Stockholder shall disclose or allow any of their respective affiliates to
disclose to third parties, and will not use for its or their own account or
allow its or their affiliates to use for their own accounts, any trade secrets,
business secrets or other information relating to the business of the Company or
the Assets or any information that the Company or the Stockholders have obtained
from CGI or Newco in connection with this Agreement with respect to CGI, Newco
or any of their affiliates.
5.8 ADDITIONAL DISCLOSURE. From the date of this Agreement to and
including the Closing Date, the Company and each of the Stockholders, as
applicable, shall, and the Stockholders shall cause the Company to, promptly
after the occurrence thereof is known to the Company and/or any one or more of
the Stockholders, as applicable, advise CGI and Newco of each event subsequent
to the date hereof which causes any covenant of the Company or any one or more
of the Stockholders to be breached or causes any representation or warranty of
the Company or any one or more of the Stockholders contained herein to no longer
be true, correct or complete.
5.9 REQUIRED FINANCIAL STATEMENTS. The Stockholders and the Company shall,
and the Stockholders shall cause the Company to, cooperate with CGI and Newco in
the preparation of any other audited or unaudited balance sheets, income
statements and other financial statements with respect to the business of the
Company for such fiscal years and interim periods as may be determined by CGI,
upon the advice of its counsel and independent public accountant, to be required
by the rules and regulations of the Securities and Exchange Commission in
connection with filings that may be made or may be required to be made by CGI
under the Securities Act, the Securities Exchange Act of 1934, as amended, and
any related rules, regulations or state statutes, rules or regulations.
ARTICLE 6
COVENANTS OF CGI AND NEWCO
CGI and Newco covenant and agree with the Company and the Stockholders
that:
6.1 APPROVALS.
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(a) CGI and Newco shall take all reasonable steps, and shall use
reasonable commercial efforts to obtain, and shall cooperate with the
Company and the Stockholders in obtaining, as promptly as possible, all
approvals, authorizations and clearances of governmental and regulatory
bodies and officials required to consummate the transactions contemplated
hereby;
(b) CGI and Newco shall provide such other information and
communications to governmental and regulatory authorities as such
governmental and regulatory authorities, the Company or the Stockholders
may reasonably request; and
(c) CGI and Newco shall use reasonable commercial efforts to obtain
any requisite consents of third parties, to the extent required to
consummate the transactions contemplated hereby but only if no payment or
other concessions are required to obtain such consents.
6.2 COMPLIANCE WITH LEGAL REQUIREMENTS. CGI and Newco shall use reasonable
commercial efforts to comply promptly with all requirements which federal or
state law may impose on them or any of their affiliates with respect to the
transactions contemplated by this Agreement and will promptly cooperate with and
furnish information to the Company in connection with any such requirements
imposed upon them in connection therewith.
6.3 CERTAIN ACTS OR OMISSIONS. Neither CGI nor Newco shall (a) omit to
take any action called for by any of its covenants in this Agreement or (b) take
any action which it is required to refrain from taking by any of such covenants.
Each of CGI and Newco shall use all reasonable efforts to cure, before the
Closing, any violation or breach of any of its representations, warranties or
covenants contained in this Agreement which becomes known, occurs or arises
subsequent to the date of this Agreement and to obtain the satisfaction of all
conditions to Closing set forth in this Agreement.
6.4 RELEASE FROM PERSONAL LIABILITY. CGI and Newco shall use reasonable
commercial efforts to obtain the release of all personal guaranties by the
Stockholders of Company obligations.
ARTICLE 7
CONDITIONS TO OBLIGATIONS OF CGI AND NEWCO
Except as may be waived in writing by CGI and Newco, the obligations of
CGI and Newco to consummate this Agreement and the transactions to be
consummated by CGI and Newco hereunder on the Closing Date shall be subject to
the following conditions:
7.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of
the Company and the Stockholders contained in this Agreement or in any
certificate or document executed and delivered to CGI or Newco by the Company
and/or any one or more of the
24
Stockholders pursuant to this Agreement shall have been true and correct on and
as of the Closing Date as though such representations and warranties were made
at and as of such date.
7.2 COMPLIANCE WITH AGREEMENT. On and as of the Closing Date, the Company
and Stockholders shall have performed and complied in all material respects with
the covenants and agreements required by this Agreement to be performed and
complied with by the Company and the Stockholders on or before the Closing Date.
7.3 STOCKHOLDER AND OFFICER'S CERTIFICATES. The Stockholders shall deliver
to CGI and Newco a certificate and the Company shall deliver to CGI and Newco a
certificate of an officer (signed on behalf of the Company by the President of
the Company), each certificate dated the Closing Date and certifying the
fulfillment of the conditions specified in Sections 7.1 and 7.2 hereof.
