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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 1, 1999
THE STANDARD REGISTER COMPANY
Incorporated under the laws of Ohio
Commission File No. 01-1097
IRS Employer Identification No. 31-0455440
600 Albany Street, Dayton, Ohio 45401
_________________________________________________________________
(Address of Principal Executive Offices) (Zip Code)
(937) 443-1000
_____________________________________________________________
Registrant's Telephone Number, Including Area Code
===============================================================
Item 2. Acquisition or Disposition of Assets
On April 1, 1999 (the "Closing Date"), The Standard Register Company
(the "Registrant"), an Ohio corporation, sold the assets, properties
and business of its Communicolor Division (the "Division") to R. R.
Donnelley & Sons Company (the "Buyer"), a Delaware corporation. The
Division is a direct mail printing operation that employs 550 people
in Newark, Ohio and Eudora, Kansas and generated about $97 million
in sales in 1998.
In accordance with the Asset Purchase Agreement (the "Agreement"),
Buyer paid to Registrant $98 million (the "Purchase Price") in cash
on the Closing Date and also assumed as of the Closing Date certain
specified liabilities. The Agreement provides that the Purchase
Price is subject to adjustment for changes, among other things, in
the book value of the Division since September 27, 1998. Such an
adjustment to the Purchase Price will be determined after completion
of a closing balance sheet of the Division as at the Closing Date.
Such closing balance sheet must be delivered by Registrant to Buyer
within 30 days of the Closing Date. Any unresolved dispute among
the parties concerning a possible adjustment to the Purchase Price
will be subject to final determination by an independent accounting
firm.
<PAGE>
Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits
(a) Financial Statements of Business Acquired
Not applicable
(b) Pro Forma Financial Information
The following pro forma financial information is filed as part of
this report:
Pro Forma Condensed Balance Sheet at January 3, 1999
Pro Forma Condensed Statement of Income for the Fifty-three Weeks
Ended January 3, 1999
The Pro Forma Condensed Balance Sheet of the Registrant at January
3, 1999 reflects the financial position of the Registrant after
giving effect to the disposition of the assets and assumption of the
liabilities discussed in Item 2 and assumes the disposition took
place on January 3, 1999. The Pro Forma Condensed Statement of
Income for the fifty-three weeks ended January 3, 1999 assumes that
the disposition occurred on December 29, 1997, and is based on the
operations of the Registrant for the fifty-three weeks ended January
3, 1999.
The unaudited pro forma condensed financial statements have been
prepared by the Registrant based upon assumptions deemed proper by
the Registrant. The unaudited pro forma condensed financial
statements presented herein are shown for illustrative purposes only
and are not necessarily indicative of the future financial position
or future results of operations of the Registrant, or of the
financial position or results of operations of the Registrant that
would have actually occurred had the transaction been in effect as
of the date or for the period presented. In addition, it should be
noted that the Registrant's financial statements will reflect the
disposition only from April 1, 1999, the Closing Date.
The unaudited pro forma condensed financial statements should be
read in conjunction with the historical financial statements and
related notes of the Registrant.
(c) Exhibits
10 - Material Contracts
Asset Purchase Agreement dated February 11, 1999.
First Amendment To Asset Purchase Agreement dated March 31, 1999.
SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of
1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned hereunto duly authorized.
THE STANDARD REGISTER COMPANY
By:/s/ C.J. Brown
C.J. Brown, Senior Vice President - Administration,
Treasurer, Chief Financial Officer and Chief
Accounting Officer
Dated April 15, 1999
<PAGE>
<TABLE>
PRO FORMA FINANCIAL INFORMATION
THE STANDARD REGISTER COMPANY
PRO FORMA CONDENSED BALANCE SHEET AT JANUARY 3, 1999
(Dollars in thousands)
(UNAUDITED)
<CAPTION>
Pro Forma
Adjustments
A S S E T S Historical Communicolor(1) Other Pro Forma
<S> <C> <C> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 9,792 $ 2,009 $98,000 (2) $ 104,864
(919)(3)
Short-term investments 6,530 6,530
Accounts receivable 288,103 17,787 (161)(3) 270,155
Inventories 138,376 3,689 134,687
Other current assets 30,994 (12) 31,006
-------- --------- ----------- ---------
Total current assets 473,795 23,473 96,920 547,242
-------- --------- ----------- ---------
PROPERTY, PLANT AND EQUIPMENT, NET 368,161 54,368 313,793
-------- --------- ----------- ---------
OTHER ASSETS 143,121 1,674 141,447
-------- --------- ----------- ---------
Total assets $985,077 $ 79,515 $96,920 $1,002,482
======== ========= ============ ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of
long-term debt $ 525 $ 525
Accounts payable 29,967 $ 2,882 $ (24) (3) 27,061
Dividends payable 6,251 6,251
Accrued compensation 44,406 2,429 1,184 (3) 43,161
Income taxes payable 1,335 1,335
Customer deposits 3,138 2,928 210
Deferred service contract income 8,404 8,404
Accrued restructuring 14,843 14,843
Other current liabilities 21,487 808 52 (3) 20,731
--------- --------- ---------- ---------
Total current liabilities 130,356 9,047 1,212 122,521
--------- --------- ---------- ---------
LONG-TERM LIABILITIES
Long-term debt 234,075 234,075
Retiree health care obligation 55,057 55,057
Deferred compensation 3,795 3,795
Deferred income taxes 40,829 40,829
--------- ---------- ---------- ---------
Total long-term liabilities 333,756 - - 333,756
--------- ---------- --------- ---------
SHAREHOLDERS' EQUITY
--------- ---------- --------- ---------
Total shareholders' equity 520,965 70,468 95,708 (4) 546,205
--------- ---------- --------- ---------
Total liabilities and
shareholders' equity $ 985,077 $ 79,515 $ 6,920 $1,002,482
========= ========== ========== ==========
<FN>
(1) To eliminate the assets and liabilities included in
the balance sheet of the Company's Communicolor business
as of January 3, 1999.
(2) To reflect the proceeds of the sale of the
Communicolor business.
(3) To reflect the assets and liabilities retained
by The Standard Register Company.
(4) Represents net effect of pro forma adjustments.
</FN>
</TABLE>
<TABLE>
PRO FORMA FINANCIAL INFORMATION
THE STANDARD REGISTER COMPANY
PRO FORMA CONDENSED STATEMENT OF INCOME
FOR THE FIFTY-THREE WEEKS ENDED JANUARY 3, 1999
(Dollars and shares in thousands, except per share amounts)
(UNAUDITED)
<CAPTION>
Pro Forma
Adjustments
Historical Communicolor (1) Other Pro Forma
<S> <C> <C> <C> <C>
REVENUE $1,396,869 $ 97,254 $4,080(2) $1,303,695
---------- ------------ --------- ----------
COST AND EXPENSE
Cost of products sold 874,302 70,714 803,588
Engineering and research 9,399 387 9,012
Selling and administrative 345,007 12,755 2,333(4) 334,585
Depreciation and amortization 54,112 9,085 45,027
Interest 14,044 14,044
---------- ------------ --------- ----------
Total cost and expense 1,296,864 92,941 2,333 1,206,256
---------- ------------ --------- ----------
INCOME BEFORE INCOME TAXES 100,005 4,313 1,747 97,439
---------- ------------ --------- ----------
INCOME TAXES 40,422 1,743 706(3) 39,385
---------- ------------ --------- ----------
NET INCOME $ 59,583 $ 2,570 $1,041 $ 58,054
========== ============ ========= ==========
Average Shares Outstanding 28,426 28,426
Common Stock Equivalents 175 175
EARNINGS PER SHARE
Basic $ 2.10 $ 2.04
=========== =========
Diluted $ 2.08 $ 2.03
=========== =========
<FN>
(1) To eliminate the profit of the Communicolor business
for the entire period.
(2) To reflect interest earned on the net tax proceeds
of the sale of the Communicolor business.
(3) To record tax effect, using a 40.42% combined federal
and state effective tax rate, on the net pro forma adjustments.
(4) To reflect costs that would not have been eliminated
due to the sale of the Communicolor business.
</FN>
/TABLE
<PAGE>
ASSET PURCHASE AGREEMENT
Dated as of February 11, 1999
Between
R. R. DONNELLEY & SONS COMPANY
and
THE STANDARD REGISTER COMPANY
Note: Exhibits B through G and the Schedules to the Asset Purchase
Agreement are not filed as part of this Form 8-K, as specified in
Section 601(b)(2) of Regulation S-K. Registrant hereby agrees to
supplementally furnish a copy of any such omitted exhibit or
schedule to the Securities and Exchange Commission upon request.
<PAGE>
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
1.1. Definitions
ARTICLE II
PURCHASE AND SALE
2.1. Purchased Assets
2.2. Excluded Assets
2.3. Assumed Liabilities
2.4. Excluded Liabilities
ARTICLE III
PURCHASE PRICE
3.1. Purchase Price
3.2. Determination of Estimated Purchase Price
3.3. Determination of Purchase Price
3.4. Adjustment
3.5. Allocation of Purchase Price
ARTICLE IV
CLOSING
4.1. Closing Date
4.2. Payment on the Closing Date
4.3. Buyer's Additional Deliveries
4.4. Seller's Deliveries
4.5. Tax Free Exchange
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF SELLER
5.1. Organization of Seller
5.2 Subsidiaries and Investments
5.3 Authority of Seller
5.4. Financial Statements
5.5 Operations Since Balance Sheet Date
5.6 Taxes
5.7 Availability of Assets
5.8 Governmental Permits
5.9. Real Property
5.10 Real Property Leases
5.11 Condemnation
5.12. Personal Property
5.13. Personal Property Leases
5.14. Intellectual Property; Software
5.15. Title to Property
5.16. Employees and Related Agreements
5.17. Employee Relations
5.18. Contracts
5.19. Status of Contracts
5.20. No Violation, Litigation or Regulatory Action
5.21. Environmental Matters
5.22. Insurance
5.23. Customers
5.24. No Finder
5.25. Disclosure
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF BUYER
6.1. Organization of Buyer
6.2. Authority of Buyer
6.3. No Finder
ARTICLE VII
ACTION PRIOR TO THE CLOSING DATE
7.1. Investigation of the Division by Buyer
7.2. Preserve Accuracy of Representations and Warranties
7.3. Consents of Third Parties: Governmental Approvals
7.4. Operations Prior to the Closing Date
7.5. Notification by Seller of Certain Matters
7.6. Antitrust Law Compliance
7.7. Commitment for Title Insurance
ARTICLE VIII
ADDITIONAL AGREEMENTS
8.1. Covenant Not to Compete or Solicit Business
8.2. Taxes
8.3. Discharge of Division's Liabilities
8.4. Employees and Employee Benefit Plans
8.5. Collection of Valuation Date Receivables
ARTICLE IX
CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER
9.1. No Misrepresentation or Breach of Covenants and Warranties
9.2. No Changes or Destruction of Property
9.3. No Restraint or Litigation
9.4. Necessary Governmental Approvals
9.5. Necessary Consents
9.6. Title Insurance
ARTICLE X
CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER
10.1. No Misrepresentation or Breach of Covenants and Warranties
10.2. No Restraint or Litigation
10.3. Necessary Governmental Approvals
ARTICLE XI
INDEMNIFICATION
11.1. Indemnification by Seller
11.2. Indemnification by Buyer
11.3. Environmental Indemnity
11.4. Notice of Claims
11.5. Third Person Claims
ARTICLE XII
TERMINATION
12.1. Termination
12.2. Notice of Termination
12.3. Effect of Termination
ARTICLE XIII
GENERAL PROVISIONS
13.1. Survival of Obligations
13.2. Confidential Nature of Information
13.3. No Public Announcement
13.4. Notices
13.5. Successors and Assigns
13.6. Access to Records After Closing
13.7. Entire Agreement; Amendments
13.8. Interpretation
13.9. Waivers
13.10. Expenses
13.11. Partial Invalidity
13.12. Execution in Counterparts
13.13. Further Assurances
13.14. Governing Law
EXHIBITS
Number Description
A Covenant Not to Compete
B Instrument of Assignment
C Instrument of Assumption
D Limited Warranty Deed
E Patent License Agreement
F Form of Opinion of Counsel to Buyer
G Form of Opinion of Counsel to Seller
SCHEDULES
Number Description
A "Knowledge of Seller"
1.1 Agreed Accounting Principles
2.2(G) Excluded Real Property Leases
2.2(H) Excluded Contracts etc.
2.2(J) Excluded Intellectual Property and Software
5.1 Qualification to do Business/Good Standing
5.3 Conflicts
5.4 Financial Statements
5.5(A) Material Events Since Balance Sheet Date
5.5(B) Operations Not in the Ordinary Course
5.6 Taxes
5.7 Availability of Assets
5.9 Owned Real Property
5.10 Real Property Leases
5.12 Personal Property
5.13 Personal Property Leases
5.14(A) Copyrights, Patent Rights and Trademarks
5.14(B) Software
5.14(C) Related Agreements
5.14(D) Title to Intellectual Property and Software
5.14(E) Registrations for Copyrights, Patent Rights and
Trademarks
5.14(F) Use of Intellectual Property and Software
5.15(A) Title to Owned Real Property
5.15(B) Title to All Other Purchased Assets
5.16(A) Employee Agreements
5.16(B) Employee Salaries
5.16(C) Employee Conflicts of Interest
5.17 Employee Relations
5.18 Contracts
5.19 Status of Contracts
5.20 Legal Proceedings
5.21 Environmental matters
5.23 Customers
8.4(A) Affected Employees Not Offered Employment
8.4(B) Accrued Vacation
8.4(D) Sales Managers
ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT, dated as of February ___, 1999, between R.
R. Donnelley & Sons Company, a Delaware corporation ("Buyer"), and
The Standard Register Company, an Ohio corporation ("Seller").
WHEREAS, Seller, among other things, operates the Communicolor
Division (the "Division"); and
WHEREAS, Seller desires to sell to Buyer, and Buyer desires to
purchase from Seller, on a going concern basis, substantially all of
the assets, properties and business of the Division, all on the
terms and subject to the conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements hereinafter set forth, it is hereby agreed between Seller
and Buyer as follows:
ARTICLE I
DEFINITIONS
1.1. Definitions. In this Agreement, the following terms have the
meanings specified or referred to in this Section 1.1 and shall be
equally applicable to both the singular and plural forms. Any
agreement referred to below shall mean such agreement as amended,
supplemented and modified from time to time to the extent permitted
by the applicable provisions thereof and by this Agreement.
"Accounting Firm" has the meaning specified in Section 3.3.
"Affected Employees" has the meaning specified in Section 8.4.
"Affiliate" means, with respect to any Person, any other Person
which directly or indirectly controls, is controlled by or is under
common control with such Person.
"Agreed Accounting Principles" means generally accepted accounting
principles consistently applied, provided that, with respect to any
matter as to which there is more than one generally accepted
accounting principle, Agreed Accounting Principles means the
generally accepted accounting principles applied in the preparation
of the Balance Sheet included in Schedule 5.4; provided further
that, notwithstanding the foregoing, Agreed Accounting Principles
shall include the accounting policies and be subject to the
exceptions described in Schedule 1.1; provided further that under
the Agreed Accounting Principles, no Tax liabilities or Tax assets
shall be taken into account; provided further that, for purposes of
the Agreed Accounting Principles, no known adjustments for items or
matters, regardless of the amount thereof, shall be deemed to be
immaterial; and provided further, that, the current asset for
customer deposits reflected on the Valuation Date Balance Sheet
shall equal the current liability for customer deposits reflected on
the Valuation Date Balance Sheet.
"Agreed Adjustments" has the meaning specified in Section 3.3.
"Agreed Rate" means the prime rate published by The Wall Street
Journal, as that rate may vary from time to time, or if that rate is
no longer published a comparable rate.
"Allocation Schedule" has the meaning specified in Section 3.5.
"Appraisal" has the meaning specified in section 3.5.
"Appraiser" has the meaning specified in Section 3.5.
"Assumed Liabilities" has the meaning specified in Section 2.3.
"Balance Sheet" means the unaudited balance sheet of the Division as
of September 27, 1998 included in Schedule 5.4.
"Balance Sheet Date" means September 27, 1998.
"Business" means the business of the Division.
"Buyer" has the meaning specified in the first paragraph of this
Agreement.
"Buyer Ancillary Agreements" means all agreements, instruments and
documents being or to be executed and delivered by Buyer under this
Agreement or in connection herewith.
"CAA" means the Clean Air Act, 42 U.S.C. Sections 7401 et seq., any
amendments thereto, any successor statutes, and any regulations or
guidance promulgated thereunder.
"CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. Sections 9601 et seq., any
amendments thereto, any successor statutes, and any regulations
promulgated thereunder.
"Claim Notice" has the meaning specified in Section 11.4(a).
