Exhibit 10.01
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT, dated as of December 27, 1995 between Phoenix
Color Corp., a New York corporation ( the "Purchaser"), and Xxxxxx X. Xxxxxxxx
Xx., Xxxxx X. Xxxxxxxxx, Xxxxxx X. Xxxxxxxx (referred to collectively as the
"Individual Stockholders"), Chemical Venture Capital Associates, a California
Limited Partnership ("CVCA"), and Xxxxxx X. Xxxxxxxx, Xx., Xxxxx X. Xxxxxxxxx
and Xxxxxx X. Xxxxxxxx, as Voting Trustees (the "Voting Trustees") of the New
England Book Corporation Voting Trust.
RECITALS
A. The Individual Stockholders, CVCA, certain persons listed on
Schedule A annexed hereto (the "Employee Stockholders"), and the Voting Trustees
(all of the foregoing being referred to collectively as the "Sellers")
beneficially own or hold of record, in the aggregate, 1,000,000 shares of Common
Stock of New England Book Holding Corporation, a Delaware corporation ("NEBH");
B. The Individual Stockholders are active in the management of NEBH,
which conducts a book cover and component printing business through its
wholly-owned subsidiary, New England Book Components, Inc. ("NEBC"), a
Massachusetts corporation ( NEBH and NEBC being sometimes collectively referred
to herein as the "Corporations");
C. The Sellers desire to sell and the Purchaser desires to buy
1,000,000 shares of NEBH Common Stock, constituting all of the issued and
outstanding Common Stock of NEBH, subject to the terms and conditions of this
Agreement; and
D. The parties desire to set forth in this Agreement the terms and
conditions of such sale and purchase, and to enter into the other agreements and
arrangements provided for herein;
NOW, THEREFORE, in consideration of the foregoing recitals, the mutual
promises, covenants, representations and warranties made herein, and the sum of
$10.00 and other good and valuable consideration paid and given by each party to
the others, receipt of which is hereby acknowledged, THE PARTIES AGREE AS
FOLLOWS:
I. PURCHASE AND SALE OF SHARES
1.1 Purchase and Sale of the Shares. Subject to all of the terms and
conditions of this Agreement, the Purchaser agrees to buy and the Sellers agree
to sell an aggregate of 1,000,000 shares of NEBH Common Stock, $.01 par value
(the NEBH Shares), constituting all, and not less than all, of the outstanding
shares of NEBH, for a purchase price of $21.00 per share, representing an
aggregate purchase price (the "Purchase Price") of Twenty-One Million Dollars
($21,000,000) . The number of Shares being purchased from and sold by each of
the Sellers, and the portion of the Purchase Price to be paid to each of the
Sellers, is as set forth in Schedule A annexed to and included in this
Agreement.
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1.2 Payment of Purchase Price; Disbursing Agent; Escrow Payment. The
Purchase Price will be paid in immediately available funds by wire transfer,
payable to Xxxxxx, Hall & Xxxxxxx, as special counsel for the Sellers, who will
act as a disbursing agent (the "Disbursing Agent") and will be authorized by the
Sellers to receive and disburse such Purchase Price payment in the amounts to
which each of the Sellers is entitled as set forth in Schedule A, provided,
however, that the Purchase Price payment and the amounts so disbursed shall be
adjusted to reflect the setting aside and delivery in escrow of a portion of the
Purchase Price as set forth in Article VIII hereof.
1.3 Closing. The closing for the sale and purchase of the NEBH Shares
(the "Closing") shall take place at the offices of Rosner, Bresler, Xxxxxxx &
Xxxxxxx, 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 at 10:00 a.m. on January 2,
1996 or such other time and date as the parties may agree to in writing (the
"Closing Date"). At the Closing:
(a) each of the Sellers will deliver (or, in the case of the
Employee Stockholders, will cause the Individual Stockholders, and the Voting
Trustees acting on behalf of the Employee Stockholders, to deliver) to the
Purchaser, free and clear of all liens, claims, charges and encumbrances,
certificates representing, in the aggregate, all of the NEBH Shares, which shall
be validly issued, duly endorsed for transfer to the Purchaser or accompanied by
valid stock powers or other instruments of transfer duly executed, and
accompanied by all requisite stock transfer tax stamps;
(b) subject to the provisions of Article VIII hereof, the
Purchaser will deliver to the Disbursing Agent the payment required under
Section 1.2 above;
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(c) the Purchaser, the Individual Stockholders, CVCA and the
Escrow Agent (as hereinafter defined) will execute and deliver an escrow
agreement, and the Purchaser will arrange to deposit in escrow the $2,100,000
portion of the Purchase Price to be paid in installments subsequent to the
Closing Date, in accordance with the provisions of Article VIII hereof;
(d) the Purchaser and the Individual Stockholders and CVCA will
execute and deliver to each other (and, where required, the Individual
Stockholders will cause the Employee Stockholders to execute and deliver) those
agreements, consents, powers of attorney, documents and other items required to
be delivered pursuant to Article VI hereof; and
(e) the parties will deliver all other documents and take all
other actions required to be delivered or taken at the Closing in accordance
with this Agreement.
II. EMPLOYMENT AND OTHER ARRANGEMENTS
2.1 Employment Agreements. At the Closing, the Purchaser will enter
into separate two-year employment agreements with Xxxxxx X. Xxxxxxxx, Xx., and
Xxxxxx X. Xxxxxxxx, on the terms and in the form set forth as Exhibit 1 annexed
to this Agreement, and Messrs. Xxxxxxxx and Xxxxxxxx, by their signatures to
this Agreement, each confirms that he will execute and deliver his respective
employment agreement.
2.2 Non-Competition Agreement. At the Closing, the Purchaser will
enter into an agreement with Xxxxx X. Xxxxxxxxx, in the form set forth as
Exhibit 2 annexed to this Agreement, pursuant to which Purchaser will agree to
pay Xxxxx X. Xxxxxxxxx the compensation provided in such
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agrement in return for an undertaking by Xxxxx X. Xxxxxxxxx not to engage,
directly or indirectly, in any activity competitive with the business of the
Purchaser, NEBH or NEBC, as defined in Exhibit 2, for a period of four (4) years
from the Closing.
2.3 Option to Acquire Shares of Purchaser. At the Closing, the
Purchaser will enter into a stock option agreement with Xxxxxx X. Xxxxxxxx, Xx.,
and Xxxxxx X. Xxxxxxxx granting them the collective right to purchase an
aggregate of up to 1,400 shares of the Purchaser's Class A common stock for a
price of $3,214.28 per share, with such right of purchase to be allocated
between Messrs. Xxxxxxxx and Xxxxxxxx as they shall determine; provided,
however, that neither person shall have the right to purchase more than 1,000
such shares. The stock option agreement will be in the form set forth as Exhibit
3 annexed to this Agreement, and will provide for (i) an option exercise period
which will commence at the Closing and will terminate at the earlier of 15 days
after delivery of Purchaser's financial statements for the six-month period
ending June 30, 1996, or 45 days after notice of the filing by Purchaser of a
registration statement for a public offering of Purchaser's shares, and (ii)
registration rights with respect to any shares of Purchaser acquired under the
stock option agreement, comparable to those available to other shareholders of
the Purchaser.
2.4 Certain Leased Facilities. At the Closing:
(a) The Individual Stockholders will deliver, at their own cost
and expense, an executed instrument, satisfactory in form and substance to the
Purchaser and its attorneys, by which the landlord of the manufacturing facility
located at 000 Xxxxxxxxxx Xxxx Xxxx, Xxxxxxx, Xxxxxxxxxxxxx, presently occupied
by NEBH and NEBC, will cause the lease for such facilities to terminate on the
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second anniversary of the Closing, without any further liability to NEBH, NEBC
or the Purchaser;
and
(b) Beginning six months after the Closing, and subject to the terms
and conditions of the applicable lease, the Individual Stockholders and CVCA
will have the right to obtain a suitable subtenant or assignee for the
additional facilities occupied by NEBH and NEBC at 000 Xxxxxxxxxx Xxxx Xxxx,
Xxxxxxx, Xxxxxxxxxxxxx, and, in the event such subtenant or assignee shall duly
occupy such facilities with the consent of the Purchaser (which consent shall
not be unreasonably withheld) and the landlord of such facilities, the Purchaser
shall cause any net rental received by it from such occupancy prior to the
termination of the applicable lease immediately to be remitted to the Disbursing
Agent, who will pay such net rental to the Individual Stockholders and CVCA in
the following percentages: Xxxxxxxx - 21.85714%; Middleton - 21.85714%; Xxxxxxxx
- 7.28572%; and CVCA - 49%. For purposes of this provision, "net rental" shall
mean the gross rental or other sums actually received by Purchaser from such
subtenant or assignee, less the cost to Purchaser of (i) any fix-up or repair
activities for, and capital improvements in, such facilities required by such
subtenant or assignee, and (ii) any expenditures of Purchaser in attempting to
obtain such subtenant or assignee; provided, however that any such deductions
shall not include monthly rental charges payable to the landlord of such
facilities, the amounts of which have been taken into consideration in the
calculation of the Purchase Price. If such subtenant or assignee should default
in the payment of rental due after occupying such facilities, Purchaser shall be
entitled, after such default, to withhold payment of any amounts otherwise due
the Individual Stockholders and CVCA under this subsection. In addition to
paying any net rental to the Individual Stockholders and CVCA as contemplated by
this subsection, the Purchaser shall be required to pay to the Individual
Stockholders and CVCA, in the percentages
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described above in this subsection, the amount representing the actual gross
rents forgiven by the landlord of such facilities in connection with any sale or
other transfer of such facilities as a result of which the Purchaser (or any
subtenant or assignee) ceases to occupy such facilities.
III. REPRESENTATIONS AND WARRANTIES OF THE SELLERS
The Individual Stockholders and CVCA jointly and severally represent
and warrant to the Purchaser, acknowledging that the Purchaser is relying
materially thereon, as follows:
3.1 Organization and Standing. NEBH is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
NEBC is a corporation duly organized, validly existing and in good standing
under the laws of the Commonwealth of Massachusetts, and is a wholly-owned
subsidiary of NEBH. The Corporations have all requisite corporate power to carry
on their respective businesses as they are now being conducted, and each is duly
qualified to do business as a foreign corporation and is in good standing in
each jurisdiction where such qualification is necessary under applicable law,
except where the failure to qualify (individually or in the aggregate) does not
have any material adverse effect on their respective businesses. The copies of
the Certificate of Incorporation and by-laws of NEBH, as amended to date,
delivered to the Purchaser, are true and complete copies of these documents as
now in effect. The copies of the Articles of Organization and the by-laws of
NEBC, as amended to date, delivered to the Purchaser, are true and complete
copies of such documents now in effect. The minute books of each of the
Corporations, as presented for inspection by Purchaser, are accurate and
complete in all material respects.
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3.2 Capitalization. The authorized capital stock of NEBH consists of
1,500,000 shares of Common Stock, $.01 par value, of which 1,000,000 shares are
issued and outstanding as of the date hereof. The authorized capital stock of
NEBC consists of 1,000 shares of Common Stock, no par value, of which 1,000
shares are validly issued and outstanding as of the date hereof. Except as set
forth in this paragraph, there is no other authorized class, series or unit of
securities, of any kind, evidencing a proprietary interest in NEBH. None of the
shares of NEBH or NEBC has been issued in a manner giving rise to claims for
violation of the securities laws of any jurisdiction.
