<PAGE>
EXHIBIT 10.1
EXECUTION
================================================================================
ASSET PURCHASE AGREEMENT
BY AND BETWEEN
CAPS GROUP ACQUISITION, LLC,
AN ILLINOIS LIMITED LIABILITY COMPANY
AND
SCHAWK, INC.,
A DELAWARE CORPORATION
AND THE FOLLOWING WHOLLY-OWNED
DIRECT OR INDIRECT SUBSIDIARIES OF SCHAWK, INC.
SCHAWK HOLDINGS,
INC.
AND
SCHAWK USA, INC.
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TABLE OF CONTENTS
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1. PURCHASE AND
SALE OF ASSETS; ASSUMPTION OF LIABILITIES..............
2
1.1
Purchase and Sale of
Assets.................................... 2
1.2
Excluded
Assets................................................ 4
1.3
Assumed and Excluded
Liabilities............................... 5
1.4
Purchase Price
Calculation..................................... 6
1.5
Payment of Purchase
Price...................................... 7
1.6
Post-Closing
Adjustment........................................ 7
1.7
Dispute
Resolution-Post-Closing Adjustment.....................
7
2.
REPRESENTATIONS AND
WARRANTIES...................................... 8
2.1
Representations and
Warranties of Seller....................... 8
2.2
Representations and
Warranties of Buyer........................ 29
2.3
Survival of Warranties
and Representations..................... 30
2.4
Knowledge......................................................
30
3. AGREEMENTS
PENDING CLOSING..........................................
31
3.1
Agreements of Seller
Pending the Closing....................... 31
3.2
Agreements of Buyer
Pending the Closing........................ 33
4. CONDITIONS
PRECEDENT TO THE CLOSING.................................
33
4.1
Conditions Precedent
to Buyer's Obligations.................... 33
4.2
Conditions Precedent
to the Obligations of Seller.............. 36
5. CLOSING DATE
AND DOCUMENTS..........................................
37
5.1
Closing
Date...................................................
37
5.2
Seller's
Deliveries............................................ 37
5.3
Buyer's
Deliveries.............................................
39
5.4
Third Party
Consents........................................... 39
5.5
Transaction
Costs.............................................. 40
5.6
Further
Assurances.............................................
40
5.7
Post-Closing
Receipts.......................................... 41
6.
INDEMNIFICATION.....................................................
41
6.1
Seller's Agreement to
Indemnify................................ 41
6.2
Buyer's Agreement to
Indemnify................................. 43
6.3
Procedures for Making
Claims................................... 43
6.4
Defense Procedure for
Third Party Claims....................... 43
6.5
Warranty
Claims................................................ 44
6.6
Consent to
Jurisdiction, Etc................................... 44
6.7
Intentionally
Omitted.......................................... 44
6.8
Compliance with Bulk
Sales Laws................................ 44
6.9
Limitation on
Indemnity........................................ 45
7. OTHER
AGREEMENTS....................................................
46
7.1
Intentionally
Omitted.......................................... 46
7.2
Allocation of Purchase
Price................................... 46
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TABLE OF CONTENTS
(Continued)
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7.3
Covenant Not to
Compete........................................ 46
7.4
Termination of
Employees....................................... 48
7.5
Conditions to
Closing.......................................... 48
7.6
Tax
Cooperation................................................
48
7.7
Employees of the
Business...................................... 48
8.
MISCELLANEOUS.......................................................
49
8.1
Termination....................................................
49
8.2
Entire Agreement and
Modification.............................. 49
8.3
Sole
Benefit...................................................
49
8.4
Severability...................................................
50
8.5
Waiver.........................................................
50
8.6
Governing
Law.................................................. 50
8.7
Public
Announcement............................................
50
8.8
Notices........................................................
50
8.9
Currency.......................................................
51
8.10
Assignment.....................................................
51
8.11
Counterparts...................................................
52
8.12
Section Headings; Gender; Person...............................
52
8.13
Prevailing Party...............................................
52
8.14
Jury Waiver....................................................
52
8.15
Other Definitions..............................................
52
8.16
Arbitration....................................................
53
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SCHEDULES AND EXHIBITS*
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Schedule 1.1.1
Equipment
Schedule 1.1.2
Customer Lists
Schedule 1.1.3
Assumed Contracts
Schedule 1.1.4
Inventory
Schedule 1.1.5
Memberships
Schedule 1.1.6
Marketing and Reference Materials
Schedule 1.1.7
Receivables
Schedule 1.1.9
Authorizations
Schedule 1.1.10
Goodwill and Trade Names
Schedule 1.1.11
Intellectual Property
Schedule 1.1.12
Security Deposits and Prepaid Expenses
Schedule 1.1.13
Other Assets
Schedule 1.2
Excluded Assets
Schedule 1.3
Assumed and
Excluded Liabilities
Schedule 1.3(e)
Certain Compensation to Employees/Executive Officers
Schedule 2.1.2
Conflicts; Defaults; Consents
Schedule 2.1.3
Liens
Schedule 2.1.4
Condition of Assets
Schedule 2.1.6
Customers; Distributors; Contractors; Suppliers
Schedule 2.1.10
Financial Statements
Schedule 2.1.11
Absence of Undisclosed Liabilities
Schedule 2.1.17
Insurance
Schedule 2.1.18
Contracts and Commitments
Schedule 2.1.19
Labor Matters; Employee Relations
Schedule 2.1.20
Employee Plans
Schedule 2.1.21
Intellectual Property Agreements and Rights
Schedule 2.1.22
Premises
Schedule 2.1.23
Environmental
Schedule 2.1.25
Warranty; Product Liability Claims
Schedule 2.1.26
The Software
Schedule 2.1.27
Other Material Adverse Information
Schedule 7.2
Allocation of Purchase Price
Exhibit A
Intentionally Omitted
Exhibit B
Working Capital Formula Sheet
Exhibit C
Opinion of Seller
Exhibit D
License Agreement
Exhibit E, E-1 and E-2 Lease Agreements
Exhibit F
Transition Services Agreement
Exhibit G
Opinion of Buyer
Exhibit H
401(k) Plan Spinoff Agreement
Exhibit I
Waiver
</TABLE>
*
Schedules and exhibits to this agreement have been omitted pursuant
to Item
601(b)(2) of Regulation S-K. Schawk, Inc. will furnish
supplementally a
copy
of any omitted schedule or exhibit to the Securities and
Exchange
Commission upon request.
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ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT (hereinafter the referenced above
("AGREEMENT"),
made and entered into this 3rd day of March, 2006, by and between
CAPS GROUP
ACQUISITION, LLC, an Illinois limited liability company ("BUYER")
and SCHAWK,
INC., a Delaware corporation ("SCHAWK") and each of the direct or
indirect
wholly-owned subsidiaries of Schawk, Inc. signatories hereto
(Schawk and such
subsidiaries are hereinafter collectively and individually referred
to as
"SELLER").