"Closing" means the closing of the transfer of the Purchased Assets
from Seller to Buyer.
"Closing Date" has the meaning specified in Section 4.1.
"Code" means the Internal Revenue Code of 1986, as amended.
"Collection Period" has the meaning specified in Section 8.5.
"Contaminant" means any pollutant, hazardous or toxic substance or
waste, petroleum, petroleum-based substance or waste, or any
constituent of any such substance or waste defined as such in the
National Oil and Hazardous Substances Pollution Contingency Plan, 40
CFR Part 300.5, or defined as such, by or regulated as such under,
any Environmental Law.
"Copyrights" means United States and foreign copyrights, whether
registered or unregistered, and pending applications to register the
same.
"Court Order" means any judgment, order, award or decree of any
foreign, federal, state, local or other court or tribunal and any
award in any arbitration proceeding.
"Covenant Not to Compete" means the Covenant Not to Compete in the
form of Exhibit A.
"Donnelley Separation Pay Plan" has the meaning specified in Section
8.4.
"Donnelley Welfare Plans" has the meaning specified in Section 8.4.
"Division" has the meaning specified in the first recital to this
Agreement.
"Division Property" means any real or personal property, plant,
building, facility, structure, underground storage tank, equipment
or unit, or other asset owned, leased or operated by Seller and used
exclusively in the Business.
"Encumbrance" means any lien, claim, charge, security interest,
mortgage, pledge, easement, conditional sale or other title
retention agreement, defect in title, covenant or other restrictions
of any kind.
"'Environmental Encumbrance" means an Encumbrance in favor of any
Governmental Body for (i) any liability under any Environmental Law,
or (ii) damages arising from, or costs incurred by such Governmental
Body in response to, a Release or threatened Release of a
Contaminant into the environment.
"Environmental Law" means all Requirements of Laws derived from or
relating to all federal, state and local laws or regulations
relating to or addressing the environment, health or safety,
including but not limited to CAA, CERCLA, OSHA and RCRA and any
state equivalent thereof.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
"Estimated Purchase Price" means the Purchase Price, as defined
herein, but determined on an estimated basis by Seller in good faith
and as reflected in the certificate referred to in Section 3.2.
"Exchange Agreement" has the meaning specified in Section 4.5.
"Exchange Property" has the meaning specified in Section 4.5.
"Excluded Assets" has the meaning specified in Section 2.2.
"Expenses" means any and all expenses incurred in connection with
investigating, defending or asserting any claim, action, suit or
proceeding incident to any matter indemnified against hereunder
(including, without limitation, court filing fees, court costs,
arbitration fees or costs, witness fees, and reasonable fees and
disbursements of legal counsel, investigators, expert witnesses,
consultants, accountants and other professionals).
"Governmental Body" means any foreign, federal, state, local or
other governmental authority or regulatory body.
"Governmental Permits" has the meaning specified in Section 5.8.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"Indemnified Party" has the meaning specified in Section 11.4(a).
"Indemnitor" has the meaning specified in Section 11.4(a).
"Instrument of Assignment" means the Instrument of Assignment in the
form of Exhibit B.
"Instrument of Assumption" means the Instrument of Assumption in the
form of Exhibit C.
"Intellectual Property" means Copyrights, Patent Rights, Trademarks
and Trade Secrets.
"IRS" means the Internal Revenue Service.
"knowledge of Seller" and words of similar import mean, in respect
to the accuracy of any representation, warranty or covenant herein,
the current actual knowledge of the individuals listed on Schedule
A, which Schedule shall include the officers of Seller and certain
other individuals identified thereon.
"Letter Agreement" means the Letter Agreement dated October 26, 1998
between Buyer and Seller.
"Limited Warranty Deed" means the Limited Warranty Deed in the form
of Exhibit D.
"Losses" means any and all losses, costs, obligations, liabilities,
settlement payments, awards, judgments, fines, penalties, damages,
expenses, deficiencies or other charges.
"Minimum Net Worth" means $73,930,000.
"OSHA" means the Occupational Safety and Health Act, 29 U.S.C.
Sections 651 et seq., any amendment thereto, any successor statute,
and any regulations promulgated thereunder.
"Owned Real Property" has the meaning specified in Section 5.9.
"Owned Software" has the meaning specified in Section 5.14.
"Patent License Agreement" means the Patent License Agreement in the
form of Exhibit E.
"Patent Rights" means United States and foreign patents, patent
applications, continuations-in-part, divisions, reissues, patent
disclosures, inventions (whether or not patentable) or improvements
thereto.
"Permitted Encumbrances" means (a) liens for taxes and other
governmental charges and assessments which are not yet due and
payable, (b) liens of landlords and liens of carriers, warehousemen,
mechanics and materialmen and other like liens arising in the
ordinary course of business for sums not yet due and payable and (c)
other liens, encumbrances or imperfections on property which are not
material in amount or do not materially detract from the value of or
materially impair the existing use of the property affected by such
lien or imperfection.
"Person" means any individual, corporation, partnership, joint
venture, limited liability company, association, joint-stock
company, trust, unincorporated organization or Governmental Body.
"Plans" has the meaning specified in Section 8.4.
"Preliminary Accounting Report" has the meaning specified in Section
3.3.
"Preliminary Purchase Price" has the meaning specified in Section
3.3.
"Preliminary Valuation Date Balance Sheet" has the meaning specified
in Section 3.3.
"Purchase Price" has the meaning specified in Section 3.1.
"Purchased Assets" has the meaning specified in Section 2.1.
"RCRA" means the Resource Conservation and Recovery Act, 42 U.S.C.
Sections 6901 et seq., and any successor statute, and any
regulations promulgated thereunder.
"Release" means release, spill, emission, leaking, pumping,
injection, deposit, disposal, discharge, dispersal, leaching or
migration of a Contaminant into the indoor or outdoor environment or
into or out of any Division Property, including the movement of
Contaminants through or in the air, soil, surface water, groundwater
or Division Property.
"Remedial Action" means actions required to (i) clean up, remove,
treat or in any other way address Contaminants in the indoor or
outdoor environment; (ii) prevent the Release or threatened Release
or minimize the further Release of Contaminants or (iii) investigate
and determine if a remedial response is needed and to design such a
response and post-remedial investigation, monitoring, operation and
maintenance and care.
"Requirements of Laws" means any foreign, federal, state and local
laws, statutes, regulations, rules, codes or ordinances enacted,
adopted, issued or promulgated by any Governmental Body (including,
without limitation, those pertaining to electrical, building,
zoning, environmental and occupational safety and health
requirements) or common law.
"Seller" has the meaning specified in the first paragraph of this
Agreement.
"Seller Agreements" has the meaning specified in Section 5.19.
"Seller Ancillary Agreements" means all agreements, instruments and
documents being or to be executed and delivered by Seller under this
Agreement or in connection herewith.
"Software" means computer applications software programs and
software systems and related documentation and materials, whether in
source code, object code or human readable form.
"Specified Real Property Amount " has the meaning specified in
Section 4.5.
"Straddle Period" shall mean any taxable year or period beginning
before and ending after the Closing Date.
"Subsidiaries" has the meaning specified in Section 5.2.
"Tax" means any federal, state, local or foreign net income,
alternative or add-on minimum, gross income, gross receipts,
windfall profit, severance, property, production, sales, use,
transfer, gains, license, excise, franchise, employment, payroll,
withholding, alternative or add-on minimum tax, or any other tax
custom, duty, governmental fee or other like assessment or charge of
any kind whatsoever, together with any interest or any penalty,
addition to tax or additional amount imposed by any Governmental
Body.
"Tax-Free Exchange" has the meaning specified in Section 4.5.
"Tax Return" means any return, report or similar statement required
to be filed with respect to any Taxes (including any attached
schedules), including, without limitation, any information return,
claim for refund, amended return and declaration of estimated Tax.
"Trademarks" means United States, state and foreign trademarks,
service marks, logos, trade dress and trade names, whether
registered or unregistered, and pending applications to register the
foregoing.
"Trade Secrets" means confidential ideas, trade secrets, know-how,
concepts, methods, processes, formulae, reports, data, customer
lists, mailing lists, business plans, or other proprietary
information.
"Transferred Employees" has the meaning specified in Section 8.4.
"Valuation Date" means the close of business on the last business
day prior to the Closing Date.
"Valuation Date Balance Sheet" has the meaning specified in Section
3.3.
"Valuation Date Net Worth" means the excess of the Purchased Assets
over the Assumed Liabilities reflected in the Valuation Date Balance
Sheet.
"Valuation Date Receivables" means all accounts receivable that are
included in the Valuation Date Balance Sheet.
"Year 2000 Compliant Format" means, in respect of any computer
software programs and software systems, including, without
limitation, all applications software, operating systems, utilities,
databases, compilations, tool sets, firmware, program logic
controllers, chips included in electronic devices (such as routers,
switches, hubs, personal computers and servers), compilers, higher
level or "proprietary" languages, related documentation and
materials, whether in source code, object code or human readable
form, that the same conforms with the following:
(i) No value for current date will cause any interruption in
operation;
(ii) Data-based functionality must behave consistently for dates
prior to, during and after year 2000;
(iii) In all interfaces and data storage, the century in any date
must be specified either explicitly or by unambiguous algorithms or
inferencing rules; and
(iv) Year 2000 must be recognized as a leap year.
ARTICLE II
PURCHASE AND SALE
2.1. Purchased Assets. Upon the terms and subject to the
conditions of this Agreement, on the Closing Date, Seller shall
sell, transfer, assign, convey and deliver to Buyer, and Buyer shall
purchase from Seller, on a going concern basis, free and clear of
all Encumbrances (except for Permitted Encumbrances), all of the
business and operations of the Division and all of the assets and
properties of Seller of every kind and description, wherever
located, real, personal or mixed, tangible or intangible, used
exclusively in connection with the Business as the same shall exist
on the Closing Date (herein collectively called the "Purchased
Assets"), including, without limitation, all right, title and
interest of Seller in, to and under:
(a) all of the assets reflected on the Balance Sheet, except those
disposed of or converted into cash after the Balance Sheet Date in
the ordinary course of business;
(b) all customer deposits and accounts receivable generated by the
Business;
(c) all raw materials, supplies, work-in-process and other
materials included in the inventory of the Division;
(d) the Owned Real Property and options to acquire real property
listed in Schedule 5.9;
(e) the real estate leases listed or described in Schedule 5.10 and
any related leasehold improvements (subject to obtaining any
required consents of third parties);
(f) the machinery, equipment, vehicles, furniture and other
personal property listed or referred to in Schedule 5.12;
(g) the personal property leases listed in Schedule 5.13 (subject
to obtaining any required consents of third parties);
(h) the Copyrights, Patent Rights and Trademarks (including the
name "Communicolor" and any related or similar trade names,
trademarks, service marks or logos), and all goodwill associated
therewith, and the agreements, contracts, licenses, sublicenses,
assignments and indemnities, listed in Schedules 5.14(A) and (C);
(i) the contracts, agreements or understandings listed or described
in Schedule 5.18 (subject to obtaining any required consents of
third parties);
(j) all Trade Secrets and other proprietary or confidential
information used exclusively in the Business;
(k) all of Seller's rights, claims or causes of action against
third parties relating to the Purchased Assets arising out of
transactions occurring prior to the Closing Date;
(l) all books and records (including all data and other information
stored on discs, tapes or other media) of Seller relating
exclusively to the assets, properties, business and operations of
the Division; and
(m) Seller's interest in and to all telephone, telex and telephone
facsimile numbers and other directory listings utilized primarily in
connection with the Business.
2.2. Excluded Assets. Notwithstanding the provisions of Section
2.1, the Purchased Assets shall not include the following (herein
referred to as the "Excluded Assets"):
(a) all cash, bank deposits and cash equivalents (other than
customer deposits);
(b) the name "The Standard Register Company" and any related or
similar trade names, trademarks, service marks or logos;
(c) Seller's rights, claims or causes of action against third
parties relating to the assets, properties, business or operations
of the Division which may arise in connection with the discharge by
Seller of the Excluded Liabilities;
(d) all contracts of insurance;
(e) all corporate minute books and stock transfer books and the
corporate seal of Seller;
(f) all refunds of any Tax for which Seller is liable pursuant to
Section 8.2;
(g) the real property leases listed in Schedule 2.2(G);
(h) the contracts, agreements or understandings listed or described
in Schedule 2.2(H);
(i) all of Seller's rights, claims or causes of action against
third parties relating to the Excluded Assets;
(j) the Intellectual Property and Software listed or described in
Schedule 2.2(J); and
(k) any reserve for doubtful accounts receivable.
2.3. Assumed Liabilities. On the Closing Date, Buyer shall deliver
to Seller the Instrument of Assumption pursuant to which Buyer shall
assume and agree to discharge the following obligations and
liabilities of Seller in accordance with their respective terms and
subject to the respective conditions thereof:
(a) all liabilities of the Division reflected in the Valuation Date
Balance Sheet as a dollar amount;
(b) All liabilities and obligations of Seller to be paid or
performed after the Closing Date under (i) the Seller Agreements,
(ii) the leases, contracts and other agreements related primarily to
the Business that are not required by the terms of Section 5.18 to
be listed in a Schedule to this Agreement and (iii) the leases,
contracts and other agreements related primarily to the Business
that are entered into by Seller after the date hereof consistent
with the terms of this Agreement, except (A) in each case, to the
extent such liabilities and obligations, but for a breach or default
by Seller, would have been paid, performed or otherwise discharged
on or prior to the Closing Date or to the extent the same arise out
of any such breach or default and (B) in each case, to the extent
such liabilities and obligations would be required to be reflected
on a balance sheet as of the Valuation Date with respect to the
Purchased Assets prepared in accordance with the Agreed Accounting
Principles and were not so reflected in the Valuation Date Balance
Sheet and not taken into account as a deduction in determining
Valuation Date Net Worth in connection with the determination of the
Purchase Price pursuant to Section 3.3; and
(c) all liabilities in respect of Taxes or employee benefits for
which Buyer is liable pursuant to Section 8.2 or Section 8.4.
All of the foregoing liabilities and obligations to be assumed by
Buyer hereunder (excluding any Excluded Liabilities) are referred to
herein as the "Assumed Liabilities."
2.4. Excluded Liabilities. Buyer shall not assume or be obligated
to pay, perform or otherwise discharge any liability or obligation
of Seller, direct or indirect, known or unknown, absolute or
contingent, not expressly assumed by Buyer pursuant to the
Instrument of Assumption (all such liabilities and obligations not
being assumed being herein called the "Excluded Liabilities") and,
notwithstanding anything to the contrary in Section 2.3, none of the
following shall be Assumed Liabilities for purposes of this
Agreement:
(a) any liabilities in respect of Taxes or employee benefits
for which Seller is liable pursuant to Section 8.2 or Section 8.4;
(b) any intercompany payables and any other liabilities or
obligations of the Division to Seller or any of its Affiliates;
(c) any costs and expenses incurred by Seller incident to its
negotiation and preparation of this Agreement and its performance
and compliance with the agreements and conditions contained herein;
(d) any liabilities or obligations in respect of any Excluded
Assets;
(e) any liabilities in respect of the agreements listed in
Schedule 5.16(A) or in respect of the claims or proceedings
described in Schedule 5.20;
(f) accrued liabilities of any kind required to be reflected on
the Valuation Date Balance Sheet prepared in accordance with the
Agreed Accounting Principles which were not reflected thereon as a
dollar amount; or
(g) any liabilities and obligations related to, associated with
or arising out of (i) the occupancy, operations, use or control of
any of the Division Property prior to the Closing Date or (ii) the
operation of the Business prior to the Closing Date, in each case
incurred or imposed by any Environmental Law or environmental common
law theory (including, without limitation, any Release of any
Contaminant on, at or from (1) the Division Property, including,
without limitation, all facilities, improvements, structures and
equipment thereon, surface water or sediment thereon or adjacent
thereto and soil or groundwater thereunder, or (2) any real property
or facility to which Contaminants generated by the Business were
sent prior to the Closing Date).
ARTICLE III
PURCHASE PRICE
3.1. Purchase Price. The purchase price for the Purchased
Assets (the "Purchase Price") shall be determined in accordance with
Section 3.3 and shall be equal to:
(a) $103,000,000; less
(b) if the Valuation Date Net Worth is less than the Minimum
Net Worth, the difference between the Valuation Date Net Worth and
the Minimum Net Worth; or plus
(c) if the Valuation Date Net Worth is greater than the Minimum
Net Worth, the difference between the Valuation Date Net Worth and
the Minimum Net Worth.
3.2. Determination of Estimated Purchase Price. At least two
business days prior to the Closing Date, Seller shall deliver to
Buyer a certificate executed on behalf of Seller by the President or
any Vice President of Seller, dated the date of its delivery,
stating that there has been conducted under the supervision of such
officer a review of all relevant information and data then available
and setting forth Seller's best estimate of the Estimated Purchase
Price, setting forth in reasonable detail the estimated total assets
and total liabilities of the Division as of the Valuation Date which
such officer anticipates based upon the most recent available
financial statements will be reflected on the Valuation Date Balance
Sheet prepared in accordance with the Agreed Accounting Principles.