3.3 Ownership, Transfer and Validity.
(a) All of the NEBH Shares are fully paid, duly and validly
issued and beneficially owned by the persons listed, in the respective amounts
indicated, in Schedule A and, where indicated in Schedule A, such NEBH Shares
are held of record by the Voting Trustees under a Voting Trust Agreement dated
September 1, 1987 ( the "Voting Trust Agreement"), which (i) is in full force
and effect as of the date hereof and (ii) authorizes the Voting Trustees to act
in accordance with the terms thereof on behalf of all of the beneficiaries named
therein. All of the issued and outstanding shares of NEBC are owned beneficially
and of record by NEBH. Except for the Voting Trust Agreement and as set forth in
Section 3.3 of the Sellers Disclosure Schedule annexed to this Agreement (the
"Sellers Disclosure Schedule"), there is no option, warrant, call, convertible
security, preemptive right or commitment of any kind relating to unissued shares
of the capital stock of either NEBH or NEBC. Other than NEBH's ownership of the
shares of NEBC, neither of the Corporations owns any shares of capital stock or
other interest in any corporation, partnership, association or other entity.
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(b) The NEBH Shares to be delivered at the Closing will be free and
clear of any liens, charges, encumbrances or claims. The sale and delivery of
the NEBH Shares to Purchaser, when consummated pursuant to this Agreement, will
transfer to and vest in Purchaser the ownership of all, and not less than all,
the issued and outstanding shares of NEBH.
(c) This Agreement constitutes the valid and binding obligation of
the Individual Stockholders, CVCA and the Voting Trustees enforceable against
the Individual Stockholders, CVCA and the Voting Trustees in accordance with its
terms, except as may be limited by applicable bankruptcy, reorganization,
insolvency, moratorium or other similar laws or by legal or equitable principles
relating to or limiting creditors' rights generally.
3.4 Financial Statements. The consolidated financial statements of
NEBH and NEBC for the years ended December 31, 1990, 1991, 1992, 1993 and 1994,
audited by Xxxxxx Xxxxxxxx LLP, independent certified public accountants, the
unaudited consolidated balance sheet of NEBH and NEBC (the "Balance Sheet") as
of September 30, 1995 (the "Balance Sheet Date") and the unaudited statements of
operations and retained earnings and cash flows for the nine-month period then
ended (such audited and unaudited financial statements being referred to
collectively as the "Financial Statements"), copies of which have been delivered
to the Purchaser, have been prepared in accordance with generally accepted
accounting principles applied on a basis consistent with prior periods, are
accurate and complete, and present fairly the financial condition of the
Corporations as of the respective dates indicated and the results of their
operations and cash flows for the respective periods indicated, subject, in the
case of unaudited Financial Statements, to audit and other customary adjustments
and the absence of footnotes.
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3.5 No Undisclosed Liabilities. Section 3.5 of the Sellers Disclosure
Schedule lists each and every liability of NEBH and NEBC (whether accrued,
absolute, contingent or otherwise) as of the Balance Sheet Date, and such
liabilities are fully reflected in the Balance Sheet. Except as set forth in
Section 3.5 of the Sellers Disclosure Schedule, to the best knowledge of the
Individual Stockholders and CVCA, the Corporations are not subject to any
material liability (defined, for purposes of this Section 3.5, as any single
item in excess of $5,000), whether absolute, contingent, accrued or otherwise,
other than (i) liabilities of the same nature as those set forth in Section 3.5
of the Disclosure Schedule which were incurred by the Corporations in the
ordinary course of business after the Balance Sheet Date, (ii) liabilities
arising under existing agreements to which NEBC and /or NEBH is a party
(excluding liabilities arising on account of breaches by NEBC or NEBH of such
existing agreements which breaches are not disclosed in the Sellers Disclosure
Schedule), and (iii) other liabilities disclosed in the Sellers Disclosure
Schedule. Except as disclosed herein, neither of the Corporations have any
material unrealized or anticipated losses, in excess of $5,000 for a single
item, from unfavorable commitments.
3.6 Books and Records. The books and records of the Corporations are
true, accurate and complete in all material respects and have been maintained in
accordance with generally accepted accounting principles applied on a consistent
basis.
3.7 Accounts Receivable. The accounts receivable of NEBH and NEBC
reflected in the Balance Sheet (except those accounts receivable collected since
the Balance Sheet Date) and as listed in Section 3.7 of the Sellers Disclosure
Schedule (which sets forth the accounts receivable on the books of the
Corporations, together with an aging schedule) have been generated in the
ordinary
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course of business and reflect bona fide obligations for the payment of goods or
services provided by the Corporations. The amounts reflected in such accounts
receivable are expected (but not guaranteed) to be fully collected in the
ordinary course of business, on a schedule consistent with past collection
practices of the Corporations, except to the extent reserved against in the
Balance Sheet.
3.8 Inventories. The inventories of NEBH and NEBC reflected in the
Balance Sheet and listed in Section 3.8 of the Sellers Disclosure Schedule are
in good, merchantable and usable condition, have been reflected in the Balance
Sheet at cost, and include no obsolete or discontinued items, or items which
have failed any quality testing, in each case except to the extent reserved
against in the Balance Sheet. Except as set forth in Section 3.8 of the Sellers
Disclosure Schedule, such inventories are located and maintained at the
Corporations' facilities in Hingham, Massachu setts, and are owned free and
clear of any liens, encumbrances, charges or claims of others, except for the
encumbrance (the "Permitted Encumbrance") consisting of claims, liens,
mortgages, charges, security interests and encumbrances or other restrictions or
limitations in favor of Fleet Bank of Massachusetts, N.A. ("Fleet") pursuant to
the Credit Agreement dated as of December 23, 1995 (the "Credit Agreement")
between NEBC and Fleet and the related credit documents referenced therein.
3.9 Backlog. Section 3.9 of Sellers Disclosure Schedule accurately
sets forth as of the Balance Sheet Date the name, aggregate contract price,
revenues received to date and balance remaining on all projects of the Company
then in progress or under contract to be performed.
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3.10 Real Property Leases. NEBH and NEBC are tenants in the facilities
described and under the lease agreements listed in Section 3.10 of Sellers
Disclosure Schedule, and each of such lease agreements is in full force and
effect, and is valid and binding and enforceable in accordance with its terms.
Neither NEBH nor NEBC is in default in the performance of any provision of such
leases. Except as set forth in Section 3.10 of the Sellers Disclosure Schedule,
neither NEBH nor NEBC has collaterally assigned or encumbered its interest under
such leases. The current use by NEBH or NEBC of any of the real property leased
by either of them does not violate any environmental or local zoning or similar
land use laws.
3.11 Machinery and Equipment. Section 3.11 of Sellers Disclosure
Schedule lists each item of NEBH or NEBC machinery and equipment with an
original cost on the books of the Corporations in excess of $500 per item (the
"Equipment"). All of such Equipment is owned by NEBH or NEBC, free and clear of
any liens, charges, encumbrances or security interests, except as set forth in
Section 3.11 and Section 3.12 of the Sellers Disclosure Schedule, and except for
the Permitted Encumbrance. With respect to any Equipment held under an equipment
lease, any such lease is in full force and effect and neither NEBH nor NEBC is
in default thereunder. The Equipment is in good operating condition and repair
and is suitable for use in the ordinary course of business of NEBH and NEBC, and
includes all machinery and equipment necessary to manufacture the products sold
by NEBH and NEBC and to operate the business of the Corporations as currently
conducted.
3.12 Title to Assets Generally. Except as stated in Section 3.12 of
Sellers Disclosure Schedule, NEBH and NEBC hold good and marketable title to
their respective assets reflected on
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the Balance Sheet and to all assets and properties whose ownership has been
acquired by NEBH or NEBC after the Balance Sheet Date (except assets sold or
consumed in the ordinary course of business subsequent to the Balance Sheet
Date), free and clear of all adverse claims, liens, mortgages, charges, security
interests, encumbrances or restrictions other than the Permitted Encumbrance.
3.13 Contracts Listed; No Default. Section 3.13 of the Sellers
Disclosure Schedule contains a complete and correct list as of the date hereof
of all agreements, contracts and commitments of the following types, written or
oral, to which NEBH or NEBC is a party or by which NEBH or NEBC or any of its
properties is bound as of the date hereof: (i) mortgages, indentures, security
agreements, letters of credit, loan agreements and other agreements, guarantees
and instruments relating to the borrowing of money or extension of credit; (ii)
employment, consulting, severance and agency agreements; (iii) collective
bargaining agreements; (iv) bonus, profit-sharing, compensation, stock option,
stock purchase, pension, severance, retirement, deferred compensation or other
plans, trusts or funds for the benefit of employees, officers, agents or,
directors (whether or not legally binding); (v) sales agency, manufacturer's
representative or distributorship agreements; (vi) agreements, orders or
commitments for the purchase of raw materials, supplies or finished products
exceeding $10,000 in amount; (vii) agreements, orders or commitments for the
sale of products exceeding $10,000 in amount; (viii) licenses of intellectual
property, transfer of technology or know how and other intellectual property
rights; (ix) confidentiality agreements, including agreements binding any of
NEBH or NEBC's employees; (x) agreements or commitments for capital expenditures
in excess of $5,000 for any single project (it being warranted that all
undisclosed
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agreements or commitments for capital projects do not exceed $25,000
in the aggregate for all projects); (xi) brokerage or finder's agreements; (xii)
stockholders' agreements and any agreements restricting the transfer of any of
the shares of NEBH or NEBC; (xiii) joint venture and partnership agreements;
(xiv) leases for real and personal property; and (xv) other agreements,
contracts and commitments which in any case involve payments or receipts of more
than $10,000. The Sellers have made available to the Purchaser complete and
correct copies of all such written agreements, contracts and commitments,
together with all amendments thereto, and provided accurate descriptions of all
oral agreements listed in Section 3.13 of the Sellers Disclosure Schedule. All
agreements, contracts and commitments referred to in this Section 3.13 are in
full force and effect in accordance with their respective terms and there does
not exist thereunder as of the date hereof any default by NEBH or NEBC or, to
the knowledge of the Individual Stockholders or CVCA, any other party thereto,
or event or condition which, after notice or lapse of time or both, would
constitute a default thereunder on the part of NEBH or NEBC or, to the knowledge
of the Individual Stockholders or CVCA, any other party thereto. Neither NEBH
nor NEBC has granted any powers of attorney, except routine powers of attorney
relating to representation before governmental agencies or given in connection
with qualification to conduct business in another jurisdiction, except as set
forth in Section 3.28.
3.14 Related Party Transactions. Except as set forth in Section 3.14
of the Sellers Disclosure Schedule, neither NEBH nor NEBC has made any loans to
any officer, director, shareholder or employee, outstanding on the date of this
Agreement, nor entered into any agreement or arrangement with any such person,
or with a parent, child, spouse or sibling of such person, in which such person
or any of such relatives has a material direct or indirect economic interest in
such
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arrangement or agreement, other than compensation arrangements in keeping with
the usual and customary practices of the Corporations.
3.15 Customers and Customer Deposits. Set forth in Section 3.15 of the
Sellers Disclosure Schedule is a true and complete list of customers and
customer deposits shown on the Balance Sheet, indicating for each customer the
date on which the deposit was received, the amount of each deposit, the
product(s) ordered, the total purchase price for each such product, the current
stage of production and the estimated delivery date for the product(s) ordered.
Except as therein set forth, each of the customer deposits represents a bona
fide customer order for a product or products that NEBH and NEBC reasonably
believe can be delivered in accordance with the specifications and upon the
terms agreed to with the customer. Neither NEBH nor NEBC is engaged in any
material dispute with any customer, and the entering into and performance of
this Agreement is not expected to have any material adverse effect on the
business relationship between NEBH and NEBC and such customers.
3.16 Employee Benefit Plans. With respect to each employee benefit
plan of NEBH or NEBC:
(a) Section 3.16(a) of the Sellers Disclosure Schedule sets
forth all pension, savings, retirement, health, insurance, severance and other
employee benefit or fringe benefit plans, within the meaning of Section 3(3) of
ERISA, maintained currently with respect to the business of NEBH and NEBC
(referred to herein as the "Plan" or "Plans"). With respect to the Plans, the
Sellers have delivered to the Purchaser copies of: (i) the Plan documents, and,
where applicable, related trust
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agreements, and any related agreements which are in writing; (ii) summary plan
descriptions; (iii) the most recent Internal Revenue Service ("IRS")
determination letter relating to each Plan for which a letter of determination
was obtained; (iv) to the extent required to be filed, the most recent Annual
Report (Form 5500 Series and accompanying schedules of each Plan and applicable
financial statements) as filed with the IRS; (v) audited financial statements,
if any.