7.4 NO ACTION OR PROCEEDING. On the Closing Date, no action or proceeding
by any public authority or any other person shall be pending before any court or
administrative body or overtly threatened to restrain, enjoin or otherwise
prevent the consummation of this Agreement or the transactions contemplated
hereby, and no action or proceeding by any public authority or private person
shall be pending before any court or administrative body or overtly threatened
to recover any damages or obtain other relief as a result of this Agreement or
the transactions contemplated herein or as a result of any agreement entered
into in connection with or as a condition precedent to the consummation thereof,
which action or proceeding could reasonably be expected to result in a decision,
ruling or finding which would materially and adversely affect the business of
the Company or the Assets or the Company's ability to conduct normal operations
after the Closing.
7.5 CONSENTS, AUTHORIZATIONS, ETC. All orders, consents, permits,
authorizations, approvals and waivers of every governmental entity or third
party required for the consummation of the transactions contemplated hereby, and
all filings, registrations and notifications to or with all governmental
entities required with respect to the consummation of such transactions, shall
have been obtained or given.
7.6 STOCKHOLDER EMPLOYMENT AND NONCOMPETITION AGREEMENTS. Each of Messrs.
Robert Garner, Gerald Ross, Thomas Kruger and John W. Duro shall have delivered
to CGI and Newco an executed counterpart of the Employment and Noncompetition
Agreement applicable to such Stockholder, in substantially the form attached
hereto as Appendix C as an inducement for CGI and Newco to enter into this
Agreement and consummate the transactions contemplated hereby.
7.7 NONCOMPETITION AGREEMENTS. Mr. Bernie Nevins shall have delivered to
CGI and Newco an executed counterpart of the Noncompetition Agreement in
substantially the form attached hereto as Appendix D as an inducement for CGI
and Newco to enter into this Agreement and consummate the transactions
contemplated hereby.
25
7.8 OPINION OF COUNSEL. CGI and Newco shall have received an opinion,
addressed to CGI and dated the Closing Date, from Dreher, Simpson and Jensen,
P.C., counsel for the Company and the Stockholders, in form and substance as set
forth in Appendix E hereto.
7.9 OPINION OF ACCOUNTING FIRM. CGI and Newco shall have received an
opinion, addressed to CGI and Newco and dated the Closing Date, from an
independent accounting firm, confirming the validity and efficacy of the
election of the Company to be treated as an "S" corporation from the date of its
Sub-S election.
7.10 NO MATERIAL ADVERSE CHANGE. No incident or event shall have occurred
resulting in the destruction, damage to, or loss of any Asset or diminution in
the value of the business of the Company (whether or not covered by insurance).
7.11 CORPORATE ACTION BY CGI AND NEWCO. All action necessary to authorize
the execution, delivery and performance by CGI and Newco of this Agreement shall
have been duly and validly taken by the respective boards of directors of CGI
and Newco.
7.12 DELIVERY OF OTHER DOCUMENTS AND INSTRUMENTS. The following additional
documents shall have been executed and delivered by the Company and the
Stockholders (and their respective spouses, where applicable):
(a) CONSENTS. Copies of all required consents and approvals.
(b) RELEASES. A release in substantially the form attached hereto as
Appendix F by each Stockholder and his spouse of any and all claims each
such person may have against the Company, Newco or CGI, except as may
arise hereunder or under any documents executed in connection herewith.
(c) OTHER REQUESTED DOCUMENTS. Further instruments and documents, in
form and content reasonably satisfactory to counsel for CGI and Newco, as
may be necessary or reasonably appropriate more fully to consummate the
transactions contemplated hereby.
7.13 CGI REVIEW AND APPROVAL OF STOCKHOLDER DISTRIBUTIONS. CGI shall have
been provided the opportunity to review and approve in advance any distribution
to the Stockholders after May 31, 1996.
ARTICLE 8
CONDITIONS TO OBLIGATIONS OF THE
COMPANY AND THE STOCKHOLDERS
Except as may be waived in writing by the Stockholders, the obligations of
the Company and the Stockholders to consummate this Agreement and the
transactions to be consummated by the Company and the Stockholders hereunder on
the Closing Date shall be subject to the following conditions:
26
8.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of
CGI and Newco contained in this Agreement or in any certificate or document
executed and delivered by CGI and Newco to the Company and the Stockholders
pursuant to this Agreement shall have been true and correct and shall be true
and correct on and as of the Closing Date as though such representations and
warranties were made at and as of such date.
8.2 COMPLIANCE WITH AGREEMENT. On and as of the Closing Date, CGI and
Newco shall have performed and complied in all material respects with the
covenants and agreements required by this Agreement to be performed and complied
with by CGI or Newco on or before the Closing Date.
8.3 OFFICER'S CERTIFICATE. Each of CGI and Newco shall have delivered to
the Company and the Stockholders an officer's certificate, dated the Closing
Date and signed on behalf of CGI and Newco, respectively, by the President or a
Vice President of such company, certifying the fulfillment of the conditions
specified in Sections 8.1 and 8.2 hereof.
