<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 7, 1998
Registration No. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
U.S. OFFICE PRODUCTS COMPANY
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 5112 52-1906050
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
------------------------
1025 THOMAS JEFFERSON STREET, N.W., SUITE 600 EAST
WASHINGTON, D.C. 20007
(202) 339-6700
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
------------------------------
THOMAS MORGAN
PRESIDENT AND CHIEF EXECUTIVE OFFICER
U.S. OFFICE PRODUCTS COMPANY
1025 THOMAS JEFFERSON STREET, N.W., SUITE 600 EAST
WASHINGTON, D.C. 20007
(202) 339-6700
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
------------------------------
WITH A COPY TO:
<TABLE>
<S> <C>
GEORGE P. STAMAS, ESQ. MARK D. DIRECTOR, ESQ.
WILMER, CUTLER AND PICKERING EXECUTIVE VICE PRESIDENT--ADMINISTRATION,
2445 M STREET, N.W. GENERAL COUNSEL AND SECRETARY
WASHINGTON, D.C. 20037 U.S. OFFICE PRODUCTS COMPANY
(202) 663-6000 1025 THOMAS JEFFERSON STREET, N.W.
SUITE 600 EAST
WASHINGTON, D.C. 20007
(202) 339-6700
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
------------------------
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF SECURITIES AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING REGISTRATION
TO BE REGISTERED REGISTERED PER SHARE (A) PRICE (A) FEE
<S> <C> <C> <C> <C>
Common stock, par value $.001 per share 8,889,920 $16.17 $143,750,000 $42,407
</TABLE>
(a) Based on the aggregate principal value of securities to be received in
exchange for the registered securities pursuant to Rule 457(f).
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
SUBJECT TO COMPLETION DATED APRIL 7, 1998
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE ISSUED PRIOR TO
THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS OFFERING
CIRCULAR/PROSPECTUS 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 IN
WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION
OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
OFFERING CIRCULAR/PROSPECTUS
[LOGO]
OFFER TO EXCHANGE UP TO 8,889,920 SHARES OF COMMON STOCK
FOR 5 1/2% CONVERTIBLE SUBORDINATED NOTES DUE 2001
AT A TEMPORARILY REDUCED NOTE CONVERSION PRICE
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK
CITY TIME,
MAY , 1998, UNLESS EXTENDED.
U.S. Office Products Company (the "Company") hereby offers to exchange
shares of its common stock, par value $.001 per share (the "Common Stock"), for
its outstanding 5 1/2% Convertible Subordinated Notes due 2001 (the "Notes") at
an exchange rate that will effectively reduce the conversion price for a period
beginning on the date of this Offering Circular/Prospectus and ending at 5:00
p.m. New York City time on May , 1998 or such later date as extended by the
Company, in its sole discretion (the "Expiration Date") (such period, the
"Exchange Period"). This offer is being made on the terms set forth in this
Offering Circular/Prospectus (the "Offering Circular/Prospectus") and the
accompanying Letter of Transmittal (the "Letter of Transmittal," which, together
with the Offering Circular/Prospectus, constitutes the "Exchange Offer").
The Notes are currently convertible into shares of Common Stock at a rate of
one share for each $19.00 principal amount of the Notes (the "Existing
Conversion Price"). During the Exchange Period, holders of the Notes (the
"Holders") will be able to exchange the Notes for Common Stock at an exchange
rate of 61.843 shares per $1,000 principal amount of the Notes, which
effectively reduces the conversion price to $16.17 per share (the "Reduced
Conversion Price"). The Company will pay in cash unpaid interest accrued on the
Notes through the Expiration Date with respect to all Notes tendered pursuant to
the Exchange Offer.
Holders who exchange pursuant to the Exchange Offer will be able to tender
shares they receive upon exchange in a self-tender offer for shares of Common
Stock that the Company is making. Holders who exchange also will be able to
receive shares of stock of four companies that the Company is spinning off to
its stockholders. See "The Strategic Restructuring Plan."
Upon the terms and subject to the conditions of the Exchange Offer, the
Company will accept for exchange all Notes validly tendered and not withdrawn
prior to 5:00 p.m., New York City time, on May , 1998, or if extended by the
Company, in its sole discretion, the latest date and time to which extended (the
"Expiration Date"). The Exchange Offer will expire on the Expiration Date.
Tenders of Notes may be withdrawn at any time prior to the Expiration Date and,
unless accepted for exchange by the Company, may be withdrawn at any time after
40 business days after the date of this Offering Circular/Prospectus.
As of the date of this Offering Circular/Prospectus, there were $143,750,000
principal amount of the Notes outstanding. The Common Stock is traded on the
Nasdaq National Market System under the trading symbol "OFIS." On April ,
1998, the closing sale price of the Common Stock on the Nasdaq National Market
System was $ per share.
THE COMPANY WILL NOT BE REQUIRED TO COMPLETE THE EXCHANGE OFFER IF THE
OBLIGATION OF INVESTOR (AS DEFINED HEREIN) TO MAKE THE EQUITY INVESTMENT IS
TERMINATED, OR IF THE COMMITMENT WITH RESPECT TO A PROPOSED NEW CREDIT FACILITY
IS TERMINATED. IN ADDITION, THE EXCHANGE OFFER IS SUBJECT TO CERTAIN OTHER
CONDITIONS. SEE "THE TERMS OF THE EXCHANGE OFFER--CONDITIONS OF THE EXCHANGE
OFFER." [CONTINUED ON FOLLOWING PAGE]
------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 7 OF THIS OFFERING CIRCULAR/PROSPECTUS
FOR A DISCUSSION OF CERTAIN FACTORS THAT HOLDERS SHOULD CONSIDER IN EVALUATING
WHETHER TO EXCHANGE THEIR NOTES FOR COMMON STOCK PURSUANT TO THE EXCHANGE OFFER.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR BY ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS OFFERING CIRCULAR/
PROSEPCTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
BancAmerica Robertson Stephens has been retained to act as Dealer Manager to
solicit exchanges of Notes for Common Stock. See "The Terms of the Exchange
Offer--Dealer Manager." State Street Bank and Trust Company has been retained to
act as the Exchange Agent in connection with the Exchange Offer. MacKenzie
Partners, Inc. has been retained to act as Information Agent to assist in
connection with the Exchange Offer.
------------------------
The Dealer Manager for the Exchange Offer is:
[LOGO]
The date of this Offering Circular/Prospectus is April , 1998.
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the U.S. Securities and
Exchange Commission (the "Commission") (File No. 0-25372) are incorporated
herein by reference:
(a) The Company's Annual Report on Form 10-K for the fiscal year ended April
26, 1997, as amended through the date hereof;
(b) The Company's Quarterly Reports on Form 10-Q for the periods ended July
26, 1997, October 25, 1997 and January 24, 1998;
(c) The Company's Current Report on Form 8-K filed with the Commission on
March 12, 1998; and
(d) The Company's Proxy Statement filed on Schedule 14A on March 12, 1998,
as amended.
In addition, all reports and other documents filed by the Company with the
Commission pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Securities
Exchange Act of 1934 (the "Exchange Act"), subsequent to the date of
effectiveness of the Registration Statement of which this Offering Circular/
Prospectus is a part and prior to the termination of the offering made hereby,
shall be deemed to be incorporated by reference into this Offering
Circular/Prospectus. Any statement contained herein or incorporated or deemed to
be incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Offering Circular/Prospectus to the extent that a statement
contained or incorporated by reference herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a part
of this Offering Circular/Prospectus.
THIS OFFERING CIRCULAR/PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH
ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THE COMPANY WILL PROVIDE WITHOUT
CHARGE TO EACH PERSON, INCLUDING ANY BENEFICIAL OWNER OF NOTES, TO WHOM THIS
OFFERING CIRCULAR/PROSPECTUS IS DELIVERED, UPON THE WRITTEN OR ORAL REQUEST OF
SUCH PERSON, A COPY OF ANY OR ALL OF THE FOREGOING DOCUMENTS INCORPORATED HEREIN
BY REFERENCE, OTHER THAN EXHIBITS TO SUCH DOCUMENTS (UNLESS SUCH EXHIBITS ARE
SPECIFICALLY INCORPORATED BY REFERENCE INTO SUCH DOCUMENTS). SUCH REQUESTS
SHOULD BE MADE BY CONTACTING MARK D. DIRECTOR, EXECUTIVE VICE PRESIDENT-
ADMINISTRATION, GENERAL COUNSEL AND SECRETARY, U.S. OFFICE PRODUCTS COMPANY,
1025 THOMAS JEFFERSON STREET, N.W., SUITE 600 EAST, WASHINGTON, D.C. 20007 OR
THE INFORMATION AGENT AT THE ADDRESS SET FORTH ON THE BACK PAGE OF THIS OFFERING
CIRCULAR/PROSPECTUS. IN ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY
REQUEST SHOULD ALLOW AT LEAST FIVE (5) BUSINESS DAYS FOR DELIVERY.
------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THE EXCHANGE OFFER OTHER THAN THOSE CONTAINED
IN THIS OFFERING CIRCULAR/PROSPECTUS. IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS SHOULD NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY OR THE DEALER MANAGER. NEITHER THE DELIVERY OF THIS OFFERING
CIRCULAR/PROSPECTUS NOR ANY EXCHANGE CONTEMPLATED HEREBY SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE RESPECTIVE DATES AS OF WHICH INFORMATION IS
GIVE HEREIN.
The Exchange Offer is not being made to (nor will any tender of Notes for
exchange be accepted from or on behalf of) Holders in any jurisdiction in which
the making of the Exchange Offer or the acceptance of any tender of Notes for
exchange therein would not be in compliance with the laws of such jurisdiction.
However, the Company may, at its discretion, take such action as it may deem
necessary for the Company to make the Exchange Offer in any such jurisdiction
and extend the Exchange Offer to Holders in such jurisdiction. In any
jurisdiction the securities laws or Blue Sky Laws of which require the Exchange
Offer to be made by a licensed broker or dealer, the Exchange Offer is being
made on behalf of the Company by the Dealer Manager or one or more registered
brokers or dealers which are licensed under the laws of such jurisdiction.
<PAGE>
TABLE OF CONTENTS
<TABLE>
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PAGE
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<S> <C>
Summary............................................................... 1
Risk Factors.......................................................... 7
The Terms of the Exchange Offer....................................... 16
Dividend Policy....................................................... 25
Capitalization........................................................ 26
Selected Historical and Pro Forma Financial Data...................... 27
The Strategic Restructuring Plan...................................... 30
Effect of the Strategic Restructuring Plan on the Conversion Price for
the Notes........................................................... 40
U.S. Federal Income Tax Considerations................................ 41
Description of the Notes.............................................. 43
Description of the Common Stock....................................... 54
Legal Matters......................................................... 55
Experts............................................................... 55
Available Information................................................. 56
</TABLE>
<PAGE>
SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ IN
CONJUNCTION WITH, THE MORE DETAILED INFORMATION INCLUDED ELSEWHERE IN THIS
OFFERING CIRCULAR/PROSPECTUS OR INCORPORATED BY REFERENCE HEREIN. SEE "RISK
FACTORS" FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED IN
CONNECTION WITH THE EXCHANGE OFFER. UNLESS THE CONTEXT OTHERWISE REQUIRES, THE
TERMS "U.S. OFFICE PRODUCTS" OR THE "COMPANY" REFER TO U.S. OFFICE PRODUCTS
COMPANY, A DELAWARE CORPORATION, AND ITS SUBSIDIARIES AFTER COMPLETION OF THE
STRATEGIC RESTRUCTURING PLAN. CERTAIN OTHER CAPITALIZED TERMS USED IN THIS
SUMMARY ARE DEFINED ELSEWHERE IN THIS OFFERING CIRCULAR/PROSPECTUS.
THIS OFFERING CIRCULAR/PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS THAT
INVOLVE RISKS AND UNCERTAINTIES. WHEN USED IN THIS OFFERING CIRCULAR/PROSPECTUS,
THE WORDS "ANTICIPATE," "ESTIMATE," "INTEND," "MAY," "WILL," AND "EXPECT" AND
SIMILAR EXPRESSIONS AS THEY RELATE TO THE COMPANY OR ITS MANAGEMENT ARE INTENDED
TO IDENTIFY SUCH FORWARD-LOOKING STATEMENTS. THE COMPANY UNDERTAKES NO
OBLIGATION TO REVISE THESE FORWARD-LOOKING STATEMENTS TO REFLECT ANY FUTURE
EVENTS OR CIRCUMSTANCES. THE COMPANY'S ACTUAL RESULTS, PERFORMANCE OR
ACHIEVEMENTS COULD DIFFER MATERIALLY FROM THE RESULTS EXPRESSED IN, OR IMPLIED
BY, THESE FORWARD-LOOKING STATEMENTS. FACTORS THAT COULD CAUSE OR CONTRIBUTE TO
SUCH DIFFERENCES INCLUDE THOSE DISCUSSED IN "RISK FACTORS." THIS OFFERING
CIRCULAR/PROSPECTUS ALSO CONTAINS PRO FORMA FINANCIAL INFORMATION THAT GIVES
EFFECT TO CERTAIN EVENTS. SUCH INFORMATION IS NOT NECESSARILY INDICATIVE OF THE
RESULTS THAT THE COMPANY WOULD HAVE ATTAINED HAD THE EVENTS OCCURRED AT THE
BEGINNING OF THE PERIODS PRESENTED, AS ASSUMED, OR OF THE FUTURE RESULTS OF THE
COMPANY.
THE COMPANY
U.S. Office Products is one of the world's leading suppliers of a broad
range of office products and business services to corporate customers. Through
its North American Office Products Group ("NAOPG"), U.S. Office Products
provides office supplies, office furniture and office coffee, beverage and
vending services primarily to middle market companies (25 to 500 employees).
Based on current sales, NAOPG is one of the largest contract stationers in the
United States. Outside North America, U.S. Office Products' Blue Star Group
Limited ("Blue Star") is a leading supplier of office products in New Zealand
and Australia, and U.S. Office Products owns a 49% interest in Dudley Stationery
Limited ("Dudley"), the second largest independent contract stationer in the
United Kingdom. With its November 1997 acquisition of Mail Boxes Etc. ("MBE"),
U.S. Office Products has expanded into the high growth small office and home
office market. MBE is the world's largest franchisor of local postal, packaging,
business and communications service centers with more than 3,600 outlets
worldwide.
Since its founding in October 1994, U.S. Office Products has grown primarily
through an aggressive acquisition program, which has included the purchase of
more than 230 businesses in the United States and internationally. U.S. Office
Products has focused on acquiring successful, established companies with
experienced management and sales presence in specific geographic, product or
service markets. It adheres to a rigorous due diligence and financial review
process in acquiring target companies.
U.S. Office Products is now transitioning into a new stage of development,
less reliant on acquisitions and more focused on organic growth, operational
efficiencies and improved margins. U.S. Office Products is implementing new
product, sales and marketing programs to leverage its extensive sales force and
its existing distribution channels. U.S. Office Products continues to pursue
strategic alliances with well-known companies to enable U.S. Office Products to
increase sales by offering a broader selection of services and products, such as
its exclusive arrangement to distribute Starbucks-Registered Trademark- coffee
in the North American office market. As part of this transition, U.S. Office
Products is centralizing a number of common business functions, such as
purchasing, distribution, inventory management and information systems.
Furthermore, U.S. Office Products is systematically consolidating the operations
of businesses located within the same geographic area into district fulfillment
centers ("DFCs") to provide greater regional efficiencies and economies of scale
in purchasing, distribution and asset utilization. At the same time, U.S. Office
Products
1
<PAGE>
continues to encourage entrepreneurial innovation and management of customer
relationships at the local level. U.S. Office Products believes that its
organizational structure combines the best elements of both centralized and
decentralized management for its business.
The Company is a Delaware corporation. Its executive offices are located at
1025 Thomas Jefferson Street, N.W., Washington, D.C. 20007, and its telephone
number is 202-339-6700.
THE STRATEGIC RESTRUCTURING PLAN
On January 12, 1998, the Board of Directors of U.S. Office Products approved
a comprehensive Restructuring Plan (the "Strategic Restructuring Plan"). See
"The Strategic Restructuring Plan." The principal elements of the Strategic
Restructuring Plan are:
- EQUITY SELF-TENDER. Pursuant to a self-tender offer, the Company will
purchase 37,037,037 shares of its Common Stock, including shares issuable
upon exercise of options to purchase Common Stock, at $27.00 per share or,
in the case of shares underlying stock options, $27.00 minus the exercise
price of such options (the "Equity Self-Tender"). The aggregate purchase
price for shares of Common Stock in the Equity Self-Tender will be $1.0
billion less the exercise price of any purchased shares issuable upon
exercise of options. Holders who exchange their Notes for Common Stock in
the Exchange Offer will be able to tender such Common Stock in the Equity
Self-Tender. The Equity Self-Tender will expire on May , 1998, unless
extended.
- SPIN-OFF DISTRIBUTIONS. The Company will distribute to its stockholders
the shares of four separate companies: Aztec Consulting, Inc., Workflow
Management, Inc., School Specialty, Inc., and Navigant International, Inc.
(collectively, the "Spin-Off Companies"). The distributions of the shares
of the Spin-Off Companies are referred to in this Offering
Circular/Prospectus as the "Distributions." The Spin-Off Companies will
conduct the Company's former technology solutions, print management,
educational supplies and corporate travel services businesses,
respectively. Each of the Spin-Off Companies plans to issue additional
shares of its common stock in public offerings substantially concurrent
with the Distributions. Holders who exchange their Notes for Common Stock
in the Exchange Offer will receive stock of the Spin-Off Companies in the
Distributions to the extent shares of Common Stock are not tendered and
accepted in the Equity Self-Tender and are held on the record date for the
Distributions. The record date for the Distributions will be after the
expiration date for the Equity Self-Tender.
- EQUITY INVESTMENT. Pursuant to an investment agreement (the "Investment
Agreement"), an affiliate ("Investor") of an investment fund managed by
Clayton, Dubilier & Rice, Inc. ("CD&R"), a private investment firm, will
acquire Common Stock representing 24.9% of the equity of the Company after
giving effect to the Equity Self-Tender and warrants to purchase
additional Common Stock for $270.0 million (the "Equity Investment").
The Strategic Restructuring Plan was adopted in light of the Company's
movement into a new stage of development, less reliant on acquisitions and more
focused on growth through improvements in and expansion of existing operations.
The Company believes that the Strategic Restructuring Plan will benefit the
Company by focusing U.S. Office Products' business on a complementary group of
businesses and permitting management to implement operational improvements in
its core business. It will also bring to the Company's core business the
managerial assistance and support of CD&R.
In connection with the Strategic Restructuring Plan and subject to
stockholder approval, the Company plans to undertake a one-for-four reverse
stock split.
In conjunction with the Strategic Restructuring Plan, the Company plans to
undertake the following financing transactions (together with the Exchange
Offer, the "Financing Transactions") in addition to the Exchange Offer:
2
<PAGE>
- NEW CREDIT FACILITY. The Company has entered into a commitment letter for
a new $1.225 billion senior credit facility (the "Credit Facility"). See
"The Strategic Restructuring Plan--Indebtedness of U.S. Office Products
After the Restructuring."
- SUBORDINATED DEBT OFFERING. The Company plans to issue and sell at least
$400.0 million in Senior Subordinated Notes in a private placement (the
"Subordinated Debt Offering"). See "The Strategic Restructuring
Plan--Indebtedness of U.S. Office Products After the Restructuring."
- 2003 NOTES TENDER OFFER. The Company plans to offer to purchase any and
all of its $230.0 million outstanding 5 1/2% Convertible Subordinated
Notes Due 2003 (the "2003 Notes") for a purchase price of % of the
principal amount, plus accrued interest (the "2003 Note Tender"). See "The
Strategic Restructuring Plan--The Financing Transactions."
The Company intends to use the proceeds of the Equity Investment and the
Subordinated Debt Offering, together with borrowings under the Credit Facility,
to refinance the Company's existing credit facility, to pay the purchase price
of the Equity Self-Tender and 2003 Note Tender, and to pay fees and expenses
incurred in connection with the Strategic Restructuring Plan. The Credit
Facility also will be available for future borrowings, including to fund
acquisitions.
3
<PAGE>
THE EXCHANGE OFFER
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Securities subject to the Exchange
Offer.................................. U.S. Office Products Company 5 1/2% Convertible
Subordinated Notes due 2001.
Exchange Ratio........................... 61.843 shares of Common Stock per $1,000
principal amount of the Notes.
Reduced Conversion Price................. The Exchange Ratio effectively reduces the
Conversion Price to $16.17 principal amount of
the Notes per share of Common Stock for the
Exchange Period.
Purpose.................................. To induce the exchange of the Notes prior to
their maturity, and thereby (i) reduce the
amount of cash the Company otherwise could be
required to pay to retire the Notes in 2001 and
(ii) minimize the dilutive effect of the
issuance of Common Stock upon conversion of the
Notes if they were converted after the
completion of the Strategic Restructuring Plan.
Exchange Period.......................... From April , 1998 through 5:00 p.m., New York
City time on May , 1998, unless extended by
the Company, in its sole discretion (the latest
date and time to which extended, the "Expiration
Date"). The Exchange Offer will expire on the
Expiration Date. See "The Terms of the Exchange
Offer--Expiration Date; Extension; Amendment;
Termination."
Withdrawal Rights........................ Tenders of Notes may be withdrawn at any time on
or prior to the Expiration Date and, unless
accepted for exchange by the Company, may be
withdrawn at any time after 40 business days
after the date of this Offering
Circular/Prospectus. Withdrawal can be effected
by delivering a written notice of such
withdrawal to the Exchange Agent in conformity
with certain procedures set forth below under
"The Terms of the Exchange Offer--Withdrawal
Rights."
Extension; Amendment; Termination........ The Company expressly reserves the right to (i)
extend, amend or modify the terms of the
Exchange Offer in any manner, and (ii) withdraw
or terminate the Exchange Offer and not accept
for exchange any Notes, at any time for any
reason. See "The Terms of the Terms of the
Exchange Offer--Expiration Date; Extension;
Amendment; Termination."
Conditions to the Exchange Offer......... The Exchange Offer is conditioned upon
Investor's obligation to make the Equity
Investment not having been terminated, the
commitment with respect to the Credit Facility
not having been terminated, as well as certain
other conditions. See "The Terms of the Exchange
Offer--Conditions of the Exchange Offer."
Fractional Shares........................ No fractional shares will be issued upon
exchange of Notes pursuant to the Exchange
Offer. If any fractional share of stock
otherwise would be issuable upon the exchange of
any Note, the Company will pay the exchanging
Holder an amount equal to such fractional share
times the Current Market Price (as defined in
this
</TABLE>
4
<PAGE>
<TABLE>
<S> <C>
Offering Circular/Prospectus) on the last
trading day prior to the date of exchange. See
"The Terms of the Exchange Offer--Terms of the
Offer."
Accrued Interest......................... The Company will pay in cash unpaid interest
accrued on the Notes through the Expiration Date
with respect to all Notes exchanged pursuant to
the Exchange Offer. See "The Terms of the
Exchange Offer--Terms of the Offer."
Dealer Manager........................... BancAmerica Robertson Stephens.
Exchange Agent........................... State Street Bank & Trust Company.
Information Agent........................ MacKenzie Partners, Inc.
How to Exchange Notes.................... Any holder of Notes wishing to exchange Notes in
the Exchange Offer should: (i) complete and sign
the Letter of Transmittal attached to this
Offering Circular/ Prospectus (the "Letter of
Transmittal"), and (ii) tender the original Note
and the Letter of Transmittal to the Exchange
Agent or follow the procedures for book-entry
delivery set forth in "The Terms of the Exchange
Offer--Procedures for Tender of Notes for
Exchange."
Acceptance of Notes and Delivery of
Securities............................. Upon the terms and subject to the conditions of
the Exchange Offer, the Exchange Agent will
deliver the registered certificates for the
shares of Common Stock issuable upon exchange of
the Notes as soon as practicable after the
exchange. To the extent instructed on the Letter
of Transmittal, the Exchange Agent will cause
the shares of Common Stock to be tendered in the
Equity Self-Tender. See "The Terms of the
Exchange Offer--Procedure for Tendering Shares
Received upon Exchange in the Equity
Self-Tender."
Special Procedures for Beneficial
Owners................................. Any beneficial owner whose Notes are registered
in the name of a broker, dealer, commercial
bank, trust company, or other nominee and who
wishes to exchange should contact such
registered holder promptly and instruct such
registered Holder to tender the Notes on such
beneficial owner's behalf. If such beneficial
owner wishes to exchange on its own behalf, such
owner must, prior to completing and executing a
Letter of Transmittal and delivering its Notes,
make appropriate arrangements to register the
ownership of such Notes in such owner's name.
The transfer of registered ownership may take
considerable time and may not be able to be
completed prior to the Expiration Date. See "The
Terms of the Exchange Offer--Procedures for
Tender of Notes for Exchange."
Notes not Tendered for Exchange.......... Holders who do not exchange their Notes in the
Exchange Offer or whose Notes are not accepted
for exchange will continue to hold such Notes
and will be entitled to all the rights, and will
be subject to all of the limitations, applicable
thereto. See "The Terms of the
</TABLE>
5
<PAGE>
<TABLE>
<S> <C>
Exchange Offer--Market and Trading Information."
To the extent that a significant amount of Notes
are exchanged in the Exchange Offer, a Holder's
ability to sell Notes not tendered for exchange
could be adversely affected. See "Risk
Factors--Limited Trading Market." The Conversion
Price will be $19.00 per share, adjusted to take
account for the Equity Self-Tender, the
Distributions, and the reverse stock split. See
"Effect of the Strategic Restructuring Plan on
the Conversion Price for the Notes."
Risk Factors............................. An investment in the Common Stock issuable upon
acceptance of the Exchange Offer involves
certain risks, including, among others, the
following: risks arising from the significant
additional indebtedness that the Company will
incur in completing the Strategic Restructuring
Plan, risks associated with changing the
Company's strategic focus, and risks related to
the Company's acquisition program. See "Risk
Factors."
Tax Considerations of Exchange........... The Company will receive an opinion from Wilmer,
Cutler & Pickering that for U.S. federal income
tax purposes, the exchange of Notes into Common
Stock will be a recapitalization that is
tax-free to holders of Notes (except with
respect to cash received in lieu of fractional
shares). See "U.S. Federal Income Tax
Considerations." This opinion is based in part
on Wilmer, Cutler & Pickering's opinion that the
Distributions will qualify as tax-free spin-offs
under Section 355 of the Internal Revenue Code
of 1986, as amended. See "The Strategic
Restructuring Plan--U.S. Federal Income Tax
Consequences of the Distributions."
</TABLE>
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RISK FACTORS
HOLDERS WHO ARE CONSIDERING EXCHANGING THEIR NOTES PURSUANT TO THE EXCHANGE
OFFER SHOULD CONSIDER CAREFULLY THE FOLLOWING RISK FACTORS, AS WELL AS THE OTHER
INFORMATION INCLUDED IN THIS OFFERING CIRCULAR/PROSPECTUS OR INCORPORATED HEREIN
BY REFERENCE, IN EVALUATING WHETHER TO EXCHANGE THEIR NOTES FOR SHARES OF COMMON
STOCK.
SUBSTANTIAL INDEBTEDNESS OF THE COMPANY; ABILITY TO SERVICE DEBT
The Company will incur substantial indebtedness in connection with the
Strategic Restructuring Plan and the Financing Transactions and will thereby
become highly leveraged. At January 24, 1998, the Company had outstanding
approximately $714.5 million in indebtedness consisting of bank loans,
convertible subordinated notes, and capital leases. As a result of the Strategic
Restructuring Plan and the Financing Transactions, the Company's total
indebtedness will increase by approximately $504.1 million to approximately $1.2
billion, assuming that all Notes are exchanged and all 2003 Notes are accepted
for purchase in the 2003 Note Tender. Any Notes that remain outstanding will
increase the amount of outstanding debt. Any Notes that are not exchanged will
be subordinated to all of the additional indebtedness incurred in connection
with the Financing Transactions, except the $400.0 million of notes the Company
plans to issue in the Subordinated Debt Offering and any of the 2003 Notes that
remain outstanding after the 2003 Note Tender, each of which will rank PARI
PASSU with the Notes. See "Description of Notes--Subordination."
The Company's high leverage could have material consequences to the Company,
including, but not limited to, the following: (i) the Company's ability to
obtain additional financing in the future for acquisitions, working capital,
capital expenditures, and general corporate or other purposes may be impaired or
any such financing may not be on terms favorable to the Company, (ii) a
substantial portion of the Company's cash flow will be required for debt service
and, as a result, will not be available for its operations and other purposes;
(iii) a substantial decrease in net operating cash flows or increase in expenses
could make it difficult for the Company to meet its debt service requirements or
force it to modify its operations or sell assets; and (iv) the Company's level
of indebtedness could make it more vulnerable to economic downturns, and reduce
its flexibility in responding to changing business and economic conditions. In
addition, the Company's borrowings under the Credit Facility are and will
continue to be at variable rates of interest, which exposes the Company to the
risk of increased interest rates. The Company will be required to enter into
arrangements to ensure that the effective interest rate paid by the Company on
at least 50% of its outstanding bank and subordinated debt will not go above a
certain rate. If the Company is unable to service its indebtedness, it will be
forced to pursue one or more alternative strategies, such as selling assets,
restructuring or refinancing its indebtedness, or seeking additional equity
capital. The Company's management does not have experience to date operating a
business with a substantial amount of leverage.
Historically, the Company has funded its capital requirements by debt
financings and the sale of Common Stock. Future sales of Common Stock may be
subject to limitations on the number of shares the Company can issue without
jeopardizing the tax-free treatment for the Distributions. See "--Potential
Liability for Taxes Related to the Distributions." In addition, the Credit
Facility is expected to contain restrictions on the incurrence of additional
indebtedness. See "--Risks Arising from Restrictions in Agreements Relating to
Indebtedness." The Company believes that borrowings under the Credit Facility
and cash flow from operations will be sufficient to fund the Company's planned
capital expenditures and working capital and debt service requirements. The
Company may require additional financing for future acquisitions and for further
expansion of its operations.
