<PAGE>
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
MAY 2, 1996
------------------------------------------------
Date of Report (Date of earliest event reported)
U.S. OFFICE PRODUCTS COMPANY
---------------------------------------------------
(Exact name of registrant specified in its charter)
DELAWARE 0-25372 52-1906050
- --------------------------------------------------------------------------------
(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
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(202) 628-9500
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On May 2, 1996, U.S. Office Products Company (the "Company") acquired
School Specialty, Inc. ("School Specialty"), a school supply distributor that
operates in 31 states with six warehouses in Iowa, Kansas, Maryland,
Massachusetts, Oregon and Wisconsin, in a transaction in which School
Acquisition Corp., a wholly-owned subsidiary of the Company, merged with and
into School Specialty. The Company intends to continue the use of the assets of
School Specialty in the school supply business. The consideration paid to the
stockholders of School Specialty was determined pursuant to arm's-length
negotiations and consisted of 1,538,462 shares of the Company's Common Stock.
The acquisition of School Specialty was accounted for under the pooling-of-
interests method.
ITEM 5. OTHER EVENTS
On May 14, 1996 the Company issued a press release relating to the sale,
in an offshore offering and in a concurrent private placement in the United
States, of $200 million of 5 1/2% Convertible Subordinated Notes due 2003. The
press release is filed herewith as Exhibit 99.1 and is incorporated herein by
reference.
In February 1996, the Company acquired 51% of Blue Star Group Limited
("Blue Star"), an office products company in New Zealand, through which it is
making acquisitions in New Zealand and plans to enter into other international
markets. The Company recently reached an agreement in principle to acquire
the remaining 49% of Blue Star and expects to complete such acquisition in
the near future.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) Financial Statements of Business Acquired
Consolidated financial statements of School Specialty, Inc. as of
December 31, 1995 and 1994 and for the years then ended.*
(b) Pro Forma Financial Information
Pro forma financial information as of January 31, 1996 and for the
years ended April 30, 1995, 1994 and 1993 and the nine months ended
January 31, 1995 and 1996.
(c) Exhibits
(i) Agreement and Plan of Reorganization, dated as of April 29, 1996,
by and among School Specialty, School Acquisition Corp., U.S.
Office Products Company and certain investors of School Specialty
named therein.
(ii) Press Release, dated May 15, 1996
- ---------------------
*Previously filed in a current report on Form 8-K, dated March 7, 1996 (File No.
0-25372) and omitted pursuant to General Instruction B.3 of Form 8-K.
<PAGE>
PRO FORMA COMBINED FINANCIAL STATEMENTS
(UNAUDITED)
The following unaudited pro forma combined financial statements give effect
to the following acquisitions: Fiscal Year 1995 Consummated Acquisitions -- GOP,
acquired by Sharp Pencil effective September 30, 1994; Dameron Pierson and
DeKalb effective January 31, 1995; H.H. West effective February 25, 1995; Fiscal
Year 1996 Consummated Acquisitions -- Coffee Butler effective August 1, 1995;
C.W. Mills effective August 1, 1995; Copenhaver Holdings, Incorporated (the sole
shareholder of Smith-Wilson) effective August 27, 1995; MISSCO Commercial
Division effective October 6, 1995; Emmons-Napp effective January 16, 1996; Blue
Star Group effective February 27, 1996; U-Bix Business Machines Limited by Blue
Star Group (assuming 100% of U- Bix shares acquired); and the Company's other
consummated acquisitions; Fiscal Year 1996 Pending Acquisitions -- the pending
acquisitions of School Specialty, Inc., The J Thayer Company, Radar Holding
Corporation, Raleigh Office Supply, Kentwood Office Furniture, Inc. and certain
other Pending Acquisitions. The pro forma combined financial statements also
give effect to (i) the Company's Initial Public Offering in February 1995, (ii)
the Second Offering in August 1995 and (iii) the Note Offering and the Stock
Offering in March 1996. The pro forma combined financial statements are based on
historical financial statements of the Company, the Fiscal Year 1995 Consummated
Acquisitions, the Fiscal Year 1996 Consummated Acquisitions and the Fiscal Year
1996 Pending Acquisitions and certain assumptions set forth below and in the
notes to the pro forma combined financial statements. The historical financial
statements of the Company give retroactive effect to the following acquisitions
which were accounted for under the pooling of interest method of accounting:
Mills Morris Arrow (MMA), Carithers-Wallace-Courtenay, Inc. (CWC), the Costigan
Companies and certain other consummated acquisitions.
The unaudited pro forma combined balance sheet gives effect to the
combination of the Company with the Blue Star Group, other acquisitions included
in the Fiscal Year 1996 Consummated Acquisitions, consummated during February
1996 and the Fiscal Year 1996 Pending Acquisitions as if all such acquisitions
had occurred on the Company's most recent balance sheet date, January 31, 1996.
The pro forma combined statement of operations for the year ended April 30,
1995 gives effect to the Fiscal Year 1995 Consummated Acquisitions, the Fiscal
Year 1996 Consummated Acquisitions and the Fiscal Year 1996 Pending Acquisitions
as if all such acquisitions had been made on May 1, 1994.
15
<PAGE>
The pro forma combined statement of operations for the year ended April 30,
1995 includes the audited financial information of the Company for the year
ended April 30, 1995 (which includes the results of GOP, Dameron-Pierson, DeKalb
and H.H. West from their respective dates of acquisition) and the financial
information for the following companies for the periods indicated:
<TABLE>
<CAPTION>
COMPANY PERIOD
- ----------------------------------------------------------- -------------------------------------------
<S> <C>
GOP........................................................ Five Months ended September 30, 1994
Dameron-Pierson............................................ Nine Months ended January 31, 1995
DeKalb..................................................... Nine Months ended January 31, 1995
H.H. West.................................................. Ten Months ended February 24, 1995
Coffee Butler.............................................. Year ended March 31, 1995
C.W. Mills................................................. Year ended April 30, 1995
MISSCO Commercial Division................................. Year ended March 31, 1995
Copenhaver Holdings, Incorporated.......................... Year ended June 30, 1995
Emmons-Napp................................................ Year ended April 30, 1995
Blue Star.................................................. Year ended March 31, 1995
U- Bix Business Machines Limited........................... Year ended June 30, 1995
School Specialty........................................... Year ended December 31, 1994
The J Thayer Company....................................... Year ended December 31, 1994
Radar Holdings Corporation................................. Year ended June 30, 1995
Raleigh Office Supply...................................... Year ended April 30, 1995
Kentwood Office Furniture.................................. Year ended December 31, 1994
Other acquisitions and Pending Acquisitions................ Year ended April 30, 1995 (or a date within
93 days of April 30, 1995)
</TABLE>
The pro forma combined statement of operations for the nine months ended
January 31, 1996 includes the unaudited interim financial information of the
Company, the Fiscal Year 1996 Consummated Acquisitions and the Fiscal Year 1996
Pending Acquisitions for the nine months ended January 31, 1996.
The pro forma combined statement of operations for the nine months ended
January 31, 1995 includes the unaudited interim financial information of the
Company, the Fiscal Year 1995 Consummated Acquisitions, the Fiscal Year 1996
Consummated Acquisitions and the Fiscal Year 1996 Pending Acquisitions for the
nine months ended January 31, 1995.
The pro forma combined statement of operations for the years ended April 30,
1994 and 1993 gives effect to the Fiscal Year 1996 Pending Acquisitions of
School Specialty, Inc., The J Thayer Company, Radar Holdings Corporation,
Kentwood Office Furniture, Inc, certain other consummated acquisitions and other
Fiscal Year 1996 Pending Acquisitions which will be accounted for under the
pooling-of-interests method.
Pro forma adjustments are based upon preliminary estimates, available
information and certain assumptions that management deems appropriate. The
unaudited pro forma combined financial data presented herein are not necessarily
indicative of the results the Company would have obtained had such events
occurred at the beginning of the period, as assumed, or of the future results of
the Company. The pro forma combined financial statements should be read in
conjunction with the other financial statements and notes thereto included
elsewhere in this report and other filings of the Company.
16
<PAGE>
U.S. OFFICE PRODUCTS COMPANY
PRO FORMA COMBINED BALANCE SHEET
JANUARY 31, 1996
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
FISCAL YEAR 1996 PENDING ACQUISITIONS
-----------------------------------------------
U.S. OFFICE RADAR
PRODUCTS BLUE STAR SCHOOL THE J THAYER HOLDINGS
COMPANY GROUP SPECIALTY, INC. COMPANY CORPORATION
----------- ----------- --------------- --------------- -------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash........................................ $ 4,628 $ 264
Accounts receivable......................... 83,627 24,832 11,381 3,304 6,963
Inventory................................... 34,631 12,477 6,986 429 2,388
Prepaid and other current assets............ 14,499 2,032 9 202
----------- ----------- ------- ------ -------------
Total current assets...................... 137,385 37,309 20,399 4,006 9,553
Property and equipment, net................... 29,983 11,491 7,094 460 1,265
Intangible assets, net........................ 89,662 2,908 7,032 147 577
Other assets.................................. 1,712 10,840 224 5 224
----------- ----------- ------- ------ -------------
Total assets.............................. $ 258,742 $ 62,548 $ 34,749 $ 4,618 $ 11,619
----------- ----------- ------- ------ -------------
----------- ----------- ------- ------ -------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt............................. $ 54,394 $ 21,558 $ 15,394 $ 25 $ 2,877
Accounts payable............................ 35,604 12,961 4,771 2,478 4,509
Accrued compensation........................ 7,331 161 418
Other accrued liabilities................... 7,796 4,987 5,684 222 927
----------- ----------- ------- ------ -------------
Total current liabilities................. 105,125 39,506 25,849 2,886 8,731
Long term debt................................ 6,620 9,228 13,131 619 2,003
Notes payable to officers and shareholders.... 241
Deferred income taxes......................... 4,988 14
Other long-term liabilities................... 121 508 48
Minority Interest in subsidiary............... 275
Stockholders' equity:
Common stock................................ 20 803 33 612
Additional paid-in capital.................. 126,738 3,012
Preferred Stock............................. 1,000
Retained earnings........................... 14,889 (9,554) 1,032 259
----------- ----------- ------- ------ -------------
141,647 (4,739) 1,065 871
Equity of acquired companies.................. 13,539
----------- ----------- ------- ------ -------------
Total Liabilities and Shareholders
Equity................................... $ 258,742 $ 62,548 $ 34,749 $ 4,618 $ 11,619
----------- ----------- ------- ------ -------------
----------- ----------- ------- ------ -------------
<CAPTION>
FISCAL YEAR
1996
RALEIGH ACQUISITIONS PRO FORMA
OFFICE KENTWOOD OFFICE PRO FORMA OFFERING
SUPPLY FURNITURE, INC. OTHER ADJUSTMENTS SUBTOTAL ADJUSTMENTS
----------- ----------------- --------- ------------- ----------- ------------
<S> <C>
ASSETS
Current Assets:
Cash........................................ $ 3,536 $ (64,896)(d) $ (56,468) $ 121,600(a)
138,700(b)
193,500(b)
(137,037)(c)
Accounts receivable......................... 3,499 1,193 46,132 180,931
Inventory................................... 2,643 1,254 27,143 87,951
Prepaid and other current assets............ 49 2,312 19,103
----------- ------ --------- ------------- ----------- ------------
Total current assets...................... 6,142 2,496 79,123 (64,896) 231,517 316,763
Property and equipment, net................... 402 195 7,687 58,577
Intangible assets, net........................ 43 235 88,845(d) 189,449
Other assets.................................. 101 34,110 3,000(d) 50,216 11,550(b)
----------- ------ --------- ------------- ----------- ------------
Total assets.............................. $ 6,645 $ 2,734 $ 121,155 $ 26,949 $ 529,759 $ 328,313
----------- ------ --------- ------------- ----------- ------------
----------- ------ --------- ------------- ----------- ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt............................. $ 100 $ 52,811 $ 147,159 $(101,464)(c)
Accounts payable............................ 726 639 21,247 82,935
Accrued compensation........................ 208 136 1,066 $ -- 9,320
Other accrued liabilities................... 63 74 2,360 22,113
----------- ------ --------- ------------- ----------- ------------
Total current liabilities................. 997 949 77,484 261,527 (101,464)
Long term debt................................ 970 1,883 34,454 143,750(b)
200,000(b)
(34,454)(c)
Notes payable to officers and shareholders.... 878 1,119 (1,119)(c)
Deferred income taxes......................... 1,141 6,143
Other long-term liabilities................... 18 695
Minority Interest in subsidiary............... 275
Stockholders' equity:
Common stock................................ 50 123 (1,613)(d) 28 6(a)
Additional paid-in capital.................. 150 459 81,360(d) 211,719 121,594(a)
Preferred Stock............................. (1,000)(d)
Retained earnings........................... 615 6,558 13,799
----------- ------ --------- ------------- ----------- ------------
815 7,140 78,747 225,546 121,600
Equity of acquired companies.................. 5,648 32,611 (51,798)(d)
----------- ------ --------- ------------- ----------- ------------
Total Liabilities and Shareholders
Equity................................... $ 6,645 $ 2,734 $ 121,155 $ 26,949 $ 529,759 $ 328,313
----------- ------ --------- ------------- ----------- ------------
----------- ------ --------- ------------- ----------- ------------
<CAPTION>
PRO FORMA
COMBINED
TOTALS
-----------
ASSETS
Current Assets:
Cash........................................ $ 260,295
Accounts receivable......................... 180,931
Inventory................................... 87,951
Prepaid and other current assets............ 19,103
-----------
Total current assets...................... 548,280
Property and equipment, net................... 58,577
Intangible assets, net........................ 189,449
Other assets.................................. 61,766
-----------
Total assets.............................. $ 858,072
-----------
-----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt............................. 45,695
Accounts payable............................ $ 82,935
Accrued compensation........................ 9,320
Other accrued liabilities................... 22,113
-----------
Total current liabilities................. 160,063
Long term debt................................ 343,750
Notes payable to officers and shareholders.... --
Deferred income taxes......................... 6,143
Other long-term liabilities................... 695
Minority Interest in subsidiary............... 275
Stockholders' equity:
Common stock................................ 34
Additional paid-in capital.................. 333,313
Preferred Stock.............................
Retained earnings........................... 13,799
-----------
347,146
Equity of acquired companies..................
-----------
Total Liabilities and Shareholders
Equity................................... $ 858,072
-----------
-----------
</TABLE>
See accompanying notes to pro forma combined financial statements.
17
<PAGE>
U.S. OFFICE PRODUCTS COMPANY
PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED APRIL 30, 1995
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
PENDING FISCAL YEAR 1996 ACQUISITIONS
---------------------------------------------------
U.S. OFFICE 1995 1996 SCHOOL RADAR RALEIGH
PRODUCTS CONSUMMATED CONSUMMATED SPECIALTY, THE J THAYER HOLDINGS OFFICE
COMPANY ACQUISITIONS ACQUISITIONS INC. COMPANY CORPORATION SUPPLY
----------- ------------- ------------- ------------- ------------ ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues...................... $ 256,091 $ 83,442 $ 427,347 $ 95,370 $ 22,790 $ 19,377 $ 27,183
Cost of revenues.............. 193,256 66,949 297,427 71,967 18,416 14,230 21,461
----------- ------------- ------------- ------------- ------------ ----------- ---------
Gross Profit................ 62,835 16,493 129,920 23,403 4,374 5,147 5,722
Selling, General and
Administrative expenses...... 55,645 14,176 124,053 19,662 3,767 4,594 5,084
----------- ------------- ------------- ------------- ------------ ----------- ---------
Operating income............ 7,190 2,317 5,867 3,741 607 553 638
Other (income) expense:
Interest expense............ 1,782 503 6,936 2,318 100 201
Minority interest in
subsidiary................. (34)
Other (income) expense...... (539) (79) (9,556) (86) 2 (153)
----------- ------------- ------------- ------------- ------------ ----------- ---------
Income (loss) before provision
for income taxes............. 5,947 1,893 8,521 1,509 505 352 791
Provision for income taxes.... 1,545 299 2,348 198
----------- ------------- ------------- ------------- ------------ ----------- ---------
Net income (loss)............. $ 4,402 $ 1,594 $ 6,173 $ 1,311 $ 505 $ 352 $ 791
----------- ------------- ------------- ------------- ------------ ----------- ---------
----------- ------------- ------------- ------------- ------------ ----------- ---------
Weighted average shares
outstanding..................