8.4 NO ACTION OR PROCEEDING. On the Closing Date, no action or proceeding
by any public authority or any other person shall be pending before any court or
administrative body or overtly threatened to restrain, enjoin or otherwise
prevent the consummation of this Agreement or the transactions contemplated
hereby, and no action or proceeding by any public authority or private person
shall be pending before any court or administrative body or overtly threatened
to recover any damages or obtain other relief as a result of this Agreement or
the transactions contemplated herein or as a result of any agreement entered
into in connection with or as a condition precedent to the consummation thereof,
which action or proceeding could reasonably be expected to result in a decision,
ruling or finding which would have a material adverse effect on the ability of
CGI and Newco to fulfill their obligations under this Agreement.
8.5 CONSENTS, AUTHORIZATIONS, ETC. All orders, consents, permits,
authorizations, approvals and waivers of every governmental entity or third
party required for the consummation of the transactions contemplated hereby, and
all filings, registrations and notifications to or with all governmental
entities required with respect to the consummation of such transactions, shall
have been obtained or given; PROVIDED that any third-party consent not obtained
by the Company or the Stockholders, but waived by CGI and Newco, shall not be an
unfulfilled condition hereunder.
8.6 CORPORATE ACTION BY CGI AND NEWCO. All action necessary to authorize
the execution, delivery and performance by CGI and Newco of this Agreement shall
have been duly and validly taken by CGI and Newco and CGI and Newco shall have
delivered to the Company and the Stockholders copies, certified as at the
Closing Date by the Secretary of CGI and Newco, respectively, of all resolutions
of the board of directors of CGI and Newco authorizing this Agreement and the
transactions contemplated by this Agreement.
27
8.7 STOCKHOLDERS EMPLOYMENT/NONCOMPETITION AGREEMENTS. CGI and Newco shall
have caused to be executed and delivered to each of the applicable Stockholders
the Employment/Noncompetition Agreement specified in Section 7.6 above.
8.8 NONCOMPETITION AGREEMENTS. CGI and Newco shall have caused to be
executed and delivered to each of the applicable persons, the Noncompetition
Agreement specified in Section 7.7, above.
8.9 DELIVERY OF CGI COMMON STOCK. Delivery of the certificates
representing the shares of CGI Common Stock specified in the Plan of Merger
shall have been provided for.
8.10 OPINION OF COUNSEL. The Company and the Stockholders shall have
received opinions, addressed to them and dated the Closing Date, from Winstead
Sechrest & Minick P.C., counsel for CGI and Newco, and Davis, Brown, Koehn,
Shors & Roberts, P.C., Iowa counsel for CGI and Newco, in form and substance as
set forth in Appendices G and H hereto.
8.11 REGISTRATION RIGHTS AGREEMENT. CGI shall have executed and delivered
to the Stockholders the Registration Rights Agreement in substantially the form
of Appendix I hereto.
ARTICLE 9
SURVIVAL OF REPRESENTATIONS AND WARRANTIES
The representations and warranties made by the parties to this Agreement
in this Agreement or in any certificate or document executed and delivered in
accordance herewith, as well as any rights to indemnification granted herein,
shall survive the Closing Date and the consummation of the transactions
contemplated hereby for a period of twenty-four (24) months following the
Closing Date (the "Warranty Period").
No cause of action may be maintained against any party to this Agreement,
including an action for indemnity in accordance with Article 10, arising from
the breach of any warranty or representation contained herein unless such action
shall be commenced prior to the expiration of the Warranty Period.
Neither of the foregoing paragraphs shall be construed to abrogate,
abridge, reduce or negate in any way, any of the rights, terms or conditions
incorporated in, or provided in accordance with, the Registration Rights
Agreement, or the Employment and Noncompetition Agreements (including
non-competition provisions thereof) or the Noncompetition Agreement to be
executed concurrently herewith, all of which shall be fully enforceable
according to their terms and applicable law.
ARTICLE 10
INDEMNIFICATION
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10.1 INDEMNIFICATION OF PURCHASER INDEMNITEES. Subject to the terms
contained in Sections 10.5 and 10.6 below, and provided that such action for
indemnification shall be commenced within the Warranty Period, the Stockholders
agree to indemnify and hold the Purchaser Indemnitees (as defined below)
harmless from and against:
(a) any and all liabilities, obligations, damages, deficiencies and
expenses resulting from any misrepresentation, breach of warranty or
nonfulfillment of any covenant or agreement on the part of the
Stockholders or the Company under the terms of this Agreement;
(b) any action or suit commenced within the Warranty Period, or loss
suffered or incurred by the Company or CGI within the Warranty Period
resulting from:
(i) any Environmental Claim, including without limitation any
claim arising under CERCLA, the Clean Air Act or the Clean Water Act
arising out of the operation of the Facilities before the Closing,
and
(ii) any expenses (voluntarily or involuntarily incurred)
relating to investigation, removal, cleanup and/or remediation of
any Contaminant present at or arising out of the operation of the
Facilities before the Closing;
(c) any and all liabilities or obligations of the Company which were
not incurred in the ordinary course of business of the Company, and which
were not disclosed to CGI and Newco on or before the Closing Date which
arise from either:
(i) the ownership of the Assets and/or their use; or
(ii) the operation of the business of the Company;
(d) any and all liabilities, obligations, claims, damages, costs and
expenses arising out of an untrue statement of a material fact or omission
to state a material fact in a registration statement or report filed by
CGI under the Securities Act or the Exchange Act, but only insofar as any
such misstatement or omission results from information furnished by the
Company, in writing, before the Closing, or by the Stockholders; and
(e) all actions, suits, proceedings, demands, assessments,
judgments, costs and expenses, including reasonable attorneys' fees,
incident to the foregoing.
