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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
July 26, 1996
---------------------------------------------------
Date of Report (Date of earliest event reported)
U.S. OFFICE PRODUCTS COMPANY
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(Exact name of registrant specified in its charter)
Delaware 0-25372 52-1906050
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(State or other juris- (Commission (I.R.S. Employer
diction of incorporation) File No.) Identification No.)
1440 New York Avenue, N.W., Suite 310, Washington, D.C. 20005
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(Address of principal executive offices) (ZipCode)
(202) 628-9500
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(Registrant's telephone number, including area code)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On July 26, 1996, U.S. Office Products Company (the "Company")
consummated the acquisitions of seven businesses, including Whitcoulls Group
Limited, a New Zealand corporation ("Whitcoulls"), and Mile High Office
Supply, Co.( "Mile High"), a Colorado corporation. The Company, through its
wholly-owned subsidiary Blue Star Group Limited, paid $220 million in cash
out of its working capital to acquire all of the outstanding stock of
Whitcoulls. In addition, the Company issued a $35 million promissory note to
the former owner of Whitcoulls who repaid $35 million of Whitcoulls'
indebtedness. Additional information relating to the acquisition of
Whitcoulls has been previously reported in the Company's Current Report on
Form 8-K, dated July 23, 1996, and has been omitted pursuant to General
Instruction B.3 of Form 8-K.
The Company acquired Mile High in a transaction in which MHOS
Acquisition Corp., a wholly-owned subsidiary of the Company, merged with and
into Mile High. The Company intends to continue the use of the assets of Mile
High in the office products business. The consideration paid to the
stockholders of Mile High was determined pursuant to arm's-length
negotiations and consisted of 1,370,175 shares of the Company's Common Stock.
The acquisition of Mile High was accounted for under the
pooling-of-interests method of accounting.
In addition, on August 9, 1996, the Company acquired American
Loose Leaf/Business Products, Inc. ("American Loose Leaf") in a transaction
in which ALL Acquisition Corp., a wholly-owned subsidiary of the Company,
merged with and into American Loose Leaf. The Company intends to continue
the use of the assets of American Loose Leaf in the office products business.
The consideration paid to the stockholders of American Loose Leaf was
determined pursuant to arm's-length negotiations and consisted of 1,106,807
shares of the Company's Common Stock and $7,885,979 in cash. The acquisition
of American Loose Leaf was accounted for under the purchase method of
accounting.
ITEM 7. FINANCIAL STATEMENTS PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) Financial Statements of Businesses Acquired
(i) The financial statements of Whitcoulls as of June 30, 1995, 1994
and 1993 and for the years then ended and for the six-month
periods ended December 31, 1995 and 1994 (unaudited).*
___________________
*Previously filed in a current report on Form 8-K, dated July 23, 1996 (File
No. 0-25372), and omitted pursuant to General Instruction B.3 of Form 8-K.
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(ii) The financial statements of Mile High as of December 31, 1995 and
1994 and for the years then ended and as of March 31, 1996 and
for the three months ended March 31, 1996 and 1995 (unaudited).**
(iii) The financial statements of American Loose Leaf as of September
30, 1995 and for the year then ended and as of March 31, 1996 and
for the six months ended March 31, 1996 and 1995 (unaudited).**
(b) Pro Forma Financial Information
Pro forma financial information as of April 30, 1996 and for the
years ended April 30, 1996, 1995 and 1994 (unaudited).*
(c) Exhibits
(i) Stock Purchase Agreement, dated as of July 22, 1996, by and among
Blue Star Group Limited, Rank Commercial Limited, the Company and
Graeme Richard Hart.
(ii) Agreement and Plan of Reorganization, dated as of July 26, 1996,
by and among Mile High, MHOS Acquisition Corp., the Company and
the stockholders named therein.
(iii) Agreement and Plan of Reorganization, dated as of July 26, 1996,
by and among American Loose Leaf, ALL Acquisition Corp., the Company
and the stockholders named therein.
___________________
*Previously filed in a current report on Form 8-K, dated July 23, 1996 (File
No. 0-25372), and omitted pursuant to General Instruction B.3 of Form 8-K.
**Previously filed in a current report on Form 8-K, dated July 16, 1996 (File
No. 0-25372), and omitted pursuant to General Instruction B.3 of Form 8-K.
- 2 -
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
U.S. OFFICE PRODUCTS COMPANY
Dated: August 9, 1996 By: /s/ Mark D. Director
---------------------------------
Mark D. Director
Executive Vice President, General
Counsel and Assistant Secretary
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EXHIBIT INDEX
EXHIBIT DESCRIPTION
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10.1 Stock Purchase Agreement, dated as of July 22, 1996, by and among
Blue Star Group Limited, Rank Commercial Limited, the Company and
Graeme Richard Hart.
10.2 Agreement and Plan of Reorganization, dated as of July 26, 1996,
by and among Mile High, MHOC Acquisition Corp., the Company and
the stockholders named therein.
10.3 Agreement and Plan of Reorganization, dated as of July 26, 1996,
by and among American Loose Leaf, ALL Acquisition Corp., the
Company and the stockholders named therein.
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CONFORMED
_________________________________________________________________
STOCK PURCHASE AGREEMENT
dated as of the 22nd day of July, 1996
by and among
BLUE STAR GROUP LIMITED
RANK COMMERCIAL LIMITED
U.S. OFFICE PRODUCTS COMPANY
and
GRAEME RICHARD HART
_________________________________________________________________
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TABLE OF CONTENTS
Page
1. SALE AND PURCHASE OF STOCK.............................................. 1
1.1 The Stock Sale..................................................... 1
2. CLOSING................................................................. 1
2.1 Place and Date of Closing.......................................... 1
2.2 Closing Deliveries................................................. 1
2.3 Post-Closing Adjustment to Consideration........................... 3
2.4 Default at Closing................................................. 4
3. REPRESENTATIONS AND WARRANTIES OF STOCKHOLDER........................... 4
3.1 Due Organization................................................... 4
3.2 Authorization; Validity............................................ 4
3.3 No Conflicts....................................................... 5
3.4 Shares of the Company.............................................. 5
3.5 Transactions in Shares............................................. 5
3.6 Subsidiaries....................................................... 5
3.7 Financial Statements............................................... 6
3.8 Liabilities and Obligations........................................ 6
3.9 Accounts and Notes Receivable...................................... 7
3.10 Permits and Intangibles............................................ 7
3.11 Environmental Matters.............................................. 7
3.12 Real and Personal Property......................................... 8
3.13 Significant Customers; Material Contracts and Commitments.......... 8
3.14 Title to Property.................................................. 9
3.15 Insurance.......................................................... 9
3.16 Compensation; Employment Agreements................................ 9
3.17 Employee Benefit Plans............................................. 9
3.18 Conformity with Law; Litigation.................................... 10
3.19 Taxes.............................................................. 10
3.20 No Violations...................................................... 10
3.21 Absence of Changes................................................. 11
3.23 Disclosure......................................................... 12
3.24 Absence of Claims Against Company.................................. 12
3.25 Share Acquisition.................................................. 12
4. REPRESENTATIONS OF THE BUYER............................................ 12
4.1 Due Organization................................................... 13
4.2 Authorization; Validity of Obligations............................. 13
4.3 No Conflicts....................................................... 13
4.4 Conformity with Law................................................ 13
4.5 USOP Stock......................................................... 13
4.6 Capitalization of USOP and Ownership of USOP Stock................. 13
4.7 Disclosure......................................................... 14
5. COVENANTS PRIOR TO CLOSING.............................................. 14
5.1 Access and Cooperation............................................. 14
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5.2 Conduct of Business Pending Closing................................ 14
5.3 Prohibited Activities.............................................. 15
5.4 Amendment of Schedules............................................. 16
5.5 Cooperation in Obtaining Required Consents and Approvals........... 16
5.6 Notification of Certain Matters.................................... 16
5.7 No-Shop............................................................ 16
5.8 Consulting Agreement............................................... 17
6. OTHER AGREEMENTS........................................................ 17
6.1 Certain Employees.................................................. 17
6.2 Certain Indemnification Matters.................................... 17
6.3 Indemnification Procedure.......................................... 17
6.4 Indemnification of Directors and Officers.......................... 18
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE BUYER........................ 18
7.1 No Injunctions or Restraints....................................... 18
7.2 Consents and Approvals............................................. 18
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE STOCKHOLDER.................. 18
8.1 No Injunctions or Restraints....................................... 18
8.2 Consents and Approvals............................................. 18
9. NONCOMPETITION.......................................................... 19
9.1 Prohibited Activities.............................................. 19
9.2 Damages............................................................ 19
9.3 Reasonable Restraint............................................... 19
9.4 Severability; Reformation.......................................... 19
9.5 Independent Covenant............................................... 20
9.6 Materiality........................................................ 20
10. NONDISCLOSURE OF CONFIDENTIAL INFORMATION............................... 20
10.1 Stockholder and Mr. Hart........................................... 20
10.2 Buyer and USOP..................................................... 21
10.3 Damages............................................................ 21
10.4 Survival........................................................... 21
11. FEDERAL SECURITIES ACT REPRESENTATIONS.................................. 21
11.1 Economic Risk; Sophistication...................................... 21
11.2 Sales of Stock..................................................... 22
12. GENERAL................................................................. 22
12.1 Termination........................................................ 22
12.2 Effect of Termination.............................................. 22
12.3 Survival........................................................... 22
12.4 Cooperation........................................................ 23
12.5 Successors and Assigns............................................. 23
12.6 Entire Agreement................................................... 23
12.7 Counterparts....................................................... 23
12.8 Brokers and Agents................................................. 23
12.9 Expenses........................................................... 24
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12.10 Specific Performance; Remedies................................ 24
12.11 Notices....................................................... 24
12.12 Governing Law; Forum.......................................... 25
12.13 Severability.................................................. 25
12.14 Knowledge..................................................... 25
12.15 No Public Announcements....................................... 26
SCHEDULES AND ANNEXES
Annex I - Stockholder Indemnification Matters
Annex II - Certain Activities
Schedule 2.3 - Accounting Schedule
Schedule 3.3 - Conflicts
Schedule 3.4 - Encumbrances on Company Stock
Schedule 3.6 - Subsidiaries
Schedule 3.7 - Financial Statements
Schedule 3.8 - Liabilities and Obligations
Schedule 3.9 - Accounts Receivable
Schedule 3.10 - Licenses, Franchises, Permits and other Governmental
Authorizations
Schedule 3.11 - Environmental Matters
Schedule 3.13 - Significant Customers and Material Contracts
Schedule 3.14 - Encumbrances
Schedule 3.16 - Key Employees; Employment Agreements
Schedule 3.17 - Employee Benefit Plans
Schedule 3.19 - Tax Returns and Examinations
Schedule 3.20 - Conflicts
Schedule 3.21 - Changes Since Balance Sheet Date
Schedule 4.3 - Conflicts
Schedule 6.3 - Certain Indemnification Agreements
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement") is made as of the 22nd day
of July, 1996, by and among BLUE STAR GROUP LIMITED, a New Zealand corporation
(the "Buyer"), RANK COMMERCIAL LIMITED, a New Zealand corporation (the
"Stockholder"), the sole stockholder of WHITCOULLS GROUP LIMITED, a New Zealand
corporation (the "Company"), U.S. Office Products Company, a Delaware
corporation and the sole stockholder of the Buyer ("USOP"), but only with
respect to Section 10 hereof (and all related provisions), and Graeme Richard
Hart, the sole stockholder of the Stockholder ("Mr. Hart"), but only with
respect to Sections 9 and 10 hereof (and all related provisions).
WHEREAS, the Stockholder owns all of the issued and outstanding shares
of the Company;
WHEREAS, the Buyer desires to purchase from the Stockholder, and the
Stockholder desires to sell to the Buyer, all of the issued and outstanding
shares of the Company in accordance with the provisions of this Agreement;
NOW, THEREFORE, in consideration of the premises and of the
representations, warranties, covenants and agreements herein contained, the
parties hereto, intending to be legally bound, hereby agree as follows:
1. SALE AND PURCHASE OF STOCK
1.1 THE STOCK SALE. Subject to the terms and conditions of this Agreement
and on the basis of and in reliance upon the representations, warranties,
covenants and agreements set forth herein, on the Closing Date (as hereinafter
defined) the Stockholder shall sell to the Buyer and the Buyer shall purchase
from the Stockholder all of the issued and outstanding shares of Company Stock
(as hereinafter defined) in exchange for (i) the payment of US$220 million.
2. CLOSING
2.1 PLACE AND DATE OF CLOSING. The consummation of the sale and purchase
of shares referred to in Section 1 hereof and the other transactions
contemplated by this Agreement (hereinafter referred to as the "Closing") shall
take place at the offices of Chapman Tripp Sheffield Young, 23-29 Albert Street,
Auckland, New Zealand, on July 26, 1996, or the first business day following the
date that all of the conditions to Closing may have been satisfied or waived, or
at such other time and date as the Buyer and the Stockholder may mutually agree,
which date shall be referred to as the "Closing Date". Unless the Buyer and the
Stockholder otherwise agree, only for accounting purposes and for purposes of
calculating Adjusted NTA (as hereinafter defined) as of the Closing Date, the
Closing shall be deemed to occur at 11:59 p.m. on July 26, 1996.
2.2 CLOSING DELIVERIES.
(a) At the Closing, the Stockholder shall cause to be conveyed to the
Buyer in accordance with applicable law and free and clear of all pledges,
liens, transfer and stamp tax obligations, encumbrances, claims and other
charges thereon of every kind, all of the issued and outstanding shares of
Company Stock, and the Buyer shall cause USOP to deliver to the Stockholder
(i) the cash payment set forth in Section 1.1 hereof (by wire transfer of
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immediately available cleared funds to Account No. 001-9-910379, at Chase
Manhattan Bank, New York, for the account of Westpac Banking Corporation,
Wellington, New Zealand, to further credit the account of Rank Commercial
Limited, Account No. 287896 USD 374001, Westpac Tower Branch, Westpac
Banking Corporation, 120 Albert Street, Auckland, New Zealand) and (ii),
free and clear of all liens, pledges, security interests, adverse claims or
encumbrances of any kind, a certificate representing the number of shares
of USOP Stock to be issued to the Stockholder pursuant to Section 1.1
hereof (appropriately adjusted in the event of any stock split, stock
dividend, subdivision, combination, reclassification or other similar
corporate event of USOP between the date hereof and the Closing Date). In
addition, Mr. Hart will deliver any shares of the Company and any
Subsidiary (as hereinafter defined) held in trust by Mr. Hart to Mr. Eric
Watson, to be held in trust by Mr. Watson.
(b) The Stockholder shall cause the Company (or the appropriate
Subsidiary, if a party thereto) to assign to it, without representation or
warranty, the Company's (or such Subsidiary's) lease of the premises at
Level 11, 48 Quay Street, Auckland, and all of the Company's (or such
Subsidiary's) rights (whatever they may be) to all furniture, fixtures and
fittings on those premises. The Stockholder shall cause the Company (or
such Subsidiary) to be released from, and the Stockholder hereby
indemnifies the Company and the Subsidiaries for, all liabilities,
obligations, costs and expenses (including without limitation attorneys'
fees and expenses) in connection with such lease, furniture, fixtures and
fittings.
(c) On the Closing Date:
(i) the Buyer shall provide to the Company up to NZ$50 million in
immediately available cleared funds to fund repayment of any
indebtedness (the "Westpac Indebtedness") of the Stockholder, the
Company and the Subsidiaries to Westpac Banking Corporation
("Westpac") that is required by Westpac as a condition to such
consent; and
(ii) the Buyer shall cause the Company to assume all obligations
of the Stockholder regarding the Westpac Indebtedness;
or as an alternative to the provisions of (i) and (ii) above, the
Buyer may, at its option, provide the Company funds to, and to cause
the Company to, repay the Westpac Indebtedness in full.
(d) The Stockholder at present has a facility from Westpac for
borrowings (the "Existing Stockholder Debt"). It is intended that prior to
the Closing Date the Existing Stockholder Debt will have been paid with the
proceeds of a new facility from Westpac to the Company, which proceeds the
Company will pay to the Stockholder by way of a dividend to the Stockholder
or by the Company's acquisition of a portion of its shares from the
Stockholder (a "buy-back"), or by a combination of these methods. For the
Company to have sufficient available capital for a buy-back not to be
treated as a dividend, the Company may make a bonus issue of new shares to
the Stockholder. The transactions described in the preceding sentences are
herein referred to as the "Debt Restructuring." The Buyer's obligation to
purchase shares of the Company's stock held by the Stockholder pursuant to
Section 1.1 hereof shall be an obligation to purchase that number of shares
of Company stock
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issued and outstanding as of the Closing Date, after giving effect to any
number of shares of Company stock repurchased or issued in connection with
the Debt Restructuring.
(e) If on July 26, 1996 the net principal amount owing to Westpac by
the Stockholder, the Company and the Subsidiaries (taking into account the
debit balances of all loans and overdrafts, as netted off against the
credit balance of all current accounts and other deposits) exceeds NZ$170
million before any payment made by the Buyer to Westpac under Section
2.2(c) hereof, then the Stockholder will indemnify the Buyer for the amount
of such excess and will, on demand, pay the amount of such excess to the
Buyer.
(f) The Stockholder shall make available to the Buyer the written
resignations of all the directors and officers of the Company and its
Subsidiaries (other than directors and officers of Armidale Industries
Limited who have been appointed by or represent persons other than the
Company or any Subsidiary), such resignations to be effective as of the
Closing, and shall cause to be made available to the successor and any
continuing directors and officers of the Company (the "post-Closing Company
directors and officers") all minute books, stock record books, books of
account, corporate seals, leases, contracts, agreements, securities, bank,
checking and money market accounts, other investments, deposits, customer
and subscriber lists, files and other documents, instruments and papers
belonging to the Company and shall cause full possession and control of all
of the assets and properties of every kind and nature, tangible and
intangible, of the Company and of all other things and matters pertaining
to the operation of the business of the Company to be transferred and
delivered to the post-Closing Company directors and officers.
2.3 POST-CLOSING ADJUSTMENT TO CONSIDERATION.
(a) The parties hereto acknowledge and agree that the consideration
to be paid to the Stockholder pursuant to Section 1.1 hereof is based upon
the premise that as of the Closing Date the Company's consolidated net
tangible assets, as determined in accordance with New Zealand generally
accepted accounting principles ("NZGAAP"), subject to the adjustments
reflected on SCHEDULE 2.3 hereto (as so determined and adjusted, "Adjusted
NTA"), will be equal to or greater than NZ$81 million. The Stockholder has
attached hereto as SCHEDULE 2.3 a schedule (the "Accounting Schedule")
showing Adjusted NTA as of May 31, 1996, which SCHEDULE 2.3 shall be
updated by the Stockholder as of the Closing Date as promptly as
practicable (but not more than 21 days) after the Closing Date. The Buyer
shall cause Price Waterhouse to review such updated Schedule as promptly as
practicable after the Closing Date to determine its accuracy and, in the
event that Price Waterhouse does not agree with updated SCHEDULE 2.3, the
Buyer shall deliver a written notice to the Stockholder setting forth Price
Waterhouse's determination of Adjusted NTA as of the Closing Date.
(b) In the event that Price Waterhouse does not agree with the
updated Accounting Schedule, the Buyer and the Stockholder shall seek to
resolve the amount, if any, of the consideration adjustment to be made
pursuant to Section 2.3(c) hereof. In the event that the Buyer and the
Stockholder cannot resolve the amount of such adjustment, they shall
mutually agree on an independent accounting firm to review the updated
Accounting Schedule and determine the amount, if any, of the consideration
adjustment to be made, provided, that if the parties are unable to agree on
such an independent accounting firm, such firm shall be a "big-six"
accounting firm selected by the president of the New Zealand Society of
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Accountants. The determination of such independent accounting firm shall
be final and binding on the parties hereto. The costs of the independent
accounting firm shall be borne by the party (either the Buyer or the
Stockholder) whose determination of Adjusted NTA as of the Closing Date was
furthest from the determination of the independent accounting firm, or
equally by the Buyer and the Stockholder in the event that the
determination by the independent accounting firm is equidistant between the
determinations of the parties.
(c) In the event that Adjusted NTA at the Closing Date is less than
NZ$81 million, the Stockholder shall pay to the Buyer, as a reduction in
the consideration paid to the Stockholder pursuant to Section 1.1 hereof,
in U.S. Dollars an amount equal to the difference between NZ$81 million and
Adjusted NTA at the Closing Date. The amount of U.S. Dollars to be so paid
shall be converted from N.Z. Dollars at a rate of 0.68 N.Z. Dollars for
each 1.0 U.S. Dollar.
(d) Obligations of the Stockholder under this Section 2.3 shall be
satisfied by the payment of immediately available cleared funds to the
Buyer in the amount of such obligations in U.S. Dollars.
2.4 DEFAULT AT CLOSING. Notwithstanding the provisions of Section 2.2
hereof, if the Stockholder shall fail or refuse to deliver any shares of Company
Stock in breach of its obligations under Section 2.2, the Buyer may refuse to
make such acquisition and thereby terminate all of its obligations hereunder.
The Stockholder acknowledges that the shares of Company Stock are unique and
otherwise not available and agrees that in addition to any other remedies, the
Buyer may invoke any remedies available under applicable law to enforce delivery
of such shares hereunder.
3. REPRESENTATIONS AND WARRANTIES OF STOCKHOLDER
To induce the Buyer to enter into this Agreement and consummate the
transactions contemplated hereby, the Stockholder represents and warrants to,
and covenants and agrees with, the Buyer (which representations, warranties,
covenants and agreements are deemed repeated on the Closing Date) as follows:
3.1 DUE ORGANIZATION. Each of the Company and the Subsidiaries is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation and each is duly authorized and
qualified to do business in the places and in the manner as now conducted except
where the failure to be so authorized or qualified would not have a material
adverse effect on the business, operations, affairs, prospects, properties,
assets, profits or condition (financial or otherwise) of the Company and the
Subsidiaries taken as a whole (a "Material Adverse Effect"). The Company has
made, or will within five days after the date hereof make, available to the
Buyer (a) a list of all jurisdictions in which the Company and each Subsidiary
is authorized or qualified to do business, (b) true, complete and correct copies
of the Constitution and By-laws, each as amended, of the Company and each
Subsidiary (the "Charter Documents") and (c) the minute books of the Company and
each Subsidiary.
3.2 AUTHORIZATION; VALIDITY. The Stockholder has the right, power and
authority to execute, deliver and perform this Agreement. This Agreement is a
legal, valid and binding obligation of the Stockholder, enforceable in
accordance with its terms.
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3.3 NO CONFLICTS. The execution, delivery and performance of this
Agreement by the Stockholder will not: (a) conflict with, or result in a breach
or violation of the Charter Documents; (b) except as disclosed on SCHEDULE 3.3
hereto, materially conflict with, or result in a material default (or would
constitute a material default but for any requirement of notice or lapse of time
or both), or require any notice, consent or approval under any agreement,
contract, commitment, understanding, document or instrument to which the Company
or a Subsidiary is a party or is otherwise subject; (c) violate, require the
making or obtaining of any filing, consent or approval by the Stockholder, the
Company or any Subsidiary under, or result in the creation or imposition of any
lien, charge or encumbrance on any of the Company's or any Subsidiary's
properties pursuant to any law, rule, regulation, judgment, order or decree
(except for filings and approvals under the New Zealand Overseas Investment Act
1973, the New Zealand Overseas Investment Regulations 1995 and the Australian
Foreign Acquisitions and Takeovers Act 1975, together with all rules and
regulations promulgated thereunder); or (d) except as disclosed on SCHEDULE 3.3
hereto, result in termination or any impairment of any material permit, license,
franchise, contractual right or other authorization of the Company or any
Subsidiary.
3.4 SHARES OF THE COMPANY. Subject only to any bonus issue of shares made
by the Company to the Stockholder or any share buy back by the Company from the
Stockholder, in each case solely to effect the Debt Restructuring contemplated
by Section 2.2(d) hereof, the authorized shares of the Company consist of
121,000,398 ordinary shares of stock ("Company Stock"), all of which are issued
and outstanding. All of the issued and outstanding shares of the Company have
been duly authorized and validly issued, are fully paid and nonassessable and
are owned of record and beneficially by the Stockholder free and clear of all
liens, encumbrances and claims of every kind (except as disclosed on SCHEDULE
3.4 hereto). All of the issued and outstanding shares of the Company were
offered, issued, sold and delivered by the Company in compliance with all
applicable laws concerning the issuance of securities. Further, none of such
shares was issued in violation of the preemptive rights of any stockholder.
Upon completion of the transactions to be consummated at the Closing, there will
be no impediment to the Buyer's ownership, of record and beneficially, of all
issued and outstanding shares of the Company.
3.5 TRANSACTIONS IN SHARES. No option, warrant, call, subscription right,
conversion right or other contract or commitment of any kind exists which may
obligate the Company to issue, sell or otherwise become outstanding any shares.
Other than as contemplated by the Debt Restructuring, the Company has no
obligation (contingent or otherwise) to purchase, redeem or otherwise acquire
any of its equity securities or any interests therein or to pay any dividend or
make any distribution in respect thereof.
3.6 SUBSIDIARIES. The Company has no subsidiaries other than those
listed on SCHEDULE 3.6 hereto (each a "Subsidiary", and collectively the
"Subsidiaries"). Except as disclosed on SCHEDULE 3.6 hereto, the Company does
not own, of record or beneficially, or control, directly or indirectly, any
capital stock (except for passive investments in companies whose stock is traded
on a national securities exchange or the over-the-counter market), securities
convertible into capital stock or any other equity interest in any corporation,
association or other business entity (other than the Subsidiaries), nor is the
Company, directly or indirectly, a participant in any joint venture, partnership
or other noncorporate entity. SCHEDULE 3.6 hereto lists the number of shares
and class of authorized capital stock of each Subsidiary, all of which shares
are owned by the Company, free and clear of all liens, encumbrances and claims
of every kind (except as disclosed on SCHEDULE 3.6 hereto).
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3.7 FINANCIAL STATEMENTS. SCHEDULE 3.7 hereto includes (a) true, complete
and correct copies of the Company's audited consolidated statements of financial
position as of June 30, 1993, 1994 and 1995 (the end of each of its three most
recent completed fiscal years), and audited consolidated statements of financial
performance and cash flows for each of its three most recent completed fiscal
years (collectively, the "Audited Financials") and (b) true, complete and
correct copies of the Company's consolidated statement of financial position
(the "May Balance Sheet") as of May 31, 1996 and consolidated statements of
financial performance and cash flows for the 11-month period then ended
(collectively, the "Interim Financials"; and together with the Audited
Financials, the "Company Financial Statements"). Except as set forth in
SCHEDULE 3.7 hereto, the Company Financial Statements have been prepared in
accordance with NZGAAP. Except as set forth in SCHEDULE 3.7 hereto, each of the
consolidated statements of financial position included in the Company Financial
Statements presents fairly the consolidated financial position of the Company as
of the dates indicated thereon, and each of the consolidated statements of
financial performance and cash flows included in the Company Financial
Statements presents fairly the results of its consolidated operations for the
periods indicated thereon.
3.8 LIABILITIES AND OBLIGATIONS.
(a) Except as disclosed on SCHEDULE 3.8 hereto and except as
contemplated by the Debt Restructuring, neither the Company nor any
Subsidiary is liable for or subject to any material liabilities except for:
(i) those liabilities reflected on the May Balance Sheet and not
heretofore paid or discharged;
(ii) those liabilities arising in the ordinary course of its
business consistent with past practice under any contract, commitment
or agreement specifically disclosed on any Schedule to this Agreement
or not required to be disclosed thereon because of the term or amount
involved or otherwise; and
(iii) those liabilities incurred, consistent with past practice,
in the ordinary course of business and either not required to be shown
on the May Balance Sheet or arising since May 31, 1996 (the "Balance
Sheet Date"), which liabilities in the aggregate are of a character
and magnitude consistent with past practice.
For purposes of this Section 3.8 and Annex I hereto, the term "liabilities"
shall include without limitation any direct or indirect liability,
indebtedness, guaranty, endorsement, claim, loss, damage, deficiency, cost,
expense, obligation or responsibility, either accrued, absolute, contingent
or otherwise and whether known or unknown, fixed or unfixed, choate or
inchoate, liquidated or unliquidated, secured or unsecured.
(b) The Company has made or will promptly make available to the
Buyer, in the case of those liabilities which are not fixed, a reasonable
estimate of the maximum amount which may be payable. The Company has made
or will promptly make available to the Buyer a summary that lists by
category those liabilities that are not fixed or are contested; the Company
has made or will promptly make available to the Buyer copies of all
relevant documentation relating to such liabilities.
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3.9 ACCOUNTS AND NOTES RECEIVABLE. The Company has made or will promptly
make available to the Buyer an accurate list, as of a reasonably current date,
of the accounts and notes receivable of the Company and each Subsidiary
(including without limitation receivables from and advances to employees and the
Stockholder), which includes an aging of all accounts and notes receivable
showing amounts due in 30-day aging categories. Except as set forth on SCHEDULE
3.9 hereto, the reserve for doubtful accounts reflected in the May Balance Sheet
is adequate and has been determined in accordance with NZGAAP and the accounts
receivable reflected in the May Balance Sheet net of such reserve fairly
represent collectible accounts receivable of the Company and the Subsidiaries.
No doubtful account represents an amount owed by a customer that is a
"significant customer" under Section 3.13, except for DE MINIMIS amounts.
3.10 PERMITS AND INTANGIBLES. The Company and each Subsidiary owns or
holds all licenses, franchises, permits and other governmental authorizations,
including without limitation permits, titles (including without limitation motor
vehicle titles and current registrations), fuel permits, licenses, franchises,
certificates, trademarks, trade names, patents, patent applications and
copyrights, the absence of any of which could have a Material Adverse Effect
(the "Material Permits"). SCHEDULE 3.10 hereto sets forth an accurate list and
summary description, as of the date hereof, of all Material Permits. To the
knowledge of the Stockholder, the Company and each Subsidiary the Material
Permits are valid, and neither the Stockholder, the Company nor any Subsidiary
has received any notice that any governmental authority intends to modify,
cancel, terminate or not renew any Material Permit. The Company and each
Subsidiary has conducted and is conducting its business in compliance with the
requirements, standards, criteria and conditions set forth in the Material
Permits and other applicable orders, approvals, variances, rules and regulations
and is not in violation of any of the foregoing except where such non-compliance
or violation would not have a Material Adverse Effect. Except as set forth on
SCHEDULE 3.10 hereto, the transactions contemplated by this Agreement will not
result in a default under or a breach or violation of, or adversely affect the
rights and benefits afforded to the Company or any Subsidiary by, any Material
Permit.
3.11 ENVIRONMENTAL MATTERS. (a) Each of the Company and the Subsidiaries
has complied with and is in compliance with all national, local and foreign
statutes (civil and criminal), common laws, ordinances, regulations, rules,
notices, permits, judgments, orders and decrees applicable to it and its
properties, assets, operations and businesses relating to environmental
protection (collectively "Environmental Laws"), including without limitation
Environmental Laws relating to air, water, land and the generation, storage,
use, handling, transportation, treatment or disposal of Contaminants (as such
terms are currently defined in any applicable Environmental Law), except to the
extent that noncompliance with any Environmental Law, either singly or in the
aggregate, does not and would not have a Material Adverse Effect; (b) each of
the Company and the Subsidiaries has obtained and adhered to all necessary
permits and other approvals necessary to treat, transport, store, dispose of and
otherwise handle Contaminants and has reported, to the extent required by all
Environmental Laws, all past and present sites owned and operated by the Company
or any Subsidiary where Contaminants have been treated, stored, disposed of or
otherwise handled, except to the extent that a failure to do so, either singly
or in the aggregate, does not and would not have a Material Adverse Effect; (c)
except as disclosed in SCHEDULE 3.11 hereto, there have been no discharges of
Contaminants or threats of discharges of Contaminants at, from, in or on any
property owned or operated by the Company or any Subsidiary except as permitted
by Environmental Laws or where such releases do not and would not have a
Material Adverse Effect; (d) neither the Stockholder, the Company nor any
Subsidiary knows of any on-site or off-site location to which the Company or any
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Subsidiary has transported or disposed of Contaminants or arranged for the
transportation of Contaminants, which site is the subject of any national, local
or foreign enforcement action or any other investigation which could lead to any
claim against the Company, any Subsidiary or the Buyer for any clean-up cost,
remedial work, damage to natural resources or personal injury, including without
limitation any claim under New Zealand's Resource Management Act 1991, as
amended; and (e) except as disclosed in SCHEDULE 3.11 hereto, neither the
Company nor any Subsidiary has or will have any liability in connection with any
discharge of any Contaminants into the environment, except to the extent that
such liability does not and would not have a Material Adverse Effect.
3.12 REAL AND PERSONAL PROPERTY. The Company has made or will promptly
make available to the Buyer an accurate list of all owned and leased real
property, all personal property included in "depreciable plant, property and
equipment" on the May Balance Sheet and all other personal property owned or
leased by the Company or any Subsidiary with a value in excess of NZ$500,000 (a)
as of June 30, 1996 and (b) acquired since such date, including in each case
true, complete and correct copies of leases for material equipment and all real
properties and also including an indication as to which assets are currently
owned, or were formerly owned, by any stockholder or business or personal
affiliates of the Company or any stockholder. All of the trucks and other
material machinery and equipment of the Company and the Subsidiaries listed on
such list are in good working order and condition, ordinary wear and tear
excepted. Except as specifically disclosed on such list, all leases set forth
on such list are in full force and effect and constitute valid and binding
agreements of the Company or any Subsidiary and, to the knowledge of the
Stockholder, the Company and each Subsidiary, the other parties thereto in
accordance with their respective terms. All fixed assets used by the Company or
any Subsidiary that are material to the operation of their business are either
owned by the Company or any Subsidiary or leased under an agreement listed on
such list. Such list shall include without limitation true, complete and
correct copies of all title reports and title insurance policies received or
owned by the Company or any Subsidiary that are still in effect. Such list
shall also include a summary description of all plans or projects involving the
opening of new operations, expansion of any existing operations or the
acquisition of any real property or existing business, to which the Company or
any Subsidiary has made any material expenditure in the two-year period prior to
the date of this Agreement, which if pursued by the Company or any Subsidiary
would require additional material expenditures of capital.
3.13 SIGNIFICANT CUSTOMERS; MATERIAL CONTRACTS AND COMMITMENTS. SCHEDULE
3.13 hereto contains an accurate list of (a) all significant customers (i.e.
those customers representing 5% or more of the consolidated revenues of the
Company and the Subsidiaries for the 11 months ending on the Balance Sheet Date,
or who have paid to the Company NZ$5,000,000 or more in the past fiscal year)
and (b) all material contracts, commitments, leases, instruments, agreements,
licenses or permits to which the Company or any Subsidiary is a party or by
which it or its properties are bound (including without limitation contracts
with significant customers, joint venture or partnership agreements, contracts
with any labor organizations, loan agreements, indemnity or guaranty agreements,
bonds, mortgages, options to purchase land, liens, pledges or other security
agreements) (collectively, the "Material Contracts"). True, complete and
correct copies of the Material Contracts will promptly be made available to the
Buyer. Except to the extent set forth on SCHEDULE 3.13 hereto, (t) none of the
Company's significant customers have canceled or substantially reduced or, to
the knowledge of the Stockholder, the Company and each Subsidiary, are currently
attempting or threatening to cancel or substantially reduce service, (u) the
Company and the Subsidiaries have complied with all of their respective material
commitments and obligations and are not in default under any of the Material
Contracts and no notice of default has been received with respect to any
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thereof, (v) there are no Material Contracts that were not negotiated at arm's
length with third parties not affiliated with the Company or any Subsidiary or
any officer, director or stockholder of the Company or any Subsidiary, (w)
neither the Company nor any Subsidiary is bound by or subject to (and none of
their respective assets or properties is bound by or subject to) any arrangement
with any labor union, (x) no employees of the Company or any Subsidiary are
represented by any labor union or covered by any collective bargaining agreement
and, to the best knowledge of the Stockholder, the Company and each Subsidiary,
no campaign to establish such representation is in progress, (y) there is no
pending or, to the best knowledge of the Stockholder, the Company or any
Subsidiary, threatened labor dispute involving the Company or any Subsidiary and
any group of its employees nor has the Company or any Subsidiary experienced any
labor interruptions over the past three years and the Company considers its
relationship with its employees to be good and (z) neither the Company nor any
Subsidiary is a party to any governmental contracts subject to price
redetermination or renegotiation.
3.14 TITLE TO PROPERTY. The Company and the Subsidiaries own outright
and have good, valid and marketable title to all of their owned properties and
assets, real, personal and mixed, free and clear of all mortgages, liens,
pledges, security interests, charges, claims, restrictions and other
encumbrances and defects of title of any nature whatsoever, except liens for
current taxes not yet due and payable and items disclosed on SCHEDULE 3.14
hereto.
3.15 INSURANCE. All insurance coverage applicable to and held by the
Company and any Subsidiary is in full force and effect, is valid, binding and
enforceable in accordance with its terms against the respective insurers,
insures the Company and each Subsidiary in reasonably sufficient amounts against
all risks usually insured against by persons operating similar businesses or
properties in the localities where such businesses or properties are located and
has been issued by insurers of recognized responsibility. True, complete and
correct copies of all current insurance policies, all of which are in full force
and effect, will promptly be made available to the Buyer.
3.16 COMPENSATION; EMPLOYMENT AGREEMENTS. SCHEDULE 3.16 hereto sets forth
an accurate list of all key employees of the Company and all persons who hold
the title of General Manager or higher office for any of the Subsidiaries,
listing all written employment agreements with such persons and the rate of
compensation of each of such persons as of the date hereof. The information on
such list is not materially different from what it would have been on the
Balance Sheet Date, except for changes in the ordinary course of business and
consistent with past practice. All compensation arrangements with all other
persons employed by the Company or any Subsidiary are consistent with prevailing
market structures and rates. The Company has made or will promptly make
available to the Buyer true, complete and correct copies of all employment
contracts, commitments and arrangements with persons listed on SCHEDULE 3.16.
All other employment contracts, commitments and arrangements of the Company and
the Subsidiaries contain customary commercial terms and conditions. There are
no employment contracts, commitments and arrangements pursuant to which any
employee of the Company or any Subsidiary is or may be entitled to any special
compensation as a result of the change of control of the Company and the
Subsidiaries to be effected pursuant to this Agreement.
3.17 EMPLOYEE BENEFIT PLANS. All employee benefit plans, programs and
policies (whether formal or informal, and whether maintained for the benefit of
a single individual or more than one individual) maintained or contributed to by
the Company or any Subsidiary for the benefit of any current or former employee
of the Company or any Subsidiary or in which such employees are
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entitled to participate are listed in SCHEDULE 3.17 (the "Benefit Plans"), and
copies of all such written plans and policies, written descriptions of all such
oral plans and policies, and all other documentation relating to such plans and
policies will be made available to the Buyer. Except as disclosed on SCHEDULE
3.17: (a) each Benefit Plan and the administration thereof complies, and has at
all times complied, in all material respects with the requirements of all
applicable law; (b) no Benefit Plan provides health or death benefit coverage
beyond the termination of an employee's employment, except as required by
applicable law; (c) no suit, actions or other litigation (excluding claims for
benefits incurred in the ordinary course of plan activities) have been brought
against or with respect to any Benefit Plan; and (d) all contributions to
Benefit Plans that were required to be made under such Benefit Plans have been
made as of the Balance Sheet Date, and all benefits accrued under any unfunded
Benefit Plan will have been paid, accrued or otherwise adequately reserved in
accordance with NZGAAP as of such date and the Company and the Subsidiaries will
have performed by the Closing Date all material obligations required to be
performed as of such date under Benefit Plans.
3.18 CONFORMITY WITH LAW; LITIGATION. Neither the Company nor any
Subsidiary has violated any law or regulation or any order of any court or
national, state, municipal or other governmental department, commission, board,
bureau, agency or instrumentality having jurisdiction over it, which violations
in the aggregate would have a Material Adverse Effect; and except to the extent
set forth on SCHEDULE 3.18, there are no material claims, actions, suits or
proceedings, pending or, to the knowledge of the Stockholder, the Company or any
Subsidiary, threatened, against or affecting the Company or any Subsidiary, at
law or in equity, or before or by any national, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality
having jurisdiction over it and no notice of any claim, action, suit or
proceeding, whether pending or threatened, has been received.
3.19 TAXES. Except as set forth on SCHEDULE 3.19, (a) the Company and
each Subsidiary has timely filed all requisite Tax (as defined below) returns,
reports and forms ("Returns") due for all periods ended on or before the Closing
Date; (b) there are no examinations in progress or claims against the Company
for Taxes for any period or periods and no notice of any claim for Taxes,
whether pending or threatened, has been received; (c) the amounts shown as
accruals for Taxes on the May Balance Sheet are sufficient for the payment of
all Taxes, whenever determined, for all fiscal periods ended on or before that
date; (d) the Company and each Subsidiary has a taxable year ended on June 30 in
each year; (e) the Company and each Subsidiary currently utilizes the accrual
method of accounting for income Tax purposes and such method of accounting has
not changed in the past five years; (f) the Company and each Subsidiary has paid
or has fully accrued for all Taxes, whenever determined, with respect to periods
ending on or before the Closing Date; and (g) copies of (i) any Tax
examinations, (ii) extensions of statutory limitations for the collection or
assessment of Taxes and (iii) the Returns of the Company for the last three
fiscal years have been made available to the Buyer.
For purposes of this Agreement, the term "Tax" shall be understood to
include any tax or similar governmental charge, impost or levy (including
without limitation income taxes, franchise taxes, transfer taxes or fees, sales
taxes, use taxes, gross receipts taxes, value added taxes, goods and services
taxes, employment taxes, ACC employer levies, PAYE, excise taxes, ad valorem
taxes, property taxes, withholding taxes, payroll taxes, minimum taxes or
windfall profit taxes) together with any related penalties, fines, additions to
tax or interest imposed by New Zealand, Australia or any state, county, local or
foreign government or subdivision or agency thereof.
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3.20 NO VIOLATIONS. Neither the Company, any Subsidiary nor, to the
knowledge of the Stockholder, the Company or any Subsidiary, any other party
thereto is (a) in violation of any Charter Document or (b) in default under any
Material Contract (the Material Contracts, together with the Charter Documents,
being referred to herein as the "Material Documents"); and, except as disclosed
in SCHEDULE 3.20 hereto or as specifically set forth in the other Schedules
attached to this Agreement, neither the Stockholder, the Company or any
Subsidiary is aware of any reason why the rights and benefits of the Company and
the Subsidiaries under the Material Documents, and under all customer contracts,
commitments and agreements not included in the Material Documents, would be
materially and adversely affected by the transactions contemplated hereby.
3.21 ABSENCE OF CHANGES. Since the Balance Sheet Date, except for the
consummation of the transactions contemplated hereby (including the Debt
Restructuring) or as set forth on SCHEDULE 3.21 there has not been:
(a) [intentionally omitted];
(b) any damage, destruction or loss (whether or not covered by
insurance) materially adversely affecting the properties or business of the
Company or any Subsidiary;
(c) any change in the authorized capital of the Company or any
Subsidiary or in its outstanding securities or any change in its ownership
interests or any grant of any options, warrants, calls, conversion rights
or commitments;
(d) any declaration or payment of any dividend or distribution in
respect of the capital stock or any direct or indirect redemption, purchase
or other acquisition of any of the capital stock of the Company or any
Subsidiary;
(e) any increase in the compensation, bonus, sales commissions or fee
arrangement payable or to become payable by the Company or any Subsidiary
to any of its officers, directors, stockholders, employees, consultants or
agents, except for ordinary and customary bonuses and salary increases for
employees in accordance with past practice;
(f) any work interruptions, labor grievances or claims filed, or any
similar event or condition of any character, materially adversely affecting
the business or prospects of the Company or any Subsidiary;
(g) any sale or transfer, or any agreement to sell or transfer, any
material assets, property or rights of the Company or any Subsidiary to any
person, including without limitation the Stockholder and its affiliates,
except for sales of inventory in the ordinary course of business consistent
with past practice;
(h) any cancellation, or agreement to cancel, any indebtedness or
other obligation owing to the Company or any Subsidiary, including without
limitation any indebtedness or obligation of the Stockholder or any
affiliate thereof, PROVIDED that the Company and the Subsidiaries may
negotiate and adjust bills in the course of good faith disputes with
customers in a manner consistent with past practice;
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(i) any plan, agreement or arrangement granting any preferential
rights to purchase or acquire any interest in any of the assets, property
or rights of the Company or any Subsidiary or requiring consent of any
party to the transfer and assignment of any such assets, property or
rights;
(j) any purchase or acquisition of, or agreement, plan or arrangement
to purchase or acquire, any property, rights or assets outside of the
ordinary course of business of the Company and the Subsidiaries;
(k) any waiver of any material rights or claims of the Company or any
Subsidiary;
(l) any material breach, amendment or termination of any material
contract, agreement, license, permit or other right to which the Company or
any Subsidiary is a party; or
(m) any transaction by the Company or any Subsidiary outside the
ordinary course of businesses.
3.22 BANK ACCOUNTS; POWERS OF ATTORNEY. The Company has made or will
promptly make available to the Buyer an accurate list of: (a) the name of each
financial institution in which the Company or any Subsidiary has any account or
safe deposit box; (b) the names in which the accounts or boxes are held; (c) the
type of account; and (d) the name of each person authorized to draw thereon or
have access thereto. Such list shall also sets forth the name of each person,
corporation, firm or other entity holding a general or special power of attorney
from the Company or any Subsidiary and a description of the terms of such power.
3.23 DISCLOSURE. No representation or warranty by the Stockholder
contained in this Agreement, and no representation, warranty or statement
contained in any list, certificate, Schedule or other instrument, document,
agreement or writing furnished or to be furnished to, or made with, the Buyer
pursuant hereto or in connection with the negotiation, execution or performance
hereof, contains or will contain any untrue statement of a material fact or
omits or will omit to state any material fact necessary to make any statement
herein or therein not misleading.
3.24 ABSENCE OF CLAIMS AGAINST COMPANY. The Stockholder has no claim
against the Company or any Subsidiary except for items specifically identified
on SCHEDULES 3.8 and 3.13 as being claims of or obligations to the Stockholder.
3.25 SHARE ACQUISITION. The acquisition, during the period from February
to June 1996, of all of the shares in the Company not prior to then held or
controlled by the Stockholder (including without limitation the compulsory
acquisition pursuant to listing rule 4.8 of the New Zealand Stock Exchange
listing rules effected in that regard) was conducted in accordance with all
applicable New Zealand laws and regulations, and stock exchange requirements,
and to the best of the Stockholder's knowledge there are no claims (actual,
threatened or pending) against it, the Company or the Subsidiaries in regard to
any aspect of that acquisition process.