Such Estimated Purchase Price shall not exceed $108,000,000.
3.3. Determination of Purchase Price. (a) As promptly as
practicable following the Closing Date (but not later than 30 days
after the Closing Date), Seller shall:
(i) prepare, in accordance with the Agreed Accounting
Principles, a balance sheet as of the Valuation Date with respect to
the Purchased Assets and the Assumed Liabilities (the "Preliminary
Valuation Date Balance Sheet") using the Division accounting
personnel,
(ii) determine the Purchase Price in accordance with the
provisions of this Agreement (such Purchase Price as determined by
Seller being referred to as the "Preliminary Purchase Price") and
(iii) deliver to Buyer the Preliminary Valuation Date Balance
Sheet and a certificate setting forth the Preliminary Purchase Price
(the "Preliminary Accounting Report").
(b) Promptly following receipt of the Preliminary Accounting
Report, Buyer may review the same and, within 30 days after the date
of such receipt, may deliver to Seller a certificate (signed by its
chief financial officer or its chief accounting officer) setting
forth its objections to the Preliminary Valuation Date Balance Sheet
and the Preliminary Purchase Price as set forth in the Preliminary
Accounting Report, together with a summary of the reasons therefor
and calculations which, in its view, are necessary to eliminate such
objections. In the event Buyer does not so object within such 30-
day period, the Preliminary Valuation Date Balance Sheet and the
Preliminary Purchase Price set forth in the Preliminary Accounting
Report shall be final and binding as the "Valuation Date Balance
Sheet" and the Purchase Price, respectively, for purposes of this
Agreement but shall not limit the representations, warranties,
covenants and agreements of the parties set forth elsewhere in this
Agreement.
(c) In the event Buyer so objects within such 30-day period,
Buyer and Seller shall use their reasonable efforts to resolve by
written agreement (the "Agreed Adjustments") any differences as to
the Preliminary Valuation Date Balance Sheet and the Preliminary
Purchase Price and, in the event Seller and Buyer so resolve any
such differences, the Preliminary Valuation Date Balance Sheet and
the Preliminary Purchase Price set forth in the Preliminary
Accounting Report as adjusted by the Agreed Adjustments shall be
final and binding as the Valuation Date Balance Sheet and the
Purchase Price, respectively, for purposes of this Agreement but
shall not limit the representations, warranties, covenants and
agreements of the parties set forth elsewhere in this Agreement.
(d) In the event any objections raised by Buyer are not
resolved by Agreed Adjustments with the 30-day period next following
such 30-day period, then Buyer and Seller shall submit the
objections that are then unresolved to Deloitte & Touche LLP and
such firm (the "Accounting Firm") shall be directed by Buyer and
Seller to resolve the unresolved objections (based solely on the
presentations by Buyer and by Seller as to whether any disputed
matter had been determined in a manner consistent with the Agreed
Accounting Principles) as promptly as reasonably practicable and to
deliver written notice to each of Buyer and Seller setting forth its
resolution of the disputed matters. The Preliminary Valuation Date
Balance Sheet and the Preliminary Purchase Price, after giving
effect to any Agreed Adjustments and to the resolution of disputed
matters by the Accounting Firm, shall be final and binding as the
Valuation Date Balance Sheet and the Purchase Price, respectively,
for purposes of this Agreement but shall not limit the
representations, warranties, covenants and agreements of the parties
set forth elsewhere in this Agreement.
(e) The parties hereto shall make available to Buyer, Seller
and, if applicable, the Accounting Firm, such accounting personnel,
books, records and other information (including work papers) as any
of the foregoing may reasonably request to prepare or review the
Preliminary Accounting Report or any matters submitted to the
Accounting Firm. The fees and expenses of the Accounting Firm
hereunder shall be paid one-half by Buyer and one-half by Seller.
3.4. Adjustment. Promptly (but not later than five days) after
the determination of the Purchase Price pursuant to Section 3.3 that
is final and binding as set forth therein:
(a) if the Purchase Price exceeds the Estimated Purchase Price,
then Buyer shall pay to Seller, by wire transfer of immediately
available funds to such bank account as Seller shall designate in
writing to Buyer, an amount equal to the excess of the Purchase
Price over the Estimated Purchase Price, plus interest on such
excess from the Closing Date to the date of payment thereof at the
Agreed Rate; or
(b) if the Purchase Price is less than the Estimated Purchase
Price, then Seller shall pay to Buyer, by wire transfer of
immediately available funds to such bank account as Buyer shall
designate in writing to Seller, an amount equal to the excess of the
Estimated Purchase Price over the Purchase Price, plus interest on
such excess from the Closing Date to the date of payment thereof at
the Agreed Rate.
3.5. Allocation of Purchase Price. Buyer shall cause an
independent appraiser selected by Buyer and reasonably acceptable to
Seller (the "Appraiser") to conduct and deliver to Buyer and Seller,
within 45 days following the determination of the Purchase Price
that is final and binding as set forth herein, an appraisal (the
"Appraisal") of the fair market value as of the Closing Date of the
Purchased Assets and the covenants granted pursuant to the Covenant
Not to Compete. The costs of the Appraisal shall be paid by Buyer.
Within 30 days following receipt of the Appraisal, Buyer shall
deliver to Seller a schedule (the "Allocation Schedule") allocating
the Purchase Price (including, for purposes of this Section 3.5, any
other consideration paid to Seller, including the Assumed
Liabilities) among the Purchased Assets and the covenants granted
pursuant to the Covenant Not to Compete; provided, that if Buyer
elects to effect a Tax-Free Exchange pursuant to Section 4.5, and
Buyer and Seller agree on a Specified Real Property Amount in
accordance with Section 4.5, the Exchange Property shall be
reflected in the Allocation Schedule at an amount equal to the
Specified Real Property Amount determined in accordance with Section
4.5. The Allocation Schedule shall be reasonable and shall be
prepared in accordance with Section 1050 of the Code and the
regulations thereunder and in accordance with the Appraisal. Seller
agrees that promptly after receiving said Allocation Schedule it
shall return an executed copy thereof to Buyer. Buyer and Seller
each agrees to file Internal Revenue Service Form 8594, and all
federal, state, local and foreign Tax Returns, in accordance with
the Allocation Schedule. Buyer and Seller each agrees to provide
the other promptly with any other information required to complete
Form 8594.
ARTICLE IV
CLOSING
4.1. Closing Date. The Closing shall be consummated at 10:00
A.M., local time, on March 31, 1999, or such later date as may be
agreed upon by Buyer and Seller after the conditions set forth in
Articles IX and X have been satisfied, at the offices of Sidley &
Austin, Chicago, Illinois, or at such other place or at such other
time as shall be agreed upon by Buyer and Seller. The time and date
on which the Closing is actually held are sometimes referred to
herein as the "Closing Date."
4.2. Payment on the Closing Date. Subject to fulfillment or
waiver of the conditions set forth in Article IX, and subject to
reduction as provided in Section 4.5, at Closing Buyer shall pay
Seller an amount equal to the Estimated Purchase Price by wire
transfer of immediately available funds to the account specified by
Seller in writing to Buyer.
4.3. Buyer's Additional Deliveries. Subject to fulfillment or
waiver of the conditions set forth in Article IX, at Closing Buyer
shall deliver to Seller all the following:
(a) Copies of Buyer's Certificate of Incorporation certified as
of a recent date by the Secretary of State of the State of Delaware;
(b) Certificate of good standing of Buyer issued as of a recent
date by the Secretary of State of the State of Delaware;
(c) Certificate of the Secretary or an Assistant Secretary of
Buyer, dated the Closing Date, in form and substance reasonably
satisfactory to Seller, as to (i) no amendments to the Certificate
of Incorporation of Buyer since a specified date; (ii) the by-laws
of Buyer; (iii) the resolutions of the Board of Directors of Buyer
or a committee thereof authorizing the execution and performance of
this Agreement and the transactions contemplated hereby; and (iv)
incumbency and signatures of the officers of Buyer executing this
Agreement and any Buyer Ancillary Agreement;
(d) Opinion of counsel to Buyer substantially in the form
contained in Exhibit F;
(e) The Instrument of Assumption duly executed by Buyer;
(f) The certificate contemplated by Section 10.1, duly executed
by the President or any Vice President of Buyer; and
4.4. Seller's Deliveries. Subject to fulfillment or waiver of
the conditions set forth in Article X, at Closing Seller shall
deliver to Buyer all the following:
(a) Copies of the Articles of Incorporation of Seller certified
as of a recent date by the Secretary of State of the State of Ohio;
(b) Certificate of good standing of Seller issued as of a
recent date by the Secretary of State of the State of Ohio:
(c) Certificate of the Secretary or an Assistant Secretary of
Seller, dated the Closing Date, in form and substance reasonably
satisfactory to Buyer, as to (i) no amendments to the Articles of
Incorporation of Seller since a specified date; (ii) the Code of
Regulations of Seller; (iii) the resolutions of the Board of
Directors of Seller or a committee thereof authorizing the execution
and performance of this Agreement and the transactions contemplated
hereby; and (iv) incumbency and
signatures of the officers of Seller executing this Agreement and
any Seller Ancillary Agreement;
(d) Opinion of counsel to Seller substantially in the form
contained in Exhibit G;
(e) The Instrument of Assignment duly executed by Seller;
(f) Certificates of title or origin (or like documents) with
respect to any vehicles or other equipment included in the Purchased
Assets for which a certificate of title or origin is required in
order to transfer title;
(g) All consents, waivers or approvals obtained by Seller with
respect to the Purchased Assets or the consummation of the
transactions contemplated by this Agreement;
(h) The Patent License Agreement duly executed by Seller;
(i) The certificates contemplated by Sections 9.1 and 9.2, duly
executed by the authorized officer of Seller;
(j) A Limited Warranty Deed with respect to each of the parcels
of Owned Real Property, duly executed by Seller;
(k) An assignment, in recordable form, with respect to each of
the leases of real estate described in Schedule 5.10, duly executed
by Seller and in form and substance reasonably satisfactory to
Buyer; and
(l) Such other bills of sale, assignments and other instruments
of transfer or conveyance as Buyer may reasonably request or as may
be otherwise necessary to evidence and effect the sale, assignment,
transfer, conveyance and delivery of the Purchased Assets to Buyer.
In addition to the above deliveries, Seller shall take all steps and
actions as Buyer may reasonably request or as may otherwise be
necessary to put Buyer in actual possession or control of the
Purchased Assets; provided, however, that, notwithstanding anything
herein to the contrary, Seller shall have no obligation to pay any
monies that may be demanded by third parties to obtain their consent
to the assignment of any leases, contracts or other commitments.
4.5. Tax Free Exchange. (a) Notwithstanding anything to the
contrary in this Agreement, Seller acknowledges and agrees that
Buyer shall have the right at Closing, in lieu of purchasing any or
all of the Owned Real Property, to exchange any such property in a
transaction intended to qualify as a tax-free exchange under Section
1031 of the Code (the "Tax-Free Exchange").
(b) If Buyer elects to effect a Tax-Free Exchange under this
Section 4.5, Buyer shall provide written notice to Seller not less
than 10 days prior to Closing specifying the parcels of Owned Real
Property as to which such election relates (the "Exchange
Property"), in which case Buyer shall enter into an exchange
agreement with a Person to be used to facilitate the Tax-Free
Exchange (the "Exchange Party") pursuant to the Exchange Party's
standard form of such exchange documents (the "Exchange Agreement").
Pursuant to the Exchange Agreement, Buyer shall assign all of its
right, title and interest to the Exchange Property under this
Agreement to the Exchange Party; provided, however, that such
assignment shall not relieve Buyer of any of its obligations
hereunder. Seller agrees to execute and deliver such documents as
may be required to complete the transactions contemplated by the
Tax-Free Exchange, and otherwise cooperate with Buyer with respect
to the Tax-Free Exchange: provided, however, that, notwithstanding
anything herein to the contrary, Seller shall have no obligation to
execute and deliver any such document that increases in any material
respect the obligations of Seller beyond its obligations under this
Agreement. Seller further agrees that, if Buyer elects to exercise
its option to effect a Tax-Free Exchange under this Section 4.5, (i)
Seller shall accept payment of an amount equal to the fair market
value of the Exchange Property (the "Specified Real Property
Amount") from the Exchange Party by wire transfer on the Closing
Date of immediately available funds to the account specified by
Seller in writing to the Exchange Party and (ii) the receipt by
Seller of the Specified Real Property Amount shall be treated as
partial payment to Seller of the Estimated Purchase Price, and thus
the amount payable by Buyer pursuant to Section 4.2 shall be reduced
by the Specified Real Property Amount. Buyer and Seller shall
negotiate in good faith to determine the Specified Real Property
Amount not later than three business days prior to the Closing Date.
If the Specified Real Property Amount has not been agreed to or
determined on or before the third day prior to the Closing Date,
then each of Seller and Buyer shall have no obligation to
participate in the Tax-Free Exchange.
(c) Notwithstanding the foregoing in this Section 4.5, the Tax-
Free Exchange shall not diminish Seller's rights, nor increase
Seller's obligations under this Agreement. Buyer shall pay for all
costs and expenses in connection with the Tax-Free Exchange.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF SELLER
As an inducement to Buyer to enter into this Agreement and to
consummate the transactions contemplated hereby, Seller represents
and warrants to Buyer and agrees as follows:
5.1. Organization of Seller. Seller is a corporation duly
organized, validly existing and in good standing under the laws of
the State of Ohio. Seller is duly qualified to transact business as
a foreign corporation and is in good standing in each of the
jurisdictions listed in Schedule 5.1, which jurisdictions are the
only ones in which the ownership or leasing of the Purchased Assets
or the conduct of the Business requires such qualification. No
other jurisdiction has demanded, requested or otherwise indicated
that Seller is required so to qualify on account of the ownership or
leasing of the Purchased Assets or the conduct of the Business.
Seller has full power and authority to own or lease and to operate
and use the Purchased Assets and to carry on the Business as now
conducted.
True and complete copies of the certificate or articles of
incorporation and all amendments thereto and of the Code of
Regulations as amended to date, of Seller have been delivered to
Buyer.
5.2 Subsidiaries and Investments. Seller does not, directly or
indirectly, (i) own, of record or beneficially, any outstanding
voting securities or other equity interest in any corporation,
partnership, joint venture or other entity which is involved in or
relates to the Business or (ii) control any corporation,
partnership, joint venture or other entity which is involved in or
relates to the Business.
5.3 Authority of Seller. Seller has full power and authority
to execute, deliver and perform this Agreement and all of the Seller
Ancillary Agreements. The execution, delivery and performance of
this Agreement and the Seller Ancillary Agreements by Seller have
been duly authorized and approved by Seller's board of directors or
a committee thereof and do not require any further authorization or
consent of Seller or its shareholders. This Agreement has been duly
authorized, executed and delivered by Seller and is the legal, valid
and binding obligation of Seller enforceable in accordance with its
terms, and each of the Seller Ancillary Agreements has been duly
authorized by Seller and upon execution and delivery by Seller will
be a legal, valid and binding obligation of Seller enforceable in
accordance with its terms.
Except as set forth in Schedule 5.3 or in any other Schedule
hereto, neither the execution and delivery of this Agreement or any
of the Seller Ancillary Agreements or the consummation of any of the
transactions contemplated hereby or thereby nor compliance with or
fulfillment of the terms, conditions and provisions hereof or
thereof will:
(i) conflict with, result in a breach of the terms, conditions
or provisions of, or constitute a default, an event of default or an
event creating rights of acceleration, termination or cancellation
or a loss of rights under, or result in the creation or imposition
of any Encumbrance upon any of the Purchased Assets, under (1) the
Articles of Incorporation or Code of Regulations of Seller, (2) any
Seller Agreement, (3) any other material note, instrument,
agreement, mortgage, lease, license, franchise, permit or other
authorization, right, restriction or obligation to which Seller is
a party or any of the Purchased Assets is subject or by which Seller
is bound, (4) any Court Order to which Seller is a party or any of
the Purchased Assets is subject or by which Seller is bound, or (5)
any Requirements of Laws affecting Seller or the Purchased Assets;
or
(ii) Require the approval, consent, authorization or act of, or
the making by Seller or the Division of any declaration, filing or
registration with, any Person, except as provided under the HSR Act.