(b) Except as set forth in Section 3.16(b) of the Sellers
Disclosure Schedule, (i) to the best knowledge, after reasonable inquiry, of the
Individual Stockholders and CVCA, in all material respects, each Plan conforms
to, and its administration is in compliance with, all applicable requirements of
law, including, without limitation ERISA and the Internal Revenue Code of 1986
(the "Code") and all rules and regulations promulgated pursuant thereto, and
(ii) all of the Plans are in full force and effect as written, and all premiums,
contributions and other payments required to be made by the NEBH or NEBC under
the terms of any pension plan as defined in Section 3(2) of ERISA (a "Pension
Plan") or welfare plan as defined in Section 3(1) of ERISA (a "Welfare Plan")
have been made. There are no Plan defects which would make any of the Plans
eligible for any IRS voluntary compliance programs, including the IRS Voluntary
Compliance Resolution Program (VCR), Standardized VCR Program, Closing Agreement
Program (CAP), and/or Walk-In CAP.
(c) Except as set forth in Section 3.16(c) of the Sellers
Disclosure Schedule, each Plan maintained by the Corporations with respect to
their business that is a Pension Plan is qualified under Section 401(a) of the
Code, and a favorable determination letter has been issued by the IRS with
respect to each such qualified Pension Plan. No Plan maintained by the
Corporations that is a Welfare Plan is funded through a voluntary employee
beneficiary association as defined in Section 501(c)(9) of the Code.
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(d) Except as set forth in Section 3.16(d) of the Sellers
Disclosure Schedule, all required installments as defined in Section 412(m) of
the Code required to be made by the Corporations or any trade or business
(whether or not incorporated) under common control with the Corporations within
the meaning of Sections 414(b), (c), (m) or (o) of the Code (the "Controlled
Group") before the Closing Date with respect to each Pension Plan will have been
paid prior to the Closing Date. No Pension Plan maintained by the Corporations
or the Controlled Group has incurred any "accumulated funding deficiency"
(whether or not waived) as that term is defined in Section 412 of the Code or
Section 302 of ERISA.
(e) Except as set forth in Section 3.16(e) of the Sellers
Disclosure Schedule, there are no multiemployer plans (as defined in Subsection
3(37) of ERISA) in which the Corporations or any other trade or business under
common control (within the meaning of Section 414(b) or (c) of the Code) has
ever participated or to which a contribution or other payment is required.
(f) Except as set forth in Section 3.16(f) of the Sellers
Disclosure Schedule or as required by COBRA, no Pension Plan has been terminated
since September 1, 1974, in a termination which will result in any liability to
be incurred by the Corporations under Title IV of ERISA. Except as indicated in
Section 3.16(f) of the Sellers Disclosure Schedule, none of the Pension Plans
that are subject to Title IV of ERISA have been partially terminated or have
been the subject of a "reportable event" as defined in Section 4043 of ERISA. No
proceedings by the Pension Benefit Guaranty Corporation ("PBGC") to terminate
any of the Pension Plans pursuant to Subtitle C of Title IV of ERISA have been
instituted or threatened. All required premiums have been paid to the PBGC with
respect to all Pension Plans.
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(g) Except as set forth in Section 3.16(g) of the Sellers
Disclosure Schedule or as required by COBRA, the Corporations do not maintain
any plan providing post-retirement benefits other than pension benefits provided
under a Pension Plan qualified under Section 401(a) of the Code
("Post-Retirement Benefits"). The Corporations are not liable for
Post-Retirement Benefits under any plan not maintained by them. To the best
knowledge of the Individual Stockholders and CVCA after reasonable inquiry, the
Corporations have complied in all material respects with the requirements of
Section 4980B of the Code and Sections 601 to 608 of ERISA relating to
continuation coverage for group health plans.
(h) Except as disclosed in Section 3.16(h) of the Sellers
Disclosure Schedule, with respect to each Pension Plan that is a "defined
benefit plan" within the meaning of Section 414(j) of the Code, the present
value of all accrued benefits under the Plan does not exceed the present value
of the assets of the Plan, with both such amounts calculated as of the same date
based on the actuarial assumptions established by NEBH or NEBC for funding. The
Sellers have delivered to the Purchaser a true and complete copy of the most
recent actuarial report for each such Pension Plan.
(i) Except as disclosed in Section 3.16(i) of the Sellers
Disclosure Schedule, each Plan has filed all required reports, documents and
notices with the IRS, the United States Department of Labor and the PBGC.
(j) There are no investigations, proceedings, or lawsuits
pending or, to the best knowledge of the Individual Stockholders or CVCA,
threatened against any Plan by any administrative agency, whether local, state
or federal.
(k) Other than routine employee claims for benefits, there are
no lawsuits or other claims pending or, to the best knowledge of the Individual
Stockholders or CVCA, threatened
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against any Plan, the Corporations or any fiduciary (within the meaning of
Section 3(21)(A) of ERISA) of a Plan brought on behalf of any participant,
beneficiary or any such fiduciary thereunder, nor is there any reasonable basis
for any such claim.
(l) All amendments required to have been made prior to the date
hereof to comply with applicable law (whether required by reason of the
enactment of legislation or otherwise) have been adopted with respect to each
Plan.
(m) With respect to each Plan, (A) no nonexempt "prohibited
transaction" within the meaning of Section 4975 of the Code or Section 406 of
ERISA has occurred, and (B) no income has been received that constitutes
"unrelated business taxable income" within the meaning of Section 512 of the
Code or "unrelated debt-financed income" within the meaning of Section 514 of
the Code.
(n) All applicable local, state and federal income tax
withholding obligations have been satisfied with respect to all benefits paid
under each Plan.
(o) As set forth in Section 3.16(o) of the Sellers Disclosure
Schedule:
(i) on or before December 31, 1995 the Corporations shall
cause to be terminated The 401 (k) Profit Sharing
Plan for the Employees of New England Book
Components, Inc. ("NEBC 401(k) Plan");
(ii) prior to the Closing Date, the Corporations shall
make any and all filings and submissions then
required under the Code or ERISA to the appropriate
governmental agencies necessary in connection with
such termination; and
19
(iii) notwithstanding clause (2) above, prior to the
Closing Date, the Corporations shall direct the
Trustees of the NEBC 401(k) Plan (the "Trustees") to
distribute the fully vested account balances to the
NEBC 401(k) Plan participants, as provided under the
NEBC 401(k) Plan, as soon as administratively
practicable.
3.17 Authorization and Non-Contravention; Consents. Each of the
Individual Stockholders, CVCA and the Voting Trustees, has full right, power and
authority to enter into and to perform this Agreement. Except as set forth in
Section 3.17 of the Sellers Disclosure Schedule, each consent, authorization,
order or approval of or filing or registration with, any governmental authority
required in connection with the execution, delivery and performance of this
Agreement by the Individual Stockholders, CVCA and the Voting Trustees has been
or by the Closing Date will be obtained, and the execution and delivery of this
Agreement and the performance thereof by the Individual Stockholders, CVCA and
the Voting Trustees do not and will not:
(a) violate any provision of the charter or bylaws of NEBH and
NEBC or any law, order, arbitration award, judgment or decree to which either of
them is a party or by which they or any of their properties are bound;
(b) violate or breach, or result with the passage of time in the
violation or breach of, or result in the acceleration or termination of or
entitle any party to accelerate or terminate (whether after the giving of notice
or lapse of time or both) any obligation under, or result in the creation or
imposition of any lien, charge, pledge, security interest or other encumbrance
upon any of the properties of the Corporations pursuant to, any provision of any
mortgage, lien, lease,
20
agreement, permit, indenture, license or instrument to which the Individual
Stockholders, CVCA, the Voting Trustees, NEBH or NEBC is a party or by which any
of them or any of the Corporations' properties are bound and which is material
to the business of the Corporations as now or as proposed to be conducted; or,
(c) violate or conflict with any other material restriction of
any kind or character to which NEBH or NEBC is subject or by which any of its
properties may be bound.
3.18 Labor Relations. Except as described in Section 3.18 of the
Sellers Disclosure Schedule, there are no agreements with, or pending petitions
for recognition of, a labor union or association as the exclusive bargaining
agent for any or all of NEBH or NEBC's employees; no such petitions have been
pending at any time within five years of the date of this Agreement, and, to the
best knowledge of the Individual Stockholders and CVCA, there has not been any
organizing effort by any union or any other group seeking to represent any
employees of NEBH or NEBC as their exclusive bargaining agent at any time within
five years of the date of this Agreement; and there are no labor strikes, work
stoppages or other labor troubles now pending or, to the best knowledge of the
Individual Stockholders and CVCA, threatened against NEBH or NEBC, nor have
there been any such labor strikes, work stoppages or other labor troubles at any
time within five years of the date of this Agreement.
3.19 Insurance. Set forth in Section 3.19 of the Sellers Disclosure
Schedule is a true, correct and complete listing of all insurance policies or
binders of insurance which relate to the Corporations' business. Except as set
forth in the Schedule:
21
(a) the coverage under each such policy and binder is in full
force and effect, and no notice of cancellation or nonrenewal with respect to,
or disallowance of any claim under, any such policy or binder has been received
by NEBH or NEBC;
(b) there are no programs of self-insurance relating to the
Corporations' business;
(c) there are no pending or unpaid claims under any such
insurance policy; and
(d) to the best knowledge of the Individual Stockholders and
CVCA after reasonable inquiry, no event has occurred which reasonably might form
the basis of any claim against NEBH or NEBC relating to their business or
operations or any of their assets or properties covered by any of the policies
or binders set forth in the Schedule or which would reasonably be expected to
increase materially the insurance premiums payable under any such policy or
binder.
3.20 Intellectual Property. Section 3.20 of the Sellers Disclosure
Schedule sets forth a true and complete list, including, where applicable, the
date of application, date of registration, date of issuance, date of
termination, serial or registration number of each patent, trademark or
copyright and the book value thereof, as of the Balance Sheet Date, of all
intellectual property which is related to the business of NEBH or NEBC, and
describes the extent of the interest of the Corporations and any third party
therein. Except as stated in such Schedule, the right, title or interest of the
Corporations in any intellectual property is free and clear of adverse claims,
liens, mortgages, charges, security interests and encumbrances or other
restrictions or limitations of any kind other than the Permitted Encumbrance.
NEBH and NEBC own or have the legal right to use all intellectual property
necessary for the non-infringing design, manufacture, use or sale, as the case
may be, of all of the products, components of products and services which they,
in their business as currently
22
conducted, manufacture, use or sell. Except as set forth in such Schedule, to
the best knowledge of the Individual Stockholders and CVCA after reasonable
inquiry, NEBH and NEBC have not, within the time period as to which liability is
not barred by statute, infringed or misappropriated any intellectual property of
another, received from another any notice or claim in respect thereto, committed
any acts of unfair competition, or received from another any notice or claim in
respect thereto.
3.21 Compliance with Applicable Law. To the best knowledge of the
Individual Stockholders and CVCA after reasonable inquiry, NEBH and NEBC are, in
the conduct of their business and with respect to the properties owned or used
by them, currently in compliance with all foreign, federal, state or local laws,
statutes, ordinances, regulations and permits, the failure to comply with which
could materially adversely affect their business, operations, earnings or
financial condition.