4. REPRESENTATIONS OF THE BUYER
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To induce the Stockholder to enter into this Agreement and consummate the
transactions contemplated hereby, the Buyer represents and warrants to the
Stockholder as follows:
4.1 DUE ORGANIZATION. The Buyer is a corporation duly organized, validly
existing and in good standing under the laws of New Zealand, and is duly
authorized and qualified to do business in the places and in the manner as now
conducted except for where the failure to be so authorized or qualified would
not have a Material Adverse Effect. A copy of the Constitution, as amended,
(the "Buyer Charter Document") of the Buyer has been delivered to the Company.
The Buyer is not in violation of the Buyer Charter Document.
4.2 AUTHORIZATION; VALIDITY OF OBLIGATIONS. The Buyer has the right,
power and authority to execute, deliver and perform this Agreement. The
execution, delivery and performance of this Agreement by the Buyer have been
duly authorized by all necessary corporate action. This Agreement is a legal,
valid and binding obligation of the Buyer, enforceable in accordance with its
terms.
4.3 NO CONFLICTS. The execution, delivery and performance of this
Agreement by the Buyer will not: (a) conflict with, or result in a breach or
violation of the Buyer Charter Document; (b) except as disclosed on SCHEDULE 4.3
hereto, materially conflict with, or result in a material default (or would
constitute a default but for any requirement of notice or lapse of time or
both), or require any notice, consent or approval under any agreement, contract,
commitment, understanding, document or instrument to which the Buyer is a party
or is otherwise subject; (c) violate, require the making or obtaining of any
filing, consent or approval by the Buyer or USOP under, or result in the
creation or imposition of any lien, charge or encumbrance on any of the Buyer's
properties pursuant to any law, rule, regulation, judgment, order or decree
(except for filings and approvals under the New Zealand Overseas Investment Act
1973, the New Zealand Overseas Investment Regulations 1995 and the Australian
Foreign Acquisitions and Takeovers Act 1975, together with all rules and
regulations promulgated thereunder); or (d) except as disclosed on SCHEDULE 4.3
hereto, result in termination or any impairment of any material permit, license,
franchise, contractual right or other authorization of the Buyer.
4.4 CONFORMITY WITH LAW. The Buyer has not violated any law or regulation
or any order of any court or national, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality having
jurisdiction over it which would have a Material Adverse Effect. There are no
material claims, actions, suits or proceedings, pending or, to the knowledge of
the Buyer, threatened, against or affecting the Buyer, at law or in equity, or
before or by any national, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality having jurisdiction over it
and no notice of any such claim, action, suit or proceeding, whether pending or
threatened, has been received.
4.5 USOP STOCK. The USOP Stock to be issued to the Stockholder on the
Closing Date will be duly authorized, validly issued shares of Common Stock of
USOP, fully paid and nonassessable, free and clear of all liens, pledges,
security interests, adverse claims or encumbrances of any kind.
4.6 CAPITALIZATION OF USOP AND OWNERSHIP OF USOP STOCK. The authorized
capital stock of USOP consists of 100,000,000 shares of common stock, US$.001
par value ("USOP Stock"), of which 34,482,488 shares were issued and outstanding
on July 15, 1996, and 500,000 shares of
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preferred stock, US$.001 par value, of which no shares are issued and
outstanding. All of the shares of USOP Stock to be issued to the Stockholder on
the Closing Date were or will be offered, issued, sold and delivered in
compliance with all applicable state and federal laws concerning the issuance of
securities and none of such shares were or will be issued in violation of the
preemptive rights of any stockholder.
4.7 DISCLOSURE. No representation or warranty by the Buyer contained in
this Agreement, and no representation, warranty or statement contained in any
list, certificate, Schedule or other instrument, document, agreement or writing
furnished or to be furnished to, or made with, the Stockholder pursuant hereto
or in connection with the negotiation, execution or performance hereof, contains
or will contain any untrue statement of a material fact or omits or will omit to
state any material fact necessary to make any statement herein or therein not
misleading. The USOP prospectus dated March 28, 1996 (including all amendments
and supplements thereto) does not, as of the date thereof, 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 the
light of circumstances under which they were made, not misleading.
5. COVENANTS PRIOR TO CLOSING
5.1 ACCESS AND COOPERATION. Prior to the Closing Date, the Stockholder
will cause the Company to provide such access and to furnish such data and other
information as the Buyer may reasonably request, in each case so long as
compliance with any such request will not conflict with the reasonable
confidentiality concerns of the Company and the Subsidiaries with respect to
proprietary information. All such access shall be arranged through the
following employees of the Company: David Brown and Bryce Murray. The
Stockholder will cooperate (and will cause the Company and its Subsidiaries to
cooperate) with the Buyer, its representatives, engineers, auditors and counsel
in the preparation of any documents or other materials which may be required in
connection with this Agreement.
5.2 CONDUCT OF BUSINESS PENDING CLOSING. Between the date hereof and the
Closing Date, the Stockholder agrees that it will cause the Company and each
Subsidiary to:
(a) carry on its business in substantially the same manner as it has
heretofore and not introduce any material new method of management, operation or
accounting;
(b) maintain its properties and facilities, including without limitation
those held under leases, in as good working order and condition as at present,
ordinary wear and tear excepted;
(c) perform all of its obligations under agreements relating to or
affecting its respective assets, properties or rights;
(d) keep in full force and effect present insurance policies or comparable
insurance coverage;
(e) use reasonable best efforts to maintain and preserve its business
organization intact, retain its present employees and maintain its relationships
with suppliers, customers and others having business relations with it;
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(f) comply with all permits, laws, rules and regulations, consent orders,
and all other orders of applicable courts, regulatory agencies and similar
governmental authorities; and
(g) maintain present debt and lease instruments and not enter into new or
amended debt (other than as contemplated by the Debt Restructuring) or lease
instruments involving more that NZ$500,000 individually.
5.3 PROHIBITED ACTIVITIES. Between the Balance Sheet Date and the Closing
Date, the Stockholder represents, warrants and agrees that the Company and each
Subsidiary has not and from the date hereof, without the prior written consent
of the Buyer, will not (except as listed on Annex II hereto and except as
contemplated by the Debt Restructuring):
(a) make any change in its Constitution or its banking or financing
documentation (except as may be necessary to effect the Debt Restructuring
contemplated by Section 2.2(d) hereof);
(b) issue any securities, options, warrants, calls, conversion rights or
commitments relating to its securities of any kind;
(c) declare or pay any dividend, or make any distribution in respect of its
stock whether now or hereafter outstanding, purchase, redeem or otherwise
acquire or retire for value any shares of its stock, or make any payment of any
kind (including without limitation drawings and management and consulting fees)
to the Stockholder or any of its affiliates;
(d) enter into any contract or commitment or incur or agree to incur any
liability or make any capital expenditure, except if it is in the ordinary
course of business (consistent with past practice) and involves an amount not in
excess of NZ$500,000;
(e) increase the compensation payable or to become payable to any officer,
director, stockholder, employee or agent, or make any bonus or management fee
payment to any such person except ordinary and customary bonuses, and periodic
salary increases, to employees (other than employees who are also stockholders);
(f) create, assume or permit to exist any mortgage, pledge or other lien or
encumbrance, except for the items listed on SCHEDULE 3.14 hereto, upon any
assets or properties whether now owned or hereafter acquired;
(g) sell, assign, lease or otherwise transfer or dispose of any assets,
properties or rights except in the ordinary course of business (consistent with
past practice);
(h) negotiate for the acquisition of any business or the start-up of any
new business;
(i) merge, consolidate or combine with or into any other person;
(j) waive any material rights or claims, provided that bills may be
negotiated and adjusted in the course of good faith disputes with customers in a
manner consistent with past practice;
(k) commit a material breach of, or amend or terminate, any material
agreement, permit, license or other right;
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(l) enter into any other transaction (i) that is not negotiated at arm's
length with a third party not affiliated with the Company or any officer,
director or stockholder of the Company or any Subsidiary or (ii) outside the
ordinary course of business consistent with past practice or (iii) prohibited
hereunder; or
(m) enter into any discussions or agreements with respect to, or otherwise
facilitate or attempt to facilitate, any of the foregoing.
5.4 AMENDMENT OF SCHEDULES. The Stockholder will promptly disclose to the
Buyer in writing any information set forth in the Schedules to this Agreement
that no longer obtains and any information of the nature set forth in the
Schedules that arises after the date hereof and that would have been required to
be included in the Schedules if such information had obtained on the date
hereof. Such disclosure shall not limit or affect any of the representations
and warranties provided herein; nor will such disclosure otherwise limit or
affect any of the Buyer's rights hereunder for or with respect to any
misrepresentation or breach of warranty by the Stockholder or the Stockholder's
failure to fulfill any agreement, covenant or condition contained in this
Agreement.
5.5 COOPERATION IN OBTAINING REQUIRED CONSENTS AND APPROVALS. Each party
hereto shall cooperate in obtaining all consents and approvals required by
Sections 7.2 and 8.2 hereof. In connection therewith, if required, the
Stockholder and the Buyer shall file all notices and other information and
documents required under the New Zealand Overseas Investment Act 1973 and the
New Zealand Overseas Investment Regulations 1995, and the Autralian Foreign
Acquisitions and Takeovers Act 1975 as promptly as practicable after the date
hereof.
5.6 NOTIFICATION OF CERTAIN MATTERS. Each party hereto shall give prompt
notice to the other party hereto of (a) the occurrence or non-occurrence of any
event the occurrence or non-occurrence of which would be likely to cause any
representation or warranty of it contained herein to be untrue or inaccurate in
any material respect at or prior to the Closing and (b) any material failure of
it to comply with or satisfy any covenant, condition or agreement to be complied
with or satisfied by such person hereunder. The delivery of any notice pursuant
to this Section 5.6 shall not be deemed to (x) modify the representations or
warranties hereunder of the party delivering such notice, (y) modify the
conditions set forth in Sections 7 and 8 hereof or (z) limit or otherwise affect
the remedies available hereunder to the party receiving such notice.
5.7 NO-SHOP. Prior to the Closing and so long as this Agreement is in
effect:
(a) The Stockholder will, and will cause the Company, its
Subsidiaries and each of the Stockholder's other affiliates, and all of the
respective directors, officers, employees, representatives and agents of
the Stockholder, the Company, its Subsidiaries and each of the
Stockholder's other affiliates to, immediately cease and cause to be
terminated any existing activities, discussions or negotiations with any
parties conducted heretofore in respect to any amalgamation, sale of assets
(other than in the ordinary course of business consistent with past
practice) or equity interests or other business combination involving the
Stockholder, the Company or any Subsidiary other than the transactions
contemplated by this Agreement (a "Competing Transaction"). The
Stockholder shall not, and shall not permit the Company, its Subsidiaries
or any of the Stockholder's other affiliates, or any of the respective
officers, employees, representatives or agents of the Stockholder, the
Company, its Subsidiaries or any of the Stockholder's other affiliates to,
directly or indirectly, initiate, solicit, encourage,
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participate in, negotiate or discuss with any third party, or take any
other action (including without limitation the furnishing of non-public
information concerning the Stockholder, the Company or its Subsidiaries or
their respective businesses, assets or properties) to facilitate any
inquiries with respect to or the making of, any proposal that constitutes
or may reasonably be expected to lead to a Competing Transaction.
(b) The Stockholder will promptly communicate to the Buyer the terms
of any inquiry or proposal which the Stockholder, the Company, its
Subsidiaries or any of the Stockholder's other affiliates may receive in
respect of a Competing Transaction. The Stockholder's notification under
this paragraph shall include the identity of the person making such
proposal, all of the terms and conditions thereof and any other such
information with respect thereto as the Buyer may request.
5.8 CONSULTING AGREEMENT. Between the date hereof and the Closing, the
Buyer and the Stockholder shall undertake good faith negotiations with a view
towards entering into a consulting agreement pursuant to which the Stockholder
will provide consulting services to the Buyer on such terms as may be acceptable
to the Buyer and the Stockholder.
6. OTHER AGREEMENTS
6.1 CERTAIN EMPLOYEES. After the Closing and until December 31, 1996, the
Stockholder shall be fully responsible for, and shall indemnify the Buyer and
the Company for, all liabilities, obligations, costs and expenses (including
without limitation attorneys' fees and expenses) in the employment of David
Brown, Bryce Murray, Allen Hugli and Linda Scott by the Company. After the
Closing and until December 31, 1996, if any such employees chooses to be
employed by an affiliate of the Stockholder, the Stockholder shall use its
reasonable best efforts to make such employee available to the Company and its
Subsidiaries through December 31, 1996 on a full-time basis at no cost or
expense to the Company or any Subsidiary, other than out-of-pocket expenses
incurred by the employee at the request of the Company or any Subsidiary.
6.2 CERTAIN INDEMNIFICATION MATTERS. After the Closing, the Stockholder
shall be fully responsible for, and shall indemnify USOP, the Buyer, the Company
and each of the Subsidiaries for, all liabilities, obligations, costs and
expenses (including without limitation attorneys' fees and expenses) in
connection with the matters listed on Annex I hereto.
6.3 INDEMNIFICATION PROCEDURE. Promptly after receipt by an indemnified
party of notice of the commencement of any third party claim or other action for
which an indemnifying party has agreed to indemnify under this Agreement, such
indemnified party shall notify the indemnifying party in writing of the
commencement thereof (but the failure so to notify the indemnifying party shall
not relieve it from any liability which it may have under this Agreement). In
case any such action is brought against any indemnified party, and it notifies
the indemnifying party of the commencement thereof, the indemnifying party will
be entitled to participate therein, and to the extent it may elect by written
notice delivered to the indemnified party promptly after receiving the aforesaid
notice from such indemnified party, to assume the defense thereof with counsel
satisfactory to such indemnified party. An indemnified party shall have the
right to employ its own counsel in any such case, and the fees and expenses of
such counsel shall be at the expense of the indemnifying party if (i) the
employment of such counsel shall have been authorized in writing by the
indemnifying party in connection with the defense of such action, (ii) the
indemnifying party shall not have employed
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counsel to have charge of the defense of such action within a reasonable time
after notice of commencement of the action, or (iii) such indemnified party
shall have reasonably concluded that there may be defenses available to it which
are different from or additional to those available to the indemnifying party
(in which case the indemnifying party shall not have the right to direct the
defense of such action on behalf of the indemnified party). The indemnifying
party shall not settle any claim or action against an indemnified party without
the written consent of such indemnified party, unless such settlement provides
for a full and unconditional release of the indemnified party. The indemnifying
party shall not be liable for any settlement of any claim or action effected
without its written consent, such consent not to be unreasonably withheld.
6.4 INDEMNIFICATION OF DIRECTORS AND OFFICERS. After the Closing, the
Buyer shall cause the Company and its Subsidiaries to provide the same rights of
indemnification and advancement of expenses to present and former directors,
officers and employees of the Company and its Subsidiaries as those to which
they are entitled with respect to any matter existing or occurring prior to the
Closing, or by reason of the transactions contemplated by this Agreement (other
than the matters set forth in item 3 of Annex I hereto), under the Company's
existing Constitution or By-laws, or any indemnification agreement with the
Company or any Subsidiary. The Stockholder represents and warrants to the Buyer
that all such indemnification agreements are listed on SCHEDULE 6.2 hereto.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE BUYER
The obligation of the Buyer to effect the transactions contemplated by
Section 2.2 hereof is subject to the satisfaction, at or before the Closing, of
the following conditions:
7.1 NO INJUNCTIONS OR RESTRAINTS. No temporary restraining order,
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint, undertaking (with the mutual
consent of the parties) or prohibition restraining or prohibiting the
consummation of the transactions contemplated hereby shall be in effect.
7.2 CONSENTS AND APPROVALS. All necessary filings, consents and approvals
under the New Zealand Overseas Investment Act 1973 and the New Zealand Overseas
Investment Regulations 1995 relating to the consummation of the transactions
contemplated hereby shall have been obtained and made.
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE STOCKHOLDER
The obligation of the Stockholder to effect the transactions contemplated
by Section 2.2 hereof is subject to the satisfaction, at or before the Closing,
of the following conditions:
8.1 NO INJUNCTIONS OR RESTRAINTS. No temporary restraining order,
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint, undertaking (with the mutual
consent of the parties) or prohibition restraining or prohibiting the
consummation of the transactions contemplated hereby shall be in effect.
8.2 CONSENTS AND APPROVALS. All necessary filings, consents and approvals
under the New Zealand Overseas Investment Act 1973 and the New Zealand Overseas
Investment Regulations 1995 relating to the consummation of the transactions
contemplated hereby shall have been obtained and made.
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9. NONCOMPETITION
9.1 PROHIBITED ACTIVITIES. The Stockholder and Mr. Hart agree that
neither it, he nor any other affiliate of the Stockholder will, for a period of
five years following the Closing Date, for any reason whatsoever, directly or
indirectly, for itself or himself or on behalf of or in conjunction with any
other person, persons, company, partnership, corporation or business of whatever
nature:
(a) engage, as an officer, director, shareholder, owner, partner,
joint venturer, or in a managerial capacity, whether as an employee,
independent contractor, consultant or advisor, or as a sales
representative, in any business having as a principal or significant
activity the sale of commercial stationary, office products, books or
printing services in New Zealand or Australia (the "Territory");
(b) call upon any person who is, at that time, within the Territory,
an employee of the Buyer (including without limitation the subsidiaries
thereof) in a managerial capacity for the purpose or with the intent of
enticing such employee away from or out of the employ of the Buyer
(including without limitation the subsidiaries thereof);
(c) call upon any person or entity which is, at that time, or which
has been, within one year prior to that time, a customer of the Buyer
(including without limitation the subsidiaries thereof) within the
Territory for the purpose of soliciting or selling products or services in
competition with the Buyer within the Territory; or
(d) call upon any prospective acquisition candidate that does
substantial business in the Territory, on its or his own behalf or on
behalf of any competitor, which candidate was to its or his knowledge
either called upon by the Buyer (including without limitation the
subsidiaries thereof) or for which the Buyer (or any subsidiary thereof)
made an acquisition analysis, for the purpose of acquiring such entity.
Notwithstanding the above, the foregoing covenant shall not be deemed to
prohibit the Stockholder, Mr. Hart or any other affiliate of the Stockholder
from acquiring as a passive investment (x) shares of USOP Stock or (y) not more
than ten percent of the equity interests of a competing business whose stock is
traded on a national securities exchange or the over-the-counter market.
9.2 DAMAGES. Because of the difficulty of measuring economic losses to
the Buyer as a result of a breach of the foregoing covenant, and because of the
immediate and irreparable damage that could be caused to the Buyer for which it
would have no other adequate remedy, the Stockholder, and Mr. Hart agree that
the foregoing covenant may be enforced by the Buyer by injunctions and
restraining orders.
9.3 REASONABLE RESTRAINT. It is agreed by the parties hereto that the
foregoing covenants in this Section 9 impose a reasonable restraint on the
Stockholder, Mr. Hart and the other affiliates of the Stockholder in light of
the activities and business of the Buyer (including without limitation the
subsidiaries thereof) on the date of the execution of this Agreement and the
current plans of the Buyer.
9.4 SEVERABILITY; REFORMATION. The covenants in this Section 9 are
severable and separate, and the unenforceability of any specific covenant shall
not affect the provisions of any other
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covenant. Moreover, in the event any court of competent jurisdiction shall
determine that the scope, time or territorial restrictions set forth are
unreasonable, then it is the intention of the parties that such restrictions be
enforced to the fullest extent which the court deems reasonable, and this
Section 9 shall thereby be reformed.
9.5 INDEPENDENT COVENANT. Subject to the final sentence of this Section
9.5, all of the covenants in this Section 9 shall be construed as an agreement
independent of each other provision in this Agreement, and the existence of any
claim or cause of action of the Stockholder, Mr. Hart or any other affiliate of
the Stockholder against the Buyer (including without limitation the subsidiaries
thereof), whether predicated on this Agreement or otherwise, shall not
constitute a defense to the enforcement by the Buyer of such covenants. It is
specifically agreed that the period of five years stated at the beginning of
this Section 9, during which the agreements and covenants of the Stockholder and
Mr. Hart made in this Section 9 shall be effective, shall be computed by
excluding from such computation any time during which the Stockholder, Mr. Hart
or any other affiliate of the Stockholder is found by a court of competent
jurisdiction to have been in violation of any provision of this Section 9. The
covenants contained in this Section 9 shall not be affected by any breach of any
other provision hereof by any party hereto and shall have no effect if the
transactions contemplated by this Agreement are not consummated.
9.6 MATERIALITY. The Stockholder and Mr. Hart hereby agree that the
covenants contained in this Section 9 are a material and substantial part of
this transaction.
10. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
10.1 STOCKHOLDER AND MR. HART. Each of the Stockholder and Mr. Hart
recognizes and acknowledges that it and he had in the past, currently has, and
in the future may possibly have, access to certain confidential information of
the Company, the Subsidiaries, the Buyer and/or USOP and its other affiliates,
such as lists of customers, operational policies and pricing and cost policies
that are valuable, special and unique assets of the Company's, the
Subsidiaries', the Buyer's, and/or USOP's and its other affiliates' respective
businesses. Each of the Stockholder and Mr. Hart agrees not to disclose
confidential information with respect to the Company and/or the Subsidiaries
(unless this Agreement is terminated) or with respect to the Buyer and/or USOP
and its other affiliates to any person, firm, corporation, association or other
entity for any purpose or reason whatsoever, except to authorized
representatives of the Stockholder and Mr. Hart and to counsel and other
advisers, PROVIDED that such advisers (other than counsel) agree to the
confidentiality provisions of this Section 10.1, unless (a) such information
becomes known to the public generally through no fault of the Stockholder or Mr.
Hart or such information is disclosed to the Stockholder or Mr. Hart by a
source, other than the Company, any Subsidiary, the Buyer, USOP or their
respective representatives, permitted to make such disclosure, (b) disclosure is
required by law or the order of any governmental authority under color of law,
(c) the disclosing party reasonably believes that such disclosure is required in
connection with the defense of a lawsuit against the disclosing party, (d) as
may be required to obtain consents to and approvals of the consummation by the
Stockholder of the transactions contemplated by this Agreement or (e) as may be
required in the defense of any claim or other matter for which the Stockholder
is indemnifying the Buyer, the Company or any Subsidiary, PROVIDED, that prior
to disclosing any information pursuant to clause (b) or (c) above, the
Stockholder or Mr. Hart (as the case may be) shall, if possible, give prior
written notice thereof to the Buyer and provide the Buyer with the opportunity
to contest such disclosure. In the event of a breach or threatened breach by
the Stockholder or Mr. Hart of the provisions of this Section 10.1, the Buyer
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shall be entitled to an injunction restraining it or him (as the case may be)
from disclosing, in whole or in part, such confidential information. Nothing
herein shall be construed as prohibiting the Buyer from pursuing any other
available remedy for such breach or threatened breach, including without
limitation the recovery of damages.
10.2 BUYER AND USOP. Each of the Buyer and USOP recognizes and
acknowledges that it had in the past, currently has, and in the future may
possibly have, access to certain confidential information of the Company and/or
the Subsidiaries, such as lists of customers, operational policies, and pricing
and cost policies that are valuable, special and unique assets of the Company's
and/or the Subsidiaries' respective businesses. Each of the Buyer and USOP
agrees that, prior to the Closing, or if there shall not be a Closing, it will
not disclose confidential information with respect to the Company and/or the
Subsidiaries to any person, firm, corporation, association or other entity for
any purpose or reason whatsoever, except to authorized representatives of the
Buyer and USOP and to counsel and other advisers, PROVIDED that such advisers
(other than counsel) agree to the confidentiality provisions of this Section
10.2, unless (a) such information becomes known to the public generally through
no fault of the Buyer or USOP or such information is disclosed to the Buyer or
USOP by a source, other than the Stockholder, the Company, any Subsidiary, the
Buyer, USOP or their respective representatives, permitted to make such
disclosure, (b) disclosure is required by law or the order of any governmental
authority under color of law, (c) the disclosing party reasonably believes that
such disclosure is required in connection with the defense of a lawsuit against
the disclosing party or (d) as may be required to obtain consents to and
approvals of the consummation by the Stockholder of the transactions
contemplated by this Agreement, PROVIDED, that prior to disclosing any
information pursuant to clause (b) or (c) above, the Buyer or USOP (as the case
may be) shall, if possible, give prior written notice thereof to the Stockholder
and provide the Stockholder with the opportunity to contest such disclosure. In
the event of a breach or threatened breach by the Buyer or USOP of the
provisions of this Section 10.2, the Stockholder shall be entitled to an
injunction restraining it from disclosing, in whole or in part, such
confidential information. Nothing herein shall be construed as prohibiting the
Stockholder from pursuing any other available remedy for such breach or
threatened breach, including without limitation the recovery of damages.
10.3 DAMAGES. Because of the difficulty of measuring economic losses as a
result of the breach of the covenants in Sections 10.1 and 10.2 hereof, and
because of the immediate and irreparable damage that would be caused for which
they would have no other adequate remedy, the parties hereto agree that, in the
event of a breach by any of them of the foregoing covenants, the covenants may
be enforced against them by injunctions and restraining orders.
10.4 SURVIVAL. The obligations of the parties under this Section 10 shall
survive the termination of this Agreement.
11. FEDERAL SECURITIES ACT REPRESENTATIONS
11.1 ECONOMIC RISK; SOPHISTICATION. The Stockholder represents and
warrants that it has not relied on any purchaser representative or any other
person in connection with the acquisition of shares of USOP Stock hereunder.
The Stockholder (a) has such knowledge, sophistication and experience in
business and financial matters that it is capable of evaluating the merits and
risks of an investment in the shares of USOP Stock and (b) can bear the economic
risk of an investment in the shares of USOP Stock and can afford a complete loss
of such investment. The Stockholder has had an adequate opportunity to ask
questions and receive answers from the officers of USOP concerning
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any and all matters relating to the transactions described herein including
without limitation the background and experience of the officers and directors
of USOP, the plans for the operations of the business of USOP, the business,
operations and financial condition of USOP, and any plans for additional
acquisitions and the like. The Stockholder has asked any and all questions in
the nature described in the preceding sentence and all questions have been
answered to its satisfaction.
11.2 SALES OF STOCK. By execution and delivery of this Agreement, the
Stockholder represents and warrants to USOP and the Buyer that it does not have
any contract, undertaking, agreement or arrangement, written or oral, with any
other person to sell, transfer or grant participations in any shares of USOP
Stock to be acquired by it. The Stockholder acknowledges and agrees that USOP
will not provide it with a prospectus for its use in selling the shares of USOP
Stock received by it hereunder, and agrees to sell such shares only in
accordance with the requirements, if any, of Rule 145(d) promulgated under the
Securities Act of 1933, as amended.
12. GENERAL
12.1 TERMINATION. This Agreement may be terminated at any time prior to
the Closing Date solely:
(a) by mutual consent of the Buyer and the Stockholder;
(b) by the Stockholder or the Buyer if the Closing shall not have
occurred on or before September 30, 1996; provided that the right to
terminate this Agreement under this Section 12.1(b) shall not be available
to either one of the parties whose failure to fulfill any obligation under
this Agreement has been the cause of, or resulted in, the failure of the
Closing to occur on or before such date; or
(c) by the Stockholder or the Buyer if there is or has been a failure
to fulfill or default on the part of the other party in the due and timely
performance and satisfaction of any of the covenants, agreements or
conditions contained herein, and the curing of such default shall not have
been made or shall not reasonably be expected to occur before September 30,
1996.
12.2 EFFECT OF TERMINATION. In the event of the termination of this
Agreement pursuant to Section 12.1 hereof, this Agreement shall forthwith become
void (except for this Section 12.2 and Sections 10, 12.9 and 12.12 hereof), and
there shall be no liability or obligation on the part of either party hereto
(except with respect to such excluded sections). Notwithstanding the foregoing,
if such termination is due to a material breach or material failure to fulfill
any of the covenants or agreements set forth in this Agreement on the part of
either party hereto, then such party shall be liable to the other party hereto
(a) to the extent of the expenses incurred by such other party in connection
with this Agreement and the transactions contemplated hereby and (b) in the case
of the willful failure to fulfill any of the covenants or agreements set forth
herein, also for damages in accordance with applicable law.
12.3 SURVIVAL. The representations and warranties given or made by the
Buyer or Stockholder in this Agreement or in any certificate or other writing
furnished in connection herewith shall survive the Closing until 120 days after
the Closing Date and shall thereafter terminate and be of no further force or
effect, except that any representation or warranty as to which a claim
(including
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without limitation a contingent claim) shall have been asserted during the
survival period shall continue in effect with respect to such claim until such
claim shall have been finally resolved or settled. Each party shall be entitled
to rely upon the representations and warranties of the other party or parties
set forth herein regardless of any investigation or audit conducted before or
after the Closing Date or the decision of any party to complete the Closing.
12.4 COOPERATION. The Buyer and the Stockholder shall each deliver or
cause to be delivered to the other on the Closing Date, and at such other times
and places as shall be reasonably agreed to, such additional instruments as the
other may reasonably request for the purpose of carrying out this Agreement. In
connection therewith, if required, the Stockholder shall use its best efforts to
cause a Director or Chairman and the Chief Financial Officer of the Company to
execute any documentation reasonably required prior to the Closing by the
Buyer's independent public accountants (in connection with such accountant's
audit of the Company) or the Nasdaq Stock Market. The Stockholder shall also
cooperate and use its reasonable best efforts to have its and its affiliates'
present officers, directors and employees cooperate with the Buyer, the Company
and the Subsidiaries on and after the Closing Date in furnishing information,
evidence, testimony and other assistance in connection with any Return, filing
obligations, actions, proceedings, arrangements or disputes of any nature with
respect to matters pertaining to all periods prior to the Closing Date. After
the Closing, the Buyer shall cause the Company to cooperate and use its
reasonable best efforts to have the present officers, directors and employees of
the Company and its Subsidiaries cooperate with the Stockholder on and after the
Closing Date in furnishing information, evidence, testimony and other assistance
in connection with any Return, filing obligations, actions, proceedings,
arrangements or disputes of any nature with respect to matters pertaining to all
periods prior to the Closing Date.
12.5 SUCCESSORS AND ASSIGNS. This Agreement and the rights of the parties
hereunder may not be assigned (except by operation of law) and shall be binding
upon and shall inure to the benefit of the parties hereto and their successors.
12.6 ENTIRE AGREEMENT. This Agreement (which includes the Schedules and
Annexes hereto and the guaranties on the signature page hereof) sets forth the
entire understanding of the parties hereto with respect to the transactions
contemplated hereby. It shall not be amended or modified except by a written
instrument duly executed by each of the parties hereto. Any and all previous
agreements and understandings between the parties regarding the subject matter
hereof, whether written or oral, are superseded by this Agreement. Each person
or entity specifically referred to herein other than the Buyer and the
Stockholder is a third-party beneficiary of this Agreement and shall be entitled
to the benefits of this Agreement with the same effect as if a party hereto.
12.7 COUNTERPARTS. This Agreement may be executed in any number of
counterparts and any party hereto may execute any such counterpart, each of
which when executed and delivered shall be deemed to be an original and all of
which counterparts taken together shall constitute but one and the same
instrument. This Agreement shall become binding when one or more counterparts
taken together shall have been executed and delivered (which deliveries may be
by telefax) by the parties. It shall not be necessary in making proof of this
Agreement or any counterpart hereof to produce or account for any of the other
counterparts.
12.8 BROKERS AND AGENTS. The Buyer and the Stockholder each represents
and warrants to the other that it has not employed any broker or agent in
connection with the transactions
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contemplated by this Agreement and agrees to indemnify the other against all
loss, cost, damages or expense relating to or arising out of claims for fees or
commission of any broker or agent employed or alleged to have been employed by
such indemnifying party.
12.9 EXPENSES. The Buyer has paid and will pay the fees, expenses and
disbursements of the Buyer and its agents, representatives, accountants and
counsel incurred in connection with the subject matter of this Agreement,
including without limitation the fees and expenses of Price Waterhouse LLP,
Chapman Tripp Sheffield Young, Russell McVeagh McKenzie Bartleet & Co and
Morgan, Lewis & Bockius LLP. The Stockholder has paid and will pay the fees,
expenses and disbursements of the Stockholder and its agents, representatives,
financial advisors, accountants and counsel incurred in connection with the
subject matter of this Agreement, including without limitation the fees and
expenses of Kramer, Levin, Naftalis & Frankel, Bell Gully Buddle Weir and
Deloitte Touche Tohmatsu. The Company has paid and may pay (a) up to the first
NZ$25,000 of fees, expenses and disbursements of the Company and its
Subsidiaries and their agents, representatives and advisors incurred in
connection with the subject matter of this Agreement (with the Stockholder
paying all amounts in excess thereof, if any) and (b) the fees and expenses of
the Company's independent accountants for translating the Company's financial
statements from NZGAAP to U.S. generally accepted accounting principles.
12.10 SPECIFIC PERFORMANCE; REMEDIES. Each party hereto acknowledges that
the other party will be irreparably harmed and that there will be no adequate
remedy at law for any violation by either of them of any of the covenants or
agreements contained in this Agreement. It is accordingly agreed that, in
addition to any other remedies which may be available upon the breach of any
such covenants or agreements, each party hereto shall have the right to obtain
injunctive relief to restrain a breach or threatened breach of, or otherwise to
obtain specific performance of, the other party's covenants and agreements
contained in this Agreement. Nothing in this Agreement shall be construed to
limit the right of a party to seek specific performance or injunctive or other
equitable relief for a breach or threatened breach of this Agreement.
Furthermore, nothing in this Agreement shall limit or restrict in any manner
(and for this purpose all representations and warranties herein shall survive
the Closing without limitation) any, and each party shall be entitled to all,
rights or remedies which a party has, or might have, at law, in equity or
otherwise, against the other party based on any willful misrepresentation,
willful breach of warranty or failure to fulfill any covenant or agreement set
forth herein.
12.11 NOTICES. Any notice, request, claim, demand, waiver, consent,
approval or other communication which is required or permitted hereunder shall
be in writing and shall be deemed given if delivered personally or sent by
telefax (with confirmation of receipt), by registered or certified mail, postage
prepaid, or by recognized courier service, as follows:
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IF TO THE BUYER TO: with required copies to:
U.S. Office Products Company Blue Star Group Limited
1440 New York Avenue, N.W. Level 22
Washington, DC 20005 Coopers & Lybrand Tower
Attn: Mark D. Director Auckland 1, New Zealand
(telefax: 202-628-9509) Attn: Eric John Watson
(telefax: 011-64-9-358-1946)
and to:
Morgan, Lewis & Bockius LLP
2000 One Logan Square
Philadelphia, PA 19103
Attn: Timothy Maxwell, Esq.
(telefax: 215-963-5299)
IF TO THE STOCKHOLDER TO: with a required copy to:
Rank Commercial Limited Kramer, Levin, Naftalis & Frankel
Level 11 919 Third Avenue
48 Quay Street New York, NY 10022
Auckland, New Zealand Attn: Joshua M. Berman, Esq.
Attn: Graeme Richard Hart (telefax: 212-715-8000)
(telefax: 011-64-9-366-6263)
or to such other address as the person to whom notice is to be given may have
specified in a notice duly given to the sender as provided herein. Such notice,
request, claim, demand, waiver, consent, approval or other communication shall
be deemed to have been given as of the date so delivered, telefaxed, mailed or
dispatched and, if given by any other means, shall be deemed given only when
actually received by the addressees.
12.12 GOVERNING LAW; FORUM. This Agreement shall be governed by and
construed, interpreted and enforced in accordance with the laws of New Zealand.
Each party agrees that any suit, action or other legal proceeding arising under
this Agreement shall be brought and adjudicated in the courts of New Zealand and
submits to the exclusive jurisdiction of any such courts for such purposes.
12.13 SEVERABILITY. If any provision of this Agreement or the application
thereof to any person or circumstance is held invalid or unenforceable in any
jurisdiction, the remainder hereof, and the application of such provision to
such person or circumstance in any other jurisdiction or to other persons or
circumstances in any jurisdiction, shall not be affected thereby, and to this
end the provisions of this Agreement shall be severable.
12.14 KNOWLEDGE. Whenever reference in this Agreement is made to the
knowledge of a party or other person, such reference shall be to the actual
knowledge of the senior management of
25
<PAGE>
such party or other person or, if such party or person is an individual, to the
actual knowledge of such individual.
12.15 NO PUBLIC ANNOUNCEMENTS. Neither the Buyer nor the Stockholder, nor
any of their respective affiliates, shall issue or cause the publication of any
press release or other public announcement with respect to this Agreement or any
of the transactions contemplated hereby without the prior consultation of the
other party, except as may be required by law or by any listing agreement with a
national securities exchange.
[remainder of page intentionally blank]
26
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
BLUE STAR GROUP LIMITED
By /s/ Eric John Watson
----------------------------------
Name: E J Watson
Title: CEO/Director
RANK COMMERCIAL LIMITED
By /s/ Graeme Richard Hart
----------------------------------
Name: Graeme R. Hart
Title: Director
U.S. OFFICE PRODUCTS COMPANY
By /s/ Jonathan J. Ledecky
----------------------------------
Jonathan J. Ledecky
Chairman and Chief Executive Officer
Witness
/s/ Stephen James /s/ Graeme Richard Hart
- - ------------------------------ ------------------------------------
GRAEME RICHARD HART
27
<PAGE>
U.S. OFFICE PRODUCTS GUARANTY
For value received and to induce the Stockholder to enter into this
Agreement, U.S. Office Products Company, a Delaware corporation and the sole
stockholder of the Buyer ("USOP"), hereby guarantees to and for the benefit of
the Stockholder the prompt payment and performance of each of the Buyer's
obligations under this Agreement in accordance with the terms and conditions
hereof. This guaranty constitutes a guaranty of payment when due and not of
collection, and USOP specifically agrees that it shall not be necessary or
required that the Stockholder assert any claim or demand or enforce any remedy
whatsoever against the Buyer (or any other person). This guaranty shall in all
respects be a continuing, absolute, unconditional and irrevocable guaranty, and
shall remain in full force and effect until all of the Buyer's obligations under
this Agreement shall have been performed and discharged in full, irrespective of
(i) the failure of the Stockholder to assert any claim or demand or to enforce
any right or remedy against the Buyer or any other person; (ii) any change in
the time, manner or place of payment or performance of, or in any other term of,
all or any of the obligations of the Buyer under this Agreement; (iii) any
amendment to, rescission, waiver, or other modification of, or any consent to
departure from, any of the terms of this Agreement; (iv) any bankruptcy,
insolvency, reorganization, arrangement, readjustment, composition, liquidation
or similar proceeding with respect to the Buyer, USOP, or any other person or
any of their respective properties or creditors, or any action taken by any
trustee or receiver or by any court in any such proceeding; (v) any merger or
consolidation of the Buyer or USOP into or with any other corporation or any
sale, lease or transfer of any of the assets of the Buyer or USOP to any other
person; or (vi) any change in the ownership of any shares of capital stock of
the Buyer or USOP. USOP represents and warrants to the Stockholder that it has
the right, power and authority to execute, deliver and perform this Guaranty,
the execution, delivery and performance of this Guaranty by it have been duly
authorized by all necessary corporate action and this Agreement is a legal,
valid and binding obligation of USOP, enforceable in accordance with its terms.
The provisions of Section 12.12 shall apply to this guaranty and to USOP in
respect of its obligations hereunder.
U.S. OFFICE PRODUCTS COMPANY
By /s/ Jonathan J. Ledecky
-------------------------------------
Jonathan J. Ledecky
Chairman and Chief Executive Officer
28
<PAGE>
GRAEME RICHARD HART GUARANTY
For value received and to induce the Buyer to enter into this
Agreement, Graeme Richard Hart, the sole stockholder of the Stockholder ("Mr.
Hart"), hereby guarantees to and for the benefit of the Buyer the prompt payment
and performance of each of the Stockholder's obligations under this Agreement in
accordance with the terms and conditions hereof. This guaranty constitutes a
guaranty of payment when due and not of collection, and Mr. Hart specifically
agrees that it shall not be necessary or required that the Buyer assert any
claim or demand or enforce any remedy whatsoever against the Stockholder (or any
other person). This guaranty shall in all respects be a continuing, absolute,
unconditional and irrevocable guaranty, and shall remain in full force and
effect until all of the Stockholder's obligations under this Agreement shall
have been performed and discharged in full, irrespective of (i) the failure of
the Buyer to assert any claim or demand or to enforce any right or remedy
against the Stockholder or any other person; (ii) any change in the time, manner
or place of payment or performance of, or in any other term of, all or any of
the obligations of the Stockholder under this Agreement; (iii) any amendment to,
rescission, waiver, or other modification of, or any consent to departure from,
any of the terms of this Agreement; (iv) any bankruptcy, insolvency,
reorganization, arrangement, readjustment, composition, liquidation or similar
proceeding with respect to the Stockholder, Mr. Hart, or any other person or any
of their respective properties or creditors, or any action taken by any trustee
or receiver or by any court in any such proceeding; (v) any merger or
consolidation of the Stockholder into or with any other corporation or any sale,
lease or transfer of any of the assets of the Stockholder or Mr. Hart to any
other person; or (vi) any change in the ownership of any shares of capital stock
of the Stockholder. Mr. Hart represents and warrants to the Stockholder that he
has the right, power and authority to execute, deliver and perform this Guaranty
and this Agreement is a legal, valid and binding obligation of Mr. Hart,
enforceable in accordance with its terms. The provisions of Section 12.12 shall
apply to this guaranty and to Mr. Hart in respect of his obligations hereunder.
Witness
/s/ Stephen James /s/ Graeme Richard Hart
- - --------------------------------- ----------------------------------
GRAEME RICHARD HART
29
<PAGE>
ANNEX I
STOCKHOLDER INDEMNIFICATION MATTERS
1. For 120 days after the Closing, all matters referred to in
SCHEDULE 3.19 hereto, and thereafter, the matters specifically
identified in this item 1, plus any other matters on which the
Buyer makes a claim, as contemplated by Section 6.3 hereof. (a)
FBT exposures in relation to motor vehicles, (b) tax treatment of
purchase of GPO business and (c) tax treatment of restructuring
undertaken upon purchase of the GPO business, in each case only
to the extent the matter is not accrued by Whitcoulls, and in
addition to provide that any Rank indemnity obligation with
respect to these three matters would be reduced by offsetting tax
credits and refunds available to Whitcoulls.
2. The ongoing dispute between the Company and Spicers Paper
Limited, as evidenced in existing court proceedings, concerning
the purchase of the Croxley Collins Olympic business, including
without limitation all legal costs and other expenses incurred
after the Closing Date (but not on or before the Closing Date,
all of which costs and other expenses shall be fully accrued in
the calculation of Adjusted NTA) in relation to this dispute.
3. All liabilities in connection with the Stockholder's recent
acquisition of the shares of Company Stock held by persons other
than the Stockholder (other than to the extent such liabilities
are included in the calculation of Adjusted NTA).
4. All liabilities of the Company or its Subsidiaries arising out of or
resulting from actions taken by the Company, its Subsidiaries and/or
the Stockholder in connection with the restructuring of the Westpac
Indebtedness, as contemplated by Section 2.2(d) hereof, but not
liabilities of the Company or its Subsidiaries to Westpac as a result
of (a) the debtor-creditor relationship between the Company or its
Subsidiaries and Westpac due to the indebtedness of the Company or its
Subsidiaries to Westpac that existed prior to the Closing or was
incurred or assumed in connection with the Debt Restructuring, as
contemplated by Section 2.2(d) hereof, or (b) actions taken by the
Company or its Subsidiaries after the Closing.
30
<PAGE>
ANNEX II
CERTAIN ACTIVITIES
5.3(a) The Company's current constitution is in a form suitable for a
company listed on the New Zealand Stock Exchange. The Company is
proposing to adopt a new form of constitution more suitable for a
privately owned company.
The Company's overdraft limit was increased from approximately
NZ$8 million to NZ$16.2 million effective 1 July 1996
5.3(c) On 28 June 1996 a fully imputed dividend of NZ$10 million was paid to
Rank Commercial Ltd.
On 25 June 1996 a number of dividends were paid and received within
the Whitcoulls Group of companies in order to protect imputation
credits (refer Schedule 3.21).
A dividend is to be paid by Armidale Industries Ltd on 22 July 1996
(refer Schedule 3.21).
5.3(d) Some contracts have been entered into which will result in providing
services to customers of NZ$500,000 or more per annum.
5.3(e) By Deed dated 25 June 1996, it was agreed that the Company would
pay Gregory Andrew Howell the sum of NZ$95,000, including an
indemnity against taxation, in consideration of various covenants
including an 18 month trade restraint.
In May 1996 Bruce Reid was appointed as General Manager of Hollands
Ltd effective 1 July 1996, at which date his remuneration increased.
In May 1996 the decision was taken to have Bennetts report direct to
Whitcoulls Group Ltd, rather than to Whitcoulls Retail. As a
consequence effective 1 July 1996 the Manager of Bennetts, Siohban
Matich was promoted to the title of General Manager and her
remuneration increased.
5.3(g) The Croxley Papakura property has been sold, with the Agreement
becoming unconditional prior to the Balance Sheet Date.
Settlement is anticipated to be on or about August 11, 1996.
(Refer Schedule 3.21)
5.3(h) The Company and its subsidiaries are involved in joint ventures
in New Zealand and Australia with Calendar Club LLC of Texas USA
and Paul Breen of Australia (refer Schedule 3.6)
5.3(i) Various company amalgamations are underway (refer Schedule 3.21)
31
<PAGE>
5.3(k) Various material contracts (as described in Schedule 3.3) contain
provisions which either:
a) require the consent or agreement of the other party to a
change in control of the Company or to a transfer of all the
shares in the Company; or
b) treat such an event as an event giving the other party
rights of enforcement or termination; or
c) may contain other provisions which could be triggered by
such an event.
The Company and its Subsidiaries lease many properties in New Zealand
and Australia. Some of these leases may contain provisions requiring
the consent of the lessor or landlord to be obtained to a change of
control of the lessee or tenant; however, none of the leases for which
consent is required and has not been obtained is material to the
Company and its Subsidiaries taken as a whole.
5.3(l) Liquidation of Rank Developments Ltd (refer Schedule 3.21).
5.3(m) Negotiations are proceeding on renewals of various collective labour
agreements (refer Schedule 3.13).
Discussions are occurring with various parties in the ordinary course of
business, which may result in contracts to provide services to customers of
NZ$500,000 or more per annum.
