SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. ___)*
HA-LO Industries, Inc.
(Name of Issuer)
Common Stock, no par value
(Title of Class of Securities)
404429 10 2
(CUSIP Number)
Seymour N. Okner
701 Lee Street
Des Plaines, IL 60016
(847) 803-1931
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
September 30, 1996
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule
13G to report the acquisition which is the subject of this
Schedule 13D, and is filing this Schedule because of Rule 13d-
1(b)(3) or (4), check the following box. / /
Check the following box if a fee is being paid with the
statement. / X /
*The remainder of this cover page shall be filled out for a
reporting person's initial filing on this form with respect to
the subject class of securities, and for any subsequent amendment
containing information which would alter disclosures provided in
a prior cover page.
The information required on the remainder of this cover page
shall not be deemed to be "filed" for the purpose of Section 18
of the Securities Exchange Act of 1934 ("Act") or otherwise
subject to the liabilities of that section of the Act but shall
be subject to all other provisions of the Act (however, see the
Notes).
Exhibit index appears at end of text.
(Continued on following pages)
Page 1 of 25 Pages<PAGE>
<PAGE>
1. Name of Reporting Person:
Seymour N. Okner
2. Check the Appropriate Box if a Member of a Group: (a) / /
(b) / X /
3. SEC Use Only
4. Source of Funds: OO
5. Check box if Disclosure of Legal Proceedings is
Required Pursuant to Items 2(e) or 2(f): / /
6. Citizenship or Place of Organization: United States Citizen
Number of 7. Sole Voting Power: 771,361
Shares
Beneficially
Owned By Each 8. Shared Voting Power: -0-
Reporting
Person
With 9. Sole Dispositive Power: 771,361
10. Shared Dispositive -0-
Power:
11. Aggregate Amount Beneficially Owned by Each Reporting
Person:
771,361
12. Check Box if the Aggregate Amount in Row (11) Excludes
Certain Shares: / /
13. Percent of Class Represented by Amount in Row (11):
5.9%
14. Type of Reporting Person: IN
Page 2 of 25 Pages<PAGE>
<PAGE>
1. Name of Reporting Person:
Samuel P. Okner Family Trust
2. Check the Appropriate Box if a Member of a Group: (a) / /
(b) / X /
3. SEC Use Only
4. Source of Funds: OO
5. Check box if Disclosure of Legal Proceedings is
Required Pursuant to Items 2(e) or 2(f): / /
6. Citizenship or Place of Organization: Illinois
Number of 7. Sole Voting Power: 401,625 (1)
Shares
Beneficially
Owned By Each 8. Shared Voting Power: -0-
Reporting
Person
With 9. Sole Dispositive Power: 401,625 (1)
10. Shared Dispositive -0-
Power:
11. Aggregate Amount Beneficially Owned by Each Reporting
Person:
401,625
12. Check Box if the Aggregate Amount in Row (11) Excludes
Certain Shares: / /
13. Percent of Class Represented by Amount in Row (11):
3.1%
14. Type of Reporting Person: OO - Trust
(1)Power is exercised through its Trustees, Samuel P. Okner and
Anne Okner.
Page 3 of 25 Pages<PAGE>
<PAGE>
1. Name of Reporting Person:
Ellyn Robbins Family Trust
2. Check the Appropriate Box if a Member of a Group: (a) / /
(b) / X /
3. SEC Use Only
4. Source of Funds: OO
5. Check box if Disclosure of Legal Proceedings is
Required Pursuant to Items 2(e) or 2(f): / /
6. Citizenship or Place of Organization: Illinois
Number of 7. Sole Voting Power: 248,625 (1)
Shares
Beneficially
Owned By Each 8. Shared Voting Power: -0-
Reporting
Person
With 9. Sole Dispositive Power: 248,625 (1)
10. Shared Dispositive -0-
Power:
11. Aggregate Amount Beneficially Owned by Each Reporting
Person:
248,625
12. Check Box if the Aggregate Amount in Row (11) Excludes
Certain Shares: / /
13. Percent of Class Represented by Amount in Row (11):
1.9%
14. Type of Reporting Person: OO - Trust
(1)Power is exercised through its Trustees, Ellyn Robbins and Anne
Okner.
Page 4 of 25 Pages<PAGE>
<PAGE>
1. Name of Reporting Person:
Joel C. Okner Family Trust
2. Check the Appropriate Box if a Member of a Group: (a) / /
(b) / X /
3. SEC Use Only
4. Source of Funds: OO
5. Check box if Disclosure of Legal Proceedings is
Required Pursuant to Items 2(e) or 2(f): / /
6. Citizenship or Place of Organization: Illinois
Number of 7. Sole Voting Power: 363,375 (1)
Shares
Beneficially
Owned By Each 8. Shared Voting Power: -0-
Reporting
Person
With 9. Sole Dispositive Power: 363,375 (1)
10. Shared Dispositive -0-
Power:
11. Aggregate Amount Beneficially Owned by Each Reporting
Person:
363,375
12. Check Box if the Aggregate Amount in Row (11) Excludes
Certain Shares: / /
13. Percent of Class Represented by Amount in Row (11):
2.8%
14. Type of Reporting Person: OO - Trust
(1)Power is exercised through its Trustees, Joel C. Okner and Anne
Okner.
Page 5 of 25 Pages<PAGE>
<PAGE>
1. Name of Reporting Person:
Samuel P. Okner
2. Check the Appropriate Box if a Member of a Group: (a) / /
(b) / X /
3. SEC Use Only
4. Source of Funds: OO
5. Check box if Disclosure of Legal Proceedings is
Required Pursuant to Items 2(e) or 2(f): / /
6. Citizenship or Place of Organization: United States Citizen
Number of 7. Sole Voting Power: 254,984
Shares
Beneficially
Owned By Each 8. Shared Voting Power: 401,625 (1)
Reporting
Person
With 9. Sole Dispositive Power: 254,984
10. Shared Dispositive 401,625 (1)
Power:
11. Aggregate Amount Beneficially Owned by Each Reporting
Person:
656,609
12. Check Box if the Aggregate Amount in Row (11) Excludes
Certain Shares: / /
13. Percent of Class Represented by Amount in Row (11):
5.0%
14. Type of Reporting Person: IN
(1)Solely in his capacity as co-Trustee of the Samuel P. Okner
Family Trust.
Page 6 of 25 Pages<PAGE>
<PAGE>
1. Name of Reporting Person:
Ellyn Robbins
2. Check the Appropriate Box if a Member of a Group: (a) / /
(b) / X /
3. SEC Use Only
4. Source of Funds: OO
5. Check box if Disclosure of Legal Proceedings is
Required Pursuant to Items 2(e) or 2(f): / /
6. Citizenship or Place of Organization: United States Citizen
Number of 7. Sole Voting Power: -0-
Shares
Beneficially
Owned By Each 8. Shared Voting Power: 248,625 (1)
Reporting
Person
With 9. Sole Dispositive Power: -0-
10. Shared Dispositive 248,625 (1)
Power:
11. Aggregate Amount Beneficially Owned by Each Reporting
Person:
248,625
12. Check Box if the Aggregate Amount in Row (11) Excludes
Certain Shares: / /
13. Percent of Class Represented by Amount in Row (11):
1.9%
14. Type of Reporting Person: IN
(1)Solely in her capacity as co-Trustee of the Ellyn Robbins
Family Trust.
Page 7 of 25 Pages<PAGE>
<PAGE>
1. Name of Reporting Person:
Joel C. Okner
2. Check the Appropriate Box if a Member of a Group: (a) / /
(b) / X /
3. SEC Use Only
4. Source of Funds: OO
5. Check box if Disclosure of Legal Proceedings is
Required Pursuant to Items 2(e) or 2(f): / /
6. Citizenship or Place of Organization: United States Citizen
Number of 7. Sole Voting Power: -0-
Shares
Beneficially
Owned By Each 8. Shared Voting Power: 363,375 (1)
Reporting
Person
With 9. Sole Dispositive Power: -0-
10. Shared Dispositive 363,375 (1)
Power:
11. Aggregate Amount Beneficially Owned by Each Reporting
Person:
363,375
12. Check Box if the Aggregate Amount in Row (11) Excludes
Certain Shares: / /
13. Percent of Class Represented by Amount in Row (11):
2.8%
14. Type of Reporting Person: IN
(1)Solely in his capacity as co-Trustee of the Joel C. Okner
Family Trust.
Page 8 of 25 Pages<PAGE>
<PAGE>
1. Name of Reporting Person:
Anne Okner
2. Check the Appropriate Box if a Member of a Group: (a) / /
(b) / X /
3. SEC Use Only
4. Source of Funds: OO
5. Check box if Disclosure of Legal Proceedings is
Required Pursuant to Items 2(e) or 2(f): / /
6. Citizenship or Place of Organization: United States Citizen
Number of 7. Sole Voting Power: 25
Shares
Beneficially
Owned By Each 8. Shared Voting Power: 1,013,625 (1)
Reporting
Person
With 9. Sole Dispositive Power: 25
10. Shared Dispositive 1,013,625 (1)
Power:
11. Aggregate Amount Beneficially Owned by Each Reporting
Person:
1,013,650
12. Check Box if the Aggregate Amount in Row (11) Excludes
Certain Shares: / /
13. Percent of Class Represented by Amount in Row (11):
7.8%
14. Type of Reporting Person: IN
(1)Solely in her capacity as co-Trustee of the Samuel P. Okner
Family Trust with respect to 401,625 Shares. Solely in her
capacity as co-Trustee of the Ellyn Robbins Family Trust with
respect to 248,625 Shares. Solely in her capacity as co-Trustee
of the Joel C. Okner Family Trust with respect to 363,375 Shares.
Page 9 of 25 Pages<PAGE>
<PAGE>
1. Name of Reporting Person:
Debra Okner
2. Check the Appropriate Box if a Member of a Group: (a) / /
(b) / X /
3. SEC Use Only
4. Source of Funds: OO
5. Check box if Disclosure of Legal Proceedings is
Required Pursuant to Items 2(e) or 2(f): / /
6. Citizenship or Place of Organization: United States Citizen
Number of 7. Sole Voting Power: 25
Shares
Beneficially
Owned By Each 8. Shared Voting Power: -0-
Reporting
Person
With 9. Sole Dispositive Power: 25
10. Shared Dispositive -0-
Power:
11. Aggregate Amount Beneficially Owned by Each Reporting
Person:
25
12. Check Box if the Aggregate Amount in Row (11) Excludes
Certain Shares: / /
13. Percent of Class Represented by Amount in Row (11):
0.0%
14. Type of Reporting Person: IN
Page 10 of 25 Pages<PAGE>
<PAGE>
Item 1. Security and Issuer.
This statement relates to the Common Stock, no par value
(the "Shares"), of HA-LO Industries, Inc., an Illinois
corporation (the "Company"). The principal executive offices of
the Company are located at 5980 West Touhy Avenue, Niles,
Illinois 60714.
Item 2. Identity and Background.
(a) Pursuant to Rules 13d-1(f)(1) and (2) promulgated
under the Securities Exchange Act of 1934, as amended (the
"Act"), the undersigned hereby file this statement on Schedule
13D on behalf of Seymour N. Okner, the Samuel P. Okner Family
Trust, the Ellyn Robbins Family Trust, the Joel C. Okner Family
Trust, Samuel P. Okner, Ellyn Robbins, Joel C. Okner, Anne Okner
and Debra Okner. The foregoing persons are sometimes hereinafter
referred to collectively as the "Reporting Persons." The
Reporting Persons are making this single, joint filing because
they may be deemed to constitute a "group" within the meaning of
Section 13(d)(3) of the Act, although neither the fact of this
filing nor anything contained herein shall be deemed to be an
admission by any of the Reporting Persons that such a "group"
exists.
Seymour N. Okner
(b) - (c) Seymour N. Okner's business address is 701
Lee Street, Des Plaines, Illinois 60016, and his present
principal occupation or employment at such address is as the
Chairman and Chief Executive Officer of each of Market U.S.A.,
Inc. and Marusa Marketing Inc.
Samuel P. Okner Family Trust
The Samuel P. Okner Family Trust is an irrevocable grantor
trust existing under the laws of the State of Illinois. The
address of the Samuel P. Okner Family Trust is 701 Lee Street,
Des Plaines, Illinois 60016.
Ellyn Robbins Family Trust
The Ellyn Robbins Family Trust is an irrevocable grantor
trust existing under the laws of the State of Illinois. The
address of the Ellyn Robbins Family Trust is 701 Lee Street, Des
Plaines, Illinois 60016.
Joel C. Okner Family Trust
The Joel C. Okner Family Trust is an irrevocable grantor
trust existing under the laws of the State of Illinois. The
Page 11 of 25 Pages<PAGE>
address of the Joel C. Okner Family Trust is 701 Lee Street, Des
Plaines, Illinois 60016.
Samuel P. Okner
(b) - (c) Samuel P. Okner's business address is 701 Lee
Street, Des Plaines, Illinois 60016, and his present principal
occupation or employment at such address is as the President and
Chief Operating Officer of each of Market U.S.A., Inc. and Marusa
Marketing Inc.
Ellyn Robbins
(b) - (c) Ellyn Robbins' business address is 931 Yale,
Highland Park, Illinois 60035, and her present principal
occupation or employment at such address is as an interior
decorator.
Joel C. Okner
(b) - (c) Joel C. Okner's business address is 150 Half
Day Road, Buffalo Grove, Illinois 60089, and his present
principal occupation or employment at such address is as a
medical doctor.
Anne Okner
(b) - (c) Anne Okner's business address is 5834 N.
Lincoln Avenue, Chicago, Illinois 60659, and her present
principal occupation or employment at such address is as a travel
agent.
Debra Okner
(b) - (c) Debra Okner's business address is 257
Woodlawn, Hubbard Woods, Illinois 60093, and her present
principal occupation or employment at such address is as a
housewife.
(d) None of the persons identified in this Item 2 has,
during the last five years, been convicted in a criminal
proceeding (excluding traffic violations and similar
misdemeanors).
(e) None of the persons identified in this Item 2 has
during the last five years been a party to a civil proceeding of
a judicial or administrative body of competent jurisdiction and
as a result of such proceeding was or is subject to a judgment,
decree or final order enjoining future violations of, or
prohibiting or mandating activities subject to, federal or state
securities laws or finding of any violation with respect to such
laws.
Page 12 of 25 Pages<PAGE>
<PAGE>
(f) All of such persons identified in this Item 2 are
citizens of the United States of America.
Item 3. Source and Amount of Funds or Other Consideration
Prior to September 30, 1996, Seymour N. Okner, the Ellyn
Robbins Family Trust, the Joel C. Okner Family Trust and the
Samuel P. Okner Family Trust were shareholders of Market U.S.A.,
Inc., an Illinois corporation ("Market USA"); Seymour N. Okner
and Samuel P. Okner were shareholders of Marusa Marketing Inc., a
Canadian federal corporation ("Marusa"); Seymour N. Okner and
Samuel P. Okner were shareholders of Marusa Financial Services
Ltd., a Canadian federal corporation ("Marusa Financial"); and
Anne Okner and Debra Okner were shareholders of Nerok
Verifications Inc., a Canadian federal corporation ("Nerok"). On
September 30, 1996, pursuant to the Agreement and Plan of Merger
and Amalgamation dated June 14, 1996, as amended (the "Plan of
Merger"), attached hereto as Exhibit 1 and incorporated herein by
reference, among other things, (i) HA-LO Acquisition Corporation,
Inc., an Illinois corporation and a wholly-owned subsidiary of
the Company merged with and into Market USA (the "Merger"), (ii)
HA-LO Acquisition Corporation of Canada Ltd., a Canadian federal
corporation and a wholly-owned subsidiary of the Company
amalgamated with Marusa (the "Amalgamation"), and (iii) the
Company purchased the shares of the common stock of certain
shareholders of each of Marusa Financial and Nerok (the "Stock
Purchase Transactions"). Pursuant to the Merger, each
shareholder of Market USA received 19,125 Shares in exchange for
each of his shares of the common stock of Market USA. Pursuant
to the Amalgamation, each shareholder of Marusa received 318,700
Shares for each of his shares of the common stock of Marusa.
Pursuant to the Stock Purchase Transactions, certain shareholders
of Marusa Financial received, in the aggregate, 50 Shares in
exchange for their shares of the common stock of Marusa
Financial, and each shareholder of Nerok received 25 Shares in
exchange for her shares of the common stock of Nerok.
Item 4. Purpose of Transaction.
The Shares to which this Statement relates have been
acquired for investment purposes.
Pursuant to the terms of the Plan of Merger, at the
Effective Time (as defined in the Plan of Merger), the Company
amended its By-laws to increase the number of its Directors by
one (1), and elected Seymour N. Okner to fill such additional
directorship. In addition, from and after the Effective Time
until the date set forth below, prior to each annual meeting of
the shareholders of the Company, the Company shall nominate one
(1) Target Shareholder (as defined in the Plan of Merger)
reasonably satisfactory to the Company and Seymour N. Okner (or,
in his absence, Samuel P. Okner) for election to the Board of
Page 13 of 25 Pages<PAGE>
<PAGE>
Directors of the Company. The Company's obligation to recommend
to its shareholders the election of a Target Shareholder to the
Company's Board of Directors will terminate upon the earlier to
occur of (i) June 14, 2001; (ii) the last to occur of the death
of Seymour N. Okner or Samuel P. Okner; or (iii) the date upon
which the Target Shareholders have sold or disposed of more than
fifty percent (50%) of the Shares received by them pursuant to
the Plan of Merger.
The Reporting Persons expressly reserve the right to
dispose of all or any part of their investment in the Shares by
public or private sale, merger or otherwise (subject to
applicable restrictions of the Securities Act of 1933, as amended
(the "Securities Act")) or to continue to hold the Shares or to
acquire additional Shares or other securities of the Company at
such prices and on such terms as each of the Reporting Persons
deems advisable, including without limitation, by purchase, by
inviting a tender of Shares or other securities of the Company,
by merger or otherwise.
Except as described herein, none of the Reporting Persons
has any plans or proposals that relate to or would result in any
of the actions specified in clauses (a) through (j) of Item 4 of
Schedule 13D.
Item 5. Interests in Securities of the Issuer.
The following information provided in this statement is
based upon a total of 13,059,055 Shares outstanding. This total
number of Shares outstanding is based on information disclosed in
the final prospectus set forth in the Company's Registration
Statement on Form S-4 (Registration No. 333-10481) (the
"Registration Statement"), dated August 20, 1996, that as of July
31, 1996, the Company had outstanding approximately 10,509,055
shares. The total number of Shares also includes the 2,550,000
shares registered pursuant to the Registration Statement.
(a) Seymour N. Okner
Seymour N. Okner beneficially owns 771,361 Shares,
constituting approximately 5.9% of the Shares outstanding as
described above.
Samuel P. Okner Family Trust
The Samuel P. Okner Family Trust beneficially owns 401,625
Shares, constituting approximately 3.1% of the Shares outstanding
as described above.
Page 14 of 25 Pages<PAGE>
<PAGE>
Ellyn Robbins Family Trust
The Ellyn Robbins Family Trust beneficially owns 248,625
Shares, constituting approximately 1.9% of the Shares outstanding
as described above.
Joel C. Okner Family Trust
The Joel C. Okner Family Trust beneficially owns 363,375
Shares, constituting approximately 2.8% of the Shares outstanding
as described above.
Samuel P. Okner
Samuel P. Okner beneficially owns 656,609 Shares,
constituting approximately 5.0% of the Shares outstanding as
described above.
Ellyn Robbins
Ellyn Robbins beneficially owns 248,625 Shares,
constituting approximately 1.9% of the Shares outstanding as
described above.
Joel C. Okner
Joel C. Okner beneficially owns 363,375 Shares,
constituting approximately 2.8% of the Shares outstanding as
described above.
Anne Okner
Anne Okner beneficially owns 25 Shares and, due to her
positions as Trustee of the Samuel P. Okner Family Trust, the
Ellyn Robbins Family Trust, and the Joel C. Okner Family Trust,
may be deemed to be the beneficial owner of 1,013,625 Shares,
constituting, in the aggregate, approximately 7.8% of the Shares
outstanding as described above.
Debra Okner
Debra Okner beneficially owns 25 Shares, constituting
approximately 0.0% of the Shares outstanding as described above.
Other
If the Reporting Persons are deemed, pursuant to Section
13(d)(3) under the Act, to be members of a "group," such group
would beneficially own in the aggregate 2,040,020 Shares,
constituting approximately 15.6% of the Shares outstanding as
described above.
Page 15 of 25 Pages<PAGE>
<PAGE>
(b) Seymour N. Okner
Seymour N. Okner has the sole power to vote or direct the
vote and the sole power to dispose or direct the disposition of
771,361 Shares, constituting approximately 5.9% of the Shares
outstanding as described above.
Samuel P. Okner Family Trust
Acting through its Trustees, the Samuel P. Okner Family
Trust has the sole power to vote or direct the vote and the sole
power to dispose or direct the disposition of 401,625 Shares,
constituting approximately 3.1% of the Shares outstanding as
described above.
Ellyn Robbins Family Trust
Acting through its Trustees, the Ellyn Robbins Family Trust
has the sole power to vote or direct the vote and the sole power
to dispose or direct the disposition of 248,625 Shares,
constituting approximately 1.9% of the Shares outstanding as
described above.
Joel C. Okner Family Trust
Acting through its Trustees, the Joel C. Okner Family Trust
has the sole power to vote or direct the vote and the sole power
to dispose or direct the disposition of 363,375 Shares,
constituting approximately 2.8% of the Shares outstanding as
described above.
Samuel P. Okner
Samuel P. Okner has the sole power to vote or direct the
vote and the sole power to dispose or direct the disposition of
254,984 Shares, and, in his capacity as co-Trustee of the Samuel
P. Okner Family Trust, has shared power to vote or direct the
vote and shared power to dispose or direct the disposition of
401,625 Shares, constituting, in the aggregate, approximately
5.0% of the Shares outstanding as described above.
Ellyn Robbins
Ellyn Robbins, in her capacity as co-Trustee of the Ellyn
Robbins Family Trust, has shared power to vote or direct the vote
and shared power to dispose or direct the disposition of 248,625
Shares, constituting approximately 1.9% of the Shares outstanding
as described above.
Page 16 of 25 Pages<PAGE>
<PAGE>
Joel C. Okner
Joel C. Okner, in his capacity as co-Trustee of the Joel
Co. Okner Family Trust, has shared power to vote or direct the
vote and shared power to dispose or direct the disposition of
363,375 Shares, constituting approximately 2.8% of the Shares
outstanding as described above.
Anne Okner
Anne Okner has the sole power to vote or direct the vote
and the sole power to dispose or direct the disposition of 25
Shares, and, in her capacities as co-Trustee of the Samuel P.
Okner Family Trust, the Ellyn Robbins Family Trust and the Joel
C. Okner Family Trust, has shared power to vote or direct the
vote and shared power to dispose or direct the disposition of
1,013,625 Shares, constituting, in the aggregate, approximately
7.8% of the Shares outstanding as described above.
Debra Okner
Debra Okner has the sole power to vote or direct the vote
and the sole power to dispose or direct the disposition of 25
Shares, constituting approximately 0.0% of the Shares outstanding
as described above.
(c) Except as set forth above, none of the Reporting
Persons beneficially owns any Shares or has effected any
transactions in, or with respect to, Shares during the preceding
60 days.
(d) Not applicable.
(e) Not applicable.
Item 6. Contracts, Arrangements, Understandings or
Relationships With Respect to Securities of the Issuer.
Except as set forth below, none of the Reporting Persons
nor, to the best of their knowledge, any other person listed
herein, has any contract, arrangement, understanding or
relationship (legal or otherwise) with any person with respect to
any securities of the Company, including but not limited to,
transfer or voting of any of the securities, finder's fees, joint
ventures, loan or option arrangements, puts or calls, guarantees
of profits, division of profit or loss, or the giving or
withholding of proxies.
Seymour N. Okner, Samuel P. Okner, Anne Okner and Debra
Okner have each entered into an Affiliate Agreement dated
September 30, 1996 between each of them and the Company. Samuel
P. Okner and Anne Okner, not individually but as co-Trustees of
Page 17 of 25 Pages<PAGE>
<PAGE>
the Samuel P. Okner Family Trust, have entered into an Affiliate
Agreement dated September 30, 1996, between the Samuel P. Okner
Family Trust and the Company (the "Samuel Okner Trust Affiliate
Agreement"). Ellyn Robbins and Anne Okner, not individually but
as co-Trustees of the Ellyn Robbins Family Trust, have entered
into an Affiliate Agreement dated September 30, 1996, between the
Ellyn Robbins Family Trust and the Company (the "Ellyn Robbins
Trust Affiliate Agreement"). Joel C. Okner and Anne Okner, not
individually but as co-Trustees of the Joel C. Okner Family
Trust, have entered into an Affiliate Agreement dated September
30, 1996, between the Joel C. Okner Family Trust and the Company
(the "Joel Okner Trust Affiliate Agreement"). Pursuant to such
Affiliate Agreements, the Reporting Persons have each agreed,
among other things, not to sell, transfer or otherwise dispose of
any Shares until such time as results covering thirty (30) days
of combined operations Market USA, Marusa and the Company have
been published by the Company in the form of a public earnings
report (the "Pooling Period"). In addition, the Reporting
Persons each agreed that he would not sell, transfer or otherwise
dispose of Shares issued under the Plan of Merger unless (x) such
sale, transfer or disposition has been registered under the
Securities Act of 1933, as amended (the "Securities Act"),
including pursuant to the Registration Rights Agreement (as
defined below), for as long as he shall remain an "affiliate" of
the Company, (y) such sale, transfer or disposition is made in
conformity with the volume and other limitations of Rule 145
under the Securities Act, or (z) in the opinion of counsel
reasonably acceptable to the Company, such sale, transfer or
disposition is exempt from registration under the Securities Act.
Such Affiliate Agreements are attached hereto as Exhibits 2
through 8 and incorporated herein by reference.
Each of the Reporting Persons has entered into a
Registration Rights Agreement dated September 30, 1996 (the
"Registration Rights Agreement") among Seymour N. Okner, Samuel
P. Okner, Anne Okner, Debra Okner, the Ellyn Robbins Family
Trust, the Joel C. Okner Family Trust, the Samuel P. Okner Family
Trust, Merchant Partners Limited Partnership, a Delaware limited
partnership, and the Company. Pursuant to the Registration
Rights Agreement, the Company shall file with, and shall cause to
be declared effective by, the Securities and Exchange Commission
prior to times set forth below, a registration statement under
the Securities Act relating to the following number of
Registrable Shares (as defined in the Registration Rights
Agreement), which registration statement shall provide for the
sale by the holders thereof of the Registrable Shares included
therein from time to time on a delayed or continuous basis
pursuant to Rule 415 under the Securities Act, but need not
provide for an underwritten registration:
(i) prior to the completion of the Pooling
Period, a whole number of Shares equal to the quotient of
Page 18 of 25 Pages<PAGE>
<PAGE>
$15 million divided by the average per share price of
Shares for the ten trading days prior to the Closing Date
(as defined in the Registration Rights Agreement) (it being
understood, however, that the Company shall not be required
to request acceleration of the effective date of such
registration statement until the completion of the Pooling
Period);
(ii) prior to the first anniversary of the Closing
Date, a whole number of Shares equal to the product of (x)
the number of Shares then held by the Shareholders (as
defined in the Registration Rights Agreement) which were
acquired pursuant to the Plan of Merger multiplied by (y)
50%; and
(iii) prior to the second anniversary of the
Closing Date, the remaining number of Shares acquired by
the Shareholders pursuant to the Plan of Merger which have
not previously been sold or otherwise disposed of.
The Company agreed to use its best efforts to keep each
registration statement filed pursuant to the Registration Rights
Agreement continuously effective and usable for the resale of
shares for a period time as specified in the Registration Rights
Agreement. In addition, if at any time prior to the satisfaction
of the Company's obligation to file and keep effective the Shelf
Registrations, Lou Weisbach ceases to be Chairman of the Board of
the Company, holders of Shares owning a majority of the
Registrable Shares, have the right to require the Company to
effect an underwritten registration with respect to their Shares.
The Registration Rights Agreement also grants the Reporting
Persons certain rights, subject to cutback, to piggyback on
primary and secondary offerings of the Company's common stock
pursuant to a registration statement. The Registration Rights
Agreement is attached hereto as Exhibit 9 and incorporated herein
by reference.
Pursuant to the Plan of Merger, claims for damages under
the indemnification provisions of the Plan of Merger are
enforceable against the Shares issued pursuant to the Plan of
Merger. The Plan of Merger provides that all Shares which are
not then eligible for registration and sale are subject to the
Company's right of indemnification through set-off against the
cancellation of such Shares. The Company's right of
indemnification is limited to the set-off against and
cancellation of Shares with an aggregate value not exceeding ten
percent (10%) of (x) the total number of Shares received pursuant
to the Plan of Merger, multiplied by the Average Value (as
defined in the Plan of Merger). The Company is not entitled to
any recovery for a claim of indemnification unless such claim is
made within the twelve (12) month period immediately following
the Effective Time (as defined in the Plan of Merger).
Page 19 of 25 Pages<PAGE>
<PAGE>
Item 7. Material to be filed as Exhibits.
Exhibit 1. Plan of Merger
Exhibit 2. Affiliate Agreement dated September 30, 1996,
by and between Seymour N. Okner and HA-LO
Industries, Inc.
Exhibit 3. Affiliate Agreement dated September 30, 1996,
by and between Samuel P. Okner and HA-LO
Industries, Inc.
Exhibit 4. Samuel Okner Trust Affiliate Agreement
Exhibit 5. Ellyn Robbins Trust Affiliate Agreement
Exhibit 6. Joel Okner Trust Affiliate Agreement
Exhibit 7. Affiliate Agreement dated September 30, 1996,
by and between Debra Okner and HA-LO
Industries, Inc.
Exhibit 8. Affiliate Agreement dated September 30, 1996,
by and between Anne Okner and HA-LO
Industries, Inc.
Exhibit 9. Registration Rights Agreement
Page 20 of 25 Pages<PAGE>
<PAGE>
After reasonable inquiry and to the best of my knowledge
and belief, I certify that the information set forth in this
statement is true, complete and correct.
Dated: October 7, 1996
/s/ Seymour N. Okner
Seymour N. Okner
SAMUEL P. OKNER FAMILY TRUST
By:/s/ Samuel P. Okner
Samuel P. Okner
Co-Trustee
By:/s/ Anne Okner
Anne Okner
Co-Trustee
ELLYN ROBBINS FAMILY TRUST
By:/s/ Ellyn Robbins
Ellyn Robbins
Co-Trustee
By:/s/ Anne Okner
Anne Okner
Co-Trustee
JOEL C. OKNER FAMILY TRUST
By:/s/ Joel C. Okner
Joel C. Okner
Co-Trustee
By:/s/ Anne Okner
Anne Okner
Co-Trustee
/s/ Samuel P. Okner
Samuel P. Okner
Page 21 of 25 Pages<PAGE>
<PAGE>
/s/ Ellyn Robbins
Ellyn Robbins
/s/ Joel C. Okner
Joel C. Okner
/s/ Anne Okner
Anne Okner
/s/ Debra Okner
Debra Okner
Page 22 of 25 Pages<PAGE>
<PAGE>
EXHIBIT INDEX
Exhibit No. Document Description
A. Agreement pursuant to Rule 13d-1(f)(1)(iii).
1. Agreement and Plan of Merger and Amalgamation
dated June 14, 1996, by and among HA-LO
Industries, Inc., HA-LO Acquisition Corporation,
Inc., HA-LO Acquisition Corporation of Canada
Ltd., Market USA, Inc., Marusa Marketing Inc.,
Marusa Financial Services Ltd., Nerok
Verifications Inc., and the stockholders of Market
USA, Inc. and Marusa Marketing Inc., including the
First and Second Amendments thereto.
2. Affiliate Agreement dated September 30, 1996, by
and between Seymour N. Okner and HA-LO Industries,
Inc.
3. Affiliate Agreement dated September 30, 1996, by
and between Samuel P. Okner and HA-LO Industries,
Inc.
4. Affiliate Agreement dated September 30, 1996, by
and between Samuel P. Okner and Anne Okner, not
individually, but as co-Trustees of the Samuel P.
Okner Family Trust u/a/d May 14, 1996, and HA-LO
Industries, Inc.
5. Affiliate Agreement dated September 30, 1996, by
and between Ellyn Robbins and Anne Okner, not
individually, but as co-Trustees of the Ellyn
Robbins Family Trust u/a/d May 14, 1996, and HA-LO
Industries, Inc.
6. Affiliate Agreement dated September 30, 1996, by
and between Joel C. Okner and Anne Okner, not
individually, but as co-Trustees of the Joel C.
Okner Family Trust u/a/d May 14, 1996, and HA-LO
Industries, Inc.
7. Affiliate Agreement dated September 30, 1996, by
and between Anne Okner and HA-LO Industries, Inc.
8. Affiliate Agreement dated September 30, 1996, by
and between Debra Okner and HA-LO Industries, Inc.
Page 23 of 25 Pages<PAGE>
<PAGE>
Exhibit No. Document Description
9. Registration Rights Agreement dated September 30,
1996, by and among HA-LO Industries, Inc., Seymour
N. Okner, Samuel P. Okner, the Ellyn Robbins
Family Trust, the Joel C. Okner Family Trust, the
Samuel P. Okner Family Trust and Merchant
Partners, Limited Partnership.
Page 24 of 25 Pages<PAGE>
<PAGE>
EXHIBIT A
Pursuant to Rule 13d-1(f)(1)(iii) of Regulation 13D-G of
the General Rules and Regulations of the Securities and Exchange
Commission under the Securities Exchange Act of 1934, as amended,
the undersigned agree that the Statement to which this Exhibit is
attached is filed on behalf of each of them in the capacities set
forth below.
Dated: October 7, 1996
/s/ Seymour N. Okner /s/ Samuel P. Okner
Seymour N. Okner Samuel P. Okner
SAMUEL P. OKNER FAMILY TRUST /s/ Ellyn Robbins
Ellyn Robbins
By:/s/ Samuel P. Okner
Samuel P. Okner
Co-Trustee /s/ Joel C. Okner
Joel C. Okner
By:/s/ Anne Okner
Anne Okner
Co-Trustee /s/ Anne Okner
Anne Okner
ELLYN ROBBINS FAMILY TRUST
By:/s/ Ellyn Robbins /s/ Debra Okner
Ellyn Robbins Debra Okner
Co-Trustee
By:/s/ Anne Okner
Anne Okner
Co-Trustee
JOEL C. OKNER FAMILY TRUST
By:/s/ Joel C. Okner
Joel C. Okner
Co-Trustee
By:/s/ Anne Okner
Anne Okner
Co-Trustee
120841_04
Page 25 of 25 Pages<PAGE>
THIS AGREEMENT AND PLAN OF MERGER AND AMALGAMATION, dated as
of June 14, 1996 (this "Agreement"), is by and among HA-LO
Industries, Inc., an Illinois corporation ("Acquiror"), HA-LO
Acquisition Corporation, Inc., an Illinois corporation ("Acquiror
Sub-1"), HA-LO Acquisition Corporation of Canada Ltd., a Canadian
federal corporation ("Acquiror Sub-2"), Market USA, Inc., an
Illinois corporation (the "U.S. Company"), Marusa Marketing Inc.,
a Canadian federal corporation (the "Canada Company"), Marusa
Financial Services Ltd., a Canadian federal corporation ("Marusa
Financial"), Nerok Verifications Inc., a Canadian federal
corporation ("Nerok"), and the stockholders of the U.S. Company
and the Canada Company who are identified on Schedule 1 to this
Agreement (such stockholders, together with every other person
who acquires shares of the authorized capital stock of the U.S.
Company or the Canada Company prior to the "Effective Time" [as
hereafter defined], are hereafter collectively the "Target
Shareholders", and each individually is a "Target Shareholder").
WITNESSETH:
WHEREAS, the U.S. Company and the Canada Company are each
engaged in the conduct of a telemarketing business on behalf of
their respective clients and customers;
WHEREAS, the U.S. Company and the Canada Company are
"affiliates" through common ownership within the meaning of (i)
paragraphs (c) and (d) of Rule 145 of the rules and regulations
of the Securities and Exchange Commission (the "Commission")
under the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder (the "Securities Act"), and
(ii) Accounting Series, Releases 130 and 135, as amended, of the
Commission (the U.S. Company and the Canada Company are hereafter
collectively the "Target Companies", and each individually is a
"Target Company");
WHEREAS, the Target Shareholders identified on Schedule 1 to
this Agreement are currently the sole stockholders of the Target
Companies;
WHEREAS, the Canada Company engages in its telemarketing
business alone and through Marusa Financial, and conducts
telemarketing verification services through Nerok (Marusa
Financial and Nerok are hereafter collectively the "Canadian
Ancillary Service Entities", and each individually is a "Canadian
Ancillary Service Entity");
WHEREAS, Acquiror Sub-1, a wholly-owned first tier
subsidiary of Acquiror, upon the terms and subject to the
conditions of this Agreement and in accordance with the Business
Corporation Act of the State of Illinois, as amended ("Illinois
Law"), will merge with and into the U.S. Company (the "U.S.
Merger");
-1-<PAGE>
<PAGE>
WHEREAS, Acquiror Sub-2, a wholly-owned first tier
subsidiary of Acquiror, upon the terms and subject to the
conditions of this Agreement and in accordance with the Canada
Business Corporations Act, as amended ("Canada Law"), will
amalgamate with the Canada Company (the "Canada Amalgamation");
WHEREAS, at the Effective Time, Acquiror, upon the terms and
subject to the conditions of this Agreement, will cause a
designee organized under Canada Law to acquire all of the right,
title and interest of the Canada Ancillary Service Entities in
all of their licenses, rights, properties and other assets, in
exchange for such designee's (the "New Canadian Ancillary Service
Entity") transfer to the Canadian Ancillary Service Entities of
one hundred (100) shares in aggregate of Acquiror's common voting
stock, no par value, together with its assumption, without
recourse of any nature to Acquiror, of all debts, obligations,
liabilities and "Taxes" (as hereafter defined) of the Canadian
Ancillary Service Entities (such transaction is hereafter the
"Ancillary Asset Acquisition") (the U.S. Merger, the Canada
Amalgamation and the Ancillary Asset Acquisition are hereafter
sometimes collectively referred to as the "Unitary Transaction");
WHEREAS, the Board of Directors and shareholders of the U.S.
Company have determined that the U.S. Merger and Unitary
Transaction are in the best interests of the U.S. Company, and
have unanimously approved and adopted this Agreement and
consented to the transactions contemplated hereby;
WHEREAS, the Board of Directors and shareholders of the
Canada Company have determined that the Canada Amalgamation and
Unitary Transaction are in the best interests of the Canada
Company, and have unanimously approved and adopted this Agreement
and consented to the transactions contemplated hereby;
WHEREAS, the Board of Directors and shareholders of the
Canadian Ancillary Service Entities have determined that the
Ancillary Asset Acquisition and Unitary Transaction are in the
best interests of each Canadian Ancillary Service Entity, and
have unanimously approved and adopted this Agreement and
consented to the transactions contemplated hereby;
WHEREAS, the Board of Directors of Acquiror has determined
that the Unitary Transaction is in the best interests of Acquiror
and its stockholders, and has approved and adopted this Agreement
and the transactions contemplated hereby;
WHEREAS, for U.S. federal income tax purposes, it is
intended that the U.S. Merger and the Canada Amalgamation shall
qualify as a reorganization under the provisions of Sections
368(a) of the United States Internal Revenue Code of 1986, as
amended (the "Code");
-2-<PAGE>
<PAGE>
WHEREAS, for Canada tax purposes, it is intended that the
Canada Amalgamation shall qualify as a transaction exempt from
taxation under the Canada/U.S. Income Tax Convention, as amended
(the "Tax Convention"); and
WHEREAS, for accounting purposes, it is intended that the
Unitary Transaction shall be accounted for as a "pooling of
interests";
NOW, THEREFORE, in consideration of the foregoing and the
respective representations, warranties, covenants and agreements
set forth in this Agreement, the parties agree as follows:
ARTICLE I
THE UNITARY TRANSACTION
SECTION 1.01. The U.S. Merger. Upon the terms and subject
to the conditions set forth in this Agreement, and in accordance
with Illinois Law, at the Effective Time, Acquiror Sub-1 shall be
merged with and into the U.S. Company. As a result of the U.S.
Merger, the separate corporate existence of Acquiror Sub-1 shall
cease and the U.S. Company shall continue as the surviving
corporation of the Merger (the "U.S. Surviving Corporation").
SECTION 1.02. The Canada Amalgamation. Upon the terms and
subject to the conditions set forth in this Agreement, and in
accordance with Canada Law, at the Effective Time, Acquiror Sub-2
shall be amalgamated with the Canada Company. As a result of the
Canada Amalgamation, the separate corporate existences of
Acquiror Sub-2 and the Canada Company shall cease and the
amalgamating corporations shall continue in existence as one
amalgamated corporation under Canada Law (hereafter, the
"Amalgamated Canada Corporation"), using such name, and having
such features and characteristics, as are described in Schedule 2
to this Agreement.
SECTION 1.03. The Ancillary Asset Acquisition. Upon the
terms and subject to the conditions set forth in this Agreement
and in the Asset Purchase Agreement in the form attached to this
Agreement as Exhibit "A" and by this reference incorporated in
and made a part hereof (the "Ancillary Asset Purchase
Agreement"), and in accordance with Ontario (Canada) Law, at the
Effective Time, the Canadian Ancillary Service Entities shall
sell, convey, transfer and assign to the New Canadian Ancillary
Service Entity, and the New Canadian Ancillary Service Entity
shall purchase from the Canadian Ancillary Service Entities, free
and clear of any liability, lien, claim, restriction or
encumbrance whatsoever, except those created under the Ancillary
Asset Purchase Agreement, all of their respective right, title
and interest in and to all assets, properties, rights and
privileges of every kind and nature whatsoever, tangible and
-3-<PAGE>
<PAGE>
intangible, wherever located, and whether or not used in or
related to the conduct of a business (the "Ancillary Assets");
provided, however, the New Canadian Ancillary Service Entity,
Marusa Financial and the Canada Company may, in their sole
discretion, endeavor to cause the clients and customers of Marusa
Financial to renew and/or renegotiate any contracts expiring
prior to the Effective Time with the New Canadian Ancillary
Service Entity.
SECTION 1.04. Effective Time. As promptly as practicable
after the satisfaction or, if permissible, waiver, of the
conditions set forth in Article VII, the parties shall cause the
Unitary Transaction to be consummated by filing, as promptly as
practicable without regard to priority of task, (i) a certificate
of merger (the "Certificate of Merger") with the Secretary of
State of the State of Illinois in such form as required by, and
executed in accordance with, the relevant provisions of Illinois
Law, (ii) the Articles of Amalgamation in the form attached to
this Agreement as Exhibit "B" (the "Articles of Amalgamation")
with the Department of Industry Canada, together with such other
forms required by, and executed in accordance with, the relevant
provisions of Canada Law, and (iii) all filings required (if any)
to effectuate the purposes of the Ancillary Asset Purchase
Agreement (the date and time at which the last of such filings
shall become effective, and the Unitary Transaction deemed close
for all purposes under this Agreement is hereafter the "Effective
Time").
SECTION 1.05. Effect of the Unitary Transaction. At the
Effective Time, the effect of the U.S. Merger shall be as
provided in the applicable provisions of Illinois Law, and the
effect of the Canada Amalgamation shall be as provided in the
applicable provisions of Canada Law. Without limiting the
generality of those laws, and subject to their provisions, at the
Effective Time, except as otherwise provided in this Agreement,
(i) all the properties, rights, privileges, powers and franchises
of Acquiror Sub-1 and the U.S. Company shall vest in the U.S.
Surviving Corporation, (ii) all the properties, rights,
privileges, powers and franchises of Acquiror Sub-2 and the
Canada Company shall continue to be properties, rights,
privileges, powers and franchises of the Amalgamated Canada
Corporation, (iii) all debts, liabilities and duties of Acquiror
Sub-1 and the U.S. Company shall become the debts, liabilities
and duties of the U.S. Surviving Corporation, (iv) all debts,
liabilities and duties of Acquiror Sub-2 and the Canada Company
shall be the debts, liabilities and duties of the Amalgamated
Canada Corporation, and (v) the New Canadian Ancillary Service
Entity shall purchase the Ancillary Assets from the Canadian
Ancillary Service Entities (subject to its assumption of all
debts, obligations, liabilities and Taxes of same), for the
purpose, among others, of continuing the businesses previously
conducted by the Canadian Ancillary Service Entities.
-4-<PAGE>
<PAGE>
SECTION 1.06. Articles of Incorporation; By-Laws. At the
Effective Time, (i) the Articles of Incorporation and the By-Laws
of the U.S. Company shall be the Articles of Incorporation and
the By-Laws of the U.S. Surviving Corporation, (ii) the Articles
of Amalgamation shall be the Articles of the Amalgamated Canada
Corporation, and (iii) the By-Laws of the Amalgamated Canada
Corporation shall be in the form attached to this Agreement as
Exhibit "C".