RECITALS:
WHEREAS, Seller, is in the business of providing printing and
pre-press
services through its Seven Worldwide Publications, Books and
Catalog operating
unit (the "SEVEN WORLDWIDE PUBLICATIONS, BOOKS AND CATALOG
BUSINESS") and is in
the business of providing certain other printing, pre-press,
imaging and other
services;
WHEREAS, Buyer wishes to purchase the Seven Worldwide Publications,
Books
and Catalog Business and certain other operations of Seller
described below,
namely, all of Seller's Black Dot division operation, excluding the
accounts
with Sears and its affiliates, including, without limitation, the
Great Indoors
account, operating at 6115 Official Road, 6209 Official Road, 6210
Factory Road
and 6220 Factory Road, Crystal Lake, Illinois (the "CRYSTAL LAKE
OPERATIONS");
all of Seller's operations at 1001 W. North Street, Pontiac,
Illinois (the
"PONTIAC OPERATIONS"); all of Seller's operations at 2606 East
Livingston
Street, Orlando, Florida (the "ORLANDO OPERATIONS"); all of
Seller's operations
at 1620 Central Street, Lower level, 1st and 2nd Floors, Evanston,
Illinois (the
"EVANSTON OPERATIONS"); all of Seller's operations at 450 West 33rd
Street, 11th
Floor, New York, specifically including the Hudson Yards retouching
business,
the on-site facilities at McGraw-Hill and Newsweek, the on-site
facilities of
Time, Inc. and that portion of Seller's operations relating to the
Kero Road
Transferred Accounts (collectively, the "NEW YORK OPERATIONS"),
and, together
with the Crystal Lake Operations, Pontiac Operations, Orlando
Operations and
Evanston Operations, the "BUSINESS"). Not in limitation of the
foregoing, the
Business includes the following account work done in New York to
the extent such
type of work has been done prior to the "Closing Date" (as defined
below): the
General Motors work from Lowe and Partners, the Kraft work from
various
agencies, the KMart work directed by Martha Stewart Omnimedia (for
the Martha
Stewart Line), the ad work directed by agencies for Elizabeth Arden
and
Unilever, and the Rolex account for J. Walter Thompson
internationally. The
portion of Seller's business and operations not included within the
Business is
hereinafter referred to as the "RETAINED BUSINESS". The parties
hereto agree
that Seller's Designer's Atelier division shall be included within
the Retained
Business.
WHEREAS, Seller desires to sell to Buyer, upon the terms and
subject to the
conditions hereinafter set forth, the Business and that portion of
Seller's
properties and assets substantially and primarily used in
connection with the
Business, as well as certain specified liabilities, which assets
include,
without limitation, the goodwill, accounts receivable, equipment,
assumed
contracts, marketing materials, permits, customer lists,
memberships, inventory,
work in process, trade names, and general intangibles of Seller
used primarily
and substantially in the operation of the Business (but which
assets shall
exclude the "EXCLUDED ASSETS" (as defined below); and
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WHEREAS, Buyer desires to purchase and acquire from Seller, upon
the terms
and subject to the conditions hereinafter set forth, the Business
and the
"PURCHASED ASSETS" (as defined below) and to assume the "ASSUMED
LIABILITIES"
(as defined below);
NOW,
THEREFORE, for and in consideration of the premises and the
mutual
covenants hereinafter contained and other good and valuable
consideration, the
receipt and sufficiency of which are hereby mutually acknowledged
by the parties
hereto, Buyer and Seller on the basis of, and in reliance upon,
the
representations, warranties, covenants, obligations and agreements
set forth in
this Agreement, and upon the terms and subject to the conditions
contained
herein, hereby agree as follows:
1. PURCHASE AND
SALE OF ASSETS; ASSUMPTION OF LIABILITIES
1.1
Purchase and Sale of Assets. Seller shall, and hereby does,
effective
as of the Closing Date (as hereinafter defined in Section 3.1
hereof), sell,
assign, transfer, and deliver to Buyer free and clear of all
Encumbrances (other
than Permitted Encumbrances) and Buyer shall and hereby does
effective as of the
Closing Date, purchase and acquire from Seller the Business
together with the
following assets, properties, rights and interests of Seller,
wherever situated,
as the same exist as of the Closing Date (such Business together
with the
assets, properties, rights and interests of the Business being
hereinafter
collectively called the "ACQUIRED ASSETS"):
1.1.1 Equipment. All equipment owned or leased by Seller used
substantially and primarily in the operation of the Business
including,
without limitation, trucks, other vehicles, machinery, and
computers, and
supplies and tools used to repair such equipment, and goods and
other
tangible personal property of Seller including any and all policy
manuals
and
records relating to such equipment ("EQUIPMENT"), including,
without
limitation, all personalty listed on Schedule 1.1.1, attached to
and made a
part
hereof.
1.1.2 Customer Lists. All lists of the persons or entities to whom
or
to
which Seller has provided goods or services pertaining to the
Business
at
any time prior to the Closing date including, without
limitation,
customers relating to bids in process or outstanding proposals, all
as
listed on Schedule 1.1.2 (collectively, the "CUSTOMERS").
1.1.3 Assumed Contracts. All assignable rights Seller may have
under
any
and all agreements, contracts, including customer contracts and
supplier contracts, licenses and leases and pending orders
pertaining to
the
Business, including without limitation, the Agreement by and
between
Black Dot Graphics, Inc. and Ettore G. Nardulli dated April 1, 2004
(the
"NARDULLI EMPLOYMENT AGREEMENT") (all as listed on Schedule
1.1.3)
("ASSUMED CONTRACTS"),
but excluding all Employee Plans (as defined
herein).
1.1.4 Inventory. All inventory (collectively, "INVENTORY") of
Seller
pertaining to the Business including as described on Schedule 1.1.4
hereto,
including all raw materials, work in process relating to work that
has not
yet
been completed and/or has not yet been billed, and finished
goods,
reflected in the Financial Statements (as hereinafter defined), and
the
Inventory acquired since the date thereof; provided, however, that
Seller
shall sell and Buyer shall purchase only good and usable Inventory,
but not
obsolete or
2
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unusable Inventory or Inventory in excess of two (2) years'
actual
historical usage as of the Closing Date.
1.1.5 Memberships. All assignable rights of Seller in and to
any
memberships of Seller pertaining to the Business which Buyer elects
to
assume (all as listed on Schedule 1.1.5).
1.1.6 Marketing and Reference Materials. Any and all marketing
and
reference materials utilized substantially and primarily in the
Business
including, without limitation, any and all product literature
and/or
brochures, technical documents, computer software and ancillary
materials,
referral lists, marketing leads, telephone numbers, websites,
facsimile
numbers and the domain names, names for any catalogs and the books
and
publications business, email addresses and internet home pages and
similar
assets utilized by Seller primarily and substantially in the
conduct of the
Business.
1.1.7 Accounts Receivable. All accounts receivable of Seller
arising
out
of the sale of goods and services by the Business outstanding as of
or
prior to the Closing Date which are acceptable to Buyer net of
reserves,
including as set forth on Schedule 1.1.7 attached hereto
("RECEIVABLES").
1.1.8 Furniture and Fixtures. Any and all furniture and fixtures
(the
"FURNITURE AND FIXTURES") owned by Seller and used primarily
and
substantially in relation to the Business and including,
without
limitation, as set forth on Schedule 1.1.1 attached hereto and made
a part
hereof.
1.1.9 Authorizations. All rights under any permit,
registration,
franchise, license, easement, right, application, filing, approval
or
authorization of any nature applicable to the Business, to the
extent
assignable (collectively, "AUTHORIZATIONS") including, without
limitation,
all
as listed on Schedule 1.1.9, attached to and made a part
hereof;
1.1.10 Goodwill and Trade Names. The Business and associated
goodwill
of
Seller related to the Business, as a going concern as well as any
and
all
proprietary rights of Seller in and to the names Black Dot,
Applied
Graphics Technologies, HudsonYards, Agile Enterprises and
Typo-Graphics and
the
goodwill related thereto. Without limiting the foregoing, Seller
shall
cooperate with Buyer in transferring to Buyer any and all customer
leads,
referrals, and inquiries pertaining to the Business. Seller shall
refer to
Buyer any customer calls or referrals received after the Closing
Date with
respect to the Business. Except as provided below, Seller agrees to
cease
using the names Black Dot, Applied Graphics Technologies,
HudsonYards,
Agile Enterprises and Typo-Graphics and any name similar thereto as
of the
Closing Date and to execute and/or file any and all necessary
documents,
instruments and certificates to accomplish such name changes and to
use an
expedited filing process and pay all fees and charges related to
such
filings listed on Schedule 1.1.10. The foregoing notwithstanding,
Buyer
acknowledges that after the Closing Date, Seller may continue to
use the
trade name Applied Graphics Technology and Agile Enterprises in
connection
with
existing contracts and agreements
3
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of
the Retained Business (but not with respect to any contracts or
agreements entered into after the Closing Date).