10.2 INDEMNIFICATION OF SELLER INDEMNITEES. Subject to the terms contained
in Sections 10.5 and 10.6 below, and provided that such action for
indemnification shall be commenced within the Warranty Period, CGI agrees to
indemnify and hold the Seller Indemnitees (as defined below) harmless from and
against:
29
(a) any and all liabilities, obligations, damages, deficiencies and
expenses resulting from any misrepresentation, breach of warranty or
nonfulfillment of any covenant or agreement on the part of CGI under the
terms of this Agreement;
(b) with respect to the Stockholders, any losses on personal
guaranties on loans to Garner Publishing Company to the extent the
indebtedness so guarantied was reflected on the Financial Statements.
(c) all actions, suits, proceedings, demands, assessments,
judgments, costs and expenses, including reasonable attorneys' fees,
incident to the foregoing.
10.3 METHOD OF ASSERTING CLAIMS, ETC. The items listed in Section 10.1 and
Section 10.2 are sometimes collectively referred to herein as "Damages";
PROVIDED that such reference shall be understood to mean the respective damages
from and against which CGI and its officers, directors, stockholders, agents and
attorneys (the "Purchaser Indemnitees") or the Stockholders and their respective
agents and attorneys (the "Seller Indemnitees"), as the case may be, are
indemnified as the context requires. The person claiming indemnification
hereunder, whether a Purchaser Indemnitee or a Seller Indemnitee, is sometimes
referred to as the "Indemnified Party" and the party against whom such claims
are asserted hereunder is sometimes referred to as the "Indemnifying Party". All
claims for indemnification by an Indemnified Party under Section 10.1 or Section
10.2 hereof, as the case may be, shall be asserted and resolved as follows:
(a) If any claim or demand for which an Indemnifying Party would be
liable for Damages to an Indemnified Party hereunder is overtly asserted
against or sought to be collected from such Indemnified Party by a third
party (a "Third Party Claim"), such Indemnified Party shall with
reasonable promptness (but in no event later than thirty (30) days after
the Third Party Claim is so asserted or sought against the Indemnified
Party) notify in writing the Indemnifying Party of such Third Party Claim
enclosing a copy of all papers served, if any, and specifying the nature
of and specific basis for such Third Party Claim and the amount or the
estimated amount thereof to the extent then feasible, which estimate shall
not be conclusive of the final amount of such Third Party Claim (the
"Claim Notice"). For this purpose the commencement of any audit or other
investigation respecting Taxes shall constitute a Third Party Claim.
Notwithstanding the foregoing, failure to so provide a Claim Notice as
provided above shall not relieve the Indemnifying Party from its
obligation to indemnify the Indemnified Party with respect to any such
Third Party Claim except to the extent that a failure to so notify the
Indemnifying Party in reasonably sufficient time prejudices the
Indemnifying Party's ability to defend against the Third Party Claim. The
Indemnifying Party shall have thirty (30) days from delivery of the Claim
Notice (the "Notice Period") to notify the Indemnified Party (i) whether
or not the Indemnifying Party disputes the liability of the Indemnifying
Party to the Indemnified Party hereunder with respect to such Third Party
Claim and (ii) whether or not the Indemnifying Party desires, at the sole
cost and expense of the Indemnifying Party, to defend the Indemnified
Party against such Third Party Claim.