SECTION 1.07. Directors and Officers. Except as may be
provided in the Employment Agreements attached as Exhibits "D"
and "E" to this Agreement, the directors of Acquiror Sub-1
immediately preceding the Effective Time shall be the initial
directors of the U.S. Surviving Corporation, each to hold office
in accordance with the Articles of Incorporation and the By-Laws
of the U.S. Surviving Corporation, and the officers of Acquiror
Sub-1 immediately preceding the Effective Time shall be the
initial officers of the U.S. Surviving Corporation, in each case
until their respective successors are duly elected or appointed
and qualified. The directors of Acquiror Sub-2 immediately
preceding the Effective Time shall be the initial directors of
the Amalgamated Canada Corporation, and the officers of Acquiror
Sub-2 immediately preceding the Effective Time shall be the
initial officers of the Amalgamated Canada Corporation, in each
case until their respective successors are duly elected or
appointed and qualified.
SECTION 1.08. Taking Necessary Action; Further Action. The
parties shall each use reasonable efforts to take all action as
may be necessary or appropriate to effectuate the Unitary
Transaction at the time specified in Section 1.04 hereof. If, at
any time following or prior to the Effective Time, any further
action is necessary or desirable to carry out the purposes of
this Agreement or (i) to vest the U.S. Surviving Corporation and
the Amalgamated Canada Corporation with full right, title and
possession to all properties, rights, privileges, immunities,
powers and franchises of its constituent corporations, the
officers of such Surviving or Amalgamated Corporation are fully
authorized, in the name of each constituent corporation or
otherwise, to take, and shall take, all such lawful and necessary
action, to carry out the purposes of this Agreement, and (ii) the
Ancillary Asset Purchase Agreement, and/or to vest the New
Canadian Ancillary Service Entity with the Canadian Ancillary
Service Entities' respective right, title and possession to all
Ancillary Assets, the officers of the Canadian Ancillary Service
Entities and the New Canadian Ancillary Service Entity are fully
authorized to take, and shall take, all such lawful and necessary
action desirable to carry out the purposes of this Agreement and
the Ancillary Asset Purchase Agreement. Without limiting the
generality of the forgoing, each such party shall take all steps
necessary (if any) to conform their respective boards of
directors to applicable Laws, and obtain and/or renew all
-5-<PAGE>
<PAGE>
licenses and other permits required to conduct their businesses
under applicable Laws.
SECTION 1.09. The Closing. The closing of the transactions
contemplated by this Agreement will take place at the offices of
Neal Gerber & Eisenberg, Chicago, Illinois, and will be effective
at the Effective Time.
ARTICLE II
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
SECTION 2.01. Conversion of Securities; Consideration. At
the Effective Time, by virtue of the Unitary Transaction and
without any further action on the part of Acquiror, Acquiror Sub-
1, Acquiror Sub-2, the U.S. Company, the Canada Company, the
Canadian Ancillary Service Entities or the holders of any of the
following securities:
(a) Conversion Applicable to Shares of the U.S.
Company. Each share of common stock, no par value per
share, of the U.S. Company ("U.S. Company Common Stock"),
issued and outstanding immediately preceding the Effective
Time shall be converted into and become nineteen thousand
one hundred twenty-five (19,125) shares (the "U.S. Exchange
Ratio") of common voting stock, no par value, of the
Acquiror ("Acquiror Common Stock"). All such shares of U.S.
Company Common Stock so converted shall no longer be
outstanding and shall automatically be cancelled and retired
and shall cease to exist, and each certificate previously
representing any such shares shall thereafter represent the
shares of Acquiror Common Stock into which such U.S. Company
Common Stock was converted in the U.S. Merger. Certificates
previously representing shares of U.S. Company Common Stock
shall be exchanged for certificates representing whole
shares of Acquiror Common Stock issued in consideration
therefor upon the surrender of such certificates in
accordance with the provisions of Section 2.02, without
interest; and
(b) Conversion Applicable to Shares of the Canada
Company. Each share of Class A Common Stock of the Canada
Company ("Canada Company Common Stock"), issued and
outstanding immediately preceding the Effective Time shall
be converted into and become three hundred eighteen thousand
seven hundred (318,700) shares of Acquiror Common Stock (the
"Canada Exchange Ratio"). Certificates previously
representing shares of Canada Company Common Stock shall be
exchanged for certificates representing whole shares of
Acquiror Common Stock issued in consideration therefor upon
the surrender of such certificates in accordance with the
provisions of Section 2.02, without interest.
-6-<PAGE>
<PAGE>
(c) Consideration Payable to the Canadian Ancillary
Service Entities. At the Effective Time, the New Canadian
Ancillary Service Entity shall transfer (or cause Acquiror
to issue) (i) fifty (50) shares of Acquiror Common Stock to
Marusa Financial against delivery of Marusa Financial's
Ancillary Assets, and (ii) fifty (50) shares of Acquiror
Common Stock to Nerok against delivery of Nerok's Ancillary
Assets, representing one hundred (100) shares of Acquiror
Common Stock in aggregate issuable to Marusa Financial and
Nerok. Simultaneously therewith, the New Canadian Ancillary
Service Entity shall assume and agree to pay and discharge
the debts, obligations, liabilities and Taxes arising from
the conduct of each Canadian Ancillary Service Entity's
businesses preceding the Effective Time, in each case
whether matured or unmatured, accrued or contingent, and
whether now known or later discovered. As soon as
practicable after the Effective Time, each of Marusa
Financial and Nerok shall completely liquidate and dissolve
under Canada Law, and each shall distribute to its
stockholders in cancellation of all their outstanding shares
of capital stock, all right, title and interest in and to
the Acquiror Common Stock received in the exchange for the
Ancillary Assets and debt assumptions under the Ancillary
Asset Purchase Agreement.
(d) Effect of Recapitalization, Etc. If between the
date of this Agreement and the Effective Time the
outstanding shares of Acquiror Common Stock, U.S. Company
Common Stock or Canada Company Common Stock shall have been
changed into a different number of shares or a different
class, by reason of any stock dividend, subdivision,
reclassification, recapitalization, split, combination or
exchange of shares, the U.S. Exchange Ratio and/or Canada
Exchange Ratio, and the aggregate number of Acquiror Common
Stock to be issued to Marusa Financial and Nerok under the
Ancillary Asset Purchase Agreement, as the case may be,
shall be correspondingly adjusted to reflect such stock
dividend, subdivision, reclassification, recapitalization,
split, combination or exchange of shares. Subject to the
provisions of this subsection (d), at the Effective Time,
after giving effect to all issuances by Acquiror of its
voting common stock under this Section 2.01, an aggregate
amount not exceeding two million five hundred fifty thousand
(2,550,000) shares of Acquiror Common Stock shall be
transferred at the Effective Time to the Target
Shareholders, Marusa Financial and Nerok.
(e) No Fractional Shares. Anything in this Agreement
to the contrary notwithstanding, any fractional shares of
Acquiror Common Stock otherwise issuable in the Unitary
Transaction shall be rounded upward or downward to the
nearest whole number of shares of Acquiror Common Stock.
-7-<PAGE>
<PAGE>
(f) Treasury and Other Shares. Each share of U.S.
Company Common Stock held in the treasury of the U.S.
Company and each share of U.S. Company Common Stock owned by
Acquiror or any direct or indirect subsidiary of Acquiror,
the U.S. Company, the Canada Company or the Canadian
Ancillary Service Entities immediately preceding the
Effective Time shall be cancelled and extinguished without
any conversion of such shares and no payment shall be made
with respect to such shares.
(g) Conversion of Acquiror Sub Shares. Each share of
common stock, no par value, of Acquiror Sub-1 issued and
outstanding immediately preceding the Effective Time shall
be converted into and exchanged for one (1) newly and
validly issued, fully paid and nonassessable share of common
stock of the U.S. Surviving Corporation, and each share of
common stock, no par value, of Acquiror Sub-2 issued and
outstanding immediately preceding the Effective Time shall
be converted into and exchanged for one (1) newly and
validly issued, fully paid and nonassessable share of Common
Voting Stock of the Amalgamated Canada Corporation.
SECTION 2.02. Exchange of Certificates; No Cash Payments in
Lieu of Fractional Shares.
(a) Exchange of Certificates. At the Effective Time,
each holder of record of a certificate or certificates which
immediately preceding the Effective Time represented
outstanding shares of U.S. Company Common Stock or Canada
Company Common Stock, as the case may be (the "Target
Certificates"), shall forthwith deliver to Acquiror the
Target Certificates in exchange for and against certificates
representing the shares of Acquiror Common Stock issuable
pursuant to Section 2.01 hereof (such certificates for
shares of Acquiror Corporation Stock are hereafter the
"Acquiror Certificates"). Upon the transfer of a Target
Certificate to Acquiror, together with such duly executed
documents and other instruments of transfer as may
reasonably be required by Acquiror, the holder of such
Target Certificate shall receive in exchange therefor an
Acquiror Certificate or Certificates representing, in
aggregate, that number of whole shares of Acquiror Common
Stock which such holder has received in respect of the
shares of U.S. Company Common Stock or Canada Company Common
Stock, as the case may be, formerly represented by such
Target Certificate (after taking into account all shares of
such U.S. Company Common Stock or Canada Company Common
Stock, as the case may be, then held by such holder and the
Exchange Ratio applicable thereto).
(b) No Further Rights in Company Common Stock. All
shares of Acquiror Common Stock issued upon conversion of
-8-<PAGE>
<PAGE>
the shares of U.S. Company Common Stock in accordance with
the terms of this Agreement shall be deemed to have been
issued in full satisfaction of all rights pertaining to such
shares of U.S. Company Common Stock. All shares of Acquiror
Common Stock issued upon conversion of the shares of Canada
Company Common Stock in accordance with the terms of this
Agreement shall be deemed to have been issued in full
satisfaction of all rights pertaining to such shares of
Canada Company Common Stock.
SECTION 2.03. Stock Transfer Books. At the Effective Time,
the stock transfer books of the Target Companies shall, with
respect to the Unitary Transaction, be closed and solely with
respect to the Unitary Transaction, there shall be no further
registration of transfers of shares of (i) U.S. Company Common
Stock thereafter on the records of the U.S. Company, or (ii)
Canada Company Common Stock thereafter on the records of the
Canada Company. From and after the Effective Time, (i) the
holders of Target Certificates representing shares of U.S.
Company Common Stock outstanding immediately preceding the
Effective Time shall cease to have any rights with respect to
such shares of U.S. Company Common Stock following the U.S.
Merger except as otherwise provided in this Agreement or by "Law"
(as hereafter defined), and (ii) the holders of Target
Certificates representing shares of Canada Company Common Stock
outstanding immediately preceding the Effective Time shall cease
to have any rights with respect to such shares of Canada Company
Common Stock following the Canada Amalgamation except as
otherwise provided in this Agreement or by Law. For the purposes
of this Agreement, the term "Law" shall mean any Canada or U.S.
federal, state, provincial, local or municipal law, statute,
ordinance, rule, regulation, order, judgment or decree.
SECTION 2.04. Other Securities and Options. At and as of
the Effective Time:
(a) each outstanding share of common and preferred
capital stock of the U.S. Company other than U.S. Company
Common Stock ("Other U.S. Company Securities"), together
with all options, warrants or other rights, agreements,
arrangements or commitments (collectively, the "U.S. Company
Options") to sell or purchase shares of U.S. Company Common
Stock or Other U.S. Company Securities, whether written,
oral, authorized, outstanding, issued, unissued, vested or
unvested, shall, to the extent not prohibited by Law, be
cancelled and terminated, and of no further force or effect.
Prior to the Effective Time, the U.S. Company and the Target
Shareholders shall take all corporate action necessary to
effectuate the cancellation and termination of all Other
U.S. Company Securities and U.S. Company Options; and
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(b) each outstanding share of common and preferred
capital stock of the Canada Company other than Canada
Company Common Stock ("Other Canada Company Securities"),
together with all options, warrants or other rights,
agreements, arrangements or commitments (collectively, the
"Canada Company Options") to sell or purchase shares of
Canada Company Common Stock or Other Canada Company
Securities, whether written, oral, authorized, outstanding,
issued, unissued, vested or unvested, shall, to the extent
not prohibited by Law, be cancelled and terminated, and of
no further force or effect. Prior to the Effective Time,
the Canada Company and the Target Shareholders shall take
all corporate action necessary to effectuate the
cancellation and termination of all Other Canada Company
Securities and Canada Company Options.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE TARGET COMPANIES
The term "Target Company Adverse Effect", as used in this
Agreement, shall mean any change or effect that, individually or
when taken together with all other such changes or effects, would
reasonably be considered to be materially adverse to the
financial condition, business or results of operations of the
U.S. Company, the Canada Company and their respective
"subsidiaries" (if any), taken as a whole; provided, however,
except to the extent set forth in Article IX hereof, the
occurrence of any of the changes or events described in any
Section of the "Target Company Disclosure Schedule" (as hereafter
defined), shall not, individually or in the aggregate, constitute
a breach of, or misstatement or inaccuracy in a representation or
warranty of a Target Company hereunder, nor shall it constitute a
Target Company Adverse Effect.
The term "subsidiary" (or its plural) as used in this
Agreement with respect to the U.S. Company, the Canada Company,
Acquiror, the U.S. Surviving Corporation, the Amalgamated Canada
Corporation, Marusa Financial, Nerok, or any other person, shall
mean any corporation, partnership, joint venture or other legal
entity of which the U.S. Company, the Canada Company, Acquiror,
the U.S. Surviving Corporation, the Amalgamated Canada
Corporation, Marusa Financial, Nerok or such other person, as the
case may be (either alone or through or together with any other
subsidiary), owns, directly or indirectly, five percent (5%) or
more of the stock or other equity interests the holders of which
are generally entitled to vote for the election of the board of
directors or other governing body of such corporation or other
legal entity.
For purposes of this Article III, and Sections 6.04 and 7.01
hereof, the term "knowledge" means the actual knowledge of the
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following individuals (collectively, the "Target Knowledge
Persons"): (1) the current Target Shareholders, (2) each person
who, in accordance with Section 7.02(e)(iii) hereof, has executed
an Employment Agreement as of the date of this Agreement, and (3)
to the extent not previously described, the directors, officers
and shareholders of the Target Companies and the Canadian
Ancillary Service Entities who were in or acquired such director,
officer or shareholder status at any time within the six (6)
month period immediately preceding the date of this Agreement and
ending at the Effective Time.
Acquiror hereby agrees that to the extent any representation
or warranty of a Target Company made hereunder is, to the actual
knowledge of any person listed on Schedule 3 to this Agreement
(the "Acquiror Knowledge Persons"), acquired prior to the
Effective Time, untrue or incorrect in any material respect, and
Acquiror does not elect to terminate this Agreement in accordance
with the provisions of Section 8.01(b) hereof, then such
representation or warranty shall be deemed to be amended as of
the Effective Time to the extent necessary to render it
consistent with the actual knowledge of such Acquiror Knowledge
Person. The Target Companies agree they shall have the sole
burden of proof to demonstrate the actual knowledge of an
Acquiror Knowledge Person, and further agree that such burden
shall include a showing that such actual knowledge was derived
prior to the Effective Time from any one or more of the documents
provided to Acquiror listed on Schedule 4 to this Agreement,
which Schedule 4 is, by this reference, incorporated herein and
made a part hereof.
Except to the extent provided in the preceding paragraph,
and except as set forth in the Target Company Disclosure Schedule
attached to this Agreement and by this reference made a part
hereof (the "Target Company Disclosure Schedule"), which Target
Company Disclosure Schedule shall identify exceptions to the
Target Companies' representations and warranties by specific
Section references, the Target Companies hereby represent and
warrant, jointly and severally, to Acquiror that:
SECTION 3.01. Organization and Qualification; Subsidiaries.
Each Target Company and its subsidiaries (if any), and each
Canadian Licensed Entity and its subsidiaries (if any), is a
corporation validly existing and in good standing under the Laws
of the jurisdiction of its incorporation or organization. Except
to the extent described in Section 3.01 of the Target Company
Disclosure Schedule, each Target Company, each Canadian Ancillary
Service Entity and, to the Target Companies' knowledge, each of
their respective employees, separately possesses all requisite
corporate or other power and authority to own, lease and operate
its properties and/or to carry on their business as it is now
being conducted, and is duly qualified and in good standing to do
business in each jurisdiction in which the nature of the business
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conducted by such person or the ownership or leasing of its
properties makes such qualification necessary, other than where
the failure to do so would not have a Target Company Adverse
Effect. A true and complete list of each Target Company's and
Canadian Licensed Entity's directly and indirectly owned
subsidiaries, together with the jurisdiction of incorporation or
organization of each such subsidiary and the percentage of each
subsidiary's outstanding capital stock or other equity interests
owned by such Target Company, Canadian Licensed Entity or another
subsidiary thereof, is set forth in Section 3.01 of the Target
Company Disclosure Schedule.
SECTION 3.02. Articles of Incorporation; By-Laws. The U.S.
Company has furnished to Acquiror complete and correct copies of
its Articles of Incorporation and By-Laws, as amended or
restated, together with those of each of its subsidiaries. The
Canada Company, Marusa Financial and Nerok have each furnished to
Acquiror complete and correct copies of their respective Articles
of Incorporation and By-Laws, as amended or restated, together
with those of each of their respective subsidiaries. Except as
set forth in Section 3.02 of the Target Company Disclosure
Schedule, neither Target Company nor any subsidiary thereof, nor
any Canadian Ancillary Service Entity nor any subsidiary thereof,
is in violation of any provision of its Articles of Incorporation
or ByLaws.
SECTION 3.03. Capitalization of the Target Companies and
the Canadian Ancillary Service Entities.
(a) As of the date of this Agreement, the authorized
capital stock of the U.S. Company consists solely of one
thousand (1,000) shares of U.S. Company Common Stock, no par
value, of which one hundred (100) shares are issued and
outstanding, and as of the date hereof there are not, and at
the Effective Time there shall not be, any Other U.S.
Company Securities authorized by the U.S. Company.
(b) As of the date of this Agreement, the authorized
capital stock of the Canada Company consists solely of (i)
an unlimited number of shares of (A) Class A Voting Shares,
of which two (2) Class A Voting Shares are issued and
outstanding, (B) Class B Non-Voting Shares, and (C) Classes
A through D, inclusive, of Preferred Stock, and (ii) as of
the date hereof there are not, and at the Effective Time
there will not be, any other Canada Company Securities
authorized by the Canada Company.
(c) As of the date of this Agreement, the authorized
capital stock of Marusa Financial consists solely of (i) an
unlimited number of Class A Common Non-Voting Shares, of
which two (2) Class A Common Non-Voting Shares are issued
and outstanding, (ii) an unlimited number of Class B Common
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Voting Shares, of which one hundred (100) Class B Common
Voting Shares are issued and outstanding, and (iii) the
other securities set forth in Section 3.03(c) of the Target
Company Disclosure Schedule.
(d) As of the date of this Agreement, the authorized
capital stock of Nerok consists solely of (i) an unlimited
number of shares of (A) Class A Voting Shares, of which one
hundred (100) Class A Voting Shares are issued and
outstanding, (B) Class B Non-Voting Shares, and (C) Classes
A through D, inclusive, of Preferred Stock, and (ii) as of
the date hereof there are not, and at the Effective Time
they will not be, any other Canada Company Securities
authorized by Nerok.
(e) Except as described in Section 3.03(e) of the
Target Company Disclosure Schedule no shares of U.S. Company
Common Stock or Canada Company Common Stock are held in
treasury or are reserved for any other purpose.
(f) All outstanding shares of U.S. Company Common
Stock and Canada Company Common Stock are duly authorized,
validly issued, fully paid and non-assessable, and not
subject to preemptive rights created by statute, a Target
Company's Articles of Incorporation or By-Laws, or any
agreement as to which any Target Company is a party or by
which it is bound. Each of the outstanding shares of
capital stock of, or other equity interests in, each Target
Company's subsidiaries is duly authorized, validly issued,
fully paid and non-assessable, and such shares or other
equity interests are owned by such Target Company, free and
clear of all security interests, liens, claims, pledges,
agreements, limitations on such Target Company's voting
rights, charges or other encumbrances of any nature
whatsoever, except for an option in favor of Merchant
Partners, Limited Partnership, a Delaware limited
partnership ("MPLP"), pursuant to the terms and conditions
of an October, 1993 agreement between certain Target
Shareholders and MPLP, which was re-memorialized in a letter
agreement dated November 9, 1995 (a true and correct copy of
which is attached to this Agreement as Exhibit "F" and by
this reference made a part hereof; hereafter, the "MPLP
Option"). From October, 1993, through and including the
date of this Agreement, the MPLP Option was, and at all
times hereafter, through and including the period expiring
at the Effective Time, the MPLP Option shall be, valid and
binding on MPLP and the Target Shareholders who are
signatory thereto, and there is no default (or event which,
with the giving of notice or lapse of time, or both, would
be a default) by any party thereto in the timely performance
of any obligation to be performed or paid thereunder. The
MPLP Option provides MPLP with no rights, and MPLP does not
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otherwise possess any right or claim, to acquire any shares
of capital stock or assets of Marusa Financial or Nerok.
(g) Except as disclosed in Section 3.03(g) of the
Target Company Disclosure Schedule, there are no U.S.
Company Options to which the U.S. Company or any of its
subsidiaries is a party of any character relating to the
issued or unissued capital stock of, or other equity
interests in, the U.S. Company or any of its subsidiaries or
obligating the U.S. Company or any of its subsidiaries to
grant, issue, sell or register for sale any shares of the
capital stock of, or other equity interests in, the U.S.
Company or any subsidiaries thereof, whether by sale, lease,
license or otherwise. As of the date of this Agreement
there are no, and as of the Effective Time there will be no,
obligations, contingent or otherwise, of the U.S. Company or
any of its subsidiaries to (x) repurchase, redeem or
otherwise acquire any shares of U.S. Company Common Stock or
the capital stock of, or other equity interests in, any
subsidiary of the U.S. Company, or (y) except for (i)
guarantees of obligations of subsidiaries in the ordinary
course of business, and (ii) advances and loans to providers
in the ordinary course of business and in amounts not
exceeding five thousand dollars ($5,000) in the aggregate to
any one such provider, provide funds to, or make any
investment in (in the form of a loan, capital contribution
or otherwise), or provide any guarantee with respect to the
obligations of, any subsidiary of the U.S. Company, or any
other person.
(h) Except as disclosed in Section 3.03(h) of the
Target Company Disclosure Schedule, there are no Canada
Company Options to which the Canada Company or any of its
subsidiaries is a party of any character relating to the
issued or unissued capital stock of, or other equity
interests in, the Canada Company or any of its subsidiaries
or obligating the Canada Company or any of its subsidiaries
to grant, issue, sell or register for sale any shares of the
capital stock of, or other equity interests in, the Canada
Company or any subsidiaries thereof, whether by sale, lease,
license or otherwise. As of the date of this Agreement
there are no, and as of the Effective Time there will be no,
obligations, contingent or otherwise, of the Canada Company
or any of its subsidiaries to (x) repurchase, redeem or
otherwise acquire any shares of Canada Company Common Stock
or the capital stock of, or other equity interests in, any
subsidiary of the Canada Company, or (y) except for (i)
guarantees of obligations of subsidiaries in the ordinary
course of business, and (ii) advances and loans to providers
in the ordinary course of business and in amounts not
exceeding five thousand dollars ($5,000) in the aggregate to
any one provider at any one time, provide funds to, or make
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any investment in (in the form of a loan, capital
contribution or otherwise), or provide any guarantee with
respect to the obligations of, any subsidiary of the Canada
Company, or any other person.
(i) The Target Shareholders hold of record and own the
entire beneficial interest in all of the outstanding U.S.
Company Common Stock and Canada Company Common Stock. Each
Target Shareholder's legal and beneficial stockholdings (by
number of shares and percentage) in the Target Companies is
listed opposite each such person's name and address on
Schedule 1 attached to this Agreement.
(j) The shareholders of Marusa Financial and Nerok
(the "MFN Shareholders") are listed on Schedule 1(a) to this
Agreement. Each such MFN Shareholder's legal and beneficial
stockholdings (by number of shares and percentage) in the
Canadian Ancillary Service Entities is listed opposite each
such person's name and address on said Schedule 1(a).
(k) With the exception of the MPLP Option, each Target
Shareholder owns his shares of Target Company Common Stock,
and such Target Company Common Stock is, on the date of this
Agreement, and will be, at the Effective Time, free and
clear of all liabilities, liens, charges, security
interests, adverse claims, pledges, restrictions,
encumbrances and demands whatsoever. No other person has
any right, title or interest in or to such shares of Target
Company Common Stock, whether by reason of any purchase
agreement, Law, statute, rule, option, assignment, contract
(written or oral) or otherwise. No Target Shareholder is a
party to any voting trust, proxy or other agreement or
understanding with respect to the voting of such shares of
Target Company Common Stock. The shares of Target Company
Common Stock recited herein as being owned by the Target
Shareholders constitute all of the issued and outstanding
shares of capital stock of the Target Companies. Except for
the MPLP Option, no Target Shareholder has entered into,
issued or given, or agreed to enter into, issue or give, any
person other than Acquiror or its subsidiaries an option,
warrant, right, put, call, commitment or agreement relating
to, or any security convertible into, any shares of capital
stock of the Target Companies or any such convertible
security and, except as set forth in Section 3.03(k) to the
Target Company Disclosure Schedule, no Target Shareholder is
a party to any agreement (written or oral) respecting the
issue, purchase, sale or transfer of any of the same.
(l) Each MFN Shareholder owns his shares of capital
stock in Marusa Financial or Nerok, as the case may be, and
such shares of stock are, on the date of this Agreement, and
will be, at the Effective Time, free and clear of all
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liabilities, liens, charges, security interests, adverse
claims, pledges, restrictions, encumbrances and demands
whatsoever. No other person has any right, title or
interest in or to shares of capital stock of Marusa
Financial or Nerok, whether by reason of any purchase
agreement, Law, statute, rule, option, assignment, contract
(written or oral) or otherwise. No MFN Shareholder is a
party to any voting trust, proxy or other agreement or
understanding with respect to the voting of such shares of
Marusa Financial and/or Nerok capital stock. The shares of
Marusa Financial and Nerok capital stock recited herein as
being owned by the MFN Shareholders constitute all of the
issued and outstanding shares of capital stock of the
Canadian Ancillary Service Entities. No MFN Shareholder has
entered into, issued or given, or agreed to enter into,
issue or give, any person other than Acquiror or its
subsidiaries an option, warrant, right, put, call,
commitment or agreement relating to, or any security
convertible into, any shares of capital stock or assets of
the Canadian Ancillary Service Entities and, except as set
forth in Section 3.03(l) to the Target Company Disclosure
Schedule, no MFN Shareholder is a party to any agreement
(written or oral) respecting the issue, purchase, sale or
transfer of any of the same.
(m) As used in this Agreement, the term "person" means
any individual, corporation, partnership, association,
trust, unincorporated organization, other entity or group.
SECTION 3.04. Authority. The Target Companies and the
Canadian Ancillary Service Entities have the requisite corporate
power and authority to execute and deliver this Agreement, to
perform their obligations under this Agreement and to consummate
the transactions contemplated by this Agreement. The execution
and delivery of this Agreement by each Target Company and
Canadian Ancillary Service Entity and the consummation by such
Target Company or Canadian Ancillary Service Entity of the
transactions contemplated by this Agreement have been duly
authorized by all necessary corporate action and no other
corporate proceedings on the part of any Target Company or
Canadian Ancillary Service Entity are necessary to authorize this
Agreement or to consummate the transactions contemplated by this
Agreement. This Agreement has been duly executed and delivered
by the Target Companies, the Target Shareholders and the Canadian
Ancillary Service Entities, and assuming the due authorization,
execution and deliver by Acquiror, Acquiror Sub-1 and Acquiror
Sub-2, constitutes the legal, valid and binding obligation of
each Target Company, Target Shareholder and Canadian Ancillary
Service Entity.
SECTION 3.05. No Conflicts; Required Filings and Consents.
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(a) The execution and delivery of this Agreement by
the U.S. Company does not, and the performance of this
Agreement by the U.S. Company shall not (i) conflict with or
violate its Articles of Incorporation or By-Laws or
equivalent organizational documents, or those of any of its
subsidiaries, (ii) subject to (x) obtaining the consents,
authorizations, approvals and permits of, and making filings
with or notifications to, any governmental or regulatory
authority, domestic or foreign (collectively, "Governmental
Entities"), pursuant to the applicable requirements of U.S.
and Canadian federal, state, provincial and local rules,
Laws and regulations, including but not limited to the
Securities Act, the Securities Exchange Act of 1934, as
amended, and the rules and regulations thereunder (the
"Exchange Act"), state securities or blue sky laws and the
rules and regulations thereunder ("Blue Sky Laws"), the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, and the rules and regulations thereunder (the "HSR
Act"), and the filing and recordation of appropriate merger
documents as required by Illinois Law, and (y) obtaining the
consents, approvals, authorizations or permits described in
Section 3.05(a) of the Target Company Disclosure Schedule,
conflict with or violate any Laws applicable to the U.S.
Company or any of its subsidiaries or by which any of their
respective properties is bound or affected, or (iii) result
in any breach of or constitute a default (or an event that
with notice or lapse of time or both would become a default)
under, or give to others any rights of termination,
amendment, acceleration or cancellation of, or result in the
creation of a lien or encumbrance on any of the properties
or assets of the U.S. Company or any of its subsidiaries
pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other
instrument or obligation to which the U.S. Company or any of
its subsidiaries is a party or by which the U.S. Company or
any of its subsidiaries or any of their respective
properties is bound or affected, except for any such
conflicts or violations described in clause (ii), or
breaches or defaults described in clause (iii) that would
not have a Target Company Adverse Effect.
(b) The execution and delivery of this Agreement by
the Canada Company, Marusa Financial and Nerok does not, and
the performance of this Agreement by the Canada Company,
Marusa Financial and Nerok shall not (i) conflict with or
violate their respective Articles or By-Laws or equivalent
organizational documents, or those of any of their
subsidiaries, (ii) subject to (x) obtaining the consents,
authorizations, approvals and permits of, and making filings
with or notifications to, any Governmental Entities pursuant
to the applicable requirements of U.S. and Canadian federal,
state, provincial and local rules, Laws and regulations,
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including but not limited to the HSR Act, the Competition
Act (Canada), and the rules and regulations thereunder (the
"Competition Act"), the Investment Canada Act, and the rules
and regulations thereunder (the "Investment Act"), the
Income Tax Act (Canada), as amended, and the rules and
regulations thereunder (the "ITA"), and the filing and
recordation of appropriate amalgamation documents (with
respect to the Canada Company) as required by applicable
Law, and (y) obtaining the consents, approvals,
authorizations or permits described in Section 3.05(a) of
the Target Company Disclosure Schedule, conflict with or
violate any Laws applicable to the Canada Company, Marusa
Financial, Nerok or any of their subsidiaries or by which
any of their respective properties is bound or affected, or
(iii) result in any breach of or constitute a default (or an
event that with notice or lapse of time or both would become
a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or
result in the creation of a lien or encumbrance on any of
the properties or assets of the Canada Company, Marusa
Financial, Nerok or any of their subsidiaries pursuant to,
any note, bond, mortgage, indenture, contract, agreement,
lease, license, permit, franchise or other instrument or
obligation to which the Canada Company, Marusa Financial,
Nerok or any of their subsidiaries is a party or by which
the Canada Company, Marusa Financial, Nerok or any of their
subsidiaries or any of their respective properties is bound
or affected, except for any such conflicts or violations
described in clause (ii), or breaches or defaults described
in clause (iii) that would not have a Target Company Adverse
Effect.
(c) The execution and delivery of this Agreement by
the Target Companies and the Canadian Ancillary Service
Entities does not, and the performance of this Agreement by
the Target Companies and the Canadian Ancillary Service
Entities shall not, individually or collectively, require
any consent, approval, authorization or permit of, or filing
with or notification to, any Governmental Entities or other
persons, except for applicable requirements, if any, of the
Securities Act, Exchange Act, Blue Sky Laws, the HSR Act,
the Competition Act, the Investment Act, the ITA, the
consents, approvals, authorizations or permits described in
Section 3.05(a) of the Target Company Disclosure Schedule,
and the filing and recordation of appropriate merger or
amalgamation documents as required by Illinois Law and
Canada Law, as applicable.
SECTION 3.06. Permits; Compliance. Each Target Company and
its subsidiaries, and each Canadian Ancillary Service Entity and
its subsidiaries, is in possession of all franchises, grants,
authorizations, licenses, permits, easements, variances,
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exemptions, consents, certificates, approvals and orders
necessary for such Target Company, Canadian Ancillary Service
Entity and their subsidiaries to own, lease and operate their
respective properties or to carry on their respective businesses
as they are now being conducted (each, a "Company Permit"), other
than where the failure to so possess a Company Permit would not
have a Target Company Adverse Effect, and no suspension,
revocation or cancellation of any such Company Permit is pending
or, to the knowledge of any Target Company, threatened. No
Target Company, Canadian Ancillary Service Entity or any
subsidiary of any of the foregoing is operating in conflict with,
or is in default or violation of (i) any Canadian or U.S.
federal, state, provincial or local rule, Law or regulation
applicable to such person or by which its properties are bound or
affected, including without limitation, the Telemarketing and
Consumer Fraud and Abuse Prevention Act of 1994, as amended, and
the rules and regulations thereunder (the "Telemarketing Act"),
other Canadian and U.S. federal, state, provincial and local
telemarketing rules, Laws and regulations ("Other Telemarketing
Laws"), and rules, Laws and regulations governing the sale of
insurance or other financial products, or the performance of
insurance agency or other financial services ("Financial Laws"),
or (ii) any Company Permit, except for any such conflicts,
defaults or violations which would not have a Target Company
Adverse Effect. Each Company Permit material to the operations
of a Target Company or Canadian Ancillary Service Entity is
listed in Section 3.06 to the Target Company Disclosure Schedule.
SECTION 3.07. Governmental Reports; Financial Statements.
(a) Since December 31, 1992, the Target Companies, the
Canadian Ancillary Service Entities and their respective
subsidiaries have filed all forms, reports, statements and
other documents required to be filed with any applicable
Governmental Entities, except where failure to file any such
forms, reports, statements and other documents would not
have a Target Company Adverse Effect (all such forms,
reports, statements and other documents referred to in this
Subsection (a) are, collectively, "Company Reports"). The
Company Reports, including all Company Reports filed after
the date of this Agreement and prior to the Effective Time
(i) were or will be prepared in all material respects in
accordance with the requirements of applicable Laws, and
(ii) did not, at the times they were filed, or will not at
the time they are filed, contain any untrue statement of a
material fact or omit to state a material fact required to
be stated therein or necessary in order to make the
statements therein, in light of the circumstances under
which they were made, not materially misleading.
(b) Except as disclosed in Section 3.07(b) of the
Target Company Disclosure Schedule, the audited combined
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income statements of the Target Companies as at and for the
periods ended December 31, 1993, 1994 and 1995, and the
audited combined balance sheets of the Target Companies for
the years ended December 31, 1994 and 1995 (including, in
each case, related notes) (collectively, the "Target Company
Financial Statements") delivered to Acquiror prior to the
date of this Agreement (i) have been prepared from, and are
in agreement in all material respects with, the books,
records and accounts
(including consolidating workpapers and supporting entries),
of the Target Companies and their subsidiaries, (ii) have
been prepared in all material respects in substantial
accordance with the published rules and regulations of the
Financial Accounting Standards Board and United States
generally accepted accounting principles and standards
("GAAP") applied on a consistent basis throughout the
periods involved, (iii) fairly present in all material
respects the financial position of the Target Companies and
their subsidiaries on a combined basis as of the dates
thereof, and (iv) fairly present, in all material respects,
the combined results of operations of the Target Companies
for the periods indicated. All assets, properties,
liabilities, debts, results of operations and cash flows of
the Canadian Ancillary Service Entities have previously
been, and shall continue to be, fully reported in the Target
Company Financial Statements.
(c) Except as and to the extent set forth on the
Target Company Financial Statements, including all notes
thereto, the Target Companies, the Canadian Ancillary
Service Entities and their respective subsidiaries have no
liabilities or obligations of any nature whatsoever (whether
accrued, absolute, contingent or otherwise) that would be
required to be reflected on, or reserved against in, a
balance sheet of such Target Company (or in the notes
thereto), prepared in accordance with GAAP applied on a
consistent basis, except for liabilities or obligations
described in Section 3.07(c) of the Target Company
Disclosure Schedule, or incurred in the ordinary course of
business since December 31, 1995, that would not have a
Target Company Adverse Effect.
SECTION 3.08. Absence of Certain Changes or Events. Except
as disclosed in Section 3.08 of the Target Company Disclosure
Schedule, (i) since December 31, 1995, there has not been, and
the Target Companies have no knowledge of any facts that are
reasonably likely to result in, any event or events causing a
Target Company Adverse Effect, and (ii) from December 31, 1995,
to the date of this Agreement, there has not been any change by a
Target Company, Canadian Ancillary Service Entity or any
subsidiary in its accounting methods, principles or practices,
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except any such change after the date of this Agreement mandated
by a change in GAAP.
SECTION 3.09. Absence of Litigation.
(a) Section 3.09(a) of the Target Company Disclosure
Schedule lists and briefly describes all claims, actions,
suits, litigations, proceedings, arbitrations or
investigations of any kind affecting each Target Company,
Canadian Ancillary Service Entity and their respective
subsidiaries, at law or in equity (including actions or
proceedings seeking injunctive relief), which are pending
or, to the knowledge of the Target Companies, threatened.
Except as noted in Section 3.09(a) of the Target Company
Disclosure Schedule, none of the matters listed therein may
reasonably be expected to have a Target Company Adverse
Effect. There is no action pending seeking to enjoin or
restrain the Unitary Transaction or any of the transactions
contemplated by this Agreement.
(b) Except as set forth in Section 3.09(b) of the
Target Company Disclosure Schedule, neither Target Company,
Canadian Ancillary Service Entity nor any of their
respective subsidiaries is subject to any continuing order
of, consent decree, settlement agreement or other similar
written agreement with, or, to the knowledge of such Target
Company, continuing investigation by, any Governmental
Entity, or any judgment, order, writ, injunction, decree or
award of any Governmental Entity or arbitrator, including,
without limitation, cease-and-desist or other orders.
SECTION 3.10. Contracts; No Default.
(a) Section 3.10(a) of the Target Company Disclosure
Schedule sets forth as of the date of this Agreement a
listing of each contract or agreement of each Target
Company, Canadian Ancillary Service Entity or their
respective subsidiaries in effect as of the date of this
Agreement and:
(i) concerning a partnership, joint venture or other
business venture involving the sharing of profits with
another person;
(ii) relating to the employment or compensation of any
employee, officer, director or agent, with respect to which
there is or may be an obligation by a Target Company or
Canadian Ancillary Service Entity to provide current or
deferred compensation in excess of U.S. fifty thousand
dollars (U.S. $50,000) per year for such person, and which
is not terminable by such Target Company or Canadian
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Ancillary Service Entity without premium or penalty on less
than twenty (20) days prior notice;
(iii) under which such Target Company's, Canadian
Ancillary Service Entity's or subsidiary's unfulfilled
obligations exceed U.S. fifty thousand dollars (U.S.$50,000)
in value;
(iv) under which any Target Company, Canadian
Ancillary Service Entity or subsidiary has obtained access
to or through local or long-distance telephone carriers or
other Canada and U.S. federally-regulated entities;
(v) relating to any customer of a Target Company
listed on Section 3.26 to the Target Company Disclosure
Schedule;
(vi) relating to telephone or telemarketing equipment
or other personal property purchases involving an
expenditure (or series thereof) of U.S. fifty thousand
dollars (U.S.$50,000) or greater, or to the development of
computer software programs or applications involving
expenditures of U.S. twenty-five thousand dollars
(U.S.$25,000) or greater (but excluding annual maintenance
expenses arising after the first twelve (12) months
following acceptance thereof);
(vii) relating to bonus and incentive plans or similar
plans and arrangements providing for the payment of bonuses,
commissions, incentive compensation or similar result-based
salary or other remuneration to employees and other service
providers to the Target Companies;
(viii) relating to borrowed money, guarantees or
undertakings to answer for the debts of another, or
otherwise encumbering title to any asset, excepting purchase
money obligations relating to personal property which do not
exceed U.S. fifty thousand dollars (U.S.$50,000) in any one
case;
(ix) concerning a conditional sales contract or lease
of personal property involving an annual expenditure (or
series thereof) of U.S. twenty-five thousand (U.S.$25,000)
or greater;
(x) concerning a lease or agreement relating in any
manner to real estate; and
(xi) relating to royalty or licensing contracts, or
contracts requiring similar payments (including software
license agreements) involving or which may reasonably in the
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future involve an amount in excess of U.S. ten thousand
dollars (U.S.$10,000) annually.
(b) Section 3.10(b) of the Target Company Disclosure
Schedule lists each contract or agreement to which any
Target Company, Canadian Ancillary Service Entity or any of
their respective subsidiaries, directors, affiliates,
shareholders, employees or officers is a party limiting the
right of such Target Company, Canadian Ancillary Service
Entity or any such person to engage in, or to compete with
any person in, any business, including each contract or
agreement containing exclusivity provisions restricting the
geographical area in which, or the method by which, any
business may be conducted by such Target Company, Canadian
Ancillary Service Entity or any such person prior to or
after the Effective Time, or by the Acquiror or any of its
subsidiaries or affiliates after the Effective Time. For
the purpose of this Agreement, the term (i) "affiliate", in
addition to the meaning given by the Commission, means any
person that directly or indirectly, through one or more
intermediaries, controls, is controlled by, or is under
common control with, the first mentioned person, (ii)
"control" (including the terms "controlled by" and "under
common control with") means the possession, directly or
indirectly or as trustee or executor, of the power to direct
or cause the direction of the management or policies of a
person, whether through the ownership of stock or as trustee
or executor, by contract or credit arrangement or otherwise,
and (iii) "Company Contracts" means the contracts and
agreements listed in Sections 3.10(a) and 3.10(b) of the
Target Company Disclosure Schedule.
(c) Each Company Contract, each other contract or
agreement which would have been required to be disclosed in
Section 3.10(a) of the Target Company Disclosure Schedule
had such contract or agreement been entered into prior to
the date of this Agreement, and each contract or agreement
listed in Section 3.10(b) of the Target Company Disclosure
Schedule is, on the date hereof, and shall be at the
Effective Time, in full force and effect and valid and
binding as to the contracting Target Company or Canadian
Ancillary Service Entity and, to the knowledge of the Target
Companies, the other party or parties signatory thereto.
With respect to each such Company Contract, there is no
default (or any event known to a Target Company which, with
the giving of notice or lapse of time or both, would be a
default) by a Target Company or Canadian Ancillary Service
Entity or, to the knowledge of the Target Companies, any
other party or parties thereto, in the timely performance of
any obligation to be performed or amount to be paid
thereunder, which default would have a Target Company
Adverse Effect.
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SECTION 3.11. Employee Benefit Plans; Labor Matters.
(a) Section 3.11(a) of the Target Company Disclosure
Schedule sets forth all pension, retirement, savings,
disability, medical, dental, health, life (including any
individual life insurance policy as to which a Target
Company is owner, beneficiary or both of such policy), death
benefit, group insurance, profit sharing, deferred
compensation, stock option, bonus, incentive, vacation pay,
severance pay, "cafeteria" or "flexible benefit" plans, or
other employee benefit plans, trusts, arrangements,
contracts, agreements, policies or commitments (including
without limitation, any employee pension benefit plan as
defined in Section 3(2) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), any pension plan
as defined in Section 1 of the Pension Benefits Act
(Quebec), as amended ("QBA"), and any employee welfare
benefit plan as defined in Section 3(1) of ERISA), under
which current or former employees of a Target Company,
Canadian Ancillary Service Entity or their respective
subsidiaries or "Plan Affiliates" (as defined in Section
3.11(b) below) are entitled to participate by reason of
their employment with such Target Company, Canadian
Ancillary Service Entity, subsidiary or its Plan Affiliates,
whether or not any of the foregoing is funded, and whether
insured or self-funded, (i) to which a Target Company,
Canadian Ancillary Service Entity, subsidiary or Plan
Affiliate is a party or a sponsor or a fiduciary thereof or
by which such Target Company, Canadian Ancillary Service
Entity, subsidiary or Plan Affiliate (or any of their
rights, properties or assets) is bound, or (ii) with respect
to which such Target Company, Canadian Ancillary Service
Entity, subsidiary or Plan Affiliate has made any payments,
contributions or commitments, or may otherwise have any
liability (whether or not such plan, trust, arrangement,
contract, agreement, policy or commitment is still in effect
or frozen as to benefits or assets) (collectively, the
"Employee Benefit Plans").
(b) For purposes of this Agreement, the term "Plan
Affiliate" shall mean any trade or business (whether or not
incorporated) that is part of the same controlled group, or
under common control with, or part of an affiliated service
group that includes, a Target Company or Canadian Ancillary
Service Entity within the meaning of Section 414(b), (c),
(m) or (o) of the Code, or within the intendment of the QBA.