The ability of the Company to meet its debt service and other obligations
(including compliance with financial covenants) will be dependent upon the
future performance of the Company and its cash flow from operations, which will
be subject to prevailing economic conditions and financial, business and other
factors, certain of which are beyond the Company's control. These factors could
include general economic
7
<PAGE>
conditions, operating difficulties, increased operating costs, product pricing
pressures, potential revenue instability arising from cost savings initiatives
or other factors, labor relations, the response of competitors or customers to
the Company's business strategy or projects and delays in implementation of the
Company's business strategy.
No assurance can be given that, in the event the Company were to require
additional financing, such additional financing would be available on terms
permitted by agreements relating to existing indebtedness or otherwise
satisfactory to the Company. Moreover, there can be no assurance that the
Company will be able to generate sufficient cash flow from operating activities
to meet its debt service obligations and working capital requirements. Failure
to obtain such financing could result in delays or abandonment of some or all of
the Company's plans, which could limit the ability of the Company to meet its
debt service obligations (including obligations with respect to any Notes that
are not exchanged in the Exchange Offer) and could have an adverse effect on its
business. In addition, because the Company's obligations under the Credit
Facility will bear interest at floating rates, an increase in interest rates
could materially adversely affect, among other things, the Company's ability to
meet its debt service obligations.
The Company's ability to repay or refinance any of its debt obligations, or
to obtain additional financing, will depend on, among other things, its
financial condition at the time, the restrictions in the instruments governing
its indebtedness and other factors, including market conditions, which may be
beyond the control of the Company. There can be no assurance that any
refinancing could be effected successfully or on terms that are acceptable to
the Company. In the absence of such refinancings, the Company may be forced to
dispose of assets in order to account for any shortfall in its ability to make
the payments due on its indebtedness, including interest and principal payments
due on any Notes that are not exchanged in the Exchange Offer, under
circumstances that might not be favorable to realizing the best price of such
assets. Further, there can be no assurance that any assets could be sold quickly
enough, or for amounts sufficient, to enable the Company to make any such
payments. If the Company is not able to satisfy its debt service obligations, it
may default on its indebtedness, including any Notes that are not exchanged in
the Exchange Offer and the Credit Facility, which would entitle the holders of
such indebtedness to accelerate the maturity thereof.
LIMITED TRADING MARKET
The Notes were issued in February 1996, and there currently is a limited
trading market for the Notes. Quotations for securities that are not widely
traded, such as the Notes, may differ from actual trading prices and should be
viewed as approximations. Holders are urged to contact their brokers to obtain
the best available information as to current market prices.
To the extent that Notes are tendered and accepted for exchange in the
Exchange Offer, the trading market for Notes that remain outstanding may be
significantly more limited, which might adversely affect the liquidity of the
Notes. The extent of the public market and the availability of price quotations
would depend upon a number of factors, including the number of holders of Notes
remaining at such time. An issue of securities with a smaller outstanding market
value available for trading (the "float") may command a lower price than would a
comparable issue of securities with a greater float. Therefore, the market price
for Notes that are not tendered for exchange in the Exchange Offer may be
affected adversely to the extent that the amount of Notes exchanged pursuant to
the Exchange Offer reduces the float. The reduced float also may tend to make
the trading prices of the Notes that are not exchanged more volatile.
RISKS ARISING FROM RESTRICTIONS IN AGREEMENTS RELATING TO INDEBTEDNESS
The Company expects that the agreements governing the indebtedness it will
incur in connection with the Strategic Restructing Plan will impose significant
operating and financial restrictions on the Company. Such restrictions will
affect, and in many respects significantly limit or prohibit, among other
things, the ability of the Company to incur additional indebtedness and certain
types of indebtedness, create liens,
8
<PAGE>
engage in transactions with stockholders and affiliates, sell assets, issue
capital stock of subsidiaries or engage in mergers or acquisitions. In addition,
the Credit Facility will require that the Company maintain certain financial
ratios. These restrictions could also limit the ability of the Company to effect
future financings, make needed capital expenditures, withstand a future downturn
in the Company's business or the economy in general, or otherwise conduct
necessary corporate activities.
Failure by the Company or its subsidiaries to comply with these restrictions
could lead to a default under the terms of such indebtedness and any Notes not
exchanged in the Exchange Offer, notwithstanding the ability of the Company to
meet its debt service obligations. In the event of a default, the holders of
such indebtedness could elect to declare all such indebtedness to be due and
payable, together with accrued and unpaid interest. In such event, a significant
portion of the Company's other indebtedness (including any Notes that are not
exchanged in the Exchange Offer) may become immediately due and payable and
there can be no assurance that the Company would be able to make such payments
or borrow sufficient funds from alternative sources to make any such payment.
Even if additional financing could be obtained, there can be no assurance that
it would be on terms that are acceptable to the Company. In addition, the pledge
of substantially all of the Company's assets as collateral under the Credit
Facility could impair the Company's ability to obtain additional financing on
terms favorable to the Company.
RISKS RELATED TO CHANGE IN STRATEGIC FOCUS AND BUSINESS AND GROWTH STRATEGIES
The Company was founded in October 1994 and conducted no operations prior to
the acquisition of its founding companies in February 1995. Since that time, the
Company has grown primarily through an aggressive acquisition strategy. The
Company is now moving into a new stage of development, less reliant on
acquisitions and more focused on growth through improvements in and expansion of
existing operations. The Company's ability to achieve this objective will depend
on a number of factors, including its ability to continue to integrate
acquisitions and existing operations without substantial delays, or other
problems; its ability to achieve operating improvements and cost reductions,
such as volume purchasing arrangements, consolidation of general and
administrative functions and elimination of redundant facilities, improvement of
technology and operating and distribution systems; and its ability to generate
increased sales and margins in existing businesses through, among other things,
expansion into new markets and additional "cross selling" activities. In
particular, the Company's ability to achieve operating improvements will depend
on successful implementation of its plans to establish DFCs in the United
States. There can be no assurance that these efforts to achieve operating
improvements will be successful or will result in anticipated levels of cost
savings and efficiencies or growth in sales and margins.
RISKS RELATED TO ACQUISITIONS; CHALLENGES OF BUSINESS INTEGRATION
Historically, the Company has grown substantially through acquisitions. The
Company's aggressive acquisition program has produced a significant increase in
sales, employees, facilities and distribution systems. While the Company's
decentralized management strategy, together with operating efficiencies
resulting from the elimination of duplicative functions and economies of scale,
may present opportunities to reduce costs, such strategies may initially require
additional expenditures to expand operational and financial systems and
corporate management administration. Because of the various costs and possible
cost-saving strategies, historical operating results may not be indicative of
future performance. There also can be no assurance that the pace of the
Company's acquisitions will not adversely affect efforts to implement
cost-saving and integration strategies and to manage operations and acquisitions
profitably. Additionally, attempts to achieve economies of scale through cost
cutting and lay-offs of existing personnel may, at least in the short term, have
an adverse impact upon the Company. Delays in implementing planned integration
and consolidation strategies, or the failure of such strategies to achieve
anticipated cost savings, also could adversely affect the Company's results of
operations and financial condition. In addition, there can be no assurance that
the Company's management and financial controls, personnel,
9
<PAGE>
computer systems and other corporate support systems will be adequate to manage
the continuing increase in the size and scope of the Company's operations and
acquisition activity.
The Company intends to pursue future acquisition opportunities; however, no
assurance can be given that the Company will identify, finance and complete
additional suitable acquisitions on acceptable terms, or that future
acquisitions, if completed, will be successful. Moreover, the amount of capital
stock the Company can issue as consideration for future acquisitions without
jeopardizing the tax-free treatment of the Distributions will be limited in the
near-term. See "--Potential Liability for Taxes Related to the Distributions".
The Company will likely incur additional debt to finance any additional
acquisitions. In addition, acquired companies may not achieve future sales and
profitability levels that justify the prices that the Company paid to acquire
them. Acquisitions also may involve a number of special risks that could have a
material adverse effect on future operations and financial performance,
including diversion of management's attention; unanticipated declines in
revenues or profitability following acquisitions; difficulties with the
retention, hiring and training of key personnel; risks associated with
unanticipated business problems or legal liabilities; and the amortization of
acquired intangible assets, such as goodwill.
RISKS RELATING TO INABILITY TO USE POOLING-OF-INTEREST ACCOUNTING TREATMENT FOR
FUTURE ACQUISITIONS
As a result of the Equity Self-Tender and the Distributions, the Company
will be precluded from completing business combinations under the
pooling-of-interests accounting method for a period up to 6-9 months. Any
business combinations that the Company completes during this period will have to
be accounted for under the purchase method. Under the purchase method of
accounting, the Company will have to record goodwill for each such acquisition,
in an amount equal to any excess of the purchase price paid for the acquired
company over the fair market value of the acquired company's net assets. Under
the pooling-of-interests method, no goodwill is recorded in connection with the
acquisition of a pooled company, and there is no corresponding expense
associated with the amortization of such goodwill.
HIGHLY COMPETITIVE MARKETS
The Company operates in a highly competitive environment. It generally
competes with a large number of smaller, independent companies, many of which
are well-established in their markets. In addition, in the United States, the
NAOPG competes with five large office products companies, each of which may have
greater financial resources than the Company. Several of the Company's large
competitors operate in many of its geographic and product markets, and other
competitors may choose to enter its geographic and product markets in the
future. In addition, as a result of this competition, the Company may lose
customers or have difficulty acquiring new customers. As a result of competitive
pressures on the pricing of products, the Company's revenues or margins may
decline. The highly leveraged nature of the Company after the Strategic
Restructuring Plan could limit the Company's ability to continue to make
necessary or desirable investments or capital expenditures, to compete
effectively and to respond to market conditions.
The Company faces significant competition to acquire additional businesses
as the office products industry undergoes continuing consolidation. Significant
competition is expected to increase in the geographic markets that the Company
serves or is planning to enter as consolidation occurs (or accelerates) in those
markets. A number of the Company's major competitors are actively pursuing
acquisitions outside of the United States.
FOREIGN OPERATIONS; EXCHANGE RATE FLUCTUATIONS
Management intends to continue to focus significant attention and resources
on international operations and expects foreign sales to continue to represent a
significant portion of the Company's total sales. The factors described in this
section that apply to the Company's domestic operations also may affect the
Company's foreign operations. In addition, the Company's foreign operations are
subject to a number of
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<PAGE>
other risks, including currency exchange rates; new and different legal and
regulatory requirements in local jurisdictions; tariffs and trade barriers;
potential difficulties in staffing and managing local operations; credit risk of
local customers and distributors; potential difficulties in protecting
intellectual property; potential imposition of restrictions on investments;
potentially adverse tax consequences, including imposition or increase of
withholding and other taxes on remittances and other payments by subsidiaries;
and local economic, political and social conditions, including the possibility
of hyper-inflationary conditions, in certain countries. There can be no
assurance that one or a combination of these factors will not have a material
adverse impact on the Company's ability to maintain or increase its foreign
sales or on its business, financial condition or results of operations.
Over 34% of the Company's consolidated revenues for the nine months ended
January 24, 1998 were generated from the Company's international operations and
are denominated in currencies other than United States dollars. The Company's
results of operations have been and are impacted by the translation rate of the
international operations' currencies into United States dollars. Devaluation has
adversely affected the return on the Company's investment in its New Zealand and
Australian operations. If the exchange rates stabilize at current rates or
continue to decline, the Company's return on assets and equity from its New
Zealand and Australian operations will continue to be depressed. The Company
expects that it will incur additional costs with respect to accessing cash flows
from international operations, including such items as New Zealand and
Australian withholding and other taxes and foreign currency hedging costs. In
addition, the results of operations could be further impacted by fluctuations in
the New Zealand and Australian exchange rates as a result of the structure of
certain financing alternatives.
RISKS RELATING TO DEPENDENCE OF MAIL BOXES ETC. ON BUSINESS OF UPS AND FRANCHISE
RELATIONSHIPS
Various factors may affect MBE's business. The Company estimates that a
significant percentage of the gross sales of a typical MBE retail center in the
United States are attributable to services provided by United Parcel Service
("UPS"). In addition, the Company estimates that the vast majority of general
ground shipping from MBE retail centers in the United States is done through
UPS. As such, UPS is a key vendor for MBE. If UPS were to raise its prices to
MBE or otherwise materially adversely change the terms on which it does business
with MBE, the revenues of MBE could be materially and adversely affected. MBE
conducts its business principally through franchisees or licensees, with the
result that MBE has limited control over franchisee operations and is subject to
significant government regulation of its legal relationships with franchisees
that limits the control that MBE has over its franchisees. MBE also faces
growing competition from the United States Postal Service as it establishes
postal service centers located in shopping centers and other locations to
compete against MBE and other similar retail service centers.
RELIANCE ON KEY PERSONNEL
The Company's operations will depend on the continued efforts of its senior
executive officers, including Thomas Morgan, President and Chief Executive
Officer, and the senior management of certain of its subsidiaries. If any of
these people becomes unable to continue in his or her present role, or if the
Company is unable to attract and retain other skilled employees, its business
could be adversely affected. The Company intends to obtain key person life
insurance covering Thomas Morgan, but does not intend to obtain key person life
insurance covering any other members of senior management.
INTANGIBLE ASSETS
As of January 24, 1998, approximately $917.0 million, or 45.4% of the
Company's total assets on a pro forma basis to reflect the Equity Self-Tender,
the Distributions, the Equity Investment and purchase acquisitions completed
subsequent to January 24, 1998 as if such transactions had occurred on January
24, 1998, represents intangible assets, the substantial majority of which was
goodwill. As a result, a substantial
11
<PAGE>
portion of the value of the Company's assets may not be available to repay
creditors in the event of a bankruptcy or dissolution of the Company.
INCREASE IN OUTSTANDING SHARES
To the extent that Notes are exchanged for Common Stock, the number of
shares of Common Stock outstanding will increase. At March 24, 1998, there were
approximately 133.2 million shares of Common Stock outstanding. If all Notes are
exchanged, the total shares outstanding will increase by approximately 8.9
million to 142.1 million. If those shares are tendered in the Equity
Self-Tender, that in turn will decrease the percentage of all outstanding shares
that will be accepted in the Equity Self-Tender. The increase in number of
shares outstanding resulting from the exchange will also increase the number of
shares of each Spin-Off Company that will be issued in the Distributions, which
could result in a reduction in the trading prices of the shares of the Spin-Off
Companies as compared to the trading prices that might have been realized if no
exchanges had occurred before the Distributions. On the other hand, to the
extent Notes are not exchanged prior to the Equity Self-Tender and the
Distributions, then the number of shares into which they can be converted will
be increased as a result of the anti-dilution provisions in the Indenture. See
"Effect of the Strategic Restructuring Plan on the Conversion Price for the
Notes."
Even if the Strategic Restructuring Plan is not completed, the exchange of
Notes pursuant to the Exchange Offer will result in a dilution of earnings per
share and a potential adverse impact on the trading price of the Common Stock.
This dilution will be greater than would otherwise result if the Notes were
converted at the Existing Conversion Price.
As a result of the Strategic Restructuring Plan, the number and exercise
price of existing stock options held by the Company's employees will be adjusted
pursuant to a formula based on the market prices of the Common Stock at the time
of the Distributions and cannot be determined at this time. Nevertheless, the
Company expects that the adjustment will increase the percentage interests
represented by such options. See "The Strategic Restructuring Plan--Adjustment
to Employee Stock Options." However, the Company's employees are eligible to
tender shares underlying options (both vested and unvested) in the Equity
Self-Tender and, to the extent shares underlying tendered options are purchased,
the percentage interest represented by options outstanding after the Strategic
Restructuring Plan will be less than it otherwise would have been.
IMPACT OF THE STRATEGIC RESTRUCTURING PLAN ON TRADING PRICES OF COMMON STOCK
There can be no assurance as to the prices at which the Common Stock will
trade after the Strategic Restructuring Plan is completed. The plan consists of
a number of elements that involve major changes to the assets and capital
structure of the Company. Upon completion of these transactions, the trading
price of the Common Stock is likely to be substantially lower to reflect the
cash distributions that will occur in the Equity Self-Tender and the
distribution of assets in the Distributions. The actual adjustment that will be
made by the market based on its valuation of the parts of the Strategic
Restructuring Plan cannot be predicted. The Company expects that an active
market for its Common Stock will continue on the Nasdaq National Market System,
but the trading prices may be affected in the short or long run by a number of
factors in addition to those that typically affect the trading prices of stocks.
These special factors may include trades by investors seeking to change their
relative ownership positions in the stock of the Company and each Spin-Off
Company, uncertainty in the marketplace about the impact of the Strategic
Restructuring Plan on the Company's future operating results, possible trading
strategies by investors seeking to arbitrage disparities in pricing between the
Common Stock and the stock of each Spin-Off Company, and increased market
volatility resulting from market uncertainty or confusion about the transactions
or their impact on the Company.
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<PAGE>
EFFECT OF SHARES ELIGIBLE FOR FUTURE SALE
Sales of a substantial number of shares of Common Stock, or the perception
that such sales could occur, could adversely affect prevailing market prices for
shares of Common Stock. Investor will hold shares of Common Stock representing
24.9% of shares outstanding after the issuance of such shares to Investor, and
warrants to purchase an equal number of shares (plus additional shares in
certain circumstances). The Investment Agreement restricts Investor's ability to
sell these shares or warrants, but when these restrictions expire (or if they
are waived) Investor may sell these shares or warrants. Additional shares may be
issued either in connection with acquisitions by the Company or upon exercise of
outstanding options, options that may be issued in the future, and warrants. The
sale of shares upon exercise of options or by Investor, or the perception that
such sales could occur, may have an adverse effect on the trading price of the
Common Stock if a significant number of shares become available over a limited
period of time.
ABILITY OF INVESTOR TO INFLUENCE MANAGEMENT
As part of the Strategic Restructuring Plan, Investor will acquire shares of
Common Stock representing 24.9% of the outstanding shares of the Common Stock
after giving effect to the Equity Self-Tender and to the issuance of such
shares. Investor will also purchase various warrants that give it the right to
acquire additional shares of Common Stock in the future. Investor will have,
among other things, the right (subject to certain conditions) to nominate three
of the nine members of the Company's Board of Directors (the "Board"), including
the Chairman of the Board. Investor will retain the right to nominate three
members of the Board and to designate the Chairman of the Board until Investor's
level of ownership of Common Stock declines by more than one-third. In addition,
certain Board decisions will be subject to super-majority voting provisions
that, in certain circumstances, may require the concurrence of at least one
director nominated by Investor. The super-majority voting provisions require the
affirmative vote of three-fourths of the Board for certain decisions such as
sale of certain equity securities; any merger; tender offer or sale, lease or
disposition of all or substantially all of the Company's assets or other
business combination involving the Company; any dissolution or partial
liquidation of the Company; and certain changes to the Company's charter and
by-laws. These super-majority Board voting requirements may give Investor the
ability to block the approval of certain actions requiring the super-majority
vote of the Board. In addition, Investor's significant ownership of the Common
Stock may permit Investor to influence significantly matters requiring the
approval of the Company's stockholders. See "The Strategic Restructuring Plan---
Equity Investment."
POTENTIAL LIABILITY FOR CERTAIN LIABILITIES OF THE SPIN-OFF COMPANIES
As part of the Strategic Restructuring Plan, the Spin-Off Companies have
agreed to indemnify the Company for certain liabilities that the Company could
incur relating to the Distributions, the operations of the Spin-Off Companies
and other matters. There can be no assurance that the Spin-Off Companies will be
able to satisfy any such indemnities, and the Company may therefore incur such
liabilities even if they arose out of the activities of the Spin-Off Companies.
The Company could be adversely affected if in the future the Spin-Off Companies
are unable to satisfy these obligations. See "The Strategic Restructuring
Plan--Distributions--Distribution Agreement."
POTENTIAL LIABILITY FOR TAXES RELATED TO THE DISTRIBUTIONS
The Company will receive an opinion from Wilmer, Cutler & Pickering (the
"Spin-Off Opinion") that for U.S. federal income tax purposes, the Distributions
will qualify as tax-free spin-offs under Section 355 of the Internal Revenue
Code of 1986, as amended (the "Code"), and will not be taxable under Section
355(e) of the Code. The Spin-Off Opinion will be based on the accuracy of
factual representations made by the Company, the Spin-Off Companies and the
Investor, and certain other information, data,
13
<PAGE>
documentation and other materials as counsel has deemed necessary. See "The
Strategic Restructuring Plan--U.S. Federal Income Tax Consequences of the
Distributions."
The Spin-Off Opinion represents Wilmer, Cutler & Pickering's best judgment
of how a court would rule. However, the opinion is not binding upon either the
Internal Revenue Service ("IRS") or any court. A ruling has not been, and will
not be, sought from the IRS with respect to the U.S. federal income tax
consequences of the Distributions.
Assuming the Distributions qualify as tax-free spin-offs and are not taxable
under Section 355(e), no gain or loss for U.S. federal income tax purposes will
be recognized by the Company and no gain or loss will be recognized by holders
of Common Stock (except with respect to cash received in lieu of fractional
shares) solely as a result of the Distributions.
The Spin-Off Opinion is not binding on the IRS or the courts. It is
therefore possible that the IRS may take the position that any or all of the
Distributions do not qualify as tax-free spin-offs or are taxable under Code
Section 355(e). If a Distribution fails to qualify as a tax-free spin-off under
Section 355 of the Code, the Company will recognize gain, if any, equal to the
difference between the Company's tax basis in the Spin-Off Company's common
stock on the effective date of the Distribution (the "Distribution Date") and
the fair market value of the Spin-Off Company's common stock on the Distribution
Date. In addition, each stockholder of the Company will be treated as having
received a taxable corporate distribution in an amount equal to the fair market
value (on the Distribution Date) of the Spin-Off Company's common stock
distributed to such stockholder.
If a Distribution is taxable under Section 355(e), but otherwise satisfies
the requirements for a tax-free spin-off, the Company will recognize gain in an
amount described in the preceding paragraph. However, no gain or loss will be
recognized by holders of Common Stock (except with respect to cash received in
lieu of fractional shares).
POTENTIAL LIMITATIONS ON STOCK ISSUANCES
Certain limitations under Section 355 of the Code may restrict U.S. Office
Products' ability to issue capital stock after the Distributions. As described
below on pages 36-38 under "The Strategic Restructuring Plan -- U.S. Federal
Income Tax Consequences of the Distributions," these limitations will generally
prevent U.S. Office Products from issuing capital stock to the extent the
issuance is part of a plan or series of related transactions, which includes a
Distribution, pursuant to which on or more persons acquire capital stock of U.S.
Office Products that represents 50% or more of the voting power or 50% or more
of the value of U.S. Office Products' capital stock. These limitations may
restrict U.S. office Products' ability to undertake transactions involving
issuances of capital stock of U.S. Office Products that management otherwise
believes would be beneficial.
FAILURE TO COMPLETE STRATEGIC RESTRUCTURING PLAN
The Exchange Offer is not subject to all of the same conditions as the
Equity Self-Tender and the other elements of the Strategic Restructuring Plan.
Accordingly, it is possible that a Holder could exchange its Notes under
circumstances where all or part of the Strategic Restructuring Plan is not
completed. Such an exchanging Holder would then hold Common Stock without the
opportunity to sell shares in the Equity Self-Tender or to receive shares of the
Spin-Off Companies in the Distributions. Moreover, failure to complete the
Strategic Restructuring Plan, or parts of it, could have a material adverse
effect on the Company and its stockholders. The Company would have to continue
to operate the businesses of the Spin-Off Companies or otherwise dispose of
them. The Company's reported earnings will be reduced by the loss of
pooling-of-interests accounting treatment for many transactions. In addition, in
certain circumstances the Company could be obligated to pay a termination fee of
$25.0 million to CD&R if the
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Equity Investment is not completed. The Strategic Restructuring Plan is subject
to numerous conditions, and there can be no assurance that any or all of its
elements will be completed.
YEAR 2000 COMPLIANCE
The Company is currently reviewing the year 2000 compliance of software that
it uses in its business. The Company's Trinity System, which it is currently
installing throughout its North American Office Products Group operations as the
core operations system, is year 2000 compliant. However, the Company's operating
subsidiaries are, in some cases, using billing or other software that is not
year 2000 compliant. Based upon information that the Company has collected from
its operating subsidiaries, it expects to be able to achieve year 2000
compliance in 1999 and does not expect that the cost of making necessary
adaptations will be material to the Company. If the Company cannot make the
necessary adaptations on a timely basis, or if the costs are greater than
expected, the Company's business could be adversely affected.
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THE TERMS OF THE EXCHANGE OFFER
GENERAL
Participation in the Exchange Offer is voluntary and Holders should
carefully consider whether to accept. None of the Board of Directors or the
Company makes any recommendation to Holders as to whether to tender or refrain
from tendering in the Exchange Offer. Holders are urged to consult their
financial and tax advisors in making their own decisions on what action to take
in light of their own particular circumstances.
PURPOSE OF THE OFFER
The Company has reduced the conversion price of the Notes during the
Exchange Period through the Exchange Offer in order to induce Holders to
exchange their Notes for Common Stock prior to maturity and thereby (i) reduce
the amount of cash the Company otherwise could be required to pay to retire the
Notes in 2001 and (ii) minimize the dilutive effect of the issuance of Common
Stock upon conversion of the Notes if they were converted after completion of
the Strategic Restructuring Plan.
TERMS OF THE OFFER
Subject to the terms and conditions of the Exchange Offer, U.S. Office
Products is offering to exchange shares of Common Stock for Notes at an Exchange
Ratio of 61.843 shares per $1,000 principal amount of the Notes. The Exchange
Offer effectively reduces, for a limited period of time, the aggregate principal
amount of the Notes that must be surrendered to receive one share of Common
Stock from $19.00 per share to $16.17 per share (the "Reduced Conversion
Price").
Upon the terms and subject to the conditions of the Exchange Offer, the
Company will exchange the Notes at the Reduced Conversion Price for any and all
Notes that are properly tendered and not withdrawn during the Exchange Period.
As of the date of this Offering Circular/Prospectus, the total principal amount
of the Notes outstanding was $143,750,000. If all Notes are exchanged during the
Exchange Period, approximately 8,890,000 shares of Common Stock will be issued
upon exchange of the Notes. If the Exchange Offer were not in effect,
approximately 7,565,800 shares of Common Stock would be issuable upon conversion
of the Notes (assuming all of such Notes were converted prior to completion of
the Strategic Restructuring Plan).
The Company shall be deemed to have accepted validly tendered Notes (or
defectively tendered Notes with respect to which the Company has waived such
defect) when, as and if the Company has given oral or written notice thereof to
the Exchange Agent. The Exchange Agent will act as agent for the tendering
Holders for the purpose of receiving the Common Stock from the Company and
remitting such Common Stock to tendering Holders. Upon the terms and subject to
the conditions of the Exchange Offer, delivery of Common Stock in exchange for
Notes will be made as promptly as practicable after the Expiration Date.
No fractional shares will be issued upon exchange of Notes pursuant to the
Exchange Offer. If any fractional share of stock otherwise would be issuable
upon the exchange of any Note, the Company shall pay the exchanging Holder an
amount equal to such fractional share multiplied by the Current Market Price on
the last trading day prior to the date of exchange. "Current Market Price" is
defined in the Indenture, and generally means the average of the daily closing
prices per share of Common Stock for the ten consecutive trading days
immediately prior to the last trading day prior to the date of conversion.
The Company will pay to all Holders who tender Notes for exchange pursuant
to the Exchange Offer unpaid interest accrued on the Notes through the
Expiration Date, irrespective of the date on which Notes are tendered for
exchange. The unpaid interest will be paid in cash promptly after the exchange
pursuant to the Exchange Offer.
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CONDITIONS OF THE EXCHANGE OFFER
Notwithstanding any other provisions of the Exchange Offer, and in addition
to (and not in limitation of) the Company's rights to extend and amend the
Exchange Offer at any time in its sole discretion, the Company will not be
required to accept for exchange, and may delay the acceptance for exchange of,
any tendered Notes, and may terminate the Exchange Offer if (i) the obligation
to make the Equity Investment has been terminated; (ii) the commitment with
respect to the Credit Facility has been terminated, or (iii) any of the General
Conditions (as defined below) shall not have been satisfied.
The obligation to make the Equity Investment will be deemed to have been
terminated for purposes of the Exchange Offer if, prior to the Expiration Date,
the Investment Agreement is terminated in accordance with its terms, or there
has occurred any event that would give Investor the right to terminate the
Investment Agreement in accordance with its terms, and Investor has not waived
that right in writing.
The commitment with respect to the Credit Facility will be deemed to have
been terminated for purposes of the Exchange Offer if the closing of the Credit
Facility shall not have occurred on or before June 30, 1998 (or such other date
as the Company and lenders may agree).