Net income per share..........
<CAPTION>
KENTWOOD
OFFICE COMBINED
FURNITURE, PRO FORMA PRO FORMA
INC. OTHER ADJUSTMENTS TOTALS
------------- --------- ------------ ---------------
<S> <C> <C> <C> <C>
Revenues...................... $ 9,501 $ 87,846 $ -- $ 1,028,947
Cost of revenues.............. 5,230 63,301 752,237
------ --------- ------ ---------------
Gross Profit................ 4,271 24,545 276,710
Selling, General and
Administrative expenses...... 3,821 22,667 4,012(e) 253,288
(4,193)(f)
------ --------- ------ ---------------
Operating income............ 450 1,878 181 23,422
Other (income) expense:
Interest expense............ 140 134 1,829(h) 13,943
Minority interest in
subsidiary................. -- (34)
Other (income) expense...... (9) (165) (10,585)
------ --------- ------ ---------------
Income (loss) before provision
for income taxes............. 319 1,909 (1,648) 20,098
Provision for income taxes.... 76 3,768(i) 8,234
------ --------- ------ ---------------
Net income (loss)............. $ 319 $ 1,833 $ (5,416) $ 11,864
------ --------- ------ ---------------
------ --------- ------ ---------------
Weighted average shares
outstanding.................. 31,093(j)
Net income per share.......... $ 0.38
---------------
---------------
</TABLE>
See accompanying notes to pro forma combined financial statements
18
<PAGE>
U.S. OFFICE PRODUCTS COMPANY
PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED JANUARY 31, 1996
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
FISCAL YEAR 1996 PENDING ACQUISITIONS
FISCAL YEAR -------------------------------------------------------------------------
U.S. OFFICE 1996 SCHOOL RADAR RALEIGH
PRODUCTS CONSUMMATED SPECIALTY, THE J THAYER HOLDINGS OFFICE KENTWOOD OFFICE
COMPANY ACQUISITIONS INC. COMPANY CORPORATION SUPPLY FUNRITURE, INC.
----------- --------------- ------------- ------------- ------------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues................. $ 349,937 $ 311,674 $ 104,566 $ 24,846 $ 30,501 $ 20,888 $ 9,740
Cost of revenues......... 266,958 210,180 75,864 20,481 22,647 15,966 5,716
----------- --------------- ------------- ------------- ------------- ----------- ------
Gross Profit........... 82,979 101,494 28,702 4,365 7,854 4,922 4,024
Selling, General and
Administrative
expenses................ 77,239 93,787 25,058 3,836 7,022 3,863 3,395
----------- --------------- ------------- ------------- ------------- ----------- ------
Operating income....... 5,740 7,707 3,644 529 832 1,059 629
Other (income) expense:
Interest expense....... 2,194 6,309 3,382 73 386 61
Minority interest in
subsidiary............ 115
Other (income)
expense............... (747) (7,227) (16) 7 (92) (23)
----------- --------------- ------------- ------------- ------------- ----------- ------
Income (loss) before
provision for income
taxes................... 4,293 8,510 278 449 446 1,151 591
Provision for income
taxes................... 1,266 2,190 111
----------- --------------- ------------- ------------- ------------- ----------- ------
Net income (loss)........ $ 3,027 $ 6,320 $ 167 $ 449 $ 446 $ 1,151 $ 591
----------- --------------- ------------- ------------- ------------- ----------- ------
----------- --------------- ------------- ------------- ------------- ----------- ------
Weighted average shares
outstanding.............
Net income per share.....
<CAPTION>
PRO FORMA
PRO FORMA COMBINED
OTHER ADJUSTMENTS TOTALS
--------- ------------- -----------
<S> <C> <C> <C>
Revenues................. $ 77,794 $ -- $ 929,946
Cost of revenues......... 58,276 676,088
--------- ------------- -----------
Gross Profit........... 19,518 253,858
Selling, General and
Administrative
expenses................ 18,452 2,305(e) 225,291
(358)(f)
(9,308)(g)
--------- ------------- -----------
Operating income....... 1,066 7,361 28,567
Other (income) expense:
Interest expense....... 55 (1,471)(h) 10,989
Minority interest in
subsidiary............ 115
Other (income)
expense............... (240) (8,338)
--------- ------------- -----------
Income (loss) before
provision for income
taxes................... 1,251 8,832 25,801
Provision for income
taxes................... 290 7,141(i) 10,997
--------- ------------- -----------
Net income (loss)........ $ 961 $ 1,691 $ 14,804
--------- ------------- -----------
--------- ------------- -----------
Weighted average shares
outstanding............. 31,323(j)
Net income per share..... $ 0.47
-----------
-----------
</TABLE>
See accompanying notes to pro forma combined financial statements
19
<PAGE>
U.S. OFFICE PRODUCTS COMPANY
PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED JANUARY 31, 1995
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
FISCAL YEAR 1996 PENDING ACQUISITIONS
FISCAL YEAR FISCAL YEAR -------------------------------------------
U.S. OFFICE 1995 1996 SCHOOL RADAR
PRODUCTS CONSUMMATED CONSUMMATED SPECIALTY THE J THAYER HOLDINGS
COMPANY ACQUISITIONS ACQUISITIONS INC. COMPANY CORPORATION
----------- --------------- --------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Revenues.......................... $ 168,989 $ 78,708 $ 319,251 $ 76,147 $ 18,609 $ 13,111
Cost of revenues.................. 125,641 63,150 221,182 54,165 15,153 9,591
----------- ------- --------------- ------------- ------------- -------------
Gross Profit.................... 43,348 15,558 98,069 21,982 3,456 3,520
Selling, General and
Administrative expenses.......... 38,158 13,416 92,219 17,155 2,784 3,143
----------- ------- --------------- ------------- ------------- -------------
Operating income (loss)......... 5,190 2,142 5,850 4,827 672 377
Other (income) expense:
Interest expense................ 1,274 471 4,677 1,424 77 134
Minority interest in
subsidiary..................... 607
Other (income) expense.......... (403) (76) (7,356) (226) 1
----------- ------- --------------- ------------- ------------- -------------
Income (loss) before provision for
income taxes..................... 4,319 1,747 7,922 3,629 594 243
Provision for income taxes........ 998 248 2,143 30
----------- ------- --------------- ------------- ------------- -------------
Net income (loss)................. $ 3,321 $ 1,499 $ 5,779 $ 3,599 $ 594 $ 243
----------- ------- --------------- ------------- ------------- -------------
----------- ------- --------------- ------------- ------------- -------------
Weighted average shares
outstanding......................
Net income per share..............
<CAPTION>
RALEIGH KENTWOOD PRO FORMA
OFFICE OFFICE PRO FORMA COMBINED
SUPPLY FURNITURE INC. OTHER ADJUSTMENTS TOTALS
----------- --------------- --------- ------------- -----------
<S> <C> <C> <C> <C> <C>
Revenues.......................... $ 19,939 $ 9,501 $ 56,338 $ -- $ 760,593
Cost of revenues.................. 15,811 5,568 42,057 552,318
----------- ------ --------- ------------- -----------
Gross Profit.................... 4,128 3,933 14,281 208,275
Selling, General and
Administrative expenses.......... 3,925 3,464 14,263 3,010(e) 190,656
(881)(f)
----------- ------ --------- ------------- -----------
Operating income (loss)......... 203 469 18 (2,129) 17,619
Other (income) expense:
Interest expense................ 140 47 1,663(h) 9,907
Minority interest in
subsidiary..................... -- 607
Other (income) expense.......... (125) (8) (90) -- (8,283)
----------- ------ --------- ------------- -----------
Income (loss) before provision for
income taxes..................... 328 337 61 (3,792) 15,388
Provision for income taxes........ 19 3,098(i) 6,536
----------- ------ --------- ------------- -----------
Net income (loss)................. $ 328 $ 337 $ 42 $ (6,890) $ 8,852
----------- ------ --------- ------------- -----------
----------- ------ --------- ------------- -----------
Weighted average shares
outstanding...................... 30,069(j)
Net income per share.............. $ 0.29
-----------
-----------
</TABLE>
See accompanying notes to pro forma combined financial statements
20
<PAGE>
U.S. OFFICE PRODUCTS COMPANY
PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED APRIL 30, 1994
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
U.S. OFFICE RADAR KENTWOOD PRO FORMA
PRODUCTS SCHOOL THE J THAYER HOLDINGS OFFICE PRO FORMA COMBINED
COMPANY SPECIALTY, INC. COMPANY CORPORATION FURNITURE, INC OTHER ADJUSTMENTS TOTALS
----------- --------------- ------------ ----------- --------------- ------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues.......... $159,240 $55,555 $12,773 $10,840 $8,086 $45,909 $ -- $ 292,403
Cost of
revenues......... 116,010 40,375 10,594 7,205 4,385 31,722 210,291
----------- ------- ------------ ----------- ------ ------- ----------- ---------
Gross Profit.... 43,230 15,180 2,179 3,635 3,701 14,187 82,112
Selling, General
and
Administrative
expenses......... 38,084 13,990 1,944 3,479 3,300 13,689 74,486
----------- ------- ------------ ----------- ------ ------- ----------- ---------
Operating
income......... 5,146 1,190 235 156 401 498 7,626
Other (income)
expense:
Interest
expense........ 1,106 1,350 89 181 105 2,831
Other (income)
expense........ (563) 31 1 98 (280) (713)
----------- ------- ------------ ----------- ------ ------- ----------- ---------
Income (loss)
before provision
for income
taxes............ 4,603 (191) 145 58 220 673 5,508
Provision for
income taxes..... 926 16 11 25 1,390(k) 2,368
----------- ------- ------------ ----------- ------ ------- ----------- ---------
Net income
(loss)........... $ 3,677 $ (207) $ 145 $ 47 $ 220 $ 648 $ (1,390) $ 3,140
----------- ------- ------------ ----------- ------ ------- ----------- ---------
----------- ------- ------------ ----------- ------ ------- ----------- ---------
</TABLE>
See accompanying notes to pro forma combined financial statements
21
<PAGE>
U.S. OFFICE PRODUCTS COMPANY
PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED APRIL 30, 1993
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
KENTWOOD
U.S. OFFICE SCHOOL RADAR OFFICE
PRODUCTS SPECIALTY, THE J THAYER HOLDINGS FURNITURE,
COMPANY INC. COMPANY CORPORATION INC.
----------- ------------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Revenues........................................... $ 137,004 $ 53,986 $ 8,694 $ 8,119 $ 6,833
Cost of revenues................................... 99,696 39,573 7,082 5,482 3,713
----------- ------------- ------ ----------- ------
Gross Profit..................................... 37,308 14,413 1,612 2,637 3,120
Selling, General and Administrative expenses....... 34,819 17,156 1,495 2,518 2,838
----------- ------------- ------ ----------- ------
Operating income (loss)............................ 2,489 (2,743) 117 119 282
Other (income) expense:
Interest expense................................. 1,085 1,424 124 23 228
Other (income) expense........................... (713) (149) (11) (4)
----------- ------------- ------ ----------- ------
Income (loss) before provision for income
taxes............................................. 2,117 (4,018) 4 100 54
Provision for income taxes......................... 663 11 (13)
----------- ------------- ------ ----------- ------
Net income (loss).................................. $ 1,454 $ (4,029) $ 4 $ 113 $ 54
----------- ------------- ------ ----------- ------
----------- ------------- ------ ----------- ------
<CAPTION>
PRO FORMA
PRO FORMA COMBINED
OTHER ADJUSTMENTS TOTALS
--------- ------------ ----------
<S> <C> <C> <C>
Revenues........................................... $ 45,408 $ -- $ 260,044
Cost of revenues................................... 31,965 187,511
--------- ------ ----------
Gross Profit..................................... 13,443 72,533
Selling, General and Administrative expenses....... 13,302 72,128
--------- ------ ----------
Operating income (loss)............................ 141 405
Other (income) expense:
Interest expense................................. 102 2,986
Other (income) expense........................... (208) (1,085)
--------- ------ ----------
Income (loss) before provision for income
taxes............................................. 247 (1,496)
Provision for income taxes......................... 14 (1,332)(k) (657)
--------- ------ ----------
Net income (loss).................................. $ 233 $ 1,332 $ (839)
--------- ------ ----------
--------- ------ ----------
</TABLE>
See accompanying notes to pro forma combined financial statements
22
<PAGE>
U.S. OFFICE PRODUCTS COMPANY
NOTES TO THE PRO FORMA COMBINED FINANCIAL STATEMENTS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
1. UNAUDITED PRO FORMA COMBINED BALANCE SHEET ADJUSTMENTS
(a) Adjustment to reflect $121,600 of net proceeds from the sale of
5,543,045 shares of common stock, including the underwriters over-allotment
option of 610,000 shares which was exercised in March 1996, as part of the Stock
Offering in February 1996 (net of expenses and underwriting discount).
(b) Adjustment to reflect the $138,700 of net proceeds from the sale of
$143,750 of Notes, including the underwriters over-allotment option of $18,750,
which was exercised in March 1996, as part of the Note Offering in February 1996
(net of expenses and underwriters discount). Adjustment to reflect $193,500 of
net proceeds from the sale of $200,000 of Notes (net of expenses and
underwriter's discount).
(c) Adjustment to reflect the use of the proceeds from the issuance of
Common Stock and the Notes to (i) repay short-term debt of $101,464, (ii) repay
long-term debt of $34,454 and (iii) repay notes payable to officers and
stockholders of $1,119.
(d) Adjustment to reflect purchase price adjustments associated with certain
Fiscal Year 1996 Consummated Acquisitions and the Fiscal Year 1996 Pending
Acquisitions noted below. Except as noted, the Company has entered into
agreements or non-binding letters of intent with respect to its acquisition of
all of the outstanding common stock of the companies listed below:
<TABLE>
<CAPTION>
STOCK
----------------------
COMPANY CONSIDERATIONS CASH SHARES VALUE GOODWILL (1)
- ------------------------------------------------- ------------- --------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Poolings:
School Specialties, Inc........................ $ 40,000 1,538,462 $ 40,000
The J Thayer Company........................... 20,000 1,226,091 20,000
Radar Holding Corporation...................... 20,000 909,091 20,000
Kentwood Office Furniture, Inc................. 5,750 250,000 5,750
Other Acquisitions and Pending Acquisitions.... 26,660 1,543,305 26,660
------------- ---------- ----------
Total Poolings............................... $ 112,410 5,466,949 $ 112,410
------------- ---------- ----------
------------- ---------- ----------
Purchases:
Blue Star Group................................ $ 68,000 $ 10,000 2,264,753 $ 58,000 $ 54,461
U- Bix Business Machines....................... 19,000 19,000 1,181
Raleigh Office Supply.......................... 12,788 12,788 7,140
Other acquisitions and Pending Acquisitions.... 43,855 23,108 1,007,688 20,747 26,063
------------- --------- ---------- ---------- -----------
Total Purchases.............................. $ 143,643 $ 64,896 3,272,441 $ 78,747 $ 88,845
------------- --------- ---------- ---------- -----------
------------- --------- ---------- ---------- -----------
</TABLE>
- ------------------------
(1) The portion of the consideration assigned to goodwill in transactions
accounted for as purchases represents the excess of the cost over the fair
value of the net assets acquired. The Company amortizes goodwill over a
period of 40 years. The recoverability of the unamortized goodwill will be
assessed on an ongoing basis by comparing anticipated undiscounted future
cash flows from operations to net book value.