(c) As used in this Agreement, "Pension Plan" means
any Employee Benefit Plan which is an employee pension
benefit plan as defined in ERISA or the QBA, or is otherwise
a pension, savings or retirement plan or a plan of deferred
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compensation, and the term "Welfare Plan" means any Employee
Benefit Plan which is not a Pension Plan.
(d) With respect to the Employee Benefit Plans:
(i) There are no Employee Benefit Plans which are
multiemployer plans as defined in Section 3(37) of ERISA or
Section 1 of the QBA, and neither the Target Companies, the
Canadian Ancillary Service Entities nor any of their
respective subsidiaries or ERISA Affiliates has incurred or
may reasonably be expected to incur, any direct or indirect
liability under or by operation of Title IV of ERISA or the
QBA (including, without limitation, Sections 22, 75(1)(b),
86, 87, 88, 109 or 110 of the QBA).
(ii) There are no Employee Benefit Plans which promise
or provide health or life benefits to retirees or former
employees of a Target Company, Canadian Ancillary Service
Entity, subsidiary or Plan Affiliate other than as required
by Title I of ERISA or Section 4980 of the Code, or
otherwise as identified in Section 3.11(d) of the Target
Company Disclosure Schedule.
(iii) Except as disclosed in Section 3.11(d) of the
Target Company Disclosure Schedule, each Employee Benefit
Plan has at all times been operated and administered in
material compliance with the applicable requirements of
ERISA, the Code, the QBA, the ITA and any other applicable
law (including regulations and rulings thereunder), and its
terms.
(iv) Each Pension Plan identified in Section 3.11(a)
of the Target Company Disclosure Schedule has (i) received a
favorable determination letter from the Internal Revenue
Service ("IRS") stating that such Plan meets all the
requirements of the Code and that any trust or trusts
associated with the plan are tax exempt under Section 501(a)
of the Code, or (ii) been accepted for registration under
the ITA. Any trust or trusts associated with such Pension
Plans are tax exempt under Section 501(a) of the Code or the
relevant provisions of the ITA. To the knowledge of the
Target Companies, there is no reason why the tax-qualified
or registered status of any such Pension Plan should be
revoked, whether retroactively or prospectively, by any
Governmental Entity pursuant to applicable rules, Laws or
regulations. All amendments to the Pension Plans which were
required to be made through the date hereof and the
Effective Time under Section 401(a) of the Code or the
applicable provisions of the ITA subsequent to the issuance
of each such Plan's determination letter or registration
have been made, including all amendments required to be made
by each respective date by the Tax Reform Act of 1986, the
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ITA, the Canadian federal budget announced in March, 1996,
and any other rules, Laws or regulations legislation
affecting such Employee Benefit Plans. Except as set forth
in Section 3.11(d) of the Target Company Disclosure
Schedule, there are no amendments which are required to be
made to such Pension Plans which adversely affect, or may
result in the discontinuance of, the continuing tax-
qualification or registered status of such Pension Plans
under the Code or the ITA.
(v) To the knowledge of the Target Companies, no
actual or threatened disputes, lawsuits, claims (other than
routine claims for benefits), investigations, audits or
complaints to, or by, any person or Governmental Entity have
been filed or are pending with respect to any Employee
Benefit Plan or its sponsor, or such sponsor's subsidiaries
or Plan Affiliates, in connection with any Employee Benefit
Plan, or the fiduciaries responsible for such Employee
Benefit Plan, and to the knowledge of the Target Companies,
no state of facts or conditions exist which reasonably could
be expected to subject such Target Company, Canadian
Ancillary Service Entity, subsidiary or Plan Affiliate to
any material liability (other than routine claims for
benefits) in accordance with the terms of such Employee
Pension Plan or pursuant to applicable rules, Laws or
regulations.
(vi) Except as disclosed in Section 3.11(d) of the
Target Company Disclosure Schedule, the following clauses
are true with respect to each Employee Benefit Plan:
(A) All material filings required by ERISA, the
Code or the ITA, or any other applicable rules, Laws or
regulations, have been timely filed and all material
notices and disclosures to Plan participants required
by same have been timely provided.
(B) The Target Companies, the Canadian Ancillary
Service Entities and their respective subsidiaries and
Plan Affiliates have not made, nor have they committed
to make, whether in writing or orally, any
representation, payment, contribution or award to or
under any Employee Benefit Plan (other than as required
by its terms, the Code, ERISA, the ITA or the QBA).
(C) All contributions and payments made or
accrued with respect to each Employee Benefit Plan
required to be disclosed in Section 3.11(a) of the
Target Company Disclosure Schedule are deductible in
full under the Code or the ITA, as applicable. All
contributions, premiums or payments required to be made
with respect to each such Employee Benefit Plan have
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been or will hereafter be made on or before their due
date(s).
(D) Except as disclosed in Section 3.11(e) of the
Target Company Disclosure Schedule, with respect to
each Employee Benefit Plan, the Target Companies have
delivered to Acquiror true and complete copies of the
following documents to the extent in each case that
such documents exist or are required to be preserved
under applicable domestic or foreign Laws:
(1) plan documents, subsequent plan
amendments, and any and all other documents that
establish or describe the existence of the plan,
trust, arrangement, contract, policy or
commitment;
(2) summary plan descriptions and summaries
of material amendments and modifications;
(3) the most recent tax-qualified
determination letters received from, or
applications pending with, the IRS with respect to
Pension Plans;
(4) the most recent letters received from
the Department of National Revenue and the Pension
Commission of Quebec relating to the status of the
Pension Plans adopted by the Canada Company, and a
copy of the most recent letter of confirmation of
registration for such Plans pursuant to the ITA
and the QBA;
(5) the three most recent annual information
returns, including related schedules and audited
financial statements and opinions of independent
certified public accountants, for each Employee
Benefit Plan filed (i) on IRS Form 5500 for
Employee Benefit Plans adopted by the U.S.
Company, and (ii) on such forms prescribed under
the QBA for Employee Benefit Plans adopted by the
Canada Company; and
(6) all related trust agreements, insurance
contracts or other funding agreements that imple-
ment each such Employee Benefit Plan.
(vii) At no time have the Target Companies adopted any
Pension Plan which is or could become subject to Title IV of
ERISA, the funding standards of Section 402 of the Code, or
which contain defined benefit provisions within the meaning
of Section 147.1(1) of the ITA. The Target Companies have
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not, and no subsidiaries or Plan Affiliates thereof have,
incurred any liability to, or adopted any Employee Benefit
Plan or other arrangement which may expose it to liability
of any nature whatsoever, to (i) the Pension Benefit
Guarantee Corporation under Title IV or Section 502 of
ERISA, (ii) the IRS under Chapter 43 of the Code, or (iii)
the Department of National Revenue or the Pension Commission
of Quebec under the ITA or other Canadian Laws;
(viii) With respect to each Employee Benefit Plan,
there has not occurred, and no person or entity is
contractually bound to enter into, any nonexempt "prohibited
transaction" within the meaning of Section 4975 of the Code
or Section 406 of ERISA, or any other transaction contrary
to the provisions of the ITA, the QBA or the terms of such
Employee Benefit Plan.
(e) The Target Companies have complied in all material
respects with the provisions of ERISA, the Code and the ITA,
as applicable, with respect to each Pension Plan and Welfare
Plan heretofore adopted or currently in effect for the
benefit of its employees, together with employees of their
respective subsidiaries and Plan Affiliates. Each Employee
Benefit Plan described in Section 3.11(a) of the Target
Company Disclosure Schedule may, by its express terms, be
amended or terminated, in whole or in part, without penalty,
premium or unscheduled contributions or payments.
(f) No payment that is owed or may become due to any
director, officer, employee or agent of a Target Company is
subject to, and none shall result in the imposition of, tax
under Section 280(G) or 4999 of the Code, nor is any Target
Company obligated, orally or in writing, to "gross up" or
otherwise compensate any such person due to the imposition
of an excise or similar tax on payments made to such person
by the Target Company.
(g) The consummation of the transactions contemplated
by this Agreement will not accelerate or terminate, nor does
there exist any basis for the acceleration or termination
of, (i) benefits payable to employees of or other
compensated personnel at the Target Companies under any
Employee Benefit Plan, Welfare Plan, or other plan,
arrangement, contract or agreement, written or oral, (ii) a
participant's vesting credits or years of service under any
Pension Plan or Welfare Plan, or (iii) accruals with respect
to any other benefits or amounts reserved under any such
plan or arrangement.
(h) Section 3.11(e) of the Target Company Disclosure
Schedule lists, as of the date of this Agreement, all
collective bargaining or other labor union contracts to
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which either Target Company or any of its subsidiaries is a
party and which is applicable to persons employed by such
Target Company or subsidiary. There is no pending or, to
the knowledge of the Target Companies, threatened, labor
dispute, strike or work stoppage against a Target Company or
any of its subsidiaries which may materially interfere with
the business activities of such Target Company, its
revenues, profits, cash flows, or other results of
operations, or those of its subsidiaries. The Target
Companies have no knowledge of the commission of any unfair
labor practices in connection with the operation of their
respective businesses or the businesses of their respective
subsidiaries, and there is not now pending or, to the
knowledge of the Target Companies, threatened, any charge,
complaint or other proceeding against any Target Company or
its subsidiaries by the National Labor Relations Board, or
comparable Governmental Entities, both Canadian and U.S.,
state and provincial, and local.
(i) Section 3.11 (i) of the Target Company Disclosure
Schedule sets forth all written employment agreements,
employment contracts or understandings relating to
employment to which each Target Company or any of its
subsidiaries is a party, other than (i) the general
employment of employees pursuant to an at-will
understanding, and (ii) agreements, contracts or
understandings which may be terminated without penalty or
premium on no more than twenty (20) days' prior notice to
the employed person. To the knowledge of the Target
Companies, no employee of a Target Company or any of its
subsidiaries holding the position of manager or higher is
subject to any secrecy or noncompetition agreement or any
agreement or restriction of any kind with any third party
that in any material way would impede the ability of such
employee to carry out fully all activities of such employee
in furtherance of the business of such Target Company or any
of its subsidiaries.
SECTION 3.12. Taxes.
(a) (i) Except as disclosed in Section 3.12(a) of the
Target Company Disclosure Schedule, all material Returns (as
defined below) in respect of "Taxes" (as defined below)
required to be filed with respect to each Target Company,
Canadian Ancillary Service Entity and each of their
subsidiaries (including any Canada or U.S. federal, state,
provincial and local income tax returns and returns which
would include a Target Company, Canadian Ancillary Service
Entity or any subsidiary on a consolidated, combined or
unitary basis, returns required to be filed under the ITA
and under Part IX of the Excise Tax Act (Canada) (the "GST")
and reports and returns applicable to the S Corporation
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Election under Section 1361 et. seq. of the Code filed by
the U.S. Company and its stockholders (the "S Corporation
Election") have been timely filed (including extensions),
and no extension of time within which to file any such
Return has been requested, which Return has not since been
filed;
(ii) Except as disclosed in Section 3.12(b) of the
Target Company Disclosure Schedule, all Taxes shown on such
Returns or otherwise known by a Target Company to be due or
payable (whether by such Target Company, a Canadian
Ancillary Service Entity or, in the case of the S
Corporation Election, by a Target Shareholder, "Subchapter S
Returns") have been timely paid by the party to whom
chargeable and all payments of estimated Taxes required to
be made with respect to a Target Company, Canadian Ancillary
Service Entity or any of their respective subsidiaries,
affiliates or shareholders under the Code, the ITA, the GST,
or any comparable provision of Canada or U.S. federal,
state, provincial, local or foreign law have been made on
the basis of such Target Company's good faith estimate of
the required installments;
(iii) Except as disclosed in Section 3.12 of the
Target Company Disclosure Schedule, all such Returns (or, in
cases where amended Returns have been filed, such Returns as
amended) are believed by the Target Companies to be true,
correct and complete in all material respects;
(iv) No material adjustment relating to any of such
Returns has been proposed in writing by any Tax authority,
except proposed adjustments that have been resolved prior to
the date hereof;
(v) There are no outstanding subpoenas or requests for
information with respect to any Canada or U.S. federal,
state or provincial income tax Returns of a Target Company,
Canadian Ancillary Service Entity or subsidiary, or the
Taxes reflected on such Returns, or with respect to
Subchapter S Returns;
(vi) No Target Company or Canadian Ancillary Service
Entity has, in any taxable period for which the statute of
limitations on assessment remains open, acquired, either
directly or through any subsidiary, any corporation that
filed a consolidated federal income tax return with any
other corporation that was not also acquired, either
directly or through any subsidiary, by such Target Company
or Canadian Ancillary Service Entity, and no subsidiary or
corporation that was included in the filing of a Return with
a Target Company or Canadian Ancillary Service Entity on a
consolidated, combined, or unitary basis has left such
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corporation's consolidated, combined or unitary group in a
taxable year for which the statute of limitations on
assessment remains open;
(vii) No consent under Section 341(f) of the Code has
been filed with respect to a Target Company, Canadian
Ancillary Service Entity or their subsidiaries;
(viii) There are no Tax liens on any assets of a
Target Company, Canadian Ancillary Service Entity or their
subsidiaries other than liens for Taxes not yet due or
payable or being contested in good faith;
(ix) No Target Company, Canadian Ancillary Service
Entity or any of their subsidiaries has been at any time a
member of any partnership or joint venture or the holder of
a beneficial interest in any trust for any period for which
the statute of limitations for any Tax potentially
applicable as a result of such membership or holding has not
expired;
(x) No Target Company, Canadian Ancillary Service
Entity or any of their subsidiaries owes any material amount
pursuant to any Tax sharing agreement or arrangement, and no
such corporation will have any liability after the date
hereof in respect of any Tax sharing agreement or
arrangement executed or agreed to prior to the date hereof
with respect to any company that has been sold or disposed
prior to the date of this Agreement or the Effective Time,
whether any such agreement or arrangement is written or
unwritten;
(xi) All material Taxes required to be withheld,
collected or deposited by each Target Company, Canadian
Ancillary Service Entity and their respective subsidiaries
during any taxable period for which the statue of
limitations on an assessment remains open have been timely
withheld, collected or deposited and, to the extent
required, have been paid to the relevant Tax authority;
without limiting the generality of the foregoing, the Canada
Company and each Canadian Ancillary Service Entity has
withheld at source and remitted to the relevant Government
Entity all material amounts required to be withheld under
the ITA, and has accounted for and remitted all Tax that has
been collected and is remittable under the GST;
(xii) Neither Target Company nor any of its
subsidiaries was acquired in a qualified stock purchase
under Section 338(d)(3) of the Code and no elections under
Section 338(g) of the Code, protective carryover basis
elections, offset prohibition elections or other deemed or
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actual elections are applicable to such Target Company or
any of its subsidiaries;
(xiii) Neither Target Company nor any of its
subsidiaries is or has been subject to the provisions of
Section 1503(d) of the Code related to "dual consolidated
loss" rules;
(xiv) Neither Target Company nor any of its
subsidiaries is a party to any agreement, contract, or
arrangement that would result, separately or in the
aggregate, in the payment of any "excess parachute payments"
within the meaning of Section 280G of the Code by reason of
the Unitary Transaction; and
(xv) No property of any Target Company or any of its
subsidiaries is property that is or will be required to be
treated as being owned by another person under the
provisions of section 168(f)(8) of the Code (as in effect
prior to amendment by the Tax Reform Act of 1986); or is
"tax-exempt use property" within the meaning of Section 168
of the Code.
(b) (i) There are no outstanding waivers or
agreements extending the statute of limitations for any
period with respect to any Tax, other than real or personal
property Taxes to which a Target Company, Canadian Ancillary
Service Entity or their subsidiaries may be subject;
(ii) No Target Company, Canadian Ancillary Service
Entity or any of their subsidiaries is, as of the date of
this Agreement, under audit with respect to any taxable
period for any federal, state, provincial, local or foreign
Tax (including income and franchise Taxes but not including
real or personal property Taxes) by the Internal Revenue
Service, Revenue Canada or the applicable Tax authority in
each such other country, state, local, or foreign
jurisdiction.
(c) (i) Except as expressly provided in this
subdivision (i), no Target Company, Canadian Ancillary
Service Entity or any of their subsidiaries has any --
(A) Material income reportable for a period
ending after the Effective Time but attributable to an
installment sale occurring in or a change in accounting
method made for a period ending at or prior to the
Effective Time which resulted in a deferred reporting
of income from such transaction or from such change in
accounting method (other than a deferred intercompany
transaction), or
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(B) Material deferred gain or loss arising out of
any deferred intercompany transaction.
(ii) No written Tax sharing or allocation agreement
exists involving a Target Company or Canadian Ancillary
Service Entity.
(iii) Neither Target Company nor any of its
subsidiaries has any unused net operating loss, unused net
capital loss, unused credit, unused foreign tax credit, or
excess charitable contribution for federal or Canada income
tax purposes as of the Effective Time.
(d) For purposes of this Agreement, "Tax" or "Taxes"
shall mean any and all taxes, charges, fees, levies, and
other governmental assessments and impositions of any kind,
payable to any Canada or U.S. federal, state, provincial,
local or foreign governmental entity or taxing authority or
agency, including, without limitation,
(i) income, franchise, net worth, profits, gross
receipts, minimum, alternative minimum, estimated, ad
valorem, value added, sales, use, goods and services, real
or personal property, capital stock, license, payroll,
withholding, disability, employment, social security,
Medicare, workers compensation, unemployment compensation,
utility, severance, production, excise, stamp, occupation,
premiums, withholding taxes pursuant to the Tax Convention,
windfall profits, transfer and gains taxes;
(ii) customs duties, imposts, charges, levies or other
similar assessments of any kind; and
(iii) interest, penalties and additions to tax imposed
with respect thereto.
As used herein, the term "Returns" shall mean any and all
returns, reports, information returns and information statements
with respect to Taxes required to be filed with the IRS, Revenue
Canada or any U.S. State or Canada provincial equivalent, or any
other Governmental Entity or tax authority or agency, whether
domestic or foreign, including, without limitation, consolidated,
combined, unitary and Subchapter S Returns. For the purposes of
this Section 3.12, references to a Target Company or Canadian
Ancillary Service Entity and each of its subsidiaries shall
include former subsidiaries of such Target Company or Canadian
Ancillary Service Entity for periods during which any such
corporations were owned, directly or indirectly, by such
corporation.
SECTION 3.13. Intellectual Property Rights. Except as set
forth in Section 3.13 to the Target Company Disclosure Schedule,
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each Target Company and its subsidiaries owns or possesses the
right or license to use all material patents, trademarks,
servicemarks, trade names, slogans, registered copyrights,
industrial designs, and all trade secrets (including scientific
and technical information, design processes, procedures,
formulae, data processing techniques, computer programs and
improvements, the specialized information and technology embodied
in communications program materials, software documentation and
other program and system designs), it currently uses, without any
known conflict or alleged conflict with, or infringement of, the
rights of others. Section 3.13 of the Target Company Disclosure
Schedule identifies in all material respects (i) the intellectual
property (including, without limitation, issued domestic and
foreign patents, patent applications pending, patent applications
in process, industrial designs, industrial design applications
and registrations, trademarks, trademark registrations, trademark
registration applications, copyright registrations, copyright
registration applications, service marks, service mark
registrations, service mark registration applications, know-how
agreements, licenses (other than of computer software which is
generally commercially available), rights acquired through
litigation, logos, trade names and trade secrets material to the
conduct of the business of the Target Companies (collectively,
the "Owned Intellectual Property"), and (ii) intellectual
property currently licensed to such Target Company ("Licensed
Intellectual Property") (together with the "Owned Intellectual
Property", the "Intellectual Property"). To the knowledge of the
Target Companies, (i) the agreements and/or arrangements for
Licensed Intellectual Property (including computer software) are
in full force and effect; (ii) the rights of each Target Company
thereunder are free and clear of all adverse claims, options,
liens, charges, security interests and encumbrances; and (iii) no
material defaults exist thereunder. There are no interference,
opposition or cancellation proceedings or infringement suits
pending, or, to the knowledge of the Target Companies threatened,
with respect to any Owned Intellectual Property. Within the last
six (6) years, no Target Company or subsidiary has been charged
with infringing any patent or trademark right of any person. The
Intellectual Property comprises all of the intellectual property
rights and licenses pertaining thereto necessary for the Target
Companies to conduct their respective businesses as now operated,
and such Intellectual Property is sufficient for the purposes of
operating the communications hardware and other equipment
utilized by the Target Companies in the provision of
telemarketing services generally. No Target Company has
knowingly taken or knowingly allowed there to be taken any action
to cause any of the material Owned Intellectual Property relating
to its business or operations to enter the public domain,
or knowingly failed to take such action necessary to prevent such
Owned Intellectual Property from so entering the public domain.
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SECTION 3.14. Certain Business Practices and Regulations.
Neither Target Company nor any of its subsidiaries, nor any of
their respective executive officers, directors, or managerial
employees has, to the knowledge of such Target Company, (i) made
or agreed to make any contribution, payment or gift to any
customer, supplier, governmental official, employee or agent
where either the contribution, payment or gift or the purpose
thereof was illegal under any Law, (ii) established or maintained
any unrecorded fund or asset for any purpose or made any false
entries on its books and records for any reason, (iii) made or
agreed to make any contribution, or reimbursed any political gift
or contribution made by any other person, to any candidate for
foreign, federal, state, provincial or local public office in
violation under any Law, or (iv) engaged in any activity
constituting fraud or abuse under the Laws relating to
telemarketing or insurance.
SECTION 3.15. Insurance. All policies and binders of
insurance for professional liability, directors and officers,
fire, liability, worker's compensation and other customary
matters held by or on behalf of each Target Company or its
subsidiaries ("Insurance Policies") have been made available to
Acquiror. The Insurance Policies (which term shall include any
insurance policy entered into after the date of this Agreement in
replacement of an Insurance Policy; provided, that such
replacement policy shall insure against risks and liabilities,
and in amounts and under terms and conditions, substantially the
same as those provided in such replaced policy or binder) are in
full force and effect and neither Target Company nor any of their
subsidiaries is in default with respect to any material provision
contained in any Insurance Policy nor, to the knowledge of such
Target Company, has such Target Company or its subsidiaries
failed to give any notice of any claim under any Insurance Policy
in due and timely fashion, nor, to the knowledge of such Target
Company, has any coverage for current claims been denied, except
where such default or failure individually or in the aggregate
would not reasonably be expected to have a Target Company Adverse
Effect.
SECTION 3.16. Accounting and Tax Matters. No Target
Company, Canadian Ancillary Service Entity, nor, to the knowledge
of the Target Companies, any of their subsidiaries or affiliates,
has taken or agreed to take any action that would prevent either
the U.S. Merger or the Canadian Amalgamation from being effected
as a pooling of interests under GAAP or the rules and regulations
promulgated by the Commission, or would prevent the U.S. Merger
or the Canadian Amalgamation from constituting a transaction
qualifying as a reorganization under Section 368(a) of the Code.
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SECTION 3.17. Real Property. Neither Target Company nor
any of its subsidiaries owns or has the option or right to
acquire any
real property. Section 3.17 of the Target Company Disclosure
Schedule sets forth a true and complete list of all real property
leases to which a Target Company is a party (all such real estate
is hereafter collectively, the "Real Property"). Each Target
Company has heretofore furnished to Acquiror true and complete
copies of the most recent lease with respect to any leased Real
Property.
(a) Except as set forth in Section 3.17(a) of the
Target Company Disclosure Schedule, no Target Company has
any interest in, or any right or obligation to acquire any
material interest in, any other real property.
(b) To the knowledge of the Target Companies, there
are no pending or threatened requests, applications or
proceedings to alter or materially restrict the zoning or
other use restrictions applicable to any Real Property.
(c) Each Target Company is in material compliance
with, and to the knowledge of the Target Companies the Real
Property has not been used by any other person in violation
of, any Environmental Laws. For purposes of this Agreement,
the term "Environmental Laws" shall mean all Canadian and
U.S. federal, state, provincial and local statutes, Laws,
ordinances, codes, rules, regulations, orders, decrees,
directives, permits, licenses and guidelines relating to
protection of the environment, or to protection of the
public health from releases into the environment of
hazardous substances, pollutants or contaminants, including,
but not limited to, the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as
amended, the Resource Conservation and Recovery Act of 1976,
as amended, the Environmental Quality Act, R.S.Q.C., Q-2,
and Canadian and U.S. state and provincial tort laws and
common Laws.
(d) With respect to the leases described in Section
3.17(d) of the Target Company Disclosure Schedule (i) the
rental set forth in each such lease is the actual rental
being paid, and there are no separate agreements or
understandings with respect to the same not set forth
therein, (ii) the lessee under each such lease has, as of
the date hereof, the full right to exercise any renewal
option contained therein, (iii) there are no written or oral
contracts between a Target Company and any person relating
to any claim by such person of any right to all or any part
of the interest of such Target Company in any leasehold
estate; and (iv) all security deposits required by such
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leases have been made and no material forfeiture with
respect thereto has been claimed by any of the lessors.
(e) No Target Company is the subject of any remedial
order entered with respect to real property of which it was
previously or is currently in possession.
SECTION 3.18. Shareholder Approval Obtained. The Target
Shareholders and the MFN Shareholders have unanimously approved
and consented to the Unitary Transaction.
SECTION 3.19. Brokers. No broker, finder or investment
banker is entitled to any brokerage, finder's or other fee or
commission in connection with the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of
any Target Company, Canadian Ancillary Service Entity or their
subsidiaries or affiliates.
SECTION 3.20. Title to Assets. Each Target Company, or
its applicable subsidiary, is the owner of and has good and valid
title to, or in the case of leased property has a valid leasehold
interest in, all of its material properties and assets (except
statutory liens for taxes, materialmen, warehousemen and
landlords incurred in the ordinary course of business and not yet
due), including those assets and properties reflected in the 1995
Target Company Financial Statements.
SECTION 3.21. Related Party Transactions. Neither Target
Company, nor to the knowledge of the Target Companies, any
director, employee, shareholder, officer or agent of a Target
Company, have any direct or indirect interest in any competitor,
supplier or customer of a Target Company or in any person from
whom or to whom a Target Company leases any property, or in any
other person, firm or entity with whom a Target Company transacts
business of any nature. Section 3.21 to the Target Company
Disclosure Schedule identifies and describes all material
contracts or other arrangements (oral or written), including, but
not limited to, intercompany loans, advances, transfers of goods
or services, or other transactions (whether or not for
consideration), to which either Target Company is a party and to
which the other, or any of their subsidiaries or affiliates, or
their respective officers, directors, employees, shareholders,
officers or agents, is directly or indirectly also a party.
SECTION 3.22. Bank Accounts. Section 3.22 to the Target
Company Disclosure Schedule sets forth all banks and other
institutions or agents in which either Target Company or any of
its subsidiaries has or maintains an account, installment
obligation, mortgage, deposit, escrow, lockbox or safe deposit
box, the names of all persons authorized to draw thereon or to
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have access thereto, the number of signatures required to be
given for any transaction, deposit or withdrawal, and a
description of the type of relationship maintained by such entity
with such bank, institution or agent.
SECTION 3.23. Officers and Directors. Section 3.23 to the
Target Company Disclosure Schedule sets forth a list of the
names, addresses and years of service of all officers and
directors of the Target Companies, the Canadian Ancillary Service
Entities and their respective subsidiaries as of the date hereof.
SECTION 3.24. Powers of Attorney. No Target Company or
Canadian Ancillary Service Entity has given any powers of
attorney (irrevocable or otherwise) to any person or entity for
any purpose whatsoever.
SECTION 3.25. Guarantees. No Target Company or Canadian
Ancillary Service Entity is a guarantor of, or indemnitor, co-
maker or otherwise liable for, any indebtedness of any person,
except as an endorser of checks received by it and deposited in
the ordinary course of business.
SECTION 3.26. Customers. Section 3.26 to the Target
Company Disclosure Schedule sets forth a true, complete and
accurate listing of (i) the names, addresses and telephone
numbers of the ten (10) largest customers (measured by revenue)
to whom the Target Companies and the Canadian Ancillary Service
Entities, as a whole, have provided services during each of
calendar years 1994 and 1995, (ii) the revenues attributable to
each such customer for the same periods, and (iii) the
approximate gross profits attributable to each such customer for
such periods. The business of the Target Companies will, as of
the Effective Time, include the services provided on behalf of
those customers listed on Section 3.26 to the Target Company
Disclosure Schedule. Except as specifically noted on such
Disclosure Schedule, the Target Companies have no knowledge that
the customers listed therein will not continue as customers of
the U.S. Surviving Corporation and Amalgamated Canada Corporation
on and after the Effective Time. Except for billings with respect
to customer deposits, the Target Companies have made no billings
whatsoever to their customers for services to be provided after
the Effective Time. All customer deposits held by a Target
Company arose from written agreements between such Target Company
and the remitting customer, are correct as to amount, and no such
customer has notified the Target Company of its intention to seek
a refund of its deposit. All such customer deposits were received
by the Target Companies in cash, in the ordinary course of their
business. The Target Companies have previously delivered to
Acquiror true and complete copies of all contracts and agreements
(and written descriptions of any oral arrangements) between all
such customers and the applicable Target Company. As of the date
of this Agreement, no party to any such contract has defaulted in
any of its material obligations thereunder, and no customer is in
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default of its payment obligations on invoices for services
previously rendered by such Target Company.
SECTION 3.27. Proprietary Software Used in the Business.
Section 3.27 to the Target Company Disclosure Schedule contains a
description of all material non-licensed computer software
products and software programs (collectively, "Software
Programs"), both generally available in a Target Company's
business and under development (in all stages of development),
that are used or intended for use in the business and operations
of each Target Company. To the extent any Software Program has
been developed by a third party for the benefit of, or in
accordance with specifications provided by, a Target Company, the
Target Company Disclosure Schedule sets forth the form and
placement of the proprietary legends and/or copyright notices
displayed in or on the Software Programs. To the Target
Companies' knowledge, in no instance has the eligibility of any
such Software Program for protection under applicable copyright
law been forfeited to the public domain by omission of any
required notice or any other action or inaction by a Target
Company unless such forfeiture would not have a Target Company
Material Effect. Except as provided in Section 3.27 of the Target
Company Disclosure Schedule, the source code for such Software
Programs has at all times been maintained in strict confidence
and the only individuals or entities who have access to such
source code are parties to written nondisclosure agreements with
the Target Company. Section 3.27 to the Target Company Disclosure
Schedule also sets forth all individuals and entities, including
employees, agents, consultants and contractors, who have
contributed to or participated in the conception and development
of such Software Programs. All individuals so listed in such
Schedule have either (i) been party to a "work-for-hire"
arrangement or agreement with a Target Company, in accordance
with applicable national and state law, or (ii) have executed
appropriate instruments of assignment in favor of such Target
Company as assignee, conveying to such Target Company full,
effective and exclusive ownership of all tangible and intangible
property rights thereunder arising.
SECTION 3.28. Receivables and Advances. All accounts
receivable and advances of the Target Companies have arisen in
the ordinary course of business, for full and adequate
consideration, and, to the knowledge of the Target Companies, are
subject to no claims, charges or defenses (either by a Target
Company or by any other person). No person has asserted a right
of set-off (or similar right) against any such receivable or
advance.
SECTION 3.29. Commission Policies. Each Target Company's
commission and bonus policies with respect to employees and
independent contractors entitled to receive commissions and/or
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bonus in excess of U.S. ten thousand dollars (U.S.$10,000) per
year are described on Section 3.29 to the Target Company
Disclosure Schedule.
SECTION 3.30. Sole Source Suppliers. Section 3.30 to the
Target Company Disclosure Schedule sets forth the names and
addresses of, and volume of purchases from, any suppliers of
significant goods, equipment or services to each Target Company
(other than public utilities) with respect to which practical
alternative sources of supply are not available.
SECTION 3.31. Disclosure. No representations or warranties
made by either Target Company under this Agreement or in any
certificate, Schedule, Exhibit or other document furnished or to
be furnished to Acquiror, Acquiror Sub-1, Acquiror Sub-2 or their
respective counsel pursuant hereto contains or will contain any
untrue statement of any material fact, or omits or will omit to
state a material fact necessary to make the statements of fact
contained therein not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF ACQUIROR
The term "Acquiror Adverse Effect" as used in this Agreement
shall mean any change or effect that, individually or when taken
together with all such other changes or effects, is or is
reasonably likely to be materially adverse to the financial
condition, business or results of operations of Acquiror and its
subsidiaries, taken as a whole; provided, however, that the
occurrence of any or all of the changes or events described in
the Acquiror Disclosure Schedule shall not, individually or in
the aggregate, constitute an Acquiror Adverse Effect. Except as
set forth in the Acquiror Disclosure Schedule attached to this
Agreement and by this reference made a part hereof (the "Acquiror
Company Disclosure Schedule"), which Acquiror Company Disclosure
Schedule shall identify exceptions to the Acquiror's represent-
ations and warranties by specific Section references, Acquiror
hereby represents and warrants to the Target Companies that:
SECTION 4.01. Organization and Qualification; Subsidiaries.
Each of Acquiror and Acquiror's subsidiaries is a corporation,
duly incorporated, validly existing and in good standing under
the Laws of the jurisdiction of its incorporation or
organization, has all requisite corporate or other power and
authority to own, lease and operate its properties and to carry
on its business as it is now being conducted and each of Acquiror
and its subsidiaries is duly qualified and in good standing to do
business in each jurisdiction in which the nature of the business
conducted by it or the ownership or leasing of its properties
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makes such qualification necessary, other than where the failure
to do so would not have an Acquiror Adverse Effect. A true and
complete list of all of Acquiror's directly or indirectly owned
subsidiaries, together with the jurisdiction of incorporation or
organization of each subsidiary and the percentage of each
subsidiary's outstanding capital stock or other equity interests
owned by the Acquiror or another subsidiary of Acquiror, is set
forth in Section 4.01 of the Acquiror Disclosure Schedule.
SECTION 4.02. Articles of Incorporation; By-Laws. Acquiror
has furnished to the Target Companies a complete and correct copy
of the Articles of Incorporation and the By-Laws, as amended or
restated, of each of Acquiror, Acquiror Sub-1 and Acquiror Sub-2.
Neither Acquiror, Acquiror Sub-1 nor Acquiror Sub-2 is in
violation of any of the provisions of its Articles of
Incorporation or ByLaws.
SECTION 4.03. Capitalization of Acquiror.
(a) The authorized capital stock of Acquiror consists
of (i) 25,000,000 shares of Acquiror Common Stock, and (ii)
10,000,000 shares of preferred stock, no par value per
share. As of the date of this Agreement, (i) 10,479,219
shares of Acquiror Common Stock are issued and outstanding,
and are duly authorized, validly issued, fully-paid and non-
assessable and not subject to preemptive rights created by
statute, Law, Acquiror's Articles of Incorporation or By-
Laws or any agreement to which Acquiror is a party or is
bound, (ii) approximately 3,111,905 shares of Acquiror
Common Stock were reserved for future issuance pursuant to
stock options, warrants and awards issued to certain
officers, employees, consultants, directors and affiliates
of Acquiror, and (iii) approximately 510,426 shares of
Acquiror Common Stock were issued and outstanding pursuant
to the terms and conditions of those certain agreements
described in Section 4.03(a) of the Acquiror Disclosure
Schedule, a significant portion of which are subject to set-
off or cancellation in accordance with the terms and
provisions of such agreements, and therefore may not be
fully-paid and non-assessable. As of the date of this
Agreement, no shares of Acquiror preferred stock were
outstanding.
(b) As of the date of this Agreement, except as set
forth in Section 4.03(b) to the Acquiror Disclosure
Schedule, there are no obligations, contingent or otherwise,
of Acquiror or any of its subsidiaries to repurchase, redeem
or otherwise acquire any shares of Acquiror Common Stock or
the capital stock of, or other equity interests in, any
subsidiary of Acquiror.
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(c) Subject in all respects to the terms and
conditions of this Agreement, the shares of Acquiror Common
Stock to be issued pursuant to the Unitary Transaction (i)
will be duly authorized, validly issued, fully paid and non-
assessable and not subject to preemptive rights created by
statute, or by Acquiror's Articles of Incorporation or By
Laws or any agreement to which Acquiror is a party or is
bound, (ii) will, when issued, be registered under the
Exchange Act and the Securities Act (but without
representation as to effectiveness) and registered or exempt
from registration under applicable Blue Sky Laws, and (iii)
will, when issued, be listed on the NASDAQ.
SECTION 4.04. Capitalization of Acquiror Sub-1 and Sub-2.
(a) The authorized capital stock of Acquiror Sub-1
consists of 100,000 shares of Acquiror Sub-1 Common Stock of
which, as of the date of this Agreement, 10,000 shares are
issued and outstanding. On the date of this Agreement, all
issued and outstanding shares of Acquiror Sub-1 Common Stock
are, and at the Effective Time all issued and outstanding
shares of Acquiror Sub-1 Common Stock will be, duly
authorized, validly issued, fully paid and non-assessable.
Acquiror is the record holder of all issued and outstanding
shares of Acquiror Sub-1 Common Stock, and such shares are
owned by Acquiror free and clear of any and all security
interests, liens, claims, pledges, agreements, limitations
on Acquiror's voting rights, charges or other encumbrances
of any nature whatsoever.
(b) The authorized capital stock of Acquiror Sub-2
consists of an unlimited shares of Acquiror Sub-2 Common
Stock of which, as of the date of this Agreement, one (1)
shares is issued and outstanding. On the date of this
Agreement, all issued and outstanding shares of Acquiror
Sub-2 Common Stock are, and at the Effective Time, all
issued and outstanding shares of Acquiror Sub-2 Common Stock
will be, duly authorized, validly issued, fully paid and
non-assessable. Acquiror is the record holder of all issued
and outstanding shares of Acquiror Sub-2 Common Stock, and
such shares are owned by Acquiror free and clear of any and
all security interests, liens, claims, pledges, agreements,
limitations on Acquiror's voting rights, charges or other
encumbrances of any nature whatsoever.
(c) Except as disclosed in Section 4.04(c) to the
Acquiror Disclosure Schedule, as of the date of this
Agreement, there are no options, warrants or other rights,
agreements, arrangements or commitments to which Acquiror or
either of Acquiror Sub-1 or Acquiror Sub-2 is a party of any
character relating to the issued or unissued capital stock
of, or other equity interests in, Acquiror Sub-1 or Acquiror
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Sub-2, or obligating Acquiror or Acquiror Sub-1 or Acquiror
Sub-2 to grant, issue, sell or register for sale any shares
of the capital stock of, or other equity interests in,
either of Acquiror Sub-1 or Acquiror Sub-2 by sale, lease,
license or otherwise.
SECTION 4.05. Authority. Each of Acquiror, Acquiror Sub-1
and Acquiror Sub-2 has the requisite corporate power and
authority to execute and deliver this Agreement, to perform its
obligations hereunder, and to consummate the transactions
contemplated hereby.
The execution and delivery of this Agreement by Acquiror and such
Acquiror Subs, and the consummation by Acquiror and such Acquiror
Subs of the transactions contemplated hereby, have been duly
authorized by all necessary corporate action and no other
corporate proceedings on the part of Acquiror or such Acquiror
Subs are necessary to authorize this Agreement or to consummate
the transactions contemplated by this Agreement. This Agreement
has been duly executed and delivered by Acquiror, Acquiror Sub-1
and Acquiror Sub-2 and, assuming the due authorization, execution
and delivery by the Target Companies, the Canadian Ancillary
Service Entities, the Target Shareholders and the stockholders of
Acquiror, constitutes the legal, valid and binding obligation of
Acquiror, Acquiror Sub-1 and Acquiror Sub-2.
SECTION 4.06. No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement by
Acquiror, Acquiror Sub-1 and Acquiror Sub-2 do not, and the
performance of this Agreement by Acquiror and such Acquiror
Subs shall not (i) conflict with or violate the Articles,
By-Laws or equivalent organizational documents of Acquiror,
Acquiror Sub-1, Acquiror Sub-2 or any of Acquiror's
subsidiaries, (ii) subject to (x) obtaining the consents,
approvals, authorizations and permits of, and making filings
or notifications to, any Governmental Entities pursuant to
the applicable requirements, if any, of the Securities Act,
the Exchange Act, Blue Sky Laws, the NASDAQ, the HSR Act,
the Competition Act, the Investment Act, the ITA and the
filing and recordation of appropriate merger and
amalgamation documents as required by Illinois Law and
Canada Law, and (y) obtaining the consents, approvals,
authorizations or permits described in Section 4.06(b) of
the Acquiror Disclosure Schedule, conflict with or violate
any Laws applicable to Acquiror, Acquiror Sub-1, Acquiror
Sub-2 or any of Acquiror's other subsidiaries or by which
any of their respective properties is bound or affected, or
(iii) result in any breach of or constitute a default (or an
event that with notice or lapse of time or both would become
a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or
result in the creation of a lien or encumbrance on any of
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the properties or assets of Acquiror, Acquiror Sub-1,
Acquiror Sub-2 or any of Acquiror's other subsidiaries
pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other
instrument or obligation to which Acquiror, Acquiror Sub-1,
Acquiror Sub-2 or any of Acquiror's other subsidiaries is a
party or by which Acquiror, such Acquiror Subs or other
Acquiror subsidiaries or any of their respective properties
is bound or affected, except for any such conflicts or
violations described in clause (ii) or breaches or defaults
described in clause (iii) that would not have an Acquiror
Adverse Effect.
(b) The execution and delivery of this Agreement by
Acquiror, Acquiror Sub-1 and Acquiror Sub-2 do not, and the
performance of this Agreement by Acquiror, Acquiror Sub-1
and Acquiror Sub-2 shall not, require any consent, approval,
authorization or permit of, or filing with or notification
to, any Governmental Entities or other persons, except for
(i) applicable requirements, if any, of the Securities Act,
the Exchange Act, Blue Sky Laws, the NASDAQ, the HSR Act,
the Competition Act, the Investment Act, the ITA, the
Telemarketing Act, Other Telemarketing Laws and Insurance
Laws, (ii) the consents, approvals, authorizations or
permits described in Section 4.06(b) of the Acquiror
Disclosure Schedule, and (iii) the filing and recordation of
appropriate merger and amalgamation documents as required by
Illinois Law and Canada Law.
SECTION 4.07. Permits; Compliance. Each of Acquiror and
its subsidiaries is in possession of all franchises, grants,
authorizations, licenses, permits, easements, variances,
exemptions, consents, certificates, approvals and orders
necessary for Acquiror or any of its subsidiaries to own, lease
and operate its properties or to carry on its business as it is
now being conducted (the "Acquiror Permits") and no suspension,
revocation or cancellation of any of the Acquiror Permits is
pending or, to the knowledge of Acquiror, threatened, except
where the failure to have, or the suspension, revocation or
cancellation of, any of the Acquiror Permits would not have an
Acquiror Adverse Effect. Neither Acquiror nor any of its
subsidiaries is in conflict with, or in default or violation of
(i) any Law applicable to Acquiror or any of its subsidiaries or
by which any of their respective properties is bound or affected,
or (ii) any of the Acquiror Permits, except for any such
conflicts, defaults or violations which would not have an
Acquiror Adverse Effect.
SECTION 4.08. Securities Reports; Financial Statements.
(a) Since December 31, 1993, Acquiror and its
subsidiaries have filed (x) all forms, reports, statements
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and other documents required to be filed (or filed by
reference) with (i) the Commission, including without
limitation, (A) all Annual Reports on Form 10-K, (B) all
Quarterly Reports on Form 10-Q, (C) all Proxy Statements
relating to meetings of shareholders, (D) all required
current reports on Form 8-K, (E) all other reports and
registration statements, and (F) all amendments and
supplements to all such reports and registration statements
(collectively, the "Acquiror SEC Documents"), and (ii) any
applicable state securities authorities, and (y) all forms,
reports, statements and other documents required to be filed
with any other applicable federal or state regulatory
authorities, except where failure to file any such forms,
reports, statements and other documents under this clause
(y) would not have an Acquiror Adverse Effect (all such
forms, reports, statements and other documents referred to
in this Subsection (a) are, collectively, "Acquiror
Reports"). The Acquiror Reports, including all Acquiror
Reports filed after the date of this Agreement and prior to
the Effective Time (i) were or will be prepared in all
material respects in accordance with the requirements of
applicable Law, and (ii) did not, at the times they were
filed, or will not at the time they are filed, contain any
untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in
order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(b) Except as disclosed in Section 4.08(b) of the
Acquiror Disclosure Schedule, and except for changes
required under GAAP or by the Commission, each of Acquiror's
financial statements (including any notes to such financial
statements) included within the Acquiror Reports (i) has
been or will be prepared in all material respects in
accordance with the published rules and regulations of the
Financial Accounting Standards Board and GAAP and the
Commission applied on a consistent basis throughout the
periods involved, and (ii) fairly present, or will fairly
present, in all material respects, the consolidated
financial position of the Acquiror as of the respective
dates thereof and the consolidated results of operations and
cash flows for the periods indicated; provided, however, the
interim financial statements of Acquiror may (x) be subject
to normal or recurring adjustments at Acquiror's fiscal
year-end, (y) not necessarily be indicative of results for a
full-fiscal year, and (z) contain pro-forma financial
information which is not necessarily indicative of
Acquiror's consolidated financial position.