All General Conditions will be deemed to have been satisfied for purposes of
the Exchange Offer unless any of the following conditions occur prior to the
Expiration Date:
(i) there shall have been instituted or threatened or be pending any
action or proceeding before or by any court or governmental, regulatory or
administrative agency or instrumentality, or by any other person, in
connection with the Exchange Offer, the Equity Investment, the Equity
Self-Tender or the Distributions that is, or is reasonably likely to be, in
the sole judgment of the Company, materially adverse to the business,
operations, properties, condition (financial or otherwise), assets,
liabilities or prospects of the Company or its subsidiaries;
(ii) any order, statute, rule, regulation, executive order, stay,
decree, judgment or injunction shall have been proposed, enacted, entered,
issued, promulgated, enforced or deemed applicable by any court or
governmental, regulatory or administrative agency or instrumentality that,
in the sole judgment of the Company, would or might prohibit, prevent,
restrict or delay consummation of the Exchange Offer, the Equity Investment,
the Equity Self-Tender or the Distributions or that is, or is reasonably
likely to be, in the sole judgment of the Company, materially adverse to the
business, operations, properties, condition (financial or otherwise),
assets, liabilities or prospects of the Company or its subsidiaries;
(iii) there shall have occurred or be likely to occur any event that, in
the sole judgment of the Company, would or might prohibit, prevent, restrict
or delay consummation of the Exchange Offer, the Equity Investment, the
Equity Self-Tender or the Distributions or that will, or is reasonably
likely to, materially impair the contemplated benefits to the Company of the
Exchange Offer, the Equity Investment, the Equity Self-Tender or the
Distributions, or otherwise result in the consummation of the Exchange
Offer, the Equity Investment, the Equity Self-Tender or the Distributions
not being, or not being reasonably likely to be, in the best interests of
the Company or its subsidiaries;
(iv) a tender or exchange offer for some or all of the Common Stock
(other than the Equity Self-Tender) or a proposal with respect to a merger,
consolidation or other business combination with or involving the Company or
any subsidiary shall have been proposed to be made or shall have been made
by another person; or
(v) (1) any entity, "group" (as that term is used in Section 13(d)(3) of
the Exchange Act) or person (other than Investor and entities, groups or
persons, if any, who have filed with the Commission, on or before January
12, 1998, a Schedule 13G or Schedule 13D with respect to the Common Stock)
shall have acquired or proposed to acquire beneficial ownership of more than
5% of the outstanding shares; or
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<PAGE>
(2) such entity, group or person that has publicly disclosed any such
beneficial ownership of more than 5% of the Common Stock prior to such date
shall have acquired, or proposed to acquire, beneficial ownership of
additional shares of Common Stock constituting more than 2% of the
outstanding shares or shall have been granted any option or right to acquire
beneficial ownership of more than 2% of the outstanding shares; or
(3) any entity, person or group shall have filed a Notification and
Report Form under the Hart-Scott-Rodino Antitrust Improvements Act of 1976
reflecting an intent to acquire the Company or any of its shares of Common
Stock; or
(vi) there shall have occurred (a) any general suspension of, or
limitation on prices for, trading in securities in the United States
securities or financial markets, (b) any significant adverse change in the
trading prices for the Common Stock or in the Company's other securities, or
in any financial markets, (c) a material impairment in the trading market
for securities that could, in the sole judgment of the Company, affect the
Exchange Offer, the Equity Investment, the Equity Self-Tender or the
Distributions or the Financing Transactions, (d) a declaration of a banking
moratorium or any suspension of payments in respect of banks in the United
States, (e) any limitation (whether or not mandatory) by any government or
governmental, administrative or regulatory authority or agency, domestic or
foreign, on (or other event that, in the reasonable judgment of the Company,
might affect) the extension of credit by banks or other lending
institutions, (f) a commencement of a war or armed hostilities or other
national or international calamity directly or indirectly involving the
United States, or (g) in the case of any of the foregoing existing on the
date hereof, a material acceleration or worsening thereof.
The conditions to the Exchange Offer are for the sole benefit of the Company
and may be asserted by the Company in its sole discretion regardless of the
circumstances giving rise to such conditions (including any action or inaction
by the Company) or may be waived by the Company, in whole or in part, at any
time and from time to time, in its sole discretion, whether or not any other
condition of the Exchange Offer is also waived. Any determination by the Company
concerning the events described in this section shall be final and binding upon
all persons.
EXPIRATION DATE; EXTENSION; AMENDMENT; TERMINATION
Upon the terms of the Exchange Offer, the Company will accept for exchange
all Notes validly tendered for exchange and not withdrawn prior to 5:00 p.m.,
New York City time, on May , 1998, or if extended by the Company, in its sole
discretion, the latest date and time to which extended (the "Expiration Date").
The Company expressly reserves the right to extend the Exchange Offer on a daily
basis or for such period or periods as it may determine in its sole discretion
from time to time by giving written or oral notice to the Exchange Agent and by
making a public announcement by press release (which shall include disclosure of
the approximate principal amount of Notes surrendered for conversion during the
Exchange Period) to the Dow Jones News Service prior to 9:00 a.m., New York City
time, the next business day following the previously scheduled Expiration Date;
however, the Exchange Offer will not be extended beyond the expiration date for
the Equity Self-Tender. During any extension of the Exchange Offer, all Notes
previously tendered and not withdrawn will remain subject to the Exchange Offer.
The Company also expressly reserves the right, in its sole discretion,
subject to applicable law to (i) terminate the Exchange Offer, and not accept
for exchange any Notes and promptly return all Notes at any time for any reason,
including (without limitation) upon failure of any of the conditions specified
in "The Terms of the Exchange Offer--Conditions of the Exchange Offer," (ii)
waive any condition to the Exchange Offer and accept all Notes previously
tendered pursuant to the Exchange Offer, or (iii) amend or modify the terms of
the Exchange Offer in any manner. Any amendment applicable to the Exchange Offer
will apply to all Notes tendered pursuant to the Exchange Offer. The minimum
period during which
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<PAGE>
the Exchange Offer must remain open following a material change in the terms of
the Exchange Offer or a waiver by the Company of a material condition of the
Exchange Offer will depend upon the facts and circumstances, including the
relative materiality of the change or waiver. Any withdrawal or termination of
the Exchange Offer will be followed as promptly as practicable by public
announcement thereof. In the event the Company withdraws or terminates the
Exchange Offer, it will give immediate notice to the Exchange Agent, and all
Notes theretofore tendered pursuant to the Exchange Offer will be returned
promptly to the tendering Holders thereof.
If the Company makes a material change in the terms of the Exchange Offer,
the Company will disseminate additional Exchange Offer materials and will extend
the Exchange Offer, in each case to the extent required by applicable law. For
purposes of the Exchange Offer, the term "business day" means any day other than
a Saturday, Sunday or federal holiday and consists of the time period from 12:01
a.m. through 12:00 midnight, New York City time.
EXCHANGE OF NOTES
Upon the terms of the Exchange Offer (including, if the Exchange Offer is
extended or amended, the terms and conditions of any such extension or
amendment) and applicable law, the Company will issue shares of Common Stock
with respect to all Notes validly tendered and not withdrawn for exchange
pursuant to the Exchange Offer promptly after receipt of the Letter of
Transmittal by the Exchange Agent. Such exchange will be made by the issuance of
a certificate for the appropriate number of shares of Common Stock in the name
of, or pursuant to the instructions of, the Holder of the Note tendered for
exchange and the delivery of such certificate or certificates to or pursuant to
the instructions of the Holder.
In all cases, delivery of certificates will be made only after timely
receipt by the Exchange Agent of (i) certificates representing such Notes or
timely confirmation of a book-entry transfer of such Notes into the Exchange
Agent's account at the Depository Trust Company ("DTC") pursuant to the
procedures set forth herein, (ii) a properly completed and duly executed Letter
of Transmittal (or manually signed facsimile thereof) or a properly transmitted
Agent's Message (as defined below), and (iii) any other documents required by
the Letter of Transmittal.
If any Notes tendered are not accepted for exchange pursuant to the Exchange
Offer for any reason, such Notes not accepted for exchange will be returned
promptly, without expense, to the exchanging holder (or, in the case of Notes
tendered by book-entry transfer, such Notes will be credited to the account
maintained at DTC from which such Notes were delivered) after the expiration or
termination of the Exchange Offer.
Holders who tender their Notes for exchange will not be obligated to pay
brokerage fees or commissions or, except as set forth in the instructions to the
Letter of Transmittal, transfer taxes on the exchange of Notes pursuant to the
Exchange Offer.
PROCEDURES FOR TENDER OF NOTES FOR EXCHANGE
Only Holders of record are authorized to tender their Notes for exchange.
The procedures by which the Notes may be tendered for exchange by beneficial
owners that are not Holders of record will depend upon the manner in which the
Notes are held.
The tender of Notes by a Holder thereof pursuant to one of the procedures
set forth below will constitute an agreement between such Holder and the Company
in accordance with the terms and subject to the conditions set forth herein and
in the Letter of Transmittal.
TENDER OF NOTES HELD IN PHYSICAL FORM. To effectively tender Notes held in
physical form pursuant to the Exchange Offer, a properly completed Letter of
Transmittal (or a facsimile thereof) duly executed by the holder thereof, and
any other documents required by the Letter of Transmittal, must be received by
the Exchange Agent at its address set forth on the back cover of this Offering
Circular/Prospectus (or delivery
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<PAGE>
of Notes may be effected through the deposit of Notes with DTC and making
book-entry delivery as set forth below) on or prior to the Expiration Date.
LETTERS OF TRANSMITTAL AND NOTES SHOULD BE SENT ONLY TO THE EXCHANGE AGENT AND
SHOULD NOT BE SENT TO U.S. OFFICE PRODUCTS, THE INFORMATION AGENT OR THE DEALER
MANAGER.
TENDER OF NOTES HELD THROUGH A CUSTODIAN. To effectively tender Notes that
are held of record by a custodian bank, depositary, broker, dealer, commercial
bank, trust company or other nominee, the beneficial owner thereof must instruct
such Holder to tender the Notes on the beneficial owner's behalf. A Letter of
Instructions is included with this Offering Circular/Prospectus and may be used
by a beneficial owner in this process to give such instructions. Any beneficial
owner of Notes held of record by DTC or its nominee, through authority granted
by DTC, may direct the DTC participant through which such beneficial owner's
Notes are held in DTC to tender on such beneficial owner's behalf.
TENDER OF NOTES HELD THROUGH DTC. To effectively tender Notes that are held
through DTC, DTC participants should transmit their acceptance through DTC's
Program ("DTC Program"), and DTC will then edit and verify the
acceptance and send an Agent's Message to the Exchange Agent for its acceptance.
Delivery of tendered Notes must be made to the Exchange Agent pursuant to the
book-entry delivery procedures set forth below.
The method of delivery of Notes and Letter of Transmittal, any required
signature guarantees and all other required documents, including delivery
through DTC and any acceptance of an Agent's Message transmitted through the DTC
Program, is at the election and risk of the person tendering Notes and
delivering the Letter of Transmittal and, except as otherwise provided in the
Letter of Transmittal, delivery will be deemed made only when actually received
by the Exchange Agent. If delivery is by mail, it is suggested that the holder
use properly insured, registered mail with return receipt requested, and that
the mailing be made sufficiently in advance of the Expiration Date to permit
delivery to the Exchange Agent prior to such date.
Except as provided below, unless the Notes being tendered for exchange are
deposited with the Exchange Agent on or prior to the Expiration Date
(accompanied by a properly completed and duly executed Letter of Transmittal or
a properly transmitted Agent's Message), the Company may, at its option, treat
such surrender as defective for purposes of the right to exchange pursuant to
the Exchange Offer. Exchange of the Notes will be made only against deposit of
the tendered Notes and delivery of all other required documents.
BOOK-ENTRY DELIVERY PROCEDURES. The Exchange Agent will establish accounts
with respect to the Notes at DTC for purposes of the Exchange Offer within two
business days after the date of this Offering Circular/Prospectus, and any
financial institution that is a participant in DTC may make book-entry delivery
of the Notes by causing DTC to transfer such Notes into the Exchange Agent's
account in accordance with DTC's procedures for such transfer. However, although
delivery of Notes may be effected through book-entry transfer into the Exchange
Agent's account at DTC, the Letter of Transmittal (or facsimile thereof), with
any required signature guarantees or an Agent's Message in connection with a
book-entry transfer, and any other required documents, must, in any case, be
transmitted to and received by the Exchange Agent at one or more of its
addresses set forth on the back cover of this Offering Circular/ Prospectus on
or prior to the Expiration Date, as applicable. Delivery of documents to DTC
does not constitute delivery to the Exchange Agent. The confirmation of a
book-entry transfer into the Exchange Agent's account at DTC as described above
is referred to herein as a "Book-Entry Confirmation."
The term "Agent's Message" means a message transmitted by DTC to, and
received by, the Exchange Agent and forming a part of the Book-Entry
Confirmation, which states that DTC has received an express acknowledgment from
the participants in DTC described in such Agent's Message stating the aggregate
principal amount of Notes which have been tendered by such participants pursuant
to the Exchange Offer and that such participants have received this Offering
Circular/Prospectus and the Letter of Transmittal
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<PAGE>
and agree to be bound by the terms of this Offering Circular/Prospectus and the
Letter of Transmittal, and U.S. Office Products may enforce such agreement
against such participants.
SIGNATURE GUARANTEES. Signatures on all Letters of Transmittal must be
guaranteed by a recognized participant in the Securities Transfer Agents
Medallion Program, the New York Stock Exchange Medallion Signature Program or
the Stock Exchange Medallion Program (a "Medallion Signature Guarantor"), unless
the Notes tendered thereby are tendered (i) by a registered Holder (or by a
participant in DTC whose name appears on a security position listing as the
owner of such Notes) who has not completed either the box entitled "Special
Delivery Instructions" or "Special Exchange Instructions" on the Letter of
Transmittal, or (ii) for the account of a member firm of a registered national
securities exchange, a member of the National Association of Securities Dealers,
Inc. ("NASD") or a commercial bank or trust company having an office or
correspondent in the United States (each of the foregoing being referred to as
an "Eligible Institution"). See Instruction 1 of the Letter of Transmittal. If
the Notes are registered in the name of a person other than the signer of the
Letter of Transmittal or if Notes not accepted for payment or not tendered are
to be returned or payment of cash in lieu of fractional shares is to be made to
a person other than the registered Holder, then the signatures on the Letter of
Transmittal accompanying the tendered Notes must be guaranteed by a Medallion
Signature Guarantor as described above. See Instructions 1 and 4 of the Letter
of Transmittal.
DETERMINATION OF VALIDITY. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance of any tendered Notes
pursuant to any of the procedures described above will be determined by the
Company in its sole discretion (whose determination shall be final and binding).
The Company reserves the absolute right to reject any or all tenders of any
Notes determined by it not to be in proper form. The Company also reserves the
absolute right, in its sole discretion, to waive any defect or irregularity in
any tender for exchange with respect to the Notes of any particular Holder,
whether or not similar defects or irregularities are waived in the case of other
holders. The Company's interpretation of the terms and conditions of the
Exchange Offer (including the Letter of Transmittal and the instructions
thereto) will be final and binding. No tender of Notes will be deemed to have
been validly made until all defects or irregularities have been cured or
expressly waived. None of U.S. Office Products, the Exchange Agent, the Dealer
Manager, the Information Agent, the Trustee or any other person will be under
any duty to give notification of any defects or irregularities in surrenders or
will incur any liability for failure to give any such notification. If U.S.
Office Products waives its right to reject a defective tender of Notes, the
Holder will be entitled to exchange pursuant to the terms of the Exchange Offer.
WITHDRAWAL RIGHTS
Tenders of Notes may be withdrawn at any time on or prior to the Expiration
Date and, unless accepted for exchange by the Company, may be withdrawn at any
time after 40 business days after the date of this Offering Circular/Prospectus.
In order for a withdrawal to be effective a written, telegraphic, telex or
facsimile transmission of such notice of withdrawal must be timely received by
the Exchange Agent at its addresses set forth under "-- Exchange Agent" on or
prior to the Expiration Date. Any such notice of withdrawal must specify the
name of the person who tendered the Notes to be withdrawn, that such person is
withdrawing his election to have such Notes exchanged, the aggregate principal
amount of Notes to be withdrawn, and the name of the registered Holder of the
Notes as set forth on the Notes, if different from that of the person who
tendered such Notes. If Notes have been delivered or otherwise identified to the
Exchange Agent, then prior to the physical release of such Notes, the tendering
Holder must submit the serial numbers shown on the particular Notes to be
withdrawn and the signature on the notice of withdrawal must be guaranteed by an
Eligible Institution, except in the case of Notes tendered for the account of
any Eligible Institution. If Notes have been tendered pursuant to the procedures
for book-entry transfer set forth in "--Procedures for Tender of Notes for
Exchange," the notice of withdrawal must specify the name and number of the
account at DTC to be credited with the withdrawal of Notes, in which case a
notice of withdrawal will be
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<PAGE>
effective if delivered to the Exchange Agent by written, telegraphic, telex or
facsimile transmission. Withdrawals of tenders of Notes may not be rescinded.
Notes properly withdrawn will not be deemed validly tendered for purposes of the
Exchange Offer, but may be retendered at any subsequent time on or prior to the
Expiration Date by following any of the procedures described above under
"--Procedures for Tender of Notes for Exchange." All questions as to the
validity of notice of withdrawal, including time of receipt, will be determined
by the Company, and such determination shall be final and binding
PROCEDURE FOR TENDERING SHARES RECEIVED UPON EXCHANGE IN THE EQUITY SELF-TENDER
Holders who exchange Notes pursuant to the Exchange Offer may tender the
shares of Common Stock they are entitled to receive upon exchange in the Equity
Self-Tender by so indicating on the Letter of Transmittal in the space provided.
If a Holder tenders shares in the Equity Self-Tender, certificates for shares of
Common Stock will be retained by the Depositary in the Equity Self-Tender until
the tender of shares in the Equity Self-Tender is validly withdrawn or until the
Depositary returns shares that are not accepted in the Equity Self-Tender.
Shares tendered in the Equity Self-Tender will be subject to all of the terms
and conditions of the Equity Self-Tender as set forth in the Tender Offer
Statement relating to the Equity Self-Tender. Holders who are considering
tendering shares into the Equity Self-Tender should read the Tender Offer
Statement carefully before deciding whether to tender shares. Copies of the
Tender Offer Statement and related materials are being delivered to Holders with
this Offering Circular/Prospectus.
MARKET AND TRADING INFORMATION
THE NOTES. The Notes were issued in February 1996, and there currently is a
limited trading market for the Notes. Quotations for securities that are not
widely traded, such as the Notes, may differ from actual trading prices and
should be viewed as approximations. Holders are urged to contact their brokers
to obtain the best available information as to current market prices.
To the extent that Notes are tendered and accepted for exchange in the
Exchange Offer, the trading market for Notes that remain outstanding may be
significantly more limited, which might adversely affect the liquidity of the
Notes. The extent of the public market and the availability of price quotations
would depend upon a number of factors, including the number of Holders of Notes
remaining at such time. An issue of securities with a smaller outstanding market
value available for trading (the "float") may command a lower price than would a
comparable issue of securities with a greater float. Therefore, the market price
for Notes that are not tendered for exchange in the Exchange Offer may be
affected adversely to the extent that the amount of Notes exchanged pursuant to
the Exchange Offer reduces the float. The reduced float also may tend to make
the trading prices of the Notes that are not exchanged more volatile.
THE COMMON STOCK. The Common Stock is traded on the Nasdaq National Market
under the symbol "OFIS." On April , 1998, the last sale price of the Common
Stock was $ per share. The following table sets forth, for the fiscal
periods indicated, the range of high and low sale prices for the Common Stock on
the Nasdaq National Market. On November 6, 1997, the Company effected a three-
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for-two split of the Common Stock. The prices given below are adjusted
retroactively to reflect this stock split. On March , 1998, there were
approximately holders of record of the Common Stock.
<TABLE>
<CAPTION>
HIGH LOW
--------- ---------
<S> <C> <C>
FISCAL YEAR ENDED APRIL 30, 1996
First fiscal Quarter......................................................................... $ 10.58 $ 7.00
Second fiscal Quarter........................................................................ $ 12.08 $ 9.00
Third fiscal Quarter......................................................................... $ 17.58 $ 10.83
Fourth fiscal Quarter........................................................................ $ 26.67 $ 14.67
FISCAL YEAR ENDED APRIL 26, 1997
First fiscal Quarter......................................................................... $ 30.33 $ 16.33
Second fiscal Quarter........................................................................ $ 25.33 $ 16.50
Third fiscal Quarter......................................................................... $ 24.83 $ 17.50
Fourth fiscal Quarter........................................................................ $ 23.17 $ 13.33
FISCAL YEAR ENDING APRIL 25, 1998
First fiscal Quarter......................................................................... $ 20.58 $ 14.67
Second fiscal Quarter........................................................................ $ 25.92 $ 17.21
Third fiscal Quarter......................................................................... $ 24.83 $ 14.69
Fourth fiscal Quarter (through April , 1998)............................................... $ $
</TABLE>
The value realized by Holders on exchange of the Notes will depend on the
market price of the Common Stock, which is subject to fluctuation. Holders are
urged to obtain current market quotations for the Common Stock. The market price
of the Common Stock will also be affected by the completion of the Strategic
Restructuring Plan, including the completion of the Equity Self-Tender and the
Distributions. See "Risk Factors--Impact of the Strategic Restructuring Plan on
Trading Prices of the Common Stock." The market price of the Common Stock also
may be affected by any failure to complete all or any elements of the Strategic
Restructuring Plan. See "Risk Factors--Failure to Complete Strategic
Restructuring Plan."
DEALER MANAGER
The Company has retained BancAmerica Robertson Stephens to act as Dealer
Manager in connection with the Exchange Offer. In its capacity as Dealer
Manager, BancAmerica Robertson Stephens may contact Holders regarding the
Exchange Offer and may request brokers, dealers, commercial banks, trust
companies and other nominees to forward this Offering Circular/Prospectus and
related materials to beneficial owners of Notes. BancAmerica Robertson Stephens
will receive a fee, based on the Reduced Conversion Price, for its services as
Dealer Manager in connection with the Exchange Offer that will depend on the
percentage of the aggregate principal amount of the Notes that is tendered for
exchange.
No fee will be paid on the first 60% of the aggregate principal amount of
the Notes tendered. Thereafter, a fee will be paid for each $1,000 principal
amount of Notes tendered. The fee is based on a sliding scale, with the higher
fee only paid on the incremental Notes tendered above specified thresholds. The
fees range from $3.75 per $1,000 principal amount up to a maximum of $30.00 per
$1,000 principal amount if more than 95% of the aggregate principal amount of
the Notes are tendered. Based on the foregoing fee structure, if all outstanding
Notes are tendered in the Exchange Offer, BancAmerica Robertson Stephens will
receive an aggregate fee of $619,518.
BancAmerica Robertson Stephens will also be reimbursed for its reasonable
out-of-pocket expenses incurred in connection with the Exchange Offer (including
the reasonable fees and disbursements of counsel). The Company has also agreed
to indemnify BancAmerica Robertson Stephens and its affiliates against certain
liabilities, including liabilities under the federal securities laws, caused by,
relating to or arising out of the Exchange Offer.
BancAmerica Robertson Stephens has also been selected by the Company to act
as Dealer Manager with respect to the 2003 Note Tender. BancAmerica Robertson
Stephens has also been selected as the
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<PAGE>
managing underwriter for the public offering of common stock of two of the
Spin-Off Companies. BancAmerica Robertson Stephens has in the past provided
certain investment banking services to the Company, for which services
BancAmerica Robertson Stephens has received compensation, including acting as
lead manager for U.S. Office Products' public offering of the Notes and
placement agent for the private placement of the 2003 Notes.
The Dealer Manager does not assume any responsibility for the accuracy or
completeness of the information concerning the Company or its affiliates
contained herein or for any failure by the Company to disclose events which may
have occurred and may affect the significance or accuracy of such information.
Unless otherwise indicated, all information contained in this Offering
Circular/Prospectus has been supplied by the Company. The Company assumes full
responsibility for the accuracy or completeness of such information.
EXCHANGE AGENT AND INFORMATION AGENT
State Street Bank and Trust Company has been appointed Exchange Agent for
the Exchange Offer. All deliveries and correspondence sent to the Exchange Agent
should be directed to its address set forth on the back cover of this Offering
Circular/Prospectus. MacKenzie Partners, Inc. has been appointed Information
Agent for the Exchange Offer. Requests for assistance or additional copies of
this Offering Circular/Prospectus and the Letter of Transmittal should be
directed to the Information Agent at its address set forth on the back cover of
this Offering Circular/Prospectus. Holders of the Notes may also contact their
broker, dealer, commercial bank or trust company for assistance concerning the
Exchange Offer.
FEES AND EXPENSES
In addition to the fees and expenses payable to the Dealer Manager, the
Company will pay the Exchange Agent and the Information Agent reasonable and
customary fees for their services (and will reimburse them for their reasonable
out-of-pocket expenses in connection therewith), and will pay brokerage houses
and other custodians, nominees and fiduciaries the reasonable out-of-pocket
expenses incurred by them in forwarding copies of this Offering
Circular/Prospectus and related documents to the beneficial owners of the Notes
and in handling or forwarding tenders for purchase. In addition, the Company has
agreed to indemnify the Exchange Agent and the Information Agent against certain
liabilities in connection with their services, including liabilities under the
federal securities laws.
The Company will pay all transfer taxes, if any, applicable to the exchange
of the Notes pursuant to the Exchange Offer. If, however, certificates for
shares of Common Stock issued upon exchange are to be delivered to, or are to be
registered or issued in the name of, any person other than the registered holder
of the Notes, or if tendered Notes are registered in the name of any person
other than the person signing the Letter of Transmittal, or if a transfer tax is
imposed for any reason other than the conversion of the Notes pursuant to the
Exchange Offer, then the amount of any such transfer tax (whether imposed on the
registered holder or any other person) will be payable by the surrendering
Holder.
ACCOUNTING TREATMENT OF REDUCTION IN EXCHANGE PRICE
As a result of the Exchange Offer, the Company will issue up to an
additional 1,324,000 shares of Common Stock with a market value of approximately
$25.2 million to induce exchange of the Notes. The $25.2 million will be
recorded as expense in the Company's consolidated financial statements at the
time of the exchange. The expense will not be deductible for income tax
purposes.
FEDERAL INCOME TAX CONSEQUENCES OF THE EXCHANGE
For a discussion of the federal income tax consequences of the Exchange
Offer see "U.S. Federal Income Tax Considerations."
24
<PAGE>
MISCELLANEOUS
In connection with the Exchange Offer, directors, officers and employees of
the Company (who will not be specifically compensated for such services) may
solicit tenders and consents by use of the mails, personally or by telephone,
telegram or facsimile transmissions.
None of the officers, directors or affiliates of the Company hold any of the
Notes.
DIVIDEND POLICY
The Company does not anticipate declaring and paying cash dividends on
Common Stock in the foreseeable future. The decision whether to apply any
legally available funds to the payment of cash dividends on the Common Stock
will be made by the Company's Board of Directors from time to time in the
exercise of its business judgment, taking into account the Company's financial
condition, results of operations, existing and proposed commitments for use of
the Company's funds and other relevant factors. U.S. Office Products' ability to
pay dividends may be restricted from time to time by financial covenants in its
credit agreements.
25
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company at January
24, 1998: (i) on an actual basis; and (ii) on a pro forma basis to reflect (a)
the Equity Self-Tender, (b) the Distributions, (c) the Equity Investment, (d)
the purchase acquisitions completed subsequent to January 24, 1998, (e) the
Exchange Offer, (f) the 2003 Note Tender, (assuming that all of the Notes are
exchanged in the Exchange Offer and all of the 2003 Notes are tendered and
accepted for purchase in the 2003 Note Tender) and (g) the Subordinated Debt
Offering and borrowings under the Credit Facility in connection with these
transactions ("New Borrowings") as if such transactions had occurred on January
24, 1998. This table should be read in conjunction with the "Management's
Discussion and Analysis of Financial Condition and Results of Operations," the
historical consolidated financial statements and the unaudited pro forma
combined financial statements of the Company, and the related notes to each
thereof, all of which are included in or incorporated by reference into this
Offering Circular/Prospectus.
<TABLE>
<CAPTION>
ACTUAL PRO FORMA
------------- -------------
<S> <C> <C>
JANUARY 24, 1998
----------------------------
(IN THOUSANDS)
Short-term debt.................................................................... $ 332,636 $ 332,636
------------- -------------
------------- -------------
Long-term debt..................................................................... $ 381,844 $ 842,273
Stockholders' equity:
Preferred stock, $0.001 par value, 500,000 shares authorized; none outstanding...
Common stock, $0.001 par value, 500,000,000 shares authorized, 133,041,979, and
146,991,899 shares issued, 133,041,979, and 146,411,267 shares outstanding,
none, and 580,631 shares held in treasury, respectively........................ 133 146
Additional paid-in capital....................................................... 1,405,883 593,221
Cumulative translation adjustment................................................ (113,022) (113,022)
Retained earnings................................................................ 179,928 65,047
------------- -------------
Total stockholders' equity..................................................... 1,472,922 545,392
------------- -------------
Total capitalization......................................................... $ 1,854,766 $ 1,387,665
------------- -------------
------------- -------------
</TABLE>
26
<PAGE>
SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA
The historical Statement of Income Data for the fiscal years ended April 30,
1995 and 1996 and April 26, 1997 and the Balance Sheet Data at April 30, 1996
and April 26, 1997 have been derived from the Company's consolidated financial
statements that have been audited and are included in the documents incorporated
by reference herein. The historical Statement of Income Data for the years ended
April 30, 1993 and 1994 and the Balance Sheet Data at April 30, 1993, 1994, and
1995 have been derived from unaudited consolidated financial statements which
are not included in the documents incorporated by reference herein. The Selected
Financial Data for the nine months ended January 25, 1997 and January 24, 1998
(except pro forma amounts) have been derived from unaudited consolidated
financial statements that appear in the documents incorporated by reference
herein. These unaudited consolidated financial statements have been prepared on
the same basis as the audited consolidated financial statements and, in the
opinion of management, contain all adjustments, consisting of normal recurring
accruals, necessary for a fair presentation of the financial position and
results of operations for the periods presented.
The pro forma financial data gives effect, as applicable, to: (i) the Equity
Self-Tender, (ii) the Distributions, (iii) the Equity Investment, (iv) the
purchase acquisitions completed subsequent to the dates indicated in the
applicable footnotes, (v) the Exchange Offer, (vi) the 2003 Note Tender
(assuming that all of the Notes are exchanged in the Exchange Offer and all of
the 2003 Notes are tendered and accepted for purchase in the 2003 Note Tender),
and (vii) the New Borrowings, in each case as of the dates indicated in the
applicable footnotes. In addition, the pro forma information is based on
available information and certain assumptions and adjustments.
The Selected Financial Data provided herein should be read in conjunction
with the "Management's Discussion and Analysis of Financial Condition and
Results of Operations," the historical consolidated financial statements and the
unaudited pro forma combined financial statements of the Company and the related
notes to each thereof, all of which are included in or incorporated by reference
in this Offering Circular/Prospectus.