23
<PAGE>
U.S. OFFICE PRODUCTS COMPANY
NOTES TO THE PRO FORMA COMBINED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
(DOLLARS IN THOUSANDS)
2. UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS ADJUSTMENTS
(e) Adjustment to reflect the increase in amortization expense relating to
the goodwill recorded in purchase accounting related to the following
acquisitions and the amortization of such goodwill over an estimated life of 40
years:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED JANUARY 31,
APRIL 30 --------------------
1995 1996 1995
----------- --------- ---------
<S> <C> <C> <C>
Fiscal Year 1995 Consummated Acquisitions.................................. $ 348 $ 261
Fiscal Year 1996 Consummated Acquisitions.................................. 2,225 $ 1,226 1,670
Fiscal Year 1996 Pending Acquisitions...................................... 1,439 1,079 1,079
----------- --------- ---------
$ 4,012 $ 2,305 $ 3,010
----------- --------- ---------
----------- --------- ---------
</TABLE>
(f) Adjustment to reflect the reduction in executive compensation, as a
result of the elimination of certain executive positions and the renegotiation
of executive compensation arrangements, made in conjunction with the acquisition
of Andrews (1995: $731; January 1995: $224; January 1996: $0), BAT (1995: $269;
January 1995: $80; January 1996: $0), Coffee Butler (1995: $1,058; January 1995:
$265; January 1996: $216), Reliable (1995: $187; January 1995: $47; January
1996: $47), MMA (1995: $1,508; January 1995: $326; January 1996: $95), and the
MISSCO Commercial Division (1995: $1,257; January 1995: $189; January 1996: $0).
The reduction is partially offset by increased corporate overhead (1995: $817;
January 1995: $250; January 1996: $0) related to the newly formed public entity.
(g) Adjustment to reflect the reduction in one-time nonrecurring costs
related to pooling-of-interests business combinations, certain discontinued
printing operations, and restructuring charges. The adjustment includes: (i)
$3,962 related to payments to certain key employees in conjunction with
agreements entered into by MMA which required the payment of a percentage of the
gain recognized as a result of the business combination of MMA with the Company,
(ii) $2,132 of legal, accounting and finders' fees related to these business
combinations, (iii) $682 related to the discontinuation of the printing division
at a subsidiary and (iv) $2,532 related to restructuring charges accrued for one
of the pending acquisition.
(h) Adjustment to reflect the increase (decrease) in interest expense
resulting from the utilization of the proceeds from the sale of the Notes at an
interest rate of 5.5% plus amortization of debt issuance costs of $11,550 over
the five year term of the notes. (1995: $1,939; January 1995: $1,455; January
1996: $1,455).
(i) Adjustment to calculate the provision of income taxes on the combined
pro forma results at the effective statutory rate of 43%. The difference between
the effective tax rate of 43% and the statutory tax rate of 35% represents the
effect of state taxes and non-deductible goodwill.
(j) The weighted average shares outstanding used to calculate pro forma
earnings per share is based on 31,093, 31,323 and 31,069 shares of Common Stock
and Common Stock equivalents outstanding for the year ended April 30, 1995 and
the nine months ended January 31, 1996 and 1995, respectively. These amounts are
24
<PAGE>
U.S. OFFICE PRODUCTS COMPANY
NOTES TO THE PRO FORMA COMBINED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
(DOLLARS IN THOUSANDS)
2. UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS ADJUSTMENTS (CONTINUED)
based on the following shares and 92, 322 and 68 Common Stock equivalents
considered to be outstanding related to stock options, for the year ended April
30, 1995 and the nine month periods ended January 31, 1996 and 1995,
respectively.
<TABLE>
<S> <C>
Shares issued in conjunction with the formation of the Company...... 3,878
Shares issued in the Initial Public Offering........................ 3,738
Shares issued to acquire H.H. West.................................. 875
Shares issued to acquire Coffee Butler.............................. 757
Shares issued to acquire C.W. Mills................................. 373
Shares issued to acquire MMA........................................ 1,751
Shares issued to acquire Copenhaver Holdings, Incorporated.......... 323
Shares issued in the Second Offering (August 1995).................. 4,025
Shares issued to acquire CWC........................................ 1,161
Shares issued to acquire Costigan Companies......................... 1,515
Shares issued to acquire Blue Star Group............................ 2,265
Shares issued to acquire Emmons-Napp................................ 515
Shares issued in the Third Offering (March 1996) to cover the
purchase price to be paid in connection with Fiscal Year 1996
Pending Acquisitions............................................... 2,482
Shares to be issued to acquire School Specialty, Inc................ 1,538
Shares to be issued to acquire The J Thayer Company................. 1,226
Shares to be issued to acquire Radar Holdings Corporation........... 909
Shares to be issued to acquire Kentwood Office Furniture, Inc....... 250
Shares issued for other acquisitions and to be issued for Pending
Acquisitions....................................................... 3,420
---------
31,001
---------
---------
</TABLE>
(k) Adjustment to reflect the income taxes for certain acquisitions
accounted for under the pooling-of-interests method which were taxed as
subchapter S Corporations as if these companies had been subject to taxation as
C corporations. As a result of being subchapter S corporations, any tax
liabilities prior to acquisition were the responsibility of the individual
company stockholders.
Various of the Company's acquisitions since April 30, 1995 have been
significant as defined in Rule 3-05 of Regulation S-X. The Company's pro forma
assets as of April 30, 1995 and the Company's pro forma income before provision
for income taxes for the fiscal year ended April 30, 1995, assuming in the case
of the pro forma assets that the Company's significant acquisitions had been
consummated as of April 30, 1995 and in the case of the pro forma income before
provision for income taxes that the Company's significant acquisitions had been
consummated as of May 1, 1994, would have been $365,900 and $15,000
respectively.
25
<PAGE>
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: May 17, 1996 By: /s/ Mark Director
----------------------
Mark Director
Executive Vice President and
General Counsel
2
<PAGE>
EXHIBIT INDEX
Exhibit
- -------
2.1 Agreement and Plan of Reorganization, dated as of April 29,
1996, by and among School Specialty, School Acquisition
Corp., U.S. Office Products Company and certain investors of
School Specialty named therein.
99.1 Press Release, dated May 14, 1996
<PAGE>
ML&B 5/2/96
(MARKED FROM 4/24 DRAFT)
_____________________________________________________________________________
AGREEMENT AND PLAN OF REORGANIZATION
dated as of the 29th day of April, 1996
by and among
U.S. OFFICE PRODUCTS COMPANY
SCHOOL SPECIALTY, INC.
SCHOOL ACQUISITION CORP.
and
the INVESTORS named herein
_____________________________________________________________________________
<PAGE>
TABLE OF CONTENTS
Page
1. PLAN OF REORGANIZATION............................................... 2
1.1 The Merger..................................................... 2
1.2 Conversion of Securities....................................... 2
1.3 Certain Information With Respect to the Capital Stock of the
COMPANY, USOP and NEWCO........................................ 2
1.4 Certain Matters With Respect to the Merger Consideration....... 3
2. CLOSING.............................................................. 6
3. REPRESENTATIONS AND WARRANTIES OF INVESTORS.......................... 6
3.1 Representations and Warranties of INVESTORS.................... 6
3.2 Representations and Warranties of EMPLOYEE SHAREHOLDERS........ 7
4. REPRESENTATIONS OF USOP and NEWCO.................................... 7
5. COVENANTS PRIOR TO CLOSING........................................... 7
5.1 Access and Cooperation; Due Diligence.......................... 7
5.2 Conduct of Business Pending Closing............................ 8
5.3 Prohibited Activities.......................................... 9
5.4 No Shop........................................................ 10
5.5 Notice to Bargaining Agents.................................... 11
5.6 Notification of Certain Matters................................ 11
5.7 Amendment of Schedules......................................... 11
5.8 Cooperation in Obtaining Required Consents and Approvals...... 12
5.9 Exercise of Options and Warrants; Conversion of Preferred Stock 12
5.10 Termination of Shareholders Agreement.......................... 12
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF USOP AND NEWCO................ 13
6.1 Representations and Warranties; Performance of Obligations..... 13
6.2 No Litigation.................................................. 13
6.3 Employment Agreement........................................... 13
6.4 Opinion of Counsel............................................. 14
6.5 Consents and Approvals......................................... 14
6.6 Charter Documents.............................................. 14
6.7 Insurance...................................................... 14
6.8 Accountant's Letter With Respect to Pooling of Interest
Accounting Treatment........................................... 14
6.9 Due Diligence Review........................................... 14
6.10 No Material Adverse Change..................................... 15
6.11 Payment of Prepayment Fees and Penalties....................... 15
6.12 Long-Term Debt................................................. 15
6.13 No Convertible Securities...................................... 15
6.14 Noncompetition Agreements...................................... 15
6.15 Nonsolicitation Agreements..................................... 15
i
<PAGE>
6.16 Affiliates Agreement........................................... 15
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF .............................. 16
7.1 Representations and Warranties; Performance of Obligations..... 16
7.2 No Litigation.................................................. 16
7.3 Employment Agreement........................................... 16
7.4 Opinion of Counsel............................................. 16
7.5 Consents and Approvals......................................... 16
7.6 Certificates................................................... 17
7.7 Accountant's Letter With Respect to Pooling of Interest
Accounting Treatment........................................... 17
7.8 Personal Guarantees............................................ 17
7.9 Repayment of Debt.............................................. 17
8. COVENANTS OF USOP AFTER CLOSING...................................... 17
8.1 Adequate Public Information.................................... 17
8.2 Preservation of Tax Treatment.................................. 17
8.3 Early Publication.............................................. 18
9. INDEMNIFICATION...................................................... 18
9.1 Indemnification by INVESTORS................................... 18
9.2 Indemnification by the EMPLOYEE SHAREHOLDERS................... 18
9.3 Indemnification by USOP........................................ 20
9.4 Survival of Representations and Warranties..................... 21
9.5 Indemnification Procedure...................................... 22
9.6 Certain Adjustments............................................ 25
10. NONDISCLOSURE OF CONFIDENTIAL INFORMATION............................ 25
10.1 INVESTORS...................................................... 25
10.2 USOP and NEWCO................................................. 26
10.3 Damages........................................................ 27
10.4 Survival....................................................... 28
11. FEDERAL SECURITIES ACT REPRESENTATIONS............................... 28
11.1 Economic Risk; Sophistication.................................. 28
11.2 Sales of Stock................................................. 28
12. GENERAL.............................................................. 29
12.1 Investors' Agent............................................... 29
12.2 Accounts Receivable............................................ 31
12.3 Termination.................................................... 31
12.4 Effect of Termination.......................................... 32
12.5 Cooperation.................................................... 33
12.6 Successors and Assigns......................................... 33
12.7 Entire Agreement............................................... 34
12.8 Counterparts................................................... 34
12.9 Brokers and Agents............................................. 34
12.10 Expenses...................................................... 34
12.11 Specific Performance; Remedies................................ 35
12.12 Notices....................................................... 35
12.13 Governing Law................................................. 37
12.14 Severability.................................................. 37
12.15 Consent of SHAREHOLDERS....................................... 37
ii
<PAGE>
APPENDICES, SCHEDULES AND ANNEXES
Appendix A.1 - Representations and Warranties of INVESTORS
Appendix A.2 - Representations and Warranties of EMPLOYEE SHAREHOLDERS
Appendix A.3 - Representations and Warranties of USOP and NEWCO
Annex I - Shareholders and Stock Ownership of the COMPANY
Annex II - Plan of Merger
Annex III - Forms of Employment Agreement
Annex IV - Form of Opinion of Morgan, Lewis & Bockius LLP
Annex V - Form of Opinion of Counsel to the COMPANY and EMPLOYEE
SHAREHOLDERS
Annex VI - Form of Noncompetition Agreement
Annex VII - Form of Nonsolicitation Agreement
Annex VIII - Form of Affiliates Agreement
Annex IX - Form of Pledge Agreement
Schedule 1.4 - Accounting Schedule
Schedule 5.3 - Certain Permitted Activities
Schedule 7.8 - Guarantees
Schedule 7.9 - Debt to be Repaid
Schedule 12.9 - Brokers and Agents
Schedule A.1.2 - Share Ownership; Options
Schedule A.2.1 - Qualifications to Do Business
Schedule A.2.4 - Capital Stock of the COMPANY
Schedule A.2.7 - Subsidiaries
Schedule A.2.8 - Names of Predecessor Companies
Schedule A.2.9 - Spin-off by the COMPANY
Schedule A.2.10 - Financial Statements
Schedule A.2.11 - Liabilities and Obligations
Schedule A.2.12 - Accounts and Notes Receivable
Schedule A.2.13 - Licenses, Franchises, Permits and other Governmental
Authorizations
Schedule A.2.14 - Environmental Matters
Schedule A.2.15 - Real Property, Leases and Significant Personal Property
Schedule A.2.16 - Significant Customers and Material Contracts
Schedule A.2.18 - Insurance Policies and Claims
Schedule A.2.19 - Officers, Directors and Key Employees; Employment
Agreements; Compensation
Schedule A.2.20 - Employee Benefit Plans
Schedule A.2.22 - Tax Returns and Examinations
Schedule A.2.25 - Changes Since Balance Sheet Date
Schedule A.2.26 - Bank Accounts; Powers of Attorney
iii
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made as of
the 29th day of April, 1996, by and among U.S. OFFICE PRODUCTS COMPANY, a
Delaware corporation ("USOP"), SCHOOL SPECIALTY, INC., a Wisconsin corporation
(the "COMPANY"), SCHOOL ACQUISITION CORP., a Delaware corporation ("NEWCO"), and
the investors in the COMPANY, listed on ANNEX I hereto (each an "INVESTOR", and
collectively the "INVESTORS"). The shareholders of the COMPANY listed on ANNEX
I hereto (each a "SHAREHOLDER", and collectively the "SHAREHOLDERS") are all of
the shareholders of the COMPANY. ANNEX I hereto identifies each INVESTOR as,
and such INVESTOR is sometimes herein referred to as, either an "EMPLOYEE
SHAREHOLDER" or an "OUTSIDE SHAREHOLDER." Certain INVESTORS are also holders of
stock options, warrants and Preferred Stock, par value $1.00 per share, of the
Company, as set forth on ANNEX I hereto.
WHEREAS, NEWCO is a corporation duly organized and existing under
the laws of the State of Delaware, having been incorporated solely for the
purpose of completing the transactions set forth herein, and is a
wholly-owned subsidiary of USOP;
WHEREAS, the respective Boards of Directors of NEWCO and the
COMPANY (which together are sometimes hereinafter together referred to as
the "Constituent Corporations") deem it advisable and in the best
interests of the Constituent Corporations and their respective
shareholders that NEWCO merge with and into the COMPANY pursuant to this
Agreement, the Plan of Merger set forth as Annex II hereto (the "Plan of
Merger") and the applicable provisions of the laws of the State of
Delaware and the State of Wisconsin, such transaction sometimes being
herein called the "Merger";
WHEREAS, the Boards of Directors of each of the Constituent
Corporations have approved and adopted this Agreement as a plan of
reorganization (a "tax-free
1
<PAGE>
reorganization") within the provisions of Sections 368(a)(1)(A) and
368(a)(2)(E) 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, hereby agree as follows:
1. PLAN OF REORGANIZATION
1.1 THE MERGER. At the Effective Time (as hereinafter defined),
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
hereinafter referred to as the "Surviving Corporation."
