REORGANIZATION AGREEMENT
REORGANIZATION AGREEMENT made as of January 30, 1998 by and among
XXXXXXXXXX GRAPHICS INTERNATIONAL, INC., a New Jersey corporation ("CGII"),
XXXXXXXXXX GRAPHICS, INC., a New Jersey corporation ("CGI") and the individuals
identified on the signature page hereto as Stockholders (the "Stockholders").
RECITALS:
A. The Stockholders own all the issued and outstanding capital stock of CGI
(the "CGI Stock").
B. In connection with an initial public offering of securities and the
acquisition (the "Acquisition") of Roda Limited, a corporation organized under
the laws of England ("Roda"), the Stockholders have determined that it would be
advisable to form a holding company to own all of the capital stock of CGI and
to acquire all the share capital of Roda.
C. The parties wish to set forth their agreement regarding the formation
and organization of CGII and the terms upon which they will contribute their
respective shares of CGI Stock to CGII.
NOW, THEREFORE, in consideration of the foregoing, it is agreed as follows:
1. ACKNOWLEDGMENT OF INCORPORATION AND ORGANIZATION OF CGII.
Each of the Stockholders acknowledges that CGII has been incorporated
and organized by the filing of a certificate of incorporation and its adoption
of organizational resolutions, which have been made available to him for
examination. The parties further acknowledge that as of this date, Xxxxxxx X.
Xxxxxxxxxx is the sole stockholder of CGII, having subscribed for one share for
a purchase price of $12.00.
2. CONTRIBUTION OF CGI STOCK.
(a) Immediately prior to the initial public offering (the "Offering")
of common stock of CGII (the "Common Stock") pursuant to a Registration
Statement on Form S-1 declared effective by the United States Securities and
Exchange Commission, each of the Stockholders agrees to contribute to CGII all
of his shares of CGI Stock (the "Reorganization"). In consideration therefore,
the Stockholders shall receive shares of Common Stock and notes of CGII (the
"Exchange Notes," and together with the Distribution Notes referred to in
paragraph 5
below, the "Reorganization Notes"). On the date of the Reorganization, (i) each
of the Stockholders shall deliver to CGII his certificate or certificates
representing CGI Stock duly endorsed for transfer and (ii) CGII shall deliver to
each of the Stockholders a certificate representing shares of the Common Stock
and an Exchange Note and a Distribution Note of CGII payable to such
Stockholder.
(b) Each Stockholder acknowledges that he owns the number of shares of
CGI Stock and is entitled to receive in the Reorganization the number of shares
of Common Stock and an Exchange Note in the principal amount set forth opposite
his name on Schedule I hereto. Each Stockholder further acknowledges that the
aggregate principal amount of the Exchange Notes shall be determined as if CGII
were to issue an additional 200,000 shares of Common Stock in the
Reorganization. Accordingly, each Stockholder shall be entitled to receive his
proportionate interest in the aggregate amount derived by multiplying 200,000 by
the initial public offering price of the Common Stock.
(c) The Reorganization Notes are non-interest bearing and have no
specified maturity date; provided, however, it is intended that CGII will pay
the Reorganization Notes from the net proceeds of the Offering. CGII shall have
the right to offset against the principal amount of the respective
Reorganization Notes any amounts due to CGI by the respective Stockholders.
(d) Each Stockholder represents and warrants to CGII that (i) he has
good and marketable title to his shares of CGI Stock, free and clear of all
liens and encumbrances of any kind; (ii) he has the absolute right, power,
authority and capacity to execute and deliver this Agreement and perform his
obligations hereunder; and (iii) this Agreement constitutes his legal, valid and
binding obligation, enforceable against him in accordance with its terms.
3. SECURITIES LAWS.
Each of the Stockholders:
(a) represents and warrants that (i) he is acquiring the Common Stock
for investment purposes only, for his own account and without a view to the
resale, transfer or distribution thereof, (ii) he or his representative has had
access to the same kind of information concerning CGII that is required by
Schedule A of the Securities Act of 1933, as amended (the "Act"), to the extent
that CGII possesses such information; and (iii) has such knowledge and
experience in financial and business matters that he is capable of utilizing the
information that is available to him concerning CGII to evaluate the risk of his
investment in CGII and that he is able to bear the economic risk of his
investment in the Common Stock.
(b) acknowledges that he has been advised that the shares of Common
Stock issued under this Agreement are not being registered under any applicable
federal or state securities laws in reliance upon certain exemptions thereunder,
cannot be resold unless they are registered under those laws or unless an
exemption from registration is available and will bear a legend to such effect
and, accordingly, he may not be able to sell or otherwise dispose of the
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shares when he wishes to do so. Each of the Stockholders acknowledges that the
reliance of CGII and its agents upon such exemption from registration is
predicated upon the foregoing representations.