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(i) If the Indemnifying Party notifies the Indemnified Party
within the Notice Period that the Indemnifying Party does not
dispute its liability to the Indemnified Party and that the
Indemnifying Party desires to defend the Indemnified Party with
respect to the Third Party Claim pursuant to this Article 10, then
the Indemnifying Party shall have the right to defend, at its sole
cost and expense, such Third Party Claim by all appropriate
proceedings, which proceedings shall be diligently prosecuted by the
Indemnifying Party to a final conclusion or settled at the
discretion of the Indemnifying Party (but only if the Indemnifying
Party is liable hereunder to the Indemnified Party for the full
amount of, and all obligations under, such settlement; otherwise, no
such settlement shall be agreed to without the prior written consent
of the Indemnified Party). If the Indemnifying Party is liable
hereunder to the Indemnified Party for the full amount of such Third
Party Claim, the Indemnifying Party shall have full control of such
defense and proceedings, including any compromise or settlement
thereof; PROVIDED, HOWEVER, that the Indemnified Party is hereby
authorized, at the sole cost and expense of the Indemnifying Party
(but only if the Indemnified Party is actually entitled to
indemnification hereunder or if the Indemnifying Party assumes the
defense with respect to the Third Party Claim), to file during the
Notice Period any motion, answer or other pleadings which the
Indemnified Party shall deem necessary or appropriate to protect its
interests or those of the Indemnifying Party and not prejudicial to
the Indemnifying Party (it being understood and agreed that if an
Indemnified Party takes any such action which is prejudicial and
conclusively causes a final adjudication which is adverse to the
Indemnifying Party, the Indemnifying Party shall be relieved of its
obligations hereunder with respect to such Third Party Claim); and
PROVIDED FURTHER, that if requested by the Indemnifying Party, the
Indemnified Party agrees, at the sole cost and expense of the
Indemnifying Party, to cooperate with the Indemnifying Party and its
counsel in contesting any Third Party Claim which the Indemnifying
Party elects to contest, or, if appropriate and related to the Third
Party Claim in question, in making any counterclaim against the
person asserting the Third Party Claim, or any cross-complaint
against any person. The Indemnified Party may participate in, but
not control (except if the Indemnifying Party is not liable
hereunder to the Indemnified Party for the full amount of such Third
Party Claim, in which case whichever of the Indemnifying Party or
the Indemnified Party is liable for the largest amount of Damages
with respect to the Third Party Claim shall control), any defense or
settlement of any Third Party Claim with respect to which the
Indemnifying Party is participating pursuant to this Section
10.3(a)(i), and except as provided in the preceding sentence, the
Indemnified Party shall bear its own costs and expenses with respect
to such participation.
(ii) If the Indemnifying Party fails to notify the Indemnified
Party within the Notice Period that the Indemnifying Party does not
dispute its liability to the Indemnified Party and that the
Indemnifying Party desires to defend the Indemnified Party pursuant
to this Article 10, then the Indemnified Party shall
31
have the right to defend, at the sole cost and expense of the
Indemnifying Party, the Third Party Claim by all appropriate
proceedings, which proceedings shall be promptly and vigorously
prosecuted by the Indemnified Party to a final conclusion or
settled. The Indemnified Party shall have full control of such
defense and proceedings, including any compromise or settlement
thereof; PROVIDED, HOWEVER, that if requested by the Indemnified
Party, the Indemnifying Party agrees, at the sole cost and expense
of the Indemnifying Party, to cooperate with the Indemnified Party
and its counsel in contesting any Third Party Claim which the
Indemnified Party is contesting, or, if appropriate and related to
the Third Party Claim in question, in making any counterclaim
against the person asserting the Third Party Claim, or any
cross-complaint against any person. Notwithstanding the foregoing
provisions of this Section 10.3(a)(ii), if the Indemnifying Party
has timely notified the Indemnified Party that the Indemnifying
Party disputes its liability to the Indemnified Party and if such
dispute is resolved in favor of the Indemnifying Party by final,
nonappealable order of a court of competent jurisdiction, the
Indemnifying Party shall not be required to bear the costs and
expenses of the Indemnified Party's defense pursuant to this Section
10.3(a)(ii) or of the Indemnifying Party's participation therein at
the Indemnified Party's request and the Indemnified Party shall
reimburse the Indemnifying Party in full for all costs and expenses
of such litigation. The Indemnifying Party may participate in, but
not control, any defense or settlement controlled by the Indemnified
Party pursuant to this Section 10.3(a)(ii) (other than a dispute as
to the Indemnifying Party's liability to the Indemnified Party) and
the Indemnifying Party shall bear its own costs and expenses with
respect to such participation.
(iii) If any Indemnified Party should have a claim against any
Indemnifying Party hereunder which does not involve a Third Party
Claim, the Indemnified Party shall notify the Indemnifying Party, in
writing, of such claim by the Indemnified Party, specifying the
nature of and specific basis for such claim and the amount of the
estimated amount of such claim (the "Indemnity Notice"). If the
Indemnifying Party does not notify the Indemnified Party within
thirty (30) days from delivery of the Indemnity Notice that the
Indemnifying Party disputes such claim, the amount or estimated
amount of such claim specified by the Indemnified Party shall be
conclusively deemed a liability of the Indemnifying Party hereunder.
If the Indemnifying Party has timely disputed such claim, as
provided above, such dispute shall be resolved by litigation in an
appropriate court of competent jurisdiction or as the parties
otherwise at such time agree.
10.4 PAYMENT OF INDEMNITY. Any indemnity claim shall be paid in cash or by
offset against any amounts otherwise payable pursuant to the
Employment/Noncompetition and Noncompetition Agreements by the Indemnifying
Party to the appropriate Indemnified Party.
32
10.5 MAXIMUM LIABILITY FOR BREACH OF WARRANTY OR REPRESENTATION. The
cumulative total maximum liability for any single Stockholder for a Breach of
Warranty or Representation shall be Two Hundred Fifty Thousand Dollars
($250,000). The foregoing notwithstanding, no single Stockholder shall be liable
for more than twenty percent (20%) of any claim. The cumulative total maximum
aggregate liability of all the Stockholders shall be One Million Two Hundred
Fifty Thousand Dollars ($1,250,000). The cumulative total maximum aggregate
liability of CGI shall be One Million Two Hundred Fifty Thousand Dollars
($1,250,000).