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
INVESTOR, the shares of capital stock of each of the Constituent Corporations
shall be converted as set forth in the Plan of Merger.
1.3 CERTAIN INFORMATION WITH RESPECT TO THE CAPITAL STOCK OF THE
COMPANY, USOP and NEWCO. The respective designations and numbers of
outstanding shares and voting rights of each class of outstanding capital stock
of the COMPANY, USOP and NEWCO are as follows:
(a) the authorized capital stock of the COMPANY consists of 180,000
shares of voting common stock, par value $10.00 per share ("Voting Common
Stock"), of which 79,939 shares of Voting Common Stock are issued and
outstanding (and of which 143,332 shares of Voting Common Stock will be
issued and outstanding following consummation of the transactions referred
to in Section 5.9 hereof); 50,000 shares of non-voting common stock, par
value $1.00 per share ("Non-Voting Common Stock"), of which 3,298 shares
of Non-Voting Common Stock are issued and outstanding (and of which
2
<PAGE>
27,491.8 shares of Non-Voting Common Stock will be issued and outstanding
following consummation of the transactions referred to in Section 5.9
hereof); and 2,000 shares of preferred stock, par value $1.00 per share
("Preferred Stock"), of which 1,000 shares are issued and outstanding (and
none of which Preferred Stock will be issued and outstanding following
consummation of the transactions referred to in Section 5.9 hereof) (the
Voting Common Stock, Non-Voting Common Stock and Preferred Stock are
sometimes collectively referred to herein as the "COMPANY Stock");
(b) the authorized capital stock of USOP is 100,000,000 shares of
common stock, $.001 par value ("USOP Stock"), of which 30,818,076 shares
were issued and outstanding as of April 10, 1996, and 500,000 shares of
preferred stock, $.001 par value, of which no shares are issued and
outstanding; and
(b) the authorized capital stock of NEWCO consists of 100 shares of
common stock, no par value ("NEWCO Stock"), all of which shares are issued
and outstanding.
1.4 CERTAIN MATTERS WITH RESPECT TO THE MERGER CONSIDERATION.
(a) The parties hereto acknowledge and agree that the
consideration set forth in section 4(a) of the Plan of Merger is based
upon the COMPANY's representation and warranty to USOP and NEWCO that as
of the Effective Time (i) the COMPANY'S Shareholders' Deficit (the
"Shareholders' Deficit"), as determined in accordance with generally
accepted accounting principles applied on a consistent basis ("GAAP")
(except as hereinafter provided in this Section 1.4(a)), will be no
greater than $5,300,000; (ii) in connection with the exercise of all
outstanding stock options or warrants and the conversion of all
outstanding shares of Preferred Stock into shares of Common Stock, the
COMPANY shall have received cash (the "Additional Cash") in an aggregate
amount of at least $1,800,000; (iii) the
3
<PAGE>
COMPANY'S long-term debt (which shall not include for this purpose (a)
amounts outstanding under the COMPANY's revolving line of credit with Bank
One, Milwaukee, National Association, (b) non-competition covenants or (c)
capital lease obligations aggregating less than $650,000), including the
current portion thereof, as determined in accordance with GAAP (the
"Long-Term Debt"), will be no greater than $17,000,000. The EMPLOYEE
SHAREHOLDERS have attached hereto Schedule 1.4 (the "Accounting
Schedule"), setting forth the Shareholders' Deficit, the Additional Cash,
and the Long-Term Debt as of April 26, 1996. The Accounting Schedule
shall be updated by the Investors' Agent (as defined in Section 12.1
hereof) as of the Effective Time on behalf of the EMPLOYEE SHAREHOLDERS.
For purposes of determining whether an adjustment is to be made in the
consideration to be paid pursuant to section 4 of the Plan of Merger, the
Shareholders' Deficit shall be subject to the following adjustments and
agreements: (s) if the Additional Cash is less than $1,800,000, the
Shareholders' Deficit shall be increased by an amount equal to the
remainder of $1,800,000 minus the Additional Cash; (t) if the Long-Term
Debt is more than $17,000,000, the Shareholders' Deficit shall be
increased by an amount equal to the remainder of the Long-Term Debt minus
$17,000,000; (u) the accrual for vacation pay used in the calculation of
the Shareholders' Deficit (on an after-tax basis) shall be $287,153; (v)
the calculation of the Shareholders' Deficit shall not reflect any
deferred tax assets; (w) the calculation of the Shareholders' Deficit
shall not reflect any fees, expenses and disbursements of the INVESTORS,
the COMPANY and their agents, representatives, financial advisors (other
than the $250,000 fee payable to Dain Bosworth, which the COMPANY has
accrued in full as of the date hereof), accountants and counsel paid or to
be paid by the COMPANY in connection with the subject matter of this
Agreement (PROVIDED, that all
4
<PAGE>
such fees, expenses and disbursements paid or payable by the COMPANY shall
be paid or fully accrued by the COMPANY as of a date no later than
April 27, 1996); (x) the calculation of the Shareholders' Deficit shall
include (i) an accrual for the unamortized portion of the loan discount
attributable to the COMPANY's subordinated debentures from Bank of America
Illinois and (ii) an accrual for the payment of dividends to the holders
of the COMPANY's Preferred Stock; (y) the calculation of the Shareholders'
Deficit shall not reflect any increase to the extent caused by a net loss
of the COMPANY for the month of April 1996 (as reflected on the COMPANY's
financial statements) that is greater than $750,000 but not more than
$1,000,000; and (z) the calculation of the Shareholders' Deficit shall not
reflect the $265,000 reduction in the COMPANY's cash resulting from the
payment by the COMPANY on or before April 27, 1996 of a prepayment penalty
to Bank One, Milwaukee, National Association. USOP shall cause Price
Waterhouse LLP to review such updated Accounting Schedule as promptly as
practicable after the Effective Time to determine its accuracy and, in the
event that Price Waterhouse LLP does not agree with Schedule 1.4, shall
deliver a written notice to the Investors' Agent on behalf of the EMPLOYEE
SHAREHOLDERS, setting forth USOP's determination of the Shareholders'
Deficit, the Additional Cash and the Long-Term Debt at the Effective Time
on behalf of the EMPLOYEE SHAREHOLDERS.
(b) In the event that Price Waterhouse LLP does not agree with the
updated Accounting Schedule, USOP and the Investors' Agent shall seek to
resolve the amount, if any, of the merger consideration adjustment to be
made pursuant to section 4(b) of the Plan of Merger. In the event that
USOP and the Investors' Agent cannot resolve the amount of such
adjustment, they shall mutually agree on an independent accounting firm
to review the updated Accounting Schedule
5
<PAGE>
and determine the amount, if any, of the merger consideration adjustments
to be made. In the event that USOP and the Investors' Agent cannot agree
on an independent accounting firm to review the updated Accounting
Schedule, 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. The costs of the independent
accounting firm shall be borne by the party (either USOP or the Investors'
Agent) whose determination of Shareholders' Deficit at the Effective Time
was furthest from the determination of the independent accounting firm, or
equally by USOP and the Investors' Agent in the event that the
determination by the independent accounting firm is equidistant between
the determinations of the parties.
1.5 PLEDGE AGREEMENT. At the Closing, the parties shall establish a
pledge arrangement pursuant to a Pledge Agreement, substantially in the form
attached as Annex IX hereto, which will secure the payment of the merger
consideration adjustment pursuant to section 4(b) of the Plan of Merger and the
indemnification obligations of the INVESTORS by means of a pledge of a portion
of the merger consideration pursuant to section 4 of the Plan of Merger.
2. CLOSING
A closing of the consummation of the Merger and the other transactions
contemplated by this Agreement shall take place on the date hereof at the
offices of Morgan, Lewis & Bockius LLP, 1800 M Street, N.W., Washington, D.C.
(such consummation is hereinafter referred to as the "Closing", and the date
thereof is referred to herein as the "Closing Date"). On the Closing Date, a
Certificate of Merger shall be filed with the Secretary of the State of Delaware
in accordance with the provisions of the Delaware General Corporation Law and
Articles of Merger shall be filed with the Secretary of the State of Wisconsin
in accordance
6
<PAGE>
with the provisions of the Wisconsin Business Corporation Law (the "WBCL"), and
the Merger shall become effective upon the latter of such filings or at such
later time on the Closing Date as may be specified in the filings with the
Secretary of the State of Delaware and the Secretary of the State of Wisconsin
(the "Effective Time").
3. REPRESENTATIONS AND WARRANTIES OF INVESTORS
3.1 REPRESENTATIONS AND WARRANTIES OF INVESTORS. To induce USOP and
NEWCO to enter into this Agreement and consummate the transactions contemplated
hereby, each INVESTOR, severally (but not jointly), represents and warrants as
of the Closing Date to USOP and NEWCO as set forth in Section A.1 of Appendix A
hereto, which representations and warranties are incorporated in this Section
3.1 by reference and are deemed to be part of this Agreement.
3.2 REPRESENTATIONS AND WARRANTIES OF EMPLOYEE SHAREHOLDERS. To
induce USOP and NEWCO to enter into this Agreement and consummate the
transactions contemplated hereby, each EMPLOYEE SHAREHOLDER, jointly and
severally, represents and warrants as of the Closing Date to USOP and NEWCO as
set forth in Section A.2 of Appendix A hereto, which representations and
warranties are incorporated in this Section 3.2 by reference and are deemed to
be part of this Agreement.
4. REPRESENTATIONS OF USOP AND NEWCO
To induce the COMPANY and the INVESTORS to enter into this Agreement and
consummate the transactions contemplated hereby, USOP represents and warrants as
of the Closing Date to the COMPANY and the INVESTORS as set forth in Section A.3
of Appendix A hereto, which representations and warranties are incorporated in
this Section 4 by reference and are deemed to be part of this Agreement.
5. COVENANTS PRIOR TO CLOSING
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5.1 ACCESS AND COOPERATION; DUE DILIGENCE.
(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 all of the sites, properties, books and records of the COMPANY
and will furnish USOP with 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. The INVESTORS and the
COMPANY will cooperate with USOP, its representatives, engineers, auditors
and counsel in the preparation of any documents or other material which
may be required in connection with this Agreement. USOP, NEWCO, the
INVESTORS and the COMPANY will treat all information obtained in
connection with the negotiation and performance of this Agreement or the
due diligence investigations conducted with respect hereto as confidential
in accordance with the provisions of Section 10 hereof.
(b) Between the date of this Agreement and the Closing Date, USOP
will afford to the officers and authorized representatives of the COMPANY
access to all of USOP's and NEWCO's sites, properties, books and records
and will furnish the COMPANY with such additional financial and operating
data and other information as to the business and properties of USOP and
NEWCO as the COMPANY may from time to time reasonably request. USOP and
NEWCO will cooperate with the COMPANY, its representatives, engineers,
auditors and counsel in the preparation of any documents or other material
which may be required in connection with any documents or materials
required by this Agreement. The COMPANY will cause all information
obtained in connection with the negotiation and performance of this
Agreement to be treated as confidential in accordance with the provisions
of Section 10 hereof.
5.2 CONDUCT OF BUSINESS PENDING CLOSING. Between the date hereof
and the Closing Date, the COMPANY will:
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(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 assets, properties or rights;
(d) keep in full force and effect present insurance policies or
other comparable insurance coverage;
(e) use reasonable 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;
(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 or reduce present salaries and commission levels for
all officers, directors, employees and agents, except for ordinary and
customary bonuses and salary increases for employees (other than EMPLOYEE
SHAREHOLDERS) in accordance with past practice.
5.3 PROHIBITED ACTIVITIES. Between the date hereof and the Closing
Date, the COMPANY has not and from the date hereof, without prior written
consent of USOP and except as permitted by Schedule 5.3 hereof, will not:
(a) make any change in its Articles of Incorporation or By-laws
without the written consent of USOP;
(b) issue any securities, options, warrants, calls, conversion
rights or commitments relating to its securities of any kind;
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(c) declare or pay any dividend, or make any distribution in
respect of its stock whether now or hereafter outstanding, 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, except if it is in
the ordinary course of business (consistent with past practice) or
involves an amount not 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, INVESTOR, 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 EMPLOYEE
SHAREHOLDERS);
(f) create, assume or permit to exist any new mortgage, pledge or
other lien or encumbrance upon any assets or properties whether now owned
or hereafter acquired;
(g) sell, assign, lease or otherwise transfer or dispose of any
property or equipment 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 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 material breach or amend or terminate any material
agreement, permit, license or other right; or
(l) enter into any other transaction (i) that is not negotiated at
arm's length with a third party not affiliated
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with the COMPANY, any INVESTOR or any officer, director or SHAREHOLDER of
the COMPANY or (ii) outside the ordinary course of business consistent
with past practice or (iii) prohibited hereunder.
5.4 NO SHOP. None of the INVESTORS, the COMPANY or any agent,
officer, director or any representative of any of the COMPANY or the INVESTORS
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 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.
5.5 NOTICE TO BARGAINING AGENTS. Prior to the Closing Date, the
COMPANY shall satisfy any requirement for notice of the transactions
contemplated by this Agreement under applicable collective bargaining
agreements, and shall provide USOP with proof that any required notice has been
sent.
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 or him contained herein to
be untrue or inaccurate in any material respect at or prior to the Closing and
(b) any material failure of it or him 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, which modification may only be made
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pursuant to Section 5.7 hereof, (y) modify the conditions set forth in Sections
6 and 7 hereof, or (z) limit or otherwise affect the remedies available
hereunder to the party receiving such notice.
5.7 AMENDMENT OF SCHEDULES. Each party hereto agrees that, with
respect to the representations and warranties of such party contained in this
Agreement, such party shall have the continuing obligation until the Closing to
supplement or amend promptly the Schedules hereto with respect to any matter
hereafter arising or discovered which, if existing or known at the date of this
Agreement, would have been required to be set forth or described in the
Schedules, PROVIDED that no amendment or supplement to a Schedule that
constitutes or reflects a material adverse change may be made unless USOP, in
the case of an amendment or supplement by the COMPANY or any INVESTOR, or the
COMPANY and the Investors' Agent, in the case of an amendment or supplement by
USOP, consents to such amendment or supplement and, PROVIDED, FURTHER, that
the acceptance of any amendment or supplement to any Schedule shall operate as a
waiver of any claim under Section 9 hereof or otherwise by the consenting party
solely with respect to the item or items set forth in such amendment or
supplement.
5.8 COOPERATION IN OBTAINING REQUIRED CONSENTS AND APPROVALS. Each
party hereto shall cooperate in obtaining all consents and approvals required by
Sections 6.5 (which shall nonetheless continue to be the responsibility of the
EMPLOYEE SHAREHOLDERS and the COMPANY) and 7.5 hereof (which shall nonetheless
continue to be the responsibility of USOP). In connection therewith, if
required, the COMPANY, the EMPLOYEE SHAREHOLDERS and USOP shall file all notices
and other information and documents required under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, as promptly as practicable after
the date hereof.