(c) Except as and to the extent disclosed in Section
4.08(c) of the Acquiror Disclosure Schedule, neither
Acquiror nor any of its subsidiaries has any liabilities or
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obligations of any nature (whether accrued, absolute,
contingent or otherwise) that would be required to be
reflected on, or reserved against in, a balance sheet of
Acquiror, prepared in accordance with GAAP, except (i) as
otherwise disclosed in Section 4.08(c) of the Acquiror
Disclosure Schedule, or (ii) for liabilities or obligations
incurred in the ordinary course of business since March 31,
1996, that would not have an Acquiror Adverse Effect.
SECTION 4.09. Absence of Certain Changes or Events. Except
as disclosed in Section 4.09 of the Acquiror Disclosure Schedule,
or as contemplated in this Agreement, (i) since March 31, 1996,
there has not been, and Acquiror has no knowledge of any facts
that are reasonably likely to result in, an Acquiror Adverse
Effect, and
(ii) from December 31, 1996, to the date of this Agreement, there
has not been any change by Acquiror or its subsidiaries in their
accounting methods, principles or practices, except any such
change after the date of this Agreement required by GAAP or the
Commission.
SECTION 4.10. Absence of Litigation.
(a) There is no claim, action, suit, litigation,
proceeding, arbitration, or, to the knowledge of Acquiror,
investigation of any kind affecting Acquiror or any of its
subsidiaries, at law or in equity (including actions or
proceedings seeking injunctive relief), pending or, to the
knowledge of Acquiror, threatened, except for claims,
actions, suits,litigations,proceedings, arbitrations or
investigations which cannot reasonably be expected to have
an Acquiror Adverse Effect.
(b) Neither Acquiror nor any of its subsidiaries is
subject to any continuing order of, consent decree,
settlement agreement or other similar written agreement
with, or, to the knowledge of Acquiror, continuing
investigation by, any Governmental Entity, or any judgment,
order, writ, injunction, decree or award of any Governmental
Entity or arbitrator, including, without limitation, cease-
and-desist or other orders, except for such matters which
cannot reasonably be expected to have an Acquiror Adverse
Effect.
SECTION 4.11. Title to Assets. Acquiror, or its applicable
subsidiary, is the owner of and has good and valid title to, or
in the case of leased property has a valid leasehold interest in,
all of its material properties and assets (except statutory liens
for taxes, materialmen, warehousemen and landlords incurred in
the ordinary course of business and not yet due), including those
assets and properties reflected in the Acquiror's consolidated
financial statements.
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SECTION 4.12. Accounting and Tax Matters. Neither Acquiror
nor, to the knowledge of Acquiror, any of its subsidiaries or
affiliates, has taken or agreed to take any action that would
prevent either the U.S. Merger or the Canadian Amalgamation from
being effected as a pooling of interests under GAAP or the rules
and regulations promulgated by the Commission, or would prevent
the U.S. Merger or the Canadian Amalgamation from constituting
transaction qualifying as a reorganization under Section 368(a)
of the Code.
SECTION 4.13. Ownership of Acquiror Subs; Prior Activities.
(a) Acquiror Sub-1 and Acquiror Sub-2 were formed for
the purpose of engaging in the transactions contemplated by
this Agreement and have no material debts or liabilities.
(b) As of the Effective Time, all the outstanding
capital stock of each of Acquiror Sub-1 and Acquiror Sub-2
will be owned directly by Acquiror. As of the Effective
Time, there will be no options, warrants or other rights
(including registration rights), agreements, arrangements or
commitments to which either Acquiror Sub is a party of any
character relating to the issued or unissued capital stock
of, or other equity interests in, such Acquiror Sub or
obligating such Acquiror Sub to grant, issue or sell any
shares of the capital stock of, or other equity interests
in, such Acquiror Sub, by sale, lease, license or otherwise.
There are no obligations, contingent or otherwise, of any
Acquiror Sub to repurchase, redeem or otherwise acquire any
shares of the capital stock of such Acquiror Sub.
SECTION 4.14. Brokers. Except as disclosed in Section 4.14
of the Acquiror Disclosure Schedule, no broker, finder or
investment banker is entitled to any brokerage, finder's or other
fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or
on behalf of Acquiror.
SECTION 4.15. Disclosure. No representations or warranties
made by Acquiror under this Agreement or in any certificate,
Schedule, Exhibit or other document furnished or to be furnished
to the Target Companies, Target Shareholders or their respective
counsel pursuant hereto contains or will contain any untrue
statement of any material fact, or omits or will omit to state a
material fact necessary to make the statements of fact contained
therein not misleading.
ARTICLE V
COVENANTS RELATING TO THE CONDUCT OF BUSINESS
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SECTION 5.01. Affirmative Covenants of the Target
Companies. The Target Companies and Canadian Ancillary Service
Entities hereby covenant and agree with Acquiror and its
subsidiaries that, prior to the Effective Time, unless otherwise
expressly contemplated by this Agreement or consented to in
writing by Acquiror, each Target Company and Canadian Ancillary
Service Entity shall, and shall cause its subsidiaries to:
(a) operate its business only in the usual and
ordinary course, consistent with reasonable past practices;
(b) use reasonable best efforts to preserve intact its
business organization and assets, maintain its rights and
franchises, retain the services of its officers, key
employees and managers, and maintain existing good
relationships with its customers, clients, vendors and
suppliers;
(c) use reasonable best efforts to keep in full force
and effect all liability insurance and bonds comparable in
amount and scope of coverage to that currently maintained;
and
(d) confer with Acquiror from time-to-time at
Acquiror's request to report on all manner of operational
matters, and to provide, orally or in writing, as Acquiror
shall request, the general status of the ongoing operations
of the business of such Target Company or Canadian Ancillary
Service Entity;
(e) prepare and cause its independent accountants to
deliver to Acquiror combined interim quarterly financial
statements (including a balance sheet and statement of
results of operations and cash flows) as at and for the
periods ended March 31, 1996, June 30, 1996, and if prior to
the Effective Time, September 30, 1996 (the "Target Company
Interim Financials"). Such Target Company Interim Financials
shall be prepared in accordance with GAAP, applied on a
consistent basis for the periods involved, and shall present
fairly, in all material respects, the combined financial
position of the Target Companies as of the dates indicated
therein the combined results of operations and cash flows of
the Target Companies for the periods then ended, except that
the Target Companies Interim Financials (i) shall be subject
to normal recurring year-end adjustments, and (ii) may omit
footnote disclosures required by GAAP in audited annual
financial statements;
(f) file their Canada and U.S. federal income tax
returns, and all required provincial, state and local income
and franchise tax returns, and Subchapter S Returns, that
include a Target Company, Canadian Ancillary Service Entity
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or any of their subsidiaries, for the fiscal tax year 1995
on or before the due date for filing such returns (including
extensions), and if such returns, or any of them, are filed
prior to the Effective Time, such corporation shall afford
to Acquiror reasonable opportunity for review of such
returns prior to filing; and
(g) immediately prior to the Effective Time, the U.S.
Company shall, upon the written instructions of Acquiror,
sell all or such portion of its accounts receivable to a
bank or factor designated by Acquiror, for a discount from
face value reasonably acceptable to Acquiror.
SECTION 5.02. Negative Covenants of the Target Companies.
Except as expressly contemplated by this Agreement, set forth in
Section 5.02 of the Target Company Disclosure Schedule or other-
wise consented to in writing by Acquiror, from the date of this
Agreement until the Effective Time, the Target Companies and the
Canadian Ancillary Service Entities shall not, and the Target
Shareholders shall not cause a Target Company to, individually or
collectively, nor shall the Target Companies or Canadian
Ancillary Service Entities permit any of their respective
subsidiaries to, do any of the following:
(a) (i) increase the compensation payable or to become
payable to any director, officer, manager or employee,
except for increases in salary or wages payable or to become
payable in the ordinary course of business and consistent
with past practice to employees who are not directors,
officers or managers, (ii) grant any severance or
termination pay other than pursuant to normal severance
policy to, or enter into any severance agreement with, any
director, officer, manager or employee, (iii) enter into any
employment agreement of any nature whatsoever with any
director, officer, manager or employee that would extend
beyond the Effective Time, except on an at-will basis, or
(iv) establish, adopt, enter into or amend any employee
benefit plan or arrangement, except as may be required to
comply with applicable Law;
(b) except as expressly set forth in Section 5.02(b)
of the Target Company Disclosure Schedule with respect to
income reportable on the U.S. Company's final Subchapter S
Return, declare or pay, or agree to declare or pay, in any
manner whatsoever, any dividend on, or make any other
distribution in respect of, outstanding shares of U.S.
Company Common Stock, Canada Company Common Stock, Other
U.S. Company Securities, Other Canada Company Securities,
U.S. Company Options or Canada Company Options;
(c) accrue or pay, or agree to accrue or pay, in any
manner whatsoever, any amount, whether in cash or in kind,
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from one Target Company, Canadian Ancillary Service Entity
(or their respective subsidiaries) to or in respect of
another Target Company, Canadian Ancillary Service Entity
(or their respective subsidiaries), and whether for products
or services provided or to be provided, or for any other
reason;
(d) (i) redeem, purchase or otherwise acquire any
shares of its or any of its subsidiaries' capital stock or
any securities or obligations convertible into or
exchangeable for any shares of its or its subsidiaries'
capital stock, or any options, warrants or conversion or
other rights to acquire any shares of its or its
subsidiaries' capital stock or any such securities or
obligations, (ii) effect any reorganization or
recapitalization, or (iii) split, combine or reclassify any
of its or its respective subsidiaries' capital stock or
issue or authorize or propose the issuance of any other
securities in respect of, in lieu of or in substitution for,
shares of its or its subsidiaries' capital stock;
(e) issue, deliver, award, grant or sell, or authorize
the issuance, delivery, award, grant or sale of (including
the grant of any security interests, liens, claims, pledges,
limitations in voting rights, charges or other
encumbrances), any shares of any class of its or its
subsidiaries' capital stock (including shares held in
treasury), any securities convertible into or exercisable or
exchangeable for any such shares, or any rights, warrants or
options to acquire any such shares, or amend or otherwise
modify the terms of any such rights, warrants or options,
the effect of which shall be to make such terms more
favorable to the holders thereof;
(f) acquire or agree to acquire, by merging or
consolidating with, by purchasing an equity interest in or a
portion of the assets of, or by any other manner, any
business or any corporation, partnership, association or
other business organization or division thereof, or
otherwise acquire or agree to acquire any assets of any
other person (other than the purchase of assets from
suppliers or vendors in the ordinary course of business and
consistent with reasonable past practices);
(g) except to the extent required under Section
5.01(g) of this Agreement, sell, lease, exchange, mortgage,
pledge, transfer or otherwise dispose of, or agree to sell,
lease, exchange, mortgage, pledge, transfer or otherwise
dispose of, any amount of any of its or its subsidiaries'
operating assets, except for retirements of operating assets
in the ordinary course of business and consistent with
reasonable past practices;
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(h) initiate, solicit or encourage (including by way
of furnishing any information or assistance in connection
with) any inquiries or the making of any proposal that
constitutes, or may reasonably be expected to lead to, any
"Competing Transaction" (as such term is defined below),
enter into discussions or negotiate with any person or
entity in furtherance of such inquiries or to obtain a
Competing Transaction, or agree to or endorse any Competing
Transaction, or authorize any officer, manager, director or
affiliate of such Target Company, or of any of subsidiary
thereof, to take any such action; and each Target Company,
together with its Target Shareholder(s) shall use its
reasonable best efforts to cause the directors, officers,
managers, employees, affiliates, agents and representatives
of such Target Company and its subsidiaries (including,
without limitation, any investment banker, financial
advisor, attorney or accountant retained by such Target
Company or any of its subsidiaries) not to take any such
action. Each Target Company shall promptly notify Acquiror
if any such inquiries or proposals are received by a Target
Company or any of its subsidiaries, or by any of their
respective officers, managers, directors, affiliates,
investment bankers, financial advisors, attorneys,
accountants or other representatives. Each Target Company
shall keep Acquiror informed, on a current basis, of the
nature of, and provide Acquiror with true and complete
copies of, any such inquiries, and such Target Company's
responses thereto. For purposes of this Agreement, the term
"Competing Transaction" shall mean any of the following
involving a Target Company or any subsidiary (other than the
transactions contemplated by this Agreement): (i) any
merger, consolidation, share exchange, business combination,
or other similar transaction; (ii) any sale, lease,
exchange, mortgage, pledge, transfer or other disposition of
five percent (5%) or more of the assets of a Target Company
or a subsidiary thereof, in a single transaction; (iii) any
public or private tender offer or exchange offer for any
outstanding shares of capital stock of a Target Company or
any subsidiary thereof, or the filing of a registration
statement under the Securities Act in connection therewith;
(iv) any solicitation of proxies in opposition to approval
by a Target Company's shareholders of such Target Company's
Merger or of the Unitary Transaction; (v) any person other
than the Target Shareholders or MPLP shall have acquired
beneficial ownership or the right to acquire beneficial
ownership of, or any "group" (as such term is defined under
Section 13(d) of the Exchange Act) shall have been formed
which beneficially owns or has the right to acquire
beneficial ownership of, any of the then outstanding shares
of capital stock of a Target Company; or (vi) any agreement
to, or public announcement by a Target Company of a
proposal, plan or intention, to do any of the foregoing;
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(i) adopt any amendments to their Articles or By-Laws;
(j) change any methods of accounting in effect at
December 31, 1995, or make or rescind any express or deemed
election relating to taxes (including an election to file a
Subchapter S Return), settle or compromise any claim,
action, suit, litigation, proceeding, arbitration,
investigation, audit or controversy relating to Taxes, or
change any method of reporting income, gain, expense, loss
or deduction for federal or Canada income tax purposes from
those employed in the preparation of income tax returns for
taxable years ending on or prior to November 30, 1994,
except in either case as may be required by Law; provided,
however, that the Canada Company may settle an existing
dispute with Revenue Canada to the extent and on the terms
set forth in Section 3.12 of the Target Company Disclosure
Schedule;
(k) incur any obligation for borrowed money or
purchase money indebtedness, whether or not evidenced by a
note, bond, debenture or similar instrument, except for
borrowings made with the prior written consent of Acquiror
or borrowings not exceeding $10,000 in the aggregate made in
the ordinary course of a Target Company's business and
consistent with reasonable past practice;
(l) agree in writing or otherwise to do any of the
foregoing; or
(m) without first consulting with Acquiror, (i)
perform any act which, if performed, would prevent or excuse
the performance of this Agreement by Acquiror or which would
result in any representation or warranty herein contained of
the Target Companies to be untrue in any material respect as
if originally made on and as of the Effective Time, or (ii)
fail to perform any act which, if omitted to be performed,
would prevent or excuse the performance of this Agreement by
Acquiror or which would result in any representation or
warranty herein contained of the Target Companies to be
untrue in any material respect as if originally made on and
as of the Effective Time.
SECTION 5.03. Affirmative Covenants of Acquiror. Acquiror
hereby covenants and agrees that, prior to the Effective Time,
unless otherwise expressly contemplated by this Agreement or
consented to in writing by the Target Companies, Acquiror will,
and will cause each of its subsidiaries to:
(a) operate its business in the usual and ordinary
course;
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(b) use reasonable efforts to preserve intact its
business organization and assets, maintain its rights and
franchises, retain the services of its respective officers
and key employees and maintain the relationships with its
respective customers and suppliers; and
(c) use reasonable efforts to keep in full force and
effect liability insurance and bonds comparable in amount
and scope of coverage to that currently maintained.
SECTION 5.04. Negative Covenants of Acquiror. Except as
expressly contemplated by this Agreement or otherwise consented
to in writing by the Target Companies, from the date of this
Agreement to the Effective Time, Acquiror shall not, and shall
not permit any of its subsidiaries to (i) amend any of the
material terms or provisions of Acquiror's securities, except for
any such amendments which affect equally all shares of Acquiror
Common Stock, (ii) agree in writing or otherwise to do the
foregoing, or (iii) without first consulting with the Target
Companies, (x) perform any act which, if performed, would prevent
or excuse the performance of this Agreement by the Target
Companies or which would result in any representation or warranty
herein contained of the Acquiror to be
untrue in any material respect as if originally made on and as of
the Effective Time, or (y) fail to perform any act which, if
omitted to be performed, would prevent or excuse the performance
of this Agreement by the Target Companies or which would result
in any representation or warranty herein contained of Acquiror to
be untrue in any material respect as if originally made on and as
of the Effective Time.
SECTION 5.05. Access and Information.
(a) Upon reasonable prior notice from Acquiror, the
Target Companies and the Canadian Ancillary Service Entities
shall (and shall cause their subsidiaries to) afford to
Acquiror and its officers, employees, accountants,
consultants, legal counsel and other representatives,
reasonable access during business hours to (i) the
properties and locations at which the Target Companies, the
Canadian Ancillary Service Entities and their subsidiaries
are conducting business activities, (ii) the directors,
officers and management personnel of the Target Companies
and the Canadian Ancillary Service Entities at all such
locations, and (iii) all information (including, if
available, original documents and Returns) concerning the
business, properties, contracts, records and personnel of
the Target Companies, the Canadian Ancillary Service
Entities and their subsidiaries. The Target Companies and
the Canadian Ancillary Service Entities shall permit
Acquiror to make copies of such books, records and other
documents as Acquiror reasonably considers necessary or
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appropriate for the purpose of familiarizing itself with the
business, properties, contracts, records and personnel of
such corporations, and/or for obtaining any approvals,
consents, licenses or permits for the transactions
contemplated by this Agreement.
(b) Acquiror shall (and shall cause its subsidiaries
to) afford to the Target Companies and their respective
officers, employees, accountants, consultants, legal counsel
and other representatives, reasonable access upon reasonable
notice to all information concerning the business,
properties, contracts, records and personnel of Acquiror or
its subsidiaries as the Target Companies may reasonably
request, and as may be lawfully disclosed by Acquiror.
(c) The parties and their respective officers,
employees, accountants, consultants, legal counsel and other
representatives shall comply with all of their respective
obligations under that certain Confidentiality Letter
Agreement dated as of April 30, 1996, among Acquiror, the
U.S. Company and the Canada Company.
SECTION 5.06. New Target Company Shareholders. The Target
Companies shall cause each person becoming a Target Shareholder
after the date of this Agreement (including MPLP, upon the
exercise of the MPLP Option) to be bound by this Agreement, by
executing a counterpart hereof or such other document in form and
substance reasonably satisfactory to Acquiror which causes this
Agreement, and the duties and obligations of the Target
Shareholders hereunder, to become valid and binding on such new
Target Shareholder; provided, however, no person may become a
Target Shareholder if, in the reasonable judgment of Acquiror,
the effect of such acquisition of Target Company Common Stock
shall be to (i) disqualify the Unitary Transaction for "pooling
of interests" accounting treatment, or (ii) cause the
representation of the Target Companies in Section 3.16 of this
Agreement to become untrue in any respect whatsoever.
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01. Registration Statement; Proxy Statement.
(a) As promptly as practicable after the date of this
Agreement, Acquiror shall prepare and file with the
Commission a registration statement on Form S-4 (together
with any amendments thereto, the "Registration Statement"),
containing a proxy statement/prospectus (together with any
amendments thereto, the "Proxy Statement"), in connection
with (i) the registration under the Securities Act of the
Acquiror Common Stock to be issued in the Unitary
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Transaction, (ii) the vote of Acquiror's stockholders with
respect to the Unitary Transaction, and (iii) the other
transactions contemplated by this Agreement. Each of
Acquiror, the Target Companies and the Canadian Ancillary
Service Entities will use reasonable best efforts to have or
cause the Registration Statement to become effective as
promptly as practicable, and shall take any action required
to be taken under any applicable Canadian and U.S. federal,
state, provincial or local securities Laws in connection
with the issuance of shares of Acquiror Common Stock in the
Unitary Transaction. Each of Acquiror, the Target Companies
and the Canadian Ancillary Service Entities shall furnish
all information concerning it and the holders of its capital
stock as the other may reasonably request in connection with
such actions. As promptly as practicable after the
Registration Statement shall have become effective, Acquiror
shall mail the Proxy Statement to its stockholders. The
Proxy Statement shall include the recommendation of
Acquiror's Board of Directors in favor of the Unitary
Transaction, unless otherwise required by the fiduciary
duties of the directors of Acquiror, as determined by such
directors in good faith after consultation with and receipt
of written advice from outside legal counsel.
(b) The information supplied by the Target Companies,
Target Shareholders or the Canadian Ancillary Service
Entities for inclusion in the Registration Statement shall
not, at the time the Registration Statement is declared
effective, contain any untrue statement of a material fact
or omit to state any material fact required to be stated
therein or necessary in order to make the statements
therein, in light of the circumstances under which they are
made, not misleading. The information supplied by the Target
Companies, the Target Shareholders or the Canadian Ancillary
Service Entities for inclusion in the Proxy Statement to be
sent to the stockholders of Acquiror in connection with the
meeting of Acquiror's stockholders to consider the Unitary
Transaction (the "Stockholders' Meeting") shall not, at the
time the Proxy Statement (or any amendment thereof or
supplement thereto) is first mailed to Acquiror
stockholders, at the time of the Stockholders' Meeting or at
the Effective Time, contain any untrue statement of a
material fact or omit to state any material fact required to
be stated therein or necessary in order to make the
statements therein, in light of the circumstances under
which they are made, not misleading. If at any time prior to
the Effective Time any event or circumstance relating to the
Target Companies, the Canadian Ancillary Service Entities or
any of their respective subsidiaries, or their respective
affiliates, officers or directors, should be discovered by
the Target Companies or Target Shareholders which should be
set forth in an amendment to the Registration Statement, the
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Target Companies (or Target Shareholders, as the case may
be) shall promptly so inform Acquiror. All documents that
any Target Company, Canadian Ancillary Service Entity or
Target Shareholder is responsible for providing in
connection with the transactions contemplated herein will
comply as to form and substance in all material respects
with the applicable requirements of the Securities Act and
the rules and regulations thereunder, and the Exchange Act
and the rules and regulations thereunder.
(c) The information supplied by Acquiror for inclusion
in the Registration Statement shall not, at the time the
Registration Statement is declared effective, contain any
untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in
order to make the statements therein, in light of the
circumstances under which they are made, not misleading. The
information supplied by Acquiror for inclusion in the Proxy
Statement to be sent to the stockholders of Acquiror in
connection with the Stockholders' Meeting shall not, at the
time the Proxy Statement (or any amendment thereof or
supplement thereto) is first mailed to Acquiror
stockholders, at the time of the Stockholders' Meeting or at
the Effective Time, contain any untrue statement of a
material fact or omit to state any material fact required to
be stated therein or necessary in order to make the
statements therein, in light of the circumstances under
which they are made, not misleading. If at any time prior to
the Effective Time any event or circumstance relating to
Acquiror or any of its subsidiaries, or their respective
affiliates, officers or directors, should be discovered by
Acquiror which should be set forth in an amendment to the
Registration Statement, Acquiror shall promptly so inform
the Target Companies and the Target Shareholders. All
documents that Acquiror is responsible for providing in
connection with the transactions contemplated herein will
comply as to form and substance in all material respects
with the applicable requirements of the Securities Act and
the rules and regulations thereunder, and the Exchange Act
and the rules and regulations thereunder.
(d) The Target Companies, the Target Shareholders, the
Canadian Ancillary Service Entities and Acquiror each hereby
(i) consent to the use of their names and, on behalf of
their subsidiaries and affiliates, the names of such
subsidiaries and affiliates, and to the inclusion of
financial statements and business information relating to
such party and its subsidiaries and affiliates, in any
registration statement or proxy statement prepared by
Acquiror, (ii) agree to use their reasonable efforts to
obtain the written consent of any person or entity retained
by it which may be required to be named (as an expert or
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otherwise) in such registration statement or proxy
statement, and (iii) agree to cooperate, with any legal
counsel, investment banker, accountant or other agent or
representative retained by any of the parties specified in
clause (i) in connection with the preparation of any and all
information required, as determined after consultation with
each party's counsel by applicable securities Laws to be
disclosed in any such registration statement or proxy
statement.
SECTION 6.02. Meeting of Acquiror Stockholders. Acquiror
shall, promptly after the date of this Agreement, take all action
necessary, in accordance with Illinois Law and its Articles of
Incorporation and By-Laws, to convene the Stockholders' Meeting.
Acquiror shall use its reasonable efforts to solicit from the
stockholders of Acquiror proxies in favor of the Unitary
Transaction and shall take all other actions necessary or
advisable to secure the vote or consent of stockholders required
by Illinois Law to approve the Unitary Transaction, unless
otherwise required by the applicable fiduciary duties of
directors of Acquiror, as determined by such directors in good
faith after consultation with and receipt of written advice from
outside legal counsel.
SECTION 6.03. Ratification of Target Shareholder Approval.
At any time or times prior to the Effective Time as Acquiror
shall reasonably request, the Target Shareholders shall provide
Acquiror with documents, in such form and substance as reasonably
requested
by Acquiror, executed by each such Target Shareholder, and
affirming and ratifying their unanimous approval of and consent
to the Unitary Transaction and the other transactions
contemplated hereunder.
SECTION 6.04. Appropriate Action; Consents; Filings.
(a) The Target Companies, the Canadian Ancillary
Service Entities, the Target Shareholders and Acquiror shall
use all reasonable efforts to (i) take, or cause to be
taken, all appropriate action, and do, or cause to be done,
all things necessary, proper or advisable under applicable
Laws or otherwise to consummate and make effective the
transactions contemplated by this Agreement as promptly as
practicable, (ii) obtain from any Governmental Entities any
consents, licenses, permits, waivers, approvals,
authorizations or orders required to be obtained or made by
the Target Companies, Canadian Ancillary Service Entities,
Target Shareholders or Acquiror or any of their respective
subsidiaries in connection with the authorization, execution
and delivery of this Agreement and the consummation of the
transactions contemplated herein, including, without
limitation, the Unitary Transaction, and (iii) make all
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necessary filings, and thereafter make any other required
submissions, with respect to this Agreement and the Unitary
Transaction required under (A) the Securities Act and the
Exchange Act, and any other applicable Canadian, federal or
state securities Laws, (B) the HSR Act, (C) the Competition
Act, and (D) any other applicable Law; provided,
however,that the Target Companies. Canadian Ancillary
Service Entities and Acquiror shall cooperate with each
other in connection with the making of all such filings,
including providing copies of all such documents to the non-
filing party and its advisors prior to filing and, if
requested, to accept all reasonable additions, deletions or
changes suggested in connection therewith. The Target
Companies, Canadian Ancillary Service Entities, Target
Shareholders and Acquiror shall furnish to each other all
information required for any application or other filing to
be made pursuant to the rules and regulations of any
applicable Law (including all information required to be
included in the Registration Statement and the Proxy
Statement) in connection with the transactions contemplated
by this Agreement.
(b) (i) The Target Companies, Canadian Ancillary
Service Entities, Target Shareholders and Acquiror shall
give (or shall cause their respective subsidiaries or
affiliates to give) any notices to third parties, and use,
and cause their respective subsidiaries to use, all
reasonable efforts to obtain any third party consents, (A)
necessary or advisable to consummate the transactions
contemplated in this Agreement, or (B) required to prevent a
Target Company Adverse Effect from occurring prior to or
after the Effective Time or an Acquiror Adverse Effect from
occurring after the Effective Time (collectively, "Material
Consents").
(ii) In the event that any party shall fail to obtain a
third party consent described in subsection (b)(i), above,
such party shall use best reasonable efforts, and shall take
any such actions reasonably requested by the other party
hereto, to minimize any adverse effect upon the Target
Companies, the Canadian Ancillary Service Entities and
Acquiror, their respective subsidiaries, and their
respective businesses resulting, or which could reasonably
be expected to result after the Effective Time, from the
failure to obtain such consent.
(c) From the date of this Agreement until the
Effective Time, the Target Companies, Canadian Ancillary
Service Entities and Target Shareholders shall promptly
notify Acquiror in writing of any pending or, to the
knowledge of any Target Company, threatened action,
proceeding or investigation by any Governmental Entity or
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any other person (i) challenging or seeking damages in
connection with the U.S. Merger, the Canada Amalgamation,
the Ancillary Asset Acquisition, the Unitary Transaction,
the conversion of U.S. Company Common Stock into Acquiror
Common Stock pursuant to the U.S. Merger, the conversion of
Canada Company Common Stock into Acquiror Common Stock
pursuant to the Canada Amalgamation, the conversion of
Acquiror Sub-1 capital stock into capital stock of the U.S.
Surviving Corporation, and/or the conversion of Acquiror
Sub-2 capital stock into capital stock of the Amalgamated
Canada Corporation, or (ii) seeking to restrain or prohibit
the consummation of the Unitary Transaction, the other
transactions contemplated under this Agreement, or otherwise
limit the right of Acquiror or its subsidiaries to own or
operate all or any portion of the businesses or assets of
the Target Companies, the Canadian Ancillary Service
Entities or their subsidiaries, which in either case is
reasonably likely to have a Target Company Adverse Effect
prior to or after the Effective Time, or an Acquiror Adverse
Effect after the Effective Time.
(d) From the date of this Agreement until the
Effective Time, Acquiror shall promptly notify the Target
Companies and Target Shareholders in writing of any pending
or, to the knowledge of Acquiror, threatened action,
proceeding or investigation by any Governmental Entity or
any other person (i) challenging or seeking damages in
connection with the U.S. Merger, the Canada Amalgamation,
the Ancillary Asset Acquisition, the Unitary Transaction,
the conversion of U.S. Company Common Stock into Acquiror
Common Stock pursuant to the U.S. Merger, the conversion of
Canada Company Common Stock into Acquiror Common Stock
pursuant to the Canada Amalgamation, the conversion of
Acquiror Sub-1 capital stock into capital stock of the U.S.
Surviving Corporation, and/or the conversion of Acquiror
Sub-2 capital stock into capital stock of the Amalgamated
Canada Corporation, or (ii) seeking to restrain or prohibit
the consummation of the Unitary Transaction or the other
transactions contemplated under this Agreement, or in either
case reasonably likely to have an Acquiror Adverse Effect
prior to the Effective Time.
SECTION 6.05. Letters of Accountants. The Target Companies
and Acquiror shall use their reasonable efforts, respectively, to
cause to be delivered "cold comfort" letters of Arthur Andersen,
L.L.P., independent public accountants for each of the Target
Companies and Acquiror, dated the date on which the Registration
Statement shall become effective and as of the Effective Time,
and addressed to the Target Companies and Acquiror, respectively,
in form and substance reasonably satisfactory to the Target
Companies and Acquiror, and reasonably customary in scope and
substance for letters delivered by independent public accountants
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in connection with registration statements similar to the
Registration Statement and transactions such as those
contemplated by this Agreement.
SECTION 6.06. Update Disclosure; Breaches. From and after
the date of this Agreement until the Effective Time, the Target
Companies and the Canadian Ancillary Service Entities, on the one
hand, and Acquiror, on the other hand, shall promptly notify the
other by written update to its Disclosure Schedule of (i) the
occurrence or non-occurrence of any event the occurrence or
nonoccurrence of which would be likely to cause any condition to
the obligations of any party to effect the Unitary Transaction
and the other transactions contemplated by this Agreement not to
be satisfied, or (ii) the failure of any Target Company, Canadian
Ancillary Service Entity or Acquiror, as the case may be, to
comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it pursuant to this Agreement which
would be likely to result in any condition to the obligations of
any party to effect the Merger and the other transactions
contemplated by this Agreement not to be satisfied; provided,
however, that the delivery of any notice pursuant to this Section
6.06 shall not be deemed to cure any breach of any representation
or warranty requiring disclosure of such matter prior to the date
of this Agreement, or otherwise limit or affect the remedies
available hereunder to the party receiving such notice.
SECTION 6.07. Target Company Affiliates; Accounting and Tax
Treatment. Section 6.07 of the Target Company Disclosure
Schedule sets forth all persons who, as of the date of this
Agreement, may be deemed to be affiliates of the Target Companies
under applicable accounting releases with respect to pooling-of-
interests accounting treatment. As promptly as practicable after
the date of this Agreement, the Target Companies shall advise
such persons of the resale restrictions imposed by applicable
securities Laws required to cause the U.S. Merger, the Canada
Amalgamation, the Ancillary Asset Acquisition and the Unitary
Transaction to qualify for pooling-of-interests accounting
treatment. Prior to the Effective Time, the Target Companies
shall obtain from each person listed in Section 6.07 of the
Target Company Disclosure Schedule and any person who may be
deemed to have become an affiliate of a Target Company after the
date of this Agreement and on or prior to the Effective Time, or
affiliate of Acquiror on and after the Effective Time, a written
agreement substantially in the form of Exhibit "G" hereto (each,
an "Affiliate Agreement"); provided, however, the Target
Companies shall provide Acquiror with Affiliate Agreements
executed by Seymour Okner ("Sy Okner") and Sam Okner ("Sam
Okner") prior to the filing by Acquiror of the Registration
Statement; and provided, further, the Target Companies shall use
reasonable efforts to obtain executed Affiliate Agreements from
each other such person as soon as practicable after the date of
this Agreement or the date on which such person attains such
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status, as the case may be. Each party shall use reasonable
efforts to cause the U.S. Merger, the Canada Amalgamation, the
Ancillary Asset Acquisition and the Unitary Transaction to
qualify, and shall not take any actions which could prevent any
such Merger from qualifying, for pooling-of-interests accounting
treatment and as a reorganization qualifying under the provisions
of Section 368(a) of the Code; provided, however, that the
incurrence of tax by stockholders of the Canada Company upon
consummation of the Canada Amalgamation by virtue of its status
as a "controlled foreign corporation" under the Code shall not,
in itself, be deemed a disqualification from reorganization
treatment under the provisions of Section 368(a) of the Code.
SECTION 6.08. Public Announcements. Acquiror shall consult
with the Target Companies and Target Shareholders before issuing
any press release with respect to the Unitary Transaction or this
Agreement, and shall not issue any such press release or make any
such public statement prior to such consultation, except as may
be required by Law or the requirements of the NASDAQ. The Target
Companies and Target Shareholders acknowledge and agree that any
such press release or other public announcement respecting the
Unitary Transaction or this Agreement may be disseminated only
through the agents of Acquiror.
SECTION 6.09. NASDAQ Listing of Acquiror Common Stock.
Acquiror shall cause the shares of Acquiror Common Stock to be
issued in the Unitary Transaction to be listed on the NASDAQ
subject only to official notice of issuance thereof.
SECTION 6.10. Indemnification of Directors and Officers.
(a) From and after the Effective Time, Acquiror shall,
and shall cause (x) the U.S. Surviving Corporation to,
indemnify, defend and hold harmless the present and former
officers and directors of the U.S. Company, and (y) the
Amalgamated Canada Corporation to, indemnify, defend and
hold harmless the present and former officers and directors
of the Canada Company (such U.S. Company and Canada Company
present and former officers and directors are collectively,
the "Indemnified Parties") against all losses, expenses,
claims, damages or liabilities arising out of actions or
omissions occurring at or prior to the Effective Time
(including, without limitation, the transactions
contemplated by this Agreement, but specifically excluding
damages or liabilities attributable to an inaccuracy in or
breach or violation of the representations, warranties,
covenants and agreements of the Target Companies made under
or pursuant to the Agreement) to the full extent permitted
or required under Illinois Law and Canada Law (and shall
also advance expenses as incurred to the fullest extent
permitted under Illinois Law and Canada Law, provided that
the person to whom expenses are advanced provides the
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undertaking to repay such advances contemplated by Illinois
Law and Canada Law). Acquiror, Acquiror Sub-1 and Acquiror
Sub-2 agree that all rights to indemnification, including
provisions relating to advances of expenses incurred in
defense of any claim, action, suit, proceeding or
investigation (a "Claim") existing in favor of the
Indemnified Parties as provided in each Target Company's
Articles of Incorporation or By-Laws, as in effect as of the
date hereof, with respect to matters occurring through the
Effective Time, shall (subject to the exclusions provided
for damages and liabilities attributable to inaccuracies,
breaches and violations, as provided above) survive the
Unitary Transaction and continue in full force and effect,
as provided by Law.
(b) Without limiting the generality of the foregoing,
in the event any Claim is brought against any Indemnified
Party (whether arising before or after the Effective Time)
after the Effective Time, (i) the Indemnified Parties may
retain counsel satisfactory to them and the applicable
Surviving Corporation, (ii) the applicable Surviving
Corporation shall pay all reasonable fees and expenses of
such counsel for the Indemnified Parties promptly as
statements therefor are received, and (iii) the applicable
Surviving Corporation will use all reasonable efforts to
assist in the defense of any such matter; provided, however,
the applicable Surviving Corporation shall not be liable for
the settlement of any Claim effected without its written
consent, which consent, however, shall not be unreasonably
withheld. Any Indemnified Party wishing to claim
indemnification under this Section 6.10, upon learning of
any such Claim, shall promptly notify Acquiror and the
applicable Surviving Corporation. The Indemnified Parties
as a group may retain only one law firm to represent them
with respect to each such matter unless there is, under
applicable standards of professional conduct, a conflict on
any significant issue between the positions of any two or
more Indemnified Parties.
(c) In the event a Target Company (the U.S. Survivor
Corporation or the Canada Amalgamated Corporation) is unable
to obtain extended coverage under any existing policies of
directors' and officers' liability insurance, Acquiror shall
use reasonable efforts to cause to be maintained in effect
for not less than three (3) years after the Effective Time
the current policies of directors' and officers' liability
insurance and fiduciary liability insurance maintained by
such Target Company with respect to matters occurring prior
to the Effective Time; provided, however, that Acquiror may
cause to be substituted therefor policies of substantially
the same coverage containing terms and conditions which are
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substantially the same for the Indemnified Parties to the
extent reasonably available.
(d) This Section 6.10 is intended to benefit the
Indemnified Parties and shall be binding on all successors
and assigns of Acquiror, Acquiror Sub-1, Acquiror Sub-2, the
U.S. Company, the Canada Company, the U.S. Surviving
Corporation and the Amalgamated Canada Corporation.
SECTION 6.11. Election of Target Shareholder to Acquiror
and Other Sub Boards. At the Effective Time, Acquiror shall
amend its By-Laws to increase the number of its Directors by one
(1), and shall elect one (1) Target Shareholder reasonably
satisfactory to Acquiror and Sy Okner to fill the directorship
thereby created. Acquiror agrees that, in the absence of
materially adverse information discovered or coming to light
after the date of this Agreement, Sy Okner and Sam Okner are each
deemed reasonably satisfactory to Acquiror for purposes of this
Section 6.11. From and after the Effective Time, prior to each
annual meeting of the stockholders of Acquiror, Acquiror shall,
and shall cause the U.S. Surviving Corporation and the
Amalgamated Canada Corporation to, nominate one (1) Target
Shareholder reasonably satisfactory to Acquiror and selected by
Sy Okner (or, in his absence, Sam Okner) for election to the
respective Boards of Directors of Acquiror, the U.S. Surviving
Corporation and the Amalgamated Canada Corporation, and once so
nominated, Acquiror shall not, except to the extent of the
fiduciary requirements under Illinois Law, withdraw its
recommendation of or support for such Target Shareholder to
Acquiror's stockholders generally; provided, however, that
election of such Target Shareholder to the Board of Directors of
any such corporation shall be determined by vote of Acquiror's
stockholders (or the Board of Directors elected by them); and
provided, further, upon the earlier to occur of (i) five (5)
years from the date of this Agreement, (ii) the last to occur of
the death of Sy or Sam Okner, or (iii) the sale or other
disposition by Target Shareholders of more than one-half of the
shares of Acquiror Common Stock received by them in the Unitary
Transaction, Acquiror shall be under no obligation to nominate or
cause there to be nominated any such Target Shareholder to the
Boards of Directors of Acquiror, the Surviving U.S. Corporation
or the Amalgamated Canada Corporation.
SECTION 6.12. Obligations of Acquiror Subs. Acquiror shall
take all action necessary to cause each of Acquiror Sub-1 and
Sub-2 to perform its obligations under this Agreement and to
consummate the Unitary Transaction on the terms and conditions
set forth in this Agreement.
SECTION 6.13. Obligations of the Target Companies. Each
Target Company shall take all action necessary to cause the other
to perform its obligations under this Agreement and to consummate
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the Unitary Transaction on the terms and conditions set forth in
this Agreement.
SECTION 6.14. Obligations of Target Shareholders. The
Target Shareholders shall take all action necessary to cause the
Target Companies to perform their respective obligations under
this Agreement and to consummate the Unitary Transaction on the
terms and conditions set forth in this Agreement.
ARTICLE VII
CLOSING CONDITIONS
SECTION 7.01. Conditions to Obligations of Each Party Under
this Agreement. The respective obligations of each party to
effect the Unitary Transaction and the other transactions
contemplated by this Agreement shall be subject to the
satisfaction at or prior to the Effective Time of the following
conditions, any or all of which may be waived, in whole or in
part, to the extent permitted by applicable Law:
(a) Effectiveness of the Registration Statement. The
Registration Statement shall have been declared effective by
the Commission under the Securities Act. No stop order
suspending the effectiveness of the Registration Statement
shall have been issued by the Commission and no proceedings
for that purpose shall have been initiated and be continuing
or, to the knowledge of Acquiror or any Target Company,
threatened by the Commission. Acquiror shall have received
all other Canadian and U.S. federal, state or provincial
securities permits and other authorizations necessary to
issue Acquiror Common Stock in exchange for the U.S. Company
Common Stock and Canada Company Common Stock, and to
consummate the U.S. Merger, the Canada Amalgamation, the
Ancillary Asset Acquisition and the Unitary Transaction, and
the shares of Acquiror Common Stock so deliverable pursuant
to this Agreement shall have been delivered as a portion of
the registered distribution covered by the Registration
Statement.
(b) Stockholder Approval. This Agreement and the
Unitary Transaction shall have been approved and adopted by
the requisite vote of the stockholders of Acquiror.
(c) No Action or Proceeding. There shall not have
been instituted and there shall not be pending any action or
proceeding by a Governmental Entity, and no such action or
proceeding shall have been specifically threatened in a
written communication from a representative of a
Governmental Entity with authority to institute such an
action or proceeding, before any court of competent
jurisdiction or governmental agency or regulatory or
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administrative body, and no order or decree shall have been
entered in any action or proceeding before such court,
agency or body (i) imposing or seeking to impose limitations
on the ability of Acquiror to acquire or hold or to exercise
full rights of ownership of any securities of the U.S.
Surviving Corporation, the Amalgamated Canada Corporation or
any of their respective subsidiaries, (ii) imposing or
seeking to impose limitations on the ability of Acquiror to
combine and operate the business and assets of any Target
Company with any of Acquiror's subsidiaries or other
operations, (iii) imposing or seeking to impose other
sanctions, damages or liabilities arising out of the Unitary
Transaction on Acquiror, Acquiror Sub-1, Acquiror Sub-2, the
U.S. Company, the Canada Company, Marusa Financial, Nerok or
any of their respective officers or directors, (iv)
requiring or seeking to require divestiture by Acquiror of
all or any significant portion of the business, assets or
properties of any Target Company or any of its subsidiaries,
or (v) restraining, enjoining or prohibiting or seeking to
restrain, enjoin or prohibit the consummation of the U.S.
Merger, the Canada Amalgamation, or both; provided, however,
the condition described in this clause (v) may not be
invoked with respect to threatened proceedings with respect
to which no action or proceeding is commenced within days
(10) days following receipt of written notice of the
threatened proceeding.
(d) HSR Act. The applicable waiting period, together
with any extensions thereof, under the HSR Act shall have
expired or been terminated.
(e) Competition Act. If deemed reasonably necessary,
the Director under the Competition Act shall have informed
the parties in writing that no approval, consent or
application for an order is required under the Competition
Act; provided, if approval is required thereunder, then such
approval, consent or order shall have been received.
(f) Section 116 Certificate. The Target Shareholders
shall have delivered to Acquiror a certificate issued under
Section 116 of the ITA indicating a certificate limit or
proceeds of disposition equal to or greater than the value
of Acquiror's Common Stock, in order to constitute the
Canada Amalgamation a tax-free transaction under the ITA.
SECTION 7.02. Additional Conditions to Obligations of
Acquiror. The obligations of Acquiror to effect the Unitary
Transaction and the other transactions contemplated in this
Agreement are also subject to the following conditions:
(a) Representations and Warranties. Each of the
representations and warranties of the Target Companies and
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Target Shareholders contained in this Agreement shall be
true and correct in all material respects as of the
Effective Time, as though made on and as of the Effective
Time, and Acquiror shall have received a certificate of the
Chief Executive Officer (acting in such capacity) of each
Target Company to that effect; provided, however, that (i)
those representations and warranties which address matters
only as of a particular date shall remain true and correct
in all material respects as of such date, and (ii) for
purposes of determining satisfaction of this condition,
Acquiror shall not give effect to an individually
insignificant breach of a representation and warranty of a
Target Company herein. For purposes of this Agreement, an
"individually insignificant breach of a representation or
warranty" shall mean a misstatement in, or breach of, any
representation or warranty set forth in Article III or
Article IV of this Agreement, and which misstatement or
breach, absent discovery by the non-breaching party prior to
the Effective Time, may reasonably have resulted in
"Damages" (hereafter defined) not exceeding U.S. five
thousand dollars $5,000 in a single instance, or U.S. one
hundred thousand dollars $100,000 in the aggregate from all
such breaches.