10.6 INDEMNIFICATION THRESHOLD. No indemnification shall be required to be
made by the Stockholders under this Article 10 as a result of any breach of any
representation, warranty, covenant or agreement of the Company or the
Stockholders until the amount of the claims of CGI and Newco under this
Agreement exceeds in the aggregate $75,000, at which time CGI and Newco may seek
to recover all of their claims from the first dollar thereof. No indemnification
shall be required to be made by CGI under this Article 10 as a result of any
breach of any representation, warranty, covenant or agreement of CGI or Newco
until the amount of the claims of the Stockholders under this Agreement exceeds
in the aggregate $75,000, at which time the Stockholders may seek to recover all
of their claims from the first dollar thereof.
ARTICLE 11
TERMINATION
This Agreement may be terminated at any time before the Closing Date:
(a) by mutual consent of CGI and Newco, on the one hand and the
Company and the Stockholders on the other hand;
(b) by CGI and Newco, upon notice of termination of its obligation
to consummate the transaction delivered to the Company or the Stockholders
if CGI and Newco reasonably have determined that there has been any
material breach of any covenant of the Company or the Stockholders or that
the Company or any one or more of the Stockholders has breached any of its
or their representations or warranties, stating in particularity the
default or defaults on which the notice is based; PROVIDED that the
Company or the Stockholders shall, after receipt of such notice, have
thirty (30) days in which to cure such breach and, if so cured, CGI and
Newco shall, for that reason, have no right to terminate this Agreement;
(c) by the Company and the Stockholders acting unanimously, upon
notice of termination of their obligation to consummate the transaction
delivered to CGI and Newco, if the Company and the Stockholders have
determined that there has been any material breach of any covenant of CGI
or that CGI has breached any of its representations or warranties, stating
in particularity the default or defaults on which the notice is based;
PROVIDED that CGI shall, after receipt of such notice, have thirty (30)
days in which to cure such breach and, if so cured, the Stockholders
shall, for that reason, have no right to terminate this Agreement; or
33
(d) by either CGI and Newco on the one hand or the Company and the
Stockholders on the other hand (acting unanimously) if the Closing has not
occurred on or before July 3, 1996.
If this Agreement is terminated pursuant to (a) or (d) above, such
termination shall be without liability of any party, or any director, officer,
employee, agent, consultant or representative of such party, to any other party
to this Agreement by either CGI and Newco or the Company and the Stockholders,
except as specifically provided in this Agreement. If this Agreement is
terminated pursuant to (b) or (c) above, the rights and remedies granted hereby
are cumulative and nonexclusive of any other right or remedy available to the
terminating party at law or in equity. The parties agree that the business of
the Company is unique in character and if the Company and the Stockholders
default, damages suffered by CGI and Newco may not be readily ascertainable.
Accordingly, the parties agree that they shall, at their respective options, be
entitled to the equitable remedy of specific performance.
ARTICLE 12
NOTICES
All notices, requests, claims, demands and other communications hereunder
shall be in writing and shall be given (and shall be deemed to have been duly
received, if so given) by personal delivery, telegram, telecopy, or telex, or by
registered or certified mail, postage prepaid, return receipt requested, to the
parties at the following addresses:
If to the Company or the Stockholders, to each:
c/o Garner Publishing Company
1697 N.E. 53rd Avenue
Des Moines, Iowa 50313
With a copy to:
Lyle Simpson, Esq.
Dreher, Simpson & Jensen, P.C.
1200 Hub Tower
699 Walnut Street
Des Moines, IA 50309
If to CGI, to:
Consolidated Graphics, Inc.
2210 West Dallas Street
Houston, Texas 77019
Attention: Joe R. Davis, Chairman and
Chief Executive Officer
34
With a copy to:
R. Clyde Parker, Jr., Esq.
Winstead Sechrest & Minick P.C.
910 Travis, Suite 1700
Houston, Texas 77002-5895
Any party from time to time may change its address for the purpose of
notices to that party by giving a similar notice specifying a new address, but
no such notice shall be deemed to have been given until it is actually received
by the party sought to be charged with the contents.
ARTICLE 13
MISCELLANEOUS
13.1 INCORPORATION OF SCHEDULES AND APPENDICES; ENTIRE AGREEMENT. The
Appendices and Schedules attached hereto are an integral part of this Agreement
and are incorporated herein by this reference and the specific references
thereto contained herein. This Agreement supersedes all prior discussions and
agreements among the parties with respect to the subject matter of this
Agreement, and this Agreement, including the Appendices and Schedules hereto to
be delivered in connection herewith, contains the sole and entire agreement
among the parties hereto with respect to the subject matter hereof.
13.2 WAIVER. Any term or condition of this Agreement may be waived at any
time by the party which is entitled to the benefit thereof; such waiver shall be
in writing and shall be executed by the chairman, president or a vice president
of each of the parties or by such party individually, as applicable. A waiver on
one occasion shall not be deemed to be a waiver of the same or any other matter
on a future occasion.