5.9 EXERCISE OF OPTIONS AND WARRANTS; CONVERSION OF PREFERRED STOCK.
At the Closing, each INVESTOR who holds options or warrants shall exercise all
of such options or warrants, and
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each INVESTOR who holds shares of Preferred Stock shall convert such shares of
Preferred Stock into shares of Voting Common Stock (resulting in the ownership
of Common Stock set forth in the fourth table in Annex I hereto), and each such
INVESTOR shall execute and deliver all such agreements, instruments,
certificates and documents and make all such payments as may be required in
connection therewith.
5.10 TERMINATION OF SHAREHOLDERS AGREEMENT. At the Effective Time,
and without any requirement of any further action, the Shareholders Agreement,
dated January 9, 1992, among certain of the SHAREHOLDERS, and all rights and
obligations of the parties thereunder, shall automatically be terminated and be
of no further force and effect.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF USOP AND NEWCO
The obligation of USOP and NEWCO to effect the Merger is subject to the
satisfaction, 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 INVESTORS (including without
limitation all of the representations and warranties of certain INVESTORS as
EMPLOYEE SHAREHOLDERS) 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 INVESTORS
(including without limitation all of the representations and warranties of
certain INVESTORS as EMPLOYEE SHAREHOLDERS) on or before the Closing Date shall
have been duly complied with, performed or satisfied; and certificates to the
foregoing effects dated the Closing Date and signed by the Investors' Agent (on
behalf of the INVESTORS) shall have been delivered to USOP.
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6.2 NO LITIGATION. No action or proceeding before a court or any
other governmental agency or body shall have been instituted or threatened to
restrain or prohibit the merger of NEWCO with and into the COMPANY, and no
action or proceeding shall have been instituted or threatened to restrain or
prohibit USOP's acquisition of the COMPANY Stock or the INVESTORS' acquisition
of USOP Stock and no governmental agency or body shall have taken any other
action or made any request of USOP as a result of which the management of USOP
reasonably deems it inadvisable to proceed with the transactions hereunder.
6.3 EMPLOYMENT AGREEMENT. Daniel P. Spalding shall have entered
into the Employment Agreement referred to in Section 7.3 hereof.
6.4 OPINION OF COUNSEL. USOP shall have received an opinion from
counsel to the COMPANY and the EMPLOYEE SHAREHOLDERS, dated the Closing Date,
substantially in the form of Annex V hereto.
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 A.2.16 of Appendix A.2 hereto),
relating to the consummation by the COMPANY and the INVESTORS of the
transactions contemplated herein 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
By-laws of the COMPANY certified by the Secretary of the COMPANY.
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
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transaction contemplated by this Agreement qualifying for pooling of interests
accounting treatment in accordance with GAAP and shall have delivered a copy of
that letter to the COMPANY. USOP shall have been delivered a copy of the letter
delivered to the COMPANY by Ernst & Young LLP as contemplated by Section 7.7
hereof.
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 or
condition (financial or otherwise) of the COMPANY.
6.10 NO MATERIAL ADVERSE CHANGE. No material adverse change in the
business, operations, affairs, prospects, properties, assets, existing and
potential liabilities, obligations, profits or condition (financial or
otherwise) of the COMPANY, taken as a whole, shall have occurred; and USOP shall
have received certificates dated the Closing Date and signed by the Company and
by the Investors' Agent on behalf of the EMPLOYEE SHAREHOLDERS to such effect.
6.11 PAYMENT OF PREPAYMENT FEES AND PENALTIES. The COMPANY shall
have paid, on or before April 27, 1996, all prepayment fees and penalties owing
in connection with the early payment (whether on the Closing Date or thereafter)
of any outstanding indebtedness of the COMPANY.
6.12 LONG-TERM DEBT. At the time of the Closing, the COMPANY's
Long-Term Debt (as defined in Section 1.4 hereof) shall be less than or equal to
$17,000,000.
6.13 NO CONVERTIBLE SECURITIES. At the Effective Time, there shall
not be any securities, rights, warrants, options or other instruments originally
issued by the COMPANY which, after consummation of the Merger, would be
convertible into or exercisable for securities of the Surviving Corporation.
6.14 NONCOMPETITION AGREEMENTS. Daniel P. Spalding, Leo McKenna and
Philip Vanderhyden shall have entered into
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Noncompetition Agreements with USOP substantially in the form of ANNEX VI
attached.
6.15 NONSOLICITATION AGREEMENTS. Donald J. Noskowiak, Michael J.
Killoren and Clem Massey shall have entered into Nonsolicitation Agreements with
USOP substantially in the form of ANNEX VII hereto.
6.16 AFFILIATES AGREEMENT. The COMPANY shall have received, and
furnished copies to USOP, agreements from each director, officer and ten percent
shareholder of the COMPANY who will receive shares of USOP Stock in the Merger
substantially in the form of ANNEX VIII hereto.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF INVESTORS AND COMPANY
The obligation of the INVESTORS and the COMPANY to effect the Merger is
subject to the satisfaction, 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 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.
7.2 NO LITIGATION. No action or proceeding before a court or any
other governmental agency or body shall have been instituted or threatened to
restrain or prohibit the merger of NEWCO with and into the COMPANY, and no
action or proceeding shall have been instituted or threatened to restrain or
prohibit USOP's acquisition of the COMPANY Stock or the INVESTORS' acquisition
of USOP Stock and no governmental agency or body shall have taken any other
action or made any request of COMPANY
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as a result of which COMPANY reasonably deems it inadvisable to proceed with the
transactions hereunder.
7.3 EMPLOYMENT AGREEMENT. The COMPANY shall have afforded Daniel P.
Spalding an opportunity to enter into an Employment Agreement substantially in
the form of Annex III hereto.
7.4 OPINION OF COUNSEL. The COMPANY and the INVESTORS' Agent (on
behalf of the INVESTORS) shall have received an opinion from counsel for USOP,
dated the Closing Date, substantially in the form of Annex IV hereto.
7.5 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.
7.6 CERTIFICATES. Each of USOP and NEWCO shall have delivered to
the COMPANY (a) copies of their respective Certificates of Incorporation,
certified by the Secretary of State of the State of Delaware and (b) copies of
their respective By-laws, certified by their respective Secretaries.
7.7 ACCOUNTANT'S LETTER WITH RESPECT TO POOLING OF INTEREST ACCOUNTING
TREATMENT. The COMPANY shall have received a letter from Ernst & Young LLP
stating its concurrence, as of the Closing Date, as to the appropriateness of
the COMPANY and the transaction contemplated by this Agreement qualifying for
pooling of interests accounting treatment in accordance with GAAP and shall have
delivered a copy of that letter to USOP. The COMPANY shall have been delivered
a copy of the letter delivered to USOP by Price Waterhouse LLP, as contemplated
by Section 6.8 hereof.
7.8 PERSONAL GUARANTEES. The guarantees listed on Schedule 7.8
hereto shall have been terminated.
7.9 REPAYMENT OF DEBT. The debt of the COMPANY listed on Schedule
7.9 hereto and any and all obligations arising with respect thereto (including
without limitation related legal fees and expenses of McDermott Will & Emery)
shall have been paid in full by the COMPANY.
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8. COVENANTS OF USOP AFTER CLOSING.
8.1 ADEQUATE PUBLIC INFORMATION. USOP will use reasonable best
efforts to make and keep available the "adequate public information" required by
Rule 144(c) under the 1933 Act.
8.2 PRESERVATION OF TAX TREATMENT. After the Closing Date, USOP
shall not and shall not permit any of its subsidiaries to undertake any act that
would jeopardize the tax-free status of the issuance of the Registered Shares
(as defined in section 4(a) of the Plan of Merger attached hereto as Annex II)
to the INVESTORS.
8.3 EARLY PUBLICATION. USOP shall publish 30 days' post-closing
combined financial results of USOP and the COMPANY for the first full monthly
period following the Closing within 30 days of the end of such monthly period in
a form sufficient to satisfy the pooling of interest accounting requirements.
9. INDEMNIFICATION
9.1 INDEMNIFICATION BY INVESTORS. Each INVESTOR, severally (but not
jointly), covenants and agrees that he will indemnify, defend, protect and hold
harmless USOP, NEWCO and the Surviving Corporation from, against and in respect
of:
(a) all liabilities, losses, claims, damages, actions, suits,
proceedings, demands, assessments, adjustments, settlement payments,
deficiencies, costs and expenses (including without limitation reasonable
attorneys' fees and expenses) (collectively, "Claims") suffered,
sustained, incurred or paid by USOP, NEWCO or the Surviving Corporation in
connection with, resulting from or arising out of any breach of any
representation or warranty of such INVESTOR set forth in Section A.1 of
Appendix A hereto and
(b) any and all actions, suits, claims, proceedings,
investigations, demands, assessments, audits, fines, judgments, costs and
other expenses (including without limitation reasonable attorneys' fees
and expenses) incident
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to any of the foregoing or to the enforcement of this Section 9.1;
PROVIDED that the aggregate amount of any of any OUTSIDE SHAREHOLDER'S
liability under this Section 9.1 shall not exceed the value of the consideration
to be received by such OUTSIDE SHAREHOLDER pursuant to the Plan of Merger.
9.2 INDEMNIFICATION BY THE EMPLOYEE SHAREHOLDERS. Each EMPLOYEE
SHAREHOLDER, jointly and severally, covenants and agrees that he will indemnify,
defend, protect and hold harmless USOP, NEWCO and the Surviving Corporation
from, against and in respect of:
(a) all Claims suffered, sustained, incurred or paid by USOP, NEWCO
or the Surviving Corporation in connection with, resulting from or arising
out of:
(i) any breach of any representation or warranty of any
INVESTOR or the COMPANY set forth in this Agreement or any
certificate or other writing delivered by any INVESTOR or the
COMPANY in connection herewith other than the representations and
warranties of the INVESTORS set forth in Section A.1 of Appendix A
hereto;
(ii) any nonfulfillment of any covenant or agreement on the
part of any INVESTOR or, prior to the Effective Time, the COMPANY,
in this Agreement. This Section 9.2(a)(ii) is intended to and shall
survive the termination of certain indemnification rights under
Section 9.4 hereof;
(iii) the assertion against USOP, NEWCO or the Surviving
Corporation of any liability or obligation relating to or arising
out of the business, operations or assets of the COMPANY prior to
the Closing Date, other than those liabilities or obligations that
are disclosed in the Accounting Schedule, or out of the actions or
omissions of the COMPANY'S directors,
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officers, shareholders, employees or agents prior to the Closing
Date;
(iv) any liability or obligation which relates to, or which
involves a claim, liability or obligation which arises out of or is
based upon, any Environmental Law (as defined in Section A.2.14 of
Appendix A.2 hereto) to the extent that such liability or obligation
relates to or arises out of, in whole or in part, any activity
occurring, condition existing, omission to act or other matter
existing prior to the Closing Date;
(v) environmental conditions known or unknown existing on or
before the Closing Date, at, on, in, from or below the property
known as 609 Silver Street, Agawam, Massachusetts (the "Agawam
Property") currently leased and operated by the COMPANY, including
without limitation the presence of Hazardous Substances (as defined
in Section A.2.14 of Appendix A.2 hereto) at or in the Agawam
Property, or the Release (as defined in Section A.2.14 of Appendix
A.2 hereto) or threat of release of Hazardous Substances at, on, in,
from or below the Agawam Property or occurring from the off-site
use, treatment, storage, disposal, transportation or arranging for
the transportation of Hazardous Substances generated by the COMPANY
or others on the Agawam Property, or for violation of any
Environmental Law with respect to the Agawam Property. This Section
9.2(a)(v) is intended to and shall survive the termination of
certain indemnification rights under Section 9.4 hereof;
(vi) subject to Section 9.6(b) hereof, the assertion of any
liability to Dain Bosworth (whether accrued or unaccrued as of the
date hereof) arising in connection with the engagement letter dated
September 18, 1995 from Dain Bosworth to the COMPANY or arising in
connection with the letter dated April 26, 1996 from
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Dain Bosworth to the COMPANY. This Section 9.2(a)(vi) is intended
to and shall survive the termination of certain indemnification
rights under Section 9.4 hereof; or
(vii) the matters identified on Schedule A.2.21 hereto. This
Section 9.2(a)(vii) is intended to and shall survive the termination
of certain indemnification rights under Section 9.4 hereof; and
(b) any and all actions, suits, claims, proceedings,
investigations, demands, assessments, audits, fines, judgments, costs and
other expenses (including without limitation reasonable attorneys' fees
and expenses) incident to any of the foregoing or to the enforcement of
this Section 9.2;
PROVIDED (a) that no EMPLOYEE SHAREHOLDER shall have any liability under
subsection 9.2(a)(i) unless, and solely to the extent that, the amount of the
aggregate indemnification obligations under such clause (a)(i) exceeds $800,000
(the "Indemnification Threshold") and (b) the aggregate amount of the EMPLOYEE
SHAREHOLDERS liability under this Section 9.2 shall not exceed $40,000,000.
9.3 INDEMNIFICATION BY USOP. USOP covenants and agrees that it will
indemnify, defend, protect and hold harmless each INVESTOR from, against and in
respect of:
(a) all Claims suffered, sustained, incurred or paid by such
INVESTOR in connection with, resulting from or arising out of:
(i) any breach of any representation or warranty of USOP or
NEWCO set forth in this Agreement or any certificate or other
writing delivered by USOP or NEWCO in connection herewith; or
(ii) any nonfulfillment of any covenant or agreement on the
part of USOP or NEWCO in this Agreement; and
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(b) any and all actions, suits, claims, proceedings,
investigations, demands, assessments, audits, fines, judgments, costs and
other expenses (including without limitation reasonable attorneys' fees
and expenses) incident to any of the foregoing or to the enforcement of
this Section 9.3.
9.4 SURVIVAL. The representations and warranties given or made by
the INVESTORS or USOP and NEWCO in this Agreement or in any certificate or other
writing furnished in connection herewith, and all rights to assert an
indemnification claim under Section 9.2(a)(i), (iii) or (iv) hereof, shall
survive the Closing until (a) the date of completion of the first audit of
financial statements containing combined operations for those items that would
be expected to be encountered in the audit process or (b) the first anniversary
of the Closing Date for other items and shall thereafter terminate and be of no
further force or effect except that any representation or warranty as to which,
and all rights under Sections 9.2(a)(i), (iii) and (iv) hereof pursuant to
which, a claim (including 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; PROVIDED that a party shall not
be liable for a Claim under Section 9.2(a)(i) or 9.3(a)(i) (as the case may be)
if such party can establish that the General Counsel of USOP (in the case of a
Claim under Section 9.2(a)(i)) or the President of the COMPANY (in the case of a
Claim under Section 9.3(a)(i)) had actual knowledge on or before the Closing of
the event or breach resulting in such Claim.
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9.5 INDEMNIFICATION PROCEDURE. All claims for indemnification under
Sections 9.1, 9.2 and 9.3 hereof shall be asserted and resolved as follows:
(a) In the event that any claim or demand for which a party (the
"Indemnifying Party") would be liable to another party (the "Indemnified Party")
hereunder is asserted against an Indemnified Party by a third party, the
Indemnified Party shall with reasonable promptness notify the Indemnifying Party
of such claim or demand, specifying the nature of such claim or demand 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 or demand)
(the "Claim Notice"). 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 the Indemnifying Party disputes the Indemnifying
Party's liability to the Indemnified Party hereunder with respect to such claim
or demand (including any dispute as to whether the Indemnification Threshold has
been met) and (ii) if the Indemnifying 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 or demand, provided that
the Indemnified 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 Indemnified Party shall deem necessary or
appropriate to protect the Indemnified Party's interests. In the event that 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 or demand and except as hereinafter provided, the Indemnifying Party shall
have the right to defend by appropriate proceedings, which proceedings shall be
promptly settled or prosecuted by the Indemnifying Party to a final conclusion;
PROVIDED that, unless the Indemnified Party otherwise agrees in
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<PAGE>
writing, the Indemnifying 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 the
Indemnified Party's sole cost and expense. If the Indemnifying Party elects not
to defend the Indemnified Party against such claim or demand, whether by not
giving the Indemnified Party timely notice as provided above or otherwise, then
the Indemnified Party, without waiving any rights against the Indemnifying
Party, may settle or defend against any such claim in the Indemnified Party's
sole discretion and, if it is ultimately determined that the Indemnifying Party
is responsible therefor under this Section 9, then the Indemnified Party shall
be entitled to recover from the Indemnifying Party the amount of any settlement
or judgment and all indemnifiable costs and expenses of the Indemnified Party
with respect thereto, including interest from the date such costs and expenses
were incurred.