3.22 Environmental Laws. Except as set forth in Section 3.22 of the
Sellers Disclosure Schedule:
(a) the facilities located at 125 and 000 Xxxxxxxxxx Xxxx Xxxx,
Xxxxxxx, Xxxxxxxxxxxxx, used by NEBH and NEBC (collectively, the "Facilities")
comply and have at all times complied with, and NEBH and NEBC are not in
violation of and have not violated, in connection with the ownership, use,
maintenance or operation of the Facilities and the conduct of the business
related thereto, any environmental laws;
23
(b) NEBH and NEBC (i) have operated the Facilities and have at
all times received, handled, used, stored, treated, shipped and disposed of all
hazardous material in compliance with all environmental laws and all other
applicable health or safety statutes, ordinances, orders, rules, regulations or
requirements, and (ii) have removed (or will remove prior to the Closing) from
the Facilities all hazardous material, other than those permitted to be retained
by NEBH or NEBC at the Facilities pursuant to applicable law or valid permits or
other approvals issued by relevant governmental authorities;
(c) no work, repairs, construction or capital expenditures with
respect to the Facilities are necessary in order to bring them into compliance
with or avoid violation of any environmental laws;
(d) to the best knowledge of the Individual Stockholders and
CVCA after reasonable inquiry, no hazardous material has been released into the
environment or deposited, discharged, placed or disposed of at, on or near the
Facilities, nor have the Facilities been used at any time by any person as a
landfill or a waste disposal site;
(e) no notices of any violation of any of the matters referred
to in subsections (a) through (d) above relating to the Facilities or their use
have been received by NEBH or NEBC, and there are no outstanding writs,
injunctions, decrees, orders or judgments or pending or (to the best knowledge
of the Individual Stockholders and CVCA) threatened lawsuits, claims,
proceedings or investigations relating to the ownership, use, maintenance or
operation of the Facilities, nor is there any basis for the institution or
filing of such lawsuits, claims, proceedings or investigations;
(f) there are no monitoring xxxxx at the Facilities for
monitoring hazardous leachate or other hazardous substances or releases;
24
(g) there are no subsurface tanks situated at the Facilities;
(h) there is no evidence of PCB contamination from any power
transformer, capacitor or any other source at the Facilities;
(i) there is no asbestos-containing material at the Facilities;
and
(j) NEBH and NEBC know of no fact or circumstance that would
reasonably be expected to give rise to any future civil, criminal or
administrative proceedings against them under any environmental laws.
3.23 Litigation. Except as set forth in Section 3.23 of the Sellers
Disclosure Schedule, there is no action, suit, proceeding or investigation
pending or, to the best knowledge of the Individual Stockholders or CVCA,
threatened against NEBH or NEBC, and there are no facts known to the Individual
Stockholders or CVCA which would reasonably be expected to serve as the basis
for any such action, suit, proceeding or investigation; and NEBH and NEBC are
not in default in respect of any judgment, order, writ, injunction or decree of
any court or any federal, state, local or other governmental department,
commission, board, bureau, agency or instrumentality.
3.24 Unlawful Payments. NEBH and NEBC have not, directly or
indirectly, made any of the following payments: (i) illegal political
contributions, (ii) payments from corporate funds not recorded or falsely
recorded on their books and records, (iii) payments from corporate funds to
governmental officials in their individual capacities for the purpose of
obtaining favorable treatment in securing business or licenses or to obtain
special concessions, or (iv) illegal payments from corporate funds to obtain
or retain business.
25
3.25 Permits. Except as set forth in Section 3.25 of the Sellers
Disclosure Schedule:
(a) NEBH and NEBC hold all permits, licenses, orders and
approvals of all foreign, federal, state or local governmental or regulatory
bodies required to conduct their business as currently conducted; all such
permits, licenses, orders and approvals are in full force and effect, and, to
the best knowledge of the Individual Stockholders and CVCA after reasonable
inquiry, no suspension or cancellation of any of them is threatened; and none of
such permits, licenses, orders or approvals will be adversely affected by the
consummation of the transactions contemplated in this Agreement;
(b) NEBH and NEBC are currently in compliance with the rules and
regulations of all governmental agencies having authority over them, including,
without limitation, agencies concerned with export and import licenses,
occupational safety, environmental protection and employment practices, the
failure to comply with which could adversely affect their business, operations,
earnings or financial condition;
(c) NEBH and NEBC have not received notice of violation of any
such rules or regulations within the last five years, which could result in any
liability to the Corporations for penalties or damages or any injunction or
governmental order or decree.
3.26 Restrictive Covenants. Except as set forth on in Section 3.26 of
the Sellers Disclosure Schedule, NEBH and NEBC are not a party to any agreement,
contract or covenant
26
limiting their freedom in competing in any line of business or with any person
or other entity in any geographic area.
3.27 Tax Matters.
(a) Except as set forth in Section 3.27 of the Sellers
Disclosure Schedule:
(i) All federal, state and local income, payroll, sales,
franchise and other tax returns, and all reports of
estimated federal, state and local taxes, required to
be filed to date by or on behalf of the Corporations
have been duly filed on a timely basis (unless
otherwise indicated in Section 3.27 of the Sellers
Disclosure Schedule), and such returns and reports of
estimated taxes are true, complete and correct to the
best knowledge of the Individual Stockholders and
CVCA after reasonable inquiry. All estimated taxes
shown on such reports and all taxes shown to be
payable on such returns or on subsequent assessments
with respect thereto have been paid in full on a
timely basis (unless otherwise indicated in such
Schedule), and, to the best knowledge of the
Individual Stockholders and CVCA after reasonable
inquiry, no other taxes are payable by the
Corporations with respect to items or periods covered
by such returns (whether or not shown on or
reportable on such returns). Each of the Corporations
has withheld and paid over all taxes required to have
been withheld and paid over, and complied with all
information reporting and backup withholding
requirements, including maintenance of required
records with respect thereto, in connection with
amounts paid or owing to any employee, creditor,
independent contractor or other third party. There
are no liens on any of the assets of NEBH and NEBC
with respect to taxes, other than liens for taxes not
yet due and payable or for
27
a tax liability that NEBH or NEBC is contesting in
good faith through appropriate proceedings and for
which appropriate reserves have been established, as
set forth in Section 3.27 of the Sellers Disclosure
Schedule. Neither NEBH or NEBC currently is the
beneficiary of any extension of time to file any
return. No claim has ever been made by an authority
in a jurisdiction where NEBH and NEBC do not file
returns that either of them is or may be subject to
tax by that jurisdiction.
(ii) Purchaser has been furnished by Sellers or the
Corporations with true and complete copies of (A) all
tax audit reports, statements of deficiencies, and
closing or other agreements received by NEBH or NEBC
relating to taxes, and (B) all federal, state and
local income or franchise tax returns for the
Corporations, in each case for all periods ending on
and after December 31, 1989. Neither of the
Corporations has been a member of an affiliated group
filing consolidated returns other than a group of
which NEBH and NEBC were the only members. Neither
NEBH nor NEBC has done or is doing business or has
derived or is deriving income from activities
conducted (except to the extent protected by P.L.
86-272), in any state, local, territorial or foreign
taxing jurisdiction other than those for which all
tax returns have been furnished to Purchaser.
(iii) The returns of NEBH and NEBC have never been audited
by a government or taxing authority, nor is any such
audit in process, pending or, to the best knowledge
of the Individual Stockholders and CVCA, threatened
(either in writing or orally, formally or
informally). To the best knowledge of the Individual
Stockholders and CVCA after reasonable inquiry, no
deficiencies exist, and no deficiencies have been
asserted (either in writing or orally, formally or
informally) or are expected to
28
be asserted with respect to taxes of the
Corporations, and neither of the Corporations has
received notice (either in writing or orally,
formally or informally) or expects to receive notice
that it has not filed a return or paid taxes required
to be filed or paid by it. Neither of the
Corporations is a party to any action or proceeding
for assessment or collection of taxes, and no such
action or proceeding has been asserted or, to the
best knowledge of the Individual Stockholders or
CVCA, threatened (either in writing or orally,
formally or informally) against the Corpora tions or
any of their assets. No waiver or extension of any
statute of limitations is in effect with respect to
taxes or returns of the Corporations. Each of the
Corporations has disclosed on federal income tax
returns all positions taken therein that could give
rise to a substantial understatement penalty, and
such disclosures are reflected in the copies of tax
returns delivered to Purchaser.
(iv) Neither of the Corporations is, nor has it been, a
party to any tax-sharing agreement or arrangement.
(v) Neither of the Corporations has made an election
under Section 338 of the Code or has taken any action
that would result in any income tax liability as a
result of a deemed election within the meaning of
Section 338 of the Code. Neither of the Corporations
is or has been a United States real property holding
corporation within the meaning of Section 897(c)(2)
of the Code during the applicable period specified in
Section 897(c)(1)(A)(ii) of the Code and Purchaser is
not required to withhold tax on the purchase of the
stock of NEBH by reason of Section 1445 of the Code.
Neither of the Corporations is a "consenting
corporation" under Section 341(f) of the
29
Code. Neither of the Corporations has entered into
any compensatory agreements with respect to the
performance of services which payment thereunder
would result in a nondeductible expense pursuant to
Section 28OG of the Code or an excise tax to the
recipient of such payment pursuant to Section 4999 of
the Code. Neither of the Corporations has made or
will make (A) a deemed dividend election under
Treasury Regulations Section 1.1502-32(f)(2) or (B) a
consent dividend filing under Section 565 of the
Code. Neither of the Corporations has agreed to, nor
is it required to make, any adjustment under Code
Section 481(a) by reason of a change in accounting
method or otherwise.
(b) The Sellers Disclosure Schedule and the Financial Statements
contain an accurate and complete description of the adjusted tax basis of NEBH
and NEBC in their assets as of December 31, 1994, their current and accumulated
earnings and profits, their tax carryovers, excess loss accounts, tax elections
affecting either of the Corporations, and deferred intercompany transactions.
Except as disclosed in the Sellers Disclosure Schedule, the Corporations have no
net operating losses or other tax attributes presently subject to limitation
under Code Sections 382, 383, or 384, or the federal consolidated return
regulations.
3.28 Bank Accounts and Powers of Attorney. Section 3.28 of the Sellers
Disclosure Schedule lists the name of each bank, savings and loan, or other
financial institution, in which NEBH or NEBC has an account, including cash
contribution accounts or safe deposit boxes, the names of all persons authorized
to draw thereon or to have access thereto, and the names of any persons
30
holding powers of attorney with respect to the business of the Corporations and
a summary of the terms thereof.
3.29 Corporate and Fictitious Names. Except as disclosed in Section
3.29 of the Sellers Disclosure Schedule, neither of the Corporations have been
known by or used any other corporate or fictitious name.