27
<PAGE>
SELECTED FINANCIAL DATA (1)
(IN THOUSANDS, EXCEPT RATIOS AND PER SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS
FISCAL YEAR ENDED ENDED
------------------------------------------------------------------------ -----------
PRO FORMA
APRIL 30, APRIL 30, APRIL 30, APRIL 30, APRIL 26, APRIL 26, JANUARY 25,
1993 1994 1995 1996 1997 1997 (2) 1997
----------- ----------- ----------- --------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Revenues.......................... $ 486,763 $ 523,755 $ 658,494 $1,061,528 $2,115,954 $2,794,009 $1,498,320
Cost of revenues.................. 350,647 377,494 485,955 789,436 1,518,287 1,988,315 1,077,408
----------- ----------- ----------- --------- --------- ----------- -----------
Gross profit.................. 136,116 146,261 172,539 272,092 597,667 805,694 420,912
Selling, general and
administrative expenses......... 124,065 132,320 152,176 231,569 488,215 646,867 344,474
Amortization expense.............. 601 733 801 2,711 12,416 25,138 8,072
Non-recurring acquisition costs... 8,057 8,001 7,316
Restructuring costs............... 682 4,201 4,201
----------- ----------- ----------- --------- --------- ----------- -----------
Operating income.............. 11,450 13,208 19,562 29,073 84,834 129,488 61,050
Interest expense.................. 2,914 2,519 3,401 8,132 36,047 104,567 27,540
Interest income................... (327) (411) (675) (3,506) (6,857) (6,048)
Other income...................... (1,463) (1,315) (1,456) (684) (4,233) (7,150) (4,073)
----------- ----------- ----------- --------- --------- ----------- -----------
Income from continuing operations
before provision for income
taxes and extraordinary items... 10,326 12,415 18,292 25,131 59,877 32,071 43,631
Provision for income taxes........ 1,594 1,727 2,800 6,032 27,939 20,846 18,238
----------- ----------- ----------- --------- --------- ----------- -----------
Income from continuing operations
before extraordinary items...... 8,732 10,688 15,492 19,099 31,938 $ 11,225 25,393
-----------
-----------
Income from discontinued
operations, net of income taxes
(3)............................. 2,824 10,953 15,675 15,778 26,800 20,411
----------- ----------- ----------- --------- --------- -----------
Income before extraordinary
items........................... 11,556 21,641 31,167 34,877 58,738 45,804
Extraordinary items, net of income
taxes (4)....................... 701 1,450 612
----------- ----------- ----------- --------- --------- -----------
Net income........................ $ 11,556 $ 21,641 $ 31,167 $ 34,176 $ 57,288 $ 45,192
----------- ----------- ----------- --------- --------- -----------
----------- ----------- ----------- --------- --------- -----------
Weighted average common shares
outstanding
Basic......................... 44,260 44,260 45,562 67,545 90,026 146,411(5) 85,978
Diluted....................... 44,260 44,260 45,704 68,374 91,761 148,146(5) 87,824
Per share amounts:
Basic:
Income from continuing
operations before
extraordinary items......... $ 0.20 $ 0.24 $ 0.34 $ 0.28 $ 0.35 $ 0.08 $ 0.30
-----------
-----------
Income from discontinued
operations.................. 0.06 0.25 0.34 0.24 0.31 0.24
Extraordinary items........... (0.01) (0.02) (0.01)
----------- ----------- ----------- --------- --------- -----------
Net income.................... $ 0.26 $ 0.49 $ 0.68 $ 0.51 $ 0.64 $ 0.53
----------- ----------- ----------- --------- --------- -----------
----------- ----------- ----------- --------- --------- -----------
Diluted:
Income from continuing
operations before
extraordinary items......... $ 0.20 $ 0.24 $ 0.34 $ 0.28 $ 0.35 $ 0.08 $ 0.29
-----------
-----------
Income from discontinued
operations.................. 0.06 0.25 0.34 0.23 0.29 0.23
Extraordinary items........... (0.01) (0.02) (0.01)
----------- ----------- ----------- --------- --------- -----------
Net income.................... $ 0.26 $ 0.49 $ 0.68 $ 0.50 $ 0.62 $ 0.51
----------- ----------- ----------- --------- --------- -----------
----------- ----------- ----------- --------- --------- -----------
Ratio of earnings to fixed charges
(6) 2.1x 2.3x 2.5x 1.9x 2.0x 1.3x 2.0x
<CAPTION>
PRO FORMA PRO FORMA
JANUARY 24, JANUARY 25, JANUARY 24,
1998 1997 (2) 1998 (2)
----------- ----------- -----------
<S> <C> <C> <C>
STATEMENT OF INCOME DATA:
Revenues.......................... $1,930,113 $2,087,861 $2,070,655
Cost of revenues.................. 1,390,855 1,487,711 1,481,421
----------- ----------- -----------
Gross profit.................. 539,258 600,150 589,234
Selling, general and
administrative expenses......... 436,037 483,908 467,356
Amortization expense.............. 13,830 18,415 18,433
Non-recurring acquisition costs...
Restructuring costs...............
----------- ----------- -----------
Operating income.............. 89,391 97,827 103,445
Interest expense.................. 27,534 78,425 78,425
Interest income................... (1,545)
Other income...................... (6,369) (6,730) (6,711)
----------- ----------- -----------
Income from continuing operations
before provision for income
taxes and extraordinary items... 69,771 26,132 31,731
Provision for income taxes........ 32,535 16,986 20,625
----------- ----------- -----------
Income from continuing operations
before extraordinary items...... 37,236 $ 9,146 $ 11,106
----------- -----------
----------- -----------
Income from discontinued
operations, net of income taxes
(3)............................. 25,464
-----------
Income before extraordinary
items........................... 62,700
Extraordinary items, net of income
taxes (4).......................
-----------
Net income........................ $ 62,700
-----------
-----------
Weighted average common shares
outstanding
Basic......................... 114,758 146,411(5) 146,411(5)
Diluted....................... 117,185 148,257(5) 148,837(5)
Per share amounts:
Basic:
Income from continuing
operations before
extraordinary items......... $ 0.32 $ 0.06 $ 0.08
----------- -----------
----------- -----------
Income from discontinued
operations.................. 0.23
Extraordinary items...........
-----------
Net income.................... $ 0.55
-----------
-----------
Diluted:
Income from continuing
operations before
extraordinary items......... $ 0.32 $ 0.06 $ 0.07
----------- -----------
----------- -----------
Income from discontinued
operations.................. 0.22
Extraordinary items...........
-----------
Net income.................... $ 0.54
-----------
-----------
Ratio of earnings to fixed charges
(6) 2.5x 1.3x 1.3x
</TABLE>
<TABLE>
<CAPTION>
JANUARY
APRIL 30, 24, 1998
------------------------------------------ APRIL 26, ---------
1993 1994 1995 1996 1997 ACTUAL
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital.............................................. $ 13,609 $ 51,344 $ 70,153 $ 274,124 $ 233,986 $ 107,210
Net assets of discontinued operations........................ 19,199 26,879 33,514 33,674 59,231 346,083
Total assets................................................. 130,666 172,656 259,904 805,978 1,706,991 2,469,442
Long-term debt, less current portion......................... 2,414 15,112 18,841 176,230 380,209 381,844
Stockholders' equity......................................... 27,986 77,735 128,512 394,746 921,148 1,472,922
<CAPTION>
PRO FORMA (7)
-------------
<S> <C>
BALANCE SHEET DATA:
Working capital.............................................. $ 63,973
Net assets of discontinued operations........................
Total assets................................................. 2,006,085
Long-term debt, less current portion......................... 842,273
Stockholders' equity......................................... 545,392
</TABLE>
28
<PAGE>
- ------------------------------
(1) The historical financial information of the businesses that were acquired in
business combinations accounted for under the pooling-of-interests method
(the "Pooled Companies") have been combined on a historical cost basis in
accordance with generally accepted accounting principles ("GAAP") to present
this financial data as if the Pooled Companies had always been members of
the same operating group. The financial information of the businesses
acquired in the business combinations accounted for under the purchase
method (the "Purchased Companies") have been included from the dates of
their respective acquisitions. The pro forma financial data reflect purchase
acquisitions completed by the Company through March 20, 1998.
(2) Gives effect to the Strategic Restructuring Plan, the Exchange Offer, the
2003 Note Tender (assuming that all of the Notes are exchanged in the
Exchange Offer and all of the 2003 Notes are accepted for purchase in the
2003 Note Tender), the New Borrowings and the purchase acquisitions
completed by the Company since May 1, 1996 as if such transactions had been
made on May 1, 1996. The pro forma statement of income data are not
necessarily indicative of the operating results that would have been
achieved had these events actually then occurred and should not be construed
as representative of the Company's future operating results.
(3) The results of the companies included in the Distributions are reflected as
discontinued operations for all periods presented in the Company's
consolidated statement of income.
(4) Extraordinary items represent the losses associated with the early
terminations of credit facilities, net of the related income tax benefits.
(5) For calculation of the pro forma weighted average shares outstanding for the
fiscal year ended April 26, 1997 and for the nine months ended January 25,
1997 and January 24, 1998, see Notes to Pro Forma Combined Financial
Statements incorporated by reference into this Offering Circular/
Prospectus.
(6) In computing the ratio of earnings to fixed charges: (i) earnings are based
on income from continuing operations before provision for income taxes and
extraordinary items and fixed charges; and (ii) fixed charges consist of
interest expense from continuing and discontinued operations, amortization
of deferred financing costs and the estimated interest component of rent
expense.
(7) Gives effect to the Strategic Restructuring Plan, the Exchange Offer, the
2003 Note Tender (assuming that all of the Notes are exchanged in the
Exchange Offer and all of the 2003 Notes are tendered and accepted for
purchase in the 2003 Note Tender), the New Borrowings and the purchase
acquisitions completed by the Company subsequent to January 24, 1998 as if
such transactions had been made on January 24, 1998. The pro forma balance
sheet data are not necessarily indicative of the financial position that
would have been achieved had these events actually then occurred and should
not be construed as representative of the Company's future financial
position.
29
<PAGE>
THE STRATEGIC RESTRUCTURING PLAN
On January 12, 1998, the Company's Board of Directors approved a
comprehensive restructuring plan (the "Strategic Restructuring Plan"). The
elements of the Strategic Restructuring Plan, and related transactions, are
described below.
EQUITY SELF-TENDER
Pursuant to the Equity Self-Tender, the Company will offer to purchase
37,037,037 shares of Common Stock (including shares underlying options to
purchase Common Stock) at a price of $27.00 per share (or, in the case of shares
underlying stock options, $27.00 less the exercise price of such options). The
acceptance of and payment for shares of Common Stock under the Equity
Self-Tender will be subject to a number of conditions. These conditions include:
(i) a minimum of 37,037,037 shares of Common Stock (including shares underlying
options to purchase Common Stock) being validly tendered and not withdrawn; (ii)
the Company having obtained financing sufficient to fund the purchase of Common
Stock pursuant to the Equity Self-Tender, and the Company's lenders having
consented to the Equity Self-Tender or the debt to them having been refinanced;
(iii) all conditions to the completion of the Equity Investment having been
satisfied or waived, except for consummation of the Equity Self-Tender and the
Distributions; and (iv) registration statements relating to the Distributions
having become effective and all other conditions to the completion of the
Distributions having been satisfied.
DISTRIBUTIONS
After acceptance of shares in the Equity Self-Tender, the Company will
distribute all of the shares it holds of the Spin-Off Companies to stockholders
of the Company. To effect the Distributions, the Company created the Spin-Off
Companies---Aztec Consulting, Inc., Workflow Management, Inc., School Specialty,
Inc. and Navigant International, Inc.--to conduct substantially all of the
business and hold substantially all of the assets of, and to be responsible for
substantially all of the liabilities associated with, the Company's technology
solutions, print management, educational supplies and corporate travel services
divisions, respectively. Each of the Spin-Off Companies also intends to issue
additional common stock in an underwritten public offering to occur at
approximately the same time as the Distributions. The Distributions are intended
to qualify for tax-free treatment under Section 355 of the Code.
In connection with the Strategic Restructuring Plan and subject to
stockholder approval, the Company plans to undertake a one-for-four reverse
stock split.
In connection with the Distributions, the Company will enter into a series
of agreements with each Spin-Off Company to provide mechanisms for an orderly
transition and to define certain relationships among the Company and the
Spin-Off Companies after the Distributions. These agreements are: a distribution
agreement (the "Distribution Agreement") among the Company and the Spin-Off
Companies; a tax allocation agreement (the "Tax Allocation Agreement") among the
Company and the Spin-Off Companies; and an employee benefits agreement (the
"Employee Benefits Agreement") among the Company and the Spin-Off Companies; and
a tax indemnification agreement (the "Tax Indemnification Agreement") among the
Spin-Off Companies.
DISTRIBUTION AGREEMENT. The Distribution Agreement will provide for the
transfer from the Company to the Spin-Off Companies of substantially all of the
equity interests in the Company's subsidiaries that are engaged in the business
of technology solutions, print management, educational supplies and corporate
travel services businesses as well as the transfer, in certain instances, of
other assets related to these businesses. The Distribution Agreement will also
allocate and provide for the assumption of financial responsibility for certain
liabilities (other than taxes and employee benefit matters which will be
governed by separate agreements) among the Company and the Spin-Off Companies.
Each Spin-Off Company will be responsible for (i) any liabilities arising out of
or in connection with its respective businesses as it was
30
<PAGE>
formerly conducted by the Company and/or its subsidiaries, (ii) its liabilities
under the Distribution Agreement and the Employee Benefits Agreement and related
agreements, (iii) its liabilities for its portion of an aggregate of $130.0
million of debt allocated to the Spin-Off Companies, (iv) certain liabilities
under the U.S. federal securities laws and (v) any liabilities of the Spin-Off
Company or its subsidiaries. In addition, the Distribution Agreement will
provide that each of the Company and the Spin-Off Companies will bear a portion
of (i) any liabilities of the Company under the securities laws arising from
events prior to the Distributions (other than claims relating solely to a
specific Spin-Off Company or relating specifically to the continuing businesses
of the Company), (ii) the Company's general corporate liabilities (other than
debt, except for that specifically allocated to the Spin-Off Companies) incurred
prior to the Distributions (i.e., liabilities not related to the conduct of a
particular distributed or retained subsidiary's business) and (iii) transaction
costs (including legal, accounting, investment banking and financial advisory)
and other fees incurred by the Company in connection with the Strategic
Restructuring Plan.
TAX ALLOCATION AGREEMENT AND TAX INDEMNIFICATION AGREEMENT. The Tax
Allocation Agreement will provide that each Spin-Off Company is responsible for
its respective share of the Company's consolidated tax liability for the years
that each such corporation was included in the Company's consolidated U.S.
federal income tax return. The Tax Allocation Agreement will also provide for
sharing, where appropriate, of state, local and foreign taxes attributable to
periods prior to the Distributions. Under the Tax Allocation Agreement, the
Spin-Off Companies will jointly and severally indemnify the Company for any
taxes assessed against the Company related to the Distributions if an action or
omission (an "Adverse Tax Act") of any of the Spin-Off Companies materially
contributes to a final determination that any or all of the Distributions are
taxable. Further, the Spin-Off Companies, but not the Company, will enter into
the Tax Indemnification Agreement which will require the Spin-Off Company that
is responsible for the Adverse Tax Act to indemnify the other Spin-Off Companies
for any liability to the Company under the Tax Allocation Agreement. If there is
a final determination that any or all of the Distributions are taxable and it is
determined that there has not been an Adverse Tax Act by either the Company or
any of the Spin-Off Companies, each of the Company and the Spin-Off Companies
will be liable for its pro rata portion of such taxes based on the value of each
company's common stock after the Distributions.
EMPLOYEE BENEFITS AGREEMENT. In connection with the Distributions, the
Company will enter into the Employee Benefits Agreement with the Spin-Off
Companies to provide for an orderly transition of benefits coverage between the
Company and the Spin-Off Companies. Pursuant to this agreement, the respective
Spin-Off Companies will retain or assume liability for employment-related claims
and severance for persons currently or previously employed by the respective
Spin-Off Companies and their subsidiaries, while the Company and the businesses
which remain part of the Company after the Distributions will retain or assume
responsibility for their current and previous employees.
EQUITY INVESTMENT
Pursuant to an Investment Agreement dated January 12, 1998, as amended (the
"Investment Agreement"), the Company will, following the Equity Self-Tender and
Distributions, issue and sell Common Stock and warrants to purchase Common Stock
to Investor for a purchase price of $270.0 million. As a result of the Equity
Investment, Investor will acquire: (a) shares of Common Stock representing 24.9%
of the outstanding shares of Common Stock after giving effect to the issuance of
such shares; (b) rights ("Special Warrants") to receive for nominal
consideration additional shares of Common Stock equal to 24.9% (after giving
effect to issuance of such additional shares upon exercise of the Special
Warrants) of the additional shares that are issuable upon conversion of any
Notes that remain outstanding after the Strategic Restructuring Plan is
completed and certain shares of Common Stock that are actually issued pursuant
to certain contingent rights under existing acquisition agreements; and (c)
warrants representing the right to purchase one share of Common Stock for (i)
each share of Common Stock purchased by Investor at the date of closing under
the Investment Agreement (the "Closing Date") and (ii) each share of Common
Stock into which the Special Warrants become exercisable. The Special
31
<PAGE>
Warrants are exercisable from and after the Closing Date until the twelfth
anniversary thereof, subject to certain limitations, and the warrants described
in clause (c) above are exercisable from and after the second anniversary of the
Closing Date until such twelfth anniversary thereof. The aggregate exercise
price of the warrants described in clause (c) above is $405.0 million.
In accordance with the Investment Agreement, the Company's Board of
Directors will consist of nine directors, including the Chief Executive Officer
of the Company, three designees of Investor and five persons initially selected
by the Company's current Board of Directors. Investor's obligation to consummate
the Equity Investment is conditioned on two of the designees to the Company's
Board of Directors initially selected by the Company's current Board of
Directors being satisfactory to Investor. After closing, for so long as Investor
maintains certain levels of ownership of Common Stock, Investor will have the
right to nominate three members of the Company's Board of Directors and to
designate the Chairman of the Board. Certain Company Board of Directors'
decisions will be subject to super-majority voting provisions that, under
certain circumstances, may require the concurrence of at least one director
nominated by Investor. Investor will be subject to certain restrictions and
limitations with respect to transactions in Common Stock.
Investor's obligation to consummate the Equity Investment is subject to the
satisfaction or waiver of various conditions. These include, among others: (i)
receipt of necessary antitrust and other regulatory clearance; (ii) absence of
material litigation; (iii) Company stockholder approval of the issuance of
shares in the Equity Investment; (iv) consummation of the Distributions in
accordance with the Distribution Agreement containing certain terms specified in
the Investment Agreement and otherwise as reasonably approved by Investor; (v)
execution and delivery of the Tax Allocation Agreement containing certain terms
specified in the Investment Agreement and otherwise as reasonably approved by
Investor; (vi) execution of documents relating to financing for the Equity
Self-Tender satisfactory in form and substance to Investor; (vii) execution of a
consulting agreement with CD&R providing for payment of an annual consulting fee
of $500,000 and a registration rights agreement with Investor; (viii) absence of
any development since October 25, 1997 that would have a material adverse effect
on the Company (after giving effect to the Distributions); and (ix) the
Company's debt existing immediately following completion of the transactions
contemplated by the Strategic Restructuring Plan shall not exceed $1.4 billion
(assuming exchange of all of the Notes) and the outstanding debt of the Spin-Off
Companies shall be at least $130.0 million plus expenditures by such entities
for acquisitions after the date of the Investment Agreement. If the Company does
not proceed with the Distributions, or if the Equity Investment does not occur
for certain other reasons, Investor can terminate the Investment Agreement and
CD&R would receive a termination fee of $25.0 million plus Investor's reasonable
fees and expenses. Upon completion of the Equity Investment, CD&R will receive a
transaction fee of $15.0 million and Investor will receive reimbursement for
expenses it incurs in connection with the transaction.
Investor or the Company can terminate the Investment Agreement at any time
if they both agree in writing. Either one can terminate the agreement if
Investor has not purchased the equity securities by September 30, 1998, if the
Company's stockholders do not approve the transaction, or if any law or order
prohibits the transaction.
In addition, Investor can terminate the Investment Agreement if (i) the
Company materially breaches or makes a material misrepresentation which is not
cured within 30 days after notice from Investor; (ii) the Company's Board of
Directors withdraws, modifies, or publicly announces the intention to withdraw
or modify, its approval of the Investment Agreement or related transactions or
recommends an alternative transaction proposal; (iii) the Board of Directors
publicly announces that it has decided not to complete the Distributions; (iv)
certain conditions--including the accuracy at closing of statements made by the
Company in the Investment Agreement--become impossible to fulfill and Investor
does not waive the conditions; (v) the Company makes substantive amendments to
the agreement setting out the terms of the Distributions or the Equity
Self-Tender; or (vi) Investor decides not to proceed with the transaction based
on its review of the agreements relating to the Distributions or the Equity
Self-Tender.
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The Company can terminate the Investment Agreement if (i) Investor
materially breaches or makes a material misrepresentation which is not cured
with 30 days after notice from the Company; or (ii) certain
conditions--including the accuracy at closing of statements made by Investor in
the Investment Agreement--become impossible to fulfill and the Company does not
waive the conditions.
THE FINANCING TRANSACTIONS
In addition to the Exchange Offer, the Company plans to enter into the
Financing Transactions in conjunction with the Strategic Restructuring Plan:
- SUBORDINATED NOTES OFFERING. The Company plans to issue and sell $400.0
million in Senior Subordinated Notes Due 2008 in a private placement. See
"Indebtedness of U.S. Office Products After the Restructuring."
- NEW CREDIT FACILITY. The Company has entered into a commitment letter for
a new $1.225 billion senior credit facility. See "Indebtedness of U.S.
Office Products After the Restructuring."
- 2003 NOTE TENDER. Pursuant to the 2003 Note Tender the Company has offered
to purchase any and all of its $230.0 million principal amount of 2003
Notes for a purchase price of % of the principal amount, plus accrued
interest. The 2003 Note Tender will be conditioned upon the Company
entering into the Credit Facility and completing the Subordinated Debt
Offering and the Equity Investment, as well as other customary conditions.
The Company will use the proceeds of the Equity Investment and the
Subordinated Debt Offering, together with borrowings under the Credit Facility,
to refinance the Company's existing credit facility, to pay the purchase price
of the Equity Self-Tender and the 2003 Note Tender, and to pay fees and expenses
incurred in connection with the Strategic Restructuring Plan.
AGREEMENT WITH JONATHAN LEDECKY
Jonathan J. Ledecky, the founder, Chairman of the Board and former Chief
Executive Officer of the Company, will resign as Chairman of the Board of
Directors of the Company upon consummation of the Distributions. In connection
with the adoption of the Strategic Restructuring Plan, the Company's Board of
Directors and Mr. Ledecky concluded that it was important to the achievement of
the objectives of the Strategic Restructuring Plan that the Spin-Off Companies
obtain the benefit of Mr. Ledecky's skills and experience. Pursuant to an
agreement with the Company, which is contingent on the Distributions occurring,
Mr. Ledecky will remain an employee of the Company and has agreed to extend his
existing non-competition agreement with the Company until the fourth anniversary
of the Distributions. Mr. Ledecky will also retain his existing Company stock
options, adjusted to take account of the transactions under the Strategic
Restructuring Plan. In consideration of this agreement by Mr. Ledecky and his
serving as a director of and advisor to each of the Spin-Off Companies following
the Distributions, the Ledecky agreement provides that he will receive options
to purchase up to 7.5% of the shares of common stock of each Spin-Off Company
that will be outstanding as of the date of the Distributions. As a result of
this agreement, while Mr. Ledecky will remain employed by the Company, his role
after the Distributions will be substantially reduced. Mr. Ledecky also will be
employed by the Spin-Off Companies.
ADJUSTMENT TO EMPLOYEE STOCK OPTIONS
The Company has previously granted stock options to management and
employees. U.S. Office Products expects that the number and exercise price of
these options will be adjusted following completion of the Strategic
Restructuring Plan to take account of the effects of the Distributions on the
underlying value of the Common Stock. Options held by employees who remain with
U.S. Office Products will continue to be exercisable for shares of U.S. Office
Products Common Stock. Options held by employees who will become employees of a
Spin-Off Company will be converted into options to purchase common
33
<PAGE>
stock of that particular Spin-Off Company. The adjustments will be made by a
formula that takes account of the difference between the price of the Company's
Common Stock before and after the Distributions have been completed (and, in the
case of options for Spin-Off Company shares, the price of Spin-Off Company
shares in the public offerings of the Spin-Off Companies). The formula will not
affect when the options vest or when employees can exercise the options. For
employees remaining with U.S. Office Products, the respective optional exercise
prices will be adjusted by this formula:
<TABLE>
<S> <C> <C>
Trading Price
Post-Distributions
New Exercise Price = Old Exercise * ---------------------------
Price Trading Price
Pre-Distributions
</TABLE>
The respective numbers of shares subject to option will be adjusted by this
formula:
<TABLE>
<S> <C> <C>
Trading Price
Pre-Distributions
Option Shares (New) = Option Shares (Old) * ---------------------------
Trading Price
Post-Distributions
</TABLE>
The intrinsic value of the adjusted options will be no greater than the
intrinsic value of options before the Distributions, and the ratio of exercise
price to market price will be no less than the ratio before the Distributions.
As a result of the adjustments, employee stock options will likely represent a
greater percentage interest in the Company after these transactions than they
did before. See "Risk Factors -- Increase in Outstanding Shares." At March 15,
l998, the Company's management and employees held options to purchase a total of
approximately 21.3 million shares, of which approximately 2.7 million were held
by employees that are expected to be employees of a Spin-Off Company. The number
of options that will be outstanding after the Strategic Restructuring Plan will
depend on the number of shares subject to options that are accepted in the
Equity Self-Tender and also on the trading prices of the Common Stock around the
time of the Distributions. As a result, the ultimate number of such options
cannot be determined at this time. Employees are eligible to tender shares
underlying options (both vested and unvested) in the Equity Self-Tender; to the
extent shares underlying options are purchased, this will reduce the amount of
options that otherwise would be outstanding after the Strategic Restructuring
Plan.
INDEBTEDNESS OF U.S. OFFICE PRODUCTS AFTER THE RESTRUCTURING
In connection with the Strategic Restructuring Plan, the Company expects to
refinance its existing senior bank debt and to borrow additional funds to help
finance the cost of purchasing shares in the Equity Self-Tender, purchasing 2003
Notes in the 2003 Note Tender and fees and expenses incurred in connection with
the Strategic Restructuring Plan. At March 20, 1998, the Company had borrowed
approximately $362.0 million under the terms of its existing bank loan
arrangement.
The Company has agreed to and accepted a commitment letter, dated March 24,
1998, from The Chase Manhattan Bank, Bankers Trust Company, and Merrill Lynch
Capital Corporation, as agents, and Chase Securities Inc., BT Alex. Brown
Incorporated and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as
co-arrangers, for a new bank loan facility that will provide for an aggregate
principal amount of $1.225 billion, consisting of (i) seven-year term loan
facilities totalling $350.0 million, (ii) an eight-year term loan in the
principal amount of $475.0 million, and (iii) a revolving credit facility in the
principal amount of $400 million. The loan facilities will be guaranteed by the
Company's material domestic subsidiaries and secured by substantially all assets
of the Company and its material domestic subsidiaries. The Company will be
required to enter into arrangements to insure that the effective interest rate
paid by the Company on at least 50% of its outstanding bank and subordinated
debt will not exceed a certain rate. The loan documents likely will include
financial and other covenants and other customary provisions, including
representations by the Company, conditions to funding, cost and yield
protections, restricted payment provisions, transfer provisions, amendment
provisions and indemnification provisions. The loan facilities will be subject
to mandatory prepayment in a variety of circumstances, including upon certain
asset sales and issuances of debt.
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<PAGE>
The Company also expects to issue the Senior Subordinated Notes in a
principal amount of at least $400.0 million. The Senior Subordinated Notes will
be subordinated in right of payment to the new bank loans. U.S. Office Products
expects to offer these in a private placement. The Senior Subordinated Notes
will not be registered under the Securities Act of 1933 and may not be offered
or sold in the United States absent registration or an applicable exemption from
registration requirements. The availability of subordinated debt financing will
depend on a number of factors, including market conditions and interest rates.
The indebtedness of the Company after the Strategic Restructuring Plan will
also include (i) any Notes that are not exchanged for Common Stock in the
Exchange Offer and (ii) any 2003 Notes that are not purchased in the 2003 Note
Tender.
INFORMATION ABOUT THE BOARD OF DIRECTORS AFTER THE EQUITY INVESTMENT
Investor has the right to designate three members of the Board of Directors
of the Company who will serve beginning at closing of the Equity Investment. In
addition, the Chief Executive Officer of the Company, Thomas Morgan, will be a
director. Two of the remaining directors at closing must be satisfactory to
Investor. The existing members of the Board will select the new directors who
will serve on the Board after closing until the next Annual Meeting of
Stockholders. Investor has informed the Company that it intends to designate
Charles P. Pieper, and as the three directors it is entitled to
designate. Mr. Pieper will serve as Chairman of the Board after closing. In
addition, Michael Dooling, Timothy J. Flynn, Jonathan J. Ledecky, Clifton B.
Phllips and John A. Quelch have advised the Board that they intend to resign
from the Board of Directors of the Company effective as of the time that
Investor purchases the equity securities, and the Board intends to appoint two
new independent directors to fill these vacancies. Milton H. Kuyers, Allon H.
Lefever, Edward J. Mathias and Thomas Morgan will remain as directors of the
Company after the sale of common stock and warrants to Investor.
Set forth below is information about the directors of the Company after
consummation of the Strategic Restructuring Plan who have been identified to
date:
<TABLE>
<CAPTION>
NAME TITLE AGE BUSINESS EXPERIENCE
- -------------------- -------------------------- --------- ---------------------------------------------------------
<S> <C> <C> <C>
Milton H. Kuyers Director 60 Mr. Kuyers has been a director of the Company since April
1995. He is a part owner and executive officer of a
number of privately held companies including: Zero Zone,
Inc., a manufacturer of commercial refrigeration units;
Desert Air Corp., a manufacturer of commercial
dehumidification equipment; Northwest Coatings, Inc., a
manufacturer of coating products; Grayline, Inc., a
manufacturer of tubing used in the appliance and
electrical industries; Digicorp Inc., a distributor of
business telephone systems and cellular telephones; and
Faustel, Inc., a manufacturer of custom coating
equipment. Prior to 1993, Mr. Kuyers served as the
President of Star Sprinkler Corp., a manufacturer of
sprinkler heads for fire protection systems. Mr. Kuyers
previously served on the board of Medical Advances, Inc.,
a manufacturer of parts for medical diagnostic
applications, until its sale in March 1997. Prior to its
acquisition by the Company, Mr. Kuyers also served as a
director of the The H.H. West Company, a wholly owned
subsidiary of the Company. Mr. Kuyers holds an
undergraduate degree in business administration and an
M.B.A. from the University of Michigan.