32
<PAGE>
SCHEDULE 4.3
CONFLICTS
1. Credit and Security Agreement, dated June 30, 1995, between U.S.
Office Products Company and First Bank National Association.
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
U.S. OFFICE PRODUCTS COMPANY,
MHOS ACQUISITION CORP.,
MILE HIGH OFFICE SUPPLY CO.
AND
THE STOCKHOLDERS NAMED THEREIN
DATED AS OF JULY 26, 1996
<PAGE>
TABLE OF CONTENTS
1. PLAN OF REORGANIZATION . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Conversion of Securities . . . . . . . . . . . . . . . . . . . 2
1.3 Merger Consideration . . . . . . . . . . . . . . . . . . . . . 3
1.4 Post-Closing Adjustment. . . . . . . . . . . . . . . . . . . . 3
1.5 Pledged Amount . . . . . . . . . . . . . . . . . . . . . . . . 4
1.6 Exchange of Certificates . . . . . . . . . . . . . . . . . . . 5
1.7 Stockholders' Representative . . . . . . . . . . . . . . . . . 5
1.8 Accounting Terms . . . . . . . . . . . . . . . . . . . . . . . 6
2. CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE STOCKHOLDERS . . 6
3.1 Due Organization . . . . . . . . . . . . . . . . . . . . . . . 6
3.2 Authorization; Validity. . . . . . . . . . . . . . . . . . . . 7
3.3 No Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.4 Capital Stock of the Company . . . . . . . . . . . . . . . . . 7
3.5 Transactions in Capital Stock; Accounting Treatment. . . . . . 7
3.6 No Bonus Shares. . . . . . . . . . . . . . . . . . . . . . . . 7
3.7 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.8 Predecessor Status; Etc. . . . . . . . . . . . . . . . . . . . 8
3.9 Spin-off by the Company. . . . . . . . . . . . . . . . . . . . 8
3.10 Financial Statements . . . . . . . . . . . . . . . . . . . . . 8
3.11 Liabilities and Obligations. . . . . . . . . . . . . . . . . . 8
3.12 Accounts and Notes Receivable. . . . . . . . . . . . . . . . . 9
3.13 Permits. . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.14 Environmental Matters. . . . . . . . . . . . . . . . . . . . . 9
3.15 Real and Personal Property . . . . . . . . . . . . . . . . . . 10
3.16 Significant Customers; Material Contracts and Commitments. . . 10
3.17 Inventory. . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.18 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.19 Employee Matters . . . . . . . . . . . . . . . . . . . . . . . 12
3.20 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . 12
3.21 Conformity with Law; Litigation. . . . . . . . . . . . . . . . 13
3.22 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.23 Government Contracts . . . . . . . . . . . . . . . . . . . . . 15
3.24 Absence of Changes . . . . . . . . . . . . . . . . . . . . . . 15
3.25 Bank Accounts; Powers of Attorney. . . . . . . . . . . . . . . 17
3.26 Relations with Governments . . . . . . . . . . . . . . . . . . 17
3.27 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.28 Pooling Representation Letter. . . . . . . . . . . . . . . . . 17
3.29 USOP Prospectus; Securities Representations. . . . . . . . . . 18
3.30 Absence of Claims Against Company. . . . . . . . . . . . . . . 18
3.31 Complete Copies of Materials . . . . . . . . . . . . . . . . . 18
3.32 Company Financial Conditions . . . . . . . . . . . . . . . . . 18
3.33 Intellectual Property. . . . . . . . . . . . . . . . . . . . . 18
3.34 No Present Plan or Intention to Sell . . . . . . . . . . . . . 18
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4. REPRESENTATIONS OF USOP AND NEWCO. . . . . . . . . . . . . . . . . . . 19
4.1 Due Organization . . . . . . . . . . . . . . . . . . . . . . . 19
4.2 USOP Common Stock. . . . . . . . . . . . . . . . . . . . . . . 19
4.3 Authorization; Validity of Obligations . . . . . . . . . . . . 19
4.4 No Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . 19
4.5 Capitalization of USOP and Ownership of USOP Stoc. . . . . . . 20
4.6 Pooling Letter . . . . . . . . . . . . . . . . . . . . . . . . 20
4.7 Conformity with Law; Litigation. . . . . . . . . . . . . . . . 20
4.8 USOP Prospectus. . . . . . . . . . . . . . . . . . . . . . . . 20
4.9 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5. COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.1 Access to Information; Confidentiality . . . . . . . . . . . . 20
5.2 Conduct of Business Pending Closing. . . . . . . . . . . . . . 21
5.3 Prohibited Activities. . . . . . . . . . . . . . . . . . . . . 22
5.4 Exclusivity. . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.5 Reserved . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.6 Notification of Certain Matters. . . . . . . . . . . . . . . . 23
5.7 Cooperation in Obtaining Required Consents and Approvals . . . 23
5.8 Affiliate Agreements . . . . . . . . . . . . . . . . . . . . . 24
5.9 Pooling Accounting . . . . . . . . . . . . . . . . . . . . . . 24
5.10 Tax Returns. . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.11 FIRPTA Compliance. . . . . . . . . . . . . . . . . . . . . . . 24
5.12 Tax Distribution . . . . . . . . . . . . . . . . . . . . . . . 24
5.13 HSR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.14 Options. . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.15 Reserve. . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.16 Credit Agreements, Guarantees. . . . . . . . . . . . . . . . . 24
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF USOP AND NEWCO. . . . . . . . . 25
6.1 Representations and Warranties; Performance of Obligations . . 25
6.2 No Litigation. . . . . . . . . . . . . . . . . . . . . . . . . 25
6.3 Employment Agreements. . . . . . . . . . . . . . . . . . . . . 25
6.4 Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . 25
6.5 Consents and Approvals . . . . . . . . . . . . . . . . . . . . 25
6.6 Charter Documents. . . . . . . . . . . . . . . . . . . . . . . 25
6.7 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . 25
6.8 Accountant's Letter With Respect to Pooling of Interest
Accounting Treatment . . . . . . . . . . . . . . . . . . . . . 25
6.9 Due Diligence Review . . . . . . . . . . . . . . . . . . . . . 25
6.10 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . 26
6.11 No Material Adverse Change . . . . . . . . . . . . . . . . . . 26
6.12 Affiliate Agreements . . . . . . . . . . . . . . . . . . . . . 26
6.13 S Corporation Status . . . . . . . . . . . . . . . . . . . . . 26
6.14 Delivery of Closing Financial Certificate. . . . . . . . . . . 26
6.15 HSR . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
6.16 Related Party Agreements . . . . . . . . . . . . . . . . . . . 27
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE STOCKHOLDERS AND THE
COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
7.1 Representations and Warranties; Performance of Obligations . . 27
7.2 No Litigation. . . . . . . . . . . . . . . . . . . . . . . . . 27
7.3 Employment Agreements. . . . . . . . . . . . . . . . . . . . . 27
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7.4 Consents and Approvals . . . . . . . . . . . . . . . . . . . . 27
7.5 Reserved . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
7.6 No Material Adverse Change . . . . . . . . . . . . . . . . . . 27
7.7 HSR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
8. INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
8.1 General Indemnification by the Stockholders. . . . . . . . . . 28
8.2 Limitation and Expiration. . . . . . . . . . . . . . . . . . . 28
8.3 General Indemnification by USOP. . . . . . . . . . . . . . . . 29
8.4 Indemnification Procedures . . . . . . . . . . . . . . . . . . 30
8.5 Survival of Representations, Warranties and Covenant . . . . . 31
8.6 Right to Set Off . . . . . . . . . . . . . . . . . . . . . . . 32
8.7 Exclusive Remedies . . . . . . . . . . . . . . . . . . . . . . 32
9. NONCOMPETITION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
9.1 Prohibited Activities. . . . . . . . . . . . . . . . . . . . . 32
9.2 Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . 32
9.3 Damages. . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
9.4 Reasonable Restraint . . . . . . . . . . . . . . . . . . . . . 33
9.5 Severability; Reformation. . . . . . . . . . . . . . . . . . . 33
9.6 Independent Covenant . . . . . . . . . . . . . . . . . . . . . 33
9.7 Materiality. . . . . . . . . . . . . . . . . . . . . . . . . . 33
10. GENERAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
10.1 Accounts Receivable. . . . . . . . . . . . . . . . . . . . . . 33
10.2 Termination. . . . . . . . . . . . . . . . . . . . . . . . . . 34
10.3 Effect of Termination. . . . . . . . . . . . . . . . . . . . . 34
10.4 Cooperation. The Company, Stockholder. . . . . . . . . . . . . 34
10.5 Successors and Assigns . . . . . . . . . . . . . . . . . . . . 35
10.6 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . 35
10.7 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . 35
10.8 Brokers and Agents . . . . . . . . . . . . . . . . . . . . . . 35
10.9 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
10.10 Specific Performance; Remedies . . . . . . . . . . . . . . . . 35
10.11 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
10.12 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . 36
10.13 Severability . . . . . . . . . . . . . . . . . . . . . . . . . 37
10.14 Absence of Third Party Beneficiary Rights. . . . . . . . . . . 37
10.15 Mutual Drafting. . . . . . . . . . . . . . . . . . . . . . . . 37
10.16 Further Representations. . . . . . . . . . . . . . . . . . . . 37
10.17 Amendment; Waiver. . . . . . . . . . . . . . . . . . . . . . . 37
10.18 Public Disclosure. . . . . . . . . . . . . . . . . . . . . . . 37
iii
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made as of July
26, 1996, by and among U.S. Office Products Company, a Delaware corporation
("USOP"), Mile High Office Supply Co., a Colorado corporation (the "Company"),
Vassilios Sirpolaidis and Lynne Sirpolaidis (each a "Stockholder" and
collectively, the "Stockholders") and MHOS Acquisition Corp., a Delaware
corporation and a newly-formed, wholly-owned subsidiary of USOP ("Newco").
BACKGROUND
A. The respective Boards of Directors of Newco and the Company (which
together are sometimes referred to as the "Constituent Corporations") deem it
advisable and in the best interests of the Constituent Corporations and their
respective stockholders that Newco merge with and into the Company (the
"Merger") pursuant to this Agreement, the Plan and Agreement of Merger
substantially in the form attached as Annex I and the applicable provisions of
the laws of the State of Colorado and the State of Delaware.
B. The Boards of Directors of each of the Constituent Corporations
have approved and adopted this Agreement as a plan of reorganization within the
provisions of Section 368(a) of the Internal Revenue Code of 1986, as amended
(the "Code").
NOW, THEREFORE, in consideration of the premises and of the representations,
warranties, covenants and agreements herein contained, the parties hereto,
intending to be legally bound, agree as follows:
1. PLAN OF REORGANIZATION
1.1 THE MERGER.
(a) THE MERGER. At the Effective Time (as defined in Section 2), Newco
shall be merged with and into the Company pursuant to this Agreement and the
Merger Documents (as defined in Section 2) and the separate corporate existence
of Newco shall cease. The Company, as it exists from and after the Effective
Time, is sometimes referred to as the "Surviving Corporation."
(b) EFFECTS OF THE MERGER. The Merger shall have the effects provided
therefor by the Colorado Business Corporation Act (the "CBCA") and the Delaware
General Corporation Law (the "DGCL"). Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time (i) all the rights,
privileges, immunities, powers and franchises, of a public as well as of a
private nature, and all property, real, personal and mixed, and all debts due on
whatever account, including without limitation subscriptions to shares, and all
other choses in action, and all and every other interest of or belonging to or
due to the Company or Newco shall be taken and deemed to be transferred to, and
vested in, the Surviving Corporation without further act or deed; and all
property, rights and privileges, immunities, powers and franchises and all and
every other interest shall be thereafter as effectually the property of the
Surviving Corporation, as they were of the Company and Newco, and (ii) all
debts, liabilities, duties and obligations of the Company and Newco shall become
the debts, liabilities and duties of the Surviving Corporation and the Surviving
Corporation shall thenceforth be responsible and liable for all the debts,
liabilities, duties and obligations of the Company and Newco and neither the
rights of creditors nor any liens upon the property of the Company or Newco
shall be impaired by the Merger, and may be enforced against the Surviving
Corporation.
(c) ARTICLES OF INCORPORATION; BYLAWS; DIRECTORS AND OFFICERS. The
Articles of Incorporation of the Surviving Corporation from and after the
Effective Time shall be the Articles of Incorporation of the Company until
thereafter amended in accordance with the provisions therein and as provided by
the CBCA. The Bylaws of the Surviving Corporation from and after the Effective
Time shall be the Bylaws of the Company as in effect immediately prior to the
Effective Time, continuing until thereafter amended in accordance with their
terms and the Articles of
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Incorporation of the Surviving Corporation and as provided by the CBCA. The
initial directors of the Surviving Corporation shall be: Mark D. Director,
Donald H. Platt, Timothy J. Flynn, Lynne Sirpolaidis and Vassilios Sirpolaidis,
in each case until their successors are elected and qualified, and the initial
officers of the Surviving Corporation shall be the officers of the Company
immediately prior to the Effective Time, with the addition of Mark D. Director
as Assistant Secretary of the Surviving Corporation, in each case until their
successors are duly elected and qualified.
1.2 CONVERSION OF SECURITIES. At the Effective Time, by virtue of the
Merger and without any action on the part of USOP, Newco, the Company or any
Stockholder, the shares of capital stock of each of the Constituent Corporations
shall be converted as follows:
(a) CAPITAL STOCK OF NEWCO. Each issued and outstanding share of
capital stock of Newco shall continue to be issued and outstanding and shall be
converted into one share of validly issued, fully paid and non-assessable Common
Stock of the Surviving Corporation. Each stock certificate of Newco evidencing
ownership of any such shares shall continue to evidence ownership of such shares
of capital stock of the Surviving Corporation.
(b) CANCELLATION OF CERTAIN SHARES OF CAPITAL STOCK OF THE COMPANY. All
shares of capital stock of the Company that are owned directly or indirectly by
the Company shall be canceled and no stock of USOP or other consideration shall
be delivered in exchange therefor.
(c) CONVERSION OF CAPITAL STOCK OF THE COMPANY. Subject to Sections
l.2(d) and (e), and Sections 1.3, 1.4 and 1.5, each issued and outstanding share
of common stock of the Company, no par value ("Company Common Stock") (other
than shares to be canceled pursuant to Section 1.2(b)), that is issued and
outstanding immediately prior to the Effective Time shall automatically be
canceled and extinguished and converted, without any action on the part of the
holder thereof, into the right to receive that number of shares of USOP common
stock, $.001 par value ("USOP Common Stock") that is equal to the Merger
Consideration (as defined in Section 1.3) divided by 415.6 representing the
number of shares of Company Common Stock outstanding immediately prior to the
Effective Time. All such shares of Company Common Stock, when so converted,
shall no longer be outstanding and shall automatically be canceled and retired
and shall cease to exist, and each holder of a certificate representing any such
shares shall cease to have any rights with respect thereto, except the right to
receive the shares of USOP Common Stock to be issued or paid in consideration
therefor upon the surrender of such certificate in accordance with Section 1.6
of this Agreement. The ratio pursuant to which each share of Company Common
Stock will be exchanged for shares of USOP Common Stock, determined in
accordance with the foregoing provisions, is referred to as the "Exchange
Ratio."
(d) ADJUSTMENT OF EXCHANGE RATIO. If, between the date of this
Agreement and the Effective Time, the outstanding shares of USOP Common Stock
or, subject to compliance with Section 5.3 below, the outstanding shares of
Company Common Stock shall have been changed into a different number of shares
or a different class by reason of any reclassification, split-up, stock
dividend, or stock combination, then the Exchange Ratio shall be correspondingly
adjusted. In addition, the Exchange Ratio is based on the assumption that there
are 415.6 shares of Company Common Stock outstanding, and no other shares or
options or other rights to acquire shares of capital stock Company Stock
outstanding. To the extent that there are more shares of capital stock of the
Company or options or other rights therefore outstanding at the Effective Time,
the Exchange Ratio shall be correspondingly adjusted downward.
(e) FRACTIONAL SHARES. No fractional shares of USOP Common Stock shall
be issued, but in lieu thereof each holder of shares of Company Common Stock who
would otherwise be entitled to receive a fraction of a share of USOP Common
Stock shall receive from USOP an amount of cash equal to the Average Closing
Price, as defined in Section 1.3(a), multiplied by the fraction of a share of
USOP Common Stock to which such holder would otherwise be entitled. The
fractional share interests of each Stockholder shall be aggregated, so that no
Stockholder shall receive cash in an amount greater than the value of one full
share of USOP Common Stock.
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1.3 MERGER CONSIDERATION.
(a) For purposes of this Agreement, the "Merger Consideration" shall be
(i) the number of shares of USOP Common Stock, registered under the
Securities Act of 1933, as amended (the "1933 Act"), equal to the product of
1,027,631 and a fraction, the numerator of which is (x) $38.00 and the
denominator of which is (y) $28.50 (the "Average Closing Price");
(ii) adjusted pursuant to this Section 1.3 and Section 1.4.
(b) The Merger Consideration has been calculated based upon the
assumption that the net worth of the Company, calculated in accordance with
generally accepted accounting principles ("GAAP") consistently applied, and
after taking into account all Tax Distributions, as defined in Section 5.3(c)
and accrued as set forth in Section 5.12, is equal to or greater than
$7,000,000.
(c) If on the Closing Financial Certificate (as defined in Section
6.14), the Certified Closing Net Worth (as defined in Section 6.14) is less than
$7,000,000, the Merger Consideration to be delivered to the Stockholders shall
be reduced at Closing by the number of shares of USOP Common Stock (the "Net
Worth Adjustment Factor") obtained by dividing (A) the difference between
$7,000,000 and the Certified Closing Net Worth by (B) the Average Closing Price.
1.4 POST-CLOSING ADJUSTMENT.
(a) The Merger Consideration shall be subject to adjustment after the
Closing Date as specified in this Section 1.4.
(b) Within 120 days following the Effective Time, USOP shall cause
Price Waterhouse LLP to audit the Closing Financial Certificate to determine the
accuracy of the Certified Closing Net Worth set forth therein. The parties
acknowledge and agree that for purposes of determining the net worth of the
Company as of the Closing Date, the Company shall take into account any Tax
Distributions, but shall exclude any increase in intangible assets (including
without limitation goodwill, franchises and intellectual property) accounted for
after May 31, 1996. In the event that Price Waterhouse LLP determines that the
actual Company net worth as of the Closing Date was less than the Certified
Closing Net Worth, USOP shall deliver a written notice (the "Financial
Adjustment Notice") to the Stockholders setting forth (i) the determination made
by Price Waterhouse LLP of the actual Company net worth (the "Actual Company Net
Worth"), (ii) the Net Worth Adjustment Factor that would have been applicable
pursuant to Section 1.3(c) had the Actual Company Net Worth been reflected on
the Closing Financial Certificate instead of the Certified Closing Net Worth,
and (iii) the number of additional shares of USOP Common Stock by which the
Merger Consideration would have been reduced at Closing had the Actual Company
Net Worth been used in the calculations pursuant to Section 1.3(c) (the
"Adjustment Shares").
(c) The Stockholders' Representative, as defined in Section 1.7, shall
have thirty (30) days from the receipt of the Financial Adjustment Notice to
notify USOP if the Stockholders dispute such Financial Adjustment Notice. If
USOP has not received notice of such a dispute within such 30-day period, USOP
shall be entitled to receive from the Stockholders (which may, at USOP's sole
discretion, be from the Pledged Amount as defined in Section 1.5) the number of
shares that is equal to the Adjustment Shares. If, however, the Stockholders'
Representative has delivered notice of such a dispute to USOP within such 30-day
period, then USOP's chief financial officer and the Stockholders' Representative
shall meet (by conference telephone call or in person at a mutually agreeable
site) within one week after notice of a disagreement is given as provided
herein. USOP's chief financial officer and the Stockholders' Representative
shall attempt to make a final determination of the Adjustment Shares, if any.
If USOP's chief financial officer and the Stockholders' Representative do not
reach agreement within a reasonable time, either or both of them shall give
notice of an impasse, in which case they shall mutually agree on an
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independent accounting firm to review the Closing Financial Certificate and the
Financial Adjustment Notice (and related information) to determine the amount,
if any, of Adjustment Shares. In the event that USOP's chief financial officer
and the Stockholders' Representative cannot agree on an independent accounting
firm, Price Waterhouse LLP shall select such independent accounting firm. The
determination of such independent accounting firm shall be final and binding on
the parties hereto and upon such determination USOP shall be entitled to receive
from the Stockholders (which may, at USOP's sole discretion, be from the Pledged
Amount as defined in Section 1.5) the number of shares that is equal to the
Adjustment Shares. The costs of the independent accounting firm shall be borne
by the party (either USOP or the Stockholders as a group) whose determination of
the Company's net worth at Closing was furthest from the determination of the
independent accounting firm, or equally by USOP and the Stockholders in the
event that the determination by the independent accounting firm is equidistant
between the Certified Closing Net Worth and the Actual Company Net Worth.
1.5 PLEDGED AMOUNT.
(a) As collateral security for the payment of any post-Closing
adjustment to the Merger Consideration under Section 1.4, or any indemnification
obligations of the Stockholders pursuant to Section 8, each Stockholder shall,
and by execution hereof does hereby, transfer, pledge and assign to USOP, for
the benefit of USOP, a security interest in the following assets (collectively,
the "Pledged Amount"):
(i) ten percent (10%) of the number of shares of USOP Common Stock such
Stockholder is entitled to receive pursuant to the Merger as the same may have
been adjusted pursuant to Section 1.3 or Section 1.4 hereof (collectively with
respect to all Stockholders, the "Pledged Securities"), the certificates and
instruments representing or evidencing such Stockholder's Pledged Securities;
(ii) all securities hereafter delivered to such Stockholder in
substitution for such Stockholder's Pledged Securities, all certificates and
instruments representing or evidencing such securities, and all non-cash
dividends and other property at any time received, receivable or otherwise
distributed in respect of or in exchange for any or all thereof; and in the
event such Stockholder receives any such property, such Stockholder shall
immediately deliver such property to USOP to be held hereunder as Pledged
Securities; and
(iii) all non-cash proceeds of all of the foregoing property and all
rights, titles, interests, privileges and preferences appertaining or incident
to the foregoing property.
(b) Each certificate evidencing a Stockholder's Pledged Securities
issued in his or her name in the Merger, shall, at the Closing, be delivered to
such Stockholder, such certificate bearing a restrictive or cautionary legend
imprinted by USOP's transfer agent at USOP's request.
(c) The Stockholders shall be entitled to exercise any voting powers
incident to the Pledged Securities and all securities described in Section
1.5(a)(ii) and to receive and retain all cash dividends paid thereon.
(d) The Pledged Amount shall be available to satisfy any post-Closing
adjustment to the Merger Consideration pursuant to Section 1.4 and any
indemnification obligations of the Stockholders pursuant to Section 8 until the
date which is one (1) year after the Effective Time or until completion of the
First Audit (as defined in Section 8.2(c)), whichever is sooner (the "Release
Date"). For purposes of the preceding sentence, the value per Pledged Security
shall be the Average Closing Price. Promptly following the Release Date USOP
shall cause such security interest to be released and such Pledged Securities to
be reissued without such restrictive legend, less that number of Pledged
Securities required by USOP to satisfy any post-Closing adjustment to the Merger
Consideration under Section 1.4 and any indemnification obligations of the
Stockholders pursuant to Section 8.
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<PAGE>
1.6 EXCHANGE OF CERTIFICATES.
(a) USOP TO PROVIDE COMMON STOCK. Promptly after the Effective Time,
USOP shall cause to be made available the shares of USOP Common Stock issuable
pursuant to Section 1.2 and the Merger Documents (defined below) in exchange for
outstanding shares of capital stock of the Company, and cash in an amount
sufficient for payment in lieu of fractional shares pursuant to Section 1.2(e).
(b) CERTIFICATE DELIVERY REQUIREMENTS. At the Effective Time, the
Stockholders shall deliver to USOP the certificates (the "Certificates")
representing Company Common Stock, duly endorsed in blank by the Stockholders,
or accompanied by blank stock powers duly executed by the Stockholders, in each
case with signatures guaranteed by a national bank or member firm of the New
York Stock Exchange, and with all necessary transfer tax and other revenue
stamps, acquired at the Stockholders' expense, affixed and canceled.
The Stockholders shall promptly cure any deficiencies with respect to the
endorsement of the Certificates or other documents of conveyance with respect to
the stock powers accompanying such Certificates. The Certificates so delivered
shall forthwith be canceled. Until delivered as contemplated by this Section
1.6(b), each Certificate shall be deemed at any time after the Effective Time to
represent the right to receive upon such surrender the number of shares of USOP
Common Stock as provided by this Section l and the applicable provisions of the
CBCA and the DGCL.
(c) NO FURTHER OWNERSHIP RIGHTS IN CAPITAL STOCK OF THE COMPANY. All
USOP Common Stock delivered (including USOP Common Stock delivered pursuant to
Section 1.5(b) but withheld) upon the surrender for exchange of shares of
Company Common Stock in accordance with the terms hereof shall be deemed to have
been delivered in full satisfaction of all rights pertaining to such shares of
Company Common Stock, and following the Effective Time, the Certificates shall
have no further rights to, or ownership in, shares of capital stock of the
Company. There shall be no further registration of transfers on the stock
transfer books of the Surviving Corporation of the shares of Company Common
Stock which were outstanding immediately prior to the Effective Time. If, after
the Effective Time, Certificates are presented to the Surviving Corporation for
any reason, they shall be canceled and exchanged as provided in this Section
1.6.
(d) LOST, STOLEN OR DESTROYED CERTIFICATES. In the event any
certificates evidencing shares of Company Common Stock shall have been lost,
stolen or destroyed, USOP shall cause payment to be made in exchange for such
lost, stolen or destroyed certificates, upon the making of an affidavit of that
fact by the holder thereof, such shares of USOP Common Stock and cash for
fractional shares, if any, as may be required pursuant to Section 1.2(e);
provided, however, that USOP may, in its discretion and as a condition precedent
to the issuance thereof, require the owner of such lost, stolen or destroyed
certificates to deliver a bond in such sum as it may reasonably direct as
indemnity against any claim that may be made against USOP with respect to the
certificates alleged to have been lost, stolen or destroyed.
(e) NO LIABILITY. Notwithstanding anything to the contrary in this
Section 1.6, none of the Surviving Corporation or any party hereto shall be
liable to a holder of shares of Company Common Stock for any amount paid to a
public official pursuant to any applicable abandoned property, escheat or
similar law.
1.7 STOCKHOLDERS' REPRESENTATIVE.
(a) Each holder of Company Common Stock, by signing this Agreement,
designates Vassilios Sirpolaidis or, in the event that Vassilios Sirpolaidis is
unable or unwilling to serve, Lynne Sirpolaidis, to be the Stockholders'
Representative for purposes of this Agreement. The Stockholders shall be bound
by any and all actions taken by the Stockholders' Representative on their
behalf.
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(b) USOP and its representatives and agents shall be entitled to rely
upon any communication or writings given or executed by the Stockholders'
Representative. All notices to be sent to Stockholders pursuant to this
Agreement may be addressed to the Stockholders' Representative and any notice so
sent shall be deemed notice to all of the Stockholders hereunder. The
Stockholders hereby consent and agree that the Stockholders' Representative is
authorized to accept notice on behalf of the Stockholders pursuant hereto.
(c) The Stockholders' Representative is hereby appointed and
constituted the true and lawful attorney-in-fact of each Stockholder, with
full power in his or her name and on his or her behalf to act according to
the terms of this Agreement in the absolute discretion of the Stockholders'
Representative; and in general to do all things and to perform all acts
including, without limitation, executing and delivering all agreements,
certificates, receipts, instructions and other instruments contemplated by or
deemed advisable in connection with this Agreement. This power of attorney
and all authority hereby conferred is granted subject to the interest of the
other Stockholders hereunder and in consideration of the mutual covenants and
agreements made herein, and shall be irrevocable and shall not be terminated
by any act of any Stockholder, by operation of law, whether by the death or
other event.
1.8 ACCOUNTING TERMS. Except as otherwise expressly provided herein,
all accounting terms used in this Agreement shall be interpreted, and all
financial statements and certificates and reports as to financial matters
required to be delivered hereunder shall be prepared, in accordance with GAAP
consistently applied.
2. CLOSING
The consummation of the Merger and the other transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Bryan Cave LLP, One
Metropolitan Square, 211 North Broadway, Suite 3600, St. Louis, Missouri 63102,
on July 26, 1996, providing that all conditions to Closing shall have been
satisfied or waived, or at such other time and date as USOP, the Company and the
Stockholders may mutually agree, which date shall be referred to as the "Closing
Date."
On the Closing Date, the articles of merger, certificate of merger, or other
appropriate documents executed in accordance with the CBCA and the DGCL (the
"Merger Documents"), together with any required officers' certificates, shall be
filed with the Secretary of the State of the States of Colorado and Delaware in
accordance with the provisions of the CBCA and the DGCL. The Merger shall
become effective upon such filings or at such later time on the Closing Date as
may be specified in such filings (the "Effective Time").
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE STOCKHOLDERS
To induce USOP and Newco to enter into this Agreement and consummate the
transactions contemplated hereby, each of the Company and the Stockholders,
jointly and severally, represents and warrants to USOP and Newco as follows:
3.1 DUE ORGANIZATION. The Company is a corporation duly organized,
validly existing and is in good standing under the laws of the jurisdiction of
its incorporation and is duly authorized and qualified to do business under all
applicable laws, regulations, ordinances and orders of public authorities to own
its properties and to carry on its business in the places and in the manner as
now conducted except where the failure to be so authorized or qualified would
not have a material adverse effect on the business, operations, affairs,
prospects, properties, assets, profits or condition (financial or otherwise) of
the Company (a "Material Adverse Effect"). Schedule 3.l hereto contains a list
of all jurisdictions in which the Company is authorized or qualified to do
business. The Company is in good standing as a foreign corporation in each
jurisdiction it which it does business. The Company has delivered to USOP true,
complete and correct copies of the Articles of Incorporation and Bylaws of the
Company. Such Articles of Incorporation and Bylaws are collectively referred to
as the "Charter Documents." The Company is not in violation of any Charter
Documents. The minute books of the Company as previously made available to USOP
(and
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as shall be delivered to USOP at Closing) are correct and, except as set forth
in Schedule 3.1, complete in all material respects.
3.2 AUTHORIZATION; VALIDITY. The Company has all requisite corporate
power and authority to enter into and perform its obligations pursuant to the
terms of this Agreement. The Company and each Stockholder has the full legal
right, corporate power and authority to enter into this Agreement and the
transactions contemplated hereby. The execution and delivery of this Agreement
by the Company and the performance by the Company of the transactions
contemplated herein have been duly and validly authorized by the Board of
Directors of the Company and the Stockholders and this Agreement has been duly
and validly authorized by all necessary corporate action. This Agreement is a
legal, valid and binding obligation of the Company and each Stockholder,
enforceable in accordance with its terms.
3.3 NO CONFLICTS. The execution, delivery and performance of this
Agreement, the consummation of the transactions contemplated hereby, and the
fulfillment of the terms hereof will not:
(a) conflict with, or result in a breach or violation of any of the
Charter Documents;
(b) other than such as would not, individually or in the aggregate,
have a Material Adverse Effect, conflict with, or result in a default (or would
constitute a default but for any requirement of notice or lapse of time or both)
under any document, agreement or other instrument to which the Company is a
party, or result in the creation or imposition of any lien, charge or
encumbrance on any of the Company's properties pursuant to (i) any law or
regulation to which either the Company or any of its property is subject, or
(ii) any judgment, order or decree to which the Company is bound or any of their
respective property is subject;
(c) result in termination or any impairment of any material permit,
license, franchise, contractual right or other authorization of the Company; or
(d) violate any law, order, judgment, rule, regulation, decree or
ordinance to which the Company is subject or by which the Company is bound
(including without limitation the HSR Act, together with all rules and
regulations promulgated thereunder).
3.4 CAPITAL STOCK OF THE COMPANY. The authorized capital stock of the
Company consists of 50,000 shares of common stock, no par value, of which 415.6
shares are issued and outstanding, and no shares of Preferred Stock. All of the
issued and outstanding shares of the capital stock of the Company have been duly
authorized and validly issued, are fully paid and nonassessable and are owned of
record and beneficially by the Stockholders in the amounts set forth in Annex II
free and clear of all liens, encumbrances and claims of every kind. All of the
issued and outstanding shares of the capital stock of the Company were offered,
issued, sold and delivered by the Company in compliance with all applicable
state and federal laws concerning the issuance of securities. Further, none of
such shares was issued in violation of any preemptive rights. There are no
voting agreements or voting trusts with respect to any of the outstanding shares
of the capital stock of the Company.
3.5 TRANSACTIONS IN CAPITAL STOCK; ACCOUNTING TREATMENT. No option,
warrant, call, subscription right, conversion right or other contract or
commitment of any kind exists of any character, written or oral, which may
obligate the Company to issue, sell or otherwise become outstanding any shares
of capital stock. The Company has no obligation (contingent or otherwise) to
purchase, redeem or otherwise acquire any of its equity securities or any
interests therein or to pay any dividend or make any distribution in respect
thereof. Neither the voting stock structure of the Company nor the relative
ownership of shares among any of its Stockholders has been altered or changed in
contemplation of the Merger. As a result of the Merger, USOP will be the record
and beneficial owner of all outstanding capital stock of the Company and rights
to acquire capital stock of the Company.
3.6 NO BONUS SHARES. None of the shares of Company capital stock was
issued pursuant to awards, grants or bonuses.
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3.7 SUBSIDIARIES. Except as set forth on Schedule 3.7, the Company has
no subsidiaries and does not presently own, of record or beneficially, or
control, directly or indirectly, any capital stock, securities convertible into
capital stock or any other equity interest in any corporation, association or
business entity, nor is the Company, directly or indirectly, a participant in
any joint venture, partnership or other noncorporate entity.
3.8 PREDECESSOR STATUS; ETC. Schedule 3.8 sets forth a listing of all
names of all predecessor companies of the Company, including without limitation
the names of any entities from whom the Company has acquired material assets.
The Company has not at any time been a subsidiary or division of another
corporation or a part of an acquisition which was later rescinded.
3.9 SPIN-OFF BY THE COMPANY. There has not been any sale or spin-off of
material assets of either the Company, any other person or entity that directly,
or indirectly through one or more intermediaries, controls, is controlled by or
is under common control with the Company ("Affiliates") within the two years
prior to the date of this Agreement.
3.10 FINANCIAL STATEMENTS. Schedule 3.10 includes (a) true,
complete and correct copies of the Company's unaudited Balance Sheet as of
December 31, 1995 (the end of its most recent completed fiscal year), and
Statement of Profit and Loss for the year ended December 31, 1995
(collectively, the "Reviewed Financials") and (b) true, complete and correct
copies of the Company's unaudited Balance Sheet (the "April Balance Sheet")
as of April 30, 1996 (the "Balance Sheet Date") and Statement of Income, for
the four-month period then ended (collectively, the "Interim Financials," and
together with the Reviewed Financials, the "Company Financial Statements").
Except as noted on the compilation report accompanying the Reviewed
Financials, the Company Financial Statements have been prepared in accordance
with GAAP consistently applied, subject, in the case of the Interim
Financials to normal year-end audit adjustments, which individually or in the
aggregate will not be material, and to the omission of footnote information.
Each unaudited Balance Sheet included in the Company Financial Statements
presents fairly the consolidated financial condition of the Company as of the
date indicated thereon, and each of the Statements of Profit and Loss or of
Income, included in the Company Financial Statements as well as the unaudited
Statements of Income, for the years ended December 31, 1995 and December 31,
1994, which are included in Schedule 3.10, presents fairly the results of its
consolidated operations for the periods indicated thereon. Since the dates of
the Company Financial Statements, there have been no material changes in the
Company's accounting policies.
3.11 LIABILITIES AND OBLIGATIONS.
(a) The Company is not liable for or subject to any liabilities except
for:
(i) those liabilities reflected on the April Balance Sheet and not
previously paid or discharged;
(ii) those liabilities arising in the ordinary course of its business
consistent with past practice under any contract, commitment or agreement
specifically disclosed on any Schedule to this Agreement or not required to
be disclosed thereon because of the term or amount involved or otherwise; and
(iii) those liabilities incurred since the Balance Sheet Date in the
ordinary course of business consistent with past practice, which liabilities are
not, individually or in the aggregate, material.
For purposes of this Section 3.11, the term "liabilities" shall include without
limitation any direct or indirect liability, indebtedness, guaranty,
endorsement, claim, loss, damage, deficiency, cost, expense, obligation or
responsibility, either accrued, absolute, contingent, mature, unmature or
otherwise and whether known or unknown, fixed or unfixed, choate or inchoate,
liquidated or unliquidated, secured or unsecured.
(b) The Company has delivered to USOP, in the case of those liabilities
which are not fixed or contested, a reasonable estimate of the maximum amount
which may be payable.
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3.12 ACCOUNTS AND NOTES RECEIVABLE. The Company has delivered to USOP
an accurate list, as of a date not more than two business days prior to the
date hereof, of the accounts and notes receivable of the Company (including
without limitation receivables from and advances to employees and the
Stockholders), which includes an aging of all accounts and notes receivable
showing amounts due in 30-day aging categories. All accounts receivable of
the Company that are reflected on its books and records as of the Closing
Date (collectively, the "Accounts Receivable") represent or will represent
valid obligations arising from sales actually made or services actually
performed in the ordinary course of business. Unless paid prior to the
Closing Date, the Accounts Receivable are or will be as of the Closing Date
current and collectible net of any respective reserves shown as of the
Closing Date (which reserves are adequate and calculated consistent with past
practice). Subject to such reserves, each of the Accounts Receivable either
has been or will be collected in full, without any set-off, within one
hundred twenty (120) days after the day on which it first becomes due and
payable. There is no contest, claim, or right of set-off, other than returns
in the ordinary course of business, under any contract with any maker of an
Accounts Receivable relating to the amount or validity of such Accounts
Receivable.
3.13 PERMITS. The Company owns or holds all licenses, franchises,
permits and other governmental authorizations, including without limitation
permits, titles (including without limitation motor vehicle titles and current
registrations), fuel permits, licenses, franchises, the absence of any of which,
individually or in the aggregate, could have a Material Adverse Effect (the
"Material Permits"). The Material Permits are valid, and the Company has not
received any notice that any governmental authority intends to modify, cancel,
terminate or not renew any Material Permit. The Company has conducted and is
conducting its business in compliance with the requirements, standards, criteria
and conditions set forth in the Material Permits and other applicable orders,
approvals, variances, rules and regulations and is not in violation of any of
the foregoing except where such non-compliance or violation would not have a
Material Adverse Effect. The transactions contemplated by this Agreement will
not result in a default under or a breach or violation of, or adversely affect
the rights and benefits afforded to the Company by any Material Permit.
3.14 ENVIRONMENTAL MATTERS.
(a) HAZARDOUS MATERIAL. Other than as set forth on Schedule 3.14(a),
no underground storage tanks and no amount of any substance that has been
designated by any Governmental Entity or by applicable federal, state, local or
other applicable law to be radioactive, toxic, hazardous or otherwise a danger
to health or the environment, including, without limitation, PCBs, asbestos,
petroleum, urea-formaldehyde and all substances listed as hazardous substances
pursuant to the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended, or defined as a hazardous waste pursuant to
the United States Resource Conservation and Recovery Act of 1976, as amended,
and the regulations promulgated pursuant to said laws, but excluding office and
janitorial supplies properly and safely maintained (a "Hazardous Material"), are
present in, on or under any property, including the land and the improvements,
ground water and surface water thereof, that the Company has at any time owned,
operated, occupied or leased. Schedule 3.14(a) identifies all underground and
aboveground storage tanks, and the capacity, age, and contents of such tanks,
located on property currently owned or leased by the Company.
(b) HAZARDOUS MATERIALS ACTIVITIES. The Company has not transported,
stored, used, manufactured, disposed of or released, or exposed its employees or
others to, Hazardous Materials in violation of any law in effect on or before
the Closing Date, nor has the Company disposed of, transported, sold, or
manufactured any product containing a Hazardous Material (collectively, "Company
Hazardous Materials Activities") in violation of any rule, regulation, treaty or
statute promulgated by any Governmental Entity in effect prior to or as of the
date hereof to prohibit, regulate or control Hazardous Materials or any
Hazardous Material Activity.
(c) PERMITS. The Company currently holds all environmental approvals,
permits, licenses, clearances and consents (the "Environmental Permits")
necessary for the conduct of the Company's Hazardous Material Activities and
other business of the Company as such activities and business are currently
being conducted. All Environmental Permits are in full force and effect. The
Company (A) is in compliance in all material respects with all terms and
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conditions of the Environmental Permits and (B) is in compliance in all material
respects with all other limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules and timetables contained in
the laws of all Governmental Entities relating to pollution or protection of the
environment or contained in any regulation, code, plan, order, decree, judgment,
notice or demand letter issued, entered, promulgated or approved thereunder. To
the best of the Company's knowledge after due inquiry, there are no
circumstances that may prevent or interfere with such compliance in the future.
Schedule 3.14(c) includes a listing and description of all Environmental Permits
currently held by the Company.
(d) ENVIRONMENTAL LIABILITIES. No action, proceeding, revocation
proceeding, amendment procedure, writ, injunction or claim is pending, or to the
best knowledge of the Company and the Stockholders, threatened concerning any
Environmental Permit, Hazardous Material or any Company Hazardous Materials
Activity. There are no past or present actions, activities, circumstances,
conditions, events, or incidents that could involve the Company (or any person
or entity whose liability the Company has retained or assumed, either by
contract or operation of law) in any environmental litigation, or impose upon
the Company (or any person or entity whose liability the Company has retained or
assumed, either by contract or operation of law) any material environmental
liability including, without limitation, common law tort liability.
3.15 REAL AND PERSONAL PROPERTY. Schedule 3.15 sets forth an accurate
list of all owned and leased real property, all personal property included in
"fixed assets" on the April Balance Sheet and all other personal property owned
or leased by the Company with a current book value in excess of $10,000 both (a)
as of the Balance Sheet Date and (b) acquired since the Balance Sheet Date,
including in each case true, complete and correct copies of leases for material
equipment and all real properties on which are situated buildings, warehouses,
workshops, garages and other structures used in the operation of the business of
the Company and also including an indication as to which assets are currently
owned, or were formerly owned, by any Stockholder or business or personal
affiliates of or any Stockholder or of the Company. All of the trucks and other
material machinery and equipment of the Company listed on Schedule 3.15 are in
good working order and condition, ordinary wear and tear excepted. All leases
set forth on Schedule 3.15 are in full force and effect and constitute valid and
binding agreements of the Company, and the Company is not in breach of any of
their respective terms. All fixed assets used by the Company that are material
to the operation of its business are either owned by the Company or leased under
an agreement listed on Schedule 3.15. Schedule 3.15 also includes a summary
description of all plans or projects involving the opening of new operations,
expansion of any existing operations or the acquisition of any real property or
existing business, to which management of the Company has made any material
expenditure in the two-year period prior to the date of this Agreement, which if
pursued by the Company or the Surviving Corporation would require additional
material expenditures of capital. The Company has good and insurable title to
the real property owned and used in its business, including without limitation
those reflected on Schedule 3.15 hereto, subject to no mortgage, pledge, lien,
conditional sales agreement, encumbrance or charge, except for:
(a) mortgages and liens reflected on Schedules 3.11 and 3.15 as
securing liabilities reflected on such Schedules (with respect to which
liabilities no default exists);
(b) liens for current taxes not yet payable and assessments not in
default; or
(c) easements for utilities serving such real property only.
3.16 SIGNIFICANT CUSTOMERS; MATERIAL CONTRACTS AND COMMITMENTS.
(a) The Company has, prior to the date of this Agreement, delivered to
USOP a complete and accurate list of all Significant Customers. For purposes of
this Agreement, "Significant Customers" are those customers representing five
percent (5%) or more of the Company's revenues for the 12 months ending on the
Balance Sheet Date, or who have effected purchases from the Company of $100,000
or more in any of the past four fiscal quarters.
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(b) Schedule 3.16 contains an accurate list of all contracts,
commitments, leases, instruments, agreements, licenses or permits, written or
oral, to which the Company or any Subsidiary is a party or by which it or its
properties are bound (including without limitation contracts with Significant
Customers, joint venture or partnership agreements, contracts with any labor
organizations, employment agreements, consulting agreements, loan agreements,
indemnity or guaranty agreements, bonds, mortgages, options to purchase land,
liens, pledges or other security agreements) that (i) may give rise to
obligations or liabilities exceeding, during the current term thereof, $25,000,
(ii) generate revenues or income exceeding, during the current term thereof,
$25,000, or (iii) to which any Affiliate of the Company is a party or any
officer, director or Stockholder of the Company is a party (collectively, the
"Material Contracts") as of the Balance Sheet Date and entered into since the
Balance Sheet Date. The Company has delivered to USOP true, complete and correct
copies of the Material Contracts.
(c) Except to the extent set forth on Schedule 3.16, (i) none of the
Company's Significant Customers has canceled or substantially reduced, or is
currently attempting or, to the knowledge of the Stockholders, threatening to
cancel or substantially reduce, any purchases, (ii) the Company has complied
with all of its commitments and obligations and is not in default under any of
the Material Contracts, and no notice of default has been received with respect
to any thereof, and (iii) there are no Material Contracts that were not
negotiated at arm's length with third parties not affiliated with the Company or
any officer, director or Stockholder of the Company. The Company has received
no material customer complaints concerning its products and/or services, nor has
it had any of its products returned by a purchaser thereof except for normal
warranty returns consistent with past history and those returns that would not
result in a reversal of any material revenue by the Company.
(d) Each Material Contract, except those terminated pursuant to Section
6.16, is valid and binding on the Company and is in full force and effect and is
not subject to any default thereunder by any party obligated to the Company
pursuant thereto. The Company has obtained, or will obtain prior to the
Effective Time, all necessary consents, waivers and approvals of parties to any
Material Contracts that are required in connection with any of the transactions
contemplated hereby, or as are required by any governmental agency or other
third party or are advisable in order that any such Material Contract remain in
effect without modification after the Merger and without giving rise to any
right to termination, cancellation or acceleration or loss of any right or
benefit ("Company Third Party Consents"). All Company Third Party Consents are
listed on Schedule 3.16.
(e) There is no contract or agreement which requires the Company to be
a "women's business enterprise" ("WBE") or "woman-owned business concern" as
defined in 48 C.F.R. ' 52.204-5 in order for such contract or agreement to be
valid and enforceable by the Company; PROVIDED, HOWEVER, that no representation
or warranty is made as to whether any current customer that is not contractually
required to purchase goods or services from the Company will elect to purchase
any quantity of goods or services from the Company following the Closing Date.