3.30 Absence of Certain Recent Changes. Except as disclosed in Section
3.30 of the Sellers Disclosure Schedule, since September 30, 1995, NEBH and NEBC
have conducted their operations and business only in the ordinary course and
have not:
(a) suffered either any material adverse change in their
financial condition, results of operations or business or any other event or
condition of any character that might reasonably be expected to have a material
adverse effect on their business or prospects, including any liabil- ity, loss,
damage or expense outside the ordinary course of business, except for any such
material adverse change or other event or condition disclosed in an updated
Sellers Disclosure Schedule to be provided to Purchaser in accordance with the
provisions of Section 5.11 of this Agreement;
(b) suffered any loss or prospective loss of one or more
dealers, suppliers or customers, or altered any contractual arrangement with any
one or more of its dealers, suppliers or customers, the loss or alteration of
which, either individually or in the aggregate, would have a materially adverse
effect on the business or prospects of NEBH or NEBC, except for any such loss or
alteration disclosed in an updated Sellers Disclosure Schedule to be provided to
Purchaser in accordance with the provisions of Section 5.11 of this Agreement;
31
(c) made any capital expenditure or commitments for the
acquisition or construction of any single item of property, plant or equipment
in excess of $5,000;
(d) amended or terminated any lease, contract or material
commitment to which NEBH or NEBC is a party;
(e) entered into any transaction not in the ordinary course of
business or otherwise inconsistent in any respect with the past practices or
conduct of the business of NEBH or NEBC;
(f) declared, set aside or paid any dividend or other
distribution in respect of the capital stock of NEBH or NEBC;
(g) sold any accounts receivable, disposed of any inventories
other than in the ordinary course of business or accrued any liabilities not in
the ordinary course of business;
(h) changed any material accounting principle, material
procedure or material practice followed by NEBH or NEBC or the method of
applying such principle, procedure or practice;
(i) incurred any indebtedness for borrowed money, other than
pursuant to the Credit Agreement and in the ordinary course of business;
(j) to the best knowledge of the Individual Stockholders and
CVCA after reasonable inquiry, created, assumed or permitted to exist any lien,
pledge, security interest, encumbrance or mortgage of any kind on any of its
properties or assets other than pursuant to the Credit Agreement;
(k) to the best knowledge of the Individual Stockholders and
CVCA after reasonable inquiry, permitted the occurrence or continuance of any
default under any agreement, except for a default existing under Section 6.5.1
of the Credit Agreement, which default has been waived for the period ended
September 30, 1995 as set forth in Section 3.30 of the Sellers Disclosure
Schedule;
(l) acquired the securities or substantially all of the assets
of any other entity;
32
(m) merged or consolidated with any entity;
(n) established or agreed to establish any pension, retirement,
profit-sharing, deferred compensation or other employee benefit or welfare plan
for the employees of NEBH or NEBC;
(o) increased the rate of compensation payable or to become
payable to the Corporations' officers or employees or increased the amounts paid
or payable to such officers or employees under any Plan, or made or increased
any arrangements made for or with any of such officers or employees for the
payment of any bonus or profit-sharing amounts; provided, however, that the
amounts payable by NEBH to Messrs. Xxxxxxxx, Xxxxxxxxx and Xxxxxxxx pursuant to
Section 9 (vi) of the Stock and Note Purchase Agreement dated August 26, 1987
among NEBH, CVCA and others, up to an aggregate limit of $350,000, shall not be
deemed to constitute a prohibited bonus or profit-sharing contribution
contemplated by this provision, and provided further, however, that any such
bonus permitted to be paid and actually paid pursuant hereto shall be payable in
12 equal monthly installments commencing on the date of Closing;
(p) entered into any employment or similar contract with any
officer or employee;
(q) amended in any material respect or terminated any Plan or
agreement concerning employee benefits or compensation or made awards or
distributions under any such Plan or agreement not consistent with past practice
or custom except as contemplated herein;
(r) entered into any material contract (including but not
limited to assignments, licenses, transfers of exclusive rights, "work for hire"
agreements, special commissions, employment contracts, purchase orders, sales
orders, mortgages and security agreements) which (A) contain a grant or other
transfer, whether present, retroactive, prospective, or contingent, by it of any
rights in any Intellectual
33
Property, or (B) contain a promise made by or to it to pay any lump sum or
royalty or other payment or consideration with respect to the acquisition,
practice or use of any intellectual property.
3.31 OSHA. Except as otherwise provided in Section 3.31 of Sellers
Disclosure Schedule, during the five years immediately prior to the date of this
Agreement, neither of the Corporations has been cited for any violations of the
Occupational Safety and Health Act of 1970, as amended, nor are there any
citations pending as a result of inspections of NEBH or NEBC or for
noncompliance with such Act. Except as otherwise provided in such Schedule, each
of the conditions which resulted in the issuance of a citation has been abated
or otherwise corrected to the satisfaction of the Occupational Safety and Health
Administration as of the date of this Agreement.
3.32 Immigration Matters. Except as set forth in Section 3.32 of the
Sellers Disclosure Schedule, each of the Corporations has properly completed and
maintained Forms I-9 on all persons who became employed by the Corporations for
the past three years, and any alien employee of the Corporations is employed
pursuant to a valid temporary work authorization. The Schedule lists the names
of any alien employees who are required to have temporary work authorizations,
the date of their employment and their job titles and responsibilities, and
attached to such Schedule is the Form I-9 for each such person.
3.33 Brokers. No finder, broker, or agent (i) has acted for or on
behalf of Sellers or NEBH or NEBC in connection with negotiation or consummation
of this Agreement or the
34
transactions contemplated hereby or (ii) is entitled to any commission or
finders fee in connection therewith.
3.34 Accuracy of Information Furnished. No statement by the Individual
Stockholders or CVCA contained in this Agreement or in any Schedule hereto or in
the Financial Statements, and no statement contained in any certificate or other
instrument or document furnished or to be furnished by or on behalf of the
Individual Stockholders or CVCA to Purchaser pursuant hereto, or in connection
with the transactions contemplated by this Agreement, contains or will contain
any untrue statement of a material fact, or omits or will omit to state any
material fact which is necessary to make the statements contained herein or
therein not misleading.
IV. REPRESENTATIONS OF PURCHASER
Purchaser represents and warrants to the Individual Stockholders and
CVCA, acknowledging that they are materially relying thereon, as follows:
4.1 Authorization. The execution, delivery and performance of this
Agreement, and the consummation of the transactions contemplated by this
Agreement, have been duly approved by the Purchaser's Board of Directors. The
Purchaser has all necessary corporate power and authority to enter into this
Agreement, to perform its obligations hereunder and to consummate such
transactions in accordance with the terms and conditions of this Agreement. This
Agreement constitutes the valid and binding obligation of the Purchaser,
enforceable against the Purchaser in accordance with its
35
terms, except as may be limited by applicable bankruptcy, reorganization,
insolvency, moratorium or other similar laws or by legal or equitable principles
relating to or limiting creditors' rights generally.
4.2 Organization. The Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of the State of New York.
4.3 Non-Contravention. The execution, delivery and performance of
this Agreement by Purchaser do not and will not (i) conflict with the charter or
the by-laws of Purchaser, (ii) violate any order, writ, injunction, or decree
applicable to Purchaser or (iii) result in any breach or termination of, or
constitute a default under, or constitute an event which, with notice or lapse
of time, or both, would become a default under, or create any rights of
termination, cancellation, or acceleration in any person under, any contract,
agreement, arrangement, commitment, license, lease, easement, permit, right of
way or understanding or violate any provisions of any laws, ordinances, rules or
regulations to which Purchaser is a party or by which Purchaser or any of its
assets, business or operations is bound; provided, however, that Purchaser will
be required to obtain the consent of CoreStates Bank and the Maryland Industrial
Development Finance Authority to its execution of this Agreement.
4.4 No Broker. No finder, broker, or agent (i) has acted for or on
behalf of Purchaser in connection with negotiation or consummation of this
Agreement or the transactions contemplated hereby or (ii) is entitled to any
commission or finders fee in connection therewith.
36
V. CONDUCT PENDING CLOSING; COVENANTS
5.1 Access and Information. From the date of this Agreement until the
Closing:
(a) The Individual Stockholders shall cause NEBH and NEBC to
permit Purchaser and Purchaser's counsel, accountants, investment bank,
commercial bank and other representatives full access during normal business
hours and upon reasonable notice to all of the properties, assets, books,
records, agreements, commitments and other documents of NEBH and NEBC;
(b) The Individual Stockholders and NEBH and NEBC shall furnish
to Purchaser and its representatives all information with respect to the
Corporations as Purchaser may reasonably request; and
(c) The Individual Stockholders and NEBH and NEBC shall permit
and facilitate communications between Purchaser and all providers, suppliers and
other persons having dealings with the Corporations.
5.2 Cooperation and Publicity. From the date of this Agreement until
the Closing, the Individual Stockholders and CVCA will cause NEBH and NEBC and
their officers and employees to cooperate with Purchaser and its representatives
in planning for the post-Closing operations of NEBC and Purchaser on a combined
basis, including the possible merger or consolidation of NEBH and NEBC with the
Purchaser. In addition, the Individual Stockholders, CVCA and Purchaser will
consult with each other before making any public announcements with respect to
the transactions contemplated hereby, and any public announcements shall be made
only at such time and in such manner as the Individual Stockholders, CVCA and
Purchaser shall mutually agree.
37
5.3 Other Proposals to Sellers. From the date of this Agreement until
the Closing (provided that this Agreement has not been terminated pursuant to
Article X hereof), the Individual Stockholders and CVCA will not, directly or
indirectly, whether through representatives or otherwise, solicit or encourage
any written inquiries or proposals for the acquisition of the NEBH Shares or all
or substantially all of the assets or the business of NEBH or NEBC, and the
Individual Stockholders and CVCA will promptly inform Purchaser of any
unsolicited offers from third parties for the purchase of the shares of NEBH or
NEBC or the purchase of their assets.
5.4 Notification by Sellers. Each of the Individual Stockholders and
CVCA shall give prompt notice to Purchaser of:
(a) any notice or other communication received by him or it or
NEBH or NEBC, or any occurrence or state of facts of which he or it shall become
aware, subsequent to the date of this Agreement and prior to the Closing Date,
which would cause any representation or warranty of the Individual Stockholders
or CVCA to be or become untrue or misleading under this Agreement, or which
relate to a default (or event which with notice or lapse of time or both would
become a default) under any contract, agreement or instrument to which NEBH or
NEBC Company is a party or by or to which either NEBH or NEBC or any of their
respective property is bound or subject; and
(b) Any notice or other communication from any third party
alleging that the consent of such third party is or may be required in
connection with this Agreement and the performance thereof.
5.5 Conduct of Business. From the date of this Agreement until the
Closing Date, the Individual Stockholders and CVCA will cause the business
conducted by NEBH and NEBC to be
38
operated in the ordinary and usual course of business, in a manner consistent
with current practices, and in compliance with the terms of this Agreement.
Without limiting the generality of the foregoing, the Individual Stockholders
and CVCA shall cause NEBH and NEBC to:
(a) use their best efforts to preserve intact their business,
organization and relationships with employees, agents, customers and others
having business dealings with them;
(b) use their best efforts to complete or maintain in full
force and effect all existing contracts other than the agreement referenced in
Section 5.10 hereof;
(c) use their best efforts to preserve their goodwill;
(d) pay all of their respective accounts payable and other
obligations as they become due; and
(e) maintain in force their respective existing insurance
policies.