</TABLE>
35
<PAGE>
<TABLE>
<CAPTION>
NAME TITLE AGE BUSINESS EXPERIENCE
- -------------------- -------------------------- --------- ---------------------------------------------------------
<S> <C> <C> <C>
Allon H. Lefever Director 50 Mr. Lefever has served as a director of the Company since
February 1995. He has been Vice President of the
Affiliated Companies for High Industries, Inc., since
April 1988. From 1988 until its acquisition by the
Company, Mr. Lefever served as the Chairman of the Board
and Chief Executive Officer of The Office Works, Inc.,
and he currently serves on the boards of directors of
several private companies. In addition, he is a director
of Red Rose SuperNet and Goodville Insurance Co. and
serves on the Business Advisory Board of Millersville
State University. Mr. Lefever received his undergraduate
degree from Millersville State University and a Masters
in Economics from Pennsylvania State University.
Edward J. Mathias Director 55 Mr. Mathias has been a director of the Company since
February 1995. Currently, Mr. Mathias is a Managing
Director of The Carlyle Group, a merchant bank based in
Washington, D.C. From 1971 through 1993, Mr. Mathias was
employed by
T. Rowe Price Associates, Inc., a major investment
management organization, most recently as a Managing
Director. Mr. Mathias presently serves on the boards of
directors of Sirrom Capital Corporation, Pathogenesis and
The Fortress Group, Inc. as well as on the boards of
directors of several private companies. Mr. Mathias holds
an undergraduate degree from The University of
Pennsylvania and an M.B.A. from Harvard Business School.
Thomas Morgan President, Chief Executive 44 Mr. Morgan joined U.S. Office Products in February 1997
Officer and Director as President of U.S. Office Products' North American
Office Products Group. He was promoted to Chief Operating
Officer in June 1997 and to Chief Executive Officer in
November 1997. Before joining U.S. Office Products, he
spent more than 20 years with Genuine Parts Company where
he was most recently Executive Vice President of S.P.
Richards Company.
Charles P. Pieper Chairman of the Board of 51 Mr. Pieper has been a principal and a director of CD&R
Directors since March 1997 and March 1998, respectively.
Previously, Mr. Pieper was President and Chief Executive
Officer of GE Lighting Europe and GE Japan, GE Korea, GE
Taiwan, GE Medical Systems Asia, Yokogawa Medical Systems
and GE Trading Co. Mr. Pieper is a director of Alliant
Foodservice, Inc., and its parent, CDRF Holding, Inc., a
corporation in which a CD&R-managed investment fund has
an investment.
</TABLE>
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<PAGE>
U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE DISTRIBUTIONS
EFFECT ON THE COMPANY AND THE STOCKHOLDERS OF THE COMPANY. The Company will
receive an opinion of Wilmer, Cutler & Pickering (the "Spin-Off Opinion") that
for U.S. federal income tax purposes the Distributions will qualify as a
tax-free spin-off under Section 355 of the Code and will not be taxable under
Section 355(e) of the Code. The Spin-Off Opinion will be based on the accuracy
of factual representations made by the Company, the Spin-Off Companies and the
Investor, and certain other information, data, documentation and other materials
that Wilmer, Cutler & Pickering has deemed necessary.
The Spin-Off Opinion represents Wilmer, Cutler & Pickering's best judgment
of how a court would rule. However, the Spin-Off Opinion is not binding upon
either the Internal Revenue Service ("IRS") or any court. A ruling has not been,
and will not be, sought from the IRS with respect to the U.S. federal income tax
consequences of the Distributions.
Assuming the Distributions qualify as a tax-free spin-off under Section 355
of the Code and are not taxable under Section 355(e) of the Code, no gain or
loss will be recognized by the Company or the stockholders of the Company
(except with respect to cash received in lieu of fractional shares) as a result
of the Distributions.
CONSEQUENCES OF FAILURE TO QUALIFY AS A TAX-FREE DISTRIBUTION. As noted
above, the Spin-Off Opinion is not binding on the IRS or the courts. Holders
should be aware that the requirements of Code Section 355 pertaining to business
purpose, active trade or business, and absence of a device for distribution of
earnings and profits, as well as the requirements of Section 355(e) pertaining
to a plan or series of related transactions to acquire 50% or more by vote or
value of a company, are highly dependent on factual interpretations, are to a
significant extent subjective in nature, and have a relative absence of
authority addressing their application to the particular facts presented by the
Distributions. Accordingly, the IRS and/or a court could reach a conclusion that
differs from counsel's opinion.
BUSINESS PURPOSE. In order for a Distribution to qualify under Section 355,
it must be motivated by a valid business purpose. The Company has represented
that the Distributions were undertaken primarily to allow the Company and the
Spin-Off Companies to adopt strategies and pursue objectives that are more
appropriate to their respective industries and stages of growth; to allow the
Spin-Off Companies to pursue independent acquisition programs with a more
focused use of resources and, where stock is used as consideration, to allow the
Spin-Off Companies to provide stock of a public company that is in the same
industry as the business being acquired; to allow the Company and the Spin-Off
Companies to offer their respective employees more focused compensation
packages; and to make possible the Equity Investment by Investor, which the
Board of Directors of the Company concluded would contribute to the Company's
development, based on the skills and experience of CD&R. Based on these
representations and certain other information, data, documentation and other
materials, it is the opinion of Wilmer, Cutler & Pickering that each
Distribution satisfies the business purpose requirement of Section 355 of the
Code. However, although similar rationales have been accepted by the IRS in
other circumstances as sufficient to meet the business purpose requirement of
Code Section 355, there can be no assurance that the IRS will not successfully
assert that the business purpose requirement is not satisfied.
ACTIVE TRADE OR BUSINESS. In order for the distribution of the stock of a
Spin-Off Company (other than Navigant International, Inc. ("Navigant")) to
qualify under Code Section 355, both the Spin-Off Company and the Company must
be engaged in an active trade or business that was actively conducted for the
five-year period preceding the Distribution, taking into account only businesses
that have been acquired in transactions in which no gain or loss was recognized.
In order for the distribution of the stock of Navigant to qualify under Code
Section 355, Navigant must hold no assets other than the stock of Professional
Travel Corporation ("Professional Travel"), and Professional Travel and the
Company must meet the requirements described in the preceding sentence. Whether
current and historical business activity constitutes an active trade or
business, and whether any gain or loss should have been recognized in
37
<PAGE>
an acquisition structured and reported as a nontaxable transaction, turn in some
instances on the application of subjective legal standards and on factual
determinations, such as intentions of the parties involved. Based on the
representations of the Company and the Spin-Off Companies, it is Wilmer, Cutler
& Pickering's opinion that each Distribution will satisfy the active trade or
business requirement. However, because of the inherently subjective nature of
important elements of the active trade or business requirement, and because the
IRS may challenge the representations upon which Wilmer, Cutler & Pickering
relies, there can be no assurance that the IRS will not successfully assert that
the active trade or business requirement is not satisfied.
ABSENCE OF A DEVICE FOR DISTRIBUTION OF EARNINGS AND PROFITS. A
Distribution will not qualify as a tax-free spin-off if the Distribution was
used principally as a device for the distribution of the earnings and profits of
the Company or the Spin-Off Company. Treasury regulations provide that this test
is applied based on all the facts and circumstances, including the presence or
absence of factors described in the Regulations as "device factors" and
"nondevice factors." Application of this test is uncertain in part because of
its subjective nature. Based on the representations of the Company and the
Spin-Off Companies, it is Wilmer, Cutler & Pickering's opinion that none of the
Distributions is a transaction used principally as a device for the distribution
of earnings and profits of either the Company or any of the Spin-Off Companies.
However, because of the inherently subjective nature of the device test
(including the subjectivity involved in assigning weight to various factors),
and because the IRS may challenge the representations upon which Wilmer, Cutler
& Pickering relies, there can be no assurance that the IRS will not successfully
assert that any or all of the Distributions are transactions used principally as
a device for the distribution of earnings and profits.
If a Distribution fails to qualify under Section 355 of the Code as a
tax-free spin-off, each holder of Common Stock on the record date of the
Distributions will be treated as having received a taxable corporate
distribution in an amount equal to the fair market value (on the effective date
of the Distributions) of the Spin-Off Companies' common stock distributed to
such holder of Common Stock, including fractional shares. In addition, the
Company will be subject to a material corporate-level U.S. federal income tax.
EFFECT OF POST-DISTRIBUTION TRANSACTIONS. Code Section 355(e), which was
added in 1997, generally provides that a company that distributes shares of a
subsidiary in a spin-off that is otherwise tax-free will incur U.S. federal
income tax liability if 50% or more, by vote or value, of the capital stock of
either the company making the distribution or the subsidiary is acquired by one
or more persons acting pursuant to a plan or a series of related transactions
that includes the spin-off. Stock acquired by certain related persons is
aggregated in determining whether this 50% test is met. There is a presumption
that any acquisition of 50% or more, by vote or value, of the capital stock of
the company or the subsidiary occurring two years before or after the spin-off
is pursuant to a plan that includes the spin-off. However, the presumption may
be rebutted by establishing that the spin-off and the acquisition are not part
of a plan or a series of related transactions. Based on the representations of
the Company, the Spin-Off Companies and the Investor, and the assumption that no
Distribution is part of a plan that is outside the knowledge of U.S. Office
Products and the Spin-Off Companies pursuant to which one or more persons will
acquire directly or indirectly 50% or more by vote or value of the capital stock
of the Company or of any Spin-Off Company, it is Wilmer, Cutler & Pickering's
opinion that the Distributions will not be taxable under Code Section 355(e).
However, there can be no assurance that the IRS will not successfully assert
that any or all of the Distributions are taxable under Code Section 355(e).
If the Distributions are taxable under Section 355(e), the Company will
incur a material U.S. federal income tax liability. However, no gain or loss
will be attributable to holders of Common Stock (except with respect to cash
received in lieu of fractional shares).
The Company, but not the holders of the Common Stock, will be indemnified by
the Spin-Off Companies if the actions or omissions of the Spin-Off Companies
materially contribute to a determination
38
<PAGE>
that the Company is subject to a tax liability in connection with the
Distributions. See "The Strategic Restructuring Plan--Distributions--Tax
Allocation Agreement and Tax Indemnification Agreement". However, there can be
no assurance that the Company will be successful in recovering the full amount
of such tax liability under the indemnification arrangements with the Spin-Off
Companies.
FOR A DESCRIPTION OF THE TAX CONSEQUENCES OF EXCHANGING THE NOTES FOR COMMON
STOCK, SEE "U.S. FEDERAL INCOME TAX CONSIDERATIONS."
39
<PAGE>
EFFECT OF THE STRATEGIC RESTRUCTURING PLAN ON THE
CONVERSION PRICE FOR THE NOTES
The Indenture provides for two adjustments to the Existing Conversion Price
as a result of the Equity Self-Tender and the Distributions, respectively. These
adjustments will apply to any Notes that remain outstanding after completion of
the Exchange Offer. The adjustments are summarized below. This summary is
qualified by reference to the terms of the Indenture.
EQUITY SELF-TENDER ADJUSTMENT
Under the Indenture, the Existing Conversion Price will be adjusted to
account for the purchase by the Company of its shares in the Equity Self-Tender
by multiplying the Existing Conversion Price by a fraction (the "Equity
Self-Tender Adjustment Factor"). The numerator of the fraction will be the
number of shares of Common Stock outstanding (including any tendered shares)
upon expiration of the Equity Self-Tender (the "Expiration Time") multiplied by
the Current Market Price (as defined in the last sentence of this paragraph) of
the Common Stock after the Expiration Time. The denominator will be the sum of
(x) the fair market value of the aggregate consideration payable to stockholders
based on the acceptance (up to the maximum specified in the terms of the Equity
Self-Tender) of all shares validly tendered and not withdrawn as of the
Expiration Time (the shares so accepted, up to any such maximum, being referred
to as the "Purchased Shares") plus (y) the product of the number of shares of
Common Stock outstanding (less any Purchased Shares) on the Expiration Time and
the Current Market Price of the Common Stock. For purposes of the Equity
Self-Tender Adjustment Factor, the "Current Market Price" is the average of the
daily closing prices per share of Common Stock for three trading days following
the Expiration Time.
DISTRIBUTION ADJUSTMENT
Under the Indenture, the Existing Conversion Price will also be adjusted to
account for the Distributions by multiplying the Existing Conversion Price (as
adjusted by the Equity Self-Tender Adjustment factor) by a separate fraction
(the "Spin-Off Adjustment Factor"). The numerator of the fraction will be the
Current Market Price (as defined in the next sentence) on the record date for
the Distributions less the fair market value (as determined by the Board of
Directors) on the record date of the portion of the shares of the Spin-Off
Companies so distributed applicable to one share of Common Stock and the
denominator will be the Current Market Price. For purposes of the Spin-Off
Adjustment Factor, "Current Market Price" is defined as the average of the daily
closing prices per share of Common Stock for the ten consecutive trading days
immediately prior to the record date for the Distributions, except that the
closing price for each trading day prior to or including the Expiration Time for
the Equity Self-Tender will be adjusted by multiplying it by the Equity
Self-Tender Adjustment Factor. Further, for purposes of the Spin-Off Adjustment
Factor, the Board of Directors has determined that the "fair market value" of
each Spin-Off Company will be equal to the price at which the shares of common
stock of the Spin-Off Companies are offered to the public (without reduction for
underwriting discounts or commissions) in underwritten primary offerings on or
about the record date for the Distributions.
Because the Equity Self-Tender Adjustment Factor and the Spin-Off Adjustment
Factor are calculated by reference to closing prices of the Common Stock and the
offering price of the Spin-Off Companies' stock, the actual adjustments cannot
be calculated in advance. It is likely that the Equity Self-Tender Adjustment
Factor and the Spin-Off Adjustment Factor could result in an Existing Conversion
Price (as adjusted) that is less than the Reduced Conversion Price.
ADJUSTMENT FOR REVERSE STOCK SPLIT
Concurrently with the Distributions, the Company will, subject to
stockholder approval, effect a one-for-four reverse stock split. Under the
Indenture, the Existing Conversion Price will be proportionately adjusted to
account for the reverse stock split.
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<PAGE>
U.S. FEDERAL INCOME TAX CONSIDERATIONS
The Company will receive an opinion from Wilmer, Cutler & Pickering (the
"Tax Opinion") on the material U.S. federal income tax considerations relating
to the exchange of Notes for Common Stock pursuant to the Exchange Offer. The
Tax Opinion is based on the Internal Revenue Code of 1986, as amended (the
"Code"), and regulations, rulings, and judicial decisions as of the date hereof,
all of which may be repealed, revoked, or modified so as to result in U.S.
federal income tax consequences different from those described below. Such
changes could be applied retroactively in a manner that could adversely affect a
Holder. In addition, the authorities on which the Tax Opinion is based are
subject to various interpretations. It is therefore possible that the U.S.
federal income tax treatment of the exchange of Notes for Common Stock may
differ from the treatment described below.
The Tax Opinion does not address all aspects of U.S. federal income taxation
that may be relevant to Holders in light of their particular circumstances, nor
does it address any tax consequences arising under the laws of any state, local,
or foreign tax jurisdiction. The Tax Opinion applies only to Holders who are
U.S. persons and hold Notes as a capital asset (generally, property held for
investment) within the meaning of Section 1221 of the Code. A U.S. person is the
beneficial owner of a Note that is (i) for U.S. federal income tax purposes a
citizen or resident of the United States (including certain former citizens and
former long-term residents), (ii) a corporation, partnership or other entity
created or organized in or under the laws of the United States or of any
political subdivision thereof, (iii) an estate the income of which is subject to
U.S. federal income taxation regardless of its source or (iv) a trust with
respect to the administration of which a court within the United States is able
to exercise primary supervision and one or more U.S. fiduciaries have the
authority to control all substantial decisions of the trust. The Tax Opinion
does not address tax considerations applicable to a Holder's particular
circumstances or to a Holder that may be subject to special tax rules (such as
Holders subject to the alternative minimum tax) or other special situations,
such as those of dealers in securities or currencies, financial institutions,
insurance companies, persons holding Common Stock as part of a hedging or
conversion transaction or a straddle, and persons whose "functional currency" is
not the U.S. dollar. The Tax Opinion takes into account the Equity Self-Tender
(the tax consequences of which are described in the Tender Offer Statement) and
Wilmer, Cutler & Pickering's Spin-Off Opinion, as described in "The Strategic
Restructuring Plan -- U.S. Federal Income Tax Consequences of the Distribution,"
that the Distributions will qualify as tax-free spin-offs under Section 355 of
the Code and will not be taxable under Section 355(e) of the Code.
Subject to the foregoing, the Tax Opinion states Wilmer, Cutler &
Pickering's opinion, that for U.S. federal income tax purposes the exchange of
Notes for Common Stock pursuant to the Exchange Offer is an exchange of
securities for common stock that will constitute a recapitalization under
Section 368(a)(1)(E) of the Code and that will therefore be tax-free to the
Holders (except with respect to cash received in lieu of fractional shares). The
Tax Opinion will be based on certain assumptions and the accuracy of factual
representations made by U.S. Office Products. A ruling has not been, and will
not be, sought from the IRS with respect to the U.S. federal income tax
consequences of the exchange of Notes for Common Stock pursuant to the Exchange
Offer. Thus, no assurances can be given that a position taken in reliance on the
Tax Opinion will not be challenged by the IRS or rejected by a court. Assuming
the exchange of Notes for Common Stock pursuant to the Exchange Offer is a
tax-free recapitalization, the following U.S. federal income tax consequences
apply:
(1) A Holder will not recognize any gain or loss (except with respect to
cash received in lieu of fractional shares) by reason of the exchange of Notes
for Common Stock.
(2) The Common Stock received by a Holder upon the exchange of Notes will
have an aggregate basis equal to the aggregate basis of the Notes that are
exchanged for Common Stock (reduced by any basis allocable to a fractional
share).
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<PAGE>
(3) A Holder's holding period in the Common Stock issued upon the exchange
of Notes will include the period during which the Holder held the Notes prior to
the exchange.
(4) A Holder who receives cash in lieu of a fractional share of Common Stock
upon exchange of Notes will be taxable as if the fractional share had been
issued and then redeemed for cash. The receipt of cash for a fractional share
will result in capital gain or loss measured by the difference between the basis
of such fractional share interest and the cash received.
(5) A Holder that does not exchange its Notes for Common Stock will not
recognize gain or loss by reason of the Exchange Offer.
THE FOREGOING DISCUSSION OF WILMER, CUTLER & PICKERING'S OPINION AS TO THE
MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS RELATING TO HOLDERS IS FOR
GENERAL INFORMATION ONLY AND DOES NOT PURPORT TO COVER ALL U.S. FEDERAL INCOME
TAX CONSEQUENCES THAT MIGHT APPLY TO EVERY HOLDER. ALL HOLDERS SHOULD CONSULT
THEIR OWN TAX ADVISORS REGARDING THE PARTICULAR U.S. FEDERAL, FOREIGN, STATE AND
LOCAL TAX CONSEQUENCES TO THEM OF THE EXCHANGE.
FOR INFORMATION CONCERNING THE TAX CONSIDERATIONS TO EXCHANGING HOLDERS OF
THE DISTRIBUTIONS AND PARTICIPATION IN THE EQUITY SELF-TENDER, SEE "THE
STRATEGIC RESTRUCTURING PLAN -- U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE
DISTRIBUTIONS" AND THE INFORMATION STATEMENT/PROSPECTUSES RELATING TO THE
DISTRIBUTIONS AND THE TENDER OFFER STATEMENT DISTRIBUTED WITH THIS OFFERING
CIRCULAR/PROSPECTUS.
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<PAGE>
DESCRIPTION OF THE NOTES
The Notes were issued under an indenture dated as of February 7, 1996 (the
"Indenture"), between U.S. Office Products and State Street Bank and Trust
Company, as trustee (the "Trustee"). The terms of the Notes include those stated
in the Indenture and those made a part of the Indenture by reference to the
Trust Indenture Act of 1939, as amended (the "TIA"), as in effect on the date of
the Indenture. The Notes are subject to all such terms, and Holders are referred
to the Indenture and the TIA for a statement of such terms. The following is a
summary of important terms of the Notes and does not purport to be complete.
Reference should be made to all provisions of the Indenture, including the
definitions therein of certain terms and all terms made a part of the Indenture
by reference to the TIA. As used in this "Description of the Notes," the
"Company" refers only to U.S. Office Products Company and does not, unless the
context otherwise indicates, include any of its subsidiaries.
GENERAL
The Notes are general unsecured obligations of U.S. Office Products
subordinate in right of payment to certain other obligations of U.S. Office
Products as described under "-- Subordination," and convertible into Common
Stock as described under "-- Conversion." The aggregate principal amount of the
Notes issued and outstanding is $143,750,000. The notes were issued in fully
registered form only in denominations of $1,000 and integral multiple thereof
and will mature on February 1, 2001, unless earlier redeemed at the option of
U.S. Office Products or repurchased by U.S. Office Products at the option of the
Holder upon a Designated Event (as defined below).
The Notes bear interest from February 7, 1996 at an annual rate of 5 1/2%,
payable semi-annually on February 1 and August 1, to holders of record at the
close of business on the preceding January 15 and July 15, respectively, other
than with respect to a Note or portion thereof called for redemption on a
redemption date, or repurchased in connection with a Designated Event on a
repurchase date, during the period from a record date to (but excluding) the
next succeeding interest payment date (in which case accrued interest shall be
payable (unless such Note or portion thereof is converted) to the Holder of the
Note or portion thereof redeemed or repurchased). Interest is computed on the
basis of a 360-day year comprised of 12 30-day months.
Principal of and premium, if any, and interest on the Notes are payable, and
the transfer of Notes is registrable, and the Notes may be presented for
conversion, at the office or agency of U.S. Office Products maintained for such
purposes, which is currently the Corporate Trust Office of the Trustee. In
addition, payment of interest may, at the option of U.S. Office Products, be
made by check mailed to the address of the person entitled thereto as it appears
in the Note register, PROVIDED that the Holder with an aggregate principal
amount in excess of $5,000,000 shall, at the election of such Holder, be paid by
wire transfer in immediately available funds.
No service charge will be made for a registration or transfer or exchange of
Notes, but U.S. Office Products may require payment of a sum sufficient to cover
any tax or other governmental charge payable in connection therewith. U.S.
Office Products is not required to exchange or register the transfer of (i) any
Note for a period of 15 days next preceding any selection of Notes to be
redeemed, (ii) any Note or portion thereof selected for redemption, (iii) any
Note or portion thereof surrendered for conversion, or (iv) any Note or portion
thereof surrendered for repurchase in connection with a Designated Event.
The Indenture does not contain any restrictions on the payment of dividends
or the repurchase of securities of U.S. Office Products or any financial
covenants. The Indenture contains no covenants or other provisions to afford
protection to Holders in the event of a highly leveraged transaction or a change
in control of U.S. Office Products except to the extent described under "--
Repurchase at Option of Holders Upon a Designated Event" below.
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CONVERSION
Holders are entitled at any time before the close of business on the last
trading day prior to the final maturity date of the Notes, subject to prior
redemption or repurchase, to convert any Notes or portions thereof (in
denominations of $1,000 or multiples thereof) into Common Stock of U.S. Office
Products, at the conversion price of $19.00 per share, subject to adjustment as
described below. Except as described below, no adjustment will be made on
conversion of any Notes for interest accrued thereon or for dividends on any
Common Stock issued. If Notes are converted after a record date for the payment
of interest and prior to the next succeeding interest payment date, such Notes,
other than Notes called for redemption during such period, when submitted for
conversion by the Holder, must be accompanied by funds equal to the interest
payable on such succeeding interest payment date on the principal amount so
converted. U.S. Office Products is not required to issue fractional shares of
Common Stock upon conversion of Notes and, in lieu thereof, will pay a cash
adjustment based upon the market price of the Common Stock during the last 10
trading days prior to the date of conversion. In the case of Notes called for
redemption, conversion rights will expire at the close of business on the
trading day preceding the date fixed for redemption, unless U.S. Office Products
defaults in payment of the redemption price in which the conversion right will
terminate at the close of business on the date such default is cured. In the
event any Holder exercises its repurchase right upon a Designated Event, such
holder's conversion right will terminate upon submission of written notice of
exercise of such repurchase right together with the Notes as to which such right
is being exercised. See "-- Repurchase at Option of Holders Upon a Designated
Event."
The conversion price of $19.00 per share of Common Stock is subject to
adjustment (under formulas set forth in the Indenture) in certain events,
including: (i) the issuance of Common Stock as a dividend or distribution on
Common Stock of U.S. Office Products; (ii) certain subdivisions and combinations
of the Common Stock; (iii) the issuance to all holders of Common Stock of
certain rights or warrants to purchase Common Stock at less than the current
market price of the Common Stock; (iv) the dividend or other distribution to all
holders of Common Stock of shares of capital stock of U.S. Office Products
(other than Common Stock) or evidences of indebtedness of U.S. Office Products
or assets (including securities, but excluding those rights, warrants, dividends
and distributions referred to in clauses (i) and (iii) above and dividends and
distributions paid exclusively in cash); (v) dividends or other distributions
consisting exclusively of cash (excluding any cash portion of distributions
referred to in clause (iv)) to all holders of Common Stock in an aggregate
amount that, combined together with (A) all other such all-cash distributions
made within the preceding 12 months in respect of which no adjustment has been
made plus (B) any cash and the fair market value of other consideration payable
in respect of any tender offers by U.S. Office Products or any of its
subsidiaries for Common Stock concluded within the preceding 12 months in
respect of which no adjustment has been made, exceeds 10% of the Company's
market capitalization (being the product of the then current market price of the
Common Stock times the number of shares of Common Stock then outstanding) on the
record date for such distribution; (vi) the purchase of Common Stock pursuant to
a tender offer made by U.S. Office Products or any of its subsidiaries which
involves an aggregate consideration that, together with (X) any cash and the
fair market value of any other consideration payable in any other tender offer
by U.S. Office Products or any of its subsidiaries for Common Stock expiring
within the 12 months preceding such tender offer in respect of which no
adjustment has been made plus (Y) the aggregate amount of any such all-cash
distributions referred to in clause (v) above to all holders of Common Stock
within the 12 months preceding the expiration of such tender offer in respect of
which no adjustments have been made, exceeds 10% of the Company's market
capitalization on the expiration of such tender offer; and (vii) payment in
respect of a tender offer or exchange offer by a person other than U.S. Office
Products or any subsidiary of U.S. Office Products in which, as of the closing
of the offer, the Board of Directors is not recommending rejection of the offer.
U.S. Office Products is entitled, in lieu of making certain adjustments under
clause (v) above, to provide that, subject to satisfying certain conditions,
upon conversion of the Notes, the Holders will receive, in addition to the
Common Stock issuable upon conversion of such Notes, the amount of such
distribution
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<PAGE>
referred to in clause (v). The adjustment referred to in clause (vii) above will
only be made if the tender offer or exchange offer is for an amount which
increases that person's ownership of Common Stock to more than 25% of the total
shares of Common Stock outstanding and, if the cash and value of any other
consideration included in such payment per share of Common Stock exceeds the
current market price per share of Common Stock on the trading day next
succeeding the last date on which tenders or exchanges may be made pursuant to
such tender or exchange. The adjustment referred to in clause (vii) above will
not be made, however, if, as of the closing of the offer, the offering documents
with respect to such offer disclose a plan or an intention to cause U.S. Office
Products to engage in any transaction of the type described in "Consolidation,
Merger or Assumption."
No adjustment in the conversion price will be required unless such
adjustment would require a change of at least 1% in the conversion price then in
effect; PROVIDED that any adjustment that would otherwise be required to be made
shall be carried forward and taken into account in any subsequent adjustment.
Except as stated above, the conversion price will not be adjusted for the
issuance of Common Stock or any securities convertible into or exchangeable for
Common Stock or carrying the right to purchase any of the foregoing.
The Strategic Restructuring Plan will result in an adjustment to the
conversion price as set forth in "Effect of the Strategic Restructuring Plan on
Conversion of the Notes." The Strategic Restructuring Plan will not, however,
affect the Reduced Conversion Price because the Exchange Period will end before
any element of the Strategic Restructuring Plan that would result in an
adjustment.
Subject to the rights of Holders described below under "-- Repurchase at
Option of Holders upon a Designated Event," in the case of (i) any
reclassification or change of the outstanding Common Stock (other than changes
in par value or resulting from a subdivision or combination of Common Stock) or
(ii) a consolidation, merger, or combination involving U.S. Office Products or a
sale or conveyance to another corporation of the property and assets of U.S.
Office Products as an entirety or substantially as an entirety, in each case as
a result of which holders of Common Stock shall be entitled to receive stock,
other securities, other property or assets (including cash) with respect to or
in exchange for such Common Stock, the Holders then outstanding will be entitled
thereafter to convert such Notes into the kind and amount of shares of stock,
other securities or other property or assets which they would have owned or been
entitled to receive upon such reclassification, change, consolidation, merger,
combination, sale or conveyance had such Notes been converted into Common Stock
immediately prior to such reclassification, change, consolidation, merger,
combination, sale or conveyance (assuming, in a case in which the Company's
stockholders may exercise rights of election, that a Holder would not have
exercised any rights of election as to the stock, other securities or other
property or assets receivable in connection therewith and received per share the
kind and amount received per share by a plurality of non-electing shares). If
the provisions of this paragraph apply to any reclassification, change of Common
Stock, consolidation, merger, combination, sale or conveyance, then the
adjustments to the conversion price described above will not be made with
respect to such reclassification, change of Common Stock, consolidation, merger,
combination, sale or conveyance.
In the event of a taxable distribution to holders of Common Stock (or other
transaction) which results in any adjustment of the conversion price, the
Holders may, in certain circumstances, be deemed to have received a distribution
subject to United States income tax as a dividend. In certain other
circumstances, the absence of such an adjustment may result in a taxable
dividend to the holders of Common Stock.