(f) The outstanding balance on all loans or credit agreements between
the Company and any Person in which any of the Stockholders owns a material
interest and the average amounts guaranteed by the Company from time to time for
the benefit of any Person in which any of the Stockholders owns a material
interest are set forth on Schedule 3.16.
3.17 INVENTORY. The inventory of the Company consists of raw materials
and supplies, manufactured and purchased parts, goods in process and finished
goods, all of which is merchantable and fit for the purposes for which it was
procured or manufactured, and none of which is slow-moving, obsolete, damaged,
or defective, subject only to the reserve for inventory writedown set forth on
the face of the April Balance Sheet (rather than in any notes thereto) as
adjusted for the passage of time through the Closing Date in accordance with the
past custom and practice of the Company.
3.18 INSURANCE. Schedule 3.18 sets forth an accurate list, as of the
Balance Sheet Date, of all insurance policies carried by the Company and all
insurance loss runs or workmen's compensation claims received for the past two
policy years. The Company has delivered, prior to the date of this Agreement,
true, complete and correct copies
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of all current insurance policies, all of which are in full force and effect.
All premiums payable under all such policies have been paid and the Company is
otherwise in full compliance with the terms of such policies (or other policies
providing substantially similar insurance coverage). Such policies of insurance
are of the type and in amounts customarily carried by persons conducting
businesses similar to that of the Company. To the knowledge of the
Stockholders, there have been no threatened terminations of or material premium
increases with respect to any of such policies.
3.19 EMPLOYEE MATTERS. With respect to employees of and service
providers to the Company:
(a) the Company is and has been in compliance in all material respects
with all applicable laws respecting employment and employment practices, terms
and conditions of employment and wages and hours, including without limitation
any such laws respecting employment discrimination, workers' compensation,
family and medical leave, the Immigration Reform and Control Act, and
occupational safety and health requirements, and has not and is not engaged in
any unfair labor practice;
(b) there is not now, nor within the past three years has there been,
any unfair labor practice complaint against the Company pending or, to the
Company and the Stockholders' knowledge, threatened before the National Labor
Relations Board or any other comparable authority;
(c) there is not now, nor within the past three years has there been,
any labor strike, slowdown or stoppage actually pending or, to the Company's
and the Stockholders' knowledge, threatened against or directly affecting the
Company;
(d) to the Company's and the Stockholders' knowledge, no labor
representation organization effort exists nor has there been any such
activity within the past three years;
(e) no grievance or arbitration proceeding arising out of or under
collective bargaining agreements is pending and, to the Company's and the
Stockholders' knowledge, no claims therefor exist or have been threatened;
(f) the employees of the Company are not and have never been
represented by any labor union, and no collective bargaining agreement is
binding and in force against the Company or currently being negotiated by the
Company; and
(g) all persons classified by the Company as independent contractors
do satisfy and have satisfied the requirements of law to be so classified,
and the Company has fully and accurately reported their compensation on IRS
Forms 1099 when required to do so.
3.20 EMPLOYEE BENEFIT PLANS. All employee benefit plans, programs and
policies (whether formal or informal, and whether maintained for the benefit of
a single individual or more than one individual) maintained or contributed to by
the Company for the benefit of any current or former employee of the Company or
in which such employees are entitled to participate are listed in Schedule 3.20
(the "Benefit Plans"), and copies of all such written plans and policies,
written descriptions of all such oral plans and policies, and all other
documentation relating to such plans and policies have been delivered or made
available to USOP.
(a) Each Benefit Plan and the administration thereof complies, and has
at all times complied, in all material respects with the requirements of all
applicable law, including without limitation the Employee Retirement Income
Security Act of 1974, as amended ("ERISA") the Code, and each Benefit Plan
intended to qualify under section 401(a) of the Code so qualifies, and each
trust which forms a part of any such plan is tax-exempt under section 501(a) of
the Code.
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(b) No Benefit Plan subject to Part 3 of Title I of ERISA has incurred
any "accumulated funding deficiency" within the meaning of section 302 of ERISA
or section 412 of the Code.
(c) No liability has been incurred or is expected to be incurred under
Title IV of ERISA to any party with respect to any Benefit Plan, or any other
plan presently or heretofore maintained or contributed to by the Company, any
predecessor to the Company or any entity that is or at any time was a member of
a controlled group, as defined in Section 412(n) (6) (B) of the Code, which
includes or included the Company ("Controlled Group Member").
(d) Neither the Company nor any Controlled Group Member has incurred
any liability for any tax imposed under section 4971 through 4980B of the Code
or civil liability under section 502(i) or (1) of ERISA.
(e) The "amount of unfunded benefit liabilities" within the meaning of
section 4001(a) (18) of ERISA does not exceed zero with respect to any Benefit
Plan subject to Title IV of ERISA.
(f) No Benefit Plan is a multiemployer plan within the meaning of
section 3 (37) of ERISA.
(g) No Benefit Plan provides health or death benefit coverage beyond
the termination of an employee's employment, except as required by Part 6 of
Title I of ERISA or section 4980B of the Code.
(h) No material "reportable event" (within the meaning of section 4043
of ERISA) has occurred with respect to any Benefit Plan or any plan maintained
by a Controlled Group Member since the effective date of said section 4043.
(i) No suit, actions or other litigation (excluding claims for benefits
incurred in the ordinary course of plan activities) have been brought against or
with respect to any Benefit Plan.
(j) All contributions to Benefit Plans that were required to be made
under such Benefit Plans have been made as of the Balance Sheet Date, and all
benefits accrued under any unfunded Benefit Plan will have been paid, accrued or
otherwise adequately reserved in accordance with GAAP as of such date and the
Company will have performed by the Closing Date all material obligations
required to be performed as of such date under Benefit Plans.
If reasonably requested by USOP, the Company will terminate any Benefit Plan
substantially contemporaneously with the Closing.
3.21 CONFORMITY WITH LAW; LITIGATION. The Company has not violated any
law or regulation or any order of any court or federal, state, municipal or
other governmental department, commission, board, bureau, agency or
instrumentality having jurisdiction over it which would have a Material Adverse
Effect. There are no claims, actions, suits or proceedings, pending or, to the
knowledge of the Stockholders, threatened against or affecting the Company at
law or in equity, or before or by any federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality
having jurisdiction over it and no notice of any claim, action, suit or
proceeding, whether pending or threatened, has been received. There are no
judgments, orders, injunctions, decrees, stipulations or awards (whether
rendered by a court or administrative agency or by arbitration) against the
Company or against any of its properties.
3.22 TAXES.
(a) (i) The Company has timely filed or will timely file all
requisite federal, state and other Tax (as defined below) returns, reports
and forms ("Returns") for all periods ended on or before the Closing Date,
and all such Tax Returns are true, correct and complete in all respects.
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(ii) Except as set forth on Schedule 3.22, there are no examinations in
progress or claims against the Company for Taxes for any period or periods and
no notice of any claim for Taxes, whether pending or threatened, has been
received.
(iii) The amounts shown as accruals for Taxes on the April Balance Sheet
are sufficient for the payment of all applicable Taxes, whenever determined, for
all fiscal periods or portions thereof ended on or before that date, and such
accruals as adjusted through the Effective Time in accordance with past custom
and practice of the Company will be sufficient for the payment of all applicable
Taxes, whenever determined, for all fiscal periods or portions thereof ending on
or before the Effective Time.
(iv) The Company has a taxable year ended on December 31, in each year
commencing 1987.
(v) The Company currently utilizes the accrual method of accounting for
income Tax purposes and such method of accounting has not changed in the past
five years.
(vi) The Company has paid or has fully accrued for, and will have
withheld with respect to its employees, all federal and state income Taxes,
FICA, FUTA and other Taxes required to be withheld, whenever determined, with
respect to periods ending on or before the Closing Date.
(vii) Copies of (i) any Tax examinations, (ii) extensions of statutory
limitations for the collection or assessment of Taxes and (iii) the Returns of
the Company for the last fiscal year has been delivered to USOP.
(viii) There are (and as of immediately following the Closing there will
be) no liens, pledges, charges, claims, security interests or other encumbrances
of any sort ("Liens") on the assets of the Company relating to or attributable
to Taxes.
(ix) Neither the Company nor the Stockholders have any knowledge of any
basis for the assertion of any claim relating or attributable to Taxes which, if
adversely determined, would result in any Lien on the assets of the Company or
otherwise have an adverse effect on the Company.
(x) None of the Company's assets are treated as "tax exempt use
property" within the meaning of Section 168(h) of the Code.
(xi) As of the Effective Time, there will not be any contract,
agreement, plan or arrangement, including but not limited to the provisions
of this Agreement, covering any employee or former employee of the Company
that, individually or collectively, could give rise to the payment of any
amount that would not be deductible pursuant to Section 280G, 404 or 162 of
the Code.
(xii) The Company has not filed any consent agreement under Section
341(f) of the Code or agreed to have Section 341(f)(2) of the Code apply to any
disposition of a subsection (f) asset (as defined in Section 341(f)(4) of the
Code) owned by the Company.
(xiii) The Company is not a party to a tax sharing, tax indemnity or
allocation agreement nor does the Company owe any amount under any such
agreement.
(xiv) The Company is not, and has not been at any time, a "United States
real property holding corporation" within the meaning of Section 897(c)(2) of
the Code.
(xv) The Company's tax basis in its assets for purposes of determining
its future amortization, depreciation and other federal income tax deductions is
accurately reflected on the Company's tax books and records.
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(xvi) The Company has not been a member of an affiliated group filing a
consolidated federal income Tax Return and does not have any liability for the
Taxes of another person under Treas. Reg. ' 1.1502-6 (or any similar provision
of state, local or foreign law) as a transferee or successor, by contract or
otherwise.
(b) The Company has since June 1, 1987, been an S Corporation within
the meaning of Section 1361 of the Code.
For purposes of this Agreement, the term "Tax" shall be understood to include
any tax or similar governmental charge, impost or levy (including without
limitation income taxes, franchise taxes, transfer taxes or fees, sales taxes,
use taxes, gross receipts taxes, value added taxes, employment taxes, excise
taxes, ad valorem taxes, property taxes, withholding taxes, payroll taxes,
minimum taxes or windfall profit taxes) together with any related penalties,
fines, additions to tax or interest imposed by the United States or any state,
county, local or foreign government or subdivision or agency thereof.
3.23 GOVERNMENT CONTRACTS.
(a) Except as set forth on Schedule 3.23, the Company is not a party to
any governmental contracts.
(b) The Company has not been suspended or debarred from bidding on
contracts or subcontracts for any agency or instrumentality of the United States
Government, nor, to the knowledge of the Stockholders, has any suspension or
debarment action been threatened or commenced. There is no valid basis for the
Company's suspension or debarment from bidding on contracts or subcontracts for
any agency of the United States Government.
(c) Except as set forth in Schedule 3.23, the Company has not been, nor
is it now being, audited, or investigated by any government agency, or the
inspector general or auditor general or similar functionary of any agency or
instrumentality, nor, to the knowledge of the Stockholders, has such audit or
investigation been threatened.
(d) The Company has no dispute pending before a contracting office of,
nor any current claim (other than the Accounts Receivable) pending against, any
agency or instrumentality of the United States Government, relating to a
contract.
(e) The Company has not, with respect to any contract, received a cure
notice advising the Company that it is or was in default or would, if it failed
to take remedial action, be in default under such contract.
(f) The Company has not submitted any inaccurate, untruthful, or
misleading cost or pricing data, certification, bid, proposal, report, claim, or
any other information relating to a contract to any agency or instrumentality of
the United States Government.
(g) No employee, agent, consultant, representative, or affiliate of the
Company is in receipt or possession of any competitor or government proprietary
or procurement sensitive information related to the Company's business under
circumstances where there is reason to believe that such receipt or possession
is unlawful or unauthorized.
(h) Each of the Company's contracts has been issued, awarded or novated
to the Company in the Company's name.
3.24 ABSENCE OF CHANGES. Since the Balance Sheet Date, the Company has
conducted its business in the ordinary course and except as contemplated herein
or as set forth on Schedule 3.24, there has not been:
(a) any change that by itself or together with other changes, has had
or is likely to have a Material Adverse Effect;
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(b) any damage, destruction or loss (whether or not covered by
insurance) materially adversely affecting the properties or business of the
Company;
(c) any change in the authorized capital of the Company or in its
outstanding securities or any change in its ownership interests or any grant of
any options, warrants, calls, conversion rights or commitments;
(d) any declaration or payment of any dividend or distribution in
respect of the capital stock, including Tax Distributions (as defined in Section
5.3(c) of the Agreement), or any direct or indirect redemption, purchase or
other acquisition of any of the capital stock of the Company;
(e) any increase in the compensation, bonus, sales commissions or fee
arrangements payable or to become payable by the Company to any of its officers
directors, Stockholders, employees, consultants or agents, except for ordinary
and customary bonuses and salary increases for employees in accordance with past
practice;
(f) any work interruptions, labor grievances or claims filed, or any
similar event or condition of any character, materially adversely affecting the
business or future prospects of the Company;
(g) any sale or transfer, or any agreement to sell or transfer, any
material assets property or rights of the Company to any person, including
without limitation the Stockholders and their Affiliates (as defined in Section
5.8);
(h) any cancellation, or agreement to cancel, any indebtedness or other
obligation owing to the Company, including without limitation any indebtedness
or obligation of any Stockholders or any affiliate thereof, provided that the
Company may negotiate and adjust bills in the course of good faith disputes with
customers in a manner consistent with past practice;
(i) any plan, agreement or arrangement granting any preferential rights
to purchase or acquire any interest in any of the assets, property or rights of
the Company or requiring consent of any party to the transfer and assignment of
any such assets, property or rights;
(j) any purchase or acquisition of, or agreement, plan or arrangement
to purchase or acquire, any property, rights or assets outside of the ordinary
course of business of the Company;
(k) any waiver of any material rights or claims of the Company;
(l) any material breach, amendment or termination of any material
contract, agreement, license, permit or other right to which the Company is a
party;
(m) any transaction by the Company outside the ordinary course of
business;
(n) any capital expenditure or commitment by the Company, either
individually or in the aggregate, exceeding $10,000;
(o) any change in accounting methods or practices (including any change
in depreciation or amortization policies or rates) by the Company or the
revaluation by the Company of any of its assets;
(p) any creation or assumption by the Company of any mortgage, pledge,
security interest or lien or other encumbrance on any asset (other than liens
arising under existing lease financing arrangements which are not material and
liens for taxes not yet due and payable);
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(q) any entry into, amendment of, relinquishment, termination or non-
renewal by the Company of any contract, lease transaction, commitment or other
right or obligation requiring aggregate payments by the Company in excess of
$50,000;
(r) any loan by the Company to any person or entity, incurring by the
Company, of any indebtedness, guaranteeing by the Company of any indebtedness,
issuance or sale of any debt securities of the Company or guaranteeing of any
debt securities of others;
(s) the commencement or notice or, to the knowledge of the
Stockholders, threat of commencement of any lawsuit or proceeding against or
investigation of the Company or any of its affairs; or
(t) negotiation or agreement by the Company or any officer or employee
thereof to do any of the things described in the preceding clauses (a) through
(s) (other than negotiations with USOP and its representatives regarding the
transactions contemplated by this Agreement).
3.25 BANK ACCOUNTS; POWERS OF ATTORNEY. Schedule 3.25 sets forth an
accurate list as of the date of this Agreement, of:
(a) the name of each financial institution in which the Company has any
account or safe deposit box;
(b) the names in which the accounts or boxes are held;
(c) the type of account; and
(d) the name of each person authorized to draw thereon or have access
thereto.
Schedule 3.25 also sets forth the name of each person, corporation, firm or
other entity holding a general or special power of attorney from the Company and
a description of the terms of such power.
3.26 RELATIONS WITH GOVERNMENTS. The Company has not made, offered or
agreed to offer anything of value to any governmental official, political party
or candidate for government office nor has it otherwise taken any action that
would cause the Company to be in violation of the Foreign Corrupt Practices Act
of 1977, as amended, or any law of similar effect.
3.27 DISCLOSURE. All written agreements, lists, schedules, instruments,
exhibits, documents, certificates, reports, statements and other writings
furnished to USOP or Newco pursuant hereto or in connection with this Agreement
or the transactions contemplated hereby, are and will be complete and accurate
in all material respects. No representation or warranty by the Stockholders and
the Company contained in this Agreement, in the schedules attached hereto or in
any certificate furnished or to be furnished by the Stockholders or the Company
to USOP or Newco in connection herewith or pursuant hereto contains or will
contain any untrue statement of a material fact or omits or will omit to state
any material fact necessary in order to make any statement contained herein or
therein not misleading. There is no fact known to either Stockholder that has
specific application to either Stockholder or the Company (other than general
economic or industry conditions) and that materially adversely affects or, as
far as either Stockholder can reasonably foresee, materially threatens, the
assets, business, prospects, financial condition, or results of operations of
the Company that has not been set forth in this Agreement or any Schedule
hereto.
3.28 POOLING REPRESENTATION LETTER. The Stockholders have delivered to
Price Waterhouse LLP a pooling representation letter substantially in the form
of Annex VI.
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3.29 USOP PROSPECTUS; SECURITIES REPRESENTATIONS. Each Stockholder has
received and reviewed a copy of the prospectus dated March 28, 1996 including
all supplements thereto (as supplemented, "USOP Prospectus") contained in USOP's
shelf registration statement on Form S-4. Each Stockholder (a) has such
knowledge, sophistication and experience in business and financial matters that
they are capable of evaluating the merits and risks of an investment in the
shares of USOP Common Stock, (b) fully understands the nature, scope, and
duration of the limitations on transfer contained in this Agreement, and (c) can
bear the economic risk of any investment in the shares of USOP Common Stock and
can afford a complete loss of such investment. Each Stockholder has had an
adequate opportunity to ask questions and receive answers (and has asked such
questions and received answers to its satisfaction) from the officers of USOP
concerning the business, operations and financial condition of USOP. Neither
Stockholder has any contract, undertaking, agreement or arrangement, written or
oral, with any other person to sell, transfer or grant participation in any
shares of USOP Common Stock to be acquired by such Stockholder in the Merger.
Each Stockholder acknowledges and agrees that USOP will not provide such
Stockholder with a prospectus for such Stockholder's use in selling USOP Common
Stock.
3.30 ABSENCE OF CLAIMS AGAINST COMPANY. Neither Stockholder has any
claims against the Company.
3.31 COMPLETE COPIES OF MATERIALS. The Company has delivered to USOP and
Newco true and complete copies of each agreement, contract, commitment or other
document (or summaries of same) that is referred to in the Company Schedules or
that has been requested by USOP and Newco or its counsel.
3.32 COMPANY FINANCIAL CONDITIONS. As of the Closing:
(a) the Company's net worth as of the last day of its most recent
fiscal year, and the Company's net worth as of the Closing Date, are not less
than $7,000,000;
(b) the Company's sales for the most recent fiscal year, and the
Company's sales for the 12-month period ending as of the last day of the month
immediately preceding the Closing Date, are not less than $28,000,000;
(c) the Company's earnings before interest and taxes for the most
recent fiscal year, and the Company's earnings before interest and taxes for the
12-month period ending as of the last day of the month immediately preceding the
Closing Date, are not less than ten percent (10%) of sales for the respective
period; and
(d) long-term debt as of the Closing Date is less than $250,000.
3.33 INTELLECTUAL PROPERTY.
(a) The Company (i) owns or (ii) possesses adequate, enforceable and
transferable long-term licenses or other rights to use, without payment, all
copyrights, patents, trade names, trade secrets, trademarks, franchises and
similar rights now used or employed in the Company's business (the "Intellectual
Property"), including without limitation the trademarks, tradenames, and service
marks set forth on Schedule 3.33(a). The Company has taken all actions
necessary to record, preserve and protect such licenses or other rights.
(b) No claim adverse to the interests of the Company in the
Intellectual Property has been made in litigation or other proceedings to which
the Company is a party or about which the Company has received written notice.
No such claim has been threatened or asserted and no person has infringed or
otherwise violated the Company's rights in any of the Intellectual Property.
3.34 NO PRESENT PLAN OR INTENTION TO SELL. The Stockholders have no
present plan or intention to sell, exchange, or otherwise dispose of a number of
shares of USOP Common Stock received in the Merger that would reduce their
aggregate ownership of the USOP Common Stock received in the Merger to a number
of shares having
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a value, computed as of the date of the Merger, of less than 50% of the value of
all of the formerly outstanding Common Stock as of the same date.
4. REPRESENTATIONS OF USOP AND NEWCO
To induce the Company and the Stockholders to enter into this Agreement and
consummate the transactions contemplated hereby, each of USOP and Newco
represents and warrants to the Company and the Stockholders as follows:
4.1 DUE ORGANIZATION. Each of USOP and Newco is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, and each is duly authorized and qualified to do business under all
applicable laws, regulations, ordinances and orders of public authorities to
carry on their respective businesses in the places and in the manner as now
conducted except for where the failure to be so authorized or qualified would
not have a material adverse effect on the business, operations, affairs,
prospects, properties, assets, profits, or condition (financial or otherwise) of
USOP and its subsidiaries, taken as a whole (a "USOP Material Adverse Effect").
Copies of the Certificate of Incorporation and the Bylaws, each as amended, of
USOP and Newco (collectively, the "USOP Charter Documents") have been delivered
to the Company. Neither USOP nor Newco is in violation of any USOP Charter
Document.
4.2 USOP COMMON STOCK. The USOP Common Stock to be delivered pursuant
to this Agreement to the Stockholders at the Closing Date will be duly
authorized, validly issued shares of Common Stock of USOP, fully paid and
nonassessable. Except as provided in this Agreement and any Affiliate Agreements
executed in connection with this Agreement, there are no contractual
restrictions or limitations on the transferability of the USOP Common Stock.
4.3 AUTHORIZATION; VALIDITY OF OBLIGATIONS. The representatives of USOP
and Newco executing this Agreement have all requisite corporate power and
authority to enter into and bind USOP and Newco to the terms of this Agreement,
USOP and Newco have the full legal right, power and corporate authority to enter
into this Agreement and the transactions contemplated hereby. The execution and
delivery of this Agreement by USOP and Newco and the performance by each of USOP
and Newco of the transactions contemplated herein have been duly and validly
authorized by the respective Boards of Directors of USOP and Newco, and this
Agreement has been duly and validly authorized by all necessary corporate
action. This Agreement is a legal, valid and binding obligation of each of USOP
and Newco enforceable in accordance with its terms.
4.4 NO CONFLICTS. The execution, delivery and performance of this
Agreement, the consummation of the transactions herein contemplated here by and
the fulfillment of the terms hereof will not:
(a) conflict with, or result in a breach or violation of the USOP
Charter Documents;
(b) other than such as would not, individually or in the aggregate have
a USOP Material Adverse Effect, conflict with, or result in a default (or would
constitute a default but for and requirement of notice or lapse of time or both)
under any document, agreement or other instrument to which either USOP or Newco
is a party, or result in the creation or imposition of any lien, charge or
encumbrance on any of USOP's or Newco's properties pursuant to (i) any law or
regulation to which either USOP or Newco or any of their respective property is
subject, or (ii) any judgment, order or decree to which USOP or Newco is bound
or any of their respective property is subject;
(c) result in termination or any impairment of any material permit,
license, franchise, contractual right or other authorization of USOP or Newco
("USOP Third Party Consents"); or
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(d) violate any law, order, judgment, rule, regulation, decree or
ordinance to which USOP or Newco is subject or by which USOP or Newco is bound
(including without limitation the HSR Act, together with all rules and
regulations promulgated thereunder).
4.5 CAPITALIZATION OF USOP AND OWNERSHIP OF USOP STOCK. The authorized
capital stock of USOP consists of 100,000,000 shares of Common Stock and 500,000
shares of Preferred Stock. 34,984,697 shares of USOP Common Stock and no shares
of Preferred Stock were outstanding on July 24, 1996. The authorized capital
stock of Newco consists of 1,000 shares of Common Stock, of which 100 shares are
outstanding. All of the issued and outstanding shares of Newco are owned
beneficially, and of record by USOP. All of the shares of USOP Common Stock to
be issued to the Stockholders in accordance herewith will be offered, issued,
sold and delivered by USOP in compliance with all applicable state and federal
laws concerning the issuance of securities and none of such shares was or will
be issued in violation of the preemptive rights of any stockholder of USOP.
4.6 POOLING LETTER. USOP has received a letter from Price Waterhouse
LLP, its independent accountants, stating their concurrence as to the
appropriateness of USOP, Newco and the transactions contemplated by this
Agreement all qualifying for pooling of interests accounting treatment in
accordance with GAAP.
4.7 CONFORMITY WITH LAW; LITIGATION. Neither USOP nor Newco has
violated any law or regulation or any order of any court or federal, state,
municipal or other governmental department, commission, board, bureau, agency or
instrumentality having jurisdiction over either of them which would have a USOP
Material Adverse Effect. There are no claims, actions, suits or proceedings,
pending or, to the knowledge of USOP and Newco, threatened against or affecting
USOP or Newco at law or in equity, or before any federal, state, municipal or
other governmental department, commission, board, bureau, agency or
instrumentality having jurisdiction over either of them that would have a USOP
Material Adverse Effect and no notice of any such claim, action, suit or
proceeding, whether pending or threatened, has been received. There are no
judgments, orders, injunctions, decrees, stipulations or awards (whether
rendered by a court or administrative agency or by arbitration) against USOP or
Newco or against any of the properties of either of them which would have a USOP
Material Adverse Effect.
4.8 USOP PROSPECTUS. The USOP Prospectus, in the form delivered to the
Stockholders pursuant to Section 3.29 hereof does not, at the date thereof or,
as amended or supplemented through the Closing Date, will not at the Closing
Date, 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 the light or the circumstances under which they were
made, not misleading.
4.9 DISCLOSURE. No representation or warranty by USOP and Newco
contained in this Agreement or in any certificate furnished or to be furnished
by USOP or Newco to the Stockholders or the Company in connection herewith or
pursuant hereto contains or will contain any untrue statement of a material fact
or omits to state any material fact required o make the statements herein or
therein contained not misleading.
5. COVENANTS
5.1 ACCESS TO INFORMATION; CONFIDENTIALITY.
(a) Between the date of this Agreement and the Closing Date, the
Company will afford to the officers and authorized representatives of USOP
access to (a) all of the sites, properties, books and records of the Company and
(b) such additional financial and operating data and other information as to the
business and properties of the Company as USOP may from time to time reasonably
request, including without limitation, access upon reasonable request to the
Company's employees, customers, vendors, suppliers and creditors for due
diligence inquiry. The Stockholders and the Company will cooperate with USOP,
its representatives, auditors and counsel in the preparation of any documents or
other material which may be required in connection with this Agreement. No
information or knowledge obtained in any investigation pursuant to this Section
5.1 shall affect or be deemed to
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modify any representation or warranty contained in this Agreement or the
conditions to the obligations of the parties to consummate the Merger.
(b) Each of the Stockholders recognizes and acknowledges that he or she
has in the past, currently has, and in the future may possibly have, access to
certain confidential information of the Company's and USOP, such as lists of
customers, operational policies, and pricing and cost policies that are
valuable, special and unique assets of the Company and USOP's respective
businesses. Each of the Stockholders agrees that he or she will not disclose
confidential information with respect to the Company or USOP or its subsidiaries
to any person, firm, corporation, association or other entity for any purpose or
reason whatsoever, except to authorized representatives of USOP and to counsel
and other advisers, PROVIDED that such advisers (other than counsel) agree to
the confidentiality provisions of this Section 5.1(b), unless (i) such
information becomes known to the public generally through no fault of either
Stockholder, (ii) disclosure is required by law or the order of any governmental
authority under color of law, or (iii) the disclosing party reasonably believes
that such disclosure is required in connection with the defense of a lawsuit
against the disclosing party, PROVIDED, that prior to disclosing any information
pursuant to clause (i), (ii) or (iii) above, the Stockholder (as applicable)
shall, if possible, give prior written notice thereof to USOP and provide USOP
with the opportunity to contest such disclosure and shall cooperate with efforts
to prevent such disclosure.
(c) Each of USOP and Newco recognizes and acknowledges that it had in the
past, currently has, and in the future may possibly have, access to certain
confidential information of the Company, such as lists of customers, operational
policies, and pricing and cost policies that are valuable, special and unique
assets of the Company's business. Each of USOP and Newco agree that, unless
there is a Closing, they will not disclose confidential information with respect
to the Company to any person, firm, corporation, association or other entity for
any purpose or reason whatsoever, except to authorized representatives of the
Company and to counsel and other advisers, PROVIDED that such advisers (other
than counsel) agree to the confidentiality provisions of this Section 5.1(c),
unless (i) such information becomes known to the public generally through no
fault of USOP or Newco, (ii) disclosure is required by law or the order of any
governmental authority under color of law, or (iii) the disclosing party
reasonably believes that such disclosure is required in connection with the
defense of a lawsuit against the disclosing party, PROVIDED, that prior to
disclosing any information pursuant to clause (i), (ii) or (iii) above, USOP
shall, if possible, give prior written notice thereof to the Company and provide
the Company with the opportunity to contest such disclosure and shall cooperate
with efforts to prevent such disclosure.
5.2 CONDUCT OF BUSINESS PENDING CLOSING. Between the date hereof and the
Effective Time, the Company will:
(a) carry on its business in substantially the same manner as it has
heretofore and not introduce any material new method of management, operation or
accounting;
(b) maintain its properties and facilities, including those held under
leases, in as good working order and condition as at present, ordinary wear and
tear excepted;
(c) perform all of its obligations under agreements relating to or
affecting its respective assets, properties or rights;
(d) keep in full force and effect present insurance policies or other
comparable insurance coverage;
(e) use all commercially reasonable efforts to maintain and preserve its
business organization intact, retain its present officers and key employees and
maintain its relationships with suppliers, vendors, customers, creditors and
others having business relations with it;
(f) maintain compliance with all permits, laws, rules and regulations,
consent orders, and all other orders of applicable courts, regulatory agencies
and similar governmental authorities;
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(g) maintain present debt and lease instruments and not enter into new or
amended debt or lease instruments; and
(h) maintain present salaries and commission levels for all officers,
directors, employees, agents, representatives and independent contractors,
except for ordinary and customary bonuses and salary increases for employees
(other than employees who are also Stockholders) in accordance with past
practice.
5.3 PROHIBITED ACTIVITIES. Between the date hereof and the Effective Time,
the Company will not, without the prior written consent of USOP:
(a) make any change in its Articles of Incorporation or Bylaws, or
authorize or propose the same;
(b) issue, deliver or sell, authorize or propose the issuance, delivery or
sale of any securities, options, warrants, calls, conversion rights or
commitments relating to its securities of any kind, or authorize or propose any
change in its equity capitalization, or issue or authorize the issuance of any
debt securities;
(c) declare or pay any dividend, or make any distribution (whether in
cash, stock or property) in respect of its stock whether now or hereafter
outstanding, or split, combine or reclassify any of its capital stock or issue
or authorize the issuance of any other securities in respect of, in lieu of or
in substitution for shares of its capital stock, or purchase, redeem or
otherwise acquire or retire for value any shares of its stock (provided that the
Company may make a dividend distribution to the Stockholders prior to the
Closing in an amount necessary to cover the Stockholders' state and federal
income tax obligations associated with their deemed income by virtue of their
position as stockholders of the Company for the period commencing January 1,
1996 through the Closing Date (exclusive of any amounts distributed prior to the
date of this Agreement to the Stockholders to cover such tax obligations) (the
"Tax Distribution"));
(d) enter into any contract or commitment or incur or agree to incur any
liability or make any capital expenditures, or guarantee any indebtedness,
except in the ordinary course of business (consistent with past practice) in an
amount in excess of $10,000, including contracts to provide services to
customers;
(e) increase the compensation payable or to become payable to any officer,
director, Stockholder, employee, agent, representative or independent
contractor; make any bonus or management fee payment to any such person; make
any loans or advances; adopt or amend any Company Plan or Company Benefit
Arrangement; or grant any severance or termination pay;
(f) create or assume any mortgage, pledge or other lien or encumbrance
upon any assets or properties whether now owned or hereafter acquired;
(g) sell, assign, lease, pledge or otherwise transfer or dispose of any
property or equipment except in the ordinary course of business consistent with
past practice;
(h) acquire or negotiate for the acquisition of (by merger, consolidation,
purchase of a substantial portion of assets or otherwise) any business or the
start-up of any new business, or otherwise acquire or agree to acquire any
assets that are material, individually or in the aggregate, to the Company;
(i) merge or consolidate or agree to merge or consolidate with or into any
other corporation;
(j) waive any material rights or claims of the Company, provided that the
Company may negotiate and adjust bills in the course of good faith disputes with
customers in a manner consistent with past practice;
(k) commit a breach of or amend or terminate any material agreement,
permit, license or other right;
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(l) enter into any other transaction (i) that is not negotiated at arm's
length with a third party not affiliated with the Company or any officer,
director or Stockholder of the Company or (ii) outside the ordinary course of
business consistent with past practice or (iii) prohibited hereunder;
(m) commence a lawsuit other than for routine collection of bills;
(n) revalue any of its assets, including without limitation, writing down
the value of inventory or writing off notes or accounts receivable other than in
the ordinary course of business consistent with past practice;
(o) make any tax election other than in the ordinary course of business
and consistent with past practice, change any tax election, adopt any tax
accounting method other than in the ordinary course of business and consistent
with past practice, change any tax accounting method, file any tax return (other
than any estimated tax returns, payroll tax returns or sale tax returns) or any
amendment to a tax return, enter into any closing agreement, settle any tax
claim or assessment, or consent to any tax claim or assessment, without the
prior written consent of USOP; or
(p) take, or agree (in writing or otherwise) to take, any of the actions
described in Sections 5.3(a) through (o) above, or any action which would make
any of the representations and warranties of the Company and the Stockholders
contained in this Agreement untrue or result in any of the conditions set forth
in Sections 6 and 7 not being satisfied.
5.4 EXCLUSIVITY. None of the Stockholders, the Company, or any agent,
officer, director or any representative of the Company or any Stockholder will,
during the period commencing on the date of this Agreement and ending with the
earlier to occur of the Closing or the termination of this Agreement in
accordance with its terms, directly or indirectly: (a) solicit, encourage or
initiate the submission of proposals or offers from any person for, (b)
participate in any discussions pertaining to, or (c) furnish any information to
any person other than USOP relating to, any acquisition or purchase of all or a
material amount of the assets of, or any equity interest in, the Company or a
merger, consolidation or business combination of the Company. In addition to the
foregoing, if the Company or any Stockholder receives any unsolicited offer or
proposal, or has actual knowledge of any unsolicited offer or proposal, relating
to any of the above, the Company or such Stockholder shall immediately notify
USOP thereof, including the identity of the party making such offer or proposal
and the specific terms of such offer or proposal.
5.5 RESERVED.
5.6 NOTIFICATION OF CERTAIN MATTERS. Each party hereto shall give prompt
notice to the other parties hereto of (a) the occurrence or non-occurrence of
any event the occurrence or non-occurrence of which would be likely to cause any
representation or warranty of it contained herein to be untrue or inaccurate in
any material respect at or prior to the Closing and (b) any material failure of
such party to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by such party hereunder. The delivery of any notice
pursuant to this Section 5.6 shall not, without the express written consent of
the other parties be deemed to (x) modify the representations or warranties
hereunder of the party delivering such notice, (y) modify the conditions set
forth in Sections 6 and 7, or (z) limit or otherwise affect the remedies
available hereunder to the party receiving such notice.
5.7 COOPERATION IN OBTAINING REQUIRED CONSENTS AND APPROVALS. Each party
hereto shall cooperate in obtaining all consents and approvals required by
Section 6.5 (which shall nonetheless continue to be the responsibility of the
Stockholders and the Company), including without limitation Company Third Party
Consents set forth on Schedule 3.16, and Section 7.4 (which shall nonetheless
continue to be the responsibility of USOP), including without limitation USOP
Third Party Consents. In connection therewith, if required, the Company, the
Stockholders and USOP shall file all notices and other information and documents
required under the HSR Act (as defined in Section 5.13) as promptly as
practicable after the date hereof.
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5.8 AFFILIATE AGREEMENTS. The Stockholders are the only persons who are,
in the reasonable judgment of the Company and each of the Stockholders,
affiliates of the Company within the meaning of Rule 145 (each such person an
"Affiliate") promulgated under the Securities Act of 1933, as amended ("Rule
145"). Each of the Stockholders has executed an Affiliate Agreement in the form
attached as Annex III. USOP and Newco shall be entitled to place appropriate
legends on the certificates evidencing any USOP Common Stock to be received by
such Affiliates pursuant to the terms of this Agreement, and to issue
appropriate stop transfer instructions to the transfer agent for USOP Common
Stock, consistent with the terms of such Affiliate Agreements.
5.9 POOLING ACCOUNTING. USOP, the Stockholders and the Company shall each
use commercially reasonable efforts to cause the business combination to be
effected by the Merger to be accounted for as a pooling of interests. Each of
USOP, the Stockholders and the Company shall use commercially reasonable efforts
to cause its Affiliates not to take any action that would adversely affect the
ability of USOP to account for the business combination to be effected by the
Merger as a pooling of interests.
5.10 TAX RETURNS. The Stockholders shall timely file or cause to be
filed all federal and state Tax Returns of the Company for taxable periods
ending on or prior to the Effective Time and have paid or will pay all Taxes
(as defined in Section 3.22) attributable to such periods. Such returns will
be prepared and filed in accordance with applicable law and in a manner
consistent with past practices and shall be subject to review and approval by
USOP. After the Effective Time, USOP and the Company, on the one hand, and
the Stockholders, on the other hand, will make available to the other, as
reasonably requested, all information, records or documents in their
possession or control relating to the liability for Taxes of the Company for
all periods prior to or including the Effective Time and will preserve such
information, records or documents until the expiration of any applicable
statute of limitations or extensions thereof.
5.11 FIRPTA COMPLIANCE. On the Closing Date, the Company shall
deliver to USOP a properly executed statement in a form reasonably acceptable
to USOP for purposes of satisfying USOP's obligations under Treas. Reg. Sec.
1.1445-2(c)(3).
5.12 TAX DISTRIBUTION. The balance sheet of the Company as of the
Closing Date will reflect an accrual for the estimated Tax Distribution, if
any, through such date (the "Accrued Amount"). The parties agree that
following the Closing Date, the Company shall pay to the Stockholders the Tax
Distribution (exclusive of any amounts previously paid as a Tax Distribution)
up to a maximum amount equal to the Accrued Amount.
5.13 HSR. The Stockholders and USOP shall promptly file, or cause to
be filed, with the Department of Justice and the Federal Trade Commission the
Notification and Report Form (if any) required of such party by the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act") and the
rules and regulations of the Federal Trade Commission promulgated thereunder
with respect to the transactions contemplated hereby.
5.14 OPTIONS. An amount of options shall be made available for
allocation to key employees by the Company's president in an amount not to
exceed six and one-quarter percent (6.25%) of the total number of shares of
USOP Common Stock issued in the transaction.
5.15 RESERVED.
5.16 CREDIT AGREEMENTS, GUARANTEES. Within ninety (90) days of the
date hereof, the Stockholders will terminate any and all agreements or
guarantees described in Section 3.16(f), unless this covenant is waived by
USOP.
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6. CONDITIONS PRECEDENT TO OBLIGATIONS OF USOP AND NEWCO
The obligation of USOP and Newco to effect the Merger is subject to the
satisfaction or waiver, at or before the Effective Time, of the following
conditions:
6.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS. All of the
representations and warranties of the Stockholders and the Company contained in
this Agreement shall be true, correct and complete on and as of the Closing Date
with the same effect as though such representations and warranties had been made
on and as of such date; all of the terms, covenants, agreements and conditions
of this Agreement to be complied with, performed or satisfied by the Company and
the Stockholders on or before the Closing Date shall have been duly complied
with, performed or satisfied; and a certificate to the foregoing effects dated
the Closing Date and signed on behalf of the Company and by each of the
Stockholders shall have been delivered to USOP.
6.2 NO LITIGATION. No temporary restraining order, preliminary or
permanent injunction or other order issued by any court of competent
jurisdiction or other legal or regulatory restraint or provision challenging
USOP's proposed acquisition of the Company, or limiting or restricting USOP's
conduct or operation of the business of the Company (or its own business)
following the Merger shall be in effect, nor shall any proceeding brought by an
administrative agency or commission or other governmental authority or
instrumentality, domestic or foreign, seeking any of the foregoing be pending.
There shall be no action, suit claim or proceeding of any nature pending or
threatened against USOP, Newco or the Company, their respective properties or
any of their officers or directors, that could materially and adversely affect
the business, assets, liabilities, financial condition, results of operations or
prospects of the Company.
6.3 EMPLOYMENT AGREEMENTS. Vassilios Sirpolaidis shall have entered into
an employment agreement with the Company substantially in the form attached as
Annex IV.A. Lynne Sirpolaidis shall have entered into an employment agreement
with the Company substantially in the form attached as Annex IV.B.
6.4 OPINION OF COUNSEL. USOP shall have received an opinion from counsel
to the Company and the Stockholders, dated the Closing Date, in the form
attached as Annex V.
6.5 CONSENTS AND APPROVALS. All necessary consents of and filings with any
governmental authority or agency or third party (with respect to Material
Contracts, as defined in Section 3.16, and including without limitation any
Company Third Party Consents), relating to the consummation by the Company and
the Stockholders of the transactions contemplated hereby shall have been
obtained and made.
6.6 CHARTER DOCUMENTS. The Company shall have delivered to USOP (a) a copy
of the Articles of Incorporation of the Company certified by an appropriate
authority in the state of its incorporation and (b) a copy of the Bylaws of the
Company certified by the Secretary of the Company, and such documents shall be
in form and substance reasonably acceptable to USOP and its counsel.
6.7 INSURANCE. The Company shall have delivered to USOP evidence that USOP
has been added as an additional named insured on all liability insurance
policies of the Company.
6.8 ACCOUNTANT'S LETTER WITH RESPECT TO POOLING OF INTEREST ACCOUNTING
TREATMENT. USOP shall have received a letter from Price Waterhouse LLP stating
its concurrence, as of the Closing Date, as to the appropriateness of USOP,
Newco and the transactions contemplated by this Agreement qualifying for pooling
of interests accounting treatment in accordance with GAAP.
6.9 DUE DILIGENCE REVIEW. USOP shall be fully satisfied in its sole
discretion with the results of its review of, and its other due diligence
investigations with respect to, the business, operations, affairs, prospects,
properties, assets, existing and potential liabilities, obligations, profits and
condition (financial or otherwise) of the Company.
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6.10 EMPLOYEE BENEFIT PLANS. If reasonably requested by USOP, the
Company will terminate any Company Plan or Company Benefit Arrangement
substantially contemporaneously with the Closing.
6.11 NO MATERIAL ADVERSE CHANGE. There have been no Material Adverse
Effects and no material adverse changes in the business, operations, affairs,
prospects, properties, assets, existing and potential liabilities, obligations,
profits or condition (financial or otherwise) of the Company shall have occurred
since the Balance Sheet Date; and USOP shall have received a certificate signed
on behalf of the Company and by the Stockholders dated the Closing Date to such
effect.
6.12 AFFILIATE AGREEMENTS. USOP shall have received from each of the
Affiliates of the Company an executed Affiliate Agreement which shall be in full
force and effect.
6.13 S CORPORATION STATUS. The Company shall have maintained its
status as an S Corporation for federal and state income tax purposes.
6.14 DELIVERY OF CLOSING FINANCIAL CERTIFICATE. USOP shall have
received a certificate (the "Closing Financial Certificate"), dated as of the
Closing Date, signed on behalf of the Company and by each of the
Stockholders, setting forth:
(a) the net worth of the Company as of the last day of its most recent
fiscal year (the "Certified Year-End Net Worth");
(b) the net worth of the Company as of the Closing Date (the "Certified
Closing Net Worth");
(c) the sales of the Company for the most recent fiscal year preceding
the Closing Date (the "Certified Year-End Sales");
(d) the sales of the Company for the twelve-month period ending as of
the last day of the month immediately preceding the Closing Date (the
"Certified Closing Sales");
(e) the earnings of the Company before interest and taxes (net of
"add-backs" agreed upon between USOP and the Stockholders prior to the date
of this Agreement) for the most recent fiscal year preceding the Closing Date
(the "Certified Year-End Profits");
(f) the earnings of the Company before interest and taxes (net of
"add-backs" agreed upon between USOP and the Stockholders prior to the date
of this Agreement) for the twelve-month period ending as of the last day of
the month immediately preceding the Closing Date (the "Certified Closing
Profits"); and
(g) the Company's long-term debt (including current portion) as of the
Closing Date (the "Certified Closing Long-Term Debt").
The parties acknowledge and agree that for purposes of determining the
Certified Closing Net Worth and the Certified Closing Profits, the Company
shall take into account all Tax Distributions, but shall exclude any increase
in intangible assets (including without limitation goodwill, franchises and
intellectual property) accounted for after May 31, 1996.
6.15 HSR. Any waiting period applicable to the consummation of the Merger
under the HSR Act shall have expired or been terminated, and no action shall
have been instituted by the Department of Justice or Federal Trade Commission
and not withdrawn or terminated that challenges or seeks to enjoin the
consummation of the transactions contemplated hereby.
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6.16 RELATED PARTY AGREEMENTS. USOP shall have received sufficient
evidence that any Material Contracts to which any Affiliate of the Company is
a party or any officer, director or Stockholder of the Company is a party,
which USOP requests the Company or Stockholders to terminate, have in fact
been terminated at no cost or expense to the Company without the express
prior written approval of USOP.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE STOCKHOLDERS AND THE
COMPANY
The obligation of the Stockholders and the Company to effect the Merger are
subject to the satisfaction or waiver, at or before the Effective Time, of
the following conditions:
7.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS. All of
the representations and warranties of USOP and Newco contained in this
Agreement shall be true, correct and complete on and as of the Closing Date
with the same effect as though such representations and warranties had been
made as of such date; all of the terms, covenants, agreements and conditions
of this Agreement to be complied with, performed or satisfied by USOP and
Newco on or before the Closing Date shall have been duly complied with,
performed or satisfied; and a certificate to the foregoing effects dated the
Closing Date and signed by the President or any Vice President of USOP shall
have been delivered to the Company and the Stockholders.