5.6 Prohibited Activities. From the date of this Agreement until the
Closing Date, the Individual Stockholders and CVCA shall take all measures
necessary to ensure that NEBH and NEBC will not, without Purchaser's express
written consent:
(a) issue, sell or contract to sell any stock, notes, bonds, or
other securities, or any option to purchase the same, or enter into any
agreement with respect thereto:
(b) amend their charters or bylaws;
(c) redeem, repurchase, or otherwise acquire any capital stock
or securities convertible into or exchangeable for capital stock or enter into
any agreement to do so;
(d) initiate any legal proceedings, including suits and
administrative proceedings in either the United States or foreign countries;
provided, however, that if any such proceeding is commenced
39
without such consent, the Individual Stockholders and CVCA will be responsible
for the costs and expenses (including attorneys fees) of such proceeding and any
adverse judgment or award rendered as a result thereof, but shall also be
entitled to retain for their own benefit any recovery obtained in such
proceeding ;
(e) suffer either any material adverse change in the financial
condition, results of operations or business of the Corporations or any other
event or condition of any character that might reasonably be expected to have a
material adverse effect on NEBH or NEBC, including any liability, loss, damage
or expense outside the ordinary course of business (provided, however, that this
undertaking by the Individual Stockholders and CVCA shall be deemed to be one to
use their best efforts only);
(f) suffer any loss or prospective loss of one or more dealers,
suppliers or customers, or alter any contractual arrangement with any one or
more of their dealers, suppliers or customers, the loss or alteration of which,
either individually or in the aggregate, would have an adverse effect on the
business of NEBH or NEBC (provided, however, that this undertaking by the
Individual Stockholders and CVCA shall be deemed to be one to use their best
efforts only);
(g) make any capital expenditures or commitments for the
acquisition or construction of any single item of property, plant or equipment
in excess of $5,000;
(h) amend or terminate any lease, contract or material
commitment to which either of the Corporations is a party;
(i) declare, set aside or pay any dividend or other
distribution in respect of the capital stock of either of the Corporations;
40
(j) sell any accounts receivable, dispose of any inventories
other than in the ordinary course of business or accrue any liabilities not in
the ordinary course of business;
(k) change any material accounting principle, material
procedure or material practice followed by NEBH or NEBC or the method of
applying such principle, procedure or practice;
(l) incur any indebtedness for borrowed money other than
pursuant to the Credit Agreement and in the ordinary course of business;
(m) create, assume or permit to exist any lien, pledge,
security interest, encumbrance or mortgage of any kind on any of the
properties or assets of the Corporations, other than pursuant to the Credit
Agreement and in the ordinary course of business;
(n) permit the occurrence or continuance of any default under
any agreement for funded debt, except for a default existing under Section 6.5.1
of the Credit Agreement, which default has been waived as set forth in Section
3.30 of the Sellers Disclosure Schedule;
(o) acquire the securities or substantially all of the assets
of any other entity;
(p) merge or consolidate with any entity other than Purchaser;
(q) increase the rate of compensation payable or to become
payable to the Company's officers or employees or increase the amounts paid or
payable to such officers or employees under any Plan, or make or increase any
arrangements for the payment of any bonus or profit-sharing amounts; provided,
however, that the amounts payable by NEBH to Messrs. Xxxxxxxx, Xxxxxxxxx and
Xxxxxxxx pursuant to Section 9 (vi) of the Stock and Note Purchase Agreement
dated August 26, 1987 among NEBH, CVCA and others, up to an aggregate limit of
$350,000, shall not be deemed to constitute a prohibited bonus or profit-sharing
contribution contemplated by this provision, and
41
provided further, however, that any such bonus permitted to be paid and actually
paid pursuant hereto shall be payable in 12 equal monthly installments
commencing on the date of Closing;
(r) enter into any employment or similar contract with any
officer or employee;
(s) adopt, amend in any material respect or terminate any Plans,
severance plan or agreement or collective bargaining agreement or make awards or
distributions under any such plan or agreement, except as otherwise contemplated
by Section 5.9 hereof;
(t) enter into any material contract (including but not limited
to assignments, licenses, transfers of exclusive rights, "work for hire"
agreements, special commissions, employment contracts, purchase orders, sales
orders, mortgages and security agreements) concerning any rights in any
Intellectual Property;
(u) agree, whether in writing or otherwise, to take any action
described in this Section 5.6.
5.7 Certain Affirmative Covenants. Prior to the Closing Date, the
Individual Stockholders and CVCA will cause NEBH and NEBC, with the cooperation
of Purchaser where appropriate, to:
(a) comply promptly with all filing requirements, if any, which
foreign, federal or state law may impose on the execution, delivery and
performance of this Agreement; and
(b) use their best efforts to obtain any consent, authorization
or approval of, or exemption by, any governmental authority or other third
party, including without limitation, CVCA, the Corporations' lenders and
landlords and those persons or entities who are parties to the agreements or
instruments described in the Sellers Disclosure Schedule, whose consent is or
may be required to be obtained it in connection with the consummation of the
transactions contemplated in this
42
Agreement, including without limitation, any consent, authorization or approval
necessary to waive any default under any of such agreements or instruments.
5.8 Tax Liabilities and Information.
(a) The Individual Stockholders shall cause NEBH and NEBC to
prepare and timely file all tax returns and amendments thereto and reports of
estimated taxes required to be filed by them on or before the Closing Date. The
time for filing such returns and reports will not be extended without
Purchaser's consent, and, if such late filing occurs or such an extension is
obtained (as to which Purchaser shall be informed in each case) without
Purchaser's consent, the Individual Stockholders shall be responsible for any
interest, penalties or assessments or other costs resulting from such late
filing or extension. Purchaser shall have a reasonable opportunity to review
such returns, reports and amendments thereto. From the date of this Agreement
until the Closing Date, the Individual Stockholders will cause NEBH and NEBC to
pay and discharge all taxes, assessments and governmental charges upon or
against them or any of their properties or assets, including liabilities for
estimated tax payments and all other tax liabilities, before the same shall
become delinquent and before penalties accrue thereon, except to the extent and
as long as:
(i) the same are being contested in good faith and by
appropriate proceedings pursued diligently and in
such a manner as not to cause any adverse effect upon
the condition (financial or otherwise) or operations
of the Corporations; and
(ii) the Corporations shall have set aside on their books
reserves (segregated to the extent required by sound
accounting practice) in the amount of the demanded
principal imposition, together with interest and
penalties relating thereto, if any.
43
Between the date of this Agreement and the Closing Date, the Individual
Stockholders shall give Purchaser and its authorized representatives full access
to all tax returns and estimated tax reports of NEBH and NEBC, whether in their
possession or in the possession of third parties. The Individual Stockholders
and NEBH and NEBC shall, as of the Closing Date, terminate all tax allocation
agreements or tax sharing agreements with respect to the Corporations and shall
ensure that such agreements are of no further force or effect.
(b) With respect to NEBH and NEBC tax returns and reports
required to be prepared and filed after the Closing Date for any prior period
through the Closing Date ("Post-Closing Returns"): (i) the Individual
Stockholders will prepare, sign and timely file all Post-Closing Returns, and,
for this purpose, shall have access after the Closing Date to the appropriate
tax and financial records of the Corporations as set forth in subsection (f) of
this Section 5.8; (ii) the Purchaser shall have a reasonable opportunity to
review such returns prior to the filing thereof; and (iii) any taxes shown by
the Post-Closing Returns to be payable in the ordinary course shall be the
responsibility of the Corporations, subject to the provisions of the following
subsection. (c) Notwithstanding any other provision of this Agreement to the
contrary, if, as the result of any tax audit, examination, or proceeding by any
tax authority, any deficiency, assessment, interest or penalty is asserted
(whether before or after the Closing) against NEBH or NEBC with respect to any
period prior to and through the Closing Date, any liability in respect thereof
shall (subject to the provisions of Section 8.2 of this Agreement) be the
responsibility of the Individual Stockholders and CVCA (and not the obligation
of NEBH, NEBC or the Purchaser) to the extent, and only to the extent, that any
such deficiency, assessment, interest or penalty exceeds the tax benefit
received by Purchaser or the Corporations with respect to the item which is the
subject of such tax audit, examination or
44
proceeding; provided, however, that if the subject deficiency, assessment,
interest or penalty results in a tax benefit to be received by refund claims,
then such deficiency, assessment, interest or penalty shall be paid in full from
the Escrow Fund described in Section 8.2, and Purchaser will cause to be filed
any and all applicable refund claims and will reimburse the Escrow Fund if, as
and when any such refund (and any interest thereon) is received.
(d) The Purchaser shall be responsible for preparing and filing
any NEBH or NEBC tax returns required for any period after the Closing Date, and
for any tax liabilities in connection therewith.
(e) The Purchaser and the Individual Stockholders agree to
furnish or cause to be furnished to each other, as promptly as practicable, such
information and assistance relating to the Corporations as is reasonably
necessary for the preparation and filing of any return, claim for refund or
other required or optional filings relating to tax matters, for the preparation
for and proof of facts during any tax audit, for the preparation for any tax
protest, for the prosecution or defense of any suit or other proceeding relating
to tax matters and for the answer to any governmental or regulatory inquiry
relating to tax matters.
(f) The Purchaser agrees to retain possession of all accounting,
business, financial and tax records and information (i) relating to the
Corporations in existence on the Closing Date and transferred to the Purchaser
hereunder and (ii) coming into existence after the Closing Date which relate to
the Corporations before the Closing Date, for the period not to exceed six years
from the Closing Date. In addition, from and after the Closing Date, the
Purchaser agrees that it will not unreasonably withhold access by the Individual
Stockholders and CVCA and their attorneys, accountants and other representatives
(after reasonable notice and during normal business hours and
45
with reasonable charge), to such books, records, documents and any or all other
information relating to the Corporations as the Individual Stockholders and CVCA
may reasonably deem necessary to properly prepare for, file, prove, answer,
prosecute and/or defend any such return, filing, audit, protest, claim, suit,
inquiry or other proceeding. Such access shall include, without limitation,
access to any computerized information retrieval systems relating to the
Corporations.
5.9 Termination of Employee Benefit Plans. On or before the Closing
Date, the Individual Stockholders and CVCA will cause NEBH and NEBC to take all
actions necessary to terminate, effective on or prior to the Closing Date, the
Plans to be terminated on or prior to the Closing Date, listed in Section 3.16
of Sellers Disclosure Schedule, and such termination shall be accomplished
without requiring any contributions or payments after the Closing Date by NEBH,
NEBC or Purchaser. Such actions shall include, but shall not be necessarily
limited to the actions described in Section 3.16(o) of the Sellers Disclosure
Schedule. Purchaser agrees to credit any employee of NEBC and NEBH who will be
employed by Purchaser immediately after the Closing Date for such employee's
prior service as an employee of NEBH or NEBC, for purposes of eligibility and
vesting under the Purchaser's Employees' Savings and Investment Plan, or any
successor plan.
5.10 Termination of Dynamic Graphic Agreement. On or before the
Closing Date, the Individual Stockholders and CVCA will cause NEBH and NEBC to
take all actions necessary to terminate the agreement of NEBC with Dynamic
Graphic Finishing, Inc., and such termination shall be without any obligation or
liability to NEBH, NEBC or Purchaser, except for the cost of relocating
equipment of Dynamic Graphic Finishing, Inc. previously used by NEBC in
connection with foil stamping.
46
5.11 Updated Financial Statements and Disclosure Schedules. From the
date of this Agreement until the Closing Date, the Individual Stockholders and
CVCA will cause NEBH and NEBC to prepare and deliver to Purchaser (i) monthly
unaudited financial statements for each calendar month subsequent to the Balance
Sheet Date, and (ii) an amended Sellers Disclosure Schedule updated to reflect
current information as of the end of each such calendar month, in each case no
later than 20 days after the end of such calendar month.
5.12 Books and Records to be Kept Current. From the date of this
Agreement until the Closing Date, the Individual Stockholders and CVCA shall
cause NEBH and NEBC to keep their books and records current and to safeguard and
maintain such books and records and other corporate documents, so that such
books, records and documents will be available to the Purchaser from and after
the Closing.
VI. CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER
The obligation of Purchaser to consummate the transactions contemplated
in this Agreement is subject to the fulfillment of each of the following
conditions:
6.1 Authorization of Board. The form and substance of this Agreement
and all appended Exhibits and Schedules, and the consummation of the
transactions contemplated thereby shall have been duly approved by the Board of
Directors of the Purchaser.
47
6.2 Financing Commitment. The Purchaser shall have obtained a binding
commitment from a commercial lending institution pursuant to which such
institution will make available to Purchaser, on or before the Closing Date and
on terms acceptable to Purchaser in its sole discretion, financing in an
aggregate amount sufficient to pay the Purchase Price and the costs of the
acquisition of the NEBH Shares and to provide for the working capital needs of
the combined business of Purchaser and NEBH and NEBC after the Closing.
6.3 Termination of Dynamic Graphic Agreement. The Individual
Stockholders and CVCA, as of or prior to the Closing Date, shall have obtained
and delivered to Purchaser an instrument, satisfactory in form and substance to
Purchaser's attorneys, terminating the agreement between Dynamic Graphic
Finishing, Inc. and NEBC, in accordance with the provisions of Section 5.10
above.
6.4 Leased Facilities Agreements. With respect to facilities leased
and occupied by NEBH and NEBC, the Individual Stockholders and CVCA shall have
delivered agreements or other instruments, satisfactory in form and substance to
Purchaser's attorneys:
(i) by which the landlord of the manufacturing facility
located at 000 Xxxxxxxxxx Xxxx Xxxx, Xxxxxxx,
Xxxxxxxxxxxxx, will cause the lease for such facility
to terminate on the second anniversary of the
Closing, without any further liability to NEBH, NEBC
or the Purchaser, as set forth in Section 2.4 above;
and
48
(ii) by which each landlord under any Facilities lease
containing a restriction or limitation on the
acquisition of shares of NEBH or NEBC, or on the
merger or consolidation of NEBH or NEBC, waives such
restriction or limitation.