(b) Agreements and Covenants. Each Target Company.
Canadian Ancillary Service Entity and Target Shareholder
shall have performed or complied in all material respects
with all agreements and covenants required by this Agreement
to be performed or complied with by it or him on or prior to
the Effective Time, and Acquiror shall have received a
certificate of the Chief Executive Officer (acting in such
capacity) of each Target Company to that effect.
(c) Consents Under Agreements. The Material Consents
shall have been obtained.
(d) Affiliate Agreements. Each Target Shareholder and
every other holder of shares of U.S. Company Common Stock
and Canada Company Common Stock shall have fully tendered
such shares to Acquiror in accordance with the provisions of
Section 2.01 of this Agreement, and Acquiror shall have
received from the Target Shareholders and each other person
listed in Section 6.07 of the Target Company Disclosure
Schedule and any other person who may be deemed to have
become an affiliate or stockholder of a Target Company after
the date of this Agreement and on or prior to the Effective
Time (or affiliate of Acquiror after the Effective Time), a
duly executed Affiliate Agreement in the form of Exhibit
"G".
(e) Employment and Other Agreements. Acquiror, on
behalf of the Surviving Corporations, shall have received
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from (i) Sy Okner, an executed Employment Agreement in the
form of Exhibit "D" hereto, (ii) Sam Okner, an executed
Employment Agreement in the form of Exhibit "E" hereto, and
(iii) the persons identified in Section 7.02(e) of the
Target Company Disclosure Schedule, shall have executed, on
the date of this Agreement, Employment Agreements in the
form of Exhibit "H" hereto, and all such Employment
Agreements shall be in full force and effect at and as of
the Effective Time. In addition, Acquiror shall have
received from each of Sy Okner and Sam Okner an executed (i)
Agreement and Covenant Against Unfair Competition, in the
form of Exhibit "I" hereto, and (ii) General Release of
Claims, in the form of Exhibit "J" hereto.
(f) The Ancillary Asset Acquisition. The New Canadian
Ancillary Service Entity and the Canadian Ancillary Service
Entities shall have closed the transactions under the
Ancillary Asset Purchase Agreement.
(g) Fairness Opinion. Acquiror shall have received
the updated opinion of William Blair & Company, L.L.C.,
dated the date of the Proxy Statement, to the effect that
the U.S. Exchange Ratio and the Canada Exchange Ratio are,
from a financial standpoint, fair to Acquiror.
(h) Cash Accounts. Acquiror shall have received, if
it so requests, terminations of authority, effective as of
the Effective Time, by each employee or agent of a Target
Company having signatory or other authority over such Target
Company's cash, checking, lock box, safe deposit and other
depositary arrangements, and for each institution described
in Section 3.22 to the Target Company Disclosure Schedule.
(i) Opinion of Counsel. Acquiror shall have received
the opinion of Altheimer & Gray, legal counsel for the
Target Companies, dated as of the Effective Time, with
respect to those matters set forth in Exhibit "K" hereto,
and in a form reasonably acceptable to Acquiror.
(j) Complete Financial Information. Acquiror shall
have received true and complete financial information from
the Target Companies and Target Shareholders in the form
required, in the reasonable opinion of Arthur Andersen,
L.L.P., certified public accountants for Acquiror, to be
included in any and all of Acquiror's filings with the
Commission prior to the Effective Time.
(k) Director Resolutions. Acquiror shall have
received resolutions of each Target Company's Board of
Directors, dated after the date hereof and immediately prior
to the Effective Time, and certified by such Target
Company's Secretary, unanimously approving, ratifying and
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confirming, (1) all matters and things done by the officers
and directors of such Target Company at any time in the
conduct its business or otherwise during the course of
operations, and (2) the consummation of the Unitary
Transactions and other transactions contemplated by this
Agreement.
(l) Shareholder Resolutions. Acquiror shall have
received resolutions of each Target Company's stockholders,
dated after the date hereof and immediately prior to the
Effective Time, and certified by such Target Company's
Secretary, unanimously approving, ratifying and confirming
(1) all matters and things done by the officers and
directors of such Target Company at any time in the conduct
its business or otherwise during the course of operations,
and (2) the consummation of the Unitary Transactions and
other transactions contemplated by this Agreement.
(m) Other Documents and Instruments. Acquiror shall
have received, upon its written request given at least two
(2) days prior to the Effective Time, such other
certificates, instruments and other documents reasonably
required to effectuate the transactions contemplated hereby,
or to confirm to Acquiror the effectiveness thereof.
(n) Satisfaction of Debts. All Target Shareholders
and other stockholders of the Target Companies, together
with their spouses, blood relations and affiliates, shall
have paid in full, with interest if applicable, all of their
outstanding indebtedness to each Target Company, whether or
not then due.
SECTION 7.03. Conditions to Obligations of the Target
Companies and Target Shareholders. The obligations of the Target
Companies and Target Shareholders to effect the Unitary
Transaction and the other transactions contemplated in this
Agreement are also subject to the following conditions:
(a) Representations and Warranties. Each of the
representations and warranties of Acquiror contained in this
Agreement shall be true and correct in all material respects
as of the Effective Time, as though made on and as of the
Effective Time, and the Target Companies and Target
Shareholders shall have received a certificate of the Chief
Operating Officer or Chief Financial Officer of Acquiror to
that effect; provided, however, that (i) those
representations and warranties which address matters only as
of a particular date shall remain true and correct in all
material respects as of such date, and (ii) for purposes of
determining satisfaction of this condition, the Target
Companies shall not give effect to an individually
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insignificant breach of a representation and warranty of
Acquiror herein.
(b) Agreements and Covenants. Acquiror and its
subsidiaries shall have performed or complied in all
material respects with all agreements and covenants required
by this Agreement to be performed or complied with by them
on or prior to the Effective Time, and the Target Companies
and Target Shareholders shall have received a certificate of
the Chief Operating Officer or Chief Financial Officer of
Acquiror to that effect.
(c) Consents Under Agreements. Acquiror shall have
obtained the consent or approval of each person whose
consent or approval shall be required in connection with the
Unitary Transaction under all loan or credit agreements,
notes, mortgages, indentures, leases or other agreements or
instruments to which it or any of its subsidiaries is a
party, except those agreements or instruments for which
failure to obtain such consents and approvals would, in the
Target Companies' reasonable estimation, not have a Target
Company Adverse Effect prior to or after the Effective Time,
or an Acquiror Adverse Effect after the Effective Time.
(d) Affiliate Agreements. Each person entering into
an Affiliate Agreement shall have received an executed
counterpart thereof from Acquiror.
(e) Employment Agreements. Each person entering into
an Employment Agreement with a Surviving Corporation shall
have received an executed counterpart thereof from Acquiror
and such Surviving Corporation.
(f) Opinion of Counsel. The Target Companies and
Target Shareholders shall have received the opinion of Neal
Gerber & Eisenberg, counsel for Acquiror, dated as of the
Effective Time, with respect to those matters set forth in
Exhibit "L" hereto, and in a form reasonably acceptable to
the Target Companies.
(g) Other Documents and Instruments. The Target
Companies and Target Shareholders shall have received, upon
their written request given at least two (2) days prior to
the Effective Time, such other certificates, instruments and
other documents reasonably required to effectuate the
transactions contemplated hereby, or to confirm to the
Target Companies and Target Shareholders the effectiveness
thereof.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
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SECTION 8.01. Termination. This Agreement may be
terminated at any time prior to the Effective Time, whether
before or after approval of this Agreement and the Unitary
Transaction by the stockholders of Acquiror:
(a) by mutual consent of Acquiror and the Target
Companies (or Target Shareholders acting on their behalf);
(b) by Acquiror, if there has been a breach by a
Target Company or Target Shareholder of any of its or his
covenants or agreements contained in this Agreement or if
any of the representations and warranties of the Target
Companies or Target Shareholders shall have become untrue,
in any such case such that Section 7.02(a) or Section
7.02(b) will not be satisfied, and such breach or condition
has not been cured within thirty (30) days following receipt
by either Target Company of written notice of such breach;
(c) by the Target Companies (or Target Shareholders
acting on their behalf), if there has been a breach by
Acquiror of any of its covenants or agreements contained in
this Agreement or if any of the representations and
warranties of Acquiror shall have become untrue, in any such
case such that Section 7.03(a) or Section 7.03(b) will not
be satisfied, and such breach or condition has not been
cured within thirty (30) days following receipt by Acquiror
of written notice of such breach;
(d) by Acquiror or the Target Companies (or the Target
Shareholders acting on their behalf), if any decree,
permanent injunction, judgment, order or other action by any
court of competent jurisdiction or any Governmental Entity
preventing or prohibiting consummation of the Unitary
Transaction shall have become final and nonappealable;
(e) by Acquiror or the U.S. Company, if the U.S.
Merger and Canada Amalgamation shall not have been
consummated prior to August 31, 1996; provided, however,
that this Agreement may be extended not more than sixty (60)
days by either Acquiror or the U.S. Company by written
notice to the other if the U.S. Merger and Canada
Amalgamation shall not have been consummated as a result of
any party's having failed to receive all regulatory
approvals or consents required to be obtained by that party
with respect to the U.S. Merger or Canada Amalgamation;
(f) by Acquiror, if the Board of Directors of a Target
Company shall have recommended to the stockholders of such
Target Company any Competing Transaction, or resolved to do
so; provided, however, subject to Section 8.03(c), and
notwithstanding the existence of a Competing Transaction,
termination by Acquiror under this subsection (g) shall not
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be exclusive of, or preclude, Acquiror's right to terminate
this Agreement under any other provision of this Section
8.01; or
(g) by the Target Companies (or the Target
Shareholders, acting on their behalf), if Acquiror has
entered into a written agreement under which Acquiror will
be acquired by or merge with another entity where, after
such transaction, persons who were directors of Acquiror
prior to such transaction will not constitute a majority of
the board of directors of the acquiring or surviving
corporation.
SECTION 8.02. Effect of Termination. Except as provided in
Sections 9.01 and 9.02, and subject to the remedies of the
parties set forth in Sections 8.03(c), (d), (e) and (f), in the
event of the termination of this Agreement pursuant to Section
8.01, this Agreement shall forthwith become void, there shall be
no liability under this Agreement on the part of Acquiror,
Acquiror Sub-1, Acquiror Sub-2, the U.S. Company, the Canada
Company, the Canadian Ancillary Service Entities, the Target
Shareholders, or any of their respective officers or directors,
and all rights and obligations of any party shall cease.
SECTION 8.03. Fees and Expenses.
(a) Except as provided in Sections 8.03(d) and (e),
all "Expenses" (hereafter defined) incurred by the parties
hereto shall be borne solely and entirely by the party which
has incurred the same; provided, however, that advice of tax
counsel received by the Target Shareholders in connection
with the structure and general tax consequences of the U.S.
Merger and Canada Amalgamation shall be deemed to have been
incurred by the Target Companies.
(b) As used in this Agreement, the term "Expenses"
shall include all reasonable out-of-pocket expenses and
disbursements (including, without limitation, all fees and
expenses of counsel, accountants, experts and consultants to
a party hereto and its affiliates) incurred by a party or on
its behalf in connection with or related to the
authorization, preparation, negotiation, execution and
performance of this Agreement, the preparation of the
Registration Statement and Proxy Statement, the solicitation
of stockholder approvals and all other matters related to
the closing of the transactions contemplated herein.
(c) (i) The Target Companies agree that if Acquiror
shall terminate this Agreement pursuant to Section 8.01(b)
due to an intentional breach, and without fault of its own,
the Target Companies shall, on the "Payment Date" (as
hereafter defined), jointly and severally pay to Acquiror an
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amount equal to the sum of its Expenses incurred in
connection with this Agreement.
(ii) Acquiror agrees that if the Target Companies shall
terminate this Agreement pursuant to Section 8.01(c) due to
an intentional breach, and without fault of their own,
Acquiror shall, on the Payment Date, pay to the Target
Companies an amount equal to the sum of their Expenses
incurred in connection with this Agreement.
(d) The Target Companies agree that if Acquiror shall
terminate this Agreement pursuant to Section 8.01 without
fault of its own, and at the time of such termination there
shall exist a Competing Transaction as defined in Section
5.02(h), then at the written election of Acquiror, on the
Payment Date, the Target Companies shall jointly and
severally pay to Acquiror an amount equal to the sum of its
Expenses incurred in connection with this Agreement and
fifteen million dollars ($15,000,000). For purposes of this
Section 8.03(d), the "Payment Date" shall be the date ten
(10) days following the termination of this Agreement
pursuant to Section 8.01(f) hereof. Acquiror agrees that
its election to accept the payments provided for under this
Section 8.03(d) shall constitute its exclusive remedy under
this Agreement, regardless of the circumstances (including
wilful or deliberate conduct) giving rise to such
termination or surrounding the breach of this Agreement by a
Target Company.
(e) Acquiror agrees that if the Target Companies shall
terminate this Agreement pursuant to Section 8.01(g) without
fault of the Target Companies, and at the time of such
termination there shall exist a written agreement of the
nature described in Section 8.01(g), then at the written
election of the Target Companies, on the Payment Date,
Acquiror shall pay to the Target Companies, in such
proportions as they shall determine, an amount equal to the
sum of their Expenses incurred in connection with this
Agreement and fifteen million dollars ($15,000,000). The
Target Companies agree that their election to accept the
payments provided for under this Section 8.03(e) shall
constitute their sole and exclusive remedy arising upon
termination of this Agreement, regardless of the
circumstances (including wilful or deliberate conduct)
giving rise to such termination or surrounding the breach of
this Agreement by Acquiror.
(f) Acquiror agrees that if the Target Companies shall
terminate this Agreement pursuant to Section 8.01(c) or (d)
without fault of the Target Companies, then at the written
election of the U.S. Company, on the Payment Date, Acquiror
shall pay to the U.S. Company an amount equal to the
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discount (if any) applicable to accounts receivable sold by
the U.S. Company pursuant to the provisions of Section
5.01(g) hereof.
(g) Any payment required to be made to Acquiror or the
Target Companies pursuant to Section 8.03(b), (c), (d) or
(e) shall be made not later than two (2) business days after
delivery by one party to the other of demand for payment and
an itemization setting forth in reasonable detail all
Expenses of such party for which it is entitled to
reimbursement (which
itemization may be supplemented and updated from time to
time by such party until the 60th day after delivery of such
notice of demand for payment), and shall be made by wire
transfer of immediately available funds to an account
designated by the party so entitled to receive payment in
the notice of demand delivered pursuant to Section 8.03(b),
(c), (d) or (e), as the case may be.
ARTICLE IX
INDEMNIFICATION MATTERS
SECTION 9.01. Survival of Representations, Warranties and
Agreements; Indemnification. Except as provided in Sections
8.03(b), (c), (d), (e) and (f), the representations, warranties
and agreements of Acquiror, the Target Companies and the Target
Shareholders in this Agreement shall survive termination of this
Agreement or the Effective Time.
SECTION 9.02. Indemnification by the Target Companies and
the Target Shareholders.
(a) In the event Acquiror terminates this Agreement
pursuant to Section 8.01(b) or (f) prior to consummation of
the Unitary Transaction, then, unless Acquiror shall have
elected the remedy provided under Section 8.03(d), the
Target Companies shall be obligated, jointly and severally,
to indemnify and hold Acquiror harmless from and against the
full amount of its costs, Expenses, losses, damages and
liabilities (including reasonable legal fees and costs of
investigation) (collectively, "Damages") incurred or
suffered directly or indirectly by Acquiror and proximately
resulting from or attributable to such termination, not
later than two (2) business days after Acquiror's delivery
of written demand for payment pursuant to this Section 9.02,
and an itemization setting forth in reasonable detail the
Damages as to which it shall be entitled to indemnification
hereunder. Such payment shall be made in the manner
provided in the last sentence of Section 8.03(g) hereof.
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(b) Provided the Unitary Transaction shall have been
consummated, the Target Shareholders, jointly and severally,
covenant and agree to indemnify and save harmless Acquiror
from and against any and all Damages incurred or suffered
directly or indirectly by Acquiror and proximately resulting
from or attributable to (i) the breach of, or misstatement
in, any one or more of the representations or warranties of
the Target Companies made in this Agreement, or (ii) the
failure of any Target Company or Target Shareholder to
comply with, or the breach by any Target Company of, any of
the covenants or agreements in this Agreement to be
performed by such Target Company or Target Shareholder.
(c) Provided the Unitary Transaction shall have been
consummated, the Target Shareholders, jointly and severally,
covenant and agree to indemnify and save harmless Acquiror
from and against any and all Damages incurred or suffered
directly or indirectly by Acquiror and proximately resulting
from or attributable to, (x) U.S. federal, state, provincial
and local Taxes attributable to, assessed against or levied
on the U.S. Company with respect to all Tax periods ending
on or before the Effective Time, but only to the extent (i)
such Taxes would not have been payable by or assessable
against the U.S. Company if a valid S Corporation Election
had been in effect with respect to the U.S. Company during
such Tax periods, and (ii) the U.S. Company, during such Tax
periods, would have been subject to the provisions of
Sections 1361 et. seq. of the Code, and (y) any failure to
withhold Employee Health Tax in Canada.
(d) Following the Effective Time, any and all claims
for Damages pursuant to Section 9.02(b), above, shall be
enforceable, if at all, only against the shares of Acquiror
Common Stock issued in the Unitary Transaction, and limited
as follows:
(i) Each Target Shareholder acknowledges and agrees
with Acquiror that all shares of Acquiror Common Stock which
are not then eligible for registration and sale shall,
during such period of ineligibility, be and remain subject
to Acquiror's right of indemnification through set-off
against and cancellation of such shares. Such shares shall
constitute the sole source for satisfaction of Acquiror's
indemnification claims, and Acquiror hereby agrees that it
shall not seek payment or satisfaction of any such claim
from any other source, it being acknowledged by Acquiror
that the rules set forth in this Section 9.02(d) shall
exclusively govern Acquiror's claims for indemnification
asserted after the Effective Time. Subject to the
provisions of this Section 9.02(d), any such set-off shall
be treated as a reduction of the consideration received by
the Target Shareholders in the Unitary Transaction.
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(ii) Acquiror's right of set-off against shares of
Acquiror Common Stock held by any Target Shareholder shall
be limited to the product of the maximum amount for which
indemnification shall be available and the indemnifying
Target Shareholder's percentage interest in all shares of
Acquiror Common Stock issued in the Unitary Transaction.
(iii) Acquiror shall not be entitled to any recovery
unless a claim for indemnification is made in accordance
with Section 9.02 and within the twelve (12) month period
immediately following the Effective Time.
(iv) Acquiror shall not be entitled to any recovery for
Damages (or portion thereof) which are attributable to
matters for which Acquiror has (x) received (or is
indirectly entitled to receive) proceeds of insurance under
a policy which was in effect at the Effective Time with
respect to the matter for which indemnification is otherwise
available hereunder, (y) separately accrued, for the period
during which such claim for Damages actually arises, a
charge against its reportable earnings for Tax expense
directly attributable to such Damages, but only to the
extent such Tax expense would not be treated or reflected as
a timing difference under GAAP, and only to the extent of
fifty percent (50%) of the Tax expense actually accrued by
Acquiror, or (z) reserved against assets or reflected as
liabilities in the Target Company Financial Statements, but
only to the extent specific provision is made therefor.
(v) In valuing a Target Shareholder's shares of
Acquiror Common Stock for purposes of Acquiror's set-off and
indemnification rights under this Section 9.02(d), such
shares shall in all events be valued at the average closing
sale price of a share of Acquiror Common Stock as reported
by the NASDAQ National Market or other securities exchange
("NASDAQ") on which the Acquiror Common Stock is traded for
the ten (10) trading days prior to the Effective Time (the
"Average Value").
(vi) Acquiror's right of indemnification under this
Section 9.02 shall in each and every instance be limited to
the set-off against and cancellation of shares with an
aggregate value not exceeding ten percent (10%) of (x) the
total number of shares of Acquiror Common Stock received by
the indemnifying Target Shareholder under Article II of this
Agreement (and/or through liquidation of the Canada
Ancillary Service Entities), multiplied by (y) the Average
Value.
(vii) Acquiror shall not be entitled to recover any
amount for indemnification claims under this Section 9.02(d)
unless and until the aggregate Damages which Acquiror is
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entitled to recover in respect of all such claims exceeds
U.S. five hundred thousand dollars ($500,000) (the
"Basket"), and only to the extent such Acquiror's aggregate
Damages exceed the Basket; provided, however, the amount of
any Damage incurred or suffered, directly or indirectly, by
Acquiror and proximately resulting from or attributable to
the breach of, or misstatement in, any one or more of the
representations or warranties of the Target Companies made
in this Agreement shall, notwithstanding the failure of such
breach, misrepresentation or inaccuracy to constitute a
Target Company Adverse Effect, and notwithstanding the
materiality (monetarily or otherwise) of such Damage, be
specifically applied against and reduce the Basket available
for purposes of this Section 9.02(vii).
(e) As used in this Agreement, the term "Damages"
shall not include punitive or exemplary damages awarded by a
court or other trier of fact, Damages arising from the
breach of a representation or warranty which has been
disclosed in the Target Company Disclosure Schedule or
Acquiror Disclosure Schedule or otherwise actually known to
an Acquiror Knowledge Person as of the Effective Date, or
Damages arising solely from the failure to obtain a Material
Consent (provided the person required to have obtained such
consent shall have used reasonable best efforts to obtain
same); provided, however, notwithstanding disclosure in the
Target Company Disclosure Schedule or the actual knowledge
of an Acquiror Knowledge Person, but subject to the
provisions of Section 9.02(d)(vii) hereof, the Target
Companies shall be obligated, jointly and severally, to
indemnify and hold Acquiror harmless from and against the
full amount of any Damages incurred or suffered, directly or
indirectly, by Acquiror and proximately resulting from or
attributable to the following specific matters prior to the
Effective Time:
(i) The U.S. Company's failure to register (if
required) under and comply with an Act relating to the
regulation of telephone solicitation; providing civil and
criminal penalties. Acts 1993, 73rd Leg., ch. 569, of the
Texas Civ. St. Art. 5069-18.01, as amended;
(ii) The U.S. Company's failure to register (if
required) and comply with, and the failure of its employees
to register (if required) and comply with, Title XXXIII,
Regulation of Trade, Commerce, Investments and
Solicitations, Chapter 501, Consumer Protection, Part IV,
the Florida Telemarketing Act, Fla. Stat. Section 501.601,
et.seq.;
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(iii) Marusa Financial's failure (if any) to maintain
in full force and effect any required permits and licenses
under applicable Canadian Laws; and
(iv) Marusa Financial's and/or the Canada Company's
failure (if any) to remit Taxes actually collected under the
GST, but only to the extent any such Taxes not so remitted
exceed the amounts reserved therefor in the Target
Companies' Financial Statements.
SECTION 9.03. Acquiror's Indemnification. Acquiror
covenants
and agrees to indemnify and save harmless the Target Companies
and the Target Shareholders from and against any and all Damages
incurred or suffered directly or indirectly by them and
proximately resulting from or attributable to (i) the breach of,
or misstatement in, any one or more of the representations or
warranties of Acquiror made in this Agreement, and (ii) the
failure of Acquiror to comply with, or the breach by Acquiror of,
any of the covenants or agreements in this Agreement to be
performed by Acquiror. The Target Companies and Target
Shareholders shall not be entitled to recover any amount for
indemnification claims under this Section 9.03 unless and until
the aggregate Damages which the Target Companies are entitled to
recover in respect of all such claims exceed the Basket, and only
to the extent the Target Companies' aggregate Damages exceed the
Basket.
SECTION 9.04. Indemnification Procedures.
(a) In the event that any party hereto shall sustain
or incur any Damages in respect of which indemnification may
be sought by such party pursuant to this Agreement, the
party to be indemnified hereunder (the "Indemnitee") shall
assert a claim for indemnification by serving written notice
on the party providing indemnification (the "Indemnitor"),
stating the nature and basis of such claim.
(b) The Indemnitee shall provide the Indemnitor, on
request, all information and documentation reasonably
necessary to support and verify any Damages which the
Indemnitee believes give rise to a claim for indemnification
hereunder, and shall give the Indemnitor reasonable access
to all books, records and personnel in the possession or
under the control of the Indemnitee which would have bearing
on such claim.
(c) In case either party has received actual notice of
any claim asserted or any action or administrative or other
proceeding in respect of which claim, action or proceeding
such party believes indemnity properly may be sought against
the other party pursuant to this Agreement, the Indemnitee
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shall, within thirty (30) days of receiving such notice,
give notice thereof in writing to the Indemnitor, but
failure to give such notice within such time period shall
relieve the Indemnitor of its indemnification obligation
only to the extent of actual prejudice resulting therefrom.
Within fifteen (15) days after receipt of notice of such
claim, action or proceeding, the Indemnitor may give the
Indemnitee written notice of its election to conduct the
defense of such claim, action or proceeding; provided,
however, that the Indemnitee shall have the right to
participate in the defense thereof, but such participation
shall be solely at the expense of the Indemnitee, without a
right of further reimbursement. Until the Indemnitee has
received notice of the Indemnitor's election whether to
defend any claim, action or proceeding, the Indemnitee shall
take reasonable steps to defend (but may not settle) such
claim, action or proceeding. If the Indemnitor has not so
notified the Indemnitee in writing within the time
hereinabove provided of its election to conduct the defense
of such claim, action or proceeding, the Indemnitee shall
conduct the defense of any such claim, action or proceeding;
provided that the Indemnitee shall not at any time settle,
compromise or satisfy any such claim, action or proceeding
without the written consent of the Indemnitor, which shall
not unreasonably be withheld. Any such settlement,
compromise or satisfaction made by the Indemnitee with the
Indemnitor's consent of, or any such final judgment or
decree entered in, any claim, action or proceeding defended
only by the Indemnitee shall be binding upon the Indemnitor.
The failure of the Indemnitor to assume the defense of any
claim, action or proceeding shall not be deemed a concession
that it is required to indemnify the Indemnitee for the
subject matter thereof. If the Indemnitor has elected under
this Section to conduct the defense of any claim, action or
proceeding, then the Indemnitor shall be obligated to pay
the amount of any adverse final judgment or decree rendered
with respect to such claim, action or proceeding.
ARTICLE X
GENERAL PROVISIONS
SECTION 10.01. Notices. All notices and other
communications given or made pursuant to this Agreement shall be
in writing and shall be deemed to have been duly given or made as
of the date delivered, mailed or transmitted, and shall be
effective upon receipt, if delivered personally, mailed by
registered or certified mail (postage prepaid, return receipt
requested) to the parties at the following addresses (or at such
other address for a party as shall be specified by like changes
of address) or sent by electronic transmission to the telecopier
number specified below:
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If to Acquiror, Acquiror Sub-1 or Acquiror Sub-2:
HA-LO Industries, Inc.
5980 West Touhy Avenue
Niles, IL 60714
Attention: Mr. Richard A. Magid, CFO
Facsimile number: 847.647.4970
with copies to:
Marc S. Roth, Esq.
Marc S. Roth & Associates, Ltd.
261 Walden Drive
Glencoe, IL 60022
Facsimile number: 847.835.3418
-and-
Barry J. Shkolnik
Neal Gerber & Eisenberg
Two North LaSalle Street
Suite 2200
Chicago, IL 60602
Facsimile number: 312.269.1747
(a) If to the Target Companies:
Market USA, Inc.
701 Lee Street
Des Plaines, IL 60610
Attention: Mr. Seymour Okner, CEO
Facsimile No.: 847.803.1825
with a copy to:
David W. Schoenberg, Esq.
Altheimer & Gray
10 South Wacker Drive
Suite 4000
Chicago, IL 60606
Facsimile No.: 312.715.4800
SECTION 10.02. Amendment. This Agreement may be amended by
the parties by action taken by or on behalf of their respective
Boards of Directors at any time prior to the Effective Time;
provided, however, that, after approval of the Merger by the
stockholders of Acquiror, no amendment may be made which would
increase the amount or change the type of consideration into
which each share of Target Company Common Stock shall be
converted pursuant to this Agreement upon consummation of the
Unitary Transaction. This Agreement may not be amended except by
an instrument in writing signed by the parties.
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SECTION 10.03. Waiver. At any time prior to the Effective
Time, any party may (i) extend the time for the performance of
any of the obligations or other acts of the other party, (ii)
waive in writing any inaccuracies in the representations and
warranties of the other party contained in this Agreement or in
any document delivered pursuant to this Agreement, and (iii)
waive compliance by the other party with any of the agreements or
conditions contained in this Agreement. Any such extension or
waiver shall be valid if set forth in an instrument in writing
signed by the party or parties to be bound thereby.
SECTION 10.04. Headings. The headings contained in this
Agreement are for reference purposes only and shall not affect in
any way the meaning or interpretation of this Agreement.
SECTION 10.05. Severability. If any term or other provision
of this Agreement is invalid, illegal or incapable of being
enforced by any rule of Law or public policy, all other
conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected
in any manner materially adverse to any party. Upon such
determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties shall
negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties as closely as possible in an
acceptable manner to the end that transactions contemplated
hereby are fulfilled to the extent possible.
SECTION 10.06. Entire Agreement. This Agreement (together
with the Exhibits, and the Target Company and Acquiror Disclosure
Schedules and the other documents delivered pursuant hereto),
constitutes the entire agreement of the parties and supersede all
prior agreements and undertakings, both written and oral, between
the parties, or any of them, with respect to the subject matter
hereof and, except as otherwise expressly provided herein, are
not intended to confer upon any other person any rights or
remedies hereunder. Any matter which is disclosed in any portion
of the Target Company or Acquiror Disclosure Schedule shall be
deemed to have been disclosed for the purposes of all relevant
provisions of this Agreement. The inclusion of any item in any
such Disclosure Schedule shall not be deemed evidence of the
materiality of such item for purposes of this Agreement. The
parties make no representations or warranties to each other,
except as contained in this Agreement, and any and all prior
representations and warranties made by any party or its
representatives, whether orally or in writing, shall be deemed to
have been merged into this Agreement, it being intended that no
such prior representations or warranties shall survive the
execution and delivery of this Agreement.
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SECTION 10.07. Assignment. This Agreement shall not be
assigned by operation of law or otherwise.
SECTION 10.08. Parties in Interest. This Agreement shall be
binding upon and inure solely to the benefit of each party, and
nothing in this Agreement, express or implied, other than the
right to receive the consideration payable in the Unitary
Transaction pursuant to Article II, is intended to or shall
confer upon any other person any right, benefit or remedy of any
nature whatsoever under or by reason of this Agreement.
SECTION 10.09 Governing Law. This Agreement shall be
governed by, and construed in accordance with, the Laws of the
State of Illinois, regardless of the Laws that might other vise
govern under applicable principles of conflicts of law.
SECTION 10.10. Counterparts. This Agreement may be executed
in or more counterparts, and by the different parties hereto in
separate counterparts, each of which when executed shall be
deemed to be an original but all of which taken together shall
constitute one and the same agreement. Each person owning shares
of U.S. Company or Canada Company Common Stock on the date of
this Agreement shall execute this Agreement on the date hereof as
a Target Shareholder, and every other person so acquiring shares
of U.S. Company or Canada Company Common Stock after the date of
this Agreement and prior to the Effective Time shall execute a
separate undertaking or counterpart hereof, agreeing to be bound
by all the representations, warranties, covenants and agreements
of a Target Shareholder herein.
SECTION 10.11. Power of Attorney. Each of the Target
Shareholders hereby appoints Sy Okner, with full power of
substitution, as his attorney in fact, with full power and
authority:
(a) to execute and deliver, on behalf of such Target
Shareholder, and to accept delivery of, on behalf of such
Target Shareholder, such documents as may be deemed by the
Sy Okner, in his sole discretion, to be appropriate to
consummate this Agreement;
(b) to deliver on behalf of such Target Shareholder,
certificates representing the U.S. Company Common Common
Stock or Canada Company Common Stock to be converted in the
Unitary Merger Transaction;
(c) to receive, on behalf of such Target Shareholder,
the shares of Acquiror Common Stock to be issued to such
Target Shareholder in the Unitary Merger Transaction;
(d) to (x) dispute or refrain from disputing, on
behalf of such Target Shareholder, any claim made by
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Acquiror under this Agreement; (y) negotiate and compromise,
on behalf of such Target Shareholder, any dispute that may
arise under, and to exercise or refrain from exercising any
remedies available under, this Agreement, and (z) execute,
on behalf of such Target Shareholder, any settlement
agreement, release or other document with respect to such
dispute or remedy;
(e) to waive, on behalf of such Target Shareholder,
any closing condition contained in Article VII of this
Agreement and to give or agree to, on behalf of such Target
Shareholder, any and all consents, waivers, amendments or
modifications, deemed by Sy Okner, in his sole discretion,
to be necessary or appropriate, under this Agreement, and,
in each case, to execute and deliver any documents that may
be necessary or appropriate in connection therewith;
(f) to enforce, on behalf of such Target Shareholder,
any claim against Acquiror arising under this Agreement;
(g) to engage attorneys, accountants and agents at the
expense of the Target Shareholders;
(h) to amend this Agreement (other than this Section
10.11) or any of the instruments to be delivered to Acquiror
by such Target Shareholder pursuant to this Agreement; and
(i) to give such instructions and to take such action
or refrain from taking such action, on behalf of such Target
Shareholder, as Sy Okner deems, in his sole discretion,
necessary or appropriate to carry out the provisions of this
Agreement.
Each Target Shareholder shall severally indemnify Sy Okner
against any Damages (except such as result from his gross
negligence or willful misconduct) that Sy Okner may suffer or
incur in connection with any action or omission by him. Each
Target Shareholder shall bear its pro-rata portion of such
Damages. Sy Okner shall have no liability to any Target
Shareholder with respect to any action or omission taken or
omitted to be taken by him pursuant to this Section 10.11, except
for Sy Okner's gross negligence or willful misconduct. The power
of attorney granted to Sy Okner pursuant to this Section 10.11 is
coupled with an interest and is irrevocable.
IN WITNESS WHEREOF, Acquiror, Acquiror Sub-1, Acquiror Sub-
2, the U.S. Company, the Canada Company, Marusa Financial, Nerok
and the Target Shareholders have caused this Agreement to be
executed as of the date first written above by their respective
officers duly authorized.
-82-<PAGE>
<PAGE>
HA-LO INDUSTRIES, INC.
By: /s/ Lou Weisbach
Its: Chief Executive Officer
HA-LO ACQUISITION CORPORATION, INC.,
By: /s/ Lou Weisbach
Its: President
HA-LO ACQUISITION CORPORATION OF CANADA,
LTD.,
By: /s/ Lou Weisbach
Its: President
MARKET USA, INC.
By: /s/ Seymour N. Okner
Its: President
MARUSA MARKETING INC.
By: /s/ Seymour N. Okner
Its: President
MARUSA FINANCIAL SERVICES LTD.
By: /s/ Seymour N. Okner
Its: President
NEROK VERIFICATIONS INC.
By: /s/ Anne Okner
Its: President
TARGET SHAREHOLDERS:
/s/ Seymour N. Okner
Seymour N. Okner
/s/ Samuel P. Okner
Samuel P. Okner
-83-<PAGE>
<PAGE>
ELLYN ROBBINS FAMILY TRUST UNDER
AGREEMENT DATED MAY 14, 1996
/s/ Anne Okner
Anne Okner, Co-Trustee
/s/ Ellyn Robbins
Ellyn Robbins, Co-Trustee
JOEL C. OKNER FAMILY TRUST UNDER
AGREEMENT DATED MAY 14, 1996
/s/ Anne Okner
Anne Okner, Co-Trustee
/s/ Joel C. Okner
Joel C. Okner, Co-Trustee
SAMUEL P. OKNER, FAMILY TRUST UNDER
AGREEMENT DATED MAY 14, 1996
/s/ Anne Okner
Anne Okner, Co-Trustee
/s/ Samuel P. Okner
Samuel P. Okner, Co-Trustee
MERCHANT PARTNERS, LIMITED PARTNERSHIP
By: Merchant Advisors, Limited
Partnership, general partner
By: Merchant Development Corp., general
partner
By: /s/ Raymond L. Bank
President
182519_01
-84-<PAGE>
<PAGE>
FIRST AMENDMENT TO
AGREEMENT AND PLAN OF MERGER AND AMALGAMATION
THIS FIRST AMENDMENT TO THE AGREEMENT AND PLAN OF MERGER AND
AMALGAMATION ("Amendment One") is made and entered into as of
this 30th day of September, 1996, by and among HA-LO INDUSTRIES,
INC., an Illinois corporation ("HA-LO"), HA-LO ACQUISITION
CORPORATION, INC., an Illinois corporation ("Acquiror Sub-1"),
HA-LO ACQUISITION CORPORATION OF CANADA LTD., a Canadian federal
corporation ("Acquiror Sub-2"), MARKET USA, INC., an Illinois
corporation (the "U.S. Company"), MARUSA MARKETING INC., a
Canadian federal corporation (the "Canada Company"), MARUSA
FINANCIAL SERVICES LTD., a Canadian federal corporation ("Marusa
Financial"), NEROK VERIFICATIONS INC., a Canadian federal
corporation ("Nerok"), and the shareholders of the U.S. Company
and the Canada Company (such shareholders, together with every
other person who acquires shares of the authorized capital stock
of the U.S. Company or the Canada Company prior to the Effective
Time, are hereafter collectively the "Target Shareholders", and
each individually is a "Target Shareholder").
WHEREAS, the parties have entered into an Agreement and Plan
of Merger and Amalgamation dated as of June 14, 1996 (the "Plan
of Merger"), whereunder HA-LO will acquire the U.S. Company and
the Canada Company through a series of transactions intended to
qualify as a reorganization under the provisions of Sections
368(a) of the United States Internal Revenue Code of 1986, as
amended, an exempt transaction under the Canada/U.S. Income Tax
Convention, as amended, and a pooling of interests under
applicable securities and accounting rules;
WHEREAS, Section 1.03 of the Plan of Merger contemplates
that, at the Effective Time, HA-LO would purchase the assets of
Marusa Financial and Nerok through a Canadian designee (the
"Ancillary Asset Acquisition");
WHEREAS, in lieu of consummating the Ancillary Asset
Acquisi-tion, the parties have determined it would be more
appropriate for HA-LO to purchase (i) all issued and outstanding
shares of Marusa Financial which are owned by Seymour N. Okner
and Samuel P. Okner, and (ii) all of the issued and outstanding
shares of Nerok; and
WHEREAS, the sole shareholders of Nerok are Anne Okner and
Debra Okner (the "Nerok Shareholders"), who are not otherwise
signatories to the Plan of Merger; and
WHEREAS, the parties are desirous of amending the Plan of
Merger for the purposes of cancelling the Ancillary Asset
Acquisition, and establishing terms and conditions pursuant to
which HA-LO would purchase (i) the issued and outstanding shares
of Marusa Financial which are owned by Seymour N. Okner ("Sy
Okner") and Samuel P. Okner ("Sam Okner"), and (ii) all of the<PAGE>
<PAGE>
issued and outstanding shares of Nerok from the Nerok
Shareholders;
WHEREAS, Section 10.2 of the Plan of Merger provides that
the agreement of the parties may be amended, modified or altered
only by action taken by or on behalf of the Boards of Directors
of HA-LO, Acquiror Sub-1, Acquiror Sub-2, the Target Companies,
Marusa Financial and Nerok prior to the Effective Time;
WHEREAS, HA-LO, Acquiror Sub-1, Acquiror Sub-2, the Target
Companies, Marusa Financial, Nerok and the Target Shareholders
have agreed to amend the Plan of Merger as provided in this
Preamble;
NOW, THEREFORE, in consideration of the premises, the mutual
covenants and agreements hereinafter set forth, and other good
and valuable consideration, the receipt and sufficiency of which
is hereby mutually acknowledged, the parties hereto, intending to
be legally bound, agree as follows:
1. Reference is hereby made to the Plan of Merger. Unless
otherwise provided in this Amendment One, all capitalized terms
shall have the meanings ascribed to them under the Plan of
Merger.
2. This Amendment One shall be conclusive, final and
binding on the parties and their successors with respect to the
matters herein, and in the event of an ambiguity between the
terms and provisions of this Amendment One and the terms and
provisions of the Plan of Merger, the terms and provisions of
this Amendment One shall, to the fullest extent possible, govern
and control the rights and obligations of the parties.
3. Section 1.03 of the Plan of Merger is hereby amended in
its entirety to read as follows:
"SECTION 1.03 Acquisition of Outstanding Shares of Marusa
Financial and Nerok.
(a) Upon the terms and subject to the conditions set
forth in this Agreement and the Stock Purchase Agreement in
the form attached to this Agreement as Exhibit "A-1" (the
"Marusa Financial Stock Purchase Agreement", which is by
this reference specifically incorporated in and made a part
hereof), at the Effective Time, Sy Okner and Sam Okner
(collectively, the "Selling Target Shareholders") shall
sell, convey, transfer and assign to Acquiror, and Acquiror
shall purchase from the Selling Target Shareholders, free
and clear of any liability, lien, claim, restriction or
encumbrance whatsoever, the entire right, title and interest
in and to their shares of Marusa Financial. As
consideration therefor, Acquiror shall issue fifty (50)
shares of Acquiror Common Stock to the Selling Target
2<PAGE>
<PAGE>
Shareholders, to be divided between them in the manner
provided in the Marusa Financial Stock Purchase Agreement.
Acquiror hereby acknowledges that the Selling Target
Shareholders (i) have informed Acquiror they do not own all
of the authorized and outstanding shares of, or other forms
of ownership in, Marusa Financial, and (ii) have neither
promised nor made representations to Acquiror regarding the
intentions of Ernest E. Gershon with respect to the fifty-
one (51) Class B shares of Marusa Financial reflected as
being owned by him in the permanent records of the
corporation.
(b) Upon the terms and subject to the conditions set
forth in this Agreement and the Stock Purchase Agreement in
the form attached to this Agreement as Exhibit "A-2" (the
"Nerok Stock Purchase Agreement", which is by this reference
specifically incorporated in and made a part hereof), at the
Effective Time, Anne Okner and Debra Okner (the spouses of
Sy Okner and Sam Okner, and hereafter sometimes collectively
referred to as the "Nerok Shareholders") shall sell, convey,
transfer and assign to Acquiror, and Acquiror shall purchase
from the Nerok Shareholders, free and clear of any
liability, lien, claim, restriction or encumbrance
whatsoever, the entire right, title and interest in and to
their shares of Nerok. As consideration therefor, Acquiror
shall issue fifty (50) shares of Acquiror Common Stock to
the Nerok Shareholders, to be divided between them in the
manner provided in the Nerok Stock Purchase Agreement."
4. The Plan of Merger is hereby amended in its entirety to
cancel reference to the Ancillary Asset Acquisition and, in
replacement therefor, substitute the Marusa Financial Stock
Purchase Agreement, the Nerok Stock Purchase Agreement, the
transactions contemplated thereunder and all documents, actions
and/or forbearances required or reasonably deemed necessary by
Acquiror, a Selling Target Shareholder or a Nerok Shareholder to
effectuate the transactions contemplated thereby. The parties
acknowledge and agree that (i) the closing of the transactions
under the Marusa Financial Stock Purchase Agreement and the Nerok
Stock Purchase Agreement shall constitute conditions to the
obligations of the parties thereto to close the other
transactions under the Plan of Merger, and (ii) a refusal by
either Nerok Shareholder to execute, deliver or perform the Nerok
Stock Purchase Agreement shall be deemed a failure to satisfy the
conditions of Section 7.02(b) of the Plan of Merger.
5. The parties hereby acknowledge that Merchant Partners,
Limited Partnership, a Delaware limited partnership ("MPLP"), by
virtue of its exercise of option under an agreement dated
November 9, 1995, memorializing an oral understanding reached in
October, 1993, with certain Target Shareholders, has recently
acquired shares of Target Company Common Stock and become a
3<PAGE>
<PAGE>
Target Shareholder hereunder. MPLP hereby ratifies and reaffirms
its execution and delivery of the Plan of Merger, MPLP and the
other parties hereby agreeing that, at all relevant times
hereafter, MPLP shall be subject to and observe the terms and
conditions of the Plan of Merger as fully as though it was an
original signatory thereto.
6. In all other respects, the terms and conditions of the
Plan of Merger shall remain in full force and effect.
IN WITNESS WHEREOF, Acquiror, Acquiror Sub-1, Acquiror Sub-
2, the U.S. Company, the Canada Company, Marusa Financial, Nerok
and the Target Shareholders have caused this Amendment One to be
executed as of the date first written above by their respective
officers duly authorized.
HA-LO INDUSTRIES, INC.
By: /s/ Richard A. Magid
Its: Vice President
HA-LO ACQUISITION CORPORATION, INC.
By: /s/ Richard A. Magid
Its: Vice President
HA-LO ACQUISITION CORPORATION OF CANADA,
LTD.
By: /s/ Richard A. Magid
Its: Treasurer
MARKET USA, INC.