7.2 NO LITIGATION. No temporary restraining order, preliminary or
permanent injunction or other order issued by any court of competent
jurisdiction or other legal or regulatory restraint or provision challenging
USOP's proposed acquisition of the Company, or limiting or restricting USOP's
conduct or operation of the business of the Company (or its own business)
following the Merger shall be in effect, nor shall any proceeding brought by
an administrative agency or commission or other governmental authority or
instrumentality, domestic or foreign, seeking any of the foregoing be
pending. There shall be no action, suit, claim or proceeding of any nature
pending or threatened, against USOP, Newco or the Company, their respective
properties or any of their officers or directors, that could materially and
adversely affect the business, assets, liabilities, financial condition,
results of operations or prospects of the USOP and its subsidiaries taken as
a whole.
7.3 EMPLOYMENT AGREEMENTS. The Company shall have afforded (a) Vassilios
Sirpolaidis an opportunity to enter into an employment agreement
substantially in the form of Annex IV.A, and (b) Lynne Sirpolaidis an
opportunity to enter into an employment agreement substantially in the form
of Annex IV.B.
7.4 CONSENTS AND APPROVALS. All necessary consents of and filings with
any governmental authority or agency or third party relating to the
consummation by USOP and Newco of the transactions contemplated herein shall
have been obtained and made.
7.5 RESERVED.
7.6 NO MATERIAL ADVERSE CHANGE. There have been no USOP Material Adverse
Effects and no material adverse changes in the business, operations, affairs,
prospects, properties, assets, existing and potential liabilities,
obligations, profits or condition (financial or otherwise) of USOP and its
subsidiaries, taken as a whole, shall have occurred since the date of the
latest supplement to the USOP Prospectus received by the Stockholders; and
the Stockholders shall have received a certificate signed on behalf of USOP
dated the Closing Date to such effect.
7.7 HSR. Any waiting period applicable to the consummation of the Merger
under the HSR Act shall have expired or been terminated, and no action shall
have been instituted by the Department of Justice or Federal Trade Commission
and not withdrawn or terminated that challenges or seeks to enjoin the
consummation of the transactions contemplated hereby.
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8. INDEMNIFICATION
8.1 GENERAL INDEMNIFICATION BY THE STOCKHOLDERS. Each Stockholder,
jointly and severally, covenants and agrees to indemnify, defend, protect and
hold harmless USOP, Newco and the Surviving Corporation and their respective
officers, directors, employees, stockholders, assigns, successors and
affiliates (individually, a "USOP Indemnified Party" and collectively, "USOP
Indemnified Parties") from, against and in respect of:
(a) all liabilities, losses, claims, damages, punitive damages, causes
of action, lawsuits, administrative proceedings (including informal
proceedings), investigations, audits, demands, assessments, adjustments,
judgments, settlement payments, deficiencies, penalties, fines, interest
(including interest from the date of such damages) and costs and expenses
(including without limitation reasonable attorneys' fees and disbursements of
every kind, nature and description) (collectively, "Damages") suffered,
sustained, incurred or paid by the USOP Indemnified Parties in connection
with, resulting from or arising out of, directly or indirectly:
(i) any breach of any representation or warranty of the Stockholders or
the Company set forth in this Agreement or any schedule or certificate,
delivered by or on behalf of any Stockholder or the Company in connection
herewith;
(ii) any nonfulfillment of any covenant or agreement on the part of
the Stockholders or, prior to the Effective Time, the Company, in this
Agreement;
(iii) the business, operations or assets of the Company prior to the
Closing Date or the actions or omissions of the Company's directors,
officers, shareholders, employees or agents prior to the Closing Date, except
as otherwise disclosed in the Company Financial Statements, this Agreement or
the schedules to this Agreement; or
(iv) the matters disclosed on Schedule 3.1 (due organization),
Schedule 3.21 (conformity with law, litigation), the matters disclosed in
Schedule 3.14 and the potential environmental liabilities identified in
Schedule 8.1(a)(iv); or
(v) reserved; or
(vi) any amounts that, within ninety (90) days of the date hereof,
are not repaid in full to the Company under the loans or credit agreements
described in Section 3.16(f) and any amounts that the Company pays under the
guarantees described in such Section (and upon such payment, any rights of
the Company under the applicable loans, credit agreements or guarantees shall
be assigned to the Stockholders);
(b) any and all Damages incident to any of the foregoing or to the
enforcement of this Section 8.1.
8.2 LIMITATION AND EXPIRATION. Notwithstanding the above:
(a) there shall be no liability for indemnification under Section 8.1
unless, and solely to the extent that, the aggregate amount of Damages
exceeds $400,000 (the "Indemnification Threshold"), provided, however, that
the Indemnification Threshold shall not apply to (i) adjustments to the
Merger Consideration as set forth in Sections 1.3 and 1.4 or (ii) Damages
arising out of any breaches of the covenants of the Stockholders set forth in
this Agreement or matters covered by Section 3.21 (conformity with law;
litigation), Section 3.16 (significant customers; material contracts and
commitments) ;
(b) the aggregate amount of the Stockholders' liability under this
Section 8 shall not exceed the Merger Consideration, as adjusted pursuant to
Section 1.3 and Section 1.4, valued at the Average Closing Price; PROVIDED,
HOWEVER, that liability for Damages described in Section 8.1(a)(vi) shall not
be so limited and shall not count toward the limitation on liability set
forth in this Section;
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(c) the indemnification obligations under this Section 8 shall terminate
as follows: (i) with respect to claims of a nature and of sufficient
materiality typically expected to be encountered in the audit process, on the
later of (x) the date of completion of the first independent audit of
financial statements containing combined operations of USOP and the Company
(the "First Audit") or (y) the final resolution of any Claims pending on the
date of the completion of the First Audit; and (ii) with respect to all
claims other than those referred to in clause (i), on the later of (x) twelve
(12) months after the Effective Time (the "First Anniversary") or (y) the
final resolution of any and all Claims under this Agreement pending as of the
First Anniversary. The term "Indemnification Deadline Date" refers to the
dates specified in subclause (x) of clauses (i) and (ii) above, and the term
"Pending Claims" refers to the Claims referred to in subclause (y) of clauses
(i) and (ii) above. From and after the applicable Indemnification Deadline
Date, the indemnification obligations under this Section 8 shall survive only
to the extent of Pending Claims;
(d) the Indemnification Deadline Date shall not apply to the potential
environmental liabilities identified in Schedule 8.1(a)(iv) and the
liabilities described in Section 8.1(a)(vi), and the Stockholders'
indemnification obligations with respect to those matters shall survive until
the expiration of the applicable statute of limitations;
(e) for purposes of the indemnity in this Section 8, all representations
contained in Section 3 are made without any limitations as to materiality; and
(f) for purposes of this Agreement, the parties acknowledge that the
Stockholders acquired control of the Company on March 6, 1978 (the "Control
Acquisition Date"), and shall, therefore, not be liable for fraud or
intentional misrepresentation with respect to any failure to disclose
information not known to the Stockholders or within their custody and control
otherwise required to be disclosed under Sections 3.8, 3.14, 3.15 or
3.22(a)(xvi), regarding periods prior to the Control Acquisition Date.
8.3 GENERAL INDEMNIFICATION BY USOP.
(a) USOP covenants and agrees to indemnify, defend, protect and hold
harmless each Stockholder and the officers, directors, employees, assigns,
successors and affiliates of the Company and, if there shall not be a
Closing, the Company (individually, a "Stockholder Indemnified Party" and
collectively, "Stockholder Indemnified Parties") from and against:
(i) all Damages suffered, sustained, incurred or paid by the Stockholder
Indemnified Parties in connection with, resulting from or arising out of,
directly or indirectly:
(A) any breach of any representation or warranty of USOP or Newco set
forth in this Agreement or any certificate delivered by or on behalf of USOP
or Newco in connection herewith;
(B) any nonfulfillment of any covenant or agreement on the part of USOP
or Newco in this Agreement; and
(C) the loss of tax-free reorganization status for the transactions
contemplated herein as a result of (1) the failure of USOP to retain control
of the Company within the meaning of section 368(c) of the Internal Revenue
Code of 1986, as amended, (2) the reacquisition of any of the USOP Common
Stock issued in the Merger, (3) the liquidation or other merger of the
Company into another corporation, (4) the failure to continue the Company's
historic business or use of a significant portion of its historic business
assets in a business within the meaning of Treas. Reg. Sec. 1.368-1(d), or
(5) the disposition of any material part of the assets of the Company; and
(D) the business, operations or assets of the Surviving Corporation
after the Closing Date, except (1) for matters that are covered by clauses
(i) through (iii) of Section 8.1(a) hereof or (2) to the extent arising out
of the act or omission of any Stockholder; and
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(ii) any and all Damages incident to any of the foregoing or to the
enforcement of this Section 8.3.
(b) There shall be no liability for indemnification under this Section
8.3 unless, and solely to the extent that, the aggregate amount of Damages
under this Section 8.3 exceeds the Indemnification Threshold, as defined in
Section 8.2(a); provided, however, that the Indemnification Threshold shall
not apply to (i) adjustments to the Merger Consideration; and (ii) Damages
arising out of any breaches of the covenants of USOP set forth in this
Agreement or matters covered by Section 4.7 (conformity with law; litigation).
(c) The aggregate amount of USOP's liability under this Section 8.3
shall not exceed a dollar amount equal to the Merger Consideration, as
adjusted pursuant to Section 1.3 and Section 1.4, valued at the Average
Closing Price.
(d) The indemnification obligations under this Section 8.3 shall
terminate on the Indemnification Deadline Date, as defined in Section 8.2(c).
(e) For purposes of the indemnity in this Section 8, all representations
contained in Section 4 are made without any limitations as to materiality.
8.4 INDEMNIFICATION PROCEDURES. All claims for indemnification under
this Section 8 ("Claims") shall be asserted and resolved as follows:
(a) In the event that any USOP Indemnified Party or Stockholder
Indemnified Party (the "Indemnified Party") has a Claim against any party
obligated to provide indemnification pursuant to Section 8.1 or 8.3 hereof
(the "Indemnifying Party") which does not involve a Claim being asserted
against or sought to be collected by a third party, the Indemnified Party
shall with reasonable promptness send a Claim Notice with respect to such
Claim to the Stockholders' Representative or USOP, as the case may be. If
the Stockholders' Representative (if the Indemnifying Party is one or both of
the Stockholders) or USOP (if USOP is the Indemnifying Party) does not notify
the Indemnified Party within the Notice Period that the Indemnifying Party
disputes such Claim, the amount of such Claim shall be conclusively deemed a
liability of the Indemnifying Party hereunder. In case an objection is made
in writing in accordance with this Section 8.4(a), the Indemnified Party
shall have thirty (30) days to respond in a written statement to the
objection. If after such thirty (30) day period there remains a dispute as to
any Claims, the parties shall attempt in good faith for sixty (60) days to
agree upon the rights of the respective parties with respect to each of such
Claims. If the parties should so agree, a memorandum setting forth such
agreement shall be prepared and signed by both parties. The actions and
decisions of the Stockholders' Representative shall be binding upon all
Stockholders.
(b) In the event that any Claim for which the Indemnifying Party would
be liable to an Indemnified Party hereunder is asserted against an
Indemnified Party by a third party, the Indemnified Party shall with
reasonable promptness notify the Stockholders' Representative (if the
Indemnifying Party is one or both of the Stockholders) or USOP (if USOP is
the Indemnifying Party) of such Claim, specifying the nature of such claim
and the amount or the estimated amount thereof to the extent then feasible
(which estimate shall not be conclusive of the final amount of such Claim)
(the "Claim Notice"). The actions and decisions of the Stockholders'
Representative shall be binding upon all Stockholders. The Stockholders'
Representative (if the Indemnifying Party is one or both of the Stockholders)
or USOP (if USOP is the Indemnifying Party) shall have 30 days from the
receipt of the Claim Notice (the "Notice Period") to notify the Indemnified
Party (i) whether or not such party disputes the liability to the Indemnified
Party hereunder with respect to such Claim and (ii) if such party does not
dispute such liability, whether or not the Indemnifying Party desires, at the
sole cost and expense of the Indemnifying Party, to defend against such
Claim, provided that such party is hereby authorized (but not obligated)
prior to and during the Notice Period to file any motion, answer or other
pleading and to take any other action which the Indemnifying Party shall deem
necessary or appropriate to protect the Indemnifying Party's interests. In
the event that Stockholders' Representative (if the Indemnifying Party is one
or both of the Stockholders) or USOP (if USOP is the Indemnifying Party)
notifies
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the Indemnified Party within the Notice Period that the Indemnifying Party
does not dispute the Indemnifying Party's obligation to indemnify hereunder
and desires to defend the Indemnified Party against such Claim and except as
hereinafter provided, such party shall have the right to defend by
appropriate proceedings, which proceedings shall be promptly settled or
prosecuted by such party to a final conclusion, PROVIDED that, unless the
Indemnified Party otherwise agrees in writing, such party may not settle any
matter (in whole or in part) unless such settlement includes a complete and
unconditional release of the Indemnified Party. If the Indemnified Party
desires to participate in, but not control, any such defense or settlement
the Indemnified Party may do so at its sole cost and expense. If the
Stockholders' Representative (if the Indemnifying Party is one or both of the
Stockholders) or USOP (if USOP is the Indemnifying Party) elects not to
defend the Indemnified Party against such Claim, whether by failure of such
party to give the Indemnified Party timely notice as provided above or
otherwise, then the Indemnified Party, without waiving any rights against
such party, may settle or defend against any such Claim in the Indemnified
Party's sole discretion and the Indemnified Party shall be entitled to
recover from the Indemnifying Party the amount of any settlement or judgment
and, on an ongoing basis, all indemnifiable costs and expenses of the
Indemnified Party with respect thereto, including interest from the date such
costs and expenses were incurred.
(c) If at any time, in the reasonable opinion of the Indemnified Party,
notice of which shall be given in writing to the Stockholders' Representative
(if the Indemnifying Party is one or both of the Stockholders) or USOP (if
USOP is the Indemnifying Party), any such Claim seeks material prospective
relief which could have a materially adverse effect on the assets,
liabilities, financial condition, results of operations or business prospects
of any Indemnified Party, or, in the case of Section 8.1, the Surviving
Corporation or any subsidiary, the Indemnified Party shall have the right to
control or assume (as the case may be) the defense of any such Claim and the
amount of any judgment or settlement and the reasonable costs and expenses of
defense shall be included as part of the indemnification obligations of the
Indemnifying Party hereunder. If the Indemnified Party should elect to
exercise such right, the Stockholders' Representative (if the Indemnifying
Party is one or both of the Stockholders) or USOP (if USOP is the
Indemnifying Party) shall have the right to participate in, but not control,
the defense of such claim or demand at the sole cost and expense of the
Indemnifying Party.
(d) Nothing herein shall be deemed to prevent the Indemnified Party from
making a claim, and an Indemnified Party may make a claim hereunder, for
potential or contingent claims or demands provided the Claim Notice sets
forth the specific basis for any such potential or contingent claim or demand
to the extent then feasible and the Indemnified Party has reasonable grounds
to believe that such a claim or demand may be made.
(e) The Indemnified Party's failure to give reasonably prompt notice as
required by this Section 8.4 of any actual, threatened or possible claim or
demand which may give rise to a right of indemnification hereunder shall not
relieve the Indemnifying Party of any liability which the Indemnifying Party
may have to the Indemnified Party unless the failure to give such notice
materially and adversely prejudiced the Indemnifying Party.
(f) The parties will make appropriate adjustments for any Tax benefits,
Tax detriments or insurance proceeds in determining the amount of any
indemnification obligation under Section 8, PROVIDED that no Indemnifying
Party shall be obligated to seek any payment pursuant to the terms of any
insurance policy.
8.5 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. All
representations, warranties and covenants made by the Company, the
Stockholders, USOP and Newco in or pursuant to this Agreement or in any
document delivered pursuant hereto shall be deemed to have been made as of
the Closing Date, and, for purposes of asserting Claims under this Section 8,
will survive the Closing and will remain in effect until, and will expire
upon, the Indemnification Deadline Date; PROVIDED, HOWEVER, that the
indemnification obligations with respect to any Pending Claim (and the
related representations, warranties and covenants) will survive until the
final resolution of such Pending Claim.
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8.6 RIGHT TO SET OFF. USOP shall have the right, but not the obligation,
to set off, in whole or in part, amounts finally determined under Section 8.4
to be owed to USOP by the Stockholders under Section 8.1 hereof, against the
Pledged Amount.
8.7 EXCLUSIVE REMEDIES. The indemnification provided for in this Section
8 shall be the exclusive remedy in any action seeking damages or any other
form of monetary relief brought by any party to this Agreement against
another party, provided that nothing herein shall be construed to limit the
right of a party, in a proper case, to seek injunctive relief for a breach of
this Agreement or to bring an action for fraud.
9. NONCOMPETITION
9.1 PROHIBITED ACTIVITIES. No Stockholder will, for a period of four
years following the Closing Date, for any reason whatsoever, directly or
indirectly, for himself, herself or on behalf of or in conjunction with any
other person, persons, company, partnership, corporation or business of
whatever nature:
(a) engage, as an officer, director, shareholder, owner, partner, joint
venturer, or in a managerial capacity, whether as an employee, independent
contractor, consultant or advisor, or as a sales representative, in any
business selling any products or services in direct competition with USOP,
within 100 miles of anywhere where USOP conducts business as of the Closing
Date (the "Territory");
(b) call upon any person who is, at that time, within the Territory, an
employee of USOP in a managerial capacity for the purpose or with the intent
of enticing such employee away from or out of the employ of USOP;
(c) call upon any person or entity which is, at that time, or which has
been, within one year prior to that time, a customer of USOP within the
Territory for the purpose of soliciting or selling products or services in
competition with USOP within the Territory; or
(d) call upon any prospective acquisition candidate, on the
Stockholder's own behalf or on behalf of any competitor, which candidate was,
to the knowledge of such Stockholder, either called upon by USOP or for which
USOP made an acquisition analysis, for the purpose of acquiring such entity.
Each Stockholder, to the extent lacking the knowledge described in the
preceding sentence, shall immediately cease all contact with any prospective
acquisition candidate upon being informed that USOP had called upon such
candidate or made an acquisition analysis thereof.
Notwithstanding the above, the foregoing covenant shall not be deemed to
prohibit (i) either Stockholder from acquiring as an investment not more than
one percent (1%) of the capital stock of a competing business whose stock is
traded on a national securities exchange or over-the-counter; or (ii) Lynne
Sirpolaidis from directly or indirectly acting as an officer or director of,
or providing managerial or consulting assistance to, or owningshares of Town
& Country Business Products, Inc., a Minnesota corporation ("Town &
Country"); or, for a period of 90 days following the Closing Date, Vassilios
Sirpolaidis from providing managerial or consulting assistance to Town &
Country and, thereafter, from providing informal occasional advice to Lynne
Sirpolaidis concerning Town & Country. For purposes of this Section 9, the
term "USOP" includes all subsidiaries of USOP (including without limitation
the Company and any companies USOP has resolved to acquire).
9.2 CONFIDENTIALITY. Each Stockholder recognizes that by reason of his
or her ownership of the Company and his or her employment by the Company, he
or she has acquired confidential information and trade secrets concerning the
operation of the Company, the use or disclosure of which could cause the
Company or its affiliates or subsidiaries substantial loss and damages that
could not be readily calculated and for which no remedy at law would be
adequate. Accordingly, each Stockholder covenants and agrees with the Company
and USOP that he or she will not at any time, except in performance of
Stockholder's obligations to the Company or with the prior written consent of
the Company pursuant to authority granted by a resolution of the Board,
directly or indirectly,
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disclose any secret or confidential information that he or she may learn or
has learned by reason of his or her ownership of the Company or his or her
employment by the Company, or any of its subsidiaries and affiliates, or use
any such information in a manner detrimental to the interests of the Company.
The term "confidential information" includes, without limitation,
information not previously disclosed to the public or to the trade by the
Company's management with respect to the Company's, or any of its affiliates'
or subsidiaries', products, facilities, and methods, trade secrets and other
intellectual property, software, source code, systems, procedures, manuals,
confidential reports, product price lists, customer lists, financial
information (including the revenues, costs, or profits associated with any of
the Company's products), business plans, prospects, or opportunities but
shall exclude any information already in the public domain.
9.3 DAMAGES. Because of the difficulty of measuring economic losses to
USOP as a result of a breach of the foregoing covenant, and because of the
immediate and irreparable damage that could be caused to USOP for which it
would have no other adequate remedy, each Stockholder agrees that the
foregoing covenant may be enforced by USOP in the event of breach by such
Stockholder, by injunctions and restraining orders.
9.4 REASONABLE RESTRAINT. The parties agree that the foregoing covenants
in this Section 9 impose a reasonable restraint on each Stockholder in light
of the activities and business of USOP on the date of the execution of this
Agreement and the current plans of USOP; but it is also the intent of USOP
and each Stockholder that such covenants be construed and enforced in
accordance with the changing activities and business of USOP throughout the
term of this covenant. The parties further agree that so long as a
Stockholder is not an employee of the Company, in the event a Stockholder
shall enter into a business or pursue other activities not in competition
with USOP or similar activities or business in locations the operation of
which, under such circumstances, does not violate Section 9.1(a) or the terms
of any employment agreement with USOP, such Stockholder shall not be
chargeable with a violation of this Section 9 if USOP shall thereafter enter
the same, similar or a competitive (a) business, (b) course of activities or
(c) location, as applicable.
9.5 SEVERABILITY; REFORMATION. The covenants in this Section 9 are
severable and separate, and the unenforceability of any specific covenant
shall not affect the provisions of any other covenant. Moreover, in the event
any court of competent jurisdiction shall determine that the scope, time or
territorial restrictions set forth are unreasonable, then it is the intention
of the parties that such restrictions be enforced to the fullest extent which
the court deems reasonable, and the Agreement shall thereby be reformed.
9.6 INDEPENDENT COVENANT. All of the covenants in this Section 9 shall
be construed as an agreement independent of any other provision in this
Agreement, and the existence of any claim or cause of action of any
Stockholder against USOP, whether predicated on this Agreement or otherwise,
shall not constitute a defense to the enforcement by USOP of such covenants.
The parties expressly acknowledge that the terms and conditions of this
Section 9 are independent of the terms and conditions of any other
agreements. It is specifically agreed that the period of four years stated
at the beginning of this Section 9 during which the agreements and covenants
of the Stockholder made in this Section 9 shall be effective, shall be
computed by excluding from such computation any time during which the
Stockholder is found by a court of competent jurisdiction to have been in
violation of any provision of this Section 9. The covenants contained in
Section 9 shall not be affected by any breach of any other provision hereof
by any party hereto and shall have no effect if the transactions contemplated
by this Agreement are not consummated.
9.7 MATERIALITY. The Company and each Stockholder hereby agree that the
covenants set forth in this Section 9 are a material and substantial part of
the transactions contemplated by this Agreement.
10. GENERAL
10.1 ACCOUNTS RECEIVABLE. In the event that all accounts and notes
receivable of the Company as of the Closing Date are not collected in full
within 120 days after the Closing then, at the request of the Surviving
Corporation,
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the Stockholders shall pay (based on their percentage ownership of the
Company immediately prior to the Effective Time) the Surviving Corporation an
amount equal to the receivables not so collected, less an allowance for
doubtful accounts equal to $225,000, and upon receipt of such payment the
Surviving Corporation shall assign to the Stockholders making the payment all
of their rights with respect to the uncollected accounts and notes receivable
giving rise to the payment and shall also thereafter promptly remit any
excess collections received by it with respect to such assigned receivables.
If and when the amount subsequently collected by Stockholders with respect to
the assigned receivables equals (a) the payment made therefor plus (b) the
costs and expenses reasonably incurred by the Stockholders in the collection
of such assigned receivables, the Stockholders shall reassign to the
Surviving Corporation all of such assigned receivables as have not been
collected in full by the Stockholders and shall also thereafter promptly
remit any excess collections received by them. Upon the written request of
the Surviving Corporation, the Stockholders shall provide it with a status
report concerning the collection of assigned receivables.
10.2 TERMINATION. This Agreement may be terminated at any time prior
to the Closing Date solely:
(a) by mutual consent of the boards of directors of USOP and the Company;
or
(b) by the Stockholders and the Company as a group, on the one hand, or by
USOP, on the other hand, if the Closing shall not have occurred on or before
July 26, 1996; provided that the right to terminate this Agreement under this
Section 10.2(b) shall not be available to either party (with the Stockholders
and the Company deemed to be a single party for this purpose) whose material
misrepresentation, breach of warranty or failure to fulfill any obligation under
this Agreement has been the cause of, or resulted in, the failure of the
Closing to occur on or before such date; or
(c) by the Stockholders and the Company as a group, on the one hand, or by
USOP, on the other hand, if there is or has been a material breach, failure to
fulfill or default on the part of the other party (with the Stockholders and the
Company deemed to be a single party for this purpose) of any of the
representations and warranties contained herein or in the due and timely
performance and satisfaction of any of the covenants, agreements or conditions
contained herein, and the curing of such default shall not have been made or
shall not reasonably be expected to occur before the Closing Date; or
(d) by the Stockholders and the Company as a group, on the one hand, or by
USOP, on the other hand, if there shall be a final nonappealable order of a
federal or state court in effect preventing consummation of the Merger; or there
shall be any action taken, or any statute, rule regulation or order enacted,
promulgated or issued or deemed applicable to the Merger by any governmental
entity which would make the consummation of the Merger illegal.
10.3 EFFECT OF TERMINATION. In the event of the termination of this
Agreement pursuant to Section 10.2, this Agreement shall forthwith become void,
and there shall be no liability or obligation on the part of any party hereto or
its officers, directors or shareholders. Notwithstanding the foregoing sentence,
(i) the provisions of this Section 10.3 and Section 8 (indemnification), Section
5.1(b) and (c) (confidentiality) and the other provisions of Section 10
(including without limitation brokers and expenses), shall remain in full force
and effect and survive any termination of this Agreement; (ii) each party shall
remain liable for any breach of this Agreement prior to its termination; and
(iii) in the event of termination of this Agreement pursuant to Section 10.2(c)
above, then notwithstanding the provisions of Section 10.9 below, the breaching
party (with the Stockholders and the Company deemed to be a single party for
purposes of this Section 10.3), shall be liable to the other party to the extent
of the expenses incurred by such other party in connection with this Agreement
and the transactions contemplated hereby, as well as any damages in accordance
with applicable law.
10.4 COOPERATION. The Company, Stockholders, USOP and Newco shall each
deliver or cause to be delivered to the other on the Closing Date, and at such
other times and places as shall be reasonably agreed to, such additional
instruments as the other may reasonably request for the purpose of carrying out
this Agreement. In connection therewith, if required, the president or chief
financial officer of the Company will execute any documentation
34
<PAGE>
reasonably required by USOP's independent public accountants (in connection with
such accountant's audit of the Company) or the Nasdaq National Market. The
Stockholders and the Company will also cooperate and use their reasonable
efforts to have the present officers, directors and employees of the Company
cooperate with USOP on and after the Closing Date in furnishing information,
evidence, testimony and other assistance in connection with any Tax Return
filing obligations, actions, proceedings, arrangements or disputes of any nature
with respect to matters pertaining to all periods prior to the Closing Date.
10.5 SUCCESSORS AND ASSIGNS. This Agreement and the rights of the
parties hereunder may not be assigned (except by operation of law) and shall
be binding upon and shall inure to the benefit of the parties hereto, the
successors of USOP, and the heirs and legal representatives of the
Stockholders.
10.6 ENTIRE AGREEMENT. This Agreement (which includes the Schedules,
Annexes and Exhibits hereto) sets forth the entire understanding of the parties
hereto with respect to the transactions contemplated hereby. It shall not be
amended or modified except by a written instrument duly executed by each of the
parties hereto. Any and all previous agreements and understandings between or
among the parties regarding the subject matter hereof, whether written or oral,
are superseded by this Agreement. Each of the Schedules to this Agreement is
incorporated herein by this reference and expressly made a part hereof. A
specific disclosure in any Schedule or closing document shall be deemed a
disclosure on all relevant Schedules and closing documents to the extent such
disclosure is responsive to the requirements of such other Schedules or closing
documents.
10.7 COUNTERPARTS. This Agreement may be executed in any number of
counterparts and any party hereto may execute any such counterpart, each of
which when executed and delivered shall be deemed to be an original and all of
which counterparts taken together shall constitute but one and the same
instrument. This Agreement shall become binding when one or more counterparts
taken together shall have been executed and delivered (which deliveries may be
by telefax) by the parties.
10.8 BROKERS AND AGENTS. USOP and Newco (as a group) and the Company
and each Stockholder (as a group) each represents and warrants to the other
that it has not employed any broker or agent in connection with the
transactions contemplated by this Agreement and agrees to indemnify the other
against all loss, damages or expense relating to or arising out of claims for
fees or commission of any broker or agent employed or alleged to have been
employed by such indemnifying party.
10.9 EXPENSES. USOP has and will pay the fees, expenses and
disbursements of USOP and Newco and their agents, representatives,
accountants and counsel incurred in connection with the subject matter of
this Agreement. The Stockholders (and not the Company) have and will pay the
fees, expenses and disbursements of the Stockholders, the Company, and their
agents, representatives, financial advisers, accountants and counsel incurred
in connection with the subject matter of this Agreement.
10.10 SPECIFIC PERFORMANCE; REMEDIES. Each party hereto acknowledges
that the other parties will be irreparably harmed and that there will be no
adequate remedy at law for any violation by any of them of any of the
covenants or agreements contained in this Agreement, including without
limitation, the confidentiality obligations set forth in Section 5.1(b) and
(c) and the noncompetition provisions set forth in Section 9. It is
accordingly agreed that, in addition to any other remedies which may be
available upon the breach of any such covenants or agreements, each party
hereto shall have the right to obtain injunctive relief to restrain a breach
or threatened breach of, or otherwise to obtain specific performance of, the
other parties covenants and agreements contained in this Agreement.
10.11 NOTICES. Any notice, request, claim, demand, waiver, consent,
approval or other communication which is required or permitted hereunder
shall be in writing and shall be deemed given if delivered personally or sent
by telefax (with confirmation of receipt), by registered or certified mail,
postage prepaid, or by recognized courier service, as follows:
35
<PAGE>
If to USOP, Newco or the Surviving Corporation to:
U.S. Office Products Company
1440 New York Avenue, N.W.
Washington, D.C. 20005
Attn: Mark D. Director, Esq.
Executive Vice President and General Counsel
(Telefax: (202) 628-9509)
with a required copy to:
Wilmer, Cutler & Pickering
2445 M Street, N.W.
Washington, D.C. 20037
Attn: George P. Stamas, Esq.
Eric R. Markus, Esq.
(Telefax: (202) 663-6363)
If to any Stockholder to:
Vassilios Sirpolaidis
Lynne Sirpolaidis
Mile High Office Supply Co.
60 Tejon Street
Denver, CO 80223
Attn: Vassilios Sirpolaidis
(Telefax: (303) 744-3594)
Marked: ADDRESSEE ONLY
PERSONAL AND CONFIDENTIAL
with a required copy to:
Bryan Cave LLP
One Metropolitan Square
211 North Broadway, Suite 3600
St. Louis, Missouri 63102
Attn: Frank P. Wolff, Jr., Esq.
James A. Kearns III, Esq.
(Telefax: (314) 259-2020)
or to such other address as the person to whom notice is to be given may have
specified in a notice duly given to the sender as provided herein. Such notice,
request, claim, demand, waiver, consent, approval or other communication shall
be deemed to have been given as of the date so delivered, telefaxed, mailed or
dispatched and, if given by any other means, shall be deemed given only when
actually received by the addressees.
10.12 GOVERNING LAW. This Agreement shall be governed by and construed,
interpreted and enforced in accordance with the laws of Delaware.
36
<PAGE>
10.13 SEVERABILITY. If any provision of this Agreement or the application
thereof to any person or circumstances is held invalid or unenforceable in any
jurisdiction, the remainder hereof, and the application of such provision to
such person or circumstances in any jurisdiction, shall not be affected thereby,
and to this end the provisions of this Agreement shall be severable. The
preceding sentence is in addition to and not in place of the severability
provisions in Section 9.4.
10.14 ABSENCE OF THIRD PARTY BENEFICIARY RIGHTS. No provision of this
Agreement is intended, nor will be interpreted, to provide or to create any
third party beneficiary rights or any other rights of any kind in any client,
customer, affiliate, shareholder, employee, partner of any party hereto or any
other person or entity.
10.15 MUTUAL DRAFTING. This Agreement is the mutual product of the parties
hereto, and each provision hereof has been subject to the mutual consultation,
negotiation and agreement of each of the parties, and shall not be construed for
or against any party hereto.
10.16 FURTHER REPRESENTATIONS. Each party to this Agreement acknowledges and
represents that it has been represented by its own legal counsel in connection
with the transactions contemplated by this Agreement, with the opportunity to
seek advice as to its legal rights from such counsel. Each party further
represents that it is being independently advised as to the tax consequences of
the transactions contemplated by this Agreement and is not relying on any
representation or statements made by the other party as to such tax
consequences.
10.17 AMENDMENT; WAIVER. This Agreement may be amended by the parties hereto
at any time prior to the Closing by execution of an instrument in writing signed
on behalf of each of the parties hereto. Any extension or waiver by any party of
any provision hereto shall be valid only if set forth in an instrument in
writing signed on behalf of such party.
10.18 PUBLIC DISCLOSURE. Prior to the Effective Time, neither the Company
nor either Stockholder shall make any disclosure (whether or not in response to
an inquiry) of the subject matter of this Agreement unless previously approved
by USOP in writing. USOP agrees to keep the Company and the Stockholders
apprised in advance of any disclosure of the subject matter of this Agreement by
USOP.
37
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
U.S. OFFICE PRODUCTS COMPANY
By:/s/ Mark D. Director
-----------------------------------------------
Mark D. Director
Executive Vice President and General Counsel
MILE HIGH OFFICE SUPPLY CO.
By:/s/ Vassilios Sirpolaidis
-----------------------------------------------
Vassilios Sirpolaidis, President
MHOS ACQUISITION CORP.
By:/s/ Mark D. Director
-----------------------------------------------
Mark D. Director, President
STOCKHOLDERS:
/s/ Vassilios Sirpolaidis
--------------------------------------------------
Vassilios Sirpolaidis
/s/ Lynne Sirpolaidis
--------------------------------------------------
Lynne Sirpolaidis
38
<PAGE>
ANNEX I
PLAN AND AGREEMENT OF MERGER
THIS PLAN AND AGREEMENT OF MERGER (the "Merger Plan") is made and entered
into as of July 26, 1996, by and between MHOS Acquisition Corp. ("Newco"), a
Delaware corporation and a newly-formed, wholly-owned subsidiary of U.S. Office
Products Company, a Delaware corporation ("USOP"), and Mile High Office Supply
Co., a Colorado corporation (the "Company"). Capitalized terms used herein and
not defined in this Merger Plan shall have their defined meanings as set forth
in the Agreement and Plan of Reorganization dated as of July 26, 1996 (the
"Agreement"), entered into by and among USOP, Vassilios Sirpolaidis and Lynne
Sirpolaidis (each a "Stockholder" and collectively, the "Stockholders"), the
Company and Newco.
NOW THEREFORE, in consideration of the premises and mutual covenants and
agreements contained herein, Newco and the Company agree as follows.
ARTICLE I
THE MERGER
1.1 MERGER OF NEWCO WITH AND INTO THE COMPANY.
(a) AGREEMENT TO ACQUIRE THE COMPANY. Subject to the terms of this
Merger Plan and the Agreement, the Company shall be acquired by USOP through a
merger (the "Merger") of Newco with and into the Company.
(b) EFFECTIVE TIME OF THE MERGER. The Merger shall become effective
at 6:00 p.m., Eastern Time, on the date of the filing of this Merger Plan
together with any required officers' certificates of each Constituent
Corporation pursuant to the Colorado Business Corporation Act (the "CBCA") and
the Delaware General Corporation Law (the "DGCL"). 6:00 p.m. Eastern Time on
the date of such filing is referred to as the "Effective Time."
(c) SURVIVING CORPORATION. At the Effective Time, Newco shall be
merged with and into the Company pursuant to this Merger Plan and the Agreement
and the separate corporate existence of Newco shall cease. The Company, as it
exists from and after the Effective Time, is sometimes referred to as the
"Surviving Corporation."
1.2 EFFECT OF THE MERGER; ADDITIONAL ACTIONS.
(a) EFFECTS. The Merger shall have the effects provided therefor by
the CBCA and the DGCL. Without limiting the generality of the foregoing, and
subject thereto, at the Effective Time (i) all the rights, privileges, powers
and franchises, of a public as well as of a private nature, and all property,
real, personal and mixed, and all debts due on whatever account,
1
<PAGE>
including without limitation subscriptions to shares, and all other choses in
action, and all and every other interest of or belonging to or due to the
Company or Newco shall be taken and deemed to be transferred to, and vested in,
the Surviving Corporation without further act or deed; and all property, rights
and privileges, powers and franchises and all and every other interest shall be
thereafter as effectually the property of the Surviving Corporation, as they
were of the Company and Newco, and (ii) all debts, liabilities, duties and
obligations of the Company and Newco shall become the debts, liabilities and
duties of the Surviving Corporation and the Surviving Corporation shall
thenceforth be responsible and liable for all the debts, liabilities, duties and
obligations of the Company and Newco and neither the rights of creditors nor any
liens upon the property of the Company or Newco shall be impaired by the Merger,
and may be enforced against the Surviving Corporation.
(b) ADDITIONAL ACTIONS. If, at any time after the Effective Time,
the Surviving Corporation shall consider or be advised that any deeds, bills of
sale, assignments, assurances or any other actions or things are necessary or
desirable (i) to vest, perfect or confirm of record or otherwise in the
Surviving Corporation its right, title or interest in, to or under any of the
rights, properties or assets of either Constituent Corporation acquired or to be
acquired by the Surviving Corporation as a result of, or in connection with, the
Merger or (ii) to otherwise carry out the purposes of this Merger Plan, each
Constituent Corporation and its officers and directors shall be deemed to have
granted to the Surviving Corporation an irrevocable power of attorney to execute
and deliver all such deeds, bills of sale, assignments and assurances and to
take and do all such other actions and things as may be necessary or desirable
to vest, perfect or confirm any and all right, title and interest in, to and
under such rights, properties or assets in the Surviving Corporation and
otherwise to carry out the purposes of this Merger Plan; and the officers and
directors of the Surviving Corporation are fully authorized in the name of each
Constituent Corporation or otherwise to take any and all such actions.
ARTICLE II
THE CONSTITUENT CORPORATIONS
2.1 ORGANIZATION OF THE COMPANY. The Company was incorporated under the
laws of the State of Colorado on May 25, 1967. The Company is authorized to
issue an aggregate of 50,000 shares of common stock, no par value, (the "Company
Common Stock") and no shares of preferred stock. As of July 26, 1996, 415.6
shares of the Company Common Stock are outstanding, all of which are held by the
Stockholders, and no shares of Preferred Stock were outstanding. Stockholder
approval of the Merger was required. The Stockholder vote was as follows:
2
<PAGE>
<TABLE>
<CAPTION>
Class or Series of Number of Shares Number of Votes Number of Number of Votes
Shares Outstanding Entitled to be Cast Votes Cast for Cast Against
- - --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common 415.6 415.6 415.6 0
</TABLE>
2.2 ORGANIZATION OF NEWCO. Newco was incorporated under the laws of
the State of Delaware on July 16, 1996. Newco is authorized to issue an
aggregate of 1,000 shares of Common Stock, $0.0l par value per share ("Newco
Stock"), of which 100 shares are outstanding as of July 26, 1996. Stockholder
approval of the Merger was required. The Stockholder vote was as follows:
<TABLE>
<CAPTION>
Class or Series of Number of Shares Number of Votes Number of Number of Votes
Shares Outstanding Entitled to be Cast Votes Cast for Cast Against
- - --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common 100 100 100 0
</TABLE>
ARTICLE III
ARTICLES OF INCORPORATION AND BYLAWS
OF THE SURVIVING CORPORATION
3.1 ARTICLES OF INCORPORATION; BYLAWS; DIRECTORS AND OFFICERS The
Articles of Incorporation of the Surviving Corporation from and after the
Effective Time shall be the Articles of Incorporation of the Company until
thereafter amended in accordance with the provisions therein and as provided by
the CBCA. The Bylaws of the Surviving Corporation from and after the Effective
Time shall be the Bylaws of the Company as in effect immediately prior to the
Effective Time, continuing until thereafter amended in accordance with their
terms and the Articles of Incorporation of the Surviving Corporation and as
provided by CBCA. The initial directors of the Surviving Corporation shall be
Mark D. Director, Donald H. Platt, Timothy J. Flynn, Lynn Sirpolaidis and
Vassilios Sirpolaidis, in each case until their successors are elected and
qualified, and the initial officers of the Surviving Corporation shall be the
officers of the Company immediately prior to the Effective Time, with the
addition of Mark D. Director as Assistant Secretary of the Surviving
Corporation, in each case until their successors are duly elected and qualified.
3
<PAGE>
ARTICLE IV
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
4.1 EFFECT ON CAPITAL STOCK. At the Effective Time, subject and
pursuant to the terms of this Merger Plan and the Agreement, by virtue of the
Merger and without any action on the part of USOP, Newco, the Company or any
Stockholder, the shares of capital stock of the Constituent Corporations shall
be converted as follows:
(a) CAPITAL STOCK OF NEWCO. Each issued and outstanding share
of capital stock of Newco shall continue to be issued and outstanding and shall
be converted into one share of validly issued, fully paid and non-assessable
Common Stock of the Surviving Corporation. Each stock certificate of Newco
evidencing ownership of any such shares shall continue to evidence ownership of
such shares of capital stock of the Surviving Corporation.
(b) CANCELLATION OF CERTAIN SHARES OF COMPANY COMMON STOCK. All
shares of capital stock of the Company that are owned directly or indirectly by
the Company shall be canceled and no stock of USOP or other consideration shall
be delivered in exchange therefor.
(c) CONVERSION OF CAPITAL STOCK OF THE COMPANY. Subject to
Section 4.1(d), (e), (f) and (g) below, each share of Company Common Stock
(other than shares to be canceled pursuant to Section 4.1(b)) that is issued and
outstanding immediately prior to the Effective Time shall automatically be
canceled and extinguished and converted, without any action on the part of the
holders thereof, into the right to receive that number of shares of USOP common
stock, $0.001 par value, of USOP ("USOP Common Stock") that is equal to the
Merger Consideration (as defined in Section 4.1(d) of the Merger Plan) divided
by 415.6 shares of outstanding Company Common Stock. All such shares of Company
Common Stock, when so converted, shall no longer be outstanding and shall be
automatically canceled and retired and shall cease to exist, and each holder of
a certificate representing any such shares shall cease to have any rights with
respect thereto, except the right to receive the shares of USOP Common Stock to
be issued or paid in consideration therefor upon the surrender of such
certificate in accordance with Section 4.2 of this Merger Plan. The ratio
pursuant to which each share of Company Common Stock will be exchanged for
shares of USOP Common Stock, determined in accordance with the foregoing
provisions is referred to as the "Exchange Ratio."
(d) MERGER CONSIDERATION. The consideration to be paid by USOP
pursuant to the merger (the "Merger Consideration") is the number of shares of
USOP Common Stock, registered under the Securities Act of 1933, as amended (the
"1933 Act"), equal to the product of 1,027,631 and a fraction, the numerator of
which is (x) $38.00 and the denominator of which is (y) $28.50 (the "Average
Closing Price"). The Merger
4
<PAGE>
Consideration is based upon the assumption that the net worth of the Company,
calculated in accordance with GAAP consistently applied, is equal to or greater
than $7,000,000. If on the Closing Date, the Certified Closing Net Worth (as
defined in Section 6.14 of the Agreement) is less than $7,000,000, the Merger
Consideration to be delivered to the Stockholders shall be reduced at Closing by
the number of shares of USOP Common Stock (the "Net Worth Adjustment Factor")
obtained by dividing (A) the difference between the $7,000,000 and the Certified
Closing Net Worth by (B) the Average Closing Price. Pursuant to Section 1.4 of
the Agreement, the Merger Consideration shall also be subject to adjustment
after the Closing Date in the event that USOP's independent accountant
determines that the actual net worth of the Company as of the Closing Date was
less than the Certified Closing Net Worth.
(e) ADJUSTMENT OF EXCHANGE RATIO. If between the date of the
Agreement and the Effective Time, the outstanding shares of USOP Common Stock
(or, subject to compliance with Section 5.3 of the Agreement, Company Common
Stock) shall have been changed into a different number of shares or a different
class by reason of any reclassification, split-up, stock dividend, or stock
combination, then the Exchange Ratio shall be correspondingly adjusted. In
addition, the Exchange Ratio is based on the assumption that there are 415.6
shares of Company Common Stock outstanding, and no other shares or options or
other rights to acquire shares of capital stock of the Company outstanding. To
the extent that there are more shares of capital stock of the Company or options
or other rights therefor outstanding at the Effective Time, the Exchange Ratio
shall be correspondingly adjusted downward.
(f) FRACTIONAL SHARES. No fractional shares of USOP Common
Stock shall be issued, but in lieu thereof each holder of shares of Company
Common Stock who would otherwise be entitled to receive a fraction of a share of
USOP Common Stock shall receive from USOP an amount of cash equal to the Average
Closing Price multiplied by the fraction of a share of USOP Common Stock to
which such holder would otherwise be entitled. The fractional share interests
of each Stockholder shall be aggregated, so that no Stockholder shall receive
cash in an amount greater than the value of one full share of USOP Common Stock.
(g) WITHHELD AMOUNT. Upon closing, and as collateral security
for the payment of any post-Closing adjustment to the Merger Consideration or
any indemnification obligations of the Stockholders pursuant to Sections 8 or
10.1 of the Agreement, each Stockholder transfers, pledges and assigns to USOP,
for the benefit of USOP, a security interest in ten percent (10%) of the number
of shares of USOP Common Stock issuable to the Stockholders pursuant to this
Section 4.1 (the "Withheld Amount").
4.2 EXCHANGE OF CERTIFICATES.
(a) USOP TO PROVIDE COMMON STOCK. Promptly after the
Effective Time, USOP shall cause to be made available the shares of USOP Common
Stock issuable pursuant to Section 4.l and the Agreement in exchange for
outstanding shares of capital stock of the Company, and cash in an amount
sufficient for payment in lieu of fractional shares pursuant to Section 4.1(f).
5
<PAGE>
(b) CERTIFICATE DELIVERY REQUIREMENTS. At the Effective
Time, the Stockholders shall deliver to USOP the certificates (the
"Certificates") representing Company Common Stock, duly endorsed in blank by the
Stockholders, or accompanied by blank stock powers, and with all necessary
transfer tax and other revenue stamps, acquired at the Stockholders' expense,
affixed and canceled. The Stockholders shall promptly cure any deficiencies
with respect to the endorsement of the Certificates or other documents of
conveyance with respect to the stock powers accompanying such Certificates. The
Certificates so delivered shall be deemed at any time after the Effective Time
to represent the right to receive upon such surrender the number of shares of
USOP Common Stock as provided by this Section 4 and Section l of the Agreement
and the provisions of the CBCA.