(b) If at any time, in the reasonable opinion of the Indemnified
Party, notice of which shall be given in writing to the Indemnifying Party, any
such claim or demand 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, the
Indemnified Party shall have the right to control or assume (as the case may be)
the defense of any such claim or demand 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 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.
(c) In the event the Indemnified Party should have a claim against
the Indemnifying Party hereunder which does not
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<PAGE>
involve a claim or demand 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 Indemnifying Party. If 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.
(d) Nothing herein shall be deemed to prevent the Indemnified Party
from making, 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. The Indemnified Party shall, to the
extent commercially appropriate, diligently pursue all potential or contingent
claims or demands until such time, if ever that they become claims or demands
otherwise subject to this Section 9.5.
(e) The Indemnified Party's failure to give reasonably prompt
notice to the Indemnifying Party 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 procedures set forth in this Sections 9 shall not apply to
claims or demands of any Indemnified Party which, in the reasonable opinion of
USOP, NEWCO or the Surviving Corporation may be covered by the Indemnification
Threshold. As part of any claim or demand for indemnification by any
Indemnified Party, such Indemnified Party must demonstrate that the
Indemnification Threshold has been met.
(g) The Indemnifying Party shall be subrogated to the rights of the
Indemnified Party with respect to any matter as to
25
<PAGE>
which (i) the Indemnifying Party shall have fully indemnified the Indemnified
Party and (ii), if USOP, NEWCO or the Surviving Corporation is the Indemnified
Party, the Indemnified Party shall have fully recovered the amount of the
Indemnification Threshold from a third party, and shall have the right to
pursue, at the Indemnifying Party's sole cost and expense, any and all claims
arising out of such matter in the name of and with the full authority of the
Indemnified Party; provided, however, that the Indemnifying Party shall not
pursue such claims in a manner that is likely to give rise to a claim against
the Indemnified Party, and the Indemnifying Party hereby agrees to indemnify and
hold harmless the Indemnified Party against any and all Claims resulting from or
arising out of any such pursuit.
9.6 CERTAIN ADJUSTMENTS.
(a) The parties hereto will make appropriate adjustments for any
Tax benefits, Tax detriments or insurance proceeds in determining the amount of
any indemnification obligation under Section 9 hereof, PROVIDED that no
Indemnifying Party shall be obligated to seek any payment pursuant to the terms
of any insurance policy.
(b) The EMPLOYEE SHAREHOLDERS, jointly and severally, shall be
liable to USOP, NEWCO and the Surviving Corporation under Section 9.2(a)(vi)
hereof only if, and to the extent that, the aggregate amount for which they
would otherwise (but for this provision) be liable to USOP, NEWCO and the
Surviving Corporation under such Section and the other applicable Sections of
this Section 9 exceeds in the aggregate $250,000.
10. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
10.1 INVESTORS. Each INVESTOR recognizes and acknowledges that he
had in the past, currently has, and in the future may possibly have, access to
certain confidential information of the COMPANY and/or USOP, 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 USOP's
26
<PAGE>
respective businesses. Each INVESTOR agrees that he will not disclose or use
confidential information with respect to the COMPANY and/or USOP 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 10.1, unless (a) such information
becomes known to the public generally through no fault of any INVESTOR, (b)
disclosure is required by appropriate regulatory authorities, applicable law or
the order of any governmental authority under color of law, or (c) 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 (a), (b)
or (c) above (except to appropriate regulatory authorities), the INVESTOR shall,
if possible, give prior written notice thereof to USOP and provide USOP with the
opportunity to contest such disclosure; PROVIDED, that nothing contained
herein shall prevent any INVESTOR from using such information in connection with
its commercial lending and investing businesses so long as such information is
not disclosed to any third party. In the event of a breach or threatened breach
by any INVESTOR of the provisions of this Section, USOP shall be entitled to an
injunction restraining the INVESTOR from disclosing, in whole or in part, such
confidential information. Nothing herein shall be construed as prohibiting USOP
from pursuing any other available remedy for such breach or threatened breach,
including without limitation the recovery of damages.
10.2 USOP AND NEWCO. 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.
27
<PAGE>
Each of USOP and NEWCO agrees that, prior to the Closing, or if there shall not
be 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 10.2,
unless (a) such information becomes known to the public generally through no
fault of the USOP or NEWCO, (b) disclosure is required by law or the order of
any governmental authority under color of law, or (c) 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 (a), (b) or (c) above, USOP shall,
if possible, give prior written notice thereof to the COMPANY and provide the
COMPANY with the opportunity to contest such disclosure. In the event of a
breach or threatened breach by USOP or NEWCO of the provisions of this Section,
the COMPANY shall be entitled to an injunction restraining USOP and NEWCO from
disclosing, in whole or in part, such confidential information. Nothing herein
shall be construed as prohibiting the COMPANY 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 foregoing 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
covenant 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.
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<PAGE>
11. FEDERAL SECURITIES ACT REPRESENTATIONS
11.1 ECONOMIC RISK; SOPHISTICATION. Each INVESTOR has received a
copy of the USOP Prospectus (as defined in Section A.1.4 of Appendix A hereto).
Each INVESTOR represents and warrants that such INVESTOR has not relied on any
purchaser representative, or on the COMPANY or any other INVESTOR, in connection
with the acquisition of shares of USOP Stock hereunder. The INVESTORS (a) have
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 Stock, (b) fully understand the nature, scope and duration of the
limitations on transfer contained in this Agreement and (c) can bear the
economic risk of an investment in the shares of USOP Stock and can afford a
complete loss of such investment. The INVESTORS have had an adequate
opportunity to ask questions and receive answers from the officers of USOP
concerning 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 INVESTORS have asked any and all
questions in the nature described in the preceding sentence and all questions
have been answered to their satisfaction.
11.2 SALES OF STOCK. Each INVESTOR acknowledges and agrees that USOP
will not provide such INVESTOR with a prospectus for such INVESTOR's use in
selling the Registered Shares (as defined in section 4(a) of the Plan of Merger
attached hereto as Annex II) and agrees to sell such shares only in accordance
with the requirements, if any, of Rule 145(d) promulgated under the Securities
Act.
29
<PAGE>
12. GENERAL
12.1 INVESTORS' AGENT.
(a) The INVESTORS irrevocably make, constitute and appoint Daniel
P. Spalding as their agent and attorney-in-fact (the "Investors' Agent") and
authorize and empower him to fulfill the role of Investors' Agent hereunder. In
the event of the death, resignation or incapacity of Mr. Spalding, Leo McKenna
shall act as the Investors' Agent in his place. In the event of the death,
resignation or incapacity of the above-named successor Investors' Agent, his
successor shall be appointed within 30 days of such death, resignation or
incapacity by the then remaining INVESTORS, whose choice shall be final and
binding upon all of the INVESTORS. The decisions and actions of any successor
Investors' Agent shall be, for all purposes, those of a Investors' Agent as if
originally named herein.
(b) Subject to Section 12.1(g) hereof, the Investors' Agent is
hereby fully authorized and directed by the INVESTORS, for them and in their
names, (i) to represent the INVESTORS at the Closing and to take any and all
other action or execute such agreements or documents in connection with the
Closing as the Investors' Agent deems in its sole discretion to be reasonable
and necessary, including without limitation agreeing to modify and adjust the
consideration to be received by the INVESTORS, execution and delivery of Closing
documents and certificates including without limitation stock certificates and
powers, and acceptance of the definitive Accounting Schedule as final and
binding (ii) to amend, modify or waive any of the provisions of this Agreement
or any other agreements or documents to be executed and delivered in accordance
therewith, (iii) to receive all payments to be made to any INVESTOR hereunder,
(iv) to receive all Claim Notices and all other notices and communications
directed to him or the INVESTORS under this Agreement and to take any action or
no action in connection therewith as he may deem appropriate and (v) to take any
action (or to determine to take no action) with respect to the
30
<PAGE>
transactions contemplated by this Agreement, whether before or after the
Closing, as he may deem appropriate as effectively as the INVESTORS could act
themselves, including without limitation acceptance of service of process and
other pleadings and the settlement or compromise of any dispute or controversy.
The authority granted hereunder is deemed to be coupled with an interest.
(c) The death, resignation or incapacity of any Investors' Agent
or the death or incapacity of any INVESTOR shall not terminate the authority and
agency of the Investors' Agent.
(d) By their execution hereof, Mr. Spalding accepts his
appointment as Investors' Agent hereunder and Mr. McKenna accepts his
appointment as successor Investors' Agent hereunder. Messrs. Spalding and
McKenna each hereby agrees to exercise the rights and perform the obligations of
Investors' Agent in accordance with the terms and conditions of this Agreement.
(e) The EMPLOYEE SHAREHOLDERS jointly and severally agree to
indemnify and hold harmless USOP and NEWCO against any and all claims, losses,
liabilities and expenses (including without limitation reasonable legal fees and
expenses) which may be asserted against or incurred or paid by any of them (i)
as a result of any negligent, fraudulent or otherwise unauthorized or improper
act or omission of the Investors' Agent or (ii) in connection with any claim,
litigation or other dispute between or among any of the INVESTORS or the
Investors' Agent.
(f) Notwithstanding anything herein to the contrary, the COMPANY
and USOP shall be protected in acting upon any instructions or other acts of the
Investors' Agent so long as they, in good faith but without any obligation to
investigate, do not believe that such instructions are not duly authorized,
genuine and correct, and the only recourse that the INVESTORS shall have with
respect to actions and omissions of the Investors' Agent shall be against the
Investors' Agent.
(g) The Investors' Agent may act without the consent of the
INVESTORS in all cases, except in such cases where an
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<PAGE>
action could have a material adverse effect on the rights or obligations of any
INVESTOR.
(h) The Investors' Agent shall not be liable to the INVESTORS for
any error of judgment or for any action taken or omitted by him or for any
mistake of fact or law, or for anything which he may do or refrain from doing in
connection herewith except his own willful or intentional misconduct or fraud.
The Investors' Agent shall be reimbursed by the INVESTORS for his reasonable
legal fees and expenses and direct expenses incurred in the performance of his
duties as Investors' Agent as set forth in this Agreement.
(i) The Investors' Agent shall promptly notify the INVESTORS upon
the receipt of any Claim Notice pursuant to Section 9.5 hereof.
12.2 ACCOUNTS RECEIVABLE. In the event that all accounts and notes
receivable of the COMPANY are not collected in full within 14 months after the
Closing then, at the request of the Surviving Corporation, the EMPLOYEE
SHAREHOLDERS shall pay the Surviving Corporation an amount equal to the
receivables not so collected, less an allowance for doubtful accounts equal to
the reserve for doubtful accounts utilized in the preparation of the March
Balance Sheet (as defined in Section A.1.10 of Appendix A hereto), and upon
receipt of such payment the Surviving Corporation shall assign to the EMPLOYEE
SHAREHOLDERS (who, in turn, shall assign pro rata to the INVESTORS) all of its
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.
12.3 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;
(b) by the Investors' Agent (on behalf of the INVESTORS) and the
COMPANY (acting through its board of
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<PAGE>
directors) as a group, on the one hand, or by USOP (acting through its
board of directors), on the other hand, if the Closing shall not have
occurred on or before May 30, 1996; provided that the right to terminate
this Agreement under this Section 12.3(b) shall not be available to either
party (with the INVESTORS 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 Investors' Agent (on behalf of the INVESTORS) and the
COMPANY (acting through its board of directors) as a group, on the one
hand, or by USOP (acting through its board of directors), 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 INVESTORS 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; PROVIDED that, nothing in this Section 12.3(c), shall cause the
INVESTORS and/or the COMPANY to be deemed to be making any representation
or warranty jointly and severally.
12.4 EFFECT OF TERMINATION. In the event of the termination of this
Agreement pursuant to Section 12.3 hereof, this Agreement shall forthwith become
void (except for this Section 12.4 and Section 9, Section 10 and Sections 12.11
and 12.14 hereof), and there shall be no liability or obligation on the part of
any party hereto. Notwithstanding the foregoing, if such termination is due to
a material breach or material failure to fulfill any of the representations,
warranties, covenants or agreements set forth in this Agreement on the part of
either party hereto (with
33
<PAGE>
the INVESTORS and the COMPANY deemed to be a single party for purposes of this
Section 12.4), 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 either
a material breach of any of the representations or warranties which is known
when made or should have been known with the exercise of reasonable diligence,
or the willful material failure to fulfill of any of the covenants or
agreements, also for damages in accordance with applicable law; PROVIDED that
the provisions of the previous sentence shall not expand the indemnification
obligations of the OUTSIDE SHAREHOLDERS under this Agreement beyond that
described in Section 9.1 hereof.
12.5 COOPERATION. The COMPANY, INVESTORS, 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 Stock Market. The COMPANY will
also cooperate and use its 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 Return filing obligations, actions, proceedings,
arrangements or disputes of any nature with respect to matters pertaining to all
periods prior to the Closing Date.
12.6 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
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<PAGE>
of the parties hereto, the successors of USOP, and the successors, heirs and
legal representatives of the INVESTORS.
12.7 ENTIRE AGREEMENT. This Agreement (which includes the
Appendices, 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
USOP, the COMPANY, NEWCO and the Investors' Agent, subject to the terms of
Section 12.1(g) hereof. 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.
12.8 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.
12.9 BROKERS AND AGENTS. USOP and NEWCO (as a group), and the
COMPANY and each INVESTOR (as a group) represents and warrants to the other
that, except as set forth in Schedule 12.9 hereto, 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, cost, damages or
expense relating to arising out of claims for fees or commission of any broker
or agent employed or alleged to have been employed by such indemnifying party.
12.10 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,
including without
35
<PAGE>
limitation the fees and expenses of Price Waterhouse LLP and Morgan, Lewis &
Bockius LLP. The COMPANY has and will pay the fees, expenses and disbursements
of the INVESTORS, the COMPANY and their agents, representatives, financial
advisors (including without limitation, the $250,000 fee payable to Dain
Bosworth), accountants and counsel incurred in connection with the subject
matter of this Agreement, including without limitation the fees and expenses of
Ernst & Young LLP, Franzoi & Franzoi, S.C., Godfrey & Kahn, S.C. and McDermott
Will & Emery (PROVIDED, that all such fees, expenses and disbursements paid or
payable by the COMPANY shall be paid or fully accrued by the COMPANY as of a
date no later than April 27, 1996).
12.11 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. 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. The indemnification provided for in Section 9
hereof 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 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 any
rights or remedies which any party has, or might have, at law, in equity or
otherwise, against any other party based on any willful misrepresentation,
willful breach of warranty or willful failure to fulfill any covenant or
agreement set forth herein.