By: /s/ Seymour N. Okner
Its: President
4<PAGE>
<PAGE>
MARUSA MARKETING INC.
By: /s/ Seymour N. Okner
Its: President
MARUSA FINANCIAL SERVICES LTD.
By: /s/ Seymour N. Okner
Its: President
NEROK VERIFICATIONS INC.
By: /s/ Anne Okner
Its: President
TARGET SHAREHOLDERS:
MERCHANT PARTNERS, LIMITED PARTNERSHIP
By: Merchant Advisors, Limited
Partnership, its general partner
By: Merchant Development Corp.,
its general partner
By: /s/ Raymond L. Bank
Raymond L. Bank, President
/s/ Seymour N. Okner
Seymour N. Okner
/s/ Samuel P. Okner
Samuel P. Okner
5<PAGE>
<PAGE>
ELLYN ROBBINS FAMILY TRUST UNDER
AGREEMENT DATED MAY 14, 1996
By: /s/ Anne Okner
Anne Okner, Co-Trustee
By: /s/ Ellyn Robbins
Ellyn Robbins, Co-Trustee
JOEL C. OKNER FAMILY TRUST UNDER
AGREEMENT DATED MAY 14, 1996
By: /s/ Anne Okner
Anne Okner, Co-Trustee
By: /s/ Joel C. Okner
Joel C. Okner, Co-Trustee
SAMUEL P. OKNER FAMILY TRUST UNDER
AGREEMENT DATED MAY 14, 1996
By: /s/ Anne Okner
Anne Okner, Co-Trustee
By: /s/ Sam Okner
Sam Okner, Co-Trustee
6<PAGE>
<PAGE>
SECOND AMENDMENT TO AGREEMENT AND PLAN OF MERGER AND AMALGAMATION
THIS SECOND AMENDMENT TO AGREEMENT AND PLAN OF MERGER AND
AMALGAMATION ("Second Amendment") is made and entered into as of
this 30th day of September, 1996, by and among HA-LO INDUSTRIES,
INC., an Illinois corporation ("HA-LO"), party of the first part;
and MARKET U.S.A., INC., an Illinois corporation ("Market"),
MARUSA MARKETING INC., a Canadian federal corporation ("Marusa")
(Market and Marusa are collectively, the "Target Companies"), and
SEYMOUR N. OKNER (the "Shareholder"), individually and as
attorney-in-fact for all Target Shareholders (as defined herein),
parties of the second part (collectively, the "Target Parties").
WHEREAS, HA-LO, HA-LO Acquisition Corporation, Inc., an
Illinois corporation ("HA-LO Sub-1"), HA-LO Acquisition
Corporation of Canada Ltd., a Canadian federal corporation ("HA-
LO Sub-2") (the foregoing parties are collectively, the "HA-LO
Parties"), the Target Parties and certain affiliates of the
Target Parties entered into an Agreement and Plan of Merger and
Amalgamation dated as of June 14, 1996 (the "Merger Agreement"),
under which, among other events (i) HA-LO Sub-1 agreed to merge
with and into Market, with Market continuing as the surviving
corporation (the "Merger"), and (ii) HA-LO Sub-2 and Marusa
agreed to amalgamate, such that their separate corporate
existences ceased with both continuing in existence as one
amalgamated corporation (the "Amalgamation"); and
WHEREAS, the closing of the transactions contemplated under
the Merger Agreement (the "Effective Time"), as modified by that
certain First Amendment to Agreement and Plan of Merger and
Amalgamation dated even date herewith ("First Amendment"), are
scheduled to occur simultaneously with the execution and delivery
of this Second Amendment; and
WHEREAS, at the Effective Time, the Target Shareholders
owning shares of Market immediately prior to the Merger, and the
Target Shareholders owning shares of Marusa immediately prior to
the amalgamation, are to receive, in exchange for their shares in
the respective Target Companies, a fixed number of shares of HA-
LO's authorized common capital stock, no par value; and
WHEREAS, the parties to the Merger Agreement have in certain
instances agreed to indemnify and save harmless certain other
parties thereto from and against certain qualifying "Damages" (as
defined in the Merger Agreement) incurred or suffered directly or
indirectly by such other parties and proximately resulting from
or attributable to, among other matters, a breach of, or
misstatement in, any one or more of the representations or
warranties of the indemnifying parties set forth in the Merger
Agreement; and
WHEREAS, HA-LO has asserted a claim for Damages against the
Target Parties (the "HA-LO Damage Claim") arising from the breach
of, and misstatement in, certain representations and warranties<PAGE>
<PAGE>
of the Target Companies set forth in the Merger Agreement, which
HA-LO Damage Claim is evidenced by certain disclosures of the
Target Companies set forth in the second revised "Target Company
Disclosure Schedule" delivered to HA-LO prior to the date of this
Second Amendment (the "Second Revised Disclosure Schedule", a
true and correct copy of which is attached to this Second
Amendment as Exhibit A); and
WHEREAS, after discussions, and in consideration of the
mutual desire of the parties hereto to consummate the
transactions contemplated under the Merger Agreement, the HA-LO
Parties and the Target Parties have agreed to (i) fully and
finally determine the terms and conditions under which the Target
Shareholders shall indemnify the HA-LO Parties pursuant to
Article IX of the Merger Agreement for their damages arising from
and as a result of the HA-LO Damage Claim, and (ii) thereafter
diligently proceed to consummate the transactions contemplated
under the Merger Agreement in accordance with the terms and
conditions thereof;
NOW, THEREFORE, in consideration of the premises, the mutual
covenants and agreements hereinafter set forth, and other good
and valuable consideration, the receipt and sufficiency of which
is hereby mutually acknowledged, the parties hereto, intending to
be legally bound, agree as follows:
1. Reference is hereby made to the Merger Agreement and
the First Amendment. Unless otherwise provided in this Second
Amendment, all capitalized terms herein shall have the meanings
ascribed to them in the Merger Agreement and the First Amendment.
This Second Amendment is entered into pursuant to, and is
specifically intended to supplement, the Merger Agreement and the
First Amendment.
2. This Second Amendment shall be conclusive, final and
binding on the parties and their successors with respect to all
rights of indemnification of the HA-LO Parties under Section
9.02(b) and 9.02(c)(y) of the Merger Agreement with respect to
Damages directly or indirectly incurred or suffered by any of
them from, in connection with or as a result of the changes and
events (i) described in Section 3.07(b)(1) of the Second Revised
Disclosure Schedule, (ii) relating to any GST and/or QST owed by
the Canada Company or Marusa Financial for periods ending on or
prior to the Effective Time (which together with interest and
penalties thereon are hereafter collectively, the "Canadian
Taxes") described on page 15 of the Second Revised Disclosure
Schedule, and (iii) relating to U.S. federal and state taxes,
interest and penalties arising from the failure to file 1099
Informational Returns for payments to non-employees and
transactions with other persons (the "1099 Taxes") (collectively,
the "Settled Matters"), and irrespective of whether the Settled
Matters would, in themselves, or in combination with other
2<PAGE>
<PAGE>
changes or events not so set forth or described, constitute a
breach of, or misstatement in, the representations and warranties
of the Target Companies made in the Merger Agreement.
3. The parties hereto agree that, on or prior to October
11, 1996, the Target Shareholders shall pay HA-LO the U.S. dollar
equivalent of CN $144,000, in settlement of the obligations of
the Target Shareholders under Section 9.02(c)(y) of the Merger
Agreement. Such amount shall be converted to United States
Dollars utilizing the exchange rate in effect as of the date
hereof, as quoted in the Wall Street Journal for Tuesday, October
1, 1996. At the election of the Target Shareholders, such amount
shall be paid to HA-LO (i) in cash, in United States Dollars, or
(ii) by means of pro-rata cancellation of the Acquiror Shares
issued to the Target Shareholders at the Effective Time,
utilizing for such purpose a value of $29.1875 per share, which
shall constitute the Average Value for all purposes under the
Merger Agreement. The parties agree to cooperate in
effectuating any such cancellation. The Target Shareholders
represent to HA-LO that all other Employee Health Taxes which are
due and payable in Canada through August 31, 1996 (September 1996
Employee Health Taxes are not due as of the date hereof) have
been paid in full, and agree they shall pay directly and hold the
HA-LO Parties harmless from and against any interest and
penalties attributable to any delinquencies in Employee Health
Taxes for periods prior to September 1, 1996.
4. From and after the Effective Time, the Target
Shareholders shall be obligated to indemnify and hold the HA-LO
Parties harmless from and against any (i) 1099 Taxes assessed or
assessable aginst the U.S. Surviving Corporation, and (ii)
Canadian Taxes assessed or assessable against the Amalgamated
Canada Corporation and Marusa Financial, with respect to all
periods ending on or prior to the Effective Time, without regard
to the provisions of Section 9.02 of the Merger Agreement, to the
extent such 1099 Taxes and Canadian Taxes (x) exceed U.S.
$50,000, and (y) do not exceed U.S. $490,000. All remaining 1099
Taxes and/or Canadian Taxes which become payable by the U.S.
Survivor Corporation, Amalgamated Canada Corporation or Marusa
Financial and which are not indemnifiable pursuant to the
preceding sentence shall constitute Damages which shall be
indemnifiable pursuant to Section 9.02(b) of the Merger
Agreement, subject to the limitations set forth in Section
9.02(d) of the Merger Agreement.
5. In all other respects, the terms and conditions of the
Merger Agreement, as amended by the First Amendment and this
Second Amendment shall remain in full force and effect.
IN WITNESS WHEREOF, the parties have duly executed this
Second Amendment on the day and year first above written.
3<PAGE>
<PAGE>
HA-LO INDUSTRIES, INC.
By: /s/ Richard A. Magid
Its: COO
MARKET U.S.A., INC.
By: /s/ Seymour N. Okner
Its: President
MARUSA MARKETING INC.
By: /s/ Seymour N. Okner
Its: President
/s/ Seymour N. Okner
Seymour N. Okner, individually and
as attorney-in-fact for the Target
Shareholders
4<PAGE>
AFFILIATE AGREEMENT
THIS AFFILIATE AGREEMENT ("Affiliate Agreement") is made and
entered into as of this 30th day of September, 1996, by and
between the undersigned, SEYMOUR N. OKNER ("Shareholder"), and
HA-LO INDUSTRIES, INC., an Illinois corporation ("HA-LO").
The background of this Affiliate Agreement is as follows:
As of the date of this Affiliate Agreement, Shareholder is
an executive officer, director and/or shareholder of Market
U.S.A., Inc., an Illinois corporation ("Market USA"), and
executive officer and/or shareholder of Marusa Marketing Inc., a
Canadian federal corporation ("Marusa"). Pursuant to an
Agreement and Plan of Merger and Amalgamation dated as of June
14, 1996 (the "Plan of Merger"), among Shareholder, the other
shareholders of Market USA and Marusa, HA-LO, Market USA, Marusa,
and others, it was agreed that, upon satisfaction of certain
conditions, HA-LO's wholly-owned Illinois and Canadian
subsidiaries would merge into and amalgamate with Market USA and
Marusa, respectively, in a unitary transaction intended to
qualify simultaneously as (i) a reorganization under the
provisions of Section 368(a) of the Internal Revenue Code of
1986, as amended, (ii) an amalgamation exempt from taxation under
the Canada/U.S. Income Tax Convention, and (iii) a "pooling of
interests" under generally accepted accounting principles
("GAAP"), the published statements of the Financial Accounting
Standards Board ("FASB"), and the rules and regulations ("Rules
and Regulations") of the Securities and Exchange Commission (the
"Commission") promulgated under the Securities Act of 1933, as
amended (the "Securities Act"). The aforesaid tax and accounting
treatments (hereafter collectively referred to as the "Merger
Benefits") were a material inducement to the parties to enter
into the Plan of Merger. Shareholder's agreements hereunder
constituted an inducement to HA-LO to enter into the Plan of
Merger, and HA-LO's obligation to consummate the transactions
contemplated under the Plan of Merger are expressly conditioned
upon Shareholder's execution and delivery of this Affiliate
Agreement prior to the effectiveness of said transactions (as
defined in Section 1.04 of the Plan of Merger, the "Effective
Time"). Unless otherwise provided in this Affiliate Agreement,
the capitalized terms used herein shall have the same meanings
ascribed to them in the Plan of Merger.
Pursuant to the Plan of Merger, Market USA and Marusa (in
their merged and/or amalgamated composition) would become wholly-
owned subsidiaries of HA-LO, and Shareholder would receive shares
of HA-LO's common capital voting stock, no par value (the
"Acquiror Securities"), in exchange for Shareholder's total
shareholdings in Market USA and/or Marusa (the "Target
Securities"). It is the parties' good faith belief and
understanding that Shareholder is an "affiliate" of Market USA
and/or Marusa prior to the Effective Time, and may be an<PAGE>
<PAGE>
"affiliate" of HA-LO on and after the Effective Time. As used
herein, "affiliate" shall have the same meaning given to such
term for purposes of paragraphs (c) and (d) of Rule 145 of the
Rules and Regulations of the Commission under the Securities Act,
and/or as used in and for purposes of Accounting Series, Releases
130 and 135, as amended, of the Commission.
By and through this Affiliate Agreement, Shareholder is (i)
acknowledging that certain requirements of the Code, the Canada
Tax Act, GAAP, Financial Accounting Statements of FASB ("FAS")
and the Securities Act (among other laws and rules) may govern or
limit the applicability and/or availability of the Merger
Benefits in the event of a sale, transfer or other disposition by
Shareholder of his Target Securities and Acquiror Securities,
(ii) representing and warranting to and for the benefit of HA-LO
that Shareholder will not take any action which could jeopardize
the treatment of the merger of Market USA and the amalgamation of
Marusa as a pooling of interests for accounting purposes, and
(iii) acknowledging and agreeing that HA-LO shall have no
obligation or responsibility to facilitate the sale, transfer or
other disposition of Acquiror Securities received by Shareholder
under the Plan of Merger except to the extent set forth in the
Registration Rights Agreement attached hereto as Annex "1" (the
"Registration Agreement"), which shall be executed concurrently
herewith by HA-LO, Shareholder and the other shareholders of
Market USA and/or Marusa, or paragraph 7 hereof.
NOW, THEREFORE, in consideration of the premises, the
agreement of the parties to enter into and consummate the
transactions contemplated under the Plan of Merger, and other
good and valuable consideration, the receipt and sufficiency of
which is hereby mutually acknowledged, Shareholder and HA-LO,
intending to be legally bound, covenant to and agree, each with
the other, as follows:
1. In the event Shareholder receives any Acquiror
Securities under, pursuant to or as a result of the Plan of
Merger, Shareholder shall not make any sale, transfer or other
disposition of such Acquiror Securities in violation of the
Securities Act or Rules and Regulations of the Commission.
2. Shareholder acknowledges and represents that
Shareholder has carefully read the Plan of Merger and this
Affiliate Agreement, and to the extent Shareholder deemed it
necessary, Shareholder has discussed the requirements of these
documents, and other applicable limitations on Shareholder's
ability to sell, transfer or otherwise dispose of Acquiror
Securities, with legal counsel of Shareholder s selection.
3. Shareholder understands the transactions contemplated
under the Plan of Merger must be submitted for a vote of the
stockholders of HA-LO pursuant to a Proxy Statement containing,
in part, material information concerning, and provided by or on
- 2 -<PAGE>
<PAGE>
behalf of, Market USA, Marusa and Shareholder. In connection
with such solicitation, and otherwise for the purpose of
consummating the transactions contemplated under the Plan of
Merger, the Proxy Statement and other written materials prepared
by or on behalf of HA-LO may deem Shareholder to be an
"affiliate" of Market USA and Marusa prior to the Effective Time,
and an "affiliate" of HA-LO on and after the Effective Time.
Shareholder hereby agrees that, whether or not such
classification is correct, Shareholder shall not take objection
to, and Shareholder shall not cause or suffer others to take
objection to, such classification, if such objection could result
in, or effect, any modification, alteration, amendment,
restatement or nullification of any term or provision set forth
in this Affiliate Agreement or otherwise intended to be binding
on Shareholder and Shareholder's successors and assigns.
4. Shareholder hereby agrees that, from the Effective
Time, he shall not sell, transfer or otherwise dispose of
Acquiror Securities issued to him under the Plan of Merger unless
(x) such sale, transfer or disposition has been effectively
registered under the Securities Act, including pursuant to the
Registration Agreement, for as long as he shall remain an
"affiliate" of HA-LO, (y) such sale, transfer or disposition is
made in conformity with the volume and other limitations of Rule
145 promulgated by the Commission under the Securities Act, or
(z) in the opinion of counsel reasonably acceptable to HA-LO,
such sale, transfer or disposition is exempt from registration
under the Securities Act.
5. Anything in this Affiliate Agreement to the contrary
notwithstanding, Shareholder covenants and agrees with HA-LO that
Shareholder shall not, directly or indirectly, (i) during the
thirty (30) days prior to the Effective Time, sell, transfer or
otherwise dispose of any shares of Target Securities, or (ii)
sell, transfer or otherwise dispose of any shares of Acquiror
Securities, whether or not received by Shareholder under the Plan
of Merger, during the period from the Effective Time until after
such time as results covering at least thirty (30) days of
combined operations of Market USA, Marusa and HA-LO have been
published by HA-LO in the form of a quarterly earnings report, an
effective registration statement filed with the Commission, a
report to the Commission on Form 10-K, 10-Q or 8-K, or any other
public filing or announcement which includes such combined
results of operations for Market USA, Marusa and HA-LO. For
purposes of this Affiliate Agreement, the separate periods during
which Shareholder shall be prohibited from selling, transferring
or otherwise disposing of Target Securities or Acquiror
Securities pursuant to this Section 5 are hereafter collectively,
the "Pooling Periods".
6. Shareholder understands and agrees it is intended the
transactions under the Plan of Merger will be treated as a
- 3 -<PAGE>
<PAGE>
"pooling of interests" in accordance with GAAP, FAS and Rules and
Regulations promulgated by the Commission under the Securities
Act. Shareholder agrees that Shareholder's forbearance from
selling, transferring or otherwise disposing of Target Securities
and Acquiror Securities during a Pooling Period is required to
preserve the Merger Benefits.
7. Following expiration of the Pooling Periods, for so
long as shall be necessary in order to permit Shareholder to sell
Acquiror Securities issued to him under the Plan of Merger
pursuant to Rule 145 under the Securities Act, and to the extent
applicable, Rule 144 under the Securities Act, HA-LO shall file
those reports required to be filed by it pursuant to Section 13
of the Securities Exchange Act of 1934, as amended, in order to
permit Shareholder to sell Acquiror Securities pursuant to the
terms and conditions of Rule 145 and the applicable provisions of
Rule 144.
Shareholder understands that, except as set forth in the
Registration Agreement or this Agreement, HA-LO shall be under no
obligation to register the sale, transfer or other disposition of
any Acquiror Securities by or on behalf of Shareholder or to take
any other action necessary in order to make compliance with an
exemption from registration available.
8. Nothing set forth in this Affiliate Agreement shall be
deemed to evidence a present intention on the part of Shareholder
to dispose of any Acquiror Securities, and Shareholder expressly
disclaims any such intention. This Agreement merely establishes
parameters for the disposition by Shareholder of Acquiror
Securities should Shareholder elect in the future to do so.
9. Shareholder agrees that stop transfer instructions
shall be given to HA-LO's transfer agent with respect to the
shares of Acquiror Securities issued to Shareholder under the
Plan of Merger (other than those shares which are eligible for
registration and sale from time to time under the Registration
Agreement following the expiration of the Pooling Periods or sale
in accordance with Rule 145) and that there will be placed on the
certificates for such shares, or on any substitutions therefor, a
legend stating in substance:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE
(1) ARE OWNED BY A PERSON (THE "OWNER") WHO MAY BE
DEEMED TO BE AN "AFFILIATE," AS SUCH TERM IS
DEFINED IN RULE 144(a) PROMULGATED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OF HA-LO INDUSTRIES, INC. (THE
"ISSUER"); (2) WERE RECEIVED BY THE OWNER IN A
TRANSACTION SUBJECT TO RULE 145 PROMULGATED UNDER
THE SECURITIES ACT; (3) ARE SUBJECT TO CERTAIN
RESTRICTIONS ON DISPOSITIONS CONTAINED IN AN
- 4 -<PAGE>
<PAGE>
AFFILIATE AGREEMENT DATED AS OF SEPTEMBER __, 1996
BETWEEN THE ISSUER AND THE OWNER (A COPY OF WHICH
IS ON FILE WITH THE SECRETARY OF THE ISSUER); AND
(4) MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT
(AND ANY APPLICABLE STATE LAWS) OR AN OPINION OF
THE ISSUER'S COUNSEL TO THE EFFECT THAT SUCH SALE,
TRANSFER OR OTHER DISPOSITION IS PERMITTED UNDER
THE SECURITIES ACT AND THE REGULATIONS PROMULGATED
THEREUNDER."
The foregoing "stop transfer" instructions shall be
terminated with respect to said Acquiror Securities at the times
at which they become eligible for registration and sale pursuant
to the Registration Agreement or to the extent eligible for sale
in accordance with Rule 145.
10. Shareholder hereby represents and warrants to HA-LO
that he possesses the full power, right and authority to execute
and deliver this Agreement, and to make the representations,
warranties, covenants and agreements herein contained, and to
perform all of his obligations hereunder. This Affiliate
Agreement shall inure to the benefit of HA-LO and its successors
and assigns, and shall be binding upon, and obligate, Shareholder
and Shareholder's successors and assigns. This Affiliate
Agreement shall be specifically enforceable by HA-LO, with or
without proof of monetary damages. This Affiliate Agreement may
be amended only in a writing signed by the parties, and shall be
construed in accordance with, and governed by, the internal laws
of the State of Illinois. In the event of any dispute under this
Affiliate Agreement, the matter shall be settled by resort to the
federal or state courts with venue in the County of Cook, State
of Illinois, and in no other location.
- 5 -<PAGE>
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Affiliate
Agreement as of the day and year first above written.
/s/ Seymour N. Okner
Seymour N. Okner
HA-LO INDUSTRIES, INC.
By: /s/ Richard A. Magid
Its: Vice President
182640_01
- 6 -<PAGE>
AFFILIATE AGREEMENT
THIS AFFILIATE AGREEMENT ("Affiliate Agreement") is made and
entered into as of this 30th day of September, 1996, by and
between the undersigned, SAMUEL P. OKNER ("Shareholder"), and HA-
LO INDUSTRIES, INC., an Illinois corporation ("HA-LO").
The background of this Affiliate Agreement is as follows:
As of the date of this Affiliate Agreement, Shareholder is
an executive officer, director and/or shareholder of Market
U.S.A., Inc., an Illinois corporation ("Market USA"), and
executive officer and/or shareholder of Marusa Marketing Inc., a
Canadian federal corporation ("Marusa"). Pursuant to an
Agreement and Plan of Merger and Amalgamation dated as of June
14, 1996 (the "Plan of Merger"), among Shareholder, the other
shareholders of Market USA and Marusa, HA-LO, Market USA, Marusa,
and others, it was agreed that, upon satisfaction of certain
conditions, HA-LO's wholly-owned Illinois and Canadian
subsidiaries would merge into and amalgamate with Market USA and
Marusa, respectively, in a unitary transaction intended to
qualify simultaneously as (i) a reorganization under the
provisions of Section 368(a) of the Internal Revenue Code of
1986, as amended, (ii) an amalgamation exempt from taxation under
the Canada/U.S. Income Tax Convention, and (iii) a "pooling of
interests" under generally accepted accounting principles
("GAAP"), the published statements of the Financial Accounting
Standards Board ("FASB"), and the rules and regulations ("Rules
and Regulations") of the Securities and Exchange Commission (the
"Commission") promulgated under the Securities Act of 1933, as
amended (the "Securities Act"). The aforesaid tax and accounting
treatments (hereafter collectively referred to as the "Merger
Benefits") were a material inducement to the parties to enter
into the Plan of Merger. Shareholder's agreements hereunder
constituted an inducement to HA-LO to enter into the Plan of
Merger, and HA-LO's obligation to consummate the transactions
contemplated under the Plan of Merger are expressly conditioned
upon Shareholder's execution and delivery of this Affiliate
Agreement prior to the effectiveness of said transactions (as
defined in Section 1.04 of the Plan of Merger, the "Effective
Time"). Unless otherwise provided in this Affiliate Agreement,
the capitalized terms used herein shall have the same meanings
ascribed to them in the Plan of Merger.
Pursuant to the Plan of Merger, Market USA and Marusa (in
their merged and/or amalgamated composition) would become wholly-
owned subsidiaries of HA-LO, and Shareholder would receive shares
of HA-LO's common capital voting stock, no par value (the
"Acquiror Securities"), in exchange for Shareholder's total
shareholdings in Market USA and/or Marusa (the "Target
Securities"). It is the parties' good faith belief and
understanding that Shareholder is an "affiliate" of Market USA<PAGE>
<PAGE>
and/or Marusa prior to the Effective Time, and may be an
"affiliate" of HA-LO on and after the Effective Time. As used
herein, "affiliate" shall have the same meaning given to such
term for purposes of paragraphs (c) and (d) of Rule 145 of the
Rules and Regulations of the Commission under the Securities Act,
and/or as used in and for purposes of Accounting Series, Releases
130 and 135, as amended, of the Commission.
By and through this Affiliate Agreement, Shareholder is (i)
acknowledging that certain requirements of the Code, the Canada
Tax Act, GAAP, Financial Accounting Statements of FASB ("FAS")
and the Securities Act (among other laws and rules) may govern or
limit the applicability and/or availability of the Merger
Benefits in the event of a sale, transfer or other disposition by
Shareholder of his Target Securities and Acquiror Securities,
(ii) representing and warranting to and for the benefit of HA-LO
that Shareholder will not take any action which could jeopardize
the treatment of the merger of Market USA and the amalgamation of
Marusa as a pooling of interests for accounting purposes, and
(iii) acknowledging and agreeing that HA-LO shall have no
obligation or responsibility to facilitate the sale, transfer or
other disposition of Acquiror Securities received by Shareholder
under the Plan of Merger except to the extent set forth in the
Registration Rights Agreement attached hereto as Annex "1" (the
"Registration Agreement"), which shall be executed concurrently
herewith by HA-LO, Shareholder and the other shareholders of
Market USA and/or Marusa, or paragraph 7 hereof.
NOW, THEREFORE, in consideration of the premises, the
agreement of the parties to enter into and consummate the
transactions contemplated under the Plan of Merger, and other
good and valuable consideration, the receipt and sufficiency of
which is hereby mutually acknowledged, Shareholder and HA-LO,
intending to be legally bound, covenant to and agree, each with
the other, as follows:
1. In the event Shareholder receives any Acquiror
Securities under, pursuant to or as a result of the Plan of
Merger, Shareholder shall not make any sale, transfer or other
disposition of such Acquiror Securities in violation of the
Securities Act or Rules and Regulations of the Commission.
2. Shareholder acknowledges and represents that
Shareholder has carefully read the Plan of Merger and this
Affiliate Agreement, and to the extent Shareholder deemed it
necessary, Shareholder has discussed the requirements of these
documents, and other applicable limitations on Shareholder's
ability to sell, transfer or otherwise dispose of Acquiror
Securities, with legal counsel of Shareholder's selection.
3. Shareholder understands the transactions contemplated
under the Plan of Merger must be submitted for a vote of the
- 2 -<PAGE>
<PAGE>
stockholders of HA-LO pursuant to a Proxy Statement containing,
in part, material information concerning, and provided by or on
behalf of, Market USA, Marusa and Shareholder. In connection
with such solicitation, and otherwise for the purpose of
consummating the transactions contemplated under the Plan of
Merger, the Proxy Statement and other written materials prepared
by or on behalf of HA-LO may deem Shareholder to be an
"affiliate" of Market USA and Marusa prior to the Effective Time,
and an "affiliate" of HA-LO on and after the Effective Time.
Shareholder hereby agrees that, whether or not such
classification is correct, Shareholder shall not take objection
to, and Shareholder shall not cause or suffer others to take
objection to, such classification, if such objection could result
in, or effect, any modification, alteration, amendment,
restatement or nullification of any term or provision set forth
in this Affiliate Agreement or otherwise intended to be binding
on Shareholder and Shareholder's successors and assigns.
4. Shareholder hereby agrees that, from the Effective
Time, he shall not sell, transfer or otherwise dispose of
Acquiror Securities issued to him under the Plan of Merger unless
(x) such sale, transfer or disposition has been effectively
registered under the Securities Act, including pursuant to the
Registration Agreement, for as long as he shall remain an
"affiliate" of HA-LO, (y) such sale, transfer or disposition is
made in conformity with the volume and other limitations of Rule
145 promulgated by the Commission under the Securities Act, or
(z) in the opinion of counsel reasonably acceptable to HA-LO,
such sale, transfer or disposition is exempt from registration
under the Securities Act.
5. Anything in this Affiliate Agreement to the contrary
notwithstanding, Shareholder covenants and agrees with HA-LO that
Shareholder shall not, directly or indirectly, (i) during the
thirty (30) days prior to the Effective Time, sell, transfer or
otherwise dispose of any shares of Target Securities, or (ii)
sell, transfer or otherwise dispose of any shares of Acquiror
Securities, whether or not received by Shareholder under the Plan
of Merger, during the period from the Effective Time until after
such time as results covering at least thirty (30) days of
combined operations of Market USA, Marusa and HA-LO have been
published by HA-LO in the form of a quarterly earnings report, an
effective registration statement filed with the Commission, a
report to the Commission on Form 10-K, 10-Q or 8-K, or any other
public filing or announcement which includes such combined
results of operations for Market USA, Marusa and HA-LO. For
purposes of this Affiliate Agreement, the separate periods during
which Shareholder shall be prohibited from selling, transferring
or otherwise disposing of Target Securities or Acquiror
Securities pursuant to this Section 5 are hereafter collectively,
the "Pooling Periods".
- 3 -<PAGE>
<PAGE>
6. Shareholder understands and agrees it is intended the
transactions under the Plan of Merger will be treated as a
"pooling of interests" in accordance with GAAP, FAS and Rules and
Regulations promulgated by the Commission under the Securities
Act. Shareholder agrees that Shareholder's forbearance from
selling, transferring or otherwise disposing of Target Securities
and Acquiror Securities during a Pooling Period is required to
preserve the Merger Benefits.
7. Following expiration of the Pooling Periods, for so
long as shall be necessary in order to permit Shareholder to sell
Acquiror Securities issued to him under the Plan of Merger
pursuant to Rule 145 under the Securities Act, and to the extent
applicable, Rule 144 under the Securities Act, HA-LO shall file
those reports required to be filed by it pursuant to Section 13
of the Securities Exchange Act of 1934, as amended, in order to
permit Shareholder to sell Acquiror Securities pursuant to the
terms and conditions of Rule 145 and the applicable provisions of
Rule 144.
Shareholder understands that, except as set forth in the
Registration Agreement or this Agreement, HA-LO shall be under no
obligation to register the sale, transfer or other disposition of
any Acquiror Securities by or on behalf of Shareholder or to take
any other action necessary in order to make compliance with an
exemption from registration available.
8. Nothing set forth in this Affiliate Agreement shall be
deemed to evidence a present intention on the part of Shareholder
to dispose of any Acquiror Securities, and Shareholder expressly
disclaims any such intention. This Agreement merely establishes
parameters for the disposition by Shareholder of Acquiror
Securities should Shareholder elect in the future to do so.
9. Shareholder agrees that stop transfer instructions
shall be given to HA-LO's transfer agent with respect to the
shares of Acquiror Securities issued to Shareholder under the
Plan of Merger (other than those shares which are eligible for
registration and sale from time to time under the Registration
Agreement following the expiration of the Pooling Periods or sale
in accordance with Rule 145) and that there will be placed on the
certificates for such shares, or on any substitutions therefor, a
legend stating in substance:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE
(1) ARE OWNED BY A PERSON (THE "OWNER") WHO MAY BE
DEEMED TO BE AN "AFFILIATE," AS SUCH TERM IS
DEFINED IN RULE 144(a) PROMULGATED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OF HA-LO INDUSTRIES, INC. (THE
"ISSUER"); (2) WERE RECEIVED BY THE OWNER IN A
TRANSACTION SUBJECT TO RULE 145 PROMULGATED UNDER
- 4 -<PAGE>
<PAGE>
THE SECURITIES ACT; (3) ARE SUBJECT TO CERTAIN
RESTRICTIONS ON DISPOSITIONS CONTAINED IN AN
AFFILIATE AGREEMENT DATED AS OF SEPTEMBER __, 1996
BETWEEN THE ISSUER AND THE OWNER (A COPY OF WHICH
IS ON FILE WITH THE SECRETARY OF THE ISSUER); AND
(4) MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT
(AND ANY APPLICABLE STATE LAWS) OR AN OPINION OF
THE ISSUER'S COUNSEL TO THE EFFECT THAT SUCH SALE,
TRANSFER OR OTHER DISPOSITION IS PERMITTED UNDER
THE SECURITIES ACT AND THE REGULATIONS PROMULGATED
THEREUNDER."
The foregoing "stop transfer" instructions shall be
terminated with respect to said Acquiror Securities at the times
at which they become eligible for registration and sale pursuant
to the Registration Agreement or to the extent eligible for sale
in accordance with Rule 145.
10. Shareholder hereby represents and warrants to HA-LO
that he possesses the full power, right and authority to execute
and deliver this Agreement, and to make the representations,
warranties, covenants and agreements herein contained, and to
perform all of his obligations hereunder. This Affiliate
Agreement shall inure to the benefit of HA-LO and its successors
and assigns, and shall be binding upon, and obligate, Shareholder
and Shareholder s successors and assigns. This Affiliate
Agreement shall be specifically enforceable by HA-LO, with or
without proof of monetary damages. This Affiliate Agreement may
be amended only in a writing signed by the parties, and shall be
construed in accordance with, and governed by, the internal laws
of the State of Illinois. In the event of any dispute under this
Affiliate Agreement, the matter shall be settled by resort to the
federal or state courts with venue in the County of Cook, State
of Illinois, and in no other location.
- 5 -<PAGE>
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Affiliate
Agreement as of the day and year first above written.
/s/ Samuel P. Okner
Samuel P. Okner
HA-LO INDUSTRIES, INC.
By: /s/ Richard A. Magid
Its: Vice President
182659_01
- 6 -<PAGE>
AFFILIATE AGREEMENT
THIS AFFILIATE AGREEMENT ("Affiliate Agreement") is made and
entered into as of this 30th day of September, 1996, by and
between the undersigned, ANNE OKNER and SAMUEL P. OKNER, not
individually, but as co-Trustees of The Samuel P. Okner Family
Trust u/a/d May 14, 1996 ("Shareholder"), and HA-LO INDUSTRIES,
INC., an Illinois corporation ("HA-LO").
The background of this Affiliate Agreement is as follows:
As of the date of this Affiliate Agreement, Shareholder is a
shareholder of Market U.S.A., Inc., an Illinois corporation
("Market USA"), an affiliate of Marusa Marketing Inc., a Canadian
federal corporation ("Marusa"). Pursuant to an Agreement and
Plan of Merger and Amalgamation dated as of June 14, 1996 (the
"Plan of Merger"), among Shareholder, the other shareholders of
Market USA and Marusa, HA-LO, Market USA, Marusa, and others, it
was agreed that, upon satisfaction of certain conditions, HA-LO's
wholly-owned Illinois and Canadian subsidiaries would merge into
and amalgamate with Market USA and Marusa, respectively, in a
unitary transaction intended to qualify simultaneously as (i) a
reorganization under the provisions of Section 368(a) of the
Internal Revenue Code of 1986, as amended, (ii) an amalgamation
exempt from taxation under the Canada/U.S. Income Tax Convention,
and (iii) a "pooling of interests" under generally accepted
accounting principles ("GAAP"), the published statements of the
Financial Accounting Standards Board ("FASB"), and the rules and
regulations ("Rules and Regulations") of the Securities and
Exchange Commission (the "Commission") promulgated under the
Securities Act of 1933, as amended (the "Securities Act"). The
aforesaid tax and accounting treatments (hereafter collectively
referred to as the "Merger Benefits") were a material inducement
to the parties to enter into the Plan of Merger. Shareholder's
agreements hereunder constituted an inducement to HA-LO to enter
into the Plan of Merger, and HA-LO's obligation to consummate the
transactions contemplated under the Plan of Merger are expressly
conditioned upon Shareholder's execution and delivery of this
Affiliate Agreement prior to the effectiveness of said
transactions (as defined in Section 1.04 of the Plan of Merger,
the "Effective Time"). Unless otherwise provided in this
Affiliate Agreement, the capitalized terms used herein shall have
the same meanings ascribed to them in the Plan of Merger.
Pursuant to the Plan of Merger, Market USA and Marusa (in
their merged and/or amalgamated composition) would become wholly-
owned subsidiaries of HA-LO, and Shareholder would receive shares
of HA-LO's common capital voting stock, no par value (the
"Acquiror Securities"), in exchange for Shareholder s total
shareholdings in Market USA and/or Marusa (the "Target
Securities"). It is the parties' good faith belief and
understanding that Shareholder is an "affiliate" of Market USA
and/or Marusa prior to the Effective Time, and may be an
"affiliate" of HA-LO on and after the Effective Time. As used<PAGE>
<PAGE>
herein, "affiliate" shall have the same meaning given to such
term for purposes of paragraphs (c) and (d) of Rule 145 of the
Rules and Regulations of the Commission under the Securities Act,
and/or as used in and for purposes of Accounting Series, Releases
130 and 135, as amended, of the Commission.
By and through this Affiliate Agreement, Shareholder is (i)
acknowledging that certain requirements of the Code, the Canada
Tax Act, GAAP, Financial Accounting Statements of FASB ("FAS")
and the Securities Act (among other laws and rules) may govern or
limit the applicability and/or availability of the Merger
Benefits in the event of a sale, transfer or other disposition by
Shareholder of his Target Securities and Acquiror Securities,
(ii) representing and warranting to and for the benefit of HA-LO
that Shareholder will not take any action which could jeopardize
the treatment of the merger of Market USA and the amalgamation of
Marusa as a pooling of interests for accounting purposes, and
(iii) acknowledging and agreeing that HA-LO shall have no
obligation or responsibility to facilitate the sale, transfer or
other disposition of Acquiror Securities received by Shareholder
under the Plan of Merger except to the extent set forth in the
Registration Rights Agreement attached hereto as Annex "1" (the
"Registration Agreement"), which shall be executed concurrently
herewith by HA-LO, Shareholder and the other shareholders of
Market USA and/or Marusa, or paragraph 7 hereof.
NOW, THEREFORE, in consideration of the premises, the
agreement of the parties to enter into and consummate the
transactions contemplated under the Plan of Merger, and other
good and valuable consideration, the receipt and sufficiency of
which is hereby mutually acknowledged, Shareholder and HA-LO,
intending to be legally bound, covenant to and agree, each with
the other, as follows:
1. In the event Shareholder receives any Acquiror
Securities under, pursuant to or as a result of the Plan of
Merger, Shareholder shall not make any sale, transfer or other
disposition of such Acquiror Securities in violation of the
Securities Act or Rules and Regulations of the Commission.
2. Shareholder acknowledges and represents that
Shareholder has carefully read the Plan of Merger and this
Affiliate Agreement, and to the extent Shareholder deemed it
necessary, Shareholder has discussed the requirements of these
documents, and other applicable limitations on Shareholder's
ability to sell, transfer or otherwise dispose of Acquiror
Securities, with legal counsel of Shareholder's selection.
3. Shareholder understands the transactions contemplated
under the Plan of Merger must be submitted for a vote of the
stockholders of HA-LO pursuant to a Proxy Statement containing,
in part, material information concerning, and provided by or on
behalf of, Market USA, Marusa and Shareholder. In connection
- 2 -<PAGE>
<PAGE>
with such solicitation, and otherwise for the purpose of
consummating the transactions contemplated under the Plan of
Merger, the Proxy Statement and other written materials prepared
by or on behalf of HA-LO may deem Shareholder to be an
"affiliate" of Market USA and Marusa prior to the Effective Time,
and an "affiliate" of HA-LO on and after the Effective Time.
Shareholder hereby agrees that, whether or not such
classification is correct, Shareholder shall not take objection
to, and Shareholder shall not cause or suffer others to take
objection to, such classification, if such objection could result
in, or effect, any modification, alteration, amendment,
restatement or nullification of any term or provision set forth
in this Affiliate Agreement or otherwise intended to be binding
on Shareholder and Shareholder's successors and assigns.
4. Shareholder hereby agrees that, from the Effective
Time, he shall not sell, transfer or otherwise dispose of
Acquiror Securities issued to him under the Plan of Merger unless
(x) such sale, transfer or disposition has been effectively
registered under the Securities Act, including pursuant to the
Registration Agreement, for as long as he shall remain an
"affiliate" of HA-LO, (y) such sale, transfer or disposition is
made in conformity with the volume and other limitations of Rule
145 promulgated by the Commission under the Securities Act, or
(z) in the opinion of counsel reasonably acceptable to HA-LO,
such sale, transfer or disposition is exempt from registration
under the Securities Act.
5. Anything in this Affiliate Agreement to the contrary
notwithstanding, Shareholder covenants and agrees with HA-LO that
Shareholder shall not, directly or indirectly, (i) during the
thirty (30) days prior to the Effective Time, sell, transfer or
otherwise dispose of any shares of Target Securities, or (ii)
sell, transfer or otherwise dispose of any shares of Acquiror
Securities, whether or not received by Shareholder under the Plan
of Merger, during the period from the Effective Time until after
such time as results covering at least thirty (30) days of
combined operations of Market USA, Marusa and HA-LO have been
published by HA-LO in the form of a quarterly earnings report, an
effective registration statement filed with the Commission, a
report to the Commission on Form 10-K, 10-Q or 8-K, or any other
public filing or announcement which includes such combined
results of operations for Market USA, Marusa and HA-LO. For
purposes of this Affiliate Agreement, the separate periods during
which Shareholder shall be prohibited from selling, transferring
or otherwise disposing of Target Securities or Acquiror
Securities pursuant to this Section 5 are hereafter collectively,
the "Pooling Periods".
6. Shareholder understands and agrees it is intended the
transactions under the Plan of Merger will be treated as a
"pooling of interests" in accordance with GAAP, FAS and Rules and
- 3 -<PAGE>
<PAGE>
Regulations promulgated by the Commission under the Securities
Act. Shareholder agrees that Shareholder's forbearance from
selling, transferring or otherwise disposing of Target Securities
and Acquiror Securities during a Pooling Period is required to
preserve the Merger Benefits.
7. Following expiration of the Pooling Periods, for so
long as shall be necessary in order to permit Shareholder to sell
Acquiror Securities issued to him under the Plan of Merger
pursuant to Rule 145 under the Securities Act, and to the extent
applicable, Rule 144 under the Securities Act, HA-LO shall file
those reports required to be filed by it pursuant to Section 13
of the Securities Exchange Act of 1934, as amended, in order to
permit Shareholder to sell Acquiror Securities pursuant to the
terms and conditions of Rule 145 and the applicable provisions of
Rule 144.
Shareholder understands that, except as set forth in the
Registration Agreement or this Agreement, HA-LO shall be under no
obligation to register the sale, transfer or other disposition of
any Acquiror Securities by or on behalf of Shareholder or to take
any other action necessary in order to make compliance with an
exemption from registration available.
8. Nothing set forth in this Affiliate Agreement shall be
deemed to evidence a present intention on the part of Shareholder
to dispose of any Acquiror Securities, and Shareholder expressly
disclaims any such intention. This Agreement merely establishes
parameters for the disposition by Shareholder of Acquiror
Securities should Shareholder elect in the future to do so.
9. Shareholder agrees that stop transfer instructions
shall be given to HA-LO's transfer agent with respect to the
shares of Acquiror Securities issued to Shareholder under the
Plan of Merger (other than those shares which are eligible for
registration and sale from time to time under the Registration
Agreement following the expiration of the Pooling Periods or sale
in accordance with Rule 145) and that there will be placed on the
certificates for such shares, or on any substitutions therefor, a
legend stating in substance:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE
(1) ARE OWNED BY A PERSON (THE "OWNER") WHO MAY BE
DEEMED TO BE AN "AFFILIATE," AS SUCH TERM IS
DEFINED IN RULE 144(a) PROMULGATED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OF HA-LO INDUSTRIES, INC. (THE
"ISSUER"); (2) WERE RECEIVED BY THE OWNER IN A
TRANSACTION SUBJECT TO RULE 145 PROMULGATED UNDER
THE SECURITIES ACT; (3) ARE SUBJECT TO CERTAIN
RESTRICTIONS ON DISPOSITIONS CONTAINED IN AN
AFFILIATE AGREEMENT DATED AS OF SEPTEMBER __, 1996
- 4 -<PAGE>
<PAGE>
BETWEEN THE ISSUER AND THE OWNER (A COPY OF WHICH
IS ON FILE WITH THE SECRETARY OF THE ISSUER); AND
(4) MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT
(AND ANY APPLICABLE STATE LAWS) OR AN OPINION OF
THE ISSUER'S COUNSEL TO THE EFFECT THAT SUCH SALE,
TRANSFER OR OTHER DISPOSITION IS PERMITTED UNDER
THE SECURITIES ACT AND THE REGULATIONS PROMULGATED
THEREUNDER."