(c) NO FURTHER OWNERSHIP RIGHTS IN CAPITAL STOCK OF THE
COMPANY. All USOP Common Stock delivered upon the surrender for exchange of
shares of Company Common Stock in accordance with the terms hereof shall be
deemed to have been delivered in full satisfaction of all rights pertaining to
such shares of Company Common Stock, and following the Effective Time, the
Certificates shall have no further rights to, or ownership in, shares of capital
stock of the Company. There shall be no further registration of transfers on
the stock transfer books of the Surviving Corporation of the shares of Company
Common Stock which were outstanding immediately prior to the Effective Time. If
after the Effective Time, Certificates are presented to the Surviving
Corporation for any reason, they shall be canceled and exchanged as provided in
this Section 4.2.
(f) LOST, STOLEN OR DESTROYED CERTIFICATES. In the event
any certificates evidencing shares of Company Common Stock shall have been lost,
stolen or destroyed, USOP shall cause payment to be made in exchange for such
lost, stolen or destroyed certificates, upon the making of an affidavit of that
fact by the holder thereof, such shares of USOP Common Stock and cash for
fractional shares, if any, as may be required pursuant to Section 4.1(f);
provided, however, that USOP may, in its discretion and as a condition precedent
to the issuance thereof, require the owner of such lost, stolen or destroyed
certificates to deliver a bond in such sum as it may reasonably direct as
indemnity against any claim that may be made against USOP with respect to the
certificates alleged to have been lost, stolen or destroyed
(h) NO LIABILITY. Notwithstanding anything to the contrary
in this Section 4.2, none of the Surviving Corporation or any party hereto shall
be liable to a holder of shares of Company Common Stock for any amount paid to a
public official pursuant to any applicable abandoned property, escheat or
similar law.
6
<PAGE>
ARTICLE V
TERMINATION
5.1 TERMINATION BY MUTUAL AGREEMENT. Notwithstanding the approval of
this Merger Plan by the Stockholders and Newco, this Merger Plan may be
terminated at any time prior to the Effective Time by mutual agreement of the
Boards of Directors of the Company and Newco.
5.2 TERMINATION OF AGREEMENT. Notwithstanding the approval of this
Merger Plan by the Stockholders and Newco, this Merger Plan shall terminate
forthwith in the event that the Agreement shall be terminated as therein
provided.
5.3 EFFECTS OF TERMINATION. In the event of the termination of this
Merger Plan, this Merger Plan shall forthwith become void and there shall be no
liability on the part of USOP, Newco or the Company or their respective officers
or directors, except to the extent otherwise provided in the Agreement.
ARTICLE VI
GENERAL PROVISIONS
6.1 AMENDMENT. This Merger Plan may be amended prior to the
Effective Time by the parties hereto, by any action taken by their respective
Boards of Directors, at any time before or after approval of the Merger by the
Stockholders and Newco but, after any such approval, no amendment shall be made
which by law requires the further approval of the Stockholders or Newco without
obtaining such further approval. This Merger Plan may not be amended except by
an instrument in writing signed on behalf of each of the parties.
6.2 COUNTERPARTS. This Merger Plan may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same agreement.
6.3 GOVERNING LAW. This Merger Plan shall be governed in all
respects, including validity, interpretation and effect, by the laws of the
State of Colorado.
IN WITNESS WHEREOF, the parties have duly executed this Merger Plan as of
the date first written above.
7
<PAGE>
MHOS ACQUISITION CORP.
By:/s/ Mark D. Director
-----------------------------------------
Name: Mark D. Director, President
MILE HIGH OFFICE SUPPLY CO.
By:/s/ Vassilios Sirpolaidis
-----------------------------------------
Name: Vassilios Sirpolaidis, President
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
U.S. OFFICE PRODUCTS COMPANY,
ALL ACQUISITION CORP.,
AMERICAN LOOSE LEAF/BUSINESS PRODUCTS, INC.
AND
THE STOCKHOLDERS NAMED THEREIN
MADE EFFECTIVE AS OF JULY 26, 1996
<PAGE>
TABLE OF CONTENTS
1. PLAN OF REORGANIZATION. . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 CONVERSION OF SECURITIES . . . . . . . . . . . . . . . . . . . 2
1.3 AGGREGATE MERGER CONSIDERATION . . . . . . . . . . . . . . . . 3
1.4 POST-CLOSING ADJUSTMENT. . . . . . . . . . . . . . . . . . . . 4
1.5 PLEDGED ASSETS . . . . . . . . . . . . . . . . . . . . . . . . 5
1.6 EXCHANGE OF CERTIFICATES AND PAYMENT OF CASH . . . . . . . . . 7
1.7 STOCKHOLDERS' REPRESENTATIVE . . . . . . . . . . . . . . . . . 8
1.8 ACCOUNTING TERMS . . . . . . . . . . . . . . . . . . . . . . . 8
2. CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE STOCKHOLDERS. . 9
3.1 DUE ORGANIZATION . . . . . . . . . . . . . . . . . . . . . . . 9
3.2 AUTHORIZATION; VALIDITY. . . . . . . . . . . . . . . . . . . . 9
3.3 NO CONFLICTS . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.4 CAPITAL STOCK OF THE COMPANY . . . . . . . . . . . . . . . . . 10
3.5 TRANSACTIONS IN CAPITAL STOCK; ACCOUNTING TREATMENT. . . . . . 11
3.6 NO BONUS SHARES. . . . . . . . . . . . . . . . . . . . . . . . 11
3.7 SUBSIDIARIES.. . . . . . . . . . . . . . . . . . . . . . . . . 11
3.8 PREDECESSOR STATUS; ETC. . . . . . . . . . . . . . . . . . . . 11
3.9 [INTENTIONALLY OMITTED]. . . . . . . . . . . . . . . . . . . . 11
3.10 FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . 11
3.11 LIABILITIES AND OBLIGATIONS. . . . . . . . . . . . . . . . . . 12
3.12 ACCOUNTS AND NOTES RECEIVABLE. . . . . . . . . . . . . . . . . 12
3.13 PERMITS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.14 ENVIRONMENTAL MATTERS. . . . . . . . . . . . . . . . . . . . . 13
3.15 REAL AND PERSONAL PROPERTY . . . . . . . . . . . . . . . . . . 14
3.16 SIGNIFICANT CUSTOMERS; MATERIAL CONTRACTS AND COMMITMENTS. . . 15
3.17 INVENTORY. . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.18 INSURANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.19 EMPLOYEE MATTERS . . . . . . . . . . . . . . . . . . . . . . . 17
3.20 EMPLOYEE BENEFIT PLANS . . . . . . . . . . . . . . . . . . . . 17
3.21 CONFORMITY WITH LAW; LITIGATION. . . . . . . . . . . . . . . . 19
3.22 TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.23 GOVERNMENT CONTRACTS . . . . . . . . . . . . . . . . . . . . . 21
3.24 ABSENCE OF CHANGES . . . . . . . . . . . . . . . . . . . . . . 22
3.25 BANK ACCOUNTS; POWERS OF ATTORNEY. . . . . . . . . . . . . . . 24
3.26 RELATIONS WITH GOVERNMENTS . . . . . . . . . . . . . . . . . . 24
3.27 DISCLOSURE . . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.28 CONTINUITY OF BUSINESS ENTERPRISE. . . . . . . . . . . . . . . 25
3.29 USOP PROSPECTUS; SECURITIES REPRESENTATIONS. . . . . . . . . . 25
<PAGE>
3.30 ABSENCE OF CLAIMS AGAINST COMPANY. . . . . . . . . . . . . . . 25
3.31 COMPLETE COPIES OF MATERIALS . . . . . . . . . . . . . . . . . 25
3.32 COMPANY FINANCIAL CONDITIONS.. . . . . . . . . . . . . . . . . 25
3.33 INTELLECTUAL PROPERTY. . . . . . . . . . . . . . . . . . . . . 26
3.34 TAX MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . 26
4. REPRESENTATIONS OF USOP AND NEWCO . . . . . . . . . . . . . . . . . . 26
4.1 DUE ORGANIZATION.. . . . . . . . . . . . . . . . . . . . . . . 26
4.2 USOP COMMON STOCK. . . . . . . . . . . . . . . . . . . . . . . 27
4.3 AUTHORIZATION; VALIDITY OF OBLIGATIONS . . . . . . . . . . . . 27
4.4 NO CONFLICTS . . . . . . . . . . . . . . . . . . . . . . . . . 27
4.5 CAPITALIZATION OF USOP AND OWNERSHIP OF USOP STOCK . . . . . . 28
4.6 [INTENTIONALLY OMITTED]. . . . . . . . . . . . . . . . . . . . 28
4.7 CONFORMITY WITH LAW; LITIGATION. . . . . . . . . . . . . . . . 28
4.8 USOP PROSPECTUS. . . . . . . . . . . . . . . . . . . . . . . . 28
4.9 DISCLOSURE.. . . . . . . . . . . . . . . . . . . . . . . . . . 28
5. COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.1 ACCESS TO INFORMATION; CONFIDENTIALITY . . . . . . . . . . . . 29
5.2 CONDUCT OF BUSINESS PENDING CLOSING. . . . . . . . . . . . . . 30
5.3 PROHIBITED ACTIVITIES. . . . . . . . . . . . . . . . . . . . . 31
5.4 EXCLUSIVITY. . . . . . . . . . . . . . . . . . . . . . . . . . 32
5.6 NOTIFICATION OF CERTAIN MATTERS. . . . . . . . . . . . . . . . 33
5.7 COOPERATION IN OBTAINING REQUIRED CONSENTS AND APPROVALS . . . 33
5.8 AFFILIATE AGREEMENTS . . . . . . . . . . . . . . . . . . . . . 33
5.9 [INTENTIONALLY OMITTED]. . . . . . . . . . . . . . . . . . . . 33
5.10 COOPERATION ON TAX MATTERS . . . . . . . . . . . . . . . . . . 33
5.11 FIRPTA COMPLIANCE. . . . . . . . . . . . . . . . . . . . . . . 34
5.12 [INTENTIONALLY OMITTED]. . . . . . . . . . . . . . . . . . . . 34
5.13 HSR. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
5.14 OPTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
5.15 SCHEDULES. . . . . . . . . . . . . . . . . . . . . . . . . . . 34
5.16 CREDIT AGREEMENTS, GUARANTEES. . . . . . . . . . . . . . . . . 34
5.17 SEAT LICENSES AND LUXURY BOX LEASES. . . . . . . . . . . . . . 34
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF USOP AND NEWCO . . . . . . . . 35
6.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS . . 35
6.2 NO LITIGATION. . . . . . . . . . . . . . . . . . . . . . . . . 35
6.3 EMPLOYMENT AGREEMENTS. . . . . . . . . . . . . . . . . . . . . 35
6.4 OPINION OF COUNSEL . . . . . . . . . . . . . . . . . . . . . . 35
6.5 CONSENTS AND APPROVALS.. . . . . . . . . . . . . . . . . . . . 36
6.6 CHARTER DOCUMENTS. . . . . . . . . . . . . . . . . . . . . . . 36
6.7 INSURANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . 36
ii
<PAGE>
6.8 [INTENTIONALLY OMITTED]. . . . . . . . . . . . . . . . . . . . 36
6.9 DUE DILIGENCE REVIEW . . . . . . . . . . . . . . . . . . . . . 36
6.10 EMPLOYEE BENEFIT PLANS.. . . . . . . . . . . . . . . . . . . . 36
6.11 NO MATERIAL ADVERSE CHANGE . . . . . . . . . . . . . . . . . . 36
6.12 AFFILIATE AGREEMENTS . . . . . . . . . . . . . . . . . . . . . 36
6.13 [INTENTIONALLY OMITTED]. . . . . . . . . . . . . . . . . . . . 36
6.14 DELIVERY OF CLOSING FINANCIAL CERTIFICATE. . . . . . . . . . . 37
6.15 HSR. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
6.16 RELATED PARTY AGREEMENTS . . . . . . . . . . . . . . . . . . . 38
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE STOCKHOLDERS AND
THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
7.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS . . 38
7.2 NO LITIGATION. . . . . . . . . . . . . . . . . . . . . . . . . 38
7.3 EMPLOYMENT AGREEMENTS. . . . . . . . . . . . . . . . . . . . . 38
7.4 CONSENTS AND APPROVALS . . . . . . . . . . . . . . . . . . . . 39
7.5 [INTENTIONALLY OMITTED]. . . . . . . . . . . . . . . . . . . . 39
7.6 NO MATERIAL ADVERSE CHANGE.. . . . . . . . . . . . . . . . . . 39
7.7 HSR. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
8. INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
8.1 GENERAL INDEMNIFICATION BY THE STOCKHOLDERS. . . . . . . . . . 39
8.2 LIMITATION AND EXPIRATION. . . . . . . . . . . . . . . . . . . 40
8.3 GENERAL INDEMNIFICATION BY USOP. . . . . . . . . . . . . . . . 41
8.4 INDEMNIFICATION PROCEDURES.. . . . . . . . . . . . . . . . . . 42
8.5 SURVIVAL OF REPRESENTATIONS WARRANTIES AND COVENANTS . . . . . 44
8.6 RIGHT TO SET OFF . . . . . . . . . . . . . . . . . . . . . . . 45
8.7 EXCLUSIVE REMEDIES.. . . . . . . . . . . . . . . . . . . . . . 45
9. NONCOMPETITION. . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
9.1 PROHIBITED ACTIVITIES. . . . . . . . . . . . . . . . . . . . . 45
9.2 CONFIDENTIALITY. . . . . . . . . . . . . . . . . . . . . . . . 46
9.3 DAMAGES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
9.4 REASONABLE RESTRAINT . . . . . . . . . . . . . . . . . . . . . 47
9.5 SEVERABILITY; REFORMATION. . . . . . . . . . . . . . . . . . . 47
9.6 INDEPENDENT COVENANT.. . . . . . . . . . . . . . . . . . . . . 47
9.7 MATERIALITY. . . . . . . . . . . . . . . . . . . . . . . . . . 47
10. GENERAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
10.1 ACCOUNTS RECEIVABLE. . . . . . . . . . . . . . . . . . . . . . 48
10.2 TERMINATION. . . . . . . . . . . . . . . . . . . . . . . . . . 48
10.3 EFFECT OF TERMINATION. . . . . . . . . . . . . . . . . . . . . 49
10.4 COOPERATION. . . . . . . . . . . . . . . . . . . . . . . . . . 49
iii
<PAGE>
10.5 SUCCESSORS AND ASSIGNS . . . . . . . . . . . . . . . . . . . . 49
10.6 ENTIRE AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . 49
10.7 COUNTERPARTS.. . . . . . . . . . . . . . . . . . . . . . . . . 50
10.8 BROKERS AND AGENTS . . . . . . . . . . . . . . . . . . . . . . 50
10.9 EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
10.10 SPECIFIC PERFORMANCE; REMEDIES . . . . . . . . . . . . . . . . 50
10.11 NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
10.12 GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . . . 52
10.13 SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . 52
10.14 ABSENCE OF THIRD PARTY BENEFICIARY RIGHTS . . . . . . . . . . 52
10.15 MUTUAL DRAFTING . . . . . . . . . . . . . . . . . . . . . . . 52
10.16 FURTHER REPRESENTATIONS . . . . . . . . . . . . . . . . . . . 52
10.17 AMENDMENT; WAIVER . . . . . . . . . . . . . . . . . . . . . . 53
10.18 PUBLIC DISCLOSURE . . . . . . . . . . . . . . . . . . . . . . 53
iv
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made
effective as of July 26, 1996, by and among U.S. Office Products Company, a
Delaware corporation ("USOP"), ALL Acquisition Corp., a Delaware corporation
and a newly-formed, wholly-owned subsidiary of USOP ("Newco"), American Loose
Leaf/Business Products, Inc., a Missouri corporation (the "Company"), Vicki
M. Barnell, the Paul Mendelson Revocable Trust, the Betty Lou Mendelson
Revocable Trust, the Albert Mendelson Trust, Suzan Laycob, Nina Mendelson
Greenfield, the Leah Galansky Revocable Trust, MVB Investments, L.P., SML
Partnership, L.P., NMG Partnership, L.P., and the Michael J. Barnell Trust
(each a "Stockholder" and collectively, the "Stockholders"), and Michael J.
Barnell, Leah Galansky, and Paul Mendelson (solely for purposes of Section 9).
BACKGROUND
A. The respective Boards of Directors of Newco and the Company (which
together are sometimes referred to as the "Constituent Corporations") deem it
advisable and in the best interests of the Constituent Corporations and their
respective stockholders that Newco merge with and into the Company (the
"Merger") pursuant to this Agreement, the Plan of Merger substantially in the
form attached as Annex I (the "Plan of Merger") and the applicable provisions
of the laws of the State of Missouri and the State of Delaware.
B. The Boards of Directors of each of the Constituent Corporations
have approved and adopted this Agreement as a plan of reorganization within
the provisions of Section 368(a) of the Internal Revenue Code of 1986, as
amended (the "Code").
NOW, THEREFORE, in consideration of the premises and of the
representations, warranties, covenants and agreements herein contained, the
parties hereto, intending to be legally bound, agree as follows:
1. PLAN OF REORGANIZATION
1.1 THE MERGER.
(a) THE MERGER. At the Effective Time (as defined in Section
2), Newco shall be merged with and into the Company pursuant to this
Agreement and the Plan of Merger and the separate corporate existence of
Newco shall cease. The Company, as it exists from and after the Effective
Time, is sometimes referred to as the "Surviving Corporation."
(b) EFFECTS OF THE MERGER. The Merger shall have the effects
provided therefor by the Missouri General and Business Corporation Law (the
"MGBCL") and the Delaware General Corporation Law (the "DGCL"). Without
limiting the generality of the foregoing, and subject thereto, at the
Effective Time (i) all the rights, privileges, immunities, powers and
franchises, of a public as well as of a private nature, and all property,
real, personal and mixed,
<PAGE>
and all debts due on whatever account, including without limitation
subscriptions to shares, and all other choses in action, and all and every
other interest of or belonging to or due to the Company or Newco shall be
taken and deemed to be transferred to, and vested in, the Surviving
Corporation without further act or deed; and all property, rights and
privileges, immunities, powers and franchises and all and every other
interest shall be thereafter as effectually the property of the Surviving
Corporation, as they were of the Company and Newco, and (ii) all debts,
liabilities, duties and obligations of the Company and Newco shall become the
debts, liabilities and duties of the Surviving Corporation and the Surviving
Corporation shall thenceforth be responsible and liable for all the debts,
liabilities, duties and obligations of the Company and Newco and neither the
rights of creditors nor any liens upon the property of the Company or Newco
shall be impaired by the Merger, and may be enforced against the Surviving
Corporation.
(c) ARTICLES OF INCORPORATION; BYLAWS; DIRECTORS AND OFFICERS.
The Articles of Incorporation of the Surviving Corporation from and after the
Effective Time shall be the Articles of Incorporation of the Company until
thereafter amended in accordance with the provisions therein and as provided
by the applicable provisions of the MGBCL and the DGCL. The Bylaws of the
Surviving Corporation from and after the Effective Time shall be the Bylaws
of the Company as in effect immediately prior to the Effective Time,
continuing until thereafter amended in accordance with their terms and the
Articles of Incorporation of the Surviving Corporation and as provided by the
MGBCL and the DGCL. The initial directors of the Surviving Corporation shall
be: Mark D. Director, Donald H. Platt and Michael J. Barnell, in each case
until their successors are elected and qualified, and the initial officers of
the Surviving Corporation shall be the officers of the Company immediately
prior to the Effective Time, with the addition of Mark D. Director as
Assistant Secretary of the Surviving Corporation, in each case until their
successors are duly elected and qualified.
1.2 CONVERSION OF SECURITIES. At the Effective Time, by virtue of
the Merger and without any action on the part of USOP, Newco, the Company or
any Stockholder, the shares of capital stock of each of the Constituent
Corporations shall be converted as follows:
(a) CAPITAL STOCK OF NEWCO. Each issued and outstanding share
of capital stock of Newco shall continue to be issued and outstanding and
shall be converted into one share of validly issued, fully paid and
non-assessable Common Stock of the Surviving Corporation. Each stock
certificate of Newco evidencing ownership of any such shares shall continue
to evidence ownership of such shares of capital stock of the Surviving
Corporation.
(b) CANCELLATION OF CERTAIN SHARES OF CAPITAL STOCK OF THE
COMPANY. All shares of capital stock of the Company that are owned directly
or indirectly by the Company shall be canceled and no stock of USOP or other
consideration shall be delivered in exchange therefor.
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<PAGE>
(c) CONVERSION OF CAPITAL STOCK OF THE COMPANY.
(i) For purposes of this Agreement, the "Aggregate Merger
Consideration" shall be Thirty-Nine Million Four Hundred Twenty-Nine Thousand
Nine Hundred Seventy-Eight Dollars ($39,429,978.00), as adjusted pursuant to
Sections 1.3 and 1.4. The Aggregate Merger Consideration shall be payable
$7,885,978.50 in cash (the "Cash Merger Consideration") and 1,106,807 shares
(the "Stock Merger Consideration") of USOP common stock, $.001 par value
("USOP Common Stock") that have been registered under the Securities Act of
1933, as amended (the "1933 Act"). The withholding of a portion of the
consideration in Section 1.5 shall be made in USOP Common Stock. For
purposes of this Section, the Stock Merger Consideration shall be valued at
$28.50 per share (the "Average Closing Price").
(ii) Subject to Section l.2(d), the issued and outstanding
shares of common stock of the Company, $100.00 par value (the "Company Common
Stock") (other than shares to be canceled pursuant to Section 1.2(b)), that
are issued and outstanding immediately prior to the Effective Time shall
automatically be canceled and extinguished and converted, without any action
on the part of the holder thereof, into the right to receive (1) the Cash
Merger Consideration, plus (2) the Stock Merger Consideration. The precise
amount of cash for each Stockholder (totaling the Cash Merger Consideration)
and the precise number of shares of USOP Common Stock for each Stockholder
(totaling the Stock Merger Consideration) shall be specified on Schedule
1.2(c). All such shares of Company Common Stock, when so converted, shall no
longer be outstanding and shall automatically be canceled and retired and
shall cease to exist, and each holder of a certificate representing any such
shares shall cease to have any rights with respect thereto, except the right
to receive the cash and shares of USOP Common Stock to be issued or paid in
consideration therefor upon the surrender of such certificate in accordance
with Section 1.6 of this Agreement.
(d) FRACTIONAL SHARES. No fractional shares of USOP Common
Stock shall be issued, but in lieu thereof each holder of shares of Company
Common Stock who would otherwise be entitled to receive a fraction of a share
of USOP Common Stock shall receive from USOP an amount of cash equal to the
Average Closing Price multiplied by the fractional share interest. The
fractional share interests of each Stockholder shall be aggregated, so that
no Stockholder shall receive cash pusuant to this Section 1.2(d) in an amount
greater than the value of one full share of USOP Common Stock.
1.3 AGGREGATE MERGER CONSIDERATION.
(a) [Intentionally Omitted]
(b) The Aggregate Merger Consideration has been calculated based
upon the assumption that the net worth of the Company, calculated in
accordance with generally accepted
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<PAGE>
accounting principles ("GAAP") consistently applied, is equal to or greater
than $7,000,000 for the preceding fiscal year and $8,900,000 as of June 30,
1996.
(c) If on the Closing Financial Certificate (as defined in
Section 6.14), the Certified Closing Net Worth (as defined in Section 6.14)
is less than $8,900,000, the Aggregate Merger Consideration to be delivered
to the Stockholders shall be reduced at Closing by the difference between
$8,900,000 and the Certified Closing Net Worth set forth on the Closing
Financial Certificate (which reduction shall be in cash or USOP Common Stock,
as provided in the preceding Section).
1.4 POST-CLOSING ADJUSTMENT.
(a) The Aggregate Merger Consideration shall be subject to
adjustment after the Closing Date as specified in this Section 1.4.
(b) Within 120 days following the Effective Time, USOP shall
cause Price Waterhouse LLP to audit the Closing Financial Certificate to
determine the accuracy of the Certified Closing Net Worth set forth therein.
The parties acknowledge and agree that for purposes of determining the net
worth of the Company as of the Closing Date, the value of the assets of the
Company shall, except with the prior written consent of USOP, be calculated
as provided in the last paragraph of Section 6.14. In the event that Price
Waterhouse LLP determines that the actual Company net worth as of the Closing
Date was less than the Certified Closing Net Worth, USOP shall deliver a
written notice (the "Financial Adjustment Notice") to the Stockholders
setting forth (i) the determination made by Price Waterhouse LLP of the
actual Company net worth (the "Actual Company Net Worth"), (ii) the amount of
the Aggregate Merger Consideration adjustment that would have been applicable
pursuant to Section 1.3(c) had the Actual Company Net Worth been reflected on
the Closing Financial Certificate instead of the Certified Closing Net Worth
(the "Merger Consideration Adjustment"), and (iii) the amount by which the
Aggregate Merger Consideration would have been reduced at Closing had the
Actual Company Net Worth been used in the calculations pursuant to
Section 1.3(c).
(c) The Stockholders' Representative, as defined in Section 1.7,
shall have thirty (30) days from the receipt of the Financial Adjustment
Notice to notify USOP if the Stockholders dispute such Financial Adjustment
Notice. If USOP has not received notice of such a dispute within such 30-day
period, USOP shall be entitled to receive from the Stockholders in cash
(which may, at USOP's sole discretion, be from the Pledged Assets as defined
in Section 1.5) the Merger Consideration Adjustment. If, however, the
Stockholders' Representative has delivered notice of such a dispute to USOP
within such 30-day period, then USOP's chief financial officer and the
Stockholders' Representative shall meet (by conference telephone call or in
person at a mutually agreeable site) within one week after notice of a
disagreement is given as provided herein. USOP's chief financial officer and
the Stockholders' Representative shall attempt to make a final determination
of the Merger Consideration Adjustment, if any. If USOP's chief financial
officer and the Stockholders' Representative do not reach agreement
-4-
<PAGE>
within a reasonable time, either or both of them shall give notice of an
impasse, in which case they shall mutually agree on an independent accounting
firm to review the Closing Financial Certificate and the Financial Adjustment
Notice (and related information) to determine the amount, if any, of the
Merger Consideration Adjustment. In the event that USOP's chief financial
officer and the Stockholders' Representative cannot agree on an independent
accounting firm, Price Waterhouse LLP shall select such independent
accounting firm. The determination of such independent accounting firm shall
be final and binding on the parties hereto and upon such determination USOP
shall be entitled to receive from the Stockholders in cash (which may, at
USOP's sole discretion, be from the Pledged Assets as defined in Section 1.5)
the Merger Consideration Adjustment. The costs of the independent accounting
firm shall be borne by the party (either USOP or the Stockholders as a group)
whose determination of the Company's net worth at Closing was furthest from
the determination of the independent accounting firm, or equally by USOP and
the Stockholders in the event that the determination by the independent
accounting firm is equidistant between the Certified Closing Net Worth and
the Actual Company Net Worth.
1.5 PLEDGED ASSETS.
(a) As collateral security for the payment of any post-Closing
adjustment to the Aggregate Merger Consideration under Section 1.4, or any
indemnification obligations of the Stockholders pursuant to Section 8, one or
more Stockholders as indicated on Schedule 1.2(c) shall, and by execution
hereof do hereby, transfer, pledge and assign to USOP, for the benefit of
USOP, a security interest in the following assets:
(i) ten percent (10%) of the dollar value of the
Aggregate Merger Consideration (using the Average Closing Price) as the same
may have been adjusted pursuant to Section 1.3 or Section 1.4 hereof (the
"Pledged Assets"), which such amount is set forth next to one or more
stockholders' names on Schedule 1.2(c), and the certificates and instruments,
if any, representing or evidencing such Stockholder's Pledged Assets;
(ii) all securities hereafter delivered to such
Stockholder in substitution for such Stockholder's Pledged Assets, all
certificates and instruments representing or evidencing such securities, and
all non-cash dividends and other property at any time received, receivable or
otherwise distributed in respect of or in exchange for any or all thereof;
and in the event such Stockholder receives any such property, such
Stockholder shall immediately deliver such property to USOP to be held
hereunder as Pledged Assets; and
(iii) all cash and non-cash proceeds of all of the
foregoing property and all rights, titles, interests, privileges and
preferences appertaining or incident to the foregoing property.
(b) Each certificate, if any, evidencing a Stockholder's Pledged
Assets issued in his or her name in the Merger, shall, at the Closing, be
delivered to USOP, together with a
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<PAGE>
stock power duly signed in blank by him or her, such certificate bearing no
restrictive or cautionary legend other than those imprinted by USOP's
transfer agent at USOP's request.
(c) The Stockholders shall be entitled to exercise any voting
powers incident to the Pledged Assets and all securities described in Section
1.5(a)(ii).
(d) The Pledged Assets shall be available to satisfy any
post-Closing adjustment to the Aggregate Merger Consideration pursuant to
Section 1.4 and any indemnification obligations of the Stockholders pursuant
to Section 8 until the date which is one (1) year after the Effective Time
(the "Release Date"). Promptly following the Release Date, USOP shall return
or cause to be returned to the Stockholders the Pledged Assets, less Pledged
Assets having an aggregate value equal to the amount of any post-Closing
adjustment to the Aggregate Merger Consideration under Section 1.4 and any
indemnification obligations of the Stockholders pursuant to Section 8. For
purposes of the preceding sentence, the value of USOP Common Stock held as
Pledged Assets shall be the Average Closing Price with respect to
post-Closing Adjustments, and, with respect to indemnification obligations,
shall be the average of the final bid and ask prices on the Nasdaq National
Market per share of USOP Common Stock for the five (5) trading days prior to
the satisfaction of an indemnification obligation (the "Market Value"). All
shares of USOP Common Stock included in the Pledged Assets so returned to the
Stockholders shall, if necessary, be reissued by USOP without any restrictive
or cautionary legend referring to such stock as Pledged Assets or as being
subject to any contractual restriction on resale.
(e) Each Stockholder shall have the right, at such Stockholder's
option at any time and from time to time prior to the Release Date, to
deliver to USOP one or more cash payments to serve as all or part of the
Pledged Assets in lieu of a number of pledged shares of USOP Common Stock
equal in value at the Average Closing Price per share. Such payment shall be
made by wire transfer or bank cashier's check payable to the order of USOP.
Promptly upon receipt of such payment, USOP shall return or cause to be
returned to such Stockholder a number of pledged shares of USOP Common Stock
equal in value (at the Average Closing Price per pledged share) to the amount
of such cash payment. USOP shall not be required to return any fractional
share of USOP Common Stock. All shares of USOP Common Stock included in the
Pledged Assets so returned to the Stockholders shall, if necessary, be
reissued by USOP without any restrictive or cautionary legend referring to
such stock as Pledged Assets or as being subject to any contractual
restriction on resale. Such cash payment shall thereafter be held by USOP
and applied as part of the Pledged Assets to satisfy any post-Closing
adjustment to the Aggregate Merger Consideration pursuant to Section 1.4 and
any indemnification obligations of the Stockholders pursuant to Section 8.
Prior to USOP's utilization of USOP Common Stock held as Pledged Assets to
satisfy a Stockholder's obligations under Sections 1.4 and 8 of this
Agreement, such Stockholder shall be given the opportunity to substitute cash
for pledged shares of USOP Common Stock as provided in this Section. USOP
shall deposit any cash portion of the Pledged Assets in an interest bearing
account, and any interest earned shall constitute a part of the Pledged
Assets.
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1.6 EXCHANGE OF CERTIFICATES AND PAYMENT OF CASH.
(a) USOP TO PROVIDE CASH AND COMMON STOCK. In exchange for the
outstanding shares of capital stock of the Company, USOP shall cause to be
made available to the Stockholders (i) at the Effective Time, the Cash Merger
Consideration (including cash in an amount sufficient for payment in lieu of
fractional shares pursuant to Section 1.2(d)), and (ii) promptly after the
Effective Time, the Stock Merger Consideration, in each case as adjusted
pursuant to Section 1.3 and Section 1.4.
(b) CERTIFICATE DELIVERY REQUIREMENTS. At the Effective Time,
the Stockholders shall deliver to USOP the certificates (the "Certificates")
representing Company Common Stock, duly endorsed in blank by the
Stockholders, or accompanied by blank stock powers duly executed by the
Stockholders, in each case with signatures guaranteed by a national bank or
member firm of the New York Stock Exchange, and with all necessary transfer
tax and other revenue stamps, acquired at the Stockholders' expense, affixed
and canceled.
The Stockholders shall promptly cure any deficiencies with respect to
the endorsement of the Certificates or other documents of conveyance with
respect to the stock powers accompanying such Certificates. The Certificates
so delivered shall forthwith be canceled. Until delivered as contemplated by
this Section 1.6(b), each Certificate shall be deemed at any time after the
Effective Time to represent the right to receive upon such surrender the
number of shares of USOP Common Stock and cash as provided by this Section l
and the applicable provisions of the MGBCL and the DGCL.
(c) NO FURTHER OWNERSHIP RIGHTS IN CAPITAL STOCK OF THE COMPANY.
All USOP Common Stock and cash delivered (including USOP Common Stock
delivered pursuant to Section 1.5(b) but withheld) upon the surrender for
exchange of shares of Company Common Stock in accordance with the terms
hereof shall be deemed to have been delivered in full satisfaction of all
rights pertaining to such shares of Company Common Stock, and following the
Effective Time, the Certificates shall have no further rights to, or
ownership in, shares of capital stock of the Company. There shall be no
further registration of transfers on the stock transfer books of the
Surviving Corporation of the shares of Company Common Stock which were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Certificates are presented to the Surviving Corporation for any reason,
they shall be canceled and exchanged as provided in this Section 1.6.
(d) LOST, STOLEN OR DESTROYED CERTIFICATES. In the event any
certificates evidencing shares of Company Common Stock shall have been lost,
stolen or destroyed, USOP shall cause payment to be made in exchange for such
lost, stolen or destroyed certificates, upon the making of an affidavit of
that fact by the holder thereof, such shares of USOP Common Stock and cash as
provided in Section 1.2; PROVIDED, HOWEVER, that USOP may, in its discretion
and as a condition precedent to the issuance thereof, require the owner of
such lost, stolen or destroyed certificates to deliver a bond in such sum as
it may reasonably direct as indemnity against any
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claim that may be made against USOP with respect to the certificates alleged
to have been lost, stolen or destroyed.
(e) NO LIABILITY. Notwithstanding anything to the contrary in
this Section 1.6, none of the Surviving Corporation or any party hereto shall
be liable to a holder of shares of Company Common Stock for any amount paid
to a public official pursuant to any applicable abandoned property, escheat
or similar law.
1.7 STOCKHOLDERS' REPRESENTATIVE.
(a) Each holder of Company Common Stock, by signing this
Agreement, designates Michael J. Barnell or, in the event that Michael J.
Barnell is unable or unwilling to serve, Vicki M. Barnell, to be the
Stockholders' Representative for purposes of this Agreement. The Stockholders
shall be bound by any and all actions taken by the Stockholders'
Representative on their behalf.
(b) USOP and Newco shall be entitled to rely upon any
communication or writings given or executed by the Stockholders'
Representative. All notices to be sent to Stockholders pursuant to this
Agreement may be addressed to the Stockholders' Representative and any notice
so sent shall be deemed notice to all of the Stockholders hereunder. The
Stockholders hereby consent and agree that the Stockholders' Representative
is authorized to accept notice on behalf of the Stockholders pursuant hereto.
(c) The Stockholders' Representative is hereby appointed and
constituted the true and lawful attorney-in-fact of each Stockholder, with
full power in his or her name and on his or her behalf to act according to
the terms of this Agreement in the absolute discretion of the Stockholders'
Representative; and in general to do all things and to perform all acts
including, without limitation, executing and delivering all agreements,
certificates, receipts, instructions and other instruments contemplated by or
deemed advisable in connection with this Agreement. This power of attorney
and all authority hereby conferred is granted subject to the interest of the
other Stockholders hereunder and in consideration of the mutual covenants and
agreements made herein, and shall be irrevocable and shall not be terminated
by any act of any Stockholder, by operation of law, whether by the death or
other event.
1.8 ACCOUNTING TERMS. Except as otherwise expressly provided herein,
all accounting terms used in this Agreement shall be interpreted, and all
financial statements and certificates and reports as to financial matters
required to be delivered hereunder shall be prepared, in accordance with GAAP
consistently applied.
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2. CLOSING
The consummation of the Merger and the other transactions contemplated
by this Agreement (the "Closing") shall take place at the offices of Bryan
Cave, LLP, One Metropolitan Square, 211 North Broadway, Suite 3600, St.
Louis, Missouri, 63102, on August 9, 1996, providing that all conditions to
Closing shall have been satisfied or waived, or at such other time and date
as USOP, the Company and the Stockholders may mutually agree, which date
shall be referred to as the "Closing Date."
On the Closing Date, the articles of merger, certificate of merger, or
other appropriate documents executed in accordance with the MGBCL and the
DGCL (the "Merger Documents"), together with any required officers'
certificates, shall be filed with the Secretary of the State of the States of
Missouri and Delaware in accordance with the provisions of the MGBCL and the
DGCL. The Merger shall become effective upon such filings or at such later
time on the Closing Date as may be specified in such filings (the "Effective
Time").
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE STOCKHOLDERS
To induce USOP and Newco to enter into this Agreement and consummate the
transactions contemplated hereby, each of the Company and the Stockholders,
jointly and severally, represents and warrants to USOP and Newco as follows:
3.1 DUE ORGANIZATION. The Company is a corporation duly organized,
validly existing and is in good standing under the laws of the jurisdiction
of its incorporation and is duly authorized and qualified to do business
under all applicable laws, regulations, ordinances and orders of public
authorities to own its properties and to carry on its business in the places
and in the manner as now conducted except where the failure to be so
authorized or qualified would not have a material adverse effect on the
business, operations, affairs, prospects, properties, assets, profits or
condition (financial or otherwise) of the Company (a "Material Adverse
Effect"). Schedule 3.l hereto contains a list of all jurisdictions in which
the Company is authorized or qualified to do business. The Company is in
good standing as a foreign corporation in each jurisdiction it which it does
business. The Company will promptly after the date hereof deliver to USOP
true, complete and correct copies of the Articles of Incorporation and Bylaws
of the Company. Such Articles of Incorporation and Bylaws are collectively
referred to as the "Charter Documents." The Company is not in violation of
any Charter Documents. The minute books of the Company will be made available
to USOP (and shall be delivered to USOP at Closing) and are correct and,
except as set forth in Schedule 3.1, complete in all material respects.
3.2 AUTHORIZATION; VALIDITY. The Company has all requisite corporate
power and authority to enter into and perform its obligations pursuant to the
terms of this Agreement. The
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Company and each Stockholder has the full legal right, corporate power and
authority to enter into this Agreement and the transactions contemplated
hereby. The execution and delivery of this Agreement by the Company and the
performance by the Company of the transactions contemplated herein have been
duly and validly authorized by the Board of Directors of the Company and the
Stockholders and this Agreement has been duly and validly authorized by all
necessary corporate action. This Agreement is a legal, valid and binding
obligation of the Company and each Stockholder, enforceable in accordance
with its terms.
3.3 NO CONFLICTS. As of the Closing and, except as set forth on
Schedule 3.3, as of the date hereof, the execution, delivery and performance
of this Agreement, the consummation of the transactions contemplated hereby,
and the fulfillment of the terms hereof will not:
(a) conflict with, or result in a breach or violation of any of
the Charter Documents;
(b) other than such as would not, individually or in the
aggregate, have a Material Adverse Effect, conflict with, or result in a
default (or would constitute a default but for any requirement of notice or
lapse of time or both) under any document, agreement or other instrument to
which the Company is a party, or result in the creation or imposition of any
lien, charge or encumbrance on any of the Company's properties pursuant to
(i) any law or regulation to which either the Company or any of its property
is subject, or (ii) any judgment, order or decree to which the Company is
bound or any of their respective property is subject;
(c) result in termination or any impairment of any material
permit, license, franchise, contractual right or other authorization of the
Company (other than the Company's authorization from Steelcase); or
(d) violate any law, order, judgment, rule, regulation, decree
or ordinance to which the Company is subject or by which the Company is bound
(including without limitation the HSR Act, together with all rules and
regulations promulgated thereunder).
3.4 CAPITAL STOCK OF THE COMPANY. The authorized capital stock of
the Company consists of 3,000 shares of common stock, $100.00 par value, of
which 1,719 shares are issued and outstanding and no shares of Preferred
Stock. All of the issued and outstanding shares of the capital stock of the
Company have been duly authorized and validly issued, are fully paid and
nonassessable and are owned of record and beneficially by the Stockholders in
the amounts set forth in Annex II free and clear of all liens, encumbrances
and claims of every kind as of the Closing and, except as set forth on
Schedule 3.4, as of the date hereof. All of the issued and outstanding shares
of the capital stock of the Company were offered, issued, sold and delivered
by the Company in compliance with all applicable state and federal laws
concerning the issuance of securities. Further, none of such shares was
issued in violation of any preemptive rights. There are no voting agreements
or voting trusts with respect to any of the outstanding shares of the capital
stock of the Company.
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3.5 TRANSACTIONS IN CAPITAL STOCK; ACCOUNTING TREATMENT. No option,
warrant, call, subscription right, conversion right or other contract or
commitment of any kind exists of any character, written or oral, which may
obligate the Company to issue, sell or otherwise become outstanding any
shares of capital stock. The Company has no obligation (contingent or
otherwise) to purchase, redeem or otherwise acquire any of its equity
securities or any interests therein or to pay any dividend or make any
distribution in respect thereof. As a result of the Merger, USOP will be the
record and beneficial owner of all outstanding capital stock of the Company
and rights to acquire capital stock of the Company.
3.6 NO BONUS SHARES. None of the shares of Company capital stock was
issued pursuant to awards, grants or bonuses.
3.7 SUBSIDIARIES. Except as set forth on Schedule 3.7, the Company
has no subsidiaries and does not presently own, of record or beneficially, or
control, directly or indirectly, any capital stock, securities convertible
into capital stock or any other equity interest in any corporation,
association or business entity, nor is the Company, directly or indirectly, a
participant in any joint venture, partnership or other noncorporate entity.
3.8 PREDECESSOR STATUS; ETC. Schedule 3.8 sets forth a listing of
all names of all predecessor companies of the Company, including without
limitation the names of any entities from whom the Company has acquired
material assets. The Company has not at any time been a subsidiary or
division of another corporation or a part of an acquisition which was later
rescinded.
3.9 [INTENTIONALLY OMITTED]
3.10 FINANCIAL STATEMENTS. Schedule 3.10 includes (a) true, complete
and correct copies of the Company's audited Balance Sheet as of September 30,
1995 (the end of its most recent completed fiscal year), and Income Statement
for the year ended September 30, 1995 (collectively, the "Audited
Financials") and (b) true, complete and correct copies of the Company's
unaudited Balance Sheet (the "June Balance Sheet") as of June 30, 1996 (the
"Balance Sheet Date") and Income Statement, for the nine-month period then
ended (collectively, the "Interim Financials," and together with the Audited
Financials, the "Company Financial Statements"). Except as noted on the
auditors' report accompanying the Audited Financials, the Company Financial
Statements have been prepared in accordance with GAAP consistently applied,
subject, in the case of the Interim Financials (i) to normal year-end audit
adjustments, which individually or in the aggregate will not be material,
(ii) the exceptions stated on Schedule 3.10, and (iii) to the omission of
footnote information. Each unaudited Balance Sheet included in the Company
Financial Statements presents fairly the consolidated financial condition of
the Company as of the date indicated thereon, and each of the Income
Statements, included in the Company Financial Statements as well as the
audited Income Statement, for the year ended September 30, 1995, and the
unaudited Income Statement for the year ended September 30, 1994, which are
included in Schedule 3.10, presents fairly the results of its
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consolidated operations for the periods indicated thereon. Since the dates of
the Company Financial Statements, there have been no material changes in the
Company's accounting policies other than as requested by USOP to conform the
Company's accounting policies to GAAP.
3.11 LIABILITIES AND OBLIGATIONS.
(a) The Company is not liable for or subject to any liabilities
except for:
(i) those liabilities reflected on the June Balance Sheet
and not previously paid or discharged;
(ii) those liabilities arising in the ordinary course of
its business consistent with past practice under any contract, commitment or
agreement specifically disclosed on any Schedule to this Agreement or not
required to be disclosed thereon because of the term or amount involved or
otherwise; and
(iii) those liabilities incurred since the Balance Sheet
Date in the ordinary course of business consistent with past practice, which
liabilities are not, individually or in the aggregate, material.
For purposes of this Section 3.11, the term "liabilities" shall include
without limitation any direct or indirect liability, indebtedness, guaranty,
endorsement, claim, loss, damage, deficiency, cost, expense, obligation or
responsibility, either accrued, absolute, contingent, mature, unmature or
otherwise and whether known or unknown, fixed or unfixed, choate or inchoate,
liquidated or unliquidated, secured or unsecured.
(b) The Company will promptly after the date hereof deliver to
USOP, in the case of those liabilities which are not fixed or contested, a
reasonable estimate of the maximum amount which may be payable.
3.12 ACCOUNTS AND NOTES RECEIVABLE. The Company will promptly after
the date hereof deliver to USOP an accurate list, as of a date not more than
two business days prior to the date hereof, of the accounts and notes
receivable of the Company (including without limitation receivables from and
advances to employees and the Stockholders), which includes an aging of all
accounts and notes receivable showing amounts due in 30-day aging categories.
On the Closing Date, the Company will deliver to USOP an accurate list, as
of a date not more than two (2) business days prior to the Closing Date, of
the accounts and notes receivable of the Company, which includes an aging of
all accounts and notes receivable showing amounts due in 30-day aging
categories. All accounts receivable of the Company that are reflected on its
books and records as of the Closing Date (collectively, the "Accounts
Receivable") represent or will represent valid obligations arising from sales
actually made or services actually performed in the ordinary course of
business. Unless paid prior to the Closing Date, the Accounts Receivable are
or will be as of the Closing Date current and collectible net of any
respective reserves shown as
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of the Closing Date (which reserves are adequate and calculated consistent
with past practice). Subject to such reserves, each of the Accounts
Receivable either has been or will be collected in full, without any set-off,
within one hundred twenty (120) days after the day on which it first becomes
due and payable. There is no contest, claim, or right of set-off, other than
rebates and returns in the ordinary course of business, under any contract
with any maker of an Accounts Receivable relating to the amount or validity
of such Accounts Receivable.