5.4. Financial Statements. Schedule 5.4 contains (i) the
unaudited balance sheets of the Division as of December 31, 1995,
December 29, 1996 and December 28, 1997 and the related statements
of income for each of the three fiscal years then ended,
respectively, and (ii) the unaudited balance sheet of the Division
as of September 27, 1998 and the related statements of income for
the fiscal nine months ended September 27, 1998 and September 28,
1997, respectively. Except as set forth therein, such balance
sheets and statements of income have been prepared in conformity
with the Agreed Accounting Principles (except that materiality
standards were applied and certain liabilities paid by Seller, as
opposed to the Division, were excluded) and such balance sheets and
related statements of income present fairly the financial position
and results of operations of the Division as of their respective
dates and for the respective periods covered thereby.
5.5 Operations Since Balance Sheet Date. (a) Except as set
forth in Schedule 5.5(A), since the Balance Sheet Date, there has
been:
(i) no material adverse change in the Purchased Assets, the
Business or the operations, liabilities, profits, prospects or
condition (financial or otherwise) of the Division, and no fact or
condition exists or is contemplated or threatened which might
reasonably be expected to cause such a change in the future; and
(ii) no damage, destruction, loss or claim, whether or not
covered by insurance, or condemnation or other taking materially
adversely affecting any of the Purchased Assets or the Business.
(b) Except as set forth in Schedule 5.5(B), since the Balance
Sheet Date, Seller has conducted the Business only in the ordinary
course and in conformity with past practice. Without limiting the
generality of the foregoing, since the Balance Sheet Date, except as
set forth in such Schedule, Seller has not, in respect of the
Business:
(i) sold, leased (as lessor), transferred or otherwise disposed
of (including any transfers from the Division to Seller or any of
its Affiliates), or mortgaged or pledged, or imposed or suffered to
be imposed any Encumbrance on, any of the assets reflected on the
Balance Sheet or any assets acquired by the Division after the
Balance Sheet Date, except for inventory and minor amounts of
personal property sold or otherwise disposed of for fair value in
the ordinary course of the Business consistent with past practice
and except for Permitted Encumbrances;
(ii) canceled any debts owed to or claims held by the Division
(including the settlement of any claims or litigation) other than in
the ordinary course of the Business consistent with past practice;
(iii) created, incurred or assumed, or agreed to create, incur
or assume, any indebtedness for borrowed money in respect of the
Division (other than money borrowed or advances from Seller or any
of its Affiliates in the ordinary course of the Business consistent
with past practice) or entered into, as lessee, any capitalized
lease obligations (as defined in Statement of Financial Accounting
Standards No. 13);
(iv) accelerated or delayed collection of notes or accounts
receivable generated by the Business in advance of or beyond their
regular due dates or the dates when the same would have been
collected in the ordinary course of the Business consistent with
past practice;
(v) delayed or accelerated payment of any account payable or
other liability of the Business beyond or in advance of its due date
or the date when such liability would have been paid in the ordinary
course of the Business consistent with past practice;
(vi) allowed the levels of raw materials, supplies, work-in-
process or other materials included in the inventory of the
Division to vary in any material respect from the levels customarily
maintained in the Business;
(vii) instituted any increase in any compensation payable to
any employee of Seller with respect to the Business or in any
profit-sharing, bonus, incentive, deferred compensation, insurance,
pension, retirement, medical, hospital, disability, welfare or other
benefits made available to employees of Seller with respect to the
Business, except in the normal course of business consistent with
past practice; or
(viii) made any change in the accounting principles and
practices used by Seller from those applied in the preparation of
the Balance Sheet and the related statements of income and cash flow
for the period then ended.
5.6 Taxes. Except as set forth in Schedule 5.6, (i) Seller
has, in respect of the Business and the Purchased Assets, filed all
Tax Returns which are required to be filed and has paid all Taxes
which have become due pursuant to such Tax Returns or pursuant to
any assessment which has become payable; (ii) all such Tax Returns
are complete and accurate and disclose all Taxes required to be paid
in respect of the Business and the Purchased Assets; (iii) all
monies required to be withheld by Seller (including from employees
for income Taxes, and social security and other payroll Taxes) have
been collected or withheld, and either paid to the respective taxing
authorities or set aside in accounts for such purpose; and (iv) no
transaction contemplated by this Agreement is subject to withholding
under Section 1445 of the Code.
5.7 Availability of Assets. Except as set forth in Schedule
5.7 and except for the Excluded Assets, the Purchased Assets
constitute all of the material assets used primarily in the Business
(including, but not limited to, all books, records, computers and
computer programs and data processing systems) and are in reasonably
good condition (subject to normal wear and tear).
5.8 Governmental Permits. To Seller's knowledge, Seller owns,
holds or possesses all licenses, franchises, permits, privileges,
immunities, approvals and other authorizations from a Governmental
Body which are necessary to entitle it to own or lease, operate and
use the Purchased Assets and to carry on and conduct the Business
substantially as currently conducted (herein collectively called
"Governmental Permits").
Except as set forth in Schedule 5.8, (i) to Seller's knowledge,
Seller has fulfilled and performed its obligations under each of the
Governmental Permits, and no event has occurred or condition or
state of facts exists which constitutes or, after notice or lapse of
time or both, would constitute a material breach or default under
any such Governmental Permit or which permits or, after notice or
lapse of time or both, would permit revocation or termination of any
such Governmental Permit, or which might materially adversely affect
the rights of Seller under any such Governmental Permit; (ii) no
notice of cancellation, of default or of any dispute concerning any
Governmental Permit, or of any event, condition or state of facts
described in the preceding clause, has been received by, or is known
to, Seller; and (iii) each of the Governmental Permits is valid,
subsisting and in full force and effect.
5.9. Real Property. Schedule 5.9 contains a brief description
of (i) each parcel of real property owned by Seller and used in or
relating to the Business (the "Owned Real Property") and (ii) each
option held by Seller to acquire any real property for use by the
Division.
5.10 Real Property Leases. Schedule 5.10 sets forth a list and
brief description of each lease or similar agreement under which (i)
Seller is lessee of, or holds or operates, any real property owned
by any third Person and used in or relating to the Business or (ii)
Seller is lessor of any of the Owned Real Property. Except as set
forth in such Schedule, Seller has the right to quiet enjoyment of
all the real property described in such Schedule for the full term
of each such lease or similar agreement (and any renewal option
related thereto) relating thereto, and the leasehold or other
interest of Seller in such real property is not subject or
subordinate to any Encumbrance except for Permitted Encumbrances.
Complete and correct copies of such leases or similar agreements
have heretofore been delivered by Seller to Buyer.
5.11 Condemnation. Neither the whole nor any part of the Owned
Real Property or any real property leased, used or occupied by
Seller in connection with the Business is subject to any pending
suit for condemnation or other taking by any public authority, and,
to the knowledge of Seller, no such condemnation or other taking is
threatened or contemplated.
5.12 Personal Property. Schedule 5.12 contains a detailed list
of all machinery, equipment, vehicles, furniture and other personal
property owned by Seller having an original cost of $1,000 or more
and included in the Purchased Assets.
5.13 Personal Property Leases. Schedule 5.13 contains a brief
description of each lease or other agreement or right, whether
written or oral (including in each case the annual rental, the
expiration date thereof and a brief description of the property
covered), under which Seller is lessee of, or holds or operates, any
machinery, equipment, vehicle or other tangible personal property
owned by a third Person and used exclusively in the Business, except
for any such lease, agreement or right that is terminable by Seller
without penalty or payment on notice of 30 days or less, or which
involves the payment by Seller of rentals of less than $12,000 per
year.
5.14 Intellectual Property; Software. (a) Schedule 5.14(A)
contains a list and description of all Copyrights, Patents and
Trademarks (including all assumed or fictitious names under which
Seller is conducting the Business or has within the previous five
years conducted the Business) owned by or licensed to Seller and
used by Seller in connection with the conduct of the Business.
(b) Schedule 5.14(B) contains a list and description of all
Software owned by or licensed to Seller and used by Seller in the
conduct of the Business, provided that Schedule 5.14(B) does not
list Software licensed to Seller that is available in consumer
retail stores and subject to "shrink-wrap" license agreements.
(c) Schedule 5.14(C) contains a list and description of all
agreements, contracts, licenses, sublicenses, assignments and
indemnities which relate to (i) any Copyrights, Patent Rights or
Trademarks listed in Schedule 5.14(A), (ii) any Trade Secrets owned
by, licensed to or used by Seller in connection with the conduct of
the Business or (iii) any Software listed in Schedule 5.14(B).
(d) Except as disclosed in Schedule 5.14(D), Seller either:
(i) owns the entire right, title and interest in and to the
Intellectual Property and Software included in the Purchased Assets,
free and clear of any Encumbrance; or (ii) has the perpetual,
royalty-free right to use the same.
(e) Except as disclosed in Schedule 5.14(E), (i) all
registrations for Copyrights, Patent Rights and Trademarks
identified in Schedule 5.14(A) as being owned by Seller are valid
and in force, and all applications to register any unregistered
Copyrights, Patent Rights and Trademarks so identified are pending
and in good standing, all without challenge of any kind; (ii) the
Intellectual Property owned by Seller is valid and enforceable; and
(iii) Seller has the sole and exclusive right to bring actions for
infringement or unauthorized use of the Intellectual Property and
Software owned by Seller and included in the Purchased Assets, and
to the knowledge of Seller, there is no basis for any such action.
(f) Except as set forth in Schedule 5.14(f), to the knowledge
of Seller, no infringement of any Intellectual Property Right of any
other Person has occurred or results in any way from the operations
of the Business, no claim of any infringement of any Intellectual
Property Right of any other Person has been made or asserted in
respect of the operations of the Business and Seller has not had
notice of, or knowledge of any basis for, a claim against Seller
that the operations, activities, products, software, equipment,
machinery or processes of the Business infringe any Intellectual
Property Right of any other Person.
5.15. Title to Property. (a) Seller has good and marketable
title in fee simple absolute to all Owned Real Property and to all
buildings, structures and other improvements thereon, in each case
free and clear of all Encumbrances, except for Permitted
Encumbrances and except as set forth in Schedule 5.15(A).
(b) Seller has good and marketable title to all of the
Purchased Assets other than the Owned Real Property, free and clear
of all Encumbrances, except for Permitted Encumbrances and except as
set forth in Schedule 5.15(B).
(c) Upon delivery to Buyer on the Closing Date of the
instruments of transfer contemplated by Section 4.4, Seller will
thereby transfer to Buyer good and marketable title to the Purchased
Assets (other than the Owned Real Property), subject to no
Encumbrances, except for Permitted Encumbrances.
5.16. Employees and Related Agreements. (a) Except as
described in Schedule 5.16(A), Seller is not, with respect to the
Business, a party to or bound by any written or, to Seller's
knowledge, oral:
(i) employee collective bargaining agreement, employment
agreement (other than employment agreements terminable by Seller
without premium or penalty on notice of 30 days or less under which
the only monetary obligation of Seller is to make current wage or
salary payments and provide current fringe benefits), consulting,
advisory or service agreement, deferred compensation agreement,
confidentiality agreement or covenant not to compete;
(ii) contract or agreement with any officer, director or
employee (other than employment agreements disclosed in response to
clause (i) or excluded from the scope of clause (i)), agent, or
attorney-in-fact of Seller; or
(iii) stock option, stock purchase, bonus or other incentive
plan or agreement.
(b) Schedule 5.16(B) contains: (i) a list of all employees or
commission salespersons of the Division as of November 30, 1998
whose then-current annual compensation was in excess of $80,000;
(ii) the then current annual compensation of, and a description of
the fringe benefits (other than those generally available to
employees of Seller) provided by Seller to any such employees or
salespersons; (iii) a list of all present or former employees or
commission salespersons of the Division paid in excess of $80,000 in
calendar year 1997 who have terminated or given notice of their
intention to terminate their relationship with Seller or the
Division since December 31, 1997;
(c) Except as set forth in Schedule 5.16(C), (i) to the
knowledge of Seller, the Division is not involved in any material
transaction or other situation with any employee, officer, director
or Affiliate of Seller which may be generally characterized as a
"conflict of interest", including, but not limited to, direct or
indirect interest in the business of competitors, suppliers or
customers of the Division, and (ii) there are no situations with
respect to the Business which involved or involves (A) the use of
any corporate funds for unlawful contributions, gifts, entertainment
or other unlawful expenses related to political activity, (B) the
making of any direct or indirect unlawful payments to government
officials or others from corporate funds or the establishment or
maintenance of any unlawful or unrecorded funds, (C) the violation
of any of the provisions of The Foreign Corrupt Practices Act of
1977, or any rules or regulations promulgated thereunder, (D) the
receipt of any illegal discounts or rebates or any other violation
of the antitrust laws or (E) any investigation by the Securities and
Exchange Commission or any other federal, foreign, state or local
government agency or authority.
5.17. Employee Relations. Except as set forth in Schedule
5.17, to Seller's knowledge, Seller has complied in respect of the
Business with all applicable laws, rules and regulations which
relate to prices, wages, hours, discrimination in employment and
collective bargaining and to the operation of the Business and is
not liable for any arrears of wages or any Taxes or penalties for
failure to comply with any of the foregoing. Seller believes that
its relations with the employees of the Division are satisfactory.
Seller is not a party to, and the Division is not affected by or
threatened with, any dispute or controversy with a union or with
respect to unionization or collective bargaining involving the
employees of the Division. To Seller's knowledge, neither Seller
nor the Division is materially affected by any dispute or
controversy with a union or with respect to unionization or
collective bargaining involving any supplier or customer of the
Division. Schedule 5.17 sets forth a description of any organizing
or election activities involving any non-union employees of the
Division which have occurred since June 1, 1995 or, to the knowledge
of Seller, are threatened.
5.18. Contracts. Except as set forth in Schedule 5.18, Seller
is not, with respect to the Business, a party to or bound by:
(i) any contract to purchase or sell real property;
(ii) any contract to purchase goods or services which Seller
reasonably anticipates will involve the payment of more than
$250,000 in 1999 or in any calendar year thereafter;
(iii) any contract to sell goods or services which Seller
reasonably anticipates will involve the payment of more than
$500,000 in 1999 or in any calendar year thereafter;
(iv) any contract to purchase, license or develop Software to
be used by the Division;
(v) any consignment, distributor, dealer, manufacturer's
representative, sales agency, advertising representative or
advertising or public relations contract;
(vi) any guarantee of the obligations of customers, suppliers,
officers, directors, employees, Affiliates or others;
(vii) any agreement which provides for, or relates to, the
incurrence by the Division of debt for borrowed money (including,
without limitation, any interest rate or foreign currency swap, cap,
collar, hedge or insurance agreements, or options or forwards on
such agreements, or other similar agreements for the purpose of
managing the interest rate and/or foreign exchange risk associated
with its financing); or
(viii) any material contract not made in the ordinary course.
5.19. Status of Contracts. Except as set forth in Schedule
5.19, each of the leases, contracts and other agreements listed in
Schedules 5.10, 5.13, 5.14, 5.16 and 5.18 (collectively, the "Seller
Agreements") constitutes a valid and binding obligation of the
parties thereto and is in full force and effect and (except as set
forth in Schedule 5.3 and except for those Seller Agreements which
by their terms will expire prior to the Closing Date or are
otherwise terminated prior to the Closing Date in accordance with
the provisions hereof) may be transferred to Buyer pursuant to this
Agreement and will continue in full force and effect thereafter, in
each case without breaching the terms thereof or resulting in the
forfeiture or impairment of any rights thereunder and without the
consent, approval or act of, or the making of any filing with, any
other party. To the knowledge of Seller, Seller has, in all
material respects, fulfilled and performed its obligations under
each of the Seller Agreements, and Seller is not in, or alleged to
be in, breach or default under, nor is there alleged to be any basis
for termination of, any of the Seller Agreements and, to the
knowledge of Seller, no other party to any of the Seller Agreements
has breached or defaulted thereunder, and no event has occurred and
no condition or state of facts exists which, with the passage of
time or the giving of notice or both, would constitute such a
default or breach by Seller or by any such other party. Seller is
not currently renegotiating any of the Seller Agreements or paying
liquidated damages in lieu of performance thereunder. Complete and
correct copies of each of the Seller Agreements have heretofore been
delivered to Buyer by Seller.
5.20. No Violation, Litigation or Regulatory Action. Except as
set forth in Schedule 5.20;
(i) to the knowledge of Seller, the Purchased Assets and their
uses comply with all applicable Requirements of Laws and Court
Orders;
(ii) to the knowledge of Seller, Seller has complied with all
Requirements of Laws and Court Orders which are applicable to the
Purchased Assets or the Business;
(iii) there are no lawsuits, claims, suits, proceedings or
investigations pending or, to the knowledge of Seller, threatened
against or affecting Seller in respect of the Purchased Assets or
the Business nor, to the knowledge of Seller, is there any basis for
any of the same, and there are no lawsuits, suits or proceedings
pending in which Seller is the plaintiff or claimant and which
relate to the Purchased Assets or the Business;
(iv) there is no action, suit or proceeding pending or, to the
knowledge of Seller, threatened which questions the legality or
propriety of the transactions contemplated by this Agreement; and
(v) to the knowledge of Seller, no legislative or regulatory
proposal has been adopted or is pending which could adversely affect
the Business.