6.5 Termination of Employee Benefit Plans. The Individual
Stockholders and CVCA shall have delivered agreements, instruments, certificates
and other documents, and a legal opinion of counsel to NEBH and NEBC, all of
which shall be satisfactory in form and substance to Purchaser and its
attorneys, confirming the termination of each of the Plans to be terminated on
or prior to the Closing Date, listed in Section 3.16 of the Sellers Disclosure
Schedule, as set forth in Section 5.9 above.
6.6 Termination of Voting Trust. An agreement or other instrument
duly terminating the Voting Trust Agreement shall have been delivered to
Purchaser, together with all necessary consents and/or powers of attorney on
behalf of the Employee Stockholders, without any expense or liability to
Purchaser.
6.7 NEBH Shares. The Individual Stockholders, CVCA and the Voting
Trustees shall have delivered certificates for the NEBH Shares, free and clear
of all liens, encumbrances, charges and claims, which Shares, as of the Closing
Date, shall be duly and validly issued and fully paid and non-assessable, and
which shall constitute all, and not less than all, of the issued and outstanding
shares of NEBH.
49
6.8 Officers' Certificates. The Sellers shall have delivered the
following certificates, dated as of the Closing Date:
(a) certificates duly executed, respectively, by the Secretary
of NEBH and the Clerk of NEBC, certifying as to the incumbency and signatures of
the officers of NEBH and NEBC, as to copies of the charter and by-laws of NEBH
and NEBC, and as to any director or shareholder resolutions required in
connection with the consummation of the transactions contemplated by this
Agreement;
(b) a certificate executed by the Individual Stockholders and
CVCA to the effect that the representations and warranties of the Individual
Stockholders and CVCA made under this Agreement are true and correct in all
material respects at and as of the Closing Date, and that the Individual
Stockholders and CVCA have complied with or performed all conditions, and have
caused NEBH and NEBC to comply with and perform all conditions, required to be
performed by each of them on or prior to the Closing Date in accordance with
this Agreement.
6.9 Opinion of Counsel. The Purchaser shall have received a favorable
opinion, dated as of the Closing Date, from Xxxxxx, Xxxx & Xxxxxxx, special
counsel to the Sellers and counsel to NEBH and NEBC, in form and substance
reasonably satisfactory to the Purchaser and its counsel, in the form annexed
hereto as Exhibit 4.
6.10 No Material Adverse Change. No material adverse change in the
business, operations, earnings, assets or financial condition of either or both
of NEBH and NEBC, (a "Material Adverse Change") shall have occurred. For
purposes hereof, a Material Adverse Change shall be
50
deemed to have occurred only if the aggregate consolidated sales of NEBH and
NEBC for the six-month period ended December 31, 1995 evidence a decline of 20%
or more from the aggregate consolidated sales of the Corporations for the
six-month period ended December 31, 1994, as reflected in the Financial
Statements.
6.11 Compliance with Covenants. The Individual Stockholders, CVCA, the
Voting Trustees, NEBH and NEBC shall have duly performed and complied with all
covenants, agreements and conditions required by this Agreement to be performed
or complied with by them prior to or at the Closing.
6.12 Truth of Representations. The representations and warranties of
the Individual Stockholders and CVCA contained in this Agreement shall have been
true and correct in all material respects when made, and shall also be true and
correct in all material respects at and as of the Closing Date, with the same
force and effect as if made at and as of the Closing.
6.13 Consents and Waivers. At the Closing, all consents,
authorizations, orders or approvals provided for in this Agreement hereof shall
have been obtained.
6.14 Litigation. At the Closing, (i) there shall be no effective
injunction, writ or preliminary restraining order or any order of any nature
issued by a court or governmental agency of competent jurisdiction restraining
or prohibiting the consummation of the transactions provided for herein or
limiting in any manner Purchaser's right to control NEBH or NEBC or any aspect
of their
51
business or requiring the sale or other disposition of any of their operations
or making such consummation unduly burdensome to the Purchaser, and (ii) no
proceeding or lawsuit shall have been commenced and be pending or be threatened
by any governmental or regulatory agency or any other person with respect to
such consummation which Purchaser, in good faith and with the advice of counsel,
believes is likely to result in any of the foregoing or which seeks the payment
of substantial damages by NEBH or the or Purchaser.
6.15 Employment and Non-Competition Agreements. The Employment
Agreements and Non-Competition Agreements described in Section 2.1 and 2.2 shall
have been executed and delivered.
6.16 Escrow Agreement and Disbursing Agent. The parties shall have
executed and delivered the Escrow Agreement provided for in Article VIII.
6.17 Miscellaneous Documents. The Individual Stockholders and CVCA
shall have caused NEBH and NEBC to deliver certificates of good standing for the
jurisdictions in which NEBH and NEBC are incorporated and in which they are
qualified to do business, as well as such resolutions, consents and other
confirmatory documents and instruments reasonably requested by Purchaser's
counsel.
6.18 Legal Matters. All certificates, instruments, opinions and other
documents required to be executed or delivered by or on behalf of the Sellers,
or with respect to NEBH or NEBC, under
52
the provisions of this Agreement, and all other actions and proceedings required
to be taken by or on behalf of the Sellers in furtherance of the transactions
contemplated hereby, shall be reasonably satisfactory in form and substance to
counsel for the Purchaser.
VII. CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLERS
The obligation of the Sellers to consummate the transactions
contemplated in this Agreement is subject to the fulfillment of each of the
following conditions:
7.1 Truth of Representations. The representations and warranties made
by Purchaser shall be true and correct in all material respects and shall be
deemed to have been made again on and as of the Closing Date.
7.2 Compliance by Purchaser. All the terms, covenants, agreements and
conditions of this Agreement to be complied with and performed by the Purchaser
on or before the Closing Date shall have been complied with and performed in all
respects.
7.3 Litigation. No action or proceeding shall have been instituted or
shall have been threatened to restrain or prohibit any of the transactions
contemplated hereby.
53
7.4 Payment. The Purchaser shall have obtained the financing
commitment set forth in Section 6.3 above and tendered payment of the Purchase
Price in accordance with the terms of this Agreement.
7.5 Employment, Non-Competition and Option Agreements, etc. The
Purchaser shall have executed and delivered the agreements described in Article
II above.
VIII. INDEMNIFICATION AND CLAIMS
8.1 Indemnification by Sellers. Subject to the provisions of Section
11.1 of this Agreement as to the survival of representations, warranties,
covenants and agreements, the Individual Stockholders and CVCA hereby jointly
and severally agree to indemnify Purchaser and its directors, officers,
employees, agents and affiliates (any of the foregoing being referred to as a
"Purchaser Indemnitee" or collectively, "Purchaser Indemnitees") from and
against any loss, liability, damage, obligation or expense whether absolute or
accrued, including interest, penalties and reasonable attorneys fees and
expenses incurred in the investigation or defense of, or in asserting the rights
of, the Purchaser Indemnitees hereunder (collectively, "Losses"), incurred and
arising directly or indirectly by reason of or in connection with:
(i) the inaccuracy or breach of any representation or
warranty by the Individual Stockholders or CVCA
contained in this Agreement or in any certificate or
other document furnished by Sellers or NEBH or NEBC
pursuant to this Agreement;
54
(ii) the nonperformance or breach of any covenant,
agreement or obligation of Sellers, NEBH or NEBC
which is contained in this Agreement, including,
without limitation, the nonperformance of the
obligations of the Individual Stockholders set forth
in Section 5.8 above, provided, however, that CVCA
shall not be liable for any post-Closing conduct by
the Individual Stockholders;
(iii) any claim of liability under the provisions of the
agreement between Dynamic Graphic Finishing, Inc. and
NEBC, except for a pre-Closing trade account payable
in the or-
55
dinary course of business as disclosed in the Sellers
Disclosure Schedule and as otherwise provided in
Section 5.10;
(iv) any tax liability (of any kind whatsoever) of
Purchaser, NEBH or NEBC (including any interest and
penalty) resulting from or in connection with any
56
breach of the representations contained in Section
3.27 or nonperformance of the obligations of
Individual Stockholders set forth in Section 5.8;
(v) any past, present or future obligation or liability,
whether or not disclosed pursuant to this Agreement,
arising from a condition prior to Closing at any of
the Facilities, which, as a result of enforcement of
any federal, state or local environmental or land use
laws or regulations, results in Losses; and
(vi) any obligation or liability arising or resulting from
the termination of any or all of the Plans listed in
Section 3.16 of the Sellers Disclosure Schedule, and
any liability or obligation resulting from any
failure by NEBH or NEBC to have made any
contributions, pay any premiums or take any steps
required by applicable laws or regulations in
connection with such Plans prior to the Closing.
8.2 Certain Limitations as to Indemnification Liability.
Notwithstanding the foregoing:
(a) the liability of the Individual Stockholders and CVCA for
Losses shall extend only to Losses in amounts exceeding any tax benefit or
insurance proceeds actually received by Purchaser, NEBH or NEBC in connection
with such Losses, provided, however, that (i) payments from the Escrow Fund
regarding any tax liabilities shall be subject to the provisions of Section
5.8(c) above; and (ii) any losses subject to or covered by insurance shall be
paid in full from the Escrow Fund and, if, as and when the proceeds of any
insurance recovery are received, such proceeds shall be used to reimburse the
Escrow Fund;
57
(b) the maximum liability of CVCA for Losses under Section 8.1
and any other provision of this Agreement shall not exceed an amount equal to
the portion of the Purchase Price payable to CVCA as set forth in Schedule A;
(c) the liability of CVCA under the provisions of this
Article VIII shall constitute the sole recourse and remedy of the Purchaser
against CVCA for any claims arising under this Agreement;
(d) the maximum liability of the Individual Stockholders for
Losses under Section 8.1 shall not exceed the portion of the Purchase Price
payable to them as set forth in Schedule A unless any Losses for which they are
liable under the provisions of Section 8.1 arise from a knowing breach of any
warranty or representation or covenant or other provision contained in this
Agreement; and
(e) except for claims by participants in the NEBC 401(k) Plan,
no claim for indemnification under Section 8.1 shall be payable unless such
claim amounts to at least $2,500 per occurrence.
8.3 Indemnity Fund; Escrow. In order to secure the indemnification
obligations set forth in Section 8.1 and any other provision of this Agreement,
the parties agree that a sum equal to ten percent (10%) of the Purchase Price
(the "Escrow Fund") will be set aside and placed in escrow at the Closing, to be
held, administered, applied, disbursed and distributed as set forth in a
separate escrow agreement ("Escrow Agreement") among the parties (and counsel to
Purchaser and counsel to Sellers as joint escrow agents), in the form annexed to
this Agreement as Exhibit 5, to be executed and delivered at the Closing.
Subject to the provisions of the Escrow Agreement, the Escrow Fund
58
will be available to pay any Losses required to be paid and not otherwise
resolved or settled, will be maintained for a period of four years after the
Closing in an interest-bearing form at a reputable financial institution
selected by Purchaser's counsel, and will be released and returned to the
Individual Stockholders and CVCA in equal annual increments over such period,
provided that such increments shall be adjusted for Losses paid from time to
time as set forth in the Escrow Agreement and for pending claims which may
result in Losses under Section 8.1. The amount or availability of the Escrow
Fund to pay Losses at any given time shall not be deemed to limit or fix the
liability of the Individual Stockholders and CVCA under Section 8.1, the
limitations on such liability being expressly provided for in Section 8.2,
provided, however, that the Purchaser shall be obligated to seek recovery of
Losses from the Escrow Fund prior to exercising any other rights to recover such
Losses under this Agreement.
8.4 Purchaser's Right of Offset. In the event that the aggregate
Losses shall, at any time, exceed the amount available in the Escrow Fund to pay
such Losses (such excess Losses being referred to as the Non-Secured Losses),
Purchaser shall have the right to offset and deduct the Non- Secured Losses
from: (i) amounts due to the Individual Stockholders by way of any bonus
payments referred to in Section 5.6 above; (ii) amounts due to Xxxxx X.