13.3 AMENDMENT. This Agreement may be modified or amended only by a
writing duly executed by or on behalf of all the parties hereto.
13.4 COUNTERPARTS. This Agreement may be executed simultaneously in any
number of counterparts, each of which shall be deemed an original, but all of
which taken together shall constitute one and the same instrument.
13.5 HEADINGS. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
13.6 GOVERNING LAW. This Agreement and all rights and obligations
hereunder, including matters of construction, validity and performance shall be
governed by the laws of the State of Texas, without giving effect to the
principles of conflicts of laws thereof, except to the extent that Iowa
corporate law is required by law to govern the effectiveness of the Merger.
35
13.7 BINDING EFFECT. This Agreement shall be binding upon and inure to the
benefit of the parties and their respective successors and assigns; PROVIDED,
HOWEVER, that this Agreement or any right or part hereunder shall not be
voluntarily assigned by any party hereto without the prior written consent of
the other parties hereto, except that CGI may assign its rights and obligations
hereunder to a wholly owned, direct or indirect, subsidiary of CGI.
13.8 EXPENSES. Each party hereto shall pay its own expenses in connection
with this Agreement and the transactions contemplated hereby; PROVIDED, HOWEVER,
that the expenses incurred on behalf of the Company and the Stockholders shall
be paid by the Stockholders except to the extent of up to $50,000 in cash paid
by the Company to NH and 1,500 shares of CGI common stock issued by CGI to NH,
each as provided in Section 2.27 and except for up to $12,000 in legal fees
payable by the Company to Dreher, Simpson & Jensen, P.C.
13.9 FURTHER ASSURANCES. The Stockholders, at any time after the Closing
Date, will promptly execute, acknowledge and deliver any further assignments,
conveyances and other assurances, documents and instruments of transfer,
reasonably requested by CGI and necessary for the Stockholders to comply with
the representations, warranties and covenants contained herein and will take any
action consistent with the terms of this Agreement that may reasonably be
requested by CGI.
36
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the third day of July, 1996.
CGI:
CONSOLIDATED GRAPHICS, INC.
By: Joe R. Davis
Chief Executive Officer
NEWCO:
GARNER ACQUISITION CO.
By: Joe R. Davis
Chief Executive Officer
THE COMPANY:
GARNER PUBLISHING COMPANY
By:
Name:
Title:
THE STOCKHOLDERS:
Robert Garner
Bernie Nevins
S1
Gerald Ross
Thomas Kruger
John W. Duro
S2
PLAN OF MERGER
by and between
GARNER PUBLISHING COMPANY
(an Iowa corporation)
and
GARNER ACQUISITION CO.
(an Iowa corporation)
PLAN OF MERGER, dated as of July 3, 1996, by and between Garner
Acquisition Co., an Iowa corporation ("Newco"), and Garner Publishing Company,
an Iowa corporation ("Garner"), said corporations being hereinafter collectively
referred to as the "Constituent Corporations".
WHEREAS, Consolidated Graphics, Inc., a Texas corporation ("CGI"),
Newco, Garner and the stockholders of Garner have entered into an Agreement and
Plan of Reorganization, dated as of July 3, 1996, (the "Reorganization
Agreement"), providing, among other things, for the execution, acknowledgement
and filing of this Plan of Merger and for the merger of Newco with and into
Garner (the "Merger") upon the terms set forth in the Reorganization Agreement
and this Plan of Merger; and
WHEREAS, the respective Boards of Directors of each of the Constituent
Corporations deem it advisable and in the best interest of each of such
corporations and their respective shareholders that Newco be merged with and
into Garner in the manner contemplated herein and in the Reorganization
Agreement and have adopted resolutions approving this Plan of Merger and the
Reorganization Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein contained, and for the purpose of stating the
terms and conditions of the Merger, the mode of carrying the same into effect,
the manner and basis of causing the shares of each Constituent Corporation to be
converted into shares of the Surviving Corporation (as hereinafter defined) or
into shares of CGI and such other details and provisions as are deemed
desirable, the parties hereto have agreed, and do hereby agree, subject to the
terms and conditions hereinafter set forth, as follows:
ARTICLE I.
In accordance with the provisions of the laws of the State of Iowa,
Newco shall be merged with and into Garner, which shall be, and is herein
sometimes referred to as, the "Surviving Corporation", and which shall continue
its business under the name "Garner Printing Company" and shall continue to be
governed by the laws of the State of Iowa. The registered office of the
Surviving Corporation in the State of Iowa shall be Corporation Service Company,
729 Insurance Exchange Building, Des Moines, Iowa 50309.
ARTICLE II.
The Merger shall become effective upon completion of the filing of an
executed original [and duplicate copy] of this Plan of Merger and articles of
merger (the "Articles of Merger") with the Secretary of the State of Iowa. The
date and time when the Merger becomes effective shall be the "Effective Time"
referred to in this Plan of Merger.
ARTICLE III.