5.21. Environmental Matters. Except as set forth in Schedule
5.21:
(i) to the knowledge of Seller, the operations of the Business
comply in all material respects with all applicable Environmental
Laws.
(ii) Seller has, in respect of the Business, obtained all
environmental, health and safety Governmental Permits necessary for
its operation, and all such Governmental Permits are in good
standing and Seller is in compliance in all material respects with
all terms and conditions of such permits;
(iii) neither Seller, with respect to the Business, nor any of
the present Division Property or operations, or the past Division
Property or operations, is subject to any on-going investigation by,
order from or agreement with any Person (including without
limitation any prior owner or operator of Division Property)
respecting (i) any Environmental Law, (ii) any Remedial Action or
(iii) any claim of Losses and Expenses arising from the Release or
threatened Release of a Contaminant into the environment;
(iv) Seller is not, with respect to the Business, subject to
any juridical or administrative proceeding, order, judgment, decree
or settlement alleging or addressing a violation of or liability
under any Environmental Law;
(v) Seller has not with respect to the Business:
(a) reported a Release of a hazardous substance pursuant to
Section 103(a) of CERCLA, or any state equivalent;
(b) filed a notice pursuant to Section 103(c) of CERCLA;
(c) filed notice pursuant to Section 3010 of RCRA, indicating
the generation of any hazardous waste, as that term is defined under
40 CFR Part 261 or any state equivalent; or
(d) filed any notice under any applicable Environmental Law
reporting a substantial violation of any applicable Environmental
Law;
(vi) there is not now nor to the knowledge of Seller has there
ever been, on or in any Division Property:
(a) any treatment, recycling, storage or disposal of any
hazardous waste, as that term is defined under 40 CFR Part 261 or
any state equivalent, that requires or required a Governmental
Permit pursuant to Section 3005 of RCRA; or
(b) any underground storage tank or surface impoundment or
landfill or waste pile.
(vii) to the knowledge of Seller, there is not now on or in any
Division Property any polychlorinated biphenyls (PCB) used in
pigments, hydraulic oils, electrical transformers or other
equipment;
(viii) Seller has not, with respect to the Division, received
any notice or claim, including information requests under CERCLA, to
the effect that it is or may be liable to any Person as a result of
the Release or threatened Release of a Contaminant;
(ix) no Environmental Encumbrance has attached to any Division
Property; and
(x) any asbestos-containing material which is on or part of any
Division Property is in good repair according to the current
standards and practices governing such material, and its presence or
condition does not violate any currently applicable Environmental
Law.
5.22. Insurance. Seller believes it has adequate insurance in
force with respect to the Division and Seller shall keep or cause
such insurance or comparable insurance to be kept in full force and
effect through the Closing Date. Seller has complied in all
material respects with each of such insurance policies and has not
failed to give any notice or present any claim thereunder in a due
and timely manner.
5.23. Customers. Set forth in Schedule 5.23 hereto is (i) a
list of names of the 15 largest customers (measured by dollar volume
of sales in each case) of Seller in respect of the Business during
each of the two fiscal years ended December 28, 1997 and the fiscal
nine months ended September 27, 1998.
5.24. No Finder. Neither Seller nor any Person acting on its
behalf has paid or become obligated to pay any fee or commission to
any broker, finder or intermediary for or on account of the
transactions contemplated by this Agreement.
5.25. Disclosure. None of the representations or warranties of
Seller contained herein and none of the information contained in the
Schedules referred to in Article V is false or misleading in any
material respect or omits to state a fact herein or therein
necessary to make the statements herein or therein not misleading in
any material respect.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF BUYER
As an inducement to Seller to enter into this Agreement and to
consummate the transactions contemplated hereby, Buyer hereby
represents and warrants to Seller and agrees as follows:
6.1. Organization of Buyer. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of
the State of Delaware and has full corporate power and authority to
own or lease and to operate and use its properties and assets and to
carry on its business as now conducted.
6.2. Authority of Buyer. Buyer has full power and authority to
execute, deliver and perform this Agreement and all of the Buyer
Ancillary Agreements. The execution, delivery and performance of
this Agreement and the Buyer Ancillary Agreements by Buyer have been
duly authorized and approved by Buyer's board of directors or a
committee thereof and do not require any further authorization or
consent of Buyer or its stockholders. This Agreement has been duly
authorized, executed and delivered by Buyer and is the legal, valid
and binding agreement of Buyer enforceable in accordance with its
terms, and each of the Buyer Ancillary Agreements has been duly
authorized by Buyer and upon execution and delivery by Buyer will be
a legal, valid and binding obligation of Buyer enforceable in
accordance with its terms.
Neither the execution and delivery of this Agreement or any of
the Buyer Ancillary Agreements or the consummation of any of the
transactions contemplated hereby or thereby nor compliance with or
fulfillment of the terms, conditions and provisions hereof or
thereof will:
(i) conflict with, result in a breach of the terms, conditions
or provisions of, or constitute a default, an event or default or an
event creating rights of acceleration, termination or cancellation
or a loss of rights under (1) the Certificate of Incorporation or
By-laws of Buyer, (2) any material note, instrument, agreement,
mortgage, lease, license, franchise, permit or other authorization,
right, restriction or obligation to which Buyer is a party or by
which it is bound or (4) any Requirements of Laws affecting Buyer;
or
(ii) require the approval, consent, authorization or act of, or
the making by Buyer of any declaration, filing or registration with,
any Person, except as provided under the HSR Act.
6.3. No Finder. Neither Buyer nor any Person acting on its
behalf has paid or become obligated to pay any fee or commission to
any broker, finder or intermediary for or on account of the
transactions contemplated by this Agreement.
ARTICLE VII
ACTION PRIOR TO THE CLOSING DATE
The respective parties hereto covenant and agree to take the
following actions between the date hereof and the Closing Date:
7.1. Investigation of the Division by Buyer. Upon receipt of
reasonable advance notice, Seller shall afford and cause the
Division to afford to the officers, employees and authorized
representatives of Buyer (including, without limitation, independent
public accountants and attorneys) access during normal business
hours to the offices, properties, employees and business and
financial records (including computer files, retrieval programs and
similar documentation and such access and information that may be
necessary in connection with an environmental audit) of the Division
to the extent Buyer shall deem necessary or desirable and shall
furnish to Buyer or its authorized representatives such additional
information concerning the Purchased Assets, the Business and the
operations of the Division as shall be reasonably requested,
including all such information as shall be necessary to enable Buyer
or its representatives to verify the accuracy of the representations
and warranties contained in this Agreement, to verify that the
covenants of Seller contained in this Agreement have been complied
with and to determine whether the conditions set forth in Article IX
have been satisfied. Buyer agrees that such investigation shall be
conducted in such a manner as not to interfere unreasonably with the
operations of Seller or the Division. No investigation made by
Buyer or its representatives hereunder shall affect the
representations and warranties of Seller hereunder.
7.2. Preserve Accuracy of Representations and Warranties. Each
of the parties hereto shall refrain from taking any action which
would render any representation or warranty contained in Article V
or VI of this Agreement inaccurate as of the Closing Date. Each
party shall promptly notify the other of any action, suit or
proceeding that shall be instituted or threatened against such party
to restrain, prohibit or otherwise challenge the legality of any
transaction contemplated by this Agreement. Seller shall promptly
notify Buyer of any lawsuit, claim, proceeding or investigation that
may be threatened, brought, asserted or commenced against Seller
which would have been listed in Schedule 5.20 if such lawsuit,
claim, proceeding or investigation had arisen prior to the date
hereof.
7.3. Consents of Third Parties: Governmental Approvals. (a)
Seller will act diligently and reasonably to secure, before the
Closing Date, the consent, approval or waiver, in form and substance
reasonably satisfactory to Buyer, from any party to any Seller
Agreement required to be obtained to assign or transfer any such
Agreements to Buyer or to otherwise satisfy the conditions set forth
in Section 9.5; provided that neither Seller nor Buyer shall have
any obligation to offer or pay any consideration in order to obtain
any such consents or approvals; and provided, further, that Seller
shall not make any agreement or understanding affecting the
Purchased Assets or the Business as a condition for obtaining any
such consents or waivers except with the prior written consent of
Buyer. During the period prior to the Closing Date, Buyer shall act
diligently and reasonably to cooperate with Seller to obtain the
consents, approvals and waivers contemplated by this Section 7.3(a).
(b) During the period prior to the Closing Date, Seller and
Buyer shall act diligently and reasonably, and shall cooperate with
each other, to secure any consents and approvals of any Governmental
Body required to be obtained by them in order to assign or transfer
any Governmental Permits to Buyer, to permit the consummation of the
transactions contemplated by this Agreement, or to otherwise satisfy
the conditions set forth in Section 9.4; provided that Seller shall
not make any agreement or understanding affecting the Purchased
Assets or the Business as a condition for obtaining any such
consents or approvals except with the prior written consent of
Buyer.
7.4. Operations Prior to the Closing Date. From the date of
this Agreement to the Closing Date, (a) Seller shall operate and
carry on the Business only in the ordinary course and substantially
as presently operated. Consistent with the foregoing, Seller shall
keep and maintain the Purchased Assets in substantially their
present condition and shall use its reasonable best efforts
consistent with good business practice to maintain the business
organization of the Division intact and to preserve the goodwill of
the suppliers, contractors, licensors, employees, customers,
distributors and others having business relations with the Business.
In connection therewith, Seller shall not (i) transfer or cause to
be transferred from the Division any employee or agent thereof (ii)
offer employment after the Closing Date to any such employee or
agent or otherwise attempt to persuade any such person to terminate
his or her relationship with the Division, except as otherwise
provided in Section 8.4.
(b) Except as expressly contemplated by this Agreement or
except with the express written approval of Buyer, Seller shall not:
(i) make or enter into any contract or commitment for any
capital expenditure with respect to the Division which exceeds
$100,000;
(ii) enter into any contract, agreement, undertaking or
commitment which would have been required to be set forth in
Schedule 5.18 if in effect on the date hereof or enter into any
contract which cannot be assigned to Buyer;
(iii) enter into any contract for the purchase of real property
to be used by the Division or for the sale of any Owned Real
Property or exercise any option to purchase real property listed in
Schedule 5.9 or any option to extend a lease listed in Schedule
5.10;
(iv) sell, lease (as lessor), transfer or otherwise dispose of
(including any transfers within the Division as well as any
transfers from the Division to Seller or any of its Affiliates), or
mortgage or pledge, or impose or suffer to be imposed any
Encumbrance on, any of the Purchased Assets, other than inventory
and minor amounts of personal property sold or otherwise disposed of
for fair value in the ordinary course of the Business consistent
with past practice and other than Permitted Encumbrances;
(v) cancel any debts owed to or claims held by the Division
(including the settlement of any claims or litigation) other than in
the ordinary course of the Business consistent with past practice;
(vi) create, incur or assume, or agree to create, incur or
assume, any indebtedness for borrowed money in respect of the
Division (other than money borrowed or advances from Seller or any
of its Affiliates in the ordinary course of the Business consistent
with past practice) or enter into, as lessee, any capitalized lease
obligations (as defined in Statement of Financial Accounting
Standards No. 13);
(vii) accelerate or delay collection of any notes or accounts
receivable generated by the Business in advance of or beyond their
regular due dates or the dates when the same would have been
collected in the ordinary course of the Business consistent with
past practice;
(viii) delay or accelerate payment of any account payable or
other liability of the Business beyond or in advance of its due date
or the date when such liability would have been paid in the ordinary
course of the Business consistent with past practice;
(ix) allow the levels of raw materials, supplies, work-in-
process or other materials included in the inventory of the Division
to vary in any material respect from the levels customarily
maintained in the Business;
(x) institute any increase in any profit-sharing, bonus,
incentive, deferred compensation, insurance, pension, retirement,
medical, hospital, disability, welfare or other employee benefit
plan with respect to employees of the Division or make any change in
the compensation of the employees of the Division, other than
changes made in accordance with normal compensation practices and
consistent with past compensation practices; or
(xi) make any material change in the accounting policies
applied in the preparation of the financial statements contained in
Schedule 5.4.
7.5. Notification by Seller of Certain Matters. During the
period prior to the closing Date, Seller will promptly advise Buyer
in writing of (i) any material adverse change in the condition of
the Purchased Assets or the Business, (ii) any notice or other
communication from any third Person alleging that the consent of
such third Person is or may be required in connection with the
transactions contemplated by this Agreement, and (iii) any material
default under any Seller Agreement or event which, with notice or
lapse of time or both, would become such a default on or prior to
the Closing Date and of which Seller has knowledge.
7.6. Antitrust Law Compliance. Buyer and Seller have caused to
be filed with the Federal Trade Commission and the Antitrust
Division of the Department of Justice the notifications and other
information required to be filed under the HSR Act, or any rules and
regulations promulgated thereunder, with respect to the transactions
contemplated hereby. Each party warrants that all such filings by
it are, as of the date filed, true and accurate and in accordance
with the requirements of the HSR Act and any such rules and
regulations. Each of Buyer and Seller agrees to make available to
the other such information as each of them may reasonably request
relative to its business, assets and property (including, in the
case of Seller, the Business) as may be required of each of them to
file any additional information requested by such agencies under the
HSR Act and any such rules and regulations.
7.7. Commitment for Title Insurance. Seller shall cause to be
delivered to Buyer not less than five days prior to the Closing
Date, with respect to each parcel of Owned Real Property identified
in Schedule 5.9, (i) a current commitment for the issuance of an
owner's title insurance policy, all of which policies shall be 1990
form policies with an endorsement deleting the "creditor's rights"
exception or exclusion, with extended coverage over general
exceptions 1 (rights or claims of parties in possession), 2 (survey
matters), 3 (Zoning), 4 (mechanic's liens) and 5 (taxes or special
assessments not shown as existing liens), with a Form 3.1 zoning
endorsement (with assurances with respect to the number of parking
spaces and the number of loading docks) written by a nationally
recognized title insurance company in amount, form and substance
satisfactory to Buyer and providing that, upon the satisfaction of
the conditions specified therein, Buyer will have good and
marketable title thereto, free and clear of all Encumbrances, except
for Permitted Encumbrances; and (ii) a survey, acceptable to such
title company, of a recent date with respect to each such parcel
showing no encroachments or other survey defects with respect to the
buildings, structures and other improvements located on such
property, except any such imperfections which do not materially
detract from the value of, or materially impair the existing use of,
the property affected by such imperfections.
ARTICLE VIII
ADDITIONAL AGREEMENTS
8.1. Covenant Not to Compete or Solicit Business. In
furtherance of the sale of the Purchased Assets and the Business to
Buyer hereunder by virtue of the transactions contemplated hereby
and more effectively to protect the value and goodwill of the
Purchased Assets and the Business so sold, at the Closing Seller
shall execute and deliver to Buyer the Covenant Not to Compete.
8.2. Taxes. (a) Seller shall be liable for and shall pay, and,
pursuant to Article XI shall indemnify Buyer against, all Taxes
(whether assessed or unassessed) applicable to the Business and the
Purchased Assets, in each case attributable to (i) taxable years or
periods ending prior to the Closing Date and, with respect to any
Straddle Period, the portion of such Straddle Period ending on and
including the day immediately preceding the Closing Date, (ii) any
and all Taxes imposed on the sale of the Purchased Assets (and the
assumption of the Assumed Liabilities) pursuant to the transactions
contemplated by this Agreement. Buyer shall be liable for and shall
pay, and, pursuant to Article XI shall indemnify Seller against, all
Taxes (whether assessed or unassessed) applicable to the Business
and the Purchased Assets, in each case attributable to taxable years
or periods beginning on or after the Closing Date and, with respect
to any Straddle Period, the portion of such Straddle Period
beginning on or after the Closing Date; provided, however, that
Buyer shall not be liable for or pay, and shall not indemnify Seller
against, any Taxes (whether assessed or unassessed) for which Seller
is liable under this Agreement without regarding to this sentence
and provided further that Buyer shall not be liable for or pay, and
shall not indemnify Seller against (i) any and all Taxes (whether
assessed or unassessed) imposed on the sale of the Purchased Assets
(and the assumption of the Assumed Liabilities) pursuant to the
transactions contemplated by this Agreement or any Seller Ancillary
Agreement. For purposes of this Section 8.2, any Straddle Period
shall be treated on a "closing of the books" basis as two partial
periods, one ending at the close of the day immediately preceding
the Closing Date and the other beginning at the beginning of the
Closing Date except that Taxes (such as property Taxes) imposed on
a periodic basis shall be allocated on a daily basis.