U.S. Office Products from time to time may, to the extent permitted by law,
reduce the conversion price of the Notes by any amount for any period of at
least 20 days, in which case U.S. Office Products shall give at least 15 days'
notice of such reduction, if the Board of Directors has made a determination
that such decrease would be in the best interests of U.S. Office Products, which
determination shall be conclusive. U.S. Office Products also may, at its option,
make such reductions in the conversion price, in addition to those set forth
above, as the Board of Directors deems advisable to avoid or diminish any
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income tax to holders of Common Stock or rights to purchase Common Stock
resulting from any dividend or distribution of stock (or rights to acquire
stock) or from any event treated as such for income tax purposes.
OPTIONAL REDEMPTION BY U.S. OFFICE PRODUCTS
The Notes are redeemable at the option of the Company on at least 20 but not
more than 60 days' notice, as a whole or, from time to time in part, at the
following prices (expressed in percentages of the principal amount), together
with accrued interest to, but excluding, the date fixed for redemption;
PROVIDED, HOWEVER, that U.S. Office Products may not redeem the Notes prior to
February 2, 1999 unless the closing price of the Common Stock on the principal
stock exchange or market on which the Common Stock is then quoted or admitted to
trading equals or exceeds 150% of the conversion price for at least 20 trading
days within a period of 30 consecutive trading days ending on the fifth trading
day prior to the date the notice of redemption is first mailed to the Holders,
PROVIDED FURTHER that if a redemption date is an interest payment date, the
semi-annual payment of interest becoming due on such date shall be payable to
the holder of record as of the relevant record date. As of April 3, 1998, the
closing price of the Common Stock had not satisfied the conditions in the
foregoing sentence.
If redeemed during the 12-month period beginning February 1:
<TABLE>
<CAPTION>
YEAR REDEMPTION PRICE
- ---------------------------------------------------------------------------- ----------------
<S> <C>
1998........................................................................ 103.3%
1999........................................................................ 102.2%
2000........................................................................ 101.1%
</TABLE>
and 100% at February 1, 2001.
If fewer than all the Notes are to be redeemed, the Trustee will select the
Notes to be redeemed in principal amounts of $1,000 or multiples thereof by lot
or, in its sole discretion, on a pro rata basis. If any Note is to be redeemed
in part only, a new Note or Notes in principal amount equal to the unredeemed
principal portion thereof will be issued. If a portion of a Holder's Notes is
selected for partial redemption and such Holder converts a portion of such
Notes, such converted portion shall be deemed to be taken from the portion
selected for redemption.
No sinking fund is provided for the Notes.
REPURCHASE AT OPTION OF HOLDERS UPON A DESIGNATED EVENT
The Indenture provides that if a Designated Event (as defined) occurs, each
Holder shall have the right, at the Holder's option, to require U.S. Office
Products to repurchase all of such holder's Notes, or any portion thereof that
is a multiple of $1,000, on the date (the "repurchase date") that is 40 days
after the date of the Company Notice (as defined below), for cash at a price
equal to 100% of the principal amount of the Notes, together with accrued
interest, if any, to the repurchase date (the "repurchase price"), PROVIDED,
HOWEVER, that if a repurchase date is an interest payment date, the semi-annual
payment of interest becoming due on such date shall be payable to the Holder of
record as of the relevant record date.
Within 15 days after the occurrence of a Designated Event, U.S. Office
Products is obligated to mail to all holders of record of the Notes a notice
(the "Company Notice") of the occurrence of such Designated Event and of the
repurchase right arising as a result thereof. U.S. Office Products must deliver
a copy of the Company Notice to the Trustee and cause a copy or a summary or
such notice to be published in a newspaper of general circulation in the city of
New York. To exercise the repurchase right, a Holder must deliver, on or before
the 30th day after the date of the Company Notice, irrevocable written notice to
U.S. Office Products (or an agent designated by U.S. Office Products for such
purpose) and the Trustee of
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<PAGE>
the holder's exercise of such right, together with the Notes with respect to
which the right is being exercised, duly endorsed for transfer. The submission
of such notice together with such Notes pursuant to the exercise of a repurchase
right will be irrevocable on the part of the Holder (unless U.S. Office Products
fails to repurchase the Notes on the repurchase date) and the right to convert
such Notes will expire upon such submission. The Strategic Restructuring Plan
does not constitute a Designated Event.
"Designated Event" means a Change in Control (as defined below) or
Termination of Trading (as defined below).
"Change in Control" means an event or series of events as a result of which
(i) any "person" or "group" (as such terms are used in Sections 13(d)(3) and
14(d) of the Exchange Act) is or becomes the "beneficial owner" (as defined in
Rules 13d-3 and 13d-5 under the Exchange Act) of shares representing more than
50% of the combined voting power of the then outstanding securities entitled to
vote generally in elections of directors of U.S. Office Products ("Voting
Stock"); (ii) the stockholders of U.S. Office Products approve any plan or
proposal for the liquidation, dissolution or winding up of U.S. Office Products;
(iii) U.S. Office Products consolidates with or merges into any other
corporation, or conveys, transfers or leases all or substantially all of its
assets to any person, or any other corporation merges into U.S. Office Products,
and, in the case of any such transaction, the outstanding common stock of U.S.
Office Products is changed or exchanged as a result, unless the stockholders of
U.S. Office Products immediately before such transaction own, directly or
indirectly immediately following such transaction, at least 51% of the combined
voting power of the outstanding voting securities of the corporation resulting
from such transaction in substantially the same proportion as their ownership of
the Voting Stock immediately before such transaction; or (iv) the Continuing
Directors (as defined below) do not constitute a majority of the Board of
Directors of U.S. Office Products (or, if applicable, a successor corporation to
U.S. Office Products); PROVIDED that a Change in Control shall not be deemed to
have occurred if either (x) the last sale price of the Common Stock for any five
trading days during the 10 trading days immediately preceding the Change in
Control is at least equal to 105% of the conversion price in effect on such day,
(y) at least 90% of the consideration (excluding cash payments for fractional
shares) in the transaction or transactions constituting the Change in Control
consists of common stock or securities convertible into common stock that are,
or upon issuance will be, traded on a United States national securities exchange
or approved for trading on an established automated over-the-counter trading
market in the United States. A Change of Control also shall not be deemed to
have occurred if Jonathan J. Ledecky or a group that includes Jonathan J.
Ledecky (a "Permitted Investor") becomes the beneficial owner of more than 50%
of the Voting Stock, PROVIDED that, if as a consequence of any transaction
involving a Permitted Investor, or in which a Permitted Investor has an
interest, less than 30% of the shares of Common Stock outstanding upon the
issuance of the Notes are neither listed for trading upon a national securities
exchange nor approved for trading or on an established over-the-counter trading
market in the United States, then a Change of Control shall be deemed to have
occurred upon the consummation of such transaction.
"Continuing Director" means at any date a member of the Company's Board of
Directors (i) who was a member of such board on February 12, 1996 or (ii) who
was nominated or elected by at least a majority of the directors who were
Continuing Directors at the time of such nomination or election or whose
election to the Company's Board of Directors was recommended or endorsed by at
least a majority of the directors who were Continuing Directors at the time of
such nomination or election. (Under this definition, if the current Board of
Directors of U.S. Office Products were to approve a new director or directors
and then resign, no Change in Control would occur even though the current Board
of Directors would thereafter cease to be in office.)
A "Termination of Trading" shall have occurred if the Common Stock (or other
common stock into which the Notes are then convertible) is neither listed for
trading on a United States national securities exchange nor approved for trading
on an established automated over-the-counter trading market in the United
States.
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No quantitative or other established meaning has been given to the phrase
"all or substantially all" (which appears in the definition of Change in
Control) by courts which have interpreted this phrase in various contexts. In
interpreting this phrase, courts, among other things, make a subjective
determination as to the portion of assets conveyed, considering such factors as
the value of assets conveyed, the proportion of an entity's income derived from
the assets conveyed and the significance of those assets to the ongoing business
of the entity. To the extent the meaning of such phrase is uncertain,
uncertainty will exist as to whether or not a Change in Control may have
occurred (and, accordingly, as to whether or not the Holders will have the right
to require U.S. Office Products to repurchase their Notes).
In the event of a Designated Event, any repurchase of the Notes could be
prevented by the subordination provisions of the Indenture. See
"--Subordination" below. The Company's repurchase of Notes as a result of the
occurrence of a Designated Event currently is prohibited, absent a waiver, under
the terms of the Company's existing credit facility and the expected terms of
the Credit Facility (in either case, the "Line of Credit"). As a result, U.S.
Office Products will be precluded from making payment of the repurchase price
unless such provisions are waived by the lender or unless the Line of Credit has
been repaid in full and terminated. Repurchase may also be prohibited or limited
by the subordination provisions applicable to the Notes or be prohibited or
limited by, or create an event of default under, the terms of other agreements
relating to borrowings which constitute Senior Indebtedness which may be entered
into, amended, supplemented or replaced from time to time. Failure of U.S.
Office Products to repurchase Notes at the option of the Holder upon a
Designated Event would result in an Event of Default with respect to the Notes
whether or not such repurchase is prohibited by the subordination provisions or
the terms of Senior Indebtedness. No Notes may be repurchased by U.S. Office
Products at the option of holders upon a Designated Event if there has occurred
and is continuing an Event of Default described under "Events of Default and
Remedies" below (other than a default in the payment of the repurchase price
with respect to such Notes on the repurchase date).
Certain leveraged transactions (as defined by the Indenture) that are
sponsored by the Company's management or an affiliate of U.S. Office Products
could constitute a Change in Control that would give rise to the repurchase
right. The Indenture does not provide the Company's Board of Directors with the
right to limit or waive the repurchase right in the event of any such leveraged
transaction. Conversely, U.S. Office Products could, in the future, enter into
certain transactions, including certain recapitalizations of U.S. Office
Products, that would not constitute a Change in Control (such as the Strategic
Restructuring Plan) but that would increase the amount of Senior Indebtedness
(or other indebtedness) outstanding at such time. There are no restrictions in
the Indenture or the Notes on the creation of additional Senior Indebtedness (or
any other indebtedness) of U.S. Office Products or any of its subsidiaries and
the incurrence of significant amounts of additional indebtedness could have an
adverse impact on the Company's ability to service its debt, including the
Notes. The Notes are subordinate in right of payment to all existing and future
Senior Indebtedness as described under "Subordination" below.
The right to require U.S. Office Products to repurchase Notes as a result of
a Designated Event could have the effect of delaying, deferring or preventing a
Change of Control or other attempts to acquire control of U.S. Office Products
unless arrangements have been made to enable U.S. Office Products to repurchase
all of the Notes at the repurchase date. Consequently, the right may render more
difficult or discourage a merger, consolidation or tender offer (even if such
transaction is supported by the Company's Board of Directors or is favorable to
the stockholders), the assumption of control by a holder of a large block of the
Company's shares and the removal of incumbent management.
No modification of the Indenture regarding the provisions on repurchase at
the option of any Holder is permissible without the consent of the Holder so
affected.
Rule 13e-4 under the Exchange Act requires, among other things, the
dissemination of certain information to security holders in the event of an
issuer tender offer and may apply in the event that the
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<PAGE>
repurchase option becomes available to Holders. The Company will comply with
this rule to the extent applicable at that time.
SUBORDINATION
The indebtedness evidenced by the Notes is, to the extent provided in the
Indenture, subordinate to the prior payment in full of all Senior Indebtedness
(as defined below). Upon any distribution of assets of U.S. Office Products upon
any dissolution, winding up, liquidation or reorganization of U.S. Office
Products, the payment of the principal of, or premium, if any, and interest on
the Notes is to be subordinated to the extent provided in the Indenture in right
of payment to the prior payment in full of all Senior Indebtedness. Moreover, in
the event of any acceleration of the Notes because of an Event of Default, the
holders of any Senior Indebtedness then outstanding would be entitled to payment
in full of all obligations in respect of such Senior Indebtedness before the
Holders are entitled to receive any payment or distribution in respect thereof.
U.S. Office Products also may not make any payment upon or in respect of the
Notes if (i) a default in the payment of principal of, premium, if any,
interest, or other payment due on Senior Indebtedness occurs and is continuing
beyond any applicable period of grace or (ii) any other default occurs and is
continuing with respect to Designated Senior Indebtedness (as defined below)
that permits holders of the Designated Senior Indebtedness as to which such
default related to accelerate its maturity and the Trustee and U.S. Office
Products receive a notice of such default (a "Payment Blockage Notice") under
the Line of Credit
or from a holder of at least $5 million in outstanding principal amount of
Designated Senior Indebtedness. Payments on the Notes may and shall be resumed
(a) in case of payment default, on the date on which such default is cured or
waived and (b) in case of a nonpayment default, on the earlier of the date on
which such nonpayment default is cured or waived or 179 days after the date on
which the applicable Payment Blockage Notice is received. No new period of
payment blockage may be commenced pursuant to a Payment Blockage Notice unless
(i) 365 days have elapsed since the effectiveness of the immediately prior
Payment Blockage Notice and (ii) all scheduled payments of principal, premium,
if any, and interest on the Notes that have become due have been paid in full in
cash or the Trustee or the Holders shall not have instituted proceedings to
enforce the Holders' right to receive such payments. No nonpayment default that
existed or was continuing on the date of delivery of any Payment Blockage Notice
shall be, or be made, the basis for a subsequent Payment Blockage Notice.
By reason of the subordination, in the event of the Company's bankruptcy,
dissolution, liquidation or reorganization, holders of Senior Indebtedness may
receive more, ratably, and Holders may receive less, ratably, than the other
creditors of U.S. Office Products. Such subordination will not prevent the
occurrence of an Event of Default under the Indenture.
Subject to the qualifications described below, the term "Senior
Indebtedness" means the principal of, premium, if any, interest on, and any
other payment due pursuant to, any of the following, whether outstanding on the
date of the Indenture or thereafter incurred or created:
(a) All secured indebtedness of U.S. Office Products for money borrowed
(including (A) any indebtedness secured by a security interest, mortgage,
conditional sales contract or other lien on the assets of U.S. Office
Products which is (i) given to secure all or part of the purchase price of
property subject thereto, whether given to the vendor of such property or to
another, or (ii) existing on property at the time of acquisition thereof and
(B) secured indebtedness for borrowed money from banks, insurance companies
and other financial institutions);
(b) All secured indebtedness of U.S. Office Products evidenced by notes,
debentures, bonds or other securities (including, but not limited to, those
which are convertible or exchangeable for securities of U.S. Office
Products);
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<PAGE>
(c) All secured indebtedness of U.S. Office Products due and owing with
respect to letters of credit and bank guarantees (including, but not limited
to, reimbursement obligations with respect thereto);
(d) All secured indebtedness or other secured obligations of U.S. Office
Products due and owing with respect to interest rate and currency swap
agreements, cap, floor and collar agreements, currency spot and forward
contracts and other similar agreements and arrangements;
(e) All secured indebtedness consisting of commitment or standby fees
due and payable to lending institutions with respect to credit facilities or
letters of credit available to U.S. Office Products;
(f) All secured indebtedness of others of the kinds described in any of
the preceding clauses (a), (b), (c), (d) or (e) assumed by or guaranteed in
any manner by U.S. Office Products or in effect guaranteed by U.S. Office
Products through an agreement to purchase, contingent or otherwise; and
(g) All secured renewals, extensions, refundings, deferrals, amendments
or modifications of secured indebtedness of the kinds described in any of
the preceding clauses (a), (b), (c), (d), (e) or (f);
unless in the case of any particular indebtedness, obligation, renewal,
extension, refunding, amendment or modification the instrument or other document
creating or evidencing the same or the assumption or guarantee of the same
expressly provides that such indebtedness, obligation, renewal, extension,
refunding, amendment or modification is subordinate to, is PARI PASSU with, or
is not superior to, the Notes. Notwithstanding the foregoing, Senior
Indebtedness shall not include (i) any indebtedness of any kind of U.S. Office
Products to any subsidiary of U.S. Office Products, a majority of the voting
stock of which is owned, directly or indirectly, by U.S. Office Products, (ii)
indebtedness of U.S. Office Products for trade payables or constituting the
deferred purchase price of assets or services incurred in the ordinary course of
business and (iii) conditional obligations of U.S. Office Products based on
future performance (including, without limitation, earn out agreements or
similar arrangements) entered into in connection with acquisitions.
The term "Designated Senior Indebtedness" means U.S. Office Products' Line
of Credit and any other Senior Indebtedness if the instrument creating or
evidencing the same or the assumption or guarantee thereof (or related
agreements or documents to which U.S. Office Products is a party) expressly
provides that such Indebtedness shall be "Designated Senior Indebtedness" for
purposes of the Indenture (provided that such instrument, agreement or other
document may place limitations and conditions on the right of holders of such
Senior Indebtedness to exercise the rights of Designated Senior Indebtedness).
It is expected that as a result of the financing associated with the Strategic
Restructuring Plan, a total of approximately $774.9 million of indebtedness will
constitute Designated Senior Indebtedness.
In the event that, notwithstanding the foregoing, the Trustee or any Holder
receives any payment or distribution of assets of U.S. Office Products of any
kind in contravention of any of the terms of the Indenture, whether in cash,
property or securities, including, without limitation, by way of set-off or
otherwise, in respect of the Notes before all Senior Indebtedness is paid in
full, then such payment or distribution will be held by the recipient in trust
for the benefit of the holders of Senior Indebtedness of U.S. Office Products,
and will be immediately paid over or delivered to the holders of Senior
Indebtedness of U.S. Office Products or their representative or representatives
to the extent necessary to make payment in full of all Senior Indebtedness of
U.S. Office Products remaining unpaid, after giving effect to any concurrent
payment or distribution, or provision therefor, to or for the holder of Senior
Indebtedness of U.S. Office Products.
The Notes are obligations exclusively of U.S. Office Products. As certain of
the Company's operations are conducted through subsidiaries, the cash flow and
the consequent ability to service debt of U.S. Office Products, including the
Notes, may be dependent upon the earnings of its subsidiaries and the
distribution of those earnings to, or upon loans, royalties, license fees, or
other payments of funds by those subsidiaries
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to, U.S. Office Products. The subsidiaries are separate and distinct legal
entities and have no obligation, contingent or otherwise, to pay any amounts due
pursuant to the Notes or to make any funds available therefor, whether by
dividends, loans or other payments. In addition, the payment of dividends and
the making of loans and advances to U.S. Office Products by its subsidiaries may
be subject to statutory or contractual restrictions, are dependent upon the
earnings of those subsidiaries and are subject to various business
considerations.
Any right of U.S. Office Products to receive assets of any of its
subsidiaries upon their liquidation or reorganization (and the consequent right
of the Holders to participate in these assets) will be effectively subordinated
to the claims of that subsidiary's creditors (including trade creditors), except
to the extent that U.S. Office Products is itself recognized as a creditor of
such subsidiary, in which case the claims of U.S. Office Products would still be
subordinate to any security interests in the assets of such subsidiary and any
indebtedness of such subsidiary senior to that held by U.S. Office Products.
As of February 21, 1998, U.S. Office Products had approximately $361.8
million of indebtedness outstanding (excluding accrued interest) that
constituted Senior Indebtedness. As of February 21, 1998, there was also
outstanding approximately $23.8 million of indebtedness and other obligations of
subsidiaries of U.S. Office Products (excluding intercompany liabilities and
liabilities of a type not required to be reflected as a liability on the balance
sheet of such subsidiaries in accordance with GAAP) as to which the Notes were
effectively structurally subordinated. The amount of Senior Indebtedness may
change in the future and indebtedness of subsidiaries may change in the future.
The amount of Senior Indebtedness will increase substantially if the Strategic
Restructuring Plan is completed. On a pro forma basis, assuming completion of
all elements of the Strategic Restructuring Plan (including the purchase of 100%
of the 2003 Notes in the 2003 Note Tender and the incurrence of additional
indebtedness in connection with the Strategic Restructuring Plan), Senior
Indebtedness would have been approximately $774.9 million as of January 24,
1998. The indenture does not limit the amount of additional indebtedness,
including Senior Indebtedness, which U.S. Office Products can create, incur,
assume or guarantee, nor does the Indenture limit the amount of indebtedness
which any subsidiary of U.S. Office Products can create, incur, assume or
guarantee.
U.S. Office Products is obligated to pay reasonable compensation to the
Trustee and to indemnify the Trustee against any losses, liabilities or expenses
incurred by it in connection with its duties relating to the Notes. The
Trustee's claims for such payments will be senior to those of Holders in respect
of all funds collected or held by the Trustee.
EVENTS OF DEFAULT AND REMEDIES
An Event of Default is defined in the Indenture as being default in payment
of the principal of, or premium, if any, on the Notes whether or not such
payment is prohibited by the subordination provisions of the Indenture; default
for 30 days in payment of any installment of interest on the Notes whether or
not such payment is prohibited by the subordination provisions of the Indenture;
default in the payment of the repurchase price in respect of any Note on the
repurchase date therefor whether or not such payment is prohibited by the
subordination provisions of the Indenture; failure by U.S. Office Products to
comply with any of its other agreements in the Notes or the Indenture upon the
receipt by U.S. Office Products of notice of such default by the Trustee or by
Holders of not less than 25% in aggregate principal amount of the Notes then
outstanding and the Company's failure to cure such default within 45 days after
receipt by U.S. Office Products of such notice (which period may be extended for
an additional 45 days if U.S. Office Products is contesting in good faith the
existence of such default); default by U.S. Office Products under and
acceleration of the maturity of, or failure to pay at maturity, certain other
indebtedness of U.S. Office Products for money borrowed aggregating in excess of
$5 million and continuance of such default for 30 days after notice; or certain
events involving bankruptcy, insolvency or reorganization of U.S. Office
Products or any Significant Subsidiary (as defined).
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The Indenture provides that the Trustee shall, within 90 days after the
occurrence of a default, give to the registered Holders notice of all defaults
known to it unless such defaults have been cured or waived before the giving of
such notice, but the Trustee shall be protected in withholding such notice if it
in good faith determines that the withholding of such notice is in the best
interest of such registered Holders, except in the case of a default in the
payment of the principal of, or premium, if any, or interest on, any of the
Notes.
The Indenture provides that if any Event of Default shall have occurred and
be continuing, the Trustee or the Holders of not less than 25% in principal
amount of the Notes then outstanding may declare the principal of and premium,
if any, and accrued interest on the Notes to be due and payable immediately, but
if U.S. Office Products shall cure all defaults (except the nonpayment of
interest on, premium, if any, and principal of any Notes which shall have become
due by acceleration) and certain other conditions are met, such declaration may
be canceled and past defaults may be waived by the holders of a majority in
principal amount of Notes then outstanding. If an Event of Default resulting
from certain events of bankruptcy, insolvency or reorganization were to occur,
all unpaid principal of, premium, if any, and accrued interest on the
outstanding Notes will become due and payable immediately without any
declaration or other act on the part of the Trustee or any Holders, subject to
certain limitations.
The Indenture provides that the Holders of a majority in principal amount of
the outstanding Notes may direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on the Trustee, subject to certain limitations specified in the
Indenture. Before proceeding to exercise any right or power under the Indenture
at the direction of such Holders, the Trustee shall be entitled to receive from
such holders reasonable security or indemnity against the costs, expenses and
liabilities which might be incurred by it in complying with any such direction.
The right of a Holder to institute a proceeding with respect to the Indenture is
subject to certain conditions precedent, including the written notice by such
Holder of a Event of Default and an offer to indemnify to the Trustee, along
with the written request by the holders of not less than 25% in principal amount
of the outstanding Notes that such a proceeding be instituted, but the Holder
has an absolute right to institute suit (i) for the enforcement of payment of
the principal of, and premium, if any, and interest on, such Holder's Notes when
due and (ii) to enforce such Holder's right to convert such Notes.
The Holders of not less than a majority in principal amount of the
outstanding Notes may on behalf of the Holders of all Notes waive any past
defaults, except (i) a default in payment of the principal of, or premium, if
any, or interest on, any Note when due, (ii) a failure by U.S. Office Products
to convert any Notes into Common Stock or (iii) in respect of certain provisions
of the Indenture which cannot be modified or amended without the consent of the
holders of all Notes then outstanding.
U.S. Office Products is required to furnish to the Trustee annually a
statement of certain officers of U.S. Office Products stating whether or not to
the best of their knowledge U.S. Office Products is in default in the
performance and observation of certain terms of the Indenture and, if they have
knowledge that U.S. Office Products is in default, describing such default and
its status.
CONSOLIDATION, MERGER OR ASSUMPTION
U.S. Office Products may, without the consent of the Holders, consolidate
with, merge into, or transfer all or substantially all of its properties to any
other corporation organized under the laws of the United States or any political
subdivision thereof or therein, PROVIDED that the successor corporation assumes
all obligations of U.S. Office Products under the Indenture and the Notes and
that certain other conditions are met.
MODIFICATIONS OF THE INDENTURE
The Indenture contains provisions permitting U.S. Office Products and the
Trustee, with the consent of the Holders of not less than a majority in
principal amount of the Notes at the time outstanding, to
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modify the Indenture or any supplemental indenture or the rights of the Holders,
except that no such modification shall (i) extend the fixed maturity of any
Note, reduce the rate or extend the time of payment of interest thereon, reduce
the principal amount thereof or premium, if any, thereon, reduce any amount
payable upon redemption or repurchase thereof, change or impair the obligation
of U.S. Office Products to make repurchase of any Note upon the happening of a
Designated Event, impair or affect the right of a Holder to institute suit for
the payment thereof, change the currency in which the Notes are payable, or
change or impair the right to convert the Notes into Common Stock subject to the
terms set forth in the Indenture or modify the provisions of the Indenture with
respect to the subordination of the Notes in a manner adverse to the Holders,
without the consent of the Holder of each Note so affected, or (ii) reduce the
aforesaid percentage of Notes, without the consent of the Holders of all of the
Notes then outstanding.
SATISFACTION AND DISCHARGE
U.S. Office Products may discharge its obligations under the Indenture while
Notes remain outstanding if (i) all outstanding Notes will become due and
payable at their scheduled maturity within one year or (ii) all outstanding
Notes are scheduled for redemption within one year, and, in either case, U.S.
Office Products has deposited with the Trustee an amount sufficient to pay and
discharge all outstanding Notes on the date of their scheduled maturity or the
scheduled date of redemption.
GOVERNING LAW
The Indenture and Notes are governed by and construed in accordance with the
laws of the State of New York.
CONCERNING THE TRUSTEE
State Street Bank and Trust Company, the Trustee under the Indenture, has
been appointed by U.S. Office Products as the paying agent, conversion agent and
registrar with regard to the Notes. U.S. Office Products and its subsidiaries
may maintain deposit accounts and conduct other banking transactions with the
Trustee or its affiliates in the ordinary course of business, and the Trustee
and its affiliates may from time to time in the future provide banking and other
services to U.S. Office Products in the ordinary course of their business.
During the existence of an Event of Default, the Trustee will be required to
exercise such rights and powers vested in it under the Indenture and use the
same degree and care and skill in its exercise as a prudent person would
exercise under the circumstances in the conduct of such person's own affairs.
Subject to such provisions, the Trustee is under no obligation to exercise any
of its rights or powers under the Indenture at the request of any of the
Holders, unless they shall have offered to the Trustee security and indemnity
satisfactory to it.
The Indenture and the TIA contain certain limitations on the rights of the
Trustee, should it become a creditor of U.S. Office Products, to obtain payment
of claims in certain cases or to realize on certain property received in respect
of any such claim as security or otherwise. Subject to the TIA, the Trustee will
be permitted to engage in other transactions, PROVIDED, HOWEVER, that if it
acquires any conflicting interest (as described in the TIA), it must eliminate
such conflict or resign.
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DESCRIPTION OF THE COMMON STOCK
GENERAL
As of March 26, 1998, the Company's authorized capital stock consisted of
500,000,000 shares of Common Stock, par value $.001 per share, and 500,000
shares of preferred stock, par value $.001 per share (the "Preferred Stock"). As
of March 26, 1998, the Company had outstanding approximately 133,225,298 shares
of Common Stock and no shares of Preferred Stock. As of March 26, 1998, there
were approximately record holders of Common Stock. In connection with the
Strategic Restructuring Plan and subject to stockholder approval, the Company
intends to effect a one-for-four reverse stock split. Assuming completion of all
elements of the Strategic Restructuring Plan, including the one-for-four reverse
stock split, and exchange of all of the Notes pursuant to the Exchange Offer,
the Company will have outstanding approximately shares of Common Stock and no
shares of Preferred Stock.
COMMON STOCK
The holders of Common Stock are entitled to one vote for each share on all
matters voted upon by stockholders, including the election of directors.
Subject to the rights of any then outstanding shares of Preferred Stock, the
holders of the Common Stock are entitled to such dividends as may be declared in
the discretion of the Board of Directors out of funds legally available
therefor. See "Dividend Policy." The holders of Common Stock are entitled to
share ratably in the net assets of the Company upon liquidation after payment or
provision for all liabilities and any preferential liquidation rights of any
Preferred Stock then outstanding. The holders of Common Stock generally have no
preemptive rights to purchase shares of stock of the Company, although Investor
will have certain contractual preemptive rights pursuant to the Investment
Agreement. Shares of Common Stock are not subject to any redemption provisions
and are not convertible into any other securities of the Company. All
outstanding shares of Common Stock are, and the shares of Common Stock to be
issued by the Company upon conversion of the Notes will be, fully paid and
non-assessable.
PREFERRED STOCK
The Preferred Stock may be issued from time to time by the Board of
Directors as shares of one or more classes or series. Subject to the provisions
of the Company's Amended and Restated Certificate of Incorporation and
limitations prescribed by law, the Board of Directors is expressly authorized to
adopt resolutions to issue the shares, to fix the number of shares and to change
the number of shares constituting any series, and to provide for or change the
voting powers, designations, preferences and relative, participating, optional
or other special rights, qualifications, limitations or restrictions thereof,
including dividend rights (including whether dividends are cumulative), dividend
rates, terms of redemption (including sinking fund provisions), redemption
prices, conversion rights and liquidation preferences of the shares constituting
any class or series of the Preferred Stock, in each case without any further
action or vote by the stockholders. The Company has no current plans to issue
any shares of Preferred Stock of any class or series.
One of the effects of undesignated Preferred Stock may be to enable the
Board of Directors to render more difficult or to discourage an attempt to
obtain control of the Company by means of a tender offer, proxy contest, merger
or otherwise, and thereby to protect the continuity of the Company's management.