The foregoing "stop transfer" instructions shall be
terminated with respect to said Acquiror Securities at the times
at which they become eligible for registration and sale pursuant
to the Registration Agreement or to the extent eligible for sale
in accordance with Rule 145.
10. Shareholder hereby represents and warrants to HA-LO
that he possesses the full power, right and authority to execute
and deliver this Agreement, and to make the representations,
warranties, covenants and agreements herein contained, and to
perform all of his obligations hereunder. This Affiliate
Agreement shall inure to the benefit of HA-LO and its successors
and assigns, and shall be binding upon, and obligate, Shareholder
and Shareholder's successors and assigns. This Affiliate
Agreement shall be specifically enforceable by HA-LO, with or
without proof of monetary damages. This Affiliate Agreement may
be amended only in a writing signed by the parties, and shall be
construed in accordance with, and governed by, the internal laws
of the State of Illinois. In the event of any dispute under this
Affiliate Agreement, the matter shall be settled by resort to the
federal or state courts with venue in the County of Cook, State
of Illinois, and in no other location.
- 5 -<PAGE>
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Affiliate
Agreement as of the day and year first above written.
THE SAMUEL P. OKNER FAMILY TRUST
U/A/D MAY 14, 1996
By: /s/ Samuel P. Okner
Co-Trustee
By: /s/ Anne Okner
Co-Trustee
HA-LO INDUSTRIES, INC.
By: /s/ Richard A. Magid
Its: Vice President
182671_01
- 6 -<PAGE>
AFFILIATE AGREEMENT
THIS AFFILIATE AGREEMENT ("Affiliate Agreement") is made and
entered into as of this 30th day of September, 1996, by and
between the undersigned, ANNE OKNER and ELLYN ROBBINS, not
individually, but as co-Trustees of The Ellyn Robbins Family
Trust u/a/d May 14, 1996 ("Shareholder"), and HA-LO INDUSTRIES,
INC., an Illinois corporation ("HA-LO").
The background of this Affiliate Agreement is as follows:
As of the date of this Affiliate Agreement, Shareholder is a
shareholder of Market U.S.A., Inc., an Illinois corporation
("Market USA"), an affiliate of Marusa Marketing Inc., a Canadian
federal corporation ("Marusa"). Pursuant to an Agreement and
Plan of Merger and Amalgamation dated as of June 14, 1996 (the
"Plan of Merger"), among Shareholder, the other shareholders of
Market USA and Marusa, HA-LO, Market USA, Marusa, and others, it
was agreed that, upon satisfaction of certain conditions, HA-LO's
wholly-owned Illinois and Canadian subsidiaries would merge into
and amalgamate with Market USA and Marusa, respectively, in a
unitary transaction intended to qualify simultaneously as (i) a
reorganization under the provisions of Section 368(a) of the
Internal Revenue Code of 1986, as amended, (ii) an amalgamation
exempt from taxation under the Canada/U.S. Income Tax Convention,
and (iii) a "pooling of interests" under generally accepted
accounting principles ("GAAP"), the published statements of the
Financial Accounting Standards Board ("FASB"), and the rules and
regulations ("Rules and Regulations") of the Securities and
Exchange Commission (the "Commission") promulgated under the
Securities Act of 1933, as amended (the "Securities Act"). The
aforesaid tax and accounting treatments (hereafter collectively
referred to as the "Merger Benefits") were a material inducement
to the parties to enter into the Plan of Merger. Shareholder's
agreements hereunder constituted an inducement to HA-LO to enter
into the Plan of Merger, and HA-LO's obligation to consummate the
transactions contemplated under the Plan of Merger are expressly
conditioned upon Shareholder's execution and delivery of this
Affiliate Agreement prior to the effectiveness of said
transactions (as defined in Section 1.04 of the Plan of Merger,
the "Effective Time"). Unless otherwise provided in this
Affiliate Agreement, the capitalized terms used herein shall have
the same meanings ascribed to them in the Plan of Merger.
Pursuant to the Plan of Merger, Market USA and Marusa (in
their merged and/or amalgamated composition) would become wholly-
owned subsidiaries of HA-LO, and Shareholder would receive shares
of HA-LO's common capital voting stock, no par value (the
"Acquiror Securities"), in exchange for Shareholder's total
shareholdings in Market USA and/or Marusa (the "Target
Securities"). It is the parties' good faith belief and
understanding that Shareholder is an "affiliate" of Market USA
and/or Marusa prior to the Effective Time, and may be an
"affiliate" of HA-LO on and after the Effective Time. As used<PAGE>
<PAGE>
herein, "affiliate" shall have the same meaning given to such
term for purposes of paragraphs (c) and (d) of Rule 145 of the
Rules and Regulations of the Commission under the Securities Act,
and/or as used in and for purposes of Accounting Series, Releases
130 and 135, as amended, of the Commission.
By and through this Affiliate Agreement, Shareholder is (i)
acknowledging that certain requirements of the Code, the Canada
Tax Act, GAAP, Financial Accounting Statements of FASB ("FAS")
and the Securities Act (among other laws and rules) may govern or
limit the applicability and/or availability of the Merger
Benefits in the event of a sale, transfer or other disposition by
Shareholder of his Target Securities and Acquiror Securities,
(ii) representing and warranting to and for the benefit of HA-LO
that Shareholder will not take any action which could jeopardize
the treatment of the merger of Market USA and the amalgamation of
Marusa as a pooling of interests for accounting purposes, and
(iii) acknowledging and agreeing that HA-LO shall have no
obligation or responsibility to facilitate the sale, transfer or
other disposition of Acquiror Securities received by Shareholder
under the Plan of Merger except to the extent set forth in the
Registration Rights Agreement attached hereto as Annex "1" (the
"Registration Agreement"), which shall be executed concurrently
herewith by HA-LO, Shareholder and the other shareholders of
Market USA and/or Marusa, or paragraph 7 hereof.
NOW, THEREFORE, in consideration of the premises, the
agreement of the parties to enter into and consummate the
transactions contemplated under the Plan of Merger, and other
good and valuable consideration, the receipt and sufficiency of
which is hereby mutually acknowledged, Shareholder and HA-LO,
intending to be legally bound, covenant to and agree, each with
the other, as follows:
1. In the event Shareholder receives any Acquiror
Securities under, pursuant to or as a result of the Plan of
Merger, Shareholder shall not make any sale, transfer or other
disposition of such Acquiror Securities in violation of the
Securities Act or Rules and Regulations of the Commission.
2. Shareholder acknowledges and represents that
Shareholder has carefully read the Plan of Merger and this
Affiliate Agreement, and to the extent Shareholder deemed it
necessary, Shareholder has discussed the requirements of these
documents, and other applicable limitations on Shareholder's
ability to sell, transfer or otherwise dispose of Acquiror
Securities, with legal counsel of Shareholder's selection.
3. Shareholder understands the transactions contemplated
under the Plan of Merger must be submitted for a vote of the
stockholders of HA-LO pursuant to a Proxy Statement containing,
in part, material information concerning, and provided by or on
behalf of, Market USA, Marusa and Shareholder. In connection
- 2 -<PAGE>
<PAGE>
with such solicitation, and otherwise for the purpose of
consummating the transactions contemplated under the Plan of
Merger, the Proxy Statement and other written materials prepared
by or on behalf of HA-LO may deem Shareholder to be an
"affiliate" of Market USA and Marusa prior to the Effective Time,
and an "affiliate" of HA-LO on and after the Effective Time.
Shareholder hereby agrees that, whether or not such
classification is correct, Shareholder shall not take objection
to, and Shareholder shall not cause or suffer others to take
objection to, such classification, if such objection could result
in, or effect, any modification, alteration, amendment,
restatement or nullification of any term or provision set forth
in this Affiliate Agreement or otherwise intended to be binding
on Shareholder and Shareholder's successors and assigns.
4. Shareholder hereby agrees that, from the Effective
Time, he shall not sell, transfer or otherwise dispose of
Acquiror Securities issued to him under the Plan of Merger unless
(x) such sale, transfer or disposition has been effectively
registered under the Securities Act, including pursuant to the
Registration Agreement, for as long as he shall remain an
"affiliate" of HA-LO, (y) such sale, transfer or disposition is
made in conformity with the volume and other limitations of Rule
145 promulgated by the Commission under the Securities Act, or
(z) in the opinion of counsel reasonably acceptable to HA-LO,
such sale, transfer or disposition is exempt from registration
under the Securities Act.
5. Anything in this Affiliate Agreement to the contrary
notwithstanding, Shareholder covenants and agrees with HA-LO that
Shareholder shall not, directly or indirectly, (i) during the
thirty (30) days prior to the Effective Time, sell, transfer or
otherwise dispose of any shares of Target Securities, or (ii)
sell, transfer or otherwise dispose of any shares of Acquiror
Securities, whether or not received by Shareholder under the Plan
of Merger, during the period from the Effective Time until after
such time as results covering at least thirty (30) days of
combined operations of Market USA, Marusa and HA-LO have been
published by HA-LO in the form of a quarterly earnings report, an
effective registration statement filed with the Commission, a
report to the Commission on Form 10-K, 10-Q or 8-K, or any other
public filing or announcement which includes such combined
results of operations for Market USA, Marusa and HA-LO. For
purposes of this Affiliate Agreement, the separate periods during
which Shareholder shall be prohibited from selling, transferring
or otherwise disposing of Target Securities or Acquiror
Securities pursuant to this Section 5 are hereafter collectively,
the "Pooling Periods".
6. Shareholder understands and agrees it is intended the
transactions under the Plan of Merger will be treated as a
"pooling of interests" in accordance with GAAP, FAS and Rules and
- 3 -<PAGE>
<PAGE>
Regulations promulgated by the Commission under the Securities
Act. Shareholder agrees that Shareholder's forbearance from
selling, transferring or otherwise disposing of Target Securities
and Acquiror Securities during a Pooling Period is required to
preserve the Merger Benefits.
7. Following expiration of the Pooling Periods, for so
long as shall be necessary in order to permit Shareholder to sell
Acquiror Securities issued to him under the Plan of Merger
pursuant to Rule 145 under the Securities Act, and to the extent
applicable, Rule 144 under the Securities Act, HA-LO shall file
those reports required to be filed by it pursuant to Section 13
of the Securities Exchange Act of 1934, as amended, in order to
permit Shareholder to sell Acquiror Securities pursuant to the
terms and conditions of Rule 145 and the applicable provisions of
Rule 144.
Shareholder understands that, except as set forth in the
Registration Agreement or this Agreement, HA-LO shall be under no
obligation to register the sale, transfer or other disposition of
any Acquiror Securities by or on behalf of Shareholder or to take
any other action necessary in order to make compliance with an
exemption from registration available.
8. Nothing set forth in this Affiliate Agreement shall be
deemed to evidence a present intention on the part of Shareholder
to dispose of any Acquiror Securities, and Shareholder expressly
disclaims any such intention. This Agreement merely establishes
parameters for the disposition by Shareholder of Acquiror
Securities should Shareholder elect in the future to do so.
9. Shareholder agrees that stop transfer instructions
shall be given to HA-LO's transfer agent with respect to the
shares of Acquiror Securities issued to Shareholder under the
Plan of Merger (other than those shares which are eligible for
registration and sale from time to time under the Registration
Agreement following the expiration of the Pooling Periods or sale
in accordance with Rule 145) and that there will be placed on the
certificates for such shares, or on any substitutions therefor, a
legend stating in substance:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE
(1) ARE OWNED BY A PERSON (THE "OWNER") WHO MAY BE
DEEMED TO BE AN "AFFILIATE," AS SUCH TERM IS
DEFINED IN RULE 144(a) PROMULGATED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OF HA-LO INDUSTRIES, INC. (THE
"ISSUER"); (2) WERE RECEIVED BY THE OWNER IN A
TRANSACTION SUBJECT TO RULE 145 PROMULGATED UNDER
THE SECURITIES ACT; (3) ARE SUBJECT TO CERTAIN
RESTRICTIONS ON DISPOSITIONS CONTAINED IN AN
AFFILIATE AGREEMENT DATED AS OF SEPTEMBER __, 1996
- 4 -<PAGE>
<PAGE>
BETWEEN THE ISSUER AND THE OWNER (A COPY OF WHICH
IS ON FILE WITH THE SECRETARY OF THE ISSUER); AND
(4) MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT
(AND ANY APPLICABLE STATE LAWS) OR AN OPINION OF
THE ISSUER'S COUNSEL TO THE EFFECT THAT SUCH SALE,
TRANSFER OR OTHER DISPOSITION IS PERMITTED UNDER
THE SECURITIES ACT AND THE REGULATIONS PROMULGATED
THEREUNDER."
The foregoing "stop transfer" instructions shall be
terminated with respect to said Acquiror Securities at the times
at which they become eligible for registration and sale pursuant
to the Registration Agreement or to the extent eligible for sale
in accordance with Rule 145.
10. Shareholder hereby represents and warrants to HA-LO
that he possesses the full power, right and authority to execute
and deliver this Agreement, and to make the representations,
warranties, covenants and agreements herein contained, and to
perform all of his obligations hereunder. This Affiliate
Agreement shall inure to the benefit of HA-LO and its successors
and assigns, and shall be binding upon, and obligate, Shareholder
and Shareholder s successors and assigns. This Affiliate
Agreement shall be specifically enforceable by HA-LO, with or
without proof of monetary damages. This Affiliate Agreement may
be amended only in a writing signed by the parties, and shall be
construed in accordance with, and governed by, the internal laws
of the State of Illinois. In the event of any dispute under this
Affiliate Agreement, the matter shall be settled by resort to the
federal or state courts with venue in the County of Cook, State
of Illinois, and in no other location.
- 5 -<PAGE>
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Affiliate
Agreement as of the day and year first above written.
THE ELLYN ROBBINS FAMILY TRUST
U/A/D MAY 14, 1996
By: /s/ Ellyn Robbins
Co-Trustee
By: /s/ Anne Okner
Co-Trustee
HA-LO INDUSTRIES, INC.
By: /s/ Richard A. Magid
Its: Vice President
182652_01
- 6 -<PAGE>
AFFILIATE AGREEMENT
THIS AFFILIATE AGREEMENT ("Affiliate Agreement") is made and
entered into as of this 30th day of September, 1996, by and
between the undersigned, ANNE OKNER and JOEL C. OKNER, not
individually, but as co-Trustees of The Joel C. Okner Family
Trust u/a/d May 14, 1996 ("Shareholder"), and HA-LO INDUSTRIES,
INC., an Illinois corporation ("HA-LO").
The background of this Affiliate Agreement is as follows:
As of the date of this Affiliate Agreement, Shareholder is a
shareholder of Market U.S.A., Inc., an Illinois corporation
("Market USA"), an affiliate of Marusa Marketing Inc., a Canadian
federal corporation ("Marusa"). Pursuant to an Agreement and
Plan of Merger and Amalgamation dated as of June 14, 1996 (the
"Plan of Merger"), among Shareholder, the other shareholders of
Market USA and Marusa, HA-LO, Market USA, Marusa, and others, it
was agreed that, upon satisfaction of certain conditions, HA-LO's
wholly-owned Illinois and Canadian subsidiaries would merge into
and amalgamate with Market USA and Marusa, respectively, in a
unitary transaction intended to qualify simultaneously as (i) a
reorganization under the provisions of Section 368(a) of the
Internal Revenue Code of 1986, as amended, (ii) an amalgamation
exempt from taxation under the Canada/U.S. Income Tax Convention,
and (iii) a "pooling of interests" under generally accepted
accounting principles ("GAAP"), the published statements of the
Financial Accounting Standards Board ("FASB"), and the rules and
regulations ("Rules and Regulations") of the Securities and
Exchange Commission (the "Commission") promulgated under the
Securities Act of 1933, as amended (the "Securities Act"). The
aforesaid tax and accounting treatments (hereafter collectively
referred to as the "Merger Benefits") were a material inducement
to the parties to enter into the Plan of Merger. Shareholder's
agreements hereunder constituted an inducement to HA-LO to enter
into the Plan of Merger, and HA-LO's obligation to consummate the
transactions contemplated under the Plan of Merger are expressly
conditioned upon Shareholder's execution and delivery of this
Affiliate Agreement prior to the effectiveness of said
transactions (as defined in Section 1.04 of the Plan of Merger,
the "Effective Time"). Unless otherwise provided in this
Affiliate Agreement, the capitalized terms used herein shall have
the same meanings ascribed to them in the Plan of Merger.
Pursuant to the Plan of Merger, Market USA and Marusa (in
their merged and/or amalgamated composition) would become wholly-
owned subsidiaries of HA-LO, and Shareholder would receive shares
of HA-LO's common capital voting stock, no par value (the
"Acquiror Securities"), in exchange for Shareholder's total
shareholdings in Market USA and/or Marusa (the "Target
Securities"). It is the parties' good faith belief and
understanding that Shareholder is an "affiliate" of Market USA
and/or Marusa prior to the Effective Time, and may be an
"affiliate" of HA-LO on and after the Effective Time. As used<PAGE>
<PAGE>
herein, "affiliate" shall have the same meaning given to such
term for purposes of paragraphs (c) and (d) of Rule 145 of the
Rules and Regulations of the Commission under the Securities Act,
and/or as used in and for purposes of Accounting Series, Releases
130 and 135, as amended, of the Commission.
By and through this Affiliate Agreement, Shareholder is (i)
acknowledging that certain requirements of the Code, the Canada
Tax Act, GAAP, Financial Accounting Statements of FASB ("FAS")
and the Securities Act (among other laws and rules) may govern or
limit the applicability and/or availability of the Merger
Benefits in the event of a sale, transfer or other disposition by
Shareholder of his Target Securities and Acquiror Securities,
(ii) representing and warranting to and for the benefit of HA-LO
that Shareholder will not take any action which could jeopardize
the treatment of the merger of Market USA and the amalgamation of
Marusa as a pooling of interests for accounting purposes, and
(iii) acknowledging and agreeing that HA-LO shall have no
obligation or responsibility to facilitate the sale, transfer or
other disposition of Acquiror Securities received by Shareholder
under the Plan of Merger except to the extent set forth in the
Registration Rights Agreement attached hereto as Annex "1" (the
"Registration Agreement"), which shall be executed concurrently
herewith by HA-LO, Shareholder and the other shareholders of
Market USA and/or Marusa, or paragraph 7 hereof.
NOW, THEREFORE, in consideration of the premises, the
agreement of the parties to enter into and consummate the
transactions contemplated under the Plan of Merger, and other
good and valuable consideration, the receipt and sufficiency of
which is hereby mutually acknowledged, Shareholder and HA-LO,
intending to be legally bound, covenant to and agree, each with
the other, as follows:
1. In the event Shareholder receives any Acquiror
Securities under, pursuant to or as a result of the Plan of
Merger, Shareholder shall not make any sale, transfer or other
disposition of such Acquiror Securities in violation of the
Securities Act or Rules and Regulations of the Commission.
2. Shareholder acknowledges and represents that
Shareholder has carefully read the Plan of Merger and this
Affiliate Agreement, and to the extent Shareholder deemed it
necessary, Shareholder has discussed the requirements of these
documents, and other applicable limitations on Shareholder's
ability to sell, transfer or otherwise dispose of Acquiror
Securities, with legal counsel of Shareholder s selection.
3. Shareholder understands the transactions contemplated
under the Plan of Merger must be submitted for a vote of the
stockholders of HA-LO pursuant to a Proxy Statement containing,
in part, material information concerning, and provided by or on
- 2 -<PAGE>
<PAGE>
behalf of, Market USA, Marusa and Shareholder. In connection
with such solicitation, and otherwise for the purpose of
consummating the transactions contemplated under the Plan of
Merger, the Proxy Statement and other written materials prepared
by or on behalf of HA-LO may deem Shareholder to be an
"affiliate" of Market USA and Marusa prior to the Effective Time,
and an "affiliate" of HA-LO on and after the Effective Time.
Shareholder hereby agrees that, whether or not such
classification is correct, Shareholder shall not take objection
to, and Shareholder shall not cause or suffer others to take
objection to, such classification, if such objection could result
in, or effect, any modification, alteration, amendment,
restatement or nullification of any term or provision set forth
in this Affiliate Agreement or otherwise intended to be binding
on Shareholder and Shareholder's successors and assigns.
4. Shareholder hereby agrees that, from the Effective
Time, he shall not sell, transfer or otherwise dispose of
Acquiror Securities issued to him under the Plan of Merger unless
(x) such sale, transfer or disposition has been effectively
registered under the Securities Act, including pursuant to the
Registration Agreement, for as long as he shall remain an
"affiliate" of HA-LO, (y) such sale, transfer or disposition is
made in conformity with the volume and other limitations of Rule
145 promulgated by the Commission under the Securities Act, or
(z) in the opinion of counsel reasonably acceptable to HA-LO,
such sale, transfer or disposition is exempt from registration
under the Securities Act.
5. Anything in this Affiliate Agreement to the contrary
notwithstanding, Shareholder covenants and agrees with HA-LO that
Shareholder shall not, directly or indirectly, (i) during the
thirty (30) days prior to the Effective Time, sell, transfer or
otherwise dispose of any shares of Target Securities, or (ii)
sell, transfer or otherwise dispose of any shares of Acquiror
Securities, whether or not received by Shareholder under the Plan
of Merger, during the period from the Effective Time until after
such time as results covering at least thirty (30) days of
combined operations of Market USA, Marusa and HA-LO have been
published by HA-LO in the form of a quarterly earnings report, an
effective registration statement filed with the Commission, a
report to the Commission on Form 10-K, 10-Q or 8-K, or any other
public filing or announcement which includes such combined
results of operations for Market USA, Marusa and HA-LO. For
purposes of this Affiliate Agreement, the separate periods during
which Shareholder shall be prohibited from selling, transferring
or otherwise disposing of Target Securities or Acquiror
Securities pursuant to this Section 5 are hereafter collectively,
the "Pooling Periods".
6. Shareholder understands and agrees it is intended the
transactions under the Plan of Merger will be treated as a
- 3 -<PAGE>
<PAGE>
"pooling of interests" in accordance with GAAP, FAS and Rules and
Regulations promulgated by the Commission under the Securities
Act. Shareholder agrees that Shareholder's forbearance from
selling, transferring or otherwise disposing of Target Securities
and Acquiror Securities during a Pooling Period is required to
preserve the Merger Benefits.
7. Following expiration of the Pooling Periods, for so
long as shall be necessary in order to permit Shareholder to sell
Acquiror Securities issued to him under the Plan of Merger
pursuant to Rule 145 under the Securities Act, and to the extent
applicable, Rule 144 under the Securities Act, HA-LO shall file
those reports required to be filed by it pursuant to Section 13
of the Securities Exchange Act of 1934, as amended, in order to
permit Shareholder to sell Acquiror Securities pursuant to the
terms and conditions of Rule 145 and the applicable provisions of
Rule 144.
Shareholder understands that, except as set forth in the
Registration Agreement or this Agreement, HA-LO shall be under no
obligation to register the sale, transfer or other disposition of
any Acquiror Securities by or on behalf of Shareholder or to take
any other action necessary in order to make compliance with an
exemption from registration available.
8. Nothing set forth in this Affiliate Agreement shall be
deemed to evidence a present intention on the part of Shareholder
to dispose of any Acquiror Securities, and Shareholder expressly
disclaims any such intention. This Agreement merely establishes
parameters for the disposition by Shareholder of Acquiror
Securities should Shareholder elect in the future to do so.
9. Shareholder agrees that stop transfer instructions
shall be given to HA-LO's transfer agent with respect to the
shares of Acquiror Securities issued to Shareholder under the
Plan of Merger (other than those shares which are eligible for
registration and sale from time to time under the Registration
Agreement following the expiration of the Pooling Periods or sale
in accordance with Rule 145) and that there will be placed on the
certificates for such shares, or on any substitutions therefor, a
legend stating in substance:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE
(1) ARE OWNED BY A PERSON (THE "OWNER") WHO MAY BE
DEEMED TO BE AN "AFFILIATE," AS SUCH TERM IS
DEFINED IN RULE 144(a) PROMULGATED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OF HA-LO INDUSTRIES, INC. (THE
"ISSUER"); (2) WERE RECEIVED BY THE OWNER IN A
TRANSACTION SUBJECT TO RULE 145 PROMULGATED UNDER
THE SECURITIES ACT; (3) ARE SUBJECT TO CERTAIN
RESTRICTIONS ON DISPOSITIONS CONTAINED IN AN
- 4 -<PAGE>
<PAGE>
AFFILIATE AGREEMENT DATED AS OF SEPTEMBER __, 1996
BETWEEN THE ISSUER AND THE OWNER (A COPY OF WHICH
IS ON FILE WITH THE SECRETARY OF THE ISSUER); AND
(4) MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT
(AND ANY APPLICABLE STATE LAWS) OR AN OPINION OF
THE ISSUER'S COUNSEL TO THE EFFECT THAT SUCH SALE,
TRANSFER OR OTHER DISPOSITION IS PERMITTED UNDER
THE SECURITIES ACT AND THE REGULATIONS PROMULGATED
THEREUNDER."
The foregoing "stop transfer" instructions shall be
terminated with respect to said Acquiror Securities at the times
at which they become eligible for registration and sale pursuant
to the Registration Agreement or to the extent eligible for sale
in accordance with Rule 145.
10. Shareholder hereby represents and warrants to HA-LO
that he possesses the full power, right and authority to execute
and deliver this Agreement, and to make the representations,
warranties, covenants and agreements herein contained, and to
perform all of his obligations hereunder. This Affiliate
Agreement shall inure to the benefit of HA-LO and its successors
and assigns, and shall be binding upon, and obligate, Shareholder
and Shareholder s successors and assigns. This Affiliate
Agreement shall be specifically enforceable by HA-LO, with or
without proof of monetary damages. This Affiliate Agreement may
be amended only in a writing signed by the parties, and shall be
construed in accordance with, and governed by, the internal laws
of the State of Illinois. In the event of any dispute under this
Affiliate Agreement, the matter shall be settled by resort to the
federal or state courts with venue in the County of Cook, State
of Illinois, and in no other location.
- 5 -<PAGE>
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Affiliate
Agreement as of the day and year first above written.
THE JOEL C. OKNER FAMILY TRUST
U/A/D MAY 14, 1996
By: /s/ Joel C. Okner
Co-Trustee
By: /s/ Anne Okner
Co-Trustee
HA-LO INDUSTRIES, INC.
By: /s/ Richard A. Magid
Its: Vice President
182651_01
- 6 -<PAGE>
AFFILIATE AGREEMENT
THIS AFFILIATE AGREEMENT ("Affiliate Agreement") is made and
entered into as of this 30th day of September, 1996, by and
between the undersigned, DEBRA OKNER ("Shareholder"), and HA-LO
INDUSTRIES, INC., an Illinois corporation ("HA-LO").
The background of this Affiliate Agreement is as follows:
As of the date of this Affiliate Agreement, Shareholder is a
shareholder of Nerok Verifications Inc., a Canadian federal
corporation ("Nerok"). Pursuant to an Agreement and Plan of
Merger and Amalgamation dated as of June 14, 1996 (the "Plan of
Merger"), among HA-LO, Market USA, Inc., an Illinois corporation
("Market USA"), Marusa Marketing Inc., a Canadian federal
corporation ("Marusa"), Marusa Financial Services Ltd., a
Canadian federal corporation, Nerok Verifications Inc., a
Canadian federal corporation ("Nerok"), the shareholders of
Market USA and Marusa, and others, it was agreed that, upon
satisfaction of certain conditions, HA-LO's wholly-owned Illinois
and Canadian subsidiaries would merge into and amalgamate with
Market USA and Marusa, respectively, in a unitary transaction
intended to qualify simultaneously as (i) a reorganization under
the provisions of Section 368(a) of the Internal Revenue Code of
1986, as amended, (ii) an amalgamation exempt from taxation under
the Canada/U.S. Income Tax Convention, and (iii) a "pooling of
interests" under generally accepted accounting principles
("GAAP"), the published statements of the Financial Accounting
Standards Board ("FASB"), and the rules and regulations ("Rules
and Regulations") of the Securities and Exchange Commission (the
"Commission") promulgated under the Securities Act of 1933, as
amended (the "Securities Act"). The aforesaid tax and accounting
treatments (hereafter collectively referred to as the "Merger
Benefits") were a material inducement to the parties to enter
into the Plan of Merger. In addition, as part of the unitary
transaction, HA-LO would purchase all of the outstanding shares
of Nerok pursuant to a Stock Purchase Agreement dated September
30, 1996 (the "Stock Purchase Agreement") between HA-LO and the
shareholders of Nerok. Shareholder enters into this Affiliate
Agreement pursuant to the terms of the Stock Purchase Agreement.
Unless otherwise provided in this Affiliate Agreement, the
capitalized terms used herein shall have the same meanings
ascribed to them in the Plan of Merger.
Pursuant to the Stock Purchase Agreement, HA-LO would
purchase Shareholder's total shareholdings in Nerok (the "Target
Securities"), and Shareholder would receive, as consideration for
the Target Securities, shares of HA-LO's common capital voting
stock, no par value (the "Acquiror Securities"). It is the
parties' good faith belief and understanding that Shareholder is
an "affiliate" of Market USA and/or Marusa prior to the Effective
Time, and may be an "affiliate" of HA-LO on and after the<PAGE>
<PAGE>
Effective Time. As used herein, "affiliate" shall have the same
meaning given to such term for purposes of paragraphs (c) and (d)
of Rule 145 of the Rules and Regulations of the Commission under
the Securities Act, and/or as used in and for purposes of
Accounting Series, Releases 130 and 135, as amended, of the
Commission.
By and through this Affiliate Agreement, Shareholder is (i)
acknowledging that certain requirements of the Code, the Canada
Tax Act, GAAP, Financial Accounting Statements of FASB ("FAS")
and the Securities Act (among other laws and rules) may govern or
limit the applicability and/or availability of the Merger
Benefits in the event of a sale, transfer or other disposition by
Shareholder of her Target Securities and Acquiror Securities,
(ii) representing and warranting to and for the benefit of HA-LO
that Shareholder will not take any action which could jeopardize
the treatment of the merger of Market USA and the amalgamation of
Marusa as a pooling of interests for accounting purposes, and
(iii) acknowledging and agreeing that HA-LO shall have no
obligation or responsibility to facilitate the sale, transfer or
other disposition of Acquiror Securities received by Shareholder
under the Plan of Merger except to the extent set forth in the
Registration Rights Agreement attached hereto as Annex "1" (the
"Registration Agreement"), which shall be executed concurrently
herewith by HA-LO, Shareholder and the shareholders of Market
USA, Marusa and/or Nerok, or paragraph 7 hereof.
NOW, THEREFORE, in consideration of the premises, and other
good and valuable consideration, the receipt and sufficiency of
which is hereby mutually acknowledged, Shareholder and HA-LO,
intending to be legally bound, covenant to and agree, each with
the other, as follows:
1. In the event Shareholder receives any Acquiror
Securities under, pursuant to or as a result of the Plan of
Merger, Shareholder shall not make any sale, transfer or other
disposition of such Acquiror Securities in violation of the
Securities Act or Rules and Regulations of the Commission.
2. Shareholder acknowledges and represents that
Shareholder has carefully read this Affiliate Agreement, and to
the extent Shareholder deemed it necessary, Shareholder has
discussed the requirements of these documents, and other
applicable limitations on Shareholder's ability to sell, transfer
or otherwise dispose of Acquiror Securities, with legal counsel
of Shareholder's selection.
3. Shareholder understands the transactions contemplated
under the Plan of Merger must be submitted for a vote of the
stockholders of HA-LO pursuant to a Proxy Statement containing,
in part, material information concerning, and provided by or on
behalf of, Market USA and Marusa. In connection with such
- 2 -<PAGE>
<PAGE>
solicitation, and otherwise for the purpose of consummating the
transactions contemplated under the Plan of Merger, the Proxy
Statement and other written materials prepared by or on behalf of
HA-LO may deem Shareholder to be an "affiliate" of Market USA and
Marusa prior to the Effective Time, and an "affiliate" of HA-LO
on and after the Effective Time. Shareholder hereby agrees
that, whether or not such classification is correct, Shareholder
shall not take objection to, and Shareholder shall not cause or
suffer others to take objection to, such classification, if such
objection could result in, or effect, any modification,
alteration, amendment, restatement or nullification of any term
or provision set forth in this Affiliate Agreement or otherwise
intended to be binding on Shareholder and Shareholder's
successors and assigns.
4. Shareholder hereby agrees that, from the Effective
Time, she shall not sell, transfer or otherwise dispose of
Acquiror Securities received by her pursuant to the Stock
Purchase Agreement unless (x) such sale, transfer or disposition
has been effectively registered under the Securities Act,
including pursuant to the Registration Agreement for as long as
she shall remain an "affiliate" of HA-LO, (y) such sale, transfer
or disposition is made in conformity with the volume and other
limitations of Rule 145 promulgated by the Commission under the
Securities Act, or (z) in the opinion of counsel reasonably
acceptable to HA-LO, such sale, transfer or disposition is exempt
from registration under the Securities Act.
5. Anything in this Affiliate Agreement to the contrary
notwithstanding, Shareholder covenants and agrees with HA-LO that
Shareholder shall not, directly or indirectly, (i) during the
thirty (30) days prior to the Effective Time, sell, transfer or
otherwise dispose of any shares of Target Securities, or (ii)
sell, transfer or otherwise dispose of any shares of Acquiror
Securities, whether or not received by Shareholder pursuant to
the Stock Purchase Agreement, during the period from the
Effective Time until after such time as results covering at least
thirty (30) days of combined operations of Market USA, Marusa and
HA-LO have been published by HA-LO in the form of a quarterly
earnings report, an effective registration statement filed with
the Commission, a report to the Commission on Form 10-K, 10-Q or
8-K, or any other public filing or announcement which includes
such combined results of operations for Market USA, Marusa and
HA-LO. For purposes of this Affiliate Agreement, the separate
periods during which Shareholder shall be prohibited from
selling, transferring or otherwise disposing of Target Securities
or Acquiror Securities pursuant to this Section 5 are hereafter
collectively, the "Pooling Periods".
6. Shareholder understands and agrees it is intended the
transactions under the Plan of Merger will be treated as a
"pooling of interests" in accordance with GAAP, FAS and Rules and
- 3 -<PAGE>
<PAGE>
Regulations promulgated by the Commission under the Securities
Act. Shareholder agrees that Shareholder's forbearance from
selling, transferring or otherwise disposing of Target Securities
and Acquiror Securities during a Pooling Period is required to
preserve the Merger Benefits.
7. Following expiration of the Pooling Periods, for so
long as shall be necessary in order to permit Shareholder to sell
Acquiror Securities received by her pursuant to the Stock
Purchase Agreement pursuant to Rule 145 under the Securities Act,
and to the extent applicable, Rule 144 under the Securities Act,
HA-LO shall file those reports required to be filed by it
pursuant to Section 13 of the Securities Exchange Act of 1934, as
amended, in order to permit Shareholder to sell Acquiror
Securities pursuant to the terms and conditions of Rule 145 and
the applicable provisions of Rule 144.
Shareholder understands that, except as set forth in the
Registration Agreement or this Agreement, HA-LO shall be under no
obligation to register the sale, transfer or other disposition of
any Acquiror Securities by or on behalf of Shareholder or to take
any other action necessary in order to make compliance with an
exemption from registration available.
8. Nothing set forth in this Affiliate Agreement shall be
deemed to evidence a present intention on the part of Shareholder
to dispose of any Acquiror Securities, and Shareholder expressly
disclaims any such intention. This Agreement merely establishes
parameters for the disposition by Shareholder of Acquiror
Securities should Shareholder elect in the future to do so.
9. Shareholder agrees that stop transfer instructions
shall be given to HA-LO's transfer agent with respect to the
shares of Acquiror Securities received by Shareholder pursuant to
the Stock Purchase Agreement (other than those shares which are
eligible for registration and sale from time to time under the
Registration Agreement following the expiration of the Pooling
Periods or sale in accordance with Rule 145) and that there will
be placed on the certificates for such shares, or on any
substitutions therefor, a legend stating in substance:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE
(1) ARE OWNED BY A PERSON (THE "OWNER") WHO MAY BE
DEEMED TO BE AN "AFFILIATE," AS SUCH TERM IS
DEFINED IN RULE 144(a) PROMULGATED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OF HA-LO INDUSTRIES, INC. (THE
"ISSUER"); (2) WERE RECEIVED BY THE OWNER IN A
TRANSACTION SUBJECT TO RULE 145 PROMULGATED UNDER
THE SECURITIES ACT; (3) ARE SUBJECT TO CERTAIN
RESTRICTIONS ON DISPOSITIONS CONTAINED IN AN
AFFILIATE AGREEMENT DATED AS OF SEPTEMBER ___,
- 4 -<PAGE>
<PAGE>
1996 BETWEEN THE ISSUER AND THE OWNER (A COPY OF
WHICH IS ON FILE WITH THE SECRETARY OF THE
ISSUER); AND (4) MAY NOT BE SOLD, TRANSFERRED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT (AND ANY APPLICABLE STATE LAWS) OR
AN OPINION OF THE ISSUER'S COUNSEL TO THE EFFECT
THAT SUCH SALE, TRANSFER OR OTHER DISPOSITION IS
PERMITTED UNDER THE SECURITIES ACT AND THE
REGULATIONS PROMULGATED THEREUNDER."
The foregoing "stop transfer" instructions shall be
terminated with respect to said Acquiror Securities at the times
at which they become eligible for registration and sale pursuant
to the Registration Agreement or to the extent eligible for sale
in accordance with Rule 145.
10. Shareholder hereby represents and warrants to HA-LO
that she possesses the full power, right and authority to execute
and deliver this Agreement, and to make the representations,
warranties, covenants and agreements herein contained, and to
perform all of her obligations hereunder. This Affiliate
Agreement shall inure to the benefit of HA-LO and its successors
and assigns, and shall be binding upon, and obligate, Shareholder
and Shareholder s successors and assigns. This Affiliate
Agreement shall be specifically enforceable by HA-LO, with or
without proof of monetary damages. This Affiliate Agreement may
be amended only in a writing signed by the parties, and shall be
construed in accordance with, and governed by, the internal laws
of the State of Illinois. In the event of any dispute under this
Affiliate Agreement, the matter shall be settled by resort to the
federal or state courts with venue in the County of Cook, State
of Illinois, and in no other location.
- 5 -<PAGE>
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Affiliate
Agreement as of the day and year first above written.
/s/ Debra Okner
Debra Okner
HA-LO INDUSTRIES, INC.
By: /s/ Richard A. Magid
Its: Vice President
180110_01
- 6 -<PAGE>
AFFILIATE AGREEMENT
THIS AFFILIATE AGREEMENT ("Affiliate Agreement") is made and
entered into as of this 30th day of September, 1996, by and
between the undersigned, ANNE OKNER ("Shareholder"), and HA-LO
INDUSTRIES, INC., an Illinois corporation ("HA-LO").
The background of this Affiliate Agreement is as follows:
As of the date of this Affiliate Agreement, Shareholder is a
shareholder of Nerok Verifications Inc., a Canadian federal
corporation ("Nerok"). Pursuant to an Agreement and Plan of
Merger and Amalgamation dated as of June 14, 1996 (the "Plan of
Merger"), among HA-LO, Market USA, Inc., an Illinois corporation
("Market USA"), Marusa Marketing Inc., a Canadian federal
corporation ("Marusa"), Marusa Financial Services Ltd., a
Canadian federal corporation, Nerok Verifications Inc., a
Canadian federal corporation ("Nerok"), the shareholders of
Market USA and Marusa, and others, it was agreed that, upon
satisfaction of certain conditions, HA-LO's wholly-owned Illinois
and Canadian subsidiaries would merge into and amalgamate with
Market USA and Marusa, respectively, in a unitary transaction
intended to qualify simultaneously as (i) a reorganization under
the provisions of Section 368(a) of the Internal Revenue Code of
1986, as amended, (ii) an amalgamation exempt from taxation under
the Canada/U.S. Income Tax Convention, and (iii) a "pooling of
interests" under generally accepted accounting principles
("GAAP"), the published statements of the Financial Accounting
Standards Board ("FASB"), and the rules and regulations ("Rules
and Regulations") of the Securities and Exchange Commission (the
"Commission") promulgated under the Securities Act of 1933, as
amended (the "Securities Act"). The aforesaid tax and accounting
treatments (hereafter collectively referred to as the "Merger
Benefits") were a material inducement to the parties to enter
into the Plan of Merger. In addition, as part of the unitary
transaction, HA-LO would purchase all of the outstanding shares
of Nerok pursuant to a Stock Purchase Agreement dated September
30, 1996 (the "Stock Purchase Agreement") between HA-LO and the
shareholders of Nerok. Shareholder enters into this Affiliate
Agreement pursuant to the terms of the Stock Purchase Agreement.
Unless otherwise provided in this Affiliate Agreement, the
capitalized terms used herein shall have the same meanings
ascribed to them in the Plan of Merger.
Pursuant to the Stock Purchase Agreement, HA-LO would
purchase Shareholder's total shareholdings in Nerok (the "Target
Securities"), and Shareholder would receive, as consideration for
the Target Securities, shares of HA-LO's common capital voting
stock, no par value (the "Acquiror Securities"). It is the
parties' good faith belief and understanding that Shareholder is
an "affiliate" of Market USA and/or Marusa prior to the Effective
Time, and may be an "affiliate" of HA-LO on and after the<PAGE>
<PAGE>
Effective Time. As used herein, "affiliate" shall have the same
meaning given to such term for purposes of paragraphs (c) and (d)
of Rule 145 of the Rules and Regulations of the Commission under
the Securities Act, and/or as used in and for purposes of
Accounting Series, Releases 130 and 135, as amended, of the
Commission.
By and through this Affiliate Agreement, Shareholder is (i)
acknowledging that certain requirements of the Code, the Canada
Tax Act, GAAP, Financial Accounting Statements of FASB ("FAS")
and the Securities Act (among other laws and rules) may govern or
limit the applicability and/or availability of the Merger
Benefits in the event of a sale, transfer or other disposition by
Shareholder of her Target Securities and Acquiror Securities,
(ii) representing and warranting to and for the benefit of HA-LO
that Shareholder will not take any action which could jeopardize
the treatment of the merger of Market USA and the amalgamation of
Marusa as a pooling of interests for accounting purposes, and
(iii) acknowledging and agreeing that HA-LO shall have no
obligation or responsibility to facilitate the sale, transfer or
other disposition of Acquiror Securities received by Shareholder
under the Plan of Merger except to the extent set forth in the
Registration Rights Agreement attached hereto as Annex "1" (the
"Registration Agreement"), which shall be executed concurrently
herewith by HA-LO, Shareholder and the shareholders of Market
USA, Marusa and/or Nerok, or paragraph 7 hereof.
NOW, THEREFORE, in consideration of the premises, and other
good and valuable consideration, the receipt and sufficiency of
which is hereby mutually acknowledged, Shareholder and HA-LO,
intending to be legally bound, covenant to and agree, each with
the other, as follows:
1. In the event Shareholder receives any Acquiror
Securities under, pursuant to or as a result of the Plan of
Merger, Shareholder shall not make any sale, transfer or other
disposition of such Acquiror Securities in violation of the
Securities Act or Rules and Regulations of the Commission.
2. Shareholder acknowledges and represents that
Shareholder has carefully read this Affiliate Agreement, and to
the extent Shareholder deemed it necessary, Shareholder has
discussed the requirements of these documents, and other
applicable limitations on Shareholder's ability to sell, transfer
or otherwise dispose of Acquiror Securities, with legal counsel
of Shareholder's selection.
3. Shareholder understands the transactions contemplated
under the Plan of Merger must be submitted for a vote of the
stockholders of HA-LO pursuant to a Proxy Statement containing,
in part, material information concerning, and provided by or on
behalf of, Market USA and Marusa. In connection with such
- 2 -<PAGE>
<PAGE>
solicitation, and otherwise for the purpose of consummating the
transactions contemplated under the Plan of Merger, the Proxy
Statement and other written materials prepared by or on behalf of
HA-LO may deem Shareholder to be an "affiliate" of Market USA and
Marusa prior to the Effective Time, and an "affiliate" of HA-LO
on and after the Effective Time. Shareholder hereby agrees
that, whether or not such classification is correct, Shareholder
shall not take objection to, and Shareholder shall not cause or
suffer others to take objection to, such classification, if such
objection could result in, or effect, any modification,
alteration, amendment, restatement or nullification of any term
or provision set forth in this Affiliate Agreement or otherwise
intended to be binding on Shareholder and Shareholder's
successors and assigns.
4. Shareholder hereby agrees that, from the Effective
Time, she shall not sell, transfer or otherwise dispose of
Acquiror Securities received by her pursuant to the Stock
Purchase Agreement unless (x) such sale, transfer or disposition
has been effectively registered under the Securities Act,
including pursuant to the Registration Agreement for as long as
she shall remain an "affiliate" of HA-LO, (y) such sale, transfer
or disposition is made in conformity with the volume and other
limitations of Rule 145 promulgated by the Commission under the
Securities Act, or (z) in the opinion of counsel reasonably
acceptable to HA-LO, such sale, transfer or disposition is exempt
from registration under the Securities Act.