(b) Buyer and Seller agree that the transactions contemplated
by this Agreement constitute a sale of a trade or business within
the meaning of Section 41(f)(3) of the Code. Seller will provide to
Buyer upon request all information necessary in order to permit
Buyer to apply the provisions of Section 41(f)(3)(A) of the Code.
Buyer and Seller further agree that neither Buyer nor Seller will
prepare or file any Tax Return, or take any position on such Tax
Return, which is inconsistent with this Section 8.2(b).
(c) Notwithstanding Section 8.2(a), any sales Tax, use Tax,
real property transfer or gains Tax, documentary stamp Tax or
similar Tax attributable to the sale or transfer of the Purchased
Assets shall be paid by Seller. Buyer agrees to timely sign and
delivery such certificates or forms as may be necessary or
appropriate to establish an exemption from (or otherwise reduce), or
make a report with respect to, such Taxes.
(d) Seller or Buyer, as the case may be, shall provide
reimbursement for any Tax paid by one party all or a portion of
which is the responsibility of the other party in accordance with
the terms of this Section 8.2. Within a reasonable time prior to
the payment of any said Tax, the party paying such Tax shall give
notice to the other party of the Tax payable and the portion which
is the liability of each party, although failure to do so will not
relieve the other party from its liability hereunder.
(e) After the Closing Date, each of Seller and Buyer shall (and
cause their respective Affiliates to):
(i) assist the other party in preparing any Tax Returns which
such other party is responsible for preparing and filing;
(ii) cooperate fully in preparing for any audits of, or
disputes with taxing authorities regarding, any Tax Returns of the
Business or the Purchased Assets;
(iii) make available to the other and to any taxing authority
as reasonably requested all information, records, and documents
relating to Taxes of the Business or the Purchased Assets;
(iv) provide timely notice to the other in writing of any
pending or threatened Tax audits or assessments relating to Taxes of
the Business or the Purchased Assets for taxable periods for which
the other may have a liability under this Section 8.2; and
(v) furnish the other with copies of all correspondence
received from any taxing authority in connection with any Tax audit
or information request with respect to any such taxable period.
(f) Notwithstanding anything to the contrary in this Agreement,
the obligations of the parties set forth in this Section 8.2 shall
be unconditional and absolute and shall remain in effect without
limitation as to time and, to the extent, if any, inconsistent with
Section 8.3, this Section 8.2 shall govern with respect to the
obligations set forth in this Section 8.2.
8.3. Discharge of Division's Liabilities. Seller covenants and
agrees that it will pay and discharge, and hold Buyer harmless from,
each and every liability and obligation of Seller in respect of the
Business or the Purchased Assets arising from events occurring prior
to the Closing Date, excepting only those liabilities and
obligations expressly assumed by Buyer at the Closing pursuant to
instruments of assumption delivered to Seller at the Closing, it
being understood and agreed that Buyer is assuming no liabilities or
obligations of Seller other than liabilities and obligations so
expressly assumed by Buyer.
8.4. Employees and Employee Benefit Plans. (a) Offers of
Employment. Effective as of the Closing Date, Buyer shall make
offers of employment to all employees of Seller on the Closing Date
who are employed in the Division (the "Affected Employees"),
including, without limitation, any such Affected Employees who are
on leave of absence on the Closing Date, except for those persons
listed in Schedule 8.4(A), each such offer to be contingent upon
receipt by Buyer of a release signed by the offeree allowing Seller
to comply with its obligations under Section 8.4(i). Each Affected
Employee, except for those persons listed in Schedule 8.4(A) shall
be offered a job with Buyer that has similar job content, rate of
pay, and, except in the case of persons who are sales
representatives or sales managers, location as the job in which such
Affected Employee is employed by Seller on the Valuation Date.
Those employees of Seller who accept Buyer's offer of employment
with Buyer are referred to herein as "Transferred Employees." The
active participation of all Transferred Employees in the employee
benefit plans, programs, agreements or arrangements maintained by
Seller (the "Plans") shall cease as of the Closing Date, except as
otherwise provided in any of the Plans (provided, however, that no
such continued participation shall give rise to a multiple employer
arrangement which includes Buyer). Seller shall retain all
obligation and liability for all benefits (including, but not
limited to, severance benefits, if any, and continuation coverage
under Part 6 of Title I of ERISA) under the Plans with respect to
the Transferred Employees and their beneficiaries. Buyer shall take
all action necessary (including the adoption of plan amendments) to
provide to Transferred Employees coverage effective as of the
Closing Date under the following employee benefit plans: Retirement
Benefit Plan of R. R. Donnelley & Sons Company; Donnelley Deferred
Compensation and Voluntary Savings Plan; R. R. Donnelley & Sons
Company Group Benefits Plan; R. R. Donnelley & Sons Company Flexible
Benefits Plan; R. R. Donnelley & Sons Company Separation Pay Plan
(the "Donnelley Separation Pay Plan"); R. R. Donnelley & Sons
Company Special Severance Plan and Donnelley Educational Assistance
Plan (the last five plans shall be hereinafter referred to as the
"Donnelley Welfare Plans").
(b) Vacation. Buyer shall assume the liability for all accrued
but unused vacation of Transferred Employees determined as of the
Closing Date, as set forth in Schedule 8.4(B), which Seller shall
deliver to Buyer within ten days after Closing, accompanied by a
certificate as to the accuracy of such Schedule signed on behalf of
Seller by the President or any Vice President of Seller.
(c) Workers' Compensation. Workers' compensation injury claims
of any Transferred Employees shall be the responsibility and
liability of Seller if the event giving rise to such claims occurred
prior to the Closing Date and shall be the responsibility and
liability of Buyer if the event giving rise to the claim occurs on
or after the Closing Date. Workers' compensation occupational
disease claims of any Transferred Employees shall be the
responsibility and liability of Seller if such claims were filed
prior to the Closing Date and shall be the responsibility and
liability of Buyer if such claims are filed on or after the Closing
Date.
(d) Severance. Seller shall indemnify Buyer for the cost of
severance payable under the Donnelley Separation Pay Plan to any
Transferred Employee identified as a sales manager on Schedule
8.4(D) whose employment with Buyer is terminated during the six-
month period beginning on the Closing Date; provided, however, that
Seller's liability shall be limited to the amount which would have
been payable to such terminated employee under the terms of The
Standard Register Company Employee Severance Pay Plan.
(e) Credit. Buyer shall recognize the continuous service of
Transferred Employees with Seller and its Affiliates on or prior to
the Closing Date as if such service had been rendered to Buyer or
one of its Affiliates for purposes of any waiting periods,
eligibility and vesting purposes under the Donnelley Welfare Plans
and the other Buyer plans referred to in Section 8.4; provided,
however, that with respect to the retiree portions of the Medical
Benefits Program and the Death Benefit Program under the R. R.
Donnelley & Sons Company Group Benefits Plan, such continuous
service shall only be taken into account for those Transferred
Employees who remain employed with Buyer or one of its subsidiaries
during the entire thirteen-month period beginning on the Closing
Date. Transferred Employees shall be reimbursed by Buyer for any
portion of annual deductible, co-payment or out-of-pocket maximums
which were satisfied under the Plans during the period prior to the
Closing Date. The Donnelley Welfare Plans shall not impose
limitation of coverage for pre-existing conditions on any
Transferred Employee with respect to any such condition which was
not excluded under the Plans prior to the Closing Date.
(f) Consulting. Seller shall use its reasonable best efforts
to make Michael Spaul available, on a full-time basis, for
consulting services to Buyer at no cost to Buyer for the six-month
period beginning on the Closing Date. At the end of such six-month
period, Buyer shall have the right to offer employment to Michael
Spaul, and Seller shall not interfere with Buyer's negotiations
regarding such offer. Seller will also use its reasonable best
efforts to keep David Dilucente employed at the Division through the
Closing Date.
(g) Third-Party Rights. No provision of this Section 8.4 shall
create any third-party beneficiary rights in any employee or former
employee (including any beneficiary or dependent thereof) of Seller,
any of its Affiliates, or Buyer or any of its Affiliates in respect
of continued employment (or resumed employment) for any specified
period of any nature or kind whatsoever, and no provision of this
Section 8.4 shall create such third-party beneficiary rights in any
such persons in respect of any benefits that may be provided,
directly or indirectly, under any employee benefit plan or
arrangement.
(h) Indemnity. Seller shall indemnify and hold Buyer harmless
against any liabilities and obligations of any kind, whether direct,
indirect, contingent or otherwie (including but not limited to any
liability arising under (a) Part 6 of Title I of ERISA or Section
4980B of the Code, (b) Sections 502(i) or 502(l) of ERISA or Section
4975 of the Code, (c) Section 302 of ERISA or Section 412 of the
Code or (d) Title IV of ERISA) related to, associated with or
arising out of any of the Plans. This indemnity shall apply in
addition to the indemnification in Section 11.1 and shall apply
without regard to any minimum amounts or time limitations otherwise
imposed therein.
(i) Personnel Files. Within 14 days after the Closing Date,
Seller shall deliver to Buyer copies of all personnel files of all
Transferred Employees who have signed the release contemplated in
Section 8.4(a). As soon as practicable after execution of this
Agreement, Seller shall make available to Buyer employee demographic
data regarding the Affected Employees so that Buyer may make the
offers of employment contemplated by Section 8.4(a).
8.5. Collection of Valuation Date Receivables. (a) During the
90-day period following the Closing Date (the "Collection Period"),
Buyer shall collect the Valuation Date Receivables in accordance
with its collection practices, except that with respect to any
particular Valuation Date Receivable, Buyer shall be under no
obligation to commence or not to commence litigation to effect
collection. Buyer shall not make any adjustment, concession or
settlement with respect to any particular Valuation Date Receivable
without first obtaining the written consent of Seller, which shall
not be unreasonably withheld or delayed.
(b) From time to time during the Collection Period and through
the 15 days thereafter, Buyer may notify Seller of Buyer's desire to
sell all or any portion of the Valuation Date Receivables to Seller.
Any such notice to Seller shall be in writing, shall include a
certification by Buyer that Buyer has not made any adjustment,
concession or settlement with respect to any of the Valuation Date
Receivables that Buyer desires to sell to Seller, except as
contemplated in Section 8.5(a), and shall be signed by the President
or any Vice President of Buyer. Within five days of receipt of such
notice, Seller shall pay Buyer, by wire transfer of immediately
available funds to such bank account as Buyer shall designate in
writing to Seller, the amount of Valuation Date Receivables set
forth in Buyer's notice, plus interest thereon, if any, from the
fifth day after receipt of Buyer's notice to the date of payment
thereof at the Agreed Rate therefor. Upon receipt of payment
therefor, Buyer shall transfer to Seller, without recourse or
warranty, all of Buyer's right, title and interest in, to and under
the Valuation Date Receivables sold to Seller pursuant to this
Section 8.5.
ARTICLE IX
CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER
The obligations of Buyer under this Agreement shall, at the
option of Buyer, be subject to the satisfaction, on or prior to the
Closing Date, of the following conditions:
9.1. No Misrepresentation or Breach of Covenants and
Warranties. There shall have been no material breach by Seller in
the performance of any of its covenants and agreements herein; each
of the representations and warranties of Seller contained or
referred to herein shall be true and correct on the Closing Date as
though made on the Closing Date, except for (a) changes therein
specifically permitted by this Agreement or resulting from any
transaction expressly consented to in writing by Buyer, (b) any
transaction permitted by Section 7.4 or (c) any loss of customers,
sales representatives or sales managers as a result of the public
announcement or pendency of the transactions contemplated by this
Agreement, provided that Seller used its reasonable best efforts to
prevent any such loss of customers, sales representatives or sales
managers; and there shall have been delivered to Buyer a certificate
to such effect, dated the Closing Date, signed on behalf of Seller
by the President or any Vice President of Seller.
9.2. No Changes or Destruction of Property. Between the date
hereof and the Closing Date, there shall have been (a) no material
adverse change in the Purchased Assets, the Business or the
operations, liabilities, profits, prospects or condition (financial
or otherwise) of the Division; provided that any loss of customers,
sales representatives or sales managers as a result of the public
announcement or pendency of the transactions contemplated by this
Agreement shall not be deemed to be a material adverse change for
purposes of this Section 9.1, provided further that Seller used its
reasonable best efforts to prevent any such loss of customers, sales
representatives or sales managers; (b) no material adverse federal
or state legislative or regulatory change affecting the Business or
its products or services; and (c) no material damage to the
Purchased Assets by fire, flood, casualty, act of God or the public
enemy or other cause, regardless of insurance coverage for such
damage; and there shall have been delivered to Buyer a certificate
to such effect, dated the Closing Date and signed on behalf of
Seller by the President or any Vice President of Seller.
9.3. No Restraint or Litigation. The waiting period under the
HSR Act shall have expired or been terminated, and no action, suit,
investigation or proceeding shall have been instituted or threatened
to restrain or prohibit or otherwise challenge the legality or
validity of the transactions contemplated hereby.
9.4. Necessary Governmental Approvals. The parties shall have
received all approvals and actions of or by all Governmental Bodies
which are necessary to consummate the transactions contemplated
hereby, which are required to be obtained prior to the Closing by
applicable Requirements of Laws or which are necessary to prevent a
material adverse change in the Purchased Assets, the Business or the
operations, liabilities, profits, prospects or condition (financial
or otherwise) of the Division.
9.5. Necessary Consents. Seller shall have received consents,
in form and substance reasonably satisfactory to Buyer, to the
transactions contemplated hereby from the other parties to all
contracts, leases, agreements and permits to which Seller is a party
or by which Seller or any of the Purchased Assets is affected and
which are necessary to prevent a material adverse change in the
Purchased Assets, the Business or in the operations, liabilities,
profits, prospects or condition (financial or otherwise) of the
Division.
9.6. Title Insurance. Buyer shall have received, with respect
to each parcel of the Owned Real Property identified in Schedule
5.9, a current owner's title insurance policy, all of which policies
shall be 1990 form policies with an endorsement deleting the
"creditor's rights" exception or exclusion, with extended coverage
over general exceptions 1 (rights or claims of parties in
possession), 2 (survey matters), 3 (easements), 4 (mechanic's liens)
and 5 (taxes or special assessments not shown as existing liens),
with a Form 3.1 zoning endorsement (with assurances with respect to
the number of parking spaces and the number of loading docks),
written by a nationally recognized title insurance company in
amount, form and substance satisfactory to Buyer insuring that Buyer
has good and marketable title thereto, free and clear of all
Encumbrances, except for Permitted Encumbrances.
ARTICLE X
CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER
The obligations of Seller under this Agreement shall, at the
option of Seller, be subject to the satisfaction, on or prior to the
Closing Date, of the following conditions:
10.1. No Misrepresentation or Breach of Covenants and
Warranties. There shall have been no material breach by Buyer in
the performance of any of its covenants and agreements herein; each
of the representations and warranties of Buyer contained or referred
to in this Agreement shall be true and correct on the Closing Date
as though made on the Closing Date, except for changes therein
specifically permitted by this Agreement or resulting from any
transaction expressly consented to in writing by Seller or any
transaction contemplated by this Agreement; and there shall have
been delivered to Seller a certificate to such effect, dated the
Closing Date and signed on behalf of Buyer by the President or any
Vice President of Buyer.
10.2. No Restraint or Litigation. The waiting period under the
HSR Act shall have expired or been terminated, and no action, suit
or proceeding by any Governmental Body shall have been instituted or
threatened to restrain, prohibit or otherwise challenge the legality
or validity of the transactions contemplated hereby.
10.3. Necessary Governmental Approvals. The parties shall have
received all approvals and actions of or by all Governmental Bodies
necessary to consummate the transactions contemplated hereby, which
are required to be obtained prior to the Closing by applicable
Requirements of Laws.
ARTICLE XI
INDEMNIFICATION
11.1. Indemnification by Seller. (a) Seller agrees to
indemnify and hold harmless Buyer from and against any and all
Losses and Expense incurred by Buyer in connection with or arising
from:
(i) any breach by Seller of any of its covenants in this
Agreement or in any Seller Ancillary Agreement;
(ii) any failure of Seller to perform any of its obligations in
this Agreement or in any Seller Ancillary Agreement;
(iii) any breach of any warranty or the inaccuracy of any
representation of Seller contained or referred to in this Agreement
or any certificate delivered by or on behalf of Seller pursuant
hereto;
(iv) any failure of any of the Purchased Assets to be in Year
2000 Compliant Format; or
(v) the failure of Seller to perform any Excluded Liability
(except for the Excluded Liabilities described in Section 2.4(g)).