Xxxxxxxxx as compensation under the terms of the Non-Competition agreement
annexed as Exhibit 2; and (iii) amounts due to the Individual Stockholders and
CVCA in connection with any facilities sublease or otherwise as set forth in
Section 2.4(b) above. In the event the Purchaser shall exercise its right to
offset Non- Secured Losses, it shall so notify the Individual Stockholders and
CVCA immediately prior to effecting such offset.
59
8.5 Indemnification Procedures and Notice.
(a) If any event which may give rise to any Losses occurs or is
alleged, and any Purchaser Indemnitee asserts that the Individual Stockholders
and CVCA have become obligated to such Purchaser Indemnitee pursuant to Section
8.1, or if any suit, action, investigation, claim or proceeding is begun, made
or instituted as a result of which the Individual Stockholders and CVCA may
become obligated to any Purchaser Indemnitee under any provision, term or
condition of this Agreement, such Purchaser Indemnitee shall give written notice
thereof to the Individual Stockholders and CVCA. The Individual Stockholders and
CVCA shall thereafter defend, contest or otherwise protect the Purchaser
Indemnitee against any such suit, action, investigation, claim or proceeding at
their sole cost and expense (subject to the limitations set forth in Section
8.2). The Purchaser Indemnitee shall have the right, but not the obligation, to
participate at its own expense in the defense thereof by counsel of the
Purchaser Indemnitee's choice and shall in any event cooperate with and assist
the Individual Stockholders and CVCA to the extent reasonably possible. If the
Individual Stockholders and CVCA fail timely to defend, contest or otherwise
protect against such suit, action, investigation, claim or proceeding, the
Purchaser Indemnitee shall have the right to do so, including, without
limitation, the right to make any compromise or settlement thereof, and the
Purchaser Indemnitee shall be entitled to recover the entire cost thereof from
the Individual Stockholders and CVCA including, without limitation, reasonable
attorneys' fees, disbursements and amounts paid as the result of such suit,
action, investigation, claim or proceeding, but subject to the limitations
provided in Section 8.2.
(b) If, at any time after the notice and other procedures
provided for in the preceding subparagraph are undertaken, a Purchaser
Indemnitee will be required to pay any Losses, and if the
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Individual Stockholders and CVCA have been unable or have failed to pay, settle
or eliminate such Losses, the affected Purchaser Indemnitee shall be entitled to
payment of the full amount of such Losses from the Escrow Fund (subject to the
limitations provided in Section 8.2). In such case, the Purchaser Indemnitee
shall send notice to the escrow agents of the Escrow Fund, stating the amount
and nature of the Losses, and indicating the inability, failure or refusal of
the Individual Stockholders and CVCA to indemnify such Purchaser Indemnitee.
Within 15 days after such notice, the escrow agents of the Escrow Fund shall
issue a check drawn on the Escrow Fund and payable to the Purchaser Indemnitee
in the full amount of such Losses or shall take such other action as shall be
provided for in the Escrow Agreement, and shall so notify the Individual
Stockholders and CVCA.
8.6 Distribution and Termination of Escrow Fund. Amounts held in the
Escrow Fund, less amounts paid or reserved for Losses or for claims in
connection therewith, shall be subject to distribution to the Individual
Stockholders and CVCA from time to time, and the Escrow Fund shall be
terminated, as set forth in the Escrow Agreement.
8.7 Indemnification Successors and Assigns. All of the rights and
obligations of the Sellers and the Purchaser pursuant to this Article VIII shall
survive any sale, assignment or other transfer by the Purchaser of title to or
interest in the NEBH Shares and shall apply to and bind each and every successor
and assign of the Purchaser.
IX. MISCELLANEOUS MATTERS
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9.1 Parties to Bear Their Own Expenses. The parties will be
responsible for their own legal fees, advisory fees and other expenses incurred
by them, respectively, in connection with the preparation of this Agreement and
the consummation of the transactions contemplated therein, as well as all
personal federal, state and local tax liabilities incurred in connection with
such transactions.
9.2 Purchaser May Assign; Possible Merger. Purchaser has informed
Sellers that it is considering (i) merging NEBC into NEBH and/or (ii) merging
NEBH and NEBC into Purchaser and/or (iii) merging Purchaser with a new Delaware
corporation as a means of reincorporating in Delaware. In connection therewith,
Purchaser may assign its interest in this Agreement to a wholly-owned subsidiary
corporation, without obtaining the consent of the Sellers; provided, however,
that the Purchaser shall remain primarily liable under this Agreement.
Subsequent to the completion of the Closing, the Individual Stockholders and
CVCA will cooperate with and assist NEBH and NEBC to the extent possible (and
without cost to the Individual Stockholders or CVCA) to effectuate such merger.
9.3 Parties to Cause NEBH to Act. Whenever a provision of this
Agreement requires any action to be taken by NEBH or NEBC, the Individual
Stockholders, by their execution of this Agreement, undertake to cause such
action to be taken by NEBH and NEBC, and CVCA, by its execution of this
Agreement, undertakes to use its best efforts to assist the Individual
Stockholders in carrying out their obligations under this Section 9.3 and to
refrain from taking any action inconsistent with the provisions of this
Agreement or the consummation of the transactions contemplated thereby.
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X. TERMINATION PRIOR TO CLOSING
10.1 Mutual Termination. This Agreement may be terminated at any time
prior to Closing by the mutual written consent of the Individual Stockholders,
CVCA and the Purchaser.
10.2 Termination by Purchaser. This Agreement may be terminated at any
time prior to Closing by Purchaser, if any of the Sellers or NEBH or NEBC shall
(i) fail to perform the obligations required in this Agreement to be performed
by such party on or prior to the Closing Date, or (ii) breach any of the
representations, warranties or covenants of the Individual Stockholders or CVCA
contained in this Agreement, which failure or breach is not cured within ten
(10) days after the Purchaser has notified the breaching party of Purchaser's
intent to terminate this Agreement pursuant to this Section 10.2. This Agreement
may also be terminated by Purchaser if it shall not be able to obtain a binding
financing commitment as set forth in Section 6.2 on or before December 20, 1995.
10.3 Termination by Sellers. This Agreement may be terminated by the
Individual Stockholders and CVCA if (i) Purchaser has not obtained a binding
financing commitment as set forth in Section 6.2 on or before December 20, 1995,
(ii) Purchaser shall fail to perform in any material respect the obligations
contained herein required to be performed by such party on or prior to the
Closing Date, or (iii) Purchaser shall breach any of its representations,
warranties or covenants contained herein, which failure or breach is not cured
within ten (10) days after the Individual
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Stockholders and CVCA have notified the breaching party of the intent of the
Individual Stockholders and CVCA to terminate this Agreement pursuant to this
Section 10.3.
10.4 Termination by Purchaser or Sellers. Either Purchaser or the
Individual Stockholders and CVCA may terminate this Agreement if there shall be
any order, writ, injunction or decree of any court or governmental or regulatory
agency binding on any party which prohibits or restrains such party from
consummating the transactions contemplated hereby, or in the event that the
transactions contemplated hereby have not been consummated (other than on
account of any default by any party hereto) on or prior to January 31, 1996.
XI. GENERAL PROVISIONS
11.1 Survival of Representations, Warranties, etc. Each of the
representations and warranties, covenants and agreements contained in this
Agreement shall survive for a period of four (4) years from the Closing Date
(except that the representations and warranties contained in Section 3.27 shall
survive until the applicable tax statutes of limitations relating thereto shall
have run) and any liability relating thereto shall be extinguished with regard
to any indemnification or other claim not made against the Individual
Stockholders or CVCA hereunder prior to the fourth anniversary of the Closing
Date, except for claims against the Individual Stockholders based on fraudulent
conduct.
11.2 Entire Agreement. This Agreement and the Schedules, Exhibits,
lists and other documents referred to herein constitute the entire agreement
among the parties hereto with respect to
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the transactions contemplated hereby and supersede all prior agreements,
discussions and proposals with respect thereto, whether written or oral. This
Agreement may be modified only by a written instrument executed by the parties.
11.3 No Assignment. Except as provided in Sections 8.7 and 9.2,
neither Sellers nor Purchaser shall have the authority to assign any of their
respective interests in this Agreement without the prior written consent of the
other party; provided, however, that Purchaser may assign all or any portion of
its rights hereunder as security, without the prior written consent of Sellers,
to any bank or other financial institution providing financing to Purchaser as
set forth in Section 6.2 above. The Individual Stockholders and CVCA shall
execute, and shall cause NEBH and NEBC to execute, any documents reasonably
required in order to effect such assignments.
11.4 Benefits of Agreement. This Agreement shall be binding upon and,
to the extent permitted in this Agreement, shall inure to the benefit of the
Sellers and the Purchaser and their respective successors and assigns. However,
it is the intent of the parties hereto that no third-party beneficiary rights be
created or deemed to exist, and none shall so exist, in favor of any person not
a party to this Agreement, unless otherwise expressly agreed in writing by the
parties.
11.5 Remedies Cumulative. Subject only to the express limitations set
forth in this Agreement, including Section 8.2 thereof, the rights and remedies
provided herein shall be cumulative and shall not preclude Sellers or Purchaser
from asserting any other rights or seeking any other remedies against the other
to which it may otherwise be entitled by law.
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11.6 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York, without regard to conflict
of law provisions. The parties agree that any actions or claims arising under
this Agreement shall be brought in a court of general jurisdiction located in
New York County.
11.7 Notices. Any notice, request, instruction or other document
required or permitted to be given hereunder by a party shall be in writing and
delivered personally or sent by registered or certified mail, postage prepaid,
return receipt requested, or by prepaid overnight delivery service, addressed as
follows:
If to Sellers:
Xxxxxxx X. Xxxx, Esq.
Xxxxxx, Xxxx & Xxxxxxx
Exchange Place
00 Xxxxx Xxxxxx
Xxxxxx, XX 00000-0000
If to Purchaser:
Phoenix Color Corp.
000 Xxxxx Xxxxx
Xxxxxxxxxx, XX 00000
Attn: Xxxxx XxXxxxx, President
Xxxxxx Xxxxxxxxx, Executive Vice President
with a copy to:
Xxxxxx X. Xxxxxxx, Esq.
Rosner, Bresler, Xxxxxxx & Xxxxxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
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or to such other persons or addresses as may be designated in writing by the
party desiring to receive such notice. If mailed as aforesaid, the day of
mailing shall be deemed to be the date of delivery.
11.8 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be an original, but all of which shall
constitute but one agreement.
11.9 Severability. In case any one or more of the covenants,
agreements, provisions or terms contained in this Agreement shall be invalid,
illegal or unenforceable in any respect, the validity of the remaining
covenants, agreements, provisions or terms contained herein shall be in no way
affected, prejudiced or disturbed thereby.
11.10 Headings. The headings of the various Articles and Sections of
this Agreement, were employed, are for convenience of reference only and shall
not be deemed in any way to modify, interpret or construe the text of this
Agreement or the intent of the parties.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered on the date and year first above written.
PHOENIX COLOR CORP.
By: /s/ Xxxxx XxXxxxx
------------------------------
President
/s/ Xxxxxx X. Xxxxxxxx, Xx.
------------------------------
XXXXXX X. XXXXXXXX, XX.,
Individually, and as Voting Trustee
/s/ Xxxxx X. Xxxxxxxxx
------------------------------
XXXXX X. XXXXXXXXX,
Individually, and as Voting Trustee
/s/ Xxxxxx X. Xxxxxxxx
------------------------------
XXXXXX X. XXXXXXXX,
Individually, and as Voting Trustee
CHEMICAL VENTURE
CAPITAL ASSOCIATES,
a California Limited Partnership
By: CHEMICAL VENTURE PARTNERS,
its General Partner
By:
------------------------------
a General Partner
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