1.1.11 Intellectual Property. All rights under any patent
application,
patent, trademark, service mark, trade dress, trade name or
copyright,
whether registered or unregistered, internet domain name, and
any
applications therefor; and all technologies, methods, formulations,
data
bases, trade secrets, know how, inventions and other intellectual
property
owned or licensed by Seller and used substantially and primarily in
the
Business or under development with respect to the Business; and
all
computer software primarily and substantially used in connection
with the
Business (including documentation and related object and source
codes) and
the
goodwill related to all of the foregoing but only to the extent of,
the
intellectual property listed on Schedule 1.1.11 (collectively,
the
"INTELLECTUAL PROPERTY"); provided, however, that the Intellectual
Property
shall not include (x) the TeamBase and Digital Link software (the
"TEAMBASE
AND
DIGITAL LINK SOFTWARE"), which shall be licensed to Buyer pursuant
to
the
License Agreement or (y) the Studio Eye software, which is used
by
Seller's Ambrosi's operating unit and which shall not be licensed
to Buyer.
1.1.12 Security Deposits and Prepaid Expenses. All security
deposits
and
prepaid expenses of Seller as they pertain to the Business listed
on
Schedule 1.1.12.
1.1.13 Other Assets. Any and all other assets and properties of
Seller
of
every kind, character and description, whether tangible,
intangible,
real, personal or mixed, and wherever located or by whomever
possessed
pertaining primarily and substantially to the Business including,
without
limitation, supplies on hand, all financial accounting and business
related
books and records pertaining substantially and primarily to the
Business,
or any of the Acquired
Assets (provided that Seller's accountant shall be
permitted to retain all records of Seller that it holds, but Buyer
shall be
provided access thereto to the extent pertaining primarily and
substantially to the Business, and may, at its expense, make
copies
thereof), existing advertising, technical manuals, any and all
policy
and/or procedure manuals pertaining primarily and substantially to
the
Business, all rights or choses in action arising out of occurrences
before
or
after the Closing (as hereinafter defined) pertaining primarily
and
substantially to the Business including, without limitation, all
rights
under express or implied warranties relating to the Acquired
Assets, and
all
information and records (including, without limitation,
personnel
records to the extent not prohibited by law), whether reduced to
physical
form
or otherwise, acquired for, used in, or in any way primarily
related
to
the Business listed on Schedule 1.1.13. The foregoing
notwithstanding,
Buyer acknowledges that Seller may retain the pre-Closing Date
original
personnel records of employees of the Business who are hired by
Buyer so
long
as Seller has made complete copies of said records and delivered
such
copies to Buyer. Seller agrees to pay the entire cost for any such
copying,
and
furthermore, Seller will assume the responsibility for making all
such
copies. Pre-Closing personnel records of employees of the Business
who are
not
retained by Buyer shall remain Seller's property.
1.2
Excluded Assets. Notwithstanding the foregoing, the Acquired
Assets
shall not include any of the following assets (collectively, the
"EXCLUDED
ASSETS"):
4
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(a) cash and cash equivalents of Seller;
(b) the tax returns, books of account or other records having
to
do with the organization of Seller;
(c) the real estate holdings of the Business as set forth on
Schedule 1.2, including, without limitation, the Owned Real
Property
(as hereinafter defined).
(d) the rights which accrue or will accrue to Seller under this
Agreement;
(e) the rights to any of Seller's claims for any federal,
state,
local, or foreign tax refunds; or
(f) the other assets, properties or rights of Seller which are
not part of the Business and which constitute or are used in
the
Retained Business, including, without limitation, those assets
listed
on Schedule 1.2 hereof.
1.3
Assumed and Excluded Liabilities. Except for (x) those categories
of
current liabilities set forth on Exhibit B hereto as of the Closing
Date, (y)
obligations arising under Assumed Contracts on or after the Closing
Date and (z)
liabilities and obligations arising under the 401(k) Plan Spinoff
Agreement to
the extent (and only to the extent) provided for in said 401(k)
Plan Spinoff
Agreement (collectively, the "ASSUMED LIABILITIES"), Buyer shall
not assume or
be liable for, and Seller shall retain, discharge and perform, any
and all
liabilities and obligations of Seller, including, without
limitation, the
following (collectively, the "EXCLUDED LIABILITIES"):
(a) Any liability, expense or cost relating to claims against
Seller for personal injury or property damage arising from or
relating
to, in whole or in part, any event occurring prior to Closing;
(b) Any liability or obligation of Seller arising from or
relating to services provided, goods produced, sold or distributed
by
Seller prior to Closing;
(c) Any liability or obligation of Seller for loans or other
debts of Seller;
(d) Any liability or obligation of Seller under any real estate
lease or in relation to any real estate owned or operated by
Seller
(other than leases included within Assumed Contracts for the
liabilities or obligations accruing after the Closing);
(e) Except as set forth on Exhibit B hereto, any liability or
obligation of Seller to any employee of Seller for any stay
bonuses,
severance, or
related items to be paid to any key employees, agents
and executive officers of Seller;
5
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(f) Any obligation of Seller for Taxes (as hereinafter defined)
(including interest and penalties) imposed by any state, federal
or
other entity arising from, on, or out of the ownership, use or
operation of the Acquired Assets prior to Closing, or arising
from,
on, or out of the sale or conveyance by Seller of the Acquired
Assets
pursuant to this Agreement other than those Taxes arising from
the
conveyance of the Acquired Assets to Buyer which by applicable law
are
assessed against the purchaser of such assets (which such Taxes
shall
be included in the Assumed Liabilities);
(g) Any obligation of Seller for expenses incurred in
connection
with the sale or conveyance of the Acquired Assets pursuant to
this
Agreement, including, without limitation, the fees and expenses
of
attorneys, accountants, brokers and other advisors and agents;
(h) Any liability related to rent for the vacated space on the
twelfth floor of the Newsweek building in New York, New York;
(i) Any liability related to the union and employment
discrimination claims related to the merger or consolidation of
Seller's operating units or divisions prior to the Closing
Date;
(j) Any
environmental liability occurring before the Closing;
(k) Any OSHA-related liabilities, including, but not limited
to,
OSHA Complaint No. 203439302 (OSHA Complaint No. 203439302)
incurred
or occurring as a result of the operations of the Business prior
to
the Closing Date;
(l) Any obligation or liability of Seller for health benefits,
welfare benefits, pension or retirement benefits which have
accrued
prior to Closing; except for those items included within the
classification of accrued expenses on Exhibit B;
(m) Any liability of Buyer related to the "Plan" (as defined in
the 401(k) Plan Spinoff Agreement) except to the extent provided
in
such 401(k) Plan Spinoff Agreement.
(n) Any other liability, contract, commitment or obligation
(whether known or unknown, fixed or contingent, liquidated or
unliquidated) arising out of or relating to the ownership, use
or
operation of the Acquired Assets prior to Closing and not
included
within the Assumed Liabilities; and
(o) Any liability or obligation of Seller arising under this
Agreement.
Within a reasonable time prior to Closing (as hereinafter defined),
Buyer
shall have the right to review the proposed Assumed Liabilities of
Seller and
refuse to be responsible for any Assumed Liabilities that are
unrelated to the
Business. Buyer hereby agrees and covenants to perform and
discharge and fully
indemnify Seller from all costs, expenses and damages relating
6
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to the Assumed Liabilities. Seller hereby agrees and covenants to
indemnify
Buyer from all costs, expenses and damages relating to the Excluded
Liabilities.
1.4
Purchase Price Calculation. The Purchase Price ("PURCHASE PRICE")
shall
be Twenty-Nine Million and No/100 Dollars ($29,000,000.00) plus the
amount of
the Assumed Liabilities. The Purchase Price shall be subject to
adjustment and
the Post-Closing Adjustment (as hereinafter defined).