(b) Seller shall be required to indemnify and hold harmless
under clause (iii) of Section 11.1(a) with respect to Loss and
Expense incurred by Buyer (other than Loss and Expense incurred as
a result of inaccuracies of the representations and warranties
contained in Sections 5.1, 5.3, 5.6, 5.15(b) and 5.24) only to the
extent that the aggregate amount of such Loss and Expense exceeds
$500,000; provided, however, that Seller's obligation to indemnify
and hold harmless under clause (iii) of Section 11.1(a) with respect
to Loss and Expense incurred by Buyer (other than Loss and Expense
incurred as a result of inaccuracies of the representations and
warranties contained in Sections 5.1, 5.3, 5.6, 5.15(b) and 5.24)
shall be limited to the payment by Seller of cash in the aggregate
in an amount equal to $15,000,000.
(c) Seller shall be required to indemnify and hold harmless
under clause (iv) of Section 11.1(a) with respect to Loss and
Expense incurred by Buyer only to the extent that the aggregate
amount of such Loss and Expense exceeds $250,000; provided, however,
that Seller's obligation to indemnify and hold harmless under clause
(iv) of Section 11.1(a) with respect to Loss and Expense incurred by
Buyer shall be limited to the payment by Seller of cash in the
aggregate in an amount equal to $250,000.
(d) The indemnification provided for in Section 11.1(a) shall
terminate two years after the Closing Date (and no claims shall be
made by Buyer under Section 11.1(a) thereafter), except that the
indemnification by Seller shall continue as to:
(i) the covenants of Seller set forth in Section 8.2 and the
representations and warranties set forth in Section 5.6, which shall
survive until one year after the expiration of the relevant
statutory periods of limitations applicable to the underlying claim,
giving effect to any waiver, mitigation or extension thereof;
(ii) the covenants of Seller set forth in Section 13.6 and the
Covenant Not to Compete, as to which the indemnification provided
for in Section 11.1(a) shall terminate three months after the
expiration of the period provided for therein; and
(iii) any Loss or Expense of which Buyer has notified Seller in
accordance with the requirements of Section 11.4 on or prior to the
date such indemnification would otherwise terminate in accordance
with this Section 11.1(d), as to which the obligation of Seller
shall continue until the liability of Seller shall have been
determined pursuant to this Article XI, and Seller shall have
reimbursed Buyer for the full amount of such Loss and Expense in
accordance with this Article XI.
(e) Notwithstanding anything to the contrary contained in this
Agreement, the representations and warranties of Seller set forth in
Section 5.15(a) shall expire at Closing.
(f) Seller shall not be required to indemnify and hold harmless
under this Section 11.1 with respect to Loss and Expense incurred by
Buyer of the type described in clauses (i) through (iii) of Section
11.3(a).
11.2. Indemnification by Buyer. (a) Buyer agrees to indemnify
and hold harmless Seller from and against any and all Loss and
Expense incurred by Seller in connection with or arising from:
(i) any breach by Buyer of any of its covenants or agreements
in this Agreement or any Buyer Ancillary Agreement;
(ii) any failure by Buyer to perform any of its obligations in
this Agreement or in any Buyer Ancillary Agreement; or
(iii) any breach of any warranty or the inaccuracy of any
representation of Buyer contained or referred to in this Agreement
or in any certificate delivered by or on behalf of Buyer pursuant
thereto.
(b) Buyer shall be required to indemnify and hold harmless
under clause (iii) of Section 11.2(a) with respect to Loss and
Expense incurred by Seller (other than Loss and Expense incurred as
a result of inaccuracies of the representations and warranties
contained in Section 6.3) only to the extent that the aggregate
amount of such Loss and Expense exceeds $250,000; and provided,
further, that Buyer's obligation to indemnify and hold harmless
under clause (iii) of Section 11.2(b) with respect to Loss and
Expense incurred by Seller (other than Loss and Expense incurred as
a result of inaccuracies of the representations and warranties
contained in Section 6.3) shall be limited to the payment by Buyer
of cash in the aggregate in an amount equal to $15,000,000.
(c) The indemnification provided for in Section 11.2(a) shall
terminate two years after the Closing Date (and no claims shall be
made by Seller under Section 11.2(a) thereafter), except that the
indemnification by Buyer shall continue as to:
(i) the covenants of Buyer set forth in Section 8.2 which shall
survive until one year after the expiration of the relevant
statutory periods of limitations applicable to the underlying claim,
giving effect to any waiver, mitigation or extension thereof;
(ii) the covenant of Buyer set forth in Section 13.6 as to
which the indemnification provided for in this Section 11.2(a) shall
terminate three months after the expiration of the period provided
for therein; and
(iii) any Loss or Expense of which Seller has notified Buyer in
accordance with the requirements of Section 11.4 on or prior to the
date such indemnification would otherwise terminate in accordance
with this Section 11.2(c), as to which the obligation of Buyer shall
continue until the liability of Buyer shall have been determined
pursuant to this Article XI, and Buyer shall have reimbursed Seller
for the full amount of such Loss and Expense in accordance with this
Article XI.
11.3. Environmental Indemnity. (a) Without regard to any
limitations set forth in Section 11.1, Seller agrees to indemnify
and hold harmless Buyer from and against any and all Losses and
Expense incurred by or asserted against Buyer in connection with or
arising from:
(i) the breach of any warranty or the inaccuracy of any
representation of Seller contained in Section 5.21; or
(ii) all liabilities and obligations, including Remedial
Action, whether the subject of a third Person claim or incurred by
Buyer, related to, associated with or arising out of any violation
of Environmental Law or any Release or threatened Release of a
Contaminant at, on or from any Division Property prior to the
Closing Date, whether incurred or imposed pursuant to any
Environmental Law, or any environmental common law theory; and
(iii) any liabilities or obligations, including Remedial
Action, related to any real property or facility to which
Contaminants generated by the Business were sent prior to the
Closing Date;
provided, however, that Seller shall be required to indemnify and
hold harmless under this Section 11.3(a) with respect to Loss and
Expense incurred by Buyer only to the extent that the aggregate
amount of such Loss and Expense exceeds $250,000; and provided,
further, that Seller's obligation to indemnify and hold harmless
under this Section 11.3(a) shall be limited to the payment by Seller
of cash in the aggregate in an amount equal to $10,000,000.
(b) The indemnification provided for in this Section 11.3 shall
terminate three years after the Closing Date (and no claims shall be
made by Buyer under this Section 11.3 thereafter), except that the
indemnification by Seller shall continue as to any Loss or Expense
of which Buyer has notified Seller in accordance with the
requirements of Section 11.4 on or prior to the date that such
indemnification would otherwise terminate in accordance with this
Section 11.3(b), as to which the obligation of Seller shall continue
until the liability of Seller shall have been determined pursuant to
this Article XI.
11.4. Notice of Claims. Buyer or Seller (the "Indemnified
Party") seeking indemnification hereunder shall give to the party
obligated to provide indemnification to such Indemnified Party (the
"Indemnitor") a notice (a "Claim Notice") describing in reasonable
detail the facts giving rise to any claim for indemnification
hereunder and shall include in such Claim Notice (if then known )
the amount or the method of computation of the amount of such claim,
and a reference to the provision of this Agreement or any other
agreement, document or instrument executed hereunder or in
connection herewith upon which such claim is based; provided, that
a Claim Notice in respect of any action at law or suit in equity by
or against a third Person as to which indemnification will be sought
shall be given promptly after the action or suit is commenced;
provided, further that failure to give such notice shall not relieve
the Indemnitor of its obligations hereunder, except to the extent it
shall have been prejudiced by such failure.
(b) After the giving of any Claim Notice pursuant hereto, the
amount of indemnification to which an Indemnified Party shall be
entitled under this Article XI shall be determined: (i) by the
written agreement between the Indemnified Party and the Indemnitor;
(ii) by a final judgment or decree of any court of competent
jurisdiction; or (iii) by any other means to which the Indemnified
Party and the Indemnitor shall agree. The judgment or decree of a
court shall be deemed final when the time for appeal, if any, shall
have expired and no appeal shall have been taken or when all appeals
taken shall have been finally determined. The Indemnified Party
shall have the burden of proof in establishing the amount of Loss
and Expense suffered by it.
11.5. Third Person Claims. (a) Subject to Section 11.5(b), the
Indemnified Party shall have the right to conduct and control,
through counsel of its choosing, the defense, compromise or
settlement of any third Person claim, action or suit against such
Indemnified Party as to which indemnification will be sought by any
Indemnified Party from any Indemnitor hereunder, and in any such
case the Indemnitor shall cooperate in connection therewith and
shall furnish such records, information and testimony and attend
such conferences, discovery proceedings, hearings, trials and
appeals as may be reasonably requested by the Indemnified Party in
connection therewith; provided, that the Indemnitor may participate,
through counsel chosen by it at its own expense, in the defense of
any such claim, action or suit as to which the Indemnified Party has
so elected to conduct and control the defense thereof; and provided,
further, that the Indemnified Party shall not, without the written
consent of the Indemnitor (which written consent shall not be
unreasonably withheld), pay, compromise or settle any such claim,
action or suit, except that no such consent shall be required if,
following a written request from the Indemnified Party, the
Indemnitor shall fail, within 14 days after the making of such
request, to acknowledge and agree in writing that, if such claim,
action or suit shall be adversely determined, such Indemnitor has an
obligation to provide indemnification thereunder to such Indemnified
Party. Notwithstanding the foregoing, the Indemnified Party shall
have the right to pay, settle or compromise any such claim, action
or suit without such consent, provided that in such event the
Indemnified Party shall waive any right to indemnity therefor
hereunder unless such consent is unreasonably withheld.
(b) If any third Person claim, action or suit against any
Indemnified Party is solely for money damages or, where Seller is
the Indemnitor, will have no continuing effect in any material
respect on the Business or the Purchased Assets, then the Indemnitor
shall have the right to conduct and control, through counsel of its
choosing, the defense, compromise or settlement of any such third
Person claim, action or suit against such Indemnified Party as to
which indemnification will be sought by any Indemnified Party from
any Indemnitor hereunder if the Indemnitor has acknowledged and
agreed in writing that, if the same is adversely determined, the
Indemnitor has an obligation to provide indemnification to the
Indemnified Party in respect thereof, and in any such case the
Indemnified Party shall cooperate in connection therewith and shall
furnish such records, information and testimony and attend such
conferences, discovery proceedings, hearings, trials and appeals as
may be reasonably requested by the Indemnitor in connection
therewith; provided, that the Indemnified Party may participate,
through counsel chosen by it and at its own expense, in the defense
of any such claim, action or suit as to which the Indemnitor has so
elected to conduct and control the defense thereof. Notwithstanding
the foregoing, the Indemnified Party shall have the right to pay,
settle or compromise any such claim, action or suit, provided that
in such event the Indemnified Party shall waive any right to
indemnity therefor hereunder unless the Indemnified Party shall have
sought the consent of the Indemnitor to such payment, settlement or
compromise and such consent was unreasonably withheld, in which
event no claim for indemnity therefor hereunder shall be waived.
ARTICLE XII
TERMINATION
12.1. Termination. Anything contained in this Agreement to the
contrary notwithstanding, this Agreement may be terminated at any
time prior to the Closing Date:
(a) by the mutual consent of Buyer and Seller;
(b) by Buyer or Seller if the Closing shall not have occurred
on or before March 31, 1999 (or such later date as may be mutually
agreed to by Buyer and Seller);
(c) by Buyer in the event of any material breach by Seller of
any of Seller's agreements, representations or warranties contained
herein and the failure of Seller to cure such breach within seven
days after receipt of notice from Buyer requesting such breach to be
cured; or
(d) by Seller in the event of any material breach by Buyer of
any of Buyer's agreements, representations or warranties contained
herein and the failure of Seller to cure such breach within seven
days after receipt of notice from Seller requesting such breach to
be cured.
12.2. Notice of Termination. Any party desiring to terminate
this Agreement pursuant to Section 12.1 shall give notice of such
termination to the other party to this Agreement.
12.3. Effect of Termination. In the event that this Agreement
shall be terminated pursuant to this Article XII, all further
obligations of the parties under this Agreement (other than Sections
13.2 and 13.10) shall be terminated without further liability of any
party to the other, provided that nothing herein shall relieve any
party from liability for its willful breach of this Agreement.
ARTICLE XIII
GENERAL PROVISIONS
13.1. Survival of Obligations. All representations,
warranties, covenants and obligations contained in this Agreement
shall survive the consummation of the transactions contemplated by
this Agreement; provided, however, that, except as otherwise
provided in Article XI, the representations and warranties contained
in Articles V and VI shall terminate on the second anniversary of
the Closing Date. Except as otherwise provided herein, no claim
shall be made for the breach of any representation or warranty
contained in Article V or VI or under any certificate delivered with
respect thereto under this Agreement after the date on which such
representations and warranties terminate as set forth in this
Section.
13.2. Confidential Nature of Information. Each party agrees
that it will treat in confidence all documents, materials and other
information which it shall have obtained regarding the other party
during the course of the negotiations leading to the consummation of
the transactions contemplated hereby (whether obtained before or
after the date of this Agreement), the investigation provided for
herein and the preparation of this Agreement and other related
documents, and, in the event the transactions contemplated hereby
shall not be consummated, each party will return to the other party
all copies of nonpublic documents and materials which have been
furnished in connection therewith. Such documents, materials and
information shall not be communicated to any third Person (other
than, in the case of Buyer, to its counsel, accountants, financial
advisors or lenders, and in the case of Seller, to its counsel,
accountants or financial advisors). No other party shall use any
confidential information in any manner whatsoever except solely for
the purpose of evaluating the proposed purchase and sale of the
Purchased Assets; provided, however, that after the Closing, Buyer
may use or disclose any confidential information included in the
Purchased Assets or otherwise reasonably related to the Business or
the Purchased Assets. The obligation of each party to treat such
documents, materials and other information in confidence shall not
apply to any information which (i) is or becomes available to such
party from a source other than such party, (ii) is or becomes
available to the public other than as a result of disclosure by such
party or its agents, (iii) is required to be disclosed under
applicable law or judicial process, but only to the extent it must
be disclosed, or (iv) such party reasonably deems necessary to
disclose to obtain any of the consents or approvals contemplated
hereby.
13.3. No Public Announcement. Neither Buyer nor Seller shall,
without the approval of the other, make any press release or other
public announcement concerning the transactions contemplated by this
Agreement, except as and to the extent that any such party shall be
so obligated by law or the rules of any stock exchange, in which
case the other party shall be advised and the parties shall use
their best efforts to cause a mutually agreeable release or
announcement to be issued; provided that the foregoing shall not
preclude communications or disclosures necessary to implement the
provisions of this Agreement or to comply with the accounting and
Securities and Exchange Commission disclosure obligations.
13.4. Notices. All notices or other communications required or
permitted hereunder shall be in writing and shall be deemed given or
delivered when delivered personally or when sent by registered or
certified mail or by private courier addressed as follows:
If to Buyer, to:
R. R. Donnelley & Sons Company
77 West Wacker Drive
Chicago, Illinois 60601-1696
Attention: Corporate Secretary
with a copy to:
Sidley & Austin
One First National Plaza
Chicago, Illinois 60603
Attention: David J. Zampa, Esq.
If to Seller, to:
The Standard Register Company
600 Albany Street
Dayton, Ohio 45408-1442
Attention: Corporate Secretary
with a copy to:
Dinsmore & Shohl LLP
50 East Third Street
Dayton, Ohio 45402
Attention: Nicholas C. Hollenkamp, Esq.
or to such other address as such party may indicate by a notice
delivered to the other party hereto.
13.5. Successors and Assigns. (a) Except to the extent
provided in Section 4.5, the rights of either party under this
Agreement shall not be assignable by such party hereto prior to the
Closing without the written consent of the other. Following the
Closing, either party may assign any of its rights hereunder, but no
such assignment shall relieve it of its obligations hereunder.
(b) This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their successors and permitted
assigns. Nothing in this Agreement, expressed or implied, is
intended or shall be construed to confer upon any Person other than
the parties and successors and permitted assigns any right, remedy
or claim under or by reason of this Agreement.
13.6. Access to Records After Closing. For a period of six
years after the Closing Date, Seller and its representatives shall
have reasonable access to all of the books and records of the
Division transferred to Buyer hereunder to the extent that such
access may reasonably be required by Seller in connection with
matters relating to or affected by the operations of the Division
prior to the Closing Date. Such access shall be afforded by Buyer
upon receipt of reasonable advance notice and during normal business
hours. Seller shall be solely responsible for any costs or expenses
incurred by it pursuant to this Section 13.6. If Buyer shall
desire to dispose of any of such books and records prior to the
expiration of such six-year period, Buyer shall, prior to such
disposition, give Seller a reasonable opportunity, at Seller's
expense, to segregate and remove such books and records as Seller
may select.
For a period of six years after the Closing Date, Buyer and its
representatives shall have reasonable access to all of the books and
records relating to the Business which Seller or any of its
Affiliates may retain after the Closing Date. Such access shall be
afforded by Seller and its Affiliates upon receipt of reasonable
advance notice and during normal business hours. Buyer shall be
solely responsible for any costs and expenses incurred by it
pursuant to this Section 13.6. If Seller or any of its Affiliates
shall desire to dispose of any of such books and records prior to
the expiration of such six-year period, Seller shall, prior to such
disposition, give Buyer a reasonable opportunity, at Buyer's
expense, to segregate and remove such books and records as Buyer may
select.