(c) agrees that the shares of Common Stock will not be resold (i)
without registration thereof under the Act (unless an exemption from such
registration is available and the Stockholder has provided to CGII an opinion of
counsel reasonably acceptable to CGII to such effect) or (ii) in violation of
any law.
(d) consents that the certificate or certificates representing the
Common Stock may be impressed with a legend indicating that the shares are not
registered under the Act and reciting that transfer thereof is restricted.
(e) consents that stop transfer instructions in respect of the shares
may be issued to any transfer agent, transfer clerk or other agent at any time
acting for CGII.
4. TERMINATION OF SHAREHOLDERS' AGREEMENT. Each of Xxxxxxx X. Xxxxxxxxxx,
Xxxxxx Xxxx and Xxxxxxx Xxxx agrees that effective upon the consummation of
transactions contemplated by this Agreement, the Shareholders' Agreement among
each of them and Xxxxxxxxxx Graphics, Inc. dated as of June 13, 1991 shall be
canceled and of no further force and effect.
5. DISTRIBUTION OF S CORPORATION TAXABLE INCOME. CGI shall distribute to
the Stockholders the amounts in their respective S Corporation "accumulated
adjustments accounts" immediately prior to the Reorganization, which, for
purposes of this Agreement are estimated to be $2,200,000 in the aggregate. Such
distribution shall be effected by CGI's issuance to each Stockholder of a note
in the respective amounts set forth opposite their names in Schedule I hereto
(each, a "Distribution Note"). In connection with the Reorganization, CGII
hereby agrees to assume and discharge the obligations of CGI by issuing restated
Distribution Notes. The Stockholders agree to accept the Distribution Notes in
satisfaction of CGI's obligation to make payments of undistributed S Corporation
taxable income.
6. ASSIGNMENT OF RODA AGREEMENT. Contemporaneously with the actions
described in paragraph 2(a) of this Agreement, CGI shall assign to CGII the
benefit of, and CGII shall perform the obligations of CGI under, that certain
agreement dated January 16, 1998, as amended, providing for the acquisition of
all the outstanding capital stock of Roda (the "Roda Agreement"). CGII shall
accordingly execute a Deed of Adherence as required pursuant to clause 18 of the
Roda Agreement.
7. SURVIVAL AND REPRESENTATIONS. The representations and warranties made by
the Stockholders in this Agreement shall survive for a period of one year
following the date of the Reorganization.
8. TERMINATION. This Agreement shall terminate and the parties shall have
no further obligations hereunder, if the Offering has not occurred by June 30,
1998.
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9. MODIFICATION. No modification of this Agreement shall be valid unless
such modification is in writing and signed by all parties hereto.
10. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of New Jersey.
11. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which together shall be deemed to constitute a single
instrument.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement or
caused the same to be executed by their duly authorized representatives as of
the day and year first above written.
XXXXXXXXXX GRAPHICS INTERNATIONAL, INC.
By:
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Name: Xxxxxxx X. Xxxxxxxxxx
Title: President
XXXXXXXXXX GRAPHICS, INC.
By:
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Name: Xxxxxxx X. Xxxxxxxxxx
Title: President
THE STOCKHOLDERS:
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Xxxxxxx X. Xxxxxxxxxx
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Xxxxxx Xxxx
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Xxxxxxx Xxxx
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Xxxxx X. Xxxxxxxxxx, Trustee
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Xxxxxxx X. Xxxx, Trustee
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Xxxxxxx Xxxxxx Xxxxxxx, Trustee
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SCHEDULE I
STOCKHOLDER SHARES OF SHARES OF COMMON EXCHANGE(1) AAA AS OF DISTRIBUTION
CGI STOCK STOCK NOTE DECEMBER 31 NOTE
----------- --------- ---------------- ----------- --------- ------------
Xxxxxxx X. Xxxxxxxxxx 94 2,050,727 $1,896,432 $2,021,536 $1,738,400
Xxxxxx Xxxx 10.46 228,198 211,030 224,949 193,443
Xxxxxxx Xxxx 7.60 165,803 153,330 163,443 140,551
Xxxxx X. Xxxxxxxxxx, 6 130,898 121,050 129,034 110,962
Trustee
Xxxxxxx X. Xxxx, Trustee 0.45 9,817 9,079 9,678 8,322
Xxxxxxx Xxxxxx Xxxxxxx, 0.45 9,817 9,079 9,678 8,322
Trustee
TOTALS 118.96 2,595,260 $2,400,000 $2,558,318 $2,200,000
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1 The principal amounts of the Exchange Notes assumes an initial public
offering price of $12.00 per share