1.5
Payment of Purchase Price. The Purchase Price shall be paid as
follows:
1.5.1 Cash Purchase Price. At the Closing on the Closing Date,
Buyer
shall pay to Seller or as otherwise directed by Seller an amount
("CASH
PURCHASE PRICE") equal to Twenty-Nine Million and No/100
Dollars
($29,000,000.00) in the form of a certified or cashier's check, or
by wire
transfer of immediately available funds.
1.6
Post-Closing Adjustment. On or prior to the Closing Date (as
hereinafter defined), Seller shall provide Buyer with its estimated
balance
sheet and income statement reflecting Seller's estimated
calculation of working
capital (as hereinafter defined) as of the Closing Date
(collectively, the
"SELLER'S ESTIMATED CLOSING BALANCE SHEET"). Within one hundred and
20 (120)
days after Closing, Seller shall have prepared, at Seller's/Buyer's
expense on a
50/50 basis, through an accountant engaged by Seller, an audited
balance sheet
in accordance with generally accepted accounting principles as of
the Closing
Date (the "CLOSING BALANCE Sheet"), for purposes of confirming the
accuracy of
the calculation of Working Capital as of the Closing Date. Based
upon such
Closing Balance Sheet, the parties agree that the amount of the
Purchase Price
shall be adjusted upwards or downwards, as appropriate (the
"POST-CLOSING
ADJUSTMENT"), on a dollar-for-dollar basis to the extent that the
amount of the
Working Capital of Seller calculated using the Closing Balance
Sheet is greater
than or less than, as the case may be, Eleven Million Eight Hundred
Seventy-Two
Thousand and No/100 Dollars ($11,872,000.00) (the "TARGET WORKING
CAPITAL") plus
or minus Five Hundred Thousand and No/100 Dollars ($500,000.00). If
the Target
Working Capital is greater than the Working Capital by more than
Five Hundred
Thousand and No/100 Dollars ($500,000.00), then within five (5)
business days
after the final determination thereof pursuant to Section 1.7
hereof, then
Seller shall immediately pay Buyer such shortfall (the amount by
which the
Target Working Capital exceeds the sum of Working Capital plus
$500,000).
If
the Working Capital is greater than the sum of Target Working
Capital
plus Five Hundred Thousand and No/100 Dollars ($500,000.00), then
Buyer shall
pay Seller any amount by which Working Capital exceeds the sum of
Five Hundred
Thousand and No/100 Dollars ($500,000.00) plus the Target Working
Capital, such
payments to be made within five (5) business days after the final
determination
thereof pursuant to Section 1.7 hereof.
For
purposes of determining the Working Capital as of the Closing Date,
the
parties agree that the components thereof shall consist solely of
those line
items set forth on the Working Capital Formula Sheet attached
hereto as Exhibit
B, which line items shall contain those categories of assets and
liabilities
contained in the line items as of September 30, 2005.
7
<PAGE>
1.7
Dispute Resolution-Post-Closing Adjustment. Any dispute which may
arise
between Seller and Buyer as to the Closing Balance Sheet or the
proper amount of
the Post-Closing Adjustment shall be resolved in the following
manner:
(a) Buyer, if it disputes the Closing Balance Sheet or the
Post-Closing Adjustment, shall notify Seller in writing
("ADJUSTMENT
OBJECTION NOTICE") within forty-five (45) days after the delivery
of
the Closing Balance Sheet that Buyer disputes the Closing
Balance
Sheet or the amount of the Post-Closing Adjustment; with such
notice
to specify in reasonable detail the nature of the dispute and
Buyer's
proposed Closing Balance Sheet and Post-Closing Adjustment;
(b) if Buyer fails to deliver an Adjustment Objection Notice
within such forty-five (45) days, the Post-Closing Adjustment shall
be
paid to the appropriate party pursuant to Section 1.6 above;
(c) if Buyer delivers an Adjustment Objection Notice, then
during
the fifteen (15) day period following the date of such notice,
Seller
and Buyer shall attempt to resolve such dispute and to determine
the
appropriateness of the Closing Balance Sheet and/or the
Post-Closing
Adjustment; and
(d) if at the end of the fifteen (15) day period specified in
subparagraph (c) above, Seller and Buyer shall have failed to reach
a
written
agreement with respect to such dispute, the matter shall be
referred to the Chicago, Illinois office of Blackman Kallick
Bartelstein, LLC, independent certified public accountants (the
"ARBITRATOR"), which shall act as an arbitrator and shall issue
its
report as to the Closing Balance Sheet or the Post-Closing
Adjustment
within sixty (60) days after such dispute is referred to the
Arbitrator. At the opening of the arbitration review, each party
shall
present the Arbitrator with such party's proposed Post-Closing
Adjustment along with supporting documentation. The Arbitrator is
not
required to choose a Post-Closing Adjustment from the
adjustment
proposals. All costs and expenses incurred by the parties in
connection with such arbitration including, without limitation,
fees
and expenses of the Arbitrator shall be paid by the party whose
proposed Post-Closing Adjustment number is furthest from the
Post-Closing Adjustment actually determined by the Arbitrator.
This
provision for arbitration shall be specifically enforceable by
the
parties and the decision of the Arbitrator in accordance with
the
provisions hereof shall be final and binding and there shall be
no
right of appeal therefrom. The dispute resolution provisions in
this
Section 1.7 are intended to resolve disputes only with respect to
the
Closing Balance Sheet and the Post-Closing Adjustment. All
other
disputes arising under the terms of this Agreement shall be
resolved
pursuant to the provisions of Section 6 hereof.
2.
REPRESENTATIONS AND WARRANTIES
2.1
Representations and Warranties of Seller. Each Seller hereby,
jointly
and severally, represents and warrants to Buyer as follows:
8
<PAGE>
2.1.1 Organization and Standing; Power and Authority. Each Seller
is a
corporation duly organized, validly existing and in good standing
under the
laws
of the state of its incorporation or formation and has full power
and
authority to operate its business, to own or lease the Acquired
Assets, to
carry on its business as now being conducted, to make and perform
this
Agreement and the transactions and other agreements and
instruments
contemplated by this Agreement. Each Seller is qualified to
conduct
business in the state of its incorporation or formation and is in
good
standing in each jurisdiction in which the failure to so qualify
would have
a
Material Adverse Effect (as hereinafter defined). This Agreement
and all
other agreements and instruments executed and delivered by each
Seller in
connection herewith have been duly authorized, executed and
delivered by
each
Seller. This Agreement and the transactions contemplated hereby
have
been
duly approved and authorized by the board of directors (managers)
of
each
Seller (and shareholder or member approval and authorization is
not
required), and this Agreement and all other agreements and
instruments
delivered by each Seller in connection herewith constitute the
valid and
binding obligations of each Seller enforceable in accordance with
their
respective terms, except as the enforceability thereof may be
limited by
the
availability of equitable principles or by bankruptcy,
insolvency,
reorganization, moratorium, or other similar laws affecting
creditors'
rights generally.