5. Anything in this Affiliate Agreement to the contrary
notwithstanding, Shareholder covenants and agrees with HA-LO that
Shareholder shall not, directly or indirectly, (i) during the
thirty (30) days prior to the Effective Time, sell, transfer or
otherwise dispose of any shares of Target Securities, or (ii)
sell, transfer or otherwise dispose of any shares of Acquiror
Securities, whether or not received by Shareholder pursuant to
the Stock Purchase Agreement, during the period from the
Effective Time until after such time as results covering at least
thirty (30) days of combined operations of Market USA, Marusa and
HA-LO have been published by HA-LO in the form of a quarterly
earnings report, an effective registration statement filed with
the Commission, a report to the Commission on Form 10-K, 10-Q or
8-K, or any other public filing or announcement which includes
such combined results of operations for Market USA, Marusa and
HA-LO. For purposes of this Affiliate Agreement, the separate
periods during which Shareholder shall be prohibited from
selling, transferring or otherwise disposing of Target Securities
or Acquiror Securities pursuant to this Section 5 are hereafter
collectively, the "Pooling Periods".
6. Shareholder understands and agrees it is intended the
transactions under the Plan of Merger will be treated as a
"pooling of interests" in accordance with GAAP, FAS and Rules and
- 3 -<PAGE>
<PAGE>
Regulations promulgated by the Commission under the Securities
Act. Shareholder agrees that Shareholder's forbearance from
selling, transferring or otherwise disposing of Target Securities
and Acquiror Securities during a Pooling Period is required to
preserve the Merger Benefits.
7. Following expiration of the Pooling Periods, for so
long as shall be necessary in order to permit Shareholder to sell
Acquiror Securities received by her pursuant to the Stock
Purchase Agreement pursuant to Rule 145 under the Securities Act,
and to the extent applicable, Rule 144 under the Securities Act,
HA-LO shall file those reports required to be filed by it
pursuant to Section 13 of the Securities Exchange Act of 1934, as
amended, in order to permit Shareholder to sell Acquiror
Securities pursuant to the terms and conditions of Rule 145 and
the applicable provisions of Rule 144.
Shareholder understands that, except as set forth in the
Registration Agreement or this Agreement, HA-LO shall be under no
obligation to register the sale, transfer or other disposition of
any Acquiror Securities by or on behalf of Shareholder or to take
any other action necessary in order to make compliance with an
exemption from registration available.
8. Nothing set forth in this Affiliate Agreement shall be
deemed to evidence a present intention on the part of Shareholder
to dispose of any Acquiror Securities, and Shareholder expressly
disclaims any such intention. This Agreement merely establishes
parameters for the disposition by Shareholder of Acquiror
Securities should Shareholder elect in the future to do so.
9. Shareholder agrees that stop transfer instructions
shall be given to HA-LO's transfer agent with respect to the
shares of Acquiror Securities received by Shareholder pursuant to
the Stock Purchase Agreement (other than those shares which are
eligible for registration and sale from time to time under the
Registration Agreement following the expiration of the Pooling
Periods or sale in accordance with Rule 145) and that there will
be placed on the certificates for such shares, or on any
substitutions therefor, a legend stating in substance:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE
(1) ARE OWNED BY A PERSON (THE "OWNER") WHO MAY BE
DEEMED TO BE AN "AFFILIATE," AS SUCH TERM IS
DEFINED IN RULE 144(a) PROMULGATED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OF HA-LO INDUSTRIES, INC. (THE
"ISSUER"); (2) WERE RECEIVED BY THE OWNER IN A
TRANSACTION SUBJECT TO RULE 145 PROMULGATED UNDER
THE SECURITIES ACT; (3) ARE SUBJECT TO CERTAIN
RESTRICTIONS ON DISPOSITIONS CONTAINED IN AN
AFFILIATE AGREEMENT DATED AS OF SEPTEMBER ___,
- 4 -<PAGE>
<PAGE>
1996 BETWEEN THE ISSUER AND THE OWNER (A COPY OF
WHICH IS ON FILE WITH THE SECRETARY OF THE
ISSUER); AND (4) MAY NOT BE SOLD, TRANSFERRED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT (AND ANY APPLICABLE STATE LAWS) OR
AN OPINION OF THE ISSUER'S COUNSEL TO THE EFFECT
THAT SUCH SALE, TRANSFER OR OTHER DISPOSITION IS
PERMITTED UNDER THE SECURITIES ACT AND THE
REGULATIONS PROMULGATED THEREUNDER."
The foregoing "stop transfer" instructions shall be
terminated with respect to said Acquiror Securities at the times
at which they become eligible for registration and sale pursuant
to the Registration Agreement or to the extent eligible for sale
in accordance with Rule 145.
10. Shareholder hereby represents and warrants to HA-LO
that she possesses the full power, right and authority to execute
and deliver this Agreement, and to make the representations,
warranties, covenants and agreements herein contained, and to
perform all of her obligations hereunder. This Affiliate
Agreement shall inure to the benefit of HA-LO and its successors
and assigns, and shall be binding upon, and obligate, Shareholder
and Shareholder s successors and assigns. This Affiliate
Agreement shall be specifically enforceable by HA-LO, with or
without proof of monetary damages. This Affiliate Agreement may
be amended only in a writing signed by the parties, and shall be
construed in accordance with, and governed by, the internal laws
of the State of Illinois. In the event of any dispute under this
Affiliate Agreement, the matter shall be settled by resort to the
federal or state courts with venue in the County of Cook, State
of Illinois, and in no other location.
- 5 -<PAGE>
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Affiliate
Agreement as of the day and year first above written.
/s/ Anne Okner
Anne Okner
HA-LO INDUSTRIES, INC.
By: /s/ Richard A. Magid
Its: Vice President
180116_01
- 6 -<PAGE>
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made
and entered into as of September 30, 1996, by and among HA-LO
INDUSTRIES, INC., an Illinois corporation (together with its
permitted successors and assigns, the "Company"), and the persons
whose signatures appear on the execution pages of this Agreement
(the "Shareholders").
This Agreement is made pursuant to the Agreement and Plan of
Merger dated as of June 14, 1996 (the "Merger Agreement") by and
among the Company, HA-LO Acquisition Corporation, Inc., HA-LO
Acquisition Corporation of Canada, Ltd., Market U.S.A., Inc.,
MARUSA Marketing Inc., and the Shareholders, pursuant to which
the Shareholders will receive shares of Common Stock (as defined
below) of the Company.
The parties hereto, for good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged,
intending to be bound hereby, agree as follows:
SECTION 1. Definitions.
As used in this Agreement, the following terms shall have
the following meanings:
Advice: See Section 6 hereof.
Affiliate means, with respect to any specified person, any
other person directly or indirectly controlling or controlled by
or under direct or indirect common control with such specified
person. For the purposes of this definition, "control" when used
with respect to any specified person means the power to direct
the management and policies of such person, directly or
indirectly, whether through the ownership of voting securities,
by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
Business Day means any day that is not a Saturday, a Sunday
or a legal holiday on which banking institutions in the State of
Illinois are not required to be open.
Claims: See Section 8(a) hereof.
Closing Date means the date upon which the transactions
contemplated by the Merger Agreement are consummated.
Common Stock means the Common Stock, no par value, of the
Company, or any other shares of capital stock of the Company into
which such stock shall be reclassified or changed (by operation
of law or otherwise). If the Common Stock has been so
reclassified or changed, or if the Company pays a dividend or
makes a distribution on its Common Stock in shares of capital<PAGE>
<PAGE>
stock, or subdivides (or combines) its outstanding shares of
Common Stock into a greater (or smaller) number of shares of
Common Stock, a share of Common Stock shall be deemed to be such
number of shares of capital stock and amount of other securities
to which a holder of a share of Common Stock outstanding
immediately prior to such reclassification, exchange, dividend,
distribution, subdivision or combination would be entitled.
Cutback Registration means any registration in which the
managing underwriter advises the Company that marketing factors
require a limitation of the number of Registrable Shares to be
underwritten in such registration.
Delay Period: See Section 2(b) hereof.
Delay Notice: See Section 2(b) hereof.
Delaying Notice: See Section 3(d) hereof.
Demand Effectiveness Period: See Section 3(b) hereof.
Demand Request: See Section 3(a) hereof.
Effectiveness Period: See Section 2(b) hereof.
Exchange Act means the Securities Exchange Act of 1934, as
amended.
Merchant Agreement means that certain Registration Rights
Agreement dated as of January 11, 1995, as amended, between the
Company and Merchant Partners, L.P.
Notice of Demand Request: See Section 3(a) hereof.
person means any individual, corporation, partnership, joint
venture, association, joint stock company, trust, unincorporated
organization or government or any agency or political subdivision
thereof.
Pooling Period means the period of time beginning on the
Closing Date and ending on the date that the date Company
publishes an earnings release meeting the requirements of APB
Opinion No. 16.
Prospectus means the prospectus included in any Registration
Statement (including, without limitation, a prospectus that
discloses information previously omitted from a prospectus filed
as part of an effective Registration Statement in reliance upon
Rule 430A), as amended or supplemented by any prospectus
supplement, with respect to the terms of the offering of any
portion of the Registrable Shares covered by such Registration
Statement and all other amendments and supplements to the
-2-<PAGE>
<PAGE>
prospectus, including post-effective amendments, and all material
incorporated by reference or deemed to be incorporated by
reference in such Prospectus.
Registrable Shares means the shares of Common Stock issued
to the Shareholders pursuant to the Merger Agreement, until in
the case of any such share (i) it has been effectively registered
under Section 5 of the Securities Act and disposed of pursuant to
an effective Registration Statement under the Securities Act or
(ii) it has been transferred other than pursuant to Rule
"4(1-1/2)" (or any similar private transfer exemption) under the
Securities Act. Where specified herein, "Registrable Shares" may
also refer to the shares of Common Stock held by any other
person.
Registration Documents: See Section 8(a) hereof.
Registration Statement means any registration statement of
the Company that covers any of the Registrable Shares pursuant to
the provisions of this Agreement, including the Prospectus,
amendments and supplements to such registration statement,
including post-effective amendments, all exhibits, and all
material incorporated by reference or deemed to be incorporated
by reference in such registration statement.
Requested Registration means a registration demanded
pursuant to Section 3 for which the Registration Statement
relating thereto has been declared effective by the SEC and for
which no stop-order suspending the effectiveness of such
registration statement has been issued by the SEC within the
Demand Effectiveness Period which prevents the Shareholders from
completing the distribution of their Registrable Shares described
included in such Registration Statement.
SEC means the Securities and Exchange Commission.
Securities Act means the Securities Act of 1933, as amended.
Shelf Registration: See Section 2(a) hereof.
Shareholders: See the introductory clauses hereof.
underwritten registration or underwritten offering means a
registration in which securities of the Company are sold to or
through one or more underwriters, on a firm commitment basis, for
reoffering or sale to the public.
Weisbach: See Section 3(a) hereof.
-3-<PAGE>
<PAGE>
SECTION 2. Required Shelf Registration.
(a) The Company shall file with, and shall cause to be
declared effective by, the SEC prior to times set forth below, a
Registration Statement under the Securities Act relating to the
following number of Registrable Shares, which Registration
Statement shall provide for the sale by the holders thereof of
the Registrable Shares included therein from time to time on a
delayed or continuous basis pursuant to Rule 415 under the
Securities Act, but need not provide for an underwritten
registration (each, a "Shelf Registration"):
(i) prior to the completion of the Pooling
Period, a whole number of shares of Common Stock equal to
(x) the quotient of $11 million divided by the average per
share price of Common Stock for the ten trading days prior
to the Closing Date if the Closing Date occurs on or before
August 31, 1996 or (y) the quotient of $15 million divided
by the average per share price of Common Stock for the ten
trading days prior to the Closing Date if the Closing Date
occurs after August 31, 1996 (it being understood, however,
that the Company shall not be required to request
acceleration of the effective date of such Registration
Statement until the completion of the Pooling Period);
(ii) prior to the first anniversary of the Closing
Date, a whole number of shares of Common Stock equal to the
product of (x) the number of shares of Common Stock then
held by the Shareholders which were acquired pursuant to the
Merger Agreement multiplied by (y) 50%; and
(iii) prior to the second anniversary of the
Closing Date, the remaining number of shares of Common Stock
acquired by the Shareholders pursuant to the Merger
Agreement which have not previously been sold or otherwise
disposed of.
(b) The Company agrees to use its best efforts to keep
each Registration Statement filed pursuant to this Section 2
continuously effective and usable for the resale of Registrable
Shares for a period ending on the earlier of (i) two years from
the date upon which such Registration Statement was declared
effective and (ii) the first date on which all the Registrable
Shares covered by such Shelf Registration have been sold pursuant
to such Registration Statement.
(c) Notwithstanding anything to the contrary contained
in this Agreement, the Company shall not be required to file a
Registration Statement or cause it to be declared effective at a
time (x) after completion of a fiscal year end, but prior to the
availability of the year end audited financial statements, (y)
when the Company, in the good faith judgement of its board of
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directors shall determine that any offering of Registrable Shares
would impede, delay or otherwise interfere with any pending or
contemplated acquisition involving the Company or (z) when the
Company is in possession of material information which, in the
good faith judgment of the Company's board of directors, if
disclosed in a Registration Statement, would be materially
harmful to the interests of the Company and its shareholders (any
such period in clauses (y) or (z) is referred to as a "Delay
Period"). A Delay Period shall commence on and include the date
that the Company gives written notice (such notice referred to
herein as the "Delay Notice") to the Shareholders that it is not
required to file a Registration Statement or cause it to be
declared effective pursuant to the provisions of this
Section 2(c) and shall end on the date when the Shareholders are
advised in writing by the Company that the current Delay Period
is over (it being understood that the Company shall give such
notice to all Shareholders promptly upon making the determination
that the Delay Period is over); provided; however, that the
Company shall not be entitled to Delay Periods having durations
that exceed 90 days in the aggregate during any calendar year.
Each Shareholder shall cease all disposition efforts with respect
to Registrable Shares held by them immediately upon receipt of a
Delay Notice.
(d) The two year time period for which the Company is
required to maintain the effectiveness of any Registration
Statement shall be extended by the aggregate number of days of
all Delay Periods and such two year period or the extension
thereof required by the preceding sentence is hereafter referred
to as the "Effectiveness Period."
(e) The Company may, in its sole discretion, include
other securities in such Shelf Registration (whether for the
account of the Company or otherwise, including without limitation
any securities of the Company held by security holders, if any,
who have piggyback registration rights with respect thereto) or
otherwise combine the offering of the Registrable Shares with any
offering of other securities of the Company (whether for the
account of the Company or otherwise).
SECTION 3. Requested Registration.
(a) If at any time prior to the satisfaction of the
Company's obligations to file and keep effective the Shelf
Registrations pursuant to Section 2(a) hereof, Lou Weisbach
("Weisbach") is no longer the Chairman of the Board of the
Company, Shareholders owning a majority of the Registrable
Shares, shall have the right to require the Company, by written
request (the "Demand Request"), to effect an underwritten
registration with respect to the Registrable Shares owned by such
Shareholders and their respective Affiliates. The Company will
give prompt written notice (the "Notice of Demand Request") of
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such demand for an underwritten registration to all Shareholders
and thereupon the Company shall, as expeditiously as reasonably
practicable, file a Registration Statement relating to the
registration under the Securities Act of (i) first, the
Registrable Shares which the Company has been so requested to
register by the demanding Shareholders and (ii) second, all other
Registrable Shares as to which Shareholders (other than the
demanding Shareholders) shall have made a written request to the
Company for registration thereof within 30 days after the Notice
of Demand Request, all to the extent necessary to permit the sale
or other disposition in an underwritten offering by such
Shareholders of the Registrable Shares to be so registered;
provided; however, that (i) if such registration is a Cutback
Registration, the Company shall register in such registration
(A) first, the Registrable Shares proposed to be sold by
Shareholders and (B) second, the Registrable Shares proposed to
be sold by each of Weisbach, his relatives and/or trust(s) for
the benefit thereof, and Merchant Partners, L.P. and its partners
holding Registrable Shares included in such Registration
Statement pursuant to the Merchant Agreement; and (ii) that the
Company shall not be obligated to take any action to effect any
such registration, qualification or compliance pursuant to this
Section 4(a) (A) of a number of Registrable Shares in excess of
the number of Registrable Shares for which the Company is then
required to effect Shelf Registrations pursuant to Section 2(a);
(B) within 90 days (or such other date as may be agreed between
the Company, the Shareholders, and the managing underwriter of an
underwritten offering of Registrable Shares) immediately
following the effective date of any Registration Statement
pertaining to such an underwritten offering; (C) if the
Shareholders have, within the past 270 days, caused a Requested
Registration; or (D) if the demanding Shareholders have requested
the registration of Registrable Shares in an aggregate price to
public of less than $7,500,000.
(b) The Company agrees to keep each Registration
Statement filed pursuant to this Section 3 continuously effective
and usable for the resale of Registrable Shares for a period of
up to 90 days or until all Registrable Shares included in such
Registration Statement have completed the distribution described
in the Registration Statement relating thereto, whichever first
occurs (the "Demand Effectiveness Period"), provided, however,
that during such 90-day period the Company may give notice to all
such Shareholders that the Registration Statement or the
prospectus included therein is no longer usable for offers and
sales of Registrable Shares, in which case the 90-day period will
be tolled until such time as each such Shareholder and the
managing underwriter of such underwritten offering either
receives copies of a supplemented or amended prospectus or is
advised in writing by the Company that use of the prospectus may
be resumed (it being understood that in such case the Company
shall promptly comply with its obligations under Section 6(a)).
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(c) The Company, if eligible to do so, shall file a
Registration Statement covering the Registrable Shares so
requested to be registered on Form S-2 or S-3 or any similar
short-form registration under the Securities Act as soon as
reasonably practicable after the receipt of the Demand Request;
provided, however, that if the managing underwriter of such
underwritten offering shall advise the Company in writing that,
in its opinion, the use of another form of Registration Statement
is of material importance to the success of such proposed
underwritten offering, then such underwritten registration shall
be effected on such other form.
(d) The Shareholders shall be entitled to three
Requested Registrations. Notwithstanding anything contained in
this Section 4, if (x) the SEC has issued a stop-order as a
result of actions taken by the demanding Shareholders or (y) the
demanding Shareholders give notice (the "Delaying Notice"), at
any time prior to the time the Registration Statement is declared
effective or prior to the last day of Demand Effectiveness
Period, that the demanding Shareholders desire the Company to
either withdraw the Registration Statement with the SEC, if the
Registration Statement has been filed with the SEC, or postpone
filing the Registration Statement, if the Registration Statement
has not been filed with the SEC and the Company is immediately
able to file the Registration Statement, then, in the case of
clause (x) herein, the issuance of the stop-order, or, in the
case of clause (y) herein, the Delaying Notice, shall reduce by
one the number of Requested Registrations to which the
Shareholders are entitled.
(e) A underwritten registration requested pursuant to
this Section 3 shall not be deemed to have been effected unless
the Registration Statement relating thereto and any post-
effective amendment required to commence the underwritten
offering contemplated thereby has been declared effective by the
SEC and maintained continuously effective for the Demand
Effectiveness Period.
(f) The demanding Shareholders shall enter into an
underwriting agreement relating to a firm commitment underwriting
in a form which is reasonably satisfactory to the demanding
Shareholders with the underwriter or underwriters selected for
such underwriting by the demanding Shareholders and which are
reasonably satisfactory to the Company. The Company shall enter
an underwriting agreement with a managing underwriter or
underwriters of an underwritten offering containing
representations, warranties, indemnities and agreements
customarily included (but not inconsistent with the agreements
contained herein) by an issuer of common stock in underwriting
agreements with respect to offerings of common stock for the
account of, or on behalf of, selling shareholders. The Company
may include securities for its own account or the account of any
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other person in such registration if the managing underwriter so
agrees and if so doing would not make such registration a Cutback
Registration.
SECTION 4. Piggyback Registration.
(a) If, at any time prior to the Company's
satisfaction of its obligations to file and keep effective the
Shelf Registrations pursuant to Section 2(a) or a Requested
Registration pursuant to Section 3(a) hereof, the Company
proposes to register under the Securities Act any shares of
Common Stock for its account or for the account of any other
person (other than a registration relating solely to employee
stock option or employee stock purchase plans or pursuant to Form
S-4 (or successor form) under the Securities Act), the Company
shall:
(i) promptly give to each Shareholder written
notice thereof (which written notice shall include a list of
jurisdictions in which the Company intends to attempt to
qualify such securities under or otherwise comply with the
applicable blue sky or other state securities laws); and
(ii) include in such registration (and any related
qualification under or other compliance with blue sky or
other state securities laws), and in any underwriting
involved therein, all the Registrable Shares specified in a
written request, made within 15 days from such written
notice from the Company, by any Shareholder; provided that
if such registration is a Cutback Registration, then (x) if
such registration is a primary registration on behalf of the
Company, the Company shall register in such registration (A)
first, the Company securities which the Company proposes to
sell in such registration, (B) second, the Registrable
Shares proposed to be sold by each of Weisbach, his
relatives and/or trust(s) for the benefit thereof, and
Merchant Partners, L.P. and it partners holding Registrable
Shares included in such Registration Statement pursuant to
the Merchant Agreement and (C) third, Registrable Shares
held by each Shareholder, on a pro rata basis, based upon
the number of Registrable Shares the Shareholders originally
sought to include in such registration; and (y) if such
registration is a secondary registration on behalf of a
holder of Company securities, the Company shall register in
such registration (A) first, the Registrable Shares proposed
to be sold by the holder thereof requesting such
registration, and (B) second, the Registrable Shares
proposed to be sold by each of Weisbach, his relatives
and/or trust(s) for the benefit thereof, and Merchant
Partners, L.P. and it partners holding Registrable Shares
included in such Registration Statement pursuant to the
Merchant Agreement and (C) third, Registrable Shares held by
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each Shareholder, on a pro rata basis, based upon the number
of Registrable Shares the Shareholders originally sought to
include in such registration.
(b) If the registration of which the Company gives
notice is pursuant to an effective Registration Statement under
the Securities Act, involving an underwriting, the Company shall
so advise the Shareholders as part of the written notice given
pursuant to subclause (a)(i) above. In such event, the right of
any Shareholder to registration pursuant to this Section shall be
conditioned upon the inclusion of the Registrable Shares held by
the Shareholder in the underwriting and the Shareholder entering
into an underwriting agreement, in a form reasonably acceptable
to the Company, with the underwriter or underwriters selected for
such underwriting by the Company.
SECTION 5. Hold-Back Agreements.
(a) Each holder of Registrable Shares agrees, if such
holder is reasonably requested by an underwriter in an
underwritten offering for the Company (whether for the account of
the Company or otherwise), not to effect any public sale or
distribution of any of the Company's equity securities, including
a sale pursuant to Rule 144 (except as part of such underwritten
registration), during the 10-day period prior to, and during the
90-day period beginning on, the closing date of such underwritten
offering.
(b) Subject to the satisfaction of its obligations
under the Merchant Agreement, the Company agrees, to the extent
not inconsistent with applicable law, and if and to the extent
requested by the managing underwriter of an underwritten
registration of Registrable Shares pursuant to Section 3 hereof,
not to effect any public sale or distribution of any of its
equity securities or of any security convertible into or
exchangeable or exercisable for any equity security of the
Company (other than any such sale or distribution for such
securities on Form S-4 or in connection with an employee stock
option or other benefit plan) during the 15 days prior to, and
for a period of 90 days (or such longer period as the
underwriters of such underwritten offering may reasonably
request) beginning on, the effective date of such Registration
Statement (except as part of such registration).
SECTION 6. Registration Procedures.
In connection with the registration obligations of the
Company pursuant to and in accordance with Sections 2, 3 and 4
hereof (and subject to the Company's rights under Sections 2, 3
and 4), the Company will use its best efforts to effect such
registration to permit the sale of such Registrable Shares in
accordance with the intended method or methods of disposition
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thereof, and pursuant thereto the Company shall as expeditiously
as possible:
(a) prepare and file with the SEC such amendments
(including post-effective amendments) to any Registration
Statement, and such supplements to any Prospectus, as may be
required by the rules, regulations or instructions applicable to
the Securities Act or the rules and regulations thereunder during
the applicable period in accordance with the intended methods of
disposition by the sellers thereof (other than pursuant to any
underwritten registration or underwritten offering, except in
accordance with Section 4) and cause any Prospectus as so
supplemented to be filed pursuant to Rule 424 under the
Securities Act;
(b) before filing with the SEC any such Registration
Statement or prospectus or any amendments or supplements thereto,
the Company shall furnish to counsel selected by the holders of a
majority of the Registrable Shares covered by such Registration
Statement and counsel for the underwriter, if any, in connection
therewith, drafts of all such documents proposed to be filed and
provide such counsel with a reasonable opportunity for review
thereof and comment thereon, such review to be conducted and such
comments to be delivered with reasonable promptness;
(c) notify the selling holders of Registrable Shares
promptly and (if requested by any such person) confirm such
notice in writing, (i) when a Prospectus or any Prospectus
supplement or post-effective amendment has been filed, and, with
respect to a Registration Statement or any post-effective
amendment, when the same has become effective, (ii) of any
request by the SEC for amendments or supplements to a
Registration Statement or related Prospectus or for additional
information regarding such holder, (iii) of the issuance by the
SEC of any stop order suspending the effectiveness of a
Registration Statement or the initiation of any proceedings for
that purpose, (iv) of the receipt by the Company of any
notification with respect to the suspension of the qualification
or exemption from qualification of any of the Registrable Shares
for sale in any jurisdiction or the initiation or threatening of
any proceeding for such purpose, and (v) of the happening of any
event that requires the making of any changes in such
Registration Statement, Prospectus or documents so that they will
not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or
necessary to make the statements therein not misleading;
(d) use its best reasonable efforts to obtain the
withdrawal of any order suspending the effectiveness of a
Registration Statement, or the lifting of any suspension of the
qualification or exemption from qualification of any of the
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Registrable Shares for sale in any jurisdiction in the United
States;
(e) if requested by the selling holders, furnish to
counsel for the selling holders of Registrable Shares, without
charge, one conformed copy of each Registration Statement as
declared effective by the SEC and of each post effective
amendment thereto, in each case including financial statements
and schedules and all exhibits and reports incorporated or deemed
to be incorporated therein by reference; and such number of
copies of the preliminary prospectus, each amended preliminary
prospectus, each final Prospectus and each post effective
amendment or supplement thereto, as the selling holders may
reasonably request in order to facilitate the disposition of the
Registrable Shares covered by each Registration Statement in
conformity with the requirements of the Securities Act;
(f) prior to any public offering of Registrable Shares
register or qualify such Registrable Shares for offer and sale
under the securities or Blue Sky laws of such jurisdictions in
the United States as any selling holder shall reasonably request
in writing; and do any and all other reasonable acts or things
necessary or advisable to enable such holders to consummate the
disposition in such jurisdictions of such Registrable Shares
covered by the Registration Statement; provided, however, that
the Company shall in no event be required to qualify generally to
do business as a foreign corporation or as a dealer in any
jurisdiction where it is not at the time so qualified or to
execute or file a general consent to service of process in any
such jurisdiction where it has not theretofore done so or to take
any action that would subject it to general service of process or
taxation in any such jurisdiction where it is not then subject;
(g) except during any Delay Period, upon the
occurrence of any event contemplated by paragraph 6(b)(ii) or
6(b)(v) above, prepare a supplement or post-effective amendment
to each Registration Statement or related Prospectus or any
document incorporated or deemed to be incorporated therein by
reference or file any other required document so that, as
thereafter delivered to the purchasers of the Registrable Shares
being sold thereunder, such Prospectus will not contain an untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were
made, not misleading;
(h) cause all Registrable Shares covered by the
Registration Statement to be listed on each securities exchange
and included in the over-the-counter market, if any, on which
similar securities issued by the Company are then listed or
traded;
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(i) if requested by the managing underwriter or
underwriters of any registration or by the holders of a majority
of the Registrable Shares included in any Registration Statement,
subject to approval of counsel to the Company in its reasonable
judgement, promptly incorporate in a prospectus, supplement or
post-effective amendment to the Registration Statement such
information concerning underwriters and the plan of distribution
of the Registrable Shares as such managing underwriter or
underwriters or such holders reasonably shall furnish to the
Company in writing and request be included therein, including,
without limitation, with respect to the number of Registrable
Shares being sold by such holders to such underwriter or
underwriters, the purchase price being paid therefor by such
underwriter or underwriters and with respect to any other terms
of the underwritten offering of the Registrable Shares to be sold
in such offering; and make all required filings of such
prospectus, supplement or post-effective amendment as soon as
reasonably possible after being notified of the matters to be
incorporated in such prospectus, supplement or post-effective
amendment;
(j) make available for inspection by any seller of
Registrable Shares, any underwriter participating in any
disposition pursuant to such Registration Statement, and any
attorney, accountant or other agent retained by any such seller
or underwriter (in each case in a manner which minimizes
disruption of the Company's business), all financial and other
records, pertinent corporate documents and properties of the
Company, and cause the Company's officers, directors, employees,
attorneys and independent accountants to supply all information
in each case reasonably requested by any such sellers,
underwriters, attorneys, accountants or agents in connection with
such Registration Statement, subject to right of the Company to
limit access to any such information (i) to the extent that the
Company is restricted from providing such information pursuant to
any bona fide confidentiality agreement to which the Company or
any of its subsidiaries or Affiliates is a party and (ii) the
Company shall have delivered to each seller of the Registrable
Shares a certificate duly executed by the chief executive officer
of the Company stating that such information does not contain any
material information that has not been publicly disclosed and
which would be required to be disclosed in, or which would
materially affect any information required to be disclosed in,
such Registration Statement;
(k) use its best efforts to comply with all applicable
laws related to such Registration Statement and offering and sale
of securities and all applicable rules and regulations of
governmental authorities in connection therewith (including,
without limitation, the Securities Act and the Exchange Act, and
the rules and regulations promulgated by the SEC) and make
generally available to its security holders as soon as
practicable (but in any event not later than fifteen (15) months
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after the effectiveness of such Registration Statement) an
earnings statement of the Company and its subsidiaries complying
with Section 11(a) of the Securities Act;
(l) deliver promptly to each Shareholder participating
in a registration copies of all correspondence between the SEC
and the Company, its counsel or auditors and all memoranda
relating to discussions with the SEC or its staff with respect to
the Registration Statement;
(m) provide a transfer agent and registrar for all
such Registrable Shares covered by such Registration Statement
not later than the effective date of such Registration Statement;
(n) with respect to an underwritten registration only,
obtain an opinion from the Company's counsel and "cold comfort"
letters from the Company's independent public accountants
(including one letter when such Registration Statement goes
effective and one at the closing) in customary form and covering
such matters of the type customarily covered by such opinions and
"cold comfort" letters;
(o) make any necessary arrangements with The
Depository Trust Company;
(p) cause unlegended stock certificates for the
Registrable Shares to be prepared and printed;
(q) make any necessary filings with the National
Association of Securities Dealers, Inc., or with respect to an
underwritten registration only, assist the underwriters to make
any necessary filings.
The Company may require each seller of Registrable
Shares as to which any registration is being effected to furnish
such information regarding the distribution of such Registrable
Shares and as to such seller as it may from time to time
reasonably request. If any such information with respect to any
seller is not furnished prior to the filing of the Registration
Statement, the Company may exclude such seller's Registrable
Shares from such Registration Statement.
Each holder of Registrable Shares agrees by acquisition
of such Registrable Shares that, upon receipt of any notice from
the Company of the happening of any event of the kind described
in Section 6(b)(ii), 6(b)(iii), 6(b)(iv) or 6(b)(v) hereof or
upon notice of the commencement of any Delay Period, such holder
shall forthwith discontinue disposition of such Registrable
Shares covered by such Registration Statement or Prospectus until
such holder's receipt of the copies of the supplemented or
amended Prospectus contemplated by Section 6(f) hereof, or until
it is advised in writing (the "Advice") by the Company that the
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use of the applicable Prospectus may be resumed, and has received
copies of any amended or supplemented Prospectus or any
additional or supplemental filings which are incorporated, or
deemed to be incorporated, by reference in such Prospectus and,
if requested by the Company, such holder shall deliver to the
Company (at the expense of the Company) all copies, other than
permanent file copies then in such holder's possession, of the
Prospectus covering such Registrable Shares at the time of
receipt of such request. Each holder of Registrable Shares
further agrees not to utilize any material other than the
applicable current Prospectus in connection with the offering of
Registrable Shares pursuant to this Agreement.
SECTION 7. Registration Expenses.
Whether or not any Registration Statement becomes effective,
the Company shall pay all costs, fees and expenses incident to
the Company's performance of or compliance with this Agreement
including, without limitation, (i) all registration and filing
fees, (ii) fees and expenses of compliance with securities or
Blue Sky laws, (iii) printing expenses (including, without
limitation, expenses of printing of prospectuses if the printing
of prospectuses is requested by the holders of a majority of the
Registrable Shares included in any Registration Statement), (iv)
fees and disbursements of counsel for the Company, (v) fees and
disbursements of all independent certified public accountants of
the Company and all other persons retained by the Company in
connection with the Registration Statement, (vi) to the extent an
underwritten registration is involved in accordance with the
terms of this Agreement, to the extent provided in the
underwriting agreement, all fees and expenses of underwriters in
connection therewith (excluding discounts and commissions) and
(vii) the reasonable fees and expenses, not to exceed $1,500, of
no more than one counsel for the holders (as a group) of the
Registrable Shares included in such registration.
Notwithstanding the foregoing, any discounts, commissions,
underwriting or advisory fees, brokers' fees or fees of similar
securities industry professional (including any "qualified
independent underwriter" retained for the purpose of Section 3 of
Schedule E of the By-laws of the National Association of
Securities Dealers, Inc.) relating to the distribution of the
Registrable Shares will be payable by such holder and the Company
will have no obligation to pay any such amounts.
SECTION 8. Indemnification.
(a) In connection with any Registration Statement
effected or to be effected pursuant to this Agreement, the
Company shall indemnify each holder of Registrable Shares
included in such Registration Statement and each person who
controls (within the meaning of Section 15 of the Securities Act)
such holder of Registrable Shares from and against all losses,
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claims, damages, liabilities or expenses, joint or several, or
actions in respect thereof ("Claims") to which each such
indemnified party may become subject, under the Securities Act or
otherwise, insofar as such Claims (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the
Registration Statement or prospectus or any preliminary
prospectus or summary or final prospectus or any amendment or
supplement thereto or any document filed under a state securities
or blue sky law (collectively, "Registration Documents") or
insofar as such Claims arise out of or are based upon the
omission or alleged omission to state in any Registration
Document a material fact required to be stated therein or
necessary to make the statements made therein not misleading;
provided that the Company shall not be liable in any such case to
the extent such Claim arises out of or is based upon an untrue
statement or alleged untrue statement of a material fact or
omission or alleged omission of a material fact made in any
Registration Document in reliance upon and in conformity with
written information furnished to the Company by or on behalf of
such indemnified party specifically for use in the preparation of
such Registration Document.
(b) In connection with any Registration Statement
effected or to be effected pursuant to this Agreement, each
holder of Registrable Shares included in such Registration
Statement shall indemnify the Company, its directors, officers,
employees or agents, and each person who controls (within the
meaning of Section 15 of the Securities Act) the Company from and
against all Claims to which each such indemnified party may
become subject under the Securities Act or otherwise, insofar as
such Claims (or actions in respect thereof) arise out of or are
based upon any untrue statement or alleged untrue statement of
any material fact contained in any Registration Document, or
insofar as such Claims arise out of or are based upon the
omission or alleged omission to state in any Registration
Document a material fact required to be stated therein or
necessary to make the statements made therein not misleading;
provided, however, that such indemnification or reimbursement
shall be payable only if, and to the extent that, any such Claim
arises out of or is based upon an untrue statement or alleged
untrue statement of a material fact or omission or alleged
omission of a material fact made in any Registration Document in
reliance upon and in conformity with written information
furnished to the Company by such holder of Registrable Shares
specifically for use in the preparation of such Registration
Document; provided further, however, that no holder of
Registrable Shares shall be liable under this Section 7(b) for
any amounts in excess of the dollar amount of the gross proceeds
to be received by such Holder from the sale of its Registrable
Shares pursuant to such registration.
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(c) Any person entitled to indemnification under
Section 8(a) or 8(b) above shall notify promptly the indemnifying
party in writing of the commencement of any Claim if a claim for
indemnification in respect thereof is to be made against an
indemnifying party pursuant to this Section 8, but the omission
of such notice shall not relieve the indemnifying party from any
liability which it may have to any indemnified party, except to
the extent that the indemnifying party has been materially
prejudiced by such failure to provide such notice. In case any
action is brought against the indemnified party and it shall
notify the indemnifying party of the commencement thereof, the
indemnifying party shall be entitled to participate in, and, to
the extent that it shall wish, jointly with any other
indemnifying party similarly notified, to assume the defense
thereof with counsel satisfactory to the indemnified party; and,
after notice from the indemnifying party to the indemnified party
that it so chooses, the indemnifying party shall not be liable
for any legal or other expenses subsequently incurred by the
indemnified party in connection with the defense thereof other
than reasonable costs of investigation; provided, however, that
(i) if the indemnifying party fails to take reasonable steps
necessary to defend diligently the Claim within twenty (20) days
after receiving notice from the indemnified party that the
indemnified party believes it has failed to do so; or (ii) if the
indemnified party who is a defendant in any action or proceeding
which is also brought against the indemnifying party reasonably
shall have concluded that there may be legal defenses available
to the indemnified party which are not available to the
indemnifying party; or (iii) if representation of both parties by
the same counsel is otherwise inappropriate under applicable
standards of professional conduct, the indemnified party shall
have the right to assume or continue its own defense as set forth
above (but with no more than one firm of counsel for all
indemnified parties in each jurisdiction, except to the extent
any party or parties reasonably shall have concluded that there
may be legal defenses available to such party or parties which
are not available to the other indemnified parties or to the
extent representation of all indemnified parties by the same
counsel is otherwise inappropriate under applicable standards of
professional conduct) and the indemnifying party shall be liable
for any reasonable expenses therefor; provided, that no
indemnifying party shall be subject to any liability for any
settlement of a Claim made without its consent (which may not be
unreasonably withheld). If the indemnifying party assumes the
defense of any Claim hereunder, such indemnifying party shall not
enter into any settlement without the consent of the indemnified
party if such settlement attributes liability to the indemnified
party (which consent may not be unreasonably withheld).
(d) If for any reason the foregoing indemnity is
unavailable, or is insufficient to hold harmless, an indemnified
party, then the indemnifying party shall contribute to the amount
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paid or payable by the indemnified party as a result of any Claim
in such proportion as is appropriate to reflect the relative
fault of the indemnifying party and the indemnified party as well
as any other relevant equitable considerations. The relative
fault shall be determined by reference to, among-other things,
whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact
relates to information supplied by the indemnifying party or by
the indemnified party and the parties' relative intent,
knowledge, access to information and opportunity to correct or
prevent such statement or omission. The parties hereto agree
that it would not be just and equitable if contributions pursuant
to this Section 8(d) were determined by pro rata allocation or by
any other method of allocation which does not take account of the
equitable considerations referred to above in this Section.
SECTION 9. Miscellaneous.
9.1 Termination. This Agreement and the obligations of the
Company hereunder shall terminate on the earliest of (i) the
first date on which no Registrable Shares remain outstanding, and
(ii) the close of business on the last day of the last
Effectiveness Period.
9.2 Rule 144. The Company hereby covenants that the
Company will file in a timely manner all reports required to be
filed by it under the Securities Act and the Exchange Act and the
rules and regulations adopted by the SEC thereunder (or, if the
Company is not required to file such reports, it will, upon the
request of any holder of Registrable Shares, make publicly
available other information so long as necessary to permit sales
under Rule 144 under the Securities Act), and it will take such
further action as any holder of Registrable Shares may reasonably
request, all to the extent required from time to time to enable
such holder to sell Registrable Shares without registration under
the Securities Act within the limitation of the exemptions
provided by (i) Rule 144 under the Securities Act, as such Rule
may be amended from time to time, or (ii) any similar rule or
regulation hereafter adopted by the SEC.
9.3 Amendments and Waivers. The provisions of this
Agreement, including the provisions of this sentence, may not be
amended, modified or supplemented, and waivers or consents to
departures from the provisions hereof may not be given, unless
the Company has obtained the written consent of holders
representing a majority of the Registrable Shares.
Notwithstanding the foregoing, a waiver or consent to depart from
the provisions hereof with respect to a matter which relates
exclusively to the rights of holders of Registrable Shares whose
securities are being sold pursuant to a Registration Statement
and that does not directly or indirectly affect the rights of a
holder whose securities are not being sold pursuant to such
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Registration Statement may be given by holders of a majority of
the Registrable Shares being sold by such holders; provided,
however, that the provision of this sentence may not be amended,
modified, or supplemented except in accordance with the
provisions of the immediately preceding sentence.
9.4 Notices. All notices, requests, demands and other
communications required or permitted hereunder shall be in
writing and shall be deemed given: when delivered personally; one
Business Day after being deposited with a next-day air courier;
five Business Days after being deposited in the mail, postage
prepaid, if mailed; when answered back if telexed and when
receipt is acknowledged, if telecopied, in each case to the
parties at the address specified for such party in the Merger
Agreement (or at such other address for a party as shall be
specified by like notice: provided that notices of a change of
address shall be effective only upon receipt thereof).
9.5 Successors and Assigns. This Agreement, other than the
provisions of Section 3, shall inure to the benefit of and be
binding upon the successors and assigns of each of the parties.
9.6 Counterparts. This Agreement may be executed in any
number of counterparts and by the parties hereto in separate
counterparts, each of which when so executed shall be deemed to
be an original and all of which taken together shall constitute
one and the same agreement.
9.7 Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise
affect the meaning hereof.
9.8 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF
ILLINOIS WITHOUT GIVING EFFECT TO THE PROVISIONS THEREOF
GOVERNING CONFLICT OF LAWS PRINCIPLES.
9.9 Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent
jurisdiction to be invalid, illegal, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions
set forth herein shall remain in full force and effect and shall
in no way be affected, impaired or invalidated, and the parties
hereto shall use their best efforts to find and employ an
alternative means to achieve the same or substantially the same
result as that contemplated by such term, provision, covenant or
restriction. It is hereby stipulated and declared to be the
intention of the parties that they would have executed the
remaining terms, provisions, covenants and restrictions without
including any of such that may be hereafter declared invalid,
illegal, void or unenforceable.
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9.10 Entire Agreement. This Agreement is intended by the
parties as a final expression of their agreement and a complete
and exclusive statement of the agreement and understanding of the
parties hereto in respect of the subject matter contained herein.
There are no restrictions, promises, warranties or undertakings,
other than those set forth or referred to herein, with respect to
the registration rights granted by the Company with respect to
the Registrable Shares issued pursuant to the Merger Agreement.
This Agreement supersedes all prior agreements and understandings
between the parties with respect to such subject matter.
9.11 Calculation of Time Periods. Except as otherwise
indicated, all periods of time referred to herein shall include
all Saturdays, Sundays and holidays; provided, that if the date
to perform the act or give any notice with respect to this
Agreement shall fall on a day other than a Business Day, such act
or notice may be timely performed or given if performed or given
on the next succeeding Business Day.
9.12 Existing Registration Rights; No Inconsistent
Agreements. The Company represents and warrants that there are
not existing agreements with respect to its securities which are
inconsistent with the rights granted to the holders of
Registrable Shares in this Agreement or otherwise conflict with
the provisions hereof and agrees that it will not enter into any
agreements which are inconsistent with or limit or impair the
rights granted to the holders of Registrable Shares prior to the
termination of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
THE COMPANY:
HA-LO INDUSTRIES, INC., an Illinois
corporation
By: /s/ Richard A. Magid
Its: Vice President
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SHAREHOLDERS:
/s/ Seymour N. Okner
Seymour N. Okner
Number of Shares: 771,361
/s/ Samuel P. Okner
Samuel P. Okner
Number of Shares: 254,984
The Ellyn Robbins Family Trust
u/a/d May 14, 1996
By: /s/ Ellyn Robbins
Co-Trustee
By: /s/ Anne Okner
Co-Trustee
Number of Shares: 248,625
The Joel C. Okner Family Trust
u/a/d May 14, 1996
By: /s/ Joel C. Okner
Co-Trustee
By: /s/ Anne Okner
Co-Trustee
Number of Shares: 363,375
The Samuel P. Okner Family Trust
u/a/d May 14, 1996
By: /s/ Samuel P. Okner
Co-Trustee
By: /s/ Anne Okner
Co-Trustee
Number of Shares: 401,625
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Merchant Partners, Limited Partnership
By: Merchant Advisors, Limited
Partnership,
general partner
By: Merchant Development Corp.,
general partner
By: /s/ Raymond L. Bank
President
Number of Shares: 509,980
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/s/ Anne Okner
Anne Okner
Number of Shares: 25
/s/ Debra Okner
Debra Okner
Number of Shares: 25
182643_01
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