The issuance of shares of the Preferred Stock pursuant to the Board of
Directors' authority described above may adversely affect the rights of the
holders of Common Stock. For example, Preferred Stock issued by the Company may
rank prior to the Common Stock as to dividend rights, liquidation preference or
both, may have full or limited voting rights and may be convertible into shares
of Common Stock. Accordingly, the issuance of shares of Preferred Stock may
discourage bids for the Common Stock or may otherwise adversely affect the
market price of the Common Stock.
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STATUTORY BUSINESS COMBINATION PROVISION
The Company is subject to the provisions of Section 203 of the Delaware
General Corporation Law ("Section 203"). Section 203 provides, with certain
exceptions, that a Delaware corporation may not engage in any of a broad range
of business combinations with a person or an affiliate or associate of such
person who is an "interested stockholder" for a period of three years from the
date that such person became an interested stockholder unless: (i) the
transaction resulting in a person becoming an interested stockholder, or the
business combination, is approved by the board of directors of the corporation
before the person becomes an interested stockholder; (ii) the interested
stockholder acquired 85% or more of the outstanding voting stock of the
corporation in the same transaction that makes such person an interested
stockholder (excluding shares owned by persons who are both officers and
directors of the corporation, and shares held by certain employee stock
ownership plans); or (iii) on or after the date the person becomes an interested
stockholder, the business combination is approved by the corporation's board of
directors and by the holders of at least 66 2/3% of the corporation's
outstanding voting stock at an annual or special meeting, excluding shares owned
by the interested stockholder. Under Section 203, an "interested stockholder" is
defined as any person who is: (i) the owner of 15% or more of the outstanding
voting stock of the corporation; or (ii) an affiliate or associate of the
corporation if such affiliate or associate was the owner of 15% or more of the
outstanding voting stock of the corporation at any time within the three-year
period immediately prior to the date on which it is sought to be determined
whether such person is an interested stockholder.
A corporation may, at its option, exclude itself from the coverage of
Section 203 by amending its certificate of incorporation or bylaws, by action of
its stockholders, to exempt itself from coverage, provided that such bylaws or
certificate of incorporation amendment shall not become effective until 12
months after the date it is adopted. The Company has not adopted such an
amendment to its Amended and Restated Certificate of Incorporation or Amended
and Restated Bylaws.
LIMITATION ON DIRECTORS' LIABILITIES
Pursuant to the Company's Amended and Restated Certificate of Incorporation
and under Delaware law, directors of the Company are not liable to the Company
or its stockholders for monetary damages for breach of fiduciary duty, except
for liability in connection with a breach of duty of loyalty, for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, for dividend payments or stock repurchases illegal under
Delaware law or any transaction in which a director has derived an improper
personal benefit.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Common Stock is American Stock
Transfer & Trust Company.
LEGAL MATTERS
The validity of the issuance of the Common Stock to be issued upon exchange
of the Notes has been passed on for the Company by Wilmer, Cutler & Pickering,
Washington, D.C. Wilmer, Cutler & Pickering has also given its opinion as to
certain tax matters described herein. Certain legal matters will be passed upon
for the Dealer Manager by Wilson Sonsini Goodrich & Rosati, Professional
Corporation, Palo Alto, California.
EXPERTS
The historical financial statements incorporated in this Offering
Circular/Prospectus by reference to the Company's Current Report on Form 8-K
dated January 12, 1998 (except as they relate to the unaudited interim periods)
have been audited by various independent accountants. The companies and periods
covered by these audits are indicated in the individual accountants' reports.
Such financial statements have been so incorporated in reliance on the reports
of the various independent accountants given on the authority of such firms as
experts in auditing and accounting.
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AVAILABLE INFORMATION
The Company has filed with the Commission in Washington, D.C., a
Registration Statement on Form S-4 under the Securities Act with respect to the
securities offered hereby and a statement on Schedule 13E-4 with respect to the
Exchange Offer. This Offering Circular/Prospectus, which constitutes part of the
Registration Statement and is an exhibit to the statement on Schedule 13E-4,
omits certain of the information contained in the Registration Statement and the
exhibits and schedules thereto on file with the Commission pursuant to the
Securities Act, and the rules and the regulations of the Commission thereunder.
Statements contained in this Offering Circular/Prospectus as to the contents of
any contract or other document referred to are not necessarily complete and in
each instance reference is made to the copy of such contract or other document
filed as an exhibit to the Registration Statement, and each such statement is
qualified in all respects by such reference. The Company is subject to the
informational requirements of the Exchange Act and, in accordance therewith,
files reports, proxy statements, and other information with the Commission. Such
reports, proxy statements and other information can be inspected and copied at
the public reference facilities maintained by the Commission at Judiciary Plaza,
Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the following
Regional Offices of the Commission: Seven World Trade Center, Suite 1300, New
York, New York 10048; and 500 West Madison Avenue, Suite 1400, Chicago, Illinois
60661. Copies of such material can be obtained from the public reference section
of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates, or from the Commission's Internet web site at
http://www.sec.gov.
Each of the Spin-Off Companies has filed an Information Statement on Form
S-1 under the Securities Act with respect to shares of common stock of such
companies to be issued in the Distributions. Such Information Statements can be
inspected and copied at the facilities of the Commission described above.
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Facsimile copies of the Letter of Transmittal, properly completed and validly
executed, will be accepted. Letters of Transmittal, certificates for Notes and
any other required documents should be sent or delivered by each Holder of Notes
or such Holder's broker, dealer, commercial bank or trust company to the
Exchange Agent at one of its addresses set forth below:
THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS:
STATE STREET BANK & TRUST COMPANY
<TABLE>
<S> <C> <C>
BY MAIL: BY OVERNIGHT COURIER: BY HAND:
Corporate Trust Department Corporate Trust Department Corporate Trust Department
2 International Place, 4th 2 International Place, 4th 2 International Place, 4th
Floor Floor Floor
Boston, MA 02110 Boston, MA 02110 Boston, MA 02110
Attention: Kellie Mullen Attention: Kellie Mullen Attention: Kellie Mullen
</TABLE>
BY FACSIMILE:
(617) 664-5290
Attention: Kellie Mullen
FACSIMILE CONFIRMATION ONLY:
(617) 664-5587
Attention: Kellie Mullen
Requests for assistance or additional copies of this Offering
Circular/Prospectus, the Letter of Transmittal, and other related documents
should be directed to the Information Agent at its telephone number and location
set forth below. You may also contact your broker, dealer, commercial bank,
trust company or nominee for assistance concerning the Exchange Offer.
THE INFORMATION AGENT FOR THE EXCHANGE OFFER IS:
abcdef
156 Fifth Avenue
New York, New York 10010
(212) 929-5500
or
Call Toll Free (800) 322-2885
THE DEALER MANAGER FOR THE EXCHANGE OFFER IS:
BANCAMERICA ROBERTSON STEPHENS
555 California Street
Suite 2600
San Francisco, CA 94104
(415) 781-9700
or
Call Toll Free (800) 234-2663
Attn: Dan White
The date of this Offering Circular/Prospectus is April , 1998
<PAGE>
PART II
ITEM 20. INDEMNIFICATION OF OFFICERS AND DIRECTORS
U.S. Office Products' Amended and Restated By-laws provide that U.S. Office
Products shall, to the fullest extent permitted by Section 145 of the General
Corporation Law of the State of Delaware, as amended from time to time,
indemnify all persons whom it may indemnify pursuant thereto.
Section 145 of the General Corporation Law of the State of Delaware permits
a corporation, under specified circumstances, to indemnify its directors,
officers, employees or agents against expenses (including attorney's fees),
judgments, fines and amounts paid in settlements actually and reasonably
incurred by them in connection with any action, suit or proceeding brought by
third parties by reason of the fact that they were or are directors, officers,
employees or agents of the corporation, if such directors, officers, employees
or agents acted in good faith and in a manner they reasonably believed to be in
or not opposed to the best interests of the corporation and, with respect to any
criminal action or proceeding, had no reason to believe their conduct was
unlawful. In a derivative action, i.e., one by or in the right of the
corporation, indemnification may be made only for expenses actually and
reasonably incurred by directors, officers, employees or agents in connection
with the defense or settlement of an action or suit, and only with respect to a
matter as to which they shall have acted in good faith and in a manner they
reasonably believed to be in or not opposed to the best interests of the
corporation, except that no indemnification shall be made if such person shall
have been adjudged liable to the corporation, unless and only to the extent that
the court in which the action or suit was brought shall determine upon
application that the defendant directors, officers, employees or agents are
fairly and reasonably entitled to indemnity for such expenses despite such
adjudication of liability. Article Eight of U.S. Office Products' Amended and
Restated Certificate of Incorporation provides that U.S. Office Products
directors will not be personally liable to U.S. Office Products or its
stockholders for monetary damages resulting from breaches of their fiduciary
duty as directors except (a) for any breach of the duty of loyalty to U.S.
Office Products or its stockholders, (b) for acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of law, (c) under
Section 174 of the General Corporation Law of the State of Delaware, which makes
directors liable for unlawful dividends or unlawful stock repurchases or
redemptions or (d) for transactions from which directors derive improper
personal benefit.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) See Exhibit Index for list of exhibits.
(b) Not applicable.
(c) Not applicable.
ITEM 22. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions described in Item 20, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-1
<PAGE>
The undersigned Registrant hereby undertakes:
(1) That, for purposes of determining any liability under the Securities Act
of 1933, each filing of the registrant's annual report pursuant to Section 13(a)
or Section 15(d) of the Securities Exchange Act of 1934 that is incorporated by
reference in the registration statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(2) To deliver or cause to be delivered with the Offering
Circular/Prospectus, to each person to whom the Offering Circular/Prospectus is
sent or given, the latest annual report to security holders that is incorporated
by reference in the Offering Circular/Prospectus and furnished pursuant to and
meeting the requirements of Rule 14a-3 or Rule 14c-3 under the Securities
Exchange Act of 1934; and where interim financial information required to be
presented by Article 3 of Regulation S-X are not set forth in the Offering
Circular/Prospectus, to deliver, or caused to be delivered to each person to
whom the Offering Circular/Prospectus is sent or given, the latest quarterly
report that is specifically incorporated by reference in the Offering
Circular/Prospectus to provide such interim financial information.
(3) To respond to requests for information that is incorporated by reference
into the Offering Circular/Prospectus pursuant to Items 4, 10(b), 11, or 13 of
this Form, within one (1) business day of receipt of such request, and to send
the incorporated documents by first class mail or other equally prompt means.
This includes information contained in documents filed subsequent to the
effective date of the registration statement through the date of responding to
the request.
(4) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired therein, that was not
the subject of and included in the registration statement when it became
effective.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Washington, District of
Columbia, on April 7, 1998.
<TABLE>
<S> <C> <C>
U.S. OFFICE PRODUCTS COMPANY
By: /s/ THOMAS I. MORGAN
-----------------------------------------
Name: Thomas I. Morgan
Title: Chief Executive Officer
</TABLE>
Each person whose signature appears below hereby appoints Thomas I. Morgan
and Mark D. Director, and both of them, either of whom may act without the
joinder of the other, as his true and lawful attorneys-in-fact and agents, with
full power of substitution and resubstitution, for him and in his name, place
and stead, in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement and any registration
statements for the same offering filed pursuant to Rule 462 under the Securities
Act of 1933, and to file the same, with all exhibits thereto and all other
documents in connection therewith, with the Commission, granting unto said
attorneys-in-fact and agents full power and authority to perform each and every
act and thing appropriate or necessary to be done, as full and for all intents
and purposes as he might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents or their substitute or substitutes
may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
/s/ THOMAS I. MORGAN
--------------------------------------
Thomas I. Morgan
Title: Chief Executive Officer
(Principal Executive Officer)
and Director
Date: April 7, 1998
/s/ DONALD H. PLATT
--------------------------------------
Donald H. Platt
Title: Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer)
Date: April 7, 1998
/s/ JONATHAN J. LEDECKY
--------------------------------------
Jonathan J. Ledecky
Title: Chairman of the Board of
Directors
Date: April 7, 1998
II-3
<PAGE>
/s/ MICHAEL DOOLING
--------------------------------------
Michael Dooling
Title: Director
Date: April 7, 1998
--------------------------------------
Timothy J. Flynn
Title: Director
Date:
--------------------------------------
Milton H. Kuyers
Title: Director
Date:
/s/ ALLON H. LEFEVER
--------------------------------------
Allon H. Lefever
Title: Director
Date: March 24, 1998
--------------------------------------
Edward J. Mathias
Title: Director
Date:
--------------------------------------
Clifton B. Phillips
Title: Director
Date:
/s/ JOHN A. QUELCH
--------------------------------------
John A. Quelch
Title: Director
Date: April 7, 1998
II-4
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION
- --------------- ----------------------------------------------------------------------------------------------------
<C> <S>
5.1* Opinion of Wilmer, Cutler & Pickering regarding legality
8.1* Opinion of Wilmer, Cutler & Pickering regarding tax matters
12.1 Statement regarding computation of ratio of earnings to fixed charges
23.1 Consent of Charles P. Pieper to be named as a director
23.2 Consent of Price Waterhouse LLP
23.3 Consent of Ernst & Young LLP
23.4 Consent of Hertz, Herson & Company, LLP
23.5* Consents of KPMG Peat Marwick LLP
23.6 Consent of BDO Seidman, LLP
23.7* Consent of Rubin, Koehmstedt & Nadler, PLC
23.8* Consent of Deloitte & Touche LLP
23.9 Consent of Wilmer, Cutler & Pickering (contained in Exhibits 5.1 and 8.1)
24.1 Power of Attorney (included on signature page)
99.1 Form of Letter of Transmittal
99.2 Form of Letters to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees
99.3 Form of Letter to Clients
</TABLE>
- ------------------------
* To be supplied by amendment.
II-5
<PAGE>
EXHIBIT 12.1
U.S. OFFICE PRODUCTS COMPANY
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(AMOUNTS IN THOUSANDS, EXCEPT RATIOS)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED NINE MONTHS ENDED
------------------------------------------------------------------- ------------------------
PRO FORMA
APRIL 30, APRIL 30, APRIL 30, APRIL 30, APRIL 26, APRIL 26, JANUARY 25, JANUARY 24,
1993 1994 1995 1996 1997 1997 1997 1998
--------- --------- --------- --------- ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Income from continuing
operations before provision
for income taxes and
extraordinary items.......... $ 10,326 $ 12,415 $ 18,292 $ 25,131 $ 59,877 $ 32,071 $ 43,631 $ 69,771
Fixed charges:
Interest expense and
amortization of debt issue
costs...................... 6,015 6,067 8,319 20,123 45,901 104,567 35,450 34,247
Rentals...................... 3,083 3,317 4,196 6,341 13,394 17,695 9,489 12,224
--------- --------- --------- --------- ---------- ----------- ----------- -----------
Total fixed charges............ 9,098 9,384 12,515 26,464 59,295 122,262 44,939 46,471
--------- --------- --------- --------- ---------- ----------- ----------- -----------
Income from continuing
operation before provision
for income taxes,
extraordinary items and fixed
charges...................... $ 19,424 $ 21,799 $ 30,807 $ 51,595 $ 119,172 $ 154,333 $ 88,570 $ 116,242
--------- --------- --------- --------- ---------- ----------- ----------- -----------
--------- --------- --------- --------- ---------- ----------- ----------- -----------
Ratio of earnings to fixed
charges...................... 2.1x 2.3x 2.5x 1.9x 2.0x 1.3x 2.0x 2.5x
--------- --------- --------- --------- ---------- ----------- ----------- -----------
--------- --------- --------- --------- ---------- ----------- ----------- -----------
<CAPTION>
PRO FORMA PRO FORMA
JANUARY 26, JANUARY 24,
1997 1998
----------- -----------
<S> <C> <C>
Income from continuing
operations before provision
for income taxes and
extraordinary items.......... $ 26,132 $ 31,731
Fixed charges:
Interest expense and
amortization of debt issue
costs...................... 78,425 78,425
Rentals...................... 13,223 13,114
----------- -----------
Total fixed charges............ 91,648 91,539
----------- -----------
Income from continuing
operation before provision
for income taxes,
extraordinary items and fixed
charges...................... $ 117,780 $ 123,270
----------- -----------
----------- -----------
Ratio of earnings to fixed
charges...................... 1.3x 1.4x
----------- -----------
----------- -----------
</TABLE>
<PAGE>
EXHIBIT 23.1
CONSENT TO BE NAMED AS A DIRECTOR
I hereby consent to be named as a person who will become a director of U.S.
Office Products Company (the "Company") in the registration statement on Form
S-4 to be filed by the Company with the Securities and Exchange Commission
relating to the offer by the Company to temporarily reduce the conversion price
of its 5 1/2% Convertible Subordinated Notes due 2001.
/s/ Charles P. Pieper
Charles P. Pieper
Dated: March , 1998
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Offering
Circular/Prospectus constituting part of this Registration Statement on Form S-4
of U.S. Office Products Company of our report dated June 6, 1997, except as to
the second paragraph of the Common Stock section of Note 15, which is as of
November 6, 1997, and Note 4, which is as of January 13, 1998 appearing in the
Current Report on Form 8-K dated January 12, 1998 of U.S. Office Products
Company. We also consent to the reference to us under the heading "Experts."
PRICE WATERHOUSE LLP
Minneapolis, Minnesota
March 31, 1998
<PAGE>
EXHIBIT 23.3
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Offering
Circular/Prospectus constituting part of this Registration Statement on Form S-4
of U.S. Office Products Company of our report dated February 2, 1996, with
respect to the financial statements of School Specialty, Inc. for the years
ended December 31, 1995 and 1994 included in the Current Report on Form 8-K
dated January 12, 1998 of U.S. Office Products Company. We also consent to the
reference to us under the heading "Experts."
ERNST & YOUNG LLP
Milwaukee, Wisconsin
March 31, 1998
<PAGE>
EXHIBIT 23.6
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Offering
Circular/Prospectus constituting part of this Registration Statement on Form S-4
of U.S. Office Products Company of our report dated February 8, 1996, relating
to the financial statements of The Re-Print Corporation, which report appears in
the Current Report on Form 8-K dated January 12, 1998 of U.S. Office Products
Company. We also consent to the reference to us under the heading "Experts."
BDO Seidman, LLP
Atlanta, Georgia
March 31, 1998
<PAGE>
EXHIBIT 99.1
CUSIP 912 325 AA5
LETTER OF TRANSMITTAL
WITH RESPECT TO THE
5 1/2% CONVERTIBLE SUBORDINATED NOTES DUE 2001
OF
U.S. OFFICE PRODUCTS COMPANY
PURSUANT TO THE OFFERING CIRCULAR/PROSPECTUS DATED APRIL , 1998
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON MAY , 1998, UNLESS EXTENDED
THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS:
STATE STREET BANK & TRUST COMPANY
<TABLE>
<S> <C> <C>
BY MAIL: BY OVERNIGHT COURIER: BY HAND:
Corporate Trust Department Corporate Trust Department Corporate Trust Department
2 International Place, 4th 2 International Place, 4th 2 International Place, 4th
Floor Floor Floor
Boston, MA 02110 Boston, MA 02110 Boston, MA 02110
Attention: Kellie Mullen Attention: Kellie Mullen Attention: Kellie Mullen
</TABLE>
BY FACSIMILE:
(617) 664-5290
Attention: Kellie Mullen
FACSIMILE CONFIRMATION ONLY:
(617) 664-5587
Attention: Kellie Mullen
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS, OR TRANSMISSION OF
INSTRUCTIONS VIA FACSIMILE, OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A
VALID DELIVERY. THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD
BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
This Letter of Transmittal should be used only to tender the Notes for
exchange pursuant to the Exchange Offer as described in the Offering
Circular/Prospectus of U.S. Office Products Company, dated April , 1998 (as the
same may be amended or supplemented from time to time, the "Offering Circular/
Prospectus"). This Letter of Transmittal may also be used to tender in the
Equity Self-Tender (as defined in the Offering Circular/Prospectus) shares
received upon exchange of Notes.
This Letter of Transmittal is to be used (i) if Notes are to be physically
delivered to the Exchange Agent, or (ii) if delivery of Notes is to be made by
book-entry transfer to the account maintained by the Exchange Agent at the
Depository Trust Company ("DTC") pursuant to the procedures set forth in the
Offering Circular/Prospectus under the caption "The Terms of the Exchange
Offer--Procedures for Tender of Notes for Exchange--Book-Entry Delivery
Procedures."
Holders that are tendering Notes by book-entry transfer to the Exchange
Agent's account at DTC can execute the tender for exchange through the DTC
Program (the "DTC Program"), for which
<PAGE>
the transaction will be eligible. DTC participants that are accepting the
Exchange Offer should transmit their acceptance to DTC, which will edit and
verify the acceptance and execute a book-entry delivery to the Exchange Agent's
account at DTC. DTC will then send an Agent's Message to the Exchange Agent for
its acceptance. Delivery of the Agent's Message by DTC will satisfy the terms of
the Exchange Offer as to execution and delivery of a Letter of Transmittal by
the participant identified in the Agent's Message. DTC participants may also
accept the Exchange Offer by submitting a notice of guaranteed delivery through
ATOP.
DELIVERY OF DOCUMENTS TO DTC, THE COMPANY OR THE DEALER MANAGER DOES NOT
CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
THE EXCHANGE OFFER IS NOT BEING MADE TO (NOR WILL NOTES BEING TENDERED
PURSUANT TO THE EXCHANGE OFFER BE ACCEPTED FROM OR ON BEHALF OF) HOLDERS IN ANY
JURISDICTION IN WHICH THE MAKING OR ACCEPTING OF THE EXCHANGE OFFER WOULD NOT BE
IN COMPLIANCE WITH THE LAWS OF SUCH JURISDICTION.
Holders who wish to tender their Notes pursuant to the Exchange Offer must
complete the box below entitled "Method of Delivery" and complete columns (1)
through (3) in the box herein entitled "Description of Notes Being Tendered for
Exchange" and sign in the appropriate box below.
Only registered Holders of Notes may validly tender their Notes pursuant to
the Exchange Offer.
All capitalized terms used herein and not defined herein shall have the
meanings ascribed to them in the Offering Circular/Prospectus.
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
METHOD OF DELIVERY
/ / CHECK HERE IF NOTES TENDERED FOR EXCHANGE ARE ENCLOSED HEREWITH.
/ / CHECK HERE IF NOTES TENDERED FOR EXCHANGE ARE BEING DELIVERED BY
BOOK-ENTRY TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT
WITH A BOOK-ENTRY TRANSFER FACILITY SPECIFIED ABOVE AND COMPLETE THE FOLLOWING:
/ / NAME OF INSTITUTION TENDERING FOR EXCHANGE:
NAME OF BOOK-ENTRY TRANSFER FACILITY:
/ / THE DEPOSITORY TRUST COMPANY
ACCOUNT NUMBER: VOI NUMBER:
- ------------------------------------------------------------------------------------------------------------------------------
DESCRIPTION OF NOTES BEING TENDERED FOR EXCHANGE
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
NAME(S) AND ADDRESS(ES) OF HOLDER(S)
(PLEASE FILL IN, IF BLANK, NOTES BEING TENDERED FOR EXCHANGE
EXACTLY AS NAME(S) APPEAR(S) ON NOTES) (ATTACH ADDITIONAL SCHEDULE, IF NECESSARY)
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
(1) (2) (3)
- ------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT OF NOTES
SECURITY NUMBER(S)* TENDERED FOR EXCHANGE**
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- ------------------------
* Need not be completed by Holders tendering for exchange by book-entry
transfer.
** Unless otherwise specified, the entire aggregate principal amount
represented by the Notes described above will be deemed to be tendered for
exchange.
<PAGE>
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
By execution hereof, the undersigned hereby acknowledges receipt of the
Offering Circular/Prospectus dated April , 1998 (as the same may be amended or
supplemented from time to time, the "Offering Circular/Prospectus") and the
Tender Offer Statement dated , 1998 (the "Tender Offer Statement") of
U.S. Office Products Company (the "Company") and this Letter of Transmittal and
instructions hereto (the "Letter of Transmittal," which with the Offering
Circular/Prospectus constitutes the "Exchange Offer" ) relating to the Company's
offer to exchange shares of its common stock, par value $.001 per share (the
"Common Stock") for its outstanding 5 1/2% Convertible Subordinated Notes due
February 1, 2001 (the "Notes") at a temporarily reduced conversion price (the
"Exchange Offer") upon the terms and subject to the conditions set forth in the
Exchange Offer.
Upon the terms and subject to the conditions of the Exchange Offer as set
forth in the Offering Circular/Prospectus, the undersigned hereby tenders to the
Company the Notes for exchange.
The undersigned hereby irrevocably constitutes and appoints the Exchange
Agent as the true and lawful agent and attorney-in-fact of the undersigned (with
full knowledge that the Exchange Agent also acts as the agent of the Company)
with respect to such Notes, with full power of substitution (such power of
attorney being deemed to be an irrevocable power coupled with an interest) to
deliver such Notes for exchange pursuant to the terms of the Exchange Offer.
The undersigned hereby represents and warrants that the undersigned has full
power and authority to tender for exchange the Notes tendered hereby. The
undersigned, upon request, will execute and deliver all additional documents
deemed by the Exchange Agent or the Company to be necessary or desirable to
complete the tender of the Notes for exchange pursuant to the terms and
conditions of the Exchange Offer.
The undersigned understands that tendering of Notes pursuant to any of the
procedures described in the Offering Circular/Prospectus under the caption "The
Terms of the Exchange Offer--Procedures for Tender of Notes for Exchange" and in
the instructions hereto will constitute the undersigned's acceptance of the
terms and conditions of the Exchange Offer. The Company's acceptance of such
Notes for exchange will constitute a binding agreement between the undersigned
and the Company upon the terms and subject to the conditions of the Exchange
Offer.
All authority conferred or agreed to be conferred by this Letter of
Transmittal shall survive the death or incapacity of the undersigned and every
obligation of the undersigned under this Letter of Transmittal shall be binding
upon the undersigned's heirs, personal representatives, executors,
administrators, successors, assigns, trustees in bankruptcy and other legal
representatives.
The undersigned understands that the delivery and tender of any Notes is not
effective, and the risk of loss of the Notes does not pass to the Exchange
Agent, until receipt by the Exchange Agent of this Letter of Transmittal (or a
manually signed facsimile hereof), properly completed and duly executed,
together with all accompanying evidences of authority and any other required
documents in form satisfactory to the Company. All questions as to the form of
all documents and the validity (including the time of receipt) and exchange of
Notes will be determined by the Company, in its sole discretion, which
determination shall be final and binding.
Unless otherwise indicated herein in the box entitled "Special Exchange
Instructions," please issue the shares of Common Stock issuable upon exchange of
the tendered Notes and return any certificates for Notes not tendered for
exchange and any payment for cash in lieu of fractional shares, payment of
accrued interest and payment for any shares accepted in the Equity Self-Tender
in the name of the registered holder(s) appearing above under "Description of
Notes being Tendered for Conversion." Similarly, unless otherwise indicated
herein in the box entitled "Special Delivery Instructions," please mail the
shares of Common Stock, together with any certificates for Notes not tendered
for exchange and any payment for cash in lieu of fractional shares, payment of
accrued interest and payment for any shares accepted in the Equity Self-Tender
(and any accompanying documents, as appropriate) to the address(es) of the
registered holder(s) appearing above under "Description of Notes Being
Tendered." If both the "Special Exchange Instructions" box and the "Special
Delivery Instructions" box are completed, please issue the Notes and return any
certificates for Notes not tendered for exchange and any payment for cash in
lieu of fractional shares, payment of accrued interest and payment for any
shares accepted in the Equity Self-Tender in the name(s) of, and mail any such
certificates to, the person(s) at the address(es) so indicated.
<PAGE>
- --------------------------------------------------------------------------------
SPECIAL EXCHANGE INSTRUCTIONS
(SEE INSTRUCTIONS 1, 2, 4, 5 AND 6)
To be completed ONLY if certificates for Notes in a principal amount not
tendered for exchange and/ or certificates for Common Stock issuable upon
exchange and/or payment of cash in lieu of fractional shares, payment of
accrued interest and payment for any shares accepted in the Equity
Self-Tender are to be issued in the name of someone other than the
undersigned, or if Notes are to be returned by credit to an account
maintained by DTC.
Issue certificates for Common Stock and/or Notes to:
Name: ______________________________________________________________________
(Please print)
Address: ___________________________________________________________________
____________________________________________________________________________
____________________________________________________________________________
Zip Code
____________________________________________________________________________
(Taxpayer Identification Number)
REQUIRES SIGNATURE GUARANTEE
Credit Notes or Common Stock with respect to Notes surrendered by book-entry
transfer to:
/ / The Depository Trust Company
account set forth below:
____________________________________________________________________________
(account number)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 2, 4, 5 AND 6)
To be completed ONLY if certificates for Notes in a principal amount not
tendered for exchange and/or the certificates for Common Stock issuable upon
exchange and/or payment of cash in lieu of fractional shares, payment of
accrued interest and payment for any shares accepted in the Equity
Self-Tender are to be sent to someone other than the undersigned at an
address other than that shown above.
Deliver certificates for Common Stock and/or Notes to:
Name: ______________________________________________________________________
(Please print)
Address: ___________________________________________________________________
____________________________________________________________________________
____________________________________________________________________________
Zip Code
____________________________________________________________________________
(Taxpayer Identification Number)
REQUIRES SIGNATURE GUARANTEE
- --------------------------------------------------------------------------------
<PAGE>
TENDER OF SHARES IN EQUITY SELF-TENDER
To be completed only if shares issuable upon exchange of Notes are to be
tendered in the Equity Self-Tender.
If you wish to tender all or some of the shares of Common Stock that are
issuable upon exchange of Notes in the Equity Self-Tender, please check the
appropriate box and, if appropriate, indicate the number of shares you wish to
tender in the Equity Self-Tender.
/ / Tender all shares issuable upon exchange of Notes in the Equity
Self-Tender
/ / Tender the following number of shares issuable upon exchange of Notes
in the Equity Self-Tender. (If amount indicated exceeds the number of
shares issuable, all shares issuable will be tendered.)
Number of shares: ____________________________________
ODD LOTS
(SEE INSTRUCTION 9)
This section will be applicable ONLY if less than 100 shares are issuable
upon exchange and the Holder of Notes does not own beneficially other shares so
that the total number of shares beneficially owned is 100 shares or more.