2.1.2 Conflicts; Defaults; Consents. Except as set forth on
Schedule
2.1.2 attached hereto, neither the execution and delivery of this
Agreement
and
the other agreements and instruments executed in connection
herewith by
any
Seller nor the performance by any Seller of the transactions
contemplated hereby or thereby (including Buyer's ability to
continue to
conduct the Business after the Closing in the manner in which such
Business
is
currently conducted), will (with or without the giving of notice or
the
lapse of time or both) (a) violate, conflict with, require to
consent
under, accelerate an obligation under, or change the rights or
obligations
of
any Seller under, or constitute a default under, any of the terms
of
such
Seller's certificate of incorporation or by-laws, or any
provisions
of,
any material contract, sales or service commitment, license,
purchase
order, security agreement, mortgage, note, deed, lien, lease,
agreement,
instrument, order, judgment or decree relating to any Seller to
which such
Seller is a party or to which such Seller or the Acquired Assets
may be
bound or subject, (b) breach or violate, or constitute a default
under, or
trigger any payment or other material obligations pursuant to, any
of any
Seller's Employee Plans (as hereinafter described in Section
2.1.20) or any
grant or award made under any of the foregoing, (c) result in any
material
change in the rights or obligations of any party under any of the
Contracts
described pursuant to Section 2.1.18 hereof excluding any such
change as
the
result of a change in control provision or similar provision
contained
in
any such Contract with any customer, (d) result in the creation
or
imposition of any liens on the Acquired Assets, (e) violate any
statute,
law,
ordinance or regulation of any jurisdiction, as such statute,
law,
ordinance or regulation relates to any Seller or to the
securities,
properties, assets or the Business, the violation of which would
have a
Material Adverse Effect, (f) constitute an event which, after
notice or
lapse of time or both, would result in such violation, conflict,
default,
acceleration, or creation or imposition of any liens, or (g)
require any
consent, approval authorization or other action by, or filing with
or
notification to any governmental or regulatory authority. For
purposes of
this
Agreement, the term "MATERIAL ADVERSE EFFECT" means any change,
effect
or
circumstance that (a) a reasonably prudent investor would
consider
important
9
<PAGE>
(either individually or when considering the collective effect of
all such
matters) in deciding whether to consummate the transactions
contemplated
hereby) and (b) is materially adverse to the business, assets,
financial
condition or results of operations of the Business, taken as a
whole, or
that
materially and adversely affects the ability of Seller to perform
its
obligations under this Agreement and consummate the
transactions
contemplated hereby; provided, however, that any change, effect
or
circumstance that singly exceeds Five Thousand and No/100
Dollars
($5,000.00) or in the aggregate exceeds Fifteen Thousand and No/100
Dollars
($15,000.00) shall be deemed a Material Adverse Effect; provided,
further,
however, that the term Material Adverse Effect shall not include
the impact
of
(i) changes in laws or interpretations thereof by courts or any
other
governmental entity, (ii) changes in general accepted accounting
principles
and
(iii) actions or omissions of Seller taken with the consent of
Buyer in
contemplation of the transactions contemplated hereby, (iv)
general
economic conditions and events or conditions generally affecting
the
printing, pre-press graphic arts business or imaging business, (v)
national
or
international hostilities, acts of terror or acts of war, and (vi)
this
Agreement or the announcement hereof.
2.1.3 Title to the Acquired Assets. Seller has good and
marketable
title to, and has the right to transfer to Buyer, each of the
Acquired
Assets, and, except as set forth on Schedule 2.1.3 or with respect
to other
Permitted Encumbrances, the Acquired Assets are free and clear of
all
mortgages, liens, pledges, security interests, charges, claims,
restrictions and encumbrances of any nature whatsoever
("ENCUMBRANCES").
Seller will transfer the Acquired Assets to Buyer with good and
marketable
title, free and clear of all Encumbrances other than the
Permitted
Encumbrances. The Acquired Assets constitute substantially all of
the
tangible assets used in or necessary to the conduct of the Business
as it
is
presently being conducted.
2.1.4 Condition of Acquired Assets. The Acquired Assets
including,
without limitation, the Equipment and the Furniture and Fixtures,
are in
good
operating condition and repair, ordinary wear and tear and
normal
levels of obsolescence excepted and conform to all applicable
laws,
ordinances, codes, rules and regulations relating to their
construction,
use
and operation, except that the air conditioning equipment for the
New
York
Operations at the West 33rd Street location are to be sold on an
"AS
IS,"
"WHERE IS" basis and except as otherwise described on Schedule
2.1.4.
No
person other than Seller owns any of the Acquired Assets other than
that
portion of the Acquired Assets consisting of leased or licensed
Equipment
or
Intellectual Property in which case, no person other than a Seller
owns
the
leasehold interest or license with respect to such Acquired
Asset.
2.1.5 Services Rendered by Seller. Seller has conducted the
Business
in
compliance with (a) all laws, statutes, regulations and
ordinances
applicable to such services and (b) the contracts it has entered
into;
except where the failure to be in such compliance could not be
reasonably
expected to have a Material Adverse Effect.
2.1.6 Customers, Distributors, Contractors, Suppliers. Schedule
2.1.6
sets
forth all the Customers (with annual purchases of $25,000 or
more)
relating to the Business during the two (2) year period ended
December 31,
2005, and also sets forth the ten (10)
10
<PAGE>
largest customers by revenue during such period and the revenue
generated
for
each such customer during such period, and Schedule 2.1.6 sets
forth
all
contractors, distributors and suppliers who have provided in excess
of
Twenty-Five Thousand Dollars ($25,000) of services or materials in
the
aggregate to Seller relating to the Business during such two (2)
year
period (each, a "MATERIAL SUPPLIER") and also sets forth the ten
(10)
largest Material Suppliers by cost during such period and the fees
paid to
each
such Material Supplier during such period. Except as set forth
on
Schedule 2.1.6 with respect to Newsweek, McGraw-Hill and any other
item
disclosed thereon, Seller has not received any notice or threat
from any
Customer to terminate, cancel or otherwise materially and adversely
modify
its
relationship with Seller since January 31, 2005, and to
Seller's
Knowledge, there is no plan or intention of any Customer to
terminate,
cancel, or otherwise materially modify its relationship with
Seller. To
Seller's Knowledge, there is no plan or intention of any Material
Supplier
to
decrease materially or limit its services, supplies or materials
to
Seller or its usage, purchase, or distribution of the services or
products
of
Seller. Except as set forth on Schedule 2.1.6, Seller has not
submitted
and
is not aware of or received notice or invitation to submit any
competitive bid for sale of its services with respect to the
continuation
of
any existing program with any Customer relating to the Business
or
enhancement of an existing program or service, other than
quotations given
and
competitive bids submitted in the ordinary course of business.
2.1.7 Inventory. The Inventory shown on Schedule 1.1.4 consists,
and
all
Inventory on the Closing Date will consist of, in each case, net
of
reserves as accounted for on the Interim Balance Sheet as of the
Interim
Balance Sheet Date, items of a quality and quantity useable in the
ordinary
course of business during the twelve (12) month period after the
Closing
Date, and has been maintained in the ordinary course of business,
is of
good
and merchantable quality, and consists substantially of a
quality,
quantity, and condition usable or saleable in the ordinary course
of the
Business. The value at which the Inventory is carried, and the
reserves
reflected, on the Financial Statements reflect Seller's normal
inventory
valuation policy (which provides for statement at cost) all in
accordance
with
generally accepted accounting principles consistently applied
and,
other than as reflected in such reserves, such Inventory is not
subject to
any
write-down or write-off. None of the Inventory is obsolete
(unless
appropriate writedowns have been taken). Seller is not under any
liability
or
obligation with respect to the return of Inventory in the
possession of
wholesalers, retailers, or customers. Seller has, and on the
Closing Date
will
have, inventories in such amounts as are consistent with past
practices.
2.1.8 Receivables. All of the Receivables shown on the
Financial
Statements, and any such Receivables, net of reserves, which have
arisen
since the Interim Balance Sheet Date are, and all Receivables on
the
Closing Date will be valid and genuine, arose from bona fide sales
made or
services delivered in the ordinary course of business, represent
legal and
valid obligations to Seller and are not subject to any liens or
set-offs or
counterclaims or valid defenses. All of the Receivables are
enforceable in
the
ordinary course of business. All of the Receivables are
collectible
(other than for reasons of the account debtor's credit worthiness)
in the
ordinary course of business, net of reserves for doubtful
accounts.
Schedule 1.1.7 hereto accurately lists as of the date hereof, and
will list
as
of the last day of the month immediately prior to the Closing Date,
each
11
<PAGE>
Receivable, the amount owing, the aging of such Receivable and the
name of
the
party from whom such Receivable is owing.
2.1.9 No Third Party Options. There are no existing agreements,
options, commitments or rights with, of or to any person other than
Buyer
to
acquire any of Seller's assets, properties or rights included in
the
Acquired Assets or any interest therein.