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12.12 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:
If to USOP, NEWCO or the Surviving Corporation to:
U.S. Office Products Company
1440 New York Avenue, N.W.
Washington, DC 20005
Attn: Mark D. Director
(telefax: 202-628-9509)
with a required copy to:
Morgan, Lewis & Bockius LLP
2000 One Logan Square
Philadelphia, PA 19103-6993
Attn: F. Traynor Beck, Esq.
(telefax: 215-963-5299)
If to the COMPANY prior to the Merger to:
School Specialty, Inc.
1000 N. Bluemound Drive
P.O. Box 1579
Appleton, WI 54913-1579
Attn: Daniel P. Spalding
(telefax: 414-734-6276)
Marked: ADDRESSEE ONLY/PERSONAL AND CONFIDENTIAL
with a required copy to:
Franzoi & Franzoi, S.C.
514 Racine Street
Menasha, WI 54952
Attn: Joseph Franzoi, Esq.
(telefax: 414-725-0998)
If to any INVESTOR, to the Investors' Agent:
Daniel P. Spalding
c/o School Specialty, Inc.
1000 N. Bluemound Drive
P.O. Box 1579
Appleton, WI 54913-1579
(telefax: 414-734-6276)
37
<PAGE>
with a required copy to:
Franzoi & Franzoi, S.C.
514 Racine Street
Menasha, WI 54952
Attn: Joseph Franzoi, Esq.
(telefax: 414-725-0998)
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.
12.13 GOVERNING LAW. This Agreement shall be governed by and
construed, interpreted and enforced in accordance with the laws of the State of
Wisconsin.
12.14 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.
12.15 CONSENT OF SHAREHOLDERS. The SHAREHOLDERS, being all of the
shareholders of the COMPANY, in accordance with section 180.0704 of the WBCL, do
hereby consent in writing to the following resolution, with the same force and
effect as if adopted at a meeting of the shareholders of the COMPANY, duly
called and held in accordance with law and the By-Laws of the COMPANY.
RESOLVED, that, in accordance with sections 180.1107 and 180.1103 of
the Wisconsin Business Corporation Law, this Agreement, the Plan of Merger
and the transactions contemplated hereby and thereby be and
38
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hereby are approved with any required notice as therein provided being
expressly waived; and it is further
RESOLVED, that the Articles of Amendment of the Company, executed by
the Company on March 1, 1996, are hereby ratified, approved and confirmed.
[INTENTIONALLY LEFT BLANK]
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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
SCHOOL SPECIALTY, INC.
By /s/ Leo P. McKenna
-----------------------------------------
Leo P. McKenna
Secretary
SCHOOL ACQUISITION CORP.
By /s/ Mark D. Director
-----------------------------------------
Mark D. Director
President
BAIRD CAPITAL PARTNERS LIMITED PARTNERSHIP
By: Robert W. Baird & Co.,
Incorporated
General Partner
Attest:
(illegible) By: /s/ David P. Pelisek
- ------------------------ ----------------------------------
Name: David P. Pelisek
Title: Vice President
<PAGE>
RWBCO II PARTNERS FUND LIMITED PARTNERSHIP
By: Robert W. Baird & Co.,
Incorporated
Attest: General Partner
(illegible) By: /s/ David P. Pelisek
- ------------------------ ----------------------------------------
Name: David P. Pelisek
Title: Vice President
BERGSTROM CORPORATION
Attest:
Marla Anderson By: /s/ Richard Bergstrom
- ------------------------ ----------------------------------------
Name: Richard Bergstrom
Title: VP
Witness
Marla Anderson /s/ Joseph F. Franzoi IV
- ------------------------ --------------------------------------------
Joseph F. Franzoi IV
Witness
(illegible) /s/ Donald J. Killoren
- ------------------------ --------------------------------------------
Donald J. Killoren
Witness
Marla Anderson /s/ Joanne Lee Killoren - P.O.A. DPS
- ------------------------ --------------------------------------------
Joanne Lee Killoren
By Daniel P. Spalding,
attorney-in-fact
Witness
Claudia McClone /s/ Michael McClone
- ------------------------ --------------------------------------------
Michael McClone
Witness
Marla Anderson /s/ Ralph J. McClone
- ------------------------ --------------------------------------------
Ralph McClone
Witness
Marla Anderson /s/ Leo P. McKenna
- ------------------------ --------------------------------------------
Leo McKenna
Witness
Vernice Pearl Albury /s/ Robert Rodday
- ------------------------ --------------------------------------------
Robert Rodday
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KIRBY JEAN COOK TRUST A
Witness
(illegible) By: /s/ Gregory M. Cook
- ----------------------- ----------------------------------------
Name: Gregory M. Cook
Title: Trustee
Witness
(illegible) /s/ Charles Ellerin
- ------------------------ --------------------------------------------
Charles Ellerin
Witness
Marla Anderson /s/ Michael J. Killoren
- ------------------------ --------------------------------------------
Michael J. Killoren
Witness
Karen E. Vail /s/ Clem Massey
- ------------------------ --------------------------------------------
Clem Massey
Witness
Marla Anderson /s/ Donald J. Noskowiak
- ------------------------ --------------------------------------------
Donald J. Noskowiak
BANKAMERICA INVESTMENT CORPORATION
Attest:
By:
- ------------------------ ----------------------------------------
Name:
Title:
Witness
- ------------------------ --------------------------------------------
Ford Bartholow
Witness
- ------------------------ --------------------------------------------
Jeffrey Mann
Witness
- ------------------------ --------------------------------------------
Robert F. Perille
Witness
- ------------------------ --------------------------------------------
Christopher J. Perry
<PAGE>
Witness
Marla Anderson /s/ Daniel P. Spalding
- ------------------------ --------------------------------------------
Daniel P. Spalding
IRA F/B/O DANIEL P. SPALDING
Witness
(illegible) By: SIGNATURE GUARANTEED
- ------------------------ MEDALLION GUARANTEED
ROBERT W. BAIRD & CO. INCORPORATED
----------------------------------------
Name: Lois C. Phillips
Title: X0005470
NYSE INC. MEDALLION SIGNATURE PROGRAM
RB060
Witness
Donald J. Sullivan /s/ John S. Spalding
- ------------------------ --------------------------------------------
John S. Spalding
IRA F/B/O JOHN S. SPALDING
Witness
(illegible) By: SIGNATURE GUARANTEED
- ------------------------ MEDALLION GUARANTEED
ROBERT W. BAIRD & CO. INCORPORATED
----------------------------------------
Name: Lois C. Phillips
Title: X0005470
NYSE INC. MEDALLION SIGNATURE PROGRAM
PATRICIA M. SPALDING REVOCABLE TRUST
Witness
Donald J. Sullivan By: /s/ John S. Spalding
- ------------------------ ----------------------------------------
Name: John S. Spalding
Title: Co-Trustee
Witness
Marla Anderson /s/ Philip Vanderhyden, Jr.
- ------------------------ --------------------------------------------
Philip Vanderhyden, Jr.
IRA F/B/O PHILIP VANDERHYDEN, JR.
Witness
(illegible) By: SIGNATURE GUARANTEED
- ------------------------ MEDALLION GUARANTEED
ROBERT W. BAIRD & CO. INCORPORATED
----------------------------------------
Name: Lois C. Phillips
Title: X0005470
NYSE INC. MEDALLION SIGNATURE PROGRAM
RB060
WALLIS WOOLSEY COOK TRUST A
Witness
(illegible) By: /s/ Gregory M. Cook (TTEE)
- ------------------------ ----------------------------------------
Name: Gregory M. Cook
Title: Trustee
<PAGE>
APPENDIX A
A.1 REPRESENTATIONS AND WARRANTIES OF INVESTORS
A.1.1 AUTHORIZATION; VALIDITY. Such INVESTOR has the full legal
right, power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by such INVESTOR and the performance by such INVESTOR of the transactions
contemplated herein have been duly and validly authorized. This Agreement is a
legal, valid and binding obligation of such INVESTOR, enforceable in accordance
with its terms, except as may be limited by bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium or other laws affecting the
enforcement of creditors' rights in general.
A.1.2 SHARE OWNERSHIP; OPTIONS. If such INVESTOR is listed in
Annex I hereto as owning COMPANY Stock, he owns COMPANY Stock, of record and
beneficially, of the type and in the amounts set forth in Annex I hereto free
and clear of all liens, encumbrances and claims of every kind, except as set
forth on Schedule A.1.2. If such INVESTOR is listed in Annex I hereto as owning
an option, he owns options, of record and beneficially, of the type and in the
amounts set forth in Annex I hereto free and clear of all liens, encumbrances
and claims of every kind.
A.1.3 DISCLOSURE. No representation or warranty by such
INVESTOR 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 by such INVESTOR to
USOP or NEWCO 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.
A.1.4 USOP PROSPECTUS. Such INVESTOR has received and reviewed
a copy of, and is making his decision to invest in USOP on the basis of, the
prospectus dated March 28, 1996 contained in USOP's shelf registration statement
on Form S-4.
A.1.5 ABSENCE OF CLAIMS AGAINST COMPANY. Such INVESTOR has no
claims against the COMPANY except for (a) items specifically identified on
SCHEDULES A.2.11 and A.2.16 as being claims of or obligations to such
INVESTOR and (b) continuing obligations to such INVESTOR relating to his
employment by the COMPANY.
A.1.6 NO ARRANGEMENT TO SELL USOP STOCK. Such Investor does not
have any contract, undertaking, agreement or arrangement, written or oral, with
any other person to sell, transfer or
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grant participations in any shares of USOP Stock to be acquired by such
INVESTOR.
A.2 REPRESENTATIONS AND WARRANTIES OF EMPLOYEE SHAREHOLDERS
A.2.1 DUE ORGANIZATION. The COMPANY is a corporation duly organized,
validly existing and is in good standing under the laws of the State of
Wisconsin and is duly authorized and qualified to do business under all
applicable laws, regulations, ordinances and orders of public authorities 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 A.2.1 hereto contains a list of all
jurisdictions in which the COMPANY is authorized or qualified to do business.
True, complete and correct copies of the Articles of Incorporation and By-laws,
each as amended, of the COMPANY are attached hereto as SCHEDULE A.2.1. Such
Articles of Incorporation and By-laws are referred to herein as the "Charter
Documents." The minute books of the COMPANY as heretofore made available to
USOP (and as shall be delivered to USOP at Closing) are correct and complete in
all material respects.
A.2.2 AUTHORIZATION; VALIDITY. The representatives of the COMPANY
executing this Agreement have the corporate power and authority to enter into
and bind the COMPANY to the terms of this Agreement. The COMPANY 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 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, enforceable in accordance with its terms.
A.2.3 NO CONFLICTS. The execution, delivery and performance of this
Agreement, the consummation of any transactions herein referred to or
contemplated by and the fulfillment of the terms hereof and thereof will not:
(a) conflict with, or result in a breach or violation of the
Articles of Incorporation or By-laws of the COMPANY;
(b) 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) 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
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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 its 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, or require any filing, approval or consent under, any
law, order, judgment, rule or regulation to which the COMPANY is subject
or by which the COMPANY is bound.
No authorization, approval or consent of, and no registration or filing with,
any governmental or regulatory official, body or authority is required in
connection with the execution, delivery and performance of this Agreement, the
consummation of any transactions herein referred to or contemplated by and the
fulfillment of the terms hereof and thereof by the COMPANY, except for filings
with the Federal Trade Commission and the Department of Justice pursuant to the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 and the rules and
regulations thereunder.
A.2.4 CAPITAL STOCK OF THE COMPANY. The authorized capital stock of
the COMPANY is as set forth in Section 1.3(a) hereof. 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 (except as provided in
section 180.0622(2)(b) of the WBCL). 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 the preemptive rights of any shareholder.
A.2.5 TRANSACTIONS IN CAPITAL STOCK, ACCOUNTING TREATMENT. Except as
disclosed in Annex I and in item (1) of SCHEDULE A.2.5 hereto, 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 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. Other than the exercise of options
and warrants and the conversion of Preferred Stock into shares of Common Stock
in connection with the Closing, neither the voting stock structure of the
COMPANY nor the relative ownership of shares among any of its shareholders has
been altered or changed in contemplation of the Merger. Except as disclosed in
item (2) of SCHEDULE A.2.5 hereto, there has been no transaction or action
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taken with respect to the equity ownership of the COMPANY since March 1, 1994.
A.2.6 NO BONUS SHARES. None of the shares of COMPANY Stock was
issued pursuant to awards, grants or bonuses.
A.2.7 NO SUBSIDIARIES. Except as disclosed on SCHEDULE A.2.7, 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.
A.2.8 PREDECESSOR STATUS; ETC.. SCHEDULE A.2.8 hereto 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.
A.2.9 SPIN-OFF BY THE COMPANY. Except as disclosed in SCHEDULE
A.2.9 hereto, there has not been any sale or spin-off of material assets of
either the COMPANY or 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 within the preceding two years.
A.2.10 FINANCIAL STATEMENTS. SCHEDULE A.2.10 hereto includes (a)
true, complete and correct copies of the COMPANY's audited Consolidated Balance
Sheets as of December 31, 1993, 1994 and 1995 (the end of each of its three most
recent completed fiscal years) and audited Consolidated Statements of Income,
Cash Flows and Retained Earnings 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 Balance Sheet (the "March Balance Sheet") as of
March 30, 1996 (hereinafter referred to as the "Balance Sheet Date") and
Consolidated Statements of Income for the 13-week period then ended
(collectively, the "Interim Financials"; and together with the Audited
Financials, the "COMPANY Financial Statements"). The COMPANY Financial
Statements have been prepared in accordance with GAAP, subject, in the case of
the Interim Financials to normal year-end audit adjustments, which in the
aggregate will not be material, and to the omission of footnote information.
Each of the Consolidated Balance Sheets included in the COMPANY Financial
Statements presents fairly in all material respects the consolidated financial
condition of the COMPANY as of the dates indicated thereon, and each of the
Consolidated Statements of Income, Cash Flows and Retained Earnings included in
the COMPANY Financial Statements presents fairly in all material respects the
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results of its consolidated operations and its cash flows for the periods
indicated thereon.
A.2.11 LIABILITIES AND OBLIGATIONS.
(a) Except as disclosed on SCHEDULE A.2.11 attached hereto, the
COMPANY is not liable for or subject to any liabilities except for:
(i) those liabilities reflected on the March 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 March Balance Sheet or arising since the Balance
Sheet Date, which liabilities in the aggregate are of a character
and magnitude consistent with past practice.
For purposes of this Section A.2.11 and Sections 9.1 and 9.2 hereof, 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 delivered to USOP, in the case of those
liabilities which are not fixed, a reasonable estimate of the maximum
amount which may be payable. For each such liability for which the amount
is not fixed or is contested, the COMPANY has provided to USOP (i) a
summary description of the liability together with (a) copies of all
relevant documentation relating thereto, (b) amounts claimed and any other
action or relief sought and (c) name of claimant, (ii) all other parties
to the claim, suit or proceeding and the name of each court or agency
before which such claim, suit or proceeding is pending and (iii) the date
such claim, suit or proceeding was instituted.
A.2.12 ACCOUNTS AND NOTES RECEIVABLE. SCHEDULE A.2.12 hereto sets
forth 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
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receivables from and advances to employees and the INVESTORS), which includes an
aging of all accounts and notes receivable showing amounts due in 30-day aging
categories. Historically, the accounts receivable of the COMPANY have been
collectible, subject to the reserve on the COMPANY Financial Statements.
A.2.13 PERMITS AND INTANGIBLES. 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,
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 A.2.13 hereto sets forth an accurate list
and summary description, as of the date hereof, of all Material Permits. To the
knowledge of the COMPANY 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.