3.13 PERMITS. The Company owns or holds all licenses, franchises,
permits and other governmental authorizations, including without limitation
permits, titles (including without limitation motor vehicle titles and
current registrations), fuel permits, licenses, franchises, the absence of
any of which, individually or in the aggregate, could have a Material Adverse
Effect (the "Material Permits"). The Material Permits are valid, and the
Company has not received any notice that any governmental authority intends
to modify, cancel, terminate or not renew any Material Permit. The Company
has conducted and is conducting its business in compliance with the
requirements, standards, criteria and conditions set forth in the Material
Permits and other applicable orders, approvals, variances, rules and
regulations and is not in violation of any of the foregoing except where such
non-compliance or violation would not have a Material Adverse Effect. The
transactions contemplated by this Agreement will not result in a default
under or a breach or violation of, or adversely affect the rights and
benefits afforded to the Company by any Material Permit.
3.14 ENVIRONMENTAL MATTERS.
(a) HAZARDOUS MATERIAL. Other than as set forth on Schedule
3.14(a), no underground storage tanks and no amount of any substance that has
been designated by any Governmental Entity or by applicable federal, state,
local or other applicable law to be radioactive, toxic, hazardous or
otherwise a danger to health or the environment, including, without
limitation, PCBs, asbestos, petroleum, urea-formaldehyde and all substances
listed as hazardous substances pursuant to the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended, or defined as
a hazardous waste pursuant to the United States Resource Conservation and
Recovery Act of 1976, as amended, and the regulations promulgated pursuant to
said laws, but excluding office and janitorial supplies properly and safely
maintained (a "Hazardous Material"), are present in, on or under any
property, including the land and the improvements, ground water and surface
water thereof, that the Company has at any time owned, operated, occupied or
leased. Schedule 3.14(a) identifies all underground and aboveground storage
tanks, and the capacity, age, and contents of such tanks, located on property
currently owned or leased by the Company.
(b) HAZARDOUS MATERIALS ACTIVITIES. The Company has not
transported, stored, used, manufactured, disposed of or released, or exposed
its employees or others to, Hazardous Materials in violation of any law in
effect on or before the Closing Date, nor has the Company disposed of,
transported, sold, or manufactured any product containing a Hazardous
Material (collectively, "Company Hazardous Materials Activities") in
violation of any rule, regulation,
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treaty or statute promulgated by any Governmental Entity in effect prior to
or as of the date hereof to prohibit, regulate or control Hazardous Materials
or any Hazardous Material Activity.
(c) PERMITS. The Company currently holds all environmental
approvals, permits, licenses, clearances and consents (the "Environmental
Permits") necessary for the conduct of the Company's Hazardous Material
Activities and other business of the Company as such activities and business
are currently being conducted. All Environmental Permits are in full force
and effect. The Company (A) is in compliance in all material respects with
all terms and conditions of the Environmental Permits and (B) is in
compliance in all material respects with all other limitations, restrictions,
conditions, standards, prohibitions, requirements, obligations, schedules and
timetables contained in the laws of all Governmental Entities relating to
pollution or protection of the environment or contained in any regulation,
code, plan, order, decree, judgment, notice or demand letter issued, entered,
promulgated or approved thereunder. To the best of the Company's knowledge
after due inquiry, there are no circumstances that may prevent or interfere
with such compliance in the future. Schedule 3.14(c) includes a listing and
description of all Environmental Permits currently held by the Company. For
purposes of this Agreement, knowledge of the Company includes the knowledge
of the persons who, as of the Closing Date, were its officers, directors, and
stockholders (including the trustees, officers, partners, and directors of
stockholders that are not natural persons).
(d) ENVIRONMENTAL LIABILITIES. No action, proceeding,
revocation proceeding, amendment procedure, writ, injunction or claim is
pending, or to the best knowledge of the Company and the Stockholders,
threatened concerning any Environmental Permit, Hazardous Material or any
Company Hazardous Materials Activity. There are no past or present actions,
activities, circumstances, conditions, events, or incidents that could
involve the Company (or any person or entity whose liability the Company has
retained or assumed, either by contract or operation of law) in any
environmental litigation, or impose upon the Company (or any person or entity
whose liability the Company has retained or assumed, either by contract or
operation of law) any material environmental liability including, without
limitation, common law tort liability.
3.15 REAL AND PERSONAL PROPERTY. Schedule 3.15 sets forth an accurate
list of all owned and leased real property, all personal property included in
"property and equipment" on the June Balance Sheet and all other personal
property owned or leased by the Company with a current book value in excess
of $10,000 both (a) as of the Balance Sheet Date and (b) acquired since the
Balance Sheet Date, including in each case true, complete and correct copies
of leases for material equipment and all real properties on which are
situated buildings, warehouses, workshops, garages and other structures used
in the operation of the business of the Company and also including an
indication as to which assets are currently owned, or were formerly owned, by
any Stockholder or business or personal affiliates of or any Stockholder or
of the Company. All of the trucks and other material machinery and equipment
of the Company listed on Schedule 3.15 are in good working order and
condition, ordinary wear and tear excepted. All leases set forth on
Schedule 3.15 are in full force and effect and constitute valid and binding
agreements of
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the Company, and the Company is not in breach of any of their respective
terms. All fixed assets used by the Company that are material to the
operation of its business are either owned by the Company or leased under an
agreement listed on Schedule 3.15. Schedule 3.15 also includes a summary
description of all plans or projects involving the opening of new operations,
expansion of any existing operations or the acquisition of any real property
or existing business, to which management of the Company has made any
material expenditure in the two-year period prior to the date of this
Agreement, which if pursued by the Company or the Surviving Corporation would
require additional material expenditures of capital. The Company has good and
insurable title to the real property owned and used in its business,
including without limitation those reflected on Schedule 3.15 hereto, subject
to no mortgage, pledge, lien, conditional sales agreement, encumbrance or
charge, except for:
(a) mortgages and liens reflected on Schedules 3.11 and 3.15 as
securing liabilities reflected on such Schedules (with respect to which
liabilities no default exists);
(b) liens for current taxes not yet payable and assessments not
in default; or
(c) easements for utilities serving such real property only.
3.16 SIGNIFICANT CUSTOMERS; MATERIAL CONTRACTS AND COMMITMENTS.
(a) The Company will promptly after the date hereof deliver to
USOP a complete and accurate list of all Significant Customers. For purposes
of this Agreement, "Significant Customers" are those customers representing
five percent (5%) or more of the Company's revenues for the 12 months ending
on the Balance Sheet Date, or who have effected purchases from the Company of
$100,000 or more in any of the past four fiscal quarters.
(b) Schedule 3.16 contains an accurate list of all contracts,
commitments, leases, instruments, agreements, licenses or permits, written or
oral, to which the Company or any Subsidiary is a party or by which it or its
properties are bound (including without limitation contracts with Significant
Customers, joint venture or partnership agreements, contracts with any labor
organizations, employment agreements, consulting agreements, loan agreements,
indemnity or guaranty agreements, bonds, mortgages, options to purchase land,
liens, pledges or other security agreements) that (i) may give rise to
obligations or liabilities exceeding, during the current term thereof,
$25,000, (ii) generate revenues or income exceeding, during the current term
thereof, $25,000, or (iii) to which any Affiliate of the Company is a party
or any officer, director or Stockholder of the Company is a party
(collectively, the "Material Contracts") as of the Balance Sheet Date and
entered into since the Balance Sheet Date. The Company will promptly after
the date hereof deliver to USOP true, complete and correct copies of the
Material Contracts.
(c) Except to the extent set forth on Schedule 3.16, (i) none of
the Company's Significant Customers has canceled or substantially reduced, or
is currently attempting or, to the
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knowledge of the Stockholders, threatening to cancel or substantially reduce,
any purchases, (ii) the Company has complied with all of its commitments and
obligations and is not in default under any of the Material Contracts, and no
notice of default has been received with respect to any thereof, and (iii)
there are no Material Contracts that were not negotiated at arm's length with
third parties not affiliated with the Company or any officer, director or
Stockholder of the Company. The Company has received no material customer
complaints concerning its products and/or services, nor has it had any of its
products returned by a purchaser thereof except for normal warranty returns
consistent with past history and those returns that would not result in a
reversal of any material revenue by the Company.
(d) Each Material Contract, except those terminated pursuant to
Section 6.16, is valid and binding on the Company and is in full force and
effect and is not subject to any default thereunder by any party obligated to
the Company pursuant thereto. The Company has obtained, or will obtain prior
to the Effective Time, all necessary consents, waivers and approvals of
parties to any Material Contracts that are required in connection with any of
the transactions contemplated hereby, or as are required by any governmental
agency or other third party or are advisable in order that any such Material
Contract remain in effect without modification after the Merger and without
giving rise to any right to termination, cancellation or acceleration or loss
of any right or benefit ("Company Third Party Consents"). All Company Third
Party Consents are listed on Schedule 3.16.
(e) The Company is not a "women's business enterprise" ("WBE")
or "woman-owned business concern" as defined in 48 C.F.R. Section 52.204-5,
nor has it held itself out to be such to any of its customers.
(f) The outstanding balance on all loans or credit agreements
between the Company and any Person in which any of the Stockholders owns a
material interest and the average amounts guaranteed by the Company from time
to time for the benefit of any Person in which any of the Stockholders owns a
material interest is set forth in Schedule 3.16.
3.17 INVENTORY. The inventory of the Company consists of raw
materials and supplies, manufactured and purchased parts, goods in process
and finished goods, all of which is merchantable and fit for the purposes for
which it was procured or manufactured, and none of which is slow-moving,
obsolete, damaged, or defective, subject to a reserve for obsolescence not
greater than the LIFO reserve for inventory set forth on the face of the June
Balance Sheet (rather than in any notes thereto) as adjusted for the passage
of time through the Closing Date in accordance with the past custom and
practice of the Company.
3.18 INSURANCE. Schedule 3.18 sets forth an accurate list, as of the
Balance Sheet Date, of all insurance policies carried by the Company and all
insurance loss runs or workmen's compensation claims received for the past
two policy years. The Company will promptly after the date hereof deliver
true, complete and correct copies of all current insurance policies, all of
which are in full force and effect. All premiums payable under all such
policies have been paid
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and the Company is otherwise in full compliance with the terms of such
policies (or other policies providing substantially similar insurance
coverage). Such policies of insurance are of the type and in amounts
customarily carried by persons conducting businesses similar to that of the
Company. To the knowledge of the Stockholders, there have been no threatened
terminations of or material premium increases with respect to any of such
policies.
3.19 EMPLOYEE MATTERS. Except as set forth on Schedule 3.19, with
respect to employees of and service providers to the Company:
(a) the Company is and has been in compliance in all material
respects with all applicable laws respecting employment and employment
practices, terms and conditions of employment and wages and hours, including
without limitation any such laws respecting employment discrimination,
workers' compensation, family and medical leave, the Immigration Reform and
Control Act, and occupational safety and health requirements, and has not and
is not engaged in any unfair labor practice;
(b) there is not now, nor within the past three years has there
been, any unfair labor practice complaint against the Company pending or, to
the Company and the Stockholders' knowledge, threatened before the National
Labor Relations Board or any other comparable authority;
(c) there is not now, nor within the past three years has there
been, any labor strike, slowdown or stoppage actually pending or, to the
Company's and the Stockholders' knowledge, threatened against or directly
affecting the Company;
(d) to the Company's and the Stockholders' knowledge, no labor
representation organization effort exists nor has there been any such
activity within the past three years;
(e) no grievance or arbitration proceeding arising out of or
under collective bargaining agreements is pending and, to the Company's and
the Stockholders' knowledge, no claims therefor exist or have been threatened;
(f) the employees of the Company are not and have never been
represented by any labor union, and no collective bargaining agreement is
binding and in force against the Company or currently being negotiated by the
Company; and
(g) all persons classified by the Company as independent
contractors do satisfy and have satisfied the requirements of law to be so
classified, and the Company has fully and accurately reported their
compensation on IRS Forms 1099 when required to do so.
3.20 EMPLOYEE BENEFIT PLANS. All employee benefit plans, programs and
policies (whether formal or informal, and whether maintained for the benefit
of a single individual or
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more than one individual) maintained or contributed to by the Company for the
benefit of any current or former employee of the Company or in which such
employees are entitled to participate are listed in Schedule 3.20 (the
"Benefit Plans"), and copies of all such written plans and policies, written
descriptions of all such oral plans and policies, and all other documentation
relating to such plans and policies will be delivered or made available to
USOP.
(a) Each Benefit Plan and the administration thereof complies,
and has at all times complied, in all material respects with the requirements
of all applicable law, including without limitation the Employee Retirement
Income Security Act of 1974, as amended ("ERISA") the Code, and each Benefit
Plan intended to qualify under section 401(a) of the Code so qualifies, and
each trust which forms a part of any such plan is tax-exempt under section
501(a) of the Code.
(b) No Benefit Plan subject to Part 3 of Title I of ERISA has
incurred any "accumulated funding deficiency" within the meaning of section
302 of ERISA or section 412 of the Code.
(c) No liability has been incurred or is expected to be incurred
under Title IV of ERISA to any party with respect to any Benefit Plan, or any
other plan presently or heretofore maintained or contributed to by the
Company, any predecessor to the Company or any entity that is or at any time
was a member of a controlled group, as defined in Section 412(n) (6) (B) of
the Code, which includes or included the Company ("Controlled Group Member").
(d) Neither the Company nor any Controlled Group Member has
incurred any liability for any tax imposed under section 4971 through 4980B
of the Code or civil liability under section 502(i) or (1) of ERISA.
(e) The "amount of unfunded benefit liabilities" within the
meaning of section 4001(a) (18) of ERISA does not exceed zero with respect to
any Benefit Plan subject to Title IV of ERISA.
(f) No Benefit Plan is a multiemployer plan within the meaning
of section 3 (37) of ERISA.
(g) No Benefit Plan provides health or death benefit coverage
beyond the termination of an employee's employment, except as required by
Part 6 of Title I of ERISA or section 4980B of the Code.
(h) No material "reportable event" (within the meaning of
section 4043 of ERISA) has occurred with respect to any Benefit Plan or any
plan maintained by a Controlled Group Member since the effective date of said
section 4043.
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(i) No suit, actions or other litigation (excluding claims for
benefits incurred in the ordinary course of plan activities) have been
brought against or with respect to any Benefit Plan.
(j) Except as set forth on Schedule 3.20(j), all contributions
to Benefit Plans that were required to be made under such Benefit Plans have
been made as of the Balance Sheet Date, and all benefits accrued under any
unfunded Benefit Plan will have been paid, accrued or otherwise adequately
reserved in accordance with GAAP as of such date and the Company will have
performed by the Closing Date all material obligations required to be
performed as of such date under Benefit Plans.
If reasonably requested by USOP, the Company will terminate any Benefit
Plan substantially contemporaneously with the Closing.
3.21 CONFORMITY WITH LAW; LITIGATION. The Company has not violated
any law or regulation or any order of any court or federal, state, municipal
or other governmental department, commission, board, bureau, agency or
instrumentality having jurisdiction over it which would have a Material
Adverse Effect. Except as set forth on Schedule 3.21, there are no claims,
actions, suits or proceedings, pending or, to the knowledge of the
Stockholders, threatened against or affecting the Company at law or in
equity, or before or by any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality having
jurisdiction over it and no notice of any claim, action, suit or proceeding,
whether pending or threatened, has been received. There are no judgments,
orders, injunctions, decrees, stipulations or awards (whether rendered by a
court or administrative agency or by arbitration) against the Company or
against any of its properties.
3.22 TAXES.
(a) (i) The Company has timely filed or will timely file all
requisite federal, state and other Tax (as defined below) returns, reports
and forms ("Returns") for all periods ended on or before the Closing Date,
and all such Tax Returns are true, correct and complete in all respects.
(ii) Except as set forth on Schedule 3.22, there are no
examinations in progress or claims against the Company for Taxes for any
period or periods and no notice of any claim for Taxes, whether pending or
threatened, has been received.
(iii) The amounts shown as accruals for Taxes on the June
Balance Sheet are sufficient for the payment of all applicable Taxes,
whenever determined, for all fiscal periods or portions thereof ended on or
before that date, and such accruals as adjusted through the Effective Time in
accordance with past custom and practice of the Company will be sufficient
for the payment of all applicable Taxes, whenever determined, for all fiscal
periods or portions thereof ending on or before the Effective Time.
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(iv) The Company has a taxable year ended on September
30, in each year commencing 1989.
(v) The Company currently utilizes the accrual method of
accounting for income Tax purposes and such method of accounting has not
changed in the past five years.
(vi) The Company has paid or has fully accrued for, and
will have withheld with respect to its employees, all federal and state
income Taxes, FICA, FUTA and other Taxes required to be withheld, whenever
determined, with respect to periods ending on or before the Closing Date.
(vii) Copies of (i) any Tax examinations, (ii) extensions
of statutory limitations for the collection or assessment of Taxes and (iii)
the Returns of the Company for the last fiscal year will promptly after the
date hereof be delivered to USOP.
(viii) There are (and as of immediately following the
Closing there will be) no liens, pledges, charges, claims, security interests
or other encumbrances of any sort ("Liens") on the assets of the Company
relating to or attributable to Taxes.
(ix) Neither the Company nor the Stockholders have any
knowledge of any basis for the assertion of any claim relating or
attributable to Taxes which, if adversely determined, would result in any
Lien on the assets of the Company or otherwise have an adverse effect on the
Company.
(x) None of the Company's assets are treated as "tax
exempt use property" within the meaning of Section 168(h) of the Code.
(xi) As of the Effective Time, there will not be any
contract, agreement, plan or arrangement, including but not limited to the
provisions of this Agreement, covering any employee or former employee of the
Company that, individually or collectively, could give rise to the payment of
any amount that would not be deductible pursuant to Section 280G, 404 or 162
of the Code.
(xii) The Company has not filed any consent agreement
under Section 341(f) of the Code or agreed to have Section 341(f)(2) of the
Code apply to any disposition of a subsection (f) asset (as defined in
Section 341(f)(4) of the Code) owned by the Company.
(xiii) The Company is not a party to a tax sharing, tax
indemnity or allocation agreement nor does the Company owe any amount under
any such agreement.
(xiv) The Company is not, and has not been at any time, a
"United States real property holding corporation" within the meaning of
Section 897(c)(2) of the Code.
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(xv) The Company's tax basis in its assets for purposes
of determining its future amortization, depreciation and other federal income
tax deductions is accurately reflected on the Company's tax books and records.
(xvi) The Company has not been a member of an affiliated
group filing a consolidated federal income Tax Return and does not have any
liability for the Taxes of another person under Treas. Reg. Section 1.1502-6
(or any similar provision of state, local or foreign law) as a transferee or
successor, by contract or otherwise.
(b) [Intentionally Omitted]
For purposes of this Agreement, the term "Tax" shall be understood to
include any tax or similar governmental charge, impost or levy (including
without limitation income taxes, franchise taxes, transfer taxes or fees,
sales taxes, use taxes, gross receipts taxes, value added taxes, employment
taxes, excise taxes, ad valorem taxes, property taxes, withholding taxes,
payroll taxes, minimum taxes or windfall profit taxes) together with any
related penalties, fines, additions to tax or interest imposed by the United
States or any state, county, local or foreign government or subdivision or
agency thereof.
3.23 GOVERNMENT CONTRACTS.
(a) Except as set forth on Schedule 3.23, the Company is not a
party to any governmental contracts.
(b) The Company has not been suspended or debarred from bidding
on contracts or subcontracts for any agency or instrumentality of the United
States Government, nor, to the knowledge of the Stockholders, has any
suspension or debarment action been threatened or commenced. There is no
valid basis for the Company's suspension or debarment from bidding on
contracts or subcontracts for any agency of the United States Government.
(c) Except as set forth in Schedule 3.23, the Company has not
been, nor is it now being, audited, or investigated by any government agency,
or the inspector general or auditor general or similar functionary of any
agency or instrumentality, nor, to the knowledge of the Stockholders, has
such audit or investigation been threatened.
(d) The Company has no dispute pending before a contracting
office of, nor any current claim (other than the Accounts Receivable) pending
against, any agency or instrumentality of the United States Government,
relating to a contract.
(e) The Company has not, with respect to any contract, received
a cure notice advising the Company that it is or was in default or would, if
it failed to take remedial action, be in default under such contract.
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(f) The Company has not submitted any inaccurate, untruthful, or
misleading cost or pricing data, certification, bid, proposal, report, claim,
or any other information relating to a contract to any agency or
instrumentality of the United States Government.
(g) No employee, agent, consultant, representative, or affiliate
of the Company is in receipt or possession of any competitor or government
proprietary or procurement sensitive information related to the Company's
business under circumstances where there is reason to believe that such
receipt or possession is unlawful or unauthorized.
(h) Each of the Company's contracts has been issued, awarded or
novated to the Company in the Company's name.
3.24 ABSENCE OF CHANGES. Since the Balance Sheet Date, the Company
has conducted its business in the ordinary course and except as contemplated
herein or as set forth on Schedule 3.24, there has not been:
(a) any change that by itself or together with other changes,
has had or is likely to have a Material Adverse Effect;
(b) any damage, destruction or loss (whether or not covered by
insurance) materially adversely affecting the properties or business of the
Company;
(c) any change in the authorized capital of the Company or in
its outstanding securities or any change in its ownership interests or any
grant of any options, warrants, calls, conversion rights or commitments;
(d) any declaration or payment of any dividend or distribution
in respect of the capital stock, or any direct or indirect redemption,
purchase or other acquisition of any of the capital stock of the Company;
(e) any increase in the compensation, bonus, sales commissions
or fee arrangements payable or to become payable by the Company to any of its
officers directors, Stockholders, employees, consultants or agents, except
for ordinary and customary bonuses and salary increases for employees in
accordance with past practice;
(f) any work interruptions, labor grievances or claims filed, or
any similar event or condition of any character, materially adversely
affecting the business or future prospects of the Company;
(g) any sale or transfer, or any agreement to sell or transfer,
any material assets property or rights of the Company to any person,
including without limitation the Stockholders and their Affiliates (as
defined in Section 5.8);
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(h) any cancellation, or agreement to cancel, any indebtedness
or other obligation owing to the Company, including without limitation any
indebtedness or obligation of any Stockholders or any affiliate thereof,
PROVIDED that the Company may negotiate and adjust bills in the course of
good faith disputes with customers in a manner consistent with past practice;
(i) any plan, agreement or arrangement granting any preferential
rights to purchase or acquire any interest in any of the assets, property or
rights of the Company or requiring consent of any party to the transfer and
assignment of any such assets, property or rights;
(j) any purchase or acquisition of, or agreement, plan or
arrangement to purchase or acquire, any property, rights or assets outside of
the ordinary course of business of the Company;
(k) any waiver of any material rights or claims of the Company;
(l) any material breach, amendment or termination of any
material contract, agreement, license, permit or other right to which the
Company is a party;
(m) any transaction by the Company outside the ordinary course
of business;
(n) any capital expenditure or commitment by the Company, either
individually or in the aggregate, exceeding $10,000;
(o) any change in accounting methods or practices (including any
change in depreciation or amortization policies or rates) by the Company or
the revaluation by the Company of any of its assets;
(p) any creation or assumption by the Company of any mortgage,
pledge, security interest or lien or other encumbrance on any asset (other
than liens arising under existing lease financing arrangements which are not
material and liens for taxes not yet due and payable);
(q) any entry into, amendment of, relinquishment, termination or
non-renewal by the Company of any contract, lease transaction, commitment or
other right or obligation requiring aggregate payments by the Company in
excess of $50,000;
(r) any loan by the Company to any person or entity, incurring
by the Company, of any indebtedness, guaranteeing by the Company of any
indebtedness, issuance or sale of any debt securities of the Company or
guaranteeing of any debt securities of others;
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(s) the commencement or notice or, to the knowledge of the
Stockholders, threat of commencement of any lawsuit or proceeding against or
investigation of the Company or any of its affairs; or
(t) negotiation or agreement by the Company or any officer or
employee thereof to do any of the things described in the preceding clauses
(a) through (s) (other than negotiations with USOP and its representatives
regarding the transactions contemplated by this Agreement).
3.25 BANK ACCOUNTS; POWERS OF ATTORNEY. Schedule 3.25 sets forth an
accurate list as of the date of this Agreement, of:
(a) the name of each financial institution in which the Company
has any account or safe deposit box;
(b) the names in which the accounts or boxes are held;
(c) the type of account; and
(d) the name of each person authorized to draw thereon or have
access thereto.
Schedule 3.25 also sets forth the name of each person, corporation, firm
or other entity holding a general or special power of attorney from the
Company and a description of the terms of such power.
3.26 RELATIONS WITH GOVERNMENTS. The Company has not made, offered or
agreed to offer anything of value to any governmental official, political
party or candidate for government office nor has it otherwise taken any
action that would cause the Company to be in violation of the Foreign Corrupt
Practices Act of 1977, as amended, or any law of similar effect.
3.27 DISCLOSURE. All written agreements, lists, schedules,
instruments, exhibits, documents, certificates, reports, statements and other
writings furnished to USOP or Newco pursuant hereto or in connection with
this Agreement or the transactions contemplated hereby, are and will be
complete and accurate in all material respects. No representation or warranty
by the Stockholders and the Company contained in this Agreement, in the
schedules attached hereto or in any certificate furnished or to be furnished
by the Stockholders or the Company to USOP or Newco in connection herewith or
pursuant hereto contains or will contain any untrue statement of a material
fact or omits or will omit to state any material fact necessary in order to
make any statement contained herein or therein not misleading. There is no
fact known to any Stockholder that has specific application to such
Stockholder or the Company (other than general economic or industry
conditions) and that materially adversely affects or, as far as such
Stockholder can reasonably foresee, materially threatens, the assets,
business, prospects, financial condition, or
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results of operations of the Company that has not been set forth in this
Agreement or any Schedule hereto.
3.28 CONTINUITY OF BUSINESS ENTERPRISE. The Company operates at least
one significant historic business line, or owns at least a significant
portion of its historic business assets, in each case within the meaning of
Treas. Reg. Section 1.368-1(d).
3.29 USOP PROSPECTUS; SECURITIES REPRESENTATIONS. Each Stockholder
has received and reviewed a copy of the prospectus dated March 28, 1996
including all supplements thereto (as supplemented, "USOP Prospectus")
contained in USOP's shelf registration statement on Form S-4. Each
Stockholder (a) has such knowledge, sophistication and experience in business
and financial matters that they are capable of evaluating the merits and
risks of an investment in the shares of USOP Common Stock, (b) fully
understands the nature, scope, and duration of the limitations on transfer
contained in Sections 1.5, 3.29, and 3.34 hereof, in the Affiliate Agreement
(if applicable), and under applicable law, and (c) can bear the economic risk
of any investment in the shares of USOP Common Stock and can afford a
complete loss of such investment. Each Stockholder has had an adequate
opportunity to ask questions and receive answers (and has asked such
questions and received answers to its satisfaction) from the officers of USOP
concerning the business, operations and financial condition of USOP. None of
the Stockholders has any contract, undertaking, agreement or arrangement,
written or oral, with any other person to sell, transfer or grant
participation in any shares of USOP Common Stock to be acquired by such
Stockholder in the Merger. Each Stockholder acknowledges and agrees that USOP
will not provide such Stockholder with a prospectus for such Stockholder's
use in selling USOP Common Stock.
3.30 ABSENCE OF CLAIMS AGAINST COMPANY. No Stockholder has any claims
against the Company.
3.31 COMPLETE COPIES OF MATERIALS. The Company will promptly after
the date hereof deliver to USOP and Newco true and complete copies of each
agreement, contract, commitment or other document (or summaries of same) that
is referred to in the Company Schedules or that has been requested by USOP
and Newco or its counsel.
3.32 COMPANY FINANCIAL CONDITIONS.
(a) The Company's net worth as of the end of the Company's most
recent fiscal year is not less than $7,000,000 and its net worth as of both
June 30, 1996 and the Closing is not less than $8,900,000.
(b) The Company's sales for its most recent fiscal year are not
less than $49,000,000, and the Company's sales for the nine-month period
ending June 30, 1996 are not less than $42,000,000.
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(c) The Company's earnings before interest and taxes (net of
add-backs agreed to by the Company and USOP) for the most recent fiscal year
are not less than four (4%) of sales, and its earnings before interest and
taxes (net of add-backs agreed to by the Company and USOP) for the nine
months ended June 30, 1996 are not less than $1,169,795.
(d) The Company's long-term debt (including the current portion)
as of the Closing Date is less than $1,400,000.
For purposes of Section 3.32(a) and (c), calculation of amounts as of
June 30, 1996 or as of Closing shall be made in accordance with the last
paragraph of Section 6.14.
3.33 INTELLECTUAL PROPERTY.
(a) The Company (i) owns or (ii) possesses adequate, enforceable
and transferable long-term licenses or other rights to use, without payment,
all copyrights, patents, trade names, trade secrets, trademarks, franchises
and similar rights now used or employed in the Company's business (the
"Intellectual Property"), including without limitation the trademarks,
tradenames, and service marks set forth on Schedule 3.33(a). The Company has
taken all actions necessary to record, preserve and protect such licenses or
other rights.
(b) No claim adverse to the interests of the Company in the
Intellectual Property has been made in litigation or other proceedings to
which the Company is a party or about which the Company has received written
notice. No such claim has been threatened or asserted and no person has
infringed or otherwise violated the Company's rights in any of the
Intellectual Property.
3.34 TAX MATTERS. The Stockholders have no present plan or intention
to sell, exchange, or otherwise dispose of a number of shares of USOP Common
Stock received in the Merger that would reduce their aggregate ownership of
the USOP Common Stock received in the Merger to a number of shares having a
value, computed as of the date of the Merger, of less than 50% of the value
of all of the formerly outstanding Company Common Stock as of the same date.
4. REPRESENTATIONS OF USOP AND NEWCO
To induce the Company and the Stockholders to enter into this Agreement
and consummate the transactions contemplated hereby, each of USOP and Newco
represents and warrants to the Company and the Stockholders as follows:
4.1 DUE ORGANIZATION. Each of USOP and Newco is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Delaware, and each is duly authorized and qualified to do business under
all applicable laws, regulations, ordinances and
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orders of public authorities to carry on their respective businesses in the
places and in the manner as now conducted except for where the failure to be
so authorized or qualified would not have a material adverse effect on the
business, operations, affairs, prospects, properties, assets, profits, or
condition (financial or otherwise) of USOP and its subsidiaries, taken as a
whole (a "USOP Material Adverse Effect"). Copies of the Certificate of
Incorporation and the Bylaws, each as amended, of USOP and Newco
(collectively, the "USOP Charter Documents") have been delivered to the
Company. Neither USOP nor Newco is in violation of any USOP Charter Document.
4.2 USOP COMMON STOCK. The USOP Common Stock to be delivered
pursuant to this Agreement to the Stockholders at the Closing Date will be
duly authorized, validly issued shares of Common Stock of USOP, fully paid
and nonassessable. Except as provided in Sections 1.5, 3.29 and 3.34 of this
Agreement and any Affiliate Agreements executed in connection with this
Agreement, there are no contractual restrictions or limitations on the
transferability of the USOP Common Stock.
4.3 AUTHORIZATION; VALIDITY OF OBLIGATIONS. The representatives of
USOP and Newco executing this Agreement have all requisite corporate power
and authority to enter into and bind USOP and Newco to the terms of this
Agreement, USOP and Newco have the full legal right, power and corporate
authority to enter into this Agreement and the transactions contemplated
hereby. The execution and delivery of this Agreement by USOP and Newco and
the performance by each of USOP and Newco of the transactions contemplated
herein have been duly and validly authorized by the respective Boards of
Directors of USOP and Newco, and this Agreement has been duly and validly
authorized by all necessary corporate action. This Agreement is a legal,
valid and binding obligation of each of USOP and Newco enforceable in
accordance with its terms.
4.4 NO CONFLICTS. The execution, delivery and performance of this
Agreement, the consummation of the transactions herein contemplated hereby
and the fulfillment of the terms hereof will not:
(a) conflict with, or result in a breach or violation of the
USOP Charter Documents;
(b) other than such as would not, individually or in the
aggregate have a USOP Material Adverse Effect, conflict with, or result in a
default (or would constitute a default but for and requirement of notice or
lapse of time or both) under any document, agreement or other instrument to
which either USOP or Newco is a party, or result in the creation or
imposition of any lien, charge or encumbrance on any of USOP's or Newco's
properties pursuant to (i) any law or regulation to which either USOP or
Newco or any of their respective property is subject, or (ii) any judgment,
order or decree to which USOP or Newco is bound or any of their respective
property is subject;
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(c) result in termination or any impairment of any material
permit, license, franchise, contractual right or other authorization of USOP
or Newco ("USOP Third Party Consents"); or
(d) violate any law, order, judgment, rule, regulation, decree
or ordinance to which USOP or Newco is subject or by which USOP or Newco is
bound (including without limitation the HSR Act, together with all rules and
regulations promulgated thereunder).
4.5 CAPITALIZATION OF USOP AND OWNERSHIP OF USOP STOCK. The
authorized capital stock of USOP consists of 100,000,000 shares of Common
Stock and 500,000 shares of Preferred Stock. 34,984,697 shares of USOP Common
Stock and no shares of Preferred Stock were outstanding on July 24, 1996.
The authorized capital stock of Newco consists of 1,000 shares of Common
Stock, of which 100 shares are outstanding. All of the issued and
outstanding shares of Newco are owned beneficially, and of record by USOP.
All of the shares of USOP Common Stock to be issued to the Stockholders in
accordance herewith will be offered, issued, sold and delivered by USOP in
compliance with all applicable state and federal laws concerning the issuance
of securities and none of such shares was or will be issued in violation of
the preemptive rights of any stockholder of USOP.
4.6 [INTENTIONALLY OMITTED]
4.7 CONFORMITY WITH LAW; LITIGATION. Neither USOP nor Newco has
violated any law or regulation or any order of any court or federal, state,
municipal or other governmental department, commission, board, bureau, agency
or instrumentality having jurisdiction over either of them which would have a
USOP Material Adverse Effect. There are no claims, actions, suits or
proceedings, pending or, to the knowledge of USOP and Newco, threatened
against or affecting USOP or Newco at law or in equity, or before any
federal, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality having jurisdiction over either of
them that would have a USOP Material Adverse Effect and no notice of any such
claim, action, suit or proceeding, whether pending or threatened, has been
received. There are no judgments, orders, injunctions, decrees, stipulations
or awards (whether rendered by a court or administrative agency or by
arbitration) against USOP or Newco or against any of the properties of either
of them which would have a USOP Material Adverse Effect.
4.8 USOP PROSPECTUS. The USOP Prospectus, in the form delivered to
the Stockholders pursuant to Section 3.29 hereof does not, at the date
thereof or, as amended or supplemented through the Closing Date, will not at
the Closing Date, 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 the light or the circumstances under which
they were made, not misleading.
4.9 DISCLOSURE. No representation or warranty by USOP and Newco
contained in this Agreement or in any certificate furnished or to be
furnished by USOP or Newco to the
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Stockholders or the Company in connection herewith or pursuant hereto
contains or will contain any untrue statement of a material fact or omits to
state any material fact required to make the statements herein or therein
contained not misleading.
5. COVENANTS
5.1 ACCESS TO INFORMATION; CONFIDENTIALITY.
(a) Between the date of this Agreement and the Closing Date, the
Company will afford to the officers and authorized representatives of USOP
access to (a) all of the sites, properties, books and records of the Company
and (b) such additional financial and operating data and other information as
to the business and properties of the Company as USOP may from time to time
reasonably request, including without limitation, access upon reasonable
request to the Company's employees, customers, vendors, suppliers and
creditors for due diligence inquiry. The Stockholders and the Company will
cooperate with USOP, its representatives, auditors and counsel in the
preparation of any documents or other material which may be required in
connection with this Agreement. No information or knowledge obtained in any
investigation pursuant to this Section 5.1 shall affect or be deemed to
modify any representation or warranty contained in this Agreement or the
conditions to the obligations of the parties to consummate the Merger.
(b) Each of the Stockholders recognizes and acknowledges that he
or she has in the past, currently has, and in the future may possibly have,
access to certain confidential information of the Company's and USOP, such as
lists of customers, operational policies, and pricing and cost policies that
are valuable, special and unique assets of the Company and USOP's respective
businesses. Each of the Stockholders agrees that he or she will not disclose
confidential information with respect to the Company or USOP or its
subsidiaries to any person, firm, corporation, association or other entity
for any purpose or reason whatsoever, except to authorized representatives of
USOP and to counsel and other advisers, PROVIDED that such advisers (other
than counsel) agree to the confidentiality provisions of this Section 5.1(b),
unless (i) such information becomes known to the public generally through no
fault of any Stockholder, (ii) disclosure is required by law or the order of
any governmental authority under color of law, or (iii) the disclosing party
reasonably believes that such disclosure is required in connection with the
defense of a lawsuit against the disclosing party, PROVIDED, that prior to
disclosing any information pursuant to clause (i), (ii) or (iii) above, the
Stockholder (as applicable) shall, if possible, give prior written notice
thereof to USOP and provide USOP with the opportunity to contest such
disclosure and shall cooperate with efforts to prevent such disclosure.
(c) Each of USOP and Newco recognizes and acknowledges that it
had in the past, currently has, and in the future may possibly have, access
to certain confidential information of the Company, such as lists of
customers, operational policies, and pricing and cost policies that are
valuable, special and unique assets of the Company's business. Each of USOP
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and Newco agree that, unless there is a Closing, they will not disclose
confidential information with respect to the Company to any person, firm,
corporation, association or other entity for any purpose or reason
whatsoever, except to authorized representatives of the Company and to
counsel and other advisers, PROVIDED that such advisers (other than counsel)
agree to the confidentiality provisions of this Section 5.1(c), unless (i)
such information becomes known to the public generally through no fault of
USOP or Newco, (ii) disclosure is required by law or the order of any
governmental authority under color of law, or (iii) the disclosing party
reasonably believes that such disclosure is required in connection with the
defense of a lawsuit against the disclosing party, PROVIDED, that prior to
disclosing any information pursuant to clause (i), (ii) or (iii) above, USOP
shall, if possible, give prior written notice thereof to the Company and
provide the Company with the opportunity to contest such disclosure and shall
cooperate with efforts to prevent such disclosure.
5.2 CONDUCT OF BUSINESS PENDING CLOSING. Between the date hereof and
the Effective Time, the Company will (except as requested or agreed by USOP):
(a) carry on its business in substantially the same manner as it
has heretofore and not introduce any material new method of management,
operation or accounting;
(b) maintain its properties and facilities, including those held
under leases, in as good working order and condition as at present, ordinary
wear and tear excepted;
(c) perform all of its obligations under agreements relating to
or affecting its respective assets, properties or rights;
(d) keep in full force and effect present insurance policies or
other comparable insurance coverage;
(e) use all commercially reasonable efforts to maintain and
preserve its business organization intact, retain its present officers and
key employees and maintain its relationships with suppliers, vendors,
customers, creditors and others having business relations with it;
(f) maintain compliance with all permits, laws, rules and
regulations, consent orders, and all other orders of applicable courts,
regulatory agencies and similar governmental authorities;
(g) maintain present debt and lease instruments and not enter
into new or amended debt or lease instruments; and
(h) maintain present salaries and commission levels for all
officers, directors, employees, agents, representatives and independent
contractors, except for ordinary and
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customary bonuses and salary increases for employees (other than employees
who are also Stockholders) in accordance with past practice.
5.3 PROHIBITED ACTIVITIES. Between the date hereof and the Effective
Time, the Company will not, without the prior written consent of USOP:
(a) make any change in its Articles of Incorporation or Bylaws,
or authorize or propose the same;
(b) issue, deliver or sell, authorize or propose the issuance,
delivery or sale of any securities, options, warrants, calls, conversion
rights or commitments relating to its securities of any kind, or authorize or
propose any change in its equity capitalization, or issue or authorize the
issuance of any debt securities;
(c) declare or pay any dividend, or make any distribution
(whether in cash, stock or property) in respect of its stock whether now or
hereafter outstanding, or split, combine or reclassify any of its capital
stock or issue or authorize the issuance of any other securities in respect
of, in lieu of or in substitution for shares of its capital stock, or
purchase, redeem or otherwise acquire or retire for value any shares of its
stock.
(d) enter into any contract or commitment or incur or agree to
incur any liability or make any capital expenditures, or guarantee any
indebtedness, except in the ordinary course of business (consistent with past
practice) in an amount in excess of $10,000, including contracts to provide
services to customers;
(e) increase the compensation payable or to become payable to
any officer, director, Stockholder, employee, agent, representative or
independent contractor; make any bonus or management fee payment to any such
person; make any loans or advances; adopt or amend any Company Plan or
Company Benefit Arrangement; or grant any severance or termination pay;
(f) create or assume any mortgage, pledge or other lien or
encumbrance upon any assets or properties whether now owned or hereafter
acquired;
(g) sell, assign, lease, pledge or otherwise transfer or dispose
of any property or equipment except in the ordinary course of business
consistent with past practice;
(h) acquire or negotiate for the acquisition of (by merger,
consolidation, purchase of a substantial portion of assets or otherwise) any
business or the start-up of any new business, or otherwise acquire or agree
to acquire any assets that are material, individually or in the aggregate, to
the Company;
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(i) merge or consolidate or agree to merge or consolidate with
or into any other corporation;
(j) waive any material rights or claims of the Company, provided
that the Company may negotiate and adjust bills in the course of good faith
disputes with customers in a manner consistent with past practice;
(k) commit a breach of or amend or terminate any material
agreement, permit, license or other right;
(l) enter into any other transaction (i) that is not negotiated
at arm's length with a third party not affiliated with the Company or any
officer, director or Stockholder of the Company or (ii) outside the ordinary
course of business consistent with past practice or (iii) prohibited
hereunder;
(m) commence a lawsuit other than for routine collection of
bills;
(n) revalue any of its assets, including without limitation,
writing down the value of inventory or writing off notes or accounts
receivable other than in the ordinary course of business consistent with past
practice;
(o) make any tax election other than in the ordinary course of
business and consistent with past practice, change any tax election, adopt
any tax accounting method other than in the ordinary course of business and
consistent with past practice, change any tax accounting method, file any tax
return (other than any estimated tax returns, payroll tax returns or sale tax
returns) or any amendment to a tax return, enter into any closing agreement,
settle any tax claim or assessment, or consent to any tax claim or
assessment, without the prior written consent of USOP; or
(p) take, or agree (in writing or otherwise) to take, any of the
actions described in Sections 5.3(a) through (o) above, or any action which
would make any of the representations and warranties of the Company and the
Stockholders contained in this Agreement untrue or result in any of the
conditions set forth in Sections 6 and 7 not being satisfied.
5.4 EXCLUSIVITY. None of the Stockholders, the Company, or any
agent, officer, director or any representative of the Company or any
Stockholder will, during the period commencing on the date of this Agreement
and ending with the earlier to occur of the Closing or the termination of
this Agreement in accordance with its terms, directly or indirectly: (a)
solicit, encourage or initiate the submission of proposals or offers from any
person for, (b) participate in any discussions pertaining to, or (c) furnish
any information to any person other than USOP relating to, any acquisition or
purchase of all or a material amount of the assets of, or any equity interest
in, the Company or a merger, consolidation or business combination of the
Company. In addition to the foregoing, if the Company or any Stockholder
receives any unsolicited offer or
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proposal, or has actual knowledge of any unsolicited offer or proposal,
relating to any of the above, the Company or such Stockholder shall
immediately notify USOP thereof, including the identity of the party making
such offer or proposal and the specific terms of such offer or proposal.
5.5 [INTENTIONALLY OMITTED]
5.6 NOTIFICATION OF CERTAIN MATTERS. Each party hereto shall give
prompt notice to the other parties hereto of (a) the occurrence or
non-occurrence of any event the occurrence or non-occurrence of which would
be likely to cause any representation or warranty of it contained herein to
be untrue or inaccurate in any material respect at or prior to the Closing
and (b) any material failure of such party to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by such
party hereunder. The delivery of any notice pursuant to this Section 5.6
shall not, without the express written consent of the other parties be deemed
to (x) modify the representations or warranties hereunder of the party
delivering such notice, (y) modify the conditions set forth in Sections 6 and
7, or (z) limit or otherwise affect the remedies available hereunder to the
party receiving such notice.
5.7 COOPERATION IN OBTAINING REQUIRED CONSENTS AND APPROVALS. Each
party hereto shall cooperate in obtaining all consents and approvals required
by Section 6.5 (which shall nonetheless continue to be the responsibility of
the Stockholders and the Company), including without limitation Company Third
Party Consents set forth on Schedule 3.16, and Section 7.4 (which shall
nonetheless continue to be the responsibility of USOP), including without
limitation USOP Third Party Consents. In connection therewith, if required,
the Company, the Stockholders and USOP shall file all notices and other
information and documents required under the HSR Act (as defined in Section
5.13) as promptly as practicable after the date hereof.
5.8 AFFILIATE AGREEMENTS. The Stockholders are the only persons who
are, in the reasonable judgment of the Company and each of the Stockholders,
affiliates of the Company within the meaning of Rule 145 (each such person an
"Affiliate") promulgated under the Securities Act of 1933, as amended ("Rule
145"). Each of the Stockholders has executed an Affiliate Agreement in the
form attached as Annex III. USOP and Newco shall be entitled to place
appropriate legends on the certificates evidencing any USOP Common Stock to
be received by such Affiliates pursuant to the terms of this Agreement, and
to issue appropriate stop transfer instructions to the transfer agent for
USOP Common Stock, consistent with the terms of such Affiliate Agreements.
5.9 [INTENTIONALLY OMITTED]
5.10 COOPERATION ON TAX MATTERS. After the Effective Time, USOP and
the Company, on the one hand, and the Stockholders, on the other hand, will
make available to the other, as reasonably requested, all information,
records or documents in their possession or
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control relating to the liability for Taxes of the Company for all periods
prior to or including the Effective Time and will preserve such information,
records or documents until the expiration of any applicable statute of
limitations or extensions thereof.
5.11 FIRPTA COMPLIANCE. On the Closing Date, the Company shall
deliver to USOP a properly executed statement in a form reasonably acceptable
to USOP for purposes of satisfying USOP's obligations under Treas. Reg.
Section 1.1445-2(c)(3).
5.12 [INTENTIONALLY OMITTED]
5.13 HSR. The Stockholders and USOP shall promptly file, or cause to
be filed, with the Department of Justice and the Federal Trade Commission the
Notification and Report Form (if any) required of such party by the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act") and the
rules and regulations of the Federal Trade Commission promulgated thereunder
with respect to the transactions contemplated hereby.