2.1.10 Financial Statements. Seller has delivered to Buyer true
and
complete copies of the Business' pro forma balance sheets and the
related
statements of income for the annual periods ended as of December
31, 2003
and
December 31, 2004, as well as pro forma accrual basis interim
financials for the period January 1, 2005 through December 31,
2005
(collectively, the "FINANCIAL STATEMENTS"), certified as true and
correct
in
all material respects by an authorized representative of Seller.
Except
as
otherwise disclosed on Schedule 2.1.10 hereto, the Financial
Statements
have
been prepared in accordance with generally accepted accounting
principles applied consistent with Seller's past practices, and
all
Financial Statements are complete and accurate in all respects and
fairly
present the financial condition of the Business at the dates
thereof and
the
results of operations for the periods covered thereby, except that
such
Financial Statements do not include footnotes and with respect to
the
interim period ending September 30, 2005 are subject to year-end
audit
adjustments. Further, such Financial Statements were created on a
pro forma
basis using the methodology and assumptions detailed on Schedule
2.1.10
hereto. Buyer acknowledges that such assumptions have been arrived
at in
consultation with Buyer. Buyer agrees that such assumptions are
reasonable
and
that Buyer shall not contest the validity of any such assumptions.
Such
statements of income do not contain any items of special or
non-recurring
income or any other income not earned in the ordinary course of
business
except as expressly specified therein, and such Financial
Statements
include all adjustments, which consist only of normal recurring
accruals,
necessary for such fair presentation. The Interim Balance Sheet
identifies
the
assets and liabilities which, if the Closing had been held on
the
Interim Balance Sheet Date, would have been transferred to Buyer
in
accordance herewith. References in this Agreement to the "INTERIM
BALANCE
SHEET" shall mean the pro forma balance sheet of the Business as
of
December 31, 2005, previously delivered to Buyer; and references in
this
Agreement to the "INTERIM BALANCE SHEET DATE" shall be deemed to
refer to
September 30, 2005.
2.1.11 Absence of Undisclosed Liabilities. Except as set forth
on
Schedule 2.1.11, the Business has no Liabilities (as hereinafter
defined)
except those Liabilities reflected in the Interim Balance Sheet and
not
heretofore paid or discharged and those Liabilities arising in the
ordinary
course of business under any agreement, contract, or lease. For the
purpose
of
this Agreement, "LIABILITIES" shall include, without limitation,
any
direct or indirect indebtedness, guaranty, endorsement, claim,
loss,
damage, deficiency, cost, expense, obligation or responsibility,
fixed or
unfixed, known or unknown, asserted or unasserted, choate or
unchoate,
liquidated or unliquidated, secured or unsecured. All prepaid
expenses of
the
Business arose in the ordinary course of business and represent
valid
obligations with value to the Business.
12
<PAGE>
2.1.12 Books of Account. The books, records and accounts of
Seller
maintained with respect to the Business accurately and fairly
reflect, in
reasonable detail, the transactions and the assets and liabilities
of
Seller with respect to the Business. Seller has not engaged in
any
transaction with respect to the Business, maintained any bank
account for
the
Business or used any of the funds of Seller in the conduct of
the
Business except for transactions, bank accounts and funds which
have been
and
are reflected in the normally maintained books and records of
the
Business.
2.1.13 Tax Matters. Seller has timely filed all federal, state,
local
and
foreign tax returns and reports required to be filed by Seller.
Seller
has
paid or has properly accounted for all federal, state, local
and
foreign taxes (and all interest, penalties or additions to tax
thereon, if
any), including, without limitation, all income, franchise,
transfer, real
property transfer or real property gains, recording, documentary,
sales,
use,
property, payroll unemployment withholding, occupation, gross
receipts, value added, excise and estimated taxes, due or which
later
become due and payable by Seller with respect to all taxable
periods up to
and
including the period ending on the Closing Date (collectively,
the
"TAXES"). There are no due and unpaid assessments or proposals by
any
taxing authority for Taxes for which Seller does not have adequate
reserves
and
there are no pending audits of Seller and Seller has not waived
restrictions on assessment or collection of taxes or consented to
the
extension of any statute of limitations related to federal, state,
local or
foreign taxes. All Taxes that Seller is or was required by law to
withhold
or
collect have been duly withheld or collected and, to the extent
required, have been paid to the proper governmental body or person.
Seller
has
not received any notice of assessment or proposed assessment in
connection with any tax returns and there are not pending tax
examinations
of
or tax claims asserted against Seller or any of assets or
properties of
Seller. Seller has no Knowledge of any basis for any additional
assessment
of
any taxes. Seller has made all deposits required by law to be made
with
respect to employee's withholding of employment taxes, including
without
limitation, the portion of such deposits relating to taxes imposed
upon
Seller. Adequate accruals on the Financial Statements have been
made for
the
payment of all accrued and unpaid Taxes attributable to the
Business
and
to be included within the Assumed Liabilities, whether or not
disputed,
for
all fiscal periods through the date hereof or arising out of
transactions entered into or any state of facts existing on or
prior
thereto; and for such periods, and all periods prior to and through
the
date
hereof have been, and through the Closing Date will be,
properly
accrued on the books and financial records of Seller maintained in
respect
of
the Business in accordance with generally accepted accounting
principles
and
in amounts sufficient for the payment of all unpaid Taxes required
to
be
paid by Seller with respect to such periods.
2.1.14 Existing Condition. Since the Interim Balance Sheet
Date,
Seller, with respect to the Business, has not:
(a) incurred or paid any liabilities, other than liabilities
incurred in the ordinary course of business consistent with
past
practice, or discharged or satisfied any lien or encumbrance,
or
failed to pay or discharge when due any liabilities of which
the
failure to pay or discharge has caused or will cause any
material
damage or risk of material loss to it or any of the Acquired
Assets;
13
<PAGE>
(b) sold, encumbered, assigned, or transferred any assets or
properties which would have been included in the Acquired Assets
if
the Closing had been held on the Interim Balance Sheet Date or on
any
date since the Interim Balance Sheet Date, except for dispositions
of
surplus or used Equipment or obsolete or unusable Inventory, or
other
sales of Inventory in the ordinary course of business;
(c) pledged or subjected any of the Acquired Assets to any
mortgage, lien, pledge, security interest, conditional sales
contract
or other encumbrance of any nature whatsoever;
(d) Intentionally Deleted;
(e) suffered any damage, destruction or loss, whether or not
covered by insurance which has had or could reasonably be expected
to
have a Material Adverse Effect or suffered any repeated, recurring
or
prolonged shortage, cessation or interruption of supplies or
utility
or other services required to conduct the Business which has had
or
could reasonably be expected to have a Material Adverse Effect;
(f) suffered any loss of any key employee or any change in the
Business, its operations, assets, properties, prospects or
condition
(financial or otherwise) which has had or could reasonably be
expected
to have a Material Adverse Effect;
(g) made any increase in the compensation, commissions or
perquisites payable or to become payable to, or made any loan
or
advance to, any employee of the Business or agent thereof, or
any
payment of any bonus, profit sharing or other extraordinary
compensation to any employee of the Business (other than any
such
increase or payment paid or to become payable in the ordinary
course
of business consistent with past practices);
(h) received notice or had Knowledge of any actual or
threatened
labor trouble, strike or other occurrence, event or condition of
any
similar character which has had or could reasonably be expected
to
have a Material Adverse Effect;
(i) negotiated or otherwise made any commitment or incurred any
liability or obligation to any labor organization or labor
pension
plan with respect to employees of the Business;
(j) changed, in any material respect, any of its accounting
principles followed by it or the methods of applying such
principles
with respect to transactions involving the Business;
(k) experienced any cancellation of any debts owed to or claims
held by or on behalf of Seller with respect to the Business,
other
than the settlement or write-off of Receivables in the ordinary
course
of business consistent with past practice;
14
<PAGE>
(l) except for the loss of ULTA, Linens N Things and DDB
Needham,
experienced any actual or threatened terminations of any
business
relationships or agreements between the Business' Customers or
Material Suppliers which has had or could reasonably be expected
to
have a Material Adverse Effect;
(m) experienced, with respect to the Business, any occurrence
of
any obligation or liability (absolute or contingent) for any
indebtedness, except routine trade accounts payable, operating
expenses and contract obligations incurred in the ordinary course
of
business; or any acceleration in the payment of, or payment other
than
in the ordinary course of the business of the Business and
consistent
with past custom and practices thereof, of any indebtedness or
amounts
due or payable thereunder;
(n) with respect to the Business, made or suffered any
amendment
or termination of any agreement, contract, commitment, lease or
plan
to which it is a party or by which it is bound, or cancelled,
modified
or waived any substantial debts or claims held by it or waived
any
rights of substantial value, whether or not in the ordinary course
of
business where the effect of any such event could reasonably be
expected to have a Material Adverse Effect;
(o) with respect to the Business, made commitments or
agreements
for capital expenditures or capital additions or betterments
exceeding
in the aggregate Two Hundred Fifty Thousand and No/100 Dollars
($250,000.00), except such as may be involved in the ordinary
repair,
maintenance or replacements of the Equipment.