A.2.14 ENVIRONMENTAL MATTERS. Except as disclosed in SCHEDULE
A.2.14 hereto, (a) The COMPANY has complied with and is in compliance with all
federal, state, 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, health, safety or pollution (collectively
"Environmental Laws"), including without limitation Environmental Laws relating
to air, groundwater, surface water, land or relating to the generation, storage,
use, handling, transportation, treatment or disposal of Hazardous Substances,
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) the COMPANY has obtained and adhered to all necessary permits and
other approvals necessary to treat, transport, store, dispose of and otherwise
handle Hazardous Substances and has reported, to the extent required by all
Environmental Laws, all past and present sites owned and operated by the COMPANY
where Hazardous Substances 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) there have
been no Releases (as defined in any of the
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Environmental Laws) or threats of Releases at, from, in, below or on any
property owned or operated by the COMPANY except as permitted by Environmental
Laws or where such releases do not and would not have a Material Adverse Effect;
(d) the COMPANY knows of no on-site or off-site location to which the COMPANY
has transported or disposed of Hazardous Substances or arranged for the
transportation or disposal of Hazardous Substances, which site is the subject of
any federal, state, local or foreign enforcement action or any other
investigation which could lead to any claim against the COMPANY, USOP or NEWCO
for any clean-up cost, remedial work, damage to natural resources or personal
injury, including without limitation any claim under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, or
any comparable state law; and (e) the COMPANY does not and would not have any
liability in connection with any Release of any Hazardous Substance into the
environment, except to the extent that such liability does not and would not
have a Material Adverse Effect. For the purposes of this Section A.2.14 the
term "Hazardous Substance" means without limitation those substances, whether
waste materials, raw materials, finished products, coproducts, byproducts, or
any other material or article, which are regulated by, form the basis of
liability or are defined as hazardous, extremely hazardous or toxic, under any
of the Environmental Laws, including without limitation, petroleum or any
byproducts or fractions thereof, asbestos, polychlorinated biphenyls, chemical
solvents, or any other material or substance that constitutes a material health,
safety or environmental hazard to any person, property or natural resource.
A.2.15 REAL AND PERSONAL PROPERTY. SCHEDULE A.2.15 hereto sets
forth an accurate list of all owned and leased real property, all personal
property included in "depreciable plant, property and equipment" on the March
Balance Sheet and all other personal property owned or leased by the COMPANY
with a value in excess of $10,000 (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 INVESTOR
or business or personal affiliates of the COMPANY or any INVESTOR. All of the
trucks and other material machinery and equipment of the COMPANY listed on
SCHEDULE A.2.15, taken as a whole, are in good working order and condition,
ordinary wear and tear excepted. All leases set forth on SCHEDULE A.2.15 are
in full force and effect and constitute valid and binding agreements of the
COMPANY and, to the knowledge of the COMPANY, the other parties thereto in
accordance with 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
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SCHEDULE A.2.15. SCHEDULE A.2.15 includes without limitation true, complete
and correct copies of all title reports and title insurance policies received or
owned by the COMPANY that are still in effect. SCHEDULE A.2.15 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.
A.2.16 SIGNIFICANT CUSTOMERS; MATERIAL CONTRACTS AND COMMITMENTS.
SCHEDULE A.2.16 hereto contains an accurate list of (a) all significant
customers (I.E. those customers representing 5% or more of the COMPANY's
revenues for the 12 months ending on the Balance Sheet Date, or who have paid to
the COMPANY $100,000 or more in any of the past four fiscal quarters) and (b)
all material contracts, commitments, leases, instruments, agreements, licenses
or permits to which the COMPANY 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) (i) as of the
Balance Sheet Date and (ii) entered into since the Balance Sheet Date
(collectively, the "Material Contracts"). True, complete and correct copies
of the Material Contracts have been delivered or made available to USOP. Except
to the extent set forth on SCHEDULE A.2.16 hereto, (x) none of the COMPANY's
significant customers have canceled or substantially reduced or, to the
knowledge of the COMPANY, are currently attempting or threatening to cancel or
substantially reduce service, (y) the COMPANY has complied with all of its
material 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 (z) there are no Material Contracts that were not negotiated at
arm's length with third parties not affiliated with the COMPANY, any INVESTOR or
any officer or director of the COMPANY. Except as disclosed in SCHEDULE
A.2.16 hereto, (A) the COMPANY is not bound by or subject to (and none of its
respective assets or properties is bound by or subject to) any arrangement with
any labor union, (B) no employees of the COMPANY are represented by any labor
union or covered by any collective bargaining agreement and, to the best of the
COMPANY's knowledge, no campaign to establish such representation is in
progress, and (C) there is no pending or, to the best of the COMPANY's
knowledge, threatened labor dispute involving the COMPANY and any group of its
employees nor has the COMPANY experienced any labor interruptions over the past
three years and the COMPANY considers its relationship with its employees to be
good.
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A.2.17 TITLE TO REAL PROPERTY. The COMPANY has good and insurable
title to the real property owned and used in its business, including without
limitation those reflected on SCHEDULE A.2.15 hereto, subject to no mortgage,
pledge, lien, conditional sales agreement, encumbrance or charge, except for:
(a) liens reflected on SCHEDULES A.2.11 and A.2.15 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;
(c) easements for utilities serving the property only; and
(d) easements, covenants and restrictions and other exceptions to
title shown of record in the office of the Register of Deeds (or
comparable office) of each county in which the properties, assets and
leasehold estates are located which do not in the aggregate materially
adversely affect the current use of the property.
A.2.18 INSURANCE. SCHEDULE A.2.18 hereto 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. Also attached to SCHEDULE A.2.18 are true,
complete and correct copies of all current insurance policies, all of which are
in full force and effect
A.2.19 COMPENSATION; EMPLOYMENT AGREEMENTS. SCHEDULE A.2.19 hereto
sets forth an accurate list, as of the date hereof, of all officers, directors
and key employees of the COMPANY, listing all employment agreements with such
officers, directors and key employees and the rate of compensation (and the
portions thereof attributable to salary, bonus and other compensation,
respectively) of each of such persons as of (a) the Balance Sheet Date and (b)
the date hereof. The COMPANY has provided to USOP true, complete and correct
copies of all employment contracts, commitments and arrangements with persons
listed on SCHEDULE A.2.19.
A.2.20 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
A.2.20 (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.
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Except as disclosed on SCHEDULE A.2.20: (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") and the Internal Revenue Code of 1986, as amended (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 (l) 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, and (k) no
employee of the COMPANY is represented by a labor union or organization, no
labor union or organization has been certified or recognized as a representative
of any such employee, there are no pending or, to the knowledge of the COMPANY,
threatened representation campaigns concerning union representation involving
any employee or efforts of any labor union or organization (or representatives
thereof) to organize any employees. If reasonably requested by USOP, the
COMPANY will terminate any Benefit Plan substantially contemporaneously with the
Closing.
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A.2.21 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 violations in the aggregate
would have a Material Adverse Effect; and except to the extent set forth on
SCHEDULE A.2.11, there are no material claims, actions, suits or proceedings,
pending or, to the knowledge of the COMPANY, 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.
A.2.22 TAXES. Except as set forth on SCHEDULE A.2.22, (a) 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; (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 March 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 has a taxable year ended
on December 31 in each year; (e) 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; (f) the COMPANY has paid or has fully
accrued for all Taxes, whenever determined, with respect to periods ending on or
before the Closing Date; and (g) the COMPANY has delivered or made available to
USOP 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 (3) fiscal years.
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.
A.2.23 NO VIOLATIONS. Neither the COMPANY nor, to the knowledge of
the COMPANY, 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
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Documents"); and, except as set forth in the Schedules attached to this
Agreement, (i) the rights and benefits of the COMPANY under the Material
Documents will not be materially and adversely affected by the transactions
contemplated hereby and (ii) the execution of this Agreement and the performance
of the obligations hereunder and the consummation of the transactions
contemplated hereby will not result in any material violation or breach or
constitute a default under, any of the terms or provisions of the Material
Documents or the Charter Documents. Except as described in Schedule A.2.16,
none of the Material Documents requires notice to, or the consent or approval
of, any governmental agency or other third party to any of the transactions
contemplated hereby to remain in full force and effect or give rise to any right
to termination, cancellation or acceleration or loss of any right or benefit.
A.2.24 GOVERNMENT CONTRACTS. The COMPANY is not a party to any
federal governmental contracts subject to price redetermination or
renegotiation.
A.2.25 ABSENCE OF CHANGES. Since the Balance Sheet Date, except as
contemplated herein or as set forth on SCHEDULE A.2.25 there has not been:
(a) any change that by itself or together with other changes, has
had 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 arrangement payable or to become payable by the COMPANY to any of its
officers, directors, shareholders or other investors, 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;
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(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 INVESTORS and their affiliates;
(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 INVESTOR 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; or
(m) any transaction by the COMPANY outside the ordinary course of
businesses.
A.2.26 BANK ACCOUNTS; POWERS OF ATTORNEY. SCHEDULE A.2.26 hereto
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 A.2.26 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.
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A.2.27 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.
A.2.28 DISCLOSURE. No representation or warranty by the COMPANY
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, USOP or
NEWCO 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.
A.2.29 POOLING LETTER. The COMPANY has received a letter from Ernst
& Young LLP, its independent accountants, stating their concurrence as to the
appropriateness of the COMPANY qualifying for pooling of interests accounting
treatment in accordance with GAAP and has delivered a copy of that letter to
USOP.
A.2.30 Schedule A.2.30 hereto includes the COMPANY's budget for the year
ended December 31, 1996 (the "Budget"). The Budget was prepared in good faith
and the COMPANY reasonably believes that there is a reasonable basis for the
projections contained therein. The Budget presents fairly and accurately in all
material respects the COMPANY's expectations regarding its anticipated financial
results for the periods specified therein. The COMPANY is not aware of any
matter affecting the business, operations, affairs, prospects, properties,
existing and potential liabilities, obligations, profits or condition (financial
or otherwise) of the COMPANY that would materially adversely affect the
COMPANY's ability to achieve the financial results set forth in the Budget.
A.3 REPRESENTATIONS OF USOP AND NEWCO
A.3.1 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. Copies of the Certificate of Incorporation
and the By-laws, each, as amended, (collectively, the "USOP Charter
Documents") of USOP
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and NEWCO have been delivered to the COMPANY. Neither USOP nor NEWCO is in
violation of any USOP Charter Document.
A.3.2 USOP STOCK. The USOP Stock to be delivered to the INVESTORS at
the Closing Date will be duly authorized, validly issued shares of Common Stock
of USOP, fully paid and nonassessable. The Registration Statement has been
declared effective and no stop order has been issued by the SEC. Any event that
has occurred since the effectiveness of the Registration Statement and
preparation of the prospectus which would require a supplement or amendment to
same has been appropriately disclosed in such a supplement or amendment or
through the filing of a report that is incorporated by reference into the
Registration Statement. The Registration Statement and prospectus conform in
all material respects to the requirements provided for in the rules and
regulations adopted under the Securities Act of 1933, as amended. Any required
Blue Sky filings relative to shares issued to the Shareholders have been
properly made. The notification to the National Association of Securities
Dealers, Inc. relating to the shares of USOP Stock to be issued in the Merger
has been or will be made.
A.3.3 AUTHORIZATION; VALIDITY OF OBLIGATIONS. The representatives of
USOP and NEWCO executing this Agreement have the 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.
A.3.4 NO CONFLICTS. The execution, delivery and performance of this
Agreement, the consummation of any transactions herein referred to or
contemplated by and the fulfillment of the terms hereof and thereof will not:
(a) conflict with, or result in a breach or violation of the
Certificate of Incorporation or By-laws of either USOP or NEWCO;
(b) 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) 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
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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; or
(d) violate any law, order, judgment, rule or regulation to which
USOP or NEWCO is subject by which USOP or NEWCO is bound.
No authorization, approval or consent of, and no registration or filing with,
any governmental or regulatory official, body or authority is required in
connection with the execution, delivery and performance of this Agreement, the
consummation of any transactions herein referred to or contemplated by and the
fulfillment of the terms hereof and thereof by USOP or NEWCO, except for filings
with the Federal Trade Commission and the Department of Justice pursuant to the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 and the rules and
regulations thereunder.
A.3.5 CAPITALIZATION OF USOP AND OWNERSHIP OF USOP STOCK. The
authorized capital stock of USOP and NEWCO is as set forth in Section 1.3(b) and
1.3(c), respectively. All of the issued and outstanding shares of NEWCO are
owned beneficially and of record by USOP. All of the shares of USOP Stock to be
issued to the INVESTORS 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 were or will be
issued in violation of the preemptive rights of any shareholder.
A.3.6 CONFORMITY WITH LAW. 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
Material Adverse Effect. There are no material claims, actions, suits or
proceedings, pending or, to the knowledge of USOP or NEWCO, threatened, against
or affecting USOP or NEWCO, 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 either of them and no notice
of any claim, action, suit or proceeding, whether pending or threatened, has
been received.
A.3.7 USOP PROSPECTUS. The USOP Prospectus does not, as of the date
thereof, omit to state a material fact required to be stated therein of
necessary in order to make the statements
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therein, in the light of circumstances under which they were made, not
misleading.
A.3.8 TRANSACTIONS IN CAPITAL STOCK. There has been no transaction
or action taken with respect to the equity ownership of USOP or NEWCO in
contemplation of the transactions described in this Agreement which would
prevent USOP from accounting for such transactions as a pooling.
A.3.9 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 transaction contemplated by this
Agreement all qualifying for pooling of interests accounting treatment in
accordance with GAAP, and has delivered a copy of that letter to the COMPANY.
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U.S. OFFICE PRODUCTS COMPANY
________________________________________________________________________________
FOR IMMEDIATE RELEASE - MAY 14, 1996 RELEASE NO. 96-005
U.S. OFFICE PRODUCTS COMPANY CONTACT: DONALD H. PLATT
(NASDAQ - "OFIS") U.S. OFFICE PRODUCTS
(202) 628-9500 OR
(800) 330-6347
OR EDELMAN FINANCIAL
OPHELIA BUMGARDNER (ANALYSTS)
(212) 704-4517
OR KERRY O'BRIEN (MEDIA)
(212) 704-8291
U.S. OFFICE PRODUCTS COMPANY EXECUTES AGREEMENT
FOR THE SALE OF $200 MILLION OF
CONVERTIBLE SUBORDINATED NOTES
Washington, D.C., May 14, 1996 -- U.S. Office Products Company (NASDAQ: OFIS)
announced today that it has executed an agreement for the sale, in an offshore
offering and in a concurrent private placement in the United States, of $200
million of 5 1/2% Convertible Subordinated Notes due 2003. The Notes will be
convertible into common stock at a price of $47.40 per share, which equates to
an aggregate of approximately 4,219,409 shares of the Company's common stock.
The agreement provides for an option to purchase up to approximately $30
million principal amount of additional Notes for the purpose of covering over-
allotment, if any. The sale is scheduled to close on May 22, 1996.
The net proceeds of offering will be used by U.S. Office Products for
general corporate purposes including additional acquisitions.
U.S. Office Products was founded in October 1994 to create a nationwide
office products supplier, primarily to corporate, commercial and industrial
customers.
Neither the notes nor the common stock issuable upon conversion have been
registered under the United States Securities Act of 1933. Accordingly, these
securities may not be offered or sold in the United States or to any U.S. person
absent registration or an applicable exemption from the registration
requirements. This press release shall not constitute an offer to sell or the
solicitation of an offer to buy, nor shall there be any sale of these securities
in any state or jurisdiction in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws of any
such state or jurisdiction.
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