The undersigned either (check one box):
/ / was the beneficial owner as of the close of business on April , 1998,
and will continue to be the beneficial owner until the Expiration Date of
the Equity Self-Tender, of an aggregate of fewer than 100 shares
(including all shares issuable upon exchange pursuant to the Exchange
Offer), all of which are being tendered, or
/ / is a broker, dealer, commercial bank, trust company or other nominee
that (i) is tendering, for the beneficial owners thereof, shares with
respect to which it is the record owner, and (ii) believes, based upon
representations made to it by each such beneficial owner, that such
beneficial owner owned beneficially as of the close of business on April
, 1998, and will continue to own beneficially until the Expiration Date
(including all shares issuable upon exchange pursuant to the Exchange
Offer), an aggregate of fewer than 100 shares, and is tendering all of
such shares,
and, in either case, hereby represents that the above indicated information
is true and correct as to the undersigned.
ODD LOT SHARES CANNOT BE CONDITIONALLY TENDERED
CONDITIONAL TENDER
(SEE INSTRUCTION 10)
/ / CHECK HERE IF TENDER OF SHARES IN THE EQUITY SELF-TENDER IS CONDITIONED ON
THE COMPANY PURCHASING ALL OR A MINIMUM NUMBER OF THE TENDERED SHARES, AND
COMPLETE THE FOLLOWING:
Minimum Number of shares to be sold:
----------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
SIGN HERE
(TO BE COMPLETED BY ALL HOLDERS OF NOTES
TENDERING FOR EXCHANGE REGARDLESS OF WHETHER
NOTES ARE BEING PHYSICALLY DELIVERED HEREWITH)
____________________________________________________________________________
____________________________________________________________________________
____________________________________________________________________________
(SIGNATURE(S) OF HOLDER(S) OR AUTHORIZED SIGNATORY)
Dated: __________________, 1998
Must be signed by the registered Holder(s) of Notes exactly as their
name(s) appear(s) on certificate(s) for the Notes or by person(s) authorized
to become registered holder(s) by endorsement and documents transmitted with
this Letter of Transmittal. If signature is by a trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation, agent
or other person acting in a fiduciary or representative capacity, please
provide the following information and see Instruction 4 herein.
Name(s): ___________________________________________________________________
____________________________________________________________________________
(PLEASE PRINT)
__________________________________________________________________________
Capacity (full title): _____________________________________________________
Address: ___________________________________________________________________
____________________________________________________________________________
(INCLUDING ZIP CODE)
Area Code and Telephone No.: _______________________________________________
----------------------------------------------------------------------------
----------------------------------------------------------------------------
SIGNATURE GUARANTEE (SEE INSTRUCTIONS 1 AND 4 BELOW)
____________________________________________________________________________
(NAME OF MEDALLION SIGNATURE GUARANTOR GUARANTEEING SIGNATURE(S))
__________________________________________________________________________
(ADDRESS (INCLUDING ZIP CODE) AND TELEPHONE NO. (INCLUDING AREA CODE) OF
FIRM)
__________________________________________________________________________
(AUTHORIZED SIGNATURE)
__________________________________________________________________________
(PRINTED NAME)
__________________________________________________________________________
(TITLE)
Dated: __________________, 1998
----------------------------------------------
<PAGE>
INSTRUCTIONS
Forming Part of the Terms and Conditions of the Exchange Offer
1. GUARANTEE OF SIGNATURES. All signatures on this Letter of Transmittal
must be guaranteed by a Medallion Signature Guarantor (as defined in the
Offering Circular/Prospectus) unless (i) this Letter of Transmittal is signed by
the registered Holder(s) (which term, for purposes of this Letter of
Transmittal, shall include DTC) of the Notes tendered herewith and neither the
"Special Exchange Instructions" box nor the "Special Delivery Instructions" box
of this Letter of Transmittal has been completed or (ii) such Notes are tendered
for the account of an Eligible Institution (as defined in the Offering Circular/
Prospectus). See Instruction 4 herein.
2. DELIVERY OF LETTER OF TRANSMITTAL AND NOTES. This Letter of Transmittal
is to be completed by Holders if (i) certificates representing Notes are to be
physically delivered to the Exchange Agent herewith by such Holders; or (ii)
tender of Notes for exchange is to be made by book-entry transfer to the
Exchange Agent's account at DTC pursuant to the procedures set forth under the
caption "The Terms of the Exchange Offer--Procedures for Tender of Notes--Tender
of Notes Held Through DTC" in the Offering Circular/Prospectus. All physically
delivered Notes, or a confirmation of a book-entry transfer into the Exchange
Agent's account at DTC of all Notes delivered electronically, as well as a
properly completed and duly executed Letter of Transmittal (or manually signed
facsimile thereof) and any other documents required by this Letter of
Transmittal, must be received by the Exchange Agent at its address set forth
herein prior to 5:00 p.m., New York City time, on the Expiration Date, as
applicable. Delivery of documents to DTC does not constitute delivery to the
Exchange Agent.
THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, THE NOTES AND ALL
OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH THROUGH DTC AND ANY
ACCEPTANCE OR AGENTS MESSAGE DELIVERED THROUGH ATOP, IS AT THE OPTION AND RISK
OF THE TENDERING HOLDER. If delivery is by mail, registered mail with return
receipt requested, properly insured, is recommended. In all cases, sufficient
time should be allowed for such documents to reach the Exchange Agent. Except as
otherwise provided in this Instruction 2, delivery will be deemed made only when
actually received by the Exchange Agent.
No alternative, conditional or contingent tenders of Notes for exchange will
be accepted. All tendering Holders, by execution of this Letter of Transmittal
(or a facsimile thereof), waive any right to receive any notice of the
acceptance of their Notes for exchange.
If Holders wish to exchange less than the entire principal amount evidenced
by any Note submitted, such Holders must fill in the principal amount that is to
be exchanged in the column entitled "Principal Amount of Notes Tendered for
Exchange," but only in integral multiples of $1,000. In the case of a partial
exchange of Notes, as soon as practicable after the exchange, new certificates
for the remainder of the Notes that were evidenced by such Holder's old
certificates will be sent to such Holder, unless otherwise provided in the
appropriate box on this Letter of Transmittal. The entire amount that is
represented by Notes delivered to the Exchange Agent will be deemed to have been
surrendered for exchange, unless otherwise indicated. (This paragraph does not
apply to tendered by book-entry transfer.)
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of tendered Notes will be resolved by the Company, whose
determination will be final and binding. The Company reserves the absolute right
to reject any or all tenders of Notes for exchange that are not in proper form
or the acceptance of which would, in the opinion of the Company or counsel for
the Company, be unlawful. The Company also reserves the right to waive any
irregularities of a tender for exchange as to particular Notes. The Company's
interpretation of the terms of the Exchange Offer (including the instructions in
this Letter of Transmittal) will be final and binding. Unless waived, any
irregularities in connection with tenders of Notes must be cured within such
time as the Company shall determine. Tenders of Notes for exchange will not be
deemed to have been made until such irregularities have been cured or waived.
Any Notes received by the Exchange Agent that are not properly tendered or
delivered and to which the irregularities have not been cured or waived will be
returned by the Exchange Agent to the tendering Holder unless otherwise provided
in this Letter of Transmittal as soon as practicable following the Expiration
Date.
<PAGE>
None of the Company, the Exchange Agent, the Information Agent, the Dealer
Manager, the Trustee or any other person shall be obligated to give notification
of defects or irregularities in any tender or delivery or shall incur any
liability for failure to give any such notification.
3. INADEQUATE SPACE. If the space provided herein under "Description of
Notes Being Tendered for Exchange" is inadequate, the certificate numbers of the
Notes and the principal amount of Notes surrendered should be listed on a
separate schedule and attached hereto.
4. SIGNATURES ON LETTER OF TRANSMITTAL; BOND POWERS AND ENDORSEMENTS. If
this Letter of Transmittal is signed by the registered Holder(s) of the Notes
tendered hereby, the signature(s) must correspond to the name(s) as written on
the face of the Notes without alteration, enlargement or any other change
whatsoever. If this Letter of Transmittal is signed by a participant in DTC
whose name is shown as the owner of the Notes tendered hereby, the signature
must correspond with the name shown on the security position listing as the
owner of the Notes.
If any Notes tendered hereby are owned of record by two or more persons, all
such persons must sign this Letter of Transmittal.
If any Notes tendered hereby are registered in the names of different
Holders, it will be necessary to complete, sign and submit as many separate
Letters of Transmittal, and any necessary accompanying documents, as there are
different registrations of such Notes.
If this Letter of Transmittal is signed by the registered Holder of Notes
tendered for exchange hereby, no endorsements of such Notes or separate bond
powers are required, unless Common Stock or Notes not tendered for exchange are
to be issued in the name of a person other than the registered Holder(s), in
which case the Notes tendered for exchange hereby must be endorsed or
accompanied by appropriate bond powers, in either case signed exactly as the
name(s) of the registered Holder(s) appear(s) on such Notes. Signatures on such
Notes and bond powers must be guaranteed by a Medallion Signature Guarantor. See
Instruction 1 herein.
If this Letter of Transmittal or any Notes or bond powers are signed by a
trustee, executor, administrator, guardian, attorney-in-fact, officer of a
corporation or other person acting in a fiduciary or representative capacity,
such person should so indicate when signing, and proper evidence satisfactory to
the Company of such person's authority so to act must be submitted with this
Letter of Transmittal.
5. TRANSFER TAXES. Except as set forth in this Instruction 5, the Company
will pay all transfer taxes, if any, applicable to the exchange of Notes
pursuant to the Exchange Offer. If, however, Notes for principal amounts not
accepted for exchange are to be delivered to, or are to be registered or issued
in the name of, any person other than the registered Holder of the Notes, or if
tendered Notes are registered in the name of any person other than the person
signing the Letter of Transmittal, or if a transfer tax is imposed for any
reason other than the exchange of Notes pursuant to the Exchange Offer, then the
amount of any such transfer tax (whether imposed on the registered Holder or any
other person) will be payable by the tendering Holder. The Company shall not be
required to issue or deliver any certificates for Common Stock unless and until
the person or persons requesting the issue thereof shall have paid to the
Company the amount of such tax or shall have established to the satisfaction of
the Company that such tax has been paid.
6. SPECIAL EXCHANGE AND DELIVERY INSTRUCTIONS. If Common Stock issued upon
exchange of any Notes is to be issued, or if Notes not tendered or not accepted
for exchange are to be issued, or if payment of cash in lieu of fractional
shares or of accrued interest is to be made in the name of a person other than
the person(s) signing this Letter of Transmittal, or if certificates for such
Common Stock or any such Note or payment of cash in lieu of fractional shares or
of accrued interest are to be sent to someone other than the person(s) signing
this Letter of Transmittal or to the person(s) signing this Letter of
Transmittal but at an address other than that shown in the box entitled
"Description of Notes Being Tendered for Exchange," the appropriate boxes in
this Letter of Transmittal must be completed. If no such instruction is given,
the certificates for the Common Stock and/or Notes not tendered, will be sent to
the person signing this Letter of Transmittal. Common Stock with respect to
Notes tendered by book-entry transfer and Notes not
<PAGE>
tendered for exchange will be delivered by crediting the account at DTC
designated above as the account from which such Notes were delivered.
7. CONFLICTS. In the event of any conflict between the terms of the Offering
Circular/Prospectus and the terms of this Letter of Transmittal, the terms of
the Offering Circular/Prospectus will control.
8. MUTILATED, LOST, STOLEN OR DESTROYED NOTES. If a Holder desires to tender
Notes for exchange pursuant to the Exchange Offer, but any such Note has been
mutilated, lost, stolen or destroyed, such Holder should write to or telephone
the Trustee, at the address listed below, concerning the procedures for
obtaining replacement certificates for such Note, arranging for indemnification
or any other matter that requires handling by the Trustee:
State Street Bank and Trust Company
Two International Place
Fourth Floor
Boston, MA 02110
Attn: Corporate Trust Department--Kellie Mullen
(800) 531-0368
9. ODD LOTS. As described in the Offer to Purchase for the Equity
Self-Tender, if the Company is to purchase fewer than all shares tendered before
the Expiration Date of the Equity Self-Tender and not withdrawn, the shares
purchased first will under certain circumstances consist of all shares tendered
by any shareholder who owned of record or owned beneficially (including shares
issuable upon exchange pursuant to the Exchange Offer), as of the close of
business on April , 1998, an aggregate of fewer than 100 shares, and who
tenders all of his shares (an "Odd Lot Owner"). This preference will not be
available unless the box captioned "Odd Lots" is completed.
10. CONDITIONAL TENDERS. As described in the Offer to Purchase for the
Equity Self-Tender, share-holders may condition their tenders in the Equity
Self-Tender on all or a minimum number of their tendered shares being purchased
("Conditional Tenders"). If the Company is to purchase less than all shares
tendered before the Expiration Date of the Equity Self-Tender and not withdrawn,
any shares tendered pursuant to a Conditional Tender for which the condition was
not satisfied shall be deemed withdrawn, subject to reinstatement if such
Conditionally Tendered Shares are all the shares held by the person tendering
and the Conditionally Tendered Shares are subsequently selected by lot for
purchase pursuant to the provision for purchase of Odd Lots in the Offer to
Purchase for the Equity Self-Tender. All tendered shares shall be deemed
unconditionally tendered unless the Conditional Tender section is completed. The
Conditional Tender alternative is made available so that shareholders may assure
that any gain that they realize will be capital gain rather than ordinary income
for federal income tax purposes. Odd Lot shares, in order to be eligible for
preferential treatment, cannot be conditionally tendered. It is the tendering
shareholder's responsibility to calculate the minimum number of shares, and each
shareholder is urged to consult his or her own tax advisor.
11. TAXPAYER IDENTIFICATION NUMBER. Each Holder tendering Notes for exchange
is required to provide the Depository with the Holder's correct taxpayer
identification number ("TIN"), generally, the Holder's Social Security or
Federal Employer Identification number, on Substitute Form W-9, which is
provided under "Important Tax Information" below, and to certify whether such
person is subject to backup withholding of federal income tax.
12. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions relating to the
procedure for tendering, as well as requests for additional copies of the
Offering Circular/Prospectus and the related Letter of Transmittal, may be
directed to the Information Agent, MacKenzie Partners, Inc., 156 Fifth Avenue,
New York, New York 10010, (800) 322-2885, or collect (212) 929-5500. A Holder
may also contact the Dealer Manager at its telephone number set forth on the
back cover page of this Letter of Transmittal or such Holder's broker, dealer,
commercial bank or trust company or nominee for assistance concerning the
Exchange Offer.
<PAGE>
IMPORTANT TAX INFORMATION
Under federal income tax law, an owner of Notes who receives cash in lieu of
fractional shares in connection with the Exchange Offer is required to provide
the Exchange Agent (as payor) with such owner's current TIN on Substitute Form
W-9 below. If such owner is an individual, the TIN is his or her social security
number. If the Exchange Agent is not provided with the correct TIN, the owner or
other payee may be subject to a $50 penalty imposed by the Internal Revenue
Service. In addition, any consideration paid to such owner or other payee in
lieu of fractional shares may be subject to 31% backup withholding tax.
Certain owners of Notes (including, among others, all corporations and
certain foreign individuals) are not subject to these backup withholding and
reporting requirements. In order for a foreign individual to qualify as an
exempt recipient, that owner must submit to the Exchange Agent a properly
completed Internal Revenue Service Form W-8 (a "Form W-8"), signed under
penalties of perjury, attesting to that individual's exempt status. A Form W-8
can be obtained from the Information Agent. See the enclosed "Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9" for
additional instructions.
If backup withholding applies, the Exchange Agent is required to withhold
31% of any consideration paid to the owner or other payee in lieu of fractional
shares. Backup withholding is not an additional tax. Rather, the federal income
tax liability of persons subject to backup withholding will be reduced by the
amount of tax withheld. If withholding results in an overpayment of taxes, a
refund may be obtained from the Internal Revenue Service provided the required
information is furnished.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup withholding on any consideration paid to an owner or other
payee in lieu of fractional shares, the owner is required to notify the Exchange
Agent of the owner's current TIN (or the TIN of any other payee) by completing
the form below, certifying that the TIN provided on Substitute Form W-9 is
correct (or that such owner is awaiting a TIN), and that (i) the owner has not
been notified by the Internal Revenue Service that the owner is subject to
backup withholding as a result of failure to report all interest or dividends or
(ii) the Internal Revenue Service has notified the owner that the owner is no
longer subject to backup withholding.
WHAT NUMBER TO GIVE THE EXCHANGE AGENT
The Holder is required to give the Exchange Agent the TIN (e.g., social
security number or employer identification number) of the owner of the Notes. If
the Notes are registered in more than one name or are not registered in the name
of the actual owner, consult the enclosed "Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9" for additional guidance
on which number to report.
THE FOREGOING DISCUSSION OF CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATION
DOES NOT CONSIDER THE PARTICULAR FACTS AND CIRCUMSTANCES OF ANY HOLDER'S
SITUATION OR STATUS. THE SUMMARY IS BASED ON THE PROVISIONS OF THE CODE,
REGULATIONS, PROPOSED REGULATIONS, RULINGS AND JUDICIAL DECISIONS NOW IN EFFECT,
ALL OF WHICH ARE SUBJECT TO CHANGE, POSSIBLY ON A RETROACTIVE BASIS. HOLDERS OF
NOTES (INCLUDING HOLDERS OF NOTES WHO DO NOT TENDER THEIR NOTES) ARE URGED TO
CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THE TAX CONSEQUENCES TO THEM,
INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL, FOREIGN AND OTHER LAWS, OF
THE EXCHANGE OF THE NOTES INTO COMMON STOCK PURSUANT TO THE EXCHANGE OFFER. FOR
ADDITIONAL INFORMATION, SEE "U.S. FEDERAL INCOME TAX CONSIDERATIONS" IN THE
STATEMENT.
<PAGE>
<TABLE>
<S> <C> <C>
- ----------------------------------------------------------------------------------------
PAYER'S NAME: [ ]
- ----------------------------------------------------------------------------------------
SUBSTITUTE Part 1 -- PLEASE PROVIDE YOUR Social Security Number or
FORM W-9 TIN IN THE BOX AT RIGHT AND Employer Identification
DEPARTMENT OF THE TREASURY CERTIFY BY SIGNING AND DATING Number
INTERNAL REVENUE SERVICE BELOW
-------------------------------------------------------------
Part 2 -- Certification-Under penalties of perjury, I certify
that:
(1) The number shown on this form is my correct taxpayer
identification number (or I am waiting for a number to be
issued to me) and
(2) I am not subject to backup withholding because: (a) I am
exempt from backup withholding, or (b) I have not been
PAYER'S REQUEST FOR notified by the Internal Revenue Service (IRS) that I am
TAXPAYER IDENTIFICATION
NUMBER "TIN"
subject to backup withholding as a result of a failure to
report all interest or dividends, or (c) the IRS has
notified me that I am no longer subject to backup
withholding.
CERTIFICATION INSTRUCTIONS -- You must cross out Item (2)
above if you have been notified by the IRS that you are
currently subject to backup withholding because of under
reporting interest or dividends on your tax return.
-------------------------------------------------------------
SIGNATURE: Part 3
Awaiting TIN / /
DATE:
- -----------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 31
PERCENT OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE EXCHANGE OFFER. PLEASE
REVIEW THE ENCLOSED "GUIDELINES FOR CERTIFICATION OF
TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9" FOR ADDITIONAL
DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED
THE BOX IN PART 3 OF SUBSTITUTE FORM W-9.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification
number has not been issued to me, and either (1) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or
(2) I intend to mail or deliver an application in the near future. I
understand that if I do not provide a taxpayer identification number by the
time of payment, 31% of all reportable cash payments made to me thereafter
will be withheld until I provide a taxpayer identification number.
Signature
--------------------------------------------------------------
Date
-----------------------------------------------------------------
<PAGE>
THE INFORMATION AGENT FOR THE EXCHANGE OFFER IS:
MACKENZIE PARTNERS, INC.
156 Fifth Avenue
New York, New York 10010
(212) 929-5000
or
(800) 322-2885
THE DEALER MANAGER FOR THE EXCHANGE OFFER IS:
BANCAMERICA ROBERTSON STEPHENS
555 California Street
Suite 2600
San Francisco, CA 94104
(800) 234-2663
Attn: Dan White
<PAGE>
EXHIBIT 99.2
CUSIP 912 325 AA5
U.S. OFFICE PRODUCTS COMPANY
OFFER TO EXCHANGE UP TO 8,889,920 SHARES OF COMMON STOCK FOR
5 1/2% CONVERTIBLE SUBORDINATED NOTES DUE 2001
AT A TEMPORARILY REDUCED NOTE CONVERSION PRICE
DATED APRIL , 1998
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, MAY , 1998, UNLESS EXTENDED
To Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees:
Enclosed for your consideration is an Offering Circular/Prospectus dated
April , 1998 (the "Offering Circular/Prospectus") and a form of Letter of
Transmittal (the "Letter of Transmittal" which, together with the Offering
Circular/Prospectus constitutes the "Exchange Offer"), relating to the offer by
U.S. Office Products Company (the "Company") to exchange shares of its Common
Stock for its outstanding 5 1/2% Convertible Subordinated Notes due 2001 (the
"Notes") at a temporarily reduced conversion price. Capitalized terms used
herein but not defined herein shall have the meanings ascribed to such terms in
the Offering Circular/Prospectus.
The Notes are currently convertible into shares of Common Stock of the
Company at a rate of one share for each $19.00 principal amount of the Notes.
Pursuant to the terms and subject to the conditions of the Exchange Offer,
Holders of Notes will be able to exchange their Notes for Common Stock under the
terms of the Exchange Offer at a reduced price of $16.17 per share.
We are asking you to contact your clients for whom you hold Notes registered
in your name or in the name of your nominee. In addition, we ask you to contact
your clients who, to your knowledge, hold Notes registered in their own names.
The Company will pay all transfer taxes, if any, applicable to the tender for
exchange of Notes, except as otherwise provided in the Offering
Circular/Prospectus and the Letter of Transmittal.
Enclosed herewith are copies of the following documents:
1. An Offering Circular/Prospectus dated April , 1998 relating to the
Exchange Offer;
2. A Tender Offer Statement dated , 1998 relating to the Equity
Self-Tender;
3. A Letter of Transmittal for your use and for the information of your
clients; and
4. A form of a letter which may be sent to your clients for whose account
you hold the Notes in your name or in the name of a nominee, with space provided
for obtaining such clients' instructions with regard to the Exchange Offer.
DTC participants will be able to tender Notes through the DTC [ ]
Program (the "DTC Program").
PLEASE NOTE THAT THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT
5:00 P.M., NEW YORK CITY TIME, ON MAY , 1998, UNLESS EXTENDED (THE "EXPIRATION
DATE"). WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE IN ORDER TO
OBTAIN THEIR INSTRUCTIONS.
The Company will not pay any fees or commissions to any broker or dealer or
other person for soliciting exchange of the Notes pursuant to the Exchange
Offer. You will be reimbursed for customary
<PAGE>
mailing and handling expenses incurred by you in forwarding the enclosed
materials to your clients as described in the Offering Circular/Prospectus under
the caption "The Terms of the Exchange Offer--Fees and Expenses."
Additional copies of the enclosed materials may be obtained from the
Information Agent, at its address and telephone number set forth on the back
cover of the enclosed Offering Circular/Prospectus.
Very truly yours,
BancAmerica Robertson Stephens
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR
ANY OTHER PERSON AS THE AGENT OF THE COMPANY, THE EXCHANGE AGENT, THE
INFORMATION AGENT, THE TRUSTEE OR THE DEALER MANAGER OR AUTHORIZE YOU OR ANY
OTHER PERSON TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATION ON BEHALF OF ANY
OF THEM WITH RESPECT TO THE EXCHANGE OFFER WHICH IS NOT CONTAINED IN THE
OFFERING CIRCULAR/PROSPECTUS OR THE LETTER OF TRANSMITTAL.
<PAGE>
EXHIBIT 99.3
CUSIP 912 325 AA5
U.S. OFFICE PRODUCTS COMPANY
OFFER TO EXCHANGE SHARES OF COMMON STOCK FOR
ALL OUTSTANDING 5 1/2% CONVERTIBLE SUBORDINATED NOTES DUE
2001 AT A TEMPORARILY REDUCED CONVERSION PRICE
DATED MAY , 1998
- --------------------------------------------------------------------------------
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, MAY , 1998, UNLESS EXTENDED
- --------------------------------------------------------------------------------
To Our Clients:
Enclosed for your consideration is the Offering Circular/Prospectus dated
April , 1998 (as the same may be amended or supplemented from time to time,
the "Offering Circular/Prospectus") and related Letter of Transmittal and
instructions thereto (the "Letter of Transmittal" which, together with the
Offering Circular/Prospectus constitutes the "Exchange Offer") relating to the
offer by U.S. Office Products Company (the "Company") to exchange shares of
Common Stock for its outstanding 5 1/2% Subordinated Convertible Notes due
2001(the "Notes") at a temporarily reduced conversion price. Also enclosed is a
Tender Offer Statement dated __________, 1998 relating to the Company's offer to
purchase 37,037,037 shares of Common Stock (the "Equity Self-Tender").
The Notes are currently convertible into shares of Common Stock of the
Company at a rate of one share for each $19.00 principal amount of the Notes.
Pursuant to the terms of the Exchange Offer, Holders of Notes will be able to
exchange Notes for shares of Common Stock under the terms of the Exchange Offer
at a reduced price of $16.17 per share.
Capitalized terms used herein and not defined herein shall have the meanings
ascribed to them in the Offering Circular/Prospectus.
THIS MATERIAL RELATING TO THE EXCHANGE OFFER IS BEING FORWARDED TO YOU AS
THE BENEFICIAL OWNER OF NOTES CARRIED BY US FOR YOUR ACCOUNT OR BENEFIT BUT NOT
REGISTERED IN YOUR NAME. A TENDER FOR EXCHANGE OF ANY SUCH NOTES CAN BE MADE
ONLY BY US AS THE REGISTERED HOLDER AND PURSUANT TO YOUR INSTRUCTIONS. THE
LETTER OF TRANSMITTAL IS FURNISHED TO YOU FOR YOUR INFORMATION ONLY AND CANNOT
BE USED BY YOU TO SURRENDER NOTES HELD BY US FOR YOUR ACCOUNT.
Accordingly, we request instructions as to whether you wish us to tender for
exchange any or all such Notes held by us for your account pursuant to the terms
and conditions set forth in the Offering Circular/ Prospectus and the Letter of
Transmittal. We urge you to read the Offering Circular/Prospectus and the Letter
of Transmittal carefully before instructing us to tender your Notes for
exchange.
Shares of Common Stock that you are entitled to receive upon exchange of
Notes in the Exchange Offer can be tendered into the Equity Self-Tender. You
should read carefully the information in the separate statement relating to the
Equity Self-Tender for shares of Common Stock. If you wish to tender all or a
portion of the shares of Common Stock you would receive upon exchange of the
Notes, please indicate on the attached instructions.
Your instructions to us should be forwarded as promptly as possible in order
to permit us to tender Notes on your behalf in accordance with the provisions of
the Exchange Offer. The Exchange Offer will expire at 5:00 p.m., New York City
time, on May , 1998, unless extended (the "Expiration Date").
<PAGE>
Your attention is directed to the following:
1. The Exchange Offer applies to all outstanding Notes.
2. Holders must tender their Notes on or prior to 5:00 p.m., New York City
time, May , 1998 in order to have their Notes exchanged at the reduced
conversion price.
3. Any transfer taxes incident to the exchange of Notes will be paid by the
Company, except as provided in the Offering Circular/Prospectus and the
instructions to the Letter of Transmittal.
4. The Exchange Offer is not being made to (nor will the tender of Notes for
exchange be accepted from or on behalf of) Holders in any jurisdiction in which
the making or acceptance of the Exchange Offer would not be in compliance with
the laws of such jurisdiction.
5. The exchange of such Notes for shares of Common Stock will be made as
promptly as practicable after valid receipt of the Notes and the Letter of
Transmittal by the Exchange Agent.
If you wish to have us tender any or all of the Notes held by us for your
account please so instruct us by completing, executing and returning to us the
instruction form that follows.
<PAGE>
INSTRUCTIONS REGARDING THE EXCHANGE OFFER WITH RESPECT TO THE
5 1/2% CONVERTIBLE SUBORDINATED NOTES DUE 2001
OF
U.S. OFFICE PRODUCTS COMPANY
The undersigned acknowledge(s) receipt of your letter and the enclosed
documents referred to therein relating to the Exchange Offer of U.S. Office
Products Company.
This will instruct you whether to tender for exchange the principal amount
of Notes indicated below held by you for the account of the undersigned pursuant
to the terms of and conditions set forth in the Offering Circular/Prospectus and
the Letter of Transmittal.
Box 1 / / Please tender for exchange the indicated Notes held by you
for my account.
Box 2 / / Please do not tender for exchange any Notes held by you for
my account.
Box 3 / / Please tender shares issuable upon exchange of Notes in the
Company's self-tender for shares, as follows:
Box 3.a / / Tender all shares issuable upon exchange of Notes
Box 3.b / / Tender only the following number of shares: ____________
Box 3.c / / The shares of Common Stock issuable to me in the
Exchange Offer plus other shares of Common Stock I own
total less than 100 shares, and I elect to have all such
shares purchased irrespective of pro-rationing pursuant
to the provisions for odd lot tenders in the Company's
self-tender.
Box 3.d / / Do not tender shares issuable upon exchange unless at
least the following number of shares will be
purchased: _____________________________________________
Date: ______ , 1998
____________________________________
Signature(s)
____________________________________
____________________________________
Please print name(s) here
Principal amount of Notes to Be Tendered for Exchange:
________________________________
________________________________________________________________________________
$ ________________ *
(must be in principal amounts equal to $1,000 or
________________________________________________________________________________
integral multiples thereof)
Please type or print address
________________________________
Area Code and Telephone Number
________________________________________________________________________________
Taxpayer Identification or
Social Security Number
________________________________________________________________________________
My Account Number with You
- ------------------------
* UNLESS OTHERWISE INDICATED, SIGNATURE(S) HEREON BY BENEFICIAL OWNER(S) SHALL
CONSTITUTE AN INSTRUCTION TO THE NOMINEE TO TENDER ALL NOTES OF SUCH
BENEFICIAL OWNER(S).