2.1.15 Compliance with Law; Authorizations. As pertaining to
the
Business, (a) Seller is in compliance with all federal, state,
local, or
foreign laws, ordinances, regulations, and orders applicable to
its
Business, operations, assets or its properties ("REGULATIONS"), (b)
Seller
possesses all Authorizations which are in any manner necessary for
it to
conduct the Business as now or previously conducted or for the
ownership
and
use of the assets owned or used by Seller in the conduct of the
Business, free and clear of all Encumbrances (other than
Permitted
Encumbrances) and in compliance with all Regulations, and (c) no
written
notice has been received of any requirement that Seller is required
to
obtain any Authorization or other similar governmental approval
which it
does
not presently have, except where in any such instance, the failure
of
any
of the foregoing could not reasonably be expected to have a
Material
Adverse Effect. Schedule 1.1.9 lists all Authorizations which are
presently
in effect with respect to
the Business, and no action or claim is pending
and
no written notice of any such claim or action has been received
which
threatens to revoke, terminate, or declare any of them invalid in
any
respect and Seller, in respect to the Business, is not in default,
nor has
it
received any notice of a claim of default, with respect to any
such
Authorization, except where any such default could not reasonably
be
expected to have a Material Adverse Effect. All such Authorizations
are
renewable by their terms or in the ordinary course of business
without the
need
to comply with any special qualification procedures or to pay
any
amounts other than routine filing fees. None of such Authorizations
will be
affected, in any matter that could reasonably be expected to have
a
15
<PAGE>
Material Adverse Effect, by consummation of the transactions
contemplated
hereby. No shareholder, director, officer, employee or former
employee of
Seller or any affiliates of Seller, or any other person, firm
or
corporation owns any proprietary, financial or other interest
(direct or
indirect) in any authorization which Seller owns, possesses or uses
in the
operation of the Business as now or previously conducted.
2.1.16 Litigation. No litigation, including any arbitration,
investigation, or other proceeding of or before any court,
arbitrator or
governmental or regulatory official, body, or authority is pending
or, to
Seller's Knowledge, is threatened against Seller as relates to the
Business
or
which relates to the Acquired Assets or the transactions
contemplated by
this
Agreement, the result of which could reasonably be expected to have
a
Material Adverse Effect on the Business, the Acquired Assets or
the
transactions contemplated hereby. Seller is not a party to or
subject to
the
provisions of any judgment, order, writ, injunction, decree, or
award
of
any court, arbitrator, or governmental or regulatory official body
or
authority which could reasonably be expected to have a Material
Adverse
Effect on the Business, the Acquired Assets or the transactions
contemplated hereby.
2.1.17 Insurance. Schedule 2.1.17 contains a list of all
insurance
policies (specifying (a) the insurer, (b) the amount of the
coverage, (c)
the
type of insurance, (d) the policy number and (e) any currently
pending
claims thereunder or any claims asserted thereunder or under
similar
policies since January 31, 2005) currently maintained by or on
behalf of
Seller on the properties, assets, business or personnel of the
Business. No
notice of cancellation, termination or non-renewal has been
received by
Seller with respect to any insurance policy providing insurance
coverage of
any
nature to Seller, nor has Seller been refused any insurance by
any
insurance carrier to which it has applied for insurance coverage in
the
past
two (2) years. No bonds or surety claims are outstanding
currently
and,
except as set forth on Schedule 2.1.17, Seller has provided
performance or payment bonds wherever necessary. All such policies
are in
full
force and effect in accordance with their terms and there is
existing
no
default which, with the giving of notice or lapse of time or both,
would
constitute a default thereunder. Such policies are in amounts which
are
adequate in relation to the Business and all premiums to date have
been
paid
in full.
2.1.18 Contracts and Commitments. Except as set forth on
Schedule
2.1.18 hereto, as related to the Business, Seller is not a party
to, or
bound by, any oral or written contracts, agreements, commitments
or
understandings:
(a) with any present or former officer or employee or
consultant
or for the employment of any person, including any consultant, who
is
engaged for in the conduct of the Business;
(b) with any dealer, representative, or service agreement
contract or commitment, sales agency, manufacturer's
representative,
distributorship or marketing agreement or commitment relating to
the
Business;
(c) for leasing personal property (including, without
limitation,
leases for vending and other machinery and office equipment,
furniture, fixtures,
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vehicles and tools) which require in any case an annual payment
in
excess of Twenty-Five Thousand Dollars ($25,000) or the term of any
of
which exceeds one (1) year and which is not cancelable on thirty
(30)
days' or less notice without penalty;
(d) involving the payment or receipt in any case of in excess
of
Twenty-Five Thousand Dollars ($25,000) per annum by Seller and
the
term of any of which exceeds one (1) year (including, without
limitation, vendor, supply and service contracts) and which is
not
cancelable on thirty (30) days' or less notice without penalty;
(e) containing a covenant not to compete or confidentiality
agreement by Seller with respect to the Business or which
restricts
Seller from engaging in the Business, which restriction would
affect
Buyer's ability to operate the Business or to Seller's Knowledge,
is
any employee at Seller engaged in the conduct of the Business
subject
to any covenants not to compete, confidentiality agreement or
other
agreement which in any case restricts such employee's ability
to
perform his obligations to the Business;
(f) involving capital expenditures or the acquisition of fixed
assets which require or will require aggregate payments of more
than
One Hundred Thousand Dollars ($100,000);
(g) other than as included within the Assumed Contracts,
involving a note, debenture, bond, equipment trust agreement,
mortgage, indenture, security agreement, letter of credit
agreement,
loan agreement or other contract or commitment for the borrowing
or
lending of money specifically relating to the Business, or
agreement
or arrangement for a line of credit or guarantee, pledge, or
undertaking of the indebtedness of any other person
specifically
relating to the Business;
(h) providing for the services of agents, consultants,
advisors,
advertisers, dealers, distributors, sales representatives or
similar
representatives involving in any case the payment or receipt of
in
excess of Twenty-Five Thousand Dollars ($25,000) per annum by
the
Business and not immediately terminable by Seller at will and
without
cost or liability to the Business (exclusive of accrued but
unpaid
salaries, commissions and other benefits);
(i) involving any license, franchise, distributorship or other
agreement which relates in whole or in part to any of the
Acquired
Assets not otherwise disclosed in the Schedules hereto;
(j) partnership, joint venture or other arrangements or
agreements involving a sharing of profits or expenses involving
the
Business;
(k) Intentionally Omitted;
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(l) relating to product or service warranties outside the
Ordinary Course of Business (as hereinafter defined) of the
Business;
(m) directly or indirectly between Seller, on the one hand, and
any of its shareholders, directors, officers and their Affiliates,
on
the other hand, regarding the leasing or licensing of properties
or
assets, royalty payments, the providing of services to or by
Seller
relating to the Business or any loan or other financial or
business
relationship relating to the Business other than the provision
of
accounting, legal, corporate, technology support and other services
by
Seller's corporate offices to the Business in the Ordinary Course
of
Business;
(n) Intentionally Omitted;
(o) which otherwise is material to the Business and not made in
the Ordinary Course of Business and is not otherwise disclosed in
any
of the Schedules hereto; and
(p) involving any charitable or political contribution relating
to the Business.