5.14 OPTIONS. An amount of options shall be made available for
allocation to key employees by the Company's president in an amount equal to
six and one-quarter percent (6.25%) of the total number of shares of USOP
Common Stock issued in the transaction.
5.15 SCHEDULES. The Company shall provide the schedules called for by
this Agreement (the "Schedules") to USOP within seven days of the date of
this Agreement.
5.16 CREDIT AGREEMENTS, GUARANTEES. Within 90 days of the Closing
Date, the Stockholders will terminate any and all agreements or guarantees
described in Section 3.16(f) unless this covenant is waived by USOP.
5.17 SEAT LICENSES AND LUXURY BOX LEASES. The Company owns Personal
Seat Licenses ("PSLs") for the St. Louis Football Rams games and a lease for
an all-events private box at the Kiel Center and related parking facilities
(the "Kiel Box"). As promptly after the Closing as allowed by the St. Louis
Football Rams, the Surviving Corporation shall transfer the PSLs to such
persons as the Stockholders may unanimously designate in writing (the
"Designees") in exchange for a payment of $54,000 to the Surviving
Corporation. Following such transfer, the use of the PSLs shall be allocated
between the Designees and the Surviving Corporation as they shall mutually
agree, and the Surviving Corporation shall reimburse the Designees for the
Surviving Corporation's pro rata share of the costs and expenses actually
incurred by the Designees directly in maintaining the PSLs based upon the use
thereof by the Surviving Corporation. The Designees shall be given the
opportunity to use the Kiel Box for one-third of the events available under
the Kiel Center lease (which such events shall be selected as the Designees
and the Surviving Corporation may mutually agree), and shall reimburse the
Surviving Corporation for one-third of the costs and expenses actually
incurred by the Surviving Corporation directly in leasing and maintaining the
Kiel Box; PROVIDED, HOWEVER, that if the Surviving Corporation requires
additional events, it may purchase such additional events from
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the Designees as the Designees and the Surviving Corporation shall mutually
agree. Tickets for games or other events shall be paid or reimbursed by the
Surviving Corporation or the Designees, as the case may be, according to
their actual use thereof.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF USOP AND NEWCO
The obligation of USOP and Newco to effect the Merger is subject to the
satisfaction or waiver, at or before the Effective Time, of the following
conditions:
6.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS. All
of the representations and warranties of the Stockholders and the Company
contained in this Agreement shall be true, correct and complete on and as of
the Closing Date with the same effect as though such representations and
warranties had been made on and as of such date; all of the terms, covenants,
agreements and conditions of this Agreement to be complied with, performed or
satisfied by the Company and the Stockholders on or before the Closing Date
shall have been duly complied with, performed or satisfied; and a certificate
to the foregoing effects dated the Closing Date and signed on behalf of the
Company and by each of the Stockholders shall have been delivered to USOP.
6.2 NO LITIGATION. No temporary restraining order, preliminary or
permanent injunction or other order issued by any court of competent
jurisdiction or other legal or regulatory restraint or provision challenging
USOP's proposed acquisition of the Company, or limiting or restricting USOP's
conduct or operation of the business of the Company (or its own business)
following the Merger shall be in effect, nor shall any proceeding brought by
an administrative agency or commission or other governmental authority or
instrumentality, domestic or foreign, seeking any of the foregoing be
pending. There shall be no action, suit claim or proceeding of any nature
pending or threatened against USOP, Newco or the Company, their respective
properties or any of their officers or directors, that could materially and
adversely affect the business, assets, liabilities, financial condition,
results of operations or prospects of the Company.
6.3 EMPLOYMENT AGREEMENTS. Michael J. Barnell shall have entered
into an employment agreement with the Company substantially in the form
attached as Annex IV.A. Paul Mendelson, Gerald Holschen, Douglas Short, Suzan
Laycob, Nina Greenfield and Vicki Barnell shall have each entered into an
employment agreement with the Company substantially in the form attached as
Annex IV.B with the specific terms and conditions contained in the schedule
in Annex IV.B.
6.4 OPINION OF COUNSEL. USOP shall have received an opinion from
counsel to the Company and the Stockholders, dated the Closing Date, in a
form reasonably satisfactory to counsel for USOP.
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6.5 CONSENTS AND APPROVALS. All necessary consents of and filings
with any governmental authority or agency or third party (with respect to
Material Contracts, as defined in Section 3.16, and including without
limitation any Company Third Party Consents), relating to the consummation by
the Company and the Stockholders of the transactions contemplated hereby
shall have been obtained and made.
6.6 CHARTER DOCUMENTS. The Company shall have delivered to USOP (a)
a copy of the Articles of Incorporation of the Company certified by an
appropriate authority in the state of its incorporation and (b) a copy of the
Bylaws of the Company certified by the Secretary of the Company, and such
documents shall be in form and substance reasonably acceptable to USOP and
its counsel.
6.7 INSURANCE. The Company shall have delivered to USOP evidence
that USOP has been added as an additional named insured on all liability
insurance policies of the Company.
6.8 [INTENTIONALLY OMITTED]
6.9 DUE DILIGENCE REVIEW. The Company shall have delivered the
schedules as called for by Section 5.15 and made such other deliveries as are
called for by this Agreement. USOP shall be fully satisfied in its sole
discretion with the results of its review of all of the Schedules, whether
delivered before or after the execution hereof, and such deliveries, and its
review, and its other due diligence investigations with respect to, the
business, operations, affairs, prospects, properties, assets, existing and
potential liabilities, obligations, profits and condition (financial or
otherwise) of the Company.
6.10 EMPLOYEE BENEFIT PLANS. If reasonably requested by USOP, the
Company will terminate any Company Plan or Company Benefit Arrangement
substantially contemporaneously with the Closing.
6.11 NO MATERIAL ADVERSE CHANGE. There have been no Material Adverse
Effects and no material adverse changes in the business, operations, affairs,
prospects, properties, assets, existing and potential liabilities,
obligations, profits or condition (financial or otherwise) of the Company
shall have occurred since the Balance Sheet Date; and USOP shall have
received a certificate signed on behalf of the Company and by the
Stockholders dated the Closing Date to such effect.
6.12 AFFILIATE AGREEMENTS. USOP shall have received from each of the
Affiliates of the Company an executed Affiliate Agreement which shall be in
full force and effect.
6.13 [INTENTIONALLY OMITTED]
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6.14 DELIVERY OF CLOSING FINANCIAL CERTIFICATE. USOP shall have
received a certificate (the "Closing Financial Certificate"), dated as of the
Closing Date, signed on behalf of the Company and by each of the
Stockholders, setting forth:
(a) the net worth of the Company as of the last day of its most
recent fiscal year (the "Certified Year-End Net Worth");
(b) the net worth of the Company as of the Closing Date (the
"Certified Closing Net Worth") and the net worth of the Company as of June
30, 1996 (the "Certified June 30 Net Worth");
(c) the sales of the Company for the most recent fiscal year
preceding the Closing Date (the "Certified Year-End Sales");
(d) the sales of the Company for the nine-month period ending on
June 30, 1996 (the "Certified June 30 Sales");
(e) the earnings of the Company before interest and taxes (net
of "add-backs" agreed upon between USOP and the Stockholders prior to the
Closing Date) for the most recent fiscal year preceding the Closing Date as a
percent of sales (the "Certified Year-End Profits");
(f) the earnings of the Company before interest and taxes (net
of "add-backs" agreed upon between USOP and the Stockholders prior to the
date of this Agreement) for the nine month period ending on June 30, 1996
(the "Certified June 30 Profits"); and
(g) the Company's long-term debt (including current portion) as
of the Closing Date (the "Certified Closing Long-Term Debt").
The parties acknowledge and agree that for purposes of determining the
Certified Closing Net Worth, the Certified June 30 Net Worth, and the
Certified June 30 Profits, the Company shall not take account of (i) any
increase in intangible assets (including without limitation goodwill,
franchises and intellectual property) accounted for after May 31, 1996; (ii)
any accelerated bonus compensation payable under Section 3.4 of the
Consulting Agreement between the Company and Robert J. Gruener, dated as of
January 1, 1995, and the corresponding provision of the Employment Agreement
between the Company and Edward E. Gruener, dated as of February 1, 1995;
(iii) any accelerated non-competition payment under Section 4 of the
Non-Competition Agreement between the Company, Robcomp, Inc., Robert J.
Compton, and Mary Jane Compton, dated as of February 1, 1996; and (iv) the
Company's LIFO reserve for inventory or any reserve for 1997 vacation pay or
accrual for 1996 vacation pay; but shall take account of (v) a reserve for
inventory obsolescence (which such reserve shall be determined in accordance
with GAAP).
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6.15 HSR. Any waiting period applicable to the consummation of the
Merger under the HSR Act shall have expired or been terminated, and no action
shall have been instituted by the Department of Justice or Federal Trade
Commission and not withdrawn or terminated that challenges or seeks to enjoin
the consummation of the transactions contemplated hereby.
6.16 RELATED PARTY AGREEMENTS. USOP shall have received sufficient
evidence that any Material Contracts to which any Affiliate of the Company is
a party or any officer, director or Stockholder of the Company is a party,
which USOP requests the Company or Stockholders to terminate, have in fact
been terminated at no cost or expense to the Company without the express
prior written approval of USOP.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE STOCKHOLDERS AND THE COMPANY
The obligation of the Stockholders and the Company to effect the Merger
are subject to the satisfaction or waiver, at or before the Effective Time,
of the following conditions:
7.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS. All
of the representations and warranties of USOP and Newco contained in this
Agreement shall be true, correct and complete on and as of the Closing Date
with the same effect as though such representations and warranties had been
made as of such date; all of the terms, covenants, agreements and conditions
of this Agreement to be complied with, performed or satisfied by USOP and
Newco on or before the Closing Date shall have been duly complied with,
performed or satisfied; and a certificate to the foregoing effects dated the
Closing Date and signed by the President or any Vice President of USOP shall
have been delivered to the Company and the Stockholders.
7.2 NO LITIGATION. No temporary restraining order, preliminary or
permanent injunction or other order issued by any court of competent
jurisdiction or other legal or regulatory restraint or provision challenging
USOP's proposed acquisition of the Company, or limiting or restricting USOP's
conduct or operation of the business of the Company (or its own business)
following the Merger shall be in effect, nor shall any proceeding brought by
an administrative agency or commission or other governmental authority or
instrumentality, domestic or foreign, seeking any of the foregoing be
pending. There shall be no action, suit, claim or proceeding of any nature
pending or threatened, against USOP, Newco or the Company, their respective
properties or any of their officers or directors, that could materially and
adversely affect the business, assets, liabilities, financial condition,
results of operations or prospects of the USOP and its subsidiaries taken as
a whole.
7.3 EMPLOYMENT AGREEMENTS. The Company shall have afforded Michael
J. Barnell an opportunity to enter into an employment agreement substantially
in the form attached at Annex IV.A. The Company shall have afforded Paul
Mendelson, Gerald Holschen, Douglas
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Short, Suzan Laycob, Nina Greenfield and Vicki Barnell each an opportunity to
enter into an employment agreement substantially in the form attached at
Annex IV.B with the specific terms and conditions as set forth on the
schedule contained in Annex IV.B.
7.4 CONSENTS AND APPROVALS. All necessary consents of and filings
with any governmental authority or agency or third party relating to the
consummation by USOP and Newco of the transactions contemplated herein shall
have been obtained and made.
7.5 [INTENTIONALLY OMITTED]
7.6 NO MATERIAL ADVERSE CHANGE. There have been no USOP Material
Adverse Effects and no material adverse changes in the business, operations,
affairs, prospects, properties, assets, existing and potential liabilities,
obligations, profits or condition (financial or otherwise) of USOP and its
subsidiaries, taken as a whole, shall have occurred since the date of the
latest supplement to the USOP Prospectus received by the Stockholders; and
the Stockholders shall have received a certificate signed on behalf of USOP
dated the Closing Date to such effect.
7.7 HSR. Any waiting period applicable to the consummation of the
Merger under the HSR Act shall have expired or been terminated, and no action
shall have been instituted by the Department of Justice or Federal Trade
Commission and not withdrawn or terminated that challenges or seeks to enjoin
the consummation of the transactions contemplated hereby.
8. INDEMNIFICATION
8.1 GENERAL INDEMNIFICATION BY THE STOCKHOLDERS. Each Stockholder,
jointly and severally, covenants and agrees to indemnify, defend, protect and
hold harmless USOP, Newco and the Surviving Corporation and their respective
officers, directors, employees, stockholders, assigns, successors and
affiliates (individually, a "USOP Indemnified Party" and collectively, "USOP
Indemnified Parties") from, against and in respect of:
(a) all liabilities, losses, claims, damages, punitive damages,
causes of action, lawsuits, administrative proceedings (including informal
proceedings), investigations, audits, demands, assessments, adjustments,
judgments, settlement payments, deficiencies, penalties, fines, interest
(including interest from the date of such damages) and costs and expenses
(including without limitation reasonable attorneys' fees and disbursements of
every kind, nature and description) (collectively, "Damages") suffered,
sustained, incurred or paid by the USOP Indemnified Parties in connection
with, resulting from or arising out of, directly or indirectly:
(i) any breach of any representation or warranty of the
Stockholders or the Company set forth in this Agreement or any schedule or
certificate, delivered by or on behalf of any Stockholder or the Company in
connection herewith; or
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(ii) any nonfulfillment of any covenant or agreement on
the part of the Stockholders or, prior to the Effective Time, the Company, in
this Agreement; or
(iii) the business, operations or assets of the Company
prior to the Closing Date or the actions or omissions of the Company's
directors, officers, shareholders, employees or agents prior to the Closing
Date, except as otherwise disclosed in the Company Financial Statements, this
Agreement or the schedules to this Agreement; or
(iv) any and all Damages related to or in any way
involving claims by David Mendelson concerning this Agreement, the
transactions contemplated hereby, or the Settlement Agreement dated June 10,
1988 by and among David B. Mendelson, American Loose Leaf/Business Products,
Inc., Paul Mendelson, Michael J. Barnell and Four M Investments; or
(v) the matters disclosed on Schedule 3.14 (environmental
matters); or
(vi) any amounts that, within 90 days of the Closing Date,
are not repaid in full to the Company under the loans or credit agreements
described in Section 3.16(f) and any amounts that the Company pays under the
guarantees described in such Section (and upon such payment, any rights of
the Company under the applicable agreement shall be assigned to the
Stockholders); or
(vii) the matters disclosed on Schedule 3.21 (conformity
with law, litigation), provided that as to the litigation styled OFFICE PLUS,
INC. V. AMERICAN LOOSE LEAF, ET AL. described on such Schedule, only to the
extent that Damages arising therefrom exceed $50,000;
(b) any and all Damages incident to any of the foregoing or to
the enforcement of this Section 8.1.
8.2 LIMITATION AND EXPIRATION. Notwithstanding the above:
(a) there shall be no liability for indemnification under
Section 8.1 unless, and solely to the extent that, the aggregate amount of
Damages exceeds $400,000 (the "Indemnification Threshold"); PROVIDED,
HOWEVER, that the Indemnification Threshold shall not apply to (i)
adjustments to the Merger Consideration as set forth in Sections 1.3 and 1.4;
(ii) Damages arising out of any breaches of the covenants of the Stockholders
set forth in this Agreement or representations made in Section 3.21
(conformity with law; litigation), Section 3.16 (significant customers;
material contracts and commitments); or (iii) Damages described in Section
8.1(a)(iv), (vi), or (vii);
(b) the aggregate amount of the Stockholders' liability under
this Section 8 shall not exceed the Aggregate Merger Consideration, as
adjusted pursuant to Section 1.3 and Section 1.4, valued at the Average
Closing Price; PROVIDED, HOWEVER, that liability for Damages
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described in Section 8.1(a)(vi) shall not be so limited and shall not count
toward the limitation on liability set forth in this Section;
(c) the indemnification obligations under this Section 8 or in
any certificate or writing furnished in connection herewith shall terminate
on the later of clause (i) or (ii) below:
(i) (1) except as to representations, warranties, and
covenants specified in clause (i)(2) of this Section 8.2(c), the third
anniversary of the Closing Date, or
(2) with respect to representations and warranties
contained in Sections 3.14 (environmental matters), 3.20 (ERISA), 3.22
(taxes), and the indemnification set forth in Section 8.1(a)(v) or (vi), on
(A) the date that is six months after the expiration of the longest
applicable federal or state statute of limitation (including extensions
thereof), or (B) if there is no applicable statute of limitation, (x) ten
(10) years after the Closing Date if the Claim is related to the cost of
investigating, containing, removing, or remediating a release of Hazardous
Material into the environment, or (y) five (5) years after the Closing Date
for any other Claim covered by clause (i)(2)(B) of this Section 8.2(c); or
(ii) the final resolution of claims or demands (a "Claim")
pending as of the relevant dates described in clause (i) of this Section
8.2(c) (such claims referred to as "Pending Claims");
(d) for purposes of the indemnity in this Section 8, all
representations contained in Section 3 are made without any limitations as to
materiality.
8.3 GENERAL INDEMNIFICATION BY USOP.
(a) USOP covenants and agrees to indemnify, defend, protect and
hold harmless each Stockholder and the officers, directors, employees,
assigns, successors and affiliates of the Company and, if there shall not be
a Closing, the Company (individually, a "Stockholder Indemnified Party" and
collectively, "Stockholder Indemnified Parties") from and against:
(i) all Damages suffered, sustained, incurred or paid by
the Stockholder Indemnified Parties in connection with, resulting from or
arising out of, directly or indirectly:
(A) any breach of any representation or warranty of
USOP or Newco set forth in this Agreement or any certificate delivered by or
on behalf of USOP or Newco in connection herewith;
(B) any nonfulfillment of any covenant or agreement
on the part of USOP or Newco in this Agreement; and
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(C) the loss of tax-free reorganization status for
the transactions contemplated herein as a result of (1) the failure of USOP
to retain control of the Company within the meaning of section 368(c) of the
Internal Revenue Code of 1986, as amended, (2) the reacquisition of any of
the USOP Common Stock issued in the Merger, (3) the liquidation or other
merger of the Company into another corporation, (4) the failure to continue
the Company's historic business or use of a significant portion of its
historic business assets in a business within the meaning of Treas. Reg. Sec.
1.368-1(d), or (5) the disposition of any material part of the assets of the
Company; and
(D) the business, operations or assets of the
Surviving Corporation after the Closing Date, except (1) for matters that are
covered by clauses (i) through (iii) of Section 8.1(a) hereof or (2) to the
extent arising out of the act or omission of any Stockholder; and
(ii) any and all Damages incident to any of the foregoing
or to the enforcement of this Section 8.3.
(b) There shall be no liability for indemnification under this
Section 8.3 unless, and solely to the extent that, the aggregate amount of
Damages under this Section 8.3 exceeds the Indemnification Threshold, as
defined in Section 8.2(a); provided, however, that the Indemnification
Threshold shall not apply to (i) adjustments to the Merger Consideration; and
(ii) Damages arising out of any breaches of the covenants of USOP or Newco
set forth in this Agreement or matters covered by Section 4.7 (conformity
with law; litigation).
(c) The aggregate amount of USOP's liability under this Section
8.3 shall not exceed a dollar amount equal to the Aggregate Merger
Consideration, as adjusted pursuant to Section 1.3 and Section 1.4, valued at
the Average Closing Price.
(d) The indemnification obligations under this Section 8.3 shall
terminate on the third anniversary of the Closing Date or the final
resolution of Pending Claims, whichever is later.
(e) For purposes of the indemnity in this Section 8, all
representations contained in Section 4 are made without any limitations as to
materiality.
8.4 INDEMNIFICATION PROCEDURES. All claims for indemnification under
this Section 8 ("Claims") shall be asserted and resolved as follows:
(a) In the event that any USOP Indemnified Party or Stockholder
Indemnified Party (the "Indemnified Party") has a Claim against any party
obligated to provide indemnification pursuant to Section 8.1 or 8.3 hereof
(the "Indemnifying Party") which does not involve a Claim being asserted
against or sought to be collected by a third party, the Indemnified Party
shall with reasonable promptness send a Claim Notice with respect to such
Claim to the
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Stockholders' Representative or USOP, as the case may be. If the
Stockholders' Representative (if the Indemnifying Party is one or more of the
Stockholders) or USOP (if USOP is the Indemnifying Party) does not notify the
Indemnified Party within the Notice Period that the Indemnifying Party
disputes such Claim, the amount of such Claim shall be conclusively deemed a
liability of the Indemnifying Party hereunder. In case an objection is made
in writing in accordance with this Section 8.4(a), the Indemnified Party
shall have thirty (30) days to respond in a written statement to the
objection. If after such thirty (30) day period there remains a dispute as to
any Claims, the parties shall attempt in good faith for sixty (60) days to
agree upon the rights of the respective parties with respect to each of such
Claims. If the parties should so agree, a memorandum setting forth such
agreement shall be prepared and signed by both parties. The actions and
decisions of the Stockholders' Representative shall be binding upon all
Stockholders.
(b) In the event that any Claim for which the Indemnifying Party
would be liable to an Indemnified Party hereunder is asserted against an
Indemnified Party by a third party, the Indemnified Party shall with
reasonable promptness notify the Stockholders' Representative (if the
Indemnifying Party is one or more of the Stockholders) or USOP (if USOP is
the Indemnifying Party) of such Claim, specifying the nature of such claim
and the amount or the estimated amount thereof to the extent then feasible
(which estimate shall not be conclusive of the final amount of such Claim)
(the "Claim Notice"). The actions and decisions of the Stockholders'
Representative shall be binding upon all Stockholders. The Stockholders'
Representative (if the Indemnifying Party is one or more of the Stockholders)
or USOP (if USOP is the Indemnifying Party) shall have 30 days from the
receipt of the Claim Notice (the "Notice Period") to notify the Indemnified
Party (i) whether or not such party disputes the liability to the Indemnified
Party hereunder with respect to such Claim and (ii) if such party does not
dispute such liability, whether or not the Indemnifying Party desires, at the
sole cost and expense of the Indemnifying Party, to defend against such
Claim, provided that such party is hereby authorized (but not obligated)
prior to and during the Notice Period to file any motion, answer or other
pleading and to take any other action which the Indemnifying Party shall deem
necessary or appropriate to protect the Indemnifying Party's interests. In
the event that Stockholders' Representative (if the Indemnifying Party is one
or more of the Stockholders) or USOP (if USOP is the Indemnifying Party)
notifies the Indemnified Party within the Notice Period that the Indemnifying
Party does not dispute the Indemnifying Party's obligation to indemnify
hereunder and desires to defend the Indemnified Party against such Claim and
except as hereinafter provided, such party shall have the right to defend by
appropriate proceedings, which proceedings shall be promptly settled or
prosecuted by such party to a final conclusion, PROVIDED that, unless the
Indemnified Party otherwise agrees in writing, such party may not settle any
matter (in whole or in part) unless such settlement includes a complete and
unconditional release of the Indemnified Party. If the Indemnified Party
desires to participate in, but not control, any such defense or settlement
the Indemnified Party may do so at its sole cost and expense. If the
Stockholders' Representative (if the Indemnifying Party is one or more of the
Stockholders) or USOP (if USOP is the Indemnifying Party) elects not to
defend the Indemnified Party against such Claim, whether by failure of such
party to give the Indemnified Party timely notice as provided above or
otherwise, then the Indemnified Party, without waiving any rights against
such
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party, may settle or defend against any such Claim in the Indemnified Party's
sole discretion and the Indemnified Party shall be entitled to recover from
the Indemnifying Party the amount of any settlement or judgment and, on an
ongoing basis, all indemnifiable costs and expenses of the Indemnified Party
with respect thereto, including interest from the date such costs and
expenses were incurred.
(c) If at any time, in the reasonable opinion of the Indemnified
Party, notice of which shall be given in writing to the Stockholders'
Representative (if the Indemnifying Party is one or more of the Stockholders)
or USOP (if USOP is the Indemnifying Party), any such Claim seeks material
prospective relief which could have a materially adverse effect on the
assets, liabilities, financial condition, results of operations or business
prospects of any Indemnified Party, or, in the case of Section 8.1, the
Surviving Corporation or any subsidiary, the Indemnified Party shall have the
right to control or assume (as the case may be) the defense of any such Claim
and the amount of any judgment or settlement and the reasonable costs and
expenses of defense shall be included as part of the indemnification
obligations of the Indemnifying Party hereunder. If the Indemnified Party
should elect to exercise such right, the Stockholders' Representative (if the
Indemnifying Party is one or more of the Stockholders) or USOP (if USOP is
the Indemnifying Party) shall have the right to participate in, but not
control, the defense of such claim or demand at the sole cost and expense of
the Indemnifying Party.
(d) Nothing herein shall be deemed to prevent the Indemnified
Party from making a claim, and an Indemnified Party may make a claim
hereunder, for potential or contingent claims or demands provided the Claim
Notice sets forth the specific basis for any such potential or contingent
claim or demand to the extent then feasible and the Indemnified Party has
reasonable grounds to believe that such a claim or demand may be made.
(e) The Indemnified Party's failure to give reasonably prompt
notice as required by this Section 8.4 of any actual, threatened or possible
claim or demand which may give rise to a right of indemnification hereunder
shall not relieve the Indemnifying Party of any liability which the
Indemnifying Party may have to the Indemnified Party unless the failure to
give such notice materially and adversely prejudiced the Indemnifying Party.
(f) The parties will make appropriate adjustments for any Tax
benefits, Tax detriments or insurance proceeds in determining the amount of
any indemnification obligation under Section 8, PROVIDED that no Indemnifying
Party shall be obligated to seek any payment pursuant to the terms of any
insurance policy.
8.5 SURVIVAL OF REPRESENTATIONS WARRANTIES AND COVENANTS. All
representations, warranties and covenants made by the Company, the
Stockholders, USOP and Newco in or pursuant to this Agreement or in any
document delivered pursuant hereto shall be deemed to have been made on the
date of this Agreement (except as otherwise provided herein) and, if a
Closing occurs, as of the Closing Date, and, for purposes of asserting Claims
under this Section 8, will survive the Closing and will remain in effect
until, and will expire upon, the termination
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of the relevant indemnification obligation as provided in Section 8.2 or 8.3,
as the case may be; provided, however, that the indemnification obligations
with respect to any Pending Claim (and the related representations,
warranties and covenants) will survive until the final resolution of such
Pending Claim.
8.6 RIGHT TO SET OFF. USOP shall have the right, but not the
obligation, to set off, in whole or in part, amounts finally determined under
Section 8.4 to be owed to USOP by the Stockholders under Section 8.1 hereof,
against the Pledged Assets. Any such set off shall be satisfied with the cash
portion, if any, of the Pledged Assets before reducing the Pledged Assets by
the number of pledged shares of USOP common stock having an aggregate value
(using the Average Closing Price with respect to post-Closing Adjustments,
and the Market Value with respect to the indemnification obligations) equal
to the amount of any additional set off.
8.7 EXCLUSIVE REMEDIES. The indemnification provided for in this
Section 8 shall be the exclusive remedy in any action seeking damages or any
other form of monetary relief brought by any party to this Agreement against
another party, provided that nothing herein shall be construed to limit the
right of a party, in a proper case, to seek injunctive relief for a breach of
this Agreement or to bring an action for fraud.
9. NONCOMPETITION
9.1 PROHIBITED ACTIVITIES. No Stockholder (such term to include,
solely for purposes of this Section 9, Michael J. Barnell, Leah Galansky, and
Paul Mendelson) will, for a period of four years following the Closing Date,
for any reason whatsoever, directly or indirectly, for himself, herself or on
behalf of or in conjunction with any other person, persons, company,
partnership, corporation or business of whatever nature:
(a) engage, as an officer, director, shareholder, owner,
partner, joint venturer, or in a managerial capacity, whether as an employee,
independent contractor, consultant or advisor, or as a sales representative,
in any business selling any products or services in direct competition with
USOP, within 100 miles of anywhere where USOP conducts business as of the
Closing Date (the "Territory");
(b) call upon any person who is, at that time, within the
Territory, an employee of USOP in a managerial capacity for the purpose or
with the intent of enticing such employee away from or out of the employ of
USOP;
(c) call upon any person or entity which is, at that time, or
which has been, within one year prior to that time, a customer of USOP within
the Territory for the purpose of soliciting or selling products or services
in competition with USOP within the Territory; or
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(d) call upon any prospective acquisition candidate, on the
Stockholder's own behalf or on behalf of any competitor, which candidate was,
to the knowledge of such Stockholder, either called upon by USOP or for which
USOP made an acquisition analysis, for the purpose of acquiring such entity.
Each Stockholder, to the extent lacking the knowledge described in the
preceding sentence, shall immediately cease all contact with any prospective
acquisition candidate upon being informed that USOP had called upon such
candidate or made an acquisition analysis thereof.
Notwithstanding the above, the foregoing covenant shall not be deemed to
prohibit (i) any Stockholder from acquiring as an investment not more than
one percent (1%) of the capital stock of a competing business whose stock is
traded on a national securities exchange or over-the-counter; or (ii) any of
Vicki M. Barnell, Suzan Laycob, or Nina Mendelson Greenfield from directly or
indirectly acting as an officer or director of, providing managerial or
consulting assistance to, or owning shares of, Town & Country Business
Products, Inc., a Minnesota corporation ("Town & Country"); or (iii) for a
period of 90 days following the Closing Date, Michael J. Barnell from
providing managerial or consulting assistance to Town & Country and,
thereafter, from providing informal, occasional advice to Vicki M. Barnell in
connection with Town & Country. For purposes of this Section 9, the term
"USOP" includes all subsidiaries of USOP (including without limitation the
Company and any companies USOP has, to the knowledge of such Stockholder,
resolved to acquire by a formal resolution of the Board of Directors of USOP).
9.2 CONFIDENTIALITY. Each Stockholder recognizes that by reason of
his or her ownership of the Company and his or her employment by the Company,
he or she has acquired confidential information and trade secrets concerning
the operation of the Company, the use or disclosure of which could cause the
Company or its affiliates or subsidiaries substantial loss and damages that
could not be readily calculated and for which no remedy at law would be
adequate. Accordingly, each Stockholder covenants and agrees with the Company
and USOP that he or she will not at any time, except in performance of
Stockholder's obligations to the Company or with the prior written consent of
the Company pursuant to authority granted by a resolution of the Board,
directly or indirectly, disclose any secret or confidential information that
he or she may learn or has learned by reason of his or her ownership of the
Company or his or her employment by the Company, or any of its subsidiaries
and affiliates, or use any such information in a manner detrimental to the
interests of the Company. The term "confidential information" includes,
without limitation, information not previously disclosed to the public or to
the trade by the Company's management with respect to the Company's, or any
of its affiliates' or subsidiaries', products, facilities, and methods, trade
secrets and other intellectual property, software, source code, systems,
procedures, manuals, confidential reports, product price lists, customer
lists, financial information (including the revenues, costs, or profits
associated with any of the Company's products), business plans, prospects, or
opportunities but shall exclude any information already in the public domain.
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9.3 DAMAGES. Because of the difficulty of measuring economic losses
to USOP as a result of a breach of the foregoing covenant, and because of the
immediate and irreparable damage that could be caused to USOP for which it
would have no other adequate remedy, each Stockholder agrees that the
foregoing covenant may be enforced by USOP in the event of breach by such
Stockholder, by injunctions and restraining orders.
9.4 REASONABLE RESTRAINT. The parties agree that the foregoing
covenants in this Section 9 impose a reasonable restraint on each Stockholder
in light of the activities and business of USOP on the date of the execution
of this Agreement and the current plans of USOP; but it is also the intent of
USOP and each Stockholder that such covenants be construed and enforced in
accordance with the changing activities and business of USOP throughout the
term of this covenant. The parties further agree that so long as a
Stockholder is not an employee of the Company, in the event a Stockholder
shall enter into a business or pursue other activities not in competition
with USOP or similar activities or business in locations the operation of
which, under such circumstances, does not violate Section 9.1(a) or the terms
of any employment agreement with USOP, such Stockholder shall not be
chargeable with a violation of this Section 9 if USOP shall thereafter enter
the same, similar or a competitive (a) business, (b) course of activities or
(c) location, as applicable.
9.5 SEVERABILITY; REFORMATION. The covenants in this Section 9 are
severable and separate, and the unenforceability of any specific covenant
shall not affect the provisions of any other covenant. Moreover, in the event
any court of competent jurisdiction shall determine that the scope, time or
territorial restrictions set forth are unreasonable, then it is the intention
of the parties that such restrictions be enforced to the fullest extent which
the court deems reasonable, and the Agreement shall thereby be reformed.
9.6 INDEPENDENT COVENANT. All of the covenants in this Section 9
shall be construed as an agreement independent of any other provision in this
Agreement, and the existence of any claim or cause of action of any
Stockholder against USOP, whether predicated on this Agreement or otherwise,
shall not constitute a defense to the enforcement by USOP of such covenants.
The parties expressly acknowledge that the terms and conditions of this
Section 9 are independent of the terms and conditions of any other
agreements. It is specifically agreed that the period of four years stated at
the beginning of this Section 9 during which the agreements and covenants of
the Stockholder made in this Section 9 shall be effective, shall be computed
by excluding from such computation any time during which the Stockholder is
found by a court of competent jurisdiction to have been in violation of any
provision of this Section 9. The covenants contained in Section 9 shall not
be affected by any breach of any other provision hereof by any party hereto
and shall have no effect if the transactions contemplated by this Agreement
are not consummated.
9.7 MATERIALITY. The Company and each Stockholder hereby agree that
the covenants set forth in this Section 9 are a material and substantial part
of the transactions contemplated by this Agreement.
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10. GENERAL
10.1 ACCOUNTS RECEIVABLE. In the event that all accounts and notes
receivable of the Company as of the Closing Date are not collected in full
within 120 days after the Closing then, at the request of the Surviving
Corporation, the Stockholders shall pay (based on their percentage ownership
of the Company immediately prior to the Effective Time) the Surviving
Corporation an amount equal to the receivables not so collected, less an
allowance for doubtful accounts equal to $100,000, and upon receipt of such
payment the Surviving Corporation shall assign to the Stockholders making the
payment all of their rights with respect to the uncollected accounts and
notes receivable giving rise to the payment and shall also thereafter
promptly remit any excess collections received by it with respect to such
assigned receivables. If and when the amount subsequently collected by
Stockholders with respect to the assigned receivables equals (a) the payment
made therefor plus (b) the costs and expenses reasonably incurred by the
Stockholders in the collection of such assigned receivables, the Stockholders
shall reassign to the Surviving Corporation all of such assigned receivables
as have not been collected in full by the Stockholders and shall also
thereafter promptly remit any excess collections received by them. Upon the
written request of the Surviving Corporation, the Stockholders shall provide
it with a status report concerning the collection of assigned receivables.
10.2 TERMINATION. This Agreement may be terminated at any time prior
to the Closing Date solely:
(a) by mutual consent of the boards of directors of USOP and the
Company; or
(b) by the Stockholders and the Company as a group, on the one
hand, or by USOP, on the other hand, if the Closing shall not have occurred
on or before September 27, 1996; provided that the right to terminate this
Agreement under this Section 10.2(b) shall not be available to either party
(with the Stockholders and the Company deemed to be a single party for this
purpose) whose material misrepresentation, breach of warranty or failure to
fulfill any obligation under this Agreement has been the cause of, or
resulted in, the failure of the Closing to occur on or before such date; or
(c) by the Stockholders and the Company as a group, on the one
hand, or by USOP, on the other hand, if there is or has been a material
breach, failure to fulfill or default on the part of the other party (with
the Stockholders and the Company deemed to be a single party for this
purpose) of any of the representations and warranties contained herein or in
the due and timely performance and satisfaction of any of the covenants,
agreements or conditions contained herein, and the curing of such default
shall not have been made or shall not reasonably be expected to occur before
the Closing Date; or
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(d) by the Stockholders and the Company as a group, on the one
hand, or by USOP, on the other hand, if there shall be a final nonappealable
order of a federal or state court in effect preventing consummation of the
Merger; or there shall be any action taken, or any statute, rule regulation
or order enacted, promulgated or issued or deemed applicable to the Merger by
any governmental entity which would make the consummation of the Merger
illegal.
10.3 EFFECT OF TERMINATION. In the event of the termination of this
Agreement pursuant to Section 10.2, this Agreement shall forthwith become
void, and there shall be no liability or obligation on the part of any party
hereto or its officers, directors or shareholders. Notwithstanding the
foregoing sentence, (i) the provisions of this Section 10.3 and Section 8
(indemnification), Section 5.1(b) and (c) (confidentiality) and the other
provisions of Section 10 (including without limitation brokers and expenses),
shall remain in full force and effect and survive any termination of this
Agreement; (ii) each party shall remain liable for any breach of this
Agreement prior to its termination; and (iii) in the event of termination of
this Agreement pursuant to Section 10.2(c) above, then notwithstanding the
provisions of Section 10.9 below, the breaching party (with the Stockholders
and the Company deemed to be a single party for purposes of this Section
10.), shall be liable to the other party to the extent of the expenses
incurred by such other party in connection with this Agreement and the
transactions contemplated hereby, as well as any damages in accordance with
applicable law.
10.4 COOPERATION. The Company, Stockholders USOP and Newco shall each
deliver or cause to be delivered to the other on the Closing Date, and at
such other times and places as shall be reasonably agreed to, such additional
instruments as the other may reasonably request for the purpose of carrying
out this Agreement. In connection therewith, if required, the President or
Chief Financial Officer of the Company will execute any documentation
reasonably required by USOP's independent public accountants (in connection
with such accountant's audit of the Company) or the Nasdaq National Market.
The Stockholders and the Company will also cooperate and use their reasonable
efforts to have the present officers, directors and employees of the Company
cooperate with USOP on and after the Closing Date in furnishing information,
evidence, testimony and other assistance in connection with any Tax Return
filing obligations, actions, proceedings, arrangements or disputes of any
nature with respect to matters pertaining to all periods prior to the Closing
Date.
10.5 SUCCESSORS AND ASSIGNS. This Agreement and the rights of the
parties hereunder may not be assigned (except by operation of law) and shall
be binding upon and shall inure to the benefit of the parties hereto, the
successors of USOP, and the heirs and legal representatives of the
Stockholders.
10.6 ENTIRE AGREEMENT. This Agreement (which includes the Schedules
and Annexes hereto) sets forth the entire understanding of the parties hereto
with respect to the transactions contemplated hereby. It shall not be amended
or modified except by a written instrument duly executed by each of the
parties hereto. Any and all previous agreements and understandings between or
among the parties regarding the subject matter hereof, whether written or
oral, are
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superseded by this Agreement. Each of the Schedules to this Agreement is
incorporated herein by this reference and expressly made a part hereof. A
specific disclosure in any Schedule or closing document shall be deemed a
disclosure on all relevant Schedules and closing documents to the extent such
disclosure is responsive to the requirements of such other Schedules or
closing documents.
10.7 COUNTERPARTS. This Agreement may be executed in any number of
counterparts and any party hereto may execute any such counterpart, each of
which when executed and delivered shall be deemed to be an original and all
of which counterparts taken together shall constitute but one and the same
instrument. This Agreement shall become binding when one or more counterparts
taken together shall have been executed and delivered (which deliveries may
be by telefax) by the parties.
10.8 BROKERS AND AGENTS. USOP and Newco (as a group) and the Company
and each Stockholder (as a group) each represents and warrants to the other
that it has not employed any broker or agent in connection with the
transactions contemplated by this Agreement and agrees to indemnify the other
against all loss, damages or expense relating to or arising out of claims for
fees or commission of any broker or agent employed or alleged to have been
employed by such indemnifying party.
10.9 EXPENSES. USOP has and will pay the fees, expenses and
disbursements of USOP and Newco and their agents, representatives,
accountants and counsel incurred in connection with the subject matter of
this Agreement. The Stockholders (and not the Company) have and will pay the
fees, expenses and disbursements of the Stockholders, the Company, and their
agents, representatives, financial advisers, accountants and counsel incurred
in connection with the subject matter of this Agreement.
10.10 SPECIFIC PERFORMANCE; REMEDIES. Each party hereto acknowledges
that the other parties will be irreparably harmed and that there will be no
adequate remedy at law for any violation by any of them of any of the
covenants or agreements contained in this Agreement, including without
limitation, the confidentiality obligations set forth in Section 5.1(b) and
(c) and the noncompetition provisions set forth in Section 9. It is
accordingly agreed that, in addition to any other remedies which may be
available upon the breach of any such covenants or agreements, each party
hereto shall have the right to obtain injunctive relief to restrain a breach
or threatened breach of, or otherwise to obtain specific performance of, the
other parties, covenants and agreements contained in this Agreement.
10.11 NOTICES. Any notice, request, claim, demand, waiver, consent,
approval or other communication which is required or permitted hereunder
shall be in writing and shall be deemed given if delivered personally or sent
by telefax (with confirmation of receipt), by registered or certified mail,
postage prepaid, or by recognized courier service, as follows:
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If to USOP, Newco or the Surviving Corporation to:
U.S. Office Products Company
1440 New York Avenue, N.W.
Washington, D.C. 20005
Attn: Mark D. Director, Esq.
Executive Vice President and General Counsel
(Telefax: (202) 628-9509)
with a required copy to:
Wilmer, Cutler & Pickering
2445 M Street, N.W.
Washington, D.C. 20037
Attn: George P. Stamas, Esq. and Eric R. Markus, Esq.
(Telefax: (202) 663-6363)
If to any Stockholder to:
Michael J. Barnell
Vicki M. Barnell
Paul Mendelson
Betty Lou Mendelson
Suzan Laycob
Nina Mendelson Greenfield
Leah Galansky
American Loose Leaf/Business Products, Inc.
4015 Papin Street
St. Louis, MO 63110
(Telefax: (314) 535-6135)
Marked: ADDRESSEE ONLY
PERSONAL AND CONFIDENTIAL
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with a required copy to:
Bryan Cave LLP
One Metropolitan Square
211 North Broadway, Suite 3600
St. Louis, Missouri 63102
Attn: Frank P. Wolff, Jr., Esq.
James A. Kearns III, Esq.
(Telefax: (314) 259-2020)
or to such other address as the person to whom notice is to be given may have
specified in a notice duly given to the sender as provided herein. Such
notice, request, claim, demand, waiver, consent, approval or other
communication shall be deemed to have been given as of the date so delivered,
telefaxed, mailed or dispatched and, if given by any other means, shall be
deemed given only when actually received by the addressees.
10.12 GOVERNING LAW. This Agreement shall be governed by and
construed, interpreted and enforced in accordance with the laws of Delaware.
10.13 SEVERABILITY. If any provision of this Agreement or the
application thereof to any person or circumstances is held invalid or
unenforceable in any jurisdiction, the remainder hereof, and the application
of such provision to such person or circumstances in any jurisdiction, shall
not be affected thereby, and to this end the provisions of this Agreement
shall be severable. The preceding sentence is in addition to and not in place
of the severability provisions in Section 9.4.
10.14 ABSENCE OF THIRD PARTY BENEFICIARY RIGHTS. No provision of this
Agreement is intended, nor will be interpreted, to provide or to create any
third party beneficiary rights or any other rights of any kind in any client,
customer, affiliate, shareholder, employee, partner of any party hereto or
any other person or entity.
10.15 MUTUAL DRAFTING. This Agreement is the mutual product of the
parties hereto, and each provision hereof has been subject to the mutual
consultation, negotiation and agreement of each of the parties, and shall not
be construed for or against any party hereto.
10.16 FURTHER REPRESENTATIONS. Each party to this Agreement
acknowledges and represents that it has been represented by its own legal
counsel in connection with the transactions contemplated by this Agreement,
with the opportunity to seek advice as to its legal rights from such counsel.
Each party further represents that it is being independently advised as to
the tax consequences of the transactions contemplated by this Agreement and
is not relying on any representation or statements made by the other party as
to such tax consequences.
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10.17 AMENDMENT; WAIVER. This Agreement may be amended by the parties
hereto at any time prior to the Closing by execution of an instrument in writing
signed on behalf of each of the parties hereto. Any extension or waiver by any
party of any provision hereto shall be valid only if set forth in an instrument
in writing signed on behalf of such party.
10.18 PUBLIC DISCLOSURE. Prior to the Effective Time, neither the
Company nor any Stockholder shall make any disclosure (whether or not in
response to an inquiry) of the subject matter of this Agreement unless
previously approved by USOP in writing. USOP agrees to keep the Company and the
Stockholders apprised in advance of any disclosure of the subject matter of this
Agreement by USOP.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
U.S. OFFICE PRODUCTS COMPANY
By: /s/ Mark D. Director
------------------------------------
Mark D. Director
Executive Vice President and
General Counsel
ALL ACQUISITION CORP.
By: /s/ Mark D. Director
------------------------------------
Mark D. Director, President
AMERICAN LOOSE LEAF/BUSINESS
PRODUCTS, INC.
By: /s/ Michael M. Barnell
------------------------------------
Michael J. Barnell, President
STOCKHOLDERS:
/s/ Vicki M. Barnell
---------------------------------------
Vicki M. Barnell
PAUL MENDELSON REVOCABLE TRUST
By: /s/ Paul Mendelson
------------------------------------
Paul Mendelson, Trustee
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BETTY LOU MENDELSON REVOCABLE TRUST
By: /s/ Betty Mendelson
------------------------------------
Betty Lou Mendelson, Co-Trustee
By: /s/ Paul Mendelson
------------------------------------
Paul Mendelson, Co-Trustee
/s/ Suzan Laycob
---------------------------------------
Suzan Laycob
/s/ Nina Greenfield
---------------------------------------
Nina Greenfield
LEAH GALANSKY REVOCABLE TRUST
By: /s/ Vicki M. Barnell
------------------------------------
Vicki M. Barnell, Co-Trustee
MVB INVESTMENTS, L.P.
By: /s/ Vicki M. Barnell
------------------------------------
Vicki M. Barnell, General Partner
SML PARTNERSHIP, L.P.
By: /s/ Suzan Laycob
------------------------------------
Suzan Laycob, General Partner
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<PAGE>
NMG PARTNERSHIP, L.P.
By: /s/ Nina Greenfield
------------------------------------
Nina Greenfield, General Partner
THE MICHAEL J. BARNELL REVOCABLE TRUST
By: /s/ Michael J. Barnell
------------------------------------
Michael J. Barnell, Trustee
THE ALBERT MENDELSON TRUST
By: /s/ Paul Mendelson
------------------------------------
Paul Mendelson, Trustee
SOLELY FOR PURPOSES OF SECTION 9:
/s/ Michael J. Barnell
- - -------------------------------------
Michael J. Barnell
- - -------------------------------------
Leah Galansky
/s/ Paul Mendelson
- - -------------------------------------
Paul Mendelson
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