13.7. Entire Agreement; Amendments. This Agreement and the
Exhibits and Schedules referred to herein and the documents
delivered pursuant hereto contain the entire understanding of the
parties hereto with regard to the subject matter contained herein or
therein, and supersede all prior agreements, understandings or
letters of intent between or among any of the parties hereto,
including, without limitation, the Letter Agreement. This Agreement
shall not be amended, modified or supplemented, except by a written
instrument signed by an authorized representative of each of the
parties hereto.
13.8. Interpretation. Article titles and headings to sections
herein are inserted for convenience of reference only and are not
intended to be a part of or to affect the meaning or interpretation
of this Agreement. The Schedules and Exhibits referred to herein
shall be construed with and as an integral part of this Agreement to
the same extent as if they were set forth verbatim herein.
13.9. Waivers. Any term or provision of this Agreement may be
waived, or the time for its performance may be extended, by the
party or parties entitled to the benefit thereof. Any such waiver
shall be validly and sufficiently authorized for the purposes of
this Agreement if, as to any party, it is authorized in writing by
an authorized representative of such party. The failure of any
party hereto to enforce at any time any provision of this Agreement
shall not be construed to be a waiver of such provision, nor in any
way to affect the validity of this Agreement or any part hereof or
the right of any party thereafter to enforce each and every such
provision. No waiver of any breach of this Agreement shall be held
to constitute a waiver of any other or subsequent breach.
13.10. Expenses. Each party hereto will pay all costs and
expenses incident to its negotiation and preparation of this
Agreement and to its performance and compliance with all agreements
and conditions contained herein on its part to be performed or
complied with, including the fees, expenses and disbursements of its
counsel and accountants. The cost of the commitments for title
insurance and surveys described in Section 7.7 and the cost of the
title insurance policies described in Section 9.6 shall be paid by
Seller.
13.11. Partial Invalidity. Wherever possible, each provision
hereof shall be interpreted in such manner as to be effective and
valid under applicable law, but in case any one or more of the
provisions contained herein shall, for any reason, be held to be
invalid, illegal or unenforceable in any respect, such provision
shall be ineffective to the extent, but only the extent, of such
invalidity, illegality or unenforceability without invalidating the
remainder of such invalid, illegal or unenforceable provision or
provisions or any other provisions hereof, unless such a
construction would be unreasonable.
13.12. Execution in Counterparts. This Agreement may be
executed in one or more counterparts, each of which shall be
considered an original instrument, but all of which shall be
considered one and the same agreement, and shall become binding when
one or more counterparts have been signed by each of the parties
hereto and delivered to each of Seller and Buyer.
13.13. Further Assurances. On the Closing Date Seller shall
(i) deliver to Buyer such other bills of sale, deeds, endorsements,
assignments and other good and sufficient instruments of conveyance
and transfer, in form reasonably satisfactory to Buyer and its
counsel, as Buyer may reasonably request or as may be otherwise
reasonably necessary to vest in Buyer all the right, title and
interest of Seller in, to or under any or all of the Purchased
Assets, and (ii) take all steps as may be reasonably necessary to
put Buyer in actual possession and control of all the Purchased
Assets. From time to time following the Closing, Seller shall
execute and deliver, or cause to be executed and delivered, to Buyer
such other instruments of conveyance and transfer as Buyer may
reasonably request or as may be otherwise necessary to more
effectively convey and transfer to, and vest in, Buyer and put Buyer
in possession of, any part of the Purchased Assets, and, in the case
of licenses, certificates, approvals, authorizations, agreements,
contracts, leases, easements and other commitments included in the
Purchased Assets (a) which cannot be transferred or assigned
effectively without the consent of third parties, which consent has
not been obtained prior to the Closing, to cooperate with Buyer at
its request in endeavoring to obtain such consent promptly, and if
any such consent is unobtainable, to use its best efforts to secure
to Buyer the benefits thereof in some other manner, or (b) which are
otherwise not transferable or assignable, to use its best efforts
jointly with Buyer to secure to Buyer the benefits thereof in some
other manner (including the exercise of the rights of Seller
thereunder); provided, however, that nothing herein shall relieve
Seller of its obligations under Section 7.3. Notwithstanding
anything in this Agreement to the contrary, this Agreement shall not
constitute an agreement to assign any license, certificate,
approval, authorization, agreement, contract, lease, easement or
other commitment included in the Purchased Assets if an attempted
assignment thereof without the consent of a third party thereto
would constitute a breach thereto.
13.14. Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws (as opposed to the
conflicts of law provisions) of the State of Ohio.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed the day and year first above written.
R. R. DONNELLEY & SONS COMPANY
By /s/ William L. Davis
William L. Davis
Chairman of the Board
THE STANDARD REGISTER COMPANY
By /s/ Peter S. Redding
Peter S. Redding
President and Chief
Executive Officer
<PAGE>
EXHIBIT A
COVENANT NOT TO COMPETE
This Covenant Not to Compete is made and given this _____ day of
February, 1999 (this "Covenant"), by The Standard Register Company,
an Ohio corporation ("Seller"), to R. R. Donnelley & Sons Company,
a Delaware corporation ("Buyer").
ARTICLE I
DEFINITIONS
As used herein, the following terms shall have the following
meanings;
A. "Affiliate" means any business organization or entity of any
kind in which Seller or any of its subsidiaries, separately or in
the aggregate, owns or own a controlling interest, which, in the
case of a corporation, shall be deemed to be ownership of 25% or
more of the outstanding equity or voting securities of such
corporation and, in the case of any business organization or entity
of any kind other than the corporation, shall be deemed to be
ownership of 25% or more of the outstanding partnership or other
equity interests of such organization or entity or 25% or more of
the rights generally to elect management of such organization or
entity.
B. "Division" means the Communicolor Division of Seller.
C. "Direct Mail Solicitation Products" means the Production Run
and mailing of a single or multi-event advertising or promotional
campaign, the primary purpose of which is the Solicitation of new or
repeat business, e.g., a printed credit card solicitation or a
magazine subscription solicitation.
D. "Solicitation" means, in respect of any advertising or
promotional campaign, that such campaign is primarily designed to
generate a direct, specific response by the recipient, e.g., a
return offer to order a magazine subscription.
E. "Production Run" means a print run and drop mailing of
100,000 pieces or more.
F. "Fulfillment Services" means periodic mailings to support
customers' requests for information, e.g., the printing and mailing
of advertizing literature or statement generation, bill paying
services, estimation of benefits, tickets, plastic card services or
prescription forms.
ARTICLE II
COVENANT
In consideration of the purchase by Buyer of substantially all of
the assets of the Division, the payment of the purchase price
therefor and the assumption by Buyer of certain liabilities of the
Division, all as provided in the Asset Purchase Agreement dated as
of _______________, 1999 (the "Agreement"), between Buyer and
Seller, Seller hereby covenants and agrees as follows with Buyer,
its successors and assigns, that, for a period of four years
immediately following the date hereof:
A. Neither Seller nor any of its Affiliates, directly or
indirectly, shall (i) manufacture, sell, offer to sell, distribute,
market or in any manner participate in the sale,
distribution or marketing of any Direct Mail Solicitation Products
anywhere in the United States of America (the "Restricted
Activities"), or (ii) provide any other business organization or
entity of any kind with information about the Business (as defined
in the Agreement), including, without limitation, information about
the manufacturing methods, pricing policies, suppliers or customers
of the Business, for the purpose of assisting such other business
organization or entity to engage in the Restricted Activities;
provided, however, that
(1) this Covenant shall terminate immediately in the event
there occurs a reorganization, merger, consolidation or other
corporate transaction involving Seller, in each case, with respect
to which the shareholders of Seller immediately prior to such
transaction do not, immediately after such transaction, own more
than (A) 50% of the combined voting power of the shareholders of
Seller; or (B) 50% or more of (i) the outstanding equity or voting
securities of the business organization or entity that so acquires
Seller (if such organization or entity is a corporation) or (ii) the
outstanding partnership or other equity interest of the business
organization or entity that so acquires Seller (if such organization
or entity is not a corporation);
(2) this Covenant shall not prevent Seller or any of its
Affiliates from acquiring any business organization or entity of any
kind that has a subsidiary, division, group, franchise or segment
that is engaged in the Restricted Activities (a "Competing Unit")
and, following such acquisition, actively engaging in the Restricted
Activities of such Competing Unit; provided, however; that the
consolidated annual sales of such Competing Unit are less than $25
million at the date of such acquisition;
(3) this Covenant shall not prevent Seller or any of its
Affiliates from acquiring any business organization or entity of any
kind that has a Competing Unit and, following such acquisition,
actively engaging in the Restricted Activities of such Competing
Unit; provided, however, that if the consolidated annual sales of
such Competing Unit are $25 million or more at the date of such
acquisition, then Seller shall divest itself of the Competing Unit
within a reasonable period of time after the date of such
acquisition; and
(4) this Covenant shall not prevent Seller of any of its
Affiliates from manufacturing, selling, offering to sell,
distributing, marketing or in any manner participating in the sale,
distribution or marketing of any Fulfillment Services.
B. Neither Seller nor any of its Affiliates, directly or
indirectly, shall induce or attempt to persuade any employee, agent
or customer of the Business to terminate such employment, agency or
business relationship in order to enter into any such relationship
on behalf of any other business organization in competition with the
Business.
C. Pending any divestiture required by clause (3) of paragraph
A above, Seller shall use its reasonable best efforts to conduct the
business of the Competing Unit so as not to adversely effect the
benefit of this Covenant to Buyer, including, without limitation,
(1) using its reasonable best efforts to isolate the business
of the Competing Unit from Seller's other businesses (including,
without limitation, the business of which the Competing Unit is or
was a part) by, among other things, operating the business of the
Competing Unit on a stand-alone basis in respect of employees
(including management), production facilities and services provided
by Seller or its Affiliates; and
(2) maintaining the competitive position of the Competing Unit
on terms substantially similar to those existing as of the
acquisition thereof by Seller.
ARTICLE III
MISCELLANEOUS
A. Buyer acknowledges that Seller sells to customers of the
Business and others certain products that are not included in the
definition of Direct Mail Solicitation Products set forth above.
Seller intends to continue to sell such other products and nothing
contained in this Covenant shall restrict Seller's ability to sell
such other products, even if in competition with Buyer.
B. In the event of a violation or threatened or intended
violation of this Covenant, Buyer shall be entitled, in addition to
remedies otherwise available to Buyer, to obtain and enforce
injunctions, both preliminary and permanent, enjoining and
restraining such violation or threatened or intended violation.
C. In the event that any provision of this Covenant should ever
be deemed to exceed the time, geographic or other limitations
permitted by the laws of any jurisdiction in which this Covenant is
sought to be enforced, then any such provision shall be reformed to
reflect the maximum time, geographic or other limitations permitted
by the then-applicable laws of such jurisdiction.
D. In the event of any violation of this Covenant, the four year
time period set forth in this Covenant shall be extended
automatically for a period of time equal to the period of time
during which Seller was in violation of this Covenant.
E. Buyer's failure to exercise any right or privilege granted to
it by law or by this Covenant or its failure to enforce full
performance of any obligation or duty of Seller or its Affiliates
hereunder shall not be construed as a waiver of any such right or
privilege, or obligation or duty.
F. No modification of this Covenant shall be valid unless such
modification is in writing and signed by Buyer and Seller.
G. This Covenant shall be governed by and construed in
accordance with the laws of the State of Ohio.
IN WITNESS WHEREOF, the parties hereto have caused this Covenant
to be executed the day and year first above written.
THE STANDARD REGISTER COMPANY
By __________________________
Title_________________________
R. R. DONNELLEY & SONS COMPANY
By __________________________
Title_________________________
FIRST AMENDMENT TO ASSET PURCHASE AGREEMENT
This FIRST AMENDMENT TO ASSET PURCHASE AGREEMENT ("First
Amendment") is made and entered into as of March 31, 1999 by and
between THE STANDARD REGISTER COMPANY, an Ohio corporation
("Seller"), and R. R. DONNELLEY & SONS COMPANY, a Delaware
corporation ("Buyer").
WITNESSETH:
WHEREAS, Seller and Buyer have entered into the Asset Purchase
Agreement, dated as of February 11, 1999 (the "Agreement"),
providing for the sale of Purchased Assets (as defined in the
Agreement) to Buyer; and
WHEREAS, Seller and Buyer desire to amend the Agreement in
certain respects.
NOW, THEREFORE, in consideration of the premises and of the
agreements herein contained, the parties hereto agree as follows:
SECTION 1. Amendments to Agreement. Effective as of the date
hereof, the Agreement is amended as follows:
1.1. Schedule 2.2(G) of the Agreement is hereby amended by
deleting the references to the following real property leases: San
Rafael, CA (BT), HQ Business Centers and Sherman Oaks, CA (BT1),
West Oak.
1.2. Schedule 2.2H of the Agreement is hereby amended by
inserting the following:
6) Agreement with United Healthcare of Ohio
1. 3. The Disclosure Schedules to the Agreement are hereby
amended by inserting the following:
Schedule 5.8
See disclosure at paragraph (ii) of Schedule 5.21.
1.4. Schedule 5.10 of the Agreement is hereby amended by
inserting the following:
San Rafael, CA (BT), HQ Business Centers
Sherman Oaks, CA (BT1), West Oak
1.5. Schedule 5.14(A) of the Agreement is hereby amended by
inserting the following:
Following assignment by Seller to Buyer of the unregistered
trademark "ACCUMATCH", Buyer shall grant to Seller certain rights to
use the ACCUMATCH mark as provided in a Trademark License Agreement,
a copy of which is attached hereto as Exhibit A and which shall be
executed by Buyer and Seller at the Closing.
1.6. Schedule 5.21 of the Agreement is hereby amended by
inserting the following at the end of paragraph (ii) thereof:
During the latter part of March, 1999, Seller became aware that
the discharge of certain wastewaters from Seller's plant at 190
Milliken Road, Newark, Ohio has not been in compliance with Seller's
NPDES Permit because water treatment additives are included in the
wastewater being discharged which requires written permission from
the Ohio EPA prior to such use and discharge. Such written
permission was not obtained. Seller also determined on or about
March 29, 1999 that such wastewaters currently have molybdenum
content that exceeds the permissible limits for discharge into the
sanitary sewer system.
1.7. Schedule 5.20 of the Agreement is hereby amended by
inserting the following:
On March 19, 1999, an investigator with the Sweepstakes Division
of the Office of the Attorney General for the State of Florida
contacted Seller by telephone. The investigator stated that he had
reviewed a sweepstakes direct mail piece that was produced by the
Division and that he was troubled by some of the contents of the
document. The investigator stated that the document appeared to
contain certain objectionable provisions or features that are
contained in other sweepstakes materials that are the subject of
pending civil actions in the State of Florida.
1.8. Section 11.3 of the Agreement is hereby amended by
inserting the following:
(c) In addition to Seller's indemnification obligations as set
forth in Section 11.3(a), Seller agrees to undertake and complete,
at its sole cost and expense, and to indemnify and hold harmless
Buyer for any Loss or Expense without regard to any limitations set
forth in this Section 11.3 in connection with the following
environmental matters whether or not disclosed:
(i) the residual contamination in the area of the former
underground storage tank at the Newark, Ohio property, including,
without limitation, any costs to further investigate the extent of
contamination and costs to excavate and dispose of or otherwise
remediate any impacted soils or groundwater to the extent required
by applicable Environmental Law or Governmental Authorities; and
(ii) the rerouting to the sanitary sewer of the current effluent
stream containing cooling water now discharged though the Newark,
Ohio facility's NPDES permit or, in the alternative, the obtaining
of the required permission of the relevant Governmental Authority to
discharge the current effluent stream containing cooling water
either through the Newark, Ohio facility NPDES outfall or to the
sanitary sewer, including, without limitation, any fines or
penalties assessed or any costs to correct, including, without
limitation, those imposed by the relevant Governmental Authority.
IN WITNESS WHEREOF, the parties have executed this First Amendment
on the date first above written.
THE STANDARD REGISTER COMPANY
By: /s/ C.J. Brown
Its: Senior Vice President-Administration,
Treasurer and CFO
R. R. DONNELLEY & SONS COMPANY
By: /s/ Joseph C. Lawler
Its: President, Merchandise Media
Exhibit A
Accumatch Trademark License Agreement
Note: Exhibit A is not filed as part of this Form 8-K, as specified
in Section 601(b)(2) of Regulation S-K. Registrant hereby agrees to
supplementally furnish a copy of such omitted exhibit to the
Securities and Exchange Commission upon request.