For purposes of this Agreement, "AFFILIATES" shall mean a person
that
directly, or indirectly through one or more intermediaries,
controls, is
controlled by, or is under common control with, the person referred
to. In
this
definition, "CONTROL" means the possession, direct or indirect, of
the
power to direct or cause the direction of the management and
policies of a
person, whether through ownership of securities, by contract, or
otherwise.
Except as set forth on Schedule 2.1.18, Seller is not in default
and,
to
Seller's Knowledge, no event has occurred which with or without
the
giving of notice or lapse of time, or both, would constitute a
default in
the
performance, observance, or fulfillment of any obligation, covenant
or
condition contained in any of the agreements, contracts,
commitments,
leases, documents, and other instruments listed on Schedule 2.1.18
(the
"CONTRACTS") and each of the Contracts is valid and enforceable
in
accordance with its terms, except in any case where any such
default or
event of default thereunder could not reasonably be expected to
have a
Material Adverse Effect. Except as disclosed on Schedule 2.1.18,
no
Contract requires the consent of any party to this assignment in
connection
with
the transactions contemplated by this Agreement. Correct and
complete
copies of all written Contracts disclosed on Schedule 2.1.18 have
been
delivered to Buyer.
2.1.19 Labor Matters; Employee Relations. Except as set forth
on
Schedule 2.1.19, Seller is not a party to any collective
bargaining
agreement or contract or lease with respect to labor or bound to or
made
any
agreement or commitment to enter into any other agreement with a
labor
union pertaining to the Business. Except as set forth on Schedule
2.1.19,
no
employees of the Business are represented by any labor union or
similar
organization, and no representation campaign or election is now in
progress
with
respect to any of the employees of the Business. Schedule
2.1.19
contains
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the
name and compensation (including information as to bonuses paid for
the
immediately-preceding calendar year) of all employees of Seller
involved in
the
Business. There has not been within the preceding fiscal year of
Seller
and
the current fiscal year, nor is there currently, any strike,
walkout or
work
stoppage related to the Business; nor, to Seller's Knowledge, is
any
such
action threatened. There is no existing or, to Seller's
Knowledge,
threatened labor disturbance by any of the Business' principal
suppliers,
contractors or customers which could reasonably be expected to have
a
Material Adverse Effect. Seller is not delinquent in payments to
any of the
Business' employees or consultants for wages, salaries,
commissions,
bonuses, or other direct compensation for any services performed by
them to
the
date hereof or amounts required to be reimbursed to such
employees.
Also
attached to Schedule 2.1.19 is a list of all employee
handbooks,
manuals, and/or written policies pertaining to the employees of
the
Business, true, correct and complete copies of which have been
delivered to
Buyer.
Except as set forth in Schedule 2.1.19, there are no charges or
complaints pertaining to the Business and involving any federal,
state or
local civil rights enforcement agency or court; complaints or
citations
under the Occupational Safety and Health Act, as amended, or any
state or
local occupational safety act or regulation; unfair labor practice
charges
or
complaints by employees of the Business with the National Labor
Relations Board; or other claims, charges, actions or
controversies
pending, or, to Seller's Knowledge, threatened or proposed,
involving
Seller and any employee or former employee of the Business or any
labor
union or other organization representing or claiming to represent
such
employees' interests, which could reasonably be expected to have a
Material
Adverse Effect. To Seller's Knowledge, the Business has good
relations with
its
employees.
Seller, with respect to the Business, is and has heretofore been
in
compliance in all respects with all laws, rules and regulations
respecting
employment and employment practices, terms and conditions of
employment and
wages and hours, the sponsorship, maintenance, administration and
operation
of
(or the participation of its employees in) employee benefit plans
and
arrangements and occupational safety and health programs, and
Seller is not
engaged in any violation of any law, rule or regulation related
to
employment, including unfair labor practices or acts of
employment
discrimination, which, in either case, could reasonably be expected
to have
a
Material Adverse Effect. No incidents, injuries or events have
occurred
which have affected or, to Seller's Knowledge, will affect
Seller's
workmen's compensation rating. As of the date of this Agreement,
Seller has
provided to Buyer Seller's most recent workmen's compensation
rating
information.
Except as disclosed on Schedule 2.1.19, Seller has not made, or
agreed
to
make, any direct or indirect change (including any general
uniform
increase) in the rate or amount or kind of benefits, payable or
paid, to
any
employee or class of employees of the Business or any direct or
indirect change in the terms or conditions of (including the
adoption of)
any
policy, plan, agreement, trust, fund or other arrangement for
the
benefit of any employee or class of employees of Seller as it
relates to
the
Business. Schedule 2.1.19 sets forth all the employees of the
Business.
Effective as of the Closing, the employment of all employees of
Seller with
respect to the Business will be terminated
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by
Seller and, except as set forth on Schedule 2.1.19, Buyer intends
to
hire
all such employees, including, without limitation, Diane Romano
and
Jerry H. Byrd at comparable base pay and with customary fringe
benefits
such
as health and insurance coverage.
2.1.20 Employee Plans.
(a) Definitions. The following terms, when used in this Section
2.1.20, shall have the following meanings. Any of these terms
may,
unless the context otherwise requires, be used in the singular or
the
plural depending on the reference.
(i) "BENEFIT ARRANGEMENT" means any employment, consulting,
severance, bonus, or other similar contract, arrangement or
policy and each plan, arrangement (written or oral), program,
agreement or commitment providing for insurance coverage
(including any self-insured arrangements), workers'
compensation,
disability benefits, supplemental unemployment benefits,
vacation
benefits, retirement benefits, life, health, disability or
accident benefits (including any voluntary employees'
beneficiary
association as defined in Section 501(c)(9) of the Code
providing
for the same or other benefits) or providing for deferred
compensation, profit-sharing, bonuses, stock options, stock
appreciation rights, stock purchases or other forms of
incentive
compensation or post-retirement insurance, compensation or
benefits which (A) is not a Welfare Plan, Pension Plan or
Multi-employer Plan, (B) is entered into, maintained,
contributed
to or required to be contributed to, as the case may be, by
Seller or an ERISA Affiliate (as hereinafter defined) or under
which Seller or any ERISA Affiliate may incur any liability,
and
(C) covers any employee or former employee of Seller or any
ERISA
Affiliate (with respect to their relationship with such
entities). "EMPLOYEE PLANS" means all Benefit Arrangements,
Multi-employer Plans, Pension Plans and Welfare Plans.
"EMPLOYEE"
means all employees working for Seller or any Subsidiary (as
hereinafter defined), whether on a part-time or full-time
basis.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended. "ERISA AFFILIATE" means any entity which is
(or
at any relevant time was) a member of a controlled group of
corporations with or under common control with Seller, as
defined
in Section 414(b) or (c) of the Code. "MULTI-EMPLOYER PLAN"
means
any multi-employer plan, as defined in, Section 4001 (a)(3) of
ERISA, and to which Seller, or any ERISA Affiliate is making,
is
obligated to make or has made or been obligated to make, on
behalf of any employee or former employee of Seller or any
ERISA
Affiliate (with respect to their relationship with such
entities). "PBGC" means the Pension Benefit Guaranty
Corporation.
"PENSION PLAN" means any employee pension benefit plan as
defined
in Section 3(2) of ERISA (other than a Multi-employer Plan) (A)
which
Seller or any ERISA Affiliate maintains, administers,
contributes to or is required to contribute to, or,
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within the five (5)