A. THE MERGER. Subject to the terms and conditions of this Plan of
Merger, Newco shall be merged with and into Garner at the Effective Time.
Following the Merger, the separate corporate existence of Newco shall cease and
Garner shall be the Surviving Corporation and shall succeed to and assume all
the rights and obligations of Newco in accordance with the Iowa Business
Corporation Act ("IBCA").
B. EFFECTS OF THE MERGER; CERTIFICATE AND BYLAWS; DIRECTORS AND
OFFICERS.
1. The Merger shall have the effects specified in Section
490.1106 of the IBCA.
2. The Articles of Incorporation of Garner, as amended and
restated and attached to the Articles of Merger, shall be the Articles
of Incorporation of the Surviving Corporation thereafter unless and
until amended in accordance with its terms and as provided by law.
3. The Bylaws of Newco as in effect at the Effective Time
shall be the Bylaws of the Surviving Corporation thereafter unless and
until amended in accordance with their terms, the terms of Certificate
of Incorporation of the Company following the Effective Time and as
provided by law.
4. The directors and officers of Newco at the Effective Time
shall be the directors and officers of the Surviving Corporation
thereafter, each to hold a directorship or office in accordance with
the Articles of Incorporation and Bylaws of the Surviving Corporation
until their respective successors are duly elected and qualified.
ARTICLE IV.
The mode of carrying the Merger into effect and the manner and basis of
converting or exchanging the shares of the Constituent Corporations into shares
of CGI Common Stock or into the Common Stock, no par value per share, of the
Surviving Corporation shall be as follows:
A. CONVERSION OF SHARES.
1. At the Effective Time, by virtue of the Merger and without
any further action on the part of CGI, Newco, Garner or the Surviving
Corporation, or any holder of any of the following securities:
a. each share of common stock of Newco issued and
outstanding at the Effective Time shall be converted
into one share of the common stock, no par value per
share, of the Surviving Corporation;
b. each issued share of common stock of Garner that is
held in treasury by Garner or held by any subsidiary
of Garner shall be canceled and no stock of CGI or
other consideration shall be delivered in exchange
therefor;
c. each share of common stock of Garner issued and
outstanding at the Effective Time shall be converted
into the right to receive 3.65 nonassessable shares
of common stock, $.10 par value per share (the "CGI
Common Stock"), of CGI (the "Merger Consideration").
2. Upon conversion of the shares of common stock of Garner
into the Merger Consideration in the manner described in paragraph
4.1.1.3 above, each record holder of issued and outstanding common
stock of Garner immediately prior to the Effective Time shall have the
right to receive a certificate representing such whole number of shares
of CGI Common Stock equal to the product of 3.65 times the number of
issued and outstanding shares of common stock of Garner of which such
person is the record holder immediately prior to the Effective Time.
3. No fractional shares of CGI Common Stock will be issuable.
B. EXCHANGE OF STOCK CERTIFICATES; RECORD DATE.
1. At or after the Effective Time, each holder of record of a
certificate or certificates that immediately prior to the Effective
Time represented issued and outstanding shares of common stock of
Garner whose shares were converted into the Merger Consideration
pursuant to Section 4.1 hereof shall surrender such certificates for
cancellation to CGI duly endorsed.
2. CGI shall deliver or arrange for the delivery of the Merger
Consideration required under this Agreement to such persons who were
record owners of the common stock of Garner as of the close of business
on the Effective Time.
C. NO FURTHER RIGHTS IN COMMON STOCK OF GARNER. As of the Effective
Time, all shares of common stock of Garner shall no longer be outstanding and
shall automatically be canceled and shall cease to exist, and each holder of a
certificate representing shares of common stock of Garner as of the Effective
Time shall cease to have any rights with respect thereto, except the right to
receive the Merger Consideration upon surrender of such certificate as provided
in Section 4.2.
ARTICLE V.
For the convenience of the parties hereto and to facilitate the filing
and recording of this Plan of Merger, separate counterparts hereof may be
executed and all such counterparts shall be deemed to be one and the same
instrument.
ARTICLE VI.
This Plan of Merger may be terminated or amended at any time prior to
the Effective Time in the manner provided in the Reorganization Agreement.
IN WITNESS WHEREOF, each of the Constituent Corporations has caused
this Plan of Merger to be signed in its corporate name by its duly authorized
officer, attested by its Secretary or its Assistant Secretary, and its corporate
seal to be affixed hereto, all as of the date first above written.
[CORPORATE SEAL] GARNER ACQUISITION CO.
ATTEST:
______________________________ By:_________________________
Secretary Joe R. Davis,
Chief Executive Officer
[CORPORATE SEAL] GARNER PUBLISHING COMPANY
ATTEST:
______________________________ By:__________________________
Secretary President
Consolidated Graphics, Inc. hereby joins in this Plan of Merger for the
limited purpose of agreeing to issue shares of CGI Common Stock as provided in
the Plan of Merger.
CONSOLIDATED GRAPHICS, INC.
By:__________________________
Joe R. Davis,
Chief Executive Officer
